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Russia, China Warned on Piracy

WASHINGTON -- Rampant intellectual property theft in China and Russia is undermining the free trade policies of the Bush Administration, U.S. Sen. Orin Hatch (R-Utah) said today.

As a Chinese trade delegation prepares for a Washington summit with officials of the United States Trade Representative (USTR), Hatch spoke at a Senate Judiciary subcommittee hearing on piracy with a clear message to Beijing and Moscow.

"Various analyses indicate that piracy levels in many sectors are close to or exceed 90 percent in China," Hatch said. "In Russia, overall losses to copyright-related industries have continued to increase and are, in my opinion, at unacceptable levels."

For proof, Hatch pointed to a recent USTR report that placed China on the United States' Priority Watch List for intellectual property theft. Beijing joined Russia and 12 other trading partners that Washington says are not effectively protecting or enforcing intellectual property rights (IPR).

According to the Business Software Alliance (BSA), software piracy in the Asia-Pacific region cost manufacturers close to $8 billion in 2004. Worldwide, losses due to software piracy were estimated at more than $32 million.

The BSA puts piracy rates in China at 90 percent and Russia at 87 percent.

BSA President Robert Holleyman told the Senate panel that in 1996 China was the world's sixth largest market for personal computers and the 26th largest for software. Today, China is the second largest market for personal computers but is still only 25th in software.

"This growing gap between hardware and software sales is the inevitable consequence of a market that does not respect intellectual property rights or reward the significant investment required to develop and market innovative software products," he said.

Holleyman characterized the situation in Russia as "mixed," noting recent cooperation by Moscow in drafting new anti-piracy laws. Internet piracy, though, remains unchecked.

"Internet piracy is one piracy challenge in Russia where industry efforts have met with little success in the past few years," Holleyman said. "The business software industry faces a persistent problem of pirated software promoted and sold all over the world using unsolicited e-mail advertisements and delivered via mail order."

"A well-connected, sophisticated Russian criminal network in Moscow," Holleyman claimed, runs these "spam and scam" operations.

Mary Beth Peters, Register of Copyrights at the Library of Congress, added that "sketchy" information indicates a "series of rumored ties" between pirating operations and terrorist organizations.

"Among many problems in Russia is the fact that, of the pirated goods that are confiscated by law enforcement, 70 percent get returned to the market," Sen. Patrick Leahy (D-Ver.) noted. "Meaningful enforcement needs to involve more than a revolving door."

In his opening comments, Hatch cited an oft-used phrase about the former Soviet Union's negotiating style: "What's mine is mine and what's yours is negotiable," he said.

Hatch warned that if China or Russia attempts to adopt that view, "I can assure you that public support for U.S. trade agreements will be undermined."

He added, "There will be strong resistance from and appropriate action taken by -- members of Congress."



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