Bill C-11 Committee on March 1st, 2012

[The Chair, NDP, Glenn Thibeault]

Good morning, everyone.

I'd like to welcome our witnesses and guests to the sixth meeting of the Legislative Committee on Bill C-11.

Before we begin, I have a quick announcement that we have a minor technical glitch. Our proceedings and verification officer—who is fantastic, I might add—is very quick on making sure your microphone is on. Please make sure you do not touch your microphones today, especially numbers 17 and 18 and Mr. Lake, as it will cause a bit of a glitch.

With that, I'd just like to talk to our witnesses briefly. I know you have been briefed by our clerk. Each organization will have ten minutes to speak. After your ten-minute presentation, we'll get to questions and comments from the members, who will have five minutes each.

Introducing our guests, from CHUM Radio we have Richard Gray and Tanya Woods. From ole, we have Michael McCarty. From the Canadian Council of Archives, we have Nancy Marrelli.

Starting off our presentations for ten minutes will be CHUM Radio.

[Tanya Woods, Counsel, Regulatory Law, Bell, CHUM Radio]

Good morning, Mr. Chairman and members of the committee.

My name is Tanya Woods, and I am legal counsel for BCE, here today representing Bell Media. I'm joined by Richard Gray, who is the general manager of Magic 100, Bob FM, CFRA, and The Team 1200 in Ottawa.

Thank you for moving forward with the copyright reform package and providing Bell Media with the opportunity to present our perspective on Bill C-11. We applaud this government's copyright modernization efforts, which will continue to allow Canadian companies to innovate and maintain a competitive edge in an ever-growing international marketplace.

In the last year, Bell Media has grown and changed as a company. We have gone from being one of the largest ISPs and telephone service providers to also becoming one of the largest broadcasters and content producers in the country through the acquisition of CTV.

Today Bell Media is the proud owner and operator of 33 licensed radio stations, including the former CHUM radio stations, operating in 14 markets across the country. We are uniquely positioned to provide perspective on copyright both as a copyright owner and distributor of content.

While Bell Media supports the goals of Bill C-11, as both a copyright owner and content distributor we would like to focus our discussion today on addressing two significant items of concern that, if addressed, we feel will ensure that this bill is both workable and balanced.

First we will address notice-and-notice; and second, we would like to spend some time discussing the exception for technical copies that are made by radio stations for the purpose of broadcasting.

We believe that the government got it right with notice-and-notice. We are pleased with the proposed regime, and with a few technical tweaks we hope it will prove to be a valuable tool in the fight against piracy.

What could not have been anticipated, but what must be considered, is that since the introduction of Bill C-32 and Bill C-11 technology and content consumption patterns have changed. This is evident when you sit in a coffee shop or airport lounge and read the news on your tablet or smartphone, possibly through the local WiFi connection.

We know from past Bill C-32 testimony that some of the bigger ISPs have been doing notice-and-notice for years. However, they are not the majority. In fact most ISPs are not yet doing notice-and-notice, and neither are most other network service providers, like wireless carriers.

As a copyright owner, we want to make sure that an effective notice-and-notice service is put in place so that we can better educate individuals suspected of piracy while protecting and preserving the neutrality of the messengers, like ISPs who pass along our message.

We know that it will take time for everyone to get their notice-and-notice service up and running at full capacity, including us, and we want to put on the record that we are supportive of granting the time needed to establish and implement an effective notice-and-notice service. We would like to see the bill explicitly provide that time so that we can build our systems to accommodate the new rules before any obligations come into force.

We also want to make clear that we view the notice-and-notice systems as a valuable service, and we are willing to pay reasonable fees to both facilitate network service providers building effective systems and to enable them to ensure that this service will keep up with technology.

We see that as drafted the bill contemplates the possibility that network service providers may not be able to charge any fees for the notice-and-notice service. As both sides of the coin, copyright owner and network service provider, we believe that network service providers need to do their part to enforce rules and pass on to their customers the notices of copyright violations they get from content owners, but also that content owners need to compensate network service providers for the cost of doing this. It is only fair.

For example, people using a courier service must pay a fee to deliver their messages. There is no exception for businesses in that case, and there is no reason for notice-and-notice to be any different. But of course we are just looking to cover our costs.

