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Glen A. Bloom Direct Dial: 613.787.1073 gbloom@osler.com Our Matter No: 1059568

December 10, 2010

BY EMAIL

Mr. Gilles McDougall Acting Secretary General Copyright Board of C an ada Suite 800 - 56 Sparks Street Ott awa, Ontario K1A 0C9 Dear Mr. McDougall:
Application for an Interim Decision on the Access Copyright Post-Secondary Educational Institution Tariff, 2011-2013 (the "Proposed Tariff")

We are writing to you on behalf of the Association of Universities and Colleges of C anada ("AUCC") pursuant to the Notice of the Board dated November 26, 2010 and Ruling of the Board dated December 8, 2010. AUCC vigorously opposes Access Copyright's above application (the "Interim Decision Application"). The Copyright Board of C anada (the "Board") has no jurisdiction to grant the decision sought by Access Copyri ght, and in any event, the Interim Decision Application does not meet the established test for the issuance of an interim decision.
AUCC

AUCC is the voice of Canada's universities. It represents 95 Canadian public and private not-for-profit universities and university-degree level colleges. We will refer to both universities and university-degree level colleges collectively as "universities". The 95 universities are listed in Appendix A.
History of the AUCC Model Licence

Commencing in 1989 AUCC entered into discussions with Access Copy ri ght, then known as Cancopy, regarding a reprography licence for AUCC member universities. AUCC was subsequently mandated by its Board of Directors to negotiate a model reprography licence. In 1994, after an analysis by AUCC of copying practices for which compensation was due to copyright owners and extensive negotiations, AUCC and Access Copyright reached an agreement on a model licence (the "AUCC Model
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Page 2 Licence"). A copy of the AUCC Model Licence is attached as Appendix B. The AUCC Model Licence has been renewed on a number of occasions. The current AUCC Model Licence became effective September 1, 2003. A copy of that model licence is attached as Appendix B to the Interim Decision Application. Although the terms and conditions of the AUCC Model Licence have changed over the years, the basic structure of the agreements has remained the same. The licence grants a non-exclusive right to make copies of published works l . The licence is not confined to published works in the repertoire of Access Copyright. Instead, specific published works listed on an exclusions list are excluded from the scope of the licence 2. To protect a university from liability for copyright infringement to a person whose published works are not in Access Copyright's repertoire and are not on the exclusion list, Access Copyright provided an indemnity3 . The indemnity holds the university harmless from any claim brought against it for exercising its rights under the licence. The indemnity is a significant po rtion of the value that the AUCC Model Licence brings to AUCC's member universities. In effect, it provides the universities with an insurance policy against claims for copyright infringement by the numerous authors and publishers whose works are not in Access Copyright's repertoire and are not listed on the exclusions list. Another impo rtant feature of the AUCC Model Licence is the fact that the licence does not cover any dealing of any work for the purposes of private study, research, c riticism, review or newspaper summary4. AUCC and Access Copyright have never agreed on what copyright constitutes fair dealing in the context of the copying activities of AUCC member universities for which no permission of the copyright owner is required to make copies. Differences Between the AUCC Model Licence and the Proposed Tariff There are impo rtant and significant differences between the AUCC Model Licence and the Proposed Tariff. Three of these differences are relev ant to the Interim Tariff Application. First, the scope of the licence granted under the Proposed Tariff is limited to Repertoire Works, a term defined in the tariff as published works for which Access
Section 2 of the 1994 AUCC Model Licence and section 2 of the 2003 AUCC Model Licence.
2

Section 3(d) and schedule A of the 1994 AUCC Model Licence and section 3(d) an d schedule A of the 2003 AUCC Model Licence Section 24 of the 1994 AUCC Model Licence and section 23 of the 2003 AUCC Model Licence Section 3(c) of the 1994 AUCC Model Licence and section 3(c) of the 2003 AUCC Model Licence

3

4

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Page 3 Copyri ght administers rights by assignment, licence, agency or otherwise 5 . The rights to copy granted under the Proposed Tariff are therefore substantially less than the rights to copy under the AUCC Model Licence. Second, the Proposed Tariff does not include any indemnity from suit in respect of copying of works outside Access Copyright's repertoire. A substantial part of the value of the AUCC Model Licence has therefore been removed from the licence under the Proposed Tariff. Third, the Proposed Tariff changes the tariff royalty structure. Under the AUCC Model Licence a university pays a fl at rate based upon the number of full-time equivalent students ("FTEs"), the current amount is the FTE multiplied by $3.38, plus $0.10 page for copies made for s ale to and used by students, professors and administrative staffs . Separate payment rates are specified for other specialized copying activities. The Proposed Tariff eliminates the per page payment and instead arbitrarily increases the per FTE royalty rate by a whopping 1331 per cent to $45 per FTE, an amount not tied to copying volume. AUCC acknowledges that the Proposed Tariff expands the scope of the copying rights to include the making of digital copies of ce rtain works but only in limited circumstances. The Proposed Tariff would permit an authorized person to make a digital copy by scanning a paper copy into electronic form, subject to various safeguards. Given today's technology, scanning is a costly and time consuming process for securing digital copies. AUCC member universities have elected models, described below, which enable them to source digital copies directly from publishers or aggregators thereby reducing the cost and delay of scanning, and provides to faculty, researchers and students a far more timely and valuable research and study resource. As a result, the value of the right to make digital copies under the Proposed Tariff is only of margin al value to universities. Access Copyright's Rights are Non-exclusive Access Copyri ght only secures non-exclusive rights to administer the published works in its repertoire. As a result, in order to obtain consent to reproduce a work in its repertoire a prospective user does not require a licence from Access Copyright. In circumstances in which permission is required, the user can secure that permission directly from the copyright owner, typically the publisher. As merely a holder of a non-exclusive licence to the published works in its repertoire, Access Copyri ght does not have a monopoly over the granting of permissions for published works in its repertoire, and Access Copyright does not hold an interest in the
5

