VZCZCXRO1752
PP RUEHCN RUEHGH RUEHVC
DE RUEHIN #0212/01 0560929
ZNR UUUUU ZZH
P 250929Z FEB 09
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 0978
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHINGTON DC

UNCLAS SECTION 01 OF 05 TAIPEI 000212 
 
SENSITIVE 
 
STATE FOR EAP/RSP/TC, EAP/EP 
STATE PLEASE PASS USTR 
USTR FOR RAGLAND AND ALTBACH 
USDOC FOR 4430/ITA/MAC/AP/OPB/TAIWAN 
USDOC ALSO FOR ITA/MAC/OIPR 
USDOC FOR USPTO GIN, BROWNING, AND SNYDOR 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR TW
SUBJECT:  Taiwan IPR: 2009 301 Watch List Submission 
 
REFTEL: 
 
A) Taipei 26 
B) 2008 Taipei 49 
C) 2008 Taipei 1655 
D) 2007 Taipei 2442 
E) 2007 Taipei 2498 
F) 2008 Taipei 950 
 
Overall Assessment 
------------------ 
 
¶1. (SBU) The Taiwan authorities continued to strengthen intellectual 
property rights (IPR) enforcement over the past 12 months. The 
long-awaited specialized IP Court started accepting cases in July 
2008, and by year's end had a caseload of 694 cases.  The Taiwan 
Intellectual Property Office (TIPO) finalized ISP-related amendments 
to the Copyright Law.  TIPO also took steps to address EU concerns 
about Taiwan's use of compulsory licenses, but did not submit an 
amended Patent Act to the LY before the end of the 2008 session. 
Taiwan's Ministry of Education (MOE) increased efforts to reduce 
electronic piracy and textbook copying on university campuses, and 
schools are more closely tracking and punishing violations. 
 
¶2. (SBU) However, problems remain.  Although physical copying of 
movies and music continued a decade-long fall, digital piracy of 
music, movies, and software continues to be a problem.  The EY sent 
to the LY an amendment to the Copyright Law that would have limited 
an Internet service provider's (ISP) liability if the ISP quickly 
removed IPR-infringing material, but the LY was not able to complete 
the process of approval before the end of the 2008 winter session. 
Although Taiwan's software piracy rate held steady at 41 
percent--third-best in Asia behind Japan and Singapore--some 
software companies' representatives believe that the actual rate is 
significantly higher. Rights-holders continue to complain that 
Taiwan Customs remains the weak link in Taiwan's improving efforts 
against piracy. 
 
¶3. (SBU) Overall, due to Taiwan's steadily improving IPR 
environment, AIT does not believe that Taiwan should be included on 
the 2009 Watch List.  In 2009, we will encourage Taiwan to 
demonstrate continued commitment to IPR enforcement by passing the 
ISP amendment, finalizing amendments to the Patent Act that address 
industry concerns on compulsory licensing, and continuing to combat 
digital and textbook piracy on university campuses.  End overall 
assessment. 
 
----------------------- 
Ongoing Areas of Review 
----------------------- 
 
Notorious Markets 
----------------- 
 
¶4. (SBU) Piracy in Taiwan's night markets has declined over the past 
decade, and there are no "notorious" physical markets.  In 2008, 
several stalls in the Hsin-Ming night market in Taoyuan County began 
offering free pirated CDs, DVDs, and computer games in exchange for 
a "suggested" donation to the stalls' operators.  The ambiguous 
legal status of the stall owners' actions initially slowed law 
enforcement reaction to the pirating, but by the end of 2008, 
Intellectual Property (IP) Police raids shut the scheme down. 
 
Optical Media 
------------- 
 
¶5. (SBU) According to the Recording Industry Foundation in Taiwan 
(RIT), which represents the international recording industry, as 
legitimate CD sales in Taiwan have dropped by half over the past 
five years, the percentage of pirated copies has fallen from 36 
percent of all copies sold to 22 percent.  RIT estimates that the 
number of physical outlets for pirated CDs has also fallen to fewer 
than 20 night market stalls island-wide, down from about 30 in 2007 
and some 250 a decade ago, and that this kind of physical piracy is 
under control. Other rights-holder groups agree that large-scale 
production and distribution of physically-pirated goods is 
declining. 
 
