Welcome, everybody, to meeting 140 as we continue our five-year legislative review of the Copyright Act.
A voice: It's been a long study.
The Chair: It's almost done. We're down to the wire on this study.
First off, we have some folks with us today. Unfortunately, we couldn't be here earlier. We had votes and that seems to take precedence over anything else.
With us today we have, as individuals, Jeremy de Beer, Professor of Law, Faculty of Law, University of Ottawa. We have Marcel Boyer, Emeritus Professor of Economics, Department of Economics, Université de Montréal. We have Mark Hayes, Partner, Hayes eLaw LLP, and we have Howard P. Knopf, Copyright Lawyer. Mr. Knopf is Counsel at Macera & Jarzyna.
All right, we have lost half an hour. You have up to seven minutes. Less is better, it gives us more time to ask questions. We do have another committee meeting here at 5:30.
Why don't we start with Mr. de Beer? You have up to seven minutes.
Thank you very much, Mr. Chair and committee members.
My name is Jeremy de Beer. I'm a law professor at the University of Ottawa and a member of the Centre for Law, Technology and Society, but I'm appearing here in my individual capacity.
I offer this committee only my own views, but based on my experience as a former legal counsel to the Copyright Board of Canada and adviser to the Copyright Board of Canada, as well as to collecting societies, user groups, government departments and international organizations. For over 15 years I've designed and taught courses on copyright, argued a dozen cases on copyright and digital policy before the Supreme Court, and published extensively in this field.
I'd like to specifically mention just two of my recent articles commissioned by the Government of Canada. One was a widely cited empirical study on the Copyright Board's tariff-setting process, which I did for the Departments of Canadian Heritage and what is now Innovation, Science and Economic Development Canada. The other was a thorough review for ISED on methods and conclusions from evidence-based policy-making. I cite these studies to emphasize that my views aren't based on the special interests of certain industries or mere speculation, but on rigorous research that I hope will help this committee make some well-informed decisions.
It’s my third appearance in about a week before a parliamentary committee. Last week my testimony to the Senate's Standing Committee on Banking, Trade, and Commerce focused on proposed reforms in Bill , the budget implementation act, to the Copyright Board and the collective administration of copyright. Yesterday, I testified to the Standing Committee on Canadian Heritage for its study on remuneration models for artists and creative industries, which will feed into this committee's review of the Copyright Act.
I won't repeat that testimony, but I would like to highlight the most important points. First, as I told the banking committee, the resources and proposed reforms to the board and collecting societies are on the whole good, but there remains some important work for this committee to do on a policy level. To the heritage committee, I made the point that if artists have remuneration problems, the root cause may not be copyright at all, but rather power imbalances and unfair contracts with publishers, record labels and other intermediaries. I said that if the government wants to expand anyone’s rights, it could start by recognizing and affirming that copyright doesn't derogate from indigenous people's rights over knowledge and culture.
I think most importantly that whatever the heritage committee and this committee recommends must take account of the dramatic extension of copyright protection in Canada’s most recent trade deal with the United States and Mexico, the USMCA.
With that, let me turn to the statutory review of the Copyright Act that this committee is mandated to do. You do not have an easy task. I've seen the 100 briefs already submitted, and the list of 182, and counting, witnesses you’ve heard from. Here's what I take from all of that. It's much too soon since the last round of amendments to consider any major overhaul of Canadian copyright law. In my view, the most important recommendation this committee can make is to get off the hamster wheel of perpetual copyright reform. lt's not just pointless. It's counterproductive to reopen the act every five years, as section 92 currently requires. Just looking at the list of special interest groups coming to you cap in hand makes one’s head spin.
The act was modernized. That was the word, it was the “modernization” act in 2012. Before that there was a massive expansion of copyright in 1997, and before that in 1989. How can anyone credibly claim to have evidence on whether the last batch of reforms is working or not? How can anyone say with a straight face that the act is already out of date again? These frequent reviews aren't free. There are cash expenses, there are opportunity costs, you could be focusing on other things, and most importantly, there are big policy risks.
To be clear, I'm not suggesting that copyright is unimportant. To the contrary, it's a crucial issue. My point is that we need, and we have, technologically neutral principles, and we need the time to properly implement and interpret, in practice and by the courts, and then consider the principles before giving lobbyists another kick at the can.
