Singapore’s Copyright Act Revisions: A Step in the Right Direction, But….

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Singapore’s long awaited and long debated revisions to its copyright law were tabled in Parliament at the beginning of July with a view to enactment by the end of summer. This follows a two-month public consultation by the Law Ministry and Intellectual Property Office. The revisions have been in the works for some time, beginning with consultations in 2016 and 2017 culminating in the publication of the Copyright Review Report in 2019. What is the upshot? Will these revisions address the concerns of rights-holders? The answer is a qualified “yes, but”.

The fundamental objective is to update copyright law for the digital age, a challenge faced by many governments. The consultation that concluded in April was to finetune application of the proposals brought forth in the 2019 report, not to add to or subtract from them. One of the major changes is to update language in the legislation to use of “plain English”, to make the law more accessible. While laudable and understandable, the devil is always in the detail when it comes to translating well understood legal concepts into layman’s language. This can potentially lead to misunderstanding on the part of the public and potentially to further litigation, which could have been avoided. A good example is the introduction of the term “permitted use” to describe not only legal exceptions to copyright but other “permitted uses”. There is ample scope for confusion here. It is important for the public to understand that the copyright owner is not permitting the use; in fact in the case of a legal exception or a fair use, no permission is required. It would have been far better to be precise, noting that a fair use is a legal exception to a copyright holders’ monopoly right, not one that has been “permitted” as in the case of a licensed use. 

As stated in the preamble to the 2019 report, the intent of the revisions is to enhance creator’s rights by introducing a new right of attribution, change the default ownership of commissioned works in favour of the creator (although this can be modified by contract) and enact new enforcement measures to crack down on the sale of Illicit Streaming Devices (ISDs). These are devices that, when combined with related software, provide unauthorized access to streaming content. They are sold openly in Singapore and often advertised as providing access to “free content”. The revisions will also provide some additional exceptions to users, such as broadening the education exception for students and non-profit schools (but only for content freely available on the internet, allowing content providers to put content behind a paywall), exceptions for text and data mining, adjusting fair use criteria, and facilitating the works of the GLAM (galleries, libraries, archives, museums) sector, among other objectives. Some of these exceptions, if not applied carefully, could be problematic.

One of the most positive elements of the revisions for creative industries is the new provision that makes it illegal to sell set top boxes (aka Illicit Streaming Devices) and associated software applications that offer access to pirated content (movies, television shows, sports events), or to advertise that they provide access to such content. The infringing content is hosted on pirate sites outside Singapore and accessed by consumers in Singapore by purchasing ISDs openly sold in shopping malls and electronics markets. In most instances, ISDs themselves do not contain pirated content, as used to be the case with illicit DVDs, but they provide the means of access once configured to do so. Merchants will either offer a configured device or provide the purchaser with the means to access the infringing content, through software or a website. In some instances, purchasers even agree to pay for access to the content, mistakenly believing that this legalizes their conduct—while congratulating themselves on the terrific “deal” they just got. Pirate websites can easily afford to undercut legitimate content providers since they are stealing the product and then reselling it. It’s a great business model for the pirates.

I have written about the difficulty of dealing with sellers of ISDs in the past. (here, here and here). It is a problem in many countries. Unless the law is very precise, bad actors will try to deny culpability by proclaiming that they are “shocked, shocked” that their customers are using what amount to burglary tools to commit burglary. The new provisions in Singapore, although a long time in coming, should deal with this by targeting retailers who, although selling a “clean device”, facilitate the loading of the apps that provide access to pirated content or provide instructions on how to modify the device, or advertise that their devices provide access to unauthorized content. This should largely constrain the ability of those retailers who knowingly sell devices for the purpose of accessing pirated streaming content to escape legal consequences. The penalties will be significant and can be both civil and criminal, including jail time.

In an interesting initiative even prior to the new law coming into effect, StarHub, one of the main pay-TV providers in Singapore, is offering consumers who have purchased the boxes that are soon to be outlawed the opportunity to exchange them, at no initial cost, for a StarHub box. For turning in their pirate box, consumers will get two years of free rental of a StarHub box if they sign up for StarHub’s subscription service. Even though the new law is focused on retailers and not consumers, the StarHub initiative gives consumers who may have purchased an ISD hoping for “free” content an additional incentive to “go legit”. This is important because surveys have shown that watching pirated content is, unfortunately,  widespread in Singapore. With the new law targeting the sale of ISDs combined with numerous and growing legitimate content offerings particularly in the VOD space, hopefully Singaporeans will be as law-abiding regarding content consumption as they are in other areas of the law.

Another provision of potential concern is the tinkering that has been done with Singapore’s fair use provisions. Singapore instituted a hybridized fair dealing/fair use regime some fifteen years ago. Certain fair dealing exceptions, such as “criticism and review”, “research and study”, and “current affairs and news reporting” exist in Singapore’s copyright law combined with an open-ended fair use provision that, until now, has been subject to five “factors”, four of which align with US legal practice. In determining fair use, the Singaporean courts currently consider;

(a)     the purpose and character of the use, including whether the use is of a commercial nature or is for non-profit educational purposes;

(b)     the nature of the work or performance;

(c)      the amount and substantiality of the portion used in relation to the whole work or performance; and

(d)     the effect of the use upon the potential market for, or value of, the work or performance.

(e)         the possibility of obtaining the creative work within a reasonable time at an ordinary commercial price

The fifth factor, which helped protect rights-holders against fair use claims exploiting the argument that unauthorized copies were justified because of the unavailability of certain content in Singapore, has now been dropped. The Ministry of Law argues that it is subsumed in the fourth factor, effect of the use on the potential market, etc, but this is not as explicit as the previous wording in providing guidance to the courts. However, the Ministry appears to have listened to input provided by stakeholders during the public consultation and the explanatory statement to the Bill now explicitly states that the removed fifth factor may “still be considered where relevant”. In addition, the existing fair dealing exceptions will now be made subject to the four fair use factors, which will provide some additional balance.

