Educational Activity
Cabinet of Ministers of Ukraine
Ministry of Economic Development
and Trade of Ukraine
State Regulatory Service of Ukraine
The Information Technology Ukraine Association (hereinafter – the Association) expresses its respect to you and addresses you with the following.
On September 15, 2017, the Ministry of Economic Development and Trade of Ukraine published for public discussion a draft resolution of the Cabinet of Ministers of Ukraine "On amending the annex to the resolution of the Cabinet of Ministers of Ukraine of June 27, 2003, No. 992", see http://bit.ly/2jBHXTV.
The Association supports the Ministry's initiative, as the effective protection of authors' rights, or rather, the lack thereof, is a major problem in our state. The current legislation of Ukraine provides for a number of mechanisms through which this issue should be resolved; however, their actual implementation further exacerbates the situation.
One of the effective mechanisms for supporting authors is the practice, common worldwide, of levying a fee on imported equipment and storage media in order to compensate rights holders for the reproduction of their works by citizens at home.
In Ukraine, this procedure was introduced back in 2003 by CMU Resolution No. 992, the annex to which establishes a list of equipment and media for which manufacturers and importers must pay a fee. Over the 14 years of this act's existence, it has been repeatedly amended with the aim of expansion and detailing, but the practice of its application testifies only to its ineffectiveness, inconsistency with the stated goals, and the obsolescence of the approach established by the legislator.
Currently, importers and manufacturers of equipment and storage media pay deductions to rights holders exclusively through two authorized collective management organizations (CMOs). At the same time, these CMOs are not required to notify or report on the availability of payments due to rights holders, as the latter are obliged to apply for remuneration on their own. In the event that rights holders do not apply within a 3-year period, the CMO has the right to use the undistributed funds for its own needs. And even regarding distributed funds, CMOs are not required to report. Such legislative provisions result in the abuse of their position by CMOs and a lack of transparency in the system of distributing payments to rights holders (this is noted annually by the Office of the United States Trade Representative in its annual special report, alongside such problems as online piracy and the use of unlicensed software).
The imperfection of the established procedure for collecting and distributing the fee also negatively affects importers and manufacturers of equipment and storage media. The existence of a voluminous list of 33 items significantly complicates doing business and in no way stimulates importers and manufacturers to operate legally. Excessive detailing results in a significant number of them moving into the "gray" import zone.
European practice shows that a fee on imported equipment and storage media can and should be effective. But for this, it is necessary to change the approach and make a number of amendments to the current legislation.
The Better Regulation Delivery Office (BRDO) in Ukraine has taken the first step in this direction and developed a draft CMU Resolution "On amending the annex to the resolution of the Cabinet of Ministers of Ukraine of June 27, 2003, No. 992". The main idea of this project is a significant reduction in the list of equipment and media for which manufacturers and importers must pay a fee. The adoption of this project will result in a significant reduction in pressure on these entities, an improvement in the business climate in this area, and the real ensuring of a balance of interests between society, rights holders, and business.
The Information Technology Ukraine Association, which unites more than 60 enterprises – participants in the IT goods production and supply chain, supports this project and hopes for the introduction of a transparent and effective mechanism for collecting and distributing the fee in Ukraine. This project is one of the steps on the path to establishing an effective system for protecting the interests of rights holders in our state, which can only be overcome by combining our efforts and moving forward incessantly.
Annex: Analysis of the system currently in force in Ukraine for collecting remuneration for the free use of objects of copyright and (or) related rights in comparison with similar systems in some EU countries (on 3 pages).
General Director Yuriy Perohanych
Analysis of the system currently in force in Ukraine for collecting remuneration for the free use of objects of copyright and (or) related rights in comparison with similar systems in some EU countries
The system for collecting remuneration for the free use of objects of copyright and (or) related rights is based on the principle of so-called "exceptions" (Articles 21–25 of the Law of Ukraine "On Copyright and Related Rights"). The essence of this principle is that, as a general rule, any use of an object of copyright and (or) related rights is carried out only with the consent of the subject of such copyright and (or) related rights, with the exception of specific cases where such use is possible without the consent of the subject of copyright and (or) related rights. Such cases are the so-called "exceptions". One of these exceptions is the possibility of free reproduction of works for personal purposes.
Part two of Article 25 of the Law of Ukraine "On Copyright and Related Rights" (hereinafter – the Law) provides that works and performances fixed in phonograms, videograms, their copies, as well as audiovisual works and their copies may be reproduced at home exclusively for personal purposes or for the family circle without the permission of the author(s), performers, producers of phonograms, producers of videograms, but with the payment of remuneration to them. The specifics of paying remuneration in this case are defined by Article 42 of this Law.
