Wednesday, February 24, 2016

Access Copyright and Absent Universities & Colleges – As the Mandatory Elephant in the Room Patiently Waits and Watches


Here's an update on the Access Copyright Hearing for a Post-Secondary tariff that supposedly was concluded on January 22, 2016.

I attended to hear the final oral arguments in Access Copyright’s Post-Secondary tariff hearing at the Copyright Board on Friday, January 22, 2016. Conspicuously absent as participants were the AUCC (which now calls itself Universities Canada) and ACCC (which now calls itself Colleges and Institutes Canada), both of which might have been expected to represent the interests of Canada’s universities and colleges respectively. They had both withdrawn much earlier, though only after having already spent  by mid-2012 almost three million dollars ($3,000,000) that we know about to accomplish apparently little if anything other than providing a huge amount of interrogatory information from far more institutions than necessary  (even notwithstanding an explicit ruling from the Board about this) for the benefit of AC  and reaching model agreements that have been widely rejected by their own members and developing a set of fair dealing guidelines that are now being frontally challenged both at the Copyright Board and in the Federal Court. But I’ve said all this before at great length, for example here, here and here. Etc. etc.

Access Copyright (“AC”) is, among other things, seeking $26 per FTE university student and rigorous record keeping and intrusive audit rights. If AC gets anything close to what it wants, the result could be a very major, expensive and intrusive chill on education and research on Canadian university and college campuses.

The as yet publicly unexplained and perhaps inexplicable absence of AUCC and ACCC puts the Copyright Board in a difficult and unprecedented position for a case of this importance. As I’ve suggested before, the Board could have taken  on more of an “inquisitorial” role than usual – since there was nobody there to challenge AC’s evidence and legal submissions.  On occasion, a few tariffs have slipped through essentially, if not completely, unopposed because they were insufficiently commercially important to warrant even minimal opposition.  However, this is one that is potentially worth tens of millions of dollars per year and which has the potential to impose enormous copyright chill and compliance expense and inconvenience on Canadian university and college campuses. Important public policy is at stake.

All I will say about AC’s case from I’ve read and seen and heard is that its evidence and legal submissions – especially on the significance of Supreme Court of Canada case law – were clearly highly contentious and readily questionable, although there was nobody there to contest or to question. It’s very hard to understand why there was no effective and efficient challenge on the merits to AC’s application, including a challenge to the Board’s original interim tariff. It is this unchallenged interim tariff that is now the basis for the litigation against York University. I suggested at the time how it might have been challenged and commented on the fact that it was not.

Based upon what I heard on January 22, 2016, it does not appear that the Board was noticeably much more “inquisitorial” than usual. In an “inquisitorial” role, the Board could, to some extent, take it upon itself to do more research and ask more questions about the evidence and the legal submissions than it would normally do, the “normal” situation being where the presence of opposing competent counsel would  presumably ensure the unfolding of the adversarial process for which the Board is designed. The Board could have exercised appropriate inquisitorial powers (i.e. ask its own questions and do its own investigations) in order to deal with the lack of submissions or inadequate submissions or evidence from one or more parties. As long as the Board ensures procedural fairness, this kind of approach is not only OK. This may have happened to some extent. However, it was not particularly obvious during the closing arguments that it did happen here in this instance to any significantly greater extent than usual.

The Board’s staff can, of course, play a role here – but that role is limited. Their involvement cannot cross the line of procedural fairness to the point where Board members are basing their decisions on material or arguments of which AC is unaware and to which it cannot respond. The “record” is what it is – and in this case, thanks to AUCC and ACCC, it is unsatisfactory and incomplete. That said, the Board showed in the recent K-12 decision that it is prepared to adopt its own methodology, subject of course to procedural fairness concerns. See paras 350 and 351. I’ll have more to say about this decision another day.

There was the unusual participation as a lone individual intervenor, namely one Mr. Sean Maguire, a university student with several bachelors and master’s degrees who is currently a part-time undergraduate student at Ryerson. He apparently has had enough time and interest to remain involved throughout for more than five years, and has apparently been involved in at least one other Board hearing.  His presence was in no way a substitute for the absence of those who could and should have been there. Mr. Maguire made it explicitly clear that he repented only himself. And he is clearly neither a lawyer nor a typical student, given his several degrees and ongoing student status. Thus, this proceeding was a default proceeding for all intents and purposes. 

Some of the questions from Board members did indicate concern with relevant issues and appreciation of the importance of relevant jurisprudence from the Supreme Court of Canada. However, the questioning was no more “inquisitorial” than usual.

All that said, there was one obvious issue that apparently was not raised by anyone, including the Board, on the final day or even earlier in the week according to reliable observers. This, of course,  concerns the “mandatory tariff” issue. Spoiler alert – this is the “elephant in the room” issue.

