The Artists’ Resale Right: A Matter of Simple Fairness

Credit photo: author 

Canadian artist E.J. Hughes, although likely not a household name to many outside Canada, is nonetheless one of the iconic artists of the west coast of Canada. His paintings chronicle the relatively recent history of the coast of British Columbia (BC), as the example above shows. His works, full of life and colour, record the steamships that used to call in at small settlements along the coast, fishing boats and little car ferries, not to mention spectacular mountain scenery, colourful fishing wharves, houses and sheds.

Hughes was born in BC in 1913 and lived to a ripe old age, passing away at the age of 93 in 2007. Except for a period during the Second World War as a war artist overseas, he spent virtually all his time in coastal communities, the last half century in the Cowichan Valley where many of his paintings were executed.

Recently a Hughes painting, Steamer Arriving at Nanaimo (home of course to the eponymous “Nanaimo Bars”), sold at auction for $841,250 and Three Tugboats, Nanaimo Harbour, for just over $600,000. That may not seem like the big leagues when compared to a recent sale of Monet’s Meules, which fetched over $110 million in 2019, but for Canadian art it is a lot. What is worth knowing about Steamer Arriving is that when Hughes first sold it in the 1950s, it earned him all of $150. Another of Hughes’ paintings, Fishboats Rivers Inlet fetched over $2 million at auction in 2018. It was painted in 1946 using materials that Hughes had left over from his days as a war artist. I could not find a record of what it originally sold for, but it couldn’t have been much as Hughes was living hand to mouth at the time. Another work of his that sold for over $400,000 in 2007 was reportedly purchased for just $200 at a garage sale a few years earlier (although not directly from Hughes, who painted it in 1959). These examples all illustrate the common phenomenon of rapidly escalating values of artistic works that were often originally purchased for just a pittance.

In Hughes’ case, he had a longstanding relationship with Montreal art dealer Max Stern who reached a standing arrangement with the artist to purchase all his work. That suited Hughes who then had a steady source of income. By all accounts, Hughes lived modestly and was not demanding of Stern, who often had to insist on increasing the price he paid Hughes for his paintings. Toward the end of his life, (in 2000), Stern was paying Hughes in the vicinity of $10,000 for new works. This was a fair return given that Hughes was becoming more and more well known, elected to the Royal Canadian Academy of Arts in 1968. As artists become better known, the value of their new paintings generally increases as well as their older works—yet they receive nothing from these earlier works when they are resold. This is a situation that the Artists Resale Right (ARR), which does not exist in either Canada or the US, seeks to redress.

For the past few years, the charge on the ARR has been led in Canada by CARFAC (Canadian Artists Representation), an advocacy group for Canadian artists, and its sister Quebec-based group, RAAV (Le Front des Artistes Canadiens). France is the original home of the ARR, where it is known as the droit de suite, and both CARFAC and RAAV are in regular contact with their French colleagues. The droit de suite was first adopted in France in 1920, and the organization and copyright collective representing French artists, the Society of Authors in the Graphic and Plastic Arts–known as AGADP in France–continues to lobby for global application of the ARR. This is primarily because, although the right was adopted into the Berne Convention in 1948, it is optional rather than compulsory for Berne Convention states and operates strictly on the basis of reciprocity. Thus, broader global coverage brings greater returns for French artists. In 2019, of 15.5 million Euros in droit de suite payments made to French artists, roughly a third or 4.6 million Euros came from payments from sister organizations in foreign countries collecting on behalf of French artists.

But first, let’s examine how the Artist Resale Right works. While structured somewhat differently in various countries, the principle is that where sales of artistic works (works of graphic or plastic art such as pictures, collages, paintings, drawings, engravings, prints, lithographs, sculptures, tapestries, ceramics, glassware and photographs) take place beyond the initial sale, a small proportion of the re-sale price shall be remitted to the original artist or their estate, with post-mortem payments limited to a specified number of years. Often there is a sliding scale for payments, with the percentage going to the artist decreasing as value increases. Sometimes there is a ceiling beyond which a resale royalty is not levied. There can also be a ceiling on the amount paid. In the case of France at the present time that amount is €12,500, a limit to which AGADP objects. It is also important to note that the droit de suite does not apply to private sales that take place without the participation of an art market professional, nor to sales by individuals to public museums.

