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Intellectual Property JournalAugust, 2008Article

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Canadian Copyright Collectives and the Copyright Board: A Snapshot in 2008

Howard

P.

Knopf

Howard

P.

Knopf

Canada's system of collective administration of copyright has both many strengths and weaknesses. This isalso the case in most other countries. Improvements are possible and necessary. Some of these can come fromcollectives themselves. Others will need to come from the Copyright Board, or the Government itself in the form of regulation or legislation. Canada's Copyright Board plays a greater role in the collective administration of copyright than comparable tribunals in Australia, the USA, UK and other common law countries, and probably all other major developed countries. It appears to have more full time members and staff than its counterparts in anycomparable country. It has a long and rich history of which it can mostly be very proud. However, that is not to saythat improvements cannot be made. This appears to be recognized. Canada's Federal Court of Appeal, and onoccasion the Supreme Court of Canada, have played a vital role in reviewing all of this activity and in ensuring that the public interest element inherent in copyright law is kept in mind. Much more work needs to be done. Perhaps it is time for another commission along the lines of those chaired by Justice Parker and Justice Ilsley to look at all of this along with other copyright issues more fully and in the interests of the Canadian public

.

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1. INTRODUCTION

Canada has a unique approach amongst developed countries to collectives and to the oversight of collectives bya specialized tribunal and, in turn, by the Courts. While Canada provides very strong copyright protection in theform of mostly exclusive rights, it recognizes that these rights can most effectively and efficiently be enforced bycollectives in many cases. The overall result is that Canada has more collectives and a larger tribunal with more fulltime members and, effectively, more power to make law than any other country with which I am familiar.There is much that is good about this system. However, there is also much that can and needs to be improved. Iwill take this opportunity to present a snapshot and overview of how it works, with a little perspective on how itevolved. I will also take the liberty of making some suggestions on how it could work better.Although things sometimes seem to move and evolve very slowly at the Copyright Board, it has produced alarge body of important decisions over the years affecting billions of dollars' worth of tariffs. The Federal Court of Appeal (“FCA”), which usually moves much faster, has produced numerous judgments in turn about the work of theBoard. And on a few important occasions over the years, matters involving collectives and the Copyright Board[FN2][FN2] have attracted the attention of the Supreme Court of Canada (“SCC”). A short paper and presentationcannot hope to capture the full detail of this very important area.

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2. WHAT IS A COPYRIGHT COLLECTIVE?

Copyright collectives--or collective management organizations (“CMOs”) as they are sometimes called--are pervasive and powerful throughout the world today. The sheer magnitude of money involved is staggering--andtherefore important to policymakers, lobbyists and litigators. For example, the American Society of Composers,© 2008 Thomson Reuters/West. No Claim to Orig. US Gov. Works.

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Authors and Publishers (“ASCAP”) reported revenues of $785.5 million for 2006 and Broadcast Music Incorporated(BMI) reports revenues of almost $850 million for 2007. These are the two largest musical performing rightscollectives in the United States. Gesellschaf für musikalische Aufführungs--und-mechanischeVervielfaltigungsrechte (GEMA), the mega music collective in Germany, reported revenues of more than €874.4million (about US $1.286 billion) for 2006. SACEM, the enormous French music collective, reports revenues of about €757.4 (about US $1.114 billion for 2006). These are four of the largest collectives in the world.Turning to Canada, the Society of Composers, Authors and Music Publishers of Canada's (SOCAN's) revenues,which are in excess of $200 million a year, are well over the normal benchmark of 10% of the comparable Americanfigures (i.e., ASCAP + BMI) that one would expect to see. Likewise, Access Copyright has collected far more proportionally than its counterpart in the USA, the Copyright Clearance Center. The Neighbouring Rights Collectiveof Canada (“NRCC”), of course, has no counterpart in the USA because the USA does not have neighbouring rights.In Canada, which is eighth on the list of G-8 countries in terms of gross domestic product (GDP), and has alarge deficit in copyright royalties, collectives have revenues approaching CDN $500 million a year. It is possiblethat

per capita

payments to collectives in Canada are, overall, among the highest in the world, and this is somethingthat merits much closer study. This is not necessarily good news for Canadian creators, because most of this moneyleaves Canada and goes to the USA or Europe. Moreover, the Canadian creators who benefit from these high tariffsare those who are already very successful. That is the nature of the copyright system, which rewards success and notartistic merit or need. Sometimes the concepts coincide but, often they do not.While performing rights societies representing composers and authors are the oldest of the collectives, they areno longer alone in generating large amounts of money. Neighbouring rights collectives are catching up quickly inCanada. Private copying levies in Europe generate

