Systematic Problems in Intellectual Property Rights Exercise and Protection
SOKOJ – From the Organization for Copyright Exercise to the Mechanism for its Usurpation
Even though it holds a prominent position in the system for intellectual property rights exercise and protection, as the organization for collective management of copyright, SOKOJ is increasingly recognized, in the eyes of the members of this organization, as the focal point of non-transparency and abuse that, instead of protecting them, in practice, significantly reduces and usurps their copyright. In the last couple of years, by a series of scandals and complaints from the SOKOJ membership, that pointed to a number of documented abuse cases that cost the authors several million euros, needlessly spent from royalties’ funds, the legality of management operations of this organization was seriously questioned. Those who, anonymously or under their full name, dared to speak of these abuses, mostly agree in one thing – that in addition to badly created and non-transparent system of operation in SOKOJ, current omissions are, in most part, the responsibility of the former Director Aleksandar Kovačević, and the group of people he surrounded himself with while holding this function, that took over the operational management of the organization upon his sudden removal from function.
Increasingly frequent public discussions of stakeholders, organizations and professional bodies that are, related to the topic of protection of copyright and neighboring rights, organized related to the harmonization of domestic legislature with the European legislature and practice, point out the clear need to adequately regulate this area as soon as possible, to enable Serbia to successfully close the negotiating Chapter 7. At the same time, the progress in the respect of intellectual property rights is one of the two key conditions for the Serbian membership in the World Trade Organization (WTO), which puts additional significance on this subject, insufficiently present in the domestic public domain.
Even though Serbia accomplished undoubted progress during the last ten years in the area of respecting intellectual property rights, starting from the improvement of legislation, to its due application in practice, which lead to the removal of street piracy and a drastic reduction of abuse and violation of copyright and neighboring rights through Internet platforms registered within the country, the system of protection of these rights, as well as the realization of economic benefit arising from them, still includes a number of serious faults. As already discovered by Antidote in its extensive research from November 2017, the current issues are dominantly related to the slow adjustment of legislation and insufficient regulation of the area of new distribution technologies in the area of creative industry, and the lack of transparency and abuse in the operation of large broadcasters on the market, and, being the worst, certain copyright and neighboring rights collective management organizations.
During the research on the behavior of the Public Service related to its obligations regarding the respect of copyright and neighboring rights, a large number of respondents from the creative industry pointed out that, even though it is significant, it is surely not the only issue in the current mechanism of intellectual property rights exercise and protection. As one of the key collective actors in this area, having over 9,000 members, registered holders of copyright in Serbia, to support it, SOKOJ organization took on a significant, almost dominant position in the current system of protection, and, primarily, exercise of copyright. The significance of the function awarded to this organization, however, is not proportional to the required level of transparency and responsibility when it comes to fund management. Such funds are formed from collected royalties that are distributed between the holders of copyright whose works were publicly broadcasted, communicated or exploited in some other manner on the market after the deduction of costs of operation of SOKOJ, all in accordance with previously adopted plan.
In accordance with financial statements of SOKOJ for 2017, the costs of organization’s operations were EUR 2.7 million which represents a share of 20% of assets in the total collection fund, from which author’s royalties are paid out. In the financial plan for 2018 it is forecasted that the percentage of share of costs in total collected assets will be increased, reaching 22.5%. Even though the official reports of SOKOJ’s bodies present these costs as something usual and justified, a number of complaints related to irrational management of this organization imply that they could be significantly lower, and the system of asset distribution to authors should be far more impartial.
What is SOKOJ?
SOKOJ – Serbian Music Authors’ Organization, was founded in 1950. Pursuant to Article 219 of the Law on Protection of Copyright and neighboring Rights and the decision adopted on the Members Assembly of SOKOJ in March 2010, the organization changed its legal form when it was transformed from legal entity to association.
Register of the association includes a decision of the Intellectual Property Office dated 30 April 2010 renewing the license to SOKOJ for the performance of activities of collective management of copyright for a 5-year period. By a new decision of the Office from 2015, the license was renewed for additional 5 years, valid until 2020. Until that time, due to the harmonization of domestic legislation with the directives of the European Union the system of collective management of copyright and neighboring rights should be de-monopolized meaning that SOKOJ, in its primary activity, will face inevitable competition on the market.
SOKOJ is a non-profit organization, and its members are authors and holders of rights with residence or permanent residence, that is, seat for legal entities, on the territory of the Republic of Serbia, that entrusted protection to SOKOJ, by means of contract. The basic activity of the Serbian Music Authors’ Organization is the collective management of property copyright of music authors and other holders of rights based on a contract with SOKOJ or pursuant to the Law.
The bodies of SOKOJ include the Members Assembly, Managing Board (MB), Supervisory Board and the Director. The average number of employees in 2015 was 61, in 2016 it was 67, while during 2017 this number reached 72.
Lost Dispute with SBB and the Resignation of the President of the Managing Board
Resignation submitted in June 2017 by the President of the Managing Board Petar Stokanović pointed out the fact that there is a significant discontent within the organization caused by the lack of transparency and irregularities in the work of the management. In a letter sent to the Members Assembly of the organization, Stokanović said that, by committing this act, he wanted to protest “the way Director Aleksandar Kovačević was running the Organization for eleven years.”
“Affairs and intrigues, guilty parties named by the Director without any evidence of guilt, Director avoiding to prepare and sign an official record on specific issues, to detect problems and propose long-term solutions, bad interpersonal relations between the Director and employees, as well as mobbing complaints that come from employees addressed to the Director, that are expected in the future as well, as we can learn… Is this the protection of interest of authors?”, asked Stokanović in an open letter addressed to the organization members.
He warned that the failure to meet obligations that Director Kovačević took upon himself, arising from unilaterally adopted acts and decision of the MB, followed by ignoring professional orders delegated to the Director by the President of the MB, related exclusively to the pre-agreed business, extensive delays without explanation, lack of familiarization with the issues and lack of interest of the director related to certain important issues of copyright do not represent examples of respect of author’s choice and will.
“I never got the chance to question Director’s responsibility since he skillfully avoided coming to the Managing Board meetings several times, suddenly, always a couple of hours before the meeting, without a written notification to the President of MB on the reason for his absence. The strategy of the Director to divide and produce conflict within the MB by talking to certain members of the MB and to protect himself in that manner is completely pointless since the problems surfaced due to a significant number of such problems the Director tried to push under the carpet in previous years”, stated the former President of MB in his resignation letter.
He reminded on irregularities during the 2016 distribution and everything that was going on before and after the adopted royalties’ reports, and “sudden error on which nobody knows a thing, as well as the attempt to correct already adopted statements by the famous “corrective coefficient” that was used only in extremely critical moments in the false playlist scandal”. Stokanović also asked “in which European or global society, to which we should look upon, do we have such absurd situations”?
He warned that due to the blockade of the Managing Board’s work, the problems that seriously question the credibility of the organization will have to be resolved by the Members Assembly of the organization and its members.
“In addition to me, the recent President of MB, completely losing trust in our Director, who was obviously not up to the task in different critical situations, I am even more concerned with the repetition of same omissions and complete absence of the sense of responsibility by the Director in different incidents. I often could not completely define whether he was just a silent observer of the event or, simply, he was not aware of consequences produced by his lack of action, ignoring or delaying the problem resolution,” concluded Stokanović in a letter sent to the members of the organization.
