Glover Clearing Up the Copyright Confusion

8/8/2019 Glover Clearing Up the Copyright Confusion

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SOWING NEW CONFUSION?

A Response to Professor Michael Geists Clearing Up the Copyright Confusion

By Dan Glover*

Abstract

The creation of copyright works for educational uses is a complex and substantial endeavour,

particular in a country as large, diverse and sparsely populated as Canada. Careful thought should be given

before adopting fair dealing rules that threaten the health of educational publishing.

"Fairness" is an eye-of-the-beholder concept that must be revisited on the facts of every new case.

Only six years after the landmark CCH case on fair dealing, this issue is returning to the Supreme Court

for a second review!

By exposing all copying with any connection to education to a vague fairness assessment, Canada

risks violating its international treaty commitments. Such a broad and ambiguous phrasing would be

unparalleled among the worlds major trading partners.

The governments stated desire to promote new technologies in the educational setting would be far

better achieved by implementing targeted exceptions that will not be vulnerable to abuse.

* Dan Glover is an associate in the Intellectual Property Group at McCarthy Ttrault LLP. This

comment is written in Mr. Glovers personal capacity.


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Sowing New Confusion? A Response to Professor Michael Geists Clearing Up the Copyright Confusion

By Dan Glover

1) Introduction

In mid-December, Professor Michael Geist published ablog entry entitled Clearing Up the Copyright Confusion:Fair Dealing and Bill C-32, a comment on the governments proposed addition of another user right in the form offair dealing for the purpose of education. He concludes that this reform would not affect the balance betweencreators of educational materials and the users of such materials.

Of all of the critically important amendments proposed in Bill C-32, this reform may have the largest measurableimpact. Professor Geist himself has noted that educational institutions and students currently spend more than a

billion dollars a year on books and hundreds of millions of dollars on access to educational databases. Arepresentative of the rightsholder collective Access Copyright testified before a Parliamentary committee thatCanada's education sector alone reproduces more than half a billion pages of text for use in classrooms. Currently,authors are compensated for much of this copying because only a percentage of these copies is made for allowableresearch or private study purposes. Under the new regime, any educational purpose would be an allowable

purpose, leaving it up to courts to decide whether or not the dealing is fair. While estimating the potential futurelosses to publishers resulting from the change will never be an exact science, projections raised in committee haveranged between $40-million per year(Bloc MPs Carole Lavalle and Serge Cardin) and $60-million per year(Access Copyright). Due to concerns about the breadth of this reform, both the Liberal Party and the Bloc Qubecoishave suggested that they will seek to amend this provision.

It must also be remembered that the educational marketplace in Canada is an intricate ecosystem with characteristicsthat are not present in larger marketplaces such as the United States. While certain popular texts will receive widecirculation in Canada, many other texts will be aimed at far smaller marketplaces. Any legislative rule must becalibrated to avoid disincentives for authors and publishers to publish new educational works for these smallermarketplaces, such as those aimed at cultural and linguistic minorities. With so much at stake, the importance ofcorrectly evaluating the policy implications of this particular provision cannot be overstated.

Unfortunately, I do not have the same confidence as Professor Geist that the effects of the proposed amendment willpromote new technologies while minimally impairing the interests of authors and publishers. In particular, I am

convinced that Professor Geist significantly understates the potential impact of the proposed new educational fairdealing exception, in part because he places too much faith in the second fairness stage of the fair dealing test togovern behaviour in the marketplace. Further, Professor Geists survey of other laws omits a principled analysis ofwhether the proposed exception risks putting Canada offside its international treaty commitments, in particular thethree-step test enshrined by TRIPS and the Berne Convention for the Protection of Literary and Artistic Works.

In responding to Professor Geist, I offer the disclaimer that although this blog entry is my personal opinion and wasprepared in my private time, part of my understanding has been developed through retainers as counsel for a numberof rightsholder organizations in this field. (As counsel, I have also advised numerous institutional users of copyrighton their fair dealing rights, and appreciate that users have real concerns with respect to managing use of copyrightworks in a complex technological landscape.)

