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Balsillie’s Call for Patent Troll Reform: RIM Co-Founder Pushes For Made-in-Canada IP Policies

Michael Geist Law RSS Feed - Fri, 2015/05/15 - 09:34

Research in Motion co-founder Jim Balsillie wrote a lengthy article on Canadian innovation policy last week that focused primarily on intellectual property policy. While the article would have benefited from some editing, Balsillie’s core argument is that Canada needs to do a better job of identifying and protecting domestic interests when it is developing intellectual property policy.

There is much to agree with in the Balsillie piece. For example, he rightly criticizes the 2012 Canadian copyright reform bill as primarily a response to U.S. pressure:

As a major creator and distributor of creative content, the United States has a great deal to gain from lobbying for rules making it illegal to enjoy American creative work without new licences. Canada recently passed the Copyright Modernization Act, which was created in response to U.S. government and corporate interests working in a sophisticated fashion to advance American interests at the expense of other countries, including our own.

Disturbing WikiLeaks cables from the 2005-2009 period show systemic and effective lobbying by U.S. officials, who pressured Canadian politicians to implement stricter copyright laws. Cables from 2006 show Canada’s industry minister promising the U.S. ambassador that final copyright legislation “would be in line” with American priorities. Another cable, from 2009, recounts a senior Industry Canada policy official asking a U.S. counterpart to put public pressure on Canada to create the needed justification to give Washington what it wanted.

Our policy-makers need a reminder that Canada’s interests are not served this way. Without a domestic innovation lobby that can vouch for the interests of Canadian ideas and creative content, Canadian politicians are inadvertently legislating in American interests.

There were many good aspects in the copyright bill, but the most contentious issue – legal protection for digital locks, better known as anti-circumvention rules – perfectly fits Balsillie’s description. Ironically, the recent decision to extend the term of copyright for sound recordings demonstrates that the same dynamic is still at play, since it is the major international record companies that lobbied for the change at the expense of Canadian consumers and small businesses.

Having endured a costly patent fight with NTP Inc. that cost RIM hundreds of millions of dollars, Balsillie unsurprisingly saves the bulk of his recommendations for patent reform. These include:

A judicial strategy is a critical place to start. Canada’s Federal Court could be given greater powers to combat unacceptable behaviour by domestic and foreign “patent trolls” – companies that do not make or sell a product but sue other companies for patent infringement based on existing patent rights the troll has secured. New legislation could allow for injunctions to prevent a troll from filing a U.S. lawsuit while Canada’s Federal Court rules on whether the Canadian company has infringed on an asserted patent. Trolls could be required to be much more specific about how the target company’s product infringes on the patent troll’s claim – right now they can send out threat letters with general claims of infringement – and they could face sanctions when they are found to be using bad-faith tactics. Canada’s Competition Bureau could be given the power to target anti-competitive activity.

There are some good ideas here. Yet the problem is that Canadian business leaders cautioned against these kinds of reforms when they were consulted on these issues just last year. As I reported last fall, Industry Canada conducted a consultation on patent troll issues with leaders from companies such as Blackberry, IBM, Bombardier, Microsoft, and Cisco. Balsillie was at the February 2014 meeting where Industry Minister James Moore stressed the government’s willingness to address patent troll concerns. In fact, the government provided a detailed discussion document that raised the possibility of implementing some of the toughest anti-patent troll reforms in the world. That sounds much like the Balsillie ask with government taking the lead on potential policy reforms and working with stakeholders to gauge their interest.

Despite the opportunity to give the green light to combat patent trolls, the Canadian business community urged caution. According an internal summary document on the discussions, Balsille indicated that he supported the intent of the patent troll reforms. But others were less supportive: the Canadian Chamber of Commerce expressed concern with the reforms, arguing that the measures could legislate against legitimate assertion of patent rights and that they could create a chilling effect, while Cisco warned that the reforms “could do more harm than good.”

The document included reforms that are virtually identical to the ones Balsillie mentions in his recent piece. For example, the government document identified potential changes that would grant the Federal Court the power to issue injunctions to stop patent trolls from forum shopping or amendments to the Competition Act to give the Competition Bureau the power to target anti-competitive activity by patent trolls. Moreover, Balsillie talks about new specificity requirements for patent troll demand letters, which the government also raised, noting the possibility of a new prohibition against demand letters that are intentionally ambiguous or designed to induce a settlement without considering the merits of the claim.

Balsillie efforts to raise awareness of intellectual property reform are well taken. However, the problem lies with the Canadian business community – many of whom are subsidiaries of larger U.S. multi-nationals – that were less than enthusiastic about much needed patent troll reforms when given the chance to act just last year.

The post Balsillie’s Call for Patent Troll Reform: RIM Co-Founder Pushes For Made-in-Canada IP Policies appeared first on Michael Geist.

No End in Sight: CISAC Calls for Another Canadian Copyright Term Extension

Michael Geist Law RSS Feed - Thu, 2015/05/14 - 10:26

I’ve written multiple posts on the government’s surprise decision to extend the term of copyright for sound recordings without public consultation or discussion (surprise, cost to consumers, limited competition, reduced access to Canadian heritage, lobbying impact). In recent days, a further implication has arisen: other groups are now demanding that the government extend other terms of copyright within the law.  If the government agrees to those demands, it would result in all works, including books and music, being locked out of the public domain for decades.

CISAC, the International Confederation of Societies of Authors and Composers, has publicly chastised the Canadian government for not also extending the term of copyright for authors to life plus 70 years. The current term of protection in Canada is life of the author plus an additional 50 years. That meets the standard found in international copyright treaties and is what is used in a wide of range of countries including Japan, New Zealand, China, South Africa. Indeed, the majority of people around the world live in systems with copyright protection of less than life plus 70 years.

The president of CISAC states:

“Authors in Canada still do not benefit from the same term of copyright protection as in most of the world, where protection for authors extends to 70 years after their death, while in Canada the term of protection for authors expires 50 years after the author’s death. This puts the whole community of creators in Canada, as well as foreigners seeking protection in Canada, at a major disadvantage. On behalf of CISAC and the four million creators represented by its members, I call upon the Canadian government to address this imbalance and immediately bring Canada’s law in line with the rest of the world.”

As noted above, it is simply wrong to stated that Canada’s law is not in line with the rest of the world. While the demands for yet another copyright term extension were predictable, the Canadian government should reject the opportunistic attempt to lock down copyright works for decades beyond the current term of protection.

The post No End in Sight: CISAC Calls for Another Canadian Copyright Term Extension appeared first on Michael Geist.

Why the CRTC Fell Short in Addressing Canada’s Wireless Woes

Michael Geist Law RSS Feed - Wed, 2015/05/13 - 09:10

The competitiveness of Canadian wireless services has been the source of an ongoing and contentious debate for years. Last week, Canada’s telecom regulator concluded that there is a competitiveness problem, yet in a decision surprisingly applauded by many groups, declined to use much of its regulatory toolkit to address the problem. Instead, it placed a big bet on the prospect of a smaller wireless carrier somehow emerging as a fourth national player.

