Month: September 2020

This is a story with many facets. It is about the intersection of copyright and design, but is also an amusing story involving a design application submitted to the Hong Kong Intellectual Property Office by an iconoclastic entrepreneur who sought to register the design shown above, an image that resembles the “good fortune” cat statuettes found in corner stores, offices and restaurants throughout East Asia but with a notable exception, the raised middle digit of the feline’s right paw. It is also about the relationship between Hong Kong and China, the “One Country-Two Systems” principle under which Hong Kong operates as a “Special Autonomous Region” of China, and the extremely cautious “politically correct” positions taken by Hong Kong authorities on any issues possibly related to public order and morality. (One cannot help but speculate on what motivates this).

First, let’s review what we mean by “One Country-Two Systems” (1C2S) and how it is that Hong Kong can make and enforce its own IP laws (as well as laws in other areas) even though it is now a part of China. We have heard a lot lately about the “1C2S” principle because it has come under severe stress and challenge. “One Country-Two Systems” was the special arrangement agreed to between China and Britain, incarnated in the Sino-British Joint Declaration of 1984, a bilateral treaty that helped pave the way for Hong Kong’s return to Chinese administration in 1997. Under “IC2S” Hong Kong retains a substantial degree of autonomy, (except in foreign affairs and defence), including rights and freedoms such as those of the person, of speech, of the press, of assembly, travel, academic research, religious belief, private property and foreign investment, and others (including intellectual property). In addition, Hong Kong is a separate customs territory which operates as a free port. It also maintains its own financial institutions and currency and its own legal system, police force and courts. These freedoms were guaranteed for a period of fifty years after 1997. During the fifty-year period of 1C2S China agreed not to interfere with Hong Kong’s internal affairs. (The question, of course, is what constitutes an “internal affair”).

Of late China has trampled all over Hong Kong’s “1C2S” autonomy with passage by the National People’s Congress of a new national security law for Hong Kong. That law can bypass Hong Kong’s police and courts in cases that China deems to involve its national security and can result in Hong Kong citizens being sent to the Mainland for trial and likely, indefinite incarceration. This exception to 1C2S is supposed to be rarely used and only for severe cases that threaten China’s national security. Well, we’ll see. Since it includes the crimes of sedition, subversion, terrorism and collusion with foreign powers, depending on how those crimes are interpreted and enforced, the new national security law could constrain many of the freedoms supposedly guaranteed to Hong Kong under 1C2S. There is no question that this is an erosion of the autonomy granted to Hong Kong and is a further sign of the gradual assertion of full Chinese control. Apologists for the law claim that it is necessary to curtail unlawful activity that threatens national security.

There is no question that Hong Kong has had its share of what might be considered unlawful activity in the past couple of years, with widespread protest demonstrations, sometimes violent, against actions by the Hong Kong Government to enact a treaty that would allow Hong Kong residents to be extradited to China to face criminal charges there. Demonstrations have also focussed on failure to follow through on measures promised in the Sino-British Declaration to allow for increased voting rights for the position of Hong Kong Chief Executive, and other grievances against creeping extension of Chinese authority in the territory. Whether these protests in support of democratic rights undermine China’s national security is of course another question entirely.

The Hong Kong government has been careful not to rock the boat when it comes to relations with China, and has deployed the Hong Kong police to restrain the demonstrations, often with violence (although to be fair there has been violence on both sides). It is fair to say that Hong Kong officials are “politically correct” to a fault when it comes to how the territory is administered and perceived by Beijing, and Hong Kong’s Chief Executive is seen by many as not standing up for Hong Kong interests against Chinese pressure. This political correctness is well-illustrated in the story that follows.

While “1C2S” is under stress because of the new national security law, it is worth remembering that Hong Kong still retains a degree of legal autonomy and still deals with many issues quite differently from China. One of these areas is copyright and intellectual property (IP) generally, where there is a far higher degree of legal protection for IP and much stronger enforcement than in China.  This helps explain why China is a perennial chart-topper (not a place you want to be) in the annual Special 301 report on IP practices abroad produced by the US Trade Representative’s Office, whereas Hong Kong has seldom made the list, although in the most recent report, it gets (dis)honourable mention for allowing open sale of Illicit Streaming Devices and for insufficient enforcement regarding the use of Hong Kong as a transit hub for traffic in counterfeit goods. However, unlike China, it is not named to the Priority Watch List or the Watch List, the list of IP transgressors identified by USTR annually.

