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Barrister & Solicitor
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December 10, 2010 Mr. Gilles McDougall Acting Secretary General Copyright Board of Canada Suite 800 - 56 Sparks Street Ottawa, Ontario K1A 0C9 Re: Application for an Interim Decision on the Access Copyright PostSecondary Educational Institution Tariff, 2011-2013 (the “Proposed Tariff”) Dear Mr. McDougall: We are writing to you on behalf of the Association of Canadian Community Colleges (“ACCC”) pursuant to the Notice of the Board dated November 26, 2010. ACCC opposes Access Copyright’s above application (the “Interim Decision Application”) because it does not meet the established test for the issuance of an interim decision and for the reasons further described below. ACCC ACCC is the national and international voice of Canada’s colleges, institutes, polytechnics, cégeps, university-colleges and universities with a college mandate. With campuses in 1,000 urban, rural and remote communities,1.5 million learners, and 60,000 educators, colleges draw students equally from all socio-economic quarters, and supply graduates with the advanced skills essential to Canada’s economic growth and productivity. They encourage business formation and sustainability by growing the local talent pool, by re-training displaced employees,
by offering customized education, and by providing applied research and development support to local businesses. The list of ACCC's member colleges is attached as Appendix A. History of the Existing College Licences The existing college licences and the AUCC Model Licence do not vary in ways that are materially relevant to this submission.1 The initial AUCC Model Licence was used as a basis for negotiations between Access Copyright and ACCC's member colleges. There have been licences in place between Access Copyright and ACCC's member colleges since 1994. The most recent versions of the college licences came into effect on September 1, 2003. A sample of a typical licence between Access Copyright and a college is attached as Appendix B. Appendix C lists the ACCC's member colleges, outside of Quebec, that have licences with Access Copyright. While these licences were set to expire on August 31, 2010, Access Copyright and ACCC agreed in June of 2010 to extend them until December 31, 2010. Differences Between The Existing College Licences And The Proposed Tariff There are four significant differences between the existing college licences now in effect and the Proposed Tariff that are relevant to this Interim Tariff Application. The first difference is that the Proposed Tariff is inclusions based, that is, the repertoire is limited to published works for which Access Copyright administers rights by assignment, licence, agency or otherwise.2 The existing college licences now in effect are exclusions based. Licensees have access to a repertoire consisting of material that is not on the Exclusions List. Therefore, the rights to
The existing college licences define the terms “Copyright Board” and “Employee”. Those terms are not defined in the AUCC Model Licence. The definition of “FTE” in clause 1 of the AUCC licence is different from the definition in the same clause in the existing college licences. The AUCC licence gives it the right to approve Access Copyright’s poster materials in clause 10.1, whereas the existing college licences do not contain this right. The AUCC licence specifies that Sampling Survey methods will be agreed upon in clause 22.1, whereas the existing college licences do not. The existing college licences specify in clause 30 that refunds after termination of the agreement will be made on a pro-rated basis, whereas the AUCC licence does not specify this. The AUCC licence has a specific provision in clause 32 regarding breaches of clause 2(c), whereas the existing college licences do not. The notice provisions in clauses 37.1 and 37.2 in the existing college licences, and clauses 38.1 to 38.4 in the AUCC licence, also differ.
Statement of Proposed Royalties to Be Collected By Access Copyright for the Reprographic Reproduction, in Canada, of Works in its Repertoire - Post-Secondary Educational Institutions (2011-2013) Supplement Canada Gazette Part I, June 12, 2010, sections 2 (definition of “Repertoire Works”) and 3, pp. 4-5. Online: http://www.cb-cda.gc.ca/tariffs-tarifs/proposedproposes/2010/2009-06-11-1.pdf
copy granted under the Proposed Tariff are substantially less than the rights to copy under the existing college licences. Second, the Proposed Tariff does not include an indemnity from copyright infringement suits in respect of copying of works outside Access Copyright’s repertoire. The existing college licences provide an indemnity. This removes a valuable part of the college licences. Third, the Proposed Tariff profoundly changes the tariff royalty structure. Under the existing college licences, a college pays a $3.38 per each full-time equivalent student (“FTE”), plus $0.10 page for copies made for sale to and use by students, professors and administrative staff.3 The Proposed Tariff eliminates the per page royalty payment all together and increases the royalty rate to $35 per FTE. Fourth, the Proposed Tariff expands the scope of permitted copying to include the making of digital copies of certain works in limited circumstances. The value of the right to make digital to colleges is undetermined. Colleges are increasingly purchasing licences and subscriptions to electronic resources and reducing their photocopying and scanning activities as sources of course content. Evolution Of Copyright Practices Digital licensing, the Internet, course management systems, course websites and technological advances are changing copying, library, and learning resource centre practices in ACCC’s member colleges. There are now real, practical and efficient alternatives to an Access Copyright licence or tariff to secure copyright permission for the copying activities of ACCC's member colleges. Some colleges have harnessed these digital technologies to a greater extent than others. Some of ACCC's members may no longer require a licence from Access Copyright because they are able to make the copies they need without it. Evolving copying practices in colleges call into question the value of the Proposed Tariff, and particularly the maintenance of existing royalty rates. Although ACCC's member colleges have had reprography licensing agreements with Access Copyright for many years, they are expanding the scope of their licensing with academic publishers through regional consortia. For example, member colleges in British Columbia license materials through the BC Electronic Library Network, the Council of Prairie and Pacific University Libraries (COPPUL)
2003 College Agreement with Access Copyright, sections 14(a)(iv) and 14(b)(iv), pp. 8-9. See Appendix B for a sample agreement. In most cases these per page royalties are passed on to students buying course packs.
