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Serbia: SERBIA'S IPR ENFORCEMENT EFFORTS IMPROVE IN 2006

     
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Reference ID: 07BELGRADE307
Created: 2007-03-07 13:45
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED
Origin: Embassy Belgrade

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DE RUEHBW #0307/01 0661345
ZNR UUUUU ZZH
O 071345Z MAR 07
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0407
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 03 BELGRADE 000307

SIPDIS

DEPT FOR EB/IPE-JBOGER
DEPT PLS PASS TO USTR JCHOE-GROVES, DOC-CPETERS, USPTO-JURBAN
AND LOC-STEPP
USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH

SIPDIS

E.O. 12958: N/A
TAGS: ECON, ETRD, PREL, SR, KIPR
SUBJECT: SERBIA'S IPR ENFORCEMENT EFFORTS IMPROVE IN 2006

REF: A) STATE 7944 B) 06 BELGRADE 275

SUMMARY
-------
1. The International Intellectual Property Alliance (IIPA),
in its yearly Special 301 submission to USTR, elected not to
recommend that Serbia be placed on the Special 301 Watch
list. Embassy supports this decision. Serbian authorities
responsible for intellectual property rights (IPR)
enforcement demonstrated significantly improved results in
2006. Passage of legislation in July 2006 that establishes
the enforcement powers and sets penal provisions was a key
enabler for these gains. Numerous business people from
various industries concerned with IPR protection all
confirmed greater coordination with enforcement bodies and
general satisfaction with the improved results. END SUMMARY.

PROGRESS ON 2006 IPR ACTION PLAN
--------------------------------
2. The Serbian government (GOS) agreed to the action plan
proposed in reftel B in March 2006. One of the key items of
the plan was passage of a new IPR enforcement law that
provides powers for market inspection, tax inspectors,
customs and police to act independently whenever pirated or
counterfeit goods are found. The law, which was approved and
entered into force in July 2006, also makes companies liable
for criminal penalties.

3. Vera Despotovic, head of the department for Market
Inspectors in the Ministry of Trade, Tourism and Services,
told econoff that prior to the new law, market inspectors had
limited enforcement powers with authority to investigate only
upon the request of the rights holder. Now, market
inspectors can act ex officio, i.e., independently, on
suspicion of illicit activities.

4. Since May 30, 2006, market inspectors conducted 414
audits and confiscated 23,882 articles of various counterfeit
goods. Only 28 of the 414 audits were conducted at the
request of rights holders, indicating that inspectors were
proactively searching for IPR violations.

5. In one request from the Anti-Piracy Association (APA) in
Serbia, market inspectors were notified of the rental of
pirated DVDs by a large video rental chain called Video Klub
Zabac, in Novi Sad. It is one of the largest video rental
outlets in Serbia, with 23 locations. Market inspectors
seized some 2,000 pirated DVDs from the Novi Sad location.
Charges have been filed against the video club owner, and the
case is currently before the court.

6. Zoran Savic, Executive Director of Millennium Film and
Video, one of the primary distributors of films to Serbian
theaters and video clubs, told econoff that the environment
is changing for the better due to market inspector
activities. Video club owners with pirated DVDs, worried
about the prospect of unannounced raids, now are calling
Millennium to purchase legitimate DVDs while discarding
pirated copies. Owners realize that if they are caught,
criminal penalties will cost them three times more than
purchasing legitimate titles. Savic also said that
Millennium's sales increased 30 percent in 2006.

7. The IPR Unit at the Serbian Customs Administration also
reported strong results in 2006 in comparison with 2004 and
2005:

- The number of actions taken based on the requests of the
right holders was 92 in 2006. This is six times greater than
in 2004 (15) and 2.3 times greater than 2005.

- The number of interruptions to customs procedures due to
suspicion of IPR violations was 1,042 in 2006. This was 57
times greater than 2004 (18) and 3.3 times greater than 2005
(305).

- The number of legal sentences by the commercial courts that
included destruction of the goods due to IPR violations was
39 in 2006. This is 6.5 times greater than in 2005 (6).

- The number of declarations made by importers, exporters,
receivers or owners in which goods were acknowledged as
counterfeit was 185 in 2006. This is 5.6 times greater than
in 2005 (35). These declarations were not possible in 2004,
since appropriate regulations were introduced only in 2005.

- In 2006, Customs made 48 requests for information on rights

BELGRADE 00000307 002 OF 003


holders to the Institute for Intellectual Property Rights
when a shipment had been halted and Customs lacked the
necessary information for verification. In 2005, Customs
made only one such request.

8. In an effort to demonstrate its willingness and ability
to effectively carry out its enforcement responsibilities,
Customs conducted its first-ever destruction ceremony,
involving 15,240 pairs of counterfeit sneakers (10,440 NIKE
and 4,800 Diesel), on December 28, 2006. The shoes were
confiscated at Belgrade's airport in three separate shipments
from China. The authorized NIKE retailer in Serbia, Delta
Sport, made a EUR 25,000 donation of shoes and NIKE
merchandise to a local charity, rather than consent to
donating the fake merchandise. Milos Drobnjak, brand
protection manager at Delta Sport, told econoff after the
ceremony that cooperation with Customs and the market
inspectors has never been better.

9. In another event to highlight the work of its market
inspectors, the Ministry of Trade, Tourism and Services
hosted a destruction ceremony on May 31, 2006, in which
Minister Bojan Dimitrijevic himself threw confiscated CDs
into a mill at a local factory. According to him, 437,456
CDs with music, films and computer software were seized and
subsequently destroyed in the ceremony, while the byproduct
was purchased and used by the owner of the factory.

