Copyright – Page 9 – Hugh Stephens Blog

Does the Trudeau Government Really Support Canadian Media? Saying One Thing but Doing Another (It’s Time to Walk the Talk)

A couple of weeks ago I provided my interpretation of the results of the recent Federal Court case, Blacklock’s Reporter v Attorney General of Canada. My main objective was to call out the twisting of that decision by those claiming the result means that fair dealing trumps the protection provided under the Copyright Act to TPMs (Technological Protection Measures, aka “digital locks”). In other words, debunking the assertion that as a result of this decision, it is legal for a user to bypass or circumvent an access control TPM in order purportedly to exercise their rights under fair dealing. As I explained, the court did not so rule for the simple reason that it concluded that the user, a Parks Canada employee, did not circumvent the TPM because she had obtained access licitly through purchase of a subscription. The issue at bar was that the password thus obtained was then shared with a couple of dozen or so other employees of Parks Canada and other Canadian government departments for “research”, an identified fair dealing purpose.

The judge concluded that the terms of the subscription were sufficiently ambiguous to permit the interpretation that sharing the password was not an infringement, and thus did not constitute circumvention. He was also unwilling to conclude that a password constitutes a TPM, absent expert testimony. He then went on to assess whether the use fell within the four corners of fair dealing, concluding that it did both in terms of purpose and form of use. As controversial as this decision may have been in terms of determining that sharing a licitly-obtained password granted for a single subscription was not an infringement because the end use was fair, as well as failing to accept that a password authorized by the copyright owner that controls access to content is not a TPM, the decision nonetheless did not legitimize the circumvention of a TPM on the basis of fair dealing. Thus, I concluded the Court had upheld the principle that fair dealing does not trump a TPM, or, put another way, the Court did not overturn that principle.

Then, noted copyright lawyer Barry Sookman weighed into the debate, posting his views on the decision, “Understanding subscription licenses, fair dealing and legal protection for TPMs in Canada: A critical commentary of the Blacklock’s Reporter Parks Canada decision”. Sookman’s legal deep dive into the case is a much more detailed analysis than my own although he also concludes that, among other things, the decision did not rule that fair dealing trumps the Copyright Act’s anti-circumvention prohibition regarding TPMs. He also disputes the Court’s fair dealing analysis, concluding that since access was not licitly obtained, there can be no fair dealing. According to his analysis, it was not obtained legally because there was breach of contract. Based on his review of contract law and precedents, Sookman concludes (unlike the decision reached by the judge in the case), that Blacklock’s Terms of Service were binding on Parks Canada. You can read his arguments for yourself.

One sure way to know how persuasive these points are would be for Blacklock’s to appeal the case, although this seems unlikely unless a source of funding appears. As Blacklock’s noted in a posting shortly after the decision was announced,

“We are a small business like a million others. We have spent eight years and $538,665 fighting the Attorney General and Federal Court to uphold property rights. FC 829 should be appealed to the Supreme Court, but large corporations and trade associations relying on electronic commerce cannot leave it to Blacklock’s alone to litigate the definition of “password” in Canada in the digital age. Parties interested in joining an appeal with financing should contact counsel: Scott Miller, c/o MBM Intellectual Property Law. 275 Slater Street, 14th Floor, Ottawa K1P 5H9.”

Will anyone step forward? The Attorney General for Canada has deep taxpayer-funded pockets. Blacklock’s does not. This is David v Goliath.

Sookman’s analysis suggests there are solid grounds for an appeal, but to me the most important element of his blog post relates to policy direction rather than legal arguments. He concluded his analysis by noting the discrepancy between the Government of Canada’s aggressive pursuit of Blacklock’s and its professed support for Canadian journalism. The government, through the Attorney General of Canada (AGC, i.e. the Department of Justice), not only very aggressively defended the suits Blacklock’s brought against government departments but went beyond a defence, seeking a declaration from the Court that a password is not a TPM and that its use does not constitute circumvention, in effect seeking to gut the TPM provisions of the Act. (The Court declined to make such a declaration). Moreover, when Blacklock’s tried to discontinue the action, the government continued to pursue the case, instituting a motion seeking declaratory relief that the Agency did not breach Blacklock’s Terms of Service or infringe copyright based on a fair dealing defence.

This is the same government that constantly speaks of the need to maintain a viable media sector and which has undertaken several initiatives with the declared intent of doing so. Perhaps the most visible, and possibly most controversial, is the Online News Act, Bill C-18, that sought to impose an obligation on large US-based social media platforms, to wit Google and Meta (Facebook/Instagram), to negotiate good faith content sharing agreements with Canadian media for the platforms’ use of news content, failing which the government would impose binding arbitration. Most people are familiar with the decidedly mixed outcome of that exercise, with Meta “complying” with the legislation by blocking links to Canadian news content on its sites while Google agreed to contribute $100 million annually to media in Canada, to be disbursed through a hastily formed entity, the Canadian Journalism Collective. The funding subsumes Google’s earlier voluntary licensing agreements with some media companies. The Collective is expected to dole out about $17,000 annually per working journalist from this fund. Meanwhile news links remain blocked on Facebook and Instagram.

Another government attempt to obtain additional funds comes through a second recently passed piece of legislation, the Online Streaming Act, Bill C-11. The CRTC has taken early action to require an initial “downpayment” from foreign streaming services operating in Canada, part of which will go to support the Independent Local News Fund. Then there are tax credits such as the Canadian Journalism Labour Tax Credit for a QCJO (Qualified Canadian Journalism Organization).

There has been some pushback against financial support for media from governments, streamers, and social media organizations, primarily from a few prominent journalists worried about compromising the independence of the Fourth Estate. See Andrew Coyne’s recent comments (“Please stop helping us: the newspaper bailout is a comprehensive policy failure”) in the Globe and Mail. Although many in the media industry do not agree with his perspective, Coyne has a point. The media, newspapers like the Globe and Mail and National Post, specialized journals like Blacklock’s, recreational publications like the Walrus or Maclean’s, or various other online publications, should be able to stand on their own feet and earn revenue from the valuable content they provide. If that content is not worth paying for in the eyes of consumers, why produce it? But a business model that is based primarily on getting paid by consumers for the content they consume is not viable if media products are free for the taking by anyone claiming “fair dealing”. That is nothing but a licence for piracy.

If you click on the link to the Coyne opinion piece above, unless you have a digital subscription to the Globe, you will run into their paywall. You will be invited to register for a few free articles, but more specifically you will be encouraged to subscribe, with a very attractive initial offering (at the moment, $7.96 a month, before tax) that after a set period of time will revert to the more normal subscription price of about $32 a month. That is how the Globe can afford to pay Coyne and run its business. You can even use the Globe content that you access through your paid subscription for fair dealing purposes, for example by making a copy of a reasonable amount of that content for research, private study etc. However, it you were an employee of a large organization, (like a federal government agency or department for example), and a number of employees of your organization needed access to the Globe to stay current on issues, to track what the public is reading, or to anticipate questions that ministers might be asked, etc., one would normally expect that rather than having just one subscription for members of that organization, there would be an institutional subscription that reflects the true usage of the content. For example, Parks Canada has almost 6000 employees. The federal government in Canada has almost 300,000. A smaller organization, like the Department of Canadian Heritage, (that is spearheading policy initiatives to “save” journalism in Canada) has almost 2000 employees. Some specialized agencies (Copyright Board of Canada, for example) have just a handful. (The Copyright Board has 25). One would expect that an institutional subscription would be tailored to the number of users.

One would not expect that a large government department would purchase exactly one (1!) subscription and freely share it among any employees who might need access to the content, using fair dealing as the pretext. But that is what happened to Blacklock’s Reporter. That is what Department of Justice lawyers, representing Parks Canada, (an agency of the Government of Canada, the same government that is touting its support for professional journalism because of the important role it plays in our democracy) argued was their right to do. Rather than siccing the legal dogs from the Justice Department (representing the Attorney General of Canada) on a news organization like Blacklock’s that investigates and reports on what is going on in Ottawa, the Government of Canada should walk the talk of its policy to support responsible journalism in Canada and pay fairly for the content it uses rather than hiding behind a specious expansive interpretation of fair dealing. The actions of the government are reminiscent of the tactics used by educational institutions in Canada to avoid compensating authors and publishers for widespread copying of content for use in teaching under the guise of “educational fair dealing”.

Not only has the Attorney General taken a hard line on this case, it has also tried to blacken Blacklock’s reputation by accusing it of entrapment and being a copyright troll. Blacklock’s had to resort to Access to Information requests to learn how many government employees had accessed the single subscription they had authorized. The judge in the Blacklock’s case explicitly dismissed these allegations, noting that Blacklock’s had no intent to deceive.

As Barry Sookman concluded in his blog post,

“It is high time the Government decides whether it wants to win its suits with Blacklock’s at all costs and in the process create precedents which undermine news services and other cultural industries in Canada or do the right thing and support Canadian news publishing. A good start would be revisiting its legal argument and if this case is appealed, think about what it is really trying to accomplish.”

There are lots of precedents where the Justice legal dogs have been called off for policy reasons, among them the $20 billion settlement on First Nations child welfare. The Canadian Human Rights Commission ruled that the federal government had chronically underfunded child welfare services on Reserves and ordered restitution. The federal government appealed the Commission’s order for payment and challenged the tribunal’s orders in the Federal Court. The Justice lawyers were prepared to fight to the bitter end. But then political realities intruded and common sense prevailed, the appeal was paused and negotiations leading to the settlement were undertaken. The government’s legal stance was way out of synch with its stated policy positions.

