Tuesday, November 06, 2018

Massive Canadian IP Law Reform in a Budget Bill – Throwing Parliamentary Scrutiny Under the Omnibus Bus with Bill C-86

We will not resort to legislative tricks to avoid scrutiny.

Stephen Harper has used prorogation to avoid difficult political circumstances. We will not.

Stephen Harper has also used omnibus bills to prevent Parliament from properly reviewing and debating his proposals. We will change the House of Commons Standing Orders to bring an end to this undemocratic practice.

Justin Trudeau: 2015 Campaign Platform
(highlight added)

Bill C-86, which was given first reading on October 29, 2018, is 884 pages long. It is an omnibus budget implementation bill that touches innumerable unrelated issues and amends dozens of acts. This is not the first Liberal omnibus bill that that breaks an important campaign promise. But it is the longest and most obviously “omnibus” bill to date. To the Liberal’s credit, there is now a procedure to divide omnibus bills with a Speaker’s ruling – EXCEPT notably in the case of budget bills. However, division has apparently even been done recently even in the case of a budget bill based upon a Speaker’s ruling. The NDP now wants this done again.  
Peter Julian MP (NDP) has raised the possibility of such division on Bill C-86 as a point of order. He appears to have a major point, without even focussing on IP. He has called this bill the “the largest and the worst omnibus bill ever presented in Canadian Parliament.”

Omnibus bills raise interesting and even existentially important questions about the democratic process. For example:
  • When is it appropriate to use an omnibus bill – even a budget bill – that mixes together so many unrelated issues that may be fraught with complexity and even controversy and may bear only a nebulous relationship to the budget, which in turn may be an artificial berth for such proposal in the first place?  After all, budgets in the Westminster tradition have traditionally been about taxation and other important financial and fiscal matters – not extremely detailed micromanagement of arcane aspects of IP law, for example.
  • Even if the provisions are welcome and uncontroversial, how can there be assurance of “quality” of the drafting when there may be only token and extremely abbreviated committee hearings and debate?
  • How can Canadian be assured of the advantage of “crowd sourcing” – which is a new term that could be applied to the very old concept of Parliamentary democracy and the law but essential procedure that entails three readings in each of the House of Commons and Senate, detailed committee consideration in both places, floor debate and eventual passage and royal assent? That takes time and is meant to take time. Otherwise, why would we need that big building on Wellington Street known as the Centre Block with its 338 Members of Parliament and 105 Senators?

Many of the IP issues dealt with in Bill C-86 cannot be said to be “provisions that were announced in the budget presentation or in the documents tabled during the budget presentation” as required by Standing Order 69.1(2) so as to prevent division. The Government’s IP Strategy announced on April 26, 2018 along with a promise to spend $85.3 million as part of the Budget  was extremely vague in general and devoid of any specific documents. The few references in it to proposed legislation, in the colourful but non-specific and largely uninformative web presentation were very uninformative and devoid of documentation . The closest the April announcement comes to Copyright Board reform is a vague reference to “less costly IP dispute resolution and copyright tariff setting at the Federal Court and Copyright Board of Canada.” That is a very thin basis for one of the two or three most drastic structural changes to the Copyright Board and its predecessor in the last 80+ years – all of which involved substantial standalone legislation and considerable scrutiny.

The Bill contains nearly 100 pages of dense, complicated and game changing IP legislation that will result in some significant structural change in several respects and may result in potentially controversial, costly and unintended consequences.  Ostensibly, this is about implementing this Government’s extremely vague IP strategy, and this is the pretext for including all of this in giant sized omnibus bill.

On the IP side, among other things, Bill C-86;
  • Uses the heavy and not easily correctable hand of legislation on many issues when regulatory authority has been available for years, but the government didn’t act, for whatever reason
  • Will establish a new and inevitably very expensive “college” of patent and trademark agents
  • Will quite possibly slow down the work of the Copyright Board rather than expedite it and stops well short of establishing hard-wired deadlines to hold hearings or render decisions, which could have been decisively done by regulation long ago
  • Introduces numerous complex and potentially controversial changes, such as patent “file wrapper estoppel” – an American concept that may help Canadian users/defendants in some cases but may backfire on innovator/patentees in others.

