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Russia IIPA 2020 special 301 report

Special 301 Recommendation: IIPA recommends that the Russian Federation be retained on the Priority Watch List in 2020.

Priority actions requested in 2020

  • Increase the number and effectiveness of criminal IPR cases focused against digital piracy, including a focus on deterrent criminal actions against organized criminal syndicates. Criminal actions should target those involved in piracy retail chains that continue to sell pirated entertainment software, music and movies.
  • Increase the number of administrative actions (in addition to the criminal actions, noted above) against Internet piracy regardless of whether the servers or users are located in Russia.
  • Implement regulations on the operation of collecting societies that confirm that rights holders have the legal and practical ability to determine how to exercise their rights, including whether to choose to entrust licensing to any collective, and if so, to choose that entity and to delineate the rights for such collections.
  • Amend the Civil Code, Part IV, to:
    • clarify the basis for liability for providers of online services that induce or encourage the infringement of copyright and related rights, or that facilitate infringement and do not take reasonable steps to prevent such activities, to prevent knowing facilitators from enjoying these safe harbor benefits; and
    • provide additional legal norms that create incentives for ISPs to cooperate with rights holders in fighting infringement taking place over their networks. Article 1253.1 of the Civil Code provides that intermediary services facilitating the widespread dissemination of unauthorized content cannot benefit from the liability privileges if they know or should have known of an infringement.
  • Amend the Civil Code in Article 1299 to provide civil liability for commercial trafficking in circumvention devices.
  • Amend the Criminal Code to establish criminal liability: (i) for the unauthorized camcording of motion pictures; (ii) against principals in legal entities, including for IPR crimes (the Civil Code limits civil liability to the legal entities, not the principals of those entities); and (iii) for the importation of and commercial trafficking in circumvention devices.
  • Amend the Administrative Code by eliminating the for-profit requirement in Article 7.12 (Administrative Offences), and raise administrative penalties to deterrent levels by implementing higher fixed fines for violations by legal entities and individuals.

The copyright marketplace in Russia

Internet Use and Piracy

Often the Russian websites insist on proof of copyright ownership before even considering compliance with takedown requests. There are a few exceptions, with some industries reporting that a few sites do comply with takedown notices. Russia is first in the world when it comes to the unauthorized file sharing of video games on PCs.

In the past few years, access to illegal music via apps in Russia has grown exponentially, and major sources of these apps do not respond quickly (e.g., Apple), or, in some cases, at all, to takedown notices. The draft legislation that would block mobile apps (as the current law does for websites) would significantly improve this particular problem. In general, publishers report online enforcement is hampered by low compliance rates in response to rights holder notifications for links to infringing content, with many sites ignoring the notices altogether.

The 2013 legal reforms included two key civil law changes and procedures directed at online piracy. The first change amended the Civil Code, Part IV—in theory, to provide for third party liability, as well as safe harbors from such liability for “information brokers” (ISPs) that comply with all the requirements for those safe harbors. Unfortunately, the changes did not provide clarity regarding the liability of online infringing websites and services, so that safe harbors apply only to activities that are merely neutral or passive.

The second 2013 reform included a set of amendments to the Civil Procedure Code (and corresponding amendments to the Arbitration Procedure Code and the Federal Law on Information and Information Technologies (2006)) authorizing judicial injunctions after notice and takedown to block access to infringing materials or websites. In 2014, amendments expanded the subject-matter scope of the 2013 changes (Federal Law No. 364, in force May 2015) and expanded the existing procedures for court ordered site-blocking against repeat infringers.

The 2017 reform (Federal Law No. 157, in force October 1, 2017) addressed the problems of clone, proxy and mirror sites by broadening the Russia court ordered (civil) injunctions to cover these sites as well as the original infringing site. Under the 2017 law, with an existing court order against an infringing website, a rights holder can submit a request to the Ministry of Digital Development, Communications and Mass Media (Ministry of DDCMM) identifying a mirror (or clone or proxy) site, and, after review by the ministry, RosKomNadzor issues instructions to block the mirror site; an administrative procedure is then used to block mirror site.

