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Cablegate: Ukraine's Ipr Agency Faces Existential Challenges

VZCZCXYZ0000
RR RUEHWEB

DE RUEHKV #1989/01 3171414
ZNR UUUUU ZZH
R 131414Z NOV 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 8813
INFO RUEHMO/AMEMBASSY MOSCOW 0479
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBS/USEU BRUSSELS

UNCLAS KYIV 001989

SIPDIS

STATE FOR EUR/UMB AND EB/TPP/IPE
STATE PLEASE PASS TO USTR FOR BURKHEAD/GROVES
COMMERCE PLEASE PASS TO USPTO FOR KROSENBAUM

E.O. 12958: N/A
TAGS: KIPR UP
SUBJECT: UKRAINE'S IPR AGENCY FACES EXISTENTIAL CHALLENGES

1. (U) Summary. Upon receiving information that Ukraine's
State Department of Intellectual Property (SDIP) was facing
the possibility of elimination, Emboffs met with its
chairman, Mykola Paladiy, to discuss the situation. The SDIP
also briefed Emboffs on the status of new copyright
legislation in the parliament, which is expected to be voted
on after the January 2010 presidential elections. Chairman
Paladiy also updated Emboffs on successful initiatives to
train judges in IPR law and enhance interagency cooperation
on IPR within the GOU. Emboffs also raised the issue of GOU
use of unlicensed software, which Paladiy says is a 'stuck'
issue with rights holders. End Summary.

-----------------------------
Potential Elimination of SDIP
-----------------------------

2. (SBU) Chairman Polokhalo of the Parliamentary Committee on
Science and Education has submitted to the Cabinet of
Ministers a proposal to eliminate the SDIP, and replace it
with a new State Committee of Intellectual Property, which
would report directly to the Cabinet of Ministers. SDIP
currently falls under the jurisdiction of the Ministry of
Education and Science. Mykola Paladiy, SDIP's Chairman told
EconOffs on November 6 that this is Polokhalo's third attempt
to eliminate the SDIP. This attempt is more threatening,
however, because Polokhalo has the support of Minister of
Education and Science Vakarchuk. First Deputy Prime Minister
Turchinov has ordered a ministerial level review of the
proposal, with the final reports to be submitted to the
Ministry of Education and Science, according to Paladiy. The
proposed change could be approved and implemented by a Decree
of the Cabinet of Ministers and would not require an act of
parliament.

3. (SBU) Chairman Paladiy believes that Polokhalo wants to
create a new organization so that he could fill its
leadership with his associates. Paladiy expressed hope that
the attempt would fail, and mentioned that the Deputy
Minister of Education and Science, Pavlo Poliansky, opposes
the elimination of SDIP as 'unnecessary'. However, as Deputy
Minister, Poliansky has no authority to block the decision of
the Minister, so Paladiy's confidence in SDIP's continued
existence may be unfounded.

4. (SBU) Prior to the meeting with SDIP, a representative of
the Ukrainian Music Alliance (UMA), a collective society that
has developed positive working relationships with SDIP,
expressed concern that the creation of a new State Committee
of Intellectual Property would be a severe setback for IPR
enforcement in Ukraine. The representative noted that
Committee Chairman Polokhalo has connections to organizations
which have profited in the past from exploitation of
loopholes in IPR laws and weak enforcement. UMA would not
only need to establish new relationships with any new body
but was concerned that the new organization would not
actively protect their interests.

---------------------------------------
IPR Legislation -- Likely Not This Year
---------------------------------------

5. (U) Paladiy stated that Ukrainian IPR laws were now
generally harmonized with international standards. In
addition, SDIP is presently following the course of two
related laws through parliament - a new draft law on
industrial property rights and a new draft copyright law.

6. (U) The Draft Law on Industrial Property Rights amends the
Civil Code of Ukraine, the Civil Procedural Code of Ukraine,
and the following laws: "On Protection of Inventions and
Utility Models," "On The Protection of Industrial Designs,"
"On The Protection of Marks for Goods and Services," "On the
Protection of Topographies of Integrated Circuits," and "On
the Protection of Appellations of Origin. " This legislation
would bring the laws into compliance with European Union
directives and international agreements to which Ukraine is a
signatory. This legislation was introduced on July 23 as
Draft Law 5015, but remains in Committee and has not been
submitted to the full Rada for a first reading.

7. (SBU) Five versions of the Draft Copyright Law are
currently circulating in the Ukrainian parliament. According
to Paladiy, SDIP and the majority of copyright holders and
collective rights management societies support the version
authored by former Deputy Prime Minister Tabachnik. The goal
of the new legislation is to legally define the role of
collective rights management societies in Ukraine -
determining how such societies are formed and recognized, how
they operate, and how their authority can be terminated by
the rights holder. SDIP prefers this version because, in
Paladiy's view, the other four reflect the interests of
special interest groups that have profited from loopholes in
the current laws. Due to the contentious atmosphere in
parliament, Paladiy does not expect progress on the Copyright
Law this year.

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

8. (U) SDIP has found enforcement to be the most difficult
part of its responsibilities. Paladiy reported that a shift
in priorities away from IPR at local levels has reduced the
level of monitoring performed by police, allowing pirate
retail outlets, such as Kyiv's infamous Petrivka Market, to
flourish. SDIP also reports difficulty in enforcing IPR laws
against criminals using the Internet as a distribution
channel.

