VZCZCXYZ0001
OO RUEHWEB

DE RUEHUL #0403/01 0751059
ZNR UUUUU ZZH
O 161059Z MAR 09
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3607
INFO RUCPDOC/USDOC WASHDC IMMEDIATE 8257

UNCLAS SEOUL 000403 
 
SIPDIS 
 
SENSITIVE 
STATE FOR EAP AND EEB/TPP/IPE - MCGOWAN, 
STATE PASS USTR FOR CUTLER, TRICK AND CHOE GROVES 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR KS
SUBJECT: 2009 SPECIAL 301 - POST RECOMMENDATION 
 
REF: STATE 008410 
 
¶1.  (SBU) SUMMARY:  2008 saw a significant acceleration of 
Korean efforts on intellectual property rights (IPR) 
protection and enforcement.  On February 25, 2008, Lee 
Myung-bak was inaugurated as Korea's President; Lee 
explicitly identified stronger IPR protection as an important 
strategy to boost foreign and domestic investment in Korea. 
The improvements in 2008 also reflect a broader, longer-term 
change in Korean attitudes toward IPR in recent years, as 
Koreans have come to realize that rewarding and protecting 
innovation can be key to enhancing the country's 
competitiveness (particularly vis a vis China).   2008 saw 
significant new developments, outlined in paras 5 through 8: 
Korea's legal/regulatory framework for IPR; enforcement 
resources; precedent-setting court decisions; and a vast 
increase in the number of pirated materials seized or 
deleted.  Local representatives of U.S. IPR stakeholders 
report satisfaction with the progress being made, note marked 
improvement in the access they enjoy to ROKG IPR officials, 
call Korea one of the pace-setters in the region, and also 
express some (pleased) surprise that the ROKG is already 
pushing so hard for new IPR improvements just one year after 
the conclusion of the KORUS FTA (which contains what most 
U.S. stakeholders call the strongest IPR chapter of any U.S. 
FTA ever concluded).  Emerging forms of digital piracy are a 
challenge in Korea's broadband society, but U.S. copyright 
stakeholders believe the ROKG is cognizant of the need for 
special measures to combat it, and legal authorities and 
enforcement efforts expanded significantly in 2008. 
RECOMMENDATION:  Post believes that the IPR actions taken by 
Korea in 2008 and early 2009 reflect both a significant 
strengthening of Korea's IPR regime and indicate that the 
push for stronger IPR protection has become a domestically 
generated, self-sustaining process in Korea.  Post recommends 
that Korea be removed from the Special 301 Watch List in 
¶2009.  END SUMMARY. 
 
¶2.  (SBU) 2008 saw a significant acceleration of Korean 
efforts on intellectual property rights (IPR) protection and 
enforcement.  In February 25, 2008, Lee Myung-bak was 
inaugurated as Korea's President.  Lee was elected on a 
platform of increasing economic growth, including by boosting 
foreign and domestic investment in Korea.  Lee explicitly 
identified stronger IPR protection as an important strategy 
to boost foreign and domestic investment in Korea.  When he 
released his "100 Policy Tasks" following his election, 
President Lee listed "Protecting intellectual property rights 
(and establishing fair trade practices)" as Task 15 (grouped 
with four other separate tasks under the objective "To 
establish a trust-based society governed by the rule of 
law").  But the commitment to IPR was not merely rhetorical. 
President Lee and his government sent a message to ROKG IPR 
officials -- in the Ministry of Culture, Sports and Tourism 
(MCST), the Korea Intellectual Property Office (KIPO), the 
Korea Customs Service (KCS), and prosecutors at the Ministry 
of Justice (as well as police) -- to come up with new ways to 
strengthen Korea's IPR regime, accelerate plans already under 
discussion, push hard for strong enforcement, and reach out 
to IPR stakeholders -- domestic and foreign alike -- to hear 
and try to address their concerns.  The result has been by 
all measures a significant strengthening of Korean IPR 
protection and significantly expanded enforcement in 2008 and 
early 2009. 
 
