Viewing cable 08NICOSIA126

08NICOSIA1262008-02-22 08:18:00 2011-08-30 01:44:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Nicosia

DE RUEHNC #0126/01 0530818
O 220818Z FEB 08
E.O. 12958: N/A 
REFS: (A) STATE 9475, (B) 07 NICOSIA 0153 
(U) This cable is sensitive but unclassified.  Please treat 
¶1.  (SBU) Summary and Comment.  Further to Ref A request, post 
submits our input for USTR's 2008 Special 301 review of country IPR 
practices.  (Note: This report covers mainly the 
government-controlled area of Cyprus.  A separate section is devoted 
to the area administered by Turkish Cypriots, where IPR piracy is 
more widespread.)   In 2007, Cyprus made further progress combating 
IPR abuses, mainly due to better enforcement by the Police and 
Customs.  Cyprus also strengthened further its legislative framework 
by adopting legislation to harmonize its legislation with the EU's 
Directive 29/2005 on Unfair Commercial Practices.  Earlier 
legislative improvements allowing increased penalties for IPR 
violations have also had the desired effect of discouraging piracy. 
Nevertheless, counterfeit optical media (particularly DVD piracy 
through rental shops,) remains a problem, while software piracy 
remains prevalent. 
¶2.  (SBU) Post does not/not recommend including Cyprus on the watch 
list.  The overall IPR situation in the government-controlled has 
improved slightly compared to previous years thanks to better 
enforcement. IPR legislation in the area controlled Turkish Cypriots 
remains antiquated with limited resources or interest in 
enforcement. Post plans to hold its fourth international IPR seminar 
in Cyprus (in the government-controlled part as well as in the area 
administered by Turkish Cypriots) in November 2008.  Post encourages 
participation of USG IPR experts in this workshop. 
End Summary and Comment. 
Optical Media Piracy 
¶3.  (SBU) Cyprus' main IPR problem remains optical media piracy, 
facilitated in part by advances in computer technology.  Motion 
picture piracy is estimated at 50 percent, and music piracy at 40 
percent, although the figures are somewhat dated.  Pirate optical 
discs (CDs, VCDs, and DVDs) are no longer sold at kiosks, although 
they are still used widely by DVD rental clubs. 
¶4.  (SBU) There are approximately 125 DVD rental shops on the 
island.  Only a small percentage of these rent exclusively 
legitimate product (i.e., original, licensed region 2 disks).  Many 
carry both region 1 and region 2 disks.  Multi-region players are 
readily available.  A smaller percentage of shops rent 
illegally-duplicated disks, most of which have been locally burned 
on DVD-/+R media.  During 2007, the combination of more frequent 
police raids and stricter fines by the courts has helped keep in 
check the number of pirated products visibly on display at DVD 
rental shops.  There are no indications of domestic, large-scale, 
organized, mass-production piracy for the export market. 
¶5.  (SBU) In December 2006, and after extensive consultations with 
POVEK (the shop-keepers' union), the GOC implemented new regulations 
concerning the kinds of items that can be sold by retail 
establishments including kiosks.  This new policy, although not 
specifically directed against piracy, had an unexpectedly positive 
impact against piracy as it prohibited kiosks from selling CDs and 
DVDs, including even legitimate copies.  Given the pervasive nature 
of piracy through kiosks before this new policy, this measure has 
significantly reduced the availability of pirated CDs and DVDs to 
the public. 
Software Piracy 
¶6.  (SBU) The International Intellectual Property Alliance (IIPA) 
dropped Cyprus from its 2007 Special 301 report to the USTR.  The 
IIPA had included Cyprus in its "special mention" category (one 
notch below recommending inclusion on the watch list) in its 2006 
report, estimating that, in 2005, the rate of business software 
piracy in Cyprus was 53 percent, causing losses of USD 5.9 million 
to the industry.  These figures reflect an improvement for Cyprus 
over the long term, given that software piracy was estimated at 77 
percent in 1994.  However, the rate of software piracy in Cyprus 
remains somewhat above the current EU average.  The most common form 
of software piracy in Cyprus occurs through local PC retailers, 
often loading new PCs with unauthorized software copies.  Software 
piracy figures for 2007 are not yet available. 
Use/Procurement of Government Software 
¶7.  (SBU) The GOC is much more scrupulous than the private sector in 
abiding by national and international copyright laws for government 
software.  The GOC Department of IT Services (under the Ministry of 
Finance) issued in 1998 a circular to all government departments 
expressly forbidding the use of pirated software on GOC machines, 
subject to administrative action for violators and their 
supervisors.  In January, 2008 the GOC signed an MOU with Microsoft 
licensing Microsoft operating system and productivity software for 
all government PCs including those in schools. 
