After nearly 6 ½ years, on August 2, 2019 the Copyright Board of Canada has finally issued its retransmission tariff and reasons for its decision for the years 2014 to 2018. Spoiler alert: the maximum rate for each Canadian cable subscriber will increase from the previous amount of $.98 to $1.17. This seems like a relatively modest amount that will not likely be noticed by any Canadians who are still cable subscribers at arguably outrageous rates and have not become part of the increasing horde of cord cutters. It is virtually certain that all of this increase will be passed along to the subscribers along with the enormous cost of these hearings, which resulted in a 157-page decision. It could have been worse from the objectors’ standpoint, since the collectives attempted after some interrogatories two years or so into the process to more than double the amount. If the collectives had gotten what they wished for, it would have been worth about another $100 million a year – for the past several years and going forward.
This is the only substantial or
substantive decision of the Copyright Board so far in 2019. It is one of the
longest decisions that I can recall from the Board, although not quite as long
as the first-ever retransmission decision which ran to 178 pages
and which set the stage for an unexpectedly high tariff right out of the gate. Here’s
what I said about the origins of this tariff
in the context of the current hearing:
Canada, unlike the USA, did not spell out a
formula in the legislation for what was to be a distant signal and left the
mechanics of it all to the then new Copyright Board. Distant signals were
eventually defined by regulation in an ultra-complex manner potentially much
more generous to copyright owners than the US mechanism. The Board’s first
tariff in 1990, following an extremely long “inaugural” tariff hearing, was
worth about $53 million p.a., an amount about 9 times more than anyone ever
expected at the time – even including the proponents of the tariff. A rather
tepid subsequent “criteria” regulation resulted in a very modest cutback of
about $3 million a year in 1993. For twenty years, Canadian cable subscribers
paid $0.70 per month that was included in their cable or satellite bill for
access to “distant” signals. This amount was increased to $0.98 per month in
2013 and so certified by the Board pursuant to a negotiated agreement.
Interestingly, the Board’s first retransmission
tariff decision – and its first ever major decision under the new Copyright
Board regime established in 1989 that replaced the old, honourable and very efficient
Copyright Appeal Board regime that lasted for six decades or so – was delivered
in less than 14 months from the time of publication of the proposed tariff in
the Canada Gazette. That was in the good old days under the leadership of the
very esteemed and long since retired Michel Hétu as Vice Chair, who was a
distinguished lawyer and expert advisor in his days in the Department of
Justice before his appointment to the Board.
This is the first full retransmission
hearing since the 1990 decision, apart from a proceeding that result in a small downward adjustment in
1993 following the implementation of “criteria” by
way of regulations intended to respond to the outcry over the unexpectedly high
tariff set in 1990. This hearing featured abundant new expert evidence and
suggested approaches. In the end, the Board adopted what appears to a blend of
what the parties presented and the Board’s own approach.
Probably the most interesting part of the current
decision is a Board’s discussion about the arcane doctrine of “non ultra petita”, which roughly entails
the notion that a court or board should not give a party more than it initially
asks for, since opponents who might have objected may have remained silent in
reliance on the initial demands.
The Board held that:
[233]
These proceedings do not attract the application of non ultra petita, however.
All participants are well aware of the Collectives’ revised rates and what they
are requesting. The entire hearing, and the expert and other evidence
presented, revolved around the revised request. The issue is whether the Board
should permit the revised claim to be considered and, if so, to what extent.
That is a matter of procedural fairness and the Board’s power to amend or vary
a proposed tariff.
Interestingly enough, the Board ruled on
the one hand that it can override or avoid the application of the “non ultra petita” doctrine but effectively
achieved a similar result based upon an apparently newly enhanced sensitivity
to the retroactivity issue:
[238] In the circumstances of this case, we think it unlikely that
Retransmitters – in the face of such a significant potential retroactive
increase in royalties over such an extended period of time – would be able to
find reasonable ways in which to retroactively collect from their customers
and/or otherwise set aside funds necessary to pay the difference, along with
interest, between the royalties originally proposed and published in the Canada Gazette on June 1, 2013, and
the royalties sought in the revised proposed tariff. This may be particularly
relevant for smaller, independent and less financially-robust Retransmitters.
