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Budget 2017: Why Canada’s Digital Policy Future Is Up For Grabs

Michael Geist Law RSS Feed - Wed, 2017/03/22 - 18:02

Canadian Finance Minister Bill Morneau released his government’s 2017 budget today and while the spending promises may be underwhelming for some, the documents sets out an ambitious agenda for digital policy review. In fact, with changes to copyright, patent, broadcast, telecom, net neutrality, digital taxes, fintech, Canadian media, and Cancon all under consideration, the coming year will have enormous implications for the future of Canada’s digital policies.

The budget does include several spending promises, including $13.2 million over five years to support an affordable Internet access program, $50 million for kids coding programs, $29.5 million over five years for digital literacy, and $14.9 million for digitization of Indigenous language and materials. There is also new money for the growth of artificial intelligence sector and the much-anticipated revamping of innovation funding programs.

Yet the biggest digital implications may ultimately come from the policy reforms. First up may be new digital sales taxes. The budget includes a commitment to extend sales taxes to ride sharing companies such as Uber, a move that seems likely to ultimately lead to a broader extension of sales taxes to digital services such as Netflix.

A review of the Copyright Act was already planned for November 2017 as required by the law. However, the government is throwing open an even bigger review of intellectual property laws as it seeks to develop a new IP strategy:

In recognition of the importance of a well-functioning intellectual property regime, Budget 2017 announces the Government will develop a new intellectual property strategy over the coming year. The strategy will help ensure that Canada’s intellectual property regime is modern and robust and supports Canadian innovations in the 21st century.

Canada already meets international standards on IP and has some one of the world’s toughest anti-piracy measures. As I noted earlier today, what has been missing are rules to better support innovation and the need for Innovation, Science and Economic Development Minister Navdeep Bains to assume the policy lead on the issue. The review and strategy exercise offers the chance to adopt fair use rules that have been critical for innovative economies such as the United States, Israel, South Korea, and Singapore. When coupled with the restrictive digital lock rules that suffer from narrowly interpreted exceptions, the Canadian copyright law environment is supportive of cracking down on infringement but lacks the flexibility needed for new creativity and innovation.

The review of Cancon in a digital world conducted by Canadian Heritage Minister Melanie Joly also makes its way into the budget with a promise for policy reforms that could dramatically alter the Internet in Canada. The budget places all the big issues up for grabs:

To ensure that Canadians continue to benefit from an open and innovative Internet, the Government proposes to review and modernize the Broadcasting Act and Telecommunications Act. In this review, the Government will look to examine issues such as telecommunications and content creation in the digital age, net neutrality and cultural diversity, and how to strengthen the future of Canadian media and Canadian content creation. Further details on the review will be announced in the coming months.

This guarantees that the major policy fights of the past year will continue into the next, with some viewing this as an opportunity for an ISP or Netflix tax, reform to net neutrality rules that prioritize Canadian content, new Internet regulations as the Internet is folded into broadcast regulation (as opposed to bringing broadcast into the Internet to better reflect what is actually happening), a reshaping of how telecom and broadcast are regulated in the Internet age, and new schemes to support mainstream media. I’ve written a lot about these issues in recent weeks:

Budget 2017 leaves no doubt that digital policy will be a major issue in the coming year (a consultation on fintech retail payments followed by regulation is also promised).  When twinned with the digital policy implications of the NAFTA renegotiation, Canada’s digital policy future will hang in the balance.

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How Navdeep Bains Can Get His #Innovation Groove Back

Michael Geist Law RSS Feed - Wed, 2017/03/22 - 10:06

The release of today’s federal budget is expected to include a significant emphasis on innovation, with the government revealing how it plans to spend (or re-allocate) hundreds of millions of dollars that is intended to support innovation. Canada’s dismal innovation record needs attention, but spending our way to a more innovative economy is unlikely to yield the desired results. While Navdeep Bains, the Innovation, Science and Economic Development Minister, has talked for months about the importance of innovation, Toronto Star columnist Paul Wells today delivers a cutting but accurate assessment of those efforts:

This government is the first with a minister for innovation! He’s Navdeep Bains. He frequently posts photos of his meetings on Twitter, with the hashtag “#innovation.” That’s how you know there is innovation going on. A year and a half after he became the minister for #innovation, it’s not clear what Bains’s plans are. It’s pretty clear that within the government he has less than complete control over #innovation. There’s an advisory council on economic growth, chaired by the McKinsey guru Dominic Barton, which periodically reports to the government urging more #innovation.

There’s a science advisory panel, chaired by former University of Toronto president David Naylor, that delivered a report to Science Minister Kirsty Duncan more than three months ago. That report has vanished. One presumes that’s because it offered some advice. Whatever Bains proposes, it will have company.

Wells is right. Bains has been very visible with plenty of meetings and public photo shoots but no obvious innovation policy direction. This represents a missed opportunity since Bains has plenty of policy tools at his disposal that could advance Canada’s innovation framework without focusing on government spending.

For example, Canada’s communications system – wireless and broadband Internet access – falls directly within his portfolio and is crucial for both business and consumers. Yet Bains has been largely missing in action on the file. He gave approval for the Bell – MTS merger that virtually everyone concedes will increase prices in the province and make the communications market less competitive. There are potential policy measures that could bring new competitors into the market (MVNOs and municipal broadband) and that could make it easier for consumers to switch providers (ban on unlocking devices). Some of this falls to the CRTC, but government direction and emphasis would make a difference.

Even more troubling has been his near total invisibility on issues relating to new fees or taxes on Internet access and digital services. Canadian Heritage Minister Melanie Joly has taken control of the issue with the possibility that Canadians could face increased costs for their Internet access or digital services through mandatory fees to contribute to Canadian content.  Leaving aside the policy objections to such an approach (reducing affordable access and the fact that foreign sources now contribute more toward Canadian English language TV production than Canadian broadcasters and distributors), Internet access and e-commerce are supposed to be Bains’ issue and they have a direct connection to the innovation file. How is it possible for the Innovation, Science and Economic Development Minister to have remained silent for months on the issue?

Bains has been largely missing on trade related innovation issues as well. My Globe and Mail column today focuses on a digital-era NAFTA, pointing to likely U.S. demands on data localization, data transfers, e-commerce rules, and net neutrality.  These are all issues that fall under Bains’ portfolio and will impact investment in Canadian networks and digital services. There are innovation opportunities for Canada here, but Bains has been content to leave the policy issues to others, who will be willing to sacrifice potential gains in those areas.

Intellectual property policy is yet another area that falls directly under Bains’ mandate with an obvious link to innovation, but he has done little on the file. Canada won a huge NAFTA victory late last week involving the Canadian patent system, which was challenged by pharmaceutical giant Eli Lilly. Why has Bains not promoted the decision as an affirmation of how Canada’s intellectual property rules?

On the copyright front, the government is scheduled to conduct a review of the Copyright Act later this year, but it is not clear whether Bains will take the lead or again cede responsibility to Joly. The Copyright Act is statutorily under the Industry Minister and reform offers the chance to kickstart innovation. For example, Canada could adopt fair use rules that have been critical for innovative economies such as the United States, Israel, South Korea, and Singapore. When coupled with the restrictive digital lock rules that suffer from narrowly interpreted exceptions, the Canadian copyright law environment is supportive of cracking down on infringement but lacks the flexibility needed for new creativity and innovation. This represents an enormous opportunity for Bains to create a policy framework that supports innovation without new taxes or public expenditures.

There are no shortage of other opportunities that fall within the ISED mandate: leveraging government-funded research with open access policies, improving open data, and addressing cyber-security opportunities among them. In fact, many of these issues were included in Bains’ mandate letter.  Nearly 18 months after the release of that letter, Canadians are still waiting for the promised “real change”.

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Panel Rejects Eli Lilly Claim Over Canadian Patent Law, Orders Company to Pay Millions in Costs

Michael Geist Law RSS Feed - Tue, 2017/03/21 - 08:05

In the early 1990s, Eli Lilly applied for patent protection in Canada for two chemical compounds, olanzapine and atomoxetine. The company had already obtained patents over the compounds, but asserted that it had evidence to support new uses for the compounds that merited further protection. The Canadian patent office granted the patents based on the content in the applications, but they remained subject to challenge.

Both patents ultimately were challenged on the grounds that there was insufficient evidence at the time of the applications to support the company’s claims. The Federal Court of Canada agreed, invalidating both patents. Eli Lilly proceeded to appeal the decision to the Federal Court of Appeal and later to the Supreme Court of Canada. The company lost the appeals, as the courts upheld the decision to invalidate the patents.

Under most circumstances, that would conclude the legal story as several Canadian courts reviewed Eli Lilly’s patent applications and ruled that they failed to meet the standards for patentability. Yet in June 2013, the company served notice that it planned to use the ISDS provisions in the North American Free Trade Agreement to claim that in light of the decisions, Canada was not compliant with its patent law obligations under the treaty. As compensation, Eli Lilly sought at least $500 million in damages.

The fear for many was that if the pharmaceutical giant succeeded, it would have effectively found a mechanism to override the Supreme Court of Canada and hold Canadian taxpayers liable for hundreds of millions in damages in the process. Last week, however, the Tribunal hearing the case rendered its verdict, rejecting Eli Lilly’s claims and ordering it to pay millions of dollars to compensate the Canadian government for its costs.

There are several key takeaways from the decision. First, the Tribunal emphasized that overruling national courts should only occur in exceptional circumstances. The potential for any such cases will still be a cause for concern, but the standard it set is quite high:

the Tribunal emphasizes that a NAFTA Chapter Eleven tribunal is not an appellate tier in respect of the decisions of the national judiciary. It is not the task of a NAFTA Chapter Eleven tribunal to review the findings of national courts and considerable deference is to be accorded to the conduct and decisions of such courts. It will accordingly only be in very exceptional circumstances, in which there is clear evidence of egregious and shocking conduct, that it will be appropriate for a NAFTA Chapter Eleven tribunal to assess such conduct against the obligations of the respondent State under NAFTA Article 1105(1).

On the substance of the case, the Tribunal found that Eli Lilly did not demonstrate a fundamental change to Canadian patent law that might trigger a NAFTA claim:

For all of the reasons in subsections (1) to (5) above, the Tribunal finds that, on the record in this arbitration, Claimant has not demonstrated a fundamental or dramatic change in Canadian patent law. For the interrelated reasons in subsection (6) above, the Tribunal finds that Claimant has not demonstrated, as a factual matter, that its legitimate expectations were violated by the application of Canadian patent law to the Zyprexa and Strattera Patents.