As a final introductory point, I should note that it is not always easy to respond to Professor Geist, primarily due to

his a tendency to make bold pronouncements without explanation or support. A representative example is ProfessorGeists statement that Educational institutions and students spend over a billion dollars each year on books andhundreds of millions of dollars on licencing [sic] for access to databases. That will not change with the inclusion ofeducation within fair dealing. Professor Geist does not provide a source or a rationale for this critically important

prediction. Furthermore, he tells a different story elsewhere in testimony before a Parliamentary Committee, wherehe admitted that the fair dealing for education reform would result in lost revenues for authors and publishers:

Mr. Pablo Rodriguez (Honor-Mercier, Lib.):


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Regarding the education example, don't you think that the exemption, as it is now, would cost revenues to someof the creators, writers, or producers?

Prof. Michael Geist:

Right. As I mentioned in my opening remarks, I think that any copying that takes place, including under the

new exception for education, must still be fair. It would be disingenuous to argue that there is going to be nocopying that's currently compensated for that might now fall within fair dealing, but by definition any copyingthat does indeed qualify through the court's analysis is fair. [Emphasis added.]

Given such disparities in message, and given Professor Geists ad hominem complaint that rightsholders have mademisleading claims about potential losses, inaccurate comments on copyright and Internet materials, and dubiousarguments about the compliance of the reforms under international copyright law, it has been necessary to respondat length to the main contentions in Professor Geists blog entries, articles and testimony.

2) Why Is Educational Publishing Important?

Canada is not the first country to step to the brink of considering creating broad exceptions to copyright to reducepublic expenditures for education. While Professor Geist tells the story of the United States and Israel to promote hisdesired result, the experience of the United Kingdom explains why passing such an exception may lead tounanticipated and undesirable results.

In the United Kingdom, the case for not treating educational publishing differently than other sectors of thepublishing industry was made by the Whitford Report as long ago as 1977. Decades before the age of the Internet,the makers of the Report recognized that there was an ongoing friction between the educators desire to promotenew methods of teaching and the rights of publishers and authors. The Whitford Committees conclusion, which isworth quoting at length, was that governments should resist the temptation to save on education funding by drainingthe resources of publishers and authors, on the grounds that it was a self-defeating exercise:

The needs of education in modern society are changing. In the new teaching situation [] it is no longerconsidered appropriate for text books to be issued to each pupil. We were told that new methods of teaching andlearning require the use of a wide range of teaching material to meet the particular needs of a student or groupof students. This concept of resource-based learning, whether applied to independent or class activity, was

said to require the availability of a diversity of material, extracted from a great variety of sources.

[]

In view of the growth of reprography as a problem in the educational field since the time of the GregoryCommittee, we have considered first the question whether there should be any express exceptions in favour ofeducational establishments at all. We feel that the fact that education is a good cause is not in itself a reasonfor depriving copyright owners of remuneration. Nobody suggests that the makers of notebooks, compasses andrulers should supply these products to educational establishments free of charge. Although the types of materialused in such places today are very different from the text books of the past and indeed are much more diverse,education is still in a large measure dependent upon the work of authors, artists and composers. Education isequally dependent upon the work of the publishers who first produced the material which the authorities want tocopy for educational purposes.

(Report of the Committee to consider the Law on Copyright and Designs (London: Her Majestys StationeryOffice, 1977) at paras. 254-56, 268-69)

In evaluating the same issues recently in a copyright dispute between educators and authors, the UK CopyrightTribunal affirmed the Whitford Report, and warned that crossing this line could destroy a longstanding symbioticrelationship between publishers and the education system:


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In declining to create a wide generalised defence for educational establishments the legislature has struck abalance between the interests of copyright owners on the one hand, and the interests of education andscholarship on the other. A healthy publishing industry is important in general, but of particular importance tothose in education. Wholesale exemption from the copyright laws for educational establishments would bedamaging to the publishing industry, and in consequence damaging to education. On the other hand the

publishing industry depends on academic authors for much of its raw material. If education is burdened tooheavily with copyright restrictions, teaching and scholarship is discouraged, to the disadvantage of the publicinterest in general, and the publishing industry in particular. It is a good example of a symbiotic relationship.

(Universities UK Ltd v Copyright Licensing Agency Ltd[2002] E.M.L.R. 35)

As I discuss in the final section of this comment, this symbiotic relationship for Canada might be better achieved byimplementing a targeted series of exceptions to promote concrete goals, a path that would minimally impair theeducational publishing sector while promoting the interests of educators in developing new means of reaching out tostudents.