More specifically:

On copyright:

Bill C-86 contains provisions in ss. 243 – 246 of the bill that amend the Copyright Act “in order to specify that certain information is not permitted to be included within a notice under the notice and notice regime and to provide for a regulation-making power to prohibit further types of information from being included within such a notice.”  That’s OK  - but it is six years late and arguably unnecessary, since the authority to implement regulations prohibiting such abusive messaging is probably already sufficiently there in s. 41.25. This is better late than never, though we will never know how much money was unnecessarily paid by unsophisticated recipients who were naïve enough to unnecessarily respond to abusive notices and who needlessly put themselves on the radar of a troll after the in appropriate notices were passed along without apparent protest by risk averse and profit motivated ISPs

More complicated by far are the 20 pages of amendments from pages 216 -236 of the bill concerning the Copyright Board. The amendments purport to amend the Copyright Act:

in order to modernize the legislative framework relating to the
Copyright Board so as to improve the timeliness and clarity of its
proceedings and decision-making processes. More specifically, it
repeals spent provisions and
(a) codifies the Board’s mandate and establishes decision making
(b) establishes new timelines in respect of Board matters, including
earlier filing dates for proposed tariffs and longer effective
periods for approved tariffs, and empowers the Governor
in Council to make additional timelines by regulation;
(c) formalizes case management of Board proceedings;
(d) reduces the number of matters that must be considered
by the Board;
(e) streamlines procedural steps across different tariff contexts,
maintaining differences between them only where necessary;
(f) amends relevant enforcement provisions, including the
availability of statutory damages for certain parties in respect
of Board-set royalty rates and enforcement of Board-set
terms and conditions; and
(g) modernizes existing language and structure for greater
clarity and consistency

That is reasonably accurate summary, as far as it goes, and is included in the bill. However, there are some detailed and new provisions that may have unintended consequences. In anything this complex, the devil is in the details – and there’s 20 pages of details.

Most of what needed to be done to the Copyright Board to speed things up and lower costs could have been and should have been done by regulation, since the authority for timelines, case management, etc. is already there. Here’s a copy of my submission to Industry Canada in 2017 incorporating my previous submission to the Senate BANC Committee, showing how most of the immediately pressing concerns can be dealt with by regulations.

There was a conference call on very short notice on November 1, 2018 with officials. A number of important questions were raised, such as the following:
  • What is the purpose or need for the new s. 73.1 which imports language from the “mandatory” levy scheme in Part VIII of the act re enforcement of “terms and conditions”?
  • Why will the 80+ year-old requirement of tariff filing and board hearings in the music sector – because it is such a powerful monopolist when operating collectively – be suddenly rendered obsolete? The Parker Commission recommended this in 1935, and the government of day approved it for reasons that are essentially just as valid today as they were more than 80 years ago.
  • How can it help small businesses to potentially have to negotiate separately with SOCAN and RE:SOUND who have millions a year to spend on legal fees and other costs associated with collective administration and pushing revenues up?
  • Has the permissive language of “may” referred to the in the SCC decision in CBC v. SODRAC in current s. 70.4 disappeared?
  • Will the imposition of explicit criteria re “competitive market” and “public interest” cause more mischief, costs and need for protracted and expensive evidence from so-called experts? The Board has purported to be concerned with the public interest all along – so do we really need to etch this into stone, whatever it may mean? Even John Degen agreed with me that this was cause for concern – thought for difference reasons. But the fact that Mr. Degen and I agreed on something should tell you something.
  • How will the great idea of cost recovery for public interest involvement is a great idea – but which I have not been able to find in the nearly 100 pages of IP legislation in Bill C-86 amount to anything other than an empty gesture? At the CRTC, cost recovery is provided for in legislation where appropriate.

The conference call Q&A was short, highly managed and scripted, and frankly not very satisfactory. While it was useful for those invited, it was no substitute for the normal committee hearing process which is the basis of good legislation.

Bill C-86 also contains other IP stuff – some of it potentially controversial, such as:
  • Regulations on patent demand letters
  • File wrapper estoppel, as noted above
  • A “college” for patent and trademark agents that have great powers and potentially great complexity and operational costs and resembling a provincial law society
  • Trademark “use” and inability of registered users to sue for three years unless they have actual “use’
  • “Official marks” that makes only a tiny incremental step forward on a massive problem
  • Awarding of costs in Trademark Opposition Board proceedings – but no details as to how or on what scale.

Again, there was a conference call on October 31, 2018 on very short notice. Questions were managed, truncated and/or ignored, perhaps but not clearly due to technical reasons. There was no discussion at all about the “College” – a potentially huge topic. There were mostly unsatisfactory answers to some good questions.

At least this is not stealth legislation, as we saw with Stephen Harper’s gratuitous windfall to the American recording industry in a budget bill on his way out the door in 2015. Or as we saw in the Liberal’s stealth attempt to prolong the copyright term in the name of Lucy Maude Montgomery in 2003 buried away in a “machinery of government” bill to merge the national library and archives.

True, there have been consultations on many though not all of the IP matters in Bill C-86. But this is no way to do IP legislation. The good intentions and hard work of the government and officials have led to a very dangerous procedural precedent because there will be no meaningful review of this work. Nearly 100 pages of dense legislation require parliamentary scrutiny – not a rubber stamp. Prior consultation is not and never will be an excuse to avoid parliamentary scrutiny.

