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Sabrina Macklai is an IPilogue Senior Editor and a 2L JD Candidate at the University of Toronto Faculty of Law.

On July 30, the Supreme Court of Canada released their much-anticipated judgement in [91��ɫ]. The unanimous decision, written by Justice Abella, endorses several past Supreme Court judgements including and . Perhaps one of the most important copyright decisions since the 2012 ‘’ cases, 91��ɫ reflects the Supreme Court’s intention to develop Canadian copyright law in a way that maintains a balance between users’ and creators’ rights.

Background

Historically, Canadian educational institutions negotiated licence agreements with copyright collectives Access Copyright and Copibec to fulfill their copying needs within the collectives’ repertoires. In 2010, Access Copyright sought the Copyright Board’s approval for a new proposed tariff for post-secondary education institutions of a flat fee of $45 per full-time university student and $35 per full-time college student per year. This was a drastic increase from the fees stipulated in the 1994 to 2010 licence agreement between Access Copyright and post-secondary institutions. On December 23, 2010, the Copyright Board granted Access Copyright an interim tariff at the rate of $3.38 per full-time student and $0.10 per page for course packs, receiving . In anticipation of the upcoming academic session in July of 2011, 91��ɫ chose to “opt out” of Access Copyright’s licensing agreement and rely on alternative means, particularly the “educational purpose” under the , to continue reproducing copyrighted works for their students. Like with most educational and library institutions, 91��ɫ published internal “Fair Dealing Guidelines” that interpret section 29 to help 91��ɫ faculty and staff comply with the law. Access Copyright subsequently sued for copyright infringement. 91��ɫ then counterclaimed and sought a declaration that its Fair Dealing Guidelines complied with section 29 of the Act.

In 2017, ruled in favour of Access Copyright in all regards, claiming that the interim tariff is mandatory and that 91��ɫ’s Fair Dealing Guidelines and its actual practices are not fair under section 29. In 2020, the reversed the lower court’s decision on the tariff issue, finding that tariffs set by the Copyright Board are only applicable to those voluntarily under a licence with Access Copyright and therefore not mandatory. However, on the fair dealing issue, the Federal Court of Appeal found that the lower court did not make any “palpable and overriding errors” in conducting their fair dealing analysis. 

Issues at Appeal

The Supreme Court appeal considered two issues: 1) is the tariff mandatory? and 2) if the tariff is mandatory, are 91��ɫ’s Fair Dealing Guidelines “fair” such that their activities may be covered by section 29 fair dealing?

Access Copyright’s Non-Mandatory Interim Tariff

The Supreme Court upheld the Federal Court of Appeal’s reasoning on the tariffs issue, agreeing that the interim tariff is not mandatory and thus not enforceable against 91��ɫ. They affirmed that users are free to pursue alternative methods to lawfully copy works, such as acquiring transactional or site licences or relying on section 29 fair dealing. In their reasons, they drew heavily upon arguments made by Professor Ariel Katz at the University of Toronto Faculty of Law, who asserted that where a user makes an unauthorized use, the appropriate remedy is an action for infringement—one that Access Copyright lacks standing to initiate.

Considering the Ultimate User in Fair Dealing Analyses

Although the Court deemed it inappropriate to rule on fair dealing, given that this is not a copyright infringement suit, Justice Abella nonetheless provided helpful obiter on fair dealing in Canada. Namely, she clarified that the reasoning of both the Federal Court and Federal Court of Appeal on the fair dealing issue is not endorsed. Both lower courts erred in their evaluation of the purpose of the work, by only considering the institutional perspective. As Justice Abella discussed in multiple past decisions, including Alberta, the end-user perspective must also be considered when assessing the fairness of a dealing. In this case, but for the students, there would be no copying. Therefore, the judgement must consider the students’ perspective. The institutional purpose is not completely irrelevant, but it must be interpreted in light of the end-user. Here, Justice Abella found that educational institutions have no “ulterior or commercial purpose” when copying for their students’ benefit under fair dealing, even if the institutions benefit financially by saving funds. As the first discussion of the educational purpose of fair dealing since it was introduced during the , the Supreme Court clarifies that the appropriate way to assess an educational institution’s fair dealing practices is to determine whether those practices facilitate their students’ educational purposes in a fair manner, maintaining the balance between users’ and creators’ rights.

91��ɫ adds to a growing list of copyright jurisprudence by the Supreme Court, many of which were spearheaded by the . This latest decision delivers several wins to the users’ rights community, particularly through confirming that users always have the choice to rely on section 29 fair dealing when working with copyright-protected materials. Educators and librarians across the country can breathe a sigh of relief that they may continue to lawfully offer their services, many of which rely on fair dealing, to the benefit of their students and patrons.

The post A Win for Users’ Rights: Supreme Court Finds Access Copyright Tariff Not Mandatory and End-User Perspective Must be Considered in Fair Dealing Analyses appeared first on IPOsgoode.

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.

The post Tariffbusters: Does the CBC v SODRAC decision debunk the "Mandatory Tariff Theory appeared first on IPOsgoode.

