New Baltic-Wide Survey Findings:

"Effective Enforcement of Anti-Counterfeiting and Trademark Laws Requires Strong Political and Business Leadership"

Trademark Piracy and Counterfeiting
Major Issues Confronting Businesses in the Baltics

Riga, Latvia - Trademark infringements, counterfeiting and patent violations are major obstacles to doing business in the Baltic States, according to leading Latvian, Estonian, Lithuanian and international companies that took part in a survey released today by the Coalition for Intellectual Property Rights (CIPR).

The survey findings and a five-point action plan for improving IPR regimes were announced as part of a roundtable discussion in Riga hosted by CIPR involving key government, judicial and law enforcement authorities from the Baltic states; top intellectual property lawyers; and, executives of some of the region's biggest regional and international companies.

Inadequate protection of intellectual property (IP) rights now ranks just behind taxes, customs and government bureaucracy as the most critical problems facing businesses in the Baltic States, according to the survey. When asked who was to blame for IP problems in the Baltic States, business executives pointed to themselves, the business community in general and to political leaders and government officials.

Business executives cited issues relating to trademark violations and counterfeiting as the top concerns. Counterfeiting and trademark protection, infringement, piracy and enforcement were named the most abused practices by 102 respondents, including 49 companies from Latvia, 29 from Lithuania and 24 from Estonia.

Baltic IPR Violations = $100 Million Annual Problem

"Based on this first-of-its-kind survey and other proprietary data available to the Coalition, a conservative estimate of annual costs of IP violations to business and government exceeds $100 million in the three Baltic countries combined," said Peter B. Necarsulmer, CIPR President.
"Uncollected taxes and customs duties, and diverted police resources, are major direct costs to Baltic governments. Lost sales, diminished consumer confidence in well-known brands and major price tags for legal and investigative activities hit the private sector hardest," said Necarsulmer. "Perhaps even more significant is the damage to the international reputations of Latvia, Lithuania and Estonia, which directly results in lost foreign investment and decreased economic activity."

"The greatest costs of all are to consumers who unknowingly buy adulterated or ineffective products, including medicines, foods and everyday household goods, which can cause serious illness or even death," Necarsulmer added.

Necarsulmer pointed out that because of the three countries' location on the Baltic Sea, the economic reach of counterfeiting and piracy here goes far beyond their borders. One out of five business executives believe that counterfeit products are mostly produced in the region.

"Counterfeited and pirated goods entering and transiting through the Baltic marketplace is a major problem that requires the concerted effort of government and business working together," said Necarsulmer.

Baltic States' Biggest Companies Speak Out

The CIPR survey summarizes views of trademark owners of some of the most well-known consumer and industrial goods in the food, beverage, pharmaceutical, household appliance, tobacco, heavy machinery, automotive and information sectors. The domestic and international firms who took part in the study comprise a veritable "Who's Who" of famous companies investing and trading in Latvia, Lithuania and Estonia.

Participants in the survey included Estonia's Hansapank, confectioner Kalev and cellular giant Eesti Mobilitelefon; Lithuania's heavy industry and mining conglomerate Nemunas, pharmaceuticals maker Sanitas and soft drinks major Alita; and, Latvia's Aldaris brewer, electronics manufacturer VEF and Latvijas Balzams. Several dozens of giant international corporations who expressed their opinions on intellectual property issues in the Baltics included Kraft Foods, Coca-Cola, Merck Sharpe & Dome, GlaxoSmithKline Beecham, Philip Morris Companies, United Distillers & Vintners (UDV) and Proctor & Gamble, to name just a few.

Enforcement is Key to Trademark Protection and Anti-Counterfeiting

"Good laws are clearly not enough. The Baltic States marshaled the essential political will and public-private sector cooperation to build effective legislative and regulatory regimes that meet international IPR standards and World Trade Organization (WTO) requirements," said Romans Baumanis, Managing Director of The PBN Company Baltics in Latvia and CIPR Baltic States Representative.

