Unsettling Comments from the Ontario Courts re the Settled Law of Trademarks and Parallel Importation

The Ontario courts have made some unsettling comments suggesting that the Canadian trademarks law is “unsettled” on the issue of parallel imports or grey marketing. Ironically, like the leading Canadian case on parallel imports discussed below, this also appears to be a case about chocolate bars. The comments were made in the context of an attempt by the parallel importers to defend against the enforcement of March 2006 settlement agreements on the basis that the settlement agreements were in restraint of trade and, therefore, void.

In  Mars Canada Inc. v Bemco Cash & Carry Inc. 2016 ONSC 7201 (CanLII), Justice F. L. Meyers of the Ontario Superior Court stated that:

[8] …. The law is unsettled as to whether a Canadian trade-mark holder can prevent third parties from selling products bearing the Canadian company’s trade-marks which are legitimate goods sourced from a foreign parent or affiliate of the Canadian trademark holder. …

The motions judge goes on to state:

[10] The parties argued at some length about the current state of the law concerning grey marketing in Canada and whether, in particular, a Canadian trade-mark holder is entitled to enforce its trade-marks to prevent sales in Canada by third parties of genuine product purchased from the trade-mark holder’s foreign parent company. I have not found it necessary to resolve that issue as part of the resolution of the motion before the court.

The Ontario Court of Appeal recently repeated this comment in an appeal of the foregoing decision in Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239:

[4]          …The law is unsettled as to whether a Canadian trademark holder can prevent this activity.

With respect, there is nothing that is “unsettled” about this question. Nor was anything unsettled even back in March 2006 (when the settlement agreements were entered into) about whether Canadian trademark law can be used to “thwart” parallel imports, which are by definition legitimate products put on the market by a trademark owner in another country. The answer was and is clearly “no” – except perhaps in very rare factual situations where the imported product may be of a materially different character or quality than the Canadian product and consumers get to buy a very different product from that which they expected. Usually, these grey market cases involve identical products – even from the very same ultimate source – that were acquired outside of the “official” or “authorized” channels of trade. While such parallel trade might displease the Canadian trademark owners or exclusive licensee or distributor who wishes to lessen competition and raise prices in the Canadian market, trademark law does not give them any such power.

The well-known 2007 Supreme Court of Canada decision in  Euro-Excellence Inc. v. Kraft Canada Inc., [2007] 3 SCR 20, involved the parallel importation of Toblerone and Côte d’Or chocolate bars concerning which Kraft sought unsuccessfully to “thwart” parallel importation by using copyright law instead of trademarks law. Kraft was the trademark owner in that case and if it could have used trademark law, it surely would have done so. It was represented by a very sophisticated IP litigation firm.

I made the prevailing arguments in that case in the SCC on behalf of the intervener Retail Council of Canada. Kraft tried to use copyright law because it knew that trademarks law wouldn’t work and was a non-starter. In fact, Kraft’s very experienced counsel told INTA, the major American based International Trademark Association, in a June 23, 2006 letter to encourage it to intervene in the SCC, that:

In light of the limitations imposed by legal authorities on enforcement of trade-mark rights in cases of parallel importation, Section 27(2) is very important to intellectual property right holders.

Indeed, as the trial Judge, whose decision was eventually overturned, noted that, even though it was not contested that Kraft owned the trademark, it did not try to invoke trademark law in its attempt to thwart the parallel importation of its chocolate bars. Instead, it developed an interesting strategy, alleging that the importation infringed its copyright in the artwork on the chocolate bars wrappers:

 [4] Kraft has developed an interesting strategy in an effort to thwart Euro Excellence's

distribution of these chocolate bars in Canada. To better appreciate the strategy, I should first say what it has not done. If it put distribution restrictions on Euro Excellence's supplier, it has not invoked them. Nor does it rely on trade-mark protection, although it alleges, and it is not contested, that it is the owner in Canada of the trade-marks "Côte d'Or" and "Toblerone". What it has done is take Canadian licensing rights in the artworks on the chocolate bar wrappers which have been copyrighted in Canada. It does not seek to enjoin Euro Excellence from distributing Toblerone and Côte d'Or chocolate bars. Rather, it seeks to enjoin it from distributing the copyrighted artwork on the wrappers. The idea is that the cost of re-wrapping or covering over the copyrighted artwork would act as a major disincentive...(emphasis added)

Kraft Canada Inc. v. Euro Excellence Inc. (F.C.), 2004 FC 652

(highlight and emphasis added)

Here is a comment I wrote for LSUC in 2008 shortly after the decision.

