There is No New “Making Available” Right: The Copyright Board Got It Wrong

 

On July 15, 2022 the Supreme Court of Canada (“SCC”) rendered a lengthy, nuanced and very important judgment  in Society of Composers, Authors and Music Publishers of Canada v. Entertainment Software Association, 2022 SCC 30 (CanLII), <https://canlii.ca/t/jqgw0>.

Objectively, the decision affirmed that:

1)     There is no new “making available right" as such resulting from the 2012 amendments to the Copyright Act. The new definition added as s. 2.4(1.1) merely clarified the meaning of the existing right under s. 3(1)(f) to “communicate to the public by telecommunication”, and did not create a standalone new right or a justification for stacking on an additional tariff.

2)     SOCAN was not entitled to stack a new royalty on top of existing tariffs simply by virtue of a user making a work available for streaming or download. Such activity is already covered by existing rights and tariffs, and the 2012 amendment clarifying the definition of “communication of a work or other subject matter” in s. 2.4(1.1) doesn’t create new liability.

3)     The “definition” provisions in s. 2 of the Copyright Act do not add new rights. The rights of owners of “works” are found in the first paragraph of s. 3(1). As ably stated by ESA, “These rights are the right to reproduce, perform, and publish the work or any substantial part thereof.” The “making available” provision, however, is not contained in this rights-granting section but rather in definition section 2.4(1.1).

4)     The Court once again affirmed the importance and centrality of the doctrine of technological neutrality to applying the Copyright Act.

5)     The Court once again affirmed the principle of balance in copyright law:

   “[5] I cannot agree with the Board’s interpretation of s. 2.4(1.1). The Copyright Act does not exist solely for the benefit of authors. Its overarching purpose is to balance authors’ and users’ rights by securing just rewards for authors while facilitating public access to works. When this balance is achieved, society is enriched. Authors are encouraged to produce more works, and users gain access to works which they can use to inspire their own original artistic and intellectual creations.”

6)     The Court once again affirmed the rule that one activity (here, streaming or downloading) can only give rise to one royalty payment, and that payment of two royalties for the same activity is prohibited.

7)     The domestic legislation is what is determinative – not the treaty. Without being as blunt and even apparently sarcastic as Justice Statas was in the Federal Court of Appeal when he  he referred to “the vibe” of international law, the SCC affirmed Justice Statas’ general approach to use of international law to interpret domestic statutes.  

8)     The Copyright Board was wrong – i.e. not “correct” - in its interpretation of the 2012 legislation. The Copyright Board will be held to the “correctness” standard of review when it comes to interpreting the Copyright Act because it shares concurrent first instance jurisdiction with the Superior Courts. The Board will be given no deference for being “reasonable” in its interpretation of the substantive provisions of Copyright Act. It must be correct. Importantly, this is the first new category of correctness review since the landmark Vavilov decision. Two of the judges disagreed and would have applied the more deferential “reasonableness” standard. That said, they found that the Board’s decision was unreasonable in this case.

9) Justice Rowe states and reiterates that “If a work is made available for downloading, the author’s right to authorize reproductions is engaged.” (paras. 8, 108). Moreover, the meaning of “authorize” has been considered in greater depth in a number of prior SCC decisions. It will be interesting to see whether future courts look more to ESA or to earlier cases like CCH when confronted with this issue.

10) Finally, this decision may or may not have some potential application to infringement cases, given the closing comment from Justice Rowe:

 [113]  Before concluding, I would note that the value of these rights is not in issue in this appeal. Setting the appropriate royalties to compensate authors when these rights are engaged is a matter for the Board to decide. Similarly, the considerations that a court might have regard to in assessing monetary remedies for infringement is a matter to be decided if and when such a case arises. 

