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.

The declaration on the Internet made the link between the Internet and innovation as follows:

For business, the Internet has become an essential and irreplaceable tool for the conduct of commerce and development of relations with consumers. The Internet is a driver of innovation, improves efficiency, and thus contributes to growth and employment…

The Internet has become a major driver for the global economy, its growth and innovation…

Their implementation must be included in a broader framework: that of respect for the rule of law, human rights and fundamental freedoms, the protection of intellectual property rights, which inspire life in every democratic society for the benefit of all citizens. We strongly believe that freedom and security, transparency and respect for confidentiality, as well as the exercise of individual rights and responsibility have to be achieved simultaneously. Both the framework and principles must receive the same protection, with the same guarantees, on the Internet as everywhere else…

The Internet and its future development, fostered by private sector initiatives and investments, require a favourable, transparent, stable and predictable environment, based on the framework and principles referred to above. In this respect, action from all governments is needed through national policies, but also through the promotion of international cooperation…

The leaders recognized the importance of framework laws and means for enforcing intellectual property laws on the Internet.

With regard to the protection of intellectual property, in particular copyright, trademarks, trade secrets and patents, we recognize the need to have national laws and frameworks for improved enforcement. We are thus renewing our commitment to ensuring effective action against violations of intellectual property rights in the digital arena, including action that addresses present and future infringements. We recognize that the effective implementation of intellectual property rules requires suitable international cooperation of relevant stakeholders, including with the private sector. We are committed to identifying ways of facilitating greater access and openness to knowledge, education and culture, including by encouraging continued innovation in legal on line trade in goods and content, that are respectful of intellectual property rights.

The leaders also gave special recognition of the need for protecting privacy in the Internet context using common approaches.

The effective protection of personal data and individual privacy on the Internet is essential to earn users’ trust. It is a matter for all stakeholders: the users who need to be better aware of their responsibility when placing personal data on the Internet, the service providers who store and process this data, and governments and regulators who must ensure the effectiveness of this protection. We encourage the development of common approaches taking into account national legal frameworks, based on fundamental rights and that protect personal data, whilst allowing the legal transfer of data.

The leaders acknowledged the importance of addressing key concerns of all G8 nations for protecting the security of networks against the ever growing criminal and terrorist threats.

The security of networks and services on the Internet is a multi-stakeholder issue. It requires coordination between governments, regional and international organizations, the private sector, civil society and the G8’s own work in the Roma-Lyon group, to prevent, deter and punish the use of ICTs for terrorist and criminal purposes. Special attention must be paid to all forms of attacks against the integrity of infrastructure, networks and services, including attacks caused by the proliferation of malware and the activities of botnets through the Internet. In this regard, we recognize that promoting users’ awareness is of crucial importance and that enhanced international cooperation is needed in order to protect critical resources, ICTs and other related infrastructure. The fact that the Internet can potentially be used for purposes that are inconsistent with the objectives of peace and security, and may adversely affect the integrity of critical systems, remains a matter of concern. Governments have a role to play, informed by a full range of stakeholders, in helping to develop norms of behaviour and common approaches in the use of cyberspace. On all these issues, we are determined to provide the appropriate follow-up in all relevant fora.

The leaders also focused on the importance of innovation in the knowledge economy. The declaration highlighted the importance of having strong and robust intellectual property systems as a catalyst to innovation.

We agree on the necessity of a level playing field in the innovation area, including a strong and robust intellectual property system as an incentive to innovation and a catalyst for growth. We acknowledge the important role of the World Intellectual Property Organization (WIPO) in developing a broad approach to intellectual property in support of business friendly, robust and efficient national intellectual property systems. Renewing our support to the principles of the patent system, we attach great importance to its promotion and development. We encourage increased international action to strengthen patent quality, and call for improved diffusion of patent information, particularly critical for SMEs and research centres. We support transparency in technology markets and call for the improvement of market places for trading rights. We invite WIPO, in close cooperation with Member States and other relevant entities, to intensify its work in these three areas. In addition we note the importance of enforcement in order to incentivise innovation and protect innovation once developed.

A main issue in the appeal was whether iiNet had an obligation to have and implement a policy to transmit notices of claimed infringement to its subscribers and to terminate the accounts of repeat infringers who used its systems and services to engage in file sharing. The trial judge had held that iiNet was not liable for infringement for refusing to do so. The appeal was rejected by a 2 to 1 majority, with Emmett and Nicholas JJ concurring in separate opinions that the appeal should be dismissed, and with Jagot J, who would have allowed the appeal.

All three judges were of the opinion that iiNet could have established and implemented a policy to forward notices of claimed copyright infringement to subscribers that could have included suspending and terminating the accounts of repeat infringers to avoid being liable for authorizing copyright infringement under Australia’s copyright laws. All three judges also held that iiNet’s obligation to act was premised on copyright holders providing cogent evidence of the alleged primary acts of infringement which took place using its services.

The main disagreement between the judges was whether iiNet had been provided with sufficient information to trigger the obligation to act. Jagot J. was of the opinion that iiNet was given everything required and in any event would not have acted irrespective of the information provided to it. Emmett and Nicholas JJ expressed the opinion that sufficient information had not been supplied. Nicholas J found that the fact that iiNet may not have acted irrespective of the information was “not to the point”.

Accordingly, while iiNet was exonerated on the facts, the opinions rendered in the case leaves it open for copyright holders in Australia to hold ISPs liable for authorizing infringement unless they take available steps to deal with infringements by their subscribers.

The decision is an important one for ISPs and rights holders in Australia. However, the decision also has global implications for policy makers that are concerned with finding practical and efficacious means of reducing the scourge of illegal online distribution of copyright content. I say this because in the course of giving reasons for decision, the judges of Australia’s appeal court canvassed the effectiveness of sending out notices of claimed infringement with warnings of potential account terminations and found they would be effective in reducing online file sharing. They also reviewed the reasonableness and practicality of requiring ISPs to implement a graduated response system including sending out these types of notices and adopting and implementing a process to terminate accounts of repeat infringers. They found such a process reasonable and workable.

As noted above, the main issue in the iiNet case was whether iiNet was liable for the authorizing infringement of its subscribers who used its systems and services to engage in illicit peer-to-peer file sharing. To make this determination the court canvassed a series of issues including whether its subscribers were liable for copyright infringement when they used the BitTorrent protocol to share movies and television programming and whether failing to implement a graduated response system rendered iiNet liable for authorizing infringement.

Liability of subscribers for copyright infringement

The first issue in the case was the extent of infringement by iiNet subscribers using BitTorrent to engage in file sharing of movies and TV programming. While iiNet had admitted that users had infringed copyright, it claimed that they only ever did so once and that there were no further infringements for iiNet to prevent. The trial judge had agreed. The trial judge had found that users of BitTorrent had infringed copyright, however the parties disagreed on the extent of infringements taking place and this was potentially relevant to the obligations that iiNet would be under to act on the infringements. The trial judge had also found that users of BitTorrent only ever infringed copyright once, the first time the file was shared with other users, irrespective of the duration the file was available to other BitTorrent users.

All of the appeal judges reversed the finding and found that the uploaders were liable for multiple infringements of copyright.

Australia has implemented the WIPO Internet Treaties. Accordingly, unlike Canada, its copyright laws include a right of making available a work to the public. All judges of the court accepted that when an individual uploads a file to make it available for sharing over a BitTorrent network, the person is liable for infringement under the making available right. The court also held that each time an individual connected to the internet, a separate act of making the work available to the public occurred.  All of the judges also agreed that the electronic transmissions made by subscribers as part of a BitTorrent swarm involved transmissions that were “to the public”. However, the judges disagreed as to whether the evidence before the court established that files or substantial parts of files were communicated to the public when transmitted by the BitTorrent protocol.

Authorization

The main issue in the case was whether iiNet was liable for the illegal file sharing of its customers under the theory of authorization. Section 101(1) of Australia’s copyright law establishes liability for authorization in Australia:

101 (1)  Subject to this Act, a copyright subsisting by virtue of this Part is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright.

The Australian Act was amended in 2000 by inserting into s. 101 a new subsection 1(A) to provide a practical enforcement regime for copyright owners and to promote access to copyright material online.  Universal Music Australia Pty Ltd. v. Sharman License Holdings Ltd., [2005] FCA 1242 (5 September 2005); Universal Music Pty Ltd. v. Cooper, [2005] FCA 972 (Aust. F.C.). The provision states that in deciding whether a person has authorized the doing in Australia of any act comprised in the copyright, the matters that must be taken into account by the Court include:

(a) the extent (if any) of the person’s power to prevent the doing of the act concerned;

(b) the nature of any relationship existing between the person and the person who did the act concerned;

(c) whether the person took any other reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.