Proposed Tariff, sections 2 (definition of "Repertoire Works") and 3

6 Sections 2(a) and (b), 14(a)(iv) and 14(b)(i) of the 2003 AUCC Model Licence

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Page 4 copyright in the works in its repertoire. Access Copyright cannot therefore sue for copying infringement in its own name. The significance of this point will become apparent below. In proceedings before the Board which resulted in the certification of the Access Copyright Elementary and Secondary School Tariff, 2005-2009 the Executive Director of Access Copyright testified as to scope of the rights of creators and publishers that it represents. In her witness statement the Executive Director states that over 7,000 Canadian creators and publishers have signed an affiliation agreement with Access Copyright and that Access Copyright has obtained the right to administer the rights of foreign creators and publishers through bilateral agreements with foreign reproduction rights organizations ("RROs"). The witness statement attached a standard form affiliation agreement with creators and a standard form affiliation agreement with publishers. The grant of rights in the creator's agreement reads as follows: You grant us, with respect to your Works, the exclusive licence to exercise and manage the reproduction rights (the "Rights") listed in Appendix A through collective licences. This grant of an interest in copyright authorizes us to license other persons to copy your Works, either directly or through agreements with other collective societies, and applies only to the extent that you own or control the Rights being granted. For greater certainty, you retain the right to license your Works through agencies and organizations that are not considered to be collective societies. Although the first two sentences of the grant are in the terms of a grant of an interest in a creator's copyright by way of exclusive license, the third sentence takes away from that grant. The effect of the third sentence is to render the grant non-exclusive. With respect to foreign creators and publishers, in her witness statement Access Copyright's Executive Director further states that, as pa rt of its participation in the International Federation of Reproduction Rights Organizations ("IFRRO"), Access Copyright has entered into bilateral agreements with RROs in 23 countries. The bilateral agreements were attached to the witness statement, but were designated as confidential. IFRRO does however make sample bilateral agreements available on its website. Pursuant to these sample agreements, the RROs who are pa rties thereto grant to each 7
Copyright Act, section 36(1)

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Page 5 other the non-exclusive right to enter into licensing agreements with users and to collect fees for the reprographic reproduction of the works of the rightsholders they represent.
Evolution of Copyright Practices