The same is true in this case and it is high time the Government of Canada stopped saying one thing but doing another. It’s time to walk the talk in Ottawa.

Fair Dealing, Passwords and Technological Protection Measures (TPMs) in Canada: Federal Court Confirms Fair Dealing Does Not Trump TPMs (Digital Lock Rules)

Image: Shutterstock.com

Anyone who has been following this case, Blacklock’s Reporter v Attorney General of Canada, might be scratching their heads about now, saying, “Wait a minute, didn’t I just read the exact opposite somewhere?”. Yes, if you were reading Michael Geist’s blog, that is precisely what you read. On June 1, Dr. Geist jumped in with both feet with his blog “Huge Win for Copyright User Rights in Canada: Federal Court Rules Digital Lock Rules Do Not Trump Fair Dealing”. That is one interpretation of the outcome of this case but, IMHO, there is one heck of a lot of spin and some wishful thinking in that headline. In fact, if you were to listen to the breathless self-congratulatory podcast on Prof. Geist’s blog featuring the lawyers who represented CIPPIC, the “Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic” at the University of Ottawa (of which Dr. Geist was a founder) in their intervention, you would think that Canadian copyright law had suddenly been turned on its head by this decision.

While there has been a lot of commentary from both sides of the copyright divide on this case, I think some additional perspective is needed. Apart from the “huge win” Geist school of thought (picked up by a number of blogs from law firms), there have been comments that this marks the end of password protection in Canada as well as statements claiming that this decision puts Canada in violation of the CUSMA/USMCA. Although there were indeed controversial aspects of the decision relating to passwords and circumvention, it did not invalidate the role of access control TPMs, nor did it violate the CUSMA (which requires remedies be taken against circumvention without authority), nor did it give a blank cheque to password sharing. Let’s dig a bit deeper.

First, we could start with my headline above stating that “Fair dealing does not trump TPMs.” This is admittedly a bit of counter spin but is just as accurate as the headline in Michael Geist’s blog. The Court’s decision does not allow or condone circumvention (i.e. the “trumping” or “overriding”) of a TPM, even if the purpose of the circumvention is to engage in a fair dealing activity. That is because the Court ruled there was no circumvention given the circumstances of the case. As the judge noted,

“In the case at bar, there is no circumvention of a TPM simply because the password was not circumvented: it was properly obtained and used for a legitimate purpose.” (Para 120)

We may disagree with the conclusion that there was no circumvention, but it is important to note that the Court did not sanction circumvention.

First, a quick clarification of what a TPM is. A TPM (Technological Protection Measure), sometimes called a “digital lock” is defined in the Copyright Act, s. 41, as;

“any effective technology, device or component that, in the ordinary course of its operation, (a) controls access to a work, to a performer’s performance fixed in a sound recording or to a sound recording and whose use is authorized by the copyright owner; or (b) restricts the doing – with respect to a work, to a performer’s performance fixed in a sound recording or to a sound recording – of any act [which only the copyright owner has the right to do or authorize].

The ”or” is important, since this distinguishes between two types of TPM, those that control access to a work (Part a of Section 41), aka “access controls” (which is what we are concerned with in this case), and those that control reproduction or other copyright related activities related to a work (Part b). aka “copy controls”.

Access controls provide the gateway that allows business models to function in the digital environment. You cannot access a work protected by copyright unless you are given the “key”, normally by paying for a subscription. (This is where paywalls and passwords come into the picture). Copy controls (Part b of Section 41) protect a copyright owner’s rights with respect to how the work is used. Those rights include the right to reproduce and distribute the work, but these rights are subject to fair dealing, as are copy controls in both Canada and the US, (fair use in the US case). It is only the circumvention of access controls that is prohibited by law. The Blacklock case was about access controls. (Often copy controls are bundled with access controls, in which case the access control protection prevails).

Because a copy cannot be made for fair dealing purposes unless access is licitly obtained (i.e by not circumventing access controls), it seems reasonable to state, as I have done, that fair dealing does not trump TPMs/digital locks. Content has to be accessed legally in order for fair dealing rights to be exercised. A TPM may be part of that legal access. If a TPM has to be circumvented in order to exercise a fair dealing purpose, that is offside Section 41.1 (1) of the Canadian Copyright Act. The Blacklock’s case does not change this.

The Court was very precise in its language stating that the fair dealing rights of the users, in this case employees of Parks Canada, could be exercised because they had licit access to the content through a licitly obtained password. In other words, there was no hacking, bypassing or decryption of a TPM in order to obtain access to and then subsequently use the content on the basis of fair dealing. At the same time, the Court refrained from ruling on whether or not a password was a TPM. More on this later.

This reaffirmation of protection afforded to a TPM will no doubt disappoint Dr. Geist and others who in the past have argued that it should be legal to bypass a TPM in order to assert fair dealing rights. He has claimed there is a self-described “fair dealing gap” that stops users from accessing content to exercise fair dealing. He has advocated for a “long overdue fair dealing exception for the digital lock rules” and has also called for establishing an exception “to allow for circumvention of a TPM for any lawful purpose”.

There are a few circumstances when it is legal to break a TPM. These are specified in the Copyright Act and include such things as law enforcement and national security; reverse engineering for software compatibility; encryption research; verification as to whether a TPM permits the collection or communication of personal information; security testing of computer systems; accessibility for disabled persons; temporary recordings made by broadcasters for technical reasons; and unlocking cell phones. Fair dealing is not among them.

To grant a legal exception to allow users to bypass a TPM in order to access content for a fair dealing purpose, such as research, would gut the ability of creators to protect content and operate a business model in the digital age. While third parties can use content in accordance with the law, including fair dealing purposes, access must be gained legally. This is just as true in the digital age as it was in the analog world. As one of the lawyers on the Geist podcast himself said, you can’t throw a brick through the window of a bookstore and grab a book just to exercise your fair dealing rights. Nor can you hack a TPM that controls access to a work, whether or not your ultimate purpose is to conduct research. The Blacklock case did not change this. I explained all this in a blog I wrote several years ago (Why Can’t I Legally Pick ‘Digital Locks’ to exercise my Fair Dealing Rights?)

But what about passwords and paywalls? Aren’t they access control TPMs? I would have thought so, and that is what Blacklock’s contended, but it seems that in terms of jurisprudence this may be unclear. A password is certainly a common means to control access, to open the door to protected content once payment or some other form of authorization is given, and is often an integral feature of a TPM. The Attorney General of Canada (AGC), representing Parks Canada, asserted that a password is not a TPM (and thus the use of a password does not constitute circumvention), and asked the Court to so affirm. It did not do so. In the absence of any evidence or expert testimony as to what a TPM is, the Court declined to address the issue. To quote from the decision, (Para 111)

“…the issue raised clearly lacks any evidence of a technical nature…There is no evidence either of what a “password” is and what it was in this case: thus, there was no expert evidence led by either party on what, in this case, constitutes the TPM.”

The Court then went on to a discussion of paywalls and whether a paywall was a TPM, or merely a means of enforcing a TPM. The end result was uncertainty regarding how a TPM (which you will recall is any effective technology, device or component that controls access to a work) is to be defined. The Court also focussed on the word “effective” to dismiss Blacklock’s argument that s. 41 was intended to empower owners to protect their works with any technological tool at their disposal, yet “effective” has been interpreted in CUSMA to simply mean that it cannot be accidentally bypassed. (Article 20.66 FN 72).

Another loose end is the meaning of circumvention. Password sharing, apparently, is not circumvention according to the Court.

Key takeaways:

The absence of expert testimony as to what constitutes a TPM was not helpful to Blacklock’s case. The judge admitted that a password could arguably constitute a TPM (Para 133) but in this case there was a paucity of evidence to allow that determination.
The fact that the password was obtained licitly was also not helpful to Blacklock’s. The password was not circumvented (defined as descrambled, decrypted, or otherwise avoided, bypassed, removed, deactivated or impaired). A subscription had been paid for, and a password provided, albeit shared within the organization-but for a fair dealing purpose.
The terms and conditions under which the subscription was purchased were ambiguous. This case dates back more than a decade. Memories are not precise. No exact replication of the Blacklock’s website at the time the subscription was purchased (2013) is available, having vanished into internet history. Testimony as to what it contained was contradictory and inconclusive. The terms of use were contradictory, allowing circulation of Blacklock’s content for personal and non-commercial use, but then referring to bulk subscriptions. Moreover, the terms and conditions did not require explicit acknowledgement by the user, opening it to claims that the terms may not have been read in full or understood. In short, there were a number of unfortunate loopholes that weakened the case. To use a cricket analogy, the Blacklock’s case was played on a regrettably weak wicket.
The use of the content was, in my view, consistent with fair dealing. It constituted non-commercial research. Of that there can be little doubt. It met the fair dealing test.

All of these elements created a perfect storm of conditions that undermined Blacklock’s case, although the Court specifically rejected the AGC’s low-blow allegation of entrapment and deception by Blacklock’s.

Going forward, the issue of whether a password or paywall is a TPM needs to be clarified. If it is, does unauthorized sharing of a password constitute circumvention? The circumstances of the sharing will certainly be relevant. As the Court stated (Para 125),

“how the password was obtained is significant as this may prevent a user from invoking the fair dealing provisions of the Act. Obtaining content by descrambling a signal or decrypting a communication may render invoking fair dealing very difficult to establish successfully.”

Properly drafted terms and conditions can provide protection against unauthorized sharing of passwords, avoiding a weakness faced by Blacklock’s in this case. The Court also went on record to note that its decision was decided on the evidence presented in this case alone and is not to become a reference at large.

