Month: October 2022

If you are not an early tech adopter, you may not have heard of, or heard much about, DALL-E 2. Not being on the cutting edge of hi-tech myself this term had not crept into my consciousness until a couple of weeks ago, while I was up at my cottage north of Toronto enjoying the autumn foliage. While basking on the dock in my “Muskoka chair” (aka Adirondack Chair for my US friends) noodling on my phone, I saw reports that Microsoft will be soon be bringing Dall-E 2 to a laptop near you by integrating it with Bing and Microsoft Edge. Dall-E 2 is an artificial intelligence (AI) program that produces artwork through the use of verbal and textual prompts. Sort of like, “make me a picture of cats and dogs wearing funny hats in the style of Rembrandt”. Or to be more contemporary, “make me a picture of purple dragons breathing fire in the style of Greg Rutkowski”. (More on Rutkowski later).

As I have written about in the past, the expanding use of AI raises many issues for creators and for copyright; see, for example, my blog post on “AI, Ethics and Copyright”. These range from ownership/authorship to liability for infringement to dealing with piracy, both of and by AI-generated content. Who is the author of an AI generated work? The US Copyright Office (USCO) has taken a clear position that there must be a human hand behind an AI-generated work for it to be subject to copyright. As I wrote earlier this year, the USCO rejected on appeal the application for copyright registration of an art work that the applicant claimed was the exclusive creation of a machine (one that he had invented). In the UK, by contrast, there is a provision for copyright protection for machine-generated works where no human author of the work is involved. The term of protection for such works is less than that of works authored by a human.

The ease of producing a passable image through voice or text prompts raises once again the question of who owns the copyright on an AI-generated work, or even whether a work like this can be subject to copyright protection? If I had exercised some skill and originality, mimicking the style of Monet which I had studied from artbooks, online images or the real paintings while looking at the foliage across the lake from my dock, arguably the copyright in the artwork would be mine. But all I did was type in a few words, allowing the algorithm to compile four images from countless impressions of foliage, chairs, docks and Monet paintings scraped from the internet, of which I chose one. The only originality I exercised was the choice of prompts. Moreover, the identical prompts produce slightly different images each time, so there is a degree of randomness introduced into the process by the algorithm. While it is generally accepted that a photograph can be copyrighted, even one taken by an amateur like myself, because in pointing the camera, choosing the location, judging the light etc, I have made some creative choices even though all the heavy lifting was done by my phone camera, even this minimal degree of creativity does not exist with text prompted art.

However, while issues of authorship will continue to arise and be debated, the most serious current copyright challenge arising from AI relates to the widespread, unauthorized text and data mining (TDM) of copyrighted works. Massive amounts of data are required to feed the AI machines that produce AI-generated artworks through DALL-E 2, developed by OpenAI, or other similar programs such as Midjourney, Meta’s Make-a-Scene and Stability.AI’s open-source AI art generator, Stable Diffusion. (You can try it here, but please don’t input the name of any contemporary artists or artists whose work is still under copyright. Monet—see image on this blog post–died in 1926 and his works are in the public domain).

What is the data the AI machines ingest and process to create a work like the one at the top of this blog post? It is the work of artists; past artists like Michelangelo, Rembrandt, Monet and Van Gogh, all in the public domain, or Picasso or Dali, whose works are partially or not in the public domain, or contemporary living artists with unique styles, like Greg Rutkowski and others. Some 6 billion images were scraped from art sites and other depositories on the internet to create the data base. Rutkowksi is a contemporary Polish artist whose work has appeared in a number of video games. His art-style is notable for fire breathing dragons on eerie futuristic landscapes. As outlined by an article in the MIT Technology Review, his distinctive style is now one of the most commonly used prompts for AI generated art, but this is not necessarily to his benefit. Type “Rutkowksi” into a search engine and you are as likely to get an AI-generated clone of Rutkowski’s work as the genuine article. The AI generated images threaten to swamp his original work and open the very real possibility of being in competition with the original work of the artist. This has led Rutkowski to proclaim that AI should not be scraping and using the work of living artists.

