AUCC’s Reply to Access Copyright on Transactional Licenses

There are some interesting aspects to AUCC’s reply to Access Copyright’s submission on the transactional licensing issue as submitted to the Board on July 19, 2011 and available here:

• It confirms certain information about the license fees that universities have been paying to AC.  It is well known that the previous blanket license agreements with AUCC members provided for payment of $3.38 per FTE plus $0.10 per page for copies of published works sold to students (i.e. course packs). The Interim Tariff continues the royalty rate and structure of the blanket license agreements. The most recent information of AUCC is that in 2008 the average course pack cost per student per year was $15.26. Thus, the average amount per FTE university student paid to AC in 2008 was $18.64.
• That may not sound like much but readers of this blog will know that this amount of $18.64 is about 500% higher than the recently revealed “middle of the range” blanket license FTE rate charged (which includes course packs) by the Copyright Clearance Centre (AC’s counterpart in the USA) for university students. This is the rate for US universities and colleges that actually choose to get a blanket license. Most don’t and it’s not mandatory.
• The formula that generates this result was agreed to by AUCC in 2007 when the 2003 pre- CCH v. LSUC model license with AC was renewed on the same pre- CCH terms.  Not surprisingly, the Board noted in its reasons for the interim decision that the negotiated FTE rates did not go down in the post-CCH negotiations. Why this was the case will perhaps eventually become clear in the hearing. In the meantime, one can only wonder why not, because one might have expected a significant post-CCH reduction as a result of the Supreme Court’s more “large and liberal” conception of fair dealing that would seem to suggest that much less of the ‘Part “A”’ copying (i.e. which includes copying for “research and private study” purposes in libraries, etc.) should be compensable.
• For reasons that are not apparent, AUCC appears to gratuitously dismiss the application of s. 45 and s. 90.1 of the Competition Act at this time.  If the AUCC is serious in its complaints about AC’s anti-competitive behaviour, one would expect it to pursue, rather than downplay, provisions in the Competition Act that would appear to support its case.
• This concession is particularly curious in light of the evidence filed by AUCC itself and AUCC’s own statement in the next paragraph following the above concession that:

We have addressed this issue and provided above what Access has told its publisher affiliates. These statements are clearly intended to convince its publisher affiliates not to grant transactional licenses to post-secondary educational institutions in an attempt to cause those institutions to operate under the Interim Tariff.  (Emphasis added).

• S. 45 and s. 90 deal not only with “conspiracy” (which is difficult to establish) but with “arrangements”. Whether these sections might be applicable here would seem to be an interesting question - at least to Prof. Katz - who teaches both competition and copyright law at the U. of T. Faculty of Law, and who has just written an important comparative law working paper on copyright law and & refusal to deal, etc.  But if these provisions are applicable, then the AUCC clearly has relevant information.  Indeed, it provided it to the Board.
• There is nothing on the record to date suggesting that AC and its publisher affiliates could invoke the regulated conduct defence in competition law - at least with respect to a new practice of allegedly refusing to provide transactional licenses, a practice which the Board clearly did not sanction. Indeed, since AC and its publisher affiliates would seem to be clearly (or at least prima facie) governed by these provisions of the Competition Act in this respect, and the AUCC and ACCC have provided what is arguably cogent and relevant information and evidence, it would seem that this concession is arguably not only unnecessary but potentially even damaging to AUCC. This could be the case if it has the effect of dissuading the Commissioner of Competition from getting involved on the side of the universities and colleges and the public interest generally, or if it has the effect of generally downplaying the severity of AC’s behaviour.
• Also rather interesting is AUCC’s non-reply to Prof. Katz’ detailed submissions and proposed remedy. “AUCC makes no reply to Access’s response to Professor’s Katz’s suggested remedy for Access’s anti-competitive acts”. Prof. Katz is on the same side as AUCC on this issue, but arguably has a much more effective remedy proposal that would foster competition between various copyright holders, AC, and even CCC in the USA.  The AUCC’s proposed remedy, on the other hand, would simply require AC to issue transactional licenses. That is something that AC clearly doesn’t want to do and which AC may well attempt to frustrate with delays, red tape and other obstacles.  Whether and to what extent the Copyright Board would be willing and able to enforce the order AUCC seeks would be interesting. Whether or not AUCC would even seek such enforcement in the event of non-compliance would also be interesting. After all, AUCC barked but did not bite on the interim tariff issue, having stated that it was “vigorously” opposed the imposition of an interim tariff but having failed to even attempt what arguably would have been an easy and successful judicial review exercise to get rid of it. In any event, Prof. Katz’ suggested remedy avoids all of these problems by requiring AC rightsholders themselves to issue transactional licenses when so requested in good faith. He suggests a potentially simple review mechanism in the event that they refuse to do so, with the onus being on the rights holder to justify the refusal and a license being deemed to have been given upon request in the meantime provided the Board has been notified of the refusal. His proposal is here.
• Not replying to Prof. Katz’ suggested remedy is especially odd, because he took issue with the AUCC's proposed remedy on two serious fronts that should be of great interest to university administrators. The first was that AUCC’s remedy is arguably strategically misguided in the long run because it will not promote an essential degree of competition, and the second is that the fee that the AUCC is proposing (now up to $0.15 per page plus a five per cent administrative fee from the figure of  $0.10 that AUCC itself proposed last month) is very high, and could amount to presumably unforeseen astronomical figures in the case of digital copying. After all, AC considers and the Board adopted for interim tariff purposes that EACH, EVERY and “ANY” act of scanning, transmitting, displaying, posting, and linking) count as a digital copy. At a minimum, any use by a student would appear to entail several such “copies”. Does each time a student views a document (i.e. displays it on a screen) generate a $0.15 payment? The answer is unclear but the result could be extremely costly. Prof. Katz’s remedy avoids this. AUCC’s proposed remedy arguably invites this potentially extremely expensive result - at $0.15 a page.
• As was the case with the AUCC fair dealing guidelines, the positions put forward by AUCC concerning the transactional licensing issue have raised questions. Indeed, Prof Katz said in his submission of June 27, 2011 that:

While I am confident that this was not the AUCC’s intention, I believe that the remedy that it proposes could inadvertently backfire and serve the interests of Access Copyright to the detriment of Canadian academic institutions.

• One would have thought that Prof. Katz’ submissions on the transactional license matter called for a substantial response from AUCC not only because of the importance of the issues they raise but the careful reasoning behind them that is clearly intended to benefit AUCC members.  The AUCC might agree or disagree with Prof. Katz’s concerns and proposals. At the very least, it would have been useful to many in the university community to know AUCC’s position in this regard.

HK