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Israel Faces US Sanctions Over Software

By Judy Dempsey in Jerusalem (02/18/1999)

London Financial Times


Israel risks sanctions under US trade law unless it enforces legislation to combat pirated music, software and compact discs, US diplomats said yesterday.

The warning followed repeated US requests to the Israeli government to tighten legislation.

"We have not seen as much progress as we like to," said Edward Walker, US ambassador to Israel. "Israel's fundamental interest must be protecting intellectual property rights."

Sanctions would undermine Israel's export growth, increasingly driven by the high-tech and software sectors. Software exports grew 15 per cent last year, reaching almost $600m, while high-tech exports exceeded $2.5bn.

The piracy of software, particularly CDs, has also spread to areas controlled by the Palestinian Authority, US officials said.

Israelis and Palestinians involved in the counterfeiting business recently set up two manufacturing units in the West Bank cities of Hebron and Nablus to produce pirated CDs. Once manufactured, the software is transported to Israel where it is distributed.

US companies have repeatedly complained about Israel's failure to protect intellectual property rights. The International Intellectual Property Alliance - which lobbies on behalf of industry for copyright protection - this week asked Charlene Barshefsky, the US trade representative, to name Israel a "priority foreign country" under US trade law - a provision which would give Israel six months to take action or face sanctions.

US companies claim to have lost more than $170m in revenues during 1997 because of Israel's export-driven pirate audio CD market. US officials warned that other companies would not invest in Israel or provide venture capital unless legislation was tightened.

According to the Business Software Alliance (BSA), the US-based industry lobby, nearly 70 per cent of all software installed on computers in Israeli businesses in 1996 was illegal.

Israeli trade ministry officials said they were taking measures to push through new legislation. They pointed out that the maximum prison sentence for piracy was already three years and the maximum fine Shk1bn ($247m).

But Deborah Schwartz, economic affairs counsellor at the US embassy in Tel Aviv, said that of the 225 criminal cases of piracy brought before the courts last year "not one single sentence was made and there has been no movement on the legislative front. What is taking place in Israel is plain burglary".

Israeli recording artists are also demanding tougher action.


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