VZCZCXRO6509
OO RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHPG #0113/01 0611025
ZNR UUUUU ZZH
O 021025Z MAR 09
FM AMEMBASSY PRAGUE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1167
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHDC IMMEDIATE

UNCLAS SECTION 01 OF 03 PRAGUE 000113 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/CE AND EEB/TPP/IPE - TMCGOWAN AND JURBAN 
DEPT PLS PASS TO USTR - JGROVES 
 
E.O. 12958: N/A 
TAGS: KIPR ECON ETRD EZ
SUBJECT: CZECH REPUBLIC: POST INPUT 2009 SPECIAL 301 REVIEW 
 
REF: A. SECSTATE 8410 
     ¶B. NOV 24 PRAGUE DAILY 
     ¶C. 08 PRAGUE 619 
     ¶D. SEPT 23 PRAGUE DAILY 
 
(U) This cable is sensitive but unclassified.  Please protect 
accordingly.  Not for placement on the public internet. 
 
¶1. (SBU) Over the past 12 month, Czech authorities have made 
significant progress on combating IPR violations.  Customs 
and the Czech Trade Inspection Office (CTIO) have increased 
raids on, and presence at, the roughly 50 markets that dot 
the border with Germany and Austria.  As a result, most 
pirated goods are no longer openly displayed but hidden and 
only available to select customers.  In 2008, Customs and the 
CTIO confiscated almost 5 million pirated items with an 
estimated value of over 4 billion CZK (roughly USD 200 
million).  In January 2009, the parliament passed a new 
criminal code, which, when it goes into effect January 1, 
2010, will significantly increase penalties for IPR 
violations.  Problems, however, remain.  Those arrested tend 
to be low-level vendors, rather than middle-men or 
organizers.  Over 99 percent of those convicted receive only 
suspended sentences.  Non-traditional enforcement tools such 
as the revocation of business licenses are rarely used. 
Internet piracy is also becoming a growing concern, despite 
significant police cooperation.  Consequently, the Embassy 
recommends that the Czech Republic be kept on the Special 301 
Watch List but be removed from the list, even as early as 
later this year, should the Czech authorities be able to 
demonstrate an increase in criminal penalties and business 
license revocations.  End Summary. 
 
Increased Raids at Border Markets Having a Visible Effect 
 
¶2. (SBU) Czech Customs officials adopted a much more 
organized approach in 2008 to combating IPR violations at the 
roughly 50 markets that dot the Czech borders with Germany 
and Austria.  These markets are run by the large and 
tight-knit Czech Vietnamese community and cater almost 
exclusively to German and Austrian visitors.  Since early 
2008, Czech customs has targeted the markets for repeated 
raids. This is in stark contrast to previous years, when 
Customs symbolically visited only a few stalls and then left 
the area,  Customs is now inspecting the entire market and 
leaving its people on site for several weeks. 
 
¶3. (SBU) Customs also reported that it is reaching out to 
market vendors to educate them on what items can be sold 
legally and what constitutes IPR piracy.  After raids, 
written materials are often left behind warning both vendors 
and consumers.  The Czech Ministry of Culture has separately 
participated and helped fund a number of IPR educational 
programs for domestic Czech consumers and students, often in 
cooperation with private stakeholders.  At major Czech 
cinemas, an anti-piracy spot is shown before every movie 
screened.  Czech authorities are also planning at least three 
IPR conferences this spring, including one with French 
government support and another addressing IPR educational 
programs. 
 
¶4. (U) According to Customs officials, in 2008, Customs 
confiscated (and subsequently destroyed) 4,843,360 
counterfeit items, worth a total of 3.9 billion Czech crowns 
(CZK). The Czech Trade Inspection Office also confiscated an 
additional 129,955 items worth a total of 176 million CZK. 
 
