According to the USTR “The scale and popularity of these markets can cause economic harm to U.S. and other IP right holders.  In addition, products sold at these markets may pose possible health and safety risks to consumers.”

We were recognized in the following markets:

B2B and B2C

Modchip.ca and Consolesource:  Both sites, reportedly based in Canada, allegedly sell circumvention devices and components used to circumvent technological protection measures on game consoles.

These are the type of sites and services the TPM anti-trafficking prohibitions in Bill C-11 are intended to address.

BitTorrent Indexing

IsoHunt:  Canada-based IsoHunt is one of the largest BitTorrent indexes in the world, ranking among the top 300 websites in global traffic and among the top 600 in U.S. traffic, according to Alexa.com.  At least one U.S. court has found liability in cases involving IsoHunt.

Kat.ph (formerly kickasstorrents):  Another popular indexing site, this site, which reportedly is based in Canada, Ukraine and Romania, is notable for its commercial look and feel.  The site is currently ranked by Alexa.com among the 320 most visited sites in the world.

torrentz.eu (formerly torrentz.com):  This site, which reportedly is based in Canada, Panama and Switzerland, is a major aggregator of torrents from other BitTorrent sites, and currently ranks among the top 150 sites in the world.

These are the types of sites the new enabling provision in Bill C-11 is intended to address.

For the record, Industry Minister Christian Paradis said the following in speaking about the Bill in the House:

Mr. Speaker, as you know, this is the second time that the government has introduced this bill. During the previous Parliament and for almost a year, the Copyright Modernization Act—then known as Bill C-32—was carefully examined and debated by parliamentarians and stakeholders.

We know how much time and effort members of Parliament, stakeholders and Canadians spent on this bill. The legislative committee created to examine the bill heard from more than 70 witnesses and received more than 150 submissions. All stakeholders were consulted, and the government received letters from across the country.

We fully expect that when the bill is once again referred to a House of Commons committee the work and testimony from the previous Parliament will be carefully considered and taken into account.

Over the course of the committee hearings on this bill in the last Parliament, there were two clear messages that emerged. The first message was that this bill balances the interests of the various stakeholders. The bill, a product of wide-ranging consultation and discussion, sets out a balanced approach to corporate reform in the digital age. While the government strongly believes that this bill delivers the best balance between the interests of consumers and the rights of the creative community, we are open to technical amendments that may improve the clarity and intent of certain provisions.

Second, we heard that Canada urgently needs to pass legislation to update the Copyright Act. By reintroducing this same bill, parliamentarians will be able to build on this previous work in order to enable the swift passage of these important legislative updates. Each year that Canada goes without modern copyright laws, the need for such modernization becomes more evident as technology evolves and new issues emerge.

The last time the act was changed, there were no MP3 players. Video stores were still full of VHS tapes. No one thought we would be able to take pictures with a cellphone and upload them onto computer screens around the world, or use a cellphone to download songs and movies.

The world has changed so much since then that the Copyright Act seems like a law for a different era. The time has come to modernize Canada’s copyright laws and bring them in line with the demands and technologies of the digital age.

This bill must be passed in order to modernize Canada’s copyright regime in accordance with the government’s digital economy strategy.

Digital technology opens new markets and expands the reach of companies. It brings together people and ideas in a way that was still unimaginable only a few years ago. When individuals, companies and national economies create and adopt these new technologies, a number of important things are achieved. Productivity and innovation increase, and new products, processes and business models see the light of day.

The growth of the digital economy in Canada depends on a clear, predictable and fair copyright regime that supports creativity and innovation while protecting copyright holders.

The global economy remains fragile. This bill will help to protect existing jobs and create new ones. It will spark innovation and attract new investments in Canada. It will give creators and copyright holders the tools they need to protect their work and increase their business. The bill establishes clearer rules that will allow all Canadians to fully participate in the digital economy, both now and in the future.

One of the bill’s main objectives is to balance the interests of all stakeholders in the copyright regime. Achieving this balance has become increasingly complex given the exponential growth of the Internet. Canadians can obtain protected works online, sometimes through revenue-generating platforms or services, but also through free services, both legitimate and illegitimate. Our capacity to use high-quality Web services to obtain, protect and create copyrighted works is essential to our economic success and our cultural presence in the world.

That is why, in 2009, our government turned to Canadians to get their ideas and advice on copyright reform in the digital age. Thousands of individual Canadians, companies and stakeholder organizations shared their opinions on the best way to adapt Canada’s copyright regime to this new age. These consultations showed that Canadians were becoming increasingly aware of the importance of copyright in their daily lives and in our digital economy.

On the one hand, this bill seeks to reflect today’s reality where the private, non-commercial use of copyrighted material is commonplace. The bill would authorize many of these uses and establish parameters for cases which, to date, were not well defined.

For example, Canadians could copy works legally obtained on their computers and mobile devices to enjoy them wherever they may be. They could store content in and retrieve it from the information cloud or use a network PVR service.

It will also be legal to integrate protected works into a work generated by a user for non-commercial purposes. That would include recording a home video of a child dancing to a song, or creating original mixes of songs and videos. This exception requires that the rights and interests of copyright holders be respected. There are many examples where copyright holders have benefited from exposure on the Internet owing to work done by users.

Finally, the bill updates the Copyright Act to reflect new technologies and uses by broadening the exceptions and creating new ones for educational and training institutions, technical procedures, the development of software, broadcasters and the disabled.

I would like to point out that great care was taken when drafting these provisions to reflect the needs and interests of copyright holders. The provisions do place limits and restrictions on the use of protected works.

For example, many of these exceptions do not apply to works protected by a technological protection measure or digital lock. Copyright holders told us that their digital and on-line business models depend on the robust protection provided by digital locks. Therefore, the bill strikes a good balance. It allows Canadians to make reasonable use of content while providing creators and businesses, whose work depends on this content, with the tools and certainty they need to launch new products and services.

While our government knows that the overwhelming majority of Canadians are law-abiding, we are concerned about the threat of major penalties that hang over Canadians who infringe copyright for non-commercial purposes. Currently, those who have been found to violate copyright can be found liable for damages from $500 to $20,000 per work.

If people illegally download five songs, for example, they could theoretically be liable for $100,000. In our view, such penalties are way out of line. As such, the bill proposes to reduce the penalties for non-commercial infringement. Under its provisions, the courts would have the flexibility to award total damages of between $100 and $5,000.

However, while the bill reduces penalties for non-commercial infringements, it still seriously punishes those who profit from copyright infringement. Penalties of $500 to $20,000 per infringement will still apply to piracy for commercial purposes. In addition, the bill proposes new tools to target those who find techniques to infringe online copyright and it sets out serious penalties for those who make money by creating and distributing devices and services designed to hack digital locks. It will be very difficult to benefit from piracy.

Heritage Minister James Moore said the following:

Madam Speaker, I am very pleased to be here with the Minister of Industry. I should also certainly give a great deal of thanks to the President of the Treasury Board for the work that he did on Bill C-32, which was last Parliament’s version of Bill C-11, which we are debating today.

As the Minister of Industry said, the bill contains a number of provisions that Canadians, I think, will welcome and are welcoming. The bill contains provisions that will provide the ability of copyright owners to control the uses of their works to fight online piracy. This is about individual creators and creative industries, like the video game industry, the software industry, the movie industry, and others. It is having the tools to protect their art, their businesses and their jobs.

For example, the bill includes provisions to protect the technological protection measures and authorizes copyright holders to sue those who enable copyright infringement through such means as illegal peer-to-peer file sharing sites. Our government knows that the best way to deal with online copyright violation is to target those who enable this crime and profit from it.

More specifically, Bill C-11 introduces a new definition of civil liability for those who knowingly enable online copyright violation. Online piracy takes revenues away from creators and reduces the incentive to create. This measure sends a clear message that Canada is prohibiting piracy sites and giving copyright holders the tools to protect their activities. What is more, the bill also introduces new provisions to stop those who develop and sell tools and services for getting around technological protection measures.

Canada is among the first jurisdictions in the world, if not the first, to provide its copyright legislation with this very important tool to fight online piracy. At the same time, we are taking steps to ensure that Canadians are aware that they may be infringing copyright. Canadian Internet service providers have developed a unique model in which they tell subscribers when a rights holder notifies them that a subscriber has infringed on copyright material. This is known as notice and notice. The bill formalizes this practice into law. I would just point out here that this is one of the key elements that consumers have come to us and said they want as part of the bill.

We disagree with the American approach with regard to copyright. We have a notice and notice regime in our legislation, not a notice and take down regime as they have in the United States, for very good reason. These provisions are also on top of a wide array of legal protections already provided for in the Copyright Act that rights holders can use to assert their rights.

Educators, students, artists, companies, consumers, families, copyright holders and Canadians in general use technology in a number of different ways, and this bill simply recognizes that reality. It gives creators and copyright holders the necessary tools to protect their works, their investments, and to develop their business through innovative business models. It establishes clearer rules that will allow Canadians to fully participate in the digital economy today and in the future. More specifically, this bill gives creators and copyright holders the tools they absolutely need.

