The American Music Fairness Act (AMFA): The Canadian Dimension

Last week I posted a blog on the American Music Fairness Act (AMFA), draft US legislation that seeks to end the exemption that US terrestrial broadcasters enjoy with respect to payment of broadcast royalties to performers and labels for playing recorded music. It is an anomalous situation in which the US is the only developed country jurisdiction to provide such an advantage to terrestrial broadcasters. Not only that, the exemption unfairly tilts the playing field within the US broadcasting industry by discriminating against digital broadcasters, since streaming services and digital and satellite US broadcasters are required to pay performance royalties. It is also an anomaly because terrestrial (and other) broadcasters are required to pay royalties to songwriters and composers when they play their music, just not to performers (in the case of AM/FM stations).

As a result of this longstanding special treatment for terrestrial radio stations, which dates back to the dawn of the radio era in the US, not only do US performers in the US not get paid royalties when their work is played on terrestrial radio, but foreign artists are likewise deprived of such payments. As a result, many countries reciprocate by denying to US artists the ability to collect performance royalties when their works are played on terrestrial radio in their countries. This is permitted by the international convention that governs such matters, the WIPO (World Intellectual Property Organization) Performances and Phonograms Treaty of 1996 (WPPT). The WPPT, which the US ratified in 2002, provides that, in the words of WIPO;

performers and producers of phonograms have the right to a single equitable remuneration for the direct or indirect use of phonograms, published for commercial purposes, broadcasting or communication to the public. However, any Contracting Party may restrict or – provided that it makes a reservation to the Treaty – deny this right. In the case and to the extent of a reservation by a Contracting Party, the other Contracting Parties are permitted to deny, vis-à-vis the reserving Contracting Party, national treatment”.

In other words, instead of applying national treatment, i.e. treating foreign performers “no less favourably” than domestic performers, Contracting Parties could apply reciprocity, discriminating against foreign performers if their home countries failed to provide the full benefits of the treaty. Tit for tat, or the “mirror principle”. At the time the US acceded to the WPPT it filed a reservation with respect to equitable remuneration because the performance right under US law is not applicable to terrestrial broadcasting. This led a number of countries to exercise their right to refuse to collect or pay royalties owed to US artists for performance of their works on their terrestrial radio stations. Among them was Canada, as well as many EU countries, including Ireland and, at the time, the UK.

But it gets more complicated. The policy of applying reciprocal rather than national treatment to US performers was recently challenged in a dispute between copyright collectives in Ireland. The Irish court then referred the matter to the EU Court of Justice (ECJ). In a preliminary ruling, the ECJ found that Irish law, which applied reciprocity, was not consistent with EU law, which is silent on the reciprocity question leading the Court to conclude that it was not permitted. However, this was not the end of the matter as the European Commission is now launching a study into the impact of this decision. A solution, pushed by some in the European music industry, is to amend EU law to allow individual member states to continue to apply the reciprocity principle, writes music journalist Chris Cooke.

Because Canada, like Ireland the UK and others, applied reciprocal rather than national treatment to US performing rights, Canadian broadcasters were not required to pay, nor did Canadian collecting societies (Re:Sound and others) collect, performance royalties on US works. The US music industry, which to date has been unsuccessful in having the terrestrial broadcast royalty exemption lifted despite years of trying, has been seeking “national treatment” as a fallback. If granted national treatment, US performers are able to collect radio royalties in countries that mandate payment of performance royalties by broadcasters, even though they and non-US performers are denied such royalties in the US. For US performers it is a partial solution. That solution is now coming to Canada.

As part of the updating of NAFTA and its replacement by the USMCA (known as CUSMA in Canada), the US, Canada and Mexico agreed to national treatment when it comes to “all categories of intellectual property covered in the (IP) Chapter”; viz.

each Party shall accord to nationals of another Party treatment no less favorable than it accords to its own nationals with regard to the protection (2) of intellectual property rights.” Article 20.8 (1)

But that is all about “protection”, not payment of royalties, right?

Did you notice the footnote (2)? That says, among other things,

for the purposes of this paragraph, “protection” also includes…any form of payment, such as licensing fees, royalties, equitable remuneration, or levies, in respect of uses that fall under the copyright and related rights in this Chapter.”

