Article for Wicki Partners AG
Conducting Business within Sanctions Against the Russian Federation
Article for Wicki Partners AG, August 2023 (orininal e-source, full version: https://en.wickipartners.ch/news/conducting-business-within-sanctions-against-the-russian-federation )
In light of Russia's ongoing military aggression against Ukraine, the international community took immediate measures in the form of economic and social sanctions. They affected both large players on the Russian market as well as foreign companies that decided to leave the business market of Russia. The measures also included asset freezes and visa restrictions for people on sanction lists (in this case, the EU list), as well as a ban on companies from sanctioning countries to do business with listed individuals and organizations.
However, a big question remains whether it is possible to have any economic and commercial relations at all if your counterparty is located in the territory of the Russian Federation or has its assets there.
In this article we describe how sanctions can affect small and medium-sized businesses and what the sequence of actions should be in case you are one of the parties of the Russian-Swiss business relation.
Overall legal framework
The Swiss Federal Council decided to fully adopt the first, fifth and sixth package of EU sanctions imposed on Russia. The measures include individual and economic sanctions as well as restrictions on media and diplomatic measures.
In the area of financial restrictions, these sanctions include a ban on providing audit and business consulting services and a clarification of the ban on providing services to trusts.
Trade sanctions concern a ban on imports of coal and other goods that are an essential source of income for Russia, and a ban on exports of kerosene and other goods that might contribute to Russia's industrial capacity (including industrial robots and some chemicals).
In the area of financial restrictions, sanctions include a ban on the participation of Russian companies in public procurement, a ban on financial support for Russian state institutions and other new financial measures, especially those targeting trusts. It has been also approved the exclusion of four Russian and Belarusian banks (i.a. Sberbank), from the SWIFT financial messaging service and the expansion of the list of banned exports of goods that may contribute to Russia's military and technical strength or its defense and security sector, namely certain chemicals, as well as the list of economically important goods banned for import.
In addition, Switzerland decided to implement a sanction list of Russian individuals and entities.
What should I do if my counterparty is a representative of Russia or is located on the territory of the Russian Federation?
1. Commercial or trade relations
First, and most importantly, there are no direct restrictions on any commercial or trade relations with representatives of the Russian Federation. Second, among the sanctions that are now in place, a direct and non-alternative ban on economic interaction applies only if your counterparty is on the sanction list of individuals and legal entities (to find out if certain people are covered by the sanctions, follow this link.
2. Payments and bank transactions
There is also no general prohibition for Swiss citizens to make payments towards Russian nationals holding a bank account in a Russian bank. It is however important to make sure that payment does not breach other prohibitions, for instance, that it is not in favor of a natural person or entity designated under the sanction list or does not serve the military support.
There is also no general prohibition on receiving payment made by Russian legal entities.
3. Financial and other support
Regarding the support of the Russian Federation, it is essential here to specify the list of prohibitions.
Further, it is not allowed to provide any funds or economic resources, directly or indirectly, to individuals or entities on the sanction list, whether by gift, sale, barter, or any other means. Said includes the return of the designated person's funds (for example, businesses are not allowed to sell or supply products or services to these individuals, even if in exchange for adequate payment).
Please note that there are several exceptions of this prohibition, including for prior contracts where payment to a listed person you are obliged to under an agreement entered into or an obligation incurred prior to the listing of that person.
It is also prohibited to
sell,
supply,
transfer or
export any goods or technology to any person or entity operating in the energy sector.
Thus, if you are conducting your business related to the listed goods or sectors with a Russian person or entity as a party, it won't be allowed to continue such a commercial relation.
Conclusion
In concluding the legal analysis of the sanctions, we would like to point out that at the time of the publication of this article, there is no strict prohibition on conducting business if your client or counterparty is Russian or is seated in the territory of the Russian Federation. Meanwhile, it is essential to consider that the other party to your economic relationship or commercial activity does not belong to the sanctions list of individuals and entities and does not concern any of the areas listed in this article, and is prohibited for the transaction.