With this legislation Canadians will also be able to create new works incorporating existing publishing or publicly available works, as long as it is done for non-commercial purposes, as my colleague has said. The new user generated content cannot be a substitute for the original work or have the substantial negative impacts on the markets of the original material or on a creator’s reputation.

Canadians with perceptual disabilities will be permitted to adapt legally acquired material to a format that they can easily use. Also, Canadian photographers will benefit from the same authorship rights as creators. Currently, photographers are not considered authors of commissioned works. This legislation changes that.

Consumers and users of content will also see their interests reflected in the bill. Canadians will be allowed to record television, radio and Internet programs to enjoy at their time and choosing with no restrictions as to the device or technology chosen or the time of day.

Under certain conditions, Canadians will also be able to copy for their personal use legally acquired works such as music, movies or other works, on the device or component of their choice. They will be able to make backup copies in the format and on the device or component of their choice.

I would like to close my speech by ensuring the House understands that this was, from the very beginning of the process that we initiated just prior to the summer of 2009, a good faith effort on the part of our government to get copyright legislation done effectively.

The member for Timmins—James Bay was engaged in debate on Bill C-61 when we tabled that legislation. Bill C-61, as it turned out, was not the balance that Canadians were looking for. We think this legislation achieves the balance that Canadians have come to expect. We tabled Bill C-61, there was the fall campaign, and then we came back.

We re-engaged Canadians from the beginning. We went back to square one. We did unprecedented consultation on this legislation. We heard from thousands of Canadians in the process. We went across the country to town halls and we did open, online consultation. We arrived at Bill C-32.

As a result of the participation of thousands of Canadians in that process, we thought we would respect that process.

My observations on the Bill including the areas that will need scrutiny at committee are here.

In the press conference announcing the Bill at the Ottawa office of software producer bitHeads Inc., Minister Paradis added “With the reintroduction of today’s legislation, Canadians will soon have a modern and responsive copyright law for the digital age that protects and helps create jobs, promotes innovation and attracts new investment to Canada”. In the House of Commons Minister Moore also said “we introduced a bill that is fair to everyone, both creators and consumers. What artists across the country need right now is copyright legislation that will make piracy illegal in Canada. That is what Bill C-11 will do.”

Bill C-11 is the fourth attempt to amend the Copyright Act since 2005 — to bring the Act into the digital age. The Bill will likely make good the promise made in the Conservative Party Platform on Copyright that, “A Stephen Harper-led majority Government will also reintroduce and pass the Copyright Modernization Act, a key pillar in our commitment to make Canada a leader in the global digital economy.” It will also likely deliver on the commitment made in the Throne Speech to swiftly pass “copyright legislation that balances the needs of creators and users.”

Bill C-11 contains the same proposed amendments as its predecessor, Bill C-32.  This was anticipated based on statements made by Minister Moore and others prior to its introduction. According to a press release announcing that Canada had signed the Anti-Counterfeiting Trade Agreement (ACTA), the “bill informed and guided Canada’s approach to the ACTA negotiations.”

Along with Bill C-11, the Government released Fact Sheets, an FAQ, and a Backgrounder.[1] These are all available on the Government`s website: www.balancedcopyright.gc.ca.

The FAQ describe certain aspects of the Bill including the following summary that says the Copyright Modernization Act will:

• implement the rights and protections of the World Intellectual Property Organization (WIPO) Internet treaties;
• give copyright owners the tools they need to combat piracy;
• clarify the roles and responsibilities of ISPs and search engines;
• promote creativity and new methods of teaching in the classroom by providing greatly expanded exceptions for education;
• encourage innovation in the private sector through exceptions for technical computer processes;
• provide legal protection for businesses that choose to use technological protection measures or “digital locks” to protect their work as part of their business models; and,
• give consumers the ability to, among other things, record their favourite TV shows for later viewing, transfer music from a CD to a digital device, and create a mash-up to post via social media.

I previous provided an overview of the Bill`s key provisions. See, Some thoughts on Bill-C-32: An Act to Modernize Canada’s copyright laws.

As I noted in My C-32 opening remarks to the Legislative Committee that studied Bill C-32, I support the government’s objectives. There are, however, areas where the Bill would have significant unintended consequences if passed without amendments consistent with those objectives. Many of these are technical. Perrin Beatty, President and CEO, Canadian Chamber of Commerce, referred to this in a press release when Bill C-11 was introduced on Sept. 29th:

While the Canadian Chamber supports the principles behind this copyright legislation, improvements still need to be made to the bill. As currently drafted, the bill still contains some possible unintended consequences that could prove problematic for business. We look forward to a rigorous review of the bill at committee stage that will make sure that it achieves the purposes for which it is designed.

In the Government background documents the Government stated that it will refer the Bill to a House of Commons committee and that the “work and testimony from the previous Parliament will be carefully considered and taken into account.” Minister Paradis also confirmed at the press conference that the Government “…will make any technical fixes necessary to achieve our objectives of taking meaningful action on copyright piracy, protecting right owners and promoting creativity, innovation and legitimate business models for the benefit of the consumers.” The Government`s objective remains to have the Bill passed by Christmas.

There has been considerable debate concerning some of proposed amendments. Some of the main issues that will be debated as the Bill winds its way through a House of Commons committee and, ultimately, into law are the following:

• Technological Protection Measures
• The Enablement Right
• The Non-Commercial User-Generated Content (UGC) Exception
• Statutory damages
• The Internet Service Provider and Search Engine Exceptions and Responsibilities
• The Fair Dealing for Education Exception
• The Copyright Exceptions to Encourage Innovation

Technological Protection Measures (aka digital locks or TPMs)

Bill C-11 will prohibit circumventing (hacking) of TPMs that control access to a work. It will also prohibit trafficking of tools or provision of services that can be used for this purpose. The Government background documents explained the TPM provisions and the rationale for protecting TPMs as follows:

Innovative companies, such as video game developers, will have the legal tools to protect the investments they have made in order to reinvest in future innovation and jobs.

Protecting digital locks gives copyright industries the certainty they need to roll out new products and services, such as online subscription services, software and video games, if they choose to use this technology. Not only will this promote investment and growth in Canada’s digital economy, it will also encourage the introduction of innovative online services that offer access to content. Such services are increasingly available in other countries.

The Bill recognizes that certain protections, such as restricted content on news websites or locked video games, are important tools for copyright owners to protect their digital works and are often an important part of online and digital business models.

Opponents of legal protection for TPMs — such as Michael Geist — have made inaccurate statements about the legal protection for TPMs. Michael Geist’s relentless misinformation campaign[2] against them makes it difficult and confusing for many Canadians to form informed views about the Bill’s TPM provisions. Michael Geist repeated some of the inaccurate or misleading statements in a blog post and in the media after the Bill was introduced. For example:

• He continues to suggest that “digital lock rules trump education rights”. However, since Bill C-11 does not prohibit circumventing copy control TPMs, it would be legal to hack a copy control TPM for an educational or any other purpose. Once hacked, a person would be able to make copies of the unprotected work under the new fair dealing for education exception, as long as the dealing is “fair”. However, a person could not bypass a technical control that protects a work against access the person is not entitled to in the first place.[3] The prohibition against hacking access control TPMs is not about “trumping education rights”. It is about ensuring that people who want to make copies of a work for an educational purpose obtain legal access to the work such as by purchasing or licensing a copy in order that the creator or other rights holder may be compensated.
• He also continues to argue that “digital lock rules extend far beyond those required for compliance with the WIPO Internet treaties”; that Canada can properly implement the WIPO Treaties by limiting the prohibition on circumvention to an infringing purpose; that the WIPO Treaties would permit hacking TPMs for the purpose of format shifting; that many of our trading partners have implemented the WIPO Treaties in these ways; and that “many of our trading partners have adopted more balanced digital lock rules”. He makes these arguments although they have been found to be completely inconsistent with the minimum requirements of the Treaties by the leading international expert , Dr. Mihaly Ficscor here, here, here, and here. Michael Geist’s proposals would, essentially, eviscerate the business and policy reasons for protecting TPMs.
• Further, he suggests that the U.S. DMCA’s TPM provisions “offer more flexibility than Canada”.  This statement is misleading as I have shown here, here, and here.

There is also considerable misunderstanding about the TPM provisions within the general public. For example,

• the National Post, Vancouver Sun, Winnipeg Free Press, Calgary Herald, and other newspapers just published an article stating that the TPM “provisions would make consumers liable for thousands of dollars in legal damages if they break the digital encryption on a purchased DVD or video game to make a backup copy for themselves.”
• the Montreal Gazette published an article stating that Bill C-11 contains a “blanket provision against breaking digital locks, even for purposes of personal use; The bill provides for $5,000 fines for even the smallest such violations. This provision was apparently included as a result of heavy pressure from U.S. authorities and in the interest of maintaining cross-border trade and exemption from protectionist measures that would prevent Canadian firms from bidding on U.S. government procurement contracts.”

