HERI Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Canadian Heritage

EVIDENCE

CONTENTS

Tuesday, November 4, 2003

Á

1145

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.))

Mr. Paul Spurgeon (Vice-President, Legal Services and General Counsel, Society of Composers, Authors and Music Publishers of Canada)

Á

1150

Á

1155

The Chair

Mr. Paul Spurgeon

Â

1200

The Chair

Mr. Paul Spurgeon

The Chair

Mr. Paul Spurgeon

The Chair

Mr. Jay Thomson (President, Canadian Association of Internet Providers)

Â

1205

Â

1210

The Chair

Mr. Pierre Nollet (Vice-President, General Counsel and Corporate Secretary, CBC/Radio-Canada)

Â

1215

The Chair

Mr. Pierre Nollet

The Chair

Â

1220

Mr. Douglas Cooper (President, Intel of Canada Limited; Canadian Coalition for Fair Digital Access)

Â

1225

The Chair

Mrs. Diane Brisebois (President and CEO, Retail Council of Canada; Canadian Coalition for Fair Digital Access)

Â

1230

The Chair

Mr. Claude Brunet (Legal Counsel, Ogilvy Renault; Canadian Private Copying Collective)

Â

1235

Mr. Paul Audley (Consultant, Paul Audley & Associates Ltd.; Canadian Private Copying Collective)

Â

1240

The Chair

Mr. Claude Brunet

Â

1245

The Chair

Mr. Jim Abbott (Kootenay—Columbia, Canadian Alliance)

Mr. Pierre Nollet

Mr. Jim Abbott

Mr. Paul Audley

Â

1250

Mr. Jim Abbott

Mr. Paul Audley

Mr. Claude Brunet

The Chair

Ms. Wendy Lill (Dartmouth, NDP)

Mr. Paul Spurgeon

Â

1255

The Chair

Mr. Paul Spurgeon

The Chair

Ms. Wendy Lill

The Chair

Ms. Carole-Marie Allard (Laval East, Lib.)

Mr. Pierre Nollet

Ms. Carole-Marie Allard

The Chair

Mr. Alex Shepherd (Durham, Lib.)

Mr. Paul Audley

·

1300

Mr. Alex Shepherd

Mr. Paul Audley

The Chair

Mr. Claude Brunet

The Chair

Mrs. Diane Brisebois

Mr. Douglas Cooper

The Chair

Mr. Douglas Cooper

Mr. Douglas Cooper

The Chair

·

1305

Mr. Claude Brunet

The Chair

Mr. Douglas Cooper

The Chair

Mr. Claude Brunet

The Chair

Ms. Liza Frulla (Verdun—Saint-Henri—Saint-Paul—Pointe Saint-Charles, Lib.)

Mrs. Diane Brisebois

Ms. Liza Frulla

Mrs. Diane Brisebois

Mr. Douglas Cooper

The Chair

Ms. Liza Frulla

·

1310

M. Claude Brunet

Ms. Liza Frulla

Mr. Claude Brunet

The Chair

Mr. Douglas Cooper

The Chair

Mrs. Diane Brisebois

·

1315

The Chair

Mr. Jim Abbott

The Chair

Mr. Jim Abbott

Mr. Claude Brunet

The Chair

Mr. Claude Brunet

The Chair

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CANADA

Standing Committee on Canadian Heritage

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NUMBER 056

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Tuesday, November 4, 2003

[Recorded by Electronic Apparatus]

Á  (1145)  

[English]

    The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): Welcome to the meeting of the Standing Committee on Canadian Heritage,

[Translation]

    the Standing Committee on Canadian Heritage

[English]

which meets today to continue its statutory review of the Copyright Act under section 92,

[Translation]

    to continue its review of the Copyright Act, section 92.

[English]

    I should apologize to our witnesses, as there was a vote, which was completely out of our control, naturally.

    If members are available—and we don't know that yet—and we can carry on beyond our time, we will. If we don't get a quorum, then we won't be able to, but we'll try.

    Today we are very pleased to welcome the Society of Composers, Authors and Music Publishers of Canada, represented by Mr. Paul Spurgeon, vice-president, legal services, and general counsel;

[Translation]

    the Canadian Association of Internet Providers,

[English]

represented by Mr. J. Thomson, president; CBC/Radio-Canada, represented by Pierre Nollet, vice-president,

[Translation]

    Counsel and General Secretary

[English]

the Canadian Coalition For Fair Digital Access,

[Translation]

    from the Canadian Coalition for Fair Digital Access,

[English]

represented by Mr. Douglas E. Cooper, president, Intel Canada,

[Translation]

    and Ms. Diane J. Brisebois, Chairman and CEO of the Retail Council of Canada.

[English]

We also have the Canadian Private Copying Collective, represented by Mr. Paul Audley, consultant,

[Translation]

    and Mr. Claude Brunet, Counsel.

[English]

    In view of the time constraints and everything, I would really urge you to confine your remarks to a maximum of 10 minutes. If you go over that I'll have to cut it off, just to give a chance to members to ask questions, and hopefully give a chance also to yourselves to all be heard.

    I'll start with Mr. Spurgeon.

    Mr. Paul Spurgeon (Vice-President, Legal Services and General Counsel, Society of Composers, Authors and Music Publishers of Canada): Good morning, Mr. Chairman. Thank you very much, Mr. Chairman, committee members.

    My name is Paul Spurgeon and I'm general counsel for SOCAN. Today I would like to do three things. First, I would like to make sure you understand who SOCAN is and what we do. Second, I want to respond to the committee's invitation to speak to the comprehensiveness of the list of major issues to be addressed, together with the timeframe for action. Third, I will respond to the committee's request for our views regarding how the copyright reform process should unfold and what the guiding principles of this reform should be.

    Let me start by describing who we are and what we do. SOCAN is a not-for-profit Canadian copyright collective that represents composers, lyricists, songwriters, and publishers of musical works from across Canada and around the world. On behalf of our approximately 25,000 active Canadian members, creators, and publishers, and members of affiliated performing rights societies around the world, SOCAN collectively administers performing rights in music and lyrics.

    The performing right is that part of copyright that gives owners of musical works the sole right to perform in public or broadcast their works or to authorize others to do so in return for royalty payments.

    As you heard last month during your first briefing by officials, on behalf of our members, SOCAN grants blanket licences to users of music who pay us copyright royalties in accordance with tariffs set by the Copyright Board of Canada.

    Since the livelihood of our members depends on effective and up-to-date copyright laws, SOCAN has always been active in the copyright reform process. We took part in the amendment process known as phase I, which resulted in the passage of Bill C-60 back in 1988. You may also recall the SOCAN amendment that was contained in Bill C-88 about a decade ago.

    In addition, we were very involved in phase two of copyright reform in Bill C-32 in the mid-1990s. More recently, of course, we came before your committee just last year regarding Bills C-48 and C-11 and the so-called Internet retransmission issue.

    In addition to our involvement in the copyright legislative reform process, SOCAN also appears frequently before the Copyright Board. We are now before the Supreme Court of Canada dealing with our tariff 22 regarding Internet royalties and Internet access provider liability.

    Mr. Chairman, the bottom line here is that we care about copyright. We welcome this opportunity to provide our preliminary views as you embark on your section 92 copyright reform process.

    Now that you know who we are and what we do, I would like to move to our second point.

    As you may be aware, SOCAN filed a 53-page submission and four appendices with the committee on September 15. In the submission we dealt with many of the more than three dozen issues that are raised in the Government of Canada's report on the provisions and operation of the Copyright Act, which was tabled in the House of Commons a little over a year ago.

    As you requested, I am not here to discuss our submission today. Instead, I will respond to your invitation to speak to the comprehensiveness of the list of major issues to be addressed, together with the timeframe for action.

    Now, we believe that the government report has indeed provided a comprehensive list of the major issues your committee should address. We commend the officials from the Department of Canadian Heritage and the Department of Industry for ensuring this report provides a comprehensive starting point for discussion. They've done a wonderful job.

    Mr. Chairman, when you examine the wording of section 92, we believe Parliament has made it clear that both the report and the parliamentary review are very extensive in scope.