Normally one would expect the payment to be made by the seller from the proceeds, much as the seller in a real estate transaction is responsible for paying the commission to a realtor. While this is normally the case, in France there was a protracted legal battle over this point when Christie’s auction house tried to impose contracts requiring that the droit be paid by the buyer. French dealers objected, claiming that it was illegal to shift the burden from seller to buyer. After eight years and several levels of appeal, the French Supreme Court ruled that it was possible for the seller of a work of art to agree with the buyer that the buyer be liable for paying the royalty, provided the royalty was still paid to the artist. The royalties are paid to collecting societies who charge a commission (to the artist) for tracking sales and disbursing to artists.

For many works under copyright, the reproduction right provides for steady ongoing revenues to authors, songwriters and performers but in the case of graphic and plastic arts, revenue from licensing of reproductions (print or digital) is generally limited. This raises the question of what art works should qualify for the ARR. Under Berne, it applies to unique works of art or those with very limited authorized reproductions, such as numbered limited editions or signed prints, which themselves could be collected or re-sold. The need to provide some “aftersales” revenue to artists, many of whom struggle financially, is one of the main arguments in favour of establishing an ARR. Artists whose fame increases during their lifetimes usually command higher prices for their new, later works, yet often the production of these artists decreases as they get older. At the same time, the value of their earlier works also rises, but they derive no benefit.

Another argument often used to support the establishment of an ARR is its effect in offsetting some of the imbalance between third world creators and first world art collectors, galleries, dealers and auction houses. Original works in developing countries are often sold for a very low initial price, yet subsequent profits and benefits flow exclusively to dealers and collectors in major capitals rather than to the artist–unless an ARR is in place. For payments to flow back to artists, however, it is important that their country of residence itself offers an ARR since the right operates only on a reciprocal basis. (Many countries in Africa, especially in francophone Africa, have incorporated the ARR into domestic law for precisely this reason). This argument can be applied to Canada and the US with respect to Indigenous art. In the Canadian case, the work of Inuit artists (soap stone carvings, prints) is the most notable example. As I cited in an earlier blog on copyright and Indigenous art, the renowned Inuit artist Kenojuak Ashevak sold the original of her famous print Enchanted Owl in 1960 for just $24. It sold in 2018 for $216,000 of which Kenojuak’s estate (she died in 2013) received not a penny.

CARFAC is working to build support for amendments to the Copyright Act in Canada to establish an ARR of 5 percent, pointing out that over 80 countries have an ARR arrangement, including similar jurisdictions like the UK (2006) and Australia (2010). CARFAC proposes that an ARR be applied to secondary sales of $1000 or more that are conducted by a dealer or auction house, at a flat rate of 5%, with the liability to pay shared between the seller and the dealer, as is currently the case in the UK. It would apply only to Canadian artists and artists of countries that offer an ARR. Payment would be collected through a copyright collective, Copyright Visual Arts, owned jointly by CARFAC and RAAV. The idea has been around in various forms for several years and has been the subject of a private member’s bill although never receiving government support. More recently it was examined by the two Parliamentary committees reviewing the Copyright Act, with recommendations ranging from adoption to more study.

The issue is also a live one in the US, where various attempts have been made to pass ARR legislation, most recently in 2018. The draft US legislation set a much higher threshold than that proposed in Canada ($5000), would apply only to auction houses with at least $1 million annually in sales, would have a payout ceiling of $35,000 and, as in Canada, would be at a set rate of 5%. Recently the new Register of Copyrights, Shira Perlmutter, expressed support for an ARR in the US. Not surprisingly, it is not supported by the major auction houses, notwithstanding that they comply with ARR legislation in other major art markets, like the UK and France. Neither the US nor China, the two largest art markets, have a resale right although ARR supporters argue that it would strengthen these markets if they did so by encouraging European artists to offer their works for sale there. European artists would benefit from the existence of an ARR in the US and China because of the reciprocity principle and artists from China and the US would then likewise benefit from the ARR in effect in Europe.

In the final analysis, this is more about artists than dealers, despite the symbiotic relationship between the two. Some dealers, in fact, offer voluntary re-sale royalty payments, either European dealers who are not obligated to compensate US or Canadian artists but do so, or North American dealers who have decided that it is in their interest to do so because of their relationship with artists. (A similar concept  has recently been introduced by some second hand book dealers to pay authors when used copies of their books are sold). But business being business, most dealers and auction houses will not do so unless required by law. Extension of the ARR to North America would increase harmonization of international art markets, (although if China remains an outlier this could become a competition problem) and is widely supported by artists in both Canada and the US. It is also, not surprisingly, supported by collecting societies as it provides them with a new revenue stream.