These statements are just plain wrong. The Bill does not prohibit hacking copy control digital locks for any purpose and there are multiple exceptions that permit circumventing access control TPMs. Moreover, Section 41.1(3) of the Bill expressly precludes an award of statutory damages against an individual who circumvents a TPM for his or her own private purposes. Accordingly, it is flat out wrong to claim that an individual could be liable for “thousands of dollars in legal damages” for hacking a TPM for personal purposes. Further, even if statutory damages did apply, which they do not, the Bill would limit such damages to a range, the maximum of which would be $5,000 for the most egregious case.

In my blog post, An FAQ on TPMs, Copyright and Bill C-32, I tried to set the record straight on the following questions about the legal protection for TPMs to enable the public to make their own assessment of the TPM provisions in Bill C-32 based on correct information:

• Whether Bill C-32 properly implements the WIPO Treaties consistent with the practices of our trading partners
• Whether the Bill permits copying for fair dealing, educational, and other purposes
• Whether the circumvention exceptions in the Bill are flexible enough to deal with unforeseen or unintended consequences
• Whether Canada can properly implement the WIPO Treaties by limiting the prohibition on circumvention to an infringing purpose
• Whether other jurisdictions limit protection of TPMs to circumvention for an infringing purpose
• Whether circumvention of TPMs for the purposes of format shifting, time shifting, and making back-up copies for private purposes (private copying) ought to be permitted
• (Given that one of the legislative goals is to follow international standards) whether other jurisdictions permit exceptions for private copying to trump TPMs
• Whether an exception for private copying that permits circumvention of TPMs for such purpose would comply with the Berne Three Step Test
• Whether the WIPO Treaties which Canada has committed to ratify permit circumventing TPMs for private copying
• Whether Michael Geist`s two proposals for amending the TPM provisions in Bill C-32 (now Bill C-11) have international precedents.

Other posts such as the ones set out below also correct inaccurate statements made about legal protection for TPMs.

• Separating copyright fiction from facts about C-32’s TPM provisions
• Separating facts from hype about C-32
• Are the TPM provisions in C-32 more restrictive than those in the DMCA
• C-32 and the BlackBerry PlayBook: A reply to Michael Geist
• Dr. Ficsor TPMs and Flexibility (’The Ability of Bending Without Breaking’) – Why Should the TPM Provisions of Bill C-32 Protect Access Controls and Prohibit ‘Preparatory Acts”,
• Dr. Ficsor is right; Prof. Geist is wrong about the WIPO Internet Treaties
• Dr. Ficsor: An invitation to Canada to join the international community by ratifying the WIPO Internet Treaties
• Dr Ficsor Legends and reality about the 1996 WIPO Treaties in the light of certain comments on Bill C-32
• Dr Ficsor Only once more – and then Marry Christmas and Happy New Year to everybody, including Professor Geist and his devoted followers: the 1996 WIPO Diplomatic Conference, the WIPO Treaties and the balance of interests
• Reflections on the liberal roundtable on the digital economy
• FACEBOOK FAIR FOR COPYRIGHT OF CANADA: REPLIES TO PROFESSOR GEIST
• ‘TPMs’’: A Perfect Storm for Consumers: Replies to Professor Geist

The Enablement Right

Section 27(2.3) of Bill C-11 would create a new cause of action referred to in the Bill as “enablement”. The Government background documents describe this new right and the rationale for it as follows:

The Bill gives copyright owners the tools to pursue those who wilfully and knowingly enable copyright infringement online, such as operators of websites that facilitate illegal file-sharing.

It recognizes that the most effective way to stop online copyright infringement is to target those who enable and profit from the infringements of others. By allowing copyright owners to pursue these “enablers”, such as illegal peer-to-peer file sharing sites, this Bill supports the development of significant legitimate markets for downloading and streaming in Canada. This supplements existing criminal punishments for those who aid and abet infringement.

The Government background documents also state that the “proposed legislation will ensure that services that enable infringement will not benefit from the liability limitations afforded to ISPs and search engines.”

From the appearances and submissions to the Legislative Committee that studied C-32, there is a consensus supporting the enablement provision. Michael Geist, however, opposes giving rights holders tools to go after pirate sites and services like IsoHunt calling into question the need for an enablement amendment. I responded to his contradictory posts on the state of Canadian secondary liability law in a blog post, Are Canada’s copyright laws friendly or unfriendly towards wealth destroyers according to Prof. Geist? I concluded that:

It is clear that Prof. Geist’s objective in this recent spate of activity is to persuade policy makers and the public that the new proposed enablement cause of action is not needed because Canada’s copyright laws are already robust enough to deal with what Minister Clement calls “the wealth destroyers” like IsoHunt. However, for years Prof. Geist has consistently and repeatedly been writing and telling the public that Canada’s laws related to authorization might not be effective against pirate sites and services and that Canada does not have contributory liability laws that can be used against these sites and services…

The only conclusion that can be drawn from a review of his writings is that he has either changed his long standing opinion about the state of Canadian law – now believing it is effective enough to shut down the wealth destroyers like IsoHunt- or that he is inaccurately describing what he believes Canadian law to be to oppose the amendments in Bill C-32 that are intended to give rights holders the tools needed to close down wealth destroyers.

While the new enablement right could be a very useful tool in fighting online pirate sites and services, it has some technical drafting deficiencies that need to be fixed to ensure that the new cause of action can be used as intended. Perrin Beatty of the Canadian Chamber of Commerce noted this in the Q&A at the press conference in Ottawa where he stated that the concept of “designed primarily to enable infringement” needed to be clarified and that this clarification is an “essential technical amendment to ensure that the bill in fact achieves the purpose for which it was intended.”

I addressed the drafting problems in My C-32 opening remarks to the Legislative Committee and in an article co-written with Dan Glover titled C-32 enablement remedy targets secondary copyright infringement. There we noted three of the technical amendments that are needed to ensure the Government`s objectives of targeting the “wealth destroyers” are met.

• First, Parliament must recognize that pirate sites and services often are “not designed primarily to enable” acts of copyright infringement. The design is very often neutral, but the site or service is operated to induce, aid or abet infringing activities, or is primarily operated or used for infringing purposes.
• Second, Parliament must ensure that this provision clearly trumps all of the online service provider exceptions to avoid a circumstance in which enablers like wealth destroying pirate hosting sites can avoid liability for enablement.
• Third, to provide an adequate and effective remedy against enablement, Parliament should confirm that rightsholders may rely on the full scale of statutory damages against those who are liable for enablement, regardless of whether such persons were operating for commercial purposes or not.

The Non-Commercial User-Generated Content (UGC) Exception

Bill C-11 contains a new exception that would permit individuals to use existing content to create new ‘user generated content’. The Government background documents describe this amendment and its objective as follows:

The Bill permits the use of legitimately acquired material in user-generated content created for non-commercial purposes. This applies only to creations that do not affect the market for the original material. Examples could include making a home video of your friends and family dancing to a popular song and posting it online, or creating a “mash-up” of video clips.

The Government background documents also state that the changes proposed are in “conformity with Canada’s international obligations”.

In My C-32 opening remarks to the Legislative Committee studying Bill C-32 I pointed out some of the unintended consequences of the draft wording in the UGC amendment stating the following:

This is an exception that, to my knowledge, does not exist anywhere else in the world.

From a technical drafting perspective, the exception is so widely cast that it would most likely violate Canada’s WTO TRIPS obligations. TRIPs mandates that exceptions must be subject to what is known internationally as the 3 step test.

The exception, as drafted, would permit individuals to do almost anything that the author could do with his/her work including creating translations, sequels, or other derivative works and publish them on the internet.

They could also create a “collective work” or “compilation” of works such as “the best” of a TV series or artists’ works, or iPod playlist and post those on the internet.

They can also do a lot more.

The result is that the author loses significant control over the uses of his/her work.

But, over and above this, there could be significant economic consequences to the author. The intention is to permit uses which have no effect on the market for the work. However, the drafting permits aggregate effects on the market for the work that could be very substantial.

Also, the individual’s use of the new UGC work must be non-commercial. But a web site operator can charge for disseminating the UGC work. But, the author gets none of that. They would however in other countries which don’t have this exception and which have let the market solve the problem.

I also highlighted some of the potential problems with the draft language of the UGC, format shifting, time shifting, and back-up copying exceptions in a speech on Bill C-32’s fair dealing and other new copyright exceptions at Osgoode Hall Law School’s professional development program on understanding Bill C-32.

Statutory damages

Bill C-11 would cap statutory damages against individuals who infringe copyright for non-commercial purposes to a range of between $100 and $5,000 for all works involved in the proceeding. It also specifically exempts persons who are liable under the new enablement provision from any statutory damages. The Government background documents describe this amendment and its objective as follows:

This Bill ensures that Canadians will not face disproportionate penalties for minor infringements of copyright by distinguishing between commercial and non-commercial infringement.

The Bill ensures that Canadians are not subject to unreasonable penalties by significantly reducing statutory damages for infringement for non-commercial purposes by individuals, providing the courts with the flexibility to award between $100 and $5,000 in total damages. Using the same example of five illegally downloaded songs, the individual would only be liable for a penalty of between $100 and $5,000 under the proposed changes. The Bill will ensure that courts take proportionality into account in awarding damages.

