Access Copyright Responds to Motion and Submissions re Alleged Refusal to Provide Transactional Licenses

Access Copyright ("AC") has filed a lengthy submissions regarding AUCC's motion concerning the alleged refusal to provide transactional licenses.

Here's the public version of the submission and the public Appendix.

The existence of confidential material here certainly whets the appetite and makes one wonder why this material can be regarded as confidential. 

In a nutshell, AC denies that it ever issued transactional licenses before that would fall within the scope of  the post secondary licenses (i.e. one chapter, 10% of a work, etc.). That comes as a surprise to me - but let's see what the Board considers to be sufficient evidence on this point. Actual evidence of recent refusals was filed. AUCC and ACCC presumably have a chance tomorrow to file more evidence by way of reply, if they wish to do so. 

AC also denies all legal arguments and is apparently particularly  sensitive to the competition law points raised by Prof. Katz, which include refusal to deal, abuse of dominant position, and s. 45, which deals with potentially very serious offences.

One interesting aspect of AC’s argument involves the "refusal to deal" issue. AC relies on the arguably overly broad ruling in the 1997 decision Canada v. Warner Music, which held that Warner Records was not required to license its rival BMG to make records for inclusion in the catalogue of Warner’s mail order business that would then compete with the then very well known Columbia House record club, of which Warner was an equal partner with SONY. Indeed, BMG could obtain the Warner records it needed to fill out its catalogue at wholesale cost, but that was not good enough for BMG.

In that decision, the Competition Tribunal ruled that copyright licenses were not a “product” for purposes of the refusal to deal provisions in the Competition Act. That decision resulted from the Bureau's surprising decision take that case forward at all, and in turn to pursue the arguments that it did. Naturally, the Tribunal refused to let the case proceed - but arguably went farther than it needed to based upon unnecessary and frankly unfortunate arguments by the Bureau. Arguably, the Competition Tribunal reached the right decision but for the wrong reasons, which flowed from the then Director’s arguments. Naturally, nobody would argue that Ford should be forced to sell certain types of its car engines at its manufacturing cost to General Motors to make up for gaps in the latter’s engineering expertise or production facilities, or vice versa - assuming that these were the facts. However, that, in effect, was what the Director seemed to be arguing.

In any case, it would seem that the Warner decision is completely inapposite on the facts in this case.

AC's submission is lengthy - but its is a must read for both copyright and competition lawyers and especially for interested officials in the Competition Bureau, who may wonder whether the current proceeding is the right forum with the right evidence to deal with some rather important issues at the intersection of copyright and competition law. 

The other parties have until tomorrow - July 19, 2011 to respond to AC.

AC's submission is very heavy on competition law, which is interesting because AC submits that there are no competition law issues.

The Board has clearly indicated that it does not want to hear from the Commissioner of Competition until a much later time "such as once the evidence and arguments of the parties have been filed" at the least, in this case. It it will be interesting to see if the Commissioner should wish to become involved earlier. This may depend on how the Board rules on the current motion.

S. 125 of the Competition Act gives the Commissioner the power to "make representations to and call evidence before the board, commission or other tribunal in respect of competition, whenever such representations are, or evidence is, relevant to a matter before the board". This can be at the Commissioner's own initiative or at the direction of the Minister.

HK

Copyright Board and the Commissioner of Competition? Expect the Unexpected

Access Copyright (“AC”), whether intentionally or not,  has thrown down the gauntlet regarding the role of the Competition Act and the Commissioner of Competition in the current post secondary tariff application in particular and Copyright Board proceedings generally.

Prof. Ariel Katz - a participant in this proceeding - has taken up the challenge in this very important filing with the Copyright Board. He is Canada’s leading scholar in the interplay between IP and competition law. Here is his own posting on this submission.

I have previously mentioned that AC’s refusal to issue transactional licenses to universities could arguably amount to a refusal to deal or an abuse of dominant position, contrary to the Competition Act. See here and here.

Prof. Katz  also makes this point and goes on to raise the possible application of s. 45 of the Competition Act, which deals with "conspiracies, agreements or arrangements between competitors."

Prof. Ariel Katz has boldly and rightly asked the Board to request the participation of the Commissioner of Competition pursuant to s. 125 of the Competition Act, which seems to have been enacted precisely for moments such as this.    

