Criminal responsibility for copyright infringement in the cyber sphere: an unlikely threat or a severe reality?

The presence of software on the working PC (as well as the presence of the PC itself) in the
current conditions is a prerequisite for the functioning of any business. Indeed, today it is hard to
imagine a corporation or a company that does not use computer technologies for its
business. However, the computer, in essence, is just a tool, a machine. In order for it to function, it,
like any car, needs its "fuel", that is, software. Another question is whether this software is
licensed. Unfortunately, the low purchasing power of consumers in the software market and their
lack of knowledge of intellectual property law often encourage business owners to choose
unlicensed, "pirate" software for their activities. It seems to be much cheaper and easier – you just
need to take borrow a Windows disc from your friend, install it on your computer and that is
all. This logic is guided by most employers. Thus, according to data released by the State Service
of Special Communication and Information Protection of Ukraine, only 13% of the software used in
Ukraine is under license.
When selecting the software that company will use to conduct its business, licensed software
should be chosen not only because it ensures quality and reliable operation of computer programs,
their constant updates and prompt technical support in the event of tech's problems. The fact is that
the usage of "pirate" software is a serious violation of the international and Ukrainian legislation
and exposing the violator to significant legal risks, including criminal ones.
In accordance with international conventions in the field of intellectual property, to which
Ukraine is a party and Articles 5 and 18 of the Law of Ukraine "On Copyright and Related Rights",
computer software are objects of copyright and are protected as literary works. This means that their
use or distribution is impossible without the consent of the author or the copyright holder. As a
common practice, such consent or permit is issued by a license for which a certain fee is charged. A
computer program obtained without such a license is a counterfeit copy of the work (that is, a copy
of the work, published or distributed with copyright infringement), and any use of it (especially for
the purpose of obtaining profits) entails further infringement of the copyright and is considered as a
piracy.
For violation of copyright, in particular the use of unlicensed computer software, different
types of legal liability are established. The hardest of them is criminal responsibility. It is envisaged
in various articles of the Criminal Code of Ukraine and consists of committing various acts. For
example, Art. 216 of the Criminal Code of Ukraine establishes criminal responsibility for illegal
production, counterfeiting, use or sale of illegally produced, acquired or counterfeit documentary
stamps or check stamps of copies of computer software, Art. 231 and 232 of the Criminal Code of
Ukraine – for the illegal collection for the purpose of use or use of information on trade secrets and
disclosure of commercial secrets (it may be a unique code of a computer program). But the
characteristic feature of all these crimes is that copyright of software in this case is only an
additional object, which is placed under the protection of the Criminal Law. The main thing is the
proper order of economic activity.
Instead, Art. 176 of the Criminal Code of Ukraine is aimed at direct protection of copyright,
including software copyright. According to its provisions, the illegal reproduction or distribution of
computer programs and databases, where such actions caused a significant pecuniary loss (a
significant pecuniary loss is caused, if the value of copies of illegally reproduced or distributed
works, material media with computer software, databases exceeds 20 tax-free minimum incomes –
1 762 UAH) is a crime. The commission of such actions involves the following possible
punishments:
 fine in the amount of from two hundred to one thousand tax-free minimum incomes (from
3 400 UAH to 17 000 UAH);
 correctional for a term up to 2 years;
 imprisonment for a term up to 2 years.
Qualified (if the crime was committed repeatedly or by a prior conspiracy by a group of
persons or if it caused material damage in a large amount) or especially qualified forms of this
crime (if the crime was committed by an official by using a position or an organized group or if it
caused material harm in a particularly large scale) are punished much more severely, including even
imprisonment for a term up to six years.
In 2001, when Article 176 was introduced in the new Criminal Code of Ukraine, it was
"dead", essentially an unconventional norm. This was due to the Soviet legal heritage and the total
lack of understanding of the concept of intellectual property rights. With the election of a European
integration vector for the development and ratification of a number of international legal documents
in the field of intellectual property protection, legislation and jurisprudence have become much
more rigorous in responding to cases of copyright infringement. This is especially true of
cyberspace. On the Internet it is much more difficult to detect a violation, find out the location of
the attacker, or determine the exact amount of damage caused by him. That is why in October,
2015, a special unit within the National Police of Ukraine – the Department of Cyber police was
established – in order to combat criminal offenses, the commission of which involves the use of
computer equipment or Internet networks.