3) Is There a Stable Set of Rules to Govern Fair Dealing in Canadian Law?

By far the most important assumption underlying Professor Geists blog entry is that the new reform will have littleor no effect on authors rights because the right is limited only to those dealings that are fair. In his view, authorswill be protected because judges are required to assess the fairness of any use including education before it wastreated as fair dealing. Since the reform respecting education affects only the threshold allowable purposes

portion of the fair dealing test, nothing will change. (See also Professor Geists September blog on this point.)

The stability of rules established by the courts has also been a prominent talking point of the government. Intestimony before the Parliamentary committee charged with examining Bill C-32, Industry Minister Tony Clementstated:

I want to give some comfort to this committee on education, because that's another issue that's going to comeup, the fact that we've added education to the fair dealing concept. Again, I'm conscious that I'm at a copyrighthearing, so I will attribute my remarks to Professor Geist, who educated me that fair dealing is not free dealing,and there's a big difference between the two.

Fair dealing means that the work must be for a non-commercial purpose, that the original material was lawfullyacquired, and that the use of that original material must not harm the market for that material. That's a verydifferent concept from just saying, because we've added education to fair dealing, all the rules are gone. That'snot true: the rules are still in place and they seek to create that balance. Again, I want to give you that assurance.

This endorsement requires a few clarifications. Critically, the three rules stated in the second paragraph of thestatement above do not reflect the state of the law in Canada. Rather, in the landmark decision CCH Canadian Ltd.v. Law Society of Upper Canada, 2004 SCC 13, a unanimous Supreme Court found (i) a commercial, for-profit

purpose can qualify as a fair dealing (para. 51), and that (ii) the effect of the dealing on the market of the copyrightowner is neither the only factor nor the most important factor that a court must consider in deciding if the dealing isfair (para. 59). In that decision, the Supreme Court made no finding that the original material must be lawfullyacquired, nor have any other Canadian courts. Last, the Supreme Court found that there is no set test for fair dealing:whether a dealing is fair is a question of fact and will depend on the facts of each case (paras. 52-53).

These points aside, Professor Geists justifications for the reform also rely on the proposition that fairness rulesestablished by the courts will avoid disruption to this marketplace. With the greatest of respect, this is a faith

proposition that appears unsound in light of experiences in both Canada and the United States.

The first problem with relying on fairness alone is the notorious instability of the CCHfairness test. This instabilitywas highlighted by the December 23 decision of the Supreme Court to hear SOCANs appeal of a fair dealingdecision that found that fair dealing for the purpose of research could include previews of songs sold forcommercial profit. SOCANs leave application argued that the Federal Court of Appeal has divided considerably on


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how to treat the test for fairness in Canadian law, and a number of commentators havepredicted that the SOCANappeal will be accompanied by an appeal from another Federal Court of Appeal decision affirming that classroomuse of educational materials was not fair dealing for the purpose of research or private study.

Accordingly, the assurance and comfort that are offered by Minister Clement and echoed by Professor Geist arenot evident in the case law. Since the fairness test is an open-ended, case-by-case discretionary analysis, it does not

provide the hard rules they describe. Rather, the fairness test is notoriously soft and subjective, an eye-of-the-beholder test that will be left in almost every case to the judgment of the copier. This uncertainty was why the well-known U.S. reformist Lawrence Lessig described fair use as an astonishingly bad system amounting to little morethan the right to hire a lawyer. (Lawrence Lessig, Free Culture, at 187.)

The Canadian counterbalance to the soft fairness test has always been to maintain a hard allowable purposes testat the threshold of the fair dealing right. If a person cannot plausibly say his or her copy is made for the purpose ofresearch, private study, criticism, review, or news reporting, the inquiry is over. The copy is simply not a fairdealing. This is a sharp contrast to the United States, where users who seek to make a copy for free may offer anysoft fairness justification and (effectively) dare rightsholders to sue them.

The need for the stability of the threshold test is precisely why the government should consider carefully beforeusing an unprecedentedly expansive term at the hard allowable purposes threshold. As Professor Geist states at

point 10 of hisblog entry, the Supreme Court has construed education in broad terms to include more informaltraining initiatives, aimed at teaching necessary life skills or providing information toward a practical end. If thislanguage were applied to the fair dealing test, the critical threshold test would be eradicated in respect of any personproviding information toward a practical end. All that would be left is the soft fairness test and the user standingalone at the copy machine.