¶3.  (SBU) The efforts of the past year reflect the 
convictions of President Lee and his one-year old government. 
 But they also reflect a broader, longer-term change in 
Korean attitudes toward IPR in recent years.  Part of that 
stems from longstanding trade policy discussions with Korea's 
major trading partners (principally the United States, 
although the European Union has periodically weighed in on 
its priorities as well).  But a more fundamental 
transformation has been a growing understanding that a 
stronger IPR regime serves Korea's interests, both 
domestically and internationally.  As Korea tries to position 
itself in the region -- trying to catch up with Japan and 
(the big change) keep ahead of China -- Koreans have come to 
realize that rewarding and protecting innovation can be key 
to enhancing the country's competitiveness.  It has become 
widely accepted that strong IPR protection and enforcement 
will help Korea make the final transition from emerging 
economy to advanced economy.  Similarly, Koreans understand 
that their own adoption of high IPR standards will put the 
country in a better position to press other countries in the 
region to extend better protection to Korean IPR.  The 
success in recent years of Korea's "Hallyu" (Korean Wave) 
cultural industries (film and music) in Asian regional 
markets has provided added rationale within Korea for 
strengthening copyright protection, both domestically and 
internationally. 
 
¶4.  (SBU) Korea's progression from regional IPR laggard to 
leader culminated in the June 2007 signing of the KORUS FTA, 
a trade agreement that is widely regarded by U.S. (and 
international) IPR stakeholders as having the strongest IPR 
chapter of any U.S. trade agreement.  The public release of 
the text drew attention to the fact that the IPR chapter of 
that agreement was the longest of the agreement; but critics' 
complaints that the lengthy text was "one-sided" (because the 
commitments were almost entirely on Korea, not the United 
States) failed to develop much traction in Korea, as ROKG 
officials explained that strengthening Korea's IPR regime was 
clearly in Korea's own interest.   (Note:  the KORUS FTA 
ratification bill was re-introduced in Korea's National 
Assembly on October 8, 2008, and was actively debated at the 
end of the year; most observers expect the FTA to eventually 
pass, since President Lee's GNP party is strongly committed 
to the FTA and has a sizable majority, but the lack of 
progress toward Congressional ratification in Washington has 
slowed the process down).  Like all countries, Korea 
continues to face IPR challenges, particularly in new 
technologies, and the solutions it devises may not precisely 
mirror those adopted in the United States.  What is 
indisputable, however, is that the ROKG is not just saying 
the right things about a strong IPR regime but is also 
devoting the resources and political will to strengthen it 
further. 
 
Major Developments over the Past Year 
------------------------------------- 
 
¶5.  (U) Legislative and Regulatory Improvements: 
 
-- The Act on Persons to Conduct Duties of Judicial Police 
Authority was amended on June 13, 2008 to give judicial 
authority to MCST officials and its local agencies to conduct 
enforcement activities related to copyright infringement. 
Under this new authority, MCST created the Copyright 
Protection Team (CPT) in August 2008 and granted it judicial 
authority over enforcement related to Korea's two copyright 
laws (the Copyright Act and Computer Programs Protection 
Act), empowering MCST for the first time to act on its own 
initiative in enforcing IPR laws. 
 
-- In August 2008, the MCST drafted legislation that would 
merge Korea's two main copyright laws, the Copyright Act (CA) 
and the Computer Programs Protection Act (CPPA).  The 
legislation significantly strengthens enforcement against 
online piracy and goes beyond Korea's KORUS FTA commitments 
in terms of IPR protections.  For example, the law contains a 
"three strikes" provision which gives MCST the power to order 
internet service providers (ISPs) to close their boards after 
three warnings.  The legislation was introduced to the 
Culture, Sports and Tourism Committee in Korea's National 
Assembly on February 26, 2009.  The bill is considered 
non-controversial and likely to pass, though the timing of 
its passage is currently uncertain, since the copyright bill 
is being considered in a package with controversial media 
reform bills. 
 
