Under section 19 of the Copyright Act, performers and makers of sound recordings are entitled to remuneration when their recordings are performed or telecommunicated to the public. However, the section 2 definition of “sound recording” excludes a “soundtrack of a cinematographic work where it accompanies the cinematographic work.” “Soundtrack” is not defined, but the appellants had argued that it means the whole aggregate of sounds accompanying the film, and not the individual pre-existing sound recordings incorporated into the soundtrack. They contended, therefore, that royalties should be collected when those recordings are broadcast as part of a film’s soundtrack.

The Court rejected the appellants’ arguments that the Copyright Board’s decision is incompatible with Canada’s obligations under the Rome Convention, pointing out that the Rome Convention contemplates only protection of “exclusively aural fixation of sounds.” The Court also discounted the precedential value of Australian and U.K. jurisprudence because of significant differences in wording between Canadian and foreign copyright laws.

Online music previews are short extracts of musical works and assist a consumer in deciding musical purchases. The Copyright Board concluded that those who make previews available, and the users that listen to previews, were entitled to avail themselves of the fair dealing exception under section 29 of the Copyright Act, as listening to the previews constituted research of a purchasing decision (see our previous post). The Federal Court of Appeal upheld the Copyright Board’s decision and SOCAN sought leave to appeal to the Supreme Court of Canada.

In upholding the decisions below, the Supreme Court concluded that the previews constituted fair dealing, applying the test articulated by the Court in CCH Canadian Ltd v. Law Society of Canada (CCH).

The second step of the test required determining whether the use of the previews was “fair” in accordance with the six CCH factors: (i) the purpose, (ii) character and (iii) amount of the dealing, (iv) the existence of any alternatives to the dealing, (v) the nature of the work, and (vi) the effect of the dealing on the work. The Court concluded that: (i) the main purpose to provide previews was to facilitate the consumer’s research purposes; (ii) the previews were streamed and not downloaded, after listening, the preview was automatically deleted from the user’s computer, and copies could not be duplicated or further disseminated; (iii) regarding the quantity, the Court confirmed the “amount” meant the “quantity of the work taken”, the proportion of the excerpt used in relation to the whole work; (iv) previews were found to be reasonably necessary to help consumers research what to purchase since there were no other reasonable alternatives that could effectively preview the musical work; (v) previews were also necessary in disseminating the work because dissemination required a consumer to be able to locate and identify a work he or she wanted to buy; (vi) since the previews served to increase the sale of the work, they could not be said to be in competition with it, and thus the dealing did not adversely affect the work.

In a major, but slim, victory for proponents of electronic commerce, a majority of the Supreme Court of Canada has ruled that online sellers of music and video game downloads are not required to pay more copyright royalties than their “bricks and mortar” counterparts, solely because the products from the virtual stores are delivered via the internet.

In addition, although not considered by the Court, these rulings would also suggest that another copyright tariff, for the delivery of ringtones to mobile phones, may be invalid.

In two decisions that form part of the unprecedented “copyright pentalogy” of copyright tariff appeals heard by the top court last year, the Supreme Court considered whether a download of a recording of a musical work, either on its own or when incorporated into a video game, constituted a “communication to the public by telecommunication,” such that a download could attract a distinct copyright royalty, in addition to the royalty payable to the copyright holder for the reproduction of the work on the buyer’s computer or device. 

Among other rights, the Copyright Act grants rights holders both the sole right to reproduce and authorize the reproduction of their works, as well as the right to communicate their works to the public by telecommunication and to authorize such communication.  Under these provisions, the Copyright Board of Canada had approved tariffs requiring royalty payments to the Society of Authors, Composers and Music Publishers of Canada (SOCAN) for the communication of downloads of recordings of musical works and for the communication of downloads of recordings of musical works incorporated into video games; as well as a separate tariff, payable to different copyright collective societies, for the reproduction of musical works in permanent downloads, limited downloads and on-demand streams of music transmitted over the internet.  Royalties for the reproduction of musical works incorporated into games are individually negotiated with rights holders.

In the view of objectors to the SOCAN tariff at issue, the tariff amounted to “double dipping” in that both a communication royalty and a reproduction royalty arose from the same act or transaction (the downloading of a work), whereas only the reproduction royalty was payable with respect to a tangible copy of the work (such a CD or game cartridge) in a retail store.

In Entertainment Software Association v. SOCAN, which considered the application of the “communication by telecommunication” right to downloads of video games incorporating musical works, the majority of the court found that the Act must be interpreted in light of the principle of technological neutrality, avoiding the imposition of additional layers of protections and fees based solely on the method of delivery of the work to the end user.  In this regard, the majority found that the internet was simply an alternative form of delivery.  The majority also found that the legislative history of the Act demonstrated that the right to “communicate” was connected to the right to perform a work, not to the right to reproduce permanent copies of the work, and that the performance right did not contemplate the delivery of permanent copies of the work.

In Rogers Communications Inc. v. SOCAN, an eight Justice majority applied the finding in the Entertainment Software Association case in ruling that downloads of musical works on their own (i.e. not incorporated into video games) are also not “communications by telecommunication.” 

It should be noted that these decisions relate only to downloads of permanent copies of games and music recordings, not to live streaming of musical works, which do not result in the placement of a permanent copy of the work on the recipient’s hard drive or device.  Such streaming services continue to be subject to copyright royalties for “communication by telecommunication.”  The decision also do not affect the reproduction royalties payable for enabling, through downloads, the creation of permanent copies on user equipment.

Interestingly, the Entertainment Software Association decision also calls into question the validity of another SOCAN tariff for “communication by telecommunication,” which was not before the Court for consideration: SOCAN’s tariff for the downloading of ring tones to mobile telephones.  An earlier challenge to that tariff had been upheld by the Federal Court of Appeal, and the Supreme Court had denied leave to appeal the lower court’s decision; however, it is difficult to see how the delivery, by wireless telecommunication, of a permanent copy of a sound recording could constitute a “communication”, when the delivery of the same recording via the internet would not.