Even a trademark “owner” cannot use trademarks law to stop parallel importation. There are no developments since the Kraft case of which I am aware that would suggest otherwise.  I would be very interested in hearing from any expert counsel or academic who believes otherwise. Notwithstanding some obiter dicta in the Smith & Nephew, any attempt to change ownership of Canadian trademarks in favour of a Canadian subsidiary so as to enhance the chance of a more positive outcome in a grey marketing case is fraught with risks that include the potential loss of distinctiveness of the trademark and income tax issues.

The law was also clear before the Kraft decision.  See also:

·       Consumers Distributing Co. v. Seiko, [1984] 1 S.C.R. 583

·       Coca-Cola Ltd. et al. v. Pardhan et al. (1999) 85 C.P.R. (3d) 489 Affirming 77 C.P.R. (3d) 501 (FCA)

·       Smith & Nephew Inc. v. Glen Oak Inc. et al.; Beiersdorf Ag, Necessary Party (1996) 68 C.P.R. (3d) 153.

It is worth noting that this Bemco litigation – which has a very long and voluminous record – arises from a settlement agreement entered into in March, 2006 – at the very time when leave to appeal to the Supreme Court of Canada was being sought in the Kraft case. Perhaps Bemco settled in 2006 based upon perceived uncertainty about whether copyright law could be used to “thwart” parallel importation of chocolate bars. I don’t know and can only speculate.

However, the law on trademarks and grey marketing/parallel imports seemed very clear at the time, as shown above, which is why Kraft had chosen to frame its litigation as a copyright case. I make no comment on the underlying issues concerning the Bemco settlement agreements or the ensuing litigation in which it was apparently been argued that the settlement agreements were in a “restraint of trade”.

Speaking generally, and not about this case in any way, there are potential issues regarding settlement agreements involving intellectual property that can raise serious antitrust and pubic interest issues. This has become quite obvious in “pay for delay” cases involving generic drugs, such as FTC v. Actavis that went to the US Supreme Court.

I reiterate that I make no comment on whether or not the 2006 agreements made commercial or legal sense at the time. However, they were apparently negotiated by sophisticated parties with experienced counsel. Courts are normally very reluctant to set aside such agreements, and that seems to be the conclusion reached here after much obviously expensive and complex litigation concerning which I make no comment, except for the following.

For whatever reasons, the Ontario Superior Court and now the Ontario Court of Appeal have recently stated that the law concerning trademarks and parallel imports is “unsettled”.  This is of some concern if other parties and counsel begin to believe that perfectly legal commercial activity involving grey marketing may now be illegal or even arguably so under Canadian trademarks law. The fact that the Ontario courts in this very protracted Bemco litigation seem to believe and feel the need to state that the law regarding trademarks and parallel imports is “unsettled” is in itself unsettling.

HPK

Submission of Civil Society Coalition at WIPO SCCR 36 on Broadcasters' Rights Treaty

SUBMISSION OF

CIVIL SOCIETY COALITION

http://www.civilsocietycoalition.org
WIPO SCCR  36

Howard Knopf

May 28, 2018

1.      This current proposal frankly seems to be a proposed treaty that is mostly in search of a problem that doesn’t exist.

2.      If the problem is piracy, there are adequate and effective means of stopping piracy now in place virtually everywhere.  

3.      This proposed treaty is inevitably going to cause unintended consequences and complications concerning the internet.

4.      Among the many concerns we have about the broadcast treaty are:

a)      will the treaty outlaw the use of Virtual Private Networks (VPNs); and,

b)      will the systems of safe harbors for ISPs we now have for copyright also apply to the new broadcaster rights?

5.      It will create a potentially impenetrable thicket of new rights that will prevent lawful access to the underlying content, even long after the copyright – if any – may have expired.

6.      This reminds me of the WIPO Washington Treaty of 1989 – which was about integrated circuit protection – which was the next big thing at the time. That treaty was unnecessary and still hasn’t entered into force 29 years later.

