Copyright Board studied by Senate Banking Committee

November 6th, 2016 by Barry Sookman Leave a reply »

The Copyright Board may not be a household name, but it is a vital institution that is relied upon by tens of thousands of creators and users. But, according to witnesses who appeared before the Senate banking committee examining the operation and practices of the Copyright Board of Canada last week, there are significant problems with it that need to be addressed.

The witnesses that appeared at the two Committee meetings included Claude Majeau, Vice-Chairman and Gilles McDougall, Secretary General, of the Copyright Board, Gilles Daigle (GC SOCAN), Erin Finlay (GC Access Copyright), Graham Henderson (President Music Canada), Jason Kee (Public Policy Counsel Google Canada), Ian MacKay (President Re:Sound), Paul Daly (U of Cambridge), Jeremy de Beer and Michael Geist (U of Ottawa), Ariel Katz (U of T), and Howard Knopf (Counsel, Macera & Jarzyna).

Many of the witnesses confirmed the criticisms expressed earlier this year at ALAI’s symposium,  The Copyright Board of Canada: Which Way Ahead.”

High on the list of claimed problems are: delays – how long proceedings take; the uncertainty and unpredictability of the decisions; and decisions made by the Board based on its own economic theories not based on the evidence before it. Witnesses also testified that these problems adversely affect both users and creators including by impeding the launch of and new innovative services. Witnesses also questioned whether the Board’s mandate should be narrowed to only address tariff or royalty disputes where there are market failures, impasses, or to address anti-competitive conduct by collectives or users.

Some of the criticisms of the Board were summarized by Senator Black who said the following after opening remarks by representatives of the Board:

Both Senator Tannas and I are senators from Alberta, and while that’s a very good thing, sometimes the downside is that we tend to be very impatient with things that just don’t work for reasons that don’t seem to make sense. With the greatest of respect, that’s what I’m hearing today. I’m hearing that there’s a clear understanding of the problems but either no willingness or no acknowledgement that they need to be solved.

You are the linchpin of an extraordinarily important industry in Canada, existing and growth. We are hearing, in the strongest but most respectful of terms, that it’s broken…

My view is that it’s not getting done, and my view, respectfully, is that it’s unacceptable…

So I apologize for being a little sharp, but I find it incredible that we’re taking time to discuss this, frankly.

The Committee hearings were recorded and can be viewed at ParlVU.

My partner Daniel Glover, Partner, Intellectual Property, McCarthy Tétrault LLP also appeared at the Committee. Here are his prepared remarks filed with the Committee.

_____________________________

Testimony of Daniel Glover of McCarthy Tétrault LLP, November 3, 2016 (Senate Standing Committee on Banking, Trade and Commerce)

Good afternoon, Mr. Chair. I am an intellectual property lawyer at McCarthy Tétrault. I represent both creators and users in Board matters, and have done so all the way up to the Supreme Court. But today, my opinions are my own.

Senators, the Board is a vital economic body.[1] It serves the public interest only if it promotes transactions that get content to users quickly and justly compensate creators.[2]

These goals can be achieved via framework rules that allocate resources where they are most needed. The Board’s role should be to foster collective licensing, especially to avoid market failure or potential abuse. But while digital technologies evolve in the blink of an eye, the tariff system does not appear to be keeping pace.

The Board process unwinds very slowly, even for uncontested tariffs. As of 2015, the many tariffs before the Board had an average wait time of more than five years.[3] The Tariff 22 case took 17 years to resolve; the pivotal “making available” case has been awaiting decision for more than three years, and that on a paper record. Eight other recent cases were awaiting resolution between 20 and 36 months after their hearing date.[4] At a certain point, no matter who wins, the uncertainty impacts all stakeholders.

The root causes of delay are complex. I have outlined some of them in the written version of this presentation. Some may require fundamental changes to address.

As a lawyer who advises both creators and users, I can confirm that delay causes great anxiety for everyone. Let me provide three quick examples:

First, content providers face a “black box” of liability, with the ultimate rates unknown for years. This hurts new business models, and may result in innovative services avoiding Canada.

Second, creators face significant holdbacks years after their works are used.[5] When users knock out a tariff on legal grounds, long after an interim tariff was put in place, collectives may face claims for unjust enrichment.[6] The longer the delay, the greater the potential liability.

