VZCZCXRO4521
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHKL #0120/01 0530912
ZNR UUUUU ZZH
R 220912Z FEB 08
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC 0576
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 1546

UNCLAS SECTION 01 OF 03 KUALA LUMPUR 000120 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EB/TPP/IPE - J. BOGER AND EAP/MTS - M. TAYLOR 
DEPT PASS USTR FOR J. GROVES, B. WEISEL, D. BELL 
USDOC FOR ITA/MAC/OIPR - CPETERS 
USDOC ALSO FOR USPTO - PFOWLER 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ETRD KIPR MY
SUBJECT: SPECIAL 301 REVIEW: MALAYSIA 
 
REF: A) STATE 9475; B) 2007 KUALA LUMPUR 1238 
 
¶1.  Summary. In 2007 Malaysian IPR enforcement authorities continued 
to make good progress in fighting IPR piracy.  The single most 
promising development of the year was the long-awaited launch of the 
country's specialized intellectual property court. The United States 
and Malaysia continued to cooperate closely, in particular through 
ongoing negotiations on IPR issues within the framework of a free 
trade agreement. Piracy levels for motion pictures and for 
entertainment software declined in 2007. However, the overall piracy 
rates remain high for most types of IP, and the government will need 
to continue to strengthen its enforcement and prosecution efforts, 
and to seek certain legislative changes to strengthen Malaysian 
authorities. Embassy recommends that Malaysia remain on the Special 
301 Watch List.  End summary. 
 
Optical Media Piracy 
-------------------- 
 
¶2. In 2007 Malaysian IPR enforcement officers continued to exert 
strong pressure on the producers and exporters of counterfeit 
optical disc media.  The Ministry of Domestic Trade and Consumer 
Affairs (MDTCA), Malaysia's principal IPR enforcement authority, 
reports that in 2007 it conducted 70,863 raids, resulting in the 
seizure of 2,395,733 optical discs with an approximate value of 54 
million Malaysian ringgit (approximately USD 16.8 million).  The 
number of cases taken under the Copyright Act of 1987 was 2,720 
involving 597 arrestees.  MDTCA also reported 566 new criminal 
prosecutions. 
 
¶3. Statistics compiled by the copyright industry indicate a seven 
percent drop in piracy rates (from 90 to 83 percent) in 
entertainment software.  MDTCA is carrying out more raids on pirated 
computer game sellers, and is working more closely with the 
Entertainment Software Alliance and the Motion Picture Association 
(MPA) to facilitate enforcement actions and subsequent 
prosecutions. 
 
¶4. The estimated piracy level of records and music remained steady 
at 45 percent, and the business software piracy rate also was 
unchanged, at 60%.  The book publishing industry also reports 
continued large-scale piracy in Malaysia, principally in and around 
university campuses, though increased enforcement efforts lessened 
the overall monetary value of this form of piracy. 
 
¶5. In July 2007 the MDTCA announced a new program targeting the use 
of pirated software. MDTCA has worked with the Business Software 
Alliance to target students, company directors, and employees, and 
include both educational efforts as well as targeted enforcement. 
One of the new IP court's first successful prosecutions involved a 
prominent retail establishment that admitted to possession of 
pirated software, paying a hefty fine while generating unwelcome 
publicity. 
 
Digital Music - The Future of Piracy 
------------------------------------ 
 
¶6. In 2007 the Recording Industry Association of Malaysia (RIM) 
called on the Malaysian Communications and Multimedia Commission 
(MCMC), Malaysia's regulatory body for telecommunications, to block 
internet users from accessing illegal song download sites.  RIM has 
claimed a significant increase in demand for digitized music in 
Malaysia, which has eroded the sales of compact discs (including 
pirated discs).  Much of the demand is being met by foreign websites 
offering free music downloads. MCMC continues to deliberate whether 
to take action against such sites, which would constitute a shift in 
the government's generally hands-off approach to internet website 
access. 
 
