On
April 22, 2020 the Federal Court of Appeal (FCA) in a unanimous judgment by
Pelletier, J.A., released its long-awaited decision in the appeal of the Federal
Court’s July 12, 2017 decision of Phelan, J. Here’s the judgment of the FCA: York University v. The Canadian Copyright
Licensing Agency (Access Copyright), 2020 FCA 77 (CanLII), <http://canlii.ca/t/j6lsb> In a nutshell, the FCA ruled that:
Re
whether tariffs are mandatory:
[204] As a result, I conclude that a final tariff
would not be enforceable against York because tariffs do not bind non-licensees. If a final
tariff would not be binding, the conclusion can hardly be different for an
interim tariff.
[205] Acts of infringement do not turn infringers into licensees so as to
make them liable for the payment of royalties. Infringers are subject to an
action for infringement and liability for damages but only at the instance of
the copyright owner, its assignee or exclusive licensee. In the
course of the hearing before this Court, Access Copyright candidly admitted that, given its
agreement with its members, it cannot sue York for infringement in the event
that some or all of the copies made by York are infringing copies. However, Access
Copyright claims the right to enforce the tariff against non-licensee
infringers; yet if the tariff is not mandatory then there can be no right to
enforce it.
[206] As a result, the validity of York’s Guidelines as a defence to
Access Copyright’s action does not arise because the tariff is not mandatory
and Access Copyright cannot maintain a copyright infringement action.
Therefore, I would allow York’s appeal from the judgment of the Federal Court
with costs, set aside the Federal Court’s judgment, and dismiss Access
Copyright’s action with costs.
Re: York’s Fair Dealing Guidelines
[309] The prayer for relief of York’s counterclaim
seeks a declaration that “any reproductions made that fall within the
guidelines set out in York’s “Fair Dealing Guidelines for York Faculty and
Staff (11/13/12)” … constitute fair dealing pursuant to sections 29, 29.1,
or 29.2 of
the Copyright Act”.
It is apparent from
this that the Guidelines are the heart of York’s position in this litigation.
[310] Given the relief which York sought, it was incumbent on
it to justify the Guidelines themselves so as allow the Court to
declare that reproductions that fall within the Guidelines are fair dealing. It has not done so.
[311] The Federal Court ruled that, having regard to
the fairness factors set out in CCH, as developed in SOCAN and Alberta
Education, York’s
Guidelines did not ensure that copying that complied with them was necessarily
fair dealing. In most instances, the Court found that fairness factors
pointed in the direction of unfairness, markedly so in some cases.
[312] York has not shown that the Federal Court erred in law in
its understanding of the relevant factors or that it fell into palpable and
overriding error in applying them to the facts. As a result, I
would dismiss York’s appeal from the Federal Court’s judgment with respect to
the counterclaim with costs.
(highlight and
emphasis added)
For
those not familiar with the “mandatory tariff” debate – which goes back almost
a decade – here it is in simplified terms. According
to Access Copyright (“AC”), if a university is responsible for the making of
even one inadvertently infringing copy of one work in its very limited
repertoire – perhaps a newspaper article or a poem or a short story or a
chapter of a book – that university
would be liable for payment of the Copyright Board’s FTE rate (initially pegged
at $45
per annum per FTE) for ALL the students in the university for the entire
term of the tariff. So, for a university
with 50,000 FTE students, that single copy could cost $2,250,000 for each year –
i.e. the entire period – of the tariff as certified by the Copyright Board. The
initial tariff was proposed for 3 years – so that would mean $6,750,000 for
that one cursed copy. This would be in addition to the tens of millions per
annum that such a university would be paying for site licenses and the
acquisition of traditional paper copies of books and journals. Not to mention
what students would be paying for their own textbooks and course packs
purchased through AC licensed copy shops. Naturally, it’s very possible and
maybe even likely that there could be a few instances of inadvertent copyright
infringement in works that may actually be in AC’s very limited repertoire
during an academic year giving rise to perhaps a few dollars’ worth of actual
damages. But is that any reason to
impose a tariff worth many millions of dollars on an unwilling institution for
one inadvertently infringing copy of one work?
Absurd?
Ridiculous? Absolutely! But that was what AC believed and spent millions to put
in place – with a lot of help from the Copyright Board in the early days and not
a lot of explicit and effective opposition until it was almost too late from Universities
Canada (“UC”) and York University, which finally made the necessary points at
the appeal hearing.
Here’s
a simple analogy. In the old days, when train fares were regulated by tariffs,
there was a tariff that set the maximum amount for a ticket from, for example, Ottawa
to Toronto at, say, $10. But nobody was forced to take the train. You could choose
to fly and pay more. Or take the bus and pay less. Or ride a bicycle and pay
nothing. There was choice. But travelers were protected by a maximum amount in
the form of a regulated tariff that could be charged for train travel on the
trains that were controlled by two providers and eventually only one. But once again – and of prime importance –
nobody was forced to take the train to get there from here.
