Our traditional overview of the most important changes that have occurred in 2015 in Russian IP, IT and mass communications law

New songs on the main

Most of 2015 was spent anticipating the entry into force of RF Federal Law № 242-FZ dated 21.07.2014 “On the Amendment of Certain Legislative Acts of the Russian Federation Clarifying the Procedure for Processing Personal Data in Information and Telecommunication Networks,” better known as the “Law on the Localization of Personal Data”

Despite the ambiguity of some of the new act’s clauses —and the wide range of opinions as to their possible interpretation—market players managed to brace themselves for the coming changes. That said, this advance work was significantly aided by the explanations provided by the RF Ministry of Telecom and Mass Communications and posted on the department’s official website, as well as by the measures taken by the responsible oversight agency – the RF Federal Service for Supervision of Communications, Information Technology and Mass Media (Roskomnadzor).

One of the most anticipated and important of these explanations came in the form of official confirmation of the possibility of personal data trans-border transmission, as well as stipulation of the conditions under which such transmission is allowed. According to the consensus position taken by the oversight authorities, personal-data operators are entitled to engage in the transmission of Russian citizens’ personal data to foreign countries—provided their preliminary recording in databases located in the Russian Federation. Moreover, some light was shed on a number of other issues of crucial importance. In particular, the oversight authorities expressed their position on the interpretation of such basic concepts as the “collection of personal data” and “database.” Whether this approach to interpretation of the law remains consistent and resistant to change over time remains to be seen.

Above and beyond the aforementioned clarifications, 2015 saw the adoption of a number of statutory instruments designed to ensure the robust enforcement of the new requirements (including new rules governing the blocking of websites, barring access to illegally-processed personal data). These included: RF Governmental Resolution № 857 dated 19.08.2015 and Roskomnadzor Orders № 84 and № 85 dated 22.07.2015 detailing the operating protocol of the information system “Register of Infringers of the Rights of Personal Data Subjects.” What’s more, there was also the adoption of RF Ministry of Telecom and Mass Communications Order № 315 dated 28.08.2015 № 315, which changed the personal-data processing notification form in order to ensure compliance with the new requirements introduced by the law.

Made in Russia

RF Federal Law № 188-FZ dated 29 June, and RF Governmental Resolution № 1236 dated 16 November 2015 “On Establishing a Ban on Software Originating from Foreign Countries for the Purposes of Procurements for Federal and Municipal Needs” established a legal basis for the launch of the Consolidated Register of Russian Computer Programs and Databases (hereinafter – the Register), beginning on 1 January 2016

As of this date, in cases of the procurement of software (hereinafter – SW) for federal or municipal government needs, the procurer will have to be guided, first and foremost, by the Register. SW procurers are only exempted from the foregoing requirement in the following cases:

  1. The Register lists no information on SW in the same class as the SW slated for procurement.
  2. While the Register lists SW in the same class as the SW slated for procurement, in terms of its functional, technical and/or operational characteristics, the Register’s SW fails to meet the requirements of the SW slated for procurement, as established by the procurer.

The decision as to a given SW’s assignment to a particular class will be made by an advisory board at the RF Ministry of Telecom and Mass Communications (Minkomsvyaz) on the basis of the applicant’s submitted documents. Judging from Minkomsvyaz’ draft orders “On Approving the Classifier of Computer Programs and Databases,” and “On Approving the Rules Governing Application of the Classifier of Computer Programs and Databases,” the SW classifier presupposes a two-tier SW classification system: 1) SW section: embedded, system, application, development, DB and 2) SW class: for instance; for system SW – OS, utilities and drivers, security systems, etc. The Register encompasses information on SW that the Minkomsvyaz advisory board has subjected to expert analysis, ultimately affirming its conformance with the following requirements:

  1. The copyright holder of worldwide exclusive rights to the SW throughout the entire effective term of said exclusive rights is the Russian Federation/constituent entity of the Russian Federation/municipality of the Russian Federation; or a Russian non-profit organization whose decisions cannot be controlled by a foreign entity and whose supreme management body is comprised of the aforementioned public entities and/or citizens of the Russian Federation; or a Russian commercial organization in which the total share of direct and/or indirect participation by all of the aforementioned entities and citizens of the Russian Federation amounts to more than 50 percent; or a citizen of the Russian Federation.
  2. The SW has been lawfully released into market circulation within the territory of the Russian Federation, copies of the SW or usage rights to the SW are freely sold throughout the territory of the Russian Federation.
  3. The total amount of payments under licensing or other agreements concerning the SW in favor of foreign entities, agents, representatives of foreign entities and/or Russian organizations controlled by the aforesaid parties accounts for less than 30 percent of the copyright holder’s total proceeds from the sale of the SW for the calendar year.
  4. Information concerning the SW does not constitute a state secret, nor does the SW contain such information.