4) Is the Proposed Reform Too Ambiguous?

At point 2 of his blog entry, Professor Geist takes on the contention of the writer Douglas Arthur Brown in hiscommittee testimony that no one at this point really knows what fair dealing for the purpose of education reallymeans except more copying without compensation to creators, and more costly lawsuits. Rather than confront themerits of Mr. Browns argument, Professor Geist dismisses it altogether by quoting from an Access Copyright leavememorandum to the Supreme Court. This bait-and-switch tactic allows Professor Geist to gloss over a dangerouschallenge to his central claim that the fairness test alone provides certainty to creators.

Professor Geist implies repeatedly that stability will emerge because courts and tribunals can distinguish betweenfair dealings and unfair dealings. Fair dealings will remain free, and unfair dealings will be addressed appropriately,with a royalty in the form of damages or tariff monies. Thanks to this stability, institutions and other significantusers will develop policies that will accurately instruct individuals what is fair and what is not, and these policieswill be routinely followed.

From a practicing lawyers perspective, this aspiration appears hopelessly nave, specifically because it is impossibleto constructively model behaviour on a rule whose very nature is ambiguous.

There are three primary ambiguities within the proposed user right. The first is what is meant by education. Thesecond is what is meant by fair. The third ambiguity involves all institutions who have a role in copying works forothers: even if it is proved that certain dealings of those other persons were unfair, the institution may nonetheless

claim immunity on the basis that its policies and practices were education-based and fair. All practicing lawyersknow that ambiguities will (i) be interpreted in self-interested ways by adverse parties; and (ii) cost unimaginableamounts of time and money to clarify.

If the law is enacted in its current form, the first ambiguity will result in a vast series of users claiming that theircopies were made for educational purposes, whether they are within the (likely intended) category of provinciallyfunded teachers copying a substantial part of a work for classroom analysis or the (likely unintended) category ofyoga instructors. Inevitably these users will refer to the Supreme Courts decisions in CCHand in VancouverSociety of Immigrant and Visible Minority Women v. M.N.R. to support even the most far-fetched of claims.


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The second ambiguity allows any user of a copyright work with an educational connection to calculate whether agiven dealing is fair or not. If fair is free and unfair bears significant financial and administrative costs, it is onlynatural for any given user of a copyright work to conclude that his use falls on the fair side of the line, a temptationthat will only increase when it is observed that it is pragmatically impossible for copyright owners to target anyone

beyond the largest institutional users.

The second ambiguity also threatens inconsistent results whenever a case makes it to a court or tribunal, wherelawyers will exercise their considerable ingenuity and research to argue what is fair and what is not. This is now awide-open battle in Canada given that the Supreme Court has held that the effect of a dealing on the marketplace forthe original work is not the primary consideration for fairness, a significant departure from the norm in other

jurisdictions. (By contrast, see the U.S. cases Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566(1985) andBouchat v. Baltimore Ravens LP, (4th Cir. Sept. 2, 2010) at 13, calling the effect on the market thesingle most important element of fair use.) In the United States, where the only consideration is whether a use isfair, scholars have shown that courts have ruled with tremendous inconsistency in this area of the law, with the resultthat outcomes become nearly impossible to predict at the outset. The obvious consequence of such uncertainty isthat the law fails to serve as a guide to either rights holders or users, at a great societal cost.

CCH also leaves behind a third real ambiguity in terms of the circumstances in which an institution will be heldresponsible for copies made by others acting under its authority or benefitting from its facilities and services. This is

because the Supreme Court created a generalized defence to infringement when it held: Persons or institutions

relying on the s. 29 fair dealing exception need only prove that their own dealings with copyrighted works were forthe purpose of research or private study and were fair. They may do this either by showing that their own practicesand policies were research-based and fair, or by showing that all individual dealings with the materials were in factresearch-based and fair. (para. 63). In CCH, this meant that the Great Library was not held responsible for anyunfair dealings by its patrons, but could rely on the absolute defence that it had fair policies and practices.

