"Damage to US industry from unauthorized copying in Israel amounted to $148 million in 1998", a US International Trade Administration (ITA) official told "Globes". "Four out of every $10 spent on CDs in Israel goes to counterfeiters".
According to ITA figures, the US CD industry suffered $60 million damage in 1998. Damage to the US business software sector totaled $48 million. Video games manufacturers lost $20 million, and the movie industry $11 million. According to the source, Israeli pirates have begun to infiltrate the book publishing trade. The source stated that Israeli publishers translated books published in the US, without purchasing the copyright from US publishers. The loss is estimated at $1 million.
"What we find so disturbing about Israel is that fact that so many pirate products from Israel make their way to markets outside Israel, even though the products are protected by intellectual property regulations", the official stated. "That is why we define Israel as a center of pirate activity. It's a harsh term, but it's accurate."
In the section of its report on copyright violations concerning Israel, written in April 1999, the ITA contends that the theft of intellectual property rights in CD's, video games, and computer software "dominates Israeli markets".
An ITA media communique stated "Israeli copyright law is unsatisfactory. Enforcement and punishment are ineffective. Counterfeit optical products (i.e. video) are extremely profitable. The extent of counterfeiting of CD's, video games, and computer software threatens the legitimate market for these products. Israel has become the distribution center of an international video counterfeiting network, and a large part of the counterfeiting is done in Israel".
Israel's economic attache in Washington, Ohad Marani, admitted that the situation is not ideal, but claimed it had improved and was improving further. "I am saying as clearly as I can that Israel has achieved significant progress in protecting software copyright", he stated. "There is great improvement to this end in governmental, public, and commercial systems.
"Pirated software is no longer used in government ministries. The Accountant-General issued an express order requiring companies competing in public tenders to prove that their computer systems are free of piracy. The IDF no longer has pirated software. Higher awareness and compliance are becoming the norm. The lack of normative behavior until now was not due to any order to illegally copy software, but to the lack of an order against copying. We can now say that the plague of software copying is not as bad as before".
Marani admits, however, that the problem in music CD's is severe, "We admit it, and the police are aware of it", he says. "We have begun an energetic campaign on all fronts: enactment of laws, detection, and enforcement."
According to Ministry of Industry and Trade estimates, the ITA is subject to continual pressure from US companies for more severe handling of what is described by them as Israeli violations of intellectual property rights. Israel is included in this year's "priority watch list". US companies considering themselves victims of counterfeiters in Israel are pressing the ITA to classify Israel as a "priority foreign country", due to Israel's continuing failures in copyright matters.
The classification of Israel as a "priority foreign country" will allow it six months to negotiate with the US government to settle claims against it. If the problems cannot be settled in this time span, the US government will be entitled to enforce quota sanctions against Israel on its exports to the US.
The Ministry of Industry and Trade fears that these sanctions may include severe consequences for all Israeli exports, since the US customarily enforces quota sanctions against all important imports from a country against which the retaliatory measures are taken.
The decision whether to reclassify Israel on the priority watch list will be taken at the end of December. What can be expected? The senior ITA official states that the ITA is encouraged by declarations by top Israeli figures of willingness to eradicate piracy, but "we are interested in what the Israeli government can do". In other words, talk is not enough.
What must Israel do? Each side presents its viewpoint. According to data presented by Israel to the US, a police unit has been established with a NIS 1 million ($235,000) budget, with 12 positions. Only five positions have actually been filled, however, and there are those that claim that the unit's being scattered among different regions prevents enough deterrent enforcement operations from taking place. The police claim that this year has seen a sharp increase over 1998 in its anti-counterfeiting activity. The police conducted 215 anti-counterfeiting enforcement actions in the first half of 1999, compared with 227 for all of 1998, and these resulted in 50 cases being brought for prosecution. The northern region saw 17 actions during May and June, in which 20,000 counterfeit CD's were seized.
The ITA, on the other hand, claims that the Israeli police do not grant priority to anti-piracy operations. "The police only act when some industry representatives in Israel supply them with information", a source said. "US industry actually funds the raids. They supply the police with funds and resources".
The US is not even satisfied with enforcement operations of the Ministry of Industry and Trade. In unofficial talks with US embassy officials in Tel Aviv, the officials claimed that inspectors of the Ministry of Trade and Industry, which is also responsible for consumer protection, should assist in copyright enforcement.
Israel argues otherwise. According to the Attorney General's directive, Ministry of Trade and Industry inspectors should not directly engage in protection of intellectual property rights, since the matter concerns manufacturers' rights, not consumer rights. In any case, if the inspector is aware of a counterfeit product sold to consumers, he must report it immediately to his superiors.
The US is also convinced that police raids are pointless, if the courts levy light punishments. Head of the economic department of the State Attorney's Office Shimon Dolan, who studied the subject in the US in May, personally prosecuted three cases in order to set a precedent for future sentencing. The three investigations are going full steam, but there is no certainty that judgement will be rendered by December 1999.
Estimates in Washington are that Israel's status will not be changed in December, despite the ITA's dissatisfaction. After all, when CD counterfeiting is compared with the problem of peace between Israel and the Palestinians, it is clear what is important.
Published by Israel's Business Arena on November 8, 1999