and the Electronic Health Library of BC. In Alberta, most colleges are members of the Alberta Library. In Ontario, colleges purchase online databases subscriptiosn to journals and e-books through the Ontario College Library Services (OCLS), formerly the Bibliocentre. Three of ACCC’s member colleges (Nova Scotia Agricultural College, Kwantlen Polytechnic University, and Vancouver Island University) have licenses under the Canadian Research Knowledge Network (CKRN), a consortia whose members are primarily universities. Through the licences negotiated under regional consortia, colleges have access and permission to copy an extensive library of academic materials. Colleges also negotiate licenses directly with rightsholders and publishers (such as Ebsco, Proquest, Pearson and McGraw.) to permit access to, and copying of, electronic journals, e-books, articles, and other digital materials. Colleges also subscribe to periodical databases and negotiate licences directly with organizations, local, provincial, federal and international governments. They have licensing agreements with organizations such as Rockwell Automation, Alberta Bison Producers and newspapers. These licensing arrangements permit students attending ACCC's member colleges to access an ever increasing amount of content. The inevitable result is that the need for paper course packs and articles on reserve in libraries is declining. The shift to licensing is drastically affecting copying practices at Canadian colleges. Some colleges develop course packs made up solely of content produced within the institution. Some do not use course packs at all. The use of the Internet and other means of digital distribution mean that colleges do not need to rely nearly as much on paper copies for course packs or other uses. Although colleges do not have a country-wide digital licensing scheme like the CKRN for universities, many colleges have digital licensing arrangements. Since Access Copyright has relatively few digital rights compared to their repertoire in written works, the value of the rights their licenses provide has diminished significantly. An interim tariff cannot adequately reflect the evolving copying practices in Canadian colleges. Access Copyright cannot justify maintaining the existing license royalty rates when the usefulness and value of those licenses is decreasing. Access Copyright Made No Bona Fide Attempt To Renegotiate the PostSecondary Licence Historically, ACCC has worked closely with AUCC to negotiate, and then renegotiate, licences for post-secondary institutions with Access Copyright. In its submission on this matter AUCC outlines the history behind the filing of the
Proposed Tariff. ACCC has reviewed and agrees with the submission of AUCC regarding the circumstances leading up to the filing of the Proposed Tariff. In addition, Access Copyright contacted ACCC by telephone earlier this year, to advise of its reluctance to renegotiate college agreements with individual institutions. Section 70.17 ACCC's member colleges are concerned about being sued for copyright infringement for copying during the period January 1, 2011 to the date of the certification 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 ACCC’s member colleges who make an offer to Access Copyright under section 70.17 as the “Payment Period.” A way to protect ACCC's member colleges that intend to operate under the Proposed Tariff (when it is eventually certified) from infringement suits during the Payment Period is to make an offer to Access Copyright under section 70.17 of the Copyright Act. For those colleges that choose this option, section 70.17 prohibits the bringing of copyright infringement actions for copying conducted within the scope of the Proposed Tariff. Access Copyright as an administrator of non-exclusive rights4 cannot sue for copyright infringement. Section 70.17 would protect colleges from copyright infringement suits from the copyright owner (a person other than Access Copyright) pending certification of the tariff. The retroactive effect of the tariff ensures that colleges are licensed for Payment Period. Thus, the combination of section 70.17 and the retroactive effect of the certification of the Proposed Tariff back to January 1, 2011, ensures there will be no legal vacuum for ACCC's member colleges who intend to conduct their copying practices in accordance with the Proposed Tariff. The Application For An Interim Decision Access Copyright seeks an interim decision licensing ACCC's member colleges for the uses described in the Proposed Tariff upon payment to Access Copyright for the Payment Period of the amounts payable under agreements which will
Access Copyright only secures non-exclusive rights to administer the published works in its repertoire. As a holder of a non-exclusive licence to the published works in its repertoire, Access Copyright does not have a monopoly over the granting of permissions for published works in its repertoire. It therefore does not hold an interest in the copyright works in its repertoire. Access Copyright cannot therefore sue for copyright infringement in its own name under section 36(1) of the Copyright Act.