A few months after resigning, Stokanović sent a more elaborate letter to the members of the Members Assembly of SOKOJ in which he notified the authors – members of the organization on the following:
“The following was not on the agenda of the Members Assembly of SOKOJ, and should have been due to its importance, and “surprisingly” was not on the agenda of the Managing Board, in a period of three months after my resignation:
1. Dispute lost with SBB that occurred in July 2017. From the beginning of dispute with SBB the Professional Sector, Director Kovačević and his closest associates, lost the dispute due to a series of omissions and an enormously highly forecasted monetary amount for which SBB was sued. Omission of officers in SOKOJ, evidenced by the official record of the Law Office Trninić, contributed, at the very start, at the beginning of the court proceedings, to the negative outcome of court expert findings, upon repeated evaluation of disputed data delivered by SBB to SOKOJ. Director tried to cover this up and did not allow this to be included in the report of the Professional Sector that was submitted to the Managing Board. I found about this, as the President of the Managing Board, retroactively, a few months after the event, from lawyer Trninić. These two facts represent key factors for which SOKOJ was in a subordinated position in this dispute, compared to SBB. Whether the management of SOKOJ left a professional impression not only on the Judge, but on a very serious system such as SBB, being the opposite side in this dispute, you can judge for yourselves.
To the warnings and criticism I directed to Director Kovačević, he either did not respond to or said that we will win the dispute and that nothing is over yet.
For a period of one year I asked him to, as a responsible and authorized person representing SOKOJ, handle the SBB case with priority and find a way to reopen negotiations with SBB and to prepare a delegation, again, in which authors will be represented. Only one meeting was organized, without the authors in delegation at that, and this meeting had no results. In addition to that, for comparison purposes, only in May, several meetings were held related to the issue of remuneration payment for SOS Channel, and you can only imagine how “important” this channel is in the sense of collection of royalties, and how important SBB is as one of the largest, if not THE largest, user of SOKOJ’s repertoire. I think that the explanation (to come) is unacceptable, stating that an appeal was filed. Authors should seek the report and determine responsibility for the dispute lost.
Questions to which the Director and the MB should provide answers to the Members Assembly are:
1. Why the MB did not discuss the lost dispute with SBB on the September meeting? Who is responsible for the fact that we went from forecasted 3 billion dinars in the claim to paying court costs with royalties for the dispute lost? Why were the authors in the MB mislead by the Director that the amount we will collect will be several hundreds of millions of dinars, where at the end, as much as I was informed, it was a humiliatingly low amount. Is it true that a part of the claim was subject to statute of limitations? Why the suit and negotiations were not handled with more professionalism?
For how long will time be bought with the money of authors and when will the practice of Director Kovačević to announce bad news to authors when nothing can be corrected anymore end? I ask this publicly – why is this not discussed at the Supervisory Board of SOKOJ? If it was not notified by the Professional Sector, that is, the Director, why was that? Why does the Supervisory Board not handle other issues I will mention and consider whether there were omissions in the work of SOKOJ and who is responsible?
2. Who is responsible for public disclosure of secret data on individual fees of authors? How many times has this happened already? How many other secret information were disclosed in the past period? Why the origin or anonymous e-mail with half-truths and half-information sent to the public was never investigated? Who is disturbing and trying to divide the authors? What was foreseen in the operations plans and not realized by Director Kovačević related to data security?
3. How was the report of the Professional Sector of SOKOJ adopted in the June Assembly? What final value of point per class was used to calculate individual royalties for 2016?
MB of SOKOJ adopted one General Statement of Accounts and the value of point per class for the Distribution, and then the Director, at the Assembly, without duly notifying the MB on this matter, announced to the Assembly that this data on points is inaccurate and that there are errors he himself could not explain, nor did he know how they might impact the distribution. Two days after the Assembly, the MB urgently adopted something named “corrective coefficient” and the payment of fees to authors started without rescheduling the Assembly of SOKOJ. The Assembly always, until now, firstly verified the reports of the Professional Sector including, among others, this data, and then, upon the adoption of the report on the Members Assembly of SOKOJ, payment of royalties assumed. Who is responsible for the complete confusion and how can we explain the authors, primarily of popular music, the repeated drop in fees, that is, as much as I could learn, somewhere between 30 and 50%?
Why wasn’t the 2016 Distribution urgently analyzed on the Managing Board and the Supervisory Board? Moreover, since this extraordinary Assembly was scheduled for September in June? When will, if ever, the authors receive official reports of the Professional Sector with detailed analysis of distribution that includes facts on the current status? Old practice? Is this the transparency of work we strive for?
4. What happened to the Operating Plan of MB and the Professional Sector for 2017 that I asked a few times from Director Kovačević in the period February-May? Does it exist? Why is the realization of the 2016 Operating Plan no longer on the agenda of the Managing Board after I left? Why doesn’t the MB insist on executing decisions from the document adopted by the MB unanimously? Why do we omit to determine responsibility for unrealized decisions? These are not just any items, I will mention just a few:
A. Belit – for those of you who do not know, this is the company that built, that maintains and upgrades software and performs electronic data processing for SOKOJ. Bad primary contract, bad monitoring and control of realization by the Director – Annex 2 and 3, delay with Annex 4, errors, slow software development such as, for example WID that enables entering all domestic authors in the international data base, which is of key importance for fee claims from abroad. This software, WID, is a subject I personally insisted on since November 2014, and, after almost three years, according to data from June this year, we are only half way through regarding entered works in the international data base (somewhat over 90,000 out of expected 200,000). Foreign fees are lost forever, in the full amount for years and years back, since the time schedule foreseen by contract for realization by Belit was not honored, and the Director, as usual, monitored the realization of contract annex with delay and without proper reaction, ideas and solutions. This is only one example how faulty priority setting and delay in realization of the agreed results in authors losing money and suffering damage, irreversibly.
A lot of things in SOKOJ do not work properly due to the bad primary contract with Belit and poor control of agreement and annex execution. If this is an “inherited” problem for the MB I chaired, it is most certainly not for Director Kovačević who was the leader in negotiations with Belit from the very start, where all contracts and subsequent annexes were signed during the mandate of Director Kovačević.
From the adopted report of SOKOJ MB from the June Assembly under item 5 - Belit, the MB is obligated to notify the Assembly of SOKOJ on the success of executed measures and possible liability of Belit, as well as possible individual responsibility on the level of the Professional Sector related to violation of deadlines for the realization of Annex 2 and 3. Why wasn’t this on the agenda for the Assembly, especially due to the confusion that happened after the established errors in calculation, for which, allegedly, Belit is guilty of? Or it was not just Belit?
B. Other planned and unrealized processes include:
Professional monitoring of personnel requirements of employees of the Professional Sector was not performed and solutions were not offered, internal business audit was not performed, ISO 9001 and ISO 27001 standards were not introduced related to full security and protection of documentation and data in SOKOJ, without a clear and rationalized explanation on the reasons. I already mentioned that we were able to witness the information security level in SOKOJ this summer.
C. The Operating Plan of the SOKOJ’s PR is also at the minimum of realization, where, apart from presence on social network, most of the ambitious ideas planned are no longer the subject of discussion.
D. Author’s portal is waiting its turn, as well as the website reconstruction. I must add that authors are patiently waiting for their turn for a lot of things. The question is, where is the limit of that patience?
E. In spring 2017 the Managing Board unanimously adopted a decision, upon my proposal, to send a delegation to Amus, copyright protection association of BH, that would perform control or regulations in Distribution of this association in the segment referring to the authors members of SOKOJ and to determine whether there is an equal treatment compared to other authors members of Amus and members of other associations whose repertoire is used on the territory of BH.
Why was this decision not implemented? Do we have to wait for the next payment from Amus in which individual fees will be humiliating? Is it sufficient to have any pro-forma payment from BH, and other associations, especially from ex-YU territories? Perhaps it is sufficient only for the Director whose paycheck obviously does not depend on the efficiency of Professional Sector operations.