The past year has seen many important developments in the area of Canadian communications law, and we have blogged about many of them here.

In several cases, the key developments have stemmed from ongoing trends in the industry, especially those relating to technology and industry consolidation.  If there is one unifying theme for the key legal and policy changes in 2011, it would be that many of them stem from the continuing disruptive effect of broadband internet services and digital technology on both the existing business models for broadcasting and telecommunications and the regimes under which those industries have been regulated.  Several courts began considering, or issued judgement in cases that explore the intersections between the laws respecting, broadcasting, telecommunications and copyright.

Here are our picks for the most significant communications law developments of 2011:

In March, the Supreme Court of Canada granted leave to hear an appeal from a 2010 judgement of the Federal Court of Appeal, which found that Internet Service Providers (ISPs) do not carry on “broadcasting undertakings”, within the meaning of the Broadcasting Act, when they provide access through the Internet to broadcasting material requested by users.  The case, which addresses the intersection of the legal regimes for broadcasting and telecommunications, was initiated by a Reference Order issued by the CRTC to resolve fundamental questions about the Commission’s authority over ISPs with respect to broadcasting content delivered over the internet.

The appeal is scheduled to be heard on January 16, 2012.  Fingers are crossed on both sides of the debate.

2.      Value for Signal Reference to be heard by Supreme Court

In September, the Supreme Court granted leave to hear an appeal from yet another jurisdictional reference put forward by the CRTC – this time respecting the Commission’s authority under the Broadcasting Act to establish a “Value for Signal” (VFS) regime under which broadcasting distribution undertakings (BDUs) might be required to pay local broadcasters a fee to distribute their programming services within the serving areas where the broadcast signals are receivable off-air.  Among other things, the case raises significant issues about the intersection between broadcasting and copyright laws and policy.

No date has yet been set for the hearing of the appeal, but as we noted in our earlier post, much will have changed since the CRTC originally endorsed the concept of VFS.

3.      The Continuing Saga of Foreign Ownership

One of the most controversial and divisive issues in Canadian communications policy continues to be the question of the appropriate approach to ownership restrictions on broadcasting and telecommunications undertakings operating in Canada.  In this regard, 2011 was notable as much for what didn’t happen as for what did. 

The past year saw not one, but two, judgements broadly relating to the compliance of new wireless entrant Globalive Wireless Management Corp. (Globalive) with existing foreign ownership restrictions in the Telecommunications Act and related regulations.  By way of background, in 2009, the CRTC, exercising its authority under the Telecommunications Act, and the Minister of Industry, exercising his authority under the Radiocommunication Act, came to different conclusions with respect to whether Globalive complied with the ownership restrictions: the Minister said “yes,” but the Commission said “no.”  Subsequently, the federal cabinet overturned the CRTC decision.

Following an application for judicial review, in March 2011 the Trial Division of the Federal Court quashed the cabinet decision that overturned the CRTC’s decision, finding that the cabinet had misdirected itself at law.  Subsequently, in June of this year, the Federal Court of Appeal overturned the lower court’s decision, restoring the cabinet order and effectively confirming the ability of Globalive to both hold spectrum licences and operate as a telecommunications common carrier.  An application for leave to appeal that Court of Appeal decision to the Supreme Court of Canada was filed in September, but the matter is still pending.

Meanwhile, the past year was also notable for the continuing silence of the Government with respect to its intentions for the potential reform of existing ownership restrictions.  Back in June 2010, the Government had proposed and sought public comments on 3 options for foreign ownership reform, one of which was the elimination of foreign ownership rules for telecommunications carriers.  The previous Minister of Industry had indicated that any changes to the rules would be considered in the context of the upcoming 700 MHz spectrum auction, scheduled for 2012.  There was even much speculation that the current Minister would be making an announcement about foreign ownership reform at an Ottawa conference at the end of November, but instead, the Minister indicated that the Government had yet to reach a decision on reform.

4.      New Vertical Integration Rules

In September, the CRTC released a new regulatory framework to deal with vertical integration among broadcasters and broadcasting distribution undertakings.  The new framework, which followed CRTC approvals of two recent transactions that transferred effective control of major private broadcasting networks to ownership groups that controlled major distribution undertakings, imposed several significant new restrictions on vertically integrated companies.

Among the most contentious of these new restrictions, the Commission imposed a new rule prohibiting new media broadcasting undertakings from offering programming designed primarily for television on an exclusive or otherwise preferential basis, where availability is dependent on a consumer’s subscription to a particular mobile or retail Internet service.  The Commission indicated that it would revise the New Media Exemption Order to include the new restriction.

In December, the Commission initiated public processes to amend both the New Media Exemption Order and the Broadcasting Distribution Regulations to reflect the new rules stemming from the Vertical integration decision.

That same month, the Commission issued its decision on an earlier complaint by TELUS Communications Company against Bell Mobility, finding that Bell Mobility gave itself an undue preference and subjected TELUS to an undue disadvantage when it secured exclusive programming rights for certain NHL and NFL games for its mobile platform, despite Bell Mobility’s argument that its arrangement with the leagues did not allow it to sub-licence the programming in question.  The decision was actually made under the existing 2009 New Media Exemption Order, which many felt did not prohibit the provision of exclusive content on competitive, non-legacy platforms.  The Commission’s decision would have been the same under the new rule, which is more clearly restrictive of exclusive content on mobile platforms.

5.      “Over-the-Top” Still Off the Table

In another “convergence” related decision, the CRTC indicated in October that it has no immediate plans to impose broadcasting regulatory obligations on “over-the-top” (OTT) providers of internet-delivered content, but will continue to monitor the issue.  The decision followed a public proceeding in which interested parties were invited to submit comments on the implications of OTT services for regulated broadcasters.  The CRTC had been under pressure from a number of stakeholders to examine the potential impact of the growing use of services like “Netflix” and the potential impact on the Canadian broadcasting environment.

6.      Anti-Spam Regulations

Canada’s Anti-Spam Legislation (CASL), as the new anti-spam law is unofficially known, was passed in late 2010, but has yet to be proclaimed in force.  In part, that proclamation has been awaiting the finalization of 2 sets of draft regulations, both of which were introduced in the summer of 2011 – and hit snags in the fall of this year.