If Canada had an ARR as proposed by CARFAC, the sale of Steamer Arriving in Nanaimo would have brought $42,000 to Hughes’ estate. Were Hughes still alive that would have been a nice supplement to a lifetime career of hand-to-mouth painting income. With an ARR much of the revenue paid goes to artists still alive, usually in their declining years. In Australia, studies showed that 46% of payments went to living artists; in the UK over 80% of artists use ARR revenues to cover living expenses. The argument that it would inflate art prices seems hard to credit, given the ever-increasing value of good art in countries where no ARR is in place. Share the wealth, I say.

The real issue is getting the attention of government at a time when there are many priorities, including of course dealing with the current pandemic. Artists and their advocates are speaking out, but they need a champion. It seems to be a simple matter of fairness—although in the art world, as in other domains, nothing is really that simple.

© Hugh Stephens, 2021. All Rights Reserved.

An Open Letter to Justin Trudeau: Canada’s News Publishers up the Pressure on Facebook and Google

Source: National Post

I was at my local newsstand the other day, perusing the morning papers. My usual modus operandi is to scan them quickly, deciding which catchy headline will entice me to swipe my credit card for my daily “news fix” delivered in that most traditional of formats, the daily newspaper. The kind you can put under your arm and open up over the breakfast table, with a coffee. Usually I riff through each of the major local papers—under the steely eye of the proprietor—before I make my choice. But on Wednesday, June 9, all the papers (save one) had the same front-page. It was an open letter to Prime Minister Justin Trudeau, and this (in part) is what it said;

“For months, you…have promised action to rein in the predatory monopoly practices of Google and Facebook against Canadian news media. But so far, all we’ve gotten is talk. And with every passing week, that talk grows hollower and hollower. As you know, the two web giants are using their control of the internet and their highly sophisticated algorithms to divert 80 per cent of all online advertising revenue in Canada. And they are distributing the work of professional journalists across the country without compensation.

This isn’t just a Canadian problem. Google and Facebook are using their monopoly powers in the same way throughout the world — choking off journalism from the financial resources it needs to survive. The difference is that other countries are putting their foot down. (here the open letter mentions Australia, where recent legislative action was taken to bring the internet giants to heel. See my blogs “Google’s Latest “Stoush” With Australia” and “Facebook in Australia: READY, FIRE, AIM”.) The letter continues;

Time and again, you and your government have committed to similar action…But after months of promises, there is still no legislation…words alone will not sustain Canadian journalists through the long months of legislative inaction and relentless power plays by Google and Facebook.

To put it bluntly, that means that you, Prime Minister, need to keep your word: to introduce legislation to break the Google/Facebook stranglehold on news before the summer recess. It’s about political will — and promised action…The fate of news media in Canada depends on it. In no small way, so too does the fate of our democracy.”

Wow. Strong stuff. “The fate of our democracy”. The language may sound a bit purple but the parlous state of the traditional news media in Canada as elsewhere is a very real concern for good governance given the traditional role of the media in holding government to account. It is not for nothing that the motto of the Washington Post is “Democracy dies in darkness”, or that one of Winston Churchill’s better known quotes (1949) goes like this; “A free press is the unsleeping guardian of every other right that free men prize; it is the most dangerous foe of tyranny.” 

The explosion of digital media has led to a proliferation of “fake news” and self-serving echo chambers where conspiracy theories are peddled to those who want to believe. Responsible, professional journalism is the antidote, and it is actually positive that the digital platforms pick up and distribute stories from the mainstream media alongside much of the user-generated piffle that dominates the internet. The problem is the platforms are averse to paying for it, yet someone has to pay for quality journalism. In the past, despite subscription revenue, that task largely fell to advertisers. But now most advertising goes to the internet platforms. They in turn attract the viewers that advertisers want to reach with content; other people’s content, such as that produced by the news media.

The solution advanced in Australia, France (“Holding Google to Account: France Takes a Stand”) and soon, potentially, Canada is to convince the platforms that it is in their interest to “share the wealth” to some extent. But why should they—unless they are pressured to do so? That is what happened in both France and Australia where the government leveraged its competition laws to require large platforms enjoying quasi-monopolistic market power (read Facebook and Google) to come to revenue sharing agreement with publishers, failing which government regulators would step in.