While the anti-piracy provisions in the soon-to-be-adopted law will help close a significant loophole that allowed retailers to openly advertise set top devices that provided access to pirated content, much will depend on court interpretations of the new revisions. Creators will be happy that a right of attribution has been enshrined as an additional moral right while photographers will be pleased that they will now enjoy default ownership of copyright in their works (as is the case in many other countries). The GLAMs will more easily be able to show AV performances or make copies for specific purposes. There will now be a specific exception for text and data mining in addition to the general fair use provisions, but the key here will be the possible impact on the commercial interests of copyright owners since the exception applies to both commercial and non-commercial use and goes further than similar provisions in, for example, Japan and the UK. In fact, Singapore’s text and data mining exception is arguably overly broad. A good analysis of the pros and cons of the various provisions is available on the website of this international law firm.

The old saying that “you can’t please all of the people all of the time” is certainly applicable to copyright law and is relevant here. The revisions bring in some long-overdue changes, particularly with respect to dealing with the open sale of devices providing access to pirated content. The hybrid fair dealing/fair use model, now to be unambiguously called “fair use” in Singapore, will lead to some legal uncertainties that will no doubt have to be worked through the courts. The flip side of the touted “flexibility” of a fair use system is the uncertainty that it generates as, theoretically, any unauthorized use can be argued to be “fair” and will need to be evaluated according to the established criteria and legal precedent, much of which does not exist in Singaporean jurisprudence. Other provisions are not particularly controversial and will help creators, especially the attribution right. Overall, the revisions are generally a step in the right direction—but there is always room for further improvement. The Bill will go for Second Reading in September so perhaps some of the shortcomings will be addressed as it moves through the legislative process.

© Hugh Stephens, 2021. All Rights Reserved.

Supreme Court of Canada Decision Undermines Canada’s Collective Licensing System: A Parliamentary Fix is Needed

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On July 30 the Supreme Court of Canada (SCC) delivered what can only be described as body blow to the management of collective rights in Canada, although the collective society at the centre of the action, Access Copyright, found some comfort, pointing out in its press release that the Court “refuses to legitimize uncompensated copying by the education sector”.  In its decision, the SCC not only dismissed the Access appeal against a ruling by the Federal Court of Appeal that “mandatory” copyright tariffs set by the Copyright Board of Canada are not mandatory with respect to users of content when that content is covered by the tariffs, but also editorialized on the lower court’s earlier ruling that York’s Guidelines (which York claimed allowed it to use material from Access Copyright’s repertoire without obtaining a licence or paying compensation) were not fair. Although the SCC refused to issue a Declaratory Statement legitimizing York’s Guidelines, its reasons for doing so were largely procedural. The Court declared that since payment of the tariff was not mandatory, there was no legal dispute between Access Copyright and York, and therefore it would be moot to take a position on the Guidelines. It then proceeded to cast doubt on the original decision against York, although recognizing that it was not retrying the case and that other factors not before the Court had to be considered.

The Guidelines will be tested when a suit is brought against York by a rights-holder (Access Copyright, although representing rights-holders with respect to collection of royalties, does not itself hold any rights in the works in its repertoire and therefore cannot bring an infringement case in its own name). When that takes place, the views of the SCC that the original finding of unfairness failed to take into account the user’s right of individual students will clearly be a factor in assessing culpability. Despite the unequivocal finding against York by the Federal Court in 2017 that their Guidelines had materially harmed the Canadian publishing market, the interpretive musings by the Supreme Court plus the need for individual rights-holders to establish infringement adds greater uncertainty to the process.  

As for the mandatory tariff issue, it is complicated as I explored in a blog post (When is a “Mandatory Copyright Tariff” mandatory only if you opt-in?) last summer. Back in the 1930s when “mandatory tariffs” first entered the legal vocabulary with respect to copyright, they were mandatory in the sense that Performing Rights Organizations were required to issue a licence (for use of sheet music, radio broadcasts etc.) to a user if the user offered to pay or paid the established licensing fee. In the late 1980s and 1990s substantial changes were made to Canada’s copyright legislation to address challenges emerging from photocopying and digital reproduction, and a number of collective societies (collective rights management organizations) were established to facilitate licensing of content and collection of royalties. It became standard practice for the Copyright Board to “certify a tariff” (i.e. approve a royalty fee) which would be applied to all users of a collective’s repertoire unless voluntary arrangements between users and the collective were agreed upon. The Federal Court of Appeal’s decision in June 2020 upended this long-established system, ruling that the legislative intent of the original 1930’s interpretation of the term “mandatory” had not changed. This has now been reaffirmed by the SCC.

In reaching its conclusion the Supreme Court carefully parsed the wording of the 1988 and 1997 legislation and concluded that the original intent of imposing constraints on the ability of collective societies to withhold licences had not changed. Moreover, it concluded that the role of the Copyright Board of Canada in certifying tariffs was to limit the amount that collective societies could charge, not to establish the amount that a user should pay (even though this is at variance with actual practice for the past twenty years). In declaring that it could not impute intent to Parliament where no wording existed (with regard to the question of what was “mandatory”), the SCC declared (at paragraph 76);

“It is of course open to Parliament to amend the Copyright Act if and when it sees fit to make collective infringement actions more readily available. But under the existing relevant legislation in this appeal, an approved tariff is not binding against a user who does not accept a licence.”

Legislative amendment seems to be the only alternative if the system for the collective management of rights is to be maintained in Canada. Whether and when Parliament will be prepared to take up this matter is another question, particularly given the strong opposition that can be expected from the post-secondary sector.

The alternative is litigation, perhaps a class action lawsuit against York, or at least a series of individual infringement cases funded by major publishers. One of the precepts of the collective management system introduced in the 1988 and 1997 reforms, however, was to avoid endless, costly litigation by facilitating collective licensing. Given this intent, a return to litigation seems like a retrograde step. Small publishers and individual authors will find it difficult to pursue such a remedy. If Access Copyright changed its business model and acquired the rights to works that it holds in its repertoire, it could bring a collective action against York, but whether this is a viable option is a question for members of Access Copyright to decide. Some collective societies, such as SOCAN for example—representing composers, songwriters and music publishers—do have certain rights assigned to them. However, even they intervened in this case since SOCAN’s tariffs that cover bars, restaurants, and clubs cover tens of thousands of small establishments across the country and without enforceable tariffs, licensing at scale becomes impractical and inefficient.

