NFTs and Copyright

Credit: author

The English language is constantly being transformed by the addition of new words, meanings, terms and acronyms. It is hard to keep up sometimes. The latest to crowd into my consciousness is “NFT”. While the expression NFW (you can look it up and no, it doesn’t stand for Nashville Flower Week) is quite familiar to me, WTF is NFT? And does it have anything to do with copyright? Of course it does, you say, or else he wouldn’t be blogging about it.

An NFT is a “non-fungible token”, the digital phenomenon that has taken off in recent weeks as wealthy investors purchase, often at art auctions, digital representations of “something”. Rather than try to explain it, I will crib from someone who undoubtedly knows more about NFTs than I do. As explained by Luke Heemsbergen, a Ph.D candidate at Deakin University in Melbourne, in his blog “NFTs Explained: What They Are and Why They Are Selling for Millions of Dollars”;

“NFTs are digital certificates that authenticate a claim of ownership to an asset and allow it to be transferred or sold. The certificates are secured with blockchain technology similar to what underpins Bitcoin and other cryptocurrencies…  (Unlike Bitcoin) NFTs are by definition non-fungible, and thus, are deployed as individual chains of ownership to track a specific asset….   NFTs are designed to uniquely restrict and represent a unique claim on an asset. And that is precisely where things get weird: often, NFTs are used to claim “ownership” of a digital asset that is otherwise completely copiable, paste-able and shareable, such as a movie, JPEG, or other digital file”.

NFTs can be bought and sold (for a lot of money—usually cryptocurrency), as shown by the example of the token created by digital artist Beeple (Mike Winkelmann) and sold to an anonymous buyer for $69 million through auction house Christie’s in early March. They exist only digitally but unlike most digital images they cannot be duplicated as each has a unique digital signature, although a semblance of the NFT can certainly be reproduced. Basketball fans can buy unique NFTs of video game highlights of NBA games, a collectible that can be traded or sold, even though the same video clip can be viewed for free on Youtube. But the NFT owned by the fan is identified and unique. I guess it is a bit like anyone being able to see Monet’s Artist’s Garden at Giverney in an art magazine or even on the internet, but the one and only original is in the Musée d’Orsay in Paris.

An NFT can be made out of just about anything digital—images, text (Jack Dorsey’s first Tweet), videos, music, etc. and just like the famous Dutch tulip bulb is a product of scarcity. It has value because someone will pay something for it, in the expectation that in future it can be sold to someone else who will be willing to pay even more for it.

How about the role of copyright with respect to NFTs?

One thing is certain. It is the creator of the artwork or music in an NFT who owns the copyright to the underlying work, not the purchaser unless the sale includes the sale of certain rights.  In many cases, even though the buyer is the sole owner of a particular NFT, the artist who created the work to which the NFT is linked could continue to produce copies of the work. One legal blog illustrates the limits of an NFT owner’s copyright by using the following example;

“Unless the NFT owner has received explicit permission from the seller, the NFT owner does not automatically acquire the legal right to take pictures of the creative work attached to the NFT and make T-shirts or postcards for sale.”

Can the NFT itself be copyrighted? The answer is unclear but it is unlikely because the NFT itself (i.e. the certificate of ownership) is not a creative work. Some people have compared it to a deed to a house, but not the actual house. The NFT gives title to the underlying work but normally is not the work itself. (There are some exceptions when an original piece of art is uploaded directly into the blockchain but this is unusual because, as explained here, the cost of writing data into the blockchain is often prohibitive).

What about NFTs based on works created by a team, or by employees in the course of employment or by AI machines?  The answer to these questions is the same with respect to other tangible works, it depends on the circumstances, except that a machine cannot hold a copyright. There has to be a human creator behind the AI.  

This raises an intriguing question with regard to the NFT created by the humanoid robot “Sophia” that was put up for sale in an online auction at the end of March. The underlying art is based on a collaboration between Sophia and Italian digital artist Andrea Boneceto, with Sophia shown manipulating Boneceto’s original creations to produce something new. The NFT of the work will not include the copyright which pershaps will belong jointly to Boneceto and David Hanson, the owner and founder of Hanson Robotics, Sophia’s creator. It will be interesting to find out.

Can the copyright of the underlying work be transferred to the owner of the NFT? That question has been pondered by legal experts; the conclusion seems to be yes, although the actual modalities of transferring a Blockchain-verified digital file written in software code might be complicated. A rights-holder might also choose to license certain, but not all, of their rights associated with an NFT. A key element in the process is ensuring the integrity of the link between the NFT and the underlying work in order to be certain that any given NFT actually represents the art on display.

NFTs offer some potentially exciting new advantages to artists in terms of copyright tracking, as well as greater returns from selling the copyright. As I wrote in a blog posting about a year ago (Blockchain and Copyright: How can this new Technology serve Creators?), blockchains can be a useful tool to enable tracking of authorship attribution, and thus attribution of royalties, as well as monitoring of use of copyrighted materials. They enable digital music distribution companies like Bluebox to flow royalties back to rights-holders more efficiently. With respect to NFTs, these are now being exchanged through the Bluebox platform. As reported by Bloomberg, one technique is to split each song into multiple NFTs, each representing a one percent split of the song’s copyright, half of which will be sold to the public. In this way, fans could purchase “bits” of recordings to help propel their favourite artists to the top of the charts, and then potentially resell their NFT for a profit.

However, it is not all smooth sailing. Artists have found their work appropriated by sellers of NFTs, without permission. It’s a bit like finding your art work adorning posters and T-shirts being sold on the internet, all without permission or licensing. NFTs have their downsides but still, they offer a new revenue-stream for some artists, as long as they can protect their copyright.

NFTs also raise ethical concerns for some artists because of the huge amounts of energy required to power blockchain transactions. Environmental responsibility is a big issue for some artists and consumers and, believe it or not, the way in which content is distributed and consumed can have a significant impact on one’s carbon footprint.

Coming back to copyright, it should be entirely possible for the laws and principles of copyright to be adaptable to works of art that have become digital tokens. However, there are still many unanswered legal questions related to NFTs, several of them involving copyright, others contractual terms. One US legal firm has outlined a number of them in the context of US law;

  • What rights and remedies does a creator have if their work is tokenized without their permission?
  • How can platforms, issuers, and IP owners enforce their rights and remedies against NFT owners in violation of license terms and contractual restrictions?
  • How do you clearly and conspicuously “attach” terms and conditions to an NFT and ensure that those terms follow the NFT and bind subsequent owners?
  • What right of publicity and SAG (Screen Actors Guild) issues are triggered by the tokenization of an asset that includes an individual’s image, likeness, voice, or performance?
  • How do moral rights impact NFTs in the U.S. and abroad? Does the Visual Artists Rights Act (VARA) apply, or should it? (Comment: VARA protects the moral rights of artists in the US).
  • What rights and remedies does an NFT owner have, and against whom, if the underlying asset disappears or changes? (Comment: This could happen if the entity hosting the NFT went out of business or dropped its internet registration).
  • How does the first sale doctrine (17 U.S.C. § 109) operate in the world of NFTs? (Comment: It probably doesn’t since the first sale doctrine does not apply to digital works).
  • How do copyright terminations work in a world of NFTs that is designed to last for eternity?

I certainly don’t know the answers to these questions and I am not sure that anyone does. However, the author of the blog that I have referenced above, Jeremy Goldman of Frankfurt, Furnit, Klein and Selz PC in New York would be more than happy to help you figure it all out. For a fee of course. There, Jeremy, some free publicity in return for providing such a thoughtful piece on the issue of NFTs and copyright. Thank you.

There are a host of challenging and as yet undefined issues when it comes to the sale and monetization of NFTs.  Will NFTs, like the Dutch tulip bulbs of the 17th century flame out, or are they here to stay as part of our digital world? Only time will tell. In the meantime, Beeple has cashed in “big-time” for his digital token “Everydays: The First 5000 Days”. Will his benefactor be so lucky in future? WTHDIK?

© Hugh Stephens 2021. All Rights Reserved.

Throwing Good Money After Bad: How Canadian Universities Wasted Millions by Not Securing a Copyright Licence

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The wheels of justice grind slowly—and at great expense to all concerned. The result to date has been a colossal waste of public money by many of Canada’s post-secondary institutions (outside Quebec) who have chosen to incur large legal fees while hiring unnecessary staff, all to avoid paying a reasonable tariff to Canadian authors and publishers for reproducing their works in the teaching materials they provide to their students.

Beginning May 21, the Supreme Court of Canada (SCC) will hold initial hearings in the cross appeal by York University and The Canadian Copyright Licensing Agency (Access Copyright) of a recent decision by the Federal Court of Appeal (FCA) in this long-running case. York is contesting the Appeal Court’s decision upholding the 2017 ruling of the Federal Court that York’s fair dealing guidelines failed to prevent—indeed tolerated if not encouraged– infringement of copyright. For its part, Access Copyright is appealing the FCA’s ruling that the “mandatory tariffs” certified by the Copyright Board of Canada for the use of any material in its repertoire by unlicensed users are not, in fact, mandatory, allowing York to opt-out and not pay the certified tariff despite making widespread unlicensed copies of published works.

The background to all of this can be found in a series of earlier blog postings. (Access Copyright vs York University: High Stakes for Canadian Culture; The Access Copyright v York University Federal Court Decision: Restoring Some Balance to Copyright in Canada; York University’s Appeal of the Access Copyright Case: A Further Waste of Public Funds; When is a “Mandatory Copyright Tariff” mandatory only if you Opt-in?.

Background to the Case

This case goes back over a decade and involves an ongoing lawsuit over the refusal by York (standing in as a proxy for Canadian post-secondary institutions outside Quebec), to pay Access Copyright for using (reproducing) copyrighted works held in its repertoire. Instead of obtaining a licence from Access Copyright, as they did for two decades after the copyright collective society was formed in the late 1980s, or alternatively paying the per student tariff established by the Copyright Board of Canada, York and the post-secondary institutions have fought tooth and nail to escape the obligation to pay for the content they are using in (mostly digital) course packs. Over the past decade York, along with much of the rest of the post-secondary sector, has declared it was  “opting out” of the tariffs established by the Copyright Board, boycotted hearings of the Board rather than participate in the rate-setting process aimed at determining a fair and equitable tariff, tried to devise Fair Dealing Guidelines that would get it off the hook for payment, and appealed an unfavourable judicial decision on its Guidelines to the Federal Court of Appeal (FCA) and now to the Supreme Court, supported throughout by Universities Canada (UC).

Quebec universities  deal with a separate copyright collective society, Copibec, and after similar litigation involving Laval University as the proxy, all have now agreed to licences for use of materials in Copibec’s repertoire. Outside Quebec, the struggle continues.

Unneeded Staffing Increases

While York was contesting payment for use of Access Copyright materials, other post-secondary institutions were bulking up their staffing to handle copyright management, a step that would have been largely unnecessary if the universities had simply taken out a license with Access Copyright or paid the established tariff for reproducing materials in the repertoire. The Copyright Board has established a current tariff of $14.31 per student annually. Did all this ducking and weaving actually result in saving the universities any money or lightening the financial burden on students? Ironically, based on information provided by Universities Canada itself, this seems to have not been the case. 

