Official Report by the Main Directorate for the Fight Against Economic Crimes of the RF Ministry of Internal Affairs on the Ministry’s Anti-counterfeiting Activities Sent to CIPR to Address the Consumer Counterfeiting Survey

Dear Alexander Alexeevich:

The RF Ministry of Internal Affairs has considered your survey results about "Consumer Attitudes toward Counterfeits and Branded Goods."

The situation with the intellectual property protection in the RF was discussed at a government meeting in October 2002. As a result, a government commission on law enforcement in the sphere of intellectual property rights protection was established, headed by RF Prime Minister Mikhail Kasyanov.

The RF Ministry of Internal Affairs, Ministry of Economic Development, Federal Security Service, Federal Tax Police Service, State Customs Committee, Ministry of Agriculture, Ministry of the Press and the Antitrust Ministry were given a task: to take measures to suppress the production and distribution of counterfeit goods. The results of these efforts shall be reported on a quarterly basis.

From April to December 2002, in accordance with the instructions given by the RF Minister of Internal Affairs aimed at increasing the efficiency of fighting intellectual property rights violations, a variety of special actions were launched.

More than 30,000 enterprises were checked; the activities of 350 of them were suspended. Cases filed against the organizers of crimes numbered 2,800. In compliance with the RF Code on Administrative Law Violations 7,200 criminals were prosecuted. In the course of these checks, counterfeit goods worth 276.7 million rubles and 50.6 million rubles of equipment and money were confiscated.

During the first quarter of 2003, more than 43,000 enterprises were checked; the illegal activities of 104 of them were suspended. Additionally, 1,100 criminal cases were filed, 1,116 people were prosecuted, and administrative proceedings were initiated against 2086 people. The confiscated goods were valued at 265.8 million rubles; the seized equipment and money amounted to 11.5 million rubles.

The following enterprises were proven guilty of counterfeiting CDs: OOO Bars Media in Tatarstan, and in the Moscow region, OOO Sinograph, OOO Tin Invest and OOO UVK Stimul.

In the Moscow region, the Ministry of Internal Affairs, together with the Ministry of the Press, cut off the illegal activities of the firm Triada Multimedia, which had produced and sold large consignments of counterfeit CDs. An enterprise that operated without a license from the Ministry of the Press and that sold counterfeit goods through a system of warehouses in Moscow was identified in Lobnya in the Moscow region. Packaging equipment worth $1 million, 600,000 CDs and 650,000 polygraph units were confiscated.

In addition, a large criminal group that distributed pirated CDs through the Moscow underground wholesale companies OOO Makso, OOO Russky Kompact Disk, and OOO Ex Fors was caught.

The police found 250 matrices for producing CDs, 11,000 DVDs, 760,000 pirated audio CDs and 620,000 covers.

The illegal activities of an underground studio specializing in the production and distribution of counterfeit audiotapes in Penza region were stopped. The officials took more than 1,500 audiotapes and 500 videotapes, as well as 130 pieces of recording equipment.

OOO Long Stels, a company that assembled and sold counterfeit chandeliers and lamps under the brand names Swarovski (Austria) and Oro Illuminacion (Spain) was raided in the Moscow region.

An investigation in 1998 identified a special Turkish-Russian smuggling channel for components of fake crystal lamps and chandeliers.

Underground workshops owned by OOO Long Stels in Moscow assembled the lamps and the Swarovski and Oro Illuminacion (Gold Illumination) trademarks were illegally stamped on these goods. The finished commodities were shipped to the company's official warehouses to be sold through elite Moscow stores. The price for producing these was comparable to producing legal goods and was between $500-20,000.

According to preliminary tests conducted by the rights holders, together with experts from the RF Ministry of Internal Affairs, the counterfeit luminaries drastically differ from the original Swarovski products in terms of performance.

More than 1,394 counterfeit goods worth $2.5 million were identified and confiscated. Legal actions were brought against the organizers of this crime.

Crimes of this kind are committed most frequently in Tatarstan, Moscow, the Moscow region, St. Petersburg, the Leningrad region, Volgograd, Samara, Omsk, Novosibirsk, the Rostov region, the Krasnodar region and the Stavropolski region (more than 35 percent of total number of disclosed crimes). The factors conducive to these crimes being committed are high population densities, international ports, wholesale markets, traffic centers and a close proximity to national borders.

