Industry Committee on Dec. 5th, 2018

[The Chair, Liberal, Dan Ruimy]

Welcome, everybody. We're going to get started, because we are almost an hour behind—which happens in the House.

Welcome, everybody, as we continue our five-year statutory review of the Copyright Act.

Today we have with us, from the Copyright Board, Nathalie Théberge, vice-chair and chief executive officer; Gilles McDougall, secretary general; and Sylvain Audet, general counsel.

From the Department of Canadian Heritage, we have Kahlil Cappuccino, director of copyright policy in the creative marketplace and innovation branch. We also have Pierre-Marc Lauzon, policy analyst, copyright policy, creative marketplace and innovation branch.

And finally, from the Department of Industry, we have Mark Schaan, director general, marketplace framework policy branch; and Martin Simard, director, copyright and trademark policy directorate.

As we discussed on Monday, the witnesses will have their regular seven-minute introduction. We do have a second panel, so each party will get that initial seven minutes of questions and then we'll suspend. We'll bring in the second round, and we'll do the same thing all over again. We'll finish when we finish, so that will be good.

We're going to get started right away with the Copyright Board.

Ms. Théberge, go ahead.

You have seven minutes.

[Nathalie Théberge, Vice-Chair and Chief Executive Officer, Copyright Board]

Mr. Chair and distinguished members of this committee, thank you.

My name is Nathalie Théberge. I am the new vice-chair and CEO of the Copyright Board, as of October. I will be speaking today as CEO.

As you said, Gilles McDougall, secretary general, and Sylvain Audet, general counsel, both from the board, are with me today. I would like to thank the committee for giving us the opportunity to speak on the parliamentary review of the Copyright Act.

First, I'd like to provide a reminder: The Copyright Board of Canada is an independent, quasi-judicial tribunal created under the Copyright Act. The board's role is to establish the royalties to be paid for the use of works and other subject matters protected by copyright, when the administration of these rights is entrusted to a collective society. The direct value of royalties set by the board's decisions is estimated to almost $500 million annually.

The board sits at the higher end of the independent spectrum for administrative tribunals. Its mandate is to set fair and equitable tariffs in an unbiased, impartial and unimpeded fashion. This is not an easy task, especially as information required to support the work of the board is not easily acquired. The board is on the onset of a major reform following the introduction of changes to the Copyright Act imbedded in the Budget Implementation Act, Bill C-86.

If I may, I would like to state how committed the board is towards implementing the reform proposals. Of course, the impact of these proposals will take some time to assess as there will be a transition period during which all players involved, including the board and the parties that appear before it, will need to adapt and change their practices, behaviours and, to some extent, their organizational culture.

This transition period is to be expected due to the ambitious scope of the reform proposals, but we believe that the entire Canadian intellectual property ecosystem will benefit from a more efficient pricing system under the guidance of the Copyright Board.

However, reforming the board is not a panacea for all woes affecting the ability for creators to get fairly compensated for their work and for users to have access to these works. As such, the board welcomes the opportunity to put forward a few pistes de réflexion to the committee, hoping its experience in the actual operationalization of many provisions of the Copyright Act may be useful.

Today, we would like to suggest three themes the committee may want to consider. We were very careful as to choose only issues of direct implication for the board's mandate and operations, as defined in the Copyright Act and amended through the Budget Implementation Act 2018, No. 2, currently under review by Parliament.

The first theme relates to transparency. Committee members who are familiar with the board know that our ability to render decisions that are fair and equitable and that reflect the public interest depends on our ability to understand and consider the broader marketplace. For that, you need information, including on whether other agreements covering similar uses of copyrighted material exist in a given market. This is a little bit like real estate, where to properly establish the selling price of a property you need to consider comparables, namely, the value of similar properties in the same neighbourhood, the rate of the market, etc.

Currently, filing of agreements with the board is not mandatory, which often leaves the board having to rely on an incomplete portrait of the market. We believe that the Copyright Act should provide a meaningful incentive for parties to file agreements between collectives and users. Some may argue that the board already has the authority to request from parties that they provide the board with relevant agreements. We think that legislative guidance would avoid the board having to exert pressure via subpoena to gain access to those agreements, which in turn can contribute to delays that we all want to avoid.

More broadly, we encourage the committee to consider in its report how to increase the overall transparency within the copyright ecosystem in Canada. As part of the reform, we will do our part at the board by adding to our own processes steps and practices that incentivize better sharing of information among parties and facilitate the participation of the public.

