Author: hughstephensblog

I am a former Canadian foreign service officer and a retired executive with Time Warner. In both capacities I worked for many years in Asia. I have been writing this copyright blog since 2016, and recently published a book "In Defence of Copyright" to raise awareness of the importance of good copyright protection in Canada and globally. It is written from and for the layman's perspective (not a legal text or scholarly work), illustrated with some of the unusual copyright stories drawn from the blog. Available on Amazon and local book stores.

Canada and the Digital Services Tax (DST): A Humiliating Climbdown to Mark Canada Day

A black coffee mug with the text 'Proud Canadian from Eh to Zed' and decorative moose antlers, displayed on a shelf.

Photo: Author (in Agnew’s General Store, Wilberforce, ON)

Mark Carney’s first Canada Day as Prime Minister (Canada’s 158^th) was supposed to mark a milestone; the end (or at least the beginning of the end) of federal-provincial trade barriers, the enactment of legislation to fast-track major projects, and passage of tax relief. All were achieved by the July 1 deadline, no small feat for just a couple of months in office. But just two days before Canada Day, one more action took place that Mr. Carney surely had not planned for when celebrating the birthday of the True North Strong and Free. This was the decision to rescind Canada’s Digital Services Tax (DST) late on Sunday, June 29, after a phone call between Carney and President Trump, subsequent to Trump’s post on Truth Social that he was immediately suspending trade and security negotiations with Canada owing to the imminent imposition of the tax. The DST, enacted into law in 2024 but with an 18 month “advance notice” period prior to actual implementation was supposed to go into effect on June 30, with taxes owing backdated to 2022. It was estimated that companies like Google, Amazon, Uber, META, AirBNB and others were on the hook for back payments of about two billion dollars, with more to come in future years. Not surprisingly, these companies weren’t happy and enlisted the support of the Trump Administration, as indeed they had sought support from Joe Biden earlier.

The DST was controversial in Canada. It was opposed by, among others, the Canadian Chamber of Commerce and the Business Council of Canada. Reasons for opposition were several; it was a tax that the tech giants and could and would pass on to consumers (Google has already imposed a 2.5% “digital tax” on its customers to compensate for the anticipated impact of the DST—don’t count on getting that money back), but the main argument against the DST was it painted a big target on Canada’s back. The DST had already attracted significant opposition from the tech industry in the US during the Biden Administration and was certain to provoke an unpredictable Donald Trump at a time when disruption on the Canada-US trade file was already endemic.

Is important to remember what the DST is and why it is on the tax agenda. It is not a sales tax, nor a tax on profits. It is a three percent tax on revenues generated in Canada from specific services provided by large digital companies that have global operations. In the case of Canada’s DST, companies that are “in scope” to pay the tax must earn a minimum of $20 million in revenues in Canada from specified services such as sales of digital advertising, online marketplaces, social media services or sale of user data (significantly, however, not content streaming), plus have worldwide income of more than 750 million Euros, about one billion CAD. Canada’s DST legislation was passed in 2023, came into force on January 1, 2024 (when taxes began accumulating retroactive to January 1, 2022), with first payments due on June 30, 2025. Due, that is, until it was announced, just a few hours before the payment deadline, that the legislation would not be enforced and would be ultimately rescinded. The fact that legislation duly passed by Parliament that had been in force for a year and half could be rescinded within 48 hours of the US President opposing it in a “tweet” says it all. How did Canada paint itself into this corner from which there was no reasonable escape?

It is important to note that the Canadian legislation, as well as DST legislation in other countries, does not specifically name US tech giants as the targets, (a small number of Canadian companies would have also been required to pay the tax in Canada) but targetting the “GAFAMs” (Google, Apple, Facebook, Amazon and Microsoft etc.) is the import of digital service taxes generally. This is because these are the companies that dominate the digital space–and which have been accused of manipulating profits to minimize and avoid paying tax in countries where their revenues are generated. It is argued that having disrupted the business environment (by upending the advertising market, for example), the companies should at least contribute tax revenues in the jurisdictions where they have a digital presence. It is no secret that most of these companies have exploited the fact they have little or no physical presence in many of the countries where they generate significant revenue. Although headquartered in the US many of them have set up offshore operations to conduct their global business, ensuring that their operations in third countries are barely profitable. This allows them to pull back the proceeds to the low-tax offshore jurisdiction (like Ireland) from where they ostensibly conduct international operations.

Profitability is reduced by legal techniques such as charging high fees to the local subsidiary for its use of the intellectual property in the technology platform, thus ensuring that profits are attributed back to the office registered in the tax shelter location. It is no accident that if you book accommodation through AirBNB in Canada, your payment goes to AirBNB Ireland, 8 Hanover Quay, Dublin. Your refund, if any, comes from the same source. The Library of Parliament published a detailed research paper on the tax avoidance phenomenon in 2020. To counteract these manoeuvres governments have deployed various measures to plug the loopholes. One of these is a tax on revenues instead of profits. Note however that it is a blunt instrument because it captures the just and the unjust alike. A company may have low profits for a variety of reasons, such as being in start up phase, not just because of tax avoidance. Additionally, it is normal when DSTs are applied that no credit is provided for other taxes paid, disincentivizing good tax behaviour.

Be that as it may, the DST is one way for governments to fight tax venue shopping by multilateral corporations engaged in digital trade, although it is not the preferred way of dealing with the problem of tax avoidance. Since 2013 the OECD, ostensibly with US cooperation, has been trying to find a multilateral solution that would provide for an agreed reallocation of digital revenues, as well as application of an alternative minimum tax. However, since this could result in it losing out on some revenues that would be dispersed to other countries, the US has slow walked the process. While the Biden Administration agreed in principle, it did not submit the OECD “Global Tax Treaty” to Congress for fear of defeat. On assuming office in 2025, Donald Trump tore up all previous US commitments to the OECD tax reform process.

In 2021, an interim agreement was reached. The US agreed to continue to engage in the treaty negotiations provided that other countries contemplating introduction of a DST agreed to pause implementation (ie. there would be a moratorium on the introduction of new DSTs) pending conclusion of a final agreement. However some countries, notably Austria, France, Italy, Spain and the UK, had already implemented a DST and were therefore “grandfathered”. Thus, they enjoyed the tax revenue from digital companies all the while the OECD was dithering over next steps. Canada looked on with envy.

Canada appears to have felt it missed the boat by not introducing legislation earlier (it was first mooted by the Trudeau government in 2019), which would have allowed it to benefit from grandfathering. The Canadian position was that it would introduce legislation only if the OECD treaty process did not move forward as planned (which is what happened in 2023, when it stalled). While agreement was not reached, there was broad consensus on extending the DST moratorium. Canada opposed an extension, the only OECD member to do so. It then proceeded to introduce its own DST legislation, backdated to 2022 (to capture the revenue it thought it should have been receiving all along), with collection including arrears to begin on June 30 of this year. No doubt the anticipated $2 billion in revenue had already been “booked” by the Department of Finance against the budget deficit.

On one plane—the fiscal plane–this all makes sense. However, looked at from the perspective of Canada-US trade relations, it was asking for trouble. Why be the “tall poppy” when you could stick with the pack and wait out the process, especially given the asymmetry in Canada-US economic power and Canada’s dependence on the US market? Why impose an ill thought-out retroactivity provision? Why be the threatened breach in the DST dam, inviting a disproportionate response to head off others who may have the same idea? Add in the re-arrival of Donald Trump on the political scene and you have a crisis waiting to happen.

Although the implementation of the DST at the end of June, 2025 had been well publicized for a couple of years (and was the subject of a USMCA/CUSMA dispute settlement case under the Biden Administration), it seems to have only caught Donald Trump’s attention on the eve of the scheduled implementation date. Coming right in the middle of an agreed 30-day self-imposed window to reach a bilateral agreement, a timeframe agreed between Carney and Trump at the G7 summit earlier in June, Carney had no choice but to back down. The DST was not the hill to die on.

How did the government allow itself to be so backed into a corner that craven capitulation was the only reasonable outcome? Why not simply suspend the DST’s implementation for a few weeks, kick the can down the road and roll the DST into the bilateral agreement? At worst, use it as negotiating coinage. My guess is that it would likely have ended up on the cutting room floor but at least that concession could have been potentially offset against some other issue of benefit to Canada in the new agreement. What has happened now is that Canada has given up a key card simply for the privilege of being able to stay at the table with the US. What is to stop Trump from announcing next week that something else has to go or else negotiations will end? With his zero-sum approach to negotiations, he could in theory continue to pry concessions out of Canada item-by-item well before any deal is reached, if one is reached at all. It used to be that “nothing is agreed until everything is agreed”. This has now been changed to allow the dominant partner to cherry pick concessions just for the “concession” of keeping talking. We have gone from “elbows up” to “hit me”.

This is the lesson, if any was needed, as to what happens when you are dealing with someone like Donald Trump who has never heard of “principled negotiation” (defined by Google’s AI Overview as “a collaborative approach to conflict resolution that focuses on finding mutually beneficial solutions while preserving relationships”) or “win-win”. It’s all about raw power and today’s deal.