The reasons behind the conclusion include a finding that Canadian patent law did not change dramatically as the courts addressed questions of patent utility:

the Tribunal recognizes that the outcome in AZT was unexpected for some practitioners and even judges who had understood the language of the Court of Appeal in Ciba-Geigy to mean that utility could be demonstrated through post-filing evidence (most notably commercial success). Still, having considered all of the evidence, the Tribunal cannot conclude that the Supreme Court effected a dramatic change from previously well established law when it clarified this rule in AZT.

Further, the statistical data raised by Eli Lilly on invalidating patents was not persuasive (indeed, the Tribunal was troubled by what appeared to be cherry-picking of dates to try to make their case):

Without having been presented with any strong indication toward a single factor, the Tribunal considers it most likely that a combination of developments, including those in patent litigation procedures, the application of substantive patent law, and the pharmaceutical sector, has led to a rise in challenges directed at pharmaceutical patents and more invalidations.

Interestingly, the Special 301 process, which I wrote about earlier this month, made it into the decision as Eli Lilly used it to argue that Canada was out-of-step with international IP standards. The Canadian government response will be familiar:

Respondent challenges the reliability of the 2014 and 2015 editions of the USTR Special 301 Report cited by Claimant, in which the United States expresses “serious concerns” over Canada’s utility requirement. 403 According to Respondent, “the Special 301 Report is based not on empirical evidence and analysis, but on industry allegations made to USTR, including representations made by the Claimant and its industry associations”. In addition, these reports were not issued contemporaneously with the changes in the law that Claimant alleges, but rather at the time of the commencement of this arbitration. Thus, Respondent supposes that the reports were the result of Claimant’s own lobbying efforts to bolster its claims in this arbitration.

The Tribunal was not completely dismissive of the Special 301 Report, but instead concluded that it was an outlier given that there was no other evidence of complaints from other countries:

The Tribunal has paid particular attention to the 2014 and 2015 editions of the Special 301 Report of the USTR. In these documents, USTR notes that the United States “has serious concerns about the lack of clarity and the impact of the heightened utility requirements for patents that Canadian courts have applied recently”. This comment cannot be dismissed outright as a lobbying effort by Claimant, as suggested by Respondent. However, the Special 301 Report stands alone in the record as a complaint regarding Canada’s utility doctrine from any other State, including Mexico, in the decade since the promise utility doctrine was allegedly adopted. For the Tribunal, that silence speaks louder than the single, brief criticism contained in the USTR’s Special 301 Report.

The Tribunal decision represents an enormous win for the Canadian government and for the supremacy of Canadian law and the judicial system more broadly. The real fears that dispute settlement could be used to override Supreme Court of Canada decisions lies at the heart of concern with ISDS provisions that have found their way into trade agreements such as CETA and the TPP.

While Eli Lilly failed in its efforts to use the dispute settlement system to extract hundreds of millions from Canadian taxpayers, the dangers of the system remain a reality. The Canadian government tried to address some of the concerns with the reworked provisions in CETA (rules that are not mirrored in TPP), but as new trade deals are negotiated or renegotiated, should rethink the need for investor-state dispute settlement provisions in agreements with countries with respected court systems that offer investors sufficient protections and reliable legal recourse.

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Scare Tactics Down Under: The Ongoing Global Effort to Mislead on Canadian Copyright

Michael Geist Law RSS Feed - Mon, 2017/03/20 - 10:16

Last month, I traveled to Australia and New Zealand as part of a group of experts to discuss copyright fair use and fair dealing. The trip included several public talks, meetings with government officials, a book launch on Reimagining Copyright, and the chance to discuss copyright policy directly with publishers, educators, and librarians. Videos of some of the panels are available online, including a New Zealand forum on copyright and innovation and a panel on comparative copyright limitations and exceptions at the Australian Digital Alliance annual conference.

Among the most notable aspects of the trip was the revelation of efforts by publishers and copyright collectives to mislead policy makers on the state of copyright law in Canada. While not everyone is buying it – this keynote from the Australian Productivity Commission’s Deputy Chair Karen Chester was a mic drop moment that eviscerated the publisher arguments against fair use – the efforts to mislead on the impact of Canadian copyright reform was unmistakable. For example, at one event with many publishers in the audience, I was approached by one representative who told me she was embarrassed by what her company had submitted to the Australian policy process after learning about the reality of the situation in Canada. Similarly, another Australian publisher executive who had spent years with one of Canada’s largest educational publishers, openly acknowledged that fair use and fair dealing had little to do with the challenges faced by the industry.

During many of the talks and the discussions that followed, it was striking how few people were aware that paid access remains the primary source of materials in Canada, that educational copyright policies in Canada were primarily a function of court decisions not copyright reform (the emphasis on fair dealing came before the 2012 reforms), that global publishers were reporting marketplace challenges that have nothing to do with copyright, that Canadian publishers that supposedly stopped publishing were still in business, that court affidavits from Canadian publishers focus on many concerns other than copyright, and that a study from one Canadian publisher association highlighted issues such as open access and used book sales.

Notwithstanding the facts, the scare tactics will no doubt continue. Last week, the International Authors Forum put out a release that inaccurately claimed that Canadian educational policies were based on a “one word expansion” of fair dealing and tried to link Concordia’s copyright error with fair dealing despite the fact that everyone agreed it was infringement and the university has a collective licence. These efforts make it crucial that government pursue balanced policies based on fact, not fiction. In Australia, that should mean adoption of a fair use provision after years of debate and multiple independent studies confirming its value. In Canada, the 2017 review process should focus on issues such as notice-and-notice reform, Copyright Board changes, restrictive digital lock rules and fixing the fair dealing gap, and the removal of unnecessary barriers to innovation and copyright fairness by shifting from fair dealing to a fair use approach.

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The Netflix Effect?: Foreign Sources Outspend Canadian Broadcasters and Distributors for English TV Production

Michael Geist Law RSS Feed - Thu, 2017/03/16 - 09:15

The Canadian Media Producers Association recently released its annual report on the state of screen-based media production in Canada. Despite the doomsayers who fear that the emergence of Netflix will result in less money for production in Canada, the report confirms that financing of Canadian television production continues to grow, reaching its highest point in the last five years. With $2.6 billion spent on Canadian television production, the sector remains healthy with support from licensing fees, tax credits and funding from a variety of sources.

More notable, however, is the growth of English-language Canadian television production, which has been backed with a major increase of foreign funding over the past three years. Foreign financing of Canadian English-language television production hit $335 million, which now exceeds all other sources of funding, with the exception of the combination of all provincial tax credits (both represent 18% of total financing). In other words, foreign financing now contributes more toward English-language television production than the licensing fees paid by private or public broadcasters, federal tax credits, Canadian distributors, and the Canadian Media Fund.

As recently as 2013-14, foreign funding represented 10% of total financing ($187 million), far less than Canadian distributors and roughly the same as the Canadian Media Fund. No longer.  In 2014-15, foreign financing jumped by $100 million (to 16% of total funding) and added another $46 million in 2015-16 (to climb to 18% of total funding). By comparison, financing from Canadian distributors and the Canada Media Fund have remained flat with both now easily exceeded by foreign support.

CMPA Profile 2016, Page 55, http://www.cmpa.ca/sites/default/files/documents/industry-information/profile/Profile%202016%20EN.pdf

When viewed by genre, the importance of foreign funding for fictional programming becomes even more apparent. Foreign financing is easily the top source of financing for fictional English-language television programming, now comprising 22% of all funding.  By comparison, private broadcasters contribute only 7% of financing for fiction.

The CMPA does not break down the source of foreign funding (its sources for the numbers come from CAVCO and the CMF), but it is worth noting that Netflix began investing in original television production in 2013 and significantly ramped up its investment in 2015. The timing of Netflix investment coincides with the sharp Canadian growth in foreign spending. In fact, Netflix says that Canada ranks as one of the top three locations worldwide for its commissioned original productions. Last year, I blogged that given that the company spends billions each year on content, the spending in Canada is likely larger than all but a handful of regulated sources (the Netflix submission provides a full sense of the scope of its support for Canadian content).

The precise amount of Netflix spending in the Canadian market remains unknown, but the CMPA’s own data calls into question demands for regulations for over-the-top video providers. The data suggests that Canada has created a world-class production environment that is capable of attracting significant investment without new regulation. With foreign financing growing faster than any other source of funding and comprising nearly one of every five dollars spent on English-language television production, the notion of cramming old policies into a new, successful marketplace would represent a step backward for Minister Joly’s vision of a confident, export-driven, future-focused Canadian cultural policy.

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Yes We Scan: Why Concordia Should Not Shelve Its Book Scanner

Michael Geist Law RSS Feed - Tue, 2017/03/14 - 09:07

The copyright mistake at Concordia – a poetry centre scanned several books and posted them on the Internet without permission – has attracted considerable attention in the press and social media. Kate Taylor wrote a Globe and Mail column placing much of the blame at the feet of fair dealing, while I responded with a post yesterday that noted that no one claimed that the posting of the full-text books was permissible and that Concordia was an ill-advised target for fair dealing criticism given that it has a copyright collective licence with Copibec that compensates for copying on campus.

While the focus of the Taylor column and my response was on fair dealing and collective licensing, the Taylor column also included several references to the use of a scanner to digitize books. In particular, it concludes by stating that “Ottawa needs to plug that education loophole good before somebody tries to drive a $10,000 book scanner right through it.”

The inclusion of education as a fair dealing purpose is clearly not a loophole – fair dealing is a user’s right and adding education as a purpose in 2012 only marginally expanded it – but the inference that scanning books is an activity to be stopped requires a response. As I wrote last year, Canada has unveiled a modest digitization goal that calls for the digitization of 90 per cent of all published heritage dating from before 1917 along with 50 per cent of all monographs published before 1940 within ten years. It also hopes to cover all scientific journals published by Canadian universities before 2000, selected sound recordings, and all historical maps. The Canadian targets pale by comparison with other countries. For example, the Netherlands plans to digitize 90 per cent of all books published in that country by 2018 along with many newspapers and magazines that pre-date 1940.

Digitization initiatives often raise legal fears, but the experience in other countries demonstrate that the legal challenges are frequently overstated. For example, U.S. courts have ruled that massive digitization programs such as those undertaken by Google qualify as fair use. The Google Book Search initiative rightly distinguishes between the act of digitization or scanning (a data mining and non-consumptive use of the work that qualifies as fair use) and the making available of those works to the public. This means that millions of books can be freely digitized without fear of copyright infringement, though full access to the text is limited to public domain works (where the copyright has expired) and licensed materials where the copyright owner has granted permission. Partial access (often referred to as snippets) may be granted consistent with fair use.

