08ASTANA555, KAZAKHSTAN: SPECIAL 301

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Reference ID Created Released Classification Origin
08ASTANA555 2008-03-19 03:07 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXYZ0002
RR RUEHWEB

DE RUEHTA #0555/01 0790307
ZNR UUUUU ZZH
R 190307Z MAR 08
FM AMEMBASSY ASTANA
TO SECSTATE WASHDC 2042

UNCLAS ASTANA 000555 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN (O'MARA) and EB/TPP/IBE (JBOGER) 
STATE PASS USTR FOR JCHOE-GROVES 
COMMERCE FOR ITA/MAC/OIPR (CPETERS) 
 
E.O. 12958: N/A 
TAGS: ETRD KIPR ECON KZ
SUBJECT:  KAZAKHSTAN: SPECIAL 301 
 
REF:  (A) STATE 09475 (B) 06 ASTANA 009 (C) 07 ASTANA 0454 
 
------- 
SUMMARY 
------- 
 
1. (SBU) Over the past year, the Government of Kazakhstan (GOK) has 
continued to demonstrate a commitment to the development and 
modernization of its IPR protection regime. Despite an increase in 
the domestic production of pirated CD's and DVD's in Kazakhstan's 
two largest cities, the GOK, and more specifically the IPR Committee 
of the Ministry of Justice, continues to move forward in meeting 
international standards and addressing the concerns of the 
international community for the enhanced protection of IPR on the 
legislative, judicial, and enforcement fronts.  Facing a continuing 
challenge to stem the flow of pirated goods from Russia and China, 
the GOK has also proposed legislation to further empower customs 
officials to seize counterfeit materials before they enter the 
country.  Although criminal sentencing remains at low levels, and 
the lack of a public perception of the seriousness of IPR violations 
is problematic, ongoing educational programs and proposed 
legislative changes set to come to parliament for ratification in 
late spring 2008 are expected to significantly improve the IPR 
environment.  Therefore, post recommends continuing Kazakhstan's 
exclusion from the Special 301 Watch List.  End Summary. 
 
--------------------------------------------- ---- 
ENFORCEMENT INCREASES, BUT CRIMINAL SENTENCES LAG 
--------------------------------------------- ---- 
 
2.  (SBU) IPR enforcement efforts continue to increase, and the 
numbers of convictions for administrative and criminal offenses grew 
in the last year.  According to combined 2007 statistics released by 
the Ministry of Justice IPR Committee, and the Procurator General, 
 
 -- 1971 IPR-related raids were conducted.  As a result of these 
raids, 1418 entities (organizations and individuals) were charged 
with administrative penalties; 
-- 2670 administrative cases were initiated; 
-- 20,250,755 KZT ($168,056) was collected in administrative fines 
(compared to 14,385,725 KZT, or $116,013 in 2006); 
-- 229,979 counterfeit copies valued at 132,369,884 KZT ($1,098,505) 
with unlicensed or illegal trademarks were confiscated (compared to 
121 million KZT, or $975,806, in 2006); and 
-- 658 criminal cases were initiated (compared to 268 in 2006). 
 
3.  (SBU) Of the 658 criminal cases initiated in 2007, 447 were sent 
to courts.  Of these, 108 people were convicted under Part 1 of 
Article 184 of the Criminal Code, one person was convicted under 
Part 2, and 54 under Part 3.  (NOTE: Parts 1-3 of Article 184 
represent, in order, increasing categories of severity in both the 
level of the offense and severity of punishment, based on amount of 
damage, scale of the offense, repetition of the violation, etc.  End 
note.)  Penalties for those convicted of violations of Article 184 
vary. They include fines ranging from 100 to 700 times the Monthly 
Calculation Unit (one Monthly Calculation Unit is currently set to 
1,168 tenge, or $9.60), the confiscation of 5 to 10 months' wages, 
community service of 100 to 240 hours, or imprisonment from 2 to 5 
years and the possible confiscation of property. 
 
4.  (SBU) Despite the relatively high number of criminal 
convictions, no data has been made available regarding sentencing. 
According to an official at the General Prosecutor's Office, this 
most likely indicates that no individuals have been incarcerated, 
and that the criminal sentences were either reduced to 
administrative penalties, or suspended. (Comment:  The lack of jail 
sentences remains of concern, indicating a continued perception 
within the courts that copyright infringement alone, in the absence 
of other criminal violations, does not merit incarceration. End 
Comment.) 
 
