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37th PARLIAMENT, 3rd SESSION

Standing Committee on Canadian Heritage

EVIDENCE

CONTENTS

Thursday, April 22, 2004

0905

The Chair (Ms. Sarmite Bulte (Parkdale—High Park, Lib.))

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

0910

0915

The Chair

Mr. Paul Spurgeon

The Chair

Mr. Gerald (Jay) Kerr-Wilson (Vice-President, Legal Affairs, Canadian Cable Television Association)

0920

0925

The Chair

Mr. Jay Thomson (Assistant Vice-President, TELUS, Canadian Association of Internet Providers)

0930

0935

The Chair

Mr. Richard Pfohl (General Counsel, Canadian Recording Industry Association)

0940

0945

The Chair

Mr. Stéphane Gilker (Legal Counsel, Fasken Martineau, Association québécoise de l'industrie du disque, du spectacle et de la vidéo (ADISQ))

0950

0955

1000

The Chair

Ms. Wendy Noss (Member, Copyright Legislation Policy Committee, Intellectual Property Institute of Canada)

1005

The Chair

Ms. Wendy Noss

The Chair

Mr. Jay Thomson

1010

The Chair

Mr. Richard Pfohl

The Chair

Mr. Jim Abbott (Kootenay—Columbia, CPC)

Mr. Paul Spurgeon

1015

Mr. Richard Pfohl

Mr. Jim Abbott

1020

Mr. Paul Spurgeon

Mr. Jim Abbott

Mr. Paul Spurgeon

The Chair

1025

Mr. Gerald (Jay) Kerr-Wilson

The Chair

Hon. John Harvard (Charleswood St. James—Assiniboia, Lib.)

Ms. Wendy Noss

Hon. John Harvard

1030

Ms. Wendy Noss

Hon. John Harvard

Mr. Paul Spurgeon

1035

The Chair

Mr. Jay Thomson

The Chair

Mr. Richard Pfohl

The Chair

Hon. John Harvard

Ms. Wendy Noss

Hon. John Harvard

1040

Ms. Wendy Noss

The Chair

Mr. Jim Abbott

Mr. Richard Pfohl

1045

Mr. Jim Abbott

Mr. Richard Pfohl

Mr. Jim Abbott

Mr. Richard Pfohl

The Chair

Mr. Jay Thomson

Mr. Jim Abbott

Mr. Paul Spurgeon

Mr. Jim Abbott

Mr. Paul Spurgeon

1050

Mr. Jim Abbott

Mr. Paul Spurgeon

Hon. John Harvard

Mr. Gerald (Jay) Kerr-Wilson

Hon. John Harvard

Mr. Gerald (Jay) Kerr-Wilson

Hon. John Harvard

Mr. Gerald (Jay) Kerr-Wilson

Hon. John Harvard

Mr. Gerald (Jay) Kerr-Wilson

Hon. John Harvard

Mr. Jay Thomson

1055

The Chair

Mr. Richard Pfohl

The Chair

Mr. Gary Schellenberger (Perth—Middlesex, PC)

1100

Mr. Paul Spurgeon

The Chair

1105

Mr. Richard Pfohl

The Chair

Mr. Richard Pfohl

The Chair

Mr. Richard Pfohl

The Chair

Mr. Gerald (Jay) Kerr-Wilson

1110

The Chair

Mr. Gerald (Jay) Kerr-Wilson

The Chair

Mr. Gerald (Jay) Kerr-Wilson

1115

The Chair

Ms. Wendy Noss

The Chair

Mr. Jay Thomson

The Chair

Mr. Jay Thomson

The Chair

Mr. Stéphane Gilker

1120

The Chair

Mr. Jim Abbott

1125

Mr. Paul Spurgeon

1130

Mr. Jim Abbott

Mr. Jay Thomson

Mr. Jim Abbott

Mr. Jay Thomson

Mr. Jim Abbott

The Chair

Mr. Gerald (Jay) Kerr-Wilson

The Chair

Mr. Richard Pfohl

1135

The Chair

Mr. Stéphane Gilker

The Chair

Mr. Jay Thomson

The Chair

Hon. John Harvard

1140

Ms. Wendy Noss

Hon. John Harvard

Ms. Wendy Noss

Hon. John Harvard

Ms. Wendy Noss

Hon. John Harvard

1145

Ms. Wendy Noss

The Chair

Mr. Jay Thomson

The Chair

Mr. Gary Schellenberger

Mr. Richard Pfohl

Mr. Gary Schellenberger

The Chair

CANADA

Standing Committee on Canadian Heritage

NUMBER 009

3rd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, April 22, 2004

[Recorded by Electronic Apparatus]

¿ (0905)

[English]

The Chair (Ms. Sarmite Bulte (Parkdale—High Park, Lib.)): Good morning, ladies and gentlemen, and welcome to the Standing Committee on Canadian Heritage.

Pursuant to Standing Order 108(2), the committee is currently conducting a study of the government status report on copyright reform. We have been holding hearings this week, and today we're going to be focusing on Internet service provider liability.

We would ask that you try to limit your opening remarks to about eight to ten minutes so we can have a couple of rounds of questions.

Without any particular order, we're going to start with SOCAN. Mr. Spurgeon, it's up to you.

Mr. Paul Spurgeon (Vice-President, Legal Services and General Counsel, Society of Composers, Authors and Music Publishers of Canada): Good morning, Madam Chair and committee members. My name is Paul Spurgeon, and I'm vice-president for legal services and general counsel of SOCAN, the Society of Composers, Authors and Music Publishers of Canada.

Before I address the March 24 government status report on copyright reform and the issue of Internet service provider liability, or ISP liability, I want to make sure you understand who we are and what we do. SOCAN is a not-for-profit Canadian organization that represents composers, lyricists, songwriters, and publishers of musical works from across Canada and around the world.

As you know, the 1996 World Intellectual Property Organization--WIPO--treaties make a distinction between authors on the one hand, and performers and sound recording makers on the other hand. SOCAN's members are authors. Although some of our members, indeed, are also performers and producers, you cannot be a member of SOCAN unless you either create or publish music and/or lyrics.

On behalf of our approximately 25,000 active Canadian members and members of affiliated societies around the world, we administer performing rights in music and lyrics. The performing right is the part of copyright that gives owners of musical works the exclusive right, the sole right, to perform in public or broadcast their works, or to authorize others to do so, in return for royalty payments. 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, and we are no stranger to this committee. On November 4, 2003, we appeared before you and discussed the copyright reform process. In addition to our active participation in the legislative process, SOCAN frequently appears before the Copyright Board and the courts on copyright cases. For example, since the musical works of our members are increasingly used on the Internet, SOCAN has been one of driving forces working to define the copyright liability of ISPs over the past decade.

In 1995 SOCAN filed tariff 22 with the Copyright Board for the purpose of establishing the royalty to be paid for the communication of musical works on the Internet. In 1999 the Copyright Board issued a decision that addressed several key Internet copyright issues. In 2002 the Copyright Board's decision was reviewed by the Federal Court of Appeal. In December of 2003 we argued a further appeal before the Supreme Court of Canada. We anticipate a decision this year. I note this litigation is referred to in paragraph 34 of the status report.

Madam Chair, the bottom line is that we are passionate about copyright because it determines the livelihoods of our members.

Now that you know who we are and what we do, I will turn to the March 24 government status report that focuses on several WIPO treaty implementation issues.

Let me start off by saying that SOCAN strongly supports the rapid implementation of the WIPO treaties. As paragraph 36 of the status report notes, ISP liability is not addressed by the provisions of the WIPO treaties, but several jurisdictions have attempted to deal with the ISP liability issue in WIPO treaty implementation legislation.

On page seven of the status report the government has raised the ISP liability issue in the following terms:

How to clarify the circumstances under which Internet Service Providers (ISPs), acting as intermediaries, should be held liable for the transmission and storage of copyright material over their facilities.

Madam Chair, it is clear that we are talking about two things here, transmission and storage by ISPs.

First, we believe the issues before you cannot be resolved by using so-called informal understandings or the “notice-and-notice” procedure described in paragraph 35 of the status report. The past decade of experience demonstrates that private agreements and voluntary industry codes of conduct have not resolved Internet copyright issues because they do not address the concerns of copyright owners who are not a party to such agreements or codes of conduct.

¿ (0910)

The notice-and-notice procedure is ineffective, because it merely requires an ISP to notify one of their subscribers if we, the copyright owners, serve the ISP with notice of copyright infringement. In other words, there are no teeth to these notice-and-notice procedures.

If voluntary approaches worked, we would not be before the courts. Let us not lose sight of the fact that nine years after we filed an Internet musical works royalty tariff, SOCAN still does not have an approved tariff upon which to license Internet use. As a result, SOCAN members are not being fully compensated when their musical works are used on the Internet. This is unfair and unacceptable. Therefore, we oppose the approach outlined in paragraph 37(a) of the status report, which would exempt ISPs and only subject them to liability if they did not comply with a notice-and-notice procedure.

We also do not support the “notice-and-takedown” procedure adopted in the United States in the controversial 1998 Digital Millennium Copyright Act, or DMCA, as it's referred to. Only five years after the Americans adopted their notice-and-takedown procedure, it is already outmoded and inadequate, because it focuses on content that is stored on the server hosted by the ISP. Peer-to-peer transmissions do not involve content that is stored on a host server, and therefore cannot be controlled by notice-and-takedown provisions.

In addition, notice and takedown is contrary to the interests of collectives, such as SOCAN, that grant blanket licences—the traditional manner of licensing the performance of musical works throughout the world.

Performing rights societies grant users the right to access all of the works in their repertoires, and do not restrict the licences that they grant to specific works, nor do they wish to remove specific works from their repertoires. SOCAN and other collectives must ensure that they receive fair compensation in return for blanket access to their repertoires—the world's music.

Instead of repeating the mistakes made by the Americans, SOCAN believes that the only practical way to effectively administer our rights in the musical works used on the Internet is to ensure that ISPs are jointly and severally liable for the content they communicate, so that SOCAN can license and collect royalties from the ISPs who provide members of the public with access to the musical works, rather than to license the multitudes who post music on websites throughout the world.

In the Supreme Court of Canada case involving the existing provisions of the Copyright Act, we have argued that ISPs are liable if they host websites, and if they provide Internet access, cache, or post content that contains copyright-protected material, including SOCAN's musical works. All of these activities facilitate the use of SOCAN's musical works, and can be used to aid and abet copyright infringement, or communication without the copyright owner's permission.

If necessary, the act should be amended to stipulate that ISPs—who are not merely intermediary routers and backbone providers—should be held liable for the transmission and storage of copyright material, when their facilities are involved. The committee should adopt this position, because it maintains the proper balance between the rights of copyright owners and the needs of users.

Madam Chair, on September 15, 2003, SOCAN filed with this committee a 53-page preliminary submission regarding your review of the Copyright Act. I understand that you have the submission with you today. In the interests of saving time, I will conclude by quickly drawing your attention to some of the key issues in our submission.

We describe our ISP liability position in more detail on pages 26 to 34 of our September 15 preliminary submission. In addition to those eight pages, please see appendix 4, the last page in our submission. It has a diagram with a number of boxes and circles. The appendix illustrates what we mean by intermediary routers, which are the little circles in the middle of the page. I would also be pleased to provide further detail during the question-and-answer session.

Before concluding, I would like to briefly raise our concerns regarding the issue of the “making available” right, described in paragraphs 6 to 8 of the status report. This issue is critical to SOCAN, and we are not comfortable with either of the two approaches outlined in paragraph 8 of the status report. Pages 16 to 23 of our September 15 preliminary submission outline our views, and contain proposed statutory language regarding the “making available” right.

¿ (0915)

In addition to these seven pages, our submission containsthree appendices, which include a legal opinion and the legal submissionsof the Intellectual Property Institute of Canada, IPIC, on this criticalquestion.

SOCAN hereby formally requests an opportunity to appear once again before thiscommittee to discuss the “making available” right before anyrecommendations are made regarding this important issue.

Madam Chair, again I thank you and the committee for this opportunity tobe heard on the ISP liability issue today.

On another note, SOCAN hopesthis committee will continue to protect and promote Canadian culturethrough your strong leadership role on the foreign ownership issue.

Thank you very much.

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

Have you filed a copy of your speaking points with the clerk?

Mr. Paul Spurgeon: We can make that available, yes.

The Chair: Next we have the Canadian Cable Television Association, with Jay Kerr-Wilson, vice-president,legal affairs.

Mr. Gerald (Jay) Kerr-Wilson (Vice-President, Legal Affairs, Canadian Cable Television Association): Merci, Madame la présidente.

My name is Jay Kerr-Wilson, and I am the vice-president, legal affairs, at the Canadian Cable Television Association.

The Canadian Cable Television Association is the national association representing 83 Canadian cablecompanies that advance media in the home through a wide range of entertainment, information, and Internet and telecommunications services.

On behalf of the CCTA, I would like to thank the committee for inviting us to appear before you today to discuss whether or not the government should impose copyright liability on Canadian ISPs as part of the ongoing copyright reform process.

As you know, the CCTA is a member of the Balanced CopyrightCoalition, which consists of public interest advocates and major telecommunications, broadcasting, and technology companies as well as several prominent academics. The Balanced Copyright Coalition agrees with and supports the CCTA's position on the need to limit copyright liability for ISPs; however, my comments today are solely on behalf of the CCTA.

In addition to providing cable television services to more than six million Canadian households, the members of the Canadian Cable Television Association also provide broadband Internet access to more than two million Canadian households across all regions of the country. These networks deliver a full range of communication, data, and entertainment services to Canadians. For that reason, our industry is keenly interested in the process of copyright reform to reflect the realities of the digital environment.