In June, the CRTC issued the proposed Electronic Commerce Protection Regulations (CRTC) for comment.  In July, Industry Canada issued its own Electronic Commerce Protection Regulations, and in August, the government launched a new “Fight Spam” website.

In comments respecting the proposed Regulations, many interested stakeholders expressed strong concerns and urged the Government and CRTC to make significant modifications and additions.  In October, the Canadian Marketing Association confirmed in a newsletter to its members that the Government had indicated that a number of provisions in the proposed Regulations would be revisited, and further consultations initiated with stakeholder groups.

7.      The Supreme Court’s Copyright Pentalogy

Copyright cases are not often considered by the Supreme Court; indeed, the Court has apparently heard only 5 cases in the past decade that focused on substantive copyright law.  It is therefore unprecedented for 5 to be heard in a single year, never mind at the same time (all were heard in early December).  By itself, this concentration of the highest court’s attention on copyright issues earns a spot on the top ten; however the appeals also raise a number of issues of significant interest to the communications industry, including:

• the scope of the “fair dealing” exception
• whether the streaming or downloading of copyrighted content requires an additional royalty (over and above the royalty applicable for selling the content or access to the content)
• whether royalties are payable for short online previews of musical works

The Supreme Court’s consideration of these appeals is particularly timely as it coincides with Parliament’s consideration of a number of important amendments to the Copyright Act (see number 8, below), including amendments to some of the provisions at issue in the appeals. 

8.      Another Copyright Bill

For the 4^th time since 2005, the Government introduced in September a bill to implement revisions to the Copyright Act, including a number of revisions of interest to the communications industry, including:

• Anti-circumvention provisions, which prohibit tampering with Digital Rights Management protections (or digital locks) built into digital music
• Personal use exceptions that will allow for time and format shifting and back-up copies of copyrighted works – subject to any digital locks
• Education exceptions that would allow downloads of copyrighted material for study and research
• Expanded fair dealing provisions, to include use for the purposes of education, parody or satire (in addition to existing exceptions)
• A “notice and notice” regime for ISPs with respect to alleged infringements by internet users
• A “mash-up” exemption, allowing for the use of pre-existing works to create new, non-commercial works
• Revisions to the statutory damages provisions that reduce the scope of damages for non-commercial infringements

While the Heritage Minister had indicated a desire for passage by Christmas, a motion to read Bill C-11 a second time and refer it to a committee was still being debated by the House of Commons when it adjourned for the Christmas break. 

9.      Internet Traffic Management Guidelines

Also in September, the CRTC issued new procedural guidelines for dealing with customer complaints about the inappropriate use by ISPs of Internet Traffic Management Practices (ITMPs), which could include technological measures to slow down access to certain types of content in the name of managing network congestion – often referred to as “throttling.”  The guidelines, which seem intended to provide procedural certainty to both complainants and ISPs with respect to the Commission’s handling of complaints about alleged violations of its 2009 policy on the use of ITMPs, are particularly noteworthy for spelling out a range of escalating enforcement tools that will be used against ISPs that violate the ITMP policy, apparently signalling a clear “get tough” stance on the part of the CRTC.

Ironically, just as the Commission is getting tough on misuse of ITMPs, the days of using technological measures to throttle traffic may be coming to an end.  Just prior to year’s end, one of the largest ISPs in the country announced that it will stop throttling internet traffic by March of 2012.  Should others follow suit, the CRTC’s policy respecting throttling may well be moot.

10.  Telemarketing Enforcement

In recent years, the CRTC has been getting increasingly tough with telemarketers that are found to be in violation of the Unsolicited Telecommunications Rules, which include rules for the National Do Not Call List – and 2011 is no exception.  In addition to several substantial fines and alternative settlements with telemarketers, the past year is particularly notable for the Commission’s efforts respecting reciprocal international investigation and enforcement of telemarketing rules.

First, in October, the CRTC announced that it had reached an agreement with two Mexican companies related to unauthorized telemarketing and “robocalls” made to Canadians, aided by Mexico’s consumer protection agency, PROFECO.  Later that month, the Commission announced the creation of an International Do Not Call Network to facilitate international cooperation on telemarketing enforcement, which the CRTC will co-chair.

These international efforts are noteworthy given the amount of unauthorized and fraudulent telemarketing that originates outside Canada.  They may also prove significant if the same arrangements are extended to the Commission’s role as enforcer of the newAnti-Spam Legislation, once it comes into force.

Other Developments of Interest

Our sister blog, Canadian Technology & IP Law has also posted a Top 10 list, which may also be of interest to readers of Canadian Communications Law.

A Final Note

2011 was also significant to us, as it was in March of this year that we launched Canadian Communications Law.  We hope that readers have found our posts useful, and look forward to building on this year’s success in 2012.  As always, we would be pleased to receive any comments or suggestions that you may have.

Thank you to all of our readers for their support.  Happy holidays and best wishes for the New Year.

The Canadian Government is giving copyright reform another try, reintroducing what is essentially the same copyright bill that died last spring with the dissolution of Parliament. 

But while the text may be the same, one thing has clearly changed: this time, the ruling Conservatives have a legislative majority, significantly increasing the likelihood that the new bill will actually become law, either in its current form or with amendments introduced at Committee.

That said, the bill apparently won’t stay “identical” for long.  The Minster has already indicated that “technical amendments” to the just-introduced Bill are already being contemplated.   These will likely be introduced by Government members of the House Committee tasked with studying the new bill.

The new bill represents the fourth time since 2005 that the Government has introduced a bill to implement revisions to the Copyright Act. Potential changes to the Copyright Act have been the focus of intensive discussion and debate between stakeholders for a number of years—although there seems to be little dispute that change is necessary to update the Act, which was last amended before many of the digital technologies that are commonplace today were introduced.