Merchandise Piracy 
¶8.  (SBU) According to our sources in the field, merchandise piracy 
has decreased significantly in recent years, largely thanks to 
aggressive enforcement by the Department of Customs, as well as the 
Other Forms of Piracy 
¶9.  (SBU) Despite Cyprus' adoption of a recent EU directive against 
online piracy, anecdotal evidence suggests Internet piracy is on the 
rise, although still below U.S. or EU levels.  Furthermore, advances 
in digital technology are moving piracy onto a totally new level, 
often requiring more innovative approaches by the authorities.  In 
February 2008, the police dismantled a ring offering illegal TV 
satellite packages to 547 subscribers.  The police came across this 
new form of crime by chance, while investigating cases of illegal 
electronic gambling.  They were looking for servers transmitting 
illegal betting games but found that the signal being emitted was 
that of an illegal satellite TV.  The man in charge of the ring 
legally bought access cards from a satellite TV provider and then 
shared the access code with his customers at a discount.  The police 
arrested this person and seized a total of nine servers as evidence. 
 It is believed that this is only the tip of the iceberg, with many 
other such operations still in existence. 
¶10.  (SBU) On a different front, college textbook piracy has been 
dealt decisive blows over the last couple of years, largely thanks 
to a recent, high-profile law suit against a copy shop near the 
University of Cyprus.  The confiscation by the police of the shop's 
copying machines, followed by the successful prosecution in court of 
the offender sent out a strong message to others.  Additionally, the 
University of Cyprus and other tertiary education institutions have 
adopted increasingly more stringent policies against textbook piracy 
over the years. 
¶11.  (U) Cyprus is fully compliant with TRIPS and has modern IPR 
legislation, which it continues to upgrade, in line with EU 
requirements.  Currently, there are at least several different laws 
covering IPR issues including a Copyright Law, a Trading Standards 
Law, and legislation regarding customs and the obligations of 
importers and the empowerment of the customs authorities. Other 
minor laws are also used to enforce IPR protection. 
¶12.  (SBU) The existing array of local IPR legislation was 
significantly reinforced with the addition of Law 103/2007, which 
came into effect on December 12, 2007, bringing Cyprus in line with 
EU Directive 29/2005 on Unfair Commercial Practices.  This new law 
provides stiff administrative penalties (up to Euros 250,000) for 
traders exhibiting or offering for sale products that mislead 
consumers.  The Ministry of Commerce's Consumer Protection Service, 
tasked with implementing this law, intends to use it to prosecute, 
among others, trademark and copyright violators.  Significantly, the 
burden of proof in this legislation, unlike most other laws in 
Cyprus, rests on the defendant (unless he or she can justify an 
appeal to the Supreme Court), making enforcement relatively easy. 
Another welcome innovation that came with this law was that the 
House approved concurrently a request by the Consumer Protection 
Service to hire three additional staff members during 2008 to help 
implement the law. 
¶13.  (SBU) Other recent laws serving the same purpose included Law 
133(I) of 2006, which came into effect on October 20, 2006, 
concerning products violating IPR.  This law helped Cyprus harmonize 
fully with EU directives 2001/84 and 2004/48 by amending earlier 
Cypriot legislation.  These amendments provided steeper and 
recurring fines for pirates and introduce a "name and shame" policy 
for pirates in the Official Gazette.  In short, these amendments 
reinforce the rights of original creators of works of art. 
¶14.  (SBU) Important amendments to the copyright law were also 
introduced in 2002, reinforcing the presumption of ownership, 
particularly in software cases, and facilitating the admission of 
pirated material as evidence by the court.  The amendments also 
increased maximum penalties for piracy: from two years imprisonment 
and a fine of CYP 1,500 (USD 3,150) to three years and a fine of CYP 
30,000 (or USD 63,000) or more, for second-time offenders. 
