Tasty and radio point – Newspaper Kommersant No. 181 (7382) of 09/30/2022

The Court of Appeal changed the outcome of the proceedings between the Russian Authors’ Society (RAO), which collects remuneration in favor of the authors of works, and the Vkusno i Tochka restaurant chain, which previously operated under the McDonald’s brand. In July, a court ruled that music in restaurants was illegal, but US partner Redmood Inc. provided evidence to the contrary. The outcome of the case may change practice, lawyers say: the current decision proves that a restaurant can conclude an agreement with the copyright holder and not conclude it with RAO. The society, however, is considering the possibility of appealing the decision.

“Kommersant” found in the file of arbitration cases that the Ninth Arbitration Court of Appeal on September 27 changed the decision on the suit of RAO against the McDonald’s chain, which was renamed “Vkusno i Tochka” after the American restaurant chain left Russia amid the military operation in Ukraine. As follows from the basis of arbitration, the decision to satisfy the claim in full, issued in July, was replaced by a complete dismissal of the claim.

The case has been under consideration since 2019: RAO, which does not have an agreement with one of the largest networks, initially filed a lawsuit against it because of the musical accompaniment in restaurants – the society claimed that the playback of 13 tracks was illegal (including songs by foreign independent artists and one Russian – “Non-random” singer Loboda). As evidence, RAO provided videos from restaurants. 260 thousand rubles were collected.

McDonald’s argued in court that music in restaurants sounds legal, and the network’s music supply partner was Ultimate Media Services LLC (UMS), which bought the rights to the tracks from Redmood Inc., an American company operating under the Magnatune trademark. McDonald’s also claimed that two songs on the recordings provided by RAO do not sound from the UMS player, but are played from the devices of one of the visitors (see Kommersant dated March 21, 2021). However, in the first instance, the court sided with RAO, indicating that Redmood Inc. there were no rights specifically to the public reproduction of music for commercial purposes, and also did not take into account the results of the video examination.

The Court of Appeal overturned the decision after filing an appeal by Redmood Inc., which was not involved in the case by the court of first instance, explained Evgeny Dedkov, managing partner of the Dedkov & Partners Bar Association, who represented UMC and Redmood Inc. in court: “The appeal came to concluded that UMS used exclusively licensed content in McDonald’s restaurants.” According to Yevgeny Dedkov, the examination of the video recording was also taken into account regarding Loboda’s song. “The court recognized that a network or an individual institution may not have an agreement with RAO, instead they may have an agreement with a music aggregator partner, but the latter must have the rights to each track provided for performance,” says Mr. Dedkov. Vkusno i Tochka clarified to Kommersant that the rights to music in restaurants remain issued according to the previous scheme through Ultimate Media Services LLC (UMS).

The RAO stated that they would consider the possibility of appealing the decision to the cassation. “During the consideration of the case by the defendant, the McDonald’s network, repeated abuse of the right was observed, expressed, in particular, in the late provision of procedural documents,” the RAO noted.

The outcome of the case will be important for the practice of relations with RAO, lawyers say. “In the case of Russian music, the situation is more or less clear: if there is a contract directly with the copyright holder, then there is no need to pay RAO. When the copyright holder is a foreign person, the situation is more complicated, the courts regularly did not pay attention to the contract with the foreign copyright holder and collect funds in favor of RAO,” says Sergey Zuykov, managing partner of Zuykov and Partners. The agreement with a foreign copyright holder and the absence of an agreement with RAO carried the risk of receiving a claim from RAO, the lawyer notes. In general, the practice of recent years has been developing mainly in favor of RAO, notes the managing partner of Ickert and Partners Pavel Ickert: “This case introduces changes in practice and suggests that, indeed, the conclusion of an agreement with the copyright holder can exempt from the obligation to make deductions in favor of RAO” . However, he adds, it cannot be said that this decision will definitely change the practice.

Valeria Lebedeva