Month: May 2024

It’s USTR “Watch List” Time Again

Image: http://www.shutterstock.com (under licence)

Apart from the budding of leaves, the rites of spring are marked by another annual phenomenon, the issuance of the annual Special 301 Report by the Office of the United States Trade Representative (USTR), widely known as the USTR Watch List. For those not steeped in US trade law, the Special 301 report dates back to the late 1980s and is based on the US Trade Act of 1974, later amended to take intellectual property (IP) issues into account. As stated by USTR, the process is “the outcome of a Congressionally-mandated annual review of the global state of intellectual property (IP) rights protection and enforcement”. Global, that is, except for the United States (More on this later). That is because the legislation requires USTR “to identify countries that deny adequate and effective IP protections or fair and equitable market access to U.S. persons who rely on IP protection” (Federal Register). In other words, it is a US government document that catalogues and categorizes the state of IP protection in other countries if their conditions are considered to be impediments to US exports and/or result in US companies or rights-holders being treated unfairly. The practices identified relate to lack of effective legal protection resulting from lax enforcement (e.g. weak border control of counterfeit products or ineffective anti-piracy measures to protect copyrighted content) or deficient laws (loopholes or lack of legislation in key areas resulting in a failure to protect IP rights adequately), policies that weaken or fail to respect IP standards, at least as interpreted by USTR, and non-transparent, discriminatory or other forms of trade restrictions that impede access to copyright protected content. The exact wording, taken from USTR’s website can be found at the end of this blog.[i]

Note that the policies of the identified countries in question–or lack of policies in some cases–don’t have to discriminate against US rightsholders in order to be included in the USTR report. Normally in trade agreements, “national treatment” is sought in order to avoid discrimination on the basis of nationality, i.e. foreign products and services (in this case US goods and services) should be given the same treatment as domestic equivalents. There is also an expectation that a country’s domestic laws (which form the basis of national treatment) will be consistent with its trade agreement commitments. So, for example, if Ruritania has wide exceptions in its domestic copyright law that permit indiscriminate downloading of music and movies, (let’s say there is an exception “for purposes of cultural appreciation”), this does not directly discriminate against US music labels and studios. Even domestic Ruritanian content producers are affected by this very loose fair use regime although in real-life terms this lopsided legislation would affect US interests significantly more than Ruritanian, since the majority of the content consumed in Ruritania is of US origin. However, since US products have been accorded national treatment, the US would find it difficult to bring a trade dispute case. This is where the Watch List comes in handy since USTR can list any practice it feels justified in calling out without being restricted by the limitations of international trade agreements.

While in the Ruritanian case US interests are disadvantaged by the law’s interpretation, so too is the nascent local content industry, i.e. the limited number of Ruritanian music and film producers who are also getting ripped off. The locals can’t seem to get much traction for changes to the law (because who doesn’t like something for free)? Here again the Watch List can play a role. By working with US IP interests, the USTR 301 Report provides an indirect means for domestic IP stakeholders to bring their concerns to the attention of their own government, assuming that Ruritanian officials are responsive to concerns raised by USTR. So, in this way a unilateral US process can be an effective vehicle to raise all IP boats, although the direct focus is on protecting US intellectual property interests.

The Watch Lists embedded in the Special 301 report are compiled from submissions provided by US companies and trade associations in response to a Federal Register notice. These inputs are then vetted by officials in US embassies and consulates overseas, with additional input from various US government agencies.  The final decision as to who is placed on which list and for what reason is decided by USTR. There are essentially two lists, a “Priority Watch List” (PWL), where countries facing the most serious allegations of inadequate IP protection and enforcement are named. Being on the PWL could result in USTR initiating formal trade investigations or imposing sanctions if there is no improvement. The second list is the “Watch List” (WL), a longer list of countries where the USTR has concerns about their IP practices but the issues are not as serious as in those countries placed on the PWL. For WL countries, the focus is on monitoring and “encouraging” change. Thus, while each situation is a bit different, the outcome of the process can range from pressure and threats to encouragement and reward. When the hearings are held, foreign embassies will often appear to explain their government’s policies in an attempt to stay off the designation list. Some countries take this process very seriously, others less so. In years past, countries like Taiwan, the Philippines and Malaysia regularly appeared on the Watch List. Over time, they addressed the issues of concern and no longer have the dubious honour of being named.