Canadian law features fair dealing rather than fair use, but a similar approach could be adopted. It goes without saying that all public domain works – which could reasonably be estimated to include anything published before 1940 – could be digitized and made immediately accessible in full text. This appears to be part of what Concordia had in mind with respect to its poetry digitization plans. In addition to the materials that are almost certainly in the public domain, educational institutions, archivists, and the government could launch a crowdsourcing initiative where Canadians help identify additional public domain works of authors who died more than 50 years ago. This would include many books published in the 1940s, ’50s, and ’60s.  Those works could also be digitized and made accessible in full text without the need for permission or further licensing payments. Such efforts should be welcomed by supporters of Canadian culture as a way to breath new life into long-forgotten Canadian works and as a means of raising new awareness of Canadian history.

The situation for in-copyright works is more complicated and requires separate legal analysis for digitization of the works and the manner in which they are made available. The first part – digitizing or scanning the works by educational or research institutions – likely qualifies as fair dealing as it meets the research purpose (and therefore the 2012 reforms to fair dealing have little impact on the issue) and the six-factor fair dealing analysis would likely treat the act of digitizing for full text search purposes as more fair. It may involve a large amount of copying, but the other factors – including alternatives and effect on the work – would tend toward fairness. Enabling full-text searching for Canadian books would increase their “discoverability” without negatively affecting their commercial value. Indeed, it would likely increase their value.

The more challenging legal issue, however, would involve the public availability of the text of scanned or digitized books. Much like the Google Book Search approach, fair dealing and/or de minimis would likely permit a snippet of the work be made available without the need for further permission. For full text, authors would be entitled to specify how, if at all, their works should be accessible. This could involve licensing arrangements or strict limits on the amount of the scanned text that is publicly available. The digitization would create new opportunities for publishers and authors, while opening the door to heightened interest in Canadian works.

In the Concordia case, full-text of poetry books were briefly made available without permission, which would not qualify as fair dealing. However, the act of digitizing works already purchased by Canadian libraries for the purposes of full-text search is consistent with current law and if combined with the availability of full-text of public domain works and snippets of other books (or full-text with permission), would provide an enormous boost to Canadian culture where discoverability has emerged as one of the biggest barriers to commercial and cultural success.

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Who is on the Wrong Side?: Why the Copyright Mistake at Concordia Highlights the Problems with Collective Licensing

Michael Geist Law RSS Feed - Mon, 2017/03/13 - 09:38

Globe and Mail columnist Kate Taylor published an article on Friday titled Concordia University Caught on the Wrong Side of Copyright, which focused on a copyright violation at the Montreal-based university. While Taylor thinks that the Concordia incident demonstrates the problems with copyright and fair dealing (she writes “scofflaws in the universities have been egged on in Canada by the 2012 amendments to the Copyright Act that included a vaguely worded, broad-brush education exemption), a closer look suggests that the case actually says far more about the problems with collective licensing.

The issue at Concordia involved unauthorized scanning and online posting of several poetry books (I will have a follow-up post on the scanning issue). Once the publishers complained, the books were quickly removed. The director of the centre responsible for the posting acknowledged the error and indicated that he planned to purchase five copies of each book, which is equal to the number of graduate students who attend a weekly reading group. That would seem to be the end of the issue as no one suggests that the posting of the entire books were permitted or consistent with university policy, the issue was addressed immediately, and there was an attempt to compensate for the perceived losses.

But wait, argues Ms. Taylor. The case itself surely stems from the state of Canadian copyright law and therefore reforming the law would reduce the likelihood of future incidents. Taylor argues that the law is uncertain (with fair dealing for education described as a “loophole”) and that courts might decide on the appropriate limits “if publishers and writers weren’t too busy creating books to spend their days policing the Internet and too poor to lawyer up.”

Yet the law is not uncertain and the myriad of copyright cases in Canada involving education have all been launched by publishers and authors, often represented by copyright collectives such as Access Copyright and Copibec. Indeed, as I noted last month, the widely used fair dealing guidelines within education are based primarily on decisions from the Supreme Court of Canada, the Federal Court of Appeal, and the Copyright Board of Canada. Despite claims that fair dealing guidelines go beyond the law, the copyright collectives have lost every legal attempt to challenge them and the widely accepted interpretation of fair dealing. This is not a case of uncertainty nor one of publishers and writers shying away from legal action. Quite the opposite, in fact, as copyright collectives have frittered away millions of dollars in litigation costs that could have been allocated to publishers and authors.

But even leaving aside the arguments about fair dealing, Taylor’s decision to focus on Concordia is particularly ill-advised since the university has a copyright licence with Copibec, choosing to pay the collective hundreds of thousands of dollars every year. That is in addition to the massive investment it makes each year in paid access to thousands of content databases, including through membership in the Canadian Research Knowledge Network. In fact, Concordia has been a poster child for Copibec as the first Quebec institution to also use a service that involves additional transactional licences for publications not covered by the licence. In other words, this is not an example of confusion at the university involving the scope of fair dealing. If there is any confusion, it involves the scope of the licence from authors and publishers through their copyright collective since the university paid for the right to copy and distribute portions of the books to students.

Taylor surprisingly does not disclose the fact that Concordia pays for a copyright collective licence, but by raising the issue she succeeds in highlighting the real limits of collective licensing on campuses. Copyright collectives frequently suggest that their licence permits widespread copying, but the reality is that their licences are fairly narrow in scope. For years, university copying practices may even have exceeded those limits, but the collectives were happy to collect fees from every student enrolled in the institution and look the other way. Today, universities are far more conscious of respecting copyright, employing full-time copyright officers and providing extensive guidelines. While mistakes can obviously happen, university spending on licensed access to digital materials runs into the hundreds of millions of dollars annually, far outpacing declines in copyright collective revenues. Moreover, transactional licences (Copibec alone garners nearly $500,000 per year from pay-per-use licences) provides more compensated access alongside open access materials, fair dealing, and de minimis copying.

That the copying in this case involved several poetry books for five students is also relevant.  Poetry and other fictional works are often cited as the type of uncompensated copying that collective licences seek to address. The problem is that Access Copyright and Copibec want all students to pay annual copying fees, not just social science and arts students. That means collecting from students in the sciences, math, engineering, law, medicine, dentistry, and others who simply don’t copy these kinds of works. These disciplines represent millions of Canadian students, who access materials by purchasing books, using licensed databases, or reading works under open access licences. Yet copyright collectives would argue that all students should pay these fees, which under their earlier proposals could have run into the hundreds of dollars per student over the course of their education. That is not a case of “society paying for what it truly values”, but rather an instance of authors and publishers trying to force students to pay for materials they don’t even use.

Moreover, the involvement of works of poetry is notable since for years Canadian poets have been vocal about the need for greater transparency at Canadian copyright collectives. The League of Canadian Poets has called for formal audits of Access Copyright and expressed concern about how the millions generated by the collective are distributed. Those concerns remain relevant as the latest Access Copyright annual report shows that one in every four dollars it collects goes toward operational expenses rather than authors and publishers and for every dollar collected from foreign collectives, Access Copyright sends $2.50 out of the country.

Copyright mistakes, whether by authors, publishers or educators, will inevitably happen from time to time. Rather than demonstrating a link between a quickly corrected error and the state of the law, the Concordia incident actually shows that copyright collective licensing was never the panacea its advocates suggest. Instead, emerging alternatives offer a far better approach for all copyright stakeholders with a mix of paid access, open access, and fair dealing.

The post Who is on the Wrong Side?: Why the Copyright Mistake at Concordia Highlights the Problems with Collective Licensing appeared first on Michael Geist.

Freeland on the TPP: Taking the U.S. Out Changes a Delicately Balanced Deal

Michael Geist Law RSS Feed - Thu, 2017/03/09 - 10:10

The Trans Pacific Partnership effectively died with the election of U.S. President Donald Trump, who wasted no time in announcing that the U.S. would not move forward with the agreement. Since the TPP cannot legally take effect without U.S. ratification, the decision to withdraw effectively kills the deal. The remaining TPP countries will meet in Chile next week to discuss what comes next. In advance of that meeting, Foreign Affairs Minister Chrystia Freeland appeared before the Senate on Tuesday and was specifically asked by Senator Joseph Day about the possibility of trying to salvage the agreement.

Freeland’s response:

On the TPP, it’s important for people to understand that that agreement had a very specific architecture. The architecture of the TPP is such that it can only come into force if it is ratified by a minimum of six countries equal to a minimum of 85 per cent of the economic activity covered by the TPP countries. In practice, what that means is the TPP can only come into force if it is ratified by both the U.S. and Japan. So there can be no TPP without U.S. ratification.

It is absolutely the case that some sort of other combination of TPP interested countries could happen. Chile is convening a meeting of TPP countries next week, and Canada will be there. China has been invited and the U.S. has been invited also, so different combinations are being discussed.

But I do want to caution honourable senators from thinking that it would be as simple as just taking the United States out. These agreements are very delicately balanced deals, and everyone makes different concessions based on the concessions they’re getting. If the U.S., with its huge market, is taken out of that picture, then a new calculus would apply to everyone. So reconstituting the TPP11 would be a complicated thing to do.

While Freeland is no longer the Minister of International Trade, her response strikes at the heart of the issue.  The U.S. was an integral part of the TPP and the willingness of countries to compromise on key issues was a function of gaining access to the U.S. market. Without the U.S., the agreement as currently structured makes no sense. I made much the same argument earlier this year:

The need for U.S. and Japanese ratification for the TPP to take effect is no accident. For most of the countries in the TPP, access to those two markets were the reason they were willing to sign in the first place. For example, Canada came late to the TPP negotiations in part because it saw limited value in better access to markets such as Australia, Vietnam, Malaysia, and New Zealand. Trade with those countries is relatively minor and would not justify making significant policy concessions. The decision to join the negotiations was sparked by concern that preferential access to the U.S. would be undermined if Canada was left out of the TPP and by a desire to strike a trade agreement with Japan. Once Japan shifted its focus from bi-lateral discussions to the TPP, Canada pushed for inclusion in the deal. With the U.S. out, one of the foundational arguments for joining the TPP is gone.

Moreover, the TPP text reflects the power of the U.S. in the negotiations. For example, the extension of the term of copyright stems from  a U.S. demand, since many TPP countries have terms that mirror Canada’s life of the author plus 50 years. For Canada to move forward with an agreement that does not offer the benefits of better access to the U.S. market, cannot be enforced (since it cannot take effect), and which involves provisions of little interest to many other TPP members does not make sense.

