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. Last Updated: 07/27/2016

AllofMP3 Survives First Test In Court

Moscow's Cheremushkin District Court cited poor work by prosecutors Wednesday in finding Denis Kvasov, the former owner of digital music site AllofMP3.com, not guilty of violating intellectual property laws.

Kvasov was the general director of online digital music company MediaServices from 2003 to 2005, the period for which the charges were filed.

The court said the evidence produced by the prosecution was not sufficient to demonstrate that Kvasov had broken the law.

"This is an unusual case, and prosecutors have to be careful in collecting evidence in connection with intellectual rights violations," the presiding judge, Yekaterina Sharapova, said in delivering her verdict, Interfax reported. "I want to draw particular attention to the sloppy job done by prosecutors in collecting and analyzing the facts."

The Moscow City Prosecutor's Office could not be reached for comment Wednesday.

Kvasov's lawyer, Eduard Margulyan, said after the decision that he had always believed his client was not guilty, adding that his only concern was the media hype surrounding the case.

"My fears centered around the connection between AllofMP3.com and the anti-piracy campaign in the press," Margulyan said.

A number of criminal investigations have been opened against MediaServices directors at the behest of Igor Pozhitkov, director of the International Federation of the Phonographic Industry in Russia and the CIS, a lobbying group.

Pozhitkov said he was "very disappointed with the court's decision."

"We are going to appeal this decision and we hope that the Russian court will ultimately decide more favorably for the holders of these rights," Pozhitkov said. "Wednesday's decision was, in our opinion, very contradictory and simply wrong."

Pozhitkov said two more criminal cases involving AllofMP3.com were due to be heard soon -- one against Vadim Mamotin, who has been MediaServices' director since 2005, and the other against the company for violating intellectual property rights.

AllofMP3.com was shut down earlier last month under pressure from the United States, which has made the protection of intellectual property rights a central issue in negotiations over Russia's accession to the World Trade Organization.

Access to MP3Sparks.com, a mirror site used by MediaServices, remained blocked Wednesday.

American Chamber of Commerce president Andrew Somers said the recent pressure on the site was a positive sign.

"The fact that AllofMP3.com, the notorious intellectual-rights abuser, was closed down, presumably under pressure from the Russian government, shows that the authorities are taking the threat seriously."

He added that it was understandable that the prosecution had a tough time making the charges stick, as Russian courts are new at dealing with this kind of piracy, and that Wednesday's ruling was "an early stage for Russians trying to look at the enforcement of intellectual property rights in the court system."

Somers added that prosecutors should appeal, and that the attitudes of the courts in cases of this type would not be clear until higher courts had heard the evidence.

MediaServices, which offers music at a fraction of the price charged by other online services, like iTunes, had always insisted that it was acting within the law.

The company claimed that its licensing agreement with the Russian Multimedia and Internet Society, or ROMS, which says it has the rights to collect and distribute royalties for the online sale of copyrighted music, meant its activities were legal.

Under the licensing agreement, MediaServices pays a percentage of each download fee to ROMS, which in turn pays rights holders.

ROMS chief Oleg Nezus said Wednesday that the Moscow Arbitration Court ruled in 2004 that AllofMP3.com's activities were legal, adding that he expected the company to resume its online sale of digital music.

"No court has overruled the Moscow Arbitration Court decision, and as long as it stands, AllofMP3.com is legal in Russia," Nezus said. "Our opponents lack legal arguments for the closure of the web site."

Nezus said the present lack of access to the sites was the result of a unilateral decision by a state official that lacked any basis in law.

"There is no court ruling that AllofMP3.com should be closed down according to Russian law," Nezus said. "We will continue to help the site with necessary legal advice to challenge the status quo."

Western music labels say, however, that ROMS is not authorized to represent them.

Vadim Botnaryuk, general director of the Russian Phonographic Association, said Wednesday's decision did little to improve the legal status of MediaServices.

"Copyright owners in Russia and abroad decided to allow the direct licensing of music labels to individual online music stores," Botnaryuk said. "Issuing a package license, as ROMS does, is completely illegal."

Yevgeny Ariyevich, an international partner at Baker & McKenzie specializing in intellectual property law, said that while it was up to the court to decide, he believed pirate music sites like AllofMP3.com were illegal under Russian law.

He said new laws that come into effect Jan. 1 would plug holes in current legislation exploited by those violating intellectual property rights.

"With the advent of Part 4 of the Civil Code in January, which will replace the old codes, this type of activity will surely be considered illegal," Ariyevich said.

Anti-piracy organizations said, however, that the court was sending a bad signal by siding with companies like MediaServices.

"Wednesday's decision sets a very bad precedent and demonstrates the need to strengthen Russian intellectual property rights laws," said Konstantin Zemchenkov, director of Russian Anti-piracy Organization. "I can say unequivocally that the activities of sites like AllofMP3.com are illegal in Russia, because our country has signed on to many international conventions that prohibit them."