VZCZCXRO1214
OO RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHPG #0244/01 0681326
ZNR UUUUU ZZH
O 091326Z MAR 07
FM AMEMBASSY PRAGUE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8722
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 PRAGUE 000244 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EUR/NCE EFICHTE AND EB/IPE JBOGER 
STATE PASS USTR FOR JCHOE-GROVES AND WMOORE 
COMMERCE FOR 4232/ITA/MAC/MROGERS 
COMMERCE PASS USPTO 
STATE PASS LIBRARY OF CONGRESS 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD ECON EZ
SUBJECT: IPR SITUATION AT CZECH BORDER MARKETS 
 
REF: A. PRAGUE 160 
 
     ¶B. STATE 7944 
 
¶1. (SBU) SUMMARY AND COMMENT: Czech authorities are aware of 
current industry complaints regarding IPR violations in the 
Czech Republic, particularly at the open air markets near the 
Austrian and German borders.  The Czech government has 
introduced new legislation and strengthened existing 
legislation to address the issue and has given new competency 
to the 6,000 armed inspectors of the Customs Directorate. 
However, the sheer size of some of these markets and the 
degree of lawlessness speak to the need for reinvigorated 
efforts, particularly the need for close coordination with 
local police.  Post continues to support Ref A recommendation 
that the Czech Republic remain off of the Special 301 Watch 
List given the positive trend in legislation and enforcement. 
 Post believes the Czech government must be engaged at the 
highest levels and given the opportunity to address the 
situation more aggressively. The Ambassador plans to raise 
this issue in upcoming meetings with the Trade Minister and 
Prime Minister. END SUMMARY AND COMMENT. 
 
¶2. (U) Despite the increasing number of raids and seizures 
and the stronger IPR legislation, closing the border markets 
has proven problematic.  Markets are often located in small, 
economically depressed areas blighted by structural changes 
in the economy that have created high unemployment (20% vs. 
national average 7.7%) and few jobs. Tens of thousands of the 
estimated 250,000 to 350,000 Vietnamese living in the Czech 
Republic are earning a living at these open markets, often 
the only source of employment for people with limited Czech 
language skills.  For these reasons, despite strengthening 
legislation and greater enforcement efforts at the national 
level, local authorities have been hesitant to shut the 
markets down, but not doing so has often given way to an air 
of lawlessness that has made it possible for well-organized 
crime syndicates to develop. Customs officials admit that the 
markets have also increased street prostitution and drugs in 
these communities. 
 
------------------------- 
Strengthening Legislation 
------------------------- 
 
¶3. (U) Since Czech accession to the EU in 2004, a number of 
IPR laws have come into force that have strengthened the hand 
of enforcement and court proceedings.  The strengthening 
trend is a result of lessons learned by local enforcement 
officials in the uphill battle to combat piracy in the Czech 
Republic: 
 
2007 (expected): 
-- Law on Consumer Protection and Customs Enforcement amended 
to strengthen the provision for registering vendors (vice 
stall owner who may live overseas). 
-- New criminal code that will increase fines and punishment 
for IPR violations. 
-- Copyright Act expected to be amended again for further 
accordance with EU law 
 
2006: 
-- New Law on Consumer Protection and Customs Enforcement 
gives 6,000 customs officials a new mandate to fight piracy 
(versus previous mandate for only 300 Czech Trade Inspection 
officials) 
-- law on civil procedure, Copyright Act amended again for 
further accordance with EU law 
 
2005: 
-- Copyright Act amended in accordance with EU law 
 
---------------------- 
Enforcement Statistics 
---------------------- 
 
¶4. (U) The Customs Office statistics indicate that over 300 
open air markets exist in the Czech Republic.  Most of these 
are legitimate markets, selling items such as garden gnomes, 
plants, fertilizers, and Asian groceries. Customs has 
identified 13 markets of "serious concern" and have focused 
their enforcement efforts on them. Czech Trade Inspection 
officials provided the following seizure statistics: 
 
