New Copyright Tariffs Imposed - International Law Office

Tariff 22
Copying for Private Use

In 1999 the Copyright Board of Canada delivered two significant decisions relating to proposed tariffs for the collection of royalties for societies representing musical artists. The first decision, on October 27 1999, dealt with Tariff 22 - Transmission of Musical Works to Subscribers via a Telecommunications Service Not Covered Under Tariff 16 or 17 (ie, by the Internet). The second decision, on December 17 1999, determined the levies to be applied to recording media used for the Home Taping provisions of Part VIII of the Copyright Act.

Tariff 22

Consideration of Tariff 22 is proceeding in two phases: (i) determination of legal issues connected with the activities on the Internet that should attract responsibility for paying royalties; and (ii) determination of the amount of the tariff and who should pay it (this decision concerns phase I).

One of the more significant issues decided is that internet service providers (ISPs) will not be subject to the tariff as they can benefit from Section 2.4(1)(b) of the Copyright Act which provides that:

"a person whose only act in respect of the communication of a work…to the public consists of providing the means of telecommunication necessary for another person to so communicate the work…does not communicate the work…to the public."

Conversely, content providers responsible for posting works will be subject to the tariff.

The board's conclusions on the issues raised in these proceedings can be summarized as follows:

• A musical work is not communicated when it is made available on a server.
  
  
• A musical work is communicated by telecommunication when a server containing the work responds to a request and packets are transmitted over the Internet for the purpose of allowing the recipient to hear, see or copy the work.
  
  
• The public or private character of a communication over the Internet can be determined according to established legal and jurisprudential principles.
  
  
• A communication need not be instantaneous or simultaneous to be a communication to the public.
  
  
• By making a work available, a person authorizes its communication.
  
  
• The person who made a work available communicates it when it is transmitted from any server (host, cache, mirror).
  
  
• Persons who can apply Section 2.4(1(b) of the act to themselves concerning a given communication of work, do not communicate the work. This includes:
  
  
  • all entities acting as internet intermediaries such as the ISP of the person who makes the work available;
    
    
  • persons whose servers acts as a cache or mirror;
    
    
  • the recipient's ISP; and
    
    
  • those who operate routers used in the transmission.
    
    
• An entity cannot claim the benefit of Section 2.4(1)(b) if (i) the relationship entertained with the person who made the work available can be said to act in concert with that person, or (ii) it does not confine itself to the role of an internet intermediary.
  
  
• The person who creates an embedded hyperlink to a work authorizes its communication. The person that merely supplies a link that must be activated by the user does not.
  
  
• Communications occur at the site of the server from which the work is transmitted, regardless of the origin of the request or the location of the original web site. To occur in Canada, a communication must originate from a server located in Canada on which content has been posted. The communication triggered by an embedded hyperlink occurs at the site to which the link leads.

Copying for Private Use

The private copying exemptions of the Copyright Act, Part VIII came into force on March 19 1998. Part VIII legalizes private copying onto audio-recording media. It prescribes a system for remuneration of authors, performers and makers of musical works through a levy on blank audio recording media usually used by individual consumers to copy sound recordings. The levy is paid to a designated collecting body and then distributed to eligible copyright owners. The levy is set after the board has considered tariffs submitted by collectives and objections to the tariffs.

The tariff filing and objection process leading to the hearing began on March 13 1998. Over 3,000 objections were filed in the available 60-day period. Eventually, nine parties appeared at the hearing.

The Canadian Private Copying Collective (CCPC) represented all collectives who had filed tariffs. The Canadian Storage Media Alliance (CSMA) represented major importers of blank audio recording media. Various other interest groups also participated.

After deciding that the board had jurisdiction to deal with the constitutional and charter challenges, it found that Part VIII:

• was valid copyright law;
  
  
• did not violate Charter rights 2(a) or 15(1) (Freedom of Religion and Discrimination); and
  
  
• was not void as in the nature of an illegally enacted tax.

A key issue decided was what constitutes 'ordinarily used by individual consumers'. The definition was used to determine which types of audio-recording media attract the levy.

The purpose of Part VIII of the Copyright Act is to adequately compensate rights holders for the legalized copying, so it was concluded that a broad meaning ought to be given to 'ordinarily used'. An ordinary activity need not be a main activity so long as it is not rare, abnormal or minimal. Cassettes of 40-minute duration (C-45) and over were found to qualify. C-45 tapes were the shortest standard-length that could be conveniently used. No distinction was drawn between Type I and II cassettes, or standard and custom length cassettes as too much specificity could lead to avoidance.

Mini-disc, CD-R ('R' means recordable once), Audio and CD-RW ('RW' means recordable, rewriteable) audio qualify. They comprise only 1% of sales but are targeted at consumers for copying music. CD-R and CD-RW qualify as he proportion used for private copying is in the range of 5% to 15%, thereby meeting the 'ordinary' threshhold.

Micro-cassettes used for dictaphones and digital audio tapes (targeted at professionals) were excluded. Economic evidence presented showed cassettes dominating the market, but with sales in decline. Conversely, CD-R and CD-RW formed a very small segment of the market, but rapid growth is expected. Prices are dropping for all forms of audio media.

The CPCC wanted a tariff at a fixed amount per 15 minutes recording time. The CSMA wanted a fixed amount based on wholesale price. Both were rejected and a fixed amount was set per media.

The levy was set at:

• 23.3¢ on cassettes;
  
  
• 60.8¢ on CD-R Audio, CD-RW Audio, Mini-disc; and
  
  
• 5.2¢ on CD-R and CD-RW.

These levies should generate about C$8.85 million in 2000. The board designated CPCC as the collecting bodies for all collectives.

Allocation of the levy resulted in

• 60.8% share to authors;
  
  
• 21.5% to performers; and
  
  
• 17.7% to makers.

The only exception to the application is found in Section 86, which exempts sales to associations representing persons with perceptual disabilities.

Home taping is still likely to occur. However, it is not an undue burden on individual copiers. Eligible rights holders will be able to receive some remuneration from a previously illegal, but practically uncontrollable activity.

For further information on this topic please contact Peter Wells at Lang Michener by telephone (+1 416 360 8600) or by fax (+1 416 365 1719) or by e-mail (pwells@toronto.langmichener.ca).

The materials contained on this web site are for general information purposes only and are subject to the disclaimer.