Video Game Regulation in Russia: A Brief Overview (2014)

There is currently no set of regulations in Russia which would target video games specifically, however there are a variety of rules, both established and novel, which are applicable to this particular industry. At least the following critical areas can be identified as far as it comes to the Russian law: intellectual property, gambling, content, virtual property and data protection. Apparently, each of the aforementioned critical areas correlates with the respective aspect of the industry. Note that depending on specific project, this list of critical areas can be non-exhaustive and include additional considerations.

 Intellectual Property

Traditionally, intellectual property is the area of law which comes to mind first when it concerns video game industry. In this context intellectual property is relevant at least for the following situations: structuring video game development in Russia, making a transaction with intellectual property assets which pertain to Russia, developing an intellectual property strategy in the aspect of user relations (such as drafting EULAs, End-User License Agreements, especially for products which imply large portions user-generated content).

Most of the intellectual property issues pertaining to video game industry are resolved in Russia on the premises of copyright law. Program algorithms, methods for business operations, structures of interface cannot be patented in Russia in the dominant majority of cases, so this area of intellectual property is generally out of use for video game developers. To certain extent trademark registration can be useful for video game developers, as Russia allows registering brands in unlimited kinds of forms and recognizes ‘non-traditional’ trademarks whereunder a 3D-model of a character could fit along with other unusual objects, such as, for example, a whole maze-like level of a particular computer game.

Copyright law in Russia is based on the same premises as most of the European (and, to a large extent, the American as well) approaches. The majority of intellectual property aspects regulated in Russia generally correspond to the contents of Paris Convention (1883) and Berne Convention (1886), and this is the reason why it resembles European intellectual property rules so much. A copyright appears at the moment the work is created, it does not require registration and is protectable all over the world, as long as the corresponding country shares the same intellectual property principles. There is a variety of things which cannot be copyrighted, and, besides official documents, national symbols and other objects like these, non-copyrightable objects include ideas, concepts, principles, methods, processes, systems, means, solutions, discoveries, facts and programming languages.

Most of the video game elements are protected in Russia under the copyright. This includes, in particular, texts, images, databases, sounds and program code. Program code is explicitly protected in the same manner as literary works, therefore only the form of the code is protected, and the code does not necessarily have to be workable (which is usually the point where the programmers learning basics of IP law have a good laugh). It is possible to register a particular computer program with the Federal Service for Intellectual Property (Rospatent), but such a registration does not have any constitutive effect and neither originality nor functioning of the program is verified by the state authority while registering.

It is quite important to understand how copyright can be transferred. Generally speaking, Russian law recognizes two basic scenarios:

  • An author creates a work independently and later sells it. For such situations Russian law suggests to use either an agreement for alienation of exclusive rights (roughly speaking, IP is sold once and for all) or a license agreement (roughly speaking, IP is granted for use for a period of time and within certain limits). That said, license agreements can also be exclusive or non-exclusive. Both kinds of agreement will be null and void if (a) not made in writing, (b) they do not provide explicit clause on consideration or that the transfer of rights does not imply any payment.
  • An author creates a work for hire / on order. Copyright in IP objects of those individuals who are in labor relationships (which are regulated separately from civil contracts) with an employer and create such IP objects further to their labor obligations and instruction of employer is considered to be automatically transferred to the employer. This is the most common way video game, programming and creative studios work in Russia, however it requires providing proper documentary framework from the beginning. The same principle applies to works made on order by a civil law contractor.

Other important aspect is ‘moral rights’ of the author. Authors in Russia have three inalienable rights which include (i) right to be recognized as an author, (ii) right to publicize a work anonymously, under real name or under fictional name, (iii) right to integrity of the work. Although such three rights are inalienable, an author may manage the two latter by making an explicit statement e.g. in a license agreement.   

Gambling

Game developers and publishers who consider implementing gambling elements in their games should be careful when operating in Russia. In some cases (such as, for instance, adding an element of virtual casino with an opportunity to make bets with real money and cash-out) video games can be qualified as gambling which could potentially lead, on the one hand, to liability of company and company management, and, on the other hand, blocking of relevant Internet resources.

