Tuesday, July 31, 2012

Virgin v. I Am Not A Virgin

This is too funny to be true...Billionaire Richard Branson Sues Eco-Label "I Am Not A Virgin" For Copyright [sic] Infringement - Forbes
 Here's the video. The guy is a brilliant marketer......Even a good quip about "extra-virgin olive oil"

When it comes to cease and desist letters, "be careful what you wish for."

Monday, July 23, 2012

Access Copyright’s Fantasy of a “Seven Per Cent Solution”


Access Copyright (“AC”) has gone straight to Freudian denial mode as a result of the Supreme Court's  landmark K-12 ruling of July 12, 2012. See, for example, here, and here. This type of response worked rather well for AC in the past following its huge 2004 setback in CCH v. LSUC, largely because of overall inadequate and ineffective responses by often overly risk-averse and under-informed stakeholders. Sometimes, indeed, these stakeholders and/or their representative associations took positions that seemed best suited, for whatever reason, to the interests of AC itself. However, the increasing dissatisfaction by stakeholders in the university and library communities, at least, about how they have been represented in dealings with AC in the past and present is now plain, palpable and spreading quickly within those communities and beyond.

While it’s true that the K-12 case went to the Supreme Court of Canada on the issue, as narrowly framed by AC and the CMEC K-12 coalition, of 16.8 million out of 246 million copies (i.e. 7%) supposedly in dispute, that doesn’t mean that this will set the boundaries of where the fair dealing issues go from here overall or even in the future unfolding of this particular case. 

That’s one of the wonderful things about the SCC. When it takes a case that is a matter of “public importance”, it can and usually does make rulings that are of considerable “public importance” and that sometimes go well beyond the immediate facts at hand and the issues as so often understandably narrowly framed by the parties. Unlike lower courts, which are usually required to resolve whatever particular disputes come their way and fit within their jurisdiction, it’s the job of the SCC to pick and choose cases where, as in most instances, leave is required. These cases invariably involve issues of “public importance” and the Court decides them in a manner that provides as much guidance for the future as is appropriate and possible in the circumstances. This is necessary because the SCC, despite its extraordinary workload and efficiency, has limited resources and can only hear only a small fraction of the cases where leave is required and sought. Unlike trial courts, the SCC does not hear "evidence" and, unlike normal appeal courts, its function is not primarily one of error correction. In fact, it will rarely, if ever, grant leave simply because a case was wrongly decided below.

Even when the comments from the SCC go beyond the sometimes narrow “ratio decidendi” (what is actually decided and what is generally rooted in the facts) to the those that are “obiter dicta”, the latter type of comments can still be authoritative if they are closely related to “ratio decidendi”.  Those who are curious about the role of SCC “obiter dicta” may want to read the SCC’s own important 2005 decision regarding this issue. See  R. v. Henry.

So,  when AC says that:
… Access Copyright notes with interest and concern the Supreme Court
of Canada’s decision announced today in favour of the Council of Ministers of Education in the appeal of Access Copyright’s Elementary and Secondary Schools Tariff.  This very close decision (5:4)  will have a  limited impact on the importance of the Access Copyright licence to the education community, according to a preliminary analysis by the copyright licensing collective.

"The fact is the Supreme Court was only looking at about seven percent of the copying done in schools,” Maureen Cavan, Executive Director, Access Copyright, said in a statement emailed to media and posted on its website. "The decision absolutely does not mean a free-for-all on copyright-protected materials used in the classroom. On the contrary, it leaves copyright licensing in the education sector alive and well," she said. 

The question before the Supreme Court dealt with only seven percent of copying done in the primary and secondary school sector leaving over 90% of copying by K-12 schools unaffected by the decision. The limited number of uses under appeal at the Supreme Court dealt only with copies made for private study and research in elementary and secondary schools when the
teacher gave instruction to read the material.

In its decision the Supreme Court did not conclude that the copying at issue was "fair" under the terms of the Copyright Act.  The Court said whether something is “fair” is a question of fact and a “matter of impression”. It referred the case back to the Copyright Board for re-determination in light of the Court’s decision. The Copyright Board will decide whether the ruling changes its impression that the dealing was unfair.  (emphasis added),
AC’s comments are inaccurate, incomplete and arguably misleading.

Anything and everything that the Court said about “fair dealing” in both the K-12 and the iTunes previews case are statements and comments that are, at the very least, obviously intended for guidance and which should be accepted as authoritative”, if not decisively and conclusively binding.  

It is quite clear that the Court was looking well beyond these 16.8 million copies and the $0.32 per student supposedly in issue, as described by the lead counsel for the K-12 parties when she stated at the oral hearing:   
If the Appellants are successful in this case and you decide that copying short excerpts for students is permitted under fair dealing, the tariff will go from five dollars and sixteen cents to four dollars and eighty-four cents. So that is the dollar amount that is in issue here.

The Court, however, perhaps in some measure because of submissions made by Ariel Katz and me and some other interveners, went well beyond the questions in issue as precisely posed by the parties.  For example, the Court ruled that "private study" does not mean simply "study by oneself" and put to rest the misinterpretations of the 1916 University of London decision that have caused so much mischief in Canada until now. Ariel and I had dealt with this issue in some detail.  The decision will have profound effects on copyright law generally and fair dealing in particular regardless of what AC may believe or what they Copyright Board may rule in its reconsideration. It should go without saying that the Board can only apply the SCC’s decision. It cannot change it.