My weekly technology law column (Toronto Star version, homepage version) notes that the Canadian Radio-television and Telecommunications Commission began investigating the wholesale wireless services market in 2013. The big three wireless companies – Bell, Rogers, and Telus – argued that the market was competitive and that no regulatory action was needed. By contrast, new entrants such as Wind Mobile called for regulated roaming rates so that they could offer viable national services with more affordable connectivity wherever their customers roam.

On the issue of competitiveness, the CRTC decision is damning: the big three maintain wholesale rates and the ability to impose terms and conditions that would not prevail if Canada had a competitive market. Given their market power, it concluded that regulation is needed and it will therefore establish a process for setting the wholesale roaming rate. That move should allow the new entrants to more affordably offer national service to their customers and turn them into more effective competitors.

While that was enough to generate supportive comments from Industry Minister James Moore, the new entrants, and some consumer groups, the reality is that the CRTC could have done far more to address the Canadian competitiveness problem. For example, smaller wireless companies had asked for “seamless roaming” to ensure that customers that move in and out of networks do not experience dropped calls. The Commission rejected the request, meaning that dropped calls will continue and will place the new entrants at a competitive disadvantage.

An even bigger disappointment was the CRTC’s decision to sidestep mandating access for mobile virtual network operators, or MVNOs. MVNOs typically do not own spectrum or network infrastructure. Instead, they purchase network access at wholesale rates from existing operators and offer it to consumers with their own retail pricing. MVNOs such as Canadian-owned Ting have become a hit in the United States but are not even available in Canada.

The CRTC acknowledged that MVNOs can help create a more competitive environment. Further, it determined that the big three possess market power for wholesale access for MVNOs.  In other words, they have the ability to charge uncompetitive rates or simply avoid selling to MVNOs altogether.

Yet despite the opportunity to inject more competition into the marketplace, the CRTC decided against mandating MVNO access, arguing that it might “discourage continued investment by wireless carriers, because they could rely on this access rather than investing in their own mobile wireless network infrastructure.”

Given the success stories in other countries, it is hard to believe that the commission still believes claims that MVNO access would discourage ongoing investment by wireless carriers who emphasize each quarter the scope of their investments and breadth of their spectrum holdings. With the MVNO market in Canada stuck on the sidelines, business analysts were quick to raise their ratings for the big three, noting that the CRTC ruling would likely keep new competitors out of Canada.

The CRTC decision smacks of the regulator asserting that it knows best what competition should look like, namely a fourth wireless player that offers an economically viable if somewhat inferior national service. That vision falls well short of a vibrant, competitive market with as many players and as many different services as possible. Further, it makes it likely that Canadian consumers will have marginally more choice in wireless services, but will be left looking with envy at other countries that feature a wider variety of business models and pricing options.

The post Why the CRTC Fell Short in Addressing Canada’s Wireless Woes appeared first on Michael Geist.

CRTC Falls Short on True Wireless Competition

Michael Geist Law RSS Feed - Wed, 2015/05/13 - 09:01

Appeared in the Toronto Star on May 9, 2015 as CRTC Falls Short on True Wireless Competition

The competitiveness of Canadian wireless services has been the source of an ongoing and contentious debate for years. Last week, Canada’s telecom regulator concluded that there is a competitiveness problem, yet in a decision surprisingly applauded by many groups, declined to use much of its regulatory toolkit to address the problem. Instead, it placed a big bet on the prospect of a smaller wireless carrier somehow emerging as a fourth national player.

The Canadian Radio-television and Telecommunications Commission began investigating the wholesale wireless services market in 2013. The big three wireless companies – Bell, Rogers, and Telus – argued that the market was competitive and that no regulatory action was needed. By contrast, new entrants such as Wind Mobile called for regulated roaming rates so that they could offer viable national services with more affordable connectivity wherever their customers roam.

On the issue of competitiveness, the CRTC decision is damning: the big three maintain wholesale rates and the ability to impose terms and conditions that would not prevail if Canada had a competitive market. Given their market power, it concluded that regulation is needed and it will therefore establish a process for setting the wholesale roaming rate. That move should allow the new entrants to more affordably offer national service to their customers and turn them into more effective competitors.

While that was enough to generate supportive comments from Industry Minister James Moore, the new entrants, and some consumer groups, the reality is that the CRTC could have done far more to address the Canadian competitiveness problem. For example, smaller wireless companies had asked for “seamless roaming” to ensure that customers that move in and out of networks do not experience dropped calls. The Commission rejected the request, meaning that dropped calls will continue and will place the new entrants at a competitive disadvantage.

An even bigger disappointment was the CRTC’s decision to sidestep mandating access for mobile virtual network operators, or MVNOs. MVNOs typically do not own spectrum or network infrastructure. Instead, they purchase network access at wholesale rates from existing operators and offer it to consumers with their own retail pricing. MVNOs such as Canadian-owned Ting have become a hit in the United States but are not even available in Canada.

The CRTC acknowledged that MVNOs can help create a more competitive environment. Further, it determined that the big three possess market power for wholesale access for MVNOs.  In other words, they have the ability to charge uncompetitive rates or simply avoid selling to MVNOs altogether.

Yet despite the opportunity to inject more competition into the marketplace, the CRTC decided against mandating MVNO access, arguing that it might “discourage continued investment by wireless carriers, because they could rely on this access rather than investing in their own mobile wireless network infrastructure.”

Given the success stories in other countries, it is hard to believe that the commission still believes claims that MVNO access would discourage ongoing investment by wireless carriers who emphasize each quarter the scope of their investments and breadth of their spectrum holdings. With the MVNO market in Canada stuck on the sidelines, business analysts were quick to raise their ratings for the big three, noting that the CRTC ruling would likely keep new competitors out of Canada.

The CRTC decision smacks of the regulator asserting that it knows best what competition should look like, namely a fourth wireless player that offers an economically viable if somewhat inferior national service. That vision falls well short of a vibrant, competitive market with as many players and as many different services as possible. Further, it makes it likely that Canadian consumers will have marginally more choice in wireless services, but will be left looking with envy at other countries that feature a wider variety of business models and pricing options.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can be reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

The post CRTC Falls Short on True Wireless Competition appeared first on Michael Geist.

CMRRA Confirms Denial of Licences for Public Domain Recordings

Michael Geist Law RSS Feed - Tue, 2015/05/12 - 10:09

CMRRA, the Canadian Musical Reproduction Rights Agency, recently wrote to the Toronto Star and the Hill Times to respond to one of my columns which focused on the lobbying and denial of licensing effort to stop cheaper public domain recordings from entering the Canadian market. The column reported that CMRRA had issued a “pay as you press” licence for the recordings to ensure that creators were paid for the works still in copyright. CMRRA was later ordered to stop issuing the licence.

CMRRA writes that the column’s statement that record labels ordered the denial of licences is “patently false”. Dig deeper into the letter and it becomes clear that CMRRA confirms that it denied the licence, but takes issue with the claim that it was record labels that ordered it to do so. In the case of the Beatles recordings, it was Sony/ATV, which is jointly owned by Sony and the Michael Jackson Estate that ordered the denial of licence. Sony also owns one of the world’s largest record labels.

