Bill C-32 (40th Parliament, 3rd Session) Committee on Dec. 6th, 2010

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

Good afternoon, everyone.

We're going to call this sixth meeting of the Legislative Committee on Bill C-32 to order.

Today we have, from Access Copyright, Roanie Levy, general counsel and director of policy and external affairs; from the Canadian Anti-Counterfeiting Network, Brian Isaac, the chair; and from the Canadian Private Copying Collective, Annie Morin, chair of the board, and Sophie Milman.

Could we hear from Ms. Levy from Access Copyright for five minutes?

[Roanie Levy, General Counsel and Director, Policy and External Affairs, Access Copyright]

Thank you, Mr. Chair, mesdames et messieurs, members of the committee.

I'll begin by explaining what Access Copyright does. In order to do so, I invite you to reflect for a second on just one image.

Here I have a copy of a page from a story by children's author, Alan Cumyn. All it is is words on paper: words and paper. In what does the value reside? Of course, the value resides in the organization of the thoughts and ideas on the page; that is, in the words. So when we photocopy, when we reproduce, when we display, or when we post it for others to use, we are reproducing the words, not the page or medium that merely conveys the words.

Access Copyright captures the value of these reproductions and redistributes it to creators and publishers who have invested their creativity, sweat, and capital to produce words on paper.

Reforms to the Copyright Act in 1988 and 1997 brought in collective societies like ours to manage parts of Canada's copyright regime. We have counterparts in every developed and many developing countries around the world.

Every year, Canada's education sector alone reproduces more than half a billion pages of text for use in classrooms. That's equivalent to three million books, books unsold, but whose words are valued enough to be copied. This is not about the child who copies a poem to memorize. This is about mass, industrial-scale copying of texts as educational resources. Mass copying that occurs one page at a time, one chapter at a time.

Across Canada, the education sector, and others, negotiate licences with Access Copyright for these very purposes. This ensures that rights owners are compensated when their works are copied instead of being purchased.

For centuries, this has been the purpose copyright has served: protect the value invested in the words and images that convey the ideas that drive our culture and civilization forward.

Perhaps it was unintended, but Bill C-32 turns this principle on its head. It does so with the introduction of a raft of new exceptions, exceptions that say users will continue to pay for the paper, the iPod, the iPad, but the words shall be theirs for free.

Today I'm going to walk you through provisions that demonstrate the true consequences of Bill C-32, that is, the stripping of revenues from Canada's creative industries and redistribution of them as subsidies to the education sector. That is done in the name of fairness. The word “fair”, like a fig leaf, appears to hide an embarrassing reality.

I have wrestled to understand the public policy rationale behind these changes.

I have wrestled to understand the public policy rationale in Bill C-32 for cutting off existing compensation from the education sector to creators and publishers for the use of copyright protected works in tests and exams, uses that are covered today under collective licences.

I have wrestled to understand the public policy rationale for cutting off existing compensation for the display in the classroom of copyright protected works, once again, uses that are covered today under collective licences. These are licences that generate a return on investment that keeps Canada's creators and publishers thriving as partners in the development of Canadian resources for Canadian students.

And I have wrestled to understand the public policy rationale for adding education to the so-called fair dealing exemption. Make no mistake, this is a misnomer: when dealing or use is considered fair dealing, it is not paid for. Fair dealing is free dealing.

Am I wrong or is this an unintended consequence of Bill C-32? Are the education exemptions a subsidy? Half a billion pages are paid for today. How many millions will be free tomorrow?

The government's background paper says this provision will “reduce administrative and financial costs”. As written, the exception is a hole through which many trucks will pass: everything will become education.

The Canadian Federation of Students understands that. They are cheering. The Council of Ministers of Education understands that. They, with the notable exception of the Quebec ministry of education, hope to bring us to the Supreme Court, because they believe that “most, if not all, photocopying in schools is fair dealing”.

“Fair” does not ensure that creators and publishers will be treated fairly. To me it looks like a fig leaf for expropriation without compensation.

You may have seen this. Four hundred of Canada's world-celebrated writers have signed this letter of protest, which was published a couple of days ago in The Globe and Mail.

If these consequences are unintended, please make it clear in the legislation. Fix it now and spare us decades in the courts.

I will be pleased to take your questions.

Thank you.

[The Chair, Conservative, Gord Brown]

Thank you very much.

