Access Copyright Strikes Back re Status of 99 of 101 Objectors

Here’s an update on the Access Copyright (“AC”) proposed tariff that would, if approved, result in a cost if about $60 million a year to the Canadian post-secondary educational sector. There is no such mechanism in place in the USA, where much of the money collected will inevitably end up.

Access Copyright , through its current lawyer Barry Sookman, has written to the Copyright Board questioning the status of all but two of the 101 objectors to the proposed $45 per head tariff on university students and $35 tariff on college students. It wants only to deal with AUCC and ACCC, which represent the universities and colleges, respectively. AUCC’s objection was filed by Glen Bloom, who acted for the law publishers in the CCH v. LSUC case. ACCC filed its objection itself.

AC’s letter talks about s. 68(1) of the Copyright Act and “prospective users”, in the context of why it thinks that 99 of the 101 objectors should not be permitted to participate fully in this hearing. AC fails, however, to recognize that s. 70.16 requires that:

“Independently of any other provision of this Act relating to the distribution or publication of information or documents by the Board, the Board shall notify persons affected by a proposed tariff....”

(Emphasis added)

This is the section that most directly applies to the Copyright Board regime under which AC is dealt with. It clearly states that persons need only be “affected” by a proposed tariff - and does not require that only the parties writing the cheques can be objectors.

It is well understood that many post secondary institutions will simply pass along onto their students all or a substantial portion of whatever costs the Board imposes. If anything, post secondary teachers and students will be probably be more directly “affected” than their institutions themselves, at least in those cases where the costs are passed along.

And there are objectors on record here that represent institutions where the costs cannot, for various reasons, be passed along and which must be absorbed by the institutions, with ever tighter budgets. Unlike AC, these institutions do not have a government conferred monopoly (the right to collective administration under the Copyright Act) to guarantee revenues.

The $60 million or so per year that AC wants to collect from colleges and universities could pay the salaries about 600 full time or or about 15,000 part time professors a year - or build a several useful buildings on campuses a year - or otherwise be used to actually improve the educational system at the infrastructural level in Canada.

$60 million a year is a lot of money, by any measure and particularly so by Canadian measures. Where the costs are not passed on to students directly, then Canadian taxpayers will absorb the costs.

It is also well known that teachers at the college and the university level have a direct stake in these tariffs, which is why the Federal Court of Appeal (“FCA”) allowed the Canadian Association of University Teachers to intervene on CMEC’s side, though for different reasons than CMEC argued, in the recent judicial review of the Board’s decision to more than double AC’s K-12 tariff and restrict Canada’s fair dealing laws, even in the light of CCH v. LSUC. I represented the CAUT in that court hearing.

Unfortunately, the Federal Court of Appeal ruled against CMEC and CAUT’s positions. Fortunately, CMEC, as the losing party in the FCA, filed a leave to appeal application in the Supreme Court of Canada yesterday, September 29, 2010. CAUT, as only an intervener, could not bring this application on its own.

CAUT’s intervention in the FCA was in anticipation of exactly what has happened, namely AC’s attempt to springboard from the unfortunate result of the K-12 decision to an even more costly, counterproductive and chilling tariff at the post secondary level.

If the Supreme Court of Canada grants leave, which we will know in about three months or so, then the Copyright Board should suspend the consideration of this tariff as well as AC's proposed $24 per FTE levy on each provincial employee pending the SCC's final judgment, which could profoundly affect the outcome of both these pending Board cases. Typically, the entire Supreme Court process takes about 18 months from start to finish.

There are 101 parties that took the time and effort to file objections here, notwithstanding that the deadline for objection fell on August 11, 2010 - a time when the university and college teaching and student communities are dispersed and virtually inactive. This deadline could just as easily have been during the normal academic term. In response to CIPPIC’s request to extend the deadline for objection, AC ironically relies on “widely read commentators” such as Michael Geist and I for the supposedly “broad publicity” given to this proposed tariff. I regret to admit that my belated post appeared just three days before the filing deadline of August 11, 2010. I don’t think that Michael posted much about it beforehand, other than to refer to my blog posting. That may have helped, since my blog has only a tiny fraction of the readership that Michael’s has.

I am pleased if my blog may have generated at least some awareness. I only wish that I had blogged earlier and more often. But it's nothing if not amusing for AC to rely on Michael's and my blogs for the adequacy of notice in this instance.

On a rather ominous note, AC also sets forth what amounts to a direct threat to objectors and interveners, namely that “Finally, it is important, in our view, that all potential objectors and interveners understand that their participation means that Access Copyright will have the right to pursue any useful information that they may possess in pursuing this tariff through the interrogatory process of otherwise”. (emphasis by AC, not HK).