¶7. RIM has been pushing Malaysian authorities to take stronger 
action against landlords who allow pirating operations at their 
premises. RIM has also taken direct action against such landlords by 
filing a number of lawsuits seeking damages as well as the closure 
of such operations.  RIM has also sent out warnings of imminent 
lawsuits to hundreds of landlords, many of whom have complied with 
the warning by expelling the pirates.  Following RIM's lead, MDTCA 
has begun to initiate criminal actions against a few landlords as 
well.  Industry is pushing legislation that would specifically 
address the liability of landlords who allow their premises to be 
used for copyright infringement. 
 
Progress on Motion Picture Piracy 
--------------------------------- 
 
¶8. Malaysian authorities successfully attacked the problem of pirate 
 
KUALA LUMP 00000120  002 OF 003 
 
 
recordings in Malaysian cinemas, in particular those recordings 
using advanced cell phone technology (since cell phones are less 
detectable than camcorders).  In 2006 the Motion Picture Association 
(MPA) had estimated that 88% of pirated DVDs and VCDs circulating on 
the streets of Malaysia originated from illegal recordings in 
cinemas. The MDTCA focused its efforts to combat this illegal 
activity, acting on tips provided by cinema employees as well as 
patrons (the local branch of MPA offers a reward for such tips).  In 
early 2008 MPA announced that the joint efforts of cinemas and MDTCA 
officials had effectively eliminated cinemas as a source for illegal 
recordings; in 2007 some 30 cases of illegal recording were stemmed 
in Malaysia.  As a positive corollary, MPA noted that cinema 
attendance in Malaysia increased 20 percent in 2007 compared to 
¶2006. 
 
¶9. Malaysian authorities currently use existing Malaysian statutes 
to arrest and prosecute those caught recording movies in cinemas. 
However, such arrestees can be charged only with theft, not piracy. 
The MPA continues to push for the implementation of standalone 
anti-camcording legislation, both to strengthen the authorities' 
hands (by broadening the scope of illegal activity and by increasing 
fines) as well as to promote the problem among the Malaysian public. 
 The Attorney General is also reportedly considering amendments to 
the Copyright Act to take into account copyright offenses conducted 
over the Internet, though there reportedly was little movement on 
such legislation in 2006. 
 
¶10. The export of pirated discs, in particular those purchased over 
the Internet, remains a significant problem, although most industry 
sectors report fewer exports of pirated material from Malaysia than 
in previous years (with the one exception being the entertainment 
software industry). MPA reports good cooperation with MDTCA 
enforcement officers, Malaysian Post, Royal Malaysian Customs, cargo 
handling companies and courier companies in order to tackle the 
export of pirated discs. 
 
¶11. MPA was instrumental in bringing two sniffer dogs to Malaysia in 
2007 to help MDTCA officials detect hidden optical discs and 
replicating machines.  The resulting seizure of more than 1.6 
million discs received extensive publicity, and has convinced MDTCA 
to establish a permanent canine enforcement unit. 
 
¶12. In early 2007 Prime Minister Abdullah announced the development 
of a national IP policy that had as its centerpiece the allocation 
of RM 5 billion (USD 1.55 billion) to promote IP protection.  The 
MDTCA solicited suggestions from the private sector on the best uses 
for the targeted funds, which should begin to be used in early 
¶2008. 
 
IPR-Related Prosecution 
----------------------- 
 
¶13. The first branch of Malaysia's new intellectual property court 
was launched in Kuala Lumpur in July 2007 (ref 2007 KL 1238). The 
new court eventually will consist of 15 session courts with criminal 
jurisdiction, to be located in each of Malaysia's 14 states plus the 
administrative capital of Putrajaya.  Six high courts, holding both 
civil and appellate jurisdiction, will be established in Kuala 
Lumpur, Selangor, Johor, Perak, Sabah and Sarawak. Allaying the 
concerns of local IP lawyers, the court is organized to operate 
independently of the rest of the court system, with both judges and 
prosecutors assigned exclusively to the IP courts. Although the 
government had hoped that most of the new IP court branches would be 
open by the end of 2007, it appears more likely that such a goal 
will not be achieved until late 2008. 
 