No sooner was the announcement made about rescinding the DST than the pundits jumped in. The University of Ottawa’s Michael Geist crowed that the government had “caved” (on this he was right) and went on to point out all the times in the past he had warned the government this would happen. If there was ever an “I told you so” moment, this was it. (Gee, Michael, if only they had listened to you). He offers the obvious point that the US tech industry doesn’t like paying taxes, especially to little old Canada, so be careful how hard you poke the bear, but offers no solution as to how to deal with the tax avoidance issue. Mind you, as far as I can tell, there has never been much daylight between Dr. Geist’s positions and those of the US tech industry, so I am not surprised. On the other hand, Canadian nationalists like former Foreign Minster Lloyd Axworthy (a member of the same Liberal Party as Mark Carney no less!) called it “forelock-tugging diplomacy”. Commentators Perrin Beatty and Fen Hampson appropriately described it as an “own goal we could do without”.

Personally, I had hoped for a better strategy from this new government. There is no need to gratuitously pull the eagle’s feathers but at the same time, recognizing reality, ensure that when you pick a fight, you don’t find yourself alone in the corner. Or if you have to be pummelled, make sure it is about something fundamental, not just stubbornness over the means of bringing the tech giants to heel. Canada still needs to deal with both disruptions to Canada-US goods and services trade as well as how to appropriately regulate and tax digital services. Caution and realism are important watchwords, but so is sovereignty. Let’s learn a lesson from this sad chapter and do better next time.

Hold the Champagne: The Two AI Training/Copyright Decisions Released in the US Last Week Were a Mixed Bag for AI Developers

Illustration of a champagne bottle being popped, enclosed in a red circle with a slash indicating 'no champagne'.

Image: Shutterstock.com

Last week I wrote about the questionable ethics of META’s use of pirated content to train its AI model, Llama, pointing out the ethical issues involved with META’s admitted use of pirated online libraries, such as LibGen (Library Genesis), to feed content to Llama for training purposes. This is quite apart from whatever legal issues that may arise from the widespread practice of ingesting copyrighted content for AI training by making an unauthorized copy from any source (such as a legitimate library, through purchase of a single copy of a work, or from publicly available internet sources, for example) not to mention the additional element of taking that content from pirate sources. The day after that blog was posted the first of what will be a series of legal decisions in the US regarding cases brought by authors and copyright holders against AI companies was issued, followed by another a day later. Both cases were heard in the Northern District of California, in the same San Franciso court house, but handled by different judges.

I updated last week’s blog to make reference to the Bartz v Anthropic case (hereafter “Anthropic”), but given the importance of that decision, combined with a decision released in another California court room a day later (Kadrey et al v META), these cases merit further exploration–especially since they were widely trumpeted by AI advocates as opening the door to unauthorized use of copyrighted content for AI training on the basis of “fair use”.

Fair use is the complex legal doctrine used in the US to determine exceptions to copyright protection. US readers are well aware of the intricacies and idiosyncrasies of fair use but for those not overly familiar with how it works, here is a short summation I drew from a blog post on fair use vs fair dealing that I wrote a few years ago.

In the US context, fair use is an affirmative defence against copyright infringement and is determined by the courts on a case by case basis, judged against several fairness factors (purpose and character of the use, the nature of the work copied, the amount and substantiality of the amount of the work used, and the effect of the use on the value of the original work)… Fair use is not defined by law. Some examples are given in US law of areas where the use is likely to be fair (criticism, comment, news reporting, teaching, scholarship, research) but these are illustrative and not exhaustive. In short, it is the courts that decide. This in turn can lead to extensive litigation as to what is and is not fair use, and it is worth noting that different judicial circuits in the US have at times come up with conflicting interpretations.

Or, for that matter, two different judges in the same circuit delivering decisions just days apart on similar issues but with some significantly different outcomes, as we saw last week (although in these cases both found fair use by AI developers with regard to the copyrighted works at issue).

On the Anthropic case, US District Judge William Alsup ruled, on summary judgement, that the use of copyrighted works for AI training, even though done without authorization, is highly transformative and does not substitute for the original work (“The technology at issue was among the most transformative many of us will see in our lifetimes”). It thus qualifies, according to Alsup, as fair use because the transformative nature of the use overrides or swallows the three other fair use factors, including the important fourth factor (effect of the use on the value of the work). He notes there was no allegation that the output of Anthropic’s model, known as “Claude”, produced content infringing the works of the plaintiffs. However, Judge Alsup then went on to consider the legality of Anthropic’s actions to download more than 7 million works from pirate libraries (such as Books3, Library Genesis and the Pirate Library Mirror) to constitute its reference library, which it initially planned to use for AI training. He concluded this was a prima facie case of copyright infringement, whether Anthropic intended to use some or all of the pirated works to train Claude or not. (“Anthropic seems to believe that because some of the works it copied were sometimes used in training LLMs (Large Language Models), Anthropic was entitled to take for free all the works in the world and keep them forever with no further accounting “.) Damages, to be decided at trial, could be substantial. Alsop did not, however, rule explicitly on whether or not the use of pirated works for AI training purposes could be a fair use.

Because of the controversial nature of Alsup’s findings on transformation and fair use, there is no question that this case will be appealed. While there have been many criticisms of the fair use elements of Alsup’s ruling, a particularly clear and trenchant analysis was put forth by Kevin Madigan of the Copyright Alliance (Fair Use Decision Fumbles Training Analysis but Sends Clear Piracy Message).

The second case last week to reach the decision stage was Kadrey et al v META. In this case District Judge Vince Chhabria found that META’s use of the works of the plaintiffs, thirteen noted fiction writers, to train its AI model (“Llama”) was also fair use. Chhabria, like Alsup, found that META’s use was transformative on the first fairness factor dealing with the purpose and character of the use (“There is no serious question that Meta’s use of the plaintiffs’ books had a “further purpose” and “different character” than the books—that it was highly transformative.”) but unlike Alsup, Chhabria put much greater emphasis on market harm, (the fourth fairness factor dealing with the effect of use on the value of the work) suggesting that it could be determinative. Unfortunately for the plaintiffs, however, Chhabria considered their arguments with respect to market harm to be unconvincing. There was no evidence that Llama’s output reproduced their works in any substantial way or substituted for the specific works at play nor was there evidence, according to the judge, that the unauthorized copying deprived the authors of licensing opportunities.

Chhabria suggested that a far more cogent argument would have been that use (unauthorized reproduction) of copyrighted books to train a Large Language Model might harm the market for those works by enabling the rapid generation of countless similar works that compete with the originals, even if the works themselves are not infringing. In other words, causing indirect substitution for the works rather than direct substitution. This is the theory of “market dilution”, which was also put forward speculatively by the US Copyright Office in its recent Pre-Publication Report on AI and copyright. Since this wasn’t presented as an argument, Chhabria could not rule on it but in effect he is inviting future litigants to pursue this line of argument, noting that his decision on fair use relates only to the works of the thirteen authors who brought the case.

The clearest way to illustrate his line of reasoning is to quote directly,

“In cases involving uses like Meta’s, it seems like the plaintiffs will often win, at least where those cases have better-developed records on the market effects of the defendant’s use. No matter how transformative LLM training may be, it’s hard to imagine that it can be fair use to use copyrighted books to develop a tool to make billions or trillions of dollars while enabling the creation of a potentially endless stream of competing works that could significantly harm the market for those books”.

This editorializing, known in legal circles as obiter dicta, is not binding nor precedential, yet will undoubtedly have some influence given Chhabria’s stature. It is likely that one of these days Judge Chhabria will have the opportunity to put these theories into practice when ruling on a similar case, but one where the plaintiffs have made a better case for market harm. He has provided them a roadmap.

While these two cases have fired the first shots in what is going to be a lengthy war, they do not seem to be dispositive. There are enough caveats and nuances to be able to conclude that the AI developers are far from being out of the woods. Both “victories” have a sting in their tail, especially Judge Alsup’s finding on piracy. Neither copyright advocates nor AI developers should be breaking out the champagne just yet. But whichever way it turns out, there will be some sure winners; the lawyers for each side.

Is it Ethical to Use Pirated Content for Commercial Purposes? META Thinks So

Two signs hanging on a string, one labeled 'ETHICAL' in green and the other labeled 'LEGAL' in red, against a purple background.

Image: Shutterstock.com

There is the question of what is ethical, and then there is the question of what is legal. Sometimes they are the same, often not. The legality of using copyrighted content without authorization for commercial purposes, such as in training AI models—as META and a number of other companies have done—is being decided in court. In META’s case, however, there is the further complaint (not denied by META) that many of the unauthorized copies it made were taken from pirated content. While this revelation may not change the fundamentals of the copyright infringement case against it, there is still the ethical question for META to answer. On this, it comes up short. Very short.

META, the parent company of Facebook, Instagram and WhatsApp, used vast amounts of copyrighted content, without permission or licensing, to train its AI model. It is not alone in doing so. This practice may or may not be legal. A number of cases are working their way through the courts, most of them in the US, with copyright owners from Getty Images to Disney and Universal, from the New York Times to the Authors Guild and on to music labels, all claiming that their content was unfairly and illegally copied to provide training fodder for training AI models, such as META’s model, Llama. META and other AI developers claim that their use was a “fair use” under US law. We’ll see. However, as part of its giant vacuuming of publicly available (but in many cases protected) content, META also ingested content from various pirate sites and databases, notably the notorious “shadow library”, LibGen (Library Genesis). LibGen originated in Russia and contains up to 80 million scientific and academic articles, as well as millions of novels and nonfiction books, most unauthorized, unlicensed copies. It has a been sued by major academic and textbook publishers. In 2017 Elsevier won a $15 million judgement against LibGen, and another pirate website, SciHub. Last year Elsevier was awarded a $30 million default judgement. However, both LibGen and SciHub remain available online.

