Are Libraries the Enemy of Authors and Publishers?

As regular readers of this blog will know, I am unabashedly and unapologetically pro-©, pro-creator, pro-author, pro-artist, pro-publisher and a strong supporter of our cultural and entertainment industries. I am also pro-public library. This raises the question of what to do about publisher Kenneth Whyte’s long and controversial opinion piece that appeared in the Globe and Mail on July 25, “Overdue: Throwing the Book at Libraries”.  (Byline: “As important as public libraries are to civic culture, the good they do is made possible by being a net harm to literature, Kenneth Whyte writes. Libraries are overdue for renewal”). 

Should I refute his criticisms of this venerated public institution? Others, including not surprisingly librarians themselves, have already done that. I could try to defend Whyte’s thesis, that public lending libraries undercut booksellers to the detriment of authors and publishers by giving readers for free what they should be paying for. But then his description of libraries as “pimping free entertainment to people who can afford it” becomes a little difficult to defend, even allowing that he may be deliberately using strong language for effect. I could simply ignore it, as it appears many others in the copyright world have done (and as a couple of friends suggested that I also do). After all, attacking libraries is not a helpful tactic in dealing with a public that is not always convinced of the benefits of copyright to society, and won’t win authors and publishers many friends. Techdirt, a notoriously anti-copyright publication has already jumped on Whyte’s article accusing him of being a “copyright maximalist” who hates libraries. 

Now since you are reading this blog, it is obvious that I did not take the friendly advice to avoid wading into the debate on Whyte’s opinion piece. Why? Because the issue he has raised, which is far from being cut and dried, intrigues me. There are many shades of grey on this one. Whyte’s piece is not the first attack on the role of the public library in the book trade, only the most recent. In Britain a few years ago, when British libraries were facing a funding crisis, popular children’s writer Terry Deary claimed that libraries had outlived their usefulness, being relics of the Victorian age when there was widespread illiteracy. He is reported to have said that: “People have to make the choice to buy books. People will happily buy a cinema ticket to see Roald Dahl’s Matilda, and expect to get the book for free. It doesn’t make sense”. 

There is little doubt that libraries do hustle for business, trying to broaden their appeal to consumers to justify their need for public funding, and this can make it sometimes appear that they offer (unfair?) subsidized competition to booksellers. A good example is this clip from “Curbside Larry” for the Harris County Public Library in Houston, TX. Yes, it’s hilarious and no, it’s not a spoof (I think). It certainly gets its point across that “we got it, and it’s absolutely free”. So librarians are good marketers of what they offer. Better that than stock a product no-one is aware of. They can also be very protective of their own turf to the point of even objecting to free pop-up libraries in parks and people’s front gardens. 

One measure that has been taken in Britain, Canada, Australia and New Zealand–but not the US–to help offset the diversion of revenues away from authors and publishers because of library lending is the Public Lending Right (PLR) scheme. Under the PLR authors (and in some countries publishers) get annual payments based on the number of time their titles are loaned out by libraries. These payments come from general government revenues and are a form of cultural subsidy. Deary complained that the British PLR paid him only 1/6 of what he’d get from a book sale. At the time he was getting 6.2p each time his book went out on loan up to an annual maximum of £6,600. He complained that “if I sold the book I’d get 30p per book. I get six grand, and I should be getting £180,000”. (I’m not sure about his math; just quoting). As for the Canadian PLR regime, Whyte describes it as throwing “a few beans at guileless authors in compensation for the use of their works in libraries”, and urges that it be vastly expanded and adopted in the US. 

The Canadian PLR was instituted in 1986 and was the result of concerns at the time by authors that they were being “ripped off” by libraries. Of course not every book loaned out is a foregone sale, a point repeatedly made by librarians. Maybe a sixth of a loaned loaf is better than 100% of a loaf that wasn’t sold and brought in no revenue? Just how generous the PLR actually is clearly depends on your perspective. University of Ottawa law professor and blogger Michael Geist points out that the PLR is the gift that keeps on giving for authors, earning them some revenue for up to 25 years (as long as their books are in a library’s inventory and go out on loan), albeit with a diminishing percentage as the years pass. In Canada, seven “marker” libraries are used to determine the inventory. That said, according to Geist the average payout per author last year was only $822 with a maximum per title of just $467.88 and the maximum payment to an individual author of $4,500. No one in the literary field is getting rich from the Public Lending Right. The total funding envelope is just over $14 million annually so for the PLR to provide any meaningful income to authors, it would have to be increased many-fold. That is unlikely to happen, despite Whyte’s calls for “more”. 

It is not just libraries that stick in the craw of some authors. Second-hand book shops are also a target. Authors get no royalties from sales of second-hand books. In the US this is known as the “first sale doctrine”, (called “exhaustion” in Canada and some other countries) and this principle allows the purchaser of a book to do just about anything with it once it has been paid for;  keep it, give it away, lend it, sell it or burn it; anything except copying and redistributing it. The authors gets their royalty from the initial sale. Stores selling used books are common, and often they “recycle” books by taking back books that have been “gently read” against a credit that can be used to purchase more used books from them. I frequent one myself because it has a great selection of out-of-print titles, but if it’s a relatively recent title that’s also available online at Amazon or Indigo, or at a bookshop selling new titles, should you feel guilty if you pick up your copy second-hand? Some writers think so; others are more relaxed about it arguing that the most important thing is that a book gets read. 

As an aside, the same principle of exhaustion (i.e. once you buy a work, you can do with it what you wish without further reference to the author, except for not violating the author’s copyright) applies to works of art in Canada and the US. As I noted in an earlier blog posting, there is a push afoot in both countries to get a legislated “Artists Resale Right” whereby an artist would get a small portion of the sale proceeds when one of their works is resold. (A resale right exists in the EU, UK and Australia). One notorious case cited in Canada is that of the Inuit artist Kenojuaq Ashevak, who sold her famous print “Enchanted Owl” in 1960 for just $24. An original print of the work recently changed hands for over $200,000 but her estate gets not a sou. All the benefit from the increased value of her work as she became renowned in the art community accrued to galleries and previous purchasers, and this pattern is often repeated with artists whose work becomes sought after later in their careers. A resale right wouldn’t work for writers though because (a) it would be difficult if not impossible to track the resales and (b) books usually—but of course not always—go down in value as time passes.

But back to libraries. So far I have been discussing how libraries and authors relate mostly with regard to physical books. Lending of digital works opens up many new questions. In the case of an e-book, a consumer typically does not purchase the work but rather licences the right to read the work on a device. The copy on that device could be loaned to someone, but the device would have to be loaned as well. However when loaning a digital book, you can’t have your cake and eat it too. You can’t lend out the work or give it to someone else while still retaining a copy. Libraries have got into the e-book business in a big way, often licensing multiple copies of a work (under terms where they pay considerably more per copy than an individual user would), and then lending out these e-copies to borrowers. However, it is important to note that if a library licenses ten copies of, say, The Handmaid’s Tale, only ten copies can be in circulation at any one time. One digital loan has to terminate before another digital copy can go out on loan to a new borrower. 

Despite this, many publishers are not happy and are concerned that the ease and ubiquity of library digital copies is cannibalizing e-book sales. The argument is that borrowing a physical book causes “friction” that can be alleviated by the consumer when opting for a purchase. Friction consists of inconveniences such as having to go to the library to pick up the book, often having to request it be put on hold, returning the book on time and paying a fine if not returned by the due date, etc. A digital book abolishes friction, as it can be downloaded at home from a library website and the download sunsets when the loan period is up. In an attempt to deal with this issue, in November of last year MacMillan announced that in order to encourage purchases it would withhold new digital titles from libraries for eight weeks after digital release to consumers, with the exception of one copy per library. This is similar in concept to the “windowing” strategy used by major film studios whereby the DVD or streaming release of a film is held back for a set number of weeks while the film plays in cinemas. That strategy is becoming less prevalent in the movie industry, in part because of concern that withholding the home entertainment versions encourages piracy as determined consumers try to skirt the rules to get access to pre-release streaming versions of popular films. Would delayed release also encourage e-book piracy, which is already a growing problem? It’s hard to say, and we may not find out, since MacMillan backed down after loud protests from the library community. However, COVID-19 was undoubtedly a factor and the policy could be revived in future in a post-COVID world. 

COVID was also the catalyst for another experiment involving digital lending and libraries, this time the so-called “National Emergency Library” launched by the Internet Archive in the US. Through its “Open Library” project, the Archive (and other libraries) had been pushing a project whereby it scanned books in its inventory and made them available for loan digitally, bypassing the normal licencing requirements for e-books. The issue of scanning a book to provide a digital version is controversial, with detractors saying this is a form of copying while supporters claim it is a fair use by simply changing formats. Until COVID hit the Archive was careful to follow normal lending rules by allowing only as many copies into circulation as it physically had in inventory. This is known as “controlled digital lending” and requires that if a scanned digital copy is loaned out, the physical copy stays in the stacks. In other words, there is a wait list and a limit on the number of copies in circulation (no more than the number of physical copies from which the scans were taken). 

With the arrival of COVID, the Archive announced that it was suspending the normal practice of maintaining a wait list and would allow unlimited digital copies to go into circulation. While a few initially lauded the Archive for taking measures to assist consumers self-isolating because of the pandemic, it was quickly pointed out that this unilateral move hurt authors and publishers—who were not consulted– and was a case of giving away someone else’s property. Publishers had already loosened controls during COVID and brought suit against the Internet Archive accusing it of giving away what it did not own. The National Emergency Library has now been closed but the suit over controlled digital lending continues. 

Kenneth Whyte, however, was not complaining about the Internet Archive’s agenda to digitally scan and circulate books for free; he was complaining about taxpayer-funded competition from public libraries who lend out both hard copy and digital books in apparent competition with publishers and booksellers. One of Whyte’s suggested solutions is to impose a charge to use libraries, like a monthly Netflix subscription, with an exemption for low-income borrowers. In other words, institute a means test for library borrowing. Somehow I don’t think that is going to catch on. In fact to judge by the majority of the reaction to his op-ed, his views are not mainstream, even amongst publishers. Kate Edwards, Executive Director of the Association of Canadian Publishers wrote to the Globe and Mail to put on the record that;

Canadian publishers recognize that libraries are an important part of the reading ecosystem and a primary channel for book discovery….Library sales are also an important part of the publishing business model…Readers are best served when libraries purchase and promote a diversity of material, including books by local authors published by independent Canadian presses. Increased investment in and attention to these efforts are critical to building a strong reading and literary culture. Publishers and librarians are well poised to pursue these shared goals in partnership, to the benefit of readers, writers and local communities.” 

That sound you just heard was the rug being pulled out from under Whyte by his publishing colleagues. That said, many writers and independent publishers are in a perilous financial position, particularly with the additional challenges of COVID. Publishers, booksellers and writers face challenges from large online book marketers and digital publishers like Amazon, second-hand book stores, consumers who pirate hard copy and e-books, universities and public education systems that refuse to acquire copying licences arguing that their actions constitute fair dealing and, yes, libraries. However that is the ecosystem we live in with all its complexities, and to single out libraries as the main problem seems disingenuous. It’s not cut and dried as to who is right and who is wrong, if that is even the correct way to assess the situation. The situation is complex, combining several hundreds of years of publishing and bookselling trade practices, a hundred and fifty years of public libraries, and twenty years of the digital revolution. 

Changing the public lending model and the role of public libraries is an unlikely and frankly politically unacceptable solution to the problem. However, ensuring that authors get paid for the use of their work by educational institutions, and taking stricter measures against digital piracy and unauthorized copying are actions that could be taken. In the meantime, despite the financial challenges that authors and publishers face, I can confidently predict that books will continue to be written, published, and sold in digital and hard copy formats, both new and used, while being simultaneously circulated by public libraries. There are many paths to literacy. 

© Hugh Stephens 2020. All Rights Reserved. 

