Interestingly, this also comes at
a time when the Board has - by its own admission – committed yet another
“error”, concerning the issue to which I had alluded in my September 24, 2014
posting about the July 18, 2014 Netflix decision, in which judicial review is
already underway as noted above. I indicated on September 24, 2014 that:
Also
unresolved and up in the air are issues around “downloads” and “making
available right” – on the one hand, the Board says that SOCAN not
entitled but then the tariff refers to liability for downloads.
Shortly after my September
24, 2014 posting, the Board on October 8, 2014 published this notice which discloses the error and
which coincidentally came just a few days before the CAFDE decision of the FCA.
It is interesting now to see how the Board apparently is going about the
process to “proceed with the correction” of
its erroneous decision by the simple “issuance of
an erratum by which any reference to downloads would be deleted.”
NOTICE OF THE BOARD
On July 18, 2014, the Board issued its
decision (the “Decision”) for the Statement of Royalties to Be Collected by
SOCAN for the Communication to the Public by Telecommunication, in Canada, of
Musical or Dramatico-Musical Works [SOCAN Tariffs 22.D.1 (Internet – Online
Audiovisual Services) and 22.D.2 (Internet – User-Generated Content),
2007-2013] (the “Tariffs”). The Tariffs were published in the Supplement of the
Canada Gazette, Part I, Vol. 148, No. 29, on Saturday, July 19, 2014.
The Decision was clear with respect to
the Board’s intention related to the fact that SOCAN did not have the right to
collect royalties for permanent and limited downloads. In fact, paragraph 14 of
the Decision reads as follows:
The decision of the Supreme Court of
Canada in ESA v. SOCAN meant that SOCAN no longer had the right to
collect royalties for permanent downloads and limited downloads. This was
reflected in the Board’s recent decision on online music services which had
been structured the same way. As a result, neither agreement filed by SOCAN
makes reference to downloads.
Although the Board’s
intention was clear, the Board made an error in assuming that neither agreement
made reference to downloads, and in certifying, as requested by the parties,
Tariffs that reflected the terms and conditions of the agreements. Thus, the
certified Tariffs do not express the intention of the Board and contain
provisions related to downloads. In particular, the definitions and reporting
requirements refer to downloads of audiovisual works, limited downloads and
permanent downloads.
The Board’s preliminary view is that
the Tariffs can be corrected in order to reflect the conclusions of the Board
clearly conveyed in its Decision, for the following reasons:
·
First, the Board committed an error when it certified the Tariffs;
·
Second, the error committed by the Board is in expressing its intention with
respect to the rights of SOCAN to collect royalties for downloads;
·
Third, the Board’s intention is manifest in paragraph 14 of its Decision;
·
Fourth, because of this error in expressing its manifest intention, the
Board is not functus officio; and,
·
Fifth, the Board has the inherent authority to correct such error.
The Board would like to proceed with
the correction of the Tariffs by the issuance of an erratum by which any
reference to downloads would be deleted. For convenience, we have attached to
this notice a marked version of the proposed, corrected Tariffs.
The Board would like to know whether
any party objects to this proposal no later than Friday October 17,
2014. If no objection is received, the Board will proceed accordingly.
(highlight added)
The Board has published a proposed redlined version of the proposed deletions
that would be involved, which are quite extensive. Apparently, no parties
objected prior to October 17, 2014 as to the Board’s proposed course of action. This remarkable announcement is in in the current issue of the Canada Gazette. Whether this unusual turn of events and the FCA’s CAFDE decision of October 20, 2014 will find their way into the Netflix
judicial review proceedings underway or have any other repercussions remains to
be seen.
And all of this is
happening as the Board sits without a Chair. The term of past Chair, retired
Judge William Vancise from Saskatchewan, expired on May 13, 2014. He could not
have been reappointed beyond that date because that’s the way the statute
works. His jurisdiction to remain seized of unfinished matters is spelled out
as follows in the Copyright Act:
Concluding matters after membership
expires
66.5 (1) A member of the Board
whose term expires may conclude the matters that the member has begun to
consider.