In a
recent blog, I posted the following on the issue of retroactivity:
This
has led to a persistent pattern of hearings that often take more than four
years to happen, decisions that take three more years to render, and tariffs
that are consequently retroactive for several years. Then, there is the almost
inevitable and often successful judicial review. This inexplicable, inexcusable
and unique pattern exists notwithstanding explicit Supreme Court of Canada
jurisprudence going back to 1954 that says that his shouldn’t be happening. On
the issue of retroactivity caused by delay, I have previously pointed to:
“….the
potential invalidity of retroactive tariffs in light of the venerable
1954 Maple
Leaf Broadcasting v. Composers, Authors and Publishers Association of Canada
Ltd., [1954] SCR 624 (“Maple Leaf”) decision
from the Supreme Court of Canada (“SCC”). That decision was concerned with a
tariff on radio stations that was retroactive by less than three months and the
SCC – with some rather explicit reluctance – permitted it as a
“practical necessity” but stated clearly that it was the "implied
duty" of the Board to proceed with "all possible expedition" in
cases where tariffs may have a retroactive effect. In the recent CBC
v. SODRAC 2015 SCC 57 case in the SCC, I cited this same Maple Leaf case in the factum prepared along with Prof.
Ariel Katz and Prof. David Lametti (as he then was). There was considerable
interest during the oral argument in the retroactivity
issue and the SCC commented on it very explicitly in this unusual footnote –
which may be seen as a warning signal to collectives and an invitation to users
seeking judicial review of retroactive tariffs:
[2] During the hearing before this Court, counsel for the
interveners the Centre for Intellectual Property Policy and Ariel Katz briefly
raised concerns regarding the Board’s power to issue retroactively binding
decisions in general. That issue was not squarely before this Court in this
case, and I do not purport to decide broader questions concerning the legitimacy
of or limits on the Board’s power to issue retroactive decisions here.”
It is also interesting that the Board
emphasizes at paragraph 239 the importance of timely notices in the Canada
Gazette is an essential means “to inform parties of the possibility to object
to such a proposal”. This is not without irony, given that the new Vice Chair
of the board, Nathalie Theberge, recently spoke at length about what she
regarded as the positive aspects of the elimination of the decades-old
requirement to post proposed tariffs in the Canada Gazette. Mme. Theberge was
not a member of the panel that decided retransmission, since the file was opened,
and the hearings took place long before her own appointment last year.
There is also considerable discussion of
the concept of “competitive market”, which is something of an oxymoron in any
discussion of de facto mandatory tariffs that are built upon highly prescribed
regulations in a context where the costs will almost certainly be passed along
100% to those Canadian consumers who have not taken the initiative to “cut the
cord”. Indeed, there was some discussion about “cord cutting”. One of the great
frustrations and illustrations of the dysfunctionality of the Copyright Board
is that, while it attempts valiantly to analyse massive amounts of presumably
relevant and expert evidence, such evidence can become manifestly irrelevant
and unreliable in the face of a rapidly changing economic and technological
environment when hearings in the decision-making process takes so long – in
this case 6 ½ years. That is a very long time in Internet time when one
considers the rapid proliferation of OTT services such as Netflix and the
increasing proliferation of cord cutting. The use of VPN, Facebook and other
tools enables many consumers to get all the basic news and entertainment they may
want online legally for free or for much lower costs than Canadian cable
companies have imposed for so many years.
In any event, subject to the outcome of
judicial review, we now know more than six years after the proposed tariff was
filed what the cost of the cable retransmission tariff will be for 2014 to 2018.
No doubt the cable companies have set aside a reserve for the relatively modest
increases and will surely be able to pass the costs along to their consumers.
The Board’s apparently enhanced concern for retroactivity when it can impose potentially
extreme consequences is a welcome development but begs the question of the
obvious overall retroactivity of the entire process.
Once again, the the
lawyers and expert witnesses have no doubt done very well in this long
process. Moreover, it ain’t over till it’s over as Yogi Berra famously said. Indeed,
because the parties wanted an early ruling on the overall quantum so that they
could better determine its allocation, the Board – in an unusual move – announced the rates for this tariff back on December 18,
2019 – which immediately triggered two judicial review
applications 30 days later. These
applications were ordered to be “held in abeyance pending the release of the
Copyright Board's reasons for the Decision”. Well, that movement has now arrived.
It would seem likely that the judicial
review applications will be pursued, given the amount of money involved that
is, on its face, ~ $100,000,000 PER YEAR going back to 2014 and going forward.
The chance of success may not be high,
considering that the Court normally defers to the Board on number crunching –
but there are some legal issues involved and the SCC will presumably any time
now release a major decision on standard of review which could provide
surprises. Thus, we can look forward to another year or two of activity in the
Federal Court of Appeal, with a possible remand to the Copyright Board and/or a
possible appeal, if leave is granted, to the Supreme Court of Canada – with a
possible remand after all the to the Copyright Board. So, it could be several
years before this over. Who knows how many cable customers will be left at that
point? But that’s another matter?
Like a broken old vinyl record, I keep
reminding everyone that the PMNOC (Patented Medicines Notice of Compliance) proceedings, which can often involve comparably enormous if not even more amounts
of money than may be at stake in this case, MUST be dealt with from start to
finish including the Court’s decision within 24 months.
HPK
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