In its Motion for Leave to Intervene in the SCC case, at paragraph 32, Universities Canada makes much of the increased resources universities have dedicated over the past few years to ensuring compliance with copyright licensing. This is intended to rebut assertions that institutions are free-riding without paying. However, hiring staff to “promote and assist compliance” in effect means increasing staffing in order to operationalize self-defined fair dealing guidelines, policies that have been found by the Courts to fall outside the boundaries of fair dealing and which condone infringement. UC states that;   

“Staffing at Canadian universities further confirms the importance of copyright universities. Based on a survey Universities Canada did of its member institutions between the fall of 2016 and summer of 2017, Canadian universities, on average, had hired the equivalent of two additional full-time staff dedicated to copyright since 2012. Larger institutions will have hired even more. For example, in the summer of 2017, the University of Guelph reported that it had ten full-time equivalent staff working on copyright issues across its campus (including at the library, bookstore and distance education office). The University of British Columbia has 16 full time employees working on copyright issues across both campuses, including five new rights and permissions assistants added in 2019. These staff promote and assist compliance with copyright laws by members of the campus community.”

What the Numbers Mean

Let’s unpack these numbers. There are 77 universities outside Quebec that have hired on average the equivalent of two additional full-time staff (FTE) dedicated to copyright since 2012. These staff members presumably spend their time trying to ensure that university users are aware of and follow the institution’s fair dealing policy as well as seeking to acquire copyright licenses when they are required. This adds up to a lot of personnel resources, at least 154 new full-time positions since the universities decided not to licence content from Access Copyright. Most of these costs could have been avoided by the simple expedient of securing a single licence, or paying the tariff, since the university would have been granted a blanket licence to use content within the repertoire. One of the main functions of a copyright collective is to provide an efficient and effective mechanism for users to obtain permission to reproduce and use copyrighted works published by multiple rights-holders, savings and efficiencies that the universities have decided to forgo.

It is impossible to know exactly how much the added costs of these 154 incremental professional staff amount to, but a fair estimate would be about $80,000 to $85,000 per FTE in 2021, including benefits which on average amount to 13 percent of staff costs. Thus, the cost for this additional copyright management staff cumulatively amounts to $12.5 to $13 million dollars annually, not including office overheads. How does this compare to the cumulative cost of paying the Access Copyright tariff? It is almost the same–$13 to $14 million annually.

Now of course it is true that even if the universities sought and obtained licences from Access Copyright, or paid the tariff set by the Copyright Board, they would still have to do some copyright management. Despite having millions of works in its repertoire, Access Copyright does not represent all authors and publishers. However, it covers a substantial proportion of them, and a licence agreement would undoubtedly have allowed university libraries to reduce or streamline their copyright clearance staff significantly. The 154 FTEs noted by Universities Canada are all incremental staff added since the universities decided to drop the Access Copyright licence. Universities are huge consumers of public funds, getting almost half their funding, (47.2% in 2017-18), from government.  Rather than investing these largely public funds into the creation of more and better Canadian content through payment to authors and publishers, the universities have instead chosen to increase staffing levels. And on top of that, York, its spear-carrier, has had to commit substantial funding to legal resources to defend its position in court, and after losing (twice) has dug the hole deeper by further appeals.

The Tariff in Perspective

As noted above, the Copyright Board determined that starting in 2015, a fair tariff for uncompensated use of works whose rights were held by authors and publishers represented by Access Copyright would be $14.31 per full time student. (It was higher for the period 2011 to 2014). This was despite a potential wider application of fair dealing arising from the addition of “education” as a fair dealing exception in 2012 and the fact that many universities directly license some content from some publishers. How significant is this tariff, a fee which provides reproduction rights and legal access for students and teaching staff across the country to the works of over 11,000 Canadian authors and 600 publishers, as well as millions of international works and publishers represented by Access Copyright, in comparison to the cost of education in Canada?

For the most recent year for which figures are available from the Canadian Association of University Teachers (CAUT), 2017-18, the total cost of university education in Canada was slightly more than $38 billion dollars. If divided by the most recent reported number of full-time equivalent university students in Canada (1,027,644), that amounts to a per capita cost of around $37,000. The tariff set by the Copyright Board amounts to less than .0004% of the average annual cost per student (or less than four cents a day).

Wasting Scarce Public Funds

While the case before the Supreme Court involves appeals by both parties, the litigation could be very disruptive in terms of upsetting and undermining the existing copyright collective licensing system if the Supreme Court upholds the FCA’s decision on “mandatory tariffs”. One cannot help but wonder whether all this legal action was necessary in the first place. Had the universities, including York, reached a licence agreement with Access Copyright, or alternatively complied with the Copyright Board’s tariff ruling, the lengthy litigation and waste of public funds could have been avoided while providing Canadian authors and publishers fair compensation for use of their work. Nor did York have to appeal the initial finding that its Fair Dealing Guidelines were, in the words of the judge of the Federal Court “not fair in either their terms or their application”, a conclusion upheld by the Federal Court of Appeal. None of this obstinacy and litigation saved the universities any money or lightened the financial burden on students.

Ongoing Challenges

Where do we go from here? With the appeals having been launched, the court proceedings probably have to now play out, although the government could step in to clarify the legislative intent with regard to the applicability of mandatory tariffs for use of content within the repertoire of a collective society, as I argued it should in an earlier blog. (Undoing the Damage of the Federal Court of Appeal’s Decision on “Mandatory” Tariffs). For York and the universities outside Quebec, it is not just the $13 million for 2020 that is at issue, or the royalties that York owes. Because of the stonewalling by the universities over the past decade, hundreds of millions of dollars are now at stake, going back to 2011.

COVID-19 has increased the challenges for universities (not to mention authors and publishers). Foreign student enrolment, a revenue “quick fix” that more and more universities have become addicted to, is down sharply and may not recover. Government funding is tightening as provincial and federal budgets are under stress from COVID. Already one major university, Laurentian in northern Ontario, has declared bankruptcy. Every penny counts these days, which is why it is so frustrating and disappointing to see university funds being squandered on legal proceedings and hiring unnecessary staff to manage multiple copyright permissions and find loopholes.  Instead, the universities should be doing the obvious and right thing by licensing the content needed by students and professors from the collective society that represents the vast majority of authors and publishers, both Canadian and international, in Canada. It is time that the universities, York in particular, faced up to their obligations and stopped throwing good money after bad.

© Hugh Stephens 2021. All Rights Reserved.

Will Article 19.17 of the USMCA/CUSMA Influence Canadian Court Proceedings? (The Long—or Short?—Arm of Section 230)

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Over the past couple of years I have written, as have others, about the abuses generated from the free-ride that large internet platforms have been given as a result of their exemption from liability for abusive or sometimes illegal content carried on their services and disseminated by them. They have thrived in this permissive environment. In the US, the cornerstone of this immunity is Section 230 of the Communications Decency Act, 1996. This piece of legislation, passed at the dawn of the internet era, has come under increasing scrutiny in the US–most recently because of the antics of Donald Trump.

Trump’s Provocations

Trump’s online comments have long been suspect with regard to accuracy, but it was his comments justifying violent, seditious activity such as the attack on the Capitol Building on January 6, that finally forced the major platforms to act. Facebook/Instagram, Twitter, Youtube, Reddit, Snapchat and others all took action to block his access to their services, either temporarily or on a longer-term basis. The flow of alternate facts and incitement to violence was finally turned off. It has taken far too long–and needed an incident that shook US democracy to its core–for the major social media platforms to finally “man up” and exert some control over the harmful, even dangerous, content propagated by Trump. While on this occasion they acted, on too many others the platforms have hidden behind the immunities provided by Section 230. This legislation is 25 years old this year; it is high time for a serious update.

Why is Section 230 a Concern?

Why am I writing about this in a copyright blog when intellectual property infringement is specifically carved out of Section 230 immunities for internet platforms? There are other laws in the US (viz. Section 512 of the Digital Millennium Copyright Act, known as the DMCA) that provide safe harbours to the platforms when copyright infringement takes place, provided they take certain actions. (Section 512 is also under review because in the view of many it has not operated as intended to protect copyrighted content online).  Section 230 is relevant because of the broader need for internet intermediaries (platforms) to assume responsibility for the content they propagate and profit from, especially when they are well aware of the abusive content they are enabling. That need for greater accountability and responsibility extends into many areas, including respect for copyright and creators.

The lack of responsibility—enabled by Section 230—that has been a feature of the industry for many years is now catching up to it. The immunity should never have been so broad or widespread. Section 230 has been used as the shield to protect websites promoting child sexual exploitation, selling weapons to individuals prohibited from purchasing them in the offline world, and promoting hate-speech; it has even allowed businesses like Airbnb to ignore municipal regulations on home rentals. Through its broad immunity shield, it has indirectly enabled revenge-porn, doxing, cyber-bullying and defamation. No wonder there are calls for review.

Not only is the new US Congress likely to scrutinize the protections that internet platforms have enjoyed—and often abused—for the past 25 years, but the unfettered right of these platforms to host defamatory or inappropriate content is being challenged in other forums as well, such as courts outside the US. On several occasions, national courts have sought and exerted jurisdiction over cases of abusive online behaviour tolerated by the platforms that has affected their nationals.

Twitter Challenged in a Canadian Court

The most recent example is the lawsuit brought against Twitter in the British Columbia (BC) Supreme Court by Frank Guistra, among other things the founder of Lionsgate Entertainment. He has accused Twitter of publishing and then failing to remove false and defamatory tweets related to him. The tweets in question accused him of being involved in “Pizzagate”, the spurious conspiracy-theory about pedophilia that arose during Hilary Clinton’s campaign against Donald Trump in 2016.

Twitter had argued that the BC Court did not have jurisdiction, and wanted the case heard in California, where Guistra has a residence and where Twitter maintains its corporate headquarters. Guistra, who is a Canadian citizen and whose career in the financial, mining and entertainment industries has been primarily pursued in Canada, maintains his home in Vancouver. Twitter wanted the case heard in California for obvious reasons—they could hide behind Section 230, as well as argue the First Amendment to the US Constitution. The First Amendment provides for freedom of speech and freedom of the press, amongst other things, although it applies only to the role of government. “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press…”. It doesn’t stop Twitter from moderating content on its platform.

There are several interesting aspects to this case; that of jurisdiction, the geographic reach of a potential ruling on the case, and probably most important, whether a social media platform like Twitter can be held liable in Canada for defamation arising from content published on its service by third parties, its users. Related to this last point is the question of whether Section 230 has extended its long arm into Canada as a result of Article 19.17 of the USMCA/CUSMA, the updated version of NAFTA that entered into force in July 2020. Noted copyright lawyer and blogger Barry Sookman has an extensive post on the various legal ramifications of this case, which is well worth reading.

Does Canada have Jurisdiction?

I won’t repeat the well-documented legal arguments in Sookman’s blog posting but want to touch briefly on the jurisdiction question and then take a deeper dive on Section 230. The court asserted territorial competence because the harm to the plaintiff, a BC resident, occurred in BC (as well as elsewhere). It then determined it had jurisdiction–despite the existence of US law on the subject–because under US law the plaintiff would have had no cause of action (because of Section 230) for the harms suffered in BC. With the venue issue settled (unless there is a successful appeal), the really interesting point is whether Twitter is liable in Canada for defamation.

Can Twitter Rely on USMCA/CUSMA Article 19.17

Sookman points out that, in a Canadian context, strictly passive intermediaries (bulletin boards, social media platforms, etc.) will not be held liable for publishing defamatory content posted by users unless they know, or should have known, that their services are being used to distribute such content and they take no steps to remove it. Guistra had specifically requested that Twitter remove the defamatory tweets, and block future ones. Allegedly it did not do so fully, despite repeated requests.

Assuming no appeal, or an unsuccessful appeal, the case will be heard in Canada. This brings Section 230 back into the picture, specifically the language in USMCA/CUSMA Article 19.17, which reads in part;

“…no Party shall adopt or maintain measures that treat a supplier or user of an interactive computer service as an information content provider in determining liability for harms related to information stored, processed, transmitted, distributed, or made available by the service, except to the extent the supplier or user has, in whole or in part, created, or developed the information.”

