The Copyright Board’s “New Leaf”? Not So Much and Not at All

By Jin Zan - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=43789998

On April 14, 2019 I blogged with great optimism that:

On March 6, 2019 the Copyright Board appears to have turned over one new leaf by asking for comments more than three years after the close of the hearing from “affected persons” on the “feasibility and clarity of the terms of the tariff” with respect to Access Copyright’s proposed tariffs for the Post-Secondary Educational (“PSE”) Institutions.  I reported on this here. Those entitled to comment potentially included lots of people and institutions that may have withdrawn from this nearly nine-year-old saga or may even have never engaged. In the past, the Board has limited acceptance of comments to a short window following the close of the oral hearing.

The invitation resulted in 11 submissions, which have conveniently been made available here from the Board itself – a helpful and timely development and another new leaf in itself. (Publishing filed court and tribunal public documents is a crucial component of access to justice). From the users’ point of view, these submissions feature a comforting degree of consistency and, at the same time, a considerable degree of independent analysis and approach.

(highlight added)

Well – it turns out that the Board intends to disregard and ignore virtually all of the substantive comments regarding:

      1.     the mandatory nature of the tariffs,
2.     the retroactive application of the tariffs,
3.     the structure of the royalties (i.e. FTE vs transactional) and
4.     the scope of acts covered by the tariffs

and presumably many other important submissions from these 11 submissions. It should be noted that these 11 submissions came from very sophisticated parties who responded to the Board’s invitation in good faith and spent a lot of time, resources and expense to do so. Here’s the Board’s Notice dated April 24, 2019 which I reproduce here in full because the Board has apparently not even seen fit to send it to those 11 “affected persons” who went to the trouble of responding to the Board’s invitation.

  

April 24, 2019

[CB-CDA 2019-021]

NOTICE OF THE BOARD

File: Access Copyright – Post-Secondary Educational Institutions (2011-2013

and 2014-2017)

Pursuant to Notice 2019-013, the Board received comments on the draft tariffs. These were provided to the Parties on April 1, 2019. The Parties may now respond to these comments.

The Notice specified that comments are to be on “the feasibility and clarity of the terms of the tariff.” Given the breadth of issues raised by the comments, the Board notes that it is of the view that many issues go beyond “feasibility and clarity.” The Board does not intend to rely on those comments and does not expect the Parties to respond thereto. This includes comments on issues of the mandatory nature of the tariffs, the retroactive application of the tariffs, the structure of the royalties (i.e. FTE vs transactional) and the scope of acts covered by the tariffs. It is also not the case that these issues are new: they were either explicitly made an issue by the proposed tariffs, or their possibility should have been reasonably contemplated (e.g., that a certified tariff may have retroactive effect).

For greater certainty, the Board is of the view that comments made in relation to issues such as record keeping, manner of performing FTE calculations, and specific issues of wording/definitions are within the scope of comments sought by the Notice.

Additionally, while not within the scope of the Notice, the Board notes that certain comments raised the issue of previous payments made for the licensing of material during the tariff period. The Board is of the preliminary view that it does not have the evidence in this proceeding necessary to establish a mechanism in the tariffs that would adjust royalties based on other licensing activities of the user.

The Board asks the Parties to respond to the Board’s preliminary view.

Parties’ responses shall be filed with the Board by no later than Thursday, May 9, 2019.

Gilles McDougall

Secretary General

(highlight added)

It will be interesting to see how the “affected persons” whose submissions are now being ignored in whole or in part react to the above notice, if they somehow become aware of it. Here are some questions I am thinking about that do not necessarily reflect any position of any clients of mine:

      1.     Why did the Board invite submissions from “affected persons” on the “feasibility” of the tariffs – only to now ignore those submissions?
2.     Why has the Board failed to notify the “affected persons” who were invited to make submissions on the draft tariffs that their submissions will be ignored in whole or part and is only interested at this point in hearing further from “the Parties” – which technically means only Access Copyright and Sean Maguire?
3.     Did the Board create a “legitimate expectation” among “affected persons” that their submissions would be accorded fair and adequate consideration?
4.     How can the Board ignore the “retroactivity” issue – especially in the context of this proposed tariff – when “affected persons” may have to try to reconstruct information on course pack content, third party licenses, fair dealing and other considerations going back almost a decade and particularly if the tariff is “mandatory” in any way? How can the Board’s decision to ignore the retroactivity issue in this context be reasonable and how could a lengthy period of retroactivity possibly be feasible in this case?
5.     How can fundamental and even jurisdictional issues such as whether tariffs can be mandatory and to what extent, if any, they can be retroactive not go straight to the core of the “feasibility and clarity of the terms of the tariff”? Surely, if a tariff is inconsistent with the Copyright Act and several Supreme Court of Canada decisions, the “feasibility” of such a tariff would be fundamentally at issue.