Canada will attend the meeting in Chile next week, but no one should expect that a “TPP11” is the likely outcome.  Rather, the question is whether to go back to the drawing board with the same partners (less the U.S.) or start from scratch in a series of bi-lateral trade negotiations.  Either way, the TPP in its current form is dead and with Canada facing a significant challenge with the NAFTA renegotiation, it should not be working to revive it.

The post Freeland on the TPP: Taking the U.S. Out Changes a Delicately Balanced Deal appeared first on Michael Geist.

Canadian Government on U.S. Special 301: We Don’t Recognize Validity of Flawed Report

Michael Geist Law RSS Feed - Wed, 2017/03/08 - 11:46

The U.S. Trade Representative is conducting a hearing today on the Special 301 report, its annual list of countries it claims have inadequate intellectual property protections. Several countries will appear alongside many lobby groups. I’ve previously posted on how the report from the IIPA, which represents the movie, music, software and publishing industries, badly misstates Canadian law.  Indeed, with recent court decisions, Canada now has one of the toughest anti-piracy rules in the world.

I recently obtained documents under the Access to Information Act that confirm the Canadian government’s rejection of the Special 301 process.  Canada will not bother appearing today largely because it rejects the entire process. According to a memorandum drafted for Canadian Heritage Minister Melanie Joly after last years’ report:

The Government of Canada does not recognize the validity of the process as the findings tend to rely predominantly on allegations from U.S. industry stakeholders rather than on objective analysis.

Media lines go even further:

Canada does not recognize the validity of the Special 301 and considers the process and the Report to be flawed. The Report fails to employ a clear methodology and the findings tend to rely on industry allegations rather than empirical evidence and objective analysis.

The full ATIP document can be accessed here.

 

The post Canadian Government on U.S. Special 301: We Don’t Recognize Validity of Flawed Report appeared first on Michael Geist.

Why Canada is Now Home to Some of the Toughest Anti-Piracy Rules in the World…And What Should Come Next

Michael Geist Law RSS Feed - Tue, 2017/03/07 - 10:02

Canada last overhauled its copyright law in 2012, bringing to a conclusion more than a decade of failed bills and lobbying pressure. The public debate over the Copyright Modernization Act was often framed by disputed claims that Canada was weak on piracy, with critics arguing that updated laws were needed to crack down on copyright infringement. As the government prepares to conduct a statutorily-mandated review of the law later this year, the landscape has shifted dramatically with court cases and industry data confirming that Canada is now home to some of the toughest anti-piracy rules in the world.

My Globe and Mail column notes that the change in Canadian law is best exemplified by a ruling last week from the Federal Court of Canada involving the sale and distribution of “modchips”, which can be used to circumvent digital controls on video game consoles. Nintendo filed a lawsuit against a modchip retailer in 2016, arguing that the distribution of modchips violated the law, even without any evidence of actual copying.

The federal court agreed, pointing to the 2012 anti-circumvention rules that largely mirror legal restrictions on by-passing copy and access controls found in the United States in awarding $12.7 million in damages. The court adopted an aggressive approach in interpreting the digital lock provisions, while also taking a narrow view of exceptions that were designed to safeguard legitimate reasons to circumvent such as interoperability of computer programs. If followed by other courts, the ruling could similarly restrict the applicability of privacy, security research, and access for the blind exceptions found in the law.

The decision is the latest in a growing line of cases in which Canadian courts have used the law to shut down cutting-edge technologies that have both infringing and non-infringing uses. Last year, the federal court issued sweeping injunctions against multiple distributors of set-top boxes that turn standard televisions into “smart TVs” by enabling users to access a wide range of video content found online. This includes authorized content such as YouTube, Netflix or other online video providers, as well as unauthorized streaming services that offer access to unlicensed content.

Canadian copyright law has also been used to shut down websites whose primary purpose is to enable infringement with rights holders relying on a first-of-its-kind “enabler provision” contained in the 2012 reforms. The provision appears to have worked as the U.S. government’s most recent report on notorious online markets makes no reference to Canada. Moreover, the Business Software Alliance reports that Canada is at its lowest software piracy rate ever, well below global and European averages.

Canadians have also demonstrated a willingness to pay for content online. Netflix had not even entered the Canadian market when the bill that led to the 2012 reforms was introduced, but it has since enjoyed explosive growth in Canada with more than half of English-language households subscribing to the video service. SOCAN, Canada’s largest music copyright collective, recently reported a 460 per cent increase in earnings from Internet music streaming services. In fact, even in the education sector, where critics have expressed frustration with fair dealing rules, spending on licensed access to digital materials runs into the hundreds of millions of dollars annually, far outpacing declines in copyright collective revenues.

If anything, the experience of the past five years suggests that the two ministers responsible for copyright – Innovation, Science and Economic Development Minister Navdeep Bains and Canadian Heritage Minister Melanie Joly – should be working to  tweak the law to address concerns involving misuse and restrictions on innovation.

The notice-and-notice system deployed by copyright owners to alert Internet users of alleged infringements has been widely misused with the inclusion in email notices of demands for settlements that were never envisioned by policy makers. Long overdue regulations to crack down on misleading notices would be an obvious step to address the problem.

Further, the absence of fair use may hamstring innovation as it leaves Canadian companies at a disadvantage when compared with innovative, fair use-based economies such as the United States, Israel, South Korea, and Singapore. When coupled with the restrictive digital lock rules that suffer from narrowly interpreted exceptions, many may find the current Canadian copyright law environment supportive of cracking down on infringement but lacking the flexibility needed for new creativity and innovation.

The post Why Canada is Now Home to Some of the Toughest Anti-Piracy Rules in the World…And What Should Come Next appeared first on Michael Geist.

Canadian DMCA in Action: Court Awards Massive Damages in First Major Anti-Circumvention Copyright Ruling

Michael Geist Law RSS Feed - Fri, 2017/03/03 - 09:04

The Federal Court of Canada has issued a massive damage award in the first major Canadian digital lock copyright ruling involving circumvention of technological protection measures.  The ruling, which is the first to conduct an extensive examination of the anti-circumvention rules established in 2012, adopts expansive interpretations to the digital lock protections and narrow views of the exceptions. The case confirms that Canada has tough anti-piracy laws with one of the most aggressive digital lock laws in the world and will fuel calls to re-examine the effectiveness of the anti-circumvention exceptions in the 2017 copyright review.

The case stems from a lawsuit launched by video game maker Nintendo against Go Cyber Shopping, a modchip seller that operated a retail store in Waterloo, Ontario and several online stores. Go Cyber Shopping offered a wide range of products that allow users to circumvent the digital lock controls on the Nintendo gaming console (such as the Wii) and play unauthorized games including “homebrew” games.  Go Cyber Shopping argued that it provided other services but the court says that it did not tender any evidence in that regard.

The court concluded that the modchip seller engaged in copyright infringement and circumvented technological protection measures. In fact, it went out of its way to emphasize the importance of TPM protection. It adopted a broad interpretation of a technological protection measure – rejecting a UK case that used a narrower interpretation – in favour of an approach that covers access controls that go beyond restrictions on copying.  It states:

having regard to Parliament’s express intent to give copyright owners the power to control access to works, the principle of technological neutrality, the scheme of the Act, and the plain meaning of the definitions for TPM and “circumvent”, it is clear that access control TPMs do not need to employ any barrier to copying in order to be “effective”.

In other words, Canadian copyright law is no longer just about copying as the digital lock rules create legal rights to limit access even without any actual copying.

The court also resoundingly rejected defences to the circumvention claims, concluding that circumvention should also be broadly interpreted while adopting a restrictive approach to the anti-circumvention exceptions. For example, Go Cyber Shopping argued that its modchips allowed users to play “homebrew” games that are designed for use on Nintendo consoles but not owned or licensed by the game maker.  Canadian copyright law includes an exception for interoperability, which conceivably could be applied to such games.  However, the court rejected the argument, concluding that homebrew usage was dwarfed by infringing activity.

Of considerable concern is the court’s conclusion that the availability of a Nintendo-approved interoperability approach would be enough to eliminate the availability of the anti-circumvention interoperability exception.  The court stated:

the Applicant’s evidence establishes that there are legitimate paths for developers to develop software on its consoles without circumventing the Applicant’s TPMs. There is no need for any TPM circumvention to achieve interoperability

Much like fair dealing – which Canadian courts have ruled is still available even where a licence is available – the anti-circumvention exceptions should be available even if there are other mechanisms to address the concern. For example, there are currently anti-circumvention exceptions for access to materials for the visually impaired, to protect personal information, and for security research. Those exceptions should not be dismissed simply because there may alternate ways to safeguard privacy or conduct security research. Indeed, the use of circumvention may be a necessity given the possibility that companies could offer opportunities for third-party security research but subject to restrictions or conditions that limit the effectiveness of the research activity.

With the court clearly concluding that Go Cyber Shopping was a bad actor, it proceeded to lower the boom with massive damages.  It concluded that statutory damages can be applied to circumvention, ruling that the $20,000 maximum per infringement should be applied for a total of $11.7 million.  Moreover, it concluded that there was a need for further deterrence and it awarded another $1 million in punitive damages.

The case is a big win for Nintendo and an exceptionally aggressive application of the new anti-circumvention rules.  It leaves no doubt that Canada has one of the most restrictive and potentially punitive digital lock rules in the world, with the court adopting expansive interpretations to the digital lock protections and dangerously narrow views of the exceptions. The government emphasized that the digital lock exceptions would help maintain the copyright balance, but the court pays little regard for balance in the ruling. With the government set to conduct its review of the Copyright Act later this year, the decision reinforces that Canada already has some of the most powerful anti-piracy laws in the world and that the government must now work to address the ineffectiveness of the anti-circumvention exceptions, most notably by closing the fair dealing gap.

The post Canadian DMCA in Action: Court Awards Massive Damages in First Major Anti-Circumvention Copyright Ruling appeared first on Michael Geist.

six factors if necessary

Fair Duty by Meera Nair - Fri, 2017/02/24 - 12:58

But not necessarily six factors.

Below is some of the content I covered yesterday during a panel discussion Fair Dealing–Where do we go from here?  With the aim of simplifying the fairness analysis, I drew attention to some pre-CCH Canadian case law (see here and here).  My thanks to the University of Alberta for the opportunity to participate in the discussion.

Earlier this week, I mentioned Canada’s progress in developing a mutually respectful system of copyright, one that does more than pay lip-service to creativity. Fair dealing plays its part in this system of limited rights, as is necessary to maintain the goal and structure of copyright set some three hundred years ago. That fair dealing has become part and parcel of the legal landscape is perhaps best exemplified by remarks from a Federal court judge: “I don’t think this case is as profound as you and others made it out to be.”

