Report on 22 FebruaryCIPR Trademarks Roundtable with Russian Federation IP Delegation,Washington, DC.

February 23, 2001

MEMORANDUM
TO: CIPR MEMBERS
FR: COALITION FOR INTELLECTUAL PROPERTY RIGHTS
RE: REPORT ON FEBRUARY 22 CIPR INDUSTRY ROUNDTABLE AT U.S. DEPARTMENT OF COMMERCE

This memorandum provides an overview of the U.S. Dept. of Commerce & CIPR Industry Roundtable with Russia's intellectual property negotiating team held in Washington, DC on February 22. The Russian delegation was visiting Washington for bilateral meetings with the U.S. Government (USG) on WTO intellectual property (IP) related issues

Participants

CIPR was represented by EPC members Frank Hellwig, Anheuser-Busch ; Janet Hoffman, Fross Zelnick; Gary Zizka, UDVNA; and, Associate Members Susan Wilson, IACC and Karen Montagne, US-Russia Business Council (USRBC). A representative from Eli Lilly, a USRBC member, also attended. CIPR was represented by Tom Thomson, who served as moderator, Jim Clawson, Paul Nathanson, Christina Bucher and Courtenay Carr.
Members of the Russian delegation included: Dr. Korchagin, Head of Rospatent; Nikolai V. Bogdanov, Deputy Director General, Rospatent; Valentina V. Orlova, Department Director Rospatent; Yuri G. Demin, First Deputy Minister, Ministry of Justice; Andrei A. Starostine, Detective Inspector, RF Ministry of Interior; Alexander A. Pakhomov, Counselor; RF Ministry of Economic Development and Trade; Natalia V. Popesku, RF Ministry of Culture; and Ianina G. Larina, Judge, Moscow Arbitration Court.
USG representatives attending the event included Katrin Kuhlmann, Director of Central Europe and Eurasia, USTR; Kerry Eckstein, Senior Counsel, Eastern Europe and the NIS, Office of the General Counsel, Dept. of Commerce; and Inga Litvinsky, Senior Trade Specialist, Russia Desk Officer, Department of Commerce.

Debrief on USG-RF Negotiations

Before the Russian delegation arrived, Katrin Kuhlmann gave CIPR members a briefing on the negotiations that took place between the USG and the Russian Delegation on Wednesday, February 21. Kuhlmann is a key U.S. negotiator with the Russians for USTR.

Legislation
Kuhlmann stated that much of the discussion focused on the legislative proposals prepared by Rospatent. The five components of that legislation include patents, trademarks, copyrights, software and integrated circuits. Korchagin told the USG that he plans to submit the legislative package to the Duma before it recesses in July.

Civil Code
Korchagin also briefed the USG on the draft criminal and customs codes already circulating in the Duma, which he assured conforms to TRIPS. USTR will review both items to confirm they are TRIPS compliant. Korchagin also talked about the other civil code draft that contains detailed IP provisions that he does not support. He prefers that the civil code include general language and defer to Rospatent's specific legislation.

Enforcement
The USG told the Russians that enforcement continues to be a major problem for IP holders in Russia. While the Russians acknowledged enforcement problems, they constantly returned to the argument that it is more of a perception problem than reality. The Russians mentioned repeatedly that they find it puzzling that there are so many allegations of IP abuse but US companies are not availing themselves to the mechanisms available for protection, particularly the courts.

Susan Wilson of IACC added that U.S. companies are unlikely to bring civil cases for a variety of reasons. She stated that, for example, without ex parte searches, there is little chance of catching counterfeiters or their products. It also has become dangerous for rights holders to investigate violations of their marks - their personnel in these countries face harassment or even death.

Counterfeit
The Russian delegation told the USG that counterfeit goods are destroyed or returned to the rightful IP owner. Janet Hoffman told Kuhlmann that there is no legislative basis at this time for the destruction of counterfeit goods.

Well-Knowness
Kuhlmann said that the Russians briefed the USG on the well-knowness legislation. Attendees did not discern from Kuhlmann any reluctance on the US side to support the well-knowness provisions.
According to Kuhlmann, Korchagin used the issue of well knowness as another example of US companies not participating in the process established to protect IP in Russia. He noted that only a few companies had registered well-known marks. Janet Hoffman explained that the requirements - surveys conducted in seven Russian cities - are too onerous for many companies and create a disincentive.

Technical Assistance
USTR offered prior to this round of meetings to assist Russia in gaining needed technical assistance. They asked the negotiators to provide ideas and specific areas of need for the assistance. According to the Russian delegation, one of the problems with technical assistance is the inability to disseminate information widely. Russian officials travel to the U.S. for training but do not share the knowledge gained from this training with colleagues. Also, there is little follow-up done after the training programs. Dr. Korchagin stated that training materials are needed for wide distribution throughout the country. Materials could include print, audio and videos.
Department of Commerce participants suggested that CIPR gain access to a database at the Department of State which tracks technical assistance and training. They also requested that CIPR add its own activities to the database to coordinate with other IP organizations working in the region.

Geographic Indications
Kuhlmann did not provide much detail initially on the GI discussion and Frank Hellwig asked her to elaborate. According to Kuhlmann, Korchagin says the language on GIs is taken directly from TRIPS. USTR's Cathy Novelli emphasized to the Russians that GIs would continue to be a topic of discussion.