The second theme relates to access. We encourage the committee to include in its report a recommendation for a complete scrub of the act, since the last time it was done was in 1985. Successive reforms and modifications have resulted in a legislative text that is not only hard to understand but that at times appears to bear some incoherencies. In a world where creators increasingly have to manage their rights themselves, it is important that our legislative tools be written in a manner that facilitates comprehension. As such, we offer as an inspiration the Australian copyright act.

We further encourage the committee to consider modifying the publication requirements in the orphan works regime. Currently, where the owner of copyright cannot be located, the board cannot issue licences in relation to certain works, such as works that are solely available online or deposited in a museum. We believe the act should be amended to permit the board to issue a licence in those cases, with safeguards.

Finally, our third theme relates to efficiency. The board reform as proposed in Bill C-86 would go a long way in making the tariff-setting process in Canada more efficient and predictable and ultimately a better use of public resources. I believe the committee has heard the same message from various experts.

We recommend two other possible means to achieve these objectives.

First, we encourage the committee to consider changing the act to grant the board the power to issue interim decisions on its motion. Currently, the board can only do so on application from a party. This power would provide the board with an additional tool to influence the pace and dynamics of tariff-setting proceedings.

Second, we encourage the committee to explore whether the act should be modified to clarify the binding nature of board tariffs and licences. This proposal follows a relatively recent decision of the Supreme Court of Canada where the court made a statement to the effect that when the board sets royalties within licences in individual cases—the arbitration regime—such licences did not have a mandatory binding effect against users in certain circumstances. Some commentators have also expressed different views on how that statement would be applicable to the tariff context before the board.

We are aware that this is a controversial issue, but would still invite you to study it if only because parties and the board spend time, efforts and resources in seeking a decision from the board.

On that happy note, we congratulate each member of the committee for the work accomplished thus far, and thank you for your attention.

[The Chair, Liberal, Dan Ruimy]

Thank you.

We're going to move directly to the Department of Canadian Heritage.

Mr. Cappuccino, you have up to seven minutes.

[Kahlil Cappuccino, Director, Copyright Policy, Creative Marketplace and Innovation Branch, Department of Canadian Heritage]

It's actually Mark Schaan who will start.

[The Chair, Liberal, Dan Ruimy]

Okay. We're going to go to the Department of Industry.

Mr. Schaan, you have up to seven minutes.

[Mark Schaan, Director General, Marketplace Framework Policy Branch, Department of Industry]

The Department of Innovation, Science and Economic Development Canada will share the time available with the Department of Canadian Heritage.

Thank you very much, Mr. Chair.

Good afternoon, distinguished members of the committee.

It is a pleasure for me to be before you again to discuss copyright. My name is Mark Schaan. I am the director general of the Marketplace Framework Policy Branch at Innovation, Science and Economic Development Canada.

I am accompanied by Martin Simard, who is the director of the Copyright and Trademarks Policy Directorate in my branch.

We are here with our Canadian Heritage colleagues, Kahlil Cappuccino and Pierre-Marc Lauzon, to update the committee on two recent developments that relate to your review of the Copyright Act.

First, we will speak about the Canada-United States-Mexico Agreement and the obligations the agreement contains regarding copyright.

Second, we will highlight the comprehensive actions taken by the government to modernize the Copyright Board of Canada, including the legislative proposals contained in Bill C-86, the Budget Implementation Act 2018, No. 2, which were generally noted as forthcoming in the first letter to your committee on the review and then again more specifically in Minister Bains and Minister Rodriguez's recent letter to you.

On November 30, Canada, the United States and Mexico signed a new trade agreement that preserves key elements of the North American trading relationship and incorporates new and updated provisions to address modern trade issues. Particularly germane to your review of the Copyright Act, the new agreement updates the intellectual property chapter and includes shared commitments specific to copyright and related rights, which will allow Canada to maintain many of the important features in our copyright system with some new obligations as well. As a result, the modernized agreement requires Canada to change its legal and policy framework with respect to copyright in some limited areas, including the following.

First, the agreement requires parties to provide a period of copyright protection of life of the author plus 70 years for works of authorship, a shift from Canada's current term of life of the author plus 50 years. The extension to life plus 70 is consistent with the approach in the United States, Europe and other key trading partners, including Japan. It will also benefit creators and cultural industries by giving them a longer period to monetize their works and investments.

That said, we are aware that term extension also brings challenges, as stated by several witnesses during your review. Canada negotiated a two-and-a-half-year transition period that will commence on the agreement entering into force, which will ensure that this change is implemented thoughtfully, in consultation with stakeholders, and with the full knowledge of the results of your review.

