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Viewing cable 09KYIV1989, UKRAINE'S IPR AGENCY FACES EXISTENTIAL CHALLENGES

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Reference ID Created Released Classification Origin
09KYIV1989 2009-11-13 14:14 2011-08-24 16:30 UNCLASSIFIED Embassy Kyiv
VZCZCXYZ0000
RR RUEHWEB

DE RUEHKV #1989/01 3171414
ZNR UUUUU ZZH
R 131414Z NOV 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 8813
INFO RUEHMO/AMEMBASSY MOSCOW 0479
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBS/USEU BRUSSELS
UNCLAS KYIV 001989 
 
SIPDIS 
 
STATE FOR EUR/UMB AND EB/TPP/IPE 
STATE PLEASE PASS TO USTR FOR BURKHEAD/GROVES 
COMMERCE PLEASE PASS TO USPTO FOR KROSENBAUM 
 
E.O. 12958: N/A 
TAGS: KIPR UP
SUBJECT: UKRAINE'S IPR AGENCY FACES EXISTENTIAL CHALLENGES 
 
1. (U) Summary.  Upon receiving information that Ukraine's 
State Department of Intellectual Property (SDIP) was facing 
the possibility of elimination, Emboffs met with its 
chairman, Mykola Paladiy, to discuss the situation.  The SDIP 
also briefed Emboffs on the status of new copyright 
legislation in the parliament, which is expected to be voted 
on after the January 2010 presidential elections.  Chairman 
Paladiy also updated Emboffs on successful initiatives to 
train judges in IPR law and enhance interagency cooperation 
on IPR within the GOU.  Emboffs also raised the issue of GOU 
use of unlicensed software, which Paladiy says is a 'stuck' 
issue with rights holders. End Summary. 
 
----------------------------- 
Potential Elimination of SDIP 
----------------------------- 
 
2. (SBU) Chairman Polokhalo of the Parliamentary Committee on 
Science and Education has submitted to the Cabinet of 
Ministers a proposal to eliminate the SDIP, and replace it 
with a new State Committee of Intellectual Property, which 
would report directly to the Cabinet of Ministers.  SDIP 
currently falls under the jurisdiction of the Ministry of 
Education and Science.  Mykola Paladiy, SDIP's Chairman told 
EconOffs on November 6 that this is Polokhalo's third attempt 
to eliminate the SDIP.  This attempt is more threatening, 
however, because Polokhalo has the support of Minister of 
Education and Science Vakarchuk.  First Deputy Prime Minister 
Turchinov has ordered a ministerial level review of the 
proposal, with the final reports to be submitted to the 
Ministry of Education and Science, according to Paladiy.  The 
proposed change could be approved and implemented by a Decree 
of the Cabinet of Ministers and would not require an act of 
parliament. 
 
3. (SBU) Chairman Paladiy believes that Polokhalo wants to 
create a new organization so that he could fill its 
leadership with his associates.  Paladiy expressed hope that 
the attempt would fail, and mentioned that the Deputy 
Minister of Education and Science, Pavlo Poliansky, opposes 
the elimination of SDIP as 'unnecessary'.  However, as Deputy 
Minister, Poliansky has no authority to block the decision of 
the Minister, so Paladiy's confidence in SDIP's continued 
existence may be unfounded. 
 
4. (SBU) Prior to the meeting with SDIP, a representative of 
the Ukrainian Music Alliance (UMA), a collective society that 
has developed positive working relationships with SDIP, 
expressed concern that the creation of a new State Committee 
of Intellectual Property would be a severe setback for IPR 
enforcement in Ukraine.  The representative noted that 
Committee Chairman Polokhalo has connections to organizations 
which have profited in the past from exploitation of 
loopholes in IPR laws and weak enforcement.  UMA would not 
only need to establish new relationships with any new body 
but was concerned that the new organization would not 
actively protect their interests. 
 