¶6. (SBU) According to RIT, the Taiwan police initiated 90 
music-related physical piracy cases in Taiwan in 2008, down from 136 
in 2007 and 227 in 2006. Rights-holder groups believe that most 
domestic physical movie counterfeiting is now individuals burning 
counterfeit DVDs on home computers, with the majority of pirated 
 
TAIPEI 00000212  002 OF 005 
 
 
DVDs coming from the PRC and other overseas mail-order sites that 
take orders over the Internet and deliver physical copies by mail 
(ref A) 
 
Digital Piracy 
-------------- 
 
¶7. (SBU) In June 2007, Taiwan passed legislation providing a legal 
basis for prosecuting online peer-to-peer platforms whose service 
allows for the exchange of IPR-infringing materials, and by the end 
of 2007, the authorities had shut down the two largest P2P service 
providers in Taiwan (ref B). In 2008, the MOE issued increasingly 
strict Internet guidance to universities, including new rules 
forbidding all peer-to-peer (P2P) software use except with explicit 
permission, requiring daily bandwidth limits, and monitoring 
download volume per student (ref C). 
 
¶8. (SBU) In September 2008, the Taiwan Intellectual Property Office 
(TIPO) finalized a proposed amendment to the Copyright Law that 
would limit an ISP's liability if the provider quickly removed 
IPR-infringing material.  In September, the EY approved the draft 
amendments, and forwarded the draft to the LY for approval. However, 
the 2008 LY session ended before the amendment could become law. 
According to TIPO, the LY will debate passage of the proposed 
amendment during the first session of 2009, and we expect the bill 
to be approved by mid-year. (ref A). 
 
¶9. (SBU) Although digital piracy of music and movies remains the 
number one concern for movie and music industry groups, industry 
statistics show rights holders are becoming more effective at 
enforcing intellectual property rights. In 2008, RIT members sent 
more than 1000 "Cease and Desist" letters asking major Internet 
service providers (ISPs) and auction sites to remove unauthorized 
music content, with a 91-precent success rate in having the ISP 
remove the offending content. RIT members averaged 1250 such letters 
in 2006 and 2007, with a take-down rate of only 80 percent. 
 
¶10. (SBU) Digital piracy prosecutions are also falling.  According 
to RIT statistics, Taiwan prosecuted 122 music-related digital 
piracy cases in 2008, down from 265 cases in 2007.    RIT's Alex 
Chen attributes the drop to more successful notice-and-takedown 
efforts by the recording industry, a greater awareness of 
intellectual property among the general public, and the increasing 
availability of legitimate music online. Chen noted, however, that 
RIT does not believe digital piracy itself is dropping, only that 
industry is getting better at identifying and taking action against 
websites hosting copyrighted material. 
 
Software, Including Use and Procurement by Authorities 
------------------------ ----------------------------- 
 
¶11. (SBU) According to the latest Business Software Alliance (BSA) 
surveys, 40 percent of member-company software used in Taiwan in 
2007 was unauthorized.  This is a one percentage-point drop from the 
2006 figure, and places Taiwan third-best in Asia--behind only Japan 
and Singapore--and 23rd worldwide. 
 
¶12. (SBU) The true picture of software piracy is likely worse, 
however (ref A).  In a recent meeting, BSA's Taiwan office head told 
econoff that BSA's survey methodology undercounts the level of 
unauthorized use, including illegal copies, expired licenses, and 
under-reporting of licensed users, and software company 
representatives privately estimate to us that 70 to 90 percent of 
business software in Taiwan is unauthorized.  According to 
rights-holders, such unauthorized use of software is common not only 
in the business community, but also on university campuses and 
within official agencies. 
 
TRIPS Compliance and Other IPR Issues 
------------------------------------- 
 
¶13. (SBU) In January 2008, the EU completed a Trade Barriers 
Regulation (TBR) investigation into Taiwan's 2006 decision to issue 
a compulsory license to local company Gigastorage to produce CDs 
using Philips' licensed technology (ref D).  The EU report concluded 
Taiwan's Patent Law is inconsistent with WTO rules on intellectual 
property, and recommended that the European Commission start WTO 
proceedings if Taiwan did not take concrete steps to amend its 
Patent Law within two months. 
 
¶14. (SBU) In response, TIPO began drafting amendments to the Patent 
Act.  Although the changes would address some of the EU's concerns, 
Philips is worried about several other changes the bill would bring 
 
TAIPEI 00000212  003 OF 005 
 
 
to the compulsory license regime, including unclear guidance on what 
constitutes patent abuse, provisions that would allow the use of a 
compulsory license to produce for export, and an inadequate appeal 
mechanism for the patent holder (ref A). 
 
¶15. (SBU) Fortunately, however, TIPO was not able to complete the 
text of the amendments before the 2008 LY session ended in January 
¶2009.  We will continue to track the proposed amendments, and will 
seek to ensure TIPO gives industry adequate time to understand and 
comment on the proposed changes and make comments on the changes. 
 
