Tariffbusters: Does the CBC v SODRAC decision debunk the "Mandatory Tariff Theory

Introduction to the panel

After two exciting and lively debates on the principle of technological neutrality (see Sebastian Beck-Watt’s coverage here) and reproduction rights (see Paul Blizzard’s coverage here), IP Osgoode’s Unpack SODRAC symposium turned to a new panel to ‘unpack’ the paragraphs of CBC v SODRAC [SODRAC] concerning the mandatory (or not) nature of tariffs set by the Copyright Board.

The fresh panel was asked to tackle the issue of whether the majority decision of SODRAC dispelled the notion—coined by Ariel Katz as the “mandatory tariff theory”—that once the Copyright Board approves a tariff, any unauthorized use of a work triggers legal obligations to pay the royalties specified in the tariff and comply with the terms and conditions. The majority judgment’s alleged ‘debunking’ is found in paragraphs [101]-[13]. At paragraph [107] Justice Rothstein (for the majority) wrote: “In the absence of clear authority that this is Parliament’s intent, the burdens of a license should not be imposed on a user who does not consent to be bound by its terms” and, at [112] he concluded “that the statutory licensing scheme does not contemplate that licences fixed by the Board pursuant to s 70.2 [of the Copyright Act (the “Act”)] should have a mandatory binding effect against users [emphasis added].”

This issue was posed to the panel—comprised of Katz (University of Toronto Intellectual Property Professor), Mario Bouchard (former General Counsel, Copyright Board of Canada), Adriane Porcin (University of Manitoba Copyright Professor), Bobby Glushko (Head of the Scholarly Communications and Copyright Office at University of Toronto), and Howard Knopf (Copyright Lawyer and Blogger)—in the form of the following questions: what are the potential implications for collective management organizations (CMOs), copyright users, and the copyright board?; and, more specifically (a major point of contention) does the reasoning of paragraphs [112]-[113] extend to other tariffs approved by the Copyright Board, and if so, does this “debunk” the so-called “mandatory tariff” theory?

Ariel Katz – The spectre is dismissed

Katz promptly asserted that Copyright Board issued tariffs are not mandatory. He focused on the language of s 68.2(1) of the Act, stating that even though a literal reading of s 68.2(1) appears to grant CMOs a right to collect royalties, it does not grant such a right. The provision reads:

68.2 (1) Without prejudice to any other remedies available to it, a collective society may, for the period specified in its approved tariff, collect the royalties specified in the tariff and, in default of their payment, recover them in a court of competent jurisdiction.

Katz examined the key phrase “default of their payment”, and reasoned that a collective may only collect royalties if the user owes a payment. Logically, Katz argued, if the user does not owe any payment they cannot be in default. As a result, a CMO’s right to collect only extends to a licensee, and not a user who falls outside the definition of the type of users to which the tariff applies.

Katz then argued that the holding was applicable to s 70.1 of the Act, since it is indistinct from s 70.2. He focused on the plain meaning of the word “tariff” and stated that if parliament wanted it to be mandatory, they would have called it a “Levy”.

As a joint intervener in the case with the Centre for Intellectual Property Policy, more of Katz’ argument can be found in his factum.

Mario Bouchard – Copyright Board-issued tariffs are mandatory

Bouchard followed Katz and began with a criticism of the way the issue was framed for the panel. He was concerned by the classification of s 70.2 licenses as tariffs. Bouchard dispelled this notion by explaining that s 70.2 licenses are not tariffs, they are regulations.

Turning to SODRAC, Bouchard argued in favour of the mandatory tariff theory. He reasoned that the SODRAC decision misapplied, misapprehended, and ignored copyright principles, principles of statutory interpretation, judicial precedents, legislative history, and the way foreign copyright values approach the regulation of collective societies. Concerning copyright principles, Bouchard stated that—well established by the Berne Convention—where permission is required, it is for the user to ask permission from the copyright owners, not the other way around. Asking rhetorically “are we to embrace Google’s approach to copyright: use first, ask forgiveness later”, he conceded that it may be an appealing instrumentalist approach, but Berne still legally controls.