When it is seen in that light, I think it becomes easier to discount a lot of the rhetoric and the recommendations around—to list just a few examples—statutory damages to coerce educational institutions into buying licences they may not need or want, website-blocking schemes or special injunctions to give copyright owners more procedural powers than other plaintiffs have, iPod or Internet taxes or other cross-subsidies, and on and on and on.
That said, there's one very recent game-changer that I think this committee should consider, and that's the dramatic expansion of copyright required by the USMCA. The USMCA will give copyright owners an additional two full decades of monopoly. Copyright in Canada will soon last for the life of an author plus 70 years. On average, if you look at life expectancy, that's 150 years—a century and a half—that we have to wait to freely build on and embellish works in the public domain.
I understand why we did that. I'm a pragmatist. If that's what it took to salvage free trade in North America, all right. However, what it means is that Canada has now aligned the term of protection of copyright with that in the United States but not the safety valves, like fair use, that are so crucial for driving innovation. Without counterbalancing measures to align Canadian and American copyright flexibilities, Canadian innovators would be at a huge disadvantage.
In light of the time, let me conclude with my general point on this. For the theory of free trade in copyright-protected works to function in practice, both the floor and the ceiling of protection have to be harmonized. We can't take just the bad of American law without taking the good, so my recommendation above all for this committee is to ensure that in any measures it takes, it consider the changes that USMCA will bring in its report.
Thank you very much.
Thank you very much for the invitation.
Conflict exists between creators and users. Obviously, creators want to benefit from the value their creations generate for users. Users want to minimize payment for such inputs in order to channel savings towards other means of reaching their goals, their objectives or their mission. We have two particular examples before us: replacing copyright payments with scholarships or other services for students, or investments in broadcasting facilities in smaller communities or markets.
Is this a standard conflict between buyers and sellers? The answer is yes and no, and I will explain why. As I am an economist, I am going to talk about what economic efficiency or optimality tells us about this conflict.
Copyrighted works have two characteristics. First, they are information goods, or assets—I'm going to say that—which means that once produced or fixed, their use or consumption does not destroy such goods or assets. They remain available now and in the future for consumption by other people. That would be different from the standard public goods, which have to be produced every year, things like national defence or public security, for instance.
The second point is on digital technologies. What exactly they have changed in the world of copyright is that they have reduced to zero or almost zero the cost of reproducing and disseminating copyrighted works—whether they are music or books—and therefore, maximal dissemination becomes possible. Digitization challenges the delicate balance of creators' and users' rights. The excludability level favoured by copyright may have become too severe for the digital world, hence the conflict we're facing today.
Economists have been studying this type of problem for many decades and analytical solutions do exist.
An optimal solution when allocating resources would be to have the price set at zero for this type of good or asset. That way, the goods could be distributed to the maximum extent possible. However, we then have a problem: how to compensate creators within such a system.
Economists have studied solutions such as limited distribution, whereby distribution would not be optimal and the price would be set higher than zero in order to ensure fair compensation for rights holders, while still trying to distribute the products as much as possible with some possible tinkering between the two solutions.
In order to put this or these types of solution into practice, we have to know the value of the product in question. What is the competitive market value of the works that are protected given that they are information goods or assets and that digital technologies have changed the commercial domain, making it nearly impossible to have a competitive market or to even sell those goods commercially?
How can we solve this problem that I have called, in one of my publications, the Gordian knot of today's corporate world?
We can arrive at a solution through four key changes.
First, move away from the current circular heuristics in favour of direct inferences of competitive market value from the behaviour and choices of users. This can be done. It is not done today. We say that we're going to set up the rates today at that level because two years ago or four years ago we did that. Therefore, we're constrained by those decisions.
Rights holders are significantly shortchanged by the current Copyright Act provisions, including exceptions of many kinds, and the way they are implemented. The undercompensation of creators, as compared to the competitive market benchmarks, is a significant impediment to a more efficient and vibrant economy. The undercompensation totals several hundred million dollars per year in Canada.
Secondly, we have to avoid stigmatizing creators, who are seen to be opposing the digital economy and maximum distribution of works through exceptions, including fair use.
