Despite the many positive trends, however, industry estimates on current IPR piracy levels indicate that it remains a serious problem. Piracy will require sustained government attention in many areas for the foreseeable future, and improved government attention in some areas that are currently deficient. Embassy therefore recommends that Malaysia remain on the Special 301 Watch List.


Raja Petra Kamarudin

1.  Summary. In 2007 Malaysian IPR enforcement authorities continued to make good progress in fighting IPR piracy.  The single most promising development of the year was the long-awaited launch of the country’s specialized intellectual property court. The United States and Malaysia continued to cooperate closely, in particular through ongoing negotiations on IPR issues within the framework of a free trade agreement. Piracy levels for motion pictures and for entertainment software declined in 2007. However, the overall piracy rates remain high for most types of IP, and the government will need to continue to strengthen its enforcement and prosecution efforts, and to seek certain legislative changes to strengthen Malaysian authorities. Embassy recommends that Malaysia remain on the Special 301 Watch List.  End summary.

Optical Media Piracy

2. In 2007 Malaysian IPR enforcement officers continued to exert strong pressure on the producers and exporters of counterfeit optical disc media.  The Ministry of Domestic Trade and Consumer Affairs (MDTCA), Malaysia’s principal IPR enforcement authority, reports that in 2007 it conducted 70,863 raids, resulting in the seizure of 2,395,733 optical discs with an approximate value of 54 million Malaysian ringgit (approximately USD 16.8 million).  The number of cases taken under the Copyright Act of 1987 was 2,720 involving 597 arrestees.  MDTCA also reported 566 new criminal prosecutions.

3. Statistics compiled by the copyright industry indicate a seven percent drop in piracy rates (from 90 to 83 percent) in entertainment software.  MDTCA is carrying out more raids on pirated computer game sellers, and is working more closely with the Entertainment Software Alliance and the Motion Picture Association (MPA) to facilitate enforcement actions and subsequent prosecutions.

4. The estimated piracy level of records and music remained steady at 45 percent, and the business software piracy rate also was unchanged, at 60%.  The book publishing industry also reports continued large-scale piracy in Malaysia, principally in and around university campuses, though increased enforcement efforts lessened the overall monetary value of this form of piracy.

5. In July 2007 the MDTCA announced a new program targeting the use of pirated software. MDTCA has worked with the Business Software Alliance to target students, company directors, and employees, and include both educational efforts as well as targeted enforcement. One of the new IP court’s first successful prosecutions involved a prominent retail establishment that admitted to possession of pirated software, paying a hefty fine while generating unwelcome publicity.

Digital Music – The Future of Piracy

6. In 2007 the Recording Industry Association of Malaysia (RIM) called on the Malaysian Communications and Multimedia Commission (MCMC), Malaysia’s regulatory body for telecommunications, to block internet users from accessing illegal song download sites.  RIM has claimed a significant increase in demand for digitized music in Malaysia, which has eroded the sales of compact discs (including pirated discs).  Much of the demand is being met by foreign websites offering free music downloads. MCMC continues to deliberate whether to take action against such sites, which would constitute a shift in the government’s generally hands-off approach to internet website access.

7. RIM has been pushing Malaysian authorities to take stronger action against landlords who allow pirating operations at their premises. RIM has also taken direct action against such landlords by filing a number of lawsuits seeking damages as well as the closure of such operations.  RIM has also sent out warnings of imminent lawsuits to hundreds of landlords, many of whom have complied with the warning by expelling the pirates.  Following RIM’s lead, MDTCA has begun to initiate criminal actions against a few landlords as well.  Industry is pushing legislation that would specifically address the liability of landlords who allow their premises to be used for copyright infringement.

Progress on Motion Picture Piracy

8. Malaysian authorities successfully attacked the problem of pirate recordings in Malaysian cinemas, in particular those recordings using advanced cell phone technology (since cell phones are less detectable than camcorders).  In 2006 the Motion Picture Association (MPA) had estimated that 88% of pirated DVDs and VCDs circulating on the streets of Malaysia originated from illegal recordings in cinemas. The MDTCA focused its efforts to combat this illegal activity, acting on tips provided by cinema employees as well as patrons (the local branch of MPA offers a reward for such tips).  In early 2008 MPA announced that the joint efforts of cinemas and MDTCA officials had effectively eliminated cinemas as a source for illegal recordings; in 2007 some 30 cases of illegal recording were stemmed in Malaysia.  As a positive corollary, MPA noted that cinema attendance in Malaysia increased 20 percent in 2007 compared to 2006.

9. Malaysian authorities currently use existing Malaysian statutes to arrest and prosecute those caught recording movies in cinemas. However, such arrestees can be charged only with theft, not piracy. The MPA continues to push for the implementation of standalone anti-camcording legislation, both to strengthen the authorities’ hands (by broadening the scope of illegal activity and by increasing fines) as well as to promote the problem among the Malaysian public. The Attorney General is also reportedly considering amendments to the Copyright Act to take into account copyright offenses conducted over the Internet, though there reportedly was little movement on such legislation in 2006.

