The government announced the beginning of the fight against piracy in Ukraine in late May. “We are now preparing a comprehensive and deep intellectual property reform, which will offer fairly radical measures intended to change the whole system,” Minister of Economic Development and Trade Aivaras Abromavicius said then.
By way of a reminder, the Office of the United States Trade Representative removed Ukraine from the list of “top pirates” in April 2015. We have “lost” the status of a Priority Foreign Country, assigned in 2013.
However, according to research done by the Business Software Alliance, the share of pirated software in Ukraine has been consistently high, standing at 83 percent now, placing it among the worst offenders in Central and Eastern Europe. Also, the commercial value of unlicensed software installed on personal computers in Ukraine is about 444 million dollars.
Obviously, the government will have a lot of work cut out for it in the coming months. It is especially so because the Ukraine-EU FTA comes into force at the start of 2016, and it, too, involves strengthening intellectual property rights protection in Ukraine as a condition of its entry into the European IT space.
The Day discussed with Microsoft’s Central and Eastern Europe Software Asset Management and Compliance Director Laurent Signoret to what extent Ukrainian legislation on intellectual property rights protection conformed to Western practices, and in particular, what countries could we learn from as we try to improve our standing in this regard.
Many Ukrainian state agencies spread the news of Ukraine’s being removed from the top pirates’ list in great hurry and with joyful enthusiasm. They commented that the US was finally appreciating our efforts to protect intellectual property rights. Do you agree with that assessment?
“I think it is way too early for any victory celebrations now.”
Why?
“The level of piracy in Ukraine remains quite high at over 80 percent, that is, the highest in Central and Eastern Europe. We are not seeing major changes in the government’s effort to protect intellectual property rights. In addition, the Ukrainian public is still very immature in this regard.”
What else, besides people’s readiness, influences the strength of intellectual property rights protection, both in Ukraine and in Europe?
“Two things are important on this issue. The first is how people assess the significance of software for themselves. That is, if one needs it, then of course one will be ready to pay for it. Secondly, the government’s legislative influence on citizens is needed as well, to make them buy original licensed software. These two factors are most important in many countries.”
I find it hard to assess today how much the government can influence such processes. Even as recently as two years ago, your colleague, Microsoft Corporation’s Worldwide Software Asset Management and Compliance Director Dinis Couto said that Ukraine’s government bodies were major “pirates” as well, using unlicensed software. Has the situation changed?
“The word ‘pirate’ is likely too harsh to be used in such cases. After all, it applies to conscious users of unlicensed software. I think that ‘pirated’ software use is very prevalent in public institutions. However, this is not because they want to use it, but because they have neither tools nor leverage to monitor what programs they obtain from their suppliers.
“Additionally, the importance of IT for society in general, and public bodies in particular, is playing a role here as well. One can consider IT as a powerful strategic tool to change society and life in the country for the better, but one can also treat it as something of minor importance.
“If you look at other European countries, they all see IT as a strategic direction for the public administration improvement. For example, you can do a lot of things online there, like paying taxes or obtaining the necessary paperwork. Their governments understand that it is a valuable tool, allowing them to properly manage social processes and govern the country, and at the same time it does not create any problems, because they use licensed software.
“Ukraine has little understanding of this. Therefore, IT and licensed software are not seen as something really valuable.”
Is Microsoft cooperating with the government to improve protection of intellectual property rights and to ensure cyber security of the country?
“Yes, we aspire and want to cooperate, do everything to make it happen. However, our proposals get rather slow responses, even if very polite at that. The fact is that other countries in the region, such as Poland, offer a great many examples of close cooperation between business community and government, which sees government agencies getting licensed software in a regular way. Some French agencies are this way, too.
“So I think that to get it all working, we need political will. In addition, our cooperation can accelerate changes that take place in Ukraine today, raise your image in the world, increase your competitiveness both in European and global markets.
“For our part, we stand ready to partner with your state.”
Over recent months, the government has been positioning Ukrainian IT industry as a future growth engine of our economy. Has the country’s leadership begun to actively respond to proposals like yours, or has the situation not changed in recent years?
“It should be understood that focusing attention on the development of the IT sector will allow Ukraine to increase its population’s educational attainment, because people will have to get a quality education to work for the wider world. It will also increase the number of jobs, in contrast to the agricultural sector, which is currently the mainstay of your economy, since agricultural modernization sees jobs decreasing. Of course, wages in the IT sector are much higher as well.
