Collecting Management in Ukraine: Landmark Trends Introduced by Courts

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Collecting Management in Ukraine: Landmark Trends Introduced by Courts

By Ilarion Tomarov and Daria Romashchenko*

Introduction

Legal framework of collective management of copyright and related rights is far from perfect. The system lacks regulation and transparency, which, in turn, results in unfair restriction of authors’ and performers’ right to fair remuneration. Collective management organizations (CMO) in Ukraine are authorized to charge rates on users on behalf of any rights owners even if they are not members of the particular CMO. Such wide discretion, jointly with a large number of CMOs having no divided scope of authorization, creates complicated outcome for users of the content involved in different disputes with CMO.


Where does a list of related rights to sound recording end?

In case No. 910/22952/16 recently considered by Ukrainian courts, the plaintiff, which was a lawful licensee, allegedly stated that the defendant had infringed plaintiff’s rights to use performance of “Uptown Funk” by Mark Ronson feat. Bruno Mars in four different ways, particularly, by placing phonogram online.


Defendant revealed that royalties for use of phonogram at issue have been paid in due to CMO. However, plaintiff insists that scope of use by defendant was not entirely covered by the scope of authorization of CMO and, therefore, the phonogram was placed online without consent of the right holder and without payment of royalties to CMO.


The defendant objected against such interpretation stating that placing phonogram online was not listed in the regulation[1], and the list of acts constituting the use of phonogram provided by the Law is exhaustive and, therefore, cannot be interpreted widely.


The first instance court[2] rejected the claim without giving any thought to the said argument offered by the defendant. However, the Kyiv Commercial Court of Appeals[3] has noticed while examining Article 40 of the Law of Ukraine “On Copyright and Related Rights” that the list of acts constituting the use of an object of related rights is exhaustive and may not be interpreted freely.


The High Commercial Court of Ukraine has overturned[4] both decisions and ordered reconsideration of the case at first instance by pointing out the lack of interpretation of legal rules. The court answered the question raised by the parties in the following way: since producers of phonograms have the right to authorize or prohibit reproduction of phonograms in any manner or form, the respective list of acts constituting reproduction should be treated as unlimited (emphasis added).


It worth noting that the High Commercial Court of Ukraine has shifted focus from use of related rights object to reproduction of a phonogram.


Having that in mind, the plaintiff did ask for abandonment of claim, which the court of first instance found admissible[5].


Legal regulation of a phonogram and scope of its protection is a good example of how different continental and common law legal systems are. Within the European approach, a phonogram is not a piece of work since no creative efforts were put into its production but technical expertise of the producer.


The common law copyright system enables the author to prevent copying of work without consent of the respective right holder. Thus, sound recording protection covers the same scope as a work protection.


However, it is highlighted in UNESCO & WIPO Project[6] that almost each state where phonograms enjoy copyright protection has the common law legal system, where protection for said object is granted under the “right-to-copy” conception.


The list of actions constituting use of copyrighted object is unlimited in both legal concepts. Hence, the list of manners of using a phonogram under the common law copyright doctrine is more likely to be unlimited. The continental law approach, on the contrary, treats a phonogram as object with sui generis regulation, which grants the right owner a limited scope of entitlements.


Delia Lipszyc (“Droit d'auteur et droits voisins”, 1997) noted that several European countries provide their national legislations with a limited list of acts constituting the use of phonogram. At the same time absence of reservation as to non-exhaustiveness of the list should be interpreted in favor of due interpretation without too wide context.


The 1961 Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations authorizes producers of phonograms to authorize or prohibit direct or indirect reproduction of their phonograms”[7] (emphasis added).


The 1971 Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms provides an obligation for the Member states to protect interests of producers of phonograms from manufacturing copies of phonograms and from importation of such copies, where these actions are for the purpose of distribution to the public, and against distribution of such copies to the public[8].


The Infosoc Directive vests in producers of phonograms the particular rights: reproduction right, right to communication to the public[9].


Hopefully, the issue will be clarified in the coming future through the interpretation offered by the courts.


Should user provide evidence for authorization from rightholder?


On February 2015, CMO recorded some works being communicated to the public by TV channel and came up with a lawsuit demanding statutory damages in amount of UAH 73,080 (ca. USD 2,435). The works communicated are humor TV show, teaser of “Supernatural” series and tea commercial. Each of the works contained one or more musical works communicated to the public.


After license agreements allowing TV channel to use TV show and series were examined, the court considered that musical works were communicated lawfully within the scope granted by the license agreements. As to the commercial, it was revealed that the broadcasting was ordered by a third party, in evidence of which the defendant presented a license agreement between the client who ordered the commercial and the right holder, where the right to use the disputed musical work was explicitly mentioned.


The court of first instance rejected[10] the claim in full, which decision was upheld[11] by the appellate instance. However, the High Commercial Court of Ukraine overturned[12] both decisions and ordered reconsideration of the case in view of the following observations: the court did not examine whether TV channel’s licensor had right to use musical works in audiovisual works; it was not clear whether it was lawful to use the song in the commercial, and the person liable for the copyright infringement was not identified.


