Copyright Term Extension in Canada: Facts versus “Fake News”

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Last week I discussed Article 20.62 of the new NAFTA (aka USMCA, or CUSMA if you are Canadian) that commits Canada to extend its term of copyright protection from life of the author plus 50 years to “life + 70” (for those works where protection is measured by the life of the author, which applies to the vast majority of creative works), bringing it into alignment with the US, EU and many other countries. Copyright minimalists in Canada oppose this change, although they are probably reconciled to it happening as part of the broader USMCA agreed to by Canada, the US and Mexico. (Now that the Agreement has passed the US Congress, all that remains is for the Canadian Parliament to pass its implementing legislation, and for the Agreement to be signed into law in the US and Canada. Canada will introduce legislation this week.) The new Agreement is likely to come into effect sometime this spring, although Canada has up to 2.5 years from the date of entry into force of USMCA/CUSMA to implement the copyright extension provisions.

Despite the fact that copyright extension is going to happen as part of NAFTA, the carping and spreading of misinformation about the impact and cost of extending the duration of copyright in Canada continues. Critics of extending the period of copyright protection allege that the measure will cost consumers and the Canadian economy hundreds of millions of dollars as royalties are sent out of the country. The misinformation and “fake news” on this topic is deeply entrenched and widespread, taken as an article of faith by copyright opponents.

I was particularly struck by the editorial bias inherent in emphasizing the supposed costs of copyright extension versus highlighting its benefits while listening to a recent CBC broadcast (“Cost of Living”) on copyright and the new NAFTA. The broadcast professed to examine both sides of the copyright extension issue. To be fair, it noted that the Writers Guild of Canada and the music industry in Canada favoured extension but then went on to ask, “What is the cost to the public, and to the economy as a whole?” It framed the question as “Does the public interest outweigh the interest of the copyright holder?” as if the two were incompatible. This, in my view, sets up a false dichotomy that reveals the underlying assumptions and bias in the broadcast.

Since when is the interest of the rights-holder, which normally is to seek maximum exposure to the work in order to earn a return for the creative and commercial effort that was put into creating it, at odds with the public interest? It is the economic incentive provided by copyright that encourages creators and creative industries to invest time and money in producing new content for public consumption. And since when is it in the public interest to free-ride on the creative efforts of others, undermining the commercial and social benefits that come with creation of new works?

Unable to find any study that documents the purported losses to the Canadian economy of term extension, the program resorted to quoting Howard Knopf, an IP lawyer in Toronto who among other things writes an IP blog called “Excess Copyright”. That title tells you all you need to know about the editorial position of Mr. Knopf.

Knopf is reported to have estimated the costs of term extension to Canada as being in the range of $400-$500 million dollars annually. This is totally fanciful, as I pointed out in an earlier blog. It is based on nothing more than Knopf taking a discredited New Zealand study done several years ago that estimated the cost to the New Zealand economy of extending the term of copyright protection at $55 million (NZD) annually, and multiplying that sum by the extent to which the Canadian economy is larger than the economy of New Zealand.  Even if the New Zealand study was accurate, which it was not, it bears no relation to Canada’s situation with regard to copyright industries. You might just as easily have divided the supposed benefits of term extension to the US by the respective sizes of the US and Canadian economies and come to the conclusion that if the US benefits by x, then Canada must benefit by one-tenth of that amount. With regard to the 2009 New Zealand study cited by Knopf, it was closely examined by Dr. George Barker, Director of the Centre for Law and Economics at Australian National University, who found major errors of oversight and calculation in the study and concluded that the result could easily be a benefit to New Zealand of up to $150 million annually instead of a loss of $55 million (all figures NZD). To follow Knopf’s mathematical formula, this would yield a benefit to Canada of between 1.1 and 1.3 billion annually.

The only credible study done on the effects of copyright term extension on the Canadian economy took place a number of years ago. It was commissioned by Industry Canada (as it was then called) and conducted by University of Montreal economist Abraham Hollander. It concluded that, “user cost may increase slightly in response to a higher cost of locating right holders” and that “a longer protection term will likely contribute in a small way to an outflow of royalties from Canada”. Based on the latest numbers available at the time of the study, that estimate of costs to Canada was about $2.5 million. Not hundreds of millions; not a hundred million. $2.5 million. Since that time, the creative industries in Canada—writing, music, film and television and so on— have grown exponentially thus increasing the potential benefits flowing back to Canada from the longer period of protection that Canadian authors will now enjoy in the EU and other states that confer the benefits of extended copyright protection reciprocally.

