Thursday, April 14, 2016

Access Copyright v. CMEC re K-12 – Is it “Mission Accomplished” or "The End of the Beginning"?



I originally wrote about the Copyright Board’s February 19, 2016 K-12 Tariff decision and its immediate aftermath here. Below are some further developments.

Not surprisingly, Access Copyright (“AC”) is pursuing judicial review (“JR”, or an “appeal” in layperson’s terminology). Except for the surprising outcome that would potentially give it almost $10 million per annum based almost solely on the reproduction of “consumables” (assuming all school boards actually decide to pay – which is very doubtful - see below), AC lost badly on just about every other conceivable aspect – including some very important ones such as fair dealing, insubstantial copying, and its agency by ratification argument, about which the Board has effectively, even if belatedly, done a 180 degree turn around. Here is AC’s comparatively fulsome JR Notice of Application.

Somewhat surprisingly in view of the arguably much too high FTE rate of $2.46, CMEC, which represents school boards outside of Quebec, is not seeking JR. For those interested in Federal Court of Appeal procedure, there is no such thing as “cross” judicial review. Each party needs to launch its own JR on or before the 30 day deadline. In this case, only AC did so. CMEC (Council of Ministers of Education, Canada) will no doubt ably defend AC’s JR but has not commenced its own, perhaps for the reasons I speculate about below.

Moreover, CMEC’s counsel have now come out and proclaimed in a Lexology posting dated April 7, 2016 that
This decision represents a complete victory for the K-12 schools with respect to a number of important legal issues addressed by the Board in its decision, including the application of the fair dealing provisions contained in the Copyright Act (the "Act") to K-12 schools, the adoption of a quantitative test to determine the scope of "non-substantial" copying under the Act, and Access Copyright's ability to represent the interests of rights holders in relation to whom it has not formally entered into an affiliation agreement.

In terms of the specific rates approved by the Board, Access Copyright had initially proposed annual rates of $15.00 per student for the period of 2010-2012 and $9.50 per student for the period of 2013-2015. In its tariff decision, however, the Board certified royalty rates of $2.46 per student for the first tariff period and $2.41 for the second tariff period. If this tariff is ultimately taken up by the K-12 schools, these rates are expected to generate approximately $9.4 million per year for Access Copyright, or about $56 million over the course of the six years covered by the tariff.
          (Highlight added)

As I’ve suggested before, obtaining a rate lower than what AC seeks is not necessarily a major victory per se. AC is notorious for overreaching at the Copyright Board. Its currently proposed Post-Secondary tariff would represent a 1,300% increase over a previously negotiated rate that in turn pre-dated the CCH decision. AC got smacked down very badly by the Board in its Provincial Tariff, where it got only a fraction (1% and 2% for the periods involved) of what it sought. That decision is subject to JR. I should remind readers that the Province of Ontario, inexplicably and at great expense to its much beleaguered taxpayers, settled for an amount exponentially in excess of what the Board ultimately ruled – namely $7.50 per FTE.

For reasons which I explain in more detail on my earlier blog, the rates of $2.46 per student for the first tariff period and $2.41 for the second tariff period, based almost entirely on “consumables”) seem surprisingly high by a factor of about 500%. However, I will not speculate on whether there might have been grounds for CMEC to attack that result by way of JR.

So, I can only speculate that CMEC’s decision not to pursue its own JR may be based – perhaps in large measure - upon a possible assessment that it need not expend any more resources than necessary to fight a tariff that may not matter and be effectively optional in the end. Note CMEC counsel’s interesting wording in the Lexology piece: “If this tariff is ultimately taken up by the K-12 schools…”  (emphasis and highlight added)

CMEC may have concluded that its members can rely on fair dealing and clear whatever rights they may need in a more efficient and less expensive manner than pursuant a non-mandatory AC Copyright Board tariff. CMEC may be taking comfort in the recent CBC v. SODRAC decision from the Supreme Court of Canada, which indicates that the Board’s tariffs are not de jure mandatory. Indeed, even before that decision, the CMEC school boards stopped paying anything to AC in after 2013, as AC’s 2014 annual report confirms. I emphasize that I am only speculating, since CMEC naturally has not disclosed its strategy publicly.

Regarding the “mandatory tariff” issue, all eyes are naturally now turning to York University and its forthcoming three week trial at the suit of AC dues to begin on May 16, 2016. This case is based upon the mandatory tariff theory, now debunked by the Supreme Court of Canada. Indeed, York is being sued under the Board’s “interim tariff” imposed just before Christmas in 2010, which was not even a final certified tariff. This is not a copyright infringement action, and could not have been because AC has no standing on its own to sue for copyright infringement.

Of course, if York University - even with the authority of the recent CBC v. SODRAC decision of the Supreme Court of Canada  - should somehow fail to decisively prevail against AC on the “mandatory tariff” aspect which is the basis of AC’s forthcoming Federal Court case due to start on May 16, 2016, there could be big trouble for the entire educational establishment, including CMEC’s school board members.

 It’s also worth noting that many of the issues that will presumably be argued in this AC K-12 JR, such as those concerning fair dealing, will likely be argued much sooner in the JR of the Provincial tariff, which could be heard and decided even in the next few months. 

That decision from the Federal Court of Appeal could also come after the hearing but before the judgment in the AC v. York University trial. That could be interesting. And there is also the pending decision by the Copyright Board in the AC Post-Secondary case that concluded in January of 2016. While the Board has, in recent times, taken two years or even more to render a decision, one hopes that this time frame will now lessen dramatically to the judicial norm in Canada of six months or less. What the Federal Court of Appeal decides is binding on the Federal Court. What the Copyright Board decides could be influential, even if not binding. There are a lot of things up in the air now – and where, when and how they all finally land will be very interesting.

So, as far as the K-12 Tariff goes, CMEC may purport to consider that this is a case about “Mission Accomplished” and there’s only a little bit of clean up left to do in defending the AC JR, which may be largely determined in any event by the JR of the Provincial tariff.  It may be that things turn out that way, although we all know how recent history shows that “Mission Accomplished” is not always a safe conclusion.

Moreover, as in the Middle East, where the “Mission Accomplished” motto has achieved such notoriety, there are many players engaged in Canada’s copyright collective battles and each have complex agendas and nobody is in control. Thus, “Mission Accomplished” may not turn out to be the appropriate phrase. Is it possible that Winston Churchill’s immortal words may turn out to be applicable?

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

However, here is something a bit more concrete from Roanie Levy, AC’s Executive Director, in AC’s recently published Annual Report for 2015:

Post-secondary revenues are projected to drop from over $10 million in 2015 to less than $2 million in 2016, and the resumption of K-12 schools revenue remains uncertain, even after the recently certified tariff for K-12 schools.Our strategic plan anticipated that we would operate in the red for a certain time in order to complete the transformation—and we are prepared for that possibility.
In the Provincial-Territorial tariff decision and recent K-12 tariff decision, the Copyright Board’s troublingly opaque assessments lead to outcomes that are simultaneously unfair for rightsholders and impractical for users. These decisions highlight the systemic dysfunction in the Canadian copyright landscape today and further underscore the importance of legislative reform.
(highlight added)

All I can do, however, is to conclude, as Yogi Berra once said, “It's tough to make predictions, especially about the future.”


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