During reconsideration, the court of first instance requested the entire chain of copyright assignment agreements between the British company, which licensed series to TV channel, and the right owners of disputed musical works.


The right owners did not provide requested documents, so that the court arrived at a conclusion that the lawful use of musical works in TV show, series and tea commercial was not confirmed with proper evidence. The court sustained the claim and ordered the defendant to pay statutory damages in the amount of UAH 96,000 (ca. USD 3,620).


To sum up, the defense was forced to provide each part of right clearance chain, whereas the plaintiff submitted an extract from foreign database only.


It is worth noting that the High Commercial Court of Ukraine made[13] ambiguous observations regarding the issue of providing the entire chain of assignment agreements confirming the rights clearance from right holder to the party involved in the case in one case earlier. At the same time, the High Commercial Court of Ukraine also has voiced the position that the agreement with the party concerned is the only thing required for court proceedings.


The interesting detail is that the court did not request CMO to provide documents confirming that foreign CMO contractors of the plaintiff were authorized to manage copyright and related rights to the disputed musical works.


Whereas the defendant should look for some companies licensing content, which sometimes is not easy to find, it is enough for the plaintiff to provide an extract from IPI system (database containing information about composers, authors and publishers, electronic access to which is given by SUISA), containing information about rights management.


Recent approach to private copying levies treatment in Ukraine

Disputes over private copying levies are quite popular in Ukraine. The criteria of charging the said levy for a long time was not the actual functions of equipment but simply its name and importing custom code. The list of equipment was defined a long time ago and no longer fits today’s technologies. Moreover, courts usually rely on formal criterion – name of gadget (e. g. TV, or MP3 player) – rather than its actual technical functions.

In view of that, producers and importers have undertaken a complicated task to persuade judges that, regardless of the nature of the particular equipment, the reproduction function should be established by the court clearly.

Another issue worth noting is the Ukrainian approach to charging private copying levy on equipment, regardless of the availability of a flash memory, which leads to so-called “double taxation” of levy for potentially one act: the levy charged on a flash drive to which copyrighted work will be recorded and the same levy charged on totally empty DVD-player able to record copyrighted work, but useless without having a flash drive in the user’s possession.

Such approach is not favorable for users, because of increasing prices, as well as for producers/importers, because the levies are charged several times.

Usually, the issue of technical function of equipment must be verified by a professional examiner. In disputes involving private copying levies to be recovered for substantively earlier period, it is not easy to present equipment for forensic examination due to fast replacement of versions and different models of the equipment on the market. Therefore, there is no object to which expert’s knowledge can be applied and, consequently, no need of its application since even judges may examine consumer documentation put along with the equipment.

We hope that in course of upcoming reform of CMO sector in Ukraine the approach to private copying levy would be changed to the more liberal ones applied in many countries, where a levy is charged on a flash memory only.


 

[1] See Article 42 of the Law of Ukraine “On Copyright and Related Rights”

[2] Decision of the Commercial court of Kyiv dd. 27.02.2017. Access http://reyestr.court.gov.ua/Review/65164037

[3] Decision of the Kyiv Commercial Court of Appeals dd. 27.05.2017 Access: http://reyestr.court.gov.ua/Review/66657025

[4] Decision of the High Commercial Court of Ukraine dd. 01.08.2017. Access: http://reyestr.court.gov.ua/Review/68159710

[5] Ruling of the Commercial court of Kyiv dd. 09.10.2017. Access: http://reyestr.court.gov.ua/Review/69505032

[6] Sec. 78 of Part III of Memorandum of Committee of Governmental Experts on the Evaluation and Synthesis of Principles on Various Categories of Works dd. 01.07.1988. Access: http://www.wipo.int/mdocsarchives/UNESCO_OMPI_CGE_SYN_1988/UNESCO_OMPI_CGE_SYN_3-III_E.pdf

[7] See Art. 10 of the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations

[8] See Art. 2 of the Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms

[9] See Art. 2-3 of the Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society

[10] Decision of the Commercial court of Kyiv dd. 14.07.2015. Access: http://reyestr.court.gov.ua/Review/47106802

[11] Decision of the Kyiv Commercial Court of Appeals dd. 28.09.2015. Access: http://reyestr.court.gov.ua/Review/51655451

[12] Decision of the High Commercial Court of Ukraine dd. 29.12.2015. Access: http://reyestr.court.gov.ua/Review/54752500

[13] Decision of the High Commercial Court of Ukraine dd. 21.04.2015. Access: http://www.reyestr.court.gov.ua/Review/43742226


 

[*] Ilarion Tomarov is a head of Intellectual Property Practice at Vasyl Kisil & Partners. Mr. Tomarov can be contacted at tomarov@vkp.ua.  Daria Romashchenko is associate in Intellectual Property Practice at Vasyl Kisil & Partners. Ms. Romashchenko can be contacted at romashchenko@vkp.ua.

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Kyiv,
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Kyiv,
Wednesday, April 25, 2018
Litigation (Civil, Business and Commercial), Intellectual Property