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.

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