The provisions on rights management information will also require Canada to add criminal remedies for altering and removing a copyright owner's rights management information to what it already provides in respect of civil rights management information. In addition, there is an obligation to provide full national treatment to copyright owners from each of the other signatories.

The agreement includes important flexibilities that will allow Canada to maintain its current regime for technological protection measures and Internet service providers' liability, such as Canada's notice and notice regime. The government has stated it intends to implement the agreement in a fair and balanced manner, with an eye towards continued competitiveness of the Canadian marketplace.

Moving now to the Copyright Board of Canada. My colleague Kahlil Cappuccino, director of Copyright Policy in the Creative Marketplace and Innovation Branch at Canadian Heritage, will now provide you with an overview of recent measures to modernize the Copyright Board.

[Kahlil Cappuccino]

Thanks very much, Mark.

Mr. Chair and distinguished members of the committee, as the ministers of ISED and PCH committed to in their first letter to your committee in December 2017, and pursuant to public consultations and previous studies by committees of both the House of Commons and the Senate, the government has taken comprehensive action to modernize the board.

First, budget 2018 increased by 30% the annual financial resources of the board. Second, the government appointed a new vice-chair and CEO of the board, Madame Nathalie Théberge, who is sitting with us, as well as appointing three additional members of the board. With these new appointments and additional funding, the Copyright Board is on its way and ready for modernization. Third, Bill C-86, which is now before the Senate, proposes legislative changes to the Copyright Act to modernize the framework in which the board operates.

As numerous witnesses stated to you as part of your review, more efficient and timely decision-making processes at the Copyright Board are a priority. The proposed amendments in the bill seek to revitalize the board and empower it to play its instrumental role in today's modern economy.

It would do this by introducing more predictability and clarity in board processes, codifying the board's mandate, setting clear criteria for decision-making and empowering case management. To tackle the delays directly, the proposed amendments would require tariff proposals to be filed earlier and be effective longer, and a proposed new regulatory power would enable the Governor-in-Council to establish decision-making deadlines. Finally, the proposed amendments would allow direct negotiation between more collectives and users, ensuring that the board is only adjudicating matters when needed, thus freeing resources for more complex and contested proceedings.

These reforms would eliminate barriers for businesses and services wishing to innovate or enter the Canadian market. They would also better position Canadian creators and cultural entrepreneurs to succeed so they can continue producing high-quality Canadian content. Overall, these measures would ensure that the board has the tools it needs to facilitate collective management and support a creative marketplace that is both fair and functional.

However, the changes do not address broad concerns that have been raised around the applicability and enforceability of board-set rates. Certain stakeholders asked that the government clarify when users have to pay rates set by the board and provide stronger tools for enforcement when those rates are not paid. The ministers felt that these important issues were more appropriately considered as part of the review of the Copyright Act, with the benefit of the in-depth analysis being undertaken by this committee and the Standing Committee on Canadian Heritage.

We look forward to recommendations that will help foster sustainability across all creative sectors, including the educational publishing industry.

At this point, I'd like to hand things back over to Mark to conclude.

[Mark Schaan]

Thank you, Mr. Cappuccino.

Allow me to also mention that, as committed in the government's intellectual property strategy, Bill C-86 proposes a change to the notice and notice provisions of the Copyright Act to protect consumers while ensuring that the notice and notice regime remains effective in discouraging infringement.

The proposed amendments would clarify that notices that include settlement offers or payment demands do not comply with the regime. This was an important shift, given the consensus of all parties in the copyright system, and the continued fear of consumer harm in the face of the continued use of settlement demands.

In closing, we would like to applaud the committee for the thorough review of the Copyright Act that you've conducted so far. We've particularly noted members' efforts to raise issues related to indigenous traditional knowledge throughout the exercise. Such probing and open consultations are invaluable to the development of strong public policy.

We would be pleased to answer your questions.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you all very much for your presentations.

We're going to move directly into questions, starting with Mr. Longfield.

You have seven minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, Mr. Chair.

Thank you all for being here. It's good timing when we're trying to pull it all together.

Particularly, Mr. Schaan, I was pleased to see that you were on the witness list, and I want to start with you.

We're talking about a market, and how the market efficiency doesn't work for creators and how it works for other people. When we talk about the market itself, transparency seems to be an issue. I'm trying to picture a flow chart in my head that goes from creator through the Copyright Board, Access Copyright and all the holders.