Dear colleagues, through these examples and facts I wanted to paint an image describing my reasons for resigning from the position of the President of MB and MB membership. Events occurring this summer confirmed I was right to do so. According to MB activities from the moment of my resignation until present time, I can conclude that the new MB management, by changing the policy and omitting to execute own decisions, placed SOKOJ’s MB in a very unpleasant position. I do not understand in whose name and why the new President of MB treats the responsibility of the MB and Director Kovačević equally by omitting to act for the omissions only Director Kovačević is responsible for. What is being covered up, who is protecting who and what is the interest involved?
Even though I have friends in the MB and colleagues that I respect personally and professionally, I can regretfully say that the Director managed to move the focus from his oversights and oversights of his employees to authors and that, by seeking support from other authors in the MB, since he lost my trust, he placed all of us into a situation of responding to each other’s claims, which was certainly not my goal.
The top of it all is the violation of own decisions, unanimously adopted at MB meetings while I was the President. If you do not respect yourself, how can you demand respect from others? I feel that this observation of mine is sufficient clarification on why I resigned. I could say a lot more, but as a man that sacrificed a lot for SOKOJ and the author that respects and loves our Organization I do not wish to increase the instability of SOKOJ caused by deficient management of the Director in any way.
Different external opponents of SOKOJ that have tried to win me over in the last couple of months for their own interest and extract information from me, failed at this attempt since we do not think the same, so we cannot work together. I am all for changes, but changes within SOKOJ that will be the result of agreement and will of majority of authors. No external influence.
My proposals are clear: Extraordinary elections for the members of the Managing Board and Supervisory Board.
Dismissal of Director Kovačević and seeking temporary solution through the Acting Director status. Determination of responsibility on the level of sector for omissions in work and damage caused. Reorganization of the Professional Sector.
Internal independent audit of finance operations, first of all.
Execution of all decisions not realized by the MB and reestablishment of reform tempo with defined, realistic realization deadlines for items in the Operating Plan that have not been completed, and some were not started in the previous period.”
Almost One Million Euros Paid for Inoperable Software
Even though, as the organization for collective protection of copyright, SOKOJ has one of the most significant roles in the system of exercising intellectual property rights, a number of authors and employees had significant number of complaints related to the operation of this organization. The majority of those complaints referred to the absence of transparency and abuse in the disposal of money by the management of SOKOJ.
In addition to other indicators and evidence on irregularities in the operation of this organization, Antidote research team came into a possession of anonymous letters that were sent to SOKOJ members from e-mail address [email protected] recently. In addition to faults in the system of operation of this organization, numerous intrigues of the current management were pointed out to authors, primarily Director Aleksandar Kovačević, as well as the damage caused to the members of the organization in that manner.
The letter reminds that in 2008 the Members Assembly of the Organization approved EUR 500,000 for a new software (BELIT company) for documentation, playlists, finance, etc. During 2012 the handover of software to SOKOJ was signed, when it was concluded that BELIT performed all of its obligations from the primary contract.
The analysis of the contract signed by the Director Aleksandar Kovačević with Belit company, that was performed in 2015 at the request of the Managing Board, determined that due to significant problems in calculating remuneration and large costs, Belit did not in fact perform its obligations from the primary contract, even though this company received the full contracted fee.
The author of the letter warns that the software delivered by Belit to SOKOJ was paid drastically more than the contracted sum, even though the organization of authors did not receive what it paid for. Even though, pursuant to the primary contract, SOKOJ was entitled to engage a third person to complete the contracted job at the expense of Belit, for unknown reasons, Director Kovačević, did not exercise this right.
Instead, Kovačević signed the document stating everything was completed, which turned out to be inaccurate. The author of the letter continues with “in addition to all of these obvious omissions in work with the elements of economic criminal offenses, the Director of SOKOJ released the Belit company from penalties in the amount of EUR 10,000.” The letter states that since 2008 until now the Director was warned about the omissions and suspicious actions related to software. Regardless of all of those warnings and letters, Kovačević signed that everything was executed per contract where he, as stated, “signed a damaging contract for the authors, presented a false status and mislead bodies of SOKOJ, released the Belit company from penalties and neglected the right from the primary contract to engage a third person to complete the job at the expense of Belit, but, paid Belit in full…”
Instead of taking steps towards the resolution of the issue and finalization of the deal, Director Kovačević approved Belit a period of additional 8 years to complete the job that hasn’t been completed yet. “The Director and the management were informed that the software was not working properly and the Director, in the meantime, along with the management, signed the document that everything is completed and knowingly pushed us into a problem”, says the letter and adds: “SOKOJ hired a Spanish company for the part of work for which Belit was paid out, so you are paying a large sum for something that has already been paid. The job entrusted to the Spanish company cannot be executed because if you wish to compare data from monitoring and electronic playlists as well as the proper execution of the job, you will have to make a link between Belit and the Spanish company, which is a problem. Proper and accurate control is impossible, Belit’s software has no technical capacity to make quality and accurate connections due to the issue with electronic playlists. The entire software was envisaged as a mask for abuse. Omissions of the Director, Aleksandar Kovačević caused damage to SOKOJ in the amount exceeding 20 million dinars.”
The letter also warns that through series of measures and actions Kovačević keeps employees frightened and under control, adopts acts with the purpose of punishing employees, while, at the same time, awarding those responsible for millions in damages.
“Who got punished for the lost dispute against SBB? According to the official lawyer of SOKOJ, employee Dragana Mihajlović was directly responsible for the loss of the dispute with SBB. She was not punished… for this error, in which you lost a lot of money, she was rewarded by the Director by securing a loan through SOKOJ for the purchase of a private mobile phone, out of your pockets. There are no acts that allow this, if there were, you authors could also ask Aleksandar Kovačević for loans for mobile phones”, the letter states and adds that even though the disciplinary action was not executed against the guilty parties for SBB, Kovačević executes procedures against employees for much lesser offenses, like coming late from breaks for just a few minutes.
The letter also warns about fingering and false presentations of business results in annual financial statements in which the Director and the management claim collection increase has occurred. “There is no increase in collection, but they present there is, since the old debt from RTS is included in the report. If you exclude the old RTS debt, you can see the real status,” claims the letter.
“The Director and the management changed the Distribution Plan under the pretense that this is the usual way of work of others, they adopted the rules that favor a certain group of authors. Belit provides false and fingered data for fee remuneration calculation, and this includes yours, as well”, the letter states and announces more information on this in the next announcement to the authors.
“The only way to stop this is for you to form an independent Commission that will check these allegations in the official SOKOJ records. Dear authors, this is just the first mail, soon you will receive more information. After everything you learned and what you are about to learn, think well whether copyright even exists, is it in your interest to stop the Director Aleksandar Kovačević and the management in their obviously intentional malpractice directed against you,” the letter of the unknown SOKOJ member sent form the e-mail address Sokojleaks concludes.
Software for Robbing Authors
Shortly after the first mail sent to the authors members of SOKOJ, the second letter came from the address Sokojleaks warning the authors on the circumstance that their works registered in SOKOJ base are mysteriously disappearing, as result of defects in software developed by the company Belit. “When we moved to Belit software, the Professional Sector of SOKOJ opposed this idea due to large changes. Still, Aleksandar Kovačević ordered the commissioning of the system in order to pay the rest of the debt to Belit. Contrary to the interest of SOKOJ, that is, you, authors. From the moment of software release, a huge number of works disappeared from the base”, the letter states and adds that the Professional Sector corrected this problem for full three years, but a large number of works was never found, and this is the current status.