Henceforward, the discovery of infringers of copyright and bringing them to criminal
responsibility is actually not as ghastly as it seems at first glance. Even the banal requirement to
have skills in working with Microsoft Office, placed in the vacancy of the company on job search
sites can be a pretext for checking by the control bodies of all the software used by the
company. On the other hand, in its quest to provide a high standard of disclosure of cybercrime law
enforcement bodies sometimes surpass themselves. Thus, the prosecution of suspected of the
Internet fraud and money laundering, Anton Timokhin was initiated by Prosecutor General’s Office
of Ukraine on the basis of  the resemblance of nickname (Grower) and part of the similar email of
data hacker, whose prosecution was conducted by Prosecutor of the Federal Republic of Germany.
Court practice regarding criminal responsibility for infringement of copyright also does not
fall back. According to the Unified State Register of Judgments, in 2017 the courts of Ukraine
issued 2,739 sentences against individuals charged with copyright infringement. But in truth, the
punishments provided by these sentences are not very strictly. Often offenders "happen" to
be exempted from serving a sentence if they do not commit a new criminal offense during the trial
period of 1 year, or small fines, which are several times less than the amount of damage caused by
copyright infringement. Thus, according to the judgment of Frankivsk district court of Lviv on June
23, 2017 a person accused of illegally reproducing and distributing accounting software for the
purpose of obtaining profits, was sentenced to a penalty of fine in the amount of 600 tax-free
minimum incomes that is 10 200 UAH. Such punishments are simply ridiculous for foreign
countries. For example, in the case of proving the guilt of Ukrainian Artem Vauulin, whom the
Warsaw court has agreed to extradite to the United States and who is suspected of having created
the BitTorren system, which has laid out and made available to download millions files of movies,
music, books and games, he is threatened up to 5 years of imprisonment for copyright infringement,
and for money laundering – up to 20 years of imprisonment.
It is worth noting that potential copyright infringement is not only a threat to large software
corporations that have millions of users, such as Microsoft Office, Adobe Photoshop and
others. The object of unauthorized interference or proliferation may also be the software of the city
council site or a mobile application with scheduling and tracking of public transport. It is these
thefts that are most widespread, but also the most latent ones, since victims of these crimes cannot
prove the violation of copyright or the existence of property damage. It is true that participation in a
criminal trial against copyright infringement as a victim is no less troublesome and burdensome
than as an accused. It usually involves several steps:
 preparation and rendering with the statement on the commission of a criminal offense to law
enforcement bodies. Despite the lack of the right to refuse to open a criminal proceeding to the
applicant, law enforcement officers often refuse to open criminal cases because the person has not
confirmed that he owns the copyright of the relevant object or has not provided evidence of
copyright infringement (screenshots on which visual similarity of the software can be seen, etc.);
 conducting forensic examinations concerning the identity or similarity of the original and
illegally reproduced software, as well as the fact of the causing of monetary damages in the amount
that allows to ascertain the existence of a criminal offense in the actions of a person (1 762 UAH);
 active participation in procedural actions, in particular interrogations, testimony, evidence
collection and participation in their study. The gathering of evidence proving the guilt of the
accused in the commission of a crime is the responsibility of the prosecution, that is, in essence, the
law enforcement bodies. However, in cases where it requires special knowledge of a specific object
(as software), the burden of proof often falls on the shoulder of the victim who has to conduct a
parallel investigation
It is difficult to overcome all these stages alone, and it is hardly possible to do it without the
help of a qualified lawyer. Attorneys at law "Bachynskyy, Kolomiets & Partners" has a successful
experience of representing interests of both victims of copyright infringement and unlawfully
accused of such actions. And due to the competent construction of the strategy of action in the pre-
trial investigation and trial proceedings, parallel advocate investigation and cooperation with mass
media, this representation is truly professional and qualified.]]>

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A new law on virtual assets: the picture is formed, but without details. On September 8, 2021, the Verkhovna Rada has finally adopted the long-awaited law "On Virtual Assets", which clarified many ambiguous points. This is especially true for the status of cryptocurrency and the rules of its circulation in the country. Let`s take a closer look at novelties. An ambiguous term Let's start with what the legislator actually means by "virtual assets". There are the following features:  they are an intangible good (cannot be represented on tangible media)  fall under the list of objects of civil rights (that is, they can be owned and be disposed of)  represent an electronic form of a set of data (essentially, they are blocks of information put in order);  the existence and circulation of assets are due to software tools (specific electronic environment). From these features we can draw the following conclusion: virtual assets are not limited to cryptocurrency. Digital currency is part of the concept, but other instruments, such as tokens, NFTs, or