Special Report Russia’s Enforcement Against Online Copyright Infringement

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During the joint news conference held in Paris on 27 November by Russian Prime Minister Dmitry Medvedev and French Prime Minister Jean-Marc Ayrault, Medvedev was asked a question of legislative scrutiny with regard to internet regulation in Russia. In his reply, the Russian prime minister admitted that the current legislation regulating the internet is “imperfect” and called upon the international community to “consider parameters to regulate the operation of the internet on the national or international level.”

The Medvedev-Ayrault press conference transcript is available here.

This article reviews recent developments in the Russian legislation and judicial practice in the field of copyright protection on the Internet focusing on the availability and applicability of enforcement measures.

On 9 October, the federal court in Los Angeles ruled in favour of music publishers led by Warner/Chappell Music, Peermusic and Bug Music in a lawsuit against LiveUniverse.com owned by MySpace. The judge ordered LiveUniverse to pay, in total, US$6.6 million in damages for publishing lyrics online without the authorisation ($12,500 for each of the claimed 528 songs), according to a report.

The day after, a few thousand kilometres away, the Arbitration Court of St. Petersburg and Leningradskaya Oblast, Russia, ordered few times less damages – about US$ 1,600 per each of 11 songs – for which the rights had been claimed as infringed by making available without authorisation on Russia’s largest social network, vKontakte.

And whereas it is likely no one can easily recollect the US figures, the decision by the Russian court was touted in Russian press headlines as the second ‘landmark’ ruling in support of right holders and hailed by foreign representatives of recording industry.

International Concerns

The scale of digital piracy in Russia has been a growing concern among international organisations, especially as regards the operation of Russia-based websites making available copyright-protected content without the right holders’ permission.

The US-based International Intellectual Property Alliance (IIPA) earlier this year assessed the level of online and physical piracy in Russia as having reached ‘disastrous levels’ (see the IIPA 2012 Special 301 submission to the Office of the US Trade Representative (USTR), here [pdf]).

USTR keeps Russia on a priority watch list (with 13 other countries), calling for the improvement of protection and enforcement of IP rights there, particularly with regard to “the continuing challenges of copyright piracy over the Internet” (see here [pdf]).

In the context of Russia’s recent WTO accession, during the pre-accession negotiations it was mandated that Russia undertake reforms “providing for criminal prosecution and penalties under the Criminal Code for aiding in copyright infringement on the Internet, including through circumvention of technological protection measures.” In particular, the members of the Working Party on Russian Accession stated that

“Piracy on the Internet was a serious and growing concern, as right owners had documented the operation of numerous websites based in the Russian Federation that offered pirated material. Members noted that with regard to internet piracy, there has been inadequate enforcement activity in the face of increasing online piracy” (§1337 of the Report of the WTO Working Party on the Accession of the Russian Federation).

The European Commission (EC) and the Russian Federation cooperate in the area of IPRs within the framework of the EU/Russia IP Dialogue (likewise, the EC structures its cooperation with four other ‘priority countries’, i.e., China, Ukraine, Thailand and Turkey). In 2010, the EC issued a study entitled, ‘The Evaluation of the Intellectual Property Rights Enforcement Strategy in Third Countries’, in which Russia is categorised into the ‘Priority 3’group of countries (together with Ukraine, Argentina, Vietnam, Korea, Brazil, Chile, Malaysia, Paraguay). The final report is here [pdf].

International Precedent

Up till now, there has been one case when a Russian website was shut down based on a copyright infringement claim brought by representatives of foreign rights holders.

In 2005, proceedings were initiated against the website Allofmp3.com, which had been offering pay-per-download services for content without the authorisation of rights holders. The complaint on behalf of the foreign rights holders against Allofmp3 was submitted to the Moscow Prosecutor’s Office by the IFPI (London-based International Federation of the Phonographic Industry) via their Moscow representative.

At first, the action was not successful. However, in the end the website was shut down, after USTR stipulated it as one of the preconditions of Russia’s accession to the WTO.

Russian Copyright Law

Russia is a signatory to the so-called 1996 internet treaties of the World Intellectual Property Organization. In 2009, it acceded to the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT).