Fair dealing is here to stay; students and teachers have every reason to make use of it.

However, it would be reasonable to say that there is still a great deal of timidity among educational institutions over actually using fair dealing.

The principal element of a decision of fair dealing is the contextual analysis to determine if a use is fair. This approach was set via CCH Canadian where the Court relied on six factors for analysis: (i) purpose of the dealing; (ii) character of the dealing; (iii) amount of the dealing; (iv) alternative to the work; (v) nature of the work; (vi) effect of the dealing on the work. These factors were included in fair dealing policies developed by national educational bodies and subsequently implemented at institutions across the country.

But therein lies a problem. While it is essential to remember that fairness is embedded in context, we have also to remember that the six factors cited are not sacrosanct. In CCH Canadian, the Supreme Court also emphasized that the framework of exploration must be malleable. That discussion of fair dealing is hailed as a progressive development because it struck down the 20th century tendency to see copyright, or exceptions thereto, in terms of mechanical rules to be applied without consideration of context. By simply adopting new rules, we risk that estimable gain of progressive development.

To be sure, rules carry some value in setting general guidelines for institutions as a whole. When fashioning policies for use of copyrighted works, the 10% / 1 chapter position of the prevailing policies is a reasonable starting point. If more is desired, then discussion with copyright personnel is the next step. Yet the larger goal should be to encourage thought with regard to any decision to copy. Fair dealing is not, and never should be, confined to the perspective of measure.

A challenge to such copyright literacy is the six-factor analysis. Intimating that teachers carry out such an expansive consideration risks evoking horror, even paralysis, in that audience. But that audience is well-positioned to grasp a more tailored analysis.

Fair dealing is not used purely to obtain reference materials; fair dealing also shows itself in the creative effort of developing learning resources. Such resources benefit from the inclusion of quotations, images, charts/tables etc. Inclusion of any one of these items may well be legitimate simply by virtue of being an insubstantial portion of a larger work; yet it is beneficial to engage in a fairness analysis. Particularly, as such cases lend themselves to a two-factor examination that everyone is capable of understanding and executing:

1. What is the purpose of using the copyrighted material?

Mere conventional thinking would tell us that the purpose is education, and education is one of the permissible categories of s.29 Fair Dealing. But a more precise answer pays dividends in terms of risk management. Teachers choosing to use particular materials should be clear (at least to themselves) as to how that content serves an educational objective. The answer need not be couched in pedagogical jargon, it could be as simple as it “illustrates a concept.” This modest exercise of thought sharpens focus on both the objective and the material, and (inadvertently perhaps) places a curb on the amount copied. Without resorting to stipulations of measure, such consideration encourages the teacher to use only what is needed, nothing more.

2. How is the material distributed?

We ought not to forget that teachers stand in the fair dealing shoes of their students. Hence, distribution should be in light of what is necessary to meet the needs of that finite group. Placing content in a secure, password-protected learning platform, or via handouts in class, serves that goal. Whereas posting content to a public website is not as confined in its reach. (I am not ruling out wider distribution such as placing a dissertation in an open-access institutional repository–more on that another day). In any case, if students were then to circulate the carefully curated material, there is no liability to the teacher or institution.

To those who are concerned at the seeming loss of four factors, they have not disappeared.  Rather, they are subsumed by the situational aspects of this type of copying. As noted above, the aspect of amount is implicit to considered thought regarding why a work (or portions thereof) is being copied. The question of alternative resources becomes less germane as the explicit language in Alberta v. Education rules out the implication that schools ought to purchase a copy of every conceivable work for every conceivable student. (And if the work copied is from institution-wide subscription resources, this factor becomes irrelevant.) The nature of the work tends to be published material, eminently suited to fair dealing. As to effect, the Supreme Court has emphasized that such dealings should not be read in the aggregate. And the Copyright Board has explicitly rejected the former dictum of anything worth copying is worth paying for (para 110 here and  para. 217 here).

To some that may sound harsh, but only until one realizes that the Board has not ruled out paying for copying when appropriate. The Board only rejected a century-old proposition which was inspired by the conduct of a rival publisher. The Board, like the Supreme Court, now emphasizes a holistic examination of any dispute.

On a different note; in 2016 I met an American lawyer who was–to put it plainly–in awe of Canada and our development of fair dealing. Three Supreme Court decisions, progressive amendments passed by government, two Copyright Board decisions, and fifteen years of considered dialogue led by legal scholars, practicing lawyers, university counsels and many, many librarians. In part wonderment, part frustration, she asked: “What are you waiting for?

 


The Copyright Lobby’s IIPA Report: Fake News About the State of Canadian Copyright

Michael Geist Law RSS Feed - Wed, 2017/02/22 - 11:25

The International Intellectual Property Alliance (IIPA), a lobby group that represents the major lobbying associations for music, movie, software, and book publishing in the United States, has released its submission to the U.S. government as part of the Special 301 process. The Special 301 process leads to an annual report invariably claiming that intellectual property rules in the majority of the world do not meet U.S. standards. The U.S. process has long been rejected by the Canadian government, which has consistently (and rightly) stated that the exercise produces little more than a lobbying document on behalf of U.S. industry. The Canadian position, as described to a House of Commons committee in 2007 (and repeated regularly in internal government documents):

In regard to the watch list, Canada does not recognize the 301 watch list process. It basically lacks reliable and objective analysis. It’s driven entirely by U.S. industry. We have repeatedly raised this issue of the lack of objective analysis in the 301 watch list process with our U.S. counterparts.

The lack of credibility stems in part from the annual IIPA submission. While the submission generates some media attention, this year’s falls squarely into the category of fake news. The IIPA focuses on three concerns: piracy rates in Canada, the notice-and-notice system for allegations of infringement, and fair dealing. None of the concerns withstand even mild scrutiny and each is addressed below.

1.    State of Canadian Piracy

Throughout the Canadian copyright reform process that led to the 2012 law, the IIPA and rights holder groups claimed that Canada was a piracy haven in need of copyright reform. Despite getting what it asked for – tough anti-circumvention rules similar to those found in the U.S., an ISP liability system, an enabler provision that makes it easy to target websites that primarily facilitate infringement, and retention of some of the biggest statutory damages for commercial infringement in the world – the IIPA has returned to the same playbook in advance of the review of Canadian copyright law scheduled for later this year.

The IIPA claims are presented without much evidence, presumably because it isn’t available. The real Canadian story is that infringement rates have consistently declined in recent years. For example, the Business Software Alliance’s annual report last showed Canada at its lowest software piracy rate ever and well below the global and European averages. The decline will not come as a surprise to anyone following the explosive growth of digital services in Canada. As many predicted, the availability of affordable, convenient services is easily the best method to counter infringement. In the case of Canada, Netflix is seemingly too popular for many in the cultural community as the millions of subscribers have transformed the sector and conclusively demonstrated that Canadian consumers are willing to pay for good entertainment services. The growth of these services is not limited to video. SOCAN, Canada’s largest music copyright collective, recently reported record earnings from Internet streaming services which increased by more than 460 percent (which followed from previous records) again confirming that Canadian consumers are paying for music online too.

But wait, says the IIPA. While it admits that Canadian law has been used to shut down piracy sites such as isoHunt and KickAss Torrents, it identifies a few other sites that it says have a Canadian connection. However, the IIPA neglects to mention that the U.S. government’s most recent report on notorious markets makes no reference to Canada. In fact, it identifies what it says are the most problematic online markets and sites in the world and the word “Canada” does not appear anywhere. More importantly, the IIPA acknowledges that the Canadian enabler provision has been effective in shutting down sites of this kind. The failure is not a function of Canadian law, but rather a failure of the IIPA and its members to use the very legal tools they demanded.

2.    Notice and Notice

The IIPA is also unhappy with Canada’s notice-and-notice system, which it says is inadequate, is not receiving full compliance from ISPs, and which hurts licensed services. As noted above, licensed services are experiencing record revenues and growth in Canada.  Further, there has been no public evidence that ISPs are not compliant with the law. It would be surprising if there was given that ISPs face financial penalties for failure to comply with the law.

With respect to whether the notice-and-notice system meets U.S. standards, it is worth noting that the U.S. government itself has acknowledged that it does. As part of the Trans Pacific Partnership treaty, the Canadian system was treated as equivalent to the U.S. system for the purposes of complying with ISP liability and safe harbour rules. All parties, including the U.S. and Canadian governments, asserted that no reforms would be needed in Canada to meet the TPP requirements. Moreover, promoting the U.S. system raises serious concerns, particularly since it is receiving increased scrutiny with reports that it generates millions of fake DMCA notices that have massively inflated claims of online infringement. In fact, Google has advised the Register of Copyrights that 99.95% of the processed URLs from Google’s trusted submitter program regarding search are machine-generated URLs that do not involve actual pages in the search index. In other words, the notice-and-takedown system is filled with fake notices and rife with abuse.

The Canadian notice-and-notice system needs amendment, but not for the reasons articulated by the IIPA. The Canadian government never intended for notice-and-notice to be used by rights holders to send thousands of settlement demands and scare recipients into paying settlements. The Canadian government’s own public documents make it clear that there is no obligation to settle and even the movie industry has established a website that tries to set the record straight. The misuse of the notice-and-notice system is the real story and one that requires reform when the government turns to copyright.  Notice-and-notice should not be used by rights holders to trick or scare users into paying hundreds of dollars for settlements as part of ethically questionable anti-piracy business tactics. Addressing the notice-and-notice loopholes in the system should be at the top of the 2017 reform list.

3.    Fair Dealing

The IIPA comments on Canada also focus on Canadian fair dealing law, as it points to the 2012 reforms and states “that none has had a more concrete and negative impact than the addition of the word ‘education’ to the list of purposes (such as research and private study) that qualify for the fair dealing exception.” Given that it is fair dealing/fair use week, it essentially to correct the record yet again.

i.    Fair Dealing Practices

First, the attempt to link fair dealing practices in Canada with the 2012 legislative reforms are false. Fair dealing includes multiple purposes that can be relied upon by educational institutions, including research and private study. The addition of education in 2012 was always evolutionary rather than revolutionary. Indeed, the proof is in the Supreme Court of Canada’s fair dealing copyright decisions, which ruled against Access Copyright without the benefit of an education fair dealing purpose.