Beyond the clarification that it was Sony/ATV, not Sony Music that issued the order, the CMRRA letter confirms the key points in the column.  First, it confirms that there was denial of licence as it states that it was instructed “to refrain from issuing licences for certain products that had either recently been, or were about to be, released in Canada”. Second, it confirms that the denial of licence results in less revenue for songwriters, noting “as for the copyright owners of the songs embodied in those master recordings – that is, the songwriters and/or music publishers – it is their own choice to refuse to grant such licences and forego any potential associated revenue.”

The post CMRRA Confirms Denial of Licences for Public Domain Recordings appeared first on Michael Geist.

Bitcoin faces a crossroads, needs an effective decision-making process

Freedom to Tinker - Mon, 2015/05/11 - 09:42
Joint post with Andrew Miller. Virtually unknown outside the Bitcoin community, a debate is raging about whether or not to increase the maximum size of Bitcoin blocks. Blocks are created in Bitcoin roughly once every ten minutes and are currently limited to a size of 1 megabyte, putting a limit on the rate at which […]

Sound of Silence: Why the Government’s Copyright Extension for Sound Recordings Will Reduce Access to Canada’s Musical Heritage

Michael Geist Law RSS Feed - Fri, 2015/05/08 - 08:25

The government yesterday tabled its budget implementation bill (Bill C-59), which includes provisions to extend the term of copyright for sound recordings and performances. The extension adds 20 years to the term (to 70 years). It also caps the term at 100 years after the first fixation of the sound recording or performance. The change is not retroactive, so sound recordings currently in the public domain will stay there. The government’s unexpected decision to extend the term of copyright for sound recordings and performances will not only cost consumers by reducing competition and stop cheaper, legal music alternatives from coming to the market – but it will also reduce access to Canada’s music heritage.

This is the inescapable conclusion based on studies elsewhere, which find that longer copyright terms discourage re-issuing older releases, which often means that the musical heritage is lost.  For example, Tim Brooks conducted a detailed study in 2005 on how copyright law affects reissues of historic recordings. He concluded that longer copyright terms significantly reduce public access. First, he examined the data in the United States, which at the time had the longest term of protection:

our analysis shows that rights-holders have reissued – or as a practical matter allowed legal access to – only a small fraction of the historic recordings they control. Overall, 14 percent of listed pre-1964 recordings were found to be available from rights holders, mostly from the 1940s, 1950s and early 1960s. The figure drops to ten percent or less for most periods prior to World War II, and approaches zero for periods before 1920. This study focused on recordings in which there is demonstrated interest; it is likely that the percent of all recordings that have been reissued is even less.

Where copyright laws are less restrictive, the percentage of re-issues are higher:

Despite laws discouraging unauthorized reissue activity in the U.S. or the importation of reissues of U.S. recordings from other countries (parallel import laws), foreign labels and small entities in the U.S. have made available a considerable amount. The study found that other entities have exclusively reissued 22 percent of the sample recordings compared to 14 percent by rights holders. To the extent rights-holders do reissue older recordings, they concentrate on recent periods with larger potential markets, while third-party distributors serve all periods more or less equally. As a result, non- rights holders have reissued more than rights-holders for every period prior to 1945.

None of this should surprise. Many works have limited commercial value, though there remains some interest in them. Record labels will only re-issue a small number of works that offer the greatest commercial potential. For the remainder, they are largely lost as copyright locks out the prospect of anyone other than the record label re-issuing them or making them publicly available. Under those circumstances, everyone loses. Songwriters do not get the royalties that might come from a re-issue, the public does not gain access, and an important part of Canada’s musical heritage is effectively lost.

This point was made in a 2006 report conducted by the Institute for Information Law for the European Commission:

only a small share of sound recordings still continues to generate a commercial value for phonogram producers after 50 years. A term extension of related rights beyond 50 years would therefore only have a positive effect on the revenues from that small share of recordings that are still popular after this time. From the remaining part of the back catalogue repertoire, phonogram producers typically do not derive revenues anymore. Repertoire that does not sell well or that does not generate sufficient royalty payments and older niche productions are usually not disseminated after a certain time. These recordings will disappear from the market, leaving them inaccessible to the general public. ‘Many works do not stay in the commercial chain and a majority of sound recordings are locked in vaults.’ A term extension would keep these recordings from being free to use by the public for an additional period of time.

Of course, the loss is not limited to commercial re-issues. The U.S. Library of Congress conducted an extensive examination of the state of recorded sound preservation in the United States in 2010. The impact of longer copyright terms for sound recordings has a devastating impact on preservation as the report notes that “were copyright law followed to the letter, little audio preservation 
would be undertaken. Were the law strictly enforced, it would brand virtually all audio preservation as illegal.” Library and Archives Canada once invested in sound preservation with the Virtual Gramophone. The project was suspended in 2006 and will have little hope of revival for more recent works if the copyright term extension is passed.

The post Sound of Silence: Why the Government’s Copyright Extension for Sound Recordings Will Reduce Access to Canada’s Musical Heritage appeared first on Michael Geist.

House of Commons Passes Bill C-51 as Conservative MP Questions Values of Canadian Tech Companies

Michael Geist Law RSS Feed - Thu, 2015/05/07 - 07:47

Bill C-51, the anti-terrorism bill, passed third reading in the House of Commons last night as Conservative and Liberal MPs voted in favour of the bill, leaving only the NDP and Green opposed. It now heads to the Senate, which has already conducted most of its hearings on the bill. Those hearings – which have included Canadian Privacy Commissioner Daniel Therrien – have been better than the embarrassing Public Safety and National Security review (hearing by the numbers, witnesses, and clause-by-clause review), yet the outcome is almost sure to be the same. Bill C-51 is on a legislative fast track and Conservative Senators are incredibly unlikely to require amendments that would send the bill back to the House.

As debate on Bill C-51 wound down, Press Progress points out that Conservative MP Laurie Hawn took the time to question the values of leading Canadian technology companies such as Shopify and Hootsuite.  The CEOs of those companies, along many others, dared to sign a public letter calling on the government to go back to the drawing board on the bill. The letter highlights concerns with website takedowns, new CSIS powers, and data security issues.

Hawn responded to the letter (and a related op-ed) in the House of Commons:

Several NDP members have cited an op-ed by some high-tech business owners critical of the bill. I admit that it is nice to see the NDP supporting business in some way, but I digress. I would suggest that if websites providing content, hosting services or other businesses are profiting from the dispersal of this type of horrific material, they should seriously reconsider their business model and lack of commitment to the values that bind us as Canadians.

Suggesting that some of Canada’s most prominent new technology companies lack a commitment to Canadian values is an incredible accusation. Ironically, Shopify is the same company that Industry Minister James Moore recognized when pulling together his Digital Canada 150 as his leading example of a Canadian e-commerce success story. That turns out to be a better call than even Moore might have anticipated, since their speaking out on Bill C-51 demonstrates a willingness to place public policy concerns ahead of the possible consequences arising from government criticism.

The post House of Commons Passes Bill C-51 as Conservative MP Questions Values of Canadian Tech Companies appeared first on Michael Geist.

