VZCZCXRO4891
RR RUEHIK
DE RUEHUP #0788/01 3031549
ZNR UUUUU ZZH
R 301549Z OCT 09
FM AMEMBASSY BUDAPEST
TO RUEHC/SECSTATE WASHDC 4611
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC
RUEHGV/USMISSION GENEVA 0545
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 05 BUDAPEST 000788 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/JMORE, EB/JURBAN, TOKEEFFE; DEPT PASS USTR FOR 
EMCCONAHA, JGROVES, DWEINER; COMMERCE FOR SSAVICH, MROGERS; 
BRUSSELS FOR CWILSON; SOFIA FOR MLAMBERTI 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR HU
SUBJECT: HUNGARY: CONCRETE ACTION ON IPR PROTECTION 
 
REF: A. BUDAPEST 155 
     ¶B. BUDAPEST 331 
     ¶C. STATE 42792 
 
BUDAPEST 00000788  001.2 OF 005 
 
 
¶1. (SBU) Summary.  Over the past year, under the leadership 
of the National Board Against Counterfeiting (HENT), the GOH 
has taken concrete steps to improve the protection of 
intellectual property rights, combat counterfeiting and 
piracy, and increase public awareness of the importance of IP 
protection.  As a result of these considerable positive 
efforts, Post believes Washington agencies should consider 
removing Hungary from the Special 301 watch list during its 
2010 review, taking note of the positive actions taken to 
date, but underlining the expectation that these actions will 
continue.  To help support positive change, we believe the 
USG should organize a conference targeting judges and senior 
law enforcement and policy officials to underscore the 
importance of levying deterrent-level penalties for IPR 
crimes.  End summary. 
 
¶2. (U) During an October 8-9 visit to Hungary, USTR Europe 
Director Erin McConaha met with GOH officials responsible for 
IPR protection and enforcement, representatives of trade 
associations as well as the private sector to survey 
developments in the protection of intellectual property 
rights in Hungary. 
 
THE NATIONAL BOARD AGAINST COUNTERFEITING (HENT) 
 
¶3. (SBU) The cornerstone of Hungary's Intellectual Property 
Rights strategy is the creation in January 2008 of the 
National Board Against Counterfeiting (HENT), and the 
HENT-developed National Strategy and Action Plan for 
2008-2010, which was adopted by government decree 2140/2008. 
The HENT is chaired by State Secretary for Justice Affairs 
Dr. Dezso Avarkeszi, and falls under the authority of the 
Minister of Justice and Law Enforcement.  The HENT meets 
regularly and is comprised of 11 government agencies and 10 
private sector organizations, including the Ministry of 
Justice and Law Enforcement, the Patent Office, the Ministry 
of Economy, the Customs and Finance Guard, the National 
Police, as well as NGOs like AmCham, BSA, PHARMA, the 
Foundation for the Copyright Protection of Audiovisual Works 
(ASVA), and others. 
 
¶4. (SBU) Over the past year, the GOH - often with the close 
cooperation of private industry - has taken a number of 
concrete actions to enhance the level of IPR protection, by 
increasing public awareness, increasing the training of law 
enforcement officials and the judiciary, and through enhanced 
enforcement efforts.  The following highlights some of these 
actions: 
 
INCREASING PUBLIC AWARENESS 
 
¶5. (SBU) --In December 2008, the HENT launched a daily 
newsletter on counterfeiting and piracy that highlights legal 
cases, hazards of counterfeiting, etc, which it distributes 
to journalists and newspapers.  This has resulted in greater 
media attention to the issue of IPR protection. 
 
--During the December 2008 holiday shopping season, in an 
organized public awareness campaign, labels and flyers were 
affixed to personal computers, laptops, and other electronic 
products for sale in major retail outlets warning about the 
use of illegal software and the illegal downloading of music 
and films.  A similar campaign was launched in April 2009 in 
major electronic stores in larger towns throughout the 
country.  A separate campaign ealier this year focused on 
counterfeiting of medical products, and involved leaflets 
placed in medical consultation rooms, pharmacies and gyms, as 
well as newspaper advertisements warning of the dangers of 
counterfeit medical products. 
 
--Last year, the Customs Guard created a "counterfeit museum" 
with interactive exhibits to highlight the importance of 
intellectual property rights protection, and to point out 
possible dangers posed by counterfeit products. 
 