Although York’s Guidelines were found to be unfair in the original trial by the Federal Court in 2017, the SCC’s musings on that decision will make a finding of infringement less certain. The SCC noted that while the Declaration requested by York should not be granted:

this should not be construed as endorsing the reasoning of the Federal Court and Federal Court of Appeal on the fair dealing issue. There are some significant jurisprudential problems with those aspects of their judgments that warrant comment.”

According to the SCC the main problem with the analysis by the lower courts was that they approached the fairness analysis exclusively from the institutional perspective.

This error tainted their analysis of several fairness factors. By anchoring the analysis in the institutional nature of the copying and York’s purported commercial purpose, the nature of fair dealing as a user’s right was overlooked and the fairness assessment was over before it began.”

This will add complications for those bringing an infringement case, although there are a number of other factors to be considered in evaluating fair dealing that the SCC recognized were dealt with in the original trial and would need to be dealt with in any future litigation, such as amount of the dealing, nature of the work and the effect of the dealing on the market. It is far from certain that York would prevail in a future case. Far from creating clarity, it looks as if the result of the SCC’s decision–barring Parliamentary action on reinterpreting the meaning of mandatory tariffs–is more litigation, more uncertainty, and more waste of public funds as universities defend themselves against infringement actions that could have been avoided by the simple expedient of obtaining a licence.

Copyright minimalist Michael Geist at the University of Ottawa declared that the SCC’ decision was “a massive win for education and copyright”. It may represent a massive win for those educational institutions that seem determined to avoid paying a reasonable licensing fee for the content they provide to their students but it is hardly a win either for education or for copyright. Undermining copyright and payment of royalties for the use of copyrighted material will only result in less quality material being available to students. The quality of education will suffer in order to save payment of a few dollars per student to the copyright collective that represents the bulk of publishing and the vast majority of authors in Canada. The only winners in the end will be the legal profession in terms of legal fees. The solution is for Parliament to plug the holes in the legislation that the Supreme Court’s decision has exposed.

© Hugh Stephens 2021. All Rights Reserved.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© Hugh Stephens, 2021. All Rights Reserved.

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

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

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

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

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

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

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

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

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

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

© Hugh Stephens, 2021. All Rights Reserved

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© Hugh Stephens, 2021. All Rights Reserved.

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

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

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

Renegotiating NAFTA

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

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

Extending the Copyright Term in Canada

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

Implementation Still in Progress

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

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

Then There was the Super Bowl

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

What is “Simsub” Anyway?

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

More Business for Border Bars

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

The Canadian Cultural Exception

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

Does CUSMA Stop Canada from Passing Legislation affecting Internet Platforms?

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

….Or Holding Platforms Responsible for Harmful Content?

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

The USMCA One Year Later

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

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

© Hugh Stephens 2021. All Rights Reserved.

The Artists’ Resale Right: A Matter of Simple Fairness

Credit photo: author 

Canadian artist E.J. Hughes, although likely not a household name to many outside Canada, is nonetheless one of the iconic artists of the west coast of Canada. His paintings chronicle the relatively recent history of the coast of British Columbia (BC), as the example above shows. His works, full of life and colour, record the steamships that used to call in at small settlements along the coast, fishing boats and little car ferries, not to mention spectacular mountain scenery, colourful fishing wharves, houses and sheds.

Hughes was born in BC in 1913 and lived to a ripe old age, passing away at the age of 93 in 2007. Except for a period during the Second World War as a war artist overseas, he spent virtually all his time in coastal communities, the last half century in the Cowichan Valley where many of his paintings were executed.

Recently a Hughes painting, Steamer Arriving at Nanaimo (home of course to the eponymous “Nanaimo Bars”), sold at auction for $841,250 and Three Tugboats, Nanaimo Harbour, for just over $600,000. That may not seem like the big leagues when compared to a recent sale of Monet’s Meules, which fetched over $110 million in 2019, but for Canadian art it is a lot. What is worth knowing about Steamer Arriving is that when Hughes first sold it in the 1950s, it earned him all of $150. Another of Hughes’ paintings, Fishboats Rivers Inlet fetched over $2 million at auction in 2018. It was painted in 1946 using materials that Hughes had left over from his days as a war artist. I could not find a record of what it originally sold for, but it couldn’t have been much as Hughes was living hand to mouth at the time. Another work of his that sold for over $400,000 in 2007 was reportedly purchased for just $200 at a garage sale a few years earlier (although not directly from Hughes, who painted it in 1959). These examples all illustrate the common phenomenon of rapidly escalating values of artistic works that were often originally purchased for just a pittance.

In Hughes’ case, he had a longstanding relationship with Montreal art dealer Max Stern who reached a standing arrangement with the artist to purchase all his work. That suited Hughes who then had a steady source of income. By all accounts, Hughes lived modestly and was not demanding of Stern, who often had to insist on increasing the price he paid Hughes for his paintings. Toward the end of his life, (in 2000), Stern was paying Hughes in the vicinity of $10,000 for new works. This was a fair return given that Hughes was becoming more and more well known, elected to the Royal Canadian Academy of Arts in 1968. As artists become better known, the value of their new paintings generally increases as well as their older works—yet they receive nothing from these earlier works when they are resold. This is a situation that the Artists Resale Right (ARR), which does not exist in either Canada or the US, seeks to redress.

For the past few years, the charge on the ARR has been led in Canada by CARFAC (Canadian Artists Representation), an advocacy group for Canadian artists, and its sister Quebec-based group, RAAV (Le Front des Artistes Canadiens). France is the original home of the ARR, where it is known as the droit de suite, and both CARFAC and RAAV are in regular contact with their French colleagues. The droit de suite was first adopted in France in 1920, and the organization and copyright collective representing French artists, the Society of Authors in the Graphic and Plastic Arts–known as AGADP in France–continues to lobby for global application of the ARR. This is primarily because, although the right was adopted into the Berne Convention in 1948, it is optional rather than compulsory for Berne Convention states and operates strictly on the basis of reciprocity. Thus, broader global coverage brings greater returns for French artists. In 2019, of 15.5 million Euros in droit de suite payments made to French artists, roughly a third or 4.6 million Euros came from payments from sister organizations in foreign countries collecting on behalf of French artists.