Other countries, like Canada, seem less concerned about being named, at one point calling the USTR report “… invalid and analytically flawed because the process relies primarily on US industry allegations rather than empirical evidence and objective analysis”. Or maybe the Canadian government has realized that no matter what actions it takes, the goal posts will move as new complaints surface from one US industry or another (BigPharma doesn’t like the pharmaceutical approval process in Canada, US food producers don’t like the recognition Canada accorded to European Geographical Indications in the Canada-EU Trade Agreement, or whatever), and it will continue to be designated as has been the case for at least the past 20 years.

As an example, for many years one of the US complaints was that Canadian border officials did not have ex-officio authority allowing them to seize counterfeit goods in transit (presumably enroute to the US from China or somewhere). That issue was fixed in the update to NAFTA (the USMCA/CUSMA) but now the complaint is that “Canadian authorities have yet to take full advantage of expanded ex officio powers”. Not that this would surprise me. CBSA, the Canadian Border Services Agency, seems to be particularly challenged these days. CBSA’s ineptness extends to an apparent inability to stop a massive movement of stolen Canadian vehicles being shipped in containers through the Port of Montreal to the Middle East and Africa. Given the criminal networks engaged in this large-scale, well-organized theft and hijacking of cars, (which has become an epidemic in Toronto—full disclosure, members of my family have been victimized with cars being stolen from in front of their home in the middle of the night three times in the past 24 months), perhaps using their ex-officio authority to interdict the transit of counterfeit goods is not high on CBSA’s to-do list.  

Apart from industry complaints, it would be fair to say that broader political factors also sometimes enter into designation decisions. For example, for many years Ukraine was regularly named to the Priority Watch List for a range of IP transgressions. While its IP record has probably not markedly improved, it is fighting for its life against Russian aggression and presumably strengthening its IP laws is not a current top priority. Therefore, reasonably, the review of Ukraine has been “suspended” although it is not off the hook. Other countries that figure regularly on the “Priority Watch List” (PWL), constitute the “usual suspects”, the ones you would expect to be on such a list; China, Russia, India, Venezuela and three or four others. In 2024, there were 7 PWL countries. There were also 20 named to the less serious “Watch List” category, among them places like Algeria, Belarus, Pakistan, and Turkemenistan, (Uzbekistan was removed this year) but also NAFTA partners Canada and Mexico.

During the USMCA/CUSMA negotiations in 2018, under the Trump Administration, Canada was downgraded to the PWL, the most serious transgressor category. As I commented at the time, this was clearly a politically-driven negotiating tactic to exert pressure on Canada during the negotiations and, frankly, strained the credibility of the process by equating a rule of law country like Canada with other countries on that year’s PWL. Not that Canada has clean hands. This year’s USTR comments about Canada’s Watch List designation cite several concerns. One is the failure of CBSA to fully exploit its ex-officio powers, mentioned above. There is also concern that the courts are not issuing sufficient deterrent level penalties when those trafficking in counterfeit goods are caught. There is also the allegation that “Levels of online piracy remain very high in Canada, including through direct downloads and streaming. Piracy devices, apps, and subscription services are reportedly sold throughout Canada, both in physical retail locations and through online channels.” All probably true, but is the problem any worse in Canada than in the US? See my next blog.

The USTR report also includes a concern with which I very much agree, namely, “the broad interpretation of the fair dealing exception for the purpose of education, which…has significantly damaged the market for educational authors and publishers”. However, I suspect that even if the Canadian government finally got around to fixing this injustice (which I hope will be the case), Canada would still be on the WL some other reason.

To summarize, the Special 301 Watch List process has been effective in raising IP standards generally in many areas globally but is not immune from influence arising from US domestic political factors. It is also consciously not designed to identify IP shortcomings in the United States. But what if the US was also reviewed under the Special 301 provisions? If USTR applied the same critical lens to IP practices in the United States that it applies to other countries, (at least in the area of copyright), what would a US Watch List designation look like? The results might be surprising to some readers. To find out what this might look like, stay tuned for my next blog post, “The USTR Watch List Designation You Will Never See”.