This
concept of a “mandatory tariff” is, of course, ridiculous – which is why I, Prof. Ariel
Katz, Prof. David Lametti, as he then was, and ultimately many universities
decided to fight against this theory. Not only is it bad policy and bad
economics. It is and always has been bad law. The Supreme Court of Canada got
this right in 2015. Phelan, J. got it very
wrong in 2017. Finally, the FCA in a unanimous judgment from Justice Pelletier
has got it right again.
Below
are some of my current observations on Justice Pelletier’s decision, and later some
references to some of my many past comments on this case. Needless to say, I am
very pleased that the FCA completely embraced the arguments that I made in the
Supreme Court of Canada on behalf of Prof. Ariel Katz and Prof. David Lametti,
as he then was, on behalf of his McGill institute. Here’s the
webcast of the oral argument, where we were heard at the 1:02 mark. Here’s our
factum. That resulted in the landmark 2015 SCC ruling in Canadian Broadcasting Corp. v. SODRAC 2003 Inc., 2015 SCC 57 (CanLII), [2015] 3 SCR 615, <http://canlii.ca/t/gm8b0> that resulted in Rothstein, J.’s ruling that tariffs
are not mandatory for users. That result was very much influenced by Ariel Katz’s
extremely important Spectre I paper which
was then forthcoming, and which has finally received the explicit recognition
it deserves from Pelletier, J.A. (see para. 32 of the FCA judgment). Interesting,
the CBC judgement and Prof. Katz’s paper were mentioned but downplayed by York at
the trial before Phelan, J. Fortunately, more attention was brought to bear by
York at the appeal – but the real credit here belongs to Prof. Katz whose analysis
is reflected and made very accessible in the long but very logical and lucid
reasons of Pelletier, J.A.
I’m
also very pleased to note that the same
arguments that my client the Canadian
Association of Research Libraries (CARL), which was refused leave to intervene
in the FCA because the motion judge thought that final approved tariffs were
not in issue, have now found their way into the FCA judgment. The motion judge wrongly denied leave in
my view, on the basis that “Any arguments that CARL would wish
to make in relation to any final approved tariff are outside the issues that
are before this Court and do not justify granting CARL leave to intervene.” Fortunately,
the FCA panel with Justice Pelletier presiding ruled that the issue of “any
final approved tariff” was indeed the essence of the issues at stake and got it
right.
I
will not say much now beyond the obvious about what this all currently means
and where this all may be headed because a lot of parties, some of whom may or
may not be or become my clients, are or will be studying this very carefully as
the presumptive date of June 22, 2020 approaches for leave to appeal (“LTA”) applications
to the Supreme Court of Canada (“SCC”). By the way, that date may get pushed
out to September 13, 2020 if a draft bill recently circulated by the Minister
of Justice becomes law soon.
Early
on in this 107-page 312 paragraph judgment, Justice Pelletier makes the
following very important statement:
[33] I will
begin with the issue of the enforceability of the tariff. The question of fair
dealing only arises if the tariff applies to York. It is only if a final tariff is “mandatory” that
York must rely on its Guidelines to show that compliance with them is fair
dealing, a user’s right.
This,
along with the above quoted paras. 204 – 206 might suggest that the ruling on
York’s fair dealing guidelines can be disregarded, given that Justice Pelletier
spent the better part of 73 pages and 206 paragraphs totally vindicating the
proposition that final – and obviously interim – Copyright Board tariffs are
not mandatory. However, things may not quite that simple. The decision on York’s
fair dealing guidelines arose because York made the initial strategic decision
in 2013 to affirmatively seek such a ruling by way of a formal counterclaim –
in effect, a separate but related lawsuit. As Justice Pelletier states:
[309] The prayer for relief of York’s counterclaim seeks a declaration that “any reproductions made that fall within the guidelines set out in York’s “Fair Dealing Guidelines for York Faculty and Staff (11/13/12)” … constitute fair dealing pursuant to sections 29, 29.1, or 29.2 of the Copyright Act”. It is apparent from this that the Guidelines are the heart of York’s position in this litigation.
Perhaps
York should have been rather more careful about what it wished for. Both the
Federal Court and the FCA had to respond to the counterclaim, which they did as
asked. I am on record from the beginning as having questioned not only the
guidelines themselves, which emanate from AUCC (now UC) guidelines but York’s decision
to needlessly, in my view, put them on trial. Essentially, I had suggested that
York get a summary ruling on whether the tariff was mandatory – which should
have been very easy at least after the 2015 SCC judgment – and not unnecessarily
“bet the farm” on the controversial fair dealing guidelines. Here are some of my blogs in reverse chronological
order.
