When is a “Mandatory Copyright Tariff” mandatory only if you opt-in? When you’re in Canada, that’s when.

It’s a long and complicated story, and it may not be over. In the latest turn of a very big wheel, the Federal Court of Appeal (FCA) in Canada has overturned part of the landmark Access Copyright v York University case, on which I have written in the past (here, here, and here). That case had restored some balance to copyright law in Canada, with the Federal Court handing a victory to Access Copyright on the two issues under dispute, (1) whether the interim tariff certified by the Copyright Board of Canada was mandatory (York had decided to opt-out of paying the tariff on the basis that its use of materials in Access Copyright’s repertoire was covered by fair dealing) and (2) whether York’s Guidelines on copying were consistent with fair dealing. In the initial case, the Federal Court ruled that even an interim tariff (the final tariff being still under review) was mandatory (i.e. York could not opt-out), and that York’s fair dealing guidelines were, in the words of Mr. Justice Phelan, “…not fair in either their terms or their application”. York appealed.

On April 22 the FCA released its decision. In a setback for Access Copyright, based on a lengthy review of historical legal precedents dating back to the 1930s, it ruled that the certified tariff–whether interim or final–is not mandatory, i.e. not binding on a user such as York if the user declines to pay the tariff to obtain a de facto licence from a collective society such as Access Copyright. At the same time, however, it upheld the earlier decision that York’s fair dealing guidelines were not fair from a copyright law perspective. You could say it was a mixed result but, as with many things, whether the glass is half full or half empty depends on where you are standing. Copyright critic Michael Geist of the University of Ottawa proclaimed that “Federal Court of Appeal Deals Access Copyright Huge Blow…”. Pro-copyright lawyer Richard Owens countered with “The Court Backs Creators, Not Universities”. There is truth in both assertions.

Access Copyright itself stated that the outcome was a “mixed outcome for Canadian creators and publishers”. The Association of Canadian Publishers was less equivocal stating that the Canadian copyright framework is “broken” after the Court’s decision. It issued a press release saying it was “frustrated” and “disappointed” by the decision and called for “Urgent action on the part of the federal government…to implement reforms that will correct market damage and provide a policy framework that supports future investment in Canadian writing and publishing”.

While the Appeal Court upheld the finding that York’s fair dealing practices were unfair, this was not actually relevant to the case once the Court had decided that the Copyright Board tariff was not mandatory. York had offered fair dealing as a defence against its unauthorized use of materials from Access Copyright’s repertoire given that it had opted not to pay the tariff. (The tariff would in effect have provided it with a licence for specified copying). That defence was dismissed but at the same time, Access Copyright’s suit against York for opting out and not paying the “mandatory tariff” was also dismissed. Since York was not obligated to pay the tariff, whether or not its Guidelines for use of Access Copyright content were consistent with fair dealing was moot. There is little doubt that York is now vulnerable to suits alleging copyright infringement, but these suits will have to be pursued separately by owners of the infringed copyrights, not by the collective.

Access Copyright did not bring suit against York for copyright infringement because although it represents copyright holders in licensing negotiations it does not itself hold any copyrights; its individual members do. As a result, it cannot sue on behalf of copyright owners, who will have to take that action themselves. Large publishers may be able to take on the legal costs of bringing suit, but individual authors and small publishers are unlikely to do so.

Collective licensing was a way of avoiding endless, costly litigation. The Appeal Court’s decision to declare that what had previously been considered binding tariffs are in fact only optional has exposed a major weakness in the structure of collecting and enforcing copyright royalties in Canada. One of the reasons why collective societies (also known as collective management organizations, or CMOs) exist is to provide the strength of a collective entity to negotiate licences with users on behalf of individual authors and publishers, but also to provide a mechanism for licensing that would avoid the need for litigation, thus serving both rights-holders and users.

How did it come to this? How did a “mandatory” tariff become optional? It is really complicated and I am not sure I can explain it without going into far too much detail. But it all goes back to the 1930s when collective societies (at that time called Performing Rights Organizations) were established for the music industry. At the time there was a concern that these organizations were acting as monopolies, depriving users (in the quaint language of the era) of “gramophones, sheets of music and radio receiving sets”) of access to the repertoire that the organizations represented. A form of compulsory licence was introduced through legislation, with administration of “mandatory” tariffs overseen by the Copyright Appeal Board (which became the Copyright Board of Canada in 1989). While not fixed in law, the term mandatory tariff has been widely used since that time and there was a widespread assumption within the copyright legal community that that is exactly what they were once certified by the Board—mandatory; in other words, compulsory, required by law, binding, obligatory. Pick your definition. But it turns out that the only thing mandatory about the tariffs was that once a user offered to pay or paid the tariff, it was mandatory on the CMO to licence the content, in this case, music.

