Standing Senate Committee on Banking, Trade and Commerce
 

Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 23 - June 26, 2012 - morning meeting


OTTAWA, Tuesday, June 26, 2012

The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-11, An Act to amend the Copyright Act, met this day at 9 a.m. to give consideration to the bill.

Senator Irving Gerstein (Chair) in the chair.

[English]

The Chair: I call this meeting of the Standing Senate Committee on Banking, Trade and Commerce to order. Last week the Senate referred Bill C-11, An Act to amend the Copyright Act, to this committee for its examination. We began our consideration shortly thereafter, hearing from the responsible ministers, and then continued the study on Friday, hearing from seven panels of interested stakeholders and experts in the field.

Today we will continue in that regard, hearing from a further three panels in each of this morning and this afternoon.

In this first session we are pleased to welcome Lee Webster, Chair of the Canadian Chamber of Commerce Intellectual Property Committee. Also joining us by video conference from Winnipeg is Graham Henderson, President of Music Canada.

Colleagues, we have one hour for this session, and we will hear from Mr. Henderson first, followed by Mr. Webster.

Graham Henderson, President, Music Canada: Good morning and thank you for the opportunity to appear before you today, albeit virtually. I am here on behalf of Music Canada, a trade association representing the major music companies: Warner, EMI, Sony and Universal. These are the foreign direct investors, if you will. They are headquartered in the Greater Toronto Area and are part of an industry that, according to a recent study done by PWC, is responsible for thousands of jobs throughout Canada. We market, nurture and promote the artists and musicians who have and continue to put Canada on the map.

My background is long in the music industry. I have not always worked for an association. For the first 13 or 14 years of my career I was actually an artist representative representing some of Canada's best-known musicians, singers and songwriters. After that, I went to Universal Music where, in addition to my duties as their head of business affairs, I was also responsible for the development of their digital businesses. I actually have hands-on experience in building out the digital businesses that are starting to take root in our country today.

Also, I am on the board of the Ontario Chamber of Commerce, and I see my friend Lee Webster there in the room with you. I am the Vice-Chair of the Canadian Intellectual Property Council, which is an arm of the Canadian Chamber of Commerce. That is my background. Our industry is highly collaborative. My members also support and work with dozens and dozens of domestic music companies through distribution and marketing arrangements.

It is a privilege to speak to you about Bill C-11 in an effort to encourage you to ensure its quick passage and progress into law. As you know, this bill has been many, many years in the making, perhaps too long. It is not the first but the fourth iteration of copyright reform and the fourth attempt to ratify the World Intellectual Property Organization's Internet treaties, yet this is the first of its kind to make it all the way to the Senate. In the time it has taken us to debate this issue, it has had a catastrophic effect, the delay on our business. Jobs have been lost; careers have been damaged, perhaps irreparably.

First and foremost, I commend the government for its commitment and vision and the considerable energy and attention it has devoted to this legislation. The discussion thus far has featured mammoth, almost unprecedented, public consultations. There were town halls, round tables, submissions electronically and in writing. There was testimony by hundreds of witnesses, and the result in our view is a balanced piece of legislation.

Please do not mistake me; I am not saying it is perfect, but I would invite you to suggest to me whether there has ever been a perfect piece of legislation passed in Canada or anywhere. It does not meet all of the needs of our community. To quote Minister Moore, this is tough, technical, complicated stuff. You will not please everyone.

The discourse has also featured — and I think this is particularly unfortunate — an enormous amount of hyperbole and exaggeration, some of which you have witnessed in previous testimony. It is almost like a Chicken Little syndrome. The claims made about the legislation, some of the drastic and terrible things that will happen contingent on its passage, are quite extraordinary. I sometimes wonder whether the people who are saying these things about the bill have even read it. In my few minutes before you, I want to try to correct some of this misinformation, and then we will have lots of time for questions.

First, there has been lots of discussion about technical protection measures, or TPMs as they are called, and there have been claims made that they protect outdated business models and that they are not in the best interest of consumers. Nothing could be further from the truth. In fact, TPMs allow software developers, for example, to offer 30-day free trials so consumers can test a product before deciding whether or not to buy it. TPMs also allow Canadians to download millions of electronic books from libraries. TPMs provide Netflix subscribers in Canada, numbering well over a million, unlimited access to subscription movies and TV shows.

A statement has been made about my business by a professor. He suggested we do not need TMPs. Nothing could be further from the truth. Technical protection measures offer my members and the creators that we work with the ability to offer access to millions of songs through music subscription services such as Rdio and Zeet at a fraction of the purchase price of the music. TPMs are an enabler of business models that benefits consumers. They are so important to our businesses and are why the WIPO treaties have provided help to prevent their circumvention. Bill C-11 provides an appropriate protection for the TPMs as required by the WIPO treaties.

You heard a professor say that Bill C-11 goes "far beyond what is necessary in international law." In fact WIPO treaties require both: measures that prohibit acts of circumvention, including prohibiting act of access control circumvention, and measures that prohibit providing circumvention services and trafficking in circumvention tools. According to one of the architects — in fact, some people call this gentleman the father of WIPO treaties — Mihály Ficsor, Bill C-11, and he has looked at it, meets the requirements. In a very public discourse with Professor Geist, for example, Dr. Ficsor disagreed with Professor Geist's interpretation of the TPM provisions.

Claims have also been made that many of the new exceptions established in Bill C-11 are nullified by TPMs. For example, Professor Geist told the committee that the exception for perceptually impaired individuals is ineffective, asking the committee rhetorically, "Who would be against providing appropriate access for the blind?" Yet the exception, permitting organizations like the CNIB to circumvent a TPM on behalf of blind persons, has no qualifications whatsoever, and you will see that in proposed section 41.16. There are even rights that enable manufacturers and importers to supply the CNIB with circumvention tools. The condition is subject to a single and very reasonable condition, that the tool not do more than what is necessary to circumvent it for that purpose.

If that is not adequate, the bill goes further to permit the government to pass regulations that would require owners of works to provide disabled peoples with access to TPM-free works if there was ever a problem, and that is in proposed paragraph 41.21(2)(b). The answer to Professor Geist's question, then, is that no one would be against providing appropriate access for the blind.

In concluding, Bill C-11 has been drafted, in my view, to meet the government's objectives of protecting the creative industries, combatting piracy, and encouraging productivity and innovation in Canada's vital creative sector. As I said before, it is not perfect, but what is? We respect the extent of deliberation that has taken place.

With its passage, the creative community looks forward to rebuilding our marketplace, and we are committed to working with the government to identify any issues that need to be addressed, mandated, in the mandated five-year review.

Let us remember that this is about jobs — jobs and careers.

Thank you. I am happy to answer any questions you may have.

The Chair: Thank you very much, Mr. Henderson.

Lee Webster, Chair, Intellectual Property Committee, Canadian Chamber of Commerce: Good morning. My name is Lee Webster. I am a partner with the law firm of Osler, Hoskin & Harcourt in Toronto. I am here today in my capacity as Chair of the Intellectual Property Committee of the Canadian Chamber of Commerce. I am also a member of the Canadian Intellectual Property Council.

The Canadian Intellectual Property Council, CIPC, is a Canadian business coalition established in 2008 under the umbrella of the chamber. It was founded to provide a central voice to press for stronger IP protection both in Canada and worldwide. It represents a subset of Canadian members, including pharmaceutical, software, entertainment and consumer goods companies.

My practice has focused on IP law for over 25 years, and I thank you on my behalf and on behalf of the Canadian Chamber of Commerce for the opportunity that you have given us and others to appear before this committee today.

As a personal observation, I am surprised — I guess perhaps pleasantly surprised — to see that copyright reform has become such a hot and debated topic in this country. It was not so long ago that the Copyright Act contained references to long-dead technologies, such as perforated rolls, punched rolled steel cylinders used in music boxes in the 1880s and 1890s, and it only took 100 years for those references to be removed from the act. I am pleased to see that copyright reform is now moving at a quickened pace and that we may not have to wait until 2085 to have our Copyright Act amended to address the Internet age.

It is virtually self-evident that copyright reform is long overdue. The rollout of the Internet and the ease with which works — music, words, pictures — can be digitized and replicated has severely challenged traditional distribution models for information-based media. We are familiar with the decline in sales of CDs and the challenges faced by the traditional recording industry. More recently, similar challenges now confront the motion picture, newspaper and book businesses.

We now have before us Bill C-11, An Act to amend the Copyright Act. We are here today to provide witness to this committee on how copyright reform should be implemented to amend our laws to fit the digital age, the last somewhat major reforms being implemented in the days when the greatest fear of music rights holders was the copying of cassette tapes on dual tape recorders.

I would like to make a few points. Copyright reform presents a multitude of issues upon which reasonable people can differ. There are many voices who loudly — and now with the extended reach available through technologies such as messaging, blogs and tweets — argue that copyright, and indeed other IP rights, are overly restrictive. They are, of course, entitled to their opinions. However, as a practising lawyer, I can attest from my personal experience that some who argue the loudest for the free dissemination of the works of others also complain loudly when their works are appropriated without compensation.

We also hear that copyright and, more broadly, other intellectual property rights are stifling, that they constrain the free flow of information and consequently are somehow bad for society and impede education and development. Librarians sometimes assert this position. In contrast, universities are often some of the more vigorous proponents of IP rights as a foundation for commercializing university-sourced inventions.

One's views of IP are often skewed by the side of the telescope one is looking through. I urge you in your deliberations to bear in mind that IP rights, including copyright, are therefore well-recognized and time-tested purposes. Generally, IP promotes economic prosperity and protects the health and safety of Canadians.

I will not bore you with a dissertation on the role of patents, trademarks and industrial designs and commerce. However, I will focus on the basic subject matter of Bill C-11, namely, copyright.

Copyright acts as a reward for creative effort. The concept of creating something and giving it away for free is "meritable." However, like it or not, it is simply human nature that reward stimulates creativity. Copyright also does not stifle the free flow of information, simply the right to replicate the work. Copyright protects the form of the work, not substance of or ideas expressed in the work.

Copyright is not an IP right that just protects big business. Individuals and SMEs benefit. It benefits authors, musicians, artists, performers, software designers and others of all stripes. It also benefits the general public, as they are able to enjoy and use the copyrighted works that are created as a direct result of the copyright stimulus.

The chamber has long noted that copyright reform is long overdue. Canada adopted the WIPO Copyright Treaty and Performances and Phonograms Treaty back in 1996. Over four years ago, the Standing Committees on Industry and Public Safety both recommended that Canada's IP laws be reformed quickly, not only to restrain the flood of counterfeit goods in Canada but also to bring Canada's copyright law into conformance with today's technology and international standards. I appeared before both house committees and was pleasantly surprised at the broad support for reform demonstrated by all parties. The Canadian Chamber of Commerce is now very pleased to see that Bill C-11 has made it to the Senate, and we look forward to speedy passage of the legislation.

The Canadian Chamber of Commerce subscribes to the following principles that were initially set out in the introductory sections of Bill C-11. Specifically, the Copyright Act supports creativity and innovation that is important to the knowledge-based economy.

Second, the exclusive rights conferred under the Copyright Act provide rights holders with recognition and remuneration that are essential to support such creativity and innovation. Those rights must be balanced with the ability to ensure that consumers have access to and ease of use for those works.