This language almost didn’t make it into CUSMA because of last minute objections by Nancy Pelosi and House Democrats at the time the Trump Administration was seeking Congressional approval of the negotiated USMCA deal. Other changes were made to the treaty at the request of the Democrats, changes that Mexico and Canada subsequently agreed to, but Pelosi’s eleventh hour opposition to inclusion of Article 19.17 was too little, too late, and the language, which mirrors parts of Section 230 but with modifications, stayed in. It is the sort of measure that should not be in a trade agreement, and many in the US are opposed to exporting it to other countries.

There is a qualifier (footnote 7) to 19.17 which reads; 

a Party may comply with this Article through its laws, regulations, or application of existing legal doctrines as applied through judicial decisions.”

In other words, Canada was not obliged to pass any new legislation as a result of the USMCA/CUSMA commitment and can comply through the application of existing law.

Will the USMCA/CUSMA language shield Twitter from  Giustra’s suit? It will be interesting to find out. The question of the extent to which Article 19.17 will bear on defamation cases in Canada involving internet platforms is an open one, as I wrote just over two years ago (“Did Canada Get Section 230 Shoved Down its Throat in the USMCA?”). You can read that blog for yourself, but my conclusion was that;

“…while the Parties have agreed under the USMCA to not treat a platform as the creator of content, in other words as a primary publisher, platforms are still liable under the Canadian common law as secondary publishers when they knowingly publish the contents of a primary publisher that is, for example, defamatory.”

“Far from having Section 230 type safe harbours shoved down its throat, Canada protected its ability to regulate platforms and protected the ability of the courts to take action against platform abuse where and when required.”

Does Article 19.17 Cover Secondary Liability?

This interpretation is based on the explicit wording of Article 19.17. While the article prevents the Parties to the USMCA from treating an “an interactive computer service” (like Twitter) as an “information content provider” (publisher) for purposes of liability for content “stored, processed, transmitted, distributed, or made available” on its service (unless it has created the information itself), that protection is related solely to not treating the interactive computer service as a content provider. This expressly does not exclude secondary publishers from potential liability. Rather, they may be liable if they have published content from someone else, have knowledge of what they have published, and have refused to remove it. That is why the common law clarification in the footnote is important. It confirms that liability as a secondary publisher is not being changed.

Article 19.17 and Section 230: Some Significant Differences

The precise language of Article 19.17 is also interesting because, unlike Section 230, it does not limit access to injunctive relief. It does not exclude the issuance of injunctions, or court-ordered equitable relief whereas Section 230 has been interpreted to prevent the issuance of injunctions against internet intermediaries.

Clarifying Section 230’s Reach into Canada

The Giustra case should help clarify the extent to which Section 230 has reached into Canada through the back-door of Article 19.17. The outcome will be important. Meanwhile, Section 230 is unravelling in the US, and there are moves to amend or get rid of it, notwithstanding Article 19.17 which of course applies as much to the US as it does to Canada and Mexico (although Mexico negotiated a three-year delay in implementing it). If the US Congress intends to forge ahead and amend or repeal Section 230 in order to start holding internet platforms accountable for the harms that they disseminate through unmoderated content posted by users, regardless of the USMCA, then one wonders how much credence courts in Canada will or should give to the trade agreement’s “obligation”, particularly since no legislation was needed to implement it. As I noted above, Canada was free to comply with the commitments in Article 19.17 through the application of existing legal doctrines (i.e. common law principles) as applied through judicial decisions.

Does Article 19.17 have any Legal Effect?

Vivek Krishnamurthy and Jessica Fjeld, two legal scholars who published a research paper on issues related to the implementation of Article 19.17 in the US and Canada have pointed out that;

“The Supreme Court of Canada has found that international treaties are of no force and effect beyond what is provided in their implementing legislation. Since there is nothing in Canada’s USMCA implementing legislation that refers directly to Article 19.17, the provision appears to have no direct domestic legal effect. However, the Supreme Court has also held that it will consider Canada’s international obligations and customary international law as interpretive aids when the meaning and effect of a provision is called into question.”

However, it has since been pointed out to me that the above interpretation is not uncontested in legal circles, and is at variance with the conclusion from the 2007 Regina v Hape (SCC) case that there is a presumption that Canada’s laws will confirm to treaties;

...courts will strive to avoid constructions of domestic law pursuant to which the state would be in violation of its international obligations, unless the wording of the statute clearly compels that result… (R v Hape, [2007] 2 SCR 292 BOA Tab 92 at para 53).

Section 230 Reform in the US

We will have to wait to see what happens with the Giustra case with regard to the applicability of  a Section 230-like safe harbour in Canada. In the meantime, calls for Section 230 reform continue to get plenty of traction in the US, such as this thoughtful analysis published by Dr. Mary Anne Franks, Professor of Law at the University of Miami, and concerns about under-filtering identified by University of Virginia School of Law professor Danielle K. Citron. What happens in the US may eventually influence what happens in Canada with regard to Article 19.17 because if it becomes a dead letter in the US, one can hardly expect that it will be rigorously applied in Canada (or Mexico).

Stay tuned.

© Hugh Stephens, 2021. All Rights Reserved.

This blog has been updated to include reference to the Regina v Hape case with respect to the impact of international treaties on domestic law in Canada.

Canada’s Copyright Term Extension Consultation: Why all the Tinkering Around the Edges?

On February 11, the Canadian Government, through the lead ministry responsible for the Copyright Act, Innovation, Science and Economic Development Canada (ISED), issued a consultation paper asking the question as to “whether accompanying measures should be adopted to address concerns that have been raised over the potential implications of a longer general copyright term”, and if so, what measures?

USMCA/CUSMA Obligations

The issue is not whether Canada will be extending its copyright term, bringing it into alignment with roughly 80 countries around the world (including most of Canada’s major trading partners), but how, i.e. whether it should adopt “accompanying measures”. Canada made a commitment in the new NAFTA agreement, aka the USMCA or CUSMA in Canada, to extend its general copyright term of protection from life of the author plus 50 years after death (known in the trade as post-mortem auctoris, or pma) to 70 years pma. The Canadian government has 2.5 years from the entry into force of the USMCA/CUSMA (July 1, 2020) to do so, in other words by the end of 2022. It could just go ahead and bring in legislation without any consultation or accompanying measures, but since the question of term extension has been frequently debated in Canada and was studied by two Parliamentary committees reviewing the Copyright Act in 2019, a process of public consultation presenting some options to consider as “accompanying measures” seems inevitable and is probably a politically astute move.

Parliamentary Review of Term Extension

The two committees of Parliament that examined term extension and other copyright issues were the “INDU” Committee (Standing Committee on Industry, Science and Technology), and the Heritage Committee. I discussed the different conclusions these two committees reached on a number of copyright-related issues back in June 2019 at the time the INDU Committee released its report, some two months after the Heritage Committee’s report, (called “Shifting Paradigms”) was made public. Both were chaired by Members of Parliament from the governing Liberal Party, and both included representatives from the two other major parties, yet they reached different conclusions on a number of copyright issues, including term extension.

While the Shifting Paradigms recommendations were more copyright and rights-holder friendly, significantly it is the ISED Minister–served by the INDU Committee–who has the statutory responsibility for copyright legislation, not the Minister responsible for Heritage Canada. (Both Departments cooperate on copyright issues and have officials that work on copyright topics, but when it comes to legislation, the “Minister” in the Act refers exclusively to the Minister of Industry, except for one section of the Act relating to customs measures, where the “Minister” is the Minister of Public Safety. The Copyright Office is part of ISED and the Registrar of Copyrights reports to the ISED Minister through the Commissioner for Patents). Despite this well-known and well-established fact, after the release of its report (which was somewhat at odds with the conclusions of Shifting Paradigms), the INDU Committee felt compelled to issue a shrill and tone-deaf press release declaring that it had “sole responsibility” for reviewing the Act, in effect dismissing the Heritage Committee report. This was seemingly a way of mollifying critics who didn’t like the conclusions reached by the Parliamentarians who drafted Shifting Paradigms. It is worth noting that the government is under no obligation to accept the recommendations of either committee.

With regard to term extension, the Heritage Committee unequivocally endorsed an extended term, recommending simply “That the Government of Canada pursue its commitment to implement the extension of copyright from 50 to 70 years after the author’s death.” The INDU Committee was more lukewarm in its recommendation, endorsing term extension “only if CUSMA is ratified”, and adding another qualification promoted by groups opposed to extending the term of protection.

 “The Committee believes that requiring rights-holders to register their copyright to enjoy its benefits after a period equal to the life of the author plus 50 years would mitigate some of the disadvantages of term extension, promote copyright registration, and thus increase the overall transparency of the copyright system.”

Additional Registration Requirement?

This two-stage process, which would insert a barrier into what would otherwise be a smooth transition from a life plus 50 regime to life plus 70, was hailed by copyright critics such as University of Ottawa professor Michael Geist who claimed this would be making the best of a bad provision”. As I commented at the time, inserting such a road-bump in the way of extension would in fact be making complex what should be simple, would increase costs for rights-holders, and would arguably be a violation of Canada’s international obligations under the Berne Convention, (given that under Berne copyright is to be conferred automatically without a registration requirement). The current Government of Canada consultation document seems to agree;

“The approach recommended by INDU raises serious questions in the context of Canada’s international obligations, as well as the costs that would be borne by copyright owners and the duplication of administrative efforts that might result. Numerous international treaties to which Canada is a party (e.g., Berne) prohibit the imposition of any ‘formalities’ that would need to be satisfied for foreign works to benefit from copyright protection in Canada. While limitations on enforcement of copyright linked to registration are not unprecedented, they do not appear to be the norm internationally. In addition, with new pressure on copyright owners to register their works, such an approach would likely result in increased costs in the form of registration fees and associated administrative and legal costs, particularly for owners of copyright in multiple works”

In other words, instituting a registration requirement to access the additional twenty years of copyright protection is a bad idea.

Expect Misinformation About the Costs of Term Extension

That conclusion won’t stop the critics, however, who are already complaining that the one-month consultation period is inadequate. (On the evening of March 11, the day before the consultation period was to close, it was announced that an extension would be granted, with submissions now due by March 31). They will also undoubtedly trot out all the old discredited arguments about how extending the term of protection will cost Canada hundreds of millions of dollars by leading to a massive outflow of royalties from Canada to other countries, ignoring the benefits that Canadian rights-holders will get from qualifying from an additional period of protection in overseas markets that apply the 70 year pma standard reciprocally. The same misinformation was circulated about this time last year prompting me to write a blog post on the topic, (Copyright Term Extension in Canada: Facts versus “Fake News”). However, I fully expect that the same distortion of facts will be recycled again, and I am not the only one to think so.

Possible Accompanying Measures

Clearly the point of the consultation paper is not to re-open the debate on whether term extension should occur or even to focus primarily on a registration requirement. Rather, as the document makes clear, it is to invite comments on options for measures dealing with orphan works and out of commerce works (e.g. out of print books) that could accompany term extension. Neither of these issues is directly related to extension of the copyright term, although there is a connection in that difficulties in accessing copyrighted works that fall into these categories could be increased by virtue of longer terms of legal protection.

