Ukraine battles reputation as haven for intellectual property rights violators
At issue is whether five Ukrainian compact disc producers are flooding the world's flea markets with unauthorized copies of everything from pop music albums to computer software. The problem is serious enough that the nation's reputation among law-abiding countries, not to mention billions of dollars in foreign aid and international loans, is at risk.
Representatives of firms suspected of pressing the illicit CDs and governments concerned by the practice recently set out their positions during separate news conferences. One thing is clear: The various parties agree on little.
The International Federation of the Phonographic Industry (IFPI), which represents the recording industry, focused attention on Ukraine when it cited the nation as Europe's most flagrant violator of international copyright laws. That attention, in turn, shifted to the country's five plants capable of producing compact discs.
The Ukrainian government, with U.S. trade officials in town, visited the manufacturing plants late last year to look for evidence that illicit discs were being produced. The inspections, which had been arranged with the plants in advance, found only that suspect discs were not being manufactured at the time of the visits. Since plants don't keep records of orders or sample copies of discs they burn, it was hard to determine what the plants were producing in the absence of inspectors.
Representatives of the plants deny that they manufacture unauthorized material, and maintain that, in any case, they are not responsible for the material they produce.
Serhy Slavutsky, director of Bolidisc, a compact disc manufacturer located in Kyiv, likened the production companies to printers, merely reproducing material provided by customers. As such, he said they should not be held accountable for the content.
"The plant is responsible only for completion of the customer's order," Slavutsky said.
U.S. experts said that while it is technologically possible to trace a compact disc to the plant that recorded it, finding the customer who placed the order is harder.
Trade officials from the United States and from Sweden, which currently holds the European Union presidency, are pressuring Ukraine to allow unannounced inspections.
Ihor Yehenvald, who represents Bolidisc and the Union of Copyright Users, a trade group of Ukraine's CD manufacturers, claims that the threat of unannounced inspections by the Ukrainian government and international trade officials has paralyzed the plants.
"It is not possible to work under such conditions," Yehenvald said.
"Besides, some customers may be scared away" by the prospect of international inspectors examining their orders, Yehenvald said.
Ukraine's CD manufacturers contend that the West's intent is not so much in protecting intellectual property treaties as it is in destroying Ukraine's duplication industry. They blame U.S. "recording industry monopolists," represented by IFPI, with trying to stamp out competitive Ukrainian CD producers, rather than piracy.
The producers fear that the battle over illicit music will destroy the entire digital recording industry. The plants produce music CDs for two Ukrainian record labels, as well as software for Liga-Online and USAID.
IFPI estimates that the Ukrainian plants have the capacity to manufacture 70 million compact discs annually, and peg legitimate local demand at no more than 5 million discs per year. That leaves plants with the annual capacity to create up to 65 million illicit discs for export, the lobbying group says.
The manufacturers say Ukrainian production facilities create no more than about 15 million discs annually, and that Ukraine lacks the raw materials necessary to press 70 million discs per year. Only 450 tons of the plastic needed to manufacture discs was imported by the country last year - enough to press 22 million CDs.
"International organizations do not have any proof of piracy in Ukraine," Slavutsky said. "Yet, they demand a complete closure of the plants until they get clarification [whether piracy exists or not]."
International trade officials say they have the proof.
On Feb. 21, U.S. and Swedish diplomats and IFPI representatives presented evidence of counterfeit CDs produced in the Ukrainian plants.
Stefan Krawczyk, IFPI's Eastern European director, said his organization has amassed a huge database of CD samples, including legal CDs produced at the Ukrainian plants. By comparing discs it is possible to detect where and on what machine a specific disc was pressed, he said.
Krawczyk said IFPI analysis "proved that the CDs were made in Ukraine."
He also said that there is no part of the world where Ukrainian pirate CDs could not be found.
Krawczyk denied the allegations that IFPI wants to shut down Ukrainian plants to rid the West of potential rivals.
"For example in Poland, there are 12 CD manufacturing plants," Krawczyk said. "We do not attack them, because they produce legitimate CDs. In Ukraine, there are only five plants, and they produce pirate CDs."
Krawczyk said that IFPI is interested in the development of legitimate CD production in Ukraine. The companies producing counterfeit discs know they are committing a crime, and yet operate with impunity.
Sometimes, Krawczyk said, the pirates don't even try to hide the fact the disc is counterfeit. Inspectors recently found a Ukrainian-made copy of Jennifer Lopez's latest album that said, "Made on Mars."
"Martian" manufacturing may be a joke to counterfeiters, but trade officials aren't laughing. United States Ambassador to Ukraine Carlos Pascual says that Ukraine may face strict international sanctions if it doesn't stem the flow of pirate products. U.S. and EU concerns should being taken seriously, he said.
Ukraine's admission into the World Trade Organization may be blocked, or other sanctions may be imposed on it if the practice continues, Pascual said.
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