RIAA Files Special 301 Report With USTR Outlining Problems in 55 Countries

RIAA Files Special 301 Report With USTR Outlining Problems in 55 Countries; Trade Group Recommends that USTR Initiate Trade Investigations Against the Ukraine and Israel

Washington, DC - February 18, 2000 - In cooperation with the International Intellectual Property Alliance, the Recording industry Association of America today filed a report with the United States Trade Representative outlining the problems that U.S. record companies face conducting business in foreign marketplaces. The report is filed in accordance with Special 301, a provision of U.S trade law requiring the U.S Trade Representative to identify countries that deny adequate protection of intellectual property with respect to standards and enforcement.

RIAA today joined its copyright brethren in calling for the Office of the United States Trade Representative to initiate investigations into the practices of two of the biggest global producers of pirate CDs -- the Ukraine and Israel. This filing comes after extensive dialogue with these Governments failed to produce meaningful action. Both countries are primary sources of pirate CDs for the world's markets.

The Ukraine produced and exported an estimated 30 million pirate CDs last year, resulting in losses to the music industry of at least $210 million. Ukraine's estimated production capacity stands at about 70 million units per year, vastly outstripping the legitimate demand for optical media products. Pirate CDs from the Ukraine flood surrounding markets in the CIS and Eastern Europe, and is regularly found in Western Europe.

According to Neil Turkewitz RIAA Executive Vice President, International, “As the Bulgarian Government clamped down on CD pirates, they sought refuge. Unfortunately, the Ukraine has provided safe shelter and a new home base, and we look to the Ukrainian Government to take swift and effective action against these organized criminal enterprises.”

Israel, which has traditionally been an important market and repertoire source, has been ravaged by piracy in recent years, resulting in a sales decline of approximately 50% and significant reductions in investment in the creation of new recordings. Israel both imports and exports pirate CDs, and is home to a manufacturing base out of line with its legitimate requirements.

The Israeli Government has only recently begun to pay any attention to this dire situation, and has left industry completely alone in its fight against criminal piracy. Israel's current record on enforcement is dismal, and incompatible with the requisites imposed by the WTO TRIPS Agreement. “The piracy situation in Israel affects Israeli creators first and foremost, and it is our sincere hope that the Government of Israel will, in the next few months, take the necessary actions to reverse the present downwards spiral. If it does not, we look to the U.S. Government to find that Israel fails to provide adequate and effective protection, and to act accordingly,” said Turkewitz.

Added Turkewitz, "This year's filing continues a trend that has developed over the past few years of focusing on countries that are involved in the production for export of pirate product, and of identifying those countries that have not effectively engaged notwithstanding repeated attempts by industry and the U.S. Government to draw attention to the issue. Requesting relief from the U.S Government in the form of trade investigations is our least preferred option, and comes about only as the result of exhaustion of alternatives. In particular, U.S trade action has the unfortunate consequence of masking what is generally a mutuality of interest between countries and their private sectors. Rampant piracy completely undermines local creativity, economic development and competitiveness, and effectively addressing this problem brings great gains to the relevant country."

Other Highlights Of The Report

Today's multi-industry filing addressed problems in 55 territories, including Poland, the Czech Republic, Taiwan, China, Paraguay, Brazil, Russia and Australia. Taiwan and Paraguay have been major players in hosting activities of some of the principal organized criminal enterprises involved in the manufacture and global distribution of pirate CDs. Poland and the Czech Republic have presented major difficulties with respect to the manufacture and sale of unauthorized back-catalog recordings. China, Brazil and Russia are the largest markets in the world for pirate music, and suffer from tremendously high levels of piracy in their internal markets. The industry report to USTR also addresses problems in the Baltics and CIS relating to their increased role in the production, distribution, transshipment and/or retail of pirate product, and highlights current violations of trade agreements reached by these countries with the United States. Finally, Australia is highlighted because it is presently considering legislation that is critical to the future of the copyright industries in the information age -- the protection of technical measures used by copyright owners to guard against unauthorized uses of their property. Measures currently being proposed in Australia would effectively undermine a key component of the ability to enforce copyright protection, and would turn Australia into a hacker's paradise.

Notably absent from this year's filing are two long-time residents of Special 301 lists -- Hong Kong and Mexico. Hong Kong, home to the greatest concentration of optical media production facilities in the world, has adopted strict controls over the operation of these plants, and has amended its legislation to bring copyright offenses under their serious crimes ordinance. According to Turkewitz, these actions, coupled with a burgeoning anti-piracy presence, lead us to conclude that Hong Kong is on the right track and will soon have piracy under control if it continues in the direction that it has now identified as necessary for its development and competitiveness. Mexico does not present as clear cut a picture, but legal and enforcement reforms that have lead to some significant positive developments, in conjunction with a political commitment to a dialogue with the United States, suggest that Mexico too has made a decision that effective enforcement is critical to its own economic, social and political interests. The RIAA hopes that these developments are indicative of what is to come, and the trade group will be working closely with our Mexican colleagues and the respective Governments to continue this march.

The RIAA is a trade association whose members create, manufacture and/or distribute more than 90% of all legitimate sound recordings produced or sold in the United States.

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The Recording Industry Association of America (RIAA) is the trade organization that supports and promotes the creative and financial vitality of the major music companies. Its members are the music labels that comprise the most vibrant record industry in the world. RIAA® members create, manufacture and/or distribute approximately 85% of all legitimate recorded music produced and sold in the United States.

In support of this mission, the RIAA works to protect the intellectual property and First Amendment rights of artists and music labels; conduct consumer, industry and technical research; and monitor and review state and federal laws, regulations and policies. The RIAA® also certifies Gold®, Platinum®, Multi- Platinum™ and Diamond sales awards as well as Los Premios De Oro y Platino™, an award celebrating Latin music sales.