To implement this commitment, on April 29, 2020, the Government of Canada published a Statement Amending the Statement Limiting the Right to Equitable Remuneration of Certain Rome Convention or WPPT Countries, in the Canada Gazette, the publication of record for the Government of Canada. In plain English, this complicated “statement amending the statement…etc” means that U.S. recordings are now eligible in Canada for equitable remuneration under all tariffs applied by the collecting society responsible for performance royalties. U.S. recordings fixed before 1972 will also now be eligible. This is as a result of changes introduced in the US by the US Music Modernization Act, which among many other things, extended copyright protection under US federal law to pre-1972 sound recordings. The change in Canada for pre-1972 recordings came into effect April 29, 2020 while the rest of the changes came into effect on July 1, 2020, the date when the USMCA/CUSMA entered into force.

This is one more copyright related commitment in the USMCA/CUSMA that I probably should have included in my blog on the cultural aspects of the trade agreement that I posted on its first anniversary at the beginning of July this year. (I am making amends now). As an aside, and unrelated to the USMCA, for certain tariffs (satellite radio, pay audio, simulcasting, non-interactive and semi-interactive streaming) U.S. recordings became eligible as of August 13, 2014 as a result of Canada’s ratification of the WPPT. (This was because US law requires digital broadcasters to pay performance royalties, so Canada accorded US recordings national treatment). As noted above, on April 29, 2020, pre-1972 U.S. recordings also became eligible for the same treatment.

As a result of the USMCA, for US artists the problem of performance royalties paid by Canadian terrestrial broadcasters is “solved”, even though they do not get performance royalties from terrestrial broadcasters in their own country. This change will impose some additional costs on Canadian radio stations although the Canada Gazette did not hazard a guess as to the cost, saying in effect that it was too complicated to calculate. Canada also has its own peculiarity when it comes to payment of performance royalties, which complicates calculations. The first $1.25 million in advertising revenues for terrestrial stations is sheltered from performance royalty payments except for a nominal $100 fee. In effect, this is a greatly watered-down version of the performance royalty exemption enjoyed by US radio stations, and is as controversial in Canada (and as unpopular with the music industry) as the terrestrial broadcast exemption is in the US.

While the new USMCA/CUSMA provisions will help US artists earn revenues when their recordings are broadcast in Canada, this does nothing to solve the problem for Canadian artists with regard to royalties for the broadcast of their music on US AM/FM stations, nor does it do anything for US artists in the US (a far bigger market of course). Any improvement in outcomes for artists is a step forward, but the tiny step taken in Canada is dwarfed by what would happen in the US if the American Music Fairness Act becomes law. It has a long way to go, and the US broadcast lobby is well organized and well-funded. This is not the first time this issue has come before Congress, the most recent being in 2017 when the “Fair Play Fair Pay Act” was introduced. Despite determined efforts by the music industry at generating support in Congress, ultimately it did not make it through the legislative sausage machine. Now the issue is back on the congressional agenda; it is high time to end this anomalous exception to payment of copyright performance royalties by bringing US law into alignment with the rest of the modern world.

Getting national treatment for US performing artists in Canada is positive (for this one group of performers) but is nonetheless only a half-step forward, an interim measure. The US Congress needs to fix the problem once and for all by passing the AMFA and eliminating the broadcast exemption. That is the right thing to do for all artists affected by the non-payment of performance royalties for radio broadcasts, whether they are from the US, Canada or elsewhere. Enacting the AMFA would also eliminate the disparity (some would say unfairness) whereby Canadian broadcasters will now be paying royalties to US performers while Canadian performers are denied the same benefits in the US.

© Hugh Stephens, 2021. All Rights Reserved.

The American Music Fairness Act (AMFA): A Better and Fairer Solution for Performers than Seeking “National Treatment”

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From the title of this draft legislation, introduced into the US House of Representatives in late June, you can surmise that something is unfair about music in America. What is unfair–from the perspective of performers and record labels–is that US terrestrial radio stations are not required to pay royalties to performers or labels for playing recorded music on air. Online broadcasters and streaming services do, but not over-the-air AM/FM radio stations. Terrestrial stations do, however, pay royalties to composers and songwriters for music played on air, but not to performers. Why is this, and what is the justification for this free-ride on the work of others?

