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Cablegate: Ukraine Ipr: Gou Trying to Improve Hologram

VZCZCXYZ0975
RR RUEHWEB

DE RUEHKV #0503/01 0671119
ZNR UUUUU ZZH
R 071119Z MAR 08
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 5165
INFO RUEAWJA/DEPT OF JUSTICE WASHDC
RUCPDOC/USDOC WASHDC
RUEHMO/AMEMBASSY MOSCOW 0318
RUEHBJ/AMEMBASSY BEIJING 0013
RUEHAK/AMEMBASSY ANKARA 0020
RUEHSF/AMEMBASSY SOFIA 0026

UNCLAS KYIV 000503

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
SOFIA FOR DOJ - MLAMBERTI

E.O. 12958: DECL: N/A
TAGS: ETRD KIPR ECON UP
SUBJECT: UKRAINE IPR: GOU TRYING TO IMPROVE HOLOGRAM
STICKER PROGRAM

REF: 2005 KIEV 4872

SENSITIVE BUT UNCLASSIFIED; NOT FOR INTERNET PUBLICATION.

1. (SBU) Summary: The European Commission hosted an IPR
roundtable on March 5 with participation from the GOU and
rights holders to discuss the hologram sticker program for
optical discs. Industry reps laid out their concerns
regarding the technical design of the hologram sticker, the
process of issuance, and enforcement. The GOU described
plans to improve the technical design within a few months,
agreed to make more information publicly available to
increase transparency in issuance, and promised to step up
investigations of counterfeit stickers. Post expects these
practical steps to improve the hologram sticker program,
and does not believe that elimination of the program is
warranted. End Summary.

2. (U) Econoff participated in a March 5 roundtable on
intellectual property rights (IPR) hosted by the European
Commission. The first part of the roundtable focused on
the GOU's hologram sticker program, which is meant to
combat optical disk piracy but has long been an area of
contention with industry (reftel). The second part focused
on public performance piracy (to be reported septel). The
event was virtually identical to meetings of the U.S.-
Ukraine Enforcement Cooperation Group, as it brought
together representatives of the GOU and industry to review
IPR enforcement issues.

3. (U) The following is a list of key participants:

GOU
---
Valentin Chebotaryov - Deputy Chairman, State Department of
Intellectual Property (SDIP)
Serhiy Lebid - Deputy Head of Economic Crimes
Department, Ministry of Interior
Oleksiy Gashchytskyy - Head of IPR Division, Customs
Service
Vadim Vnukov - Security Service of Ukraine
Georgiy Beilin - Specialized Enterprise "Holographia"
Oleg Andruschakevych - Deputy Director, State Enterprise
"Intelzahyst"

Industry
--------
Alexander Kotlyarevsky - Deputy Regional Coordinator for
CIS, IFPI
Ignat Berezhny - Director, Ukrainian Association of
the Music Industry
Oleg Dolinsky - Managing Director, Comp Music (EMI
Licensee)
Andriy Dakhovskiy - President, Ukrainian Records
(Universal Licensee)
Alexander Pakharenko - Partner, Pakharenko and Partners
Law Firm (local counsel for
Electronic Arts)

4. (U) Berezhny delivered a detailed presentation,
coordinated with local music industry reps and IFPI,
outlining industry's problems with the hologram program.
Industry complaints fell under three general topics --
technical elements of the stickers, the issuance process,
and enforcement.

Technical Elements of the Hologram Sticker
------------------------------------------

5. (U) On the technical side, Berezhny said that pirates
were able to wash off the artist/album name from the first
layer of legitimate stickers in order to reprint and attach
them to pirated products. He also argued that forged
stickers were becoming more widespread, and Dolinsky
presented a pirated CD of well-known Ukrainian singer
Ruslana bearing a high-quality counterfeit hologram
sticker. Chebotaryov recognized that technical
improvements to the sticker were necessary and said the GOU
intended to introduce a new design within a matter of
months. The new design would stop the problem of washing

off the first layer, said Chebotaryov. Beilin said that
"Holographia," which designs and manufactures the hologram
stickers, was also planning to roll out an easy-to-use,
handheld device to aid law enforcement in detecting if a
sticker was counterfeit. Lebid praised the planned
improvements to the sticker design, but questioned whether
the GOU would be able to procure enough of the detection
devices and properly train law enforcement officials
throughout the country on how to use the device.

Issuance Process
----------------

6. (U) Rights holders also complained of a lack of
transparency in the issuance of stickers, a process managed
primarily by the State Enterprise "Intelzahyst." (Note:
"Intelzahyst," which is subordinate to SDIP, reviews
applications for hologram stickers and then distributes
them to rights holders, who themselves apply the stickers
to their products. End Note.) Berezhny argued that some
pirates had managed to acquire hologram stickers by posing
as small, little-known recording companies based abroad.

7. (SBU) As a solution, Berezhny proposed that
"Intelzahyst" make application information publicly
available on its website, and give rights holders an
opportunity to file complaints on suspect applications.
Chebotaryov noted GOU concerns that recording companies
could use such a policy to disrupt the operations of
legitimate competitors, but said that posting information
on the internet should be possible. Andruschakevych,
Deputy Director of "Intelzahyst," privately cautioned
Econoff that posting such information on the internet could
be problematic due to privacy laws. Andruschakevych had
previously made clear to a meeting of the European Business
Association on February 11 that "Intelzahyst" would not be
liable for its decisions on issuing stickers, as such
liability should fall to the GOU directly.

Enforcement
-----------

8. (U) There was a lengthy discussion of the need to
improve enforcement measures. Rights holders called for
increased inspections of all optical disc sales, and
specifically for increased attention to discs containing
hologram stickers, claiming there appeared to be more
counterfeit stickers appearing on the market. Lebid
reiterated the Ministry of Interior's long-standing
position that the hologram sticker program remains an
effective enforcement tool, as law enforcement benefits
from some ex-officio authorities to seize optical discs
bearing no sticker. Indeed, said Lebid, the majority of
pirated optical discs on the market were without stickers,
rather than with counterfeit stickers.

9. (U) Industry reps also called on law enforcement to
investigate the sources of counterfeit stickers. Lebid
urged rights holders to formally address the Ministry of
Interior with any examples of counterfeit stickers, and
promised to properly investigate every such case. Rights
holders and GOU officials seemed to agree that counterfeit
production was based abroad, mostly in Turkey and China,
making investigations by the GOU more difficult.

Comment: Practical Steps to Improvement
---------------------------------------

10. (SBU) Although some disagreement remains, industry and
government appear to broadly concur on the need to improve
the hologram sticker program. The GOU agreed to most of
industry's suggestions regarding technical improvements to
the sticker, the issuance process, and enforcement. Post
was somewhat concerned by industry's uncompromising
position, as stated by Berezhny, however, that "unless ALL
[of industry's] proposals are implemented, the hologram
sticker system in Ukraine should be abolished." As many
pirated products in Ukraine continue to sell without any
hologram sticker, the hologram sticker program remains a
valuable tool in aiding the work of law enforcement. Post

will continue to urge the GOU to take practical steps to
improve the system as we believe this is the best method of
aiding IPR enforcement, as opposed to eliminating
holograms.

TAYLOR

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