Should copyright tariffs be mandatory?

CBC/Radio-Canada and the Society for Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC) recently argued before the Supreme Court of Canada over whether a tariff on “broadcast incidental copies” of musical works for television or Internet productions is legal. CBC says these are copies of content made simply to “facilitate modern digital broadcasting” and do not incrementally generate additional revenue. SODRAC, on the other hand, says a legal precedent for such payments has been in place for more than two decades, and CBC has been a willing participant for most of that time. Besides, there’s $1.2 million a year at stake, SODRAC said in a factum filed with the court. CBC is appealing a Federal Court of Appeal decision from March last year that upheld a tariff certified by the Copyright Board in 2012. An organization not directly involved in the dispute, the Centre for Intellectual Property Policy (CIPP), has taken the opportunity to intervene and make the case that tariffs, in general, should not be forced upon unwilling users. It’s battling what it refers to as “mandatory tariff theory.” It's essentially the idea that the Copyright Board of Canada, at the request of a collective representing certain rights-holders, can simply certify a tariff and make users automatically compelled to abide by the terms. "We generally support the CBC side, although not for the necessarily for the reasons they put forward," Howard Knopf, a lawyer with Macera & Jarzyna LLP who's representing CIPP in this case, said in a phone interview. For example, Knopf noted that CBC says in its argument that it is willing to pay a "nominal royalty" of $100 a year, but even that idea goes against the principle CIPP is trying to establish. "Can a collective ask the Copyright Board to approve a licensing scheme and then impose it on users?" Knopf asks rhetorically. "If that's right, then users would have no choice other than to deal with the collective — we call them CMOs, collective management organizations — and then would be required by law to pay the entire amount under that tariff, even if they just make one unauthorized copy of one single work that happens to be in the CMO's repertoire." To illustrate the practical effect of giving the idea of mandatory tariffs legitimacy, Knopf pointed to the example of Access Copyright, a collective that is trying enforce tariffs on universities' use of academic material. "Many universities don't want to deal with Access Copyright at all because they spend often millions of dollars a year on direct licences with major publishers and minor publishers, and they hire people to go over material and determine what's fair dealing and what is not substantial copying and what doesn't need to be paid for, and they use open-source material," he said. "They go to great lengths to comply with their copyright obligations, and do not want to deal with Access Copyright because, in their view, Access Copyright charges too much for too little, and Access Copyright has a quite limited repertoire. " Knopf said users of copyrighted material should be able make deals with rights-holders individually to secure, by negotiation, access to the specific content they need. He noted that sometimes it's more efficient for users to work with a collective, such as in cases of music radio stations dealing with a collective like the Society of Composers, Authors and Music Publishers of Canada (SOCAN). "SOCAN has virtually all the commercially important under its wing, so it makes sense normally for a radio station to deal with SOCAN if they're going to play music at all," Knopf said. Still, he added that "in theory, shouldn't be forced to ." Knopf said one problem in the case of universities is that due to the amount of copying done by both faculty members and students, there's bound to be unauthorized copies made, at some point, of something in Access Copyright's repertoire. And given how other copyright regimes often work, he fears this would commit schools to paying full tariff rates based on a per-student formula. "There should be transactional licences available so they can use one work at a time and not pay for a whole bunch of things that they don't need," Knopf said. He said the Copyright Board hasn't yet ruled on a proposed university tariff from Access Copyright, so it's unclear how it might work. Becoming unwillingly subject to a tariff is sometimes not just about the amount of money users have to pay, Knopf added. "Even a nominal tariff has potentially very onerous reporting and record-keeping and auditing and a whole bunch of other provisions," Knopf said. He said if the notion of mandatory tariffs were dismissed, as he is arguing it should be, there would still be a role for collectives, the Copyright Board and tariffs. "If the board sets tariffs that make sense, which may involve transactional tariffs limited tariffs so you don't have to pay for a whole lot you don't need, people will want to use them," he said, noting that a tariff should be seen as price cap rather than a binding price for all situations. "It's not like the Board is going to go out of business if our theory is right," Knopf said. In a factum filed to the Supreme Court, CIPP argued that the idea of mandatory tariffs "misconstrues" the Copyright Act, arguing that Section 70.4 of the law "confirms that voluntary nature of the scheme." The filing adds that making tariffs mandatory is contrary to parts of the Competition Act and case law. Barry Sookman, a lawyer with McCarthy Tétrault LLP who is representing Music Canada as an intervener in the Supreme Court case involving CBC and SODRAC, said the argument put forth by Knopf and CIPP "doesn't have a shred of credibility to it." In a phone interview, Sookman said: "The Copyright Act is pretty clear that when the board goes through the process and it sets the rate, if you make a use that's within the what the board sets, you have to pay it." The example of universities potentially being subject to a hefty tariff regime as a result of accidental usage of certain materials is "greatly exaggerated," Sookman said. He said the Copyright Board has the flexibility to "say if you do X, you have to pay, or it can set a tariff based on how much you do X." SODRAC general manager Alain Lauzon declined to comment on his or SODRAC's position on mandatory tariff theory, adding that it's not pertinent in the case against CBC. "We decided not to answer to theory because it was not relevant to the case," Lauzon said in a phone interview. "Am I for or am I against this? It's a regime that is there," he said. Erin Finlay, general counsel for Access Copyright, said in an email that "Mr. Knopf's theory is without merit or substance," though she added that the organization does not generally comment on issues that are before the courts. Gilles McDougall, secretary general of the Copyright Board, declined in an email to provide the regulatory body's stance on mandatory tariff theory, citing the fact that it is currently before the Supreme Court. Knopf said the CBC versus SODRAD case is an appropriate place to raise this issue because the argument came up during the Federal Court of Appeal case preceding it. "We felt that it was important to challenge this mandatory tariff theory because it's now been blessed by the Federal Court of Appeal, and from a legal standpoint, that's pretty serious," he said. A Supreme Court hearing on the case took place March 16, and Knopf noted it usually takes about six months to issue decisions. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Should copyright tariffs be mandatory?

News | March 30, 2015

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