Third, the benefits of copyright protection are enhanced when countries adopt coordinated approaches based on internationally recognized norms.

Fourth, copyright protections afforded under the act should be enhanced, including through the recognition of technological protection measures, in a manner which promotes culture, innovation, competition and investment.

The chamber agrees with the made-in-Canada solution, but that solution must make sense, and we urge you to look to the experiences of other countries that have reformed their copyright laws. In a knowledge-based economy and in a digital economy, Canada must be on side with its trading partners' practices and get it right.

The chamber believes that with Bill C-11, the government will take a significant step in harmonizing our laws with our trading partners and provide an excellent foundation for allowing Canada to become a member of some important trading blocks. We strongly support the goal of bringing our legislation in line with other leading nations that have adopted the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. We feel that the copyright bill now before the Senate will help foster new business models and stronger economic growth and provide greater clarity.

Lastly, a word an balance, the most overworked word in the copyright debate, as is the word "chill." Balance is important. I tell you what it is not. The balance is not to gut the benefit of copyright under the guise of information dissemination or because of vague fears of big business or foreign governments. The balance is not concocting a right for someone to take away the rights of another. It is simply, as it has always been, that the balance is a means of ensuring proper reward for creative effort. We feel that a modern and effective copyright regime is a critical pillar in Canada's digital economy in order to ensure that the balance is maintained and that Bill C-11 provides that balance.

Again, I would like to thank you for the opportunity to appear today.

The Chair: Thank you very much, Mr. Webster.

Mr. Henderson, in your opening comments you said — I believe I am quoting you directly — "careers destroyed, sometimes irreparably." Could you expand for the committee somewhat just the issues of piracy, what it is and the implications in this regard?

Mr. Henderson: Absolutely. When I left private practice to join Universal Music, the music business in Canada at the cash register, so from a retail perspective, was worth $1.4 billion. Today, it is under $400 million. There is $1 billion missing. There can be a debate about what proportion of that might be directly attributable to privacy, but there can be no debate that most of it is. If $1 billion is missing from your marketplace, that will have an incalculable effect. It will have a ripple effect that goes right through the entire economy. It will not be limited to the big businesses. I think Mr. Webster makes a terrific point. Often it is suggested that the only people who benefit from copyright would be Disney, Warner Brothers or Universal Music. In fact, copyright acts to protect the small guy, the people who, in some sense, almost cannot protect themselves because they do not have access to batteries of lawyers and so forth.

What have we seen in the music industry? We have seen musicians who used to be signed to major labels lose their contracts with major labels. A company like EMI records would have at one point had 30 to 40 artists on the label and might be having four or five now. Where did they go? Some of them did sign to independents, big independents, but where did the artists who were on the big independents go? Did they go to small independents? It pushed people further and further out to the periphery. I would almost describe the result as turning music from a career into more of a hobby. People cannot make money in music these days. There is an absolutely astonishing contrast between an artist who started their career in the early 1990s or late 1980s, like my wife Margot Timmins in Cowboy Junkies, and an artist who has started since 1999 in the Internet era. The disparity in earning ability is extraordinary.

The Chair: I will go my list of questioners, starting with the deputy chair of the committee, Senator Hervieux-Payette.

[Translation]

Senator Hervieux-Payette: Thank you for appearing before the committee this morning. You said that composers could not live off their art and make a respectable living. Could you give us more information about the cause of that drop in income?

Next year, your sales will reach $500 million, and the following year, that number will exceed $800 million. Does this piece of legislation set out any mechanisms that establish some sort of equity for creators? I am mostly referring to the music industry.

[English]

Mr. Henderson: This legislation does not contain a silver bullet, and we have never thought that it would. There is nothing in it that will allow us overnight to restore the marketplace, but it does begin from an important premise. It asserts a moral high ground. In effect, it makes the statement that people cannot take other people's property without recompense. You cannot steal music from an artist unless they want you to. Indeed, many artists do like to give their music away on the Internet. There is nothing in this bill that would prevent them from doing that. It starts from establishing a moral high ground, and that enables us to work with the country and the citizens to rebuild the marketplace. It also brings us into line with what they have done throughout Europe and the United States.

[Translation]

Senator Hervieux-Payette: Would you say that, in the United States and Europe, music creators are better protected?

[English]

Mr. Henderson: Without question, their laws are much stronger. I would point to France, which has the strongest legislation in many respects. Perhaps it should not surprise us that, as the home of the "droit d'auteur," they have acted with such dispatch to protect them. There, recent studies have shown a marketed decline in the taking of music and an increase in paying for music.

[Translation]

Senator Hervieux-Payette: Mr. Webster, last week, a great deal was said about inheritance tax. For instance, in Quebec, we have a well-known artist by the name of Félix Leclerc. Félix Leclerc has heirs. Riopelle, a great painter who is known worldwide, also has heirs.

Do you feel that this bill has a defect because it does not allow a creator's heirs to benefit from his work? In Riopelle's case, a painting that may have been sold for $5,000 at the time could be worth $1 million today, and the family receives nothing.

[English]

Mr. Webster: Are you referring to a right of reversion? Mr. Riopelle, for example, has assigned his copyright to someone. Your concern is that his heirs will not benefit from that in the long run?

It is interesting that you ask that question, because I acted on behalf of a company called Sylvan Entertainment for a number of years in litigation against the heirs to Lucy Maud Montgomery, and I am completely immersed in Victorian copyright law on reversionary rights. The reversionary rights were put into the 1923 Copyright Act as a result of their inclusion in the 1911 Copyright Act in the United Kingdom, and they were included there because of concerns about the heirs of Charles Dickens, who were impoverished.

My personal view, not speaking on behalf of the chamber on this, is that I think that the reversionary rights provisions of the act are mistaken. You will find that, around the world, most Commonwealth countries had enacted reversionary rights provisions following the U.K. act in 1911, and they have all been revoked. I think a copyright holder should clearly have the right do as it sees fit with his or her copyright of works during the person's lifetime, so if the decision is to assign the copyright to a third party, so be it.

I know that in the case of Lucy Maud Montgomery, she assigned her rights to a Boston publishing company back in late 1910s, and she received about $17,000 or $18,000 for her books, which was a fair amount of money at the time. Having said that, those works have earned a lot of income over the years. I do not particularly think that there should be benefit that reverts to the heirs who frankly had nothing to do with the creation of the work when the author of the work has made a commercial business decision to dispose of the rights.

[Translation]

Senator Hervieux-Payette: So you do not believe in the principle of inheritance tax when the artist did not sell, but the work was sold and gained value through several auction sales. Riopelle was generally very poor and left only his work as inheritance.

In such a case, the heirs do not benefit at all from the talent of their father or grandfather.

[English]

Mr. Webster: Let me clarify here that I am not speaking on behalf of the Canadian Chamber of Commerce because the chamber does not have a view on reversionary rights. I can tell you that during the course of my work on the Lucy Maud Montgomery matter, I did read the Senate proceedings here in Ottawa back in the 1920s on this, and this debate was thoroughly canvassed 80 or 90 years ago. Frankly, at the time, reversionary rights were put into the act. My personal view is that I do not believe in them.

The Chair: Mr. Henderson, would you have a comment on the subject?

Mr. Henderson: The only thing I would say is with respect to resale rights per se. I know they are recognized in Europe, and I think that was a progressive move by the French government, for example.

My comment would be that I think that that is beyond the scope of this bill. While that may be an issue that is worthy of being addressed, we have a very narrow ambit here. This is a bill that concerns itself with the WIPO intellectual property treaties, which are focused on the Internet.

Senator Massicotte: Mr. Henderson, you mentioned that this proposed act basically re-establishes the high ground relative to ownership rights. Last Friday, we had some witnesses saying that maybe the act goes on to define the legal rights more clearly, but it will not establish the high ground because those who are technologically proficient will continue to get around the locks. Therefore, it will not achieve very much. I presume that you do not share that opinion. Could you respond to that, though?

Mr. Henderson: No, I do not. If Canada was the first country to embrace the protection of TPMs or if Canada was going first in enacting legislation to implement the WPPT, I would say that we would have to think very long and hard. However, we are the last. When people came to testify before you, before the House of Commons and in the many hearings and round tables, there was much speculation and imagining of things that might or might not happen. In fact, TPMs are protected throughout Europe, Asia, the United States, South America and all around the world. Our legislation is virtually identical to that. None of the terrible things that are supposed to happen with the passage of legislation like this have happened anywhere else. I would start by saying that we need to throw the window open, look out into the rest of the world and see whether any of these things have happened. They have not.

In terms of whether it is a perfect answer or a magic bullet, no, it is not. However, take music; we used to be in the business of selling things. You buy a CD from me; you have that thing. That is a business of selling things. We are increasingly moving into a world where we provide access to you and to others — to consumers of music — they are not buying something; they are acquiring access. The models that employ this business model are models like, as we have referenced, Zeke in Quebec, for example. Rdio is another one; you can visit it at www.rdio.com. You access music. It is streamed to you. You do not get anything. It is not a download; it is a stream. If we cannot protect the integrity of that signal, then people could grab that signal, hack it and keep it for a fraction of the cost of buying the music.

Senator Massicotte: Mr. Webster, another comment made to us is the question of access. We all know about ownership rights. We all have private property, but, even with private property there are certain legislative rights that give people a right of access in spite of the agreement or non-agreement of the author. In this case, locks trump all. There are exceptions, but the locks will trump it all. What do you make of the educators and people in the libraries saying, "We do not want to duplicate, but we want legislative access in spite of the locks." How do you respond to that?

Mr. Webster: The position of the Canadian Chamber of Commerce is that it does support technological protection measures, TPMs. My basic view on TPMs is that a person who distributes copyrighted works should have the right to lock down what they are distributing. If someone does not like that, they do not need to buy it. They do not need to take a licence out on it. It is a package that is delivered with locks, and I think that the commercial market will take care of that.

With respect to educators, it depends on what the purpose is, but I find it hard to fathom how an educator can be impeded by a technological protection measure on a particular work. Do they need to break a lock to copy music? Do they need to break a lock to access a BlackBerry device? What is the work that will be locked down? Textbooks will still be distributed in printed form. If they are distributed digitally and locked down by TPMs, I have no problem with that fact because those are the terms and conditions of use.

Senator Massicotte: How about the other comment that we have gotten? Let us say that the locks permit it. We had one significant witness on Friday morning saying that if someone is trying to facilitate access, which is permitted, but it is not the user directly and they offend the act, the government should use the regulations to make clear that unintended, unauthorized access is not be an offence under the act.

Mr. Webster: If it is authorized.

Senator Massicotte: The locks permit it, but it may not be directly by the person seeking access. He was making reference to that being an offence under the act, and that was not intended to be.

Mr. Webster: Can you give me an example?

Senator Massicotte: There are all kinds of examples, such as someone helping a blind person to get access, given that it is not the direct user.

Mr. Webster: A third party breaking a lock for a blind person, for example; is that going to be happening?

With the copyright debate you see a lot of arguments raised that in the real world never or rarely happen. If there is a third party breaking a lock for a blind person, can the blind person not find access to that media in some other way without breaking the lock? Even if it is broken, will there be a claim brought? I think that is a very small, remote hypothetical.

