Bill C-11 Committee on March 5th, 2012

[The Chair, NDP, Glenn Thibeault]

I call the meeting to order.

Good afternoon, everyone—witnesses and guests and members—to the seventh meeting of the Legislative Committee on Bill C-11. I want to welcome you all.

We did have two votes this afternoon. Unfortunately, this delayed us from getting here to start at 3:30, so of course we'll have to adjust the time during questioning.

Welcome, and I'll introduce each of you: from the Society for Reproduction Rights for Authors, Composers and Publishers in Canada, Alain Lauzon and Martin Lavallée; from Tucows Inc., Elliot Noss; and from Shaw Communications, Jean Brazeau, Cynthia Rathwell, and Jay Kerr-Wilson.

I believe you've all been briefed by the clerk that each organization, not each individual, will have 10 minutes, and 10 minutes only, to present. I will, unfortunately, step in after 10 minutes if you haven't wrapped up at that time.

We'll start off with the Society for Reproduction Rights for Authors, Composers and Publishers in Canada.

You have the floor for 10 minutes.

[Alain Lauzon, General Manager, Society for Reproduction Rights of Authors, Composers and Publishers in Canada]

Thank you, Mr. Chairman.

Good afternoon.

I would like to thank the members of the legislative committee for allowing us to give testimony before you today. My name is Alain Lauzon and I am the general manager of SODRAC. Joining me is Martin Lavallée, Director, Licensing and Legal Affairs.

SODRAC has been around for 25 years. In music, we manage reproduction rights, and in visual arts and crafts, we manage all the copyrights of the repertoire we represent.

As a collecting society, we play an important economic role for the thousands of authors, composers and publishers that we represent in Quebec, Canada and abroad. Actually, copyright is sometimes the only compensation creators get.

The members I represent are active in three sectors: musical works in songwriting, audiovisual musical works—television, film, video games—and artistic works in visual arts and crafts.

The Copyright Act is the essential foundation granting creators ownership rights for the work they create. The reproduction right, which is separate from the performance right, is a fundamental right recognized in the Copyright Act, as well as in international treaties and the Berne Convention, to which Canada is a signatory.

The Internet has brought about changes in technology that have transformed the way works are distributed, disseminated and used. That is why the act must be modernized. The question is at what price. Producers say that the measures proposed in Bill C-11 are sufficient, but that is not the case for creators.

In the music industry, Bill C-11 will have a significant impact on our rights holders. Introducing and changing exceptions for broadcasters, not extending the private copying regime to include digital audio recorders, and extending fair dealing to education are all provisions that affect existing royalty sources. The bill also creates new exceptions for users and consumers, without any compensation for rights holders.

That adds up to more than 40% in royalty losses for the authors, not to mention the weakening of financial instruments that authors and collecting societies use. Also, this bill does not provide any legal or financial solutions to the problem of illegal file sharing and the responsibility of Internet service providers.

Music has never been played, listened to and copied to the extent that it is now. The Copyright Act should continue to provide us with the legal framework necessary to exercise the ownership right with respect to the works of the authors, composers and publishers we represent and to enable us to play our role as a collecting society and compensate them properly.

In terms of artistic works, we believe that Canada should introduce resale rights, just like over 50 other countries, including those in the European Union. Resale rights would enable creators and their rights holders to receive a portion of the resale price.

Creators must be able to participate fully in culture and in the new digital economy through the Copyright Act. We are in favour of the legal protection measures for digital locks, although some platforms used for the distribution of works do not have them yet. Digital locks can be effective in some sectors, such as film and video games, although they are currently more beneficial for producers than creators.

Furthermore, rather than creating exceptions without compensation, we believe that it would be better to favour the licensing system by collecting societies in order to allow access to works. Collective management has demonstrated to be quite effective for both users and rights holders, whose compensation it guarantees.

The technical amendments that we are proposing in our brief represent a minimum threshold in order to avoid an irreversible imbalance between those who create the content and those who use and consume it.

[Martin Lavallée, Director, Licensing and Legal Affairs, Society for Reproduction Rights of Authors, Composers and Publishers in Canada]

So in order to restore this balance, SODRAC has 13 specific recommendations, with new wording. You have received a copy this afternoon. We feel that these recommendations are in keeping with the government’s wishes while avoiding any unnecessary disruptions to the business relationship between creators and users.