More important, tinkering around the edges to increase access to copyright protected works that are often difficult to access is a politically astute move designed to draw some of the sting from critics of term extension, given that the signals emanating from the consultation document indicate the government is unlikely to adopt the INDU committee’s recommendation to impose an additional registration requirement on rights-holders in order to access the extra twenty years of protection. Canada’s term of protection could be simply extended with no accompanying measures, but it seems that the government has decided that increasing access by “LAMs” (Libraries, Archives and Museums) to copyright-protected but difficult to access works will help offset some of the criticisms of a longer term.

Orphan and “Out of Commerce” Works

Orphan works, works where the copyright holder cannot be identified, are an issue regardless of the duration of copyright, particularly when an institution like an archive or library wants to digitize them. There is currently a provision in Canadian copyright law for access to orphan works, through an application to the Copyright Board of Canada. This, however, is a slow and cumbersome process. There is currently no such provision for “out of commerce” works, works that presumably have little current commercial value except for a very limited number of users (like a library) where obtaining additional (digital) copies can be a challenge if a publisher is not interested in licensing further production. The consultation paper puts forward several options for consideration. They include remuneration and exception-based models (five options are presented).  

Minimum Standards to Protect Rights-Holders

Whatever model is adopted, it must be carefully constructed so as not to undermine the rights of copyright holders. It should be limited to LAMs in accordance with their public interest mandate and restricted to non-commercial exploitation. (Special attention will need to be paid to educational institutions to ensure they do not use the special access provisions as a means to do an end-run on rights-holders and avoid payment for materials used in course packs, etc. as they have done with the education fair dealing exception introduced in 2012). It must also ensure that a reasonable and documented search has been conducted for the author of an orphan work and should provide a reasonable window after use during which a rights-holder could come forward to claim compensation.

If special access provisions are going to be put in place for “out of commerce” works (as is currently the case in the EU and US), definitions have to be carefully drawn as to what constitutes “out of commerce”, and care taken in the administration of permissions. Collective societies that hold “out of commerce” works in their repertoire could, for example, be engaged to issue licences. But there could be other wrinkles as well. An interesting example has recently arisen with the decision of the publisher of the Dr. Suess works to cease publishing a number of his works because of concerns they contain racial caricatures. These books will soon technically be “out of commerce” although existing copies will continue to be for sale for many years as used books. Would an “out of commerce” provision allow someone to publish a work that the copyright owner had specifically decided not to republish? That question was discussed in a US context in a recent blog (Copyright Lately by Aaron Moss), which examined the issue from a fair use perspective. Copyright certainly gives the author the right to decide whether or not to publish a work they created (e.g. a private letter, such as Meghan Markle’s letter to her father), but does this include control over republishing? One would think so, but this underlines the need for provisions to widen access to “out of commerce” works to be crafted carefully in order to avoid unforeseen outcomes.

Public Comment

Public comment is invited with a closing date of March 12, 2021 (since extended to March 31). Various stakeholder groups, from the LAMs to rights-holder organizations, to others with just a viewpoint to express will be making submissions. These will all be made public after the closing date. The stakeholders are obviously best placed to assess their own interests, and it will be illuminating to see whether opinion will coalesce significantly around any one of the options from a user or rights-holder perspective, or whether it will be dispersed across all five. There will also no doubt be repetition of the arguments both for and against term extension, but the die is cast. Copyright term extension will happen in Canada; the only question is how much tinkering there will be around the edges.

© Hugh Stephens, 2021. All Rights Reserved.

This post has been updated to clarify that both ISED and Heritage work on copyright issues, although the Minister responsible for copyright legislation in the Copyright Act is the ISED Minister. The new closing date for the consultation, March 31, has also been referenced.

Facebook in Australia: “READY, FIRE, AIM”

Source: http://www.shutterstock.com

Over the course of the past week or so, Facebook has managed what some thought impossible; pushing Google off the front pages as the “bad actor” when it comes to behemoth internet platforms thumbing their nose at a sovereign government, indeed at an entire nation, and instead putting itself in the spotlight. This took a degree of clumsiness that only Facebook could manage.

First There Was Google

For months, Google has been in the cross-hairs of the Australian government’s News Media Bargaining Code. The Code, in its original iteration, required that major internet platforms that use news content from Australian media sources (specifically Google and Facebook because of their dominant market share) compensate the content providers through contractual arrangements, failing which a government arbitrator would impose a settlement based on a “final arbitration” model (where each side makes a final offer and the arbitrator selects one of them). It’s not just about payment for news. The Code will also require the platforms to inform news providers in advance of any changes to algorithm settings that may materially affect referral traffic to news, as well as any substantial changes to the display of news and advertising directly associated with news, plus a requirement to share audience data. In other words, a peek behind the algorithmic curtain.

Google dug in, claimed the proposals were unworkable, unfair and would “break the internet”. It threatened to withdraw its online search engine from Australia and to delist Australian news services, while encouraging Australians to bombard their government with complaints about the new Code. In the past, Google has had similar encounters with governments in Europe (Germany, Spain, France) where it resisted reaching agreements to pay publishers for use of news content after publishers had been granted additional rights to the content to enable negotiations. In Germany, Google was able bring the publishers to heel by blocking access to their content on Google News unless they renounced claims to payment. In Spain, Google simply shut down Google News.

Google in France

More recently, in France they faced a determined government that took a stand and used its competition authority to require that Google enter meaningful consultations with publishers over payment for content. Google dragged its feet but finally reached an agreement with one of the major French publishing groups. It may not be out of the woods yet, however, as other publishers not included in the initial agreement have complained to the French competition authority that Google did not bargain in good faith (it has a tendency to approach negotiations on a “take it or leave it basis”), and apparently the Authority has concluded that there is merit to the complaint. The Australian Code will prevent the platforms from abusing their market power through “take it or leave it” offers by holding the arbitration stick in reserve.

Payment for News

Neither Google nor Facebook has refused to pay for access to news content, but they want to do it on their terms. Google has its Google News Initiative that involves some payment for content from selected partners. This was rolled out in some countries after pressure mounted to require quasi-monopoly online platforms that dominate advertising revenues to recognize the contribution of bona fide journalism to public discourse by providing some payment for content. Google tried to use its News Initiative as a lever in Australia by signing contracts with some small media players but making the contracts conditional on the News Media Bargaining Code not seeing the light of day. That didn’t work, and Google has now reached agreements with most of the major media players in Australia. Magically, the “unworkable” Australian proposals suddenly became workable when Microsoft inserted itself into the debate by announcing that it would be more than willing to abide by the Code and in fact, urged the US Government to adopt something similar.  

Facebook too has paid for news. In 2019 it reached a deal with major US publishers to pay for headlines for its news feed, and recently reached a similar deal in the UK to license news stories. For Facebook the motivation was largely to insulate itself from growing criticism that it has become a platform for fake news, alternate facts and conspiracy theories, becoming a closed-loop echo chamber for those who subscribe to such theories. However, Facebook has consistently maintained that it derives no value from news content and should not have to pay to access it. The head of public policy for Facebook Canada, Kevin Chan, claimed that the value of news to Facebook was “zero”.  

Is News of Value to Facebook?

Facebook’s position is that it does news media a service by allowing them to post content on Facebook, which in turn drives readers to the media outlets. Facebook’s VP of Global Affairs, Nick Clegg (a former Deputy Prime Minister of the UK, by the way) wrote that the company had directed 5.1 billion referrals to Australian media in 2020, worth over A$400 million. Yet news does provide “sticky” content that keeps users on Facebook longer—and thus exposed to more advertising which is the source of 98% of Facebook’s revenue. A Canadian researcher, Prof. Jean-Hugues Roy of the University of Quebec at Montreal, who analyzed 1.9 million Facebook posts in 2020 found that almost 20 percent were from media pages. These posts generated 7.3 percent of the total interactions in the sample. Based on that percentage and Facebook’s revenues in Canada he concluded that “Mark Zuckerberg’s company made $210 million thanks to Canadian journalism in 2020.” By way of contrast, Kevin Chan stated that Facebook had contributed $10 million to various news projects in Canada over the past four years. I am tempted to say, “big deal”.

Facebook Blocks News in Oz

So as we see, Facebook, like Google, is prepared in extremis to throw some dollars toward media providers, but does not like being required to do so. Negotiations with media content providers in Australia had been going nowhere, similar to the situation with Google, until the Australian government rolled out its big gun, the Media Code with its binding arbitration mechanism. Google decided that a strategic retreat was the best option, resumed negotiations with the major news providers, and disappeared off the front pages. They were helped by Facebook’s next move, which firmly planted a bullet in its own foot by threatening, and then following through with, a blockage of all Australian media content. It wasn’t as if Facebook’s engineers executed the move with much care. No. In addition to major news sources, they blocked public health information related to COVID-19 vaccinations, the website of the Australian Council of Trades Unions, information relating to women’s health, food banks, emergency services, cancer clinics, charities…. It couldn’t have been worse. Nick Clegg offered the lame excuse that;

“we had to take action quickly because it was legally necessary to do so before the new law came into force, and so we erred on the side of over-enforcement. In doing so, some content was blocked inadvertently”.

A Classic Backfire

An under-statement. The piling on began immediately. The former chief executive of Facebook Australia, now heading an NGO dealing with digital threats to democracy, described Facebook’s actions as a “shameless demonstration of corporate might”. Other descriptions ranged from “heavy-handed” and “reckless, arrogant and dangerous”, to “corporate bullying” and “unfriending Australia”. The blockage of responsible news sources left open the field for the alternate facts crowd. Facebook has been widely criticized for tolerating abusive content and misinformation on its platform but has argued that it lacks the means to monitor and control such content. Yet, in the blink of an eye it managed to take down just about every legitimate source of essential news in Australia. For a company that has been under constant scrutiny for various abuses, from failing to protect the privacy of users to allowing promotion of conspiracy theories to monopolistic practices, it could not have been a more perfect public relations and reputational disaster. It made (Sir) Nick Clegg’s political achievement of taking the Liberal Democrats in the UK from 57 seats to 8 look like a success.

The Compromise

Facebook back-pedalled, unblocked what should not have been blocked and entered into talks with the Australian government resulting in a compromise, of sorts. Like any good compromise, both sides can claim victory. The government agreed to amend the legislation to provide exemptions from application of the Code if companies subject to it (like Facebook and Google, based on market dominance) have already struck content deals. They also agreed to provide for a one month notice period (to allow for the completion of deals) if the Code is to be applied. Once the Code is triggered, there will be a longer mediation period before arbitration takes place, and platforms will be allowed to differentiate their offers depending on what kind and size of media company they are dealing with. The Code, with these amendments, has now been passed into law. At the same time Facebook announced that it would be restoring news feeds in Australia, that it had secured a content deal with one major Australian media conglomerate, Seven West Media, and was in discussions with others.

Who Won? Not Facebook.

So who won? Overall, certainly not Facebook, although they have likely managed to wriggle out from having the Code applied to them because they will have “voluntarily” reached content deals with media providers. This, of course, was the intent of the legislation all along. If it does not have to be applied, because the market is now working, that is so much the better. And, by the way, the Code is now law and will remain on the books as a back-stop. The outcome is probably even better for smaller players on the Australian media scene given the domination of Australian media by conglomerates such as News Corp. since the platforms are now allowed and encouraged to make differentiated offers. The requirements for disclosure of algorithmic information did not change significantly as the legislation worked its way through the Parliamentary process.

Facebook is claiming that it can still block news coverage, which is true, but this is a hollow victory since it was the blockage of news that caused it such huge reputational damage and ultimately led to the compromise by which Facebook will pay for content in order to avoid becoming subject to the Code. Facebook can still block content—if it wants to shoot itself in the foot yet again. It could also exit the Australian market. The Code does not stop that either, but neither of these things is going to happen.