    First, the report is far-reaching because it is not confined to the provisions of the legislation that created section 92, which was Bill C-32. Instead, the report covers both the provisions and the operation of the entire Copyright Act.

Á  (1150)  

    Second, the scope of your parliamentary review is wide ranging because it goes beyond the review of the report. In addition, section 92 calls for your independent, comprehensive review of both the provisions and the operation of the Copyright Act in its entirety.

    Allow me to conclude my second point with some remarks on the timeframe for action. As you know, the October 2002 report proposed to break down the legislative work into three different phases or stages: the short term, 2003-04; a medium term, 2005-06; and a long term, beyond 2006.

    First, I have to say I'm not convinced the proposed compartmentalization and the phasing of listed issues will necessarily be workable. As you are well aware, there are many competing interests involved in copyright reform. In order to achieve the critical mass and the trade-offs necessary to carry a bill through Parliament, the right number and the right kinds of issues must be put forward for discussion. It may be too early at this stage to say what the right number and the right mix of issues will be for the current copyright reform exercise.

    However, some of you will recall that trade-offs were made right up to the last minute in Bill C-32, before it emerged from your committee. I do not believe the current exercise is going to be any easier than Bill C-32.

    Based on my experience with copyright reform over the past couple of decades, I believe small copyright bills are not necessarily easier to pass than large ones. When SOCAN worked on Bill C-88 in the early 1990s, we took a lot of time to develop all-party approval for the legislation. I doubt very much this approach would work today with the menu of issues you have before you.

    It's also clear that one issue of legislation, like the recent Bill C-11 Internet retransmission bill, can be extremely controversial because it pits one group of creators against a group of users. Confining legislation to a narrow set of issues can sometimes make it more difficult to achieve an equitable balance between the often opposing rights of creators and the needs of users.

    I also think trying to tag copyright reform provisions onto largely unrelated bills can sometimes create considerable controversy, as we just witnessed with Bill C-36 and the so-called Lucy Maud Montgomery provisions.

    One last comment on the timeframe for action is that your committee has already requested a one-year extension. It's also no secret that by the end of this month the Liberal Party will have a new leader and the government will enter the fourth year of its mandate. Now, depending on what Mr. Chrétien and Mr. Martin decide, we may have to wait for an election and a fresh four-year mandate to really move forward on copyright reform in the 2005 and 2008 timeframes.

    However—and this is an important aspect—I would like to say that SOCAN strongly supports the rapid implementation of the World Intellectual Property Organization, or WIPO, treaties. The fastest way to implement the WIPO treaties would be to introduce legislation that contains only what is required to pass those treaties. If you start adding in additional provisions, the process, in our view, will bog down. In this regard, SOCAN is particularly concerned with the introduction of the making-available right that is part of the treaty and ratification process.

    I'll give you an example of an additional process that may create controversy at this stage if it is added on. The WIPO issues and the Internet service provider liability issue were listed in the report, and you will recall that in the report there were three columns. In the first, or short term, we have the treaties, and then we have ISP liability and other important issues for copyright reform.

    If you combine all of these issues in one bill, it will make the implementation of the WIPO treaties perhaps more complicated and controversial. You should also keep in mind that SOCAN and others will be arguing the ISP liability before the Supreme Court of Canada on December 3, in just a few weeks.

    Just to keep things in perspective, I recall back in 1982, when the government of the day was proposing to table a package of copyright reforms, a Department of Communications official at the time--I won't mention his name--was quoted as follows:

When this bill is tabled it will have the universal appeal of the plague. By trying to satisfy everybody, it will satisfy no one. You're dealing with conflicting interests.

    So on that happy note, I would like to conclude by dealing with my third and last point regarding how the copyright reform process should unfold and what the guiding principles of that reform should be.

Á  (1155)  

    First, SOCAN believes the copyright reform process should unfold in a transparent and open manner. Your committee should conduct extensive public hearings before you table your report. Your report should be very clear on the guiding principles of copyright reform and contain specific recommendations for legislative amendments to the Copyright Act.

    Second, once any legislation is tabled, your committee should again conduct extensive hearings that allow all interested parties a full opportunity to be heard, and you must also ensure that any committee amendments are made in an open and transparent manner—as I'm sure they will be.

    With respect to the principles that should guide this copyright reform exercise, we believe the following two principles are critical. SOCAN has been subject to a form of compulsory licensing for over 60 years, in the sense that SOCAN must file tariffs for approval by the Copyright Board of Canada before it can enforce its rights. However, SOCAN does not believe compulsory licensing should be further extended into other areas, because to do so would violate the exclusive property rights of copyright owners—not to mention international treaty law—and perhaps discourage the creation of Canadian content. Instead, we believe the copyright owners should continue to have the right to decide with whom they wish to do business and to agree on the terms of their business relationship.

    We also do not believe that further exceptions should be created. Exceptions to copyright owners mean copyright owners do not get paid when their works are used.

    Article 13 of the Agreement on Trade-Related Aspects of Intellectual Property Rights, or TRIPS, creates the following three-step test required to justify the exceptions. I should point out that this three-step test is also part of the WIPO Copyright Treaty that is the subject of the discussion in copyright reform.

    The Chair: Mr. Spurgeon, is it long before you complete...

    Mr. Paul Spurgeon: I'll be finished in less than a minute.

  (1200)  

    The Chair: All right, thank you.

    Mr. Paul Spurgeon: Members shall confine limitations or exceptions to exclusive rights to certain special cases, which don't conflict with normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder.

    The regime that currently applies to SOCAN can indeed strike an equitable balance between the rights of creators and users because it allows composers, lyricists, songwriters, and their publishers, through their collective, SOCAN, to decide on their own volition to donate the use of their works to a particular user for a particular purpose.

    In the event, SOCAN is not prepared to forego remuneration, and if SOCAN and the user are unable to agree on a fee, the Copyright Board of Canada provides a fair mechanism to set the fee and balance the rights of users and the rights of creators.

    We believe these two principles should guide this committee in the work that lies ahead.

    Mr. Chairman and committee members, I thank you for your attention today, and SOCAN looks forward to coming back to discuss our submission with you when you move into the next stage of your study.

    Thank you very much.

    The Chair: Mr. Spurgeon, you've made your viewpoints and suggestions very clear for SOCAN, and we appreciate it.

    Mr. Paul Spurgeon: Thank you.

    The Chair: Mr. Thomson.

    Mr. Jay Thomson (President, Canadian Association of Internet Providers): Thank you, Mr. Chair and members of the committee.

    Good afternoon. My name is Jay Thomson, and I'm president and CEO of the Canadian Association of Internet Providers, or, as we call ourselves, CAIP.

    Formed in 1996, CAIP's members include Bell Canada, Telus, Allstream, Sprint Canada, AOL Canada, MCI Canada, Yahoo Canada, IBM Canada, plus hundreds—or almost 100—smaller and mid-sized Internet service providers, or ISPs, in this country.

    My message to you this afternoon is this. Exempting ISPs of copyright liability when they are merely acting as conduits of other people's content is the cornerstone of digital copyright reform and is directly linked to ratification of the WIPO treaties.

    I'm not saying this out of self-interest or to permit ISPs to escape responsibility. To expand on the closing remarks last week of the CCTA's Mr. Hennessy, I'm saying it because if you require ISPs to differentiate between the types of content within the billions of packets of information crossing their networks without their control; if you require ISPs, which have no knowledge of what is in any of these packets, to try to ascertain whether these packets—once they're ultimately reassembled in an end-user's computer—will form copyrighted, or public domain, or licensed, or unlicensed content; if you then require ISPs to pay copyright royalties under a myriad of blanket licences for some parts of this content and to seek individual licences for other parts, then you will make it impossible for ISPs to operate in this country.

    With no ISPs, there is no Internet access; no Internet access, no digital delivery of content; no digital delivery, and no need for digital copyright reform and no need to ratify the WIPO treaties.

    This is why exempting ISPs from copyright liability for content over which they have no knowledge or control is fundamental to the whole process in which this committee is currently engaged.

    Now, by advocating ISP exemption, I cannot lay claim to any originality in this respect. CAIP did not think this up. I'm not suggesting something that only ISPs are promoting. I'm not suggesting something that's unique to Canada. To the contrary, to advocate a different position would clearly set Canada apart from other industrialized nations and the rest of the global Internet community—as an outcast rather than a leader.

