Copyright Board of Canada · 10 ANNUAL REPORT 2004-2005 examine, at the request of the Commissioner of Competition appointed under the Competition Act,agreements made between a collective

ANNUALREPORT

2004•2005

Copyright Boardof Canada

Copyright Board of Canada 1

The Honourable David L. Emerson, P.C., M.P.Minister of IndustryOttawa, OntarioK1A 0A6

Dear Mr. Minister:

I have the honour of transmitting to you for tabling in Parliament, pursuant to section 66.9of the Copyright Act, the seventeenth Annual Report of the Copyright Board of Canada forthe financial year ending March 31, 2005.

Yours sincerely,

Stephen J. CallaryVice-Chairman andChief Executive Officer

Copyright BoardCanada

Commission du droit d’auteurCanada

CANADA

56 Sparks Street, Suite 800, Ottawa, Ontario KlA 0C9Telephone: (613) 952-8621 Fax: (613) 952-8630

Web Site: www.cb-cda.gc.ca


Page

Chairman’s Message .......................................................................... 5

Mandate of the Board ........................................................................ 9

Operating Environment ................................................................... 11

Organization of the Board ............................................................... 13

Public Performance of Music ............................................................ 15

Retransmission of Distant Signals .................................................... 23

Private Copying ............................................................................... 23

Educational Rights .......................................................................... 24

Media Monitoring ........................................................................... 25

Arbitration Proceedings .................................................................... 29

Unlocatable Copyright Owners ......................................................... 30

Court Decisions ............................................................................... 32

Agreements Filed with the Board ...................................................... 42

Table of Contents

ANNUAL REPORT 2004-20054

Chairman: The Honourable Justice William J. Vancise

Vice-Chairman and Chief Executive Officer: Stephen J. Callary

Members: Francine Bertrand-Venne

Sylvie Charron

Brigitte Doucet

Secretary General: Claude Majeau

General Counsel: Mario Bouchard

Director of Researchand Analysis: Gilles McDougall

Clerk of the Board: Lise St-Cyr

Manager, Corporate Services: Ivy Lai

Registry Officers: Nadia Campanella

Tina Lusignan

Financial and Adminitrative Assistant: Joanne Touchette

Administrative Assistant: Manon Huneault

Informatics Officer: Michel Gauthier

Board Members and Staffas of March 31, 2005


I am pleased to present the 2004-2005Annual Report of the Copyright Board

of Canada. This report, the first since my nomination as Chairman, describes theBoard’s activities during the year in dischargingits mandate and responsibilities under the Copyright Act. A number of interestingchallenges and issues presented themselvesduring the first year of my term and I lookforward to considering them and others inthe years to come.

The Board held two hearings and one pre-hearing conference during 2004-2005.In the first hearing, the Board consideredthe amount of royalties payable to the CanadianBroadcasters Rights Agency (CBRA) forthe fixation and reproduction of works andcommunication signals by commercialmedia monitors for the years 2000-2005and by non-commercial media monitors for the years 2001-2005.

The second hearing required the Board toconsider the royalties payable by commercialradio stations for the years 2003-2007 forthe communication to the public by telecom-munication of musical works in the repertoireof the Society of Composers, Authors andMusic Publishers of Canada (SOCAN) and ofpublished sound recordings forming part of the Neighbouring Rights Collective ofCanada (NRCC) repertoire.

The pre-hearing conference, held onFebruary 15, 2005, dealt with proceduralmatters to expedite the hearing pertaining to the SOCAN’s tariff for ringtones.

During the year, the Board issued six decisions.The first dealt with various SOCAN tariffsthe Board had certified in the previous fiscalyear and for which the reasons were issuedon June 18, 2004. The second, issued onDecember 14, 2004, extended indefinitely,on an interim basis, the application of thecertified 2003-2004 Private Copying Tariffuntil a final decision is rendered. The third,issued on January 14, 2005, certified theroyalties to be collected by the EducationalRights Collective of Canada (ERCC) fromeducational institutions for the reproductionand performance of works or other subject-matters communicated to the public bytelecommunications for the period 2003-2006.The fourth, also issued on January 14, 2005,certified NRCC’s tariff pertaining to theCanadian Broadcasting Corporation (radio).The fifth was issued on February 25, 2005,certifying SOCAN-NRCC tariffs applicableto pay audio services for the years 2003-2006. And finally, on March 29, 2005, theBoard issued its decision on the royaltiesto be collected by CBRA for the fixation andreproduction of works and communicationsignals by commercial media monitors for theyears 2000-2005 and by non-commercialmedia monitors for the years 2001-2005.

All of the foregoing decisions are describedin greater detail in the present Report.

In 2004-2005, the Board issued 16 non-exclusive licences for the use of publishedworks for which copyright owners could not be located. The Board also issued threedecisions dismissing applications for licences.

Chairman’s Message

...


In the first two applications there was acomplete lack of evidence that the works hadbeen published and in the other, the applicantsought to reproduce anonymous workspublished more than fifty years ago whichwere in the public domain.

The Board initiated procedures in this fiscal year, which will result in hearings inthe fall of 2005, 2006 and early 2007.Some of these hearings will be very challenging.The Board will consider for the first time thetariff payable for the reproduction of musicalworks by online music services. It will

also consider the royalties payable by educational institutions for the reprographicreproduction of works in Access Copyright’srepertoire.

From the foregoing, it can be seen that theyear 2004-2005 was a busy and productiveperiod for the Board.

On a personal note, I would like to thankmy colleagues on the Board as well as the staff and personnel for their supportand assistance throughout the year. Theirexpertise and dedication make the work ofthe Board possible.

The Honourable William J. Vancise

...the year 2004-2005 was a busy and productive

period for the Board.

The Board is an economicregulatory body empoweredto establish royalties...


T he Copyright Board of Canada wasestablished on February 1, 1989, as the

successor of the Copyright Appeal Board.The Board is an economic regulatory bodyempowered to establish, either mandatorilyor at the request of an interested party, theroyalties to be paid for the use of copyrightedworks, when the administration of such copy-right is entrusted to a collective-administrationsociety. Moreover, the Board has the rightto supervise agreements between users andlicensing bodies, issue licences when thecopyright owner cannot be located and maydetermine the compensation to be paid by a copyright owner to a user when there is a riskthat the coming into force of a new copyrightmight adversely affect the latter.

The Copyright Act (the “Act” ) requires thatthe Board certify tariffs in the following fields:the public performance or communicationof musical works and of sound recordings ofmusical works, the retransmission of distanttelevision and radio signals, the reproductionof television and radio programs by educationalinstitutions and private copying. In otherfields where rights are administered collectively,the Board can be asked by a collective societyto set a tariff; if not, the Board can act as anarbitrator if the collective society and a usercannot agree on the terms and conditions ofa licence.

The Board’s specific responsibilities underthe Act are to:

certify tariffs for the public performanceor the communication to the public bytelecommunication of musical works andsound recordings [sections 67 to 69];

certify tariffs, at the option of a collectivesociety referred to in section 70.1, forthe doing of any protected act mentionedin sections 3, 15, 18 and 21 of the Act.[Sections 70.1 to 70.191];

set royalties payable by a user to a collectivesociety, when there is disagreement onthe royalties or on the related terms andconditions [sections 70.2 to 70.4];

certify tariffs for the retransmission ofdistant television and radio signals or thereproduction and public performance by educational institutions, of radio or television news or news commentary programs and all other programs, for educational or training purposes [sections 71 to 76];

set levies for the private copying of recordedmusical works [sections 79 to 88];

rule on applications for non-exclusivelicences to use published works, fixed performances, published sound recordingsand fixed communication signals, whenthe copyright owner cannot be located[section 77];

Mandate of the Board

...


examine, at the request of theCommissioner of Competition appointedunder the Competition Act, agreementsmade between a collective society and a user which have been filed with theBoard, where the Commissioner considersthat the agreement is contrary to thepublic interest [sections 70.5 and 70.6];

set compensation, under certain circumstances, for formerly unprotectedacts in countries that later join the BerneConvention, the Universal Convention or the Agreement establishing the WorldTrade Organization [section 78].

In addition, the Minister of Industry candirect the Board to conduct studies with respect to the exercise of its powers[section 66.8].

Finally, any party to an agreement on a licence with a collective society can file the agreement with the Board within 15 days of its conclusion, thereby avoidingcertain provisions of the Competition Act[section 70.5].


Historical Overview

In 1925, PRS England set up a subsidiarycalled the Canadian Performing RightsSociety (CPRS). In 1931, the Copyright Actwas amended in several respects. The need toregister copyright assignments was abolished.Instead, CPRS had to deposit a list of allworks comprising its repertoire and file tariffswith the Minister. If the Minister thoughtthe society was acting against the publicinterest, he could trigger an inquiry into theactivities of CPRS. Following such an inquiry,Cabinet was authorized to set the fees thesociety would charge.