We are really talking about a business relationship between authors and those who use their works. And who can claim responsibility for the effects of a piece of legislation on the Copyright Act? It is not up to the Internet provider, broadcasters, professors or even rights holders, it seems.

The Copyright Act protects the economic life of a work, by ensuring maximum exposure, in exchange for reasonable compensation.

When we talk about economic value, we are not talking about taxes or double payment. We are talking about payment for the value of music use by those who, in most cases, make music a major component of their business model.

But Bill C-11 in its current form interferes with this private business relationship, by creating numerous exceptions that are sometimes expressed in terms that go beyond the government's clear intentions, or that result in unintended consequences.

Let me illustrate this by focusing on two of our recommendations. The first one pertains to the new section 30.71 that deals with the so-called temporary reproductions for technological processes. The government has specified that this section has no copyright implications because it covers technical and temporary reproductions made as part of a process that is technical in itself, such as cached transmission over the Internet, or cache.

However, the wording of the section deals only with facilitating a technological process, which is so broad and vague that it could be misinterpreted as encompassing numerous digital reproductions whose value has already been established in a free market.

It is therefore necessary to clarify that those reproductions, as intended by the government, are technical and have no real value. If the use of those temporary and separate reproductions and—that is not the final solution, but the reproduction that is separate from the temporary reproduction—leads to a quantifiable benefit for the user, the exception should not apply.

In addition, the title of the section refers to a temporary reproduction, but the word “temporary” does not appear anywhere else in the wording of the section. Instead, reference is made to the duration of the technological process, which is extremely vague. The current meaning of the word “temporary” is “momentary” and “limited in time”. We therefore recommend that this notion be reflected by specifying that the reproduction is temporary or transitory.

Our second recommendation addresses the exception for ephemeral recordings. We talked about that a lot last week. Of course, SODRAC is not sure why there is a need to withdraw the requirement to obtain a license from a collecting society for this type of reproduction, when we can see that the use of all reproduction rights by commercial radio stations accounted for barely 1.4% of their annual revenues in 2009, compared to using—which is still true to this day—80% of the music in their programming. So we would prefer that subsection 30.9(6) of the current remain unchanged.

But the government still wants rights holders to be duly compensated for copies of works kept for more than 30 days. We just want to point out that it is possible today to create automated systems for recopying and destroying recordings, which would make it possible to do indirectly what the legislation prohibits from being done directly—for example, destroying the recording on the 29^th day only to recopy it two days later, resetting the clock over and over again every 30 days.

Let me remind you that a recording kept for more than 30 days can barely be described as ephemeral. It is not a simple transfer. It is a multi-purpose reproduction. SODRAC has been seeing this since 1992, for over 20 years. The radio industry has not collapsed during that period, quite the contrary. Its profit margin has increased from 1% to 21% during the same period.

SODRAC recommends incorporating the proposed minor modifications to subsection 34(2) of the bill, as you can see in our brief, in order to eliminate the possibility that this provision might be bypassed contrary to the government’s intent.

I would like to thank the committee members for their attention and I encourage them to read the other proposed technical modifications in our brief that are meant to reflect more specifically the government’s intentions.

[Alain Lauzon]

To conclude, I would like to point out that SODRAC plays an active role in the work and recommendations of the following groups: the Coalition des ayants droit musicaux sur Internet, DAMIC or Droit d'auteur Multimédia-Internet Copyright, and the coalition of cultural organizations under the Canadian Arts Coalition.

On SODRAC's behalf, I would like to thank the committee members for listening to us. Thank you.

[The Chair, NDP, Glenn Thibeault]

Thank you for your presentation.

Now we will go to Mr. Noss for 10 minutes.

[Elliot Noss, President and Chief Executive Officer, Tucows Inc.]

Thank you.

My name is Elliot Noss. I'm the CEO and president of Tucows Inc. I'd like to thank you all for giving me the opportunity to appear here today.

I'd like to start by thanking the totality of you. Perhaps it is third time lucky, but it appears that on the third pass we have copyright reform or are at least close to it, and it looks as though it will present a fair balance for all involved. I think you all deserve a lot of credit and a lot of recognition for that.

I certainly have views up and down the elements of the legislation, but I want to contain my remarks today to a couple of key areas where we at Tucows have a specific window on the world, and I want to share some parts of our existence with you.

