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

[The Chair (Mr. Gordon Brown (Leeds—Grenville, CPC)), Conservative, Gord Brown]

Good morning, everyone. We're going to call this 10th meeting of the special Legislative Committee on Bill C-32 to order.

For the first hour we have witnesses from the Business Coalition for Balanced Copyright, Jay Kerr-Wilson; and also from the Canadian Chamber of Commerce, Perrin Beatty and Lee Webster.

We will start with Mr. Kerr-Wilson for five minutes. You have the floor.

[Jay Kerr-Wilson, Representative, Business Coalition for Balanced Copyright]

Thank you very much, Mr. Chairman and members of the committee.

My name is Jay Kerr-Wilson, and I am here today on behalf of the members of the Business Coalition for Balanced Copyright.

Thank you very much for giving us the opportunity to present our views on Bill C-32.

The members of the coalition include individual companies and trade associations representing a broad spectrum of the communications, technology, broadcasting, retail, and Internet industries. The one thing our members have in common is that they provide the essential links between creators and consumers.

The issues addressed in today's presentation are those on which there is agreement among the coalition members. Some individual members may wish to address additional questions or concerns when they appear before the committee on their own behalf.

We believe that Canada's copyright laws should focus on two fundamental and interrelated objectives: first, to deter infringing activity; and second, to promote open and efficient markets for legitimate distribution of copyrighted works.

We disagree with the notion that copyright legislation is either good for consumers or good for creators. We believe that by promoting the development of a vibrant digital economy, a balanced approach to copyright legislation can serve the interests of creators, distributors, and consumers.

We also believe that Bill C-32 goes a long way towards striking this balance, and we support its passage in a timely manner.

This doesn't mean the coalition thinks the legislation is perfect or couldn't benefit from some minor changes to provide greater clarity and certainty. In fact, we have submitted a number of proposed changes that we would like the committee to consider as part of its review.

First, Bill C-32 provides limited liability for content hosting services. The ministers have repeatedly stated that these provisions are intended to remove barriers to the introduction of innovative remote storage services, including cloud computing and network PVRs. We are concerned, however, that while the existing language limits liability for the reproduction of a work that is stored using such a service, it still leaves potential liability for any transmissions of the hosted content even back to the person who posted it in the first place.

Second, Bill C-32 would create liability for those people who enable others to engage in copyright infringement. We support this provision as an important tool for rights holders to protect themselves against the widespread, unauthorized distribution of their works. We are concerned, however, that the provision as drafted does not adequately distinguish between those individuals who provide services intending that those services be used to infringe copyright and innocent actors who merely provide links to Internet sites but who do not actively promote or encourage infringement.

We are also sensitive to the concern of rights holders that only prohibiting those services that are primarily designed to enable acts of infringement may be too narrow. We therefore support amending the provision to prohibit those services that are designed or operated primarily to enable acts of infringement.

Third, we support providing legal protection for technological protection measures, or digital locks. However, we do not believe that the use of digital copy control locks should prevent consumers from relying on the personal use exceptions such as format shifting or time shifting.

Fourth, we support the provision that would permit broadcasters to transfer musical works onto a different format for a limited time without incurring additional copyright obligations. We believe that a similar amendment should be made to the provision that lets local television stations or community channels tape live events such as parades and concerts for later broadcast.

Fifth, we support the provisions that would impose on ISPs the obligation to implement a notice and notice system. Many Canadian ISPs have engaged in voluntary notice and notice systems for several years, and other countries are now beginning to adopt similar obligations. However, we are concerned that the bill would not provide any time for ISPs to implement the additional obligations that would be imposed by the legislation. We recommend that the notice obligations only come into force once the minister has enacted regulations prescribing the forms of the notice and the fees that can be recovered, and after a sufficient period, for ISPs to implement the necessary systems to comply with all of the obligations.

Sixth, we support the inclusion of an exception for user-generated content. However, we have heard the concerns expressed by rights holders about the potential for abuse of the exception as drafted. Therefore, we agree that the provision could be amended to require that any use of the works in user-generated content be fair, in addition to the conditions that have already been proposed.

Finally, we strongly oppose the introduction of new levies or the extension of existing levies to cover private copying on digital devices. We recognize that the bill does not deal with the private copying levy, but we are aware that the issue has been raised on several occasions before the committee. From our perspective, there are insurmountable problems with such a levy.

Thank you for giving us the time to present these recommendations. I look forward to answering any questions you may have.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We'll move to Mr. Beatty for five minutes.

[Perrin Beatty, President and Chief Executive Officer, Canadian Chamber of Commerce]

Thank you very much, Mr. Chairman.

I'm delighted to be here, and I'm very pleased to have with me Mr. Lee Webster, who's a partner with Osler's, and who's also the chair of the Canadian chamber's intellectual property committee and a member of the Canadian Intellectual Property Council.

Mr. Chairman, our members see the bill as a piece of the larger puzzle of innovation in Canada. Many companies, big and small, rely on the protection of intellectual property rights to maintain their businesses. Updated copyright legislation will bring Canada in line with other major industrialized countries and establish rules of the road for downloading and file sharing on the Internet. It will also position Canada to finally ratify the WIPO Internet treaties that Canada signed in 1997.

