Special Report: Russia Amends IP Law In Advance Of WTO Accession

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As of September of this year, Russia is expected to become the 154th member of the World Trade Organization – 19 years after the accession application was received and the Working Party on the Accession of the Russian Federation established in June 1993. In advance of the accession, the Russian intellectual property rights law is being amended to meet the WTO accession requirements.

The Accession Package was adopted by WTO members at the Ministerial Conference on 16 December 2011, and on 7 June 2012 the Accession Protocol was submitted for the ratification of the Russian State Duma, the lower house of the Russian Parliament. It was ratified on 10 July, and once the WTO secretariat receives the notification of the ratification, Russia’s accession will be completed.

At present, Russia remains the biggest economy outside the WTO, and aspirations to benefit from its integration into the global system of trade relations are high, both, at Russia’s and trading partners’ ends. It is “a win-win deal” that is expected to “cement the integration of the Russian Federation into the global economy,” as pronounced by the WTO Director General in a statement on Russia’s accession.

Although Russia has amended its legislation in recent years in an effort to raise intellectual property rights protection up to the standards of the international IP treaties, the Russian IP legal framework and its compliance with the TRIPS standards raised many ‘concerns’ and ‘requests for clarifications’ from WTO members during pre-accession negotiations. The Report of the Working Party on the Accession issued on 17 November 2011 (henceforth, ‘the Accession Report’) documents these concerns, as well as Russia’s commitments to adopt national legislation to adhere to the WTO requirements.

Russia’s Current Law Development

In parallel to the Accession Protocol, another major document has been underway for president’s signature: the Draft Federal Law ‘On Amending the First, Second, Third and Forth Parts of the Civil Code of the Russian Federation, and other Independent Acts of Legislation of the Russian Federation’ introduced to the Russian State Duma in April by Dmitry Medvedev at the end of his presidential term.

The revisions took almost four years, contain over 2,000 amendments encompassing all four parts of the Civil Code, and are considered as the major legislative initiative since the 1st Part of the Civil Code was adopted in 1995.

According to [in Russian] now Prime Minister Medvedev, the draft law presents significant modernization of key provisions of the civil legislation.

As characterised [in Russian] by Minister of Justice Alexander Konovalov, the novelties reflect the vast judicial practice accumulated during the past 15 years; they are “not political by nature, but driven by life and based exclusively on the interests of the Russian commercial intercourse, Russian and foreign investors, and Russian citizens.”

Konovalov also commented [in Russian] that the amendments are designed to strike the balance between providing stimulus for the development and utilisation of new technologies, on the one hand, and protecting interests of right-holders, on the other.

According to [in Russian] Pavel Krasheninnikov, head of the Committee of the State Duma for the Civil, Criminal, Arbitration and Procedural Legislation, “those amendments that aim to regulate the use of the results of intellectual activity on the internet and other information and telecommunication networks, are the most substantial modifications of the Fourth Part of the Civil Code and are necessitated by mass infringements of IP rights on the internet.”

The Fourth Part of the Civil Code codified Russian IP laws and entered into force on 1 January 2008.

Copyright Protection and Enforcement in Digital Environment

Within the IP agenda, copyright protection and enforcement in the digital environment have been the particular focus of WTO pre-accession bilateral and multilateral negotiations, especially, due to Russia’s vast share in the global market across copyright-based industries, the trans-border nature of the internet infrastructure, and information intermediaries’ activities allowing for the dissemination of copyright content ever-faster and uncontrollable.

As assessed by the Office of the United States Trade Representative in the annual ‘Special 301’ report issued on 10 February 2012, Russia remains among the 10 countries recommended to be placed on the Priority Watch List in 2012.

The present amendments to the Civil Code contain norms regulating the use of copyright-protected content on the internet and other information and telecommunication networks. Among the legal novelties are the notions of ‘internet site’ and ‘information intermediary’.

The amended Article 1260 (2) defines ‘internet site’ as “a collection of independent materials expressed in the objective form and systematized in such a way that they can be posted on the internet.” Internet site is added to the list of categories of the subject matter protected under the exclusive rights after anthologies, encyclopaedias and databases.

