For quite a few years now copyright holders suffering significantly from infringements in the Internet and intellectual property professionals protecting the former have been talking about the necessity to establish clear rules for copyright protection in the said area. Moreover, the community has realized that to make the protection process really effective intermediaries like Internet service providers, including hosting providers (the ISPs), should also be somehow engaged into the said protection. This idea has come to the minds of Ukrainian intellectual property practitioners, inter alia, in light of the successful foreign regulations for copyright protection in the Internet engaging ISPs and the respective practice by foreign colleagues. This idea looks very efficient since no one can physically influence content in the Internet more than ISPs storing that content on their own hardware.

Foreign Regulations

One of the model examples of the aforesaid effective rules is the Digital Millennium Copyright Act (the DMCA) that is a US copyright law implementing two treaties of the World Intellectual Property Organization. It criminalizes the production and dissemination of technology, devices, or services intended to circumvent measures (commonly known as digital rights management) that control access to copyrighted works. It also criminalizes the act of circumventing an access control, whether or not there is actual infringement of copyright itself. In addition, the DMCA heightens the penalties for copyright infringement on the Internet. The DMCA’s principal innovation in the field of copyright is the clear rules and conditions, including the exemptions from those rules, for holding ISPs and other intermediaries liable for copyright infringement. These rules were adopted by the European Union in the Electronic Commerce Directive 2000.

Normally, the above rules and conditions are elaborated specifically for the copyright and related rights (and not with regard to trademarks, patents or any other intellectual property objects) because of the specific nature of the copyrighted works and their value. For example, an average movie can retain its value only for few weeks upon release. Within those weeks unauthorized use of the movie should be urgently ceased to allow the right holder duly commercialize its copyright. This is why the prompt and effective system of the “noticeand-takedown” and engagement of ISPs is vitally needed to protect copyright in the Internet. The said rules may also be applied to trademarks and other intellectual property objects (since trademark and other intellectual property rights are also extensively infringed in the Internet); however it must be carefully tailored with regard to those objects. 

The stakeholders 

Notwithstanding the above continuous concerns of the copyright holders, nothing has changed inthe Ukrainian legal environment in this respect so far. This happens because different stakeholders of the copyright relations in the Internet (i.e. copyright holders, ISPs, so-called “content generators” and manufacturers of the electronic devices making copyrighted content available to consumers) cannot find any acceptable and mutually beneficial solution, and are staying in the permanent conflict. 

The ISPs always tried to prove technical impossibility to efficiently manage the access to certain types of information in the Internet. They also argued against money and human resource consuming technologies that they would be required to set up to increase their technical capacity for the copyright protection which allegedly would not bring a complete control over the web. Frankly speaking, most of the ISPs arguments seem to be truth, since the Internet was initially designed as a global network that is aimed at securing delivery of information from one computer to another notwithstandingany local network barriers that can appear due to various reasons. The Internet was created in the US during the Cold War to effectively inform of a nuclear attack. The ISPs earn their profits mostly from the subscribers of their services who receive access, inter alia, to the copyrighted works through the ISPs’ networks/hardware. 

Copyright holders argued for years that effective protection through ISPs is possible since, at least, it somehow successfully works in other jurisdictions, and blamed ISPs of willful lack of cooperation in this area. One of the copyright holders’ main ideas is that there is no need to completely restrict access to the infringing content in the Internet (especially when it is not technically possible) but would be sufficient just to make mass copyright infringement not profitable. The copyright holders receive money from successful commercialization of their copyrighted works and are directly interested in eliminating the copyright infringers’ business in the Internet. 

The above conflict between copyright holders and ISPs is a normal thing around the world and it is inevitable while developing the effective copyright protection system in the Internet.

Another player in the Ukrainian Internet market is the so-called “content generator”. These are entities like EX.UA or FS.TO that actually play the role of significant media supermarkets in the Internet. They attract users to certain content contained on their site due to the enormous volume of the copyrighted works uploaded thereto. From one side, these Internet supermarkets perfectly structure and search the content, host millions of users a day and increase the popularity of works that under other circumstances could never be seen/ heard by the users. The downside is that the content offered on these e-sources is predominantly illegal, i.e. used without any authorization from the respective right holders. This category of stakeholders earns money on advertising and prefers to avoid any contacts with other market players and governmental authorities, though they are from time to time approached by law-enforcement bodies. 

And the last but not least stakeholder in these relations is the manufacturer of electronic devices allowing to reproduce the copyrighted works by the end users (e.g. computers, tabs, smart TVs, etc.). These guys are not engaged much in the above discussion in Ukraine so far, though, according to the effective Ukrainian copyright law, they are obliged to pay copyright levies through the collective management societies to the copyright holders. The most progressive manufacturers offer to the end consumers their devices already containing certain volume of the authorized copyrighted content (e.g. free movie library in the smart TV) the cost of which is included into the price of such device. 

As proceeds from the above, all the four market players depend a great deal on each other since they earn money from the users who receive access to the copyrighted works held by the right holders through the ISPs’ networks/hardware using the “content generators’” web sites and certain electronic devices allowing to reproduce music/video content. 

It seems obvious that all the above stakeholders should come to an agreement on the effective system of monetization of copyrighted works in the Internet with fair funds distribution among them. At the same time, the copyrighted works should be easily accessible by the users. The system should provide for the mutual rights and obligations of the market players where everyone is financially motivated to work within the legal framework and, inter alia, to respect the copyright; and to those who failed to comply with the rules a tough liability should be applied inevitably. 

The trigger

Presently the Special 301 Report may become a trigger accelerating implementation of the above system of monetization of copyright in the Internet in Ukraine. The said Report is prepared annually by the Office of the US Trade Representative (the USTR) under Section 301 as amended of the Trade Act of 1974. The report identify trade barriers to US companies and products due to the intellectual property laws, such as copyright, patents and trademarks, in other countries. Each year the USTR must identify countries which do not provide “adequate and effective” protection of intellectual property rights or “fair and equitable market access to US persons that rely upon intellectual property rights”. The USTR must also undertake annual surveys of foreign countries’ intellectual property laws and policies.

By statute, the annual report must identify a list of “Priority Foreign Countries”, those countries judged to have inadequate intellectual property laws; these countries may be subject to sanctions. In addition, the report contains a “Priority Watch List” and a “Watch List”, containing countries whose intellectual property regimes are deemed to be of concern. 

In 2013 Ukraine was introduced to the “Priority Watch List”. In light of this, the US government now demands to resolve the three key issues as high priority steps from Ukraine: 

(1) Unauthorized software use by the Ukrainian government;

(2) Ineffective collective management system;

(3) Ineffective protection of intellectual property rights in the Internet.

Assumingly, the last issue is the most difficult one that cannot be resolved by just taking an immediate government decision or attracting investment. The decision can be elaborated only on the basis of consensus of all parties engaged in the intellectual property relations in the Internet.
In addition, the indicated question is regulated in the EU-Ukraine Association Agreement that should be implemented in Ukrainian legislation. 

In view of the above, it has become obvious that a respective regulation would inevitably be elaborated. A number of draft laws to secure effective protection of copyright in the Internetwere elaborated by the State Intellectual Property Service of Ukraine (the SIPS), and when those failed the Ukrainian government decided to engage in the process of law drafting the above stakeholders. Negotiations between market players are currently pending. A result should follow shortly.

To be continued…