The extent of the copyrighted content held by LibGen was revealed in an investigative report published recently by The Atlantic. You can search through the LibGen database as published by The Atlantic to find out what works are included, and whether your work has been pirated. Authors from Newfoundland to New York and lots of places in-between and elsewhere found their works included in the database when they did the search. The Authors Guild advises writers to fight back by sending a formal notice to META and other AI companies asserting their rights, as well as adding a “No AI Training” notice on the copyright page of works. This is in addition, as would be expected, to joining the Authors Guild to help them fight what is happening.

Consuming pirated content can result in costly penalties, as some unfortunate downloaders have found out to their regret. Using it for commercial purposes is even more egregious. It’s like running a pirate streaming service based on stolen content. META didn’t use pirated content in this way, but they used it commercially just the same, in their case for AI training. Were they aware of what they were doing. You bet they were.

The discovery process in the US suit of Kadrey et. al. v META revealed a series of email exchanges in which some META employees expressed concerns over the ethics of using pirated content. The concerns went up the chain and back, with “MZ” (guess who? No, not Moses Znaimer) giving approval to proceed. Following on these revelations in Kadrey v META in the US, two class action lawsuits have been filed in Canada, one in Quebec on behalf of a number of French language authors and one in British Columbia. The Quebec suit specifically flags the piracy issue. Among the listed complaints is the following:

“Rather than acting within the law and respecting the rights of class members, it (META) deliberately chose to train its LLMs (Large Language Models) from datasets containing illicit copies of works from all over the world, including those of class members.”

Damages sought are $20,000 per work.

It is clear that META wilfully torrented content from LibGen, knowing that many or most of the works on LibGen were infringing, pirated copies. They just didn’t care.

If it turns out that somehow, inexplicably, META’s unauthorized use of copyrighted content for AI training is ruled by the US courts to be fair use, would the fact that the source of some of the content was from a pirate source be relevant? I am not sure, but a judgement that has just been delivered in California in the “Anthropic” case suggests that even if unauthorized copying can be justified as fair use because it is considered “transformative”, that does not excuse piracy–which is still an infringement. In this case, Anthropic copied both purchased and pirated works to train its AI model, and kept the copies in its central library. It was sued by some authors and journalists in a class action suit alleging copyright infringement. The judge, in one of the first such cases to reach a decision point, concluded on summary judgement that Anthropic’s unauthorized reproduction of copyrighted works for AI training was fair use under the transformation doctrine but added, with respect to those works drawn from pirate sources such as LibGen and others,

“piracy of otherwise available copies is inherently, irredeemably infringing even if the pirated copies are immediately used for the transformative use and
immediately discarded”.

A trial will be held to determine the damages from the piracy.

Being one of the first AI training cases out of the gate, Anthropic will certainly be appealed, so this is not the last word. However, this ruling when added to the US Copyright Office’s views expressed in its Pre-Publication Report on Generative AI issued last month on May 9, a day before Register Shira Perlmutter was dismissed, that “the copying of expressive works from pirate sources in order to generate unrestricted content that competes in the marketplace, when licensing is reasonably available, is unlikely to qualify as fair use”, suggests that META could be in both ethical and legal trouble.

In other jurisdictions, such as Singapore, content used in AI training under a Text and Data Mining exception has to be legally accessed, although this is very thin legal protection because technology companies can legally purchase just one copy of a work to comply. In Canada you cannot break the law (i.e. circumvent a technological protection measure) to exercise a fair dealing right. But whether or not using a pirated source puts META offside the law in the US with respect to fair use, (and the Anthropic case suggests that it could at least with respect to the pirated works), think of the ethics and the image this presents to the public.

A company like META, capitalized at something like $2 trillion, cannot be bothered to even access content legitimately, let alone use it legitimately. Why? Because MZ said it was ok to proceed. Sadly, even though they are not the only ones to use pirated content to train their AI models, that tells me all I need to know about the values and ethics of this particular company.

This post has been updated to include reference to the decision in the Anthropic case, released after the initial publication of this blog post.

The Online Streaming Act Was Already Complicated and Controversial Enough, But Now Quebec Enters the Fray (No Surprise: It’s Happened Before)

An illustration depicting a tug-of-war scenario, featuring a Canadian flag on one side and a Quebec flag on the other, symbolizing the cultural and political tensions between Canada and Quebec.

Tug of War Image: Shutterstock (modified)

Welcome to Canada, where the difficult can become the intractable when you add the inevitable additional ingredient of federal-provincial politics to any policy issue. Throw in the survival of the French language and Quebec culture in Canada and you have another classic Canadian drama. How to ensure that in protecting majority interests you don’t damage minority interests, or put another way, how to govern in the national interest without making a special exception for Quebec that will undermine the federation, especially now that some other provinces, such as Alberta, are playing the “Quebec card”. It has always been a delicate dance to keep the two linguistic groups rowing in the same direction, often accomplished by providing concessions to Quebec that have managed to meet its unique needs while maintaining provincial interoperability and minimum national standards. The latest challenge is broadcasting, or more specifically, streaming—which may or may not meet the definition of broadcasting.

It has been a well-established principle for decades that broadcasting in Canada is regulated by the federal government, although this was initially contentious (as it is once again). Perhaps not surprisingly, the original challenge came from Quebec which passed its own Broadcast Act in April 1929, before any federal legislation in the broadcast space had been enacted. A Royal Commission on Radio Broadcasting had been established by the federal government the year before to examine British and US systems (one leaning heavily toward a national public broadcaster, the other taking the lightly regulated commercial broadcasting route). Quebec quickly seized the initiative before any recommendations were issued by passing its own legislation. The Royal Commission’s findings, known as the Aird Report after Chief Commissioner Sir John Aird, former President of the Canadian Bank of Commerce, were finally issued in November of 1929.

That report recommended a public broadcasting system and laid the foundations for the establishment of the CBC/Radio-Canada. The stock market crash and ensuing Depression delayed action, along with a change of government, but by 1931 the R.B. Bennett government was ready to act. Quebec further forced the issue by passing a provincial Radio Act relating to licensing of receivers and transmitters. The federal government then referred the jurisdictional issue of broadcasting to the Supreme Court of Canada which ruled, 3-2, that broadcasting was a federal responsibility under Section 92(10)(a) of the BNA Act on the grounds that broadcasting was an undertaking, like the telegraph, that extended beyond provincial boundaries. Quebec appealed, but the Privy Council in London upheld the Supreme Court’s decision. The Bennett government then established the Canadian Radio Broadcasting Commission (CRBC), the forerunner of both the public broadcaster, the CBC, and the broadcast and telecoms regulator, the CRTC (Canadian Radio-Television and Telecommunications Commission). Originally national broadcasting was in both official languages but to meet criticisms from Quebec, the CRBC launched French language programming unique to Quebec in 1934, marking the beginning of Radio-Canada’s French language service. An excellent summary of the history of Canadian broadcasting, produced by the Canadian Communications Foundation, can be found here.

Given the fractious history over who should regulate the airwaves, particularly given the importance of communications when it comes to cultural and linguistic identity, it is not surprising that differences have arisen with regard to streaming. The key question is whether streaming constitutes broadcasting. The federal regulator, the CRTC, has always maintained that mass communication transmitted digitally (new media) is a form of broadcasting although for many years it declined to regulate it on the grounds that there was no current need and that regulation might stifle innovation. In 1999, it issued a New Media Exemption Order, the main conclusion of which stated;

“…pursuant to subsection 9(4) of the Act, the Commission exempts persons who carry on, in whole or in part in Canada, broadcasting undertakings of the class consisting of new media broadcasting undertakings, from any or all of the requirements of Part II of the Act or of a regulation thereunder. New media broadcasting undertakings provide broadcasting services delivered and accessed over the Internet,…”

The Exemption Order was extended in 2009, but all that changed with the introduction in 2023 of the Online Streaming Act. That legislation amended the Broadcasting Act to specifically bring streaming content under the purview of the regulator, thus allowing the application of many provisions regarding streaming content, a number of them controversial. In particular it extends CRTC authority over foreign based streamers distributing programming in Canada. While the legislation gave authority to the CRTC (the Commission) to implement key parts of the Act, this will be a slow process as extensive hearings are required. Nonetheless, the Commission fired the first shot almost exactly a year ago, even before hearings had commenced, by requiring “base contributions” of 5% of Canadian revenues from (mostly foreign) streaming services for the creation of Canadian content, including funding to support local news broadcasting in Canada. This occurred prior to the CRTC’s review of how to define Canadian content, and determining who is entitled to claim a Canadian content credit for its creation. In the meantime, the foreign streamers have gone to Federal Court to fight the mandatory “contributions”, and so far not a nickel has been paid.

Another element of the CRTC’s deliberations will be deciding how to implement measures to ensure “discoverability” of Canadian content on streaming platforms. “Discoverability” in a broadcasting/streaming context goes beyond the plain English use of the word. Canadian Heritage (now the Ministry of Canadian Culture and Identity) has published a whole research paper on the technical aspects of discoverability. The paper offers a general definition (“…how content can stand out in order to reach an audience in a universe of hyper choice, where the catalogues of major cultural dissemination platforms offer tens of thousands of titles and products to users..”), but then goes on to point out the difference between content discoverability based on actions aimed at target audiences (such as highlighting certain content), and the use of technical tools or automated systems to showcase content and make it more findable (such as modifying or influencing algorithms). In short, it is a complex issue.