The Court sent the matter back to the Copyright Board for “reconsideration based on these reasons.” That means all of the reasons and that means the reasons of the majority. And “these reasons” include specific statements indicating that:
·       Teachers “are there to facilitate the students’ research and private study”
·       “Instruction and research/private study are, in the school context, tautological.”
·       “The fact that some copies were provided on request and others were not, did not change the significance of those copies for students engaged in research and private study.”
·       “…the word “private” in “private study” should not be understood as requiring users to view copyrighted works in splendid isolation.  Studying and learning are essentially personal endeavours, whether they are engaged in with others or in solitude.  By focusing on the geography of classroom instruction rather than on the concept of studying, the Board again artificially separated the teachers’ instruction from the students’ studying.”
·       “…the “amount” factor is not a quantitative assessment based on aggregate use, it is an examination of the proportion between the excerpted copy and the entire work, not the overall quantity of what is disseminated.  The quantification of the total number of pages copied, as the Court noted in CCH, is considered under a different factor: the “character of the dealing”.”
·       “…buying books for each student is not a realistic alternative to teachers copying short excerpts to supplement student textbooks.  First, the schools have already purchased originals that are kept in the class or library, from which the teachers make copies.  The teacher merely facilitates wider access to this limited number of texts by making copies available to all students who need them.  In addition, purchasing a greater number of original textbooks to distribute to students is unreasonable in light of the Board’s finding that teachers only photocopy short excerpts to complement existing textbooks.  Under the Board’s approach, schools would be required to buy sufficient copies for every student of every text, magazine and newspaper in Access Copyright’s repertoire that is relied on by a teacher.  This is a demonstrably unrealistic outcome.  Copying short excerpts, as a result, is reasonably necessary to achieve the ultimate purpose of the students’ research and private study.”
·       A determination of the ““effect of the dealing on the work”, which assesses whether the dealing adversely affects or competes with the original work” cannot be made in an “evidentiary vacuum”.   

All of these statements and even some more general comments in the K-12 and the iTunes previews decision that some might characterize as “obiter dicta” will inform and determine any future consideration by the Copyright Board and the Canadian courts at all levels where “fair dealing” is in issue.

The fact that the K-12 case has been sent back to the Copyright Board will be a real test of how the K-12 coalition reacts to its rights as confirmed by  SCC. While AC will no doubt try to limit the discussion to determining how much of that $0.32 per student or “seven per cent” requires adjustment,  there will arguably be an opportunity – and perhaps even a necessity - to essentially revisit much if not most of the entire proceeding.  This might even include the basic volume survey. 

Since the Board came to not only incorrect but  “unreasonable” conclusions about application of the CCH factors to determine what constitutes fair dealing for the purpose of, at least,  “private study” and “research”, it would appear that the many of the assumptions that informed the volume survey, the parties’ framing of the case, and the Board’s reasons can and likely should now be questioned. Application of the CCH factors to the discussion of “criticism” and “review” may also need revisiting. After all, there are not only tens of millions of dollars a year on table here. There are profound questions of access, dissemination, and innovation involved. There is no place for copyright “chill” in Canadian academia at any level.

Other interesting issues will include:
·       whether other educational sector and other public interest interveners will wish seek and in turn be permitted to intervene
·       whether the K-12 Coalition and AC may both wish to quietly “settle” the matter, to seek approval of such a settlement from the Board, and whether the Board would approve such as settlement without a hearing in these circumstances.

Above all, it will be interesting to see how the reconsideration will take place in the light of the Court’s explicit ruling that:
Because the Board’s finding of unfairness was based on what was, in my respectful view, a misapplication of the CCH factors, its outcome was rendered unreasonable. 

This means that, no matter how much it may be argued that the Board’s determination of what is or is not “fair dealing” may concern factual findings, its conclusions will be vulnerable to reversal if there is any  “misapplication of the CCH factors”.  It is simply inaccurate, incomplete and wrong to suggest that this is all as simple as, in AC’s words,  “The Court said whether something is “fair” is a question of fact and a “matter of impression”.

This raises, once again, the sempiternal question”, as Justice Létourneau aptly called it, of “standard of review”. This was the basic point of departure between the majority and  minority of the Court in the K-12 decision. However, the bottom line is that the majority has spoken. “Misapplication of the CCH factors” will render a decision “unreasonable” – which means that, however the standard of review analysis is applied, in such a case the decision can be overturned. Hopefully, issues about standard of review and the Copyright Board have been put to rest for a while, at least, by this and other decisions in the pentalogy.

I will follow up later with some more detailed comments on what might happen at the Board’s “reconsideration” stage. However, it should come as no surprise that there will be much discussion about what is meant by “short excerpts”. Hopefully, the K-12 coalition will not make the same mistake as many have made in the post-secondary context – which is to voluntarily agree to pay for what the SCC has clearly and now repeatedly said can be done without permission or payment. That does not mean “free for all” and “free text books” for everyone. It simply means that users have the right to engage in “fair dealing” in a manner consistent with the Copyright Act and the now three landmark decisions on fair dealing by the Supreme Court of Canada in eight years.

Interestingly, while AC is in denial about this decision having any effect beyond the “seven per cent” of the copies in issue, it has announced that it will continue to hold onto  the windfall retroactive payments received above and beyond the previously negotiated rate resulting from the Board’s 2009 decision that was five years in the making. On July 13, 2012, AC advised its members:
In light of this decision, Access Copyright may not be able to distribute the retroactive royalties collected until sometime after the Copyright Board makes a decision. Our hope is that this can occur within a time frame of one year but the Copyright Board will determine the actual timing. There remains a risk that any reconsidered decision of the Copyright Board could again be appealed to higher courts.

In its 2011 Annual Report, AC states in note 4 to its Financial Statements that:
…All licence fees invoiced to the Elementary and Secondary Schools for the years 2005 to 2011, in excess of the applicable rate under the previous licence, together with related interest, in the amount of $67,490 (2010 - $56,941) have been recorded as deferred revenue and segregated by the Corporation pending the outcome of the SCC appeal.

AC’s statement suggests, among other things, that it acknowledges that there is no simple  “seven per cent” solution to the enormous problems it now faces in the K-12 sector and, frankly, well beyond as a result of its overreaching approach to collective licensing in copyright law in general and collective licensing in particular.