Today I would like to focus my comments on the section of the status report that addresses ISP liability, specifically the heritage department's approach as reflected in option B. This approach recommends amending the Copyright Act to impose copyright liability on ISPs and contemplates ISPs collecting royalties from subscribers for copyright content. We have filed a written submission that explains the CCTA's concerns in more detail. As outlined in the submission, we believe the approach reflected in option B of the status report raises four areas of significant concern:

First, imposing liability on ISPs and requiring them to pay a copyright levy could have a serious and detrimental impact on the ISP industry and on the operation of the Internet in Canada by discouraging innovation investment and by significantly increasing the cost of Internet access for Canadians.

Second, imposing liability on ISPs is completely inconsistent with the approach taken by every other jurisdiction that has looked at this issue, including the U.S., Europe, and Japan.

Third, imposing liability on ISPs is contrary to basic copyright principles. It would make the currently legal activity of providing access an act of copyright infringement with potentially crippling liability.

Fourth, given the number of copyright works available on the Internet at any given moment, we fail to see how ISPs could manage the burden of copyright liability while continuing to operate as a viable industry.

¿ (0920)

[Translation]

To be blunt—imposing copyright liability on Canadian ISPs would have serious implications for the health and future growth of the ISP industry and the development of the Internet in Canada.

[English]

It would pose serious obstacles to the ability of CCTA member companies and other ISPs to continue to provide affordable Internet access, as they would be burdened with trying to deal with unmanageable copyright liability. It could be devastating for Canadian Internet users, who might be faced with substantially increased costs for Internet access if ISPs were required to collect Internet copyright levies from every subscriber and submit them to every rights holder and collective society that may decide to make a claim.

Ultimately, this approach could have the effect of forcing Canadians off the Internet, either because they can no longer afford Internet access or because ISPs could no longer provide Internet access on a viable basis. It could be devastating for those Canadian companies trying to develop a business plan to harness the power of the Internet to connect with customers and to market new products and services. In addition to paying increased costs for Internet access, these businesses would also suffer from the dramatic drop in demand for Internet access that would result from the increased costs. And it could be devastating for Canadian governments that see a future where information about programs and services is available to every household online and where Canadians in remote and isolated regions have access to health and education services over the Internet.

While this may sound like an overreaction to the potential impact of imposing copyright liability on ISPs, please consider that the scope and scale of the liability would be as large and complex as the Internet itself. ISPs would be liable to all of the owners of rights in the more than four billion copyright works that are available on the Internet at any given moment. They would be liable for every poem, short story, news article, sound recording, musical work, computer program, photograph, audiovisual work, blueprint, database, sketch, performer's performance, scientific research work, essay, work of criticism, speech, political commentary, and cartoon that might be accessed by Canadians browsing the Web, whether or not any Canadian ever actually accessed any of those works.

ISPs have no knowledge of or control over the content that is transmitted across their facilities. As a result, they have no way to tell which works are actually being accessed by subscribers, no practical way to limit Canadians' use of the Web, and no way to clear rights to more than a minute percentage of works. ISPs would be put in a perpetual state of massive, irresolvable liability for copyright infringement even if they paid millions of dollars a year in Internet copyright levies.

We should also understand that most of the money collected from an Internet copyright levy would not go to Canadian creators and producers but to rights holders in other countries from which we could expect no reciprocity. To force ISPs to monitor, scan, and assess the copyright ownership of material transmitted across their facilities and to administer levies would be demanding the impossible.

I want to emphasize that the CCTA does not oppose granting creators the ability to exploit their rights in the Internet environment. We do not oppose the recognition of a “making available” right as required by the WIPO Internet treaties and agree with the approach to the right reflected in the treaties. The very notion of a “making available” right makes it clear that it is the act of making content available without authorization that should give rise to liability. The obligation to clear rights and pay fees should be the responsibility of the content provider that makes the decision to use copyright works, that controls what works are used and in what manner, that can decide which business model is best to use to pay for the cost of using copyright works, and that can negotiate with rights holders to obtain the necessary licences.

Other jurisdictions, including the ones I mentioned, have recognized that limiting the liability of ISPs does not prevent rights holders from exercising their rights in an Internet environment and making creative works available to users on mutually acceptable terms. Therefore, when this committee prepares its report on the copyright reform process, we request that you not support an approach that would discourage innovation and investment, that you not support an approach that could lead to an indiscriminate Internet tax on Canadians, and that you not support an approach that could put Canada at a disadvantage compared to other countries that are also developing an Internet economy. We request that you recommend to the government that it amend the Copyright Act to provide clear and explicit limitations on the liability of ISPs.

¿ (0925)

[Translation]

Thank you for allowing me the time to present the CCTA's views. I welcome any questions you might have.

[English]

The Chair: Thank you very much.

Next, Mr. Jay Thomson from the Canadian Association of Internet Providers.

Mr. Jay Thomson (Assistant Vice-President, TELUS, Canadian Association of Internet Providers): Madam Chair, members of the committee, I appear for you today on behalf of the Canadian Association of Internet Providers, or CAIP.

Although currently employed as assistant vice-president, broadband policy, with TELUS Communications, I was until February of this year the president of CAIP. In my former capacity I had the opportunity to appear before you and to speak to this committee last fall. TELUS is a member of CAIP, and the CAIP board has asked that I represent the association before you once more.

Like the CCTA, CAIP is a member of the Balanced Copyright Coalition. Although CAIP's position on ISP liability matters is consistent with that of the coalition members, I am here today on behalf of CAIP and not the coalition.

CAIP represents all sectors of the Canadian Internet service provider industry. Our membership is made up of a broad and diverse group of Canadian ISPs, including large, medium, and small independent access providers, incumbent and competitive telephone companies, backbone providers, wireless providers, and web hosters.

At the outset let me state for the record that CAIP is not opposed to WIPO implementation and is not trying to create roadblocks for this committee or for creators in achieving that objective. Our position has been and continues to be simply this. It is vitally important to Canada's digital economy and global competitiveness that the matter of ISP liability be dealt with in conjunction with WIPO implementation and that it be dealt with fairly, correctly, and in a manner consistent with the way in which our global partners and competitors have dealt with it.

CAIP is pleased to appear this morning, and we take the inclusion of this topic on your agenda as a clear recognition that ISP liability issues are necessarily linked to WIPO implementation and therefore must figure prominently in the short-term legislative reform. My comments today will deal with the ISPs' role in the communications chain and how that relates to copyright liability. I also hope to clarify a few points you have heard both in committee and no doubt in the media.

ISPs provide Canadians with the means to access the Internet so that they can communicate electronically with each other and to the world. Like the telephone system, the ISPs make a connection. Whether their customer elects to use that connection to send e-mail, surf the net, post a message in a chat room, or download music from legitimate or illegitimate sources, the ISP's function is exactly the same: the ISP transmits the bits and bytes to and from the broader network as an intermediary of other people's communications.

The Copyright Act properly clarifies that entities acting like common carriers or intermediaries are not liable with respect to public performance and telecommunications rights for the content travelling over their networks. As you've heard and as you know, after a lengthy and detailed hearing, the Copyright Board held that this clarification applies to ISPs. The Federal Court of Appeal agreed, and the Supreme Court of Canada will soon rule on this issue.

Whether through the courts or through legislation, Canada must exempt the transmission activities of ISPs from copyright liability. Option B as described in the status report would impose liability where none exists and where none should exist. The committee should reject this approach. As I argued when I appeared before you last fall, attaching content liability to an entity that has no knowledge of or ability to control content and which has no power to choose whether lawful content is transmitted or received is unfair and simply wrong.

Madam Chair, members of the committee, please consider the following.

When then Justice Minister Anne McLellan spoke to the child pornography provisions of the Bill C-15A amendments to the Criminal Code, she made it clear that it was not the government's intent that ISPs be made liable for the illegal actions of their subscribers when the ISPs act as intermediaries. It was accepted in that context that the absence of knowledge or control meant liability should not attach.

Internet experts such as Dr. Michael Geist of the University of Ottawa have questioned and continue to question why liability might be imposed on ISPs to try to address copyright issues when such an approach has clearly and properly been rejected as a means to address the arguably even more serious issue of child pornography on the Internet. ISPs merely provide the means for third parties to communicate on the Internet.

¿ (0930)

Recently the Supreme Court of Canada, in the CCH case, ruled that intermediaries whose functions include providing the means to access and copy works do not infringe or authorize infringement. The Supreme Court further stated that courts should presume that persons who authorize an activity do so only as far as is in accordance with the law.

Finally, other witnesses may have left you with the mistaken impression that attaching liability to ISPs would be consistent with the approaches adopted by other nations, such as the U.S. and Europe. This is not the case. CAIP is unaware of any nation among WIPO signatories that are among Canada's major trading partners that has imposed copyright liability on ISPs for the infringing activities of their users. Indeed, if option B of the status report is accepted, Canada would be acting in a manner that our major trading partners, after undertaking their own lengthy and detailed examinations, have clearly rejected.

If Canadian ISPs are to be made liable for the infringing activities of their subscribers and are obliged to collect and remit royalties to collective societies, the ISP industry and Canada's role as a world leader in Internet productivity, e-commerce, and digital innovation will be put at serious risk. Just last week Statistics Canada reported that on-line sales in Canada surged 40% last year, to $19.1 billion, $5.5 billion of which came from the consumer market. Statistics Canada attributed the growth primarily to the adoption of high-speed access to the Internet. Canadian household take-up of high-speed Internet connections is a worldwide success story, and it is premised in large part on the fact that Canadian ISP pricing is among the lowest in the world. Canadians would not be willing to absorb the significant price increases that would follow from making ISPs subject to massive and unmanageable liability for copyright material on their facilities. ISPs themselves, particularly many of the smaller ones, which are already struggling, would undoubtedly abandon the business rather than face ever-increasing legal exposure.

Please let me reiterate, ISPs do not stand opposite to the interests of creators. In fact, at least two of CAIP's members offer legal music downloading services in conjunction with the music industry. But if Canadian ISPs and all Canadian ISP subscribers, whether they engage in infringing activity or not, are made liable for the copyright royalty claims of rights holders, the results will be devastating.

Madam Chair, 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. As Mr. Kerr-Wilson has indicated, 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.

In closing, on a related topic, I'd like to clarify for the committee's benefit the role CAIP members Telus and Bell played in CRIA's recent federal court application. As you know, CRIA recently launched legal action against a number of Internet users for uploading and sharing music files using peer-to-peer file-sharing services like KaZaA. First, however, CRIA had to apply for an order from the Federal Court requiring the targeted users' ISPs to disclose those users' identities and contact information, so CRIA could then serve them with the necessary legal papers. In response to CRIA's disclosure application, the ISPs asked the court to ensure that any disclosure order issued respected their customers privacy rights and took into account the administrative burden and costs ISPs would bear to find and provide the requested information. The ISPs did not challenge CRIA's arguments that music file-sharing constitutes copyright infringement. They simply wated to ensure that CRIA followed due process in seeking the disclosure order. The court denied CRIA's disclosure application, essentially on the ground that it had not met the required tests.

As high profile as this case has become, it actually had nothing directly to do with ISP liability. In fact, consistently with our own arguments here and all along, CRIA properly targeted end-users with its law suits and made no suggestion that ISPs should be liable in the circumstances. Also of note is that the court, in its decision, observed that ISPs provide the means by which individuals access the Internet and each other, but held that ISPs were in no way involved in any copyright infringing activity in which their customers may have been engaged.

CRIA is appealing this decision to the Federal Court of Appeal on a number of grounds. The court's finding that ISPs are not involved in any infringing activity is not, to my knowledge, one of those grounds.

¿ (0935)

Thank you, Madam Chair, members of the committee. I hope I've clarified matters, and I look forward to your questions.

The Chair: Thank you very much, Mr. Thomson. That's an interesting lead-in to our next speaker, Mr. Pfohl, from CRIA.

Mr. Richard Pfohl (General Counsel, Canadian Recording Industry Association): Thanks, Madam Chair.

Madam Chair and committee members, I want to thank you for the opportunity to appear today on behalf of the Canadian Recording Industry Association, CRIA.

I am delighted to hear that we have consensus on least one issue today. It sounds as if everyone actively supports, or at least would not actively oppose, WIPO treaty ratification, and similarly a making-available right. And I'm hopeful, given that sort of consensus, that this committee's efforts to move forward and to prod the government to actually implement and ratify the WIPO treaties will continue.

I do want to address, of course, the issue of liability for on-line copyright infringement, specifically ISP liability, because this issue is critical to our members. Such infringement has had a devastating effect on the Canadian music industry. I won't go into the statistics; I've provided them to you before on numerous occasions.

As starting principles, there's no reason ISPs should be treated differently from any other distributor of infringing copies of copyrighted works when they distribute such infringing copies and profit from use of their facilities for such distribution. Canada's copyright law should not be amended to permit ISPs to escape responsibility for millions of copyright infringements made possible by the operation of their commercial businesses. Furthermore, it is not appropriate policy to create exemptions that require copyright holders, such as the music industry, to subsidize the ISPs' liability with growing losses to on-line piracy.

If the government does decide to proceed with the issue of ISP liability at this time, any limitation on liability for copyright infringement must preserve the basic principles of Canadian copyright law and must be drafted in accordance with both Canada's existing treaty obligations and the WIPO treaty. Accordingly, CRIA respectfully submits that the following five principles must inform any statutory ISP liability limitation.

First, the government must not establish general or blanket limitations of liability. The status report refers simply to ISP liability, and it does not define the term ISP. ISPs should not be exempt from liability for infringement on their networks based on their status as ISPs, whatever that is. Rather, limitations on liability should apply only to activities where ISPs act as true intermediaries, in the sense that their actions consist solely of transmitting content provided by third parties, with no actual or constructive knowledge of the transmitted content.

Second, any limitations on liability for copyright infringement should be limited to safe harbours from liability, where the ISP has fulfilled defined statutory requirements to assist in identifying, preventing, and aiding legal enforcement of rights regarding the infringement. In other words, if you're giving the ISP something, there must be a concordant responsibility that they take upon themselves as well.