It goes back to the birth of radio in the 1920s and is related to political clout, in this case the political influence exercised by the National Association of Broadcasters (NAB) in the US. I mean, who wants to pay for something, even if that something is the essence of the service you are offering your customers, if you can get it for free? The argument advanced by the NAB is that radio stations shouldn’t pay performers for playing their music because the stations provide “free air-time” that promotes new recordings. If you want to get your music promoted, you need to get it on air, and therefore—so the broadcasters’ argument goes—performers should be grateful for the free publicity. It is similar to the specious argument that seeks to justify piracy by claiming that it helps promote movies or books. It’s also like raiding the orchard next door and selling their apples for personal gain but justifying the theft on the basis that the more people buy apples (from me), the better it will eventually be for the apple growing industry and for the grower next door. Moreover, because internet radio broadcasters are required to pay performance royalties, while terrestrial broadcaster are not (the requirement for digital transmissions to pay performance royalties was introduced in the US in 1995; prior to this date performance royalties applied only to public performances), the exemption for AM/FM stations is another way of tilting the playing field in favour of just one segment of the broadcasting industry. The
AMFA would deal with this longstanding injustice.

The arguments for passage of the AMFA have been well laid out by several commentators, including retired music industry executive Neil Turkewitz (Broadcasting Rights for Performers & Labels: The Fair Thing To Do) and copyright blogger David Newhoff (Has the Moment Finally Arrived for Fairness to Music Performers?). Both point out that the tired old arguments about free publicity and advertising for performers is thread-bare; if they ever had any validity in the past, that has changed with the introduction of many other ways to promote and distribute music. Terrestrial radio competes with streaming services and satellite radio, neither of which are arguing that they should be exempt from the payment of performing royalties. Radio stations are far from the only game in town when it comes to giving exposure to artists, but they are the only ones to get a free ride on the artistic efforts of third parties, which they monetize through advertising. In fact, the US appears to be one of the only countries in the world not to require the payment of performance royalties by over-the-air broadcasters. (I’m not sure about North Korea).

This US exceptionalism (which the AMFA is trying to address) also results in the situation where US artists whose music is broadcast in other countries generally are deprived of royalties for the on-air playing of their work abroad, even though terrestrial broadcasters in those countries are required to pay performance royalties. This loss of overseas income to US artists has been estimated at over $300 million annually. Most countries apply the principle of reciprocity (“tit for tat”) when it comes to collection and payment of royalties. Since US law provides a royalty exemption for radio stations for all music played, this means that foreign artists also don’t get paid when their recorded works are broadcast. Therefore, most countries reciprocate (one might say “retaliate”) by applying the same rule to US performers, either by not requiring collection of royalties on music performed on terrestrial radio by US artists, or by allowing collecting societies to keep the funds generated by US artists and distribute them to domestic performers. The best way to counter this, and to ensure that royalties flow to US performers, is to fix the problem in the US by removing the broadcast exemption. This would also have the additional benefit for non-American artists of ensuring that they receive compensation when their works are played on terrestrial radio in the US.

However, there is another way to address the problem of collecting foreign royalties for US artists—by pushing for “national treatment”. This is a trade principle whereby foreign entities in a given country are treated as well as (or one could say as badly as) domestic entities. The term of art used is that the treatment must be “no less favourable” than that accorded to a domestic equivalent. No favouritism is allowed to be shown to domestic companies, entities or artists vis à vis foreign entities, and there is no tit-for-tat reciprocal treatment. For example, under the principle of national treatment, if British law has a requirement for payment of performance royalties on radio, all performers should receive them, whether they are British, American or Zulu. The fact that British performers in the US are denied royalties when their music is played on radio is not relevant because British performers are no worse off in this respect that their US counterparts. In other words, US law discriminates against all performers, regardless of nationality. Everyone is treated the same—badly.

But national treatment is not granted by countries willy-nilly. It is usually negotiated bilaterally and is subject to many qualifications. Only certain sectors or products are accorded national treatment, and there are usually exceptions. National treatment concessions are carefully negotiated to ensure a balance of benefits overall between countries, which is the main concern of trade negotiators.

Because there is no national treatment in music between the US and UK (there being no bilateral trade agreement), we get the situation described below by the US advocacy group Music First which, among other objectives,  is urging the US Government to negotiate national treatment commitments with foreign governments, under the deceptively catchy slogan “All music creators deserve equal treatment”. The following example is put forward by Music First to substantiate its case;

because the United Kingdom doesn’t recognize national treatment, if a band has members from both the United Kingdom and United States, only the U.K. artists get paid directly from the U.K. collective when their music is played on U.K. radio.”

Some would say that is only fair because the US doesn’t allow British artists to collect royalties in the United States; others would say that two wrongs don’t make a right. Artists lose out in both scenarios. One way for the US music industry to deal with the overseas royalties issue is to push the US government to negotiate national treatment provisions with foreign countries that respect broadcast performance rights. But this is, at best, a stop-gap measure. A far better solution, one that will benefit all artists, including US and foreign performers both in the US and abroad, is to rectify the injustice by eliminating the US terrestrial broadcast exemption once and for all.