Mr. Henderson: I want to add that that has not happened anywhere else in the world. Why do we think that those sorts of things will happen only in Canada? That would be my response.

Senator Moore: Thank you, Mr. Henderson and Mr. Webster, for being here.

I have a question for each of you. Mr. Henderson, you made the solid point that this is about jobs and careers, and it is tough to make a living in music these days. The act asserts a moral high ground that one cannot steal an artist's music. I want to ask you about ephemeral rights, which I understand currently put about $20 million or $21 million in the hands of creators. They have been removed. Were you part of the discourse with the department when this was bill was being put together? Were you part of the consultation?

Mr. Henderson: No. I can say that no one came to us and suggested that it might be a good idea to take that right away.

Senator Moore: I did not mean that. I meant were you part of the discussion not of this but of the whole act?

Mr. Henderson: Yes.

Senator Moore: Having established that, was this issue raised in your discussions, or did you raise it?

Mr. Henderson: Yes. Since the bill was introduced, there has been an issue that has been hotly debated about the so-called broadcast mechanical or ephemeral right and the extent to which my members and creators deserve to be recompensed when these types of copies are made by broadcasters.

Now, I do not view the language as having removed the right. I think that the language qualifies the right, and I think that there will be a significant issue between broadcasters and rights holders, after the legislation is proclaimed, as to the exact effect it will have. Will it remain at $21 million? Will it be $10 million? What is the number going to be? The rights were very clearly affected.

Senator Moore: Aside from the dollar amount, the rights were affected.

Mr. Henderson: Yes. In effect, the legislation creates a subset of copies made by broadcasters that would be royalty free.

Senator Moore: Minister James Moore was before the committee and said that this has been eliminated in the interests of a balance. I want to know from you where the balance is. What about the people who created those works? Did anyone suggest to the department that a sum of $20 million or $21 million has been going on so let us take a piece of that budget and put it over there to ensure that those people continue to receive that?

Mr. Henderson: No.

Senator Moore: What happens to the money?

Mr. Henderson: We first saw this when it appeared in the bill as introduced that first day. Everyone gets the bill and combs through it and suddenly sees the provision that affects the broadcast mechanical. That was a surprise to us at the time. As to what will happen, it will take millions of dollars off the table.

Senator Moore: I do not understand. It seems to me that the creators will have to go to court to fight for compensation for their creations. Why are we doing that? Did you raise that?

Mr. Henderson: I prefer that the bill say nothing about the broadcast mechanical.

Senator Moore: What does your wife think about it? She is a pretty good singer.

Mr. Henderson: I do not think there is an artist in the country who would think that it is a great idea that the broadcast mechanical will be affected by this bill.

Senator Moore: Okay.

Mr. Henderson: We have to look at the bigger picture. We have been given a bill that has some good things and some bad things.

Senator Moore: I understand. It is a tough piece of proposed legislation to tackle, which I acknowledge and appreciate. It is a good first step, but I am concerned that some of these proposals will take money out of the hands of the creators. If radio stations were to have nothing but back-to-back ads, who would listen?

Mr. Henderson: I do not disagree. We are looking at this pragmatically. We are missing $1 billion, not $21 million. If this bill has impaired in some way our ability to earn a little money over here, our view is that it restores integrity to the marketplace so that I can get $1 billion back. That is a trade I am willing to make.

Senator Moore: I do not like the reputation that Canada has earned over the last number of years as a piracy haven; it is terrible. If we could do something about that, I would be in favour.

Mr. Webster, I was interested in the discussion with Senator Massicotte about the digital locks. We have heard people say in respect of the disabled that there is an exception with an exemption for them to use this tool. Others have said that using that tool is breaking the law. Is that what you understand?

Mr. Webster: I do not understand it that way. An exception is provided for disabled individuals. Under that exception they should be able to break the lock, provided it is for that intended purpose.

Senator Moore: What about the issue of fair dealing? Proposed section 29 states:

Fair dealing for the purpose of research, private study, education, parody or satire does not infringe copyright.

It seems to be pretty broad. I am concerned about the moral rights for a creator with regard to parody and satire. Do you have any thoughts on that?

Mr. Webster: My concern is moral rights, in the sense that you are concerned that the parody or satire might —

Senator Moore: — change the nature or context.

Mr. Henderson: The author's reputation is addressed by the moral rights provisions of the act. If the parody or satire harms the reputation of the author — and I guess I want to use that horrible word "balance" again — there is a balance that the court would address between the two. The moral rights would probably trump parody and fair dealing.

Senator Moore: This will be tested in the courts. I know that we have to start somewhere, but I am concerned. We heard evidence from creators last week.

Mr. Webster: Fair dealing is always a point of discussion. It is impossible, in my view, to put a sharp box around what is fair dealing and what is not. You need flexibility. In terms of material like parody and satire, you could argue under the existing legislation that they are already covered. Bill C-11 clarifies that they are covered, which is fair. It should not be an infringement for someone to parody a work or satirize something provided it is truly a parody and satire and not a replication of the work.

If someone puts something on YouTube that says it is a ridiculous work and then plays the whole thing afterward, it is clearly not a parody. Parody and satire are a public good. You get into more difficult questions with fair dealing like creating mashups or political commentary, et cetera. It is something that has to be left to the judge to make a decision on. There are many things in copyright that you have to judge by your gut sense rather than by the letter of law. Frankly, with some of our sort of aborted attempts to amend the copyright legislation over the past few years, we tended to drill down a little too far in the minutiae. You have to step back and look at it from a more principles point of view. When you drill down too far in the minutiae, silly exceptions pop up — what-if this and what-if that. The chances of that happening in the real word are quite slim. I support parody and fair dealing.

The Chair: Mr. Webster, our Senate committee and many other committees make use of video conference, as we are doing today. I may be wrong, but this is the first time that I recall seeing two locks on the screen.

Mr. Henderson may say that it is actually on his wall and is a piece of his art. Could you explain the significance of the two locks to the committee? I may be wrong, but I think this is the first time I have seen two locks. I have never seen that before. The two locks must have something to do with the system that we are looking at for the first time during this copyright study.

Mr. Webster: It is probably an issue of privacy rather than copyright law. Someone has locked this so no one can tap into it. It is a bit silly given that we are being broadcast over the Internet. I do not think this has anything to do with Mr. Henderson's support for TPMs.

Mr. Webster: I may be wrong. Is it on the wall behind you, Mr. Henderson?

Mr. Henderson: It could be my new symbol.

Senator Massicotte: My question is for clarification of my understanding of the bill and the equitable rights in terms of the locks. You seem to be saying that the person has the right to break the locks if the person has the equitable right to do so. I understood it a bit differently.

Mr. Webster: If it is in the exception, then they have the right to break the locks.

Senator Massicotte: Educators, as defined in the bill, have that right.

Mr. Webster: There is no equitable rule. You cannot argue that you are breaking a lock on a CD to post it somewhere for whatever purpose because you think it is fair to do so.

Senator Massicotte: What about librarians and documentarians?

Mr. Webster: No. It has to fall within the exceptions of the proposed legislation.

Senator Massicotte: Exactly and specifically.

Mr. Webster: Yes, and I do not have a problem with that. Breaking digital locks for decent purposes has to be addressed at a legislative level.

Senator Massicotte: What are the exceptions? Are they appropriate?

Mr. Webster: To be honest with you, I have not given great thought as to whether there should be exceptions other than those listed. The exceptions listed are appropriate. They are in place as a result of the government listening to interested groups over the past years. Everyone has something to say about it, and that is how they find their way onto the list of exceptions.

The amendments to the Copyright Act back in the 1990s contained a whole bunch of specific exceptions. Making overhead copies of things to put on an overhead projector, et cetera, did not just pop out as a basic gut instinct of equitable conduct. It came up as a result of specific complaints and a recognition of the practical reality of what happens out there in the real world. It is the same thing with the exceptions to the TPM measures.

Senator Massicotte: Senator Hervieux-Payette was asking a question relative to the rights of successors. When a person has assigned his copyrights to someone else, her question was — as I read the act — that the copyrights die or expire 50 years after the death of that person. I think her question was whether that is appropriate and fair. Should this successor not have a continued right in spite of the passing away of the author?

Mr. Webster: Then you are talking about a fundamental shift in the value in this balance. If you think that the copyrights should survive for a longer term than 50 years, you are giving a significant right in favour of the copyright holder.

Copyright extensions exist. Look at Disney in the U.S.; they have extensions of copyright there. The reason is recognition that those properties are quite valuable and the government does not think they should be falling into the public domain. If you are talking about a term extension in copyright, it does change the value of the right.

When you look at copyright versus patents versus trademarks, and I said earlier I would not get into that, judgment calls were made at one point in time that the term of copyright — life of the author plus 50 years — was fair. If you think it ought to be less than that, such as 20 years, or more like 125 years, that is a debate you can have.

Something that has bothered me my entire career is industrial design rights. You have to get a registration for an industrial design right. The total term of protection is 10 years, but I think that the artistic work put into an industrially reproduced object is extremely valuable; 10 years versus 50 years? Give me a break. If I sat here and did a doodle for you on my pad, that would be entitled to copyright for my life plus 50 years. It is a bit of a balance.

Senator Massicotte: We are being told that in many countries it is now 70 years, not 50 years. Is that the case?

Mr. Webster: That is right. The reason is that Donald Duck, Mickey Mouse and works of creative efforts that were created in the 1920s and 1930s are now at risk of falling into the public domain. Those works are still considered to be very valuable as they are, frankly, and there are interests who feel that —

Senator Massicotte: Why is the worth of that work relevant? Picasso is worth a lot. Is it not the concept that you get it while you are living plus 50 years? Why is it relevant?

Mr. Reynolds: What you are looking at now is the real fundamental question of copyright law. How long do you get these exclusive rights? How long can you commercially exploit them for? What are they worth to the public? You can argue that Mickey Mouse should be worthy of protection forever. However, for something else like my sketch and doodle, do you want to give me protection for that forever? Probably not, but those are very fundamental decisions about value and copyright that go directly to this word "balance" that I mentioned.

Mr. Henderson: We have to take this bill as it has been given to us, to a certain extent. Term extension was not on the table, nor were resale rights. They may be issues that should be raised or should not be raised, but my view is they are not within the ambit of what we are discussing today, as important as they may be. That would be my comment.

[Translation]

Senator Hervieux-Payette: Mr. Henderson, when you say that your organization went from $1 billion to $400 million, are you talking about an organization or a sector?

[English]

Mr. Henderson: That was the entire sector. That was the value of the music industry in Canada in 1999 versus today.

[Translation]

Senator Hervieux-Payette: Are you representing the whole industry in your brief?

[English]

Mr. Henderson: No. My members — the major labels — would be responsible for a percentage of that; maybe 80 per cent or something like that.

[Translation]

Senator Hervieux-Payette: Are we talking about Canadian companies?

[English]

Mr. Henderson: No. My members are foreign multinationals.

The Chair: On behalf of all committee members, I would like to express our appreciation for appearing before us today. You have been very helpful and insightful.

We are now pleased to welcome, representing the Information Technology Association of Canada, Karna Gupta, President and Chief Executive Officer, and Ken Englehart, Chair of the Smart Regulation Committee; and, representing the Ontario Arts Council, John Degen, Literature Officer; and, representing the Council of Ministers of Education, Canada, Wanda Noel, Legal Counsel to the Copyright Consortium.