If the amendment is passed, it would appear that educational institutions may be able to rely on the same concept interms of educational copying. Given such an opportunity, it would only be prudent for institutions to immediatelyadopt fair policies and practices as shields against infringement lawsuits or copyright tariffs. Institutions can raisethese shields whether or not the persons making the actual copies are acting fairly, with rational rightsholdersthinking very hard before spending significant amounts of money (if they have the money to spend) to take a shot atconvincing a court that a given fair policy is only a mask for an unfair practice.

The prospect for ambiguities leading to a series of expensive court battles is not just theoretical. As I havementioned, this year the Supreme Court will consider a SOCAN judicial review on the fair dealing purpose ofresearch, which the Copyright Board and the Federal Court of Appeal deemed applicable to commercial services

providing 30-second digital previews of music to potential purchasers. SOCAN will argue that the concept ofresearch has been stretched far beyond its natural bounds; the music services will argue that research is a neutraland flexible concept that can be fairly applied to such activities; the only certainty is that this case will have costmillions of dollars to litigate by the time of its resolution. Both sides will refer extensively to the Supreme Courts

prior decision in CCH, the 2004 case that was also fought in respect of fair dealing for the purpose of research, butwhich has left behind many uncertainties with respect to the bounds of research and the nature of fairness.

The fact that the Supreme Court will now be dealing twice with the same tiny clause in the Copyright Actproves thecost and danger of this particular combination of ambiguities. In the United States, the complexities of fair usehave led to four separate visits to the Supreme Court, an outcome derided by the leading copyright scholar David

Nimmer as a system whose upshot would be the same had Congress instituted a dartboard rather than theparticular four fair use factors embodied in the Copyright Act (David Nimmer, Fairest of them All and OtherFairy Tales of Fair Use (2003) 66 Law and Contemporary Problems 263 at 280). Other policy impacts of suchambiguities are detailed at length in Sookman & Glover, Why Canada Should Not Adopt Fair Use (2009)Osgoode Hall Rev.L.Poly 139, which concludes that a system that is too open-ended risks damage to copyrightowners and users alike.

5) Is the Breadth of the Term Education Mirrored Elsewhere?


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Rightsholders concerned by the proposed reforms have pointed out that the word education can mean manydifferent things to many different people, a quality rarely desired in a term bearing such legal weight. As aconsequence, Parliament should consider whether it is wise to introduce into Canadian legislation a term that mayapply narrowly to classroom instruction or broadly to any formal or informal activity related to learning.

Although he concedes that the Supreme Court has construed the term education in very broad terms in the

Vancouver Society of Immigrant and Visible Minority Women v. M.N.R. case, Professor Geist contends that thechange proposed in Bill C-32 would be evolutionary, not revolutionary. Yet he is unable to point to a singlelegislative system across the entire world that has gone as far as adopting a fair dealing right for the purpose ofeducation rather than narrower educational activities.

The closest outliers Professor Geist can cite are Israel, which approves as an allowable purpose the specific activitiesinstruction and examination by an educational institution, and the United States, which considers teaching(including multiple copies for classroom use), scholarship, and research to be acceptable purposes.

A close look at Israels Copyright Act demonstrates that its educational exception is far narrower than the proposedreforms in Canada. Section 19 of the Act does not broadly apply to all educational activities, but rather identifies theactivities legislators consider fair (instruction, examination). Such copies cannot be made by anyone, but areavailable only to an educational institution, whose definition is controlled by the Minister of Education under s. 67of the Israeli Copyright Act).

The language used in the U.S. Copyright Act is also narrower, not only because teaching, scholarship, andresearch are more closely defined aspects of education, but also because the courts of the United States havegenerally resisted calls to broaden these terms. Cases such asAmerican Medical Colleges v. Mikaelian, 734 F. 2d 3(3d. Cir. 1984) andRubin v. Boston Magazine Co., 645 F. 2d 80 (1st Cir. 1981) have interpreted teaching,scholarship, and research in a common-sense fashion by looking to whether the students named as the beneficiaryof the right received a degree, became qualified or certified as a result of the course, or used the course as a

prerequisite for further education and training. By contrast, it is not clear that any lower court in Canada could dothe same given the Supreme Courts statement in CCHthat fair dealing is a user right that must not beinterpreted restrictively, and given its broad construal of the term education in Vancouver Society of Immigrantand Visible Minority Women v. M.N.R.