The widely used fair dealing guidelines are based primarily on decisions from the Supreme Court of Canada, the Federal Court of Appeal, and the Copyright Board of Canada. Despite claims that fair dealing guidelines went beyond the law, Access Copyright has lost every legal attempt to challenge them. The courts and board have provided detailed guidance the scope of fair dealing, the appropriate test, and the applicability of insubstantial copying. Current practices have been influenced by what courts and tribunals have ruled, not what the government implemented in 2012. In fact, Canadian educators could rely far more on the 2012 reforms, including the use of Internet exception for education and the exception for non-commercial user generated content.

It is important to note that Canadian fair dealing practices are not inconsistent with many jurisdictions around the world. For example, the U.S. fair use provision is far broader than fair dealing with recent fair use decisions involving the legality of university copying, digitization practices, and use of APIs. Fair use can be found in other countries, some of which have practices that involve far more generous copying than Canada. For instance, copying 20% of a book is viewed as fair use in Israel, double the Canadian guideline. Most recently, the Australian Productivity Commission, a government-backed think-tank, recommended the adoption of fair use in that country.

ii.    The State of Canadian Educational Publishers

The IIPA repeats the oft-stated claim that Canadian educational publishers are struggling and seeks to draw a direct link to fair dealing. The claim is false. Publishers may be facing new challenges, but copyright is a minor part of the story as disclosed in their own corporate and legal filings. Pearson PLC, the world’s largest education company, recently warned of an unprecedented decline in the North American education publishing market. This primarily reflects U.S. developments and highlights how Canada is not an outlier in educational publishing.

Pearson is not alone. Ariel Katz has previously debunked claims regarding Oxford University Press, whose recent annual reports acknowledge changing market conditions around the world, with the company noting:

“the Higher Education textbook market shrank in important markets such as the UK, Canada, and the US, illustrating the contrasting array of market conditions to which OUP needed to adapt in 2014.”

Nelson Education is the largest Canadian educational publisher and its President and CEO Geoff Nordal identified the primary economic challenges in an affidavit:

In Canada, each province and territory has authority over curriculum development and education funding for the K-12 Market. Following a historic high in Canada in 2006 with respect to new curriculum development and spending, the K-12 Market contracted. The K-12 Market has been negatively affected by reduced spending on new curriculum by Canadian schools over the last five years, and in particular the spending decline in Ontario which represents the largest proportion of educational spending in Canada.

In the higher education market, Nordal focused on the following issues:

The Higher Education Market has been negatively affected by, among other things: a lack of clarity at universities with respect to ‘ancillary fees’; with certain institutions banning digital homework solutions with added fees; increased traction in the open textbook movement due in part to government funding in a number of provinces; and the use of used books, rental books and peer-to-peer sharing, impacting the demand for new textbooks at universities and colleges in Canada. The impact caused by used books and rental books is mitigated by revisions cycles and new textbook editions, the adoption of digital materials and increased use of custom and indigenous products. In addition, the Higher Education Market is in transition from traditional books to digital products, which is having a transformative effect on the business.

Nordal’s emphasis on reduced provincial spending (for K-12) and the digital shift (for higher education) is consistent with the data from other sources. The 2010 report on K-12 publishing commissioned by Canadian Heritage also pointed to the long pilot periods delaying purchasing decisions and the increased use of alternative and digital resources.

These findings are also consistent with a 2015 study prepared for Creative BC and the Association of Book Publishers of British Columbia. The study characterizes the challenge for educational publishing as follows:

Scholarly and educational publishers share some of the same issues as trade publishers, but they face other unique challenges. Tablet and other nonprint use will increase in the school systems here and abroad, changing how educational materials are bought, used and updated. Scholarly publishers and trade publishers that sell into the academic market are struggling with the impact on their sales of Open Access and fair use policies, tailored subscription services such as Scribd’s Edelweiss, used book sales, student piracy and increased library use for class reading lists.

None of this will surprise anyone on campuses or in schools in Canada. As the B.C. study on the publishing industry notes, open access and free online alternatives do represent a business threat to the conventional publishing industry. Several provinces have invested heavily in developing quality, peer-reviewed online materials that can be freely used by any school. For example, Open School BC, backed by the province, has modules in the sciences, social sciences, and languages. The B.C. Open Textbook Project has over 150 open textbooks that has saved students millions of dollars. E-learning Ontario has an online resource bank featuring thousands of resources from students from kindergarten to Grade 12.

Meanwhile, Canadian post-secondary institutions continue to spend hundreds of millions of dollars each year on licensing from publishers. As the Canadian Association of Research Libraries (CARL) noted at the start of this academic year:

The 31 member libraries of the Canadian Association of Research Libraries (CARL) spent $293 million on information resources in 2014-15, demonstrating a clear commitment to accessing print and digital content legally and rewarding content owners accordingly. Universities are actively engaged in outreach to their faculty, staff, and students, educating them on their rights and responsibilities under the Copyright Act and ensuring that uses of material under copyright fall well within the provisions of the law. Where educational uses are more substantive and therefore fall outside of fair dealing, the content is either purchased to be added to licensed collections, or rights clearances are obtained and royalties are paid for these uses. Trained, knowledgeable library staff support these activities.

The IIPA and its allies have engaged in a fake news effort to malign fair dealing in Canada. The actual numbers and evidence tell a far different story: paying for content remains by far the largest method of acquiring access to content for educational institutions. In fact, the spending from just the 31 CARL libraries on information resources are more than 14 times the total revenues for Access Copyright for all its licences.

The Future of Canadian Copyright Reform

The issue of copyright reform will unquestionably be on the policy radar screen starting later this year and continuing into 2018. Changes are needed: as discussed above, the government should address the misuse of notice-and-notice. With the Canadian recording industry now admitting that the WIPO Internet treaties were a wrong guess, the government should fix the fair dealing gap by creating a clear exception in the anti-circumvention rules for fair dealing.  Further, it should consider expanding fair dealing to a fair use model (by adding “such as” to the list of fair dealing purposes), which would be more consistent with the intent of the law and create the necessary pro-innovative policies that we see in places like the U.S., Singapore, and Israel. As the government moves forward with the review process, it will be essential that the debate focus on the real state of Canadian copyright, not the fictional one portrayed by the IIPA.

The post The Copyright Lobby’s IIPA Report: Fake News About the State of Canadian Copyright appeared first on Michael Geist.

Bogus Claims: Google Submission Points to Massive Fraud in Search Index Takedown Notices

Michael Geist Law RSS Feed - Wed, 2017/02/22 - 08:44

The U.S. DMCA notice-and-takedown system has generated heated debate for many years with supporters arguing that the safe harbour is essential, while rights holder critics countering that the growing number of takedown notices sent to Google illustrates mounting piracy concerns. In recent months, there have been several reports that raise questions about the reliability of takedown notices. A study released last year by the University of California, Berkeley and Columbia University found that approximately 30% of notices were questionable, while TorrentFreak report this week identified tens of millions of fake DMCA takedown notices sent to Google on a website with virtually no traffic. An earlier report also raised questions about dubious takedown practices.

Yet those reports pale in comparison to data just released by Google in its submission to the Register of Copyrights as part of the review of the DMCA notice-and-takedown system. Google reports that the overwhelming majority of takedown notices sent to Google Search through its Trusted Copyright Removal Program do not involve pages that are actually in its search index. The submission states:

a significant portion of the recent increases in DMCA submission volumes for Google Search stem from notices that appear to be duplicative, unnecessary, or mistaken. As we explained at the San Francisco Roundtable, a substantial number of takedown requests submitted to Google are for URLs that have never been in our search index, and therefore could never have appeared in our search results. For example, in January 2017, the most prolific submitter submitted notices that Google honored for 16,457,433 URLs. But on further inspection, 16,450,129 (99.97%) of those URLs were not in our search index in the first place. Nor is this problem limited to one submitter: in total, 99.95% of all URLs processed from our Trusted Copyright Removal Program in January 2017 were not in our index.

These numbers of simply staggering with only a tiny number of millions of requests reflecting actual pages in the search index. Rather, 99.95% of the processed URLs from Google’s trusted submitter program are machine-generated URLs that do not involve actual pages in the search index. Given that data, Google notes that claims that the large number of requests correlates to infringing content on the Internet is incorrect:

Nor is the large number of takedown requests to Google a good proxy even for the volume of infringing material available on the Internet. Many of these submissions appear to be generated by merely scrambling the words in a search query and appending that to a URL, so that each query makes a different URL that nonetheless leads to the same page of results.

The incredible volume of fake claims regarding allegedly infringing pages represents a serious problem. Indeed, the Google data points a massive fraud in search index takedown requests, calling into question claims about the scope of infringing material on the Internet. The Register of Copyrights review of the DMCA continues with written submissions on empirical research due next month.

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Bains Gives Bell-MTS Merger a Pass Despite Competition Bureau Finding Serious Wireless Market Problems

Michael Geist Law RSS Feed - Tue, 2017/02/21 - 10:12

The Canadian government has prioritized innovation as a marquee policy issue. There are  signals that Innovation, Science and Economic Development Minister Navdeep Bains will use the upcoming budget to overhaul the myriad of innovation funding and support programs that have cost billions of dollars with only a limited return on investment. There is no reason to doubt the commitment to innovation, but a national strategy must involve more than changes to how the government doles out cash incentives.

Yet when presented with the opportunity to address a core component of any serious innovation strategy – the communications sector that provides the foundation for the digital economy – Mr. Bains last week took a look at a market that the Competition Bureau found suffers from coordinated behaviour among the three dominant providers and simply whiffed. My Globe and Mail column notes that the decision to approve the merger of BCE and Manitoba Telecom Services (MTS) with only minor tinkering seems certain to increase wireless pricing for Manitoba residents and eliminate one of the few competitive bright spots in Canada.

The government’s news release on the merger approval attempted to shift attention toward the expansion of Xplornet into the Manitoba market as the satellite Internet provider picked up some wireless spectrum, six retail locations, and 24,700 MTS customers that were otherwise headed to Bell. Xplornet plans to use the assets to launch its own wireless service in the province.

Canadian consumers can be forgiven, however, for sensing that they have seen this movie before and knowing that it does not end well. The inability of smaller, wireless only entrants such as Public Mobile and Wind Mobile to create viable fourth competitors leaves little hope that Xplornet will do any better. Indeed, with the same challenges – the lack of bundled services, weak purchasing power for new devices, and threats from discount flanker brands deployed by the Big Three – a small new entrant will be no match for Bell, Telus and Rogers.