Inquiries were held in 1932 and 1935.The second inquiry recommended the estab-lishment of a tribunal to review, on a continuing basis and before they were effective,public performance tariffs. In 1936, theAct was amended to set up the CopyrightAppeal Board.

On February 1, 1989, the Copyright Boardof Canada took over from the Copyright AppealBoard. The regime for public performanceof music was continued, with a few minormodifications. The new Board also assumedjurisdiction in two new areas: the collectiveadministration of rights other than the performing rights of musical works and thelicensing of uses of published works whoseowners cannot be located. Later the same year,the Canada-US Free Trade Implementation Actvested the Board with the power to set andapportion royalties for the newly created compul-sory licensing scheme for works retransmittedon distant radio and television signals.

Bill C-32 (An Act to amend the Copyright Act)which received Royal Assent on April 25,1997, modified the mandate of the Board

by adding the responsibilities for the adoptionof tariffs for the public performance andcommunication to the public by telecommu-nication of sound recordings of musicalworks, for the benefit of the performers ofthese works and of the makers of the soundrecordings (“the neighbouring rights”), forthe adoption of tariffs for private copying of recorded musical works, for the benefit ofthe rights owners in the works, the recordedperformances and the sound recordings (“thehome-taping regime”) and for the adoptionof tariffs for off-air taping and use of radioand television programs for educational ortraining purposes (“the educational rights”).

General Powers of the Board

The Board has powers of a substantive andprocedural nature. Some powers are grantedto the Board expressly in the Act and someare implicitly recognized by the courts.

As a rule, the Board holds hearings. Nohearing will be held if proceeding in writingaccommodates a small user that would otherwise incur large costs. The hearing maybe dispensed with on certain preliminary orinterim issues. No hearings have been heldyet for a request to use a work whose ownercannot be located. This process has been keptsimple. Information is obtained either inwriting or through telephone calls.

The examination process is always the same.The collective society must file a statement of proposed royalties which the Board publishesin the Canada Gazette. Tariffs always comeinto effect on January 1. On or before thepreceding 31st of March, the collective societymust file a proposed statement of royalties.The users targeted by the proposal (or in thecase of private copying, any interested person)

Operating Environment

...


or their representatives may object to thestatement within sixty days of its publication.The collective society in question and theopponents will have the opportunity to arguetheir case in a hearing before the Board.After deliberations, the Board certifies thetariff, publishes it in the Canada Gazetteand explains the reasons for its decision inwriting.

Guidelines and PrinciplesInfluencing the Board’s Decisions

The decisions the Board makes are constrainedin several respects. These constraints comefrom sources external to the Board: the law,regulations and judicial pronouncements.Others are self-imposed, in the form of guidingprinciples that can be found in the Board’sdecisions.

Court decisions also provide a large part of theframework within which the Board operates.Most decisions focus on issues of procedure,or apply the general principles of administrativedecision-making to the peculiar circumstancesof the Board. However, the courts have also setout several substantive principles for theBoard to follow or that determine the ambitof the Board’s mandate or discretion.

The Board also enjoys a fair amount ofdiscretion, especially in areas of fact or policy.In making decisions, the Board itself hasused various principles or concepts. Strictlyspeaking, these principles are not binding onthe Board. They can be challenged by anyoneat anytime. Indeed, the Board would illegallyfetter its discretion if it considered itself boundby its previous decisions. However, theseprinciples do offer guidance to both the Boardand those who appear before it. In fact, theyare essential to ensuring a desirable amountof consistency in decision-making.

Among those factors, the following seem tobe the most prevalent: the coherence betweenthe various elements of the public performanceof music tariffs, the practicality aspects, theease of administration to avoid, as much aspossible, tariff structures that make it difficultto administer the tariff in a given market,the search for non-discriminatory practices, therelative use of protected works, the takinginto account of Canadian circumstances,the stability in the setting of tariffs thatminimizes disruption to users, as well as thecomparisons with “proxy” markets andcomparisons with similar prices in foreignmarkets.

13

Chairman

The Honourable William J. Vancise, a justiceof the Court of Appeal for Saskatchewan,was appointed part-time Chairman of theBoard for a five-year term commencing inMay 2004. In 1996 Mr. Justice Vancise wasappointed Deputy Judge of the SupremeCourt of the Northwest Territories. He wasappointed to the Court of Queen’s Bench in 1982 and to the Court of Appeal for

Organization of the Board

B oard members are appointed by the Governor in Council to hold office during goodbehaviour for a term not exceeding five years. They may be reappointed once.

The Act states that the Chairman must be a judge, either sitting or retired, of a superior,county or district court. The Chairman directs the work of the Board and apportions its caseloadamong the members.

The Act also designates the Vice-Chairman as Chief Executive Officer of the Board, exercisingdirection over the Board and supervision of its staff.

From left to right Stephen J. Callary, Brigitte Doucet, the Honourable Justice William J. Vancise,

Francine Bertrand-Venne and Sylvie Charron

...Copyright Board of Canada

Saskatchewan in November 1983 where hecontinues to serve. Mr. Justice Vancise receivedhis Queen’s Counsel designation in 1979.He joined Balfour and Balfour as an associatein 1961 and in 1963 he was named a partnerat Balfour, McLeod, McDonald, Laschuk andKyle, where he became a managing partner in 1972. Mr. Justice William Vancise earnedan LL.B. from the University of Saskatchewanin 1960 and was called to the SaskatchewanBar in 1961.


Vice-Chairman & Chief Executive Officer

Stephen J. Callary is a full-time memberappointed in May 1999 and reappointed in2004 for a five-year term. Mr. Callary hasserved as Managing Director of consultingfirms, RES International and IPRInternational; as Executive Director ofTIMEC – the Technology Institute forMedical Devices for Canada; and as Presidentof Hemo-Stat Limited and Sotech ProjectsLimited. He has extensive internationalexperience dealing with technology transfer,software copyrights and patents and thelicensing of intellectual property rights.From 1976 to 1980, Mr. Callary workedwith the Canadian Radio-television andTelecommunications Commission (CRTC),the Privy Council Office (PCO) and theFederal-Provincial Relations Office (FPRO).He has a B.A. degree from the University of Montreal (Loyola College) and a B.C.L.degree from McGill University. He wasadmitted to the Quebec Bar in 1973 andpursued studies towards a Dr.jur. degree inPrivate International Law at the Universityof Cologne in Germany.

Members

Francine Bertrand-Venne is a full-timemember appointed in June 2004 for a five-yearterm. Prior to her appointment, Ms. FrancineBertrand-Venne was General Manager of theSociété professionnelle des auteurs et descompositeurs du Québec (SPACQ). She wasalso legal counsel for labour relations, the Copyright Act and the Broadcasting Act.Ms. Bertrand-Venne is a graduate of theUniversity of Sherbrooke (L.L.B. in 1972).

Sylvie Charron is a full-time memberappointed in May 1999 and reappointed in2004 for a five-year term. Before joining the Copyright Board, she was an Assistant

Professor with the University of Ottawa’sFaculty of Law (French Common LawSection) and worked as a private consultantin broadcasting, telecommunications andcopyright law. Prior to her law studies, sheworked with the Canadian Radio-televisionand Telecommunications Commission (CRTC)for 15 years. Ms. Charron is a graduate of the University of Ottawa (B.Sc. Biology in1974, M.B.A. in 1981 and LL.B. – Magnacum laude in 1992). Ms. Charron is amember of the Canadian Association of LawTeachers, of the Association des juristesd’expression française de l’Ontario (AJEFO),of the Council of Canadian AdministrativeTribunals and is former Vice-Chair of theOttawa Chapter of Canadian Women in Communications and past ExecutiveDirector of the Council of Canadian Law Deans.

Brigitte Doucet is a full-time memberappointed in November 2001 for a five-yearterm. Prior to her appointment, Ms. Doucetwas Legal Counsel, Labour Relations withl’Association des producteurs de films et detélévision du Québec since October 1999.She has also been active in the copyrightand music fields as well as in business law.Furthermore, she lectured at the InstitutTrebas on Les affaires de la musique. Priorto her law studies, Ms. Doucet was aninformation technology consultant for morethan eight years. Ms. Doucet is a graduate of the University of Montreal (LL.B. in 1993).

Note: Detailed information on the Board’sresources, including financial statements, canbe found in its Report on Plans and Prioritiesfor 2005-2006 (Part III of the Estimates) andthe Performance Report for 2004-2005. Thesedocuments are or will soon be available on theBoard’s Web site (www.cb-cda.gc.ca).


Background

The provisions under sections 67 onwardsof the Act apply to the public performance ofmusic or the communication of music tothe public by telecommunication. Publicperformance of music means any musical workthat is sung or performed in public, whetherit be in a concert hall, a restaurant, a hockeystadium, a public plaza or other venue.Communication of music to the public bytelecommunication means any transmissionby radio, television or the Internet. Collectivesocieties collect royalties from users basedon the tariffs approved by the Board.