--------------------------------------- 
IPR Legislation -- Likely Not This Year 
--------------------------------------- 
 
5. (U) Paladiy stated that Ukrainian IPR laws were now 
generally harmonized with international standards.  In 
addition, SDIP is presently following the course of two 
related laws through parliament - a new draft law on 
industrial property rights and a new draft copyright law. 
 
6. (U) The Draft Law on Industrial Property Rights amends the 
Civil Code of Ukraine, the Civil Procedural Code of Ukraine, 
and the following laws: "On Protection of Inventions and 
Utility Models," "On The Protection of Industrial Designs," 
"On The Protection of Marks for Goods and Services," "On the 
Protection of Topographies of Integrated Circuits," and "On 
the Protection of Appellations of Origin. " This legislation 
would bring the laws into compliance with European Union 
directives and international agreements to which Ukraine is a 
signatory.  This legislation was introduced on July 23 as 
Draft Law 5015, but remains in Committee and has not been 
submitted to the full Rada for a first reading. 
 
7. (SBU) Five versions of the Draft Copyright Law are 
currently circulating in the Ukrainian parliament.  According 
to Paladiy, SDIP and the majority of copyright holders and 
collective rights management societies support the version 
authored by former Deputy Prime Minister Tabachnik. The goal 
of the new legislation is to legally define the role of 
collective rights management societies in Ukraine - 
determining how such societies are formed and recognized, how 
they operate, and how their authority can be terminated by 
the rights holder. SDIP prefers this version because, in 
Paladiy's view, the other four reflect the interests of 
special interest groups that have profited from loopholes in 
the current laws.  Due to the contentious atmosphere in 
parliament, Paladiy does not expect progress on the Copyright 
Law this year. 
 
----------- 
Enforcement 
----------- 
 
8. (U) SDIP has found enforcement to be the most difficult 
part of its responsibilities.  Paladiy reported that a shift 
in priorities away from IPR at local levels has reduced the 
level of monitoring performed by police, allowing pirate 
retail outlets, such as Kyiv's infamous Petrivka Market, to 
flourish.  SDIP also reports difficulty in enforcing IPR laws 
against criminals using the Internet as a distribution 
channel. 
 
9. (U) SDIP has signed an agreement with the judiciary to 
establish a dedicated Patent Court, Paladiy reported.  Those 
parts of the judiciary that already deal with patent law will 
be separated out and organized into the new body, though 
given the political considerations involved, SDIP was unable 
to estimate a timeline for the completion of this process. 
SDIP also plans to continue to organize training seminars on 
IPR issues for judges, and requested support from the USG in 
this effort. 
 
10. (U) In the area of anti-piracy, SDIP has signed an 
inter-ministerial agreement with the State Security Service, 
Customs Service, Ministry of the Interior, and Ministry of 
Culture to facilitate interagency cooperation.  A joint 
working group will be formed after the January 2010 
presidential elections, and SDIP hopes that the working group 
will result in an intensification of local law-enforcement 
efforts. 
--------- 
Education 
--------- 
 
11. (U) SDIP recognizes the ongoing need to train Ukrainian 
officials in IPR law.  Towards that end, it has launched a 
series of IPR seminars for members of the Executive Branch, 
and plans to continue the program in 2010.  It also plans to 
hold four quarterly IPR conferences in 2010, the first to be 
held in February.  Also, starting in 2010, SDIP will begin 
issuing diplomas in IPR studies to Ukrainian students as part 
of a joint program with the University of Naples. 
 
------------------------- 
International Integration 
------------------------- 
 
12. (U) SDIP has been working to further integrate Ukraine's 
IPR enforcement activities with the international community. 
To this end, it is pursuing membership in the European Patent 
Office (EPO).  The EPO accepts applications for patents and 
then coordinates with member-state patent authorities to 
issue a bundle of national patents from member countries. 
Membership would allow Ukraine to add its national patents to 
the EPO bundle. 
 
