These examples show just one of the difficulties in valuing intellectual property. The CBC v. SODRAC [SODRAC] [1] case in the Supreme Court dealt with a much more technical aspect of intellectual property valuation - but that did not make the decision any easier and the differences of opinion in the case any less difficult to justify.

Before we even got to the mechanics of valuation in that case, we had to confirm that there was something to value. Copyright is usually accepted as a property right, and the exclusive rights it gives its owners in section 3(1) of the Copyright Act [the Act] [2] - rights to stop others doing things such as copying or broadcasting - are each treated as property rights in themselves that can be sold or licensed individually. So we had to find out whether one of those rights in section 3(1) was implicated. If it was not, there was nothing to value. It is only when one of those rights the Act grants to an owner is engaged that we get to any question of valuation - how much is it worth?

Featured here are the first few paragraphs of the Honourable Mr. Marshall Rothstein's article, "The Value of Copyright".�� The full article is available in the latest issue of the , volume 28(3), pp. 295-302.

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After two exciting and lively debates on the principle of technological neutrality (see Sebastian Beck-Watt’s coverage ) and reproduction rights (see Paul Blizzard’s coverage ), IP Osgoode’s Unpack��SODRAC symposium turned to a new panel to ‘unpack’ the paragraphs of [SODRAC] concerning the mandatory (or not) nature of tariffs set by the Copyright Board.

The fresh panel was asked to tackle the issue of whether the majority decision of SODRAC dispelled the notion—coined by Ariel Katz as the “”—that once the Copyright Board approves a tariff, any unauthorized use of a work triggers legal obligations to pay the royalties specified in the tariff and comply with the terms and conditions. The majority judgment’s alleged ‘debunking’ is found in paragraphs [101]-[13]. At paragraph [107] Justice Rothstein (for the majority) wrote: “In the absence of clear authority that this is Parliament’s intent, the burdens of a license should not be imposed on a user who does not consent to be bound by its terms” and, at [112] he concluded “that the statutory licensing scheme does not contemplate that licences fixed by the Board pursuant to [of the Copyright Act (the “Act”)] should have a mandatory binding effect against users [emphasis added].”

This issue was posed to the panel—comprised of Katz ( Intellectual Property Professor), Mario Bouchard (former General Counsel, ), Adriane Porcin ( Copyright Professor), Bobby Glushko (Head of the at University of Toronto), and Howard Knopf (Copyright Lawyer and )—in the form of the following questions: what are the potential implications for collective management organizations (CMOs), copyright users, and the copyright board?; and, more specifically (a major point of contention) does the reasoning of paragraphs [112]-[113] extend to other tariffs approved by the Copyright Board, and if so, does this “debunk” the so-called “mandatory tariff” theory?

Ariel Katz – The spectre is dismissed

Katz promptly asserted that Copyright Board issued tariffs are not mandatory. He focused on the language of of the Act, stating that even though a literal reading of s 68.2(1) appears to grant CMOs a right to collect royalties, it does not grant such a right. The provision reads:

68.2 (1) Without prejudice to any other remedies available to it, a collective society may, for the period specified in its approved tariff, collect the royalties specified in the tariff and, in default of their payment, recover them in a court of competent jurisdiction.

Katz examined the key phrase “default of their payment”, and reasoned that a collective may only collect royalties if the user owes a payment. Logically, Katz argued, if the user does not owe any payment they cannot be in default. As a result, a CMO’s right to collect only extends to a licensee, and not a user who falls outside the definition of the type of users to which the tariff applies.

Katz then argued that the holding was applicable to of the Act, since it is indistinct from s 70.2. He focused on the plain meaning of the word “tariff” and stated that if parliament wanted it to be mandatory, they would have called it a “Levy”.

As a joint intervener in the case with the Centre for Intellectual Property Policy, more of Katz’ argument can be found in his .

Mario Bouchard – Copyright Board-issued tariffs are mandatory

Bouchard followed Katz and began with a criticism of the way the issue was framed for the panel. He was concerned by the classification of s 70.2 licenses as tariffs. Bouchard dispelled this notion by explaining that s 70.2 licenses are not tariffs, they are regulations.

Turning to SODRAC, Bouchard argued in favour of the mandatory tariff theory. He reasoned that the SODRAC decision misapplied, misapprehended, and ignored copyright principles, principles of statutory interpretation, judicial precedents, legislative history, and the way foreign copyright values approach the regulation of collective societies. Concerning copyright principles, Bouchard stated that—well established by the —where permission is required, it is for the user to ask permission from the copyright owners, not the other way around. Asking rhetorically “are we to embrace Google’s approach to copyright: use first, ask forgiveness later”, he conceded that it may be an appealing instrumentalist approach, but Berne still legally controls.