As set out above, negotiations for the first AUCC Model Licence were completed in 1994 and the licence was last renegotiated for the academic year commencing September 1, 2003. Since 1994, and in particular over the period since September 1, 2003, the copying practices in AUCC's member universities have changed dramatically. The AUCC Model Licence has not been renegotiated to reflect these dramatic ch anges. The changes are so dramatic that a number of AUCC member universities see no need to obtain permission from Access Copyright for their current copying practices. At the time the AUCC Model Licence was negotiated, the Internet had only a very limited role in academic institutions and digital copying was in its infancy. AUCC member universities made paper copies of published works for library reserve, handing out in the classroom, for administrative purposes and for inclusion in course packs for sale to students. In recent years, the Internet, the publication of electronic journals and ebooks, digital copying and course management systems have revolutionized university copying practices. The licensing by AUCC member universities of entire catalogues of published works in electronic form started in 2000. In January 2000, 64 universities launched a pilot project through a consortium identified as the Canadian National Site Licensing Project ("CNSLP") to secure for the universities multi-year digital site licences with publishers in science, engineering, health and environmental disciplines. Based upon $20 million project funding from the C anada Foundation for Innovation ("CFI") and $30 million from provincial governments and participating universities, CNSLP entered into seven multiyear site licences with seven major scientific publishers providing access to over 1,000 electronic journals and key citation databases for the universities. Through a model national site licence developed by CNSLP (the "CRKN Model Site Licence"), these publishers granted the participating institutions, not only access to the publications, but the right to make copies of the published works on paper and in digital form. By 2004 CNSLP had more than doubled its initial content budget and the benefit of the site licensing of electronic journals and citation databases has been demonstrated to the participating universities, CFI and the provincial governments. To permit additional universities to participate in the site licences and to increase the content licensed, on April 1, 2004 CNSLP was incorporated as a not-for-profit corporation and subsequently renamed Canadian Research Knowledge Network ("CRKN"). In 2007, through
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Page 6 additional CFI funding of $19 million and matching funding from the provinces and universities, CRKN was able to secure licences for the participating universities to a full complement of electronic journals, citation databases, ebooks and other electronic publications in both the science technology and medicine ("STM") and social sciences and the humanities ("SSH") disciplines. A list of the vast digital licensed content is attached as Appendix C. Even a brief review of Appendix C shows the extent to which now 74 participating universities hold digital licences through CRKN — Elsvier:18,000 titles from 5,000 international publishers; Oxford University Press Ebooks: 19,499 ebooks; etc. The CRKN licences are all based upon the CRKN Model Site Licence, a current copy of which is attached as Appendix D8. Sections 2 and 3 of the CRKN Model Site Licence set out the access rights and usage rights granted by the publisher or aggregator. The usage rights include more extensive rights than those rights licensed pursuant to the AUCC Model Licence Agreement or under the Proposed Tariff. The licensed rights permit the making of printed or electronic copies of single articles and distributing copies of individual articles or items to all individual students in a class without further fee. A number of AUCC member universities have also expanded the scope of their licensing with academic publishers through regional consortia and directly with publishers. The Ontario Council of University Libraries ("OCUL") has, through a model licence (the "OCUL Model Site Licence") based upon the CRKN Model Site Licence, entered into licence agreements with publishers and aggregators to permit access to, and copying of, electronic journals, ebooks, databases and other materials for the benefit of a conso rtium of 21 university libraries in Ontario. Attached as Appendix E is a copy of the list of the extensive research products made available to the conso rtium of Ontario universities by OCUL. Attached as Appendix F is a copy of the OCUL Model Site Licence upon which the licences with the publishers and aggregators is based. Sections 2 and 3 of the OCUL Model Site Licence provides a royalty free perpetual licence to have access to the licensed publications for personal research, teaching, private study and administrative use and extensive usage rights including the inclusion of paper copies in course packs and electronic copies on electronic reserve. These usage rights are also more extensive rights than those rights licensed pursuant to the AUCC Model Licence or under the Proposed Tariff. Most of AUCC's members also negotiate licences directly with publishers to permit access to, and copying of, electronic journals, ebooks, and other digital materials.
8

With the exception of the CRKN licence with the Canadian Publishers' Council

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Page 7 Through the licences negotiated under the CRKN Model Site Licence, licences negotiated through regional consortia such as those negotiated under the OCUL Model Site Licence and the licence agreements that universities negotiate directly with publishers (collectively the "Digital Licences"), AUCC's member universities now have access to, and permission to copy, an extensive library of academic materials. As one example, the University of O ttawa is a licensee under over 500 licences negotiated under the CRKN Model Site Licence, the OCUL Model Site Licence and the licences that it has negotiated directly with publishers. The access and usage rights secured under the Digital Licences are obtained at very significant cost. The CRKN licences alone cost over $99 million in CRKN's fiscal year 2009 to 2010 and is budgeted to cost over $107 million for its current fiscal year. The Digital Licences, the Internet and technological advances have enabled AUCC's member universities to ch ange their copying and library practices to enhance research, teaching and education. Through secure password protected websites universities can provide links to licensed required and supplemental reading materials for students in a course of instruction including by way of course m anagement systems such as the Blackboard system. In addition, professors have course websites where they post licensed course content and provide links to required and supplemental reading. There is now a real, practical and more efficient alternative to Access Copyright securing copyright permission for the copying activities of AUCC member universities. As a result of the Digital Licences and technological advances, a number of AUCC member universities have concluded that they no longer require a licence from Access Copyright. They are able to conduct their copying practices in accordance with the terms of the Digital Licences, and in reliance on fair dealing for the purpose of research, private studying, criticism, review or news summary, and other exceptions in the Copyright Act supplemented by individual transactional licences. These universities have decided that, the reduced value of the licence available under the Proposed Tariff, particularly due to the absence of an indemnity provision in the Proposed Tariff, clearly does not justify the mainten ance of even the existing royalty rates under the AUCC Model Licence.

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Page 8 Access Copyright made no Bona Fide Attempt to Renegotiate the AUCC Model Licence In the Interim Decision Application Access Copyright provides a truncated history behind the filing of the Proposed Tariff starting in October 2009 9. It concludes that, because AUCC advised Access Copyright in January 2010 that it did not have a negotiated mandate from its Board and would return to Access Copyright after its Board meeting in April 2010, Access Copy ri ght had no option but to file a tariff. This truncated history fails to show that discussions on a renewal of the AUCC Model Licence commenced as early as April 2009, that Access Copyright significantly delayed advancing a licence proposal, that the licence proposal finally submitted on October 21, 2009 contained only a bare bones structure without any details of royalty fees, and that Access Copyri ght made no attempt to renegotiate the AUCC Model Licence after filing the Proposed Tariff. The actual history demonstrates that Access Copyright did not enter into bona fide negotiations to renew the AUCC Model Licence and instead had made the decision to proceed with a tariff filing rather than a negotiated licensing arr angement. In April 2009 Access Copyri ght promised to forward an outline of the proposed new licence to AUCC by August 2009. By email dated July 8, 2009 AUCC advised Access Copyright that it would need to consult with its community before it could enter into negotiations regarding a possible future licence. The outline was only delivered to AUCC by email dated October 21, 2009. By email dated November 24, 2009 Access Copyright acknowledged that it was late in providing the outline. By email dated November 25, 2009 AUCC advised Access Copyright that it was starting consultation with its members and preparing Board documentation for its mid January Board meeting. On January 18, 2010 AUCC advised Access Copy right that it expected to receive final instructions from its Board during its April Board meeting. Copies of email messages substantiating this actual history of the licence "negotiations" are attached at Appendix G. Access Copyri ght did not approach AUCC to discuss renegotiation of the AUCC Model Licence in lieu of the Proposed Tariff at any time after the filing of the Proposed Tariff. AUCC submits that, given the past experience of the pa rties which showed that the negotiation of model licence arrangement for Canada's university sector is a time consuming process, Access Copyright's late outline proposal, without a fee structure, and Access Copyright's failure to follow-up, demonstrates that Access Copyright had decided 9 Interim Decision Application, p. 3