The obligation to protect the right of communication, including making available authors’ works and performers’ phonograms “in such a way that members of the public may access these works from a place and at a time individually chosen by them” (as provided under the WCT Art. 8 and the WPPT Art. 10), almost word-for-word corresponds to articles in the Civil Code of the Russian Federation (CC RF). In particular, these are: Art. 1270 (11) CC RF with regard to authors’ works; Art. 1317 (7) CC RF with regard to performers’ performances; and Art. 1324 (4) CC RF with regard to sound recordings.

Notably, the WCT and WPPT do not address directly the issue of internet service provider (ISP) liability. The agreed statements concerning Article 8 of the WCT mention:

“[i]t is understood that the mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of this Treaty or the Berne Convention.”

Thus, the question of ISP liability is supposed to be regulated under national laws, including, for example, determining under what circumstances “the mere provision of physical facilities” might amount to the “contributing liability” for online copyright infringement.

Currently, Russian law does not contain specific provisions regulating activities of online service providers and the use of copyright protected content on the internet. However, such provisions were proposed in the framework of draft amendments of the Civil Code of the Russian Federation that passed in a first reading by the State Duma of the Russian Federation in April 2012. (Initially, the draft amendments were expected to be enacted in January 2013. According to more recent information, the amendments have been divided into several parts for further readings, and it has not been announced yet when draft provisions related to intellectual property rights will be reviewed by the State Duma in a second reading).

In particular, among the novelties, the proposal contains draft provisions ‘On the Specifics of the ISP’s Liability’ (Art. 1253.1 of CC RF, draft version) that define the ‘information intermediary’ (or ‘internet provider’) as “an entity carrying out the content transmission on the Internet or providing colocation services,” who shall be liable for copyright infringement if the fault is proved, unless exemption provisions apply.

Such exemptions might differ. If an ISP transmitted the content on the internet, it can be exempted from the liability if

“(1) it did not change the content, except when such changes were necessitated by the technical process of transmission; and (2) did not know and ought not to know that certain IP-protected content was transmitted unlawfully by the initiator of the transmission.”

In the case that an ISP provided facilities for content distribution over the internet, it can be exempted from liability

“if (1) an ISP did not know, or ought not to know, that the use of IP-protected content was unlawful; and (2) when notified in writing by the right holder about the IPR infringement, an ISP promptly undertook necessary and sufficient measures to remove the consequences of IPR infringement.”

To some extent, these draft provisions can be seen as deriving from the recent case law. Within the past decade, there have been a number of cases in which certain rules regarding ISP liability have been developed (though ‘developed’ might not be quite the correct term as the criteria, as will be seen below, appear to adopt the norms set out in the US Digital Millennium Copyright Act).

Civil Enforcement of Digital Rights

Two judgments appear prominent insofar as they provided certain rules on which courts have been subsequently relying when considering cases on unlawful distribution of copyright-protected content over p2p (peer-to-peer) websites.

The Masterhost case

In 2007, Kontent i Pravo (‘Content and Law’) sued hosting services provider Masterhost and its service subscriber MetKom for making available a number of songs, for which Kontent i Pravo claimed rights ownership, on the website www.zaycev.net (humorously, the name of the website reads in Russian as ‘no free-riders’).

The dispute underwent two ‘circles’ of litigation. The first circle concluded with Resolution No. 10962/08 of the Supreme Commercial Court of the Russian Federation of 12 December 2008, which annulled all decisions of lower courts that had affirmed ISPs’ liability. The decision was based on the analysis of the contract between MetKom and Masterhost, which showed that Masterhost had rendered purely technical services to MetKom, i.e., provision of technical equipment as well as colocation and technical maintenance services. Furthermore, the Supreme Court formulated safe harbours exempting ISPs from liability, stating that the liability shall not be attached if the ISP

(i) does not initiate the transmission;
(ii) does not choose the recipient of the information;
(iii) does not influence the integrity of the information;
(iv) takes preventive measures against the use of IPRs without authorization.

The case was remanded to the court of first instance for a new trial. In light of the new criteria, the court exempted the ISP from the liability. Later, the appeal court reaffirmed this decision [pdf].

Top 7 v Agava-soft case

Safe harbours introduced in the Masterhost case were, furthermore, specified in the judgment in the case Top 7 v Agava-soft. The dispute arose in 2010 over an e-guidebook about Vietnam that was distributed on the internet. The travel guide contained 21 photographs for which Top 7 claimed copyright ownership.