Rutkowski does not appear to be against AI-generated art, but that does not extend to allowing his art to become the feeding ground to train algorithms. Other artists also have an ambivalent attitude to AI “art by numbers”. CBC interviewed a number of artists who saw programs like DALL-E 2 as a “tool” that they could use, although they recognized its shortcomings and challenges. Perhaps one way of differentiating attitudes to AI art is whether one is an established artist, whose work is being used to help generate the program, or an artist who enjoys using the tool to create new art forms and get noticed. Certainly not all the inputs are drawn from copyrighted works. One solution would be to limit the AI crawler to works that are in the public domain.

What can artists do to prevent their works from being used? Because the images are scraped from the internet, one solution is to insert watermarks since some of the web crawlers are programmed not to accept watermarked images. That does not, however, get around the issue that in many instances the AI platform is still violating copyright with impunity. Artists should not have to request that their art be removed from the crawler’s inventory (in any case, this seems to be almost impossible to do), nor should they be required to take defensive measures, or legal action. Lawsuits are almost certainly going to arise. In response, Getty Images, one of the leading providers of “stock images”, (art, designs, photos), has announced that it will not carry any AI generated art. What Getty provides to its subscribers is certainty that the images they are using are legally licensed. Getty has realized that with AI-generated art it may not be able to provide this certainty.

With the application of technology to information distribution and art, we have seen how the law of unintended consequences can prevail. Algorithms can be a useful tool to sort information and offer content to users according to their preferences, but they can also result in reinforcing the biases and intolerances of users, resulting in a closed-circuit echo chamber of hate and conspiracy theories. We have all seen how online discourse, potentially a positive tool to promote free expression and a wider exchange of views, can degenerate and slide into harassment and much worse. In the same vein, AI generated art presents a myriad of challenges in terms of people misusing the technology to create fake or offensive images, to distort artworks, hijack trademarks or a person’s image, etc. While some attempts have been made by the AI art platforms to deal with these problems by installing filters, we all know how ineffective automated filters have been in other online environments. However, while there has been some acknowledgement by the AI platforms that the form of content needs to be regulated to avoid abuse, there has been no self-restraint whatsoever when it comes to freely helping themselves to content owned by others—content protected by copyright–to feed the algorithm which produces work that will likely negatively affect the income prospects of the rights-holder.

In my view, this is the greatest threat that AI generated art imposes—the unrestricted data mining of protected content to produce derivative works that pose a very real threat of competing with the work of the original artist. It behooves all those who treasure creativity, and the protection afforded it through copyright to sound the alarm and push back.

This emerging challenge is enabled by a lax and permissive attitude to text and data mining, all in the name of supporting “innovation”. In the US, the proponents of this unrestricted data mining of copyrighted works for commercial purposes argue that it is “fair use”. Given that the end product scans the entire original copyrighted work and competes with and has a substantial negative effect on its commercial exploitation, it is highly questionable whether uses such as DALL-E 2 and others are fair use. This will surely be tested in court. In other countries, where there is a clear legal definition as to what constitutes a user exception to copyright, there is either no exception for data mining or a very limited exception. However, there are pressures to throw the door more widely open, particularly in the UK, which would set a dangerous precedent. I will follow up on these developments in a subsequent blog.

© Hugh Stephens, 2022. All Rights Reserved.

Among the plethora of plurilateral trade agreements covering the Asia Pacific region and beyond—the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the Regional Comprehensive Economic Partnership (RCEP), and the Pacific Alliance—there is yet another— one you may not have heard of. The DEPA. (Digital Economy Partnership Agreement). What is the DEPA, and who is in it? And how does it relate to those interested or invested in copyright and intellectual property issues? Let’s take a “DEPA dive” (groan) and find out.

DEPA’s current membership includes just Chile, Singapore and New Zealand, the founding members. These are the same three countries that came together to create the forerunner to the Trans-Pacific Partnership (TPP), now the CPTPP. It came into force on January 7, 2021. South Korea, Canada and China have indicated interest in joining and in May of this year, Canada formally requested to become a DEPA Party, following public consultations in the spring of 2021. There were calls from think-tanks for Canada to take the initiative to join the Agreement, an application now in process . There have also been calls in the United States for the US to join DEPA.