Unfortunately, my optimism about new leaves being turned at the Board may have been premature. What I am seeing now looks more like withered leaves. The current situation is unprecedented in my experience with the Copyright Board – which spans more than three decades. 

And that’s not all folks. Wait for my comments on the proposed regulations regarding “Time Limits in Relation to Matters Before the Copyright Board”…

HPK

Possible Fallout From the Copyright Board’s Access Copyright Provincial And Territorial Government Decision

Charles Levy - Wikimedia Commons

There once was a time when proposed inaugural Copyright Board tariffs were virtually bankable assets that would result in the financing of very expensive hearings that almost invariably paid off quickly and many times over – sometimes in the tens of millions or more.  Those essentially guaranteed good times and rich reward days for collectives and their counsel now appear to be over.

Here is my second cut of comments on the Copyright Board’s landmark decision regarding the Access Copyright (“AC”) proposed tariff for provinces and territories, which I reported on shortly after it was announced on May 22, 2015.  No doubt, I and many others will have much more to say another day. Michael Geist is already off to very good start on his blog.

To recapitulate, the Board awarded a tariff of 11.56 ¢ per FTE (full time equivalent) for the period 2005-2009 and 49.71 ¢ per FTE for 2010-2014. That’s less than 1% and about 2% respectively of what AC asked for.  According to the Board, the tariff will generate a total of only about $370,000 over its ten year period – which is likely only a small fraction of the costs involved in obtaining the tariff.

This is probably the longest decision that the Board has ever rendered. It took the Board more than 2.5 years from the hearing to render this decision, which is a very long time – but that’s another matter. To be fair, it is clearly complex. At 184 pages including the index, it is even longer than the monumentally important inaugural retransmission decision in 1990 that was the first and in some ways – at least economically – the most important Board decision ever. The Board then awarded a tariff worth more than $50 million a year 25 years ago – which was several times more than anyone including the proponents ever expected. Even that decision was shorter by six pages than the current decision – which results in the one of the lowest dollar value tariffs that the Board has ever awarded. Interestingly, the retransmission tariff decision was rendered less than five months from the time that the 57 day hearing was concluded in May of 1990 - how times have changed and not for better.

However, the current AC tariff decision may prove to be one of the Board’s most important – precisely because it is so much less than expected and precisely because it clearly is not worth even close to enough to cover the costs of obtaining it. Since it was aimed at all of the provinces and territories other than Quebec, ability to pay was definitely not an issue.

This decision is manifestly different than any other Board decision that precedes it. The writing style is dramatically different. The amount of detail and analytical rigour – both factually and legal detail – is very different. There appears to be more of an “inquisitorial” involvement that indicates that the Board will not simply rely on the adversarial process and will ask its own questions and do its own thinking. Note the post-hearing steps at the behest of the Board. Whatever the reasons, the changes are welcome.

The Board has gone from almost a dearth of legal reasoning and explicit factual underpinning and analysis to possibly the other extreme – which is clearly a preferable excess if one has to choose between the extremes. Whether such a detailed legal and factual analysis of the fair dealing issues (about 50 pages in this case) was really necessary is debatable. But it is definitely interesting and merits close analysis.

Overall, not only in hindsight but at the outset, it seems and seemed fairly obvious that copying done by governments of third party material will usually be for “research” purposes in the same way that copying done by law firms is usually for “research” purposes. And this must, as we all know now by heart, be given a “large and liberal interpretation”. Most of this copying will be for a legitimate fair dealing purpose and meet the further “factor” test. If the Board went overboard on this, it at least shows that the Board has now finally taken to heart the important rulings of the Supreme Court of Canada on fair dealing. Likewise, there’s a nine page discussion of what is “substantial” that covers some important case law including that of the Supreme Court of Canada.

It is definitely good news that the Board appears to have moved beyond comments such as referring to the Supreme Court’s CCH ruling as “the unavoidable starting point” on fair dealing and the Court’s reversal of the Board’s fair dealing analysis in the K-12 Alberta case as “findings of fact”.

Another welcome development is the Board’s recognition that Access Copyright’s repertoire is very limited, that the Board’s previous contortions in the K-12 case to recognize a wider and virtually unlimited repertoire were problematic, and that Access Copyright is not entitled to be paid for the use of works that are not clearly in its repertoire. The Board even commented negatively on AC’s repertoire “lookup” tool, noting that it is not limited to actual repertoire but is based upon AC’s conception of potential authorization.

The Board noted at para 119:

In short, Access considers in its repertoire almost all published works, without regard as to whether there is any relationship between the rights holder and Access.

And further:

[127] In the matter before us, payments have not been made by Access in relation to the copying events captured in the Volume Study, including to those with whom Access does not have an affiliate agreement. Since no payments have been made, no agency relationship could have arisen between the relevant owner of copyright and Access. The argument the Board accepted in K-12 for including works of non-affiliated copyright owners in the determination of the royalty rate is thus inapplicable in this matter.