The litigation repeated the scenario in the
Masterhost case. Again, when considered by the Supreme Commercial Court of the Russian Federation, the decisions of the lower courts holding hosting services provider Agava-soft liable were annulled.

During the ‘second circle’ of litigation, the Commercial Court of Moscow found for the defendant ordering the plaintiff to bear court fees. The court reaffirmed the position of the Supreme Commercial Court of the Russian Federation in the Masterhost case adding the new criterion of preventive measures to be taken on behalf of the ISP to avoid IP rights infringement. Overall, the decision stipulated the legal relevance of the following circumstances to be taken into account for the determination of an ISP’s liability:

(i) whether an ISP derived income from users’ activities related to the use of exclusive rights of other right holders;
(ii) whether an ISP set the limits of the volume for uploaded content and its accessibility for the unlimited audience;
(iii) whether the user’s agreement provides for the user’s obligation to comply with the legislation of the RF when sharing content online and the ISP’s ultimate right to take down the illegally uploaded content;
(v) whether technological means (software) facilitating IPR infringement were available;
(vi) whether special and efficient software programs allowing to prevent, track or delete infringing content were available.

The Decision of the Commercial Court of Moscow as of 4 September 2012 (in Russian) is here [pdf].

Recognizably, the arguments elaborated by the courts in the Agava-soft and Masterhost cases to a certain extent reflect the language of Sec. 202 Limitations on Liability for Internet Copyright Infringement of the Digital Millennium Copyright Act.

In both cases, as well as in subsequent analogous cases, the burden of proof was on the plaintiffs; the proof requirements included submitting evidence of

(i) the plaintiff’s ownership of rights being allegedly infringed;
(ii) the fact of the unauthorised use of works on the alleged infringer’s website (if screenshots and video recording must allow establish when, by whom and when they were taken; see the case between the Non-Commercial Partnership for the Development of the Market of Musical and Audio-Visual Content on the Internet vs. vKontakte, 2012);
(iii) the fact that the alleged infringer received a financial benefit attributable to infringing activities;
(iv) the fact that the alleged infringer was notified that the works were made available without the authorisation.

Criminal Enforcement

In the course of the WTO accession negotiations, Russia was required to implement reforms to provide “for criminal prosecution and penalties under the Criminal Code for aiding in copyright infringement on the Internet” (see § 1337 of the Accession report).

In response to the concerns expressed by the representatives of the member states regarding internet piracy, the Russian representative reported on “efforts on the part of the Government to shut down servers situated on the territory of Russia and websites that promote illegal distribution, which included making the object of a copyright or related right available, of content protected by copyright or related rights.”

In support of this statement, the following the statistics of 2007 were cited: the suspension of “the functioning of 90 internet sites engaged in illegal distribution of copyright and related rights objects with servers situated on the territory of the Russian Federation and 38 criminal cases under Article 146 of the Criminal Code were instituted against persons engaged in administration of these sites.”

Furthermore, Russia undertook the obligation to “take actions against the operation of websites with servers located in the Russian Federation that promote illegal distribution of content protected by copyright or related rights, such as phonograms (sound recordings) and investigate and prosecute companies that illegally distribute objects of copyright or related rights on the Internet” (see § 1339 of the Accession report).

A highly publicized case on criminal enforcement was brought in 2009 against a husband and wife named Lopukhov regarding the illegal distribution of over 30 Russian and foreign feature and animated films via the websites interfilm.ru and puzkarapuz.ru. Among the foreign right holders whose rights were allegedly infringed were Paramount Pictures Corp., Disney Enterprises Inc., Sony Picture Animation Inc., and Universal City Studios Production.

In an unprecedented element, damages caused to Russian and foreign TV companies were estimated over 38 billion roubles (approx. USD 1,223,262,000). (Press release of the Prosecutor General’s Office, in Russian, here.)

In October 2011, the Prosecutor General’s Office issued the indictment accusing the Lopukhovs of violating Article 146 (3) of the Criminal Code that prohibits the illegal use of the subject matter protected under copyright and related rights as well as purchase, storage, transportation of counterfeit copies of works or sound recordings. When carried out by previous concert and on a “significantly large scale for the purpose of sale,” such activities can be subject to the criminal penalty in the form of either (i) compulsory labour for the period up to 5 years or (ii) imprisonment up to 6 years and the fine in the amount of 500 000 roubles (approx. USD 16, 000). As specified in the provision, activities are considered to be of ‘significantly large scale’ if the value of copies of works or sound recordings, or the value of licensed rights for the use of works or sound recordings, exceeds one million roubles (approx. USD 32,000).