Adriane Porcin – Do users need CMOs in a transactional world?

Porcin followed Bouchard and took a different approach to the issue, seeking not to conclude what the majority decision means. Rather, she examined the context in which the decision was made and inquired into the purpose of the tariff regime, mandatory or not. After detailing the “one size fits all” approach tariffs impose on users, she opined on the purpose of s 70.2 and CMOs in a transactional world where organizations (like CBC) are free to negotiate licensing terms with or without the assistance of the Copyright Board as arbitrator.

She presented four points on this topic: [1] different copyright collectives have different types of relationships with their members, depending on the nature of the work and industry in which the tariff functions, and so the ability to maneuver around s 70.2 depends on the rights granted to each CMO; [2] because some CMOs’ license valuations have disconnected from the utility of those licenses to the users, intervention of the Copyright Board is essential to ensure that users are not subjected to the CMO’s own price setting; [3] the Copyright Board is in a better position than CMOs to assess the fair market price, but the timing of valuations is an issue in fulfilling their role as market surrogate; and [4] CMOs’ evolving governance structures may alleviate the issue. On the last point, Porcin used Access Copyright as an example of a CMO that evolved by shrinking their number of directors and recruiting them based on their industry knowledge and skills. She explained this may be an encouraging step toward reducing the disconnected valuations between CMOs and users).

Bobby Glushko – The lack of clarity about tariffs is not user-friendly

Glushko—Head of Scholarly Communications and Copyright at University of Toronto—brought a unique user’s viewpoint to the panel. Glushko, whose role is to help his institution identify, evaluate and mitigate risk, focused on the uncertainty of this area of copyright law. He explained that in his case, the uncertainty over whether tariffs are mandatory or not—combined with the uncertain potential outcome of valuations involved in those tariff hearings—made his job particularly difficult.

Glushko further explained how the Principle of Technological Neutrality, in light of the SODRAC decision, only exacerbates the uncertainty in his position. It remained unclear what activities constitute copying, whether they are compensable, and what the value of those copies may be.

Howard Knopf – If you don’t like the bridge toll you can swim across

Knopf closed the panel and described why CMOs might see the SODRAC decision as bad for business: it expressed a clear message that, for users, tariffs are not mandatory. Knopf detailed the historical nature of a tariff, proffering an analogy to the old train tariffs from Toronto to Ottawa to regulate train companies, and suggesting that these were only mandatory it you took that particular train—you could ride a bus, plane, bike or hitchhike if they were cheaper, faster or better means to travel. His argument was that the SODRAC decision gives users leeway to choose “alternate means of transportation” by clearing rights for works they want to use through different mechanisms without running afoul of the Act. Bouchard spoke up in disagreement with this analogy, clarifying that users are free to use alternate repertoire (reinforcing the mandatory tariff theory).

Knopf conceded an earlier argument by Bouchard—that tariffs are in fact regulations—but tempered the concession by adding that parliament is capable of adding explicit provisions to make such tariffs mandatory. In the absence of such language, tariffs as regulations still need not be mandatory.

Conclusion

In light of the disagreement between the panelists on whether the mandatory tariff ‘Spectre’ had been debunked, the panel illuminated the difficulty presented by Glushko: ��If we cannot agree on the very nature of tariffs, it makes it difficult for both users and CMOs alike to predict the implications of �����ٸ鴡��’s decision. And, with CMOs acting as representation for authors (and owners), and users often being authors themselves, it is hard to find where the SODRAC majority decision falls with regard to the Act’s role as balancer of the public interest and obtaining a just reward for the creator. Does it tilt in favour of the public interest, giving more transactional freedom to users and authors, and accordingly encourage dissemination of new works? Or, does it inject more uncertainty and place greater barriers to the just reward of creators? One thing is certain: the issue made for a fascinating and passionate panel.

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These��questions were��posed��on February 25th when Osgoode Hall Law School in collaboration with the University of Toronto, Faculty of Law, held Unpack��SODRAC, a symposium aimed at unpacking the myriad of issues covered in the 2015 Supreme Court case , [SODRAC].

Unpack��SODRAC was organized by Osgoode Associate Dean and University of Toronto Professor . The symposium��covered three main topics from the case: Technological Neutrality, Reproduction Rights, and Mandatory Tariffs.

The parties in this case include the appellant CBC, and respondent SODRAC. CBC, Canada’s national broadcaster, is responsible for the creation of many television programs and movies.��SODRAC is a french-language collective society in Quebec within the statutory definition found in of the Act.��The facts revolve��around��incidental copies made by��CBC during the video editing and broadcast preparation process. These are referred to as ‘broadcast-incidental’ copies.