Mr. Gupta, the floor is yours.

Karna Gupta, President and Chief Executive Officer, Information Technology Association of Canada: Thank you, Mr. Chair and members of the Senate committee. I am Karna Gupta, President and CEO of Information Technology Association of Canada. With me here today is Ken Englehart, Senior Vice-President of Regulatory for Rogers Communications. He is also the Chair of ITAC's Smart Regulation Committee.

We are here to support Bill C-11, An Act to amend the Copyright Act, and to present a technical amendment that we believe is necessary.

ITAC speaks on behalf of the Canadian information and communication technologies, the ICT industry. We represent a wide range of small and large companies, which account for about 750,000 jobs in Canada, approximately $140 billion in revenue to the Canadian economy. Our Canadian network providers invest approximately $6 billion a year to support this infrastructure network, including development and support of digital and broadband network and high speed access throughout our country for wireless and Internet applications. This is absolutely critical for our digital economy.

This morning I would like to focus on issues that have been raised by our members. They are, first, use of cloud computing and network personal video recorders, and second, the issue of notice-and-notice, and its implementation time. The intent of the bill has always been not to impact personal video recorder services where customers can view their stored content at a later point. The concern today is that the provision in Bill C-11 in its current wording may have some unintended consequences which can be negative for the service providers and in general for the cloud computing industry.

The whole business model of an efficient service delivery and use is based on three things: the ability to record and ability to store, in this case, either on a network or cloud services, and finally the ability to retrieve and view what has been stored. It is our understanding that the language in the current bill may become contentious for service providers and hence end users to view the stored content at a later date.

On the other issue, though we are supportive of the notice-and-notice provisions in this bill, a few implementation issues need to be addressed. First, we are concerned about the form of notices. They are disparate in their form factor, both in terms of size and in content. Second, we are concerned about the time our members will have to spend to develop the technical processes with their obligations. We would not want this imposed without appropriate time for development.

Finally, there needs to be recognition of the economics of this compliance and the ability to recover cost, or at least have a business model that supports this investment. We believe that some of these issues can be addressed through regulations. However, as for timing, our view would be that the notice obligations only come into force one year after the minister has enacted the appropriate regulations.

I will now ask Mr. Englehart to provide his comments as the chair of the ITAC's Smart Regulations Committee.

Ken Englehart, Chair, Smart Regulation Committee, Information Technology Association of Canada: Thank you very much, Mr. Chair and members of the committee. My name is Ken Englehart and I am the Senior Vice-President of Regulatory for Rogers. Rogers is a long-standing member of ITAC and I chair its Smart Regulation Committee. I appreciate the opportunity to appear before the committee today and will focus my remarks on those provisions that deal with cloud computing and network personal video recorders or network PVRs.

We support Bill C-11 and endorse its intention to legalize the time-shifting of TV programs and allow for the use of cloud computing and remote storage services like network PVRs. This was emphasized by Minister Paradis when he addressed Parliament at second reading of the bill.

For example, Canadians could copy works legally obtained on their computers and mobile devices to enjoy them whenever they may. They could store content in and retrieve it from the information cloud or use a network's PVR service. When the minister appeared before you last week, he reaffirmed the government's support for Canadian investment in and the adoption of cloud computing services like network PVRs.

However, while we applaud the government's policy, we remain concerned that the provisions of Bill C-11 that are intended to facilitate cloud computing, network PVRs and remote storage are not as clear as the minister's statements.

It would be a shame for Canada to adopt a copyright modernization framework intended to drive investment in innovative cloud technologies, only to see Canadians denied those exciting services because of a few insufficiently clear drafting decisions.

As was laid out for you in the Business Coalition for Balanced Copyright's appearance last Friday, the bill requires a modest technical amendment, which would provide greater clarity and certainty in the provision regarding the hosting exception that provides for remote storage. This amendment is needed because while the provision explicitly exempts the act of providing digital memory to store copyrighted works, it only implicitly exempts the transmission of that content back to the consumer. This creates legal uncertainty that could chill any investment in network PVR and cloud computing services in this country, tying up the issue in court for years.

What is a network PVR and why is it so important for us to be able to invest in and roll out this service to Canadian consumers? Today Canadians use personal video recorders, or PVRs, in their homes. A PVR is a set-top box that cable customers rent or own and that is used by them to record programming from their television set to watch at a later time of their choosing.

A network PVR is a service that will operate in much the same way as a PVR. However, instead of storing recorded TV shows in a physical box on top of the TV, a network PVR will remotely store our customers' recorded content in servers located in our data centre.

Consumers in the U.S. are already able to enjoy the benefits of a network PVR service. The U.S. cable company Cablevision launched such a service in 2010, following the ruling of a U.S. appeals court that the concept was lawful under U.S. copyright law. Armed with this legal certainty, other companies in the U.S. are now rolling out network PVR services. In fact, a Harvard Business School study recently found that the legal certainty provided by the Cablevision case has pumped anywhere from $728 million to $1.3 billion of venture capital investment into cloud storage services.

The overall benefit of a network PVR over a traditional PVR set-top box are as follows: first, network PVRs provide cost savings for consumers because they no longer have to rent or buy a physical PVR box. At Rogers, we estimate that the monthly cost savings for our existing PVR customers will be in the range of $5 to $7 a month.

Second, PVRs have limited storage capacity. A network PVR, on the other hand, has unlimited storage capabilities, providing customers with many more opportunities to record shows for later use.

Third, most PVRs available today can only play back the content to a television display. With a network PVR, the content can be played back on other screens securely, including tablets, PCs and smart phones. This allows customers to view their content anywhere in the home.

Fourth, network PVRs are more secure than PVR set-top boxes. If a PVR fails, everything is lost and we are unable to recover a customer's recordings. With a network PVR, everything is stored in the cloud and backups of the recordings are made continuously. As a result, network PVRs offer 99.99 per cent reliability.

Finally, a network PVR provides better energy efficiency for the consumer. Set-top PVRs use significant power consumption because they are always on. With network PVRs, there is no need for physical hard drives found in set-top boxes.

With all these customer-friendly advantages, you can appreciate why we want to offer a network PVR service to Canadians. However, if legislative drafting does not clearly reflect policy and legislative intent, it could result in these services never being offered in Canada.

Fortunately, it is not too late to do something to solve this problem. The Senate has a proud history of ironing out just this sort of legislative drafting error to ensure Canada's laws achieve their policy objectives. This is a situation that calls for just that kind of solution.

We have proposed a very modest amendment to proposed subsection 31.1(4) of the bill to ensure that the government policy is clearly reflected in the new law. That will drive investment and innovation for the benefit of Canadian consumers.

I look forward to your questions.

The Chair: I will now turn to the floor to Mr. John Degen, representing the Ontario Arts Council.

John Degen, Literature Officer, Ontario Arts Council: I want to thank the chair and members of the committee for inviting me to present today. I am honoured to share my perspective with the Senate.

I am a professional writer. I have worked for well over two decades as a publisher, editor, freelance writer, technical writer, head of a national arts service organization for writers, and chair of various boards of directors in this sector. My current day job is as the Literature Officer for the Ontario Arts Council, but I am presenting here today first and foremost as an individual writer of Canadian literature.

I have published two books of poetry, countless newspaper and magazine articles, and one novel. I have been shortlisted and received numerous awards for my writing. I am very close to completing my second novel and another collection of poems, and I would really like there to be a workable copyright structure in place for those works when they arrive in the world.

Far too much of what we hear about copyright these days references the so-called users, but there are no greater users of copyright-protected material than writers and publishers, and our user rights are tied very closely to our rights as creators.

Copyright has never once gotten in my way or impeded my work as a user. During university, I used the fair-dealing exception for my own research and private study, and I continue to actively quote and reference the copyright-protected works of others in my own work with absolutely no concern or confusion about where the legal lines are or how far across them I may venture.

We are all creators and everyone has creator rights under copyright. We must not mistakenly rob our creative selves so make things a little bit cheaper for our consumer selves. If we change the balance of copyright, we rob everyone in order to reward a privileged minority of consumers.

As I am sure you are aware, the process of copyright reform in Canada over the past decade has been painfully slow and often interrupted, mostly because of the incessant delay and confusion tactics of those who object to the very idea of copyright protection. I congratulate the government for weathering the free-culture storm and actually getting legislation this far. That is in itself is a significant accomplishment.

That said, I worry about the excessive focus on exceptions that characterize this bill. Too many exceptions to the law and it becomes more exception than law. I think of copyright law as a fence — a pretty, nicely constructed, non-threatening fence. A fence is a structure designed to define property. A fence is not a series of holes through which folks can figure out ways to trespass on property.

By concentrating too much on the holes and how one might use them to trespass, Bill C-11 risks making the pretty fence of copyright completely irrelevant.

I would like to concentrate on one gaping hole in this fence: the new fair-dealing category of education. This is an entirely unnecessary change. As I have said, existing fair-dealing categories of research and private study have served Canadian students perfectly well for many decades. There is simply no problem that needs fixing with a new educational exception.

Where copying and education go beyond the categories of research and private study — and years of photocopied works in course packs tell us that educational copying very often exceeds those existing categories — we have an affordable collective licensing system in place to ensure that "creatives" are paid royalties for educational copying.

You have no doubt been told that the new educational fair-dealing category will not damage that collective licensing structure. I have the feeling you will be told that again today, but it already has damaged it. A number of post-secondary institutions have already withdrawn from collective licensing and have specifically cited Bill C-11's new exceptions as the reasons for doing so.

This licensing structure represents tens of millions of dollars per year for Canadian writers and publishers. It is payment for actual copying beyond current fair dealing. If the education category stays in Bill C-11, we already know the result of that new dealing, and it is decidedly not fair.

The educational exception is extremely short-sighted. The very same students who, we are told, do not need to pay for educational copying over the four years of their degree program will eventually need to be paid for their own creative work for the rest of their lives. As I have said, we are robbing our creative selves to temporarily please our consuming selves.

If I could request one thing from this chamber in passing this bill, it would be this: Please remove the short-sighted and completely unnecessary educational exception. Our copyright fence has enough holes in it already.

Thank you for your time and attention.

The Chair: Thank you very much, Mr. Degen.

I will now turn to Wanda Noel, represent being the Council of Ministers of Education.

Wanda Noel, Legal Counsel to the Copyright Consortium, Council of Ministers of Education, Canada: Good morning, honourable senators. I am very pleased to be here this morning representing Minister Ramona Jennex, Nova Scotia's Minister of Education and Chair of the Copyright Consortium formed by the Council of Ministers of Education, Canada. As chair, Minister Jennex represents ministers of education from every province and territory in Canada except Quebec.

I am a lawyer in private practice; I have been practising copyright law for 30 years. The Council of Ministers of Education has been one of my clients for about 12 years now.

What is the Council of Ministers of Education, Canada? It is an intergovernmental body, formed in 1967 by education ministers. The council's purpose is to support education ministers in meeting their constitutional responsibilities to provide education in Canada's provinces and territories.

Copyright law directly affects education policy and education practice in every classroom in this country. Ministers of education have been active and engaged in the federal copyright reform process for 14 years, since 1998. We find ourselves today in this chamber at the very final hour of the passage of a 14-year journey.