7.      I note that this proposed treaty has been under urgent discussion for almost 20 years – and there’s still no evidence of any problems and the sky has not fallen. Indeed, new platforms for delivering digital content are exploding, and doing very well.  Lawful and convenient offers have reduced the piracy problems.  

8.      Canada has modest but adequate and effective provisions in its Copyright Act for the protection of the right of broadcasters. These provisions do not create the many problems that we foresee with this treaty as currently proposed. Canada’s provisions are as follows:

Rights of Broadcasters

Marginal note: Copyright in communication signals

    21 (1) Subject to subsection (2), a broadcaster has a copyright in the communication signals that it broadcasts, consisting of the sole right to do the following in relation to the communication signal or any substantial part thereof:

        (a) to fix it,

        (b) to reproduce any fixation of it that was made without the broadcaster’s consent,

        (c) to authorize another broadcaster to retransmit it to the public simultaneously with its broadcast, and

        (d) in the case of a television communication signal, to perform it in a place open to the public on payment of an entrance fee,

    and to authorize any act described in paragraph (a), (b) or (d).

    Marginal note: Conditions for copyright

    (2) Subsection (1) applies only if the broadcaster

        (a) at the time of the broadcast, had its headquarters in Canada, in a country that is a WTO Member or in a Rome Convention country; and

        (b) broadcasts the communication signal from that country.

    Marginal note: Exception

    (3) Notwithstanding subsection (2), if the Minister is of the opinion that a Rome Convention country or a country that is a WTO Member does not grant the right mentioned in paragraph (1)(d), the Minister may, by a statement published in the Canada Gazette, declare that broadcasters that have their headquarters in that country are not entitled to that right.

Term of copyright — communication signal

23 (1.2) Subject to this Act, copyright in a communication signal subsists until the end of 50 years after the end of the calendar year in which the communication signal is broadcast.

Thank you.

Howard Knopf

CIVIL SOCIETY COALITION WIPO SCCR 36 SUBMISSION ON LIMITATIONS AND EXCEPTIONS

CIVIL SOCIETY COALITION

NGO SUBMISSION

http://www.civilsocietycoalition.org/

WIPO #SCCR36

Howard P. Knopf

Wednesday, May 30, 2018

• Unfortunately, certain interest groups and some experts are attempting to push back on limitations and exceptions and to use this forum to achieve that goal internationally
• It also seems that Canada is now the focus of much of this debate – and there are even frightening references to the “Canadian Flu” – being the supposedly dangerous cumulative effect of three SCC cases that were, in fact, decided before the inclusion of the word “education “in the fair dealing provision of the CCA took effect in 2012.
• It seems that certain experts are now “shocked, shocked” as it were that multiple copies are now being made and used legally in Canadian classrooms – in a manner perfectly legal even before the 2012 Canadian legislation. There have even been astonishing and, with respect, I believe very incorrect allegations from our esteemed friend Mihaly Ficsor that Canadian law contravenes the Berne three step test and the TRIPS treaty.
• That, of course, is frankly not credible.  Canada’s fair dealing statutory regime and case law stop far short in many respects than 17 U.S. Code § 107 – which allows for “teaching (including multiple copies for classroom use)” - and which has been the law since 1976 – 42 years – without any challenge under international law.
• However, many would prefer that the American concept of fair use and its embodiment in American law should NOT be adopted outside that country have no hesitation to say, “Do as we say, not as we do”.
• So, let us use this forum to achieve a better understanding of “users’ right” and the expansion of limitations and exceptions in a “large and liberal” manner – consistent with other exemplary laws, such as that of the USA.

Thank you.

Howard Knopf

Harmonizing Tariff Regimes and Statutory Minimum Damages: A Wolf in Sheep’s Clothing? UPDATE

(Wikemedia)

May 31, 2018 UPDATE of original post from May 26, 2018

I’m hearing that the Government is planning to table legislation concerning the proposal below before the House of Commons recesses for the summer. This could come the week of June 18, 2018.

If I am right about what the bill will try to do, the current Ministers and those of their staff and officials who are not familiar with the intensity of controversy that a bad copyright bill can arouse are in for a very unpleasant surprise. There are millions of voters who will not react well to a new “tax” on education that will increase costs and limit access to knowledge and inhibit innovation. This Government may have a majority and can pass any bill it wants in the House of Commons. But the Senate may not be so compliant and there will be millions of affected voters who will have an opportunity to express their views on a new “education tax” in November of 2019.