terminate December 31, 2010.5 Access Copyright describes the purpose of the application as extending the licensing regime during the Payment Period to provide rightsholders and users with continuity and certainty6. The reasons given to support the request include: preventing “a legal void;”7 avoiding “substantial deleterious effects" on Access Copyright, creators and publishers; reducing Access Copyright's licensing revenue; cutting operating expenses; hampering the collection and distribution of royalties; impeding the development of distribution technology; hampering licensing activities outside the scope of existing and proposed tariffs; and funding these proceedings.8 Deleterious Financial Effects Are Overstated ACCC agrees with AUCC that the grounds upon which Access Copyright relies to support the Interim Decision Application do not hold up to scrutiny. Reliance on section 70.17, together with the retroactive effect of certification of the Proposed Tariff, means there will be no deleterious financial effects. Access Copyright itself admits that its licensing revenue from non-post-secondary sources fully covers its operating expenses. Although Access Copyright may be required to defer expenditures on some activities during the Payment Period, it will be able to fully continue its operations. In its Interim Decision Application, Access Copyright states that the royalties certified in the K to 12 tariff are approximately one third of its licensing revenue, but that it cannot use approximately one half of that revenue to fund its operating expenses pending the final outcome of appeals.9 First, by its own admission Access Copyright does not require that revenue to fund its operating expenses as its licensing revenue is double its operating expenses. Second, in 2009 Access Copyright received a retroactive payment in excess of $40 million upon certification of the K to 12 tariff. This revenue can be used by Access Copyright during the Payment Period. Access Copyright's annual
Application for an Interim Decision on the Access Copyright Post-Secondary Edicational th Institutions Tariff (2011-2013), submitted by Access Copyright on Oct. 7, 2010, p. 2 (4 full paragraph).
6 7 8 9
Supra, note 5, p. 1 (2
Supra, note 5, p. 5 (4 full paragraph). Supra, note 5, p. 6 (4 full paragraph). Supra, note 5, p. 7 (1 full paragraph).
expenses in 2009 were only $8,219,000,10 a fraction of the retroactive payment amount. Third, in addition to this $40 million windfall retroactive payment, Access Copyright's licensing revenue from K to 12 education institutions has more than doubled as a result of the K to 12 tariff rate being increased by a Copyright Board tariff decision in 2009. The rate went from approximately $2.50 to $5.16. With approximately 4 million K to 12 students in Canada this amounts to an increase of $2.66 per FTE or $10.6 million per year. This increase alone is more than Access Copyright's annual expenses. Fourth, although the Board can rely on assertions unsupported by evidence in making an interim decision, ACCC submits that the Board should treat Access Copyright's representations about the financial implications of a delay in payment carefully. Access Copyright has not supported its representations with documentation, and makes no reference to the substantial retroactive payments under the K to 12 tariff or the doubling of its ongoing tariff revenue from that source. The Basis For Granting An Interim Decision The Board is empowered under section 66.51 of the Copyright Act to make interim decisions. The basis for making interim decisions was established in Bell Canada v. Canada: 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
Access Copyright Annual Report 2009, p. 8. Online: http://www.accesscopyright.ca/docs/AnnualReports/Annual_Report_2009_Final.pdf
deleterious effects of the duration of the proceedings are essential characteristics of an interim rate order11. The Board has referenced the test in the Bell case in its decisions on interim tariff applications under section 66.51.12 The Interim Tariff Decision Application before the Board is framed as an extension of the voluntary licensing scheme which will terminate December 31, 2010. What is also before the Board is an application for an interim decision on a proposed inaugural tariff. As noted above, the Proposed Tariff and the existing licensing agreements between Access Copyright and the colleges differ in at least four important aspects. The Proposed Tariff is (1) inclusions rather than exclusions based; (2) has a different royalty structure (3) has no indemnity clause and (4) permits different