Monday, February 20, 2012

Copyright Board Refuses SOCAN Interim Tariff Application filed June 13, 2011

The Board has on February 17, 2012 issued its ruling in SOCAN’s application from more than 8 months ago for an “interim” tariff pursuant to s. 66.15 [sic] of the regarding, among other things, User Generated Content (UGC”) online.  Not surprisingly, it rejected the application for an interim tariff for predictable reasons that include the fact that the proposed tariff departs far from the status quo, that it is quite unclear who will be liable to pay in the case of UGC, and that “SOCAN has provided no economic rationale for the rates that it has proposed.”

On June 14, 2011,I blogged about SOCAN's applicationI said at the time that:
SOCAN's proposed interim application appears at first blush to be even less reasoned and substantiated than Access Copyright's controversial interim tariff application that was approved on December 23, 2010 - just 18 hours before Christmas - on the basis of no actual “evidence”, such as an affidavit not based on hearsay that would pass muster in a court. That said, the absence of evidence and other major gaps in its case did not hurt Access Copyright - and no judicial review was sought, as I keep saying. See my blog around that time for numerous comments.
In this case, there could also be substantial legal issues involving jurisdiction and extraterritoriality, not to mention liability. And the expected legislation that will likely receive fast passage in this majority Government in the next year could profoundly affect this tariff - at least re UGC. This potentially and explicitly targets such entities as Netflix, Apple TV, Sony, Facebook, and last - but hardly least - YouTube - which is owned by Google. These are potentially fierce foes that may not be amenable to the vicissitudes of the Copyright Board process, which often include notoriously unnecessary and intrusive but still mandatory interrogatories and time frames that unpredictably range from delays of several years to extremely tight deadlines of a few days. They may not welcome an interim tariff on the basis that it “would give businesses some assessment of the royalty payments necessary to run their operations” as SOCAN’s press release suggests.
Why would any rationale entity pay potentially millions of dollars in legal fees and disbursements to be required years from now to pay large tariffs retroactively for rights that that don't even exist in the USA - and now maybe have to pay an “interim tariff’ in the meantime that may not ever be effectively refundable?

What is most interesting, however, is the last paragraph of the Board's decision which I quote in whole, with emphasis added:

[19] Finally, largely for the reasons advanced by the Objectors, we conclude that there are no  deleterious effects that cannot be remedied through the issuance of the final tariff. For one thing, the delay at issue runs from 2007 to 2012 and the matter will proceed in a few months. In the event that SOCAN makes its case and that a tariff is certified in accordance with the terms it proposed, SOCAN will receive the quantum of royalties to which its members are entitled on a retroactive basis.

It is frankly very surprising that the Board has apparently already decided in advance that this tariff, with all of it uncertainties as acknowledged by the Board,  is going to be retroactive if it is eventually certified “in accordance with the terms it [SOCAN] has proposed.” In many cases, and particularly in this case where so much is uncertain, there might be good arguments against such a conclusion – or at least arguments that the retroactivity should be significantly nuanced. The fact that there has been no significant challenge to the Board’s position on its ability to impose retroactive tariffs reaching back several years does not mean that such as challenge is not possible and even viable.

There is a cite in footnote 10 to the controversial interim tariff in the Access Copyright Post-Secondary matter imposed by the Board on December 23, 2010, which was arguably quite vulnerable to judicial review, even though none was sought. The Board mentions this decision for the proposition that “the best way to achieve the purposes of an interim decision is to maintain the status quo while preventing a legal vacuum”.  In that instance there had been no tariff in place and the previous agreements had expired.

Nor is the there any discussion of whether or not the Board even has the jurisdiction to issue interim tariffs other than on terms identical with a previous about-to-expire tariff. Either nobody raised the issue – for which there are good arguments – or the Board considered that it was unnecessary to discuss it, given their decision to reject the application.

The hearing will begin on June 19, 2012. In the normal course of events, a decision will be announced 18 months or even more from then, based upon the current and recent pendency patterns. The Board currently has two important cases under advisement from April/May and June/July of 2010.



  1. The Board didn't say that there would be a retroactive tariff. It said that IF the SOCAN application was accepted on the basis set out by SOCAN, the tariff would be retroactive. That means that the Board has to determine the validity of the tariff and the appropriate rate. Clearly if SOCAN makes its case, it gets the money. If it doesn't, it won't. This is usually how interim and interlocutary matters are resolved.

  2. Dear Anonymous at 7:18

    That's more or less what I said. I also used the word "if".


  3. Not really. You questioned whether retroactivity was appropriate even if the tariff was certified. My point is that if SOCAN makes it case, which is (a) that the application is valid and (b) that the price is right, then of course the tariff requested must be retroactive. The Board can of course disagree with SOCAN on the merits and on price. But retroactivity is a given.

  4. Dear Anonymous at 10:37

    Such a result would not be surprising but it is far from being “given”. There are good arguments against retroactivity that may, one day, ultimately succeed in the right case. This might be that case. But I’m not going to debate it any further here, especially with an Anonymous commentator.


  5. I run a gaming website based in USA that has just been slapped with a notice to pay the tariff. To my knowledge, none of the content was created by Canadians, though we have plenty of Canadians access the site. Most of the content is in the public domain and we change no fee to access the site. We are being asked to pay up to 0.8% tariff on revenues. On the surface it looks like Canada has found yet another way to put its hand out and ask others for money - much like those poor bums you see littering the streets in Toronto. While I'm all for supporting artists, something seems very very wrong here. Get your priorities right Canada.