    Every major industrialized nation that has addressed digital copyright reform to date, including ratifying or putting themselves in a position to ratify the WIPO treaties, has recognized, as part of that process, that it makes no practical or economic sense to try to attach copyright liability to ISPs when they have no knowledge or control over the content emanating from millions of computers connected to the Internet from all over the world. The U.S, the European Union, Japan, Australia, and New Zealand have all recognized that protecting ISPs from copyright liability is an essential component of building their globally competitive digital economies while respecting the copyrights of their nations' creators.

    If all of these other countries have adopted this approach, why then are a few in this country pushing for the opposite approach? It's a simple answer because, with due respect, it's a simplistic argument. The sole reason these few wish to ignore international precedent and attach liability to ISPs for content over with they have no knowledge or control is because they can find ISPs under “I” in the yellow pages. I'm not exaggerating: their entire argument is based simply on convenience, on their mistaken assumption that ISPs will be much easier for them to find than those who should be liable--the content providers.

    Those few groups that advocate ISP liability for this reason are unable to base their arguments on copyright law or fundamental and age-old copyright principles. Principles like liability properly attach to those who choose to use a copyrighted work, and who could choose not to do so if they wished to avoid liability. Those few groups specifically ignore the widely accepted principle of attaching liability to the entity that has this power to choose and instead seek to impose liability on the only entity that has no such power—the operator of the network the content provider has chosen to use, the ISP.

  (1205)  

    Even if copyright were somehow based on some kind of natural law rather than established as it is purely by statute, even if we all ignored fundamental legal and policy principles about liability, even if Canada didn't care about the fact that our major trading partners are unified in their approach to this issue, attaching content liability to an entity that has no knowledge or ability to control content, that has no power to choose whether copyright content is transmitted or received, is just not fair. Not only is it not fair, it's based on a premise that has repeatedly been proven false, that the entity with the requisite knowledge and control of the content it uses, the Internet content provider, is somehow too hard to find for licensing purposes or royalty collection.

    The Copyright Board, after months of hearing from scores of expert witnesses whose testimony was tested by aggressive cross-examination, rejected this claim. Our Federal Court of Appeal rejected this claim. SOCAN's equivalent in the U.S. has rejected this claim, as have SOCAN's sister organizations in 40 other countries. They have all signed an international agreement accepting that royalties should and can be collected through the licensing of content providers, not ISPs. SOCAN is alone among its international peers in suggesting otherwise.

    Mr. Chairman and members of the committee, it is very important that you understand and appreciate that exempting ISPs from copyright liability will not mean creators will go without compensation. Neither does it mean that ISPs will be absolved of all responsibility here. Creators in Canada can and will be compensated by content providers, just as they are in the U.S., Germany, the U.K., France, and dozens of other countries.

    Legitimate content providers in this country accept this notion and want our laws clarified in this respect so they can get on with their business. Moreover, those infringing copyright on the Internet can and will be stopped. Our voluntary notice and notice regime is already highly successful in this regard, resolving 80% to 90% of the infringement complaints received.

    Far from shirking responsibility in these cases, ISPs in Canada have embraced the role of responsibility that reflects their function and realistic capabilities. To this end, CAIP's code of conduct provides that our members will not knowingly host illegal content. For example, if a court rules that material they host is infringing someone's copyright, they will remove the offending content from their service.

    Moreover, despite there being no clear legal obligation to do so, ISPs in Canada have actively taken steps to help copyright holders enforce their rights online. CAIP and CCTA voluntarily initiated our successful notice and notice regime, and our respective members voluntarily apply it.

    I have just a final word on our voluntary notice and notice regime. I know committee members are concerned that Canada has not moved ahead with digital copyright reform as fast as some other countries, but this delay hasn't been all bad. When the U.S. enacted its DMCA and established a notice-and-takedown regime, most copyright infringements arose from website content hosted on ISP servers, which an ISP, because it had control over those servers, could take down. Now, however, most infringing activity is generated by peer-to-peer file sharing, where the notice and takedown is ineffective because the content is stored on end-users' computers rather than hosted on an ISP server.

    Our voluntary notice and notice regime successfully addresses both website infringements and peer-to-peer file sharing. So at least in this case, Canada has benefited from not leading the charge, since it has afforded us a valuable opportunity to observe and respond to the changing nature of the Internet.

    In conclusion, CAIP generally supports the government's plans to move forward with digital copyright reform in a three-stage process. We think you're on the right track with the section 92 report, and we look forward to seeing the draft legislation to implement the short-term objectives when it's tabled and to work with you to keep Canada a world leader in Internet connectivity, innovation, and creativity.

    Thank you.

  (1210)  

    The Chair: Thank you very much, Mr. Thomson.

    As you could appreciate from the last hearing, the ISP question was very interesting to members, and your testimony adds to the interest we all have in this issue. You certainly have put your case well.

    I will now turn to CBC/Radio-Canada, Pierre Nollet, vice-président, avocat-conseil et secrétaire général.

    Monsieur Nollet.

[Translation]

    Mr. Pierre Nollet (Vice-President, General Counsel and Corporate Secretary, CBC/Radio-Canada): Thank you for this opportunity, Mr. Chairman, to make our position on this issue known.

    I'd like to begin by addressing the committee's questions. Although I'll dispense with paying royalties to him, I'd like to echo Mr. Spurgeon's comments about the thorough job that government officials have done. That's all I will say, to comply with the committee's requirements. I would however like to review the notes I've prepared. I'll start by apologizing to the interpreters because I'll be skipping from one page to the next, to stay within the time allotted. I will speak about the reform process, about the priorities identified by the CBC as well as about the guiding principles we'd like to see in place.

    Let's start with the process envisioned for the reform. From our perspective, the Act must be considered as a whole, with provisions that interact with each other. The issues of the reform raised by the Government of Canada in its report cannot be discussed piecemeal or in a vacuum. Section 92 of the Act seems to exclude the gradualist approach proposed in the Report, because it mentions “comprehensive review”.

    The review of the Act and the reform's orientations must be complete, in our opinion. Canadians, and especially the stakeholders concerned by copyright must have the broadest possible overview—what we call a comprehensive approach—of all of the reform's proposed amendments, rather than a narrow view, or gradualist approach, of only some of them, so that their interventions are relevant and enlightening for the committee.

    According to the process set out by the government in its report, the provisions of the Act will remain in flux beyond four years and the priorities of the issues raised in the report will forever be in the process of being re-evaluated. The CBC fears that such a context will create uncertainty among those concerned by the reform and contribute an element of instability to copyright related transactions.

    As you know, the CBC is a user as well as rights holder. Therefore, it's important to strike a balance between the various interests and to support the committee in its quest to do likewise.

    Let's now look at some of the issues identified by the CBC for priority consideration. Specific mention should be made of one of the WIPO's recommendation calling for a signal right to be granted to broadcasters. Further to these recommendations, broadcasters would benefit from the exclusive right to authorize the use of their signals for rebroadcasting, retransmission, cable broadcasting and communication of the signal to the public.

    The CBC has also identified as a priority the need to clarify the status of rights claimed by certain freelancers. As things stand now, the situation is unclear, which makes it difficult to use on a day-to-day basis the work done by freelancers, since copyright in that work is unclear.

    With respect to the term of protection, the CBC has made it clear to the committee that under no circumstances should the term be extended to 70 years, as some stakeholders have suggested. The CBC is concerned that the recommendation to increase the term of copyright protection is motivated more by the opportunism of certain copyright holders seeking to satisfy their financial imperatives, more than by a desire to protect the public interest. Indeed, if we look at some of the changes introduced in other countries, you'll see that financial imperatives were, generally speaking, the motivating factor.

  (1215)  

    The Chair: Go ahead, Mr. Nollet.

    Mr. Pierre Nollet: With respect to private copying, the CBC is dissatisfied with the current regime. The voluntary zero-rating scheme established following negotiations with the Canadian Private Copying Collective is a step in the right direction, but participation is strictly discretionary and voluntary. We believe the principle should be enshrined in the Act for the benefit of all broadcasters.