The CRTC Knows Best: Why the Wireless Decision Doesn’t Go Far Enough

Michael Geist Law RSS Feed - Wed, 2015/05/06 - 08:42

The CRTC released it much anticipated decision on the wholesale wireless industry yesterday, painting the decision as fostering “sustainable competition, innovation and investment in the wireless services market.” The ruling generated supportive comments from consumer groups, community groups, new entrants such as Wind Mobile, and business analysts who thought that the CRTC might go further. The regulated wholesale roaming rates has attracted the lion share of attention, but the bigger story is what the Commission did not do. Indeed, given the CRTC’s finding on the competitiveness of the Canadian wireless industry, it should have done more to address the issue. Instead, it adopted a regulatory approach that suggests it thinks it knows the right formula for more competition and it has placed its bet primarily on a fourth national wireless player rather than on an environment that facilitates as much new competition as the market can support.

The Commission sets the stage for its decision by examining the state of the market and – despite repeated claims to the contrary from the large incumbent providers – concludes that there is a competition problem. For example, it notes that at the national retail level:

there has been very little change in retail market shares (either by revenue or by number of subscribers) in Canada in the past five years, despite entry into the market by several wireless carriers. While no company has a national revenue market share greater than 35%, the national wireless carriers collectively continue to have national market shares of more than 90% for both revenues and numbers of subscribers. The Commission considers that the barriers to entry into the retail market are very high. These barriers include not only access to spectrum, and the high cost of spectrum and of investment in facilities, but also the ability of wireless service providers to obtain wholesale mobile wireless services from other wireless carriers, in particular the national wireless carriers, at reasonable rates, terms, and conditions.

After examining the competitive state of wholesale wireless roaming in Canada, it concludes:

the Commission considers that the national wireless carriers collectively have the ability and incentive to, with regard to GSM-based wholesale roaming in the national market, maintain rates and impose terms and conditions that would not prevail in a competitive market. Therefore, the Commission determines that Bell Mobility, RCP, and TCC collectively possess market power in the national market for GSM-based wholesale roaming.

It reaches the same conclusion with respect to mobile virtual network operators (MVNOs):

the Commission determines that Bell Mobility, RCP, and TCC collectively possess market power in the national market for GSM-based wholesale MVNO access

Finally, it determines that the Bell, Rogers, and Telus networks are essential to wholesale roaming and MVNO access:

the Commission determines that wholesale network access to the GSM-based mobile wireless networks of Bell Mobility, RCP, and TCC is essential for their competitors to provide broad or national network coverage to their retail customers. As such, the Commission determines that GSM-based wholesale roaming and MVNO access provided by Bell Mobility, RCP, and TCC are essential.

Given these findings, Canadians could reasonably expect the CRTC to exercise its regulatory authority to remove competitive barriers and establish the necessary regulation to allow for smaller wireless companies to offer genuinely competitive services and for MVNOs to effectively compete in the market.

But that is not what the CRTC did. Instead, the CRTC put forward a very limited vision of wireless competition based predominantly on a few smaller players competing on the national stage. A viable fourth national wireless company would be useful, but a robust competitive environment should be about more than just that. Yet the CRTC stopped short of creating a regulatory framework to allow for robust competition. It will regulate wholesale wireless rates, which is a big win for companies like Wind Mobile. However, it will not directly address an assortment of other issues for those companies such as seamless roaming or call hand backs. Without these measures, the smaller players may still suffer from an inferior product.

Moreover, the CRTC stopped well short of facilitating an MVNO market in Canada. While it removed some barriers, it did not mandate MVNO access, claiming:

if the Commission were to mandate GSM-based wholesale MVNO access provided by the national wireless carriers, this permanent network access would likely discourage continued investment by wireless carriers, because they could rely on this access rather than investing in their own mobile wireless network infrastructure.

It is hard to believe that the Commission still believes claims that MVNO access would discourage ongoing investment by wireless carriers who emphasize each quarter to business analysts the scope of their investment and breadth of their spectrum holdings.

What the CRTC is really doing is saying it knows best what competition should look like: a fourth wireless player that offers economically viable if somewhat inferior national service. That vision falls well short of a vibrant, competitive market with as many players and as many different services as possible and makes it likely that the Canadians will have marginally more choice, but still fall well short of the situation in other countries where consumers experience greater choice, more business models, and better pricing.

The post The CRTC Knows Best: Why the Wireless Decision Doesn’t Go Far Enough appeared first on Michael Geist.

Lobbying & Licensing: Behind the Recording Industry’s Campaign to Squeeze Out New Competitors

Michael Geist Law RSS Feed - Tue, 2015/05/05 - 08:31

My recent posts on the government’s surprise budget announcement that it plans to extend the term of copyright protection for sound recordings generated considerable private feedback, with several industry sources suggesting that the change is not quite what it seems. In fact, despite painting the reform as an effort to protect the rights of artists, foreign record companies have been primarily concerned with eliminating new competitors who offer cheaper, legal public domain recordings of popular artists such as the Beatles, Beach Boys, Bob Dylan, and the Rolling Stones.

From a consumer perspective, there is little doubt that the change will lead to higher prices for music. Multiple studies on copyright term extension for sound recordings have concluded that public domain recordings encourage competition between release companies and drive down the price for consumers. The songwriters are paid either way, but the consumers win with more choice and lower priced music.

My weekly technology law column (Toronto Star version, homepage version) notes that while some artists have lent support to the government’s proposed changes, the bigger story is what has been happening behind the scenes. As new public domain-based recordings began to appear at major Canadian retailers, foreign record labels adopted a two-pronged strategy: intense lobbying for legislative changes to lock down recordings for decades and blocking royalty payments to copyright owners to keep the new competitors out of the market.

The lobbying campaign started in the fall with Music Canada, the lead recording industry lobby group, hiring Tanya Peatt as its new Director of Regulatory Affairs. Peatt, who served as Industry Minister James Moore’s lead copyright policy advisor for five years, was charged with responsibility for the management and strategic direction of the industry’s relationship with the federal government.

Weeks later, Music Canada registered lobbyists began near-monthly meetings with Patrick Rogers, the Director of Policy for Canadian Heritage Minister Shelly Glover. Rogers is the former Director of Parliamentary Affairs with the Prime Minister’s Office. While a government spokesperson indicated that “it is not our practice to comment on the content of meetings with stakeholders”, the meetings appear to have had their desired effect with the copyright changes promised in the budget.

Amy Terrill, Music Canada’s Vice-President of Public Affairs defended the approach, voicing support for the changes and noting that “we believe that it is important to promote and protect the value of music and its production and we are a passionate advocate for music and those who create it. As part of that advocacy, we meet regularly with elected and non-elected representatives of all levels of government.”

If the backroom lobbying campaign does not surprise, the effort to stop copyright owners from being paid surely does. New competitors in the Canadian marketplace obtained “pay as you press” licences from the Canadian Musical Rights Reproduction Agency (CMRRA), which cover the copyright royalties for music publishers. The licences require payment for every song included on a record, ensuring that the payments add up quickly.

