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Advocates of property rights applauded the Duma's approval of amendments to a trademark law last week, as Russia steps up its battle against counterfeiting practices that cost the country $1.5 billion annually.

The second reading of amendments to the law on trademarks, service marks and appellations of origin of goods was approved by the State Duma. The Coalition for Intellectual Property Rights (CIPR) hailed the move as a "true victory for consumers, Russian and international trademark owners, the economy and the state."

The draft law states the holder of a trademark has the sole right to use that trademark and to prohibit other parties from doing so.

The amendment also includes clearer definitions on counterfeit goods, provides for the physical destruction of such goods and details the system of compensation for victims.

"This is a critical milestone in a nearly three-year effort by Rospatent, the CIPR and their allies in the State Duma, the Interior Ministry, State Customs and the business, consumer, and legal communities to create an effective system of intellectual property protection and enforcement," said Peter Necarsulmer, president of the CIPR.

Alexander Korchagin, general director of Rospatent, the government body principally responsible for the draft law, said the passing the law required a joint effort.

"Achieving real intellectual property protection and enforcement in Russia requires that a coalition of government, brand owners, copyright owners, and consumers organize to fight for the mutual best interest of all parties," he said.

Grigory Tomchin, chairman of the Duma's Economic Policy and Entrepreneurship Committee, called the new amendments a victory.

Grigory Tomchin, chairman of the Duma's Economic Policy and Entrepreneurship Committee, told The Russia Journal that the approval was a victory for consumers, Russian and international business.

"The approval in the second reading of the amendments to the law on trademarks is a significant step on the road to a complete system for the protection of intellectual property rights in accordance with international standards," he said.

The violation of intellectual property rights consists of counterfeiting (trademark infringements) and piracy (copyright infringements), which together constitute a massive problem for the Russian economy.

"Because of counterfeiters, annual losses of the legal producers and the Russian government well exceed $1.5 billion," Alexander Shelemekh, vice president of the CIPR, said. "I can only add that this is quite a conservative estimate."

The industries worst hit by counterfeiting and piracy are fast-moving consumer goods, tobacco, alcohol, medicines, computer software, compact discs and videos. According to Shelemekh, copyright piracy and trademark infringements are equally destructive, and one must not take precedence over the other.

The Association of International Pharmaceutical Manufacturers (AIPM) reports that up to 12 percent of drugs on the Russian market are counterfeit. The situation in the recording industry is even bleaker: The International Federation for the Phonographic Industry estimates that as much as 65 percent of records sold in Russia are pirated.

Kathryn Szymczyk, of the Moscow-based law firm Gowling, estimated that 60-80 percent of music CDs, videos, and software compact discs sold in Moscow are pirated copies. "That percentage rises to 90 percent outside Moscow," she added.

Other experts agree the widespread piracy has destructive effects on the market. Piracy forces legitimate producers in the video business to keep the lowest possible pricing in order to compete with counterfeits, which has a limiting effect on development budgets, said Olga Nechaeva, a marketing executive with Columbia Tristar Home Entertainment in Russia.

She told The Russia Journal that one of the most serious problems for the industry is DVD piracy that has rapidly developed in the last six months.

"The current level of uncontrolled piracy has thrown the country back to the mid-1990s in terms of legitimate market share, and is seriously damaging the civilized market we are trying to build."

The steps the government has been taking to fight piracy are encouraging, but it is a complicated issue that requires more than just legislative reform, Nechaeva said.

"It needs the highest attention on all levels - legislative, economic and law enforcement."

One often-overlooked victim of counterfeiting is the sports-clothing sector. Dmitry Binevski of Adidas Russia blames insufficient legislation, as well as the social and economic climate and high levels of corruption, for the counterfeiting of Adidas products.

"Fakes are welcomed by the market due to a low level of income and the overall social climate in the country. Intense levels of corruption make it easy to import fakes with very low taxes or without customs tax at all," he said.

According to Binevski, Adidas has launched a special program to fight against dealers of fake products with the cooperation of law-enforcement agencies and legal representatives.

In addition to simply reprimanding dealers who sell fakes in their stores, they also try to train them to recognize a fake.

Although the new copyright law has helped to lift the fog when it comes to some issues, certain problems remain.

Despite attempts to provide clearer definitions in the criminal code, "the amendments do not succeed in completely clarifying the situation," said Szymczyk, whose law firm specializes in copyright infringements.

The criminal code particularly lacks clarity, she says. For example, in order to declare a copyright infringement, proof of "substantial damage" is required - a term that has not been clearly defined anywhere.

"It is difficult to prove 'substantial damage' when no one knows what it is," she added.

Shelemekh of the CIPR said there is also room for improvement in the law on trademarks. "We still think some language could be fine-tuned," he said.

The hope is that the law will finally be adopted in May of next year, said Shelemekh, and then attention can turn to law enforcement.