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PART II (conclusion) of IFPI REPORT ON PIRACY, 2003-4


music piracy.
IN THE SPOTLIGHT: SOUTH KOREA
Pressed CDs and DVDs still dominate the pirate market
in Ukraine. A substantial number of these are imported
from Russia and sold in markets, kiosks and street stalls.
There are encouraging signs of increased, and
geographically wider, police activity against piracy at
retail level. However, this is totally insufficient to
effectively reduce the availability of illegal recordings
in Ukraine. Actions against sources and distribution
networks feeding the retailing of these illegal materials
remain rare. Border enforcement by Ukrainian Customs is
also inadequate. Consequently, while the number of raids
has increased, the availability of pirated materials
throughout Ukraine has barely decreased.
A major reason why illegal recordings are still
widely available in Ukraine is the lack of deterrent
punishment of those involved in copyright crime.
Prosecution, even of obvious piracy cases, is slow and
cumbersome. Rights holders seeking prosecutions face
time-consuming hearings, being required to testify and
turn up for endless witness interrogation sessions. The
piracy cases that do end up in court merely result in the
imposition of administrative or criminal fines that are not
even remotely deterrent. Prison sentences are very rare and
are always suspended.
Despite maintained US trade sanctions, which will
soon enter their third year, and continued record
industry pressure, Ukraine has still not adopted
the necessary amendments to its flawed CD plant
regulation. Some of Ukraine’s optical disc plants continue
to be involved in illegal production and export of
pirate optical discs.
The Ukrainian music industry calls upon the authorities to:
1. Help enforcement agencies to focus more on distribution
channels such as markets, kiosks and street stalls.
2. Substantially improve border enforcement, especially
between Russia and the Ukraine. Customs authorities
cannot continue their policy of non co-operation,
refusing to share even basic information.
3. Improve the CD Plant regulation and enforce it properly.
The Ukrainian optical disc law falls short of what is
required to effectively prevent illegal optical disc
manufacturing despite repeated explanations by
copyright industries of the elements in the law that need
to be revised. Moreover rights holders organisations
need access to production samples of optical discs and
other information currently withheld.
4. Carry out deterrent prosecution and sentencing of
pirate activity, including meaningful prison terms.
Pirate market value (US$) 42 million
Legitimate market size (units) 18 million
Piracy level 68%
Pirate unit growth 16%
Legitimate unit growth 4%
UKRAINE
Ukraine has the potential to create more artists like Ruslana,
winner of the 2004 Eurovision Song Contest
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regional reports
Counterfeiting of sound recordings in the CD-R and DVD-R
formats is most serious in Southern Europe, namely Greece,
Italy, Portugal and Spain. These countries are victims of
organised manufacturing and distribution of pirate CDs by
criminal groups, operating within hierarchical structures.
IFPI has strong relationships with Law Enforcement
Authorities (LEAs), who are now willing to initiate ex-officio
actions against retailers and distributors of these products.
Particular priority is given to educating the Western
European judiciary about the links between music piracy and
organised criminal activity. The continued lack of sentencing
in piracy cases is the major problem in tackling piracy in
Western Europe, and erodes the incentive of enforcement
authorities to be active in this area of their work.
A key priority for IFPI will be to address the expansion
of pirate trade within the European Union resulting from
the enlargement of the EU and the subsequent free
movement of goods between a larger group of Member
States. In countries such as Poland, investigators have
discovered widespread availability of pirate pre-release
music titles in local markets. The removal of internal borders
will see these products becoming available in more Western
countries. The three Baltic States – Estonia, Latvia and
Lithuania, all of which recently joined the EU – also have
huge piracy problems.
More positively, Poland adopted optical disc regulations that
are expected to prevent its massive optical disc production
capacity from being used for illegal purposes. The situation
at the infamous Warsaw Stadium has improved, with the
disappearance of numerous stalls selling illegal discs. As a
result of these actions Poland no longer features in IFPI’s list
of the top ten priority territories.
