Wednesday, October 23, 2019

The 30th (or 83rd?) Anniversary of Canada’s Copyright Board: Waiting for Version 3.0

The Copyright Board of Canada is preparing to celebrate its 30th anniversary with an invitation only event on October 24, 2019 at the National Arts Centre in Ottawa. So, it’s timely to reflect on some of its more notable aspects.

It deserves to be congratulated in many respects but needs to reminded that, only three years ago, it was described as “dated, dysfunctional and in dire need of reform”  by the Senate BANC Committee.  There has been virtually no tangible reform since then - or even any meaningful proposals in that direction - either from the Government or the Board itself.

The Copyright Board came into existence on February 1, 1989 upon proclamation ofsections 12 to 15, 17, 20 and 25 of the Act to amend the Copyright Act (Chapter 15 of the Statutes of Canada, 1988) assented to on June 8, 1988. It replaced the Copyright Appeal Board which, since 1936, was responsible for the annual review and approval of royalties payable to the performing rights societies for the performance of musical works in Canada.
 This current Copyright Board “2.0” is the 1989 replacement for Canada’s then 53-year-old internationally admired and exemplary Copyright Appeal Board “1.0”, which was established in 1936 as a result of the legendary 1935 report of the Parker Commission. The Copyright Appeal Board consisted of a judge and two public servants, all of whom served part time. The secretariat services were provided on a part time basis by an employee in the predecessor of today’s Canadian Intellectual Property Office (“CIPO”). The Copyright Appeal Board had a mandate restricted to music performing rights societies – which then meant the two predecessors of SOCAN (which is itself the result of a merger that was permitted at about the same time as the new Board was created) and following the landmark 1988 revision of the Copyright Act. So, Canada has had a copyright tribunal in one form or another for 83 years now. For those who want to dig deeper into the Board’s history – which is not yet adequately documented  – there’s an interesting and useful Master’s Thesis from 2016 by Louis J. D’Alton available online.

I’ve known both institutions and most of their key personnel until recently and have had some considerable involvement with the Copyright Board on the blank media tariff and some other matters. I’ve also been involved in successful judicial review both supporting and opposing some the Board’s key decisions

Any public criticism I’ve had of the Board has been in the spirit of “tough love” for an institution that has played and must somehow continue play an essential role in Canada’s economic and cultural development for eight decades.  If it didn’t exist, we would probably need to invent it. But, maybe it’s time now for Ver. 2.0 to be reinvented as Version 3.0.

In any event, my criticisms are essentially very simple and has been shared by many other stakeholders and counsel, including those in the music industry, who have an interest in the Board. The main, obvious and inescapable criticism is that it takes far too long for tariffs to be decided and they are thus usually very retroactive.

Before I go on, I want to make one thing very clear. The Board’s administrative staff have always exemplified the best characteristics of the Canadian public service. Claude Majeau and his successor, Gilles McDougall, in the role of Secretary-General have been extremely courteous, professional, knowledgeable, impartial, and accessible in an exemplary way. Likewise, those in the Registry who keep track of a large amount of documents have always been very helpful and extremely competent.

-        contested tariffs often take about four years or more to get to the hearing stage and about three years thereafter for a decision to be rendered;
-        The Board only renders at most two or three substantive decisions a year;
-        At the time I commented in 2015 on Prof. de Beer’s  study, the Board had only produced about 74 actual tariffs in its 30-year history, as measured by its own taxonomy and methodology utilized prior that study in which Prof. de Beer suggested the astonishing grand total of 852 tariffs (when each tariff is subdivided  and counted year by year). I commented at the time on the tally of 74 tariffs that “Even this is an inflated number and reflects a number of minor “redeterminations” and other less than significant events. But it is still the Board’s own number, as calculated from the Board’s own posted information. Still, this is less than 10% of Prof. de Beer’s number of 852.”;
-        Most of these tariffs are significantly retroactive for the simple reason that it took typically several years to decide them;
-        A great many of the tariffs as counted by Prof. de Beer were unopposed – but still languished for a long time prior to being certified;
-        The Board has been sitting on the extraordinarily important Access Copyright proposed post-secondary tariff for more than nine years now. For all practical purposes, it has been unopposed since April 24, 2012; and,
-        Even nine years and counting is not as long as a previous Access Copyright tariff took to decide. The Provincial & Territorial Government tariff was 11 years in the making and fully retroactive – though the very small amount awarded in the end was probably sufficiently good news that the Governments involved were not concerned about the retroactivity in that case. In fairness to the Board, part of this delay was due to the detour through the Federal Court of Appeal on the issue of crown immunity. However, as to that detour, see below concerning “Reference” procedure.