USCO’s Study Offers Hope for Reform of the “Notice and Takedown” Law, But Ducks the Issue on Site Blocking

Source: http://www.shutterstock.com

The US Copyright Office (USCO) recently released its 200 page study on Section 512 of the 1998 Digital Millennium Copyright Act (DMCA), the legislation passed to implement US obligations under the WIPO (World Intellectual Property Organization) Copyright Treaty. This section of the DMCA is otherwise known and better described as the Online Copyright Infringement Liability Limitation Act, the essence of which are the notice and takedown provisions of the legislation. The USCO study is a result of five years’ work reviewing whether Section 512 is working effectively in terms of balancing the needs of internet platforms with those of creators. In a nutshell, Section 512 represents the “grand bargain” that was struck back in the late 1990s at the dawn of the digital age to facilitate the development of online platforms while protecting creators and rights-holders. 

In its most basic terms, the essence of the bargain was that internet platforms (called OSPs, or Online Service Providers in the legislation) would be provided immunity from prosecution for storing, caching, transmitting or linking to copyright infringing materials as long as they took reasonable measures to remove infringing materials when notified of infringements by rights-holders. This is the so-called “safe harbour”. There are many more elements to this, including the need for repeat infringer policies, the question of what constitutes “knowledge” of infringement, the process by which content is taken down and put back, and so on, but the basic arrangement was a compromise between copyright industries who wanted internet platforms to bear more responsibility for carrying or facilitating access to infringing content and internet companies who wanted to avoid the uncertainties and pitfalls of ongoing litigation for infringing material on their platforms. 

More than two decades later, those nascent internet companies (many of which did not even exist in 1998) have become corporate behemoths. Generally speaking Silicon Valley has been very satisfied with the way in which Section 512 has worked; creators, rights-holders and the content industries not so much. As the USCO Study puts it: 

“In the twenty-plus years since section 512 went into effect, the question has often been asked whether the balance that Congress sought has been achieved, particularly in the light of the enormous changes that the internet has undergone.”

“Roughly speaking, many OSPs spoke of section 512 as being a success, enabling them to grow exponentially and serve the public without facing debilitating lawsuits. Rightsholders reported a markedly different perspective, noting grave concerns with the ability of individual creators to meaningfully use the section 512 system to address copyright infringement and the “whack-a-mole” problem of infringing content reappearing after being taken down. Based upon its own analysis of the present effectiveness of section 512, the Office has concluded that Congress’ original intended balance has been tilted askew.” (emphasis added)

Given this conclusion, the USCO Study makes a number of recommendations as to how Congress could restore that balance. The debate on these recommendations is going to be drawn out, intense and fierce, and there is not the space here to get into the specifics. Many others will be writing on these questions over the coming months. Instead, I want to focus on just one issue that was raised in the study; that of blocking access by consumers in the US to offshore pirate streaming and download sites as a means to combat content piracy. The short-hand term for such measures is “site blocking”.

The USCO examines site blocking in the section of the Study (pp. 58-63) that looks at how other countries have tried to strike the balance between platforms and rights-holders when it comes to online infringement. It notes that “recent studies have shown that website blocking has operated as an effective tool in addressing digital piracy, despite the familiar misperceptions about its efficacy and alleged potential for abuse” and that “currently, more than 40 countries have either enacted or are under an obligation to enact some form of no-fault injunctive relief to block access to piracy sites”. This is all thoroughly documented. The USCO Study goes ono to examine the very effective systems in place in the UK, Australia, India, and the EU, regimes that I have commented on elsewhere (here, here and here). So far, so good.  But then we move to the section of the Study dealing with “Specific Findings and Recommendations”. 

Site blocking falls under the rubric of “Adoption of International Approaches”. Actually, given the non-recommendation that results, it should more accurately read the “non-adoption” of approaches used successfully by other countries. This section starts out all right;

Some rightsholders also advocated for a more extensive system of no-fault injunctions to address websites primarily dedicated to piracy…many of these websites are located abroad, beyond U.S. jurisdiction, which insulates them from any likelihood of being forced to pay millions of dollars in statutory damages.  Rightsholders supporting the proposal of expanded injunctive relief report that such systems have been largely effective in addressing the most egregious cases of infringement.”

But then, after a discussion of the technical means to give effect to site blocking, the Study turns to the notorious anti-copyright lobby group EFF (Electronic Frontier Foundation) for its received wisdom; 

EFF echoes a number of website blocking opponents when it asserts that website blocking systems ‘introduce dangerous mechanisms for Internet censorship, interfere with users’ fundamental rights, and, often, prove ineffective in solving the problem of online copyright infringement’.”

All of these assertions are effectively rebutted by footnoted studies cited by USCO but in its attempt at a “on the one hand, and on the other” approach, the Copyright Office’s “two-handed” strategy inevitably ends up going nowhere. 

After citing numerous research papers documenting the effectiveness of site blocking, the Study’s only recommendation is for “additional, dedicated study”. In other words, sit firmly on the fence. This is a disappointing outcome to what could have been an important opportunity to add a major tool to the US toolbox to combat online piracy. As I noted in a blog to mark World IP Day “Time to Forge a Global Solution to a Global Problem (Blocking of Pirate Streaming Sites)”, the US is fast becoming an outlier and the major holdout on instituting some form of site blocking. And it’s not as if the US doesn’t have a problem. The US is the leading source of visits to pirate streaming sites globally. It thus has the dubious distinction of leading Russia, China and Brazil as the home of the largest number of pirate streaming site users, with 1.2 billion pirate site visits in December 2019 alone.

Strangely, Section 512 already contains a provision–Section 512(j)–that could be used to obtain injunctions to effect site blocking. That was the original intention, as noted in a 2007 study published in the Vanderbilt Law Review, cited as a reference by the USCO; 

“The Foreign Site Provision may be used to stop the U.S. infringement that occurs through the use of foreign sites and services. Interpreted correctly, the provision may be used to block infringing sites as well as those that offer the programs used to infringe. After obtaining a judgment against just one direct infringer, a copyright holder may have a service provider enjoined from providing access to the infringing site. While blocking an infringing site will not stop copyright infringement through that site worldwide, it will stop infringement through that site in the United States, where 2005 album sales were at their lowest level since 1996. The Foreign Site Provision will not solve all the problems of copyright holders. Aside from handling continued worldwide infringement, copyright holders using the Foreign Site Provision will undoubtedly face unfounded claims of censorship and damage to innovation from their actions. Nonetheless, the provision was written to protect copyrighted works and should be used accordinglyThe Foreign Site Provision is the next step in this ongoing fight against digital piracy and copyright holders should take it.”

Despite this call for use of Section 512 (j) and language in the legislation providing for site blocking injunctions, this provision has seldom if ever been used. The USCO Study examines this anomaly, and notes that rights-holders assert that they have not used the provision because “courts have interpreted the injunctive relief too narrowly” and it has become conflated with domestic takedown requests. Smaller rights-holders complain about the cost of pursuing injunctions. The platforms have argued that 512(j) is not needed or used because relief is available through the notice and takedown provision (although the USCO study noted that this is unbalanced and is not working as intended) and that expanding it could jeopardize their safe harbour protections. Whatever the reason, 512 (j) has effectively been a dead letter from the inception of the DMCA. 

So where does the USCO come out on this issue? While accepting that there may be some untapped potential in Section 512(j) to combat online infringement, it concludes that it’s unlikely that changes to this provision would play a significant role in restoring the balance between rights-holders and platforms. Yet at the same time USCO admits that courts have been overly narrow in their consideration of whether injunctive relief should be available to rights-holders under 512(j). Therefore it recommends that Congress monitor what is happening and consider (eventually), whether clearer language is needed. 

“For this reason, Congress may wish to monitor court decisions interpreting this provision and consider whether a reformulation is warranted.”

This again is a disappointment and effectively ducks the issue despite a clear conclusion that this element of the legislation is not working as originally intended by Congress. 

One cannot help but wonder why the USCO wandered into the site blocking minefield if it was not prepared to come up with any concrete recommendations. Perhaps this is explained by the fact that the Study’s terms of reference required it to respond to comments received. Some rights-holder organizations filed submissions arguing for a site blocking mechanism in the US through injunctive relief, while others, like the EFF, submitted opposing views. USCO tries to capture both viewpoints without providing any direction. 

Hearings have already begun on the Study, despite some platforms claiming that the COVID epidemic requires that examination of copyright issues be put off for another day. But it has already taken five years to produce the USCO’s 512 Study. Let’s hope it doesn’t take as long to come to grips with its recommendations. It would have been helpful to see concrete recommendations, of which there are many in the Study that are useful, also extend to enablement of site blocking in the US. That didn’t happen, so reform will have to come in some other way. In the meantime, an opportunity has been missed and the US remains a major outlier when it comes to using site blocking orders—either through the courts or via an administrative regime—to block access to offshore pirate streaming content. 

I am confident that the US will eventually get there. The question is “when”. From a rights-holder perspective, the sooner this happens, the better. 

© Hugh Stephens 2020. All Rights Reserved. 

New Zealand’s Ongoing Copyright Review Process: MBIE’s Revised Objectives Paper Withdrawn

Earlier this month it was reported that the department of the New Zealand government responsible for leading the current review of the Copyright Act (1994), the Ministry of Business, Innovation and Employment (MBIE) had issued a welcome statement withdrawing the revised objectives paper for the review it had released back in November of last year. MBIE’s statement reads, in part;

“We are writing to let you know about the latest stage we have reached in the review. In November 2019 we published a paper outlining revised objectives for copyright law. This paper was developed in response to the submissions on the Issues Paper we had previously received in April 2019. The main change we had proposed to the revised objectives was to ensure they more expressly recognise the rights and interests of people involved in creating copyright works.

Some stakeholders have raised concerns about this paper and their inability to provide formal feedback on it. It is important to MBIE for all stakeholders to have trust and confidence in the review. For this reason, we are withdrawing the revised objectives paper. The next stage in the review will be to formally consult on potential revisions to the objectives. (Emphasis added). This will ensure all stakeholders have the opportunity to fully contribute to this part of the process in an open and transparent way.

We expect to carry out this further consultation as early as possible in the new Parliamentary term. Following this, we will consult on an Options Paper.”

The New Zealand Society of Authors, who reported this turnaround, noted;

“We were delighted to secure the support of Minister Faafoi to achieve this and look forward to re-engaging with MBIE to develop objectives for the Review that will deliver legislation that will underpin the growth of New Zealand’s creative economy.”

This is a welcome rethink of the copyright review process and a needed pullback of a flawed rewrite of the objectives of that review undertaken in mid-stream and without public consultation. This skewing of the objectives threatened to undermine the integrity of the entire copyright review process. MBIE, and the Minister, are to be congratulated for listening to the voices of concerned stakeholders by withdrawing the current paper so that any potential revisions to the objectives can benefit from stakeholder input.

Although the copyright review process has already been underway for a couple of years, the stakes are such that it is important to take the time needed to get this right. Copyright law revisions do not occur often and are usually drawn out owing both to the extent of the economic stakes involved and the range of differing views on the issues. In particular there is the usual tension between copyright creators and copyright-creating industries (publishing, music, film production, etc) that seek to protect the revenues generated through content creation by limiting exceptions and penalizing piracy, and industries that use content for a variety of purposes (educational institutions, internet platforms, social media and content aggregators) who prefer to do so by paying as little as possible (in fact preferably nothing) for the content they use by expanding copyright exceptions and in some cases being able to turn a blind eye to content theft with few if any consequences.  

The process formally started in November of 2018 when MBIE issued an Issues Paper that laid out the background, the issues at play, the terms of reference and objectives for the review, seeking public comment and input. Following the public input and consultation process which closed in April 2019, the next step would normally be to evaluate that input and formulate recommendations or options, to be presented in an Options Paper that would be subject to Parliamentary and further public review. However in November of 2019, part way through the process of evaluating input, MBIE issued another paper, a  30 page revised Objectives Paper, MBIE’s approach to Policy Development, that changed the objectives of the review. Although wording changes were few, they appeared to reflect a mindset that was worrisome for rights-holders suggesting the changed objectives could lead to potential negative outcomes. There was a subtle shift in the emphasis of the objectives away from incentivizing creativity to instead focus on supply of creative works. There were also suggestions that copyright law should play a role in determining the economic balance between individual creators and the industries that promote creative content, instead of the current practice of freely negotiated contracts. Back in May, I prepared a detailed commentary on the revised objections for NZ Content Café (here). My conclusion was the following;

“What is the sum total of all this tinkering with the objectives of the Copyright review? Why go through such a lengthy process to issue a new 30 page paper (full of dubious premises) prior to producing the Options? Is it to lay the foundation for a series of recommendations that will end up gutting the traditional copyright system and greatly widen exceptions? The tone of the paper and the shifts in emphasis suggests that this may be the case. One hopes not but perhaps MBIE’s attempt at transparency has revealed more about the mindset of the drafters of the document than was intended.