Third, ISPs cannot be exempted from liability in cases where they had knowledge of or reason to know about the copyright infringement. All on-line intermediaries, including mere conduit, access, caching, and hosting services, should be held liable if they have actual or constructive knowledge about infringing activities on their networks. Furthermore, peer-to-peer services in software have been engineered expressly to attempt to evade liability for widespread copyright infringement that is common on peer-to-peer networks. Providers of peer-to-peer services or software should not be able to take advantage of any exemptions Canada may enact, as they have cynically attempted to do in the States.

Fourth, any limitations should be restricted to liability for damages, thus preserving the potential for injunctive relief, even if the ISP is protected by a limitation. ISPs are often the only entities in a position to prevent infringement, and injunctive relief is an essential remedy for rights holders.

Fifth and finally, legislation should provide incentives to ensure ISP cooperation with copyright holders to detect, address, and prevent infringements, to identify the parties directly responsible for the infringement, and to provide means for proper legal address against infringers.

These are not novel propositions. Mr. Thomson mentioned earlier the European and U.S experience. These are the sorts of propositions that form the basis of legislation in the European Union and in the U.S. If we're going to look to these principles, however, we do, of course, have to look at them in the context of Canadian values and Canadian law. In Canada we have always been concerned about protecting our cultural industries, and this committee in particular has been so concerned, and our laws must reflect that sort of concern.

¿ (0940)

The status report presents two possible approaches for ISP liability at paragraph 37. At the March 30 committee meeting Mr. Lincoln astutely observed that throughout the status report it appears that option A is Industry's option and option B is Heritage's option. I'm going to address each of the options in turn.

On option A, in paragraph 37(a) of the report the industry department proposes to exempt ISPs from any liability for copyright infringement when they act merely as intermediaries. The problem with this approach is that it starts by establishing a general limitation on liability for copyright infringement. This is done without consideration of the ISP's role in the dissemination of content, its possible knowledge of the infringement, its possible role in controlling the content, or the possible economic benefit derived by the ISP from the infringing activity. This would create wide and unjustified limitations on the rights established in the Copyright Act.

Any proposal to exempt ISPs from liability must be governed by the framework set out in the Copyright Act and the principles I have articulated. In particular, the Copyright Act establishes the principle that where a party distributes an infringing work knowing or having reason to know that the work is infringing, that party should be liable for such unlawful distribution. Accordingly, ISPs should be held liable when they knew or should have known their systems were being used to traffic in infringing works.

The industry department approach proposes that ISPs could be made subject to “civil sanctions” if they do not comply with certain requirements to remove infringing material from their networks. If by civil sanctions they mean to exempt ISPs from liability under the Copyright Act and merely subject them to a separate set of civil sanctions, this is unacceptable. ISPs should not be above the copyright law. Furthermore, ISPs should also be subject, under applicable circumstances, to potential criminal liability under the copyright law, just like any other actor.

The industry department proposes a “notice and notice” scheme to curb infringing activities on the Internet. My guess is that the department proposed this scheme because rights holders have entered into such arrangements with ISPs, particularly with the associations represented on this panel. Rights holders agreed to these “notice and notice” arrangements because, frankly, that was all the ISPs were willing to provide. They are, however, inadequate.

The “notice and notice” scheme is simply a non-starter. What it means is that if an ISP is directly informed that someone is using its network to traffic in infringing works, all the ISP need do is pass on the notice to the infringer, and the ISP is absolved from further liability. This, frankly, is a prescription for widespread infringement. Effectively, a “notice and notice” scheme simply provides a warning to infringers that they'd better hide their tracks. Such a scheme establishes no obligations upon the ISPs to take effective action against the infringement or to identify the infringers, and it doesn't even provide an ability for the rights holders to help themselves, because the rights holders can't even discover who the infringers are.

When an ISP's commercial facilities are being used to break the law and the ISP is notified that they are being used to break the law, the ISP should be required to take action to identify the law-breaker and stop the law-breaking. That's a simple proposition. A “notice and notice” provision would reify the existing methods, which are clearly failing, in light of the devastating amount of on-line piracy taking place. This isn't a favour to rights holders, it would actually be a disservice.

For these reasons, CRIA supports a “notice and takedown” approach, patterned after that which has been successfully implemented in the United States. Mr. Spurgeon mentioned that we would have to update that sort of arrangement, and I certainly agree. Certain modifications are necessary to address peer infringements, and I'd be pleased to address those in detail in the questions.

Now I'd like to turn to the Heritage approach, which is laid out in paragraph 37(b). This would subject ISPs to liability for infringing copyrighted materials on their facilities. CRIA supports this approach. Paragraph 37(b), however, provides that ISPs can escape liability if they meet certain prescribed conditions, namely, timely and effective action to respond to specified requests or proposals from rights holders regarding copyrighted material on their facilities.

¿ (0945)

CRIA does not oppose such safe harbours, provided that they are limited to cases where ISPs have taken appropriate action upon being notified of infringing material.

Paragraph 37(b), however, goes on to specify that the actions--in other words, what would qualify as subjecting you to the safe harbour--could include, first, forwarding notices regarding infringing material, or, second, collecting royalties for copyrighted material. Neither approach is satisfactory. As I have discussed, simply providing notice is insufficient to prevent infringing works on the Internet. With regard to collecting royalties, if such royalties are part of an overall scheme to create a compulsory licence on the Internet at the expense of exclusive rights, then such an approach is unacceptable and likely violates Canada's existing international treaty obligations.

In conclusion, the threat to ISPs of liability for online infringement by their customers is at this time, at best, hypothetical. Meanwhile, every day Canada's cultural industries, particularly Canada's music industry, suffer very real and tangible losses through the unauthorized and infringing copies of their copyrighted sound recordings and other copyrighted material that have been traded on the Internet. The urgent need for this government to protect Canada's cultural industries from the daily assault on their livelihood by online copyright infringement and piracy should not be sacrificed in order to protect ISPs from a hypothetical threat. The issue of ISP liability should not delay this government from the urgent task of implementing and ratifying the WIPO treaties.

Thank you, Madam Chair.

The Chair: Next, from ADISQ, we have Stéphane Gilker, from Fasken Martineau, in lieu of Lyette Bouchard. Welcome, Mr. Gilker.

[Translation]

Mr. Stéphane Gilker (Legal Counsel, Fasken Martineau, Association québécoise de l'industrie du disque, du spectacle et de la vidéo (ADISQ)): Merci.

Good afternoon, Madam Chair, and ladies and gentlemen of the Standing Committee on Canadian Heritage. I'm a partner with Fasken Martineau in Montreal, and this morning I'm acting as legal counsel for the Association québécoise de l'industrie du disque, du spectacle et de la vidéo. With me is Lyette Bouchard, Assistant Director General of ADISQ, and she would be pleased to answer any questions you may have on ADISQ's position.

¿ (0950)

[English]

First, allow me to thank you for inviting us to appear before you to share our views on the issues related to this crucial public process. As ADISQ was invited to participate in the discussions surrounding the Canadian private copying regime two days ago, let me simply recall that it is in our capacity as representatives of independent producers from Quebec, interested in the development of copyright in Canada, that ADISQ is appearing before this committee to comment on the liability of Internet services providers under the Canadian Copyright Act.

As we understand it, these hearings are being conducted in the broader context of the long-awaited ratification by Canada of the two so-called WIPO Internet treaties. Hence, before entering into the details of the issues raised by an ISP's copyright liability, let us please first recall that Canada's accession to the WIPO treaties would by and of itself be viewed as a major step forward by Canadian creators and producers in the music sector.

In that respect, let us further underline that no modification to any of the provisions in the Canadian Copyright Act related to the liability of the ISP is required for the ratification of the WIPO treaties by Canada, as simply none of the legal issues surrounding this question are addressed by those treaties.

Put otherwise, Canada may ratify the WIPO Internet treaties without incurring any obligation to modify the Copyright Act to address an ISP's liability.

As we say in French, le meilleur est l'ennemi du bien, and it may well be better for Canada to ratify the WIPO treaties without resolving all issues, including those, rather than again postponing such a ratification for months and months, with the view to resolving the numerous and indeed fascinating issues raised by the development of the Internet.

As suggested two days ago, Canadian creators and producers in the music sector would be grateful to this committee should an interim report be issued unanimously recommending the ratification of the WIPO treaties by Canada without any further delay.

These initial remarks having been made, let us look at the issues related to liability of ISPs under the Copyright Act.

First, ADISQ urges this committee to acknowledge the crucial distinction, as made by SOCAN this morning, that exists between, first, entities whose services are restricted solely to the provision of the means of telecommunication necessary for the communication of copyrighted material to the public over the Internet--i.e., Internet backbone infrastructure and services, the role played by Internet service providers--and second, entities whose services extend to the provision of services and equipment that go beyond those services and equipment necessary for the communication of copyrighted material to the public over the Internet. Some examples of that would include Internet access subscription services to Internet users; branded home-page portals, replete with advertising and hyperlinks pointing to proprietary or third-party content; website and content hosting services; and use of equipment and software underlying features, such as caching, in order to improve the efficiency and response time of transmissions--to take the word of the Federal Court of Appeal.

Entities providing such additional services and equipment will be referred to as “Internet access providers”, for lack of a better term, or “IAPs”.

While ADISQ is ready to accept that ISPs, as defined above, may be exempted from copyright liability for content transmitted through their facilities when acting solely as ISPs, as so defined, ADISQ can certainly neither accept nor understand why Internet access providers--that is, those whose services or equipment go beyond what is necessary to effect telecommunication--would benefit from such an exemption.

Let us propose to you quite an interesting analogy. Just to give you an example, no one, we think, will dispute that under the Copyright Act as it presently stands, a cable operator retransmitting copyrighted programming originating from CBC Montreal to its subscribers is communicating such CBC programming to its subscribers by telecommunication, and is thus liable for the payment of royalties to the owner of the copyright in such programming.

Please note that in this example the cable operator is neither the creator nor the originator of the CBC programming. They merely retransmit such CBC programming to persons with whom they have entered into a subscription agreement under which it was agreed that, in consideration for subscription fees, they would provide them with all telecommunication equipment and services required in order to allow such subscribers to accept all content made available through their telecommunication equipment and services.

¿ (0955)

ADISQ absolutely fails to understand why the rules underlying this example should suddenly cease to apply merely because the entity given access to the copyrighted material created by and originating from third parties to its paying subscribers, namely the IAP instead of the cable operator, would do so through the Internet rather than a cable system.

As this committee knows, the Supreme Court of Canada is about to deliver its decision regarding SOCAN's proposed Internet tariff, which decision will hopefully clarify all the issues mentioned above in the sense proposed above. But should the Supreme Court of Canada consider that it doesn't have to settle any of these issues, or should it come to the conclusion that the Copyright Act, as applied to the Internet, leads to conclusions other than those proposed above, ADISQ will unquestionably do whatever is possible to ensure that clarifications or corrective amendments be made forthwith to the Copyright Act.

Before concluding, we would like this committee to consider at least the three following propositions in assessing IAP's liability under the Canadian Copyright Act:

First, that this truly fantastic communication machine that is the Internet, while giving rise to not less fantastic new opportunities--among which are the rather profitable Internet services businesses--has also engendered enormous problems, among which is copyright piracy at a level never seen in the known history of mankind.

Second, that as the recent CRIA decision clearly illustrates, copyright owners' ability to try to at least symbolically reduce the never-ending Internet copyright massacre occurring in Canada, as elsewhere in the world, is dramatically dependent upon the collaboration of IAPs, in order to even simply identify wrongdoers and put an end to their illegal activities.

Third, that anyone objectively looking at the copyright issues on the Internet with the aim of trying to ensure that copyrights cease to be treated as something having really no importance at all will invariably come to the conclusion that the only reasonable and practical way to collect royalties for the use of copyrighted material on the Internet is through those providing access to the Internet under paying subscription agreements, and thus contracts, with Internet users, namely the Internet access providers.

To put the matter in simple words, as IAPs are clearly part of the problem, they clearly should be part of the solution. They shall work hand in hand with copyright owners to try to resolve the problem.

Interestingly enough, the situation described above presents the exact same characteristics as the one having led many countries to enact “private copying” regimes in order to indemnify copyright owners from massive and uncontrollable reproductions made possible by consumer recording apparatus and devices. Whether or not manufacturers or importers of such recording apparatus and devices may be technically said to be liable for copyright infringement resulting from the use of such recording apparatus and devices, they are actually the bottleneck, and the only practical and reasonable means through which royalties could be perceived from those who are infringing copyright in using such recording apparatus and devices. If royalties collected from manufacturers of blank recording devices are obviously passed on to those who purchase them to copy copyrighted material, at the end of the day, those who are copying are those who are paying for such copies.

Why, then, not consider applying such a solution to the “Internet problem” by ensuring that IAPs, irrespective of whether or not they are liable for infringement made through their services and facilities, be legally mandated, or allowed to collect royalties under a voluntary collective administration regime from those who are undoubtedly infringing copyright, being the bottleneck and the only practical and reasonable means through which such royalties could be perceived?

Finally, ADISQ would obviously welcome the enactment of any provisions facilitating the identification of infringers and preventing further infringement--such as by imposing blocking and, where applicable, erasure of content--notably by imposing upon IAPs the obligation to collaborate with copyright owners to that effect. Such provisions shall nevertheless not exempt IAPs from liability that would otherwise apply to them. Since the beginning of this presentation ten minutes ago, more than three million files have been illegally exchanged over the Internet.

À (1000)

I would like to thank you, Madam Chair, ladies and gentlemen, and members of the standing committee, for the opportunity given to ADISQ to express its views on these issues.

Mrs. Bouchard and I will obviously be pleased to discuss any other questions this committee may want to address.

Thank you.

The Chair: Merci.

Last, but not least, we have Wendy Noss, of the Intellectual Property Institute of Canada.

Ms. Wendy Noss (Member, Copyright Legislation Policy Committee, Intellectual Property Institute of Canada): Madam Chair, members of the committee, it's a pleasure to appear before you today. I'm Wendy Noss, a lawyer with Sim, Hughes, Ashton & McKay. I'm appearing before you as a Member of the Copyright Legislation Policy Committee of the Intellectual Property Institute of Canada. For those of you who are not familiar with the institute, it is Canada's pre-eminent association of professionals who specialize in intellectual property. It is committed to the protection and promotion of intellectual property in the Canadian economy.