….

[129] For the reasons that follow, we find that this is not sufficient for us to include copying events where the owner of copyright was not affiliated with Access as compensable for the purposes of determining a royalty rate in this Tariff.

The Board certainly seems to be resiling from its frankly untenable cheque-cashing implied agency theory in the K-12 case. See para 136:

Access can only send cheques, and thus be able to argue for the existence of an agency relationship, in relation to at most 0.005 per cent of copying from works of non-affiliated rights holders. Even if we were to accept the premise that the sending of a cheque by Access in relation to a copying event, and its subsequent cashing by the owner of copyright in the work copied, forms an agency relationship in relation to that particular copying event, it would remain that this would not happen for at least 99.995 per cent of the actual potentially compensable copying of works of non-affiliated rights holders that will occur during the Tariff period.

Clearly, Access Copyright and presumably other collectives must now be able to prove what their actual repertoire consists of and cannot expect to be compensated for repertoire for which there is no adequate chain of entitlement.

What will AC do now?

AC has is clearly “deeply concerned”. It says:

Access Copyright is deeply concerned with the Copyright Board of Canada’s May 22, 2015 decision in the Access Copyright Provincial and Territorial Governments Tariff, 2005-2009 and 2010-2014. The decision certifies a nominal rate for the copying of published works by provincial and territorial government employees and disregards the importance of licensing income to creators and publishers in the digital economy. 

We are currently reviewing the decision and assessing all appeal options.

Access Copyright will almost certainly seek judicial review (an “appeal” in laypersons’ terminology) of the current decision. This will be the expectation and, in one sense, AC would have little to lose. Judicial review is invariably much cheaper in terns if legal expenses than the initial case itself – since normally there is relatively little additional legal research that needs to be done and the record is what it is. It can’t be added to.

On the other hand, AC must assess the very real possibility of confirmation of the Board’s decision by the Federal Court of Appeal and/or the Supreme Court of Canada, if it gets that far –which would be an even far more serious loss indeed for it and which could affect other collectives in many obvious and less obvious ways.  At first glance, such review could be an uphill battle in this instance – because the Federal Court of Appeal and the Supreme Court of Canada are fairly deferential to the Copyright Board overall – and very deferential on questions of fact finding.  In this case, we have 184 pages that are, arguably, mostly about fact finding and number crunching. Even if the Board made some reviewable errors, which is far from obvious at first reading, the result may be only be a very minor adjustment overall, given the great care taken by the Board to determine what copies were compensable and why or why not.

Moreover, any judicial review may attract some interesting potential interventions – some of whom may be far from supportive of AC, as AC is aware from the Province of Alberta case in the Supreme Court of Canada where my intervener client, the Centre for Innovation Law and Policy of the Faculty of Law University of Toronto had a significant and perhaps determinative impact on the result.

Of course, there are other more positive options for AC – which I have suggested before when I debated Roanie Levy almost exactly a year ago at Brock University. (Go to the ~24:30 minute mark).  Maybe AC should recognize that it is consistently losing in the Courts and in the court of public opinion. Maybe it should drop its pending tariff cases at the Copyright Board. Maybe it should drop its litigation against York University, one of its best “customers”.  And, of course, it now has this defeat on its hands from the Copyright Board. And then maybe it can sit down with its community and figure out how to provide a marketable package of useful services based upon voluntary transactional licenses at reasonable rates based upon its actual repertoire.

Access Copyright is not growing. It is struggling to survive. It is spending an astonishing 29% of its revenues on operational expenses – far more than the norm for established copyright collectives. It has an infrastructure and resources that could still be put to good use. But its survival will require much more and something much different than desperately aggressive legal moves and a website makeover. I’m somehow sure that the AC Board of Directors will be giving this much and urgent thought in the weeks, days, and maybe even hours to come.

What will be the Immediate Collateral Effects?

Here are some questions that are inevitably going to be asked:

Province of Ontario:

Why did the Province of Ontario settle in 2011 for $7.50 per FTE (para 33) and agree to a digital deletion provision (para 154)? The Board’s decision refused to include a digital deletion provision and set a price that is only a small fraction of what Ontario agreed to pay. In 2011, according to Statistics Canada there were about 92,710 person employed by the “provincial and territorial government” in the Province of Ontario. This does not include teachers, health care workers, etc. The definition of an FTE employee caught by the tariff apparently varies province by province (see decision, page 134) and may or may not include health care workers, for example. It should not include educators, who are covered by another tariff.

If we take out the population of Quebec, which is not covered by the tariff, the remaining population of Canada is about 26 million. Of this, Ontario counts for more or less half at about 13 million. These figures are rounded off from Statistics Canada. So, it’s probably safe to assume that Ontario has about as many FTEs for AC purposes as the rest of Canada, excluding Quebec.