Miscellaneous
According to Kuhlmann, the Russians say they are enforcing unfair commercial use and plan to move forward on WIPO treaties before the end of the year. She added that Korchagin emphasized the significance of progress made on IP issues in Russia and that U.S. companies need to utilize the mechanisms established by the Russian Government to protect their IP rights. The establishment of a special IP unit in the Ministry of Interior was cited by the delegation as an example of Russia's determination to enforce IP rights.
Kuhlmann stated several times that USTR wants to cooperate closely with the private sector in general and with CIPR specifically, as close communications will be mutually beneficial.

Roundtable with the Russian Delegation

Following introductions by both sides, Frank Hellwig of Anheuser-Busch formally welcomed Korchagin and the delegation, thanked Commerce and USTR and gave a brief overview of CIPR. He stressed that CIPR seeks to cooperate with the PTO and work together to improve IP protection in Russia.

Susan Wilson of IACC then made brief remarks expressing the concerns of her members on enforcement and counterfeit issues. She explained the rationale behind the IACC's recommendation to USTR that Russia remain on the Special 301 Priority Watch List. She sees this designation as a way to continue the dialogue with Russia and give it access to U.S. resources, such as technical assistance. She also stated that the IACC recognizes the reforms undertaken by the Russian Federation Government and, in particular, the efforts of Dr. Korchagin.

Dr. Korchagin said that the Russian delegation, of course, knows CIPR very well, as we cooperate closely in both Washington and Moscow. He considers this cooperation very fruitful. He stated that he hoped to continue ongoing cooperation and looked to CIPR to provide an objective assessment of the activities undertaken to improve IP protection and the progress made. He said that the RF Government was going to "do everything possible" for IP protection in Russia.

Gary Zizka, Director of Public Policy, for UDV in Washington introduced the SMIRNOFF issue. Zizka stated that UDV is a long-term producer and player in Russia and talked about the companies relationship with the Livitz Distillery.

He stated that ongoing trademark problems have hurt UDV's business in Russia and that the Krasnodar Court's actions threaten the legal right of UDV to operate in Russia. Zizka stated that enforcement is the key and that UDV is only seeking fair and unbiased consideration in the courts.

Korchagin stated that it appears to him that during his visit to Washington the SMIRNOFF issue is "getting an unfairly large portion of attention." [In other words, the USG raised the SMIRNOFF issue several times during negotiations.]

Korchagin then stated his views of the conflict, which he has said in the past: the SMIRNOFF and Smirnov marks are not confusing to Russian consumer; this case will eventually be settled out of court; and, that Russia recognizes as historic fact that UDV has been producing SMIRNOFF for more than 60 years. He believed the SMIRNOFF issue will be resolved and that the two vodkas can co-exist in Russia without any problems.

Courts

Following the discussion of SMIRNOFF, the topic turned to the courts. Korchagin stated that U.S. companies should go to the courts as Russia now has a very organized system of arbitration courts that act in a fair and just manner. He complained that very few companies have asked the courts to intervene -- he said that he is excluding the SMIRNOFF case as "the Executive Branch wants the courts to decide this issue and hopefully it will be positive."

Korchagin said that he did not believe it was fair for US companies to portray the courts as ineffective and he asked Judge Ianina G. Larina to brief CIPR on the activities of the Moscow Arbitration Court. Judge Larina stated that in 2000, only two of 134 cases reviewed by the Moscow Arbitration Court involved American companies. She then gave an overview of the Moscow Arbitration Court. She did note that the Moscow Court has a special panel of eight judges experienced in IP.

International Intellectual Property Alliance (IIPA) and the Generalized System of Preferences (GSP) Review Process

Korchagin and Alexander A. Pakhomov, Counsellor, Ministry of Economic Development and Trade, spent about 30 minutes bitterly complaining about the IIPA and its 301 submission. Korchagin stated that the entire landscape of IPR protection had changed over the past six years, but the IIPA submission reads as if nothing has been accomplished on IP issues in Russia. He said that this is very demoralizing for those who have worked hard for years in Rospatent to improve the IP climate in Russia. He called the IIPA criticisms unfounded and wrong.

The delegation was very concerned with the GSP Process and the threat of trade sanctions. A country can be taken off of the GSP list if a petition is filed against the country (to USTR) stating that the country is denying proper IP protection or has inadequate labor standards. IIPA filed a petition against Russia stating it wasn't providing adequate protection of intellectual property within its borders.

Korchagin said that were sanctions to be imposed, it would deal a severe blow to IPR reform in Russia.

[NOTE: Kuhlmann explained that there is no immediate threat of sanctions being imposed on Russia. IIPA has petitioned the USG for a review of Russia's IP regime and possible sanctions. The USG is conducting a hearing next month on the IIPA's complaint but no decision will be made at that time, as the review is an ongoing process.]

Conclusion

Korchagin made it clear that he values cooperation with CIPR and hopes that CIPR will continue to both identify areas in IP protection that need improvement and help him set the record straight on the progress that is being made on IP issues in Russia. He faults the media in both countries for distorting the issue and asked CIPR to help in a public awareness campaign.

The meeting accomplished several objectives: 1) Allowed CIPR members to directly address Russian IP leaders on trademark issues; 2) further strengthened relations with USTR and the Department of Commerce. Both agencies have requested closer communication and cooperation with CIPR on trademark issues. 3) Continued CIPR's already close working relationship with Dr. Korchagin and other Russian leaders involved in IP issues.

CIPR would like to thank the Members who participated in the meeting, especially Frank Hellwig and Janet Hoffman, who traveled to DC despite a snowstorm.

Please contact Paul Nathanson or Christina Bucher at 202-466-6210 if you have any questions or need additional information.