More subjectively:

 1)     To put it bluntly, when the Copyright Board strays out of its permitted and mandated narrow lane of rate-setting (see Prof. Katz’s factum on this point)  and presumes to interpret the substantive provisions of the Copyright Act – much less international law – it had better be “correct” and just not merely “reasonable”. While the SCC recognizes that there can be many “reasonable” outcomes, there is normally only one “correct” outcome.  This clarifies a residual issue from Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (CanLII), [2019] 4 SCR 653, <https://canlii.ca/t/j46kb> concerning the standard of review for the Copyright Board. This is bound to upset the Copyright Board, following less than a year after the SCC declared that Copyright Board tariffs are not mandatory for unwilling users in the York v. Access Copyright decision, which I wrote about here. Per Abella, J:

 [39]     As matter of legislative coherence, it would be incongruous if royalties fixed in the context of licence negotiations between a collective society and a specific user were voluntary, but those set in a general tariff were mandatory. https://www.canlii.org/en/ca/scc/doc/2021/2021scc32/2021scc32.html

2)     This clearly very expensive and lengthy detour could have been avoided if the Board had not called for extensive submissions on the implications of the WIPO treaties – which numerous well-resourced parties went along with resulting in a pantheon of experts’ opinions. All of this could and should have been avoided if the Board had simply allowed or denied SOCAN’s submissions on the basis of the Canadian Copyright Act, the 1996 WIPO treaties, and existing authorities on the subject. Then, the FCA could have resolved the issue on judicial review. Canada does not need a panoply of “experts” to read a domestic statute, and if appropriate, an international treaty and published commentary on it. We don’t need a monumentally expensive, dilatory and gratuitous display of the “the vibe” of international and treaty law in what should have been a rate setting exercise. The Board’s decision to proceed the way it did could potentially have set a dreadful precedent in terms of access to justice in situations wherein objectors do not have the resources that were available in this instance.

3)     Ironically, after recognizing that a freestanding “making available right” existed, the Board nonetheless refused to value the making-available tariff because ‘the evidence before it was inadequate to warrant the setting of a tariff for ‘making available’’. This was upheld as “reasonable” in the companion decision of the FCA. CMRRA-SODRAC Inc. v. Apple Canada Inc., 2020 FCA 101 (CanLII), <https://canlii.ca/t/j82gf>. Arguably, that should have been the end of the matter for the Board, especially since the Board recognized more than a decade earlier in another proceeding for a SOCAN tariff on “other sites”  that “in the absence of proper and reliable evidence, it would be irresponsible to certify a tariff that could potentially have such a broad scope of application” and this was upheld by the FCA, in a decision in which I played a leading advocacy role.
Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, 2010 FCA 139 (CanLII), <https://canlii.ca/t/29z9n>, which Justice Stratas cited in 202 FCA 101.

4)     Interestingly, the issues of royalty stacking and the effort to twist or elevate definitions into new rights has a long history:

a)     The monumental Report of Judge Parker from 1935 outlined the concerns with the attempts by the predecessors of SOCAN to impose “additional” costs on motion picture exhibitors as a result of the new technology of the day – namely “talking pictures” and such practices as the notorious attempt imposition of a “score charge” to “to recoup for the producer his cost, and perhaps a profit, on what was involved in putting the sound track on the film or record the sound on a disc, timed in relation to the film." This was a blatant and early attempt at royalty stacking – and it prompted the establishment of the Copyright Appeal Board in Canada, which worked very well in Canada until the Copyright Board came along more than five decades later.

b)     Kraft tried to twist the s. 2.7 definition of an “exclusive licence” added in 1997 to the Copyright Act into a right to “thwart” the importation of perfectly authentic Toblerone chocolate bars based on copyright in a small picture on the packaging. I successfully thwarted this argument on behalf the Retail Council of Canada as an intervener when this case went to the SCC resulting in the decision in Kraft Canada Inc. v. Euro Excellence Inc., 2004 FC 652 (CanLII), [2004] 4 FCR 410, <https://canlii.ca/t/1h3qj>

c)     In one of the 2012 “Pentalogy” cases at the SCC, the Motion Picture Association of Canada incongruously argued, in effect, that the word “excludes” in the definition of “sound recording” actually means “includes”. The definition in question was: “sound recording” means a recording, fixed in any material form, consisting of sounds, whether or not of a performance of a work, but excludes any soundtrack of a cinematographic work where it accompanies the cinematographic work”. (underline added). Needless to say, the SCC wasn’t impressed and the only mystery was why it even heard the case in the first place. See Re:Sound v. Motion Picture Theatre Associations of Canada, 2012 SCC 38 (CanLII), [2012] 2 SCR 376, <https://canlii.ca/t/fs0vc>