“Your musical works end up with different authors for some reason, in certain periods. There are works and holders of rights whose percentages are doubled or increased even more. Protection and contracts are erroneous and inaccurate very often. If your musical work is properly presented in the base today, it does not mean it will be so tomorrow. The whole system was commissioned, and it should not have been. It was envisaged to steal from you. Belit is not an error but a well-designed plan to extract a huge load of money from you. The money is extracted every year, from calculation to calculation” the letter of the unknown author from SOKOJ claims.
In the same text, recent Director Kovačević was accused of “false presentation of playlists”.
“False playlists are used in several ways. Playlists are controlled as per random sample principle, that is, they are not controlled at all. All sorts of playlists are entered through the application without any control of each of them.
There is no fair and accurate control of the Belit system operation. The entire process and distribution method are very beneficial for certain authors. Some authors have “privileged distributions” before the calculation. All of this is the result of work of Director Aleksandar Kovačević and the management” the text continues and adds:
“Do you authors know that you are paying for the disputes lost by SOKOJ in court in millions? For the last five years SOKOJ lost several large disputes causing damages in millions due to employee errors that cost you 5,000,000 dinars. Due to Director’s “negligence” the parties in lawsuits against SOKOJ won millions paid out of your pocket. Why did Director Aleksandar Kovačević miss to seek compensation or run disciplinary procedure in these cases? Because this is his responsibility. A person occupying the position of the SOKOJ Director deceives you, authors. He is giving up on you, misleading you, covering up facts. In 2008 SOKOJ’s IT Sector proposed hiring 2 additional developers and 2 additional designers to upgrade the application with the annual cost of EUR 170,000. SOKOJ would be the owner of the software, naturally. Why did the Director decide to pay a one-time fee to Belit in the amount of EUR 500,000, plus 7 years of payments of EUR 200-300,000 with SOKOJ not being the owner of software, remains a mystery, or is it? Aleksandar Kovačević is a man with criminal charges on his desk and in his drawers.
Regardless of the musical genre you belong to, all of you must have a guaranteed right to fair distribution and treatment. It is the matter of intellectual property that must be accurate and in accordance with the law. Instead, you paid EUR 500,000 for a software that is robbing you and you are managed by Aleksandar Kovačević that is not protecting your interest, only his own”, reads the letter sent to the authors only a few days before Director Kovačević, in his attempt to avoid responsibility, submitted his irrevocable resignations and, through the Managing Board controlled by his closest associate Srđan Hofman, appointed a man he trusts on this position with the task of continuing recent practice of organization management.
Non-Transparent Cash Flows
In addition to non-transparent and damaging reductions (for authors) of the total fund for royalties’ distribution caused by unnecessary costs (for example, lost lawsuits, penalties or unfavorable contracts) and allocations through the controversial Fund for Cultural Giving, a number of suspicions are caused by the uncertainties from financial statements on SOKOJ operations.
Hence, differences in payments of SOKOJ towards certain foreign associations and amounts such associations report in their financial statements as received from SOKOJ cannot be explained and are very peculiar.
For example, in accordance with data from SOKOJ, this organization paid EUR 13,000 in 2017 to its Slovenian partner SAZAS, while the Slovenian reports state that EUR 10,000 was collected from SOKOJ. In case of Croatian HDS-ZAMP, SOKOJ claims that in 2017, somewhat over EUR 220,000 was paid to this association, while the Croatians, in their statements, report receiving EUR 186,000 from SOKOJ. Even if it turns out that these deviations might represent the difference between net and gross amounts (reduced by tax deductions), it turns out that in case of Slovenia the taxes amount to 30% while in case of Croatia taxes include merely 18% even though the tax rates of these two countries are almost identical.
Equally controversial is the item in business expenses of SOKOJ presented as depreciation of property and equipment that amounted to RSD 8,000,000 (almost EUR 70,000) in 2017.
Also, there is some unclarity about the item software depreciation that cost the authors, through distribution reduction, in 2017 only, somewhat over RSD 11,000,000 (over EUR 90,000). However, stated depreciation of software is not included in software maintenance costs for which SOKOJ paid Belit approximately RSD 23,000,000 in 2017. Since the depreciation of property, plant and equipment represents a bookkeeping item and not a real annual cost, it is not clear how can SOKOJ present this item as a real cost, while the report submitted to the Members Assembly does not show for what purposes that money is used later on.
A significant controversy is also caused by the item related to court and legal fees that amounted to over 40 million dinars in 2017. Since SOKOJ wins in the majority of court cases it is involved in, collecting interest in addition to basic debt, it is very difficult to explain why the item of court costs is not presented on the income side since they are collected after disputes won. Presenting this data would be significant for members for one more reason: this would enable the analysis how much regular collection, as the result of work of sectors in SOKOJ, participates in total income of SOKOJ, that is, how justified is it for authors to allocate large sums of money for the operations of these sectors.
According to stated examples, tens of millions of dinars per year taken from the authors are spent in a non-transparent manner leaving space for fraud and extracting money out of author’s pockets, which was stipulated by a number of members of this organization in the past, with no results.
Abuse Culmination in Managing Board Members Appointment
Members Assembly of the Organization held in May during which a scandal broke out regarding the appointment of members of the Managing Board showed that something was very wrong with the operations and relations within SOKOJ. In order to control this part of the organization, the current management headed by the Director Aleksandar Kovačević directly violated the Statute of the organization during the election process and MB member candidate’s proposal process.
Due to irregularities that occurred this election was cancelled, and the entire business was seemingly resolved on the extraordinary Assembly held in August 2018. As in all other cases, the costs arising from the intentional omissions of the organization’s management were paid out of author’s royalties, damaging the membership of the organization.
Serious violation of Statute and other acts of the Organization occurred on the aforementioned Assembly, held in May this year. Additionally, Director Kovačević, as the responsible person, failed to notify the MB and the Assembly on the existence of conflict of interest (subsequently determined by the Supervisory Board), in case of one MB candidate. Moreover, Kovačević openly promoted the acceptance of the disputed candidate and afterwards, the appointment of the candidate that was in conflict of interest and did not meet the formal conditions for work. In this manner, the Director provided false information to the members of the Assembly based on which they adopted a decision that was subsequently annulled and resulted in calling a new, extraordinary Members Assembly which unnecessarily increased the costs of SOKOJ’s operations.
It is clear, from the appeal sent to competent bodies by certain members of the Assembly of SOKOJ, that irregularities referred to the violation of regulated procedures regarding candidate determination and voting on irregular ballots. The objection primarily referred to the invitation of the company “Gold Diginet”, against all rules, to the Members Assembly and then, two days after, its appointment to the MB, despite the fact it was well known that this company had never been involved in music publishing and that, at the time of appointment, it was in conflict of interest.
MB was obviously under instructions of the management to decide on adding “Gold Diginet” to the list of members of the Assembly, even though the MB does not have that authority according to the Statute or Rules of Procedure of Members Assembly, it can merely record membership termination.
Also, the decision on placing the company “Gold Diginet” on the list of members of the Members Assembly was adopted after the expiration of deadline for membership candidacy in the MB, resulting in “Gold Diginet”, at the moment of candidacy conclusion, failing to meet the basic formal condition for MB membership since it was not even a member of the Assembly. For all those reasons this company could not have or should not have been accepted or placed on the ballot.
The main problem in this case is that the members of the Assembly were purposely mislead by the management that the candidacy of “Gold Diginet” was in accordance with the acts. Due to the fact that a person that is in conflict of interest was placed on the ballot against all rules, as a candidate, lead to the repetition of elections for one MB candidate even though, as stated in the rules, entire elections should have been repeated.