And, just to remind everyone, “education” is a provincial matter under Canada’s Constitution.

Giving the Copyright Board another million dollars a year was a bad idea because it will only slow things down even more and create the potential for administrative law challenges because the decision makers will likely have even less role in deciding decisions. However, harmonizing statutory minimum damages and maybe even tariff regimes on the fly at the behest of a very unpopular collective which wants a legislated business model that would give it a monopoly right to to threaten draconian litigation against its best customers is an infinitely worse idea. It could prove to be the worst copyright policy initiative in the long and often painful history of Canadian copyright law.

HPK

*************

May 26, 2018

There is a very pernicious proposal afoot which some federal bureaucrats have been led to believe will help to fix things up at the Copyright Board by harmonizing tariff regimes, or at least the statutory minimum damages provisions available to collectives.

I have not seen the documents provided to the Government or the Government’s own internal documents. However, it seems apparent that this effort is being pushed by Access Copyright and is at best disingenuous and at worst deceptive, misleading and dangerous. Above all, it seems clear that this proposal, despite its ostensible purpose, has nothing whatsoever to do with fixing the Copyright Board – and would make things even worse in that respect, as I explain below.  Indeed, it would appear that there is a very different and ulterior motive behind this proposal.

There are provisions in the current Copyright Act that allow SOCAN to go after statutory minimum damages of three to ten times the tariff amount. So, if a recalcitrant bar or restaurant doesn’t want to pay $150 per year in applicable royalties, it can be threatened with up to $1,500.  A reasonable settlement will usually be reached. Not a big deal.  SOCAN tariffs are “de facto”, even if not “de jure”, mandatory – if the bar or restaurant wants to play contemporary popular music. If that’s what it takes to encourage bars and restaurants to pay for music, then so be it.

Now, however, Access Copyright is trying to convince – some might say to “con” – the government into making the same kind of 3 to 10 times regime applicable to educational institutions. The regime that applies to Access Copyright is not remotely comparable to the SOCAN regime. Access Copyright has comparatively little repertoire and offers comparatively very little in value to educational institutions, which is why so few are voluntarily signing licenses with Access Copyright anymore. Michael Geist has recently been documenting how institutions are spending a great amount of money to clear their copyright requirements – but they are spending it in other more productive and efficient ways than on Access Copyright. There is no reason for any institution to pay more than once for any required permission. The notion that a big university can be intimidated with a potential liability of 3 to 10 times the total amount of a tariff that didn’t’ need to be paid in the first place and resulting in a threatened liability of many millions of dollars is nothing short of offensive and scandalous.

This amendment would seem to be intended to intimidate educational institutions into believing – or maybe even to legislate in such a way –  that just one unauthorized copy of one single work in Access Copyright’s rather limited repertoire could result in liability of three to ten times the amount of a tariff, notwithstanding that the Supreme Court of Canada has ruled in CBC v. SODRAC that such tariffs are NOT mandatory for users.  (The Federal Court did not read the Supreme Court’s decision that way in the Access Copyright v. York University case, but the Federal Court’s decision is under appeal.) Access Copyright wants $26 per FTE student per year. In a bigger university, there are well over 50,000 students. That’s more than $1,300,000 per year and the Copyright Board makes everything retroactive by several years because it is very likely the slowest tribunal in Canada and perhaps anywhere else. The Copyright Board is still cogitating Access Copyright’s 2010 tariff proposal for post-secondary – that’s 8 years and counting with no endpoint in sight. That’s unheard of in Canadian tribunals or courts.

This is nothing short of an end run around the appeal process in the Access Copyright v. York University  litigation, which many believe that Access Copyright will likely lose in the Federal Court of Appeal – and/or ultimately in the Supreme Court of Canada. That prospect may be behind this initiative, which is dressed up to look like Copyright Board reform. In turn, it’s  also an end run around the Supreme Court of Canada’s 2015 conclusion in CBC v. SODRAC, which held that “the statutory licensing scheme does not contemplate that licences fixed by the Board pursuant to s. 70.2 should have a mandatory binding effect against users”, a fundamentally important ruling that arguably should have brought a quick end to the York University litigation. (Yes – I’ve been involved in both these cases).

