Nifty Shades of Gray Marketing: A Split US Supreme Court - Majority Believes that Things Go Better with Coke

The U.S. Supreme Court yesterday delivered what is likely one of the most important copyright decisions from any court anywhere anytime. In a dramatically divided but decisively 6-3 decision in Kirtsaeng v. John Wiley, it held that copyright law could not be used to prevent the parallel importation into the USA of works lawfully made outside of the USA. In other words, legally made works can be bought and sold and resold on the “grey” (or “gray” for those not in the Commonwealth) market, according to common sense. As the EFF says, if "you bought it,you own it"'. If you own it, you can resell it. After the “first sale”, the copyright owner’s rights in the physical object are “exhausted” – hence the frequent reference to the doctrine of “exhaustion”.

In other words, copyright law will not be available to do what trade-marks law has also failed to do, which is to serve as a tool of international trade control, price discrimination, market segmentation and restraint of trade with respect to legitimately made goods for which the copyright owner has been paid and in respect of which the “first sale” has been made. Things are somewhat different in the EU - but that is not a jurisdiction that Canada would rush to emulate in this respect.

To be absolutely clear, the copies in question were not piratical or counterfeit. The American copyright owner got paid for these products manufactured abroad, with their permission. However, the quest to control the resale after the first sale, to control the channels of distribution and the pricing of the imported copies of these products into the USA, and to generally assert a right to control sale after “first sale” and to take advantage of higher American “what will the market bear” pricing was denied. As the EFF says, “You bought it – you own it”. It’s not quite that simple – but it’s now very close indeed. Basically, the owner of a copyrighted product can do with it what he or she wishes, other than copy it or infringe moral rights or break TPMs, where applicable.

The decision applies to all copies lawfully made anywhere – whether the product is a book, a chocolate bar, a wrist watch, a plane, train or automobile. It applies whether it is the product itself that is protected by copyright (i.e. books, in this case) or merely the packaging, labelling or other incidental aspect of the product. It should be noted that Canada has an elaborate sui generis regime to prevent the parallel importation of books – because book publishing has always been highly protected in Canada.

The Kirtsaeng decision could have important ramifications for Canada. It is consistent with the result of the six year old Supreme Court of Canada decision in Euro-Excellence v. Kraft, which involved copyright in a small logo on the packaging of Toblerone chocolate bars (I should disclose that I made the prevailing argument on behalf of an intervener, the Retail Council of Canada, in that case). The argument was highly technical, but essentially entailed that a copyright owner cannot infringe its own copyright. That argument carried the day in the only way that could have worked at the time – given the very inadequate record below. The two top courts of Canada and the USA have come to the same bottom line for most practical purposes, namely that copyright law will be ineffective to “thwart” parallel imports of grey goods – which are, by definition, legitimate. I’ll write a more detailed blog comparing the Kirtsaeng case with Canada’s Kraft case in the near future. 

It should be noted that some believe that the execution on paper of an assignment of copyright to a Canadian entity will entitle it to block parallel imports in accordance with the Kraft decision. However, such a tactic may very well backfire if adequately resisted. Such an assignment may be subject to attack as a sham or an abuse of copyright and may trigger unwelcome and unexpected tax consequences. More about this in the future. For now, see my comment prepared for the Law Society of Upper Canada. For practical purposes, copyright law is not a very practical way to block parallel importation into Canada.
 
The US decision is important to Canada for many reasons – not least of which is the imminent debate on Bill C-56, the anti-counterfeiting legislation, which includes several sometimes inconsistent references to parallel imports that could possibly have unintended or unforeseen results. Also, there can be little doubt that the lobbyists have already begun to work on Congress and the USTR to “undo” a result that some of their clients will find very difficult to accept. Such a development is a threat to Canada and other countries involved in trade negotiations with the USA, unless the negotiators stand their ground.

Kirtsaeng was a foreign student from Thailand studying in the USA. He figured out that he could import perfectly legitimate text books in English printed abroad and purchased by his friends and family in Thailand and resell them in the USA at a lower price than other channels. The profits from his little cottage industry import business helped finance his education. This is what most would consider to be free trade, competition and otherwise normal, entrepreneurial, and competitive capitalism His profits helped to finance his American university studies. The well-known publishers John Wiley decided to stamp out this very small challenge to the legacy business model of price discrimination based upon a tortured and technical result that been in place if not easily enforced as the result of lower court and two recent but inconclusive Supreme Court decisions itself over the years.

As is so often the case when copyright owners get excessively zealous in their quest for absolute control, multiple and layered payments, double-dipping and other excesses – they sometimes get more than they ask for. In this case, Wiley and an impressive alliance of amici representing the US copyright establishment went after a foreign grad student working his way through college. They must have been very pleased when a jury whacked him with $600,000 in statutory damages. But he appealed and Wiley and its supporters got a resounding defeat in the US Supreme Court that will be seen as a huge setback in the legacy book publishing, movie, music, entertainment, and more unenlightened quarters of the software sectors.

