TUL Lecture in Russian Contract Law, E-commerce and IP Law.
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TUL Lecture in Russian Contract Law, E-commerce and IP Law.

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Presentations for part of the lectures in Russian business law (contracts, e-commerce and IP law) at Tallinn University Law School 25.11-28.11.2003. To be added during the week.

Presentations for part of the lectures in Russian business law (contracts, e-commerce and IP law) at Tallinn University Law School 25.11-28.11.2003. To be added during the week.

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TUL Lecture in Russian Contract Law, E-commerce and IP Law. TUL Lecture in Russian Contract Law, E-commerce and IP Law. Presentation Transcript

  • RUSSIAN BUSINESS LAW Contracts, E-Commerce & Intellectual Property Vladislav V. Arkhipov Ph.D, Associate Professor Saint Petersburg State University vladislav.arkhipov@gmail.com
  • About Me PAST With ‘Egorov, Puginsky, Afanasiev & Partners’ (www.epam.ru): Practice. Dispute resolution, corporate law, IP, media and telecom law. PRESENT With Saint Petersburg State University (www.spbu.ru, www.law.spbu.ru): Lecturing. The course of ‘Legal Regulation of Relationships in the Internet’. Managing. Virtual Law Discussion Club (htttp://vk.com/virtuallaws, www.virtuallaws.ru). Researching. Directing ‘Legal Regulation of Internet Trade’ topic. Without any affiliation: Internet activism. Blog at www.gameponder.blogspot.com, twitter @GamePonder. FUTURE Practice. Commitment to join an international law firm. IP, IT and telecom practice (combining with teaching). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 2
  • 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 3 View slide
  • Join Me in Social Networks! Facebook https://www.facebook.com/#!/vladislav.arkhipov.5 Twitter https://twitter.com/GamePonder Scoop.It http://www.scoop.it/t/video-game-law LinkedIn http://www.linkedin.com/pub/vladislav-arkhipov/14/968/805 Blogger http://gameponder.blogspot.ru/ Google+ https://plus.google.com/101236615041366654003#101236615041 366654003 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 4 View slide
  • Structure of the Course 1. Contracts. E-contracts. Digital Signatures 2. E-money & Virtual Currency 3. Copyright. Protection of Copyright in the Internet 4. Trademarks and Other Brand Identities 5. Legal Aspects of Online Game Business 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 5
  • Source, Warning and Disclaimer Civil Code of the Russian Federation (Part 1) of 30.11.1994 No. 51-FZ (ed. of 02.11.2013). WARNING: In 2013 the Civil Code has been substantially reworked. There are many changes to general provisions. Pre-2013 literature may be outdated. DISCLAIMER: the aim of the course is to provide general understanding of Russian business law. Some details may be omitted. Nothing in these presentations constitutes legal advice and/or official position of Saint Petersburg State University and/or other affiliated parties. You may refer to www.russian-civil-code.com for basic understanding in English, but it is now extremely outdated (2006). We will use technical term ‘source of private law’ which means law, other enactment, terms of commitment/agreement and customary business practice. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 6
  • Contracts. E-contracts. Digital Signatures CONTRACTS. Definition 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 7
  • Basic Assumptions o Contract law is an ‘advanced part’ of general civil law provisions which involves most of the general institutions by ‘snowball’ principle. o As such, contract directly embraces the law of transactions and of obligations, as any contract is a kind of transaction which implies commitments. o Contract law applies only to civil (or private) relationships. Public entities though may also act as subjects of civil relationships. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 8
  • Definition of Contract Contract is an agreement of two or more parties on institution, modification or termination of their civil rights and duties (Item 1 Article 420). To what is this limited? o Law of contracts as set forth by the Civil Code applies to contracts which affect civil rights and duties. What does this entail? o Contract is a form of transaction, either bilateral or multilateral (Item 2 Article 420). o What is implied by contract is obligations which also have general rules for them (Item 3 Article 420). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 9
  • What Does ‘Civil’ Mean? In this context ‘civil’ basically means ‘private’ as opposed to ‘public’ [law]. Etymologically this term derives from Roman ius civile – the Latin for ‘citizen law’ which applied to Roman citizens. Note that Russian law operates with the term ‘relationship’. Law governs relationships (like in other continental systems, but unlike common law). How civil relationships can be distinguished from any other? Civil relationships comprise of ‘property’ and ‘non-property personal’ relationships based on equality, autonomy of will and property independence of parties (Item 1 Article 2). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 10
  • Transactions Transaction is an action of a natural person or legal entity which are aimed towards institution, modification or termination of civil rights and obligations (Article 153). Transactions can be unilateral, bilateral or multilateral (Item 1 Article 154). Unilateral transactions require a will of one party, while others – of two parties (bilateral), or even three or more (multilateral). Bilateral and multilateral transactions are synonymous for contracts. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 11