The Hong Kong Intellectual Property Department is responsible for trademarks, patents, designs and copyright within Hong Kong. It is proud of Hong Kong’s reputation as a jurisdiction that respects IP; indeed, this respect for intellectual property is advanced by Hong Kong authorities as one of the territory’s attributes when it comes to attracting foreign investment.

That’s the background. Now to the design registration case at the heart of this blog. The “angry cat” design that the applicant sought to register is based on an age-old Japanese and some say also Chinese icon, the so-called “fortune cat” or in Japanese Maneki Neko. It is a centuries old symbol. What made the angry cat design unique was the modification of the cat’s paw, sporting an upraised middle finger rather than the waving or beckoning gesture that Maneki Neko cats normally have, plus displaying a scowling or contemptuous expression instead of the fortune cat’s usual benign stare. The application for registration was initially rejected on the basis that the design was contrary to public order or morality. The applicant then requested a hearing to review the decision.

What was it about that design that so offended public order that it could not be registered? Well of course it was the “middle finger gesture”. But what exactly does that gesture mean? The applicant, showing no shortage of the creativity that had led him to create the “angry cat” in the first place, claimed that the middle finger gesture does not only convey a message of being rude, contemptuous or disrespectful, but may also convey a message of being humorous, playful or dissatisfied. Moreover, it depends on how a person subjectively thinks about the middle finger gesture. It is commonly used, he claimed, in popular culture and is growing in acceptance. (Some notable examples are Ai Weiwei’s famous middle finger works of art, former Canadian Prime Minister Pierre Trudeau’s so-called “Trudeau salute”, and a host of other notables “flipping the bird” ). The reviewing officer was not buying it. Citing a UK precedent in which the question posed was whether the design was likely to cause “outrage” or be “subject of justifiable censure amongst a relevant section of the public as being likely to undermine current religious, family or social values”, he concluded that combined with the contemptuous facial expression, the design would cause greater offence than just distaste. In fact, he concluded, many “right-thinking” people (a quasi-legal term in the UK implying the broad mass of law abiding citizens) associate the middle finger gesture with the English swear word “fuck” and would find it an offensive and insulting gesture. Besides, children might see it! Imagine how public order in Hong Kong would be undermined if an army of middle-finger gesturing angry cats suddenly appeared in shop windows. Not that refusal to register the design meant that it could not be sold in the territory. It just couldn’t be registered as a design. However, it probably still has copyright protection in Hong Kong, so I hope public order and morality can be maintained.

A design can be protected in Hong Kong through both design registration and copyright law. In Hong Kong, there is no requirement for registration of copyright, and in fact you cannot register a copyright. It is automatic upon creation of the work and normally lasts for the lifetime of the creator of the work, plus fifty years. However,  in a case such as our contemptuous cat, where an article is made by an industrial process and marketed based on an artistic work, if the article is registered as a design, copyright is shortened to 25 years from the end of the calendar year in which the article is first marketed, and if the article is not or cannot be registered as a design, copyright is shortened to 15 years.

A design on the other hand can be registered, and is valid for a period of five years, with five year renewals up to a maximum of twenty-five years. A registered design will give the designer the right to prevent others from manufacturing, importing, using, or selling the design. It can protect the shape, configuration, pattern or ornament applied to an article by any industrial process. In this case, as we have seen, the applicant was denied design registration but will still likely enjoy some protection by virtue of his copyright for a period of 15 years.

The overlap between design and copyright is outlined in an article by Hong Kong law firm Angela Wang & Co., using a teapot as an example;

“Registered design will protect the shape and configuration of the teapot only (but) according to the Copyright Ordinance of Hong Kong (Cap. 528), artistic work includes the making in 3 dimensions of a 2-dimensional work and the making in 2 dimensions of a 3-dimensional work. Therefore, if someone manufactures the teapot according to the designer’s drawings without his consent, that person will infringe the copyright of the designer as copyright protects both 2 and 3 dimensional works. Both registered design and copyright can protect the design of the teapot. (However),

(a) copyright protects the design against copying whereas a registered design not only protects the design from being copied, but also against an independent creation which is not substantially different from the registered design;

(b) copyright protects artistic work whereas a registered design protects shape, configuration, pattern or ornament applied to an article by any industrial process, being features in the finished article appeal to and are judged by the eye.”

So, there you have it. Indeed in many jurisdictions, there is intersection if not complementarity between registered design registration and copyright, as in the US (see example here), Canada (here) and the UK (here). Even though our Hong Kong applicant was not allowed to register his creation, he still gets a degree of copyright protection in Hong Kong despite the supposedly offensive nature of that naughty cat image, supposedly undermining Hong Kong’s public order and morality.

