Monday, March 03, 2008

The Copyright Board Says "No" to Record Industry Collectives for Interim Tariff

The Copyright Board has just delivered a very interesting decision on February 29, 2008 concerning an application for an interim tariff by the recording industry while it pursues its quest for a permanent tariff said to be worth up to $50 million a year in additional and strongly resented and resisted costs to Canadian radio stations. According to the Canadian Association of Broadcasters (“CAB”), “The record labels are demanding an additional payment close to $50 million annually for the right to make technical reproductions that are secondary to playing the music over the air – a right for which radio broadcasters already pay.”

The proposed tariff would cover the “ephemeral” recordings necessary for the operation of radio station, since the practice of live to air broadcasts with “disc jockeys” operating their own turntables has long been obsolete for a long time. Radio stations have moved on to automation and computers to store and play the music, so they can broadcast it efficiently. The record industry now wants a very substantial tariff for this practice.

This is in spite of the fact that there is an explicit exemption for the practice of using ephemeral recordings for broadcast purposes in the US legislation. The legislation that effectively deprives Canadian broadcasters of the “privilege” (as Bill Patry calls it in his treatise) or “exemption” long enjoyed by their American counterparts and which has enabled and will enable the collection of tens of millions of dollars in royalties mostly for the benefit of American rights owners was one of the more astonishing results of the backroom activity in the 1996-1997 Committee hearings on Bill C-32. The so-called “commercially available” exception to a number of apparent exceptions and exemptions, including the ephemeral rights exemption, rendered them apparently meaningless. But that is now the law in Canada, at least as the Board has construed it ... so far. The owners of copyright in “works”, i.e. songs, have been collecting millions for the “ephemeral right” since 2003. Now, the record companies want in on the action, and want about five times as much as the composers, authors and publishers have been getting.

Back to the Board decision of February 29, 2008. The Board decisively rejected an application for an “interim” tariff by the record industry, i.e. a tariff that would kick in while the hearing process and potential judicial review unfolds (which could take years). The record companies apparently claimed though their collectives (AVLA and SOPROQ) that they needed such a tariff to fund their application for a permanent tariff, that they had no revenues from other tariffs, that the interrogatory process would be “burdensome” for them (one is “shocked, shocked” to hear such as suggestion...), and a few other points that the Copyright Board clearly and bluntly rejected. Here are some excerpts from the ruling, which has a judicial-like ring to it that will be welcomed by many objectors:

[3] The application correctly states the test for
granting interim relief as the Board has
developed it. First, an interim order can be
issued as long as the main application is not
plainly without merit. The collectives meet this
branch of the test. Second, granting the
application will relieve the applicant from the
deleterious effects caused by the length of the
proceedings. We find that the collectives do not
meet this branch of the test, because the
arguments they rely on to conclude that
deleterious effects exist are irrelevant,
inapplicable to the collectives or just plain

[4] First, the collectives argue that neither has
“tariff income” to fund the proceedings. To the
contrary, we find the collectives are quite
capable of supporting the financial burden of
these proceedings. They probably have
significant licensing income. More importantly,
and contrary to what they state, they are not
without “tariff income”. They jointly receive
millions of dollars each year from the
Neighbouring Rights Collective of Canada
(NRCC) on account of the maker’s share of
royalties paid pursuant to section 19 of the Act.
They also receive 15 per cent of the private
copying levies, which also amounts to millions
of dollars. Other collectives use their other
incomes as a matter of course to subsidize
proceedings before the Board.

[5] Second, the collectives note that
interrogatories can be burdensome. That does
not help them. The interrogatory process
generally is of primary benefit to collectives;
they are more interested (and justified) in
seeking to understand the licensees’ business
model than the licensees are in seeking to
understand the collectives’ business practices.
To the collectives, the availability of the
interrogatory process is an advantage, not an

[6] Third, the fact that tariffs of first impression
often are judicially reviewed is irrelevant at
best. A certified tariff is enforceable even when
challenged, unless the Federal Court of Appeal
suspends its application.


[11] Two points the collectives raised in their
reply of December 28, 2007 merit attention.
First, they state that the application for an
interim tariff should be summarily granted
because the CAB failed to show that the
application does not meet the test for granting
interim relief. That is looking at the issue from
the wrong end of the telescope. The person who
applies for interim relief bears the burden to
show that relief is required, whether or not
anyone else objects to the relief being granted.
Second, contrary to what the collectives state,
neither AVLA nor SOPROQ “are obliged to
pursue proceedings before the Copyright Board
in order to collectively administer their rights.”
These collectives are subject to the general
regime. They are entitled to pursue licensing
deals with individual users. Indeed, in the
general regime, such agreements trump the

(emphasis added)

I cannot help but note that this is a little breath of fresh air as we await the end an extraordinarily long and drearily depressing winter in Ottawa...


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