The business supported the copyright reform and gave suggestions to Draft Law 5552-1

28/ 07/ 2022

On July 26, Ukrinform held a press conference on the topic Copyright in Ukraine: how to make royalties fair for authors and not burdensome for users, where representatives of leading business associations and authorities discussed the Draft Law No. 5552-1 and the possibility of taking into account business proposals in it. Thus, on July 1, the Verkhovna Rada supported in the first reading the Draft Law 5552-1 On copyright and related rights aimed at harmonizing Ukrainian legislation in the field of copyright with European legislation. Examination of the voted document has already shown that it generally complies with the norms of European Union directives. But problematic issues between the representatives of the authors (so-called OKУ - organizations of collective management) and users (importers and manufacturers of equipment) within the framework of the Draft Law 5552-1 remained unsettled. In particular, there are still questions as to which method will be used to calculate fees for private copying (the so-called smartphone tax)? After all, the OKУ proposed to unjustifiably increase this fee by 3-4 times in 2019 led to a crisis in the field of private copying and reprography, as well as to court cases between the OKУ and manufacturers-importers of equipment. As a result, the authors, on the one hand, did not receive funds, and the representatives of the manufacturers, on the other hand, were forced to defend their rights in court. This harmed the business climate in Ukraine as well - Viktoriia Kulykova, the Head of the Department of Committees of the European Business Association, told the background of the crisis. Therefore, as early as last year, to somehow unblock this situation, EBA proposed to the Kyiv School of Economics to conduct a thorough study and determine what are currently the economically justified rates for paying for equipment for the possibility of private copying of music/video and reprographic reproduction of literary works The result of this was the development of a Methodology and formula for calculating fees by the Kyiv School of Economics (KSE). Therefore, the Association sent official letters to the peoples deputies and the Ministry of Economy of Ukraine with a request to finalize the Draft Law 5552-1 and to regulate within its framework the most problematic issues for the field of private copying, in particular (1) the need to use a methodology and a scientific approach when calculating the percentage of the tax on equipment and media; (2) the need to include representatives of importers in the OKУ accreditation commission. Gennadiy Smorzhevskyi, the Head of the Intellectual Property Committee of АПІТУ, presented the content of the formula, which was introduced in KSE. The KSEs approach to calculating the private copying fee formula takes into account the level of population income, the practice of Ukrainian consumers to download audio and video content to gadgets, the level of piracy in Ukraine and the use of streaming services that are not subject to a fee under Ukrainian law, and also takes into account the latest available data regarding global and domestic benchmarks of the cost of audio, video, paper copying. It is not possible to raise the fee for the possible copying of copyrighted works on paper without reason, when a sociological survey ordered by KSE during the calculation of the formula testified that 43% of respondents do not participate in the practice of copying paper content at all. This real consumer experience is taken into account in the KSE formula and gives hope for a fair rate of collection. The KSE methodology for calculating the smartphone tax has passed expert verification. As Yurii Peroganych, the General Director of the Association of Information Technology Enterprises of Ukraine (АПІТУ), reported, 4 independent studies were recently presented that evaluated the formula. The KSE formula is objective, since the indicated indicators do not depend on the will of stakeholders, that is, neither on collective management organizations that receive deductions for private copying and reprography, nor on manufacturers or importers who pay this fee, - Yuriy Peroganych read the conclusion of expert Inna Polishchuk, the Head of the Department of Economic Research of the State Enterprise Information Judicial Systems Forensic Expertise and Expert Research Center. During the press conference, the participants reported that during July, the European Business Association, the Association of Information Technology Enterprises of Ukraine, the Association Ukrainian Importers of Consumer Electronics and the Union of Ukrainian Entrepreneurs addressed the relevant letters to the Peoples Deputies and the Ministry of Economy with a request: to provide in the Draft Law 5552-1 the need methodology for calculating tariffs in the spheres of private copying and reprography. About the content of the letter written by the Union of Ukrainian Entrepreneurs, Andriy Yerashov, the Head of the Analytical Center of the Ukrainian Entrepreneurship Association, said: If the necessity of a methodology for determining copyright fee rates is established at the legal level, such a fee will be fair and adequate to the realities of Ukraine, and our country can become the first among European countries with an economically justified formula for calculating the smartphone tax, thereby ensuring a fair balance of the rights and interests of authors and users, as required by European legislation. Representatives of the authorities supported the determination of business associations in solving the problem of fees for equipment and media. The Draft Law 5552-1, adopted in the first reading, is important for the European integration of Ukraine, it is a fundamental law on the whole sphere, so there will be many such discussions so that every branch is heard, said Oleksandr Sanchenko, Peoples Deputy of Ukraine, head of the subcommittee on of the music industry of the Committee of the Verkhovna Rada of Ukraine on Humanitarian and Information Policy. In his opinion, it is in the discussion between all the stakeholders of the reform that the answers to how to solve the problem of transparent royalties should be found. You (business associations - ed.) have been doing this for a long time, if there is an issue of an unfair price, an unclear process, we have to fix it - Oleksandr Sanchenko said. - I agree that in the accreditation commissions, in a variable part of its composition, there should be a representative of the public organization to which this story relates, but is it possible to enshrine the methodology in the law, or rely here on the specialized Ministry of Economy? It is worth hearing your suggestions and going further in improving this law. It is necessary to enshrine in the law the necessity of having a methodology for the calculation of fees, and the most effective methodology should be enshrined at the level of a by-law, answered Yuriy Peroganych. Transparent implementation of changes through research and expertise is a civilized approach to institutional changes, Dmytro Guziy, the Director of the Department of Intellectual Property Development and Innovation Policy of the Ministry of Economy of Ukraine, assessed the initiative of business associations. He noted that the existence of the methodology ensures the transparency of fee calculation, and the discussion of its content is a further prospect of cooperation in solving the problem of transparent and fair copyright fees.