This delay and retroactivity is unacceptable by any measure, and the Supreme Court of Canada, at my behest along with Ariel Katz and Prof. David Lametti, as he then was before he became  an MP and later Minister of Justice, has now explicitly revived the question of whether the Board even has the jurisdiction to issue decisions that are so retroactive in their effect.

Why “Dysfunctional”?

A large cause of the problem with the Board’s “culture of delay” may stem from the excessive expectations placed upon it by successive governments. The Mulroney government implemented the recommendations of the heavily manipulated 1985 “Charter of Rights for Creators” Parliamentary Committee report in the 1988 overhaul of the Copyright Act. Those recommendations called for essentially unlimited expansion of collective activity in Canada, and the creation of a very much expanded version of the former Copyright Appeal Board, which had served Canada well and been the source of international admiration for the previous five decades at the time. The modern structure of the Board and the expectation that collective administration of copyright would serve the cultural community and take pressure off taxpayers was the result of this report. So too was the creation of an ever-expanding bureaucracy to support the Copyright Board 2.0.

It may well be that the great weight of these expectations is a significant contributing factor to the Board’s ever-increasing tendency to imbue what could have and should have been a relatively simple number crunching rate calculation  exercise with layers of complexity and reflection that take years instead of weeks or months at the most  to resolve. In the past, many have observed anecdotally and cynically that even after many years of deliberation and millions of dollars in legal and expert fees often expended, the tariff at the end of the day has often the simple arithmetical average of the amounts proposed by the proponent and opponent(s) +/– a few percent.

However, that pattern, if it was ever true, has been changing and  the Board has issued some surprising and encouraging decision. in recent years

The Board has refused to set even a nominal tariff for SOCAN where there was insufficient evidence and was vindicated in the 2010 Federal Court decision in the case of SOCAN v Bell. I was pleased to argue successfully in favour of upholding the Board in that litigation.

More recently, The Board has sometimes certified tariffs at a surprisingly low rate that probably doesn’t even generate enough revenue to cover the costs of the proceedings, for example in 2015 in the case of the Access Copyright provincial tariff. In this tariff, as I pointed out at the time:
…the Board awarded a tariff of 11.56 ¢ per FTE (full time equivalent) for the period 2005-2009 and 49.71 ¢ per FTE for 2010-2014. That’s less than 1% and about 2% respectively of what AC asked for.  According to the Board, the tariff will generate a total of only about $370,000 over its ten year period – which is likely only a small fraction of the costs involved in obtaining the tariff.

The Board’s decision also contained ample good reasoning about fair dealing and other excellent aspects that I commented upon.  As devastating as that decision must have been to Access Copyright, no judicial review was undertaken, and the Board’s decision is thus vindicated.

That tariff was preceded in 2014 by Re:Sound’s Tariff 8, another very good decision to the Board’s credit. However, the Board was then insulted with absolutely inappropriate allegations, notably by so-called Music Canada (which represents mainly the American music industry), in a manner that might even have resulted in in some form of sanction in a normal judicial context. Music Canada’s antics were especially shameful considering the experienced lawyers on its staff, who one would have expected to behave better.

So, no good deed goes unpunished, it seems, in the copyright world in Canada. The Board took this in stride, although retired Chair William Vancise did remark upon it later as the recently retired Chair at an important ALAI event in Ottawa:
Let me say that I found it completely unacceptable and totally inappropriate for such an association to lobby the Chairman of the Board, an independent quasi-judicial tribunal—and I am certainly not alone in this view. It showed a lack of respect for the institution. The proper forum for dealing with a decision that Music Canada’s clients don’t like is to take it to judicial review

The Court concluded with some unusual language that can be seen as praiseworthy of the Copyright Board:
[100] To reiterate, overall the Board was entitled to a broad margin of appreciation in considering the complex and specialized issues in this case. The applicant has not persuaded me that the Board’s decision was outside of that margin of appreciation.
(highlight added)

The Federal Court of Appeal is usually very deliberate in its wording – especially Justice Stratas who wrote this decision. It is probably not a stretch to particularly note and appreciate his choice of the word “appreciation”.