It appears that the rationale for capping statutory damages against individuals is to preclude large judgements against them when they engage in unauthorized downloading of copyright content over the internet. The underlying concern seems to stem from a fear that a Canadian court would award large damages such as have been awarded in the United States.

The existing Canadian and U.S. regimes are very different, however. In the U.S., the statutory damages per work infringed range from $750 to $30,000 for non-wilful infringements. This range can be increased to $750 to $150,000 for wilful infringements. Canada’s statutory damages range is lower- from $500 to $20,000- and cannot be increased even if the infringement is wilful. However, they can be reduced to a range of between $200 to $500 where a person, such as an individual, had no reasonable grounds to believe he or she was infringing. A Canadian Court also has the discretion to lower the damages to zero where there is multiple copying onto a single medium and the award would be grossly out of proportion to the infringement. The Canadian statutory damages regime, unlike the regime in the U.S., therefore already reflects a proportionality principle. Moreover, there has never been a case in Canada where a copyright owner has been awarded anything close to the maximum statutory damages against an individual who downloaded copies of copyright content from file sharing networks.

This Bill would accomplish the Government’s objectives of ensuring that Canadians will not face “disproportionate penalties for minor infringements of copyright by distinguishing between commercial and non-commercial infringement.” However, it does so in a way that undermines the Government’s objectives of deterring wide scale infringements and providing effective remedies against those infringements that can cause significant economic harm. For example:

• the proposal would cap the recovery of statutory damages against infringements undertaken by organized groups like those who trade in Warez – pirated copyrighted works distributed without fees or royalties and without any commercial purpose – in violation of copyright law.[4] This would effectively cap statutory damages at $5,000 for persons who cause large scale commercial damage, but who do so for reasons other than profit. Some of the most notorious pirates and pirate sites are operated for reputational rather than profit motives.
• the proposal would preclude recovery of statutory damages against any pirate site or service that was liable under the new enablement cause of action. If the site was operated for a non-commercial e.g. reputational, purpose statutory damages could be not be recovered. However, statutory damages would still not be recoverable even against a for profit pirate site or service because of the special exception for statutory damages according to such sites.[5] Ironically, under Bill C-11 a person who is liable for enablement – a “wealth destroyer” to use the words of former Industry Minister Tony Clement- would be subject to no statutory damages while an individual who causes minimal damage and who infringes for a non-commercial purpose would be.
• the proposal would cap statutory damages at $5,000 even though a person might copy, distribute, and make available over the internet hundreds of software, video games, e-books, movies, music and other copyright content that are downloaded by thousands of other individuals as long as these acts are done for “non-commercial purposes”; for example, it would enable individuals to copy and store entire libraries of works and to distribute them to all of the person’s friends, including all of the person’s friends on social networks, high school, university or work colleagues, and over file sharing networks like IsoHunt  to millions of potential downloaders, and the maximum statutory damages would still be $5,000.

In amending the statutory damages regime, the Government should not inadvertently undermine the usefulness of statutory damages which are necessary to ensure there are effective remedies against infringers, discourage infringement, reduce the costs of litigation, and encourage parties to settle litigation. When the statutory damages regime was enacted by the Government in 1997 (the same year Canada signed the WIPO Treaties), it explained the rationale for them as follows:

A copyright owner who commences proceedings for infringement must prove not only the infringement, but also the losses suffered as a result. However, it is often difficult, sometimes impossible, to prove such losses because evidence as to the extent of infringement is usually difficult and/or expensive to find. Statutory damages alleviate this difficulty by guaranteeing a minimum award of damages once infringement is established. They also ease the evidentiary burden on the plaintiff in proceedings for infringement, deter future infringements, reduce the cost of litigation and encourage the parties to settle matters out of court.

The above rationale for statutory damages is still valid.

The Internet Service Provider and Search Engine Exceptions and Responsibilities

Bill C-11 contains four new exceptions referred to as the network service, caching, hosting, and information location tool (aka search engine or ILT) exceptions. The object of these exceptions is explained in the Government background documents as follows:

The Bill ensures that ISPs and search engines will not be held liable for the copyright infringements of their subscribers, to the extent that they are acting as neutral intermediaries (e.g., when they provide Internet access, allow users to download material they have stored in online personal storage space they control, or make temporary cached copies for network efficiency).

The bill will clarify that Internet service providers (ISPs) and search engines are exempt from liability when they act strictly as intermediaries in communication, caching, and hosting activities. The proposed legislation will ensure that services that enable infringement will not benefit from the liability limitations afforded to ISPs and search engines.

These provisions also require technical amendments to ensure the Government`s objectives are met. On March 22, 2010, TELUS, Bell and Rogers appeared before the Legislative Committee studying Bill C-32. who appeared for TELUS acknowledged that some technical amendments are needed to the ISP and ILT exceptions stating the following:

TELUS would support amendments that would give rights holders more powerful tools to go after those who actively enable infringement, and also amendments that would prevent the bad guys from taking advantage of the legal safe harbours intended to protect only the good guys…

TELUS does have some recommendations, but they’re relatively minor. They’re focused on making the notice and notice system work better, more efficiently, and more fairly for all the stakeholders involved. As I have also indicated, we recognize the concerns on the part of some rights holders that the provisions designed to protect innocent intermediaries may be drafted too broadly. They may allow not-so-innocent intermediaries to slip in underneath them. That’s not a desirable result, so we would certainly be open to amendments designed to tighten those up.

The Bill would also create a notice and notice regime. The process and its rationale are described in the Government background documents as follows:

The Bill formalizes the voluntary “notice and notice” regime currently used by Canadian ISPs. Under this system, when an ISP receives a notice from a copyright holder that a subscriber might be infringing copyright, it forwards a notice to the subscriber. The identity of the subscriber may then be released with a court order. This uniquely Canadian approach has been effective at discouraging infringement and is consistent with Canadian values.

A notice and notice process is somewhat useful in dealing with infringing activity across P2P networks and other transitory network communications. It should become part of Canadian law. Notice and notice is not effective, however, in permanently stopping online file sharing by users unless the individuals receiving the notices believe that sanctions could be imposed unless they stop such activity. We have had a de facto notice and notice system in Canada for many years and there is no empirical evidence that it materially changes people’s behaviour to stop illicit file sharing and purchase creative products from legitimate services. Research by our trading partners shows that while a simple notice may have a temporary effect in reducing online file sharing, only notices that have a threat of some sanction operate as an effective deterrent. I dealt with this issue in my submission to the Copyright Consultation in 2009 and in other blog posts including here and here.

Given the Government`s statements about copyright reform, it does not appear that any graduated response system will be put in place under any amendments to Bill C-11. However, as noted above in the testimony of Craig McTaggart some technical amendments are required to make the notice and notice system work as intended.

The Fair Dealing for Education Exception

Bill C-11 proposes to add education to the current list of fair dealing purposes. The Government background documents describe the proposed amendment and its objective as follows:

The Bill enables the use of copyrighted materials for the purpose of education, provided the use is “fair” (i.e., it does not harm the market for a work).

It expands fair dealing to recognize education in a structured context as a legitimate purpose.

As drafted, the proposed wording of the amendment would not accomplish the Government’s objective. The proposed amendment is not clearly limited to only enabling the use of copyrighted materials for the purpose of education “in a structured context”. Unlike all of the current educational purpose exceptions, the proposed amendment is not expressly limited to specific institutional beneficiaries. As well, the term “education” conveys a meaning that appears to go beyond any structured context.

Limiting the exception to dealings that are “fair” will also not ensure that the dealings do “not harm the market for a work. “Fairness” does not provide any assurance against this harm to rights holders. The courts in Canada have developed a list of six non-exclusive factors to assist in determining whether a dealing is fair. Of these six, the effect of the dealing on the work is only one factor to be considered. The Supreme Court in the CCH case stated that while the effect of the dealing on the market of the copyright owner is an important factor, “it is neither the only factor nor the most important factor that a court must consider in deciding if the dealing is fair.” This means that a court may be able to conclude that a dealing is fair even if it harms the market for a work. In contrast, in the United States, the effect of the use upon the potential market for, or value of, the copyrighted work is “the most important, and indeed, the central fair use factor”. Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, (1985), Bouchat v. Baltimore Ravens LP, (4th Cir. Sept. 2, 2010)

Prof. Giuseppina D’Agostino, a professor of Intellectual Property at Osgoode Hall Law School, in her testimony before the Legislative Committee stated the following in relation to the proposed new fair dealing exception:

This new purpose is too broad and invites years of litigation to clarify it, which will lead to access-to-justice issues and will force the courts to resolve matters that are for the government to legislate with confidence in so doing…

On fair dealing, one thing I haven’t talked about is my own analysis of the six factors. When you line up Canada with respect to the U.K. and the U.S., you see that the court says there are more or less six factors, and there could be more. At the same time, in terms of the effect of the dealing on the works–meaning the actual market considerations, the market substitute–the Supreme Court of Canada says that it’s not the only factor, nor the most important.

We know that this is not the case in the U.K. and not the case in the U.S. What we have in Canada with CCH is a broad and liberal interpretation of both the actual purposes and the fairness factor. Left unchecked, the way it’s configured now means that when you compound education plus CCH, you will have something broad, unless we are able to itemize exactly what we mean.