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

[Brian Isaac, Chair, Canadian Anti-Counterfeiting Network]

Thank you.

Good afternoon. I'm Brian Isaac. I'm the chair of the Canadian Anti-Counterfeiting Network, which we refer to as the CACN. I'm also a partner with Smart and Biggar, Canada's largest firm practising exclusively in intellectual property.

Thank you for the opportunity to present today. Due in part to the short time between our receipt of the invitation to participate and our participation, we have not yet submitted our written submissions, but plan to do so in the coming weeks.

The Canadian Anti-Counterfeiting Network is a national coalition of individuals, companies, firms, and associations, that have united in the fight against product counterfeiting and copyright piracy in Canada. We're going against IP crime. The members of CACN include Canadian organizations, companies, and practitioners who have hands-on experience enforcing against IP crime, including copyright piracy in Canada.

The issue of IP crime legislation has been studied for years in Canada. In 2007, the Standing Committee on Industry recognized that Canada's IP crime laws needed to be amended, and recommendations included ratifying the World Intellectual Property Organization Internet treaties that Canada signed in 1997.

While Bill C-32 does not address all the issues that need to be addressed relating to the problem of counterfeiting and piracy in Canada, and that includes addressing some other acts, such as the Trade-marks Act and customs legislation, it does address the Internet treaties and is an important step in addressing commercial-scale piracy in Canada.

Our submission is that passing Bill C-32 into law is a matter of urgency. Canada needs to take legislative action that is already way too long overdue, and while we're recommending some specific changes to address loopholes and practical enforcement issues, we do fully support passing of the bill as soon as possible.

Turning to substantive comments, first regarding the ISP safe harbours provisions, we remain concerned that the notice and notice system proposed in the bill will not be sufficient to effectively address the Internet trade in pirated products. In any event, a notice and notice system requires strong provisions directed against enablers of Internet piracy. The bill's proposed enabling infringement provision only applies if a service is “designed primarily” to enable infringement. With experience, I can say it's often going to be very difficult to prove a service was designed primarily for infringement, even when it would be possible to prove that a service provider is knowingly enabling and encouraging infringement as a primary use of the service.

Accordingly, our submission is that the enabling provision should be amended to catch services “designed or operated primarily” to enable acts of infringement. In addition, the provision should make it clear that the full range of legal remedies, including statutory damages, are available against enablers.

Second, we submit that the provisions providing protection for technological protective measures are crucial to fill a gaping hole in Canada's copyright laws. The prohibition on trafficking circumvention tools or services will permit rights holders and law enforcement to go after entities that are enabling widespread piracy. The nature of circumvention activities is such, however, that the act of enabling circumvention and the act of copyright infringement are normally distinct acts that are performed by different people. Accordingly, limiting the prohibition to circumvention for the purpose of infringement, in our submission, is not feasible as it's going to create a loophole for traffickers that will be exploited.

Further, the wording of the exceptions has to be closely scrutinized to try to ensure there are no unintended loopholes that may be used by persons trafficking in circumvention products and services. For instance, if you have purveyors of circumvention tools or services adapted for allowing the loading and using pirated content onto devices that are technologically protected, the fact that it may allow for the loading of legitimate content should not create a loophole when the economic viability of the tool or the service is solely based on enabling piracy.

Generally, we strongly urge against any watering down of the TPM provisions, as they may easily be rendered practicably unusable.

Third, and last, we're very concerned that the two-tier system for statutory damages will be abused and may create perverse incentives for rights holders and infringers. The new non-commercial tier provides a range between $100 and $5,000 that applies to all infringements ever done by the infringer, and that's going to give an incentive for them to copy as much as they can, because they'll only get one capped damage.

Also, the first rights holder to file an action can benefit from the ability to claim statutory damages. This could provide incentives for the rights holders to sue quickly so they're the first to the gate.

Moreover, many individuals and organizations that facilitate widespread piracy, such as “warez” or release groups, do so to build a reputation on the Internet. They don't do it for dollars. One of our concerns is that the two-tier system will benefit those people who are purposely going out to gain their reputations, and it would limit the liability of those individuals.

We recommend you eliminate the multi-tiered system and instead focus on the factors that courts must consider when determining the amounts of the awards, to ensure that individuals copying pirated content for private use are protected from inappropriate damage awards.

