A Further Perspective

Piracy on the High Steppe

Under fire, Ukraine is moving to protect intellectual property and its foreign investors.

By 6.28.13

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Cynics may be inclined to think of traffic tickets as evidence that “every cop has a quota.” After reading the latest annual report of the United States Trade Representative on theft of intellectual property, those skeptical of government agencies might conclude that they, too, have quotas.

Take the case of Ukraine, not a huge trade partner of the United States, but one strategically located between West-leaning countries and Russia. The USTR’s Special annual “301” report listed Ukraine as a “Priority Foreign Country,” the first time in seven years it has put that label on any country. This means it considers Ukraine the world’s leading pirate of such things as films, music, software, games and television programs.

Are there none others more guilty? China, for instance, with its routine hacking of government and corporate computers and its stealing of high-security plans of military equipment? Could it be that the USTR understands that the Chinese will do what they please, while bullying a smaller country may pay dividends.

Under World Trade Organization rules, once the USTR makes the “Foreign Priority Country” designation it has 30 days to initiate an investigation under Section 301 of the Trade Act to determine if trade sanctions are to be imposed on the accused country. It has since opened the investigation.

The USTR’s report contends that the Ukrainian government has not cracked down on online pirate websites -- such as ExtraTorrent.com -- and that the government itself has been using unlicensed software. The Ukrainian government admits to some use of such software; however, it is moving a new law through the parliament (No. 2056a) that will protect owners and producers of copyrighted works. 

Once passed, the new law would create a system of issuing control marks to protect the rights of authors, performers, producers of audio video recordings and films, computer programs and databases. Then, if a copyright holder reports a suspected violation of its copyright to the State Intellectual Property Service, the government will take appropriate action.

If this kind of corrective legislation is not quickly put into place, a sanction applied to Ukraine could have a serious impact on foreign direct investment in a country that is working hard to build a stable, growing economy and to strengthen the institutions of its young democracy. Foreign direct investment has been growing.

At a recent regional forum in Belgrade, President Viktor Yanukovych reported that at the end of the first calendar quarter of 2013 such investment stood at $55 billion. Without strong new protections of intellectual property, that could come to an abrupt end. 

Roman Semeshko, executive director of the Ukrainian Audiovisual Rights Management Association, “The terrible thing [about the USTR naming Ukraine the biggest pirate] is that foreign investments will completely leave the country” if sanctions are applied. 

Not only are international copyright holders victims of piracy in Ukraine, so are homegrown companies such as ABBYY Ukraine. It develops software, including a popular electronic translation program. Roman Solod, a spokesman for ABBYY, says piracy hurts sales and also increases the company’s cost of doing business in the form of extra staff lawyer salaries and court costs. 

Perhaps the USTR investigation is not a case of bureaucratic quota-making after all, but rather an application of the famous carrot-and-stick approach to regulatory oversight. Let us hope so.

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About the Author
Peter Hannaford was closely associated with the late President Reagan for a number of years. He is a member of the board of the Committee on the Present Danger. His latest book is “Presidential Retreats.”