In its conclusion, the MBIE paper states that “Objectives will be used later in the review to assess options for addressing problems with the status quo”. That is why it is very important to get the objectives right before the Options Paper is published. If the foundation for building policy recommendations is not level, then the structure that emerges will likewise be tilted and unstable. Further consultation on the objectives before the Options Paper is produced would seem to be highly advisable.” (emphasis added).

I am sure that others also made the same point and I’m delighted to see that this is now what is going to happen.

There is still a long road to follow before MBIE, New Zealand stakeholders and legislators will be ready to develop and act on recommendations for updating the NZ Copyright Act.  A review is needed in order to take into full account the many changes to copyright practice and use that have occurred in the digital age while still respecting the fundamental premise of copyright. As this review proceeds, it is reassuring to know that the review process will now be able to benefit from full stakeholder input and consultation throughout, including on the all-important issue of determining the objectives of the exercise. Withdrawing MBIE’s Revised Objectives paper was the right step to take in helping make this happen.

© Hugh Stephens 2020. All Rights Reserved.

How the WTO Helped to End Sports Broadcast Piracy in the Middle East

Source: Wikimedia commons

These days the World Trade Organization (WTO) is facing many challenges. To say that it has fallen out of favour with the Trump Administration would be an understatement. The US is currently actively working to undermine the dispute settlement process of the WTO by blocking new appointments to the organization’s Appellate Body, on the grounds that it does not like the fact that a number of WTO decisions have gone against the United States for its use of unilateral trade remedy actions against other WTO members (despite the fact that over the years the US has won far more WTO dispute cases than it has lost). In addition, since the launch of the Do’ha Round of multilateral trade negotiations in 2001, the members of the WTO have been unable to resolve significant differences between developed and developing countries over whether and how to bring new areas of trade and subsidies under WTO disciplines. As a result, the Do’ha Round has stalled, undermining the WTO’s credibility. To add to the WTO’s current woes, recently its Director-General, Roberto Azevedo, announced his early and unexpected retirement, further throwing the Organization into crisis.

Despite all these trials and tribulations, however, the WTO remains an essential component of the international trading system and continues to play a critical role in adjudicating international trade disputes. With the effective temporary demise of the WTO Appellate Body as a result of US actions blocking appointments of new members, a number of WTO members have agreed to bypass the statutory appeals process by establishing a contingency appeal arrangement whereby these members (the EU, Australia; Brazil; Canada; China; Chile; Colombia; Costa Rica; Guatemala; Hong Kong, China; Mexico; New Zealand; Norway; Singapore; Switzerland; and Uruguay) can continue to exercise their right to a review of WTO panel decisions by an appeal body when the disputes are among themselves. Moreover, the WTO continues to establish panels of experts on a case-by-case basis to adjudicate trade disputes between WTO members, and these cases are proceeding. It’s also worth noting that not all WTO panel decisions are appealed (over the years, the rate of appeal of panel decisions has varied between 40 and 100%).

So what does this history of the WTO dispute settlement process have to do with copyright issues? If you are a sports rights-holder (such as those who own the rights to the broadcast of major European soccer leagues) who has licensed content to the Qatar-based sports broadcaster BeIN Sports, and whose content has been openly pirated by the Saudi-based broadcaster BeoutQ, the answer is “everything”.

As I documented in a blog posting (Content Piracy as Hybrid Warfare) last year, the Saudi regime has been pirating BeIN’s signal as a form of non-traditional warfare against the Qatari government, which also happens to own the Al-Jazeera news network, a perennial thorn in the side of the Saudis. Despite pressure from the US through the US Trade Representative’s annual report on global intellectual property issues, which specifically called out the Saudis on this issue, a thin veil of deniability and obfuscation was maintained by Riyadh. Now, thanks in large part to the role of the WTO, this has been stripped away and the situation is changing.

BeIn Sports, unable even to hire legal counsel in Saudi Arabia to pursue its claims of piracy owing to Saudi obstruction, appealed to the Qatari government for help and Qatar filed a case against Saudi Arabia in the WTO, with a number of other WTO members (Australia, Bahrain, Brazil, Canada, China, EU, Japan, Norway, Russia, Singapore, Ukraine, the UAE and the US) joining and submitting briefs as interested third parties. Only WTO members, not companies, can bring WTO cases.  On June 16, a WTO panel found that Qatar had clearly established that the pirated BeoutQ network was operated by individuals within the criminal jurisdiction of Saudi Arabia and that the Kingdom had not only failed to take any action against them but had prevented a Qatari company (i.e. BeIN Sports) from exercising its rights to civil enforcement of its IP rights. The WTO carefully skirted the issue of exactly who was responsible for BeoutQ’s piracy but it is clear that the service is well connected to the Saudi political elite. While the panel partially upheld the Saudi argument of national security as a reason for preventing BeIN Sports from accessing legal counsel, a ruling trumpeted by Saudi media sources, the panel ruling confirmed there was a clear violation of WTO rules by Saudi Arabia.  

The panel rejected the Saudi argument that it had no jurisdiction owing to Saudi Arabia’s invocation of the WTO national security exception based on the fact that it had severed diplomatic relations with Qatar. All of the third country interventions related to the Saudi national security argument, with almost all opposing this for one reason or another. Among the third party intervenors, only Bahrain and the UAE, who are allied with the Saudis against Qatar, and the United States, supported the Saudi’s national security argument. In the case of the US, it takes the position that national security is whatever a country defines it to be (self-judging), regardless of circumstances. The panel rejected this position and concluded by recommending that “Saudi Arabia bring its measures into conformity with its obligations under the TRIPS Agreement.” (TRIPS deals with intellectual property disputes under the WTO framework).

Saudi Arabia must now decide whether it will appeal the WTO panel finding, and given the current suspension of the Appellate Body’s proceedings, this could drag out for a considerable period of time. Ultimately the Saudis could refuse to adopt the panel’s decision, in which case Qatar could seek compensation through authorized trade retaliation. However, the situation is unlikely to come to this and while it will be loath to admit culpability, there are signs that Saudi Arabia is finally recognizing the need to deal with the sports broadcast piracy issue.

Certainly not coincidentally, on June 22 the Saudi Authority for Intellectual Property (SAIP) announced that it would be blocking 231 websites that violate the intellectual property law including a number that distribute Illicit Streaming Devices (ISDs), a prime means of facilitating sports content piracy. BeoutQ’s direct satellite broadcast service was shut down late last year, but continued to be available through ISDs via the internet. In addition, the President of the Saudi Arabia Football Federation has written to UEFA, European Football’s governing body, the English Premier League (EPL), international football federation FIFA and the International Olympic Committee acknowledging that Saudi Arabia has a responsibility to fight broadcast piracy and respect intellectual property rights. 

This sudden conversion is linked not just to the unfavourable WTO decision but also to the desire of the Saudis through their sovereign wealth fund, whose Chairman is Crown Prince Mohammed bin Salman, to purchase a major EPL team, Newcastle United. The EPL’s broadcast deal with BeIN Sports was threatened by BeoutQ’s piracy, and EPL, UEFA and others had tried unsuccessfully to bring suit in Saudi courts. For its part, BeIN Sports had lobbied the EPL to block the Saudi purchase of the English team. The Newcastle ownership bid, which must be approved by the EPL, is certainly not unrelated to the apparent change of course, but there is no doubt that pressure from the WTO decision (first unofficially released in May) is an important factor.

While shutting down BeoutQ will not end the standoff and the ongoing sniping between the Saudi and Qatari regimes, the broader Saudi interest in establishing itself as a major investor in premier sports leagues, combined with the pressure of an unfavourable WTO panel finding (and bilateral pressure from the US and EU) will hopefully lead to an end to widespread, state-tolerated if not state-sponsored content piracy in the Middle East. The WTO demonstrated its value by playing an important part in bringing trade, moral and legal pressure on the Saudi authorities to change their behaviour. This is precisely why a robust and effective rules-based WTO dispute settlement process is still very much needed to help the world navigate and resolve international trade issues.

© Hugh Stephens 2020. All Rights Reserved.

Does the “New NAFTA” (USMCA) Prevent Canada–and the other USMCA Partners–from holding Internet Platforms Accountable for Disseminating Harmful Content?

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The USMCA finally came into effect a few days ago, on July 1, 2020, committing the US, Canada and Mexico to the treaty provisions the three countries agreed to in the 34 chapters, four Annexes and 16 side letters that comprise the text of the Agreement. Among its many provisions is Article 19.17 (in the Digital Trade chapter) which reads, in part:

 “.…no Party shall adopt or maintain measures that treat a supplier or user of an interactive computer service as an information content provider in determining liability for harms related to information stored, processed, transmitted, distributed, or made available by the service, except to the extent the supplier or user has, in whole or in part, created, or developed the information.” (19.17.2)

In plain English this means that none of the three governments party to the Agreement will hold an internet platform (such as Google, Amazon, Facebook, YouTube, Twitter and hosts of others providing similar “interactive” services) liable for content that appears on their platform. Responsibility rests with the source of the content. Unlike a newspaper, the internet platforms are not to be considered “publishers” of the content they carry and distribute. This is sometimes referred to as “the shield”.

The text of the Agreement goes on to say that;

“No Party shall impose liability on a supplier or user of an interactive computer service on account of…any action voluntarily taken in good faith by the supplier or user to restrict access to or availability of material that is accessible or available through its supply or use of the interactive computer services and that the supplier or user considers to be harmful or objectionable” (19.17.3 a)

Translation: The platform is allowed to take down content that it considers to be “harmful or objectionable” without fear of liability. This is sometimes called “the sword”.

Does this mean that Canada and the other two USMCA partners are now no longer able to enact legislation to hold internet platforms accountable in civil law for illegal, discriminatory, racist, violent or other objectionable and harmful content that they distribute? From a literal reading of the USMCA commitment the three countries made, the short answer is “possibly yes” but from a practical real-world perspective, the answer is a clear “no”.

The inclusion of Article 19.17 was intended by US negotiators to entrench the (in)famous and controversial Section 230 of the 1996 Communications Decency Act into the USMCA, urged on by Silicon Valley and groups like the cyber-libertarian Electronic Frontier Foundation (EFF) that proclaimed that it wanted to “bake in” Section 230 into NAFTA in order to prevent Congress from making changes to it. Section 230 has become very controversial in the US for a couple of reasons. First, the “shield” aspect of the legislation has been misused by internet platforms to allow them to ignore egregious and obvious illegal content disseminated on their services, ranging from sex trafficking to revenge porn to marketing of banned weapons and more, because they are protected from civil liability for such content. US courts have allowed them invoke Section 230’s liability shield as a reason to refuse to remove such content, even when they have been well aware of its nature and even when they have monetized it by selling ads targeted at consumers attracted to the abusive material. Second, the “sword” aspect of the legislation, although little used, has been attacked by conservative commentators (and Donald Trump) when platforms, such as Twitter, have moderated or taken down objectionable content, in the most recent case false information posted by Trump about voter fraud.  Giving platforms protection when removing content that was considered “obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable”, was the original reason for passage of the legislation more than twenty years ago.

At the time the text of the USMCA was first made public, supporters of Section 230 in Canada and the US went into raptures. University of Ottawa professor Michael Geist had been one of five Canadian signatories on a letter initiated by Santa Clara University law professor Eric Goldman to the three NAFTA negotiators urging that the new Agreement contain protection from liability for online intermediaries for third party online content, similar to Section 230. At the time the letter was sent back in early 2018, other commentators in the US warned that inclusion of blanket immunities for internet platforms in the new NAFTA would “enrich irresponsible actors and undermine the public interest.” Despite these warnings from many within the US, the negotiated draft USMCA text included Section 230-like language. When that was announced, Geist declared that what eventually became Article 19.17 was a “welcome addition” to the Agreement, and declared it meant that;

“Internet companies are not liable for the content of their users. While this does not require the creation of a legislative safe harbour, it restricts the ability for a country to create a system premised on liability for Internet companies. Moreover, the same provision excludes liability for actions taken by Internet companies to remove harmful or objectionable content on a voluntary basis.”