It’s also a shocking end run around the whole s. 92 Copyright Review process. This would be a monumental legislative change by stealth to a system that has evolved with great care and deliberation over a period of 80 years.

Above all, it has nothing whatsoever to do with fixing the Copyright Board. Virtually all of what needs to be done to fix the Copyright Board in the medium term can and should be done by regulations pursuant to the existing legislation. Bureaucrats who believe otherwise are, with respect, simply wrong. See my submissions to the Senate and to the Government.

Indeed, this proposal would only make things worse at the Copyright Board because lots of parties would feel obliged to mount strong and expensive objections if there is any serious concern about possible liability for multiple times the cost of a so-called “mandatory” tariff – and the possible retroactive imposition of such a tariff.

It’s very disappointing that this proposal is being given ANY consideration. It should have been screened out before it took up anybody’s time. If it does see the light of day in a bill, there will be a massive and messy opposition to it from many of the millions of people involved in the educational community.

Ill conceived copyright policy and especially legislation can be toxic to politicians, as Sheila Copps, Sarmite Bulte, the late Jim Prentice, and others have learned to their considerable chagrin. Unfortunately, today’s Ministers are apparently getting some very bad advice on this issue from some of their bureaucrats.

These are my own personal opinions and not necessarily those of any client – but I know that they are shared by other knowledgeable people.

HPK

The Government’s Review of the Copyright Act and the Copyright Board – What’s at Stake? ALSO Presentation May 5 2018

I had the pleasure of speaking at the conclusion of the above event by a worthy origination - Artists’ Legal Services Ottawa (ALSO) - while the audience listened politely and was contemplating the outdoor patio reception across the street on one of the first nice days of spring.

It was good to see some old colleagues and meet some new ones.

I spoke about "The Government’s Review of the Copyright Act and the Copyright Board – What’s at Stake?"

Here are my slides from May 5, 2018.

HPK

CBC is Destroying its Archives in the Name of Preservation - Better Governance Needed

This press release below raises very serious issues about the governance of the CBC - not unlike recent issues involving the National Gallery and the inexplicably bad decision to "deaccession" Chagall's masterpiece Tour Eiffel painting. How can lame duck outgoing presidents - Hubert Lacroix of the CBC  and Marc Mayer of the National Gallery - be allowed to do so much damage? Where is the good governance? Independence is important - but so is the national heritage. We need to do better. The National Gallery train wreck was somehow averted.This one must be too.Tell @JustinTrudeau @MelanieJoly 

HPK

FRIENDLY GIANT FACES FIRING SQUAD!

TORONTO, ON.  April 30, 2018.   Thousands of episodes of home-grown CBC television shows that captured life in Canada are about to be systematically destroyed.

Gone in a flash will be childhood icons like The Friendly Giant and Mr. Dress-up, as well as episodes of Canadian television classic such as Wayne & Shuster, King of Kensington, Tommy Hunter and The Beachcombers. 

CBC has decided betacam versions of these and hundreds of other iconic Canadian TV shows are no longer relevant so a destruction order for 26,163 recordings will be carried out this week. These vintage recordings will be ground up into small pieces, then shipped for incineration to New York where the steam generated will feed energy into the state’s power grid.

This is a precursor to the mass digitization program CBC plans to launch this summer during which close to one million English-language original program ‘carriers’ will be destroyed after being transferred to the latest digital media formats. 

This controversial plan flies in the face of international archival protocols that, because of the instability and insecurity of present-day digital media (think how frequently we are warned of ‘hacking’ threats’) requires the preservation of original content.

“The CBC’s digitization plan will be underway for five years”, said Kealy Wilkinson, Executive Director of the Canadian Broadcast Museum Foundation.  “Until we can gauge the reliability of the outcome, it would be foolhardy to destroy early generation copies like betacam - or original programs. 

It is up to the CBC and the Department of Canadian Heritage to halt any destruction.

Doing less risks the extinction of Canada’s national audiovisual history.”

The Canadian Broadcast Museum Foundation (CBMF) is a not-for-profit charitable foundation working in the public interest to preserve and provide public access to Canada’s history, culture and broadcasting heritage.