The United States is also a cautionary example in the sense that it continues to produce extensive litigation on

fairness issues. While Professor Geist states broadly in the currentblog entry that jurisdictions with even broaderfair dealing or fair use provisions rarely experience significant litigation between publishers/authors and educationalinstitutions, and cites the far more litigious U.S. as an example, a look at the tangled docket in the highlycontested test case launched by publishers against Georgia State University shows otherwise. The Georgia Statesaga suggest that the U.S. fair use doctrine continues to raise difficult questions for decision, at great cost torightsholders and users alike, with the parties largely locked at a standstill following two years of litigation, andcommentators leery that the case will ever provide true guidance for acceptable activities in an academic setting.

Perhaps wary of the U.S. model, the bulk of other legislators worldwide have proceeded with more caution,confining many educational exceptions to targeted exceptions (as in the European Union). A characteristic approachis that of New Zealand, whose newly amended Copyright Act provides at s. 44A that educational establishments willnot infringe copyright if they store a copy of a work that is made available on a website or other electronic retrievalsystem only if the material: (a) is stored for an educational purpose; (b) displayed under a separate frame or

identifier; (c) identifies the author (if known) and the source of the work; (d) identifies the educationalestablishments name and the date when the work was stored; and (e) available only to authenticated users. While

provisions like New Zealands take more time and care to craft, they provide exact guidance to publishers and usersalike without imposing undue technological barriers. Similarly, copyright legislation in Australia (see Parts VA, VB)and the United Kingdom (see ss. 32-36) prefers to take a targeted incremental approach to educational exceptions.

6) Will the Proposed Reform Satisfy Canadas Three-Step Test Obligations?

As Canada is a member ofBerne and TRIPS, and is currently engaged in free-trade negotiations with the EuropeanUnion that will touch on intellectual property matters, it must ask itself whether its policies fall in line with


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international standards and practices. Professor Geists blog analysis makes only a bare analysis of this issue,concluding that because no trade action has yet been filed against the narrower Israeli and U.S. regimes, thelikelihood of an international challenge to Canadas law is incredibly remote.

A full response to Professor Geist requires a review of Canadas international treaty obligations. Under the Berne-TRIPS three-step test, an authors exclusive rights such as the right to reproduce or the right to communicate a

work are the norm. By contrast, user rights must be carefully calibrated to ensure they target a specific good whileminimally impairing the authors right. The specific expression of the three-step test is as follows:

Berne Convention, Article 9(2):

It shall be a matter for legislation in the countries of the Union to permit the reproduction of such works incertain special cases, provided that such reproduction does not conflict with a normal exploitation of thework and does not unreasonably prejudice the legitimate interests of the author.

TRIPS Agreement, Article 13:

Members shall confine limitations or exceptions to exclusive rights to certain special cases which do notconflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests ofthe right holder.

An example of how this balance is maintained elsewhere is set out in the European Copyright Directive, whichexplains why the exclusive right of the author should not be lightly disturbed:

EU Copyright Directive, Recital 9:

Any harmonisation of copyright and related rights must take as a basis a high level of protection, sincesuch rights are crucial to intellectual creation. Their protection helps to ensure the maintenance anddevelopment of creativity in the interests of authors, performers, producers, consumers, culture, industryand the public at large. Intellectual property has therefore been recognised as an integral part of property.

In asking whether the C-32 fair dealing exception is evolutionary rather than revolutionary, Canada should askitself whether incorporating such an exception into domestic legislation could form the basis for a trade challenge

under the WTO regime.

Though Professor Geist does not mention it, there is existing international case law demonstrating that ambitiousdomestic legislation can entangle countries in lengthy and expensive international trade disputes. In 1999, theEuropean Community initiated a trade challenge to an exception imposed by the United States in its Fairness inMusic Licensing Act of 1998. This Act created an exception to copyright that permitted a wide variety of eating anddrinking establishments to publicly perform copyrighted musical works without the authorization of the owners ofthose works. The EC contended that the exception was too broadly targeted to survive the three-step test.

In 2000, a WTO panel found (full decision; summary) that by introducing the exception into domestic law, theUnited States had violated Articles 11bis(1)(iii) and 11(1)(ii) of the Berne Convention, thereby also violating Article9.1 of the TRIPS Agreement. This led to a settlement arrangement between the U.S. and EC that involved the

payment of millions of dollars into a rights-holders fund. As a further consequence of this dispute, the U.S. is also

required to file ongoing status reports with the WTO respecting its efforts to remedy the violation of internationaltrade law.