It is legitimate for Blacklock’s to feel cheated by the Court’s ruling that there was no circumvention of a TPM in this case, and I can sympathize with their frustration. At the same time, it is important to note that the Court did not legitimize the circumvention of a TPM for fair dealing purposes. The law remains that a fair dealing purpose does not legitimize the circumvention of a TPM, (or the breaking of a digital lock if you will).

Commentators and analysts are free to take what they wish from any case, emphasizing this or that aspect. Michael Geist and CIPPIC have provided their interpretation, or spin. Now you have an alternate perspective. While the outcome is not what Blacklock’s hoped for, bypassing or circumventing a TPM in the name of fair dealing has not been legitimized. In other words, “Fair Dealing Does Not Trump a TPM”.

Introducing “Funopoly”: (But What About Copyright?)

Photo: Author

A couple of weeks ago I wrote about Copyright in Cottage Country, and how those wet afternoons are often occupied with cards or board games, like Scrabble, Clue or Cranium, all of which (the board games, that is) are copyrighted (and trademarked). What I neglected to mention is that, in addition to these well-known pastimes, during our recent stay at the cottage we also played several games of “Funopoly”. Now, I realize you may not have heard of this game, despite its uncanny resemblance to another much more famous, commercially available game that has been around for decades. I was introduced to it when I noticed a plain cardboard box lying on the dining table. “What’s that?”, I asked. “Oh, it’s a game I brought up to play at the cottage”, said my very creative 11 year old granddaughter, Stella. “I made it”.

Although Funopoly has a number of similarities with its famous counterpart, including the concept of buying property and paying “rent” if you land on a square, it is a different game. There are no houses or hotels to buy. You won’t find any Park Places or Boardwalks. Rather you might land on Shoppers’ Drug Mart, or Skyzone Trampolines or Canada’s Wonderland, all places in Toronto. The most expensive property on the Board, valued at something like $50, is the home of prominent rapper Drake, (actually valued at around $100 million) . But even though there are Canadian, British, Australian (and many other) geographically modified editions of Monopoly, this is not simply a Toronto version of that game. (The original US version was based on street names from Atlantic City, NJ. The British edition, also dating to the 1930s, used London street names. A Canadian edition debuted in the 1970s using street names drawn from cities across the country, from St. John’s, Nfld to Victoria, BC).

Funopoly doesn’t have street names. Another difference is the money, handmade and coloured $1 (green), $5 (blue) and $10 (purple) notes. There is a limited supply of each, and there seems to be equal numbers of each denomination. As in Monopoly, you get a reward (in this case, $1) for passing Go. But the properties are relatively expensive in proportion to the amount of money you have in hand. As a result, the first time we played I faced early bankruptcy as I had the misfortune to play last and landed on a couple of properties that had already been purchased. The “rent” was crushing and the paltry replenishment when my token (a coloured Qtip) passed Go didn’t cut it. Stella modified the game the next time we played, with players being rewarded with $10 when they passed Go. In this case, the bank soon went bankrupt as all the money was in the hands of the players. Funopoly is clearly a work in progress and is still being fine-tuned–but is a lot of fun. There are also no railroads or utilities, but there is a casino, a club and an ice cream truck. You seem to end up in jail on a regular basis, but get out just as quickly, something like the “catch and release” policies followed by Canadian courts for frequent offenders. Don’t look for Funopoly on Amazon. There is only one extant version in the whole wide world, and it is definitely not for sale. And I have had the privilege of playing it (and losing).

Knowing that I write a copyright blog, Stella asked if she could copyright Funopoly. I explained to her that if it is an original work in a concrete form (i.e. fixation), then copyright is automatically conferred. However, if she wanted a nice certificate to prove that it was copyrighted, that could be arranged. For $50, I could get her a vellum-like certificate from the Canadian Intellectual Property Office (CIPO) proclaiming her copyright in Funopoly. She would not even have to send in a photo of the game, because CIPO does not want or keep any copies of the works they are registering. (Many years ago, the Copyright Office required deposit of a copy of the work to be registered, but no longer). Nor does CIPO verify whether the work conflicts with another registered work. All they do is register a description of the work—and send you a nice certificate of copyright, as I demonstrated last year when I registered some AI created artwork and poetry, (Canadian Copyright Registration for my 100 Percent AI-Generated Work). Maybe we will register Funopoly. The certificate would be a nice birthday present for her.

Canadian copyright registration certificate or not, we must still ask the question as to whether this is an original work. Does it infringe on the copyrights or other forms of intellectual property (IP) protection of others? It turns out there has been a long history of IP disputes over Monopoly. The game was first published under the Monopoly name by Parker Bros in 1935 but there were earlier versions variously called “The Landlord’s Game”, “Finance”, or “Auction”. The game’s invention has been credited to Charles Darrow but there is strong evidence that rather than inventing the game, his genius was in marketing it, the original concept being created 30 years earlier by Lizzie Magie who had patented The Landlord’s Game in 1903. While the design and artwork (tokens, the board itself, other unique elements such as game-specific cards) around a board game can be protected by copyright, the actual rules of the game can be patented. And of course, the name (such as Monopoly or Scrabble) can be trademarked.

Each of these forms of IP protection has different characteristics. A patent has to be examined and accepted, and there is a limited period of protection, about two decades. Copyright is also time-limited, albeit of much longer duration. Trademark protection can be continuous, providing the mark stays in use and is renewed as required, normally every ten years. There was a notorious dispute in the 1980s over a game called “Anti-Monopoly”, that involved challenges to the trademark. In the end, Parker Bros. retained its trademark on Monopoly and acquired the trademark Anti-Monopoly, then proceeded to license it to the creator of the Anti-Monopoly game.

However, while many of the aspects of a board game can be protected by IP laws, some cannot. This is where the idea/expression dichotomy comes into play, meaning you cannot copyright an idea, only the expression of an idea. Thus, anyone can make a game that involves the buying and selling of properties and sending a person to jail for a variety of infractions. Anyone can make a game that involves moving a token around a board according to the role of a die or dice. But the rules of a game and its artwork and design can certainly be protected by both patent and copyright, and if a game that was sold commercially was substantially similar to a copyrighted work, with only a few details changed, that could be a factor in finding infringement.

Substantial similarity is another one of those complicated copyright issues. Simply put, you cannot simply change a few words in a published work, or presumably just a few features in a copyrighted game, and claim it is a new work. But substantial similarity is an elastic concept; even different judicial circuits in the US interpret it differently, according to this article from lawfirm DLA Piper. For my part, I am convinced that Funopoly is substantially different from Monopoly. What other game in the world uses a coloured Qtip as a token?

Nonetheless, as I am always quick to point out, I am not a lawyer and any interpretation of copyright laws that you find in this blog does not constitute legal advice. Instead, I try to go to reputable sources to buttress my opinions. I can find no better source than the American Bar Association, which outlined all you need to know when it comes to IP and board games. Will Hasbro, (now the owner of Monopoly) come after Stella to shut down Funopoly? Somehow, I doubt it. In fact, according to the ABA there are several “opoly” named games registered with the USPTO, a precedent that should help. In the meantime, we can pursue a Canadian copyright registration and obtain a pretty but not very useful certificate to hang on the wall.

Funopoly is not going to make Stella’s fortune. The real inventor of the property game concept, Lizzie Magie, got only $500 and no royalties in the mid-1930s when Parker Bros bought up rights to related games from her to protect its monopoly on Monopoly. Stella for her part won’t earn a cent from Funopoly, but that is not the point. Playing Funopoly with her on a rainy day at the cottage—even though I went bankrupt–was a priceless experience, and was the true reward.

Copyright and Education in Canada: Have We Learned Nothing in the Past Two Centuries? (From the “Encouragement of Learning” to the “Great Education Free Ride”)

Image: Shutterstock (AI Assisted)

Last month I wrote about the 200 year history of copyright in Canada, (Two Hundred Years of Copyright History in Canada: What a Journey!), drawing on a recent book by copyright scholar Dr. Myra Tawfik, “For the Encouragement of Learning: The Origins of Canadian Copyright Law”. That work outlined the genesis of Canadian copyright law in Lower Canada in the 1820s and 1830s, carrying through into the 1840 pre-Confederation period in the united Province of Canada (Canada East and Canada West). As Professor Tawfik pointed out, the motivation for the first copyright laws in what eventually become Canada was to incentivize the production of localized school texts. Appropriate books for local schools were hard to come by; books produced in Britain or France were expensive and did not always meet local needs in terms of content. Books from the US, while obviously not able to address the needs of Canada’s French speaking population, were also considered suspect in the English-speaking colonies because of their “republican” content.

Various local authors petitioned the assemblies of Lower and Upper Canada for financial support to produce books of local interest, often school texts but also sometimes maps, geographies and natural histories. Support was often provided, either in the form of an advance payment (which carried the obvious risk of funding a work that ultimately was not published), or else a commitment to purchase a set number of copies once the work was in print. The problem of the lack of suitable pedagogic materials was chronic, and the Assemblies got tired of being importuned. The solution, first bruited in the 1820s, but then implemented in the 1830s, was to introduce a copyright law to provide authors with a revenue stream from royalties to encourage production of more local content. In terms of achieving its objectives, this legislation was generally successful, despite constant interference from Britain which wanted to standardize copyright laws throughout the Empire and would not recognize Canadian copyrights in Britain unless the works were registered, and copies deposited, in London. Nonetheless, Canadian copyright laws allowed Canadian authors and publishers to establish themselves and begin a long tradition of Canadian educational publishing.