The Xplornet news distracted from the far more important findings of the Competition Bureau. Its analysis of the merger confirmed what critics of the wireless sector have long maintained, namely that markets with a strong fourth competitor feature better pricing than markets dominated by the big three. The Bureau, which had access to confidential internal company data, issued the following unambiguous conclusion:

“as a result of coordinated behaviour among Bell, TELUS and Rogers, mobile wireless prices in Canada are higher in regions where Bell, TELUS and Rogers do not face competition from a strong regional competitor. Conversely, the Bureau concluded that where Bell, TELUS and Rogers face competition from a strong regional competitor, prices are substantially lower. The Bureau concluded that the lower prices are caused by the presence of a strong regional competitor who can disrupt the effects of coordination among Bell, TELUS and Rogers.”

The Bureau’s findings represent a near-complete indictment of the current wireless competitive landscape in Canada. While the Big Three insist that they actively compete against each other, it found that they actually coordinate with each other in markets without a strong fourth competitor. It is the presence of a strong fourth player that disrupts that coordination and which helps explain why the companies engaged in a lobbying blitz against the potential entry of U.S. giant Verizon several years ago.

The Bureau gave the merger a pass by concluding that beefing up Telus’s presence in Manitoba and adding Xplornet would help offset the loss of MTS. But those assurances are difficult to square with the evidence on the competitive effects of a strong regional competitor.

The Conservative government was criticized for failing to fix Canada’s uncompetitive wireless market, but at least it recognized the problem and did not shy away from challenging the Big Three. By contrast, Mr. Bains was faced with a sure thing – higher wireless prices for consumers and a less competitive, innovative marketplace – and blinked. Unless there are some new pro-competitive policies on wireless yet to come, the approval of the BCE-MTS merger guarantees that the government’s innovation strategy will start with a weak foundation.

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fair dealing week 2017

Fair Duty by Meera Nair - Sun, 2017/02/19 - 22:23

Tomorrow marks the start of Fair Dealing Week in Canada. There is much to be proud of with the steady advance in the realm of exceptions, gained not by intemperate action but by deliberative thought on the part of the judiciary, the government, the Copyright Board, and, institutions and individuals across the country. A moment of celebration and pride is warranted.

Yet, significant challenges remain. Educational institutions continue to be a favorite target with copyright owners. Those who take aim at fair dealing lack a cogent argument grounded in either legality or economics, and so must rely on hyperbole. The picture painted is that educational institutions steal from an industry which is on its deathbed, to the detriment of those individuals who carry the very soul of the nation.

In the absence of informed discussion, emotion can masquerade as logical thought. With our sesquicentennial year upon us, the emotion index will likely exceed what hysteria we have already seen. Unfortunately, many Canadians (and their representatives in government) are unaware of the nuance of copyright, that it is a system of limited rights. This post is written with the hope of reaching some of those individuals.

For those who do not yet know what fair dealing means in an educational environment, have a look at Student Life without Fair Dealing. This presentation was created a few years ago by Annie Ludbrook of Ryerson University; it remains the best illustration of how necessary fair dealing is to learning, and takes only a minute or two to view.

And, if interested in a larger story, please see below.

“Millions of times a day copyright material is probably shared in this country.”[1]

That phrase stood out among the miscellany that a Sunday-morning excursion into Twitter had unearthed. Said by a Federal court judge, it was in reference to a dispute over unauthorized uses of material protected by copyright. This dispute (later resolved in favour of fair dealing) is only one of many skirmishes in an ongoing Great Battle in the realm of copyright. Ever since it became apparent that digital technology set on world-wide networks has considerable potential for distribution, copyright holders and copyright users alike have claimed those streams of sharing. To some, sharing represents a threat to the very production of creative material; to others, such sharing is creativity’s salvation.

But the contemporary clash of views is not the first Great Battle fought in the name of copyright. Matthew Arnold, renowned poet and social commentator of 19th century England, bestowed the title on a Royal Commission which probed the very structure of copyright as a grant of monopoly power and openly questioned its usefulness. Eventually, the outcome supported the continuance of copyright as it was designed and has functioned so ever since.

But a critical point has almost been lost to history; the decision was not unanimous. Ten of the fifteen commissioners attached dissenting opinions to the final report, dissatisfaction brewed even among the victors. One could say that the only element of absolute unanimity was the implicit boundary that circumscribed any assertion of copyright: copyright was a means to govern the conduct of players in the commercial book market.

Meaning, copyright was a trade regulation imposed on corporate entities. Yet by virtue of what will long be rued as a poor choice of vocabulary, today the language of copy suggests that copyright may privatise the intellectual and creative activity of individuals.

Copyright falls within a branch of law addressing what has come to be known as intellectual property, a phrase of equally dubious construction. We are told that Thomas Jefferson was the first to associate intellectual creation as property, a word expressly chosen in order to break with the English tradition of declaring such rights as monopolies (a practice of control that functioned to the detriment of the people in England).[2]

Ironically, three centuries later, intellectual property rights are just as capable of being harnessed towards monopolistic behavior. For instance, efforts by literary estates to curtail scholarly work,[3] a steep escalation of textbook costs,[4] and the thirty-year effort it took to reach an international agreement allowing some manner of adaption and distribution of copyrighted materials to aid visually-disabled people,[5] should disabuse anyone of the notion that copyright can do no harm.

A cogent argument for some control over intellectual creations does exist. It is reasonable that writers, artists, musicians, et al, should receive remuneration when their creations are exchanged in a professional marketplace. Many will agree that the likelihood of development of creative effort is heightened when there is assurance of some rights of control after creativity has been exercised. But perpetual furor over copyright eclipses a vital factor: that control is insufficient to bring about creativity.

Creative effort does not occur by the presence of rights alone. Creativity needs knowledge, awareness, skill, diligence, luck, fodder, and something else that lacks capture in a single word; loosely speaking, this indefinable element is a capacity to envision that which others may not. A confluence of all these elements might result in developments in art, music, literature, or science.

In this light, the creative process seems less and less the purview of law, and more and more some manner of alchemy, or worse. According to Voltaire: “One must be possessed of the Devil, to succeed in any of the arts.”[6] Alternatively, one constant theme regarding creative effort is to engage with other creative effort. William Faulkner’s advice: “Read, read, read. Read everything — trash, classics, good and bad …. You’ll absorb it. Then write.”[7] Or this declaration from Margaret Atwood: “The first thing I did when starting this project was to reread the play. Then I read it again. Then I got my hands on all the films of it that I could find, and watched them. Then I read the play again… then I read it again, backwards.”[8]

And yet, law dominates discussions of fostering creative effort. Likely because law is specific, law can be written down, law can be upheld, or, violated and then wielded as an instrument of retribution. Addressing the law meets a political goal—to show that something is being done. Three centuries ago, copyright law was created under the façade of supporting starving authors; that trope reappears as each development in media is cast as a threat to literary or other artistic endeavors. The refrain repeats: Dire consequences will lie ahead for society as a whole, unless something is done.

Today, the repercussions of amending copyright law far exceed the mandate of trade regulation. Technological development has brought us to a point where we live our private lives through copies. Unauthorized use is a vital step to creativity and needs protection.

Fair dealing is a very modest exception to the monopoly of copyright. A fair dealing of copyrighted work must not only fit within prescribed categories of use (education is among them) but must also survive a fairness analysis. The educational community takes its responsibilities seriously; no institution would sanction unrestrained copying as fair dealing. Yet this is the image presented by those who prefer to cast fair dealing as something to fear and something to blame.

Footnotes:

[1] Justice Barnes, quoted by Graham C. Gordon, Loonie Politics. 24 September 2016.

[2] The praecursor to copyright were the printing privileges bestowed upon guilds; the most powerful among them holding control over the printing of widely used classes of books such as catechisms, bibles, ABCs, and lawbooks. Philosopher John Locke condemned all monopolies as hoarding money and property to the detriment of the kingdom and was particularly incensed at the system which enabled booksellers to charge high prices for poorly produced books.

[3] A case of note was the unwillingness of James Joyce’s estate to recognize fair use in scholarly work; see Schloss v. Estate of James Joyce.

[4] For instance, “…new textbook prices increased by a total of 82 percent over [2002-2012],” see Students Have Greater Access to Textbook Information, U.S. Government Accountability Office. There does not appear to be comparable data for Canadian students, but as products are generally more expensive to purchase in Canada, it is unlike that the situation would be better on this side of the border.

[5] James Love, “A Treaty for the Blind?Fordham Intellectual Property, Media and Information Journal (2006), Vol. 22 Issue 12. See also Meera Nair, “Wonderful news from Marrakesh,” in FairDuty, 6 June 2013,

[6] Quoted in Nancy Mitford’s Voltaire in Love (London: Hamish Hamilton, 1957).

[7] “The Best Writing Tips From William Faulkner,” 25 September 2013, Huffington Post.

[8] Margaret Atwood, 24 September 2016, The Guardian.


The Shattered Mirror, Part Three: Why Income Tax Changes for Digital Advertising Won’t Save Local Media

Michael Geist Law RSS Feed - Fri, 2017/02/17 - 10:15

The third part of my critique of The Shattered Mirror: News, Democracy and Trust in the Digital Age, the Public Policy Forum’s report on the future of media, has taken longer than anticipated. In the interim, there have been some excellent posts on the report, including those from Andrew Potter, Dwayne Winseck, and Marc Edge. The first two parts of my review focused on the copyright and CBC/open licensing recommendations. This post discusses the report’s most significant financial recommendation: reforms to the Income Tax Act that would be designed to increase or capture digital advertising costs with Google and Facebook accompanied by a scheme to create a fund to support Canadian media.  The recommendation is similar – though not identical – to one floated by communications law veterans Peter Miller and David Keeble in a report commissioned by the Friends of Canadian Broadcasting (FCB).

At the heart of both reports is the recommendation that advertising purchased on foreign Internet-based media should not be tax deductible. The reports offer a tempting vision for those seeking a simple solution to the struggles of Canadian media organizations. Both posit that much of the problem lies largely with the dominance of Google and Facebook in the digital advertising market. According to the FCB report:

The reason is not a failure on the part of Canadian media to transition to the internet age, or to meet Canadians’ needs. The reason, adapting the well known trade term, is the ‘dumping’ of advertising inventory into the Canadian marketplace by foreign-based internet conglomerates, which do not contribute the same level of investment, jobs and Canadian content as Canadian media.

The FCB report proceeds to try to make the legal case that these services should not qualify for advertising deductions under Canadian law, going so far as to argue that even the Google Search page should be treated like a “program” within the context of constituting “broadcasting”.  According to the FCB report, these changes would dramatically change the Canadian media landscape:

For Canadian media, it could be the single greatest factor in reversing revenue declines and ensuring viability for Canadian local print, TV and radio operations – and their contributions to Canadian culture, news and democracy. Hundreds of millions of dollars could move back from foreign to Canadian owned-and-controlled media companies – stabilizing and growing their revenues, and allowing these companies to reverse job cuts and re-invest in Canadian content, including journalism.