Tucows is a company that's been around since the dawn of the Internet. The website started in 1993. We've been partnering with service providers around the world as a Canadian company since 1995, since the dawn of the Internet. We invented wholesale domain registration. Today we are by far the largest domain name registrar in Canada, with over 1.7 million domain names registered to Canadians and, importantly, over 2,300 Canadian customers.

I'm going to spend some time describing for you who our customers are and why they matter in this discussion.

Our customers are best known as web hosting companies, ISPs, telcos, and cablecos, but there is a huge swath of that 2,300 that isn't often enough talked about or understood, and those are smaller web hosting companies, web designers, VARs, and integrators who across their businesses employ tens of thousands of Canadians.

We have about 12,000 service provider partners, but I'm just talking now about the 2,300 in Canada. These are the companies that essentially put small businesses, users, artists, and creators online and enable them to actually take advantage of all the great benefits that the Internet brings.

Sometimes, sadly, my customers are called by another insidious term: “enablers”. It is extremely important to understand the characteristics of the bulk of small business today, the bulk of users today. We all know that there is a transition in the economy to self-employment; when I'm talking about “users” now, I'm talking about people who have a daytime job and are starting a home business, people who are creators or aspiring creators themselves. They need help getting online and they need help using the tools to take best advantage of being online, whether it's registering a domain name, building and launching a website, having a Facebook page to promote what they're doing, or having a Twitter account, etc. A typical customer of ours might help 50 or 100 small businesses and end-users, and when we talk about enabler provisions, those are the people who are just simply not understood.

I love the fact that large telcos and ISPs can be well represented in the policy field and in the legal field. Tucows is a fairly small company, with $100 million in revenue. We're not very big, but we can handle what we get in terms of incoming issues around intellectual property and copyright complaints; those small businesses that I'm talking about, the ones that are the backbone of getting small business online, simply can't, which means that any enabler legislation that is too broadly drafted.... Frankly, the enabler legislation that we're seeing in front of us is the first I've seen that's narrow enough to actually give the bulk, the backbone, of that supply side for business a chance.

That was the first part that I'm going to talk about that we have intimate knowledge of, and I'm not talking about the most intimate knowledge just in Canada, but in the world. Tucows is the world leader in wholesale Internet services. We are known throughout the world as the best and biggest partner for service providers in the Internet economy, so I'm giving you a Canadian view, through a Canadian company, of a global position.

We have nearly 10% of the domain names in the generic domain names base. That also means that we see another element uniquely, which is the day-to-day practices by which intellectual property rights holders and their legal departments employ their tactics.

I'm going to give you a little window into our world.

In 2011 Tucows had over 300 complaints about intellectual property abuse. Exactly zero of them came to anything.

I want to make sure you don't think that means there is nothing wrong going on in our namespace. We have 10% of the problems if we have 10% of the registrations. We are regularly working with law enforcement and rights holders around things like phishing, child pornography, drugs, etc., but what we see as the typical practice for intellectual property rights holders, sadly, is to yell and threaten first and to do everything they can to intimidate.

I have to deal in the ICANN context, which is the global domain name regulator, so I deal with intellectual property representatives from around the world—WIPO, etc. When I raise this issue with them, they don't deny it and they don't question it; they describe it as good practice. They say, “We are simply representing our clients' interests, as we should be.”

I don't question that, but when you all are looking at the enabler legislation that you're going to put into this bill, you need to remember that those are sharp knives. Those small businesses—the five-man or 10-man web hosting shop, or the two-man web design shop—are not going to be able to do anything but fold like a cheap tent when they're confronted with demands.

I want to circle around to the top and thank you all again. I want to note for you that the Internet is the greatest agent of positive change that the world has ever seen—greater than the printing press, and certainly greater than television or the telephone. It is a platform for the future. Balanced public policy here won't be felt in three months or in a year; it'll be felt in five years and 10 years.

Canada, right now, has a rich creative landscape. I'm going to give you all a free tip. You're obviously interested in this subject matter. If any of you have teenage daughters, I'm going to kill two birds with one stone for you: take your daughter to see the Justin Bieber movie Never Say Never. There are two reasons: one, she will love you for it; two, you will see what is acknowledged by Guy Kawasaki, a Silicon Valley legend, as the greatest movie on social media made to date. Canada's biggest recording star didn't get there because of labels; he got there because of user-generated content and a free and open Internet and the platform that all of that creates.