Other Countries

As I’ve pointed out often before, no other comparable country has such a complex collective copyright administration apparatus in place. Canada has about six times as many collectives as the USA, where Congress has bitten the bullet on such major issues as retransmission and spelled out the rates, leaving much less policy responsibility to the U.S. Copyright Royalty Tribunal – which is required by law to get its job done within 11 months – not an indeterminate number of years. Moreover, in the USA, the role of antitrust law has always been important as a check and balance on the major performing rights organizations, which operate under consent decrees that have long and elaborate provenance. In Canada, the Competition Bureau has never been anything but absent when it comes to copyright collectives at the Copyright Board. To the best of my knowledge, the Bureau has never once exercised any of the powers given to it under the Copyright Act in this respect. That of course is not a fault of the Board or Parliament.

Mission Creep?

Apparently in the spirit of the large mission mandate that the Board presumably assumed it was given, the Board attempted almost 20 years ago to create and promote “the formation of the International Association of Copyright Administrative Institutions (IACAI)”.  Canada would have presumably hosted a new organization of presumably like-minded copyright institutions from around the world. Despite a lavish conference at the Chateau Laurier, there was virtually no interest outside of Canada – probably because no other country has anything comparable in size, scope, mandate or resources comparable to Canada’s Copyright Board. There were, apparently, no like-minded countries. Here are some links to the few surviving references to this effort, which was led by the now long-retired Vice Chair of the Board, Stephen Callary:
Other Mission Creep?

The Board has sometimes tended to make very simple things very complicated. This was the case for a long time with the Unlocatable Copyright Owner regime. The Board now deals with only a handful of these files every year. That is likely because the public and the legal profession now has more awareness of and confidence in the fair dealing and other exceptions in the Act, the $5,000 cap on damages for non-commercial infringement and – presumably – due to more sophistication at the Board itself.

However, it was not so long ago in 2014 that Barry Sookman proudly took it upon himself to speak in praise of this unlocatable owner activity at the Fordham Conference, with former Chairman William Vancise and I crossing swords afterwards from the audience. The Board had commissioned a study by Prof. Jeremy de Beer and former Board counsel Mario Bouchard to  look at this activity – which at one point required one full time person to support it. There was even unofficial and absurd talk about using these provisions to deal with the Google Books issue in Canada. Anyway, Chairman Vancise, as I have pointed out, deserves credit for eliminating the long-standing practice of the Board for requiring payments for copies of architectural plans from city halls from home owners doing renovations, which I had long argued was totally unnecessary in view of clear Supreme Court of Canada jurisprudence. It is not known how much resources are currently spent on this “unlocatable” activity. Hopefully, no more than few hours a year.

A current example of potentially problematic “mission creep” is the Board’s new preoccupation with the concepts of “public interest” and “competitive market”. As I’ve pointed out before, despite the recent codification of these concepts in the statute,  neither of these concepts are new:
They are embedded in existing jurisprudence, especially that of the “public interest”. That the Board should now consider that it suddenly has an obligation to decide cases “in the public interest” is astonishing. What else has it and its predecessor been doing for more than 80 years? Is the Board unaware of Supreme Court of Canada jurisprudence going back almost 8 decades? While some consultants are doubtless salivating at the prospect of providing lucrative so-called “expert” evidence on these issues that will result in protracted and much more expensive hearings, this should not be necessary if the Board simply follows longstanding case law and takes responsibility for deciding the ultimate legal questions itself rather than relying upon so-called experts, who are often repeat performers and rarely truly independent when it comes to Copyright Board proceedings.
Budget Increase

The Board has recently been given a $1,000,000 annual budget increase by the Government. The Board already had a budget of about $3.5 million a year, compared to $3.2 million p.a. for the Competition Tribunal (based upon 2015 figures). Why it needs this budget increase is totally unclear and it may actually slow things down as the Board struggles to figure out what to do with this money. It must always be recalled that they who hear must decide – so that last thing that the Board needs is more lawyers and economists doing background research. The parties to the hearings usually provide ample legal and economic research. It is for the members – who are presumed to have expertise – to decide and write decisions. That is how normal courts work – and even Supreme Court of Canada judges have only three clerks.