So – not only will AC almost certainly not be able to contain its immediate, much less long term, losses to “seven per cent”. It may just have provided the needed catalyst for a cure to the needless, destructive and very expensive addiction it has inflicted on the educational sector in Canada.  To AC and other collectives and copyright owners that get too greedy, I say once again “Be careful what you wish for”.


Thursday, July 12, 2012

A Proud and Progressive Pentalogy Day in Canadian Copyright Law

The following will be updated as I read and digest today’s landmark pentalogy of Supreme Court of Canada Copyright judgments, which all involve collectives and emanate from the Copyright Board. These cases were heard back to back in a unique two day marathon on December 6 and 7, 2011. My comments are in blue.(Disclosure - I acted along with Prof. Ariel Katz for the Centre for Innovation Law and Policy, an intervener in the K-12 case).

Some of the key particular themes of the Supreme Court of Canada’s landmark set of five simultaneous copyright rulings are:
  • Collectives cannot assume that they will be entitled to an additional "layer" of remunerated rights every time  there is a new method of delivery. Technological neutrality matters.
  • The Court said what it meant and meant what is said in CCH v. LSUC in 2004 and will move forward from there - not be pushed backwards. Users have rights that must be given a "large and liberal interpretation". Copyright doesn't exist solely for collectives. 
  • Educators are in a "symbiotic" relationship with students and the Copyright Act serves the goal of education, which includes access to essential material. "Instruction and research/private study are, in the school context, tautological."
  • Copyright law is both about "protection" and "access"  
  • Copyright law is about "dissemination"
  • "Research" is not restricted to "creative purposes". Consumer research counts too. Research can even be for "personal interest". There is no absolute requirement for "transformative" use in Canada
  • The user's purpose is the one that counts in fair dealing
  • Practices that increase the sale of work cannot be said to have a negative impact on the work
  • The concept "public" must be considered in light of new technology, technological neutrality and the purpose of the legislation. The fact that communication may be interactive on an individual basis does not mean that it cannot be considered to be to the "public"
  • When the statute uses a word such as "excludes", it means it. The word is not superfluous.
  • Parliament did not intend to "recognize a superior expertise of the Board relative to the courts with respect to legal questions arising under the Copyright Act". On copyright questions of "first instance", the Board will get no more deference that any court would get. In other words, the Board must be "correct". It will not be sufficient that it merely be "reasonable"
  •  The 1916 University of London case has firmly and finally been laid to rest on the issue of "private" study in Canada. It had a long and seriously misunderstood life in this country. Frankly, far too long. This is a key conclusion and I am pleased to note that Ariel Katz and I made this a key submission on what turned out to be a key issue in paras. 10ff our intervener factum.
  • On the "standard of review" in fair dealing cases, Justice Abella for the majority stated that "Because the Board’s finding of unfairness was based on what was, in my respectful view, a misapplication of the CCH factors, its outcome was rendered unreasonable." As lawyers will know, that is a strong and significant statement that could have profound ramifications. It is a rare event when a reviewing court will find that the decision of a tribunal under review is "unreasonable". The message is clear. CCH is the law of the land in Canada. All concerned take notice.
Some key overall thoughts on a preliminary basis:
  • The Court seems to be rejecting attempts by collectives to overreach by seeking payment for activities
    •  simply because a technical reading of the act suggests that they can
    • where such payment would add an unnecessary "layer" that offends technological neutrality
    • where strained interpretation is urged upon old words based upon new technology
  • It will be hard for collectives to refute a finding of fair dealing in the absence of any evidence of economic harm and especially where the dealing may actually help the sales of the work, and encourage "access" and "dissemination"
  • The purpose of "users" is most important in determining fair dealing - whether it be in deciding what song to buy on iTunes or learning at all stages of education
  • The Copyright Board will be held to the same standard of review as any court when it comes to legal questions of first instance. The Board will be under more rather than less judicial scrutiny in the future.
  • Collectives will need to think more carefully about seeking controversial new "inaugural" tariffs
  • Canada's Supreme Court will continue to look at foreign copyright jurisprudence - but will not hesitate to disregard it when warranted.
 All in all - after 2.5 hours of quick reading and reflection:
  • A great day for education, innovation, user's rights, access, dissemination and that most over-used and frequently misused word in copyright conversation, namely "balance"
  • The Supreme Court of Canada continues its "Magna Carta" achievement in CCH v. LSUC and to be at the centre of the world's stage as the leading forum for an enlightened and evolutionary yet cautious and reasoned common law approach to copyright. 
  • We have two new major decisions on fair dealing, penned by Justice Abella. These will be very important both in Canada and abroad for years to come.
  • There were some thoughtful and important dissents, for example penned by Justice Rothstein in the K-12 decision and the ESA decision. (though he agreed with many of the important majority conclusions in K-12). These are constructive and useful.  Some of the most important copyright decisions in history had strong dissents - for example the 1984 Sony Betamax decision in the US Supreme Court. These are not black and white issues. Nobody expected today to be the end of these debates.
  • Today's decisions come at the perfect time to help us to deal with Bill C-11, once it is proclaimed.
  • While Bill C-11, when proclaimed, may render the ruling on "communication" somewhat moot in a technical sense at least on a going forward basis, the overall message about layering and technological neutrality will survive and will need to be taken into consideration by the Board in the next inevitable attempt to add to the revenues of the  collectives based upon the new "making available" right
  • Today's K-12 decision will doubtless be the most controversial and important  in the short, medium and long terms. In the short term, it completely undercuts any possible rationale for the AUCC model license deal and clearly raises the question of why AUCC couldn't have waited a few more weeks, when things could have realistically only gotten better than the results from below and both today's decision and the passage of Bill C-11 were about to unfold. Those institutions that have signed the AUCC model license are presumably locked in until the end of 2015. The UofT/UWO licenses at least had the virtue of a much shorter minimum term - namely until the end of 2013.
  •  A proud day for Canadian law and, indeed, for Canada 

Here are the specific results from the SCC’s unique five at once set of rulings on Canadian copyright law:
1.    Case: 33921
Court Summary:

Intellectual Property – Copyright – Whether a download of a video game that includes music is a communication of that music to the public by telecommunication within the meaning of para. 3(1)(f) of the Copyright Act, R.S.C. 1985, c. C-42 – Whether standard of reasonableness or standard of correctness applies on judicial review of Copyright Board’s decision that a download of a video game that includes music is a communication of that music to the public by telecommunication.