DEPA is not the sole “digital only” trade agreement in existence; Singapore has signed digital agreements with several countries and the US and Japan reached a Digital Trade Agreement (DTA) in 2019. Much of what is in the DEPA, and the US-Japan DTA, is based on the ecommerce and digital trade chapters of the CPTPP but it goes further in some areas, and not as far in others. Notably, the DEPA departs from the standard text of most trade agreements, and from the US-Japan DTA, when it comes to intellectual property, a potential problem for content industries.

There are some important elements to the DEPA, outlined in detail by two researchers at Canada’s Centre for International Governance Innovation (CIGI), Dan Cuiriak and Robert Fay. The agreement is different from most traditional trade agreements in that it does not include a long list of items on which tariffs will be reduced or removed. It is a sectoral agreement including just 16 “modules” (chapters) and 4 annexes. It is designed to be a framework that can be built on and added to.  It covers a range of digital issues, from paperless trading, electronic invoicing, and electronic payments to treatment of digital products (where it entrenches the WTO moratorium on customs duties on electronic transmissions and content transmitted electronically) and provides for the non-discriminatory treatment of digital products, with a specific exception for “broadcasting”. There are also other general exceptions such as national security, public health and safety. It provides for privacy of personal information, cross-border data flows and agreement not to require data localization as a condition of doing business. In addition, the agreement has provisions for cybersecurity cooperation, building consumer trust (controlling unsolicited electronic messages directed at consumers) and protecting consumers from fraudulent activities. It ventures into new ground in terms of outlining principles for cooperation in emerging trends and technologies, identifying fintech, and artificial intelligence (AI) in particular as areas for further work and collaboration. The digital economy’s impact on competition policy and government procurement is also recognized, but in all these emerging areas, there are no binding commitments, simply “best efforts” language to promote cooperation.

Intellectual Property

Where the DEPA falls short, and takes an odd diversion, is in the area of intellectual property. First, unlike most digital trade chapters in broader agreements and the US-Japan sectoral DTA, there is no mention of prohibiting the forced disclosure of source code as a condition for the import, distribution, sale, or use of software, or of products containing software, a key IP issue. In Module 9 (Innovation and the Digital Economy), there a provision, Article 9.3, titled Public Domain;

”1. The Parties recognise the importance of a rich and accessible public domain.

2. The Parties also acknowledge the importance of informational materials, such as publicly accessible databases of registered intellectual property rights that assist in the identification of subject matter that has fallen into the public domain.”

While the objectives of this module “affirm the importance of technological innovation, creativity, and the transfer and dissemination of technology, being for the mutual advantage of producers and users of knowledge, as a means to achieve social and economic welfare” (emphasis added), the text of the Agreement focuses on only one element of intellectual property, the existence of the public domain once IP rights are exhausted.

Is the public domain under threat? Not to my knowledge. While the public domain is important, so too is protection for rights-holders, but you would not know it given the language of the DEPA. Access to data for development of AI is a key component of innovation but that doesn’t mean that the rights of those holding the data are to be trampled and ignored. Proprietary data is not “free for the taking” in the name of the development of AI.

Another problem arises from this Public Domain Article. The wording in Article 9.3.2 stresses the importance of publicly accessible databases to assist in identification of subject matter that is in the public domain. However, at least with respect to copyright, to my knowledge no such databases exist, at, or if they exist, they exist in a very incomplete form. A cardinal principle of the Berne Convention is that copyright is established, if all conditions are met, without any registration formalities. For copyright, Article 9.3.2 makes no sense. The intent of the Article seems to be to stand IP protection on its head and focus instead on what is not protected. (However, perhaps the intent is to suggest that only public domain materials should be used to feed the need for “open data” for the purposes of innovation?)

This article is drawn from the original text of the TPP (Article 18.15), which was I suppose inserted to “balance” the rest of the IP chapter, but standing alone as it does in the DEPA, it seems to stick out like a sore thumb.

