UKRAINE: IP RIGHTS HOLDERS STILL DISSATISFIED WITH

UNCLAS KYIV 000528

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/TPP/IPE - JBOGER/JURBAN
STATE PLEASE PASS TO USTR FOR PBURKHEAD/JGROVES
USDOC FOR 4231/ITA/OEENIS/NISD - CLUCYCK
USDOC PLEASE PASS TO USPTO
SOFIA FOR MLAMBERTI

E.O. 12958: DECL: N/A
TAGS: ETRD KIPR ECON UP
SUBJECT: UKRAINE: IP RIGHTS HOLDERS STILL DISSATISFIED WITH
COLLECTIVE MANAGEMENT -- PUBLIC PERFORMANCE PIRACY

REFS: A) KYIV 503

B) KYIV 404
C) 2007 KYIV 2260

SENSITIVE BUT UNCLASSIFIED; NOT FOR INTERNET PUBLICATION.


1. (SBU) Summary: The recording industry remains concerned
about public performance piracy -- the failure of
intellectual property users to make royalty payments -- in
Ukraine. The industry regards Ukrainian TV stations as
particularly problematic. Industry reps would like to see
increased criminal penalties and broader use of the
government's regulatory authorities. The GOU has agreed to
work with industry's proposals but is concerned about over-
criminalizing the issue. Indeed, the heart of the problem
appears to be rights holders' lack of civil remedies, which
can only come with long-term improvements in Ukrainian
courts' familiarity with intellectual property rights. End
Summary.


2. (U) Econoff attended a February 19-21 Intellectual
Property Rights (IPR) Conference organized by the GOU in
Svalyava, Ukraine and a March 5 IPR roundtable hosted by
the European Commission (ref A). Both events devoted
sessions to problems of collective management and public
performance piracy. Rights holders have long complained
that some royalty collecting societies do not properly
return royalty payments to rights holders and that only a
small fraction (about 5-7%) of the market properly pays
performance royalties (ref B,C, and previous).

GOU Conference: Royalty Collecting Societies Frustrated
-------------- --------------


3. (SBU) Pavlo Kalenychenko, Director of the royalty
collecting society Ukrainian Music Alliance (UMA),detailed
the difficulties to get IP users, such as restaurants and
bars, to make royalty payments. Tamara Davydenko, Head of
the Copyright Division at the State Department of
Intellectual Property (SDIP),said she hoped an information
campaign could help to get IP users to willingly pay
royalties. (Note: Davydenko also publicly recognized UMA
and the Ukrainian Music Rights League (UMRL) -- the two
royalty collecting societies supported by IFPI -- as the
primary societies operating in Ukraine, a positive
development in this long-running saga. Industry had
previously expressed concerned over GOU support for rogue
collecting society Oberih (ref C and previous). End note.)

TV Stations Particularly Problematic
--------------


4. (SBU) Vadim Koktysh, Director of Ukrainian recording
company Honest Music, criticized representatives of local
TV stations present at the GOU conference for failing to
make royalty payments on music they played as part of TV
programs. The TV station reps in turn complained that they
had not budgeted for royalty payments and that making such
payments would cause their stations severe financial
damage. (Comment: Although not intending to do so, the TV
station reps appeared to admit that they were in fact
avoiding royalty payments owed to rights holders, and that
they were doing so for purely financial reasons. End
Comment.) Valentin Chebotaryov, SDIP Deputy Chairman, on
March 5 lambasted as "ridiculous" a letter recently sent to
SDIP from TV stations repeating the argument that they
could not make royalty payments due to budget constraints.

Way Forward - Amend Criminal Code?
--------------


5. (U) Ignat Berezhny, Director of the Ukrainian
Association of the Music Industry, argued that Article 176
of Ukraine's Criminal Code should be applied more broadly
to IP users who play music without authorization from
rights holders. Berezhny said that industry reps would
soon provide the GOU with suggested amendments to the
Criminal Code to provide for stricter penalties in such
cases. Oleg Levchenko, from a smaller royalty collecting
society, argued that the primary enforcement problem was
the courts, as judges frequently ruled in favor of
defendants even when presented with overwhelming evidence.


Chebotaryov said SDIP agreed that the Criminal Code needed
amendment and expressed his willingness to work with
industry's draft.

Or Use Regulatory Authorities?
--------------


6. (SBU) Chebotaryov cautioned, however, that he did not
want to over-criminalize public performance piracy. Oleg
Dolinsky, Managing Director of Comp Music (an EMI
Licensee),noted that the biggest IP users -- restaurants,
bars, and TV and radio stations -- all had to obtain
government-issued licenses to run their businesses, and he
asked if the GOU could withhold licenses from IP users who
failed to make royalty payments. Chebotaryov responded
that he had personally argued before Ukraine's TV and radio
regulatory body that copyright protection requirements
should be included in the licensing process. Yet these
efforts failed, said Chebotaryov, as other GOU agencies
argued that SDIP was trying to interfere excessively in
business activities.

Comment: Lack of Civil Remedies
--------------


7. (SBU) Public performance piracy -- the failure of IP
users to make royalty payments -- continues to be a problem
in Ukraine. The GOU has demonstrated goodwill in
addressing this problem, however, both by recognizing the
legitimacy of industry-supported royalty collecting
societies, and by agreeing to try to step up criminal
enforcement in this area. Yet, as several of the
roundtable participants noted, the real solution to the
problem likely lies in better civil remedies for rights
holders. Such improvements will require a judiciary better
informed on IPR. Law enforcement cannot shut down every
restaurant and bar playing unlicensed music, and, indeed,
should not be spending its limited resources on these types
of cases. Post hopes that its continued efforts to focus
IPR training activities on judges will help lead to long-
term progress and a system that corresponds more to those
prevalent in western Europe, where IP users pay royalties
without the continual involvement of law enforcement. End
comment.

TAYLOR