Those licences covered the initial run of records that made their way into Canadian stores and made sure that the artists were paid for the use of their work. Given the initial sales and the royalty rates, the low-cost records generated thousands in royalties for the copyright holders.

Yet once the major record labels became aware that the licences were being used to create competitive products, they ordered CMRRA to stop issuing any licences. CMRRA advised the new competitors that it had no choice but to stop issuing the licence and that the decision stemmed from the fact that the master recordings were in the public domain. Interestingly, these licences are compulsory in the United States and the United Kingdom, where permission from the copyright owner is not required.

Without the CMRRA licence, the new competitors are unable to compete in the marketplace. When combined with the government’s legislative proposal, that leaves few winners: foreign record labels can maintain their high prices, but consumers face the prospect of less choice and artists lose as a new source of revenue since re-releases of older titles and new public domain compilations are effectively blocked from the Canadian market.

The post Lobbying & Licensing: Behind the Recording Industry’s Campaign to Squeeze Out New Competitors appeared first on Michael Geist.

Behind the Recording Industry’s Campaign to Squeeze Out New Competitors

Michael Geist Law RSS Feed - Tue, 2015/05/05 - 08:18

Appeared in the Toronto Star on May 2, 2015 as Behind the Recording Industry’s Latest Campaign

Last week’s column on the government’s surprise budget announcement that it plans to extend the term of copyright protection for sound recordings generated considerable private feedback, with several industry sources suggesting that the change is not quite what it seems. In fact, despite painting the reform as an effort to protect the rights of artists, foreign record companies have been primarily concerned with eliminating new competitors who offer cheaper, legal public domain recordings of popular artists such as the Beatles, Beach Boys, Bob Dylan, and the Rolling Stones.

From a consumer perspective, there is little doubt that the change will lead to higher prices for music. Multiple studies on copyright term extension for sound recordings have concluded that public domain recordings encourage competition between release companies and drive down the price for consumers. The songwriters are paid either way, but the consumers win with more choice and lower priced music.

While some artists have lent support to the government’s proposed changes, the bigger story is what has been happening behind the scenes. As new public domain-based recordings began to appear at major Canadian retailers, foreign record labels adopted a two-pronged strategy: intense lobbying for legislative changes to lock down recordings for decades and blocking royalty payments to copyright owners to keep the new competitors out of the market.

The lobbying campaign started in the fall with Music Canada, the lead recording industry lobby group, hiring Tanya Peatt as its new Director of Regulatory Affairs. Peatt, who served as Industry Minister James Moore’s lead copyright policy advisor for five years, was charged with responsibility for the management and strategic direction of the industry’s relationship with the federal government.

Weeks later, Music Canada registered lobbyists began near-monthly meetings with Patrick Rogers, the Director of Policy for Canadian Heritage Minister Shelly Glover. Rogers is the former Director of Parliamentary Affairs with the Prime Minister’s Office. While a government spokesperson indicated that “it is not our practice to comment on the content of meetings with stakeholders”, the meetings appear to have had their desired effect with the copyright changes promised in the budget.

Amy Terrill, Music Canada’s Vice-President of Public Affairs defended the approach, voicing support for the changes and noting that “we believe that it is important to promote and protect the value of music and its production and we are a passionate advocate for music and those who create it. As part of that advocacy, we meet regularly with elected and non-elected representatives of all levels of government.”

If the backroom lobbying campaign does not surprise, the effort to stop copyright owners from being paid surely does. New competitors in the Canadian marketplace obtained “pay as you press” licences from the Canadian Musical Rights Reproduction Agency (CMRRA), which cover the copyright royalties for music publishers. The licences require payment for every song included on a record, ensuring that the payments add up quickly.

Those licences covered the initial run of records that made their way into Canadian stores and made sure that the artists were paid for the use of their work. Given the initial sales and the royalty rates, the low-cost records generated thousands in royalties for the copyright holders.

Yet once the major record labels became aware that the licences were being used to create competitive products, they ordered CMRRA to stop issuing any licences. CMRRA advised the new competitors that it had no choice but to stop issuing the licence and that the decision stemmed from the fact that the master recordings were in the public domain. Interestingly, these licences are compulsory in the United States and the United Kingdom, where permission from the copyright owner is not required.

Without the CMRRA licence, the new competitors are unable to compete in the marketplace. When combined with the government’s legislative proposal, that leaves few winners: foreign record labels can maintain their high prices, but consumers face the prospect of less choice and artists lose as a new source of revenue since re-releases of older titles and new public domain compilations are effectively blocked from the Canadian market.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can be reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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Study Reports Big Drop in Spam Following Canadian Anti-Spam Law Implementation

Michael Geist Law RSS Feed - Thu, 2015/04/30 - 08:24

The launch of Canada’s anti-spam law generated considerable criticism suggesting that the law was unenforceable and would not have a discernible impact on spam. Recent enforcement actions by the CRTC and the Competition Bureau, which led to millions on fines, demonstrates that the law can be used to target businesses that run afoul of the law. Now a new study from Cloudmark, a network security firm, concludes that there was a significant drop in spam originating from Canada once the law took effect. Moreover, Canadians received considerably less email after CASL was implemented. Cloudmark states:

Last year Canada implemented one of the strongest anti-spam laws in the world, CASL. We took a close look at the impact, and the results surprised us. We saw a 37% reduction in spam originating from Canada, but it wasn’t just spam that went down. Over all, Canadians received 29% less email after CASL was implemented. We believe this is because there was a lot of marketing email which was not technically spam but did not meet the stringent requirements for affirmative consent required by CASL. The Canadian law is proving effective in reducing inbox clutter and could act as a model for stronger anti-spam laws in the US, UK and other countries.

Indeed, the charts posted in the full Cloudmark report are striking, showing a noticeable drop in spam originating in Canada and email received in Canada after CASL was implemented. It is still early days for Canada’s anti-spam law, but the Cloudmark report suggests that it is having an impact and touts it as a model for others.

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Canadian Government on Copyright Notice Flood: “It’s Not a Notice-and-Settlement Regime”

Michael Geist Law RSS Feed - Wed, 2015/04/29 - 08:43

The flood of copyright notices in Canada continues to attract attention and generate concern among many Canadians. I’ve posted several pieces on the issue, including a recent post on what recipients should consider if they receive a notice. I still receive daily emails from notice recipients, with some admitting that they quickly paid the settlement in a panic and now fear that they may have opened the door to even more settlement demands. In response to this copyright abuse, I was pleased to participate in an open letter signed by many groups calling on the government to fix the loopholes in the notice-and-notice system by prohibiting the inclusion of settlement demands within the copyright notices.

A recent Metro article suggests that the government is well aware that the system is being misused. Industry Minister James Moore’s press secretary Jake Enwright emphasizes that “there is no obligation for Canadians to pay these settlements” and that the current system is “not a notice-and-settlement regime.” Those are encouraging words that come as close as the government can to tell consumers that it does not believe that settlements should be included in the notices and to hint that it does not expect Canadians to pay.