What about the impact on consumers? Will the longer term mean that consumers will pay more for copyright-protected content during the additional period of copyright protection? Intuitively one might think so, since a royalty to the rights-holder forms part of the cost of any copyright protected product, unless the use is a fair dealing or fair use (for which no compensation need be paid) or the rights-holder has licensed the content under a Creative Commons license where no payment is sought. However the few studies that have been done on this subject have proven inconclusive. It does not necessarily follow that just because a work falls into the public domain, the price to the consumer will suddenly drop.

While some works previously made available under a copyright licence might be re-issued by a public domain publisher, more often than not the extra margin is simply put into the pocket of the entity reproducing the public domain work. It’s a benefit for the republisher but not necessarily for the consumer. In addition, once a popular work enters the public domain certain publishers may decide to produce annotated and illustrated editions that themselves enjoy the benefit of copyright protection because of the addition of value-added commentary. If you don’t believe me check the prices on Amazon for the complete works of William Shakespeare for example. The works are offered at far from bargain basement prices and are generally in the same comparable price range as anthologies of works by prominent authors still under copyright.

Public domain advocates will argue that copyright protection of older published works prevents them from being reissued in new formats (such as digital editions) because there is insufficient economic incentive to do so. They claim that when a work falls into the public domain, this encourages the publication of new independent editions (which as mentioned, may themselves attract copyright protection if they contain value-added content), as there is now a new business opportunity. The argument is circular. If there is no economic incentive for a copyright protected work to be re-issued, why would it suddenly be economically attractive when it is in the public domain? If the work has no potential for economic return, how does its arrival in the public domain change this? If it does have economic value, why wouldn’t the rights-holder exploit this potential? When a work is protected by copyright, the rights-holder has the incentive to maximize the expected return by issuing updated editions attracting new readers. An additional benefit is that the integrity of the work can be protected, preventing the publication of spin-offs that can diminish the creative value of the original.

The reality is that older works are republished by both rights-holders who still hold the copyright and by public domain publishers when copyright has expired, depending on the rules that apply in any given situation. Under both scenarios there is the potential for the consumer to benefit from greater offerings, but the price differential in most cases will be minimal or irrelevant. The real issue is who gets to reap the economic returns from the work, the rights-holder or a public domain publisher.

I will have more on this issue of “public domain vs. copyrighted content” from a publishing perspective in my next blog.

As I noted last week, copyright term extension is coming to Canada, despite the misinformation that is being slung around regarding its cost and impact. The only question is whether it will be implemented immediately upon entry into force of the new NAFTA/USMCA or whether the government exercises its right to a transition period where it consults on the possible establishment of a two-step process, requiring an additional registration to access the added period of protection. One thing that I predict; once the longer term becomes an accepted fact of life, it will be quickly factored into business models and cease to become much of an issue of public debate.

© Hugh Stephens 2020. All Rights Reserved.

4 thoughts on “Copyright Term Extension in Canada: Facts versus “Fake News””

  1. Dear Hugh

    Happy 2020.

    I continue to read your, always insightful blog and am grateful for all the light that you shine on

    the true importance of the world recognising and respecting copyright as a central tenet for the

    support of creativity; and investment in dissemination of education and innovation around the world.

    Your latest blog, picking up on “misinformation” chimes well with the new debates that it appears will

    take place within the UK about the position of the terms of the 2019 EU Copyright Directive and

    future copyright policy in the UK.

    So much work went into enabling the realisation of the Directive as a step forward for development of

    copyright in European countries where electronic transmission of works is now such an important

    part of enabling the use and appreciation of new copyright works.

    It is to be hoped that the creative and innovative reasoning which led to the development of the Directive

    will not be lost in a new cloud of “misinformation” on the back of the BREXIT process within the UK.

    With best wishes

    Andrew Yeates

    The information contained in the email and any attachments to it is confidential. The information is intended for the addressee(s) only and should not be read,copied or disclosed to any person, distributed or otherwise used by any person who is not the intended recipient. If you are not the named recipient or your name has been added as a recipient in error or you believe that your nahe challenges which me has been added as a recipient in error, or you believe that it may have been, please contact the sender and delete the email from your system.

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  2. Thank you for this excellent piece. As an additional point, I do not see enough discussion among economists about the distributional effects of copyright. If my car is stolen someone else will have the benefit of it and so public welfare is pretty much unaffected in the short term. But leaving dynamic effects completely out of account, it still seems wrong to allow the thief to reap where he has not sown. In short, there is more to “welfare” than the aggregate satisfaction of demand.

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  3. Mr. Stephens: While not fully on-point, you may want to review the article by Rebecca Giblin et.al. in the Nov. 2019 UNSW Law Journal, ‘What Happens When Books Enter the Public Domain? Testing Copyright’s Underuse Hypothesis across Australia, New Zealand, The United States and Canada’.

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