Hearings

During 2004-2005, the Board held onehearing and one pre-hearing conference.The hearing, held in May and June 2004,pertained to the royalties to be paid bycommercial radio stations in 2003-2007for the communication to the public bytelecommunications of musical works in therepertoire of the Society of Composers, Authorsand Music Publishers of Canada (SOCAN)and of published sound recordings of musicalworks, forming part of the NeighbouringRights Collective of Canada (NRCC)repertoire. The pre-hearing conference, heldon February 15, 2005, dealt with proceduralmatters relating to SOCAN’s tariff for ringtones.

Decisions of the Board

The Board issued three decisions in 2004-2005. The first one pertained to variousSOCAN tariffs the Board certified in theprevious fiscal year and for which the reasonswere issued on June 18, 2004. The second

one, rendered on January 14, 2005, certifiedNRCC’s tariff pertaining to the CanadianBroadcasting Corporation radio. And finally, the third one, rendered on February 25,2005, certified SOCAN-NRCC tariffsapplicable to pay audio services for the years2003-2006.

SOCAN Multiple Licensing of Premises and Related Issues,1998-2007

The proposed tariffs that were the object ofthis decision were filed by SOCAN between1997 and 2003. In the fall of 1998, the Boardinitiated an examination of various tariffswhich had raised many complaints or objections,particularly by the Canadian Restaurant andFoodservices Association (CRFA), the HotelAssociation of Canada (HAC) and severalsmall rural communities in Alberta. In general,these users complained of the unfairness ofhaving to pay royalties under separate tariffsfor music use in the same premises and theexcessive financial burden of having to paycumulative minimum fees, either for severalevents or tariffs.

Hearings dealing with these issues were heldon February 4 to 6, 2002, and on June 17and 18, 2003. The Board subsequentlycertified the following tariffs (some of whichwere non-contested or for which agreementswere reached):

Tariff 1.A (Commercial Radio) 2000-2002

Tariff 1.B (Non-Commercial RadioOther Than the CBC) 2000-2004

Tariff 2.B (Ontario EducationalCommunications Authority) 2000-2004

Public Performance of Music

...


Tariff 2.C (Société de télédiffusion du Québec) 1998-2007

Tariff 3.A (Cabarets, Cafes, Clubs, etc. –Live Music) 1999-2004

Tariff 3.B (Cabarets, Cafes, Clubs, etc. –Recorded Music Accompanying LiveEntertainment) 1999-2004

Tariff 3.C (Adult Entertainment Clubs)2000-2004

Tariff 4.B.2 (Classical Music Concerts,Annual Licence for Orchestras) 2003-2007

Tariff 5.A (Exhibitions and Fairs)1999-2004

Tariff 6 (Motion Picture Theatres) 2004

Tariff 7 (Skating Rinks) 1999-2004

Tariff 10.A (Strolling Musicians andBuskers; Recorded Music) 1999-2004

Tariff 10.B (Marching Bands; Floatswith Music) 1999-2004

Tariff 11.A (Circuses, Ice Shows, etc.)2000-2004

Tariff 11.B (Comedy Shows and MagicShows) 2000-2004

Tariff 12.A (Theme Parks, Ontario Place Corporation and SimilarOperations) 2000-2004

Tariff 12.B (Paramount Canada’sWonderland and Similar Operations)1998-2003

Tariff 13.A (Public Conveyances –Aircraft) 1999-2004

Tariff 13.B (Passenger Ships) 2000-2004

Tariff 13.C (Railroad Trains, Buses andOther Public Conveyances) 2000-2004

Tariff 14 (Performance of an IndividualWork) 2000-2004

Tariff 15.A (Background Music) 1999-2004

Tariff 15.B (Telephone Music on Hold)2000-2004

Tariff 20 (Karaoke Bars and SimilarEstablishments) 1998-2004

Tariff 21 (Recreational Facilities Operatedby a Municipality, School, College,University, Agricultural Society or SimilarCommunity Organizations) 2000-2004

The Board also certified Tariff 8 (Receptions,Conventions, etc.) for the years 1999-2004and Tariff 18 (Recorded Music for Dancing)for the years 1998-2004, which receivedspecial consideration in this decision. Finally,the Board dealt with the following issues: thefairness of minimum fees, the burden ofmultiple licences and the adjustment of tariffsto account for inflation.

Tariff 8 (Receptions, Conventions, etc.)

Under the last certified tariff for 1998, theoperator of the premises paid for each reception,convention or assembly, or for each day afashion show is held, $28.75 for an event thatdoes not include dancing and $57.55 forone that does. These rates, and the tariffstructure, had been the same since 1991.

This tariff always generated numerouscomplaints or objections in relation to its cost,invariableness to event size or excessiveadministration costs. During the period underexamination, SOCAN made several proposalsintended to respond to these preoccupationsby reducing the administrative burden or bymodifying the rate structure so that it varywith the size of the event.


The Board concluded that SOCAN’s proposedchanges to Tariff 8 took into account, to alarge extent, the main arguments advancedby the various objectors to this tariff over theyears. For example, the quarterly terms ofpayment proposed by SOCAN should helpreduce the administrative burden of the tariff.

The Board also accepted the objectors’ view that the tariff should vary accordingto the size of the event. The tariff certified for the years 2002 and 2003, which cuts the rates for smallest rooms, is the following:

Room Capacity (Seating and Standing)

Fee Per Event

1 to 100

101 to 300

301 to 500

Over 500

Without Dancing

$20.00

$28.75

$60.00

$85.00

With Dancing

$40.00

$57.55

$120.00

$170.00

Premises Accommodating No More Than 100 Patrons

Months of Operation

6 months or less

More than 6 months

1 to 3 Days of Operation

$184.44

$258.25


$258.25

$372.13

For 2004, the Board granted to SOCAN an adjustment of the rates to reflect inflation,in accordance with the methodologydescribed later.

Tariff 18 (Recorded Music for Dancing)

The last certification of this tariff dated backto 1997 and consisted of the following ratesfor an annual licence:

Premises Accommodating More Than 100 Patrons

20 per cent more than the fees established above, for every 20 additional clients

...


SOCAN generally argued that the currenttariff was much too low and that this becameobvious when compared to Tariff 3.C foradult entertainment clubs. An establishmentthat can accommodate 200 persons paysbetween $2,184 and $3,066 under Tariff 3.C.An establishment with the same capacitypays only $744 under Tariff 18. SOCANalleged that the proposed increase wouldreduce the distortion and would only havea modest impact on the users’ financial situation.

Objectors to the tariff, CRFA and HAC,argued that the proposed increases wereexcessive, that the impact on the financialsituation of users was underestimated andthat royalties increased too quickly in relationto the size of the premises.

The Board accepted SOCAN’s argument thatTariff 18 was too low and modified the tariff tobetter reflect the value of this type of music use.

The Board accepted the views of the objectorsthat the rate base increased too quickly forpremises that can accommodate more than100 patrons. The progression in the 1997certified tariff increased the rate by 20 per centfor each additional 20 clients after thefirst 100 clients. The Board certified a slowerprogression, which increases the rate by 10 per cent for each additional 20 clientsafter the first 100 clients.

The Board was aware that the tariff it certified involved a significant increase, butnonetheless considered that the resultingrates were fair and equitable and remainedat reasonable levels. As proposed bySOCAN, the Board agreed to spread therate increase over the five years between1998 and 2002. It did so by distributingthe tariff increase equally over these years. The rates certified for 2002 and 2003were the following (the rates for 2004 wereadjusted for inflation):

Premises Accommodating No More Than 100 Patrons

Months of Operation

6 months or less

More than 6 months


$260

$520


$520

$1 040

Premises Accommodating More Than 100 Patrons

10 per cent more than the fees established above, for every 20 additional clients


Minimum Fees

It was primarily the small rural communitiesthat raised the issue of fairness of minimumfees, which led SOCAN to prepare a reportand propose options.

Having considered the evidence, the Boardwas convinced of the importance of maintaining minimum fees. An excessivereduction or elimination of the minimums,while clearly favouring small users, wouldbe generally unfair even if, in some particularcases, there might not be other solutions.The Board accepted SOCAN’s argumentsthat such a decrease or elimination wouldmake the collection of fees from small usersunprofitable and would be equivalent to issuinga free licence. In the Board’s opinion, itwas reasonable that the minimum fees allowSOCAN to recover a portion of the costsincurred through the issuance of a licence.The minimum fees however should alsoreflect the intrinsic value of SOCAN’s musicand repertoire.

The Board reiterated the importance thatSOCAN’s tariffs reflect three overarchingprinciples.

Minimum fees should be characterized byinternal coherence, such that they should takeinto account the entire structure of thetariffs and the characteristics of the usersto which these tariffs apply. Minimum feesshould be adjusted so that the number of userswho pay them is neither proportionally toohigh nor too low.

Minimum fees should reflect the intrinsicvalue of music for users, as well as SOCAN’sadministrative costs in issuing a licence. It may be expected, therefore, that there willbe some horizontal harmonization of theminimum fees among the different tariffs,especially when similar uses of music areinvolved.