  • Commitments By force of a commitment, one party (debtor) shall perform in favor of other party (creditor) some action, in particular: transfer property, perform work, pay money etc., or to abstain from some action, while the creditor is entitled to claim the discharge of an obligation by the debtor (Item 1 Article 307). Commitments may derive from contracts, as a consequence of inflicting harm and from other grounds specified by the Code (Item 2 Article 307). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 12
  • Conclusion on Nature of Contract Contract is a kind of transaction which pertains to civil relationships and implies commitments. Three main institutes of civil law which govern contracts: o Transactions, general (form and validity) o Commitments, general (debtor-creditor relationships, guarantees, responsibility) o Contracts, specific (conclusion, amendment and cancellation) 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 13
  • Contracts. E-contracts. Digital Signatures CONTRACTS. Transactions 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 14
  • What Does Law of Transactions Govern? Form of transactions (Articles 158-165.1) o Transactions are made either orally or in written form (simple or notarial). o A transaction which may be made orally is considered to be made even if the will to make a transaction follows from behavior of a party. o It is not possible to make a transaction by remaining silent unless specifically provided by law or a contract. Invalidity of transactions (Articles 166-181) o 26.11.2013 A transaction can be invalid on the grounds provided by law as a consequence of deeming it invalid (‘voidable transaction’) or irrespective of such decision (‘void transaction’). © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 15
  • Oral Transactions o On leftovers, any transaction which should not be made in written form due to law or an agreement may be made in oral form (Item 1 Article 159). o Unless otherwise provided by the parties, any transactions which are discharged at the moment they are made may be made in oral form, except for those which require notarial form or which are void if written form is not observed (Item 2 Article 159). o In case a contract is made in written form, any transactions to fulfill it may be made in oral form if the parties agree to it and it does not contradict to law, other enactments or a contract (Item 3 Article 159). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 16
  • Written Form of Transaction o Written form of transaction shall be made by creating a document which expresses its content and is signed by party(ies) which make the transaction or by their proxies (Item 1 Article 160). Which transactions shall be made in written form? o Transactions of legal entities between themselves or with natural persons (Point 1 Item 1 Article 161). o Transactions of natural persons between themselves if the amount is higher than RUR 10 000 (app. EUR 223), or if required by law (Point 2 Item 1 Article 161). Unless otherwise provided by law, if written form requirement was not observed, the parties cannot use witnesses, but the transaction is not invalid. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 17
  • Notarial Form of Transaction o Notarial certification means checking the legality of a transaction, including rights to make it, which is made by a notary or other person entitled to make a notarial certification pursuant to the law (Item 1 Article 163, edition of 07.05.2013). o It is obligatory to make a notarial certification if required by law or by an agreement (even if the law does not require this), and incompliance with this rule results in void transaction (Items 2 and 3 Article 163). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 18
  • State Registration NOTE: State registration is not a form of transaction itself. o State registration may be required by law, and in such cases the legal consequences of a transaction occur after the transaction is registered. o A transaction which modifies a transaction which was registered, is subject to state registration itself. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 19
  • What If a Bad Guy Avoids Registration? o In case one party has completed the transaction which requires notary certification in full or in part, but other party avoids such certification, court, under the claim of the first party may deem such transaction valid without further need for certification (Item 1 Article 165). o In case a transaction which requires state registration is made in due form, but one of the parties avoids its registration, court, under the claim of the ‘good’ party may rule to register the transaction, so that it is registered pursuant to the court ruling (Item 2 Article 165). o In both cases the ‘bad buy’ shall reimburse the losses incurred by the avoidance of finalizing or registering of the transaction, and the statutes of limitation is one year (Items 3 and 4, Article 165). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 20
  • Void Transactions ‘Void’ means that a transaction is void by default, and court may only apply consequences. o The claim to apply such consequences may be made by a party to the transaction or any other party provided by the law. o In terms of theory, void transactions partly imply breach of public interest, therefore, court may apply consequences at its discretion if discovers this. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 21
  • Voidable Transactions ‘Voidable’ means that a transaction is not void by default, but can be deemed as such by court. o Voidable transaction may be contested by a party or a person specifically mentioned by law, in case such party suffered from such a transaction. o A party which shows by its behavior its will to keep the transaction intact, cannot contest the transaction on the grounds known when showing this. o If no one contests a voidable transaction, it remains intact. This effectively means that any voidable transactions which survive statute of limitations (in general, 1 year) are same as valid. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 22
