Private copying levy on death row

The Copyright Board of Canada rendered its decision on Friday with regards to the Tariff of Levies to Be Collected by CPCC in 2012, 2013 and 2014 on the sale of Blank Audio Recording Media. The decision is notable in a number of respects, most importantly because it portends the end of the levy based private copying regime for music and the beginning of the levy free format shifting regime ushered in with Bill C-11, the Copyright Modernization Act.

The Board decision certified a tariff for years 2012-2014 on eligible blank recording media which largely consist of the aging CD-R, CD-RW, CD-R Audio, and CD-RW Audio formats. The levy rate is 29¢ for each type of media.

In giving reasons for decision, the Board found that the blank CD format is in decline and will almost certainly have reached the end of its technology life cycle by the end of 2014.

Innovators and early adopters who first purchased blank CDs have long moved on to other storage media. So have businesses, since they must adapt to newer, better technologies to remain competitive. Those who remain are essentially consumers who continue to use blank CDs either by choice (laggards) or by necessity (the owner of a car equipped with a sound system which can play a CD but not an iPod). As that core number of consumers resists transitioning to a new technology while firms are forced to transition, the fraction of CDs purchased by individuals will rise.

The number of CDs bought by consumers continues to decrease; the number of CDs bought for business and commercial use decreases more rapidly. This leads to an increase in the percentage of CDs bought by individuals. This trend will probably continue until the total market itself becomes insignificant, at which point CDs will cease to be ordinarily used by individual consumers to copy music in any event.

When Bill C-11 was enacted, Parliament orphaned the private copying regime for music, leaving in place a method for rights holders to collect royalties for more antiquated technologies like CDs while creating a levy/royalty “free” exception for individuals to make copies of any works or other subject matter for private uses on other formats including hard drives and cloud storage. The findings of the Board confirm that in future, most private copying will not attract levies.

In addition to establishing a format shifting exception that was outside the existing private copying regime, the Government signalled it didn’t want the private copying regime expanded to include non-CD formats when it published the MicroSD Cards Exclusion Regulations in November 2012. This effect of this regulation was to remove MicroSD cards from being an audio-recording medium for which CPCC could collect royalties effective as of October 18, 2012.

At the time Regulations came into effect CPCC had already applied for a tariff on MicroSD cards for the period beginning on January 1, 2012. When the Regulations were published, the Board asked for submissions on whether it should proceed to certify a tariff for the period between January 1 and October 17, 2012 or whether it would be unfair to do so.

In its recent decision, the Board found that taking all circumstances into account “any attempt at certifying a fair and equitable tariff for microSD cards” was impossible and doing so would be “manifestly unfair and inequitable”.

The effect of the format shifting exception in Bill C-11, the reduced scope of the private copying regime, and the other new exceptions for individuals in Bill C-11 including the time shifting, back-up copying, and user generated content exceptions, leaves Canada with one of the broadest, if not the broadest, set of “free” exceptions for individuals among our trading partners. Other countries including Australia, the UK, Ireland, and the United States are now considering whether to implement similar or other exceptions. Some have argued that broad copyright exceptions spur “innovations” in digital services, innovations in which content is used for free and in which artists, writers, producers, and other creators are not paid for their investments and creative efforts. However, recent research by Professor Barker suggests the digital economy requires the opposite response, namely the strengthening of copyright and limiting exceptions. It will be interesting to watch and see whether, and to what extent, the Canadian model is followed or eschewed by our trading partners.

For more information about the Copyright Modernization Act or Bill C-11 or copyright reform, see Change and the Copyright Modernization Act.



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