© Hugh Stephens, 2021. All Rights Reserved

Negotiating Payment for Use of News Content on Dominant Internet Platforms: What’s Needed to Reach a Fair Deal?

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Given a choice between reaching “voluntary” agreements with news publishers for use of news content online and being compelled to do so by government, the dominant internet platforms (Google, Facebook) are now doubling down on negotiations with news providers. Mind you, there is nothing like a hanging in the morning to focus the mind. The latest confirmation that the platforms would prefer to negotiate “voluntarily” rather than face legislation compelling them to do so, or worse, have a government arbitrator set the terms of the agreement, was the announcement last month that Google Canada has reached agreements with eight Canadian publishers, including one major Canadian nationwide daily (The Globe and Mail) to license content and pay news organizations to create and curate journalism. This came on the heels of Facebook’s recent announcement that it had reached agreement with 14 Canadian news providers, most of them small digital players, to pay for some content on the platform.

The sudden interest on the part of the platforms in reaching deals with news content providers is not born of charity or concern for the fate of news publishers. It is a direct response to mounting pressure on governments, and by governments, to deal with the issue of the market dominance of the platforms in online advertising, and the fact that part of their offering to attract viewers is use of content created and produced by news publishers.

It is open to interpretation whether or not it is consistent with copyright law for platforms like Google News to scrape content from news sites in order to display headlines and snippets (brief excerpts) of news stories. That is why the EU created a new neighbouring right for publishers through Article 15 of its Copyright Directive, providing news publishers (as opposed to the journalists who create specific stories) with a new right over content they publish, valid for a two year period from the date of publication. This tool was placed in the hands of the publishers supposedly to strengthen their hand in negotiations with the platforms.

This has been a hot topic for a few years now. Attempts to deal with platform free-riding on news content produced by others go back to 2014 when both Germany and Spain enacted a publishers’ right to provide publishers with leverage in negotiations with the major internet platforms. At that time, the main concern was Google’s dominance. Google won the first round, bringing German publishers to heel by threatening to downgrade their search results, and by closing down Google News in Spain. With the enactment of the publishers’ right at the EU level in 2019, the tide began to turn.  

France was the first to move to enact the new provision into national law leading, not surprisingly, to a confrontation with Google. After protracted legal struggles and political lobbying, Google decided that negotiation was preferable to confrontation, and managed to reach agreement with a majority of (but not all) French publishers. They negotiated with some major publications as well as a consortium of publishers known as APIG (Alliance de la presse d’information generale) but some other major news providers, such as Agence France Presse, were excluded. Now a ruling by France’s Competition Bureau has put the APIG deal in doubt. According to press reports, antitrust investigators have accused Google of “failing to comply with the French competition authority’s orders on how to conduct negotiations with news publishers over copyright”. On July 13, the Authority fined Google 500 million Euros ($593 million) for failing to negotiate with the publishers “in good faith” as earlier instructed by the Authority. Google was ordered to present a reasonable offer to the publishers for use of content within two months or face a fine of up to 900,000 Euros a day. Now that’s talking tough. The ruling addresses issues that arise from the nature of the negotiations between the platforms and publishers, whether with individual news providers or with a group or groups of publishers. Because of their scale, the platforms can use “divide and conquer” tactics giving them the upper hand.

In Australia, the government dealt with this by introducing legislation that would have required both Facebook and Google to submit to binding “final offer” arbitration if they were not able to reach revenue sharing agreements for use of content with Australian media providers, giving news providers an additional lever. After unsuccessful attempts to overturn the legislation by threatening to abandon the Australian market (Google) or shutting down all Australian news feeds on its service (Facebook), campaigns which spectacularly backfired, both platforms agreed to negotiate with Australian media publishers, avoiding application of the Code. Since then some impressive deals have been struck, resulting in substantial ongoing payments to Australian media.

Google had already seen the writing on the wall. In 2020, it launched its Google News Showcase, an initiative billed at $1 billion (over 3 years) to support journalism by licensing content from news media outlets in a number of countries. (Canada, Germany, Brazil, Argentina, the UK and Australia were the countries initially named). At the time, very few major media companies signed on; Germany’s Der Spiegel and Stern were initially among the few large players to participate. No sooner was it announced, than in Australia the program was suspended as a means of pressuring the government to drop its legislation targetting the platforms. It was not implemented in Canada because no major media outlets agreed to take part. Google was more successful in Britain, however.  In February it was announced that the platform had reached agreement with 120 British publishers, including the Financial Times and Reuters.