As readers of this blog will know, the Supreme Court of Canada made an extremely important November 26, 2015 ruling on this issue in the CBC v. SODRAC case, based upon submissions that I made on behalf of Prof. Ariel Katz and the Centre for Intellectual Property Policy led at the time by Prof. David Lametti, now David Lametti, M.P. While reiterating my usual disclaimer about how this blog should not be taken as legal advice, the relevant paragraphs of which follow below, arguably mean that whatever tariff the Board may award in the current post-secondary proceeding is optional as far as universities and colleges are concerned. There will be some who disagree with me about this for whatever reason, or who don’t understand the Supreme Court of Canada decision.

For further background on the mandatory tariff theory – which has gone way beyond from being a theory to a clear ruling by the Supreme Court of Canada – readers may wish to review:
- Our factum, which can be found here, and which was necessarily limited to ten pages
- Our oral argument, which can be viewed and heard here at the 152 mark
- Prof. Ariel Katz’ two “Spectre” articles, which have no page limit constraint, the   first of which is now available online and which can be found here.

Let us hope that organizations that can benefit from this historic ruling will do so. They should read and heed the actual clear, lucid and eminently readable rulings of the Supreme Court of Canada and not rely only upon what may be excessively cautious, and possibly incomplete or inaccurate (as we occasionally seen) commentary on the Court’s series of landmark decisions involving fair dealing and now culminating in a dozen or so paragraphs explaining why tariffs are not mandatory. They should also read Ariel Katz’ recent remarks about the evolution of users from being copyright children to copyright adults. This decision should ensure that Canada’s copyright children have finally come of age.

Anyway, don’t take my word for any of this about the mandatory tariff theory.  Here is what Justice Rothstein said on behalf of the Supreme Court of Canada in the recent CBC v. SODRAC case and here is the factum on which this ruling was based:

Once again, for convenience, here are the pertinent, clear and concise paragraphs from the Supreme Court of Canada decision about whether or not tariffs are mandatory:

(2)  The Board May Not Compel a User to Agree to the Terms of a Licence Against the Will of the User
(101)      CBC argues that, while the Board may fix the royalties to be paid under the statutory licensing procedure created by s. 70.2 of the Copyright Act, the Board may not set the other terms or structure of that licence. Specifically, CBC takes issue with the Board’s decision to impose an interim licence on a blanket basis, such that CBC pays for access to the entire SODRAC repertoire, rather than on CBC’s preferred transactional basis, whereby CBC would pay only whenever it actually used a work from the SODRAC repertoire. A blanket licence grants access to SODRAC’s entire repertoire for its duration, and thus reduces CBC’s ability to control its licensing costs. Under a transactional licence, by contrast, CBC may choose in any given situation whether it wishes to licence a particular work or forego making use of SODRAC music. CBC argues that if the collective organization and the user disagree over the model a licence is to take — blanket or transactional — the Board lacks the power to compel the execution of a licence.
(102)      SODRAC counters that the Board has the power to issue licences in either blanket or transactional form, and should have this power in all proceedings under s. 70.2. To hold otherwise, it argues, would be “to make the Board’s remedial jurisdiction under section 70.2 dependent upon the consent of a user, [and] would be at odds with its mandate to resolve disputes”: R.F., at para. 133.
(103)      Though CBC first raised this issue in the context of the Board’s Interim Licence Decision, the dispute relates generally to the Board’s power to structure licences, whether interim or not: Does the Board’s power to set the terms of a licence include the power to bind the parties to those terms?
(104)      I do not read the Copyright Act to necessitate that decisions made pursuant to the Board’s licence-setting proceedings under s. 70.2 have a binding effect against users. Section 70.2 itself provides that where a collective organization and a user cannot agree on the terms of a licence, either party may apply to the Board to “fix the royalties and their related terms and conditions”: Copyright Act, s. 70.2(1). This grant of power speaks of the Board’s authority to set down in writing a set of terms that, in its opinion, represent a fair deal to licence the use of the works at issue. It says nothing, however, about whether these terms are to be binding against the user.
(105)      The statutory context supports the conclusion that licences crafted pursuant to s. 70.2 proceedings are not automatically binding on users. Section 70.4 of the Act provides:
70.4 Where any royalties are fixed for a period pursuant to subsection 70.2(2), the person concerned may, during the period, subject to the related terms and conditions fixed by the Board and to the terms and conditions set out in the scheme and on paying or offering to pay the royalties, do the act with respect to which the royalties and their related terms and conditions are fixed and the collective society may, without prejudice to any other remedies available to it, collect the royalties or, in default of their payment, recover them in a court of competent jurisdiction.
(106)      This provision makes it clear that a user whose copying activities were the subject of a s. 70.2 proceeding may avail itself of the terms and conditions established by the Board as a way to gain authorization to engage in the activity contemplated in the Board proceeding. The language of s. 70.4 does not, of its own force, bind the user to the terms and conditions of the licence.
(107)      The conclusion that Board licences established pursuant to s. 70.2 are not binding on users comports with the more general legal principle that “no pecuniary burden can be imposed upon the subjects of this country, by whatever name it may be called, whether tax, due, rate or toll, except upon clear and distinct legal authority”: Gosling v. Veley (1850), 12 Q.B. 328, 116 E.R. 891, at p. 407, as approved and adopted in Ontario English Catholic Teachers’ Assn. v. Ontario (Attorney General), 2001 SCC 15, [2001] 1 S.C.R. 470, at para. 77, and Attorney-General v. Wilts United Dairies, Ltd. (1921), 37 T.L.R. 884 (C.A.), at p. 885. To bind a user to a licence would be to make it liable according to its terms and conditions should it engage in the covered activity. In the absence of clear and distinct legal authority showing that this was Parliament’s intent, the burdens of a licence should not be imposed on a user who does not consent to be bound by its terms.
(108)      SODRAC’s framing of the issue is not entirely wrong: the Board does have the power under s. 70.2 to “fix the royalties and their related terms and conditions”. That is, the Board may decide upon a fair royalty to be paid should the user decide to engage in the activity at issue under the terms of a licence. However, this power does not contain within it the power to force these terms on a user who, having reviewed the terms, decided that engaging in licensed copying is not the way to proceed. Of course, should the user then engage in unauthorized copying regardless, it will remain liable for infringement. But it will not be liable as a licensee unless it affirmatively assumes the benefits and burdens of the licence.
(109)      The matter is complicated considerably by the fact that the Board’s statutory licence decisions have, in recent years, taken on an increasingly retroactive character. CBC’s statutory licence in this case provides an example: the licence covers the period from November 2008 to March 2012, but the Board’s final decision was issued on November 2, 2012, after the term of the licence had expired. In situations like these, the Board may issue interim licences that seek to fill the legal vacuum before the final decision is ready, but this leaves a user to operate based on assumptions about how their ultimate liability for actions taken during the interim period will be evaluated.
(110)      Should a user engage in copying activity under an interim licence, and then find itself presented with a final licence whose terms it would not voluntarily assume, the user is left in a difficult position: accept the terms of an undesirable licence, or decline the licence and retroactively delegitimize the covered activity engaged in during the interim period, risking an infringement suit. This dilemma may mean that a user who operates under an interim licence has no realistic choice but to assume the terms of the final licence.
(111)      While I find this possibility troubling, I do not find that this result would detract from the more general proposition that there is no legal basis on which to hold users to the terms of a licence without their assent. The licence is not de jure binding against users, even if the particulars of a specific proceeding, and a user’s decision to engage in covered activity during an interim period, may mean that the user does not de facto have a realistic choice to decline the licence.[2]
(112)      I conclude that the statutory licensing scheme does not contemplate that licences fixed by the Board pursuant to s. 70.2 should have a mandatory binding effect against users. However, this case does not require this Court to decide whether the same is true of collective organizations. It may be that the statutory scheme’s focus on regulating the actions of collective organizations, and the case law’s focus on ensuring that such organizations do not devolve into “instruments of oppression and extortion” (Vigneux v. Canadian Performing Right Society Ltd., [1943] S.C.R. 348, at p. 356, per Duff J., quoting Hanfstaengl v. Empire Palace, [1894] 3 Ch. 109, at p. 128) would justify finding that the Board does have the power to bind collective organizations to a licence based on the user’s preferred model — transactional or blanket — on terms that the Board finds fair in view of that model. However, this issue was not argued in this case.
(113)        I find that licences fixed by the Board do not have mandatory binding force over a user; the Board has the statutory authority to fix the terms of licences pursuant to s. 70.2, but a user retains the ability to decide whether to become a licensee and operate pursuant to that licence, or to decline.
(highlight added)