A new Article 12531 introduces the notion of ‘information intermediary’ (or ‘internet provider’), i.e., “an entity that carries out the content transmission on the internet or provides colocation services.” The internet provider shall be liable for copyright infringement if the fault is found; however, the provider can be exempted from liability “if (1) s/he did not change the content, except when such changes were necessitated by the technical process of transmission; (2) did not know and did not need to know that certain IP-protected content was used unlawfully by the transmission initiator.”

The ‘did-not-need-to-know’ defence might leave room for speculation as to under which conditions the ISP’s knowledge that certain material is infringing would be necessary, and what might constitute the ‘necessity’ of such knowledge. The law does not specify liability criteria, nor distinguishes secondary, or contributing, liability of ISPs.

However, more detailed criteria can be found in the recent judicial practice. In the decisions in ‘Masterhost’ (2008) and ‘Agava Hosting’ (2011) cases, the court concluded that by performing purely technical functions, the ISP did not use works as such and, thus, could not be held liable for copyright infringement. The court highlighted the following criteria allowing to infer copyright infringement by an ISP: an ISP has to be proved (i) to initiate the transmission of information; (ii) to select the recipient of such information; (iii) affect the integrity of the information; and (iv) not to undertake preventive measures against the use of the protected subject-matter without the consent of the right-holder.

Some recent cases between right-holders and file-sharing websites might illustrate the development of the court’s position on the question of liability for digital infringement.

For instance, ‘VKontakte’, Russia’s largest social network site with over 120 million registered members worldwide, has been recently involved in parallel litigation, and the court’s standpoint has not been constant.

In 2008, the Russian State Television and Radio Broadcasting Company (VGTRK) sued ‘VKontakte’ for the unauthorised use of the film ‘Ostrov’, i.e., making the film available for downloading enabled by built-in applications of the website.

In brief, the court of the first instance dismissed the case having revealed that the film was no longer found at the alleged site at the time of the proceedings. On appeal, the arbitration court dismissed the case, reasoning that the current legislation does not impose on ISPs the obligation to monitor for infringement the stored and transmitted information, and, since the plaintiff did not inform the defendant about the unlawful use of ‘Ostrov’ on the internet, there was no fault, either in the form of intent or negligence.

In March 2012, the Supreme Arbitration Court of the Russian Federation stayed proceedings against ‘VKontakte’ urging the re-examination of the circumstances in light of the judicial position of the Supreme Arbitration Court developed in the above-mentioned cases ‘Masterhost’ and ‘Agava Hosting’.

In another case – VKontakte v. Gala Records – the court ruled for the first time that the ISP was liable for copyright infringement (IPW, Enforcement, 30 May 2012).

Free Licence

Article 1280 of the Civil Code ‘On Regulating Free Reproduction of Software Programs and Databases’ will be supplemented by a provision on simplified software licensing. Such licence will present a contract of adherence of a shrink-wrap or click-wrap licence type. Except when agreed otherwise, the licence will be considered royalty-free and limited to the period of the ownership of the copy of the software.

Another type of the open licence will be regulated under Article 1233 ‘On the Disposal of the Exclusive Right’ that will provide for the right-holder to licence his/her results of intellectual activity on the royalty-free bases. Such licence will be limited in scope to certain, explicitly expressed, uses and valid for five years in the territory of the Russian Federation, if not stipulated otherwise. The right-holder will not be allowed to grant such type of licence if a paid licence for the same scope of rights has been granted earlier.

The free licence shall be published on the official site of the Russian federal executive authority for intellectual property – Rospatent, and during the term its conditions cannot be annulled.

Technical Means of Protection

During the WTO accession negotiations, members expressed concerns related to provisions on technical protection measures, which, in their view, needed to be refined to prevent the development of commercial services assisting individuals with circumvention. In particular, the discussion touched upon the scope of Article 1299 (2) (2), which specifies what actions are prohibited as undermining the protection of exclusive rights provided by the technical means of protection.