The journey was caused by the fact that the existing copyright law, which will be changed by Bill C-11, is unclear in many respects as it applies to education. This lack of clarity is why the CMEC Copyright Consortium has been persistent for 14 years in urging the federal government to clarify how the copyright law applies to the use of digital technology for educational purposes.

The ministers of education seek fair and reasonable access to copyright-protected material for students and teachers in their educational pursuits. It should come as no surprise to the honourable senators in this room that the CMEC Copyright Consortium responded positively to the passage of Bill C-11 by the House of Commons.

Minister Jennex, speaking on behalf of her education minister colleagues in a press release last week, applauded the passage of Bill C-11:

For years now, Canada's antiquated copyright laws have been of concern to the education community, particularly their negative impact on the use of the Internet and the ability of learners and teachers to harness the full potential of digital technologies. Updating our country's copyright laws to address Canadians' evolving digital learning needs is long overdue.

Advances in technology-enhanced learning call for a modernized Copyright Act. Digital technology has opened doors to wonderful new ways for teachers to teach and for learners to learn. However, students and teachers require a copyright law that addresses these new technologies in a clear way. Without the education amendments in Bill C-11, Canadian teachers and students at all levels, from kindergarten to post-doctoral studies, may be legally obliged to forego learning opportunities and curtail Internet use in the classroom out of fear that they might be breaking the law.

The good news is that Bill C-11 appropriately deals with the significant and important copyright issues for the education community. This legislation provides the right balance between the rights of users, creators and the commercial industries that market the works of creators.

Bill C-11 addresses the priority concern of education ministers. It establishes the legal framework for students and teachers to use the Internet for teaching and learning. The proposed educational use of the Internet amendment in Bill C-11 provides a reasonable, balanced approach for learning in the digital age.

The consortium ministers applaud the inclusion of education in the fair-dealing provision, a position which is contrary to the learned gentleman on my left, Mr. Degen, and I am sure we can have some interesting discussions about that. The ministers believe adding education to the list of enumerated fair-dealing purposes in the Copyright Act will not mean that teachers can copy whatever they want. Copying by teachers must still be fair. It is a fair-dealing provision, and the fairness requirement still exists under the two-step test to qualify for fair dealing that has been established by the Supreme Court of Canada.

For example, copying entire books would not meet the second test laid down by the Supreme Court. The dealing must be fair. The amendments to the fair-dealing provision will have a positive impact. This amendment will bring Canadians onto a level playing field with teachers and students in classrooms in the United States, and in many other countries around the world.

Ministers of education, as the guardians of the public education system in this country, view copyright very seriously. Copyright is respected by government ministries, and school boards across this country teach respect for copyright in their schools.

Education ministers across the country have long maintained that a modern and balanced copyright framework will protect the public interest and will also produce many societal benefits. Clearly, the need for such a framework has never been more important than right now when all levels of government are investing in connecting learning Canadians and promoting skills development and innovation.

In closing, I would like to read the following message to the senators here today from Minister Jennex and her ministerial colleagues:

The consortium is pleased to see the copyright laws will soon be modernized, providing opportunities for learning Canadians to excel in our digital world and helping to position the country's education sector as a leader in the information age. We applaud the federal government for moving forward.

The Chair: Thank you, Ms. Noel.

I will move to my list of questioners immediately. I call first on the deputy chair of the committee, Senator Hervieux-Payette, followed by Senator Oliver.

[Translation]

Senator Hervieux-Payette: If I may, I am from Quebec, and the province's Minister of Education completely disagrees with the council's position. She shared her concerns with us, and I understand that you do not represent Quebec.

However, I am very intrigued by your insistence on the balance that exists between the rights of creators and those of students and professors, who will someday probably publish material and be deprived of copyright when their work is reproduced. We are not talking about a huge amount, but I think that Mr. Degen does not completely agree with you. What kind of money will be saved by your anglophone provincial ministers in Canada? What amount have they been earmarking for that sector so far?

[English]

Ms. Noel: The answer to that question is that with the passage of Bill C-11, the acquisition budgets by school boards and ministers of education for the purchase of copyright materials — books, films, music — will not change. They spend hundreds of millions of dollars purchasing educational resources now, and whether Bill C-11 passes or does not, those budgets will not change.

There are no "savings" for ministers of education or ministries or school boards.

[Translation]

Senator Hervieux-Payette: I find that somewhat strange because creators have talked to us about a fund that was ultimately accepted. It is also a matter of managing — I would say carefully — since we are not talking about hundreds of millions of dollars, but just over $20 million. That money was meant for authors for the reasonable application of copyright and actually allowed photocopies or digital copies. Universities will no longer have to pay that $20 million, so could you tell me how they will compensate the authors whose work they are copying?

[English]

Ms. Noel: I do not want to use a pejorative word, but there has been a great deal of rhetoric and numbers thrown around about losses that will result from Bill C-11. None of those numbers have any empirical basis. The claims are very easy to make and are unfounded in my view and in the view of my clients, the ministers of education.

For example, the reference to the fact that universities and colleges have withdrawn from the Access Copyright system because of Bill C-11 is patently false. It has nothing whatsoever to do with Bill C-11.

What has happened is that academic publishers are now directly licensing universities and colleges and, to a more limited extent, kindergarten to grade 12 schools, so they are bypassing a collective. Half of the universities in this country, when offered a licence from a copyright collective at a rate they thought was too high, chose not to operate under the collective system and buy licences directly from publishing houses. The amount of those payments is an empirical number and can be supported and justified in terms of evidence, so that last year $161 million was paid by about 60 universities in Canada for the purchase of the rights to reproduce academic journals and other educational resources.

I think you are seeing winners and losers.

The Chair: I think Mr. Degen would like to express something as well.

Mr. Degen: I think that, absolutely, the post-secondary schools that have decided to withdraw from the Access Copyright collective licensing have quoted the fact that Bill C-11 is about to pass and that there will be new freedoms for the schools. They have all talked about the extreme cost savings that will come about. It is simply not true to say that they are not counting on new freedoms in Bill C-11 because it is in every single one of their press release announcements. In fact, most of those press release announcements are direct quotes from a Toronto Star column by Professor Michael Geist, who is advising that schools wait until the passage of Bill C-11 to see just how much of a cost savings they can realize by withdrawing from collective licensing.

I certainly congratulate every school that is investigating private licensing because that means revenues will flow to creators, but while they are investigating private licensing, they absolutely intend to withdraw from the collective licensing and to use Bill C-11 as the reason for doing so. That has been verified.

[Translation]

Senator Hervieux-Payette: Mr. Gupta, for purposes of comparison with our creative artists — especially in literature — could you tell us what the average income of those who work in your sector is?

My second question is for Mr. Englehart. Do you know why there is a lack of technological protection and why the two technologies have been allowed to compete? Is there a technical, political or economic reason behind that decision to not grant you the protection you requested in the amendment to section 31.1(4)?

[English]

Mr. Gupta: You asked about average salary. You must realize that the information and technology sector is a very wide swath of employment; there are developers all the way to senior executives, so the average salary would be very hard to pick across the board.

In a typical study looking at the information technology sector, with respect to the development dollars on a global scale, Canada falls between $55,000 and $65,000 per year compared to India, where it would probably be $45,000 and in China $40,000. It varies greatly.

It is very difficult for us to net out what the overall average salary across the segment would be. For developers and architects, we can look on a global scale based on benchmarks typically where Canadian salaries fall.

Mr. Englehart: I am not aware of anyone who has really opposed this type of clarity, so we find it very frustrating that we do not seem to have an opponent here and yet we still have a lack of clarity.

The Chair: Thank you.

Senator Oliver: My question is directed to Mr. Gupta and Mr. Englehart about their proposed amendment. After I give a little background, I will ask the question: Could this not be done by regulation?

The first witness this morning before this committee was Graham Henderson of Music Canada. What he said, among other things, is that Bill C-11 before us is the fourth iteration of copyright reform. It has been going on for years, and it is the first one to have actually made it to the Senate. The result of this bill, after all these iterations, is that we have a balanced piece of legislation.

The House of Commons has retired for the summer, so you may have to bring back 300 people for an amendment that will cost hundreds of thousands of dollars just in travel alone, plus other expenses.

I heard in your presentation that the minister, both in the House of Commons and in the Senate, said he believes that people should be able to store and retrieve information in the cloud, and he was explicit in that language. It seems to me that your main concern is that it was only implicit that it can be retrieved, so the difference is between being explicit and implicit.

You said to us in your presentation today on page 5 that "if legislative drafting does not clearly reflect policy and legislative intent, it could result in these services never being offered in Canada." You did not say that it "would"; you said it "could," so it is a possibility.

Since you have two explicit statements by the minister about the intent of the Government of Canada with respect to this section, could that intent of the minister and of the government not be included in a regulation?

Mr. Gupta: On the two issues I raised, the second one, the notice-and-notice regime, could definitely be dealt with through the regulation side. I think that needs to be clarified, and that clarity should come through.

Senator Oliver: On cloud computing?

Mr. Gupta: On cloud computing, the way this industry is moving, we are looking at things that have happened behind us. We do not even know how some of the technical changes will unfold over time. The specific clarity that is put on the table needs to be provided either through some ministerial, much more specific comments or the language in the law being changed. I realize the issue you raise in terms of bringing back the House of Commons for this change.

This morning, we are here to raise the issue that there have been serious concerns raised by many of our members. Once this has been raised, it is probably important for us to put it before this committee to be looked at. If there is another way to address this — as you mentioned, by ministerial letters or specific comments, and that clarity is provided — I will let Mr. Englehart talk to that, but that might be one of the issues we need to find out about.

Mr. Englehart: I am a communications lawyer by profession, and I do not believe this is one that can be fixed with regulations, whereas many of the things that people have come to talk to you about today can be. I understand the quandary you are in, but I also know that cable companies like ours, which would otherwise be launching a broadly based NPVR service, will in the face of this uncertainty have to proceed cautiously, probably with a small trial, and await the outcome of the courts, which is a real shame.

Senator Oliver: If it went to the courts, surely they would look at the two explicit statements of the minister, both in the House of Commons and the Senate, wherein "we intend that they can both store and retrieve in the cloud."

Mr. Englehart: Nothing would make me happier than if the court agrees with you, but some judges will say, "I am sorry, the statements in Hansard cannot override the words before me." I am hopeful but worried.

Senator Massicotte: Ms. Noel, you made reference that what is being proposed in the bill is similar to what is happening in other jurisdictions. Is that same exception allowed in the United States?

Ms. Noel: That is called fair use in the United States, and it provides for the same purposes. It does not use the word "education" in the fair use provision; it uses the word "teaching," and it says "including multiple copies for class use." That provision has been in the United States law since 1977, and the publishing and creative communities in the United States have continued to publish and thrive.

Senator Massicotte: Largely the same rules, with the obligation to destroy 30 days after the course?

Ms. Noel: The 30-day destruction requirement does not exist in the U.S. law, but in the TEACH Act — to tell you the truth, I would have to get back to you on that. There is an act dealing with online learning in the United States. It is not part of the Copyright Act.

Whether there is a 30-day destruction requirement for copyrighted material contained in lessons in the United States, I could not answer that right now, but I could find out.