To conclude our comments on notice-and-notice, we ask that you provide the time needed to build an effective notice-and-notice service and ensure that network service providers can recover the costs to set up this service, which is to the content owners' benefit.

I will now ask Richard to speak to you about radio.

[Richard Gray, Vice-President and General Manager, CTV2 and Radio Ottawa, CHUM Radio]

While radio has equally been affected by technological change, as we will see, some things in the radio world have not. Local broadcasters continue to be an integral part of their communities by employing local people, contributing to local regions, creating local content, and investing in and promoting local artists.

To demonstrate Bell Media's role you might consider the following. We employ 723 staff dedicated to our radio operations. We have sponsored thousands of community events. At a more recent one, Ottawa's CFRA raised over $2.4 million to fund care programs at the Elizabeth Bruyère Hospital.

We support and promote local talent through programs like the Bell Media emerging artist initiative, which features a new Canadian artist each month on our radio stations across the country. We invest in Canadian talent development by making substantial contributions to the Canadian content development initiatives. In 2011 Bell Media paid $7.3 million to Canadian content development. We help Canadian artists achieve success in many ways, including airplay and concert sponsorship. In 2011 our radio station in Windsor—93.9 The River-—was a big supporter of Canadian independent musicians, with more than 10,000 airplays.

In addition to all of this, we continue to support the music industry as a whole through the copyright royalties we pay. Last year, of the $64 million radio broadcasters paid for the performance of the songs they broadcast, Bell Media's share was $8.1 million. This is not at issue, and we will continue to pay these royalties. As a content owner ourselves we firmly believe that broadcasters should pay for the music they broadcast.

In addition to paying to broadcast the songs, radio broadcasters are also paying $21 million to the same people for the technical copies made to get those same songs broadcast on air. Not only do two payments for one broadcast amount to double-dipping, but the $21 million reproduction payment basically amounts to a digital tax or a penalty because of innovation. We did not pay it when we spun records, and we did not pay it when live DJs played CDs. But because technology has advanced and the guy or gal that used to drop off CDs for the labels has been replaced by a digital delivery system that the labels created, we now have to pay them to receive their music and put it in a format we can use.

There is something wrong here. They gain huge efficiencies, and even though this may be helpful for us, we nevertheless aren't sharing that gain. We are paying for it, and paying a lot, despite the contributions we continue to make to support their business. Not only is this counter-intuitive, but it also fails to achieve the fundamental goals of Bill C-11, which we understood were also supportive of innovation and business efficiency.

Bill C-11 attempts to address this problem by saying we don't have to pay for these digital copies if we destroy them 30 days after they are made. Although the overall intent is good, this is an unreasonable and unworkable solution that demands that time-intensive processes be implemented at every radio station and that more copying be done. The drafting of proposed subsection 30.9(4) fails to reflect a clear intention, and instead maintains the status quo—a status that is not pro-innovation, and sends a message to the radio industry that it will pay more for innovative and technologically specific business solutions.

We have heard concerns that a meaningful exemption for broadcasters would have a big impact on Canadian artists. We know, as you heard on Tuesday morning from the Canadian Federation of Musicians, that it will not. Most of the money only goes to record labels and publishers, many of whom are not even in Canada.

In sum, we are asking the government to amend the broadcaster exception by creating a clear technical exemption for technical copies. That will acknowledge and encourage innovation, facilitate business efficiency, and more importantly it will put an end to double-dipping.

[Tanya Woods]

We appreciate the time each of you has spent addressing the issues that matter most to our industries. Thank you for inviting us to share our views with you regarding Bill C-11, and specifically those pertaining to the technical changes we are seeking for notice-and-notice and the broadcaster's technical copying exception.

We look forward to providing you with any information you need.

Thank you.

[The Chair, NDP, Glenn Thibeault]

Thank you, Ms. Woods and Mr. Gray.

Now we'll move to Mr. McCarty.

[Michael McCarty, President, ole]

Good morning, Mr. Chairman, members of the committee, and ladies and gentlemen.

