U.S. wants end to Allofmp3 spinoffs

WASHINGTON--Allofmp3.com, the controversial Russian online music store, may be effectively dead for now, especially if its sprawling mother country has any hopes of joining the World Trade Organization any time soon.

But Russia's allegedly lackluster copyright enforcement and the rise of successor services like Alltunes.com continue to rattle U.S. politicians and bureaucrats.

The nation does not yet meet "international standards" in its intellectual property laws, Rep. Howard Berman (D-Calif.) said at a hearing about international piracy convened here Thursday by a U.S. House of Representatives intellectual property subcommittee, which he leads.

In addition to government intervention, payment and credit card processors and Internet service providers need to do more to rid the Internet of international piracy operations, too, he said: "Their refusal to use the tech­nical tools at their disposal to staunch piracy exacerbates the problem."

Russia has already taken modest steps to improve its standing as an intellectual property law enforcer, such as refusing to renew the leases on 15 of 16 unlicensed optical disc plants that reside on its military land, said Victoria Espinel, assistant U.S. trade representative for intellectual property and innovation.

But, as negotiations progress over Russia's joining the WTO, the country still needs to shut down and prosecute owners of "illegal Web sites" operating in Russia, including Allofmp3's successors, Espinel said.

"Russia remains a continuing frustration," said Eric Smith, president of the International Intellectual Property Alliance, a coalition of seven trade associations representing the music, movie, video game, publishing and computer software realms.

Cross-border copyright law clashes
Enforcement authorities and international record industry groups have tried enlisting the help of outside companies, including payment processors, to cut off documented cases of pirated file transfers. But that technique hasn't always been successful, particularly in Russia.

Visa vice president Mark MacCarthy told politicians that a pair of local court decisions issued this summer limited his company's attempts to halt Russian banks from processing its transactions through Allofmp3.com and Alltunes.com.

Last year, Visa concluded that Allofmp3 site was illegal because it hadn't secured proper permission from music copyright holders and stopped allowing Visa transactions to be processed. It made the same move a few months later with Alltunes.com. But in two separate cases, the judges determined that there wasn't significant evidence to show Allofmp3 and Alltunes were engaging in illicit activity because they were ostensibly paying royalties to a royalty collection body.

In the United States' view, those supposed royalty collection authorities were "rogue" operations that weren't authorized by the record industry, Espinel said. It pressured Russia to enact a new law, set to take effect in January, that says only those online services that pay royalties to "authorized" collection bodies are legit, she added. Assuming they're enforced, it seems those legal changes could confirm what record companies have believed all along--that the Russian music stores are illegal.

Still, the situation demonstrates "the limits of private sector enforcement efforts in cases of international infringement," MacCarthy said, adding: "When local laws are not clear or are not consistent, governments and aggrieved businesses cannot put private sector intermediaries like Visa in the position of resolving the conflicts and lack of clarity."

Berman, a well-known friend of the entertainment industry, voiced sympathy for Visa's plight. "I think this is a case where the company you represent has shown real leadership and has done the right thing," he told MacCarthy. "I hope other service providers who do online transactions follow your example."