---------------------------- 
NEW AND CONTINUED CHALLENGES 
---------------------------- 
 
5.  (SBU) Outside of Kazakhstan's two largest cities (Almaty and 
Astana), the vast majority of pirated media available originates in 
Russia and China.  Russia -- with its many railway links to northern 
Kazakhstan -- presents a particular challenge for Kazakhstani 
authorities. As noted by the IIPA, customs officials continue to 
lack the ex officio authority required to seize counterfeit 
materials at the borders, when they are discovered. 
 
6.  (SBU) According to private industry representatives, 2007 has 
witnessed an increase in the availability and sales, particularly in 
Almaty and Astana, of domestically produced counterfeit CD's and 
DVD's. This is largely due to the increasing availability of 
pirating technology and the willingness of small-time media pirates 
to engage the police in the "cat and mouse" game of street sales. 
 
Industry representatives assert that local police charged with 
enforcing the prohibition of street sales are often unmotivated and 
indifferent to the presence of such vendors, if not directly paid to 
ignore them. 
 
7.  (SBU) The pursuit of rulings against IPR violators in civil &#x
000A;courts remains problematic because of legal norms carried over from 
Soviet times.  According to the Prosecutor General's office and 
private industry representatives, this is particularly so when 
licensed copyright holders attempt to sue vendors of pirated 
material for damages.  Under current IPR legislation, plaintiffs are 
subjected to an unnecessarily heavy burden of proof, whereby they 
are required to demonstrate a direct contractual link to the artist 
or author whose pirated material is being illegally sold. (Note:  An 
example would be a direct contract between a performer and record 
store. End note.) If a licensed copyright holder or distributor can 
not substantiate this direct linkage, they can not, in the eyes of 
the court, demonstrate financial damages caused by illegal sales. 
In addition, civil claims must also be brought in a court in the 
region where the infringement is alleged to have occurred.  Regional 
courts tend to lack regular exposure to -- and knowledge of -- this 
relatively new and complex area of law, which has historically 
inhibited the successful prosecution of violations. 
 
------------------------ 
OPTICAL MEDIA PROTECTION 
------------------------ 
 
8.  (SBU) Two plants in Kazakhstan produce optical discs.  One 
specializes in films and music, the other in software.  Both plants 
have source identification codes (SID's) issued by the IFPI 
(International Federation of the Phonographic Industry) and, as IIPA 
notes, provide samples of their products for use as forensic 
evidence. 
 
---------------------------- 
SOFTWARE INDUSTRY ENGAGEMENT 
---------------------------- 
 
9.  (SBU) According to local Microsoft representatives, all newly 
procured government computers have licensed software.  While some 
older government computers may still be loaded with unlicensed 
software, overall the Microsoft representative expressed strong 
satisfaction with the government procurement situation.  Most 
recently, Microsoft founder Bill Gates and the CEO of Samgau 
(Kazakhstan's state-owned technology and innovation holding company) 
signed an MOU on plans for future cooperation in the development of 
educational technologies, as well as collaboration in IPR protection 
and enforcement.  Microsoft is recognized for its successful 
engagement in defense of IPR in Russia; its enhanced partnership 
with the GOK is expected to improve IPR protective capacity in 
Kazakhstan, with a particularly heavy focus on the prevention of 
internet-related piracy. 
 
10.  (SBU) Despite the positive relations developing between 
Microsoft and the GOK, Microsoft representatives recommend that 
Kazakhstan be placed on the Special 301 Watch List. Recent findings 
from Microsoft-funded research indicated that levels of privately 
used pirated (or unlicensed) software remains extremely high. 
According to their data, 92.9 percent of privately owned PC's in 
Kazakhstan utilize of illegally obtained software. (Note: Their data 
also indicated that the overwhelming majority of respondents 
believed piracy rates would decrease if the prices of commercially 
available software were to be lowered.  This opinion was also shared 
by the General Prosecutor's Office. End note.) 
 
--------------------------------------------- ----- 
SCHEDULED AND ENACTED IPR LEGISLATIVE IMPROVEMENTS 
--------------------------------------------- ----- 
 
11.  (SBU) During the reporting period, Kazakhstan continued to 
pursue legislative changes that strengthen the government's hand in 
protecting intellectual property rights.  The legal basis for 
preventing and prosecuting IPR violations remains the "Law on 
Amending Legislative Acts of the Republic of Kazakhstan on the 
Issues of Intellectual Property", which entered into force on 
November 26, 2005. This law amended the country's Criminal Code, 
Criminal Procedure Code, Civil Code, Administrative Code, and the 
Copyright Law as they pertain to the protection of intellectual 
property (ref B).  Amendments to the Patent Law were ratified in 
2007, significantly simplifying the patent system (as compared with 
the old Soviet two-stage system) and bringing it into closer 
conformity with international standards. 
 