Certain major collectives have successfully used the interrogatory process to drive away well intentioned and legitimate objectors ranging from individuals to major corporations (i.e. Archamault and Canoe, which are part of Québecor) by demanding answers to intrusive and arguably irrelevant questions. See here and here.

The Board has clamped down to a some extent on this practice, but arguably not far enough. The potential for misuse remains. The Board does not go as far as it should, in my humble opinion, to recognize that collectives should bear the burden of justifying a tariff - especially a new “inaugural” one - and that those affected should not have to turn themselves inside out in the interrogatory process and spend a fortune on legal fees and disbursements to fight inaugural tariffs that are usually far overreaching both legally and in quantum.

This tariff, as has been widely noted, among other things seeks to collect money for “posting a link or hyperlink” to and “displaying” a "Digital Copy". Neither of these acts involve any right that can be found anywhere in Copyright Act. If either of these acts require permission or payment, then the internet as we know it is illegal.

It also seeks to impose reporting requirements that would seem to be quite contrary to canons of academic freedom, and perhaps to Canadian privacy law itself. These and other aspects do not involve complicated facts. The issues are basically legal. They should be dealt with right away and taken off the table. This would save everyone a huge amount of time and expense.

If the Board won’t rule that such aspects of AC ‘s proposed tariff are outside of the Copyright Act and hence outside of Board’s jurisdiction, then an application for judicial review may be needed in the Federal Court of Appeal to rein in this proceeding. However, this will require a vigorous legal challenge by one or more objectors, who are more likely to be found among the 99 objectors whose status is being questioned. Based upon AUCC's letter of objection, I would predict that such a challenge does not appear likely from AUCC.

AUCC has publicly stated at a conference in Edmonton on June 2, 2010 that it had an estimate from its outside counsel that it will cost AUCC between $1.5 to $2 million dollars to fight this tariff. It has imposed a special levy on universities to cover this cost.

It would appear that that AUCC's strategy is essentially to cut down the amount rather than to fundamentally challenge the basis of this proposed tariff. However, the Board invariably cuts the amount down anyway - because collectives invariably overreach. Cutting the amount down by half or even more still means a $30 million or so hit on higher education in Canada. If the CCH decision is to be properly applied, and a full challenge mounted based on AC's repertoire and chain of title issues, as well as its lack of entitlement for "linking", etc., then the resulting tariff, if any, arguably should be nominal or even nil.

Indeed, AC has budgeted $3.1 million for lawyer and other “professional fees” for 2010 alone, a year in which there are no actual AC hearings scheduled at the Board. Even compared to the budgets of SOCAN, CPCC and other big legal spenders, that's a lot of money for Copyright Board activity.

The Board has powers that it can exercise to ensure that the public interest is protected here without imposing undue hardship on legitimate objectors. I’ve written about this in a paper done for the Law Society of Upper Canada in 2008.

Let us hope that the Board uses these powers fully and wisely in this case. I predicted a while ago that this would be the “Mother” of all Copyright Board tariff hearings at the Board. I said back on June 26, 2009:

Meanwhile, AC has budgeted an astonishing $915,000 for “Copyright Board applications” for 2009 - when there are no AC hearings scheduled. You can bet that this is going straight into the Mother of all cases aimed at post secondary copying.

Meanwhile, former U. of T. Law Dean Martin Friedland found that the largest payment to an actual individual AC creator member was $7,000 - and that tapered off dramatically and immediately to much, much less. In fact, most AC members earn at most a few hundred dollars a year. Contrast this with SOCAN, ASCAP and BMI where the top earning creators members actually do earn a lot of money - as they should.

AC currently is seeking about $80 million a year from the Canadian educational system from K-12 and post-secondary for activities that are not subject to any comparable mechanism in the USA. Count on AC’s counterpart in Quebec, COPIBEC, to add at least 25% to this, taking the amount to over $100,000,000per annum. That’s 1,000 full time professors a year. Or several univeristy buildings and schools a year.

BTW, for those with an appetite for financial statements, take at look at AC’s latest. It shows a that AC spent 23.6% of its revenues on expenses, which is arguably quite high in this day and age for a collective that has been around for 22 years. That’s up more than 5% from the previous year. And this does NOT include expenses for “Copyright Board application and development of future projects”.

Contrast this with SOCAN’s ratio of expense of expenses to revenues, which was 14.6 percent of total revenues in 2009. Or CPCC, whose ratio was 14.77% in 2009. And both of these collectives spend a lot on lawyers and other administration expenses, which are included in these percentage ratios - unlike AC.

AC is a very interesting collective indeed.