¶5. (SBU) While RIAA is recommending that the Czech Republic 
remain on the Special 301 Watch List and be elevated to the 
Priority Watch List if the Czech authorities do not take 
specific steps by the end of the year, the local IFPI 
director Petra Zikovska (who represents RIAA, please protect) 
 told us bluntly that she disagrees with RIAA's report.  She 
noted that Czech authorities have made a "visible difference" 
at the border markets.  Unlike in the past, pirated goods are 
no longer visibly displayed and vendors who offer pirated 
goods are nervous and understand that what they are doing is 
illegal.  Zikovska who in the fall was worried that Custom's 
increased raids may not be sustainable is now much less 
concerned.  She noted that while Customs may not have had as 
many big flashy, publicized raids in the second half of 2008 
as the first (as noted in the RIAA report), they continue to 
cooperate with IFPI on 5 to 7 smaller raids a week.  Zikovska 
added that a Vietnamese owner of one of the market places is 
even selling his market as it is no longer such a profitable 
endeavor. 
 
¶6. (SBU) Czech Anti Piracy Union head Marketa Prchalova, who 
 
PRAGUE 00000113  002 OF 003 
 
 
represents MPAA among other organizations, also told us that 
the increased activities of Czech Customs are having a 
positive effect.  She thought that the scale and scope of 
items being sold at the outdoor markets is now much less, as 
most pirated goods are no longer openly displayed.  Our own 
trips to several border markets in both August and November 
confirmed that most pirated goods are hidden in locked 
containers or are kept in sheds, cars or homes outside of the 
market (thus requiring customs to get a warrant to seize the 
goods).  While pirated goods are still available, vendors are 
visibly nervous and carefully vet potential customers.  In 
our experience, most pirated goods are generally offered only 
to customers who ask and fit the profile of German-speaking 
tourists. 
 
Internet Piracy a Growing Problem; Police Cooperation 
Excellent 
 
¶7. (SBU) Anti Piracy Union head Prchalova told us she was 
much more concerned with internet piracy than the outdoor 
markets.  While cooperation with the police is generally very 
good, internet pirates are becoming much more sophisticated 
and more adept at finding loop holes in current Czech 
legislation.  For instance, websites cannot be held legally 
responsible for pirated content on other (often foreign) 
sites linked to the website.  IFPI's Zikovska agreed that 
internet piracy is increasing but noted that her organization 
is very pleased with the cooperation it is receiving from the 
Czech authorities, especially the Police. 
 
Less Progress on Criminal Enforcement, License Revocations 
 
¶8. (SBU) While Customs has been successful in disrupting 
trade in pirated goods at the outdoor markets, Czech 
authorities do not appear to have made significant progress 
addressing the main concerns raised by USTR during a DVC in 
September between Washington and the Czech intergovernmental 
IPR task force.  USTR's two main concerns were: 
 
-- the lack of criminal enforcement; arrests are infrequent 
and violators generally receive only suspended sentences; and 
 
-- the failure to use creative measures available under Czech 
law to combat IPR abuses such as revoking the business 
licenses of offenders. 
 
¶9. (SBU) According to IFPI's Zikovska, during the average 
raid, the Vietnamese vendors run away as soon as their posted 
lookouts see the Czech authorities approaching.  Thus, there 
is generally no one left to arrest.  While the market 
operators are required to keep records of the stall owners, 
they are not held responsible for the accuracy of the 
reports.  In practice, most of the addresses are out of date 
or false and it is very difficult for the authorities to 
track down violators. 
 
¶10. (SBU) Czech customs and police do not have any Vietnamese 
agents and are not able to penetrate the tight-knit 
community.  Consequently, those arrested tend to be low level 
vendors rather than organizers or kingpins.  Czech judges 
tend to view IPR crimes as not particularly serious and IPR 
violators as not particularly dangerous.  Thus judges are 
reluctant to send IPR pirates to the already overcrowded 
Czech jails or to impose significant fines.  Thus, criminal 
penalties remain low.  Of those convicted, almost all receive 
suspended sentences. 
 
