VZCZCXRO3570
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHWR #0237/01 0521103
ZNR UUUUU ZZH
P 211103Z FEB 08
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC PRIORITY 5994
INFO RUCNMEM/EU MEMBER STATES
RUEHKW/AMCONSUL KRAKOW 1995
RUEHBS/USEU BRUSSELS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 06 WARSAW 000237 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO USTR 
USTR FOR WMOORE AND JCHOE GROVES 
COMMERCE FOR 4232/ITA/MAC/EUR/OECA/MROGERS AND 
ITA/MAC/OIPR/CPETERS 
STATE FOR EUR/NCE AND EEB/TPP/IPE/JBOGER 
 
E.O. 12958: N/A 
TAGS: ETRD ECON KIPR PL
SUBJECT: 2008 SPECIAL 301 REVIEW: REMOVE POLAND FROM WATCH 
LIST 
 
REF: A. STATE 09475 
 
     ¶B. 07 WARSAW 735 
     ¶C. 07 WARSAW 2149 
     ¶D. 07 WARSAW 0918 
     ¶E. WARSAW 165 
     ¶F. PARIS 156 
     ¶G. 07 WARSAW 2212 
     ¶H. WARSAW 99 
     ¶I. 07 WARSAW 2231 
 
WARSAW 00000237  001.2 OF 006 
 
 
¶1.  (SBU)  Summary: Poland made notable progress in 
protecting intellectual property rights (IPR) in 2007.  The 
Warsaw Stadium closed.  Poland implemented the EU's 
Enforcement Directive, closed a major legal loophole, called 
for IPR education for all university students, and began 
working to create specialized IPR courts.  A more 
professional customs service and Border Guard emerged as 
Poland entered the Schengen Zone.  Rights holders reported 
excellent cooperation with local police.  Government and 
industry continued to struggle with internet piracy.  The 
innovative pharmaceuticals industry's market access problem 
eased, as 33 new active substances were approved for 
reimbursement by the National Health Service and new 
legislation promising greater transparency was adopted. 
Although problems remain, overall the IPR picture for 2007 
was extremely positive.  These advances justify removing 
Poland from the Watch List (ref A).  End summary. 
 
------------------------------ 
Changing Background Conditions 
------------------------------ 
 
¶2.  (U)  Poland's economy is growing rapidly.  In 2007, gross 
domestic product grew by 6.5 percent.  Unemployment fell from 
14.9 percent in December 2006 to 11.3 percent in December 
2007, and average wages increased, year-on-year, by 8.9 
percent.  In the same period, the zloty appreciated 11 
percent against the dollar, and 3 percent against the Euro. 
In other words, more Poles are working, they are earning more 
money, and that money is worth more. 
 
¶3.  (U)  An increasing number of Poles are "wired." 
Sixty-one percent of Polish households have a computer.  Of 
those, 3/4 have internet access.  Close to three million 
users have access to broadband (ref B).  However, growth of 
legitimate internet commerce is checked by the fact that 
online stores usually require a credit card to make 
purchases.  Young Poles -- the main consumers of films and 
music -- often do not have credit cards, which blocks them 
from being able to pay to download MP3s legally. 
 
¶4.  (U)  As an EU member, Poland has adopted EU legislation 
and is subject to the discipline of infringement proceedings 
commenced by Brussels.  On December 21, 2007, Poland joined 
the Schengen zone.  As a result, Poland lifted controls on 
its western border with Germany and the Czech Republic, but 
beefed up controls on its eastern border, with Ukraine, 
Belarus and Russia. 
 
---------------------------------------- 
Notorious Markets: Warsaw Stadium Closed 
---------------------------------------- 
 
¶5.  (SBU)  Poland's most "notorious market" -- the "crown" of 
the Warsaw Stadium -- closed on October 1, 2007 (ref C). 
Contacts in the film, music, software, liquor and tobacco 
industries, the police, and the Border Guard, all identified 
this as the most significant IPR development in Poland in 
¶2007.  While some of the Stadium's trade dispersed around the 
city, this needs to be kept in perspective.  EmbOffs have 
noticed a vendor's table pop up here and there offering 
pirated DVDs.  These sightings of small-scale trading have 
been haphazard; a buyer cannot be certain of being able to 
find a given seller at a given location, or of the contents 
of the seller's stock.  This contrasts sharply with the huge 
wholesale turnover that used to exist at the Stadium, where 
hundreds of traders offered seemingly endless quantities of 
pirated shoes, clothing, cigarettes, liquor, music and 
software, and where virtually any bootleg film could be 
"ordered" if it weren't already in a trader's stock (ref D). 
Closure of the Stadium was a major advance.  According to 
Arkadiusz Olejnik, of the Polish Border Guards, in contrast 
 
WARSAW 00000237  002.2 OF 006 
 
 
to two years ago, Warsaw is no longer a distribution center 
for pirated goods. 
 