Fast forward two hundred years to the present and the disconnect between the goals of those early legislators and educators, and the situation today, is stark. I find it highly ironic that while the impetus for the first Canadian copyright laws came from a desire to promote learning and production of educational materials, today most Canadian educational institutions are taking a massive free ride when it comes to paying for teaching materials. Instead, they are using every pretext possible to avoid paying collective licence fees to the Canadian copyright collective for authors and publishers, Access Copyright, for their use (reproduction) of printed or digitized educational materials, using the “education” fair dealing exception introduced in 2012 as the excuse. Two hundred years later, we have gone backwards with respect to meeting the social objectives of copyright law.

I have written a number of times (most recently, here, but also here and here) on the fundamental unfairness of the way in which educational fair dealing has been interpreted by the educational sector in Canada, spurred on by university librarians, and abetted by the courts, resulting in upsetting the fundamental copyright balance between creators and users in this segment of the market. In the process they have turned their back on Canada’s copyright history. The negative impact on the educational publishing sector in Canada has been well documented, with several publishers giving up on the K-12 or post-secondary markets in Canada and many authors facing a drastic loss of income.

Universities and librarians continue to protest when this unfairness is pointed out, advancing a variety of arguments to justify their free ride on the work of others. One good example of the kind of self-justification put forward is an article published last summer in “The Conversation” by a couple of prominent university librarians. Among other things, they argue that the market has changed, moving largely to digital resources and digital access, no longer requiring any copying. (They seem to equate “copying” with photocopying although lots of digital reproduction takes place. This has the same impact on the market as the former practice of photocopying pages of textbooks). They point out that universities spend considerable sums on obtaining access to digital content directly from publishers. These facts are true, but they do not represent the full picture.

While many works are accessed by students from library sources directly through links, considerable copying and sharing (which a reprographic licence would permit) still takes place. After all, if there was no reproduction, the educational institutions would not have to invoke fair dealing to justify the unlicensed copying and sharing that is taking place. In testimony before the House of Commons committee reviewing the Copyright Act, one university librarian estimated that over 15% of access to course materials by students at their institution was based on fair dealing (as unilaterally interpreted by that university). Yet we have no proof that this copying complies with fair dealing guidelines, or indeed that the fair dealing guidelines published by the universities are consistent with fair dealing jurisprudence. In the long drawn-out case between Access Copyright and York University over educational copying and whether the tariffs (user fee per student) established by the Copyright Board of Canada were mandatory if universities used materials represented by the copyright collective (the courts ultimately determined that the tariffs were optional, not mandatory), the issue of whether York’s fair dealing guidelines were “fair” was never determined. The initial Federal Court ruling found that they were, in fact, not fair, and on appeal the courts declined to issue a statement requested by York that would have blessed its interpretation and application of fair dealing.

Because of the uncertainty this unilateral interpretation of fair dealing has engendered, universities have had to strengthen their oversight of copyright to ensure they stay out of trouble. Trying to make a virtue of a necessity, they have used this additional investment in library staff to attempt to demonstrate their respect for copyright. Among other things, they have had to improve their communications to make students aware of copyright and explain what they can and cannot do with copyrighted content. It is true that if you go to any university website, such as this one from Simon Fraser as an example, you will find an extensive discussion of the “do”s and “don’t”s of copyright. But is there any enforcement? Who knows? What is clear is that if these additional resources had been invested in acquiring a collective licence instead of unnecessarily bulking up on staff, this would have resulted in a better outcome for all concerned and would have provided the degree of protection needed. (“Throwing Good Money After Bad: How Canadian Universities Wasted Millions by not Acquiring a Copyright Licence”).

Many, if not most, of the digital licences obtained directly from publishers provide for access to works (usually limited to a certain number of users) but do not contain reprographic (reproduction/copying) rights. Educators have argued that the previous Access Copyright licence that covered photocopying of printed materials is no longer relevant in the digital age. While there may be truth to this in respect of printed materials, which are used less, Access’s licences also now cover digital copies. A copy is a copy, and an unauthorized copy is an unauthorized copy, whether hardcopy or digital.

Then there is the double-dipping argument that an Access Copyright digital reprographic licence would duplicate a similar licence obtained directly from a publisher, and so users would be paying twice for the same material. This is another red herring. Access Copyright represents most publishers. They belong to Access for sound business reasons. It is to receive compensation for unlicenced copying of the works they represent. If a situation arose where there was potential double-counting, Access Copyright has the ability to adjust its licence to accommodate such a situation through negotiations with the education sector, provided educational institutions were willing to demonstrate which materials were already covered by a direct licence from a publisher.

Finally, and this is the most galling assertion of all, apologists for the educational free ride (as in the article from The Conversation cited above), argue that the nature of university funding has changed. Students are now facing a heavier burden, and universities and colleges are challenged when it comes to funding. Both are true and both are irrelevant in terms of justifying the broad use of educational fair dealing to deprive authors of payment for reproduction of their content. Rather than pass on any savings to students, post-secondary institutions have found a plethora of ways to squeeze a bit more from them, as best exemplified by current stories regarding heavy dependence on–one might even say exploitation of–international students by many institutions. Do funding challenges mean that caterers for cafeterias, or cleaners in student dormitories, or any of the other suppliers to a university should suddenly provide for free what was previously paid for? Why should publishers and authors carry the burden for the funding challenges faced by many of our post-secondary institutions? We are talking about a few dollars (a couple of cups of coffee) per student per year.

Since there is no denying the hit the educational publishing industry and authors have taken, the educational sector has been quick to point to the Canada Book Fund and the Public Lending Right as alternatives. In other words, someone else should pay—but certainly not the users of the content! Whatever happened to the user-pay principle?

What is the solution? It is not to undermine fair dealing, or to remove education as a specified fair dealing purpose with respect to use of materials by students themselves. It is to put reasonable limits on its use by educational institutions who have been enjoying a decade long free ride. The Standing Committee on Canadian Heritage in its review of the Copyright Act proposed a reasonable solution. It recommended that,

“The Government of Canada amend the (Copyright) Act to clarify that fair dealing should not apply to educational institutions when the work is commercially available.”

This would preserve education as a fair dealing purpose but, with respect to educational institutions, would mean that it would not apply in situation where a commercially available licensed alternative is available. This would include both digital reprographic licences obtained directly from some publishers as well as a non-duplicative collective licence from Access Copyright for works in its repertoire. This is similar to what is done in the UK. Such an amendment would restore the education fair dealing balance that has become so badly skewed as a result of the 2012 Copyright Act amendments, and the subsequent broad interpretation thereof by the education sector, an imbalance that was surely not foreseen nor planned by legislators at the time.

Today’s Parliamentarians can make common cause with their predecessors of some two centuries ago by recognizing the symbiotic relationship between copyright, authorship and the production of quality educational materials. They need to act, and act soon. To date, despite assurances by the current government that it would take measures to ensure a sustainable educational publishing industry, including fair remuneration for creators and rights-holders, nothing has been done.

Canada’s first copyright laws were introduced almost two hundred years ago to encourage learning. That should still constitute a prime policy objective for copyright legislation; to incentivize the production of quality content for the education of today’s scholars. It is said that those who fail to learn from history are doomed to repeat it. In this case we seem to be forgetting the progress that has been made in building a vibrant and (until relatively recently) viable Canadian publishing industry and are turning our back on two centuries of copyright development for the sake of giving the education sector a short-sighted (and hopefully short-term) free ride.

Copyright in Cottage Country

Photo (c) author, 2023

For anyone who may have noticed (hopefully you did), I have not posted a blog for a couple of weeks. I am invoking that blanket summertime excuse, “I’ve been up at the cottage”. But I have not completely divorced myself from thinking about copyright issues, since they seem to pop up everywhere, even in cottage country.

For non “Central Canadians”, the term “cottage” may be a bit of mystery or even a misnomer. If you are thinking Anne Hathaway’s Tudor cottage covered with climbing roses, you are way off base. In fact, the term doesn’t seem to be used much outside of Ontario, where the term “cottage country” means any place on any lake north of Toronto. (There are a lot of them; over 250,000 lakes in Ontario). In the west, they are referred to as “cabins”, in Quebec as “chalets”—and in Russia, “dachas”, or so I am told. They can be rustic, water-access by canoe only simple abodes with outdoor plumbing or they can be multi-million homes on places like Lakes Rousseau or Joseph in the Muskokas, with every kind of cottage toy (ski boat, sea-doos, inflatable floating bouncy castle etc) imaginable. For those fortunate enough to own a cottage—and it is not a small number—many have been in the family for several generations (and will now likely attract a higher capital gains tax when they are passed on to the children, given recent budget changes. So much for the new rules affecting only 0.13 percent of Canadians). But cottage life is also embraced by new Canadians and some are even rented out (God forbid) on platforms like AirBNB.

In my case, our cottage is located in the Kawartha Highlands, Canadian Shield country between the towns of Bancroft and Haliburton. We can drive there on washboard dirt roads. There is hydro (most of the time) but very limited cell coverage. If you walk down the road, and stand on a particular rock in the evening, it usually works. We used to have a landline and dial-up Wifi but it was so slow we gave up, and then the phone company cancelled the “cottage line suspension service” we used to use in the winter. Because, you see, like many cottages, we close up for “the winter” (which generally means between Canadian Thanksgiving in early October and Victoria Day weekend in late May). The power is shut off, the pipes drained, the dock lifted and everything is closed up to await the minus 30C temperatures that sometimes arrive in Jan-Feb.

