FOR IMMEDIATE RELEASE
February 21, 2000

TRADMEMARK ABUSES, COUNTERFEITS AND OTHER INTELLECTUAL PROPERTY ABUSES COSTS RUSSIA HUNDREDS OF MILLIONS

Moscow — Intellectual property rights (IPR) violations of trademarks, patents and well-known consumerproducts are a major obstacle to doing business in Russia, costing government and private industry hundreds of millions ofdollars annually, according to an opinion research survey released today by the Coalition for Intellectual PropertyRights (CIPR).

The survey of a select group of 50 major international brand holders selling andinvesting in Russia includes some of the most famous consumer brand companiesin the world whose health, beverage, tobacco, energy, household, automotive andother products are well-known by average consumers throughout Russia.

“IPR violations not only hurt businesses in Russia, but cost the Russian government billions of rubles inuncollected revenues from counterfeit products evading taxes and duties,” said Peter Necarsulmer, CIPR President.  “IPR violations are barriers to new investment and impede Russia’sefforts to join the World Trade Organization.”

Huge Costs to Government, Private Sector & Consumers

Necarsulmeralso noted that “IPR violations result in higher consumer prices and placeindividual’s health and safety at substantial risk as unsuspecting customerspurchase counterfeit and second-rate pharmaceuticals, foods, beverages andother goods.”

Inadequateprotection of intellectual property rights ranks on par with customs and taxproblems as the most critical challenges facing businesses in Russia, accordingto the report.  Survey participants gavelow marks to their own companies, the business community in general and particularly theRussian government in assigning blame for Russia’s IPR problems, including trademark infringement, counterfeiting,copyright piracy and other abuses.

Amongthose companies willing to disclose financial information, one-half said their yearly losses amounted to atleast US $1-million, and about one-third said their yearly losses due to IPRviolations totals range between US $5-million and more than US$50-million.  “When IPR violations oftrademarks and other industrial property are combined with extensive copyrightabuses previously documented by other reliable sources, the total losses tobusinesses and government easily exceeds US $1-billion a year in Russia,” Necarsulmer said.

Whileinadequate protection and enforcement ofintellectual property rights is a global problem affecting virtually everycountry, the survey shows that international companies believe the Russiangovernment and its leading politicians severely underrate IPR as a publicpolicy priority.  Survey participants cited corruptionand a lack of political support asthe primary factors for the government’s inability to enforce intellectualproperty rights, followed by weak laws and criminal penalties, and inadequatetechnology and training.  The Russian Agency for Trademarks andPatents (Rospatent) and the Ministry of Internal Affairs were the only Russiangovernment agencies given above average ratings for their work in targeting IPR violators by surveyparticipants.

The survey findings indicate that the most effective and viable approach to advancing IPR protection and enforcement inRussia is a well-coordinated private-public partnership.  “Both Russian and international intellectualproperty owner must work with government officials and politicians to make the protection and enforcementof trademarks, patents and copyrights a top priority in Russia,” said ScottBlacklin, president of the American Chamber of Commerce which co-sponsored theopinion survey and which represents more than 400 companies doing business inRussia.

Counterfeiting

Counterfeiting also emerged as a significant issue amongsome survey participants.  When asked what percentage of theirproducts sold in Russia are counterfeit, 8% said none, and 64% said less than10%.  However, 28% of respondents said more than 10% are fake while a few companies said more than 25% of theirproducts are counterfeits.

The survey was conducted between 15November 1999 and 31 January 2000, by CIPR in cooperation with the American Chamberof Commerce in Russia (AmCham),European Business Club of the Russian Federation (EBC) and the German Business Association (GBA) and involved 135 members of these associations. The survey wasdesigned and managed by MAGRAM Market Research and The PBN Company.

Business and Industry Meet

The results from the top 50 major international trademarkowners who participated in the survey werereleased today at a meeting of senior government officials and representativesof the international and Russian business community convened by CIPR.  Participants in today’s meeting includedofficials from Rospatent, RF State Customs Committee, RF Ministry of InternalAffairs, RF Anti-Monopoly Ministry and the State Duma.  In addition to AmCham, EBC and GBA, seniorexecutives from the Association of International Pharmaceutical Manufacturers,Russian Chamber of Commerce and Industry and a number of major internationalcorporations participated in the meetingwhich focused on the role of public-private cooperation in fightingintellectual property abuses in Russia.p

Based on the survey findings as well as its other work onintellectual property reform throughout the former Soviet Union, CIPR isseeking support for and is pursuing a strategic action plan based on thefollowing principles and programs:

• A true public-private partnership is the only effective wayto address the myriad of IPR issues and concerns in Russia.

• Intellectual property protection and enforcement must bemade a major priority among Russia’s top political leadership, and must becomea major element of the government’s overall anti-corruption program.

• Adequate funding and other resources from the Russiangovernment must be made available for enforcement agencies andauthorities.  These resources must beaugmented by international community support for training of judicial, customsand other officials;  information andtechnology transfer; computerization; and, other technical assistance.

• Responsibility begins with the private sector.  Companies must be much more comprehensiveand effective in protecting and exercising their own intellectual propertyrights, including registering trademarks; registering products with statecustoms authorities; more effectively using existing laws and procedures;conducting their own research on trademark violations and counterfeiting; and,working closely with other businesses and government agencies on enforcementactivities, including police raids.

• Laws and regulations must be improved, particularly byincreasing civil and criminal penalties for IPR violators in Russia.

• Effective consumer public education must be undertaken toexplain that IPR violations raise the costs of legitimate consumer goods andthat counterfeit products often present dangerous risks to health and safety.

“IPRabuses require a top-down approach involving Russia’s political elites combinedwith bottom-up support from Russian consumers and the international anddomestic business communities,” explained CIPR’s president PeterNecarsulmer.  “Only then can we makeprogress on this extremely costly problem that is stifling new investment,robbing government coffers and threatening consumer health and safety.”

The Coalition for Intellectual Property Rights (CIPR) is a private-publicpartnership dedicated solely to advancing intellectual property rightsprotection and reform in the Baltic states, Russia, Ukraine and other CIScountries.  Through research, education,legislative initiatives, coalition buildingand legal, judicial and regulatory reforms, CIPR assists governments andbusinesses in the region to establish transparent and non-discriminatory IPRregimes and to adhere tointernational IPR standards.

For more information contact Tom Thomson or Alexander Shelemekh (7-095) 745-8700.