Senator Massicotte: With the objective of fair dealing, does the choice of the author to possibly put special locks on it impede your rights to get fair-dealing access here in Canada? Could the locks impede your right?

Ms. Noel: The position of the ministers all along has been — and I do not want to wring that word "balance" to death. The problem with a digital lock provision is that it does not protect a creative work; it protects a lock, a piece of technology. That is a fundamental and profound departure from anything that exists or has ever existed in our copyright law. The debates that have gone on through three major rounds of reform since 1988 have dealt with what rights should be given to users and what rights should be given to creators. This is the very first time that a piece of technology, as opposed to a piece of creativity, will have rights attached to it. It is a profound departure because copyright is supposed to protect creative endeavour and a lock is not a creative endeavour.

Senator Massicotte: It is an additional measure to protect the rights of the author. It looks like that person could use locks to impede the access, to the detriment of the fair-dealing provisions of the intent and the act in your mind?

Ms. Noel: Yes.

Senator Massicotte: Yet you are saying that you are happy with the act as it is?

Ms. Noel: I am really glad you asked me that question because copyright law reform, the process that you are engaged in, is a difficult one because you always have a winner and a loser no matter what decision you make in a copyright reform exercise. I think this bill was excellently done because it balances. It gives important rights to creators to be able to use digital technology to earn revenue from their works, but at the same time it gives very important rights to public interest users — libraries, archives, museums and educational institutions — to be able to use those works of the mind for societal benefit.

There are tradeoffs. If you had a piece of legislation in front of you where everyone was happy with it, then it would not have struck that balance.

Senator Massicotte: That never has occurred.

Ms. Noel: No; that is right.

Mr. Degen: This morning Mr. Henderson referenced a couple of times real world situations and a lot of the panic that goes into extreme situations that might happen. This is a Kobo eReader — not a commercial for Kobo — and I have a bunch of books on it. Let us say I was studying these books in a university environment. I have Moby Dick, that great Canadian classic up here. Let us say I was studying Moby Dick. On this piece of technology, Moby Dick is locked. It is within the Kobo propriety locked system. It cannot be transferred to a Kindle, for instance. They do that for definition within the marketplace. There are fears out there that were I to be studying in a classroom environment, the lock would impede my fair-dealing rights to research and private study. I get around that completely legally, and without breaking any locks, by using paper and a pen. I read what is on the electronic device and I make my notes for research and private studying. I am, in effect, copying what is in the text and I do that perfectly legally. That is more likely what will be happening in classrooms. The extreme fears about digital locks locking students away from information are completely unfounded.

Senator Tkachuk: Mr. Degen, so it is clearer to us, because it is a bit confusing, I would like to trace the money. You said the universities and the departments of education pay someone. Who do they pay presently? Who are they paying now that you fear they will not be paying in the future?

Mr. Degen: I am focused on the collective licensing revenues that go directly to Canada's copyright licensing agency, which is called Access Copyright. Access Copyright is a collective of writers and publishers who came together to pool their work into a repertoire and offer it under a collective licence. Otherwise, schools would have to spend a lot of time and staff effort to find individual authors to get permissions and to make payments.

As a pooled repertoire, they can have access to the entire repertoire and pay a small fee per year. That is under dispute right now. Post-secondary education institutions en masse have walked away from renegotiation of collective licensing contracts. Some have come back — some of their associations have recommended that they come back; others have not.

Senator Tkachuk: They have made deals with someone else, or there are no deals at all?

Mr. Degen: They have made private licensing agreements with other content providers but they are basically shutting out the repertoire of Access Copyright in their classrooms. That repertoire represents most of what is written and published in Canada.

Senator Tkachuk: The money goes to Access Copyright and then Access Copyright distributes it to the membership?

Mr. Degen: They distribute it to Canadian writers and publishers, yes. They also have reciprocal agreements with 29 other countries around the world so that if our work is used, for instance, in France or in England, we also get copyright royalties through that.

Senator Tkachuk: If the publisher makes an agreement, does the writer not still get money?

Mr. Degen: How so; if the publisher makes a private agreement?

Senator Tkachuk: Yes.

Mr. Degen: Yes, absolutely. As I said earlier, I congratulate anyone who is afforded to make those private agreements. The fact is that Canadian publishers and Canadian writers have expressed their preference to work as a collective. It is easier for them and it is easier for the schools. The schools are not saying we want it to be even easier by going individually; they are saying we simply do not want to pay the licence at all.

Senator Tkachuk: My point is if the university does not have deals with the publishers, they will have to have deals with Access Copyright. They are not going to not have a deal with someone. Is that not correct?

Mr. Degen: That is how it should work. Yet they have walked away.

Senator Tkachuk: What are you saying? Are you saying that universities will print these books or make copies of these books?

Mr. Degen: Universities have been using what are called course pack collections for decades now. Instead of buying 10 books, you photocopy 10 sections from those 10 books and put them together into a course pack collection. That practice will continue and they will hope beyond hope to lean on Bill C-11's educational exception to allow them to do that without licensing.

Senator Tkachuk: Does Access Copyright have people working for them?

Mr. Degen: Absolutely.

The Chair: Access Copyright will be here this afternoon as a witness.

Senator Tkachuk: I know, but I want to ask this witness. Do they have people working for them?

Mr. Degen: Yes; they have a staff.

Senator Tkachuk: How many?

Mr. Degen: I cannot answer that question. It is a small staff.

Senator Tkachuk: So the money that goes from universities to Access Copyright goes to publishers and artists. Is that done equally? How are the expenses deducted?

Mr. Degen: They have different distribution models but the bedrock principle behind Access Copyright is that the money flows to the original rights holder, who normally is the author. If money does go to publishers, it is because those publishers have separate agreements with their authors. Eventually it will then flow to the author through those separate agreements.

To make one more point, the average salary for a Canadian writer is about $24,000 a year. The Access Copyright collective licensing represents, on average, less than 0.2 per cent of university budgets. We are not talking about a huge burden on post-secondary education by any stretch of the imagination.

Senator Tkachuk: How many writers would that be?

Mr. Degen: You will have to ask Access Copyright when they come this afternoon, but I am pretty sure they represent several thousand independent Canadian writers.

Senator Tkachuk: Full time and part time?

Mr. Degen: Yes.

Senator Ringuette: My question is mostly for the ITAC representative. In your presentation, Mr. Englehart, you talk mostly about cloud data storage and computing, but you indicated mostly for TV programs. I look at the amendment that you have proposed and I cannot help but think that there is more to it than TV programs. There is coming down the tube, probably from your association, cloud computing for books and cloud computing for music — Rogers is already providing music channels.

You desperately need this amendment because of the future you are seeing for your cloud computing. Since you know that is where you want to go, you also know that the $5 to $7 a month for the PVR box will have to be replaced.

I am looking at the cost factor here for consumers. What is the cost factor that we are looking at for consumers who want to store electronic books, music and movies? What is in store for the consumer?

Mr. Englehart: That is an excellent question. Cloud computing, cloud storage and network PVRs are powerful technologies because a little bit of storage costs a lot more proportionately than a great big computer. I have a storage device in this iPad and I have a storage device on my PVR in my living room. All those little bits of storage are quite expensive on a per gigabyte basis. However, if you take a great big computer, a great big storage facility, then the cost per gigabyte is much lower. The network PVR will save customers $5 to $7 a month because our costs will go down by that much.

All of these technologies are harnessing the fact that transmission is quite cheap and storage is quite expensive. Instead of storing everything locally, you store it somewhere in a big server farm and then transmit what you need, when you need it and where you need it.

These are very powerful technologies and you are absolutely right; ITAC is interested not just from a network PVR perspective but for the broader cloud computing and cloud storage perspective. In the same way that I expressed to Senator Oliver the fact that we cannot jump in with both feet with the network PVR, entrepreneurs will be reluctant to start Canadian-based cloud storage businesses. They will locate them in another jurisdiction if they have these concerns about copyright.

Senator Ringuette: Let us go to the amendment that you have tabled here. For the purposes of this meeting and our viewers, I will read the proposed amendment 31.1(4):

Subject to subsection (5), a person who, for the purpose of allowing the telecommunication of a work or other subject matter through the Internet or another digital network, provides digital memory in which another person stores the work or other subject matter does not, by virtue of that act and the transmission of the work or other subject matter to the person who stores it, infringe copyright in the work or other subject matter.

Technically and legally, how will this amendment, if adopted, change the perspective of ITAC?

Mr. Englehart: It will mean that we will have the confidence we need to launch these new cloud services and we will jump in with both feet, whereas otherwise we have to go very slowly and cautiously and wait for lawsuits.

Senator Moore: With regard to the amendment, Mr. Englehart, did you appear before the House of Commons committee when it was studying this bill?

Mr. Englehart: Not me personally, but people from Rogers appeared, yes.

Senator Moore: Did the Information Technology Association of Canada appear?

Mr. Gupta: I think we did. We did provide a submission as well.

Senator Moore: Did you submit this amendment?

Mr. Englehart: Yes, we did, and it was discussed at the committee but it was not incorporated into the bill.

Senator Moore: You tried there already?

Mr. Englehart: Yes.

The Chair: Witnesses, that concludes our questions. On behalf of all members of the committee I would like to express our appreciation for your appearance here today. Thank you very much.

We continue our study of Bill C-11 with our third session this morning and are pleased to welcome, representing UBM TechInsights, Harry Page, Chief Executive Officer; representing the Association of Canadian Publishers, Bill Harnum, Publisher and 2012-13 President; representing the Canadian Publishers' Council, Allan Reynolds, Chief Executive Officer, Pearson Education Canada; and representing the Canadian Research Knowledge Network, Deb deBruijn, Executive Director. We will begin with Mr. Page.

Harry Page, Chief Executive Officer, UBM TechInsights: I thank you for the opportunity to be here this morning to speak on this very important subject of Bill C-11, An Act to amend the Copyright Act. More specifically what I would like to address with the committee this morning is how some of the proposed changes may impact the ability of Canadian innovators to protect their intellectual property rights beyond copyright itself.

I am the Chief Executive Officer of UBM TechInsights, as the chair has mentioned. We are a local firm headquartered here in Ottawa. Over the last 25 years our mission has been to protect the intellectual property rights of creators and owners. We do this primarily through the use of reverse engineering or forensic investigation techniques as a tool to both detect and improve infringement.

UBM TechInsights, and more broadly the Ottawa-based reverse engineering technology cluster, has continued to flourish over the last two decades with annual revenues now approaching $250 million. We play a critical role in detecting and protecting intellectual property infringement of both Canadian innovators and foreign companies.

As I am sure you are aware, intellectual property takes many different forms, and there are a variety of legal regimes in place to ensure its protection. While Parliament has recently modernized and improved Canada's Copyright Act, there are also a number of other forms of intellectual property that are just as important in promoting and protecting innovation by Canadians and Canadian companies, including patents, trade secrets and integrated circuits, topologies, to name but a few, but herein is the anomaly we see.