I'm Michael McCarty, president of ole. We're Canada's largest music publisher. We have over $115 million invested in music copyrights. With that kind of investment on the line, we have a keen interest in Bill C-11. Our catalogue of more than 45,000 songs generates significant royalty revenue around the world, which flows back into Canada, contributing to our GDP, employment, and tax base. Ole's songs and songwriters have received numerous Canadian awards, as well as a Grammy for White Horse, one of the many Taylor Swift compositions we own.

Bill C-11 may be a well-intentioned attempt to modernize Canada's Copyright Act, but the fact is that it will be destructive to music creators and rights holders, and it does not address the biggest piracy problem of all, corporate music piracy. That said, the bill's shortcomings can be overcome with relatively simple but vital changes to the legislation. We urge the committee to return the bill to Parliament incorporating these changes.

Our position is simple. Creators must be compensated for the use of their work throughout the entire digital value chain. This is perhaps an obvious statement, but one that needs to be made in the face of the anti-copyright forces so prevalent today. Here's the reality: it's been 18 years since the Internet was switched on and 13 years since Napster arrived. This powerful combination spawned a decade-long, money-drenched frat party, enjoyed by entrepreneurs, tech start-ups, venture capitalists, telecoms, Internet search engines, and hardware manufacturers. Creators and rights owners were not invited to the party but ended up footing the bill. Their financial hangover knows no end, and Bill C-11 is not the cure.

Copyright is a good thing. Copyright transactions transform art into dollars. Copyright transactions create vibrant markets that enable creators to monetize their work, leverage its value, fuel their careers, and protect their artistic integrity. This is the very currency of the value chain that enables the artists' work to reach the public and for them to be paid appropriately for it. In the digital age, ideas may be more valuable than tangible goods, and a country that fails to protect intellectual property fails to protect its economic future. This means preserving the creators' and rights holders' ability to profit from their creations, not just their right to profit.

To transform digital art into dollars, copyright laws must apply to those companies whose products and services facilitate access to the digital art. To paraphrase the infamous rock and roll pioneer Jerry Lee Lewis, there's a whole lot of monetization going on. But like much of Mr. Lewis's activity, it happens largely outside of the law.

This copyright monetization generates billions of dollars per year to the benefit of all concerned, except for the creators and copyright owners. Bill C-11 will not change this. The bill heavily favours those who are happy to benefit from music but who think it is someone else's responsibility to pay for it—the free riders. It favours the distribution industries over the creators and allows delivery systems to be built at their expense. Vast wealth has been diverted into the pockets of industries that enable and profit unjustly from infringement. ISPs, Internet search engines, advertisers, websites, and device manufacturers are all involved in monetizing music, often without paying any of the proceeds to those who created it. While severely undermining the value of recorded music, the free riders have built very lucrative businesses for themselves. Unfortunately, for the most part the system does not pay creators because the law does not require it to. Under Bill C-11 these companies will continue to enjoy their free ride.

Under the banner of protecting innovation, the bill seeks to protect the innovation of the technology sector at the expense of those who create music. In fact, songwriters and musicians provide innovative cultural work that is just as valuable to society. Favouring one innovator over another is hardly serving the Canadian public.

The bill provides no new viable tools to help creators monetize their art and misguidedly places nearly all of its anti-piracy hopes on failed strategies such as digital locks and notice-and-notice. For music, techniques such as digital locks and suing music fans have failed to reduce piracy or build the marketplace. Notice-and-notice, heralded as targeting ISPs for the piracy activity on their networks, simply requires them to assist in redirecting blame to the consumer. This amounts to even greater protection for the ISPs as they profit from piracy. We don't need band-aids for copyright enforcement; we need a marketplace. As long as the primary enablers of piracy are shielded from liability, creators' works can be taken, sold, or consumed without their being paid.

One of the great ironies of the copyright monetization act is that not only does it not provide any modern tools for our belt, it will actually take two of them away: the broadcast mechanical and the private copying provisions. This is a backward step in our ability to turn digital art into dollars. The broadcast mechanical royalty is one of the most important ways songwriters get paid from radio stations that use their music. It licenses the digital reproduction process used by most modern stations to get music on the air. The broadcast mechanical is a clear example of the copyright system working.

The government uses legislation to create a right, which in turn creates a marketplace. This important revenue stream produces approximately $20 million a year and will disappear under Bill C-11. I hope this is an unintended consequence that will be corrected.

