Ukraine Responds to IIPA Call for Special 301 Sanctions at Hearing

Ukraine’s government is implementing the intellectual property rights (IPR) “action plan” it developed in consultation with the U.S. and hopes to fix remaining IP issues through forthcoming legislation, said Serhii Nalyvaiko, head of the State Intellectual Property Service of Ukraine’s control over IP objects use division, during a Special 301 review hearing Wednesday at the Office of the U.S. Trade Representative (USTR). Nalyvaiko’s testimony came as the USTR-led Special 301 Committee considers whether to designate Ukraine as a “priority foreign country” (PFC) under the Special 301 statute.

But the International Intellectual Property Alliance (IIPA) urged USTR to elevate Ukraine to PFC status and eliminate the nation’s duty-free access to the U.S. market under the Generalized System of Preferences program for what IIPA says are “severe legal and copyright enforcement problems.” Ukraine had previously received PFC status but then gotten it removed. USTR should punish Ukraine again for displaying a “pervasive disregard” for U.S. IP rights, said IIPA counsel Eric Schwartz. Ukraine had failed to implement the IP action plan it developed with the U.S. in 2010 and still had an “exceedingly high” piracy rate, he said.

Ukraine’s Ministry of Internal Affairs was taking the lead on implementation of the plan, moving to create a special cybercrime division within the ministry and hiring more police officers to enforce copyright protection, Nalyvaiko said. The government can only take action on copyright issues once it receives a criminal complaint from a copyright holder, and it rarely receives such complaints, he said. The ministry investigated 593 IPR-related criminal complaints during 2012 -- 401 involved infringement of copyright and related rights, 92 involved “illegal circulation” of disks for laser reading systems, 88 involved illegal use of trademarks on goods and services and 12 related to industrial property rights infringement, Ukraine said in written testimony (http://1.usa.gov/YBakvD). Of the 593 complaints the ministry received, 452 resulted in convictions, Ukraine said. The ministry seized more than 296,000 copies of products that violated IPR laws worth more than the Ukrainian equivalent of $1.1 million and nearly $4 million worth of counterfeit products that illegally used trademarks, Ukraine said.

The Ukrainian government is also taking steps to combat Internet piracy, with the Ministry of Internal Affairs taking steps to closely monitor Internet activity to identify websites that facilitate the illegal sharing of copyrighted content, Nalyvaiko said. Those actions have resulted in the closure of more than 80 sites, Ukraine said. The ministry’s cybercrime division has also worked to investigate websites they believe sell counterfeit products, most notably www.ex.ua, Ukraine said. There doesn’t appear to be any organized Internet crime in Ukraine, Nalyvaiko said. “They are just spontaneous,” he said.

IIPA claimed that several Ukrainian government agencies were continuing their “blatant” use of unlicensed software. The Ukrainian government conducted a “systemic inventory” of the software used by its agencies, with subsequent measures decreasing the government’s use of illegal software by about 40 percent, Ukraine said. The government has budgeted the equivalent of $12.3 million in 2013 to work toward eliminating use of illegal software, Nalyvaiko said. Stan McCoy, assistant U.S. Trade Representative-intellectual property and innovation, said the U.S. estimates that amount would only account for 10-20 percent of the amount needed to bring the government into full compliance. Ukraine’s government is confident it will improve compliance, Nalyvaiko said, saying the government is cutting down on the cost by using open source software to replace illegal software where possible.

IIPA also claimed Ukraine was conducting “fruitless and disruptive” investigations of the Ukrainian Music Rights League (UMRL), which it called a “legitimate collective management organization” (CMO) that represented copyright owners. The government cancelled UMRL’s CMO licensing certificate. A district court in Kyiv rejected UMRL’s appeal of the cancellation in July, Ukraine said. At the same time, Ukraine’s government was allowing “rogue” groups to issue fake licenses, IIPA said. There are currently 15 CMOs registered in Ukraine, which help reimburse copyright and other rights holders. Those CMOs remunerated the equivalent of more than $6.5 million to rights owners in 2012, Ukraine said.

Draft Law 0902, currently under consideration by Ukraine’s Parliament, would improve copyright and related rights protection on the Internet, Nalyvaiko said. “It introduces the implementation of civil and legal methods of copyright and related rights enforcement in Internet by warning the infringer via the Internet service provider, and, in case the violation still takes place, blocking the access of the infringer to Internet or prohibiting hosting services,” Ukraine said. The bill passed on first reading in 2011, and is expected to receive a second reading this year. The bill would also help clarify the licensing of CMOs, Nalyvaiko said.

IIPA asked the USTR to maintain the PFC designations for Argentina, Chile, China, Costa Rica, India, Indonesia and Russia. The group also asked USTR to keep 25 nations on its so-called watch list. The American Society of Composers, Authors and Publishers (ASCAP) said its members have “been unable to receive full royalties” from China and a group of Caribbean nations, said Joan McGivern, ASCAP senior vice president. China’s broadcast tariffs are “exceedingly low,” meaning ASCAP members are “uncompensated or, by global standards, grossly undercompensated” for the broadcast of U.S.-owned music on broadcast stations -- and not compensated at all for theatrical exhibitions of movies, McGivern said. Stations in Barbados and other Caribbean nations refuse to pay royalties for the performance of ASCAP members’ music, while cable operators in Jamaica and the Republic of Trinidad and Tobago refuse to negotiate with foreign performing rights organizations, she said.