Israel’s Growing Piracy Threat

On one side of the small, smoky office sat a former Tel Aviv police officer, now working in copyright enforcement for the Israeli music industry. On the other, the owners of a Palestinian factory reputed to be churning out thousands of bootleg compact discs a day.

Across a steel desk cluttered with overflowing ashtrays, tiny cups of sweet coffee and plates of baklava, the men spent nearly three hours one recent evening trading accusations. Then the Palestinians made a startling offer.

“We said: ‘We are doing nothing wrong. But if this factory bothers you so much, why don’t you buy it?’ ” said Nour abu Maizur, Palestinian attorney for Lazer CD Co., recalling the Feb. 24 meeting at a military coordination office in this divided city. “ ‘Or bring us the same amount of work we do now.’ ”

The Israeli refused. “We should reward them and make them legitimate?” retorted Yohanon Banon, manager of anti-piracy efforts for the Israel Record Federation. “I told them there’s a word for this: ‘blackmail.’ ”

But he and others trying to fight a burgeoning piracy problem in Israel and the Palestinian areas soon may be forced to consider such unorthodox solutions as the illegal industry not only draws the ire of U.S. recording and film producers but also threatens to cripple Israel’s own small music business.

For five years, despite increasingly sharp prods from the United States and despite this country’s stake in protecting its own growing technology industry against piracy, Israel has all but ignored its widespread counterfeiting operations, according to U.S. officials and industry representatives in both countries.

Bootleggers operate openly on pedestrian malls in Jerusalem and Tel Aviv, offering illegally copied CDs for about $5 each from car trunks or makeshift stands. The bootleggers are rarely troubled by police. The only real enforcement comes from the victimized industries in the form of private investigations and civil raids.

Now, with losses to U.S. firms estimated at $170 million a year in Israel and Palestinian areas, the Clinton administration is raising the pressure on Israel--and, to a lesser extent, on the Palestinian Authority--to crack down on unauthorized copying of CDs and cassettes, videotaped films, business software, CD-ROMs and pharmaceutical products.

The office of U.S. Trade Representative Charlene Barshefsky may take the politically difficult step of imposing trade sanctions against Israel if the agency decides to accept a recent recommendation from two powerful trade groups, the Recording Industry Assn. of America and the International Intellectual Property Alliance.

U.S. Urged to Move Toward Sanctions

In their annual report, issued in February, the organizations singled out Israel for pointed criticism, calling Jerusalem’s response to urgent calls for action “entirely underwhelming.” They urged Barshefsky to move toward sanctions by boosting Israel to the U.S. government’s most serious category of offenders against intellectual property rights. A decision will be announced in late April.

Taking tough political or economic action against Israel is never easy for U.S. administrations, given the Jewish state’s powerful support in Congress and the American Jewish community. But even some of Israel’s strongest backers say they are concerned by its inability or unwillingness to act against pirates.

“I’m a great friend of Israel and want to protect the U.S.-Israeli relationship,” said U.S. Rep. Howard L. Berman of Mission Hills, the ranking Democrat on the House intellectual property subcommittee, “but there’s no reason in the world that Israel should countenance the kind of counterfeiting and piracy that goes on there. This is something they need to do something about.”

American music industry executives said they recommended sanctions only after other efforts to get Israel’s attention failed, and amid growing evidence that locally produced CD’s and cassettes were beginning to be exported to Europe.

Neither the dollar losses nor the piracy rates in Israel come close to those of more notorious nations such as China, however. The rates also tend to be lower than those listed for virtually all of Israel’s Middle Eastern neighbors.

But U.S. officials and industry representatives say they are alarmed by two trends in Israel: pirate audio CD production that has nearly tripled since 1996 and a long-standing lack of response from the Israeli government.

“We just don’t see any willingness to take this issue seriously,” a Barshefsky aide said. “Unlike some countries in the world that have weak or corrupt institutions, that is not a problem in Israel. But this is simply not a priority for the government.”

The aide and others interviewed for this report noted the irony that Israel, with a booming high-tech industry of its own and a growing reputation for innovations in software, telecommunications and biotechnology, should seem so indifferent to the need to safeguard intellectual property rights.

“Israel is a talent pool, especially in the area of software development,” the U.S. trade official said. “Inattention to these issues is not a good mesh if Israel wants to attract foreign investment and protect its own industry.”

With the Middle East peace process stalled, Israeli high-tech companies also are heavily dependent on access to markets in the U.S. and Europe, making the possibility of trade sanctions even more significant.

And Israel, unlike China, Paraguay and other nations long considered piracy “villains” by the United States, is one of Washington’s closest allies, the recipient of $3 billion each year in U.S. aid.