We urgently need to equip rights holders, law enforcement officials, and prosecutors with robust legal tools to shut down those who enable or facilitate piracy. We applaud the significant step the bill represents. We urge the committee to implement the amendments necessary to fully realize the principles of the bill and to rapidly pass and implement it.

I will gladly answer any questions.

Thank you.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We will now move to the Canadian Private Copying Collective for five minutes.

[Annie Morin, Chair of the Board, Canadian Private Copying Collective]

Good afternoon, my name is Annie Morin and I am chair of the board of the Canadian Private Copying Collective. The private copying levy has been an important part of the Canadian copyright regime for more than a decade. The levy, which is included in the purchase price of blank audio recording media, is distributed to copyright holders in the music sector.

Currently, only one blank medium is subject to this levy, which provides not very substantial revenue for artists. And that is blank CDs, to which a 29¢ levy applies.

However, the amounts generated by the levy on blank CDs are declining at an increasingly alarming rate because they are an increasingly obsolete medium for copying music. I would like to share a few quite edifying figures with you.

In 2008, the total amount of the levy for distribution to rights holders was $27.6 million. This year, the forecast amount is in the order of $10.6 million. That's a 60% decline in three years.

The dilemma is obvious and urgent. We all know that iPod-style MP3 players have become the predominant music copying medium. Some 70% of the 1.3 billion songs copied annually in Canada are copied on digital audio recorders.

That means that Canadian artists receive nothing in exchange for the vast majority of those copies. What we urgently need is a simple amendment to the Copyright Act that would allow the levy to be applied to MP3 players such as the iPod.

Such an amendment would not change the spirit of the act, which is to recognize and protect the right of Canadian artists to fair compensation for the use of their work. Instead it would constitute a simple update of the act.

In 2004, the Copyright Board set the amount of the levy at between $2 and $25, depending on the type of memory in question. Based on our research and our experience, we believe that those amounts—between $2 and $25—are still valid today. When they were applied in 2004, there was no negative impact on the market.

This kind of levy would apply solely to devices developed, manufactured and marketed to copy music. There has been extensive discussion about the fact that the full range of electronic devices such as home computers and BlackBerries would be subject to the levy. That is absolutely not the case.

It is now time to adapt this levy to the twenty-first century. It needs to reflect how music is actually copied today, not how it was copied a decade ago.

That said, the best way to show you how important the levy is for our artists is no doubt to ask Sophie Milman, a Canadian artist, to share her experience with you.

[Sophie Milman, Artist, Canadian Private Copying Collective]

Thank you, Annie.

My name is Sophie Milman. l'm a jazz singer, and l'd like to share with you what the levy means to Canada's artists. It helps us fund our recordings, music videos, and tours and to pay our musicians, tour managers, recording engineers, webmasters, make-up artists, and photographers. The levy helps us support countless Canadian suppliers.

The days of big spending record labels are over, but a good quality album still costs more than $100,000, before marketing and promotion. So we've had to become entrepreneurs, making very tough investment decisions every single day.

The levy also helps us pay for basics, such as gas, groceries, and rent, and it helps us support our families. Did you know that most musicians in Canada live on less than $30,000 a year? Without the levy, many of us would have to choose between having careers and surviving.

We need you to realize that copies made of our works have intrinsic value. How much time do you think people spend listening to empty iPods? The levy is value paid for value received, a perfect market solution that ensures that artists are paid for creating value. But it's dwindling to nothing as blank CDs become obsolete.

It is frustrating for us to hear references to the so-called iPod tax. The levy is not a tax. Taxes go to government. The levy goes to the people who make the music. And we're not proposing an extravagant sum. Even a decent set of ear buds costs more than the likely levy. Music is being consumed and enjoyed now more than ever, but artists are being compensated less and less. It's just unfair.

Culture is this country's greatest and most recognizable export. When I immigrated here at the age of 16, all I cared about was that this was the birthplace of Leonard Cohen and Oscar Peterson.

Canada's music community must be supported if we want our country to maintain a worldwide reputation of excellence in the arts.

We're not asking for charity. We don't want access to our music to be restricted. We only want to be compensated for copies of our music made to devices specifically designed for that purpose. Everybody else who makes and sells an iPod or other MP3 player gets paid. Only artists are being told that they have to work for free. You would not ask any other group in this country to forego a legitimate source of income.

We ask that you please save the levy.