Who, from apart the creators, should pay for these public policies?
Here's a first example.
In 2012, the government passed regulations to exclude microSD and similar cards from the definition of “audio recording medium”, thereby preventing the Copyright Board from setting a levy on such cards to compensate rights holders.
Here is the government's justification, and I've quoted a governmental publication:
Such a levy would increase the costs to manufacturers and importers of these cards, resulting in these costs indirectly being passed on to retailers and consumers.
... thereby negatively impacting e-commerce businesses and Canada's participation in the digital economy.
You will see that I added [sic] at the end of the quote, by which I mean that such thinking could very well bring Canada back to the Stone Age.
Here is the third policy.
Bring to the table all major groups of beneficiaries and make them jointly and severally responsible or liable to ensure the proper, fair, equitable and competitive compensation of creators. It can be done. There's a long list of economic publications showing how this can be done, and why it should be done.
Fourthly, the current sequential determination of royalties makes it difficult to implement significant adjustment and reforms.
A little earlier, I stated that when we decide on an amount for royalties or set tariffs, we have to abide by what was decided last year or two years ago in a similar field. We should set up a system to allow all decisions to be taken jointly and concurrently so that we can better adapt to changing technologies.
Given that time is whizzing by, I won't be able to talk about the main difficulties in setting copyright tariffs, but I will just say the following:
the level playing field or technological neutrality principle, the competitive market value or balance principle, the socio-economic efficiency principle, and the separation principle. The last one says that it is neither necessary nor optimal that primary users' royalty payments be equal to the competitive market compensation of creators. Commercial radio doesn't mean that what they should be paying is what the authors and composers and performers should receive in terms of compensation.
The economics of cultural public policy are really the elephant in the room, alongside rights holders and users. In education, there is a difference between what consumers, i.e. parents and students, pay and what the providers of educational services and content, i.e. teachers, professionals and support personnel, receive.
In health care, there is a difference between what consumers or patients pay and what the providers of health care services such as doctors, nurses, and professional and support staff receive as compensation.
We can also make this type of distinction in the cultural sector.
I believe this is a fundamental aspect of the reform that we should aspire to.
Rather than talking to you about it, I will conclude by inviting you to read some publications in which I've set out ideas that could help you in your work on copyright reform.
Thank you, Mr. Chairman.
I'm not a university professor, and I certainly don't have the long list that my friends have of publications. I've been out there actually doing this stuff for about 35 years, and that involves just about everything in copyright.
You'll see in my covering letter that I've made a list of some of the people I've acted for. I've spent a lot of time with the Copyright Board, including hearing Professor Boyer and his theories on quite a few of the cases.
Today, I want to talk about some practical issues. I've dealt with six of them in my written submissions. Because of time limitations, I'll just talk briefly about three today.
The first one is what I call the royalty penalty. There's been a provision in the Copyright Act for some time that provides an important tool for copyright collectives. In situations where a copyright user is subject to an approved tariff, but refuses or neglects to pay, the copyright collective is forced to take legal action and, on success of the action, can collect from three to 10 times the amount of the royalties.
The intent of this section is a really good one. Users shouldn't be allowed to refuse to pay and then, when discovered later, just pay what they should have paid in the first place. There has to be some kind of a penalty. However, in my experience, this provision of the act has been used far too often by collectives to threaten licensees who have legitimate disputes about how much they should pay in copyright royalties.
In my view, the use of this provision by collectives to try to coerce licensees to accede to demands by collectives, whether or not those demands are reasonable, appropriate or justified, is unfair and certainly not a balanced approach to copyright tariffs.
Let me give you a very simple example. Suppose that a theatre owner who puts on a musical presentation calculates that the royalty that's payable in respect of that is $1,000. They pay, or offer to pay, the $1,000, but SOCAN, the collective who would collect, comes in and says, “We think it's $1,500. If you don't pay $1,500, we're going to sue you and get three to 10 times the amount of what we should have gotten.”
What's the theatre owner going to do? He can stick by his guns and say, “Fine, sue me”, but the risk is that if his interpretation was wrong, which could be the case, he would have to pay between $4,500 and $15,000 in royalties, when the dispute was about $500. As a result, because of this risk, the theatre owner is essentially forced to accede and pay the amount demanded by collective, even if his interpretation of what was owed was correct.