Data Protection 
--------------- 
 
¶16. (U) Taiwan has three laws that cover data protection: the 
Personal Data Protection Law, the Trade Secrets Act, and the 
Integrated Circuit Layout Protection Act.  AIT has heard no 
complaints from industry about problems with data protection in 
Taiwan. 
 
¶17. (SBU) Since 2006, Taiwan's Pharmaceutical Law has provided drug 
companies five years of data exclusivity for new drugs.  This 
coverage is limited to chemical entity products and does not cover 
new indications.  The Law allows competitors to refer to the 
originators' data and submit generic filings three years after the 
originator gains market approval, and requires drug companies to 
register a new product in Taiwan within three years of the product's 
release in an advanced-country market.  Although the Taiwan 
Department of Health has expressed interest in setting up a system 
of patent linkage in the regulatory procedures for approving 
generics, Taiwan has no plans to implement a U.S.-style patent 
linkage system (ref E). 
 
Production, Import and Export of Counterfeit Goods 
--------------------------------------------- ----- 
 
¶18. (SBU) Most large-scale pirating of optical media, software, and 
clothing has shifted to other locations in Asia.  Since 2002, 
enforcement authorities have increased the frequency and 
effectiveness of raids against night markets and large-scale optical 
media factories, significantly reducing the number of pirated 
products for retail sale.  In response, over the past few years, IP 
pirates have shifted from large optical media plants to small, 
custom optical-media burning operations, often for home delivery and 
sale over the Internet, or have shifted production overseas. 
 
¶19. (SBU) Trademark infringement, including fake cigarettes, 
clothing, handbags, watches, and footwear, is also an area of 
concern in Taiwan, but cases and arrests declined in 2008.  In 2008, 
police filed 873 cases involving trademark infringement, down 27 
percent from 2007, and arrested 958 suspects, down 25 percent from 
¶2007. 
 
¶20. (U) Taiwan Customs reported that the number of seizures of 
counterfeit branded goods decreased in 2008 to 226 cases from 300 in 
2007, and Taiwan Customs impounded only 1,104,557 items in 2007, 
compared to 4,446,506 items in 2007.  Counterfeit cigarettes 
accounted for 85 percent of seized goods, car parts for six percent, 
and clothes, medicines, and leather products for about one percent 
each. 
 
¶21. (SBU) Taiwan Customs had only four cases of export commodities 
found to infringe trademarks, though the 57,626 trademark-violating 
export goods seized in these cases were a 647-percent increase from 
the 7707 items seized in 2007.  Under its Optical Disk Law, Taiwan 
routinely inspects exports of disks and disk manufacturing 
equipment.  In 2008, Customs found only 31 illegal export cases 
involving optical disks, none of which were disks suspected of 
violating copyrights.  Instead, all 31 cases involved only false 
declarations of export quantity. 
 
¶22. (SBU) The International Research-based Pharmaceutical 
Manufacturers' Association (IRPMA), the original-drug manufacturers' 
industry group in Taiwan, remains concerned about counterfeit drugs, 
but in its 2009 Policy Priority Paper, IRPMA again ranks the issue 
far below other IPR issues such as patent linkage and data 
exclusivity. 
 
Enforcement: Police and Courts Good, Sentences Light 
--------------------------------------------- ------- 
 
¶23. (U) Taiwan's Joint Optical Disk Enforcement (JODE) Task Force 
conducted 916 inspections of optical disk manufacturers in 
 
TAIPEI 00000212  004 OF 005 
 
 
2008--over half at night--and for the third year in a row found no 
violations of Taiwan law. 
 
¶24. (U) In 2008, the IPR Police conducted five percent fewer raids 
(6275) than in 2007, began seven percent fewer infringement cases, 
and made 18 percent fewer arrests.  The IP Police's efforts show the 
increasingly digital nature of piracy in Taiwan: while seizures of 
all other major counterfeit good categories declined in 2008 
compared to 2007, seizures of pirated music, movie, and 
software/video game disks were up 126 percent, 40 percent, and four 
percent, respectively. 
 
¶25. (SBU) Very few successful IPR-related prosecutions, however, 
result in jail time for the violators.  In 2008, Taiwan courts 
handed down 2,497 sentences for IPR-related crimes, and 2330 (93 
percent) were fines or short jail terms that are almost 
automatically converted into fines.  In 2007, Taiwan courts handed 
down 2,434 sentences for IPR-related crimes, and 2069 (85 percent) 
were fines or short jail terms. 
 
