Supreme Court: playing games, sampling music, or eating ice cream?

I visited the Supreme Court today as that series of Copyright related cases are being heard. Today we heard arguments from the appellants, respondents and intervenors in two cases: Entertainment Software Association, et al. v. Society of Composers, Authors and Music Publishers of Canada, Rogers Communications Inc., et al. v. Society of Composers, Authors and Music Publishers of Canada and Society of Composers, Authors and Music Publishers of Canada, et al. v. Bell Canada, et al.

While I found hearing the arguments first-hand in the court exciting, I won't be commenting on those arguments or the specifics of what is before the court. The court will be ruling on how these fact patterns are to be interpreted under current law (legislation and caselaw). Since Bill C-11 impacts the specific sections under discussion this interpretation of the law may be short lived. More interesting may be a discussion of the the underlying policy question , including what I wish the law would say, as opposed to what current law or C-11 says.

I consider the first two cases to be very different, even though much of their arguments were merged together.

Entertainment Software Association, et al. v. Society of Composers, Authors and Music Publishers of Canada

In the ESA case we are dealing with the electronic distribution of a video game which happens to include music which plays during game play.

In an ideal policy world, all rights that would need to be cleared for a motion picture or interactive motion picture (AKA: video game) would happen at the time the work as a whole was created. The composers and any performers or makers of sound recordings would negotiate any royalties with the creator of the overall work. This would include any differences in royalties (if any would ever exist) that depended on how the work was conveyed to the ultimate audience. There would be no parallel requests from the same copyright holders for additional permission or payment once the agreement to include a work within the whole had been made.

Rogers Communications Inc., et al. v. Society of Composers, Authors and Music Publishers of Canada

In the Rogers case you have the distribution of music which happens to be happening electronically, and where payments have already been made for the mechanical right (making of copies).

We are dealing with the electronic distribution of recorded music, so there is no different overall work to concern ourselves with: the music recording is the work under consideration. Here the policy question is which set of rights of each copyright holder is implicated, where policy makers should reject the answer of "all of them".

I tried to ask some of these same questions back in 2004 where I suggested there were two different legal theories of what P2P filesharing of music could be. What SOCAN is suggesting is that the answer should be both: that essentially the same copyright holder should be able to negotiate a price under one legal theory, and then ask for yet more money for essentially the same activity under a different legal theory.

The correct policy outcome would be to force a single answer. We should not allow the same copyright holder to argue parallel legal theories. We seem to be having issues simply because there are an excessive number of different collective societies collecting for the same copyright holders, but for different activities covered by the Copyright Act.

Which music distribution legal theory would offer best public policy result?

For separate policy reasons, I have my bias as to which legal theory would be preferable. In music there are 3 copyright holding groups: composers, performers and makers of sound recordings (AKA: music labels).

For radio (AKA: Communications by telecommunications) we have composers licensing under reasonable terms, and the neighbouring rights holders (performers and makers) under a compulsory license where the royalties are split 50/50 between performers and makers. I believe this arrangement results in a fair distribution of royalties between copyright holders.

For the creation of copies there is no compulsory license, and labels have been able to extract the lions share of any revenue leaving composers and performers with very little. While this might have made sense in the past under very different technological circumstances (where the labels had large up-front capital equipment costs/etc), this makes absolutely no sense today. Makers of sound recordings (labels) contribute the least to the work, and thus should in a fair policy scenario receive the smallest share of any revenue.

Clarifying the Act to suggest that the online distribution of music is a communications to the public (by the sender, such as a music store) plus a private copy (made by the recipient) would be a short-cut way to ensuring a more fair distribution of royalties between the 3 copyright holding groups. Ideal would be to modernize the act to ensure that composers and performers were in a better bargaining situation against labels in all scenarios, including any creation of mechanical copies or negotiations for inclusion of recorded music within a larger work such as a motion picture or video game.

Society of Composers, Authors and Music Publishers of Canada, et al. v. Bell Canada, et al.

Here the question is whether a short preview of a work should give rise to additional royalties. In this I side with Bell. The purpose of the preview is to convince customers to buy something from copyright holders, for which all the copyright holders will be paid. They may not be paid through SOCAN (communications right), but through CMRRA/SODRAC Inc. (CSI - for copies), but they are still paid: they are the primary beneficiaries of the preview.

SOCAN tried to argue that the different stakeholders should share in the "costs" of the preview. While there are marginal costs to offering previews for the reseller (Bell) and the customer in terms of network bandwidth and computing services, there is no marginal cost to the copyright holders. Under this economic analysis all 3 stakeholders could be said to be contributing: customer and reseller with computing/network services and copyright holders with not being able to charge people who are helping them get paid for the privilege of helping them.

It was suggested that the copyright holders should have had that choice, and that a fair dealing defense was inappropriate. It is unfortunate, but it is not something we can take for granted that a collective society will do what is in the overall best interests of the copyright holders. These collectives often have their own separate agendas, sometimes that conflict with the copyright holders. I believe SOCAN requesting a royalty for previews is itself in conflict with the interests of the relevant copyright holders, who are benefiting from the previews via increased royalty payments through CSI.

We need to ensure that copyright has appropriate limits and exceptions in order to protect the interests of creators as well as their audiences (which can include follow-on creators building on past works). This is the question that CIPPIC spoke to, discussing how copyright and charter rights of free speech overlap : and how excessive exclusive rights can limit free speech.

Unsympathetic to commercial interests?

In hallway discussions there was a general feeling that these big commercial interests (video game and online music distribution services) should be paying the "poor starving artists" more money.

This reminded me of radio broadcaster day during the Bill C-32 committee hearings. In that case it was arguments suggesting that these "rich" radio stations should be paying more money to starving musicians, an argument I felt was completely unrelated to what would make good public policy in the scenario under discussion (royalties tied to a private technological activity: ephemeral recordings). While I agree these arguments would be appropriate for a Heritage committee recommendation to raise arts funding, they were inappropriate for the C-32 legislative committee or the Supreme Court cases under discussion today.

I understand why some may find it hard to be sympathetic to these specific commercial interests. Anyone who follows my writings will know I am not a fan of the policies promoted by ESA members (Paracopyright) or Rogers/Bell (Net Neutrality, cable/satellite bundling/a-la-carte, competing ISPs, mobile phone carrier locking, etc).

In the case of ESA I consider some of its members (such as Sony) to be the least respective of IT property rights, with some companies (like Apple) in the mobile computer/phone market being fairly close. The fact that I disagree with these ESA members activities as much as the major labels publicly disagree with ISOHunt or Pirate Bay did not make me disagree with them in this case.

That said, I think people need to spend more time scrutinising the power imbalance within the music industry rather than looking outside. The record labels are as much commercial interests as video game and technology/telecommunications companies, and the collective societies can be seen as commercial interests separate from the copyright holders. In other words, the only people we heard from yesterday that were not commercial interests were some of the intervenors.

The interests of the record labels are increasingly at odds with the interests of composers and performers, with the labels taking more than their fair share of royalties and being less willing to license under reasonable terms. This may be something that will require legislative action to fix, given it will be very hard under the current regime for this imbalance to correct itself. Copyright is, after all, a temporary government granted monopoly. The government should feel some responsibility to fix anti-competitive problems that directly result from this government intervention in the marketplace.