In addition, two special requirements are envisioned for SW containing data-protection functionality, namely, the SW should have earned the appropriate certificate of conformance, and the copyright holder should have a valid license to engage in such activity.

The information about SW and the respective copyright holders contained in the Register is publicly accessible. The rules for forming and administering the Register, the composition of the information it contains, the content of applications by copyright holders seeking the inclusion of SW in the Register and list of supporting documentation and the procedure governing decision-making on inclusion in the Register (including the procedure for subjecting SW to expert analysis) are established by RF Governmental Resolution № 1236 dated 16.11.2015.

Forget – no, mercy

In 2015, Russia adopted certain amendments to RF Federal Law № 149-FZ dated 27.07.2006 “On Information, Information Technology and Data Protection” (hereinafter – the Law on Information) enshrining, following the EU, the “right to be forgotten” – a new mechanism for the regulation of information technology

By RF Federal Law № 264-FZ dated 13.07.2015, which entered into force on 01.01.2016, the Law on Information was supplemented with a special definition of “search engine.” Thus, the term “search engine” is now understood to mean an information system conducting, at the user’s prompting, a search for Internet information of a particular content providing the user with the URLs of websites offering access to the requested information, as posted on said Internet websites, belonging to other parties, with the exception of information systems used for the performance of federal or municipal informational functions or the provision of related services, as well as for the exercise of other public powers.

That said, the new Art. 10.3 of the Law on Information establishes certain obligations binding on operators of search engines that use the Internet to disseminate advertising aimed at attracting the attention of consumers located within the territory of the Russian Federation. Citizens can demand to cease and desist the display of links to information about the claimant if: (a) information is disseminated in violation of applicable Russian Federation law; (b) information is false; (c) information about the claimant is outdated or moot by virtue of subsequent events or certain actions taken thereby. Exception: operators of search engines shall not be obligates to fulfill cease and desist demands regarding information concerning events suggesting criminally-punishable actions still falling within the statute of limitations period and information concerning crimes for which the respective conviction has neither been expunged nor expired.

Requirements are also envisioned with respect to any such claimant demand, which must, inter alia, indicate the information pertaining to which the display of links must cease and desist, as well as the links themselves. Within ten business days, the operator may request that the claimant clarify his demands (in case of incompleteness, inaccuracy or error), and may also requisition the appropriate piece of ID. Within 10 business days of its receipt of the demand, the operator must either cease and desist the display of the offending links and notify the claimant to this effect, or send the claimant a reasoned refusal to do so in the same form, which may be challenged in court. The very fact of the claimant making the demand cannot be disclosed by the operator, except for instances directly named by the Federal Laws.

If, despite the injunction, the search engine system fails to stop the display of links concerning the aggrieved citizen by the mandated deadline, the legal entity could be charged with a fine of up to RUB 100,000. Repeated failure to abide by the bailiff’s order risks exposure to a fine up to ten times higher.

Advertising amnesty for Russian content

RF Federal Law № 5-FZ dated 03.02.2015 “On the Amendment of Article 14 of the RF Federal Law “On Advertising,” and “FAS Russia Order № 405/15 dated 01.06.2015 “On Approval of the Procedure for Confirming the Compliance of Mass Media Products with the Requirements Established by the RF Federal Law “On Advertising”

1 January 2015 saw the entry into force of a ban on the dissemination of advertising on cable television channels. Just a month later, however, an exception was made for TV channels whose content features at least 75 percent “national” mass media products.

That said, “national” is understood to mean products whose production investments are no less than 50 percent Russian. Such products must be produced by Russian entities or as contracted by a Russian mass media outlet. Use of the Russian language is not a binding criterion here, insofar as an allowance has been made for the creation of “national” mass media products in foreign languages – provided such products are intended for the Russian mass media.

The agency responsible for confirming the status of national mass media products is the Federal Antimonopoly Service of Russia (FAS Russia), which is empowered to make both scheduled and unscheduled audits towards this end.