His cheerleading continued;

“The USMCA’s Internet “safe harbour” rule — modelled on US law — remedies a long-standing problem in Canada”

Goldman likewise was enthusiastic;

“USMCA Article 19.17 requires signatories to adopt Internet immunity provisions similar to Section 230….This a major development in global Internet Law–and, I think, incredibly good (and unexpected) news”)

In fact the Agreement did not require any of the Parties to the USMCA to adopt internet immunity provisions (if they didn’t already have them in law), as I clearly outlined in my blog in February last year,  “Did Canada get Section 230 Shoved Down its Throat in the USMCA?”. Canada remains free to apply existing laws dealing with content on internet platforms, including those related to secondary liability. Even Michael Geist acknowledges that “this (Article 19.17) does not require the creation of a legislative safe harbour”. However, Geist was technically correct in saying that USMCA appears to restrict the ability of a USMCA signatory country to impose future liability on internet companies for allowing harmful content on their platforms. It also made it a contravention of the Agreement to impose liability on internet platforms if they remove objectionable material.  That obligation applies to all three signatories to the Agreement (US, Canada, Mexico).

Thus it was with great interest that I listened to a recent podcast where Michael Geist hosted Eric Goldman to discuss this very issue, namely whether its USMCA commitments constrain Canada from holding internet platforms to greater account for the content that they disseminate. Since the initial signing of the USMCA in November of 2018, the text of the Agreement has undergone some minor revisions but what has really changed is the status of Section 230 in the US. Just prior to the conclusion of the final revisions deemed necessary to get the USMCA ratified in the Democrat-controlled House of Representatives, House Speaker Nancy Pelosi suggested that Article 19.17 be dropped because it had become so controversial in the US. The early warnings about the dangers of Section 230 blanket immunities were gaining traction. However, in the end removal of Article 19.17 was “one-last-minute-change-too-many” and the amendment was not made. The revised Agreement that was signed on December 10, 2019 included the contentious Article 19.17 language. However, in the rearguard action fought by Silicon Valley to keep Article 19.17 in the USMCA, it conceded (in a public statement issued by the Consumer Technology Association) that “Inclusion of Section 230 language in trade agreements does not stop the US from changing the law in the future should (it) choose to do so.”

Truer words were never spoken. The ink was barely dry on the Revised Protocol of Amendment for the USMCA when the US Justice Department began holding public sessions into how Section 230 should be revised. The fact that it was included as a US obligation in the USMCA was not even mentioned. More recently President Trump invoked Section 230 reform as part of his infuriated reaction to moderation of a couple of his tweets by Twitter. As a result, the US Department of Justice (DOJ) has published a paper proposing a number of areas for change. Some of these proposals address abuses of the safe harbour liability shield by platforms; others seem more designed to address Trump’s criticisms of alleged “platform censorship” (in Trump’s view, misuse of “the sword”). The point in this blog is not to analyze what changes the Administration may propose and Congress may enact to Section 230, but to highlight the fact that Article 19.17 of the USMCA is not even a speed-bump in slowing down the Administration’s momentum to modify Section 230—for better or for worse. If the EFF’s real goal in pushing the US Trade Representative’s Office to negotiate inclusion of Article 19.17 in the USMCA was more to “bake in” Section 230 as a treaty commitment so that Congress could not modify it rather than to export Section 230 rules to Canada, that tactic has been a dismal failure. This was acknowledged as much by both Geist and Goldman in their recent podcast.

In the podcast, Goldman notes that both Trump and Joe Biden have both gone on record in calling for reform or removal of Section 230, albeit for different reasons, and he assumes that the next Congress will want to amend it. Given differing views as to what needs to be fixed, it is possible that Congressional gridlock will mean that Section 230 will survive a bit longer, but its days are clearly numbered. With regard to Canada, in Goldman’s view, Canada is unlikely to enact anything like a Section 230 law even though (in his opinion) Canada’s current legal framework is not consistent with Article 19.17 commitments. His conclusion was that Canada will be out of compliance, but has no intention of enforcing the commitment.

If Canada is out of compliance (a debatable point at best), what about the US? Since both the Democrats and Republicans seem hell-bent on changing Section 230, the US will likely be the first to be out of technical compliance with the USMCA when it changes legislation to make platforms civilly liable for at least some of the content they carry, under certain conditions. For his part, Michael Geist accepted that Canada is unlikely to put forward any Section 230 legislation, but argued that Article 19.17 is nonetheless useful as a standard, and may cause Canadian officials to think twice before introducing legislation that could or would run contrary provisions agreed to in the USMCA. Goldman disabused him of the restraining effects of USMCA;

“I would just note that Congress will have no such hesitation. Congress will absolutely blast forward with efforts to tinker with Section 230 even if that would also contravene the USMCA…I don’t know who really plans to abide by it, and if no-one plans to abide by it, I don’t understand what the point was”.

I agree. What was the point? It is clear that Article 19.17 is a dead letter when it comes to constraining the ability of the governments of the US, Canada, or Mexico from holding internet platforms responsible, or at least more responsible, for the content that they allow to be disseminated. Even cheerleaders for Section 230, like Michael Geist and Eric Goldman, (both signatories on the January 2018 letter to the three North American governments urging inclusion of Section 230 immunities in the new NAFTA Agreement) are finally coming around to a more realistic view of what Article 19.17 of the USMCA actually means in terms of real-world impact. Zilch. And that’s a good thing.

Governments and legislatures (Parliament in Canada, the US Congress, the Congreso de la Union in Mexico) are not going to allow themselves to be handcuffed by an outdated law that has been misused by internet platforms over the years to evade their responsibility to take down and moderate harmful content just because of some ambiguous wording in the new NAFTA.

© Hugh Stephens 2020. All Rights Reserved.

International Book Piracy: How Canada Got Caught in the 19th Century British-US Copyright Wars

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I think it is appropriate to post this blog on Canada Day, July 1, the day that marks Canada’s gradual transition from colony to nation, because it sheds light on the struggle that the new dominion faced in the years after Confederation in 1867 to assert its political independence from Britain, the imperial power and its economic independence from its powerful neighbour, the United States. 

This is a complex story of book piracy in the 19th century and how this became a factor in Canada’s search for identity and full political independence. It features a Canadian “pirate publisher” who, most famously, printed unauthorized editions of Mark Twain’s Adventures of Tom Sawyer and sold them by mail order across the border to American readers before the author had published his work in the US. But it is also a story of American publishers pirating British works, notably Charles Dickens, and British piracy of US authors. In fact, since in those days it was legal to publish without authorization the works of non-nationals (copyright applied only to residents of the country where the work was first published), one has to question whether this was true piracy. In the end international book piracy was sorted out through the establishment of the Berne Convention in 1886 and passage of reciprocal copyright legislation (the Chace Act) in the US in the 1890s. For Canada, this is an illustrative example of the challenges the new nation faced in developing its own publishing industry and national literary identity, handicapped as it was by its semi-colonial/semi-independent status and caught between a growing economic colossus in the US and Imperial administrators in London.

This is an account of how the Canadian publishing industry found itself caught in the crossfire of the British-US copyright wars of the 19th century, resulting in an underdeveloped publishing sector that until recent years was seen by many to have held back the blossoming of Canadian literature and Canadian authors. It is a story of book piracy on both sides of the Canada-US border, and both sides of the Atlantic. The issue has been well researched and documented, notably by Prof. Eli MacLaren of McGill University in his book “Dominion and Agency”, (University of Toronto Press, 2011), but I think it is fair to say that this specialized topic is unknown to most readers of this blog. So let’s pull aside the curtain.

Today, Britain, the US and Canada are all pretty much on the same page when it comes to copyright protection, especially now that Canada will soon be aligning its term of protection with that of the UK, the EU and the US, as a result of a commitment made in the renegotiation of NAFTA, the North American Free Trade Agreement now labelled, in the US, the USMCA (US-Mexico-Canada Agreement). Coincidentally the USMCA comes into effect today, July 1, although Canada’s commitment to extend its term of copyright protection will not take effect for 30 months.

Although the US is still not completely happy with Canada’s copyright regime, judging by the comments of the US copyright industry association, the IIPA (International Intellectual Property Alliance) in its recent submission to the US Trade Representative’s annual review of the IP standards in place in various foreign countries, all three countries are nevertheless members of the 1886 Berne Convention, (to which 178 countries have acceded) and are signatories to the Trade Related Intellectual Property (TRIPS) commitments of the World Trade Organization (WTO) and other international conventions relating to copyright. Mind you, the US did not join Berne until 1989 and Canada was initially a reluctant participant, becoming a member involuntarily only because it was a part of the British Empire at the time the Convention came into being. Today, because of Berne, British, US and Canadian copyrighted works are afforded national treatment in each other’s countries, (although in some instances foreign copyrights get better than national treatment in the US because they are afforded Berne Convention privileges which are better than those provided to US copyright holders by US legislation.)

Back in the 19th century this was not the case. While Britain and the US had similar conceptions of copyright, coming from the wellsprings of the 1710 Statute of Anne in Britain and the 1790 Copyright Act in the United States, copyright protection was initially provided to only domestic authors and printers. Until the passage in the US of the International Copyright Act (aka the Chace Act) in 1891, copyright protection was provided in the United States only to US residents—and then only to those who registered their works in the approved fashion, and had the works printed in the US.  In Britain too, initially copyright protection was restricted to British subjects, a definition that included residents of the Empire (like Canada at the time) and, as in the US, there were registration and publication requirements. However, while Canadian authors had the benefit of copyright protection throughout the British Empire, the works had to be registered (a copy deposited at Stationer’s Hall) and printed in London. Imperial copyright was thus a great boon to the London publishers who had an effective monopoly on printing and distributing British and colonial works throughout the Empire, but it did little to help promote Canadian publishing. It was an uneven playing field that favoured the imperial power.

This situation was not rectified until Canada and the other parts of the Empire became members of the Berne Convention in 1886. An example of the way in which the laws were tilted to British advantage was brought home forcefully in the 1830s when pirate editions of one of the earliest Canadian works, The Clockmaker by Thomas Chandler Haliburton, were printed in London with no regard to the Canadian publisher. (MacLaren, 26). This was all perfectly legal at the time.

The result of this situation where protection was afforded only to domestic authors and publishers led to widespread unauthorized printing of British works in the US, about which Charles Dickens famously complained during his visit to the United States in 1842, without getting much sympathy. He was surprised to be attacked for his “mercenary” attitude. Dickens was by no means the only English author whose work was regularly pirated in the US. English writers were popular in the US market and US publishing houses, while required to pay royalties to American authors, had a business model of producing cheap unauthorized editions of British works. American writers, such as Edgar Alan Poe, suffered the same fate in the UK, but given the size of the American market and the number of well-known British authors (the “must-haves” of the 19th century) who were popular in the US, the main problem lay on the American side of the Atlantic. In the end the problem was partially dealt with by US printers requesting and paying a “courtesy of the trade” fee to the main British publishing houses for advance copies of about-to-be released books. This gave them a commercial advantage over other American reprinters by getting their editions to the market first. This fee took the place of royalty payments, but was still deemed unsatisfactory by many British authors.

But what did all this mean for Canada? The unauthorized US editions of British works were blocked from entry into retail trade in Britain, where customs inspection was relatively easy given the maritime nature of trans-Atlantic trade, but it was much more difficult to prevent the US copies from entering Canada across an ill-marked and lightly patrolled land border. As a result, Canada was caught in the middle of this copyright war.

As a country subject to imperial copyright, it was obliged to protect the rights of British authors, but importing expensive books published in London was not what the residents of a frontier colony wanted. Just across the border in the US it was possible to buy the latest books by the best English authors (i.e. the unauthorized American printed editions) at a fraction of the cost of importing them from Britain. Needless to say there was a brisk cross-border trade and Canadian booksellers regularly sourced their books in New York, Boston and in other US cities. So prevalent was this practice that in 1847 the British government recognized the inevitable. It regularized the cross-border Canada-US book trade with the Foreign Reprints Act. This piece of legislation allowed Canadians to import the unauthorized US editions of British works, subject to the payment of a levy that would be remitted to the British Board of Trade for distribution to British rights-holders. It was a sound idea in principle, combining practicality on the ground with the need to respect British copyright law.