The widespread growth of CD-R production in
Western Europe has allowed for an explosion of piracy in the
CD-R format in the region. Joint industry and law
enforcement agency investigations have led to the seizure of
6.8 million CD-R discs during 2003 compared to 4.5 million
in 2002.
European-wide anti-piracy legislation has been
strengthened by the adoption in April 2004 of the
EU Enforcement Directive, which aims to bring
national legislation on civil sanctions and remedies closer in
line across the 25 EU Member States. While the Directive
could have gone further to help in the fight against piracy, it
does extend some enforcement best practices across the
entire EU region.
Gains for the all rights owners in the Directive include
measures concerning the use of injunctions, the freezing of
assets used in illegal activities, and guidelines to the courts
on awarding damages. Importantly, the Directive allows for
a presumption of ownership if a rights holder’s name
appears on a sound recording or other work. This measure
should help record companies and other rights holders avoid
expensive and pointless courtroom disputes with pirates
about copyright ownership.
Under the Directive, rights holders also will be able to ask
judicial authorities to order infringers to provide information
on the origin and distribution of pirate goods. This should
prove helpful both in physical and internet piracy cases. The
Directive also contains measures to protect evidence from
destruction and to allow for the use of sampling of
suspected pirate product.
EU Member States now have two years to implement the
Directive into national law. Since the Enforcement Directive
provides for a minimum harmonisation of enforcement
practices, Member States are free to go further during the
implementation process.
The recording industry continues to insist on the need for
strengthened criminal sanctions to help combat piracy and
counterfeiting. The European Commission intends to come
forward with a new proposal for EU legislation on criminal
sanctions later in 2004.
EUROPEAN UNION
regional reports
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Piracy levels in the Russia/CIS region remain consistently
above 60%, even though the legitimate market grew in
2003 by some 24%. There has been an increase in
enforcement actions targeting retailers and distributors of
pirate products, but results are much fewer, with less than
25% of cases resulting in court proceedings.
The trans-shipment of pirate product from Russia, often
en route to Western Europe, continues to plague the region.
High quality counterfeits originating in Russia are found
in markets throughout Eastern Europe, as is pre-1995
repertoire which is being reproduced in Russia where it is
not yet protected by copyright. CD-R piracy continues
to grow and door-to-door sales of illegal sound carriers,
which are difficult to detect and control, are increasing
throughout the region.
Action by law enforcement agencies remains sporadic and
poorly co-ordinated. Without exception, authorities fail to
show long-term resolve and a clear strategy in tackling
copyright crime.
There is a serious piracy situation in Bulgaria, where
enforcement has not improved since 1998. The judiciary
and court system in Bulgaria have failed to actively prosecute
copyright thieves or hand down deterrent sentences.
The legitimate recording industry in Bulgaria is struggling
to survive commercially and investment in Bulgarian
music production has, as a result, shown a sharp decline.
New replication facilities in Estonia, Poland, Hungary
and Romania have contributed to continuing growth in
overall production capacity for optical discs in Eastern
Europe. In most jurisdictions, attempts to effectively regulate
optical disc manufacturing have achieved little success.
Piracy in Turkey is still very high. However, the
government has recently adopted a strong anti-piracy
bill, including a total ban on street sales of audio-visual
products. This is expected to help eradicate the
widespread phenomenon of street piracy in Turkey’s
main cities and tourist areas.
EASTERN EUROPE
The continued decline in the legitimate market is the
direct result of high levels of piracy in most markets in
Latin America, resulting in a 14% decrease in value and
a 10% drop in units during 2003. Last year all markets in
the region sold 148 million legitimate units, compared to
243 million units in 1998 – representing a drop in legitimate
sales of 39%.
The trend towards recorded CD-Rs as the favoured pirate
format continues, with 98% of all seized infringing products
on CD-Rs. In 2003, over 150 million blank CD-Rs entered
Paraguay alone from markets in South East Asia.
