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OO RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBW #0307/01 0661345
ZNR UUUUU ZZH
O 071345Z MAR 07
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0407
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 03 BELGRADE 000307 
 
SIPDIS 
 
DEPT FOR EB/IPE-JBOGER 
DEPT PLS PASS TO USTR JCHOE-GROVES, DOC-CPETERS, USPTO-JURBAN 
AND LOC-STEPP 
USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PREL SR KIPR
SUBJECT: SERBIA'S IPR ENFORCEMENT EFFORTS IMPROVE IN 2006 
 
REF: A) STATE 7944 B) 06 BELGRADE 275 
 
SUMMARY 
------- 
¶1.  The International Intellectual Property Alliance (IIPA), 
in its yearly Special 301 submission to USTR, elected not to 
recommend that Serbia be placed on the Special 301 Watch 
list.  Embassy supports this decision.  Serbian authorities 
responsible for intellectual property rights (IPR) 
enforcement demonstrated significantly improved results in 
¶2006.  Passage of legislation in July 2006 that establishes 
the enforcement powers and sets penal provisions was a key 
enabler for these gains.  Numerous business people from 
various industries concerned with IPR protection all 
confirmed greater coordination with enforcement bodies and 
general satisfaction with the improved results. END SUMMARY. 
 
PROGRESS ON 2006 IPR ACTION PLAN 
-------------------------------- 
¶2.  The Serbian government (GOS) agreed to the action plan 
proposed in reftel B in March 2006.  One of the key items of 
the plan was passage of a new IPR enforcement law that 
provides powers for market inspection, tax inspectors, 
customs and police to act independently whenever pirated or 
counterfeit goods are found.  The law, which was approved and 
entered into force in July 2006, also makes companies liable 
for criminal penalties. 
 
¶3.  Vera Despotovic, head of the department for Market 
Inspectors in the Ministry of Trade, Tourism and Services, 
told econoff that prior to the new law, market inspectors had 
limited enforcement powers with authority to investigate only 
upon the request of the rights holder.  Now, market 
inspectors can act ex officio, i.e., independently, on 
suspicion of illicit activities. 
 
¶4.  Since May 30, 2006, market inspectors conducted 414 
audits and confiscated 23,882 articles of various counterfeit 
goods.  Only 28 of the 414 audits were conducted at the 
request of rights holders, indicating that inspectors were 
proactively searching for IPR violations. 
 
¶5.  In one request from the Anti-Piracy Association (APA) in 
Serbia, market inspectors were notified of the rental of 
pirated DVDs by a large video rental chain called Video Klub 
Zabac, in Novi Sad.  It is one of the largest video rental 
outlets in Serbia, with 23 locations.  Market inspectors 
seized some 2,000 pirated DVDs from the Novi Sad location. 
Charges have been filed against the video club owner, and the 
case is currently before the court. 
 
¶6.  Zoran Savic, Executive Director of Millennium Film and 
Video, one of the primary distributors of films to Serbian 
theaters and video clubs, told econoff that the environment 
is changing for the better due to market inspector 
activities.  Video club owners with pirated DVDs, worried 
about the prospect of unannounced raids, now are calling 
Millennium to purchase legitimate DVDs while discarding 
pirated copies.  Owners realize that if they are caught, 
criminal penalties will cost them three times more than 
purchasing legitimate titles.  Savic also said that 
Millennium's sales increased 30 percent in 2006. 
 
¶7.  The IPR Unit at the Serbian Customs Administration also 
reported strong results in 2006 in comparison with 2004 and 
2005: 
 
- The number of actions taken based on the requests of the 
right holders was 92 in 2006.  This is six times greater than 
in 2004 (15) and 2.3 times greater than 2005. 
 
- The number of interruptions to customs procedures due to 
suspicion of IPR violations was 1,042 in 2006.  This was 57 
times greater than 2004 (18) and 3.3 times greater than 2005 
(305). 
 
- The number of legal sentences by the commercial courts that 
included destruction of the goods due to IPR violations was 
39 in 2006.  This is 6.5 times greater than in 2005 (6). 
 