Discoverability was one of the most controversial and misinterpreted aspects of the Online Streaming legislation, then known as Bill C-11. Amendments introduced during the legislative process to encompass user-generated content, requiring that from a platform perspective it too be subject to the discoverability rules, were wildly and inaccurately criticized as internet censorship. Some groups purporting to represent the creative and user communities criticized the discoverability requirements as interfering with market forces and altering algorithmic results. But the Bill passed, including the discoverability requirements, the details of which remain to be established by the CRTC. While this process is underway, Quebec just threw a grenade into the room through the introduction of its own legislation, Bill 109, ”An Act to Affirm the Cultural Sovereignty of Québec and to Enact the Act Respecting the Discoverability of French-Language Cultural Content in the Digital Environment.”

Michael Geist of the University of Ottawa has described the Quebec bill as “unconstitutional, unnecessary and unworkable”, which is a pretty damning but largely accurate indictment. The problem that Quebec is trying to address, as MediaPolicy.ca blogger Howard Law has pointed out, is the “drastic underconsumption of French-language music on streaming platforms, a stunning 4.6 per cent of the top 10,000 song streams in Quebec, a province that is 80 per cent native French speakers.” Compare this to the French-language content requirements imposed by the CRTC on French-language radio stations. These stations must devote at least 65% of all popular music broadcast each week to French-language selections. The CRTC policy, whether it is Canadian content or French-language content, is based on the same premise; if you don’t require a minimum of Cancon/French-language content, the stations will default to non-Canadian, non-French language content. This will deprive Canadian anglophone and francophone artists of exposure and hinder development of “desirable” cultural content. And possibly contribute to weakening the French language in Quebec.

The cultural libertarians would say, so be it. If quotas are required to ensure that Cancon or French-language content gets consumed, then maybe it is not worth listening to or watching. Let the consumer decide (which is essentially how streaming works; the consumer chooses what to consume rather than consuming what is offered). The counter policy argument is that the content industry is so dominated by (take your pick; Hollywood, the major US labels, English language content, etc) that countermeasures are required to balance the playing field and ensure that local cultural content has a chance to breath before it is suffocated by the dominance of outsiders. In a society like Quebec, that represents roughly 7 million francophones in a sea of well over 350 million anglophones in North America, this is an especially critical issue. Will regulating discoverability requirements change the listening or viewing habits of Quebecois, especially young people. I have my doubts, but what is the alternative?

Governments regulate markets in many ways for the greater good, so why not cultural content? In Canada, the whole premise of broadcasting (going back to the 1920s and 1930s), and now streaming, has been to preserve and encourage Canadian voices, whether they be anglophone or francophone. How that should be done and who should do it has always been a tricky question and at times has required a delicate balancing act, sometimes between Canada and the United States, and sometimes between the Canadian federal government and Quebec. It would seem that we are in the midst of another one of those moments. Quebec’s desire to put its thumb on the scale to protect the French language is not new and should not be a surprise, although whether Bill 109 is constitutionally legal and, if it is, whether it will be effective, are valid questions. But we have been here before. As I said at the outset, welcome to Canada.

Literary Pilgrimages: How Iconic Independent Bookstores are Becoming Travel Destinations

by Jennifer Mark

Image credit: Photo by Pj Accetturo on Unsplash

There is no more satisfying feedback for a blogger than interaction with readers. After I wrote about the Livraria Lello in Porto, Portugal a few weeks ago, I received an email from a reader, who goes by the penname of Jennifer Mark. Jennifer noted that “bookstore tourism” is a growing niche travel trend and wondered if I’d be interested in a guest column on the topic, researched and written by her. Until now, I have never run a guest article but this one provided such interesting information and opened so many new doors, that I thought you would be interested to read it. So here is Jennifer’s contribution.

Independent bookstores are the heart of communities since not only do they sell hardbacks and paperbacks, they’ve also become hubs of learning and comfort for many people. Sadly, many independent bookstores are facing financial challenges as low profits and high rents make it tough for these businesses to thrive. This is likely the reason why avid supporters of these establishments are now making it their mission to visit some of the best independent bookstores all over the world as a way to help them stick around for a long time. With bookstore and library tourism becoming one of the hottest travel trends this year, it’s no wonder that an indie bookstore like Livraria Lello in Portugal attracts about 1.2 million visitors annually. What’s more, some of the most iconic independent bookstores, like The Strand in NYC, are always crowded, no matter what day it is.

In the coming years, we can expect that indie bookstores and book towns will increasingly become more popular not just as a place to shop for unique literary finds, but as places of interest for tourists from all over the world. Here’s why iconic independent bookstores are becoming travel destinations, and some suggestions as to where you can have the best reading and browsing experiences while you’re traveling.

Books, Brews, and Booze

Back in the day, staying at a coffee shop or a hidden corner in a bar was the only way that you could enjoy a beverage while reading a book in a public place. But some independent bookstore owners have found out that making drinks available to their patrons can increase browse time, which can lead to more sales. It is estimated that coffee bookstores could generate annual revenues ranging from $150,000 to $500,000, and this is why indie bookstores are stepping up their game by adding coffeeshops or bars to their business premises to entice tourists to come in, and encourage customers to stay a little longer.

Some of the most loved coffeeshop/indie bookstores in the world include the Beacon Hill Books & Cafe in Boston, which features a lovingly curated collection of good reads and an impressive Afternoon Tea menu. Here, you can get lost in a novel while enjoying a pot of their custom blend tea with a classic cream or apricot-Earl Grey scone, or perhaps a slice of Spring Carrot Cake. In Sydney, on Bondi Beach, there’s the Gertrude & Alice Bookstore and Coffee Shop, which has a stockpile of more than 40,000 second-hand books. This establishment has a cafe menu where you can choose savory eats or sweet treats, so try their salmon breakfast roll or coconut and raspberry bread with an iced latte or a pot of Moroccan mint tea.

Meanwhile, those who prefer to have a glass of wine or a cold beer after browsing or while reading can check out indie bookstore bars, which are becoming must-visit destinations for tourists who are constantly on the hunt for unique travel and adventure experiences. If you love art, wine, and books, definitely make plans to visit Bibliotheque, a family-owned bookstore, bar, and cafe in New York’s SoHo district. They have a collection of nearly 10,000 books, and a gorgeous bar area decorated with works from Henri Matisse, Alexander Calder, and other iconic artists. Choose from among their extensive wine collection which includes sparkling, white, orange, red, and rose wines, or have a wine-based cocktail if you want something a little different. If you’re in Maryland, drop by The Buzzed Word, which features a collection of diverse books, a natural wine shop, and a bar. Order a glass of vino to enjoy while reading in one of their comfy chairs, or get a bottle to go.

Unusual Set-ups and Amazing Locations

Some of the most interesting indie bookstores can be found in unusual places, which is why they’re considered to be tourist attractions. Take for instance Word on the Water, a used bookshop that’s situated on a 1920s Dutch barge behind King’s Cross in London. The novel setting makes it an enjoyable place for book shopping, and on certain days, customers are treated to live jazz music and poetry readings. While you’re in England, make sure to visit Barter Books, a used bookstore built inside a Victorian train station. You can sell books for in-store credit, then sit down for a good read while enjoying some good food from their station buffet.

For an experience you’ll never forget, plan on visiting a booktown. These destinations also draw in huge tourist crowds since they serve as one-stop shops for people who want to find rare or vintage books at low prices. Check out the Jimbocho Book Town in Tokyo and get lost browsing in the area, which boasts nearly 400 independent bookstores. Don’t forget to wear comfy shoes and bring a huge bag for your haul. If you’re traveling to Argentina, stop by the Parque Rivadavia Book Market, a booktown where you can find used and new books, comics, records, and other antique items.

Independent bookstores are the “it” travel destinations for many tourists. Visit the establishments and booktowns mentioned above to find good reads, enjoy delicious food and drinks, and have the time of your life while you’re on holiday.

Copyright Litigation in China: Some Interesting AI-Related Decisions from Chinese Courts

A wooden gavel resting on a circular base in front of a red backdrop featuring the flag of China.

Image: Shutterstock

These days just about any information in North America related to China, especially regarding intellectual property (IP), is highly negative. The narrative is along the lines of “China is an adversary with deliberately lax IP laws who has stolen and continues to steal our IP, etc.”. This characterization of China is reinforced by our political leaders (When asked during the Leaders’ debate what was the greatest security threat to Canada, Prime Minister Carney replied with one word. “China”). Donald Trump continues to have an obsession with China, the latest manifestation of which is the recent announcement that the US will revoke the visa status of an undetermined number of Chinese students currently studying in the US. (Over a quarter of a million students from China are currently studying at American colleges and universities, many simply seeking an alternative to studying in the hyper-competitive environment at home). The “China as IP thief” narrative is supported by government publications such as the annual Special 301 Report produced by the Office of the US Trade Representative (USTR) which this year had ten full pages on China. One excerpt will suffice to give you the flavour of the report. “In 2024, the pace of reforms in China aimed at addressing intellectual property (IP) protection and enforcement remained slow…Concerns remain about longstanding issues, including technology transfer, trade secrets, counterfeiting, online piracy, copyright law, patent and related policies, bad faith trademarks, and geographical indications.” Well, that covers the waterfront. One wonders how Chinese brands, innovators and creators manage to survive in such an environment.

