Israel faces sanctions if CD piracy continues

It's just past 5:30 p.m, and shoppers are coursing through Tel Aviv's largest open-air market. Windows 98? Got it. Ricky Martin's latest compact disc? No problem.

The shekels are changing hands at a brisk pace - until Yaakov Manor arrives. His presence is a reminder that much of the profit being turned here is against international law.

Mr. Manor is waving a court-issued seizure order, but an agitated salesman at the Maxim music stall refuses even to look at it. It's not the first time - more like the six or seventh - that investigators have confiscated hundreds of his compact discs, illegally produced in counterfeiting outlets in Israel and the Palestinian Authority.

"Take it and go," the salesman scowls, as Manor briskly piles stacks of CDs into a cardboard box. The quicker the raid, the less painful for business. Five off-duty policemen and detectives stand guard as Manor works. Illegal copies are not a high priority for Israeli police. So, Manor and the cops are hired by Israel's branch of the International Federation of the Phonographic Industry (IFPI), a record business coalition.

United States trade authorities are leaning on Israel to clean up this kind of piracy. The US placed Israel on a "priority list" of 16 countries with poor levels of enforcement of copyright laws. The US provides $3 billion in aid annually to Israel, and piracy hits US companies hardest.

If it shows no progress in getting up to the World Trade Organization's standards, when US officials return for a special inspection in December, Israel could face trade sanctions of more than $170 million - an estimate of just the software losses last year.

Israel's new government is taking the threat seriously. Justice Minister Yossi Beilin was in Washington yesterday to meet with Attorney General Janet Reno in Washington. He was expected to show her, among other things, a draft of a Israel's proposed law with stiffer measures to protect intellectual property.

While this Tel Aviv market sells everything from imitation Cartier watches to fake Nike sneakers, Washington is most concerned about illegal high-tech products. Each day, about 4,200 pirated CDs are sold in the Carmel Market here and in nearly 50 other open-air shopping districts in Israel. Some 2.4 million pirated cassettes and CDs are produced here per year, for a total loss to record companies, artists, and tax authorities of $30 million last year, according to the IFPI.

The group says that existing laws, when enforced, carry hand-slap penalties. The raids are aimed at collecting damages in civil courts only.

"On the criminal side, no action is made," says Yohanon Banon, IFPI's manager of enforcement activities. Of the 240 complaints they made to the police last year, he says, only six of them made it to court, and those found guilty were only fined as much as 1,000 shekels ($250).

ILLEGAL copying of American software programs is one of the highest concerns, because it often involves companies buying one copy of a program and illegally installing it on many computers.

According to the Business Software Alliance (BSA), an international group that opposes counterfeiting of computer programs, 48 percent of software for business use in Israel last year was illegal, compared with 25 percent in the US. Ami Fleischer, a lawyer representing the BSA's Israeli branch, says that shows improvement from the 78 percent of Israeli software which was illegal in 1995. He says, however, that more needs to be done.

"The problem is the government hasn't taken the initiative to prevent this," says Mr. Fleischer. "You have countries with larger problems like China and in Eastern Europe, but in those places at least they're trying."

Israeli police say they are increasing efforts to combat illegal counterfeiting, including the addition of a special investigations unit on software and music piracy. "In the framework of our operations, tens of thousands of illegal products have been confiscated," a spokeswoman for the Israeli police said in a statement.

But Washington, under domestic pressure from US industries, wants more wide-ranging action. In addition to the copyright bill and police unit, the US seeks tough criminal penalties and stricter customs controls to stem the flow of counterfeit CDs from Russia. The Clinton administration also wants to see piracy-fighting cooperation between Israel and the Palestinian Authority. (See story below.)

Moreover, the US has asked Israel to launch a public-awareness campaign. Audio CD counterfeiting, American officials point out, takes a big toll on the struggling music industry in Israel. When buyers can snatch up cheap copies of everything from Madonna to Rita - Israel's favorite diva - it eats away at the artists' profits and reduces the number of new releases.

US officials say investment in Israel's software firms could be damaged if piracy continues. "The question is, Is Israel serious about being part of the growing international market in software?" asks one official here. "Once you get a reputation of being a pirate country, the willingness to invest in that country is endangered."

(c) Copyright 1999. The Christian Science Publishing Society