Bill C-32 (40th Parliament, 3rd Session) Committee on Feb. 3rd, 2011

[Terrance Oakey]

Absolutely, our industry depends on those consumers who buy legitimate products. We are the first ones to want to crack down on piracy and other uses of the product that are illegitimate. That being said, a lot of our members have expressed concerns about digital locks that might go too far in terms of a customer expectation. We want to ensure that there's a scenario where customers are incented to buy legitimate products.

So when they buy a DVD at one of our member stores, that's completely legitimate. Then they maybe go on vacation to Europe and can't use it because of a TPM that's on it. A lot of our members feel that's an incentive for the customer, when they go to Europe, to simply find a site where they can download the movie, and that becomes a practice.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

In the interests of time, I wanted to flush out more of your comments on parallel importation. Could you give us a real example of how this is impacting your membership?

[Terrance Oakey]

I'll ask Howard to talk some more about that.

[Howard Knopf, Counsel, Retail Council of Canada]

Thank you, Mr. McTeague.

The best example I can give is the one that was in the Supreme Court of Canada three years ago in which the Retail Council of Canada intervened. Kraft, big multinational Kraft, tried to use copyright in a highly technical way to block the importation of perfectly legitimate Toblerone chocolate bars from Europe that were coming in at a lower price; they said there was copyright on this little logo, a tiny little logo on the chocolate bar. Justice Binnie, in his usual brilliant and witty way, asked the lawyer for Kraft if this was really about artistic creativity, which the lawyer for Kraft said it was. Justice Binnie said, “Do you seriously think that anybody's going to buy this chocolate bar, frame the package, and throw away the chocolate?” The answer was...of course, it was a rhetorical question.

That's what parallel import law is all about, to use copyright in a very technical way that has nothing to do with the product in most cases and is designed to achieve price discrimination and eliminate competition. So we've come up with what I think is a very simple amendment that we've given you that would combine both. There were several opinions in that Supreme Court case, and we combined the two prevailing opinions: the one rather technical one having to do with hypothetical maker, which you don't want to hear about, I'm sure, and the other having to do with what Justice Bastarache called “an incidental use”. So if the incidental use of this little logo on the label is incidental to the chocolate bar, which is the real object of the transaction—

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

It sounds to me, Mr. Knopf, that it's a very interesting point. It's a point that a good number of our friends in the bar might understand. I'm wondering how this directly impacts your members. I think that's really the concern we have. If your members are expressing this, there is a cause and effect, it's well known, and it's certainly something we'd want to look at.

In the interest of time, because I know I'm going to get gavelled here in a second,

Mr. Hémond, I would like to ask you a question about damages and penalties.

Do you think the penalties included in this bill will have a deterrent effect or prevent people from violating it?

[Anthony Hémond]

The proposed clauses provide for effective mechanisms that in fact have already been adopted by Internet service providers. So the bill merely legalizes current practices.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

You mentioned royalties and said that that troubled you somewhat. Can you give me some more details on that subject?

[Anthony Hémond]

With regard to royalties, we propose the adoption, not of a number of systems, as is proposed in the bill, but of only one. The ephemeral recording provisions include very specific conditions that are in effect inapplicable. It is impossible to control what is done in people's homes, in private life. This complicates the system. In these conditions, users are no longer reassured because they don't know whether they're entitled to do what they do. With regard to private copying, a single system combined with a royalty would reassure all users. That would enable them to make copies without having to be concerned.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

How would we proceed?

[Anthony Hémond]

There are systems. I heard that the United States and Great Britain didn't have royalty systems for private copying. On the other hand, the majority of European countries do. Their mechanisms operate more or less well, but the fact remains that the courts have found this gives people the right to engage in private copying.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Knopf, perhaps I'll ask a final question of you in the few seconds I have. Your take on the statutory damages and whether or not they in fact encourage more egregious behaviour by simply placing a monetary penalty of $5,000...are you going to be able to...? You have members obviously who are in the retail industry who may be affected by this, so how are they going to stop the isoHunts and the BitTorrents of this world who are stealing information with very little legal impact, let alone a remedy as far as penalties are concerned?

[Howard Knopf]

Mr. McTeague, as Mr. Oakey said, the RCC in no way favours piracy in any way, shape, or form. I think that $5,000 is a lot of money for most Canadian households; it's about a year's tuition at university, as I understand it these days. It's enough to make people notice. Some people think it should be eliminated. Only Canada and the United States, among major countries, even have statutory damage regimes, so we do have it. We're not in any sense proposing its abolition, but $5,000 is a lot of money for most families.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

They may be making tens of thousands a day doing what they're doing. It's legal in Canada, illegal in other....