Wider Implications

Not only was Facebook forced to accept reality in Australia, it will now be even more under the gun elsewhere as other governments, notably Canada and the UK, and possibly even the US, will move to ensure that it reaches fairer revenue sharing deals with media organizations. They will draw important lessons from what happened in Australia, as will the platforms. As Canada’s Heritage Minister Steven Guilbeault said in a radio interview on CBC, if Canada ever needed a reason to deal with the platforms, “Facebook just handed it to us on a silver platter”. The Australian experience has demonstrated that it takes determined and robust government action, backed up by application of competition law to deal with market dominance, to bring the platforms to the table. But it can be done.

Facebook was already headed for a fall before all this happened. It has just propelled itself closer to the cliff edge as governments around the world, and particularly in its home jurisdiction of the United States, will be looking ever more carefully at the company’s business practices and their impact on society, democracy and individual freedoms. Whatever “victory” Facebook salvaged from its antics in Australia, it was pyrrhic in the extreme. That’s what you get when your policy consists of “Ready, Fire, Aim”.

© Hugh Stephens 2021. All Rights Reserved.

This post has been updated with respect to the research conducted by Prof. Roy mentioned in paragraph 7.

Viola Desmond and Her Story of Courage and Creativity—And Some Thoughts on Race and Copyright

Photo: author. Powder case property of Black Cultural Centre of Nova Scotia

In this week’s blog post I am going to address the central issue of what Black History Month is all about; celebrating the courage and determination of people who made enormous sacrifices to advance the cause of racial justice. I want to highlight the case of an intrepid black woman, who was at the same time an entrepreneur and a creator of intellectual property herself–perhaps some of it even protected by copyright– who stood up (actually, sat down) for racial equality in Canada. Viola Desmond’s name may not be that well known outside Canada (or within it for that matter), and it is high time that her story was told to a broader audience.

Even though Viola Desmond’s story does not involve copyright itself, I also want to touch on the role of copyright with regard to race and racial discrimination. Why? Well, because this is a copyright blog and also because I believe that copyright can be an important instrument in helping to achieve greater racial and economic justice.

Is Copyright Colour-Blind?

We need to ask this fundamental question. Does copyright discriminate on the basis of race (or gender)? Does it better protect some racial groups better than others? On its face, I would say no, because at the end of the day an artist is an artist, an author is an author, a musician is a musician. Whether the holder of the copyright is a man or woman, or is of black, Asian, Indigenous or white racial origin, the copyright in a work that they have created belongs to them. It empowers them. The only qualification is that the creator must be human. (Recall the ridiculous attempt by the animal rights group, People for the Ethical Protection of Animals—PETA—to claim copyright for “Naruto” the macaque in the Monkey Selfie Case).  Animals don’t qualify, nor do machines.

Copyright prima facie is blind to factors of race or gender. Once a work is created, as long as it meets the established criteria (originality, fixation, and authorship) copyright is granted automatically, assuming the creator is a resident of a Berne Convention country.  An artist in Zaire, an author in Cuba, a composer in Greenland—they all qualify. I would argue that copyright is the ultimate enabler of democratic economic and moral rights because the simple act of creation confers the right. Unlike other forms of intellectual property, important as they are, copyright requires no formal process of registration. For example, it can be argued (and no doubt proven) that racialized or marginalized groups are under-represented in the patent filing process because of the barriers to filing—process, cost, access to “the system” and so on. There are no such overt barriers with copyright.

But Are Practices that flow from Copyright Colour-Blind?

Now, while I would argue that the establishment of copyright itself is colour and gender blind, I will readily admit that the exercise of the rights within copyright through business practices and application is not always free of bias. It is not difficult to find examples where the application of copyright in various business situations can be argued to be discriminatory, such as in reaching contractual agreements where one side may have disproportionate power. I would note, however, that power imbalance in negotiations over payment for use of copyrighted material (e.g. an author with a publisher, or a musician with a label) can and does happen quite frequently, independently of any racial considerations.  Nevertheless, I think there is a view that while copyright may be race or gender neutral, its application is not always so. This may explain the vigour with which I was criticized a couple of years ago when I wrote a couple of blogs (here and here) on gender and copyright.

Indigenous Cultural Expression

Another issue relating to copyright and societies not necessarily based on Western concepts of individualism and law is the problem of attributing copyright protection to group or collective works, particularly where those works were produced by Indigenous groups. This is a topic on which I have written in the past, arguing that a supplement to copyright laws is needed to protect forms of art loosely grouped under the rubric of “Indigenous Cultural Expression” (ICE). Both national governments and the World Intellectual Property Organization (WIPO) are looking at various means to do this.

Historical Application of Copyright

I also readily concede that historically copyright was not applied in the way that it is today. As with many things, it was reflective of the broader social values of the time and often embodied overt racial discrimination. Moreover, it was not until 1886 that the Berne Convention was established. This international convention established the principle of a creator’s “automatic right” to copyright, as well the virtual universality of reciprocal copyright recognition. Originally, it had just ten original signatories; today it has 179. (The US joined in 1988).

Phillis Wheatley

An obvious example of the historical context of copyright was its application to slaves in a slave-owning society (like the southern US states prior to 1864). Individual creators could hardly expect to avail themselves of their copyrights when they themselves were treated as chattels to be bought and sold. The earliest example of African-American literature, the poems of Phillis Wheatley, a slave girl in Massachusetts, published in 1773, illustrate the struggle faced by people of colour in trying to establish authorship. Wheatley had to appear before a group of notables (all white males of course, no doubt of a “certain age”) who eventually “established” that the poetry was produced by her, an authorship hurdle not known to have been forced on any other writer. Yet copyright prevailed in the end. The publication of her work was entered in Stationers’ Hall, London, the repository for copyrighted works at the time (since the publication predated US copyright and the US Constitution) although it was undoubtedly the British publisher, Archibald Bell of Aldgate, who ensured it was deposited.

Frederick Douglass

Another famous work of African-American literature, Frederick Douglass’ “Narrative of the Life of Frederick Douglass, An American Slave” (1845) and a later work, “My Bondage, My Freedom” (1855), both bear the inscription on the fly-leaf “Entered, according to Act of Congress, in the year 1845 (or 1855) by Frederick Douglass, in the Clerk’s office of the District Court of…”. It was Massachusetts for the first work and the Northern District of New York for the second. Prior to 1870, authors and publishers registered their claims to statutory copyright with the clerks of the U. S. District Court for the jurisdiction in which they resided. Douglass, a former slave who had gained his freedom by fleeing from the south to Pennsylvania, took pains to assert his copyright at a time when slavery was still thriving in parts of the United States. Despite the many hurdles and imperfections in application placed in the way of people of colour, copyright could still be harnessed as a means to assert individuality, dignity and creativity, albeit with difficulty.

Copyright Today

I would argue that copyright, imperfect though it may be, is today more of an instrument of empowerment than exploitation, more part of the solution than part of the problem. Even though there have been historical injustices, today copyright can be a liberator and equalizer, putting a powerful tool into the hands of individual creators, rather than being part of a system of oppression and exploitation. To cite but one example, an important argument in favour of creating an Artists Resale Right (about which I will be writing in a couple of weeks) is that it provides the means for an ongoing transfer of wealth from well-heeled art dealers and collectors in Europe to disadvantaged artists in the developing world. Without copyright this would not be possible.

Recent Scholarship

Not everyone will agree with this positive view of copyright, however, and I feel obliged to acknowledge here the learned treatise by Dr. Anjali Vats, Assistant Professor in Communication and African Diaspora Studies at Boston College. Her recent book, “The Color of Creatorship: Intellectual Property, Race and Making of Americans”, argues just the opposite. For her, intellectual property law (including copyright) is racialized and designed to perpetuate white privilege.

I contend that intellectual property law is organized through a racial episteme that consistently protects the (intellectual) property interests of white people and devalues the (intellectual) property interests of people of color”.

At the risk of gross oversimplification, her argument is based on the premise that if a society is racist as defined by its concepts of “citizenship” (a social rather than legal term), then everything that flows from that is racist. She says, “racial scripts can be baked into the seemingly colorblind ideals of American citizenship that, in turn, inform intellectual property law”. In her view, “the notion that intellectual property law has become equitable…is a dangerous one…” It is a system that is “ideologically rigged in favor of whiteness”. More recently, in what she calls the post-racial IP era, dating from Barack Obama’s accession to the White House in 2008, racism was perpetuated (according to Prof. Vats) by the imposition of maximalist IP policies on an infringing Global South—pharmaceutical patents being one example. But it is unfair of me to selectively quote and try to summarize an important work in a few sentences. Best you read it for yourself and make your own judgement.

At the end of the day, perhaps we are not that far apart. We all know that laws are not applied equally, (look at incarceration rates for racially marginalized groups) even though in theory they apply equally. If perceptions and values are imbued with racist assumptions, a colour-blind law or principle can be distorted. The case of Viola Desmond is a prime example of this.

Viola Desmond

Viola Desmond’s contribution to the ongoing struggle for racial equality does not directly engage copyright questions, although she was a creator of her own products and asserted her intellectual property rights. Her story is about dignity, determination, and courage. Viola Desmond (nee Davis) was born in Nova Scotia in 1914 to a black father and white mother and raised in the black community in Halifax. With career options limited for women, she trained as a beautician although she had to attend school in Montreal and in the US as there were no opportunities for black students at such institutions in Nova Scotia at that time. She opened a beauty culture studio in Halifax catering to women in the black community. This branched out into the Desmond School of Beauty Culture, and a line of beauty products that bore her name. (e.g. Sepia Face Powder by Viola Desmond).

Things were going well for Desmond until her run in with the unofficial but entrenched practice of racial segregation in Nova Scotia. In November, 1946, on her way to sell beauty products in the north of the province her car broke down in the town of New Glasgow. While it was being repaired, she decided to take in a movie at the Roseland Theatre. When she purchased her ticket, for thirty cents, it was for the balcony. Realizing that she could see better from the main floor she seated herself there, and was challenged by the ticket taker, who indicated her ticket was for the balcony. Main floor tickets cost forty cents. She offered to pay the difference and was told the main floor was for whites only. She refused to leave. This account from the Canadian Encyclopedia continues the story;

“Desmond was then confronted by the manager, Henry MacNeil, who argued that the theatre had the right to “refuse admission to any objectionable person.” Desmond pointed out that she had not been refused admission and had in fact been sold the ticket, which she still held in her hand. She added that she had attempted to exchange it for a main floor ticket and was willing to pay the difference in cost but had been refused. When she declined to leave her seat, a police officer was called. Desmond was dragged out of the theatre, injuring her hip and knee in the process, and taken to jail. There she was met by Elmo Langille, chief of police, and MacNeil — the pair left together, returning an hour later with a warrant for Desmond’s arrest. She was then held in a cell overnight.

In the morning, Viola Desmond was brought to court and charged with attempting to defraud the provincial government based on her alleged refusal to pay a one cent amusement tax (i.e., the difference in tax between upstairs and downstairs ticket prices). Even though she had indicated when she was confronted at the theatre that she was willing to pay the difference between the two ticket prices and that her offer had been refused, the judge chose to fine her $26.”

That of course is not the end of the story. Desmond could have just bitten her lip and suffered, as her husband advised her to do, but she did not. The NAACP in Nova Scotia took up her case which eventually went to the Supreme Court of Nova Scotia. It would be nice to tell you that she prevailed. She did not, on technical grounds, (the appeal of her fine had not been lodged within the statutory time limitations) but the Justice hearing the case noted acerbically;

One wonders if the Manager of the theatre who laid the complaint was so zealous because of a bona fide belief that there had been an attempt to defraud the Province of the sum of one cent or was it a surreptitious endeavour to enforce “Jim Crow” by misuse of a public statute”.

