Copyright Reform: Don’t Play Fast and Loose with Copyright Exceptions

On March 4 another attempt in Hong Kong’s never-ending saga to amend its Copyright Ordinance to bring it into the 21^st Century failed with the government announcing that it was withdrawing the Bill after weeks of discussion, debate and protests. The Bill, which the copyright industries strongly supported as necessary to deal with growing digital piracy, was attacked by an alliance of opponents, many of whom distrusted the motives of the government (and seemed to misunderstand the intent of the amendments), and others who wanted the scope of exceptions widened to include, among others, the introduction of a US-style fair use doctrine or, at the very least, a specific exception for “mash up” derivative works, or “user generated content” (UGC) along the lines of the UGC exception introduced in Canada in the 2012 update to its Copyright Law. The Hong Kong Intellectual Property Department (IPD) opposed the inclusion of a UGC exception on the basis that the concept is broad and undefined, noting that there is no widely accepted definition of UGC at the international level, and only Canada has introduced the concept in legislation.

Looser Exceptions Lead to More Litigation and Higher Costs

The IPD’s caution is well-placed. The Canadian UGC exception is a dangerous experiment that has not clarified the rights of users or copyright owners. Indeed, it is very fashionable and seductive to propose a general loosening of copyright by suggesting the adoption of a US-style fair use doctrine in jurisdictions that have for many years had the greater clarity of specified fair dealing exceptions. It has often been pointed out, including recently in the Hong Kong context, that while an open ended fair use doctrine has been in place in the US (and almost nowhere else) for many years, its application depends on legal interpretation and case law built through over 150 years of American litigation. Lawsuits are expensive and generally unnecessary where there is greater clarity. A recent report prepared by PwC examining the potential results of the introduction of a fair-use type regime in Australia concluded that the costs of copyright litigation would rise from $26.6m to $133m annually (AUD) if fair use were introduced to that country.

UGC Exception Leads to Uncertainty

What about the Canadian UGC precedent? It was introduced in the midst of a controversial updating of an outdated Copyright Act whose revision had been delayed several times by a change of government and a succession of minority governments. The new legislation, Bill C-11 or the Copyright Modernization Act (2012), closed a number of loopholes in Canadian law that had allowed Canada to become a location of choice for online pirates but at the same time it expanded the exceptions to infringement to include, among others, a new section of the Act (Section 29.21) that created an exception for content generated by non-commercial users (known as the “UGC” or “mash-up exception”). Under this exception, a consumer has the right to use, in a non-commercial context, a publicly available work in order to create a new work. The exception is subject to conditions, namely the identification of the source, the legality of the work or the copy used, and the absence of a substantial adverse effect on the exploitation of the original work. According to anecdotal reports, the exception was introduced to satisfy demands from some Members of Parliament that personal wedding videos containing background copyrighted music not be deemed infringing. While that intent may be understandable, a quick look at the wording of the exception illustrates its shortcomings. Questions of what is “non-commercial”, what constitutes a “substantial adverse effect” and what a “new work” is will inevitably end up in litigation at some point.

There is even doubt as to whether the UGC exception meets the minimum standard of the TRIPS Agreement (Three Step Test), particularly the requirement that any limitation or exception should be confined to a certain special case. This ambiguity has the potential to lead to further uncertainty and litigation.

Even when there is national legislation legitimizing the use of someone else’s work in a supposedly new “mash up” derivative work, there are limitations as to what one can get away with in a global world. This was discovered in a personal way by Michael Geist, a professor of law at the University of Ottawa. Geist, who blogs for the EFF (among others), and is a proponent of the UGC exception. He discovered that even though under Canadian law the use of copyrighted background music in a personal video is now legal, when the video in question was posted on a US site (YouTube), the non-music audio track was muted in accordance with YouTube’s policy of suppressing the audio track when copyrighted background music is detectable. Geist complains that “the decision by online video providers and social media sites to largely ignore the (UGC) provision means lawful Canadian works will be muted or taken down contrary to the policy established by the government.” Is this surprising in a world where only Canada has chosen to apply this questionable exception, and where YouTube among others is based in a jurisdiction where the exception does not apply? This illustrates the perils of “going it alone” by widening exceptions unilaterally.

Piracy does not help Rights Holders

Geist quotes a (then) government MP at the time of the debate on the new legislation as justifying the UGC exception on the basis that “these uses can enhance interest in the original when videos of user-generated content go viral on the Internet”. Except that it isn’t true. The trouble with this line of argument is that it flies in the face of logic and doesn’t hold water. There is no evidence to suggest that rights holders reap a net benefit from piracy. In fact, a recent study from Carnegie Mellon University compared the economic impact of the effect of cannibalization (i.e. box office losses) with the effect of promotion due to piracy. The study analyzed movie releases from 2006 and 2008, and from 2011 and 2013, and it showed significant increases in box office revenues if piracy were eliminated during the theatrical window. The conclusion is that although piracy does have some promotional effect, any positive impact is substantially outweighed by its negative effects.

In short, wider copyright exceptions are not the panacea that some try to make them out to be. Whether it is a questionable exception for consumer-created mash ups that piggy-back on the copyrighted works of others, or a push to adopt loosely defined and contentious “fair use” provisions that would require extensive litigation to interpret and codify, a general loosening of proven copyright protections is fraught with consequences for both users and rights holders.

Hong Kong, which has a strong content industry, has already discovered how divisive this can be. It is a disservice to all stakeholders to go down this road. Hopefully others in Asia and elsewhere who are contemplating tinkering with a clearly defined fair dealing system that has worked reasonably well over the years will reconsider the consequences of their actions.

Don’t throw out the baby with bathwater.

© Hugh Stephens 2016.

Author: hughstephensblog

I am a former Canadian foreign service officer and a retired executive with Time Warner. In both capacities I worked for many years in Asia. I have been writing this copyright blog since 2016, and recently published a book "In Defence of Copyright" to raise awareness of the importance of good copyright protection in Canada and globally. It is written from and for the layman's perspective (not a legal text or scholarly work), illustrated with some of the unusual copyright stories drawn from the blog. Available on Amazon and local book stores. View all posts by hughstephensblog