Platform Responsibility

While protection of intellectual property, or lack of it, is a failing of the DEPA, even the US-Japan DTA gives short shrift to IP concerns, other than inclusion of commitments not to force disclosure of source codes, and exclusion of IP rights from the infamous “interactive computer services” provision, language that is also incorporated into the USMCA with Canada and Mexico. This “interactive computer services” provision, Article 18.2 of the US-Japan DTA, is based on Section 230 of the 1996 US Communications Decency Act, the legislation that has been used by internet platforms to avoid any civil liability for material distributed by them on their platforms, unless they have directly created it. It has been misused by the platforms, enabling them to evade any responsibility for content moderation, notwithstanding clear precedents that exist in the offline world. Silicon Valley has tried (unsuccessfully to this point) to export this legislation through trade agreements signed by the US.

It was a controversial provision when pushed by the US government in the NAFTA renegotiation. Congress finally objected at the last minute but by then, the deal was virtually done with the concrete hardening fast. As a result, the Section 230-like provision stayed in the USMCA (as Article 19.17) although Canada managed to negotiate a qualification to the commitment that an “interactive computer service” not be considered as an “information content provider”. The qualification, contained in a footnote to the Agreement, allows existing Canadian law and precedent to continue to apply and confirms that no change is required to Canadian law. In effect, this avoided the worst-case scenario of having a Section 230-type obligation crammed down Canada’s throat.

The Japanese were equally alert to the dangers of adopting Section 230-like obligations, which would have given platforms in Japan a free ride with respect to responsibility for the material they carry, distribute and monetize. Japan included the same caveat with respect to the application of existing Japanese law (Footnote 15) but went a step further and signed a side letter with the US. This side letter renders the commitment meaningless but such a provision should not have been included in a trade agreement in the first place.

Other topical digital issues in the DEPA relate to online safety and measures to implement cultural policies in the digital environment. The online safety module is weak, noting that Parties recognize the importance of taking a multi-stakeholder approach to addressing online safety and security issues, but requiring no more than efforts (“shall endeavour”) to cooperate to advance collaborative solutions.

Culture and the Arts in the Digital Environment

With respect to cultural carve outs, broadcasting is exempted from the commitments on non-discriminatory treatment of digital products, but no definition of broadcasting is provided. Canada is currently in the process of enacting legislation (Bill C-11, the Online Streaming Act) that will define online streaming services as broadcasting, an action that could be an issue during DEPA accession negotiations. When negotiating trade commitments, Canada also likes to seek a general “cultural exemption” as it did in the original Canada-US FTA, replicated in the NAFTA and its successor, USMCA/CUSMA. (The exemption of cultural industries from the disciplines of the USMCA/CUSMA is, however, subject to the right of the other Parties to take retaliatory measures of equivalent effect). In both its trade agreement with the EU and in the TPP (and its successor, the CPTPP) Canada was unable to achieve an overriding cultural carve out and instead took chapter-by-chapter exceptions. The DEPA contains a general exception for measures affecting culture, subject to the proviso that they do not constitute disguised restrictions on trade; (Article 15.1.4)

“subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the Parties where like conditions prevail, or a disguised restriction on trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by a Party of measures necessary to protect national treasures or specific sites of historical or archaeological value, or to support creative arts of national value.”(emphasis added)

“Creative arts of national value” are defined as;

“the performing arts – including theatre, dance and music – visual arts and craft, literature, film and video, language arts, creative online content, indigenous traditional practice and contemporary cultural expression, and digital interactive media and hybrid art work, including those that use new technologies to transcend discrete art form divisions. The term encompasses those activities involved in the presentation, execution and interpretation of the arts; and the study and technical development of these art forms and activities.” (Footnote 21)

That is a broad exemption that would probably not rule out enactment of legislation like the Online Streaming Act, although whether the measures proposed by the legislation fall under the rubric of “support” (for creative arts) or “discrimination” (between the Parties) would keep trade lawyers busy. A Canadian cultural advocacy group, the Coalition for the Diversity of Cultural Expression (CDCE), submitted a brief to the DEPA consultation that, among other things, criticized the DEPA’s cultural exception clause as inadequate from a Canadian perspective.

Interestingly, having submitted its bid to join the DEPA in May of this year, several months later (July 15, 2022) the Canadian government launched public consultations on a model digital trade agreement. It seems to me it would have been more logical to take this step prior to throwing Canada’s hat into the DEPA ring rather than after, but given that the DEPA is subject to change and can be amended as new Parties join, it will still be useful to obtain input to help develop negotiating objectives.