Her Legacy

Her case did not end racial discrimination in Nova Scotia or Canada but it was a courageous and singular act that led eventually to greater justice, and to long overdue apologies and attempts to rectify the injustice. The fact that this woman entrepreneur, who built a successful business that not only generated employment in the community and provided career opportunities for young people, but also demonstrated considerable ingenuity and vision through the creation and marketing of her own products, could be denied basic dignity by being ejected from a seat in a theatre is incomprehensible today. And then to be convicted of “tax fraud” for not paying the one cent difference in tax, even though she offered to do so. Although Desmond died in 1965, her sister is still living, and kept her story alive. In 2010 Desmond received a posthumous apology, in 2012 a Canadian stamp was issued in her honour and in 2016 it was announced that she would be the first woman, other than the sovereign, to appear on a Canadian bank note, the $10 bill. Recently Nova Scotia repaid the fine, with interest, to Desmond’s sister. The fine itself was 2,600 times the value of the one cent “fraud”, which was itself a ludicrous charge of the sort that brings the law into disrepute.

The recognition of Viola Desmond’s stand for equality was long overdue. Her act of courage did not change that much that quickly in her lifetime, but she was a pioneer. Many people know of Rosa Parks, who initiated the bus segregation protests in the US in 1955, and who is noted for that and for her many other contributions in fighting racial discrimination over many years, but she had kindred spirits in Canada; people like Viola Desmond who challenged segregation practices a decade earlier.

Racial discrimination today is perhaps less obvious, but no less pervasive. One of the ways to fight it is to provide equal opportunity. Not all creators get equal opportunity, but the rights conferred on them by copyright at least enable them to stand up for their rights. Discrimination can no doubt be argued to exist even today in the application of copyright law, but copyright itself is an important tool in prying open the box of equality.

© Hugh Stephens 2021. All Rights Reserved.

Google’s Tussle Over Payment for News Content in Australia: Microsoft Scrambles the Cards–With Positive Implications for Canada and Others

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The ongoing tussle between two major US online platforms (Google and Facebook) and the Australian government over proposed legislation that would require the two internet platforms to pay Australian media for using their news content has just been joined by a third party, Microsoft. The legislation would enshrine in law a proposed News Media Bargaining Code developed by Australia’s competition authority, the Australian Competition and Consumer Commission (ACCC). Microsoft has waded into the debate unequivocally on the side of Australia, and in a very timely manner. This positioning by a major US corporation will have wider implications for other countries, such as Canada, seeking to deal with the issue of requiring Google and other major platforms to compensate news content providers for content used on their services.

Does Microsoft’s alignment with the provisions of the ACCC’s Code spring from a genuine concern over the fate of news outlets, many of which are dying on the vine as advertising dollars shift from traditional media to online service providers, or from commercial interest? According to Brad Smith, President of Microsoft, it is both. In a personal blog released late last week, Smith makes the case for maintaining a free and financially healthy Fourth Estate as a critical element of democracy. He recognized that the Australian legislation, about which I reported last week, will help redress the imbalance that exists between technology and journalism by requiring negotiations, backed up by a binding arbitration mechanism, between the two internet giants (“tech gatekeepers”) and independent news organizations. Although the Australian legislation applies only to Google and Facebook, who are specifically named, Smith says that Microsoft would willingly submit itself to the proposed Australian disciplines. This would be both the right thing to do and would also be good business for Microsoft.

Google and Facebook are caught by the legislation because of their market dominance. The fact that two US companies are specifically targeted in the legislation of another country has led to intervention by the US government (the previous Trump Administration) through the US Trade Representative’s Office (USTR) and the US Embassy in Canberra. The USTR wrote to the Australian Senate committee reviewing the legislation that the US government is concerned that “an attempt, through legislation, to regulate the competitive positions of specific players in a fast-evolving digital market, to the clear detriment of two U.S. firms, may result in harmful outcomes”. Smith points out that it would have been better for the legislation to have targeted any company that exceeded a specified market share rather than call out specific named companies. He suggested a market dominance threshold of 20 percent to trigger the legislation. (Google dominates 95 percent of online search in Australia and is clearly a better search engine at the moment although if Bing attained scale and Microsoft invested more in it, it could become competitive).  If the legislation was contingent on a 20 percent market share, and if Microsoft was able to reach that threshold, then it would readily comply according to Smith;

“…the obligations…could easily be written to apply to any search business that has more than 20% market share in Australia. At Microsoft, we are fully prepared to aim for this search share and become subject to the law’s obligations the day we do.”

Google has resorted to various threats to try to stop the legislation. These range from curtailing or cutting its search function in Australia, removing news listings from Search, or even leaving the Australian market altogether. It has tried to mobilize Australian users to pressure their government to back off. At the same time, it rolled out—and then retracted—an offer to pay for some news content, but on its terms, called the Google News Initiative. Google’s “dangle of the carrot” payment proposal was very recently put back into play (after Microsoft entered the fray), restoring its offer to pay for some content but only on condition that it reserved the right to terminate any contracts reached if the Australian government followed through by legislating the Bargaining Code.

Smith also takes aim at the US government for intervening with Australia on this issue, expressing hope that the Biden Administration will not double-down on past representations made by USTR. In fact, he urges the US government to adopt a similar provision to that being enacted in Australia, “requiring tech companies to support a free press”. There are no current proposals in the US to do this although there was draft legislation in the previous Congress, the Journalism Competition and Preservation Act (HR 2054), that would have provided US news publishers with a four-year exemption from anti-trust restrictions, permitting them to combine to negotiate with major platforms.

The fact that Microsoft has waded into this issue is good news for Australia and will likely result in the US government standing back. When one or two US companies are on one side of an issue involving a foreign country it is relatively easy for the US government to take a position to “defend US interests”. When there are US companies on both sides of an issue it is much more difficult to intervene, especially when both are large, powerful entities with significant lobbying clout in Washington. My guess is that the US embassy in Canberra will be monitoring the legislation but staying out of the melee in future.

As for the legislation itself, the Australian Senate committee responsible for reviewing it has reported out, rejecting any changes after holding hearings and listening to various threats and proposals put forward by both Google and Facebook. Google’s arguments that the legislation is “unworkable” have been undermined by Microsoft’s endorsement of the proposal. The only new proviso put forward by the committee was a proposal that the legislation be reviewed a year after adoption, recognizing that there may be a need for tweaks to the binding arbitration process envisaged by the Code. The ultimate intent of the resort to binding arbitration, of course, is to avoid having to go there by encouraging the two sides to reach a commercial agreement on payment for news content. The legislation will now proceed with a view to adoption within the next few weeks.

These developments in Australia are being closely watched in Canada where news publishers are pushing for the adoption of a similar mechanism requiring the platforms to negotiate. As I wrote back in September (“A Day of Reckoning is Coming for Google, Facebook and other major Online Platforms that access News Content without Payment: Will Canada be Next?”), the Trudeau government has made no secret of its intention to rebalance the playing field between news content producers and the major internet platforms. The exact proposals are still being worked on, but draft legislation is expected soon. Heritage Minister Guilbeault has said that “publishers must be adequately compensated for their work…We must address the market imbalance between news media organizations and those who benefit from their work”.

Guilbeault has made it clear that even though Google is now rolling out its Google News Initiative in several countries (it has signed up two small players in Canada although the program is not currently offered to Canadian consumers), this will not stop him from introducing legislation to require payment to news producers. He has acknowledged that one of the issues to be taken into account in devising a “made in Canada” solution is the existence of the USMCA, the trade agreement between the US, Canada and Mexico that went into effect on July 1, 2020.

When Guilbeault first started talking about supporting the news industry, opponents of the publishers’ proposals argued that the new NAFTA (the USMCA; called CUSMA in Canada) would constrain any Canadian policy measures since action against the major platforms would violate the terms of the trade agreement. In their report submitted to the government, “Levelling the Digital Playing Field”, News Media Canada, representing the major publishers, addressed this point by including an opinion from a noted trade expert, Barry Appleton, rebutting the USMCA argument.

Appleton pointed to Article 32.6 of the USMCA, known as the “cultural exception”. The definition of a “cultural industry” in the Agreement includes the publication of newspapers. Article 32.6 exempts a Canadian cultural industry from any of the USMCA obligations but there is a catch; the other two Parties (the US and Mexico) are allowed to retaliate with equivalent commercial effect against any measure taken by Canada to protect a cultural industry.

Notwithstanding any other provision of this Agreement, a Party may take a measure of equivalent commercial effect in response to an action by another Party that would have been inconsistent with this Agreement but for paragraph 2 or 3.” (i.e. the exception).

This is a deterrent to ensure that Canada rarely, if ever, uses the cultural exception to override its obligations. It has never done so in the more than thirty years of the existence of the cultural exception (both the original Canada-US FTA and NAFTA had a similar clause) and if it did, it could be made to pay dearly. Retaliation could be applied against any sector, so if Canada’s other two CUSMA partners were really upset with a Canadian cultural measure that “violated” the Agreement they would exert pressure by hitting other, politically influential sectors unrelated to the cultural industry that was being protected. That is the criticism levelled at the cultural exception argument adopted by News Media Canada. I agree that the cultural exception is a pretty thin reed to rely on—it is more of a political fig-leaf than anything else–although it is certainly a defence that can be put forward.

But here is the key question. Is the cultural exception the only defence that Canada would have if it were to bring in a regime that required major internet platforms to strike compensation deals with news content providers, and would such a measure be challenged by the US? There are two angles to consider. The first is that it should be possible to deal with major global corporations like Google and Facebook through policies of general application (i.e. directed at any company meeting certain criteria—such as market dominance–regardless of national origin) in a manner that would be consistent with the CUSMA. For example the Competition Chapter of CUSMA, which happens to be exempt from the Dispute Settlement Mechanism of CUSMA by virtue of Article 21.6, requires that Each Party “shall ensure that the enforcement policies of its national competition authorities include…treating persons of another Party no less favorably than persons of the Party in like circumstances;”. In other words, if a compensation scheme for news publishers were dealt with as a competition issue, it could be devised in such a way as to be applicable to both Canadian and US or Mexican entities without running afoul of the CUSMA. Moreover, the decision could not be taken to dispute settlement by the US government.

The second is the willingness of the US government to invoke the USMCA if Canada established a requirement for certain platforms to negotiate payment for news content. Quite apart from devising measures of general application that would be CUSMA-proof, now that Microsoft has positioned itself in favour of a policy where internet platforms compensate news organizations, and is willing to do so itself, it is much less likely that the US government would invoke CUSMA to argue that US companies are being discriminated against. USTR’s hands are now effectively tied, if not legally than practically in terms of the internal politics affecting the US government’s position.

And it’s not as if Google itself could initiate action. The “investor-state” provision that existed in the previous NAFTA was dropped in the USMCA/CUSMA, ironically at US insistence. The Trump Administration felt that investor-state protections encouraged US companies to invest abroad, and so had it removed. The investor-state provision allowed a private party (a company) to invoke dispute settlement against a NAFTA government if that government had taken action that resulted in expropriation of the company’s property, or measures that were tantamount to expropriation. Changes of domestic policy that resulted in making it more difficult for a foreign NAFTA company to operate or generate expected returns on investment could be argued to violate investor-state protections. Canada lost several investor-state cases under NAFTA and the Canadian taxpayer had to compensate US companies as a result. Even where the investor-state clause was not invoked, it had the potential to exert a chilling effect over policy development and implementation if there was a possibility that a US (or Mexican) company might have grounds to object. No Canadian company ever succeeded in bringing a successful investor-state case against the US although there were a few such cases launched.

