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. Last Updated: 07/27/2016

WTO Hopes Put Piracy Fight on Center Stage

Bearing special entry passes, economic crimes investigators from Department 28 of the Interior Ministry arrived at a closed military compound in Kazan at 3 a.m. two months ago. The troops guarding the facility scoffed at the documents.

Come back later, when a commander is on duty, the soldiers said. Or just go back to Moscow. But the eight investigators, accompanied by a private detective from Hollywood's Motion Picture Association, refused to back off, according to accounts they gave later.

Their target was an optical disc factory called Laser Style that had rented space in the compound, a complex of buildings surrounded by barbed wire. The police suspected that the factory, licensed by the Culture and Press Ministry, was churning out huge numbers of pirated DVDs at night after it finished its legitimate work.

As the argument continued at the gate, six investigators and the private detective broke away. After climbing a large pipe that carried hot water into the facility, they crossed the wire, dropped down and burst into the Laser Style facility.

Inside, coming off three state-of-the-art DVD presses, were pirated copies of "Finding Nemo" and the film classic "Twelve Chairs." Police found illegal master discs for nearly 400 other movies. The factory was able to produce more than 2 million discs per month, investigators said.

With negotiations over Russia's entry into the World Trade Organization at a critical juncture, Russian officials insist they are finally getting serious about taking on the country's booming industry in pirated films, music and software. Sales of copies on streets and markets across Russia are a prime U.S. trade complaint.

According to the International Intellectual Property Alliance, a trade association based in Washington, the motion picture, music, business and entertainment software industries lost $1.7 billion in Russia last year through domestic sales and the export of pirated materials, which have shown up in 27 countries around the world. "We have started to combat the problem in a complex, urgent way," said Yury Samofalov, deputy head of the economic crimes section in the Interior Ministry. "We are going after production, distribution and retail."

Western governments and industry officials praise these efforts but say they are not yet convinced that the era of free-for-all piracy is ending. "I'm very encouraged by the concrete steps the Russian authorities are taking," said U.S. Ambassador William Burns at a U.S.-Russia round-table discussion on intellectual property protection Thursday in Moscow. "I urge Russia to sustain and continue these efforts."

Kim Berger, Microsoft's senior attorney for Europe, the Middle East and Africa, had similar words after a recent raid that for the first time exposed a factory pirating her company's software here. "Our hope is that there will be other raids like it in other facilities in Russia," she said.

The raid in Kazan was one of at least 12 on factories producing pirated materials in the last three months. At least six of the raids, including the one that found Microsoft products, took place on closed military grounds, according to the Interior Ministry and industry officials.

The raids coincided with a nationwide crackdown on kiosks, stores and markets where movies still in theaters or not yet available on legal DVDs -- "Wedding Crashers" and "Harry Potter and the Goblet of Fire," for instance -- have been on sale for as little as $3 each.

All told, police seized nearly 6 million pirated products in the crackdown, called Operation Counterfeit. Samofalov, the Interior Ministry official, said small raids would continue on a daily basis during the biggest shopping period in Russia, leading up to another major strike just before New Year's.

Russia has 45 licensed optical disc factories, a majority of them producing legal and pirated products, and at least nine of them situated on military or other officially restricted facilities, according to Russian officials and copyright holders.

In the 1990s, when funding for the Russian military collapsed, the government allowed the country's defense complexes to rent out property to private enterprises. Pirates have sought space there because police officers often have great difficulty gaining access to them, officials said.

The catalyst for the new urgency was a Sept. 9 meeting of government ministers and law enforcement officials convened by the country's prosecutor general, Vladimir Ustinov, according to a person who attended the gathering.

Interior Minister Rashid Nurgaliyev read from an official report on his department's efforts against piracy, citing so many raids and so many discs confiscated over the previous eight months.

Ustinov and Economic Development and Trade Minister German Gref immediately lambasted him.

"The general prosecutor was very tough," said Konstantin Zevchenkov, director of the Russian Anti-Piracy Organization, the Russian arm of the Motion Picture Association. "He said, 'Look around, there are pirated goods everywhere. Where are your policemen? We know all the addresses where the pirates are working.'"

For years, pirates have always seemed to know when the police are coming. The factory in Kazan, for instance, had been inspected several times before the raid in October.

Even when police seized illegal material, evidence often disappeared, prosecutions faltered and the few pirates who were convicted were generally given suspended sentences. Moreover, the police had no authority to seize the valuable manufacturing equipment. As a result, pirates were often back in business within days if not hours of a raid.

Policemen from the Interior Ministry are now conducting raids across the country, such as the one in Kazan, without informing local police in advance. About six months ago, after nearly 2 1/2 years of debate among ministries, officers from the ministry's Department 28 were given passes allowing entry into all closed military facilities where entrepreneurs had rented space.

The federal prosecutor's office has assumed responsibility for major cases, taking them out of the hands of local or regional offices that were often subject to pressure from illegal entrepreneurs, Moscow officials said. Last month, for the first time in 2 1/2 years, the Culture and Press Ministry suspended the license of a factory outside Moscow after finding pirated materials in three different raids. The license will be permanently revoked if the company is found guilty of manufacturing pirated goods, officials said. "It's a start," said Zevchenkov, "but it's a long way from victory."

Distributors of legal DVDs said they had seen increased demand for their products in the last few weeks, especially in the provinces, which suggests that the supply of pirated versions is drying up. In kiosks around Moscow, the open display of pirated discs was curtailed, at least for a few days, in late November while the well-publicized raids were under way.

"It's becoming risky for them," said Nikolai Lubavin, a merchant at the Gorbuskin Dvor market who said he sold only legal DVDs and CDs. "I felt the effect of the latest raid here. My sales went up. This place was empty because the pirates were hiding."