Finally, in the case of those tariffs whereper event licences are issued, an annuallicence also comprising a minimum feeshould be available. This annual licence wouldlimit the impact of maintaining minimumfees on small users by enabling them to accrueevents on an annual basis and thereby paying a lower fee than what they would pay if the tariff were applied to each event.This licence should be so formulated as to be available only to small users.

Multiple Licences

Participants raised the argument that the needto pay fees for several types of licencesimposed an excessive burden on users. Yet,the Board concluded that the evidence on file showed that only a minority of usersneed more than one SOCAN licence and that they do not face major problems.Nevertheless, the Board commented orintervened in the following areas.

First, the Board recognized that identifyingthe licences a user requires can be complex;it encouraged SOCAN to continue itsefforts in this area. ...


Second, in recognition of the overlappingthat could result from the acquisition ofmore than one licence by the same user, theBoard said that it would be favourable tohaving the parties attempt to reach a proposalfor a new multifunctional tariff for severaldifferent uses of music in the same hall.

Third, the Board certified Tariffs 8 (Receptions,Conventions, etc.) and 21 (RecreationalFacilities) taking into account many of theconcerns raised by small users in relationto multiple licences.

Adjustment of Tariffs to Account for Inflation

The Board last considered the issue ofadjustment of fixed tariffs to account for infla-tion in 1993. It concluded that whileinflation is but one factor among others inadjusting tariffs, it is desirable to allowsome adjustment for inflation in the fixedamounts of the tariffs.

Since music is an input, the Board indicatedin 1993 that the tariffs should follow theprices of the other inputs in the economy.Consequently, the Industrial Product PriceIndex (IPPI) appeared to be the best indexto use in adjusting tariffs. For practicalreasons however, the Board decided to usethe annual increase in the Consumer PriceIndex (CPI) less 2 per cent, an easy-to-useformula whose fluctuations followed thoseof the IPPI.

This time, the Board accepted SOCAN’sargument that economic efficiency does notmean that the prices of all inputs must varyin lockstep. Economic efficiency means, rather,that the price of a good varies with its costof production. Since the CPI reflects a wider

basket that includes services, it constitutesa better approximation of the “cost of production” of SOCAN licences than theIPPI. However, to ensure some balancebetween music users and copyright owners,the Board decided to adjust the fixed tariffs by a percentage equal to the average annualvariation of the CPI less 1 per cent.

NRCC Tariff 1.C(CBC – Radio), 2003-2005

On April 2, 2002, NRCC filed its statementof proposed royalties for the years 2003 to 2007. One of the tariff items targetedthe radio of the Canadian BroadcastingCorporation (CBC), who objected to the tariffproposal. Subsequently, NRCC and CBCagreed on a monthly royalty rate of $80,000for 2003, 2004 and 2005, which is identicalto the one certified for 1998-2002.

Taking note of the agreement, the Boardcertified for 2003-2005 a tariff identical(except for some minor modifications) to theone certified for 1998-2002. NRCC’s tariff proposal as well as CBC’s objectionsare maintained for the years 2005 and 2006.

SOCAN-NRCC Pay AudioServices Tariff, 2003-2006

For the years 2003 and 2004, SOCAN andNRCC filed separate tariff proposals for payaudio services. These services are digital musicservices offered to direct-to-home satelliteor digital cable broadcasting subscribers. BellExpressVu, CBC/SRC (Galaxie), theCanadian Cable Television Association, CorusEntertainment Inc. (Max Trax) and StarChoice Communications Inc. objected tothe proposals. DMX Music Inc. objected to NRCC’s tariff for 2004.


For the years 2005 and 2006, SOCAN andNRCC filed a joint statement of proposedroyalties. They proposed rates of 12.35 and5.85 per cent of affiliation payments,respectively. This corresponded to the ratesthe Board would have certified for 1997 to 2002, had it not applied a 10 per centdiscount because the tariff was new. Therates proposed for small systems were halfof the main rates. No one objected to theproposed tariffs.

On January 26, 2004, after the Federal Courtof Appeal dismissed NRCC’s application forjudicial review of the 1997-2002 pay audiotariff, NRCC informed the Board that anagreement had been reached involving SOCANand all objectors. The latter subsequentlywithdrew their objections provided that thetariff certified for 2003-2006 be the sameas the one proposed for 2005 and 2006. Thetariff certified by the Board for the period2003-2006 reflects the agreement.

The nature of the relevant market demanded a certain stability.


Background

The Act provides for royalties to be paid bycable companies and other retransmitters for the carrying of distant television and radiosignals. The Board sets the royalties and

allocates them among the collective societiesrepresenting copyright owners whose worksare retransmitted.

In 2004-2005, no hearings were held norany decisions rendered.

Retransmission of Distant Signals

Private CopyingBackground

The private copying regime entitles anindividual to make copies of sound recordingsof musical works for that person’s personaluse (a “private copy”). In return, those whomake or import recording media ordinarilyused to make private copies are required to paya levy on each such medium. The Boardsets the levy and designates a single collectingbody to which all royalties are paid. Royaltiesare paid to the Canadian Private CopyingCollective (CPCC) for the benefit of eligibleauthors, performers and producers.

The regime is universal. All importers andmanufacturers pay the levy. However, sincethese media are not exclusively used to copymusic, the levy is reduced to reflect non-musicrecording uses of media.

Decision of the Board

On March 5, 2004, CPCC filed its proposedtariff for 2005. Four associations and corporations, including a group of retailersof blank audio recording media, objected to the proposal.

CPCC subsequently asked that the matter be expedited. The retailers objected to this andasked that the Board adopt for 2005 aninterim tariff that would be at least 25 per centlower than the 2003-2004 certified tariff.In its decision of December 14, 2004, theBoard, with the agreement of CPCC andthe other objectors, extended indefinitely,on an interim basis, the application of the Private Copying Tariff, 2003-2004. TheBoard found that the arguments of theretailers in support of a lower interim tariffwere without merits. The nature of the relevant market demanded a certain stability.


Background

Sections 29.6, 29.7 and 29.9 of the Actcame into force on January 1, 1999. Sincethen, educational institutions and personsacting under their authority can, without the copyright owner’s authorization, copyprograms when they are communicated to the public and perform the copy beforean audience consisting primarily of students. In a nutshell, institutions can copy and performnews and news commentaries and keep andperform the copy for one year without havingto pay royalties; after that, they must paythe royalties and comply with the conditionsset by the Copyright Board in a tariff.Institutions can also copy other programsand subject-matters and keep the copy forassessment purposes for thirty days; if theykeep the copy any longer, or if they performthe copy at any time, the institution mustthen pay the royalties and comply with theconditions set by the Board in a tariff.


On March 27, 2002, the EducationalRights Collective of Canada (ERCC) filed itsstatement of proposed royalties to be collectedfrom educational institutions for the years2003 to 2006.

The tariff proposal contained rates higherthan the ones certified for 1999-2002. TheAssociation of Community Colleges of Canada,the Association of Universities and Colleges of Canada, the Canadian Schools BoardAssociation and the Council of Ministers ofEducation, Canada objected to it.

On December 18, 2002, the Board hadextended on an interim basis the applicationof the tariff it had certified for 1999-2002,with minor changes to the reporting require-ments. On September 20, 2004, ERCCinformed the Board that it had reached anagreement with the objectors, who subsequentlywithdrew their objections. On January 14,2005, the Board certified for the period 2003-2006, a tariff identical to the interim tariff.

Educational Rights


Background

Sections 70.12 to 70.191 of the Act givecollective societies that are not subject to aspecific regime the option of filing a proposedtariff with the Board. The review and certifi-cation process for such tariffs is the same asunder the specific regimes. The certified tariffis enforceable against all users; however, incontrast to the specific regimes, agreementssigned pursuant to the general regime takeprecedence over the tariff.

Hearings

In 2004-2005, the Board held one hearingpertaining to media monitoring.


On March 26, 2005, the Board renderedthe following decision.

Broadcasters hold the right to reproduce theirprograms and to fix their communicationsignals. A commercial media monitor sys-tematically monitors the media sources ofinformation with a view to providing its clientswith information that interests them. In theprocess, they reproduce programs and fixthe communication signals that carry them.To do either, they require a licence.

The Canadian Broadcasters Rights Agency (CBRA) is the exclusive agent for the vast majority of Canadian privateradio and television broadcasters in themedia monitoring market. In that role, it isgoverned by sections 70.1 to 70.6 of theAct. It has the option of negotiating individualagreements or seeking certification of a tariffthat applies to all users with whom it has notagreed on a licence. It chose to do both.

CBRA first filed two series of proposed tariffs. The first targeted commercial mediamonitors, the second provincial and federalinstitutions that perform their own mediamonitoring. It then reached agreementswith ten commercial monitors representingat least 95 per cent of the market in Canada,as well as with some provincial governments.Those who had filed objections ceased topursue them. Only CBRA participated in theone-day hearing into this matter. The decisiondeals separately with commercial and non-commercial media monitors.