The case was sent for the examination on the merits to a court in Moscow. In December 2011, during the hearing by the Temiryazevsky Court, certain procedural errors made by the Prosecutor General’s Office were identified, such as the violation of defendants’ rights for defence and the abuse of authority of the investigation group. These findings were also affirmed by the Moscow city court in January 2012, and the case was remanded to the Prosecutor General Office for ‘correcting procedural errors.’ As reported, the case file has amounted to 48 volumes. For the time being, no final decision has been announced.

CMOs and Digital Rights Management

The Russian law provides for the exclusive right to control the use of works and sound recordings in the interactive way at any time and from any place individually chosen by the public (see Art. 1270 (11) CC RF with regard to authors’ works, Art. 1317 (7) CC RF with regard to performers’ performances, and Art. 1324 (4) CC RF with regard to sound recordings).

Under the civil code, the government-accredited collective management organisations (CMOs) are permitted to manage six specific categories of rights without concluding contracts with authors or other rights holders (Art. 1244 (1) CC RF). Only one organisation can receive the state accreditation, which means that the organisation can administer exclusive rights on a non-contract basis, and also, the CMO shall be exempted from the application of the antimonopoly law (Art. 1244 (2)).

Although in theory this does not preclude other organisations from managing the rights in the same areas without the accreditation, in practice, CMOs do not compete in the areas of rights management, in which the Russian law provides for the non-contract administration of rights.

Not being on the list of the rights that can be administered by CMOs on the basis of government accreditation, the making available right can be managed by CMOs on the basis of contracts concluded with the rights holders. For instance, with regard to authors’ rights, the Statute of the Russian Authors’ Society, a collective management organisation for authors’ rights, provides for

“Management of exclusive rights to published works regarding their reproduction in any material form, including in the form of audio or video recording, three dimensional copies of two dimensional work and two dimensional copies of three dimensional work, work recording on an electronic carrier including computer memory, and the distribution of thereby reproduced works, their public performance, broadcast into the air and/or via cable (including by way of retransmission), making available to the public and public demonstration, including use in the digital works (Internet, mobile communication networks, etc.)” (See § 2.1.6. of the Statute)

In the context of p2p networks, the question of whether the ISP should be targeted as the responsible party for acquiring the appropriate licenses might depend on the interpretation of the ISPs’ activities, i.e. whether they qualify as constituting the act of making the content available. In the absence of specific legal provisions and the unanimous interpretation by courts, the question whether an ISP shall bear the duty to obtain a license remains open.

On 22 October, the first Anti-Counterfeiting 2012 International Forum was held in Moscow organised with the support of the Ministry of Industry and Trade of the Russian Federation. In his keynote speech, Prime Minister Dmitry Medvedev spoke about finding “a balance between freedom and regulation in the information space and expanding the rights of right-holders, while at the same time specifying the limitations of the legal use of intellectual property on the Internet.”

Medvedev stated that “[t]he struggle against violations of copyright and related rights cannot be effective without a clear regulation of these relations, and without extending responsibility, in particular to information brokers.” Furthermore, he reaffirmed the government’s commitment to develop and adopt effective regulatory measures to strengthen IPR protection on the internet and welcomed government recommendations as well as proposals from anti-counterfeiting groups regarding how to fight against online piracy.

It appears obvious that the development of new services in digital environment necessitates the adoption of the flexible system that would ensure the legality of the provision of such services including the legitimate global accessibility of the content. The adoption of specific legal norms can be viewed as a part of the complex system including preventive and mitigation measures aimed at the legalisation of file-sharing websites and p2p activities on the internet.

Currently, according to the information compiled by IFPI, there are only 11 legal online music services operating in Russia that offer music for downloading, streaming or using as ringtones.

Certain statistics on Russia-based websites accountable for illegal content distribution http://www.webkontrol.co.uk/analytics/market/ attest to the scope of ‘open fields’, where actions stipulated by prime minister are needed and might help explain the prime minister’s puzzlement as he said in his speech, “If you ask me what kind of measures, well, I don’t know exactly. We must think about it.”

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

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