Alisa Demchenko for Wicki Partners AG, Zurich
Intersection of AI, Art, and IP
Part I. Navigating the Intersection of AI, Art, and Intellectual Property Law
As digital technologies have evolved, the art world has found itself at a turning point. The capabilities of artificial intelligence are fundamentally redefining the traditional spheres of art creation, ownership and distribution. This technological revolution brings with it intellectual property (IP) issues and ethical considerations, crossing the spheres of creativity, law and commerce. Today, I want to clarify the relationship between IP and art objects created by artificial intelligence and provide insight into the emerging field where technology meets creativity.
Intellectual property is a fundamental law framework for protecting the creations of the mind, stimulating innovation and ensuring that creators benefit from their work. IP consist of many types of forms, including copyrights, patents, trademarks, and more, each designed to protect different aspects of creativity and invention.
Among the other forms of IP, exactly the copyright protects original works of authorship, including various forms of artistic expression such as paintings, sculptures, photographs, and literary works. As a general rule, copyright protection lasts for the life of the author plus an additional 70 years (can vary by jurisdiction). It automatically covers original works of authorship from the moment they are created.
In the digital age, AI has emerged as a significant force in the creative industries, generating new pieces of art and influencing market trends. This innovation introduces new challenges regarding IP rights, as AI can draw from extensive datasets that may contain copyrighted works. From revolutionizing photography to redefining the essence of paintings and music, AI's influence is undeniable. Yet, this fusion of technology and artistry raises pertinent questions about the nature of creativity and the rights associated with AI-generated works.
The line between inspiration and plagiarism becomes increasingly blurred, raising important questions about originality and copyright.
Copyrightability of AI-created art
Nowadays, we can observe the AI-created art all over the world in different fields, such as AI in photography ( Théâtre D’opéra Spatial, a creation by designer Jason M. Allen using the AI art generator Midjourney), AI in painting (3D printed painting The Next Rembrandt as the result of an 18-month analysis of 346 paintings), and even AI in music (check AI-created single “Now And Then” which was released in 2023, created on the basis of John Lennon’s demo from 1978).
AI has emerged as a transformative force in creative industries. From generating new pieces of art to influencing market trends, AI's role is becoming increasingly significant. Yet, this innovation brings forth new challenges, especially concerning intellectual property rights.
The copyrightability of AI-created art stands at the forefront of legal discussions as the boundary between human and machine-generated creativity blurs. With AI technologies like deep learning and neural networks, machines can now produce artworks that resonate with human emotions and aesthetics, challenging our traditional notions of creativity and originality. This evolution raises crucial questions about the application of copyright laws, originally designed to protect the rights of human creators, to works produced by non-human intelligence.
Legal systems in different countries address these issues with different approaches, but the main debate revolves around the concept of authorship. Copyright laws in many jurisdictions require that a work be created by a human being in order to qualify for protection, emphasizing the need for "originality" and the "creator's touch" (based on Bern Convention).
Art created by artificial intelligence, however, complicates this definition, as the creative process and end result are products of human-driven, but not directly created, machine learning algorithms and models. This dilemma challenges not only the legal definition of authorship, but also the economic and moral rights traditionally associated with creators.
Part II. Current legal regulation. A Global perspective
The advent of AI in the creative flied has ushered in a new era for art creation, distribution, and ownership. This transformation raises complex questions about IP rights, particularly regarding the copyrightability of AI-generated works. Laws across various jurisdictions are grappling with these challenges, each adopting unique stances reflective of their legal traditions and interpretations of authorship and creativity.
Legal landscape in the United States and Europe
In the United States, the U.S. Copyright Office adheres to the principle that only works created by human beings are eligible for copyright protection, a stance reinforced by case law emphasizing the necessity of human intellectual labor for copyright eligibility. Moreover, US District Court for the District of Columbia reaffirmed the PTO’s denial of a copyrightability AI-generated artwork due to lack of "fruits of creative intellectual or aesthetic labor" (Thaler v. Perlmutter, et. al.).
Similarly, the Court of Justice of the European Union (CJEU) in its Infopaq decision, mandates that for a work to be copyrightable, it must reflect the author's own intellectual creation, inherently requiring a human author.