  • List of Void Transactions o Transaction which breaches law or other legal enactment AND infringes public interest or protected rights and interests of third parties (Article 168). o Transaction made to reach the aim which is contrary to basics of legal order and morality, if the parties know about this in advance (Article 169). o Simulated transaction (made just to create illusion of a transaction) and fraudulent transaction (made to hide other transaction) (Article 170). o Transaction made by a legally incapable person (e.g. formally recognized as insane or under 14 years) (Articles 171 and 172). o Transaction made with breach of restriction to dispose of property which follows from legislation, including bankruptcy law (Article 174.1). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 23
  • List of Voidable Transactions o Transaction made by a legal entity which does not correspond to clear limitations of its constituent instruments if the other party knew or should have known about such limitation (Article 173). o Transaction made without consent of a third party, corporate body or state/municipal authority if such consent is required by the law, if the other party knew or should have known about this (Article 173.1). o Transaction made by a corporate representative or body with breach of procedure or interests of the principal, if the other party knew or should have known about this (Article 174). o Transaction made by a minor 14-18 years old without consent of parents if such consent is required, unless such a minor has been deemed fully capable (Article 175). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 24
  • o Transaction made by a natural person with capability limited by a court (e.g. addict) – only the guardian is entitled to make a claim (Article 176). o Transaction made by a natural person who could not understand meaning of his actions or govern himself while being capable. The claim may be brought by citizen himself (Article 177). o Transaction made under the influence of significant misbelief, i.e. the party would not make the transaction if it could assess situation reasonably and objectively (Article 178). o Transaction made under deceit, violence, threat or in course of adversary circumstances. Note that deceit also means silence when a good-willed person should not be silent (Article 179). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 25
  • Consequences Consequences: o Invalid transactions do not entail any legal consequences except for those connected with invalidity (Item 1 Article 167). o Each party shall return to other party anything gained as it was gained or as a monetary reimbursement if not possible (Item 2 Article 167). o The court may not apply consequences of invalidity if such application would contradict to the basics of legal order and morality (Item 4 Article 167). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 26
  • Statutes of Limitations Statutes of Limitations: o For void transactions – 3 years starting from the execution of void transaction, or – if the claim is raised not by a party – when it got to know about start of execution but not more than within 10 years (Item 1 Article 181). o For voidable transactions – 1 year starting form the moment when the claimant got to know or should have gotten to know about the grounds or starting from the termination of violence or threat (Item 2 Article 181). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 27
  • Contracts. E-contracts. Digital Signatures CONTRACTS. Commitments 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 28
  • Parties to Commitments o Both creditor and debtor may comprise of one or more parties (Para 1 Item 1 Article 308). o When claim just to one person on one side is invalid, it does not affect others (Para 2 Item 1 Article 308). o One person may be debtor to other person as creditor and vice versa at the same time (Item 2 Article 308). o Commitments do not create obligations of third parties, but can create rights (Item 3 Article 308). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 29
  • Performance of Commitments o Commitments shall be performed duly, in compliance with their terms as well as requirements of law or, when no such requirements are present, with customary business practice (Article 309). o It is not possible to quit a commitment unilaterally unless otherwise provided by the law. In commercial practice – also by the agreement (Article 310). o Creditor is entitled NOT to accept performance made in part unless otherwise provide by any source of private law (Article 311). o Debtor may ask to prove that the person accepting commitment is a due person, and the debtor bears the risk of not asking to do so (Article 312). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 30
  • o Unless otherwise provided by any source of private law (except for custom), the debtor may entitle third party to perform commitment, and creditor shall accept that (Article 313). o A commitment shall be performed in time or within period determined by its terms or in reasonable period if no such term is provided (Article 314). o Debtor is entitled to perform commitment prematurely unless otherwise provided by any source of private law (except for custom) (Article 315). o A commitment shall be performed at debtor’s place except for sale of land, sale of good with transportation, other sale of good by entrepreneur and monetary obligation (Article 316). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 31