[2] During the hearing before this Court, counsel for the interveners the Centre for Intellectual Property Policy and Ariel Katz briefly raised concerns regarding the Board’s power to issue retroactively binding decisions in general. That issue was not squarely before this Court in this case, and I do not purport to decide broader questions concerning the legitimacy of or limits on the Board’s power to issue retroactive decisions here.

There have been some notable post-hearing comments submitted to the Board. The first is a letter from York University dated February 9, 2016. York, as is well known, is being sued by Access Copyright – and I’ll have more to say about that litigation in due course. However, in light of that litigation, which is based upon the “Interim Tariff” in the hearing under discussion, it’s notable that there is no explicit reference in York’s letter to the extremely important ruling of the SCC concerning “mandatory tariffs” mentioned above. There is only a rather indirect and oblique reference to the issue on page 5 of the letter to the “hypothetical example” of a university having to pay the full $26 per FTE for having made a “single copy” of a work in AC’s repertoire that was not “cleared through alternative licensing arrangements”.

There’s also an important letter from several universities, including UBC, U of T and U of Alberta dated February 15, 2016 that, in contrast to the York U letter, emphasizes the importance of the “mandatory tariff” issue, uses the word “mandatory” and quotes from paragraph 111 of the CBC v. SODRAC decision. This letter is supported by letters from Brock University and Mount Royal University.

In any event, come to the Unpack SODRAC conference at Osgoode Hall Law School on Thursday, February 25, 2016 and hear and learn more….The concluding panel will be about the "mandatory tariff" issue.

The featured speaker will be none other than Justice Marshall Rothstein himself, who has recently retired from the Supreme Court of Canada. He has always been witty, wise and frank in his public appearances – and will no doubt have much to say of interest and importance.


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