© Hugh Stephens, 2024. All Rights Reserved.

[i] The Report identifies a wide range of concerns that limit innovation and investment, including:  (a) the deterioration in the effectiveness of IP protection and enforcement and overall market access for persons relying on IP in a number of trading partner markets; (b) reported inadequacies in trade secret protection in countries around the world, as well as an increasing incidence of trade secret misappropriation; (c) troubling “indigenous innovation” policies that may unfairly disadvantage U.S. rights holders in foreign markets; (d) the continuing challenges of copyright piracy and the sale of counterfeit trademarked products on the Internet; (e) additional market access barriers, including nontransparent, discriminatory or otherwise trade-restrictive, measures that appear to impede access to healthcare and copyright-protected content; and (f) ongoing, systemic IP enforcement issues at borders and in many trading partner markets around the world.

Canada is not the United States when it comes to Copyright: The Cases of Anne of Green Gables and Steamboat Willie (or Down the Copyright Rabbithole, Twice)

Image: Shutterstock.com

Canada not the US when it comes to copyright—or anything else. This should be a statement of the obvious, but in fact all too often Canadians get confused about how copyright (and other) laws work in this country because of the overwhelming influence of US entertainment and, to a lesser extent, US media content in Canada. For example, during the truckers convoy to Ottawa a couple of years ago, some of those arrested protested that they weren’t read their “Miranda rights”. (Right to remain silent, etc). They’d been watching too much US television. Miranda rights do not apply in Canada although Canada does have similar “Charter rights” that include the right to be informed of the alleged offence and the right to counsel. Likewise, in the area of copyright, Canadians will often refer to “fair use”, even though the US fair use doctrine does not apply in Canada. In particular, the application of a “transformation” test by US courts as one consideration in determining fair use has no applicability in Canadian law. Just as Canada has a similar but not identical concept to Miranda rights, it also has user exceptions to copyright through the fair dealing exceptions specified in the Copyright Act. However, while there are many similarities, fair dealing and fair use have some important differences, in Canada as elsewhere.  

The Public Domain in Canada and the US: Not the Same

Yet one more important difference between Canada and the US is the date on which copyright protection expires, allowing various works to fall into the public domain. Although the term of copyright protection in Canada is now “life of the author plus 70 years”, the same as in the US since the extension of Canada’s term of protection at the end of 2022 as a result of commitments Canada made in the CUSMA/USMCA, there are still many works protected by copyright in the US that are in the public domain in Canada. This is primarily because of Canada’s shorter “life plus 50 year term” that was in force for many years until the recent change. The extension of copyright protection in Canada in 2022 does not apply retroactively to works already in the public domain. A few years ago I wrote a blog post about F. Scott Fitzgerald’s The Great Gatsby, recounting how it was in the public domain in Canada yet still under copyright protection in the US. As a result, Canadian publishers could freely reprint the work, and some did, like Broadview Press, but they could not legally sell it in the US.

The Historical Context

This harkens back to the bad old days in the 19th century when Canadian printers would frequently publish US works without obtaining rights from the author since at the time US registered works enjoyed copyright protection only within the United States, just as British or Canadian works were protected only in Britain and its possessions. Thus, reprinting US works in Canada without permission from the US rightsholder was legal. What was not legal was the smuggling of these Canadian-printed US works back into the US at cut-rate prices, a situation that led Mark Twain to lament his mistrust of “Canadian pirates”. (Just to be clear, I am not suggesting that modern Canadian publishers of US works that are in the public domain in Canada but not in the US are engaged in illicit supply of those books to US readers). At the time this Canadian “piracy” was going on, US printers were treating British works similarly, freely reprinting them for sale in the US without having obtained or needing to obtain the rights, as I discussed in this blog post. Because of its geographical position adjacent to the US yet still subject to certain imperial laws, Canada found itself caught in the crossfire of the Anglo-American copyright wars of the late 19th century. With the signing of the Berne Convention in 1886, and the passage of legislation in the US in 1891 that provided for reciprocal recognition of national copyrights under certain conditions, this problem was largely resolved.