HK

CMEC Supreme Court of Canada leave to appeal application

CMEC has now filed an application for leave to appeal to the Supreme Court of Canada, available here. It has rightly pointed out the inconsistency between the Federal Court of Appeal's approach in the "previews" case and this K-12 case.

The "previews" decision from the FCA came out shortly before the hearing by the FCA of the K-12 case. It focused on on the perspective of the user (i.e. consumer). The K-12 decision, however, focuses not the the user (i.e. student) but the teacher. As I have suggested several times, these two decisions would make a good pair for the SCC to deal with.

My client, CAUT, was an intervener in the FCA on the K-12 case and we urged the FCA to be consistent with the earlier "previews" decision. The resulting decision, with respect, was not.

Hopefully, the SCC will hear both cases and potentially render complementary judgments, as they sometimes do in these types of situations. There are appears to be a real need for guidance on the application of the CCH case, since certain collectives are strongly resisting its plain conclusions, as (with respect) did the Copyright Board in the K-12 decision.

CMEC makes a good point in its material. If there can be fair dealing in the profitable business of law, and the profitable business of iTunes type online music delivery, why is it ipso facto unfair for a teacher to provide copies, even of excerpts of textbooks, to students in the very non-commercial field of education?

No doubt, certain collectives and trade associations will press forward with their lobbying efforts to push back on CCH in the course of the C-32 debate.

HK

2nd Circuit Court of Appeals (USA) denies public performance rights for downloads

The 2nd Circuit Court of Appeals in the USA, which along with the 9th Circuit, is the most important American appeal court for copyright purposes, has just upheld a ruling that went against ASCAP and agreed that a download of musical work does not constitute a public performance. It also remitted the decision to look again at the 2.5% royalty rate set by the District Court.

Once again, this confirms that the American system overall strives to avoid multiple payments for the same transaction. In this case, the reproduction right was involved because copies were made for which compensation must be paid - but there was no public performance.

Here's the opinion, which I haven't yet had time to analyse.

HK

KEI @ WIPO re Canada & a Treaty for the Blind

Here's the KEI statement just delivered at the WIPO General Assemblies meeting. It concludes with a rather provocative comment on Canada regarding the proposed treaty for the blind:.

We also note that Canada has made an appalling proposal to limit exports of works to only Canadian authors, a proposal that would lead to very restrictive access if embraced by other countries.

(Emphasis added)

Unless Canada's position has changed very recently, this is not quite accurate (which is quite uncharacteristic for KEI). It partly describes what is proposed in Bill C-32 but fails to note that Bill C-32 would also allow for exportation of books by authors from the importing country. This also fails to note that Canada is also pushing for a much more liberal position internationally. Bill C-32 is presumably based upon what the Canadian government thinks (perhaps with an over abundance of caution?) is currently possible under international law.

True, Bill C-32 would allow a Canadian entity to export only books by Canadians and Kenyans to Kenya, for example. That would not include British, American, French, etc. authors. True, that would be a serious limitation in this example. But it would not be such a big problem vis a vis exports to the USA, UK, or France, for example, since these countries have enormous catalogues of books by their nationals that would be needed by the blind.

However, the Canadian position being advocated for an international instrument is clearly much more liberal.

As Canadian Ambassador John Gero said at WIPO last June and as reported by KEI itself via my blog here:

With respect to exportation, the bill in front of the Canadian parliament also has specific measures related to the export of special format materials. It includes a number of provisions to ensure that there is an appropriate balance between the interests of the parties involved. First, exportation is limited to special format versions of works by Canadian authors or authors of the country of importation. Second, the bill allows for the possibility of a royalty collected for export material even though there is a complete exception for domestic production of special format materials. Third, export from Canada can only be done by organizations, not by individuals; and the importer recognized by the law can only be an organization and not an individual. And fourth, the bill allows for the possibility of requiring a contract between the Canadian exporting organization and the foreign importing organization. A contract of this type could stipulate, for example, that the copies could only be used by persons with print disabilities. In this sense, this provision is aligned with the concept of trusted intermediaries by ensuring that the distribution is limited to persons with print disabilities.

Of note, the bill allows the export of special format materials to foreign countries regardless of what the law is in the foreign country and regardless of whether the foreign country has a limitation or exception for the creation of special format materials.

Although the bill does not allow for the export of third country material, any international instrument should establish rules and principles under which third country material can be exported.

(Emphasis added)

Leaving aside whether the proposed provisions in Bill C-32 are necessary or ultimately even helpful (since they arguably may inadvertently limit rather than expand current export possibilities), the fact is that Canada is proposing an “instrument” (not necessarily a “treaty”) that would do the right thing - i.e. “establish rules and principles under which third country material can be exported”. In turn, those rules would presumably allow Canadians to export not only books by Canadians and Kenyans to Kenya, for example, but also books by American, British, French and any other authors who whose works are needed by blind Kenyans.