The CDCE once again provided input, recommending not only that a model digital trade agreement contain a broad cultural exemption clause but also that;

“any Canadian model digital trade agreement…not create barriers to the implementation of digital rights management tools, or technological protection measures, that could block the free flow of digital products to protect copyright”,

and that;

“Canada should not make commitments under any Canadian model digital trade agreement that could adversely affect the remuneration of copyright holders”.

This is one area where the DEPA falls short and is one of its biggest failings. The drafters of the Agreement seem to have had a deliberate aversion to including any reference to “intellectual property”[i] in the text. In fact, they seem to have gone out of their way to avoid any recognition of the importance of IP–thus, the “standalone” article on the importance of the public domain–reflecting a bias seemingly and incorrectly seeing IP and copyright as antithetical to digital innovation.

Will the US Join DEPA?

It is unlikely that the US will join DEPA as it has already floated ideas for its own Indo-Pacific Digital Agreement as part of its proposed Indo-Pacific Economic Framework (IPEF). Since Canada is not included in the US definition of Indo-Pacific that may explain in part why Canada has stepped up its interest in DEPA. It is likely that a US-led digital initiative will put greater emphasis on IP rights within a digital environment and avoid the public domain focussed language of the DEPA. The Indo-Pacific Digital Agreement (if it ever gets off the ground) and the DEPA could even merge one day. One thing is certain; digital trade is here to stay, and it is important to forge international understandings governing this trade. The DEPA offers one path forward, albeit a path that could do more to respect IP rights. Just the same, it is a modest but useful beginning.

© Hugh Stephens 2022. All Rights Reserved.

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[i] The only reference I could find to “intellectual property” in the entire agreement was with respect to Article 3.3.(1) relating to Non-Discriminatory Treatment of Digital Products. Article 3.3 (2) says,
“Paragraph 1 shall not apply to the extent of any inconsistency with a Party’s rights and obligations concerning intellectual property contained in another international agreement a Party is party to.”

Well over half the world (more than 90 countries from Algeria to Venezuela, with all of the members of EU, Britain, Australia, Mexico and many African countries included) have an Artists’ Resale Right (ARR) in their copyright law, but not North America north of the Rio Grande—except for California. North of Mexico, the ARR does not exist except for a 1970s era California law that has been ruled unconstitutional because it infringes on the US federal government’s right to regulate copyright. But that may be changing, at least in Canada and possibly in the US.

The Artists Resale Right is a provision whereby visual artists (e.g. painters, sculptors) are paid a “royalty” each time one of their works is resold. Usually, a minimum or floor price is established before the ARR kicks in, and the sale has to be public, i.e. through a dealer or gallery. When authors sell a book, they get ongoing royalties from sales of the book as well as–in some countries (Canada is an example)–an income stream based on the number of times a work is borrowed from a library (the Public Lending Right). They do not, however, get any revenue from resales of their books, once read and thus “used”. But then a used book when resold tends to lose value. Visual art is often different. Like authors, songwriters and musicians also earn royalties, but this occurs when their work is played or performed. A popular work keeps on giving, except for visual artists unless they live in a country with an ARR regime.

Stories abound of artists who sold early works for a pittance, only to see them rise in value as they changed hands, with profits going exclusively to owners or galleries but not the artist. As recounted by the Center for Art Law in the US, in 1973 prominent art collector Robert Scull sold a Robert Rauschenberg artwork, “Thaw”, at auction for $85,000, at almost ninety five times more than his original purchase price. Scull had purchased the work from dealer Leo Castelli about fifteen years earlier for only $900. Rauschenberg confronted Scull, accusing him of unfairly profiting from the artist’s work. That notorious confrontation provided impetus for the introduction of an ARR in the US at the time, but it failed to gain traction in Congress, despite legislation being introduced in the late 1970s and again in the mid-1980s. The opposition of the art dealers lobby was a prime factor in blocking the initiative.