The Government seems intent on swift passage of the bill.  Earlier in September, Heritage Minister James Moore indicated that the government wished to resume work on the copyright bill, and noted that groups who had already appeared before the legislative committee studying Bill C-32 would not be invited to re-appear.  The Minister noted the huge investment of time that had already gone into Bill C-32 and the urgency to reform the law to keep up with current technology.   During the C-11 press conference, the Heritage Minister went so far as to say that he hoped the bill could clear the House of Commons by Christmas, aided by a special committee assembled to focus only on the copyright bill. 

Accordingly, while observers might have reasonably speculated that further work on Bill C-11 could also be influenced by the potential outcome of a cluster of copyright cases that were recently granted leave to appeal to the Supreme Court of Canada (one of which will consider the scope of the “fair dealing” exception, a provision that would itself be amended by the new bill), the majority Government’s apparent timeline, even in the face of these pending appeals, would appear to make this unlikely, since the cases would not be heard until December 2011, with the judgements unlikely to be rendered for many months thereafter.

Highlights of Bill C-11 include the following:

• Protection of Digital Rights Management (DRM). Also known as “technical protection measures” or, more commonly, as “digital locks”, DRM is built into digital music, DVDs, and other media and technology products to ensure that they are not subject to unauthorized copying. The proposed amendments include anti-circumvention provisions that prohibit the removal or tampering with DRM. Bill C-11 also proposes protection for Rights Management Information (RMI), which is used to identify the rights holders of an original work or to outline restrictions on use of the copyrighted work. The bill would prevent the removal of, or tampering with, RMI.
• "Reproduction for private purposes” provisions would allow individual Canadians to make copies of music and other copyrighted material if the original copy is not an infringing copy, the individual legally obtained the original copy other than by borrowing it or renting it, and the individual owns or is authorized to use the medium or device onto which the copy is reproduced (such as a computer, iPod or MP3 player) as long as a digital lock is not picked in making the copy. The reproduction may only be used for private purposes and cannot be given away, sold or rented without first destroying all reproductions of the original copy. In addition, these provisions would not apply if the reproduction is made onto a medium that is governed by the private copying provisions currently found at Part VIII of the Copyright Act, such as CD-Rs.
• Education exemptions would make it legal for students at schools and higher learning institutions to download copyrighted information for the purpose of study and research. Schools will also be allowed to transmit materials used in classrooms to students located off-campus to facilitate learning, as long as the material is restricted to students.  In addition, teachers and students will be allowed to use copyrighted material in lessons conducted over the Internet. This applies both to teachers and students in a physical classroom and those who may be viewing recordings of the lessons over the Internet at a later time. Teachers will also be allowed to digitally deliver course content to students, subject to fair compensation to copyright owners. The provisions currently found in the Copyright Act allowing parts of a work to be copied for display to students will be amended so that they are technologically neutral.
• Time-shifting provisions allow for the making of one recording of communication signals or programs for private purposes. The time-shifting recording must be obtained from a legal source and used only for private purposes. As well, technical protection measures could not be circumvented to make the recording, and the recording cannot be kept “longer than is reasonably necessary in order to listen to or view the program at a more convenient time”.
• A “Notice and Notice” regime for Internet Service Providers (ISPs), whereby ISPs, after being notified of infringement allegations by a rights holder, would be obligated to notify the relevant subscriber of the allegations received. ISPs would also be obliged to retain records that would enable the identification of the subscriber allegedly engaged in the infringing activity for a period of six months (or one year, if infringement proceedings are commenced in respect of the claimed infringement within six months of the initial notice from the rights holder).  The government has emphasized that this is a more balanced approach and appropriate approach than the “Notice and Take Down” approach taken in some countries such as the United States, or the “Three Strikes” approaches advocated in other jurisdictions, where alleged infringers could be deprived of internet access.
• A change to the provisions on statutory damages for non-commercial infringement from a current maximum of $20,000.00 for infringement of each protected work, to a maximum of $5,000.00 in respect of all infringements involved in the proceedings for all works or other subject-matter. Moreover, if a plaintiff elects statutory damages for non-commercial infringements, it will be barred from collecting statutory damages from that defendant for any other non-commercial infringements occurring before the proceeding began, and no other copyright owner may elect statutory damages against that defendant for non-commercial infringements that were done before the initiation of the proceedings in which statutory damages were elected.
• Fair dealing exceptions, which permit use of a copyrighted work without permission of the copyright owner, have been expanded to include uses for the purposes of education, parody or satire in addition to the current reference to research or private study. While procedurally, a defendant is required to prove that his or her dealing with a work has been fair, the Supreme Court of Canada has noted that the current fair dealing exception is a user's right, and should not be interpreted restrictively.  In Alberta (Minister of Education) v. Canadian Copyright Licensing Agency, one of the cases to be heard by the Supreme Court of Canada in December 2011 (which we wrote about here), the Court will be considering the application of the current fair dealing exceptions to photocopies made in educational institutions.  It is unclear how the addition of the word “education” into the fair dealing exception would impact the application of the tariffs considered in that case. 
• A “Mash-up” exemption, exempting from copyright infringement the use of pre-existing works to create new non-commercial works, defined as “user-generated content”. This exemption is only available, however, if the use of the copyrighted work is done solely for non-commercial purposes, does not have a substantial adverse effect (financial or otherwise) on the exploitation of the existing work (including that the new work isn’t a substitute for the existing one), and a requirement (if it is reasonable in the circumstances) to mention the sources of the works incorporated in the new work.
• The amendments make it clear that temporary reproductions for technological processes are not copyright infringements if the reproduction is essential to the technological process, exists only for the duration of that process, and the only purpose of the reproduction is to facilitate a use that isn’t an infringement of copyright. Similarly, the amendments make clear that an Internet service provider who caches a work to make the telecommunication of the work more efficient, does not, by virtue of that act alone, infringe copyright.

The government has characterized Bill C-11 as a “balanced” approach to copyright, and that assessment will likely be critically evaluated and commented on by various stakeholders in the coming months. We will continue to review and monitor the progress of this proposed legislation, and will provide you with further updates as the bill progresses through the legislative process.