9. (U) SDIP has signed an agreement with the judiciary to
establish a dedicated Patent Court, Paladiy reported. Those
parts of the judiciary that already deal with patent law will
be separated out and organized into the new body, though
given the political considerations involved, SDIP was unable
to estimate a timeline for the completion of this process.
SDIP also plans to continue to organize training seminars on
IPR issues for judges, and requested support from the USG in
this effort.

10. (U) In the area of anti-piracy, SDIP has signed an
inter-ministerial agreement with the State Security Service,
Customs Service, Ministry of the Interior, and Ministry of
Culture to facilitate interagency cooperation. A joint
working group will be formed after the January 2010
presidential elections, and SDIP hopes that the working group
will result in an intensification of local law-enforcement
efforts.
---------
Education
---------

11. (U) SDIP recognizes the ongoing need to train Ukrainian
officials in IPR law. Towards that end, it has launched a
series of IPR seminars for members of the Executive Branch,
and plans to continue the program in 2010. It also plans to
hold four quarterly IPR conferences in 2010, the first to be
held in February. Also, starting in 2010, SDIP will begin
issuing diplomas in IPR studies to Ukrainian students as part
of a joint program with the University of Naples.

-------------------------
International Integration
-------------------------

12. (U) SDIP has been working to further integrate Ukraine's
IPR enforcement activities with the international community.
To this end, it is pursuing membership in the European Patent
Office (EPO). The EPO accepts applications for patents and
then coordinates with member-state patent authorities to
issue a bundle of national patents from member countries.
Membership would allow Ukraine to add its national patents to
the EPO bundle.

13. (U) There are ongoing disputes between rival Ukrainian
collective societies (organizations responsible for
collecting royalties from commercial music users such as
nightclubs, radio stations and restaurants). Some societies
have a track record of collecting royalty payments and then
keeping the money, or demanding payments from users that had
already made payments to another society. The SDIP has
invited a professional Swiss collective management society to
operate in Ukraine as a means of stabilizing the situation in
the music royalty collection business.

14. (U) Paladiy stated he wanted SDIP to become a World
Intellectual Property Organization (WIPO)-recognized patent
search and examination body. To accomplish this, the SDIP
would need to create and maintain a database of registered
patents and conduct searches for clients to ensure that
pending patent applications did not encroach on existing
patents. Moscow, having inherited the bulk of the Soviet
Union's Patent Office and related infrastructure, currently
is the sole internationally-recognized patent search and
examination body in the CIS region. Paladiy recognized that
creating a competing service center would be a long and
difficult undertaking.

--------------
Counterfeiting
--------------

15. (U) SDIP reports that pirate audio/video media (DVDs and
CDs) as a percentage of all sales is increasing in Ukraine
simply as a result of the 40% decline in the global AV market
since the beginning of the financial crisis. Technological
changes in the black market trade in AV media have also made
enforcement more difficult for SDIP. First, many pirate
retailers have switched their stock to Flash memory cards,
which are physically smaller than optical media, yet have
greater storage capacity. Second, a large number of pirate
media distributors are now using the Internet for
distribution, bypassing physical retail outlets like Kyiv's
Petrivka Market. Paladiy stated that Internet piracy is on
the rise and a large portion of the market.

-----------------
Patent Protection
-----------------

16. (U) Emboffs raised concerns from the American
agrochemical industry that their patents are being violated
by small Ukrainian firms who use insider connections to
receive Ministry of Ecology approval in months, rather than
the years it takes American firms. SDIP officials responded
that the timeframe for approval in Ukraine is similar to that
in Europe, and welcomed submissions of patent violation
claims, along with supporting evidence, for consideration.

-------------------
Unlicensed Software
-------------------

17. (U) According to expert estimates, 60-70% of the software
used in government offices in Ukraine is unlicensed, a fact
repeatedly noted in the annual USTR Special 301 Report on IPR
enforcement. SDIP reports that there has been no progress in
reducing this level of pirate software usage in the past
year. Although SDIP had proposed the inclusion of a
line-item in the 2009 budget for acquiring software licenses,
the final budget did not include money for this item.
Paladiy told Emboffs that the issue is more political than
technical, as parliamentary deputies generally consider
Microsoft and other rights holders to be enemies.

18. (U) Paladiy feels that the rights holders need to be more
aggressive in working with parliament and pressuring the GOU
to respect intellectual property rights. SDIP has suggested
joint action plans to tackle the issue of unlicensed
government software with Microsoft and SoftProm (a software
firm that represents themselves and seven other smaller
suppliers), but say that the rights holders have not followed
up with SDIP for seven months. Paladiy considers the issue
to be "stuck".

-------
Comment
-------

19. (SBU) Although SDIP continues to work diligently to
improve its capacity and the environment for IPR protection
in Ukraine, the past year has been short on major successes
for IPR enforcement in Ukraine. This can be attributed to
the fact that the GOU has already made significant progress
over the past eight years in the area of IPR protection, and
is now left with the harder tasks. Foreign rights holders
and the USG have built up a strong working relationship with
the SDIP, and SDIP replacement with a new Cabinet of
Ministers Committee would likely be a setback, not only for
our cooperation but also for the overall IPR regime in
Ukraine. End Comment.
PETTIT

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