    Ephemeral recordings are another major issue. The legislator sought to codify certain court rulings when the Act was amended in 1997. One of the practices protected by the Act is the ephemeral recording by a broadcasting undertaking. In seeking to enshrine this practice in the Act, the legislator chose a framework that does not reflect the technological realities of the broadcasting industry. To remedy the situation, the CBC would like an exception to be created in favour of broadcasters to allow reproduction for broadcasting purposes only, on a medium not intended for the commercial market, but that is used because it renders the initial sound recording compatible with the broadcasting technology as this technology evolves.

    Moreover, as Canada's leading cultural institution, the CBC has a mandate to preserve and promote Canadian culture and heritage. In keeping with its mandate, the CBC has over the years constituted archives for the common good of the Canadian public.

    Overt time, the CBC has constituted an impressive information library, even through the use of recently created websites. The corporation's archives are an essential component of Canadian culture, for present and future generations. To ensure the maintenance, quality and accessibility of its archives, the CBC wishes to obtain regulatory recognition as a non-profit institution benefiting from the exceptions covering libraries, museums and archives. Of course, this exception would apply only to our archives. Moreover, the CBC would like to be granted an exemption authorizing it to reproduce its archives not only for conservation purposes, but for any other purpose deemed necessary to fulfil its mandate.

    The final priority I'd like to address is the procedure at the Copyright Board level. The CBC believes that the Act, specifically section 66 and following, should be amended to implement streamlined, efficient and less costly procedures, particularly with regard to tariffs.

    Lastly, to answer the question about how the process envisioned for the reform, I think users around the world are sending us a message that we should heed. Higher costs will inevitably detract users, The committee should therefore consider reform provisions that strengthen Canadian culture and Canadian identity, and not focus exclusively on increasing fees. It's important to promote broadcasting and strike a balance with a view to ensuring that copyright holders are fairly compensated.

    Consistency with international instruments should not, therefore, be the committee's prime motivation, much the same way that cultural diversity is a recognized exemption in major economic agreements. The emphasis should be on simplicity of use and on compensation.

    Thank you.

    The Chair: Thank you very much, Mr. Nollet. As you yourself noted, the CBC is a major user and holder of copyright. Your message has come through loud and clear to the committee.

    We'll now hear from Mr. Douglas Cooper and Ms. Diane Brisebois of the Canadian Coalition for Fair Digital Access.

  (1220)  

[English]

    Mr. Douglas Cooper (President, Intel of Canada Limited; Canadian Coalition for Fair Digital Access): Thank you, Mr. Chairman and committee members.

    I'm country manager and president of Intel Canada. On behalf of the Canadian Coalition for Fair Digital Access, my colleague, Diane Brisebois, president and CEO of the Retail Council of Canada, and I would like to thank you for inviting our coalition to appear before the committee today during the first phase of the hearings. The committee is to be congratulated on beginning this important and much needed review of copyright issues.

    The Canadian Coalition for Fair Digital Access, the CCFDA, was established to advocate the interests of Canadians, including businesses, consumers, and individuals who are penalized by the private copy levy regime in Canada.

    Our membership includes major Canadian retailers, consumer product manufacturers, and technology companies. We've also received support from their organizations and individuals across Canada, including a number of performers, songwriters, and independent music publishers, as well as other technology product providers who oppose the private copy levy. We believe there are alternative and more equitable methods to ensure that the right holders get compensated for their copyrighted material.

    My remarks represent the perspective of consumer product manufacturers and technology companies who have developed many of the products that help to define this new digital age.

    Ms. Brisebois will represent the perspective of our retail members.

    As requested by your committee, our comments today will focus on the government's copyright reform agenda and the timeline identified by government for addressing digital copyright issues, since we believe that modernizing copyright laws to deal with the uses of digital technology must be a high priority for government.

    We look forward to reappearing before the committee at a later date in order to address the private copying regime in more detail. At that time we will discuss ways to work together with government and other stakeholders in order to identify a balanced and workable alternative to the private copy levy regime that is fair to all.

    I'd like to emphasize that all members of our coalition are strong supporters of copyright protection. Indeed, I am sure you will appreciate that many of the members are global leaders in innovation and that protecting intellectual property is extremely important to us and to all copyright holders.

    There have been huge changes in Canada's copyright environment since Bill C-32 was passed by Parliament in 1997. Canada has emerged as a world leader in its adoption of digital technologies. Our members welcome the government's leadership in encouraging Canadians to go online. The Internet has become part of our daily life. Canada ranks second in the world in terms of Internet penetration, and the Internet is an increasingly important element of Canada's economic and cultural development.

    The global music industry has moved beyond the analog era as well. Unfortunately, the private copying regime, implemented at the tail end of the audio cassette era, has become increasingly antiquated and out of step with the fast-moving technological developments in Canada and the rest of the world.

    Modernizing copyright laws to deal with digital copyright issues, including the ultimate repeal of the private copying regime, is not a short-term issue, but it must be a high priority for government. This is because, first, according to CPCC members, by the end of 2002 the levies had already cost Canadian consumers, technology manufacturers, and retailers some $59 million. Applications by CPCC currently before the Copyright Board, if approved, would more than double this amount. As we've seen in Europe, the levy can grow to a point where it is uncontrollable and socializes the content.

    Second, once levies are implemented, they become a crutch for the content industry. The continued use of levies as a compensation tool is a disincentive for the content industry to adopt innovative technologies to protect and manage their content. Copyright holders deserve fair compensation for their works, but changes in business models and advances in technology, such as digital rights management or consumer-friendly technical protection measures, are rendering current practices obsolete. The longer we wait, the harder it gets to change course.

    Third, it's widely accepted, even by many people in the music industry, that the current system is crude because it does not make a direct link between the user and the creator. Canada's laws need to reflect a way to ensure that the user only pays for content once, at the point of sale. It is a matter of fundamental fairness that those not using the content should not have to pay.

  (1225)  

    Modernizing copyright laws, in our view, should focus primarily on alternatives to the private copying regime. Canada cannot afford to be out of step with the copyright practices of the major trading partners. Although we recognize that the government faces competing pressures, the government cannot afford to sit back and watch while these new innovations appear daily.

    The proliferation of online music distribution services is changing the way music is sold and accessed by consumers. Already gaining significant momentum in the U.S., these services are now being offered in Canada. Puretracks.com, developed by Toronto-based Moontaxi Media, was launched with considerable fanfare in Canada last month. Other Canadian services, such as the Canadian version of Apple's iTunes, are soon to follow suit. These services provide consumers with a way to download music online, while at the same time providing compensation directly to the content owner.

    Why should Canadians who are buying their music online have to pay for it twice, once when they download and then again when they buy a blank recording medium on which to store the paid content? Even worse, many Canadians purchase storage media to store non-copyrighted material or material other than music.

    Canadians want to take full advantage of innovations in technology but don't want to be penalized for doing so. A copyright framework must be in place that enables Canadians to have access to new technologies. The existing levy system acts to discourage many Canadians from paying for their music. Many say, why not just download music through one of the non-authorized sites and only pay once for copying onto a CD?

    The fact that Canadians don't want the music industry to double-dip may explain why some online services have been so slow to launch in Canada. It is urgent that changes in our laws be made now so that Canada can keep up to the rapid developments occurring elsewhere in the world.

    Before asking my colleague Diane Brisebois to speak, I would like to note the presence here today of Don Whiteside, director of Intel Corporation's strategic programs office. Mr. Whiteside is an expert in digital rights management technologies and developments in the U.S. content industry. He is in Ottawa to talk to government officials about DRM technologies and copyright developments in the U.S., and we'd be pleased to speak to individual members of the committee in order to answer any questions they might have.

    Diane.

    The Chair: Ms. Brisebois, you have just a few minutes left, so could you be concise, please?

    Mrs. Diane Brisebois (President and CEO, Retail Council of Canada; Canadian Coalition for Fair Digital Access): Then I will speak very quickly, Mr. Chairman.

    As you know, I'm president and CEO of the Retail Council. The Retail Council of Canada represents over 9,000 retailers across Canada, many of them independent merchants. Also, we represent the six largest retailers that do in fact represent 75% of the blank media sales in the country.