[Howard Knopf]

Mr. McTeague, that's a completely different issue. It has nothing to do with this issue. They do not get that exemption.

[The Chair, Conservative, Gord Brown]

Madame Lavallée, you have the floor for seven minutes.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Thank you, Mr. Chairman.

To start with, I'd like to set the record straight with regard to a statement contained in the brief by the representatives of the Retail Council of Canada.

You wrote that the levies on the iPhone could represent $75. You say, and I quote: "This fact cannot be denied." Pardon me, but I'm going to deny it. I followed the link you sent us and I saw that that amount didn't correspond to the levy proposed by the Copyright Board of Canada, but that there was a proposed levy of $75. I'll leave it up to you to go and search the Copyright Board of Canada site on the Internet. A decision made and the levy obviously didn't exceed $25. So that could be denied, just as the idea of calling it "a tax" could be denied. A tax, as you know—you're intelligent, like everyone—is money that goes to the government. However, a royalty is money paid to a copyright collective to be redistributed to artists.

Between you and me, it's quite surprising that this Conservative government doesn't want to pay artists royalties on the sales of digital audio players but instead wants to tax books in Quebec as part of the tax harmonization. Really!

My question is for Mr. Hémond.

Good morning, Mr. Hémond. I'm glad you're here. I have two questions for you, and then we'll set aside a little time because I would like to talk to you about music streaming. For the moment, I'm going to talk to you about Part VIII of the Copyright Act concerning private copying.

You say that other countries have this system—I suppose there are countries where it works very well—and that it works extremely well here in Canada and Quebec. From the point of view of consumers, whom you represent, if you had to rewrite this part of the act, to what devices would you apply this levy and to what works? Would you focus on music? Would you set a ceiling? For example, the Copyright Board cited a figure of $25. Would there be a ceiling? How would consumer interests be served in this private copying system?

Don't forget to allow 30 seconds for us at the end.

[Anthony Hémond]

Consumers are generally in favour of these levies. One survey was tabled here, which you may have read as well, which states that consumers are prepared to pay these levies. The devices concerned would be those that generally make it possible to make copies.

I have rarely met any users who have downloaded all their tech music from iTunes and have made copies. They must be reassured and told that what they're doing is legal and that, if a levy is applied, they are entitled to copy their CDs onto their iPods, or their daughter's songs and so on, in a private context. We should reassure everyone at that point. This is a win-win system for creators and users—consumers—because they know that what they're doing isn't illegal and they encourage creation. So we're in favour of this model.

What kinds of works are there? I would say you can go very far. In fact, virtually all types of works could be subject to this. As regards the limit, there's a commission—

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

That is to say, literature, visual works.

[Anthony Hémond]

Yes, why not? A man buys a book at a store. He can lend it to his wife. However, an e-book purchased from an online seller is stuck on an iPad and can't be lent to anyone unless that person lends his iPad. There are a number of e-book technologies that have digital locks and prevent copying. For the moment, users don't have the same option at all. So the system has to be reviewed considering these possibilities. That's the most technologically neutral.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

So you would apply these levies to a range of digital devices, including e-readers, iPads, wireless telephones, USB memory sticks?

[Anthony Hémond]

No. As regards USB sticks, some things should be avoided. I'm perfectly aware of what goes on in certain countries with regard to private copying. In France, for example, they want to tax GPS systems. That's crazy. That kind of thing should be avoided because, on the other hand, if it becomes excessive, it will be completely rejected by users. They'll then feel pushed and led towards something that might perhaps be the contrary or illegal with regard to copying because they'll be fed up with feeling that more and more is being taken away from them. On the other hand, they should be reassured that this concerns only certain works, certain copies, and that certain devices won't be taxed. As for the price that will be paid, the Copyright Board has done a remarkable job and it should be emphasized that the proposed levy would definitely have to be reviewed because people have greater storage capacity. However, analyses could be done and the issue would be debated before the Copyright Board.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

How would this private copying system be consistent with consumers' interests?

[Anthony Hémond]

It would enable them to make copies and to be reassured. That's what's important. It's increasingly possible to make copies. Trying to control this practice through technical measures seems completely crazy and unrealistic. So let's find a win-win system for creators and users.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Since it's possible to access music that's streamed by service providers, I would like you to tell us how artists could receive royalties through that type of broadcasting.

[Anthony Hémond]

One arrangement available on the market is to subscribe to systems such as Spotify or Deezer in France. Usage is free. So it's funded through advertising. This unfortunately doesn't exist in Canada. Some models are currently being market-tested, with varying degrees of success. However, we have virtually nothing at all like that here.