Brand name no guarantee in Russia

The government cracks down on counterfeiters, armed with a new trademark law effective this month.

At Kuznetsky Most, one of dozens of outdoor pirate markets in Moscow, a copy of Microsoft's Windows XP costs just $3. A CD containing everything the Beatles ever recorded, or the latest Madonna album, or just about any other music you want, costs $2.50. The new Harry Potter film? About $5.

"This is big business. No one is going to stop it anytime soon," says Igor, a Kuznetsky Most software vendor who declined to give his last name. "It's not piracy. These products are made in legitimate factories. I guarantee the quality of every disk I sell. The police keep order here and never bother us."

At least half the products sold in Russia - items as basic as furniture, engine lubricant, cosmetics, and coffee - are either counterfeit or contraband, experts say.

But that may be about to change. Armed with a tough new trademark law, effective Jan. 1, Russian authorities say they are going to crack down hard on the estimated $20 billion a year theft of intellectual property by Russian bootleggers and black marketeers. In a recent interview with RTR state television, Prime Minister Mikhail Kasyanov, who heads the effort to stamp out piracy, warned that the problem is a key obstacle to Russia's hopes of joining the World Trade Organization. "How can we ask foreign investors to put their money into a country where phony goods are sold along with chewing gum across every shop counter?" Mr. Kasyanov asked. The scale of Russia's black market, he said, even threatens to overwhelm the Kremlin's agenda for broader economic reforms.

Experts say Russia is already the world's second-biggest source of pirated goods, after China. But while China has made major progress in guaranteeing investor rights, Russian economic practice remains largely lawless. And despite the Russian government's declaration of war, analysts say bootleg manufacturing is growing by leaps and bounds. "Basically, everything is fake. You can hardly find a product that isn't," says Alexander Sheremekh, vice president of the Washington-based Coalition for Protection of Intellectual Property, a private antipiracy group.

Illicit goods can even be dangerous. Maria Sokolova, a Moscow homemaker, bought a well-known brand of instant coffee from a kiosk last week. The can contained "only some kind of brown sand, certainly not coffee," she says, and the shop owner refused to acknowledge the fraud or replace the product.

One reason for the wave of piracy is Russia has been slow to enact intellectual-property laws. Until two weeks ago, it was legal to print copies of any product label or package. Duma deputy and chairman of Russia's Consumer Union Pyotr Shelishch estimates that pirates account for up to 60 percent of all business done by Russian printing firms. "A lot of big Russian businesses participate in making fake goods, and they feel perfectly safe in doing so," Mr. Shelishch says. "There are huge profits to be gained, and there is not enough understanding of how bad this is for Russia's long-term economic health and image."

Law-enforcement officials complain that they are underfunded and ill-equipped to take on the pirates, who often have high-level friends and protection from crime syndicates. "Our inspectors in the field face constant threats to life and limb," says Nadezhda Naizina, director of Gostorginspektsia, the government's brand-protection agency. "It's a thankless and almost impossible job."

The huge industrial base Russia inherited from the former Soviet Union - including millions of scientists, engineers, and technicians - has fallen into poverty and disuse over the past decade. "So many of our enterprises found themselves facing hard times, and discovered they could set up little operations for off-the-books production that would be very profitable," says Yevgeny Myasin, an expert with Russia's Ministry of Trade and Economic Development.

As police learned when they opened the new war on piracy by busting a Moscow-area pirate DVD manufacturer late last year, even cash-starved state institutions can sometimes be implicated. The address of the underground factory turned out to be rented from the Russian Space Agency.

Some Russians regard pirate business as a lifeline. Anton Zladkis, head of Falsification Checkers, a detective agency that investigates the provenance of goods, says he was recently hired by a well-known Italian furniture maker to trace counterfeits flooding the Russian market. Mr. Zladkis found the factory in a small central Russian town. "Everyone was involved, including the mayor and police chief. It was the only source of employment in the area, and wages were good," he says. "They told me: 'Don't try to stop this. You'll ruin us!' "

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