Is AllofMP3 legal? Non-contractual licensing under Russian copyright law.

• Author: Budylin, Sergey

Cite as: 7 J. HIGH TECH. L. 1

Introduction

Lately, Russian copyright law has attracted keen interest from foreign media and law review authors. (1) The interest is mostly related to the activity of several Russian Web sites, such as AllofMP3, which sell copyrighted music at surprisingly low prices and without piracy protection. (2) This questionable activity, claimed to be legal under Russian law, has been reported as a major obstacle facing Russia in joining the World Trade Organization ("WTO"). (3)

In a recent article, James Chapman discusses at length possible negative consequences of downloading music from these sites for users in the United States ("U.S."). (4) Such consequences may include both criminal penalties (5) and civil sanctions. (6) However, criminal penalties apparently do not apply to not-for-financial-gain, low-value, own-use downloaders. (7) Civil sanctions against such users are possible in principle but enforcement in the U.S. may require assistance of Russian authorities to collect users' personal information from the Web sites. (8) Such necessity of Russian assistance appears to render the whole idea impracticable.

Chapman analyzes the possibility of enforcement against Russian Web sites in the U.S. His finding is pessimistic: even if a civil plaintiff obtains a judgment in its favor in a U.S. court, the plaintiff may be unable to have the judgment enforced if the Web site does not have assets in the U.S. (9) Furthermore, enforcement of U.S. criminal copyright law against Web sites in Russia requires the assistance of Russian authorities, which is unlikely to occur. (10)

Chapman goes on to analyze Russian law applicable to the activities of the Web sites. While Russian law protects musical works generally, it also provides compulsory licensing in certain cases. (11) The royalties in such cases are collected by organizations managing copyright holders' right on a collective basis ("management organizations"). (12) These statutory provisions are said to be the legal basis for the activities of the questionable Web sites, since the sites are licensed by Russian management organizations. While the validity of such compulsory licenses remains uncertain, (13) the Moscow City Prosecutor's office is reluctant to initiate criminal prosecution against the web-site operators. (14)

This does not sound encouraging for foreign right-owners; however, we are more optimistic in this respect. In this article we discuss in more detail the problem of compulsory, or so-called "non-contractual," licensing under Russian copyright law. We analyze the current statutory law and its upcoming changes as well as discuss relevant Russian case-law and conclude that while courts do recognize non-contractual licensing in principle, they do not enforce it against copyright holders where the latter are unwilling to cooperate with a specific management organization. Such de facto unenforceability of the non-contractual exception means that a foreign copyright holder might get protection after all, if she is ready to bring a civil action in Russia against a Russian management organization and its licensees. (15)

Statutory Law

In this section we analyze provisions of the Russian copyright law that was adopted in 1993 and amended in 1995 and 2004. (16) According to this law, "musical works with a text or without text" are included into the objects of copyright. (17) The author has exclusive rights to use his works, including the rights of reproduction, distribution, "communication to the general public by cable," and others (all referred to as the "property rights"). (18) These rights are transferable by an "author's contract." (19)

It is not absolutely clear whether the original statutory list of such property rights, as it existed until recently, included the right to place a musical work on a Web site in a downloadable form. This is sometimes referred to as the "Internet right." Apparently, the Moscow Prosecutor Office did not think so, saying that Russian copyright law did not cover digital media. (20) However, many copyright law specialists believe that the Internet right was covered by other items of the list: either "reproduction," "distribution," or "communication to the general public by cable." (21)

At any rate, the legislature has decided to explicitly insert the Internet right into the list of exclusive rights: as envisaged by the 2004 amendments, from September 1, 2006, the list is supplemented by the right of "communication of a work in such a way that it is accessible for any person in the interactive mode from any place and at any time at his choice (right of making available to the general public)." (22) Despite awkward language, this is clearly intended to cover the Internet right. Similar Internet rights are added, effective from the same date, to the lists of exclusive rights of performers and phonogram producers ("neighboring right" owners). (23)

As mentioned above, the law allows the establishment of organizations to manage property rights of copyright holders and neighboring right holders. Such organizations are "established directly by the holders of copyrights and neighboring rights and act within such powers as may have been granted by them." (24) As a general rule, the authority to manage one's property rights is voluntarily granted to the management organization by the right holder with a written contract (not being an "author's contract"). (25) A foreign organization managing similar rights may also grant this authority. (26)

We now turn to the issue of compulsory or non-contractual licensing. With some exceptions, using a musical work (a phonogram) requires the permission of both the copyright holder and neighboring right holders. Alternatively, a license may be granted by a management organization that has the permission of a right holder. However, on three occasions the Russian Copyright Law mentions the possibility of a management organization to issue such a license or to collect royalties on behalf of right holders without having their permission.

First, the exception applicable to copyright, found in Section II of the Russian Copyright Law, allows for reproduction of an audiovisual work or record without authorization of the author, performer, or producer, for personal needs. (27) The royalty is paid not by the users, but rather by the manufacturers or importers of the relevant equipment (audio and video recorder, etc.) and material carriers (tapes, CDs, etc.). (28) The royalty is collected by a management organization. (29) The government is supposed to fix the royalty amount. (30) Since the government never moved to fix the royalty amount, however, this statutory provision is of limited to no value. At any rate, this exception is obviously not applicable to selling music from Web sites.

Second, in Section III, which is devoted to neighboring rights, there is a provision allowing 1) performance, 2) broadcasting, and 3) transmission by cable to the general public of a phonogram without the permission of the producer or the performer of the musical work. (31) Nevertheless, the royalty must be collected by a management organization and distributed to the neighboring right holders. (32) The amount of the compensation again may be fixed by the government, and in this instance the government acted to fix the recommended performers' fees in certain cases. (33)

On September 1, 2006, a provision was added stating that the above exception does not apply to "making the phonogram available to the general public" (which apparently includes the Internet right). (34) Accordingly, at least from that date, this exception also does not cover Web sites selling music.

Notably, no similar exception is found in the section devoted to the copyright (property rights of an author). This means that the permission of the copyright owner must be obtained in the three mentioned cases (performance, broadcasting, and transmission by cable to the general public). Accordingly, copyright owners (including musical composers) are protected better than the neighboring right owners (performers and producers). (35)

Third, there is an exception in the Section IV, which is devoted to management organizations. According to the statute, the authority to manage the property rights is granted to management organizations directly by copyright and neighboring right holders. (36) Based on this authority, the management organization grants licenses to the users of the works. (37) Such licenses permit use of "all works and objects of neighboring rights" and are granted on behalf of "all copyright and neighboring right holders, including those not having granted authority to the management organization." (38)

Of course, these statutory provisions are contradictory, and the statute does not attempt to resolve the contradiction. Fortunately, copyright and neighboring right holders who have not granted authority to a management organization can demand exclusion of their works and neighboring right objects from this management...