The protection of intellectual property relies on national laws wherein technology itself is not bound by borders or national laws, per se. In many instances, the rights of creators and innovators in Canada, as well as their access to international markets, rely heavily on ensuring the rights of foreign IP holders remain intact and sacrosanct. Similarly, foreign-based companies rely on comprehensive intellectual property protection here in Canada, protection that complements and does not interfere with the intellectual property regimes of their native countries. It is in this context that creators and innovators work hard to monitor and detect infringement of their intellectual property in rapidly evolving and highly complex technology environments, thereby protecting their significant investment to realize the return on the same and enable them to continue to fund innovation.

Quite often, it is only through the use of highly advanced forensic investigation techniques that one can discover and prove intellectual property infringement. UBM TechInsights applauds the efforts of the Canadian government to modernize and improve intellectual property protection. However, I stress to the committee the importance of ensuring such efforts do not unintentionally or inadvertently impede the ability to protect other important forms of intellectual property. In this regard, we have flagged concerns that aspects of the Copyright Act may have unintended consequence with respect to the work of our local technology cluster in the protection of intellectual property rights. Specifically, our concern is that anti-circumvention provisions could create legal uncertainty that could discourage the use of forensic reverse engineering to detect patent infringement and trade secret misappropriation. This is complicated by provisions related to the means for controlling access to a device that may contain copyright works, even if such copyright works are in fact unrelated to the object of the forensic investigation.

UBM TechInsights is presently working with the government and officials to ensure that the regulatory language bringing the provisions of the act into force are clear and precise so they will not hinder the full and forceful protection of Canadian intellectual property and the protection of intellectual property creators and owners in international markets. I am encouraged so far with discussions to date and have every faith that these matters will be effectively addressed in the regulatory phase of the process.

In particular, we believe there are a number of regulatory amendments to the present exceptions for circumvention that would mitigate these risks while continuing to provide the necessary protection to copyright. Two of these exceptions would be to permit circumvention for non-infringing purposes and to broaden the current investigative exception to include all laws of Canada and those of our trading partners, specifically with respect to trade secrets and foreign intellectual property. This experience, however, has underscored both the importance and complexity of Canada's intellectual property regime.

Canada is a global leader in the protection and validation of intellectual property. Canada and Ottawa's growing reverse engineering technology cluster is now recognized globally as the champion for intellectual property rights of creators and owners. I am confident that the role of our local cluster will continue to grow in importance in market scope. It is becoming increasingly recognized that intellectual property is the engine of the new economy. We must do everything possible to ensure the full and complete protection of intellectual property, not only in its respective forms and manifestations but also in respect to how each IP regime must be enabled to complement and not interfere with one another in achieving this objective. We will continue to improve and enhance our technical skills and expertise to ensure that Canada remains at the forefront of global leadership in this rapidly evolving market and highly important technology sector for the benefit of Canada.

Bill Harnum, Publisher and 2012-13 President, Association of Canadian Publishers: I am pleased to appear here today on behalf of the Association of Canadian Publishers. I have been in the Canadian publishing industry for 35 years. I am now Director of Publications for the Pontifical Institute of Mediaeval Studies at the U of T, and I spent the bulk of my career at University of Toronto Press.

I thank you for this opportunity to speak about an issue that is of great importance to all Canadians publishers, to those represented by Mr. Reynolds' organization, which include the largest producers of classroom and curriculum materials in Canada, but also to independent Canadian-owned publishers who I represent. Among our members are scholarly presses from across the country whose books are primarily intended for educational purposes; children's publishers for whom school libraries and classrooms are a crucial market; and almost all of the publishers of Canadian novels, plays and poetry, core material in literature studies at all levels of the education system.

For Canadian publishers of all sizes, the education sector is enormously important. The introduction of education as a purpose under fair dealing in Bill C-11 without any definition of "education" or any clarification of "fairness" in this new context creates vast uncertainty for hundreds of businesses and thousands of authors and for the entire education system across the country.

Publishers recognize and have always recognized the need for fair-dealing exceptions. We do not seek compensation when excerpts of our works are used for reviews, even when the reviews are bad. We do not seek compensation from individuals who copy excerpts of our work to pursue their personal interests in specific subjects. We want our books to be read by whoever is interested in them, and we do not wish to put up unreasonable barriers for those who seek the information or the literary experience we offer.

However, in order to ensure that we remain able to produce these works, we must ensure that our work is compensated, as all other work supporting education is compensated, whether it is the construction of library buildings, the instruction provided by faculty, or the equipment that furnishes laboratories. Like all these suppliers to the education enterprise, publishers provide an essential component. We invest in these works; we are entitled to be compensated for their use; and that compensation is what propels the publication of future knowledge.

We appreciate that our government values the high-quality books we provide and is seeking to make them more accessible. We also know that this government recognizes the importance of sustaining the system that provides them and does not intend to undermine it.

Our concern is that the absence of clarity around the definition of education as a purpose under fair dealing will have a number of unintended consequences. The most immediate of these will be uncertainty in the marketplace, as users claim a very broad interpretation of education.

For example, a bank offering staff training in customer service might feel free to use copyright materials without compensation because the purpose is "education." Some members of government have said that the definition of "fair" is well understood by all, but in many other countries, similar legislation is made much clearer by reference to maintaining a market as a factor in determining fairness.

No such clarity exists in Bill C-11. Inevitably, rights holders and users will put forward differing interpretations of education and fair dealing, and litigation will surely follow. Litigation takes a long time. The CCH decision took 11 years to work its way through the courts, leading to 11 years of uncertainty. No one — not teachers, not ministries of education, not university presidents, not authors, and certainly not publishers — desires that outcome.

We understand the wish for more accessibility and we support it. We must, however, have clarity in establishing a framework for it, and that framework must be strong enough to support the investment that publishers make in our education system.

I turn now to Mr. Reynolds to give you some concrete information about that investment.

Allan Reynolds, Chief Executive Officer, Pearson Education Canada, Canadian Publishers' Council: As mentioned, my name is Allan Reynolds. It is my privilege to be the CEO of Pearson Canada. I have just recently celebrated my fortieth anniversary in publishing, and that gives me an opportunity to speak about the past with some expertise, and I can talk a little bit about the present, and I suspect this group will have something to say about what the future of publishing in Canada looks like.

In Canada, Pearson is one of the largest suppliers of both English-and French-language educational materials. We can trace our roots back to 1842, with the beginning of Copp Clark Publishing. We have been here a long time and we have invested a lot of money in Canada.

My goal for the next two minutes is to attempt to help you understand the potential unintended consequences should Bill C-11 pass into law in its current iteration.

Let me be very clear. We need a copyright bill. We need a copyright bill that reflects the realities of our rapidly evolving digital marketplace. However, I do fear the potential negative consequences of the passing of legislation that proposes the addition of education as a purpose for fair dealing. Our most immediate concern follows along from my colleague's comments about the unintended harm that the CCH Supreme Court decision did to publishing in Canada, or shall I say the varied interpretations of the decision.

Participants in our industry are not opposed to fair dealing — far from it. In fact, we all benefit from the use it permits.

That being said, the definition of "education" in this legislation has no parameters, leaving the meaning open to a wide range of interpretation. If fair dealing is expanded to include education, as proposed in Bill C-11, there will be unintended, detrimental consequences to our industry.

It is human nature to meet or to exceed a limit, and in the case of Bill C-11, no limit has been set, leaving the door wide open to a wide range of interpretations and definitions. Rights holders are put in an awkward position. Pearson, the Association of Canadian Publishers, and the Canadian Publishers' Council are put in an awkward position. If we criticize the proposed amendment, we are seen as being at odds with our customers and opposing something that appears to be good for students and educators. We are seen as exaggerating the possible outcomes. That is not my intention.

Pearson has a massive investment to support the transformation in our market from print to digital and web-based content. The publishing industry in Canada has been at the forefront of the creation of innovative digital products that meet the needs of the 21st century learner. Why would we, as an industry, continue to invest in a marketplace that has such an uncertain future? Will companies invest in the production of Canadian educational resources that have been devalued by ill-defined educational exemption?

During the question period, I would like to bring forward two or three examples of products that might be in jeopardy going forward, and you can see the impact it might have on students in Canada.

Educators are looking for clarity and for confirmation that dealings they make are permissible and fair. We, too, are looking for clarity. If the members of the committee are the least bit unsure about the potential results of this amendment, then they should propose an amendment that will achieve clarity and reduce risk all around.

The insertion of four words, "as prescribed in regulations," into the legislation would ensure that all stakeholders — students, educators, the government, and the publishing industry — have a basic negotiated framework to provide clarity, to mediate disputes and to mitigate damages. Otherwise, I am afraid we will see a combination of a disincentive for content creators to invest and potentially costly litigation. That is in no one's best interest.

Thank you for your kind attention. I would be happy to answer any questions at the appropriate time.

The Chair: Thank you very much, Mr. Reynolds.

We now turn to Ms. deBruijn.

Deb deBruijn, Executive Director, Canadian Research Knowledge Network: Good morning. Thank you very much to the committee. It is my privilege to be here today to speak with you about the Canadian Research Knowledge Network, which is a consortium of Canadian universities, 75 of them at the moment, that work together to make copyrighted works in digital form, digital content, available to the full range of faculty, students and staff at universities that participate.

My name is Deb DeBruijn. I am the Executive Director of CRKN. This is work that the universities have been involved in with this organization for the last 13 years.

I was asked to appear not so much to give my organization's views on Bill C-11. Our organization does not take a specific position on the bill, but we do support the advocacy efforts and the positions taken by the Canadian Association of Research Libraries and the Association of Universities and Colleges of Canada.

The reason that the work of our organization is relevant to this discussion is that we offer a complementary way of making copyrighted works available to authorized users under licensing provisions that we enter into directly with the publishers. At the moment, we have agreements with approximately 50 publishers, both Canadian and international. The value of these contract agreements are currently over $100 million per year. These are costs that the participant universities are covering out of their budgets, primarily out of their library budgets, and represent agreements that are seen to be both in the best interests of the publishers and the content owners, as well as the consumers and the students and faculty who use these works.

We see this as a very important, complementary way of providing fair access and compensated access to copyrighted works, because it is not on a transactional basis. It puts in place stable agreements over a multi-year period and takes away some of that risk that some of my colleagues here have talked about, and ensures that there is fair compensation to the content creators and content rights holders.

In many ways, when we started doing this work, we were dealing primarily directly with publishers and only for digital forms of the content. What we have found is that some of these publishers used to deal with access copyright in the print environment but in the digital environment have found it more beneficial to enter into agreements directly with the library or consortium of universities in order to scale these agreements and to put in place non-transactional types of arrangements.

We are now also finding, with the proposed changes in the Copyright Act, that our licensing approach to the use of these materials is coming closer in line. Publishers in our licences have long agreed on some of the provisions that are now finding their way into the Copyright Act, so we have evidence to show that in fact when there is this kind of stable regime, it is possible to come to agreements where there is benefit both for the rights holders and for the consumers.

I would be happy to answer questions of the committee following these presentations.

The Chair: Thank you very much, Ms. deBruijn.

I will now turn to our list of questioners, starting with the deputy chair of the committee, Senator Hervieux-Payette.

[Translation]

Senator Hervieux-Payette: Mr. Harnum, you talked about providing a clearer, more concise, definition on educational material because the banks that offer courses could use the "education" clause. Do you have any other examples in other areas? We are talking about all educational material made available by the private sector, and not by places of instruction because, to my knowledge, that is not specified in the legislation in terms of education. It is a matter of education departments, but also education in the general sense.