In an unprecedented cluster of cases focusing on copyright, the Supreme Court of Canada has recently granted leave to appeal in five separate cases involving tariffs approved by the Copyright Board. 

The cases, at least four of which will be heard on December 6 and 7, 2011, will consider tariffs dealing with online music, photocopying by teachers for instructional purposes and music in movie soundtracks.

The first case concerns a revised tariff, with significantly increased fees for the reproduction of literary, dramatic and artistic works – including books, newspapers and magazines - by primary and secondary educational institutions outside Québec. 

At issue in Alberta (Minister of Education) v. Canadian Copyright Licensing Agency (Access Copyright) is the application of the “fair dealing” exception to copyright infringement, found in section 29 of the Copyright Act, which allows copies to be made for research, private study, criticism and review.  The Copyright Board found that copies made by instructors for student use were made for the purposes of instruction or non-private study, and therefore did not qualify as fair dealing.  The Federal Court of Appeal upheld the Board’s decision.

Leave to appeal was sought by the Ministries of Education for each of the affected provinces, together will all of the Ontario school boards, which contend that a majority of the reproductions purported to be covered by the tariff qualify for the fair dealing exception.

The Court will likely build upon the fair dealing test it developed in a 2004 case dealing with the photocopy service provided to lawyers by the Great Library at Osgoode Hall: CCH Canadian Ltd. v. Law Society of Upper Canada.  In that decision, the Court pronounced that the fair dealing exception was a user’s right, and should therefore be given a large and liberal interpretation.

The Court is also likely to consider the application of the educational exemptions found in sections 29.4 to 30 of the Act, which were raised by the Applicants at the Board and at the Federal Court of Appeal -- particularly the exception allowing works to be reproduced for the purpose of a test or examination.

A similar Access Copyright tariff, which proposes significant increases to fees charged to post-secondary educational institutions for photocopied material, has resulted in apparent turmoil in the education community.  A number of colleges and universities have reportedly pulled out of the tariff arrangement, resulting in confusion among professors as to copyright liability, and the elimination of some course material.

Communication to the public

Three of these cases to be heard by the Court relate to the Board’s approval of Tariff 22A, a tariff for the communication of musical works over the Internet.  The tariff, originally filed in 1996, has already been the subject of several preliminary proceedings relating to jurisdiction, including judicial review by the Federal Court of Appeal and an earlier appeal to the Supreme Court of Canada.

In two of the Tariff 22A appeals, the Court will examine whether the streaming or downloading of copyrighted content, through distinct point to point transmissions of individual files to consumers, constitute communication “to the public” and thus fall within the scope of copyright protection afforded by section 3(1)(f) of the Act, such that a tariffed royalty is payable.

The first case, Rogers Communications Inc. et al. v. Society of Composers, Authors and Music Publishers of Canada, dealt with the approval of a tariff that imposed copyright liability for transmission of musical works by a range of “telecommunications services”, including websites providing music downloads and streaming and the Internet Service Providers who provide access to the Internet.  The second case, Entertainment Software Assn. v. Society of Composers, Authors and Music Publishers of Canada concerned liability for similar transmission of video games which contain background music.

The Federal Court of Appeal dismissed these applications, finding that a communication is “to the public” when the communicator intends the communication to be received by the public.  The number of persons who actually receive the communication was not considered to be relevant.

In the Entertainment Software case, the court below also rejected the Applicant’s argument that a de minimis rule exists preventing the imposition of a tariff in a situation where a musical work constitutes only a marginal component of a particular video game, finding that the download of a video game which includes music is a communication to the public within the meaning of section 3(1)(f) of the Act and is thus subject to a tariff.

Previews

Another of the cases stemming from the Tariff 22A decision concerns whether the tariff that would require the payment of royalties with respect to online music previews, which consist of short extracts of musical works provided to assist consumers in deciding to purchase the works in question.

In Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, copyright collective SOCAN sought judicial review of the Board’s refusal to certify a tariff for previews.  The Board had concluded that users listening to previews were entitled to avail themselves of the fair dealing exception, as are those that make such previews available to users, as listening to the previews constituted research of a purchasing decision.  In doing so, the Board applied another aspect of the earlier ruling in CCH, where the Supreme Court noted that research was not limited to non-commercial or private contexts.  The Federal Court of Appeal upheld the Board’s decision, and SOCAN sought leave to appeal to the Supreme Court.

Sound recordings in soundtracks

Finally, and most recently, the Supreme Court granted leave to hear the appeal of Re: Sound v. Motion Picture Theatre Associations of Canada, which concerns whether a tariff can be imposed for the communication to the public through telecommunication of a sound recording, where the recording is part of a soundtrack that accompanies a motion picture or a television program being communicated to the public by telecommunication. 

The Copyright Board refused to approve such a tariff, noting that the Act defines “sound recording” so as to exclude “any soundtrack of a cinematographic work where it accompanies the cinematographic work.”  Section 17 provides that where a performer authorizes the inclusion of a musical performance in a cinematographic work, they may no longer exercise their rights with respect to communication to the public by telecommunication, although they may contract separately to obtain royalties for such telecommunication from the studio with the rights to the cinematographic work.

On appeal to the Federal Court of Appeal, the applicant performance right copyright collective,  Re: Sound, sought to draw a distinction between a “soundtrack” and its component parts, however the Court rejected the argument, finding that there was no legal basis for the tariffs proposed by Re: Sound since its interpretation of soundtrack would require adding words to the definition of “sound recording” found in the Act.

Conclusion

The Supreme Court’s review of these key provisions in the existing Copyright Act will be timely given the federal government’s recent announcement that it would be reintroducing Bill C-32, An Act to Amend the Copyright Act.  The Bill, which died upon Parliament’s dissolution in March of this year, contains important new prohibitions on the circumvention of “digital locks” as well as reforms of the fair dealing provisions found in the Copyright Act.  The proposed fair dealing reforms, which would include new explicit exceptions for “education, parody or satire,” were explicitly referenced by the Federal Court of Appeal in the Access Copyright case.