Marginal note:
Decisions
(2) Matters before the Board shall
be decided by a majority of the members of the Board and the presiding member
shall have a second vote in the case of a tie.
R.S., 1985, c. 10 (4th Supp.), s. 12.
It may
not be absolutely clear what is meant by “may conclude matters that the member
has begun to consider”. Whether this could or will become an issue in any
of the several outstanding matters now before the Board remains to be seen.
Clearly, it would not be appropriate to discuss this question with respect to
any particular outstanding matters.
All of this is happening as there
is much speculation and suspense about who the Government will appoint as a new
Chair and when this will happen. I have taken the liberty months ago of suggesting that the appointment of the next Chair be made
from the ranks of sitting or retired judges of the Federal Court or Federal
Court of Appeal, many of whom already have considerable
expertise not only in copyright law but in administrative law, and in some
cases in constitutional, competition, communications and/or other often useful
and relevant aspects of the law that can arise before the Board – and the
Federal Court of Appeal. All of the sitting federal courts judges reside
in the National Capital region. Some of the retired judges still do. This fact
alone would have the additional advantage of saving the government a lot of
money. All of the judicial chairs of the Board since it was established
in 1989 have been from the courts of the provinces. Perhaps the time has come
for the Government to make an appointment from the ranks of the sitting or
retired judges of the Federal Courts.
I have suggested earlier this
year that the Board is at a cross-roads. Michael Geist has been far more blunt, saying that “The Board may
keep a steady stream of lawyers and economists busy, but it is time to
acknowledge that it is broken”. There is increasing concern that that:
- The Board’s hearing process regularly takes
years longer than what we see in the Courts and other comparable
tribunals, even in some far more complex cases that may involve patent,
competition or communications law. It often takes four years or more for a
proposed tariff just to get to the hearing stage at the Board and another two
years or more for the Board to render a decision. One of the results of
these long time lines can be tariffs with a sometimes very long
retroactive reach that can come as a shock to many users who are without
effective representation at the Board and may have been unaware of the
looming liability.
- While the great cost of Board hearings
was once considered a safe investment with a virtually guaranteed
lucrative return by most collectives and even by bank lenders, this is
probably no longer the case. The very high cost of Board proceedings has
always been a problem for users, especially those who cannot pass the
costs on to their customers. However, these high costs and delays and the
uncertainty of the cost/beneficial outcome are now a problem for
collectives too.
- The Board’s decisions are, it seems,
increasingly and sometimes dramatically being reversed by the Federal
Court of Appeal and the Supreme Court of Canada (“SCC”). The SCC decided
five cases from the Board in 2012. While the Board was upheld in three of
those cases, it was dramatically reversed in two of them. As noted above,
the SCC has just taken on another important case involving technological
neutrality and possibly other issues.
- While there are calls for greater
resources for the Board, it is not clear that this would solve any
problems. As I have earlier written, with about 16 full time equivalent employees (FTEs), plus up to five full or part time Board
members themselves, this Board is already by far the largest organization of its kind
anywhere in the world. It will have a net cost of operations for 2014 in excess of $3.5
million. It is an interesting fact that the Copyright Board
already has almost 10% of the budget of the Supreme Court of Canada. The Copyright Board’s net cost of operations for 2014
will be more than $3.5 million.
That of the Supreme Court for 2013 was less than $41 million. The
Copyright Board typically renders only about two or three (more or less)
substantive decisions a year that typically require several years to reach
the hearing stage. The hearings are rarely longer than a week or two.
There is typically a 1.5 to 2 year (or even more) delay after the hearing
before a decision is rendered, and the decisions are often then reversed
after judicial review. By contrast, the Supreme Court of Canada in 2013
received 529 applications for leave to appeal, heard 75 appeals and
rendered judgment in 78 cases. The average time between a hearing and the
rendering of a judgment was 6.2 months. More statistics on the SCC can be
found here.