Significantly, this increase in penalties allows the police to raid 
businesses suspected of being engaged in piracy without having to 
obtain a search warrant.  Over the last two years, the courts have 
been quite strict about piracy both in terms of definition and 
¶15.  (SBU) Similarly, tougher laws on indecent publications have 
also helped the police crack down on pirated pornographic material 
(videos and DVD's) available through kiosks etc.  Since pirates of 
pornographic material are also frequently pirating other movies and 
CDs, the crackdown on the pornography industry has also led to 
significant seizures of pirated non-pornographic optical discs and 
¶16.  (SBU) Three different GOC agencies share responsibility for IPR 
enforcement on Cyprus: the Police, Department of Customs and the 
Consumer Protection Service (CPS) of the Ministry of Commerce and 
Industry.  Each of the three agencies uses one or several of the 
laws described above, trying to tackle IPR enforcement from its own 
perspective.  Cooperation among these three agencies is still less 
than perfect, although it has improved considerably in recent years, 
with active help from the Embassy (mainly through workshops and 
¶17.  (SBU) In general, the Police spearhead the GOC's anti-piracy 
efforts and their periodic market sweeps for pirated products have 
effectively reduced the amount and incidence of illegal material. 
Similarly, Customs has shown a renewed interest in enforcement since 
May 1, 2004 due to legislative changes providing Customs with 
enhanced enforcement tools.  The Consumer Protection Service, until 
recently a laggard in IPR enforcement, now promises to take a more 
active stance following the recent approval of the law on Unfair 
Commercial Practices (see above). 
Police Lead the Pack Against Piracy 
¶18.  (SBU) The police have made good use of the evidence law, passed 
in February 2004.  This law grants Cypriot judges discretionary 
authority to admit hearsay and electronic reproductions as evidence 
in trials.  These changes facilitate prosecution of IPR cases by the 
Police.  Active press coverage of greater police involvement and 
increased prosecutions has also somewhat helped deter new parties 
from entering the pirated goods market. 
¶19.  (SBU) In November 2004, the Police formed a dedicated unit 
specializing in IPR enforcement.  With help from this unit, the 
police stepped up the number of raids on suspected pirates to 188 in 
2007, from 114 in 2006.  The total number of seizures from these 
raids (mostly DVDs and CDs) also rose to 188,516 in 2006 from 77,763 
items in 2006.  Retailers now appear more reluctant to display 
pirated products in kiosks or elsewhere in the marketplace. 
Customs Cracks Down on Imported Pirated Merchandise 
--------------------------------------------- ------ 
¶20.  (SBU) The Department of Customs has also been more successful 
in combating IPR piracy in recent years.  Cyprus' EU accession has 
allowed the Department of Customs to divert resources from its 
traditional work at Cypriot ports of entry (which has diminished 
considerably, since most trade is conducted within the EU) to new 
areas such as better IPR enforcement. 
¶21.  (SBU) Customs has also made good use of legislation adopted in 
2002 granting it enhanced authority to detain (for up to three days) 
goods or products suspected of being counterfeit until the true 
identity of the IPR holder is established.  Detentions by Customs of 
counterfeit goods have risen significantly following this increased 
authority.  Customs also credits U.S.-provided non-proliferation 
training and equipment with improving Customs ability to interdict 
counterfeit goods.  Customs now audits retail shops to identify 
imported counterfeit merchandise that has slipped though the port of 
entry.  Customs then traces the supply chain back to the importer 
for possible action.  Customs also uses this information to improve 
its screening system.  To overcome weaknesses in the evidence law 
that often prevented Customs from pursuing a case within the 
three-day detention period, Customs arranged with the Ministry of 
Commerce to seize the counterfeit goods under its administrative 
detention authority.  This innovative approach has prevented the 
release of the goods into retail channels. 
¶22.  (SBU) In 2007, Customs conducted dozens of raids, seizing 
thousands of pirated merchandize.  The total value of these seizures 
reached USD 155,868, compared with USD 696,370 in 2006.  (In 2006, 
about 60 percent of the seizures in terms of value comprised 
counterfeit cigarettes, seized in just two raids.  In 2007, there 
were no significant cigarette seizures.)  Seizure items included 
mainly cheap imitations of well-known brands of merchandise (e.g. 
clothing, towels, shoes, bags, wallets, perfumes, and sunglasses) 
and smaller quantities of pirated optical and audio material.  Most 
of the seized goods originated from the Far East (Hong Kong and 
China), while smaller numbers came from Lebanon, Greece, Russia, and 
the United States. 
High Hopes for Consumer Protection Service 
¶23.  (SBU) Armed with both the new law described above (Unfair 
Commercial Practices law) and a new Director (appointed in 2006), 
the Ministry of Commerce's Consumer Protection Service promises to 
pull its weight in the fight against piracy.  Post will follow up 
with the Service to ensure it stays on track to hire the additional 
staff and implement the new law. 