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Page 9 on its own to proceed to elect the tariff process. It was not in any way "forced" by AUCC to do so. Any "negotiation" by Access Copyright was not in good faith. Any deleterious effect on Access Copyright of its election to pursue the tariff process is an effect for which Access Copyright's must be responsible and not AUCC's member universities. Access Copyright's election to shift its focus from negotiating licences to pursuing copyright tariffs is documented in the literature. In her chapter entitled Copy ri ght, Collectives, and Contracts: New Math for Educational Institutions and Libraries, Professor Margaret Ann Wilkinson states: Access Copyright, the print collective for English language rights for reproduction, which was just expanding its network of licences back in 2005, is now, in 2010, engaged in aggressively shifting its focus from the consensual negotiation of licences to the forum of the Copyright board and the tariff process. The initial signal of what has become evidence as a wholesale ch ange in Access Copyright's strategy was the decision to take all the Ministers of Education (except Quebec) to the Board for a Tariff for public schools.1° Section 70.17 Offers When it became evident to AUCC that it was unlikely that the Proposed Tariff would not be certified until well after the expiry of the licence agreements that its member universities had with Access Copyright under the AUCC Model Licence, AUCC made a recommendation to its members that intended to operate under the Proposed Tariff as certified to provide them with protection for their copying practices during the period January 1, 2011 to the date of the ce rtification of the Proposed Tariff. AUCC recommended to its member universities that intended to operate under the Proposed Tariff to make an offer to Access Copyri ght under section 70.17 of the Copyright Act. AUCC recommended that such members make the offer using a template offer letter, a copy of which is attached as Appendix H, and that the offer letter be forwarded to Access Copyright by December 31, 2010. A number of AUCC member universities have forwarded offers to Access Copyright under section 70.17. For those universities that
10

Published in Geist, Michael From "Radical Extremism" to `Balanced Copyright": Canadian Copyright and the Digital Agenda (Irwin Law: 2010)

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Page 10 have forwarded the offer, section 70.17 prohibits the bringing of copyright infringement actions for copying conducted with the scope of the Proposed Tariff. The significance of this section is impo rtant. The combined effect of section 70.17 and the retroactive effect of the certification of the Proposed Tariff back to January 1, 2011 ensures that there will be no legal vacuum for the AUCC members who intend to conduct their copying practices in accordance with the Proposed Tariff. Those AUCC members are immune to suit for copyright infringement, and the Proposed Tariff, once certified, will ensure that their copying activities within the scope of the Proposed Tariff are licensed. As discussed above, having regard to the rights held by it, Access Copyright cannot sue for copyright infringement. However, owners of copyright in a work within Access Copyright's repertoire are able to sue a member university for infringement of that work in circumstances in which permission of the copyright owner is required if the member university has not sent a section 70.17 offer. This ensures that there will be no legal vacuum for the AUCC members who intend to conduct their copying practices outside of the Proposed Tariff. We will hereinafter refer to the period of time between January 1, 2011 and the date of certification of the Proposed Tariff for AUCC member universities who make an offer to Access Copyright under section 70.17 as the "Payment Period". The Interim Decision Application In the Interim Decision Application Access Copyright seeks an interim decision licensing AUCC member universities for the uses described in the Proposed Tariff for the Payment Period and requiring the universities to pay Access Copyright during the Payment Period the amounts payable under their agreement with Access Copyright which is to terminate December 31, 2010 11 . Access Copyright describes the purpose of the application as being to extend the licensing regime during the Payment Period providing rightsholders and users continuity and certainty 12 . Access Copyright contends that the interim decision sought would prevent "a legal void" 13 . Access Copyright relies on what it describes as a "substantial deleterious effect not only on Access Copyright but also on its many creators
11