--------------------------------------------- ----------- 
Notorious Markets: Uncertain Effect of Schengen Entry on 
Border Bazaars 
--------------------------------------------- ----------- 
 
¶6.  (SBU)  Poland continues to struggle with open-air bazaars 
along the border with Germany.  It is unclear what effect 
Poland's entry into the Schengen zone will have on these 
markets; conceivably the lifting of controls along the 
western border eliminated their raison d'etre, since sellers 
can now take pirated goods directly to the consumer in 
Germany.  Nevertheless, the Border Guards' Olejnik expects 
the bazaars to continue to operate on the same scale in 2008 
as in 2007.  Both officials and the private sector took 
measures in 2007 to reduce piracy in these bazaars. Most 
notably, the police closed down an internet site that allowed 
customers to download German subtitles for pirated DVDs. 
Also, ProMarka, an association of trademark owners, conducted 
information campaigns in the bazaars, aimed at raising 
consumer awareness of counterfeit goods. 
 
¶7.  (SBU)  Some contacts expressed concern that similar 
open-air markets could spring up on Poland's eastern border. 
However, Olejnik stated there is no evidence of that so far, 
and he doubted it would happen, as inhabitants of the 
relatively poor eastern border region still lack the 
purchasing power to make such markets profitable. 
 
---------------------------------- 
Enforcement:  Legislation Improved 
---------------------------------- 
 
¶8.  (SBU)  In 2007, Poland enacted two important changes to 
IPR legislation: 
 
-- Poland amended Articles 305 and 306 of the Industrial 
Property Law to overturn a May 2005 Supreme Court decision 
holding that the law's criminal penalties could only be 
applied to the first importer/producer of a counterfeit good 
(ref E).  Closing this loophole clears the way to increased 
infringement prosecutions. 
 
-- Poland implemented the EU's Directive on the Enforcement 
of Intellectual Property Rights (the Enforcement Directive). 
Under prior Polish legislation, in some circumstances rights 
holders could recover double (or, for intentional 
infringement, triple) damages for copyright infringement. 
When Poland implemented the Enforcement Directive, it kept 
this provision.  However, patent and trademarks are addressed 
in a separate statute.  Under that statute, only actual 
damages can be recovered for trademark and patent 
infringement.  Some rights holders groups assert that the 
level of damages should be the same (i.e., triple) for all 
classes of intellectual property.  However, double or triple 
damages are not required by the EU.  In other words, Polish 
legislation implementing the Enforcement Directive gives all 
the protection due under EU law to trademarks and patents, 
and continues to give more protection than is required by the 
EU to copyrights. 
 
The Polish Minister of Culture, whose agency has the lead on 
IPR issues within the Polish government, asked government 
agencies and stakeholders in the private sector to identify 
additional needed legislative changes.  He plans to make 
passing a new IPR bill a priority in the second half of 2008. 
 
--------------------------------------------- ----------- 
Enforcement:  Courts Still Backlogged, But Reform Effort 
Underway 
--------------------------------------------- ----------- 
 
¶9.  (SBU)  Polish courts remain congested.  Contacts estimate 
that the number of pending IPR cases has remained the same, 
or increased slightly, since last year.  The severity of the 
backlog varies from place to place, and is worst in large 
cities.  In Warsaw, it may take three or four years to reach 
a final judgment in a case.  Cases may be prolonged, and 
ultimately dismissed, because the rights holder deems the 
value of the infringing goods too small to bother with, and 
 
WARSAW 00000237  003.2 OF 006 
 
 
declines to provide needed expert testimony.  Despite 
slow-moving courts, effective relief may still be available 
to a rights holder.  Counsel to the Business Software 
Alliance (BSA) told EconOff the BSA rarely pursues civil 
cases, because of the associated costs and delays.  Instead, 
the BSA relies on criminal proceedings, in which there is 
little delay between filing a complaint and the police 
closing down the target.  He said such cases are most 
frequently resolved by a settlement.  While this precludes 
imposition of "deterrent sentences," the fact that the 
offender's business is shut down also has deterrent value. 
 
¶10.  (U)  The Polish government hopes to address the problems 
of congested courts, and often ill-prepared prosecutors and 
judges, by establishing specialized IPR courts.  The Ministry 
of Justice has already begun drafting the needed legislation. 
 Currently, there is a dispute within the government 
regarding how broad the jurisdiction of the specialized 
courts should be, but a basic consensus in favor of 
establishing such courts appears to have emerged (ref E). 
 