So what does this have to with ©? Well, you can’t escape it, even up here at the lake. Whether it is the $4.99 DVDs we buy at the local supermarket for those inevitable rainy days or the ubiquitous copyrighted board games (Scrabble, Clue, Cranium, you name it) that get trotted out, the © symbol is everywhere. Cottage country must be the last stand of the DVD, and a lot of low grade Hollywood movies and series that you have never heard of seem to arrive on the shelves of the local Foodland for bored cottagers. But there is no cable and no streaming, so if you want to watch something in the evening, get out the old DVDs. At our place, Bugs Bunny and Tom and Jerry cartoons, dating back to the 1950s and beyond, are still popular as a new generation discovers them, but beware of piracy. One young visitor, having seen the scary FBI warning at the beginning of a Bugs DVD, asked what piracy was because, as she said, I don’t want to go to jail for 5 years or pay a fine of $250,000.

And then there are the card games, many of them, like cribbage, having been invented a couple of centuries ago. But the Bicycle “Official Rules of Card Games”, first copyrighted in 1887 (our edition is a relatively recent 2006) is indispensable. While the rules of a game (i.e. the mechanics) cannot be protected by copyright–although artwork and design unique to a specific game could be–Bicycle’s edition of the rules is copyrighted because of its editorial content, organization, etc.

The local paper, the Bancroft Times (founded 1894) has its own copyrighted copy. You won’t find Canadian or Associated Press articles here. You will find a blow-by-blow description of the local Council meeting where Council wrestled with the thorny problem of the arena’s deficit and whether to impose user fees on residents of outlying municipalities that were refusing to pay their share of operating expenses. This seems only fair, except the problem arises from the disincentive caused by user fees. If it stops the kids from outside town from using the arena, there won’t be enough players for the hockey league. Thorny local issues. This made me reflect on some of the big journalism issues of the day, such as the OpenAI v New York Times lawsuit (that I wrote about here) concerning OpenAI’s unlicensed use of NYT content to train its Artificial Intelligence (AI) algorithm. This made me wonder if the Times’ (the Bancroft Times, that is) coverage of Bancroft Town Council’s meeting would be scooped up by OpenAI’s AI machine. We hear that AI has an insatiable appetite for data, in fact that within a year or two there may be such a shortage of data for AI training that AI may have to produce its own synthetic data. If there is a data drought, no doubt content in the Bancroft Times will be as important to OpenAI as the content it has purloined from the New York Times.

Another manifestation of AI is the use of copyrighted artwork and photos to produce new AI-generated content. A couple of years ago, while gazing at the lake from the dock, I read about DALL E-2, one of the earlier AI programs that could produce images on demand. I created one using the scenery I was enjoying, titled “Autumn foliage, with Muskoka Chairs in the style of Monet”, to illustrate my blog on “AI and Computer-Generated Art: Its Impact on Artists and Copyright”.

Whether it is broadcasts from “The Moose” (Moose FM Radio, officially known as CHMS-FM), content from the local newspaper, the “Think Turtle Conservation Initiative” that sells signs, decals, and fridge magnets to raise awareness of turtles crossing the road, or information from the local lake association or Fish and Game Club, the integrity of content is protected everywhere by copyright—even at the cottage!

Two Hundred Years of Copyright History in Canada: What a Journey!

Image: Shutterstock (with AI assist)

As we approach July 1, Canada Day, Canada’s 157^th anniversary, it is worth reflecting on the history that shaped this wonderful if imperfect country of now 41 million. While not top of mind for everyone, part of that history relates to copyright! This year, 2024, marks a couple of milestones in the history of copyright in Canada. It is 200 years since the first copyright bill was introduced into the Assembly of Lower Canada and it is 100 years since the entry into force of the legislation that established Canadian copyright sovereignty, the Copyright Act of 1921. During those two centuries, Canada’s copyright history has paralleled its economic and political development, moving from struggling to assert its independence from Britain to learning to live beside and accommodate the economic colossus south of the border. Internationally Canada moved from largely being, or wanting to be, a copyright outlier to a nation that has fully embraced the international rules-based order of copyright (although there are still some areas that could be strengthened).

As noted by Professor Myra Tawfik in her new book, “For the Encouragement of Learning”[i], on February 9, 1824, a “Bill for the Encouragement of Learning by Securing the Copies of Maps, Charts and Books, to the Authors and Proprietors of such Copies during the Times therein mentioned”, was introduced into the Assembly of Lower Canada (now Québec) by François Blanchet, an elected member of the Assembly. This wording mirrored that of the Statute of Anne, the first piece of British copyright legislation protecting authors, adopted in 1710, and the US Copyright Act of 1790. Blanchet’s Bill died on the order paper but subsequently, in 1832, the first piece of copyright legislation in what is now Canada was passed by the Lower Canada Assembly.

The second milestone was the proclamation, on January 1, 1924, of the Copyright Act of 1921 which, with minor amendments, established the copyright framework in Canada for decades until revised in the late 1980s. Although copyright was one of the powers granted to the new Dominion of Canada in 1867, (and indeed Canada passed, or attempted to pass, copyright legislation on several occasions), if that legislation conflicted with British interests and imperial copyright law, it was blocked by the British government. The Copyright Act of 1921 resolved those conflicts. It also brought Canada fully into compliance with the terms of the 1886 Berne Convention, the first international treaty on copyright, which for many years Canada had agitated to leave, having acceded to Berne as part of the British Empire when the Convention was established. (After a perfunctory consultation, Canadian Prime Minister Sir John A. Macdonald had sent a telegram to London agreeing). In 1928, partly as an assertion of sovereignty, Canada acceded to Berne in its own right but subsequently had doubts about having joined (in part because the United States was not a member). Today, Canada has fully embraced the international copyright system through accession to most international copyright treaties and full acceptance of the terms of Berne incorporated into the TRIPS Agreement (Trade Related Aspects of Intellectual Property Rights), part of the World Trade Organization (WTO).

While the 1710 Statute of Anne provided, for the first time, protection to the authors of works, rather than printers, (for an initial period of 14 years, which could be extended for an additional 14 years), it did not apply to any British territories outside Britain, notably not to the North American colonies prior to 1776. Although amendments to the Statute in 1814 provided protection to British authors throughout the Empire, there was no protection for Canadian or other colonial authors unless they arranged to have their works first published in Britain and registered at Stationer’s Hall in London. Not surprisingly, very few did. The Lower Canada Copyright Act of 1832 established the first copyright in Canada for Canadian authors, although it only applied in what is now Quebec. However, after the union of Upper and Lower Canada in 1840 to form the Province of Canada, the 1841 Provincial Copyright Act, modelled on Lower Canada’s 1832 law, applied to both Canada East (Quebec) and Canada West (Ontario). Nova Scotia enacted its own copyright legislation in 1839.

Prof. Tawfik points out that much of the impetus for the introduction of early copyright legislation in British North America (BNA) came from a desire to encourage the publication of Canadian school texts. Given the dearth of local books at the time, various authors of local histories, maps and schoolbooks regularly approached the legislatures of the BNA colonies seeking financial support to print their works, either a subsidy to be provided in advance or a commitment to buy a certain number of the works at a predetermined price. While in some cases, subsidies were granted, a solution to the problem was to introduce a copyright law that would provide a means for authors to be self-sustaining through royalties. As Professor Tawfik notes, government in the colonies “…adopted the position that copyright relieved it of its responsibility to subsidize the printing of books” (p. 148).

Fair dealing was first introduced in Canada in the 1921 Copyright Act. The Act mimicked the 1911 Imperial Copyright Act which had, for the first time, enshrined fair dealing exceptions in British law, providing greater clarity than the previous common law approach. Fair dealing encompassed several exceptions to copyright protection, allowing unlicensed use of copyrighted works for specified purposes. At the time, these purposes were “research, private study, criticism, review or newspaper summary”. However, even if the dealing, or use, fell within these specified categories, other factors were also considered to determine whether the dealing was fair (e.g. amount or nature of the copying). That is essentially the position that prevails in Canada today, except that the list of specified fair dealing exceptions has been broadened to include, in addition to the original categories, parody, satire, and education, while the term “newspaper summary” has been broadened to “news reporting.”

The 1921 Act also brought Canada into conformity with Berne, a key concern of Britain given Canada’s reluctance to comply during the early decades of the Convention. The issue lay with printing rather than authorship and related in large part to the situation in the United States, where the printing lobby held sway in Congress. Initially the US refused to recognize the copyright of non-US residents and US printers freely copied (one might say “pirated”) British and other works. A couple of years ago, I discussed how Canada got caught in the crossfire on this issue. (International Book Piracy: How Canada Got Caught in the 19th Century British-US Copyright Wars). Joining Berne would have required the United States to recognize non-US copyrights (in return for US copyrights being recognized in other Berne countries), so it stayed out. In 1891 Congress passed the Chace Act whereby the US would recognize the copyrights of non-US authors provided that the work was printed in the US. In other words, the US would only recognize foreign copyrights if the foreign works were published there. Canadian printers wanted something similar. The Canadian Parliament tried to pass legislation containing compulsory printing requirements as a condition for allowing foreign and British works to enjoy copyright protection in Canada, only to have these laws blocked by London because of inconsistency with Berne and potential harm to British publishing interests.

While Canada was never able to successfully institute a manufacturing clause linked to copyright as the US did, nevertheless like the US it required registration for a copyright to be valid and limited the term of protection to a fixed number of years after publication. In 1908, the Berne Convention countries abolished registration as a requirement (copyright was established automatically with no formalities upon creation as long as other criteria like originality, nationality, fixation etc. were met), while it also established the minimum term of protection to be the life of the author plus 50 years. Canada was worried that its term of protection would be longer than in the US (giving American authors better protection in Canada than vice versa) and was also wary about abolishing registration. Yet Britain wanted to ratify the 1908 revision and since Canada had entered Berne as part of the British Empire, it needed to get Canada onside to do it.

