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Ukraine's Trade Privileges On Line Over Intellectual-Piracy Concerns

U.S. software giant Microsoft has estimated that 70 percent of the software used in Ukraine's state sector is illegal.
U.S. software giant Microsoft has estimated that 70 percent of the software used in Ukraine's state sector is illegal.
KYIV/PRAGUE -- In late January 2012, authorities in Ukraine shut down one of the most notorious websites in the world for illegally downloading films, television shows, and other intellectual property. Police seized 200 servers and more than 6,000 terabytes of data.

It was hailed as major progress in coping with Ukraine's chronic problems in the area of intellectual-property rights.

Yet by February 2, 2012, the website was up and running again, reviving suspicions that the organized-crime groups behind such piracy in Ukraine are protected by highly placed officials.

Hennadiy Moskal is a member of the opposition Batkivshchyna (Fatherland) faction in Ukraine's parliament, the Verkhovna Rada. He is also a former deputy interior minister and former deputy chairman of the Ukrainian Security Service. "Who could be implicated? The police, the tax authority, the Consumer Protection Office, the Intellectual-Property Department, the tax police -- every structure that has the right to control those activities in Ukraine," Moskal says.

Kyiv's checkered track record in the area of intellectual-property protection has once again attracted the attention of the U.S.-based International Intellectual Property Alliance (IIAP), an umbrella organization comprising seven trade associations representing U.S. producers of copyrighted content and materials.

Last month, the IIAP called on the U.S. government to designate Ukraine a "priority foreign country" -- the most serious of three categories of countries considered problematic in terms of rights protection. More importantly, the IIAP also called for Washington to suspend Ukraine's trade benefits under the Generalized System of Preferences (GSP).

Such a move could cost Kyiv about $50 million a year. Washington will announce its decision before the end of April.

"One of the qualifications for GSP benefits is that a country must provide adequate and effective [intellectual-property-rights] protection, and we don't feel -- the members of the IIAP don't feel -- that Ukraine is currently providing adequate and effective protection given the high levels of piracy," says Eric Schwartz, counsel to the IIAP and one of the authors of the report criticizing Ukraine.

Getting Kyiv's Attention

However, he adds, neither designation as a "priority foreign country" nor a withdrawal of trade privileges means that Ukraine has the worst piracy problem in the world.

Rather, such moves would signal U.S. frustration with the government in Kyiv and its perceived lack of action to resolve the long-standing problem. The IIAP has concerns about countries like Russia and China, but feels their governments are, to a greater extent than Ukraine, taking the matter seriously.

Schwartz notes that the United States and Ukraine agreed to an action plan on intellectual-property protection in October 2010, but argues that Kyiv has made no progress in implementing it. "Piracy's been continuing at exceedingly high rates -- the highest piracy rates in Europe [are] in Ukraine at present," he adds. "They also have a significant problem with government ministries that are using unlicensed software."

U.S. software giant Microsoft has estimated that 70 percent of the software used in the state sector is illegal.

Ukraine's government says it is taking the piracy problem seriously, especially the embarrassing claim that state agencies routinely use pirated software. Oleksiy Yanov, deputy chairman of the State Intellectual Property Agency, disputes Microsoft's figure but acknowledges that illegal software in the state sector could be as high as 40 percent.

But Yanov says the state is taking measures. "Most computers come with software already installed -- that's one thing," he notes. "Another is that the government has budgeted money -- albeit not very much -- for every central agency of the executive branch to legalize or purchase new software."

RFE/RL's Ukrainian Service spoke with one employee of a state geological institute, who asked to be identified only as Yevhen. He says "99 percent" of the software in his office is pirated. "We have a local network where all the programs that we use are available," he explains. "You can say: 'I have a new version that I got off the Internet yesterday. Let me post it and whoever needs it can use it.'"

See You In Court

As for companies that feel their rights are being infringed upon, Yanov says they need to be more active and take their complaints to the courts.

However, other local observers feel that state-to-state measures like those advocated by the IIAP may be the best way to get Kyiv's attention. Kyiv-based lawyer Oleksandr Mamunya says that, although laws against piracy exist, individual companies have a hard time taking advantage of them -- particularly when suing the government in Ukrainian courts.

"It isn't a simple matter -- getting a court ruling in favor of a private business over the government, particularly in an area like intellectual-property rights," Mamunya explains. "This is especially true if such a court victory would result in serious material losses on the part of the state."

So far, in fact, only the giant Microsoft has managed to win such a case, getting an $8,000 judgment against the Uzhgorod International Airport late last year. Buoyed by this success, Microsoft filed 12 more complaints in Ukrainian courts last month.

The IIAP's criticism may be having an effect. Shortly after it was issued, Deputy Prime Minister Kostyantyn Hryshchenko ordered the government to prepare suggestions for more effectively implementing the action plan.

But the nexus of organized crime and corrupt officials at the heart of much intellectual-property theft leaves in doubt exactly how the $50 million lever of trade preferences from the United States compares to the illegal profits being reaped in Ukraine.

Opposition lawmaker Moskal says the key to stopping the piracy is rooting out the "protection" that surrounds the criminals. "So, obviously there are people who give a 'roof,' an umbrella of support, for all this unlicensed or counterfeit production and have some share of the proceeds," he notes. "If there were no such support it would have disappeared from the markets or shelves, from sale altogether."

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