However, Wiley and other American copyright owners in various legacy and IP maximalist sectors believe that they are entitled to segment markets, practice international price discrimination and to charge what the market will bear in various geographic markets. Canadians are familiar with having to pay higher prices than Americans for precisely the same product – in part because not all Canadian importers are as aggressive as they could be in sourcing the perfectly legitimate “grey market” for “parallel imports” that would save their customers money and earn themselves greater profit.  Young Mr. Kirtsaeng, however, was undeterred. He succeeded in slaying the giant that even mighty CostCo had failed to successfully confront in the 2010 US Supreme Court in the 2010 CostCo v. Omega case.

At the risk of seriously oversimplifying  some complex jurisprudence and its consequences, the Americans have now caught up to Canada and perhaps even passed it for the moment with respect to “international exhaustion”, free trade and a judicial distaste for using IP laws for purposes for which they were never intended. Like, the Canadian decision, the US Court today was sharply divided – although the result and the splits are much clearer in the US case. The 6-3 arithmetic speaks for itself in this instance.

As per the Court’s summary, BREYER, J., delivered the opinion of the Court, in which ROBERTS, C. J., and THOMAS, ALITO, SOTOMAYOR, and KAGAN, JJ., joined. KAGAN, J., filed a concurring opinion, in which ALITO, J., joined. GINSBURG, J., filed a dissenting opinion, in which KENNEDY, J., joined, and in which SCALIA, J., joined except as to Parts III and V–B–1.

Note the additional shades of grey added by the Kagan + Alito concurrence and the partial reservation of Scalia's concurrence with Ginsburg and Kennedy.

Court watchers will immediately note that this alignment has nothing to do with traditional “liberal” v. “conservative”  or partisan appointment divide. Nor can it be said to reflect any “activist” v. “strict constructionist” divide. If anything, it may portend an emerging meeting of the minds of of a “purposive” and “libertarian” approach to intellectual property – and the solid rejection of the “maximalist” copyright views that one had come to expect from Justice Ginsburg, normally considered to be a “liberal” on other issues.

The result is not surprising for any who heard the oral argument – which featured a “parade of horribles”–  including why consumers and users’ rights in everything ranging from library books to used cars was on the line, if the overreaching position of Wiley and its supporters had been accepted. In the end, even the Government’s lawyer admitted that Kirtsaeng and his amici supporters’ list of “horribles” was “worse” (i.e. presumably even more horrible) than the alternative list.

The result is effectively a stinging rejection by her colleagues of Ginsburg, J.’s widely noted “obiter dicta” in the Quality King case a few years earlier. That case involved shampoo products that had been made in the USA, shipped abroad and imported back. She provocatively opined by way of obiter dicta in a concurrence that:

This case involves a “round trip” journey, travel of the copies in question from the United States to places abroad, then back again. I join the Court’s opinion recognizing that we do not today resolve cases in which the allegedly infringing imports were manufactured abroad. See W. Patry, Copyright Law and Practice 166—170 (1997 Supp.) (commenting that provisions of Title 17 do not apply extraterritorially unless expressly so stated, hence the words “lawfully made under this title” in the “first sale” provision, 17 U.S.C. § 109(a), must mean “lawfully made in the United States”); see generally P. Goldstein, Copyright §16.0, pp. 16:1—16:2 (2d ed. 1998) (“Copyright protection is territorial. The rights granted by the United States Copyright Act extend no farther than the nation’s borders.”). (emphasis added)

This time around, Wiley relied upon a passage from the majority in Quality King. In Breyer, J.’s words:

We cannot, however, give the Quality King statement the legal weight for which Wiley argues. The language “lawfully made under this title” was not at issue in Quality King; the point before us now was not then fully argued; we did not canvas the considerations we have here set forth; we there said nothing to suggest that the example assumes a “first sale”; and we there hedged our statement with the word “presumably.” Most importantly, the statement is pure dictum. It is dictum contained in a rebuttal to a counterargument. And it is unnecessary dictum even in that respect. Is the Court having once written dicta calling a tomato a vegetable bound to deny that it is a fruit forever after? (Emphasis added)

As for her controversial passage mentioned above, Justice Ginsburg admitted that her comment in Quality King was “dictum” but went on to say that “I disagree with the Court’s conclusion that this dictum was ill considered.”

Kagan, J. in her concurrence indicated that if Congress views yesterday’s decision “as a problem”, “it should recognize Quality King—not our deci­sion today—as the culprit.

The Kirtsaeng decision gets very technical, as inevitably do all decisions on parallel imports if adequately briefed and reasoned. It goes into great depth  based upon the interplay of key sections of the US legislation. But, in the end, it all boiled down to the common sense interpretation of five words: “lawfully made under this title”. In the end, the Court agreed with Kirtsaeng that this phrase was not subject to geographic limitation and applied to copies lawfully made abroad.

There is already much speculation about whether this decision could be a premonition of a surprise outcome in the pending Bowman v. Monsanto case about whether and how the “exhaustion” doctrine applies to patented seeds.

The importance of yesterday’s decision cannot be over stated. Two of the judges on the US Supreme Court who have long shown a great interest in copyright law and are both regarded as “liberals” on the Court have seriously split with each other. The split is symbolic in many respects of the overall state of affairs in copyright law, in which everyone professes to believe in “balance”, as long it is their own definition of balance. The result will be very inconvenient for the USTR in its trade negotiations in the TPP, where the Americans will find it virtually impossible – though it has rarely stopped them before – to say “Do as we say, not as we do”. No doubt, the lobbyists will be hard at work in that forum in order to “policy shop” a prohibition against parallel imports back into the US congress – but that won’t be easy, to say the least.