12.  (SBU) Proposed amendments to the Copyright Law, Law on Trade 
Marks, Law on Licensing, and Customs Code are currently being 
evaluated by independent experts.  Proposed amendments to the 
Copyright Law have been praised by private industry representatives 
in as much as they directly address the weaknesses hindering 
copyright enforcement in civil courts (see para 7 above).   New 
amendments will relieve IPR holders of the heavy burden of proof, 
and will facilitate effective law enforcement. In accordance with 
WIPO requirements, the draft amendments also detail the use of 
technical means for the protection of copyrights, specifically 
prohibiting the removal of any types of technical or coded copyright 
protection technologies. The IPR Committee is confident that the 
proposed amendments to the Licensing Law stipulating mandatory 
licensing for the commercial reproduction of any copyright protected 
audio and visual recordings meet WTO requirements.  These amendments 
are scheduled to come before Parliament in late May-early June 
2008. 
 
13.  (SBU) Amendments to Customs Legislation granting ex officio 
authority to customs agents are scheduled to come before Parliament 
 
in November 2008.  These amendments will grant customs agents the 
authority to more readily seize counterfeit goods at the border, 
which has long been recommended by the International Intellectual 
Property Alliance (IIPA.) 
 
------------------------------------- 
IIPA REPORTING AND CONCERNS ADDRESSED 
------------------------------------- 
 
14.  (SBU) Over the last several years, IIPA reporting has 
consistently reiterated several concerns regarding the development 
and efficacy of IPR protective measures in Kazakhstan.  They have 
also, however, continued to report several significant inaccuracies. 
 
 
15.  (SBU) The IIPA report states that "only the Ministry of Justice 
(Copyright Office) and not the police can bring charges for 
[administrative violations]" and recommends "that the existing 
police authority be broadened to include administrative violations 
as well."  Article 620 of the Administrative Violations Code 
specifically provides such powers to the police. 
 
16.  (SBU) The IIPA's assertion that the 2004 statutes only provide 
for a 50-year term of copyright protection is inaccurate, as the 
November 2005 amendments specifically provide for the extension of 
copyright protection to 70 years, in keeping with international 
standards. 
 
17.  (SBU) The IIPA repeats another error from its 2006 and 2007 
reports, overstating the minimum damages threshold for criminal 
prosecution.  IIPA misinterprets w
hat it calls "the key amendment" 
in the November 2005 legislation. i.e., the change to Article 184 of 
the Criminal Code, which repealed the undefined "huge damage" 
threshold for criminal cases and replaced it with a threshold of 100 
Monthly Calculation Units (MCU's).  The IIPA incorrectly reported 
that one MCU is the equivalent of 36,495 tenge ($304), when in fact 
it is currently set to just 1,168 tenge ($9.60).  Thus, the IIPA 
overstates the all-important minimum damages threshold for criminal 
prosecution by a factor of more than thirty. 
 
18. (SBU) The IIPA cites Kazakhstan's need to establish a legal 
basis for the confiscation and destruction of equipment used in the 
criminal manufacture of pirated goods.  The IPR Committee continues 
to assure post that a combination of statutes in the Criminal Code 
and the Criminal Procedure Code constitutes an adequate provision 
for the confiscation of such equipment. Moreover, the IPR Committee 
has stated that such confiscations are routinely carried out and do 
not require a court order.  A court order is necessary only to 
destroy such equipment -- a procedural requirement which the IPR 
Committee defends as necessary to preserve potentially material 
evidence. It should also be noted that the abovementioned proposed 
amendments to the Copyright Law will require judges, in the event of 
a conviction, to make a ruling regarding the named piracy equipment. 
This provision is expected to increase occasions in which 
confiscated equipment will be destroyed. 
 
------- 
COMMENT 
------- 
 
19.  (SBU) Kazakhstan's continued progress on and commitment to IPR 
protection merits its continued exclusion from the Special 301 Watch 
List.  The efforts of the IPR Committee within the Ministry of 
Justice are expected to bear fruit in 2008 in the ratification of 
amendments to numerous IPR-related laws.  Post takes growing private 
sector participation in the enforcement of IPR as a very positive 
indicator of progress.  At this stage, acknowledging Kazakhstan's 
significant achievements while stressing to the GOK that they must 
continue to enhance their IPR efforts is a better approach to 
facilitate further U.S.-Kazakhstani IPR cooperation and achieve 
results on the grounds than returning Kazakhstan to Watch List 
status.  End Comment. 
 
ORDWAY

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