In my view, this scenario is not a proper application of this section. I've actually been involved in cases where this threat was made and 100 times as much money was involved. You can imagine the amount of risk that is taken on at that time.
In my view, this section should make it clear that the punitive royalty provisions do not apply where a copyright user asserts a legitimate dispute concerning the applicability or calculation of royalties in an approved tariff. I suggested appropriate wording in my written brief.
The second issue I want to talk about is authorship of audiovisual works. Some organizations have appeared before you. Yesterday some organizations appeared before the Standing Committee on Canadian Heritage and suggested that the act should specify which of the creative contributors to audiovisual work should be deemed to be the author of those works. I'm in particular speaking about the Directors Guild and Writers Guild, who have suggested it should be hard-wired into the Copyright Act that the director and the screenwriter of an audiovisual work should be deemed to be the author.
Some copyright works, in particular audiovisual works such as motion pictures and television shows, involve a lot of creative contributions from a lot of individuals. As a result, it can be really unclear who is the author of the work.
This is what I call a long-term problem and not a short-term problem. In the short term, the producer of these audiovisual works, through contract, gets licenses or assignments of all of the short-term rights that are necessary in order to distribute the work.
However, portions of the rights around an audiovisual work depend on the authorship. For example, the length of the term is based on the life of the author. When the reversion right applies depends on the life of the author. At some point down the road—not in the short term, not when it's in the theatres—after some of the creative contributors start to die, who the author is all of a sudden becomes relevant.
Right now, that's not clear. I admit there is a point to be made as to putting some clarity into this. There is no doubt that the proposal by the Directors Guild and Writers Guild put some clarity into it, but is it the right answer?
In the United States, they have a fairly unique situation because they've created a thing called “work for hire”. A motion picture or television producer can get contracts from people and the producer is now deemed to be the author. However, in Canada and most OECD countries that's not the case. Authorship still remains unclear. In some European countries they have deemed some other creative contributors to be the author, including the director and the screenwriter and, in some cases, the cinematographer and the score writer, and there are various other people. This again can lead to some uncertainty.
Yes, while deeming certain people to be the author eliminates the uncertainty, it creates a number of problems, which I've explained in my written brief. I'm just going to point out two.
First, many audiovisual works don't have directors and screenwriters. The perfect example is computer games. Computer games are very important audiovisual works. It's actually a bigger industry in Canada than motion pictures and television. There are no directors. There are no screenwriters. How are they going to be authors?
The second thing is, if you're going to put in a rule like this that is contrary to the authorship rule in the United States, you really have a potential problem with the very important film and television production industry in Canada. You would want to be very, very careful about doing that and jeopardizing that industry.
Last, I want to make a brief mention about the machine learning exemption, which I'm sure you've heard about. You've had several people come before you. I think it is really important that we have some kind of exemption that deals with these incidental reproductions that are created by machine learning.
However, in my view if we've learned anything from the last 20 or 30 years of copyright reform, it's that having specific provisions about developing technology is not a good way to form legislation. The simple reason is that, by the time you actually study it and get the legislation in place, the technology is off somewhere else. You're always going to be chasing this rabbit that's always one step in front of you. In my view, what's important is to make sure we get at the root problem.
What is the root problem that's been talked about in machine learning? It's a thing called incidental reproductions. What happens is that, in technological processes like machine learning and so on, there's a bunch of these little reproductions that have absolutely zero economic impact. They're not being sold to anybody. They're not being leased to anybody. They allow the technology to happen.
The last time we had a very major copyright reform, we created a section called section 30.71 entitled “Temporary Reproductions for Technological Processes”. Everybody thought that this would work, that it would allow these reproductions to be done. Unfortunately, in 2016, the Copyright Board made a decision that very substantially limited the ambit of the section and in essence made it largely a dead letter.
In my submission, what should happen if we have concerns about machine learning—and we certainly should—is to make revisions to section 30.71 to bring back the robust exemption that we intended to have for these technological processes that have been largely eliminated by this interpretation. I've given some suggestions in my written material. I'd be happy to talk to you about it. I think a revised section 30.71 would better position Canada and its technological leaders for future technologies, which we don't yet know what they are. Frankly, I can't guess them and I'm pretty sure most of you can't either.