All
I will say at this point about possible SCC proceedings at this point is this:
- It would seem very likely that AC will seek leave to appeal on the mandatory tariff ruling. It is an existential threat to what remains of its long obsolete and unwelcome business model. After all the presumably millions it has spent to date on this litigation and at the Copyright Board, the relatively small cost of a SCC proceeding and the hope, however faint and remote, of a successful “Hail Mary Pass” would suggest that such an attempt to get leave to appeal will almost certainly be made. How York will respond and whether leave will even be granted remain to be seen.
- How York deals with the ruling on its fair dealing guidelines is a much more complex question both substantively and procedurally that many well-paid minds are presumably now addressing.
- Only actual parties can seek leave to appeal. Theoretically, others can seek leave to intervene in the leave to appeal process – but this is extremely unusual and very rarely successful.
- If this case gets to the SCC, there are likely going to be a lot of potential interveners lined up. The recent practice of the Supreme Court, unlike the Federal Court of Appeal, is to be very liberal in allowing leave to intervene but very restrictive in permitting time for oral argument – i.e. only five minutes per intervention.
Will
there now be litigation – by some publishers as we saw in CCH with funding
provided by AC in whole or in part as we saw in CCH v. LSUC? Perhaps even class
actions as someone who should know better has rashly
predicted – against one or more universities? Such class actions might be
on behalf of many copyright owners – ranging from big publishers to individual
authors. And potentially even a “reverse
class action” against one university who would be called upon to defend all
universities.
These
are theoretical possibilities. For many procedural and substantive reasons,
which I won’t deal with here, such mass litigation will likely not happen – and
in the remote event that it happens, would likely be a very costly mistake on the
part of whoever is responsible. So – the litigation threat may be empty or at
least underwhelming. AC and any publishers who put their name on such
litigation may have much more to lose than to win. Besides, suing one’s best
customers is seldom a good idea in the long run – as AC is hopefully finally learning.
The
very strong and likely “bullet proof” nature of the FCA ruling on mandatory
tariffs should – but likely won’t – induce
AC to do something obvious that it has refused to do before, which is offer licenses
with some real value that don’t entail
double payment and that really provide rather than discourages “access” for the
repertoire it had actually has, and not the repertoire it pretends to have, at
an attractive price – say $2 or $3 per FTE for universities and less for colleges
and K-12 in turn. That way, AC could survive and serve a useful, albeit
limited, function. AC should have done this long ago. I had previously
suggested a $5 price point. But AC’s bargaining position is now much worse
because it’s very clear that educators don’t need their licenses if they don’t
want them and their tariffs are NOT mandatory. And if, as I expect, the SCC denies
leave on the mandatory issue or upholds the FCA’s ruling that tariffs aren’t
mandatory, AC’s position will be even worse still. Indeed, most if not all
educational institutions could then readily conclude that AC no longer has anything
useful to offer at any price unless its business model is somehow drastically
and positively transformed – if that is even possible.
And,
of course, AC and many powerful content owners and collectives will renew
lobbying efforts to make tariffs effectively mandatory. A bullet was dodged not
long ago when a senior official at ISED tried to usher though just such an
amendment that would harmonize statutory damages regimes and thereby
effectively make tariffs mandatory through the threat of terror and effective extortion.
To his credit, he did consult, and he got an earful and the proposal never saw
the legislative light of day. But he is now even higher the chain of command at
ISED and the stakes are now even higher.
Finally,
from the perspective of the academic community, it would seem that it’s a good
time to revisit fair dealing guidelines and safeguard procedures in any event. Even
if the fair dealing part of the ruling somehow survives any appeal process in
whole or in part, it may have very limited effect on many institutions that
have long ago departed from the AUCC (now UC) model. Besides, much has changed
in the last decade. Paper course packs have largely disappeared. Site licenses
have become much more important. We have three very positive and clear fair
dealing decisions from the SCC since 2004 – and the addition of the word
“education” in s. 29 of the Copyright Act. We have other positive fair
dealing case law, such as the April 23, 2020 decision of Justice Schabas of the
Ontario Superior Court in Wiseau Studio, LLC et
al. v. Harper et al., 2020 ONSC 2504
(CanLII), <http://canlii.ca/t/j6w8w>
which deals with documentary films but will have broader application, unless it
is somehow overturned on any appeal, which frankly seems very unlikely.