The original tariff proposals were based on certain assumptions about how monitorsoperate, many of which had to be set aside.The terms of the licences CBRA had issueddiffered significantly from the original tariffproposal. The CBRA asked that the certifiedtariff reflect these significant changes.

The Board noted the unusual nature of thesituation it was asked to address. CBRAhad reached agreements with virtually allthe relevant market. No one was taking issuewith the new tariff proposal. It was up to theBoard to identify many of the issues that areaddressed in the rest of these reasons, someof which for future reference. Despite this, theBoard still felt in the end that it was certifying a tariff based on an understanding of the mediamonitors’ business practices and needs thatit considered less than fully satisfactory.

Commercial Media Monitors

Two legal issues first retained the Board’sattention.

The first arose because the new tariff proposalprobably was more demanding for somethan the original tariff proposal. The Board

Media Monitoring

...


considered whether the ultra petita principleought to apply in the circumstances. Accordingto that principle, a decision-maker cannotgrant more than what was asked. The Boardhas always considered it possible to set higherrates if this could be done fairly. There arecogent reasons why ultra petita ought not to apply in proceedings before the Board. TheBoard has the power to certify tariffs. Toapply the principle would defeat that power.The principle also causes serious problems in setting the terms and conditions of a tariff.The choice of a tariff formula largely dictateswhat are the appropriate terms and conditions.Applying the principle would have resulted in a certified tariff that did not reflect the mediamonitors’ business practices. The Board notedthat in a decision issued on December 14,2004 which is abstracted elsewhere in thisreport, the Federal Court of Appeal appearedto endorse the analysis outlined above.

Also, shortly before the hearing on this matter,the Supreme Court of Canada issued itsdecision in the matter of CCH Canadian Ltd.v. Law Society of Upper Canada [2004SCC 13]. The decision contains two rulingsconcerning the concept of fair dealing thatmay be relevant to certain tariffs. The firstis that profit-driven research may constitutefair dealing. The second is that the personwho facilitates another person’s fair dealingmay be entitled to the same protection as thefirst person. This left open the possibilitythat certain activities of media monitors maynot constitute protected uses for which theywould require a licence. The Board concludedthis was neither the time nor the place todispose of this issue.

As for the rate, CBRA initially sought royaltiesof 25 per cent of a monitor’s income for thereproduction of the broadcasters’ programs and25 per cent for the fixation of their signals.

The rate finally agreed upon was 9 per cent.Given the record of the proceedings andevidence on foreign practices, the Boardconcluded that this was a fair rate under thecircumstances.

No one objected to the provisions of the newtariff proposal. Still, the Board addressed a number of issues.

Thus, the Board explained why it had includedrevenues obtained through an indirect useof the CBRA repertoire in the rate base. Amonitor cannot prepare notes, conductresearch or provide access to a database ofexcerpts until it has reproduced a broadcaster’sprograms and fixed its signal. Therefore, itmakes sense to include the revenues from theseactivities in the rate base.

The Board also ensured that the certifiedtariff did not include provisions that couldbe assimilated to an illegal subdelegation ofthe Board’s discretionary powers. It allowedbroadcasters to impose an embargo on worksthat are otherwise part of the licensed reper-toire; though problematic, the request wassupported by eminently practical reasons. Bycontrast, the Board did not grant CBRA thediscretion to add to the reporting requirementsimposed on users.

The Board agreed to some extent that earlierlicensing agreements provided a benchmarkthe Board could use in setting a tariff. Havingsaid this and given, among other things,how highly concentrated the market was, thetariff became not so much the norm as abackdrop that will apply by default whereCBRA and a monitoring firm are unable to reach an agreement. Under those circum-stances, differences between the tariff andthe licences should be clearly thought outand doubts generally should be resolved


in favour of users. The manner in which amonitor is informed of changes in CBRA’smembership is a case in point. Appended to each licence is a list of CBRA members.The tariff proposal was silent on the issue.In the end, the Board required that CBRAprovide an updated membership list from timeto time or post and maintain such a list ona publicly accessible website.

CBRA also wanted that monitors be requiredto supply a list of customers once a year. Eventhough it had some misgivings, the Boardconcluded that the request was reasonable.While it is not needed for the purposes ofdistribution, the information will allow CBRAto gain a better understanding of the market in which its repertoire is being used.The confidentiality concerns that were raisedwere not without merit, however. Customerlists often constitute highly sensitive andvaluable information. For that reason, thetariff prevents that information from beingused for purposes other than those forwhich it is provided.

Finally, CBRA asked that interest on latepayments be calculated according to a differentformula than the one usually used in theBoard’s tariffs. The Board concluded that itwould not be appropriate to adopt the proposedinterest clause without further justification.The matter could be the subject of a widerdebate in the context of another proceedingwhere the point of view of other interestedparties could be heard.

It should be noted that the tariff imposesless demanding reporting requirements onmonitors whose yearly revenues are less than$100,000.

Non-Commercial Media Monitors

Some institutions outsource their mediamonitoring; others do their own. At the timeof the hearings, CBRA had signed agreementswith three provincial governments and hadreached an agreement in principle with partof the Canadian government.

The proposed tariff was somewhat confusingin its definition of “monitor”. It targetedfederal and provincial government departments,agencies and Crown corporations, Parliamentand legislative assemblies, and federal andprovincial political parties and organizations.The certified tariff extends to members ofParliament and of legislative assemblies andto registered parties. There was no need tomention represented parties or constituencyoffices of members of Parliament or of legislative assemblies. Finally, the Board wasnot willing to extend the ambit of the tariff to such vaguely defined entities as politicalorganizations. CBRA did not seek a tariffthat would apply to municipalities, privatecorporations, not-for-profit associations orcharitable institutions.

The non-commercial tariff mirrors thecommercial tariff as much as possible. Maindifferences concern the rate base, the purposeof the monitoring and the adaptation of termsand conditions to the peculiar circumstancesof non-commercial monitors. Where the Boardwas unconvinced by the underlying rationaleput forward by CBRA, no distinction wasmade. Further differences had to be madebetween the non-commercial tariff and thenon-commercial licences. Thus, while it ispossible in a licence to provide added clarity

...


to the definition of the rate base or thedetermination of the uses that will be allowed,that is not possible in the case of a tariffthat will apply to circumstances that cannotbe fully predicted. A section was added inrespect of exemptions regarding below-thresholdmedia monitoring costs, reflecting theexemptions afforded in the commercial tariff.

Following up on its agreement in principlewith the Attorney General of Canada, CBRAproposed a further set of provisions targetinginstitutions or groups of institutions with morethan 15 decentralized monitoring offices,generating less than $100,000 in royaltiesin a given year. The addition of this optionwould have overly complicated the text of thetariff. The certified tariff does not offer thisadditional option.

The commercial tariff takes effect onJanuary 1, 2000. The non-commercialtariff takes effect on January 1, 2001.

Those are the dates for which the tariffs hadbeen filed. Based on available information,the Board estimated that the agreements withcommercial monitors and the attendingtariff would generate royalties in the order ofthree-quarters of a million dollars per year,while the agreements with non-commercialmonitors and attending tariff would triggeryearly payments of slightly more than onehundred thousand dollars.

The decision notes that throughout theprocess, CBRA was willing to listen to theconcerns of users and to thoroughly respondto the Board’s numerous questions. It also notes the willingness displayed by theAttorney General of Canada in helpinggather and generate information that madeit possible to better understand how mediamonitoring takes places within the federalgovernment.


Pursuant to section 70.2 of the Act, theBoard can arbitrate disputes between a col-

lective society that represents copyright ownersand the users of the works of those owners. Itsintervention is triggered by application byeither the collective society or the user.

In 2004-2005, one application was filedwith the Board by Access Copyright.

On March 31, 2004, Access Copyright filedits first proposed tariff for the reprographicreproduction of works in its repertoire for usein elementary and secondary schools. Theproposal is for the years 2005 to 2009; it doesnot target Quebec. It was published in theCanada Gazette on April 24, 2004. A coalitionof ministers of education and Ontario schoolboards objected to it; hearings into the matterare scheduled to start in January 2007.

The pan-Canadian licence that was in effectat the time the proposed tariff was filed expiredon August 31, 2004. On July 13, 2004,Access Copyright filed an application to setthe terms and conditions of a licence for theperiod from September 1 to December 31,2004. It also asked for an interim decisionthat would apply from September 1, 2004until the tariff was certified.

On August 27, 2004, Access Copyrightsent to the Board copy of an agreement setting out the terms and conditions of aninterim licence for the relevant period andwithdrew its request for an interim decision.Access Copyright maintained its requestfor a permanent licence and for a tariff; thesewill be addressed in later decisions.

Arbitration Proceedings


P ursuant to section 77 of the Act, theBoard may grant licences authorizing the

use of published works, fixed performances,published sound recordings and fixed commu-nication signals, if the copyright owner isunlocatable. However, the Act requires licenceapplicants to make reasonable efforts tofind the copyright owner. Licences grantedby the Board are non-exclusive and validonly in Canada.