After some members, primarily publishers, appealed to aforementioned irregularities and since this appeal reached the Intellectual Property Office, management of SOKOJ was forced to annul the appointment of “Gold Diginet” and select a new MB member on the extraordinary Assembly. Even though this action impacted a serious blow to the organization’s reputation and additional money from the authors was spent for the calling of the extraordinary Members Assembly, the responsible ones for these intentional omissions did not suffer any sanctions or consequences.
According to some interpretations the background of the entire story is the intention of the Director at that time, Director Kovačević, whose mandate was expiring at the end of this year, to secure the appointment of people under his control to this function by selecting close and loyal individuals in the Managing Board, that appoints the Director of the Organization.
Rulebook on Conflict of Interest was adopted in 2008 with the purpose of disabling the composer Miodrag Ilić (also known as Mile Bas), the dismissed President of the Supervisory Board, to become a member of the Assembly. Selective application of this Rulebook is shown in the fact that the current calling of the Managing Board includes a number of members that are in conflict of interest. According to data publicly available on website of these associations and companies, Nikola Čuturilo is a member of the Managing Board and the same time a member of the Rock, Jazz and Pop Music Association, that is the beneficiary of SOKOJ, Milan Đurđević is the Director of the Valjevo Festival, Ivana Stefanović is the member of the Board of Directors of Bunt Festival and the owner of the Center for Music Action, and Vlada Maričić is the Director of the Šabac Festival. Supervisory Board of SOKOJ did not wish to review these allegations which clearly speaks of the intention to have obedient authors sitting in SOKOJ’s bodies.
Managing Board of SOKOJ approves fund allocations from the Fund for Cultural Giving, formed from the assets of all authors. Center for Music Action, owned by Ivana Stefanović is on the list of approved projects, each year. Even if the Center for Music Action was not a beneficiary, this is a clear conflict of interest where Mrs. Stefanović approves funds from mutual funds to herself.
Distribution of Author’s Fees Based on Illegal Certificates of Broadcasters
A large scandal related to the work of SOKOJ broke out when it was discovered that payouts to authors were executed based on broadcaster’s certificates, regardless of playlists, whose appearance, manner and period of delivery is prescribed by the Law on Copyright and Rulebook on Music Playlists of SOKOJ.
Provisions of the aforementioned Law and the Rulebook clearly prescribe the obligation of the broadcaster to notify SOKOJ, in clearly defined time periods, on the frequency and volume of use of protection subject, as well as other circumstances relevant for fee calculation and distribution. According to these provisions said data is submitted once a month, within 15 days from the start of use of protection subject, in a manner and in form as determined by the general acts of the organization.
Evidence on serious irregularities in this segment of operation appeared when certificates from broadcasters leaked from the organizations that were used to collect royalties from SOKOJ, instead of designated playlists. Thus, certain authors collected their fees based on certificates that, even though produced with the heading of SOKOJ, bore signatures and stamps of the Radio and Television of Serbia, issued with one-year delay. Certificates issued during June 2017 state that they include data on broadcasting not included in regularly delivered music playlists for 2016. According to data from certificates, they were issued to be used as financial data for royalties’ distribution, therefore, as financial documents.
This practice was confirmed by the Author’s Council in its report for the period June 2017 – May 2018, stating that a designated commission determined that the increase of royalties of certain authors is a “direct consequence of the fact that the broadcaster (RTS) failed to deliver data on broadcasted works in given periods, but with significant delay”. This was the reason payments to these authors included period of several years! Despite of determined irregularities, even serious suspicions that these were forged financial documents, responsibility for omissions occurred was completely missing.
Director Avoids Responses
Despite numerous documented examples of serious irregularities and the promise of the Director Aleksandar Kovačević, the Antidote research team never received responses to the questions sent to the management of SOKOJ until the moment of publication of this article.
After several conversations over the telephone with Director Kovačević and his constant avoidance and prolongation of the term of proposed interview, the Antidote research team sent an e-mail including questions for the Director of SOKOJ with a request to send the answers back by 01 October. Justifying himself with his busy schedule due to a two-week business trip to Slovenia, Director Kovačević asked for the prolongation of the deadline until Monday, 08 October, to which the Antidote staff consented despite the fact that this delay caused serious revision of plans and delays of work on all other projects.
Instead of promised answers from Mr. Kovačević, Antidote received an e-mail from Jelena Sablić, professional associate of the Communications Department in SOKOJ, proposing a new, several week-long delay related to the period of receiving required answers.
“If you agree, we can schedule a meeting by the end of next week or from 22 October onward. We are currently in the process of ISO certification and for that reason we cannot offer an earlier term,” read the mail sent to the Antidote news staff by Jelena Sablić.
Since this proposal meant a direct violation of the promise given to us by Director Kovačević, and due to the circumstances that would additionally delay other important projects of Antidote for several weeks, this was the offer we could not accept. In the response of Antidote reporters Director Kovačević was left with the option to submit the required answers until the moment of publication of this article, which unfortunately did not happen. Instead of responses, on 17 October 2018, members of the organization were notified that Director Kovačević irrevocably resigned and that his position was taken by the temporarily appointed recent Operations Director Dejan Manojlović, a person brought to SOKOJ in violation of all procedures and placed on a high-ranking position by Kovačević. Manojlović was appointed to the new function at the proposal of the President of MB Srđan Hofman, also, a long term SOKOJ official and a person very close to former Director Kovačević.
In accordance with data researched by the Antidote research team, the newly appointed Acting Director of SOKOJ Dejan Manojlović left SOKOJ in 2014 by mutual agreement due to inadequate performance as evaluated by the Director, Deputy Director, President and Vice-President of the Managing Board. Current Acting Director spent the first 6 months in SOKOJ as the consultant charging SOKOJ several thousands of euros for employee performance evaluation and document preparation activities. Evaluations he provided were the basis for suits of certain employees, while a new consultant was hired for internal documents and paid for the same activities Manojlović failed to perform.
The most interesting part of the biography of the new Acting Director of SOKOJ is his suit against Director Kovačević for missing payments of all agreed items as stipulated in the employment contract termination by mutual consent. To put things into perspective, the consultant that did not complete his job, then the assistant Director of SOKOJ that did not perform, followed by the consultant that again, did not perform and to which Director refused payment, became the Acting Director of SOKOJ. Person threatening to sue SOKOJ to the court and the Intellectual Property Office now represents the interest of authors, from which he took large sums of money in 6 months. Our sources claim that Manojlović is missing only five years of service until retirement which is, as estimated by the former Director Kovačević enough time to rehabilitate himself and return to the position of Director from the current position of advisor, to which he was appointed after the irrevocable resignation.
Our sources point to the fact that Manojlović came to the position of Acting Director from the position of Operations Director of SOKOJ, which is a function that did not exist in the systematization of jobs before he took it, it was created only to employ him, as agreed with the Director at that time, Kovačević.
Persons Close to SOKOJ Confirm Irregularities Allegations
Unlike former Director and his PR advisors, several people close to SOKOJ consented to responding to questions of Antidote reporters, while the employees of SOKOJ refused to do so, frightened by the possible retaliation of the management. Reporters of Antidote were explained that the Director adopted the Trade Secret Rulebook for the purpose of concealing information about operations of SOKOJ and authors, while the Rulebook on Work Discipline introduced severe employee penalties.