And last but not least, we have the
dreadful cloud of COVID-19. Part of the silver lining on that cloud will likely
be the recognition that educators will need to increasingly rely on virtual
electronic provision of essential educational material. The SCC has made it
clear that the “geography” of teaching and learning doesn’t matter per se:
[27] With
respect, the word “private” in “private study” should not be understood as
requiring users to view copyrighted works in splendid
isolation. Studying and learning are essentially personal endeavours,
whether they are engaged in with others or in solitude. By focusing
on the geography of classroom instruction rather than on the concept of
studying, the Board again artificially separated the teachers’ instruction from
the students’ studying. (emphasis added)
Alberta (Education)
v. Canadian Copyright Licensing Agency (Access Copyright), 2012
SCC 37 (CanLII), [2012] 2 SCR 345, <http://canlii.ca/t/fs0v5>
Any copyright owner or collective that gets
too greedy as a result of COVID is unlikely to evoke any sympathy from politicians
or judges.
What About the Copyright Board?
Interestingly, the Copyright Board’s decision
on AC’s post-secondary tariff that was nearly a decade in the making and
which contained seriously embarrassing errors that required correction did get
one thing more or less right:
The
mandatory nature of the tariff
[357] The
Tariffs are silent on whether compliance with a tariff is mandatory for users
who do not seek to benefit from the licence offered thereby. We are aware that
related issues have been raised in recent judicial proceedings
[FN Canadian Broadcasting Corp v SODRAC 2003 Inc, 2015 SCC 57] and it is
not necessary for us to opine on the issue at this point.
[358] To the extent it
might be appropriate for a tariff to include wording whereby its benefits and
obligations would only apply on an opt-in basis, we would appreciate a more
complete record before including such a provision and invite affected persons to
participate in the proceedings on the next occasion the Board considers
proposed tariffs for these users.
(highlight
added)
It might have made more sense to speak
of users who do not need to utilize the
licence rather than “users who do not seek to benefit from the licence” – since
users who don’t need a license because they see no net benefit from it clearly
must be able to choose not to utilize it. QED.
Of course, para. 358 is now moot unless
the SCC unexpectedly reverses Justice Pelletier’s decision – or Parliament unexpectedly
succumbs to AC and friends’ lobbyists.
However, in any event, if the Copyright
Board is to serve any useful purpose and justify its very large budget and overcome
the chorus of criticism that it is “dysfunctional”, it is going to have to:
- come up with tariffs that offer sufficient value and convenience to Canadian users
- do so in a way that doesn’t cost creators and objectors millions of dollars
- do so in a way that doesn’t take 7 to 9 years or so.
What about Writers’ Recourse?
Will
writers be left without a remedy if the decision stands? The answer is clearly
no. Copyright infringement remedies remain available against educational
institutions when there is enough infringement and damage to warrant
proceedings. These are the same remedies that all copyright owners have against
all infringers, if there is infringement. Unlike older and wiser collectives,
AC assumes that all Canadian educational institutions are infringers. They are
not – they pay hundreds of millions of dollars a year to publishers and
writers. SOCAN, the oldest collective in Canada, doesn’t force licenses on background
music users, such as barber shops or restaurants, for example who don’t need
licenses. Some don’t use any SOCAN repertoire – perhaps they play only public
domain music such as Bach and Mozart. Or, in the case of my beloved barber, he uses
an old fashioned FM radio in his little shop, for which there is an historically
important exemption in s. 72.1(1)
that I fought successfully to preserve while in government in the face of heavy
lobbying and senior officialdom at the time who knew very little about copyright
law. AC must learn to work within the system – and not against it. If AC is to
serve any useful purpose, it must learn to survive by being useful – and not by
threats and coercion.
Conclusion:
Speaking
of coercion, our courts long ago absorbed and embraced the lesson from the
famed Hanfstaengl case as cited in Vigneux v. Canadian Performing Right Society Ltd., 1943 CanLII 38 (SCC), [1943] SCR 348, <http://canlii.ca/t/fslvq>:
Copyright, like patent right, is a monopoly restraining the public
from doing that which, apart from the monopoly, it would be perfectly lawful
for them to do. The monopoly is itself right and just, and is granted for the
purpose of preventing persons from
unfairly availing themselves of the
work of others, whether that work be
scientific, literary, or artistic. The protection of authors,
whether of inventions, works of art, or of literary
compositions, is the object to be attained by all patent and copyright laws. The Acts are to be construed with
reference to this purpose. On the other hand, care must always be taken not to
allow them to be made instruments of oppression and extortion.
(highlight added)
The Vigneux case loomed large in
Justice Pelletier’s judgment. Even if the SCC grants leave to appeal, it would
be extremely astonishing if it were to undo Justice Pelletier’s convincing judgment
that tariffs do not bind non-licensees and that AC’s tariff is not mandatory, given the long lineage from of its own
jurisprudence from Vigneux in 1943 to CBC v. SODRAC in 2015 that
led to the FCA decision.
HPK
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