Will intellectual property law end rampant piracy in Ukraine?

by Yana Sedova
Kyiv Press Bureau

KYIV - Having passed a bill in the area of intellectual property protection on July 6, the Verkhovna Rada took a significant step to limit the widespread pirate production of software, music and films.

The bill, which was supported by 261 national deputies out of 372 registered, with 44 voting against, foresees criminal liability for offenders. When President Viktor Yushchenko signs the bill, those who violate intellectual property rights will face five years of imprisonment.

The law will introduce changes to the Criminal Code and establish liability for illegal circulation of compact discs, equipment and raw materials for their production, and molds.

"The stricter the responsibility, the better," said Valentyn Chebotariov, the assistant chair of Ukraine's Department for Intellectual Property.

The lack of strong criminal penalties for copyright infringement is only one of several reasons piracy has flourished in Ukraine, officials said. Low salaries for police officers, as well as federal and local officials also, contribute to the continuing bribery that affects enforcement efforts.

As a result of nearly 300 anti-piracy raids, the Department for Intellectual Property and the Anti-Piracy Film and Video Association has uncovered two illegal enterprises and confiscated about 200,000 pirated items since 2003.

They destroyed $580,000 worth of unlicensed products.

Anti-piracy efforts yield positive results at the first stage only, during the confiscation of the pirated goods, said Kostiantyn Orlov, president of the Anti-Piracy Film and Video Association - a group that assisted Kyiv's main police department in collecting the goods and compiling inventories.

But, those judges and policemen responsible for handling the goods at the second stage, including prosecution and destruction of the pirated products often took bribes and returned the goods, Mr. Orlov said.

"When we confiscated the pirated goods everything was fine," Mr. Orlov said. "But when it was time to destroy them, some (businessmen) would come and say they demanded them back."

During the last three years, the association has also cooperated with the Security Service of Ukraine and, most successfully, with the Department for Intellectual Property.

During more than 10 years of work in this field, Mr. Orlov said he was threatened and pressured many times.

He recalled an incident when an assistant police chief in Kyiv called him after a raid and demanded that the confiscated goods be returned.

Mr. Orlov and a state official were defiant and prepared a government report that enabled them to destroy the confiscated materials. However, they ceased to work with that particular police department.

Ukraine has been a trouble spot for the worldwide intellectual property industry for many years. Neither appeals to the Ukrainian government, nor economic sanctions hinted at by the U.S. in January 2002, helped to combat piracy.

However, during the last year, Ukrainian enterprises have become more interested in manufacturing licensed products.

"Many of those who now work legally are former pirates," Mr. Orlov pointed out.

Ukrainian producers of licensed content fight piracy in their own way.

In order to prevent the expansion of pirate movies in the market, they sometimes ask pirates to wait until the official release and instead offer licensed DVDs at a lower price.

"We have to make deals with pirates," Mr. Orlov said. "Having made an agreement, we prepare the market for release. Pirates do not pirate their own movies and, moreover, they buy licensed products."

At Petrivka, Kyiv's largest DVD and music market, sellers offer both licensed and pirate products.

"There are people who have expensive home theaters and they buy licensed DVDs," said Andriy, 28, a Petrivka market seller. "But few can afford it."

A licensed DVD costs between $7 and $17, while a pirated film costs only $5 and there can be three or four movies on a disc.

"A pirate video cassette costs $3, and the licensed one is $4," Andriy said. "Ukrainians have gotten used to saving on everything. They think: why pay more?"

He asserts that his business will not suffer from the new law because he claims that 95 percent of his product line consists of licensed goods and only 5 percent is pirated copies.

It was hard to believe that claim, considering that one after another customers were buying pirated movies as a reporter spoke with Andriy.

"Piracy is a disease that could only disappear if it's destroyed everywhere simultaneously," he said. "Prices of licensed discs might decline if the turnover of the licensed products increased and if there were no pirated goods at all."

Other sellers do not share this optimism.

Oleh Ivanov, 24, who was subjected to anti-piracy raids many times, still believes that selling unlicensed goods is more profitable.

"The movie 'Lord of the Rings' costs about $17 for each part," he said. "And there are three parts on one pirated disc for $5. The average Ukrainian is not doing well enough to pay $50 for all three parts."

Mr. Ivanov claimed that people are happy with pirated movies because they are cheap and are released before the movies are even premiered in theaters. Therefore, licensing does not benefit the average citizen, he argued.

The sellers at Petrivka market are not concerned about their future and plan to continue their business.

"If necessary, I will go to jail," Mr. Ivanov said. "My only fault is that I am trying to earn some money to feed my family."

"When a movie appears in the market, you can already see it on television," said Tetiana Prohorenko, 23, who also sells both pirated and licensed products. "So nobody is interested in buying the licensed copies."

Business is capital intensive, she said, so the final price of a licensed product is too high and customers cannot afford it.

This is the "gray pirate's" logic of those who partly sell licensed products and partly pirated, Mr. Chebotariov said. "But pirates undermine the market. They give lower prices, and that is why people buy their goods."

Mr. Chebotariov asserted that licensed products would be suitable for Ukrainian customers if the pirates hadn't overwhelmed the market. "The market always dictates the rules," Mr. Chebotariov said. "If the market is thin, the legal sellers will fill it with high-quality licensed production."

Copyright © The Ukrainian Weekly, July 17, 2005, No. 29, Vol. LXXIII

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