Interim Licence Application,,p• 10,^ PP Ibid, p. 1

10^) and ^•) i ii

12

13 Ibid, p. 5

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Page 11 and publishers operating in the post-secondary educational sector 14. Access Copyright claims that the revenue from post-secondary institutions amounts to almost 50 per cent of its licensing revenue and is twice the amount of its total operating expenses 15 . Access Copyright also claims that, if the interim decision is not granted, it will be forced to cut operating expenses, hampering its ability to, among other things, collect and distribute royalties, develop essential dist ribution technology, engage in licensing activities outside the scope of its existing and proposed tariffs, and fund these proceedings16. The grounds upon which Access Copyright relies to suppo rt the Interim Decision Application do not hold up to scrutiny. As described above, in view of the section 70.17 offers and the retroactive effect of certification of the Proposed Tariff, there will be no legal void. On Access Copyright's own admission, without licensing revenue from postsecondary institutions, its other licensing revenue fully covers its operating expenses. As a result, during the Payment Period Access Copyright will be able to fully continue its operations, but may be required to defer expenditures on other activities such as developing distri bution technology and engaging in licensing activities outside its existing and proposed tariffs. Although Access Copyright refers to the roy alties certified in the K to 12 tariff in the Interim Decision Application, royalties which now form approximately one third of its licensing revenue, it indicates that it cannot use approximately one half of that revenue to fund its operating expenses until all appeals are final 17. Access Copyright does not require that revenue to fund its operating expenses as its other licensing revenue is double its operating expenses. Furthermore, in 2009 Access Copy right received a windfall of retroactive payments in excess of $40 million upon certification of the K to 12 tariff. Surely this windfall amount will go a long way to cover Access Copyright's non-essential operating expenses during the Payment Period. What Access Copyright has not explained is that it is prevented from using half of its revenue from the K to 12 tariff until all appeals are final, but seems to be fully intending to use the revenue requested in its Interim Decision Application despite the fact that, there is a clear prospect that the royalty rates will be reduced and substantial refunds will be required.

14 15 16 17

Ibid, p. 6 Ibid, p. 6 Ibid, p. 6 Ibid, p. 7

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Page 12 A final point regarding the deleterious effect that Access Copyright claims the delay in certification of the Proposed Tariff will have on Access Copyright and its creators and publishers is that none of the statements made in the Interim Decision Application are supported by affidavit or documentary evidence. All Access Copyright has done to suppo rt its request for an interim decision is to furnish bald statements from its former counsel. Although the jurisprudence is clear that the Board can rely on representations and no evidence in making an interim decision, AUCC submits that the Board should treat with caution the representation by Access Copyright about the financial impact on it should the Board refuse to issue the interim decision requested. There are two reasons to do so. First, Access Copyright did not suppo rt is representations with documentation. It would have been a simple matter to do so. Second, Access Copyright made no reference to the magnitude of the recent retroactive payments under the K to 12 tariff or the magnitude of the revenue it receives under its other licensing activities. The Board's Jurisdiction Section 66.51 of the Copyright Act provides the Board with jurisdiction to make interim decisions. In addition, by reason of section 70.2 of the Act, on application the Board has the power to fix the royalties and their related terms and conditions where a collective society, such as Access Copyright, and a user or a representative are unable to agree. As many decisions of the Board discussed below show, an interim decision may be made in the pending ce rtification of a tariff or pending a final determination of an application under section 70.2. AUCC submits that the Interim Decision Application for a decision extending the existing licensing regime amounts to a request to fix royalties and their related terms and conditions where the Access Copyright and AUCC's member universities, among others, have been unable to agree upon the terms and conditions. AUCC submits that the Board has no jurisdiction under section 66.51 to extend the licensing regime and fix the royalties and related terms and conditions. It can only make such a decision in an application made under section 70.2. AUCC also submits that Access Copyright should be barred from making a future application under section 70.2 because it has not demonstrated that it made bona fide effo rt s to renegotiate the AUCC Model Licence. A collective society should be barred from availing itself of the provision of section 70.2 in the absence of showing a bona fide negotiation. The Test for Granting an Interim Decision If the Board decides that, contrary to AUCC's submissions, it has the jurisdiction to make the interim decision requested by Access Copyright, the Board must then determine
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Page 13 whether, in the Interim Decision Application, Access Copyright has met the conditions for granting an interim decision. In Bell Canada v. Canada Justice Gonthier of the Supreme Court of C anada summarized the test for making an interim decision as follows: Traditionally, such interim rate orders dealing in an interlocutory manner with issues which remain to be decided in a final decision are granted for the purpose of relieving the applicant from the deleterious effects caused by the length of the proceedings. Such decisions are made in an expeditious manner on the basis of evidence which would often be insufficient for the purposes of the final decision. The fact that an order does not make any decision on the merits of an issue to be settled in a final decision and the fact that its purpose is to provide temporary relief against the deleterious effects of the duration of the proceedings are essential characteristics of an interim rate order'$. The Board has applied those remarks in considering a request for an interim decision under section 66.5119 The Proposed Tariff is an inaugural tariff. Although it has been proposed in the context of a voluntary licensing scheme which will terminate December 31, 2010, as demonstrated above, the structure and scope of the tariff licence and the other terms and conditions of the tariff differ substantially from the structure, scope of the licence and the other terms and conditions of the AUCC Model Licence. Granting the interim decision requested and issuing an interim tariff would be an unprecedented step by the Board in proceedings involving an inaugural tariff. The Board's Interim Decisions The Board's interim decisions fall into three categories. The first category are interim decisions made pending certification of an inaugural tariff, the second are interim decisions to extend the terms of a certified tariff or an existing licence agreement and the third category are interim decisions in applications under section 70.2 in circumstances in

