White Dress of Marilyn Monroe from The Seven Year Itch https://en.wikipedia.org/wiki/White_dress_of_Marilyn_Monroe
The Copyright
Board’s K-12 decision for 2010-2015 was released on February 19, 2016. The
tariff was filed on March 31, 2009. The hearing took place in May, 2014. Now,
almost two years after the hearing and almost seven years after filing, we finally have a
decision. Naturally, it is retroactive back to 2010. It is 172 pages long,
which puts it in the top three or so of the Board’s longest decisions. Here is
the actual Tariff.
The rates certified by the
Board are $2.46 per student per year for the period 2010-2012, and $2.41 per
student per year for the period 2013-2015.
The amounts of royalties
that are likely to be generated by the tariff the Board is certifying are $9.5
million per year for the period 2010 to 2012 and $9.3 million per year for
2013-2015.
Access’ initial proposed
rates were $15 per student for the 2010-2012 period and $9.50 per student for
the 2013-2015 period. Access later reduced its request to $13.69 per student
for 2010- 2012 and maintained its request at $9.50 per student for 2013-2015.
The Objectors to the Tariff, the ministries of education and the Ontario school
boards, proposed a rate of $0.49 per student for 2010-2012 and $0.46 per
student for 2013-2015
AC’s reaction, posted February 23, 2016
includes the following statement:
While the
amounts may appear reasonable on the surface, we are disappointed by the
Board’s decision, which establishes a troubling framework for determining the
fairness of copying behaviour in schools and dismisses the value of much of the
content that is used.
AC is clearly
trying to position the rate of $2.46 as “reasonable” when many would regard it
as quite the contrary, in part for the reasons suggested below. AC can probably
live happily with the rate, which would provide it with almost $10 million per
year, if the school boards actually regard it as mandatory and actually pay it (but
see below!). But of course AC then predictably goes on to predict gloom and
doom in any event:
The Board estimated, for
example, that schools covered under the tariff copied approximately 195-million
pages from books in Access Copyright’s repertoire each year. In its tariff
valuation, however, the board excluded 87% of that copying, or approximately
179-million pages.
That means creators and
publishers of books are going uncompensated for copying of an amount equivalent
to approximately 897,300 books, annually.
We are concerned this
decision will further diminish the incentives to publish at the same time as it
creates a compelling incentive for K-12 decision-makers to rely, even more, on
copying as an alternative to purchasing content.
The CMEC
consortium representing the K-12 school boards outside Quebec said:
The
announced tariff rates are lower than the per-student rates requested by Access
Copyright of $15.00 for the years 2010–12 and $9.50 for the years 2013–15.
However, the consortium had sought a lower rate.
Indeed, CMEC
stops well short of claiming this as a victory – perhaps because the rate
is only about half of the arguably much
too high rate that it claimed as a victory in 2009 and is about 500%
higher than the rate recently certified for provincial employees and what CMEC
had proposed. As I reported on the Provincial Governments tariff last year:
Eleven years ago, Access
Copyright filed a tariff seeking $15 for each full time equivalent employee
from provincial and territorial governments.
Its ship has now come home. But spoiler alert: the ending was not a happy one for Access Copyright. The ship was not full of riches as expected. Instead, the Copyright Board has awarded only 11.56¢ - that's indeed ¢ and not $ and not a typo - per employee per year or 0.0077, i.e. less than 1%, of what Access Copyright asked for. That is for the period of 2005-2009. The rate goes up to 49.71¢ per employee for 2010-2014. But that is in turn only about 2% of the $24 per employee that Access Copyright asked for.
This arguably
much too high rate may be due at least in part to CMEC’s reliance on the same
problematic “Volume Study” it used in the last 2005-2009 hearing that was
already seriously flawed at the time by their own admission because, as I suggested
in 2009, the
Educators had agreed at an early stage of those proceedings to a survey
methodology that resulted in evidence that by their later admission “needs to
be collected differently” in light of the 2004 CCH v. LSUC
case, even though it was obvious at the outset in 2005 that the landmark CCH
decision could and should affect what happens in Canadian schools. Perhaps a
new Volume Study that asked all the right questions might have been a good
investment. However, it clearly would have been expensive and intrusive once
again. Perhaps the Board should force – or regulations should require – that
tariff applicants bear the entire cost of such studies. But that is a topic for another day.