Ironically, Justice Ginsburg was explicitly very concerned about the future of US trade negotiations and treaties that are still only a glint in the USTR’s and various lobbyists’ eyes – a concern which many might find seriously out of place in a judgment of the  US Supreme Court: 

Quality King left open the question whether owners of U. S. copyrights could retain control over the importation of copies manufactured and sold abroad—a point the Court obscures, see ante, at 33 (arguing that Quality King “significantly eroded” the national-exhaustion principle that, in my view, §602(a)(1)embraces). The Court today answers that question with a resounding “no,” and in doing so, it risks undermining the United States’ credibility on the world stage. While the Government has urged our trading partners to refrain from adopting international-exhaustion regimes that could benefit consumers within their borders but would impact adversely on intellectual-property producers in the United States, the Court embraces an international-exhaustion rule that could benefit U. S. consumers but would likely disadvantage foreign holders of U. S. copyrights. This dissonance scarcely enhances the United States’ “role as a trusted partner in multilateral endeavors.” Vimar Seguros y Reaseguros, S. A. v. M/V Sky Reefer, 515 U. S. 528, 539 (1995).

In any case, her reference to the Vimar decision is misplaced, since the comment to which she apparently refers says that “courts should be most cautious before interpreting its domestic legislation in such manner as to violate International agreements”. In fact, not only are there no existing multilateral international treaties or agreements that prohibit international exhaustion. The TRIPS agreement expressly permits countries to come to their own conclusions on this issue. The fact that the USA may now want to forbid international exhaustion via future treaties should be of no relevance whatsoever to the US Supreme Court.

An aspect of this decision – which will be elevated no doubt to “sky is falling” proportions – is the often heard suggestion that US publishers, entertainment companies, software developers etc. may become reluctant to supply English language products to developing countries at lower prices for fear of seeing them shipped back to the USA as parallel imports. That argument may once have had some serious merit – but is increasingly moot as so many of these types of products are now provided digitally – and often controversially with DRMs of various stripes attached, including regional coding. This opens up a whole new debate about sale v. lease, and the future of TPMs, etc.  Moreover, the emergence of mega e-commerce entrepreneurs such as Amazon and the eBay phenomenon mean that the sustainability of price discrimination models is in serious doubt anyway. Finally, if students and other consumers in developing countries cannot get their needs for English language products legally satisfied at reasonable prices, they may resort to recourse to readily available online illegal sources and their governments may turn a blind eye except for token efforts at enforcement. That is simply a realistic observation. Don’t shoot the messenger.

The debate about domestic and international exhaustion has been going on for over a century. It is far from exhausted. But yesterday’s decision is a great victory for free traders and those who believe in the majesty and the wisdom of the common law (Lord Coke, no less who was referred to at length) and the role of the judiciary.

In closing, here’s the passage referring to Lord Coke (1552 to 1634) – which legal scholars will no doubt find to be delightful:

The “first sale” doctrine is a common-law doctrine with an impeccable historic pedigree. In the early 17th centuryLord Coke explained the common law’s refusal to permitrestraints on the alienation of chattels. Referring to Littleton, who wrote in the 15th century, Gray, Two Contributions to Coke Studies, 72 U. Chi. L. Rev. 1127, 1135 (2005), Lord Coke wrote:

“[If] a man be possessed of . . . a horse, or of any otherchattell . . . and give or sell his whole interest . . .therein upon condition that the Donee or Vendee shallnot alien[ate] the same, the [condition] is voi[d], because his whole interest . . . is out of him, so as he hath no possibilit[y] of a Reverter, and it is against Trade and Traffi[c], and bargaining and contracting betwee[n] man and man: and it is within the reason ofour Author that it should ouster him of all power given to him.” 1 E. Coke, Institutes of the Laws of England §360, p. 223 (1628).

A law that permits a copyright holder to control the resale or other disposition of a chattel once sold is similarly “against Trade and Traffi[c], and bargaining and contracting.” Ibid.

With these last few words, Coke emphasizes the importance of leaving buyers of goods free to compete with each other when reselling or otherwise disposing of those goods. American law too has generally thought that competition, including freedom to resell, can work to the advantage of the consumer. See, e.g., Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U. S. 877, 886 (2007) (restraints with “manifestly anticompetitive effects” are per se illegal; others are subject to the rule of reason (internal quotation marks omitted)); 1 P. Areeda & H.Hovenkamp, Antitrust Law ¶100, p. 4 (3d ed. 2006) (“[T]he principal objective of antitrust policy is to maximize consumer welfare by encouraging firms to behave competitively”).