I know that I'll be the only person speaking about the tens of thousands of employees of those thousands of small businesses who represent millions of Canadian users in saying, “You've got a balance now; please keep it”.

Thank you.

[The Chair, NDP, Glenn Thibeault]

Thank you, Mr. Noss.

I guess I'm renting Never Say Never this weekend for my daughters and me to watch.

[Elliot Noss]

It's in the theatres.

[The Chair, NDP, Glenn Thibeault]

With that, I will now go to Shaw Communications for ten minutes.

[Jean Brazeau, Senior Vice-President, Regulatory Affairs, Shaw Communications Inc.]

Mr. Chair, members of the committee, my name is Jean Brazeau. I am the senior vice-president of regulatory affairs and government relations at Shaw Communications. With me today, to my left, is Cynthia Rathwell, vice-president of regulatory affairs. To my far left is Jay Kerr-Wilson of Fasken Martineau.

Thank you very much for giving us the opportunity to present our views on Bill C-11.

Shaw Communications is a diversified company that offers a broad range of communications services, including cable and satellite television, high-speed Internet access, home phone, and broadcasting.

Through its various undertakings, Shaw creates, acquires, distributes, and transmits copyright-protected content to Canadians. As such, Shaw understands the importance of effective copyright legislation to Canadians and understands that any copyright rules must be carefully balanced to protect consumers' interests and to support both creativity and innovation.

In our view, copyright should support and encourage the development of legitimate markets and products and services. It should give rights holders adequate protection against infringement and the freedom to negotiate fair compensation for the use of their works. Copyright laws should not, however, erect barriers to innovation. They should support and not hinder the development of new services and new business models. They should foster partnerships among creators, distributors, and consumers.

We are pleased to see that the government has taken a balanced, consumer-friendly approach to copyright reform in Bill C-11. In particular, we fully support the minister's statement that this legislation is intended to legalize everyday consumer activities, including time shifting television programs, using cloud computing and remote storage services such as network personal video recorders, creating and sharing user-generated content, and moving content purchased to the devices and into the format of their choice.

We support the government's desire to achieve balance in the legislation, and we believe that Bill C-11 has largely succeeded in achieving that balance.

We would like to bring to the committee's attention three specific provisions of the legislation that we believe fall short of achieving the government's policy, provisions that could be remedied with a few minor and, for the most part, technical amendments.

To ensure that Canada's new notice and notice regime, which we strongly endorse, functions well and becomes an effective partnership between rights holders and ISPs and to ensure that ISPs are not made responsible for any infringements by their customers, a few small technical amendments to Bill C-11 are needed. The details are set out in our written brief.

In general, however, Shaw strongly believes that ISPs' obligation to deliver notices and retain data must come into effect at the same time as regulations that standardize the required notice format and set maximum fees for the provision of notices. The new automated notice system that ISPs must design to comply with the new regime can only be effective if rights holders' notices contain consistent information and formatting. As such, it is appropriate that new notice requirements come into effect pursuant to the regulations that ensure that notice systems can be built and operated efficiently.

Second, the legislation provides for a specific exemption that permits consumers to record, or time shift, television programs for viewing at a later time. The minister has stated that this exemption and the hosting exception are intended to work together to permit network personal video recorder services—PVRs—to operate without incurring copyright liability.

Shaw fully supports the government's objective to permit network PVR services. We are concerned, however, that the hosting provision as currently drafted is not as clear as it could be in expressing the government's intention to enable cable and satellite companies to offer consumers NPVR service.

To put it simply, a network PVR has to perform two separate functions to operate: it has to make a copy of the television program that the consumer wants to record and it has to transmit that program to the consumer when the consumer wants to see it. The bill, as drafted, provides a clear exception to copyright for the recording of the television program by the network PVR service, but is silent as to the transmission of that same program.

We submit, with respect, that the bill would benefit from additional clarity in exempting the network PVR provider from liability when the program is transmitted to the consumer for viewing.

The current lack of clarity could lead to vexatious litigation and stand as a barrier in the provision of network PVR services to Canadian consumers. We believe that a minor technical amendment to the existing provision will make it clear that a network PVR provider does not incur copyright liability for either hosting or transmitting television programs that have been recorded at the request of the consumer. We have provided the clerk with the specific technical amendment recommended to accomplish that very end.