In the course of analyzing the above factors, and in particular factors (a) and (b), the judges canvassed whether iiNet had the power to prevent illegal file sharing by its subscribers and could take reasonable steps to prevent or avoid these infringements by implementing a graduated response system. The judges of the court expressed the unanimous opinion that iiNet had such a power and that taking steps to adopt and implement a graduated response system would be reasonable and likely effective to prevent repeat infringements by its subscribers – even though two judges found that on more limited grounds it was not unreasonable for iiNet not to act in this case (based on the knowledge iiNet had before the case had been filed).

Effectiveness of a notice and notice regime coupled with a threat of account termination

iiNet had argued in the appeal that it should not be required to send its subscribers notices of claimed infringement with warnings of potential account terminations because such notices would not be effective in stemming online file sharing. Some Canadian ISPs have had a de facto notice and notice system in Canada for years. Despite this, there is no evidence that it changes people’s behavior to stop illicit file sharing and purchase creative products from legitimate services. However, as I and others have pointed out elsewhere, research by our trading partners shows that a notice with a threat of some sanction will operate as an effective deterrent. Opinions rendered by the iiNet court provides added support for the that fact that notices are likely to be effective in reducing infringements when coupled with potential action such as suspension or termination of accounts of customers that fail to heed such notices.

Emmett J. expressed this opinion as follows:

There was no finding by the primary judge that infringing acts engaged in by iiNet users were engaged in, in circumstances where the customer whose account was being used knew, or had reason to suspect, that infringement was involved. It may well be that an iiNet user would not know that, by downloading the Films by means of the BitTorrent System, there was infringement. It may be that an iiNet customer was unaware that the service provided to that customer was being used for infringement. A warning, coupled with reference to the entitlement of iiNet to terminate the service, may well be sufficient to persuade a customer to desist from engaging in such conduct or to take steps to ensure all users of that customer’s service desist. It is one thing to be aware of a prohibition on infringement of copyright. It is another thing to be aware that specific acts engaged in actually constitute infringement.

It may be possible that some, or indeed many, customers would disregard a warning given by iiNet. However, it does not follow, from that possibility, that all customers would disregard a warning or even that most customers would do so. Even if many customers may disregard a warning, compliance by others would prevent further infringement involving the accounts of those customers from taking place. Every time a user of the internet leaves a BitTorrent swarm, the supply of copyright material made available online within the swarm would be reduced and the opportunity for other internet users to infringe copyright would therefore also be reduced.

Giving clearly worded and accurate warning to a customer whose account was thought to be involved in acts of infringement is a reasonable step that could have been taken by iiNet, regardless of whether the warning would have been heeded by every customer. There is no basis for concluding that all, or even a substantial proportion, of iiNet’s customers would permit their accounts to continue to be used for acts of infringement if they were properly warned that the acts constituted infringement and their attention was drawn to their contractual obligations and iiNet’s contractual right to enforce those obligations by suspension or termination.

Nicholas J expressed a similar opinion:

The primary judge seems to have come to the conclusion that the giving of a warning could not be a reasonable step for the purposes of s 101(1A)(c) because the mere giving of a warning is not a power to prevent. I would accept that the ability to give a warning is not in itself a power to prevent for the purpose of s 101(1A)(a). However, s 101(1A)(c) is concerned with a different matter namely, what “reasonable steps” the alleged authoriser might have taken to prevent or avoid any of the relevant acts of copyright infringement.

I am satisfied that the primary judge erred in holding that the giving of a warning could not be a reasonable step that might be taken to prevent or avoid the relevant acts of copyright infringement. If the ability to give a warning is supported by a power to terminate or suspend a subscriber’s account then there can be no doubt that the giving of a warning is capable of amounting to a reasonable step for the purpose of s 101(1A)(c).

So did Jagot J:

It is also difficult to accept that most people when notified of copyright infringement by them or a person using their service would simply ignore the notice unless threatened with termination. Not all people would be aware of the risk of acting unlawfully in downloading films and television shows from the internet. Not all people would be aware that their downloading activities can be monitored both by third parties (such as copyright owners using software like the DtecNet agent) and internet service providers. When confronted by a mere notice or warning with evidence both of copyright infringement (either by them or another person they permitted to use their internet service) and the ease with which it can be detected by third parties, it is difficult to accept that there would be no deterrent effect whatsoever. To the contrary, it could readily be assumed that many people on receipt of a mere notice or warning would be deterred from future infringements irrespective of termination. The fact is that by receipt of a mere notice or warning people would realise that activities they might have thought innocent or at least undetectable were in fact unlawful and open to scrutiny.

The judges also commented on the reasonableness of an ISP with a contractual right to terminate an account doing no more than merely posting a policy on a website warning customers about this policy. They did not view taking these steps as being sufficient to constitute a reasonable response to the infringements. Emmett J, for example, stated the following:

The language of s 101(1A)(c) requires an enquiry as to any steps that were taken by iiNet and whether there were reasonable steps that were not taken. The Infringement Notices specifically invited iiNet to cancel, suspend or restrict the accounts of the customers identified in the spreadsheets enclosed with them. Merely having a contractual provision relating to copyright infringement and drawing attention to the contractual provision on its website is hardly an effective step to prevent infringement, in circumstances where iiNet does not enforce the contractual provision.

Reasonableness  of account termination

The judges of the Full Court also canvassed in detail the reasonableness and practicality of iiNet adopting and implementing a policy to terminate the accounts of repeat infringers. The primary judge had held that implementing such a system would not be reasonable, apparently under any circumstances. Critics of effective enforcement of copyright like Prof. Geist have relied on this holding to argue against requiring ISPs to ever take steps to suspend or terminate accounts of repeat infringers. However, the Full Court expressly disagreed with the primary judge on this issue and delivered a strong endorsement of such steps in order to prevent continuation of copyright infringement.

Emmett J. pointed out that iiNet terminated user accounts for other reasons. He also pointed out that terminating a user’s account where the user uses the account in violation of contractual terms of service to infringe copyright is reasonable and was exactly the step contemplated by the safe harbour provisions of the copyright law.

Even where a service provider such as iiNet has the benefit of the Safe Harbour Provisions, the Court is specifically empowered, under s 116AG(3)(b), to order termination of a specified account. It can hardly be concluded, therefore, that termination was, per se, unreasonable. Rather, the Copyright Act itself contemplates such a step. Accordingly, it must be regarded as a reasonable step, at least in some circumstances, including circumstances involving repeat infringements, to terminate or suspend an account of a customer.

Thus, iiNet had the capacity to control the use of its services by its customers and to take steps to prevent acts of infringement by the use of services provided to them. In some circumstances, iiNet did in fact exercise control over the provision of its services. The presence of such provisions amounted to a degree of power to prevent further acts of infringement that was significant, for the purposes of s 101(1A)(a). That power arose from the relationship between iiNet and its customers under the customer relationship agreements, the nature of which is significant for the purposes of s 101(1A)(b).

There is no reason to conclude that sending warnings would be unreasonable, given that iiNet’s business routinely involved sending warnings to users in a variety of circumstances, such as when fees were overdue. There is no reason to view a temporary suspension as unreasonable, particularly when iiNet had the right to terminate the service altogether. The period of a temporary suspension would be a matter for consideration in any given case. A very long suspension for a very minor infringement may be unreasonable. However, that is not a reason for concluding that no suspension could ever be reasonable…

iiNet says, nevertheless, that termination of an account was not a reasonable exercise of a power to prevent because it would involve disconnection of the customer from the internet. Disconnection would not, in itself, prevent infringement because of the possibility of the customer obtaining access to the internet through another carriage service provider. On the other hand, disconnection would do much more, in that the whole relationship between iiNet and its customer would be ended, thereby foreclosing all internet activity by that customer by means of iiNet’s service.

However, it is difficult to see why that consequence is unreasonable, if the customer, having been warned that the service being provided to the customer by iiNet was being used to engage in infringing acts, that to do so was a breach of contract and that continuing to do so may result in termination, nevertheless chooses to continue to permit the iiNet service to be used to engage in infringing acts. It may be unreasonable to terminate an account without warning. However, that is not the question.

Jagot J reached the same conclusion rejecting the contention that adopting and implementing a graduated response system was unreasonable.