The determination of the Australian government to stand up to the pressure tactics of Facebook and Google was favourably noted—in the US where publishers are supporting draft legislation that would allow news organizations to bargain collectively with platforms by providing a limited time exemption from anti-trust legislation–and in Canada, where Heritage Minister Steven Guilbeault, has committed to bring in legislation similar to that passed in Australia. Guilbeault, however, has not delivered, much to the chagrin of News Media Canada (NMC), the lobby group representing the news publishing industry (the self-described “voice of the print and digital media industry in Canada”). As I noted in a recent blog posting, “An Open Letter to Justin Trudeau: Canada’s News Publishers up the Pressure on Facebook and Google”, NMC is unhappy that the Trudeau government has not got around to introducing the promised legislation because they believe it would strengthen their position in negotiations with the platforms. (Separate legislation introduced in the Canadian Senate by an opposition Senator and modelled on the EU neighbouring rights provisions, is going nowhere. Senate bills rarely make it through the legislative process and bills sponsored by non-government Senators stand even less chance).

The “Open Letter”, which appeared on June 9, blanked out the front page of many daily papers in Canada, including the National Post, Toronto Star and many of the city dailies owned by the Postmedia Group. At the time I mentally noted that the Globe and Mail, and my local daily, the Times-Colonist (Victoria), did not publish the “Open Letter”. Now I know why. In addition to the Globe, Glacier Media, the owner of the Times-Colonist (and many other smaller community papers and specialty industry publications), along with Black Media, another publisher of many community papers, were among those that reached agreement with Google, despite being members of News Media Canada. That leaves Postmedia, the publisher of daily papers in most major cities in English Canada, the TorStar Corporation, publisher of the Toronto Star and Quebecor, the publishers of French language dailies in Montreal and Quebec City, out in the cold, at least for now.

This piecemeal approach is one of the biggest problems facing publishers, whether in Canada, France, the US or elsewhere (except in Australia, where the compulsory arbitration requirement backstops the process) because the deep pockets of the platforms give them a negotiating advantage. Initially, in most countries, Google and Facebook were able to make deals only with small digital outlets primarily. For these small-scale start-ups, funding from the platforms must have seemed like manna from heaven. The major publishers resisted but inevitably the common front began to crack as each outlet determined what was in its best interest.

In the US there have, to date, been no revenue sharing agreements for use of content between US news publishers and Google or Facebook. Many publishers would rather deal collectively with the platforms rather than being picked off one by one. This is one of the prime reasons for the (re)introduction of the Journalism Competition and Preservation Act (JCPA) in the US Congress. According to its bipartisan sponsors, “this bill will support the independence of local papers by giving news publishers the power to collectively negotiate with digital platforms like Google and Facebook”.

The US is not the only country (besides Australia) to recognize the negotiation imbalance. In Denmark, thirty media companies have decided to come together to bargain collectively with the platforms. This reflects a longstanding Scandinavian preference for cooperation among copyright and collective rights organizations, as I wrote about after my visit to Denmark a couple of years ago.

While the draft US legislation to provide news publishers with an anti-trust exemption has bipartisan support, it has been criticized by two well-known anti-copyright advocacy groups, Public Knowledge (PK) and the Authors Alliance. Their gripe is that the JCPAcould be interpreted by courts to implicitly expand the scope of copyright.”

Presumably they are referring to this language, which forms the core of the Bill;

A news content creator may not be held liable under the antitrust laws for engaging in negotiations with any other news content creator during the 4-year period beginning on the date of enactment of this Act to collectively withhold content from, or negotiate with, an online content distributor regarding the terms on which the news content of the news content creator may be distributed by the online content distributor…”

According to commentary published by both PK and the Alliance, their concern is that hyperlinks could be subjected to copyright protection, and that access to snippets of information that may be subject to fair use would likewise be legally constrained through court interpretations. This is not only a pretty far-fetched conclusion (there is absolutely no reference, implicit or otherwise, to hyperlinks in the legislation), but also attacks one of the fundamental principles of copyright, namely that a creator has the right to determine whether or not, and how, their content will be made available. If content is made openly available by the copyright holder, it may be subject to limited fair use access, but if a rights-holder decides to withhold or restrict access to content by putting it behind a paywall for example, that is their right. According to Public Knowledge (PK), the Bill could be interpreted to implicitly create “a new right that would allow news sites to withhold content until or unless they receive the compensation they seek”.  PK wants additions to the legislation to make it clear that copyright protection is not being expanded by the law to include linking, or fair use snippets of linked material. This is a red herring and totally unnecessary, raising a straw man to knock down where none exists. It almost looks as if PK is using this as an opportunity to try to sneak in new limitations to copyright protection that have no basis in the law.