BTW, I was not alone in finding the hearing to be rather confusing. Even the judges were wondering at times about who was agreeing or disagreeing with whom and about what. Here’s the webcast.

Some of the parties seemed to depart from their factums – which in some cases were much more clear than their oral arguments. Perhaps the most useful factum was that of ESA, which can be found here.

 HPK

How to Minimize Music and Maximize Profits – Do Moral Rights Matter?

A Calgary radio station, 90.3AMP,  has been playing condensed versions of popular songs. The station is using a third party named Sparknet to shorten the songs.  Here and here and here’s some coverage.

Just to think – maybe a 90 second or two minute version of the Beatles' five minute “A Day in the Life” or Arlo Guthrie’s  23 minute “Alice’s Restaurant”? After all, we already know the “tune” and how the stories end. Who needs boring choruses anyway?

One would be surprised if actual performers or composers (musicians) are involved in this process. They are those sometimes pesky people who support the huge corporate music industry and occasionally show a desire to be treated with respect and their fair share of economic reward. A few of them occasionally succeed in these  mostly unrealized aspirations. Moreover,  according to Canada’s Copyright Act, ss. 14.1 and 28.2, musicians actually have “moral rights”, which quite possibly could be violated by the unapproved abridgement of a work or performance if it results in prejudice to the creator’s honour or reputation. It would not be surprising if many musicians have been forced to “waive” these rights in favour their record companies. However, even if there is a “waiver”, it would be interesting to see if could apply in this type of situation and whether any record companies would authorize any radio station to invoke it.

In this case, no less than @jannarden   would seem to be seriously upset. But the AMP station doesn’t play her anyway.

It will be interesting to see if  Music Canada, SOCAN, Re:Sound or other organizations that exist only because of the creativity of musicians  react to these reports. But, so far as I’ve seen or heard, it’s been radio silence.

By the way, the only musical shortening of which  I absolutely and irrevocable approve and applaud and which has a strong Canadian connection is the late lamented  Anna Russell’s incomparable classic abridgment of Wagner’s four evening four episode twenty hour “Ring Cycle” of operas into a twenty minute hilarious and amazingly accurate condensation that will never be obsolete. One can be quite sure that the humourless and thoroughly obnoxious Richard Wagner (1813-1883) NEVER would have approved of this. Of course, this could also pass muster as a “parody”. Either way, it’s worth listening to and watching again and again….

HPK

SOCAN's Quest for a new "Making Available Right" Tariff at the Copyright Board in the Post ESA v. SOCAN and Post Bill C-11 World

As anyone who is interested in Canadian copyright knows, the Supreme Court of Canada ruled on July 12, 2012  in the decision in ESA v SOCAN  at the able behest of Barry Sookman that the “communication” right did not give rise to a separate right upon which the Copyright Board could certify a tariff with respect to the delivery of digital files of music for permanent download over the internet, i.e. the there could not be a valid tariff for the delivery of copies of works which were substitutes for the distribution of physical hardcopies on which performance royalties were not payable. As the Court stated:

[43]  In our view, therefore, the Board’s conclusion that the Internet delivery of a permanent copy of a video game containing musical works amounted to a “communication” under s. 3(1)(f) should be set aside.

The SCC was explicitly concerned with technological neutrality, avoidance of “double dipping” and ensuring that collectives and tariffs serve to enhance economic efficiency rather than impede it. The decision was based upon the statute in effect before Bill C-11 became law. The decision can be expected to have a profound effect on the increasingly complex layering and multiplicity of tariffs and collectives that had been occurring in Canada.

