Counterfeiting and Illicit trade in ASEAN

A new report called Tackling Illicit Trade in ASEAN Advocacy Paper, 2020 by the EU-ASEAN Business Council and the Transnational Alliance to combat Illicit Trade (tracit.org) sets out some stark data on how counterfeits fit into the illicit trade world. 

Illicit trade comprises all kinds  of cross border illegal trade from smuggling, to narcotics to wildlife and of course counterfeit goods are a major part of this. The problem comprises both into ASEAN region trade and intra ASEAN member states.  Some key features of the report relevant to anti-counterfeiting are set out below:

• Covid has had an impact in 2020 – 150,000 counterfeit 3M masks were seized in July 2020 in Vietnam. Philippines Customs reports $5M of counterfeit medical and PPE products this year.
• Ecommerce is a huge driver of the counterfeit trade. The  UNODC reported 2500 websites offering counterfeit sanitizer, masks and medical supplies. Major ecommerce sites like Shopee, Lazada, Topkopedia and Bukalapak are criticized by the US and EU for failing to tackle unauthorized sellers, counterfeit goods, rogue domain names and false advertisements. Hidden trader identities are a major barrier to stopping the problem. The boom in small-parcel postal services is the main delivery mechanism.
• Pharmaceuticals – the tarde in counterfeit pharma products is estimated to be $4.5 bn today. The problem is especially bad in Indonesia, with a growing online sales challenge. The Pharmaceutical Security Institute reported on 673 cases in Philippines, Thailand and Indonesia.
• Some sectors like tobacco and alcohol are hit by the triple whammy of smuggling, counterfeiting and refilling, leading to massive government tax losses (JTI estimates Malaysia lost RM1 billion in cigarette tax in 2020). The WHO asserts that ASEAN has the highest illicit (smuggled, refilled, counterfeit) liquor consumption in the world – a massive danger to consumers.
• Particular consumer sectors suffering from counterfeits in ASEAN include toys and auto parts, with these cases almost always being imports from China – according to examples like counterfeit BMW parts in Thailand.
• Agrochemical counterfeits are largely sourced from China and India according to seizures in Cambodia, Vietnam Malaysia, Philippines and Thailand. Many are very dangerous.
• China remains the main counterfeit goods source due to its proximity and shippers’ use of Free Trade zones to support the trade. Local counterfeit manufacture occurs in Malaysia, Thailand and Vietnam, including repackaging.
• The total counterfeits market in Southeast Asia is estimated to be worth $40Bn
• Weak enforcement mechanisms, poor sanctions and low Customs seizures in ASEAN countries make counterfeiting easy and attractive for criminals

The full report is available here 

PetSmart is smarting at UDRP loss in Vietnam

Many WIPO domain name cases are relatively straightforward when a company copies a famous mark. A number of the cases from SE Asia involve a local company/person who’s domain name is too close to a famous foreign mark and there is no legitimate reason for them to have it. Examples are rolex-group.com owned by a Filipino orthaiyahoo.org by a Thai person. 

A case from Vietnam Pet Smart v Pet Mart shows a different type of situation. PetSmart Inc is the largest US pet store company based in Arizona with several thousand facilities. They filed a UDRP case against 3 domain names – PetMart.info, PetMartVietnam.com, and PetMartVN.com.

PetMart Viet Nam Co. Ltd is a Hanoi based pet business. It is not very large but quite popular in Vietnam. It was established in Hanoi in 2012. It sells products and accessories (online and offline) for pets and provides pet-related services. In addition to the Head office in Hanoi, it has 17 stores / branches in Hanoi, Saigon, Da Nang and Hai Phong.

The crux of the decision therefore is whether Pet Mart had a legitimate interest in the domain name. The panelist concluded that they did. He had to balance competing rights. PetMart registered a trademark and they trade in Vietnam. PetSmart had its own marks but these were filed in Vietnam later than PetMart’s. As a result PetSmart could not prove that PetMart were deliberately taking unfair advantage. The marks are certainly quite similar and there is possibility it was set up to piggy back on PetSmart. But the evidence did not show that conclusively.

The case shows the limitations of a UDRP case against a business which has become well established, whether or not it copied the international brand owner. A safer route may be to challenge the underlying trademark itself.