HK

Minister Moore on a "really toxic and, frankly, really dumb" iPod "tax"

The Hon. James Moore said in Parliament yesterday:

This idea of imposing a new tax on iPods and MP3 players is not a new idea because there are very few new ideas, unfortunately, that come from the opposition on the issues of copyright and taxes. However, this idea is really toxic and, frankly, really dumb. This would punish consumers if we were to put in place a tax of up to $75 on iPods, Blackberries, cell phones, laptops, computers, memory sticks and automobiles, anything that is capable of playing digital music. (emphasis added)

Here's a link to the whole exchange with BQ member Carolyn Lavallée.

No one can say that the Hon. James Moore saves all of his plain speaking rhetoric only for "radical extremists".

It will be interesting to see how this plays out in the sometimes internecine dynamics of the Canadian music industry.

BTW, Mme Lavallée was quite wrong when she said (see below) that "No one has said anything about $75, other than the minister".

This was the precise amount sought by the CPCC itself in its proposed tariff filed in 2007 that we got shot down decisively and for the second time by the Federal Court of Appeal on January 10, 2008.

For convenience, here's the whole exchange from the House of Commons on September 22, 2010:

[Translation]

Mrs. Carole Lavallée (Saint-Bruno—Saint-Hubert, BQ):

Mr. Speaker, it is my great pleasure to be back in the late show once again. As you know, I have often taken part because we never get good answers to the questions we ask in the House. Question period is aptly named; it certainly is not answer period.

On April 20, I asked the Minister of Canadian Heritage a question in the House because he had stated the day before that only ADISQ was in favour of a royalty on MP3s. Everyone knows that an MP3 royalty is not a tax. It is money paid to a collective society that distributes rights, and that money is redistributed to artists according to a complex but fair formula.

Members of all of our households have purchased CDs and made copies for our MP3 players. We used to burn copies on blank CDs to play in our cars, and long before that, we made copies on four-track cassettes. These days, we are making fewer and fewer copies on four-track cassettes and CDs.

The current law, a descendant of the long-ago Bill C-42, recognizes the principle of private copying. We know that people make copies for themselves, and that is why royalties exist. They compensate for the shortfall in copyright revenue that artists might receive. They do not exist to legalize copying for any purpose or in any way whatsoever. Their purpose is not to market copies—anything but. They exist so that consumers do not feel like thieves every time they make a personal copy to listen to on their computer or MP3 player.

Of course we cannot purchase as many original CDs by a single artist as we have devices in our homes. The principle of private copying allows a family that purchases a CD to copy it to various media. Naturally, when the current legislation was passed in 1995, MP3 players did not exist. They do now. We are asking, have asked and will continue to ask the government, in the next few weeks, months and over the course of the year, when discussing Bill C-32, to update the legislative provisions for private copying by ensuring that not only will there be a levy on CDs, not only will there be a levy on cassettes, but there will also be a levy on MP3 players such as iPods. Nothing more, nothing less.

I know that in a few minutes my Conservative colleague will reply that it will cost $75 per device. An amount has never been set but it is obvious that this is a reasonable amount. We pay 29¢ in royalties on all blank cassettes and CDs. That is not a tax. We said it before and we will say it again. It is not in any way a tax. A tax is paid to government but in this case the payment goes to the artists. It is quite simply a royalty paid to artists. We already do this when we purchase an original CD of a musical work because a portion of the money is paid to the artist for copyright.

That was the purpose of my question.

(1815)

[Table of Contents]

Hon. James Moore (Minister of Canadian Heritage and Official Languages, CPC):

Madam Speaker, I was not really prepared to discuss this question from my Bloc Québécois colleague, but we are here to discuss the important matter of the firearms registry. I will take this opportunity to point out that our government is against a new tax, which goes against the interests of consumers, on iPods, BlackBerrys, computers, automobiles, laptops and anything else that is capable of playing music. But that is what the Bloc Québécois is proposing.

I understand the concerns she has raised about copyright, and that is why our government introduced Bill C-32, which would modernize our country's copyright laws. We conducted unprecedented consultations to ensure that everyone was involved in the copyright debate. As a result of our consultations, we introduced Bill C-32, a very responsible bill for both consumers and artists.

What we are talking about here is the fact that the NDP, the Liberals and the Bloc Québécois want to impose a huge new tax on consumers. The last time that the Bloc Québécois spoke here, the last time that this tax was proposed, it was a new $75 tax on every iPod, BlackBerry, computer and laptop, on anything that is capable of playing music.