Since its inception in 1989, the Board has issued 150 licences. In 2004-2005,38 applications were filed with the Board and 16 licences were issued as follows:

Don Pedro Payne, Ottawa, Ontario, forthe reproduction of architectural planscreated by Concept Gennic Inc. –Building & Design Technology for theproperty located at 91-93 ArlingtonAvenue in Ottawa.

Deerpark Management Limited, Ottawa,Ontario, for the reproduction of architec-tural plans created by Peter Pivcko for theproperty located at 99 Holland Avenue inOttawa.

Dr. Paul Jackson, Montreal, Quebec, forthe reproduction in a book of a cartoonby Stewart Cameron published in 1943in his book entitled Basic training daze:candid cartoons of you and me in the army(publisher unknown).

Aaron Burnett, Winnipeg, Manitoba, for the mechanical reproduction of thesong lyrics A Leaf Fan’s Dream written by Doug Moore (publisher unknown),published in 1961 as a single and in1996 on the record album Early CanadianRockers, Vol. 3, Collector Records,Holland.

Richard Brant, Ottawa, Ontario, for thereproduction of architectural plans createdin 1952 by James Moor and Sons Ltd.for the property located at 126-128 BaselineRoad in Ottawa.

Morrison Hershfield Limited, Ottawa,Ontario, for the reproduction of archi-tectural plans created by McDonaldDevelopments, Roy Allen & Associatesand J.G. Knowlton Ltd. for the propertylocated at 2716 Richmond Road inOttawa.

Eric Charron, Ottawa, Ontario, for thereproduction of architectural plans createdby “Tracey” on February 12, 1990 for the two-story addition to the propertylocated at 27 Monk Street in Ottawa.

Sarah Houriham, Ottawa, Ontario, for the reproduction of architecturalplans created by Maclean and Associatesin 1990 for the property located at 522 Mariposa Crescent (Rockcliffe) inOttawa.

Anne Marie Barter and Randy Sauvé,Ottawa, Ontario, for the reproduction of architectural plans created in 1976 by Campeau Homes for the propertylocated at 166 Bourbon Street inOttawa.

Summit REIT Property Management Ltd.,Calgary, Alberta, for the reproduction of architectural plans created in 1975 byK. Robert Trueman, architect, for theproperty located at 3501, 54th AvenueSE in Calgary.

Unlocatable Copyright Owners


Maloney Property Management Inc.,Ottawa, Ontario, for the reproductionof mechanical and electrical plans created by J. G. Knowlton Ltd. for theproperty located at 250 Rideau Place in Ottawa.

Alastair Gale Inc. Architect and PlanningConsultant, Ottawa, Ontario, for thereproduction of architectural plans createdby J. Morris Woolfson, architect, for the property located at 218 Maclaren Roadin Ottawa.

CRESA Partners, Calgary, Alberta, forthe reproduction of mechanical andelectrical plans created by Hrudko BustosEngineering of Calgary for the propertylocated at 2905, 12th Street NE in Calgary.

Controlex Corporation, Ottawa, Ontario,for the reproduction of architecturalplans ordered by Macdonald Developmentsin 1990 for the property located at4025 Innes Road in Ottawa.

Trigenex inc., Ste-Julie, Québec, for thereproduction of architectural plans createdin 1977 by Angelo A. Kolenc for theproperty located at 33 Banner Road inOttawa.

Robin Langdon, Record Producer ofToronto, Ontario, for the mechanicalreproduction on CD of five musicalworks (authors and publishers unknown).

In addition, the Board rendered three decisionsdismissing applications. In two instances,there was complete absence of evidence thatthe works had been published. The first one,filed by the Canadian Centre for Architectureof Montreal was for the reproduction anddisplay, in the context of the exhibition Lesannées 60 : Montréal voit grand, three photographs taken in 1955, 1957 and 1967which are at the National Archives of Canada.Neither the applicant nor the NationalArchives of Canada were able to provideany hint whatsoever of publication. Theother application, filed by the Office of theLieutenant Governor of Quebec, was for the reproduction, in a book on the history of lieutenant governors of Quebec, of a photograph taken on the opening day of the November 1959 legislative session. The name of the photographer was unknownand the applicant was unable to provide anyevidence that the picture had been published.

As for the application filed by Ms. DominiqueMarquis of Montreal, she wanted to reproduceheadlines and excerpts from articles publishedin L’Action catholique between 1910 and 1938.Based on the record, the Board concludedthat the identity of those who authored whatthe applicant seeked to reproduce was notknown. Consequently, the Board concludedthat the works were anonymous workspublished more than fifty years ago. Hence,there was no doubt, pursuant to paragraph6.1(a) of the Copyright Act, that the workswere in the public domain.


SOCAN Tariff 22 (Music on the Internet)

On October 27, 1999, the Board issuedits first decision dealing with SOCAN’sproposed Tariff 22 concerning the communi-cation to the public of musical works onthe Internet. On May 1, 2002, the FederalCourt of Appeal granted in part SOCAN’sapplication for judicial review of the Board’sdecision. On March 27, 2003, the SupremeCourt of Canada granted leave to appeal fromthe decision. On June 30, 2004, the Courtreversed part of the decision of the Courtof Appeal.

The decision reached a number of conclusionseach of which will constitute significantguidelines when time comes for the Boardto set certain tariffs. These conclusionsappear to rely on two basic principles. TheCourt reiterated that in its recent decisions, it sought to balance between promoting thepublic interest in the encouragement anddissemination of works and obtaining a justreward for the creator. The Court then addedthat the use of Internet should be facilitatedrather than discouraged, but this should notbe done unfairly at the expense of the creatorof the works.

The relevant conclusions can be stated asfollows.

First, a communication by telecommunicationoccurs when music is transmitted from thehost server to the end user.

Second, it is the content provider who effectsa telecommunication. Each transmissionmust be looked at individually to determinewhether in that case, an intermediary merely

acts as a conduit or whether it is acting assomething more. Generally speaking, however,only the person who posts a musical workcommunicates it.

Third, an Internet communication thatcrosses one or more national boundaries“occurs” at a minimum in the country oftransmission and in the country of reception.Copyright infringement occurs in Canadawhere there is a real and substantial connectionbetween this country and the communicationat issue. An analysis of Canadian decisionsand of European, American, Australian andFrench legislation on the issue led to theconclusion that Parliament could regulatea communication so long as it presented areal and substantial connection with Canada.Furthermore, Parliament intended to exerciseits copyright jurisdiction to impose liability onevery participant in an Internet communicationwith such a connection to Canada. In termsof the Internet, relevant connecting factorswould include the situs of the contentprovider, the host server, the intermediariesand the end user. The weight to be given to any particular factor will vary with thecircumstances and the nature of the dispute.

Fourth, paragraph 2.4(1)( b) of the Act,when stating that participants in a telecom-munication who only provide the means oftelecommunication necessary are deemednot to be communicators, is not a simpleexception to the violation of copyright; rather,it is an important element of the balancestruck by the statutory scheme. Whatevermeans are reasonably useful and proper to achieve the benefits of enhanced economyand efficiency are “necessary”. So long as anInternet intermediary does not itself engage

Court Decisions


in acts that relate to the content of thecommunication, whose participation is contentneutral and confines itself to providing “a conduit” for information communicatedby others, then it will fall within paragraph2.4(1)( b). The person who makes the workavailable for communication is not thehost server provider but the content provider.Having said this, a service provider can playmany roles. Copyright liability may attachto the added functions. The protectionprovided by paragraph 2.4(1)(b) relates onlyto a protected function.

So, the Court concluded that caching for thepurpose of enhancing Internet economy andefficiency is “necessary” within the meaningof paragraph 2.4(1)(b). The means “necessary”are means that are content neutral and arenecessary to maximize economy and cost-effectiveness. Parliament has decided thatthere is a public interest in encouragingintermediaries who make telecommunicationspossible to expand and improve their operations without the threat of copyrightinfringement. To impose copyright liability on intermediaries would obviously chill thatexpansion and development, as the history of caching demonstrates. That interpretationbest promotes the public interest in theencouragement and dissemination of worksof the arts and intellect without deprivingcopyright owners of their legitimate entitlement.Caching is content neutral and ought not tohave any legal bearing on the communicationbetween the content provider and the end user.

Fifth, when massive amounts of non-copyrighted material are accessible tothe end user, it is not possible to impute to the Internet service provider, based solely

on the provision of Internet facilities, anauthority to download copyrighted materialas opposed to non-copyrighted material.Copyright liability may attach if the serviceprovider has notice that a content providerhas posted infringing material on its systemand fails to take remedial action. Still, an overly quick inference of “authorization”would put the service provider in the difficultposition of judging whether the copyrightobjection is well founded, and to choose betweencontesting a copyright action or potentiallybreaching its contract with the content provider.A more effective remedy to address thispotential issue would be the enactment byParliament of a statutory “notice and takedown” procedure as has been done in theEuropean Community and the United States.