¶14. The MDTCA has taken steps to improve the ability of its 
enforcement officers to handle complex evidence in order to build 
strong criminal cases against IP pirates. Local industry 
associations have provided a large amount of this training. 
 
U.S.-Malaysia IPR Cooperation 
----------------------------- 
 
¶15. In 2007 the U.S. government continued close cooperation with the 
Malaysian government to promote increased IPR protection.  Nineteen 
Malaysian officials attended 10 USG-funded IP training programs that 
were offered in 2007 by the U.S Patent and Trademark Office (USPTO). 
 Among the programs attended by Malaysian officials were USPTO 
Global Intellectual Property Academy programs on enforcement, 
patents, and trademarks. 
 
¶16. In 2007 and early 2008 U.S. and Malaysian officials continued to 
negotiate the IPR chapter of the proposed U.S.-Malaysia Free Trade 
Agreement.  These negotiations were an unprecedented opportunity for 
 
KUALA LUMP 00000120  003 OF 003 
 
 
both sides to learn the details about each other's enforcement 
regimes, and to discuss ways in which such enforcement could be 
strengthened. 
 
Malaysia's International IP Obligations 
--------------------------------------- 
 
¶17. Following accession to the Patent Cooperation Treaty in 2006, 
Malaysia has made progress towards ratifying more multilateral IP 
treaties. Malaysian government officials hope to secure 
parliamentary ratification of Malaysia's accession to the WIPO 
Copyright Treaty and the WIPO Performances and Phonograms Treaty by 
the end of 2008.  Over the medium term, the GOM also foresees 
Malaysian accession to several other IP treaties, including the 
Convention Relating to the Distribution of Program-Carrying Signals 
Transmitted by Satellite; the Protocol Relating to the Madrid 
Agreement Concerning the International Registration of Marks; the 
Budapest Treaty on the International Recognition of the Deposit of 
Microorganisms for the Purposes of Patent Procedure; and the 
Trademark Law Treaty.  Malaysia has not committed yet to joining the 
International Convention for the Protection of New Varieties of 
Plants (aka the UPOV Convention), preferring to wait until it can 
evaluate the effect of its newly-implemented domestic plant 
protection legislation. 
 
¶18. In April 2007 the Ministry of Health announced that the 
government would implement a legal framework to protect 
pharmaceutical data in order to meet the data protection obligations 
under TRIPS Article 39.3.  The announcement indicated that such 
protection would be extended for 5 years for new products, and 3 
years for new indications of existing products.  The time period in 
both cases would begin from the date that such protection was 
extended in the product's country of origin.  As of early 2008 the 
Ministry of Health continues to deliberate (including consultations 
with multinational pharmaceutical companies and other stakeholders) 
before finalizing its policy.  Extensive discussions of the issue 
have taken place at each round of the U.S.-Malaysia FTA 
negotiations. 
 
Recommendation:  Malaysia Should Remain on Watch List 
--------------------------------------------- -------- 
 
¶19. The Malaysian government's record in 2007 showed a solid 
commitment to strengthening IPR protection.  In addition to devoting 
more resources to the single largest IPR problem - optical disc 
media piracy - government officials are also paying increasing 
attention to newer problems such as Internet downloads of pirated 
material.  U.S.-Malaysia FTA negotiations continue to provide a 
forum to discuss best practices across the range of IPR issues 
related to both enforcement and policy, fostering an ongoing 
dialogue among experts from both governments that will provide 
further dividends in the future.  Malaysia's intention to join the 
WIPO treaties this year, and its growing commitment to implement 
data protection in some form, show the importance to the government 
of strengthened multilateral IP protection. 
 
¶20. Despite the many positive trends, however, industry estimates on 
current IPR piracy levels indicate that it remains a serious 
problem. Piracy will require sustained government attention in many 
areas for the foreseeable future, and improved government attention 
in some areas that are currently deficient.  Embassy therefore 
recommends that Malaysia remain on the Special 301 Watch List. 
 
KEITH