[English]

This idea of imposing a new tax on iPods and MP3 players is not a new idea because there are very few new ideas, unfortunately, that come from the opposition on the issues of copyright and taxes. However, this idea is really toxic and, frankly, really dumb. This would punish consumers if we were to put in place a tax of up to $75 on iPods, Blackberries, cell phones, laptops, computers, memory sticks and automobiles, anything that is capable of playing digital music.

I understand the idea of modernizing the private copying levy and I understand the desire, but every time the opposition has come up with an idea with regard to this, I can say, as we have looked at this issue and we have struggled with this issue, that it gets very tricky.

This simplistic idea that has been put forward by the opposition, the Bloc Québécois, the NDP and the Liberal Party, with regard to a new iPod tax is incredibly shortsighted and it is an incredibly bad idea for consumers. It is not the way to go. We have artist after artist who has come forward and said that this is not the way to go.

We will go forward as a government will Bill C-32, the modernizing copyright legislation. We are prepared to work with the opposition parties to ensure the legislation is in the interest of consumers and in the interest of creators. We will not support an amendment to our copyright bill that puts in place a massive new tax on consumers. We will not support that. It will not happen.

However, we are more than prepared to take forward reasonable ideas to ensure that artists' creations are protected and to ensure that just compensation and the framework for that, through effective copyright legislation, goes forward. We also want to ensure that the legislation takes care of what is in the best interests of consumers.

This idea from the Bloc Québécois is a massive tax increase on consumers. It does not achieve the balance that we want to achieve, which is in the interest of consumers and creators, and we will block every effort by the NDP and the Bloc Québécois to put forward any tax on consumers that will punish consumers and do nothing that is in the long-term interest of creators.

[Translation]

[Table of Contents]

Mrs. Carole Lavallée:

Madam Speaker, obviously artists and creators want to be protected, but they also want to be paid. We are talking about their income here. This is not a tax. It will not cost $75. Those statements are all part of the minister's disinformation. I find that sad.

I also find it sad that he is calling this a dumb idea, because it is supported by ACTRA, SOCAN, SODRAC, the Société professionnelle des auteurs et des compositeurs du Québec and the Guilde des musiciens, as well as ADISQ, the CPCC, Artisti and even the Union des consommateurs.

This is not dumb; it has been thought out, and this levy already exists in the current legislation. It applies to four-track cassettes and blank CDs, and now we are asking that the law be updated to include MP3 players such as iPods. It will obviously not be as catastrophic, scary or terrible as the minister is making it out to be. I want to thank him for engaging in this debate, by the way. It is not that at all. No one has said anything about $75, other than the minister.

(1820)

[Table of Contents]

Hon. James Moore:

Madam Speaker, I understand the concern raised by my hon. colleague, but the problem is that, frankly, she does not understand the technology.

[English]

Music in the future will not be listened to simply on MP3s. This is a band-aid solution, it is very shortsighted and it is about purchasing votes. It is nonsense.

What we need is a thoughtful approach to copyright reform that is in the best interest of creators and consumers. Has she ever heard of Rhapsody? Has she ever heard of the idea of streaming digital online music and what that means for creators and that universe? Does she understand that? That is the way the future is going.

It is not about MP3s. MP3s can be played, streamed, uploaded and synced into automobiles and onto planes. There are all sorts of uses of MP3 files. Music is happening in a digital way, in ways that are far beyond the scope of the amendments that the Bloc Québécois and the NDP have come up with. They, frankly, do not understand the technology and have no sense of understanding of where the technology is going with regard to consumers' interests and supporting a digital universe in the future.

Our copyright bill is balanced and effective for consumers and for creators. Again, we will vote against any new tax on consumers that is not necessary.

* * *

Pandora - you can't get there from here.

Pandora is an apparently terrific "legal" music service that we can't get in Canada - an all too familiar theme. For example, try this link to Pandora from inside Canada. You just can't get there from here.

Here's a CBC report on why Pandora thinks that Canadian royalty rates are too high to do business here. Not surprising - considering the multiplicity of tariffs and the Copyright Board's steadfast position of valuing each right separately, even though this may result in several substantial tariffs on the same transaction and an overall excessive rate.

Naturally, defending the Canadian position, are the heads of CRIA and Re:Sound. Is pricing yourself out of the market a good strategy? Self-inflicted wounds are not uncommon in the entertainment business - after all, the motion picture folks tried their best to ban the VCR. And the music industry came up with the not so brilliant idea of suing their most enthusiastic customers.