¶11. (SBU) According to official police statistics, in 2008, 
274 people were prosecuted for trademark violations, 204 for 
copyright violations and 11 for industrial property rights 
violations (as compared to 220, 216 and 4 in 2007, and 229, 
222, and 1 in 2006).  Of the 489 people prosecuted, only 41 
were repeat offenders.  These statistics do not include 
information on the number of convictions or the level of 
penalties applied.  These statistics also do not 
differentiate between those arrested for crimes at the border 
markets or elsewhere.  (Note: The Ministry of Industry and 
Trade has rejected our suggestion to create a database to 
track the arrests and fines made at the border markets as too 
expensive and bureaucratic.  End note.)  According to the 
police, the statistics also do not include those arrested for 
petty offenses or cases in which criminal charges are dropped 
after the violators agree to provide financial compensation 
to the rights holder (a practice that is common in internet 
piracy cases). 
 
¶12. (SBU) Czech officials are hopeful that the passage of the 
new criminal code in January will convince judges to 
 
PRAGUE 00000113  003 OF 003 
 
 
significantly increase the criminal penalties they apply. 
The new code, which will go into effect January 1, 2010, 
raises the maximum sentence allowed in IPR cases from two to 
8 years imprisonment and significantly increases the maximum 
fine.  Under the old code, those caught manufacturing or 
storing (but not selling) counterfeit items could only be 
charged with petty offenses.  As of 2010, these offenses will 
now be regarded as serious crimes. 
 
¶13. (SBU) Some Czech officials claim that while criminal 
penalties are low, the confiscation of goods and level of 
administrative penalties applied are making an impact and 
having some deterrent effect.  While the increased 
confiscation of pirated goods may be having some deterrent 
effect, we have yet to see documentation supporting the 
contention that the level of administrative fines is now 
significant.  According to government statistics, Customs 
reportedly levied fines of roughly 3 million CZK (roughly USD 
150,000) in 2008.  The CTIO did not have statistics on 
administrative fines available.  The head of the Prague 
regional office told us he had fined one company the 
equivalent of USD 10,000 for selling two pirated shirts 
through the internet.  This level, however, seems to be the 
exception rather than the rule. 
 
¶14. (SBU) We have also seen no evidence that the Czech 
authorities have been using other more creative tools legally 
available to them to combat IPR crimes.  Several Czech 
officials have told us that IPR violators are not having 
their business licenses revoked.  Customs told us it is 
informing the appropriate office in each case, but that as 
far as they are aware, no actions are being taken.  Although 
very difficult to get approved, Czech law allows the police 
to confiscate property used in a crime or bought with funds 
generated from a crime.  We are not aware that this tool has 
ever been used against IPR violators.  The police also told 
us that they were considering using money laundering laws as 
another way to combat IPR offenses.  We have not seen any 
evidence, however, that this is yet occurring. 
 
Post Recommendation: 
 
¶15. (SBU) Since first being listed in January 2008, Czech 
authorities have significantly increased the scope and 
frequency of IPR raids and the amount of pirated goods 
confiscated.  The impact on the border markets is visible. 
Most pirated goods are no longer publicly displayed and have 
become harder to purchase.  This is a significant achievement 
and should be acknowledged.  Czech authorities have made less 
progress, however, meeting the concerns raised by USTR in 
September.  Criminal penalties remain light, although there 
is some hope that these will increase once the new criminal 
code takes affect.  We will work with USPTO to organize a 
seminar for Czech judges later this year.  Czech authorities 
also do not appear to be using all the tools available in 
their arsenal such as revoking the business licenses of 
offenders. 
 
¶16. (SBU) Thus, post recommends that the Czech Republic be 
kept on the Special 301 Watch List but that the report 
acknowledge the significant increase in raids and 
confiscations (while noting concerns about the lack of 
criminal enforcement and the full use of available legal 
tools).  We believe that to not acknowledge Czech progress 
would hurt the credibility of the report and lessen its 
ability to affect change.  We also recommend that the Czech 
Republic be removed from the list, even as early as later 
this year, should the Czech authorities be able to document 
an increase in criminal penalties and business license 
revocations. 
Thompson-Jones