Ukraine should step up its efforts against piracy and counterfeiting – EU-Ukraine Dialogue on Intellectual Property Rights

Ukraine committed to bring its Intellectual Property Rights (IPR) laws in compliance with the EU acquis and enforcement practices as it is stipulated by the Deep and Comprehensive Free Trade Agreement (DCFTA) as part of the Association Agreement which has been applied since 1 January 2016. Reforms are envisioned in the area of copyright, trademarks, designs, topographies of semiconductors, patents, plant varieties and civil and border enforcement. These will enable Ukraine to be fully integrated into the world trading system, to continue to attract foreign investment and to prevent major losses for right-holders. The implementation of these reforms is on the agenda of the annual EU-Ukraine inter-government Dialogue on Intellectual Property Rights. The latest 17th IPR Dialogue took place in Kyiv on 26 June 2019.

At the IPR Dialogue, the Ukrainian side represented by the Ministry of Economic Development and Trade (MEDT) presented the main elements of the draft 5-year IP Strategy and reported its progress on a number of draft laws with the view to align the Ukrainian legislation with the Ukraine-EU Association Agreement. The MEDT is also preparing a draft law to address some of the shortcomings that emerged in the recently adopted law on collective rights management. All the technical work has almost been done and the MEDT plans to submit these new draft laws to the Verkhovna Rada after the elections.

Ukraine sees the formation of the Specialised IP Court as a priority and plans to complete the selection of its judges by the end of 2019. Simultaneously, the establishment of the new IP Office is ongoing and is scheduled to finish in 2020. The European side has offered to provide technical support to Ukraine in these areas.

During the dialogue, the EU representatives expressed concerns about the slow implementation of Ukraine’s commitments under the Association Agreement, especially in the areas of copyright, trademarks, patents and enforcement. Ukraine needs to step up efforts to align its laws with the EU norms and to create the necessary institutions for the management of IP rights as well as to strengthen measures to fight against counterfeiting and piracy.

The EU representatives emphasized that intellectual property rights infringements result in severe losses to the Ukrainian economy, decreasing investment and government revenues, and killing jobs in the creative and innovative industries. They also pose a significant risk to citizens who often simply do not know whether what they are buying is safe or not. Furthermore, the link between counterfeiting and organised crime poses a major threat to the society.

On the eve of the Dialogue, the Delegation of the European Union to Ukraine, the Ministry of Economic Development and Trade of Ukraine, the Ukraine Alliance Against Counterfeiting and Piracy (UAACP) and the European Business Association organized the event “I Buy Real!” for general public to raise Ukrainians’ awareness of the issues of counterfeiting and the positive aspects of intellectual property rights.

“Our today’s focus is on the enforcement, specifically the problems related to the large scale of trade in counterfeit goods in Ukraine and attached consumer risks. Of course, this is not a Ukraine-specific problem. According to the European Union Intellectual Property Office (EUIPO) and the Organisation for Economic Co-operation and Development (OECD), trade in counterfeit and pirated products amounts annually to around EUR 460 billion worldwide. In the EU, counterfeit and pirated products amount to around 7% of its imports, or EUR 121 billion a year,” Jana Herceg, Head of Trade and Economic Section, EU Delegation to Ukraine, noted.

“A high level of protection of intellectual property rights in Ukraine is one of the main signals for business to invest into the Ukrainian economy. Therefore, a key challenge for the Ukrainian authorities is to form an effective mechanisms of preventing IP infringements, including combating piracy and spread of counterfeit products. The intellectual property protection should be a priority not only for the government, but also for the parliament of the new convocation. In addition to laws, it is also important to raise public awareness of the importance of observing IP rights, to develop a culture of respect for IP. I am confident that by uniting efforts of the authorities, business and public institutions we will create a new ecosystem based on respect for intellectual property rights,” Valeriy Zhaldak, Director of Department for Intellectual Property, Ministry of Economic Development and Trade of Ukraine, Co-Chair of the EU-Ukraine IPR Dialogue, said.

 According to European Business Association member companies, last year the proportion of falsified or illegally imported goods in Ukraine comprised inter alia: coffee – 40% (about USD 25 million), alcoholic beverages – 60% (about USD 400 million), agrochemical products – 25% ( about USD 200 million), household appliances and electronics for certain categories from 50 to 70% (USD 300-400 million).

“For example, the process of production of counterfeit coffee products begins with the import of raw materials in bulk volumes from foreign factories for the production of instant coffee with an understatement of the customs value by 2-3 times. Last year, according to EBA member companies, about 3,800 tons of coffee were imported. Coffee production alone led to more than USD 17 million in losses from the state budget. Clearly, understatement of customs values affects the cost of coffee for the consumer. But it is necessary to understand that fake coffee means quality and taste much worse than the original products,” Sergey Verbov, coordinator of the Coffee Fair Trade project of the European Business Association, said.

The meeting participants were shown samples of counterfeited clothes, footwear, toys, various accessories, cigarettes, razor blades, agrochemical and chemical substances collected in the Museum of Counterfeits by the Ukraine Alliance Against Counterfeiting and Piracy (UAACP). Some kinds of fake products, such as medicines, toys, spare parts for mechanisms and automobiles, agricultural fertilisers present a serious threat to the consumer life and safety.

Background information:

The IPR Dialogue was initially formed as part of the broader cooperation between the EU and Ukraine in the context of the European Neighbourhood Policy in 2006. It has been organised in the context of the Ukraine-EU Association Agreement since 2016. It enables both sides to exchange information on multilateral and bilateral intellectual property-related issues, on national IP legislation and practices and to identify shortcomings and proposals for improvement.

According to the OECD-EUIPO joint study published in 2017 and mapping the real routes of trade in fake goods, Ukraine was one of the four main transit points for fake goods to the EU’s market. The main channels of sending counterfeit goods to Ukraine: international postal consignments and expedited delivery of counterfeit goods ordered at foreign e-commerce platforms; goods being imported without customs control (as contraband) by sea, air or land sold to individuals at Ukrainian markets, via online stores and e-commerce platforms; domestic goods produced by small and medium businesses with unlawful use of famous brands and sold by individuals at local markets in Ukraine, through online stores and e-commerce platforms.

Ukraine’s economy is affected by a wide spread of counterfeits: legal goods cannot compete with counterfeits by price, manufacturers and distributors lose their profit, the national budget loses potential billions of hryvnias annually. For consumers, counterfeits pose threat to life and health since they are not subject to any certification inspections being a part of a criminal market.

The largest problem for legal producers is online trading with counterfeit products. There are no possible sanctions from state authorities that would help in solving this issue because of absence of physical trade place and possibility to make inspection.

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