VZCZCXRO2939
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHKL #0130/01 0561000
ZNR UUUUU ZZH
R 251000Z FEB 10
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC 3912
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 0006

UNCLAS SECTION 01 OF 04 KUALA LUMPUR 000130 
 
SIPDIS 
 
DEPT FOR EB/TPP/IPE: T McGowan AND EAP/MTS: D Bischof 
DEPT PASS USTR FOR J. GROVES and K. EHLERS 
USDOC FOR ITA/MAC/OIPR 
USDOC ALSO FOR USPTO 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR MY
SUBJECT: SPECIAL 301 KUALA LUMPUR INPUT 
 
REF: STATE 3361 
 
Sensitive but Unclassified.  Not for Internet distribution. 
 
Summary and Recommendation 
-------------------------- 
 
¶1. (SBU) In 2009 Malaysian IPR enforcement authorities continued to 
make significant progress in fighting IPR piracy as compared to the 
previous year.  Malaysia also continued its legislative efforts to 
modernize its copyright laws and come into compliance with various 
trade commitments, including the WIPO Copyright Treaty and the WIPO 
Performances and Phonograms Treaty.  The United States and Malaysia 
continued to cooperate closely, in particular through Malaysia's 
participation in our IPR training programs.  Nevertheless, as the 
overall piracy rates in Malaysia remain high for most types of IP, 
there is substantial room for the Malaysian government to continue 
to improve prosecution efforts and the efficiency of its IPR courts, 
to include seeking certain legislative reforms to strengthen the 
Malaysian authorities and IPR protection. 
 
¶2. (SBU) Recommendation: The Malaysian Government's record in 2009 
showed a significant commitment to strengthening IPR protection with 
substantial improvements in enforcement activities and training, as 
well as improvements in prosecutions, and action in its IPR courts. 
Despite these many positive trends, however, industry estimates on 
current IPR piracy levels indicate that piracy remains a serious 
problem.  Malaysia also needs to move from the drafting process to 
actually introducing into parliament proposed amendments intended to 
strengthen its copyright act.    Embassy Kuala Lumpur therefore 
recommends that Malaysia remain on the Special 301 Watch List.  End 
Summary and Recommendation. 
 
Enforcement Efforts Improved 
---------------------------- 
 
¶3. (SBU) Immediately upon assuming office in March 2009, the new 
Minister of Domestic Trade, Co-operatives and Consumerism (MDTCC) 
Ismail Sabri Yaakob made it clear that he would make IPR enforcement 
 a priority again.  He instructed Ministry officials to improve 
co-operation with private sector stakeholders and told his 
enforcement division to make IPR enforcement a high priority.  He 
also revived the previously defunct Special Anti-Piracy Taskforce 
(SAPTF) which includes government officials, rightholders, and 
industry associations.  According to international law firms and 
industry rightholder's associations in Kuala Lumpur, these Malaysian 
government initiatives have resulted in better and faster 
enforcement action throughout the country. 
 
¶4. (SBU) Some rightholders complain that subordinating local MDTCC 
enforcement officers to the Malaysian Administrative and Diplomatic 
Services (MADS) in state level offices unnecessarily slows down 
enforcement.  In 2009, MDTCC launched a new web-based system for 
submitting IPR violation complaints and raid requests.  Despite 
this, some industry groups, especially those filing large number of 
requests, still complain that many of the requests don't even 
receive a response. 
 
¶5. (SBU) The official number of raids, arrests, and prosecuted cases 
in 2009 is not available from MDTCC at this time, but Post will 
report septel when the official statistics are available, usually 
during the month of March.  According to Malaysian industry 
organization statistics, the number of criminal raids was 
significantly down, with total number of raids reported at 291, as 
compared to 668 raids in 2008.  However, several industry 
associations report that thanks to better co-operation between 
rightholders and MDTCC, the government raids are better targeted and 
more productive, and they result in higher-value prosecutions. 
 
¶6. (SBU) While there has been some recent improvement in MDTCC 
investigations, industry sources say those enforcement efforts are 
often restricted to the downstream retail facilities.  Industry 
hopes that MDTCC will conduct more full fleged investigations that 
lead to the source of distribution or the manufacturing facility for 
pirated products in Malaysia. 
 
¶7. (U) Besides the IPR enforcement unit of MDTCC, the Royal 
Malaysian Customs (RMC) also has authority to enforce IPR under its 
ex-officio capacity under the Trade Marks Act of 1976.  The RMC has 
been reluctant to get involved in IPR enforcement, and detains goods 
on suspicion of infringing or counterfeit only if the rights holder 
files a complaint with the Register of Trade Marks under MDTCC. 
(NOTE: Since the rights holder seldom would have prior knowledge of 
infringed goods shipments, RMC usually does not get involved with 
the interception of counterfeit goods at the ports of entry.) 
 
