VZCZCXYZ0975
RR RUEHWEB

DE RUEHKV #0503/01 0671119
ZNR UUUUU ZZH
R 071119Z MAR 08
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 5165
INFO RUEAWJA/DEPT OF JUSTICE WASHDC
RUCPDOC/USDOC WASHDC
RUEHMO/AMEMBASSY MOSCOW 0318
RUEHBJ/AMEMBASSY BEIJING 0013
RUEHAK/AMEMBASSY ANKARA 0020
RUEHSF/AMEMBASSY SOFIA 0026

UNCLAS KYIV 000503 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/TPP/IPE - JBOGER/JURBAN 
STATE PLEASE PASS TO USTR FOR PBURKHEAD/JGROVES 
USDOC FOR 4231/ITA/OEENIS/NISD - CLUCYCK 
SOFIA FOR DOJ - MLAMBERTI 
 
E.O. 12958: DECL: N/A 
TAGS: ETRD KIPR ECON UP
SUBJECT: UKRAINE IPR: GOU TRYING TO IMPROVE HOLOGRAM 
STICKER PROGRAM 
 
REF: 2005 KIEV 4872 
 
SENSITIVE BUT UNCLASSIFIED; NOT FOR INTERNET PUBLICATION. 
 
¶1. (SBU) Summary: The European Commission hosted an IPR 
roundtable on March 5 with participation from the GOU and 
rights holders to discuss the hologram sticker program for 
optical discs.  Industry reps laid out their concerns 
regarding the technical design of the hologram sticker, the 
process of issuance, and enforcement.  The GOU described 
plans to improve the technical design within a few months, 
agreed to make more information publicly available to 
increase transparency in issuance, and promised to step up 
investigations of counterfeit stickers.  Post expects these 
practical steps to improve the hologram sticker program, 
and does not believe that elimination of the program is 
warranted.  End Summary. 
 
¶2. (U) Econoff participated in a March 5 roundtable on 
intellectual property rights (IPR) hosted by the European 
Commission.  The first part of the roundtable focused on 
the GOU's hologram sticker program, which is meant to 
combat optical disk piracy but has long been an area of 
contention with industry (reftel).  The second part focused 
on public performance piracy (to be reported septel).  The 
event was virtually identical to meetings of the U.S.- 
Ukraine Enforcement Cooperation Group, as it brought 
together representatives of the GOU and industry to review 
IPR enforcement issues. 
 
¶3. (U) The following is a list of key participants: 
 
GOU 
--- 
Valentin Chebotaryov - Deputy Chairman, State Department of 
                       Intellectual Property (SDIP) 
Serhiy Lebid         - Deputy Head of Economic Crimes 
                       Department, Ministry of Interior 
Oleksiy Gashchytskyy - Head of IPR Division, Customs 
                       Service 
Vadim Vnukov         - Security Service of Ukraine 
Georgiy Beilin       - Specialized Enterprise "Holographia" 
Oleg Andruschakevych - Deputy Director, State Enterprise 
                       "Intelzahyst" 
 
Industry 
-------- 
Alexander Kotlyarevsky - Deputy Regional Coordinator for 
                         CIS, IFPI 
Ignat Berezhny         - Director, Ukrainian Association of 
                         the Music Industry 
Oleg Dolinsky          - Managing Director, Comp Music (EMI 
                         Licensee) 
Andriy Dakhovskiy      - President, Ukrainian Records 
                         (Universal Licensee) 
Alexander Pakharenko   - Partner, Pakharenko and Partners 
                         Law Firm (local counsel for 
                         Electronic Arts) 
 
¶4. (U) Berezhny delivered a detailed presentation, 
coordinated with local music industry reps and IFPI, 
outlining industry's problems with the hologram program. 
Industry complaints fell under three general topics -- 
technical elements of the stickers, the issuance process, 
and enforcement. 
 