If the Government is sufficiently
concerned about these issues, progress can be made in the short and medium term in
two tangible and achievable ways, as I have earlier suggested:
- By appointment of a Chair who can hit the
ground running at least in terms of both copyright and administrative law,
and quite possibly some other useful field such as communications or
competition law. As I have suggested, such a person might be found from
the ranks of the sitting or retired judges of the Federal Court or the
Federal Court of Appeal
- Through regulations that the Government can implement
pursuant to the existing legislation, either at the behest of the Board or
the Departments or both, in order to provide more certainty and
efficiency. Examples of such clearly articulated and time-tested regimes
can be found close at hand, for example with respect to the Competition Tribunal, the Canadian Industrial Relations Board,
the Canadian International Trade Tribunal,
the CRTC and other comparable federal
tribunals.
While there is much to be said
for the informality and normally high degree of collegiality among counsel and
in the way the Board works with counsel, the fact remains that there is
wide-spread concern that, at the end of the day, things take much too long and
costs are much too high for all concerned, including the collectives
themselves. With respect to certain issues such as:
- the order of proceedings (the apparently
unique process of interrogatories first and “pleadings” only at the
very end);
- departure from the normal rules of
evidence, especially regarding expert witnesses; and,
- timing benchmarks,
It seems that the
Government is indeed aware of the possibility and need of Board reform through
regulations, which can originate either from the Departments or the Board
itself or both. Hope springs eternal that we might actually see something
sooner rather than later. See the Government Response: Fifth Report of the Standing Committee on Canadian
Heritage, "Review of the Canadian Music Industry" (Presented to the House on October 10, 2014).
This report from the Minister of Canadian Heritage indicates that:
On the
time it takes for the Copyright Board to issue decisions, the Copyright Act
provides the Board with authority to set its internal procedures. I understand that the Board is currently reviewing these
procedures in an effort to streamline the royalty-setting process. Changes to
that end could be considered as early as fall 2014. Beyond this, the
next mandated Parliamentary review of the Copyright Act will be an opportune
moment to consider important copyright issues, such as the broader framework in
which the Copyright Board operates.
(highlight
added)
This may refer to the process
announced by the Board about two years ago to
embark upon an internal review to be led by the Board’s former General Counsel
that was to involve a select few invited outside counsel with experience before
the Board, The mandate from the Board’s Vice-Chair was:
….. I expect that the committee
will wish to focus generally on (a) proposing possible changes to procedures and
processes that may lead to Board proceedings being more efficient and, possibly, less costly, (b) considering
improvements to other aspects of Board processes and operations that may
enhance the quality of the Board’s services to collectives, copyright users and
the public in general, and (c) identifying other issues where improvements may be required and which may be
addressed as time and resources allow. As part of this exercice [sic],
the committee might also wish to identify more specific recommendations, on a small number of issues, and that can be
addressed relatively easily, in the hope of delivering significant improvements
fairly rapidly.
(highlight added)
There was notably
no mention by the Board of potential suggestions for regulations to be proposed
either by the Board or the Government or both. There was clearly a hint
about the possible need for more resources. There was clearly a suggestion that
that there are only a “small number of issues” that need be addressed in this
process. At the present time, the closest thing that the Board has to rules or
regulations is its “Model Directive on Procedure”, which provides little or no guidance to solving the
problems as currently perceived.
There is no
question that, even though things seem to move very slowly at times at the
Board, it has over the last 25 years or so produced a huge volume of tariffs,
important decisions and countless procedural rulings that have had an enormous
impact on the copyright collective management sector that now generates about
$500 million in revenues per annum in Canada. The challenge now is to
lower the overall transaction costs of the Board process so that the creators
actually reap the benefits they deserve from the copyright system through
collective management and users are able to enjoy their rights under the
legislation without paying for unnecessary tariffs and with a reasonable degree
of certainty at a reasonable cost and in a timely and minimally retroactive
manner when tariffs are appropriate.
HPK