18 19

[1989] 1 S.C.R. 1722 at p. 1754 Interim Statement of Royalties to be Collected by SOCAN and NRCC in respect of Commercial Radio for the Years 2003-2007, November 24, 2006

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Page 14 which there is no prior licence agreement or in which there is a new use not present in a prior licence agreement. We are aware of only three applications for an interim decision made pending certification of an inaugural tariff. Each of those applications was unsuccessful. The Board's decisions on the applications are as follows: (a) (b) (c) Ruling on CBRA's Application for an Interim Tariff, May 3, 2001 ("Media Monitoring 1"); Ruling of the Board regarding CBRA Media Monitoring Tariffs, June 11, 2003 ("Media Monitoring 2"); and Statement of Royalties to be Collected by AVLA/SOPROQ for the Reproduction of Sound Recordings, in C anada, by Commercial Radio Stations for the Years 2008 to 2011, February 29, 2008 ("AVLA/SOPROQ").

In Media Monitoring 1 CBRA applied for an interim decision in the form of an interim tariff in the context of a proposed inaugural tariff. The Board stated: CBRA's application for an interim tariff is denied. As this matter deals with a currently uncertified tariff, issuing an interim tariff could be interpreted as setting a policy precedent on a subst antive matter not yet properly heard by the Board. The legal issues raised in these proceedings are not sufficiently complex to justify their being examined separately from the substantive issues. Furthermore, a reasonable dispute exists on legal issues such as the existence of rights and retroactivity. In the Board's view, it would be best if those issues, including those regarding quantum and terms and conditions of the tariff, be fully addressed at a hearing20. The CBRA made a subsequent application for an interim tariff in the same inaugural tariff proceedings. In Media Monitoring 2 the Board denied the application for the same reasons as in Media Monitoring 1.

20 Media

Monitoring 1, 1 g ^P•

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Page 15 In AVLA/SOPROQ, the collective society AVLA and SOPROQ applied for an interim tariff pursuant to section 66.51 in the context of a proposed inaugural tariff. The Board refused the application on grounds that collectives had not established sufficient deleterious effects of the proceedings. The collectives asserted deleterious effects on several grounds, one which is relevant to the Interim Decision Application. The collectives asserted that they had no tariff income to fund the proceedings. However, the Board pointed to AVLA and SOPROQ's significant licensing income and millions of dollars received from NRCC as the maker's share of equitable remuneration pursuant to section 1921 which could be used to subsidize the proceedings before the Board. The lack of income under the tariff pending certification is not a deleterious effect caused by proceedings before the Board. AVLA and SOPROQ also sought to rely on the Board's decision in SOCAN-NRCC Interim Commercial Radio Tariff, 2005-2007 22. In that case, the interim tariff was issued in the context of an existing certified tariff. The Board distinguished that decision on grounds that setting an interim tariff in AVLA/SOPROQ would require recalculations and money changing hands as the interim tariff would certainly not be the same as the final tariff23. The second category of interim decisions of the Board is decisions to extend the terms of a certified tariff or an existing licence agreement. AUCC submits that these decisions must be considered with caution in relation to the Interim Decision Application because of the differences in the circumstances from those in the present matter. The Board has issued a number of interim decisions under section 65.51 where the objective was to extend a licensing regime. The interim decision in Cancopy v. AUCC and Wilfrid Laurier University (the "Cancopy Decision") is an example24. In that case, member universities of AUCC had licence agreements with Access Copyright, then known as Cancopy, which were to expire August 31, 1996. On August 13, 1996 AUCC, on behalf of the universities, applied to the Board under section 70.2 of the Act for a one year renewal of the licence agreement on the same terms, and applied under section 66.51 for an interim licence for a period to expire August 31, 1997. Access Copyright was prepared to consent to an extension of the licence agreements, but at a royalty rate greater than the amount specified in the prior agreement. The Board maintained the status quo and extended the agreement as requested by the applicants. The effect of the decision in 21 ALVA/SOPROQ, para 4
22 23 24

November 24, 2006 ALVA/SOPROQ, para 9 September 13, 1006

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Page 16 the Cancopy Decision was to avoid a legal void on the expiry of the licence agreements pending determination of the application under section 70.2. Another circumstance in which the Board has issued an interim decision extending an existing licence agreement is illustrated by the decision in SODRAC v. ADISC25 . That case also related to an application under section 65.51 for an interim decision pending the issuance of the decision on a section 70.2 application. The Board observed that it was an open question that a decision on a section 70.2 application could be made retroactive to the date of the application. The Board observed that the only way to prevent the status quo ante from becoming a fait accompli was to issue an interim decision26. A third category of interim decisions arises in circumstances in which a collective society seeks an order of the Board under section 70.2 where there is no prior licence agreement or where there is a new use not present in a prior licence agreement. The Board summarized its approach to granting an interim decision both where there is an existing agreement and when there is no agreement or a new use in SODRAC v. Les Chaînes Télé Astral27. In that case the Board stated: When an agreement exists between the pa rt ies, it is generally preferable to extend that agreement on an interim basis. When there is no agreement or when new uses are involved, the Board prefers to establish a symbolic royalty for the purpose of the interim licence "unless the context requires a different approach".28 An example of an interim decision in which there was no existing licensing arr angement with the Board setting a nominal fee is SODRAC v. MusicPlus Inc. 29. In that case, in setting a nominal fee of $1 per month, the Board expressed the question to address in considering an application for an interim decision as follows: The true question is whether denying SODRAC's request may result in rightsowners being deprived of fair royalties
25 26

