Bill C-32 (40th Parliament, 3rd Session) Committee on Dec. 8th, 2010

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

Very good.

Do you believe that Bill C-32 strikes the right balance between the interests of students and the interests of creators?

[Zachary Dayler]

I think if education as a fair dealing is kept in there as a provision, it's a fine step towards that balance. Obviously you want to make sure with copyright that it is living, that it will make sure it addresses the future needs of the industry and of students. I think striking that balance is an ongoing project.

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

Great. Thank you.

Moving now to the Entertainment Software Association, thank you very much for being here.

Ms. Parr, you had a recommendation earlier with respect to user-generated content. I certainly understood the rationale behind the concern, the recommendation. We've also had discussions about technological protection measures, TPMs.

Would not TPMs protect you against the concern that you described with respect to user-generated content? And if not, why not?

[Jason Kee]

Essentially, not necessarily--for a number of reasons, most of which are technical. One is that the UGC exemption in the bill, unlike some of the other exemptions, actually does continue to apply even if a TPM is circumvented in order to create the UGC. So that doesn't disallow it.

Secondly, it's possible to access some of the art and the design and so forth of a game without actually circumventing the TPMs and then replicate that in another game, either by literally reaching into the game and drawing it out and similarly doing the same for the code. That's our concern. Essentially it's because you can actually do UGC without circumventing, which I think is good because it actually promotes UGC. But on the other hand, it means it can be misappropriated.

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

Thank you for clarifying that.

I have a higher-level question now. Could you describe or elaborate on how effective and modernized copyright legislation will bolster the growth of your important sector?

[Danielle Parr]

As I said earlier, I think it speaks to public policy commitment to supporting intellectual property, saying this is of fundamental importance to our economy and creating an environment that's going to foster the growth of IP businesses in Canada. This is certainly a piece of that whole strategy.

Certainly we need to be able to protect our intellectual property. The level of investment that's made in developing a video game today, a major triple-A title, you're talking $20 million, $30 million, $40 million in terms of just development costs and years and person-hours of development. It's a massive investment, and only a very small number of games are actually profitable. So the ability to protect those creations from theft is essential to the profitability of the business.

[The Chair, Conservative, Gord Brown]

Thank you very much. That will be the last word.

Thank you to our witnesses.

We will suspend briefly to bring in our next panel.

[The Chair, Conservative, Gord Brown]

If our witnesses will take their seats, we will call to order this seventh meeting of the special legislative committee on Bill C-32.

We have three groups that are going to present this time: from the Association of Canadian Publishers, we have Carolyn Wood and Grace Westcott; from the Barreau du Québec, Marc Sauvé, Georges Azzaria, and Pierre-Emmanuel Moyse; and from the Canadian Council of Chief Executives, the Honourable John Manley.

We will start with the Association of Canadian Publishers.

[Carolyn Wood, Executive Director, Association of Canadian Publishers]

Thank you for this opportunity to speak today on behalf of the ACP. It represents 127 independent publishers from across the country. We have members in all provinces. They publish books in all genres: literary books, cookbooks, children's books, general interest books, scholarly works, and textbooks. They represent, by and large, small- to medium-sized companies, and I would have to say their emphasis is more on the small-sized than the medium-sized companies.

Though a few are affiliated with universities and other not-for-profit organizations, most are owner-operated businesses—independent, English language, and Canadian owned. The multinational publishers located in the greater Toronto area represent to our members the chief competition in the marketplace. We have no foreign-owned companies in our association, but we share some common ground with them on copyright, and particularly on Bill C-32.

For all publishers, copyright is the ground that we stand on or the roof over our head—you can pick your metaphor. It's the sole source of our revenue. Authors give us the right to make copies. We produce copies and sell them, and we sell the rights to other publishers to produce and make copies in other languages, other territories, and other formats. That's it. That's our business. We have no concert revenue. We have no spinoff merchandise. We carry no advertising in our pages.

The revenue that derives from copyright is the sole revenue for our members, so it's not unreasonable that we are pretty interested in this bill. We are really glad to see it come down the pike. We've waited a long time for it and we're glad to see a bill get to this point. We've watched others fall off the tracks over the years.

We do have a few concerns, and there are four in particular I want to talk to you about today.

The first step for us is the education exemption. It is, as written, so broad and so undefined as to create enormous uncertainty for our industry with respect to its markets and future prospects. I was interested to hear the students say that any uncertainties can be resolved in the courts. I don't think anybody thinks that this would generally be the best outcome.