    I think, Mr. Chairman and committee members, we bring an interesting perspective because we speak very often on behalf of consumers in regard to issues such as this issue today. We are in fact at the forefront. We see them first. We feel them first. We get their complaints. We also see how they react. So I think the retailers can bring a very interesting perspective to this discussion.

    Obviously our position is that the existing levy regime is indiscriminate and unfair. Customers may pay extra costs on storage media even when the products they buy are not used to record copyrighted music. Others are forced to pay to make personal copies, even when they have already paid compensation to the rights holder through a physical format and/or online service, as was mentioned by my colleague.

    I think what's important here is this. Existing legislation allows for the possibility that levies might be extended to new products, such as personal computers, consumer electronics, and multi-purpose storage media. If this were to happen, it would sharply increase costs for our customers even further. In some instances, the levy will actually far exceed the cost of the product, which makes it more profitable to be in the levy business than in the retail business.

    For example, consumers currently pay 21¢ on a CD-R that retails for as low as 30¢. The CPCC has sought approval to increase the levy amount to 59¢. This means it will far exceed the price of the product, and obviously that does not seem to be of great concern to the CPCC.

    You've asked me to be concise. I will just quickly speak of the grey market. During your review of the Broadcasting Act, members of the heritage committee witnessed the significant detrimental effects that grey market activity can have on the Canadian economy.

    The high relative cost of the private copy levy on media storage products creates an economic incentive for Canadian consumers to buy leviable products in the U.S. or elsewhere. This incentive increases as the amount of the levy gradually rises or the underlying cost of the storage products falls in the U.S. The expansion of grey market activity will have an increasingly negative impact on many industries, including ours.

    My last point, Mr. Chairman, is on zero rating. Band-aid solutions, such as the so-called zero-rating exemption scheme, do not work and only underline the urgency in undertaking a complete overhaul of the private copyright regime. It has taken decisions out of the hands of the marketplace and put them in the hands of those who collect the levy, certainly not an objective group.

    The zero-rating scheme has been shown to be administratively burdensome and it offers no relief to individuals or small businesses. Retailers and their customers, which comprise 75% of the market in Canada, have been frozen out. This is arbitrary, unfair, and discriminatory.

    This zero-rating scheme simply is in place to buy off the opposition. That might sound controversial, but certainly that is the way we see it. Let's be clear. It needs to be transparent, and that would indeed be refreshing.

    Since time is of the essence, I will be pleased to answer questions later on, if indeed there is time.

    Thank you, Mr. Chairman.

  (1230)  

    The Chair: Thank you, Ms. Brisebois, and thank you, Mr. Cooper. I think you have been very frank with your views. We appreciate this.

    Finally we will turn to the Canadian Private Copying Collective, Mr. Paul Audley and Monsieur Brunet.

[Translation]

    Mr. Claude Brunet (Legal Counsel, Ogilvy Renault; Canadian Private Copying Collective): Thank you, Mr. Chairman, members of the committee.

[English]

    I am counsel to the Canadian Private Copying Collective, and I am here today with Mr. Paul Audley, who is a consultant to the CPCC and who knows its operations by heart.

    Given the comments you have just heard on the private copying regime, it seems important that we pull back and remind ourselves why it is that Parliament in 1997 introduced such a regime. Under the Copyright Act, the most important right is the right granted exclusively to the copyright owner to reproduce, or to authorize someone to reproduce, a work. That right to reproduce is at the very root of what we call “copyright”. In the 1970s, with the advent of copying technology, music sound recordings were being multiplied galore without the creators being able to control these reproductions of their material. No technological measure existed to prevent these reproductions from being made, and these reproductions were made in the secrecy of one's home, far from the eyes and reach of copyright owners. Everyone knew that home taping, as it was then called, was endemic, but copyright owners had no usable remedy to control these exploitations of their works.

    In the 1980s and the 1990s the problem was compounded by the advent of digital technology, which in effect erased all distinctions between an original and a copy. Musical sound recordings were now being cloned; something had to be done.

    In 1997 Canada decided to recognize that it was futile to imagine that copyright owners could police their rights into the homes of Canadian citizens, and Parliament adopted the current private copying regime. In doing so, it had the benefit of considering the many models already adopted by dozens of industrialized countries. Some had levies on copying equipment, some had levies on recording media, and still others had levies on both equipment and media. Canada chose to implement a levy only on blank audio recording media.

    Under the Canadian regime it is no longer an infringement of copyright to reproduce a musical sound recording for one's private use. This, of course, is equivalent to saying that copyright owners no longer have an exclusive right of reproduction when it comes to the private copying of recorded music. In effect, their exclusive reproduction right was expropriated with respect to private copying.

    It is a tenet of capitalist democracies that there should be no expropriation without compensation. Accordingly, while doing away with the exclusive right of reproduction and matters of private copying, Parliament enacted a regime of compensation for rights holders whose right had been removed. The regime replaced the right of reproduction with a much reduced right of remuneration for private copying. A problem remained. Who was to pay? It is not any easier to collect a remuneration from the individual copyists than it is to prohibit them from copying.

    Someone other than the copyists themselves had to be offered as a vis-à-vis to the rights holders, ideally someone who could then pass on the cost of the remuneration to the actual copiers. That is how the levy was born. It is a levy payable by importers and manufacturers of blank audio recording media when these blank media are disposed of in Canada.

    My friend, Paul Audley, will now explain the impact this legislative initiative has had.

  (1235)  

    Mr. Paul Audley (Consultant, Paul Audley & Associates Ltd.; Canadian Private Copying Collective): Thank you.

    Mr. Chairman and committee members, in assessing the importance of the private copying initiative, the magnitude of the problem of unauthorized private copying should be kept in mind.

    In 2001-02, a 12-month period, 1.1 billion tracks of recorded music were copied by individuals. Of this total, not more than 3% of the copies were authorized by the rights owners and involved a payment. As a result, over 1 billion tracks, or the equivalent of more than 70 million albums of pre-recorded music, were copied without authorization.

    If the private copying legislation had not been passed, songwriters, recording artists, and record companies would have received no payment whatever for the making of these copies of their creative property. If the legislation were now to be rescinded, the undisputed result would again be massive unauthorized copying with no payment to rights owners.

    The legislation has proved itself to be well drafted. Parliament wisely recognized when it passed the law that the technologies used for copying were changing. Therefore, Parliament established a technology-neutral legal framework, leaving it to the Copyright Board to make decisions as to whether the media on which a levy was requested were actually at that time in normal use by individuals to copy music. The first private copying tariff applied to both analog and digital media, specifically covering recordable CDs and mini discs, as well as audio cassettes.

    The levy has generated significant amounts for payments to rights holders. Over the first three years, $59.3 million was collected, and after deducting all costs, $54.4 million was available for distribution to authors, publishers, recording artists, and record companies. This remuneration is important since between 1999 and the present the revenues of the music industry fell by 20%, reducing the flow of royalty revenues to everyone involved in creating recorded music.

    Private copying royalties began to flow to rights holders in January 2003, and to date, over $10 million has been distributed. By the end of this year, the $28 million in royalties available from 2000 and 2001, for which a combined distribution is being done, will have been largely distributed. A good start will also have been made on distributing during this year the $28 million available from 2002.

    Every year the distribution gets simpler and quicker. The same titles, not surprisingly, come up again, and this time you've identified the rights holders already, so distributing is much easier.

    Since the levy came into effect, the CPCC has recognized and reflected the concerns expressed over the levy's application to businesses, churches, government agencies, and non-profit organizations that are not involved in copying music.

    The CPCC has operated since the beginning a zero-rating program that permits all such organizations to purchase without payment of the levy, subject to obtaining registration from CPCC and signing an agreement that indicates they will not use those media except in conformity with their business use.

    The scope of the program is very evident if you look at the website of CPCC. It applies to small, medium, and large businesses and other organizations of every kind you could possibly conceive. This is not a band-aid. This is a comprehensive, ambitious program.

    The act of private copying requires three components: the equipment necessary for copying, a blank medium onto which the copy can be made, and, most importantly, the music itself. If we look at the most common form of copying--that is, copying onto blank CDs--it is obvious that the supplier of the CD burner gets a market price for the burner. It's just as obvious that the supplier, the importer, and the retailer of the blank CD will receive a market price.