Ysolde Gendreau a professor of law at the University of Montreal and the President of Association Littéraire et Artistique Internationale (ALAI Canada) in her testimony before the Legislative Committee stated the following:

I would like to submit a few examples of this found in Bill C-32, which, in ALAI’s view, undermines the three-step principle, because these exceptions are too broad, because they are based on unrealistic conditions that, once again, make them too broad. Here we’re talking about fair dealing for the purpose of education, the new section 29. We’re talking about non-commercial user-generated content, private copying under section 29.22…

In a law review article on the subject of the proposed fair dealing exception Professor Gendreau also expressed the opinion that the term “education” would not be read to mean “education in a structured context” and that the proposed exception would likely not meet any of the steps in the Berne Three Step Test.[6]

Michael Geist published a series of blog posts commenting on the scope of this new exception including one entitled “Clearing Up the Copyright Confusion: Fair Dealing and Bill C-32”. He concluded that this amendment would not affect the balance between creators of educational materials and the users of such materials or negatively impact the market for publications. My colleague Dan Glover wrote a series of blog posts responding to the incorrect assertions made by Michael Geist and others and demonstrating the need for amendments to the new exception in order to meet Government’s objectives. The posts are:

• A Response to Professor Michael Geist’s Clearing Up the Copyright Confusion
• En réponse à Pour démêler la confusion à l’égard du droit d’auteur, du Professeur Michael Geist
• Clearing Up the Copyright Confusion (Part II)

The Copyright Exceptions to Encourage Innovation

Bill C-11 would create news exceptions for developing interoperable computer programs, encryption research, network security testing, and technological processes. The rationale for these exceptions is explained in the Government background documents as follows:

The Copyright Modernization Act aims to eliminate some of the uncertainty facing innovative businesses. Provisions aimed at the software industry permit the reproduction of software and the hacking of digital locks in order to engage in reverse engineering, security testing and encryption research. Such provisions support, for example, companies that test software for security flaws and then develop and sell patches. Where copyright owners believe these tools have been misused, they will have recourse to deal with any infringement or inappropriate hacking of digital locks. The Bill also clarifies that companies do not face any copyright liability for technical copies that are essential but incidental to a product or service they offer.

These amendments also need technical fixes to ensure that the Government`s objectives are met. The need for this was addressed by John Manley, the President and CEO of the Canadian Council of Chief Executives, in his testimony before the Legislative Committee. After stating that he strongly endorsed “the overall thrust of this legislation” he said:

Having said that, I believe the committee may wish to consider certain technical changes to the bill so as to avoid unintended consequences. For example, important concerns have been raised with respect to the impact on Canada’s software industry of provisions dealing with encryption research, network security, reverse engineering and copying for interoperability purposes.

In addition, some of the language dealing with user-generated content and copying for private purposes may be too broad.

I also canvassed these amendments in a speech to the 14^th Annual IT.Can Conference titled Bill C-32’s impacts on the IT community.

Conclusion

After many failed attempts to modernize Canada’s copyright laws, it now appears there is a Bill before Parliament that will do this. The Copyright Modernization Act, however, still requires careful scrutiny to ensure that appropriate technical amendments are made so that the Government’s objectives are met and to avoid significant inadvertent consequences inconsistent with the Government’s objectives.

[2] Michael Geist accuses the book publishers of engaging in “a relentless misinformation campaign” against the fair dealing for education exception. His assertion is ironic since it is he that has engaged in this behaviour on copyright reform issues.

[3] See, James Gannon, TPMs: A comprehensive guide for Canadian copyright law

[4] See, Wikipedia, Warez http://en.wikipedia.org/wiki/Warez

[5] Section 38.1(6)(d)

[6] Ysolde Gendreau Canada and the Three Step test: A Step in Which Direction? 15 Intellectual Property L. Rev. 309 (2011). In the article she said:

The purpose of education is introduced within the context of an exception, fair dealing, that does not have a statutory list of criteria for its evaluation. The fair dealing exception also entails that it applies to all categories of works and to all rights, reproduction rights as well as performing rights. Moreover, its application is not limited to educational institutions because of the following a contrario argument: the wording of the specific educational exceptions shows that they are intended for educational institutions while that of the fair dealing for the purpose of education makes no such mention. Consequently, the notion of education extends the application of this exception beyond educational institutions. Government representatives say that the exception is to be a test ground for exceptions that may eventually give rise to specific exceptions. However, they still maintain that it refers to education in a structured context.

It is easy to doubt such a statement because educational institutions do represent a structured context. Courts are likely to say that, in the absence of a specific reference to such institutions, the reference to “education” is not limited to structured contexts. So this new exception would introduce a very broad notion of education in a statute that does not include criteria for the appreciation of fair use either.

After discussing why the proposed exception would have difficulty passing all three of the three steps she concluded by saying:

Generally speaking, since the three-step test has become the standard by which to judge exceptions, I would say there is a fairly strong case for stating that the proposed provision on fair dealing for the purpose of education is so broadly drafted that it goes against the three-step test of the Berne Convention and of the TRIPS Agreement.

“Counterfeit and pirated goods are an increasingly global problem that requires a globally coordinated solution,” said Minister Fast. “We all have an interest in combatting counterfeiting and piracy because these activities cost billions of dollars each year in revenue and trade losses, which translates into higher prices, lost income and lost jobs for people employed in a range of industries—from film and pharmaceuticals to electronics. Counterfeit goods also pose a real threat to the health and safety of people because the producers of goods such as drugs and auto parts evade the rigorous rules, standards and guidelines that are in place to protect consumers.”

ACTA will establish new international standards for enforcing intellectual property rights. It will cover three areas: improving international cooperation, establishing best practices for enforcement and providing a more effective legal framework to address the problem of counterfeiting and piracy. It will also give innovators, artists and entrepreneurs enhanced measures to ensure their creations and associated rights are protected. Alongside Canada, Australia, Japan, Morocco, New Zealand, the Republic of Korea, Singapore and the United States also signed the agreement, which was negotiated by 38 parties in total.

Following the signature of ACTA, the Government of Canada will develop and introduce the necessary legislation to implement the agreement. The government has already taken steps to enforce and defend intellectual property rights and help balance the needs of creators and users by reintroducing its Copyright Modernization Act (Bill C-11) in Parliament on September 29. The bill informed and guided Canada’s approach to the ACTA negotiations.

“The signing of this historic international agreement and our government’s reintroduction of copyright legislation demonstrates Canada’s commitment to combatting counterfeit and pirated goods, and protecting innovation- and knowledge-based prosperity, which are key to Canada’s future economic success,” said Minister Fast.

A backgrounder on ACTA can be found here. A summary of the agreement which I prepared when the text of ACTA was agreed to can be found here.

Signing ACTA is a step towards meeting the significant counterfeiting problems identified by the RCMP in A National Intellectual Property Crime Threat Assessment, 2005 to 2008. The porous nature of our borders and the need to upgrade our border controls to world standards to reduce counterfeiting and piracy in Canada has been noted by two parliamentary committees, three Canadian trade associations, and our major trading partners. Parliamentary Standing Committee on Public Safety and National Security, Parliamentary Standing Committee on Industry, Science and Technology, Ontario Chamber of commerce, Canadian Chamber of Commerce, U.S. Trade Representative,  U.S. Congressional Anti-Piracy Caucus, European Union, and Canadian Anti-Counterfeiting Network (CACN).

1. On Saturday, October 1, the Ministry of Foreign Affairs of Japan will hold the signing ceremony for the Anti-Counterfeiting Trade Agreement (ACTA) at Iikura Guest House, Ministry of Foreign Affairs.
2. The Agreement was inspired in significant part by Japan’s proposal at the G8 Gleneagles Summit in 2005 to create a new international framework against counterfeit and pirated products, in the context of the heightened awareness of the need for a higher degree of intellectual property protection. Its negotiation has been led by a strong initiative of Japan, the United States and other key partners.
3. The negotiation has been carried out among Australia, Canada, the European Union and its Member States, Japan, the Republic of Korea, Mexico, Morocco, New Zealand, Singapore, Switzerland, and the United States, and reached a general agreement at the negotiation meeting held in Japan in October 2010, followed by the completion of technical and translation work in April 2011.
4. The signing ceremony will be attended by the representatives of all the participants in the ACTA negotiations, and those that have completed relevant domestic processes will sign the agreement. The agreement is open for signature until May 1, 2013.
5. On the preceding day, Friday, September 30, an international symposium entitled, “Global Intellectual Property Strategy and the Reconstruction from the Great East Japan Earthquake: Eliminating Counterfeit and Pirated Products through ACTA”, will be held in Sendai as a side event of the signing ceremony.

Michael Geist’s blog post was cunningly timed to coincide with the launch of RIM’s BlackBerry PlayBook and the current federal election campaign. Unfortunately, he has misled Canadian consumers while doing a disservice to an excellent new tablet product from one of Canada’s most important technology leaders, RIM. His use of the term “tax” is clearly inaccurate and designed to maximize the political impact of his blog post which has more to do with promoting his own copyright proposals than being factually accurate.