The problem was that it didn’t work. Canadian border officials (who were not experts on literature and who had to work from outdated and incomplete lists) had difficulty in determining which works printed in the US were subject to the special duties, and since the colonial government derived no benefit from the revenue–which was to be remitted directly to Britain–enforcement was lax. Very little revenue was actually collected. The Canadian printing industry would have preferred an alternative that would have given them the right to print British works in Canada (under a compulsory licence) and remit royalties to Britain, but the imperial government had decided on the import licence scheme. As a result, the Canadian market came to be dominated by unauthorized US published versions of British works with almost no revenue raised for British copyright holders.

Meanwhile Canadian printers were lobbying the British government to find a way to supply the domestic Canadian market with works by English writers from within Canada, rather than importing the unauthorized US editions of British works. In effect, Canadian pirates wanted to take the Canadian market from American pirates. In 1867 the various British North American colonies came together to establish the Dominion of Canada (as it was called at the time), which was to be largely self-governing. Regulation of copyright was one of the powers given to the Dominion government. In 1872 the Canadian government passed legislation that would have allowed Canadian publishers to publish unauthorized editions of British works, subject to a compulsory licensing fee. It was argued that this could be much better enforced than the import levy on US published books of British authors and would result in more revenues for British rights-holders, while promoting publishing in Canada at the expense of US publishers.

The legislation was passed by Parliament but disallowed by the Governor-General, the Queen’s Representative whose assent was necessary to allow legislation to come into effect. The same system of royal assent exists today except that by convention the Governor-General will not disallow duly passed legislation. In the 1870s that was not the case and the royal prerogative exercised by the Governor-General was subject to influence from London. Thus Canada’s publishers found that their interests were thwarted by Canada’s semi-colonial status as a result of the influence of the London publishers and the British government. The former wanted to protect their market in Canada, while the latter wanted to achieve a reciprocal copyright treaty with the United States, and was concerned that if Canadian publishers could produce cheap reprints of British works, as was occurring in the US, and export these books south of the border, this would complicate negotiations toward a Britain-US Reciprocal Copyright Treaty.

In 1875 a Canadian Copyright Act was finally passed and given royal assent with British approval. It created a system of Canadian copyright, giving rights to Canadian authors and publishers in the Canadian market. However, as subsequent legal cases were to determine, the existence of Canadian copyright did not negate imperial copyright. Thus in cases where a Canadian publisher, such as the Belford Brothers, began independently producing unauthorized Canadian editions of British works, on the basis that British copyright no longer applied, they were struck down by the courts.

The Belfords then proceeded to pirate US authors in Canada, notably Mark Twain (Samuel Clemens). Twain’s The Adventures of Tom Sawyer was first published in Britain to obtain imperial copyright but before the US edition could be printed, the Belfords printed a pirated version in Canada from the British edition, and sold over 100,000 copies in the US, largely via mail order, causing Twain significant financial loss.  Twain was particularly incensed by what he called the “Canadian thieves” and wrote, “I can’t trust any more Canadians after my late experience. I suppose they are all born pirates.” In an attempt to secure Canadian copyright for a subsequent book that was being granted imperial copyright through publication in London, he took up temporary domicile in Montreal. However, since US law required that an author be a permanent resident to qualify for US copyright protection, Canada applied the rule reciprocally and disallowed Twain’s claim. Twain’s frustration with the Canadian pirates led to his advocacy for recognition of international copyright by the United States, which was to occur in 1891.

Because it was illegal for Canadian publishers to pirate British works whereas publishers in the US could do so legally until 1891, the argument has been made that this stunted the Canadian publishing industry and made the development of a national literature more difficult. It is worth noting that Canadian publishers like the Belfords showed no lack of ingenuity in pirating US authors, and for a time enjoyed financial success. (They later went bankrupt and moved to Chicago where they established another publishing enterprise).

By the same token, there is no doubt that the pirating of British works by US publishers contributed to the initial growth of the US publishing and printing industry. This industry became a powerful political lobby which resisted changes to its business model. At the same time, the dominance of pirated British works in the US market in the 19th century arguably made it more difficult for American writers to flourish. As stated by the noted American historian Arthur M. Schlesinger in his book “The Rise of the City, 1878-1898”, (New York, MacMillan, 1933, p.252), “So long as publishers […] could reprint, or pirate, popular English authors without payment of royalty, and so long as readers could buy such volumes far cheaper than books written by Americans, native authorship remained at a marked disadvantage”.

While American literature grew in stature during most of the 19th century, it flowered after the International Copyright Act (Chace Act) was passed in the US in 1891. That legislation provided for reciprocal recognition of copyright between the United States and four entities; Britain and the British Empire, Switzerland, Belgium and France. While this allowed for British and Canadian works to be protected in the US, such protection was contingent on certain measures that protected the US printing industry. To obtain the benefits of US copyright protection, the work had to be printed from type set on American soil and deposited at the Library of Congress before being published elsewhere. (MacLaren, 11, 109). This protectionism mirrored earlier British protection of its printing industry. After 1891 however, US works were not subjected to similar conditions in Canada. Their copyright was protected without any requirement to print in Canada.

Thus Canadian publishers could not serve the US market with unauthorized reprinted British works, and they could no longer produce pirated editions of US works for the Canadian (or US) market. It was equally difficult for Canadian publishers to obtain authorization to reprint British works in Canada since British authors and publishing houses had little incentive to print separate Canadian editions because imperial copyright prevailed in Canada. In fact, they often granted “North American rights” to US publishers whom they licensed. Often this was in response to demands from US publishers who wanted to shut down potential Canadian competitors and keep the Canadian market for themselves. Thus the grant of reciprocal copyright protection between Britain and the US did little for Canadian publishing.

Subsequent Canadian legislation passed in 1889 would have required publication in Canada as a condition for obtaining Canadian copyright by instituting the earlier proposed compulsory licence for reprinting of British copyright works in Canada if the British publisher did not arrange for the publication of a Canadian edition within 30 days of release in Britain. This 30 day period was to allow British publishers to use the original plates and not have to invest in duplicates (as they were later required to do in order to obtain US copyright under the Chace Act). However, like the 1872 Bill, the 1889 Canadian Copyright Bill was killed by the British government through the office of the Governor-General. As archivist and historian Meera Nair has described it;

“The British government’s desire for harmony with the United States, its conformity to international regulations of the day, and its penchant for uniformity throughout the Empire, took precedence over any legislation designed to meet Canada’s particular needs.”

To sum up, in the latter half of the 19th century Canada was coming into being as a nation, finding its way and trying to develop a national consciousness. Its semi-colonial status dictated that its interests came second to those of the imperial power, Britain, in issues that ranged from foreign policy and boundary disputes to copyright. Its economic relationship with its larger North American neighbour, the United States, meant that it was vulnerable to US market forces, such as the supply of cheaper unauthorized versions of popular British works that supplied the Canadian market. Owing to its status as a dependent state within the British Empire, it was unable to follow the US model of producing these works without payment of royalties, which in the US had resulted in the establishment of a robust publishing industry initially built largely on distribution of pirated editions. Notwithstanding these obstacles, Canadian publishers played their own version of the game, pirating US authors such as Mark Twain, even exporting unauthorized copies to the US market.

The eventual resolution of the US-British copyright wars through the passage in the US of the 1891 International Copyright Act strengthened the rights of authors but did little to help Canadian publishers. In a supreme irony, prior to the US joining the Berne Convention in 1989, many US publishers published first in Canada (through Canadian subsidiaries of US publishing houses) in order to obtain the benefit of the international copyright protection afforded by the Convention since Canada was a member of Berne and the US was not. This became known as the “back door to Berne”.

Despite the many obstacles it has faced, today Canadian literature is thriving and Canada has a small independent publishing industry, albeit one that is still economically challenged. Copyright protection in the three countries has been largely harmonized. While many well-known Canadian writers are represented by British or American publishers, this does not seem to have stopped the development of Canadian literature (“CanLit”).

Does a country need a strong national publishing industry in order for local creativity to blossom and thrive? It no doubt helps, but quality writing seems to get published regardless of the source. Does the fact that Canada was not easily able to develop a domestic publishing industry (based initially on pirating the works of others) mean that its creative development was stunted? Possibly, but impossible to prove. Meera Nair has quoted writer and university professor Nick Mount as attributing the explosion of CanLit to post WW2 affluence and an explosion of Canadian self-awareness brought about by the centenary of Confederation in 1967. If that is true, then the 19th century struggles of Canadian publishers may not be all that relevant to Canadian identity at the end of the day. What is clear is that in the area of copyright and publishing, imperial (British) economic and political interests prevailed over those of the nascent Canadian publishing industry, an inevitable outcome of Canada’s semi-colonial status at the time.

The story of how Canada struggled to develop its own “made in Canada” copyright policy in order to establish a domestic publishing industry without being crushed by British or US publishers is an interesting and little known aspect of 19th Canadian political history. As for Canadian literature, it took a century to develop, but develop it did despite the games played by publishers on both sides of the Atlantic.

© Hugh Stephens, 2020. All Rights Reserved.

I am indebted to Dr. Meera Nair, copyright historian, for reviewing this blog post and clarifying and correcting a number of facts. The interpretations and conclusions of the blog are, however, my own.

Putting Amazon on USTR’s “Hit List”

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Getting recognized by the US Trade Representative’s Office (USTR) in its annual “Notorious Markets” piracy and counterfeiting report is not the sort of recognition that most companies seek. USTR’s hit list, one might even say *hit list, is best avoided. When you consider that among the entities on the list is The Pirate Bay, Alibaba’s ecommerce platform Taobao, dodgy websites such as Phimmoi (Vietnam), FMovies (Ukraine), MP3Juices, Rapidgator, and Sci-Hub (all based in Russia) and a number of others that you have probably never heard of hosted in countries from the Netherlands to Bulgaria to Bosnia, you can understand why Amazon was not thrilled to be included. Of course, it wasn’t Amazon.com (the US company) that was listed but rather Amazon’s sites in Canada, France, Germany, India and the UK. USTR is mandated only to report on IP infringing markets and online sites abroad, not stateside, so Amazon the parent company could not be listed–but putting five of its national sites on the Notorious Markets list cuts pretty close to home. In fact, I believe it is unprecedented for a US company to be listed, even via the ruse of using its offshore businesses as a target. What gives? 

First it is probably appropriate to give a bit of background about USTR’s Notorious Markets report, for those who don’t make reading government documents a normal part of their day. The Notorious Markets report is an adjunct to USTR’s annual “Special 301” report mandated by Section 301 of the US Trade Act of 1974. Actually, the preparation of Special 301 reports dates back only to the late 1980s when the US Congress amended the Act to include a report on the intellectual property practices and IP enforcement of US trade partners.  It has become an annual exercise to construct a list of countries that fail to protect intellectual property according to US standards or which deny “fair and equitable market access for U.S. firms that rely on intellectual property”. At first the list was used to threaten trade sanctions; later it became more of a “name and shame” exercise. 

The listing of Notorious Markets was first made part of the Special 301 report in 2006; from 2011 it has been published separately. Unlike the Special 301 report, it does not name countries but rather calls out specific marketplaces, both physical and online. Despite being an official US government document, USTR is quick to put in disclaimers, stating that the Notorious Market report “does not make findings of legal violations nor does it reflect the U.S. Government’s analysis of the general IP protection and enforcement climate in the countries connected with the listed markets.” This year most of the named markets are in Asia or Latin America, but in past years they have been closer to the US such as the Pacific Mall in the Toronto suburb of Markham, about which I wrote a year or so ago (here.) 

From a corporate perspective, the Amazon online sites in Canada, France, Germany, the UK and India are not so far away from the US either. In this age of COVID and self-isolation, ecommerce platforms like Amazon have come into their own as truly essential services. Judging by the volume of product that its fulfillment centres are shipping, Amazon must be keeping a lot of consumers happy by shipping them the “real stuff”. However, the problem lies not with the products that Amazon distributes directly from its warehouses, but with the third party sellers on its website, a certain number of which flog pirated and counterfeited product to unwary consumers, using the imprimatur of being “on Amazon” to gain credibility. These “third-party sellers” now constitute more than half of Amazon’s sales. 