Last, technologies evolve rapidly. The longer a decision takes, the less likely the Board’s holdings will reflect how a given technology works. This leads to unpredictability, as parties are left to guess how the Board might treat emerging business models.

There is a valid interest in having Board matters proceed more swiftly, and in exploring if many or most tariff proceedings could be put on an alternative track. In many other countries, the norm is that the parties are given the chance to work it out. If they do, there is no need for a tribunal to intervene.

My partner Barry Sookman canvassed international models this May at the ALAI conference. These models increase speed and predictability,[7] build specific timelines into law,[8] encourage experimental licences,[9] and require Board members to possess specific kinds of expertise.[10] Other countries have invested a great deal of time and energy in ensuring that collective licensing is swift, fair and predictable. Not all of these ideas are necessarily right for Canada, but all should be carefully considered.

The bottom line is that Parliament must carefully study the role and functions of the Board. Other countries have lived this experience, and it is worth considering their systems. In particular, you should ask whether it makes sense to enable creators and users to enter into direct licensing agreements rather than requiring Board certification in each and every instance.

This concludes my presentation. I would be happy to answer any questions you may have.

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[1] In the last measured year (2013), tariff royalties totalled approximately $434 million. Approximately 84% of this total is associated with creators and users who are locked into a mandatory Board certification process. Copyright Board Annual Report, 2014-15, p. 12, and Copyright Act, ss. 3(1)(f), 31, 67, 67.1.

[2] Desputeaux v. Éditions Chouette (1987) inc., 2003 SCC 17 at ¶57: “This Court has in fact stressed the importance placed on the economic aspects of copyright in Canada: the Copyright Act deals with copyright primarily as a system designed to organize the economic management of intellectual property, and regards copyright primarily as a mechanism for protecting and transmitting the economic values associated with this type of property and with the use of it.” Théberge v. Galerie d’Art du Petit Champlain inc., 2002 SCC 34 at ¶30 (viewing the Act as a utilitarian vehicle to promote “the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator”).

[3] Jeremy de Beer, “Canada’s Copyright Tariff Setting Process” (2015) at 37 (“It took on average a further 1.29 years for the Board to issue a decision and certify the tariff following a hearing”) and 38 (calculating average time outstanding for the 209 pending tariffs as 5.31 years); Howard Knopf, “The Canadian Copyright Board – Can We Move On With Substance and Process, or Do We Need Still More Statistics?” (June 19, 2015) (suggesting that the de Beer approach may underestimate delays for contested tariffs).

[4] Howard Knopf, “The Canadian Copyright Board: To Be or Not To Be –That Is A Question – ALAI Conference, May 25, 2016” (June 28, 2016).

[5] de Beer at 34, finding that, on average, tariffs are certified 2.2 years after the beginning of the year in which they become applicable. This is, in effect, a period of retroactivity.

[6] Rogers Communications Partnership v. SOCAN, 2016 FCA 28 (seeking a $15M restitution payment and other monetary remedies relating to royalties paid between 2006 and 2012).

[7] The UK maintains a default “fast-track” system for smaller claims, though more complex cases can be shifted to the normal track: Copyright Tribunal Rules 2010, ss. 17-20. A similar “paper record” procedure exists in the USA: 17 U.S.C. § 803(b).

[8] Germany has a non-binding Arbitration Board that must come to a conclusion within one year unless both parties consent to an extension of time: Jorg Reinbothe, “Collective Rights Management in Germany”, in Daniel Gervais, at 233; 17 U.S.C. § 803(c).

[9] The EU Collective Rights Management Directive encourages direct licensing for “totally new forms of exploitation and business models” by giving stakeholders the flexibility to enter into experimental individualised licences for innovative online services, without the risk that the terms of those licences could be used as a precedent for determining the terms for other licences, while preserving the ability of competition law to address unfair bargaining practices (Art 16.2 and Recital 32).

[10] The United States requires that “the Chief Copyright Royalty Judge shall have at least 5 years of experience in adjudications, arbitrations, or court trials. Of the other 2 Copyright Royalty Judges, 1 shall have significant knowledge of copyright law, and the other shall have significant knowledge of economics”: 17 U.S.C. § 802(1).

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