#14 - RW 284
Moscow Times
November 25, 2003
Piracy Against Progress
By Alexander Vershbow
Alexander Vershbow is the U.S. ambassador to Russia. He contributed this comment to The Moscow Times.

Russians are rightly proud of their rich heritage of music, literature, theater and film, as well as their achievements in science, space and technology. The critical acclaim of recent films such as "The Return" show that Russia's long tradition of literary and artistic creation is still alive and well. Russia is known throughout the world for its achievements in science and culture. But something that Russia is becoming increasingly known for -- theft and piracy of intellectual property -- threatens Russia's future capacity for cultural and scientific achievements.

Over the past year, growing attention has been paid to the burgeoning levels of optical disc piracy (CDs, DVDs and CD-ROMs) in Russia. However, recent polls show that Russian citizens are not concerned about piracy involving music, films and software products, because they believe the only victims of this type of piracy are major Western recording and film studios, which, in their view, have no need for the extra revenue generated by sales in Russia. But Russians, too, are already victims of the pirates, and if piracy continues unchecked the number of domestic victims will swell.

Intellectual property rights exist to serve as an incentive to creativity. The reason that artists can afford to write and record music is because they can expect to be paid for their recordings. During discussions with both prominent and up-and-coming Russian musicians, I have made a point of asking how to obtain their works on CD. Sadly, the overwhelming response has been that it is simply not profitable to record their works in Russia due to current piracy levels. President Vladimir Putin's visit this month to Mosfilm emphasized the similar damage that piracy is doing to Russia's film industry, despite recent critical successes.

Likewise, the reason software firms can afford to pay computer programmers and other technicians is because they can expect to make money selling a final product. Russia has a large pool of talented programmers and technical professionals, but the technology sector here is also a victim of the pirates, who deprive innovators of the funding they need to keep innovating.

Russia's scientists and inventors have the potential to contribute to bringing Russia into the mainstream of commercially viable technical innovation, especially if the country can attract investment from high-tech companies. But this process will never truly get off the ground if technical innovation is not adequately protected by well-enforced protection of intellectual property rights.

Despite an attractive pool of talented creative professionals in both the technological and cultural arenas, foreign investment that could help bolster these industries in Russia is once again undermined by the pirates. Piracy has reached such epidemic proportions in Russia that it is increasingly seen as the next China, which during the height of its piracy problem had 29 plants producing pirated material. Russia is reported to have at least that many illegal plants operating now. It is estimated that more than 320 million pirated disks are produced in Russia each year, about 90 percent of which are exported. As long as potential investors view Russia as a country that does not respect the rule of law, intellectual or personal property rights, they will continue to invest in places where their property, in all of its forms, is better protected.

For example, Western studios say that one of their primary goals in entering the Russian marketplace is to cultivate the abundance of talented musicians in Russia and to share their creative talents with the rest of the world -- not just to sell CDs of Mariah Carey and Eminem. But -- they continue -- due to the current level of piracy it is simply not viable to invest the amount of money the Russian music industry deserves.

Nowhere is the danger of piracy as clear as in the ever-increasing arena of counterfeit pharmaceuticals. Not only does drug piracy take away profits that could be used to develop more effective and more profitable medicines, but it directly endangers the health and even the lives of Russians who rely on fake or poor quality remedies.

Russia's growing reputation as an exporter of pirated goods is also likely to have an impact on the country's legitimate exports. Foreign importers and consumers need to have confidence that their imported goods are genuine and well made. The rising flood of cheap goods, fakes and knockoffs slowly undermines this confidence and encourages importers to look for safer alternatives.

The ultimate result here is that, in the long run, the financial effects of piracy will continue to hinder the development of high-content-value industries that would provide some of the best jobs for Russians -- jobs that focus on knowledge, creativity and innovation -- while creating unneeded obstacles for the growing Russian export market.

Piracy is very profitable, but the profits are realized by only a very rich few, at the expense of many, many others. It is obviously at the expense of the artists and creative professionals whose profits are siphoned off. But it is also at the expense of the software developer who is unable to create new and innovative computer programs without fear of his final product being stolen. It is at the expense of the musician who cannot afford to record her work. It is at the expense of the film studio that has to reduce the number of films it can produce for the Russian market. It is at the expense of the exporter who meets with unwarranted concern about the legitimacy of his products. It is at the expense of every Russian worker who could be employed by a growing company in an industry that simply won't grow while the pirates bleed away its funding.

And it is at the expense of all of us here and around the world, who are deprived of the rich cultural and scientific achievements that constitute Russia's greatest historical legacy -- and her promise of even greater contributions to our world in the 21st century.