Supreme Court of Canada Decision Undermines Canada’s Collective Licensing System: A Parliamentary Fix is Needed

On July 30 the Supreme Court of Canada (SCC) delivered what can only be described as body blow to the management of collective rights in Canada, although the collective society at the centre of the action, Access Copyright, found some comfort, pointing out in its press release that the Court “refuses to legitimize uncompensated copying by the education sector”.  In its decision, the SCC not only dismissed the Access appeal against a ruling by the Federal Court of Appeal that “mandatory” copyright tariffs set by the Copyright Board of Canada are not mandatory with respect to users of content when that content is covered by the tariffs, but also editorialized on the lower court’s earlier ruling that York’s Guidelines (which York claimed allowed it to use material from Access Copyright’s repertoire without obtaining a licence or paying compensation) were not fair. Although the SCC refused to issue a Declaratory Statement legitimizing York’s Guidelines, its reasons for doing so were largely procedural. The Court declared that since payment of the tariff was not mandatory, there was no legal dispute between Access Copyright and York, and therefore it would be moot to take a position on the Guidelines. It then proceeded to cast doubt on the original decision against York, although recognizing that it was not retrying the case and that other factors not before the Court had to be considered.

The Guidelines will be tested when a suit is brought against York by a rights-holder (Access Copyright, although representing rights-holders with respect to collection of royalties, does not itself hold any rights in the works in its repertoire and therefore cannot bring an infringement case in its own name). When that takes place, the views of the SCC that the original finding of unfairness failed to take into account the user’s right of individual students will clearly be a factor in assessing culpability. Despite the unequivocal finding against York by the Federal Court in 2017 that their Guidelines had materially harmed the Canadian publishing market, the interpretive musings by the Supreme Court plus the need for individual rights-holders to establish infringement adds greater uncertainty to the process.  

As for the mandatory tariff issue, it is complicated as I explored in a blog post (When is a “Mandatory Copyright Tariff” mandatory only if you opt-in?) last summer. Back in the 1930s when “mandatory tariffs” first entered the legal vocabulary with respect to copyright, they were mandatory in the sense that Performing Rights Organizations were required to issue a licence (for use of sheet music, radio broadcasts etc.) to a user if the user offered to pay or paid the established licensing fee. In the late 1980s and 1990s substantial changes were made to Canada’s copyright legislation to address challenges emerging from photocopying and digital reproduction, and a number of collective societies (collective rights management organizations) were established to facilitate licensing of content and collection of royalties. It became standard practice for the Copyright Board to “certify a tariff” (i.e. approve a royalty fee) which would be applied to all users of a collective’s repertoire unless voluntary arrangements between users and the collective were agreed upon. The Federal Court of Appeal’s decision in June 2020 upended this long-established system, ruling that the legislative intent of the original 1930’s interpretation of the term “mandatory” had not changed. This has now been reaffirmed by the SCC.

In reaching its conclusion the Supreme Court carefully parsed the wording of the 1988 and 1997 legislation and concluded that the original intent of imposing constraints on the ability of collective societies to withhold licences had not changed. Moreover, it concluded that the role of the Copyright Board of Canada in certifying tariffs was to limit the amount that collective societies could charge, not to establish the amount that a user should pay (even though this is at variance with actual practice for the past twenty years). In declaring that it could not impute intent to Parliament where no wording existed (with regard to the question of what was “mandatory”), the SCC declared (at paragraph 76);

“It is of course open to Parliament to amend the Copyright Act if and when it sees fit to make collective infringement actions more readily available. But under the existing relevant legislation in this appeal, an approved tariff is not binding against a user who does not accept a licence.”

Legislative amendment seems to be the only alternative if the system for the collective management of rights is to be maintained in Canada. Whether and when Parliament will be prepared to take up this matter is another question, particularly given the strong opposition that can be expected from the post-secondary sector.

The alternative is litigation, perhaps a class action lawsuit against York, or at least a series of individual infringement cases funded by major publishers. One of the precepts of the collective management system introduced in the 1988 and 1997 reforms, however, was to avoid endless, costly litigation by facilitating collective licensing. Given this intent, a return to litigation seems like a retrograde step. Small publishers and individual authors will find it difficult to pursue such a remedy. If Access Copyright changed its business model and acquired the rights to works that it holds in its repertoire, it could bring a collective action against York, but whether this is a viable option is a question for members of Access Copyright to decide. Some collective societies, such as SOCAN for example—representing composers, songwriters and music publishers—do have certain rights assigned to them. However, even they intervened in this case since SOCAN’s tariffs that cover bars, restaurants, and clubs cover tens of thousands of small establishments across the country and without enforceable tariffs, licensing at scale becomes impractical and inefficient.

Although York’s Guidelines were found to be unfair in the original trial by the Federal Court in 2017, the SCC’s musings on that decision will make a finding of infringement less certain. The SCC noted that while the Declaration requested by York should not be granted:

“this should not be construed as endorsing the reasoning of the Federal Court and Federal Court of Appeal on the fair dealing issue. There are some significant jurisprudential problems with those aspects of their judgments that warrant comment.”

According to the SCC the main problem with the analysis by the lower courts was that they approached the fairness analysis exclusively from the institutional perspective.

“This error tainted their analysis of several fairness factors. By anchoring the analysis in the institutional nature of the copying and York’s purported commercial purpose, the nature of fair dealing as a user’s right was overlooked and the fairness assessment was over before it began.”

This will add complications for those bringing an infringement case, although there are a number of other factors to be considered in evaluating fair dealing that the SCC recognized were dealt with in the original trial and would need to be dealt with in any future litigation, such as amount of the dealing, nature of the work and the effect of the dealing on the market. It is far from certain that York would prevail in a future case. Far from creating clarity, it looks as if the result of the SCC’s decision–barring Parliamentary action on reinterpreting the meaning of mandatory tariffs–is more litigation, more uncertainty, and more waste of public funds as universities defend themselves against infringement actions that could have been avoided by the simple expedient of obtaining a licence.

Copyright minimalist Michael Geist at the University of Ottawa declared that the SCC’ decision was “a massive win for education and copyright”. It may represent a massive win for those educational institutions that seem determined to avoid paying a reasonable licensing fee for the content they provide to their students but it is hardly a win either for education or for copyright. Undermining copyright and payment of royalties for the use of copyrighted material will only result in less quality material being available to students. The quality of education will suffer in order to save payment of a few dollars per student to the copyright collective that represents the bulk of publishing and the vast majority of authors in Canada. The only winners in the end will be the legal profession in terms of legal fees. The solution is for Parliament to plug the holes in the legislation that the Supreme Court’s decision has exposed.

© Hugh Stephens 2021. All Rights Reserved.