The “first sale” doctrine also frees courts from the administrative burden of trying to enforce restrictions upon difficult-to-trace, readily movable goods. And it avoids the selective enforcement inherent in any such effort. Thus, it is not surprising that for at least a century the “first sale”doctrine has played an important role in American copyright law. See Bobbs-Merrill Co. v. Straus, 210 U. S. 339 (1908); Copyright Act of 1909, §41, 35 Stat. 1084. See also Copyright Law Revision, Further Discussions and Comments on Preliminary Draft for Revised U. S. Copyright Law, 88th Cong., 2d Sess., pt. 4, p. 212 (Comm. Print 1964) (Irwin Karp of Authors’ League of America expressing concern for “the very basic concept of copyright law that, once you’ve sold a copy legally, you can’t restrict itsresale”).

The common-law doctrine makes no geographical distinctions; nor can we find any in Bobbs-Merrill (where this Court first applied the “first sale” doctrine) or in§109(a)’s predecessor provision, which Congress enacted a year later. See supra, at 12. Rather, as the Solicitor General acknowledges, “a straightforward application of Bobbs-Merrill” would not preclude the “first sale” defense from applying to authorized copies made overseas. Brief for United States 27. And we can find no language, context, purpose, or history that would rebut a “straightforward application” of that doctrine here.

Yes – remembrances of the basic great principles of the common law do go better with Lord Coke.

HPK

Rev. March 20, 21 2013

Parliamentary Committee Report on Intellectual Property Regime in Canada

The Standing Committee on Industry, Science and Technology has just released a 68 page report entitled Intellectual Property Regime in Canada.

None of the the recommendations are very startling. Many seem addressed at the issues raised by Bill C-56, namely giving ex offiio power to customs officials. The timing is thus quite interesting.

There are some useful recommendations, one of which leaps out immediately:

The Committee recommends that the Government of Canada introduce
legislation which amends parts of the Trade-marks Act dealing with
official marks to restrict the scope of official marks to important
national government symbols and to narrow the definition of public
authorities to avoid stifling innovation and distorting markets

The report clearly warrants more study and comment.

But, first  you have to get past this formidable "Speaker's Permission" page - which is somewhat ironic considering the subject matter:

Published under the authority of the Speaker of the House of Commons
SPEAKER’S PERMISSION
Reproduction of the proceedings of the House of Commons and its Committees, in whole or in part and in any medium, is hereby permitted provided that the reproduction is accurate and is not presented as official. This permission does not extend to reproduction, distribution or use for commercial purpose of financial gain.
Reproduction or use outside this permission or without authorization may be treated as copyright infringement in accordance with the Copyright Act. Authorization may be obtained on written application to the Office of the Speaker of the House of Commons.

Reproduction in accordance with this permission does not constitute publication under the authority of the House of Commons. The absolute privilege that applies to the proceedings of the House of Commons does not extend to these permitted reproductions. Where a reproduction includes briefs to a Standing Committee of the House of  Commons, authorization for reproduction may be required from the authors in accordance with the Copyright Act.

Nothing in this permission abrogates or derogates from the privileges, powers, immunities and rights of the House of Commons and its Committees. For greater certainty, this permission does not affect the prohibition against impeaching or questioning the proceedings of the House of Commons in courts or otherwise. The House of Commons retains the right and privilege to find users in contempt of Parliament if a reproduction or use is not in accordance with this permission.

HPK 

PS - an astute reader has pointed out that the Report misspells "trade-mark" several times - notably using the American spelling "trademark" on about a dozen occasions. Some may find this, too, to be ironic - given the nature of some of the recommendations and where the ideas behind them may have originated from.

Warman v Fournier: Copyright in Titles and Headlines of Newspaper Articles?

Notwithstanding that I said I wouldn’t say much about the Warman v. Fournier appeal case, another point needs to be made in order to alert interested parties to the possible need to intervene.

The National Post is arguing that it is entitled to enforce copyright in the title (headline) of a newspaper article entitled: "Jonathan Kay on Richard Warman and Canada's Phony-Racism Industry"

The National Post says in its memorandum:

62. Moreover, the headline of the article was also a substantial part of the work. The application judge erred by failing to consider the effect of reproducing the headline of the article even though the Copyright Act defines a "work" as including the title of that work "when such title is original and distinctive."

63. The headline of the article was both original and distinctive. In Canada, the threshold for originality in a work is "rather low." In order for a work (or the title of a work) to be "original", all that is required is an exercise of skill and judgment by the author, which involves intellectual effort. Such exercise must not be so trivial that it could be characterized as a purely mechanical exercise. However, the statutory requirement of originality does not imply inventive originality. It is enough that the work is the production of something in a new form as a result of the skill, labour and judgment of the author.

64. Something that is "distinctive" is "serving to differentiate or distinguish; peculiar to one person or thing as distinct from others, characteristic; having well-marked properties; easily recognized." Something that is "distinct" is "distinguished as not being the same; not identical; separate; different in nature or quality."49 The title of the Kay Work possesses these qualities, distinguishing the Kay Work from other newspaper articles, and in so doing is distinctive.

65. The headline, "Jonathan Kay on Richard Warman and Canada's Phony-Racism Industry", clearly demonstrates creativity, originality and distinctiveness, including the distinctive and original concept of a "phony-racism industry."

 (footnotes omitted)

This position, if adopted by the Federal Court of Appeal, would have startling and potentially absurd consequences. The automated extraction of titles (i.e. headlines) is the very basis not only of Google News and other news aggregators but of Google, Bing and other search engines. Every scholarly article is full of cited titles.