Microsoft’s entry into the debate in Australia will scramble the cards and make it easier for the Australian government to deal with Google. However, an added indirect bonus is to widen Canada’s scope for action given the decreased probability that Google will now be able to convince the US government to try to restrain Canadian action under the USMCA/CUSMA.

© Hugh Stephens, 2021. All Rights Reserved.

Google’s Latest “Stoush” with Australia: What’s the Lesson from Germany’s Failed Effort?

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Later this week, on February 12, the Australian Senate is scheduled to present its report reviewing important draft legislation, the tongue-twisting “Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill, 2020”. This legislation, when enacted, will implement the News Media Bargaining Code developed by the country’s  competition regulator, the Australian Competition and Consumer Commission (ACCC). Assuming the final law retains all or most of the provisions of the draft bill, it will require Google and Facebook—and only Google and Facebook by the way—to license Australian news content that they use in their search or social media offerings. In other words, the platforms will have to compensate Australian news content providers when they present the providers’ content. “News content provider” is defined in the legislation according to several professional and revenue criteria, but essentially the definition includes all major Australian news entities, both publishing and broadcasting. Why does the code apply to only Google and Facebook? It has to do with scale, dominance and market power. As I discussed in a blog on this topic two weeks ago, and in earlier blogs, Google and the Australian government have been engaged in real “stoush”, a big-time arm wrestle, over this legislation.

The Australian News Media Bargaining Code

Google has said the Code is unworkable and is threatening to pull out of Australia, or at least to shut down its search function, rather than comply with the legislation if it is enacted without amendment. Google says it doesn’t object to paying content providers for use of their content, but wants to do it on the company’s terms, through its “Google News Initiative”. (Last fall Google announced it was prepared to start paying news sources, but then suspended its offer after the ACCC refused to drop its code. Now, under pressure from the new legislation, it has decided to re-activate the program).

From the perspective of the ACCC, the Google News Initiative puts most of the cards into Google’s hands, and therefore the Code contains a requirement for binding arbitration if a voluntary agreement cannot be reached between the platforms and publishers. Google doesn’t like arbitration, and particularly objects to the form of arbitration proposed in the Australian legislation. Known as “final offer” arbitration, it requires the arbitrator (which will be ACMA—the Australian Communications and Media Authority) to select a final offer from one of the two sides. If the platforms refuse to negotiate, they could be subject to heavy fines of $10 million or 10% of annual turnover.  They could also be fined if they fail to comply with an arbitration decision or take retaliatory action against news media companies. Clearly, there are some real teeth in this legislation.

For Google (and Facebook), the only way to opt out of the legislation–other than by withdrawing their services entirely from Australia or, in the case of Google, closing down its search function—would be to remove all Australian news content from their services. Google has already started to test the latter option by blocking access to Australian news content for some users in Australia. Meanwhile, rival Microsoft has stepped up indicating that while it is not subject to the Code, it would willingly comply with it. The US company is eager to fill any gap left by Google. Google’s withdrawal from online search in Australia would be a boon for Microsoft’s Bing which currently has only about 5 percent of the Australian market.

Because of this competitive factor, and because of the importance of Australia as a leading OECD country and also the expressed determination of the Australian government to follow through with the legislation, I think that a compromise will be found in the end. But be under no apprehensions. Google plays hardball as was demonstrated a few years ago when Germany tried to grasp the same nettle, although using a different approach to that taken in Australia.

What Happened in Germany

Back in 2013 Germany passed legislation that gave publishers an ancillary right (Leistungsschutzrecht) to their news content (for one year) to enable them to negotiate with major internet platforms (read Google). The “publishers right” was considered necessary because, as it was phrased in an EU study on this topic, “Although print publishers have long been able to claim copyright indirectly from the contributions of their journalists, historically, copyright has not been a key part of their business model.” The intent was to create a “neighbouring right” similar to that enjoyed by investors in broadcasts, sound recordings and films. This would relieve publishers of the need to rely on the rights created and granted by journalists and photographers they employed in order to prove ownership of copyright in each work of journalistic output they published. This new right sits alongside, and is in addition to, regular copyright protection. I wrote about the push for a publishers’ right back in 2016 when the EU was considering bringing it into the EU Copyright Directive, a step that has now been taken.

Google didn’t want to negotiate payment for what was referred to at the time as “news snippets”, and as usual was a tough negotiator. At first Google dragged its feet, so an umbrella group of German publishers sued it for ignoring the law. Google then removed all German publishers from Google News, resulting in a huge loss of traffic to major news websites. For leading German publisher Axel Springer, this amounted to a decline in visits to its websites of 80 percent. Google announced that it would allow publishers to opt back in to Google News only if they waived their right to compensation. Faced with this ultimatum, the publishers caved in and Google emerged triumphant, wielding its market force like a club. It similarly played tough in Spain when a similar law was passed, simply shutting down Google News in that country.

EU Takes the Lead

Since then, a law similar to Germany’s Leistungsschutzrecht has been enacted by the EU, as Article 15 of the Copyright Directive (although the EU Directive confers two years of protection as opposed to the one year of protection in the original German law). It is the platform for passage of national laws to implement a publishers’ right. France is the first EU member state to have done so, although more will follow. In taking the lead, France was the first to tangle with Google under the new rules, as I wrote back in April of last year (here). France implemented the Directive by means of its Competition Authority, requiring Google to negotiate, much as Australia is doing.

Why German Publishers Failed to Tame Google

Dr. Heidi Tworek of the University of British Columbia, a scholar who specializes in the history of German media, has recently argued that people have forgotten about what happened in Germany in 2013 when they look at recent developments in France and Australia, and potentially in Canada, when it comes to requiring Google to pay for news content.  “Levelling the Digital Playing Field”, the report released last October by News Media Canada, the industry group representing the Canadian news publishers, leans heavily to the Australian model in its advocacy, while noting France’s rights-based approach. The German experiment is not mentioned. Tworek points out that the struggle between news providers and news disseminators is not a new phenomenon. She refers back to the 1920s when there was a push in Germany to create a new right for publishers to protect them from the incursions of radio into their hitherto exclusive news domain. The issue was framed as one of “who owns the news” but the attempt to create a special news right foundered, just as the attempts by German publishers in 2013 were unsuccessful.

The Impact of the German Example

While German publishers did not succeed in their attempt in 2013 to force Google to share revenues generated through news content, I would argue that regulators and legislators have not forgotten what happened in Germany a few years back (although I am sure none of them are aware of the earlier history of trying to regulate news content on radio unless they have read any of Professor Tworek’s articles on the subject.) The problem in Germany in 2013 was that Google was permitted to use its market power to bend the publishing industry to its will. It was able to dominate and split the industry by offering to allow some publishers back on to its platform if they renounced their right to payment, while punishing others for exercising their rights.  Simply providing publishers with an ancillary right to the content they produced was not sufficient to empower them to stand up to the market dominance of Google. Neither France nor Australia have made that mistake. They have put the full muscle of their Competition authorities behind the confrontation with Google, leaving the platform with only a couple of options; find a solution (as they have done in France), or exit the market in full or in part (by removing all news content).

Google cannot play the game it played in Germany by splitting the industry. “Divide and rule” will no longer work. The Australian code has a non-discrimination provision ensuring that the platforms cannot choose to negotiate with some content providers, but not others. There is also the requirement for binding arbitration.  If Google follows one of the extreme options of either leaving the market, or the news segment of the market, it will create a vacuum that its competitors Bing, Yahoo and others will be only too happy to fill.

Levelling the Playing Field

The example of what happened in Germany tells us that the playing field has to be levelled if there is to be a rebalancing between the publishers and major internet platforms, of which Google is the prime example. That can only be done by dealing directly with the issue of dominance and market power as part of the solution.

Developments in Canada

This holds lessons for Canada where the Heritage Minister, Steven Guilbeault confirmed in late January that a bill for online news compensation is in the works, and is expected to be presented to Parliament in the spring. Canada has apparently not yet decided what approach it will take (the French approach, or that of Australia or a “made in Canada” solution) but Guilbeault has been in touch with ACCC’s Chair Rod Sims, and Canada is closely following how the Google-Australia “stoush” is playing out. It has been reported that Guilbeault favours a binding arbitration model, as was advocated by News Media Canada in its report.

One thing is certain. If history holds any lessons for regulators when it comes to dealing with the giant international internet platforms, it is that they are too big for local content industries to be able to deal with directly without government support. Government muscle in the form of limiting market power and anti-competitive behaviour is required. The real lesson to be learned from the German example is not that Google cannot be brought to heel; it is that this has to be done using the right tools.

© Hugh Stephens 2021. All Rights Reserved.

The Regional Comprehensive Economic Partnership (RCEP) and Copyright

Back in mid-November, something significant happened in Asia, largely unnoticed. While most of the western world continued to grapple with daily reports of increasing COVID-19 hospitalizations and deaths, (well before the word “variant” became part of our everyday vocabulary), and while we watched transfixed to see whether Donald Trump would succeed in overturning the expressed will of the American people, fifteen countries came together on November 15, 2020 to sign the Regional Comprehensive Economic Partnership (RCEP) Agreement.

These countries, the ten members of the Association of Southeast Asian Nations, known as ASEAN (comprised of Myanmar, Thailand, Malaysia, Cambodia, Laos, Vietnam, Singapore, Indonesia, the Philippines and Brunei), plus China, South Korea, Japan, Australia and New Zealand will form the bloc. India was an original negotiating partner but elected not to join the others, largely from fear that its internal market would be swamped with Chinese goods. Even without India, the amount of trade within the bloc will encompass 30% of global trade.  This is not surprising given the presence of the world’s second and third largest economies, China and Japan, plus major trading countries like Korea and Indonesia. The RCEP was built on the foundation of several “ASEAN Plus” agreements, that is to say, ASEAN plus China, ASEAN plus Japan, ASEAN plus Korea and ASEAN plus Australia/New Zealand, all agreements negotiated some ten years back or more. RCEP brings these disparate ASEAN-centered agreements together under one umbrella, with common Rules of Origin (qualifying rules for preferential tariff treatment under the agreement). It is estimated that through its trade liberalizing provisions RCEP could lead to income gains of over $200 billion by 2030 and add $500 billion to world trade.

Because of the widely varying levels of economic development among the RCEP participating members, the level of “ambition” in accepting trade disciplines is not as great as in some other trade agreements, notably agreements like those between the US, Canada and Mexico (the USMCA/CUSMA), or between the EU and Japan or Korea. In fact, I have heard RCEP described as being “as wide as the Pacific and as deep as a puddle”. There is something to be said for this description. Compared to another regional trade pact, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the eleven-country successor to the Trans-Pacific Partnership that included the United States until the US withdrew shortly after Donald Trump took office, the RCEP has fewer binding commitments to trade liberalization and is less aggressive in its reduction of tariffs. (Some of the countries in RCEP—Japan, Australia, New Zealand, Malaysia, Brunei, Vietnam and Singapore—are also members of the CPTPP. The others in the CPTPP are Canada, Mexico, Peru and Chile).