There about 120,000 FTEs in the rest of Canada, not including Quebec as counted by the Board. (See page 152 of decision). Therefore, that’s probably a safe figure to use for Ontario for FTE purposes, since Ontario’s population is about the same as that of the rest of Canada, not counting Quebec.

And recall that in the last Ontario election, Tim Hudak promised to fire 100,000 Ontario public servants out the 1.1 million he counted. See this article that points out some of the difficulties with determining these numbers. So, to be conservative, let’s assume on the presumably low side that there are 100,000 FTEs in Ontario covered by the license. So, at an overpayment of $7 per year for five years for 100,000 FTEs, we are talking about an unnecessary expenditure of at least $3,500,000 – which is far more than the total liability for the rest of Canada, excluding Quebec, for that period. And that’s probably a low estimate of the Ontario FTEs covered by the agreement. That bad deal expired on March 31, 2015.

True, hindsight is always 20/20. But, even at the time of the Ontario settlement, it was arguably predictable that this was far too generous a settlement in favour of Access Copyright. Ontario had a previously negotiated rate of $3.12 per FTE until 2010, which was determined in 2001 – three years before CCH (decision, para 31). There is lots of evidence on the record as seen in this decision of previously negotiated figures of even less than $3 per FTE in the past and that was BEFORE the CCH case. These figures were known. Obviously, the CCH case presented a strong reason to make the rate even lower after 2004. For some reason, Ontario renewed in 2010 at the same pre-CCH rate of $3.12 per FTE.

Thus, it looks like Ontario settled for an amount that is more than twice its own previously negotiated already arguably too high rate in light of CCH.

So, why would Ontario settle for more than twice the pre-CCH rate seven years AFTER the CCH case? It would be no answer that Quebec was paying more. The Board examined the Quebec situation in great detail and rejected the expensive COPIBEC license entered into by Quebec as a proxy or benchmark for the rest of Canada.

If the agreement that expired on March 31, 2015 has not been renewed, it should be significantly renegotiated. If it has been renewed at the $7.50 rate, at least foreseeably knowing that this decision was long overdue and therefore could come at any time, other questions should arise. In any event, a lot of questions generally might now be asked by Ontario taxpayers about why this costly settlement was entered into and how the Province deals with its copyright concerns.

The AC Post-Secondary Tariff

What will the Board do now about the Post-Secondary tariff, which is stuck between a rock and a hard place perhaps now even somewhere in the twilight zone? It is at once one of the most important files that Board has ever seen, and yet the associations representing universities and colleges (AUCC and ACCC respectively) have inexplicably withdrawn from the hearing, withdrawn their objections and left their members to the tender mercies of Access Copyright and the Board. While it’s obvious that there is more copying in universities and colleges per FTE than by employees of provincial governments, the Board can hardly ignore the methodology and findings in the current case, which raises very similar issues.

The York University Litigation

What will this mean to the York University litigation, which is based upon on the Post-secondary “interim tariff” that arguably should have been challenged at the time by the AUCC and/or  ACCC but wasn’t and now looks even worse in light of this decision? This litigation is based upon the “mandatory tariff” theory and I have expressed concerns about York’s response.

AC’s “Premium” and “Choice” Packages

What will this mean to Access Copyright’s new “Access Premium” and “Access Choice” offerings?  [Why does this sound more like a cable TV package? ;-)] Hard questions should be asked as to why universities should pay $18 per FTE for similar rights that Governments will now be paying less than $0.50 per FTE. That’s a 3,600% difference. While there is undoubtedly more copying per capita in universities than in Governments, it is hardly likely to be 3,600% more. And what effect will these “voluntary” license rates have on the tariffs being sought at the Copyright Board, which are much higher still – i.e. $35 for a university FTE and $25 for other post-secondary FTEs for 2014-1017.

The “Mandatory Tariff” Issue

Finally, what might be the impact on all of the above of any ruling by the Supreme Court of Canada with respect to the mandatory tariff issue,  about which I made submissions on March 16, 2015 on behalf of Prof. Ariel Katz and the Centre For Intellectual Property Policy as interveners? I won’t get into this now because that case is currently pending before the Supreme Court. We may have decision from the Court as early as September or October.

Other Aspects

I and others have recently commented on the future of the Board itself, which is a creature of statute and can be changed or eliminated by statute, and is susceptible to regulations that can be readily implemented by the Government pursuant to existing legislation. Personally, I believe and have often stated that the problems with the Board’s procedure can be fixed by regulations.

The Board is getting pressure from all sides to speed up its procedures and to lower the costs of participation. It has formed a working group to look at this. That has not gone too well, since certain incumbent interests are resistant to change. There is also a recent study by Prof. Jeremy de Beer commissioned by the Government, concerning which I’m working on a fairly detailed commentary.