  • o A monetary commitment shall be performed in Roubles, even if foreign currency equivalent is used (Article 317). o Unless otherwise provided by an agreement, in case debtor pays not enough money to perform monetary commitment, this money firstly covers creditor’s expenses, then – interest, finally – main debt (Article 319). o Unless otherwise provided by written sources of private law, a debtor is entitled to choice when commitment is alternative (Article 320). o When there are many persons at certain side, by default commitments shall be performed in equal shares. However, if prescribed by law or agreement, commitments are solidary (Articles 321 – 326). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 32
  • Security Measures o Penalty (fine). Fixed amount determined by agreement. Written form irrespective of the main commitment. Sometimes commitment is provided by the law. Disproportional penalties may be reduced by the court (Articles 330-333). o Pledge. Creditor may get discharge from pledged debtor’s property or (if something happens) from insurance. Specific rules apply to mortgage. Any property (including rights) may be pledged. There shall be an agreement specifying property, its value, nature, volume and term of main commitment. Written form is mandatory. Debtor usually can use pledged property (Articles 334-358). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 33
  • o Retention. If creditor has the asset which shall be given to debtor, but the debtor does not perform its commitment, the creditor can retain the asset until the commitment is performed, even if a third party has purchased such asset meanwhile. Then it may be sold as pledge (Articles 359-360). o Suretyship. Third party bears responsibility as the debtor in case the latter defaults. Separate written agreement or void transaction. Solidary responsibility. Third party reserves the right to contest creditor’s claim (Articles 361-367). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 34
  • o Bank Guarantee. Unrecallable and independent commitment of a bank which cannot be transferred unless otherwise specified in the commitment. After the guarantee commitment is fulfilled, the bank makes a regress claim to principal (Articles 368 – 379). o Holding Deposit (Downpayment). One party gives money to other party as advance payment, proof of contract and security measure. If commitment has not started and is terminated, downpayment just returns. If commitment has failed, the party which received downpayment and failed returns twice as much. Otherwise – just the amount (Articles 380-381). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 35
  • Change of Parties in Commitments Chapter 24: o The creditor may change without consent of the debtor, unless the commitment is tied to personality of the creditor, and the debtor may require proof of the rights of the new creditor. o The debtor may change only if the creditor gives his consent. o Change of creditor (effectively, assignment of the claim) shall be made in the form of the main commitment, including state registration requirement. Same for transfer of debt. o Assignment of claim is a general instrument used for circumvention of property rights (like rights to share capital in limited liability companies). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 36
  • Liability for Breach of Commitments Chapter 25: o The debtor shall reimburse the losses (real harm and denied profit). o As a general rule which can be modified by an agreement, if there is a penalty, it covers the losses appropriately. o Interest is accrued at the refinancing rate for default on monetary commitments. o As a general rule, covering of penalty and losses does not relieve debtor of the main obligation. o Actions of employees of a legal entity are actions of the legal entity for the purpose of liability for commitments. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 37
  • Termination of Commitments o By completion (general way). o By compensation for release of commitment. o By set-off. o By collision of debtor and creditor. o By novation. o By forgiving of debt (unless it does not infringe rights of third parties). o By act of state authority (which makes commitment impossible). o By death of a natural person or liquidation of legal entity. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 38
  • Contracts. E-contracts. Digital Signatures CONTRACTS. Specific 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 39
  • General Rules o Natural persons and legal entities are generally free to enter contracts, but tied by the prior commitments and legislative requirements. o The parties may enter any contract provided by the Civil Code or any other contract which is not directly provided, they can mix elements of different contracts. o The parties are free to determine terms of a contract unless otherwise directly provided by law. o By default contracts are considered to be ‘on a paid basis’. Therefore, pro-bono contracts should directly contain the corresponding provisions. Commercial companies cannot enter probono contracts as a general rule. o Unless directly prescribed by the law, only parties and subjectmatter are essential. The price and terms may be determined in other ways. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 40
  • Public Contract & Contract of Adhesion Public Contract - Consumers (Article 426): o Contracts which are made by commercial entities with consumers. o Entity cannot individually change terms and price, as well as refuse to enter. Contract of Adhesion – Business (Article 428): o The terms are determined by standard forms and other party may enter the contract in general. o The other party may request modification only if the contract deprives it from usual terms and if it was not (or should not be) aware of this. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 41