Anne of Green Gables

While at the present time copyright protection in the US is generally longer than in Canada for the same works, at times Canadian copyrights have been longer than those in the US. This is particularly true of that quintessential early Canadian work, Anne of Green Gables. If you will allow me to go down the copyright nerd rabbit hole for a second, I will explain how this occurred.

Lucy Maude Montgomery’s work was published first in the United States in 1908. Like many Canadian writers at the time, she thought her chances of getting published south of the border were better than in Canada. Under then US law (the Copyright Act of 1909), the work was entitled to 28 years of protection from date of publication, subject to a further 28 years of protection if the rights-holder renewed the rights in the 28th year. The book’s publisher, L.C. Page & Co. of Boston, was assiduous in protecting its rights and ensured that the term of protection was extended, which provided protection until 1964. However, beginning in 1963, the US Congress annually passed interim extensions to works still under copyright, in anticipation of a major overhaul of US copyright law. Thus the work was still protected when the US Copyright Act of 1976 came into effect on January 1, 1978. That legislation converted the US term of protection for books from a set period after publication to the more widely accepted rule of author’s life plus a specified number of years, in this case fifty.

The Berne Convention countries had recommended “life plus 50” as the minimum standard of protection in 1908 and incorporated it as a requirement in 1948. The US now joined this consensus (although it did not join Berne at that time). The new US “life plus 50” rules applied to all works created after January 1, 1978, but what to do about earlier works? Pre-1978 works were subject only to a 56 year term of protection after publication, so Congress extended the period of supplementary protection under the old legislation (28 years) by an additional 19 years, making the full term for a registered older work 75 years (28 for the original term and 47 for the supplementary term) from the date of publication. This 19-year extension provided copyright protection to the 1908 Anne of Green Gables up to 1983 in the US. Meanwhile, Canada had been following the Berne “life plus 50” standard since the early 1920s. Thus, the copyright on Anne of Green Gables (or any of Montgomery’s other works) in Canada was protected until January 1, 1993, almost a decade longer than in the US, Montgomery having died in April 1942.

The lapse of copyright on Anne in both the US and Canada has not, however, stopped the Montgomery estate and the Government of Prince Edward Island, which has set up the Anne Authority, from vigorously pursuing legal action against any usurpers of the Anne trademarks that they have registered. A couple of years ago they threatened the US producers of an Anne spin off, a musical called Anne of Green Gables: A New Musical, with a lawsuit for trademark violation. The producers countersued, claiming that Anne was as much in the public domain as Shakespeare. In the end, both sides dropped their suits and the musical continued in production.

The US Extends its Term in 1998: Why?

While Anne’s copyright lapsed in Canada later than in the US, ever since the US extended its terms of copyright from “life plus 50” to “life plus 70” in 1998, the shoe is normally on the other foot. There are critics in the US that claim Congress passed the extension to satisfy the Walt Disney Company, given that some of Disney’s corporate copyrights were close to expiring, notably the copyright on Mickey Mouse. Steamboat Willie first appeared in 1928. As I wrote in a blog post a couple of years ago, (The Mickey Mouse Copyright Extension Myth: A Convenient “Straw Man” to Attack), that is hogwash. Of course, Disney was not opposed to extending the term of copyright protection, but whatever lobbying it did was not the primary reason for the US action. The main motivation was to bring US copyright into line with that of the EU. The EU had harmonized its copyright term (which varied widely between member states) to a common “life plus 70” standard in 1993. Since the extra 20 years were beyond the required Berne minimum, the EU was free to apply a reciprocity clause, which it did in order to encourage other countries to follow its example. It would extend the longer period of protection to non-EU authors only if EU authors received similar protection in the other country. This was a permitted derogation from the normal national treatment rule in Berne whereby any member state was required to accord a foreign copyright holder equivalent treatment to that provided to its own nationals.

The adding of an additional 20 years to US copyright protection had an additional wrinkle beyond going from “life plus 50” to “life plus 70” for post-1978 works. When the US changed its term to life of the author plus 50 years back in 1978 , recall that it instituted a provision for works protected under the old regime (where protection began from the date of publication) by rounding up the period of protection post-publication to 75 years. When it added 20 years to the “life plus” formula in 1998, Congress also added 20 years to the protection afforded works published pre-1978. Thus, these earlier works were now protected for 95 years from the date of publication.

