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18 May 2005

Intellectual Property Theft in Russia Increasing Dramatically

U.S. trade official warns of "rampant piracy and counterfeiting"

By Jeffrey Thomas
Washington File Staff Writer

Washington -- The level of copyright piracy in Russia has increased dramatically, and the adverse effects on American owners of copyrights are compounded by the fact that Russia has become a major exporter of pirated material, according to a senior official in the Office of the U.S. Trade Representative (USTR).

Victoria Espinel, the principal U.S. trade negotiator on intellectual property rights (IPR) protection, testified May 17 at a congressional hearing on intellectual property theft in Russia.

Successfully combating the rampant piracy and counterfeiting that currently exist in Russia is "a top priority," Espinel told the committee.

She said President Bush and Russian President Vladimir Putin have discussed improving protection of intellectual property in Russia at several recent summits, including their meeting in early May in Moscow.

Russia is on the 2005 Special 301 Priority Watch List announced on April 29 as part of the USTR’s annual review of countries' IPR practices.

The so-called Special 301 provision of U.S. trade law authorizes measures against U.S. trade partners for failing to protect U.S. patents, copyrights and other intellectual property.  Sanctions have been applied against Ukraine, which has been identified as a Priority Foreign Country, the ranking reserved for the worst situations.  Fourteen U.S. trading partners, including Russia, are on the 2005 Priority Watch List of countries meriting close attention to IPR problems.

The April 29 Special 301 report cited concerns over piracy of CDs and DVDs in Russia as well as and Internet piracy of copyrighted works.  The USTR plans to conduct an out-of-cycle review in 2005 to monitor progress by Russia on a number of issues involving intellectual property.

Espinel outlined some of the efforts under way to improve IPR protection in Russia.  One is a bilateral working group with USTR and Rospatent, the Russian Federal Service for Intellectual Properties, Patents and Trademarks.

“Recent discussions have focused on Russia's enforcement regime, legislative deficiencies, including the need for a comprehensive regulatory regime on optical media production and Internet piracy,” she said. “Through these and other ongoing efforts we have seen an improvement in cooperation at the working level on IP [intellectual property] issues, especially from Rospatent and the Ministry of the Interior.”

Espinel said U.S. embassy officials meet regularly with senior representatives of the Ministry of Interior, the prosecutors, Rospatent and the Russian Supreme Court to track and press for enforcement in major criminal cases involving optical disc manufacturing facilities and Internet piracy.

The United States is also working on IPR issues within the context of Russia's World Trade Organization (WTO) accession negotiations, she said, adding that the United States is “raising these and other concerns in the accession negotiations" and has "made it clear to the Russian government that progress on IPR will be necessary to complete the accession progress.”

While acknowledging that Russia has strengthened its intellectual property laws to provide better protection for existing works, sound recordings, patents, and computer software and databases, “further improvements in Russia's laws are necessary,” said Espinel.

ENFORCEMENT ISSUES

There has been far less progress in enforcement, Espinel said. Russian law enforcement agencies have taken some action, including raids by police, but “these actions have not resulted in the kind of robust prosecution and meaningful penalties that would deter the significant increase in piracy that our industry has observed in Russia.”

“Enforcement efforts in Russia must increase dramatically,” Espinel said.  “We need to see improvements in enforcement of Russia's criminal law against piracy, improved enforcement at the border, and better administrative and civil procedures such as providing for ex parte procedures in civil cases.”

She expressed particular concern about the amount of excess optical-media (CDs and DVDs) capacity in Russia, and about Russia's lack of a comprehensive regulatory regime to control illegal optical-media operations.

“Russia must establish an effective system for inspecting the optical media plants to ensure that only authorized product is being made,” she said.

With regard to criminal enforcement, Espinel cited as problems frequent delays in prosecutions, the imposition of minimal penalties, the return of pirated goods to the market, and the continued operation of Internet sites that are spreading pirated material.

“Russia has made little progress in permanently closing down illegal production plants and bringing offenders to justice,” she summed up.

Other witnesses at the hearing included Eric Schwartz, vice president and special counsel to the International Intellectual Property Alliance, Bonnie Richardson of the Motion Picture Association of America, and Matthew T. Gerson of the Universal Music Company.

Schwartz said U.S. industry lost over $1.7 billion last year alone to copyright piracy in Russia, and over $6 billion in the last five years.

Richardson made a point of acknowledging that there are honest officials in Russia who put their lives on the line in trying to protect intellectual property, but he also recounted instances of official corruption and involvement with organized crime.

“At least nine of the 34 factories that replicate CDs and DVDs and possibly considerably more are located on government-owned property in Russia, the so-called restricted access regime enterprises,” Richardson asserted.

Gerson urged the committee and the Bush administration to consider what might be done to work with Japanese and European businesses and parliamentarians and other government officials to try to come up with a plan to address the intellectual property rights theft going on in China and Russia.

Progress on intellectual property rights protection will be critical for the U.S.-Russian bilateral relationship “and will have implications for Russia's accession to the WTO,” said Espinel, sounding a theme echoed by all the other witnesses and legislators participating in the hearing.