No special request to a court is needed from a rights owner; rather, a list of qualified blocked websites is provided by rights holders via an online mechanism to the Ministry of DDCMM, although it is limited to 50 or 60 site blocks per day under regulations it adopted in October 2017. The ministry’s decisions—which must be made within 24 hours of receipt of a rights holder’s request—can be appealed in the courts.

The 2017 legislation also required that search engines must remove links to infringing content on sites that have been the subject of an order from the courts or the Ministry of DDCMM. RosKomNadzor oversees compliance of both ISPs and search engines with this process. There are fines of up to 700,000 rubles (US$11,300) for search engines that do not comply with de-indexing orders.

An additional change was adopted on April 23, 2019 in a Resolution of the Plenum of the Supreme Court (revising Chapter IV of the Civil Code), which amended existing practices to permit the use of screenshots of websites with unauthorized material on them to be treated as sufficient evidence to obtain a court order under the (2015, 2016 and 2017) laws.

Criminal Enforcement Including Against Online Piracy

According to the Ministry of Interior, the reported number of crimes related to copyright violations decreased by 22% from January to October 2019 from the same period in 2018. Since the copyright industries continue to report high levels of piracy, criminal enforcement appears to have declined in Russia, continuing the trend of the past several years. Criminal enforcement in Russia has unfortunately, not focused enough on digital piracy.

IIPA continues to recommend that there should be a dedicated digital IPR enforcement unit within the Government of Russia to focus on this problem. For example, combating copyright violations on the Internet, such as the dissemination of music through illegal pay-per-download sites and illegal P2P or streaming services, does not clearly fall within the current jurisdiction of the Computer Crimes Department (Department K) within the MVD, even though they have occasionally taken action in the past (at present, only the Economic Crime Police are doing this).

Department K’s authority and responsibility to act in all cases of online infringement should be clarified and strengthened. In addition, Department K should be properly staffed, equipped and resourced, and other such units within the MVD should be formed to deal exclusively with IPR Internet cases and to train officers on how to combat these copyright crimes, including the maintenance of evidence.

However, deterrent criminal penalties have rarely, if ever, been imposed against owners of commercial Internet operations. In recent years, police and prosecutors have had difficulty applying the criminal law thresholds to Internet crimes (and especially have had difficulty proving intent, or in identifying the individuals responsible for criminal activities). As a result, few such cases are ever brought and even fewer tried to a conclusion. The problem has been an inability to adopt a unified formulation by the police and prosecutors on how to apply the thresholds for online crimes.

An intensification of criminal investigations and criminal convictions against principals of organized commercial pirate syndicates is sorely needed. The status quo only further corroborates the lack of political will or incentives by government agencies to act against large-scale copyright infringers. In addition to criminal enforcement, the relevant administrative agencies (e.g., the Federal Anti-Monopoly Service (FAS)) should target large illegal distribution enterprises, such as the large-scale unlicensed services responsible for most of the illegal distribution of music and film in Russia.

Due to the lack of adequate staffing and the high volume of work, examinations of products seized take months. The video game industry continues to report delays in examination reports from government experts, due to a lack of technical expertise. Enforcement is also hampered, and trials delayed, by the requirement that exemplars be collected only with the participation of state officials, and by a statutory reliance on government expert reports.

Improvements should also be made with respect to court procedure. The criminal procedures generally permit a rights holder to request the destruction of the seized goods or move for recovery of damages in a separate proceeding before the Arbitration Court. However, the criminal courts are reluctant to order this and treat these as civil law matters instead.

The copyright industries recommend that the Supreme Court clarify guidelines on the destruction of goods and the calculation of damages in online cases for the purpose of meeting the minimal criminal damage thresholds established under the (revised and increased) Article 146 of the Criminal Code.

Another recommended measure to increase the efficiency of IPR criminal investigations is the appointment of IPR special prosecutors, investigators, and police officers at both the federal and regional levels throughout Russia.

Russia’s current Criminal Code does not allow for corporate entities to be held criminally liable for infringement; the Code should be amended. At present, only a natural person (usually a corporation director) can be found criminally liable, and only upon a showing that he/she had a direct intent to commit the infringement. It is extremely difficult to meet this burden of proof, so many cases are suspended without any penalty.