This finally happened with the 1921 Act, although Canada maintained a compulsory licence provision applicable to non-Berne authors for many years. This was aimed at the US, although it was never used. It was designed as leverage to gain an exemption from the US manufacturing clause for Canadian authors, a measure that was eventually successful. Canada also retained a voluntary registration system. As mentioned above, as part of its goal to assert sovereignty through independent treaty-making, Canada joined the Berne Union as a separate entity in 1928.

Despite full accession, Canada had second thoughts about joining Berne for several decades thereafter, largely because of concerns about printing and a view that copyright generated more income for foreign authors in Canada than for Canadian authors abroad. In the 1960s, Canadian officials viewed the country’s international copyright obligations solely through an economic “balance of trade” lens, considering the amount of royalties paid to foreign authors for distribution of their works in Canada as an economic drain, with little offsetting benefit, ignoring social and cultural objectives entirely.[ii] At one point, Canadian officials even took the risible and unsustainable position that Canada was a “developing country” from a copyright perspective and was therefore entitled to weaken its level of copyright protection. The fact that at the time the UN definition of a developing country was limited to those with a per capita income of less than US$300 per year, and that Canada had the third highest per capita income in the world, did not help Canada’s case. This narrow, utilitarian point of view still has advocates as we saw during relatively recent discussions regarding whether Canada should extend its term of copyright protection to match that of the US, EU, UK, etc., with some commentators claiming (with no credible evidence, as I pointed out here) that extension would cost Canada between $100 million and $450 million annually. Total nonsense.

The problem of net copyright revenue outflow back in the 1950s and 1960s lay not with copyright of course, but with the fact that Canadian authors were not particularly prolific or internationally known at the time. It seems not to have occurred to Canadian officials that a strong reciprocal copyright regime might have fostered the growth of Canadian writing and provided a needed economic incentive. Happily, the explosion of Canadian literature has ended most of the parochialism. In particular, the cultural vibrancy of Quebec creators and their success internationally eventually helped push the Canadian government toward a more pro-creator position by the mid-1980s.

Subsequently, copyright and intellectual property (IP) generally become intertwined with trade policy issues. The Uruguay Round leading to the establishment of the WTO was underway, and IP, including copyright, was one of the issues on the table in the negotiations. The Canada-US Free Trade Agreement of 1989 committed both parties to cooperate in the Uruguay Round and in other international forums to improve the protection of intellectual property. Copyright became “coinage” in the negotiations, to be bundled with other issues (like dairy quotas, automotive rules of origin, or investment rules) as a means to achieve overall negotiating objectives. In 1989, the US finally acceded to the Berne Convention, further harmonizing the international rules governing copyright, and all WTO members incorporated its principal provisions through TRIPS when the WTO was established in 1995. By this time, the World Intellectual Property Organization (WIPO) had been established (in 1970) to manage not only the Berne Convention, but other international treaties related to intellectual property, such as those dealing with patents and trademarks. As Canada has embraced trade liberalization and has meticulously adhered to the rules-based order in international trade out of its own self-interest, it has come to recognize and accept the benefits of a standardized international copyright framework and the benefit this brings in terms of cultural expression and cultural industries.

Copyright in Canada and internationally continues to evolve. The current challenge is AI, and the rules by which AI developers will be able to access copyrighted content to train their algorithms. Will there be a text and data mining (TDM) exception in Canada, similar to the fair dealing exceptions? If so, how broad, or how narrow, should that exception be in order to spur innovation without harming creators and cultural industries? Will there be further international rules to govern how AI and copyright can co-exist, and to what extent will Canada be a player in setting these rules?

Canada evolved from colony to nation as its copyright framework developed over the past 200 years. In the early days, Canada agitated for more control over copyright policy. When it achieved this, it played somewhat of a spoiler role, with one eye always on the US and its impact on Canada and the Canadian market. As Canada matured, it became more committed to playing by and contributing to the international consensus on copyright, although we are still an outlier in some respects, given the situation with educational fair dealing that has decimated the educational publishing industry and the incomes of many authors in Canada. This is a situation not faced in any other country—and needs to be fixed. Although we have come a long way, we still have some lessons to learn. It’s been quite a journey, and the journey continues.

[i] “For the Encouragement of Learning: The Origins of Canadian Copyright Law”, (University of Toronto Press, 2023), p. 48

[ii] Sara Bannerman, in her book “The Struggle for Canadian Copyright”, (UBC Press, 2013) quotes the Secretary of State for External Affairs, in a Memorandum to Cabinet in 1967. Considering the wisdom of Canada staying in the Berne Union, he wrote, “An important consideration…is the fact that about 90 percent of the total cost (about $8 million) of copyright to the public in Canada is accounted for by the protection given foreign works. In turn compensation to Canadian authors by way of payments from overseas to Canada is minimal”. p. 160

The CRTC and Online Streaming: Money Now; Details Later

Photo: Author

The first shoe has dropped for foreign online music and video streamers in Canada, at least those generating more than $25 million a year in “contribution revenues” from the Canadian market. On June 4, the Canadian Radio-television and Telecommunications Commission (CRTC) announced it will be imposing “base contributions” of 5 percent of annual Canadian contribution revenues on streamers such as Netflix, Spotify, Amazon Prime, Disney + etc. as part of the implementation of the Online Streaming Act passed last year. (Canadian streamers associated with a Canadian broadcast entity, i.e. Crave, are exempt). The Act brings online streaming services under the regulatory purview of the broadcast regulator. The “base contributions” are to begin in the 2024-25 broadcast year, beginning September 1 of this year, and are expected to generate in the range of CAD$200 million annually. According to the Minister for Canadian Heritage, Pascale St. Onge, the levy is about “fairness in the system” and will be good for the streamers because it will create more content that will “most likely” go back on their platforms. So why are they not happy? (And they are not).

They are not happy because this is just the first shoe to drop, and while they now know the cost of this shoe, they don’t know what the other shoes are going to cost, what exactly those shoes will look like, or indeed whether they will be allowed to try them on. Because, you see, the rules about who can access the Funds that their money will be going into, and on what terms, have not yet been determined. Key decisions regarding the definition of Canadian content and who can own or control Canadian content (through holding the copyright) are a couple of years down the road. With those decisions could come other requirements, such as allocating a percentage of revenues to production of local content on top of the current “base contribution” to existing Funds, discoverability obligations, and possibly others.

With regard to the top-up of existing funding mechanisms, just about anybody who is anyone in film, TV or music will be lining up to get a share of the $200 million pie. The list includes (and I am not kidding) no less than 11 identified recipients named by the CRTC; the Canadian Media Fund, the Independent Local News Fund, the Black Screen Office Fund, Certified Independent Production Funds supporting OLMC (Official Language Minority Communities), the Indigenous Screen Office Fund, FACTOR and Musicaction, a new temporary fund supporting local news production by commercial radio stations outside designated market, the Canadian Starmaker Fund and Fonds RadioStar, the Community Radio Fund of Canada, direct expenditures targeting the development of Canadian and Indigenous content and, last (and least, in terms of percentage of the funding from audio online undertakings), the Indigenous Music Office. Is anyone missing? What about the Punjabi Weather Network or the Lawn Bowling Broadcast Fund? This is micro-management gone wild.

The 5% contribution funding is divided up into various slivers, some larger than others, by the Solomons at the CRTC. As for the Minister’s optimistic belief that those making the contribution will “most likely” benefit from the content produced, I struggle to see how Netflix or Disney+ will get much out of the Independent Local News Fund (which is currently funded by Canadian cable platforms) or Francophone productions in British Columbia or Alberta. The argument, no doubt, is that this is the price for participating in the Canadian broadcast ecosystem, that now includes online streaming undertakings. Music streamers, on the other hand, will probably benefit from the development of more Canadian talent.

As a consumer of music and audio-visual content, I am also a participant in the broadcast ecosystem and already pay in various ways, through income and sales taxes, and streaming and cable (yes, I am still one of them) subscription fees. I have a hunch I am about to pay more. For several years now the AV streaming services have been on a spending spree in an attempt to grab market share. Profitability came second, but that is rapidly changing as the market matures. And that means subscription fees are going up. (Netflix is killing off the basic subscription I have had for a number of years and given me the choice of a slight price reduction if I put up with ads, or else face a roughly 50% increase in monthly subscription fees. I am still dithering). And this was before the CRTC dropped its latest bombshell. If the CTRC is going to take 5% or more of revenues, simple math tells you there are only a couple of ways to make that up, cut costs or raise prices. “Costs of doing business” inevitably get recovered from customers. If the price of supporting a viable content industry in Canada was limited to a 5% increase in my monthly subscriptions, I would gladly pay but I doubt that my contribution will be limited to 5%.

Ironically, the issue of whether the CRTC should regulate streamers was postponed for years in Canada because of aversion of what was referred to at the time as the “Netflix tax”. No-one knew for sure what that meant; it could have meant imposing sales taxes on a Netflix subscription (which has since been done), or it could have meant a levy on Netflix (which was the first streaming service to enter Canada) to fund Canadian content. But while people weren’t clear on what a Netflix tax was, they knew they didn’t like it. It became a symbol of piling yet one more nuisance fee onto consumers (“carbon tax” anyone”?) and while a small fee on a streaming subscription was unlikely to send anyone to the poor house, politicians from all parties outdid themselves by swearing to avoid any form of Netflix or internet tax.