The main legislative act which defines gambling and provides explicit regulation of gambling activities is the Federal Law of December 29, 2006 No. 244-FZ “On State Regulation of Activity for Organization and Conduction of Gambling Games and On Amending Certain Legislative Acts of the Russian Federation” (hereinafter, the “Gambling Law”). The term ‘gambling game’ is defined as a risk-based agreement on a prize made by two or more participants between each other or with an entity which supplies a gambling game under the rules confirmed by the latter. Therefore, ‘pure’ games of skill (such as, for instance, chess, as well as many modern cybersport and/or other non-gambling videogames) should be out of gambling regulation, although explicit court and administrative practice on this point is currently scarce.

As regards online aspects, according to Item 3 Article 5 of the Gambling Law online gambling (and gambling which employs any means of communication including mobile) is prohibited except for the cases explicitly provided by the Gambling Law. Before the Federal Law of July 21, 2014 No. 222-FZ which amended the Gambling Law, it did not provide for such an exclusion, and by this date it is not clear what exactly can constitute permitted kinds of online and/or remote gambling.

Gambling is not an area to fiddle with in Russia, and, to be on a safe side, it is generally advisable to check any Russia-targeted product which contains such risk-factors as random game results related in significant manner to real cashing-in and/or cashing-out (up to random chests in a real-money shop of a MMORPG in case their contents can be legitimately traded for real money) to comply with gambling legislation. Otherwise, this could lead to IP-blocking at least and criminal liability at worst.

Content

Content regulation is a kind of novelty in Russia and it breaks into two major categories: content prohibited over the Internet and content restricted due to age ratings.

Content Prohibited over the Internet

The Federal Law of July 27, 2006 149-FZ “On Information, Informational Technologies and on Protection of Information” (hereinafter, the “Information Law”) has been significantly amended since 2012 so that it now includes several categories of content which cannot be shown over the Internet with a consequence that a website could be blocked in a very fast manner by a supervising authority pertaining to the executive branch, which is the Federal Service for Supervision of Communications, Information Technology and Mass Media (Roskomnadzor).

This information currently includes several specific categories such as child porn, several categories of information about narcotics, suicide information, information about a minor who has suffered from an infringement of the law (Article 15.1 of the Information Law), calls for riots, calls for extremist activities and/or participation in mass events which does not comply with the procedure established (Article 15.3 of the Information Law) and other. Whether fiction could also lead to website blocking is an open question which is resolved on a case-to-case basis.

In all fairness, the procedure of website blocking appears to be quite balanced because it gives several days for removal or suspension of disputable content after getting Roskomnadzor’s notice, and allows contesting the administrative decision afterwards. A trick with website blocking regulation in Russia is that a website is officially defined as an informational system which could be accessed by a network address so any server could potentially be qualified as a ‘website’ in this sense and face administrative blocking if allows to access prohibited information. So client-server online games with improper content would be under the risk.

Any information which could infringe legislation of the Russian Federation, including information not specifically listed by the Information Law, could also be limited within a court procedure which usually takes around several months. Although there are a couple of representative cases here, authorities do not indiscriminately use this measure at first instance.

Age Ratings

It is a common misconception that Russia has a government-operated system of age ratings. In fact, there are specific criteria set forth by the Federal Law of December 29, 2010 No. 436-FZ “On Protection of Children from Information Inflicting Harm to their Health and Development” (hereinafter, the “Age Ratings Law”). However, as Article 6 of the Age Ratings Law states, the obligation to put marks on the informational production is imposed on its developers and/or distributors. Government authorities do not intervene with the process of applying an age rating, although they may initiate administrative proceedings against those who do not comply with the Age Ratings Law or fail to comply with it properly.

In some cases the standards of the Age Ratings Law correspond to major international age ratings such as PEGI or ESRB, in some cases not. A peculiarity of the law in discussion is the level of details in which the matter is regulated. You may find below, for instance, examples of content which, according to the Age Ratings Law, can be shown in ‘information production’ (this term includes computer games) aimed to a ‘12+’ category, a very common category for video games, in addition to what could be shown to younger categories, while a general requirement is that all of the following should be explained by genre and/or plot of the production (Article 9):

  1. episodic depiction or description of cruelness and/or violence (except for sexual violence) without naturalistic depiction of the process of depriving of life or mutilation provided that a compassion to the victim is shown and/or negative attitude to cruelness and/or violence is shown so that it follows that cruelness and/or violence are subject to condemnation (except for violence which is applied in case human rights and protected interests of community or state are protected);
  2. depiction or description of antisocial activities (including alcohol or spirit production consumption, consumption of beer and beer-like drinks, gambling, vagrancy, begging) which does not propagate such activities, episodic mentioning (without demonstration) of narcotics, psychedelics or mind-numbing substances, as well as tobacco, provided that no ground and no reason is given to such antisocial activities, condemnation is indicated along with a warning that it is dangerous to consume such production, means, substances and goods.
  3. episodic non-naturalistic depiction or description of sexual relations between man and woman except for depiction or description of actions with explicit sexual nature, provided that such depiction or description does not exploit interest towards sex, is not exciting and/or insulting.