[The Chair, Conservative, Gord Brown]

Thank you very much to our witnesses.

We'll now move to our first round of questioning.

From the Liberal Party, for seven minutes, we'll have Mr. Rodriguez.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Thank you, Mr. Chairman.

Good afternoon and welcome, everyone.

Thank you for being here.

I'm going to start with you, Ms. Levy.

It is interesting to note that, when you talk about the education exemption, you consider it a subsidy to the education sector. I understand from your presentation that there is a potential net loss of vested rights in terms of revenues.

Do you have an idea of the amounts that are involved, or any actual examples of things that the education system would have had to pay in the past and would no longer have to pay today?

[Roanie Levy]

Based on our study, we believe that about $60 million is at risk as a result of the scope of fair dealing in the education sector, as well as other education-related exemptions provided for in Bill C-32. This is revenue that COPIBEC and Access Copyright collects today for the copying of a chapter here, a page there, for the distribution of works in class, for the use of works in exams. It also includes the royalties that certain film distributors collect from the education sector.

So we're talking about a minimum of $60 million at risk, but you also have to consider that, when a use or reproduction becomes free of charge, an increase in that type of reproduction follows. There will also be a revenue shortfall that will be more difficult to quantify as a result of a decline in sales of texts intended for schools.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Does that $60 million represent all revenue collected by COPIBEC and Access Copyright?

[Roanie Levy]

That includes part of the revenue collected by COPIBEC and Access Copyright and of the revenue collected by other organizations such as Criterion Pictures, Audio Ciné Films, etc.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

What would be the approximate amount for COPIBEC and Access Copyright?

[Roanie Levy]

For COPIBEC and Access Copyright, it's about $40 million, and that's just the start.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

So the total amount would be more...

What should we do?

You'll tell me that the exemption should be repealed, which could be a solution. However, if we don't repeal the exemption, do you think it would be possible to more clearly define what fair dealing in education is? Could we, for example, proceed by using the six points as defined in the Supreme Court judgment or the three-step test of the Berne Convention? In the latter case, would we put them in the specific fair dealing section or could we put them, for example, at the start of the bill?

[Roanie Levy]

You're asking me a lot of things. I'm going to start by saying that defining the education sector would be helpful. However, that's definitely not the solution. Even defined in a more limited way than it is today, the education sector as such is still an important sector for creators and book publishers. So simply defining the education sector is not enough. It's also important to define certain limits to the concept of fairness.

I'm going to suggest something else that you might consider. The amendments in 1997 made it possible to introduce a very innovative mechanism in Canada. It's a mechanism that grants access to a work and payment for that work at the same time. Access is guaranteed, and payment as well.

Unfortunately, Bill C-32 disregards that mechanism, which is provided for under the current Copyright Act. Even worse, it is eliminated in a number of instances. If we once again followed the principle that, when the market is able to meet the rights holders' needs as well as those of the user, we no longer need to apply the rules of exemption, we would succeed in achieving the twofold objective of access and compensation.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

I'm going to have to interrupt you because I would also like to ask the CPCC representatives some questions. I'd nevertheless like us to talk about this again in more detail later.

Mrs. Morin, you say there is a way to limit the collection of royalties on MP3 players, which are designed and developed strictly for the purpose of playing music, and sold and advertised as such. How would that be feasible in the current context?

[Annie Morin]

In fact, we would like it to be limited to items intended to reproduce pieces of music and that are designed, manufactured and marketed. It is possible to determine what a device is intended for.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Can Parliament define it and describe it in the current act?

[Annie Morin]

Definitely. It would indeed be possible to limit the matter. It would even be possible under section 87 of the act, as it currently stands, to limit by regulation the media to which the levy could apply. Thus, if the government deemed that such and such a medium should not be subject to royalties, it could exclude it by regulation.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

All right.

In your opinion, since there is a net loss of revenue, is there something in the bill that makes it possible to compensate for that loss?

[Annie Morin]

Absolutely nothing is provided to compensate the net loss of income arising from private copying. There is only section 29.22, which permits copying for personal purposes.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

I'm going to interrupt you because I don't have much time left.

Would the bill, as it stands, result in lost revenue?

[Annie Morin]

Absolutely, net losses.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Unless I'm mistaken, Mrs. Milman, in your case, if you no longer receive the amount that you were receiving from private copying, there would be less money in your pocket tomorrow morning.