Not to mention Twitter, in which a very large percentage of tweets are nothing more than automated quotations of newspaper article headlines, blog titles, etc.  with a shortened link. e.g.

Warman v Fournier: Copyright in Titles and Headlines of Newspaper Articles? bit.ly/XMt7a8
— Howard Knopf (@howardknopf) March 14, 2013

The assertion also flies in the face of one of the most famous of old chestnut copyright cases from the Privy Council. In 1939, the Privy Council ruled in a landmark case involving the then famous song “The Man Who Broke the Bank at Monte Carlo” and the eponymous movie that: 

“As a rule, a title does not involve literary composition, and is not sufficiently substantial to justify a claim to protection. The statement does not mean that in particular cases a title may not be on so extensive a sale and so important a character as to be a proper subject of protection against being copied”.

But not in that case, and that was a very memorable and reasonably lengthy title as far as titles go. See Francis, Day & Hunter v. Twentieth Century Fox [1939] 4 All E.R. 192 at 197. This authority is not mentioned in the National Post’s memorandum.

In other words, it will be very, very rare that a title is sufficiently substantial and original to warrant copyright protection. Frankly, IMHO, this particular instance does not leap to the forefront of such cases.

However, someone needs to make points such as this to the Fedeal Court of  Appeal.  Otherwise, such common place applications as Google News, Twitter, and such common practices as citing articles by names may be imperilled.

The Fourniers, who are representing themselves, have done well to date but they are not expert litigators or copyright lawyers. 

Interveners, start your engines.

HPK

Warman v. Fournier On Appeal: National Post Says That 11 Words Can Be "substantial"

Reader’s will recall the Warman v. Fournier case last year, in  which the Fourniers successfully represented themselves against Richard Warman in a copyright case that dealt with linking, fair dealing and what constitutes a “substantial part”.

The National Post has now filed its appeal memorandum. I won’t comment on it in any detail except to note a few brief points.

The National Post claims that, although it was named as a plaintiff in the proceeding (as required by s. 36 of the Copyright Act), it was unaware of the case until the decision was rendered:

15. While the National Post was named as an applicant, it had no knowledge that the proceeding had been commenced, was never served with any of the documents in the proceeding (including the originating process), and had no knowledge of the application until after the judgment was issued. After learning of the judgment, the National Post instructed counsel to commence this appeal.

Assuming that this is correct, this raises some very interesting questions.

The other point worth mentioning at this time is that the National Post is arguing the European Infopaq decision is applicable, which supposedly holds that even the quoting of 11 words of a newspaper article can be infringing. As is well known, there is a massive effort underway in Europe to force Google to pay newspapers for quoting snippets on various Google News websites. European law on this point is substantially different than Canadian and American law. 

Indeed, it is simply wrong to suggest categorically, as one well-known lawyer for educators recently did to the Supreme Court of Canada no less, that anything more than one sentence is "substantial". As I indicated several months ago, David Vaver explains this issue very well in his discussion of “Taking a Particle Does Not Infringe” at p. 184-188 of his 2011 book.  Indeed, Vaver states that even where the writing is of the quality of Dickens or Shakespeare, it is “simply nonsense” to suggest that “the taking of even a single sentence” may infringe copyright.

If the Federal Court of Appeal is somehow persuaded that quoting 11 words of news can be substantial, this could have interesting consequences for Google News in Canada. Here’s an example of a snippet from this morning, which is 40 words long:

A Canadian judge rejected on Tuesday a request to ban the press and public from the pre-trial hearing of a Montreal man accused of murdering and dismembering a Chinese student, eating parts of the corpse and posting an online ...

The National Post also mounts a serious attack on the Federal Court’s findings on fair dealing.

No doubt, Access Copyright is watching this case closely and relishing the prospects of applying for a “Google Tax”, as newspapers are seeking in Germany.

Access Copyright may also be hoping that outcome of this case could help it to recoup some of the considerable setbacks it has suffered in the Supreme Court of Canada and in Parliament lately.

The Fourniers are continuing to represent themselves. They now, however, are being opposed by counsel very experienced in both copyright law and appellate advocacy.

This is a classic case of where intervention is called for – not to support one side or the other but to assist the Court. There are enormous public interest implications for education and news reporting, and copyright generally in Canada. Free speech advocates will also be concerned. 

Given the fact that the Respondents are self-represented, there is also a serious risk that, without adequate intervention, not all the applicable arguments and case law will come to the attention of the Court.

HPK

SOCAN's Quest for a new "Making Available Right" Tariff at the Copyright Board in the Post ESA v. SOCAN and Post Bill C-11 World

As anyone who is interested in Canadian copyright knows, the Supreme Court of Canada ruled on July 12, 2012  in the decision in ESA v SOCAN  at the able behest of Barry Sookman that the “communication” right did not give rise to a separate right upon which the Copyright Board could certify a tariff with respect to the delivery of digital files of music for permanent download over the internet, i.e. the there could not be a valid tariff for the delivery of copies of works which were substitutes for the distribution of physical hardcopies on which performance royalties were not payable. As the Court stated:

[43]  In our view, therefore, the 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) should be set aside.