KUALA LUMP 00000130  002 OF 004 
 
 
 
Optical Media 
------------- 
 
¶8. (U) In 2009 Malaysian IPR enforcement officers continued to exert 
increasing pressure on the producers and exporters of counterfeit 
optical disc media products.  While the number of enforcement 
actions slowed down, the IPR courts established in 2007 were able to 
more effectively hear complex cases involving optical media 
infringement issues. Local and international industry associations 
report that Malaysia has addressed its export piracy problem in most 
sectors, but they assert that the export of pirated entertainment 
software remains a problem. 
 
¶9. (U) Statistics compiled by the industry indicate an increase in 
the estimated level of piracy in records and music, but no 
significant change in piracy of business software.  The estimated 
piracy level of records and music remained unchanged at 60 percent, 
while the business software piracy rate remained unchanged at 60 
percent. 
 
¶10. (SBU) MDTCC works with the Business Software Alliance to target 
students, company directors, and employees, and includes both 
educational efforts as well as targeted enforcement.  The program 
was launched in 2007 and targets the use of pirated software, with a 
focus on business software.  The KL Business Software Alliance 
representative said that the program was effective.  Based on the 
improvements from this program and general responsiveness of 
Malaysian authorities, it recommends that Malaysia should be removed 
from the Special 301 watchlist. 
 
Book Publishing 
--------------- 
 
¶11. (SBU) The book publishing industry reports that the book piracy 
situation remained a significant problem in Malaysia in 2009, 
especially due to commercial, large-scale illegal photocopying of 
textbooks in and around university campuses.  Reportedly, photocopy 
pirates save soft copy scans of books onto portable hard drives or 
computers, and can either transfer the illegal copy electronically 
or print directly from the computer.  These new technologies make 
detection of infringement more difficult. 
 
¶12. (SBU) The illegal copying of text books reportedly is 
widespread, especially in Klang Valley university campuses, where 
some lecturers are actively involved and sometimes provide sample 
copies of textbooks to infringers.  Pirated books are often 
delivered by vans directly to students.  Some websites also offer 
scanned copies of books for download. 
 
¶13. (SBU) Local law firms complain that there is no uniform approach 
to the pre-requisites for conducting raids.  Reportedly, some MDTCC 
officers require publishers to submit declarations as proof of 
ownership in advance for each title in a given raid.  Prosecutions 
against illegal copy shops remain slow and often problematic because 
of lack of preparation by prosecutors and officials handling the 
cases.  While these enforcement efforts are lacking, Malaysia is 
addressing the widespread illegal copying on college campuses 
through targeted awareness programs, such as the "IP Mobile Clinic" 
which was launched in 2009 and visits key college campuses 
throughout Malaysia. 
 
Internet Piracy 
--------------- 
 
¶14. (U) According to industry representatives, internet piracy 
increased in 2009 mostly due to greater internet and broadband 
penetration.  Malaysia had 66 percent internet penetration as of the 
end of 2009, with almost 17 million internet users.  Broadband 
penetration increased by about 200,000 to 1.4 million subscribers. 
 
 
¶15. (U) Music piracy from the internet remains the most significant 
form of internet piracy in 2009, but motion picture piracy is also 
increasing.  The Recording Industry Association of Malaysia (RIM) 
has claimed a significant increase in demand for digitized music in 
Malaysia, which has eroded the sales of compact discs (including 
pirated discs).  RIM estimates that 25 percent of losses due to 
music piracy are internet-based, and that 99 percent of music on the 
internet in Malaysia is infringing copies.  RIM also complained 
about Malaysian piraters using websites to advertise the sale of 
physical pirated goods. 
 
¶16. (SBU) Online piracy is also an increasing problem for the 
entertainment software industry.  Illegal use of gaming software 
 
KUALA LUMP 00000130  003 OF 004 
 
 
over the Internet and at Internet cafes remains a significant 
problem.  Some of the "business models" used by the infringers are 
becoming more complex and more difficult to track down.  For 
example, the game software may be installed on servers off-site, 
sometimes off-shore, and used in the cafe's premises or by access 
codes issued by the infringers. 
 
¶17. (SBU) Industry is pushing legislation that would address the 
liability of landlords and shopping mall owners who allow their 
premises to be used for copyright infringement.  Malaysia is 
conducting a comprehensive review of its institutional arrangements 
and enforcement regime.  MDTCC has indicated in discussions with 
Malaysian industry associations that the amendments to the copyright 
laws would allow criminal action to be taken against the owners of 
business premises who willingly allow their tenants to carry out 
infringing activities. This review and  expected amendments to the 
copyright laws will be subject to full cabinet and parliament 
reviews and approval, and the law is expected to be tabled at the 
parliament during 2010. 
 
Motion Picture Piracy 
--------------------- 
 
¶18. (U) Despite success of voluntary industry efforts to curb 
camcording in movie theaters, camcorder piracy remains a significant 
problem, especially with the proliferation of advanced cell phone 
technology which facilitates less detectable recording. 
 
¶19. (SBU) Malaysian authorities currently use existing Malaysian 
statutes to arrest and prosecute those caught recording movies in 
cinemas.  However, such arrestees can be charged only with theft, 
not piracy.  The Motion Picture Association continues to push for 
the implementation of stand-alone anti-camcording legislation, both 
to strengthen the authorities' hands (by broadening the scope of 
illegal activity and by increasing fines) as well as to promote 
greater understanding of this piracy problem among the Malaysian 
public. 
 