IPIC's membership encompasses the majority of lawyers working in the area of copyright law. As your committee is no doubt aware, given the hearings over the last few days, not all lawyers, and thus not all IPIC members, possess the same view with respect to the matters you are now considering. There is inevitably a range of opinions. Nonetheless, through the work of our copyright legislation committee, IPIC has made previous submissions in respect to the section 92 report, and it is the principles raised in our most recent submission relevant tothe status report that I would propose to draw on in my brief introductoryremarks. It is our hope that we can be of some assistance to the committee in providing a context for the more specific proposals you will hear from the parties with a direct interest in the matter who are before you today.

Most significantly, our committee has recommended that the act must be amended as soon as possible to clarify the circumstances under which ISPs are liable. While such amendments are not a requirement for implementation of the WIPO treaties, the issue of ISP liability is one that has been identified by the departments as part of the short-term agenda. Extensive consultation has already taken place, and there is no reason not to act now.

There are still some who advocate that the government should not enact any new legislation at this time to deal with this issue. They'll point to voluntary arrangements that exist with some ISPs and some rights holders for “notice and notice” or to the fact that the Supreme Court of Canada has not yet spoken on this issue. They may even point to problems encountered in foreign jurisdictions and urge you not to move quickly. I use the word “quickly” there in an ironic sense, given that, as you heard Mr. Spurgeon say, tariff 22 was filed in 1995.

Others, including our committee, would suggest the government must act to establish legislation prescribing the rights and obligations in a network environment.

It is true that the Supreme Court is considering the issue in the tariff 22 case, but it is critical for your committee to keep in mind that what is involved in the decision is the interpretation of how the Copyright Act, created before the advent of the Internet, should be interpreted in the new digital environment.

By way of example, a key issue of liability concerns whether the so-called common carrier exemption, an exemption originally included in the act to limit the liability of telephone companies and the like for communications over which they did not have control, applies to the activities of ISPs.

Moreover, the Supreme Court of Canada decision, no matter what it ultimately says, will deal with only one of the rights afforded under the Copyright Act, and that is the right of a copyright owner to communicate a work by telecommunication. The decision will not deal with the right of reproduction.

We have submitted that the government should bring forth new legislation to implement a preferred policy agenda regardless of how the Supreme Court of Canada interprets the application of the existing provisions. New legislative amendments should be drafted specifically to take into account the reality of the Internet, the threat posed to the right of copyright owners by the advent of information and communication technologies, and the international scope of this issue.

We would agree with the department's contention that the current law is unclear. We are pleased to see that the status report reflects a move from the section 92 report, in that it is now posing the question of how, and not whether, to effect legislative change on this issue. We are similarly pleased to see that your committee is obviously now seriously engaged in moving forward with amendments to the act.

In determining how, and not whether, to effect legislative change, I would offer the following brief comments.

Change must account for not only the variety of different types of rights that are infringed in a networked environment, but also for the fact that ISPs engage in a number of different activities, something you heard Mr. Thomson and others speak about this morning. Indeed, the limitations on liabilities for ISPs enacted in other jurisdictions differ, depending upon the activity, ranging from acting as a mere conduit to hosting or caching.

À (1005)

In acknowledging the different activities of ISPs, however, there must also be acknowledgement of the unique role they play in being able to effectively limit infringement in a networked environment, once they have been provided with knowledge from a rights owner.

Your committee may be interested in considering the fact that the Copyright Act already utilizes the concept of differing liability based on knowledge, in distinguishing between acts of primary and secondary infringement.

The concept of secondary infringement already recognizes there will be liability if you engage in certain acts that otherwise would not give rise to liability, where you knew or ought to have known you were dealing with infringing copies. This is reflected, for example, in other regimes that have established notice-and-takedown types of arrangements.

The threats to the rights of copyright holders are realistically unparalleled in the digital environment, where every minute of communication entails the possibility of millions of reproductions of infringing works. For the benefit of both copyright owners and ISPs, comprehensive legislative change must now be enacted to deal consistently with the issue of the liability of Internet service providers in Canada.

That concludes my introductory remarks, Madam Chair. I'd like to thank you for the opportunity to appear before the committee, and I will be pleased to take any questions you may have.

The Chair: Thank you very much.

Just before I open it up to questions, I notice you've used the phrase “notice and takedown”. That phrase has been used a number of times today. Ms. Noss, I'm going to put you on the line. Can you explain that to us before we get into the questions?

Ms. Wendy Noss: Essentially, in terms of both the U.S. Digital Millennium Copyright Act and the EC directive, where an ISP is engaging in certain activities, such as hosting or caching, and they have the ability to effectively take down the material, once they are provided with notice--that's the notice-and-takedown part of the equation--from a rights holder that materials are infringing, they must take effective action to limit the access to that material. In ordinary parlance, they must take it down.

The EC directive differs because it's a horizontal approach to liability for all types of information communicated, whereas the DMCA, the U.S. approach, is geared only toward copyright infringement.

The Chair: Thank you.

Mr. Thomson.

Mr. Jay Thomson: Canada already has a notice-and-takedown regime in place with respect to child pornography and hate propaganda on the Internet. Under that system, if police believe that content an ISP might be hosting is possibly child pornography or hate propaganda, they must go to a court and present that information to a judge. The judge can then issue to the ISP an interim takedown order, so the judge has an opportunity to examine the content to determine whether it is legal or illegal. If the judge determines that it is legal, the order is removed and the content can be put back up. If the judge considers the content illegal, then the order becomes finalized and the content must remain off the ISP servers.

In those circumstances where the police are involved, they have to go to the court and get a judge to order. The notice-and-takedown regime proposed here by creators would give creators or rights holders powers that the police don't even have with respect to child pornography and hate propaganda.

À (1010)

The Chair: Thank you.

Mr. Richard Pfohl: Madam Chair, I would like to address the points Mr. Thomson has raised on Canada's approach.

CRIA has found that approach fundamentally fails to protect creators or rights holders of copyrighted materials. And we saw from our court case, even if we'd been successful, that the amount of time and effort in going to a court simply does not work when we have millions of cases of infringement taking place on the Internet.

If you look at the examples of the U.S. and the EU, they've actually worked very well, and they actually have built-in protections to make sure they don't harm the people who have put that material up.

In the U.S., for example, if I want to have some material taken down, I need to effectively swear an affidavit. I have to basically swear under penalty of perjury that I'm the rights holder, that they are infringing. I send a notice to the ISP. Hundreds of thousands of these notices have been sent. The ISP receives the notice. It provides it to the person who actually put the material up in the first place. If that person disputes the notice, then they send a counter-notice and their rights are protected.

If you look at the statistics in the U.S., it has worked remarkably well.

Our counterpart in the U.S., the RIAA and a number of other rights-holder organizations, including the Business Software Alliance, the interactive games association, compiled the statistics for an 18-month period in 2001-02. What they found was that 158,000 notices were provided and that material was taken down. In only 17 cases was there a challenge to the order that was issued, so in only 17 cases did the person on the other end think they had it wrong. And in only three cases was that material eventually put back up again. So in only three cases was it eventually found that, yes, you're right, the rights holder was actually in the wrong.

So the system is working very well in the U.S., and it's protecting the rights holders without causing an undue burden upon the ISPs. It's a system that was worked out with the cooperation of the ISPs, who helped to negotiate the law in the first place.

With all due respect, Canada needs a similar type of system in order to protect the rights holders, because if we need to go to a court every time someone has infringing work on the system, it's simply never going to disappear.

The Chair: Thank you.

Mr. Abbott.

Mr. Jim Abbott (Kootenay—Columbia, CPC): This is a very interesting debate we're into.

As in all things, there are no perfect analogies. But I can't help but wonder, with the private ownership of Highway 407, I believe it is, in the Toronto area, if the owners of Highway 407 should be responsible for somebody getting on to Highway 407, paying their fee, and driving along with a trunk full of cocaine. I rather doubt it. There are criminal sanctions that can be brought against the person who has the cocaine in their trunk, and the police have access to going after the person. But I don't really understand if somebody is doing something on the Internet that is contrary to copyright laws and they are on Highway 407, how the owner of the ISP or the owner of Highway 407 could be held liable or should have some responsibility.

To carry on with this very imperfect analogy, clearly if there were some way of seeing that there are one, two, three, or ten vehicles an hour coming on at Interchange 24 and so on and so forth, then there should be some cooperation between the authorities and the owner, perhaps putting up a barricade at Interchange 24 to stop all the flow of this cocaine down the highway. But that would be on a cooperative basis, as opposed to saying that the owners of Highway 407 should be held responsible.

Mr. Spurgeon or Mr. Pfohl, how would you respond to my rather imperfect analogy?

Mr. Paul Spurgeon: First of all, with respect, it perhaps is a bit of an imperfect analogy, because if you look at the diagram, I agree with you that Highway 407 is this intermediary route or backbone- it's the highway, as it were--but here we have ISPs acting as hosters, as posters, as people involved in making sure that these people get the copyright. These people at this end of the diagram are IAPs who get a monthly fee from a subscriber, giving them access to the world's music, and that's the difference with your highway analogy.

There are, I think, some similarities. Obviously highways have responsibilities to the people who drive on them in terms of making sure they don't have cracks in the pavement and cars don't fall through them. But I think the better analogy is, yes, the intermediary router here... And I have to point out that if the status report in approach B, when they say “The actions could include forwarding notices regarding infringing material, or collecting royalties for copyright material...” means that ISPs are liable, with the exception of ISPs that are merely doing this, then no problem.

I don't know exactly what that means, but if an ISP is hosting a website, providing access to a subscriber for a monthly fee, caching or posting content, in our view, they should be responsible for that activity.

À (1015)

Mr. Richard Pfohl: The connection of the highway to the driver is a bit closer, because the ISPs profit from selling high-speed broadband access. Often the marketing even says it's for downloading. So the very activities that are illegal are the ones that are driving the profits. There's more of a direct connection.

What I'm particularly concerned about is the situation where the ISP knows or ought to know that this sort of illegal activity is occurring. Let me give you another example using a truck. Let's say that I lease a truck to someone for $50 a month. I discover that person is using the truck to go down and loot the neighbourhood record store on a regular basis. But I continue to lease the truck to this person and to collect $50 a month from this person. I think our courts would say I'm complicit in their unlawful activities and I ought to be held liable if I know that this illegal activity is going on.

This raises the question of what ought to be the response where an ISP is informed that this illegal activity is taking place on their system. We would say that I as the truck owner should not escape liability simply by sending a note to the truck user that says “I know you're doing something illegal, but all I need to do is send you a note identifying that you're doing something illegal, and I don't have to take any further action.” We would hold that once the owner is informed that truck is being used for illegal purposes, the owner actually has to do something to stop the unlawful activities.

Mr. Jim Abbott: But are you not making the assumption that the sole purpose of the ISP is to transmit copyrighted material? I suggest to you that it's purely incidental, in the same way that Xerox or other manufacturers of photocopiers may find that their photocopiers are being used to copy copyrighted material, recognizing again that the analogy breaks down because there are some fees applicable for libraries and so on and so forth. I am aware of that. But still, using the broadest brush, Xerox or other manufacturers of photocopiers should be held liable and should be paying SOCAN or other rights holders a fee because somebody just might go to the photocopier and copy something that's copyrightable--how would that be enforced?

Cable and satellite providers have a specific reason for existing, which is to transmit material. Therefore, there is under copyright law the ability of the people who are providing that content to receive fees or copyright royalties, however we want to describe it, from the cable and satellite providers, because that's the whole reason for them to exist.

An ISP may incidentally have some copyrighted material on the system. In the case of the ISP, it strikes me that the only way the state would be able to determine that they were transmitting copyrighted material would be through a massive invasion of privacy. The state would have the ability, whether it's SOCAN or its agent, to go into all of the ISP files. So the transmission of my e-mails or whatever it may be would be subject to scrutiny by a collective. I find that to be an unfortunate concept. I can't possibly imagine that. How would you possibly see the collection of these fees having any basis in fact?

À (1020)

Mr. Paul Spurgeon: First of all, I'm not so sure that the transmission of copyright is incidental with Internet access providers—from what was said earlier by several witnesses.

The analogy to cable is interesting; in fact, it's an analogy that we've been making. Cable pays for their retransmission, as Mr. Gilker mentioned. They pay for a lot of things they transmit, as do the entities that provide the programming--i.e., the programming undertakings. There's joint and several liability, because they're both involved in that communication chain or transmission to the public. I'm not a fortune teller, but in my view that's how we're going to get everything in the near future, through that Internet pipe on our TV. It's going to become the communications medium.

So we can't be short-sighted here, and say “Let's forget about the Internet, because we can point out examples where they shouldn't be liable for copyright”. The fact is, they are doing something that triggers a liability—they are communicating. If you refer to the diagram, they are communicating copyright works to the public. As a result, there is some culpability there.

There has to be some liability jointly and severally with all of the other actors in the chain of communication. If there isn't, copyright owners could find themselves without a remedy.

Mr. Jim Abbott: But I still don't understand... Do you have any best guess of what percentage of all traffic in aggregate on the Internet would actually be copyright material?

I'm just thinking of my own personal transmissions. I have some difficulty thinking of any time in the last week or month when I actually received copyright material. Certainly I don't recall ever having transmitted copyright material. I will confess that about two months ago somebody sent me the cutest advertisement that I have ever seen, which I'll bet was copyrighted. But that's only one time, about two months ago.

So what is the percentage? What's your best guess?

Mr. Paul Spurgeon: That may or may not be true. If you read press announcements, I'm sure that the next day you like to read on the Internet what's happened--or maybe you don't. Those could very well be copyright protected as well.