In June 2015, FAS Russia approved a document, pursuant to which confirmation of the national status of mass media products is based on the given TV channel’s total broadcast time in a calendar day (from 00 hours 00 minutes to 24 hours 00 minutes). Audits can take into consideration the following materials and documents: registration log listing all aired programs, recordings of programs, information on the providers of mass media products, information on the entities providing the means of production, contracts and payment orders evidencing the total volume of investments by Russian citizens in production, etc. Products acquired by the TV channel from an outside party and those produced in house, including live broadcasting, programming emanating from within or without the channel’s station—news, interviews, entertainment shows, etc. are subject to evaluation. National mass media products can also encompass the broadcasting of sporting events—provided their accompaniment by the TV channel’s own original commentary.

Mass media control under control

RF Governmental Resolution № 1107 dated 16.10.2015 “On Approval of the List of Documents Evidencing Compliance by Mass Media Founders (Participants), Mass Media Editorial Staff and Broadcast Organizations (Legal Entities) with the Requirements of Article 19.1 of the RF Federal Law “On the Mass Media” and the RF Federal Law Amending the RF Federal Law “On the Mass Media” and RF Administrative Offences Code (RF AOC) (Draft № 895844-6)”

New Article 19.1 of the “Mass Media Law,” restricted to just 20 percent the threshold limit of Russian mass media ownership (control) by foreign entities. However, it lacks the definitions of some key terms – “control” and “indirect control,” which created a considerable amount of uncertainty with respect to the allowable forms of restructuring mass media with foreign participation. Hopes were pinned on the RF Government, which was to have affirmed the list of documents used to confirm compliance with the new Article 19.1.

In October the RF Government adopted Resolution № 1107 that envisions a basic set of documents (including the relevant excerpt from the shareholders’ register, the list of participants, the excerpt from the commercial register, a copy of the physical person’s passport, a copy of the notice (where applicable) of foreign citizenship or permanent resident status), but also requires the submission of other documents “evidencing direct or indirect control.” The latter essentially means that media market players are forced to determine themselves the list of documents and appropriate criteria of foreign control. Therefore, the uncertainty still remains, and the media market players may need to proceed from the most “conservative” understanding of “indirect control”.

Hot on the heels of corporate control, state control also encompasses foreign financing of the mass media. In just a month-and-a-half, the RF Federal Assembly adopted a law supplementing the “Mass Media Law” with Article 19.2 and mandating quarterly reporting to Roskomnadzor on funds received from foreign entities, companies featuring foreign participation and NPOs deemed foreign agents. The duty to report has been assigned to the financing-receiving mass media editorial staffs, broadcasters and mass media publishers. In essence, this control extends to any financing above RUB 15,000. It’s important to note that funds received from and by mass media founders are exempt from the duty to declare. Perhaps this can be interpreted as a nod by the State at the preference for linear mass media funding through the respective founder.

Particularly striking are the tough sanctions envisioned for the violation of the new Article 19.2 of the “Mass Media Law,” simultaneously added to the RF Code of Administrative Violations: non-submission or untimely submission of the required information is punishable by an administrative fine of up to 200 percent of the received financing and up to 400 percent in the case of a repeat offence. These are one of the most severe fines found anywhere in this Code, which can even be compounded by fines imposed on the executives of the respective organizations.

Antimonopoly law – standing on guard for intellectual property

RF Federal Law № 275-FZ dated 05.10.2015 “On Amendment of the RF Federal Law “On Competition Protection” and Certain Legislative Acts of the Russian Federation”

Within the scope of the so-called fourth antimonopoly package, amendments were made to the RF Federal Law “On Competition Protection” that reassigned the various types of unfair competition to separate articles. Among other things, individual prohibitions were introduced against unfair competition involving:

  • The registration and use of trademarks and brand names (moreover, if registration of the trademark is deemed unfair competition, the respective FAS Russia decision would serve as the basis for the annulment of the trademark registration in the Rospatent)
  • Use of the results of intellectual activity
  • Actions capable of causing confusion with a competitor’s operations, goods or services (including the use of any designator identical to a competitor’s trademark, brand name, commercial identifier or specific product place of origin – or similar thereto to the point of confusion)
  • The illegal receipt, use or disclosure of information constituting a commercial or other legally-protected secret

It should be noted that the aforementioned provisions are not fundamentally new when compared to the previous version. However, they have now been worded in much greater detail, which should encourage the uniformity of enforcement.