But first, let’s examine how the Artist Resale Right works. While structured somewhat differently in various countries, the principle is that where sales of artistic works (works of graphic or plastic art such as pictures, collages, paintings, drawings, engravings, prints, lithographs, sculptures, tapestries, ceramics, glassware and photographs) take place beyond the initial sale, a small proportion of the re-sale price shall be remitted to the original artist or their estate, with post-mortem payments limited to a specified number of years. Often there is a sliding scale for payments, with the percentage going to the artist decreasing as value increases. Sometimes there is a ceiling beyond which a resale royalty is not levied. There can also be a ceiling on the amount paid. In the case of France at the present time that amount is €12,500, a limit to which AGADP objects. It is also important to note that the droit de suite does not apply to private sales that take place without the participation of an art market professional, nor to sales by individuals to public museums.

Normally one would expect the payment to be made by the seller from the proceeds, much as the seller in a real estate transaction is responsible for paying the commission to a realtor. While this is normally the case, in France there was a protracted legal battle over this point when Christie’s auction house tried to impose contracts requiring that the droit be paid by the buyer. French dealers objected, claiming that it was illegal to shift the burden from seller to buyer. After eight years and several levels of appeal, the French Supreme Court ruled that it was possible for the seller of a work of art to agree with the buyer that the buyer be liable for paying the royalty, provided the royalty was still paid to the artist. The royalties are paid to collecting societies who charge a commission (to the artist) for tracking sales and disbursing to artists.

For many works under copyright, the reproduction right provides for steady ongoing revenues to authors, songwriters and performers but in the case of graphic and plastic arts, revenue from licensing of reproductions (print or digital) is generally limited. This raises the question of what art works should qualify for the ARR. Under Berne, it applies to unique works of art or those with very limited authorized reproductions, such as numbered limited editions or signed prints, which themselves could be collected or re-sold. The need to provide some “aftersales” revenue to artists, many of whom struggle financially, is one of the main arguments in favour of establishing an ARR. Artists whose fame increases during their lifetimes usually command higher prices for their new, later works, yet often the production of these artists decreases as they get older. At the same time, the value of their earlier works also rises, but they derive no benefit.

Another argument often used to support the establishment of an ARR is its effect in offsetting some of the imbalance between third world creators and first world art collectors, galleries, dealers and auction houses. Original works in developing countries are often sold for a very low initial price, yet subsequent profits and benefits flow exclusively to dealers and collectors in major capitals rather than to the artist–unless an ARR is in place. For payments to flow back to artists, however, it is important that their country of residence itself offers an ARR since the right operates only on a reciprocal basis. (Many countries in Africa, especially in francophone Africa, have incorporated the ARR into domestic law for precisely this reason). This argument can be applied to Canada and the US with respect to Indigenous art. In the Canadian case, the work of Inuit artists (soap stone carvings, prints) is the most notable example. As I cited in an earlier blog on copyright and Indigenous art, the renowned Inuit artist Kenojuak Ashevak sold the original of her famous print Enchanted Owl in 1960 for just $24. It sold in 2018 for $216,000 of which Kenojuak’s estate (she died in 2013) received not a penny.

CARFAC is working to build support for amendments to the Copyright Act in Canada to establish an ARR of 5 percent, pointing out that over 80 countries have an ARR arrangement, including similar jurisdictions like the UK (2006) and Australia (2010). CARFAC proposes that an ARR be applied to secondary sales of $1000 or more that are conducted by a dealer or auction house, at a flat rate of 5%, with the liability to pay shared between the seller and the dealer, as is currently the case in the UK. It would apply only to Canadian artists and artists of countries that offer an ARR. Payment would be collected through a copyright collective, Copyright Visual Arts, owned jointly by CARFAC and RAAV. The idea has been around in various forms for several years and has been the subject of a private member’s bill although never receiving government support. More recently it was examined by the two Parliamentary committees reviewing the Copyright Act, with recommendations ranging from adoption to more study.

The issue is also a live one in the US, where various attempts have been made to pass ARR legislation, most recently in 2018. The draft US legislation set a much higher threshold than that proposed in Canada ($5000), would apply only to auction houses with at least $1 million annually in sales, would have a payout ceiling of $35,000 and, as in Canada, would be at a set rate of 5%. Recently the new Register of Copyrights, Shira Perlmutter, expressed support for an ARR in the US. Not surprisingly, it is not supported by the major auction houses, notwithstanding that they comply with ARR legislation in other major art markets, like the UK and France. Neither the US nor China, the two largest art markets, have a resale right although ARR supporters argue that it would strengthen these markets if they did so by encouraging European artists to offer their works for sale there. European artists would benefit from the existence of an ARR in the US and China because of the reciprocity principle and artists from China and the US would then likewise benefit from the ARR in effect in Europe.

In the final analysis, this is more about artists than dealers, despite the symbiotic relationship between the two. Some dealers, in fact, offer voluntary re-sale royalty payments, either European dealers who are not obligated to compensate US or Canadian artists but do so, or North American dealers who have decided that it is in their interest to do so because of their relationship with artists. (A similar concept  has recently been introduced by some second hand book dealers to pay authors when used copies of their books are sold). But business being business, most dealers and auction houses will not do so unless required by law. Extension of the ARR to North America would increase harmonization of international art markets, (although if China remains an outlier this could become a competition problem) and is widely supported by artists in both Canada and the US. It is also, not surprisingly, supported by collecting societies as it provides them with a new revenue stream.

If Canada had an ARR as proposed by CARFAC, the sale of Steamer Arriving in Nanaimo would have brought $42,000 to Hughes’ estate. Were Hughes still alive that would have been a nice supplement to a lifetime career of hand-to-mouth painting income. With an ARR much of the revenue paid goes to artists still alive, usually in their declining years. In Australia, studies showed that 46% of payments went to living artists; in the UK over 80% of artists use ARR revenues to cover living expenses. The argument that it would inflate art prices seems hard to credit, given the ever-increasing value of good art in countries where no ARR is in place. Share the wealth, I say.

The real issue is getting the attention of government at a time when there are many priorities, including of course dealing with the current pandemic. Artists and their advocates are speaking out, but they need a champion. It seems to be a simple matter of fairness—although in the art world, as in other domains, nothing is really that simple.

© Hugh Stephens, 2021. All Rights Reserved.

