EDITORIAL: Protecting Intellectual Property Rights

By Peter B. Necarsulmer
June 27, 2000

Adulterated food, poison spirits, fake toothpaste and knock-off drugs are a lethal combination. Readily available in neighborhood stores and kiosks, very few people could handle so many unsafe products at once and come out alive.

A growing epidemic of counterfeits and other intellectual property rights, or IPR, violations in Russia is also hazardous to the health of government and business.

Viewed from a regional perspective, IPR infringements in the countries that once comprised the Soviet Union are staggering in scope. The rocky transition to free markets creates perfect conditions for IPR abuse.

Counterfeiting and trademark piracy are global problems affecting all market economies. However, these issues have now moved closer to the center stage of public attention in this region.

There are powerful reasons why: lost sales and jobs, police raids and expensive legal disputes over famous patents and trademarks to name a few. Combined with uncollected taxes, excises and customs duties, businesses and governments in the Baltic states, Russia and other countries in the Commonwealth of Independent States lose billions of dollars each year. And this is a conservative estimate.

These losses prevent governments from delivering basic services, hinder real economic development and cause companies to think twice about market expansion. International reputations suffer, slowing the flow of much needed local and foreign direct investment.

The stakes are higher still for consumers. Shoppers rely on certain quality and health standards associated with famous trademarks and brand names. Trademark piracy and counterfeits defraud consumers and can cause substantial health risks, even death.

According to the State Statistics Committee, 6,000 people died in the Russian Federation during the first two months of this year from alcohol poisoning, a figure that includes many deaths from consumption of counterfeited alcohol products. How many of us know what is really in that bottle of shampoo or box of detergent that our families use each day? Who hasn't coughed out an awful concoction posing as a famous mineral water?

To stem the growing tide of counterfeiters, pirates and Internet cybersquatters, the Coalition for Intellectual Property Rights was created a year ago. It exclusively targets the 15 countries of the former Soviet Union, focusing mainly on industrial property protection and enforcement (e.g. trademark and patent, not copyright protection).

CIPR's target is well justified. This past spring, the U.S. Trade Representative placed 12 of the 15 countries in the region on the Special 301 "Watch List" for failing to provide adequate IPR protection. The European Union has pointed out that strengthening IPR protection and enforcement regimes in these countries is a prerequisite for closer European integration. And membership in the World Trade Organization depends on it.

This week, CIPR opens an international conference in Moscow that combines the brainpower of corporate leaders and global trade and intellectual property experts with top politicians, lawmakers and regulatory officials from the region.

Together, this public-private brain trust intends to unite around an action agenda that builds partnerships between government and business to facilitate reforms in IPR laws and regulations, and their enforcement.

Echoing the true but rarely stated sentiments of government officials throughout the region, Ukraine's Deputy Prime Minister Mykola Zhulinsky openly admitted earlier this month that governments alone cannot tackle the region's growing IPR problems.

CIPR works to help fill this gap by actively pursuing concrete tasks that achieve measurable results. CIPR's programs include public opinion polls and economic research, technical assistance and training for enforcement authorities, and building coalitions for legislative and regulatory reform.

This week's Moscow conference brings together more than 200 participants from 20 countries, including senior officials from the World Intellectual Property Organization, the European Commission, the International Anti-Counterfeiting Coalition, the World Customs Organization and the International Trademark Association, among many others.

Unlike some exercises that preach a single Western approach to problem solving, the comparative experiences from these international organizations f combined with the knowledge of local experts f will help improve understanding among all stakeholders, including the news media. Regional intellectual property owners, such as Borzhomi and Izvestia, will offer particularly valuable on-the-ground contributions.

CIPR has identified a number of specific measures that will have a positive effect on improving IPR protection and enforcement in the region.

First, increasing fines, penalties and prison sentences for IPR crimes that actually reduce recidivism will provide incentives to law enforcement officials to pursue and prosecute violators. While pirates collect millions from the sale of fake goods, existing criminal penalties and fines often amount to little more than several annual minimum wages.

Second, reforming laws to require the destruction of seized counterfeit and contraband products will send a strong signal to consumers and businesses that the government is serious about battling pirates. Ukraine has recently adopted such a law and is now moving toward its implementation.

Third, businesses need to be more aggressive in tending to their own rights and obligations by taking full advantage of IP rights provided under existing laws. Remarkably, thousands of businesses fail to take basic actions to protect their intellectual property rights, such as registering trademarks with Rospatent and the other state patent and trademark offices.

Fourth, government tax and fiscal policies must reduce incentives to counterfeit producers and contraband transporters. Government and legislative tax and budget planners need to cut duties and other tax rates that foster the growth of the shadow economy.

Fifth, paying civil servants and judges decent wages will cut down on those who can be influenced or corrupted. Too often, official salaries are subsidized in ways that hinder the fair and impartial enforcement of laws as well as the conduct of administrative and court proceedings.

Sixth, politicians and government leaders need to provide patent offices with the independence and autonomy essential to perform their duties without undue political pressure. Likewise, budget planners must secure the financial and technological resources needed to provide patentors and customs and law enforcement officials with the tools needed to do their jobs.

An important breakthrough has taken place in recent months. Awareness and admission of the "IP problem" has occurred. What's needed now is not a lot of analysis and discussion. What's needed is action through public-private partnerships.

By bringing together the business, government and multinational communities in Moscow this week, CIPR intends to continue moving forward on its agenda of building partnerships to protect and enforce intellectual property rights. This agenda is more than a rhetorical slogan. It is CIPR's founding and guiding principle. This novel approach for the region, given its not-so-distant "centralized" past, has shown positive results and proved its validity.

Peter B. Necarsulmer is president of the Coalition for Intellectual Property Rights and is also chairman of the PBN Company. He contributed this comment to The Moscow Times.