This is not to dismiss the darker side of China’s long IP history. Have there been cases of industrial espionage involving China? Yes, certainly. There have also reportedly been more than 1200 intellectual property theft lawsuits brought by US companies against Chinese entities in either the US or China over the past 25 years. There is no question that IP protection in China is not all it could and should be, or that some Chinese companies and other entities have been aggressive in seeking to acquire IP by less than transparent means. But that is not the whole story. While the number of IP infringement lawsuits against Chinese entities over the years sounds like a lot, this business website estimates that the number of IP litigation cases globally totals around 12,000 annually. There are several thousand patent litigation cases alone in the US each year. A lot of US companies sue other US companies in the patent, trademark and copyright field. And Chinese companies sue Chinese companies.

In the past, Chinese IP laws had loopholes, were often weakly enforced and were dealt with by courts that had scant knowledge and training in IP matters. That is rapidly changing as China not only climbs the innovation ladder, but has come to dominate it in some areas, such as EV’s and EV batteries, cashless payment systems, renewable energy and others. It is rapidly catching up in generative AI. While this has been happening, Chinese courts have been producing some interesting and increasingly sophisticated decisions when it comes to AI and copyright. China–like other countries–is grappling with several aspects of this issue. There is the question of finding the right balance between protecting creators and innovators while using domestic creative works to spur AI training, development and research. Another element is the extent to which AI assisted or created works qualify for copyright protection. There is currently no Text and Data Mining (TDM) exception in Chinese law to allow AI training on copyrighted content nor is there a definitive interpretation as to whether content produced by AI can be protected by copyright. However, several court decisions, which we examine below, have shed some light on this complex question.

Dreamwriter Case

In one of the earlier cases, which I wrote about back in 2020, (the Dreamwriter case), a Chinese court (in Shenzhen) ruled that an automated article written by an AI program (Dreamwriter), created by Tencent, which had been copied and published without permission by another Chinese company, Yinxun, was nevertheless subject to copyright protection because it met the originality test through the involvement of a creative group of editors. These people had performed a number of functions to direct the program, such as arranging the data input and format, selecting templates for the structure of the article, and training the algorithm model. The article was ruled to be a protectable work, and Yinxun was found to have infringed.

Li v Liu Case

The relatively loose interpretation regarding the degree of human engagement required to protect the output of an AI program in the Dreamwriter case has been supported by other Chinese courts. In the prominent Li v Liu case, the Beijing Internet Court ruled that Mr. Li, who had created the image of a young woman using the AI program Stable Diffusion, had provided “significant intellectual input and personalized expression” in creating the image through a series of prompts. As explained in detail by this article from Technollama, the prompts (along with a number of negative prompts) were sufficient for the court to decide that Li had met the standard of creative expression.

These were Li’s prompts;

“ultra-photorealistic: 1.3), extremely high quality highdetail RAW color photo, in locations, Japan idol, highly detailed symmetrical attractive face, angular symmetrical face, perfect skin, skin pores, dreamy black eyes, reddish-brown plaits hairs, uniform, long legs, thighhighs, soft focus, (film grain, vivid colors, Film emulation, kodak gold portra 100, 35mm, canon50 f1,2), Lens Flare, Golden Hour, HD, Cinematic, Beautiful Dynamic Lighting”

Liu, who had been sued by Li for using the AI generated image without authorization, was found liable for infringement and fined 500 CNY (about USD75).

At that time (late 2023), this decision was considered ground-breaking for image-based works given the position of the US Copyright Office (USCO). USCO had denied copyright registration to several generative-AI created image works owing to insufficient human creativity. (see If AI Tramples Copyright During its Training and Development, Should AI’s Output Benefit from Copyright Protection? Part One: Stephen Thaler and Part Two: Jason Allen). Since then (in January of this year) the USCO has taken a more nuanced position, permitting registration of an AI assisted work (an image called A Single Piece of American Cheese, created by graphic artist Kent Kiersey). Although Kiersey used InvokeAI to create the work, in the view of the US Copyright Office, sufficient human creativity was involved through the “selection, coordination, and arrangement of material generated by artificial intelligence”.

Plastic Chair Case

If China has been in the forefront of acknowledging that human control over AI tools used to generate content qualifies the works for copyright protection, a more recent case has reset the pendulum somewhat. As recounted in this blog by UK-based market research firm IAM, very recently a court in Jiangsu Province dismissed a copyright infringement claim brought by a designer against a company that manufactured, without a licence, children’s plastic chairs based on her AI-based designs. The designer, Feng Runjuan, had created three designs using the AI program Midjourney and posted them to social media, including the prompt she had used. Her prompt was “Children’s chair with jelly texture, shape of cute pink butterfly, glass texture, light background“. The company manufacturing the chairs approached Feng to license the designs but was unable to reach an agreement with her. They then went ahead anyway (without a licence) to produce chairs that bore some similarity to the original designs, using Feng’s original prompt with some tweaks. Feng sued. There was little doubt that the chair manufacturing company had used her prompts to produce the chair design, but the key question was whether the AI generated designs qualified as original works meriting copyright protection.

Feng was unable to reproduce the original images using her prompts owing to the randomness of the AI program. This suggested to the court that it was the AI program making the design decisions, not the person providing the prompts. As outlined in the IAM article referenced above, the court held that a user must provide a verifiable creative process that shows the:

adjustment, selection and embellishment of the original images by adding prompts and changing parameters; and
deliberate, individualised choices and substantial intellectual input over the visual expression elements, such as layout, proportion, perspective, arrangement, colour and lines.

It concluded that the original images did not qualify as original works and thus they could not be protected. Feng’s lawsuit failed.

So now we have a situation where one Chinese court has ruled that the prompts generated by Li in what I will call the “young girl image” case constituted sufficient intellectual input and personalized expression to qualify for copyright protection, even though the actual image was generated by an AI program, whereas another court has denied copyright protection for a work also produced with prompts, albeit simpler and far fewer. The difference seems to be the degree of human involvement in creating the prompts, although the fact that Ms. Feng in the plastic chair case was unable to reproduce the original images seems to have also weighed against her. As anyone who has ever used an AI program will know, identical prompts will produce different images owing to the way the program works. Does that disqualify the artist? I would hope not, but the degree of control is clearly a key factor, as both the rulings of Chinese courts and the recent USCO decision to register the work A Single Piece of American Cheese would seem to show. Both Chinese court decisions are defensible, demonstrating careful and reasoned consideration, and are helpful in establishing parameters for use in determining whether works are AI assisted or AI created.

Ultraman Case

Another area where Chinese courts have left their mark is on the topic of AI liability for copyright infringement. In what is known as the “Ultraman” case, a Chinese court (the Guangzhou Internet Court, upheld on appeal by the Intermediate Peoples’ Court in Hangzhou) delivered a ruling of contributory infringement against a company that provided AI generated text-picture services through its website. The complainant was the Chinese licensee of the Japanese company that owns the rights to the cartoon character Ultraman. When the defendant’s website (effectively a chat-bot capable of generating AI images at its users’ request) was asked to generate an Ultraman-related image, it generated a character that appeared to be substantially similar to the claimant’s licensed Ultraman. The court had to decide whether the defendant had infringed the plaintiff’s reproduction and derivative production rights and if so, what remedies were applicable.

In its ruling the court decided that even though the defendant did not directly infringe the licensee’s rights, its failure to exercise a reasonable duty of care to prevent infringements (for example, by cautioning users or providing adequate filtering or blocking mechanisms), rendered it liable for contributory infringement. It was ordered to compensate the claimant the amount of CNY 10,000, about USD1500 (considerably less than the damages sought of CNY300,000). Here we have another sophisticated and well reasoned decision, which appears to have been the first instance globally of recognizing the liability of an AI platform for contributory copyright infringement. It does not create any legal precedents but is a useful contribution to the emerging debate.

These cases well illustrate the growing sophistication and complexity of IP rulings in China and are reflective, in my view, of an economy that is rapidly moving up the innovation and creativity ladder. When it comes to IP protection in China, is the glass half empty or half full? I would argue the latter, even though this may not be the most popular interpretation these days. One thing that I am willing to predict with certainty is that we can expect more interesting and thoughtful IP legal decisions from the Chinese legal system in the months and years ahead.

AI’s Habit of Information Fabrication (“Hallucination”): Where’s the Human Factor?

An illustration of a cartoonish robot face on a computer screen with the text 'THE WORLD IS FLAT' above it.

Image: Shutterstock (with AI assist)

It is well known that when AI applications can’t respond to a query, instead of admitting they don’t know the answer, they often resort to “making stuff up”—a phenomenon commonly called “hallucination” but which should more accurately be called for what it is, total fabrication. This was one of the legal issues raised by the New York Times in its lawsuit against OpenAI, with the Times complaining, among other things, that false information attributed to the journal by OpenAI’s bot undermined the credibility of Times journalism and diminished its value, leading to trademark dilution. According to a recent article in the Times, the incidence of hallucination is growing, not shrinking, as AI models develop. One would have thought that as the models ingest more material, including huge swathes of copyrighted and curated material such as content from reputable journals like the Times (without permission in most instances), its accuracy would improve. That doesn’t seem to be the case. Given AI’s hit and miss record of accuracy, it should be evident that AI output cannot be trusted or, at the very least, can only be trusted if verified. Not only is AI built on the backs of human creativity (with a potentially disastrous impact on creators unless the proper balance is struck between AI training and development, and the rights of creators to authorize and benefit from the use of their work), but human oversight and judgement is required to make it a useful and reliable tool. AI on auto-pilot can be downright dangerous.