Serendipitously, I have just finished reading Howard Law’s new book, “Canada vs California-How Ottawa Took on Netflix and the Streaming Giants”, a fascinating deep dive on Bill C-11, which became the Online Streaming Act, and its unsuccessful predecessor Bill C-10. (For those who don’t know, Howard also publishes a weekly blog, MediaPolicy.ca, another essential read for anyone interested in the Canadian media scene). Law devotes an early chapter to “No Netflix Tax 1999-2019” and then goes on to take the reader through the painful teething pains of Bills C-10 and C-11. The term “Netflix tax” has fallen out of use these days but the end result of the imposition of the CRTC “base contribution” on foreign streamers is really no different from an indirect tax.

Alternatively, if the streamers do not fund this new “base contribution” by raising prices to consumers, they will likely compensate for it by spending less elsewhere, i.e. on Canadian production, the very objective for imposing the contribution in the first place. According to MPA-Canada, in 2021-22 “foreign investment in production” (FIIP, a metric for international participation in the film and television production industry in Canada) contributed $875 million to production of Canadian content, about 13% of total financing for Canadian-owned content productions. (This is in addition to the much larger Foreign Location Shooting spend on US productions made in Canada). By comparison, the Canadian Media Fund contributed only 7% of total financing for Canadian productions. The foreign contribution to Canadian production was not far off the $1.09 billion spent by Canadian broadcasters on in-house production. A similar scenario exists in Australia, where the government is also exploring various options to require foreign streaming services to fund local production. Yet the streamers are currently the leading source of production funding for Australian adult drama. In Australia, streaming services invest more in this drama than public, commercial and subscription broadcasters combined, despite having no legal obligation to do so.

What does the US government think of the CRTC’s announcement? That will depend on how hard the foreign streamers push the US Administration to intervene, and right now it is not clear what they will do. Part of the issue is those other dangling shoes. The outcome might not be all that bad for the streamers if they are given fair access to the content they will be required to fund. After all, they need to spend on content to fill their pipeline. But the terms of what payback they will get from their required investments are not clear. A lot will depend on what amount of spend the Commission imposes on foreign streamers for production of Canadian content (Cancon), and how Cancon is defined.

Right now, the Canadian content definition is a complicated formula, set by different funding and regulatory bodies, as I outlined in a blog a couple of years ago, (see “Unravelling the Complexities of the Canadian Content (Cancon) Conundrum”) and as Law outlines in his book. The core is the infamous points system, based on the nationality of key players in the production, plus amount of local spending. In addition, one of the current conditions for a production to be considered Canadian—and thus qualify for tax credits (funding)–is that the copyright and catalogue rights must be held by a Canadian (normally the producer) for a minimum of 25 years. However, the CRTC does not impose a copyright requirement when defining Cancon for broadcast quota purposes. Will this continue when the Commission finally gets around to addressing this issue? That shoe is still hanging there.

If the Cancon definition is tweaked in such a way that the foreign streamers are required to spend a set percentage of local revenues on Canadian content, but at the same time are excluded from being able to acquire such production (i.e. restricted to licensing content they have already invested in), this will be a problem. It is one thing to apply strings when a producer is applying for tax credits (AKA a subsidy). It is quite another to be required to fund production but be excluded from recouping a return on that investment in a way that makes most sense for the funder. With the Cancon definition shoe still dangling, trying to enlist the US Administration to bring pressure on Canada right now may not be the best strategy. Not that this has stopped some of the usual suspects, like the National Foreign Trade Council and the US Chamber of Commerce from weighing in. Their comments are no doubt a marker for future reference if needed. CUSMA/USMCA obligations need to be kept front and centre.

As I noted in an article last year, (“Could or Would the US Retaliate Against the Online Streaming Act (C-11) Now That it is Law?”), “the CRTC must be mindful that foreign streamers who contribute to Canadian productions need to be able to access, acquire and distribute them on an equal footing with Canadian streamers, who face no such limitations”. The CUSMA/USMCA trade agreement requires that cross-border digital services be dealt with on a national treatment basis, i.e. accorded no less favourable treatment than Canadian streaming services. The current proviso that exempts Canadian streaming services associated with a Canadian broadcaster from the 5% levy on revenues is not an auspicious start, but we will have to wait to see what happens.

Regarding the link between Cancon and copyright ownership, I know there are people in the industry in Canada whom I respect who argue this is very important to maintain cultural sovereignty. They feel strongly that it is essential for Canadians to hold the copyright in productions to avoid becoming just service producers. They have a point, although there are other considerations that need to be borne in mind. A Canadian producer should be able to hold the copyright (and assume the risk that the production may not be a big earner in future) if they wish, or else assign it, take the money and move on to the next project without the government putting its thumb on the scale of commercial negotiations. And it is not unreasonable for those who provide the funding and invest in a project to be allowed to negotiate commercially on how the asset is exploited.

The CRTC’s June 4 announcement can be considered a down payment or perhaps a first shot across the bow, depending on how you want to look at it. We are in for months, if not years, of more consultations. The CRTC’s own announcements project consultations into 2026, well past the next election. There will be several more shoes to drop, and the political landscape could well change. In the meantime, the streamers will have to start paying into a mixed bag of Funds as directed by the CRTC. As for those all-important details about the regulatory framework, they will come later.

It Took Glue on Pizza to Spotlight Google’s AI Problem

Image: Shutterstock (with AI assist)

Google, the “indispensable” search engine relied on by millions for accurate and reliable search, has done it again, stepping smack into the pile of steaming excrement waiting for it in the middle of the road. Its most recent ill-starred foray into AI generated search has yielded some hilarious results, lighting up the blogosphere and making Google the butt of many jokes. After flubbing the public launch of its first AI enabled service, Bard, back in early 2023 when the AI driven search function produced the wrong results for a simple question about the James Webb Space Telescope, overnight wiping $100 million off Google’s valuation, Google’s new Gemini “AI Overview” service scored another own goal with its “hallucinatory” responses to questions like how to ensure cheese will stay on pizza (add glue) or how many rocks a day should a human eat. (Only one, in case you were wondering). It also informed users that Barack Obama was the first Muslim President of the United States.

When it comes to AI, “hallucinations” refer to incorrect or misleading results resulting from lack of training data, biased or selective training data, or incorrect assumptions made by the model. Hallucinations leading to trademark dilution was one of accusations levelled against OpenAI and Microsoft by the New York Times in its landmark copyright infringement case that is still working its way through the courts. In this case, the AI algorithm incorrectly attributed the false information to the Times, thus undermining its journalistic credibility, and diluting its trademark, or so the argument goes.

Apparently, the source of the pizza glue misinformation was an old tongue-in-cheek post on Reddit. I guess an AI algorithm has no sense of humour and can’t tell sarcasm from reality. It also gives credibility to conspiracy theories and blatantly false information, such as the Barack Obama example. Normally a search on any subject turns up a variety of sources on Google, some clearly more authoritative than others. Searchers can weigh a Wikipedia entry against a Reddit post against information from a government website or reputable academic institution. Even a plain old tendentious website put up by an advocacy organization can be probed and the bona fides of the source checked out. That is becoming more difficult, or at least less obvious, with the AI generated search summary provided by Google’s AI Overview.

If the search topic falls within AI Overview’s purview (and at the moment, not all do), viewers will see a summary of the information requested drawn from sources chosen by the algorithm. The algorithm decides how much information is drawn from any given site, and which sites are chosen. Users have the option of clicking through to access these and other sites that are displayed (below the annoying sponsored listings). However, many consumers, looking for a quick information fix, will not bother to do this and thus risk taking the AI summary as gospel. If you are being advised to mix glue into your pizza topping, you can probably figure out that something is haywire, but if the summary is only slightly wrong, or is on a subject that you are not familiar with, watch out. A good example was provided by the website Plagiarism Today. It asked Google five questions about copyright in the US. Its conclusion regarding the responses provided by AI Overview? Decidedly mixed. One A, one B, one C, one D and one resounding F.

The accuracy of the summary obviously depends on the sources of information chosen by the algorithm, and the emphasis it chooses to put on information from any given source. Unfortunately, in many instances it does not seem to prefer credible and authoritative sources, but instead goes for those that are popular. That is one of the basic problems of AI generally—quantity over quality, popularity over facts. (By the way, this account of how AI Overview works is based on reading about it from US sources since it is not yet available in Canada, which may be a good thing since I have read various US posts explaining that Overview is impossible to disable and very hard to turn off). Google intends to cram it down your throat whether you want it or not.

Of course, Google assures everyone that Overview is a “good thing” and the early kinks will be ironed out. Many websites are not happy with the new interface that will now exist between themselves and the consumer. They lose traffic when users simply read the AI summary and move on, not visiting the source website. Google used to boast that it had a symbiotic relationship with content providers because it facilitated, and even drove, eyeballs to the sites. No longer. It has appropriated–without permission–content from independent sites to feed AI Overview in the same way that the LLM (Large Language Model) AI developers have scooped up content, including copyrighted content, from rightsholders, without permission, licence or payment to enable their AI training. It is one thing to link to third party content, which requires a visit to the actual site to access the content; it is quite another to freely copy from it and mix it, sometimes inaccurately or inappropriately, with content from other websites that may not be reliable or acceptable sources of information.

Google clearly controls what goes into AI Overview and has said that it will apply more filters. If it can screen out sources of sarcasm and parody, it clearly has the capacity to install other filters that could differentiate trustworthy information from garbage. This might require Google to license the use of this curated information (Horrors! Google having to pay for the information of others that it so freely uses!). Licensing has already begun for content used for generative AI training. News Corp has just signed a licensing deal with OpenAI, as has the AP and the Financial Times. Licensing is at the heart of the dispute that OpenAI is facing with the New York Times.

