“Red Zones”
Whether strolling through Chatuchak Weekend Market, lower Sukhumvit or ITCity in Pattaya, it’s virtually impossible to overlook the counterfeit goods assaulting you from every angle. Along these thoroughfares, merchants proudly hawking brand name cell phones, tablets, clothing and assorted luxury goods court a constant stream of potential buyers. The MBK Center in central Bangkok – a renowned hub for counterfeit vendors of all stripes – offers a marked study in contrasts. On the sixth floor, a fully modernized movie theater features the latest Hollywood blockbusters on the big screen; only two floors below, the same films can be acquired as bootlegged DVDs for a mere fraction of the price.
The Office of the United States Trade Representative (USTR) has labeled these areas “red zones,” a designation that makes reference both to the oceanic volume of knock-off products on offer and the virtual impunity under which vendors are able to operate. The International Intellectual Property Rights Alliance (IIPA) – a US-based trade group lobbying on behalf of music, publishing, software and film producers – describes them, quite simply, as “a disaster.”
While problematic in their own right, the prevalence of these “red zones” speaks to the broader issues plaguing Thailand’s weak intellectual property rights (IPR) environment. From cheap consumer goods, to bootlegged movies, to the prevalent use of pirated end-user software, IPR infringement permeates all layers of Thai society. And as IPR-linked “creative” industries become ever more critical to economic growth worldwide, Thailand’s inability to offer adequate protection for music, software and film producers is increasingly drawing the ire of the international business community.
Although the government utilizes an array of agencies to help quell the problem, surveys consistently indicate that IPR issues remain a central and growing concern for both native and expat businessmen alike. But despite these depressing on-the-ground realities, there is some cause for hope going forward. As the problem moves away from simple physical piracy and toward the digital arena, a growing awareness is arising amongst policymakers and key stakeholders that insufficient progress on improving the environment for creative producers is directly impeding the Kingdom’s attempts at economic diversification.
This new reality is something that Pajchima Tanasanti, Director General of the Department of Intellectual Property (DIP), seems keenly aware of. “Stronger suppression is essential for luring more foreign investment, boosting tax revenues, and facilitating technology transfers necessary for future economic growth in our country.”
Parliamentary Paralysis
While the battle over IPR protection plays out over all layers of government, it begins with Parliamentary action. A responsive Parliament is viewed as an important indicator of the Thai government’s overall level of seriousness when it comes to tackling the issue. Unfortunately, the verdict so far is anything but positive. To date, Thailand’s legislative body has moved at a glacial pace when it comes to enacting updated legislation addressing the key areas of landlord liability, copyright protection and illegal camcording.
“The market remains extremely difficult, this is exacerbated by the inability of the Thai Parliament to put in place necessary legal norms. It is very difficult to maneuver not withstanding the goodwill and wishes of the Intellectual Property Office (DIP),” explains Michael Schlesinger, speaking on behalf of the IIPA. According to Schlesinger, the core disconnect between the Parliament and committed members of the Thai bureaucracy remains a major impediment to further progress on tackling the IPR challenge.
Illegal camcording, provides an illustrative example of Parliamentary dysfunction. Numerous countries in the region – including the Philippines, Hong Kong and Malaysia – implemented IIPA-endorsed legislation addressing the camcording problem. In the case of the Philippines, the passage of updated legislation resulted in a significant drop off in the number of cases being prosecuted. In contrast, legislation currently wending its way through the Thai Parliament is viewed as both plodding and woefully insufficient. Without comprehensive reforms to the laws being proposed, critics fear Thailand risks falling further and further behind its regional peers.
Legislation on landlord liability has also been in the pipeline for several years with no tangible results to speak of. Having legal mechanisms in place to hold landlords accountable for the behavior of their tenants is viewed as an essential deterrent in the fight against physical piracy, particularly in the aforementioned “red zones.” Although a draft law was submitted to Parliament by the DIP three years ago, it was sent back down for further review.
As it stands, the DIP is currently in the process of compiling more information with hopes of having a renewed draft submitted by fall of this year. For organizations like the IIPA, this is not good enough. “Dilatory tactics are simply not going to cut it in the face of rampant physical piracy,” says Schlesinger. “There are already workable approaches in many countries around the world for basic principles of secondary liability.”
Law and Order
Unfortunately, the problem is not confined to a lack of legislative willpower. Thai court systems also struggle to deter violators, and critics hold that judges tend to de-prioritize infringement cases. Last year, only 33 cases of copyright piracy taken to court resulted in any fine being levied at all. According to the IIPA, the average fine came in at a rather miniscule $1,400 per case.
Authorities have also drawn criticism for not doing enough to identify and take down well-known camcording syndicates. This has in turn fueled speculation that news of impending raids and investigations are being prematurely leaked to perpetrators. Border crossings, particularly the Aran-Poipet crossing with Cambodia, remain another major point of contention. It is a well-established fact that high volumes of illicit goods – including pirated DVDs, music and software products produced in China and Myanmar – flow into Thailand through these loose, border checkpoints.
Coconuts Bangkok recently spoke with several vendors during a busy Saturday afternoon at the MBK Center. While some reported a noticeable spike in raids over the past year, there seemed to be a widely understood protocol for circumventing the authorities. Every vendor we spoke with acknowledged the fact that they usually have forewarning as to the dates and times when police raids occur and are able to remove, hide and adjust their inventory accordingly. Many vendors simply choose to shut down their operations for the day in anticipation of a police presence. In some instances, police officers reportedly had trouble distinguishing between counterfeit and authentic goods and were therefore hesitant to confiscate anything.
