Thursday, September 30, 2010

Access Copyright Strikes Back re Status of 99 of 101 Objectors

Here’s an update on the Access Copyright (“AC”) proposed tariff that would, if approved, result in a cost if about $60 million a year to the Canadian post-secondary educational sector. There is no such mechanism in place in the USA, where much of the money collected will inevitably end up.

Access Copyright , through its current lawyer Barry Sookman, has written to the Copyright Board questioning the status of all but two of the 101 objectors to the proposed $45 per head tariff on university students and $35 tariff on college students. It wants only to deal with AUCC and ACCC, which represent the universities and colleges, respectively. AUCC’s objection was filed by Glen Bloom, who acted for the law publishers in the CCH v. LSUC case. ACCC filed its objection itself.

AC’s letter talks about s. 68(1) of the Copyright Act and “prospective users”, in the context of why it thinks that 99 of the 101 objectors should not be permitted to participate fully in this hearing. AC fails, however, to recognize that s. 70.16 requires that:
Independently of any other provision of this Act relating to the distribution or publication of information or documents by the Board, the Board shall notify persons affected by a proposed tariff....
(Emphasis added)

This is the section that most directly applies to the Copyright Board regime under which AC is dealt with. It clearly states that persons need only be “affected” by a proposed tariff - and does not require that only the parties writing the cheques can be objectors.

It is well understood that many post secondary institutions will simply pass along onto their students all or a substantial portion of whatever costs the Board imposes. If anything, post secondary teachers and students will be probably be more directly “affected” than their institutions themselves, at least in those cases where the costs are passed along.

And there are objectors on record here that represent institutions where the costs cannot, for various reasons, be passed along and which must be absorbed by the institutions, with ever tighter budgets. Unlike AC, these institutions do not have a government conferred monopoly (the right to collective administration under the Copyright Act) to guarantee revenues.

The $60 million or so per year that AC wants to collect from colleges and universities could pay the salaries about 600 full time or or about 15,000 part time professors a year - or build a several useful buildings on campuses a year - or otherwise be used to actually improve the educational system at the infrastructural level in Canada.

$60 million a year is a lot of money, by any measure and particularly so by Canadian measures. Where the costs are not passed on to students directly, then Canadian taxpayers will absorb the costs.

It is also well known that teachers at the college and the university level have a direct stake in these tariffs, which is why the Federal Court of Appeal (“FCA”) allowed the Canadian Association of University Teachers to intervene on CMEC’s side, though for different reasons than CMEC argued, in the recent judicial review of the Board’s decision to more than double AC’s K-12 tariff and restrict Canada’s fair dealing laws, even in the light of CCH v. LSUC. I represented the CAUT in that court hearing.

Unfortunately, the Federal Court of Appeal ruled against CMEC and CAUT’s positions. Fortunately, CMEC, as the losing party in the FCA, filed a leave to appeal application in the Supreme Court of Canada yesterday, September 29, 2010. CAUT, as only an intervener, could not bring this application on its own.

CAUT’s intervention in the FCA was in anticipation of exactly what has happened, namely AC’s attempt to springboard from the unfortunate result of the K-12 decision to an even more costly, counterproductive and chilling tariff at the post secondary level.

If the Supreme Court of Canada grants leave, which we will know in about three months or so, then the Copyright Board should suspend the consideration of this tariff as well as AC's proposed $24 per FTE levy on each provincial employee pending the SCC's final judgment, which could profoundly affect the outcome of both these pending Board cases. Typically, the entire Supreme Court process takes about 18 months from start to finish.

There are 101 parties that took the time and effort to file objections here, notwithstanding that the deadline for objection fell on August 11, 2010 - a time when the university and college teaching and student communities are dispersed and virtually inactive. This deadline could just as easily have been during the normal academic term. In response to CIPPIC’s request to extend the deadline for objection, AC ironically relies on “widely read commentators” such as Michael Geist and I for the supposedly “broad publicity” given to this proposed tariff. I regret to admit that my belated post appeared just three days before the filing deadline of August 11, 2010. I don’t think that Michael posted much about it beforehand, other than to refer to my blog posting. That may have helped, since my blog has only a tiny fraction of the readership that Michael’s has.

I am pleased if my blog may have generated at least some awareness. I only wish that I had blogged earlier and more often. But it's nothing if not amusing for AC to rely on Michael's and my blogs for the adequacy of notice in this instance.

On a rather ominous note, AC also sets forth what amounts to a direct threat to objectors and interveners, namely that “Finally, it is important, in our view, that all potential objectors and interveners understand that their participation means that Access Copyright will have the right to pursue any useful information that they may possess in pursuing this tariff through the interrogatory process of otherwise”. (emphasis by AC, not HK).