CD-R burning laboratories controlled by organised crime
groups are able to operate with relative impunity in
territories such as Brazil and Mexico, where weak legislation
and ineffective policing mean there is little real threat of
detection and subsequent prosecution.
Piracy levels in Mexico and Brazil have seen both countries’
legitimate sales decline to the extent that these once-major
markets have dropped out of the world’s top ten largest
markets for legitimate music.
The piracy problems of other Latin American markets such
as Colombia are also in the spotlight. Legitimate unit sales in
Colombia decreased in 2003 by 5% in units and over 50%
in the past five years. In order to stop this continued
deterioration, the Colombian government needs to conduct
a consistent anti-piracy campaign throughout the country as
well as increase piracy criminal penalties to allow the courts
to issue deterrent level sentences.
Chile suffered a sizeable 22% decrease in legitimate unit
sales. The Chilean police have been fighting piracy in
Santiago for the past three years, but the campaign has
not been effectively extended to other major cities. In
addition, criminal penalties for piracy are too low to serve as
real deterrents.
In Peru and Ecuador piracy has practically eliminated the
legitimate music markets. Other than sporadic actions taken
by individual authorities interested in the subject, neither
country has established anti-piracy campaigns, which would
ultimately help to promote the development of local artists.
Piracy exceeds 95% of the total market in both countries.
As the Argentine market recovers from the economic and
political collapse experienced in 2002 its unit sales of
recorded music have increased. However the tools to fight
piracy are inefficient as criminal penalties remain too weak
to serve as a real deterrent. Moreover the Argentine
government has not addressed piracy as a priority problem
or recognised that it is jeopardising the local music culture as
well as contributing to crime levels.
LATIN AMERICA
World distribution of pirate CDs from Russian CD plants
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regional reports
Political disinterest, combined with a lack of effective
enforcement for intellectual property rights, continues to
result in high piracy levels in this region.
In many countries the cassette remains the most popular
pirate music carrier. However, CD-R piracy is growing fast.
Lebanon has the highest music piracy levels, followed
by Kuwait, Saudi Arabia and Egypt. In Lebanon, with
a piracy rate of 70%, the situation worsened in
2003-2004 despite promises by the government at the
highest level to make copyright enforcement a key
priority. Pre-raid leaks and a complete lack of ex-officio
action have prevented enforcement from having
any sustainable impact in the country, the only
positive exception being the customs department.
In 2003, law enforcement agencies in Saudi Arabia
carried out hundreds of raids resulting in the seizure
of approximately 600,000 pirate music carriers. However,
the absence of deterrent penalties for intellectual
property violations and a total lack of transparency in
the judicial system are preventing these actions from having
a positive and lasting impact.
With an estimated overall piracy level of 60%, Kuwait
is still one of the worst countries in the Middle
East in terms of retail piracy. Even higher levels
of piracy are estimated for Indian repertoire distributed
in the country. Intellectual property protection is a
very low priority for the Kuwaiti authorities, despite it
being one of the many Middle Eastern countries to
which Pakistan-based optical disc plants ship thousands of
illegal optical discs every month.
Egypt still has a piracy level of close to 50%, despite
the fact that enforcement has improved in the past
three years. A notable event in 2003 was a massive seizure
of two million pirate cassettes. However, legitimate sales
decreased and the industry is struggling to revive what was
once a thriving and highly creative recorded music market.
The year 2003 saw a marked increase – from three to
eight – in the number of optical disc production lines
now located in Africa. Although currently confined to
South Africa and Nigeria, it is evident that many of
the region’s territories which impose no effective
copyright protection, now represent an attractive haven for
disc plants.
The increasing popularity of the CD as a format for
music in the region has also seen increasing imports
of pirate optical disc products, as illustrated by the
recent seizures of discs on route to Nigeria from Singapore
(see page 6).