Bill C-32 died when the election was called so the debate is about a Bill that does not exist. Nevertheless, let us look at the actual facts pertaining to what the effects of Bill C-32 would have been on the BlackBerry PlayBook across the music, e-book and video markets.

Music

Music can be consumed on the PlayBook either by copying music from existing media such as CDs or music downloads onto the PlayBook or by streaming music content to the PlayBook. In almost all cases there would be no “new cost to consumers” and no “barriers” to the adoption of the PlayBook.

When it comes to selling CDs or music downloads, most digital vendors do so without any form of copy protection. iTunes has been selling TPM-free music for more than two years; Amazon MP3 was selling TPM-free tracks before then.[1] (The PlayBook also comes preloaded with an icon to RIM’s new MusicStore, which also sells TPM free music.)

Songs bought on iTunes come in AAC format while Amazon sells MP3 files. The PlayBook will play content in both these formats as well as in AVI, WAV, WMA, WMV, ASF, MP4, MPEG-4, MOV, M4V, M4A, 3GP2 and 3GP formats.

Music CDs can easily be converted into the MP3 format for listening on the PlayBook. Music already downloaded from services including iTunes can also be transferred and played on the PlayBook with no “taxes”. The ease with which this can be done on the PlayBook was noted in the review from the same newspaper that syndicated Geist’s blog, the Ottawa Citizen:

RIM deserves applause for making it easy to get content on to the device. As opposed to many competitors, PlayBook doesn’t need extra software (such as iTunes) to put files onto the device. Plug PlayBook into a computer and it shows up as a drive. Users can simply drag-and-drop files right on to it.

Music streaming services are usually protected from unauthorized copying by TPMs. The most popular music streaming service in Canada today is Slacker Radio. Any iPad user who decides to upgrade to the PlayBook would not lose a dime on their Slacker subscription. The Slacker Radio app for PlayBook comes pre-loaded on the PlayBook. Even if another music streaming service is being accessed from another device, users can simply cancel their old accounts without incurring any sort of “PlayBook Tax”.

E-Books

Geist is also inaccurate when it comes to e-books. He claims that “Consumers with Amazon Kindles or other e-book readers who have invested in e-books that have digital locks…will find that they are unable to legally transfer the content to their new device.”

In fact, consumers who have purchased e-books through Toronto-based Kobo Books will have the capability of transferring their collections to the PlayBook. Like Slacker Radio for music, a Kobo eReading app comes pre-loaded on the PlayBook. The app will enable full transferability of purchased e-books – it will even remember which page you were last reading on your Kobo eReader when you access the book on the PlayBook. Kobo users are also able to sync their e-book library on the PlayBook through the tablet’s Wi-Fi connection.

According to RIM:

“Kobo also offers free reading applications for BlackBerry® smartphones, computers and other devices, which all sync together across a user’s account.  Kobo members can pick up and read on any device without ever losing their place.”

As for the Kindle, Amazon has announced that it is working on a PlayBook app that will allow users to transfer their Kindle books from one device to the PlayBook:

“Like all Kindle apps, the Kindle app for the new BlackBerry PlayBook will let customers Buy Once, Read Everywhere—on Kindle, Kindle 3G, Kindle DX, iPad, iPod touch, iPhone, Mac, PC, BlackBerry, Android-based devices, and in the coming months, the new BlackBerry PlayBook. Amazon’s Whispersync technology syncs your place across devices, so you can pick up where you left off.”

Accordingly, e-books purchased from leading bookstores and vendors including Amazon, Kobo, Borders, Chapters, Indigo and Barnes & Nobles will be transferable and playable on the PlayBook – without switching costs contrary to what Geist asserted. Kindle compatibility may also enable Canadians to borrow e-books from their local libraries and read them on their PlayBooks when this service becomes available in Canada.

Videos

Geist also contends that individuals will be deterred from buying a PlayBook because they cannot make copies of DVDs they own that are protected from piracy by the Content Scrambling System (CSS). The idea that consumers will be dissuaded from purchasing PlayBook tablets because of an alleged inability to transfer their DVD collections onto the PlayBook is ridiculous. DVDs have been sold with CSS anti-copying technology for more than 15 years. This did not stop the adoption of iPads, nor did it hinder the adoption of Blu-Ray players, On-Demand video, iTunes or other digital video services. An inability to instantly scan books into a Kobo e-Reader also did not create a “Kobo Tax” or prevent the runaway success of Kobo. (It is of course also unreasonable to expect studios to make major investments to create motion pictures and other programming and not protect them by using TPMs or other means to prevent massive file sharing over internet file sharing sites and services.)

In any event, Geist is engaging in speculation when he makes the statement that consumers would “immediately also face the PlayBook tax since Bill C-32 would block them from making digital copies of their DVDs to play on the PlayBook” and that “they would similarly be forced to repurchase the same content again”. Beginning in 2007 and 2008, the major motion picture studios including Disney, Paramount, Warner-Bros., 20^th Century Fox, Sony Pictures, and Universal began selling DVDs together with portable Digital Copies. The bundle gives the DVD purchaser the right to make a digital copy for play on personal computers and portable devices. Given the PlayBook’s importance as a platform, it is reasonable to expect that it is only a matter of time before Digital Copies will be playable on the PlayBook.

Geist asserts that individuals will be unable to transfer their own video library unto other devices because “the presence of a digital lock will mean that the content is legally locked down to the original device or format”. It is true that Apple contractually prohibits the transfer of a downloaded video to another device other than to one of its own devices or personal computers. It enforces this restriction through its fair play DRM. Geist claims the switching costs to a consumer would “effectively double” the cost of the PlayBook. But, he provides no source or data to support this exaggerated contention. It is highly unlikely that the average user will have anywhere near the paid for video downloads that Geist claims. Moreover, given the increasing trend toward digital rentals, it is likely that a major portion of purchases from iTunes was for short term rentals rather than purchases.

In any event, Geist’s unqualified statement that individuals will be “unable to transfer their own video library unto other devices” because “the presence of a digital lock will mean that the content is legally locked down to the original device or format” is purely speculative and unwarranted. Most of the other popular video download services do not restrict the type of device that video files are copied onto. For instance movies purchased through Best Buy’s CinemaNow service may be played on “5 Devices including Portable Players”. Cineplex also recently launched a digital download and video on demand service. Digital downloads purchased from Cineplex.com can be played on personal computers and other compatible devices including mobile devices. RIM’s PlayBook supports video formats which include 3GP, 3GP2, M4A, M4V, MOV, MP4, MPEG-4, ASF, WMV, WMA and F4V. It is reasonable to expect that it will only be a matter of time before these various services work with the PlayBook.

The PlayBook also has some of the most advanced mobile video streaming technology which can take advantage of the tremendous growth in this digital market. Unlike Apple’s iPad, RIM did not shy away from providing full support for Adobe Flash 10.1, Adobe AIR and HTML 5. This means that a huge amount of online video content will be unlocked for PlayBook users compared to users of mobile devices without native Flash support, like the iPad. PlayBook users in Canada will not have to wait for the development of a specialized app before viewing commercial TV shows and other videos from sites like Youtube, CTV, CBC, GlobalTV and the Comedy Network. With the addition of Flash support for the PlayBook, it is likely that PlayBook users will have a greater choice of providers for movie streaming providers than iPad users as well.[2]

Of course, Geist’s main point about digital locks on DVDs and video content also ignores the increasing trend towards device interoperability, all of which are supported by DRM systems that enable this consumer friendly way of enjoying entertainment products. For example, under Ultraviolet, Canadian families will soon be able to access content purchased from UltraViolet media – such as Blu-ray, DVDs or Internet download – and get the enduring right to access it from any UltraViolet device registered to the household account. This includes obtaining it via streaming through devices at home or on the go.

 Conclusion

Michael Geist has disseminated inaccurate and misleading blog posts and articles about Bill C-32 and its TPM and other provisions to support his own copyright proposals before. See, for example, Separating copyright fiction from facts about C-32’s TPM provisions, Separating facts from hype about C-32, Turning up the rhetoric on C-32’s TPM provisions, Are the TPM provisions in C-32 more restrictive than those in the DMCA?, A Response to Professor Michael Geist’s Clearing Up the Copyright Confusion,  Are Canada’s copyright laws friendly or unfriendly towards wealth destroyers according to Prof. Geist?,  Legends and reality about the 1996 WIPO Treaties in the light of certain comments on Bill C-32, Are Canada’s copyright laws friendly or unfriendly towards wealth destroyers according to Prof. Geist? His recent blog post does this again.

Geist’s proposal is to legalize circumventing TPMs that protect copyright content from digital piracy to enable individuals to make free and uncompensated copies of content for any purpose that is not intended to cause an additional separate act of infringement. If this proposal was incorporated into a successor to Bill C-32, it would make Canada the only country in the industrialized world to permit this and it would contravene our treaty obligations. See, An FAQ on TPMs, Copyright and Bill C-32.