  • Preliminary Contract o Preliminary contract contains commitments to make contract on transfer of property, performance of works or services in future on conditions of the preliminary one. o Preliminary contract shall be made in the form of the main contract, otherwise it is void (not voidable). o Preliminary contract shall contain all essential terms of the main contract and the term of conclusion of the main contract (if there is no latter – the term is 1 year). o If a party avoids to enter the main contract, the other party may address the court with the relevant claim. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 42
  • Entering the Contract o Substantially, a contract is considered being made when the parties agreed on all essential terms in the form prescribed. o Procedurally, a contract is considered being made when a party which has sent an offer receives the acceptance without alteration of terms, unless it is not needed to transfer property in addition. o Form of the contract is determined pursuant to the law of transactions. o Advertisements are considered as invitation to make offers unless an advertisements says otherwise. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 43
  • Grounds for Modification and Termination o By default, modification or termination is possible only under the agreement of the parties. o Unilateral modification or termination is possible under the claim of a party, by court, in case: (a) the other party makes substantial breach, (b) in other cases provided by written sources of private law. o Substantial breach is a breach which significantly deprives a party from what it would be entitled to upon entering a contract. o Additionally a contract may be modified or terminated under substantial change of circumstances which were not expected, foreseen, which drastically change interests and the risk is not borne by an interested party. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 44
  • Contracts. E-contracts. Digital Signatures CONTRACTS. E-contracts 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 45
  • General Provisions o Russian law does not have specific regulations for general e-contracts and specifically Internet contracts. o First general reference. Transactions may be made with the use of faximile or other copy, as well as with digital signature in cases prescribed by law or an agreement (Item 2 Article 160). o Second general reference. A contract in written form may be made by exchange of documents via electronic communication which allows to identify parties in a trustworthy manner (Item 2 Article 434). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 46
  • E-contracts’ Stages of Complexity o Simple case. A contract is made by exchange of electronic messages with fortified qualified esignatures. o Medium complexity case. A contract involves completion of commitment with something which involves a kind of qualified e-signature, like bank cards. o Hard case. A contract is made without any direct or indirect use of e-signatures, somehow preceded by an ordinary written agreement. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 47
  • The Core of the Problem How natural persons may enter into agreements and make commitments? o Under his real name which includes last name, first name and, unless otherwise follows from law or national custom, patronymic (Para 1 Item 1 Article 19). o Under a pseudonym, but only in cases explicitly state by the law. Currently this covers just copyright issues (Para 2 Item 1 Article 19). o Virtually the same rules applies to legal entities (Item 1 Article 48). Remember that legal entities get commitments via their employees. Rhetoric question: how natural persons and company employees act in the Internet? Credits to my student Nikita Melaschenko who was the first to emphasize this problem. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 48
  • Contracts. E-contracts. Digital Signatures CONTRACTS. Digital Signatures 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 49
  • Sources Federal Law of the Russian Federation No. 63-FZ “On Electronic Signature” of 6 April 2011, came into force on 8 April 2011. This law replaced old Federal Law of the Russian Federation No. 1-FZ “On Electronic Digital Signature” (which was still in effect until 1 July 2012). The new Law introduced to Russian law rules similar to the provisions of the EU Directive 1999/93/EC on a Community Framework for Electronic Signatures. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 50
  • Definition Electronic signature is information in electronic form which is attached to other information in electronic form (information being signed) or is connected with the latter in other way and can be used for identification of the person which signs the information (Item 1 Article 2). General and vague legal definition of ‘information’ is given in the Federal Law of the Russian Federation ‘On Information, Informational Technologies and On Protection of Information’ No. 149-FZ of 27 July 2006: Information – data (messages, materials) irrespective of how they are presented (Item 1 Article 2). Note that the first version of the Civil Code listed information as an object of civil relationships. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 51
  • Principles of E-signatures Article 5: o The participants of electronic communication are entitled to use any e-signature at their discretion unless there is a specific rules provided by law or an agreement. o Possibility to use any information technology and/or technical devices which allow to comply with the requirements of the law to specific kinds of e-signatures. o It is not possible to deem an e-signature and/or the document signed with it legally invalid one the sole ground that such e-signature was created automatically. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 52
