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RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHSF #0086/01 0580832
ZNR UUUUU ZZH
O 270832Z FEB 09
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5798
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 03 SOFIA 000086 
 
STATE FOR USTR JCHOE-GROVES, FOR EB/IPE JURBAN; TMCGOWEN; AND EUR/CE 
YEAGER 
COMMERCE FOR SSAVICH 
DOJ FOR CALEXANDRE 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON KIPR ETRD BU
SUBJECT: SPECIAL 301 2008: BULGARIAN EFFORTS LOSE FOCUS 
 
Ref: A. STATE: 08410, B. SOFIA: 0037, C:  08 SOFIA 0522 
 
¶1.  (SBU) SUMMARY: After two years off the Special 301 list, 
Bulgarian IPR results were mixed in 2008.  The formerly dynamic and 
cooperative relationship between the Government and IPR industry 
representatives soured, partially owing to personality-driven 
issues.  The once-model Intergovernmental IPR Council lost its 
strategic vision when industry lost its official membership. 
Internet piracy increased, while major internet piracy cases made no 
headway in the courts.  A late-2008 Supreme Administrative Court 
decision severely restricted the ability of the police to 
investigate internet piracy.  Despite these setbacks, certain 
individuals and institutions fought valiantly against IPR 
violations.  The Ministry of Interior's Cyber Crime Unit acted 
boldly against pirate websites, seizing servers loaded with tens of 
thousands of pirated works and shutting some sites down for good. 
And the Ministry of Culture's copyright inspectors increased 
inspections twelvefold over last year. 
 
¶2.  (SBU) Summary Continued:  Given the overall loss of momentum on 
IPR efforts, we agree with industry that USTR should consider 
Bulgaria's placement on the Special 301 List.  When announcing the 
results of the 2009 Special 301 process, we recommend that our 
message stress the need to reinstitute a constructive, working 
relationship with IPR industry representatives.  There are no quick 
fixes for the inefficiency and non-transparency in Bulgaria's 
judicial system, and no easy solutions to escalating internet 
piracy.  But a reinvigorated government-industry partnership could 
find innovative ways to tackle these issues.  In this election year 
in Bulgaria, a Special 301 designation will have political overtones 
and ramifications.  Our message should avoid criticism of 
individuals while commending progress where appropriate.   End 
Summary. 
 
GOVERNMENT-INDUSTRY COOPERATION 
--------------------------------- 
 
¶3.  (SBU) Once the shining star and backbone of Bulgaria's IPR 
regime, relations between industry and government suffered in 2008. 
In spring 2008, the new Deputy Minister of Culture in charge of 
Bulgaria's once-model IPR Council restricted membership to 
representatives of government entities and allowed industry/civil 
sector participation only on a case-by-case basis.  At the same 
time, this deputy minister offered the Embassy an observer's seat at 
the Council.  Instead of participating during Council meetings, 
industry representatives now meet separately in a "Consultative 
Council" with the Deputy Minister, who then, in theory, raises 
industry concerns at Council meetings. 
 
¶4.  (SBU) The Deputy Minister removed industry from the working 
group because he believed council meetings had become unmanageable 
and inefficient with multiple industry and rights holders' 
participation.  He argued that the Consultative Council would offer 
rights holders more opportunity to discuss their concerns directly 
with the Deputy Minister, who chairs the IPR Council.  Industry 
firmly disagrees.  As a result, Bulgaria's IPR Council has lost 
focus and dynamism, key governmental representatives often fail to 
show up for meetings, and industry and the Ministry of Culture are 
at loggerheads.  Inviting industry back onto the IPR Council would 
be a quick fix, but at issue is not just Council membership, but the 
spirit of government-industry cooperation that has been lost.  This 
is largely a personality issue, with both sides carrying some amount 
of blame.  We have urged a quick resolution to the problem, but have 
made little headway.  As a result, Bulgaria's efforts in other IPR 
areas have suffered. 
 