  (1240)  

    The CPCC believes that no reasonable case can be advanced for forcing the music industry to subsidize the activity of private copying by going back to supplying the music in return for absolutely no remuneration. All of the arguments that led the committee, the government, and Parliament to enact the private copying legislation in 1997 are still applicable. No one has offered any alternative that would be fair to copyright holders in recorded music. What appears to be behind all such arguments for rescinding the private copying provisions is simply the time-honoured desire to go back to having the music supplied free, while the equipment and blank media suppliers would continue to receive market prices for their contribution to private copying.

    Now I will turn it back to Claude Brunet.

    The Chair: Mr. Brunet, have you long to go?

    Mr. Claude Brunet: I would just like to make one more point that may be of interest to the committee, Mr. Chairman. It has to do with the future of the private copying regime--what the future of private copying regimes generally will be.

    First, copyright owners do not take it lightly when their rights are diminished. The private copying regime, as I said, is in effect a reduction of their exclusive right of reproduction. It is trite to say that copyright owners would much prefer an exclusive right of reproduction if they could only exercise it. One day, Mr. Chairman, they will.

    The music industry is currently investing enormous sums of money to develop and implement systems that will allow copyright owners to control how many copies can be made of a sound recording, on what media the copy can be made, and even perhaps who can make the copy. These systems, referred to as technological measures of protection or systems of digital rights management, are beginning to be deployed on certain new recordings even in the face of controversy. But whatever bad press DRM may get in consumer circles, there is absolutely no doubt that the use of DRM technology is essential to the ordered delivery of recorded music online. Therefore, it is safe to predict that DRM systems will continue to be developed and eventually will be encoded routinely in newly produced sound recordings of music.

    When this happens, copyright owners will again be in the position of fully controlling the reproduction of their material, a position they enjoyed in the seventies, but we are not there yet. In fact, we are barely at the beginning. The majority of the sound recordings today are not encoded with DRM systems. Today anyone can still make an exact copy of most sound recordings in less than an instant. As a result, the stop-gap measure of a private copying regime is still very much needed.

    It so happens, fortunately, that the Canadian regime is devised to almost self-destruct in the sense that the levy of the private copying regime will diminish as the DRM systems are implemented, and eventually, just like the incredible shrinking man, the private copying regime will shrink itself into disappearance. But for the moment, it is a very much needed regime.

    Thank you very much for your patience, Mr. Chairman.

  (1245)  

    The Chair: Thank you, Mr. Brunet and Mr. Audley. I appreciate that you've tried to respect the short time constraints, and you've made your points very clearly.

    Listening to all of you, I must say I wish Solomon were reborn. I would try to be as wise and fair as he was. It's not going to be easy. Anyway, it was a very interesting session, with various points of view expressing what the problems of copyright are.

    Mr. Abbott.

    Mr. Jim Abbott (Kootenay—Columbia, Canadian Alliance): Mr. Nollet, you may or may not know that this whole issue of the ephemeral recording is a big one, as far as I'm concerned, one that's totally unnecessary. I think if you check in the Copyright Act, subsections 30.8(8) and 30.9(6), if we were to simply delete those two, you'd have the regime you've been asking for.

    Mr. Pierre Nollet: Yes.

    Mr. Jim Abbott: But I do want to get to Mr. Audley.

    Mr. Audley, I found your presentation to be—if you pardon me for saying this—a little unbelievable. The reason why I say this is I wonder where you get the billions, or how you could ever possibly arrive at those numbers; and secondly, I understood you to say the titles people are copying keep coming up. I would be curious to know how you would know what titles come up.

    I just have a great deal of incredulity, because this portion of the Copyright Act says in and of itself that you are guilty until you can prove yourself innocent, and if you can't prove yourself innocent, you must pay. So I have difficulty with this section of the act to begin with. But as I say, I mean no disrespect. I would still like to know how in the world you ever arrived at your statistics, or how accurate we can assume them to be. And secondly, how would you know what I did or didn't copy last night in my apartment here in Ottawa?

    Mr. Paul Audley: Thank you, Mr. Abbott.

    Those are both good questions. On the first question, on the $1.1 billion, the CPCC does a survey with about a thousand respondents each month. The survey is done by Circum Network, an Ottawa-based research company. The study provides documentation of the volume of copying activity, and that information has been filed with the Copyright Board in the latter's hearings. It's subject to cross-examination; it's not a figure that has been disputed or that has been contradicted by any other evidence in those proceedings. So this is a very extensive and careful study, and I believe there's every reason to consider it to be a reasonable number.

    The reference to that figure is in end note 1 in the formal submission by the CPCC.

    On the second question, which is how the distribution becomes easier because the same titles come up from one year to another, it's simply that some music remains popular. People are still playing the Beatles, or whatever. It just becomes easier to distribute the money as you develop a database of all of the rights holders who have the right to get money for a particular track of recorded music.

    Now, I should explain that it would be immensely expensive to do a major survey of individual consumers to see exactly what they copy—and that isn't what's done. What's done, instead, is to make the assumption that what is broadcast on radio, both on CBC and private stations, and what is sold provide a reasonable reflection of taste and therefore of what would be copied. So it's that information about radio air play and sales that is used as the basis for distributing the money.

  (1250)  

    Mr. Jim Abbott: Would you agree that under the present act what you're really doing is collecting a royalty; therefore, what you're saying, or what the act is presently saying, is that downloading is actually legal? In other words, the person is being charged, as per the presentation made by the people on the other side of this question. They're basically saying, “Well, this is being charged; therefore, the royalty or the copyright fee is being paid and therefore downloading is actually legal”.

    Mr. Paul Audley: Mr. Abbott, if you would agree, I would refer that question to CPCC's counsel.

    Mr. Claude Brunet: I'm sorry, Mr. Abbott. Trust lawyers to make something that should be simple a bit more complicated.

    I think the problem you're alluding to would be better couched in terms of uploading as opposed to downloading. We have to always distinguish between what happens at the source of the material and what is done with the material.

    On the Internet, for example, something is made available to the public and it is covered by other rights than copyright. When the material becomes accessible to someone and a copy of that material is made—let's call it a secondary copy, but I'm using the word “copy” so as to distinguish between the copy as opposed to the original—when a real secondary copy is made of the original material, of course, if the copy is made on material that is subject to the private copying regime in Canada, then I think the copy is legal.

    It does not solve at all the problem of this other person who, at the source of it, renders it available. Let's remember that there are many individuals involved here. It is another problem, which is not addressed at all by the private copying regime.

    The Chair: Okay, Mr. Abbott, we'll come back to you.

    Mrs. Lill.

    Ms. Wendy Lill (Dartmouth, NDP): I only have one question. I guess it's the reference that was made by CAIP about SOCAN being alone in its request for ISPs to accept copyright ability. It peaks my curiosity. I'd like to understand how it is that this is a different situation, as you seem to be saying, in Canada to what we would see in other places. Maybe we could have illumination on that.

    Mr. Paul Spurgeon: As I indicated, Ms. Lill, first of all, the issue is before our Supreme Court and the hearing is going to be on December 3. It's not as simple as perhaps stated by my friend, Mr. Thomson.

    There are a number of issues here. The liability of mere intermediaries, to use the moniker they have been given by some, is one thing, but those who you hook up to and pay $40, $50, or $60 a month to access copyright is another issue.

    SOCAN believes the current section in the Copyright Act that exempts—let's call them “intermediaries” for the sake of argument—mere intermediaries is fine. Those are the people who are involved in the process of communicating these packets along the way.

    At one end you have a content provider, a poster. Then you have an ISP that hosts sites and has control over those things, and they send it along the way. Then you have somebody here who may be the same person, the same ISP, who does that, or there is somebody else at the end. You have people at both ends of the process.

    We're saying there has to be some responsibility—we call it “joint and several responsibility”—for the access provider, not the people in between who are doing all the providing of the pipes, but the people at the end and the people at the beginning.

    It is not unlike the cable industry, as I referred to earlier on Bill C-88. After a long period of time, SOCAN was unable to collect any money from cable for the use of our repertory on cable. We were successful in having the law amended so that we could seek a rate against cable companies that similarly could make an argument for going after the channels. Well, I'm sorry. It's very similar in that regard. The cable companies in that case, of course, as you know, now pay and are jointly and severally liable with the content providers.