The most recent outrageous example of AI going astray is the publication by the Chicago Sun-Times and Philadelphia Inquirer, both reputable papers (or at least they used to be), of a summer reading list in which only five of fifteen books listed were real. The authors were real but most of the book titles and plots were just made up. Pure bullshit produced by AI. The publishers did a lot of backing and filling, pointing to a freelancer who had produced the insert on behalf of King Features, a unit of Hearst. Believe it or not, it was actually licensed content! That freelancer, reported to be one Marco Buscaglia, a Chicago “writer”, admitted that he had used AI to create the piece and had not checked it. “It’s 100% on me”, he is reported to have said. No kidding. Pathetic. Readers used to have an expectation that when a paper or magazine published a feature recommending something, like a summer reading list, the recommendation represented the intellectual output of someone who had done some research, exercised some judgement, and had presumably even read or at least heard about the books on the list. How could anyone recommend non-existent works? The readers trusted the newspaper, the paper trusted the licensor, the licensor trusted the freelancer, the so-called author. Nobody checked. Where was the human element? The list wasn’t worth the paper it was printed on.

The same problem of irresponsible dependence on unverified information produced by AI is a growing problem in the legal field. Prominent lawyer and blogger Barry Sookman has just published a cautionary tale about the consequences of using hallucinatory AI legal references. Counsel for an applicant in a divorce proceeding in Ontario cited several legal references using the CanLII database (for more information on CanLII see “AI-Scraping Copyright Litigation Comes to Canada (CANLII v Caseway AI”) that the presiding judge could not locate—because they did not exist. He suspected the factum had been prepared using Generative AI and threatened to cite the lawyer in question for contempt of court, noting that putting forward fake cases in court filings is an abuse of process, and a waste of the court’s time. The lawyer in question has now confirmed that AI was used by her law clerk, that the citations were unchecked, and has apologized, thus avoiding a contempt citation. Again, nobody checked (until the judge went to the references cited).

This is not even the first case in Canada where legal precedents fabricated by AI were presented to a court. Last year in a child custody case in the BC Supreme Court, the lawyer for the applicant was reprimanded by the presiding judge for presenting false cases as precedents. The fabricated information was discovered by the defence attorneys when they went to check the applicant’s lawyer’s arguments. As a result, the applicant’s lawyer was ordered to personally compensate the defence lawyers for the time they took to track down the truth. The perils of using AI to argue legal cases first came to prominence in the US in 2023 when a New York federal judge fined two lawyers $5000 each for submitting legal briefs written by ChatGPT, which included citations of non-existent court opinions and fake quotes.

Another area fraught with consequences for using unacknowledged AI generated references is academia. The issue extends well beyond undergraduate student essays being researched and written by AI to include graduate students, PhD candidates and professors taking shortcuts. This university library website, in its guide to students on use of AI generated content, notes that LLMs (Large Language Models used in AI) can hallucinate as much as 27% of the time and that factual errors are found in 46% of the output. The solution is pretty simple. When writing a research paper, don’t cite sources that you didn’t consult.

This brings up the question of “you don’t know what you don’t know”. If your critical faculties are so weak as to not be able to detect a fabricated response, you are in trouble. Of course, some hallucinations are easier to spot than others. Some of the checking is to simply verify that a fact stated in an AI response is accurate or that a cited reference actually exists (but then it should be read to determine relevance). In other cases, it may be more subtle, with the judgement and creativity of the human mind being brought into play to detect a hallucination. That requires experience, knowledge, context—all of which may be lacking in the position of a junior clerk or student intern assigned the task of compiling information. This is all the more reason why it is important for those using AI to check sources, and to exercise quality control. Part of the process is to ensure transparency. If AI is used as an assist, that should be disclosed.

At the end of the day, AI depends on human creativity and accurate information produced by humans. Without these inputs, it is nothing. This brings us to the fundamental issue of whether and how copyright protected content should be used in AI training to produce AI generated outputs.

The US Copyright Office has just released a highly anticipated study on the use of copyrighted content in generative AI training. Here is a good summary produced by Roanie Levy for the Copyright Clearance Center. The USCO report is clear in stating that the training process for AI implicates the right of reproduction. That is not in doubt. It then examines fair use arguments under the four factors used in the US. Notably, with respect to the purpose and character of the work used for training, USCO notes that the use of copyrighted content for AI training may not be transformative if the resulting model is used to generate expressive content or potentially reproduce copyrighted expression. It notes that the copying involved in AI training can threaten significant harm to the market for, or value of, copyrighted works especially where a model can produce substantially similar outputs that directly substitute for works used in the training data. This report is not binding on the courts but is a considered and well researched opinion by a key player.

It is interesting to note that the report was released quickly in a pre-publication version on May 9, just a day before the Register of Copyrights (the Head of the Office) Shira Perlmutter was dismissed by the Trump Administration and a day after the Librarian of Congress, Carla Hayden (to whom Perlmutter reports) was fired. Washington is rife with speculation on the causes for, and the legality of, the dismissals. We will no doubt hear more on this. With respect to fair use in general, the study concludes that “making commercial use of vast troves of copyrighted works to produce expressive content that competes with them in existing markets…goes beyond established fair use boundaries”. The anti-copyright Electronic Frontier Foundation (EFF), of course, disagrees. (Which probably further validates the USCO’s conclusions).

The USCO study is about infringement, not hallucination or fabrication, yet both stem from the indiscriminate application and use of AI where the human factor is largely ignored and devalued. Human creativity and judgement is needed to set guardrails on both. Transparency as to what content has been used to train an AI model, along with licensing reputable and reliable content for training purposes, are important factors in helping AI to get its outputs right. Not taking an AI output as gospel but applying a degree of diligence, common sense, fact verification or experienced judgement are other important factors in deploying AI as it should be used, as an aide and assist to make human creativity and human directed output more efficient but not as a substitute for thinking or original research. Generative AI must be the servant, not the master. Human creativity and judgement are needed to ensure it stays that way.

How will Mark Carney’s Cabinet Appointments Impact Canada’s Cultural and Copyright Industries?

Group photo of Prime Minister Mark Carney's new Cabinet, featuring members seated and standing in a formal setting with a colorful mural in the background.

Image credit: Reuters

As Canada’s cultural community assesses the make-up of Prime Minister Mark Carney’s new Cabinet, two common phrases come to mind, “Hope Springs Eternel” and “Grasping at Straws”. The cultural and copyright industries have a number of legitimate concerns, which were well articulated in a pre-election brief published by the Coalition for the Diversity of Cultural Expressions (CDCE), as I outlined in an earlier blog post. Among the CDCE’s requests in the area of copyright was a plea for fair remuneration for writers and publishers for the use of their works in the education sector. There was yet another reminder of the need for the long-promised establishment of an Artists Resale Right in Canada, along with a reiteration of the request to extend the private copying regime to electronic devices (as is done in Europe), a measure that would help in restoring royalties in the music sector. The final copyright ask was to amend the definition of a sound recording to ensure that performers and record labels receive compensation for the audiovisual use of their works. CDCE’s brief also argued for “proper implementation” of the Online Streaming Act so that streaming services and social media platforms contribute financially to the production of Canadian content as well as support for retention of–and increased funding to–the CBC. There were also policy positions regarding the use of copyrighted content for AI training purposes.

What are the chances that all or any of these requests will be addressed by the new Carney government? One might think that with all the hoopla during the election about Canadian identity in the face of repeated attacks on Canada’s integrity by Donald Trump, there will likely be some significant measures taken to strengthen Canadian culture, although the Liberal election platform does not have much to say on Canadian cultural enterprises–other than the CBC. The CBC gets some love as a “cornerstone of our national identity” and will not only not be defunded, as threatened by the opposition Conservatives, but will get an additional $150 million cash infusion as well as having its funding put on a statutory basis. As a quid pro quo the national broadcaster will have to strengthen accountability and its commitment to local news, promote Canadian culture and combat disinformation. Increased funding (we don’t know how much) will be provided to the Canada Council for the Arts, Telefilm Canada, the Canadian Media Fund and the National Film Board. That is all good stuff, but there is not a whisper of copyright reform or of changes to copyright legislation in the platform.

The lack of any overt reference to copyright issues is probably understandable given the focus of the election, which was on standing up to Donald Trump and building the Canadian economy. It is not a bread-and-butter issue for most voters, important as it is to the cultural community. Therefore, we have to look beyond the Party Platform to the roster of appointed ministers and examine their backgrounds to see if there is any prospect of progress. On this score, the story is a bit more positive.

The two key ministers, the Minister of Industry, Science and Economic Development (which holds the statutory mandate for administering the Copyright Act), Mélanie Joly, and the new Minister of Canadian Identity and Culture, formerly labelled Canadian Heritage, (a ministry that has an important though subsidiary role to play on copyright), Steven Guilbeault, both represent Quebec ridings. This is significant given the importance of support for culture and cultural enterprises in the province and the influence of the creative community there. Guilbeault is also Carney’s “Quebec lieutenant”, which gives him extra influence. Joly, most recently Foreign Minister, is a former Minister of Canadian Heritage herself, as was Guilbeault in a previous incarnation. Thus, they know the cultural files. The CDCE was quick to congratulate both on their election, noting Joly’s appointment was a “promising signal” with respect to copyright.

Maybe. But it is unlikely that either Joly or Guilbeault will pick up the copyright ball unless they are pushed to do it. If they do, given the minority government status of the Liberals, they will need the support of another party. The Bloc Quebecois, with 22 seats(or 23, depending on what happens in the riding of Terrebonne where the Liberals won by exactly one vote out of almost 50,000 votes cast), would be logical supporters for the kind of changes to the Copyright Act sought by Canadian creators represented by the CDCE.