In the past, some have been worried that the Board has become somewhat “captive” in the regulatory law sense to the collectives it is supposed to regulate. However, some collectives may now believe that the Board is leaning too far in favour of users. As I’ve pointed out, there are now two decisions in the last year that will apparently result in two major collectives failing to recoup their costs of obtaining a tariff – unless there is some miracle arising from judicial review. The other is the Re:Sound Tariff 8 “Pandora” tariff. 

Prior to last year, the one notable exception had been the ERCC. It has apparently folded and never paid off its debts or distributed anything to its royalty claimants. However, there were different considerations involved in the ERCC  (Educational Rights Collective of Canada) story, and ERCC was at best a very niche collective.

Are these two decisions, especially the AC one from May 22, 2015 a departure in significant ways from the past? Are they mere blips on the long term chart? Has the Board now begun to take a different view of the need for “balance” in the copyright collective realm? Has the Board taken on a more “inquisitorial” role that will allow it to address the public interest even in a fully contested case, and especially in important cases that may proceed by default, such as the Access Copyright Post-Secondary Tariff?

These are important questions as summer approaches. The next major event for Board watchers could be a puff of white smoke announcing the appointment of a new Chairperson. But it’s probably unwise to hold one’s breath, given that the post has now been vacant for over a year.

HPK

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

The Big Fat Canadian Wedding “Tax” – SOCAN + Re:Sound + AVLA - Pay Three Pipers and Double for Dancing

1566 The Wedding Dance by Pieter Brueghel the Elder

The Copyright Board has recently delivered reasons and a tariff for Re:Sound for the use of music at “live events”. Re:Sound represents record companies and performers. SOCAN has been getting paid for these types of “events” for many years. Re:Sound is now playing catch up. And the Copyright Board is letting it do so retroactively back to the beginning of 2008.

The tariff item that that is naturally getting the most attention is for weddings, which are considered to be “receptions”. There are numerous media references to this as a “tax” and to the fact that it’s retroactive. Indeed, the media focus on this tariff is remarkable, compared to most other Board tariffs .  The Board will presumably take note of all this media coverage, since it now has recently entered into a contract with a "newspaper clippings and reports services" provider. The new tariff also covers other live events such as parades, parks, fireworks displays, circuses and lots of other places. 

One odd thing about the wedding tariff is that it gets doubled if there is dancing. There aren’t many weddings without dancing.  It‘s not easy to figure out why dancing should double the tariff. This is why many may see this as a “dance tax” or even a “wedding tax”.  Depending on how many wedding guests are present, the “tax” payable to SOCAN and Re:Sound can be as much as $253.45, if recorded music is used. (If only live and no recorded music is used, Re:Sound needn't be paid). Presumably, SOCAN’s and Re:Sound’s roving inspectors don’t count as “guests”. And the Copyright Board is permitting and encouraging the sharing of information between SOCAN and Re:Sound.

But that’s not all folks. If you use a DJ, the DJ has to get a copyright license from AVLA – another music industry collective - for the privilege making mechanical reproductions (unless the DJ does not pre-record anything, which would be rare) – for which the DJ will certainly charge the happy couple either directly or indirectly.

It’s true that most people do not tend to get married very often. And many weddings cost $25,000 or more. So, some may not be too concerned about the macro or even microeconomic aspects this particular tariff item. It won’t likely harm Canada’s economy overall or even the institution of marriage. 

But these little tariffs add up. The little tariffs such as $0.29 for a blank CD or $5.16 per year for each K-12 student, or $253.45 for a wedding soon add up to about $500 million a year in Canada. One is tempted to say that "A half billion here, a half billion there, pretty soon, you're talking real money."  Copyright Board tariffs siphon huge sums out of the educational system, the broadcasting and telecom industries, businesses of all kinds that use blank media for ordinary data storage and transfer purposes, etc.  

Sadly, very little of this money through gets to the artists that need it the most.  This is because the copyright collective system tracks and rewards commercial success. Celine Dion, U2,  Lady Gaga and their record and publishing companies do very well by the this system but emerging creators see very little of this money. The ones who really and consistently benefit the most are those who run the collectives, those who are consultants to the collectives, and the lawyers who punctually pursue new and higher Copyright Board tariffs using money raised from the previous tariffs and paid for ultimately by the Canadian public. Many if not most Copyright Board hearings generate millions of dollars in legal fees in order to generate average annual payments to creators that are typically much less than a junior lawyer’s hourly rate. 

Canada is notable and perhaps even unique in its propensity for encouraging multiple tariffs requiring multiple payments to multiple parties for the same transaction. The Copyright Board sees no problem with this approach. It values each right separately, which results in significant additional complexity, hearing costs, and overall license and royalty costs that are inevitably passed on to consumers and taxpayers. We don’t see this nearly as much in the USA, where the Courts and Congress have gone to some length to avoid this phenomenon.  Canada has six times as many copyright collectives as the USA and a copyright tribunal with more than five times the staff and up to two more members than its American counterpart.