Some say that Bill C-32 will prevent Canadians from listening to music and watching movies on their portable devices. That's false!

Businesses in Canada don't want to stop people from enjoying their media, but rules do have to be established so that illegal commercial operations are stopped. What we need is to establish a marketplace framework that will support development of new digital products, services, platforms, and business models and make it clear what kinds of behaviour are legitimate and what kinds are prohibited. We have to strike a balance between the interests of consumers and those of rights holders.

Generally, we believe the government has done a good job in striking the right balance, and we support the principles of the legislation. I can certainly tell you, Mr. Chairman, that striking the appropriate balance to establish good public policy is not an easy task. I can commiserate because I had the responsibility for the copyright file when I was Minister of Communications in the early 1990s. Both the Conservatives and the Liberals put legislation on the table in recent years only to have the bills die on the order paper, and we're anxious to see this new bill passed to clarify rights and responsibilities for both businesses and consumers. So perhaps the third time is a charm.

Now, strong copyright protection will benefit communities across Canada, and here are some examples. In Toronto, there are over 3,300 high-tech companies, generating revenues over $32.5 billion annually and employing 148,000 people. In Kitchener-Waterloo, there are over 700 high-tech companies, generating $18 billion annually and employing 30,000 people, with over 200 burgeoning start-ups. The Canadian video game industry generates billions annually and employs over 14,000 people across the country. Many major studios are in the Montreal area, such as Ubisoft and Electronic Arts and Behaviour, while St. Catharines is home to a prominent video game company, Silicon Knights, which employs over 100 people in high-value jobs.

In 2009-2010, the Quebec film and television industry generated an estimated $1.2 billion annually and created more than 36,000 jobs in the province.

IP is the economic currency of the future. Properly applied, IP rights drive job creation, economic growth, and innovation. As I mentioned, copyright is only part of the puzzle; patent and brand protection and promotion is also a key element in attracting and retaining businesses in Canada.

Leading economies around the world have made IP protection a priority. Japan has created an IP strategy council led by the Japanese Prime Minister. In France, President Nicolas Sarkozy heads an anti-piracy commission to curtail Internet piracy. Clearly, other nations are effecting major changes in IP protection. If Canada does not soon follow suit, Canadian businesses risk being left at the periphery of the global economy.

By defining and better protecting IP rights, we'll develop a marketplace that rewards investments in innovation and creation. It will foster new business models that will lead to stronger economic growth, job creation, and prosperity. In modern developed nations like Canada, where services and innovation have become key economic drivers, and given our emphasis on the knowledge economy, doing so has never been more important.

Let's fix the unintended consequences in the drafting of the legislation and get this copyright bill passed. It's desperately needed to provide certainty to Canadian businesses. Mr. Chair, I simply plead with the committee this way. Let's not let the perfect be the enemy of the good. This represents our best chance to modernize.

I was looking at some of the comments that were made in Parliament and elsewhere. I think it may have been Mr. Angus who had made reference to the WIPO treaties reaching back into the past century. I was reminded of George Michael's CD, Songs from the Last Century. What we're talking about here are principles to update from the last century and to bring us into the 21st century. It's something that's critically important.

Since our time is limited for opening remarks, Lee will get into specific areas where we need amendments during the question period. Just to put it very simply, we need to see some clarifications or improvements in the areas of enabling infringement, encryption research, computer and network security, interoperability, reverse-engineering of software, user-generated content, online service provider liability or safe harbours, private copying and backups, and statutory damages.

Thank you, Mr. Chairman. We'd be very pleased to respond to questions.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We're now going to move to the first round of questioning. It's going to be seven minutes.

We will hear from the Liberal Party, Mr. Garneau.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you very much for being here this morning and for giving your testimony.

I'd like to start off by focusing on TPMs or digital locks and the issue of the bill as it currently exists, which of course says very clearly that if you circumvent an existing digital lock you are breaking the law. The Liberal Party is very clear on its position that it agrees that if you are circumventing a product with a digital lock for commercial purposes—pirating or what have you—that is breaking the law, and we are against breaking the law. However, we do have a different position with respect to people buying a product and format shifting, copying, transferring it to another personal device for their personal purposes. We've been clear on this since Bill C-60, one of the predecessors of Bill C-32.

I'd like to start with Mr. Kerr-Wilson on this issue because he referred to it briefly in his opening comments. Would you please—and then, Mr. Beatty—explain your position with respect to the use of a product with a digital lock but in the case where it is strictly for personal purposes?

[Jay Kerr-Wilson]

Thank you very much, Mr. Garneau.

The coalition's position is the same as the one you just articulated. We support protection for digital locks and we support prohibiting breaking the digital locks for an infringing purpose. But we also believe that digital locks should not prevent consumers from making legitimate uses of content they have legitimately acquired. Our preference would be that the personal use exceptions not be subject to the digital locks.