Copyright owners, users and commentators will be watching both Parliament and the Supreme Court in the coming months, as the potential for  significant reform of Canada’s copyright framework looms on the immediate horizon.

The newly elected Conservative Government is staying the course on a number of issues of interest to the communications industry.  It remains to be seen how the new majority status of the Government will affect the progress of these initiatives.

The Speech from the Throne, which opened the 41st Parliament, resurrected several  proposals that were put on hold with the fall of the previous Government and election call.  By convention, such a speech provides a general description of the Government's legislative program for the next Parliamentary session

First, the speech indicated that the new Government will generally welcome foreign investment in Canada:

"Our Government also understands the importance of attracting foreign investment to our economy.  Foreign investment helps Canadian companies grow by introducing new technologies and practices -- launching pads to strengthen growth and innovation here at home.  It provides new opportunities to connect our firms to the world.  Our Government will continue to welcome foreign investment that benefits Canada."

However, in contrast to the Speech from the Throne that opened the previous session of Parliament, today’s speech did not reference the telecommunications sector specifically, nor did it provide any details about possible revisions to Canadian ownership rules in the communications sector.   The vagueness of today’s speech is not entirely unexpected, as the new Minister of Industry, Christian Paradis, has recently indicated that the Government required more time to determine the appropriate approach to foreign ownership reform.

The reference in today’s speech could also be interpreted as referring to foreign investment policy generally, intended to provide some comfort to the investment community after the Government rejected the proposed acquisition of Potash Corp. last year.

Digital economy strategy

The previous Government had conducted a public consultation on a national digital economy strategy, which concluded in July of last year.  The original proposed 2011 federal budget had suggested a coming digital policy document.  Today’s Speech from the Throne indicated that the new Government will continue with its plans to release such a strategy:

“In order to improve Canada’s productivity, enhance our economic competitiveness and increase our standard of living, our Government will continue to make targeted investments to promote and encourage research and development in Canada's private sector and in our universities, colleges and polytechnics. It will look for ways to support innovation while ensuring that federal investment in research and development is effective and maximizes results for Canadians. It will also release and implement a Digital Economy Strategy that enhances digital infrastructure and encourages Canadian businesses to adopt digital technologies and provide digital-skills training for their employees and new hires.”

Lawful access bills

As we noted previously, several bills were introduced in he last session of Parliament that would have impacted the roles played by telecommunications service providers with respect to the investigation and enforcement of crimes and matters of national security.  Consistent with earlier remarks to police by the Minister of Public Safety, today’s speech indicates that these bills - and other “law and order” legislation - will be quickly reintroduced:

“The Government of Canada has no more fundamental duty than to protect the personal safety of our citizens and defend against threats to our national security.

Our Government will move quickly to reintroduce comprehensive law-and-order legislation to combat crime and terrorism. … They will give law enforcement officials, courts and victims the legal tools they need to fight criminals and terrorists. Our Government will continue to protect the most vulnerable in society and work to prevent crime.”

A recent statement by the Minister suggests that the lawful access legislation will be re-introduced in the fall of 2011.

Copyright

Finally, today’s speech indicated that the Government is poised to make its third attempt to pass new copyright legislation:

“The success of Canada’s job-creating businesses demands both hard work and good ideas, and we must create the right conditions for both to be rewarded. Our Government will introduce and seek swift passage of copyright legislation that balances the needs of creators and users.”

Previous copyright bills have proved to be divisive, with features such as “digital lock” and fair dealing provisions creating intense public debate.  With the new Conservative majority, it may be that a re-introduced copyright bill may find swifter passage through Parliament.

Last week’s non-confidence vote meant not only the fall of the government and the dissolution of the 40th Parliament, but the death of a number of important communications-related bills and policy initiatives.

In a recent blog post, Professor Michael Geist provided an inventory of incomplete government initiatives, noting that it is unclear when – or if -- some of these may be reintroduced following the election.

Here’s our take on which of the Harper government’s communications-related initiatives may be truly dead, and which, like the Monty Python parrot, may be “just resting.”

While the proposed 2011 budget claimed that it was setting the stage for the release of Canada’s Digital Economy Strategy later this spring, by introducing new measures to support  education, the adoption of information and communications technologies and content creation, the budget was silent with respect to other factors seen by many as necessary elements of a digital strategy, including spectrum policy and broadband development initiatives.

Given industry expectations and the fact that Canada is currently seen as behind many of its major trading partners as lacking a comprehensive digital strategy, such an initiative will likely continue post-election, although its scope and content could obviously vary if there is a change in government.

Revisions to Canadian ownership requirements

In June of last year, the government issued a consultation paper, entitled Opening Canada’s Doors to Foreign Investment in Telecommunication: Options for Reform, which proposed three possible scenarios for reform of Canadian ownership requirements for telecommunications common carriers:

• increasing the allowed level of foreign ownership in broadcasting and telecommunications undertakings to 49%,
• exempting start-up and small industry players from existing ownership restrictions (but retaining them for incumbents), or
• removing Canadian ownership restrictions entirely for telecommunications providers (but retaining them for broadcasters)

Since receiving submissions from interested stakeholders last summer, the government had said little about Canadian ownership reform, other than that it would decide the question in concert with the terms of the 2012 spectrum auction.

If the current government returns to power, one might expect Canadian ownership reform to proceed along much the same timeline as before; however, a Liberal government or coalition of current opposition parties may be much less enthusiastic about increasing foreign ownership levels and may not proceed with the initiative.

Copyright reform

With the dissolution of Parliament, Bill C-32 became the third copyright bill in recent memory to die on the order paper, this time after comprehensive hearings at the Committee stage.  As is always the case with copyright legislation, stakeholders were deeply divided with respect to many of the Bill’s features, including the fair dealing and “digital lock” provisions.  Given the strength and activity of the reform lobbies, and the real issues being presented by the rapid development and acceptance of digital technologies, it seems a certainty that some form of copyright bill will be reintroduced by the next government, but the content of the bill could obviously be affected by a change in government, and the bill is unlikely to be a first priority for any government.