Do you have that type of a flow chart in your department?

[Mark Schaan]

There certainly exists a flow chart about how board-set rates and other aspects of copyright are adjudicated. When there's a public role in those, it can get quite complicated, in terms of the mechanical right, the reproduction right, the performance right and other sorts of rights. It does exist, in some regard, of how that all flows through.

There is also a significant amount of copyright that's negotiated directly between those who own the rights and those who seek to utilize or draw upon those rights. In many cases, that information is proprietary and held within.

Is it possible to understand, for instance, on a board-set rate, how a musician or a photographer or a choreographer may be remunerated for their work? The answer is yes.

In the case where it's potentially engaging with a third party in terms of the distribution within a given contract—what an artist makes from Spotify or from any of the other platforms—that's more complicated, because much of that is proprietary and is a function of the marketplace in terms of how they negotiate those rates.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

In terms of our report, maybe you've just answered part of the question, which is that we can't get some of that information. We've been trying to get it, as a committee, to find out where the money is being made and where it's not being made at each stage of the process. Maybe we could have that as a recommendation, that it be developed, so people in the marketplace know where they sit in the marketplace and how it works.

[Mark Schaan]

There have definitely been significant efforts on the part of my colleagues at Canadian Heritage to try to ensure that creators at least understand where there are value gains to be made from their creative works.

I won't speak for my colleagues at Canadian Heritage, but I think part of it is also, as I said, the significant variation within the marketplace. In a board-set rate, everyone is compensated equally based on use, but in many other, proprietary cases.... A rock star doesn't necessarily make what someone with a YouTube channel makes, and might be compensated differently.

[Lloyd Longfield, Liberal, Guelph, ON]

And we have different markets. We're focusing a little bit on the heritage markets—I'm seeing nodding of heads on that—but we also have the educational markets. We have similar streams, similar points of contact within the Copyright Act, but there are also divergent areas where they don't work in the same way.

[Mark Schaan]

It's also where you have a huge variety of content. You raised the subject of education. In the educational context, you have digital licences, potentially, that allow people access on a per-user basis or sometimes on a per-use basis, on a transactional basis that amounts to a certain amount of compensable copyrighted material. You then potentially have other subscription services, and you have a tariff licence that exists in both cases, which covers other uses.

In all of these cases, you'd have to amass...to know what is all the potential n or openness of content, and then the various mechanisms they're using to draw on that. I think what you probably found in the course of your study, and what we often find, is that the ubiquity of copyrighted content means we're accessing it in dozens of ways through dozens of providers, and each one of those has a remuneration stream that may or may not be governed by a tariff or a contract or a subscription fee, and it may be per use, per year.

[Lloyd Longfield, Liberal, Guelph, ON]

Yes, or it may be per stream that gets created, so we don't know what's going to be the next stream of creation.

[Mark Schaan]

And then it's divvied up within that by who contributed to it.

[Lloyd Longfield, Liberal, Guelph, ON]

Yes, okay.

[Mark Schaan]

Even in the case of a musical work, you're looking at who the background artists are, who the songwriter was, and the producer.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

I'm sorry I'm cutting you short—

[Mark Schaan]

No, no.

[Lloyd Longfield, Liberal, Guelph, ON]

—but it is a complex landscape.

Ms. Théberge, it's great to have you here. It's great to have you on the board and to see the changes on the board. I've heard some positive feedback already from some of the witnesses we've had.

Among the jurisdictions of the world, Australia was mentioned, but also France. The collective rights administration in France involves a significant amount of government oversight, maybe more than what we have here, to look at the behaviour and internal management of copyright collectives.

Is your board engaged in or looking at the tariff-setting power and the scrutiny and oversight of copyright collectives in a new way? We've heard a lot from collectives and how they're managed. It seems that there's.... On the record, I guess I'll watch how far I go with that comment, but it was very hard for me to understand how the collectives work, how they're managed and what role the Copyright Board could play in helping us to understand that situation.

[Nathalie Théberge]

I'll invite my colleagues to jump in if they have something to say.

We don't oversee copyright collectives. They come to the board as a party, as part of the process, just as other user organizations are part of the processes that are arbitrated by award. If ever there was an appetite to think from a policy perspective about how collective management in Canada should behave, what it should look like, it would be more of a policy question under the responsibility of the two lead departments.

[Lloyd Longfield, Liberal, Guelph, ON]

Which departments?

[Nathalie Théberge]

It would be Canadian Heritage and ISED.