But excessive royalties that drive away legitimate services and drive users underground are bad for consumers and bad for musicians.

Time once again for Economics 100 and the lessons about price elasticity of demand?

HK

Bill C-32 and the Parliamentary Committee Process

The process of making legislation is often compared to the manufacture of sausage. It is probably better not to see how it gets made.

Copyright law is no exception. The committee process is the point where the final ingredients are added, and the recipe can change very quickly and unpredictably, for better or worse.

Hee's my analysis in the Wire Report of how how Bill C-32 may play out in a Parliamentary committee.

HK

The Wonder of Stevie @ WIPO

In what must have been a magical moment, the legendary blind musician Stevie Wonder today addressed the WIPO General Assembly on the need for a breakthrough for the blind and others whose access to copyrighted works is limited.

According to IP-Watch:

Wonder said he was launching today a “declaration of freedom for people with disabilities,” empowering them by “providing them with the tools to learn and grow.”

"I understand that the EU, the group of Brazil, Mexico and Paraguay, the US and the Africa[n] group have proposed different plans on how to address the cross border transfer of information,” for those who are visually impaired, Wonder said. “And there are issues on how to develop a protocol that has a binding effect, and at the same time respects the rights of all involved.” “

It can be done,” he said. “We have the greatest minds in the world right here in this room. Please work it out. Or I’ll have to write a song about what you didn’t do.” He added that if WIPO could accomplish an agreement by next year, he would come back and sing a celebratory concert at the 2011 General Assemblies.

He also performed and promised to the obvious delight of all a return engagement if WIPO delivers.

Here's Stevie Wonder:

According to IP-Watch, Wonder said:

"It is time to “declare a state of emergency and end the information deprivation that continues to keep the visually impaired in the dark,” he told assembled delegates."

He's right.

BTW, IP- Watch deserves great credit for covering this so well and needs your support. It is the best independent source of reliable information on international developments regarding IP law - particularly those centered in Geneva. Subscribe now.

HK

ACTA, “Ex Officio” Enforcement, and Parallel Imports

In the latest ACTA leaked text, it’s disappointing to see that Canada is endorsing the following proposal on “ex officio” border enforcement, This refers to the giving of power to border officials to detain suspect goods on their own initiative on the basis of suspected IP infringement, without the need of a prior court order.

Here’s the text that Canada supports (see draft Article 2.7):

[Aus/Can/Sing: 1. Each Party shall provide that its customs authorities may act upon their own initiative, to suspend the release of or detain suspected counterfeit trademark goods or suspected pirated copyright goods with respect to imported goods including suspected counterfeit trademark goods or suspected pirated copyright goods admitted to, withdrawn from, or located in free trade zones. Each Party may provide its customs authorities the same authority as the foregoing provision of this Article in respect of exported and in-transit goods that are suspected counterfeit trademark goods or suspected pirated copyright goods.]

This is very unwise for many reasons:

• A judgment call about whether a particular product is “legal” or not is very often far from clear. For example, running shoes or handbags may be made “illegally” on the same assembly lines as the “real” product “after hours” and be identical in all physical respects to the “real” product. How is the border official supposed to make the determination as to whether the goods are “legal” or not?

• In the case of parallel imports (which by definition are perfectly legitimate and neither fake nor counterfeit), the factual and legal issues are extremely complex. The US Supreme Court is about to hear a case about whether perfectly legitimate Omega watches with a small copyrighted logo engraved on the back can be imported into the US by Costco. Some of the smartest lawyers and judges in the USA are bitterly divided over how this case should turn out. In Canada, we had the Kraft case involving Toblerone chocolate bars, which resulted in a victory for the parallel importer and a complex judgment from a very divided Supreme Court of Canada (I was counsel for the Retail Council of Canada, whose intervener’s arguments prevailed in the result). There was, of course, immediate speculation about how to get around the judgment but the subsequent court cases of which I am aware have settled or, in the case in which I was involved, fizzled.

• If the best lawyers and judges have to struggle intellectually about whether perfectly legitimate parallel import goods can be legally imported, are we ready to allow border guards with no legal education, and with no prior judicial oversight to make this initial determination and potentially tie up millions of dollars worth of merchandise for great lengths of time, forcing the importer to go to court to get the goods released?

• Border officials will inevitably be “educated” and provided with information about suspect shipments by those who may have a vested interest in keeping out parallel imports and may even have an interest in causing serious inconvenience to a legitimate competitor.

• The recent wrongful seizure of generic aids medicine in the Netherlands was vivid proof that empowering border officials to make difficult IP decisions can lead to serious and even potentially fatal consequences.

• Somebody should pay for the economic losses resulting from wrongful seizures. Who will that be?

