Intellectual property (IP) protection and enforcement when done right are one of the fundamental conditions for innovation and competition. Ukraine’s strategic documents (in particular, Ukraine-2020 Strategy) list protection of IP rights among policy priority. However, the implementation of IP-related reforms remains slow. This was noticed by the Western partners of Ukraine (both the United States and the European Union), which are expecting radical changes in the field of IPR protection and enforcement.
On April 27, the Office of the U.S. Trade Representative (USTR) published the annual Special 301 Report. This document identified countries with high level of IP rights violations and provides an assessment of the state IP policy in these countries. Ukraine is in this list of countries. This year, the USTR confirmed the absence of sufficient progress of Ukraine in the area of IP rights protection and left Ukraine in the Priority Watch List. For several years, the list of key IP issues in Ukraine has remained almost unchanged.
The USTR criticized:
1) nontransparent and unfair administration of the system for collective management organizations (CMOs);
2) wide-spread use of unlicensed software by government institutions;
3) failure to introduce more effective measures to combat online piracy.
At the same time, the Report pays special attention to the issue of CMOs. In total, there are 19 CMOs registered in Ukraine, but most of them collect royalties without transferring payments to legitimate right holders.
Ukraine in Reports
In general, Special 301 Report underlines the limited progress in the field of IP over the last few years. Although several draft laws on IP rights protection (concerning patents, copyright and related rights, trademarks, geographical indications, CMOs, topographies of semiconductors) are pending in the Verkhovna Rada. Most of them seem to be far from the approval. Some draft laws were submitted to the Verkhovna Rada more than a year ago but have progressed only to the first reading. This reflects slow legislative process for majority of draft laws and high number of pending drafts.
Like in 2017, the new Report discusses law “On State Support of Cinematography” (adopted in March 2017) that includes provisions regarding takedown of online pirated content after notice from rightsholder. Implementation of notice and takedown system was one of the key demands of the U.S. rightsholders.
However, the Report notes that stakeholder groups reported to USTR that the new law is “too ambiguous or too onerous to facilitate an efficient and effective response to online piracy”. Such a situation can warn Western partners that there might be some problems with other IPR-related draft laws that would be adopted in the near or far future.
The European Commission also published report on IPR issues in third countries, which was made public in March of this year. The EU report notes a number of positive changes in Ukraine including establishment of a specialized IP court, shutting down pirate sites, etc.
However, the EC moved Ukraine from Priority 3 to Priority 2, citing lack of implementation of the IP provisions defined in the Association Agreement between Ukraine and the EU, high level of piracy and counterfeiting. EU agreed with the US report that implementation of online takedown provisions remains problematic and that rogue CMOs are the major concern.
Ukraine and the U.S.
In contrast with the U.S., EU was also concerned about piracy of physical goods. Ukraine was identified as one of four major transit points for fake goods entering EU. EU stakeholders companied about lows efficiency and corruption of customs. In response to problems identified in the report, EU intends to continue dialogue regarding implementation of IP provisions in the Association Agreement.
In December 2017, the U.S. announced partial suspension of Ukraine from the Generalized System of Preferences, which allows duty-free export of more than 3,500 Ukrainian product lines to the U.S. The suspension was delayed for 120 days to give Ukraine opportunity to remedy situation with problem IPR reforms (in particular CMOs).
However, the required draft law (#7466) was not passed in time. As a result, on April 26, the partial suspension on 155 types of Ukrainian goods came into force. Current impact on Ukrainian exports is quite small (several millions US dollars), but Ukraine should keep in mind possible extension of such measures if reforms are stopped. Law on CMOs was approved in Rada on May 15 and proper implementation would be the next step of the CMO reform.
In conclusion, the IP rights protection remains more of a priority of Ukraine’s international partners than of actual priority of Ukraine’s authorities. The reforms in this area are necessary to foster innovation and creative industries in Ukraine.
Ukraine should demonstrate its ability to fulfill its commitments and remain a reliable partner. It is necessary to pass and implement the IP-related draft laws, as well to complete the establishment of the High Court for Intellectual Property Matters and reform of the state system for IP protection. Otherwise, Ukraine’s image as a country with weak IP rights protection will remain unchanged, and Ukraine’s partners could apply more painful economic measures to press for reforms.
This Article has been prepared as a part of the “Civic Synergy” project, supported by the EU and the International Renaissance Foundation. Any views expressed in this column are those of the author and do not necessarily reflect those of the European Union and the Renessaince Foundation.