While Amazon is a boon to small retailers who otherwise would have difficulty in reaching consumers online, the extensive presence of third party sellers exposes Amazon to accusations of tolerating—even turning a deliberate blind eye to–the sale of pirated and counterfeited goods, among other undesirable products. This has been a problem for some time. Some brand owners and organizations have gone so far as accusing Amazon of being “knowingly complicit” in the sale of counterfeits through the service. Back in 2018, the American Apparel and Footwear Association petitioned to get Amazon put on the Notorious Markets list because of the extensive presence of fake goods on the site. 

Amazon has responded that it has a policy against sale of pirated and counterfeit goods, that it takes its responsibilities to keep them off the site seriously (using algorithms and a brand registration service) but at the end of the day its position is that it is not responsible for what third party sellers do. Apart from the liability shield of Section 230 (used to evade responsibility in non-IP cases), another Amazon defence is that goods for sale on its sites displaying false trademarks may not technically be illegal if the US trademark is not registered in the country where the goods are being offered. In one notorious case, a Chinese company sold Kodi boxes (to enable illegal content streaming) on Amazon with fake FCC (Federal Communications Commission) logos, implying authenticity and conformity with tech standards. 

Part of the problem is that because Amazon has such amazing reach, it attracts miscreants of all kinds (as well as tens of thousands of legitimate retailers of course). That would suggest that with large market power comes large responsibility, but a lot seems to slip through Amazon’s automated and human checks. It is not just copyright infringing products that are problematic. The non-profit website The Markup reported on the ease with which they were able to find products banned by Amazon on the site with little difficulty, like pill presses for making opioids and parts for automatic weapons. Fraudsters and criminals can easily trick the system, as The Markup demonstrated;

“Last month, we successfully listed two banned items for sale: an AR-15 10-round magazine and an AR-15 armorer’s wrench. We removed them within minutes of confirming they had posted. We were able to evade detection by Amazon’s automated filters by purchasing a universal product code for the magazine and by both avoiding specific keywords and miscategorizing the items…The listings went up even though we had no seller history and had already twice been prohibited from listing the same items using more precise descriptions.”

According to people who have worked at Amazon, the automated systems and algorithms used by the company tend to look back at past bad behaviour to weed out products that should not be listed, but human ingenuity (unfortunately) can usually stay a step ahead of AI systems, especially when there are illicit profits to be gained. Clearly Amazon has a problem, whether it is with products that infringe IP or other products that violate the company’s own standards. 

This year’s Notorious Markets report (which deals only with IP infringing goods) notes that USTR did not request submissions on U.S. based ecommerce platforms and online third-party marketplaces, such as Amazon.com, but commented that the Administration has been looking further at their role following last year’s Presidential Memorandum addressing trafficking in counterfeit and pirated goods.  With respect to Amazon’s foreign domains, this excerpt gives a good indication of the nature of the problem according to USTR; 

“…right holders expressed concern that the seller information displayed by Amazon is often misleading such that it is difficult for consumers and right holders alike to determine who is selling the goods and that anyone can become a seller on Amazon with too much ease because Amazon does not sufficiently vet sellers on its platforms. They also commented that Amazon’s counterfeit removal processes can be lengthy and burdensome, even for right holders that enroll in Amazon’s brand protection programs. In addition, as the scale and sophistication of the counterfeiters have continued to grow and evolve over the years, these right holders indicate that Amazon should commit the resources necessary to make their brand protection programs scalable, transparent, and most importantly, effective. More specifically, they ask that Amazon take additional actions to address their concerns, including by collecting sufficient information from sellers to prevent repeat infringers from creating multiple storefronts on the platforms, making detailed information about the real seller of a product obvious to consumers and right holders, being more responsive to complaints of counterfeits by right holders, and being more proactive in preventing counterfeit goods from appearing on the platform.”

The report outlines a series of best practices that should be followed by ecommerce platforms to address such problems. 

Is Amazon that big a problem? Given its scale, anything that happens on Amazon has enormous impact. Amazon has implemented a number of policies to combat the presence of fake or pirated goods on its site and is a member of the Alliance for Creativity and Entertainment (ACE), a grouping of 30 plus companies from around the world, including the major Hollywood studios, that have come together to fight online piracy, but many would argue it is not doing enough. 

Recently Amazon-owned site Twitch, which styles itself as “the world’s leading live streaming platform for gamers” has come under fire for allowing use of copyright infringing music in streams put up by gamers, even though its music guidelines specifically require that the music be owned or licenced by the streamer. As the site has become more popular, the music industry has started to take notice and recently began issuing takedown notices for clips that in some instances had been up for a couple of years or more. Under US legislation, Amazon is not liable for copyright infringing material posted on Twitch, but it is required to take it down when notified by rights-holders. The music industry would like Amazon to licence music for use by Twitch creators. 

In the background to the USTR listing of Amazon’s foreign sites is the ongoing open “warfare” between Amazon CEO Jeff Bezos, reputedly the world’s richest man, and Donald Trump which has touched on many issues including Bezos’ control of one of Trump’s nemeses, the Washington Post. Indeed, an Amazon spokesperson claimed that “This purely political act (the USTR listing) is another example of the administration using the U.S. government to advance a personal vendetta against Amazon.”

Maybe. Or maybe Amazon could be more pro-active in searching out and delisting third-party sellers who pass off infringing or counterfeit goods (and list other undesirable products), and who confuse consumers by hiding in plain sight on Amazon’s site. The company is so big, and has so many resources, that it has no need to attract consumers with an offer of substandard products, and has the wherewithal to ensure that its listings are properly and thoroughly vetted. It just requires the will to do so. To depend on rights-holders and brand owners to police the Amazon site, especially in cases where pirated or non-genuine products are clearly on offer, is to hide behind legalities, a position not becoming of a company like Amazon. 

Perhaps next year, Amazon’s foreign sites will be off the USTR hit list, or perhaps USTR will do something that has never been done in a Notorious Markets report—directly list a US company. Will there be political factors involved? By next year, it may, or may not be, the “Trump Administration” that we are talking about and if there is a new Administration after November 3, and if Amazon if off the 2021 list, will it be because they upped their game in tackling infringing content and products on the Amazon.com and related sites, or will it be because the Administration changed? There are so many elements to this puzzle that it is impossible to separate out the various factors involved, or to predict what will happen. 

One thing is certain. Amazon will still be around, bigger and likely more essential than ever. 

© Hugh Stephens 2020. All Rights Reserved. 

Why is Piracy so Common in China? Confucian Cultural Traditions or Just Plain Commercial Advantage? (A Historical Perspective)

Credit: photo and calligraphy: author

I usually write about current international copyright issues but occasionally I dip back into the past to look at where copyright has come from. Sometimes this can be very illuminating in terms of what is happening today. A couple of years ago, I wrote about the thriving pirate book industry in Taiwan back in the 1960s and 1970s when the “ingenious rascals” of Chungking Street in Taipei routinely disassembled, photocopied and reprinted western books, from encyclopedias to medical texts.  And all this was perfectly legal under local law in Taiwan at the time.

These were the laws of the “Republic of China”, implemented and enforced by the Kuomintang (KMT) regime that administered Taiwan from 1945 on. The KMT had loosely governed China from the overthrow of the Qing (Manchu) dynasty in 1911, through the period of war with the Japanese in the 1930s and 1940s, up until 1949 when the “People’s Republic of China” was proclaimed by Mao Zedong in Beijing. The KMT then decamped to Taiwan (which had been ruled by Japan up to 1945) where the existing Republic of China laws continued to apply. Among these was a copyright regime that protected only works that had a Chinese copyright registration, which was notoriously difficult to obtain. At the time neither the Republic of China (Taipei), nor the People’s Republic (Beijing) was a signatory to the Berne Convention.

Respect for copyright in China, or lack thereof, has been a recurring topic over the years. While China is very much in the spotlight for intellectual property (IP) violations, generally these are infringements that relate to trade secrets, patents or trademarks, including forced transfer of IP from companies seeking to invest in China. However, copyright has not been exempt from complaints as repeated reports by the US Trade Representative’s Office clearly show. For example, the most recent USTR Special 301 report on China, issued in April of this year, states that;

“It is critical that China address major deficiencies in its copyright framework, such as the lack of deterrent civil damages, ineffective criminal enforcement, and the failure to provide protection against the unauthorized transmission of sports and other live broadcasts.”

The report also raised concerns around digital piracy. These relate to distribution of unauthorized audiovisual content and dissemination of unauthorized copies of scientific, technical, and medical journal articles and academic texts, as well as China’s failure to take sustained action against websites, devices or apps that offer or facilitate access to unlicensed content.

Mind you, the section on copyright was mild in comparison to the criticisms of China’s failings in a range of other areas of intellectual property. In the past, criticism of China’s copyright practices has ranged from widespread book, DVD and music piracy to failure to establish or enforce effective copyright laws. The lack of effective enforcement remains a concern today. The most recent annual IP index produced by the Global Innovation Policy Center of the US Chamber of Commerce scores China at 2.53 out of a possible 7 in the area of copyright, or 36%.  Let’s just say there is lots of room for progress. By way of comparison, Japan’s copyright score was double this.

The reason for China’s lack of robust IP protection, including in the area of copyright, has been attributed to a number of factors. A common academic view seeks to explain China’s lack of respect for IP as a cultural phenomenon. Here is a good example of this line of argument, based on supposed Confucian cultural and moral values. It is taken from a respected academic journal, titled “The Dissonance between Culture and Intellectual Property in China.

The primary orientation of Chinese culture is toward mutual reliance…One distinction is that all forms of creativity are for the collective; any copying or imitating is a high form of flattery…”

It is true that some Confucian values still permeate traditional Chinese world views, but do they really explain rampant copyright violations in China? Are copyright pirates in China motivated by a desire to flatter the artists they are stealing from? Hardly.

Another take on explaining widespread copyright piracy in China comes from what is often considered to be the definitive work on the subject of Chinese copyright and its traditions, William P. Alford’s “To Steal A Book is an Elegant Offense”, (Stanford, 1995). In this widely-quoted work, the author postulates a number of reasons for China’s weak IP performance, reaching back far into history. At the risk of oversimplifying Prof. Alford’s opus, his main thesis is that while China appears to have had a form of copyright (and trademark) protection extending as far back as the Tang dynasty, in actual fact these regulations were primarily intended to protect the power and prerogatives of the state rather than the works of individual artists or authors.

Virtually all known examples of efforts by the state to provide protection for what we now term intellectual property in China prior to the twentieth century seem to have been directed overwhelmingly toward sustaining imperial power”.

Thus it was forbidden to reproduce government works on astronomy, the civil service examinations and other matters considered sensitive for purposes of security and censorship, but when it came to private ownership of materials, there was no legal tradition of protecting original works. Indeed, Alford points out that “the Confucian disdain for commerce fostered an ideal, even if not always realized in practice, that true scholars wrote for edification and moral renewal rather than profit”.

However, while a true Confucian scholar might disdain profit, the merchant class were entrepreneurial and aggressive—one might even say rapacious—in their drive for profit, including in the publishing industry. They had no hesitation in reprinting whatever they could (avoiding the pirating of government publications that would land them in trouble), yet at the same time they devised a sort of code that regulated their conduct toward each other. When it came to pirating foreign materials, however, that was another matter.

At the end of the 19th century, the Qing Empire was on the verge of collapse. The Chinese had been thrashed by the Japanese in the Sino-Japanese War of 1894-95 (which led to the Japanese occupation of Taiwan) and European powers were tearing at the hem of China, nibbling off little pieces for themselves. Chinese reformers recognized that China needed to adopt some western values, including promotion of modernization and innovation. The development of IP laws was considered one element of this. At the same time, the European powers were keen to impose on China (at gunpoint if necessary) various obligations to protect their own economic interests, including copyright. As a result several bilateral treaties were signed between China and European countries and the United States regarding IP protection, although the Chinese were slow to implement these obligations into law, and even slower to attempt any enforcement. For example while the US and China signed a bilateral treaty providing for reciprocal protection of copyrights and trademarks in 1903, the Chinese did not get around to enacting their first copyright law until 1911. That was the same year that the Qing Empire collapsed and China entered an extended period of internal turmoil. Needless to say, given the prevailing political situation, enforcement of copyright was not a high priority for the new Republican government.