PK has a variety of other objections to the draft legislation as well, despite claiming that it supports US journalism and access to trustworthy sources of news. Its objections are hard to reconcile with the objective of enabling the news media to negotiate fair compensation from the dominant internet platforms.

Having the ability to deal with giant digital companies like Google and Facebook to get fair compensation for use of news content is the nub of the issue for news publishers large and small in many countries, including the US. Robust government enforcement of competition law (or threats to amend competition law through new legislation) seems to be one way of ensuring a more balanced negotiation, and of bringing the platforms to the table. Allowing publishers to work together, to the extent that they are interested in doing so, is another. At the end of the day, the final outcome should be a deal that fairly compensates those who invest in gathering and creating the news, allowing them sufficient financial security to continue doing what they do best, while leveraging the ubiquitous reach of the internet to promote greater access to curated, responsible journalism.

© Hugh Stephens, 2021. All Rights Reserved.

Paragraph 5 has been updated to reflect the decision of France’s Competition Authority to fine Google 500 million Euros for failing to negotiate “in good faith” with French publishers.

The USMCA/CUSMA is One Year Old: What Has Been its Impact on Copyright, Content and Canada-US Cultural Relations?

July 1, apart from marking the 154th Canada Day, was the first anniversary of the entry into force of the “new NAFTA”, now labelled the USMCA (the US-Mexico-Canada Agreement). Canadians, being a stubborn lot, have decided to call it the CUSMA, just because they can. Whatever you call it, reaching agreement with a Trump Administration determined to blow up the original agreement was no small task for Canada, or Mexico. Although Mexico is an equal partner, I am going to concentrate on the implications for Canada (and the US) in this blog with regard to what the Agreement does, and does not do, in the area of copyright, culture, and related fields such as digital services, and to take stock of what has happened in the past year.

Renegotiating NAFTA

Renegotiating NAFTA was no easy task. Trump campaigned on a commitment to renegotiate or tear up the Agreement while Canada’s objective was to preserve as much of it as possible. The essence of the dilemma was summed up by then Commerce Secretary Wilbur Ross who commented that the negotiation was difficult because the US position was all “demand” and no “give”. “We’re asking two countries to give up some privileges that they have enjoyed for 22 years. And we’re not in a position to offer anything in return…”. Nonetheless the three countries finally managed to reach agreement. The fact that much of the original NAFTA was preserved was seen as a victory by Canadian negotiators. The biggest changes were in auto production, with new requirements imposed to try to limit the amount of low-cost Mexican labour involved in the manufacture of vehicles. But not a lot changed. Right after the conclusion of the agreement, the US imposed aluminum and steel tariffs on its NORAD and NATO ally Canada (using national security as the pretext, no less), and to this day continues to apply punitive import tariffs on the import of Canadian softwood lumber (despite unprecedented demand for building materials in the US, shortage of supply and all time high prices for consumers), while Canada continues to find technical ways to frustrate US dairy farmers from gaining a greater share of Canada’s highly protected dairy market.

Renegotiating NAFTA wasn’t just a question of rollbacks. The US set out some negotiating objectives that touched on the area of copyright and digital trade and it achieved some of those objectives– but by no means all. In Canada, there was hope in some quarters that the renegotiation could be used to advance some domestic agendas or reforms. Canadian educational publishers were as unhappy with the new education fair dealing exception introduced into Canadian copyright law in 2012 as were US publishers, given the resulting refusal of post-secondary institutions to license content from the publishers’ copyright collective, Access Copyright. However, renegotiating copyright exceptions was not a priority for either country. If the educational exception is to be narrowed or removed, it will have to be done through domestic legislation. Currently the key litigation (Access Copyright v York University) over the issue of educational fair dealing and mandatory tariffs for use of published materials is before the Supreme Court of Canada, on appeal from the Federal Court.