Thank you very much.
Thank you, Mr. Chairman.
Good afternoon, members. I'm also here for my third time this week. As a former prime minister said, I guess that gives me a three-peat.
I won't repeat what I said at the Senate banking committee and yesterday at the heritage committee, but I will repeat one thing I said yesterday, which was this.
There’s no “value gap” in the copyright system. However, there’s a serious what I call “values gap” in the fake news that is being disseminated these days about IP in general and Canadian copyright revision in particular.
Today I'll talk about a few other issues and flag some that I'll include in my written brief in more detail when I submit it on or before December 10 of this year.
For today, number one, we need to clarify that Copyright Board tariffs are not mandatory for users. The elephant in the room—the second elephant today—is the issue of whether the Copyright Board tariffs are mandatory. They are not. I successfully argued that case in the Supreme Court of Canada three years ago, but most of the copyright establishment in Canada today is in denial or actively resisting that ruling.
A tariff that sets the maximum for a train ticket from Ottawa to Toronto is just fine. We used to have such tariffs before deregulation, but travellers were always free to take the plane, the bus, their own car, a limousine, their bicycle or any other legal and likely unregulated means.
Choice and competition are essential not only for users but for creators. Access Copyright charges educators far too much for far too little, and it pays creators far too little. In fact, they only got an average of $190 for 2017 from Access itself and from their share of the publishers' portion.
There is intense litigation ongoing now between Access Copyright and York University, which is now in the appeal stage, and other litigation in the Federal Court involving school boards. Unfortunately, York failed in the trial court to address the issue of whether final approved tariffs are mandatory.
Hopefully, the Federal Court of Appeal and, if necessary, the Supreme Court will get this right in due course, but we can't be sure. The other side is lobbying you heavily on this issue, including with such devious and disingenuous suggestions as imposing a statutory minimum damages regime of three to 10 times the amount, on the totally inappropriate basis of symmetry with the SOCAN regime, which is the way it is for good reasons that go back for more than 80 years, but would be totally inappropriate for tariffs outside of the performing rights regime. In fact, Mr. Hayes has pointed out problems even with the SOCAN regime.
I urge you to codify and clarify for greater certainty—as lawyers and statutory draftspersons like to say—what the Supreme Court said in 2015, consistent in turn with previous Supreme Court and other jurisprudence going back decades, which is that Copyright Board tariffs are mandatory only for collectives but optional for users, who remain free to choose how they can best legally clear their copyright needs.
My second point today is that we need to keep current fair dealing purposes in section 29 and include the words “such as”. The Supreme Court of Canada already included the concept of education in fair dealing before the 2012 amendments kicked in. The U.S.A. allows for fair use “for purposes such as”—and I'm emphasizing those words—“criticism, comment, news reporting, teaching (including multiple copies for classroom use)”.
I ask you to ignore siren calls urging you to delete the word “education” from section 29 and urge you to add those two little words “such as”, as our friends and neighbours in the U.S.A. have had for 42 years.
My number three point today is that we need to ensure that fair dealing rights cannot be overridden by contract. In 1986 the Supreme Court of Canada, in an important but not well-known case, ruled that consumers cannot lose their statutory rights by contracting out or waiving their rights in the case of, for example, when it comes to everybody's right to pay off their mortgage every five years. We need to clarify and codify a similar principle that fair dealing rights and other important users' rights and exceptions cannot be lost by contracting out or by waivers.
Number four, we need to explicitly make technical protection measures—TPMs—provisions subject to fair dealing. We need to clarify that users' fair dealing rights apply to circumvention of technical protection measures, at least for fair dealing purposes in section 29, and for many if not all other exceptions provided in the legislation as appropriate.
Number five, we need mitigation for the nation. My friend Jeremy started using the word “mitigation” after the USMCA came in, and he made some good points. We need to mitigate the damage done by copyright term extension under both the Harper government, where it was buried deeply in an omnibus budget bill—heard of one of those recently?—and by this government in the USMCA. These concessions could cost Canada hundreds of millions of dollars a year, and even worse now, must be given to the EU and all our other WTO TRIPS treaty partners because of the most-favoured-nation and national treatment principles to which Canada is bound. One small mitigation measure might be the imposition of renewal requirements and fees for those extra years of protection that are not required by the Berne convention.