-- The Act on Regulation and Punishment of Concealment of 
Criminal Profit was passed on December 19, 2008, and will 
come into force on March 19, 2009.  The law allows for 
confiscation of criminal profits and includes IPR 
infringements under the Copyright Act and Computer Programs 
Protection Act as serious crimes. 
 
-- Korea acceded to the WIPO Performances and Phonograms 
Treaty (WPPT) on December 18, 2008.  The WPPT will enter into 
force with respect to Korea on March 19, 2009. 
 
-- The ROKG's copyright structure was streamlined, with 
responsibility for software copyright issues moving from the 
now-disbanded Ministry of Information and Communications to 
the Ministry of Culture, Sports and Tourism, which now has 
primary responsibility for all copyright issues. 
 
¶6.  (U) Significant Legal Actions: 
 
-- In January 2009, a court sentenced the chiefs of the 
country's top four internet service providers (ISPs) to a 
year's imprisonment and charged them a 30 million won penalty 
for facilitating illegal distribution of copyrighted content. 
 This marked the first criminal charges ever brought against 
such online activities. 
 
-- In June 2008, Korean prosecutors indicted eight "webhard" 
storage operators and heavy uploaders (copyright violators) 
of infringing content.  (Webhards are web-based storage 
services, also referred to as cyberlockers, which serve as a 
closed file-sharing system in which pirates store their 
illegal content online and distribute passwords to 
downloaders who usually pay for access via credits 
administered by the webhard operator.)   On February 2009, 
six were convicted and sentenced to up to one year in prison, 
the first time a prison sentence has been handed down for 
online piracy.  (The other two faced heavy fines.) 
 
-- In December 2008, prosecutors indicted six "webhard" 
operators.  Their case is still pending. 
 
--  In 2008, there were also several high-profile crackdowns 
against Korea's two main Internet portals (Daum and Naver) 
for failing to delete illegally posted music files even after 
getting takedown requests from copyright holders. 
 
¶7.  (U) Continued Expansion of Enforcement Resources and 
Activities: 
 
-- The 2009 MCST budget allocation for copyright protection 
for enforcement, education and public campaigns increased by 
40 percent to 30 billion won (up from 24 billion won in 2008). 
 
-- MCST established the Illegal Copyright Obstruction Project 
(ICOP), which is designed to find copyright infringing files 
whose names or channels have been disguised to evade 
detection. 
 
¶8. (U) Dramatic Expansion of Enforcement Activities: 
 
-- Enforcement by the Copyright Protection Center (CPC) 
increased significantly.  It deleted 28 million online music, 
visual and publications files in 2008, more than double the 
12.5 million files deleted in 2007.  This increase was 
attributed to an increase in manpower (which now allows the 
CPC to operate 24 hours a day) and improved piracy search 
technology. 
 
-- Books.  The CPC confiscated 17,811 pirated books in 2008, 
up from 10,068 in 2007.  The CPC deleted 12.16 million 
printed publications on-line, up from 3.23 million in 2007. 
 
-- CPC, police and prosecutors engaged in a special 
enforcement period for 100 days between April and June 2008 
in Seoul and surrounding Gyeonggi Province, confiscating 
172,081 items -- four times as many illegal DVDs, tapes, CDs, 
books and pieces of reproduction equipment as were 
confiscated during the same period in 2007. 
 
-- Circumvention devices (illegal modification chips): 
Korean Customs Service (KCS) stepped up efforts to block the 
entry into Korea of circumvention devices.  131,636 devices 
(valued at roughly 4 billion won) were seized in 2008. 
Devices smuggled from China accounted for roughly 92 percent 
of the devices seized, while the remainder came from Hong 
Kong; KCS announced it would try to cooperate with Chinese 
authorities to block the goods at the source in China.  In 
January 2009, KCS conducted a special raid of sales outlets 
and warehouses and seized 75,653 circumvention devices, more 
than half the total seized in 2008 (January is considered a 
peak season for game kits to be given as presents to 
graduating students). 
 