Cards, money, Internet

RF Governmental Resolution № 452 dated 08.05.2015 “On Additional Requirements binding on the organizers of games of chance”

Gambling organizers cannot use more than one domain name, which must be registered in the name of the organizer or administered thereby. The acceptance of bets must employ the use of a bank account opened at the interactive-bet-transfer accounting center, founded by the respective self-regulating organization of which the organizer is a member. Information on accepted interactive bets must be stored within the territory of the Russian Federation pursuant to Clause 3, Article 10.1 of the Law on Information, which by default had previously been geared solely towards organizers of the dissemination of information via the Internet. The hardware and software employed towards this end, including means for the protection of information, must comply with the requirements of applicable Russian law on technical regulation.

Moreover, on its website, the organizer of games of chance must post compulsory information on its activities, including information on its company name, as well as on the corresponding trademark and/or commercial identifier and the text of the RF Federal Law “On the State Regulation of Games of Chance and the Amendment of Certain Legislative Acts of the Russian Federation” or a direct link to said law on the portal www.pravo.gov.ru; posted information must also include the organizer’s established rules governing the playing of games of chance, acceptance of bets and payout of winnings, a copy of its license accompanied by enclosures; a copy of the organization’s acceptance into the membership of the respective self-regulating organization.

From a legal standpoint, the Resolution fails to provide a direct answer to the question as to the permissibility of the acceptance of bets over the Internet, although some market players believe it could be yet another “tacit” indication of movement towards the legalization of the online activities of bookmakers’ offices and betting shops.

Make way for science!

RF Federal Law № 270-FZ dated 13.07.2015 “On Amendment of the RF Federal Law “On Science and State Science-and-Technology Policy” in Terms of the Refinement of Financial Instruments and Mechanisms for Supporting Science-and-Technology Activity in the Russian Federation”

Measures have been envisioned for a change of approach to the financing of scientific research. In particular, at issue is a system of public and private foundations for the support of science-and-technology and innovation activity, including the possibility of co-financing from different sources. The same requirements have been established for all foundations, irrespective of their founders (be it Russian Federation, constituent entity of the Russian Federation or private individual).

A foundation for the support of science, technology and innovation is expected to conduct competitive selection of scientific, technology and innovation programs and projects with the aim of their subsequent financial support. The obligation to exercise control over the performance of financed programs and projects at all stages of their implementation has been strengthened. The foundations should also set up advisory councils for the expert analysis of projects under competitive selection at all stages of their subsequent implementation.

Informational openness of foundations activities will be achieved by a requirement to post on a foundation’s website information about competitive selections and terms thereof, participation applications requirements, application consideration procedure, expert analysis, and the results of competitive selection, information on the outcome of the implementation of supported programs and projects, and other information.

The law also provides a definition of some new concepts. Freshly-introduced, for example, is the term “unique scientific installation,” the presence of which is now a mandatory criterion for a scientific organization to be granted the status of a state scientific center.

Religious texts yes – extremism no

RF Federal Law № 314-FZ dated 23.11.2015 supplemented RF Federal Law № 114-FZ dated 25.07.2002 “On Combatting Extremism” with a new article – Article 3.1 “Particularities of the Application of Russian Federation Legislation on Combatting Extremism with Respect to Religious Texts”

According to the strict legal wording, the Bible, the Koran, Tanakh and Kangyur, their content and verses therefrom can no longer be deemed extremist materials. This norm should be viewed in the broader context in conjunction with RF Federal Law № 125-FZ dated 26.09.1997 “On Freedom of Conscience and Religious Associations,” pursuant to which Christianity, Islam, Buddhism and Judaism are directly referred to as religions constituting an integral part of the cultural heritage of the peoples of Russia.

This provision may turn out to be quite relevant, both for individual users and for numerous website owners, including organizers of the dissemination of information via the Internet (social networks and other interactive platforms) regularly encountering various demands in the course of their normal activities seeking the deletion of certain materials. At the same time, it should be noted that the amendment only extends unconditionally to the above-specified religious texts. Moreover, even if a specific verse from a religious text in a user’s message cannot be viewed as extremist material, this does not exclude the possibility of the message as a whole or other parts thereof being qualified as extremism.

In addition, aside from the amendment on religious texts, in 2015, Article 13.15 of the RF Administrative Offences Code was supplemented with a new Clause 6, establishing liability for legal entities in an amount from RUB 100,000 to 1,000,000 with confiscation of the offending material for legal entities engaging in the production or publication of mass media containing public calls to, or justifications of, terrorism, as well as other materials encouraging, substantiating or justifying extremist activity. This clause does not cover instances envisioned by other Clauses – 20.3 (Nazi and extremist symbols) and 20.29 (production and dissemination of the extremist materials contained on the respective list). The fine under Article 20.29 has been increased and now stands between RUB 100,000 and 1,000,000.