Extending the Copyright Term in Canada

While the USMCA did not deal with copyright reform in Canada nor did it change Canada’s rather ineffectual “notice and notice” system for dealing with online infringers, it did deal with some copyright and content-related issues, both broad and narrowly targeted. On the broad front it dealt with the longstanding issue of the length (term) of copyright protection, extending it in Canada by an additional twenty years to bring the period of protection in Canada in line with that in the US, the EU and most of the developed world. When implemented (more on that below), this extension will not only benefit Canadian rights-holders in Canada but ironically, will bring them additional benefit in the EU because the EU extends the benefits of the longer period of protection to artists from non-EU countries only on a reciprocal basis. With respect to the US, extension in Canada provides greater equity with respect to US creators in Canada since the US offered the longer term of protection in the US market to Canadian rights-holders, even though Canada did not offer equivalent protection to Americans.

Implementation Still in Progress

The actual implementation of Canada’s term extension commitment is still pending as, under the terms of the USMCA/CUSMA, the Canadian government was accorded 30 months from the date of entry into force of the Agreement to deal with this issue. Thus, it must come into effect no later than December 31, 2022. Exactly how Canada will implement its obligation is still somewhat of an open question. The simplest, most straightforward and most sensible option is to simply extend the existing “life of the author plus 50 year” term by an additional twenty years. That is what all other countries that have extended the life of the copyright term beyond the Berne Convention minimum of “life plus 50” have done. But there are those in Canada who, having opposed the term extension in the first place, now want to make it as complicated and difficult to access as possible by instituting a “trip wire”, a requirement for registration in order to obtain benefit of the additional twenty years. No other country has done this, and it is arguably in violation of the Berne Convention (to which Canada is a signatory). Berne requires an author’s copyright to be awarded automatically upon creation of a qualified work, with no additional registration requirement. Berne also establishes a minimum period of protection but has no restrictions on adding extending the period of protection beyond the Convention minimum.

Earlier this year the Department of Innovation, Science and Economic Development (the arm of the federal government with statutory responsibility for the Copyright Act) issued a consultation paper on issues relating to term extension. As I wrote at the time (“Canada’s Copyright Term Extension Consultation: Why all the Tinkering Around the Edges?”), the focus was not so much on the registration issue as on other tangential questions mostly of interest to the library community, such as orphan and out of commerce works. This will not stop copyright minimalists from attacking term extension as being an economic drain on Canada through an outflow of royalties, a conclusion unsubstantiated by facts, nor those advocating for the additional registration requirement in order to frustrate as much as possible the implementation of the CUSMA commitment. The full list of respondents to the consultation paper is available here. It is widely supported by the creative community.

Then There was the Super Bowl

Term extension was perhaps the broadest copyright-related issue dealt with by USMCA/CUSMA. The most targeted and specific, however, was Annex 15-D of the Agreement, dealing with Super Bowl ads. Yes, you read that right. Super Bowl ads. Hardly the substance of an international trade agreement, but hey, if you can achieve your goals through the leverage of a trade agreement when you can’t get it by other means, go for it. The issue was pushed by the NFL and supported by Bell Media, which licenses the Super Bowl broadcast in Canada. It’s all a bit complicated and will be a mystery to US readers. Essentially Annex 15-D removes an exception that the Canadian broadcast regulator, the CRTC, had permitted whereby Bell Media could not require Canadian cable and satellite platforms to substitute Canadian ads (i.e. Bell’s ads) for the US ads when Canadians watched the game in Canada on the original NBC feed.

What is “Simsub” Anyway?

The situation arises because the major US networks are available on Canadian cable systems under a compulsory licence issued by the CRTC. In addition, the CRTC allows Canadian broadcasters who have acquired the rights to US programming also being shown on US television to require that the Canadian cable and satellite distribution systems substitute the ads carried by the Canadian station into the US feed shown in Canada, as long as the programming is being shown simultaneously in both Canada and the US. This is known as simultaneous substitution or “simsub”. In most case simsub is not a big deal for Canadian viewers because an ad is an ad and arguably local ads are more relevant. But when it comes to the Super Bowl where the ads are considered by many as an integral part of the programming, many Canadian viewers want to watch the game with the original ads.