For our members--small businesses--legal solutions to this kind of problem are the last thing we want to see and can afford. We can't afford expensive litigation, and we can't afford to lose the market share that is at risk while all this plays out. We are interested in seeing clear definitions of “education”, and of the context in which this exception would be applied.

We are also concerned about the reduced role for collective licensing we see in this bill. The model represented by Access Copyright and Copibec has worked effectively for a long time to produce, as a result of much trial and error and many arbitrated decisions, broad access to a huge range of copyright-protected materials in a convenient and affordable form. If you want to negotiate the price, that's a market decision. If public representatives choose to do away with a lawful business model, that's a political decision. And if that model has a long history of working well for many institutions and individuals, that's a counterproductive political decision.

Our third point was addressed in the previous session on the limits to statutory damages for non-commercial use. We too are struck by the difference between copying by individuals for private purposes and the much broader and much less well-defined term of “non-commercial use”.

Finally, the extension of provisions on interlibrary loans to digital works—those provisions that applied previously only to print—causes serious market problems particularly for university presses in Canada, which publish the majority of Canadian scholarly journals. A change like this will severely undermine that market and perhaps eradicate it.

The total of all this—one of many—is a disincentive toward the production of intellectual property. While I was interested to hear the students talk about how access to intellectual property is one of the cornerstones of an innovative economy, if there is no incentive to produce those materials, then an innovative economy is the last thing we're going to have.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We'll move to the Barreau du Québec.

[Marc Sauvé, Director, Research Services and Legislation, Barreau du Québec]

Mr. Chairman, ladies and gentlemen members of the committee, my name is Marc Sauvé and I am the director of Research Services and Legislation with the Barreau du Québec. For the Barreau's appearance before this noble assembly, I am accompanied by Mr. Georges Azzaria, a professor at Laval University, and Mr. Pierre-Emmanuel Moyse, who teaches at McGill University. They are experts in the field and you will be able to ask them any questions you may have.

The Barreau's position on Bill C-32 was expressed in a letter from the president of the Barreau du Quebec addressed to Ministers Tony Clement and James Moore on October

The Barreau is of the view that the debate should focus on the principles that should apply to all legislation. However, the Barreau cannot claim that there is a consensus in the legal community regarding its position on Bill C-32, for two reasons. The first of these is the wide diversity of interests at stake, as well as the lack of a common, shared vision of what a copyright act should be.

If I may, I would like to focus on two points: the excessive complexity of the legislation, which encourages referral to the courts, and the bill's inconsistency with international law.

To address the first point, I would like to turn it over to Professor Moyse.

[Pierre-Emmanuel Moyse, Professor, McGill University, Barreau du Québec]

Mr. Chairman, ladies and gentlemen members of the committee, thank you for inviting us to appear today.

My name is Pierre-Emmanuel Moyse and I am a professor at McGill University and member of the Intellectual Property Policy Centre at that same institution. My comments will be limited to a fairly theoretical point which is at the heart of international trade concerns—namely, exhaustion and, primarily, international exhaustion.

Very briefly, copyright has to do with reproduction and communication, but not only that. In some provisions, copyright also makes it possible to control the circulation of the copies themselves as tangible objects.

That copyright control over tangible objects runs the risk of creating a form of interference with the circulation of goods, and it is in this context that the concept of exhaustion was first developed. Exhaustion can be either national or international.

At the national level, the principle is exceedingly simple. Once the author has produced a work and, with the author's authorization, that work is on the market, the buyer or owner of the good is free to dispose of it as he sees fit. In other words, there is no longer any copyright control over the destination or the ultimate use that is made of the copy, which explains the fact that books can be sold on the used book market or that someone can buy a poster and change the format, as demonstrated in the famous case of Théberge v. Galerie d’Art du Petit Champlain inc.

This point is not particularly problematic. What is of more concern is international exhaustion of rights. That has been the Achilles' heel and focus of all the policy discussions on harmonizing rights in Europe. It has also been the focus of discussions on amendments and reforms to copyright in Australia, a country which imports value-added products.

Copyright does come into play and can make it possible to control the circulation of works, particularly through import rights. In that regard, there are two relatively dangerous or worrisome trends. The first relates to the use of that import appeal process in areas that may give us pause. The best example is the Euro-Excellence Inc. v. Kraft Canada Inc., et al. case where copyright was recently used to prohibit the importation of chocolate bars, or at least to hinder such imports.