"But laws alone do not make effective IPR regimes. Today, government leaders, the courts and the business community must muster the same level of political commitment and cooperation needed to enforce the good laws already on the books," Baumanis said. "Only then we will begin to stem the tide of trademark and patent infringements, counterfeiting and piracy in the Baltic markets."

The CIPR survey found that business executives do not believe that governments place a high enough priority on trademark, patent and copyright protection. Respondents rated their countries at the mid-point on a one-to-five scale, where one represented a least important priority and five represented a most important priority for the governments of Latvia, Estonia and Lithuania. Only the Patent and Trademark Offices of the three countries were given significantly above average ratings for their work in targeting IPR violators.

The directors and staff of these offices "have been largely unsung heroes and heroines of progress in the intellectual property field in the region," said Baumanis. "Now the tools and increasing experience are in place to allow the courts, customs, internal affairs, and other enforcement authorities to become heroes and heroines too."

Businesses Must Share the Blame

Executives from the Baltic States were not only critical of their governments' abilities to protect and enforce intellectual property rights, but also of their own companies' capabilities and that of business and professional associations.

"One of CIPR's top priorities is to educate business owners that they are the first line of defense in the war against IPR violations," said Necarsulmer. "More companies need to take advantage of the legal measures available to them to protect their trademarks, patents and copyrights, which includes registering their intellectual property; registering products with customs authorities; conducting their own research on IP violations and counterfeiting; and working closely with other businesses and government enforcement agencies."

"It is not enough for businesses to criticize government," he added. The survey found that in the past 12 months nearly half of the companies had not registered trademarks with their countries' patent agencies. Only 11 percent took advantage of the opportunity to register their products with states' customs committees. Only 14 percent had conducted anti-counterfeiting in the field, with fewer than six percent conducting such raids with government authorities.

Five-Part CIPR Action Plan for IPR Protection

At today's roundtable discussion, CIPR announced a five-point action plan for fighting counterfeits, pirated goods and trademark infringements. Proven to work in the many countries in which the Coalition operates, the Baltic States Plan includes:

• Building a broad-based public-private partnership among government and business leaders in Latvia, Estonia and Lithuania to address, aggressively and transparently, IPR problems and solutions.

• Seeking commitments from the most senior political leaders of the Baltic States to make fighting counterfeiters and other IP violators a top priority among all responsible government agencies and structures.

• Working with IP owners and companies to ensure that they take responsibility and accept accountability for availing themselves of the many regulatory, legal and judicial protections already in place in each of the Baltic countries. Companies must actively conduct their own product protection programs, research levels of counterfeiting, conduct investigations and cooperate fully with enforcement authorities.

• Providing training and technical assistance for customs, judicial and other law enforcement officials to assist in improving the standards and practice of IP protection in the Baltic States. Ensuring that customs, judicial and other enforcement authorities have the necessary budgetary and human resources to properly do their jobs is also a CIPR priority.

• Educating the public about the high costs of illegitimate consumer goods in terms of their health and safety.

CIPR: A Public-Private Partnership

The Coalition for Intellectual Property Rights (CIPR) is a private-public partnership dedicated solely to advancing intellectual property rights protection and reform in the Baltic States and CIS countries. Through research, education, legislative initiatives, coalition building and legal, judicial and regulatory reforms, CIPR assists governments and businesses in the region to establish transparent and non-discriminatory IPR regimes and to adhere to international standards.

CIPR is an official Observer to the World Intellectual Property Organization. It is the only non-governmental entity accredited with the CIS Interstate Council for Industrial Property Protection. Its members include the world's most famous trademark owners and more than 25 international and regional business associations.

The survey was conducted by the Coalition for Intellectual Property Rights (CIPR) between November 2000 and March 2001. It was designed and managed by Magram Market Research and The PBN Company.