INTERNET PIRACY 
--------------- 
 
¶5.  (SBU) Internet piracy continues to grow and is now a bigger 
problem than hard goods piracy.  Local industry estimates that 
almost all downloaded music and films are pirated.  In 2008, the 
police's Cyber Crime Unit continued to take strong action in 
response.  The Unit launched a total of 78 operations against large 
pirate websites (particularly so-called "torrent trackers," which 
account for most of illegal downloading), ISPs, and end users in 
2008, compared with 80 operations in 2007.  Specifically, the Cyber 
Crime Unit seized more than 200 hard drives with illegal content, 
and nearly double the amount of seized illegal content (music, 
films, software, and other copyrighted works)-- 75 terabytes (TBs) 
-- compared with 2007 (48 TBs).  That is the equivalent of the 
inventory of almost ten video rental stores -- an extremely 
impressive achievement for a small police squad with few resources. 
The most successful raid was against a local area network (LAN) in 
the town of Dobrich (northeast Bulgaria) in January 2008, when 
police seized 12 servers with 25 TBs of illegal content. 
 
SOFIA 00000086  002 OF 003 
 
 
Unfortunately, the prosecutor's office has not yet presented that 
case to court, in part because of Bulgaria's onerous requirement 
that every seized work be examined to determined if it is 
infringing. 
 
FURTHER ACTION AGAINST TORRENT TRACKERS 
---------------------------------------- 
 
¶6. (SBU) The police Cyber Crime Unit continued to put pressure on 
Bulgaria-hosted pirate websites.  For example, in November 2008 the 
police raided and shut down the notorious torrentvalley.com pirate 
site, which was based in Bulgaria.  That site -- which was free to 
users and did not require any registration -- provided access to 
5,000 torrent-trackers from all over the world, offering literally 
millions of illegal files.  In December 2008, the Unit ordered the 
site p2pbg.com (with over 120,000 users) to stop offering access to 
infringing works.  In addition, police pressure has caused the 
mastersTB.com tracker to disappear and the torrent-bg.org and 
zarta.org sites to move in new, legal directions. 
 
LITTLE PROGRESS ON SIGNIFICANT INTERNET PIRACY CASES 
--------------------------------------------- ------ 
¶7. (SBU) Unfortunately, despite bold and successful police and 
investigative action against the largest pirate sites in Bulgaria, 
prosecutors have only presented one case to court.  That case, 
against arenabg.com, is particularly significant because the site is 
the second largest pirate site in Bulgaria and one of the most 
popular sites in Bulgaria (it is now hosted in the Netherlands.)  In 
addition, the arenabg.com prosecution is possibly the first criminal 
court case in Eastern Europe against a torrent tracker. 
Unfortunately, the judge assigned to the case has now returned it 
twice to prosecutors, citing problems with the indictment.  In 
addition, little progress has been made on the two other torrent 
tracker cases, (another against Arenabg.com and one against 
zamunda.net.)   Both are still in the investigative stage, with no 
indictments filed. 
OPTICAL MEDIA PIRACY 
-------------------- 
 
¶8.  (SBU) As a result of the expansion of internet piracy, optical 
media piracy continues to decline.  Local recording industry 
representatives estimate optical disc (OD) piracy was less than 30 
percent in 2008, compared to 40-45 percent in 2007.  Street sales of 
pirated optical disks take place primarily in Bulgaria's summer and 
winter resort areas.  According to industry, home burning of 
copyrighted materials on compact discs (CDs) and DVD-Rs is 
widespread.  In 2008, the Ministry of Economy conducted 18 
inspections of seven OD plants, and found no illegal physical OD 
output.  Illegal movie content in 2008 was estimated at 50 percent, 
compared to 60 percent in 2007.  Electronic game piracy in 2008 was 
estimated at between 70 and 80 percent (compared to 80 percent in 
2007).  The local movie industry reports that the number of pirated 
movies played by cable operators has decreased to 30 percent in 
¶2008. 
 
BUSINESS SOFTWARE/COPYRIGHT INSPECTIONS 
--------------------------------------- 
 
¶9.  (SBU) The Business Software Alliance (BSA) states that the 
percentage of software that is pirated rose to 70 percent in 2008, 
up two percent from 2007 (68 percent).  The local BSA office reports 
estimated losses in 2008 to industry of USD 53 million, up 39 
percent from 2007 (USD 38 million).  Following an agreement with 
Microsoft, the Bulgarian Government now buys business software 
rather than paying subscription fees for its use.  In 2008, the 
Ministry of Culture conducted a total of 660 copyright inspections 
in retail establishments, restaurants, cafes, and computer halls, a 
twelvefold increase over last year. 
 