  • Principles of E-signatures Article 5: o The participants of electronic communication are entitled to use any e-signature at their discretion unless there is a specific rules provided by law or an agreement. o Possibility to use any information technology and/or technical devices which allow to comply with the requirements of the law to specific kinds of e-signatures. o It is not possible to deem an e-signature and/or the document signed with it legally invalid one the sole ground that such e-signature was created automatically. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 53
  • Types of E-signatures o Simple e-signature. Confirms the fact of forming of esignature by a specific person by means of codes, passwords and other means. o Non-qualified advanced (fortified) e-signature. It should: (1) be formed by cryptographic processing of the information with use of key of electronic signature; (2) allow to identify the person who signed the document; (3) allow to identify facts of introducing changes into the document after it is signed; (4) be created with use of the means of e-signature. o Qualified advanced (fortified) e-signature. Additionally to the aforesaid: should have its verification key stated in qualification certificate and be formed by e-signature means which have a proof of compliance with statutory requirements. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 54
  • Highlights of the Law o Simple e-signatures and advanced non-qualified esignatures may be used without assistance of third-party providers (certification centers) whenever it is technically possible). o An e-signature may be associated not only with natural persons, but also with companies and state bodies, however it is still necessary to indicate authorized natural person. o E-signatures should allow for identification of author and authenticity of the document, and any cryptographic technology may be used if it is as resilient as the law prescribes. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 55
  • Equality to Paper Document o A document signed by qualified advanced e-signature equals to a document made and signed on paper unless it is specifically provided by law/ and/or subordinate legislation that the document should be made on paper. o A document signed by non-qualified advanced esignature or simple e-signature equals to a document signed on paper only if it is explicitly provided by law and/or subordinate legislation, or the agreement between the parties. Such an agreement should set forth the procedure of verification of e-signatures and the requirements should comply with statutory ones. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 56
  • Foreign E-signatures o The fact that a certificate of an e-signature verification key is issued in accordance with the rules of foreign law does not itself affect validity of e-signature. o Foreign e-signature is valid if it corresponds to Russian statutory requirements and its kind is determined by those statutory requirements to which it complies with. Theoretically, European e-signatures of citizens can be used in Russia by default (due to adoption of EU rules in form of law). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 57
  • Some General Observations o Use of qualified advanced e-signatures generally does not imply any substantial legal problems. o The same is true for use of other e-signatures pursuant to provisions of paper contract. o Current simple e-signature provisions do not resolve ‘Internet contract’ problem. o It is not specified that relationships governed by the Esignature Law are either public or private. o Agreement of parties referred to in the E-signature law should not necessarily be civil law agreement. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 58
  • Russian Universal E-Card 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 59
  • E-money & Virtual Currency E-MONEY. General Framework 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 60
  • Source and Background Federal Law of the Russian Federation of 27.06.2011 No. 161-FZ (ed. of 23.07.2013) ‘On National Payment System’. o Drastic change of electronic payments. Before it only ‘ordinary’ money in electronic form operated by banks were regulated, while e-money (PayPal, WebMoney, YandexMoney etc.) were unregulated. o The law contains new and extremely complex set of definitions and rules, regulating all service providers in the area of payments as a system. Its adoption directly affected all service providers who acted in the unregulated area forcing them to react (close or transform). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 61
  • Definition of E-Money E-money (literally ‘electronic monetary means’) – money which were provided in advance by one party (the person who provided money) to other party, who records the information about the amount of money provided without opening a bank account to execute monetary obligations of the person who provided money to third parties and in relation to which [money] the person who provided money is entitled to make instructions by electronic means exclusively (Item 18 Article 3). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 62
  • Breakdown of the Definition What do e-money imply? o One person provides money in advance (i.e. before any instructions) to other person. o Such other person records information about the amount of money provided without opening a bank account. o The aim of such a record is to execute monetary obligation of the person who provides money to third parties. o The person who provides money can make instructions by electronic means only. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 63