New enforcement decree in Vietnam

A new Decree 198 updates enforcement rules based on new commercial practices, especially online. It involves:

•           Clarifying unclear provisions

•           Adding consistency with subsequent legislation enacted after 2013.

Examples of what Decree 198 covers include:

1.         The definition of counterfeit goods is amended. A detailed new definition is created. It especially includes goods with no active ingredients, as well as goods bearing fraudulent label information and counterfeit labels and packaging. A consistency change is the removal of the term "Intellectual property counterfeit goods” which comes from Article 213 of the 2005 Intellectual Property Law from the definition of counterfeit goods. These are already handled by another Decree No. 99/2013/ND-CP on administrative IP violations. This change removes an overlap/duplication, so avoids different outcomes arising from different decrees/laws.

2.         Administrative fines are mainly increased under the new decree. Some minor violations are moved to lower levels of fine (acts of trading counterfeits, goods, services infringing IP rights and banned goods, services on the internet).

3.         A new offence of trading counterfeit goods online is included with fines specified. Specifically this change is in adding e-commerce applications on mobile platforms (“mobile applications”) as the subject of e-commerce IP violations. Compulsory removal of mobile application from application stores is one of the remedial measures.

4.         The administrative enforcement role of the General Department of Market Surveillance under the Ministry of Industry and Trade (MMB) is confirmed. 

The new rules take effect on 15th October. Many administrative IP cases are filed with this department both ex officio cases and complaint based cases. Sometimes administrative complaints ask the case be dealt with by the MMB, in other cases, in collaboration with other authorities.

Broadcasters take on internet content distribution in Indonesia

An interesting court case in Indonesia aims to answer the question, has the internet in effect replaced broadcasting? Indonesia’s Broadcast Law uses a broad definition of what broadcasting is. As in many other countries it aims to manage the number of broadcasting organizations, issue expensive licenses and control content. There is a Ministerial department and a Broadcasting Commission overseeing them. There are restrictions on foreign ownership, rules on content, advertising and must-carry rules (which means certain local content must be shown).

Indonesia’s Constitutional Court (MK) is now being asked to conduct a judicial review of the Broadcast Law in a case filed by one of the country’s leading TV networks, MNC. They argue that Netflix and YouTube, which are offering live streaming services are caught by the definition of broadcast. Their position is that there is no level playing field, that they are required to have broadcast permits and follow many restrictions, but digital content distributors do not.  

The Ministry of Communications and Infomatics (KOMINFO) has given evidence that if the court agrees with MNC, that they would need to shut down all live streaming services, (known locally as Over The Top or OTT services), including Facebook Live, YouTube and other internet services. 

The problem is that the internet is gradually eating into the traditional broadcast sector. Twitter users have jumped in to criticize the case as grasping, from a dying industry with weak content and a profit motive.  These commentators contrast it to the diverse, free, more creative (they say) digital streaming sector. MNC would probably argue one of the reasons their industry is suffering is the heavy regulatory burden which a Facebook or YouTube live streamer abroad does not have.

Perhaps the case is leverage to pressure Parliament to reduce broadcast restrictions. Traditionally this is an area with political and sovereignty concerns. But the internet has overridden this now. Broadcasters need a simplified regulatory environment; if not they say, they face a difficult future. 

When the music stops - TikTok's legal dance with a Vietnamese music titan

Major online Vietnamese content platform VNG is suing TikTok in Vietnam. VNG Corporation is a Vietnamese tech platform, founded in 2004, which focuses on digital content, online entertainment, social networking, and e-commerce. One of it’s subsidiary is app and web based a music streaming service, Zing MP3. Zing also owns rights to certain music especially Vietnamese music.

TikTok is huge in SE Asia, a relatively uncontentious region in the current global political environment. Its owner Bytedance counts Vietnam as one of its fastest growing countries. It has avoided political risk there by blocking certain content (it faces a double whammy risk of being big tech and Chinese, both highly sensitive in Vietnam). By steering clear of risk Vietnam is supposedly now among its most profitable markets in Asia.

VNG accuses TikTok of using music owned by Zing  without consent, in a number of its short videos. These are likely user posted videos probably with accompanying Vietnamese music. An analysis report from Zing showed a total of 150 Zing music tracks used in more than 11 million videos on TikTok's website and app. VNG says it sent a cease and desist letter alleging copyright infringement to Tiktok and requested Tiktok to review and remove all the music owned by Zing.

