Thursday, October 18, 2007

The "Single Malt Tariff" - aged 12 years

Twelve (12) years is a good length of time for a single malt Scotch (or Canadian Whisky) to mature. But, it is an extraordinarily long amount of time for the imposition of a retroactive tariff. This, however, is what the Copyright Board has just done in respect of music downloads from the internet in the first scene of the latest act in the ongoing melodrama of SOCAN’s proposed Tariff 22, which was first filed in 1995. The tariff as certified will reach back to January 1, 1996 - in other words, almost a dozen years. Mercifully, the Board refrains from imposing compound interest or penalties, because, after all, the amount could not have been estimated by users. The Board states that the CAB “concedes that the Board has the power to certify a tariff that takes effect in 1996.”

There are good legal arguments that can be made against such extreme retroactivity. However, they will clearly have to made in the Courts. And/or, the Government may need to step in with regulations or even legislation.

The other key findings will also raise eyebrows.

The Board held that there is a “communication to the public by telecommunication.” This very point is now before the Federal Court of Appeal, and will be the centerpiece of the judicial review hearing that will take place in Toronto on October 22, 2007 - next Monday. The fact that there is so much uncertainty now on this issue results in part from the length of time (14 months) it took for the Board to render its ring tones decision - and the fact that the objector in that case inexplicably conceded at first instance that there was a “communication”, but has now changed its mind.

On the issue of whether there can be liability when servers are located outside of Canada, the Board apparently is once again punting that issue to another day, notwithstanding the clear finding of the Supreme Court of Canada (per Binnie, J.) that there could be such liability where there is a real and substantial connection. The Board finds that there is a “problem with this proposition” and that “The proposition also creates the possibility of a “layering of royalty obligations” which might need to be addressed in future proceedings.” (Footnote omitted - but the Board cites to LeBel, J. of the SCC who dissented). Once again, the Board seems to avoiding what the reviewing Courts - in this case the Supreme Court of Canada - have ruled. This is particularly curious, given that the Board itself said in its first ruling on this file in 1999 that “the issue of whether an entity that provides content outside Canada with the intention to communicate it specifically to recipients in Canada is communicating it in Canada remains open.”

Also, the Board (following CCH v. LSUC ) indicated that previews of music can be fair dealing, if the providers are able to show “that their own practices and policies were research-based and fair”. It will be interesting to see if the Board follows through on this user friendly aspect of the ruling in the Access Copyright file, and other instances where fair dealing could loom large.

As indicated yesterday, this covers only one of SOCAN’s shopping list of seven items, and doesn’t begin to touch such important issues of webcasting.

The amount of the tariff is significant - and bound to impact the online music business in Canada:
Permanent Downloads
3.4% of the amount paid by the consumer
Minimum fee:
1.7¢ per file in a bundle
2.3¢ per file in all other cases

Limited Downloads
6.3% of the amounts paid by subscribers
Minimum fee:
60.9¢ per month, per subscriber, if
portable limited downloads are allowed;
39.9¢ if not

On-demand Stream
7.6% of the amounts paid by subscribers
Minimum fee:
48.1¢ per month, per subscriber
My prediction is that there will be judicial review applications launched by several major parties here - quite possibly including SOCAN itself.

So, I’m calling this the “Single Malt” tariff - because of its 12 year maturation. And the fact that it deals with only a single one of SOCAN's seven proposed tariff ingredients. But the bottle, rich in flavour and generous in quantity that it may be, should not be opened yet. The Courts will likely be looking at this again, and as that great jurist Yogi Berra said, "It ain't over till it's over."


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