Will “angry cats” giving the middle finger salute make it to China? It is unlikely. After all, if they undermine public order in small place like Hong Kong, imagine the consequences in country of 1.4 billion! But there is a sequel to this story that illustrates that some elements of the “One Country-Two Systems” arrangement still exists. The creator of the “angry cat” wanted to register his mark (“chop”) under the trade name  of “Lao Ganbu”, which in Chinese roughly translates as “old official”, usually applied to longstanding members of the Chinese Communist Party. The registration was turned down in China with the explanation that only veterans of the Long March were allowed to style themselves as “lao ganbu”. In Hong Kong, however, the mark was approved. One Country-Two Systems lives! But for how much longer?

© Hugh Stephens 2020. All Rights Reserved.

For those of you interested in getting a limited numbered edition of the angry cat, verified as genuine by the “Lao Ganbu” chop, they can be ordered online from the Hong Kong outlet “Goods of Desire” (GOD). (https://god.com.hk/collections/angry-cat).

Back in November of last year, the Federal Court of Canada issued Canada’s first site blocking order, an injunction requiring a number of Canadian ISPs to block two sites (GoldTV.biz and GoldTV.ca) that were providing pirated streaming content to Canadian households from offshore servers. Since then the target of blocking has shifted as the pirate content distributors play the evasive game of domain shifting, abandoning the original blocked sites while creating new ones. The applicants need to get court approval each time the list of blocked sites is amended, an ongoing game of cat and mouse.

At the time of the Court’s decision, I commented on the diametrically opposed interpretation of the decision coming from different quarters. While noted Toronto IP attorney Barry Sookman praised the decision as “carefully reasoned”, Michael Geist of the University of Ottawa, no fan of copyright (an understatement to be sure), called the decision “deeply flawed”. Geist has been a longstanding opponent of site blocking, and as the strategy of the content providers–who formed a coalition known as Fair Play Canada–changed from initially seeking establishment of an administrative agency that would adjudicate site blocking requests to now seeking court injunctions, Geist’s opposition has shifted as well. Originally, he criticized the Fair Play Canada proposal as being non-transparent and bemoaned the absence of court orders and full due process when identifying which sites to block. Now that a court order has been issued, he has shifted gears and is criticizing the role of the courts, arguing instead that any decision on site-blocking should be made by Parliament through amendments to legislation. (Those supporting site-blocking argue that while the Copyright Act does not specifically mention targeted blocking as a remedy, it does not preclude it. What the Act does provide for is injunctive relief, which the court has granted in the form of the site-blocking order).

While right now Dr. Geist seems to be advocating for a role for Parliament, if Parliamentarians ever get around to considering explicit legislation to enable site-blocking, as Australia has done, I am willing to bet that he will be among the first witnesses appearing to argue against the proposal.

With regard to the Federal Court’s GoldTV decision, all of Canada’s major ISPs accepted the outcome with the exception of one small ISP reseller, Teksavvy, which launched an appeal. At the time that appeal was filed I wagered a rhetorical bottle of Newfoundland Screech that we would see Silicon Valley-funded groups such as the Samuelson-Glushko Canadian Internet Policy & Public Interest Clinic (CIPPIC) at the University of Ottawa (founded by Michael Geist in 2003) seek intervenor status to support Teksavvy’s appeal. I don’t know who to claim my bottle of Screech from but both CIPPIC and the Canadian Internet Registration Authority (CIRA), represented in part by Dr. Geist’s University of Ottawa law faculty colleague Jeremy de Beer, have filed for intervenor status in support of Teksavvy. Their brief can be read here. TorrentFreak did a pretty good job of summarizing the arguments, which fall into several categories.

Most of CIPPIC’s arguments are technical, for example, questioning whether the Court has jurisdiction to decide the question, arguing that the Telecommunications Act is the applicable legislation to regulate site-blocking, and commenting on the nature and extent of foreign site blocking laws.  The intervenors supporting the initial decision, representing a range of content owners and rights-holders, including music, publishing, and sports, argue on the other hand that the Court has competence, that the Copyright Act does not rule out injunctive relief, and the orders are fully in compliance with Canada’s international obligations, among other points. The CIPPIC/CIRA intervention also argues that allowing the blocking of pirate sites undermines the balance between users and rights-holders inherent in the Copyright Act. Their brief states that encouraging the dissemination of works is one of the Act’s core objectives. No doubt this is true, but the protection of rights and allowing creators to reap just reward is also a key objective. It is hard to see how encouraging or allowing the dissemination of infringing/unlicensed/stolen content is consistent with the core values of copyright or the overall objectives of the legislation.