In
any case, there is a much
more immediate and cogent, though not unrelated, reason why the rate is so
high, as explained below, concerning so-called “consumables”.
BTW, that 1998
$2.10 rate adjusted to
inflation according to the Bank of Canada would now be just
under $2.94. Intuitively, based upon the Supreme Court of Canada jurisprudence
and the 2012 legislation, the K-12 tariff should be MUCH lower than that, not
just $0.48 cents lower. Indeed, recall that that the $2.10 rate negotiated in 1998
predated the landmark CCH fair dealing ruling, which the school boards have
been slow to assimilate and we now have the 2012 pentalogy decisions AND the addition of “education” to s. 29 of the Copyright Act. It will also be recalled
that the 2005-2009 tariff was set at $5.16, which was later reduced to $4.81
following the Province of Alberta decision from the SCC in 2012. That amount of
$5.16 was arguably much too high, as I
suggested at the time.
Both sides
express concerns with the Board’s reasoning. Overall, there are some good legal
findings in the current K-12 decision, from the standpoint of public policy.
CMEC is to be commended for bringing about a better understanding of fair
dealing in the context of education and the Board is to be commended for
adopting what were presumably many of CMEC’s arguments.
The Board seems
to have finally refused to include works of non-affiliated rights owners –
which AC had tried to include by sending out cheques to sometimes bewildered
recipients whose names somehow appeared in AC’s database and received a small
cheque out of the blue (para 158).
There is
growing scepticism by the Board re inclusion of repertoire from foreign RROs
(para 165).
The Board
refused to go along with inclusion of sheet music in the tariff, since the
volume in evidence was too low to be reliable – and suggests a transactional
tariff, but nobody proposed one (paras 186, 187).
On
substantiality, Board, at long last, properly notes that the old maxim that
“what is worth copying is prima facie worth protecting” is
“now discarded”. (para 217)
There is no
indemnity provision in this tariff. (para 185) The indemnity provision was
always highly problematic from a legal standpoint – as I have
questioned for many years. That said, it was comforting to users, if they
did not ask too many inconvenient questions, such as whether AC was providing
an unlicensed insurance scheme.
Notably, the
Board accepted key CMEC’s submissions on fairness with respect to copying from
books. For example:
[288] For longer works,
such as books, guided by the Supreme Court’s decisions in CCH, Alberta, and
Bell, we use the following approximation: where the amount of a work copied was
less than or equal to 5 per cent of the work, we conclude that the amount
copied tends to make the dealing fair; where the amount copied was more than 5
per cent but no more than 10 per cent of the work, we conclude that the amount
copied did not affect the fairness of the dealing; where the amount copied was
greater than 10 per cent of the work, we conclude that the amount copied tends
to make the dealing unfair.
[425] With respect to goal,
we find that 100 per cent of dealings for books tend to fairness. This is
because there are two underlying goals—private study and education—that cover
all the copying that takes place in the educational context.
[426] With respect to
amount of the dealing factor, and as explained above in Part XIII.F above, we
apply the following rule. If fewer than or equal to 5 per cent of the pages in
the work were copied, the dealing tends to fairness. If more than 10 per cent
of the pages in the work were copied, the dealing tends to unfairness. The
intermediate interval has a neutral tendency.
That can be
seen as a vindication of CMEC’s fair dealing guidelines, which some had thought
that the Board would not treat with great sympathy. Whether the Courts will
agree may be another matter, which may get addressed in judicial review of this
decision and perhaps much sooner in the AC v. York U case, which I’ll have more
to say about another day.
However, on a
less positive note, the Board rejected CMEC’s transactional license proposal as
insufficiently supported by the record and that it would entail ongoing
“monitoring and compliance” so as not be “an invitation to copyright violation”
(para 368)
So, Why All the
Right Reasoning and Resulting Surprisingly High Rate?