Technical Elements of the Hologram Sticker 
------------------------------------------ 
 
¶5. (U) On the technical side, Berezhny said that pirates 
were able to wash off the artist/album name from the first 
layer of legitimate stickers in order to reprint and attach 
them to pirated products.  He also argued that forged 
stickers were becoming more widespread, and Dolinsky 
presented a pirated CD of well-known Ukrainian singer 
Ruslana bearing a high-quality counterfeit hologram 
sticker.  Chebotaryov recognized that technical 
improvements to the sticker were necessary and said the GOU 
intended to introduce a new design within a matter of 
months.  The new design would stop the problem of washing 
 
off the first layer, said Chebotaryov.  Beilin said that 
"Holographia," which designs and manufactures the hologram 
stickers, was also planning to roll out an easy-to-use, 
handheld device to aid law enforcement in detecting if a 
sticker was counterfeit.  Lebid praised the planned 
improvements to the sticker design, but questioned whether 
the GOU would be able to procure enough of the detection 
devices and properly train law enforcement officials 
throughout the country on how to use the device. 
 
Issuance Process 
---------------- 
 
¶6. (U) Rights holders also complained of a lack of 
transparency in the issuance of stickers, a process managed 
primarily by the State Enterprise "Intelzahyst."  (Note: 
"Intelzahyst," which is subordinate to SDIP, reviews 
applications for hologram stickers and then distributes 
them to rights holders, who themselves apply the stickers 
to their products.  End Note.)  Berezhny argued that some 
pirates had managed to acquire hologram stickers by posing 
as small, little-known recording companies based abroad. 
 
¶7. (SBU) As a solution, Berezhny proposed that 
"Intelzahyst" make application information publicly 
available on its website, and give rights holders an 
opportunity to file complaints on suspect applications. 
Chebotaryov noted GOU concerns that recording companies 
could use such a policy to disrupt the operations of 
legitimate competitors, but said that posting information 
on the internet should be possible.  Andruschakevych, 
Deputy Director of "Intelzahyst," privately cautioned 
Econoff that posting such information on the internet could 
be problematic due to privacy laws.  Andruschakevych had 
previously made clear to a meeting of the European Business 
Association on February 11 that "Intelzahyst" would not be 
liable for its decisions on issuing stickers, as such 
liability should fall to the GOU directly. 
 
Enforcement 
----------- 
 
¶8. (U) There was a lengthy discussion of the need to 
improve enforcement measures.  Rights holders called for 
increased inspections of all optical disc sales, and 
specifically for increased attention to discs containing 
hologram stickers, claiming there appeared to be more 
counterfeit stickers appearing on the market.  Lebid 
reiterated the Ministry of Interior's long-standing 
position that the hologram sticker program remains an 
effective enforcement tool, as law enforcement benefits 
from some ex-officio authorities to seize optical discs 
bearing no sticker.  Indeed, said Lebid, the majority of 
pirated optical discs on the market were without stickers, 
rather than with counterfeit stickers. 
 
¶9. (U) Industry reps also called on law enforcement to 
investigate the sources of counterfeit stickers.  Lebid 
urged rights holders to formally address the Ministry of 
Interior with any examples of counterfeit stickers, and 
promised to properly investigate every such case.  Rights 
holders and GOU officials seemed to agree that counterfeit 
production was based abroad, mostly in Turkey and China, 
making investigations by the GOU more difficult. 
 
Comment: Practical Steps to Improvement 
--------------------------------------- 
 
¶10. (SBU) Although some disagreement remains, industry and 
government appear to broadly concur on the need to improve 
the hologram sticker program.  The GOU agreed to most of 
industry's suggestions regarding technical improvements to 
the sticker, the issuance process, and enforcement.  Post 
was somewhat concerned by industry's uncompromising 
position, as stated by Berezhny, however, that "unless ALL 
[of industry's] proposals are implemented, the hologram 
sticker system in Ukraine should be abolished."  As many 
pirated products in Ukraine continue to sell without any 
hologram sticker, the hologram sticker program remains a 
valuable tool in aiding the work of law enforcement.  Post 
 
will continue to urge the GOU to take practical steps to 
improve the system as we believe this is the best method of 
aiding IPR enforcement, as opposed to eliminating 
holograms. 
 
TAYLOR