While having familiarity with cultural industry issues from having spent time in the past as Canadian Heritage minister is a plus, the reality is that while both Joly and Guilbeault are strong ministers, both struggled during their previous tenures at Heritage. Guilbeault’s first love is the environment, a role he held for 4 years under Justin Trudeau as Minister of Environment and Climate Change, making him Public Enemy No. 1 for Alberta Premier Danielle Smith. Her new public enemy is the current Environment Minister, Julie Dabrusin, who served briefly as Guilbeault’s Parliamentary Secretary at Environment. Dabrusin would have been an inspired choice for Minister of Canadian Identity and Culture given the role she played as Chair of the Standing Committee on Canadian Heritage that produced the report “Shifting Paradigms”. Among other things, her Committee recommended changes to the Copyright Act to narrow the problematic education fair dealing exemption that has done so much damage to writers and publishers in Canada. But it was not to be. However, she will do just fine as Minister of the Environment. As for being attacked by Danielle Smith, that is probably a badge of honour for any environment minister. The only scenario under which Smith would not attack a federal environment minister is if Carney pulled a page from Donald Trump’s playbook and appointed someone with such an anti-environment track record (like current EPA Administrator Lee Zeldin) as to effectively disqualify them from the job. But I digress.

Joly and Guilbeault are not the only ministers who will play on copyright issues. Among the new ministers announced on May 13 was Evan Solomon, the Minister for Artificial Intelligence and Digital Innovation. This is a new Ministry (having an Minister for AI may be a world first) and it is not altogether clear what Solomon’s mandate will be, as pointed out by Michael Geist. This is especially true as he does not have a functioning department to inherit. There are lots of issues for him to resolve, including the salient one of how and on what conditions AI developers will have access to copyrighted content for training AI algorithms. Canada has no text and data mining exception in its copyright law, let alone a broad exemption for AI training such as AI developers are seeking in the US and elsewhere. Some Canadian AI developers have been quick to use the pretext that AI development will flee Canada if they are not given free and unfettered access to creative content of others, a self-serving scare tactic if there ever was one, as I wrote about here. The fact is all countries are wrestling with the issue of how to protect valuable cultural industries while enabling responsible AI to develop. Licensing is the most obvious solution.

The CDCE had three requests with respect to AI training.

no Copyright Act amendment to allow technology development companies to continue using protected works, productions, and performances to train generative AI systems without authorization or compensation
implementation of legally binding measures requiring the disclosure of training data used in AI systems, and
ensuring that all AI-generated content is clearly identified, so that the public is fully informed about the nature of the content it consumes

Solomon no doubt will become involved in these questions. His background is as a journalist, a prominent one at that. As such, one might surmise that he has some understanding of the role of content creators and the need to foster and protect creative expression. But he will be subjected to lots of attention from the tech community, so we will just have to see how it plays out.

When I read all these tea leaves, I have the uneasy feeling that the times are not particularly propitious for the kind of political leadership sought by the cultural industries in Canada, particularly those sectors needing some attention to the copyright file. However, as I noted at the outset, “hope springs eternal”. And if hope fades, one can always “grasp at straws”. There are quite a few of them lying around. But are there enough to build any kind of useful structure? That is the question.

Trump’s Threatened Tariffs on Hollywood Films Produced Outside the US: The Medicine Could be Worse than the Disease

A film reel with a reel of film unwinding next to the word 'TARIFFS' in colorful letters.

Image: Shutterstock (AI enhanced)

First it was autos, then steel and aluminum, then anything made in China—and now it’s movies and presumably television series and streaming production–that have become targets of Donald Trump’s tariff obsession. The fact that motion pictures and TV series are often multifaceted international productions, where financing, filming, editing, VFX and various elements of post-production take place in different locations, many of them not in the US, (although most US films see final production wrapping up at home) seems not to have occurred to the President. The production supply chain is complex for a number of reasons; specific locational needs for shooting, availability of sound stage and studios, financial incentives, access to specific expertise, and so on. (Lord of the Rings and the Hobbit were primarily produced and post-produced at Peter Jackson’s Weta Workshops in Wellington, NZ, for a good reason. Jackson and Weta are the best at what they do.)

The end result of this integrated supply chain for Hollywood is an industry that produces an amazing range of content. Last year there were 569 Hollywood films released in the US and Canada, less than 2019 but a considerable increase from the depths of COVID. This industry is one of America’s export successes. The movie industry generates about 70% of its revenues from foreign distribution, and is one of the leading export industries of the United States generating $22 billion in exports in 2024, with a net surplus of over $15 billion. However, it is true that actual filming takes place less now in California than in the past. A lot of production takes place in other US states, Canada, Australia, New Zealand, the UK and in other countries, owing largely to financial incentives provided plus the presence of experienced crews, good locations and specialized expertise.

But back to Donald Trump and his threatened tariffs. If your sole goal is to reshore all US film production, regardless of the benefits from, or indeed the requirements of, an integrated international supply chain, threatening to impose a 100% tariff on all non US produced films (however that would be defined) is the absolutely worst way to go about tacking the problems facing the industry. It causes havoc and uncertainty, creating a situation where people around Trump have had to tamp down the panic by stating that many measures are under consideration, not just tariffs. But chaos is what Donald Trump wants, because it gives him the sole power to undo the chaos by changing gears (backing down, rethinking, changing course—whatever you want to call it). Shoot first, aim later.

This is what has happened to date on Trump’s Canada and Mexico auto tariffs and the global tariffs he unveiled in his Rose Garden “game show” television performance in which he announced tariffs on everyone, from countries like the UK that run a trade deficit with the US to islands in Antarctica populated exclusively by penguins. And then, when reality kicked in, the “Liberation Day” tariffs were “paused”. Despite the current suspension, the outcome of Trump’s various tariff initiatives will be higher auto prices for US consumers plus empty shelves in Walmart as Chinese products find markets elsewhere. Trump’s modus operandi is to announce something outrageous initially, (without worrying about the details, impact or practicality), wait for the cataclysmic reaction, then recalibrate (but never admit to backing down) in an effort to pick up the pieces of crockery he has just broken, assuming that he is actually aware of the consequences of his actions, or cares. It is a strange way to make policy. Oh, I forgot. It is The Art of the Deal.

Not only does the tariff proposal reveal a stunning ignorance of just how the movie industry works, but it would open a door to retaliation from the very countries where US movies are generating large returns. It would also introduce the concept of tariffying service exports (movies, banking and insurance, consulting services, advertising etc.), an area in which the US excels and runs consistent surpluses. The US film industry has worked hard to keep markets open and has generally succeeded in maintaining an open market model where, apart from censorship, few barriers exist to the distribution of US films abroad. China is the notable exception, but even in China (where all film imports are strictly controlled by government agencies), US films enjoy considerable market share. (The Chinese also impose a revenue-sharing arrangement that is unique).

In the past there were various obstacles to the wide takeup of US films, from screen quotas in Korea (a requirement that cinemas had to dedicate a set number of days to the screening of Korean films) to various means of imposing duties on imports of films. The shift from physical prints to digital distribution meant the bypassing of border measures that imposed duties on the physical incarnation of films. Moreover, pushed by the US, the World Trade Organization adopted a moratorium on the imposition of customs duties on digital products back in 1998, a “temporary measure” that has been renewed regularly, currently extended to 2026. The moratorium has been opposed by some developing countries, notably Indonesia, India and South Africa, arguing that they face increasing losses of customs revenues from the increasing digitization of products. Countries with weak taxation regimes often need to rely more heavily on tariff revenues than more developed economies. How ironic then that the US is now putting itself in the same camp as those countries that can only raise revenues when products cross the border. With his talk of imposing tariffs on films (the ultimate intangible commodity) produced outside the US, Trump has just validated the international opposition to the customs moratorium and made it much more likely that many countries will start to find inventive ways to impose duties on services trade.

There could not be a more self-harming outcome for the United States given that, according to USTR, service industries account for over two-thirds of US GDP and 4 out of 5 private sector jobs. In addition, in 2020, the US generated a trade surplus of $245 billion in exports of services. USTR also notes that “services trade enhances competition and innovation, lowers costs, and improves choice and quality for consumers and businesses”. Tariffs on services trade will lead to retaliation and a shrinking of service markets dominated by the US.

Imposing tariffs on services, which are intangible, is not easily accomplished, explaining in part why it has not been done to date. To assess a tariff, a value has to be established for the service, which has to be assessed in some way. How would an import duty be calculated? For durable goods, there is a code that assigns a category to each product, with tariff rates assigned according to the code. The valuation of the product at the port of entry combined with the tariff rate determines the amount charged. How would a film be valued? Production costs? Or only the portion of production costs incurred outside the US? (Imagine the green eyeshade work this would require to determine how to allocate costs). Perhaps it would be assessed on US revenues, but then how would one know how a film will do at the box office? And if box office receipts were factored in, you can be sure that distributors would bypass the box office for streaming release. Would you penalize US filmmakers if they chose a foreign location for financial reasons alone or would they be penalized for, say, wanting to film a desert scene with Bedouins and camels in Morocco instead of on a sound stage in California? Should they instead fly in camels to some desert location in the US?