In Canada, as I recounted in an earlier blog post on the Artist Resale Rights issue, the noted Inuit artist Ashevak Kenojuak sold her famous print, Enchanted Owl, for just $24 in 1960. That’s all that she or her estate ever received for the original work, even though original prints have subsequently sold for over $200,000 (although she may have earned royalties on further reproductions of the work in the form of low-cost prints). The institution of an Artist Resale Right would help redress that situation. Just as in the US, the Art Dealers Association of Canada is opposed, arguing that an ARR would create a bureaucratic nightmare, particularly for small galleries. However, I would contend that if it has been possible to establish a royalty system for the playing of licensed music even in small establishments, in malls, elevators and elsewhere, it should not be beyond the wit of mankind to be able to collect royalties on sales of physical art. The music royalty system works because of the existence of copyright collectives whose prime function is to collect royalties and distribute them, taking a percentage for themselves to cover operating expenses. In Canada, the collective CARFAC (Canadian Artists Representation) and its Quebec counterpart RAAV (Regroupement des artistes en arts visuels du Québec) are ready and willing to step in to fill the role of collection and administration.

The dealers have a number of arguments up their sleeves to oppose the institution of an ARR. They argue that an ARR will increase costs to purchasers and thus depress art sales. The resale fee, like the dealer’s commission, is either paid by the seller or shared between the seller and the dealer. In either case, such an arrangement normally results in increased prices that are recovered in the end from the purchaser. The increase in prices resulting from the addition of a five percent royalty, according to this line of argument, will hurt emerging artists selling their works for the first time (because their work will be more difficult to sell) while the ARR will primarily reward established and wealthier artists. Or so the argument goes. This argument that resale right royalties will go mainly to well established artists who are already wealthy was picked up by cultural columnist Kate Taylor in a recent report in the Globe and Mail.

If dealers are so concerned to keep prices low, they could of course reduce their own commissions, but there is no reason for them to do so. In fact, increasing the value of art is what the business is all about. It is hard to take seriously the argument that the addition of a small royalty–some royalties, like those in France are capped, so that works selling for millions of Euros still bring only a relatively modest return to the artist—will undermine the market. In fact, many aficionados and collectors might welcome the knowledge that some small part of the price will actually flow back to the artist or their estate. While it may be true that most art does not have much of a resale value, keeping a low threshold for triggering the royalty will help address this. It has been suggested that the cut off in Canada be $1000, which, admittedly, will bring a return of only $50 to the artist—but it will establish the principle. Setting the threshold higher would eliminate micro-transactions but would then capture a smaller portion of resales. It’s a bit of a balancing act.

Countering the dealers’ economic arguments is the moral argument of fair return to the creator of the work. A resale right provides a form of ongoing return to visual artists (who retain the copyright to their works even if the physical copy is sold) similar in principle to the royalties to authors, songwriters and musicians. And there is also a cultural equity factor to consider. In Canada, much of the sculptural work sold in galleries is of native origin, especially Inuit. A regular revenue stream, even a modest one, would be welcome in northern communities and would provide a way of helping even out the disparities and profit-taking enjoyed by southern collectors and galleries. The same principle applies to African art, which in part explains why a large number of African countries have adopted an ARR. By applying it in their countries, their artists get the reciprocal benefit of collecting resale royalties when their works are sold in galleries in Europe. It helps a bit in levelling the playing field.

The ARR may even feature in the upcoming UK-Canada Trade Agreement, which is being negotiated to replace the trade regime previously existing between Britain and Canada when the UK was part of the EU. British artists are keen to expand the reciprocal nature of their resale regime; Canadian artists would welcome a commitment by Canada to establish an ARR which would give them access to the same privileges in Britain (as well as resale royalties when their works are sold in Canada).

If Canada moves in this direction, and the Trudeau government has given strong signals that it will do so[i] although exactly when is still not clear, then US artists will have one more reason to resurrect the issue in the United States. If Europe can do it, if Britain, Australia and Canada can do it, if over 90 countries can recognize the work of their artists by building in this economic incentive to help support the arts, then why not the United States? US exceptionalism is one thing; fairness to artists is another. If the ARR comes to Canada—and it already exists in Mexico—then the only “Amigo” in North America not playing the game may eventually decide to come on board.

© Hugh Stephens, 2022. All Rights Reserved.