The platforms were at first reluctant to do so, and only grudgingly opened negotiations. In the case of Google in Australia, it opened its wallet and then quickly put it away because the Australian government refused to withdraw its legislation. Google then threatened to withdraw from the Australian market, a threat that was only shown to be hollow when Microsoft offered to fill the void. As for Facebook, its clumsy effort to blackmail the Australian population and government by cutting off Australian news sources backfired, and the company soon managed to make a deal with the major Australian publishers. In France, Google dragged its feet but eventually came around to finding a way to share revenue in a way that satisfied most of the major French publishers and was acceptable to Google.

All these developments were being watched carefully in Canada by Heritage Minister Steven Guilbeault who undertook to bring in legislation in Canada to tackle the same issue. However, Guilbeault has several pieces of legislation on his plate; amendments to the Broadcasting Act (Bill C-10) to bring digital streaming services under the auspices of the broadcasting and telecoms regulator, the CRTC, “online harms” legislation to control sexual exploitation of children, hate speech and incitement to violence among other harms, including site-blocking provisions to deal with offshore websites dispensing harmful content, as well as the legislation to deal with the issue of payment for use of news content. Because of this legislative overload, things have got bogged down, and to date only the broadcasting legislation has been introduced into Parliament. And it is getting a rough ride. As for the online harms bill, although not yet introduced, the tragic events of the last few days in London, Ont, where a Muslim family was targeted in a horrific hate crime, will give that legislation added impetus.

With regard to Bill C-10, as a result of concern that a blanket exemption for user-generated content (UGC) would defeat the main purpose of the legislation, an amendment was introduced that has become the focal point for opposition to the bill. The main opposition party, the Conservatives, has engaged in delaying tactics that has forced the government, with support from smaller opposition parties, to bring in time allocation measures to limit debate. The fundamental issue is that the clock is running out. Parliament is set to rise on June 23 for the summer and it is widely expected that there could be a general election in the fall, if the COVID-19 situation is brought under control.

The Liberals would love the opportunity to win a majority and get out from under the current situation where they need to rely on at least one of the opposition parties to pass legislation. Of course, it will all depend on the public opinion polls. The Liberals won’t want to try to trigger an election unless their polling shows they can improve on their current seat count. (They won 157 of 338 seats in the 2019 election–with 170 needed for a majority. They currently have 155 seats after three members were kicked out of caucus for various reasons and one Green Party member crossed the floor to join the Liberals.) The opposition parties will also be reading the polls to decide if they want to go to the electorate.

What all this means is that the promised legislation to require the platforms to pay for using news content looks as if it will get the squeeze. Facebook and Google are not waiting for the legislation but rather are trying to head it off by launching their own payment-for-news initiatives. Although it rejected Australia-type news payment rules back in March, Facebook has since announced that it has struck content deals with 14 Canadian news providers. With the exception of the Winnipeg Free Press and French language paper Le Devoir, the others are minor or niche publications like the Coast, the Narwhal, Village Media, the SaltWire Network, the Sprawl, Discourse Media, Narcity, BlogTO and Daily Hive. Not exactly household names in Canada. Google, too, has its own offering called the Google News Initiative which, among other things, provides training for journalists and sustains some journalist positions. Google has also reached revenue sharing deals with some media outlets but, as with Facebook, its initial deals were largely with minor players. It was not until the Australian and French governments started to play hardball that Google had the incentive to reach deals with the major publishers.

That is exactly what is happening in Canada. Facebook and Google are prepared to throw a few pennies in the direction of Canadian media but, from the perspective of News Media Canada-NMC (formerly the Canadian Newspaper Association), leverage in the form of legislation will be required to get them to offer meaningful revenue-sharing. Back in the fall of 2020, NMC published a detailed study “Levelling the Digital Playing Field” that strongly advocated for an Australian-type competitive negotiating framework, backed up with regulatory muscle. News Media Canada was the sponsor of the June 9 open letter to Justin Trudeau as well as an earlier effort back in February when a number of newspapers published blank front pages, the message being that news could disappear if something is not done to level the playing field.