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enormous sums, though the results are not very transparent.A 2003 Business Software Alliance (BSA) study predicted that private copying levies in France, Germany, Italy, the Netherlands and Spain would be €1.5 billion by 2006, almost CDN $2.25 billion. In Canada, private copying levieshave generated well over $200 million to date. [FN3][FN3] New areas of collective management may be on the horizon. For example, there have long been effortsunderway in Canada to collectively monetize the use of publicly available material on the internet,[FN4][FN4]ultimately through the controversial mechanism of extended collective licensing.[FN5][FN5] A very recentexample of a suggested new area of collective activity is the controversial proposal by the Songwriters' Associationof Canada to impose a “licence fee of $5.00 per internet subscription per month.”[FN6][FN6] This proposed “tax”,as it is not surprisingly being called, would supposedly generate between $500 and $900 million a year.Collectives have many forms and foundations. These range from those that provide blanket licences under acompulsory licence regime for a particular right for virtually all of the world's repertoire to collectives that functionmore like agencies and administer rights for a limited membership. One prominent collective in Canada, namelyAccess Copyright, has functioned in certain respects more like an insurance or indemnity company than an entityholding copyright rights by way of license or assignment. It has built a successful business model on indemnifying paying users for the infringement of copyright in countless works to which it has no chain of title. [FN7][FN7] The

Copyright Act

(hereinafter “CA”) defines a collective society as follows:...

“collective society”

means a society, association or corporation that carries on the business of collectiveadministration of copyright or of the remuneration

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right conferred by section 19 or 81 for the benefit of those who, by assignment, grant of licence, appointment of it as their agent or other-wise, authorize it to acton their behalf in relation to that collective administration, and(a) operates a licensing scheme, applicable in relation to a repertoire of works, performer's performances,© 2008 Thomson Reuters/West. No Claim to Orig. US Gov. Works.

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sound recordings or communication signals of more than one author, performer, sound recording maker or broadcaster, pursuant to which the society, association or corporation sets out classes of uses that it agrees toauthorize under this Act, and the royalties and terms and conditions on which it agrees to authorize thoseclasses of uses, or (b) carries on the business of collecting and distributing royalties or levies payable pursuant to this Act[FN8][FN8]...In practical terms, a collective is an entity that licenses users to engage in certain activities that require permission under the CA. The users are generally commercial entities or institutions, such as cable companies, TVand radio stations, universities, colleges, schools, cinemas, retail stores, bars, concert halls, restaurants, dentists'offices, strip clubs and even funeral homes. A few years ago, the powerful American collective ASCAP attempted toimpose licenses on the Girl Guides, an effort that became a huge public relations disaster.[FN9][FN9] The customers or ultimate users of these entities are usually unaware of the costs and how the money is paid.The collective eventually distributes the collected royalties to its members, after deducting its administration costs.These costs can exceed 20% of revenues. For example, for collecting about $34 million a year, Access Copyrighthas expenses of almost $8 million a year which is approximately 23%. The Copyright Board has expressed little if any interest in enquiring into the internal operations of collectives, although it arguably has the jurisdiction and theresponsibility to do so.The rates, terms and conditions pursuant to which collectives can operate are subject to oversight by theCopyright Board. All of the activity of SOCAN, and collective activity in several other areas

must

be approved bythe Copyright Board. Other areas of collective activity

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may come before the Board if the parties cannot agree.More details are provided below.Canada has more copyright collectives than any other major developed country. It is said that Brazil mayactually have even more. However, Canada has approximately three dozen active collectives, many of which havereceived substantial direct or indirect government subsidies.

3. SOME OF THE CANADIAN COLLECTIVES

The following are some of the better known collectives and the collectives that most practitioners are mostlikely to have occasion to deal with.

(a) The Music Collectives:

• The largest and oldest collective is SOCAN,[FN10][FN10] which traces its roots in Canada back to 1925 and collects over $200 million annually.• NRCC (“Neighbouring Rights Coalition of Canada”)[FN11][FN11] is a collective of other collectives and collects revenues for certain activities involving sound recordings, and performers' performances. The rights involved are known as “neighbouring rights”, because they historically were notrecognized as being part of the mainstream of “authors' rights” or “droit d'auteur”. NRCC activities mirror those of SOCAN to some extent and are currently valued by the Copyright Board at approximately 43% of SOCAN's comparable tariffs. The difference arises largely because sound recordings are not entitled to full“national treatment” under Canada's legislation, a point which will be further dealt with below. The NRCC isnot very transparent in its operations, and does not publish its annual reports.• Canadian Private Copying Collective (“CPCC”), [FN12][FN12] which is also a collective of collectives that collects approximately $40 million a year from levies on blank audio recording media--almost© 2008 Thomson Reuters/West. No Claim to Orig. US Gov. Works.