Steamboat Willie

This leads us to Steamboat Willie and the frenzy that took place amongst public domain advocates when Willie entered the public domain on January 1 of this year. Almost every US broadcast and media outlet had a lead article on this “amazing development”, but Canadians were not spared. The CBC, Globe and Mail, Toronto Star, and others–even some Canadian law firms—breathlessly touted the entry of the mouse into the public domain, without bothering to even reference how Canadian copyright law applied. Some of them simply picked up a syndicated AP story, but none bothered to mention the salient but apparently unreportable fact that Willie was already in the public domain in Canada–and had been for two years! Apparently nobody noticed.

All the nonsense about works entering the US public domain on January 1 each year is designed to promote the narrative that these works have somehow been released from bondage, and that new explosions of creativity using the stories and characters are about to appear. Winnie the Pooh was the star of the show back in 2022, with the CBC grabbing the story, neglecting to mention that author A.A. Milne’s works had been in the public domain in Canada since 2007, (50 years after Milne’s passing). It’s total rubbish, with the new “creative works” emerging from this process leaving more than a little to be desired.

Why was Willie in the Public Domain in Canada but not the US?  

This is yet another copyright rabbit hole to explore. Hang on. Willie entered the public domain in the US in 2024 because of the 95 year rule mentioned earlier. Pre-1978 published US works are subject to this rule (unless the copyright was not renewed in the 28th year). Thus, Steamboat Willie, having first appeared in 1928, entered the public domain in the US this January. But Canada does not apply this rule. Its term of protection is based on the life of the author or authors (in the case of joint authorship). In the case of Steamboat Willie, there were two co-authors who held the copyright, Walt Disney and Ub Iwerks.

In his blog post “Mickey Mouse and the public domain”, copyright officer at Simon Fraser University in Vancouver, Donald Taylor, takes us through the details. Disney and Iwerks were the creators of the character. Disney died in 1966, Iwerks (a noted animator who created many Disney characters), died in 1971. With joint authorship, the term is based on the lifespan of the last survivor. Thus, in Canada, under the “life plus 50” rule that prevailed until the end of 2022, Steamboat Willie went into the Canadian public domain on January 1, 2022. Had Iwerks not died until 1972, the extended term that became effective in Canada on December 30, 2022 would have protected Willie in Canada until 2042. I wonder what the Canadian media outlets who prattled on earlier this year about Willie’s public domain entry on January 1 would have had to say then?

Willie and the Rule of the Shorter Term in Europe

There is even one more wrinkle in this, as pointed out by Taylor. Some countries have been applying the “life plus 70” rule for many years. In Germany it has been in effect since 1971, therefore in theory Willie should be protected in Germany until 2042. However, under something called the “rule of the shorter term”, (which allows the EU to apply the “shorter term” i.e. “life plus 50” to countries that do not match the EU’s “life plus 70” term), there is a provision that if a work enters the public domain in the country of its origin, then it will also be in the public domain of a country implementing the “rule of the shorter term.” Brazil does not apply this rule, so Willie is protected there until 2042, but he is now in the public domain in Germany. Incidentally, the EU’s application of the shorter term rule (the US does not apply it) provided additional benefits for Canadian authors when Canada extended its term in 2022, since Canadian works in the EU now get full national treatment, i.e. equal treatment with EU authors of “life plus 70”. What a rabbit hole!

When it comes to copyright, there is always something new to explore, a new wrinkle, a rabbit hole if you will. If there is one lesson that we can draw from all this, it’s don’t assume that what applies in the US when it comes to copyright (or any other law, for that matter) has any direct bearing on the situation in Canada, no matter what you see on TV, read in the Canadian press or hear on the CBC.

© Hugh Stephens 2024. All Rights Reserved.

