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 application. I 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.

HPK

SOCAN & Sotto Voce Retroactivity & Pending Litigation

Michael Geist has outed the curious special treatment given to SOCAN’s submission to the recent copyright consultation process, which is available only by specific request. If you do request it, you will get it right away delivered by email as an inconvenient non- searchable PDF. From a technical standpoint, this entails a minor sacrifice of privacy and a major compromise in transparency, since there is no conceivably valid reason why SOCAN’s submission to the confutation process should be given special treatment in contrast with the more than 8,000 other submissions. And as many have pointed out, this means that SOCAN’s lobbying efforts in this forum won’t show up in search engines. It was made clear from the outset that submissions would be publicly posted. In any event, it is available here courtesy of Jon Newton in spite of SOCAN’s efforts. (SOCAN should look into the “Streisand Effect”, if it is unaware).

Ironically, the submission is in locked down PDF, so one can’t easily cut and paste. Under Bill C-61, it would be illegal to try to get around this TPM. Here's a TPM-free version.

The more interesting issue is why SOCAN wants to keep this hidden from prying eyes, assuming Michael’s report is accurate. After all, SOCAN has normally been one of the more transparent collectives - though that is only relative to the others which offer varying degrees of greater opacity in their lobbying, administration, governance and even at the Copyright Board. They have collectively convinced the Board to permit few and only innocuous questions about the internal workings of these organizations with monopoly power and virtually no effective member democracy that collect almost $500,000,000 a year in Canada.

In this case, there’s at least one plausible possible reason why SOCAN might have wished to keep its submission away from public scrutiny.

SOCAN is asking for an amendment to retroactively “clarify” that there is and always has been a “making available right” in Canadian law that would presumably apply to the “communication right” in such way as to include activities as the delivery of ringtones or online music distribution. In this case, the retroactive aspect of the demand could prove to be very controversial. Retroactive legislation is usually controversial, but especially so when it interferes with pending litigation.

The communication issue has already been determined in SOCAN’s favour by the Federal Court of Appeal (“FCA”), after the ring tones objector group (led by BCE) inexplicably, and in my view very unwisely, conceded the issue before the Copyright Board and then changed its tune and its lawyer in the FCA. No surprise - they lost downstairs and upstairs. The Federal Court of Appeal politely refrained from highlighting the inconsistency in the objectors positions below at the Board and on judicial review in the FCA. But the objectors lost anyway and, quite predictably, the Supremes wouldn’t hear an appeal.

However, various parties are trying once again to prevail over SOCAN on this “communication” issue in the FCA in the current judicial review of the Copyright Board’s 2007 decision on SOCAN’s Tariff 22A, which deals with online delivery of music. To say the least, this will not be easy, in light of the FCA’s decision in the ringtones case.

I explained the tie in between ring tones and Tariff 22A in a blog here more than two years ago and talked about the dangers of layering and overlapping tariffs.

But if SOCAN gets its way with its extraordinary request for retroactive clarification, the questions now before the Courts could become moot, if such legislation comes into force before the Courts are finished with this case. If the legislation comes into force after the Courts have finished with the litigation and Courts have ruled against SOCAN, the judicial determination would probably be undone.

Governments are naturally loathe to legislate in the middle of litigation in favour of one side or another - unless the litigation results from a really glaring deficiency in the law and the results clearly create an unexpected and serious injustice.

There have been three relatively recent notable corrective surgeries in copyright law in Canada. The most controversial was the 2002 fix in the JUMP TV imbroglio which involved legislation to plug what was arguably a loophole that was found in the statute that would have enabled internet retransmission of TV signals at an extremely low license rate intended for cable companies. . There was also the case of the SOCAN amendment in 1993 that “clarified” the definition of a “musical work”, which successive bureaucrats failed to amend, despite a decision of the Supreme Court of Canada from 1968 that clearly exposed the problem.

But the most notorious fix - which was done in the midst of protracted Copyright Board and judicial proceedings - was the 1971 legislation that removed the possibility of the record industry enforcing a “sound recording license” (what we now call “neighbouring rights”), arguably then an unexpected result from thoughtless drafting of decades earlier. The music industry has since gotten even with a vengeance with the broadcasters for this amendment, and several times over. These industries have long memories. The saga was well documented by Jacques Alleyn in the Phonographic Industry Deprived of its Performing Right in Canada, 6 C.P.R. (2d) 258

But there is no current deficiency in drafting with respect to the communications rights which could result in a major and unjustly uncompensated use - as was arguably the case in past. The issue now is rather a question of interpretation and of how many times over do rights owners need to paid for the same transaction and how many layers and tariffs will pile up and wait in line for eventual disposal at the Copyright Board years later, usually with subsequent judicial review. All of this will ultimately be paid by the Canadian public, which has no effective voice in this process when costs are simply passed along. Especially in the case of oligopolistic objectors, the incentive to fully fight these tariffs and to change this system is limited if all of these suppliers face the same costs, which will be passed on the powerless public.

Retroactive “clarification” of the law is a very drastic technique that requires a very strong justification - because it basically bypasses the judicial process. This is particularly serious when it is done during the course of ligation.

Here’s an excerpt from SOCAN’s sotto voce submission, which SOCAN may not want to see widely discussed:

In our opinion, Bill C-61 (if reintroduced) needs to be changed if MAR [making available right] for authors is to be recognized, without question, as already forming part of the Act.

We are of the view that language appropriate for this purpose can be derived from the Bill C-60 definitional provision mentioned above to clarify the meaning of the section 3(1 )(f) communication right (either in section 3(1 )(f) itself or in section 90), together with clear wording to establish that the meaning has always been the case (and not just dating from the coming into force of this Bill). For example, an amended section 3(1 )(f) could read as follows:

(f) in the case of any literary, dramatic, musical or artistic work, to communicate the work to the public by telecommunication; for greater certainty, it is deemed always to have been the law that a person who makes a work available to the person in a way that allows members of the public to access it by telecommunication from a place and at a time individually chosen by them communicates it to the public by telecommunication.

In our opinion, this clause (or one of similar import) would confirm that the right of communication to the public by telecommunication in our Act includes, and has always included, the MAR right for authors.
(emphasis added)

Retroactive “clarification” of something that doesn’t cry out for such extraordinary treatment is a last resort for legislators. In the case of copyright revision, acceding to SOCAN’s request in this instance could set a disastrous precedent.

Next in line would be the Canadian Private Copying Collective (“CPCC”) - which has been smacked down twice by the FCA for trying to get a levy on iPods when the legislation clearly applies only to “media” and not to “devices.” I can just see an absurd proposed amendment that would “clarify” that “it is deemed always to have been the law that the word “medium” includes “device.”

This ever thickening morass of layered rights needs legislative simplification, since neither the Copyright Board nor most of the copyright bar have any apparent inclination to kill this golden calf of confusion arising from redundant rights that the public pays for so dearly and uniquely in Canada. The US courts repeatedly deny such attempts at layering. A judicial commission will probably be necessary because of the complexity involved and absence of any effective institutional voice with sufficient will and resources to adequately represent the public interest.

HK