The case was filed in the People’s court of Ho Chi Minh City. The complaint demands removal of the music videos both from the TikTok app and also it’s website, as well as a damages claim for 221 billion VND (over USD9 million).

This is a huge damages claim, probably not likely to be upheld by the court. However copyright cases make up most of the infringement seen in the courts in Vietnam so judges do have some experience of this area. The case could take a year or so if it proceeds to trial. in most countries such ISP cases settle, on the basis that the ISP removes the content. Settlements have happened in other copyright litigation cases in Vietnam.

Indonesian digital/ecommerce IP enforcement

US entertainment industry groups remain unhappy with Indonesia's progress on IP enforcement. One major complaint is weak online enforcement. Recently Indonesia stepped up its site blocking of pirate websites – see here.  However until now domain hopping meant many sites reopened with new domains soon after.  The Ministry of Communications, KOMINFO now led by a new Minister since November, runs the national site blocking system covering a range of negative content and seems keen to improve its blocking of IP violations. 

The International Intellectual Property Alliance (IIPA), makes an annual submission to the US Trade Representative each year. IIPA represents the movie, publishing, games and music industries.  IIPA is taking the position that the US should suspend Indonesia’s GSP trade benefits unless there is an enforcement improvement.  There is no doubt Indonesia has taken some steps. But more is needed.  On site blocking specifically they are asking for a more efficient system to block sites and prevent them hopping. A second problem is illegal camcording in movie theatres, so is live streaming piracy.  Piracy apps and set-top boxes deliver pirated content – this needs a program to take action against the sellers. IIPA asserts that in 2019 progress stalled or even regressed. 

There are multiple regulations and laws relating to IP violation online, and coordination across multiple ministries is needed to bring clarity and coordinated action. A UK Embassy seminar this week sought to bring all stakeholders together (IP Owners, ISPs, industry associations and 5 relevant government Ministries all attended).     

Data rules in SEA - regional v national

Data privacy in SE Asia is growing in importance. The Philippines, Malaysia, and Singapore have data protection laws, as well as an established a data privacy regulation authority. Thailand has its own data protection law, while Indonesia is awaiting its Parliament’s approval, and in the meantime issuing regulations to fill the gaps in data protection and data privacy.

The ASEAN Framework on Digital Data Governance is the structure under which the 10 ASEAN member states handle cooperation on data issues.  Current proposals include a data classification framework and a cross-border data flow mechanism for ASEAN. ASEAN data privacy authorities have started regular meetings. 

Beyond this in the region the Asia-Pacific Economic Cooperation (APEC) is a growing force in data privacy.  Asia Pac. has 45 percent of the world’s online citizens, 2 billion people and growing fast. APEC operates its Cross-Border Privacy Rules (CBPR) allows participating businesses and other organizations to develop internal rules and policies under the CBPR program. The organisation then seeks a seek a certification within the country, which enables them to demonstrate data security within ACEC CBPR countries. It’s purpose is to help organisations achieve higher levels of security. It doesn’t guarantee comply with any country’s laws but protects in the case of a breach by showing a high level of security.  Singapore has now joined, the first SE Asian country to do so.  Only  the US, Japan and Singapore are operating the system, but other APEC countries are planning to join. For example the National Privacy Commission (NPC) recently submitted the Philippines’ letter of intent to join the CBPR System.

So in SE Asia data officers need to keep an eye on national and regional developments. A patchwork of regional overlays is likely to sit above national laws. 

Major SE Asian piracy site shuts and reopens

Indoxxi is one of the most famous movie piracy sites in Asia. Alexa ranks it in the top 1000 websites worldwide, and top 100 in most Asian countries. An Indonesian piracy group, funded by online add click systems, operates vast numbers of illegal piracy websites offering foreign and Indonesian movies. In fact Indoxxi sites have been repeatedly closed, but they reopen offshore by domain hopping to new sites immediately. It has been flagged by the USTR as a notorious illegal piracy site. But no action has been taken by authorities other than site blocking. 