--------------------------------------- 
Enforcement:  Mixed Picture With Police 
--------------------------------------- 
 
¶11.  (SBU)  Contacts distinguished between the performance of 
local police and the national police headquarters.  The 
director of the unit responsible for IPR matters at the 
national police headquarters told EconOff that the police 
treat intellectual property violations "just like any other 
economic crime," and that when the police receive a 
complaint, they will investigate it.  When asked about 
internet piracy, he stated anyone can monitor the internet, 
and -- if one finds a problem -- can file a complaint.  The 
same official later asserted that police headquarters has a 
special internet unit to deal with online pedophiles as well 
as IPR violations.  However, he subsequently acknowledged, 
the unit has no dedicated personnel.  A single official in 
the national headquarters works full time on IPR issues. 
Nothing appears to have been done in the past year to 
increase the national headquarters' technical ability to deal 
with internet piracy.  At a Polish inter-agency meeting on 
January 30, 2008, other Polish government agencies interested 
in IPR issues criticized the national police headquarters' 
inaction.  Industry contacts repeatedly described national 
police headquarters as "doing absolutely nothing." 
 
¶12.  (SBU)  Lack of IPR fervor in the national police 
headquarters is disappointing, but in reality may be of 
little consequence, as rights holders can -- and do -- work 
directly with local police.  Representatives of the liquor, 
tobacco, film, music and software industries all reported 
that they enjoy excellent working-level cooperation from 
local police.  They stated that, thanks to training offered 
by rights holders groups, local police forces increasingly 
include officers with IPR expertise.  In addition, several 
local police commands have established specialized "economic 
crimes" units.  Moreover, in Wroclaw, an IPR group has been 
established that brings together the police, customs 
officials and Border Guards.  This model may be replicated in 
other Polish cities. 
 
¶13.  (SBU)  On another positive note, contacts report that 
the customs service and Border Guards made significant 
strides in the past year.  The government of Jaroslaw 
Kaczynski tried to root out corruption even at low levels, 
leading to a large number of officials being dismissed.  With 
Poland's entry into the Schengen zone, the overall competence 
and professionalism of the Border Guards has increased. 
According to the Border Guards' Olejnik, at each stage of 
their training, border guards receive instruction regarding 
IPR.  A handbook has been distributed in the training schools 
and to each unit.  He said that every local division of the 
Border Guards has a person assigned to deal with IPR issues. 
 
-------------------------- 
Optical Disks and Software 
-------------------------- 
 
¶14.  (SBU) In prior years, statistics on the number of seized 
goods were used as a proxy to assess the scope of trade in 
pirated goods.  This approach has always had some problems. 
 
WARSAW 00000237  004.2 OF 006 
 
 
When a case is transferred from, say, customs officials to 
the police, they may both record it, resulting in 
double-counting.  In cases where the rights holder declines 
to press charges, a seizure may not be recorded, resulting in 
under-counting.  Furthermore, figures on number of 
investigations can be distorted by a particularly large case. 
 The Border Guards' Olejnik noted that two years ago there 
was a major seizure of goods on the border with Lithuania. 
Thanks to that seizure, in that year that region appeared to 
be a leader in IPR enforcement, but there has been little 
activity there since.  In 2007, Torun officials seized an 
internet pirate's hard drive.  Using data from the hard 
drive, the Torun prosecutor commenced 2,000 cases against 
end-users, causing a spike in statistics for the region.  On 
January 23, 2008, Polish Border Guards along Poland's western 
border seized 66,000 CDs, DVDs, CD-Rs and DVD-Rs, as well as 
108,000 inlay cards.  The haul was 10 times larger than the 
total for all seizures for that area in the prior year.  The 
case was an important one that took time to prepare. 
Nevertheless, due to this one seizure, a simple year-on-year 
comparison of the number of seized goods in 2008 with 2007 
would lead to faulty conclusions regarding the degree of 
enforcement activity. 
 
¶15.  (SBU)  Changes in technology further reduce the 
probative value of statistics on the number of seized goods. 
As broadband internet access increased, illegal downloading 
of music, films and software grew apace.  There has been a 
corresponding decline in trade in physical goods, like 
pirated CDs and DVDs.  A market shift toward MP3s and away 
from CDs further reduced demand for CDs.  As in prior years, 
forensic studies indicate that 85 percent of seized "pressed" 
discs were made in Russia.  However, the number of "pressed" 
disks in circulation has declined, as CD and DVD burners have 
become commonplace.  In 2006, the ratio of pressed to burned 
disks was roughly 50-50.  In 2007, burned disks predominated 
by a ratio of 3-to-1.  Also, according to FOTA, an 
association of film producers, increases in disk capacity 
mean losses per DVD have increased.  A few years ago a seized 
DVD contained one film; now a majority of those seized 
contain three or four films. 
 