Lawful access bills

The last session of Parliament saw the introduction – or reintroduction – of a string of bills broadly relating to the roles that telecommunications service providers may play in the investigation and enforcement of crimes and matters of national security.  Among the dead bills are:

• Bill C-50, which dealt with criminal procedure related to obtaining warrants to intercept private communications
• Bill C-51, which would have granted law enforcement and national security agencies new powers relating to the interception of private communications and the preservation and production of telecommunications data
• Bill C-52, which would have required all telecommunication service providers to have the technical capability to intercept private communications under warrant, as well as, more controversially, to provide certain subscriber information to police on request

This was the third attempt to pass lawful access legislation.  Canada has been under external pressure from the G8 to enact lawful access legislation, which many countries already have, and internal pressure from the law enforcement community, to provide for policing tools that keep pace with technological development.  Prior to the introduction of the above bills by the Harper government, similar bills had been introduced by the former Liberal government, and by a Liberal private member in opposition.  It seems likely, then, that in one form or another, the powers and obligations contained in these bills will be reintroduced, although the timing is uncertain.

One law enforcement related bill that was successfully passed before the fall of the government was Bill C-22, which imposed reporting obligations on Internet service providers with respect to child pornography discovered in the course of business or reported to them by subscribers or third parties. 

Anti-spam regulations

Although the anti-spam legislation itself was passed before the end of 2010, it has yet to be proclaimed in force, waiting in part for the publication of proposed regulations to clarify a number of the obligations in the legislation.  The Anti-Spam Act had broad all-party support and moved very quickly through the Committee process.  While the publication of the regulations will be delayed by the election, it is expected that, given the broad support of all parties, the proposed regulations will be made public soon after a new government is formed. 

In the proposed CMRRA-SODRAC Inc. Non-Commercial Radio Tariff, 2011, CSI is requesting that the Copyright Board of Canada  certify a tariff of 0.63% of the annual gross operating costs of radio stations that are either owned or operated by not-for-profit corporations, excluding the Canadian Broadcasting Corporation.  In the case of such a non-commercial radio station that is a “low use station” (generally, a station that plays music for less than 20% of its broadcast time), the tariff would be lower, at 0.23% of its annual gross operating costs.  In exchange for the payment of the tariff, the non-commercial radio stations would receive a license to broadcast music contained in CSI’s repertoire as often as desired, including the streaming of the broadcast over the Internet.

An important difference between the 2008 and 2009-10 tariffs and the 2011 tariff which may partly explain why CSI is seeking substantial increases in the tariff rates is that the proposed 2011 tariff would cover the simulcast (streaming) of the broadcast online, whereas the 2008 and 2009-10 tariffs excluded all kinds of transmissions over the Internet.

In the proposed CSI Online Music Services Tariff, 2011, CSI is requesting that the Copyright Board certify new tariffs for 2011 for webcasting, streaming and downloading of music from the Internet (this does not apply to streaming of music in radio broadcasts that are the subject of other CSI tariffs, such as the non-commercial radio tariff described above).  CSI has requested:

1. for webcasting where consumers cannot influence the selection of music which is transmitted, a tariff equal to 3.5% of monthly gross revenue, in proportion to the amount of CSI-controlled music played in the month, with a minimum of 0.05¢ for each play of a CSI-controlled musical work; 
    
2. for webcasting where consumers are able to influence the selection of music which is transmitted, a tariff equal to 4.5% of monthly gross revenue, in proportion to the amount of CSI-controlled music played in the month, with a minimum of 0.065¢ for each play of a CSI-controlled musical work;
    
3. for on-demand streaming of music files that does not include the ability to download, a tariff equal to the greater of either (1) 6.8% of monthly gross revenue (excluding any amounts paid for downloads), in proportion to the amount of CSI-controlled music played in the month, and (2) the same percentage payable to the Society of Composers, Authors and Music Publishers of Canada (SOCAN) for the same service pursuant to the SOCAN Tariff 22.A (2011).  This tariff would also be subject to a minimum equal to the greater of (1) 43¢ per subscriber, (2) 0.15¢ for each play of CSI-controlled music, and (3) the minimum amount payable to SOCAN for the service pursuant to the SOCAN Tariff 22.A (2011);
    
4. for limited downloads (downloads where the file becomes unusable upon the happening of a certain event), a tariff equal to the greater of either (1) 9.9% of monthly gross revenue (excluding any amounts paid for permanent downloads), in proportion to the number of limited downloads of CSI-controlled music in the month, and (2) twice the percentage payable to the Society of Composers, Authors and Music Publishers of Canada (SOCAN) for the same service pursuant to the SOCAN Tariff 22.A (2011).  This tariff would also be subject to a minimum equal to the greater of (1) 96¢ per subscriber if the limited download can be transferred to a device other than the one used to receive it (portable downloads), and 63¢ per subscriber if they are not portable, (2) 0.20¢ for each play of CSI-controlled music, and (3) twice the minimum amount payable to SOCAN for the service pursuant to the SOCAN Tariff 22.A (2011); and
    
5. for permanent downloads, a tariff equal to the greater of either (1) 9.9% of monthly gross revenue, in proportion to the number of permanent downloads of CSI-controlled music in the month, and (2) twice the percentage payable to the Society of Composers, Authors and Music Publishers of Canada (SOCAN) for the same service pursuant to the SOCAN Tariff 22.A (2011).  This tariff would also be subject to a minimum equal to the greater of (1) 4.4¢ per permanent download in a bundle that contains 15 or more files and 6.6¢ per permanent download in all other cases, and (2) twice the minimum amount payable to SOCAN for the service pursuant to the SOCAN Tariff 22.A (2011).

CSI’s proposed 2011 tariff differs from its proposed 2010 tariff by introducing the concepts of interactive and non-interactive webcasting, which are distinguished from on-demand streaming. Further, the minimums for on-demand streaming and limited downloads in 2010 only contemplated an amount per subscriber, not per play.  Otherwise, the rates in the 2011 application remain unchanged from the 2010 levels.  The Copyright Board’s most recent certification of a CSI tariff for online music was its March 2007 decision regarding the tariff for the years 2005-2007.