Editor’s Note: This post has been updated. The second and third paragraphs in the section headed “Anne of Green Gables” have been modified to explain that the work did not fall into the public domain in the US in 1964 (56 years after publication), only to have its copyright revived and extended after the implementation of the US Copyright Act of 1976. Rather, it continued to be protected as a result of a series of interim extensions passed by Congress until the enactment of the 1976 Act, at which time the term of pre-1978 works was extended by an additional 19 years, to 75 years from date of publication. As a result, in the case of Anne of Green Gables, its US copyright expired in 1983, as stated.

The Economics of Copyright: Incentives and Rewards (It’s Important to Get them Right)

Image: Shutterstock

Two years ago, in April 2022, the US Copyright Office (USCO) appointed its first Chief Economist, Dr. Brent Lutes. Many national Intellectual Property Offices have such a position, e.g, UK IPO, IP Australia, EUIPO, and WIPO. (Notably, Canada’s Intellectual Property Office–CIPO–does not). All these positions have broad responsibility for assessing the economics of IP generally, covering patent, trademark, industrial designs as well as copyright. In the US, the Patent and Trademark Office has its own Chief Economist. However, Lutes’ USCO position appears to be the only one related exclusively to assessing the economic impact of copyright. The position sits within the Office of Policy and International Affairs and is composed of a small team of economists, providing the Register of Copyrights, Shira Perlmutter, with policy-relevant research on economic issues related to copyright.

In an interview conducted last month, Lutes talked about the economic goals of copyright in terms of enhancing social welfare. He noted the goal of copyright is to contribute to the welfare of society by promoting access to creative works, now and in the future, through market based behavioural incentives. The goal of the Office of Chief Economist is to gather more information to inform policy making, such as the geographic distribution of copyright activity or the demographic characteristics of creators. As but one example, is racial or ethnic diversity related to creativity? The economic issues surrounding AI and copyright, both pro and con, is another field of research the USCO will be exploring.

In addition to finding the right economic levers to stimulate production of creative works, economic studies of copyright also demonstrate the enormous impact copyright-based industries have on national economic welfare. While the impact can depend on what economic multipliers are used and how direct versus indirect benefits are calculated, there is no question that copyright industries in most economies are very significant as job creators and multipliers. For example, IP Australia in its most recent annual report estimates that cultural and creative activity contributes about 6% of Australian GDP annually, with design, fashion, publishing, broadcasting, electronic and digital media and film being the primary industries involved. In the US the figures are even more impressive. According to the International Intellectual Property Alliance, in 2021 (the last year for which statistics are apparently available), core copyright industries in the US, defined as those industries “whose primary purpose is to create, produce, distribute or exhibit copyright materials”, added $1.8 trillion to US GDP, accounting for 7.76% of the economy. Total copyright industries, a definition that includes industries partially dependent on copyright, such as fabric, jewellery or toys and games, account for another trillion USD, even when only a portion of their total value is included in the copyright calculation.  

The UK Intellectual Property Office published its IP survey in 2022, comparing the role of patents, trademark, registered industrial designs and copyright. While copyright industries were on the low side for exports (£4.7 billion as opposed to patents at £120.6 billion, copyright’s “non-financial value-added output” (IP data is not available for the financial industries, thus the description of “non-financial”) trounced that of patent industries by almost 2:1. As with the US IIPA study, the UK report accounted for the degree to which certain industries depend on copyright, categorizing them as core, interdependent, partial or non-dedicated support industries, adjusting the amount of copyright contribution accordingly. Book publishing, for example, is considered a 100% copyright industry and its value is calculated as such, whereas for an industry such as paper manufacturing, only 25% of the value was included in the calculation of copyright benefits. This methodology followed that of the World Intellectual Property Organization, aka WIPO, which also conducts economic studies as well as assists national authorities with their own. Economists are careful people, not prone to exaggeration, and consistent methodology is important to ensure accurate measurement and reporting.

