Tariffs 22.D.1 and 22.D.2 - A free preview of what's to come for SOCAN

On July 18, 2014, the world of everyone who streams music or videos containing music – that is, almost everyone who uses the internet – changed a little bit. On that date, the Copyright Board released a decision certifying two tariffs proposed by the Society of Composers, Authors, and Music Publishers of Canada (SOCAN). These tariffs allow royalties to be collected for the performance of musical works embedded in other audiovisual works – such as movies and television shows – distributed via the Internet. Given the immense scope of content on the Internet that incorporates copyrighted musical works, both with and without licensing agreements, many prominent Internet companies made submissions in objection to the proposed tariffs, including Facebook, YouTube, and Netflix. The reasons published by the Copyright Board are best described as terse – spectators and speculators of intellectual property policy will have to wait until the inevitable appeal to have their cravings for an in-depth explanation satisfied. Nonetheless, some things can be gleaned from the decision.

 

Facebook’s Arguments

One of Facebook’s main objections to the new tariffs was in relation to the definition of a “page impression” for the purposes of assessing the amount of tariffs to be paid. As tariff 22.D.1 stands, an “audiovisual page impression” is made when the user loads a webpage that allows them to view an audiovisual work. Facebook argued that a more accurate method of counting page impressions was by the actual number of times users viewed or listened to an audiovisual work. Moreover, Facebook contended that the existing definition of a page impression was unwieldy when applied to dynamically loading webpages like its News Feed system. The Facebook News Feed periodically refreshes the page being viewed to load new content in real time. Many websites use similar dynamic content loading techniques. Using the current definition of a page impression may result in such websites paying more in tariffs than websites with more standard page loading practices. Facebook’s proposed change to the definition would account for nonstandard content display systems, such as the News Feed, which may not refresh in their entirety, but rather add single new items periodically.

 

The Board decided that Facebook’s method of counting dynamic page impressions was permissible, but rejected its proposal to assess tariffs by actual views of an audiovisual work rather than potential views. I find the Board’s rejection of Facebook’s alternative view-counting method puzzling, particularly because no justification was given other than that SOCAN’s method was consistent with the definition in the tariff. This definition may have sufficed when the loading of a page that allowed a user to view an audiovisual work was an acceptable proxy for the actual viewing of the work, but today’s web services increasingly make use of real-time content loading similar to that of Facebook’s News Feed (Twitter is another notable example of real-time content loading). Moreover, the technology exists to make more precise view counts – Facebook, YouTube, Twitter, and similar sites almost certainly already keep track of how many times a user views a given piece of media. The Board’s decision to use a less accurate method of counting views over an available, more precise alternative is an odd one.

 

Netflix’s Arguments

Netflix made two main arguments against the tariffs: first, that its practice of offering free trials to potential subscribers was fair dealing for the purpose of research, in a manner analogous to free iTunes previews in SOCAN v Bell Canada; and second, that the levying of tariffs on free trials was a violation of the principle of technological neutrality set out in Entertainment Software Association v SOCAN. As was the case with Facebook’s submissions, the Board was not convinced, rejecting both arguments.

 

It concluded that the link between Netflix’s free trials and the short audio samples in Bell was tenuous. The iTunes previews at issue in Bell were only 90 seconds long – to listen to the full song, a purchase was necessary. In contrast, Netflix’s trials allow a user the full benefit of a Netflix subscription, but for a limited time. A closer analogy to a song preview would be allowing a user to access only a small part of Netflix’s library, or allowing them to only watch the first five minutes of a movie or television show. On a more procedural note, the Board declined to probe the fair use issue, pointing to a lack of evidence upon which to make a decision. The Board used some rather narrow reasoning in its rejection of Netflix’s technological neutrality argument, using the example of a digital download of music as an “alternative technology” to a CD being sold in a store. It then stated that the technological neutrality argument failed because no “alternative-technology equivalent” to a Netflix trial existed, despite the fact that the Supreme Court’s reasons in ESA did not mention a requirement that functionally analogous technologies be extant. Without such a requirement, it does not matter whether an alternative technology or business model based on alternative technology exists, only that an analogy may be drawn to a hypothetical alternative technology that would be treated differently than the one in question.

 

The gauntlet has been thrown down

As stated above, the extremely minimal reasons given by the Board makes in-depth analysis of the legal foundations behind its decision difficult. I look forward to a decision by a court on this matter, as there is much at stake for the businesses that made submissions here. SOCAN’s recent track record at the Supreme Court is not great – both Bell and ESA were decided against it. However, with the passage of the Copyright Modernization Act and the addition of a “making available” right in Section 2.4(1.1) of the Copyright Act, SOCAN may think that it can take any comers, and give the ESA decision a rematch to boot. It remains to be seen what the result will be, but with this many industry heavyweights in the ring, it’ll be a fight to watch.

 

Adam Chan is an IPilogue Editor and graduate of the University of British Columbia Faculty of Law.

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