Certain major collectives have successfully used the interrogatory process to drive away well intentioned and legitimate objectors ranging from individuals to major corporations (i.e. Archamault and Canoe, which are part of Qu├ębecor) by demanding answers to intrusive and arguably irrelevant questions. See here and here.

The Board has clamped down to a some extent on this practice, but arguably not far enough. The potential for misuse remains. The Board does not go as far as it should, in my humble opinion, to recognize that collectives should bear the burden of justifying a tariff - especially a new “inaugural” one - and that those affected should not have to turn themselves inside out in the interrogatory process and spend a fortune on legal fees and disbursements to fight inaugural tariffs that are usually far overreaching both legally and in quantum.

This tariff, as has been widely noted, among other things seeks to collect money for “posting a link or hyperlink” to and “displaying” a "Digital Copy". Neither of these acts involve any right that can be found anywhere in Copyright Act. If either of these acts require permission or payment, then the internet as we know it is illegal.

It also seeks to impose reporting requirements that would seem to be quite contrary to canons of academic freedom, and perhaps to Canadian privacy law itself. These and other aspects do not involve complicated facts. The issues are basically legal. They should be dealt with right away and taken off the table. This would save everyone a huge amount of time and expense.

If the Board won’t rule that such aspects of AC ‘s proposed tariff are outside of the Copyright Act and hence outside of Board’s jurisdiction, then an application for judicial review may be needed in the Federal Court of Appeal to rein in this proceeding. However, this will require a vigorous legal challenge by one or more objectors, who are more likely to be found among the 99 objectors whose status is being questioned. Based upon AUCC's letter of objection, I would predict that such a challenge does not appear likely from AUCC.

AUCC has publicly stated at a conference in Edmonton on June 2, 2010 that it had an estimate from its outside counsel that it will cost AUCC between $1.5 to $2 million dollars to fight this tariff. It has imposed a special levy on universities to cover this cost.

It would appear that that AUCC's strategy is essentially to cut down the amount rather than to fundamentally challenge the basis of this proposed tariff. However, the Board invariably cuts the amount down anyway - because collectives invariably overreach. Cutting the amount down by half or even more still means a $30 million or so hit on higher education in Canada. If the CCH decision is to be properly applied, and a full challenge mounted based on AC's repertoire and chain of title issues, as well as its lack of entitlement for "linking", etc., then the resulting tariff, if any, arguably should be nominal or even nil.

Indeed, AC has budgeted $3.1 million for lawyer and other “professional fees” for 2010 alone, a year in which there are no actual AC hearings scheduled at the Board. Even compared to the budgets of SOCAN, CPCC and other big legal spenders, that's a lot of money for Copyright Board activity.

The Board has powers that it can exercise to ensure that the public interest is protected here without imposing undue hardship on legitimate objectors. I’ve written about this in a paper done for the Law Society of Upper Canada in 2008.

Let us hope that the Board uses these powers fully and wisely in this case. I predicted a while ago that this would be the “Mother” of all Copyright Board tariff hearings at the Board. I said back on June 26, 2009:
Meanwhile, AC has budgeted an astonishing $915,000 for “Copyright Board applications” for 2009 - when there are no AC hearings scheduled. You can bet that this is going straight into the Mother of all cases aimed at post secondary copying.
Meanwhile, former U. of T. Law Dean Martin Friedland found that the largest payment to an actual individual AC creator member was $7,000 - and that tapered off dramatically and immediately to much, much less. In fact, most AC members earn at most a few hundred dollars a year. Contrast this with SOCAN, ASCAP and BMI where the top earning creators members actually do earn a lot of money - as they should.

AC currently is seeking about $80 million a year from the Canadian educational system from K-12 and post-secondary for activities that are not subject to any comparable mechanism in the USA. Count on AC’s counterpart in Quebec, COPIBEC, to add at least 25% to this, taking the amount to over $100,000,000per annum. That’s 1,000 full time professors a year. Or several univeristy buildings and schools a year.

BTW, for those with an appetite for financial statements, take at look at AC’s latest. It shows a that AC spent 23.6% of its revenues on expenses, which is arguably quite high in this day and age for a collective that has been around for 22 years. That’s up more than 5% from the previous year. And this does NOT include expenses for “Copyright Board application and development of future projects”.

Contrast this with SOCAN’s ratio of expense of expenses to revenues, which was 14.6 percent of total revenues in 2009. Or CPCC, whose ratio was 14.77% in 2009. And both of these collectives spend a lot on lawyers and other administration expenses, which are included in these percentage ratios - unlike AC.

AC is a very interesting collective indeed.

HK


2 comments:

  1. With the new tariffs I'm sure the AC expense/revenue ratio will drop. SOCAN is many times larger, which also of course explains why their creator payouts are larger.

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  2. 'management' is the end purpose of these schemes, the correct term for this is- rent seeking.
    I posit that, as income expands, costs will expand at a even faster rate.

    ReplyDelete