Cairo Magazine - The virgin and the pirates

The arrival of the Virgin Megastore will bring more CD and DVD titles to Cairo, but that might just give more opportunity to pirates.

Source: Paul Schemm

To the right of the main entrance of the massive new City Stars Center in Nasr City, a vacant building advertises what could soon be the hyper-mall’s star attraction, a Virgin Megastore offering a seemingly endless selection of books, CDs and DVDs. Virgin’s successful Beirut outlet, which opened in July 2001, seems to have piqued interest in the region and encouraged the company to open its doors to the enormous and virtually untapped Egyptian market. The store is slated to open in June of this year, but given recent scathing indictments leveled at Egypt’s intellectual property rights enforcement, Virgin may be in for a rough start.

In February of this year the International Intellectual Property Alliance (IIPA), a private sector monitoring group representing U.S.-based copyright-dependent industries, demanded that Washington refuse to discuss a Free Trade Agreement with the Arab Republic as long as it “continues to adhere to its closed trade policies, fails to afford adequate market access for U.S. copyright owners, and fails to fully implement and enforce its copyright laws.” All told, the IIPA estimates U.S.-based copyright-dependent industries lost over $72.5 million to Egyptian copyright infringement in 2004 alone and ranks Egypt as among the 18 weakest copyright enforcers in the world.

Soon after the report’s release, a coalition of research-based pharmaceutical companies published similar complaints alleging poor enforcement of drug patents. The U.S. Trade Representative responded to the demands at the beginning of March, returning Egypt to its “Priority Watch List” once again (Egypt had been rewarded for its 2002 law by being downgraded to the “Watch List”), and claimed that “Egypt's copyright enforcement remains weak, with continued high losses to the book publishing industry, high corporate end-user piracy levels, and lax enforcement against extensive commerce in pirated books, CDs, DVDs and VCDs.”

Besides criticizing the Ministry of Culture for failing to crack down on Egypt’s largest pirating networks, the IIPA report also indicted the country’s customs regime, where high tariffs on foreign copyrighted materials make it virtually impossible for legal imports to compete with pirated materials. In addition to ad valorem taxes, which can amount to 32 percent of the price of an imported CD and 87 percent of the price of a foreign film, importers are forced to pay for their own censorship services, a practice that doesn’t save Egyptian youth from corrupting influences as much as it forces them to patronize the black market instead—much of which can be found laid out on blankets along Gameat Al Dowal Street in Mohandiseen or Shawarby Street in Downtown.

Especially troubling is the widespread and generally ignored photocopying of textbooks, which may not affect a company like Virgin, but has nevertheless earned Egypt some unwanted attention. “Textbook photocopying is a major problem,” says Michael Zaug, manager of the American University of Cairo bookstore. “It’s quite substantial. We figure we sell on average half of what we could. There’s a used textbook market out there so that’s another 20 or 30 percent, so we’re probably losing the rest to photocopying.”

Cairo’s other major English-language bookstore, Diwan, has also suffered from widespread piracy, especially in the area of CDs and DVDs. Shahira Fathy, the manager of Diwan, thinks Virgin will do well in Egypt, but cautions that it will also be harder hit by piracy than some of its local competitors. “[The piracy] will affect them more than us because they depend more on CDs and DVDs, whereas we depend more on books.” Booksellers say pirates are unlikely to go to the trouble to copy popular novels when a simple CD burner is enough to enough to enter the lucrative curbside music racket.

A signatory to the World Trade Organization’s TRIPS (Trade-related Aspects of Intellectual Property Rights) agreement, Egypt updated and strengthened its enforcement regime when it passed Law 82/2002. According to Nermien Al Ali, a lawyer specializing in intellectual property rights, the laws on the books are consistent with the agreement; the problem is weak enforcement. In most cases the copyright holder must take the initiative. “You would need to catch [a pirate] red-handed, in the actual act of infringement,” Al Ali explains, “and after you find and seize the product, the next step is going to court and proving that the owner has a copyright and that this is an infringement. Because of the difficulties there are not a lot of cases in this area.”

The larger issue, she insists, is that Egypt suffers from what she calls “Imported Law Syndrome”— because the country’s copyright laws are almost entirely derived from international treaty stipulations, the court system and the authorities are ill-equipped to execute them. “Because [the law] is new, because it did not evolve in the normal way that a law usually evolves, there is a fear of action, there is a lot of indecision, and we as lawyers, trying to protect our clients’ rights, get stuck. It’s a dead end.”

Multinationals tend to be more vigilant than local companies when it comes to registering and protecting their copyrights, so the presence of a heavy hitter like Virgin in the market—besides granting consumers legal access to the latest books, CDs and DVDs— could accelerate the learning process and compel the authorities to get their house in order. Unfortunately, most copyright-dependent companies are not willing to try their luck in a market that, in the IIPA report’s words, “is essentially closed to most U.S. rights holders due to major barriers to legitimate business.”

At the height of the pharmaceutical industry controversy earlier this year many ascribed such statements to so-called U.S. industry lobbyists. Al Ali insists, however, that politics has confused the issue, which remains vitally important to Egyptian and American companies alike. “The multinationals that are trying to pressure the Egyptian government are using this as a last resort,” Al Ali says. “They are losing money in Egypt, but they don’t want to get out yet.” Many of these companies, although bearing the multinational trademark, are registered in Egypt, run by Egyptians, and listed on the stock exchange. “They provide not only high quality products, but technology, know-how, and employment for Egyptians,” Al Ali says. “They cannot really be called ‘foreign’ companies.”

Homegrown exporters are likely to suffer as well. Egypt’s continuing presence on the U.S. State Department’s “Priority Watch List” endangers not only its FTA prospects, but its continuing participation in the U.S. Generalized System of Preferences (GSP) program, which annually allows Egypt to export more that $30 million worth of merchandise to the United States duty-free, but also demands that all members provide “adequate and effective protection of intellectual property.” For Egyptian officials, it may matter little when or if the Virgin Megastore finally opens for business, but the larger consequences of inaction could be severe.