Civil Enforcement in General

For those who are able to pursue civil enforcement, there remain many inadequacies, including:

(i) remedies limited to the seizure of specific copies of works that are the object of a lawsuit;

(ii) failure to award preliminary injunctions (although 2013 amendments made some improvements), or to freeze assets and evidence;

(iii) low damages awards, which, like all awards, are also very difficult to enforce;

(iv) burdensome evidentiary requirements, including rights ownership information;

(v) absence of personal liability for the directors of infringing companies or enterprises (the only way to bring proceedings in cases where bogus companies operate);

(vi) absence of the notion of clear contributory liability under the Russian civil law system dealing with copyright infringements; and

(vii) absence of judicial guidelines on civil search practices, including provisional measures consistent with the WTO TRIPS requirements.

Collective Administration

In 2017, legislation was enacted (in force, May 2018), to purportedly address the problems of the state accreditation system and the governance of collecting societies. Unfortunately, the new law falls far short of either providing transparency to rights holders or good governance consistent with international norms and best practices for collecting societies.

The new law amended the Civil Code and the Administrative Code to revise the make-up and activities of collective rights management organizations (RMOs). One obvious failure of the new law regarding transparency is that it neither allows rights holders to see how much money their RMOs collect, nor how much they distribute to their members.

The new law creates “supervisory boards” for each of the various authors’ collection societies (the Russian Authors Society, the Russian Union of Right Holders and the All-Russian Intellectual Property Organization) consisting of members of each RMO, but also including government representatives and “user” group representatives.

This does not allow rights holders to be involved in the selection and management of the organizations that purport to manage their rights. Proper management would allow for a supervisory board of rights holders to oversee the internal management of the RMO, and would include international rights holders with local representatives on the board.

Instead, partial control by the Government of Russia deprives rights holders of their ability to control the licensing and collection of monies for their works and recordings, and is resulting in less, not more, money flowing to authors and producers (and certainly less money than should be collected for a market the size of Russia).

Lastly, the so-called fiscal control improvements, including regular audit reports, will not improve accountability, because the audit obligations are only to the government (for taxation purposes), not to those rights holders. There are many models for proper governance of RMOs, including WIPO best practices, international rights holder group best practices, as well as U.S. and European Union existing practices.

Compliance with existing obligations to the United States

With regard to collective administration, existing regulations and state accreditations have institutionalized a system that is not transparent and lacks good governance or accountability for authors, record labels and performers—who have no other option except the state collective management organizations. Correcting this problem is also a treaty obligation.

During WTO accession (in the Working Party Report, paragraph 1218), Russia assured its trading partners it would “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 entered into effect,” to bring the management societies in line with international standards on governance, transparency and accountability. That commitment was due in 2013.

Instead, the 2017 legislative reforms (in place as of May 2018) set any progress backwards to phase out non-contractual license management schemes – now five years after Russia was obligated to fix this problem. To develop properly functioning music broadcasting and public performance payment systems, the Government of Russia must fulfill its WTO Working Party Report and U.S.-Russia IPR Agreement obligations.

This would entail proper state accreditation of collecting societies in a manner that ensures that rights holders are able to control and manage their own societies, so they are fairly represented and there are no conflicts of interest in the governance structures. Fair representation in these societies includes direct representation of rights holders on the board in a manner that is proportionate to relevant market share and that reflects commercial realities.

Deficiencies in the Russian legal regime

Russia has made progress on legal reforms but gaps remain, especially with regard to effective Internet enforcement and implementation of the digital treaties.

The Russian law does not define ISPs and the various services they provide, nor does it link liability and safe harbors in a manner that will encourage cooperation with rights holders to effectively deal with Internet piracy. Lastly, it does not define secondary liability. Further, it is critical that Russia amend its regime to allow for injunctive relief that is quick and effective and applicable to all works, especially for Internet matters.

The Value Added Tax (VAT) remains very problematic and has been imposed in a discriminatory manner: only Russian-made films are given national certifications that exempt them from the VAT (which was raised to 20% on January 1, 2019). This is a WTO violation because it denies national treatment for taxes on identical foreign products.

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