Interveners on the case included Howard P. Knopf and David Lametti from the Centre for Intellectual Property Policy and Ariel Katz, David Fewer and Jeremy de Beer from the Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic, Casey M. Chisick, Peter J. Henein and Eric Mayzel from the Canadian Musical Reproduction Rights Agency Ltd., the Canadian Music Publishers Association and the International Confederation of Music Publishers, and Barry B. Sookman and Daniel G. C. Glover from Music Canada, the International Federation of the Phonographic Industry, the Canadian Council of Music Industry Associations, the Canadian Independent Music Association and Association québécoise de l'industrie du disque, du spectacle et de la vidéo.

Licensing for musical works often uses a 'through to the viewer' model, where synchronization (copies created during editing of the work), broadcast-incidental (copies created during broadcasting of the work) and distribution-incidental (copies created during the distribution of the work) licenses are bundled together. This was not the case with the licensing scheme used by SODRAC.

CBC argues that broadcast incidental copies are the result of technological efficiency and it would contravene the Principle of Tech Neutrality to compensate SODRAC for ephemeral copies of their repertoire whose use has nothing to do with copyright holders' legitimate interests.�� SODRAC argues they are entitled by the Act (and by the decision in the 1990 case ��[Bishop]) to remuneration for the ephemeral copies.

The first panel of the day discussed the emerging principle of technological neutrality in Copyright. The panel was chaired by Professor Giuseppina D’Agostino, and included Craig, Dean Gregory Hagen (University of Calgary), Professor Cameron Hutchinson (University of Alberta), and Richard Pfohl (General Counsel, Music Canada).

Craig surveyed the spectrum of case law that includes three different types of neutrality: Media neutrality at one end and a purposive approach to neutrality at the other.�� This spectrum reflects the fact that prior to SODRAC there was not a clear consensus on the spirit and the content of the principle of technological neutrality. Jurisprudence on this principle stems from two main cases: 1990's Bishop and��2012's����[ESA v SOCAN]. Justice McLachlin (as she was), writing for the court in Bishop,��held that s 3(1) of the Act did not include the right to make "ephemeral" recordings for the purpose of facilitating broadcasting. This meant that licensing was required for both synchronization copies of works and incidental copies.

At the conservative end of the spectrum, the interpretation of media neutrality was introduced in 2006 in����[Robertson]. In that��case, neutrality meant that the Act continued to apply in different types of media, and that actions undertaken when using a new technology should be reviewed rather than the technologies net effect. This position is echoed in Justice Rothstein's dissent in ESA.

In the middle of the spectrum is the functional equivalence approach found in .��In this case, Justice Abella explains that technological neutrality "seeks to have the Copyright Act applied in a way that operates consistently, regardless of the form of media involved, or its technological sophistication."

The purposive approach to neutrality was introduced by Justices Abella and Moldaver writing for��the majority in��ESA. This case represented a major evolution in the interpretation of the Act, and Technological Neutrality, demonstrated by the following quote:

"[5] ... The principle of technological neutrality is reflected in s 3(1) of the Act, which describes a right to produce or reproduce a work “in any material form whatever”. In our view, there is no practical difference between buying a durable copy of the work in a store, receiving a copy in the mail, or downloading an identical copy using the Internet. The Internet is simply a technological taxi that delivers a durable copy of the same work to the end user. "

The underlying technological neutrality issue in SODRAC is the statutory interpretation of the Act, and the Court's refusal to displace the ordinary meaning of the text. The modern Canadian approach to statutory interpretation is Driedger's Modern Principle, as identified in ��[Rizzo].

Specifically, the question is when principles of interpretation (such as the principle of technological neutrality) can displace the ordinary meaning of a statute. This is argued in SODRAC at ]. Exceptions exist in the Act for ephemeral/incidental copying under and .��However, CBC's incidental copying did not fall under them. Based on the legislative history, including failed lobbying by broadcasters to , the majority concluded that it was not possible to displace the ordinary meaning of the Act.��Panelist Greg��Hagan argued��that the majority's interpretation missed the point made in Rizzo at ], which��held that the ordinary meaning could��be displaced if it led��to an unreasonable and/or absurd outcome.

The principle of technological neutrality in statutory interpretation makes it clear that functionally equivalent technologies (in this case the delivery of television and movie programming using a digital content management system versus an analog one) should be treated equally by the Act.�� As broadcasters increasingly deliver their content digitally, SODRAC is problematic because it offers a potential disincentive for the use of these innovative technologies.�� As it stands, there is a good case to make for parliament to expand the incidental copying exceptions under and to avoid this absurd outcome and continue to encourage innovation in media delivery.