Despite this, iiNet adopted and maintained thereafter a clearly stated position that the AFACT notices did not identify any actual infringing user and, in any event, that iiNet had no obligation to do anything in response. This first aspect of iiNet’s position was adopted despite iiNet knowing not only that it could match IP addresses to customer accounts but also that its policies for dealing with other forms of unlawful or abusive activity assumed that it would do so and thereby hold customers responsible for all use on their accounts…

Another reason I take a different view is that iiNet’s position on the use of its service in a manner infringing copyright was not only inconsistent with its approach to other management issues (such as customers not paying bills or exceeding their quota), but also inconsistent with its approach to other types of internet abuse (such as spamming). The unavoidable inference is that when its own interests were at stake, iiNet exhibited no hesitation in: – (i) using IP addresses to identify the relevant customer accounts, (ii) treating the customer as responsible for all use of the iiNet service on the customer’s account, and (iii) promulgating a regime of warnings, suspension and termination (albeit discretionary) of the customer’s account. However, when its own interests were either not at stake or, at worst, might have been adversely affected by taking action, iiNet adopted a contrary position…

…it is feasible for an internet service provider to respond to the receipt of credible evidence of copyright infringements by users of its service…there is no particular difficulty with an internet service provider holding a customer responsible for the use of that customer’s service (consistent, in this case, with iiNet’s CRA and other policies about internet use)…

An internet service provider is confronted by precisely the same problems when dealing with spamming and other forms of internet abuse. iiNet has been able to formulate (and presumably implement) its policy for dealing with network abuse…

I do not see the expense and complexity of implementing a policy or scheme of warnings and suspension or termination as insuperable difficulties rendering the taking of such steps as unreasonable. The trial judge considered that the complexity and expense of such a scheme “manifestly militates against the conclusion that such scheme is a relevant power to prevent” (at [435]). For the reasons given, I consider that this conclusion does not accord with either the factual reality (that iiNet was capable of implementing equivalent schemes to deal with other issues such as network abuse and spamming) or the legislative scheme (which, by the safe harbour provisions, contemplates schemes of this very kind at least for repeat offenders).

Nicholas J. reached a similar conclusion.

Nor do I think that the difficulties involved in establishing a system for giving warnings and, if necessary, termination or suspension of accounts, were likely to be as great as Mr Malone’s evidence might suggest. It is true that the respondent, if it was to take the step of issuing warnings in particular cases, would need to decide when it would be appropriate to do so. To that end, the respondent would need to decide, among other things, whether the available material was sufficient to satisfy itself that it was appropriate for a warning to be issued or for an account to be terminated. It is also true that the respondent would need to decide how many warnings should be given (unless it decided that no warnings need be given) before terminating or suspending service to a particular subscriber. These and like questions involve matters of judgment and degree. As I have already acknowledged, the decision as to whether or not to terminate a particular account may not be a simple one. But I do not accept that the adoption of some system providing for the issuing of warnings followed by termination or suspension is not a reasonable step which the respondent could have taken for the purpose of preventing or avoiding copyright infringement by users of its network.

Nicholas J, also expressed the opinion that in the absence of a industry code of conduct that iiNet had considerable flexibility as to how to design an effective and fair graduated response process.

Nevertheless, in the absence of applicable regulations or access codes which might guide an ISP’s decision making in relation to such questions, it seems to me that an ISP should be given considerable latitude when working out the detail of such a system. It is always possible to argue that a system for the issue of warnings and termination could be tougher than it is. But it would be difficult to criticise an ISP on that account if it acted in good faith to devise and implement a system that involved taking such steps against subscribers who the ISP was satisfied had used (or permitted others to use) its facilities for the purpose of committing flagrant acts of copyright infringement.

The knowledge of infringement requirement

All of the judges accepted that the reasonableness of iiNet being required to take steps to forward notices of claimed infringement and to terminate accounts depended on its having reliable evidence that an account was being used to infringe copyright. On the facts of the case, two out of the three judges expressed the opinion that the information given to iiNet was not adequate to meet the required standard. In the final analysis that was the chief (possibly sole) reason why the appeal was dismissed.

Nicholas J. stated that to trigger a graduated response by an ISP, a notice of claimed infringement sent to the ISP must contain an explanation of how the information about the subscriber infringement was collected. He also suggested that a notice addressed to an ISP should contain a statement verifying the accuracy of the data or the reliability of the methods used to collect it. Emmett J, stated that what is required is

unequivocal and cogent evidence of the alleged primary acts of infringement by use of the iiNet service in question. Mere assertion by an entity such as AFACT, with whatever particulars of the assertion that may be provided, would not, of itself, constitute unequivocal and cogent evidence of the doing of acts of infringement. Information as to the way in which the material supporting the allegations was derived, that was adequate to enable iiNet to verify the accuracy of the allegations, may suffice. Verification on oath as to the precise steps that were adopted in order to obtain or discern the relevant information may suffice but may not be necessary.

Emmett J, would also have imposed two additional requirements on copyright owners before requiring them to voluntarily adopt and implement a graduate response process. First, that the copyright owners had undertaken “to reimburse iiNet for the reasonable cost of verifying the particulars of the primary acts of infringement alleged and of establishing and maintaining a regime to monitor the use of the iiNet service to determine whether further acts of infringements occur. Second, that the copyright owners had also undertaken to “indemnify iiNet in respect of any liability reasonably incurred by iiNet as a consequence of mistakenly suspending or terminating a service on the basis of allegations made by the Copyright Owner.” Emmett J, was the only judge to have added these two requirements.

The issue of whether iiNet had sufficient knowledge of the infringements to act was a hotly disputed issue. However while the trial judge had held that even though iiNet did not have a complete understanding it had decided from the second notice that it would never act on the notices irrespective of the information supplied to it.  Despite the fact that this finding was unchallenged, the majority judges (Emmett J and Nicholas J) did not consider the decision of the ISP not to act was determinative.  In a strong dissent, Jagot J reached the opposite conclusion.

Some reflections on the iiNet case

Online file sharing is a major problem in Canada. Recent research in Canada and elsewhere demonstrates the adverse impacts and economic losses that result from illicit online file sharing in the film and music industries.

The findings of the Full Court in the iiNet case show that graduated response processes can be effective, reasonable, and fair mechanisms to reduce illegal file sharing. In fact, although not referred to in the decision, last year the Irish High Court in EMI Records & Ors -v- Eircom Ltd, [2010] IEHC 108 reach a similar conclusion. The Irish court held that a graduated response solution to illegal file sharing involving “detection, notification and termination” “is viable and proportionate”. Other academic research supports this view as well. See, Prof.Bomsel Decreasing Copyright Enforcement Costs: The Scope of a Graduated Response, Prof.Strowel, Internet Piracy as a Wake-up Call for Copyright Law Makers—Is the ‘‘Graduated Response’’ a Good Reply?, See also, Barry Sookman and Dan Glover Graduated response and copyright: an idea that is right for the times.

The iiNet decision provides useful guidance on how Bill C-32 could be amended to better achieve the stated objectives of the Government and the opposition parties. Bill C-32 already contains a notice and notice regime which requires online service providers to forward notices of claimed infringement to end users. The current proposed notice and notice process lacks efficacy, however, because the notices do not carry any threat of sanction for repeat infringers. The iiNet decision suggests that an additional requirement to mandate online service providers to adopt and implement a policy to terminate the accounts of repeat infringers would be an efficacious and reasonable way to reduce online file sharing in Canada.

* Links updated Mar. 13, 2011

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Welcome. I hope everyone is having a good day so far. Michael Geist and I are going to talk about the legal protection of technological protection measures (TPMs).

I am going to explain how the TPM provisions in Bill C-32 work and highlight some of the areas where there has been confusion in interpreting them. I will also address some of the proposals being made for amending C-32 as it relates to TPMs. In particular, I will provide my views on the merits of Michael’s two main proposals for amending the Bill’s TPM provisions.

Michael says the Bill should only prohibit circumventing TPMs when the purpose is for infringement. He also says a person should be able to hack a TPM to make private copies and that rights holders should not be compensated for such copying such as through a private copying levy. I do not agree with his proposals and will tell you why.

It is interesting that I am speaking before Michael today. I will be anticipating some of the things he might say based on his blogs and our recent appearance before the legislative committee reviewing Bill C-32 on December 1, 2010. If I get Michael’s positions wrong, I am sure he will tell us.

Frequently asked questions about legal protection for TPMs

The topics I will canvass are set out in my slides in more detail. They are organized by a series of questions that people who are involved in the debate about TPMs need to consider. They are:

• 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. Related to this question is the notion of “user rights”; what that term means; whether “user rights” trump authors’ rights; and whether “user rights” should trump legal protection for TPMs.
• Given that one of the goals behind the Bill 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?
• Do the WIPO Treaties which Canada is committed to ratifying permit circumventing TPMs for private copying?
• My last topic is whether Michael’s two proposals for amending the TPM provisions in Bill C-32 have any precedents internationally. Michael points to Bill C-60, New Zealand and Switzerland as precedents. But are they really precedents we can or should follow? They are not and I will tell you why.