On July 26, Ukrinform held a press conference on the topic “Copyright in Ukraine: how to make royalties fair for authors and not burdensome for users”, where representatives of leading business associations and authorities discussed the Draft Law No. 5552-1 and the possibility of taking into account business proposals in it.

Thus, on July 1, the Verkhovna Rada supported in the first reading the Draft Law 5552-1 “On copyright and related rights” aimed at harmonizing Ukrainian legislation in the field of copyright with European legislation. Examination of the voted document has already shown that it generally complies with the norms of European Union directives. But problematic issues between the representatives of the authors (so-called OKУ – organizations of collective management) and users (importers and manufacturers of equipment) within the framework of the Draft Law 5552-1 remained unsettled. In particular, there are still questions as to which method will be used to calculate fees for private copying (the so-called “smartphone tax”)? After all, the OKУ proposed to unjustifiably increase this fee by 3-4 times in 2019 led to a crisis in the field of private copying and reprography, as well as to court cases between the OKУ and manufacturers-importers of equipment.

As a result, the authors, on the one hand, did not receive funds, and the representatives of the manufacturers, on the other hand, were forced to defend their rights in court. This harmed the business climate in Ukraine as well – Viktoriia Kulykova, the Head of the Department of Committees of the European Business Association, told the background of the crisis. Therefore, as early as last year, to somehow unblock this situation, EBA proposed to the Kyiv School of Economics to conduct a thorough study and determine what are currently the economically justified rates for paying for equipment for the possibility of private copying of music/video and reprographic reproduction of literary works The result of this was the development of a Methodology and formula for calculating fees by the Kyiv School of Economics (KSE).

Therefore, the Association sent official letters to the people’s deputies and the Ministry of Economy of Ukraine with a request to finalize the Draft Law 5552-1 and to regulate within its framework the most problematic issues for the field of private copying, in particular (1) the need to use a methodology and a scientific approach when calculating the percentage of the tax on equipment and media; (2) the need to include representatives of importers in the OKУ accreditation commission.