In the late nineties Canada created an elegant, progressive response to the nearly identical problem we face today, the widespread, unstoppable copying of music. Our private copying system was an effective tool to let music fans copy music, while ensuring that creators got paid from the sale of blank CDs. Copying music onto CDs is all but obsolete, replaced by newer digital media and services.

As a result, this private copying revenue stream, which to date has paid our artists over $180 million, is headed towards insignificance. Canada needs to catch up. There are over 40 countries around the world whose private copying system applies to most digital devices and media. Bill C-11 would permanently block our efforts to modernize our private copying system. We need to move forward, not backwards.

There are relatively simple amendments that can be made to make Bill C-11 work, and we have made detailed drafting suggestions in our written submission.

First, rein in the free riders by broadening the enabling provision. This was intended to make the enabling of online copyright infringement itself an infringement of copyright, but it is so narrowly written that it will only apply to the most egregious pirates. It should be broadened to include all of the industries that profit parasitically from piracy.

The result would be a law similar to the U.S. contributory infringement concept. Companies that contribute to copyright infringement can be as liable as those that actually commit the infringing act. It was this law that inspired the creation of the iTunes store. Apple needed a way to immunize the iPod from contributory infringement claims, so they created the iTunes store, which brought the labels onside, resulting in one of the most innovative digital services ever devised, and this delivered a new revenue stream for creators and rights holders.

An improved enabling provision would create a marketplace solution to the free-rider problem and would eliminate the need for extending the private copying levy. Companies that enable infringement would be liable for their actions. For instance, ISPs would have a simple decision to make: take the infringing material off their networks, or negotiate payment with the owners and suppliers of the content. This would jump-start a well-functioning marketplace and would enable ISPs to turn their underground piracy-facilitating business into a legitimate one.

Our second suggestion is to reverse the expropriation of current rights. If Bill C-11 goes ahead without revisions, millions of dollars of annual broadcast mechanical revenue will disappear. Because of a major loophole in the legislation, in order to avoid paying royalties broadcasters would simply have to refresh their hard drives every 30 days by copying one drive onto another. Ole supports the submission of the Canadian Music Publishers' Association and CSI on this subject.

Finally, while our position is that broadening the enabling provision would create a marketplace where an extended private copying levy would be unnecessary, in the absence of such a circumstance ole supports the specific recommendations made by the CPCC and the CMPA to extend private copying.

To conclude, if Bill C-11 is passed in its current form, the result will be to reduce the collective annual income of songwriters and artists by millions of dollars, to provide increased legal protection to the companies that facilitate and profit from piracy, and to support the philosophy of “steal the content to build a distribution business".

A fair marketplace exists when a willing seller and a willing buyer are free to negotiate the sale of goods or services. When the buyer can take the product without paying, there is a failed marketplace. For the creators of music, the failed digital marketplace has left them unable to effectively turn their digital art into dollars.

How long do our artists have to wait for the law to catch up so they can make a proper living? Bill C-11 will be the last opportunity to fix this for at least a decade. We must support all Canadian creators in every area of endeavour. We must not discourage our children's dreams of becoming artists who can also pay the rent. The time to get it right is now.

Thank you.

[The Chair, NDP, Glenn Thibeault]

Thank you, Mr. McCarty.

Now to Ms. Marrelli.

[Nancy Marrelli, Special Advisor, Copyright, Canadian Council of Archives]

Good morning.

I'm Nancy Marelli. I'm an archivist, and I'm from the Canadian Council of Archives, a national non-profit organization dedicated to nurturing and sustaining the nationwide efforts of over 800 Canadian archives. We are pleased to have this opportunity to present our views today.

The major concern for archivists with recent copyright reform bills has been those provisions dealing with photographs. Other matters of special concern for archivists in Bill C-11 include amendments dealing with copies of unpublished works and technological protection measures. A number of additional issues negatively affect archival researchers, and although many archivists are concerned about these issues, my remarks today focus on matters of direct concern to archival institutions.

Under the current law, archival institutions cannot provide researchers with a copy of a photograph or other types of unpublished works for research and private study purposes, especially for works whose term of protection and ownership cannot be determined. Archivists are delighted that Bill C-11 will solve this longstanding problem.