10. Concerning use of illegitimate software on government
computers, the GOS implemented a legalization campaign as a
pre-condition to Microsoft's entry into Serbia in 2001.
Since that time, Microsoft and the Business Software Alliance
in Serbia report good cooperation with government entities on
procurement and licensing issues.

11. Concerning protection of undisclosed test data of
pharmaceutical products, Zoran Labudovic, country manager for
Pfizer in Serbia, told econoff that Serbia has significantly
improved protection. Before Pfizer opened its representative
office in Belgrade in 1999, domestic companies simply ignored
the data protection laws that were on the books of the former
Yugoslavia. Pfizer sued a local pharmaceutical company for
patent infringement, winning a favorable ruling. Labudovic
said that the Ministry of Health and Human Services now
recognizes the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS) and has put in place
regulations that protect data exclusivity. He said that he
is very pleased with the progress.

AREAS OF IMPROVEMENT FOR 2007
-----------------------------
12. Passage of the draft Law on Optical Discs did not occur
in 2006. This law would regulate the production of optical
discs, require the registration of the business activity for
reproducing optical discs for commercial purposes, and
provide for surveillance of 1) optical disc imports and
exports, 2) imports and exports of polycarbonates (material
used in production of optical discs) and 3) production
equipment. In spite of a GOS commitment to push this draft
law through the government and parliamentary process, the
draft law still awaits government approval; with a new
government still under formation, it is unclear at this time
when action will resume. When the new government is formed,
Post will meet with the relevant ministry to push for the
expeditious passage of this legislation.

13. Another action item requiring follow-through is engaging
tax inspectors in upholding the new IPR enforcement law. In
the past, tax authorities resisted industry requests to
inquire about software licensing in their routine inspections
of businesses and subsequently report IPR violations to
appropriate state officials. However, the new IPR enforcement
law explicitly gives tax inspectors such authority.

14. Since the new law went into force in July 2006, it is
unclear whether or not tax inspectors are enforcing this law.
Vesna Arsic, State Secretary at the Ministry of Finance, told
econoff on February 16 that no letter of instruction for
proper implementation was issued to tax inspectors after the
law went into force. However, she did say that inspectors
were inquiring about software licensing in their audits and
had even reported a few violations to appropriate
authorities. In the meantime, she has asked the tax
administration to prepare a letter of instruction for all
inspectors giving clear guidance on how to implement the law.

15. Members of the Business Software Alliance (BSA) in

BELGRADE 00000307 003 OF 003


Serbia told econoff when that although the IPR situation is
not perfect, they would not recommend Serbia's placement on
the Watch List. In their view, such action now would be
counterproductive, given the progress that has been made over
the past few years. BSA members said that while they are
pleased with the IIPA decision not to recommend Serbia for
the Watch List, BSA will continue working with the government
to strengthen enforcement efforts and public relations
efforts. In January, the BSA created a quarterly newsletter
for distribution to IPR enforcement agencies and business
partners to raise awareness of the issue and highlight the
results for the government.

U.S. ASSISTANCE TO INTELLECTUAL PROPERTY OFFICE
--------------------------------------------- --
16. The USG is providing USD 500,000 in technical assistance
to Serbia's Intellectual Property Office (IPO) through a
grant from the U.S. Trade and Development Agency. This
project addresses issues that undermine Serbia's ability to
encourage national innovation and participate fully in
regional and global trade. Under the grant, assistance to
the IPO will focus on building human capacity and improving
processes, while helping to establish the IPO as a self-
funded agency from fees for processing patents, trademarks,
copyrights and related IPR applications.

AMCHAM IPR COMMITTEE ORGANIZES TRAINING IN 2006
--------------------------------------------- --
17. The American Chamber of Commerce's IPR Committee remains
engaged in IPR advocacy and has been an effective vehicle for
training enforcement authorities. The following training was
provided in 2006:

-- Training for the inspectors of SerbiaQs Republic Market
Inspectorate providing information on recognizing original
and pirated and counterfeit products (April 18, 2006);

-- Training for police officers, prosecutors and judges in
Zrenjanin providing information on the new legislative
framework provided by the Law on Special Authorities for the
Protection of IPR and on recognizing original and pirated and
counterfeit products;

-- Conference on IPR protection (September 18-19) brought
together over 100 representatives of the Ministry of the
Interior, the Ministry of Finance, prosecutors and judges,
tax and market inspectors, customs officials and
representatives of the intellectual property Office to
discuss practical implementation of the legislation and learn
more about best practices for fighting IPR infringements.
Ambassador Polt opened the event, and keynote speakers
included Milan Parivodic, Minister of International Economic
Relations, and Vlajko Senic, State Secretary at the Ministry
for Trade, Tourism and Services. Speakers included the
director of the intellectual property Office, lawyers and
experts from the IPR Committee, as well as a special agent
from the FBI and a senior police advisor from the US
Department of Justice, who presented techniques and
experiences in fighting cyber crime;

-- Presentation on the role of tourist inspectors in
protection of intellectual property rights at a conference
organized in Kopaonik (September 21, 2006) by the Ministry
for Trade, Tourism and Services.

18. Training efforts in 2007 will be focused on tax
inspectors and judges. The Committee will also look for ways
to assist the government in its establishment of high tech
crimes offices in the Belgrade District Court and the
Belgrade District Special Prosecutors Office.

COMMENT
-------
19. We have had excellent cooperation with the government
and relevant enforcement authorities when it comes to work on
the action plan and training assistance, although cooperation
in public relations has been less enthusiastic. The private
sector is generally pleased with these enforcement efforts,
and this is reflected in the IIPA decision not to recommend
placing Serbia on the watch list. We will continue working
with the new government on enactment of the optical disc
legislation and providing support in AmCham's training
initiatives. We will also seek ways to better publicize the
results of these efforts.

POLT

 
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