Thai Producers Grapple With Growing Piracy : Protection Issue Simmers as Moral, Economic Dilemma

On Bangkok’s Silom Road, the city’s most fashionable shopping district, pushcart vendors peddle fakes on the sidewalk just a few quick steps from the real stuff in upscale boutiques.

Cartier watches, Lee jeans and Lionel Richie tapes--every one a counterfeit--are pawed by swarms of tourists. A phony Gucci bag goes for $16 on the street outside the central Silom department store; the genuine article costs $140 inside.

In the past few years, Southeast Asia, specifically Bangkok, has become the “piracy and counterfeiting capital of the world,” declared Joseph E. Hart, vice president and managing director of ATT-Thailand, a subsidiary of American Telephone & Telegraph.

Later this month American businessmen will meet in Guam and issue a report card on the regional protection of trademarks, copyrights and patents, said Hart, who represents the American Chamber of Commerce in Thailand on the Asia Pacific Council of American Chambers.

Thailand may be lucky to get an E for effort.

Clever copies of trademark fashion apparel are just the visible tip of an iceberg of contention between foreign and Thai producers.

In the field of so-called intellectual property rights, piracy is rampant in audio and video tapes, and protection of computer software copyrights looms as an explosive issue. Foreign producers of pharmaceutical and agricultural compounds say they have no patent protection here.

The conflict is complex and longstanding between developed and emerging economies and societies. Testifying before the Senate judiciary subcommittee on patents, copyrights and trademarks in Washington last month, Commerce Secretary C. William Verity put it in a historical context.

“For most of our first century of nationhood, we were takers,” Verity told the senators. “We stole what others created. Nobody could match us in our disdain for the rights of foreign authors such as Dickens, Thackeray or Gilbert and Sullivan. But we soon learned that our behavior came at a cost as other nations denied our own authors the rights we had denied theirs. When all nations behave that way, all of them are net losers.”

Hurts Development

The issues are similar now in Thailand, as they have been in recent years elsewhere in East Asia. For an industrializing economy, appropriation of foreign technology or creative works means jobs, profits and, more importantly, a shortcut to development. The moral issue of piracy often weighs less in the balance.

“Let’s be frank,” said Surakiart Sathirathai, a law professor at Bangkok’s prestigious Chulalongkorn University. “To give absolute protection under a copyright system would do no good for the Thai scientific community. Much of what we do in science is derivative (of foreign products) but contributes to the welfare of the country. We have to provide certain mechanisms for fairness to the Thai public.”

Foreign investors are not so flexible. Said ATT’s Hart: “We think it (piracy) hurts long-term development. Many foreign companies won’t bring technology into Thailand. It would be pirated.

“They’ll come in with low-level, assembly-type stuff, but they wouldn’t bring in design information, like how the wafer is made for a semiconductor. That means Thailand will stay on the low end of the development curve.”

Western producers have seen this show before in postwar Asia, initially with the Japanese. In the past three years, Hart observed, the center of Asian piracy has moved from the north, primarily Taiwan, to the southeast, initially to Hong Kong and Singapore.

“I’ll bet it’s some of the same money,” the ATT executive said, noting a pattern in the marketing. In 1985, he said, a knock-off Rolex watch would sell for $30 to $35 in Taiwan. They now sell in Bangkok for about $25.

In the past few years, American and other Western manufacturers have been pressing their governments to obtain protection for intellectual property rights in Southeast Asia, where exports are heavily dependent on the U.S. market. The pressure was often applied in bilateral trade talks.

Lost Annual Sales

A string of successes came last year. Singapore, Indonesia and Malaysia enacted strong new protective laws with tough penalties in 1987. The government of Singapore, where pirated music tapes once left the harbor by the container-load for Africa and the Middle East, has been especially aggressive in enforcement, according to Western businessmen here. Indonesia and Malaysia are moving more slowly, but steadily, to translate their laws into practical protection. According to Malaysia officials, more than $400,000 in pirated goods have been seized under the new act, and the pirated percentage of music tapes on sale in the country has decreased to about 20% from 60%.

Few reliable statistics are available on the size of the problem, but a 1985 study by a private U.S. organization, the Intellectual Property Alliance, calculated that copyright piracy cost U.S. producers more than $1.3 billion in lost annual sales in just 10 countries.

As the squeeze was applied in its neighboring Southeast Asian countries, the spotlight turned to Thailand, where the issue gained such intensity last fall that it seriously threatened the government of Prime Minister Prem Tinsulanonda.

