No ‘Significant Impact’ on AllofMP3 from Credit Card Blockout

The contention that AllofMP3 is exploiting a loophole in the Russian copyright system is bunk, Kheit said. Regarding collection societies’ freedom to collect royalties on behalf of copyright holders, even without authorization, he said: “That’s just the way it’s done there. It’s not a loophole.” Russian society ROMS has been targeted by rightsholders for acting without authorization. Asked if it seemed wrong to sell music without rightsholder authorization, Kheit said doing otherwise would be like asking libraries to get authorization for every book they offer to check out.

Russia’s duty to work toward a law keeping collecting societies from acting without rightsholder authorization -- a provision in the recent U.S.-Russia trade agreement -- doesn’t faze AllofMP3. That might help rightsholders “engage” with licensing companies without requiring prior authorization, Kheit said, terming the provision a “single sentence” meant only as a guide to drafting actual legislation. “Who knows what the actual law is going to state… You never know what could happen, but the reality is it’s currently legal,” he added.

Major labels have ignored every means of legal recourse to protect their rights in Russia, Kheit said, noting the filing of only a single case -- a loss for Universal when it couldn’t prove it owned the copyright at issue. RIAA has sued diverse defendants in U.S. courts, he said: “Somehow they just couldn’t hire a lawyer in Russia to stop this?” It does not matter even if the U.S. president says the site infringes, he said: “Legality is not decided by a legislative branch or by an executive branch” but in courts with jurisdiction over AllofMP3, in Russia, he said.

Regarding the legal FAQ’s statement that AllofMp3 was “considering” a separate fee per transaction paid to artists, as opposed to rightsholders, Kheit said the careful language arose from logistical hurdles. The site “wants to do it in a way that doesn’t cost more” than what its downloads sell for, he said: There’s “not just a straightforward way to make things happen.” Told that U.S. website Lala.com -- which enables CD exchanges between members for under $2 and has been the target of label grumbling -- gives 20% of revenue to artists, Kheit said he would bring that up with AllofMP3’s principals.

Russian Law and ROMS’ Royalties

AllofMP3 is “flagrantly infringing” not only under U.S. law but under at least parts of Russian law it claims to heed, IIPA counsel Eric Schwartz told us. A former Copyright Office staffer who helped draft the 1992 U.S.-Russia trade agreement and a 1993 update of the 1971 Soviet copyright law, Schwartz called AllofMP3’s business model “illegal under 30- year law.”

Changes last week to the Russian civil code should make it obvious AllofMP3’s business going forward is illegal, said Schwartz. ROMS is authorized to collect and distribute royalties for the performance right, not the distribution right that AllofMP3 uses to sell downloads. “There’s a reason why ROMS was uninvited” to the international umbrella body of collecting societies, he said: “Everything they're doing is contrary to international norms.” Schwartz wasn’t familiar with FAIR, another collecting society that AllofMP3 claims is collecting its royalties for distribution to rightsholders, and that we haven’t been able to contact, he said. He called the societies “mushrooms -- they just keep spreading” with no basis in law.

ROMS indeed can collect for all covered rights, Kheit said in the teleconference. A Sept. Russian legal change “explicitly” recognizes the societies’ right to collect for “downloadable media,” he said.

Whatever Russian law’s vagaries, AllofMP3 has no excuse for misreading U.S. law, Schwartz said. The provisions the site mentions in its legal FAQ have “no relevance” since they assume rightsholder authorization, missing for AllofMP3: “I suggest they take a look at U.S. case law,” namely decisions in the 2nd U.S. Appeals Court, N.Y., and the 7th U.S. Appeals Court, Chicago, Schwartz said. In the teleconference Kheit said the U.S. authorization provision applies only to U.S.- based businesses.

It’s pointless for rightsholders to bring civil cases in Russia to go after AllofMP3 or, for that matter, illicit optical-disc plants, Schwartz said. Crime syndicates are enmeshed in piracy there and it’s difficult to find principals behind plants and Web operations, he said. The Universal case Kheit invoked was “totally bollixed up in procedural delays and went nowhere,” he added. A few “confidential settlements” have put sites out of business, but using the Russian civil system against piracy is “like asking U.S. citizens to bring lawsuits against the mob. It’s laughable.”

Blaming the court system won’t fly, because “the language of the statute is so clear,” Kheit said. If the courts are corrupt, wouldn’t that mean the Kremlin can force its will to please the WTO and join the body? he asked.

Told the company’s silence on its finances and membership makes it look “shady,” Kheit said that reporter couldn’t name the number of iTunes’ buyers off the top of his head either. AllofMP3 principals haven’t done direct interviews because they don’t speak English and went to technical, not business, schools -- hence its reliance on U.S. PR and legal counsel to talk to the media, he added. -- Greg Piper

IEEE Globecom Conference Notebook

A WiMAX Forum group studying the 700 MHz band finds “the digital dividend spectrum” especially interesting, among other frequencies “significantly below” 2.5 GHz perhaps opening internationally to the broadband wireless technology and other uses, an official said. Jayne Stancavage, vice chair of the Forum’s Regulatory Working Group, summarized its work at a Thurs. IEEE Globecom conference in San Francisco. She said at the ITU, the group works in Study Group 8 on mobile, backing inclusion of WiMAX as “a member of the IMT family,” meaning International Mobile Telecommunications standards for advanced wireless broadband. It participates in the study group’s Working Party 8F, devising out systems beyond IMT, she said: “WiMAX fits very well within the ITU view… of what IMT-Advanced should look like.” The WiMAX working group’s main aim is “to promote very flexible policies,” so fast innovation doesn’t subject operators to “policies that lock us in” to superseded technologies, Stancavage said. Companies should have latitude to use whatever technology suits a market, and policies should recognize that “the lines are blurring between fixed and mobile” but guard non-WiMAX users from interference, she said. The group supports creation of secondary markets in spectrum, which are less developed outside the U.S. than within it, Stancavage said. - LT

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Affordable, extensive broadband is crucial to American cities, Ft. Wayne, Ind. Mayor Graham Richard (D) said Thurs. Ft. Wayne, “a typical Rust Belt city working to be reborn,” has free Wi-Fi downtown and in libraries, hospitals and its airport, he said Thurs. at IEEE’s Globecom conference in San Francisco. The city offered Verizon generous terms, including fast-track permitting to bring it FiOS, rewarded with the Midwest’s first and still largest deployment, Richard said. “I love having 2 big players competing in my turf to bring killer applications to customers,” he said of Verizon and Comcast. Cities should build broadband networks if they can’t get private operators to do so, Richard said, advocating a flexible “beg, borrow, buy, build” strategy “to come up with the right combination for your community.” More broadly, he said “it’s a travesty that we've almost dismantled” the govt./business R&D partnership. Unless that changes “we will continue to be less than the best” after the 2008 election, in which he said he backs fellow Hoosier Sen. Bayh (D) for president. - LT