-- Trademarks and patents.  The Korean Intellectual Property 
Office (KIPO), with the help of police and prosecutors, 
seized and destroyed over 97,000 items, up from roughly 
36,000 the preceding year.  KIPO also took down 123 websites 
selling counterfeit goods, up from 48 such take-downs in 2007. 
 
-- The Korean Customs Service (KCS) seized more than 928 
billion won worth of counterfeit goods, an amount roughly 25 
percent higher than in 2007. 
 
¶9.  (SBU) Post spoke with local representatives of U.S. IPR 
stakeholders in February 2009 as part of the research for 
this report.  Their key views follow: 
 
Computer software: 
 
Business Software Alliance/Microsoft.  Strongly support Lee 
Administration's push to strengthen enforcement against IPR 
infringement and tougher sanctions against Internet service 
providers.  BSA continues to believe that the existing system 
of software copyright enforcement (with prosecution triggered 
by complaints by rights holder) is one of the most effective 
in any jurisdiction in which BSA operates. 
 
Software Property Right Council (group comprised of Korean 
software industry plus leading U.S. software firms):  Notes 
ROKG has shown greater public attention to piracy, and a 
stronger will to enforce against illegal copyright 
infringement, including an increase in police anti-piracy 
actions in 2008. 
 
Film: 
 
Warner:  Pleased by several recent signs of improvement, 
including:  the "three strikes" provision in the Copyright 
Act revision legislation (currently before the National 
Assembly); measures in that legislation requiring Internet 
service providers to take down infringing content; and the 
prosecution and conviction of "webhard" storage sites in 
February 2009 (which resulted in six site operators being 
sentenced to prison terms and two receiving stiff fines). 
Also, believed that the 100-day anti-piracy campaign in 
mid-2008 was effective, and noted a diminished presence of 
pirated optical disks in usual markets like Yongsan 
Electronics Market in Seoul, even after the period concluded. 
 
 
Music (Sony, Universal, Warner): 
 
Sony, Universal, Warner:  All agree the ROKG has demonstrated 
unprecedented interest this year in listening to the concerns 
of industry regarding IPR enforcement.  The Copyright 
Protection Center (CPC)'s issuance of take-down orders has 
resulted in copyright infringing P2P and "webhard" operators 
coming to music companies to negotiate settlements before 
being assessed fines by ROKG officials.  One representative 
said in internal company discussions, he and colleagues in 
Taiwan felt that more was being done to strengthen copyright 
legislation in Korea than in Taiwan, and that IPR protection 
was stronger in Korea. 
 
Books: 
 
Cengage Learning (APA representative):  Book piracy, 
especially near college campuses, has become less visible 
following a series of raids by police and prosecutors with 
the cooperation of industry (Note:  the U.S. book publishing 
industry retains well-connected consultants in Korea who will 
work with enforcement authorities to arrange raids on 
suspected sites).  The number of raids has fallen off this 
year since APA has provided fewer funds for consultants to 
organize raids.  The sell-through rate (percentage of 
enrolled students buying legitimate copies of a textbook) has 
not increased:  this could be due to piracy moving further 
underground or due to other economic factors (recession, weak 
won). 
 
Video/Computer Games: 
 
Electronic Arts:  Local office plays limited role on IPR and 
enforcement.  EA Korea is trying to compile a list of 
infringing sites, but most sites do not originate in Korea. 
Online consumer games are more popular than console games in 
Korea, and are more difficult to pirate. 
(NOTE:  the Embassy has not been approached by any U.S. 
patent or trademark rights holder with any concerns about 
Korea's IPR regime.) 
 