There were about two dozen parties opposed to this Re:Sound “live events” tariff. The Board, to its credit, went to some length to allow late interventions, since it took a long time for the thousands of potentially affected parties to realize what was about to unfold. The fact is that very few of Canadians even know about the Copyright Board, much less spend hours every year monitoring the Canada Gazette or the Copyright Board websites, which is where notice is given of these proposed tariffs.  One of the oldest and most cynical observations in Ottawa is that the best way to keep a secret is to publish it in the Canada Gazette. Sadly, this is still true to a great extent – even in the age of the internet.

There was no oral hearing in this instance, which is perfectly understandable – since probably none of the institutional objectors or interveners could have afforded or justified the six or seven figure costs of getting that far. Cost is no problem, however, for Re:Sound – since it has huge cash flows from previous tariffs and it has only one mission – which is to establish and enforce new and higher tariffs. 

It is entirely possible that this “multiple tariff” and “layering” problems may be addressed by the Supreme Court of Canada in the eagerly awaited “pentalogy” of cases from the Copyright Board heard on December 6 and 7, 2011 – all of which emanate from the Copyright Board.

If not, this issue may rise to the top of the list of priorities for the next wave of copyright law reform. In an era of “no new taxes”, Canada’s copyright system is the gift that keeps giving to its more than three dozen copyright collective, their consultants and their counsel. And Canadian citizens from newlyweds to university presidents are beginning to take notice.

HPK 

PS - here's some coverage from CTV that has been updated to include some information about Re:Sound and its tariff revenues.

Access Copyright’s excessive $45 per university student proposed tariff - August 11, 2010 deadline

This is the first in more to come about the proposed $45 per university student tariff - a more than 1,300 % increase over the current basic charge. Access Copyright (“AC”),the proponent, is probably Canada’s fastest growing and least understood collective. It started out as a reprography collective right after the 1988 reform package was proclaimed. Its initial cash flow came conveniently from a lucrative multimillion dollar contact with the Federal Government. It has since managed, with little effective resistance, to convince Canadian provincial governments, school boards, colleges and universities to pay well over $30 million a year into its coffers. The only actual Copyright Board challenge to date that has gone to fruition resulted in a big loss for the K-12 school boards and the provinces ultimately behind them under the umbrella of the Council of Ministers of Education, Canada (“CMEC”). This loss was recently confirmed by the Federal Court of Appeal. More about this and whether this case will go to the Supreme Court of Canada below.

But reprography is becoming obsolete and AC has already decided to move on to “digital”. This ought to be interesting because, in addition to certain other potential serious problems, AC lacks digital rights from a lot of creators and publishers who have been understandably reluctant to involve third parties such as Access Copyright.

Here’s a good piece on AC’s problems in terms of future legislation and its attempted incursion into digital rights by Gary Rodrigues, a former Co-Chair of AC when it was known as CanCopy.

AC also wants to push back on the CCH v. LSUC decision from the Supreme Court of Canada. It has won a temporary partial but significant victory on this front in the Board’s K-12 decision and the recent Federal Court of Appeal decision upholding it. But that may not hold and AC has been understandably muted about its victory proclamations.

Now, AC wants to impose a $45 per head digital, etc. tariff on post secondary students at universities and $35 at colleges. The date for filing an objection is AUGUST 11, 2010. Lots of people and institutions may wish to object. How to do so is explained below.

$45 is not a misprint. Moreover, it’s more than 13 times the current base amount per student. The good news, as if anyone would possibly see it that way, is that it’s all inclusive and doesn’t require the intensely disliked $0.10 per page course pack fee. That’s not really much of a concession since the use of photocopied course packs is rapidly becoming obsolete, rather like blank CDs. The future lies in e-reserves and other legitimate uses of the new technology that could soon make Access Copyright itself obsolete if universities decide to exercise their technological and legal options.

The bad news is that this figure is exorbitant and AC is arguably not entitled to much if not most of this money. It is seeking to charge for all sorts of uses that are simply not covered by copyright law or which are or should be regarded as fair dealing according to the Supreme Court of Canada’s landmark decision in the 2004 CCH v LSUC decision. AC also has serious “repertoire” and rights problems, discussed below. AC wants educators and students (i.e. taxpayers) to pay for much stuff and uses that are or should be free, if the law is properly understood and applied. And, as indicated above, AC may have a big gap in terms of digital rights in the very limited actual repertoire that it has in its system. I will, at a later date, blog about its other “repertoire” problems for those who have not read my analysis published about a decade ago.

There is no comparable tariff or other mechanism in the USA to the proposed digital tariff.

Incredibly, the tariff defines a “copy” to include “posting a link or hyperlink to Digital Copy”. So, that would presumably include any website with copyrighted material. For example, take this blog - please! AC apparently expects to be paid whenever a professor posts a link on his or her website to my blog, or Michael Geist’s blog or the Globe and Mail or eBay. That is simply absurd.