Does C-32 properly implement the WIPO Treaties?

Let me begin with the question as to whether Bill C-32 properly implements the WIPO Treaties. If you look at my slides you will see a quote from the WIPO Guide which sets out what the treaties require. WIPO itself says that to implement the treaties a contracting party must put in place several measures. The first are measures that prohibit acts of circumvention including prohibiting acts of access control circumvention. The second are measures that prohibit providing circumvention services and trafficking in circumvention tools.

Bill C-32 meets these requirements. The Bill has a definition of “technological protection measure”. It describes two types of TPMs.  Paragraph (a) defines access control TPMs; paragraph (b) defines copy control TPMs.  There is a definition of “circumvent”.  The actual prohibition against circumvention which is in Section 41.1(1) only apply to access control TPMs within the meaning of paragraph (a). There is no general prohibition against circumventing copy control TPMs. The provisions dealing with trafficking in circumvention tools or offering services to circumvent apply to both access control and copy control measures.

Does C-32 have exceptions that permit circumvention of TPMs and is there a flexible means of adding to them if needed?

The Bill has a number of exceptions, some of which are misunderstood or have been inaccurately described. There are, for example, exceptions for law enforcement, interoperability, encryption research, personal information and network security testing. There are also exceptions that permit trafficking in tools and providing circumvention services to facilitate the exercise of these exceptions.

Michael has said there are no exceptions for the blind. He is wrong. There is one that permits circumvention by or for persons with perceptual disabilities such as the blind. He also says that the exception for the blind does not include an exception that permits providing circumvention tools or services to enable people to circumvent TPMs for the blind. This too is wrong. Section 41.16(2) has an exception for this.

Michael also says there is no exception that permits jail breaking phones to use them on other networks. That is dealt with in radio apparatus exception. He also says there is no ability to jail brake a smartphone for the purpose of application interoperability. That also is wrong. To the extent a person needs to circumvent a TPM to make an application work with a phone’s operating system e.g., Apple’s iPhone OS, that is permissible under the general exception that enables people to circumvent TPMs for interoperability purposes.

If you compare the circumvention prohibitions in Bill C-32 with what exists internationally, you will see that they are less protective of TPMs than in the EU under the Copyright Directive. That directive requires Member States to prohibit the circumvention of access and copy control TPMs. Bill C-32 only prohibits circumvention of access control TPMs. Under C-32 it is permissible to circumvent a copy control TPM for a fair dealing or other purpose including education. Statements made by Michael to the effect that the TPM provisions in C-32 are more strict than in the U.S or that they completely trump fair dealing and education are not, therefore, true.

Michael has also challenged the processes in the Bill to establish new exceptions to address unintended consequences and new technologies. He claims the Bill is inflexible in this respect. However, if you look at the Bill you will see that the government has the power to enact regulations in three categories of situations to deal with unintended consequences and new technologies.

Under  S.41.21(1) there is a power to make regulations in the event TPMs are used to restrict competition in the aftermarket sector. This power was intended to deal with the few cases in the U.S. where entities tried, unsuccessfully, to use TPMs to stop competition in interoperable products such as garage door openers and printer cartridges.

The Governor in Council also has a broad power to make regulations to deal with other situations in Section 41.21(2) having regard to specific open ended criteria set out in the subsection. Subsection (i), takes into account a situation where a TPM could adversely affect the use a person may make of a work. This is very broad factor and would cover regional coding and other potential impediments to the use of a work. Subsection (iii) takes into account a situation where a TPM could adversely affect fair dealings for criticism, review, news reporting, commentary, parody, satire, teaching, scholarship or research. Accordingly, if TPMs hamper fair dealings including a dealing for educational purposes, a regulation could address the problem. Subsection (v) takes into account a situation in which a work is not commercially available in a form that is appropriate for educational uses. Last, the subsection requires taking into account any other relevant factor.

Section 41.21(2)(b) also gives the government the power by regulation to require the owner of a copyright to provide access to people who are entitled to the benefit of an exception, where for some reason the copyright owner is not making it possible to exercise the exception.

As my slides show, these processes provide mechanisms to address unintended consequences and new technologies in a broader and more flexible way than what exists internationally. For example, the U.S. has only one process to expand the scope of the exceptions. It is one that Michael has criticised. The U.S. has a tri-annual review process before the U.S. Copyright Office to exclude classes of works for certain purposes. The Canadian regulation power is broader. It applies at any time and is not subject to the same standard of proof. In the EU under Article 6(4) the EU Copyright Directive, Member States have to take appropriate measures, in the absence of voluntary agreements with rights holders, to make the exercise of certain exceptions possible.

Can a prohibition on circumvention that is limited to an infringing purpose comply with the WIPO Treaties?

I would like now to turn to the question of whether the WIPO Treaties can be implemented by limiting protection to circumvention for the purposes of infringement. I raise this because Michael has said on numerous occasions, most recently before the legislative committee examining Bill C-32, that Canada can implement protection for TPMs in this way and comply with the minimum requirements of the WIPO Treaties.

There has been an exchange of views across the Atlantic between Michael and Dr. Ficsor concerning the minimum requirements of the WIPO Treaties. Last December Dr. Ficsor published several papers in which he disagreed with Michael’s views about the WIPO Treaties. After C-32 was tabled Michael published a paper in a book edited by him, which I am sure he will show you as he did to the legislative committee. In the paper Michael took issue with Dr. Ficsor’s views about the WIPO Treaties. Dr. Ficsor read the paper and wrote a major rebuttal to Michael’s paper which he published on IP Osgoode’s blog. He thoroughly and meticulously examined every argument and conclusion that Michael made and found them wanting.

Dr. Ficsor agrees that there is certain flexibility as to how the treaties can be implemented. But he disagrees with Michael’s opinion that the treaties mean “whatever you want them to mean”.  Dr. Ficsor provides a detailed analysis of what the treaties do require. He shows that the treaties cannot be properly implemented by linking the prohibition against circumvention to an infringing purpose, as Michael contends. I recommend you read Dr. Ficsor’s paper.

Dr. Ficsor knows something about the WIPO Treaties. He was the Assistant Deputy General of WIPO at the time the WIPO Treaties were negotiated. There is probably no one who knows more about the requirements of the WIPO Treaties than he does.

Do other countries link circumvention of TPMs to an infringing purpose?

No, our trading partners do not prohibit circumventing TPMs only if the purpose of the circumvention is for an infringing purpose. There would be no point to such limited protection and it could hardly be argued that such protection provides “adequate legal protection” for TPMs, as the WIPO Treaties require.

Michael points to Bill C-60, New Zealand, and Switzerland as precedents for limiting protection for TPMs to circumvention for the purposes of infringement. He repeated that claim again before the legislative committee. Let us look at these supposed precedents.

At the time Bill C-60 was being considered, there were many people who believed that its TPM provisions would not have complied with the WIPO Treaties. An example, is Glen Bloom who expressed this view in a paper referred to in my slides. Mr. Bloom is the Chair of the IPIC Copyright Technical Committee. In this capacity he recently testified before the legislative committee about Bill C-32. He knows his copyright. Mr. Bloom states in his paper, quoted in my slides, that Bill C-60’s TPM provisions would not have met Canada’s obligations under the WIPO Treaties.

Michael also relies on New Zealand as a precedent. New Zealand permits circumvention of TPMs unless it is for an infringing purpose. Michael says that shows that the treaties can be implemented in this way. But, New Zealand has not ratified the WIPO Treaties and is hardly a country that can evidence what the treaties require.

Michael also refers to Switzerland as a precedent because Switzerland links a prohibition on circumventing TPMs to an infringing purpose. But, Switzerland is a known case of a Contracting Party that simply did not do it right. Dr. Ficsor says, “it does happen time and again that certain Contracting Parties do not fulfil their treaty obligations. Switzerland is such a country.”  Of the 88 countries that have ratified the WCT and the 87 countries that have ratified the WPPT, Michael picks as a model a country that has failed to provide adequate legal protection against the circumvention of TPMs. He does not pick any of Canada’s major trading partners as examples for Canada to follow.

Moreover, although Michael refers to Switzerland as a model, he hasn’t, to my knowledge, pointed out that Switzerland has a private copying levy to compensate rights holders for unauthorized copying. Michael told the legislative committee last week that he does not support a levy to compensate authors for unauthorized copying. So even Switzerland is not a precedent for the overall form of implementation Michael proposes.

Should circumvention of TPMs for private copying be permitted?

I now want to address whether circumvention of TPMs should be permitted for private copying. Bill C-32 has exceptions for format shifting, time shifting and making backup copies. These exceptions only apply where TPMs are not hacked to do these acts.