¶20. (SBU) The export of pirated discs has been significantly reduced 
by good cooperation between rightholders, MDTCC officials stationed 
at major international airports, and the Royal Malaysian Customs. 
The increased access to broadband internet, however, may also have 
contributed to this trend in reduced exports of physical pirated 
materials. 
 
Courts and Prosecution Improved 
------------------------------- 
 
¶21. (U) Special intellectual property courts now operate in Kuala 
Lumpur, Penang, Terengganu, Kelantan, and Pahang.  The first branch 
was launched in Kuala Lumpur in July 2007.  The plan is to expand 
the IPR courts to all of Malaysia's 14 states and the administrative 
capital region of Putrajaya.  Six high courts, holding both civil 
and appellate jurisdiction, will be established in Kuala Lumpur, 
Selangor, Johor, Perak, Sabah and Sarawak.  The IP courts are 
organized to operate independently of the rest of the court system, 
with both judges and prosecutors assigned exclusively to the IP 
courts. 
 
¶22. (SBU) MDTCC has created 25 Deputy Public Prosecutor positions 
specialized in handling the prosecution of criminal IP cases. 
Currently, 22 of the positions are filled.  The combination of 
special prosecutors and IPR courts should lead to a more effective 
prosecution of infringers. Industry groups argue that the combined 
efforts of investigation and prosecution should be targeted to 
detecting the source of the pirated copies and not just raids to the 
retail sales outlets.  While retail raids may generate a lot of 
publicity, the confiscated goods often are stolen before they are 
destroyed, and make their way back to the market. 
 
¶23. (U) The various IP industry associations in Malaysia hope that 
the new courts will increase the efficiency of the judicial system 
in processing IPR related cases.  The MDTCC has also taken steps 
together with Malaysian and international industry associations and 
interested international governments, including the U.S., E.U. and 
Sweden, to build the capacity of its enforcement officers to handle 
complex evidence in order to build stronger criminal cases against 
IP pirates. MDTCC and Royal Malaysian Police investigation officers 
participated in 35 training sessions conducted on copyright 
investigations and prosecutions by the Motion Picture Association of 
America's local representatives. Recording Industry Association 
trained 100 MDTCC officers on the role of ISPs and on internet and 
forensic investigations. Local industry associations and bar 
association continue to provide this training. 
 
 
KUALA LUMP 00000130  004 OF 004 
 
 
U.S.-Malaysia IPR Cooperation 
----------------------------- 
 
¶24. (SBU) In 2009 the U.S. government continued close cooperation 
with the Malaysian government to promote increased IPR protection. 
Several Malaysian officials attended USG-funded IP training programs 
that were offered in 2009 by the U.S Patent and Trademark Office 
(USPTO).  Among the programs attended by Malaysian officials were 
USPTO Global Intellectual Property Academy programs on enforcement, 
patents, and trademarks.  Malaysian officials attending this 
training were from MyIPO (Malaysian Intellectual Property 
Organization), MDTCC, IPR Courts, and Attorney General's office. 
The International Law Enforcement Academy (ILEA) in Bangkok also 
provides IPR enforcement training and has made slots available for 
Malaysian enforcement officials. 
 
Malaysia's International IP Obligations 
--------------------------------------- 
 
¶22. (SBU) Malaysia has made progress towards ratifying multilateral 
IP treaties.  Malaysian government officials hope to secure 
parliamentary ratification of Malaysia's accession to the WIPO 
Copyright Treaty and the WIPO Performances and Phonograms Treaty 
after the amendments of the respective domestic acts are passed by 
the Parliament.  MDTCC and MyIPO officials estimate that the 
legislative process could be completed by the end of 2010.  The GOM 
also foresees Malaysian accession to several other IP treaties, 
including the Convention Relating to the Distribution of 
Program-Carrying Signals Transmitted by Satellite; the Protocol 
Relating to the Madrid Agreement Concerning the International 
Registration of Marks; the Budapest Treaty on the International 
Recognition of the Deposit of Microorganisms for the Purposes of 
Patent Procedure; and the Trademark Law Treaty.  Malaysia has not 
committed yet to joining the International Convention for the 
Protection of New Varieties of Plants (aka the UPOV Convention), 
preferring to wait until it can evaluate the effect of its 
newly-implemented domestic plant protection legislation. 
 
¶23. (SBU) The Ministry of Health announced in 2007 that the 
government would implement a legal framework called "Test Data 
Protection Directive" to protect pharmaceutical data in order to 
meet the data protection obligations under TRIPS Article 39.3.  The 
announcement indicated that such protection would be extended for 5 
years for new products, and 3 years for new indications of existing 
products.  The time period in both cases would begin from the date 
that such protection was extended in the product's country of 
origin.  Ministry of Health indicates that they have finalized the 
directive, and that the directive would be implemented before the 
end of 2010. 
 
KEITH