With CEG TEK, the primary notice sender, leaving little doubt that it intends to continue, it falls to the government to address the problem. Enwright says that the government is waiting for the industry to identify an appropriate solution, but the real problem lies with the absence of regulations that prohibit the inclusion of settlement demands within notices that were designed to educate, not bully Canadians into paying pricey settlements. The government often talks about a copyright balance, yet it has decided to move ahead with copyright term extension without any consultation following backroom lobbying from the recording industry and is somehow is content to leave thousands of Canadians without protection against misuse of the very system it created.

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Canada joins Marrakesh Treaty

Sara Bannerman - Tue, 2015/04/28 - 14:42
I have long called on the Canadian government to join the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled. yesterday, the Toronto Star reports that Industry Minister James Moore announced Canada's accession.  This is great news.

Eight countries have ratified or acceded to the Marrakesh Treaty, which will enter into force when that number reaches 20.  Canada's accession brings that number to 9.  Canada is the first G7 country to implement the treaty.

The Power of Backroom Lobbying: How the Recording Industry Got Their Copyright Term Extension

Michael Geist Law RSS Feed - Tue, 2015/04/28 - 09:35

The government’s unexpected budget decision to extend the term of copyright for sound recordings came as a surprise to most copyright watchers, but not the music industry lobby. Music Canada (formerly the Canadian Recording Industry Association) was ready within minutes with a press release, backgrounder, and quotes from musicians that were previously critical of Prime Minister Stephen Harper. How did the industry seemingly know this was coming?

The monthly lobbyist communications reports tell the story as beginning last fall, Music Canada registered lobbyist David Dyer met almost monthly with Patrick Rogers, the Director of Policy for Canadian Heritage Minister Shelly Glover. The meetings began in November at roughly the same time as Universal Music began expressing concern about the Canadian distribution of public domain Beatles records. The lobbyist registry lists meetings on November 10, November 26, December 5, February 17, and March 18. In addition, there was a meeting with James Maunder, Chief of Staff to Industry Minister James Moore on November 28th, though it is clear that Canadian Heritage had the lead on the issue.

Near monthly access to Rogers paid off with promise to extend the term of copyright despite the absence of public consultation on the issue, increased consumer costs, and reduced choice. By comparison, Europe spent years of study and intense debate over whether to extend the term of copyright, with numerous experts reports warning against it and many European countries opposing the measure. Rogers was apparently an excellent internal advocate, particularly given his experience with the Prime Minister’s Office. Rogers is the former Manager of Parliamentary Affairs with the Prime Minister’s Office. If the name is familiar, it may be because he is named in the RCMP allegations against Senator Mike Duffy. Indeed, the RCMP evidence indicates that he was involved in meetings and emails related to the Duffy affair and recent reports indicate that he may be called to testify at the Duffy trial.

I asked Canadian Heritage officials to comment on the nature of the discussions between Music Canada lobbyists and ministry officials. Their response simply stated “It is not our practice to comment on the content of meetings with stakeholders.” In this case, there is no need. The outcome says it all.

The post The Power of Backroom Lobbying: How the Recording Industry Got Their Copyright Term Extension appeared first on Michael Geist.

Competition Killer: Why the Copyright Term Extension For Sound Recordings Will Limit Consumer Choice and Increase Costs

Michael Geist Law RSS Feed - Mon, 2015/04/27 - 10:16

As the negative coverage of the government’s surprise decision to extend the term of copyright for sound recordings and performances mounts (Billboard, National Post), it is worth remembering that it is Canadian consumers that will bear the costs with decreased choice and increased prices. I touch on this in my weekly technology law column (Toronto Star version, homepage version), but a more detailed discussion is warranted (see here, here, and here for previous posts on the proposed extension).

The question of competition and consumer costs was addressed in several leading European reports on intellectual property and term extension. The University of Cambridge’s Centre for Intellectual Property and Information Law reviewed the economic evidence related to term extension for sound recordings, stating:

When a music company or artist earns more because of a term extension that money must come from somewhere. Crudely, there are only two possibilities. On the one hand, the money came from some other firm, perhaps the “public domain specialist”, who, in the absence of a term extension, would have been able to enter the market for as a seller of the recording. On the other hand, the money came from end-users who without a term extension would have been the recipients of lower prices. Theory inclines us towards the second possibility: greater competition to supply a recording once it enters the public domain should operate to drive down prices, transferring value from producers to consumers.

The Gowers Review of Intellectual Property, a leading independent UK report, comes to much the same conclusion:

As sound recordings of enduring popularity enter the public domain, economic theory suggests that competition between many release companies will drive down the price, just as has occurred in the public domain book market for classic literature. Therefore, the review believes that most of the increased revenue from term extension would come directly from consumers who would pay higher (i.e. monopoly) prices for longer.

So did a report for the European Commission conducted by the Institute for Information Law at the University of Amsterdam, which noted:

when the exclusive reproduction right for phonograms expires, any competing record company can make use of it and release the same recording potentially at lower prices. An extended protection would prolong the temporary monopoly of the original phonogram producers, preventing the downward pressure of competition on prices. As a result, consumers would continue to pay higher prices for certain sound recordings for several years.

Canadian consumers are seeing this issue unfold right now at Walmart Canada. A search for the Beatles reveals many choices, the overwhelming majority of which are offered by Universal Music, the international record giant. But consider these results and guess which is not offered by Universal Music.

Beatles at Walmart, Walmart.ca

The answer is unsurprisingly the $5 record, which is far cheaper than anything else being offered. It is a public domain record released by Stargrove Entertainment featuring 11 songs, virtually all written by Lennon and McCartney. The composers are paid royalties for their work. What distinguishes this record is that it is a non-Universal record offered at a much lower price.

As the Gowers review predicted, public domain recordings encourage competition between release companies and drive down the price for consumers. The songwriters are paid either way, but the consumers win with more choice and lower priced music. Increased competition is good for consumers and for the creators of the songs, yet the government’s decision to extend the term of copyright for sound recordings effectively reduces choice and eliminates competitors. Given the outcome that generates profit for record companies decades after their investment at the expense of consumers, it should come as little surprise to find that Music Canada, the lead record company lobby group, engaged in extensive lobbying with the Director of Policy at the Minister of Canadian Heritage in the months leading up to the budget. More on their lobbying campaign in an upcoming post.

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Behind the Government’s Multi-Million Dollar Budget Gift to the Recording Industry

Michael Geist Law RSS Feed - Mon, 2015/04/27 - 10:10

Appeared in the Toronto Star on April 25, 2015 as Music Copyright Changes in Federal Budget Hit a Sour Note

The Conservative government’s budget last week included benefits for some families, assistance for seniors, and future tax reductions for small businesses. While those measures were widely anticipated, more surprising was the multi-million dollar gift to foreign record companies, who were overjoyed at the decision to extend the term of copyright and keep some sound recordings out of the public domain for decades.

The government unexpectedly announced that it was extending the term of copyright for sound recordings and performances from the current 50 years of protection to 70 years. While the industry emphasized the expiry of copyright for creators, the reality is that copyright in songs lasts for the life of the songwriter plus an additional 50 years. What is therefore at stake with the government’s proposed copyright term extension is not copyright in the song, but rather in the sound recording. Recording companies, not the artists, often hold those rights.