  • Statutory Requirements o The service provider must be registered as a credit organization (it may not be a bank though). o Obligatory notification of Russian Central Bank not later than 10 days after the start of operations. o As service provider is a credit organization, statutory requirements of the Federal Law ‘On Banks and Banking Activity’ of 02.12.1990 No. 395-1, in particular on minimal share capital, apply, either: - RUR 18 million (app. EUR 400 000), without right to serve legal entities. - RUR 90 million (app. EUR 2 000 000), with right to serve legal entities. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 64
  • Clear Examples of E-Money o Bitcoin o PayPal o WebMoney o YandexMoney 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 65
  • Definition of Virtual Currency Virtual currency can be generally defined as means of payment used in online games, associated services and online services based on same principle of payment arrangements (digital distribution, social networks etc.). General features of virtual currency: o User has an account with a record of his ‘money’ (a wallet). o You ‘buy’ virtual currency in advance, and use it to effect payments later. o It is neither money nor (prima facie) e-money in traditional sense, even if it is called like currency. o Virtual currency is usually used for buying objects which pertain to virtual world or virtual space. Examples of services which use (or used before) virtual currency: Steam (currency), Battle.net (currency), Facebook (coins), MTGO (tickets), Riot (points), Funcom (points), Innova (currency) etc. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 66
  • Tricks of Virtual Currency o In its original and narrow sense, virtual currency is imaginary (prima facie) currency of MMORPGs, MUDs or other virtual worlds. However, this imaginary currency has economic value – it is traded on a grey (rejected by most EULAs and/or ToS) market. E. Castronova: EQ1 GDP = Bulgaria GDP (2002). Tax authorities worldwide consider taxation of virtual currency. o It is clear that virtual currency can be interpreted as property right according to Russian civil law (you buy right to demand future service in certain amount). However, this virtual currency is recorded as a part of program code which users reproduce on their computers and as such it implies IP part. Some lawyers argue that virtual currency should be governed by IP law. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 67
  • Recap on Russian Payments Law As applied to virtual currency: o E-money imply payments to third parties. Therefore, if virtual currency is used to buy services of one company, it is regulated as property rights. No additional registrations required. o In case virtual currency is used to officially pay for at least one third party product, it is e-money, and the service provider shall be registered as credit organization. This is the reason why Blizzard did not allow Russian players to cash-out Diablo III RMAH earnings to PayPal. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 68
  • Copyright. Protection of Copyright in the Internet COPYRIGHT. Relevant Practice 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 69
  • Vkonakte Case, 2010-2012 Case No. A56-57884/2010 (Ruling of 07.11.2012), claimants – CJSC “S.B.A. Music Publishing” and CJSC “S.B.A. Production”, defendant LLC “V Kontakte” (www.vk.com). Subject matter of the claim: collection of RUR 850 000 (app. EUR 19 000) as compensation for breach of exclusive rights and RUR 300 000 (app. EUR 6 700) as compensation for breach of associated rights to various songs and phonograms respectively of a popular Russian singers. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 70
  • What the Court Established? o Exclusive rights. The fact that the works belong to the claimants was established on the basis of documents provided by the claimants. o Website owner. Defendants relation to the website was established on the basis of information possessed by accredited registrar. o Uploading of works. Notary witnessed examination with use of the ‘search’ function showed that the phonograms were uploaded to users’ pages. o Open access. The same notary witnessed examination showed that the access was open for all registered users (interpreted as public access). 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 71
  • Basic Arguments Claimants: o Works were uploaded without consent of the copyright holders. o Works were uploaded with open access for unlimited amount of persons. o This constitutes breach of their exclusive and associated rights. Defendant: o The claim cannot be accepted, because the defendant did not make any uploads. o Furthermore, the defendant, as a social network, cannot be held responsible for the actions of users. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 72
  • The Core of the Decision o The court held that there is no substantial evidence that the defendant has made necessary actions to prevent breach of exclusive and associated rights of the claimants. o Note that the court investigated Terms of Service and Terms of Use of a social network, but did not answer whether it is contract or not, limiting its scope just to assessment of evidence. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 73
  • Argument in Detail o Although the defendant had rules developed for users with prohibition to upload and use of third party IP, the fact that the defendant has a lot of technical opportunities which are in its full control, it is the defendant who may be in part responsible for unauthorized use and dissemination of information at its website. o The defendant did receive pre-court claims of the claimants to cease unlawful activity, but failed to do effective action to stop the infringement of intellectual property. o The observation given above is additionally grounded by the fact that the dubious content was still on the website of the defendant and could be accessed by the users, in particular by using search mechanism. 26.11.2013 © V.V. Arkhipov, 2013 (Presentation, Except for Photos) 74