¶16.  (SBU)  Statistics gathered by the recording industry 
association, ZPAV, indicate that from 2006 to 2007: (i) the 
number of seized cassettes fell by 98 percent, which ZPAV 
attributed to the fact that cassette tapes are essentially a 
dead technology; (ii) the number of seized foreign CDs fell 
by 17 percent (from 52,413 to 43,750), and the number of 
seized Polish CDs decreased 12 percent (from 13,455 to 
11,786); (iii) the number of seized DVDs decreased 44 percent 
(from 12,659 to 7,156); (iv) the number of seized CD-RWs 
decreased 66 percent (from 129 to 44); and (v) the number of 
seized CD-Rs increased 8 percent (from 119,874 to 129,883). 
The overall value of seizures dropped by 23 percent. 
Contacts in the film and recording industries assert the 
decline in seized goods is a result of police conducting 
fewer raids.  However, the changes in technology and the 
market discussed above undoubtedly were also major factors. 
 
¶17.  (SBU)  Post knows of no reliable means to assess the 
relative contribution of each factor to the overall decline 
in seizures.  It seems safe to say, however, that internet 
piracy is on the rise and is the primary concern of media 
rights holders.  Unfortunately, as one contact privately 
admitted, "no one really has a good idea about how to control 
the problem."  Some contacts point to the recommendations of 
the French Olivennes Commission Report on digital piracy as 
indicating the way forward (see ref F), but others worry 
efforts to adopt the Olivennes proposals in Poland would open 
the door to legislation substantially restricting rights 
holders' ability to incorporate digital rights management 
technologies into their products.  Discussion of how to adapt 
to the proliferation of peer-to-peer technologies is at an 
early stage, and rights holders seem to be floundering as 
they search for an effective response.  The Minister of 
Culture's plan to push for new IPR legislation in the second 
half of 2008 could provide a vehicle for new measures to 
limit internet piracy.  The Ministry is soliciting proposals 
from rights holders groups. 
 
¶18.  (SBU)  In prior years, the music and film industry was 
concerned by excess production capacity in optical 
 
WARSAW 00000237  005.2 OF 006 
 
 
disk-pressing facilities in Poland.  This is no longer an 
issue.  Contacts report the excess capacity has been fully 
absorbed by the new Europe-wide trend of distributing CDs and 
DVDs as free inserts in newspapers. 
 
--------------------------------------------- ---------- 
Pharmaceuticals: Major Progress on Market Access Issues 
--------------------------------------------- ---------- 
 
¶19.  (SBU)  Contacts in the research pharmaceuticals industry 
uniformly identify access to the list of drugs eligible for 
reimbursement from the National Health Service as their top 
priority.  In 2007 there was a major breakthrough: 33 new 
active substances were added to the list (ref G).  As a 
result, those companies whose products were added to the list 
expect substantial increases to their revenues in 2008 and 
2009 (ref H).  A Ministry-industry dialogue, commenced under 
USG auspices, contributed to the breakthrough. 
 
¶20.  (SBU)  In addition, on September 29 new legislation went 
into effect revising the process for adding drugs to the 
reimbursement list.  The legislation set a 180-day limit for 
making a decision on whether to add a drug, required the 
Ministry of Health to provide a reasoned basis for decisions, 
and allowed decisions not to include a drug on the 
reimbursement list to be appealed to an administrative court 
(ref G).  If implemented properly, the law should lead to a 
significant improvement in the timeliness and transparency of 
the process for adding drugs to the reimbursement list.  Some 
contacts in the industry note that deadlines existed in 
Polish law in the past, and were frequently ignored.  They 
doubt the Polish government will abide by the terms of the 
new law.  Such worries are understandable in light of the 
industry's troubled history here, but at this time post has 
no concrete information indicating the Polish government will 
fail to comply with the terms of the legislation.  Poland is 
under pressure to modify its methods because of an EU case 
challenging Poland's past lack of criteria for making 
reimbursement decisions, failure to respect deadlines, 
failure to justify decisions and failure to provide appeal 
rights.  That case is at the stage of a "reasoned opinion." 
 