¶10.  (SBU) On-line Piracy - a Special Challenge: 
 
All advanced economies are facing a growing threat of digital 
piracy, and that challenge is pronounced in Korea, which 
regularly registers as a country with one of the world's 
highest penetration rates for broadband and other high-speed 
internet services.  IPR stakeholders believe the Korean 
Government has become cognizant of the need for special 
measures to combat this growing threat.  In part this 
reflects growing global regulatory trends (a constant 
benchmark for Korean regulators), but it also reflects a 
growing recognition that digital piracy, if unchecked, could 
deal a potentially fatal blow to Korea's cultural industries, 
which remain overwhelmingly dependent on Korea's domestic 
market.  Enforcement resources and legal authorities for 
online IPR enforcement increased significantly in 2008.  The 
number of documents deleted climbed dramatically in 2008. 
With characteristic Korean zeal, MCST contacts boasted that 
the initial draft of the 2008 bill combining the Copyright 
Act and Computer Programs Protection Act had anti-piracy 
provisions that were the strongest in the world (although 
some were amended as the bill was debated in the National 
Assembly).   When asked about the situation in Korea, post's 
MPAA (motion picture) contacts said that between the growing 
access to high-speed Internet (which facilitated piracy) and 
the growing ROKG resources devoted to online enforcement, 
they found the overall situation with on-line piracy in Korea 
to be about the same or slightly improved -- essentially the 
same situation MPAA faced in Japan, Taiwan, Hong Kong and 
Singapore, which they saw as Korea's peer group.  Korea can 
not reverse the dissemination of digital technology, any more 
than those countries can (or the United States).   But it is 
clearly trying to seize the initiative in the fight against 
digital piracy, and by all measures saw significantly greater 
results in 2008. 
 
Recommendation 
-------------- 
 
¶11.  (SBU) Few countries have come as far on IPR in as brief 
a period as Korea.  Korean IPR experts trace the start of 
Korea's IPR regime to U.S. trade pressure in the late 1980's. 
 At the time, they acknowledge, Koreans remained unconvinced 
about the benefits of stronger IPR, but reluctantly agreed to 
create a viable IPR system to preserve Korea's access to the 
U.S. market.  Today, two decades later, Korea is a major 
generator of intellectual property -- patents, copyrights, 
trade secrets and even trademarks -- and has a strong, 
undisputed commitment to effective enforcement, both 
domestically and internationally.  While the United States 
continues to serve as Korea's principal benchmark for IPR, 
Korea hopes to work with us as a partner on IPR, not just 
bilaterally but also in regional and multilateral bodies as 
well.  U.S. stakeholders, while referencing the universal 
fight against new forms of digital piracy, tell us that in 
the scope of its IPR efforts, and its readiness to listen to 
foreign concerns, Korea has become one of the pace-setting 
countries in the region. 
 
¶12.  (SBU) The significant improvements in Korea's IPR regime 
and enforcement over the past year -- perhaps the most 
significant agenda of new ROKG IPR measures in the past 
decade -- would be impressive in their own right, and reflect 
the personal commitment of President Lee (and his government) 
to stronger IPR protection.  What makes them particularly 
noteworthy is that coming the year after the KORUS FTA was 
concluded, with its strong bilateral IPR chapter, these new 
moves have been largely self-generated, rather than in 
response to foreign pressure.  The ROKG's commitment to these 
measures largely came as a (pleasant) surprise to U.S. IPR 
stakeholders, rather than as a result of painstaking 
bilateral negotiations.  This demonstrates that the 
commitment to strong, effective IPR protection has reached 
critical mass in Korea, is self-generated rather than 
externally driven, and is an encouraging portent for future 
handling of IPR issues in Korea. 
 
In view of the above, Embassy Seoul recommends that Korea be 
removed from the Special 301 Watch List in 2009. 
STEPHENS