More Business for Border Bars

In 2016 the CRTC issued a decision allowing this if Canadians chose to watch the game on the US feed. Bell appealed but wasn’t sure it would prevail. Given the length of the appeal, in both 2017 and 2018 the CRTC decision prevailed resulting in a reported $10 million dollar loss in ad revenues each year for Bell (and by extension threatening the value of the NFL’s contract with Bell), because Canadian advertisers could not be assured of reaching the full Canadian audience. Although in the end Bell’s appeal was upheld by the Supreme Court of Canada, by then both Bell and the NFL had lobbied the US government to make repeal of the simsub exception a key demand. Remarkably, they were successful and the USMCA now includes a requirement that Canada cannot remove simsub for individual programs unless it ends the practice for all programming. As a result, if Canadians want to watch the Super Bowl with the US ads in 2022 they will have to hit the bars of Blaine WA, Buffalo NY or other border drinking establishments—assuming the border is open by then. At least the USMCA will improve cross-border services trade.

The Canadian Cultural Exception

If Super Bowl ads are an example of how “down in the weeds” trade negotiators can get, the Canadian cultural exception (Article 32.6) is one of the loftier goals. Canada insisted that it had to maintain the cultural exception, a provision that dated back to the original Canada-US FTA in 1988. Under this provision, Canada could take exceptional measures to override commitments in the Agreement to preserve and protect Canadian culture. Culture is defined in the USMCA/CUSMA by reference to a long list of content related industries (film, publishing, newspapers, music, broadcasting). The catch is that if Canada invokes this clause, the other parties to the Agreement are entitled to take retaliatory measures of equivalent commercial effect against any other sector. This is obviously designed to discourage Canadian policy makers from using discriminatory measures to support Canadian culture at the expense of US content producers.  For example, if Canada were to decree that cinemas had to charge an extra fee to consumers to watch US as opposed to Canadian films, in a (misguided) effort to promote Canadian film production, this would be a discriminatory measure against which retaliation would be allowed within the terms of the Agreement. However, if Canada put a tax on all cinema goers, and used the tax revenues to subsidize Canadian film production, that would not be inconsistent with the Agreement and would not justify retaliation.

Does CUSMA Stop Canada from Passing Legislation affecting Internet Platforms?

Recently the cultural exception has been highlighted as one means that Canada could use to defend (proposed) legislation that would require major internet platforms like Google and Facebook (which of course happen to be US companies) to pay news content providers for use of news content on the platforms, similar to the requirements introduced in Australia. Critics of the proposal have argued that such an action would be contrary to the USMCA, but for the cultural exception clause, which they argue would not be used because of the threat of US financial retaliation against non-cultural sectors. This is a red herring. Canada does not need to invoke Article 32.6 to defend actions to require internet platforms to reach content compensations deals with dominant internet platforms, nor, for that matter, to subject the platforms to oversight requirements relating to distribution of harmful content online. There are plenty of provisions of general application in the Agreement that can be used. One also has to consider to what extent the US government would be prepared to champion Google and Facebook, digital giants that are already under close scrutiny in the US for anti-competitive practices.

….Or Holding Platforms Responsible for Harmful Content?

In the digital chapter, the CUSMA includes a particularly controversial provision, Article 19.17 that provides internet platforms with limited immunity from civil liability for content posted by users. This article is based on Section 230 of late 1990s US legislation, the Consumer Decency Act. The misuse of this provision to shield internet platforms from any civil liability or to hold them accountable for harmful or illegal user content distributed (and monetized) by them has led to widespread demands for reform in the US. It almost did not make it into the USMCA given push-back from Democrats, and should never have been included in a trade agreement. It’s not as bad as it could have been, however. The USMCA commitments left sufficient room for the continued application of existing Canadian law without any requirement to enact legislation to create new civil liability immunities for the internet platforms. As I pointed out in an earlier blog on this topic (“Did Canada Get Section 230 Shoved Down its Throat in the USMCA?”), the Parties to the Agreement have the freedom to implement Article 19.17 in various ways including through ongoing application of common law. Existing secondary liability doctrine and precedents will continue to apply in Canada.

The USMCA One Year Later

The fact that the first anniversary of the USMCA/CUSMA passed without much brouhaha is a good sign that things are generally working well. The COVID pandemic has of course challenged global trade patterns, including those in North America but considering that the Canada-US border has been closed for almost a year and a half now except for essential traffic—hopefully it will reopen very soon—two way trade and services have continued to flow with few new trade disruptions,  although volumes were down quite significantly (Canadian exports to the US declined by 15%; imports declined by 11%). Without the security of the established rules and practices enshrined in the USMCA/CUSMA, the situation could have been far worse.

The two countries are intertwined economically in many sectors, including copyright, cultural and content industries. The “new NAFTA” has helped to maintain a mutually beneficial relationship in these areas and laid the foundation for further work.

© Hugh Stephens 2021. All Rights Reserved.