copying activities. The Board’s Interim Decisions The Board’s interim decisions fall into three categories: (1) interim decisions made pending certification of an inaugural tariff; (2) interim decisions extending the terms of a certified tariff or an existing licence agreement; and (3) interim decisions in section 70.2 applications where there is no prior licence agreement or where there is a new use not present in a prior licence agreement. (1) Interim Decisions Made Pending Certification Of An Inaugural Tariff Research of Copyright Board decisions has identified three applications for an interim decision made pending certification of an inaugural tariff. In all three decisions the Board denied the application. The first decision is the Board's ruling on a CBRA application for an Interim Tariff, May 3, 2001 (“Media Monitoring 1”) – available online at http://www.cbcda.gc.ca/decisions/2001/20010503-mv-b.pdf. CBRA applied for an interim
 1 SCR 1722, para. 46. Online: http://scc.lexum.umontreal.ca/en/1989/1989scr11722/1989scr1-1722.html
Interim Statement of Royalties to be Collected by SOCAN and NRCC in respect of Commercial Radio for the Years 2003-2007, Nov. 24, 2006. Online: http://www.cbcda.gc.ca/decisions/2006/20061124-m-e.pdf
decision in the form of an interim tariff in the context of a proposed inaugural tariff. The Board denied the application: As this matter deals with a currently uncertified tariff, issuing an interim tariff could be interpreted as setting a policy precedent on a substantive 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 hearing13. The second decision is the Board's ruling in CBRA Media Monitoring Tariffs, June 11, 2003 (“Media Monitoring 2”) – available online at http://www.cbcda.gc.ca/decisions/2003/20030611-mv-b.pdf. 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. The third decision is the Statement of Royalties to be Collected by AVLA/SOPROQ for the Reproduction of Sound Recordings, in Canada, by Commercial Radio Stations for the Years 2008 to 2011, February 29, 2008 (“AVLA/SOPROQ”) – available online at http://www.cbcda.gc.ca/decisions/2008/20080229-rs-b.pdf. 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 the ground that they had no tariff income to fund the proceedings. In its decision the Board pointed to AVLA and SOPROQ’s significant licensing income14 which could be used to subsidize the proceedings before the Board. The lack of income under the tariff pending certification was not a deleterious effect caused by proceedings before the Board. The Board did not rely on its decision in SOCAN-NRCC Interim Commercial Radio Tariff, 2005-200715 on grounds that setting an interim tariff in
13 14 15
Media Monitoring 1, p. 1 (1 full paragraph). ALVA/SOPROQ, p. 1 (4 full paragraph). Supra, note 12.
AVLA/SOPROQ would require recalculations and money changing hands as the interim tariff would certainly not be the same as the final tariff.16 (2) Interim Decisions Extending The Terms Of A Certified Tariff or an Existing Licence Agreement It is respectfully submitted that there are important differences in the circumstances involved in this case and the circumstances in these category 2 decisions. The Board has issued a number of interim decisions under section 66.51 to extend a licensing regime. In Cancopy v. AUCC and Wilfrid Laurier University (the “Cancopy Decision”),17 universities had licence agreements with Cancopy (now Access Copyright) which were to expire August 31, 1996. On August 13, 1996, universities applied to the Board under section 70.2 of the Copyright 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. Although Access Copyright was prepared to consent to an extension of the licence agreements, it wanted a higher royalty. The Board decision extended the agreement as requested by the applicants. The effect of the decision was to avoid a legal void after the expiry of the licence agreements pending determination of the application under section 70.2. The Board decision in SODRAC v. ADISC18 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 decision left open the question that a decision on a section 70.2 application could be made retroactive to the date of the application. The Board observed that: If such a decision can take effect only when issued, then the only way to prevent the statu quo ante from becoming a fait accompli is to issue an interim decision.19
16 17 18 19
Supra, note 14, p.3, para. 9. September 13, 1996. Online: http://www.cb-cda.gc.ca/decisions/1996/19960821-a-b.pdf August 31, 1999. Online: http://www.cb-cda.gc.ca/decisions/1999/19990831-a-b.pdf Supra, note 18, p.4 (1 full paragraph).