Impact of Piracy 
¶24.  (SBU) It is difficult to measure the actual impact of piracy 
and counterfeit goods on legitimate businesses but, at least, the 
trends in the legitimate market seem reassuring.  For example, in 
the cinema business, the following numbers tell the story: total 
cinema ticket sales have gone from 840,000 in 2005, to 801,000 in 
2006, to 849,000 in 2007.  About six new theater screens came on 
line in 2007, mostly in multi-screen complexes, although several 
smaller theaters were forced to shut down.  There are now 34 modern 
cinema screens on the island, compared to 40-45 in 2002 (although 
only 12 existed in 1992).  Of the 34 screens, 22 belong to the same 
operator.  In other words, cinema attendance has been growing 
slowly, and we have witnessed considerable consolidation in the 
cinema business, with multi-screen complexes on the rise elbowing 
small theaters out of the market.  Similarly, licensed goods 
merchandisers are reporting steadily increasing sales of their 
merchandise over the last two years as a result of the effective 
interdiction of counterfeit goods by Customs. 
Area Administered by Turkish Cypriots 
¶25.  (SBU) The IPR situation in the area of Cyprus administered by 
Turkish Cypriots (i.e., the self-declared "Turkish Republic of 
Northern Cyprus," which is only recognized by Turkey) is, in 
general, far worse than in the government-controlled area.  IPR 
legislation is antiquated (for example, the basic copyright law is 
based on the 1911 Imperial Copyright Law, without any amendments 
whatsoever in recent years) and the authorities have shown little or 
no initiative in combating piracy.  In November 2005 and March 2007, 
the Embassy sponsored IPR workshops in the north with support from 
the Turkish Cypriot Chamber of Commerce.  Unfortunately, these 
efforts have failed to produce the desired result.  After the 2005 
workshop, The Turkish Cypriot authorities committed to drafting 
modern, EU-compatible, IPR-related legislation, and Turkish 
officials were invited to stage an IPR training program.  The 
Turkish Cypriot authorities, however, have identified the adoption 
of other needed legislation (e.g. on money laundering and casinos) 
as greater priorities, and little progress has been made on new IPR 
laws to date. 
¶26.  (SBU) DVD and audio media piracy is almost universal (often 
victimizing Turkish artists).  Most pirated CD and DVD copies are 
imported from Turkey - although some shops openly burn CDs and DVDs 
on demand.  Merchandise piracy is also rife.  Counterfeit apparel, 
shoes, and luggage are freely available.  Software piracy is 
estimated at over 90 percent and even the "government" uses pirated 
software.   College textbook piracy is also the norm in north 
Cyprus' thriving tertiary education community.  Finally, several 
local television stations continue broadcasting recent television 
and movie releases without permission, although the problem 
reportedly decreased during 2007 due to protests by cinema owners. 
¶27.  (SBU) Although dated, a law concerning counterfeit products 
(dubbed the "Passing Off" legislation, based on the Civil Wrongs Law 
under British Common Law) has been used in recent years to prosecute 
merchandize pirates in the area administered by Turkish Cypriots. 
Such cases include counterfeit cigarettes, tea, and beer.  The law 
prevents pirates from using similar-sounding names or identical 
logos to promote their products. 
¶28.  (SBU) There have been no recent court cases involving optical 
media.  Post is aware of only one case to date involving optical 
media piracy being brought to court.  This was several years ago 
when the legitimate IPR holders for the movie "Titanic" obtained an 
injunction forbidding local TV stations to broadcast the movie prior 
to its release on the big screen, using another law concerning 
publications.  The pirates "mistake" in this case (which they have 
not repeated since) was that they advertised the release several 
months ahead. 
¶29.  (SBU) Post does not/not recommend listing Cyprus (the 
government-controlled area) in this year's Special 301 review.  We 
did not list Cyprus in 2006 and in 2007 IPR enforcement improved. 
We are also unaware of any international professional associations 
recommending Cyprus' listing.  Admittedly, IPR piracy in the 
northern part of the island is much worse but, given current 
political realities, it would be very hard to list this part of 
Cyprus (not recognized by the USG) under the Special 301 review as a 
separate entity. 
¶30.  (SBU) Post continues to advocate better education and 
awareness.  In this vein, Post plans to organize, once again, 
separate IPR workshops in both parts of the island in November 2008. 
 Post also welcomes increased training opportunities for GOC IPR 
officials, whether in the United States or in Cyprus.  Experience 
has shown that the GOC will not take advantage of training 
opportunities unless fully funded by outside sources.  End comment.