New antipiracy law enters into force

RF Federal Law № 364-FZ dated 24 November 2014 “On Amendment of the RF Federal Law “On Information, Information Technology and Information Protection” and the RF Civil Procedure Code (RF CPC)”

In the TOP-2014, we reported on the entry into force as of 1 May 2015 of a number of important amendments and augmentations concerning the protection of rights to intellectual property in information and telecommunication networks, including on the Internet (the so-called new “Antipiracy Law”). As you may recall, Article 15.2 of the Law on Information now extends not only to movies, but also to all other items protected by copyrights and (or) related rights (aside from photographs). The scope of Article 144.1 of the RF CPC on tentative injunctive relief has similarly been expanded.

The practical evolution of this development involved Roskomnadzor’s Recommendations on the basic approaches to the implementation of Articles 15.2, 15.6 and 15.7 of the RF Federal Law “On Information, Information Technology and Information Protection,” drafted in coordination with the community of right-holders (available on the official department website: http://rkn.gov.ru/news/rsoc/news32165.htm).

Interest in the document has been generated, first and foremost, by recommendations on the identification of disputed items protected by copyrights and/or related rights, namely, the reference to the requirement to provide the text of a work of music or recording in cases where identification by name, author and/or performer alone is impossible. Another important nuance is the reference to various means for proving instances of violation, including the use of video-capture programs in cases where a violation cannot be confirmed by means of screen-shot.

Another key change involved the addition to the Law on Information of Article 15.6 on the permanent blocking of websites found to have regularly and unlawfully posted information containing items protected by copyrights and (or) related rights, or information needed for their obtainment. In 2015, we witnessed the practical application of this particular development. For the first time ever, the Decision by the Moscow City Court dated 14.10.2015 in Case № 3-401/2015 (Bazilevs Distribution vs. Compubyte Limited, et al) satisfied a claim seeking a permanent ban on access to certain websites. The court satisfied the claimant’s request for permanent access ban with respect to websites concerning which, as of the date of the lawsuit seeking permanent blocking, the relevant court rulings had already entered into legal force. At the same time, the court lawfully denied a similar claim with respect to other websites, indicating that, in the absence of effective court decisions, court orders on injunctive relief against such websites cannot be taken into consideration in the context of repeated violations.

The story of the lifetime blocking of the most popular torrent-tracker on Runet, Rutracker.org, is not yet over; the Decision by the Moscow Municipal Court dated 09.11.2015 in Case № 3-0647/2015 was appealed, with representatives for both sides promising to fight the good fight to the bitter end.

Clearly, the standoff between copyright holders and intellectual-right infringers on the Internet will continue to unfold over the course of 2016.

What does the New Year have in store for us? Announcement of draft legislation coming in 2016

New faces in e-commerce: the aggregator

Amendments are planned for the RF Federal Law “On the Protection of Consumer Rights.” Plans call for the introduction of the concept “aggregator of goods (services)” for the purposes of regulating the legal status of companies using their websites to post information on goods (services) with respect to which they are not the authorized vendors. Pursuant to the bill, aggregators will be charged with the obligation to provide accurate information about such goods (services) and their authorized vendor (provider, manufacturer, importer), the breach of which entails certain liability.

Reform of collective rights management

A proposal has been made to reform the existing system for the freelance management of copyrights and related rights and arrange for the possibility of its creation based on membership in non-commercial organizations engaged in collective rights management. The bill envisions a number of requirements binding on such organizations, including a corporate management clause. In its current wording, state accreditation is left applicable only to the collection of royalties for the reproduction of albums and other audio-visual works for personal use.

VAT for the SW of foreign IT companies

For the purposes of eliminating the current unevenness in the VAT taxation of Russian and foreign companies offering electronic services, an amendment has been suggested for the RF Tax Code: regulating the registration and particularities of the VAT taxation of the electronic services provided by foreign companies. A proposal has also been tabled to repeal the current VAT exemption for operations involving the exercise of exclusive rights to SW and databases (Subclause 26, Clause 2, Article 149 of the RF Tax Code) – provided the implementation of compensatory measures aimed at Russian organizations.