The Chinese perspective on copyright and AI
A notable Li v. Liu, Case (2023) from the Beijing Internet Court illustrates China's approach, where a plaintiff's active design input through prompts in AI software was recognized, thereby granting copyright protection to the resulting work, as the Chinese court considered AI as a mere tool for human creativity. This case reinforces the view of AI as a tool for human art creation, with implications for the broader discussion on the copyrightability of AI-generated works.
Diverse international approaches
In various jurisdictions, including Hong Kong (SAR), India, Ireland, New Zealand, and the UK, there's a recognition of programmers as the authors of AI-generated works. This is notably reflected in the UK's Copyright, Designs and Patents Act (CDPA), Section 9(3), which assigns authorship to the person making the necessary arrangements for the creation of computer-generated works. This stance highlights a shift towards recognizing the human element—specifically, the programmer or the individual directing the AI—in the creative process.
The conversation around copyright allocation for AI-created content hinges on identifying the "choice-maker," the individual whose creative decisions imbue the AI output with copyright-eligible originality. This approach underscores the role of human intervention in the creative process, even when AI tools are employed.
Ukraine's Innovative Legal Approach
Being one of the first countries which legally regulated the AI, in 2023 Ukraine has introduced an innovative Amended Law on Copyright and Related Rights, by which has granted to the AI/Softwave-created art the sui generis right to protect non-original works, a pioneering legal concept addressing the unique challenges posed by AI-generated content.
The new law is applicable to the works which differ from other works of a similar type and are created without the participation of humans. Rights to such works arise at the moment of their creation. Sui generis rights include the right to use and the right to authorize or prohibit third party use of the work. The economic rights belong to the natural person who is the owner of the rights to the software that created the non-original work, if not mentioned otherwise. In such cases, moral rights does not arise at all.
Additionally, Ukraine recognizes sui generis rights for non-original databases, further expanding the legal framework to accommodate the complexities of AI-generated content.
In other words, if the program created something on its own (through its functioning) without direct human involvement, it is a non-original work. But if a human being was involved (executing commands, adjusting the operation of technologies, setting direction, etc.), then such works are considered an original work, generated by a computer program.
The Berne Convention and AI's Legal Personality
Under the Berne Convention, the lack of legal personality in AI systems means they cannot be recognized as authors, as authorship and related rights such as attribution are reserved for humans. This distinction clarifies that AI-generated works, absent human involvement, do not automatically confer copyright ownership or authorship rights.
Authorship and liability in the AI context
Determining authorship when AI is involved in the creative process poses legal uncertainties. The European Parliament's resolution on civil liability for AI underscores that an AI system's autonomy does not diminish the responsible party's liability for any resulting damages. This principle suggests a cautious approach to attributing authorship and liability in AI-generated works.
Ethical Guidelines and Transparency
The push for ethical AI usage emphasizes transparency and informed interaction with AI systems, as outlined in the EU Trustworthy AI Guidelines and Australian AI Ethics principles. Such guidelines aim to ensure users are aware of AI's role and limitations, fostering an ethical and informed application of AI technologies.
The debate extends to the nature of creativity and the extent of human input necessary for AI-assisted art to be considered original. Factors such as the level of creativity, the role of the human artist, and the purpose and audience of the work all play into the determination of copyrightability and originality.
Part III. Challenges and opportunities ahead
The integration of AI in the creative process presents both challenges and opportunities. While AI facilitates innovation, efficiency, and enhanced IP management, it also raises questions about copyright ownership, ethical considerations, and the fair use of training data. The issue of infringement detection further complicates the landscape, as AI can generate derivative works that blur the lines of copyright recognition.
As jurisdictions worldwide navigate these uncharted waters, the balance between fostering technological advancement and protecting intellectual property rights remains a critical concern. The ongoing dialogue and legal evolution in this space highlight the need for a nuanced understanding and adaptable legal frameworks that recognize the transformative impact of AI on the creative industries.
(c) Alisa Demchenko