Other arguments, not in CIPPIC’s brief, have been advanced by the appellant Teksavvy, including arguments about freedom of expression and net neutrality. No one in their right mind would consider that blocking offshore websites that disseminate pirated, unlicensed content, while simultaneously pushing advertising for dodgy products and often installing malware on the laptops of consumers foolish enough to think that they are getting something “for free”, is a violation of the freedom of expression. Whose expression? The pirates, or the consumers of infringing content? Surely I don’t need to repeat the obvious fact that free speech has its limits. No one is entitled to claim the right of free speech to deliberately cause harm to others (the calling “Fire” in a crowded theatre analogy) and the right of access to content on the internet is accordingly constrained by the law. Child pornography is the most obvious example but there are a number of others. Illegal conduct does not become legal just because it is conducted online. As the Supreme Court of Canada stated in its landmark decision on Google v. Equustek;  

 “jurisprudence has not, to date, accepted that freedom of expression requires the facilitation of unlawful conduct…”

Although Teksavvy claims it is fighting for internet freedom and not to defend piracy (David vs. Goliath and all that), it is pretty clear that this is all about competing with the large ISPs, some of which are themselves large content providers, such as Bell and Rogers. Not surprisingly, the ISP arms of these companies did not oppose the site blocking order, but nor did any of the other ISPs named in the order. If Teksavvy is permitted to continue providing access to pirated content to its subscribers while its major competitors are either constrained from doing so, or willingly agree not to, this gives “David” a competitive advantage when it comes to finding and keeping customers, especially those whose proclivities tend to consumption of content they haven’t paid for.

If Teksavvy’s motives are not that hard to figure out, I find it really difficult to get my mind around why an institution like CIPPIC, that claims it is a “public interest” law clinic, would be so vigorous in advocating against measures clearly designed to assist legitimate, employment-creating, taxpaying businesses against offshore bad guys, content pirates who contribute nothing in terms of social benefits and whom everyone recognizes are not playing by the rules. Where is the “public interest” in that position. Maybe they just don’t like creators and the content industries? 

CIPPIC’s opposition seems to be driven by an ideological bent to oppose reasonable online regulation in the copyright field on the dubious premise that this will constrain the growth of the internet and internet freedom. (This position is remarkably similar to arguments put forth by Google in any forum where there is an attempt to protect rights-holders and put some reasonable controls on behaviour of internet intermediaries.) Just a coincidence, I guess. To pursue its agenda, CIPPIC employs skilful legal practitioners who dive into the nooks and crannies of the law. That’s as it should be of course, since the law has to be clear, and in the end dispense justice–although sometimes the law and justice are not synonymous. In my view, if there is any justice in the current situation, the Federal Court will dismiss Teksavvy’s appeal, but we will have to see what points of law are considered.

But here’s the rub. Content owners are not seeking to impose their content on unwilling consumers. There is a plethora of legitimate content available at just about any price point. They are also not seeking to constrain freedom of expression on the internet. All they are trying to do is stop organized criminal enterprises from undercutting legitimate businesses that contribute to the Canadian economy and support Canadian cultural expression. Their response measures are proportionate and targeted, and come after a series of frustrating experiences in trying to shut down domestic distributors of unlicensed “Kodi” boxes. How is it in the “public interest” to fight this tooth and nail as CIPPIC is doing? What am I missing here?

© Hugh Stephens 2020. All Rights Reserved.

Newspapers and news magazines are struggling but online news aggregators, like Google and Facebook among others, are thriving. The ad dollars that prop up the internet behemoths have drifted away from the producers of the news to those who facilitate access to it without themselves having to invest in the creation of the content that attracts consumers. Readers are drawn to news headlines and stay on the internet services longer in order to browse news content through the portal. This in turn attracts advertisers and helps explain the enormous valuations of Google and Facebook in contrast to the paltry returns, if not incipient bankruptcy, of many newspapers. In the face of the challenges facing news sources on life support, and in support of the principle declared boldly on the masthead of the Washington Post that “Democracy Dies in Darkness”, governments have scrambled for ways to support traditional news-gathering, analysis and reporting. In Canada, a variety of measures have been employed ranging from tax credits to direct funding of local news reporting. But this is chump change when it comes to gaining access to what news organizations consider to be a fair share of the advertising revenues that their content helps generate.