¶26. (SBU) The long-awaited specialized IP Court started accepting 
cases in July 2008 (ref F), and by year's end had received 694 
cases, and closed out 364 of them.  The Court accepts first-instance 
and appeals civil and administrative cases, as well as criminal case 
appeals.  BSA and other rights-holder groups, while encouraged by 
the Court's establishment, are pessimistic that the IP Court will 
noticeably improve IPR-related prosecutions due to limited 
resources.  Other AIT industry and Ministry of Justice (MOJ) 
contacts, however, praise the Court for its knowledgeable experts, 
and note the IP Court is handling cases faster than non-specialized 
courts (ref A). 
 
¶27. (SBU) Rights-holder groups complain that--due to a loophole in 
Taiwan's Copyright Law--clearly counterfeit goods seized during 
investigations may be returned to defendants if the investigation 
does not end in an indictment.   In early 2008, TIPO completed a 
draft amendment to the Copyright Law in order to close this 
loophole, but did not send the bill to the LY for consideration. 
Instead, acting on the advice of TIPO and the IP Police, the 
Ministry of Justice (MOJ) issued island-wide guidance in April 
ordering prosecutors to encourage arrestees to sign away rights to 
the return of their seized goods. 
 
¶28. (SBU) Movie, music, and software rights holders--along with 
pharmaceutical companies--continue to complain that Taiwan Customs 
is a weak link in Taiwan's relatively good efforts against piracy 
(ref A).  Industry representatives tell us a significant amount of 
pharmaceuticals, music, and movies is commonly smuggled into Taiwan 
by mail-order in small batches--usually from China, but also from 
South East Asia--but Customs officials do not seem willing to spend 
time seizing these smaller quantities of counterfeits. Rights 
holders attribute this reluctance to Customs officers wanting to 
avoid the large amount of paper work required for even relatively 
small seizures, as well as a lack of manpower available for 
follow-up investigations. 
 
¶29. (SBU) Changes to the copyright law in 2004 allowed for ex 
officio inspections by Taiwan Customs, but the law requires rights 
holders to verify within a short period that the seized materials 
are counterfeit.  Although TFACT and other rights holders report to 
us they routinely send personnel to Taoyuan International Airport 
and other ports of entry to verify the authenticity of suspect 
parcels, Customs tells us some rights holders are not responsive to 
requests to verify suspect trademark violations. 
 
Campus Anti-Piracy Efforts 
-------------------------- 
 
¶30. (SBU) In 2008, the Taiwan Ministry of Education (MOE) continued 
the Campus IP Action Plan that it launched in October 2007 to combat 
IPR violations on campuses.  Over 2008, the MOE issued increasingly 
strict guidance for Taiwan Academic Network (TANet), the Ministry's 
island-wide high-school and university intranet, including new rules 
forbidding all peer-to-peer (P2P) software use except with explicit 
permission, requiring daily bandwidth limits, and monitoring 
download volume per student.  School administrators uniformly report 
they are more aggressively monitoring illegal downloads on TANet, 
shutting down campus access to the most notorious P2P websites, and 
increasing IP-protection coordination across departments (ref C). 
 
¶31. (SBU) The Action Plan also targets illegal textbook copying, and 
university administrators tell us on-campus copying of textbooks is 
less rampant and less visible in Taiwan year over year, especially 
 
TAIPEI 00000212  005 OF 005 
 
 
at on-campus copy shops. They also report off-campus copy shops are 
either more reluctant to copy textbooks in whole or in part, or have 
begun to refuse to copy more than a few pages of any one book (ref 
C). 
 
¶32. (SBU) The Taiwan Book Publishers' Association (TBPA), however, 
complains that the problem has merely gone underground, and has 
collected strong, though indirect, evidence to bolster its claims of 
continuing copyright violations on Taiwan's campuses.  TBPA believes 
shops still take orders through representatives on campus and 
standing student relationships, then deliver books directly to 
customers. 
 
Treaties 
-------- 
 
¶33. (U) Taiwan is not a member of the UN and is therefore not a 
signatory to the 1996 WIPO Copyright Treaty (WCT) or the WIPO 
Performances and Phonograms Treaty (WPPT). However, Taiwan abides by 
the terms of the both treaties. 
 
Comment 
------- 
 
¶34.  (SBU) Taiwan made significant progress in addressing the 
outstanding IPR problems identified in last year's report, and as a 
result, in January 2009, USTR removed Taiwan from the 301 Watch List 
after an out-of-cycle review.  We assess that the Taiwan authorities 
will continue to support effective IPR policies, and will maintain 
their current efforts, including under the IP Action Plan to reduce 
piracy on campuses.  We will, however, continue to press Taiwan to 
pass the ISP amendment, finalize amendments to the Patent Act that 
address industry concerns on compulsory licensing, and continue to 
combat digital and textbook piracy on university campuses. 
 
Wang