Media contact: Kealy Wilkinson, Executive Director, Canadian Broadcast Museum Foundation, Email: cbmf0fmcr@gmail.com, Phone: 416-367-4772. 

How a Polish Holocaust Story Became the Basis of a Controversial Copyright Case in Canada’s Federal Court

There has been a lot of news lately about Holocaust remembrance and a proposed Polish law that would criminalize references to “Polish death camps” and complicity of the Polish nation in atrocities carried out against the Jews during that period. As the Washington Post reports on February 2, 2018: “The law would essentially ban accusations that some Poles were complicit in the Nazi crimes committed on Polish soil, including in the Auschwitz-Birkenau extermination camp, where  more than 1.1 million people died. Germany operated six camps in Poland where Jews and others that the Nazis considered enemies were killed.”

Despite the extremely dark side of what happened in in Poland before and during the Holocaust, there are many stories about incredibly and extraordinarily brave Polish people who risked everything to save Jews from the Nazis and Nazi sympathizers in Poland.  Many of these heroes have been honoured as Righteous Among the Nations by the Israeli Holocaust memorial institution, Yad Vashem. One such particularly poignant story concerns Franciszka Halamajowa and her daughter Helena, two Polish-Catholic women who saved 15 Jews and a German defector. Eight of them were family members of Judy Maltz, who, together with Barbara Bird and Richie Sherman, made a wonderful documentary about this story. They were my clients in an unsuccessful copyright infringement lawsuit in the Federal Court of Canada alleging copyright and moral rights infringement of their documentary.

I get asked a lot about the controversial case of Maltz v. Witterick and Penguin, 2016 FC 524 (CanLII), http://canlii.ca/t/gr8mf. I’ve been asked to speak about it at a law school. After this judgment of the Honourable Mr. Justice Keith M. Boswell of the Federal Court, which was devastating to my clients, and the substantial costs award against them of $39,200, they decided not to pursue an appeal – though I did serve and file a Notice of Appeal (see below), which outlines in some detail what would have been argued on appeal. For the reasons discussed below, the appeal was subsequently discontinued.

In response to this ruling, my clients decided to make their documentary freely available online and indicate their rationale for doing so on Ms. Maltz’s Facebook page, which provides a link to the free video. The DVD can also be purchased online via Amazon, if you want a higher quality version. Here’s the official website for the film.

In a nutshell, my clients created an acclaimed film documentary in 2009 about a very brave Polish woman, Francisca Halamajowa, who at enormous risk hid and cared for three Jewish families and a defecting German solider in the pig sty, attic, and a hole dug under the kitchen of her tiny little house in the village of Sokal during WWII. A Toronto investment fund manager named Jennifer Witterick saw the film at a screening in Toronto in 2012 and then wrote a book called “My Mother’s Secret”, which was self-published in early 2013. It was subsequently published by Penguin in several languages and several countries.  The book was described by the author as a work of fiction. However, it appeared for a long time on the Globe and Mail’s non-fiction bestseller list. My clients alleged that Witterick’s book infringed their copyright and moral rights.  I will not comment on the case or the decision any further at this time. I may do so one day in greater detail. Meanwhile, interested readers may wish to refer to documents provided below.

The Notice of Appeal spells out in considerable detail why my clients believe that the case was wrongly decided. Nonetheless, my clients chose not to pursue the appeal, already having incurred the  significant costs award for their loss in the Federal Court. Unlike Ms. Witterick, my clients are not wealthy. Penguin obviously has huge resources.  After their experience in the Federal Court, my clients did not wish to risk further losses in terms of costs payable to the other side in the event that the appeal might not have succeeded. Because much of the trial judgment would likely have been argued to be in the nature of fact finding, there was a real risk that an appeal might have failed based upon the usual great reluctance of the Federal Court of Appeal to second-guess the trial judge on findings of fact.

In the meantime, it may be useful to those who are interested in the case, including copyright law professors and their students, to have convenient access to the following documents which have filed with the Federal Court and Federal Court of Appeal and are on the public record:

Amended Notice of Application dated September 23, 2014 which includes in detailed chart form the 30 instances of what was alleged to be verbatim or nearly verbatim copying. Note that this was an “application”, in contrast to an “action”, and there was, accordingly, no document such as a statement of defence responding to it directly.