¶21.  (SBU)  While major progress was made on the industry's 
top issue, several other matters of lesser commercial 
importance require comment.  First, Polish legislation still 
only provides six years of data protection for products 
registered in Poland.   However, Poland does extend the 
European "8   2   1" term of protection to all products 
registered at the EU level.  Since, as a practical matter, 
all new products are in fact registered at the EU level, the 
lesser degree of protection for Polish-registered products is 
of little commercial significance.  Post has seen no new 
evidence of specific IPR violations related to data 
exclusivity with American firms, and no U.S. pharmaceutical 
firm reported a new case of patent infringement to post 
during the past year. 
 
¶22.  (SBU)  In 2007, the Ministry of Health began to rely on 
Health Technology Assessments (HTAs) for innovative products. 
 Some companies are concerned that the assessment process 
could be used as a pretext to keep innovative products out of 
the reimbursement system.  However, contacts also report that 
the HTA process is used in other EU countries, including 
France and the UK, and that the agency conducting the HTAs is 
staffed by competent professionals using recognized 
methodologies.  While abuse of the process is possible, post 
is aware of no concrete cases where the HTA process was in 
fact abused to erect a barrier to market access for 
innovative drugs in Poland. 
 
¶23.  (SBU) On July 1, 2006, the Polish government instituted 
a 13 percent across-the-board price cut on all imported 
pharmaceutical products.  The Polish government contended 
that it cut prices in response to exchange rate changes, as 
allowed under Polish regulations.  In response to allegations 
that the price cut violated national treatment obligations, 
in November 2007 the Polish government reduced the price it 
pays domestic producers for drugs manufactured using imported 
inputs.  The European Commission is investigating the price 
reduction, and contacts are confident that Poland will 
eventually be found to have violated EU rules.  In the 
meantime, contacts advise, the costs associated with the 
 
WARSAW 00000237  006.2 OF 006 
 
 
price reduction long since have been absorbed or written off. 
 
¶24.  (SBU)  Another pending EU case concerns the accelerated 
registration on the eve of EU accession in 2004 of the 
so-called "ghost list" of generic products with incomplete 
dossiers.  The pharmaceuticals industry has expressed concern 
that a similar approach could be used by the Ministry of 
Health in 2008 to issue conditional re-registrations for 
older generics when the transitional period allowed for 
upgrading of old dossiers comes to an end.  Contacts at the 
Ministry of Health informed EconOff they are unaware of any 
such plans. 
 
--------- 
Education 
--------- 
 
¶25.  (SBU)  The Polish Ministry of Science and Higher 
Education issued a higher education guideline calling for all 
Polish university students to receive instruction in IPR, 
effective October 1, 2007 (ref I).  To our knowledge, this is 
the first time such a step has been taken anywhere in the 
world.  The President of the Polish Patent Office personally 
championed the measure.  Although the guideline is not 
binding, Polish universities report they are moving to 
implement it.  The private sector is also working to increase 
IPR awareness.  For example, Michal Siciarek, chairman of the 
AmCham's Intellectual Property Committee, told EconOff that 
AmCham members plan to teach an IPR course at Warsaw 
University.  Working with the Ministry of Culture, the AmCham 
also sponsored an IPR-related poster contest.  Similarly, 
ProMarka, an association of trademark owners, commissioned a 
survey of public attitudes towards counterfeits, and launched 
a public awareness campaign. 
 
¶26.  (SBU)  Training for government officials is also 
increasingly available and used.  Rights groups, such as 
ZPAV, participate regularly in police training and law 
enforcement conferences.  ZPAV and FOTA collaborated on a 
handbook for handling IPR cases (including a protocol for 
dealing with internet piracy) that was  distributed to all 
police commands and prosecutors offices.  Under a "twinning" 
program supported by the EU's "Transition Facility 2004," 14 
training sessions, in which 248 Border Guards participated, 
were organized by the Polish border guards, Ministry of 
Finance, and Ministry of Culture.  In 2008, officials from 
the Polish Ministry of Culture will take part in courses 
offered by the U.S. Patent and Trademark Office. 
 
------- 
Comment 
------- 
 
¶27.  (SBU)  In 2007, Poland improved its IPR legislation, 
closed the most notorious market for counterfeits in eastern 
Europe, improved control of its eastern border, and called 
for IPR education for all university students.  Poland broke 
the logjam on adding innovative pharmaceuticals to the 
reimbursement list, and adopted legislation promising a more 
transparent process.  A bill is being drafted to create 
specialized IPR courts, and the government is open to 
industry proposals to address internet piracy.  Weak spots 
remain, but overall these developments indicate a government 
with a broad and deepening commitment to IPR.  In light of 
the excellent progress made in 2007, Poland should be removed 
from the Watch List. 
CURTIN