The June open letter calls on the government to introduce news payment legislation before the impending summer recess. That is unlikely to happen and even if it does, the legislation will die before enactment assuming an election takes place in the fall. However, the letter is important as part of the tactics to maintain pressure on both the government and the platforms. If the platforms think that the legislation is dead, and that their payment offerings to date will carry the day, Canadian publishers will not see the kind of money they feel they need to be able to continue to function. In commenting on Facebook’s announced deal-making with some small Canadian media business, News Media Canada commented that “Until all news media in this country can negotiate collectively with Google and Facebook, the two multinationals will continue to use their market dominance to drive terms that are in their interests.”

Collective negotiation does not just mean the ability for media to negotiate as an industry without running afoul of competition legislation (an exemption in the US for just such a scenario, the Journalism Competition and Preservation Act, has been floating around Congress for a couple of years now) but would also include an obligation on the platforms to negotiate with the media industry collectively as was proposed in the Australian legislation. (In the end it was not applied to Facebook and Google in Australia because suddenly, magically, they were able to strike deals before the hammer of the legislation was applied to them).

The open letter is but another shot in the ongoing war between the publishers and platforms. The outcome is almost certainly going to be something similar to the arrangements reached in Australia and France. The only issue will be the amount of revenue-sharing, and who will be included. Experience has shown that achieving an outcome that meets the needs of the creators of news content requires government action, or a realistic possibility of government action. Without legislation, the platforms hold the strong cards. Even though the prospect of legislation in Canada to require payment for use of news content is fading as quickly as the last days of the current Parliamentary session tick by, it is essential for the publishers to retain legislation as a realistic future possibility. They need this in order to have sufficient negotiating leverage with Facebook and Google to reach a deal that keeps quality professional journalism alive in Canada.

I hope they succeed or else, one day when I go to the newsstand, there will be nothing to read—or perhaps there won’t even be a newsstand.

© Hugh Stephens 2021. All Rights Reserved.

Adapting Opera in the Age of COVID: From “Grand Rights” to “Synchronization Licenses”

Source: http://www.shutterstock.com

Think of yourself as Ian Rye, CEO of Pacific Opera Victoria (POV), my hometown opera company. You’ve been planning ahead for the next season, and advance planning is very much a requirement in the opera scene. The operas have been selected— Die Walküre, Death in Venice and Don Giovanni–costumes and properties designed, lead singers lined up, subscriptions sold and advertising readied—and then COVID hits. You are initially shut down for a few weeks, so the opera Carmen that you were planning to mount is put on hold. Everyone holds their breath, waiting for the storm to pass. But it doesn’t. The 2020 season is gone, but what about the company? There are expenses to meet—staff, artists, office—and no revenue except some additional grants from government. More challenging is the fact that you have an ecosystem to maintain; the artists who want to work, not just for financial but for professional and artistic reasons. Once the bond of shared artistic creation is broken, people will drift away. As the summer of 2020 brings little relief on the COVID front, you re-imagine the offering. Let’s take it online. Let’s make the next production a film version. And that is what happened.

To keep the company together, to give everyone a common goal and purpose, and to stretch the imagination, POV decided to stage an opera, and film it. Not filming it as in a video recording of a live performance, but creating a film version of a new opera, The Garden of Alice, by Canadian composer Elizabeth Raum. You can get more information here. That sounds pretty straightforward; turn what would have been a live performance into a film. (The company’s concert series were also being filmed and put up for digital distribution.) But creating a de novo filmed opera such as “Alice” was taking things to a new level, and while there clearly would be artistic and logistical challenges in going from one genre to another, most of us would not think about some of the other less obvious challenges, such as union issues and copyright.

When it comes to performers in live theatre or opera, most of them (in Canada) are members of Canadian Actors Equity Association or (CAEA). Film actors are members of a different association, ACTRA. But when you take live actors and turn them into film actors, the same artists are represented by a different union, with different fees and distribution rights. This was a new experience for many of the artists but it was worked out fairly easily. Less simple were the copyright issues in going from live to film.

Copyright is a pretty basic concept, but the execution and implementation can be complex. The concept is straightforward; when creators (authors, artists, composers, etc) create an original work, they own it and have the right to control its sale, reproduction and distribution, subject to certain limitations such as duration and fair dealing or fair use. However, in many works there is more than one rights-holder. Think of a recording—there could be a songwriter (of the lyrics), a composer (of the music), and a performer or performers, all of whom have contributed to the creation of the work. A book could have an author and an illustrator. The overall copyright for the work could be held by a record label or book publisher, who would have acquired the rights. In such circumstances, this simplifies matters when it comes to commercialization of the work. And then there is the issue of the rights themselves, which depend on the nature of the work. Rights can be limited geographically and by means of distribution, e.g. live performance, audio visual, digital and so on. Each of these various rights is licensed separately and carries different conditions and royalties. This is where it gets complicated for an organization like Pacific Opera Victoria.