The Board regularly spends a lot of money on third party contracts, for some rather surprising things, such as media monitoring and website updating – which one would think could easily be done in house. See this batch of contracts, for example – which includes $45,200 for clippings and report services, $152,829 in 2017 for Professional service for the amendment of the Copyright Act, $15,000 for outside counsel to advise on ATIP requests. The Board has 18 full time employees to support its members, including five full time lawyers plus an articling student and some three economists – though the Board has recently apparently decided to remove its list of its helpful staff other than its new Secretary General from its website. Nonetheless, resourceful people who know their way around the Government’s websites can find this information elsewhere.

The contract disclosure information sometimes includes interesting items that invite curiousity. For example, the large expenditure of $152,829 for “Professional service for the amendment of the Copyright Act” from a company called Leverage Technologie Resources Inc. in 2017 is interesting. The latest disclosure indicates an expenditure of $187,746 for  the maintenance and updates of the Copyright Board's website for the period 2019-04-05 to 2020-03-31.

The cost of the Board’s decisions should be considered. Even if the Board renders three significant substantive decisions per years – which it has not done for a long time – the cost per decision is going to be about at least about $1.5 million. By comparison, the Supreme Court of Canada typically renders 70 or more actual judgments – most with lengthy reasons - per year and considers hundreds of leave applications. Its most operating budget was about $43 million.  That’s a cost per actual judgment of about $600,000 – and the judgments are usually reliably rendered within six months or so of a hearing. And that doesn’t count the hundreds of leave applications.

Use of reference procedure

One unutilized way that the Board might expedite some proceedings and save a great deal of avoidable judicial review could be recourse to the “reference” procedure available pursuant to s. 18.3(1) of the Federal Courts Act and Rules 320 to 323 of the Federal Courts Rules. The CRTC has used this procedure. See Reference re Broadcasting Regulatory Policy CRTC 2010-167 and Broadcasting Order CRTC 2010-168, [2012] 3 SCR 489, 2012 SCC 68 (CanLII), <>

These provisions provide that the Board “may at any stage of its proceedings refer any question or issue of law, of jurisdiction or of practice and procedure to the Federal Court for hearing and determination”.

The Board could and arguably have used this procedure to save time and get to the inevitable result regarding such issues as crown immunity, the extension of the private copyright levy to devices, the making available right, and last – but not least – the “mandatory tariff” issue.

Since issues such as these are almost certain to find their way upstairs anyway, why spend years and lots of resources to achieve what is likely only going to be a preliminary opinion from a Board constituted to determine such quintessentially judicial issues? Many years of time and many millions of dollars might be saved by using this avenue. No new legislation or regulations are needed. It has been on the books for years.

Presumed Expertise

Speaking of expertise, as we respectfully, albeit impatiently, wait the judgment of the Supreme Court of Canada in the trilogy of cases involving standard of review, one cannot help but wonder whether the existential question of whether deference should be accorded to administrative tribunals premised on their presumed expertise will be addressed. In the case of the Copyright Board, it must be frankly stated and recognized that many of its members over the years have not hit the ground running in terms of actual independent and credible expertise in terms of copyright law, experience, or relevant professional knowledge of economics. Some Board members have, to their credit, worked hard to develop such expertise after they were appointed.

One notable exception in terms of both expertise and independence at the outset  was the first full time Vice Chairman of the Copyright Board, the long since retired Michel Hétu who previously had a distinguished career in the Department of Justice and experience with the Copyright Appeal Board. He knew a lot about copyright law and policy. Likewise, when Claude Majeau, also a lawyer, was elevated from being Secretary General to Vice Chairman, he had acquired considerable relevant expertise from his long and able service as Secretary General.

This expertise issue is an admittedly difficult problem to solve. There aren’t a lot of people in Canada with a lot of suitable expertise or experience in copyright law and collective administration to begin with – and virtually all of them with such background are rightfully or otherwise regarded as less than independent in their views due to their backgrounds. One possible step to solve this problem would be the appointment of members with normally opposing viewpoints to counterbalance each other. However, that option would also be fraught with problems, such as requests for recusal, whether or not justified.