The SCC was explicitly concerned with technological neutrality, avoidance of “double dipping” and ensuring that collectives and tariffs serve to enhance economic efficiency rather than impede it. The decision was based upon the statute in effect before Bill C-11 became law. The decision can be expected to have a profound effect on the increasingly complex layering and multiplicity of tariffs and collectives that had been occurring in Canada.

SOCAN is now taking the position that the new “making available right” (“MAR”), as SOCAN calls it, found in Section 2.4(1.1) of the Copyright Act now in force in the form of amendments resulting from the Copyright Modernization Act that came into force on November 7, 2012 creates a new right and warrants a new tariff.

The Copyright Board has called for submissions on this issue and SOCAN has now filed its memorandum of submissions and the expert opinion of Mihaly Ficsor. These are being posted now because of the important public interest aspect of this case.

To quote from SOCAN’s submission filed today with the Copyright Board:

SOCAN’s position is that, as a result of new section 2.4(1.1), Internet music services are liable to SOCAN when they post musical works on their Internet servers in a way that allows customers to have access to them from a place and at a time chosen by each customer, irrespective of whether the musical works are subsequently transmitted to end-users by way of downloads, streams or at all.

There are many interesting issues here. However, SOCAN will have to deal with the majority ruling in the ESA decision that:

[41] In our view, the Court in Bishop merely used this quote to emphasize that the rights enumerated in s. 3(1) are distinct.  Bishop does not stand for the proposition that a single activity (i.e., a download) can violate two separate rights at the same time.  This is clear from the quote in Ash v. Hutchinson, which refers to “two acts”.  In Bishop, for example, there were two activities: 1) the making of an ephemeral copy of the musical work in order to effect a broadcast, and 2) the actual broadcast of the work itself.  In this case, however, there is only one activity at issue: downloading a copy of a video game containing musical works.

[42]  Nor is the communication right in s. 3(1)(f) a sui generis right in addition to the general rights described in s. 3(1).  The introductory paragraph defines what constitutes “copyright”.  It states that copyright “means” the sole right to produce or reproduce a work in any material form, to perform a work in public, or to publish an unpublished work.  This definition of “copyright” is exhaustive, as the term “means” confines its scope.  The paragraph concludes by stating that copyright “includes” several other rights, set out in subsections (a) through (i).  As a result, the rights in the introductory paragraph provide the basic structure of copyright.  The enumerated rights listed in the subsequent subparagraphs are simply illustrative: Sunny Handa, Copyright Law in Canada(2002), at p. 195; see also Apple Computer Inc. v. Mackintosh Computers Ltd., [1987] 1 F.C. 173 (T.D.), at p. 197.  The rental rights in s. 3(1)(i) referred to by Justice Rothstein, for example, can fit comfortably into the general category of reproduction rights.(emphasis added)

I won’t comment further for the moment, since I (along with most other active copyright counsel in Canada) am involved in this case. The first round of responses to SOCAN’s submissions is due April 5, 2013.

HPK

Re Google News: Size Matters in Germany

So, according to my 1709 Blog Friends (who are closely related to the legendary IPKats):

Bloomberg now reports that the Bundestag has agreed [to] a bill which provides that:

- News aggregators may display "single words or very small text excerpts" from to publishers' websites free of charge, however it does not define what constitutes a small excerpt.

- Publishers will be given one year during which they have the sole rights to commercially use their journalistic content. Presumably the above exception applies during this year - perhaps a German-speaking reader could clarify this?

- Mere linking cannot be prohibited.

This arises from attempts to stop or license Google’s über-popular news search service in Germany.

The important takeaway here is that it is now clear that size matters in Germany.

And this is not necessarily bad news. Google is, as always, very clever. It’s good to know that you can quote one “single word” for sure. Some German words are far from short and are indeed quite a mouthful.  For example, from About.com:

Words listed in alphabetical order (with gender, letter count)

Betäubungsmittelverschreibungsverordnung
(die, 41 letters) "regulation requiring a prescription for an anesthetic"

Bezirksschornsteinfegermeister
(der, 30 letters) This word may be short in comparison to those below, but it's a real word submitted by Robin in our Forum, taken from a letter he received. It means roughly "head district chimney sweep."

Donaudampfschiffahrtselektrizitätenhauptbetriebswerk-
bauunterbeamtengesellschaft (one word, no hyphen)
(die, 79 letters, 80 with new German spelling [one more 'f' in ...dampfschifffahrts...]) "association of subordinate officials of the head office management of the Danube steamboat electrical services" (the name of a pre-war club in Vienna) - Not really useful, this word is more of a desperate attempt to lengthen the word below.

Donaudampfschifffahrtsgesellschaftskapitän
(der, 42 letters) "Danube steamship company captain"

Rechtsschutzversicherungsgesellschaften
(die, plur., 39 letters) "legal protection insurance companies"
According to Guinness, this was the longest German dictionary word in everyday usage, but the word below is a longer legitimate, official "longest word" — in semi-everyday usage.

Rindfleischetikettierungsüberwachungsaufgabenübertragungsgesetz
(das, 63 letters) "beef labeling regulation & delegation of supervision law"
This was a 1999 German Word of the Year, and it also won a special award as the longest German word for that year. It refers to a "law for regulating the labeling of beef" - all in one word, which is why it is so long. German also likes abbreviations, and this word has one: ReÜAÜG.