People who decided to talk to us confirmed the accuracy of statements of the former MB President Petar Stokanović. First, they stipulate the fact that SOKOJ lost a multi-million dispute with the largest cable operator SBB in a mysterious way. Even though the exact amount taken from SOKOJ members remained a secret until present time, the sources from this organization state that, in this case, SOKOJ’s lawyer for the period of last ten years Milutin Trninić was pronounced a guilty party only after he accused Dragana Kovačević-Mihajlović for the loss of dispute with SBB, SOKOJ employee, for which our sources claim was in an emotional relationship with Director Kovačević. She, according to lawyer’s claims, made an error in work by not sending a letter she was supposed to send, which lead to a turn in the proceedings. Even though the lawyer designated this person as responsible no disciplinary action was initiated on that account, nor were his claims investigated. Our sources point out that the statement of the lawyer should have been taken more seriously if we know that he never lost a significant dispute in which he represented SOKOJ.
SOKOJ employees also testify that Dragana Kovačević-Mihajlović openly threatened the aforementioned lawyer that she will throw him out of SOKOJ. Owing to her relationship with Director Kovačević, for the last 4 years, she employed her maid of honor, her husband’s sister and two friends, testifying that, by the will and consent of the first man of the organization, nepotism became a regular occurrence in it. In addition to that, she threatened the aforementioned lawyer that she will “not rest until he is no longer a lawyer of SOKOJ” which became true in a short time. The same happened to employees that were fired a few months ago, because they were involved in conflicts with this person. She repeated a similar sentence “I will kick you out of SOKOJ” and the Director ordered the Operations Director to find a model for firing, so an employee was fired for missing to report a cigarette break in front of SOKOJ building. Additionally, this employee was rewarded several times during each year with the 13th and 14th salary, and of course, a private mobile phone, paid by SOKOJ.
An important question to which Director Kovačević did not respond is why wasn’t SBB sued as soon as they stopped paying fees, that is, as soon as it was determined they were submitting false data, instead, we waited for a significant portion of the debt to become subject of statute of limitations? Even though the responsibility for the statute of limitations was never determined it is very conspicuous that Dragana Kovačević-Mihajlović, coordinator for operations with SBB at that time, found herself in the middle of this case as well.
Second large case pointed out to by the senders of anonymous letter to SOKOJ members and the former President of MB, is the case of Belit contract and software being the subject of that contract. They stipulated the fact that Director in power at that time did not exercise the provision of the Belit contract enabling the engagement of a third party, at Belit’s expense, to complete the software. Responsibility for this error was not determined, as well, disciplinary action against responsible persons was not executed thus, sanctions against responsible persons were not rendered. At the same time, SOKOJ has been paying approximately 14 million dinars annually for software for a period of 8 years, even though it is still not done.
When it comes to a scandal with the election of new members in the MB, when a member not meeting formal conditions was elected in this body (at the moment of candidacy was not a member of the Assembly) and for which it turned out later that was in the conflict of interest, our sources claim that all the decisions were made by the Supervisory and the Managing Board. Based on this the Director suggested to the Assembly to accept and vote for “Gold Diginet”, a company not subject to lawsuit despite the fact it is not paying fees to SOKOJ. Just as a reminder, in the case of “Gold Diginet” candidacy, there was a time gap between decisions for which the time of list announcement, as the conditions of its validity, was not fulfilled, and there was an absence of competence for the list amendment for those parties amending it.
Regarding the case of payment of royalties to certain authors based on written certificates of broadcasters assigned to their names and delivered with significant delay and in violation of the regulated form, this occurred based on the distribution plan voted by the campaigning authors related to RTS (broadcaster issuing these certificates). No explanation by the SOKOJ’s Director was given to the question of fairness of distribution if anonymous authors, based on aforementioned certificates, received the largest amounts, and a peculiar circumstance that many authors experienced a large increase of fees after entering SOKOJ’s management bodies. Sources from the organization point out that this happens because such authors enter the Professional Sector and resolve their private issues with broadcasters, excluding the global effect on all organization members.
A large issue in the operations of SOKOJ represents the collection of income from digital services (Deezer, etc.) which, as the management explains, happens due to a lack of experts in this area and lack of developed file processing software (Belit). This, however, is a poor explanation for the fact that in the 2015-2016 period YouTube service broadcast was collected, which was the result of work of the closest associate of Kovačević, which was removed from his job as a reward for good work, while the same duty was entrusted to Dragana Kovačević-Mihajlović in order to increase her salary.
Responsibility of the Director also includes significant omissions in the operation of the organization by avoiding payment of VAT during the course of several years, in accordance with the law, which resulted in a visit from the tax police that detected serious faults causing several criminal charges brought before the competent prosecutor’s office against Director Kovačević that, as much as we have learned, have not been processed yet.
It is also peculiar that for the last 4 years, Director Kovačević dismissed 8 managers, some of which, being long-term associates and employees of the Organization, left SOKOJ due to mobbing and pressure from the Director. Two of the closest associates of Kovačević for a number of years sued him for mobbing.
Also, there are three Directors in SOKOJ now, which was never the practice of an organization existing for 60 years, with the goal of creating a triumvirate, whose members will rotate from mandate to mandate and cover each other which is, evidently, the practice that started with the resignation of Director Kovačević and appointment of the recent Operating Director to the Acting Director position.
The information that SOKOJ, due to the administrative errors of its employees paid approximately 4 million dinars as per verdicts issued by courts causes significant concern. Not a single disciplinary procedure was initiated due to such errors, neither were the authors compensated for the damages suffered. It is very strange that the membership of the organization was never notified on this type of unnecessary expenses. The reason for this practice is clear: if the Director is responsible, the issue is covered up, and when an employee is guilty, severe penalties are implemented.
Finally, people that spoke to us pointed out to the complaints of a number of authors due to delays lasting several years related to royalties from abroad. According to their statements, this happens since the automatic data processing was not developed which was the task of Belit software, hence, calculations are done manually. However, interest received by SOKOJ related to author’s fees, that are paid with delay due to alleged technical reasons, are presented as income in the financial statement. So, SOKOJ is collecting interest on the money of domestic authors and it distributes it to other authors, including foreign ones which represents just another form of manipulation with the money of those whose rights SOKOJ was supposed to protect.
The Belit Case: Contract for Sucking the Money Out of SOKOJ
Pursuant to the contract from 19 March 2009, signed on behalf of SOKOJ by the Director Aleksandar Kovačević while Dušan Poznanović and Dragan Kaslica signed on behalf of Benet Kernel, within 24 months, company Belit was supposed to develop a software that was paid EUR 510,000 plus VAT by SOKOJ, in accordance with this contract. This contract is registered in SOKOJ under 02-4064/1 and its content is protected by the trade secret status.
According to the sources from the management bodies of SOKOJ to which this document was available, Article 6 of the Contract stipulates that if Belit performs incompletely or with a lack of competence, SOKOJ is entitled to engage a third party for the completion of this task, at the expense of Belit as the contractor. Also, the same Article of the Contract foresees that in case of violation of the completion deadline for each individual phase, Belit shall pay penalties to SOKOJ in the amount of 0.2% of contract value per day, for each day of delay, in a maximum period of 30 days from the planned deadline. In case of violation of the additional period of 30 days, SOKOJ is entitled to contract termination, damage compensation and lost profit reimbursement.
However, despite multiple violations of deadlines envisaged by this Contract the Director of SOKOJ never activated protective clauses of the Contract in order to protect the interest of the organization he manages.
Article 9 of the Contact prescribes that companies Belit and Benet Kernel retain all copyrights related to software developed with the obligation to withhold the software from third parties without a written consent of SOKOJ. This provision was fully acknowledged only with the signing of the accompanying Software Maintenance Agreement on 12 April 2012, determining the price of software maintenance and upgrade, as well as the introduction of new features. These services were estimated at a price that SOKOJ pays on monthly basis, and the amount is calculated using the percentage of the maintenance base – that is, estimated software value.