• What remedies will there be for abuse or misuse of the “ex officio” system by competitors?

• What if the result of a wrongful seizure of medicine results in harm to health and safety?

• The empowering of “ex officio” action is simply not necessary in Canada. Justice Roger Hughes of the Canadian Federal Court (who had decades of successful experience in IP enforcement before his elevation to the bench) eloquently made this point at the 2008 Fordham Conference. He said that those seeking such a change should “stop whining” and just “roll up their sleeves” in order to use the current system, . The current system of obtaining a court order works perfectly well, he said, if only IP owners would do the necessary paper work. He regularly signs these orders when the proper documentation is presented.

• There is no reliable evidence that Canada has serious problems with the importation or transshipment of counterfeit or pirated goods. Those who claim to have “evidence” of such problems are often those who are opposed to the pro-competitive effect of perfectly legitimate parallel imports.

• As the late Sir Hugh Laddie and others have repeatedly pointed out, one of the most convenient places in the world to easily buy cheap counterfeit goods is the streets of New York. There is no such flagrant activity on Canadian streets.

Nobody supports or defends fake counterfeit or pirated goods. By definition, parallel imports are neither of these - though they are and probably forever will be viewed as controversial by those who oppose real free trade and vigorous competition.

However, one does not need to set up a system that will predictably catch lots of dolphins in the net and do little to stop shark activity, of which there is much talk and little evidence in any case.

Once again, we need to question why Canada would push for a policy that will very likely harm Canadians by fixing something that isn’t broken and has long worked perfectly well.

HK

More Decisions from Judicial Review of Copyright Board Decisions

The Federal Court of Appeal (“FCA”) rendered two (or was it three? - see below) further decisions dated September 2, 2010 flowing from the now 14 or so year long proceedings involving SOCAN’s Tariff 22.

In the judicial review application brought by the major ISPs, the Court held that the delivery of files or streams of music from point to point one at a time on request via the internet is a “communication to the public” if there is an intention to communicate to the public. There can be communication even if it is only to a single user.

This is consistent with a decision from two years ago in the ringtones matter, though the arguments and facts were somewhat different. The ringtones case was hampered by the fact that the objectors had decided, for whatever reason, to concede before the Copyright Board that there was a “communication” involved. The Federal Court of Appeal heard argument on the issue notwithstanding the reversal of the objectors’ position - but upheld the Copyright Board. This recent challenge was an uphill battle to be sure, especially given the previous history of this issue.

This confirms that Canada, once again, provides stronger copyright protection than the USA in a way that costs Canadians money and for no obvious policy advantage. This takes the form of potential double payments or more for the same transaction (i.e. performance rights + communication rights + reproduction rights) in contrast to the USA, where the Courts have rejected such arguments in similar circumstances, but with different legislation. By far, the lion’s share - probably over 90% of the value of this extra protection - leaves Canada and goes to the USA.

This decision could also have an impact on file sharing. There is some obiter dicta at para. 59 that suggests that peer to peer file sharing is an activity where “there is clearly an intention to communicate to the public.”

Ironically, if this is the case, then Canada arguably does not need a “making available” right as such, at least in the case of musical works. However, it still may be open to argument on the part of an individual engaging in downloading in the P2P context that he/she had no intention to share by uploading and may be quite ignorant of the way in which particular software or protocols (e.g. Bittorent) work in this respect.

Of very great interest to lawyers and the Copyright Board will be the Court’s unusual statement that the Copyright Board is entitled to deference “with respect to its interpretation of the [Copyright] Act” and on “pure questions of law” (paragraph 25). This is the second time in just over a month that the FCA has dealt in a surprising and, with respect, arguably incorrect manner with the “standard of review” issue. See also Alberta v. Access Copyright (the K-12 fair dealing case), in which I acted for the intervener CAUT.

My friend Barry Sookman also finds the ruling on the standard of review to be a "surprising suggestion", though he didn't seem troubled by a similar conclusion in the Alberta v. Access Copyright decision noted above, in which he acted for interveners representing major publishers.

Previous jurisprudence from the FCA and the Supreme Court of Canada has been generally interpreted to mean that the Board must meet the standard of “correctness” on legal issues - not just “reasonableness” - especially where the legal question involving interpretation of the Act could potentially have implications in court proceedings that have nothing to do with the Copyright Board. This would clearly seem to be the case in this instance, since the communication right could arise in civil litigation. The Court in this instance found that the Board’s decision was “reasonable” - but stopped short of finding that it was “correct”. Often, a court will indicate its views on whether a decision meets both standards - for example, in this earlier decision from last May arising out of the same batch of judicial review applications.