An Open Letter to Justin Trudeau: Canada’s News Publishers up the Pressure on Facebook and Google

Source: National Post

I was at my local newsstand the other day, perusing the morning papers. My usual modus operandi is to scan them quickly, deciding which catchy headline will entice me to swipe my credit card for my daily “news fix” delivered in that most traditional of formats, the daily newspaper. The kind you can put under your arm and open up over the breakfast table, with a coffee. Usually I riff through each of the major local papers—under the steely eye of the proprietor—before I make my choice. But on Wednesday, June 9, all the papers (save one) had the same front-page. It was an open letter to Prime Minister Justin Trudeau, and this (in part) is what it said;

“For months, you…have promised action to rein in the predatory monopoly practices of Google and Facebook against Canadian news media. But so far, all we’ve gotten is talk. And with every passing week, that talk grows hollower and hollower. As you know, the two web giants are using their control of the internet and their highly sophisticated algorithms to divert 80 per cent of all online advertising revenue in Canada. And they are distributing the work of professional journalists across the country without compensation.

This isn’t just a Canadian problem. Google and Facebook are using their monopoly powers in the same way throughout the world — choking off journalism from the financial resources it needs to survive. The difference is that other countries are putting their foot down. (here the open letter mentions Australia, where recent legislative action was taken to bring the internet giants to heel. See my blogs “Google’s Latest “Stoush” With Australia” and “Facebook in Australia: READY, FIRE, AIM”.) The letter continues;

Time and again, you and your government have committed to similar action…But after months of promises, there is still no legislation…words alone will not sustain Canadian journalists through the long months of legislative inaction and relentless power plays by Google and Facebook.

To put it bluntly, that means that you, Prime Minister, need to keep your word: to introduce legislation to break the Google/Facebook stranglehold on news before the summer recess. It’s about political will — and promised action…The fate of news media in Canada depends on it. In no small way, so too does the fate of our democracy.”

Wow. Strong stuff. “The fate of our democracy”. The language may sound a bit purple but the parlous state of the traditional news media in Canada as elsewhere is a very real concern for good governance given the traditional role of the media in holding government to account. It is not for nothing that the motto of the Washington Post is “Democracy dies in darkness”, or that one of Winston Churchill’s better known quotes (1949) goes like this; “A free press is the unsleeping guardian of every other right that free men prize; it is the most dangerous foe of tyranny.” 

The explosion of digital media has led to a proliferation of “fake news” and self-serving echo chambers where conspiracy theories are peddled to those who want to believe. Responsible, professional journalism is the antidote, and it is actually positive that the digital platforms pick up and distribute stories from the mainstream media alongside much of the user-generated piffle that dominates the internet. The problem is the platforms are averse to paying for it, yet someone has to pay for quality journalism. In the past, despite subscription revenue, that task largely fell to advertisers. But now most advertising goes to the internet platforms. They in turn attract the viewers that advertisers want to reach with content; other people’s content, such as that produced by the news media.

The solution advanced in Australia, France (“Holding Google to Account: France Takes a Stand”) and soon, potentially, Canada is to convince the platforms that it is in their interest to “share the wealth” to some extent. But why should they—unless they are pressured to do so? That is what happened in both France and Australia where the government leveraged its competition laws to require large platforms enjoying quasi-monopolistic market power (read Facebook and Google) to come to revenue sharing agreement with publishers, failing which government regulators would step in.

The platforms were at first reluctant to do so, and only grudgingly opened negotiations. In the case of Google in Australia, it opened its wallet and then quickly put it away because the Australian government refused to withdraw its legislation. Google then threatened to withdraw from the Australian market, a threat that was only shown to be hollow when Microsoft offered to fill the void. As for Facebook, its clumsy effort to blackmail the Australian population and government by cutting off Australian news sources backfired, and the company soon managed to make a deal with the major Australian publishers. In France, Google dragged its feet but eventually came around to finding a way to share revenue in a way that satisfied most of the major French publishers and was acceptable to Google.

All these developments were being watched carefully in Canada by Heritage Minister Steven Guilbeault who undertook to bring in legislation in Canada to tackle the same issue. However, Guilbeault has several pieces of legislation on his plate; amendments to the Broadcasting Act (Bill C-10) to bring digital streaming services under the auspices of the broadcasting and telecoms regulator, the CRTC, “online harms” legislation to control sexual exploitation of children, hate speech and incitement to violence among other harms, including site-blocking provisions to deal with offshore websites dispensing harmful content, as well as the legislation to deal with the issue of payment for use of news content. Because of this legislative overload, things have got bogged down, and to date only the broadcasting legislation has been introduced into Parliament. And it is getting a rough ride. As for the online harms bill, although not yet introduced, the tragic events of the last few days in London, Ont, where a Muslim family was targeted in a horrific hate crime, will give that legislation added impetus.

With regard to Bill C-10, as a result of concern that a blanket exemption for user-generated content (UGC) would defeat the main purpose of the legislation, an amendment was introduced that has become the focal point for opposition to the bill. The main opposition party, the Conservatives, has engaged in delaying tactics that has forced the government, with support from smaller opposition parties, to bring in time allocation measures to limit debate. The fundamental issue is that the clock is running out. Parliament is set to rise on June 23 for the summer and it is widely expected that there could be a general election in the fall, if the COVID-19 situation is brought under control.

The Liberals would love the opportunity to win a majority and get out from under the current situation where they need to rely on at least one of the opposition parties to pass legislation. Of course, it will all depend on the public opinion polls. The Liberals won’t want to try to trigger an election unless their polling shows they can improve on their current seat count. (They won 157 of 338 seats in the 2019 election–with 170 needed for a majority. They currently have 155 seats after three members were kicked out of caucus for various reasons and one Green Party member crossed the floor to join the Liberals.) The opposition parties will also be reading the polls to decide if they want to go to the electorate.

What all this means is that the promised legislation to require the platforms to pay for using news content looks as if it will get the squeeze. Facebook and Google are not waiting for the legislation but rather are trying to head it off by launching their own payment-for-news initiatives. Although it rejected Australia-type news payment rules back in March, Facebook has since announced that it has struck content deals with 14 Canadian news providers. With the exception of the Winnipeg Free Press and French language paper Le Devoir, the others are minor or niche publications like the Coast, the Narwhal, Village Media, the SaltWire Network, the Sprawl, Discourse Media, Narcity, BlogTO and Daily Hive. Not exactly household names in Canada. Google, too, has its own offering called the Google News Initiative which, among other things, provides training for journalists and sustains some journalist positions. Google has also reached revenue sharing deals with some media outlets but, as with Facebook, its initial deals were largely with minor players. It was not until the Australian and French governments started to play hardball that Google had the incentive to reach deals with the major publishers.