--Other innovative awareness-raising measures include an 
annual HENT-funded award at the Hungarian Music Awards given 
to the artist with the most frequently legally downloaded 
album of the year; and an art competition for secondary 
school students in April and May 2009 in which the winners 
 
BUDAPEST 00000788  002.2 OF 005 
 
 
received licensing agreements paid by the HENT for the use of 
their works - the competition was entitled "Counterfeiting as 
I Can See It - My Creation, My Property." 
 
--Together with the Customs Guard, the HENT is planning an 
exhibition in Budapest in December to draw attention to the 
dangers of counterfeiting. 
 
TRAINING LAW ENFORCEMENT OFFICIALS AND JUDGES 
 
¶6. (SBU) Working with industry, the HENT has also focused on 
increasing training for law enforcement officials and judges: 
 
--ProArt (the Alliance for Copyright Protection) officials 
told us that the organization is participating in a HENT 
supported "roadshow" visiting each county in Hungary between 
September and November to provide a full day anti-piracy 
training to local law enforcement officials (20 training 
sessions in total). 
 
--In August, the HENT reached agreement with the Police 
College of Hungary to make "Intellectual Property Protection" 
a mandatory course for officers involved in economic crimes 
investigation. 
 
--In April 2009, the HENT sponsored a conference on the 
cooperation of judges, prosecutors, and officers of the 
Hungarian Police and Customs Guard in criminal copyright 
infringement cases. 
 
--The Customs and Finance Guard also sponsors a training 
seminar three times per year for customs officers in 
different offices around the country, and invites police, 
prosecutors, and judges to also attend. 
 
--On September 24, the HENT co-sponsored a workshop in 
Budapest on counterfeiting for enforcement officers and 
judges.  In addition to HENT, Customs and police speakers, 
presentations were made by representatives of GM, Brother, 
Sony, Microsoft, Oakley, and Louis Vuitton. 
 
--Anti-piracy representatives from Microsoft told us they 
regularly participate in a government-sponsored 
anti-counterfeiting training sessions for both sitting judges 
and judge trainees at the Judicial Training Academy. 
 
IPR LAW ENFORCEMENT 
 
¶7. (SBU) Rights-holders and trade associations confirm that 
GOH law enforcement officials (both the Police and the 
Customs and Finance Guard) are responsive to reports of 
infringements and take prompt action.  Gyula Almassy, head of 
the Hungarian Customs and Finance Guard's IPR Department, 
noted that his team responds to every right-holder complaint 
received.  David Horvath, Director of the ProArt Association 
for the Protection of Copyright, confirmed this, and gave the 
Customs Guard particularly high marks for their 
responsiveness.  He noted that the technical ability of 
Customs and Police authorities to identify infringing 
products is much improved.  Both BSA and Microsoft also 
praised the enforcement efforts of the police and the Customs 
Guard. 
 
¶8. (SBU) Almassy stated that many rights-holders email him or 
his team directly about infringing products, while others 
choose to file more formal complaints.  Almassy indicated 
that his team is able to respond "within hours, and often 
sooner" to tips about infringing products.  The Customs Guard 
is also proactive, and regularly self-initiates raids and 
investigations.  Almassy noted that one of the greatest 
challenges continues to be a lack of information from rights 
holders to enable police or the Customs Guard to identify 
infringing products.  Sandor Simonkovics of BSA noted that 
the HENT is in the process of creating a centralized IP 
database that customs authorities, police, prosecutors and 
judges can all access, which would provide access to 
information on protected goods.  This would be particularly 
useful to prosecutors, who currently must rely on expensive 
expert witnesses to provide valuation information for 
intellectual property, and would help accelerate IPR trials. 
 
 
¶9. (SBU) Almassy noted that the most frequently seized 
counterfeit hard goods tend to be clothing, accessories, 
 
BUDAPEST 00000788  003.2 OF 005 
 
 
hats, mobile phone accessories, toys, and CD/DVDs.  He said 
that customs officials are seeing fewer luxury products 
recently, and are seeing a greater proportion of 
counterfeited daily use products like laundry detergent, 
which he attributes to the current economic situation. 
 
¶10. (SBU) Regarding Internet-based piracy, organizations like 
ProArt and ASVA generally combat infringers first by sending 
"take-down" letters to ISP's and website owners distributing 
infringing content.  ASVA notes that it has issued "thousands 
of take down letters."  ProArt's Horvath notes in his 
experience, a first or second letter is effective "in 99 
percent of the cases".  When these letters are not effective 
- usually in cases where a more organized, profit-generating 
infringer is involved - the cases are referred to the police. 
 ProArt estimates that it refers about 50-60 such cases to 
police each year. 
 