The applicants represent publishers, developers and distributors of interactive entertainment software products (primarily video and computer games). Their members collectively generate approximately 90% of North American interactive software product sales. On-line downloads of games generate approximately 5% of sales of interactive entertainment software products. On October 18, 2007, the Copyright Board released a decision stating the royalties to be collected for the communication to the public by telecommunication, in Canada, of musical or dramatic-musical works for the years 1996 to 2006: SOCAN Tariff 22.A (Internet Online Music Services).

Result: Court's Headnote

Held (LeBel, Fish, Rothstein and Cromwell JJ. dissenting):  The appeal should be allowed.

                    Per McLachlin C.J. and Deschamps, Abella, Moldaver and Karakatsanis JJ.: The Copyright Board’s conclusion that the Internet delivery of a permanent copy of a video game containing musical works amounted to a “communication” under s. 3(1)(f) of the Copyright Act should be set aside.

                    The Board’s conclusion that a separate, “communication” tariff applies to downloads of musical works violates the principle of technological neutrality.  This principle requires that the Act apply equally between traditional and more technologically advanced media forms.  There is no practical difference between buying a durable copy of the work in a store, receiving a copy in the mail, or downloading an identical copy using the Internet.  ESA has already paid reproduction royalties to the copyright owners for the video games.  Absent evidence of Parliamentary intent to the contrary, we interpret the Act in a way that avoids imposing an additional layer of protections and fees based solely on the method of delivery of the work to the end user.  To do otherwise would effectively impose a gratuitous cost for the use of more efficient, Internet-based technologies.  The Internet should be seen as a technological taxi that delivers a durable copy of the same work to the end user.  The traditional balance in copyright between promoting the public interest in the encouragement and dissemination of works and obtaining a just reward for the creators of those works should be preserved in the digital environment.

                    The term “communicate” in s. 3(1)(f) is not defined in the Act, but the legislative history of the Act demonstrates that the right to “communicate” is historically connected to the right to perform a work and not the right to reproduce permanent copies of the work.  The 1988 amendment in the Act from “communicate . . . by radio communication” to “communicate . . . by telecommunication” does not demonstrate Parliament’s intent to remove all reference in s. 3(1)(f) to conventional performance or broadcasting activities, or to expand the communication right to technologies such as downloading that involve transmitting data in a way that gives end users a permanent copy of the work.  Instead, the replacement of the words “radio communication” with “telecommunication” should be understood as merely expanding the means of communicating a work — that is, from radio waves to cable and other future technologies.  By substituting the word “telecommunication” in 1988, Parliament did not intend to change the fundamental nature of the communication right, which has been concerned with performance-based activities for over 50 years.

                    Applying the dictionary definition of the word “communicate” has the effect of ignoring a solid line of legislative history connecting the term “communicate” to performance-based activities.  The term “communicate” in s. 3(1)(f) should not be transformed by the use of the word “telecommunication” in a way that would capture activities that resemble reproduction.  Such transformation would result in abandoning the traditional distinction in the Act between performance‑based rights and rights of reproduction.

2.    Case: 33922
Court Summary:

Intellectual Property – Copyright – Courts – Jurisdiction – Statutory Interpretation – Communication of a work to the public by telecommunication – Meaning of “copyright” in s. 3 of Copyright Act, R.S.C. 1985, c. C-42 – Interpretation of s. 3(1)(f) – Jurisdiction to interpret s. 3 – Test for when right to communicate a work to the public by telecommunication is engaged – Standard of review of interpretation of s. 3 – Balance between court’s supervisory powers and legislative supremacy – Scope of the supervisory role of the courts – Consistency in meaning given to exclusive rights granted by s. 3.

The applicants are internet service providers that provide consumers with the means to access the websites of online music service providers from which the consumers can download music files or streams to their computers or mobile devices. On October 18, 2007, the Copyright Board released a decision stating the royalties to be collected for the communication to the public by telecommunication of musical or dramatic-musical works for the years 1996 to 2006.


Court held that this was "to the public"....

NB re Standard of Review

Majority (per headnote)

  The appropriate standard for reviewing the Copyright Board’s decision in this case is correctness.  Normally, the legislature is presumed to have recognized the superior expertise of an administrative body in respect of issues arising under its home statute or a closely related statute, and deference warrants applying a reasonableness standard of review.  However, under the Copyright Act, Parliament has given both the Copyright Board and courts concurrent jurisdiction at first instance over questions of law such as the pure question of law that arises in this case.  It would be inconsistent to apply a reasonableness standard on judicial review of a decision by the Board when the same legal question would be decided de novo if it arose in the court at first instance.  It would be equally inconsistent to apply a reasonableness standard to a determination of a legal question by the Board on an appeal from a judicial review but a correctness standard on an appeal from a decision of a court at first instance on the same legal question.  Because the unusual statutory scheme under the Copyright Act does not give the Copyright Board a discrete and special administrative regime, it must be inferred that the legislative intent was not to recognize a superior expertise of the Board relative to the courts with respect to legal questions arising under the Copyright Act. 

3.    Case: 33800
Court Summary:

Intellectual Property – Copyright – Whether providing previews consisting of excerpts of works is fair dealing for the purpose of research that does not infringe copyright.