In the case of opera, the clearance of rights starts with what are called, in the trade, “grand rights”. These are the fees paid to an artist and a publisher for the right to a live performance, but only certain live performances. As explained in this report, “Untangling the Bundle: Grand Rights vs. Small Rights”, grand rights works can be put into two general categories;

“a) Works conceived to tell a story with words and music such as musicals, operas, and oratorios. Rodgers and Hammerstein’s South Pacific, Berg’s Wozzeck, and Stravinsky’s Oedipus Rex are examples, and

b) Existing or commissioned works that are used in certain extra-musical contexts, such as with choreography, stage action, or as part of a play.”

Just as an aside, “small rights” are fees collected by Performing Rights Organizations (PROs) , such as the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Inc, (BMI) in the US, the Society of Canadian Composers, Authors and Music Publishers of Canada (SOCAN) in Canada, by PRS in the UK and so on. Many of these PROs have reciprocal agreements with each other. Their function is to collect fees from music users and distribute royalties to the composers and appropriate publishers.

The definition of whether a work is covered by “grand rights” can be tricky. For example, (again citing “Untangling the Bundle”) a gala evening of arias from different operas in concert do not implicate grand rights because standalone arias and numbers can be treated as small rights, as are instrumental excerpts of operas and musicals, because there is no “dramatic performance”.  On the other hand, a full concert performance of an opera, even without costumes, dialogue, or movement, or a performance of a song or a selection of songs from an opera or musical, with the singers in costume and in character, would be a grand rights issue. Got it?  But this is an “aside” because in the case of converting live opera to a filmed version, it was not a question of “grand rights” versus “small rights” but rather yet another type of rights, “synchronization rights” (aka sync rights).

According to Songtrust’s music glossary, synch rights are “payments made to a songwriter or music publisher for permission to use a song in “sync” with visual images on a screen. More specifically, sync refers to the use of a song in television, movies, and commercials. Sync royalties are generally a one-time sum paid directly to the publisher.”

With respect to sync rights, ASCAP notes that “Often, the music is “synchronized” or recorded in timed relation with the visual images. Synchronization rights are licensed by the music publisher to the producer of the movie or program.”

For POV, venturing into the realm of sync rights was entering new territory, and they worked with a clearing house in the US (Easy Song Licensing) to get clearances for works in the concert series. In the case of The Garden of Alice, they were able to obtain all rights directly from the composer. It was a big change for a local opera company whose traditional concerns had been to perform locally and fill the house to getting licenses to distribute an audio-visual work internationally. It presented challenges, but also opportunities for new revenue streams.

In the case of The Garden of Alice, a new opera that has never been publicly performed, there is an opportunity to find distribution partners who could give it international exposure. There obviously would be a high degree of Canadian content (Cancon), which would make it attractive to Canadian broadcasters seeking to fulfill their “Cancon” obligations, but the basis of the story is well known internationally and there could be many distribution opportunities in other markets. At the very least it could be distributed directly from the POV’s website on a “Pay per View” (PPV) basis. While there is always risk with a brand new production that has not been tested with audiences, it makes eminent sense to launch the film venture with something new. Film versions of famous operas abound, and the POV would be offering nothing unique. If the foray into filmed opera is successful, future productions could be eligible for various forms of media funding from sources such as the Canadian Media Fund, a multi-million dollar fund established to promote Canadian AV production, adding to potential revenue streams from traditional operatic funding organizations.

All this demonstrates the need for adaptability and flexibility when it comes to producing the arts. The POV’s film venture has been a creative way to keep the company operating despite the challenges of having no live audiences (and no revenue) during the pandemic. There are many challenges to mounting a successful opera season—selecting the right program, lining up key performers and musicians, creating costumes, building sets. Added to these are the pandemic challenges arising from pivoting to a new genre and producing a new product, among them navigating the rules of copyright. But the company has risen to the task.

As Ian Rye says, “It’s been a learning experience but an exciting one. It is a bit early to say how successful our film experiment will be but it’s become a common goal around which the whole company has come together”.