Importantly, Geist’s proposal would also undermine existing and future digital business models that rely on TPMs including streaming music services such as Slacker Radio and Spotify, e-book download services such as those offered by Chapters/Indigo and Amazon, e-book library lending from companies such as Sony and Amazon, video download and streaming services such as those offered by Cineplex, CinemaNow and Netflix, household video access to be enabled through Ultrasviolet, as well as the numerous and existing business models that use TPMs in the entertainment software and software industries. Ultimately, Geist’s proposal would undermine access to and the dissemination of digital content to the Canadian public and hurt everyone involved in the digital industries including the consumers he professes to represent.

While Bill C-32 died on the Order Paper with the election call, most agree that it is essential for Canada to update it’s copyright laws to keep pace with technological change and legislative changes in other jurisdictions. When Canada’s copyright legislation is re-introduced in the next Parliament, let us be sure that Canadian consumers and their representatives are well informed about the facts.

[2] In fact, one early PlayBook reviewer has praised the PlayBook’s ability to play streaming videos from Amazon’s new Instant Video service (not currently available in Canada) as compared to other devices like the iPad:

I tested Amazon’s Instant Video and Cloud Player services on the PlayBook. Both worked like a charm. As a user of both services (I have three Sony Blue-ray players in my house that are Amazon Instant Video-enabled) this alone may make the PlayBook worth keeping long term.

To my knowledge (and please correct me if I’m wrong), the PlayBook is now the first tablet to play nice with Amazon’s Instant Video service. Some Nokia phones can playback Amazon Instant Videos, but Amazon’s PC software Amazon Unbox is required to download a special version of the program and then transfer it to the phone. With the PlayBook, no software is required; video simply streams to the device. Wow, it seems like I have waited years for this development.

The Liberal Digital Plan says the following about copyright:

Fair balance Between Creators and Consumers.

Digital technology offers many new opportunities, but enjoying content without compensating its creators shouldn’t be among them. At the same time, consumers should have freedom for personal use of digital content they rightfully possess. Liberals have worked to pass effective copyright legislation, including a private copying compensation fund instead of any new tax on consumers.

Flourishing Canadian Content, Culture and Identity in Digital Media.

Canadians should continue to have access to ever more Canadian stories and Canadian content in the Digital Canada of the future. New media should provide vibrant and rewarding new avenues for expression by Canadian artists. The public broadcasters, Radio Canada and the CBC have crucial roles to play in achieving these objectives.

On top of existing investments of $100 million per year for the Canada Media Fund, a Liberal government will support more creation of Canadian content by doubling the annual budget of the Canada Council for the Arts, from $180 million to $360 million over the next four years, and restore the Promart and Trade Routes international cultural promotion programs, increasing their funding to $25 million per year.

During the online chat, Mr. Garneau made a few additional remarks concerning the Liberal party’s position on copyright:

Would the Liberals exclude copyright from any EU trade deal?

No:  “we would exclude it from the EU deal if not in best interest of Canadians”.

Would the Liberals enshrine the controversial six factor test for defining fairness adopted by the Supreme Court in CCH in a new Bill?

The Liberals are willing to explore options: “Sure that is definitely a good option but we are still open to other options”.

Do the Liberals support a digital lock exception that permits circumvention for fair dealing purposes such as research and private study?

The Liberals “oppose the digital lock provisions as currently written in C-32” and “support an exception for people using the material they bought for non infringing purposes”.

Do the Liberals support notice and notice or are they open to other options?

The Liberals currently support notice and notice: “At this point we are with N&N”.

The case involved Blizzard, the creator of World of Warcraft (“WoW”), a popular multiplayer online role-playing game in which players interact in a virtual world while advancing through the game’s 70 levels. MDY developed and sold Glider, a software program that automatically plays the early levels of WoW for players. MDY had brought an action for a declaratory judgment to establish that its Glider sales did not infringe Blizzard’s copyright or other rights. Blizzard asserted counterclaims for copyright infringement, violation of the DMCA’s TPM provisions, and tortious interference with contract. The district court found MDY liable for secondary copyright infringement, violations of the DMCA and tortious interference with contract. The Ninth Circuit reversed the district court except as to MDY’s liability for violation of the DMCA and remanded for trial on Blizzard’s claim for tortious interference with contract.

In giving reasons for decision the Court made at least three very important legal rulings.

The first was whether end users of WoW were owners or licensees of their copies of the WoW software. This is important because under US copyright law an owner of a copy of software may copy the software without infringing copyright under USC 117(a) if making the copy is an essential step in using the software with a computer. (The distinction between a licensed and an owned copy is also important under the Canadian Copyright Act.) Following the Court’s previous decision in Vernor v. Autodesk, Inc, 621 F.3d 1102 (9th Cir. 2010), the Court concluded that end users were licensees and not owners of the WoW software because of the significant use restrictions in Blizzard’s EULA.

In Vernor v. Autodesk, Inc., we recently distinguished between  “owners” and  “licensees” of copies for purposes of the essential step defense. Vernor v. Autodesk, Inc., 621 F.3d 1102, 1108-09 (9th Cir. 2010;  see also MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 519 n.5 (9th Cir. 1993); 19992 MDY INDUSTRIES v. BLIZZARD ENTERTAINMENTTriad Sys. Corp. v. Se. Express Co., 64 F.3d 1330, 1333, 1335-36 (9th Cir. 1995);  Wall Data, Inc. v. Los Angeles County Sheriff’s Dep’t, 447 F.3d 769, 784-85 (9th Cir. 2006). In Vernor, we held  “that a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use” restrictions. 621 F.3d at 1111 (internal footnote omitted).

Applying  Vernor, we hold that WoW players are licensees of WoW’s game client software. Blizzard reserves title in the software and grants players a non-exclusive, limited license. Blizzard also imposes transfer restrictions if a player seeks to transfer the license: the player must (1) transfer all original packaging and documentation; (2) permanently delete all of the copies and installation of the game client; and (3) transfer only to a recipient who accepts the EULA. A player may not sell or give away the account.

Blizzard also imposes a variety of use restrictions. The game must be used only for non-commercial entertainment purposes and may not be used in cyber cafes and computer gaming centers without Blizzard’s permission. Players may not concurrently use unauthorized third-party programs. Also, Blizzard may alter the game client itself remotely without a player’s knowledge or permission, and may terminate the EULA and ToU if players violate their terms. Termination ends a player’s license to access and play WoW. Following termination, players must immediately destroy their copies of the game and uninstall the game client from their computers, but need not return the software to Blizzard.

The second ruling provides guidance on when a restriction in a software license is a condition, the breach of which constitutes copyright infringement, and when a restriction is a covenant, the breach of which is actionable only under contract law. The Court concluded that WoW’s prohibitions against bots and use of unauthorized third-party software were covenants rather than copyright enforceable conditions.

Central to the Court’s ruling was the holding that “for a licensee’s violation of a contract to constitute copyright infringement, there must be a nexus between the condition and the licensor’s exclusive rights of copyright.”  Here, WoW players did not commit copyright infringement by using Glider in violation of the WoW’s Terms of Use.

This Court’s holding seems to require that for a term to be a condition, its violation must be an infringement of copyright. If this is truly the holding, it is significant as other cases focuse on whether a term was drafted to be a condition rather than a mere promise by analyzing the license language. See, Jacobsen v Katzer, 535 F.3d 1373 (Fed. Cir. 2008) summarized here.

The third important ruling was the Court’s construction of the scope of the DMCA’s legal protection for technological measures. In particular, the Court considered whether Glider violated Sections 1201(a)(2) or (b)(1) of the DMCA by allowing users to circumvent a technology called Warden that prevents players who use unauthorized third-party software, including bots, from connecting to WoW’s servers. MDY contended that the provisions of § 1201 prohibit circumvention of access control TPMs only when the circumvention of the TPM infringes or facilitates the infringement of the plaintiff’s copyright e.g., there is an infringement nexus requirement for a circumvention of an access control TPM to violate the DMCA.

The Court, after construing § 1201 of the DMCA and comprehensively reviewing previous cases and the legislative history of the DMCA, held that there was not such a nexus. “In sum”, wrote the Court, “we conclude that a fair reading of the statute (supported by legislative history) indicates that Congress created a distinct anti-circumvention right under § 1201(a) without an infringement nexus requirement.”

The Court explained that Congress had explicitly rejected requiring that circumvention of an access control be linked to an infringing act “in order to grant copyright owners an independent right to enforce the prohibition against circumvention of effective technological access controls. Congress did do so to encourage copyright owners to make their works available in digital formats such as ‘on-demand’ or  ‘pay-per-view,’ which allow consumers effectively to ‘borrow’ a copy of the work for a limited time or a limited number of uses.”

Last month a US District Court in the USA v Crippen case ruled that fair use is not a defense to circumventing an access control TPM under the DMCA. The Blizzard and Crippen cases are further evidence that the  TPM provisions in C-32 are not more restrictive than those in the DMCA, as some critics of the TPM provisions in C-32 have contended. See, Are the TPM provisions in C-32 more restrictive than those in the DMCA?