WIPO worked with the Department of Canadian Heritage to produce a report in 2020 on “The Economic Impact of Canada’s Copyright-Based Industries”. As with other deep dives on the economic benefits of copyright, this study produced similar notable statistics. For example, while many copyright opponents in Canada were deploring the extension of the copyright term of protection in Canada, arguing that the result would be an outflow of royalties to foreign rights-holders because Canada was a net importer of copyrighted materials, the Heritage report established that “Canada has exported more copyright-related services than it has imported, maintaining a trade balance surplus from 2009 ($2.5 billion) to 2019 ($5.6 billion)”. In actual fact, extending the copyright term in Canada brought with it the additional benefit of a reciprocal extended term in many foreign countries for Canadian works, clearly benefiting Canadian rights-holders. The Heritage study went on to document a range of other important outcomes such as employment (over 600,000), contribution to GDP ($95.6 billion) and percentage of GDP (4.9%). All figures are based on 2019 data. No update has been published since. It is just as well that Heritage Canada took the lead in preparing this report since the government department holding lead statutory responsible for copyright in Canada, the mammoth Department of Industry, Science and Economic Development (ISED), unfortunately seems to treat copyright as but a tiny pimple on its elephantine rump.

While the studies cited above highlight the economic contribution that copyright industries make to national economies in terms of jobs and wealth generation, let us not forget the key point that Dr. Lutes underlined regarding the social welfare contribution of copyright through using market-based incentives to promote and encourage creativity and investment in creative outputs. It is hard, if not impossible, to put a dollar amount on the social welfare benefits of creative expression and cultural sovereignty, but they are immense if incalculable. Without copyright, not only would existing content-based industries be unable to thrive and expand, but the formula to encourage new, original content would be missing.

Notwithstanding the importance of a robust copyright framework for both economic and social welfare, creators and content-based copyright industries are facing major challenges today. Some are technological, like the emergence of generative AI; some behavioural, such as a wide tolerance, even acceptance, of piracy and free riding. The struggle against piracy is ongoing and protracted, a cat and mouse game. Free riding is what AI developers are doing on the backs of content creators through unauthorized training of AI models on copyrighted content, with resultant legal challenges. There is also the question of whether wholly AI generated works should be accorded copyright protection. As the Copyright Alliance has observed, the Copyright Clause in the US Constitution is premised on the promotion of the “progress of science and useful arts” by protecting for a limited period of time the writings and discoveries of authors and inventors. Given that premise, it should be self-evident that creator incentivization is not applicable to machines, which do not need nor comprehend economic incentives to create.

Free riding is also what the education sector has been doing in Canada under the specious umbrella of “education fair dealing”, introduced through copyright amendments in 2012 that broadened the scope of fair dealing. Since then, the “education industry” at the public, secondary and post-secondary level has been siphoning off economic value from writers and other creators to the tune to date of over CAD$200 million. Their legalized renunciation of collective reprographic licensing is ostensibly to benefit students but is in fact a transfer of wealth from creators to the bottom line of educational institutions. If a key objective of copyright is to incentivize creation of new content, such as materials used by educational institutions to teach students, then the current interpretation of education fair dealing in Canada upends a key rationale for granting copyright protection in the first place. (As a footnote, I should add that not all arguments in favour of copyright are based solely on economic incentives. There is also the question of natural justice and equity, providing authors with a degree of control over works they have created).

Since court challenges have unfortunately proven ineffective, the remedy for Canada’s education fair dealing fiasco is for the Government of Canada to amend the Copyright Act so that rightsholders are properly compensated when their works are used in Canada. Both the copyright collective in English Canada, Access Copyright and its Québec counterpart, Copibec, recently called for legal clarification of the nature and extent of educational fair dealing.

Thorough documentation of the contribution that copyright makes to economic and social welfare helps substantiate the case for adequate legal frameworks, including combatting piracy and ending copyright free riding. Sound economic data are essential to sound policy making. The initiative of the US Copyright Office to appoint a Chief Economist helps to meet these goals and is to be commended.  Should the Canadian Intellectual Property Office ever create such a position, its first task should be to evaluate the full economic and social costs of the current short-sighted interpretation of fair dealing in Canada’s education sector in terms of its negative long-term impact on creativity and cultural sovereignty in the country.

The Scottish writer Thomas Carlyle may have described economics as the “dismal science”, an oft-quoted remark, but rather than being dismal it is in fact just the opposite; it sheds light on the importance of copyright to maintaining a well-functioning, equitable and culturally rich modern society.

© Hugh Stephens, 2024. All Rights Reserved.