Of particular interest to Canada is the Panels finding that because the United States business exemption covereda major category of establishment critical to rightsholders, it could not meet any of the stages of the three-step testset out in TRIPS and Berne. Like the proposed reform in Canada, the business exemption cut out too broad aswath of the rightsholders market, and did not provide for a compulsory licence in the targeted area.


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Canada must therefore ask whether its use of the term education as a fair dealing purpose risks violating the three-step test as well by reason of a similar broadness. Even with a backstop fairness test, there are a number of reasonsthat Canadas reform could meet the same fate as the U.S. business exemption.

First, taken literally, the contention that fair dealing is not free dealing is not true. Any fair dealing right permitsmany free dealings, as it grants an absolute defence to an exclusive right, thus allowing users to make a copy or

copies of a work without payment to the owner of the copyright. The result of any fair dealing is at leastpotentially a lost royalty. Any government creating such a user right places itself in the Berne-TRIPS three-steptest red zone: it has carved out an exception to the core exclusive rights, transferring wealth from the creator of awork to the users of a work. If the scope of education is interpreted broadly to include any fair dealing involvinglearning, the amount of the intended transfer of wealth could be profound.

Second, the Supreme Courts expression of the CCHfairness factors is a unique amalgamation of Commonwealthand U.S. law that does not appear to have been constructed with an eye on Canadas international treaty obligations.For example, in the United States, the Supreme Court inHarper & Row, Publishers, Inc. v. Nation Enterprises, 471U.S. 539 at 566 (1985) stated that "the effect of the use upon the potential market for or value of the copyrightedwork is undoubtedly the single most important element of fair use. If applied appropriately by U.S. courts, thisstatement arguably goes a long way to satisfying the second and third stages of the three-step test. By contrast, inCCH, the Supreme Court of Canada stated that the effect on the market is neither the only factor nor the mostimportant factor that a court must consider in deciding if the dealing is fair. Accordingly, the other five factors

described by Professor Geist, which do not map easily onto the three-step test, would appear to have an equal oreven more important role in deciding whether a given dealing is fair. It would thus appear that certain dealings may

be deemed permissible in Canadian law even if they have a disruptive effect on the normal exploitation of the workor the legitimate interests of the author. Such a result would risk disharmony between Canadas domestic standardsand its international obligations.

Third, one of the six factors cited in CCHat the second fairness stage of the test is the purpose of the dealing. Adealing identified as fair at the first stage will attain a presumptive advantage at the second stage. A broad fairdealing exception is arguably double-counted, raising the risk that it will apply beyond the certain special casesrequired by Berne and TRIPS.

Fourth, it must be remembered that the first threshold stage of the fair dealing test in Canada plays a critical rolein preserving rightsholder interests. Whenever a user of a copyright work cannot plausibly fit the purpose of his or

her activities into one of the acceptable purposes of research, criticism, review, or news reporting, and cannototherwise take advantage of a targeted exception under the Canadian Act, that user must seek authorization to copy asubstantial part of a given work. This provides certainty to both users and rightsholders, and cuts down on HailMary defences in infringement actions. As recent cases on the meaning of the acceptable purpose of researchdemonstrate, a term that can be interpreted in several ways can give rise to mischief, as a plaintiff will alwaysconstrue it narrowly and a defendant will always construe it broadly, giving rise to expensive litigation and(potentially) inconsistent decision-making by courts that leave no one certain of where the law stands.

Last, a host of respected neutral observers have concluded that an expansive education exception could not pass thethree-step test, particularly if it is a pure exception as opposed to a remunerative licence. In World Copyright Law,3d ed. (London: Sweet & Maxwell, 2008) at 529, the respected expert J.A.L. Sterling expresses the opinion that:

The reference to certain special cases is intended to indicate the general limitations and exceptions to the

reproduction right (for instance, a limitation which provides that reproduction of any work may take place forany purpose connected with education) would not be permissible.

