UKRAINE IPR: ENGAGING LAW ENFORCEMENT ON INTERNET

UNCLAS KYIV 001888

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/TPP/IPE AND EUR/UMB
STATE PLEASE PASS TO USTR FOR JGROVES/LMOLNAR/PBURKHEAD
USDOC FOR ITA/MAC/OIPR
USDOC FOR 4231/ITA/OEENIS/NISD - CLUCYCK
COMMERCE PLEASE PASS TO USPTO

E.O. 12958: DECL: N/A
TAGS: ETRD KIPR ECON UP
SUBJECT: UKRAINE IPR: ENGAGING LAW ENFORCEMENT ON INTERNET
PIRACY, PETRIVKA MARKET

REFS: A) KYIV 449

B) KYIV 348

SENSITIVE BUT UNCLASSIFIED; NOT FOR INTERNET PUBLICATION.


1. (SBU) Summary: Econ Counselor met on August 1 with
leaders of the Ministry of Internal Affairs' (MIA) Economic
Crime Department to push for improved IPR enforcement. The
MIA officials expressed a firm commitment to protecting IP
rights, and described the Ministry's increased enforcement
efforts since the beginning of the year. They also
described other measures, such as a plan to give more power
to the GOU's IPR Coordination Council. Econ Counselor
highlighted Petrivka, Ukraine's largest outdoor market for
IPR-infringing goods, and internet piracy as areas of
particular concern, and pushed for more progress. MIA
officials described some successes in both areas, although
contending the problem is too large for law enforcement to
solve alone. End Summary.


2. (U) Econ Counselor met on August 1 with Serhiy Chernyh,
head of the Ministry of Internal Affairs' (MIA) Economic
Crime Department, to review Ukraine's IPR enforcement
efforts. Also present were Ihor Tyhtylo -- deputy head of
the MIA's Economic Crime Department, Yuriy Shafray -- head
of the MIA's IPR Division, and Volodymyr Berezan -- deputy
head of the Ministry's Kyiv office.

MIA Committed to IPR Enforcement...
--------------


3. (U) Chernyh described combating IPR crimes as a priority
for the MIA and said that they had significantly stepped up
enforcement efforts over the last several years. Indeed,
the latest statistics show that 2007 will see continued
increases in the number of IPR cases filed and of seizures
(ref A). There were 753 IPR-related criminal
investigations in the first half of 2007, already 93% of
the total from all of 2006 (which in turn were up 68% from
2005). As a result of the 753 investigations, 348 cases
went to the courts, 75% of the total 2006 figure (which had
been up 235% from 2005). (Note: The number of convictions
is not yet available.) The GOU seized 1.02 million pirated
discs in the first half of 2007, or 78% of the total for
all of 2006. The MIA initiated nearly 4,500 administrative
cases in the first half of 2007, 21% more than during all
of 2006.


4. (SBU) Econ Counselor praised the GOU for its increased
efforts, but expressed concern that the MIA was reportedly
reducing its staff devoted to IPR crimes. (Note: We have
heard informally from MIA staff that new leadership at the
Ministry diverted some resources away from IPR crimes.)
Chernyh admitted that there had been some restructuring,
with the goal of creating a more "vertical" structure
within the IPR Division, but denied that there had been any
staff reductions. Tyhtylo noted that the MIA planned to
strengthen its staff at the local level through additional
IPR training.

...But Arresting Pirates Not the Only Answer
--------------


5. (U) The MIA officials described the large profit margins
involved -- Shafray said that pirated CDs costing $0.20 to
produce sold for about $2.50 -- as well as strong demand
from poorer Ukrainians unable to pay for legitimate copies
made combating piracy particularly difficult. They
reiterated previous MIA complaints that Ukrainian courts
hand down overly lenient sentences, undermining the
criminal deterrent (ref A). They noted that over half of
those convicted receive probation, while the rest are given
fines or community service. Chernyh also emphasized the
importance of public outreach, noting the MIA's practice of
holding public events to publicize the destruction of
seized pirated discs.


6. (SBU) Shafray noted that the MIA was pushing for a
Cabinet of Ministers Resolution to bolster the IPR
Coordination Council (ref A). The expected CabMin
Resolution would empower the Coordination Council to task

various Ministries to take certain actions, rather than
just coordinate IPR activities. This, for example, could
help ensure that licensing (e.g., of outdoor markets) was
coordinated with IPR enforcement objectives.

Petrivka Market: Some Progress
--------------


7. (U) Econ Counselor highlighted Kyiv's Petrivka,
Ukraine's largest outdoor market for IPR-infringing
material (ref A),as an area of particular concern because
it lent the impression that piracy is still tolerated.
Shafray said that efforts to combat piracy at Petrivka were
ongoing, noting that 175,000 pirated discs (worth
approximately $495,000) had already been seized at Petrivka
in 2007. Berezan added that the Kyiv city administration
had a separate division to handle IPR violations, and that
a special working group was in place to focus on Petrivka.
After a dip in the numbers in 2004-2005, said Berezan, the
number of criminal cases initiated against Petrivka
merchants increased to 84 in 2006, and stood at 76 for the
first half of 2007. Twenty three criminal cases had
already resulted in convictions, and law enforcement had
also initiated 1,020 administrative cases during the first
half of the year. Econ Counselor noted that Poland had
particular success in pushing market operators to self-
police, and encouraged the GOU to explore similar tactics.

Internet Piracy
--------------


8. (U) Econ Counselor mentioned the recent shutdown of
allofmp3.com, the infamous Russian pirate website, and
urged the GOU to be vigilant should elements of
allofmp3.com seek to relocate to Ukraine. Shafray thanked
us for providing information on allofmp3.com, and said the
MIA was watching the situation closely.


9. (U) Econ Counselor also urged the GOU to tackle its own
pirate websites and argued that shutting down mp3.ua,
Ukraine's largest site, would send a strong signal that
Ukraine is taking the issue seriously. Shafray described
internet piracy as a "burning" concern and said that the
MIA had succeeded in closing down 20 pirate sites so far
this year. The MIA's preferred method, he said, was to
work through Internet Service Providers (ISPs) in shutting
down illegal sites. (Note: MIA officials have previously
told us that they lack the necessary authority to shut down
pirate sites through the courts (ref B).) Econ Counselor
responded that, in order to assist MIA efforts, Post would
try to relay information from industry regarding which ISPs
were hosting pirate sites.

Comment: Slow But Steady Wins the Race?
--------------


10. (SBU) Chernyh and team impressed us with their firm
commitment to combating IPR-related crime. This meeting
was nonetheless a useful opportunity to emphasize the
importance of IPR enforcement for the USG, and to push for
progress on the more troublesome problems of Petrivka
market and internet piracy. The MIA appears to be making
some progress on both fronts, although Post will continue
to push for a real breakthrough, such as shutting down
mp3.ua or permanently closing illegal trade at Petrivka.

TAYLOR