13. (U) There are ongoing disputes between rival Ukrainian 
collective societies (organizations responsible for 
collecting royalties from commercial music users such as 
nightclubs, radio stations and restaurants).  Some societies 
have a track record of collecting royalty payments and then 
keeping the money, or demanding payments from users that had 
already made payments to another society.  The SDIP has 
invited a professional Swiss collective management society to 
operate in Ukraine as a means of stabilizing the situation in 
the music royalty collection business. 
 
14. (U) Paladiy stated he wanted SDIP to become a World 
Intellectual Property Organization (WIPO)-recognized patent 
search and examination body.  To accomplish this, the SDIP 
would need to create and maintain a database of registered 
patents and conduct searches for clients to ensure that 
pending patent applications did not encroach on existing 
patents.  Moscow, having inherited the bulk of the Soviet 
Union's Patent Office and related infrastructure, currently 
is the sole internationally-recognized patent search and 
examination body in the CIS region.  Paladiy recognized that 
creating a competing service center would be a long and 
difficult undertaking. 
 
-------------- 
Counterfeiting 
-------------- 
 
15. (U) SDIP reports that pirate audio/video media (DVDs and 
CDs) as a percentage of all sales is increasing in Ukraine 
simply as a result of the 40% decline in the global AV market 
since the beginning of the financial crisis.  Technological 
changes in the black market trade in AV media have also made 
enforcement more difficult for SDIP.  First, many pirate 
retailers have switched their stock to Flash memory cards, 
which are physically smaller than optical media, yet have 
greater storage capacity.  Second, a large number of pirate 
media distributors are now using the Internet for 
distribution, bypassing physical retail outlets like Kyiv's 
Petrivka Market. Paladiy stated that Internet piracy is on 
the rise and a large portion of the market. 
 
----------------- 
Patent Protection 
----------------- 
 
16. (U) Emboffs raised concerns from the American 
agrochemical industry that their patents are being violated 
by small Ukrainian firms who use insider connections to 
receive Ministry of Ecology approval in months, rather than 
the years it takes American firms.  SDIP officials responded 
that the timeframe for approval in Ukraine is similar to that 
in Europe, and welcomed submissions of patent violation 
claims, along with supporting evidence, for consideration. 
 
------------------- 
Unlicensed Software 
------------------- 
 
17. (U) According to expert estimates, 60-70% of the software 
used in government offices in Ukraine is unlicensed, a fact 
repeatedly noted in the annual USTR Special 301 Report on IPR 
enforcement.  SDIP reports that there has been no progress in 
reducing this level of pirate software usage in the past 
year.  Although SDIP had proposed the inclusion of a 
line-item in the 2009 budget for acquiring software licenses, 
the final budget did not include money for this item. 
Paladiy told Emboffs that the issue is more political than 
technical, as parliamentary deputies generally consider 
Microsoft and other rights holders to be enemies. 
 
18. (U) Paladiy feels that the rights holders need to be more 
aggressive in working with parliament and pressuring the GOU 
to respect intellectual property rights.  SDIP has suggested 
joint action plans to tackle the issue of unlicensed 
government software with Microsoft and SoftProm (a software 
firm that represents themselves and seven other smaller 
suppliers), but say that the rights holders have not followed 
up with SDIP for seven months.  Paladiy considers the issue 
to be "stuck". 
 
------- 
Comment 
------- 
 
19. (SBU) Although SDIP continues to work diligently to 
improve its capacity and the environment for IPR protection 
in Ukraine, the past year has been short on major successes 
for IPR enforcement in Ukraine.  This can be attributed to 
the fact that the GOU has already made significant progress 
over the past eight years in the area of IPR protection, and 
is now left with the harder tasks.  Foreign rights holders 
and the USG have built up a strong working relationship with 
the SDIP, and SDIP replacement with a new Cabinet of 
Ministers Committee would likely be a setback, not only for 
our cooperation but also for the overall IPR regime in 
Ukraine.  End Comment. 
PETTIT