Ariel Katz, a law professor at the University of Toronto, has made a crusade of arguing that the tariffs are not mandatory when applied to users. In a long blog post that he put up in 2017 right after York lost the initial case to Access Copyright, Katz criticized York’s counsel for not taking his (Katz’s) advice to argue the case on the basis that tariffs were not mandatory, based on the historical antecedents discussed above, and wondered why his (apparently unsolicited) advice was not followed. He concluded that, “the notion that tariffs are mandatory for users has been accepted as conventional wisdom among copyright collectives, the small group of copyright lawyers whose practice revolves around Copyright Board proceedings, and the clients they advise.” He surmised that since submissions to the Copyright Board were part of the bread and butter of intellectual property lawyers, who sometimes represented rights-holders and sometimes users, a form of “confirmation bias” had set in. In a conclusion that no doubt won him few friends in the practicing legal profession he declared;

“Having always assumed that tariffs were mandatory and having strategized their cases accordingly, is it possible that the lawyers involved might have ignored or minimized the importance of all arguments indicating otherwise?…Is it possible that the confirmation bias becomes even stronger because it is also self-serving? I have previously written how the view that tariffs are mandatory has served lawyers who specialize in Copyright Board proceedings nicely.”

Another reason for the assumption that the tariff was mandatory was the fact that a number of enforcement cases, where collective societies sued non-licensees, have been decided by requiring the tariff be paid. Most of these cases were decided by default with awards to the collective societies based on the amount of the tariff. However the FCA declared that damages awarded based on the tariff are different from actual enforcement of the tariff. The judge writing the FCA’s decision stated;

“I acknowledge that such enforcement (of Copyright Board approved tariffs against non-licensees) has been taking place but, in my view, it is the result of the confounding the enforcement of the tariff with awarding damages based on tariff amounts. This appears to have led to the general view that tariffs are mandatory since the measure of damages for infringement has been held to be the amounts prescribed by the tariff.”

So despite years of accepted practice based on the premise that a “tariff” (licence fee) certified by the Copyright Board requires payment by all users who use copyrighted content covered by the tariff (unless the use is covered by fair dealing), whether they voluntarily agree to obtain a licence or not, suddenly this fundamental principle no longer applies. In effect, the Court has demolished a major pillar of the collective licensing system. The fact that this interpretation is based on perceived monopolistic behaviour by Performing Rights Societies eighty or ninety years ago is particularly problematic, but it may be that from a legal perspective successive redrafting of copyright legislation did not adequately address changes that have occurred in the nature of collective societies and licensing. Far from withholding repertoire, as was apparently the case in the 1930s, collective societies today are eager to licence their content. Any “monopolistic” or market power element they may have is controlled by the Copyright Board, which has the power to certify a tariff (i.e. regulate it), although collective societies and users are also free to strike their own licensing arrangements.

Now that the Appeal Court has supported Katz’s interpretation, what happens next? Of course, the legislation could be redrafted, which is what the publishers seem to be suggesting, but that is a long-term play at best. However, all is not lost for rights-holders. As Owens points out in his Financial Post article, if you take the “glass half full” approach, the decision confirms that York’s practices as embodied in its Guidelines are inconsistent with fair dealing, opening it to litigation for infringement. This puts York (and other universities) at risk; surely it would be better to simply obtain the licence from Access Copyright by paying the modest per student tariff.

But York seems to be dug in on its position. Perhaps it is betting on the fact that suing for infringement is costly and can be complex, since proof of infringement of specific content owned by specific rights-holders must be proven. But what if Access Copyright could be assigned the rights by the owners, and sue on their behalf? To do so, they would need to change their contractual relationship with their members, but it has been done in the case of the music industry, so why not publishing? As the FCA noted (para 197), SOCAN, which is the collective rights management organization for music creators, music publishers and visual artists has been active in enforcing copyrights but it differs from Access Copyright in that it is the assignee of its members’ copyrights (at least for broadcast retransmission rights) and can thus sue for infringement without reference to a tariff.

While more litigation, perhaps on a class action basis or brought by a collective (assuming it has been assigned the copyright in infringed works), is always an option, it is hard to see how this advances the interests of either creators or users. A simple, straightforward, fair system of remuneration for copying is vastly preferable to ongoing litigation over infringements great and small. The FCA’s decision now calls that trade-off into question. Will this now be appealed to the Supreme Court of Canada–and will the SCC accept the appeal? That remains to be seen.

The original case between Access Copyright and York dates to 2013, so if there is a further appeal, we may have to wait some time yet before we know for certain whether a “mandatory tariff” is truly mandatory or simply an option to be exercised by a user.

© Hugh Stephens 2020. All Rights Reserved.