In an effort to try to find balance, we've modified our position somewhat because the act actually defines two distinct types of digital locks: copy control locks and access control locks. In the general provisions, only circumventing access control locks is prohibited. There is no general prohibition against circumventing a copy control lock. So what we've said is that for the personal use exceptions, which by and large involve copying, it should not be prohibited or it should be permissible to circumvent a copy control lock in order to make your backup copy or to do time shifting, but that perhaps keeping the access lock protection in place would be a middle ground that would give rights holders some more certainty. But in principle, we agree with the position you articulated.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you.

Mr. Beatty.

[Perrin Beatty]

Thank you, Mr. Chairman.

Mr. Garneau, thank you for the question.

We have concerns about opening up the capacity to break digital locks. It could limit the options open for various business models and the range of opportunities that consumers may have. There are a number of businesses that rely on the ability to have digital locks in place as they relate to individual consumers. One thinks, for example, of digital rentals of movies. If it's possible to circumvent that, it creates a problem. You'll find content providers simply pulling the content back and not making it available, and then we run the risk in Canada of limiting consumer choice as a perverse effect of something that was intended for good purposes.

But let me turn to Mr. Webster, who is our expert on this.

[Lee Webster, Chair, Intellectual Property Committee, Canadian Chamber of Commerce]

Thank you for the opportunity to speak today. The chamber's position is that we support digital locks both for access and for copy controls. I always think that some of these supposedly complex Internet-based issues can be pushed back on the way things are dealt with in the bricks-and-mortar world.

It's illegal for somebody to come into my house and walk out with my sofa. But that's not a reason for banning the locks on my door. I think a digital lock is appropriate at the consumer marketplace. If the consumers don't like digital locks on the product, they have the option not to buy it. If they want to change the commercial model, they can complain to the rights provider.

Allowing persons to break these locks would have unintended consequences. So I think the marketplace should dictate it. I think it's basically a property right to keep the digital lock on the software. If the consumers don't want it, they can complain to the rights holder.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Webster.

On the issue of mashups and user-generated content, am I to understand, Mr. Kerr-Wilson, that you're saying that mashups should be transferred into that other group in Bill C-32 at the moment—satire, parody, education—as an exemption under fair dealing? Is that what you're proposing?

[Jay Kerr-Wilson]

Technically you can either move the user-generated content exception into the section 29 general fair dealing provision or you could simply make reference to fair use in the provision as it's drafted now. I think you want to keep the conditions in there now that talk about the effect of the mashup on the market for individual work. You want to keep those market protections, but I think it's also appropriate to stipulate that any use be fair and then incorporate the fairness factors the Supreme Court has identified.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you.

Mr. Beatty, what is your position on mashups?

[Perrin Beatty]

It's a question of balance. We understand that mashups should be allowed to an extent, but we don't want to have something so broad that it allows somebody to do essentially anything that the original creator could have done with the product. It's a matter of striking a balance.

Mr. Webster.

[Lee Webster]

Let me drill down a little bit on that. Our position is that this should not be allowed with respect to technological subjects like computer programs and engineering drawings. The user-generated content exception we think is unique. I don't think there's a similar provision in other countries. Having said that, we think it's a good idea with some amendments.

For example, mashups should not be created if there is an adverse financial effect on the rights holder. They should not be permissible if there's an agreement with the rights holder that this type of activity should not be done, and intermediaries should not be allowed to obtain a financial benefit from these mashups.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

So you're saying it should be further defined.

[Lee Webster]

Correct. In principle we would agree with it, but I think it needs a bit of fine-tuning to make sure that unauthorized third parties don't take unfair commercial advantage of it.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

I understand.

What do you think of the statutory damages, the amounts, and the way it's written?

Mr. Kerr-Wilson.

[Jay Kerr-Wilson]

The coalition has not taken a position on the statutory damages, so I will turn it over to our friends.

[Perrin Beatty]

We see them as valuable tools to enable people to enforce their rights.

Let me turn to Lee to elaborate on that.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

It's not so much whether they are a good tool. The question is whether they are appropriate. There's some controversy about whether they are appropriate in the amounts that are being discussed, whether they are commensurate with the seriousness of potential offences.

[Lee Webster]

Part of the problem here is that we all see what has gone on in the United States, with some of the rights holders getting massive damage awards from individuals. I don't think that's a fair way of dealing with things.

That being said, you look at the numbers for personal infringement and the statutory damages provisions--$100,000, $5,000. We think that's good, but there's one problem. We're concerned that it's really a licence for somebody to infringe. I know $5,000 is a lot of money to most people in this country, but what if somebody downloads a gigabyte of music--tens of thousands of songs? Is $5,000 a deterrent to that? I think not.

There's also some uncertainty. It's not just commercial uses of downloaded music. Some individuals like to disseminate music just for the heck of it, frankly.

[The Chair, Conservative, Gord Brown]

Okay. We have to move to the Bloc Québecois.

Ms. Lavallée, the floor is yours for seven minutes.

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

Thank you very much, Mr. Chairman. Good morning, gentlemen, and welcome.

You all represent business people, large businesses. Mr. Beatty, you are president of the Canadian Chamber of Commerce. So you know how to talk about business, how to talk about money.

[Perrin Beatty]

Small and medium-size businesses know that as well.