Number six, we need to look carefully at enforcement issues. I know that you're under immense pressure from some very well-funded, powerful and aggressive lobbyists and lawyers on site blocking. I'm not convinced that we need any new legislation on this issue, but I am looking into it carefully and may perhaps write more about it. In the meantime, you should be looking at the existing though not the proposed provisions in section 115A of the Australian Copyright Act, and U.K. case law.
We may also need to address the issue of mass litigation against thousands of ordinary Canadians who happen to be associated with an IP address that is the subject of a notice under paragraph 41.26(1)(a) and who are alleged to have infringed a movie that could be streamed or downloaded for a few dollars. This litigation is not akin to a parking ticket. There are systematic efforts to extract thousands of dollars by way of so-called settlements from terrified Internet account holders who may have never heard of BitTorrent until they get that dreaded registered letter in the mail. These efforts may succeed in many cases because access to justice is very difficult in these circumstances. If the government would only do its job on the notice and notice regulations, that might be a good start.
Number seven, we need to repeal the blank media levy scheme. We need to get rid of the zombie-like levy scheme in part VIII of the Copyright Act and stop listening to the big three multinational record companies who conjure new kinds of taxes on digital devices, ISPs, Internet users, the cloud and whatever else looks lucrative. Even the U.S.A. doesn't entertain such fantasies.
I'm getting to my last point now.
We need to stop this five-year ritual of review. I don't always agree with Jeremy on everything, certainly not on certain aspects of this study about the Copyright Board, but I do very much agree with him on this. We have had two major and two medium-scale revisions to copyright law in Canada in the last 100 years, two and two only in the last 100 years, and a few more focused ones in between.
There's no need for a periodic copyright policy review. It's lucrative for lobbyists and lawyers, but it's a waste of time, including Parliament's time, and that's important. Reacting reflexively and prematurely to new technology is usually very dangerous. If we had listened to the whining of the film industry in the early 1980s, the VCR, the video cassette recorder, would have become illegal, and Hollywood as we know it might have committed economic suicide. Who can forget, at least some of us of a certain age, the famous words of the late movie industry lobbyist, Jack Valenti, who said that the VCR was to the American entertainment industry as the Boston strangler was to the woman alone.
Particular issues can be addressed as needed, which is the way most other countries cope with copyright.
I thank you for your patience, and I look forward to your questions.
There's an old song. I won't try to sing it. The fundamental things apply as time goes by. It's in Casablanca
. Some things just don't change, even since the first copyright act in 1709. Certain principles don't change very much, and they certainly don't change very quickly.
As I said, it's a really bad idea to try to get ahead of things in the interests of being smart and tech-savvy. If anyone had listened to Jack Valenti, Hollywood as we know it might be dead, if his own industry had listened to him.
It's a big mistake to try to react quickly to technology, because these things don't really change. The details do and the market sorts it out. The best copyright act the world has ever seen was the 1911 U.K. act, which was really short and very general and really simple. Thank God, Canada still has the skeleton of that. The U.K. has gone off the deep end with details, and the U.K. judges hate it. Everybody hates it because they move too quickly, too often.
Working on this VCR case was the first thing I did when I joined the government as an analyst back in 1983. I wrote a paper as to why we don't need legislation.
I'll leave you with one other example. In 1997, I believe—or maybe it was 1988; no, I think it was probably 1997—some wise bureaucrat over at heritage inserted an exception in the Copyright Act called the dry-erase board exception. It said it was okay for a teacher to take chalk or a marker and write on a dry-erase board by hand as long as it was then erased with a dry instrument. I did a sarcastic piece in the newspaper, and the cartoonist showed a janitor using a wet brush. It was a question of whether that was infringing. Mercifully, that frankly stupid exception has been gotten rid of, but this shows the level of detail that people can get involved, with all the best intentions, that are completely counterproductive.
Again, I'm happy to agree with Jeremy on this. I was trying to find the quote—Winston Churchill or somebody. An official came to him and said there was a terrible crisis and he must speak to him immediately. Churchill said, if was still a crisis the next day, he should come back and they would talk about it.