(3) Interim Decisions In Section 70.2 Applications Where There Is No Prior Licence Agreement Or A New Use Not Present In A Prior Licence Agreement The Board summarized its approach to granting an interim decision where there is an existing agreement and where there is no agreement or a new use in these category 3 cases in SODRAC v. Les Chaînes Télé Astral:20 When an agreement exists between the parties, 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”.21 An example of an interim decision in which there was no existing licensing arrangement with the Board setting a nominal fee is SODRAC v. MusiquePlus Inc.22 The Board set a nominal fee of $1 per month. The Board expressed the question to be considered in an application for an interim decision as follows: The true question is whether denying SODRAC’s request may result in rights owners being deprived of fair royalties 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.23
There Is No Legal Void The second and third categories of the Board’s interim decisions establish that an interim decision is appropriate to extend an existing licence arrangement pending a final decision by the Board where there would otherwise be a legal void. Two examples of a legal void are the unlawful use of the repertoire of a collective society and the uncertainty of the retroactivity of a decision under section 70.2. It
20 21 22 23
December 14, 2009. Online: http://www.cb-cda.gc.ca/decisions/2009/20091214.pdf Supra, note 20, p. 3 (last paragraph). November 22, 1999. Online: http://www.cb-cda.gc.ca/decisions/1999/19991122-a-b.pdf Supra, note 22, p. 2 (3 full paragraph).
is submitted that there is no legal uncertainty in this case. ACCC's member colleges who intend to operate under the Proposed Tariff (as certified) have the option of making an offer under section 70.17 of the Act. 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 Board has a long standing and established practice that a tariff once certified has retroactive effect. Thus the uncertainty of the retroactivity of a decision under section 70.2, the second reason for making an interim decision in cases involving licensing arrangements, does not apply. The Interim Decision Application Does Not Meet The Test A review of Board decisions has not identified a single instance where the Board issued an interim decision in an inaugural tariff. ACCC respectfully submits that the Board should not issue an interim decision in this case. The Board’s decisions in Media Monitoring 1, Media Monitoring 2 and AVLA/SOPROQ are precedents for rejecting the Interim Decision Application. There are significant legal issues relating to the entitlement of Access Copyright to collect royalties in relation to copies made by ACCC’s member colleges. There is no evidence before the Board on what materials are copied by colleges or on the purposes for which the copies are made. There is no evidence before the Board on the extent to which colleges have otherwise secured permission to make copies of published works. These are complex issues that cannot be addressed without a full hearing. In these circumstances it is not appropriate for the Board to issue the decision requested in the Interim Decision Application. To do so would set a precedent on substantive matters which will be before the Board at the eventual hearing of the case. Refunding Royalties To Students Is Impossible The royalties in the Proposed Tariff when certified will almost certainly be different from the royalties that Access Copyright seeks to have paid as a result of the interim decision requested. It is quite possible that the royalty rates that will be certified will be less than those sought by Access Copyright in the Interim Decision Application. If this is the case, and the interim decision requested is issued, refunds of royalties paid would be required. Per page royalty payments are passed through to students by many of ACCC's member colleges. Colleges would be in the difficult if not impossible situation of having to refund royalties to students several years after they were paid by the student and to students that are likely no longer studying at the college. Issuing an interim decision could therefore produce deleterious effects for ACCC's colleges and their students.
Access Copyright Had Options Other Than A Long Proceeding The decision to be made by the Board involves balancing of the effect of not issuing the interim decision on Access Copyright and the creators and publishers it represents, with the effect on ACCC's member colleges and their students. For Access Copyright, denying its application means nothing more than a delay in payment. A payment delay is a consequence of Access Copyright's choice to move from a negotiated licence regime to a tariff. Access Copyright made this choice knowing that it takes several years to complete an inaugural tariff proceeding. Access Copyright knows this from its experience with the K to 12 inaugural tariff. Access Copyright had other options. It could have re-negotiated the existing licences. It could have filed the Proposed Tariff several years ago to take effect January 1, 2011. It could have secured a decision on the tariff before the existing licence agreements expired. Any deleterious effects to Access Copyright are, ACCC submits, due to its own delay and are outweighed by the deleterious effects to ACCC's member colleges and their students. An interim decision, as requested by Access Copyright, will set a precedent on policy and substantive matters that have not been properly heard by the Board based on evidence. Urgency If the Board decides to grant Access Copyright's application, ACCC intends to make submissions in response to the three further questions set out in the Board's Order of December 8, 2010: 1) If the Board decides to issue an interim decision, which form should that decision take? 2) If the Board decides to issue an interim decision, what should the substantive content of the decision be? Access proposes maintaining what it refers to as the status quo, with additional, potential uses being allowed at no additional cost. Does the proposal achieve what it purports to achieve? Is that what the interim decision should indeed achieve? If not, what else? 3) Once the content or substance of the decision has been determined, does the proposed text reflect that substance or content and if not, how should it be modified?
Conclusion ACCC submits that the Board should reject Access Copyright's Interim Decision Application.
Yours very truly,
Michèle Clarke J. Aidan O'Neill Ariel Thomas Jordan Snel
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