Licensing presupposes knowledge of what inputs are being used, a requirement now enshrined in EU law which requires that AI developers maintain an inventory of works used for training purposes (transparency). This will allow rightsholders to opt out or negotiate a licensing solution unless the copying meets the text and data mining exception (i.e. for research by research and cultural organizations).

However, Silicon Valley has variously proclaimed that (a) it is impossible to track all the information ingested during AI training; (b) it would bankrupt the industry should they have to pay for content (c) they need to use copyrighted content because there is not enough current public domain information available (d) it is not feasible to filter out or identify specific works amongst the millions of datapoints that it ingests (e) everything that it does is fair use anyway (f) all of the above. Google’s embarrassment, and its apparent ability to finetune AI Overview, demonstrates that it is clearly feasible to filter out certain works and types of content. It is the will to do so generally that is lacking. Meanwhile, the number of lawsuits brought by rightsholders against AI developers continues to multiply.

By making itself the object of social media ridicule, and then admitting it can address the problem, Google has actually done us all a favour by highlighting the “garbage in; garbage out” problem. Not all copyrighted material is responsible or accurate but a good chunk of it is, such as professional journalism and academic journals. Access to that material is essential to provide credible results. And that material needs to be paid for, on terms set by the content owners.

The solution is not to stop the development of generative AI; for one thing, that won’t happen. It is to corral it, improve it and make it more trustworthy, if necessary with penalties if it is not. The penalties could be imposed by the market (i.e. Google search is not reliable so I will go elsewhere) or, in certain cases, by regulation. Licensing of accurate, credible information to drive search will inevitably distinguish the fake from the real and dubious from the trustworthy. This is what any credible search engine seeks. It is market gold.

Google, open your bulging wallet and start licensing content that will make us want to continue to try you first to get reliable information. Right now, through your clumsy rollout of AI supported search, you are rapidly losing that trust. It is also not acceptable to plagiarize someone else’s content, mix it with garbage from some other source, and serve it up on a platter to consumers on the pretext that this is the definitive answer. The result, as we have seen, is gluey pizza.

The USTR “Watch List” Designation You Will Never See

Image: Shutterstock (AI Assisted)

In my last blog post, I discussed the annual Special 301 Report issued by the Office of the US Trade Representative (USTR). The Report is a global survey of the intellectual property (IP) practices of a number of US trading partners, a kind of “report card” in which those that “fail” (badly) are named to a Priority Watch List (PWL) and those that fail, but not so badly (and so are encouraged to do better), are put on the Watch List (WL). The purpose is to highlight practices that damage the interests of American IP-based businesses and IP stakeholders in order, eventually, to get them changed. While one can quibble with some of the IP “transgressions” identified by USTR in its wide-ranging survey, removing or modifying the IP impediments identified in the Report generally speaking results in better outcomes for innovation and creativity both for US IP interests and foreign rightsholders, at least in the area of copyright. (The practices, laws and policies named in the Report are not restricted to copyright; they cover the full range of IP issues such as patents, trade secrets, industrial designs, geographic indications and trademark infringements/counterfeiting). I am going to restrict my commentary today solely to copyright issues.

Since the Report is a US government document mandated by US legislation, and deals with US foreign trade, it is not surprising that problematic IP issues inside the United States are not included in the document. Thus, US rightsholders are deprived of the salutary effect that arises from shining a spotlight on such practices. Were the USTR to hold up a mirror to the US and apply the same sort of critical analysis it applies to other countries, what would be the result? We will never know as USTR has no mandate to publish such a document; the closest it came to criticizing a US company was its inclusion of Amazon’s non-US affiliates in its 2020 “Notorious Markets” list which forms part of the Special 301 Report. Since USTR will never publish a Watch List that includes the United States, someone needs to step into the breach, hold up that mirror and attempt to write what a US Watch List designation might look like. That someone will be me. However, as noted, the commentary will be based exclusively on copyright issues; I am not going to tread into the minefield of patent trolls, counterfeit products, trade secrets or any of the other aspects of IP that are also grist to USTR’s mill.

In assessing what a US Watch List citation might look like, I will follow the same general approach that USTR applies when it passes judgement on the copyright practices of other countries. A measure doesn’t have to discriminate against US IP interests or rightsholders to be included in the Special 301 Report (i.e. it doesn’t matter if US rightsholders are granted national treatment; USTR can still object to the practice), so I will apply that principle. In judging whether to include criticism of certain US measures, or lack of them, I will be guided by the sort of issues that USTR identifies in the practices of other countries named to the PWL or WL. Since I know a bit about copyright in Canada, and since Canada is again on this year’s WL as it has been for the past couple of decades (except when it was downgraded to the PWL), I will use Canada as my principal marker.

For example, in this year’s Special 301 Report in which Canada once again features on the Watch List, the USTR Report critically notes that “Levels of online piracy remain very high in Canada, including through direct downloads and streaming”. In actual fact, Canada is a relatively minor league player when it comes to online piracy. According to the brand protection website Bytescare, Canada doesn’t even rank in the top 20. The list is dominated by Russia, China, India, Brazil etc, and the United States. In fact, according to Variety, the US is the leading source of online piracy globally with 13.5 billion visits to piracy sites annually. Aha, you say, but what about the rate of piracy? Canada’s population is only 40 million so no wonder it is not as high on the list as some others in terms of total piracy visits. According to the Canadian Internet Registration Authority, as quoted by Global News, Canada’s piracy rate in 2022 was a shocking 22.5 %. The US rate in the same year? As estimated by media research firm Parks Associates, it was 22% is but expected to rise to 24.5 percent by 2027. So I guess the US should be called out for its high levels of online piracy. After all, what is sauce for the goose is sauce for the gander.

I will draw on another example from this year’s USTR Report to justify inclusion of a separate observation in my assessment, regarding music royalties. This year, Barbados is singled out for, among other things, “the refusal of Barbadian television and radio broadcasters and cable and satellite operators to pay for public performance of music.” But guess what? Neither does the US, in certain circumstances. As I outlined in this blog (“The American Music Fairness Act (AMFA): A Better and Fairer Solution for Performers than Seeking “National Treatment”), US terrestrial radio stations are not required to pay royalties to performers or labels for playing recorded music on air, a longstanding practice that dates back to the early days of radio. The same free ride does not apply to digital broadcasters and streaming services. Terrestrial AM/FM radio stations are required to pay royalties to composers and songwriters for music played on air, but not to performers. The US is the only developed country jurisdiction to provide such an advantage to terrestrial broadcasters, although since 1997 Canada has had a carve out whereby commercial radio broadcasters are required to pay only $100 in performance royalties on the first $1.25 million in advertising revenue. Needless to say, this is opposed by Canadian performing rights organizations.

The US AM/FM exception denies royalties to US performers for music played on US terrestrial radio, but it also applies to foreign performers when their music is similarly played in the US. For this reason, many countries, including Canada, apply or applied a reciprocity provision (an exception to national treatment) to payment of royalties to US performers when their music is played terrestrially. Unable to get the US Congress to change US law, US performing rights organizations convinced the US government to seek national treatment in Canada with respect to all categories of IP covered in the IP chapter of the USMCA/CUSMA, a goal that was achieved when the new Agreement was signed. Thus, US performers in Canada now get equivalent treatment to Canadian performers; in other words, they get better IP protection in Canada than they do (or Canadian performers do) in the US. Yet Canada is on the USTR Watch List. Sauce for the goose…

That is some of the background to my decision to put the United States on the Watch List in 2024 for copyright-related issues. There are other reasons as well. I know you want to read the full reasoning, so here goes;

The United States remains on the Watch List for 2024. Despite a strong legal framework in place, the US continues to be the source of the largest number of visits to online pirate sites globally. Unfortunately, unlike some 40 countries globally, including USMCA partner Canada, the US has been unsuccessful in implementing any form of site blocking legislation. Site blocking has proven to be an effective and low cost tool, in combination with other measures, to reduce visits to pirate websites and to convert users to legitimate sources of online content. The US authorities are encouraged to work with Congress to put in place an effective mechanism to implement site-blocking in order to reduce high rates of piracy estimated to be in the vicinity of 25% of users. We also have continuing concerns about the inadequacy of US law in protecting performance rights for music played on terrestrial radio stations. The United States is the only developed country that provides an exception for payment of performance royalties for terrestrial stations, a situation that has led to the denial of performance royalty payments to US musicians and labels on the basis of reciprocity in a number of countries where it has not been possible to obtain a national treatment commitment to protect US performers. We remain deeply concerned by stakeholder reports that a 2020 Supreme Court ruling in the US (Allen v Cooper), that upheld the ability of US states to impair the rights of copyright holders based on the principle of sovereign immunity, remains unaddressed. This interpretation opens the door to widespread “legalized infringement” by state operated institutions, such as state university libraries. With regard to fair use, we are encouraged by recent court rulings that suggest a more narrowly defined interpretation of “transformative use” is being applied by US courts in adjudicating fair use claims. We are also encouraged by the passage of legislation to increase criminal penalties for illegal streaming (the Protect Lawful Streaming Act) but note that the legislation has been rarely used since it came into effect in 2020 and urge the US Department of Justice to take full advantage of the tools at its disposal to curb the high rate of online piracy and illegal streaming in the United States. We look forward to working with the United States to resolve these and other important issues.

So there you have it, a slightly cheeky (and tongue-in-cheek) Watch List designation for the US, aka “The Watch List Designation You Will Never See”. I hope this doesn’t upset my many Stateside friends. It is offered in the spirit of “no one is perfect”. All we can do is strive for perfection through learning from each other.

It’s USTR “Watch List” Time Again

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

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

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

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

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

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

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

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

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

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

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

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

Tag: Copyright

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