Some commercial internet sites that sell downloads of works allow users to preview the works. A preview typically consists of an extract taken from the work, for example a 30-second extract of a musical track, streamed online and accessible to consumers. On October 18, 2007, the Copyright Board of Canada released a decision stating the royalties to be collected for the communication to the public by telecommunication, in Canada, of musical or dramatic-musical works. In part, the decision addresses previews.

Court's Headnote:

Unanimous Decision

The first inquiry in this case is whether the previews are provided for the allowable purpose of “research” under the first step of the fair dealing test. The purpose of “research” should be analyzed from the perspective of the consumer as the ultimate user, not the online service provider. The Board properly considered the previews from the perspective of the consumer’s purpose, namely, conducting research to identify which music to purchase.
“Research” need not be for creative purposes only. Permitting only creative purposes to qualify as “research” would ignore the fact that one of the objectives of the Copyright Act is the dissemination of the works themselves. Limiting “research” to creative purposes would also run counter to the ordinary meaning of “research”, which includes many activities that do not require the
establishment of new facts or conclusions. The fair dealing exception must not be interpreted restrictively and “research” must be given a large and liberal interpretation.
The inquiry then moves to the second step set out in CCH, namely, determining whether the use of previews was “fair”. The factors to be considered in determining whether a dealing is fair are the purpose, character, and amount of the dealing; the existence of any alternatives to the dealing; the nature of the work; and the effect of the dealing on the work.
The Board properly concluded that previews constituted fair dealing. The guiding perspective is that of the ultimate user or consumer. The service providers facilitate the research purposes of the consumers. There are reasonable safeguards in place to ensure that the previews are being used for this purpose.
With respect to the character of the dealing, users do not keep a permanent copy of the preview, since the file is streamed and automatically deleted from the user’s computer once the preview is heard. As a result, copies cannot be duplicated or further disseminated.
The “amount of the dealing” factor should not be assessed on the basis of the aggregate number of previews that are streamed by consumers. This factor should be assessed by looking at the proportion of the preview in relation to the whole work,
not the aggregate amount of music heard through previews. Streaming a preview of several seconds is a modest amount when compared to the whole work.
Under the remaining factors, there are no alternatives to the dealing that as effectively demonstrate to a consumer what a musical work sounds like. Previews are therefore reasonably necessary to help consumers research what to purchase. Unless a potential customer can locate and identify the work he or she wants to buy, the work will not be disseminated. Short, low-quality previews do not compete with, or adversely affect, the downloading of the works themselves. Instead, their effect is to increase the sale and dissemination of copyrighted musical works.
The previews therefore constitute fair dealing under the Copyright Act.

4.    Case: 33888
Court Summary:
Intellectual property — Copyright — Fair dealing — Copyright Board approving tariff that included as remunerable use the photocopying of excerpts primarily from textbooks for use in classroom instruction for students in kindergarten to grade 12 — Whether such copying constitutes fair dealing — Whether the Federal Court of Appeal erred in upholding the Board’s finding that it is the copier’s purpose, and not the user’s purpose, that is the relevant consideration for fair dealing — Whether the Federal Court of Appeal erred in upholding the Board’s decision to look at copying in aggregate, and not individually, in determining fairness — Whether the Federal Court of Appeal erred by not applying the “not restrictive” interpretation that fair dealing warrants under the decision of this Court in CCH v. Law Society of Upper Canada, [2004] 1 S.C.R. 339 — Whether the Federal Court of Appeal erred in applying the standard of reasonableness, and not correctness, in its judicial review — Is there an inconsistency between the Federal Court of Appeal decision in the present case and in Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, 2010 FCA 123, [2010] F.C.J. No. 570 — Sections 29, 29.1 and 29.4 of the Copyright Act, R.S.C. 1985, c. C 42 (the “Act”).

At the respondent’s request, the Copyright Board of Canada certified a tariff that applied to the reproduction of literary, dramatic and artistic works included in books, newspapers and magazines for use in primary and secondary level educational institutions in Canada, outside Quebec. The Board determined that royalties were payable with respect to some of the photocopies made in schools because they did not constitute fair dealing or come under the exception under s. 29.4 of the Act. The applicants applied for judicial review of the Board’s decision. The main issues became whether: i) “multiple copies made for the use of the person making the copies and single or multiple copies made for third parties without their request for the purpose of private study and/or research and/or criticism and/or review” (“category 4 copies”) constituted fair dealing under sections 29 and 29.1 of the Act; and ii) whether the copying was exempt under s. 29.4 of the Act as a “work or other subject matter as required for a test or examination” where the work is not “commercially available in a medium that is appropriate for the purpose”.

The Federal Court of Appeal upheld the Board’s ruling that the category 4 copies were unfair dealing. This was a question of fact for which there had been no reviewable error. However, the appellate court allowed the application for judicial review on the basis that the Board had failed to address an important part of the test under s. 29.4 of the Act.

HPK note:
In 2004, the Court ruled in the CCH v. LSUC case that “fair dealing” must be given a “large and liberal interpretation” and “research is not limited to non-commercial or private contexts.”   The battle in the K-12 case was essentially between those who are attempting to attack that decision and those who want the court to continue in the same direction as CCH and to put Canadians on a level copyright playing field with the USA in terms of education and innovation. Canadian and American fair dealing and fair use law have evolved as “kissing cousins” according to common law principles, and that’s the approach my intervener client was seeking.

5/4 victory for educators:

The Court’s Headnote:

The Copyright Board’s approach drives an artificial wedge into these unified purposes of instruction and research/private study by drawing a distinction between copies made by the teacher at the request of a student and copies made by the teacher without a prior request from a student. The word “private” in “private study” should not be understood as requiring users to view copyrighted works in isolation.