For his part, LeBel J. would have affirmedthe Board’s determination that an Internetcommunication occurs within Canada when it originates from a server located in Canada.Stakeholders need to know with a degree of certainty whether they will be liable inCanada for a communication of copyrightedworks. The test provided by the Board ispractically sound and provides the requisitepredictability. It best accords with the meaningand purpose of the Act and accords withthe principle of territoriality of internationalcopyright law. It is a straightforward andlogical rule and readily applicable by the Boardin setting tariffs, by the courts in infringementproceedings and by solicitors in providingadvice to their clients.

By contrast, the real and substantial connectiontest is used mostly in the recognition andenforcement of judgments from other provincesor countries. It is not a principle of legislative

...


jurisdiction and applies only to courts. It isinconsistent with the territoriality principlein that it may reach out and grasp contentproviders located in Bangalore who postcontent on a server in Hong Kong based onlyon the fact that the copyrighted work isretrieved by end users in Canada. Its applicationraises privacy issues, by encouraging themonitoring of an individual’s surfing anddownloading activities. Privacy interests of individuals will be directly implicatedwhere owners of copyrighted works or theircollective societies attempt to retrieve datafrom Internet service providers about an enduser’s downloading of copyrighted works.One should therefore be chary of adopting a test that may encourage such monitoring.

[Society of Composers, Authors and MusicPublishers of Canada v. Canadian Associationof Internet Providers, [2004] 2 S.C.R. 427,2004 SCC 45]

Private Copying

The Board’s decision of December 12, 2003,certifying the Private Copying Tariff, 2003-2004 triggered three applications for judicialreview. The Federal Court of Appeal heardthe applications on October 12 and 13, 2004.On December 14, 2004, the Court grantedone of the applications for part.

The applications raised four issues. First,is the private copying regime constitutionallyvalid? Second, could the Board rule that thezero-rating program operated by the CanadianPrivate Copying Collective (CPCC) had nolegal basis? Third, could the Board set levieson memory embedded in digital audiorecorders? Fourth, could the Board set ratesthat were higher than what CPCC hadrequested?

Constitutional validity

A coalition of retailers argued that the privatecopying regime is not copyright law, thatthe levy scheme is a tax and that the regimeis excessively broad and vague and not sufficiently connected to copyright law. TheCourt disagreed.

The private copying regime is in pith andsubstance copyright law. The essential elementof the federal competence over copyrightinvolves the establishment of a legal frameworkallowing rights holders to be rewarded forthe reproduction of recorded music by thirdparties. The regime achieves this. It legalizesprivate copying while providing that rightsholders are compensated. The price of doingso is sometimes borne by persons who donot private copy. Still, every element of theregime is sufficiently linked to Parliament’sgoal to compensate rights holders.

The levy is not a tax, but a regulatory charge.A tax usually is: (1) enforceable by law, (2) imposed pursuant to the authority ofParliament, (3) levied by a public body, and(4) imposed for a public purpose. Also, if anexus exists between the quantum chargedand the cost of the service provided, or if the levy is so connected to a regulatory schemethat treating it as a tax would frustrate federalism, the charge is not a tax but a fee.

The Board had reasoned that the levieswere not imposed by it since it cannot setthe tariff process in motion nor collect theamounts owing. It also held that, althoughthe regime was enacted for the benefit of theCanadian public, it is inaccurate to say thatthe levies were for a public purpose. The Courtdisagreed on both counts. The levy supportsthe creators and the cultural industries by


striking a balance between the rights of creatorsand users. As such, the levy is collectedfor a public purpose, even though it is paiddirectly to rights holders. CPCC initiates the process and collects the levies, but theBoard sets the levy. As such the levy islevied by a public body.

This left the question of whether the levyis a regulatory charge. Factors to considerinclude the presence of: (1) a complete anddetailed code of regulation; (2) a specificregulatory purpose which seeks to affect theindividual behaviour; (3) actual or properlyestimated costs of the regulation; and (4) a relationship between the regulationand the person being regulated. Applyingthese factors, the Board held that the regimewas a regulatory scheme. The Court agreed.

Though simply expressed and organized,the scheme is both complex and detailed. TheBoard’s valuation model links the levy rate to the revenue shortfall for rights holdersresulting from copying by consumers. Assuch, the regime is a complete and detailedcode of regulation that meets the first factor.

The levy is computed in order to advance thestatutory scheme. The Board must ensurethat there is a correlation between the extentof the private copying that occurs by theuse of the blank media and the levies that arecertified with respect to such media. Thissatisfies the third factor.

By making blank media available to consumers,manufacturers and importers allowed for theproliferation of consumer copying and therebycaused the need for the regime. Retailersargued that manufacturers and importers arenot responsible for the illegal acts of consumers.

However, to have “caused the need” for aregulation, it is not necessary for the manufac-turers and importers to have been responsiblefor private copying in the legal sense. It isenough that they have provided the meansby which private copying takes place. Thistakes care of the fourth factor.

The second factor is also present. By legalizing private copying, the regime enablesand may encourage individuals to copyrecorded music on blank media. This in turnmay encourage the wider dissemination ofrecorded music and increase creative effortsby rights holders through increased sales of blank media. As such, the levy affects thebehaviour of individuals.

The legality of the zero-rating program

The zero-rating program was initiated byCPCC on a voluntary basis. Users firstobtain a certificate number allowing themto purchase media levy-free from authorizedmanufacturers, importers and distributors,who are also required to register withCPCC and sign agreements.

The program has been the subject ofinconsistent rulings by the Board.However, the Board has throughout taken the position that the exemption extended by CPCC under the program is not authorizedunder the Act. In Private Copying I, theBoard, without objecting to the program, indi-cated that it could not take it into account in setting the levy. In Private Copying II, theBoard held that, although it could not create exemptions, it could take the programinto account in setting the levy. In Private

...


Copying III, the Board held both that it couldnot take the program into account in setting the levy and that the program had no legal basis and was therefore illegal.

CPCC submitted that the Board exceeded itsjurisdiction in declaring the program to beillegal and, by extension, CPCC’s zero-ratingagreements. The Act does not grant theBoard the power to rule upon the legalityof private agreements unless this is necessarilylinked to its rate-setting function. Bydeclaring the program to be illegal, the Boardignored CPCC’s right to waive the collectionof statutory debts owing to it. In any event,CPCC said, the decision was both incorrect in law and unreasonable.

Before deciding whether the Board erred inlaw when it held that it should disregardthe zero-rating program in setting a levy, theCourt thought it important to deal withthe inability of CPCC or the Board to createexemptions from the levy. The Board heldthat the program is not authorized by the Actessentially because if Parliament had intendedto insulate non-copiers from the effects of theregime, it would have so provided or wouldhave provided the Board with the tools toaccommodate those persons.

The Board’s conclusion that it does nothave the power to create exemptions was not contested. If a statute specifies exceptionsto a general rule, other exceptions generallyare not to be read in. Subsections 82(2) and86(1) of the Act provide exceptions to thelevy. Parliament expressly empowered Cabinetto exclude from liability certain media. Finally,paragraph 87(a) provides that Cabinet, andnot the Board or collecting bodies, may makeregulations respecting procedures for theoperation of the section 86 exemption. It

cannot credibly be suggested that Parliamentenvisaged that CPCC could create andadminister exemptions that are not explicitlycreated by the statute.

The words of an Act are to be read in theirentire context and in their grammaticaland ordinary sense harmoniously with thescheme of the Act, the object of the Act,and the intention of Parliament. The strongestargument in favour of an implicit authority to grant the exemptions which underlie thezero-rating program was the suggestionthat this program goes some way to achievingstatutory objectives. However, it must still beshown that Parliament intended such a grant.The Board, having confronted this question,concluded that it did not have the legalauthority to create exemptions. It noted thetotal absence of legislative control over the power being claimed by CPCC and theimportance of the consequences flowingfrom the zero-rating program. CPCC wouldeffectively regulate the market for blank CDs,thereby engendering distribution problems by forcing sales outside the normal supplychain. The Board expressed reservationsabout the fairness of the program and itspotential for arbitrariness. Realizing theimpact of the program, the Board did notaccept that Parliament could have intendedsuch an extensive grant without providingfor a framework for its exercise.

The question then was whether the zero-ratingprogram was relevant to setting the levy.This was akin to asking whether Parliamentintended the cost of the levy to be passed onto all end users, or only to those who actuallycopy music. The Court ruled that it would have been unreasonable for the Board to haveconcluded that it should take the zero-ratingprogram into account.


The Board explained that the levy wasintended to apply to all blank media regardlessof their use and that the zero-rating programcreated an exemption contrary to that intentby excluding from the levy persons who do notprivate copy. These exemptions have a directimpact on the levies set by the Board. If theexemptions are not authorized, the levy mustbe calculated on the basis that all purchasersof blank media will pay it. If the exemptionsare authorized, the levy must be adjustedupwards to account for the levy-free purchasesof blank media under the program. Theholding that the zero-rating program is “illegal”simply meant that the Board would disregard it when setting the levy.