The lack of statute law protecting copyright under the Qing Empire was thus a major obstacle, and is advanced as one reason for widespread tolerance of book piracy in China. Foreign publishers were regularly pirated, but did this occur because of a lack of understanding of the fundamentals of copyright, or was it simply a case of commercial opportunism? An interesting new work has just been published that calls into question much of the conventional wisdom regarding Chinese attitudes to copyright, and suggests that Chinese publishers, booksellers and authors were well aware of the importance of copyright at the beginning of the 20th century and later, at least insofar as it applied to them and not to foreigners. The book, “Pirates and Publishers: A Social History of Copyright in Modern China” (Princeton, 2019) by Prof. Fei-Hsien Wang, argues that;

 “contrary to common belief, copyright was not a problematic doctrine simply imposed on China by foreign powers with little regard for Chinese cultural and social traditions…Developing multiple ways for articulating their understanding of copyright, Chinese authors, booksellers and publishers played a crucial role in its growth and eventual institutionalization in China. These individuals enforced what they viewed as copyright to justify their profit, protect their books and crack down on piracy…”

And how did they do this? In the absence of a copyright law (in the period prior to 1911) or enforcement of the law (for many years after the law was enacted), the Chinese book trade established guilds with its own registration, code of enforcement, tracking system, detectives (piracy investigators), and sanctions. Wang cites the case of Ginn & Co, the noted US publisher who brought suit in 1911 in Shanghai against the Shanghai Commercial Press, which had reprinted Ginn’s history textbook without authorization. Representing Ginn was T.R Jernigan, a noted commercial lawyer and former US Consul General in Shanghai. Jernigan faced significant legal obstacles because the new copyright law did not apply to foreigners, (despite bilateral treaties being one of the reasons for passage of the law) so he argued on the basis of common law that since Chinese publishers respected and enforced copyright amongst themselves, these local practices should apply to the defendants in the Ginn case. He did not prevail, but the incident helps shed light on an informal copyright code that existed in China—but for Chinese only, and then only some Chinese.

Shanghai was the centre of the Chinese publishing and bookselling industry and naturally enough this is where the copyright guilds emerged. There were two main groups, the Shanghai Booksellers’ Guild and the Shanghai Booksellers’ Trade Association. Titles were registered based on the original printing blocks (shudi or master copy) for works, or type plates or paper stereotypes for letterpress printing. Generally members of the guild respected each other’s banquan (the word today used to translate “copyright”, which can be literally translated as “the authority or power to print”), but if there were disputes the guild would mediate. It would also dole out punishments, such as fines and burning of offending copies along with the pirated shudi masters. Sometimes there were negotiated solutions in which pirates could pay to have their editions authorized.

While Shanghai was the main commercial centre, it had rivals in Beijing (known at the time as Beiping after the national capital had moved to Nanjing). The booksellers and publishers in Beijing did not belong to the Shanghai guilds nor did they pay them much heed. Although China was technically unified under the KMT regime in Nanjing, local authorities had considerable power and the national government had a difficult time in enforcing its writ. Local “initiative” was the order of the day and Beijing became the book pirate capital of China.

According to Dr. Wang, in the early 1930s the Beijing representatives of the leading Shanghai publishers petitioned the Beiping city government to act against open piracy, even describing several “notorious markets” (echoing the description in USTR’s annual Special 301 reports today) where pirated works were sold openly. Like today, there would be a raid and then the zeal of the local authorities would fade. The Shanghai publishers realized that they needed their own people on the ground to ferret out the pirates and so they formed their own team of private investigators. (Sound familiar?). The investigators would build a case and present it to the Beiping authorities, who might or might not act, particularly since most of the so-called banquan was not legally registered copyright but was rather the unofficial copyright registered with the Shanghai guilds. Moreover, as Dr. Wang points out, while to the Shanghai publishers the Beijing booksellers were pirates, to the local authorities they were “business leaders” who deserved to be sheltered.

The experience of the Shanghai publishers from the early 1900s until the late 1930s when much of China was taken over by the Japanese is eerily reflective of the experience of many western copyright holders in China in recent years. Even today, despite the presence of strict laws against copyright and other forms of IP theft, pirated and counterfeit goods are sold openly, often in “notorious markets”. Private companies and associations have resorted to hiring private investigators to gather evidence to bring before Chinese courts. On occasion there is a big bust or anti-piracy (“strike hard”) campaign, which then peters out once the time period of the campaign is over. Frequently local authorities are not interested in pursuing IP crimes or are actively engaged in protecting local interests engaged in pirating or counterfeiting activities, which they see as contributing to local economic activity. In short, nothing much has changed. USTR’s Special 301 Notorious Markets report lists a number of physical and now online marketplaces in China dedicated to selling pirated and counterfeit products. In fact, China tops the list with no less than 7 named physical markets plus 3 online markets.

They say that those who fail to learn from history are doomed to repeat it. It was revealing to me to see how similar the experience of the Shanghai publishers was in Beijing eighty or more years ago compared to the struggles faced today by both foreign and Chinese copyright holders seeking to protect their rights. For the Shanghai book sellers of the early 20th century, self-help was the only way to succeed in a country with weak copyright laws and limited or no will or ability to enforce them. At the same time, the efforts of the Shanghai publishing and bookselling guilds clearly establishes that Chinese merchants were well aware of copyright and used it to promote and protect their economic interests. They did not subscribe to vague Confucian theories of sharing the common good of knowledge, or of producing content for its own sake. They were hard-headed business people who not only took collective action to protect their own copyright, but when they could get away with it, had no qualms about appropriating foreign content without payment.

Collective behaviour is normally rooted in cultural traditions and beliefs, and it would be wrong to say that Confucian values have no sway in China today. There may even be a residual belief among some Chinese scholars that the notion of copyright to protect individual economic interests and moral rights (which incentivizes more creation) is at odds with traditional collective Confucian beliefs. But that is a very thin cloak to use as justification for wide-scale IP theft in China. A look back a century or more into Chinese history (thanks to Prof. Wang’s new book) shows that Chinese entrepreneurs were well able to grasp the importance of copyright and employ it to advance and protect their own economic interests. Where they failed to respect copyright, as in the case of foreign works unprotected by weak Chinese laws, they did so knowing full well what they were doing and did so pragmatically for commercial gain, pure and simple. Confucius the scholar may be turning in his grave but Cai Shen, the God of Wealth, is laughing all the way to the bank.

© Hugh Stephens, 2020. All Rights Reserved.

When is a “Mandatory Copyright Tariff” mandatory only if you opt-in? When you’re in Canada, that’s when.

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It’s a long and complicated story, and it may not be over. In the latest turn of a very big wheel, the Federal Court of Appeal (FCA) in Canada has overturned part of the landmark Access Copyright v York University case, on which I have written in the past (here, here, and here). That case had restored some balance to copyright law in Canada, with the Federal Court handing a victory to Access Copyright on the two issues under dispute, (1) whether the interim tariff certified by the Copyright Board of Canada was mandatory (York had decided to opt-out of paying the tariff on the basis that its use of materials in Access Copyright’s repertoire was covered by fair dealing) and (2) whether York’s Guidelines on copying were consistent with fair dealing. In the initial case, the Federal Court ruled that even an interim tariff (the final tariff being still under review) was mandatory (i.e. York could not opt-out), and that York’s fair dealing guidelines were, in the words of Mr. Justice Phelan, “…not fair in either their terms or their application”. York appealed.

On April 22 the FCA released its decision. In a setback for Access Copyright, based on a lengthy review of historical legal precedents dating back to the 1930s, it ruled that the certified tariff–whether interim or final–is not mandatory, i.e. not binding on a user such as York if the user declines to pay the tariff to obtain a de facto licence from a collective society such as Access Copyright. At the same time, however, it upheld the earlier decision that York’s fair dealing guidelines were not fair from a copyright law perspective. You could say it was a mixed result but, as with many things, whether the glass is half full or half empty depends on where you are standing. Copyright critic Michael Geist of the University of Ottawa proclaimed that “Federal Court of Appeal Deals Access Copyright Huge Blow…”. Pro-copyright lawyer Richard Owens countered with “The Court Backs Creators, Not Universities”. There is truth in both assertions.

Access Copyright itself stated that the outcome was a “mixed outcome for Canadian creators and publishers”. The Association of Canadian Publishers was less equivocal stating that the Canadian copyright framework is “broken” after the Court’s decision. It issued a press release saying it was “frustrated” and “disappointed” by the decision and called for “Urgent action on the part of the federal government…to implement reforms that will correct market damage and provide a policy framework that supports future investment in Canadian writing and publishing”.

While the Appeal Court upheld the finding that York’s fair dealing practices were unfair, this was not actually relevant to the case once the Court had decided that the Copyright Board tariff was not mandatory. York had offered fair dealing as a defence against its unauthorized use of materials from Access Copyright’s repertoire given that it had opted not to pay the tariff. (The tariff would in effect have provided it with a licence for specified copying). That defence was dismissed but at the same time, Access Copyright’s suit against York for opting out and not paying the “mandatory tariff” was also dismissed. Since York was not obligated to pay the tariff, whether or not its Guidelines for use of Access Copyright content were consistent with fair dealing was moot. There is little doubt that York is now vulnerable to suits alleging copyright infringement, but these suits will have to be pursued separately by owners of the infringed copyrights, not by the collective.

Access Copyright did not bring suit against York for copyright infringement because although it represents copyright holders in licensing negotiations it does not itself hold any copyrights; its individual members do. As a result, it cannot sue on behalf of copyright owners, who will have to take that action themselves. Large publishers may be able to take on the legal costs of bringing suit, but individual authors and small publishers are unlikely to do so.

Collective licensing was a way of avoiding endless, costly litigation. The Appeal Court’s decision to declare that what had previously been considered binding tariffs are in fact only optional has exposed a major weakness in the structure of collecting and enforcing copyright royalties in Canada. One of the reasons why collective societies (also known as collective management organizations, or CMOs) exist is to provide the strength of a collective entity to negotiate licences with users on behalf of individual authors and publishers, but also to provide a mechanism for licensing that would avoid the need for litigation, thus serving both rights-holders and users.

How did it come to this? How did a “mandatory” tariff become optional? It is really complicated and I am not sure I can explain it without going into far too much detail. But it all goes back to the 1930s when collective societies (at that time called Performing Rights Organizations) were established for the music industry. At the time there was a concern that these organizations were acting as monopolies, depriving users (in the quaint language of the era) of “gramophones, sheets of music and radio receiving sets”) of access to the repertoire that the organizations represented. A form of compulsory licence was introduced through legislation, with administration of “mandatory” tariffs overseen by the Copyright Appeal Board (which became the Copyright Board of Canada in 1989). While not fixed in law, the term mandatory tariff has been widely used since that time and there was a widespread assumption within the copyright legal community that that is exactly what they were once certified by the Board—mandatory; in other words, compulsory, required by law, binding, obligatory. Pick your definition. But it turns out that the only thing mandatory about the tariffs was that once a user offered to pay or paid the tariff, it was mandatory on the CMO to licence the content, in this case, music.

Ariel Katz, a law professor at the University of Toronto, has made a crusade of arguing that the tariffs are not mandatory when applied to users. In a long blog post that he put up in 2017 right after York lost the initial case to Access Copyright, Katz criticized York’s counsel for not taking his (Katz’s) advice to argue the case on the basis that tariffs were not mandatory, based on the historical antecedents discussed above, and wondered why his (apparently unsolicited) advice was not followed. He concluded that, “the notion that tariffs are mandatory for users has been accepted as conventional wisdom among copyright collectives, the small group of copyright lawyers whose practice revolves around Copyright Board proceedings, and the clients they advise.” He surmised that since submissions to the Copyright Board were part of the bread and butter of intellectual property lawyers, who sometimes represented rights-holders and sometimes users, a form of “confirmation bias” had set in. In a conclusion that no doubt won him few friends in the practicing legal profession he declared;

“Having always assumed that tariffs were mandatory and having strategized their cases accordingly, is it possible that the lawyers involved might have ignored or minimized the importance of all arguments indicating otherwise?…Is it possible that the confirmation bias becomes even stronger because it is also self-serving? I have previously written how the view that tariffs are mandatory has served lawyers who specialize in Copyright Board proceedings nicely.”