The Board did some
interrelated things that could render its decision susceptible to judicial
review (aka “appeal”) – with a result that is not easy to predict that this
stage.
First, it apparently was not happy with the approach of either side on fair dealing and decided to embark upon a methodology of its own without giving the parties an opportunity to comment. It also decided, in contrast to the previous tariff, to included “consumables”.
In the Board’s
words:
[348] We generally proceed with our
calculations in the same manner as the parties, by determining the number of
copies that were made for a permitted purpose, and, of those, how many were
fair. However, in order to
use the aggregate information in evidence, we must make the assumption that the
characteristics of copying (such as the goal of the dealing, the amount of the
dealing, or nature of the work) are independent of one another. For example,
whether a copy is made for one purpose or another, the amount of the work
copied is not dependant on the purpose. This assumption is necessary, since the
data that was adduced by the parties from the Volume Study does not let us
correlate such characteristics with one another with any confidence.
[349] Given that the information in relation to consumables, which were
not compensable under the K-12 (2013) decision, is also drawn from the 2006
Volume Study, and was also provided to the Board in aggregate form, we use the
same method for approximating the amount of fair dealing in relation to
consumables as well.
[350] The full methodology and calculations
are discussed in Part XVI.E and in Appendix B.
The methodology is of our own design, inspired however by submissions of the
parties, particularly those of the Objectors. The calculations use data that is
part of the evidence. Our assumptions and inferences are also based on the
evidence. Because we are of the opinion that the parties did not adequately
address fair dealing, we had no choice but to fashion a methodology of our own.
[351] The
use of our own methodology raises the issue of whether or not we should submit
it to the parties for comments. We decline to do so, for three reasons.
First, allowing the parties to comment on the methodology issue would introduce several months of needless delay.
We believe that the record is complete enough as it is. Second, the methodology
is fundamentally based on the six-factor legal framework from CCH. This is a
well-known framework, on which the parties have already commented extensively.
Finally, the methodology uses data found in the evidence. The later has been
extensively examined and cross-examined by the parties.
(highlight added)
The decision to
make CMEC members now pay for the consumables that were excluded in 2009
appears to be based upon AC’s inclusion this time of the item in its proposed
tariff. CMEC did not object per se, but appears to have argued mainly
about how much of the copying of consumables should be worth. The data for the
consumables calculation came from the less than satisfactory 2005 Volume Study.
It is not evident in the decision exactly what was considered in the Volume
Study to be a “consumable”.
The decision to
include consumables and the value ultimately placed upon copying of consumables
clearly is why the tariff appears to be so much higher than expected. As noted, this is in contrast to the previous
decision. This time, the Board defines “consumables” as “works that contain a
statement to the effect that copying is not permitted”. (para. 33) This is in
marked contrast to the Board’s 2009 decision wherein it stated that:
[12] A consumable is a
document that is intended
for a single use and that
may not be reproduced.
In contrast, a reproducible
is a document sold
with the authorization to
reproduce it for in-class
use.
[22] Access acknowledges
that some copies
cannot or need not be
subject to the tariff. The
first are copies of
documents of which
reproduction is not allowed
(and therefore,
illegal): essentially,
consumables. The second are
those already authorized by
the rights holder or
by the Act: these are
copies of reproducibles and
copies authorized pursuant
to exceptions under
the Act, including the fair
dealing exception. For
the remainder, Access
assumes that practically
all copies of published
documents given to
students will result in
remuneration.
The Board seems
to have dropped the “intended for a single use” component of its 2009
definition of "consumable".
The
“consumables” development is potentially very troubling. It will be trivially
easy for publishers and everyone else to include such an explicit statement in
every document, whether it be a workbook, a web page or a long history book.