Our final concern is with the provisions that apply to the sale of content online, and specifically the language of the “making available” right.

As drafted, the legislation could treat every transmission over the Internet as a broadcast to the public. This means that if someone bought a copy of a song from a service such as iTunes, that transaction would be treated the same as if the song had been played on the radio. We think it's far more appropriate to treat an online sale of a song, movie, or game the same as if that song, movie, or game was purchased in a store.

As a result of the approach taken in the legislation, online transactions involving music in Canada will not be freely negotiated between parties, but will require the intervention of the Copyright Board of Canada to set the prices to be paid for music. This will produce what we believe to be unintended results. Under the approach taken by Bill C-11, negotiating with the composer for a fair price to sell the game on the Internet is not even an option. The same problem will apply to the online sale of movies, television programs, and other forms of multimedia entertainment.

Given the government's desire to encourage Canadians to be innovative leaders in the digital economy, we do not believe that copyright legislation should prevent parties from freely negotiating licensing agreements and instead impose input pricing set by the administrative tribunal. In our respectful view, it would be far more reasonable and consumer-friendly to apply the same rules to the sale of products in the online world as apply to the sale of products in the retail world.

Mr. Chairman, members of the committee, we believe that Bill C-11 is an important measure to modernize Canada's copyright laws. We support the pro-consumer exceptions and the enhanced protection against piracy. Subject to our suggested amendments to better reflect government policy, Shaw thinks that Canada and Canadians will be well served by this bill.

We would be pleased to answer any of your questions.

Thank you.

[The Chair, NDP, Glenn Thibeault]

Thank you, Mr. Brazeau.

We will now go to the first round of questions for five minutes. Starting us off is Mr. Braid.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair. Thank you to all of the witnesses for being here this afternoon.

Mr. Brazeau, I want to start with a couple of questions for you. Could you comment on the merits of the notice and notice approach, as opposed to notice and takedown?

[Jean Brazeau]

We certainly think that notice and notice is a far less intrusive means to ensure that the government achieves its policy objective. We would be very concerned if we started taking down service to our customers. The response by the customers to those measures would be significantly negative. I think the measure is somewhat too draconian. We can achieve the same objective with notice and notice.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Some ISPs today are voluntarily notifying copyright infringers on the Internet. Is that the case with your company?

[Jean Brazeau]

We are currently doing that, yes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay, great.

It's fair to describe your company as an Internet intermediary, if you will. Do you feel that Bill C-11 has the right measures, recognition, and provisions with respect to your company's role as an intermediary, notwithstanding the technical amendments that you've spoken to? I appreciate those.

[Jean Brazeau]

Notwithstanding the technical amendments, we are very supportive of the legislation.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay.

Could you speak to the importance of the safe harbour provisions in the legislation?

[Jean Brazeau]

I'm going to let Jay deal with that issue.

[Jay Kerr-Wilson, Legal Counsel, Fasken Martineau, Shaw Communications Inc.]

Certainly every jurisdiction in the world that has looked at implementing the WIPO treaties has understood that providing safe harbours for intermediaries is essential. To echo the testimony you had by Jacob Glick from Google, the investment community has also recognized that providing clarity with respect to intermediary liability and having clear and effective safe harbours is critical to having an environment where investors feel safe in supporting innovative new products and services.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Do you feel that Bill C-11 provides that?

[Jay Kerr-Wilson]

Yes, it does, again subject to the technical amendments that Shaw has put forward. By recognizing the specific roles for hosting and providing Internet access and by exempting liability for those functions, Bill C-11 takes the right approach.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Mr. Noss, do you think it's important that Canada respects and ratifies and adheres to the WIPO treaties, finally?

[Elliot Noss]

It's important for Canada to respect them, yes, but necessarily to ratify them, not so much.

There is a very interesting trend going on, in that when goals can't be achieved in domestic politics, attempts are made to achieve them through international politics. That's very worrisome.

I'll tell you something that happened just in the last couple of weeks that simply has never happened before. I received three separate phone calls from large U.S. service providers coming out of the SOPA-PIPA goings-on in the U.S., asking me—

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Were these robo-calls?