The Copyright Board’s approach to the “amount of the dealing” factor was also flawed. Having found that teachers only copied short excerpts of each textbook, the Board was required to determine whether the proportion of each of the short excerpts in relation to the whole work was fair. This factor is not a quantitative assessment based on aggregate use, but an examination of the proportion between the excerpted copy and the entire work.

With respect to the “alternatives to the dealing” factor, contrary to the Copyright Board’s conclusion, buying books for every student is not a realistic alternative to teachers copying short excerpts to supplement student textbooks. Purchasing a greater number of original textbooks to distribute to students is unreasonable in light of the Board’s finding that teachers only photocopy short excerpts to complement existing textbooks.
As for the “effect of the dealing on the work” factor, there was no evidence of a link between photocopying short excerpts and a decline in textbook
sales. There were several factors, in fact, other than photocopying, that were more likely to have contributed to any such decline. Moreover, the Board’s finding that the teachers’ copying was limited to short excerpts of complementary texts, makes it difficult to see how the teachers’ copying competes with the market for textbooks.
The Copyright Board’s decision as to whether the photocopies amount to fair dealing is to be reviewed on a reasonableness standard. Because its finding of unfairness was based on a misapplication of the CCH factors, its outcome was unreasonable.


5.    Case: 34210
Court Summary:

Intellectual property – Copyright – Legislation – Interpretation – Whether recording artists and record companies, as performers and makers of music, are entitled to equitable remuneration under s. 19 of the Copyright Act, R.S.C. 1985, c. C-42, when their music is played in movies and on television – Whether the definition of “sound recording” in s. 2 of the Copyright Act precludes equitable remuneration under s. 19 for pre-recorded music forming part of a soundtrack.

Re:Sound is a collective society authorized by the Copyright Board of Canada to collect equitable remuneration for the performance in public or communication to the public by telecommunication of published sound recordings of musical works. Its predecessor filed two proposed tariffs for public performance of published sound recordings, and that relate to the use of such sound recordings in movies shown in movie theatres and to the use of the sound recordings in television broadcasts. The respondents objected to the proposed tariffs on the ground that the definition of “sound recording” in the Copyright Act excludes soundtracks from movies and television shows and sought a determination of the following preliminary issue:

Is anyone entitled to equitable remuneration pursuant to section 19 of the Copyright Act, R.C.S. 1985, c. C-42, when a published sound recording is part of the soundtrack that accompanies a motion picture that is performed in public or a television program that is communicated to the public by telecommunication?

The Board answered in the negative and refused to certify the tariffs. The Federal Court of Appeal, on judicial review, upheld the decision.

Unanimous - per headnote:

  Irrespective of the standard of review, the Board was correct that “soundtrack” includes pre‑existing sound recordings and that such recordings are excluded from the definition of “sound recording” when they accompany a cinematographic work.  This interpretation of “soundtrack” is consistent with the scheme of the Act, Parliament’s intention, and Canada’s international obligations.  A pre‑existing sound recording that is part of a soundtrack cannot be the subject of a tariff under s. 19 of the Act when the soundtrack accompanies a cinematographic work.

                    The provisions in question must be read in their entire context, in their grammatical and ordinary sense, and harmoniously with the scheme and object of the Act, and consistently with the words chosen by Parliament.  According to s. 2 of the Act, a “sound recording” is a recording consisting of sounds “but excludes any soundtrack of a cinematographic work where it accompanies the cinematographic work.”  Therefore, a “soundtrack” is a “sound recording” except when it accompanies the motion picture.  Otherwise, the exclusion would be superfluous.  For a pre‑existing sound recording to be excluded from the interpretation of “soundtrack”, Parliament would have had to make that intention explicit in the Act.  This could have been achieved by excluding, for example, only “the aggregate of sounds in a soundtrack”.  Legislative history confirms this interpretation, notably comments made at the Standing Committee on Canadian Heritage hearing with respect to the provisions at issue.

                    The Copyright Act is not incompatible with the Rome Convention. Although the Rome Convention states that producers of phonograms shall enjoy the right to authorize or prohibit the direct or indirect reproduction of their phonograms, Article 3 defines “phonogram” as “any exclusively aural fixation of sounds of a performance or of other sounds”.  A soundtrack that accompanies a cinematographic work is not for “exclusively aural fixations”.  Furthermore, if a pre‑existing sound recording is extracted from a soundtrack accompanying a cinematographic work, it once again attracts the protection offered to sound recordings.  The Board’s interpretation is consonant with Canada’s obligations under the Rome Convention.


Copyright Litigation Mathematics in Canada: How to Turn $21,554,954.25 into $19,368.74

Aspiring copyright litigants in Canada from the largest of corporations to the lowliest little guy should take sobering note of the case of Leuthold v. CBC 2012 FC 748 decided on June 14, 2012.

In case anyone was not already aware, Canadian copyright litigation is not a lottery. One cannot necessarily expect to receive $21.5 million from the proceeds of a lawsuit against a public broadcaster involving a mistaken re-use – or even six such re-uses - of 18 seconds worth of still photographs in a feature length CBC documentary, when the original license was given for $2,500.

However, an American photographer named Catherine Leuthold sought $21,554,954.25 from the CBC and one of its employees personally for the mistaken re-uses of a few of her stills from 9/11.

At the end of the day, the Court quite predictably rejected her frankly astonishing suggestion that each transmission from each of the CBC’s hundreds of “distribution undertakings” warranted separate claims for damages, and awarded $3,200 for each of six unauthorized broadcasts, to which the CBC had admitted – i.e. $19,200. Even this amount was arguably generous under the circumstances and given the evidence.

The Court reduced Ms. Leuthold’s claim of $92,998 for her alleged entitlement to a share of Newsworld’s revenue to $168.74.

It declined to award exemplary and punitive damages or to find the individual personally liable.

It did order the CBC to remove the offending 18 seconds worth of stills, except for one archival copy.