In response to these concerns, the representative of the Russian Federation confirmed that, from the accession date, Russia would ensure that “Article 1299 would be interpreted and applied in a reasonable manner in respect to technical means that were directed to circumvent technical protection measures based on criteria such as whether the device or service was promoted, advertised or marketed for the purpose of circumvention, whether the device or service had a purpose or use that was of limited commercial significance other than to circumvent technical means of protection, and whether the device or service was primarily designed, produced, adapted or performed for the purpose of permitting or facilitating circumvention of technical protection.” (see Accession Report, § 1232)

This language is currently not reflected in the amended Article 1299. Its revised version is supplemented by the provision stipulating that “in cases when the use of a work is allowed without the consent of the author or another right-holder and such use cannot be implemented because of technical measures of protection, the entity willing to implement such use can require from the author or another right-holder either to remove technical means of protection, or allow the use, upon the choice of the right-holder.”

Collective Management Organisations

During the WTO accession negotiations, some members of the Working Party on the Accession of the Russian Federation persistently raised concerns regarding the non-contractual administration of rights by collective management organisation. They requested the elimination of the grant of licences of exclusive rights by CMOs without concluding a contract with a right-holder, and the adoption measures for monitoring and holding CMOs accountable “to ensure that right-holders received the remuneration” (see Accession Report, §§ 1213 – 1219).

In short, Article 1244 of the Russian Civil Code allows only a state-accredited organisation to administer an exhaustive list of rights on a non-contractual basis. In response to the concerns expressed by Members of the Working Party, Russia undertook the obligation to review its system of collective management of rights in order to eliminate non-contractual management of rights within five years after Part IV of the Civil Code was enacted, i.e., by 1 January 2013.

Although it was expressly requested by members of the Working Group to further amend Article 1244 (see Accession Report, § 1215), the draft amendments leave it unchanged.

Domain Names and Cybersquatting

Cybersquatting is currently not regulated under the Civil Code, although the need for norms defining domain administrators’ responsibilities and regulating the use of domain names can be observed in the recent cybersquatting disputes, such as over longines.ru, tissot.ru and windows.ru domains.

Some provisions regulate the use of domain names in relation to trademark registration. For instance, previously, Article 1483 ‘On Grounds for Refusal of the State Registration of Trademarks’ contained paragraph (9) (3) providing that a trademark cannot be registered if it is identical to a domain name, the right to which arose before the priority date of a trademark.

The amended article will exclude domain names as a possible ground for refusal of trademark registration. The reasons behind this were concerns raised by WTO members during the accession negotiations stating that domain names are not recognised as intellectual property under the TRIPS, or other IP agreements (see Accession Report, §§ 1252, 1253).

Overall, revisions affect about 600 articles of the Civil Code. Revisions are available here [in Russian].

Other IP-related amendments concern provisions on the procedure of the state registration of contracts for licensing and assignment of IP rights; registration of utility models (substantive examination requirement); registration of trademarks (specifying more precisely grounds for refusal); the right to claim compensation instead of damages in cases of infringements of patent and utility model rights; the enlarged and more specified fair use exemptions category, and other.

The amendments have already drawn international attention and were discussed during the 11th Meeting of the EU-Russia IP Dialogue held in Moscow on 14-15 June 2012.

The draft law on amending the Civil Code passed the first reading at the Russian State Duma on 27 April and is currently undergoing preparations for the second reading. Earlier, it was announced that the amended Civil Code can be enacted as of 1 September this year; presently, the term of enactment is discussed to be extended till the end of 2012 or even beginning of 2013.

Ms. Daria Kim (Russia), a researcher with Intellectual Property Watch, holds an LL.M. degree in Intellectual Property and Competition Law from Munich Intellectual Property Law Center. She specializes in copyright management and has been working for art and non-profit organizations, such as Eifman Ballet Theater and the Farukh Ruzimatov Foundation ‘The Reneissance of the Ballet Art’.

Daria Kim may be reached at info@ip-watch.ch.

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