“Ukraine has everything to develop its IT sector. You have young people, college graduates who have good education and are fairly knowledgeable, making up a whole ‘army’ of software developers. However, they are working as outsourcers. The most talented of them may leave the country for good. Ukraine has every chance to become a unique success story in the region due to having such resources. The greatest obstacle for it is inadequate protection of intellectual property rights. ‘Piracy’ is thriving in the local market, so people find it very hard to protect their intellectual property rights now.”
The Ukraine-EU FTA comes into effect at the start of 2016. How well has Ukraine complied with its plan to protect the intellectual property rights?
“Unfortunately, less than half of the plan has been executed. Still, we are now seeing all sectors, ranging from government organizations to private businesses, coming to understand that software is an important resource and tool that helps them perform their functions. The consumer culture, though, is still all for unlimited Internet downloads and free software.
“Therefore, we need a serious effort aimed at educating and enlightening people, both in our industry and among the general public, to change these attitudes which they have.”
What country has had a similar intellectual property protection experience, allowing Ukraine to learn from it?
“I think Poland can serve as the best example for Ukraine. After all, history had it so that you have a lot in common, both countries were under pressure of the Soviet totalitarian regime. In addition, you emerged from all past situations much the same. The only difference is that Poland, having become an EU member, has added service industries to its manufacturing strengths and has developed an IT industry as well. Before that, Poland was, in effect, Germany’s subcontractor, mainly working for German customers. Following these changes, though, it has become a local economic power in Europe, with large companies that work on their own and benefit the Polish economy.
“As for the stages of transition, of course, stimulus from government agencies is needed. Poland had the Ministry of Finance doing it. For example, companies with licensed software saw the government reducing their taxes. This is a win-win situation for both parties. After all, when a business uses licensed software, the Ministry of Finance can see a clear picture and collect more taxes.
“Another interesting example is offered by France. They established the Agency for Protection of Intellectual Property Rights at the national level, which reported directly to the prime minister. Everything was organized so that this agency, despite its small size, coordinated work of ministries which were interested in protecting the intellectual property rights.
“A similar structure was created by the private sector as well. Given the fact that both of them were not very large, they found it quite easy to communicate and solve problems. The most satisfied were those who fought counterfeiting, smuggling, ‘pirated’ software and the like, I mean the Directorate-General of Customs, the Ministry of Justice and others.”
To respect someone else’s intellectual property rights, ordinary Ukrainians will have to spend more in everyday life, unable to watch a movie or install a program on their computer for free. What should be their motivation to make the transition?
“I think the money is not the number-one reason. Over the past decade, the cost of software has decreased significantly. In addition, Microsoft offers discounts to schools, government organizations, hospitals, non-profit and charitable organizations, the media and others. These programs allow them to purchase software licenses at much lower prices and save a lot. Software is a powerful tool and its value is much greater than the cost. With software, you create added value and invest it in the products of your labor. Similarly, journalists cannot do without software. What do you do in the morning? You check your mail, and this operation involves using software as well. Without it, you would be unable to use any IT service or device, and would find it hard to do your daily work as well.
“In this sense, software is a production tool number one. Thus, I think that linking the problem to cost, and cost alone, is a false and incorrect approach.”
However, after the hryvnia’s devaluation, Ukrainians have to pay double or triple price for imported goods. This is an appreciable increase.
“Already, there are signs of economic stabilization in Ukraine, and we hope the situation will improve further. I came to Ukraine four or five years ago, though, when the economy was stable, GDP grew, expensive cars filled the streets, but people still used ‘pirated’ software.”
You mean it has to do with people’s upbringing and mentality?
“I think so. To somehow educate people, we need a lot of time. It was just as hard to teach people to use seatbelts in cars, and it took 20 years. Both are issues of security and maturity that come with time.
“Ukraine is going through a transformation and seeing a new generation growing up. This is the time when you have to lay a seed. Childhood is the age when people should be taught to be conscious users.”
So, how many years will it take for us to catch up with Europe on the intellectual property rights protection?
“Given political will and a favorable economic climate, I would estimate it at two to four years. Of course, the level of unlicensed software use will not fall from 80 percent to zero immediately, but only to about 40 percent.
“Meanwhile, attitudes and approaches of civil servants will change faster, in about a year. Regular users will definitely need two to four years or so. I am sure that you will succeed in it, provided you will do it the proper way.”