We have yet to see the appointment of a chair, who must be either a sitting or retired judge of a superior court, who comes already equipped with copyright expertise. Even the current Chair, a highly respected judge from the Ontario Court of Appeal who has apparently remained notably reticent about Board reform since his appointment four years ago, has actually explicitly suggested that the chair should ideally come from the Federal Courts, where some judges have actually had or acquired some copyright experience. He has also alluded more generally to the expertise issue  In his only publicly posted remarks to date, when in a May 1, 2018 presentation he said:
I think it is also important to keep in mind that, while the Board’s staff, and at least the current Vice-Chair, are the repositories of a great deal of expertise in the rate-setting process, all members of the tribunal at the hearing may not have that same in-depth knowledge. The Chair must be a sitting or retired superior court judge (where very little intellectual property work, much less copyright work, is done), and to date has not come from the Federal Court system where they actually know something about those subjects! In addition, none of the present members is an economist. In this sense, the old adage that applies to every good counsel, in any setting, is relevant: know your adjudicator and your forum.

Of course, not all Federal Court judges are experts on copyright law. Moreover, some, who are more knowledge than others, have retired and may not be interested in the kind of challenges that this job would have entailed in recent times which may have seemed less jurisprudential and more administrative, bureaucratic and even political.

Another aspect of expertise that must be kept in mind is that knowledge in one field of IP law does not necessary carry over to another. A great basketball player won’t be a good hockey player if they haven’t learned how to skate.

Moreover, a judge from the Federal Courts is much more likely to understand the Federal judicial review process and jurisprudence and to treat the process and the reviewing courts with the appropriate perspective. The previous chairman, Judge William Vancise, who was never at a loss for words, was openly critical even while he was in office of the role of the Supreme Court of Canada and the Federal Court of Appeal and even at least one of its decisions.  

Looking Forward?

I’ve also noted that this is the first time in the Board’s history that neither the Vice Chair nor the Secretary-General have any formal legal training. Nor is there much corporate memory or experience at the senior ranks of the departmental bureaucracy to deal with this situation.

I think that the ultimate solution to the problems with the Board will require that it be reinvented. This may include curtailing its mandate, budget, and staff to perform only very basic and circumscribed rate calculation, according to a fixed schedule along the lines of the US Copyright Royalty Tribunal. More complicated questions involving law, terms and conditions of tariffs, liability, etc. should be handed over to the Competition Tribunal or, perhaps, one or two designated judges in the Federal Court – something along the lines of the consent decree mechanism in the United States. None of this is going to happen overnight, nor should it. Maybe there’s an even better vision.

At the end of the day, it’s not clear how the current system does much to serve actual creators. Most individual members of collectives such as Access Copyright and SOCAN earn far less in a year from tariff royalties than the junior lawyers who work for their collective earn in an hour. Only a handful of “star” creators see serious money as a result of the Copyright Board’s tariff system.  That’s the elephant in the room that needs to be addressed. Sadly, there is little or no incentive for collectives or their law firms who know how the system works to change this system.  Even worse, there is no incentive for the major “objector” entities, at least the ones that can pass costs along to users, or the law firms that represent them, to fix the system. Consumers, students, taxpayers and other completely helpless Canadians pay for this inefficiency.  The Copyright Board has evolved by and large not only to tolerate this system but generally to enable and encourage it.  The Board has virtually ignored any issues regarding the internal efficiency, governance or adequacy of distributions to individual creators.

What we need is another Parker Commission 2.0 to kickstart a new Copyright Board 3.0. There are retired judges from the Federal Courts and the Supreme Court of Canada with the insight and experience who could lead such an effort.  Maybe what we need is an even grander new Massey Commission to explore how Canada deals with its culture, communications, innovation, etc. issues from a holistic economic, legal and evidence-based approach. But that is perhaps too big a vision. Let’s start now with a Parker Commission 2.0 that leads to a reinvented Copyright Board 3.0.

There’s an old adage that when something needs to be done quickly, it’s best to ask a busy person. The Board is not visibly busy in any obvious sense. It has held no oral hearings in more than two years and none are scheduled until September of 2020 when three hearings on relatively minor matters are set to unfold in late 2020. Hopefully, the Board will use this downtime to work towards reinventing itself and not just tinkering with procedural details that won’t make any material difference.

At any rate, happy anniversary to the Copyright Board 2.0 of Canada. We hope that its good traditions and positive accomplishments can carry on to a new and improved Copyright Board 3.0 – and that Version 3.0 is launched sooner rather than later.


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