AllofEnmity--The Questionable and Troubling Legality of AllofMP3.com

Recently, just as music file-sharing services such as Grokster are being dealt severe blows from the courts, a lesser-known threat has arisen from Russian online music sites which offer downloads for a fraction of the price of legitimate sites in the U.S. Russian website AllofMP3.com offers an extensive catalog of artists including music not licensed for Internet download in the United States such as the Beatles and Led Zeppelin. (For a great discussion of the sea of micro payment and grey legal download sites the read this Guardian UK article.) Further, AllofMP3 offers the user a novel way to purchase and download music: users can to select the format and quality of the files they wish to download and files are priced by the megabyte with 250 MB costing around $5, bringing the average cost of a song to a mere 5 cents. These sites offer prices and services that sound too good to be completely legal, and may have an adverse impact on legitimate online music sites and the music industry in general.

The AllofMP3 website claims that it is licensed to distribute music pursuant to a license issued by the Russian Organization for Multimedia and Digital Systems (ROMS) whereby it pays royalties to copyright holders. (For More on ROMS ; ROMS Press Release.) Article 39 of the Russian “Law on Copyright and Related Rights” allows for the broadcast and cablecast of a phonogram “for general public knowledge” without the permission of a performer so long as royalties are paid through collective rights organizations such as ROMS. This has been widely interpreted as creating a compulsory licensing scheme with Internet music sites being classified as “broadcasts” or “cablecasts” for the purposes of this exemption. U.S. copyright law includes compulsory licenses for derivations of musical compositions, or “covers;” however, in order to copy the actual sound recording, a license must be granted by the copyright holder. Unlike U.S. copyright law, under the Russian compulsory license scheme, websites such as AllofMP3 can offer music by the Beatles because they need not receive permission from holders of copyrights to sound recordings. If this is the correct interpretation of Russian copyright law, and AllofMP3 does in fact have the proper license from ROMS, the service is probably legal in Russia.

Organizations such as the International Federation of the Phonograph Industries (IFPI) and the International Confederation of Societies of Authors and Composers (CISAC) have been pressuring Russia to either prosecute these websites or revise the copyright law. CISAC expelled ROMS from CISAC membership in October of 2004 for contravening internationally accepted collective administration principles by issuing licenses to copyright users without being given the authority to do so by copyright holders. Despite this pressure, Russian authorities declined in March of 2005 to take action against AllofMP3.com, reasoning that the Article 39 exception creates a loophole whereby Russian copyright law only covers physical media such as CDs and not digital files. (For more details see alex.moskalyuk.com.) Moreover, according to a recent article in the Register, ROMS has lost the backing of the Russian Authors' Organization (RAO) which the article interprets as placing ROMS in unlicensed waters.

If sites such as AllofMP3.com are legal under a compulsory licensing scheme in Russia, these licenses only apply to music to users within Russia and do not permit the sites to distribute music worldwide. Essentially, digital music files have become a new type of gray market good when sold to U.S. purchasers even though the Russian websites claim that they target Russians exclusively and provide disclaimers stating that users should consult the laws of their own nations. Sites such as AllofMP3.com raise the confounding problem of how one can impose import and export controls on digital files sold legally from a Russian website to U.S. purchasers who download, or import, these files across invisible international boarders. Even if importation of digital music files could be detected and prevented, Section 602 of the U.S. Copyright code permits importation one copy of a copyrighted work without the permission of the copyright holder for personal use.

With the successful defeat of Grokster handed down by the Supreme Court it seems likely that free file-sharing services in the U.S. are likely to decrease. This void may be filled by quasi-legitimate foreign online music sites offering superior service at a fraction of the price compared to a download from popular legitimate U.S. sites such as iTunes. It appears that there is very little that the music industry players can do besides pressure Russia to change its copyright laws, and even if successful in doing this, it is likely to be a slow and laborious process. In the meantime, the music industry should decide what legal actions to take, if any, and how to compete in the constantly changing global environment.

Erin Thayer