The questions I discussed were the following:

• Does Bill C-32 properly implement the WIPO Treaties consistent with approaches used by Canada’s trading partners?
• Does Bill C-32 permit circumvention of TPMs to permit copying for fair dealing, educational and other purposes?
• Does Bill C-32 have a flexible framework to permit new exceptions to be made by regulation?
• Can the WIPO Treaties be implemented by limiting protection to circumvention for the purposes of infringement?
• Should circumvention of TPMs for private copying purposes be permitted?
• Are private copying exceptions “user rights” that trump legal protection for TPMs?
• Do other jurisdictions permit an exception for private copying to trump TPMs?
• Would an exception for private copying that permits circumventing TPMs violate the Berne Three Step Test?
• Can the WIPO Treaties be complied with by permitting circumvention of TPMs for private copying?
• Does Canada have any trading partners that have private copying, no levy, and permit circumventing a TPM for private copying?

My slides are set out below.

Insight_Slides_on C-32 and TPMs

Unfortunately, Prof. Geist himself fails to accurately separate fact from fiction when it comes to explaining Bill C-32. As examples are his assertions about legal protection for TPMs. Prof. Geist continues to contend that the legal protection of TPMs in Bill C-32 is not required by international law and in particular the WIPO Internet Treaties. In particular, he repeatedly and inaccurately asserts that:  

• The legislative history and international practice related to the WIPO Treaties demonstrates that Bill C-32  is more stringent than what the WIPO Treaties require because (i) there is no treaty obligation to protect access-control TPMs; (ii) there is no treaty obligation to prohibit the manufacture and distribution of circumvention tools; and (iii) the treaties can be complied with by prohibiting circumvention only when it is for an infringing purpose and by permitting circumvention of TPMs and trafficking in circumvetion tools for any other purpose including making private copies and to engage in other “consumer rights”.
• The “Bill C-32 model is one of the most restrictive approaches in the world” .
• Most of the world does not protect TPMs in the robust way C-32 does.
• Bill C-32 provides more extensive  protection for TPMs than does the DMCA.
• A leaked EU document related to ACTA shows that access control TPMs do not need to be protected and are not protected in the EU.

I previously pointed out Prof. Geist’s inaccuracies on the subject of TPMs including the inaccurate assertions made above in various blog postings including here, here, here, here, here, here, and here. I have not been the only person to do so, however. Dr. Mihaly Ficsor, the Assistant Director General of WIPO at the time the treaties were negotiated, has also written several papers criticizing Prof. Geist’s opinions on the minimum requirements necessary to comply with the WIPO Treaties. Prof. Geist disagreed with Dr. Ficsor’s views in his paper “The Case for Flexibility in Implementing the WIPO Internet Treaties” published in From ‘Radical Extremism’ to ’Balanced Copyright:’ Canadian Copyright and the Digital Agenda .

In a comprehensive paper just published entitled “TPMs and Flexibility (’The Ability of Bending Without Breaking’) – Why Should the TPM Provisions of Bill C-32  Protect Access Controls and Prohibit ‘Preparatory Acts”, Dr. Ficsor responded to Prof. Geist, fully rebutting all of the assertions summarized above as well as other claims made by Prof. Geist about the WIPO Treaties including its history and the international practices concerning its implementation.  Prof. David Vaver, in introducing Dr. Ficsor’s paper on IP Osgoode, says, “The paper restates Dr Ficsor’s views that Bill C-32 correctly includes both forms of control in its TPM provisions and deals comprehensively with Professor Geist’s criticisms.”

Dr. Ficsor’s paper, contains a summary of his conclusions in which he highlights the reasons that Prof. Geist’s claims about the WIPO Treaties and Bill C-32 are not accurate:

(1)   Prof. Geist does not pay sufficient attention to the key interpretation source of any treaty provisions; namely to their plain language (the ordinary meaning of their terms). . . .[I]t may be deduced from this key source of interpretation alone that

(i)     the Internet Treaties’ TPM provisions cover all categories of TPMs and not only some of them; thus, they apply to both access-control and copy-control measures – contrary to M. Geist’s allegation that they do not apply for access-control measures;

(ii)   no adequate protection may be provided for TPMs as prescribed in the Treaties without establishing a defense line already in the stage of so-called “preparatory acts” – contrary to M. Geist’s allegation according to which it is sufficient to simply prohibit the very acts of circumvention (in the stage of which alone there is no real hope anymore for such protection);

(iii)  an adequate, rather than more than sufficient, level of protection requires appropriate norms to guarantee the applicability of exceptions to copyright justified by relevant public interests; this, however, requires cautious regulation duly balancing between the various interests and it cannot take the form of simply providing direct free access for any beneficiaries of any exceptions in any possible format by eliminating the applicability of any kind of TPM – contrary to Prof. Geist’s allegation according to which the purpose of the application and protection of TPMs, and through it, the adequate protection and normal exploitation of copyright, could be achieved also by allowing the circumvention of TPMs for anybody in order to directly enjoy any exception (for example, a “private copy” exception by each member of the huge Internet population, and in fact anybody who wants at all a copy) or to get access to works otherwise (for example, in order to receive freely any online communication of works citing the fact that such acts are not directly controlled by copyright).

(2)    Prof. Geist insists on flexible interpretation and implementation of the TPM provisions, and alleges that those who do not agree with him – such as me – are the advocates of inflexible interpretation and implementation. The truth is that everybody – including myself, as I have clearly stated – is of the view that the TPM provisions offer flexibility. The difference between us is only that, while Prof. Geist – as he quite clearly states – is in favor of an unlimited flexibility, myself and others are of the view that the requirement of adequate protection sets limits in this respect.

(3)   The “preparatory work” (“negotiation history”) of the Treaties confirms the interpretation reached on the basis of the plain language of the TPM provisions in the sense indicated above. During the preparation of the Treaties, there were animated debates, in certain stages of which there were some delegations which had doubts about the need and justification of TPM provisions. However, contrary to Prof. Geist’s suggestion, it is irrelevant from the viewpoint of the interpretation of a unanimously adopted text requiring adequate protection of TPMs that previously there were some delegations which at that time were not yet ready to support such protection by the Treaties. More importantly, in the debates, again contrary to what Prof. Geist suggests, no delegation made any proposal or comment to the effect that access-control TPMs should be excluded from protection (the comments aimed at taking care of the applicability of certain exceptions, but it is a different thing than just allowing general and direct free access to digital contents by denying protection for the measures controlling regulated access that is also normal in the traditional analogue world). Furthermore, it also transpires from the preparatory documents and the reports that, where there were debates regarding “preparatory acts” (circumvention-defeating devices, etc.), those debates mainly – nearly exclusively – concerned the definition of devices to be prohibited and not the general scope of protection in the sense that it should also extend to the protection against certain “preparatory acts.” Thus, Prof. Geist’s allegation is unfounded regarding the general scope of the requirement of adequate protection; there was no understanding whatsoever according to which access-control TPMs would be excluded from the treaty obligations or that adequate protection was regarded possible without providing it already in the stage of “preparatory acts.”

(4)   The “subsequent practice” of countries party to the two Treaties implementing the TPM provisions indicates that Canada’s major trading partners have duly implemented the treaty obligations as outlined above (not limiting protection to copy-control TPMs, but equally applying it to access-control TPMs and also prohibiting relevant “preparatory acts”). Prof. Geist suggests the contrary. His examples covering certain developing and “transition” countries and countries which have not acceded yet to the Treaties, along with extremely few isolated other cases, are not suitable to justify his position.

(5)   The consistently applied international provisions on the interpretation of treaties do not list views expressed in legal literature as relevant separate sources of interpretation. Nevertheless, all the authoritative sources of legal literature based on a truly thorough analysis do agree that the Treaties’ TPM provisions cover both access-control and copy-control TPMs and that in order to provide adequate protection it is necessary to prohibit “preparatory acts.” Prof. Geist tries to present some other literary views collected from all kinds of sources about which he believes that they may support his contentions. In connection with this, two comments are justified. First, not all of those literary sources are truly suitable to serve as “witnesses of prosecution” against Bill C-32, since they do not necessarily state what M. Geist would like to prove. Secondly, with minimum efforts, one can collect and present a number of scholarly views to support any kind of legal position – and also a number of scholarly views to support exactly the opposite position. Therefore, what may only be relevant at all is what follows from truly authoritative sources and – in close connection with this – what kinds of legal analyses and arguments the views expressed are based.

Dr. Ficsor also demonstrates that the so-called “leaked” EU document relied on by Prof. Geist erroneously describes EU law as it relates to protecting TPMs. Dr. Ficsor says: “Very briefly: if such an analysis were “leaked” let us say to the European Court of Justice… it would declare it to be completely groundless and being in head-on crash with the acquis communautaire”.

Prof. Geist consistently misinterprets the WIPO Treaties to support his policy views that Canadian copyright reform should provide virtually no legal protection for TPMs. His policy proposals on TPMs provide  illusory protection for artists or creators. His proposals would not fulfill the policy objective of enabling artists and creators to protect their works in a way that supports innovative business models and allows them to be paid for their creative efforts and investments. Not surprisingly, as Dr. Ficsor authoritatively documents, Prof. Geist’s proposals do not provide adequate legal protection or effective legal remedies against the circumvention of TPMs and clearly would not comply with the requirements of the WIPO Treaties or the practices of Canada’s trading partners.