- The number of declarations made by importers, exporters, 
receivers or owners in which goods were acknowledged as 
counterfeit was 185 in 2006.  This is 5.6 times greater than 
in 2005 (35).  These declarations were not possible in 2004, 
since appropriate regulations were introduced only in 2005. 
 
- In 2006, Customs made 48 requests for information on rights 
 
BELGRADE 00000307  002 OF 003 
 
 
holders to the Institute for Intellectual Property Rights 
when a shipment had been halted and Customs lacked the 
necessary information for verification.  In 2005, Customs 
made only one such request. 
 
¶8.  In an effort to demonstrate its willingness and ability 
to effectively carry out its enforcement responsibilities, 
Customs conducted its first-ever destruction ceremony, 
involving 15,240 pairs of counterfeit sneakers (10,440 Nike 
and 4,800 Diesel), on December 28, 2006.  The shoes were 
confiscated at Belgrade's airport in three separate shipments 
from China.  The authorized Nike retailer in Serbia, Delta 
Sport, made a EUR 25,000 donation of shoes and Nike 
merchandise to a local charity, rather than consent to 
donating the fake merchandise.  Milos Drobnjak, brand 
protection manager at Delta Sport, told econoff after the 
ceremony that cooperation with Customs and the market 
inspectors has never been better. 
 
¶9.  In another event to highlight the work of its market 
inspectors, the Ministry of Trade, Tourism and Services 
hosted a destruction ceremony on May 31, 2006, in which 
Minister Bojan Dimitrijevic himself threw confiscated CDs 
into a mill at a local factory.  According to him, 437,456 
CDs with music, films and computer software were seized and 
subsequently destroyed in the ceremony, while the byproduct 
was purchased and used by the owner of the factory. 
 
¶10.  Concerning use of illegitimate software on government 
computers, the GOS implemented a legalization campaign as a 
pre-condition to Microsoft's entry into Serbia in 2001. 
Since that time, Microsoft and the Business Software Alliance 
in Serbia report good cooperation with government entities on 
procurement and licensing issues. 
 
¶11.  Concerning protection of undisclosed test data of 
pharmaceutical products, Zoran Labudovic, country manager for 
Pfizer in Serbia, told econoff that Serbia has significantly 
improved protection.  Before Pfizer opened its representative 
office in Belgrade in 1999, domestic companies simply ignored 
the data protection laws that were on the books of the former 
Yugoslavia.  Pfizer sued a local pharmaceutical company for 
patent infringement, winning a favorable ruling.  Labudovic 
said that the Ministry of Health and Human Services now 
recognizes the Agreement on Trade-Related Aspects of 
Intellectual Property Rights (TRIPS) and has put in place 
regulations that protect data exclusivity.  He said that he 
is very pleased with the progress. 
 
AREAS OF IMPROVEMENT FOR 2007 
----------------------------- 
¶12.  Passage of the draft Law on Optical Discs did not occur 
in 2006.  This law would regulate the production of optical 
discs, require the registration of the business activity for 
reproducing optical discs for commercial purposes, and 
provide for surveillance of 1) optical disc imports and 
exports, 2) imports and exports of polycarbonates (material 
used in production of optical discs) and 3) production 
equipment.  In spite of a GOS commitment to push this draft 
law through the government and parliamentary process, the 
draft law still awaits government approval; with a new 
government still under formation, it is unclear at this time 
when action will resume.  When the new government is formed, 
Post will meet with the relevant ministry to push for the 
expeditious passage of this legislation. 
 
¶13.  Another action item requiring follow-through is engaging 
tax inspectors in upholding the new IPR enforcement law.  In 
the past, tax authorities resisted industry requests to 
inquire about software licensing in their routine inspections 
of businesses and subsequently report IPR violations to 
appropriate state officials. However, the new IPR enforcement 
law explicitly gives tax inspectors such authority. 
 