This value was EUR 510,000 in 2013, reaching EUR 701,000 in 2017 by way of “engaged development”. According to the Maintenance Agreement and Annexes 1, 2, 3 and 4, SOKOJ was obligated to pay 1.67% for software management per month, which amounts to 20.04% per year. Thus, in the first year of maintenance (2013/2014) SOKOJ allocated EUR 8,500 per month for software maintenance (plus VAT), that is, EUR 102,000 per year (EUR 122,000 including VAT). Due to annual value increase of the maintenance price calculation base (that reached EUR 701,000), software maintenance rose to the monthly amount of EUR 11,700 in 2017, that is, EUR 168,000 per year including the value added tax.
Our sources claim that the most dangerous item in this Contract is the fact that Belit retained copyright over software making it impossible to engage another company for software maintenance, since this would result in copyright infringement. Such position provides a strong blackmailing potential for Belit, related to the imposition of the maintenance price and constant extension of the Maintenance Agreement. This is a minor issue, however, compared to the problem that could arise in case of bankruptcy of the Belit company as the owner of the copyright on software, which would cause the end of updating and any software maintenance, and SOKOJ would be forced to pay enormous sums to develop a completely new software.
Hence, in this case, the organization involved in copyright, deliberately or accidently, failed in the area of copyright for an overpaid software.
Violation of Rights of Small Authors
Producer Ivan Obradović, from the perspective of an author whose interest SOKOJ should primarily protect, says that the biggest problem in the operation of this organization is the absence of digital playlists.
“Despite of constant announcements and promises the fact is that the management and professional sectors of SOKOJ, alongside the large broadcasters, for years now, are not able to implement the application of digital playlists. Absence of results in this area leads to a suspicion that it is not in someone’s interest to establish a mechanism for precise and accurate recording of the number of performances of musical works. It is obvious that there is a link between certain TV editors and some composers in which the false presentation of broadcasting impacts the distribution of royalties resulting in profit at the expense of other authors. Also, it is obvious that there is a cartel within SOKOJ of individuals with their own people in the Managing Board and other managing bodies of the organization. We are witnesses of a number of complaints on abuse and conflict of interest. On the other hand, certain composers do better on TVs owing to their personal contacts with editors and owners of these TV stations,” says Obradović related to the issues authors face on daily basis.
He points out that there are only a few authors that receive enormous annual royalties while others are left with crumbs. “I think that the real status regarding the number of broadcasting of compositions does not adequately reflect the distribution of royalties collected. The problem is that the playlists are inaccurate, they can be forged, there is no electronic monitoring. For example, I know of a case of a friend of mine that received a couple of hundreds of euros because his song was allegedly played over 1,000 times on a local station which is impossible in reality. On the other hand, I received a whopping 1.000 dinars for one year for a song that was playing on TV and radio stations all day long for a certain period,” says Obradović and adds that small authors whose production houses have lower annual turnovers and whose rights are jeopardized the most, are particularly under the impact of such practice, which is an anomaly that cannot be tolerated in the system of protection and exercise of copyright and neighboring rights.
“Discrepancy between the amount received by backup singers from the Organization for Collective Administration of Performer’s Rights (PI) and me as the author from SOKOJ is unexplainable. Just to remind you, the distribution is performed in ratio of 50 percent for SOKOJ and 25 percent for PI and OFPS publishers. So, on the path from those that pay royalties to the author, doubled amount compared to the performers and publishers in the SOKOJ final distribution becomes lesser, which speaks of the amount of money lost from the broadcaster to author in SOKOJ,” pointed Obradović out.
He also reminded that a large problem occurred upon the conclusion of the agreement with a partner organization from Germany GEMA that was in dispute with the YouTube service at that time. Because of that dispute, in which SOKOJ was involved with by reckless and wrong business decision of the management, videos of Serbian authors were blocked on the German market which is the most profitable market for our authors. “We had a problem in explaining the authors why their songs were banned, that the problem was not with us, but a result of the dispute between YouTube and GEMA. Huge money was irreversibly lost because of that,” says Obradović and adds:
“Big problem for authors is the fact that our singers-performers, when they perform abroad, in Germany, Austria, Switzerland, do not report their shows, as a rule, to avoid taxes. In such situations, their fees are paid below the counter and the authors suffer damages because the entire amount is left to the singer. And this is probably the largest source of income for singers. Everything earned on the domestic market is small compared to the income they make on their performances abroad.”
Young producer from Belgrade finally points to the problem with Belit software. “We had a big problem with the registration of works. I had to register my work twice, and subsequently it turned out it was registered already,” concluded Obradović his interview with reporters from Antidote.
SOKOJ Abuses its Monopolistic Position on the Market
When it comes to controversies related to SOKOJ’s operations, certain authors-members and experts familiar with this issue agree that the causes lie in the lack of responsibility of the management and non-transparency in the business activities of the organization.
Ognjen Uzelac, Director of “Fair Share” and a court expert for copyright and neighboring rights, points out that SOKOJ is not an organization in the system of protection, but in the system of exercise of copyright. “Legislation, judiciary and administration are responsible for the protection of copyright and neighboring rights, and individual holders of such rights and their organizations for collective management of copyright and similar rights are responsible for its exercise. In the system of copyright exercise, SOKOJ is involved with the exercise of this right in a collective manner. On the market of collective management of copyright and neighboring rights, SOKOJ holds a factual monopoly that, since 2009, without any practical use, became legal. Instead of doing everything to prevent possible abuse of monopoly of collective organizations, the state did everything to remove all competition from SOKOJ and other collective organizations, even legal and loyal one. Thus, with even potential competition missing, SOKOJ is doing nothing to improve services rendered to the holders of copyright and neighboring rights and their users. On the contrary, the system of collective management of copyright and neighboring rights, that is, the monopoly of collective organizations has been abused to that extent that copyright and neighboring rights and their market are questioned,” said Uzelac in his statement to Antidote.
Further, he pointed out that SOKOJ should have only one function, “to promote efficiency, that is, to exercise copyright and neighboring rights more efficiently than beneficiaries and individual holders, for their account, regarding users, which is why the market efficiency should be the only problem of SOKOJ.”
“In practice this means efficiency in contracting the usage of works from SOKOJ’s repertoire, recording of usage, fee collection and its distribution to the holders of rights in accordance with the real use of their works and the subject of protection of neighboring rights. In SOKOJ’s operations, everything stated represents a significant problem for a very long time, since the dissolution of the Socialist Yugoslavia till present times. Repertoire of SOKOJ is unknown to its users, the obligation of recording the use of works has been completely and legally assigned to the user, forging data on usage, which is a key issue for the distribution of fees, is regular, management and control of business activities of SOKOJ by its members practically does not exist. The result of all aforementioned is the fact that the operations of SOKOJ are reduced to a systematic ravishing of money from the users and mutual pillage in distribution,” Uzelac pointed out.
He said that the business of SOKOJ is characterized by the monopolistic position on the market of exercise of copyright and neighboring rights in a collective manner, abuse of this monopolistic position towards holders of rights and beneficiaries, bad management, absence of proper control, lack of expertise and corruption of state administration. Specifically, Intellectual Property Office “should be named Office of Intellect Insult and Property Theft.” Uzelac says that there is a number of issues outside SOKOJ that should be resolved simultaneously in order to resolve the SOKOJ issue within this organization.