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[i] The December 2021 Mandate Letter for the Minister for Innovation, Science and Industry, who holds lead legal responsibility for amending the Copyright Act, included the following instruction; “Work with the Minister of Canadian Heritage to amend the Copyright Act to further protect artists, creators and copyright holders, including to allow resale rights for artists.”

The Standing Committee on Canadian Heritage began hearings late last month to review draft legislation (Bill C-18: The Online News Act) that will follow Australia’s example, with some minor tweaks, to require large digital intermediaries (think Google and Facebook for starters) to negotiate financial compensation with news content providers for the platform’s use of news content to attract users, and thus increase their ad revenues. Among the first witnesses was Prof. Rod Sims, former Chair of the Australian Competition and Consumer Commission (ACCC). Sims was the architect of Australia’s successful News Media Bargaining Code. That Code, when enacted into legislation, allowed collective bargaining on the part of media organizations and required “final offer” arbitration between the parties (Australian news media entities and the designated digital platforms) if deals could not be reached voluntarily. In the end, the arbitration provisions of the Code were not invoked as the platforms instead chose to reach “voluntary” agreements with content providers. In his testimony, Sims stressed the benefit that these arrangements had brought to Australian media, both large players and small outlets, including country weeklies, in terms of additional revenues that have translated into increased employment opportunities for journalists.

While Google and Facebook eventually acceded to the Australian legislation after initially threatening to shut down Search in Australia (Google) or to remove all Australian news content from its platform (Facebook)–a clumsy move that seriously backfired, as I wrote about here—they continue to fight the Canadian legislation by deploying many of the same arguments as were trotted out in Australia. As part of this campaign, an influential tech industry association in Washington, DC, one in which both Google and Facebook play lead roles (the Communications & Computer Industry Association, or CCIA), recently published a paper claiming that C-18 would violate Canada’s trade agreement obligations under the USMCA/CUSMA and the Berne Convention. (See my post of last week challenging these arguments). Others have taken aim at the fact that C-18 has a broad definition of what constitutes “making available” when it comes to news content. “Making available” is the action of the platforms that becomes subject to negotiation with the news media outlets if they facilitate access to content from Canadian news providers. While hyperlinks are not mentioned in the legislation, neither are they excluded and it is apparent that links, headlines and snippets will be covered. In his testimony to the Committee, Michael Geist of the University of Ottawa, a notable C-18 opponent, claimed that inclusion of linking would run counter to Supreme Court jurisprudence on fair dealing, in addition to myriad other criticisms including echoing the CCIA’s questionable interpretation of Canada’s trade obligations as well as questioning the constitutionality of the legislation. These arguments are getting little traction.

Most of the discussion has been about the definition of eligible news businesses and whether really small media outlets can qualify to take part in collective bargaining with the platforms. Along with several other witnesses, I was invited to appear before the Committee on September 27. I focussed my comments on three areas where the legislation has been attacked by its critics, arguing that these criticisms are inaccurate and off base.

A copy of my opening statement to the Committee (with minor additions—like others, I had only five minutes) follows:

”Good Morning. I would like to thank the Committee for giving me the opportunity to present my views on this important issue. I am speaking today in an individual capacity.

In my comments I will be speaking in support of this Bill. In doing so, I would like to address three criticisms that have been brought against it.

One is that the measures proposed by C-18 to stem the decline in journalism are taking aim at the wrong target, the large digital intermediaries, on the grounds that they do not benefit financially from including news content on their platforms, and even if they do, they are already voluntarily providing some financial support to some media.

The second is that the ambit of the Bill is too broad because its definition of “making available” includes some content that would normally be considered fair dealing under the Copyright Act, such as links, headlines and snippets.

The third is that, if implemented in its current form, C-18 would violate Canada’s international trade obligations under the Berne Convention and the Canada-US-Mexico Agreement (CUSMA). I believe all of these criticisms are inaccurate.

I write a weekly blog on international copyright issues and have noted that a number of governments, in the face of fierce opposition from the platforms, have had to resort to legislation in order to level the playing field between news media publishers and the large digital intermediaries.