By the date of this overview administrative practice in the context of age ratings exists mostly in respect of cinema and advertising, but a number of cases related to any other means of information, including computer games, is reasonably expected to grow shortly. Incompliance with the Age Ratings Law could lead at least to administrative liability and can eventually result in website / Internet resource blocking. 

Virtual Property

This aspect is mostly topical to MMORPG companies. Virtual property issues, including virtual currencies, also deserve specific consideration at least for two reasons. The first reason is that what concept of legal framework for virtual property is used determines general legal and intellectual property strategy of the company. The second reason is that different legal scaffolding which could used for virtual property may result in different taxation of the video game company.

At the moment this overview is being written, the Arbitration Court of the Moscow City considers a dispute between major Russian Internet and online games company Mail.Ru against local tax authority. It is reported by media that this dispute is concentrated over the issue of whether Mail.Ru should pay VAT for virtual property or not, and the context is that there is a VAT exemption for providing licenses to software and no VAT exemption for services as a general rule. This court battle, unless it ends with amicable settlement, may provide a guidance to the nature of virtual property as it should be recognized in Russia – whether, in particular, it should be considered as intellectual property, or it should be seen as services.

Irrespective of complexity and ambiguity of the issue, it is apparently recommended to think about legal and tax issues of virtual property much in advance before a game enters the Russian market.

Data Protection

Perhaps, Russian data protection rules is the issue which currently has widest media coverage not only in Russia, but in the West as well due to several recent legislative incentives which resulted in potentially ambiguous rules which yet will come into effect.

In particular, the Federal Law of July 27, 2006 No. 152-FZ “On Personal Data” (hereinafter, the “Personal Data Law”) will be supplemented with new Item 5 Article 18 which shall set forth that while collecting personal data, in particular by means of information and telecommunication network “Internet”, the operator shall ensure that record, systematizing, accumulation, storage, specification (renewal, change), extraction of personal data of the citizens of the Russian Federation shall be carried out with the use of databases located on the territory of the Russian Federation. There are a few exceptions, but generally they are not business-relevant as they include statutory/treaty goals, execution of justice, state services, journalists, mass-media, academic, literature and other creative activity.

In spite of the fact that some media already boldly decided that a new ‘Iron Curtain’ is going to be introduced by effectively prohibiting foreign Internet companies from operating in Russia, there has been no clear and binding official comment and, even more so, there is not yet subordinate legislation which could really clarify this matter. The rule will become effective on September 1, 2016 (there was an attempt to pass a law to change the date to January 1, 2015, but by this date it has passed only second hearing in State Duma and it has not been scheduled yet for the third hearing). Much can change before it becomes effective. It is clear that this rule presumably implies some degree of involvement of data centers located in Russia, but it is not clear to what extent. And apparently cross-border transfer of personal data is not prohibited, a fact often neglected by non-professional commentators.

In any case, as regards video game industry specifically, in many cases the question of relevance of this law depends on whether user data which is operated by video game companies could generally be qualified as personal data. Although the Personal Data Law gives quite broad definition of personal data (any information which pertains to an identified or identifiable individual in a direct or an indirect way), in many situations practical interpretation narrows application of the law. It is not possible to provide a universal answer to the question of which user data can be considered as personal data and which cannot, but as a general rule it is possible to do so after reviewing specific business processes and categories of information in possession of the companies.

Besides this, it would be probably helpful to mention that Russian personal data law resembles the European Union regulation to a great extent, as Russia itself is a party to Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data. However, despite common principles, Russia is a separate jurisdiction with its own peculiarities worth to consider.

Conclusion

According to a recent research made by Newzoo, Russia is No. 1 in the world when it comes to PC gaming with 98% of gamers playing on PC. That said Russia is No. 12 in the world rank (revenues). By no means is it a market to ignore. Relevant Russian legislation is rapidly developing, but it could be said that nothing substantially new comparing to most of the other jurisdiction is invented – Russia is just quickly catching up. Still, this means that a legal audit of a game project to be launched in Russia would be very useful to avoid unnecessary risks in future.

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