The second point relates to an anomaly in the bill. On the one hand, it provides for international exhaustion. Under the new paragraph 3(1)(j) which would be added to the current legislation, as soon as the object of the copyright is put into circulation abroad, the right is exhausted. Furthermore, it includes import provisions which restore control over the circulation of these tangible objects to the author. In other words, international exhaustion, as provided under paragraph 3(1)(j), and the import provisions could be contradictory and cause trade policy issues.

Thank you.

[The Chair, Conservative, Gord Brown]

Can you please go quickly? We're going over time now.

[Georges Azzaria, Professor, Laval University, Barreau du Québec]

Mr. Chairman, my comments will deal mainly with the complexity of the legislation, and I'm available to answer your questions in that regard.

Our hope was that Bill C-32 would clarify the underlying principle of the act, and yet we are left with a far more complex piece of legislation that includes an increasing number of exceptions, as well as exceptions to exceptions, to the point where it becomes very difficult to make sense of anything under the circumstances. Everyone knows that a law that becomes obscure and increasingly convoluted may not be obeyed, in some cases, because people will not know exactly what the principle involved is.

Let me quickly give you a couple of examples. You can make a private copy of a work, but not if there is a lock. In some cases, you have to destroy the copy and, in other cases, the author will be compensated, but not always. This is something that the average person will have difficulty understanding. So, I think there is significant concern associated with that.

Let me quickly give you two further examples. What is the distinction in the legislation between educational purposes, and so on? We don't know. Also, what is meant by “non-commercial purposes” or “private purposes”, considering that there is already a reference to private study and private use?

So, it is all of that, and the courts will probably end up wondering what it all means, which implies that there will be litigation in order to clarify matters. The Supreme Court will be able to explain all of this 10 years from now. But I'm not sure that is a good thing for litigants.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We'll move to Mr. Manley from the Canadian Council of Chief Executives.

[John Manley, President and Chief Executive Officer, Canadian Council of Chief Executives]

Thank you very much, Mr. Chairman. It's nice to be back.

I will read a brief statement and then I will go into the questions.

The Canadian Council of Chief Executives, which I lead, has a long history of support for measures to strengthen Canada's economy and to promote innovation. A strong regime of intellectual property protection and copyright is fundamental to that overall mission. Laws that protect and reward the fruits of intellectual capital and artistic creativity are critical to maintaining a dynamic, innovative, and open economy.

By the same token, the society has an interest in ensuring that consumers and other users enjoy fair and reasonable access to copyrighted material. This can only be achieved through a balanced approach to copyright protection. For that reason, we are supportive of Bill C-32.

This legislation is, as you know, the product of extensive national consultations, round tables, town halls and submissions from thousands of individuals and organizations across Canada.

Throughout this process, care has been taken to respect the concerns, needs and legitimate rights of everyone who creates, markets, distributes or in any way makes use of copyrighted material.

I'm aware that some Canadians are of the view that this bill goes too far in protecting the rights of creators and copyright holders.

Similarly, there are people who feel this bill gives too much freedom to consumers and other users.

This divergence of views is inevitable. The challenge in copyright law has always been to strike a balance between the interests of creators and those of the general public.

To my mind, there are four key elements of Bill C-32. First, it brings Canada's copyright rules into the 21st century by legitimizing some activities that consumers in fact do every day. This includes recording television programs for later viewing, transferring digital content from one format to another, and making backup copies, provided the original material was acquired legally and the copying is for consumers' personal use.

Second, the bill gives creators and copyright owners stronger legal tools to control how their works are made available and to guard against copyright violation. As other witnesses have pointed out, these provisions are needed to ensure that Canada does not become a haven for international music, movie, and software piracy.

Third, the bill will improve the learning experience for Canadian students by providing educational institutions, as well as libraries and museums, with enhanced access to copyrighted material. It does this in part by expanding the concept of “fair dealing” in a way that recognizes the significant societal benefits of education.

This is consistent with the recommendations of the Competition Policy Review Panel, which in its 2008 report identified the use of the Internet for research and education as a cornerstone of Canada's ability to innovate and compete in a knowledge economy.

Fourth, Bill C-32 encourages the growth of Internet services in Canada by providing legal clarity for network service providers, web-hosting services and search engines.

Under the new rules, ISPs will be exempt from liability when they act strictly as intermediaries in the communication of copyrighted material.

At the same time, the bill includes new provisions targeting those who knowingly enable copyright violations.

On behalf of the Canadian Council of Chief Executives, I strongly endorse the overall thrust of this legislation.