From an international trade perspective, the Trump Administration could choose to target the tax incentives offered by foreign jurisdictions by imposing a countervailing duty (instead of a tariff) on “unfair” subsidies, as is done is some other areas of trade. Normally, determining what is an “unfair” subsidy is not an easy task and is subject to well established rules and procedures, particularly bearing in mind that many US states also offer financial incentives to attract film production. Moreover, each film is a unique product. It cannot be compared to alleged subsidies to produce lumber 2×4’s more cheaply than in the US. There is an elaborate quasi-judicial process, with appeals and trade agreement commitments, governing the determination of an “unfair” subsidy. However, Donald Trump has shown scant regard for the established rules and prefers the unilateral route. In doing so, he will open a new can of worms as targetted countries look for ways to push back. While many details remain to be filled in, Trump has managed to sow chaos and fear (his prime objective, it appears) and has caused deep concern amongst those engaged in the film industry, in particular in Canada, the UK, in Australia, but also elsewhere.

As with much of Trump’s “policy by tweet”, there is a kernel of a problem to address. Production in California has been declining for a variety of reasons. Costs are one, and the incentives offered by other US states as well as those jurisdictions competing for production work like Australia, Britain and Canada and others are part of the reason. California has been reluctant to match the incentives. COVID, the introduction of AI, changing viewing habits and the Hollywood actors’ and writers’ strikes are also major factors. Trump appears to like simplistic solutions (to complex problems), regardless of the collateral damage or unforeseen consequences. When Trump’s “Hollywood envoy”, 86 year old actor Jon Voight, apparently mentioned limited tariffs as a tool that could be used to bring film production back to the US, Trump grabbed the gun and fired. Shoot first, aim later. It’s worth noting that Trump’s picks to be his eyes and ears on the Hollywood situation includes only aged male actors. Industry executives who actually understand how Hollywood works were apparently not welcome.

Could tariffs be actually imposed on films? Maybe, with great damage. Tariffs are a very blunt instrument. But damage has already been done in terms of undermining confidence in the business model that has worked well to date, and which has brought a lot of film production work to California, even if a lot of the actual filming takes place elsewhere. Given that Trump’s objective is to create chaos, and then use that chaos as leverage, a lot of damage can be done to the film industry generally, and to film workers both inside and outside the US. Be careful. The medicine could be a lot worse than the disease, for the film industry and for US service industries generally.

Should We Throw Copyright Under the Bus to Compete with China on AI?

An illustration depicting a stick figure running away from a bus labeled 'AI,' while another figure labeled 'C' appears to have been hit or is lying on the ground.

Image: Shutterstock (author modified)

If this sounds about as responsible as “we should legalize theft of patents at home because patent infringement is rife in China”, then you may well ask where such a nonsensical and counterproductive idea came from. From OpenAI, the company behind ChatGPT, for one, the same company being sued by the New York Times for copyright infringement for copying and using NYT content without permission to train its AI algorithms.

Sam Altman, CEO of OpenAI, is one of the “tech bro’s” now cozying up to Donald Trump. He is a vocal advocate of allowing the AI industry unfettered access to copyrighted content as part of the AI training process. Last year, in a submission to the UK Parliament OpenAI claimed that it would be “impossible” to train AI without resort to content protected by copyright. Now, it maintains that allowing AI companies to scoop up copyrighted content without authorization or payment is not only “fair use”, a legally unproven proposition that is currently very much a live issue before the courts in the US and elsewhere, but is essential for “national security”. To cite a few choice tidbits from OpenAI’s submission to the Office of Science and Technology Policy (OSTP) filed in response to the Office’s request for submissions on the Trump Administration’s AI Action Plan;

“Applying the fair use doctrine to AI is not only a matter of American competitiveness—it’s a matter of national security… If the PRC’s developers have unfettered access to data and American companies are left without fair use access, the race for AI is effectively over… access to more data from the widest possible range of sources will ensure more access to more powerful innovations that deliver even more knowledge.”

And, one could add, more profit for AI companies.

In other words, if the US government doesn’t give AI companies free and unfettered access to whatever content it desires, regardless of whether it is protected by copyright (think curated news content, musical compositions and artistic works, not to mention the published works of countless authors), then China will win the AI race, threatening the national security of the US. Or so Altman’s argument goes.

The AI industry is already a practitioner of the art of helping themselves to OPC (other peoples’ content) without permission, then claiming fair use when they are caught doing it. That is what has led to the multiplicity of lawsuits now before the courts, brought by various authors and content owners. Raising the bogeyman of China and wrapping themselves in the flag by invoking “national security”, is a new wrinkle in the attempts by the tech industry to undermine established copyright law and to wriggle out from under their legal obligations.

“National security” is a convenient catchphrase and pretext in common use today to try to justify and legalize the unjustifiable and the illegal. Donald Trump invoked national security when he used the International Economic Emergency Powers Act (IEEPA) to override USMCA/CUSMA obligations made to Canada and Mexico, treaty obligations that he himself signed in his first term in office. The immediate excuse was the flow of fentanyl across the northern and southern borders of the US. Never mind that the amount of fentanyl seized by US border agents at the Canadian border came to a grand total of less than 43 lbs. for all of 2024, or just 0.2% of the total. (The equivalent for Mexico was 21,148 lbs). National security, and in particular playing the China card, is a political winner these days in Washington.

OpenAI’s position is all the more outrageous because it went into fits when the Chinese startup, DeepSeek, launched its new and much cheaper product, allegedly having used OpenAI’s capabilities to improve its own model. OpenAI cried foul and IP infringement, a case of blatant hypocrisy if there ever was one.

OpenAI and other generative AI companies that have built their training model on permissionless copying are clearly nervous about the possible outcomes of the numerous court challenges to its practices currently underway. Most of these cases are in the US although similar lawsuits have been launched in the UK, Canada, India and Germany. While it is impossible to predict the outcome of specific cases, in a recent decision (Westlaw v Ross), a US court rejected fair use as a defence in the context of AI training data. It did not accept that copying the content was a transformative use, but rather one that created a product that competed in the market with the original source material. Given the legal uncertainties, it looks like the tech industry is trying to hedge its bets by lobbying to have all AI training uses declared to be “fair use” based on national security considerations.

It gets worse than that. Another of the tech bro’s, Mark Zuckerberg, gave the green light to training of META’s AI model on pirated material. This was not accidental. Employees reported removing © marks from books downloaded as training materials.

In Canada, in a similar search for a rationale to explain away copyright infringement, a company that was helping itself to copyright-protected curated legal case data to build an AI based legal reference service, claimed that forcing it to license the content would stifle innovation and drive AI businesses out of the country. See CanLII v CasewayAI: Defendant Trots Out AI Industry’s Misinformation and Scare Tactics (But Don’t Panic, Canada). The AI developers’ strategy seems to be that if you don’t want to license and pay for IP protected content, (or perhaps the owner of the content prefers not to license it, as is their right) just take it and claim some overriding purpose, like protecting domestic innovation or national security.

But what about the argument that if China doesn’t respect intellectual property (IP), we need to adopt the same approach in order to compete? While Chinese courts in recent years have taken a much more robust position with respect to protecting the rights of IP owners, including patents, trademark and copyright, I am not going to argue that suddenly China has become a “rule of law” country. Rather, it is a “rule by law” state, the law being whatever the leadership of the Chinese Communist Party (CCP) decides it will be at any given moment. This is a fact. However, to suggest that the West, in particular the US, should adopt China’s legal modus operandi so as not to lose the so-called “AI race” not only undermines all the values and principles on which our society is based, including the principles of private property, fairness and transparency, but also dismisses three centuries of legal developments in the protection of IP, especially copyright. The evolution of copyright law has resulted in the creation of industries that contribute far more to the economic and cultural wellbeing of our society than any of the questionable outputs of the AI industry.

Yes, AI is here to stay. It can be put to beneficial or nefarious uses and has an undoubted strategic component. It can also be used to undermine and weaken human creativity. Is that the goal we are seeking?

It is worth noting that the tech bro’s have an easy and legal way out. In most instances, they can acquire access to the content they need legitimately. A market for licensing training data for AI development already exists and is further developing rapidly, as I wrote about earlier. Using Copyrighted Content to Train AI: Can Licensing Bridge the Gap? But just taking it and claiming “fair use” is easier and cheaper. And morally and probably legally wrong.

We have seen a lot of rogue policy making in Washington of late, from the illegal deportation of US residents, to the gutting of US government agencies, to the declaration of a tariff war against the world. It is time to take a more considered approach. Rash decisions in response to tech lobbying could lead to untold consequences and collateral damage to content industries that would be impossible to roll back and remedy. Thus, I was relieved to note that Michael Kratsios, Director of the US Office of Science and Technology Policy, the same OSTP to which OpenAI submitted its comments regarding AI training and national security, stated in a recent speech on American innovation that;

“…promoting America’s technological leadership goes hand in hand with a threefold strategy for protecting that position from foreign rivals. First, we must safeguard U.S. intellectual property and take seriously American research security…”

That is a welcome recognition of the importance of IP as part of the process of innovation.

In this respect, the existing framework of copyright law has survived and adapted for over 300 hundred years. It has evolved with each new technological development, but the fundamental principle of giving an “author” of an original work the right to control how that work is used as well as the ability to earn a return from its use for a statutory period, with only limited exceptions, has remained unchanged. To undermine this principle in a flawed attempt to grasp the Holy Grail of AI leadership is self-defeating. Instead of sipping from AI’s Holy Grail we will be drinking from the poisoned chalice of IP theft.

Throwing copyright and the rule of law under the bus on the pretext that this is what’s needed to compete with China is not only self-serving, it is a sure path to ultimately losing the secret sauce of creativity and innovation. A country that steals IP rather than creating and respecting it will always lose the race.

Author: hughstephensblog

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