    I think it's a little too simplistic to say that IAPs, simplicité, should be off the hook. I don't think you can say that.

  (1255)  

    The Chair: Mr. Spurgeon, I thought the question was, are you the only institution, as Mr. Thomson stated, that is against his position?

    Mr. Paul Spurgeon: No, we're not. In fact, there's a group of music industry publishers and creators, I believe in the province of Quebec, that recently formed a group to essentially take the same position SOCAN has. There are groups around the world now that are beginning to see that the IAP is in fact the logical place. It's not only a question of convenience; it's a question of practicality. It makes sense, as a source, to ensure that their rights are protected.

    The Chair: Ms. Lill?

    Ms. Wendy Lill: No, that's fine, thank you.

    The Chair: Madame Allard, Mr. Shepherd, and Madame Frulla.

[Translation]

    Ms. Carole-Marie Allard (Laval East, Lib.): I like to welcome everyone here this morning and thank them for coming.

    As I see it, today's debate centres on two major themes: an exemption for Internet service providers and the private copyright regime.

    Mr. Chairman, I'm somewhat disappointed that we're mixing the two themes and that we have so little time to explore these subjects in depth.

    My question is for Pierre Nollet from the CBC.

    In your submission, you talk about the liability of Internet service providers. Some of the witnesses here today have called for the exemption provided under section 2.3 to be extended to Internet service providers. You maintain that in the opinion of the CBC, the Act should be amended to provide expressly for the non-liability of network intermediaries.

    Would you like network intermediaries to be considered in a category other than Internet service provider? Would you like the Act to provide for another exemption?

    Mr. Pierre Nollet: Some Internet service providers are network intermediaries. I believe that's the distinction that is drawn. I believe an agreement was reached in the case of network intermediaries to exempt them from any liability.

    However, there is disagreement in the case of other Internet service providers who offer content or value added.

    Ms. Carole-Marie Allard: I have no further questions.

    The Chair: Thank you.

    At this time, the Chair recognizes Mr. Shepherd.

    Go ahead, sir.

[English]

    Mr. Alex Shepherd (Durham, Lib.): I'll go back to Mr. Audley.

    I was interested in your comments. As you talked about the exemptions you could see going forward, I was thinking of the manufacturers' sales tax, which got up to a huge bureaucracy and reached the point where nobody could understand it, because it had a thick stack of regulations about who was going to be exempt and who wasn't. I sometimes think the technology we were addressing has passed us by. This thing is moving faster than legislators can move.

    I've heard people say the solution is that creators all go through one or two websites and charge people for access. It gets back to the whole evolution of the computer itself. If we can get the cost down so that it doesn't pay people to do this because it's just as easy to go to a website and download the information, that's the way to go. I think realistically governments would be happy not to be part of this thing if we could find some other kind of market-driven solution.

    But you seem to think this thing of yours is going to go on in some kind of perpetuity. I know you talked about self-destruct potential, but it certainly seems as though it could go on a long time, as far as I can see from what you're saying.

    Mr. Paul Audley: Certainly the very strong preference of every rights holder I know of in the music industry would be to be in a situation where they had control and could deal with the market on a business basis. The problem is we're not in that situation, so at the moment there really isn't the alternative of suddenly having everything that is available copy protected and subject to digital rights management. We're at the beginning of the process. But my perception, and that, I believe, of everyone involved with CPCC, is that the faster the new online services can be implemented and the more successful they can be, the happier everyone in the industry will be.

·  (1300)  

    Mr. Alex Shepherd: My question would be, is what you're doing and where you're going an impediment to that happening? I'd be interested in having other people comment on this as well.

    Mr. Paul Audley: Let me give you a clear sense of how little an impediment it is. On the billion tracks copied, the CPCC collected $28 million. That's about 2.8¢ a track, or something like 39¢ for an album. It's not rocket science to figure out that the rights holders would get substantially more money if they were able to make a sale in a market situation instead. Typically in the U.S., the price of a download of music is 99¢ U.S. The rights holders would much rather be getting their share of the 99¢ than getting their share of 2.8¢. I don't think there's any doubt that this is a distant second best.

    What it is not an alternative to is getting the 99¢ on the whole, because there's so much unprotected music available; the alternative is getting nothing at all. In the absence of the private copying law now, what would be obtained is nothing at all on the vast majority of copying activity.

    The Chair: Mr. Brunet, briefly, and then Madame Brisebois.

    Mr. Claude Brunet: To piggyback upon or react to Mr. Shepherd's comments that things were going too fast, curiously enough they may not be going as fast as we would want them to go. The implementation of the DRM systems, which will bring back the control where it should be—within the hands of the copyright owners—will be accelerated when these systems are themselves protected.

    The protection of those systems is precisely one of the elements of the WIPO treaties. Joining the treaties and adhering to them will accelerate the movement to implement DRM systems, which in turn will accelerate the disappearance of the private copying regime. On that point, Mr. Chairman, your committee certainly must be congratulated for having bitten that bullet and having resolved that government should go ahead and adhere to the WIPO treaties.

    The Chair: Ms. Brisebois, I see you're smiling.

    Mrs. Diane Brisebois: I can see we're getting animated in this corner.

    I'd like the president of Intel to address many of those issues, so that we have correct information at the table.

    Mr. Douglas Cooper: Mr. Chairman and committee members, the information is that the technologies do exist and actually are being implemented. While comment was made that these technologies do not exist or are just beginning to appear, that is in fact false. We can provide plenty of material to support this discussion to the committee, as well as to you, Mr. Chairman.

    The issue is that what's holding back the diffusion of a lot of those technologies—

    The Chair: I'm sorry to interrupt you. Whatever you want to supply to the committee would be very welcome. All you have to do is send it on to the clerk. If it's not too bulky, we'll make sure it is translated and distributed.

    Mr. Douglas Cooper: Excellent. Thank you very much, Mr. Chairman.

    A voice: — [Inaudible—Editor]—

    Mr. Douglas Cooper: Sir, can I just finish the discussion?

[Translation]

    The Chair: Just a moment, Mr. Brunet. We'll get back to you.

·  (1305)  

    Mr. Claude Brunet: If I were a parliamentarian, I'd be rasing a question of privilege right about now, Mr. Chairman.

    The Chair: A question of privilege isn't warranted at this time, Mr. Brunet. Let's give Mr. Cooper a chance to speak. Alright?

[English]

    Mr. Douglas Cooper: May I finish?

    The technologies exist, as I just mentioned, and we'll provide that at your invitation, Mr. Chairman. What concerns us is that what's stopping the diffusion of that technology is a substitute, and that substitute is the existing regime on levies. The incentive that needs to be in place for implementing those technologies is the elimination of that levy. That's what will encourage the content owners to implement those technologies.

    So first, they exist, and second, the disincentive in place that's holding them back is the current regime. The committee members need to understand that in fact the technology does exist. Let's not walk out of here thinking this is something that's going to happen in the future. We need to deal with it now.

    The Chair: In fairness, I think Mr. Brunet, if I understand properly, was talking about one specific technology, a DRM.

    Perhaps you were objecting to the word “false”.

[Translation]

    Mr. Claude Brunet: My concern with Mr. Cooper's remarks is that he appears to be telling the committee that we have denied the very existence of these measures. On the contrary, Mr. Chairman, we recognize that they exist. We're saying to the CPCC that all of these measures are in the process of being implemented. However, as I stated in my initial presentation, the implementation per se has generated some controversy and all measures pertaining to sound recordings have yet to have been put in place.

    The Chair: Thank you, Mr. Brunet.

    Ms. Frulla.

    Ms. Liza Frulla (Verdun—Saint-Henri—Saint-Paul—Pointe Saint-Charles, Lib.): Thank you, Mr. Chairman. I have a number of questions.

    I note your very emotional response to these proceedings, Ms. Brisebois.

    Mrs. Diane Brisebois: I blame it on my Latin blood.

[English]

    Ms. Liza Frulla: Mr. Cooper, you're saying it is coming. In the meantime, if we alleviate the levy it will come faster.