We are talking big bucks. Naturally the internet platforms are not going to roll over and easily give up a share of their revenues. In fact in Australia, where the government is currently proposing a revenue sharing agreement between platforms and news creators, Google is on the war-path. At the end of July, the Australian Government revealed draft legislation that would allow news publishers to negotiate with platforms like Google and Facebook for the latter’s use of news content. The “News Media Bargaining Code” will be administered by the Australian Competition and Consumer Commission (ACCC), using competition law to redress the imbalance of bargaining power between the platforms and news providers. There will be compulsory arbitration after three months if the two parties can’t come to a negotiated agreement, with ACMA (Australian Communications and Media Authority), the broadcasting and media regulator, having the authority to assign arbitrators if there is disagreement. The Code is backed up with substantial fines that could reach ten percent of digital revenues generated in Australia. In addition, there are some other elements of the Code besides revenue sharing that Google in particular objects to, such as required advance notice of changes to algorithms that could affect news item rankings, and a requirement to share data about users accessing news content.

Google has launched a campaign to get Australian consumers to pressure its government to back off, threatening that Australians could lose free search and privacy protections. It has urged Youtubers to bombard the Australian government with complaints about the proposed Code, arguing that the new legislation would benefit “big news businesses”–although the news organizations who will benefit are just a fraction of the size and valuation of Google itself–and even though Youtube is not covered by the proposed legislation.  The ACCC and the Australian government have issued rebuttals  to Google’s allegations, criticizing it for exaggerating and mounting what they term a “scare campaign”, and show no signs of backing down. Google could of course close its operations in Australia, but that is seen as an empty threat. Australia is an important market for Google (it is reported to generate $4 billion annually in revenues). The real issue for Google is one of precedent with regard to payment for news content. It is concerned that if it loses the fight in Australia, this will weaken its position elsewhere.

Google’s basic position is that it provides a service that allows consumers to locate and access content, which in turn benefits the content creator. Creators of the content argue that Google is free-riding on and monetizing their content by collecting and using consumer data for ad targeting (although Google does not sell ads on Google News itself). While Google has announced that it will selectively pay for some content, this is the exception rather than the rule and is on Google’s terms. Google has enormous market power, as it demonstrated in Spain and Germany a few years ago when authorities in those countries attempted to impose revenue sharing arrangements between platforms and news publishers. Google simply shut down Google News in Spain and in Germany kicked off its news platform any news providers who did not agree to voluntarily give Google access to content without payment. This “punishment” made it more difficult for consumers to access news content, impacting views on the publisher’s sites, and soon brought them to heel. (The proposed Australian legislation prevents Google from doing this).

The EU responded with legislation creating a new publisher’s right within the Copyright Directive. (Four years ago I wrote about the need for such a right, and am pleased to see it now enacted).  At the present time, EU authorities are preparing for a second run at Google’s practices, with France in the forefront. (“Holding Google to Account: France Takes a Stand”). Back in April, the French competition authorities gave Google three months to negotiate in good faith with publishers and come up with an agreement that results in payment to them. That period has elapsed and it seems that negotiations are ongoing, with Google dragging its feet by reportedly offering only small payments that publishers have so far rejected. Enabling the negotiations is the EU’s new “neighbouring right” for publishers that expands their ability to control the reproduction and communication of their work to the public.

Facebook has also been active in opposing the Australian initiative. It is fighting the ACCC’s proposals by threatening to pick up its ball and go home. It claims that news content represents “only a very small fraction of the content” in a users’ news feed and has threatened that if the proposals are adopted, it will remove and block news content on its platform. While a user’s news feed consists of a variety of content, including news but also photos, videos, likes, etc., news content plays a role in keeping users engaged and staying on the platform longer (and thus becoming more attractive to advertisers).

Meanwhile, in the wings, Canada is watching and waiting. Responding to Google and Facebook’s tactics “Down Under”, Heritage Minister Steven Guilbeault stated that, “The Canadian government stands with our Australian partners and denounces any form of threats.”  Guilbeault has suggested that legislation could be introduced this autumn requiring companies like Google and Facebook to compensate news organizations when they use their content.  This came after a public plea to the Canadian Government by Canada’s major newspaper publishers.

One approach that Guilbeault could adopt is to establish new rights for publishers along the lines of the EU’s expanded neighbouring rights regime. The Parliamentary Committee that examined the Copyright Act as part of a periodically mandated review of the legislation last year looked at what it termed a “journalists remuneration right”. Noting that, “The production and dissemination of news content is essential to democratic societies”, the Committee stated that it “supports the notion that OSPs (Online Service Providers) who profit from the dissemination of copyrighted content they do not own should fairly remunerate its rights-holders”. However, at the time the Committee was not prepared to make a recommendation for action, but instead proposed further study to take into account developments in other countries dealing with the same issue. Its specific recommendation was that;

“the House of Commons Standing Committee on Canadian Heritage consider conducting a study to investigate the remuneration of journalists, the revenues of news publishers, the licences granted to online service providers and copyright infringement on their platforms, the availability and use of online services, and competition and innovation in online markets, building on their previous work on Canada’s media landscape.”