SOCAN is now taking the position that the new “making available right” (“MAR”), as SOCAN calls it, found in Section 2.4(1.1) of the Copyright Act now in force in the form of amendments resulting from the Copyright Modernization Act that came into force on November 7, 2012 creates a new right and warrants a new tariff.

The Copyright Board has called for submissions on this issue and SOCAN has now filed its memorandum of submissions and the expert opinion of Mihaly Ficsor. These are being posted now because of the important public interest aspect of this case.

To quote from SOCAN’s submission filed today with the Copyright Board:

SOCAN’s position is that, as a result of new section 2.4(1.1), Internet music services are liable to SOCAN when they post musical works on their Internet servers in a way that allows customers to have access to them from a place and at a time chosen by each customer, irrespective of whether the musical works are subsequently transmitted to end-users by way of downloads, streams or at all.

There are many interesting issues here. However, SOCAN will have to deal with the majority ruling in the ESA decision that:

[41] In our view, the Court in Bishop merely used this quote to emphasize that the rights enumerated in s. 3(1) are distinct.  Bishop does not stand for the proposition that a single activity (i.e., a download) can violate two separate rights at the same time.  This is clear from the quote in Ash v. Hutchinson, which refers to “two acts”.  In Bishop, for example, there were two activities: 1) the making of an ephemeral copy of the musical work in order to effect a broadcast, and 2) the actual broadcast of the work itself.  In this case, however, there is only one activity at issue: downloading a copy of a video game containing musical works.

[42]  Nor is the communication right in s. 3(1)(f) a sui generis right in addition to the general rights described in s. 3(1).  The introductory paragraph defines what constitutes “copyright”.  It states that copyright “means” the sole right to produce or reproduce a work in any material form, to perform a work in public, or to publish an unpublished work.  This definition of “copyright” is exhaustive, as the term “means” confines its scope.  The paragraph concludes by stating that copyright “includes” several other rights, set out in subsections (a) through (i).  As a result, the rights in the introductory paragraph provide the basic structure of copyright.  The enumerated rights listed in the subsequent subparagraphs are simply illustrative: Sunny Handa, Copyright Law in Canada(2002), at p. 195; see also Apple Computer Inc. v. Mackintosh Computers Ltd., [1987] 1 F.C. 173 (T.D.), at p. 197.  The rental rights in s. 3(1)(i) referred to by Justice Rothstein, for example, can fit comfortably into the general category of reproduction rights.(emphasis added)

I won’t comment further for the moment, since I (along with most other active copyright counsel in Canada) am involved in this case. The first round of responses to SOCAN’s submissions is due April 5, 2013.

HPK

SOCAN's Position at the Copyright Board on SCC ESAC Judgment and Making Available Right

From:                     "Estabrooks, Matthew"

To:                            XXXXXXXXXXXXXXXXXX

CC:                          , "Watt, Lynne" ...

Date:                       28/11/2012 11:30 am

Subject:                  Making Available Right

Dear Counsel/Tariff 22 Objectors,

  

We are writing in connection with the recent coming into force of

several sections of Bill C‑11 (Copyright Modernization Act) on November

7, 2012.  Among those sections is the new section 2.4(1.1), which reads

as follows:

 2.4(1.1)  For the purposes of this Act, communication of a work or other

subject‑matter to the public by telecommunication includes making it

available to the public by telecommunication in a way that allows a

member of the public to have access to it from a place and at a time

individually chosen by that member of the public.

  

It is SOCAN's position that the new making available right ("MAR")

renders moot and inapplicable the recent conclusion reached by the

Supreme Court of Canada in ESA v. SOCAN, 2012 SCC 34, (and the Rogers

companion case) that the Act's section 3(1)(f) communication right does

not apply to downloads of musical works.  SOCAN's position is that, as a

result of new section 2.4(1.1), users of music on the Internet are

liable to pay communication right royalties to SOCAN when they post

musical works on their Internet servers in a way that allows access to

them by their end‑user customers, irrespective of whether the musical

works are subsequently transmitted to end‑users by way of downloads,

streams or at all.