In my view, the conditions against hacking TPMs in the new private copying exceptions are important. TPMs support new business models that would be undermined if people could hack TPMs to make private copies. The conditions are also important because Bill C-32 permits private copying without any compensation to rights holders. Removing these conditions would undermine legitimate markets for the legal sale of copyright content and further increase uncompensated copying.

Michael says we should drop these conditions. He says we should permit people to hack TPMs to copy for format shifting, time shifting and back-up copying purposes. But, doing so could undermine many current and future service offerings which depend on protecting copy and access control TPMs. These include subscription, rental, and rent to own services.** Examples of these services are music streaming subscription services such as Napster and Spotify; video streaming subscription services like Netflix; ad supported music; internet radio; certain digital downloads services, and digital movies rentals from Blockbuster. My slides depict how these and other models could be detrimentally affected by a legal right to hack a TPM for private copying purposes.

Here are just a couple of examples of the problems:

• On demand rent or buy models: If you rent, you pay (say) $3.99 and if you buy, you pay (say) $17.99. If a person could circumvent the TPM that protects the rent/buy model, wouldn’t some people just pay the rental fee and make permanent copies without paying for them?
• A music or movie subscription service that has copy controls that prevents copying: If a person could stream the sound recording or movie and legally circumvent the TPM to make a permanent copy, wouldn’t some people pay a monthly subscription fee and make permanent copies without paying for them?
• Music downloads like iTunes where you buy a song today for $0.99, its TPM free: A person could subscribe to a monthly subscription service and legally circumvent the copy control TPM that prevents copying to make permanent copies. Wouldn’t some people make permanent copies without paying for them?
• Software and gaming: A person could obtain a 5 day trial with an option to buy if the person likes the software or game. However, if a person can legally hack the TPM that limits access for the trial period and which prevents other copying, wouldn’t some people hack the TPM and avoid paying the purchase price to obtain permanent copies?

All of these things could be done without infringing copyright under Michael’s proposals.

Michael said to the legislative committee that private copying is a “user right”. He says if a user acquires content the user ought to have the right and does have the right to hack the TPM to make copies for format shifting and other purposes without the consent of the owner of the copyright – and without paying for the copies.

Michael is wrong that people have or should have a reasonable expectation that they can obtain content for free, or on a limited basis for some reduced consideration, hack the protections rights holders place on the content, and make copies or obtain access they had not bargained or paid for. If a person pays a rental fee, the person should not expect a right to obtain a permanent copy without paying for the permanent copy. If a person pays a monthly subscription fee for temporary access to content streams, the person cannot reasonably expect the right to make permanent copies without paying for them.

If C-32 is amended as proposed by Michael, once a person has legal access to a work, the person could legally hack the TPM protecting the work, legally make permanent copies, and effectively avoid paying for what is purchased. This is an unreasonable proposal. No person could reasonably ask for this broad right. It is unjustifiable and unsupportable. It would reduce investment in digital products and new distribution models. It would result in the loss of revenues and jobs in the digital sector. It would also substantially undermine the Government’s stated goal of enabling e-commerce in digital products in Canada.

Michael’s views about “user rights” confuses the rights a person has in the tangible thing her or she buys with the copyright in the thing. When you buy a song, you do not buy the label. When you buy a movie, you do not buy the studio. When you buy a video game or book, you are not buying the publisher. A person acquires a right to use an object he or she buys. But, the person does not acquire any legal right to make copies that have not been expressly or implicitly authorized by the copyright owner.

The metaphor of “user rights” expressed by the Supreme Court in the CCH case makes clear that copyright rights, and exceptions like fair dealing, are of paramount importance in construing the Copyright Act. But, as the Supreme Court made clear in CCH, fair dealing is only an affirmative defence to a claim of copyright infringement. It is not a concept that provides legal rights that can be asserted against copyright owners or be used to trump authors’ legal rights. “User rights” under copyright provide no basis for claiming that a person who rents copyright content such as a movie or game, or who merely subscribes to view it, has a right to hack a TPM in order to make permanent copies without authorization and payment.

A number of European decisions, in examining the legal inter-relationship between private copying and the use of TPMs, have similarly concluded that exceptions for private copying do not trump author’s rights in their works. In particular, in Europe there have been claims brought against copyright owners of content such as music and movies alleging they have a legal duty to remove TPMs to enable individuals to make private copies. These claims have been rejected in the cases referred to in my slides.

Would an exception for circumventing TPMs for private copying comply with the Three Step Test?

I now turn to the question of whether Canada could create an exception for private copying that permits circumvention of TPMs for such purposes and comply with our obligations under the Berne Convention and WTO TRIPS. These agreements, as you know, require that the Three Step Test be applied to copyright exceptions and limitations. The Three Step Test requires that an exception be a certain special case; that it not undermine the market or potential market for a work; and that it not unreasonably prejudice authors or copyright owners.

The interrelationship between private copying and protection for TPMs was considered by the French Supreme Court in the Mulholland case. A key question in the case was whether French copyright law could allow circumvention of a TPM for private copying. The French Supreme Court stated it could not. It held that a law that prevents rights holders from using TPMs on their products in the digital environment would violate the Three Step Test. Central to its decision was the concern that TPM-free products would promote unlicensed copying. That is a precedent of pretty high authority. The Paris Commercial Court in the Henry v. Warner Bros case expressed similar statements about the need for TPMs in the digital environment.

Would an exception for circumventing TPMs for private copying comply with the WIPO Treaties?

Another question is whether the WIPO Treaties can be complied with by permitting circumvention of TPMs for private copying? Dr. Ficsor also deals with this in his paper that is posted on IP Osgoode’s web site. He suggests that an adequate level of protection cannot take the form of allowing circumvention of TPMs so as to permit everyone to make private copies. The WIPO Treaties require an adequate level of protection. But, how can legal protection for TPMs be adequate if a right to circumvent TPMs for private copying would violate the Berne Three Step Test as the Mulholland case suggests?

Are there international precedents for an exception for private copying, that permits circumventing TPMs, where authors receive no compensation for the unauthorized copying?

I will now address the question of international practice and standards. In particular, I want to challenge Michael’s assertions that there are international precedents for what he proposes. I have already addressed whether there are international precedents for limiting the prohibition on circumventing TPMs to an infringing purpose. I now ask whether any of our trading partners that have private coping exceptions permit private copying to trump TPMs as is being proposed by Michael?

In the EU the answer is no. In the EU private copying is permitted only if it is subject to fair compensation. The scope of any private copying exception must be subject to the Berne Three Step Test. Moreover, Member States have no right to permit circumvention of TPMs to enable private copying. Member states may take measures to enable certain private copying where voluntary measures by rights holders are not in place. Importantly, however, even these measures do not apply to works that are available on demand through an online subscription basis. They essentially apply to CDs and other physical media.

As I already mentioned, Michael says we should look to Switzerland and New Zealand as examples. But neither of them are precedents for what is being proposed. New Zealand, to my knowledge, does not even have a broad exception for private copying. Switzerland permits circumvention of TPMs for private copying. It is a country, which as pointed out before, did not properly implement its treaty obligations. But, even putting that aside, Switzerland compensates its authors and other creators for private copying through a levy. So it is no precedent for Canada given the clear direction that the existing private copying levy on audio-recording media will not be expanded to digital audio recorders (DARs) like iPods and other devices.

Michael has not pointed to any other country that has broad rights of private copying such as those in Bill C-32, a right to hack TPMs for this purpose, and which does not provide authors and other rights holders with compensation for such copying. His proposals, essentially, ask Canadians to chart a new course in violation of our convention and treaty obligations in a way that, when properly understood by Canadians, would be viewed as unreasonable and unjustifiable, and which would seriously undermine the rights of authors and other creators and their ability to exploit and to be compensated for their creative endeavours.

Thank you.

* The talk was edited and augmented for this blog.

** I use the word “rent” in the colloquial sense. The format shift exception does not permit making a private copy where the source copy has been borrowed or rented.  It is unclear whether a download that may be viewed for a limited period is a  “rental” in the legal sense.

For convenience my slides are set out below.

Insight_Slides_on C-32 and TPMs

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

I would like to thank the committee for inviting me to appear today to provide input on Bill C-32.

Before starting my remarks, I would like to give you some background about myself.  I am not telling you all of these things to boast, but because I understand some have expressed concern that I have one or two clients affected by this legislation and that is the only view shaping my perspective. This is not the case. I am lawyer who specializes in this area and have worked and taught about it for many years.