Having said that, I think the committee may wish to consider certain technical changes to the bill so as to avoid unintended consequences. For example, important concerns have been raised with respect to the impact on Canada's software industry of the provisions dealing with encryption research, network security, reverse engineering, and copying for interoperability purposes.

In addition, some of the language dealing with user-generated content and copying for private purposes may be too broad, but I'll leave it to others to propose amendments that would address specific concerns while staying true to the spirit of the legislation.

Those issues aside, the bill generally strikes an appropriate balance among various stakeholder interests.

I note that Bill C-32 includes a mandated review of the Copyright Act by Parliament every five years. While it may not be possible to satisfy every demand of every group, this provision ensures that parliamentarians will have the tools to address unforeseen problems on the basis of experience. In that light, I urge you to move this bill forward as expeditiously as possible.

As others have noted, the Copyright Act was last revised when the Internet was in its infancy, and it badly needs updating to reflect the impact of new technologies on business practices and daily life.

Bill C-60, tabled in June 2005, and Bill C-61, tabled in June 2008, both died on the order paper after the dissolution of Parliament. If these hearings continue at the current pace, there just might be a danger that this bill, too, will die. That would not be in the interests of Canadian creators and it would not be in the interests of consumers.

Nor I suspect, would parliamentarians welcome the prospect of going back to the drawing board, with yet another round of consultations and hearings. Finally, I want to commend the committee for the work you are doing. I bear the scars of the last time Canada's copyright law was amended, and I am the first to admit that mediating among so many competing interests requires a great deal of care and effort.

I still bear some of the scars from that process.

Thank you very much, Mr. Chairman.

I'd be pleased to respond to questions.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We'll now move to questions for seven minutes from the Liberal Party.

Mr. Rodriguez.

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

Good afternoon, Mr. Manley. It's a pleasure to have you with us today.

Mr. Sauvé, Mr. Azzaria, Mr. Moyse, and Ms. Wood, welcome. I have questions for each of you.

I would like to begin with you, Mr. Manley, since you just completed your presentation.

I have two brief comments to make with respect to your presentation. You say that “this legislation is […] the product of extensive national consultations across Canada”. But you know as well as I do you can arrange for consultations to say whatever you like. I have gone all across Canada and held roundtables in the ten provinces. Yet I may not necessarily have heard the same thing that the government heard when it held those consultations.

I also want to reassure you. You say that you are “aware that some Canadians are of the view that this bill goes too far in protecting the rights of creators and copyright holders”; but let me reassure you: I don't think there are many people who believe that. I think the bill lacks balance. Some aspects of it are positive, but there is an imbalance which, unfortunately, works against rights holders and creators. There are obvious losses of income and royalties. Those have been noted. The government is also aware of that—for example, as regards the levy, private copying, ephemeral rights and the loss of potential income in education.

Is this not a concern for you? Shouldn't the government be looking at this to find ways of providing compensation, since it is clear there will be income losses for these people?

[John Manley]

Mr. Rodriguez, I don't think anyone can say with certainty that there will be losses in terms of compensation. That is why there is a five-year review process.

As I mentioned, I was around when the Copyright Act was amended in 1998. During the debate, both parties made a lot of claims that were unfounded.

I think there is balance. Some people may think that no such balance exists. Once we have a little experience with this, following extensive change, knowing that it could still be amended by Parliament five years from now, we can see whether these demands are justified or not.

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

In some cases, possibly; in others, no. In terms of the levy, for example, if we eliminate it, we will be killing a way of operating and I don't think we can go back up afterwards.

I have a question now for Ms. Wood.

With respect to the education exemption, you say that it is too vague and not well defined, and we agree with you. This will lead to endless lawsuits, as the Barreau du Québec was saying, which means that people will be spending an enormous amount of time in court. On the other hand, the students who appeared before you were telling us that it's not important because the collectives will be going to court to represent authors and publishers, meaning that cost will not be an issue. Is that true?

[Carolyn Wood]

Not at all; I think--I'll answer in English, if you'll bear with me--that if--

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

English is fine. No problem.

[Carolyn Wood]

Okay.

I think a law that leads automatically to litigation to resolve uncertainty is an outcome that no one wants to see. Our members don't want to have this resolved in court....

Did I misunderstand?

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

No, no, that's fine. You answered. But it would be you—the publishers, the writers—who would go to court. They would pay for that, not necessarily the collective, right?

[Carolyn Wood]

Not necessarily...?