Specifically, the suggested re-interpretation of the advertising tax deductibility provisions of the ITA would, we estimate, result in on the order of 50% – 80% of current internet advertising expenditures being deemed nondeductible. Conservatively estimating that 10% of these now non-deductible foreign internet advertising expenditures shift back to Canadian media, this would represent an influx of $250 to $450 million annually in incremental advertising revenue.

The Shattered Mirror also places great hope in the benefits of Income Tax Act reform, making it recommendation #1 and claiming that $300 to $400 million is at play.  Instead of hoping that advertising will gravitate to Canadian sources, however, it envisions a ten percent withholding tax on “non-qualifying media”, which would be determined based on meeting a test for either Canadian ownership or a significant Canadian media presence that includes tax payments and meeting minimum thresholds for producing “original civic function journalism aimed primarily at Canadian audiences.”  The report also recommends that the Canadian government only advertise on Canadian qualifying sites and that an exemption be created for small-scale advertisers. It estimates that the withholding tax would generate up to $400 million, which would be allocated toward a fund to support Canadian journalism.

While these reports purport to provide a much desired easy fix to the Canadian media world, the reality is unsurprisingly far more complicated. In the case of the FCB report, some of the legal arguments – Google Search and Facebook as broadcasts? – are very weak and would be unlikely to survive a court challenge.

Further, the hope that advertisers will move away from digital advertising by making it more expensive (as FCB envisions) misunderstands the very nature of advertising. Simply put, digital advertising is a function of the audience. Given that more and more people are shifting their viewing and media consumption habits from offline to digital, advertisers are unsurprisingly following their audience. A change in the tax code will not result in a shift to less effective advertising venues. Rather, it will simply make the digital advertising more expensive and leave Canadian business less competitive in the digital marketplace.

In fact, this slide from Mary Meeker, the well-known Internet analyst, provides a nice illustration of the close correlation between audience size and advertising. It suggests that these trends will continue, with newspaper advertising likely to continue its decline in favour of mobile based advertising.

Mary Meeker, KPCB Internet Trends 2016, pg. 45, http://www.kpcb.com/blog/2016-internet-trends-report

 

Even more problematic is how both reports miss the complexity associated with digital advertising.  First, a considerable portion of digital advertising with companies such as Google involves a revenue share between Google and the site where the advertising appears. In other words, the advertising often appears on the same Canadian sites that the reports want to support. That revenue initially goes to Google, which then sends the majority back to the site or media organization. For that form of advertising, Google is simply matching advertisers and websites, while collecting a commission for providing the service.  If advertising through the Google or Facebook network alone were enough to disqualify the advertising from tax deductibility, Canadian sites would be harmed in the process.

In cases where the advertising is on a foreign site – think YouTube – there may also be important Canadian connections. For example, the Globe and Mail posts videos on Youtube and generates a revenue share for the advertising that appears alongside the video. That is part of how Canadian media is trying to monetize its content, yet the policies in the reports would discourage such advertising by making it more expensive.  The problem with Canadian content on foreign sites also crops up for Canadian artists and smaller media organizations, who may similarly use foreign sites as important sources of distribution and advertising revenue.

The harm extends to Canadian businesses seeking to reach larger audiences through digital advertising. As Google points out, changing the Income Tax rules would ultimately make it more difficult for small and medium sized business to reach Canadian audiences since they could not easily use existing digital ad networks.

There is a reasonable debate to be had over the dominance of Google and Facebook in the digital advertising sector and over how to fund important investigative journalism. There are some good ideas out there including levying sales taxes on digital providers, opening the door to foundational support, and creating an investigative journalism fund similar to the court challenges program. However, cutting the flow of dollars to Internet giants – particularly where that money often boomerangs back to Canada – will do little to actually help Canadian media organizations seeking to attract digital ad dollars, Canadian artists searching for new revenues online, or Canadians businesses trying to grow through digital advertising.

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Why the Wireless Industry Fears Bill Transparency and Bans on Unlocking Fees

Michael Geist Law RSS Feed - Tue, 2017/02/14 - 10:53

The National Post has a story today on a research note written by Maher Yaghi, a telecom analyst, warning about the “regulatory risks” of the CRTC’s review of the wireless code. The article focuses on a single analyst, but there is a long tradition in Canada of the industry saying one thing to the regulator and another to the business community (see, for example, Bell’s position on investing in fibre networks) so the comments likely reflect industry concerns. What regulatory risks might arise from changes to the wireless code?

Yaghi cites two concerns that lay plain why the industry has been fighting potential changes. The issue is not, as some would have you believe, increased regulatory costs. Rather, the fear is that changes would create better informed consumers who would seek cheaper pricing and be freer to take advantage of marketplace competition.

Yaghi says the industry is concerned with “mandated bill segmentation”, which would require providers to separate the monthly service cost from the cost of devices. Once two-year contracts expire and the cost of the device is paid off, consumers would likely want to know why their monthly cost remains largely unchanged. Yaghi notes:

“In our view, bill segmentation would make the different charges more transparent to customers and would likely prompt them to look for cheaper (bring your own device) plans, which could pressure (average revenue per user) growth in the Canadian market.”

Yaghi says there is similar concern about the prospect of banning fees for unlocking phones.  The reason is that removing the fees – which bear little relation to actual cost or purported concerns about fraud – would make it easier to switch providers and reduce roaming costs:

“We believe the current policy reduces churn and increases customer stickiness, decreasing competition slightly. It also allows wireless operators to generate profits from international roaming for customers who are travelling.”

The acknowledgement that mandated bill segmentation would lead to better informed consumers able to get more competitive pricing and that unlocking fees reduces the benefits of competition provides the CRTC with validation that the reforms would be pro-consumer and should be implemented with the forthcoming changes to the wireless code.  Indeed, if the CRTC does not include the changes in the code, provincial governments should consider them as they work to update consumer protection laws for the digital marketplace.

 

The post Why the Wireless Industry Fears Bill Transparency and Bans on Unlocking Fees appeared first on Michael Geist.

Canadian Senate Report Emphasizes Need for Consultation, Transparency in Trade Talks

Michael Geist Law RSS Feed - Mon, 2017/02/13 - 10:18

Prime Minister Justin Trudeau meets U.S. President Donald Trump today with trade issues sure to be a key part of the agenda. With the TPP now dead and NAFTA headed to renegotiation, the arrival of a Trump administration has had a dramatic impact on Canadian trade policy.  Last November, I wrote a piece in the Globe and Mail arguing that Canada’s trade negotiation strategy needed to focus more on the how of trade negotiations than the who:

the how of negotiation may be more important than the who. The public backlash against trade deals points to a process that leaves many feeling excluded and to terms that are presented publicly for the first time as final. The real opportunity for Ottawa is not just to explore new trade partners but to challenge some of the long-standing assumptions about such deals in order to foster greater public confidence in the outcome.

The column continued by suggesting that the government “ensure that the same emphasis on transparency and public consultation that is emblematic of domestic policy development is mirrored in the trade file.”

Last week, the Standing Senate Committee on Foreign Affairs and International Trade issued a report on free trade agreements, which it described as “a tool for economic prosperity.”

The report was the result of months of hearings that included stakeholders from across the spectrum (I appeared in March 2016).  The final recommendations are particularly noteworthy since there is a strong emphasis on the need for public consultation, evidence-based policy, and greater transparency in Canadian trade negotiations.  They include:

Recommendation 1
That the Government of Canada engage more actively in activities aimed at increasing consultations with – and direct engagement of – Canadians on the importance of international trade and the relevance of trade agreements to Canada’s economic prosperity.

Recommendation 5
That the Government of Canada commission one or more independent evaluations of the effectiveness of the federal measures intended to mitigate the potentially adverse impacts of free trade agreements on Canadian workers, sectors and businesses. These evaluations should be used to enhance the effectiveness of such measures, and inform the development of future “free trade agreement implementation strategies.”

Recommendation 6
That the Government of Canada establish a formal consultation process when defining a negotiating mandate in relation to a particular free trade agreement. Consultations should continue throughout the negotiation process, provide timely updates and be open to all relevant stakeholders, including the public. As well, consultations should lead to the identification of measures to be included in a “free trade agreement implementation strategy.”

Recommendation 7
That, in order to enable parliamentarians to serve as effective legislators in relation to international trade agreements, the Government of Canada report throughout the negotiation process to the Standing Senate Committee on Foreign Affairs and International Trade, and the House of Commons Standing Committee on International Trade. Reports to these parliamentary committees should occur on a quarterly basis, and should provide information on negotiating mandates and progress made during negotiations. When required, sensitive information should be disclosed to these committees with strict adherence to in camera rules.

Recommendation 9
That, prior to the ratification of a free trade agreement, the Government of Canada publicly report the expected economic, labour, environmental, social and other outcomes in relation to that agreement. Moreover, five years after the ratification of such an agreement, the Government should commission one or more independent evaluations to analyze the agreement’s outcomes, and should table a report outlining these outcomes in both the Senate and the House of Commons. These reports should thoroughly describe the methodology used in the analysis, and clearly identify the agreement’s benefits and costs for Canada.

The full report is worth reviewing as it contains considerable discussion on the benefits of greater transparency in trade negotiations. The committee report notes:

The Committee’s witnesses stressed that comprehensive FTAs reach into areas of domestic regulation in a way that traditional trade agreements never did before. This trend can contribute to a perception that the freedom of governments to regulate in the public interest is diminishing. In such a context, the lack of transparency of trade negotiations risks contributing to a perception that trade deals are not necessarily negotiated for the public good. The Committee believes that a higher level of transparency is required during trade negotiations, particularly as modern FTAs increasingly involve areas of domestic regulation. Increased transparency in relation to trade negotiations could help to better inform Canadians about potential advantages while also providing for opportunities to consult Canadians and take into account their concerns throughout the negotiations.

With some additional comments on the need for future trade agreements to ensure that IP commitments are – to the greatest extent possible – consistent with Canada’s IP regime, the Senators were clearly attentive to the concerns raised by witnesses and have provided a useful road map for how Canada might proceed with future trade negotiations.

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Canadian Privacy in the Age of Trump

Michael Geist Law RSS Feed - Thu, 2017/02/09 - 11:11

Last night I appeared on TVO’s The Agenda with Steve Paikin to discuss privacy issues in light of the Trump Executive Order that eliminates Privacy Act protections for non-U.S. citizens or permanent residents. A video of the discussion is embedded below.

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