Once passed into law, this amendment will permit archival institutions to make a single copy of unpublished works in our holdings, for research or private study, under conditions that can be practically met. We heartily welcome and endorse this amendment.

One of the most important matters in Bill C-11 for archival institutions is the proposed amendments dealing with photographs. Many photographs in archival holdings are orphan works, works for which the copyright owners are unknown or cannot be located. The current copyright law relating to photographs is difficult, and even impossible in some cases, for archivists to apply when dealing with orphan works. This already difficult situation will be made even more complicated if the provisions of Bill C-11 are enacted.

Amending the law so the photographer is uniformly the copyright holder makes it even more difficult to determine the copyright owner of some photographs in our collections. Photographs by anyone other than professionals only rarely have an identifiable creator by the time they arrive at an archive many years after they were taken. Without this information, it is impossible to determine the term of protection of the photos, and they fall into limbo. It's not the works of professional photographers that are of concern to us here. Professional photographers usually clearly identify their work, and we can ascertain their date of death and their term of protection. But the law applies equally to all photos, professional or not.

Not all photos are created as commercial works. In fact, millions of the works in our institutions were not created for commercial purposes. They are the records that document the lives of ordinary Canadians, such as the photos your grandmother or your uncle took at the family cottage in the 1950s, photos taken by strangers your parents handed the camera to when they were on their honeymoon in Niagara Falls, or photos taken by a passerby of an entire East Asian immigrant family in front of their small family grocery business. This is our Canadian documentary heritage.

Archival holdings are accessible for research and private study on site in the archives, but in the digital environment, that is not where the vast majority of Canadians search for information about themselves, their families, their institutions, and their society. We seek information on the Internet, in multimedia works, and in specialized electronic and print publications. These essential modes of modern communication are not available for the dissemination of many of our archival holdings, especially photographs, because we do not know who took the photograph.

Archives expend scarce resources to acquire, preserve, and make our holdings accessible, but we often cannot use modern electronic communications means, such as web sites and the Internet, to make them available to the Canadian public because the copyright owners are unknown or cannot be located. They are orphan works. These orphan works fall by the wayside on the information highway of the 21st century. Important chunks of the Canadian experience fall into a black hole where access is severely limited. Researchers have to travel to an archival institution, often far way in another city or province, to use the material on site. Furthermore, without information about who the creator is and his or her date of death, the term of copyright protection is unknown, and the black hole extends into the future with no definite expiry date.

Let me give you a fictional example of the problem.

An archive has extensive materials from a variety of sources on residential schools in Canada and it wishes to share those precious resources with Canadians who are increasingly preoccupied by this difficult subject. The archival holdings include photos taken with a Brownie camera in the 1950s by an unknown person or persons. The amateur snapshots provide graphic documentation of the living conditions in an Ontario residential school. They also include ten minutes of 8-millimetre home movies of three brothers as they prepare to leave their reserve in Quebec in 1964 to attend a residential school. All three children subsequently die in the residential school. The parents are currently unlocatable and no one knows who filmed the event. The archive is at a dead end trying to identify and locate rights holders. It is not possible to create a website featuring these materials, because it is not possible to obtain permission from the copyright holders. The term of protection is unknown, since the date of death of the creator is unknown.

Access to the vast and rich legacy of Canadian documentary heritage provides a revealing window to the Canadian experience, past and present. Canadian archivists preserve and make accessible to all Canadians the diverse records of government, industry, and individuals. Canadian archives strive both to preserve and promote the essence of who Canadians are, and what we have done through the use of the rich documentary heritage that is the memory of the nation.

The changes in Bill C-11 regarding the term and ownership of copyright in photographs further complicate an already difficult situation and they highlight the urgent need to address the orphan works problem, which is not addressed in Bill C-11.

I will now deal with technological protection measures.

Bill C-11 prohibits the circumvention of TPMs for legal purposes, such as preservation activities used by archivists to protect the documentary heritage of Canada. This is completely unacceptable and is a matter of very grave concern to the Canadian archives community in the digital environment where obsolescence is both rapid and disastrous for long-term access.