Despite this cautious recommendation, it appears that Minister Guilbeault is preparing to move soon to deal with the issue of fair remuneration for use of news content without prolonged further study. There are various ways to go about this. The government may choose to deal with this as a copyright rather than a competition issue, for example, or it may pursue other means. One factor to bear in mind is the possibility of running afoul of commitments Canada made in the new NAFTA (USMCA) agreement, an objection raised by University of Ottawa law professor Michael Geist, who has consistently opposed requiring platforms to share ad revenues with content providers. Geist has argued that a system that required US companies to pay while only Canadian companies benefited would “likely” violate the USMCA, although this is difficult to predict since the Agreement requires only that digital products of one party be granted treatment no less favourable than like digital products of the other party. However, any measure adopted that is of general application would be non-discriminatory, even if it happened to have the greatest impact on US companies like Google and Facebook.

It is plain that perceptions have changed over the last decade about the value and importance of protecting and remunerating professional content in a world awash in disinformation and illegally distributed works. The fact that legislators and regulators are more engaged than ever in addressing abuses and ensuring a healthy online environment is to be welcomed.

The struggle going on in Australia and France between Google, Facebook and news publishers is unquestionably germane to what happens in Canada, and the stakes are high. Even in the US Google is facing its critics. Draft legislation, the Journalism Competition and Preservation Act, has been introduced into Congress, both the House and Senate, with bipartisan support. If adopted, it would provide news publishers with a four-year exemption from anti-trust restrictions so that they can combine to negotiate with major platforms. It has been supported by the Authors Guild and the News Media Alliance, among others. The legislation would apply to Google and Facebook and potentially to Apple and Microsoft, given their revenue thresholds. At the moment, however, this legislation is stalled while the US Presidential election is underway.

Given widespread dissatisfaction with Google’s current dominant role in many countries, it seems likely that the internet giant will have to make some compromises and start negotiating compensation for its access to valuable news content. However, the amount of revenue it is prepared to offer is likely to be considerably less than the publishers would like to see, although certainly more than Google would like to pay.  If agreement cannot be reached, governments will have to step in and broker a deal. As has been seen in Australia, Google will pull no punches and will use every means it has to fight forced sharing of ad revenues. In the case of Canada, it will undoubtedly remind the Canadian Government of its significant investments in R&D facilities in Waterloo, Ontario with planned expansion in Toronto and Montreal. Of course Google is not investing in Canada to be nice to Canadians. Waterloo is the hub of Canada’s “Silicon Valley” and an important source of cost-effective talent. Plus, Canada’s multicultural society and more relaxed immigration policy make it attractive to offshore software engineers and other experts, something that Google has not hesitated to benefit from. Facebook could also make threats to remove news content from its platform in Canada, similar to what it is threatening to do in Australia, although it surely recognizes that access to news is a key part of its offering and attraction to users. The fact that it has moved to license some content from trustworthy news providers is proof of the value proposition that reliable news content presents.

Will Canada grasp the nettle and introduce legislation to give news publishers greater control over their content, thus helping them to negotiate licensing fees with the big online platforms? Will the pushback from Google and Facebook in Australia give Canada pause? Heritage Minister Guilbeault has said that Canada will not be bullied, comparing the tech giants to “polluters”, a reference to his earlier incarnation as an environmental activist. We will have to wait to see what transpires this fall. First, however, the Trudeau government has to survive a confidence motion when Parliament resumes at the end of September (recall that it is a minority government and requires the support of at least one of the three main opposition parties to survive such a vote), and then it has to decide that copyright issues require legislative attention at a time when response to COVID dominates the Parliamentary agenda.

There is a legislative opportunity, however. Despite COVID, Canada needs to introduce amendments to the Copyright Act to bring it into conformity with commitments made in the USMCA to extend the term of copyright protection in Canada by an additional twenty years. Canada has 30 months from the date of implementation of the Agreement, July 1, 2020, to do so. The statutory need to review legislation would give the government an opportunity to address some other issues at the same time, including fair remuneration for online news content.