Indeed the copyright pages of many, if not most, books already contain such as
statement. I’m looking right now at the copyright page to my handy Carswell
compilation of Canadian IP statutes, which contains the remarkably incorrect
statement that “No part of this publication may be reproduced, stored in a
retrieval system, or transmitted … without the prior written consent of the
publisher (Carswell)” And that’s a book of statutes, for goodness sake! (Sorry
Carswell – you are my publisher but you shouldn’t include this over-the-top boiler
plate!) Even Sam Trosow and Laura Murray’s excellent book contains such a
statement, which I am sure Sam and Laura never intended to be the case. This
kind of boiler plate may frighten some timid librarians and even timid
copyright lawyers. The Copyright Board should not take it at face value, and
have given no compelling reasons to take it at any value.
Such statements
cannot and do not replace the law of the land as stated in the Copyright
Act and by the Supreme Court of Canada. As the Chief Justice said in
CCH, in 2004:
49 As an integral part
of the scheme of copyright law, the s. 29 fair dealing exception is always
available.
70 The availability of
a licence is not relevant to deciding whether a dealing has been fair. As
discussed, fair dealing is an integral part of the scheme of copyright law in
Canada. Any act falling within the fair dealing exception will not
infringe copyright. If a copyright owner were allowed to license people
to use its work and then point to a person’s decision not to obtain a licence
as proof that his or her dealings were not fair, this would extend the scope of
the owner’s monopoly over the use of his or her work in a manner that would not
be consistent with the Copyright’s balance between owner’s rights and user’s
interests.
Leaving aside
the fair dealing analysis, it is not clear what exactly formed the basis of the
“consumables” calculation at the end of the day in terms of what types of works
were included, or the criteria for classifying them as consumables. It all
appears to trace back to the flawed 2005 Volume Study – but if that is so, why
should the Board have relied on such evidence?
However, if one
follows (or tries to follow) the Board’s reasons and calculations, it becomes
apparent and is summarized in Table 35 that 79% of the FTE rate of $2.46 is
attributable to “consumables”. Without the new and unexplained inclusion of
"consumables", this tariff would be worth only less than $0.46 per
FTE, in other words just about exactly what CMEC had suggested at the outset.
Why Did the Board Not Consult the Parties About its
“Methodology of Our Own”?
The reference
to a potential delay of “several months” (para 351) if the Board were to have
afforded the parties an opportunity to comment on the new methodology is
nothing if not ironic. This tariff is retroactive by six years. The Board took
almost two years after the hearing to render this decision. That is an
extraordinary, inexplicable and frankly very problematic result compared to other Canadian
courts and tribunals. Another few weeks or months would hardly seem to
make a difference after seven years. In any event, why it would take the
parties “several months” to respond is not clear. Courts routinely ask parties
to respond to important questions on the Court’s mind that may not have been
considered by the parties on the spot, or overnight. The real question is
why it took the Board so long to come to “the opinion that the parties did not
adequately address fair dealing” at the hearing,
or indeed in their statements of case.
Indeed, if the Board’s decision - to unilaterally go off on its own on a fundamental issue long after the hearing was over and not consult the parties - results in judicial review, whether or not successful, another year at least will be added to the retroactive effect of this tariff. It could even be a much longer, if the Federal Court of Appeal remits the matter back to the Board – and far longer still if the matter ends up in the Supreme Court of Canada.
Moreover, an old issue is suddenly back and potentially in the foreground. This is the very fundamental jurisdictional question of whether the Board can even render such retroactive rulings, concerning which see more below. Spoiler alert: the “retroactivity” issue is now clearly on the Supreme Court of Canada’s radar screen. This could be a game changer.
Note on the
Delay and Retroactivity
The new Chair
of the Board was not involved in this proceeding, which has been almost seven
years in the making, including almost two years since the hearing took place.
The former Chair, Justice Vancise, was seized of this case and has had it under
reserve, along with his colleagues, for almost two years since his retirement
from the Board. Chairman Vancise’s term as Chair ended on May 13, 2014, which came
just after the hearing in this case concluded. The statute allows a retired
member to conclude matters that the member “has begun to consider”. Unlike the
Supreme Court of Canada, for example, there is no stated time limit on how long
this may take.
The
retroactivity issue is now clearly on the radar screen of the Supreme Court of
Canada as a result of my submissions in the recent CBC v.
SODRAC case. See
paragraphs 109 – 111 of the decision. In footnote 2 of the decision, Justice
Rothstein noted that:
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.