So, don’t waste your “single word” exception on silly, little words of only a few syllables when the German language is so rich in multi-poly-syllabic words that would almost fill a tweet quota.

As for “very small excerpts” or “short excerpts” who knows what that means in Germany. Wagner's “short” operas and Beethoven's “short” symphonies are quite lengthy. Are the “short stories” of Thomas Mann really very “short”?

On the other hand, there is something to be said for brevity:

From Shakespeare's Hamlet, 1602:

LORD POLONIUS
This business is well ended.
My liege, and madam, to expostulate
What majesty should be, what duty is,
Why day is day, night night, and time is time,
Were nothing but to waste night, day and time.
Therefore, since brevity is the soul of wit,
And tediousness the limbs and outward flourishes,
I will be brief: your noble son is mad:
Mad call I it; for, to define true madness,
What is't but to be nothing else but mad?
But let that go.

HPK

Bill C-56: Just When You Thought It Was Safe To Go Back Into The Water?

Some may have thought that ACTA was dead and that, after a year of arguably the most sweeping changes in Canadian copyright law in almost a century, there might be time to pause, reflect, absorb and assimilate.  No such luck.

Bill C-56 could very well be intended to set the stage for Canadian ratification of the controversial Anti-Counterfeiting Trade Agreement (“ACTA”).The European Union has clearly rejected ACTA – amid much controversy and even internal acrimony. Canada has signed the ACTA treaty - but has not yet ratified it. Canada has no obligation to ratify it and has no current binding obligations to make any of the changes proposed in Bill C-56. Clearly, the USA would like Canada to implement whatever changes ACTA may require and to ratify it soon.

This is what the Bill says it does, according to the published summary, which has no direct legal  effect:

SUMMARY
This enactment amends the Copyright Act and the Trade-marks Act to add
new civil and criminal remedies and new border measures in both Acts, in order
to strengthen the enforcement of copyright and trade-mark rights and to curtail
commercial activity involving infringing copies and counterfeit trade-marked
goods. More specifically, the enactment
(a) creates new civil causes of action with respect to activities that sustain
commercial activity in infringing copies and counterfeit trade-marked goods;
(b) creates new criminal offences for trade-mark counterfeiting that are
analogous to existing offences in the Copyright Act;
(c) creates new criminal offences prohibiting the possession or export of
infringing copies or counterfeit trade-marked goods, packaging or labels;
(d) enacts new border enforcement measures enabling customs officers to
detain goods that they suspect infringe copyright or trade-mark rights and
allowing them to share information relating to the detained goods with rights
owners who have filed a request for assistance, in order to give the rights
owners a reasonable opportunity to pursue a remedy in court;
(e) exempts the importation and exportation of copies and goods by an
individual for their personal use from the application of the border measures;
and
(f) adds the offences set out in the Copyright Act and the Trade-marks Act to
the list of offences set out in the Criminal Code for the investigation of which
police may seek judicial authorization to use a wiretap.
The enactment also amends the Trade-marks Act to, among other things,
expand the scope of what can be registered as a trade-mark, allow the Registrar
of Trade-marks to correct errors that appear in the trade-mark register, and
streamline and modernize the trade-mark application and opposition process.

Nobody defends counterfeiting – especially when it involves medicines or other products with health and/or safety aspects. However, the evidence that counterfeiting of such products with health and safety consequences actually occurs in Canada on a commercial scale seems strangely elusive and mostly anecdotal, as is the case with respect to economic data. Moreover, there are other laws to deal more directly with hazardous and dangerous products, especially food and drugs. 

On the other hand, the rhetorical attempts (without any evidence) to conflate “counterfeiting “and “piracy” with terrorism, pornography, theft, stealing, money laundering, organized crime  and other ills  continue unabated. Indeed, overly zealous border enforcement to prevent trade in counterfeit drugs has held up the transshipment of life saving generic and perfectly legal drugs to developing countries (for example, even via such an advanced country as The Netherlands) because customs officials took it upon themselves – or perhaps were encouraged – to block such shipments. 

Excessive criminalization and excessive border enforcement measures do not promote respect for the law. It also costs a lot for society to enforce such laws at the expense of taxpayers. 

What we do know is that ACTA is an American initiative and Canada has been under intense pressure to support the Americans on such initiatives. We see this every year in the annual “301”show. We will likely see similar efforts in the Trans Pacific Partnership ("TPP") negotiations. We vividly saw attempts to pressure Canada on IP  a few years ago when a prominent American lobbyist named Scotty Greenwood blatantly tried to trade off “buy American” protectionism for Canadian copyright capitulation. In the past, various Canadian Governments including the current Government, to its credit, have mostly resisted these kinds of tactics. Funny – we thought we already had free trade with the USA – but we keep finding out that we still just have to tweak a little here and there in our IP laws... which, incidentally, comply with every treaty we have ever ratified. The same cannot be said of the USA – as the WTO has confirmed on the copyright front, where the USA is an ongoing scofflaw in respect of the infamous “Section 110” violation.