The Ministry of Internal Affairs is working on Russian legislation and making organizational arrangements in close cooperation with other ministries and government entities (such as the Ministry of Economic Development, the State Customs Committee, Rospatent, the Ministry of the Press, the Antitrust Ministry, etc.).

The Ministry of Internal Affairs actively participated in drafting the Federal Law "On amendments and additions to in the article 146 of the Russian Criminal Code (copyrights and allied rights violations)" in April 2003.

This law makes corpus delicti in this area more precise. The terms "large amount" and "very large amount" were adopted instead of "large damages" and fixed at 500 minimum wages and 1000 minimum wages respectively. In addition, a new penalty of expropriation was introduced.

In order to improve Russian legislation in the circulation of medications and to put into effect the decision made by Interagency Committee of RF Security Council on the Protection of Health #3 "On measures to prevent the production and sale of counterfeit medicines" from October 24, 2001, the RF Ministry of Internal Affairs is working together with ministries and government entities involved in drafting the Federal Law "On amendments and additions" into the Federal Law "On medications," the Russian Criminal Code, the Russian Procedural Criminal Code and the RF Code on Administrative Law Violations, aimed at making the punishment for distribution of counterfeit medications more severe. In addition, the RF Ministry of Internal Affairs prepared a draft of the amendment "On counterfeit medicines" to the Federal Law "On medications."

The RF Ministry of Internal Affairs and the RF Ministry of Economic Development had a joint board meeting "On the measures by the RF Ministry of Internal Affairs and the RF Ministry of Economic Development aimed at protecting intellectual property rights and preventing the production and distribution of counterfeit goods." The main objectives of this meeting were to establish better control over the quality of goods and to develop a system of measures to protect the market against counterfeit production. As a result of the meeting, measures aimed at counteracting the distribution of counterfeit products were developed.

For the purpose of regulating the activity of audio and video recording enterprises and establishing better control over sales, the RF Ministry of Internal Affairs. together with the Antitrust Ministry, introduced additions to the Federal Law "On some licensing aspects." Based on these additions the Russian government signed decree #381 "On licensing the activity of copying audio and visual works and phonograms to any types of transmitters" on June 4, 2002.

Moreover, in order to systematize trade and the control over sales, the two ministries working together drafted the RF government decree "On changes and additions to the sales regulations on some goods, the list of nonfoods of proper quality that are not subject to the return, exchange to a similar good of a different shape, size, external dimensions, style or assembly, as well into the regulations of licensing the activity of copying audio and visual works and phonogram to any types of transmitters."

The RF Ministry of Internal Affairs and the Antitrust Ministry are drafting an agreement on the cooperation and exchange of information in the sphere of counteracting the circulation of counterfeit products.

A joint commission of the CIS states, the members of the cooperative agreement "On suppressing the violation of intellectual property rights," continues to work.

The RF Ministry of Internal Affairs sent its proposals concerning better cooperation between law enforcement agencies of the CIS countries, the development of the conception of interstate exchange of information, establishing a universal database to counteract and avert the violations of intellectual property rights of the members-states of the agreement.

The RF Ministry of Internal Affairs held a joint session with the Belarussian Ministry of Internal Affairs. The main topic of the agenda was "The cooperation between the Russian and Belarussian Ministers of Internal Affairs of to detect crimes in the high-tech and copyright spheres." As a result, the ministries worked out a plan of joint actions aimed at detecting and suppressing the illegal activities of counterfeiters, both individuals and legal entities.

Despite some positive tendencies, many problems affecting the efficiency of the RF Ministry of Internal Affairs remain. Most of the regions of the Russian Federation lack the representatives of copyright holders and expert centers entitled to inspect the products detained in the course of checks. Besides, since copyright holders are often unwilling to make trips to remote regions to render competent assistance, the officials have to look for ways to send samples to Moscow, which delays the process and foils timely actions.

Considering these actions as well as our mutual interest in copyright protection, we are looking forward to further cooperation and active support from copyright holders.

Respectfully,

A.M. Orlov
Deputy Director of Criminal Police Service,
Head of the Main Directorate For the Fight Against Economic Crimes