• I am a partner with the law firm McCarthy Tétrault and am the co-chair of its tech law group.
• I am an adjunct professor at Osgoode Hall Law School where I teach IP law.
• I am the author of 5 books. These include the leading Canadian 5 volume treatise on Computer, Internet and E-Commerce Law.
• I am a member of numerous IP committees, associations and organizations.
• I have also been involved in copyright matters for creators, users, and intermediaries spanning decades of practice. I have appeared in three of the precedent setting Supreme court copyright cases including CCH which modernized fair dealing in Canada and Tariff 22 which examined the liability of ISPs where I appeared for the ISPs opposite to SOCAN.

I am here today in my personal capacity and not representing any clients.

The government in introducing this bill made it clear that it was to enable Canada to have copyright legislation that would benefit the Canadian marketplace, to create framework laws and to enable Canada to be leader in digital economy, in line with all of its major trading partners. I support these objectives.

There are, however, areas where the Bill will have unintended consequences that are inconsistent with those objectives. I am hopeful to be of assistance to members of this committee in understanding these issues, many of which are technical.

In the limited time I have, I am not able to address all of the issues associated with the bill. But, I will provide a few illustrative examples of where technical problems need to be fixed.

Enabling Infringement (Provision of Services), s.27(2.3)

The government has said that the bill will give copyright owners “stronger legal tools to go after online pirate sites that facilitate copyright infringement.

As Minister Clement has stated, the bill goes after the bad guys, the “wealth destroyers”.

To address the problem the Bill has a new section called “Enabling Infringement. s27(2.3)

A technical problem is that as drafted, the section is likely ineffective because it only applies to services that are “designed primarily to enable acts of infringement”. They are designed to facilitate the sharing of information and files.

But, most file sharing sites including peer-to peer BitTorrent sites and pirate hosting sites are not “designed primarily” to enable acts of infringement.

There are two other technical  problems:

The government’s intention is that ISPs should be “exempt from liability when they act strictly as intermediaries. But, C-32 is intended to “ensure that those who enable infringement will not benefit from the ISP exceptions”.

However, the drafting does not make this clear. Only 2 out of the 4 ISP exceptions expressly say this.

Based on the differences in wording, a court might well conclude that a pirate hosting site host gets an ISP exception even when it is liable for enablement. This could not be anyone’s intent.

Lastly, the bill exempts commercial enablers-the wealth destroyers- from being liable for statutory damages, even when they facilitate infringement for a commercial purpose.

Non-Commercial User-Generated Content Exception (s.29.21)

The bill also contains a new exception that would let individuals take existing content and use it to create “user generated content”.

The intent is to permit an individual to use content to make a home video or create “mash-ups” of video clips.

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.

There are other technical issues with the Bill that also need addressing.

I would like to thank the committee again for inviting me to appear. I look forward to answering any questions you may have about my remarks or the bill.

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.

All of the political parties agreed that copyright reform is important. They concurred with the objectives behind the Bill including the goals of creating a legal climate in which creators can both safely invest in and get paid for their content and at the same time ensure access by users to their works. They recognized the need to modernize the Copyright Act to address the challenges of the 21^st century.

For example, Heritage Minister James Moore stated the following:

Canada has not elected a majority Parliament since November 2000. It has been 10 years. As a result of the realities of minority Parliaments, often it is politically challenging for governments to be willing to step forward and to engage in the copyright issue. This legislation forces Parliament, regardless of political pressures, to make sure that Canada’s copyright regime stays on the cutting edge so that Canada can continue to create jobs, so that we maintain the reputation that we have around the world as being not only an innovator and a leader in new technology, but also one of those countries that protects the rights of creators to have their works protected by law.

MP Marc Garneau (Lib.) stated the following:

The digital economy is changing culture in this country. It is also changing our society and our economy. The information and communications technology sector employs some 600,000 Canadians and spends $6 billion a year on research and development. The digital economy is flourishing around the world. Last year, OECD countries invested nearly $3 trillion in hardware, software, communications and IT…

Unfortunately, when it comes to copyright, Canada has, for too long now, been way behind in terms of global best practices. Our outdated copyright legislation has been the subject of international criticism.

A 2005 OECD study found that Canada had the greatest per capita number of offenders engaging in illegal file-sharing. In May 2009, the United States put Canada on its blacklist of countries designated as being especially lax in protecting intellectual property, a list that includes Algeria, China, Russia, Pakistan, Indonesia and Venezuela.

Copyright and intellectual property protection have become a crucial component of trade talks with the European Union.

The time has come to ensure that our artists and creators receive fair compensation for their work and that, in this digital era, our entrepreneurs are compensated for their innovations. Canada must modernize its copyright legislation.

In short, the time has come for Canada to adopt a fair and balanced copyright law, one that takes the needs of both creators and consumers into account.

MP Dan McTeague (Lib.) expressed that same point as follows:

While I sit on  the industry side of things, we can all appreciate the importance of Canadian culture, Canadian music, Canadian songwriters and the great impact they have made as a result of these kinds of arrangements, constructed in large part by Parliament in previous times. We know the Canadian recording industry is sound and strong. We are very proud of it and we have to do everything we can, in modern times, to ensure it is effectively and equitably safeguarded.

I believe there is the basis in the country for solid rewrite and review of copyright. It is long overdue. Members of Parliament may have differing opinions as to where and how we view effective copyright legislation, but I think we recognize that as the world changes, as technology evolves, so must the panoply of laws and the framework that allows us to change with changing times. That is the pragmatic approach, which the bill will require in order for it to be an effective response to the demands, needs and realities that society, that those in the industry as well as those artists expect.

While there was consensus at the high level, there was a great deal of discussion about the best ways to accomplish those goals. The following are some observations about some of the key issues in the debates.

Stopping the sites that enable piracy

Of all of the issues debated by the parties, there was no disagreement that our copyright law should enable artists to vigorously pursue the end of illegal file sharing sites and services. Beginning the debate was Industry Minister Tony Clement. He referred to “helping artists by cracking down on those who would destroy value”.  Minister James Moore stated, “We need to make pirating and theft illegal in this country. We need to ensure that those who are creating in an effort to make a living out of what it is they love doing, which is music, software and video game publishing, are not being ripped off. That is article one.”

MP Bonnie Crombie (Lib.), in discussing the “wild west” of piracy facilitated by peer-to-peer sites, stressed that “Copyright laws are only as good as the enforcement that accompanies them.” MP Dan McTeague  also made reference to “the absolute destruction and devastation” enabled by the “wealth inhibitors” such as the operators of BitTorrent sites like IsoHunt and wanted to ensure that exceptions intended for innocent intermediaries are tightened up so that these sites and services cannot rely on them. MP Marc Garneau also referred to ‘examining technical issues surrounding exemptions with regard to hosting, information location tools and network services.’

TPMs

All of the parties were in agreement that C-32 should provide legal protection for technological measures (TPMs) as required by the 1996 WIPO Treaties. Minister James Moore recognized that 21^st century business models depend on legal protection for TPMs. Individuals and businesses use locks to protect tangible property against theft and they rely on the law to protect them in those efforts. Artists and other creators of digital intellectual property should have the same rights to protection under the law. According to Minister James Moore:

Copyright holders told us that their 21st-century business model depends on strong technological protection measures. And we listened: Bill C-32 contains protection measures such as digital locks to protect against piracy and to allow creators to choose how they wish to protect their works.

We think the issue with digital locks is a central element. If a person is a creator and has created a product, a piece of software, and has decided to protect it in the way that person chooses to protect it to engage in the marketplace, we think that person has the right to protect what he or she has created, in the way he or she has chosen to protect it. If people want to hack around that or break a digital lock without that person’s consent, that person has the right to protect his or her own intellectual property. That is pretty basic. In terms of those who argue that digital locks should not be a part of this legislation, I just frankly disagree. I think they are wrong.

There are elements of the bill on which we can agree or disagree, certain defining elements of education and how that should be dealt with in fair dealing. There are certain things on which we can agree or disagree. But if a person creates some software and decides to put a digital protection measure on that software and to engage in the marketplace with 90-day trials in which things are locked down afterwards, and so on, if the person chooses to engage in that and chooses to protect his or her intellectual property, that person should have the right to protect his or her property in the way he or she chooses.

Obviously as part of this legislation, it should be illegal for one to hack somebody else’s property and to steal it and put it onto BitTorrent and spam it around the Internet and degrade people’s capacity to actually make a living on what they are doing.

… I do not want arts and culture creativity, the software industry, the video game industry, the creative community in this country, to become a hobby. I want business models to be able to work in this country, and that requires a strong and robust copyright regime.

Several Liberal MPs including MP Marc Garneau supported legal protection for TPMs but expressed opinions that Canadians who have legitimately purchased and paid for a CD, DVD or other products should have the ability to transfer their purchases onto other personal devices, such as an iPod, or make personal backup copies on their computers so long as they are not doing so for the purposes of sale, commercial distribution, or transfer to others.