Against this background, we now see Bill C-56 – introduced on Friday, March 1, 2013. Even with the whole weekend to look at it, one will need much more time. It is 50 pages long.  The first 13 page deal with copyright – the balance with trade-marks.  

There may be some  positive aspects of this legislation that will be useful to combat seriously harmful counterfeiting. However, there are countless questions that require answers. No answers in today’s blog – but just some questions that many will or should be asking:

COPYRIGHT 

1. How will these provisions affect “parallel imports”? These are imports that may in some way be protected by copyright or other IP law and which were made perfectly legally in the country where they were made and which can be imported (apart from possible “private tariff”  IP legal tactics) into Canada at a lower price than the “exclusive” Canadian distributor is able or willing to charge. Canada is known to be a high price market where price discrimination is prevalent, as a Senate Report recently confirmed. The party with copyright ownership in Canada and the place of manufacture may or not be same or related. But the goods are perfectly legitimate. The copyright owner has already been paid where the goods were made. We had a Supreme Court of Canada decision about this in the 2007 Kraft decision, in which arguments that I made were instrumental in the prevailing judgment. The complexity of that judgment is enough to show that there are no easy answers to the issues involved, as I show in a short paper for the Law Society of Upper Canada. To what extent is this initiative being driven by those whose real agenda is opposition to parallel imports and the use of IP law as "an instrument of trade control"?
2. What are the consequences of customs officers getting more immediate and short term power than we now give to judges? 
3. What does “reasonable grounds” mean, when see through the eyes of a customs officer?
4. If the Supreme Courts of Canada and the USA struggle with the difference between legitimate parallel imports and pirated goods, how are customs officers supposed to make these decisions on the spot and accurately?
5. What protection will there be for the privacy of importers?
6. What redress will there be for importers whose goods have been wrongfully seized?
7. Why does the bill deal with a “communication signal”?
8. Will the personal baggage exception be sufficient to prevent overly zealous and intrusive border searches of laptops, smart phones, etc. to ensure that "the number of copies, indicate that the copies are intended only for their personal use"? After all, it could be argued that such a determination cannot be made without a search in the first place.

TRADE-MARKS

1. Why change the definition of trade-mark – which derives from who knows how many centuries of  jurisprudence – to be based upon “sign” rather than “mark”? If this is meant to sweep in colours, sounds, smells and other things that are not “marks” in the classic sense of “making a mark”, “marking out a territory”, setting out a boundary, the “mark” of a signet ring, etc., is this a major policy shift that requires extensive debate? Or is this simply another example of “If IP protection is good, more IP must be even better”.  It’s not obvious to everyone that the colour of delivery trucks or the sound of a motorcycle or the smell of a perfume should be protected by trade-marks law and, even if so, how such a regime can be effectively maintained and enforced. For example, if I should want to start a little parcel delivery business on the side and I find a good deal on a brown van, should I need to get it repainted?
2. Will we now have a “Trade-signs Act”? Alan Macek has already decried that we have not reverted to pre-hyphen days – so many may focus on the very name of the legislation.
3. Do we want to introduce a concept of being able to expunge an existing registration that “is likely to unreasonably limit the development of any art or industry”? The Courts have struggled for years with very mixed results to interpret much clearer provisions under the Competition Act.  Whatever the intention may be here, what does this really mean?
4. Do the provisions mix up the copyright aspect of packaging and labelling with the trade-marks aspects, and create a result that could prevent or severely inhibit legitimate parallel trade? It is common ground that trade-marks law has become virtually totally ineffective in Canada and the USA in the blocking of legitimate parallel imports – and most agree that this is how it should be. But is this now about to change without a thoroughly informed discussion?
5. Are we criminalizing a whole range of activity that has at most been subject to civil remedies? Are we criminalizing activity that may even have been perfectly legal, such as parallel trade?
6. Do the criminal provisions as drafted – with the mens rea concept of “knowingly” - suggest that wise parties should do more diligent searching when adopting a trade-mark, or should they avoid any kind of searching whatsoever so as to avoid any “knowledge” of possibly “criminal” infringement?
7. Is it really a good idea for a trade-mark examiner to be able to block a registration on the basis that “the trade-mark is not distinctive”? Is this really what is intended? This is potentially a huge change in policy and practice. Does this mean that examiners will now browse the internet and raise countless problematic objections?
8. Again, is it wise to give powers to customs officials that even judges do not have?
9. Again, what redress is in place for importers and their customers for wrongful seizures.

This bill is bound to raise a lot of difficult technical and policy issues on its own. It is immensely complicated and requires enormous scrutiny.  Indeed, the proposed changes to the Trade-marks Act are the most comprehensive in 60 years. 

Moreover, questions will also be asked focussing on:
1. Is ACTA a good idea for Canada?
2. If so, does this bill go farther than necessary?
3. What are the unforeseen effects of this bill resulting from  non-transparent policy objectives, if any, and problematic drafting, if any? 
4. Could the bill, through its substantive provisions or through overly zealous enforcement or in other ways, affect trade in legitimate goods?

The coincidental timing of the bill with certain aspect of the Canada/USA file having to do not only with IP but potentially other issues is also bound to raise many questions.

HPK

(rev. March 6, 2013)