¶14.  Since the new law went into force in July 2006, it is 
unclear whether or not tax inspectors are enforcing this law. 
Vesna Arsic, State Secretary at the Ministry of Finance, told 
econoff on February 16 that no letter of instruction for 
proper implementation was issued to tax inspectors after the 
law went into force.  However, she did say that inspectors 
were inquiring about software licensing in their audits and 
had even reported a few violations to appropriate 
authorities.  In the meantime, she has asked the tax 
administration to prepare a letter of instruction for all 
inspectors giving clear guidance on how to implement the law. 
 
¶15.  Members of the Business Software Alliance (BSA) in 
 
BELGRADE 00000307  003 OF 003 
 
 
Serbia told econoff when that although the IPR situation is 
not perfect, they would not recommend Serbia's placement on 
the Watch List.  In their view, such action now would be 
counterproductive, given the progress that has been made over 
the past few years.  BSA members said that while they are 
pleased with the IIPA decision not to recommend Serbia for 
the Watch List, BSA will continue working with the government 
to strengthen enforcement efforts and public relations 
efforts.  In January, the BSA created a quarterly newsletter 
for distribution to IPR enforcement agencies and business 
partners to raise awareness of the issue and highlight the 
results for the government. 
 
U.S. ASSISTANCE TO INTELLECTUAL PROPERTY OFFICE 
--------------------------------------------- -- 
¶16.  The USG is providing USD 500,000 in technical assistance 
to Serbia's Intellectual Property Office (IPO) through a 
grant from the U.S. Trade and Development Agency.  This 
project addresses issues that undermine Serbia's ability to 
encourage national innovation and participate fully in 
regional and global trade.  Under the grant, assistance to 
the IPO will focus on building human capacity and improving 
processes, while helping to establish the IPO as a self- 
funded agency from fees for processing patents, trademarks, 
copyrights and related IPR applications. 
 
AMCHAM IPR COMMITTEE ORGANIZES TRAINING IN 2006 
--------------------------------------------- -- 
¶17.  The American Chamber of Commerce's IPR Committee remains 
engaged in IPR advocacy and has been an effective vehicle for 
training enforcement authorities.  The following training was 
provided in 2006: 
 
-- Training for the inspectors of SerbiaQs Republic Market 
Inspectorate providing information on recognizing original 
and pirated and counterfeit products (April 18, 2006); 
 
-- Training for police officers, prosecutors and judges in 
Zrenjanin providing information on the new legislative 
framework provided by the Law on Special Authorities for the 
Protection of IPR and on recognizing original and pirated and 
counterfeit products; 
 
-- Conference on IPR protection (September 18-19) brought 
together over 100 representatives of the Ministry of the 
Interior, the Ministry of Finance, prosecutors and judges, 
tax and market inspectors, customs officials and 
representatives of the intellectual property Office to 
discuss practical implementation of the legislation and learn 
more about best practices for fighting IPR infringements. 
Ambassador Polt opened the event, and keynote speakers 
included Milan Parivodic, Minister of International Economic 
Relations, and Vlajko Senic, State Secretary at the Ministry 
for Trade, Tourism and Services.  Speakers included the 
director of the intellectual property Office, lawyers and 
experts from the IPR Committee, as well as a special agent 
from the FBI and a senior police advisor from the US 
Department of Justice, who presented techniques and 
experiences in fighting cyber crime; 
 
-- Presentation on the role of tourist inspectors in 
protection of intellectual property rights at a conference 
organized in Kopaonik (September 21, 2006) by the Ministry 
for Trade, Tourism and Services. 
 
¶18.  Training efforts in 2007 will be focused on tax 
inspectors and judges.  The Committee will also look for ways 
to assist the government in its establishment of high tech 
crimes offices in the Belgrade District Court and the 
Belgrade District Special Prosecutors Office. 
 
COMMENT 
------- 
¶19.  We have had excellent cooperation with the government 
and relevant enforcement authorities when it comes to work on 
the action plan and training assistance, although cooperation 
in public relations has been less enthusiastic.  The private 
sector is generally pleased with these enforcement efforts, 
and this is reflected in the IIPA decision not to recommend 
placing Serbia on the watch list.  We will continue working 
with the new government on enactment of the optical disc 
legislation and providing support in AmCham's training 
initiatives.  We will also seek ways to better publicize the 
results of these efforts. 
 
POLT