FOR IMMEDIATE RELEASE
June 12, 2000

BUSINESS & GOVERNMENT LOSING HUNDREDS OF MILLIONS ANNUALLYVIOLATIONS OF INTELLECTUAL PROPERTY RIGHTS JEOPARDIZE UKRAINE’S ECONOMY, ADMISSION TO GLOBAL TRADING BODIES

Kyiv – Intellectual property rights (IPR) violations of well-known trademarks and counterfeiting of popular consumer products is emerging as a key issue for businesses in Ukraine, according to an opinion poll released today by the Coalition for Intellectual Property Rights (CIPR).  The unprecedented survey of 102 Ukrainian and international executives conducting business here found that government and private industry are losing hundreds of millions of dollars annually from IPR violations.

The CIPR survey comes on the heels of several recent government initiatives to improve the country’s intellectual property rights regime.  On 31 May, Prime Minister Victor Yushchenko convened senior government and industry leaders and called for a partnership to jointly tackle counterfeiting and other IPR violations, as well as contraband.  Earlier in May, the Verkhovna Rada passed and President Leonid Kuchma signed a landmark law strengthening enforcement efforts against the illegal production and sale of counterfeit and contraband alcohol and tobacco products.  The law, actively supported by CIPR, is due to take effect in early July.

International and domestic company executives surveyed by CIPR said that public and private efforts to address the growing epidemic of intellectual property violations in Ukraine have so far been ineffective.  The executives said the Government of Ukraine was not equipped with the political will nor the technical and financial resources necessary to enforce international standards of intellectual property protection.

Survey participants overwhelmingly said “reforming Ukraine’s intellectual property laws and regulations, cleaning up corruption in enforcement authorities, securing support for IPR protection from top officials and politicians, and overall legal reform” are the key “actions” needed to improve the situation.

Survey participants included 102 domestic and international companies manufacturing, importing and selling products and services in Ukraine.  These firms own famous trademarks and sell many of the most popular healthcare, beauty, food, beverage, tobacco, household, and automotive products purchased by consumers throughout Ukraine, and often the world.

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“Widespread intellectual property rights violations most of all hurt consumers who rely on certain quality and health standards associated with famous trademarks and brand names,” CIPR President Peter Necarsulmer said.  “Trademark piracy and counterfeits defraud consumers and can cause substantial health risks,” he added.

“Growing IPR violations are a barrier to expanded foreign and domestic investment in Ukraine and this hurts the country’s important efforts to join the World Trade Organization (WTO) and the European Union (EU),” Necarsulmer said.  The Government of Ukraine has made WTO accession and moving closer to the EU major public policy priorities.  Both the European Commission and the U.S. Government have cited Ukraine in the past year for its IPR problems.

The CIPR survey released today confirmed that annual losses to the government and private industry must be measured in hundreds of millions of dollars.  “When trademark piracy, counterfeits and other industrial property violations are combined with extensive copyright abuses previously documented by reliable sources, as well as uncollected customs, excise duties and value-added taxes, the combined loss to government and industry easily approaches US $1 billion a year in Ukraine,” Necarsulmer said.

Of the fifty-one percent of companies surveyed and who disclosed financial information on their losses from IPR violations, 25% said their annual losses approached the $1 million mark; 12% said their annual losses ranged from US $1 to $5 million; and 4% said losses ranged from US $5 to $50 million annually.  Annual losses to a company are defined as lost sales plus the cost to enforce its intellectual property rights.

Counterfeiting has emerged as a significant and growing issue for both domestic and international companies in Ukraine. Only 20% of the companies surveyed said they had no counterfeit problems.

When asked what percent of their products sold in Ukraine are counterfeited, 50% of the respondents said less than 10%; 13% said more than 10% are fakes; and 18% said more than 25% of their products available on the market are counterfeits.  The incidence of counterfeiting is a greater problem for international companies than Ukrainian firms – 40% of international companies said 10% or more of their products are counterfeited compared to 20% of Ukrainian companies.  Nine out of ten international companies report at least some percent of their products are being counterfeited while two out of three Ukrainian companies report the same.

The survey sponsors said they believe the incidence of counterfeiting may be even greater than was reported in the survey by Ukrainian and international executives.  “Experience shows that few companies are willing to fully disclose the extent of their counterfeiting problems to avoid damaging their reputations and that of their trademarks and brand names,” added Necarsulmer.

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“The protection and enforcement of intellectual property rights is a global problem affecting virtually every transitional economy and western country,” said Necarsulmer.  However, the survey shows that international and local companies do not believe the Government of Ukraine is giving a high degree of priority to trademark, patent and copyright protection.  In fact, 71% of the respondents rated IPR protection as a “least important priority” for the government.

Similarly, businesses gave government agencies low marks in defending intellectual property rights.  Only the State Patent Office of Ukraine received a 3.0 mid-point rating from both international and local companies.  Ukrainian companies gave higher marks to the State Patent Office, the court system and the Anti-Monopoly Committee than did international companies.

“Remarkably, however, both international and domestic businesses have failed to take many basic actions to protect their intellectual property rights in Ukraine,” Necarsulmer said.  For example, less than half of the companies surveyed have registered trademarks with the State Patent Office and less than a third have registered their products with the State Customs Committee in the past year.  “While it is fair to point fingers at the government,” said Necarsulmer, “private sector companies need to be equally aggressive in tending to their own rights and obligations by taking full advantage of existing IP rights provided under Ukrainian law.”

The survey was conducted by the Coalition for Intellectual Property Rights (CIPR) in cooperation with the Ukrainian Chamber of Commerce and Industry and the European Business Association in Ukraine between January and March 2000.  One hundred-two respondents completed the self-administered survey, of them 52 international companies and 50 Ukrainian companies.

The survey was the subject of a forum today in Kyiv hosted by CIPR, which was designed to spur public and private cooperation to improve Ukraine’s intellectual property rights regime. Participants in today’s dialogue included Deputy Prime Minister Mykola Zhulynsky; Chairman of the State Committee on Intellectual Property Mykola Paladiy; and, Deputy Chairman of the Anti-Monopoly Committee Oleksandr Melnichenko; as well as officials from the Verkhovna Rada of Ukraine.  In addition to members of the Ukrainian Chamber of Commerce and Industry, the European Business Association, the Food Product Association “Pride of Ukraine,” various corporate leaders participated in the meeting which focused on the role of public-private actions in fighting intellectual property abuses in Ukraine.

The Coalition for Intellectual Property Rights (CIPR) is a private-public partnership dedicated solely to advancing intellectual property rights protection and reform in the Baltics States, Russia, Ukraine and other 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.

For more information contact Myron Wasylyk or Serhiy Movchan (044) 464-1240.