To successfully promote  the royalty reform, a Supreme IP Court should be established.

When I hear a phrase “royalty reform”, in the first place I think of a reform in respect of collective management of copyright and related rights (CMO) as the organizations that must professionally, fairly and transparently help authors and IP holders manage their rights. Alternatively, their major task is to control (or even keep track, if you wish) use of copyright and related rights objects with the purpose of collecting fees from royalty users, allocation of collected funds.

Areas of Management

19 organizations with respect to a collective management of proprietary copyright and 4 organizations – regarding related rights were operative at the time the reform started in Ukraine. Did I say operative? They were registered. Only a few were operative.

To date, six CMO organizations are available in the new CMO register after the Law of Ukraine “On Effective Management of Proprietary Rights of IP Holders in the Area of Copyright and Related Rights” (CMO Law) came into force. At the same time, no CMO has the right to carry out activities in the area of advanced and mandatory collective management; their activities are limited by the existing rights (catalogue) in all areas, exclusive advanced and mandatory collective management –  this is a voluntary option of rights management.

Advanced and mandatory rights management falls within the competence of certified CMOs. At the same time, only one CMO may be certified with respect to each individual type of activities referred to advanced rights management, provided there is no serious conflict of interests.

In fact, advanced and mandatory management was the most profitable area for 23 CMOs before the beginning of the reform. The decision on the reform was made due to many reasons (no need to repeat them again here).

Has it become easier to “convince” IP holders to pay for the use of a song? Has the income of authors/IP holders increased?

Reform in practice

Optimists would say there has not been enough time. That’s true to some extent. Unfortunately, nobody knows how much additional time it is going to take. We should also understand that efficient implementation of the royalty reform depends on the establishment of the Supreme IP Court. It’s been a long awaited step following the adoption of the the Decree of the President dated September 29, 2017 No 299/2017 and start of the selection procedure for the chairs of the judges. However, the Court has never become operative.

Let us get back to the five steps of the royalty reform (the reform has been pending for three years):

  • winding up of the “Ukrainian Agency of Copyright and Related Rights” as a CMO;
  • only two CMOs in the country;
  • holders of rights for literary works will set up their own rules to manage CMOs;
  • IP holders will independently elect the members of CMOs’ management bodies;
  • IP holders will transparently pay the royalty.

Considering the foregoing, the royalty reform failed. Why? No task has been implemeted.

Though, we should note positive developments in this regard: adoption of the Law of Ukraine “On the State Support of the Cinematography in Ukraine”, which introduced a procedure similar to US notice and take down (Digital Millennium Copyright Act) into the Law of Ukraine “On Copyright and Related Rights”; this procedure is aimed at preventing copyright violations in the Internet through submission of a claim. Truth be told, the Ukrainian procedure is overregulated and requires involvement of a special-purpose party – an attorney. Would it do any good? Only the practice will prove it. I think, it would. On the one hand, it implies expenditure of an IP holder; on the other hand – qualified assistance of a responsible person. At the same time, we may potentially avoid an impact of “pranksters” who would want to see “how the system works”. Apparently, for this purpose the following formalities were envisaged: an application shall enclose documents that confirm respective right; an alleged trespasser shall have 48 hours to respond to a claim; the procedure shall cover only certain objects – audiovisual works, musical works, computer programs, video and audio records, TV programs.

Why does the reform falter? I would note the following:

  • representatives of authors and IP holders do not trust each other, hence there is a conflict among CMO participants;
  • authors and IP holders do not believe in justice any more; they got disappointed over past years and are sceptical towards any CMO due to regular “money losses” incurred by some CMOs and corruption allegations;
  • CMOs are not willing to work openly and transparently due to various reasons, including scepticism towards competition (each CMO believes that it is the only honest and fair and only this CMO is able to properly collect and distribute the royalty);
  • mistakes in CMO Law in practice do not allow making a choice among qualified CMOs for advanced and mandatory management;
  • non-existent Supreme IP Court;
  • the lack of a new special law on copyright and related rights that would properly regulate respective area (we have a lot of various inconsistent laws and legislative acts, which were adopted sporadically and do not fully agree with each other).

What does it take to re-launch the reform? At least the following shall be done:

  • to amend legislation (removal of mistakes from CMO Law, adoption of a brand new iteration of the Law of Ukraine “On Copyright and Related Rights”);
  • to publish data on the commencement of operations by the Supreme IP Court in the “Golos Ukrayiny” newspaper;
  • to provide CMOs with accreditation that would empower the same to carry out advanced and mandatory management.

We expect that the 2019 Special Report 301 will be presented by the Office of the US Trade Representative shortly. This report will demonstrate the status and progress of the reform.

Sergii Bryhynets, associate, intellectual property, exclusively for  Yurydychna Praktyka