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. Last Updated: 07/27/2016

Police Make First Pirate Software Bust

In the first major crackdown on Russia's $1.3 billion dollar intellectual piracy market, Moscow police have raided two local computer firms and confiscated illegal computer software.

Police described the move as a signal that Russia is finally getting serious about protecting intellectual property rights, which are blatantly ignored by most vendors of computer software, CDs and other high-tech products.

"The state is seriously concerned with the problem of violations of intellectual property rights, as the raids that were conducted show," Andrei Filinov, a representative of the economic crimes unit of Moscow's international affairs department, GUVD, said in a statement.

After a tip-off from an "information operative," the GUVD targeted local firms NPP Vysokiye Tekhnologii (High Technologies), which sells CD-ROMS, and Triatoris, which as Norton Utilities -- software owned by the U.S. firm Symantec -- as well as other Microsoft products.

"Internal Affairs will be examining who is selling illegal software, as well as who is illegally installing it on computers," Filinov said.

The catch, though, is that nobody seems to know what to do with the perpetrators once they're found. There have been no arrests because criminal law calls for only a small fine, and, according to Microsoft, Triatoris continues to sell computers with the unlawfully obtained software already installed. Triatoris officials declined to comment Wednesday.

"The arbitration court can decide what action to take, if any," a spokesman for the economic crimes unit of the GUVD said Tuesday. "The question is up to Microsoft, whether they take it to court. It's their personal problem."

As it stands, Article 144 of Russia's Criminal Code stipulates that those who violate intellectual property rights receive two years of obligatory labor or a fine of up to three times the monthly minimum wage, or about $45.

But if Microsoft or Symantec does press charges, the stakes could multiply. Under Article 18 of the 1992 Law on Legal Protection of Computer Programs and Databases, owners of the property rights may demand through the courts compensation for damages, including profits illegally obtained by the firm, or a fine of up to 50,000 minimum wages, or abut $730,000, according to the law firm Pepper, Hamilton & Scheetz.

Both U.S. software firms said Wednesday they are awaiting a decision from the Business Software Alliance, an international trade organization of major software producers that lobbies around the world to combat piracy.

"Microsoft Russia works through the BSA and their lawyers. If they consider it a successful possibility they'll tell us," said Yevgeny Danilov, project manager for Microsoft Russia. "So far we are working and so far we have no official plans."

According to a lawyer from the law firm Latham & Watkins, BSA's legal counsel, no decision has been made.

"We are considering evidence and have not decided yet whether to bring a lawsuit," said Anna Goldin. If given the green light, lawyers could file directly with the arbitration court or appeal to the Anti-Monopoly Committee.

Danilov said if Microsoft were to win damages from the case, the company would use the money to help develop the Russian software business, because piracy is a huge problem not just for foreign companies but for struggling Russian programmers.

"There is a huge mass of Russian software vendors who are suffering from this. They will never write those programs because they know they will be stolen," he said.

Still, Microsoft -- which dominates the world software market -- is an easy target for copycats. "You can virtually take any second pirated CD and it's got something from Microsoft," Danilov said.

Sergei Savinov, marketing manager for Symantec, said about 99 percent of Russia's 5 million personal computers carry an illegal version of Norton Commander, a file manager, or Norton Utilities, which protects data.

"Piracy is really a big problem for us," he said, adding that Norton Commander sells for about $50 to $60.

Part of the problem with the police force's new get-tough policy is that officers don't know what to look for. The BSA has been teaching them to spot the difference between a legal software program and a fake. "Police started to make raids, which is good, but the bad thing is they are not qualified enough to make these raids," said Danilov.

Foreign executives have long decried the insecure status of intellectual property in Russia, and the issue was high on the agenda during talks this week surrounding the Gore-Chernomyrdin Commission's semi-annual meeting.

The Commission agreed to push for further discussions on "...ensuring that intellectual property is protected both in Russia and in America," U.S. Vice President Al Gore said at a Tuesday news conference. Also here for the talks was Secretary of Commerce Mickey Kantor, who in his role as U.S. trade representative fought fiercely for tighter rules on intellectual property in China and other Asian countries. He was equally tough with Russia, one observer said.

"It is an issue that is near and dear to his heart, and he definitely raised it most forcefully in the Commission over these last two days," said Peter Charow, executive director of the American Chamber of Commerce in Russia.

The chamber itself is an outspoken advocate of protecting intellectual property rights. It put the total cost of intellectual property theft at $1.3 billion in the last few years. In a June white paper on the topic, the group concluded that "more proactive initiatives are needed, as Russia's commitment to solving [intellectual property rights] questions is being questioned by the international community."

Charow, though, gave kudos to the initiative of the economic crimes unit, saying the raids are "great news."