It has reserved judgment on costs, having noted the rules dealing with cost awards when a settlement offer has been made. It will be very interesting to see, at the end of the day, who will have to pay costs to whom and how much. It would not be surprising if Ms. Leuthold were to be in store for a very unpleasant surprise when costs are determined. 

The Canada.com story by Don Butler reports as follows on statements by Ms. Leuthold's counsel and a CBC spokesman:
O'Connor said Leuthold is "quite devastated" by the outcome of the case. "We thought that the arguments were sound."

The decision was not what his client had expected "in terms of both her and my analysis of the situation, the facts and the law," he said. "But the judge is the trier of those matters, and the decision says what it says." The decision, he added, "may have significant effects in both Canadian copyright and broadcasting law."

An appeal is under serious consideration, O'Connor said. "There may be room for interpretation, and conceivably there may have been an error made. It may not be the final chapter in this lengthy saga."

Because an appeal is still possible, a CBC spokesman would only say the broadcaster is "satisfied" with the decision.

It's not yet clear what will happen with legal costs in the case, which began in 2005. Costs could be awarded against Leuthold if the CBC made an offer to settle that was greater than the amount awarded by the court, O'Connor said. "That may come into play."
This trial took place over the course of six days.

The plaintiff was awarded about 0.0009 or less than one thousandth of what she was seeking. And she has yet to learn what the costs order will be. Her counsel apparently acknowledges in the above quote that costs could be awarded against her.

If this decision is to indeed have “significant effects in both Canadian copyright and broadcasting law” as her counsel suggests, I suspect that it will be to remind potentially aspiring litigants and their counsel that litigation is in Canada is not like a lottery and Canadian judges do not hand out gigantic jackpots like American juries sometimes do. One can normally expect that Canadian Courts will follow the maxim as stated by Justice Scott of the Federal Court in this case that: 
Fundamentally, the Court‘s discretion is broad but its assessment of damages must be based on common sense.


PS - July 26, 2012 
There is an appeal underway by Ms. Leuthhold.

Monday, July 09, 2012

Re:Sound is exercising its rights in the form of a new tariff on recorded music used to "accompany physical activities" in Canada.


Re:Sound is exercising its rights in the form of a new tariff on recorded music used to "accompany physical activities" in Canada.There is now a tariff for the use of recorded music in thousands of gyms and other venues in Canada. No doubt, there will be attacks on this “tax” – as it will inevitably be called.

Five years and three months after this proposed Re:Sound “fitness” tariff was filed, and two years and two months after the hearing was finished, the Copyright Board has determined in its July 6, 2012 decision that none of the evidence submitted by a parade of expensive experts was sufficiently reliable to form the basis of a calculation for a tariff for fitness clubs, gyms, dance studios, etc. Still, the Board certified a tariff based upon a simple calculation flowing from some SOCAN agreements with various fitness centres and dance class providers, filed at the Board’s request. SOCAN represents composers, authors and publishers. Re:Sound (formerly NRCC) represents performers and record producers.
According to a just released decision by the Copyright Board: 
  •  A fitness club that plays sound recordings in Re:Sound’s repertoire during fitness classes will pay a fee of $105.74 per year.
  •  A fitness club that plays sound recordings in workout areas will pay according to the existing Re:Sound background music tariff, which is based on either attendance, capacity or floor area. Assuming attendance can be measured, it will pay 0.08¢ per attendee.
  • A skating venue will pay 0.44 per cent of its revenues from admission, with a minimum fee of $38.18 per year. Venues with no admission revenues will pay the minimum fee
  •    A venue that offers dance instruction or any other physical activity will pay a fee of $23.42 per year.
 Somebody will have to pay for these tariffs. It remains to be seen whether the thousands of establishments that are now liable for it pass the costs onto customers or absorb the costs remains to be seen. How much will these venues pay? According to the Board:
  •  A small fitness centre with about 200 members and no fitness classes should pay about $16 per year if background music is played in its workout area.
  •    A large fitness centre with 2,000 members that plays sound recordings both in its classes and as background music in its workout areas should pay about $280 per year
  •   A dance instruction venue and any other physical activity venue will pay $23.42 per year
  •  Skating venues with admission revenues will pay on average royalties of $60 per year. Venues with no admission revenues will pay the minimum fee of $38.18 per year.
How many fitness clubs are there in Canada and what are the revenues of the fitness club industry? Here’s what the Board says: 
  •  According to the evidence filed, there are  5,047 fitness clubs in Canada. The total revenues of the fitness club industry were estimated at about $2 billion in 2008.
There’s a lot of money at stake here. In fact, the Board says that Re:Sound was seeking “roughly $86 million per year.”

Is this a “tax”? Here’s what the Board says – in a quite unusual anticipatory defence in “Fact Sheet” of the inevitable comparison to the dance and wedding “tax”, the now defeated and defunct “iPod tax”,  as Ministers Moore and Clement called it:
Is this tariff a tax?
No. Taxes are introduced by government, collected by government and spent for government purposes. This tariff is a royalty, paid for the use of someone else’s intellectual property, to be collected by a not-for-profit collective and distributed to individual rights holders. The purpose of such royalties, established under the Copyright Act, is to provide fair compensation to performers and record labels for the use of their sound recordings.

However, it’s not quite that simple. For a tax to be a tax it does not necessarily have to be collected by government. Apparently, the “tax” issue was not raised by objectors.
However, Courts are increasingly looking at just what is and what is not a “tax” – and the consequences can be quite interesting. Who would have thought that Obamacare could be saved by a finding of the US Supreme Court that it is actually a “tax”?

In 2004, the Federal Court of Appeal came very close indeed  to agreeing with me (arguing on behalf of the Retail Council of Canada) that the CD levy was a “tax” under Canadian law, which would have rendered it illegal because, if it were a  “tax”, it had not been properly dealt with by Parliament.

This Government clearly thought that the proposed iPod “tax” was a “tax” and refused to allow it into the Copyright Act.