Deborah Schwartz, economics affairs counselor at the U.S. Embassy in Tel Aviv, said Israel agreed last year to take steps to address the issue, including tougher enforcement and modernizing its copyright and patent laws. Most have yet to occur.

“They have now done some things but meanwhile the problem is getting worse,” Schwartz said.

Complicating the issue further is that several factories alleged to be illegal are in areas controlled by the Palestinian Authority, which operates under a hodgepodge of old British and Jordanian laws and newly minted Palestinian ones.

Israeli, Palestinian and U.S. officials say they believe some of the entrepreneurs may be working with an underground Israeli distribution network to flood Israel’s market with illegal recordings and computer software.

The Palestinian Legislative Council has yet to pass a copyright law, but officials say intellectual property rights of all kinds already are protected under international agreements signed by the self-rule government.

“We will not allow our areas to become a haven for piracy,” declared Maher Masri, the Palestinian Authority minister for economy and trade. “We want to make it clear that we will only accept legitimate enterprises.”

At the request of Israeli and U.S. officials, Masri said, the Palestinians are investigating the legitimacy of the Lazer CD, a family-owned factory that produces compact discs on the Palestinian-ruled side of Hebron. U.S. and Israeli officials maintain that the plant is producing pirated music.

But Maizur, the attorney for the Deis brothers who own the plant, said the claims are prompted by Israeli envy over a successful Palestinian business.

“This factory is legal,” he said. “We have a lot of evidence that Israelis are doing all the forgery. They are the pirates, not us.”

Israeli officials, meanwhile, acknowledge that they have been slow to act on complaints from the U.S. or even from their own affected music and software industries, but deny this reflects indifference.

“The suggestion that Israel is cavalier [toward] the violation of intellectual property rights is simply not true,” insisted Allen Zysblat, senior director of legislation at the Israeli Justice Ministry. “But it is a difficult situation, requiring resources that are not easy to put together overnight.”

He and others said the government, under concerted U.S. pressure, is finally moving toward action. Tougher copyright, patent and trademark laws that will meet international standards are in the works, and a specialized 10-member national police unit is being established to investigate intellectual property violations.

Some doubt that the new efforts will be enough to stem the tide. “It’s sad to say it as an Israeli, but I really have to pray for American sanctions in order to make my government do something,” said Ronnie Braun, managing director of Helicon Records, a major record company.

Yet one of the toughest aspects of fighting piracy in Israel may simply be persuading Israelis, from judges to police to the public, that there’s something wrong with sharing a software program with a friend, “burning” a personal copy of the new Mariah Carey CD or buying a slightly fuzzy version of a Disney movie for the kids.

“It’s a question of attitude,” Zysblat said. “If you ask someone, ‘Look, is buying counterfeit CDs as bad as stealing someone’s car?’ they’d say, ‘Of course not.’ It doesn’t seem as serious to a lot of people as it actually is.”

Israeli police have been reluctant to investigate piracy cases, and judges often have imposed light sentences, with minimal fines and no jail time.

Odd as it might seem in such a technology-savvy nation, awareness of intellectual property rights in Israel has been so low that the government recently felt obliged to underline to employees that only “kosher”--not pirated--software and CDs were to be used at their work stations.

“The government and the people have had other priorities over the years: security, the peace process, unemployment,” explained Izhar Ashdot, a rock musician and composer. “Israelis don’t really think this matters much.”

Sales of Legitimate CDs Drop 50%

The Israeli singer, who has a complete collection of pirated CDs and tapes of his music, says the copying craze is forcing him and other Israeli recording artists to delay the release of new songs, hoping that action will be taken against the counterfeiters.

“The minute a record shows any sign of success, it’s already out on pirate,” he said. “This problem is killing the music.”

Others say the pirates and those who buy their products are destroying a whole segment of Israeli culture, given the limited market possibilities elsewhere for songs in Hebrew. In the last two years, legitimate compact disc sales in Israel have dropped by 50%.

Frustrated by police inaction, Israeli record companies are now sinking their own money into anti-piracy efforts. The Israel Record Federation, made up of 16 companies, spent nearly $1 million last year to conduct private investigations, obtain court orders and pay off-duty police officers to raid illegal plants and distribution centers, said Yohanon Banon, who heads its effort.

In a rare success, the federation recently raided two Israeli manufacturing plants, confiscating thousands of high-quality illegal discs and cassettes before shutting the factories down. One, in the town of Maalot near the Lebanese border, received government subsidies last year because of its risky location.

But Banon, who spent 18 years as an undercover police officer in Tel Aviv, said he knows that for every confiscated illegal disc, there are many more in warehouses or in the distribution pipeline.

“It’s a drop in the ocean, but I believe that in the end, this effort will succeed, with pressure from the United States and the Europeans,” he said. “The good will win.”

Times staff writer Chuck Philips in Los Angeles contributed to this report.