Panasonic v Russian Ministry of Culture: Russian private copying levy issue

“Panasonic Rus” ltd. filed claim to Moscow commercial court and asked to admit results of inspection under № 2/2014 20.03.2014, executed by Russian Ministry of Culture, and prescription of Ministry of Culture to eliminate revealed breaches of law from 20.03.2014 as illegal. Defendant contested plaintiff’s claim and stated that prescription is justified and in accordance with law. Defendant also stated that inspection in relation to plaintiff was executed in accordance with requirements of relevant regulations. After duly examination and taking into account all arguments and objections brought by parties, the court refused to admit results of inspection executed by Ministry of Culture along with its prescription to eliminate revealed breaches of law as illegal.

The court determined that inspection has been executed by officers of Ministry of Culture under ministerial order № 262 (14.02.2014) within the period from 20.02.2014 till 20.03.2014. After this inspection officers revealed certain breaches of mandatory requirements provided by Russian copyright law, namely breach of article 1245 of Russian Civil Code. Under article 17 of Federal law 294-FZ (26.12.2008) and item 52 of administrative regulation in relation to plaintiff has been issued prescription to eliminate revealed breaches of law with detailed instructions, necessary for execution of prescription: “1. Cease to run business activity in breach of relevant Russian copyright law. Import to territory of Russian Federation of equipment, used for reproduction of phonograms and audiovisual works for private purposes and indicated in governmental decree №829 (14.10.2010) “About remuneration for free reproduction of phonograms and audio-visual works for private purposes”, in accordance with requirements provided in article 1245 of Russian Civil Code. 2. It must be reported and declared to Ministry of Culture about results of execution of ministerial prescription along with evidences not later than 20.06.2014.”

Russian Supreme Court repeatedly underlined that Russian Civil code obliges importers and manufacturers of relevant equipment to pay private copying levy, but not the agreement concluded between importer or manufacturer and accredited collecting society authorised to collect private copying levy. Supreme Court has concluded that “Russian government in its decree has not determined any obligation of importer or manufacturer of equipment of mediums to pay private copying levy. Obligation of importers or manufacturers of equipment or mediums to pay private copying levy is provided by Russian Civil Code (item 1 article 1245).” Payment of private copying levy is obligation, but not the right, of importer or manufacturer. Accordingly, despite absence of concluded agreement between importer or manufacturer of equipment or medium and accredited collecting society authorised to collect private copying levy, importer or manufacturer bears obligation to pay private copying levy. If the plaintiff does not fulfil such obligation to pay private copying levy, it breaches relevant requirements of Russian copyright law.

Procedure, under which a private copying levy must be collected by accredited collecting society and paid by importer when it imports equipment or mediums, used for reproduction of phonograms and audiovisual works, to Russian Federation, is not based on agreement concluded between importer and accredited collecting society. Ministerial prescription indicates only necessity to fulfill requirements of Russian law, determined in details in article 1245 of Russian Civil code and in governmental decree №829 from 14.10.2010. Plaintiff’s argument that it cannot be held breaching a copyright law because it cannot conclude agreement with accredited collecting society, authorised to collect private copying levy, the court considered as inappropriate. In its letter dated 04.03.2014 plaintiff provided Ministry of Culture with requested documents and information necessary for execution of inspection. This letter describes process of negotiations for agreement between accredited collecting society and plaintiff. Ministry of Culture, during inspection, has taken into consideration this information provided by plaintiff, but inspection was executed with other purpose – whether plaintiff abides the requirements of Russian copyright law. Negotiations between two independent subjects of civil legal relationships are irrelevant to subject of inspection.

The court decided that prescription issued by Ministry of Culture is in accordance with effective Russian law and the court does not have legal reasons to admit this prescription as illegal and void.

Ninth commercial court of appeal has not found reasons to repeal court’s order. In order to determine, whether a deed of state authority (decision or action) is illegal, the following requirements must be met simultaneously: deed must contradict to law or other legal act (unlawfulness of deed) and deed must breach civil rights and protected by law interests of citizen or legal entity in the field of business or other economic activity. Commercial court of first instance correctly determined absence of reasons necessary to grant plaintiff’s claim and admit prescription of Ministry of Culture to eliminate revealed breaches of law as illegal. Commercial court also correctly concluded that despite absence of signed agreement between plaintiff and accredited collecting society, authorised to collect private copying levy, the plaintiff must pay private copying levy. Plaintiff’s argument, that payment of private copying levy for reproduction of phonograms and audiovisual works for private purposes is only possible if agreement between accredited collecting society and plaintiff is concluded in writing, the court considered as baseless, even if plaintiff and defendant negotiated a draft of agreement long time. Statement (results) of inspection №2/2014 is a procedural document, contains description of revealed breaches of law, and it cannot be contested under rules of chapter 24, 25 of commercial procedural code. Substantive law was correctly applied by court of first instance. Breaches of procedural law, which entail repeal of court’s decision, were not determined. Arguments of appeal do not disprove the court’s conclusions for decision and therefore cannot be a reason for repeal or revision of court’s decision.

After duly examination of case materials, court of cassation has not found reasons to grant a claim and repeal decision of lower courts or revise them. Lower courts have determined that the planned inspection has been executed by duly authorised state body, in accordance with provided procedure and terms and contested prescription is legal and does not breach rights and protected by law interests of plaintiff. The court of cassation is agreed with conclusions of lower courts. Plaintiff’s arguments that contested prescription does not respond to requirements of definiteness and clearness also have been declined, because it prescribes to abide requirements of legal acts, which define subjects of obligations, list of “taxable” equipment and mediums, applicable rates and payments procedures. Other arguments do not indicate errors of lower courts; they aim to review lower court’s conclusions. If the plaintiff is not agreed with lower courts’ conclusions and has its own assessment of facts and its own interpretation of law provisions, it does not necessarily means that court has erred when considered the case and it is not a reason to repeal courts’ decision by court of cassation.

Judge of Supreme Court has not found reasons to consider case in Supreme Court. Lower courts have decided that planned inspection has been executed by duly authorised state body in accordance with provided procedure and terms; that contested prescription is legal and does not breach rights and protected by law interests of Panasonic. Panasonic’s arguments come to presentation of facts, which were subject of lower courts’ analysis and assessment, what is not error or breach of substantive or procedural law. Different interpretation of law by Panasonic does not indicate incorrect application of law by lower courts. Arguments, indicated in claim, don’t confirm essential breach of substantive or procedural law, which can affect courts’ decisions, and are not sufficient reason for reconsideration of judicial act in cassation.