Adriane Porcin – Do users need CMOs in a transactional world?

Porcin followed Bouchard and took a different approach to the issue, seeking not to conclude what the majority decision means. Rather, she examined the context in which the decision was made and inquired into the purpose of the tariff regime, mandatory or not. After detailing the “one size fits all” approach tariffs impose on users, she opined on the purpose of s 70.2 and CMOs in a transactional world where organizations (like CBC) are free to negotiate licensing terms with or without the assistance of the Copyright Board as arbitrator.

She presented four points on this topic: [1] different copyright collectives have different types of relationships with their members, depending on the nature of the work and industry in which the tariff functions, and so the ability to maneuver around s 70.2 depends on the rights granted to each CMO; [2] because some CMOs’ license valuations have disconnected from the utility of those licenses to the users, intervention of the Copyright Board is essential to ensure that users are not subjected to the CMO’s own price setting; [3] the Copyright Board is in a better position than CMOs to assess the fair market price, but the timing of valuations is an issue in fulfilling their role as market surrogate; and [4] CMOs’ evolving governance structures may alleviate the issue. On the last point, Porcin used Access Copyright as an example of a CMO that evolved by shrinking their number of directors and recruiting them based on their industry knowledge and skills. She explained this may be an encouraging step toward reducing the disconnected valuations between CMOs and users).

Bobby Glushko – The lack of clarity about tariffs is not user-friendly

Glushko—Head of Scholarly Communications and Copyright at University of Toronto—brought a unique user’s viewpoint to the panel. Glushko, whose role is to help his institution identify, evaluate and mitigate risk, focused on the uncertainty of this area of copyright law. He explained that in his case, the uncertainty over whether tariffs are mandatory or not—combined with the uncertain potential outcome of valuations involved in those tariff hearings—made his job particularly difficult.

Glushko further explained how the Principle of Technological Neutrality, in light of the SODRAC decision, only exacerbates the uncertainty in his position. It remained unclear what activities constitute copying, whether they are compensable, and what the value of those copies may be.

Howard Knopf – If you don’t like the bridge toll you can swim across

Knopf closed the panel and described why CMOs might see the SODRAC decision as bad for business: it expressed a clear message that, for users, tariffs are not mandatory. Knopf detailed the historical nature of a tariff, proffering an analogy to the old train tariffs from Toronto to Ottawa to regulate train companies, and suggesting that these were only mandatory it you took that particular train—you could ride a bus, plane, bike or hitchhike if they were cheaper, faster or better means to travel. His argument was that the SODRAC decision gives users leeway to choose “alternate means of transportation” by clearing rights for works they want to use through different mechanisms without running afoul of the Act. Bouchard spoke up in disagreement with this analogy, clarifying that users are free to use alternate repertoire (reinforcing the mandatory tariff theory).

Knopf conceded an earlier argument by Bouchard—that tariffs are in fact regulations—but tempered the concession by adding that parliament is capable of adding explicit provisions to make such tariffs mandatory. In the absence of such language, tariffs as regulations still need not be mandatory.

Conclusion

In light of the disagreement between the panelists on whether the mandatory tariff ‘Spectre’ had been debunked, the panel illuminated the difficulty presented by Glushko:  If we cannot agree on the very nature of tariffs, it makes it difficult for both users and CMOs alike to predict the implications of SODRAC’s decision. And, with CMOs acting as representation for authors (and owners), and users often being authors themselves, it is hard to find where the SODRAC majority decision falls with regard to the Act’s role as balancer of the public interest and obtaining a just reward for the creator. Does it tilt in favour of the public interest, giving more transactional freedom to users and authors, and accordingly encourage dissemination of new works? Or, does it inject more uncertainty and place greater barriers to the just reward of creators? One thing is certain: the issue made for a fascinating and passionate panel.

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