The European Union debated copyright term extension for these rights several years ago and studies on the issue found that the vast majority of revenues went to the record labels, rather than the artists. For example, one study estimated that the costs to the public would exceed one billion euros with 72 per cent of the benefits going to record labels.

The European Union ultimately passed an extension from 50 to 70 years in 2011, but not without significant opposition from member states. Eight countries – Belgium, Czech Republic, Luxembourg, Netherlands, Romania, Slovakia, Slovenia and Sweden – all voted against, while Austria and Estonia abstained. Sweden argued that the extension was “neither fair nor balanced”, while Belgium feared that it would mainly benefit record producers and negatively affect access to cultural materials in libraries and archives.

While the European experience on term extension for sound recordings and performances is instructive, there have been Canadian studies that have reached similar conclusions. Industry Canada commissioned University of Montreal economist Abraham Hollander to examine the issue in 2005 and his study concluded that the economic value of a term extension to the recording industry was very small.

Not only is the economic benefit tiny, but the issue was scarcely on the public radar screen. It was rarely raised during the 2012 copyright reform process. Moreover, last year the Standing Committee on Canadian Heritage conducted a major review of the music industry in Canada with dozens of witnesses taking the time to appear or submit briefs. The final report and the government’s response never identified the term of protection for sound recordings and performances as a concern.

The decision is particularly puzzling given the government’s efforts to paint itself as pro-consumer and anti-piracy. In recent months, the Canadian market had begun to see new cheaper music choices of popular artists such as the Beatles offered through retail giants like Walmart. Those records were offered for a fraction of the price of major labels, yet the copyright holders were still compensated for the work.

Extending the term of copyright will remove those choices from the market at the very time that Industry Minister James Moore and Canadian Heritage Minister Shelly Glover have emphasized the need to find ways to encourage consumers to pay for music. Further, it will raise prices and harm small innovative Canadian companies in order to ensure that large foreign record labels maintain their profits.

The government has characterized the reforms as good for the Canadian economy, yet the opposite would appear to be true. Music industry lobbyists met repeatedly with Canadian Heritage officials in the months leading up to the budget and appear to have walked away with copyright reforms that will result in copyright holders in the songs earning less revenue, the Canadian public domain being harmed, and new Canadian business models based on the public domain being extinguished.


Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can be reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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Is the Great Canadian Copyright Giveaway Really About Some Cheap Beatles Records?

Michael Geist Law RSS Feed - Thu, 2015/04/23 - 15:32

The government’s surprise decision to include copyright term extension for sound recordings and performances in this week’s budget is being painted by the music industry as important for Canadian artists. But sources suggest that the key reason for the change is lobbying from foreign record labels such as Universal Music and Sony Music, who were increasingly concerned with the appearance of public domain records from artists such as the Beatles appearing on store shelves in Canada. As discussed in this post, Canadian copyright law protects the song for the life of the author plus 50 years. However, the sound recording lasts for 50 years. That still provides decades of protection for record companies to profit from the records, but that is apparently not long enough for them.

Earlier this year, a Canadian company called Stargrove Entertainment began selling two Beatles records featuring performances that are in the public domain in Canada. The records were far cheaper than those sold through Universal Music and were picked up by retail giant Walmart, who continues to list the records on their website (Can’t Buy Me Love, Love Me Do). There were additional titles featuring the Rolling Stones, Bob Dylan, and the Beach Boys. Some of the titles are still available for sale through Walmart.

The Stargrove Entertainment records provided Canadian consumers with low-priced alternatives while still ensures that the authors of the songs received the approriate royalties. While the sound recording is in the public domain for these works, the song itself remains subject to copyright. Therefore, the song writers were still paid for every record sold. The difference is that Universal Records was not profiting from the sale. Instead, a small Canadian company was succeeding in selling the records at a lower price to Canadian consumers.

The Stargrove Entertainment records effectively broke the monopoly enjoyed by Universal Music and Sony Music over these popular artists by offering consumers more choice at better prices. After pressure on distributors and retailers failed to stop the sales, the companies began lobbying the government to change the law. Indeed, Music Canada lobbyists met with officials in the Minister of Canadian Heritage’s office in both February and March of this year.  The Harper government’s decision to cave to pressure from a couple of foreign record labels in a matter of months is remarkable. After years of concern that consumers don’t pay for music, there was a Canadian company that was offering consumers lower-priced versions of music with full payments to the songwriters. Yet because foreign record companies were not also profiting, they sought to change the law and stop the sales.

The government characterizes the reforms as good for the Canadian economy, yet the opposite is true. The changes benefit large foreign record labels at the expense of a small Canadian upstart and ensure that consumer prices for music remain high. As a result, the copyright holders in the songs will earn less revenue, the Canadian public domain is harmed, and new Canadian business models based on the public domain are extinguished.

The post Is the Great Canadian Copyright Giveaway Really About Some Cheap Beatles Records? appeared first on Michael Geist.

Canadian Recording Industry: Works Entering the Public Domain Are Not in the Public Interest

Michael Geist Law RSS Feed - Thu, 2015/04/23 - 10:22

On World Book and Copyright Day, it is worth noting how Graham Henderson, the President of Music Canada (formerly the Canadian Recording Industry Association) characterized the government’s decision to extend the term of copyright in sound recordings and performances:

With each passing day, Canadian treasures like Universal Soldier by Buffy Sainte-Marie are lost to the public domain. This is not in the public interest.  It does not benefit the creator or their investors and it will have an adverse impact on the Canadian economy.”

This statement raises several issues. First, it should be noted that the song Universal Soldier by Buffy Sainte-Marie is not in the public domain nor will it be entering the public domain for decades. As the songwriter, Buffy Sainte-Marie still holds copyright in the song and will do so for her entire lifetime plus an additional 50 years (Howard Knopf further explains the issue of copyright term in songs in this post).

What is at stake with the government’s proposed copyright term extension is not copyright in the song, but rather in the sound recording or performance. Those rights are often held by recording companies, not the artists. They are not authors rights, but rather “related rights” that are found in particular recordings. European studies on term extension for these rights found that the vast majority of revenues went to the record labels, not the artists.

Second, Henderson offers up a vision of the public domain where increasing access to works is somehow counter to the public interest. How would the public be better served by having less access and fewer works in the public domain? The recording industry would obviously like to keep works from entering the public domain so that it can continue to profit from them decades after having recouped their initial investment. Yet it hard to see how anyone can credibly claim that works are “lost” to the public domain and that the public interest in not served by increased public access.

Third, Henderson claims that works entering the public domain have an adverse effect on the Canadian economy. Numerous studies on the economic impact of the public domain find precisely the opposite. For example, Rufus Pollock’s work has examined the value of the public domain and Paul Heald has written several important articles on the economic importance of the public domain. Most recently, Heald found that Kickstarter projects based on public domain works were more likely to succeed and that commercial firms often use public domain works to create new commercial products. James Boyle’s book on the public domain is essential reading as is Yochai Benkler’s work on this issue. The expert analysis demonstrates that copyright term extension hurts the economy and the government’s decision to extend the term of copyright in sound recordings in Budget 2015 is likely to both harm the Canadian economy and undermine Canadians’ access to their cultural heritage.