Finally, in Satellite Radio Services Tariff (CMRRA-SODRAC Inc. 2011, 2012, 2013), CSI is requesting that the Copyright Board certify a tariff for 2011-2013 for the provision of music to subscribers through a satellite radio service.  The proposed tariff would be one of the following percentages applied to the satellite radio service’s monthly revenues from subscription fees, advertising and promotional activities, sales of goods and services and commissions on third-party transactions:

1. for all satellite radio broadcasts to receivers that are not enabled for either extended buffer or replay or for storing individual songs for playback later, 1% or a minimum of 10¢ per subscriber who owns such a receiver;
    
2. where the broadcast is sent to receivers enabled for extended buffer or replay, a percentage equal to 1.87 times the proportion of subscribers who own receivers enabled for extended buffer or replay, but not able to store individual songs or blocks of programming for playback at another time, to the total number of subscribers (subject to a minimum of 19¢ per subscriber who owns such a receiver); 
    
3. where the broadcast is sent to receivers enabled to store individual songs or blocks of programming for playback at another time, a percentage equal to 2.90 times the proportion of subscribers who own receivers enabled to store individual songs or blocks of programming for playback at another time to the total number of subscribers (subject to a minimum of 29¢ per subscriber who owns such a receiver).

CSI’s requested tariff for satellite radio services for 2011-2013 matches the amounts in the Satellite Radio Services Tariff (SOCAN: 2005-2009; NRCC: 2007-2010; CSI: 2006-2009)  which was certified by the Copyright Board in a decision  issued in April 2009.

“Free-to-air” local television signals may no longer be free to cable and satellite subscribers, following a recent court decision affirming the scope of the powers of the Canadian Radio-television and Telecommunications Commission (CRTC) under the Broadcasting Act.

In an important ruling that addresses the intersection of broadcasting and copyright law and policy, a majority of the Federal Court of Appeal found, in the case of Reference re the Canadian Radio-television and Telecommunications Commission’s Broadcasting Regulatory Policy CRTC 2010-167 and Broadcasting Order CRTC 2010-168, 2011 FCA 64, that the Copyright Act permits the CRTC to limit the statutory retransmission rights of broadcasting distribution undertakings (BDUs), such as cable companies, by imposing any regulatory or licensing condition that is consistent with the Commission’s statutory authority under the Broadcasting Act. In fact, the majority went so far as to state that Parliament has ranked the objectives of Canada’s broadcasting policy ahead of the statutory retransmission rights granted to BDUs under the Copyright Act.

Is the Commission empowered, pursuant to its mandate under the Broadcasting Act, to establish a regime to enable private local television stations to choose to negotiate with broadcasting distribution undertakings a fair value in exchange for the distribution of the programming services broadcast by those local television stations?

The resulting Federal Court of Appeal decision focuses on the interpretation of subsection 31(2) of the Copyright Act, which creates a statutory retransmission right for BDUs - as an exception to the rights granted, in subsection 21(2) of that legislation - to broadcasters with respect to their signals. The retransmission right is subject to 5 important conditions. These are that:

(a) the communication is a retransmission of a local or distant signal;

(b) the retransmission is lawful under the Broadcasting Act;

(c) the signal is retransmitted simultaneously and without alteration, except as otherwise required or permitted by or under the laws of Canada;

(d) in the case of the retransmission of a distant signal, the retransmitter has paid any royalties, and complied with any terms and conditions, fixed under this Act; and

(e) the retransmitter complies with the applicable conditions, if any, [imposed by the Governor in Council]

The majority interpreted the second sub-paragraph broadly, essentially finding that the phrase “lawful under the Broadcasting Act” means “in compliance with the Broadcasting Act, any regulations made under the Broadcasting Act, and any conditions that Commission has attached to the retransmitter’s broadcasting licence.” Accordingly, the majority found that the fact that the Copyright Act does not provide for the payment of a royalty for the retransmission of a local signal does not necessarily indicate “any intention on the part of Parliament to preclude the Commission from adopting the proposed value for signal regime in the interests of Canada’s broadcasting policy.”

However, in a strong and persuasive dissent, Justice Nadon found that the VFS regime was ultra vires the CRTC, because it conflicts with Parliament’s clear statement in the Copyright Act that royalties must be paid only for the retransmission of distant signals (those not normally receivable in a BDUs service area), not for local signals. 

Nadon, J. differed from the majority with respect to the scope of the CRTC’s power to determine the applicability of the retransmission right in the Copyright Act through the imposition of regulations or conditions imposed under the Broadcasting Act. In contrast to the majority, Justice Nadon found that each of the 5 conditions found in s. 31(2) of the Copyright Act are co-equal; none can be found to rank ahead of the others. Accordingly, he rejected what he saw as the Majority’s effective determination that paragraph 31(2)(d) of the Copyright Act means that “royalties may only be charged for the retransmission of distant signals and may not be charged for the retransmission of local signals, unless the CRTC decides otherwise.” 

Justice Nadon further noted that the VFS regime was “functionally equivalent” to the distant signal royalty payment regime in that in both cases, a royalty is paid, the payor and payee are the same, the obligation to pay attaches to the same activity and the protected property is the same. Accordingly, and contrary to the “exhaustiveness of statutory copyright law,” he found that the CRTC was attempting to “create a royalty that is essentially the same as the royalty Parliament has, in effect, forbidden” in the Copyright Act.

In light of the split decision, as well as the economic importance of the issue to both broadcasters and BDUs, it would appear highly likely that the decision will be appealed by one of the BDUs that participated in the reference to the Federal Court of Appeal. However, many have speculated that recent acquisitions, by BDUs, of some of the most vocal broadcaster proponents of the VFS regime may make the Court’s decision all but moot in that the broadcasters involved will no longer be inclined to negotiate VFS terms with distributors.

UPDATE: The Globe and Mail reports that Rogers Communications Inc. will seek leave to the Supreme Court of Canada to hear an appeal of the VFS Reference decision.