Russia's leadership in counterfeiting not a fact

 (Vasily Zubkov, RIA Novosti economic commentator)

By mere coincidence, parliament hearings in Moscow on legal and technical measures to counteract sales of pirated, faked and low-quality products in Russia took place at a time when the International Intellectual Property Alliance addressed the U.S. Administration on the same subject. It demanded that Russia be declared the biggest violator of intellectual property rights. The motives of the IIPA, which comprises seven profile American associations, which together unite over 1,900 companies, are easy to understand. Pirated products manufactured in Russia spell huge losses for their businesses.

But even greater losses are suffered by Russia itself. Vladimir Katrenko, deputy speaker of the Russian parliament, said at the hearing that the problem of pirated products had reached national proportions and threatened both the population's life and health and the country's economic security.

Undoubtedly, efforts against pirated and faked products are becoming increasingly topical also because one of the main requirements for Russia's accession to the WTO is to create a system of reliable protection of intellectual property. American businessmen from the IIPA are urging the White House not to admit Russia to that organization.

Alexander Shokin, president of the Russian Union of Industrialists and Entrepreneurs, was right when he said that "piracy is the biggest headache for Russian business." Nevertheless, tireless efforts against it have not yielded tangible results. Why?

One of the main reasons of the failure is that the price of licensed products is too high for Russian consumers. The population's weak financial possibilities are in reverse relation to its longing for knowledge and new culture and art products. A well-to-do person will never go to the market to buy a pirated book, tape or CD from a stand, but there are few of them in Russia, Shokhin says. He believes that among other measures, it is very important to reduce customs duties on imported items of intellectual property. Also, foreign copyright holders should move production to Russia, thereby reducing the cost of their products for Russian consumers.

Boris Simonov, head of the Federal Service for Intellectual Property, addressing the State Duma deputies, also said that the high price of licensed products for Russian consumers was a major problem. While fighting against piracy, the Russian state is punishing violators on the one hand, and its own population, on the other.

However, there are other reasons behind the growth of pirated products. Economic Development Minister German Gref opines that the main reason is that the services sector amounts to hardly 30% of Russia's GDP, while in developed Western countries it exceeds 70%. So stealing copyright products is not considered a serious offense in the Russian system of values. As the share of provided services will be growing, the volume of piracy will be decreasing, he maintains.

Loopholes in the Russian legislation also encourage piracy, and so do mild punishments that are inadequate to the scale of the offense, which many people acknowledge. A high-ranking officer in the Interior Ministry's economic crimes department, who has been fighting against intellectual property-related crimes for several years, says that piracy can be stopped only by force. To do so, cases of piracy should be tried in courts of general jurisdiction rather than arbitration courts; and amendments should be introduced to the Criminal Code to make punishment for piracy tougher.

Gennady Voronin, head of the All-Russian Quality Organization supports the idea of toughening punishment. Many of such crimes are punished with death sentence in the United States and with life imprisonment in Turkey, he says. In his opinion, it is important that a new generation of Russian businessmen would be afraid to produce pirated products. Today neither sellers nor buyers are afraid of getting long prison terms.

The Interior Ministry advocates not only the confiscation and destruction of pirated products, but also the equipment used to make it. This initiative is supported by the Federal Services for Intellectual Property and for Law Enforcement.

The latter's head, Alexander Romanenko, says that the audio and video market in Russia is not too big. It has about 200 legal firms, half of which are based in Moscow and are under permanent control. However, the current procedure of revoking licenses and shutting down production does not allow doing it quickly. He says that although seven lawsuits have been tried, only one license has been revoked so far.

Last year, the Federal Service for Intellectual Property considered 2,040 applications on violations of intellectual property rights and sent 1,000 cases to courts. It does not mean, however, that the offender will be duly punished. About 60% of criminal proceedings were stopped as the parties conciliated. Other perpetrators got away with small fines.

As we have seen, agencies and deputies responsible for fighting piracy are not sitting idle. They are acting as a united front and are looking for new reserves to fight against unscrupulous businesses. They are improving legislation and trying to create an implacable attitude towards pirates in society.

Finally, a few words about Russia's leadership in counterfeiting: many prominent Russian politicians and businessmen seriously doubt this statement. Valery Draganov, head of the State Duma's committee for economic policy, entrepreneurship and tourism, as well as Alexander Shokhin say that there are countries with a bigger population and bigger markets. For example, piracy in China, according to the IIPA, is 85-93%, incurring as much as $2.53 billion of losses on American producers. In Russia, they lose about $1.75 billion. 0