¶11. (SBU) In April 2009, the Budapest Police and the Customs 
and Finance Guard, in conjunction with the Hungarian National 
Bureau of Investigation, raided the offices of Coldfusion 
Hungary, Ltd, confiscating 43 servers with an estimated 
database of 200-250 terabytes, possibly the largest such 
seizure ever made in Europe.  The pirates operated through an 
"SMS Web" model, whereby customers would pay premium SMS 
service fees in exchange for access to download illegal 
content.  After the servers were taken offline, Internet 
traffic in Hungary dropped off by 10 percent, according to 
Budapest Internet Exchange data.  There were six arrests made 
in the case, although the main perpetrator fled Hungary and 
is still at large. 
 
PROSECUTING IPR CRIMES 
 
¶12. (SBU) Dr. Marton Barta, head of Department of the 
Hungarian Prosecutors' Office told us that more than 90 
percent of the cases presented to the Prosecutors' Office 
from the Customs Guard and police result in prosecutions. 
This figure was confirmed by Sandor Simonkovics, former head 
of BSA Hungary.  Dr. Barta noted that those cases not 
prosecuted are most often discarded due to their low monetary 
value or due to a lack of convincing evidence in the case. 
He noted that most of the criminal IPR cases prosecuted 
result in convictions, and that the prosecutor's office has 
developed considerable experience dealing with such cases. 
The problem, according to both government officials and 
rights holders, however, is that punishments handed down by 
the judiciary are rarely severe enough to have a significant 
deterrent effect.  Convicted offenders tend to receive 
relatively small fines and the confiscation of assets used in 
the perpetration of the crime, but rarely face prison time. 
 
 
¶13. (SBU) IPR-related trade organizations tell us, however, 
that things are slowly improving, and reacted positively to 
news of a sentence handed down on October 1 in a criminal 
copyright infringement case.  The court sentenced the 
perpetrator to a 2-year prison sentence, which was suspended 
for five years (meaning that if the offender commits any 
crime during the next five years, he will be required to 
serve the two year prison sentence).  He also faced a 
confiscation of assets totaling about USD 3,300.  In a press 
release, BSA noted that "it is becoming clear that the legal 
judgment of such cases is getting more severe compared to 
earlier cases." 
 
¶14. (SBU) Microsoft representatives tell us that despite the 
current negative economic climate in Hungary, piracy rates 
have not increased this year.  They complain, however, that 
the continuous decline in piracy rates seen over the past 
several years appears to have stagnated.  Former Business 
Software Alliance President Sandor Simonkavics agrees that 
piracy levels in Hungary are down over the past five years. 
Microsoft officials tell us they are "comfortable" with the 
situation in the corporate sphere, but still see room for 
improvement in the consumer sphere, despite a recognized 
improvement in levels of pre-loaded legal software on PCs and 
laptops sold by major retail outlets. 
 
THE NEED FOR DETERRENT-LEVEL SENTENCING 
 
¶15. (SBU) Despite the progress in other areas, convincing 
Hungary's independent judiciary to hand out deterrent level 
penalties to IP violators remains a challenge, with change 
 
BUDAPEST 00000788  004.2 OF 005 
 
 
coming only gradually.  Dr. Barta expressed the view that 
Hungarian law allows for sufficiently strong penalties 
against convicted offenders (the Hungarian Criminal Code 
allows for maximum prison sentences of 8 years), but that the 
independent judiciary cannt be compelled to hand out more 
severe sentences. 
 
¶16. (SBU) Unofficially, Dr. Barta opined that judicial 
leniency in IPR cases may come from the impression that IPR 
crimes are not as serious as violent or other crimes, or that 
the individuals being prosecuted for IPR crimes tend to be 
the "small fish" with whom judges tend to be more lenient. 
He admitted that judicial leniency in such cases can have a 
demoralizing effect on prosecutors. 
 
¶17. (SBU) In response to the question of what the U.S. might 
do to help encourage progress in this area, Dr. Barta noted 
that a seminar or conference with U.S. experts could be 
useful for both judges and prosecutors. 
 