What's my best guess in terms of a percentage? I don't have any data, so I don't know exactly what percentage it is. I do know that there is more and more every day. I think that some statistics were given in terms of the number of files shared. Certainly it is becoming a medium for accessing copyright material, and obviously more and more so. In some parts, I think it's going to migrate from existing media to the Internet; there will be more of a migration of copyright. You shouldn't be short-sighted and just say “It will be different, and therefore...”.

What happens when the day comes when Internet service providers can indeed keep track of those things, and they know exactly what... In fact, maybe they can do that already. I don't know. But when the technological measures are in place allowing there to be more granularity in terms of what's being transmitted, then I think that we don't want to cut off our nose to spite our face if that technology allows us to go after the people who are doing the infringing.

The Chair: Mr. Kerr-Wilson wanted to comment.

I'm going to go on, and then come back to you, Mr. Abbott.

À (1025)

Mr. Gerald (Jay) Kerr-Wilson: Sorry. I want to respond because a couple of times this morning we've heard the analogy between ISPs and cable companies. I'm actually in a fairly good position to comment on this analogy.

There's a very fundamental difference from a copyright perspective between a cable operation and an ISP. It has to do with the fact that cable operators inherit a contractual chain of title to all the works they deliver to subscribers. So when a cable operator licenses a specialty service, it gets the rights to the specialty service. The specialty service has a licence with the program producer. The program producer has a licence with the script writer and the performers. So all of the rights all along the way have been cleared. Everyone has been paid. The specialty service says to the cable operator, here's my signal; all the rights have been cleared except for SOCAN's right.

So we go to the Copyright Board, and the Copyright Board tells us, in addition to all the other rights we've already bought, how much we pay SOCAN. We do that.

An ISP has absolutely no contractual relationship with the vast majority of content providers in the world. So when our subscribers go on the Internet and decide they want to see what's posted on the Polish modern art museum website today, we don't have a relationship with the Polish modern art web museum to clear the rights to those works. We can't do it. We don't know our subscribers have gone there. So we have no chain of title to then present to the subscriber to say we've cleared all the rights, right through the entire chain. That's a fundamental difference. That's a fatal flaw in the cable analogy.

I'd also like to pick up on this truck rental analogy, because it's not going to the owner of a truck that has been rented, it is going to Hertz, and saying “One of your trucks somewhere in North America may have been used to rob a record store. Make it stop.” Hertz would say “Go to the police. Go to the court. I don't know what my trucks are used for. I have billions of trucks out there. I can't possibly keep track of all my trucks and what's in all my trucks. I'm in the business of renting trucks and not in the business of asking people to account for all their activities as they're in my truck going about their business.”

SOCAN's version is going to Hertz and saying “Two percent of your trucks might have been used to move some records from point A to point B. Where's our cheque?” If we have to pay SOCAN, then suddenly the book publishers will be coming up and saying “Who knows, maybe books were in some of those trucks. Where's our cheque?” Then suddenly it's everybody who might have had something in one of our trucks, without having to prove that our trucks were ever used to move it, is in line saying “Where's our cheque?” At the end of the day, we can't afford to rent trucks any more because we can't charge the guy $10,000 an hour for his truck because we have to pay for stuff he may or may not ever carry.

The scale of the Internet makes small analogies very dangerous. The scale of the Internet and the amount of work out there makes focusing on one particular type of work... If all the Internet was used for was to transmit nothing but musical works and sound recordings, this would be a completely different issue. With great respect, Mr. Pfohl's clients and Mr. Spurgeon's members represent a very small amount of the material that's out there. Any rule you apply to help them you then apply to four billion other works. We're the ones who are going to be burned with trying to make that system work. That's what we ask you to keep in mind.

The Chair: I'm going to go over to this side for questions, then we can come back.

Mr. Harvard.

Hon. John Harvard (Charleswood St. James—Assiniboia, Lib.): I wanted to hear from Wendy Noss on this particular conundrum that is raised by Mr. Kerr-Wilson. How do you reply to him, if at all?

Ms. Wendy Noss: To pick up on this analogy that we seem to be stuck with this morning, which is the truck analogy, the one thing perhaps the committee might wish to consider is that in that instance and in the instance mentioned by Mr. Thomson this morning, we're dealing with criminal activity. The responsibility for dealing with criminal activity lies with the police.

While there is criminal copyright infringement, generally speaking, it is a civil matter. The RCMP currently have a policy of enforcement, which reflects that they will investigate and deal with commercial piracy. So copyright infringement is left for rights holders to deal with on a civil basis. That is why there may need to be different solutions when you're dealing with civil matters as opposed to criminal matters.

Hon. John Harvard: I don't want to get sidetracked down that criminal route. It's an issue, but I don't think that's the central issue for us. For example, when you go to the bottom of page 4 of Mr. Kerr-Wilson's oral presentation today, he's concerned about this widespread.... I can just read it back to you, Wendy. He says that ISPs

...would also be liable for every poem, short story, news article, sound recording, computerprogram, photograph, audiovisual work, blue print, database, sketch, performer’sperformance, scientific research, essay, criticism, speech, political commentary, cartoon, etc.

That's the conundrum that he sees, and I don't think we can overlook it. I worked for many years at the CBC, so if anything I have a bias toward creators and I would like to see them compensated as often as possible. But at the same time, there is this conundrum, this maze of obstacles that perhaps is genuinely faced by ISPs, cable companies, and so on. How do you see through that forest?

À (1030)

Ms. Wendy Noss: I would have to agree with the concept that you can't isolate performing rights without dealing with all the other rights of copyright owners in all of the other types of work. So, yes, an analogy, or whatever legislative scheme would apply, would necessarily apply to all those types of works that--you're absolutely correct--are protected by copyright in the same way and all those types of rights holders.

Hon. John Harvard: Let me pick up on what Mr. Abbott was saying, because he doesn't know how often he makes use of or is exposed to copyright material on the Internet, and I would feel the same way.

The other day I heard on television that the Los Angeles Times had won a Pulitzer prize as a result of a series of articles written about our great friend Wal-Mart. I hadn't read the series, and that stimulated my curiosity, so I went to the Internet the very next day and I accessed that series of articles. By the way, read them; they're very good, especially if you're a critic of Wal-Mart.

I guess the question is that material does form a smidgen of the assets that ISPs provide, or cable. It is almost an atom-like part of the assets, but nevertheless it is an asset. I don't know whether it's the Los Angeles Times or whether it's the writer of the articles, but when those articles are written, what responsibility do they have in the event it wins a Pulitzer prize and becomes more valuable as a result of that? Should they have perhaps guessed that at the outset and hit somebody up front, whoever they are connected with, and said pay me an extra amount of money for those articles? How do you deal with a situation like that?

Mr. Spurgeon.

Mr. Paul Spurgeon: It's an interesting point Mr. Abbott raises. Yes, indeed there are lots of different copyrights out there on the Internet, but some people have made arrangements to clear those rights, or maybe they're just available, because it's Alice in Wonderland or whatever. It's in the public domain, but some copyright owners choose to license differently, and I think that's what I'm saying here.

In other words, and it was pointed out by Mr. Kerr-Wilson, we license the end user typically, because it's a simple way, it's a blanket licence. We license cable companies and it doesn't matter whether you happen to watch all of your.... In fact, you pay on that basis when you buy a bouquet of services from your satellite company or from your cable company; you don't watch everything. You're not enjoying every single copyright that's delivered to you. You're probably only watching a few of your favour channels, but you pay a fee, a blanket fee, for that.

We choose to license in this manner, and in order to do this we need there to be a liability on those who we believe are communicating to the public. It's as simple as that. And if there is someone like this Wal-Mart article writer who has acquired his copyright or his granted rights another way, other than the way we choose, or another pattern, that's his prerogative.

We license broadcasters who have already acquired rights from producers who have acquired rights from script writers. So there are different ways of licensing copyright. The basis for it, though, is liability on the people who are committing the act, the activity, which is communicated to the public, which we believe is being done by the Internet access providers.

À (1035)

The Chair: Mr. Thomson.

Mr. Jay Thomson: This is just to follow up on Mr. Spurgeon's comments. The sister organization to SOCAN in the U.S. licenses content providers and not ISPs; it doesn't seek to license ISPs.

The Chair: Mr. Pfohl.

Mr. Richard Pfohl: I just want to clarify this. As Mr. Spurgeon mentioned, there are all sorts of different ways of licensing, and the one common thing is that unless there are effective tools to deal with infringement, then everyone is hurt, and those articles on exposing Wal-Mart or what have you are simply not going to get written because the creators aren't going to get compensated.

I do want to clarify, though, that my members have a different approach to how we do business from that of Mr. Spurgeon's organization. Primarily, SOCAN operates on the basis of a blanket licence, and hence that accounts for why generally their organization is more interested in royalties and that sort of scheme of compensation. In our case, what we do is use the exclusive right of reproduction, deal with point-to-point sales, and make the money when each sale is made. Again, when infringement occurs and when we're not able to deal with it on the Internet, both of us are hurt by it.

As I mentioned in my opening remarks, what we want to make sure happens with respect to any law carving out ISP liability is that number one, if you're going to carve out an exception from copyright law for one group of actors, that exception has to be narrowly tailored, it has to be based upon principles, and it has to be based upon particular actions. In particular, if they know or should have known there's infringing material that's going across the networks, then they have some sort of responsibility to deal with it, because if they don't deal with it, no one can deal with it.

Finally, I do want to mention that one of the largest forms of infringement that has arisen over the last five years or so is peer-to-peer services. In those cases, first of all, 98% of the material on the services is generally music; 98% is generally infringing. These services have oftentimes been engineered not in order to be an efficient way of setting up a network but specifically in order to try to evade copyright laws. So we need to make sure that when Canada does deal with liability, we don't let the peer-to-peer services, which have been set up to allow infringement and to make money off it by selling ads to users, off the hook.

For example, we would propose this. Suppose an Internet access provider--to use the more precise language Mr. Gilker suggested--is allowing someone onto the system to use a peer-to-peer service. If we find out they're offering thousands of our members' works on the Internet, which happens on a regular basis, and notify the Internet access provider, they should then stop that person, cut them off, so they don't allow widespread infringement of our members' works. That's a simple measure we think the Internet access provider should have to take.

The Chair: Mr. Harvard.

Hon. John Harvard: I'd like to hear from Ms. Noss. Perhaps you're the closest to an honest broker here; I'm not too sure.

Some hon. members: Oh, oh!

Ms. Wendy Noss: I'll take my compliments where I can get them.

Hon. John Harvard: My last point or question really has to do with the fact that it's not a perfect world. Of course, I want the creators to be compensated whenever possible, and while the Internet service providers or cable people shouldn't expect to always get something for nothing, if you know what I mean, it's not a perfect world.

To use the analogy of the Wal-Mart articles in the Los Angeles Times, I can understand that at least in the initial situations the L.A. Times or the writer must look after his or her own interest, whatever that might be. But surely you can't expect, given the nature of the Internet, to protect that person in every instance. Say somebody in Hungary or Australia somehow picks up that article; surely the writer of the articles or the Times can't expect to get his or her pound of flesh every time. The world just doesn't work that way.

So where does that leave us as politicians?

À (1040)

Ms. Wendy Noss: Well, I think the range of legislative solutions you're hearing about in the status report and around the table are just that, they're a range, and Mr. Spurgeon's SOCAN method of blanket licensing is one such solution. In the middle of that A and B is something closer to the lines Mr. Pfohl is discussing, which is where you have a limitation on liability but there are positive obligations that come with that limitation on liability, where you have actual or reasonable grounds for believing infringing activity is taking place. You can run the spectrum all the way after that to the industry-type solution where no, it's a blanket limitation on liability but there is some sort of civil consequence if you don't behave in the way we think you should.

So I think what you're hearing is a range, as opposed to, as you said, the middle ground. Rather than advocating either of these positions that are set in the range, my suggestion to you would be that you look at the manner in which it's been dealt with internationally to provide you with some guidance. Our own act already distinguishes for liability between when there is knowledge and where there is not knowledge. Hopefully, that will be of some assistance to you.

The Chair: Mr. Abbott.

Mr. Jim Abbott: This is just to clarify it. As a result of our discussion here, I was thinking about what I happen to get in terms of material. For example, my party happens to subscribe to a particular news service, and every morning they do a summary of all of the articles that are of interest to us on particular topics. They categorize them, they put them into a template we receive, and then in turn we can push the button and up comes the article.

I would be astounded if I found out the upshot of this were contrary to the following. I would bet that this information service would pay somebody for copyright, pay CanWest or somebody for copyright for accessing the CanWest copyrighted article, which I can then get. So yes, in this particular instance I am using the ISP to access that, but what has happened is that there has been a transaction occurring between us and the people who are providing this service for copyrighted material that is in the public domain. Because they in turn are going to be making money for assembling that material for me to have on my computer and for me to be able to easily access it, they will be paying some kind of copyright fee to whoever the provider is, whether it's CP, CanWest, or whoever. So yes, I and many people are getting material in that way, and how it's happened is that there has been arrangement of that.

I go back, though, to the unorganized part. Mr. Pfohl, I believe it was you who said that if they know or should have known, they have responsibility. Well, again, in our grossly imperfect analogy, as a shareholder in Highway 407--which I'm not, but if I were--I would know that there will be some cocaine that will be in somebody's trunk. Do I have a responsibility for the fact that somebody is breaking the law using my vehicle? I suggest not. Maybe you think I do.

Mr. Richard Pfohl: No, I would apply the standard Ms. Noss suggested already exists in the Copyright Act under the provisions for distribution. What the Copyright Act says is that if you distribute something that's infringing and you know or ought to have known it was infringing, then you're going to be held liable for it. But it would require a bit more of a particular sense of knowledge; you'd have to know, for example, the particular work was infringing or you should have known the particular work was infringing. It's not that I have a system over which four billion works are traded where some of them are inherently infringing.

À (1045)

Mr. Jim Abbott: But that's exactly my point. How does an ISP know I may be uploading or downloading copyrighted material? That's exactly my point. Unless they're in a gross invasion of my personal privacy, we just can't envision that in our free and democratic society.