“SOKOJ resists anything that might jeopardize its existing monopoly, by violating domestic and EU regulations as well as good business practice of collective management of copyright and neighboring rights of developed markets. The application of the Directive on Collective Exercise of Copyright and neighboring Rights to the full extent would surely clearly present the terrifying scale of non-functionality and abuse of the system of collective management of copyright and neighboring rights. This is why SOKOJ and other collective organizations, in cooperation with their mentors from the Intellectual Property Office, that propose laws from the area of copyright and neighboring rights to the Government, will try to take from the Directive only those parts that will not endanger current criminal way of work of domestic collective organizations and present that as adopting the solutions of the European legislation,” says Uzelac and adds:
“More or less, each Members Assembly of SOKOJ is both tragedy and comedy show where most of the present members, that are scarce compared to the total membership, support, that is, provide “legitimacy” for the decision or organization’s management. The decisions are previously aligned and adjusted to the interest of certain interest groups that abuse SOKOJ in this manner for personal unfounded enrichment before the management of SOKOJ proposes them to the Assembly for adoption. This is the responsibility of the Intellectual Property Office, competence of which includes the supervision and control of operations of collective organizations.”
Well Established Machine for Swallowing Author’s Money
Famous composer Miodrag Ilić, owner of the record company “Studio MMI” says that the method of management of SOKOJ and numerous abuses in the operation of this organization represent the largest obstacles in the protection and exercise of author’s rights.
“When we are discussing SOKOJ as the organization for the exercise of copyright, we can agree on the fact that it has mutated into a machine that swallows the money of authors in Serbia. Real authors composers are practically gone from the management of SOKOJ. ThE power was taken over by arrangers and song writers controlled by the director and people who have been sitting there for decades, faking work and spending money of authors. For example, you have Srđan Hofman there, a man who hasn’t written a single note in his life, to the best of my knowledge, but, within the organization of authors, decades back, for his work in the management bodies and donations, he took more than any author,” says Ilić.
He specified that there is a number of ways to steal money from the authors. “One of their favorites is the competition for project donations, which is illegal. I, as an author, never signed an approval to share my money with anyone. SOKOJ is not a cultural and artistic community, nor a foundation, but a professional association with precisely determined mandate to collect and forward money earned by the authors,” says one of the most renowned composers of folk music.
Ilić says that nothing is transparent in the operations of the organization, that the practice of signing secret contracts is a well-established practice (for example, with Google and YouTube), with non-disclosure clauses and that the complete calculation of fees, as far as he knows, is moved outside SOKOJ. He estimates that SOKOJ takes a huge percentage that exceeds legal limits for its functioning and unnecessary costs out of author’s money by far, even though official reports state that such costs amount to 20% of the totally collected fee fund.
Ilić specified that even the Intellectual Property Office rarely acted regarding supervision over SOKOJ, justifying is passivity with a lack of authority and acting mechanism. “Autentika website includes an extensive documentation of items reported to the Office, but they were left without response. But the fact is – our money remains in their hands and does not reach its legal owners,” detailed Ilić.
He added that RTS also participates in the violation of copyright. “SOKOJ should pay the money to authors based on playlists. A couple of years ago certain authors started bringing certificates from RTS on alleged broadcasting, based on which they received tens of thousands of euros, taken from the fund that belongs to all authors. SOKOJ is managed by a team of people led by Director Kovačević, and I am afraid that, in addition to him, there are many accomplices including the company that performs calculation and payments. They control our money, criminal charges were filed against them as well as charges submitted to the Intellectual Property Office, and every single one of them finished buried under paperwork with no real resolution,” says Ilić and continues:
“Personally, I would like to know where my money is, and all that belongs to me, by law. I think that all of this is controlled by Director Kovačević, unless there is someone pulling his strings as well. SOKOJ will not operate for the benefit of authors until the Statute of the organization becomes smaller in volume than the Constitution. This Statute has a million rules instead of having only one article – that it is an organization, authorized by the state to collect the money from users on behalf of authors and to distribute this money to the authors in accordance with the number of broadcasts, and that is it. In practice, the management of SOKOJ firstly allocates money for their commissions, costs, donations and God knows what and distributes what is left to the authors.”
Speaking of the possibility to change this practice after closing the negotiations for Chapter 7, Ilić reminded us that two years ago the first debate on Chapter 7 was held in the Chamber of Commerce, related to intellectual property. “There were experts and officials there, among the speakers and it was literally said that the European Directive is not a Holly Scripture and that it can be applied in a number of ways and I think everybody got the message. This is why I do not expect drastic improvement during the negotiations within Chapter 7, due to the obstruction coming from the system itself,” stated Ilić.
In addition to system failures he pointed out to problematic functioning and issues in the structure of SOKOJ’s management bodies. “At the time I was the President of the Supervisory Board I did not let them scare me or corrupt me. I reported everything to the police. There were so many irregularities committed without restrains, since they knew nobody was controlling them. After three months of work I determined that Kovačević spent over EUR 300,000 in violation of rules and everybody from those departments jumped to his defense. This shows that authors allowed people who are not authors to take control over their money and their rights,” stated Ilić.
He feels that the only solution to end the current practice is the change in the system itself. “I am including the prosecutor’s office there, that does not process the criminal charges, which is why the Director laughs when criminal charges are brought against him. The only thing they are sensitive about is the public display of truth. The moment their names are mentioned in the evening news they will start to do their jobs. Right now, people in the public prosecutor’s office and supervisory bodies for collective organizations receive very good salaries and they have no interest in making waves. The showbusiness and property of authors reach millions of euros and the Government does not understand, not only that its legal protection is required, but that these are its authors that have no one else to protect them. I am afraid we will not have a solution for this situation until the Government starts doing its job,” warned the famous composer Miodrag Ilić.
A number of testimonies on irregularities in operations of SOKOJ, as well as documentation confirming it clearly point out the fact that this organization, contrary to its basic function, occupied the central place in the system of usurpation and prevention of exercise of copyright and neighboring rights. Rejection of Director Kovačević to respond publicly to legitimate questions asked by the authors, members of the organization, shows that matters are not so shiny and bright, as they are presented in the official forged reports the management of SOKOJ pushes for approval and verification by the Members Assembly. Such conclusion can be derived from the situation that most of the members of the organization and employees of the organization, even though they agree when criticizing the work of the current management, refuse to talk about the SOKOJ situation under full name fearing retaliation.
Due to all stated omissions of the management of SOKOJ and immeasurable damage caused to the authors, the upcoming harmonization of domestic regulations with the EU Directive, within the negotiations for Chapter 7, will represent an ideal opportunity to remove a series of detected system defects that brought us to the current position. According to people interviewed by Antidote, modernization of the legislative framework, with unavoidable cancellation of monopoly of organizations for collective management of copyright and neighboring rights, with diligent application of supervision and principle of liability in work of mentioned organization are the only way to stop current negative practice and to put things in order.
In parallel with the regulation of the system for the protection of intellectual property rights, the authors themselves need to fight for staff changes in SOKOJ and improvement of relations within this organization. The role SOKOJ will play after the liberalization of the market and cancellation of monopoly it currently holds will impact the resolution of many issues mentioned. If the majority of authors continue to live in belief that SOKOJ mutated from the organization for exercise into the mechanism for usurpation of rights and money of authors, they will seek protection in other organizations and companies specialized for the protection of these rights. Finally, with the disappearance and migration of the larger portion of distribution funds, even those members of SOKOJ that profited in the existing circumstances will no longer have the interest to remain in this organization, which is why the oldest association of music authors in this territory will disappear from the scene and remain a part of history as an example of how, due to organizational defects and lack of readiness to change, an organization can self-destruct from within.