¶18. (SBU) Many look to the September Pest County Court 
sentence as a positive sign that the judiciary is getting 
tougher on IPR crimes.  BSA notes that "the current decision 
of the Court reflects a growing seriousness against these 
crimes and the increasing condemnation of those violating 
copyright laws."  The GOH and the HENT recognize that 
judicial sentencing remains an issue, and are taking specific 
measures to address it, including through the above-mentioned 
trainings and conferences targeting the judiciary. 
 
HENT NATIONAL STRATEGY AND ACTION PLAN 2008-2010 
 
¶19. (U) Last year, the HENT prepared a National Strategy and 
Action Plan for 2008-2010.  HENT's action plan is divided 
into three main pillars, and identifies priority industries 
for which the HENT will focus its efforts.  The first pillar 
relates to statistics, and how to improve the collection and 
evaluation of statistics on piracy rates and the economic 
consequences of counterfeiting.  The second pillar is 
awareness raising, and is not limited to public awareness, 
but also includes increasing awareness of law enforcement 
officials and the judiciary.  The third pillar focuses on law 
enforcement, and includes review of the law 
enforcement-related legal environment, as well as developing 
tools and measures to help law enforcement authorities carry 
out their work. 
 
¶20. (U) In addition to the three pillars mentioned above, the 
action plan puts special focus on three industry areas: the 
food industry; pharmaceutical products and pesticides; and 
creative and IT industries.  The industry areas were selected 
because of the possible social and health consequences of 
counterfeit products in these areas; the existing level of 
counterfeiting in these industries; and areas of domestic 
industrial interest. 
 
¶21. (U) The action plan contains a list of concrete measures 
to be taken under each of the pillars and in each of the 
industry areas on an annual basis for the years 200-2010. 
The plan identifies the responsible ministry/office, funding 
allocations, and deadlines for action.  Five working groups 
have been established to pursue the action items.  The HENT 
received earmarked funds of USD 275,000 for 2008, and USD 
390,000 each for 2009 and 2010.  The private sector also 
provides support through training, equipment, products, 
venues, etc. 
 
¶22. (U) Post and USTR have the latest copy of the action 
plan.  Offices interested in obtaining a copy can contact 
Post or USTR's Erin McConaha.  In addition, Hungarian Patent 
Office representative Johanna Staedler told Ms. McConaha that 
HENT representatives would be willing to participate in a 
videoconference with U.S. officials to summarize HENT efforts 
to combat counterfeiting in Hungary. 
 
COMMENT: RECOGNIZING PROGRESS AND ENCOURAGING CONTINUING 
EFFORTS 
 
¶23. (SBU) Over the past 18 months, the GOH has taken a 
serious and measured approach to the IPR issue, by 
formulating a true interministerial committee to deal with 
the issue, which incorporates the private sector in a 
meaningful way.  It has developed a detailed action plan, 
approved by government decree, and has allocating funding to 
 
BUDAPEST 00000788  005.2 OF 005 
 
 
achieve the objectives.  It is making concrete progress on 
implementing the elements of the action plan, including by 
increasing training to justice and law enforcement officials, 
stepping up enforcement activities to combat counterfeiting 
and piracy, and by increasing public awareness of IP 
protection.  The HENT's action plan addresses the key issues 
outlined as areas of concern in recent Special 301 reports 
for Hungary.  Industry representatives, including BSA, 
ProArt, and AmCham all confirm that the GOH has demonstrated 
a strong commitment to reducing counterfeiting and piracy. 
 
¶24. (SBU) In order to reinforce these efforts and to 
encourage their continuation, we urge Washington agencies to 
consider removing Hungary from the Special 301 watch list 
during the 2010 review, taking note of the positive actions 
taken to date, but underlining the expectation that these 
actions will continue. 
 
¶25. (SBU) We believe that the USG should consider hosting a 
conference or workshop to support positive change in the 
major remaining area of concern - the failure of the 
judiciary to hand out deterrent level penalties to violators 
of IPR laws.  Bringing judges and senior law enforcement and 
policy officials together with U.S. judges, FBI, State, and 
Commerce counterparts, as well as industry experts, could 
help emphasize the costs to society of IPR-related crime - 
including costs to the economy, public health and safety, and 
the flourishing of creative industries.  Post looks forward 
to working with Washington agencies to further develop these 
ideas. 
 
¶26. (U) This message has been cleared by USTR Europe Director 
Erin McConaha. 
LEVINE