That is exactly what is happening in Canada. Facebook and Google are prepared to throw a few pennies in the direction of Canadian media but, from the perspective of News Media Canada-NMC (formerly the Canadian Newspaper Association), leverage in the form of legislation will be required to get them to offer meaningful revenue-sharing. Back in the fall of 2020, NMC published a detailed study “Levelling the Digital Playing Field” that strongly advocated for an Australian-type competitive negotiating framework, backed up with regulatory muscle. News Media Canada was the sponsor of the June 9 open letter to Justin Trudeau as well as an earlier effort back in February when a number of newspapers published blank front pages, the message being that news could disappear if something is not done to level the playing field.

The June open letter calls on the government to introduce news payment legislation before the impending summer recess. That is unlikely to happen and even if it does, the legislation will die before enactment assuming an election takes place in the fall. However, the letter is important as part of the tactics to maintain pressure on both the government and the platforms. If the platforms think that the legislation is dead, and that their payment offerings to date will carry the day, Canadian publishers will not see the kind of money they feel they need to be able to continue to function. In commenting on Facebook’s announced deal-making with some small Canadian media business, News Media Canada commented that “Until all news media in this country can negotiate collectively with Google and Facebook, the two multinationals will continue to use their market dominance to drive terms that are in their interests.”

Collective negotiation does not just mean the ability for media to negotiate as an industry without running afoul of competition legislation (an exemption in the US for just such a scenario, the Journalism Competition and Preservation Act, has been floating around Congress for a couple of years now) but would also include an obligation on the platforms to negotiate with the media industry collectively as was proposed in the Australian legislation. (In the end it was not applied to Facebook and Google in Australia because suddenly, magically, they were able to strike deals before the hammer of the legislation was applied to them).

The open letter is but another shot in the ongoing war between the publishers and platforms. The outcome is almost certainly going to be something similar to the arrangements reached in Australia and France. The only issue will be the amount of revenue-sharing, and who will be included. Experience has shown that achieving an outcome that meets the needs of the creators of news content requires government action, or a realistic possibility of government action. Without legislation, the platforms hold the strong cards. Even though the prospect of legislation in Canada to require payment for use of news content is fading as quickly as the last days of the current Parliamentary session tick by, it is essential for the publishers to retain legislation as a realistic future possibility. They need this in order to have sufficient negotiating leverage with Facebook and Google to reach a deal that keeps quality professional journalism alive in Canada.

I hope they succeed or else, one day when I go to the newsstand, there will be nothing to read—or perhaps there won’t even be a newsstand.

© Hugh Stephens 2021. All Rights Reserved.

Adapting Opera in the Age of COVID: From “Grand Rights” to “Synchronization Licenses”

Source: http://www.shutterstock.com

Think of yourself as Ian Rye, CEO of Pacific Opera Victoria (POV), my hometown opera company. You’ve been planning ahead for the next season, and advance planning is very much a requirement in the opera scene. The operas have been selected— Die Walküre, Death in Venice and Don Giovanni–costumes and properties designed, lead singers lined up, subscriptions sold and advertising readied—and then COVID hits. You are initially shut down for a few weeks, so the opera Carmen that you were planning to mount is put on hold. Everyone holds their breath, waiting for the storm to pass. But it doesn’t. The 2020 season is gone, but what about the company? There are expenses to meet—staff, artists, office—and no revenue except some additional grants from government. More challenging is the fact that you have an ecosystem to maintain; the artists who want to work, not just for financial but for professional and artistic reasons. Once the bond of shared artistic creation is broken, people will drift away. As the summer of 2020 brings little relief on the COVID front, you re-imagine the offering. Let’s take it online. Let’s make the next production a film version. And that is what happened.

To keep the company together, to give everyone a common goal and purpose, and to stretch the imagination, POV decided to stage an opera, and film it. Not filming it as in a video recording of a live performance, but creating a film version of a new opera, The Garden of Alice, by Canadian composer Elizabeth Raum. You can get more information here. That sounds pretty straightforward; turn what would have been a live performance into a film. (The company’s concert series were also being filmed and put up for digital distribution.) But creating a de novo filmed opera such as “Alice” was taking things to a new level, and while there clearly would be artistic and logistical challenges in going from one genre to another, most of us would not think about some of the other less obvious challenges, such as union issues and copyright.

When it comes to performers in live theatre or opera, most of them (in Canada) are members of Canadian Actors Equity Association or (CAEA). Film actors are members of a different association, ACTRA. But when you take live actors and turn them into film actors, the same artists are represented by a different union, with different fees and distribution rights. This was a new experience for many of the artists but it was worked out fairly easily. Less simple were the copyright issues in going from live to film.

Copyright is a pretty basic concept, but the execution and implementation can be complex. The concept is straightforward; when creators (authors, artists, composers, etc) create an original work, they own it and have the right to control its sale, reproduction and distribution, subject to certain limitations such as duration and fair dealing or fair use. However, in many works there is more than one rights-holder. Think of a recording—there could be a songwriter (of the lyrics), a composer (of the music), and a performer or performers, all of whom have contributed to the creation of the work. A book could have an author and an illustrator. The overall copyright for the work could be held by a record label or book publisher, who would have acquired the rights. In such circumstances, this simplifies matters when it comes to commercialization of the work. And then there is the issue of the rights themselves, which depend on the nature of the work. Rights can be limited geographically and by means of distribution, e.g. live performance, audio visual, digital and so on. Each of these various rights is licensed separately and carries different conditions and royalties. This is where it gets complicated for an organization like Pacific Opera Victoria.

In the case of opera, the clearance of rights starts with what are called, in the trade, “grand rights”. These are the fees paid to an artist and a publisher for the right to a live performance, but only certain live performances. As explained in this report, “Untangling the Bundle: Grand Rights vs. Small Rights”, grand rights works can be put into two general categories;

“a) Works conceived to tell a story with words and music such as musicals, operas, and oratorios. Rodgers and Hammerstein’s South Pacific, Berg’s Wozzeck, and Stravinsky’s Oedipus Rex are examples, and

b) Existing or commissioned works that are used in certain extra-musical contexts, such as with choreography, stage action, or as part of a play.”