Paul Blizzard is a JD Candidate at Osgoode Hall Law School.��Twitter: .

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The second panel of the day, titled “Reproduction Rights”, featured a particularly lively discussion of the implications of the decision for reproduction in the digital era. The panel, chaired by Professor , included��participants from a range of interested groups: ��(VP of Legal and Business Affairs at CMRRA), Professor ��(University of Ottawa), Intellectual Property lawyer ��(eLaw LLP), and Professor ��(Queen's University).

Professor Katz organized the discussion by providing a brief introduction, asking the panelists for their interpretations of the background to the decision, and then moving on to a more in-depth conversation about the matter of reproduction rights.

Following this, the panelists were asked to provide some background to the decision. Hayes noted his belief that the decision was a “good compromise”. ��He then spoke about the judicial history of the case, particularly��'s decision to separate their synchronization licensing scheme to garner additional payments, which was noted by in dissent.��Syrtash then��provided the licensing-side perspective of the issue. She agreed with��the majority decision that there is no statutory basis for reading down the meaning of reproduction in the ��[the "Act"].

Professor Amani took a more contrarian view. She was particularly concerned about the implication for the technological neutrality principle. According to Professor Amani, the decision by the majority is likely to contribute to a greater degree of uncertainty about how the court will apply the principle in future. Moreover, she pointed out that there exists no statutory basis for using the principle in the context of valuation – meaning that none of the Copyright legislation tells us to - or how to - apply technological neutrality when determining the value of a given copy for the purpose of charging tariffs. Yet, based on this case, it appears that technological neutrality now applies to both the interpretation and the application of the Copyright Act. ��In that light, she also argues that the holding that a multiplication is a copy is overbroad and overly inclusive, especially in the context of ephemeral copies.

Professor de Beer, who acted for ��as an intervener in SODRAC, argued that there is no “ordinary meaning” to section 3(1) of the Act (pointing out, for instance, that “mechanical” is an antiquated term) and there is more ambiguity in the Act than the majority considered. He also argued that SODRAC��is less��a shift in Copyright jurisprudence than��an outlier case. He stated that it is a disruptive case and may have the effect of complicating valuations��in tariff hearings and proceedings before the . In response, Syrtash was adamant that the decision is not an outlier, particularly given the consistency with which the same justices have been in the majority in related copyright cases.

The panelists then debated the decision's potential implications for reproduction rights. Hayes raised��some “real world” implications.��He noted that in practice it would be very difficult to deal with situations where certain copies have value while others do not. He discussed how it is a positive that collectives who are collecting tariffs will have to demonstrate how the additional copies made in the processes of a new technology add value for the user. In essence, those seeking additional tariffs will have to show that the user gained efficiencies and thereby value by making additional copies (necessitated by digital technologies, for example).

At this point, Professor Katz wondered aloud if the SODRAC��holding is limited to broadcasters’ reproductions. This spurred a debate around whether every copy is in fact a copy. Syrtash argued that, with exceptions and within context, “a copy is a copy is a copy” and the value of a copy is never zero. Professor de Beer then worried about the implications of this view. He argued��that view��is too simplistic and noted��that the majority confined its remarks to the broadcast context. Hayes said��that it is important to realize that the ruling applies to both the Copyright Board and to the courts. As a result, both bodies will have to consider it when valuing a given copy in a given case. Hayes pointed out that as a result of this decision, courts will not be able to value a copy, even an ephemeral one, at no value – a court will have to give a copy at least a minimum value. This is different than for the Board, which can value a tariff at zero.

The final portion of the discussion concerned��the issue of reproduction��valuations��in the digital era. Amani criticized��the view that all copies have��value��(not everything worth copying is worth protecting). Syrtash, on the other hand, emphasized��that the Supreme��Court said��these copies matter and,��accordingly,��we cannot ignore any��potential��value to the user in��increased efficiency. Hayes countered��that increased efficiency is not necessarily of great value if it is��merely the industry standard��(i.e. switching to digital technology).

The energetic��debate could have gone on at length absent the imposed time limits, but wrapped up here with a few audience questions. Overall, what became clear throughout this and other panels during the symposium was that the implications of CBC v. SODRAC remain somewhat unclear both in practice and in academia. It is easy to see why the Supreme Court’s decision was controversial, with the questions put to this panel being only a sample of the important debates to be unpacked.

Sebastian Beck-Watt is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School

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