The Digital Space
While physical piracy remains rampant and highly problematic, in the past few years more attention has shifted toward the battle over cyberspace. “In 2011, the ratio of online to offline counterfeit and pirated products was about 30% to 70%. Last year, that changed to about 40% online. It is possible that in 2013 over 50% of these products will be bought and sold over the internet,” says Ms. Pajchima.
Ms. Pajchima also noted that physical goods traditionally associated with “red zone” commerce, like clothing, handbags and watches, were increasingly being sold via online marketplaces.
The current numbers on digital piracy are staggering. Estimates place the commercial value of Thailand’s pirated end-user software market (which includes products like Microsoft Office) at somewhere in the range of USD852 million (over THB25 billion) per year. According to a recent IIPA report, pirated software comprised 72% of all the software used in Thailand in 2011. The music industry offers an equally discouraging picture. Authorities believe that roughly 80% of all Thai downloads are come by illegally.
Furthermore, industry reports suggest rogue internet service providers (ISPs), hosting massive volumes of pirated digital material, are able to successfully operate with high levels of anonymity and low levels of police scrutiny. In an example of failing to practice what they preach, the Thai government has not yet fully implemented a Cabinet Resolution mandating the procurement and use of legal software by all government agencies.
On top of cutting into the bottom line of international music and software producers, there is a growing body of evidence to suggest that widespread digital piracy is having a corrosive effect on economic growth within the Kingdom. One study, undertaken by the research firm IDC, suggests that reducing software piracy rates by as little as 10% over the next several years could generate over 2,000 new IT jobs and boost Thai GDP and tax revenues by USD1.3 billion and USD73 million, respectively.
“The Year of IP Protection”
Yet, despite this depressing backdrop, there have been signs of progress over the past few years. The Thai government has made no secret of its desire to diversify the economy away from a traditional reliance on low-cost manufacturing. And a willingness to be more open about the extent of the problem is viewed as a promising development by advocacy organizations following the issue closely. “It is important to recognize the positive posture that the Royal Thai Government has taken in terms of establishing a national plan,” says Schlesinger.
To that end, 2013 has been designated the “Year of IP protection” and the government is in the process of setting up an Operations Center for the Suppression of IP Infringement under the purview of the Deputy Commerce Secretary. The center will organize efforts across 25 government agencies in conducting raids, monitoring tax records and tracking money-laundering operations of known piracy networks.
Many industry groups report effective working relationships with key segments of the Thai bureaucracy, including the DIP, Department of Special Investigations (DSI), the Economic Crimes Division (ECD) of the Central Investigation Bureau of the Royal Thai Police and the Technology Crime Suppression Division (TCSD). Judges and prosecutors affiliated with special IP and IT courts have also drawn praise for being well informed and professional. The DIP has taken a more proactive approach to raising public awareness in recent years as well, launching seminars, ad campaigns and holding public destruction ceremonies of counterfeit goods.
Around October of 2012, the ECD replaced their chief commander and have reportedly convened a new “internal task force” to focus specifically on internet piracy issues. In yet another positive sign, the number of specific software piracy raids increased from 33 in 2011 to 187 last year. Large-scale ISPs drew plaudits for their willingness to act upon notifications of online infringement, engaging in 574 voluntary takedowns of illegal websites over the course of 2012.
The Commerce Ministry recently arranged a meeting of landlords and ISP operators to outline government concerns and solicit feedback. According to Ms. Pajchima, the meeting was viewed as constructive and there is hope that a memorandum of understanding addressing secondary liability – drafted by the Commerce Ministry – will be signed onto by all parties involved.
International Support
As a seal of approval, the IIPA endorsed upgrading Thailand’s status from “priority watch list” to “watch list” when the USTR unveils it’s annual 301 Report on the status of IP protection amongst 77 American trading partners. The group is also suggesting the USTR conduct an out-of-cycle review over the course of the year to monitor and ensure that the Thai government is effectively acting on its policy commitments.
If the USTR report takes up the IIPA’s suggestion, it would allow Thailand to distinguish itself from notorious violators like China, Russia and Pakistan. The Commerce Ministry is also petitioning for the status upgrade, believing that international support will prompt both authorities and lawmakers alike to double down on their efforts. “It is our view that being moved up to the watch list would help motivate all parties within the government to work harder on addressing the issue,” says Ms. Tanasanti.
As Thailand attempts to improve its entrepreneurial ecosystem and move toward an economy geared more and more around “industries of the mind,” successfully addressing the IPR challenge will go a long way in determining how successful they can ultimately be. Despite the dedicated efforts of entities like the DIP and DSI, the slog ahead remains perilous. “It will take the will of all parties in the equation to turn this sea change into a commercial reality,” Schlesinger readily concedes. “To date the government hasn’t taken sufficient action to create an environment of legitimate commerce.”
Meanwhile, back at MBK, it remains business as usual for the thousands of vendors manning the stalls. Sirichok, who has been selling bootleg DVDs and pirated software products for over a year now, seems non-plussed at the prospect of further police crackdowns.
“There has been talk about more raids recently but I haven’t really noticed,” he says. “We all know what to do when that happens, I don’t think it will greatly harm our business.”
Photos: Zanayasan Tanantpapat