I am sure the Canadian Government is watching with great interest what happens in Australia with regard to Google and Facebook and their attempts to roll back the proposed Australian legislation. Meanwhile this autumn’s legislative agenda is being considered and I am betting that the odds are pretty good that publishers of news content—and possibly final publishers of other types of content as well—will find themselves equipped with legal provisions designed to help them negotiate a fairer share of the online revenues that their content generates. If it doesn’t happen in the fall session, then look for legislation to be introduced next spring. Either way, the day of reckoning is coming for the big platforms. And it’s about time.

© Hugh Stephens 2020. All Rights Reserved

This post has been edited and updated to reflect recent remarks by Minister Guilbeault on the situation regarding Google and Facebook in Australia and on possible action on this issue in Canada.

In April of this year, the Federal Court of Appeal (FCA) handed down its decision on the appeal by York University of an earlier Federal Court decision regarding a dispute between York and Access Copyright (the authors and publishing collective rights management organization) over York’s unlicensed use of material from Access Copyright’s repertoire. The initial decision had found not only that York’s “Fair Dealing Guidelines” were unfair, and did not justify York’s unlicensed use of these materials, but that York was required to pay the interim tariff established by the Copyright Board of Canada for use of the works. The FCA upheld the initial Court’s conclusion that York’s Guidelines were unfair but overturned the copyright world in Canada by determining that tariffs approved by the Copyright Board were not mandatory after all. Users could decide to opt out, leaving rights-holders only one recourse; to sue unlicensed users for copyright infringement. Unfortunately, most collective societies–like Access Copyright–are not rights-holders themselves but only represent rights-holders for the purposes of collecting royalties. 

For the non-cognoscenti, it might be useful to review what an “approved tariff” is, and what role the Copyright Board of Canada plays in establishing one.  According to its website, the Copyright Board of Canada is;

“an economic regulatory body empowered to establish, either mandatorily or at the request of an interested party, the royalties to be paid for the use of copyrighted works, when the administration of such copyright is entrusted to a collective-administration society.”

Collective societies like Access Copyright, SOCAN, etc. were established to facilitate the collection of royalties owed to creators (musicians, songwriters, performers, authors etc.) for use of their works given the unfeasibility of thousands of creators chasing tens of thousands of users for small payments. The intent was to use economies of scale to keep costs down for rights-holders but also to make it simple for users to legally access content. To further simplify this system, and to avoid costly and unnecessary litigation, where parties could not mutually agree on a royalty rate or licence fee, tariffs were established to set a value on the use of copyrighted materials, such as music and published works. Parties could get together to propose a tariff in lieu of a licence agreement if they agreed on the royalty rate, but where it was impossible to agree on a value, one was set through adjudication by a quasi-judicial body like the Copyright Board. This “mandatory” tariff was then applied to all users who accessed a repertoire covered by the tariff. That has been the system for several decades, ever since the late 1980s when the proliferation of photocopying led to legislation that encouraged establishment of new collective societies through amendments to the Copyright Act. It was at that time (1988) that Access Copyright was formed. 

There were further amendments in 1997 to address the challenge of digital copying. Collective societies, (licensing bodies), were given new powers including the right to file a proposed tariff with the Copyright Board setting out the terms and conditions under which reproduction of the collective’s members’ works would be permitted. After the Board had certified (approved) a tariff, collective societies were allowed to collect the specified royalty and, if not paid, recover it in court. This system worked smoothly for a number of years in the publishing sector with Access Copyright, and its clients (primarily Provincial and Territorial Ministries of Education, school boards in Ontario and post-secondary institutions) voluntarily agreeing on a value for copying. However, over time the consensus as to what constituted a fair royalty rate for copying broke down and the Copyright Board was required to determine a tariff that would have to be paid. This process was cumbersome and protracted, with the result that an interim tariff often had to be established setting out royalties to be paid pending confirmation of the final tariff. It was at this stage that York University decided to opt-out of the interim tariff (back in 2011). The case went to the Federal Court, which denied York’s right to opt-out on the basis that the interim tariff, like a final tariff, is mandatory if an unauthorized use of a work in Access Copyright’s repertoire is made. This is the decision that the FCA has now reversed. 