Just as an aside, “small rights” are fees collected by Performing Rights Organizations (PROs) , such as the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Inc, (BMI) in the US, the Society of Canadian Composers, Authors and Music Publishers of Canada (SOCAN) in Canada, by PRS in the UK and so on. Many of these PROs have reciprocal agreements with each other. Their function is to collect fees from music users and distribute royalties to the composers and appropriate publishers.

The definition of whether a work is covered by “grand rights” can be tricky. For example, (again citing “Untangling the Bundle”) a gala evening of arias from different operas in concert do not implicate grand rights because standalone arias and numbers can be treated as small rights, as are instrumental excerpts of operas and musicals, because there is no “dramatic performance”.  On the other hand, a full concert performance of an opera, even without costumes, dialogue, or movement, or a performance of a song or a selection of songs from an opera or musical, with the singers in costume and in character, would be a grand rights issue. Got it?  But this is an “aside” because in the case of converting live opera to a filmed version, it was not a question of “grand rights” versus “small rights” but rather yet another type of rights, “synchronization rights” (aka sync rights).

According to Songtrust’s music glossary, synch rights are “payments made to a songwriter or music publisher for permission to use a song in “sync” with visual images on a screen. More specifically, sync refers to the use of a song in television, movies, and commercials. Sync royalties are generally a one-time sum paid directly to the publisher.”

With respect to sync rights, ASCAP notes that “Often, the music is “synchronized” or recorded in timed relation with the visual images. Synchronization rights are licensed by the music publisher to the producer of the movie or program.”

For POV, venturing into the realm of sync rights was entering new territory, and they worked with a clearing house in the US (Easy Song Licensing) to get clearances for works in the concert series. In the case of The Garden of Alice, they were able to obtain all rights directly from the composer. It was a big change for a local opera company whose traditional concerns had been to perform locally and fill the house to getting licenses to distribute an audio-visual work internationally. It presented challenges, but also opportunities for new revenue streams.

In the case of The Garden of Alice, a new opera that has never been publicly performed, there is an opportunity to find distribution partners who could give it international exposure. There obviously would be a high degree of Canadian content (Cancon), which would make it attractive to Canadian broadcasters seeking to fulfill their “Cancon” obligations, but the basis of the story is well known internationally and there could be many distribution opportunities in other markets. At the very least it could be distributed directly from the POV’s website on a “Pay per View” (PPV) basis. While there is always risk with a brand new production that has not been tested with audiences, it makes eminent sense to launch the film venture with something new. Film versions of famous operas abound, and the POV would be offering nothing unique. If the foray into filmed opera is successful, future productions could be eligible for various forms of media funding from sources such as the Canadian Media Fund, a multi-million dollar fund established to promote Canadian AV production, adding to potential revenue streams from traditional operatic funding organizations.

All this demonstrates the need for adaptability and flexibility when it comes to producing the arts. The POV’s film venture has been a creative way to keep the company operating despite the challenges of having no live audiences (and no revenue) during the pandemic. There are many challenges to mounting a successful opera season—selecting the right program, lining up key performers and musicians, creating costumes, building sets. Added to these are the pandemic challenges arising from pivoting to a new genre and producing a new product, among them navigating the rules of copyright. But the company has risen to the task.

As Ian Rye says, “It’s been a learning experience but an exciting one. It is a bit early to say how successful our film experiment will be but it’s become a common goal around which the whole company has come together”.

I am sure that it will be a success and hope to see The Garden of Alice one day in the near future from the comfort of my living room.

© Hugh Stephens 2021. All Rights Reserved

Appeal Against Canada’s First Successful Pirate Site-Blocking Order is Dismissed: Good News for Copyright Protection in Canada

In a unanimous decision, on May 26 Canada’s Federal Court of Appeal (FCA) dismissed the appeal by internet service provider (ISP), Teksavvy, against Canada’s first site blocking order for copyright infringement issued in November 2019. At the time, I commented that the site blocking order marked a significant step forward for the protection of copyrighted content in Canada, even though it was attacked by critics who claimed that it would lead to “internet censorship”, violated net neutrality and was a usurpation by the courts of the role of Parliament. Those criticisms were unfounded then and they are unfounded now, as the Appeal Court has ruled. The decision confirms that blocking orders are available in Canada to combat pirate content providers who camp in cyberspace while targeting Canadian consumers, and it confirms that Canada has joined the more than 40 countries that use site-blocking to fight online piracy and protect legitimate content distributors.

The case was initiated by Bell Media, Rogers Media and Groupe TVA in 2019 against GoldTV, an offshore pirate website illegally distributing content licensed for the Canadian market by the three companies. GoldTV failed to respect repeated injunctions and failed to appear in court to defend itself, which is not surprising given the offshore pirate business model it follows. (It sells subscriptions to its unlicensed content through providing apps that modify a digital box purchased by consumers, all at a fraction of the cost of legitimate subscription services). Bell, Rogers and TVA secured a court order requiring ISPs in Canada, including internet services owned by themselves, to block GoldTV. No ISPs, except Teksavvy, a small internet reseller, objected to the order.

Why did Teksavvy resist the order by launching an appeal? According to an interview with its VP of regulatory affairs posted on its website, Teksavvy’s position is that it is “not defending piracy, but rather the broader principle of an open internet against a creeping regime working in favour of very narrow commercial interests.” And what would those “narrow commercial interests” be? Well, apparently they are represented by larger ISPs and integrated media and telecom companies like Rogers, Bell and TVA that not only pay to license and distribute content, but also build the backbone internet infrastructure on which internet access resellers like Teksavvy depend. As you can surmise, there is no love lost between Teksavvy and the majors.