Applicant’s Memorandum of Fact and Law

Respondents’ Memorandum of Fact and Law

Notice of Appeal dated June 10, 2016

Notice of Discontinuance July 27 2016

The above, of course, is by no means the entire record, which includes many volumes of affidavits, transcripts of cross-examination, expert affidavits and cross-examinations, and countless exhibits which are referenced in the memoranda.  However, these documents provide further information for those interested in this case.

HPK

Maybe the Canadian Copyright Bar and the Copyright Board Should Try Some PMNOC Remedies Instead of Rearranging the Deck Chairs?

(deck chairs you know where awaiting rearrangement...)

On November 3, 2017, I spoke at the University of Toronto Sixth Annual Patent Law Conference, on the “promise” issue and its treatment in parallel proceedings with very interesting timelines by a NAFTA ISDS tribunal and Supreme Court of Canada. I shall have a lot more to say about that later in a separate posting.

The conference opened with the panel discussion chaired by Chief Justice Crampton of the Federal Court about how the Court would deal with the new regime that will eliminate the troubled two track PMNOC applications and litigation proceedings regime that has existed for many years in the federal court. Even under the old system, the Court was required by law to deal with the “NOC Applications” (where in rem validity and infringement were not determined) within 24 months from start to finish including the judgment. Under the new system, as required by CETA, the proceedings will be in the form of an action with discoveries and live witnesses (in contrast to an application in which there was no oral evidence) and will also deal with in rem validity and infringement determinations. All of this must be dealt with within 24 months from beginning to end, which will include a hearing of normally two weeks maximum to take place at least three months before the end of the two-year period so as to allow the judge time to write a judgment. Here is how the Court has spelled out how this will be done. Based on the Court’s admirably transparent and useful statistics for the last several years, it is safe to assume that there will be dozens of such proceedings per year for the foreseeable future. There are about 40 active judges on the Federal Court. However, many are “supernumerary” which means that they usually carry about half of a normal case load – which can still be considerable. They each have only one clerk. There is no in-house research facility. The vast case load of the Federal Court ranges from admiralty to extradition to land claims to environmental issues and much more in terms of jurisdiction, including countless immigration files which are obviously extremely important to the individuals involved. Many cases are immensely complex both legally and factually and can involve enormous amounts of money and huge public policy issues. Most Federal Court judges manage to issue an important judgment every month and judgments are expected normally within six months after a hearing, which normally takes place within one to two years at most after the proceeding is commenced. Many proceedings are very competently and often aggressively “managed” (i.e. moved along) by Case Management judges (who are sometimes Prothonotaries with more limited powers than Judges). 

This should serve as a much-needed reality check on what is happening, or more accurately not happening, at the Copyright Board. The Copyright Board rarely holds more than two or three contested hearings a year and rarely issues more than five actual “tariffs” per year. Very few of the matters coming before the Copyright Board are ever nearly as complex factually or legally as these pharmaceutical patent cases, which also usually involve very large amounts of money.

And yet, everyone knows that for contested matters the Board typically takes more than four years even to get to a hearing and more than three years thereafter to render a decision that is almost invariably and often successfully challenged in the Federal Court of Appeal and, six times in the last five years or so, taken to the Supreme Court of Canada. These decisions are invariably retroactive for several years causing great doubt and uncertainty for all concerned, and often unexpected windfalls or liabilities as the case may be. Even the uncontested matters move at barely more than a glacial pace.

If the Federal Court, which has a very broad mandate and enormous caseload based on a vast range of subject matter, can deal with dozens of pharmaceutical patent cases each year and dispose of actions including discoveries and two-week trials from beginning to end including judgment in 24 months or less, surely it is not too much to expect similar performance results from the supposedly expert and specialized Copyright Board with its tiny fraction of the Federal Court’s caseload. However, it is clear that the only way that this will happen is with specifically mandated legally imposed deadlines as we are now seeing in the Federal Court and have seen elsewhere. All the talk about increased resources for the Copyright Board, which is not only unnecessary but potentially even very counterproductive, and the rearranging of specifics, such as they are, of the procedural steps in the Board’s Model Directive on Procedure, and other suggested tinkering, will be of no effect in the absence of legislation and/or regulations that set forth the basic procedural steps and deadlines for meeting them. Many of the submissions in the recent consultation effort involving suggestions for fixing the Copyright appear to be pulling their punches, or not even punching at all or in the right direction.