  

We are aware that a number of objectors take a different position and

the legal implications of the new MAR will therefore have to be

determined by the Board.  The issue has already been put "on the table"

as part of upcoming proceedings for the determination of SOCAN Tariff

22.A for Online Music Services.  However, the issue is not limited to

Tariff 22.A uses and may be relevant to Objectors to the other

components of Tariff 22 as well.  For that reason, we suggest that the

Tariff 22.A procedure on this legal issue be expanded to include all

participants who may have an interest in its determination.  Our

understanding is that a number of Objectors would be amenable to

proceeding in that manner.

  

In SOCAN's view, this is a pure legal issue that can and should be

determined by the Board without the need of interrogatories and/or the

presentation of new evidence, with the following steps:

 

No later than Friday, December 21:        Filing of Legal Brief by SOCAN

 

No later than Friday, February 1:            Filing of Legal Briefs by

Objectors

 

No later than Friday, February 15:           Filing of Reply by SOCAN

 Date to be determined for oral arguments, if deemed necessary.

 

We look forward  to hearing your response to SOCAN's proposal as soon as

possible.

 

Matthew Estabrooks

Associate

T 613‑786‑0211

matthew.estabrooks@gowlings.com

 ________________________________

Gowling Lafleur Henderson LLP

Lawyers * Patent and Trade‑mark Agents

160 Elgin Street, Suite 2600

Ottawa, Ontario

K1P 1C3 Canada

T 613‑233‑1781  F 613‑563‑9869

gowlings.com

                                

Re:Sound is exercising its rights in the form of a new tariff on recorded music used to "accompany physical activities" in Canada.

(Wikimedia)

Re:Sound is exercising its rights in the form of a new tariff on recorded music used to "accompany physical activities" in Canada.There is now a tariff for the use of recorded music in thousands of gyms and other venues in Canada. No doubt, there will be attacks on this “tax” – as it will inevitably be called.

Five years and three months after this proposed Re:Sound “fitness” tariff was filed, and two years and two months after the hearing was finished, the Copyright Board has determined in its July 6, 2012 decision that none of the evidence submitted by a parade of expensive experts was sufficiently reliable to form the basis of a calculation for a tariff for fitness clubs, gyms, dance studios, etc. Still, the Board certified a tariff based upon a simple calculation flowing from some SOCAN agreements with various fitness centres and dance class providers, filed at the Board’s request. SOCAN represents composers, authors and publishers. Re:Sound (formerly NRCC) represents performers and record producers.

According to a just released decision by the Copyright Board: 

•  A fitness club that plays sound recordings in Re:Sound’s repertoire during fitness classes will pay a fee of $105.74 per year.
•  A fitness club that plays sound recordings in workout areas will pay according to the existing Re:Sound background music tariff, which is based on either attendance, capacity or floor area. Assuming attendance can be measured, it will pay 0.08¢ per attendee.
• A skating venue will pay 0.44 per cent of its revenues from admission, with a minimum fee of $38.18 per year. Venues with no admission revenues will pay the minimum fee
•    A venue that offers dance instruction or any other physical activity will pay a fee of $23.42 per year.

 Somebody will have to pay for these tariffs. It remains to be seen whether the thousands of establishments that are now liable for it pass the costs onto customers or absorb the costs remains to be seen. How much will these venues pay? According to the Board:

•  A small fitness centre with about 200 members and no fitness classes should pay about $16 per year if background music is played in its workout area.
•    A large fitness centre with 2,000 members that plays sound recordings both in its classes and as background music in its workout areas should pay about $280 per year
•   A dance instruction venue and any other physical activity venue will pay $23.42 per year
•  Skating venues with admission revenues will pay on average royalties of $60 per year. Venues with no admission revenues will pay the minimum fee of $38.18 per year.