August 31, 1999 Ibid, p. 4

27 December 14, 2009
28 29

Ibid, p. 3 to 4 November 22, 1999

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Page 17 for the period between now [the date considering the application for the interim decision] and the final determination or in the [collective] society being compelled to resort to lengthy and costly legal proceedings °.

The Interim Decision Application does not meet the Test As stated above, we are not aware of any decision of the Board whereby the Board issued an interim decision in an inaugural tariff. We submit that the Board should only issue an interim decision in such a case for the most compelling reasons. There are no such reasons in this case and in fact the Board's decisions in Media Monito ri ng 1, Media Monito ring 2 and AVLA/SOPROQ are compelling precedents for rejecting the Interim Decision Application. In the matter at hand there are significant legal issues relating to the entitlement of Access Copyright to collect royalties in relation to a substantial po rtion of copies made by AUCC's member universities. The evidence will show that most of the copies now made by the universities are made with the permission of the copyright owner, e.g. through the Digital Licences, or fall within an exception established by the Copyright Act, e.g fair dealing. These issues cannot be addressed without a full hearing and determination of what materials are copied by the universities, the purposes for which the copies are made, and the extent to which the universities have otherwise secured permission to make the copies. It is necessary that these issues be address at a full hearing. The Board should re frain from issuing the decision requested in the Interim Tariff Application to avoid setting a policy precedent on a subst antive matter which will be before the Board on the hearing of these proceedings. In addition, Access Copyright claims that the length of these proceedings will cause it deleterious effects because, without the payment of royalties, it would be significantly hampered in distributing royalties and funding these proceedings. There is no doubt that Access Copyright has significant licensing income including millions of dollars that it receives under its K to 12 tariff. There is no doubt that Access Copyri ght will in due course receive the tariff royalties certified by the Board from the AUCC member universities that require the licence under the tariff. There is no risk that the amount of the tariff certified by the Board as properly owing will not be paid. The finding in AVLA/SOPROQ applies. Access Copyright can use its existing significant licensing
30

Ibid, p. 2

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Page 18 income and tariff revenues to fund its operations, and if required, to subsidize these proceedings before the Board. A further reason for rejecting the Interim Decision Application is that the royalties in the Proposed Tariff as certified will most certainly differ from the royalties that Access Copyright seeks by way of the interim Decision Application. Having regard to the Digital Licences and the extensive ch anges in the copying practices and technology since the AUCC Model Licence was last renegotiated, there can be little doubt that the royalty rates that will be certified will be less than those sought by Access Copyright in the Interim Decision Application. Issuing the interim decision requested by Access Copyright will require recalculations on the certification of the Proposed Tariff requiring refunds of substantial royalties paid. To the extent that royalty payments are passed through to students by AUCC member universities the repayment by Access Copyright will place the universities in a difficult position in determining how the repayment should be distributed. A consideration of the second and third categories of the Board's interim decisions shows that an interim decision is appropriate to extend an existing licence arr angement pending a final decision by the Board where there would otherwise be a legal void, e.g. the unlawful use of the repertoire of a collective society or to deal with the uncertainty of the retroactivity of a decision under section 70.2. In the present circumstances there is no legal uncertainty. The AUCC member universities who intend to operate with a licence under the Proposed Tariff have, or by December 31, 2010 will have, made an offer under section 70.17 of the Act, and there is certainty that the decision in this tariff application, contrary to the circumstances in an application under section 70.2, will be retroactive to January 1, 2011, the day following the expiry of the existing licence agreements between AUCC member universities and Access Copyright. Because of the long st anding established practice of the Board, founded in the provisions of the Copyright Act, a tariff once certified has retroactive effect. Therefore, the second reason for making an interim decision in cases involving licensing arr an gements does not apply. AUCC submits that the Board must not only consider the deleterious effects of the length of these proceedings on Access Copyright, it must consider such effects on AUCC member universities and those ultimately responsible for increased costs due to the payment of the amount of royalties requested by Access Copyright, in this case university students. As discussed above, there is a compelling case for the need for the royalty rate in the Proposed Tariff to be set substantially lower than the rates in the current licence agreements between AUCC member universities and Access Copyright. The need for the
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Page 19 recalculation on certification of the Proposed Tariff of royalties paid, and the complex questions of redistribution of amounts paid imposes a deleterious effect not only on institutions. What in effect Access Copyright is requesting is the imposition of royalty payments, in circumstances where there is no legal void, with the tariff proceedings being funded on the backs of students. Access Copyright prefers funding these proceedings based on student payments which AUCC submits will be shown to be excessive, without subsidization from its substantial other tariff revenue or other licensing income. It would be an enormous and virtually impossible task for a university to refund amounts paid by students to cover the overpayment of the royalties, especially where, at the time for refund, the students are no longer students of the university. Ultimately, the Board will have to weigh the bal ance of the effect of not issuing the interim decision requested on Access Copyright and the rightsholders it represents with that on the users, including AUCC member universities and their students. AUCC submits that the only effect on Access Copyright and the rightsholders it represents is delay in receipt of payment. This delay in payment is fully attributable to the steps taken by Access Copyright. Access Copy right was fully aware of the length of time taken by tariff proceedings through its experience with the K to 12 tariff. There was nothing that prohibited Access Copyright from filing the Proposed Tariff a number of years ago to take effect January 1, 2011. It would have been possible for Access Copyright to have secured a decision on the tariff before expiry of the existence licence agreements. Instead, it elected to delay filing the Proposed Tariff to March 2010 knowing full well that it would not have a decision before December 31, 2010. The alleged deleterious effect of the delay in payment of tariff royalties attributable to Access Copyright's own delay is far outweighed by the deleterious effects on users, including AUCC member universities and their students, and the inevitable interpretation of the Board's interim decision, as requested by Access Copyright, as setting a precedent on policy and substantive matters that have not been properly heard by the Board on the evidence.
The Terms of Any Interim Tariff