That is not a
ruling. But it is a clear signal that the Supreme Court has this issue on its
radar screen. The retroactivity issue was raised in my
clients’ factum. The Court’s interest was very
clear at the hearing. Watch at just before
the 163 point in the webcast of the SCC hearing where Justice
Karakatsanis raised this issue, which extended our intervener oral submission
into overtime.
This is not the
first time that the Court has been concerned about retroactive copyright
tariffs. The Court pronounced on this rather clearly back in 1954 in the case
of Maple Leaf Broadcasting
v. Composers, Authors and Publishers Association of Canada Ltd., [1954] S.C.R.
624 (which was in our
factum) in which
the majority stated that, in the context of concerns about only a few
weeks or months of uncertainty and retroactivity:
I think the better view is I that it is an implied duty of the Board to proceed
with all possible expedition and that the statements if
certified later than January 1 relate back upon certification to the
commencement of the year.
(emphasis added)
Surely “all possible expedition” doesn’t mean almost seven years. It will be interesting to
see whether, if CMEC seeks judicial review, the retroactivity issue will be
raised. There appears to be at least $55 million at stake for the previous six
years.
I shall have
more to say about the retroactivity issue another day. For the moment, suffice to
say that the Seven Year Itch phenomenon may be setting
in.
Note on the
“Mandatory Tariff” Theory
Above
all, the elephant
in the room for all concerned in the educational sector in particular – and apparently not
addressed here by CMEC or the Board – is the overwhelmingly important question
of whether the Board’s tariff is “mandatory” in any sense at the end of the
day. If it is not, and if the school boards and other major sources of
revenue for AC find a better and cheaper way of copyright compliance and stop
paying AC as if it were mandatory, AC will have a major existential problem.
According to
the Supreme Court of Canada in the SCC’s recent
CBC v. SODRAC decision, as I understand the reasoning and it was indeed yours
truly who successfully argued this very issue, it is not mandatory as far as
the school boards are concerned. Naturally, I reiterate, as I do from time to
time and is always stated on my “masthead”, that my views on this, or any other
topic on this blog, are not to be taken by anyone as a legal opinion or advice
for any purpose. Readers should consult their own counsel – and in any
event read for themselves the Supreme Court’s copyright decisions. The Court’s
copyright decisions are very clear and comprehensible, even to non-lawyers. One
senses that the Court is very aware of the public policy implications of these
decisions and wants the public to read the reasoning directly and that this is
why these decisions are written in a particularly eloquent and direct manner
and perhaps even more so than the Court’s generally very lucid judgments.
If, as is
absolutely clear in the CBC v. SODRAC decision, a Board
tariff is NOT mandatory as concerns a party that becomes involved, as a result
of failure to reach a royalty agreement, in the so-called (but misnamed) “arbitration”
procedure under s. 70.2, why would it then be “mandatory” for countless school
boards who were forced to appear before the Board because this was under the
Board’s “general regime” set forth in Sections 70.1 to 70.191 of the Act? If
anything, the case that a general regime tariff is not mandatory seems even
more obvious than under the so-called “arbitration” regime of s. 70.2.
Even if the
CMEC consortium didn’t raise the issue of whether the tariff could and should
be “mandatory”, that doesn’t mean that this tariff is mandatory. The Supreme
Court’s ruling in CBC v. SODRAC predated this Board decision by about three
months. While the Board has asked numerous parties to comment on the
technological neutrality aspects of this decision, it has not done so with
respect to the “mandatory tariff” aspect. When the Supreme Court rules, its
decisions are effective immediately, unless the Court says otherwise (notably
in Charter cases where time may be needed to amend or adjust). It is somewhat
surprising that neither the Board nor the objectors took any steps to assess
the impact of the “mandatory tariff” ruling on this case. Likewise, as I have noted, there was not discussion of
this issue in the Post-Secondary hearing that concluded on January 22, 2016.
