The essence of private copying levy is compensation to right holders for copies made by private persons. As long as it is impossible to prohibit copying (reproduction) of phonograms and audiovisual works by private persons and in practice there is no opportunity to collect private levy personally from each natural person. Therefore such remuneration is to be paid by manufacturers and importers of equipment and mediums capable of copying (players, personal computers, phones, compact disks, tape recorders). In its turn, in order to reimburse paid remuneration, importers and manufacturers include paid levy in selling price and eventually customers, when buy equipment and mediums capable of copying, pay indirectly this private copying levy and compensate harm incurred by right holders from private copying.
When the court of first instance refused to allow a claim, it stated: “Taking into account, that agreement on payment of money for collection of royalties between plaintiff and defendant has been not concluded (item 5 of governmental decree #829 14.10.2010), the court does not have reasons to allow a claim”. But the court did not consider following circumstances, important for right decision on this case. If the right of authors, performers, producers of phonograms and audiovisual works to receive remuneration for free reproduction of mentioned intellectual property objects for private use is established by law, an obligation of importers and manufacturers of equipment and mediums capable of copying to pay such remuneration for purposes of collection of private copying levy must correspond to such right.
Russian Civil Code does not contain any reference to voluntary (contractual) procedure of arising of obligation to pay private copying levy for free reproduction of phonograms and audiovisual works for private purposes. It establishes only peremptory obligation to pay private copying levy in order to distribute it among right holders. Governmental decree also underlines peremptory character of manufacturers’ and importers’ obligation to pay private copying levy in benefit of right holders. Item 5 of Procedure about payment for free reproduction of phonograms and audio-visual works for private purposes by importers of equipment and mediums used for such reproduction states that payment is to be paid to accredited collecting society under concluded agreement with such CMO (Russian union of right holders; such provision gives evidence that agreement is only necessary to define conditions of coordinated actions in relation to payment of remuneration which are not regulated by provisions of article 1245 of Russian civil code and governmental decree #829. Despite the position of first instance court, agreement, concluded between importer of equipment and mediums capable of copying and accredited collecting society, does not give rise to importer’s obligation to pay remuneration for free reproduction of phonograms and audiovisual works for private purposes. Article 1245 of Russian civil code does not contain any reference to necessary requirement to conclude any agreement between importer and accredited collecting society.
Relying on wrong interpretation of law the court of first instance unreasonably deprived the right holders of their right on remuneration, established in article 1245 of Russian civil code. If remuneration for free reproduction would be paid voluntary, it means that the agreement with accredited collecting society, authorised to collect private copying levy, would be an agreement of donation and legal relationship between accredited CMO and importer should be governed by charity law what contradicts current and effective legislation, international practice and essence of collective rights management.
In cassation importer asserted that decision of court of appeal is impracticable due to uncertain character of decision, providing percentage penalty in future. According to claimant the court applied several types of civil liability, what is not provided by Russian civil law. When the court of appeal abolished decision of first instance it has mentioned that importer’s obligation to pay remuneration to right holders has arisen ex lege, but a court of first instance was wrong when decided that importer’s obligation to pay remuneration to right holders has arisen from agreement between importer and accredited CMO. As a court of appeal has correctly mentioned, Russian civil code has no references to voluntary (contractual) procedure of arising of obligation to pay remuneration for free reproduction of phonograms and audiovisual works for private purposes, but it establishes only peremptory obligation to pay private copying levy in order to distribute it among right holders.