In the event that, despite these submissions, the Board decides that it would be appropriate to issue an interim decision extending the provisions of the existing licence agreements, AUCC submits that the decision apply only where: (a) An institution intends to avail itself of the uses described in the Proposed Tariff for which it does not otherwise have the permission of the copyright holders or for which permission is not required; and

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Page 20 (b) The institution has not forwarded to Access Copyright an offer under section 70.17 of the Act.

It is arguable that, in those circumstances, there would be a legal void because, from January 1, 2011 to the date of the ce rtification of the tariff, the institution would be liable for copyright infringement to the copyright owner. With respect to the royalty rate to be established in the interim decision, AUCC submits that there is a compelling reason that the Board set a nominal fee of $1 per month. The Board would thereby avoid creating the inevitable interpretation that the Board has set a precedent on policy and subst antive matters without a proper hearing on the evidence. Urgency The interim decision requested by Access Copyright is a very serious matter for AUCC member universities and their students. AUCC submits that a decision in this matter be very carefully considered. If the Board decides that, based on the face of the representations as to the financial consequences for Access Copyright and the rightsholders it represents, an interim decision should issue, AUCC submits that the Board provide the pa rties with an opportunity, through or al testimony and cross examination, to test the veracity of the those representations. There is no urgency in having the Interim Decision Application disposed of before January 1, 2011. The licence agreements that AUCC member universities have with Access Copyright provide for quarterly payment. Clause 16(b) of the 2003 AUCC Model Licence provides as follows: The Institution shall remit to Access Copyright within 60 days of March 31, June 30, September 30 and December 31 of each year during the term of this Agreement the amount payment for the previous calendar qua rter calculated pursuant to clauses 14(b) through (g) of this Agreement. Access Copyright will receive the last payments under the existing licence agreements 60 days after December 31, 2010. The first payments for 2011 if the Board extends the existing licence agreements would not be due until 60 days after March 31, 2011. There is ample time for the Board to give this serious matter full consideration as to Access Copyright's representations of dire financial consequences and cross examinations thereon, before the first payment for 2011 would be payable at the end of May 2011.

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Conclusion

AUCC urges the Board to reject the Interim Decision Application and accede to AUCC's request in its letter of objection dated July 15, 2010 to promptly initiate these proceedings to ensure that the Board will be able to issue its decision at the earliest date. Rejecting the Interim Decision Application will also serve as an incentive for Access Copyright to proceed expeditiously in these proceedings. It is telling that, despite having AUCC's objection since July 15, 2010 in which AUCC expressed the desire that these proceedings be promptly initiated, Access Copyright has not approached AUCC to discuss a timetable for advancing these proceedings nor to discuss developing a proposal for a bibliographic or volume survey of AUCC member universities who intend to conduct their copying activities under the Proposed Tariff. These proceedings need to move forward quickly. The best means of ensuring that that will happen is to deny Access Copyright's application. Yours very truly,

Glen A. Bloom
GAB:cms

Enclosure c. aoneill@fasken.com and wanda.noel@sympatico.ca
ariel.katz@utoronto.ca mccutcheon@athabascau.ca tltait@athabascau.ca brad.neufeldt@stmu.ab.ca gov@casa.ca dfewer@uottawa.ca smagu039@uottawa.ca i ason. fang@gov. ab. ca lfultonlyne@ytced. ab. ca nair@sfu.ca nancy.brooks@blakes.ca and randall.hofley@blakes.ca pardoe@siast.sk.ca rideau3@gmail co rn ruth.wit enberg@ufv.ca sayer@ambrose.edu

jayrahn@yorku.ca

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