Merely linking does not create liability. If it did, the entire internet would grind to a halt instantly. The whole raison d’être of the world wide web is “linking.” Linking requires neither permission nor payment. The Copyright Board should not even consider the issue of “linking”, because it is not covered by copyright law. This issue is a non-starter and should be eliminated as soon as possible by the Copyright Board before a lot of time and money is wasted on it.

The same for “displaying” a copy on a computer. How, precisely, is one supposed to read anything otherwise? The concept of “display” does not occur in the Copyright Act, other than in connection with dry erase boards.

Of course, in the university context, much or most of the remaining uses will be for a purpose covered by fair dealing under the current s. 29 of the Copyright Act - i.e. research, private study, criticism or review.

Or, these uses will simply be permitted by virtue of an “implied license.” When someone posts a work on the internet without any technical barrier to printing, saving, emailing it, etc. there is very arguably an implied license to do those things (notwithstanding CMEC’s views to the contrary) and most if not all of the other things that AC purports to cover.

The Copyright Board has shown itself to be quite sympathetic to AC in the K-12 matter, which was the first AC file to actually result in a contested hearing at the Board. The Board more than doubled the previously negotiated rate, despite the Supreme Court of Canada’s CCH decision, which was not adequately considered by the parties or the Board - although there was more than sufficient time to do so. The hit on the school boards was enormous. As I blogged last summer:

There will be a whopping four year retroactive liability here of about $18 million a year starting in 2005-2006. That's about $72 million to date, of which about $40 million is additional to what was already presumably being paid at the old rate, allowing for a token discount of 10% to soften this blow. It'll be really interesting to see what AC does with all of this. Almost two of this four year period involved waiting for the Board to issue its decision after the hearing concluded. In fact, most of the hearing took place in June, 2007 with some follow up delayed until October of 2007 due to the illness of a key AC witness.

This at a time when school boards are desperate for money for far more useful and immediate purposes.

The Federal Court of Appeal (FCA) has decided on July 23, 2010 a judicial review case involving this decision, in which I represented the Canadian Association of University Teachers (“CAUT”). Here’s CAUT's response to that decision.

All I will say at this point and, as is always the case here on this blog, in my own my own personal capacity, is that leave to appeal to the Supreme Court of Canada should be sought by CMEC if for no other reason than this decision appears, in my view, to be fundamentally inconsistent with a decision of different panel of the FCA a few weeks earlier. In the May 14, 2010 SOCAN “Previews” case wherein it was held that the research purpose of the consumer of the user or consumer must be considered:

We must consider previews from the point of view of the person for whom they are intended: the consumer of the subject-matter of the copyright. Their purpose is to assist the consumer in seeking and finding the desired musical work.

Substitute “student” for “consumer” and the issue should be quite apparent. However, the Court in the K-12 decision did not even refer to the previews decision, concerning which ample submissions were made. There are also several other grounds for seeking leave to appeal - but I won’t deal with them here.

There can be no doubt that AC will use the Copyright Board’s K-12 decision and the recent FCA decision as spring board’s to achieve a good chunk of what is being sought in the proposed post-secondary tariff.

The proposed $45/year tariff would also require extremely onerous record keeping obligations on the part of the institutions, and privacy and operationally invasive rights to conduct surveys. Not to mention invasive audit rights concerning which CCRA (Canada’s tax collectors) would be envious. This would give a whole new level of irony to the term “Access”. Even professors’ emails must be recorded and reported.

There are about 1.5 million students registered in universities and colleges in Canada, most of whom are borrowing heavily to finance their careers and Canada’s future in scholarship and innovation.

AC wants to take $45 per year from each of university students and $35 for each of the college students per That’s about $60,000,000 a year for those who keep track of taxpayers’ money. That’s in addition to the retroactive windfall of tens of millions of dollars in addition to what had already been paid during the period b given to AC last year by the Copyright Board for K-12. That figure doesn’t include colleges. With actual and potential revenue figures like those above, it’s no wonder that AC can easily budget over $3.1 million for lawyer and other “professional fees” for 2010 as revealed at AC’s recent AGM. That goes a long way, even at the Copyright Board.

Think of all the advanced research chairs or library books that could be bought for these tens of millions of dollars. That might create real innovation.

There is no comparable regime in place in the USA to impose similar restrictions, bureaucracy, copyright chill and costs on the K-12 and post secondary educational systems. American law has codified such that most if not all of the copying activity in schools and on campuses is “fair”, including the use of multiple copies in the classroom. While the FCA clearly did not agree with this approach, hopefully the Supreme Court of Canada would do so if given the opportunity.

What should be done about the new proposed $45 p.a. annual “tax” on university students?

If this hearing follows the usual course, it will take several years to unfold, will cost several million dollars in legal fees, surveys, etc. and result in a fairly predictable amount of $23-$26 per year per student - more or less the average of the overreaching amount sought and the previous basic amount paid. Some of the more outrageous “rights” would be dropped as well. Both sides would claim victory.