This is what the Competition Act says:

125. (1) The Commissioner, at the request
of any federal board, commission or other tribunal
or on his own initiative, may, and on direction
from the Minister shall, make representations
to and call evidence before the board,
commission or other tribunal in respect of competition,
whenever such representations are, or
evidence is, relevant to a matter before the
board, commission or other tribunal, and to the
factors that the board, commission or other tribunal
is entitled to take into consideration in determining the matter.

Despite the clear intention of Parliament, the involvement of the Commissioner of Competition in the proceedings of other tribunals in Ottawa is a rare and delicate matter. I would be surprised if the Board were to welcome - much less request - such participation, as Prof. Katz quite logically and diplomatically asks.

But I always like to be pleasantly surprised.

And - the above provision clearly indicates that the Minister (meaning the Minister of Industry) can require such participation.

The Commissioner of Competition has never before become involved in a Copyright Board proceeding. Perhaps it is time.

Keep an eye on this. Things could evolve very quickly and unexpectedly.

And hopefully positively.

HK

EU on Pharma Antitrust

Big news from Europe on DG Comp action re the Pharma sector:

According to IP Watch:

Pharmaceutical companies are manipulating the intellectual property rights system and are “actively trying to delay the entry of generic medicines onto their markets,” a top EU official said of an EU inquiry into the pharmaceutical sector released Wednesday. As a result, there has been a decline in the number of innovative medicines getting to the market, it says.

Also, excellent coverage at IPKat here.

Meanwhile, Canada's Competition Bureau is busy working on the menace of the Nigerian Letter Scam. Hopefully, they are also doing other things in IP - but there's little sign of it, other than holding an invitation only symposium that resulted in a recently published book that I will comment on in due course.

HK

Prioriites in Antitrust Law?

There's some remarkable competition and antitrust law coincidences afoot at the moment:

1. In the the US Department of Justice is waking up its potent s, 2 Sherman Act mandate after decades of Reagan induced coma and focusing on telecom giants AT&T and Verizon.
2. The CRTC is holding hearings on Net Neutrality - and the elephant in the room, of course, is the duopolistic, vertically integrated and often very conflicted ISP regime we have virtually throughout Canada, at least where broadband is available. In other words, the major ISPs may have strong incentives to throttle because of their content ownership interests, and no incentive not to throttle because there is no effective price or service competition and they can control resellers and force the latter to throttle as well.
   
3. Meanwhile, the Canadian Competition Bureau - which hasn't been heard from by the public for a long time on much of anything other than misleading advertising, seem very concerned about on the "Nigerian Letter Scam." This affects about 10 poor Canadians a year who are sufficiently gullible to fall for it. If the Bureau wants to do something really useful, it needn't look far.
   

HK

Ticketing Ticketmaster?

The Government of Ontario yesterday introduced legislation to create an offence when related primary and secondary sellers make available for sale in Ontario tickets for admission to the same event.

This would presumably deal with the type of situations that gave rise to controversy earlier this year involving some of the Leonard Cohen concerts. It was alleged in some cases that “primary” market tickets were never effectively available to the public and that virtually immediately upon the release of the primary market tickets, or even allegedly beforehand, tickets were only actually available on the resale market through a related seller at drastically increased prices. Here's a news story.

Bill 172 was tabled yesterday by the Hon. Chris Bentley and is available here. It is short, sweet and even elegant in its conception. My concern, however, is that the maximum fine for a corporation is only $50,000. That's a large amount and would be a substantial deterrent if it applies per ticket, but certainly not in many cases if it applies only per event.

If that is the case, the maximum fine could be nothing more than a license fee - and a very small one at that - in many instances. For example, the Air Canada Centre in Toronto has a capacity of 19,800 seats in “full concert” mode. If only half of those seats were illegally resold at an average illegal markup of $200, that would be an illegal profit of $1,980,000 - i.e. almost $2 million. The reseller would presumably make even more from service charges. In such a case, a $50,000 fine would be barely noticeable and less than the cost of a one page ad in the Globe and Mail promoting the event in the first place.

A much higher fine may be needed, if this bill is to accomplish it purpose. Other Ontario statutes, such as the Consumer Protection Act, provide for corporate fines up to $250,000.

Ticketmaster doesn't seem too thrilled with with the Bill.

Another critical issue, moreover, is what the Competition Bureau is going to do about this. They didn’t even see an issue until their Minister Tony Clement told them to look at it. An update from the Bureau would be useful.