The Federal Court, the PMNOC bar and ISED are to be congratulated for dealing decisively with a very urgent, vast and complex situation that is, by any measure, much more difficult than that facing the Copyright Board.  The Copyright bar and the Copyright Board have much to learn from this example and, if they ignore it or fail to learn from it, may do so at their considerable peril. The Minister of ISED may wish to consider a process to encourage - and if necessary require - such learning and instruction.

Note that the Board has recently issued an astonishing number of notices directed toward holding hearings involving countless parties and consolidating several proposed tariffs no later than May and June of 2018 in an apparent effort to accelerate the imperceptibly glacial pace of its previous proceeding. This is notwithstanding the onslaught of judicial review resulting from the Board’s extremely belated and very likely incorrect ruling on the so-called “making available” right and the tariff itself more than 39 months after the retirement of Chairman William Vancise who presided over that already long delayed matter. Here are the key notices:

[CB-CDA 2017-105]	06/10/2017	Notice	Online Music Services (SOCAN: 2014-2018; Re:Sound: 2013-2018; CSI: 2014-2018; CMRRA: 2014-2018; SODRAC: 2014-2018; Artisti: 2016-2018)
[CB-CDA 2017-106]	06/10/2017	Notice	Internet - Audiovisual Content and User Generated Content (SOCAN: 2014-2018; CMRRA: 2016-2018; SODRAC: 2015-2018)

The first matter is very intertwined with the “making available” morass, which could have and should have been resolved many years ago by means of a simple reference to the Federal Court of Appeal. Instead, the Board allowed what should have been at the most a simple legal question to turn into an immensely complicated and unnecessary battle of international experts and then, in turn, failed to decide the legal issue quickly and separately from the rate determination. The result is five judicial review applications that cannot foreseeably be determined in time to avoid a potential train wreck of a hearing next June or, at the least, immense wasted expense on interrogatories and experts. If the Board follows through on this schedule that will result in a June 2018 hearing before the FCA has ruled (and potential SCC involvement), the resulting potential for chaos is painful to contemplate. If the parties object to this sudden rush, the Board may suggest that it is the parties to blame for the slowness of proceedings. On the other hand, parties may have their own reasons at this time for being deferential to the Board on this file. There is plenty of blame to attribute all around for the present state of affairs – and at this point, undue haste may create even more waste.

On both of the above files, there are a great many other notices that follow, which can be found here.

The Board’s apparently sudden and  frenetic activity -  especially in the face of active judicial review that could render much of this to be a waste of considerable time and resources - is doubtless going to be perceived as being a reaction to the Senate and the Government’s concern and  consultation effort concerning the Board and the S. 92 review about to begin. Whether or not the Board can get to these hearings by May and June of 2018 - or whether the many parties so accustomed to slower and more leisurely proceedings let this happen – remains to be seen. Whether the consequences of this new infusion of administrative adrenalin with lead to clarity or chaos also remains to be seen.

The obvious solution to the overall problems at the Board that can no longer be ignored is that the Government should ensure through regulations and, if necessary, legislation, that:

• Timelines are set, as in the case of PMNOC matters, that result in tariffs being determined with reasons within a finite time. If 24 months works for pharmaceutical patents, it should also work for Copyright Board tariffs with no exceptions.
• Copyright Board tariffs should never be retroactive – or at most only minimally so to the necessary extent, consistent with Supreme Court of Canada jurisprudence going back to 1954. See Maple Leaf Broadcasting v. Composers, Authors and Publishers Association of Canada Ltd. [1954] SCR 624 at p. 631. See also Canadian Broadcasting Corp. v. SODRAC 2003 Inc., [2015] 3 SCR 615, 2015 SCC 57 (CanLII) at paras 109-111 where I, along with Prof. Ariel Katz and Prof. David Lametti, as he then was, succeeded in getting retroactivity on to the Supreme Court’s radar screen in the modern era.

Longer term solutions, such as a change of “machinery” that might create a new tribunal perhaps merged with the Competition Tribunal, should also be considered, as I have already suggested to the Senate and in the current consultation.

HPK