Teksavvy is a “reseller”, a company that offers internet service to consumers but does not own the last mile. It must obtain, for a fee, access to the home from the major telcos who have built and who own the infrastructure. The telcos are required by the regulator, the Canadian Radio-television and Telecommunications Commission (CRTC) to offer access to the resellers at wholesale rates set by the Commission. This is done to encourage competition. The real issue is the rate structure. If too high, the resellers won’t be able to compete at the retail level; if too low, they will undercut the telcos who will say they can’t earn a sufficient return on investment to continue to build out and upgrade their infrastructure. Teksavvy is not the only reseller in this position, just one of the more vocal ones, and has consistently been a thorn in the side of the major telcos. Coincidentally–and unrelated to the FCA’s decision–just days after the Appeal Court’s ruling, the CRTC announced a revised rate structure that largely favours the telcos, increasing the wholesale rate for access. In response, Teksavvy called for the resignation of the Chair of the Commission and announced that it would withdraw its application to provide mobile services.

Was animus toward the telcos one of the reasons for Teksavvy leading the charge against a site blocking process that was widely accepted by the industry? It is hard to say with precision what their motives are but in an earlier blog (Canada’s First Site Blocking Order: What is Driving the Objectors?)  I examined both Teksavvy’s motivations and those of intervenors appearing in support of its appeal (the Samuelson-Glushko Canadian Internet Policy & Public Interest Clinic (CIPPIC) at the University of Ottawa and the Canadian Internet Registration Authority (CIRA), also associated with the University of Ottawa’s law faculty). I noted that;

“Although Teksavvy claims it is fighting for internet freedom and not to defend piracy (David vs. Goliath and all that), it is pretty clear that this is all about competing with the large ISPs…If Teksavvy is permitted to continue providing access to pirated content to its subscribers while its major competitors are either constrained from doing so, or willingly agree not to, this gives “David” a competitive advantage when it comes to finding and keeping customers, especially those whose proclivities tend to consumption of content they haven’t paid for”.

As for the intervenors, they fell into two groups, (1) those supporting the site blocking order (Fédération Internationale des Associations de Producteurs de Films–FIAPF; the Canadian Music Publishers Association, International Confederation of Music Publishers, Music Canada and International Federation of the Phonographic Industry (IFPI); the International Publishers Association, International Association of Scientific, Technical and Medical Publishers, American Association of Publishers, The Publishers Association Limited, Canadian Publishers’ Council, Association of Canadian Publishers, The Football Association Premier League Limited and Dazn Limited, a sports streaming service), and (2) those opposed (CIPPIC, CIRA and the British Columbia Civil Liberties Association–BCCLA). The court grouped them into three categories, the supporters of the order, CIPPIC and CIRA and finally, the BCCLA.  This somewhat unusual procedure was taken to expedite the filing of evidence and to hasten the court process.

Those opposing the order—Teksavvy, CIPPIC, CIRA and BCCLA– put forward a number of arguments; viz. site blocking is not mentioned in the Copyright Act and therefore the court has no jurisdiction; the CRTC has jurisdiction (this, despite the fact that the CRTC concluded that it did not have jurisdiction to establish site blocking as a result of the FairPlay Canada application to create an administrative agency to manage a site blocking regime); site blocking is inconsistent with net neutrality and, finally; that site blocking interferes with freedom of expression as enshrined in the Charter of Rights and Freedoms. The Appeal Court examined and ultimately dismissed all these arguments. For a detailed examination of the case, see prominent copyright lawyer Barry Sookman’s blog posting “Blocking orders available in Canada rules Court of Appeal in GoldTV case”.

Will this be the end of it? Teksavvy could of course try to appeal to the Supreme Court of Canada (SCC), but there is no guarantee the SCC would grant leave to hear the case. One can never pre-judge what the Supreme Court justices may decide in terms of what to add to their docket, but the FCA’s decision was both clear-cut and unanimous, suggesting little grounds for appeal. For now, the GoldTV order remains in place and the way has been cleared for further similar orders. Thus Canada is well on its way to joining the large number of countries that have already instituted blocking of copyright infringing content either through the courts, legislation or an administrative process. The Philippines is but the most recent country to move to implement site blocking as a means to protect legitimate content industries and artists.

An obvious exception is the United States, where an initiative in 2011 to bring in a measured site blocking approach through legislation, known as the Stop Online Piracy Act (SOPA) was torpedoed by a coalition of internet platforms and associations, led by Google, Wikipedia and the Electronic Frontier Foundation, among others. A campaign of fear-mongering and misinformation led to the withdrawal of the legislation, and the concept of site blocking has remained toxic in the US ever since, notwithstanding its successful introduction in a number of other democracies that are just as concerned with personal freedoms as the US, with the United Kingdom, Australia and now Canada being good examples.

While the courts in Canada have tackled the problem in the absence of specific legislation governing site blocking (as they did in the UK), arguing that a copyright owner is “entitled to all remedies by way of injunction, damages, accounts, delivery up and otherwise that are or may be conferred by law for the infringement of a right”, other countries such as Australia have passed legislation (enacted in 2015, amended in 2018) to address the issue. Australia has been one of the more successful regimes to curtail widespread online offshore piracy.  Canada is also considering legislation.

As part of the process for updating the legal regime for protection of copyrighted content in the digital environment, a consultation paper “A Modern Copyright Framework for Online Intermediaries” has recently been released by the Department of Innovation, Science and Economic Development (ISED). ISED is the department of government in Canada that has statutory authority for the Copyright Act. The paper posits a wide range of options for dealing with online copyright infringement and the role of intermediaries, with public comments sought by May 31. One of the options is to establish a statutory basis for site-blocking in cases of copyright infringement, subject to a number of conditions such as prima facie infringement, prior notice, technical feasibility, irreparable harm, effectiveness, complexity and cost, and safeguards. The paper cautiously notes that “establishing such a remedy in legislation could be warranted” given that there is already a legal basis for such orders, i.e. the GoldTV case. It thus appears that the Federal Court’s decision has helped move the bureaucratic process forward in terms of potential legislation, although one has to wonder if legislation is really necessary now that the courts have already dealt with the issue on the basis of existing law.

Any legislative solution will be a slow process given the input from across the spectrum of stakeholders, with a number no doubt opposed to any form of site blocking based on the usual exaggerated objections related to net neutrality and online freedom of expression. The result may be gridlock with proponents and objectors engaged in extensive lobbying of a Parliament where the government is in a minority situation and has a number of other difficult content and technology issues on its plate. It is therefore all the more welcome that the FCA has upheld the initial site blocking order of the Federal Court and confirmed that site blocking orders are available in Canada as a form of relief against offshore pirate websites.

© Hugh Stephens 2021. All Rights Reserved.