In 2014 both Germany and Spain passed laws requiring Google to pay news producers for use of their content. Google’s response in Spain was simply to close down Google News, its news aggregation platform, and in Germany to delist any publishers who refused to give Google access to their content without payment. The EU tackled this issue through creation of a limited 2 year press publishers right. Google and Facebook have since come to the table and struck deals with publishers for access to news. France has been particularly successful in this regard.

We know that when Australia decided to “bell this cat”, Google and Facebook mounted a vigorous lobbying campaign and threatened to pull out of Australia. Google also tried unsuccessfully to get the US government to take up its case. In the face of the legislation, however, they backed down and managed to conclude revenue sharing agreements with most Australian media outlets.

In the United States, Congress is currently debating the bipartisan Journalism Competition and Preservation Act (JCPA) which seeks to do much of what C-18 is aiming to accomplish.

I mention these examples to underline that C-18’s objective of helping to preserve a viable professional journalism sector by requiring negotiations for compensation for use of news content by the largest digital intermediaries is not unique; in fact, it is very much in the mainstream of activity taking place in a number of western democracies.

Another criticism of C-18 is that its definition of “making available” is too broad because it includes some actions, such as linking to content, or featuring headlines or snippets, that are normally considered fair dealing under the Copyright Act. There are well established legal precedents in Canada and elsewhere that under most circumstances (but not all) hyperlinking to content is not a violation of copyright. C-18 address this in Section 24, “For greater certainty, limitations and exceptions to copyright under the Copyright Act do not limit the scope of the bargaining process”. (The preceding sentence was not included in my remarks owing to time limitations). It has also been argued that posting hyperlinks provides a benefit to news outlets. Indeed, news outlets do derive a certain benefit from the referral–just as the platforms derive benefit from using news content to attract more users, and thus sell more ads. Under C-18, the balance of respective benefit will be worked out in negotiations between the parties.

While posting hyperlinks, headlines or snippets does not normally constitute a copyright infringement, by the same token C-18 does not deny digital platforms their fair dealing rights. Put another way, their rights under the Copyright Act are not diminished or changed by C-18. However, it will be a violation of the Act if they do not bargain in good faith with respect to making content available. Use of fair dealing exceptions is not a licence to ignore other laws, whether it be the Online News Act, defamation laws or any other legislation. As for the argument that this will interfere with the posting of links by users, such as members of this Committee, that is false. The requirement to bargain over the use of links is restricted in the Bill solely to digital news intermediaries, with a very precise definition.

Likewise, the criticisms that C-18 will violate Canada’s international trade obligations, including the Berne Convention and CUSMA, leading to potential trade retaliation from the United States, do not stand up to scrutiny.

The legislation is drafted in such a way that it does not target US companies, but rather companies with certain market characteristics of size and dominance. Likewise, it does not seek to protect Canadian digital intermediaries that compete directly with Google or Facebook. In addition, the section on non-discrimination does not impose any “must carry” requirements that could violate CUSMA. In the case of Berne, which contains a “right to quotation” under Section 10(1);

 “It shall be permissible to make quotations from a work which has already been lawfully made available to the public, provided that their making is compatible with fair practice, and their extent does not exceed that justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries”,

there is nothing in C-18 that derogates from the quotation right. However, use of quotations from news content providers could be a factor in the bargaining process. (The wording of Section 10(1) was not included in my remarks).

Quite apart from not having a strong legal argument to challenge the Bill under either CUSMA or Berne, it is highly unlikely that any government, including the US government, would take up a trade challenge either under CUSMA or the WTO. A key factor is the reality that even within the US high tech sector, not to mention other corporate sectors in the United States, there is no unanimity of views on legislation like C-18. In the case of Australia, when Google threatened to pull its search engine from the country, Microsoft stepped in offering to fill the gap, stating at the same time that it was ready to comply with the new Australian code. In the face of such divided corporate interests and views, it is most unlikely that the US government would be interested in pursuing a controversial trade challenge, one that would in any case be on shaky grounds.

(The reasons why the US government would be most unlikely to take up a trade challenge were not included in my introductory remarks owing to time limitations)

I will end my comments here and look forward to any questions. Thank you.”

There will likely be further hearings later this month to hear from Google and Meta.

© Hugh Stephens, 2022. All Rights Reserved.