AFRICA AND THE MIDDLE EAST
The Asia-Pacific region maintains its position as
the world’s leading producer of pressed optical
discs, feeding illegal music markets around the world. It
is no surprise that three of IFPI’s top ten priority
territories are in Asia, when the region hosts nearly 50% of
the world’s optical disc plants. Physical piracy continues
to predominate in most countries in the region,
particularly where internet penetration has yet to
reach significant proportions2.
While a number of governments within the region
have exerted tighter controls on the optical disc
industry – the Philippines being the latest to implement
legislation on optical disc manufacturing in June 2004
– such progressive moves have resulted in the shift
of optical disc production lines into countries with
little or no copyright protection or enforcement, for
example Vietnam.
CD-R piracy is also on the increase in the region,
following earlier successes in controlling pressed pirate
music products in countries like Singapore, Hong Kong
and Taiwan.
Malaysia continues to be a major exporter of pirated
discs in the region. While the Malaysian government
moved to deploy greater resources to combat
pirates in early 2004, its efforts to curb piracy have
been hampered by the backlog of cases in court
and delays in investigations. This is partly because
the relevant Ministry is also responsible for enforcing
eight other consumer-related laws. The lack of a
dedicated prosecution and investigation unit is another major
contributing factor to the backlog which could
be dealt with by creating a special intellectual property court.
Both China and Thailand have also increased
government enforcement activities, but their efforts
have yet to translate into a positive outcome on
the ground. Elsewhere, the music industries in
countries like Indonesia, India and Vietnam continue to
suffer from high piracy rates. Governments across
the region are urged to adopt measures to strengthen
enforcement, reduce piracy levels and curb exports
of illegal music products.
ASIA-PACIFIC
2The wider availability of broadband connectivity in countries such as Japan, South Korea, Hong Kong and Australia has, however, led to increases in the level of
illegal online distribution and file-sharing. Online music piracy is examined in the separate IFPI Online Music Report.
seventeen
the call to governments
IFPI and its national groups are among the most
active of all copyright-based sectors in taking action
against piracy. The basis of the work of IFPI’s
enforcement teams is the protection afforded under
copyright laws and the procedures and remedies
available to fight against piracy. Good laws and
enforcement procedures as well as a strong
government commitment are vital.
IFPI has identified three key priorities for governments to
deal with physical piracy, which are:
1. Effective copyright and enforcementrelated
legislation
It is essential that governments provide adequate
rights and protections under the copyright law
against unauthorised copying, distribution and
communication to the public of sound recordings. It is
equally important that laws protect against the
circumvention of the technological measures used
to protect content (for instance copy control
mechanisms applied to CDs).
Providing adequate rights is the first step in
protecting recorded music. Following on from this, it
is essential to provide law enforcement authorities
and rights holders with effective means to enforce such
rights in practice. These include effective civil, administrative
and criminal procedures and measures. Key provisions in this
context include:
• Damages that effectively compensate rights holders and
deter infringers.
• Search and seizure orders for obtaining evidence and
stopping the distribution of infringing copies.
• Right of information, for example about the extent of
infringing production, sources, and distribution
channels.
• Reasonable evidence rules, such as presumptions of
ownership of rights, and recognition of sampling as
evidence where large shipments are seized.
• Injunctions to prevent or to stop infringements.
• Deterrent-level criminal penalties against infringements
that are committed for economic benefit or that cause
substantial harm to rights owners.
• Effective border measures empowering customs officials
to seize infringing imports, exports and trans-shipments
on their own initiative.
2. Regulation of optical disc manufacturing
The replication of pressed CDs and DVDs takes place in a
relatively limited number of large-scale mastering and
manufacturing facilities. Anti-piracy regulation covering
optical disc (OD) plants is essential in order to stop the
production of infringing and counterfeit goods at source,
before they are dispersed widely and hurt domestic and
foreign markets.