Mr. Richard Pfohl: I'm not advocating that they should know everything that every user on their system is doing.

Mr. Jim Abbott: How else would they find out? I guess that's my question.

Mr. Richard Pfohl: What I'm saying is when they do know, for example, when we tell them, what action should they take?

In the U.S. the ISPs sat down with the content providers and they worked out a scheme--it's known as a takedown scheme. It was negotiated with the ISPs and it said if you provide evidence, you swear under penalty of perjury that your material is being infringed on, for example, on this website, then in that instance we'll take it down, and we'll give the person who put the material up a chance to respond, so if we're wrong, it'll go up again. And if they follow the rules, the ISP doesn't have any liability, either for the person who originally posted it or for the person who's alleging infringement. So it's a way of making sure we come up with a workable system that everyone agrees to when we have actual knowledge, not when it's hypothetical that somewhere on this system someone must be engaging in something illegal.

What we're looking for are workable solutions that will address these problems and be acceptable to all the actors, and I think, again, the notice-of-takedown type of approach is one.

The Chair: Mr. Thomson, you wanted to make a point.

Mr. Jay Thomson: I just wanted to follow up on Mr. Abbott's question. I referred earlier to the Supreme Court CCH case, and that held that the court should presume that persons who authorize an activity do so only to the extent that activity is lawful. That goes to your point that there's knowledge that activity is going on out there. We can only presume fairly that the activity is lawful, not illegal.

Mr. Jim Abbott: Just so I understand, though, I was perhaps under a wrong interpretation of what both Mr. Pfohl and particularly Mr. Spurgeon were saying on behalf of their associations.

I was given the impression at the outset that what you were proposing was that there be some kind of copyright fee payable to, say, SOCAN by the ISPs in the anticipation that somebody was going to be using some copyright material. Now what I'm hearing--and perhaps because you are two totally distinct organizations we may have to make this distinction--I'm hearing from Mr. Pfohl no, not necessarily, what they would like to do is have something along the lines of what they have in the U.S., where they can protect their rights holders.

Now, if that's Mr. Pfohl's case, may I ask you, Mr. Spurgeon, is that what you're suggesting, or are you saying that ISPs should be responsible for providing you with some kind of royalty that they should be trying to collect?

Mr. Paul Spurgeon: They would have to provide some royalty set by the board, whatever the Copyright Board would decide to be reasonable in the circumstances, based on, again, their liability. Now, I want to make it clear that in the diagram, we're saying they're liable, except they're not liable here. All these players are IAPs or ISPs, but these ISPs aren't. Now the suggestion is that they not be made liable--in other words, they're a blanket exemption--unless they do this. We're saying there should be a blanket liability, unless they're these people here, merely intermediary routers. That is, these people, to answer your question, would be responsible, jointly and severally, with the other players in the chain, the websites, to have to pay us.

Mr. Jim Abbott: They're guilty unless they can prove themselves innocent.

Mr. Paul Spurgeon: They would be responsible for paying a licence fee, the tariff that's applicable to them, if in fact they're doing that.

I hate to go back to this cable analogy, but programming undertakings are responsible, along with the cable systems that communicate to the public. Right now they've both worked it out and they're paying SOCAN a fee for the communication of the package of signals--now there are what, 500 channels out there. They're paying us a monthly fee for that service. And that's how I see this.

I'm not saying necessarily that only IAPs will be responsible. I'm saying there has to be joint and several liability on all the players who are involved in the chain--because that's what it is, a chain--except these people, these links to the chain, which indeed are intermediary routers. And that's the position we put before the Supreme Court, that we had no intention of seeking fees or liability against those players.

À (1050)

Mr. Jim Abbott: What was the finding of the Supreme Court?

Mr. Paul Spurgeon: We're waiting.

Hon. John Harvard: I just want to know, either from Mr. Kerr-Wilson or Mr. Thomson, if we were to, as legislators, move toward some kind of copyright regime that would be satisfactory to either Mr. Spurgeon, Mr. Pfohl, or both, would this somehow bankrupt ISPs and cable companies? Ultimately, it all comes down to money. I mean, if there were no money involved here at all, I don't think we would be having this meeting. It is money, in the final analysis.

Or maybe put the question another way. Of all the material that is flowing over your systems right now, have you any idea how much of it is copyrighted and how much more you would have to pay out to Mr. Pfohl's or Mr. Spurgeon's group if you were somehow forced to under a new copyright regime? Have you any idea?

Mr. Gerald (Jay) Kerr-Wilson: No, and this is the problem.

Hon. John Harvard: You have no idea, but even if you don't know what it is, you certainly find it frightening.

Mr. Gerald (Jay) Kerr-Wilson: Absolutely. We can't even measure how big the massive liability would be, because we can't measure...

Hon. John Harvard: But it might be big, so you can't take the chance is what you're saying.

Mr. Gerald (Jay) Kerr-Wilson: It would be big. We know it would be at least four billion works at any given moment.

Under Mr. Spurgeon's theory, we're not liable for things that are actually being transmitted; we're liable for anything that might be transmitted. Any work out there in the vast ether that one of our subscribers might go and look at, we would be liable for.

Hon. John Harvard: But only a portion of that would be someone who would assert copyright.

Mr. Gerald (Jay) Kerr-Wilson: Well, I would suggest that if the Canadian government hung a sign around ISPs' necks saying come here for payment, we would find there would be a fairly large group who would probably bring themselves forward, because they wouldn't have to establish that any Canadians had actually used their material. So we'd have a collective society, organized groups, who'd do this as a business from anywhere in the world, demanding a Canadian licence.

Hon. John Harvard: Mr. Thomson.

Mr. Jay Thomson: Between Mr. Spurgeon's approach, which is a blanket licence approach, attaching liability, and Mr. Pfohl's approach, which is a notice and takedown, we categorically reject Mr. Spurgeon's approach.

With respect to Mr. Pfohl's approach, we actually have a system similar to that now, which is our notice-and-notice regime, which is less burdensome administratively than notice and takedown. There are only three steps involved in terms of getting the notice to the end user and then notifying the rights holder that this action has been taken. It's been successful in 80% of the cases where it's been implemented.

What ultimately is the difference between what we're saying and what Mr. Pfohl is saying, I think, is with respect to the notion of knowledge--how an ISP will be provided with the knowledge that infringing activity is taking place by one of its customers. We're arguing, as we have with respect to child pornography and hate propaganda, that without knowledge, we should not be liable, but we accept that with actual knowledge there is an obligation to respond.

Our position is that rights holders should not have more powers in the law to act as judge and jury than the police have with respect to child pornography and hate propaganda. They should not be given the power to determine whether an issue or an activity is legal or illegal. That's the role of the courts. Our notice-and-notice regime contemplates that if the action is not cured by the notice, then the rights holder can go to the court and get relief.

À (1055)

The Chair: Mr. Pfohl.

Mr. Richard Pfohl: I'd like to mention two things in response. One, as I mentioned, the court process is simply unwieldy and it's extremely difficult to deal with these things.

Second, I will take exception to one thing Mr. Thomson said. We're not claiming that we ought to be judge and jury of what's legal or illegal. Again, as I've described, the notice-and-takedown provision provides that we provide an oath, under penalty of perjury, saying that we believe our copyrighted material has been infringed. The person who put the material up can provide a counter-notice and then the ISP takes action. The ISP does not have any liability. If indeed it turns out that we're in the wrong, one, we can be held criminally liable for having made a misstatement under oath; and two, the material goes back up.

As I mentioned in regard to this system in the U.S., if you look at the statistics, out of 158,000 notices over an 18-month period, in almost every single case the material came down because it was infringing. I said 17, but there were actually 13 cases in which the person who had put the material up disputed it; in only three of those cases did it turn out that the ISP was mistaken, and the material went back up again.

I should add that the criminal sanction for perjury was not invoked in any of the cases with respect to copyright holders actually having perjured themselves. In other words, copyright holders broke the law by making a misstatement about their material in zero out of 158,000 cases. So it's a process that determines whether something's infringing, not the rights holder.

The Chair: Mr. Schellenberger.

Mr. Gary Schellenberger (Perth—Middlesex, PC): I must thank everyone for being here today, because I've gained a lot of knowledge. I didn't know what some of those initials meant when I read through some of these papers. Thank you for that.

I might be just making statements here this morning, and they might not apply necessarily to the Internet. I think what we have to look at is what happens if we don't make the right decisions in some of these copyright cases.

I might be a little off the subject here, but as I have Mr. Spurgeon here today from SOCAN, I have to bring a message from many of the army and navy outlets and many of the legions that are in a drastic state because of some of the moneys they have to pay SOCAN. A lot of these outlets and legions have tried to raise funds to try to keep their establishments going and to look after their veterans. So I bring that message through. Maybe something could be looked at for some of our veteran agencies.

I think back to quite a number of years ago in my little town where I live. We have a community centre there. Back then, we used to hold lots of dances and things to raise funds to keep the community centre going and to do various things. I can remember sitting down with the local musicians union at that particular time. We couldn't use any disc jockeys at that particular time. Anytime there were any dances or any weddings, whatever, in the hall, it had to be live bands.

We tried to tell them what the outcome would probably be. And as time went on, that outcome did happen. We have very few dances anymore. The live bands might play in that hall once or twice a year. It made things so expensive that we don't even rent the building half as often anymore because it's not profitable to pay to have those people there.

So these things all have to be looked at when we look at this industry. I can understand where the musicians come from. I do have a vision now, too, and I must say that I think that if something illegal is going on on the Internet, if the provider knows it's there, it would be the provider's responsibility to take it off.

The big thing is that we want to make sure, whatever we do here, whatever we come up with, it doesn't jeopardize some of these small outfits I look after. I am a subscriber to cable--in three different places, in fact--so I understand that. I do have an Internet connection; I have a hard time getting on my computer, but I get somebody who can get on it and I can get some of the things I need off there.

The big thing is that I know.... In Stratford, Ontario, with the Stratford Agricultural Society, we used to rent out the hall for dances left, right, and centre; and now we can't because of what we have to charge. Sometimes it's just that extra $50 or $100 that gets added on to the rental for SOCAN or for the music that's going to be there, and it doesn't happen. They go someplace where there's blanket coverage, I guess.

That's probably a statement. I don't know if I can get any reply from SOCAN for my legions and army and navy outlets and if there can be anything done there.

Á (1100)

Mr. Paul Spurgeon: I can certainly respond to the issue of the dance. That tariff was recently reviewed by the Copyright Board, and I can provide you with a copy of the tariff. We don't consider it to be a lot of money for a dance, when you consider the costs that go into a dance. For example, there's payment for all the goods and services--the bartender, liquor, hall rental, and decorations. The fee for the music--the licence fee--is really quite a minuscule part of the overall budget for a dance.

As far as the musicians are concerned, of course that's another issue. The AFM over the years has been concerned about the dwindling demand for their services. There are a lot of factors that go into that, well beyond the cost of the musician. A lot of kids like listening to recorded music now from DJs, rather than live music. That's just a cultural thing.

You've probably noted that over the years musicians' bands have shrunk in size. When I was growing up there were bands with horns in them, and now you end up with one or two players and a synthesizer that has everything on it. So culture or society changes.

But we certainly consider the licence fee to be reasonable. As I said, it was recently reviewed by the Copyright Board.

The Chair: I have a couple of questions before there's one more round.

One of the approaches being considered is the notice-and-notice procedure. I'd like you or someone to comment on why that doesn't work. Why is notice and takedown, which has been talked about, better? One of the concerns that arises from that is what happens when there's a dispute?

I'd also like you to comment, Mr. Thomson and Mr. Kerr-Wilson, on Mr. Gilker's distinction between ISPs and IAPs.

Mr. Kerr-Wilson, you've talked about the cable companies. They also have compulsory retransmission licences, so the copyright is covered there. Internet service providers don't have compulsory retransmission licences. I guess I'm concerned when I hear Mr. Spurgeon talk about the Internet being the way of future broadcasting. We're going to have to deal with this one way or the other. Not dealing with it frightens me, if that becomes the major medium.

So I wonder if both of you could comment on the distinction made between the IAPs and ISPs.

Mr. Thomson, you keep bringing up the criminal thing. We all know that criminal law is dealt with by the police. Are you suggesting we put copyright now and bring it into a criminal... I think your analogies between the two are totally irrelevant in this setting. Copyright is not dealt with as a criminal activity, and civil remedies are not dealt with by police in a number of areas. So I find constantly bringing up the criminal aspect totally inapplicable and not appropriate at all in this context.

Perhaps we could start with why notice and notice doesn't work, and why notice and takedown is better. How do you deal with the concern that notice and takedown might be subject to a... What happens in the case of a dispute? I guess that's number one.

The last thing is peer-to-peer services, where 98% of the downloading is happening. Define how that works and what we can do to stop that.

Á (1105)

Mr. Richard Pfohl: I mentioned the notice and notice in my remarks because it's important to me that it not be the legislated solution. It is what we do now because it's all we could get. On how notice and notice works, if we find out that someone is infringing we send a notice to the ISP and they send a notice to the infringer, and it ends there. There's no action by the ISP to take down the material. In some instances, the infringer takes it down.

Mr. Thomson mentioned some statistics. I'm not familiar with them, but there's nothing to stop them from simply putting it back up again, because we can't even find out who they are. It simply provides a notice to the infringer that they had better cover their tracks because someone has found out what they're doing. We can't engage in self-help, because we can't find out who it is, and there's no obligation upon the ISP to take it down. So there's no guarantee that anything is going to be done about it.

It essentially provides notice to a criminal, or to an infringer--I agree with you that we shouldn't confuse the two--that they've been discovered. But frankly, their discovery is safe with the ISP, and the ISP is not going to disclose their identity to the person who's asking for it.

The reason we prefer the notice-and-takedown approach is partly because it keeps us out of the courts. When we have actually brought cases against people, a lot of people have told us it's a harsh remedy and we shouldn't be engaging in it. We've only brought it as a last resort because we needed to protect our copyright. But we'd just as soon avoid litigation, because if you need to go to court every time, not only is it expensive and potentially very frightening for the person being sued, but all those things apply to us as well.