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The Great Canadian Copyright Giveaway: Why Copyright Term Extension for Sound Recordings Could Cost Consumers Millions

Michael Geist Law RSS Feed - Wed, 2015/04/22 - 08:45

Randy Bachman, the well-known Canadian musician, found himself embroiled in a public fight with Prime Minister Stephen Harper last year when Harper used his song “Takin’ Care of Business” as a theme song for a major speech. Bachman said he probably would not have granted permission to use the song, since “I don’t think he’s taking care of business for the right people or the right reasons.” Bachman was singing a different tune yesterday as the government released its budget and apparently took care of the right people – record companies. Despite no study, no public demands, and the potential cost to the public of millions of dollars, the government announced that it will extend the term of copyright for sound recordings and performances from 50 to 70 years. For that giveaway, Bachman was quoted as saying “thanks for the term extension PM Harper, you really are taking care of business.”

While the government lined up industry supporters to praise the term extension, the decision is unexpected and unnecessary (it also announced that it will accede to the Marrakesh copyright treaty for the blind, but that should not require significant domestic reforms). The music industry did not raise term extension as a key concern during either the 2012 copyright reform bill or the 2014 Canadian Heritage committee study on the industry. Experience elsewhere suggests that the extension is a windfall for record companies, with little benefit to artists or the public. In fact, many countries that have implemented the extension have been forced to do so through trade or political agreements, while signalling their opposition along the way.

[Update: New post linking the term extension to lobbying from Universal Music over the release of cheaper public domain Beatles records in Canada.]

Canada will extend term without any public discussion or consultation, yet other studies have found that retroactive extension does not lead to increased creation and that the optimal term length should enable performers and record labels to recoup their investment, not extend into near-unlimited terms to the detriment of the public. For Canadian consumers, the extension could cost millions of dollars as works that were scheduled to come into the public domain will now remain locked down for decades.

For example, the 2006 Gowers Report on Intellectual Property, a wide ranging and well respected government-sponsored review in the UK, came out against term extension for sound recordings and performances:

In conclusion, the Review finds the arguments in favour of term extension unconvincing. The evidence suggests that extending the term of protection for sound recordings or performers’ rights prospectively would not increase the incentives to invest, would not increase the number of works created or made available, and would negatively impact upon consumers and industry. Furthermore, by increasing the period of protection, future creators would have to wait an additional length of time to build upon past works to create new products and those wishing to revive protected but forgotten material would be unable to do so for a longer period of time. The CIPIL report indicates that the overall impact of term extension on welfare would be a net loss in present value terms of 7.8 per cent of current revenue, approximately £155 million.

A Dutch study on intellectual property reached the same conclusion, noting that the arguments in favour of extension were unconvincing and that the extension would create significant costs for consumers and society as a whole. It concluded:

To conclude, the arguments made in favour of a term extension are not convincing. Many arguments already fall outside the objectives of related rights protection for phonograms. The fact that some recordings still have economic value as rights therein expire, cannot in itself provide a justification for extending the term of protection. Related rights were designed as incentives to invest, without unduly restricting competition, not as full-fledged property rights aimed at preserving ‘value’ in perpetuity. Other arguments do not convince because a term extension would either be ineffective in addressing the concerns in question, because there are other, better remedies available or advisable, or because the costs of an extension would outweigh its eventual benefits. The term of related rights must reflect a balance between  incentives, market freedom and costs for society. This balance will be upset when terms are extended for the mere reason that content subject to expiration still has market value. The public domain is not merely a graveyard of recordings that have lost all value in the market place. It is also an essential source of inspiration to subsequent creators, innovators and distributors.

With many more studies and reports reaching the same conclusion (see here, here, here, and here) – some estimating that the costs to the public would exceed one billion euros with 72 percent of the benefits going to record labels – the issue unsurprisingly proved very controversial in Europe. The European Union ultimately passed an extension from 50 to 70 years in 2011, but not without significant opposition from member states.  Eight countries – Belgium, Czech Republic, Luxembourg, Netherlands, Romania, Slovakia, Slovenia and Sweden – all voted against, while Austria and Estonia abstained.  Sweden argued that the extension was “neither fair nor balanced”, while Belgium argued that it would mainly benefit record producers and negatively affect access to cultural materials in libraries and archives.

Belgium’s concern regarding the lack of benefit for artists was also reflected in the Gowers report, which noted:

If the purpose of extension is to increase revenue to artists, given the low number of recordings still making money 50 years after release, it seems that a more sensible starting point would be to review the contractual arrangements for the percentages artists receive.

While the European experience on term extension for sound recordings and performances is instructive, there have been Canadian studies that have reached similar conclusions. Industry Canada commissioned University of Montreal economist Abraham Hollander to examine the issue in 2005.  Hollander’s study found that the economic value of a term extension to the recording industry was very small:

[Sound recordings] are protected for a period of 50 years from fixation. Adding 20 years of protection would contribute 2.3% to the present value of royalties under a 7% discount rate, assuming that the flow of royalties remains unchanged during the whole period. Under identical assumptions, extending the protection period to 100 years would contribute a mere 3.0% to the present value. This, however, is true only if the royalty flow remains constant over time. When the annual royalties decline rapidly over time, as is typical, the increase in present value would be considerably smaller.

Not only have the studies come out against term extension, but copyright stakeholders have not publicly emphasized the issue. Term extension for sound recordings and performances was nowhere to be found among the thousands of submissions to the 2010 copyright consultation, it was not discussed in the 2002 Canadian roadmap for copyright reform, and groups like the Canadian Independent Record Production Association and the American Federation of Musicians of the United States and Canada did not raise it in their submissions on copyright reform. The music industry’s form letter did not discuss term extension and it was not an issue that was prominently raised in the 2012 copyright reforms. In fact, just last year the Standing Committee on Canadian Heritage conducted a major review of the music industry in Canada with dozens of witnesses taking the time to appear or submit briefs. The final report and the government’s response never raise the term of protection for sound recordings and performances as a concern.

Why is the government using the budget to enact copyright term extension that primarily benefits foreign record labels, has proven controversial elsewhere, has been largely dismissed by numerous studies (including one funded by the government), was not the subject of a major public campaign from stakeholders, and that could cost Canadians millions of dollars?

My best guess is the Trans Pacific Partnership agreement. The TPP is nearing the end game and the U.S. is still demanding many changes to Canadian copyright law, including copyright term extension for all works (not just sound recordings). The Canadian government’s strategy in recent years has been to enact reforms before the trade agreements are finalized in order to enhance its bargaining position. For example, it moved forward with notice-and-notice rules for Internet providers without the necessary regulations in order to have the system in place and protect it at the TPP talks. It may be trying to do the same here by extending term on sound recordings and hoping that that concession satisfies U.S. copyright demands. Yet the concession comes at a significant price – locked down works and increased costs to consumers -  while providing another reminder that too often Canadian copyright law is effectively written by U.S. lobby groups who do not have Canadian interests in mind.

The post The Great Canadian Copyright Giveaway: Why Copyright Term Extension for Sound Recordings Could Cost Consumers Millions appeared first on Michael Geist.

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