2006: 
Total Pirated Articles = 998,000 
 
PRAGUE 00000244  002.2 OF 003 
 
 
% DVDs and CDs = 83% 
 
2005: 
Total Pirated Articles = 666,000 
% DVDs and CDs = 51% 
 
2004: 
Total Pirated Articles = 970,000 
% DVDs and CDs = 48% 
 
According to officials, part of the increase in DVD and CD 
seizures is a result of greater focus on this type of piracy 
as well as 'big-box' wholesalers like Tesco driving out the 
open-air markets' textile business. The Usti nad Labem and 
Pilsen regions, where Cheb is located, accounted for over 80% 
of the seizures in 2006. According to raid statistics from 
the Customs Directorate, the Cheb Asia Dragon Market was 
raided 42 times from January to October 2006, and the 
similarly sized 500 stall market Dragoun, located less than 
10 kilometers from Asia Dragon and the second largest in the 
country, was raided 58 times from January to October 2006. 
 
¶5. (U) In May 2006, the Customs Directorate received full 
authority to fight IPR violations along side Czech Trade 
Inspection. Customs officials provided seizure data covering 
the period from May to December 2006: 
 
2006: 
Total IPR raids = 11,687 
Total Pirated Articles = 1,600,000 
% DVDs and CDs = 20% 
 
Taken together, the Customs Directorate and the Czech Trade 
Inspection seized nearly 2,600,000 pirated articles in 2006, 
of which 44% were seized DVDs and CDs. 
 
¶6. (U) Econoffs met with local and Brussels-based 
representatives of the recording industry's anti-piracy lobby 
group International Federation of the Phonographic Industry 
(IFPI) March 6 to discuss IFPI's recommendation that the CR 
be placed on the Priority Watch List. The focus of the 
discussion was the problem of open air markets, especially 
those close to the German and Austrian borders. IFPI Europe 
Deputy Director Stefan Krawczyk said there are 53 open air 
markets in the CR, of which 15 are considered "major." He 
reiterated reasons from their Special 301 submission, 
including significant increases in domestic production of 
pirated CDs, the establishment of brick and mortar 
"permanent" pirate shops, and inadequate action by local 
police. He also said that there were some improvements in 
anti-piracy legislation and that anti-piracy enforcement 
competence going from the Czech Trade Inspection to the 
Customs Office was a good thing since their experience with 
customs was generally quite good. They lamented the slow 
nature of the court system. 
 
--------------------- 
Embassy Visit to Cheb 
--------------------- 
 
¶7. (U) Accompanied by three IFPI representatives, Econoff 
visited the open air Asia Dragon Market in Cheb on March 7, 
¶2007. The Asia Dragon, located approximately two hours west 
of Prague, has been cited by industry groups as one of the 
largest outdoor piracy markets in Europe. Econoff saw 
approximately 500 stalls spread over two or three football 
fields; according to Customs' statistics, this is the largest 
open air market in the Czech Republic. The 30%-40% of vendors 
open for business were selling low quality shirts, sweaters, 
bags, and watches with designer names, all of which appeared 
to be counterfeit. Approximately 5%-10% of the stalls had DVD 
and CD displays, again, all of which appeared to be 
counterfeit. Reviewing the full variety of goods for sale was 
impossible since many of the vendors closed their stalls as 
we approached. Mr. Krawczyk appeared the night before on a 
televised news broadcast regarding the border markets and 
piracy, and vendors may have recognized him as they often 
distribute amongst themselves photographs of inspectors, 
undercover cops, and anti-piracy advocates. 
 
¶8. (U) At one stall, Econoff and Mr. Krawczyk asked to listen 
to a music CD on display, inquired about pricing, and then 
attempted to walk away. At this point, the Vietnamese seller 
grabbed the arm of Econoff and tried dragging him back to the 
stall while offering a deal on two CDs. Econoff resisted 
 
PRAGUE 00000244  003.2 OF 003 
 
 
saying he was not interested, whereby he was pushed and 
kicked out of the store. A second Vietnamese seller 
approached Econoff and tried to jump-kick Econoff in the 
stomach, but was blocked. The assault ended when one of the 
IFPI representatives screamed "stop." There were no local 
authorities on the scene and no one else seemed to notice 
what had happened. IFPI reports that their inspectors have 
similarly been assaulted for collecting data on the number of 
stalls and pirated goods for sale. 
MUNTER