So if you look at the notice-and-takedown statistics we've collected from the U.S., over that 18-month period when we sent out 158,000 notices, the vast majority of sites were taken down by the ISPs, and in only 14 of those cases did the copyright holder have to go to court. So it actually keeps us out of the courts, which I think is a preferable solution.

The Chair: What about peer to peer?

Mr. Richard Pfohl: As I mentioned, the peer-to-peer systems are engineered in a way to try to avoid holding the people who engineer them liable. We have to make sure these systems don't slip through the cracks.

People regularly take 1,000, 2,000, or 3,000 songs and offer them on a peer-to-peer service where they can be accessed globally by five million strangers. This is generally what happens on peer-to-peer services.

I recommend that if we find out about this and send a notice to the ISP that this is happening, the ISP ought to kick that subscriber off the system. They can trace that subscriber and find out who that person is. They can find the equivalent of the actual truck that's being used. If you can locate the truck relatively easily, that person ought to be kicked off the system, if they're engaging in widespread infringement.

The Chair: Would peer to peer also be subject to notice and takedown?

Mr. Richard Pfohl: That's right. The notice-and-takedown provisions were enacted in the U.S. in 1997-98, before peer to peer really took off. So if we go to that sort of approach in Canada, which we recommend, we need to make sure we are also catching the peer-to-peer systems, and not letting them get away with a wink and a nudge and widespread infringement, because that's what they're doing now.

If you look at the statistics, over 90% of the material on these peer-to-peer systems is infringing, and it's killing our industry.

The Chair: Mr. Kerr-Wilson.

Mr. Gerald (Jay) Kerr-Wilson: Thank you, Madam Chair. I'm going to start with the question you had on retransmission and the compulsory licence.

I have a couple of responses to that. The first is, even with retransmitted signals, we make the conscious decision to retransmit a signal to subscribers. We then pay the compulsory licence fees to acquire the rights to all of the content in those signals. We can build that into the cost of our service.

I have to leave aside CRTC broadcast regulations, but in a pure copyright world, if a cable company decided retransmitted signals were bad business, they could simply choose not to offer them and not acquire the costs. In the Internet world we're not the ones choosing the content. We don't go out and say “Well, let's give this subscriber this website and this website, but we won't give them that website”. It's all self-directed by the subscriber. We're not part of the decision-making process. So we don't have the ability to exercise that kind of control or pricing mechanism.

Secondly, I think probably Mr. Pfohl's members would be the first ones to object if you suggested that by paying a compulsory licence, the Copyright Act would then butt out of the Internet. That's what happens in retransmission. We pay a licence fee, then that retransmission becomes a non-copyright event. I'm fairly sure that Mr. Pfohl's business plans or his members' business plans don't involve for a buck a month it's open season, because there's no more Copyright Act application in Canada.

To get to Mr. Spurgeon's now very familiar diagram, the point he doesn't make is that the people in the middle and the people at the end are the same people. There is no class of backbone providers and class of access providers, and they're distinct. It's the same people. Traffic flows across all of the facilities.

So bits of data come charging into a Rogers router. Some of the stuff may get directed to Rogers subscribers, some of it may get passed on to a Shaw subscriber or a TELUS subscriber. It's all interconnected, so at any given moment every ISP in the country is serving all of those activities, because they all have interconnection agreements that say “I'll pass along your traffic, you pass along my traffic”. We don't know which of the billions of bits of traffic are being diverted to our subscribers at any given moment and what's in those bits. It's not our business. Our business is to get people so they can access everything that's out there and make the process fast and efficient.

Everything Mr. Spurgeon talks about in terms of asserting control or assessing the copyright liability is counter-intuitive to what we want the Internet to be. It is literally asking the post office to open every letter and deciding whether or not it's copyright material and trying to clear the right before you send the letter on.

So those are the comments I would make.

Á (1110)

The Chair: Okay, we'll go back to Mr. Gilker's point about the ISPs and the IAPs. Are you saying, then, that the ISPs and IAPs are one and the same?

Mr. Gerald (Jay) Kerr-Wilson: Yes.

There are very big pipe providers who have the big broadband that everybody connects into. In terms of traffic flowing from my website to that subscriber, it goes across facilities, generally. The Internet was designed so there's no single point of connection. If one connection breaks, the traffic routes around it.

Everyone enters into agreements that say we'll all pass each other's traffic. The traffic that goes across a Rogers router isn't all destined for Rogers subscribers. Some of it keeps passing on to Japan. That's the way the system's designed. It's a whole bunch of interconnected networks.

There are very big broadband pipe connections, but generally speaking, everyone is passing everyone's traffic around. So sometimes we're the people in the middle and sometimes we're the people who are diverting stuff to our subscribers. We don't know, at any given minute, how much of the traffic is being passed on because the system's not set up for us to measure that. The system is to pass it along.

The Chair: Could you also comment, please, on the notice and takedown? Would that pose a problem for you?

Mr. Gerald (Jay) Kerr-Wilson: Well, our problem with the notice and takedown, in theory, has always been that it puts us in a difficult position of taking very harsh measures against a subscriber when we don't know whether or not that subscriber has done anything wrong. So we have to take it on faith.

I hate to go back to the truck analogy, but it's like someone says “Someone used your truck to steal my sofa.” Well, I can open up the truck and see there's a sofa in there, but I have no idea whose sofa it is. So a notice and takedown is the same thing, where someone phones up and says “Your subscriber has my poem on his website. Take it down.” I don't know who wrote the poem, and I don't know if they had an arrangement.

So there are difficulties in taking on faith that anyone who lodges a complaint then forces us to take very draconian measures, especially in a peer-to-peer environment, where there is nothing to take down. We can't reach into a subscriber's personal computer and say we're going to turn off Kaza. All we say is that the entire household loses its Internet service.

We don't know if the complaint's legitimate. We don't know the copyright status of that work, but we're just going to cut that subscriber off. Then perhaps if this individual subscriber wants to dispute the legitimacy of the complaint... The notice and takedown, as Mr. Pfohl has mentioned, was designed in the States for a pre-Napster environment. And it just doesn't lend itself to a peer-to-peer environment because we no longer have control over the content. It rests at the end points.

Á (1115)

The Chair: Ms. Noss.

Ms. Wendy Noss: I just wanted to follow up on your point, Madam Chair, about their being the same actors. Mr. Kerr-Wilson is absolutely correct, they are the same actors, but to give you a concept of how it's been dealt with in foreign legislation, they may be the same actors, but when they engage in different types of activities, there are different legislative provisions that apply. So when you're sitting, in Mr. Spurgeon's chart, at the end, there may be an absolute exemption from liability. When you're somewhere farther along and you're hosting or caching, you may also get an exemption from liability, provided that you take certain steps when you're given actual knowledge, etc.

The Chair: Mr. Thomson and Mr. Gilker.

Mr. Jay Thomson: Thank you. I'll start with the Criminal Code analogy first, then work my way back.

The Criminal Code analogy is one we think is workable, but it also works with respect to the Human Rights Acts, which is not a criminal matter. The same process is invoked under the Human Rights Act with respect to hate propaganda. So again, in a notice-and-takedown regime, the matter has to be taken to a court to make a determination as to whether the content is legal or illegal. It's not a decision made by the complainant. I think it still extends to the copyright regime as well. Copyright defamation and tort liability are legal issues, where the court is the one that makes the decision as to whether it is legal or illegal, not the complainant. So the position we're taking is that a court should make that determination here too.

The Chair: You're not suggesting that it be made criminal?

Mr. Jay Thomson: No, not at all.

Then I work back to the notice-and-takedown approach that Mr. Pfohl has suggested would be the new approach. I think this is the first time it's been suggested here in Canada that a notice-and-takedown regime with respect to peer-to-peer would result in the termination of an Internet subscriber's account. We've always been talking about it as taking down pieces of content from a website. Now we're looking at what I think is a much more severe penalty or action, requiring an ISP to terminate a customer's Internet account for an unlimited period of time without due process, based on a complaint from a rights holder. It's a very draconian result. It potentially has a significant impact for the end user, who no longer will have access not just to the piece of content they might have had on the website, but to the whole Internet.

You did raise the issue of where the Internet is going with respect to the transmission of broadcasting services and so on. TELUS, ManitobaTel, and SaskTel all have broadcasting licences now to act as competitors to the cable industry by offering a cable-like service over the digital subscriber network. So it's using the power and the concept of the Internet to offer a closed network service that is akin to a cable service, and therefore subject to the retransmission regime as well. That's the way the system is developing, we think, with respect to broadcasting and the Internet.

Lastly, you dealt with the whole issue of Internet retransmission at this committee and made amendments to the Copyright Act to deal with concerns about the delivery of content through the Internet. The decision you've made has ensured that Internet retransmission is not taking place. So I think you've already addressed that.

The Chair: Mr. Gilker, quickly, and then I'm going to open it up for one more round.

Mr. Stéphane Gilker: Many comments have been made this morning. I would like to take just one or two minutes to comment on them.

First, I would just acknowledge the distinction that has been made between an IAP and ISP. Effectively, the same entity may act wearing one hat in some cases, and wearing another hat in other cases. When the entity is actually doing something wrong, or something needing the authorization of the copyright owner under the Copyright Act, which has not been done, we think that the person doing that activity should be as liable as anyone else.

Actually, I think that if there have been exemptions or exceptions taken in the U.S.A., Europe, or other countries, it's simply because the legislators have acknowledged that there was a problem, because if there were no problem then you don't need an exemption.

It's not always fun to read those exemptions, because they are so detailed, and there are so many things that need to be done for you to be able to get away from the problem. These can certainly not be seen as providing a blanket exemption to ISPs at large.

The second point is that when an IAP actually communicates or reproduces a work to the public through technical communication, and this is not allowed, then they shall be as liable as anyone else. I think I already made that point.

There was a question you raised earlier as to whether the content that is made available on the Internet is protected or not protected by copyright, or what percentage of that content is protected. If we take the list that Mr. Kerr-Wilson gave this morning, I think that most of us would agree that the vast majority of the content over the Internet is actually copyrightable material. The Copyright Act covers text, images, photos, film, recording, and what else...? Almost everything you access through the Internet is content that is or may be protected by copyright. So it is not accurate to say that it is not an important element of what someone is doing when they give access to copyright material by providing access to the Internet. To the contrary, I think that giving access to copyrightable material is essentially what's going on when an ISP enters into a contract with the user.

That leads me to the issue of cable operations and the Internet. I will terminate my remarks on this. First, I have given the example of retransmission, because our regime in Canada provides that when you retransmit content simultaneously, and without alteration of the programming that you are retransmitting, then you do not have to enter into an agreement with the owner of the programming. So unless I'm wrong, there actually is no agreement between the poster—if we take the analogy with the Internet—and the cable operator, when retransmitting content. But our copyright legislation recognizes that in the act of sending that content to a user with whom they have a relationship, they are liable for doing that. But we have created a compulsory licence to make sure that they simply have to pay something for that—which is analogous to what is going on with SOCAN.

Finally, unless I'm wrong, all, if not the vast majority, of the actors on the Internet who are posting content, whether legal or illegal, have a contractual relationship with an Internet access provider, whether as poster or as a person who will have access to the content posted on the Internet. Having looked at some of those agreements, most of the time, if not all of the time, they will contain a provision saying that you should not post illegal content, whether obscene or whether infringing...and so on and so forth. If the person is doing so, then they have to indemnify the co-contractor, who is the person giving access to the Internet.

Á (1120)

We heard some minutes ago that all those players have interconnection agreements, which may or may not contain, but could certainly easily contain, that kind of provision to make sure that if someone is illegally using material on the Internet, there's a legal contract and a way for those people to make sure the wrongdoer will ultimately be the one who will have to pay for it.

Those are my comments.

The Chair: Mr. Abbott.

Mr. Jim Abbott: I have a quick comment, and in fairness to Mr. Spurgeon, maybe he would want to have a rebuttal.

When my colleague was mentioning the business about dances, the legions, and so on and so forth, it strikes me that in an awful lot of instances we have copyright law for good reason, so people can get the benefit of their work. We all understand that. I think all Canadians accept that. But when you have a very low-rent situation where you have voluntary bartenders, voluntary janitors, and voluntary committees setting up $50 worth of decorations in a hall, and SOCAN comes along and says the fee will be $100, or something like that, that fee is not an incidental fee.

In taking a look at that word picture in the context of what we're talking about here, it strikes me that SOCAN is really looking to say here is another place where they could be collecting some money, so they will collect a penny per transmission, a penny per subscriber, or a penny for whatever the case may be. The extrapolation isn't always made by SOCAN, but if we do the math, that penny will probably amount to $5 million or $10 million more to SOCAN.

I think it's a dangerous thing for us, as legislators, to take a rather frivolous approach, unless there is some way for SOCAN to say they know that 1%, 2%, or 3%—I'm sure it's no more than 3%—of the transmissions that are happening through ISPs down those highways are actually copyrightable and they should be receiving their pound of flesh for that 3%.

Unless there is some specific way of doing that, it strikes me that we're following the Jesse James method on why we collect fees. When Jesse James was asked why he robbed banks, he said it was because that's where the money is. That's what I'm concerned about in this particular case.

Á (1125)

Mr. Paul Spurgeon: First of all, indeed, the fees would ultimately be determined based on that kind of evidence. Obviously, we have to prepare evidence before the Copyright Board, but it's the Copyright Board that sets the tariff, after hearing all of the arguments from all of the parties in terms of what the fee should be, in terms of the reasonableness, and in terms of the industries involved in the process, the people who pay and the people who are demanding the payment to composers and publishers.

You can say micro-payments or whatever are the new terms they're using now. Indeed, it's what's happening in this day and age. Slices of pennies are being paid for different uses. I think you're going to see it more as the Internet progresses. This is how things happen. It happens right now. When you use your VISA card or whatever, there are small transaction fees.