HK

Notice of Vacancy for Commission of Competition

The Government has recently posted a notice of vacancy for the position of Commissioner of Competition. Here's an article about the departure of the previous Commissioner, Sheridan Scott. Since her exit, the Bureau has had an acting Commissioner.

This is an extremely critical position for the future of Canada's international competitiveness and for the operation of Canada's economy on an efficient and productive basis.

In recent years, the "Chicago School" seems to have been very influential at the Bureau, with the result that there has been little apparent interest in taking on major cases involving classic and basic antitrust issues, and virtually no interest in challenging excesses related to IP rights. Instead, the Bureau seems to have focused mainly on deceptive (tele)marketing practices, and false and misleading advertising cases. For example, the Bureau has apparently had little difficulty rationalizing the increasingly pronounced duopoly nature of the Canadian ISP industry, and the increasingly deep and complex vertical integration in broadcasting and telecom generally, much of which involves IP related issues. The last time I checked, which was a month or two ago, the Bureau has never once exercised its mandate under s. 70.5 of the Copyright Act to examine the hundreds (or more) of agreements involving collectives filed at with the Copyright Board in order to invoke immunity from the conspiracy provisions of the Competition Act.

This is an extremely difficult job to do well, because it requires not only a lot of experience and knowledge, but outstanding management and political skills and a high degree of independence. One would hope that in the current climate, where the dangers of excessive deregulation and forbearance have been so painfully exposed, that the Government will appoint someone with a sufficient skill set and sufficient independence to deal with some very imposing challenges.

HK

Kindling Copyight Controversy

The L.A. Times, which is hardly an anti-copyright publication, has a good editorial today that comes down against the Authors Guild position and Amazon's "capitulation."

It concludes:

Innovators such as Amazon are and should be free to create devices that help consumers exploit all of the rights they obtain when they purchase books and other copyrighted material. And by the way, Authors Guild: Amazon sells e-books. The Kindle makes those products more appealing to consumers, which makes them more valuable to authors and publishers. If authors hope to compete in the digital era, they need the e-book market to succeed. Stripping features from the Kindle 2 won't help.

The real issue here is that the Authors Guild is forcing Amazon, which is not exactly a weakling, NOT to innovate and to deny users' rights. The Authors Guild argument is based upon specious legal arguments for rights that do not exist. Amazon caved for its own business reasons.

This is yet another example of users' rights being blocked off by TPM and DRM, imposed for "business" and not legal reasons. That's why its very difficult for most non techie people to snip out portions of DVDs for perfectly legal purposes - such as research or criticism.

If antitrust enforcers ever awake from their long sleep filled with dreams that IP owners rarely if ever do more than merely enforce their IP rights, things might get better before they get worse. In any event, Canada must consider legislation that expressly enables the circumvention for legal purposes of DRM and TPM locks.

Otherwise, we will sooner rather than later live in a world of perpetual copyright, with no effective fair use/dealing rights and no ability to copy insubstantial portions of works. These are users rights that have been enjoyed since the earliest days of technoloy. New legislation should guarantee these rights - not guarantee their elimination, as Bill C-61 would have done.

HK

CRTC Net Neutraltiy and Throttling Decision Tomorrow

Let's be cautiously optimistic about the decision expected tomorrow. The Chairman of the CRTC - Konrad Von Finckenstein - was formerly the Commissioner of Competition and a judge in the Federal Court. He has never been afraid of controversy - after all, he wrote the famous BMG decision that effectively stopped the file sharing lawsuits against individuals in Canada by protecting their privacy. That decision was essentially upheld in the Federal Court of Appeal. See my analysis here. Disclosure - I was involved.

The Competition Bureau is currently apparently not interested in doing anything about these types of issues. So maybe - just maybe - the CRTC will step up to the plate now and hit a home run.

A little inter agency competition is good for consumers. That may explain why the USA is way better off than Canada in matters having to with wireless and internet service and, indeed, net neutrality. The USA has the FCC, DOJ, and the FTC to look into these types of issues.

This question could quickly cross over into the copyright arena - because some ISPs have so many conflicting agendas these days that the copyright rights of users are seriously imperilled - especially if Canada ends up with protection for and not from DRM and TPM.

Anyway, the CBC has a good analysis of the current state of play here, which suggests, as we all know, that the war won't end one way or the other tomorrow morning.

HK