The CCA recommends that Bill C-11 be amended to provide that circumvention of TPMs is prohibited only when the circumvention is for the purposes of infringing copyright, and that circumvention tools and services should be available for non-infringing uses.

Let me give you a fictional example of how Bill C-11 might affect archives.

An archives holds a copy of a CD on the history of a small Ontario company that built and sold distinctive cast-iron stoves throughout Canada over a period of 150 years. It was the main industry in the small town that grew up around the factory. The CD was created by a small communications group that came together briefly in 1985 as the company was closing its doors. The CD deposited by the family that owned the factory includes photographs, oral history interviews with the owners and several generations of workers and customers, company catalogues, and some film footage of the factory. Only one copy of the CD remains. The communications group disbanded when a fire destroyed its offices and all the original material it had collected for the project. As the lifespan of this important CD approaches obsolescence, the archives wishes to ensure the important documentary heritage it contains is preserved for posterity in a suitable format. But the CD is protected with a digital lock and the archives has not succeeded in locating the original creators. If the archives cannot circumvent the digital lock to preserve the unique historical material the CD contains, an important part of our documentary history will be lost as the CD becomes obsolete and the files become unreadable.

The CCA believes that Bill C-11 is drafted too narrowly in relation to TPMs. Its legislative intent should be extended to include activities related to preservation, management, and maintenance of archival holdings, activities that are currently permitted under the act. Archives should be able to harness the benefits of digital technology to fulfill our preservation mandate. If this requires circumvention of access control TPMs, then the interests of archival preservation for the public good should take precedence.

Copyright legislation has a very significant impact on making the documentary heritage of Canada available to Canadians and to researchers worldwide. The archival community welcomes the opportunity to present our concerns and discuss positive approaches to finding solutions that will ensure we are able to carry out our mandate as the enduring source of Canada's documentary heritage.

Thank you.

[The Chair, NDP, Glenn Thibeault]

Thank you, Ms. Marrelli.

We will now start our first round of questioning.

Mr. Del Mastro, you have five minutes.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chairman. You're doing a fine job this morning, if I might say so.

Thank you to our witnesses for attending this morning.

I'd like to start with you, Mr. Gray, and ask you to clarify something that you said earlier. You said that the radio broadcasters paid $64 million for performance rights for songs, that Bell Media's share of that was $8.1 million, but you were also asked to pay, in addition, a mechanical charge of $21 million. Is that correct?

[Richard Gray]

That's correct.

[Dean Del Mastro, Conservative, Peterborough, ON]

So the Copyright Board established the value of the music that you would pay, as an industry, as being $64 million, and your share of that was $8.1 million.

[Richard Gray]

That's correct.

[Dean Del Mastro, Conservative, Peterborough, ON]

That's what was established through negotiation.

So what is the other fee for?

[Richard Gray]

The other fee is a duplicate fee that we're charged to make the mechanical copy.

[Dean Del Mastro, Conservative, Peterborough, ON]

When did this come about?

[Richard Gray]

I believe it's been in existence for about five years.

[Dean Del Mastro, Conservative, Peterborough, ON]

Five years. And can you confirm that it's roughly tripled over that period of time?

[Richard Gray]

I'm not certain, but that's something I can get back to you on. I know it has continued to grow.

[Dean Del Mastro, Conservative, Peterborough, ON]

Okay.

Ms. Woods, do you have...?

[Tanya Woods]

I can confirm that it has; it has almost doubled, actually, in the last two years, and tripled since it was introduced.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you very much.

Most people, myself included, would look at it and ask why you don't just buy the music in the format you want to use it in. Why are you making two copies? You only use it in one format. Why don't you just buy it in that format and not pay the two fees?

[Richard Gray]

I think the best answer to that question is that radio stations are an ever-changing, ever-evolving business. We may be in a soft AC format today, tomorrow we may become a hot AC station, and a year from now we could be a classic hits station.

[Dean Del Mastro, Conservative, Peterborough, ON]

Am I not correct in making the statement, though, that you're forced to buy it in a format that you don't use, so that you can then buy it in a format that you do use?

[Tanya Woods]

I just want to make a clarification. We don't buy the music. The labels send it to us through a digital delivery service. We receive it in the format that they decide.