Another interesting aspect of this new tariff is that it is significantly retroactive – in fact, back to 2008. There is no reference to any jurisdictional objection to such retroactivity, although there are some potentially very interesting arguments that might have been made.

One of these days, there may be a serious challenge to the Board’s practice of imposing tariffs with a long retroactive reach. The reason that Board tariffs are retroactive is ultimately quite simple. It usually takes the Board a very long time to get to a hearing and then often at least another 18 months – in this case two years and two months – to render a decision. These are much longer timelines than we normally see in Courts. The Board’s Chairman, Justice Vancise, a very experienced appellate judge from Saskatchewan, has indicated that he is trying to do something about these long timelines.

In the end, and after all of the expert evidence that the Board found to be wanting, the Board  simply looked at some SOCAN agreements and discounted the average amounts it to account for Re:Sound’s limited eligible repertoire. It expressed a considerable lack of satisfaction with the result:
[172] We note that our decision comes after a
lengthy and difficult process made no easier by the
lack of reliable and relevant evidence. Our
preference is to set tariffs based on strong
economic evidence presented by the parties. In this
case we were not able to do so. As stated above, in
our opinion the 2008-2012 tariff for fitness
classes is transitional. The next time we examine
Re:Sound Tariff 6.B, it would be preferable to
also have SOCAN 19 before us. We would then
be able to consider all of the relevant economic
evidence and set both of these tariffs

In fact, the Board considered setting “no tariff” on the basis that the expert evidence of both sides was rejected by it as “unreliable”. However, the Board did accept the factual evidence of the parties.  Accordingly, it believed that it must set a tariff, unlike in a recent SOCAN case where is declined to do so on the basis of lack of evidence. I and others argued that case in the Court of Appeal in support of the Board’s conclusion that it was not required to certify a tariff – even a “nominal” tariff - in the “absence of proper and reliable evidence”.

It will be interesting to see how long it takes for the mainstream medium to start calling this a “fitness tax” or an “exercise tax”.  

t will be also interesting to see whether there is judicial review (i.e. an “appeal”) of this “fitness” decision. There are 30 days from July 6, to serve and file a notice appeal here.


Wednesday, July 04, 2012

Be Careful What You Wish For on the Three-Step Test and Fair Dealing

Once again, my old admonition to copyright maximalists about being “careful what you wish for” is proving to be true.

The US now wants its future TPP partners to benefit from its “fair use” doctrine and the “three-step test” in international law. The USA clearly believes that its own law is fully consistent with the “three-step test”. Those who have been pushing for a certain idiosyncratic notion of what the “three-step test” should mean for Canada are probably not thrilled about the way this is unfolding.

Is this some kind of trick or Trojan horse, i.e. a high stakes policy shopping play on the part of the US Government to change domestic US law? I don’t think so. The epic battles over “fair use” in Congress and the US Supreme Court have been too monumental to get changed in the middle of the night with some “technical” amendment or in some other secretive  sleight of hand, as has been known to happen in US copyright law.

It’s probably a wise concession on the part of the USA in the face of the inevitable realization that large and liberal exceptions are important to education and innovation and always have been and always will be. If countries such as Canada insist on hobbling its own innovators and educators with restrictive and expensive regimes like that of Access Copyright, the USA probably wants to ensure that such short sighted thinking does not hurt the global interests of US corporations operating abroad. 

Here is what the USTR just said about this:
For the first time in any U.S. trade agreement, the United States is proposing a new provision, consistent with the internationally-recognized “3-step test," that will obligate Parties to seek to achieve an appropriate balance in their copyright systems in providing copyright exceptions and limitations for purposes such as criticism, comment, news reporting, teaching, scholarship, and research. These principles are critical aspects of the U.S. copyright system, and appear in both our law and jurisprudence. The balance sought by the U.S. TPP proposal recognizes and promotes respect for the important interests of individuals, businesses, and institutions who rely on appropriate exceptions and limitations in the TPP region.
(Emphasis added)
I couldn’t agree more – namely that §107 of the US law and case law such as Campbell v. Acuff Rose – reflect the “three-step test”. The  1994 Campbell v. Acuff-Rose decision from the US Supreme Court clearly establishes that the fourth factor concerning effect on the market is no more or less important than the other fair use factors.  

Here is 17 USC §107:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.
The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.
          (emphasis added)

Note the stuff about “teaching (including multiple copies for classroom use”.

It’s hard to imagine but some prominent Canadian lawyers and lobbyists have been arguing lately in fora ranging from the Supreme Court of Canada to Parliament that Canadian fair dealing law does not and should not include the purpose of education or the allowance of multiple copies for classroom use because this could offend the “three-step test” and/or what they inaccurately indicate as a prioritized fourth factor effect on the market test. In fact, there was a heated debate on this blog and elsewhere involving Ariel Katz and I (supported by Bill Patry) with others who had thrown down the gauntlet against such reasonable exceptions in Canada on the spurious and misleading basis that these would contravene the “three-step test”. As I’ve said before, if that argument had any merit whatsoever, which it doesn’t, the USA would have been found to be in violation on this point many years ago.  See also here.

So – the USA, no less, is urging other countries to adopt “balance” as exemplified by its own law on fair use. Sounds like a pretty good idea to me...  Wish I’d thought of it myself ;-)

Actually, Ariel Katz and I did think of it when we urged the Supreme Court of Canada to look at US law in the K-12 case and to treat any suggestion that the “three-step test” should restrict “liberal educational exceptions” in Canadian fair dealing law as a “red herring”. Here’s our factum.

So, maybe this time at least, Canada should not only do as the USA says but as it actually does. In this case, the USA largely gets it right on “fair use”. If the Canadian Supreme Court continues along the path of its own landmark CCH v. LSUC decision and when Bill C-11 becomes law, we will be headed in the right direction with much momentum and well deserved confidence.