I am sure that it will be a success and hope to see The Garden of Alice one day in the near future from the comfort of my living room.

© Hugh Stephens 2021. All Rights Reserved

Appeal Against Canada’s First Successful Pirate Site-Blocking Order is Dismissed: Good News for Copyright Protection in Canada

In a unanimous decision, on May 26 Canada’s Federal Court of Appeal (FCA) dismissed the appeal by internet service provider (ISP), Teksavvy, against Canada’s first site blocking order for copyright infringement issued in November 2019. At the time, I commented that the site blocking order marked a significant step forward for the protection of copyrighted content in Canada, even though it was attacked by critics who claimed that it would lead to “internet censorship”, violated net neutrality and was a usurpation by the courts of the role of Parliament. Those criticisms were unfounded then and they are unfounded now, as the Appeal Court has ruled. The decision confirms that blocking orders are available in Canada to combat pirate content providers who camp in cyberspace while targeting Canadian consumers, and it confirms that Canada has joined the more than 40 countries that use site-blocking to fight online piracy and protect legitimate content distributors.

The case was initiated by Bell Media, Rogers Media and Groupe TVA in 2019 against GoldTV, an offshore pirate website illegally distributing content licensed for the Canadian market by the three companies. GoldTV failed to respect repeated injunctions and failed to appear in court to defend itself, which is not surprising given the offshore pirate business model it follows. (It sells subscriptions to its unlicensed content through providing apps that modify a digital box purchased by consumers, all at a fraction of the cost of legitimate subscription services). Bell, Rogers and TVA secured a court order requiring ISPs in Canada, including internet services owned by themselves, to block GoldTV. No ISPs, except Teksavvy, a small internet reseller, objected to the order.

Why did Teksavvy resist the order by launching an appeal? According to an interview with its VP of regulatory affairs posted on its website, Teksavvy’s position is that it is “not defending piracy, but rather the broader principle of an open internet against a creeping regime working in favour of very narrow commercial interests.” And what would those “narrow commercial interests” be? Well, apparently they are represented by larger ISPs and integrated media and telecom companies like Rogers, Bell and TVA that not only pay to license and distribute content, but also build the backbone internet infrastructure on which internet access resellers like Teksavvy depend. As you can surmise, there is no love lost between Teksavvy and the majors.

Teksavvy is a “reseller”, a company that offers internet service to consumers but does not own the last mile. It must obtain, for a fee, access to the home from the major telcos who have built and who own the infrastructure. The telcos are required by the regulator, the Canadian Radio-television and Telecommunications Commission (CRTC) to offer access to the resellers at wholesale rates set by the Commission. This is done to encourage competition. The real issue is the rate structure. If too high, the resellers won’t be able to compete at the retail level; if too low, they will undercut the telcos who will say they can’t earn a sufficient return on investment to continue to build out and upgrade their infrastructure. Teksavvy is not the only reseller in this position, just one of the more vocal ones, and has consistently been a thorn in the side of the major telcos. Coincidentally–and unrelated to the FCA’s decision–just days after the Appeal Court’s ruling, the CRTC announced a revised rate structure that largely favours the telcos, increasing the wholesale rate for access. In response, Teksavvy called for the resignation of the Chair of the Commission and announced that it would withdraw its application to provide mobile services.

Was animus toward the telcos one of the reasons for Teksavvy leading the charge against a site blocking process that was widely accepted by the industry? It is hard to say with precision what their motives are but in an earlier blog (Canada’s First Site Blocking Order: What is Driving the Objectors?)  I examined both Teksavvy’s motivations and those of intervenors appearing in support of its appeal (the Samuelson-Glushko Canadian Internet Policy & Public Interest Clinic (CIPPIC) at the University of Ottawa and the Canadian Internet Registration Authority (CIRA), also associated with the University of Ottawa’s law faculty). I noted that;

“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…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”.

As for the intervenors, they fell into two groups, (1) those supporting the site blocking order (Fédération Internationale des Associations de Producteurs de Films–FIAPF; the Canadian Music Publishers Association, International Confederation of Music Publishers, Music Canada and International Federation of the Phonographic Industry (IFPI); the International Publishers Association, International Association of Scientific, Technical and Medical Publishers, American Association of Publishers, The Publishers Association Limited, Canadian Publishers’ Council, Association of Canadian Publishers, The Football Association Premier League Limited and Dazn Limited, a sports streaming service), and (2) those opposed (CIPPIC, CIRA and the British Columbia Civil Liberties Association–BCCLA). The court grouped them into three categories, the supporters of the order, CIPPIC and CIRA and finally, the BCCLA.  This somewhat unusual procedure was taken to expedite the filing of evidence and to hasten the court process.