Then after several years of operation, Indonesia’s newly appointed Minister of Communications and Information (KOMINFO), Mr. Johnny Plate acted to shut down a large number of piracy sites in December, citing the need to protect creativity and investment. Then at the same time Indoxxi announced that to was closing down as of January 1st. Within days mirror sites with similar domains were up again. So its not clear if this was just a ploy to hide the fact that they would reopen and just dodge the KOMINFO blocking tools. Given that Indonesia blocks many times of non approved websites (gambling, pornography), it is not clear why piracy sites are so easily able to avoid the censors. 

Thai court crackdown on pirate EPL matches

The English Premier League owns various rights, most importantly the broadcast rights to EPL games around the world. A key issue is preventing pirated live broadcasts of the games.  

In Thailand the authorities filed a series of criminal charges for copyright infringement and operating a business illegally without case against a group operating a pirated match streaming service called ThaiExpat.tv. ThaiExpat.tv used a series of domains around the SEA region, first located in Hong Kong, then also found in Indonesia, Singapore, Vietnam, and Malaysia to show live matches as well as offer a full suite of British TV content, including BBC, ITV and Sky programming. They also sold illegal streaming devices, which were preloaded with apps enabling pirate broadcasts of Premier League football.

The charges were:

• Copyright Act - infringement via making a broadcast available for commercial gain (s29(3) & s69), and circumventing technological protection measures
• Computer Related Crime Act – interception of data (s8)
• Broadcasting & Television Act – operating a broadcast business without permission (s66) and importing, selling, offering to sell or installing set top boxes for subscription broadcasts (s70)
• Foreign Business Act – operating a business not permitted for foreigners

The case was heard in the Bangkok IP/IT court following a Department of Special Investigation Technology and Cyber Crime Bureau raid in 2017. The individuals operating the pirate site were two Britons and a Thai woman. One British man originally arrested at the raid subsequently jumped bail and along with other individuals, is being sought by Thai police.  Two defendants plead guilty and the case finally reached sentencing last week.

On 29^th November the IP/IT court sentenced the two defendants a British man and his Thai wife to fines of 3 million baht as well as 2 and 1 year suspended jail sentences. They were required to hand over 7 million baht in cash found in their possession at the raid and pay damages totaling 15million baht. These are huge sums, which illustrate the amount of money IP crime can earn and in this case the severe penalties it can attract. Several of the group's foreign members remain on the run. 

Creative sector in Indonesia

Indonesia has for some time had a strong focus on creative industry development. It’s a sector worth tens of billions to the economy and is growing. A government department called Bekraf leads the sector. See herefor background. Bekraf has for some time played a major role assisting research, funding, start up infrastructure, marketing, intellectual property and other training and assistance.

Following April’s elections the President has announced a new cabinet. There have been rumours of tying up the huge digital economy, including the vibrant start up world, with the creative sector into a new Ministry.

Instead Bekraf was merged into the Ministry of Tourism and Creative Economy. In fact this is the ministry it started its life as a department in.  Wishnutama Kusubandio has been appointed Minister. He is a former journalist, TV producer and TV company executive. The President also appointed Deputy Tourism and Creative Economy Minister Ms Angela Tanoesoedibjo (formerly of MNC, a media company). They are definitely the right fit. 

However the creative sector has become a major part of Indonesian commerce, driven by e-commerce. The travel sector has close connections to the creative sector, in tickets, bookings, ride sharing and so on. There are many creative sectors that focus on the travel sector too – F&B, media, publishing etc. But the wider start up, digital and ecommerce business beyond travel, is much larger. IS it limiting to put it next to tourism?

A worry is the government missed an opportunity to drive the digital and creative sectors together into something much bigger. Digital regulation still sits under the Ministry of Communications and Informatics. It too has a major role in the start up ecosystems too. Will the two ministries overlap, have conflicting roles and how will they cooperate? This at a time when convergence in the creative and digital sectors will become extremely fast. It has been said that Indonesia is entering a ‘scale-up stage’ for many of its creative and digital businesses. Will multi-ministerial backing be effective? Will the next creative tech start ups be able to thrive? Will cybersecurity, data, and ICT become barriers to the creative sector because of the differing ministries?

Of course its still too early to see how this will play out; but the two ministries will need to work closely if Indonesia’s huge digital and creative sectors are to reach the potential the analysts say they have.