Another reason for the assumption that the tariff was mandatory was the fact that a number of enforcement cases, where collective societies sued non-licensees, have been decided by requiring the tariff be paid. Most of these cases were decided by default with awards to the collective societies based on the amount of the tariff. However the FCA declared that damages awarded based on the tariff are different from actual enforcement of the tariff. The judge writing the FCA’s decision stated;

“I acknowledge that such enforcement (of Copyright Board approved tariffs against non-licensees) has been taking place but, in my view, it is the result of the confounding the enforcement of the tariff with awarding damages based on tariff amounts. This appears to have led to the general view that tariffs are mandatory since the measure of damages for infringement has been held to be the amounts prescribed by the tariff.”

So despite years of accepted practice based on the premise that a “tariff” (licence fee) certified by the Copyright Board requires payment by all users who use copyrighted content covered by the tariff (unless the use is covered by fair dealing), whether they voluntarily agree to obtain a licence or not, suddenly this fundamental principle no longer applies. In effect, the Court has demolished a major pillar of the collective licensing system. The fact that this interpretation is based on perceived monopolistic behaviour by Performing Rights Societies eighty or ninety years ago is particularly problematic, but it may be that from a legal perspective successive redrafting of copyright legislation did not adequately address changes that have occurred in the nature of collective societies and licensing. Far from withholding repertoire, as was apparently the case in the 1930s, collective societies today are eager to licence their content. Any “monopolistic” or market power element they may have is controlled by the Copyright Board, which has the power to certify a tariff (i.e. regulate it), although collective societies and users are also free to strike their own licensing arrangements.

Now that the Appeal Court has supported Katz’s interpretation, what happens next? Of course, the legislation could be redrafted, which is what the publishers seem to be suggesting, but that is a long-term play at best. However, all is not lost for rights-holders. As Owens points out in his Financial Post article, if you take the “glass half full” approach, the decision confirms that York’s practices as embodied in its Guidelines are inconsistent with fair dealing, opening it to litigation for infringement. This puts York (and other universities) at risk; surely it would be better to simply obtain the licence from Access Copyright by paying the modest per student tariff.

But York seems to be dug in on its position. Perhaps it is betting on the fact that suing for infringement is costly and can be complex, since proof of infringement of specific content owned by specific rights-holders must be proven. But what if Access Copyright could be assigned the rights by the owners, and sue on their behalf? To do so, they would need to change their contractual relationship with their members, but it has been done in the case of the music industry, so why not publishing? As the FCA noted (para 197), SOCAN, which is the collective rights management organization for music creators, music publishers and visual artists has been active in enforcing copyrights but it differs from Access Copyright in that it is the assignee of its members’ copyrights (at least for broadcast retransmission rights) and can thus sue for infringement without reference to a tariff.

While more litigation, perhaps on a class action basis or brought by a collective (assuming it has been assigned the copyright in infringed works), is always an option, it is hard to see how this advances the interests of either creators or users. A simple, straightforward, fair system of remuneration for copying is vastly preferable to ongoing litigation over infringements great and small. The FCA’s decision now calls that trade-off into question. Will this now be appealed to the Supreme Court of Canada–and will the SCC accept the appeal? That remains to be seen.

The original case between Access Copyright and York dates to 2013, so if there is a further appeal, we may have to wait some time yet before we know for certain whether a “mandatory tariff” is truly mandatory or simply an option to be exercised by a user.

© Hugh Stephens 2020. All Rights Reserved.

Reforming Section 230 is the Right Idea—But Not When Done in the Wrong Way for the Wrong Reasons

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In the ongoing war between US President Trump and Twitter over Twitter’s actions to fact-check one or two of the President’s more truth-stretching tweets, Trump has unveiled his chosen weapon to teach the social media platform a lesson. He is proposing to reinterpret elements of Section 230 of the Communications Decency Act of 1996. (I’ll explain the significance of this in a minute). When Twitter first added a “contextual label” to Trump’s assertions that mail-in ballots equated to fraudulent voting, directing readers to alternate interpretations (specifically to the Washington Post and CNN, both among the major bêtes noires of the media world as far as Trump is concerned), Trump threatened (on Twitter of course) to “strongly regulate” or “close…down” tech giants that “silence conservative voices”.

On May 28, he issued an Executive Order designed to try to exert control over social media companies in several ways, the most draconian of which would be to reinterpret Section 230 so that if an online platform engages in any editing or restricting of content posted by users, this will make it a “publisher” of such material and open it to potential legal liability. Although Donald Trump in his role as President of the United States cannot be sued for defamation for any action taken in the exercise of his responsibilities (such as communicating to the public), it would appear that if this proposal becomes law platforms like Twitter could nonetheless be exposed to legal liability for the defamatory comments of the President if they fact checked them! That’s unlikely to happen, however, as the intent of the law is clear, and Trump by himself cannot change the law. Section 230 does just the opposite of what is proposed in the Executive Order by giving platforms immunity from liability if, in good faith, they remove material that is “obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such content is constitutionally protected”. According to Section 230, taking such action will not put the platforms in the position of becoming the publisher of the material by virtue of exercising editorial judgement.

So far Twitter has not removed anything posted by Trump, but according to the law it has the explicit power, indeed the responsibility, to do so if comments fall into any of the above categories. However Section 230 is not just about removing objectionable content. In the way that it has been interpreted by US courts since it became law almost 25 years ago, it also provides internet platforms with immunity from legal liability if they do not remove content because, according to this law, they are not considered publishers of the material (unless they control the content put up on the platform). In this respect, Section 230 has been described as both a sword and a shield. The sword is the ability to take down objectionable content; the shield is immunity from prosecution for doing so, as well as not being responsible for the content posted by users.

Unfortunately it is the shield aspect of the legislation that has been most often invoked by internet platforms, allowing them to ignore all sorts of abusive material on their sites on the basis that they are merely passive bulletin boards, and not responsible for content posted by others. Thus hate speech, content promoting terrorism and violence, revenge porn, sex trafficking, and so on has been allowed to proliferate on the internet with no legal recourse against the platforms providing access to the material. In some cases, platforms have had no incentive to remove access to objectionable material because they have been able to monetize it by attracting consumer eyeballs and thus advertisers. The website Backpage, which was eventually shut down after Congress passed targeted legislation carving sex trafficking  content out of Section 230 immunity, was a good example of how the original intent of Section 230 had become distorted over the years as a result of numerous court rulings.

Backpage was a classified ad online service, a bit like Craig’s List, except that it had a section offering “adult services”, which allegedly knowingly allowed and encouraged users to post ads related to prostitution and human trafficking, particularly involving minors. It was alleged by state prosecutors that as much as 99% of Backpage’s revenues came from these sources, and that the company was failing to cooperate in curtailing illegal activity. However, despite strong evidence that Backpage actively participated in promoting the website as a sex clearing house, several claims against it were dismissed by US courts on the basis of the immunities provided by Section 230.

As a result of these types of abuses, there has been a strong push for reform of Section 230 by, among others, members of the copyright community who would like to see internet intermediaries act responsibly and exercise a greater degree of (or indeed any) control over any content that they host, distribute or enable. (This is despite the fact that Section 230 explicitly carves copyright infringement out of the immunity provided. That issue is dealt with in separate legislation, the DMCA.) If the content industries have serious reservations about how Section 230 has been used, the tech industry, social media and internet intermediaries love it and have fought tooth and nail against any suggestion of reform. Silicon Valley has gone so far as to push the US Trade Representative (USTR) to seek Section 230-like immunities for internet platforms in trade agreements negotiated by the United States. As a result, the new NAFTA (USMCA/CUSMA) contains Article 19.17, a key element of which reads as follows:

“…no Party shall adopt or maintain measures that treat a supplier or user of an interactive computer service as an information content provider in determining liability for harms related to information stored, processed, transmitted, distributed, or made available by the service, except to the extent the supplier or user has, in whole or in part, created, or developed the information”.

In plain English, for “interactive computer service” read social media platform, search engine or internet bulletin board and for “information content provider” read publisher.

This provision has been controversial in both Canada and the US. As I have written elsewhere (“Did Canada get “Section 230” Shoved Down its Throat in the USMCA?”), the final text does not require Canada to provide any new immunities for internet intermediaries as existing Canadian law–including secondary liability–will continue to apply, although there is a potential restraint on enacting new legislation that could treat platforms as publishers. In the US, there was an eleventh hour move to have Article 19.17 dropped from the text of the USMCA when Democrats reviewed changes they wanted to see made before they would agree to ratification in Congress. In the end, unfortunately in my view, Article 19.17 remained as House Speaker Nancy Pelosi expressed regrets that she had moved too late on this issue. It should never have been included in the USMCA, or any other trade agreement, given that one of the main objectives of the tech industry was to limit the ability of Congress to amend Section 230 in future as it would have become a treaty obligation. In a furious last-ditch campaign to keep Article 19.17 in the Agreement, the US tech industry went on record to concede that inclusion in the USMCA/CUSMA did not in fact prevent Congress from making future changes. Worth noting is that USMCA/CUSMA is scheduled to come into force on July 1 of this year, all three countries having now completed the ratification process.

It will be interesting to see if President Trump’s threat to modify Section 230 in order to punish Twitter will run into any legal issues as a result of US commitments under the USMCA. While that is theoretically possible (although the US could choose to ignore its obligations under the Agreement on this one point, and would likely not be challenged by either Canada or Mexico), this is unlikely to arise as there is little likelihood that Trump will get his way on Section 230. His request that the Federal Communications Commission (FCC) take action to determine whether social media platforms are acting in good faith (and thus qualify for immunity from liability) runs head on into considerations related to the First Amendment of the US Constitution, which guarantees freedom of speech, and is a real stretch. More particularly, the use of an Executive Order to bypass the will of Congress expressed through legislation is fraught with challenges.

It is not just the political process that is a problem. Trump has decided to use Section 230 in order to take personal revenge on Twitter, not to reform it or to address the fundamental issues inherent in the abuse of its immunity provisions by internet intermediaries who have used it to avoid taking down clearly harmful content. By making this allegedly about “silencing conservative voices”, Trump has in effect hijacked the issue of Section 230 reform. As copyright blogger David Newhoff put it in his aptly titled piece on this issue, What Happens When the Biggest Troll on Twitter is the President?”;

“The EO (Executive Order) itself may be a worthless piece of paper Trump signed to make himself and a few of his fans feel good, but now that he’s stamped his brand of partisanship on this narrative, one can imagine any number of ways this non-partisan discussion can become needlessly mired in the muck. As mentioned, I can certainly imagine the (tech) industry using this story as leverage to stymie legitimate review.”

There is a real risk that meaningful and needed reform of Section 230 to make platforms more accountable for harmful content they host or distribute will become conflated with the highly partisan political debate taking place in the run up to the US election in the fall, clouding the real issues and leading to no action at all.

It is ironic to see Trump, who has apparently made over 52,000 tweets since becoming President and who reportedly has over 80 million followers, get into a head-butting confrontation with Twitter. The US journal The Atlantic’s take on this was that, “The president’s two strongest instincts stand pitted against each other: his need for attention and his need to punish enemies.”

Meanwhile Canadians (and Mexicans), who each have an indirect stake in this debate given the inclusion of Article 19.17 in the new NAFTA, will sit on the sidelines and watch this debate play out in Washington. Even if the USMCA is not directly engaged, reform of Section 230 to make internet platforms in the US more responsible for the harms created by the content that they distribute or enable would be a step toward greater accountability. It would be in line with Canada’s announced intent to require social media platforms to remove illegal content within 24 hours or face significant penalties. Appropriate Section 230 reform would be welcome and is certainly needed, but it should be done in the right way and for the right reasons. Punishing Twitter for fact-checking is not one of them.

© Hugh Stephens, 2020. All Rights Reserved.