However, that would hardly be a victory if the end amount should really be more like $2 per student - or maybe even much less - which is not unreasonable in a post CCH and mostly digital and networked world.

I understand that the Association of Universities and Colleges of Canada AUCC has decided to fight the tariff at the Board. Others are expected to file objections and it is important that this be done in order to ensure that all possible arguments are made at the Board hearing stage and that the record before the Board is as adequate as possible. Part of the problem in the K-12 decision was that the record was inadequate. Even according to CMEC, which represented the K-12 school boards, the basic underlying survey should have been done “differently” in light of the CCH v. LSUC, which it did not fully take into account when the survey methodology was agreed to. While objectors other than AUCC may have limited direct input or control into the expected mega-survey, they should arguably be given an opportunity to comment on the adequacy of the proposed methodology.

People and institutions contemplating objection should understand that:

1. there are no “costs” consequences in terms of the other sides’ legal costs when filing an objection at the Copyright Board, even if one later withdraws.

2. The sometimes controversial “interrogatory” process at the Copyright Board can only be used to demand production of relevant information. And it works two ways.

Thus, a number of institutions, and even interested professors, students, librarians and other interested members of the post secondary community may wish to object. In the private copying cases, there were as many as 3,500 objections.

Canadian teachers, students, post secondary administrators and taxpayers should not want to unnecessarily pay tens of millions of dollars per year to exercise rights that they already have or do not need or don’t even exist, or that AC may not be entitled to enforce. Our educational system cannot afford such inefficiency.

Bill C-32, even if passes with the word “education” included in s. 29, will not necessarily solve any problems here. Given the Copyright Board’s rulings to date on what is “fair”, and the FCA’s reluctance to interfere, the legalisation needs more clarity - such as the “such as” wording we see in the USA and an explicit reference to “multiple copies.” Besides, waiting for Parliament to enact copyright legislation may be like Waiting for Godot. The educational community has been “waiting” for adequate exceptions since Flora MacDonald promised them in the “fall” - of 1988.

The Supreme Court of Canada may provide the necessary clarity in this situation as it did with the legal research issue. However, we must wait upon CMEC to see whether it will seek leave to appeal and whether such leave will be granted. There is a good chance here that leave would be granted, if sought, because the K-12 decision of the FCA seems inconsistent with the SOCAN previews decision of a few weeks earlier and rumours are strong that SOCAN will also seek leave. It would seem very important that this discrepancy be resolved. The Supreme Court of Canada sometimes likes to hear cases that come in contrasting “pairs”. In this case, the cases are from different panels of the same Court.

The Copyright Board seems to have an unstated “rocket docket” policy when it comes to AC. One can see this not only in the previous K-12 file but the currently unfolding attempt by AC to get $24 per FTE provincial government employee. Important decisions are likely to be made at an early stage, even while events are brewing in Parliament and the Courts that could and should provide game changing developments. Given AC’s very substantial revenues of well over $30 million a year even before the K-12 windfall, there would seem to be no need to move too quickly on the post-secondary file. That is why, in this case, additional voices may be needed to make these and other points.

How does one file an objection? It’s quite simple:

• Fax it or email it to:

GILLES MCDOUGALL

Acting Secretary General

56 Sparks Street, Suite 800

Ottawa, Ontario

K1A 0C9

613-952-8624 (telephone)

613-952-8630 (fax)

gilles.mcdougall@cb-cda.gc.ca (email)

• Indicate who you are and generally and why you are objecting - i.e. if you think that the amount sought is excessive and exorbitant, that AC is seeking to license rights it doesn’t have in respect of repertoire it doesn’t have, etc.

• You don’t need any detail. Details come much, much later. Anything much longer than one or two pages is longer than necessary at this stage. And details at this stage won't have any effect on the outcome. The objection is simply a necessary step to full participation.

• Provide your full contact information.

Note that the Board’s Model Directive on Procedure can be found here.

DO SO ON OR BEFORE AUGUST 11, 2010.

BTW, I should disclose that I am a member of AC and I do cash their little cheques each year, and hopefully redistribute the sum to good causes. However, I and many AC members - at least those in the academic and professional communities - would happily write what we write with or without this payment and would happily see this amount substantially reduced or eliminated if AC’s tariffs were to be substantially cut down to size for the benefit of the Canadian educational system, which is spending tens of millions of unnecessary dollars each year, not to mention the bureaucratic costs and the chill factors inside the educational system which are so significant that they are “priceless”.

The largest single creator beneficiary of AC’s mechanism has received about $7,000 per year, a figure which falls off very quickly, according to the 2007 Friedland report. So, whatever the purpose of AC may be, it is not doing a lot to keep individual writers writing. And that’s a very tiny fraction of the $3.1 budget for legal costs alone for 2010.

HK

PS - the above has provoked a huge and interesting discussion at Michael Geist's blog and at Techdirt.