But first a disclaimer: what follows is��merely an explanatory exercise based on a hypothetical��environment. I can not know for certain what Bryan Adams' tariff 8 income is. However, I can run��through the steps of calculating what he��might��make, assuming the��likely circumstances in which his recordings are based. The purpose of this exercise is not to guess the exact number on a��cheque. The purpose is to understand the nature of royalty distribution and the measure of remuneration��performers and makers earn��for their work.

In theory, determining “what an artist gets paid” is fairly straightforward for Tariff 8 when a non-interactive, commercial play-count is available, as it is a simple matter of per-play royalties (see: the and page 63 of the Copyright Board’s ). It is important to note that rates are the same between non-interactive and semi-interactive webcasts. Consequently, ambiguity of the language in the tariff leading to��confusion about which category a particular service falls under will not affect royalty distribution.

The Tariff 8 fact sheet describes the revenues of different sized webcasters:

• “very-large” webcasters earn $5.8M annually, with 3 billion song plays per year;

• “large” webcasters earn $130,000 annually with 70 million song plays per year; and

• “medium webcasters” earn $30,000 annually, with 15 million plays per year.

Using a combination of Tariff 8's analysis of Canadian demographics and the reality of the current webcasting industry, let us imagine a hypothetical realistic market comprised of two very-large webcasters (similar to Pandora), ten large webcasters (similar to Songza), and fifty medium webcasters. I will apply these market conditions to four typical artist roles in the music industry to determine how much each would be paid under Tariff 8.

FOUR RECOGNIZABLE ARTIST TYPES

While there are��many permutations of creator roles (Artist/Producer, Performer/Songwriter, Producer/Engineer, and so forth), for the purposes of this exercise, I will examine four well-known artists to whom we can relate. The following table outlines: [1] their roles on a particular recording; [2] which tariffs those roles trigger; [3] the likely ratio of royalties to be split (note that while these are not exact numbers, I can make a reasonable estimate of the splits based on the number of personnel or songwriters on a given recording); [4] an estimate of total play counts, determined by Spotify's historical play count values which I will apply to the hypothetical market outlined above; and finally [5] a calculation based on the ratios between the different-sized webcasters described above.��(Editor's note: I reworded the description of item [4] to clarify that I was calculating a total estimated play count from the hypothetical market I had described.)

1. Bryan Adams, “Summer of '69”

• Performer (lead singer, rhythm guitarist): Tariff 8 - 80%
• Songwriter: Tariff 22, Online Music Service Tariff - 50%
• Publisher: Tariff 22, Online Music Service Tariff - 25%
• 25 million plays in 2014

As a feature performer, Bryan Adams is entitled to eighty percent of his group’s Tariff 8 royalties, as Canadian organizations tend to distribute on an basis split between feature performers and background performers. I��will apply the same distribution model to this calculation, however band members may indeed negotiate their rates evenly if they please (for the purpose of this exercise, I will apply an even split to Arcade Fire's earnings below).

It should also be noted that Tariff 8 is split evenly between the performers and the makers. As a result, Adams is entitled to 80% of half (or 40%)��of the total royalties distributed for webcasting under Tariff 8. On 25 million plays, the song earns $2550 in the year's T8 royalties, of which his label gets half, leaving $1275. Individually he earns 80 percent of that half, $1020 - almost enough to buy a new .

2. Win Butler, “We Exist” (Artist: Arcade Fire)

• Performer (lead singer, rhythm guitarist) - Tariff 8 - 10%
• Songwriter: Tariff 22 - 16.67%
• 18.75 million plays in 2014

Arcade Fire is, at times, a large 20-piece band. It would be reasonable to assume that the band might employ the 80/20 split evenly between the six principle members and then evenly among the remaining fourteen musicians, respectively (the split may be on on a per-song basis, and may be conditional on the songs' arrangements. For our purpose we will assume an equal allocation). Win Butler will then earn ��13.33% of half the song's earnings. On 18.75 million plays, the song earns $1912.50, splitting $956.25 to the band��he takes a mere $127.50 of the year's earnings.

3. Chantal Kreviazuk, “Brave” (Artist: Josh Groban)

• Songwriter: Tariff 22, Online Music Service Tariff – 33.33%
• 2.5 million plays in 2014

As she did not perform on the recording, Chantal Kreviazuk's yearly earnings for “Brave” are nil.

4. Janina Fialkowska, “Mazurka No.1 in F-Sharp Minor” (Composer: Chopin)

• Performer: Tariff 8 – 100%
• 2,500 plays in 2014

As the solo pianist, Janina Fialkowska earns 100% of the 50/50 split of T8 royalties between her and her record label. The total earnings for 2500 plays is 25 cents, and Janina would earn 12.5 cents for the year.

While some of these amounts are not enough for a new Fender Stratocaster, it is important to keep in mind that I've only calculated the amount payable for webcasting of one song, under one tariff. All of the artists above have a deep catalogue of music, much of which is being played across different mediums, and incurring different tariffs.

In my next post, I will examine in further detail Tariff 22 and the Online Music Service Tariff.

Jordan Fine is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.

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