The issues are basic in Thailand--development and jobs versus the protection of trademarks, copyrights and patents--but are often obscured in a cloud of legalisms, nationalism and internal politics.

Thailand’s copyright and trademark laws protect the works of its own citizens and those of countries that are signatories of the century-old Berne Convention, a comprehensive intellectual property union that pledges reciprocal rights to its member states.

The United States is not a Berne signatory, but Washington officials have argued that Thailand is obliged to grant protection to Americans under two bilateral treaties, including the 1966 Treaty of Amity and Economic Relations.

“The U.S. has given full protection to Thai copyrights for over 60 years,” a U.S. Embassy statement asserted here last year.

A focus of the government-to-government negotiations has been the trade privileges granted to Thailand as a developing nation under the U.S. Generalized System of Preferences. A provision of the U.S. trade law requires copyright protection in return for GSP privileges, which covered more than $350 million in Thai exports to America in 1986.

American Stance

Under official U.S. pressure, Prime Minister Prem’s government moved last fall to amend its copyright law to cover U.S. intellectual property rights. When government bills to guarantee protection reached the floor of Parliament, the regime was assailed by opposition lawmakers, and some in the ruling coalition itself, in part for domestic political purposes but also on grounds that the government bills were hastily drawn with little research into the economic effects on Thailand. The bills passed their first reading by a hair’s breadth, and will come before Parliament again this spring for a second reading, probably next month.

Private American businessmen pressing for protection here insist that their case stands independently of the GSP issue.

“Our position continues to focus on benefits for Thailand and the moral issue,” said S. Douglas Sheldon, managing director of the Pfizer pharmaceutical firm here, speaking in his capacity as a member of the local Pharmaceutical Products Assn., an organization of 60 foreign companies operating in Thailand, 22 of them American.

According to ATT-Thailand’s Hart, the industries hardest hit by commercial piracy in Thailand are pharmaceuticals, computer software and apparel.

One American business executive, discussing the problems in pharmaceuticals, noted that foreign producers seeking to market a new drug here must submit the formula to Thai regulators for approval.

“Somehow that formula often leaks out to Thai producers before marketing approval is granted to the foreign firm,” he said.

A letter from Sheldon’s producers’ association, outlining its goals, argued, “What is especially unfortunate in this debate over Prem’s (pharmaceutical) patents is the misconception that Thais will be losers.”

The letter said Thailand would receive safer drugs under patent protection because the country has limited means for monitoring safety. The letter further contended that a strong patent law would also protect Thai scientists, encouraging research and development here.

Social Welfare Issue

Sheldon and others connected with the pharmaceutical industry reject price as a meaningful factor in the debate, pointing out that the market is dominated by more than 5,000 preparations that are “off-patent” worldwide, and claiming that the price factor would involve only about 20 to 30 new drugs a year.

Surakiart, the law professor, who is a member of a special parliamentary committee studying the proposed copyright act amendment, calls pharmaceutical patent protection a “social welfare issue,” and suggests that the balance should weigh against any solution that restricts the Thais’ access to inexpensive drugs.

Beyond the moral issues of piracy and social welfare, both sides make their cases in purely economic terms as well.

A government official told the Asian Wall Street Journal last year: “If we change our laws, we’ll lose any marginal advantage we get from stealing American works, and a lot of industrialists think stealing is the only way they can survive. Ethically, it isn’t correct, but these businessmen are looking at it in terms of international survival.”

Hart noted: “We have to make a return on our investment. If profits are cut by competition from pirate producers, it’s going to affect our own budgets for research and development and other areas down the line.”

One clear solution is for the United States to join the Berne Convention, a move with strong support in the Reagan Administration.

“The United States is the world’s major proponent of improved protection and enforcement of intellectual property rights,” U.S. Trade Representative Clayton K. Yeutter told the Senate subcommittee on patents last month. “If we expect the rest of the world to negotiate seriously on this issue and respect our commitment to strong protection internationally, we must be willing to take steps similar to those that we ask of our trading partners.”

In Bangkok, where the shelves of grocery stores are still stocked with such sound-alike look-alikes as “Freedos” corn chips and only the well-to-do pass up the knockoff Lacoste shirts, the solution will be difficult. Even if an amended copyright law goes on the books here, or if Washington joins Berne, turning law into enforcement will be a struggle in the last redoubt of the Asian pirates.