Unlike the CPTPP, RCEP does not contain chapters covering labour, the environment or state-owned enterprises, all issues of great importance in dealing with large emerging markets like China. It also does not provide for common commitments to liberalize trade in services, although there is improvement in some areas for some countries. However, it does contain a chapter on intellectual property (IP), including a number of provisions relating to copyright. While it would be fair to say that the RCEP’s IP chapter is not the most ground-breaking or sophisticated, the inclusion of a chapter on intellectual property is nonetheless important. It is worth remembering that this agreement covers 15 countries with widely differing levels of economic development and capacity, ranging from highly advanced countries like Japan, Korea, Singapore, Australia and New Zealand to rising emerging powers like China and Indonesia to lesser developed countries like Cambodia, Laos and Myanmar. A look at per capita GDP levels is revealing. They range from a high of $65,233 in Singapore to just $1,407 in Myanmar, with a huge variety in between including Australia at $55,060, Japan at $40,246, Korea at $31,846 and China at $10,261. (All figures are from the World Bank, 2019, expressed in USD).

What the IP chapter does do is to set some minimum standards across all these economies. It is based largely on the TRIPS commitments (the Agreement on Trade-Related Aspects of Intellectual Property Rights) in the World Trade Organization (WTO), and includes accession to several IP-related international treaties. In the area of copyright, these include the Berne Convention, the WIPO (World Intellectual Property Organization) Copyright Treaty and the WIPO Performers and Phonograms Treaty, commonly known as the WCT and WPPT, respectively. This will result in Cambodia and Myanmar acceding to Berne, and Cambodia, Myanmar, Laos, Thailand, and Vietnam acceding to the WCT and WPPT, although some of these countries have a grace period of up to a decade or more in which to implement their obligation. The IP chapter includes articles dealing with the protection of broadcast and encrypted program-carrying satellite signals and the establishment of collective management organizations. On this latter point, the wording is somewhat laboured and non-binding, i.e. “the parties shall endeavour to foster the establishment of appropriate organisations for the collective management of copyright and related rights”. Still, it is a start for countries where no such organizations exist.

There is also standard language on technological protection measures (TPMs) and rights management information (RMI). On TPM’s the agreement requires each party to “provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors, performers, or producers of phonograms in connection with the exercise of their rights…”, although exceptions can be provided in accordance with laws and regulations. RMI refers to information that identifies the work, performance, author and so on, of a recording, normally embedded in code. Signatories to the agreement will make illegal the removal or altering of any electronic RMI or allowing the import, distribution, broadcast etc. of works or recordings where the RMI has been removed or altered. All of this is pretty standard stuff in most modern trade agreements, but its inclusion in the RCEP will help propagate these minimum standards.

There is also language requiring the destruction of seized pirated and counterfeit products to avoid them simply being returned to channels of commerce (as often happens in developing countries), and provisions to suspend release of suspected pirate goods at a rights-holders request. Damages in civil cases will be commensurate with injury, i.e. statutory damages are not referenced.

What is not in the agreement is any reference to providing safe harbours for internet platforms, absolving them of any civil liability for content posted by their users. Of late, this has become one of the standard “asks” put forward by USTR when the United States negotiates trade agreements. The USTR language is based on Section 230 of the Communications Decency Act, 1996, a highly controversial piece of legislation in the US. I and others have argued that it has no place in the text of a trade agreement. Canada and Mexico agreed to a watered down version of Section 230 in the new NAFTA, known as the USMCA (CUSMA in Canada), but given calls in the US to amend or eliminate Section 230 it is hard to believe that its inclusion in the USMCA will have any material effect on any of the parties in terms of holding the platforms to greater account for hosting illegal or harmful content. With respect to the RCEP, this is all moot. Since the US was not a party to the negotiations, Section 230-type safe harbours didn’t come up and none of the fifteen RCEP countries had the least interest in raising the issue. Likewise, there is no inclusion of a safe harbour regime for intellectual property infringement as in some other agreements, where implementation of a notice and takedown (or equivalent) regime gives platforms protection against liability provided they respond expeditiously to bona fide takedown requests.

Some commentators have argued that the RCEP “focuses more on the balance of rights and obligations to prevent the abuse of IP rights”, but the language in the preamble, which talks about reducing impediments and distortions to trade, fostering innovation and creativity and maintaining an appropriate balance between rights-holders and users is not significantly different from the TRIPs preamble (1995) or the IP chapter preambles in more recent trade agreements like the USMCA/CUSMA. In fact, it’s a good beginning. It would have been very concerning had there not been an IP chapter in this large regional trade agreement.

For RCEP to come into effect it still has to be ratified by at least six ASEAN member states and three non-ASEAN states. Once ratified, it will join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) as an operating trade bloc in the Asia-Pacific region. The CPTPP has been ratified by seven (Australia, Canada, Japan, Mexico, New Zealand, Singapore, Vietnam) of its eleven members and has now been in effect for two years. The overlap between some RCEP and CPTPP members has led to talk of a long term aspirational goal of a Free Trade Area of the Asia Pacific (FTAAP) that would be an eventual merger of the two agreements. If that ever happened, the more comprehensive terms of the CPTPP’s IP chapter would undoubtedly prevail. (Right now, the US is the only major Asia-Pacific state not in either, but under the Biden Administration the US position may eventually change).

RCEP is a welcome step forward at a time when global trade has been threatened not only by the global pandemic but also by the increasing resort to unilateral protectionist policies on the part of some countries, such as the US under the Trump Administration. While the IP chapter and its copyright provisions are not the most sophisticated or far-reaching, they nevertheless provide a positive step forward in terms of levelling up standards of IP awareness, compliance and commitments across 15 economies–large and small, developed and developing–in the Asia-Pacific region.

© Hugh Stephens 2021. All Rights Reserved.  

Google Reaches a Deal on News Content with French Publishers but Goes to the Brink in Australia

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Finally, after months of negotiations, Google and the main French publishers’ organization (Alliance de la Presse d’Information GeneraleAIPG) have reached agreement on the principles under which Google will pay news publishers in France for use of their content in Google’s online offerings. This agreement, which reportedly covers issues such as daily volume, monthly internet traffic and contribution to political and general information will open the way for licensing deals with individual French publishers. As I wrote back in April of last year (Holding Google to Account: France Takes a Stand), it took months of protracted negotiations backed by a firm stance from the French government to reach a deal.

At that time, the French Competition Authority issued an order requiring Google to negotiate with French press publishers and news providers regarding licensing fees for news content appearing in Google search listings in France. The Authority gave Google three months to negotiate “in good faith” and come up with an agreement resulting in payment to publishers. France was the first EU member state to put in place measures to implement a new “neighbouring right” provided to publishers as part of recent revisions to the EU Copyright Directive. Google appealed the Authority’s ruling–and lost. As a result, Google started negotiating with major French publishers, including Le Monde and Le Figaro, on a revenue sharing deal, but some publishers remained opposed. The framework agreement with AIPG appears to resolve this. The conclusion of a deal in France demonstrates the need for government muscularity in dealing with this behemoth of a global corporation.

Google will fight tooth and nail to avoid any changes to its business model–through the courts, influencing public opinion, direct lobbying of national governments, and by seeking to enlist the support of the US government—as any powerful corporation would do. It takes political courage to stand up to Google, and a firm and consistent line is essential. Australia is another country learning that Google has sharp elbows and plays hardball.

Google pushed back—hard—when Australia announced it was going to introduce a new code (News Media Bargaining Code) regulated by its competition authority, the Australian Competition and Consumer Commission (ACCC), and it continues to do so. The code would require the major internet platforms (Google, Facebook) to enter into negotiations with Australian news content providers to reach revenue-sharing agreements regarding the use of news media content in the platforms’ online offerings. If no agreement is reached, an arbitrator would determine the direct and indirect value of news content to the platforms, the cost of producing it, and evaluate the impact of payment on the platforms. In response, Google launched a scare campaign threatening that Australians could lose free search, then urged Australians to swamp the ACCC with complaints.

The Australian government has not backed down to what it has termed “bullying tactics”, and it proceeded to introduce the legislation in December of last year. Meanwhile, Google was fighting rear-guard actions in other countries and, as part of its strategy, “blinked” to some extent by announcing that it was prepared to enter into licensing negotiations, on its terms, with some media outlets in some countries.  Among these countries was Australia, but no sooner were the agreements announced than Google pulled a bait-and-switch by announcing suspension of its Australian agreements because the Australian government was continuing to develop the news media bargaining code.

When the Australian legislation was finally introduced in December, it contained some concessions to Google and Facebook by explicitly recognizing that there is monetary value in the service that the platforms play by referring readers to news content. This value would have to be taken into account in any negotiations between the platforms and content providers over access to content. But this did not satisfy Google. It has gone nuclear by threatening during testimony with Senators on the legislation to once again block access to Google Search by Australians. First it “experimented” by blocking search results to Australian news sites and is now seriously threatening to close down the Search offering in Australia altogether.

Could it do so? Indeed, it could, as it has done in China, but would it? That remains to be seen. It is hard to believe that Google would abandon a market the size of Australia, where it dominates search to the tune of about 90%, and allow its competitors (Bing, Yahoo, DuckDuckGo and others) a leg up. It is also not clear whether closing down its search function would affect other Google offerings, such as Google Maps, Youtube etc. or if Australians could continue nonetheless to access Google offerings outside Australia, possibly by using Virtual Private Networks (VPNs) to skirt any geo-blocking imposed by Google. It’s all potentially very messy.

Google is also trying to get the US government to intervene, with some success. In a submission dated January 15, just five days before the Trump Administration left office, the US Trade Representative’s Office wrote that, “the U.S. Government is concerned that an attempt, through legislation, to regulate the competitive positions of specific players in a fast-evolving digital market, to the clear detriment of two U.S. firms, may result in harmful outcomes”. Harmful to whom, one wonders? Whether the Biden Administration will be as eager to take up cudgels for Google remains to be seen.

Is this about the money, or the principle? A bit of both, but mostly the latter. Google has demonstrated that it is prepared to throw some money at the problem by rolling out its $1 billion (over three years) news content initiative, announced back in October, but it wants to do it “voluntarily”, and on its terms. Its tussle with Australia is being watched by many countries (not the least of which is Canada, where news publishers have been pushing the government to take action to require the big internet platforms to share revenues generated through access to content that the publishers have produced). In France it took months of negotiations, backed up by pressure from the French government and the courts, to get a deal that satisfied both publishers and Google. The Australian government will not be easily cowed and Google is treading a dangerous path with its threats, but it also will not give way without a fight.

It is hard for me to believe that some compromise will not be found. Australia is too big and too important a market for Google to abandon. It reportedly generates about $4 billion per year in Oz, although only A$134 million of this is booked as profit. It can’t walk away from every market where it is under pressure to come to terms with news content providers. By the same token, Australia does not want to push Google so hard that it becomes the test case, but Australians, especially Australian politicians, don’t like to be threatened. That is not a wise thing to do. However, the legislation is not cast in concrete at this point; indeed the whole point of the Senate review is to assess the impact of what is being proposed and to identify areas where the legislation could be improved. I fully expect that a few tweaks will be made (the Senate Committee’s report with recommendations is due February 12) that in the end will be acceptable to Google—particularly tweaks to the arbitration process that is likely to take place after the news publishers and Google fail to agree on terms voluntarily, as seems almost inevitable. At the same time, the legislation will establish the principle of requiring payment for providing access to news content. The Australian government will settle for nothing less.

Google won’t like it, but its credibility is under threat from many sources, not the least of which are anti-trust suits in the US, and it doesn’t have many friends.  Other countries are watching and waiting to see how things will play out in Australia, after noting the agreement that was reached in France. One thing is clear. Without the threat of force majeure by governments, Google will carry on with business as usual.

France held the line, and a deal was reached. I expect something similar will happen in Australia (although if both sides are obstinate, this could go to the brink). Despite fighting to never give an inch, Google will likely have no choice but to accommodate demands from established news content providers for a reasonable degree of sharing of revenues generated from use of their content.

© Hugh Stephens 2021. All Rights Reserved.