10. The export of pirated discs, in particular those purchased over the Internet, remains a significant problem, although most industry sectors report fewer exports of pirated material from Malaysia than in previous years (with the one exception being the entertainment software industry). MPA reports good cooperation with MDTCA enforcement officers, Malaysian Post, Royal Malaysian Customs, cargo handling companies and courier companies in order to tackle the export of pirated discs.

11. MPA was instrumental in bringing two sniffer dogs to Malaysia in 2007 to help MDTCA officials detect hidden optical discs and replicating machines.  The resulting seizure of more than 1.6 million discs received extensive publicity, and has convinced MDTCA to establish a permanent canine enforcement unit.

12. In early 2007 Prime Minister Abdullah announced the development of a national IP policy that had as its centerpiece the allocation of RM 5 billion (USD 1.55 billion) to promote IP protection.  The MDTCA solicited suggestions from the private sector on the best uses for the targeted funds, which should begin to be used in early 2008.

IPR-Related Prosecution

13. The first branch of Malaysia’s new intellectual property court was launched in Kuala Lumpur in July 2007 (ref 2007 KL 1238). The new court eventually will consist of 15 session courts with criminal jurisdiction, to be located in each of Malaysia’s 14 states plus the administrative capital of Putrajaya.  Six high courts, holding both civil and appellate jurisdiction, will be established in Kuala Lumpur, Selangor, Johor, Perak, Sabah and Sarawak. Allaying the concerns of local IP lawyers, the court is organized to operate independently of the rest of the court system, with both judges and prosecutors assigned exclusively to the IP courts. Although the government had hoped that most of the new IP court branches would be open by the end of 2007, it appears more likely that such a goal will not be achieved until late 2008.

14. The MDTCA has taken steps to improve the ability of its enforcement officers to handle complex evidence in order to build strong criminal cases against IP pirates. Local industry associations have provided a large amount of this training.

U.S.-Malaysia IPR Cooperation

15. In 2007 the U.S. government continued close cooperation with the Malaysian government to promote increased IPR protection.  Nineteen Malaysian officials attended 10 USG-funded IP training programs that were offered in 2007 by the U.S Patent and Trademark Office (USPTO). Among the programs attended by Malaysian officials were USPTO Global Intellectual Property Academy programs on enforcement, patents, and trademarks.

16. In 2007 and early 2008 U.S. and Malaysian officials continued to negotiate the IPR chapter of the proposed U.S.-Malaysia Free Trade Agreement.  These negotiations were an unprecedented opportunity for both sides to learn the details about each other’s enforcement regimes, and to discuss ways in which such enforcement could be strengthened.

Malaysia’s International IP Obligations

17. Following accession to the Patent Cooperation Treaty in 2006, Malaysia has made progress towards ratifying more multilateral IP treaties. Malaysian government officials hope to secure parliamentary ratification of Malaysia’s accession to the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty by the end of 2008.  Over the medium term, the GOM also foresees Malaysian accession to several other IP treaties, including the Convention Relating to the Distribution of Program-Carrying Signals Transmitted by Satellite; the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks; the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure; and the Trademark Law Treaty.  Malaysia has not committed yet to joining the International Convention for the Protection of New Varieties of Plants (aka the UPOV Convention), preferring to wait until it can evaluate the effect of its newly-implemented domestic plant protection legislation.

18. In April 2007 the Ministry of Health announced that the government would implement a legal framework to protect pharmaceutical data in order to meet the data protection obligations under TRIPS Article 39.3.  The announcement indicated that such protection would be extended for 5 years for new products, and 3 years for new indications of existing products.  The time period in both cases would begin from the date that such protection was extended in the product’s country of origin.  As of early 2008 the Ministry of Health continues to deliberate (including consultations with multinational pharmaceutical companies and other stakeholders) before finalizing its policy.  Extensive discussions of the issue have taken place at each round of the U.S.-Malaysia FTA negotiations.

Recommendation:  Malaysia Should Remain on Watch List

19. The Malaysian government’s record in 2007 showed a solid commitment to strengthening IPR protection.  In addition to devoting more resources to the single largest IPR problem – optical disc media piracy – government officials are also paying increasing attention to newer problems such as Internet downloads of pirated material.  U.S.-Malaysia FTA negotiations continue to provide a forum to discuss best practices across the range of IPR issues related to both enforcement and policy, fostering an ongoing dialogue among experts from both governments that will provide further dividends in the future.  Malaysia’s intention to join the WIPO treaties this year, and its growing commitment to implement data protection in some form, show the importance to the government of strengthened multilateral IP protection.

20. Despite the many positive trends, however, industry estimates on current IPR piracy levels indicate that it remains a serious problem. Piracy will require sustained government attention in many areas for the foreseeable future, and improved government attention in some areas that are currently deficient.  Embassy therefore recommends that Malaysia remain on the Special 301 Watch List.

KEITH (February 2008)