Gennadiy Smorzhevskyi, the Head of the Intellectual Property Committee of АПІТУ, presented the content of the formula, which was introduced in KSE. “The KSE’s approach to calculating the private copying fee formula takes into account the level of population income, the practice of Ukrainian consumers to download audio and video content to gadgets, the level of piracy in Ukraine and the use of streaming services that are not subject to a fee under Ukrainian law, and also takes into account the latest available data regarding global and domestic benchmarks of the cost of audio, video, paper copying.

It is not possible to raise the fee for the possible copying of copyrighted works on paper without reason, when a sociological survey ordered by KSE during the calculation of the formula testified that 43% of respondents do not participate in the practice of copying paper content at all. This real consumer experience is taken into account in the KSE formula and gives hope for a fair rate of collection.”

The KSE methodology for calculating the “smartphone tax” has passed expert verification. As Yurii Peroganych, the General Director of the Association of Information Technology Enterprises of Ukraine (АПІТУ), reported, 4 independent studies were recently presented that evaluated the formula. “The KSE formula is objective, since the indicated indicators do not depend on the will of stakeholders, that is, neither on collective management organizations that receive deductions for private copying and reprography, nor on manufacturers or importers who pay this fee”, – Yuriy Peroganych read the conclusion of expert Inna Polishchuk, the Head of the Department of Economic Research of the State Enterprise “Information Judicial Systems” “Forensic Expertise and Expert Research Center”.

During the press conference, the participants reported that during July, the European Business Association, the Association of Information Technology Enterprises of Ukraine, the Association “Ukrainian Importers of Consumer Electronics” and the Union of Ukrainian Entrepreneurs addressed the relevant letters to the People’s Deputies and the Ministry of Economy with a request: to provide in the Draft Law 5552-1 the need methodology for calculating tariffs in the spheres of private copying and reprography.

About the content of the letter written by the Union of Ukrainian Entrepreneurs, Andriy Yerashov, the Head of the Analytical Center of the Ukrainian Entrepreneurship Association, said: “If the necessity of a methodology for determining copyright fee rates is established at the legal level, such a fee will be fair and adequate to the realities of Ukraine, and our country can become the first among European countries with an economically justified formula for calculating the “smartphone tax”, thereby ensuring a fair balance of the rights and interests of authors and users, as required by European legislation.”

Representatives of the authorities supported the determination of business associations in solving the problem of fees for equipment and media. “The Draft Law 5552-1, adopted in the first reading, is important for the European integration of Ukraine, it is a fundamental law on the whole sphere, so there will be many such discussions so that every branch is heard,” said Oleksandr Sanchenko, People’s Deputy of Ukraine, head of the subcommittee on of the music industry of the Committee of the Verkhovna Rada of Ukraine on Humanitarian and Information Policy. In his opinion, it is in the discussion between all the stakeholders of the reform that the answers to how to solve the problem of transparent royalties should be found.

“You (business associations – ed.) have been doing this for a long time, if there is an issue of an unfair price, an unclear process, we have to fix it – Oleksandr Sanchenko said. – I agree that in the accreditation commissions, in a variable part of its composition, there should be a representative of the public organization to which this story relates, but is it possible to enshrine the methodology in the law, or rely here on the specialized Ministry of Economy? It is worth hearing your suggestions and going further in improving this law.”

“It is necessary to enshrine in the law the necessity of having a methodology for the calculation of fees, and the most effective methodology should be enshrined at the level of a by-law,” answered Yuriy Peroganych.

“Transparent implementation of changes through research and expertise is a civilized approach to institutional changes,” Dmytro Guziy, the Director of the Department of Intellectual Property Development and Innovation Policy of the Ministry of Economy of Ukraine, assessed the initiative of business associations. He noted that the existence of the methodology ensures the transparency of fee calculation, and the discussion of its content is a further prospect of cooperation in solving the problem of transparent and fair copyright fees.