UNCLAS KYIV 001205

SIPDIS

DEPT PLEASE PASS TO USTR FOR LMOLNAR/JGROVES
USDOC FOR 4201/DOC/ITA/MAC/BISNIS
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK
STATE FOR EUR/UMB AND EB/TPP/IPE
MUMBAI FOR KLEIN

SIPDIS

E.O.: 12958: N/A
TAGS: ETRD KIPR EINT UP
SUBJECT: UKRAINE: MICROSOFT AND GOU GO AFTER SOFTWARE PIRATES

REF: A) KYIV 449

B) 2006 KIEV 2723


1. Summary: A local Kyiv court sentenced a convicted distributor of
pirated software on May 7 to one year and one month imprisonment.
Although the judge then suspended the prison term, the severity of
the sentence attracted significant media attention. The case is
part of an invigorated campaign by Microsoft, with the cooperation
of Ukrainian law enforcement, to crack down on software piracy.
Software piracy rates in Ukraine remain among the worst in the
world, although the GOU appears to be taking steps in the right
direction. End Summary.

Software Piracy Conviction
--------------


2. On May 7 a local Kyiv court found a distributor of pirated
software guilty of copyright infringement and sentenced him to one
year and one month imprisonment. The case resulted from a raid by
law enforcement officials in January at Kyiv's "Radiorynok" outdoor
market. Media reports noted that the court's sentence was stiffer
than those in previous software piracy cases, which usually resulted
only in administrative fines. The judge subsequently suspended the
prison term (conditional on the defendant not committing another
crime), however. Serhiy Lebid, head of the Ministry of Internal
Affairs' IPR Department, told Econ Assistant on May 15 that the
convicted pirate is unlikely to see the inside of a cell.

Larger Microsoft/GOU Campaign
--------------


3. Ukrainian daily Kommersant reported on May 11 that this case was
only the first of many to follow in the wake of 14 raids by law
enforcement in early 2007. Vladislav Shapoval, a lawyer
representing Microsoft, told Kommersant that there were now 17 cases
involving pirated Microsoft software working their way through the
courts. In April, Microsoft stepped up pressure on suspected
violators, sending warning letters to 82 companies and organizations
suspected of using pirated software.


4. Valery Lanovenko, General Manager of Microsoft Ukraine, told
Econoff on May 12 that this case represented an important victory
for Microsoft's anti-piracy efforts. He cautioned, however, that
Microsoft was anticipating an appeal of the conviction. Lanovenko
has in the past told Econoff that a key element of Microsoft's
strategy in Ukraine is to push for a few high-profile criminal
convictions in order to encourage Ukrainians to eschew pirated
products.

Software Piracy Remains Rampant
--------------


5. According to a recent study by the Business Software Alliance
(BSA), Ukraine places among the 10 countries with the highest rates
of software piracy in the world. The piracy rate stood at 84% in
2006, virtually unchanged from 85% in 2005. Ukraine also falls
among the top 20 countries in the world in terms of losses to
industry, estimated by BSA at USD 337 million for 2006.


6. As noted in ref A (Post's Special 301 submission), government
procurement/use of pirated software also remains a problem.
Microsoft canceled a software legalization agreement with the GOU in
June 2006 due to government noncompliance.

Comment: Small Step in Right Direction
--------------


7. Microsoft, long active in Ukraine through public outreach and
cooperation with the GOU (ref B), is stepping up its fight against
local pirates. Ukrainian law enforcement, especially the Ministry
of Internal Affairs' IPR Department, appears willing to help by
targeting raids at suspected distributors of pirated software. This
recent, high-profile conviction should help discourage use of
pirated software. Until someone actually goes to jail, however, the
deterrent effect could be limited.

TAYLOR