How many fitness clubs are there in Canada and what are the revenues of the fitness club industry? Here’s what the Board says: 

•  According to the evidence filed, there are  5,047 fitness clubs in Canada. The total revenues of the fitness club industry were estimated at about $2 billion in 2008.

There’s a lot of money at stake here. In fact, the Board says that Re:Sound was seeking “roughly $86 million per year.”

Is this a “tax”? Here’s what the Board says – in a quite unusual anticipatory defence in a “Fact Sheet” of the inevitable comparison to the dance and wedding “tax”, the now defeated and defunct “iPod tax”,  as Ministers Moore and Clement called it:

Is this tariff a tax?

No. Taxes are introduced by government, collected by government and spent for government purposes. This tariff is a royalty, paid for the use of someone else’s intellectual property, to be collected by a not-for-profit collective and distributed to individual rights holders. The purpose of such royalties, established under the Copyright Act, is to provide fair compensation to performers and record labels for the use of their sound recordings.

However, it’s not quite that simple. For a tax to be a tax it does not necessarily have to be collected by government. Apparently, the “tax” issue was not raised by objectors.

However, Courts are increasingly looking at just what is and what is not a “tax” – and the consequences can be quite interesting. Who would have thought that Obamacare could be saved by a finding of the US Supreme Court that it is actually a “tax”?

In 2004, the Federal Court of Appeal came very close indeed  to agreeing with me (arguing on behalf of the Retail Council of Canada) that the CD levy was a “tax” under Canadian law, which would have rendered it illegal because, if it were a  “tax”, it had not been properly dealt with by Parliament.

This Government clearly thought that the proposed iPod “tax” was a “tax” and refused to allow it into the Copyright Act.

Another interesting aspect of this new tariff is that it is significantly retroactive – in fact, back to 2008. There is no reference to any jurisdictional objection to such retroactivity, although there are some potentially very interesting arguments that might have been made.

One of these days, there may be a serious challenge to the Board’s practice of imposing tariffs with a long retroactive reach. The reason that Board tariffs are retroactive is ultimately quite simple. It usually takes the Board a very long time to get to a hearing and then often at least another 18 months – in this case two years and two months – to render a decision. These are much longer timelines than we normally see in Courts. The Board’s Chairman, Justice Vancise, a very experienced appellate judge from Saskatchewan, has indicated that he is trying to do something about these long timelines.

In the end, and after all of the expert evidence that the Board found to be wanting, the Board  simply looked at some SOCAN agreements and discounted the average amounts it to account for Re:Sound’s limited eligible repertoire. It expressed a considerable lack of satisfaction with the result:

[172] We note that our decision comes after a

lengthy and difficult process made no easier by the

lack of reliable and relevant evidence. Our

preference is to set tariffs based on strong

economic evidence presented by the parties. In this

case we were not able to do so. As stated above, in

our opinion the 2008-2012 tariff for fitness

classes is transitional. The next time we examine

Re:Sound Tariff 6.B, it would be preferable to

also have SOCAN 19 before us. We would then

be able to consider all of the relevant economic

evidence and set both of these tariffs

simultaneously.

In fact, the Board considered setting “no tariff” on the basis that the expert evidence of both sides was rejected by it as “unreliable”. However, the Board did accept the factual evidence of the parties.  Accordingly, it believed that it must set a tariff, unlike in a recent SOCAN case where is declined to do so on the basis of lack of evidence. I and others argued that case in the Court of Appeal in support of the Board’s conclusion that it was not required to certify a tariff – even a “nominal” tariff - in the “absence of proper and reliable evidence”.

It will be interesting to see how long it takes for the mainstream medium to start calling this a “fitness tax” or an “exercise tax”.  

t will be also interesting to see whether there is judicial review (i.e. an “appeal”) of this “fitness” decision. There are 30 days from July 6, to serve and file a notice appeal here.

HPK