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 INDONESIA

Indonesia took steps in 2003 to strengthen its IPR regime, but progress, particularly in the area of enforcement against piracy and counterfeiting, has been inconsistent. Serious concerns remain over lack of enforcement; the production, distribution, and export of pirated optical media products; trademark infringement; and deficiencies in Indonesia's judicial system. Stern warnings of strong enforcement made by the Directorate General for IPR to mall owners in July 2003 led to a near-complete shutdown of pirate vendors for 30 days, demonstrating that effective enforcement can stop pirates. However, lack of follow-through resulted in a return to high levels of activity by retail pirate vendors. Indonesia carried out some raids against retail outlets for pirate optical media products in 2003, but enforcement and prosecution of IPR violations remained insufficient. Pirate optical media products, including CDs, VCDs, DVDs and CD-ROMs, still dominate Indonesia's market. At least 27 plants in Indonesia produce optical media products. With a total annual disc capacity of 108.5 million, domestic production of pirated products continues to increase. The pharmaceutical industry has estimated that counterfeit drugs account for 30-40 percent of Indonesia's market, and there are serious concerns about imports of pirated pharmaceuticals from other countries into Indonesia. A number of companies continue to report trademark counterfeiting and infringement involving a wide range of products, including IT products, clothing and soft drinks. In July 2003, Indonesia's new copyright law came into effect. This law, first adopted in July 2002, addresses some concerns about Indonesia's compliance with its TRIPS obligations. But Indonesia still needs effective optical disc regulations that include a strong licensing requirement, sentencing guidelines that provide a strong deterrent, and other improvements. The United States will continue to use our bilateral TIFA to work with Indonesia to take the additional measures necessary to implement the IPR Work Plan submitted by the United States in May 2002.

KOREA

Korea was elevated from the Special 301 Watch List to the Priority Watch List in January 2004 as the result of an out-of-cycle review conducted in late 2003. Korea has taken several positive steps over the last year, such as granting police authority to the Standing Inspection Team responsible for investigating software piracy; increasing efforts to report cases of infringement to U.S. right holders; and stepping up efforts to combat piracy on university campuses. In addition, the U.S. Government has been encouraged by the Korean Government's commitment to redraft regulations to clearly authorize the Korea Media Rating Board to identify and stop the fraudulent rating of videos, DVDs, and video games. Accordingly, we are optimistic that this legal loophole will be finally and permanently closed in the near future. The U.S. Government is also greatly encouraged by recent statements by President Roh recognizing the importance of protection of intellectual property and his instruction to the relevant ministries to devise ways to improve Korea's system of IPR enforcement. We hope that this new effort will produce tangible systemic improvements which will, in turn, reduce piracy in Korea.

Despite such progress, the U.S. Government remains seriously concerned that modern copyright protection continues to be lacking in important areas. Key among these is Korea's failure to adequately update its laws to protect sound recordings against digital piracy. Statements by the Korean Government indicating an unwillingness to provide national treatment to U.S. sound recording producers are also a source of concern, and further exacerbate this problem. As a result, online music piracy has continued to grow, causing serious economic damage to U.S. companies.

Other important flaws in Korea's legal regime for the protection of IPRs relate to temporary copies, technological protection measures, Internet Service Providers liability, reciprocity provisions regarding