In our case, it's a fee for copyright, which brings me back to your first point about public performance and music. It is, again, a nickel-and-dime payment for copyright owners, but that's the business of copyright. When you sell a piece of sheet music, the composer gets a nickel, a dime, or whatever. That's what the original arrangements were; they're more than that now.

When you talk about dances, again, I indicated it's far less than $100, but SOCAN would not seek a fee if all of the people were donating their services. It's not fair for composers to donate their services if other people are benefiting or making money from that event. If the bartenders are doing it for free, if all the people who are supplying the goods and services are not taking any money or are donating it to the service or cause, we'll walk away from it and not charge anything. Our licensing department will in effect waive the fee, as the suppliers of goods and services did. It's only for those cases where there is use of our music. Again, I have to stress, it is a nominal fee.

I'll send a copy, Mr. Abbott and Mr. Schellenberger, of the relevant tariff you're talking about. I think you'll see, after reading it, that it's not a lot of money when you compare it to other elements. Even in the case of a community hall putting together a Saturday night dance, it's small in comparison to all the other elements that go into the dance.

Á (1130)

Mr. Jim Abbott: Just one final thing...

I'm sorry?

Mr. Jay Thomson: Could I just add to that?

Mr. Jim Abbott: Yes, go ahead.

Mr. Jay Thomson: In terms of the volume or the size of the liability or the size of the tariff that could apply to the Internet--if there were any--SOCAN has applied for a tariff that would ask for 10% of revenues. SODRAC, with respect to reproductions, has asked for a tariff that would be in the amount of 10% of ISPs' revenues.

That's 20% just for two groups, and we haven't heard from all the others that are going to come when Mr. Kerr-Wilson hangs the sign around his neck.

Mr. Jim Abbott: That's an excellent quantification, thank you.

Just in conclusion, I wonder if any of you would like to comment on something. We seem to have reached a point where the concrete is hardening around some of our positions on this, such as position (a) and (b) of item 37 in the status report.

I'd like to refer back quickly to paragraphs 6 and 7, on page 2. I'm just wondering if there is anything in paragraphs 6 and 7 that would be relevant to the discussion we've had to this point. I have to admit, I have no idea if these paragraphs are completely irrelevant and have no connection, or if in fact there is some potential light in the tunnel...or in talking about the analogy I was using, that when I receive my news in this condensed form, there has been an agreement between the people who are assembling that and paying the appropriate royalties.

I'm just wondering if in paragraphs 6 and 7 there's anything that would help us through this maze that we've been navigating today.

The Chair: Mr. Kerr-Wilson.

Mr. Gerald (Jay) Kerr-Wilson: Thank you very much, Madam Chair.

Yes, Mr. Abbott, and I agree; we actually think the implementation of a making available right for each of the performers, the makers of sound recordings, and the authors is the solution. This is how we anticipate business will get done on the Internet with respect to copyrighted works.

For instance, if Canada were to amend its legislation to provide the making available right, as the treaties require, and if I then wanted to start a website or an Internet service and make available any of the copyrighted material--audiovisual works, music, literary works--I would have to clear those rights up front. I would have to find out who owns the rights to all the material I want to use and negotiate contractual terms with them. They would be able to put conditions on the use. I could decide whether I wanted to do a subscription service or an ad-supported service. That done, I could then launch the website and people could come onto the website and use those works knowing that the rights have been cleared. It should follow along that chain.

This isn't a novel, speculative idea. This is how it works now in countries that have created a making available right and extended limited liabilities by ISPs. For instance, in Europe you can go and negotiate with sound recording makers. You can acquire the rights in multiple jurisdictions. You can go to SOCAN's counterparts, the authors, and acquire a licence for multiple jurisdictions, and the rights holders are getting paid. It's all done under the premise that the person who decides to make content available, and wants to build a business case around that, owes creators their due.

We have no quibble with that point. But then to say that, plus, after all this transaction has taken place and all these rights have been cleared, we're going to ding the ISPs, who have no knowledge of this and have no contractual relationship with all of these, it just seems we're adding on a tax for no other purpose than ISPs are there, so we can tax them. We've already taken care of the contractual relationships in granting the exclusive making available right.

The Chair: Mr. Pfohl, Mr. Gilker, and then Mr. Harvard.

Mr. Richard Pfohl: First of all, I want to say that I'm delighted to hear Mr. Kerr-Wilson say that, because we also believe the making-available right is the fundamental core of what the WIPO treaties will allow us. It basically allows us to do business in the online world with the certainty we have in the analogue world. We can then go ahead and sell our music and do it ourselves. An analogue of that making-available right is that we have to be able to enforce our rights online.

Let's say that we have the making-available right. We find an individual who is going onto a peer-to-peer service and is offering free copying of 5,000 songs to five million strangers. That is the average number of songs that are located in your typical Wal-Mart store. So they're basically taking a Wal-Mart store and offering free copying to strangers. What can we do in that instance if we don't know who that individual is? That's why we believe that for the ISPs, if there is going to be a limitation on their liability, they also have to have a responsibility and to play a part. We believe that the notice-and-takedown approach would allow them to do that.

I disagree with Mr. Thomson's statement that in the case of someone who is making available thousands of songs online, if we were to follow the notice-and-takedown provisions, there would be no due process. The notice-and-takedown provisions that were enacted in the States are due process. If we were to use this provision in the context of peer-to-peer services, in order to take such a subscriber off line, we would have to file a notification with the ISP, under penalty of perjury, that our songs are being infringed. That person would be able to file a counter-notification, again under penalty of perjury. If they filed a counter-notification, they could not be kicked off the service. The content provider would have to get a court order in order to get them kicked off.

That's the way it works in the States. That is due process. Furthermore, it works remarkably effectively in practice. As I mentioned, in the case of 158,000 of those being filed, in only 13 instances did people file a counter-notification where they took issue with it. So again, not only in theory but in practice, you have due process. You have the ability to enforce the rights we need in order to make the making-available right work for us.

Á (1135)

The Chair: Next is Mr. Gilker, followed by Mr. Thomson and Mr. Harvard. Be quick, please, as we're running out of time.

Mr. Stéphane Gilker: I will be brief.

The essential comment is that as opposed to what we have said this morning about the liability of ISPs, the implementation of that right is required by the WPPT, the two Internet treaties. I think Mr. Spurgeon will acknowledge that the Federal Court of Appeal has already said that a mixture of the communication to the public by telecommunication right and the authorization right more or less amount to the making-available right with regard to authors. So we may say that to a certain extent, our legislation complies with the WCT. I see that he does not agree.

With regard to record producers, who I'm representing this morning, I think it has been acknowledged by everyone that our legislation has to be amended, because a record producer doesn't have the right to control their records being made available over the Internet, as in the case of performers. They simply have the right to receive an equitable remuneration for that. When that communication is made on demand, that's where the distinction applies. The Canadian act doesn't recognize a right to prevent or authorize the making available of records, and an amendment to our legislation is really needed in that respect.

The Chair: Thank you.

Next is Mr. Thomson and then Mr. Harvard.

Mr. Jay Thomson: With regard to Mr. Pfohl's statistics, those of course relate to the takedown of content from websites and not to the termination of an entire account. That distinction has to be taken into account.

In terms of support for a making-available right and all the reasons it's workable, which Mr. Kerr-Wilson outlined, that has to be in conjunction with clarification that ISPs are not the ones that are making the content available. Otherwise, we'll be back here again.

The Chair: Mr. Harvard.

Hon. John Harvard: I want to put something to Ms. Noss. She's the honest broker around here.

Some hon. members: Oh, oh.

Hon. John Harvard: Ms. Noss, as a politician, I'm really loath to do any more in the area of copyright than I have to do. This is mainly because I want to leave it to the actors to sort out these gazillion kinds of problems that arise on a daily basis. To further this, I'd like to pick up on what Mr. Schellenberger was saying earlier in his remarks. I have a lot of feeling for legions and other people who have done great works, and I can understand them feeling the pinch when it comes to hiring a live band or something like that for a night's entertainment. But as a politician, I would be loath to get involved in those kinds of situations, because where the hell does it end? Where does it end? The world is full of good people.

So to me, to take this to the logical conclusion, SOCAN can charge whatever it likes for its material as far as I'm concerned, and if somebody--whether it's a legion, a university, or a parliamentarian--doesn't want to pay the price, that's the law of the marketplace. If SOCAN wants to give it away, for whatever reason, that's fine--that's part of the marketplace.

As a politician, I don't want to get involved in those kinds of situations. You know, if it was one situation a year, maybe. But we're talking perhaps millions of situations. I just think that political solutions in the marketplace are usually anathema. Sometimes we have to intervene, but if I can stay out of it, I will.

So let's go to copyright, Wendy.

Á (1140)

Ms. Wendy Noss: You're not going to like my response, because I'm going to tell you that you do have to do something.

Hon. John Harvard: I know I have to do something. But my question, really--and I'm glad that you interrupted--

Some hon. members: Oh, oh.

Hon. John Harvard: You can interrupt me anytime. I want to do no more than I have to. I want to be as flexible as possible. I want to give the actors in this play as much flexibility and room to operate as possible. I don't want to answer any more questions than I have to.

I want you to tell me what approach I take so that I can give Mr. SOCAN here, Mr. Spurgeon, or Mr. Pfohl as much opportunity as I can to levy their price, whatever they deem their price to be. At the same time, I want to give Mr. Thomson and Mr. Kerr-Wilson the right to say “Sorry, I can't afford it. You're going to run me out of town”, or whatever. Let them work it out as much as possible.

So what advice do you give me?

Ms. Wendy Noss: First, I'm going to preface my comments by saying our committee has not put forth a view in respect of the status report and the various options in it. I can give you my personal view, and that is--

Hon. John Harvard: Do anything to help me, that's all.

Ms. Wendy Noss: --the legislative solution that has to take place has to take into account a number of basic principles. Number one is that the threat posed to copyright owners in the non-Internet world is not the same, and you have to craft a legislative solution that recognizes that. What's in the act now, which has taken the court system nine years to even get to the Supreme Court, deals with one aspect of one rights holder and evaluates whether there's liability for that.

We can't leave the situation in Canada the way it is today, which is to say that in the EU, the United States, Japan, and Australia there have been a range of legislative solutions to deal with it, but there have been legislative solutions. The Copyright Act is unlike tort law or other types of law where the rights and obligations of the parties are wholly set out in the act, and the solution you choose has to take that into account as well.

As I said, the solution must also take into account the fact that the Internet is a global environment and Canada can't be an island in terms of the solution it chooses.

I'm hoping that's helped.

Hon. John Harvard: Yes, it has.

When I hear the talk about the notice and takedown, it does have a lot of appeal to me--I think it does, anyway--because basically, as I understand it, the rights holder is saying “This is my material, on which I have copyright. I've taken notice that it's out there and somebody is using it.” It then gives the rights holder, as I understand it, the right to say “I want payment for this, or you take it down.” Then, I suppose, those who are using the material can do whatever they like. They can either pay or they can take it down.

Isn't that a market decision? Isn't that a market dynamic? Or am I wrong?

Á (1145)

Ms. Wendy Noss: What we're talking about here isn't necessarily a market issue, it's an exemption from liability. Under what circumstances, where ordinarily these acts or these actors would give rise to liability, are we going to say you're not liable?

To use Mr. Abbott's example, there are payments made to a rights holder to supply him with something. It's part of a service. The copyright owner is getting remunerated. Everyone's happy in his example.

The legislative solution you have to come up with is when there's an infringement where the copyright owner has not agreed to license the use of the work or has not agreed to have the work used in that particular way. I think that's where we run into the range where Mr. Spurgeon's solution may be based more on the marketplace, whereas Mr. Pfohl's may be based more on the infringement analysis.

The Chair: Very quickly, Mr. Thomson, and then Mr. Schellenberger.

Mr. Jay Thomson: I have a quick response.

This is not a functioning marketplace; this is a monopoly environment, because there's no competitive access to alternative providers of those rights. It's why we have a copyright board to establish tariffs. It's not a case of negotiating these issues within the marketplace, because you don't have anyone else other than SOCAN, for example, to negotiate with.

The Chair: Mr. Schellenberger.

Mr. Gary Schellenberger: Yes, I only have one more thing. I'm quite entrenched on the notice and takedown. I know, as legislators, on any particular thing, we cannot pass legislation for a minimum fine or a minimum of anything.

It was mentioned that notice and takedown might be a drastic action. Sometimes with drastic penalties or drastic actions, they might not do it the next time. Would that not be a deterrent? Gradually, you might have 500 to start with, but somewhere down the line, because people can't be online or can't get their products out there because they've disobeyed the law, then hopefully one day you'd have no one doing it. That would be my thing.

I know in fisheries and oceans there was one particular ship that cleaned out its bilge oil in the ocean. They were captured by our fine people, taken to court, and fined $40,000. No one knew what it cost to prosecute that particular person. Probably, to do it the right way, it might have cost them $100,000 to change the oil, so they changed the oil for $40,000.

Again, from my point of view, for the notice and takedown, whether it's drastic or not, I think those people would only do it a few times. Mind you, they would probably come up with a different thing.

Mr. Richard Pfohl: One thing, Mr. Schellenberger, with respect to it being a drastic action, I think you have to look at what the alternative is. The only alternative we have today is taking someone to court. We're asked, repeatedly, why we take such drastic action against people who are infringing our material. The answer is it's because we have no other alternative.

Notice and takedown provides a process that provides due process, but it doesn't require us to take someone to court under a penalty of potentially thousands of dollars of liability. I think it's actually a less drastic action than the alternative.

Mr. Gary Schellenberger: I can agree with you on that, because our courts are full. It could be a frivolous action or it could be a very serious action. By the time you get through the courts, the guy could have made a few hundred thousand dollars. I agree with you on that.

Thank you.

The Chair: Thank you very much.

Ladies and gentlemen, thank you so much for coming.

Thank you, committee members, for your interest.

The meeting is adjourned.