even in-game items, fall under the definition. Actually, the actual existence of most digital products, having a certain value, is due to the software environment (ecosystem), either it is blockchain technology, a trading platform, or an online game server. It should be noted that the attempt to define virtual assets was already made in the adopted Law of Ukraine in counteracting money laundering. In this act, they understand it as digital means of payment, which goes against the new definition. As a result, there are now two different explanations for virtual assets, which causes significant confusion not only in regulation but also in interpretation. It is definitely necessary to expect clarifications from competent state bodies. Let's return to the new law. Its application covers legal relations in which the "Ukrainian element" is present:  provider or recipient of services represented in Ukraine;  an agreement according to which the turnover of virtual assets is carried out in accordance with Ukrainian legislation;  the acquirer of assets (or both counterparties) is a resident(s) of Ukraine. The law also introduces an interesting division of all virtual assets into two groups: secured and unsecured. Here again, there is a problem of interpretation. The first category includes products exchanged for (state) currency, the second category includes instruments that can be exchanged only for other digital assets. There is an alternative opinion: that the turnover of secured assets is supported by real goods (money or other property), while unsecured ones are not supported by anything. The latter interpretation is the most credible, as the new law stipulates that virtual assets are NOT means of payment. Moreover, they cannot be exchanged for real goods, be they property, services or money. This significantly narrows the potential for the use of virtual assets not only for commercial but also for civilian purposes. About obligatory licensing The new law states that in some cases, the use of virtual assets will require licensing. The 4 types of activity are mentioned:  storage and management of virtual assets (or its` keys)  servicing of exchange operations with virtual assets (both for other analogues and for real goods);  translation of digital assets;  any intermediary services. A list is quite impressive, but there are some important exclusions:  if your service works with cryptocurrency wallet (it means users can dispose of accumulations into cryptocurrency independently);  If your service works on smart contracts or decentralized protocol, based on which internal transfers are performed. As to intermediary services, everything is more compicated. Actually, any mediation is based on the public share offering. That is why it is subject to licensing. How to get a license? A company that wishes on legal grounds to engage in virtual assets must satisfy legislative requirements. The key role is played by the minimum amount of the statutory capital, which equals 1,19 million hryvnyas (for non-residents it is 5,95 million hryvnyas) in case of storage and administration. For other types of activity (trading, translation and mediation services) the minimum size of the statutory capital amounts to 595 thousand hryvnyas (for non-residents is 2,98 million hryvnyas). The order of the registration of license:  to compose an application and prepare documents.  to pay state fee (68-136 thousand hryvnyas for residents and 340-680 thousand hryvnyas is for non-residents).  to pend review of the request (30 days).  to get a license. The duration of the license is 1 year. No norms about the continuation of legal force of permission are set (we are expecting amendments or explanations from the Ministry of Digital transformation of Ukraine). Notably that non-residents must pay a far greater sum, than domestic companies. The Ukrainian legislator obviously encourages an internal market, getting rid of a strong foreign presence (that, in fact, coincide with modern politics of the state on the whole). Together with an application, the following documents must be prepared: The access code to the copy of the Statute of the company (or the foundation agreement) kept in an electronic file in the database of the Unified State Register of Enterprises and Organizations (USREO);  Funding sources of the statutory capital (where the money are taken from);  confirmation of the actual injection of money;  information about beneficiaries (special attention must be paid to business reputation);  the information about the director and founders;  the check about payment of state fee;  the internal regulations, in accordance with which ones, the privacy policy rules are regulated. In the terms of volume of necessary documentation of licensing is very alike with complete registration of legal entity. It is understood that the state wants the severe adjusting of activity of organizations that will engage in virtual assets. Is it already possible to get a license? The adoption of the law by the parliament is a significant step forward in adjusting and legal market of virtual assets creation in Ukraine. However, the new rules haven`t come into effect yet - their term of introduction depends on making amendments in the Internal Revenue Code. It is yet unknown, when a legislator will decide to enter the renewed system of taxation for such assets. Being "IT-hub" and territory, where cryptocurrency enjoys large popularity, the question of taxes must be decided maximally safely. Despite the presence of obvious gaps in interpretation, a new law on virtual assets gives the official narrative of what takes place and that, how the legal relationships related to cryptocurrency will be regulated. It is to be hoped that in the nearest time the Ministry of digital information will give out the detailed explanations concerning debatable norms.
20/01/2022
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