[Translation]

    My question to you is this: in the meantime, what are copyright holders doing? Judging from what Mr. Brunet and Mr. Audley have said, provisions are in place, but these are not widespread. What happens in the meantime, if it takes several years for all of this to pan out? What happens to authors and songwriters? What solution do you advocate?

[English]

    Mrs. Diane Brisebois: I will answer a part of the question and then invite Mr. Cooper to continue.

    What I find interesting about the presentation here is there are so many contradictions. They need the money, but most of the money has not been given to the artists. What scares me is the comment Mr. Audley made that it's the same titles and the same artists that come up. So you have to question whether this levy is indeed also there to support struggling artists who usually don't have big labels to represent them and pay them.

    Secondly, you do not put levies on a variety of products simply to say you're going to be protecting copyrights when in fact research has shown--and not just our research, general research has shown--that over 50% of the people who are purchasing those products are not using them to in fact record music. Given the fact that you have an organization that's asking permission to put levies on a broader range of products, including computers, you have to question if the shrinking man is ever going to appear.

    We come from an industry, Madame Frulla, where we have a hard time believing a tax will disappear. A tax is a tax regardless of the way you want to make it look. When its own body, an industry, is the one that is regulating itself and supporting the argument of a levy, the red flags go up, because certainly Mr. Cooper and a lot of other sectors can prove that in fact there is technology. Certainly a lot of consumer industries have criticized the music industry for just sitting back. That's the reason we say it's a band-aid solution.

    I come from the retail sector where our retailers compete in the real marketplace, and if people don't like your store, they cross the street and shop somewhere else. Retailers don't stick a levy on you when you walk out.

    So there's a question of the marketplace needing to find a solution. This does not mean that our sector, and the industry Mr. Cooper represents, and our consumers don't believe we should protect copyright holders, but we should do it in a transparent way and we should do it for the right reasons.

    Mr. Douglas Cooper: If I could add to that, I think what we're talking about is a disincentive for the implementation of technologies that do get to the world we want to be in. So what would make sense, we believe, is to work with the committee on a phase-out process on the levy so that technologies, for example, that are protected today are not subject to the levy.

    As an example, many players that would currently be subject to the levy have DRM technology implemented and should not be subject to it. So a phase-out process is what I would suggest.

    The Chair: Madame Frulla.

    Ms. Liza Frulla: You're talking about a phase-out project. We're just trying here to see how we could manage to bring out a bill that is fair to everybody.

    Mr. Spurgeon or Mr. Brunet, does that make sense to you?

·  (1310)  

[Translation]

    M. Claude Brunet: Ms. Frulla, we recognize that the gradual phasing out of this regime is a stop- gap measure. As you yourself pointed out, this regime has to be eliminated while respecting the rights of all artists, whether composers, recording artists or record producers. The regime, as established or regulated by the Copyright Board, is such that after royalties reach a certain level, they decline gradually as copies are reproduced through digital rights management. Therefore, I don't think the legislator can do anything to change that. This is how things work at the present time.

    This is somewhat unpleasant for our friends because we're on an ascending curve of sorts. The regime was implemented only six years and the implementation process is not yet complete. However, as protective technological measures are gradually brought in, the regime will be phased out because what artists themselves are calling for is not compensation rights, but the right to control the reproduction of their works.

    Ms. Liza Frulla: However, can the legislator, through the Act, speed up the process of phasing out the regime?

    Mr. Claude Brunet: I'll repeat what I said about Mr. Shepherd's comments. Yes, to the extent Canada signs on to the WIPO conventions, to the extent Canadian legislation is amended to protect technological measures, something that WIPO agreements have called for, the process of developing technological safeguards and applying them to future sound recordings would be accelerated. Therefore, to make this happen, we need to sign on to WIPO conventions and amend Canada's legislation with a view to protecting these very safeguards.

[English]

    The Chair: I want to put one question to Mr. Cooper, based on what Mr. Brunet just said. Assuming there was a technological regime--and we aren't going to debate whether it's in place or not in place and what stage it's at, because from our point of view we don't know--as members of this committee, we ask, if there was such a regime in place and it was efficient and it was protected so that people would know that it would be enforced, you would be quite happy that this regime just take over from the present system?

    I suppose that's what Mr. Brunet is reaching as well. So, in a way, that forms some kind of a consensus between two opposite viewpoints, it seems to me.

    Mr. Douglas Cooper: If I may respond to that, Mr. Chairman, I think the issue is that the incentive then would be that protected materials would be at a lower, unlevied cost; therefore, the market forces would drive consumers in that direction, eliminating the need for the levy. That's the economic incentive, and that's the other element in this that needs to be incorporated in the plan. That's what's missing in Mr. Brunet's discussion.

    The Chair: But the plan would have to be also protected by some form of legislation or regulation, because if you just have a plan and somebody doesn't enforce it or do anything with it, then there's one missing link.

    Mrs. Diane Brisebois: But you also have to make sure that if there is a plan and it's legislated, it's not one that penalizes everyone versus those who are indeed breaking the law, which in fact is what happens with the system at this point.

    I want to add a comment. Mr. Brunet was quick to ask this committee to ratify WIPO, but I think it's important that the government not move forward yet until it has meaningful discussion with all stakeholders. This is an issue that is going to have an economic impact on the national treatment under WIPO, so I wanted to make sure this was fairly clear from our position.

·  (1315)  

    The Chair: Mr. Abbott, do you have any--

    Mr. Jim Abbott: I'm still--

    The Chair: If you can make it short....

    Mr. Jim Abbott: Yes.

    I want to deal with this whole business of the downloading being legal again. The difficulty is, I recognize, Mr. Brunet, this is probably a very legal question, so it's complicated, but I wonder if we can distill it.

    The fact that somebody, an individual, is paying a levy, therefore, when they are downloading, that they are downloading, or uploading--and I don't even know the difference between download and upload, so there you go--the whole point is that the way the legislation appears at this time, if you take a look at section 80 of the Copyright Act, subsection 80(1) says:

Subject to subsection (2), the act of reproducing all or any substantial part of

(c) a sound recording in which a musical work, or a performer's performance of a musical work, is embodied

onto an audio recording medium for the private use of the person who makes the copy

    Given all of the wording that is currently in the legislation as it presently stands, notwithstanding my stated bias that I don't like the private copy levy--that is my bias, but nonetheless totally apart from that--it seems to me there is a very strong argument that what is happening right at the moment--and this goes back to Mr. Thomson's presentation, back to the other presentations--is that they're virtually off the hook as a result of the fact that this is a legal activity anyway. I wonder if there's some way, recognizing that there is undoubtedly a lot of complexity here, that we can distill it so that you can refute that position.

    Mr. Claude Brunet: If you'll allow, Mr. Abbott, I found your initial question easier to answer, so I'll start with it. I don't know whether I'll manage to get to your very last one.

    The Chair: Make it very concise, Mr. Brunet, because we'll have to close up.

    Mr. Claude Brunet: Yes, Mr. Chairman. To be exact, it is no longer a copyright infringement in this country to reproduce a musical sound recording for one's private use. Whether you do that from a record that you have at home and you put it on an old cassette for your car, or whether you actually make a copy somewhere on some hard drive, it is not a copyright infringement in this country.

    The problem with your concept, Mr. Abbott, if I may, is that when we speak of downloading, we bring together two different activities. There is the person who makes the copy; that person is exempt from copyright infringement in Canada because it is no longer an infringement to reproduce a musical sound recording for one's private use. But the person who made that copy available is a different person and did something different. The fact that it is no longer a copyright infringement to reproduce a sound recording for my private use does not, I am sure you will agree with me, allow me to go into a record store and tell the manager, “Please, give me five minutes; I'll only be here for five minutes”, take the records off the stand and make my own private copy. You see the difference? There is the act of copying and the access that I get to the source material. Those are two different questions.

    The Chair: Mr. Brunet, it's time we took a break, because if we carry on, we'll get more confused. Maybe you understand it, but I must say, it was a little difficult for us to get the nuance. We'll have to get back to it.

    Thank you very much for appearing here. It was a very interesting section for all of us. We appreciate it. Sorry for keeping you longer than normal. Thank you.

    The meeting is adjourned.