Any country with high CD production capacity, and in
particular overcapacity, should adopt OD plant regulation in
order to maintain the level of transparency and business
practices necessary to promote legitimate manufacturing
and deter piracy. OD plant regulation is already in place in
China, Macau, Hong Kong, Malaysia, Taiwan, the
Philippines, Bulgaria, Ukraine, and Poland. Legislative
projects for OD plant regulation are underway in Indonesia,
Singapore and Thailand.
Many more countries are in need of effective OD plant
regulation, based on the experience of IFPI’s enforcement
teams. At present, a number of countries clearly stand out
as needing such regulation, particularly the Russian
Federation, India and Pakistan.
IFPI/MPA presentation at the Motion Picture Association (MPA)
Anti-Piracy Conference in Barcelona
Destruction of pirate product in Romania
Governments’ top priorities in the
fight against piracy can be broadly
summarised as follows:
• Strong and up-to-date copyright laws.
• Enforcement rules that permit effective action
against any act of infringement, including
expeditious and deterrent remedies.
• Regulation of optical disc manufacturing.
• Political commitment to prosecute copyright
crime aggressively.
• Stepping up international pressure on
governments.
eighteen
• Freeloaders: Because of the relative low cost of the raw materials, pirate profit margins are close to 100% but
the pirates add no value to the creative industries. Pirates illegally copy and sell only the recordings of the most
popular international stars and local icons, pocketing the money and leaving the legitimate record business to
do all the investment and to take all the risks in producing music.
• The victims: Piracy is not a victimless crime. The economic losses due to piracy are enormous and are felt
throughout the music value chain. The victims include the artists and all those involved in the performance of
music; governments which lose hundreds of thousands in tax revenues; record producers, who are forced to
reduce artist rosters; and consumers, who get less diversity in the music that can be produced.
• Links to organised crime: Most pirates are sophisticated and organised. They are able to obtain and sell
valuable intellectual property before it is even released in the legitimate marketplace. The proceeds from pirate
sales fund ruthless criminal enterprises. They are encouraged by poor laws, weak enforcement and inadequate
legal penalties.
• Local culture suffers: Piracy sucks the lifeblood out of local culture. Talented artists in the high piracy markets
of China, India, Africa, the Middle East, Eastern Europe and elsewhere cannot get local recording contracts and
have to try to make a living from touring, or move elsewhere, which means that the cultural wealth of their
home country suffers.
• A global problem: Pirate operations are increasingly international and cross-border. The most effective way of
fighting piracy is by inter-governmental co-operation on enforcement strategies.
music piracy - the facts
IFPI represents the recording industry worldwide with over 1,450 members
in over 70 countries and affiliated industry associations in 48 countries.
3. Effective prosecution and deterrent penalties
Even where adequate laws are in place, rights are not
effectively protected unless governments commit resources
and political will to bringing prosecutions and deterrent
penalties against copyright infringers. It is also critical that
they put in place teams of prosecutors that have experience
in intellectual property crimes.
The inexperience of many courts in copyright matters can
also make it difficult for governments or rights holders to
enforce their rights through the legal process. IFPI therefore
strongly supports the creation of specialist intellectual
property courts that can hear piracy cases. Whether or not
such courts are established, it is essential that the judiciary
treat copyright infringement as a serious matter and impose
penalties that act as an effective deterrent to music piracy.
This is a legal obligation on countries that are members of
the WTO under the TRIPs Agreement.
Stepping up international pressure on countries which are
failing adequately to enforce intellectual property rights is a
vital and effective way of bringing about real change. The
regular reviews conducted by the US government under 301
legislation play a vital role in monitoring progress
internationally. Inter-governmental pressure needs to be
stepped up in several arenas, including the World Customs
Organisation (WCO), the World Trade Organisation (WTO),
the World Intellectual Property Organisation (WIPO), and at
regional level, for example, via the internal and external
policy initiatives of the European Union.
the call to governments
Russian band Drugie Pravila speak out for artists at an anti-piracy press
conference in Moscow
Published by IFPI July 2004
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