The issue of
“mandatory tariffs” and how it was dealt with in a conference
at Osgoode Hall Law School on Thursday, February 25, 2016 where Ariel Katz and
I explained why, in our view, tariffs such as this are NOT mandatory. This
should be available soon on the web – I’ll let folks know when. Here are the
Power Points. Anyway, what Ariel and I and
David Lametti, who was part of the team with Ariel and me and is now an M.P.
and Parliamentary Secretary to the Minister of International Trade, argued and
believe doesn’t really matter anymore. What matters is what the Supreme Court
of Canada said. And what the SCC said, in Justice Rothstein's last and legacy copyright decision before he retired, is very clear. On this issue, there was no dissent.
It will be
interesting to see if school boards regard this tariff as mandatory on a
going-forward and/or retroactive basis. AC’s much vaunted and commissioned PWC study suggests
that the school board’s payments have indeed stopped as of January 1, 2013. See
page 23.
Overall
Conclusion on the Board’s Decision
My preliminary
take on this very complex decision includes the following:
The Board is
finally getting around to correcting some of its prior misunderstandings on
issues such as repertoire, implied agency, insubstantial copying, and some
aspects of fair dealing.
The Board seems
to be taking a higher and more balanced road than in the past. It even rejected
AC’s claim that a decline in royalties would result in a decline of writers’
output:
[332] Under the hypothetical scenario where creators would cease to
receive royalties from Access, 60 per cent of respondents indicated that this
would have no impact on the number of works they create, and 23 per cent
indicated that they would reduce the number of works they create. Since the
majority would continue to produce works even when no royalties are paid, this suggests that Access
royalties do not have a strong effect on creator future output.
That said,
mostly because of the lengthy but not readily understandable reasons and
conclusions concerning “consumables”, the rate is about five times higher than
one might have expected and what CMEC had asked for.
Indeed,
governments and taxpayers may notice that this rate is about five times higher
than the Provincial Governments rate for 2010-2014 and about 20 times higher than the Governments rate for
2005-2009.
It is exceeding
difficult to get findings of fact, especially those involving detailed
calculations, overturned on judicial review, unless they are in turn based upon
an underlying misunderstanding of the legal principles – as was the case in the
SCC Province of Alberta decision.
That said, both
sides here have much to be concerned about and judicial review seems quite
possible, which could add at least a year and possibly much more to the
uncertainty and potential retroactivity depending on the outcome. Because
there is no “cross-appeal” process in judicial review, it would not be
surprising if both sides file at the same time – which will be on or before
March 21, 2016 by my calculation.
In any case, if
CMEC members conclude that whatever tariff the Board has certified or may
certify in the future after a rehearing may be safely ignored if there are
better and less expensive ways to be copyright compliant because such a tariff
is not “mandatory”, either on a going forward or retroactive basis, then many
if not all of these issues will become effectively moot for practical purposes.
CMEC might still file a judicial review application to keep its options open. It
might be content with a tariff in the $0.46 per FTE range.
This particular
decision has left both sides apparently unsatisfied. That does not necessarily
mean that it was decided with the Wisdom of Solomon. It exemplifies both the
positive and problematic aspects of the Copyright Board process. What happens
now is uncertain. We may have more insight by the end of the day on Monday,
March 21, 2016 if one or both sides seek judicial review.
Broader Implications?
In general
terms, the SCC’s ruling on “mandatory tariffs”, the SCC’s recognition of the retroactivity
issue and the possibility of recovering money paid in the past under tariffs
that become questionable in the light of subsequent jurisprudence (see Rogers slow motion struggle to recover ringtones money
paid to SOCAN) add to the uncertainty facing the Board and its stakeholders.
All of this may keep a small cadre of lawyers very busy, but it seems that the
actual stakeholders on all sides are starting to ask some very fundamental
questions and are becoming impatient or simply withdrawing from the process.
Meanwhile,
correction continues to come from the Federal Court of Appeal, for example this
decisions just before Christmas on procedural fairness from Justice Nadon in
the Netflix case on which I commented.
Unless the
Government gets decisive and decides to devise and implement regulations
governing the Board, its procedures and its stakeholders, one can expect that
these issues will loom large, if not dominate, the 2017 review process.
HPK
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