Representatives from the NDP including MP Charlie Angus and from the Bloc including MP Carole Lavallée expressed similar and other concerns about TPMs. One concern raised by several members of the NDP was that legal protection for TPMs would not pass a constitutional challenge. This point, which has been made by several anti-copyright advocates is not supportable for at least four reasons.

First, Section 91.23 of the Constitution gives Parliament exclusive jurisdiction over ”Copyrights”.  The Supreme Court of Canada has stated that copyright in Canada “is a creature of statute and the rights and remedies it [the statute] provides are exhaustive”.[1] Copyright is concerned with balancing the public interest in the encouragement and dissemination of the works and “to prevent someone other than the creator from appropriating whatever benefits may be generated.”[2] The proper balance is one that changes, and therefore  needs to be re-evaluated from time to time, in response to technological evolution or to reflect international developments. Parliament has the right to determine the appropriate balance including how best to protect intellectual property against piracy.

Second, it seems obvious that legislation (1) whose object is to enable rights holders to prevent the unauthorized exercise of their exclusive rights, (2) which is enacted to implement copyright treaties such as the WIPO Treaties, and (3) which has been implemented around the world as part of copyright legislation, would be in pith and substance copyright.[3]

Third, legislation protecting TPMs is in pith and substance copyright because, like the private copying levy in Part VIII of the Act, it would be “created for the purpose of supporting the creators and the cultural industries by striking a balance between the rights of creators and those of users.”[4]

Fourth, the provisions in the Radiocommunication Act which prohibit decoding encrypted programming signals or network feeds or trafficking in devices that do so have been enforced by the Supreme Court of Canada.[5] It is not plausible to assert that laws designed to prevent the decoding of devices that protect programming signals would be enforced, while devices that protect works’encryption and other content safeguards from being broken would not be protected.

Several NDP MPs also criticized the TPM provisions in C-32 for allegedly following the implementation model used in the DMCA or for going considerably further than what the WIPO Treaties require.  However, as James Gannon has pointed out, Bill C-32 actually departs considerably from the legal protection for TPMs found in the U.S., including by having significant flexibility to enable the government to enact additional exceptions through regulation at any time. Moreover, to the extent that their criticisms of C-32 are based upon an interpretation of the WIPO Treaties that Canada can comply with the treaties without prohibitions against trafficking in circumvention tools, or by linking prohibitions against circumventing TPMs to infringing acts — they are in error. See, Separating facts from hype about C-32;  Are the TPM provisions in C-32 more restrictive than those in the DMCA? Dr. Ficsor is right; Prof. Geist is wrong about the WIPO Internet Treaties;Legends and reality about the 1996 WIPO Treaties in the light of certain comments on Bill C-32.

Statutory damages

The Liberals and the Bloc expressed concerns about the proposed amendments to statutory damages. Several Liberal speakers (including MPs Marc Garneau, Bonnie Crombie, and Dan McTeague) expressed the opinion that statutory damages must continue to be commensurate with the severity of the infringement. For example, MP Bonnie Crombie stated,“ A number of people to whom I have spoken, and who have come to meet with members of Parliament, have expressed concern about this section and believe that statutory damages must be commensurate to, equal to and proportional to the severity.” Bloc MP Carole Lavallée expressed concerns with absolute caps on statutory damages.

User generated content (UGC) exception

The Liberals and Bloc also suggested that the new exception for user generated content needs to be amended to ensure that the exception is not abused. MP Marc Garneau stated his party’s concerns as follows:

Another issue is mash-ups. Bill C-32 creates a new exemption for user-generated content. However, it is broadly written and can create a potential opening for abuse. We will seek amendments to tighten the language to ensure that the mashup exemption can only be used for its intended purposes and not unexpectedly create a loophole for further copyright infringement.

According to MP Dan McTeague:

In our view, this section is too broadly written. Under the rule, individuals can post an entire movie on YouTube as long as they add a small inserted clip at the beginning or the end. Then they can call the video a mashup. It is kind of the exemption given in this kind of circumstance.

MP Carole Lavallée made the following statement about the proposed UGC exception:

The exception known as the “YouTube exception” allows a mother to post her son’s first steps on YouTube along with music, used in good faith. That seems nice enough but it opens the door to a whole slew of music piracy. The scope of this clause needs to be reduced, and these so-called works created from other works should be banned. That is exactly what it means to respect artists’ rights.

Fair dealing for education

Both the Liberals and Bloc expressed the opinion that the proposed new exception that would allow education as a purpose for fair dealing was problematic. Their concerns were that the new exception itself was unfair as it would allow substantial unpaid for copying; the concept of “fairness” was indefinite and would result in costly litigation to sort out; “fairness” was no guarantee that significant revenues needed to fund educational publishing would not be lost; and the term “education” was not defined, was not limited to any structured context, and its meaning and scope would have to be settled by litigation.

MP Marc Garneau wanted to be sure that authors and creators are paid fairly for their work. He was also worried that the concept of “fairness” was too open-ended and required clarity:

Let us talk about the exemption for the education sector. The Liberal Party agrees that educators need flexibility in order to ensure that education is as enriching as possible. However, we must see to it that authors and creators are paid fairly for their work. The education sector is in the best position to convey the message that copyright is important, and we must ensure that Canadians understand that it is important for our creators to be compensated fairly for their work.

With regard to the exemption for the education sector, the Liberal Party will attempt to amend the bill by proposing to clarify what exactly constitutes “fair dealing”. Naturally, the secret of a good policy always resides in the right balance. By defining what is fair, we will ensure that the law gives educators the necessary flexibility while offering artists, authors, and creators a better guarantee that their works will be protected.

MP Dan McTeague expressed a similar concern. In addition, he asked “…why private, commercial education institutions should be permitted to disseminate works for education purposes without compensating copyright” owners.

As well, MP Scott Simms (Lib.) spoke on the proposed new fair dealing exception for education. His major – and serious — concern was that significant policy questions about what uses of educational materials could be exercised without making any payments to copyright owners would be decided by the courts as a result of litigation, rather than by Parliament:

Some artistry groups have said that an open-minded, fair dealing provision puts in the hands of the courts what should be determined by Parliament. That is something we have to consider. Again, it becomes incredibly litigious. Fair dealing has that possibility so we have to consider that. We have to draft legislation to make sure that does not happen, in my humble opinion. Artist groups are saying that the full impact of an open-ended fair dealing provision may be difficult to predict but the fact that there will be unintended consequences is wholly predictable.

MP Joseph Volpe (Lib.) shared the concern that the proposed new exception “introduces legal uncertainty, and whenever we introduce legal uncertainty, we are encouraging litigation.”

MP Bernard Bigras (BQ) had several concerns with the fair dealing exception for education. One concern was that it was unfair for educational institutions to have an exception that permits uncompensated copying. Under copyright law any person may copy any part of a work — unless the copying is substantial– without infringing copyright. However, when a particular use is elevated to a fair dealing purpose such as research, private study or education, copying of substantial portions of a work is permitted without authors being compensated. According, to MP Bigras, such substantial uncompensated copying by educational institutions of authors’ works would not be fair:

There are a lot of exceptions in this bill. One particularly problematic exception stands in opposition to what should, in theory, be a positive principle. It concerns educational institutions. Teachers will be able to use protected materials in their courses without obtaining permission to reproduce them. This applies to movies and plays, among other things. The problem is not that people will be disseminating these cultural and artistic works, but that schools, for example, will not be required to pay royalties if they reproduce works. That is the problem.

We have to ensure that everyone in our society has access to culture. Our young people need rapid access to our literary works and their authors, but we must not forget that these are artists whose livelihoods depend on this.

I was reading the latest statistics. In the education sector alone, there are 175 million copies of parts of copyrighted works in schools, CEGEPs and universities. The education sector alone provides $9 million per year to 23 Quebec authors and 1,000 Quebec publishers. People’s economic livelihood depends on publishing and culture. Of course we want our young people to have access to culture, but we must also recognize that our creators have the right to fair compensation.

MP Bernard Bigras was also concerned that even a “fair” dealing for education was no guarantee that authors would not be economically damaged by free uncompensated copying. (Unlike in the US, the effect on the market is not the most important factor in assessing whether a dealing is fair in Canada.)  He pointed out that the “notion of fairness is not defined in the bill”. He also pointed out that the term “education” was undefined which “could therefore be defined quite broadly and have a broad scope”.

Private copying levies

The issue of extending the private copying levy to include digital audio recording equipment was raised repeatedly by the NDP and the Bloc including by NDP MP Charlie Angus and Bloc MP Carole Lavallée. However, both Ministers Clement and Moore spoke out against extending the levy. Minister Tony Clement stated that his party opposed an extended levy on DARs such as iPods as being “regressive, unfair and economically destructive.”  Minister James Moore expressed the view that it “is an old solution for an old problem and it does not embrace the fact of new media.”