Those opposing the order—Teksavvy, CIPPIC, CIRA and BCCLA– put forward a number of arguments; viz. site blocking is not mentioned in the Copyright Act and therefore the court has no jurisdiction; the CRTC has jurisdiction (this, despite the fact that the CRTC concluded that it did not have jurisdiction to establish site blocking as a result of the FairPlay Canada application to create an administrative agency to manage a site blocking regime); site blocking is inconsistent with net neutrality and, finally; that site blocking interferes with freedom of expression as enshrined in the Charter of Rights and Freedoms. The Appeal Court examined and ultimately dismissed all these arguments. For a detailed examination of the case, see prominent copyright lawyer Barry Sookman’s blog posting “Blocking orders available in Canada rules Court of Appeal in GoldTV case”.

Will this be the end of it? Teksavvy could of course try to appeal to the Supreme Court of Canada (SCC), but there is no guarantee the SCC would grant leave to hear the case. One can never pre-judge what the Supreme Court justices may decide in terms of what to add to their docket, but the FCA’s decision was both clear-cut and unanimous, suggesting little grounds for appeal. For now, the GoldTV order remains in place and the way has been cleared for further similar orders. Thus Canada is well on its way to joining the large number of countries that have already instituted blocking of copyright infringing content either through the courts, legislation or an administrative process. The Philippines is but the most recent country to move to implement site blocking as a means to protect legitimate content industries and artists.

An obvious exception is the United States, where an initiative in 2011 to bring in a measured site blocking approach through legislation, known as the Stop Online Piracy Act (SOPA) was torpedoed by a coalition of internet platforms and associations, led by Google, Wikipedia and the Electronic Frontier Foundation, among others. A campaign of fear-mongering and misinformation led to the withdrawal of the legislation, and the concept of site blocking has remained toxic in the US ever since, notwithstanding its successful introduction in a number of other democracies that are just as concerned with personal freedoms as the US, with the United Kingdom, Australia and now Canada being good examples.

While the courts in Canada have tackled the problem in the absence of specific legislation governing site blocking (as they did in the UK), arguing that a copyright owner is “entitled to all remedies by way of injunction, damages, accounts, delivery up and otherwise that are or may be conferred by law for the infringement of a right”, other countries such as Australia have passed legislation (enacted in 2015, amended in 2018) to address the issue. Australia has been one of the more successful regimes to curtail widespread online offshore piracy.  Canada is also considering legislation.

As part of the process for updating the legal regime for protection of copyrighted content in the digital environment, a consultation paper “A Modern Copyright Framework for Online Intermediaries” has recently been released by the Department of Innovation, Science and Economic Development (ISED). ISED is the department of government in Canada that has statutory authority for the Copyright Act. The paper posits a wide range of options for dealing with online copyright infringement and the role of intermediaries, with public comments sought by May 31. One of the options is to establish a statutory basis for site-blocking in cases of copyright infringement, subject to a number of conditions such as prima facie infringement, prior notice, technical feasibility, irreparable harm, effectiveness, complexity and cost, and safeguards. The paper cautiously notes that “establishing such a remedy in legislation could be warranted” given that there is already a legal basis for such orders, i.e. the GoldTV case. It thus appears that the Federal Court’s decision has helped move the bureaucratic process forward in terms of potential legislation, although one has to wonder if legislation is really necessary now that the courts have already dealt with the issue on the basis of existing law.

Any legislative solution will be a slow process given the input from across the spectrum of stakeholders, with a number no doubt opposed to any form of site blocking based on the usual exaggerated objections related to net neutrality and online freedom of expression. The result may be gridlock with proponents and objectors engaged in extensive lobbying of a Parliament where the government is in a minority situation and has a number of other difficult content and technology issues on its plate. It is therefore all the more welcome that the FCA has upheld the initial site blocking order of the Federal Court and confirmed that site blocking orders are available in Canada as a form of relief against offshore pirate websites.

© Hugh Stephens 2021. All Rights Reserved.