The esteemed Australian expert Professor Sam Ricketson has expressed the same essential conclusions. In a studyconducted for WIPO, he concludes that any exception involving libraries, archives or educational institutions needsto be clearly specified, with defined limits. In these circumstances, he concludes that a paid statutory licence forsuch works mightpass the three-step test (see p. 76). Similarly, in a text co-authored with the well-known Americanexpert Professor Jane Ginsberg,International Copyright & Neighbouring Rights: The Berne Convention and

Beyond, 2d ed. (Oxford: Oxford University Press, 2006), Professor Ricketson concludes at paragraph 13.36 (pages782-783) that an exception for teaching purposes could not pass the three-step test, and that a broad student-based


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copying for instructional purposes might be justifiable under Berne-TRIPS only where it was made subject toappropriate limitations, and subject to compensation for authors.

Given these conclusions, the broad full defence envisioned by Bill C-32 would appear to violate Canadasinternational treaty commitments.

7) Are the Reforms Truly a Middle Ground ?

In his blog entry, Professor Geist suggests that the new fair dealing provisions in Bill C-32 are a middle groundbecause they add two categories requested by creator groups and one requested by user groups.

With respect, this seems to be a disingenuous argument. All fair dealing rights serve as exceptions to an exclusiveright. They benefit persons who use a pre-existing work. In the case of parody and satire, a fair dealing right willallow one creator to use the work of a predecessor creator to his or her benefit without paying that predecessor. It isa special kind of user right focused on a class of creators.

But the fatal error is to treat these three rights as indistinguishable units with indistinguishable impacts. The parodyand satire rights are transformative rights, in the sense that they do not permit free consumption of a work, but ratherthe use of an old work in creating a new work. As such, the new works will not necessarily sap the market for theoriginal works, but may in some cases lead to works that revive or enhance interest in the originals, leading toroyalties that would not otherwise have been reaped. These dealings are, arguably, a win-win for creators and users.

The educational fair dealing right is, by contrast, a consumptive right. It does not result in the creation of new works,but results in royalty-free uses that transfer wealth directly from rightsholders to users. The impact goes in only onedirection, and that direction may be profound indeed, judging from the $40 million to $60 million estimates raised intestimony at Committee.

Accordingly, when the true impacts of these exceptions are measured, it would appear that the Bill as drafted wouldresult in a considerable loss to creators. Considered critically, Professor Geists account of an unchanged future isinconsistent with the story set out in his own recentblog entry, where he suggests that there is a growing sentimenton Canadian campuses that it is time for post-secondary education to decline the coverage by walking away fromAccess Copyright and its proposed post-secondary tariff.

How can this be done? Professor Geist suggests that institutions, professors and students can decline coverage byrelying on site database licences that are already in place, open access licences to scholarly research, and fairdealing. [Emphasis added.] Even prior to the passage of a fair dealing for education exception, Professor Geisthas catalogued (here, here and here) a series of schools that are acting on this suggestion. Clearly, if fair dealing isexpanded beyond its current bounds to all educational activities that are fair in nature, it would dramaticallyincrease the ability of institutions to take a tough stance on liability, including by opting out of such tariffs andchallenging rightsholders to sue for failure to pay. Forced to rely on the unfairness stage of the test alone, publisherswill face an extreme uphill battle.

8) Do the Reforms Support or Suppress New Technologies?

In his blog entry, Professor Geist argues that the addition of education as an acceptable purpose will open the doorto the use of new technologies in the classroom without fear of potential liability. He cites the example of a

colleague who uses a photograph from court documents as part of his classroom discussion as an example of howthe fair dealing right would enhance the educational experience.

While Professor Geists example seems eminently reasonable, Professor Geist omits any consideration of how theproposed fair dealing right would affect publishers multi-million dollar investments to support classroomtechnologies that are meant to transform the educational experience into a collaborative, multi-media endeavour. Forexample, publishers have invested significantly in CourseSmart, a North America-wide electronic repository ofthousands of the most commonly used textbooks from a variety of higher education publishers. Instructors can usethese resources to find and review the information they need to choose their textbooks and course materials, and


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up-to-date approach to these kinds of exceptions might be to push the exact mechanics of the target exceptions intoregulation, as Canada has done with its management of the record-keeping process for its existing education,libraries, archives and museums exceptions, as well as its management of the retransmission regime. This wouldallay the concern of many rightsholders and many users about the slow pace of copyright reform in Canada,including in respect of the existing educational exceptions in the Copyright Act.

Documents

Glover Clearing Up the Copyright Confusion