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RR RUEHAG RUEHDF RUEHIK RUEHLN RUEHLZ RUEHROV RUEHVK RUEHYG
DE RUEHMO #1723/01 1690920
ZNR UUUUU ZZH
R 170920Z JUN 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 8632
INFO RUEHLN/AMCONSUL ST PETERSBURG 4986
RUEHVK/AMCONSUL VLADIVOSTOK 2871
RUEHYG/AMCONSUL YEKATERINBURG 3215
RUCNCIS/CIS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 02 MOSCOW 001723 
 
STATE FOR EB/TPP/IPE, EUR/RUS 
STATE PLS PASS USTR SMCCOY, PBURKEHEAD 
USDOC FOR 4231/MAC/RISD 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958 DECL: N/A 
TAGS: ECON KIPR WTO RS
SUBJECT:  Third Annual Embassy IPR Roundtable Highlights Progress in 
Russian Software Industry 
 
MOSCOW 00001723  001.2 OF 002 
 
 
This message is sensitive but unclassified and is not intended for 
Internet distribution. 
 
¶1.  (SBU)  Summary: The Charge on May 23 hosted a roundtable for 
over 90 participants to discuss IPR protection and innovation in the 
Russian software industry.  Participants indicated that the software 
piracy situation in Russia has dramatically improved thanks to a 
combination of government and industry initiatives.  However, there 
was also a consensus that there was room for further improvement, 
including especially in fighting Internet piracy, reducing official 
corruption, and better coordinating law enforcement efforts.  End 
Summary 
 
Participants 
------------ 
 
¶2.  (U)  This is the third year that the Chief of Mission has hosted 
an IPR roundtable.  The previous years' discussions focused on 
Russia's movie and music industries respectively.  The International 
Chamber of Commerce and the Ministry of Economic Development again 
co-hosted the event.  Roundtable participants included prominent 
Russian software company executives, representatives of American 
software companies such as Microsoft and Adobe, as well as officials 
from the Ministry of Culture, Duma, MVD, General Procuracy, 
Rossvyaznadzor (formerly Rossvyazokhrankultura), Moscow city police, 
and Moscow city government.  Russian media outlet RBC provided 
exclusive coverage of the event, with stories distributed through 
its wire service, online, and on TV. 
 
Russia Making Progress on Piracy 
-------------------------------- 
 
¶3.  (SBU) Industry representatives noted that the software piracy 
rate in Russia has gone down significantly in the last four years. 
The Business Software Alliance (BSA) representative said that their 
latest statistics, released just a week before the roundtable, 
showed that it dropped 7 points in 2007 from 80% to 73%.  This 
reduction is especially significant compared to the annual 3% 
reduction of the past few years.  Microsoft Vice President Vahe 
Torossian put the numbers in perspective - every percentage 
reduction in piracy rate represents $150 million in legitimate sales 
and wages paid to employees.  Calculating from the 90% piracy rate 
of 2004, the progress made in combating software piracy in Russia 
has meant a total of $2.55 billion in recovered revenue and salary 
for the industry in the last four years. 
 
¶4. (SBU) Industry representatives and Russian government officials 
were unanimous in noting that the software IPR situation is much 
better than that of the music and film industries.  The roundtable 
participants attribute the improved IPR situation for software to a 
combination of government and private sector initiatives.  Boris 
Nuraliyev, the founder of the software company 1C and nicknamed "the 
Bill Gates of Russia," noted that increasing cooperation between 
rights holders and law enforcement agencies has resulted in 
stepped-up action against pirates.  Nuraliyev also credited better 
organization within the industry, particularly through the Nonprofit 
Partnership of Software Suppliers (NP PPP), which unites 300 Russian 
and foreign companies, and more public outreach to educate consumers 
for the improved IPR protection. 
 
¶5.  (SBU)  Yevgeniy Bakhin, Marketing Director of Russian software 
company Askon, while acknowledging Russian law enforcement efforts 
in combating piracy, noted that the IPR focus in Russia is 
overwhelmingly on punishment and argued that more positive 
incentives are needed to reward the use of legitimate products.  He 
highlighted his company's marketing campaigns that demonstrate to 
consumers the economic benefits of using legitimate software - 
quality assurance, access to company's support services, and clear 
pricing.  According to Bakhin, a particularly useful step his 
company has taken is providing schools with free software, so that 
young students get used to legal versions of the company's products 
and therefore have more inclination to continue to use legitimate 
software and the company's services as they grow into consumers. 
 
 
¶6.  (SBU)  The Russian participants expressed disappointment that 
the IPR reputation of the country has not improved along with the 
progress that they are seeing on the ground.  Nuraliyev and General 
Director of software company ABBYY Grigoriy Lipich noted that their 
companies have more piracy problems in other CIS countries than in 
Russia, but IPR issues appear to continue to impede Russian WTO 
 
MOSCOW 00001723  002.2 OF 002 
 
 
membership while other CIS members (e.g. Ukraine) have been allowed 
to join.  MED Advisor to the Minister Yuriy Lyubimov said that the 
GOR was surprised that Russia remained on the Priority Watch List 
during the 2008 Special 301 review despite the progress made, but 
pledged to continue to make improvements in Russia's IPR record. 
 
Remaining Challenges 
-------------------- 
 
¶7.  (SBU)  Roundtable participants identified Internet piracy, 
official corruption, and better law enforcement coordination as 
challenges that require further attention.  While limited broadband 
access in Russia has not made online software piracy a significant 
issue, most saw it as the inevitable next battleground for IPR 
protection, as in the music and movie industries.  Already, many 
websites registered both in Russia and abroad are doing brisk 
business selling pirated Russian software (but mostly offering 
delivery by mail rather than direct download). 
 
¶8.  (SBU)  Industry representatives appealed for better inter- and 
intra-governmental cooperation to counter this transnational 
problem.  BSA representatives offered some concrete suggestions for 
combating official corruption among law enforcement ranks and 
improving the effectiveness of enforcement actions.  They included 
more authority to conduct raids by Department K, the computer crimes 
division of MVD; better forensics methodology; and improved 
coordination between the MVD and the General Procuracy Investigative 
Committee. 
 
Comment 
------- 
 
¶9.  (SBU)  While many Russian officials still see IPR as a "Western" 
issue, events such as our roundtables that emphasize Russian rights 
holders' concerns are changing that mindset.  Three years ago, we 
had to practically wrestle the two sides into sitting down at the 
same table.  Now, officials and industry representatives meet often 
and are comfortable dealing with each other, even if they still have 
differences of opinion.  As we continue to press the GOR to fulfill 
its IPR obligations under both WTO rules and the bilateral IPR Side 
Letter, the recognition that better IPR enforcement brings benefits 
to Russia's own creative and innovative industries that should lead 
to lasting change. 
 
RUSSELL