As the Bill moves into committee for further review, I am sure that we will hear much more about these issues — as the parties redouble their best efforts to craft legislation that will meet the needs of all Canadians.

[2] Ibid.

[3] See Kirkbi AG v. Ritvik Holdings Inc., 2005 SCC 65.

[4] See Canadian Private Copying Collective v. Canadian Storage Media Alliance, 2004 FCA 424; also, Private Copying 1999-2000, Copying for Private Use.

[5] Bell ExpressVu Ltd. Partnership v. Rex, 2002 S.C.C. 42.

An example of this are several widely disseminated blogs written by Prof. Geist purporting to compare “how badly” C-32 stacks up against US law on two key issues in the Bill, digital locks and fair dealing. On these issues he argues that “Canada is far more restrictive than the U.S.” However, in making his arguments, Prof. Geist makes numerous errors in comparing Bill C-32 and US law.

Here are some illustrations from his recent blogs, The U.S. DMCA vs. Bill C-32: Comparing the Digital Lock Exceptions, U.S. Developments Demonstrate Canada’s C-32 Digital Lock Rules More Restrictive Than DMCA,  Bill C-32: My perspective on the key Issues, and CRIA Goes To Washington:

Geist claim: “U.S. rules contain a mandatory review of anti-circumvention exceptions every three years, but Bill C-32 only contains a review of the entire law every five years with no specific examination of anti-circumvention rules or mechanisms for new exceptions.”

Response: Bill C-32 contains two clauses that allow for the creation of new exceptions at any time: (1) regulations can be made any time with broad flexible criteria to exclude new classes of TPMs; and (2) regulations can be enacted to exclude classes of TPMs if they unduly restrict competition. Moreover, the US DMCA has no mechanism such as is available under Article 6(4) of the EU Copyright Directive to require rights holders to take appropriate measures to ensure beneficiaries of an exception can avail themselves of it. However, C-32 permits the enactment of further regulations at any time to require rights holders to provide access to a work to enable individuals to avail themselves of the enumerated exceptions to the TPM provisions.

Geist claim: “U.S. rules now contain an exception for unlocking and jailbreaking a cellphone. Bill C-32 only covers unlocking.”

Response: Under the recent Rulemaking by the Librarian of Congress, a new limited exception was recently established under the DMCA to cover jailbraking cell phones. The exception permits “Computer programs that enable wireless telephone handsets to execute software applications, where circumvention is accomplished for the sole purpose of enabling interoperability of such applications, when they have been lawfully obtained, with computer programs on the telephone handset.” Bill C-32 has a generally applicable exception for interoperability of computer programs that would enable circumvention of TPMs for jailbreaking applications that includes but is not limited to cell phones. Bill C-32 also contains a generally applicable exception to permit reverse engineering of computer programs that might be needed to develop applications that can work with jailbroken phones. US law does not have a comparable exception. Reverse engineering a computer program for interoperability purposes can be a fair use in the US in certain circumstances. It would also be a fair dealing for research purposes in Canada where permitted in the US.

Geist claim:  “U.S. rules contain an exception for e-books designed to facilitate access for the sight impaired. The Canadian rules do not contain a similar exception.”

Response: Under the recent Rulemaking, a new limited exception was recently established under the DMCA. It is restricted to “Literary works distributed in ebook format when all existing ebook editions of the work (including digital text editions made available by authorized entities) contain access controls that prevent the enabling either of the book’s read-aloud function or of screen readers that render the text into a specialized format.” Bill C-32 contains a much broader generally applicable exception that applies to TPMs that protect all works and subject matter to enable the content to be made perceptible to the person with the perceptual disability. It is not limited to any specific formats or type of perceptual disability.

Geist claim: “… the new YouTube exception in the Canadian bill – trumpted as progressive – is still subject to digital locks, while the U.S. has specific exception for it”.

Response:  Neither the US nor any other country I am aware of has anything similar to the proposed UGC (YouTube) copyright exception that is in C-32. The new proposed UGC exception would expressly exempt copying and other uses of content (such as movies, music, books, computer programs, games, art, architectural and engineering drawings, databases, websites and corporate logos) to create new works (including derivative works) and permit them to be disseminated over networks including the Internet. Since the US has no exception that permits this, it goes without saying that there is no exception for circumventing TPMs to enable individuals to engage in these types of activities.

Geist claim: “U.S. rules contain an exception for everyone to circumvent DVD protection to gather a short clip to create non-commercial videos. Canadian rules include an exception for non-commercial videos, but do not exempt circumvention.”

Response: The US exception for circumventing a TPM to create a non-commercial video, which came into force only after C-32 was tabled in the recent Rulemaking, is much more limited than described by Prof. Geist. The exception for non-commercial videos applies only to (1) motion pictures on DVDs that are lawfully made and acquired, (2) that are protected by the Content Scrambling System (CSS), (3) when the circumvention is accomplished solely in order to accomplish the incorporation of short portions of motion pictures into new works, (4) the purpose must be for criticism or comment, and (5)  the person engaging in the circumvention must believe and have reasonable grounds for believing that circumvention is necessary to fulfill the purpose of the use. As drafted, the Canadian UGC copyright exception applies even if an individual circumvents a TPM to create the UGC work. Bill C-32 does not prohibit individuals from circumventing copy control TPMs in order to create UGC works, only access control TPMs. So if an individual has purchased, licensed, or otherwise lawfully obtained access to original content, the individual can hack a TPM that would prevent copying in order to create a UGC work.

Geist claim: The “digital lock rules effectively trump virtually all other rights in the bill (particularly fair dealing and the new consumer exceptions) and extend far beyond what is required to comply with the WIPO Internet treaties.”

Response: The TPM provisions in the Bill, like those in the DMCA, do not prohibit circumventing copy control TPMs for fair dealing purposes. Prof. Geist’s analysis of what is required to comply with the WIPO Treaties has been utterly rebuffed by the former Assistant Director General of WIPO here, here and here.

Geist claim: “U.S. law contains a flexible fair use provision that covers everything from recording television shows to making backup copies. Bill C-32 contains a series of new fair dealing exceptions that are collectively still more restrictive than the U.S. fair use”.

Response: Bill C-32 would introduce three new fair dealing exceptions, parody, satire and education. The Bill would also create numerous new exceptions covering a myriad of activities engaged in by individuals, researchers, businesses and educational institutions including copying for format shifting purposes, time shifting, making back-ups, creating and disseminating UGC works, reverse engineering computer programs, encryption research, security testing, technical processes, and copying practically any content that is publically available over the Internet for educational purposes. These latter exceptions are not bounded or restricted in any ways that require them to be subject to any “fairness” analysis. However, all US activities that are exempted under fair use are, by definition, required to be fair. So, it is by no means accurate to assert that the Canadian Act with these new exceptions would collectively be more restrictive than US fair use.

Geist claim: “The DMCA prohibits only forms of access that would violate or impinge on the protections that the Copyright Act otherwise affords copyright owners.” This is far less restrictive than Bill C-32.”

Response: Prof. Geist refers to a single US case involving MGE UPS Systems and GE for this unqualified assertion. As I previously pointed out, MGE v GE-what did the 5th Circuit decide about the scope of the DMCA TPM provisions and was it right?, Prof. Geist’s conclusions about this case are neither accurate nor complete. The case does not support the categorical statement that in the US “The DMCA prohibits only forms of access that would violate or impinge on the protections that the Copyright Act otherwise affords copyright owners”.

Geist claim: “Canada is not breaking any international treaties” with respect to copyright.

Response:  Canada signed the WIPO Treaties in 1997 committing this country to implement them, but hasn’t done so. Canada is the only G7 country to have failed to modernize its copyright laws to address the copyright issues associated with the Internet. Canada also lags behind all other G7 countries and international standards in failing to upgrade its laws to target counterfeiting and piracy. This was highlighted in a report just released by the RCMP.

Geist claim: “Bill C-32 adopts the successful notice-and-notice approach that has been used in Canada on an informal basis for many years.”

Response: As I have previously pointed out, Prof. Geist’s assertion that notice and notice works is without foundation. We have had a de facto notice and notice system in Canada for many years and there is no evidence that it changes people’s behavior to stop illicit file sharing and purchase creative products from legitimate services. As I also pointed out elsewhere, 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.

In his latest blog Prof. Geist argues that “Canada needs to reform its laws based facts”.  I agree with this assertion. It is high time the debate about copyright in Canada was based less on hype and misinformation and more on facts.