This is a bad procedural precedent. Good intentions by ministers and officials are not necessarily sufficient for good legislation. Parliament is there for a reason. It should be allowed to do its job – without artificial shortcuts, and especially where there is no urgency to warrant any short cut. Good legislation requires good drafting – but also close scrutiny, testimony from interested parties, debate in committee and in the house and senate. Otherwise, what’s parliament for?

Bills and regulations require public comment and scrutiny. Errors and omissions can get corrected.  Even policy changes can be made, if warranted.  In the case of a free-standing bill with normal committee hearings and debate, there would also be a legislative history – which can be very important in subsequent litigation.

Prime Minister Trudeau made an important campaign promise about omnibus legislation. Hopefully, he will now ensure that the IP stuff is divided out of this Bill – or at least send it off to dedicated hearings at the INDU committee in the House and the BANC Committee in the Senate – and give these complicated provisions all the time they need for further consideration.

A token hearing by the Finance Committee, which has no experience or expertise in IP law, is no substitute for a normal hearing on a complicated IP bill.

The Ministers Letter to the INDU Committee

Here is a link to an undated  (presumably October 29, 2018 – the day of Bill C-86 first reading) letter from Ministers to the INDU Committee.

The letter has a heavy focus on the educational sector. Certain officials are widely believed to have been responsible for the ill-fated and temporarily derailed attempt to make Access Copyright tariffs effectively mandatory through the artifice of harmonizing statutory damage regimes to provide Access Copyright the same 3 -10 times statutory damage nuclear weapon available to SOCAN. This shameful attempt was heavily criticized by many, including Michael Geist and me. The rumoured legislation that would have done this failed to materialize in the spring. Nonetheless, the letter from the Ministers to the INDU Committee confirms that this very bad idea is very much alive and suggests that the certain bureaucrats apparently won’t let go of it.  The letter seems to unduly focus on educational issues, where there has clearly been intense lobbying and more than the usual litany of fake news about starving artists and who they are being failed by the allegedly inadequate copyright laws. The letter concludes as follows with an explicit invitation to the INDU Committee:

We are eager to receive the results of your work. We would appreciate any
recommendations the committees are able to offer on fairness and predictability in educational markets, including recommendations on the applicability and enforcement of Board-set rates.
(highlight added)

It looks like the confrontation over mandatory tariffs will be one of the main battle fronts in the s. 92 review. It will be fought not only in the Courts but also in Parliament. It seems that officials and Ministers and even parties who ought to know better  are either unable or unwilling to embrace the ruling of the Supreme Court of Canada in Canadian Broadcasting Corp. v. SODRAC 2003 Inc., [2015] 3 SCR 615, 2015 SCC 57 that tariffs set in the course of the so-called “arbitration” regime are not mandatory for users. This is a ruling resulting from arguments I made in the Supreme Court of Canada on behalf of Prof. Ariel Katz and the Centre for Intellectual Property Policy (“CIPP”) at McGill. If such tariffs are not mandatory even for users who voluntary submit to the Board’s so-called “arbitration” regime, how can tariffs be mandatory for those who are not party to any Board proceeding and wish to have no dealings with a collective because they can clear their copyright needs more efficiently in other ways? The issue is pending in the Federal Court of Appeal – and will likely end up in the Supreme Court of Canada.
With all of the above, and the Government’s extremely costly capitulation to Trump on the life + 70-year copyright term in the USMCA, which this Government is proclaiming as a victory, Canadian copyright is in great turmoil.
The one thing that should be obvious at this point is that an omnibus bill is not the way to proceed to fix Canada’s IP laws and lead to innovation for the nation.
Oone of my best law school professors, the wonderful Harry Glasbeek, said that anytime there’s a new Supreme Court of Canada decision or new legislation, think of the worst possible unintended consequence – and rest assured that it will indeed come to pass and sooner rather than later. Another cliché comes to mind, namely that “if it ain’t broke, don’t fix it.”

If I sound like a crusty old curmudgeon here, that may be because that’s what I may well be. It displeases me that decisions and actions are being taken on major IP issues by officials who may, in some cases, have little actual corporate memory and virtually no real IP expertise, which is somewhat understandable the way the bureaucracy works and people come and go. That is why we have Parliament to study and enact, if so inclined and after adequate study and debate, the legislation devised and drafted by officials.

There will presumably be some discussion in the Finance Committee of the House of Commons of the “subject matter” of Bill C-86 beginning tomorrow.  IPIC and Michael Geist will have a few minutes on November 7, 2018.


PS - It seems that Speaker Geoff Regan  has concerns about this process and has already begun to divide the bill upon the request of Peter Julian MP according to this report from the Globe and Mail.

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