Interestingly, the FCA just two years ago in the ringtones decision, which involved very similar issues, applied the correctness standard. Now, just when many thought the “the sempiternal question of the applicable standard of review” was reasonably resolved insofar as the Copyright Board is concerned, and the FCA itself has explicitly discouraged counsel from dwelling on it in oral argument, it now appears that the issue is once again wide open. It is important that this be resolved with respect to the Copyright Board, since so many of its decisions result in applications for judicial review, and many of which in turn have been successful when the “correctness” standard was applied by the Federal Court of Appeal.

Another interesting ruling was made in yet another part of the never ending Tariff 22 saga in the September 2 ruling. This concerned ESA’s argument that SOCAN had failed to provide “adequate evidence” to justify the fairness and reasonableness of the tariff in respect of video games. The Court held that “the collective administration regime depends on the certification of tariffs” and that “‘This system, which seeks to balance the rights of creators and users, cannot be hobbled by an overly rigid approach to the assessment of the basis upon which a tariff is certified.”

This appears to be at odds with a ruling by the same panel in the case on “other sites” which was heard together with the ESA case last May (in which I represented the Retail Council of Canada). In that decision, the Court stated at para. 26 that:

In my view, it would have been unreasonable for the Board to certify this impugned Item of the proposed Tariff 22 in the absence of the necessary probative evidence, on mere guesses, speculations and approximations, especially in view of the long retroactive period covered (1996 to 2006) and the fact that, as the Board found, it is only at the end of that period that social networking and video sharing sites became popular.

In this case, ESA had apparently itself suggested a base rate of .08%. There had been no such suggestion in the “other sites” case - but that may not be enough to resolve the apparent inconsistency in the approach by the Court.

The ESA decision also adopts the same conclusion about standard of review as was utilized in the communication to the public ruling.

Yet another curious aspect of these rulings is that CRIA’s application for judicial review, which was heard along with the others, was dismissed, but no reasons were provided.

It seems that we have just finished a summer of uncertainty in respect of several cases involving judicial review from the Copyright Board. Could there be yet other expeditions in store to the Supreme Court of Canada?

The next move towards the Supreme Court is up to CMEC - and we eagerly await its filing on or before September 29, 2010, unless, for some unexpected reason, it should decide not to seek leave. The K-12 fair dealing ruling from the Board as upheld by the FCA seems to be "fundamentally inconsistent", as I said here, with the SOCAN “previews” ruling from a few weeks earlier - and the two cases would make for a great pair for the SCC to consider. SOCAN has already filed its leave to appeal application arising from the FCA's “previews” ruling.

We’ll know within 60 days whether the September 2, 2010 rulings may also generate one or more leave to appeal applications, although the standard of review question could well be resolved in the fair dealing cases, should the Court decide to take them on. No doubt, there would also be several parties seeking leave to intervene in these cases.

HK

PS - there was some confusion about the date of the decisions. The correct date is September 2, 2010.
They were faxed out that evening and not received by me until September 3, 2010. Accordingly, I've
amended the above.

What does "educational" mean?

Many are rather nervous about the implications of including the word "education" in the proposed revision of the fair dealing provisions of Canada's Copyright Act. The big question, of course, is what does "education" mean?

The Federal Court has just rendered an intriguing decision that holds that a thesaurus is indeed an "educational text book" for purposes of Corrections Canada regulations. The fact that Roget's Thesaurus is not "required reading" for an inmate's National Sex Offender Maintenance Program or that it is available in the prison library does not take it out of the realm of being an "educational text book."

Corrections Canada had denied the inmate the right to buy the book because it ruled that the book would have put his allowable personal property limit over $1,500 - and was not considered to be exempt as an "educational text book."

Justice Sean Harrington's decision is delightful to read - quoting both Humpty Dumpty and Justice Scalia. And it is actually important to read this decision because it could be the the harbinger of what is to come in terms of debate about the "educational exception" and litigation should it be enacted without further clarification.

Interestingly, the Copyright Board ruled earlier in this year that providing copies of material that is prescribed or required reading cannot not be considered as fair dealing in the context of Access Copyright’s K-12 tariff. This was upheld by the Federal Court of Appeal. We will know by the end of the month whether CMEC will seek leave to appeal this decision to the Supreme Court of Canada. In my opinion, it is essential that leave be sought in this instance and that there is a good chance that leave would be granted in this case, as I have said earlier. (I acted for the intervener CAUT in this case the judicial review).

BTW, congratulations to inmate Ken Mackay who represented himself and prevailed against two Department of Justice Lawyers. He was even awarded $200 in costs - which should help him to build up his library as he serves his life sentence.

HK