CPCC argued that the Board exceeded itsjurisdiction by ruling on the legality of privateagreements with the program participantsand that the effect of the Board’s decisionwas to take away the common law right ofrights holders to waive the payment of levies.The Court did not read the Board’s decisionas holding that the program, to the extentthat it is based on the waiver by rights holdersof their rightful entitlement, is illegal. TheBoard made it clear that CPCC can foregothe collection of levies legally owing to it.However, it can no longer expect that the Boardwill compensate it for the negative impactof the program on its revenues.

CPCC argued that the Board has no choicebut to take the impact of the program intoaccount, just as it must take into account anyother market reality. The Board rejected thisproposition. It came to realize that CPCC wasattempting to introduce through the backdoor the very exemption which it had twicerefused to recognize. This is what led the Board

to hold that it would no longer compensaterights holders for the effect of the program onCPCC’s revenues. In so doing, the Boardcommitted no reviewable error.

Does a digital audio recorder containan audio recording medium?

An “audio recording medium” is “a recordingmedium, regardless of its material form, ontowhich a sound recording may be reproducedand that is of a kind ordinarily used by indi-vidual consumers for that purpose, excludingany prescribed kind of recording medium.”The issue was whether permanently embeddedmemory incorporated into a digital audiorecorder retains its identity as an “audiorecording medium.”

The Board held that memory incorporatedinto some device does not lose its identity so as to take it outside the definition. In effect,it looked through the device being sold andreached the permanently embedded memoryfound therein. The Canadian StorageMedia Alliance (CSMA) argued that embed-ded memory becomes integrated in, andinseparable from, the device, and thus losesits separate identity. In the alternative, itsubmitted that the Board created an exemptionby only imposing a levy on memory when it is embedded in a recorder and not whenthe identical memory is embedded in otherelectronic devices.

Although the Board purported to establish alevy on the embedded memory, it acknowledgedthat this memory could not, looked at on itsown, allow for the establishment of the levy; itis the device that is the defining element of thelevy and not the memory incorporated therein.

...


The Court found that the Board cannotestablish a levy and determine the applicablerates by reference to the device and yet assertthat the levy is being applied on somethingelse. It understood why the Board wanted tobring MP3 players within the ambit of theregime. However, as desirable as this mightseem, the authority for doing so still has to befound in the Act. The Board focussed onthe phrase “regardless of its material form” tohold that Parliament intended that a levybe established on a medium, regardless ofits incorporation into a device. The Courtfound a number of problems with this analysis.First, if memory does not become an “audiorecording medium” unless and until it isincorporated into the appropriate device, it isdifficult to see how memory can be said to remain a medium when embedded intoa device. Second, upon being incorporatedinto a device, memory undergoes no changein form. It is therefore difficult to see howthe Board could rely on the phrase “regardlessof its material form” to justify its conclusion.Furthermore, to rely on this phrase, the Boardfirst had to identify an “audio recordingmedium”. According to its own reasons, amemory is not an “audio recording medium”unless and until embedded into a digitalaudio recorder. The phrase on which the Boardrelied to “see through” a digital audiorecorder and reach the memory embeddedtherein did not support its conclusion.

The Board acknowledges that, when it enacted Part VIII, Parliament could not haveenvisioned recent technological developments.Parliament was aware that blank audio tapeswere the cause of the harm to rights holdersand had been made aware of proposals in othercountries (including the U.S.) to extendthe levy to the hardware which recorded andplayed these blank audio tapes. Still, itchose to limit the levy to blank medium. Thisshows that the definition of “audio recordingmedium” stands in contradistinction with arecorder or similar device as these were knownto exist at the time and whose function it is to record and play blank audio tapes. No onehas ever pretended that tape recorders camewithin the ambit of the definition. A digitalaudio recorder is not a medium. The Boarderred when it held that it could certify a levyon the memory integrated into a digitalaudio recorder.

Finally, the liability for the payment of thelevy can only arise “on selling or otherwisedisposing of those blank audio recordingmedia”. The Board therefore had to look atwhat was being sold and determine whetherthe subject-matter of the sale came within theambit of the definition. The subject-matterof the sale was a device, not a medium. In theabsence of such a sale, no liability can arisefor the levy. As Part VIII now reads, there isno authority for certifying a levy on suchdevices or the memory embedded therein.

...

The Board therefore had tolook at what was beingsold... the subject-matterof the sale was a device,not a medium.

...the ultra petitaprinciple did not prevent

the Board from deviating as it did from

the proposed tariff.


Ultra petita

The last issue was whether the Board couldset a levy beyond that sought by CPCC and,if so, whether the levy in question was setwithin the bounds of fairness.

CSMA submitted that nothing in the Actempowers the Board to disregard the ultra petitaprinciple. Proposed tariffs are published;stakeholders are given a period within whichto file written objections. If the Board couldunilaterally certify a tariff higher than thatproposed, the purpose of the notice periodwould be undermined. Alternatively, theapplicants argued that setting a levy beyondthe tariff published also was unfair to thosewho might have intervened if the approvedrate had been advertised.

The ultra petita principle is generally understoodto mean that a Court will not make a rulingbeyond what is requested by the parties. Thelegislator is free to remove administrativetribunals from the constraints of the principle.This will often be the case, as tribunals aregenerally created to advance interests that gobeyond those of the parties who appear beforethem. The Court found subsections 83(8)and (9) of the Act particularly relevant. Theirlanguage is not as clear as that for otheradministrative tribunals (e.g., NationalTransportation Act); still, upon being seizedwith a proposed tariff, the Board retains the discretion to establish a tariff that is fairand equitable, and to set such terms andconditions as the Board considers appropriate.

In this instance, the Board explained thatit could not set the rate based on the modelproposed by CPCC because it was too complexand used instead its own model which resultedin a marginal increase. In fixing royalties,the Board must take account of numerousfactors, including the competing interestsof the parties and the requirement that the levybe fair and equitable. Given the Board’srole, its broad discretion and the languageof subsections 83(8) and (9), the ultra petitaprinciple did not prevent the Board fromdeviating as it did from the proposed tariff.

There remained the issue of fairness. Thelevy only exceeded the amount requested for two of the four typical formats of non-removable “flash” memory incorporatedinto digital audio recorders, and was less thanwhat would have applied to higher capacityrecorders. There was no evidence suggestingthat concerned persons who did not participatewould have done so if they had known thatthe resulting tariff would be marginally higherthan that applied for. This showed in theCourt’s view that the Board had properlyassessed the situation and arrived at the correctconclusion when it said that no unfairnesswould result from the increase which itauthorized.

[Canadian Private Copying Collective v.Canadian Storage Media Alliance (F.C.A.)[2005] 2 F.C. 654]

Continued... “Court Decisions”


Pursuant to the Act, collective societiesand users of copyrights can agree on the

royalties and related terms of licences forthe use of a society’s repertoire. Filing anagreement with the Board pursuant to section 70.5 of the Act within 15 days of itsconclusion, shields the parties from prosecu-tions pursuant to section 45 of the CompetitionAct. The same provision also grants theCommissioner of Competition appointedunder the Competition Act access to thoseagreements. In turn, where the Commissionerconsiders that such an agreement is contraryto the public interest, he may request theBoard to examine it. The Board then setsthe royalties payable under the agreement,as well as the related terms and conditions.

In 2004-2005, 368 agreements were filedwith the Board, totalling 4,045 agreementsfiled since the Board’s inception in 1989.

Access Copyright, which licenses reproductionrights, such as photocopy rights, on behalf of writers, publishers and other creators,filed 303 agreements granting various insti-tutions and firms a licence to photocopyworks in its repertoire. These agreementswere concluded with various educationalinstitutions, libraries, non-profit associationsand copy shops.

The Société québécoise de gestion collectivedes droits de reproduction (COPIBEC) filed41 agreements. COPIBEC is the collectivesociety which authorizes in Quebec the repro-duction of works from Quebec, Canadian(through a bilateral agreement with AccessCopyright) and foreign rights holders.COPIBEC was founded in 1997 by l’Uniondes écrivaines et écrivains québécois (UNEQ)and the Association nationale des éditeurs delivres (ANEL). The agreements filed in2004-2005 have been concluded with various organizations and municipalities in the Province of Quebec, and one with the Government of Quebec.

Access Copyright and COPIBEC have alsofiled an agreement they jointly entered intowith the National Bank of Canada.

The Audio-Video Licensing Agency (AVLA),which is a copyright collective that administersthe copyright for owners of master andmusic video recordings, has filed, for its part,22 agreements.

Finally, the Canadian Broadcasters RightsAgency (CBRA) filed one agreement it enteredinto with the commercial media monitorCNW Group Ltd. CBRA represents variousCanadian private broadcasters who createand own radio and television news and currentaffairs programs and communication signals.

Agreements Filed with the Board

Documents

Copyright Board of Canada · 10 ANNUAL REPORT 2004-2005 examine, at the request of the Commissioner of Competition appointed under the Competition Act,agreements made between a collective