BORDER MEASURES 
--------------- 
 
¶10.  (SBU) In 2008, the Customs Office reported 1,733 seizures of 
5,491,333 goods suspected of IPR violation, a five percent decline 
over 2007 (1,823 seizures of 6,776,976 goods).  Due to the tightened 
border controls required by Bulgaria's 2007 accession to the EU, 
Bulgarian customs authorities had registered a 600 percent increase 
of seizures in 2007 over 2006. 
 
PROSECUTIONS AND THE COURTS 
-------------------------- 
 
¶11.  (SBU) Our IPR industry contacts report continued cooperation 
with the prosecutor's office.  The Prosecution Service reports 352 
new IP-related investigations in 2008, down seven percent from 2007 
(380).  On a positive note, 27 percent (129) more pre-trial cases 
 
SOFIA 00000086  003 OF 003 
 
 
made it to court in 2008 over 2007 (101).  The number of indicted 
persons was also higher in 2008 (141) over 2007 (111). 
 
¶12.  (SBU) The courts remained overwhelmingly ineffective, with the 
number of convicted persons on copyright-related cases decreasing by 
56 percent in 2008 (31) over 2007 (70).   Nevertheless, the number 
of persons convicted on all IPR-related offenses, including 
industrial property violations (patent, trademark, etc.), in 2008 
(86) edged up four percent over the number of persons convicted in 
2007 (83).  Unfortunately, court convictions carried only 
administrative penalties, with little deterrent effect. 
 
COURT DECISION, LEGISLATIVE "FIX" HAMPER ENFORCEMENT 
--------------------------------------------- ------- 
 
¶13.  (SBU) In late 2008, Bulgarian Supreme Administrative Court 
dealt the IPR regime a severe blow when it struck down an article in 
Ordinance 40 to the Act on Electronic Communication, legislation 
passed to harmonize Bulgarian legislation with relevant EU 
directives.  This article guaranteed the right of the competent 
directorate at the Ministry of Interior to access data stored by 
Internet Service Providers on behalf of their customers -- an 
essential tool for obtaining evidence in internet piracy cases.  The 
Court struck down the data access article as a violation of 
constitutional rights to information privacy.  Until the problem 
identified by the Supreme Administrative Court is solved, the 
Court's decision will hamper the ability of the police to 
investigate internet piracy and other computer crimes.  In February 
2009, a legislative push to fill the vacuum created by the court 
decision failed, and the Bulgarian Parliament enacted a "fix" that 
will make it quite difficult for the police to investigate internet 
piracy, as well as other types of computer crime such as child 
pornography.  The IPR industry plans to appeal the amended statute, 
arguing that it violates EU law and other international 
instruments. 
 
EMBASSY EFFORTS 
--------------- 
 
¶14.  (SBU) The Embassy continued to highlight IPR in its Mission 
Strategic and work plans.  Outreach by the US Commercial Service and 
the Departments of State, Justice, and Agriculture continued to 
extend across government ranks from working level to Minister.  In 
March 2009, we will send eight enforcement officials (four 
prosecutors and four police/investigators) on a Voluntary Visitors 
Program in the United States, focused particularly on internet 
piracy.  In 2008, the U.S. Department of Justice Intellectual 
Property Law Enforcement Coordinator for Eastern Europe (IPLEC) -- 
based in Embassy Sofia, but covering over 20 countries in the region 
-- conducted extensive training and technical assistance in Bulgaria 
on IPR enforcement.  Specifically, the IPLEC gave eight 
presentations in Bulgaria at six training conferences and meetings 
on a variety of topics aimed at improving IPR enforcement, to a 
total of over 500 police, investigating magistrates, prosecutors, 
judges, other government officials, and industry representatives. 
 
COMMENT 
------- 
 
¶15.  (SBU) With national elections scheduled for summer 2009, any 
inclusion of Bulgaria on the Special 301 list will have political 
implications.  Critics of the Government will use the designation to 
their advantage, while the government itself may try to deflect 
criticism by claiming that the designation is simply the result of 
personality differences between certain Bulgarian officials and 
industry representatives.  Our message to the Government and public 
statements about USTR's decision should include specific 
recommendations and acknowledge progress, where appropriate.  Facing 
an up-hill reelection battle, the current government will not greet 
a possible 301 designation constructively and will not be in a 
position to implement the report's recommendations in the near-term. 
 
 
MCELDOWNEY