The FCA’s decision went further than simply declaring an interim tariff to be optional. It declared that all tariffs that had been considered “mandatory” until now were in fact optional for users—and always had been despite the fact that a number of enforcement cases in the past, where collective societies had sued non-licencees, had been decided by requiring the “mandatory” tariff be paid.  As I documented in a blog posting back in June, (“When is a “Mandatory Copyright Tariff” mandatory only if you opt-in?”) this decision was arrived at on the basis of a 1930’s era judicial precedent and the Court’s reading of the legislative record in the 1980s and 1990s. The FCA decided that the original basis for establishment of the mandatory tariff back in 1936 was still the operative legal principle. During the Great Depression, Performing Rights Organizations (PRO) were accused of withholding repertoire from users such as radio stations, sheet music publishers and record manufacturers in order to increase returns, thus behaving in an anti-competitive manner. In the 1930s, the mandatory nature of the tariff was such that if a user opted to pay the established royalty, the PRO was required (mandated) to license the content. At that time, the obligation (mandatory nature of the licence) was on the rights organization or collective society to make the content available, not on the user to pay for using the content without a licence. 

Today the situation is exactly the opposite. Collective societies are eager to license content in their repertoire; the main issue is setting a value on it. That’s where the Copyright Board’s tariff determination and approval process comes into play. Today the issue is not that users cannot get access to content, it is that they are using it without obtaining a licence. When they do so, if a tariff has been approved for that content by the Copyright Board, the understanding has always been–until the FCA’s recent decision–that users of such content are required to pay the tariff (interim or final) whether or not they have sought a licence.

In reaching its decision, the FCA sifted through the entrails of the original 1930s court case and subsequent amendments to the Copyright Act over the years. It concluded that despite substantial redrafting of legislation in both 1988 and 1997, the original elements and language of the tariff regime, and thus the intent of a mandatory tariff, had never been changed. It is a surprising conclusion and we will not know whether the FCA is right until the Supreme Court of Canada (SCC) reviews the decision if it decides to grant leave to hear the appeal. (Both York and Access Copyright have appealed). However, there is no guarantee that the SCC will grant leave (known as certiorari in the US) to hear the case. The SCC has full discretion as to whether or not to hear cases on appeal, and it is not required to provide reasons for declining to grant leave. Less than one in six cases is successful in applying for review. Even if the SCC does agree to hear the case, it will likely take several years to reach a conclusion. In the meantime, a huge pall of uncertainty has been cast over the whole structure of copyright remuneration in Canada. 

But there is another solution. That is to have Parliament clarify the situation by amending the wording of the Copyright Act so that the intent of Parliament, as expressed through amendments in the late 1980s and 1990s, is restored. After all, while the Courts interpret the law, it is Parliament that establishes and enacts it. If the law is drafted in such a way that its wording fails to fully express the will of legislators, the Court can only follow the legislation. If the legislation is faulty, fix the legislation. That is no doubt what the Association of Canadian Publishers meant when they described the situation after the FCA decision as a “broken legal framework” 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”.

Parliament will have just such an occasion this fall when it resumes after the Throne Speech in late September, following the prorogation in August. Legislation is required to amend the Copyright Act to bring it into compliance with Canada’s commitments under the new NAFTA (aka USMCA, or CUSMA in Canada). Canada made a commitment to extend the term of copyright protection by twenty years and has 30 months from the date of implementation of the Agreement, July 1, 2020, to bring its legislation into compliance. (There are a couple of ways it can do that, as I discussed here). That process will require a period of public consultation which is why it is important that the draft legislation be introduced at an early date. This affords an opportunity to address other urgent copyright issues at the same time, using the same committee process. 

The first of these is to fix the anomalies in the Act that have led to the FCA decision that undermines the mandatory tariff regime, affecting not just Access Copyright but most collective rights management organizations in the country. The amendments would be minor, but they would rectify the damage done by the FCA’s decision and restore some order and predictability to the licensing of content in Canada through collective societies.

Another is a proposal pushed by major Canadian newspaper publishers to require that news aggregators, like Google or Facebook, share ad revenues with news creators when they distribute their content through excerpts or snippets embedded in links. This is currently a live issue in France and Australia. Google is fighting back, threatening that Australians could lose access to free search and encouraging Youtubers to bombard the Australian government with complaints. These are classic Google scare and misinformation tactics that Google can be expected to also employ in Canada should the government decide to proceed with such a measure, as has been rumoured. Likewise Facebook is playing hardball with the Australian government, threatening to remove news content from its platform if the measures are enacted into law. I plan to write on this subject in my next blog. 

So far there has been no indication as to what issues the government will embrace as it considers its legislative agenda with respect to copyright, or whether it will bring forth legislation this fall or in the spring, but the opportunity to undo the damage wrought by the FCA’s decision on “mandatory” tariffs should not be missed. If there was ever a time to restore predictability and order to the marketplace, and to right an obvious wrong, this is it. 

© Hugh Stephens 2020. All Rights Reserved.