Part four of Article 42 of the Law determines that the payment of remuneration to producers of phonograms and videograms and other persons who have copyright and (or) related rights for reproduction at home and exclusively for personal purposes of works and performances fixed in phonograms, videograms and their copies is carried out in the form of deductions (percentages) from the cost of equipment and (or) storage media by manufacturers and (or) importers of equipment and storage media, with the use of which it is possible to carry out reproduction exclusively for personal purposes at home.
By Resolution of the Cabinet of Ministers of Ukraine of June 27, 2003, No. 992, the amount of deductions paid by manufacturers and importers of equipment and storage media, with the use of which it is possible to carry out reproduction of works and performances fixed in phonograms and (or) videograms at home, was approved.
The said resolution instructed the Ministry of Education and Science of Ukraine to develop and approve the procedure for determining authorized organizations that will carry out the collection and distribution among subjects of copyright and (or) related rights of funds from deductions paid by manufacturers and importers of equipment and storage media, with the use of which it is possible to carry out reproduction of works and performances fixed in phonograms and (or) videograms at home, and to determine such authorized organizations after its approval.
The Ministry of Education and Science of Ukraine, by orders dated May 21, 2003, No. 311 and July 25, 2003, No. 503, approved the Procedure for accounting for collective management organizations and supervising their activities and the Procedure for determining authorized organizations that will carry out the collection and distribution among subjects of copyright and (or) related rights of funds from deductions (percentages) by manufacturers and importers of equipment and storage media, with the use of which it is possible to carry out reproduction of works and performances fixed in phonograms and (or) videograms at home, respectively.
Similar to the Ukrainian system are the systems of France and the Netherlands, however, these systems have differences from the system currently in force in Ukraine, which makes them functional. In particular, the features of the system in France are as follows:
Due to litigation in Germany and Spain, the systems for collecting remuneration for the free use of objects of copyright and (or) related rights are practically non-functional.
Having analyzed the regulatory documents in force in Ukraine and studied the experience of European Union countries on this issue, the ITUA concluded that the national system for collecting remuneration for the free use of objects of copyright and (or) related rights is imperfect compared to similar systems of advanced European Union countries in this regard for the following reasons:
1. In Ukraine, the amount of deductions paid by manufacturers and importers of equipment and storage media, with the use of which it is possible to carry out reproduction of works and performances fixed in phonograms and (or) videograms at home, is set imperatively. Such a method excludes the possibility of forming fair remuneration, as it does not take into account the opinions of either manufacturers or importers, which in turn leads to an unwillingness to pay these deductions.
2. The reporting system of authorized organizations that carry out the collection and distribution among subjects of copyright and (or) related rights of funds from deductions (percentages) by manufacturers and importers of equipment and storage media, as well as the system of supervision over their activities, is opaque. Today's system does not provide manufacturers and importers with answers to the questions: "Who receives the remuneration? In what amount? How much money is used to maintain the authorized organizations?" etc. That is, reports on funds received by collective management organizations, paid by importers and manufacturers of equipment and storage media, as well as on the volumes of remuneration to subjects of copyright and (or) related rights for reproduction at home of works and performances fixed in phonograms and (or) videograms, are not available to market participants.
3. In accordance with Part 4 of Article 42 of the Law, the payment of remuneration is carried out in the form of deductions (percentages) from the cost of equipment and (or) storage media by manufacturers and (or) importers of equipment and storage media, with the use of which it is possible to carry out reproduction exclusively for personal purposes at home of works fixed in phonograms and videograms, except, in particular, professional equipment and (or) storage media not intended for use at home. The presence of such a norm is quite logical, but proving that equipment is intended specifically for use in professional activities is possible only in the process of conducting appropriate examinations, since CMOs do not take into account the arguments of importers, which leads to litigation.
4. The existing principles of managing the system of fees for free copying provoke the expansion of the gray market (when the import of goods is not declared). In a number of cases, an organization or an individual who imports taxable products into their country must independently notify the CMO about such operations so that they can calculate the due compensation for payment. It is not surprising that some importers prefer not to do this. Naturally, conscientious distributors find themselves in an unequal position, and CMOs under-receive the due payments.
In the context of European integration, it would be logical to use the experience of the leading European Union countries in this regard.
Based on the above, the ITUA believes:
1. The system of compensation for reproduction at home exclusively for personal purposes or for the family circle without the permission of the author(s), performers, producers of phonograms, producers of videograms, but with the payment of remuneration to them, is appropriate, used in the world, and complies with the principles of intellectual property protection.
2. A system of compensation has been created and is operating in Ukraine that complies with the specified principles but is imperfect in terms of:
3. Industry associations of manufacturers and importers of relevant equipment have been formed and are successfully operating in Ukraine. These industry associations have the structural and personnel potential to perform consultative and advisory functions during the development of relevant draft laws by responsible institutions.