Would you agree with the clause if it was well-defined and guaranteed compensation?

[English]

Mr. Harnum: I believe that our biggest concern is the lack of clarity, you are right, and we can certainly point to examples where a bank, one of Canada's prime banks, notified access copyright two years ago that they would not be renewing their licence because, once this bill was passed, they felt that their use would be fair dealing right across the board. That is certainly a concrete example of that sort of thing.

In the government's backgrounder to Bill C-11, they stated clearly that this bill would define education as education within a structured context, such as education within a university or a school, but that did not make it into the bill. There were other things mentioned in the background papers that did not make into the bill, including the importance of market damage. There is a lot of need to clarify that entire issue.

[Translation]

Senator Hervieux-Payette: My second question is for Mr. Reynolds. Actually, I think you agree with the fact that the education issue lacks clarity. Do you make a distinction between electronic copies and paper copies? Do you think one would be easier to cover than the other?

She is mostly talking about electronic copies. Nowadays, a house like yours probably produces both, so it makes material available to the clients who buy it in either electronic or paper format. If we were to keep the current system, do you think that electronic and paper copies would be well-protected and that creators would be compensated appropriately?

[English]

Mr. Reynolds: That is a good question. However, I would suspect that, as time goes by, as the future unfolds, we will find that we are going to need a system of compensating publishers, authors and creators both digitally and in ink on paper. My suspicion is that our Copyright Act needs to be very clear on how we will approach compensation going forward. Really, all we are looking for at this point is clarification.

[Translation]

Senator Hervieux-Payette: You promised us some examples. For the sake of those listening to us, I would like to hear some specific and concrete examples that could illustrate your concerns or recommendations.

[English]

Mr. Reynolds: Mr. Chairman, with your permission, I will reach under the desk. I have something here.

The Chair: By all means.

Mr. Reynolds: This book that I am holding is a social studies Saskatchewan custom book. If you can imagine, I am holding the book in one hand and the digital copy in my other hand. It certainly is available in both ways. This was created specifically for the province of Saskatchewan, for the students of the province of Saskatchewan. It looks at social studies from the perspective of a Saskatchewan student from a first Nations perspective. If you could imagine, we created this as a custom book with no guarantee of a sale. Once we have created this book, obviously it is our job to go out and sell it to the boards, to the schools and to the teachers to ensure that we are being compensated for what we have done. There is significant cost in both the digital and the hard copy.

Going forward, we know that if there are not regulations put in place, if there are not definitions of what fair use truly is from an educational perspective, individuals, teachers, will take this and simply create an opportunity for a new book, if you will, taking a chapter here, a chapter there, integrating it with their own content and taking chapters from other books. We cannot see how that would compensate us for the monies that will be put at risk as we create this product.

Our concern is that there is a way to identify what is a fair use of content, how we will be compensated for it, and giving clarity to the teachers, boards and provinces on what they can do and cannot do. Is that reasonably clear?

[Translation]

Senator Hervieux-Payette: You said two or three, so I am ready for your other examples.

[English]

Mr. Reynolds: This book is actually a small part of a grade 4 French second-language program. It is meant for students in grade 4 across Canada who are learning French as a second language for the first time. That is their entry point, if you will. It is not for immersion students who are learning everything in French. It is not for core French in the province of Quebec or elsewhere in Canada. There is no market in the world for this product except in Canada. Without some degree of certainty that it will not be used in a way that breaks up the program and that it is used pedagogically correctly, we are not compensated for it. Once again, this puts it at risk.

My job as CEO of a company, and many of you have been in this position before, is to assess risk. Where do we invest our money to be sure that we will have a return on our investment? Pearson is a very large company, worldwide. My superiors will make decisions about risk in Canada. I have to make decisions about where that money will be invested across Canada as well. My suspicion is that if an uncertainty is created, we will be at risk in terms of the creation of products for students going forward in Canada.

Senator Moore: Mr. Page, on June 6, you appeared before the House of Commons Standing Committee on Industry, Science and Technology in connection with the review of this bill, and I read your company's press release. It says you flagged concerns that certain aspects of the bill may have unintended consequences with respect to the protection of other forms of intellectual property, in particular patents and trade secrets. Specifically, anti-circumvention provisions could create a legal uncertainty, discouraging the use of reverse engineering to detect infringement by restricting access to a device that may contain copyrighted works, even if such works are in fact unrelated to the subject of the reverse engineering effort. Could you explain that?

Mr. Page: Sure. There is probably a bit of marketing going on there. A perfect example would be that there is a growing gaming industry in Canada. Someone could create a gaming console, where the person who is actually bringing that gaming console to the marketplace is the owner and creator of the copywritten material. However, the hardware that is put into the console itself, the electronics, the other software, all the control mechanisms could be misappropriated from someone else. By putting a TPM on that gaming console, actually opening up that device to prove that there is misappropriated technology other than what the copyright owner actually owns in there could be deemed to be illegal.

Senator Moore: You have the game.

Mr. Page: The technology protection measure could actually inhibit you from opening up the game. There could be a seal, for example, on the enclosure or some kind of technology protection measure that prevents you from actually opening up the enclosure and seeing what is actually inside that or the electronics or looking at some of the other software that might be utilized.

Senator Moore: Who will open it up? I do not understand.

Mr. Page: That is what my company does. We do that on behalf of the other intellectual property owners. We do the forensics. The best analogy for my company is that we are like the crime lab on the American TV show, CSI. We do the forensic investigation to provide evidence of use that allows the rightful owners of intellectual property to identify misappropriation of that. In the case of this gaming console, if a client of ours felt that there was something within that game that actually infringed upon their intellectual property, we would need to open that up, provide that incontrovertible evidence that says, "Yes, indeed, your rights have been violated."

Senator Moore: Given what you do, are you saying that this bill would make it illegal?

Mr. Page: We believe it could create legal uncertainty around that aspect of our business. In other jurisdictions, the right do that is protected in law. For example, at the micro circuit or the semiconductor level, there are acts in the world. In the U.S., there is the Semiconductor Chip Protection Act. It says that as long as you obtain the product legally and do the forensic work for a legal and honourable purpose, those acts are allowed in law. You are doing that to help someone protect their intellectual property rights. That is the basis of our business. That is how we protect people and illustrate infringement.

Senator Moore: Very interesting.

Ms. deBruijn, you mentioned that the Canadian Research Knowledge Network has arrangements with 75 universities and 50 publishers. How does it work? Can you run through what your company does so that I can understand? We have heard comments here today that, because of this act, people think that they will not have to enter into rights agreements with companies such as yours or Access Copyright. I would like to know how it works today, and if that is a concern for you.

Ms. deBruijn: Our organization is a not-for-profit organization, and its members are 75 universities. That includes all of the major universities, all of the doctoral and PhD granting universities and the majority of the others.

I would say that our organization does not envision a future when all of the access to copyrighted materials will be provided either through large licences like the kind that we enter into now or, alternatively, that it will be all covered under compensation through Access Copyright or through fair-dealing provisions.

We believe that the future will probably be more of a portfolio of different approaches depending on the need, the scale, the cost and so on, and that there will be a variety of mechanisms that will work in a complementary way together to provide both a fair regime for creators and consumers and a flexible one where there will be a provision for supporting and enabling innovation and the production of new works.

For example, we work specifically with some of the very large, international, very expensive scholarly publishers where we want to be sure that there can be provisions for unlimited use of the content. We typically put in place these licences that cover a broad range of rights and accesses, such printing and using in classes.

Senator Moore: Aimed at the research sector.

Ms. deBruijn: Yes, aimed at the research community. It means that it extends the kinds of access and uses that would typically be of a scale and magnitude that would not be allowed under exceptions to the Copyright Act and would typically not be something dealt with on a transactional basis, where every single use has to be counted. The administration of that is very onerous and high.

Because these are very large agreements, they cover a very large group of students, faculty and staff, and they are for a multi-year period. There is stability. There is confidence on the part of both the publisher and the universities that these are stable, that the costs will not go through the roof and that the kind of use that they need — the bona fide educational use — is provided for.

Ultimately, where the publisher sees a return is not only in financial compensation for the use of those works but also in that foundation of knowledge being used and re-purposed and coming in the form of new publications, new knowledge that is created and new scholarly work that is brought to the market.

Senator Moore: On the practical, day-to-day basis, the Canadian Research Knowledge Network might have an agreement with University of Toronto, for example. We probably could not afford this at Saint Mary's University.

You are aimed at research schools primarily?

Ms. deBruijn: The content is aimed at the research agenda but not just at research schools.

Senator Moore: You enter into agreements with those universities.

Ms. deBruijn: They are members of our organization.

Senator Moore: You charge them a fee.

Ms. deBruijn: Yes.

Senator Moore: What do they do? Do they pass that on to the students?

Ms. deBruijn: No.

Senator Moore: What about the people who wrote the books that the publishers represent? How do they get their money?

Ms. deBruijn: We broker the agreements between the publishers, and then the contracts that are created have the universities that wish to participate joining those agreements. For the most part, the costs of these are covered by the libraries; it is part of their acquisitions cost.

Senator Moore: University libraries?

Ms. deBruijn: Yes. Those costs are not passed on to students. The universities pay an operations or administration fee to CRKN, but the costs of the licences are shared and cost-recovered. There is no overhead on that that is charged to the universities. It is based on a cost-recovery system.

What arrangements the publishers have with the authors and the content producers is a separate matter.

Senator Moore: You do not get into that?

Ms. deBruijn: No.

Senator Hervieux-Payette: You were talking about the value of these agreements being $100 million. What is the component of the material itself, if I were just buying a copy and not making a reproduction, and the reproduction attached to it? What is the percentage? Is it 10 per cent of the book? When we had an author appearing before us last week, she was saying that, when one of her books is sold at $10, she gets 90 cents. Of course, if it is being reproduced under the new law, she believes and we heard that she might not be sure to get additional money if 100 copies were made of her book.

What are you doing in your organization? How much money is going back to the author for electronic or paper copies? How much will the authors get?

Ms. deBruijn: I am not sure that I can answer that question because those business arrangements are between the publisher and the authors. We are not privy to that information.

Senator Hervieux-Payette: Do you pay something to the publisher? You pay someone. I do not mind the percentage; I am just wondering if there is a cost attached to the reproduction per se.

Ms. deBruijn: No, not per se, not on a transactional basis. For example, we have one major scientific publisher where the annual cost for that licence is $30 million. That $30 million is paid to the publisher irrespective of how much usage there is of that resource among the participating universities. Strictly hypothetically, if there were not a single use or access of that scholarly material, the cost would be exactly the same. Equally, if the usage is 1 million or 2 million downloads of different, specific articles, the cost remains the same.

That puts in place what we believe are very fair compensations to the publisher for that material. It is not free, cheap or misappropriated, but it also gives the universities and the scholars certainty and stability to fully utilize that material in all elements of their work.

The basis is that we believe it contributes to the production of new knowledge, new information and new scholarly content that ultimately is brought back to the publishers and the marketplace.

Senator Hervieux-Payette: Can you be more precise? I do not know how that will work for reproduction versus production, which is costs plus profit. Take my example of $10. Everyone is satisfied at $10 but when it comes to reproducing, do you add something? What percentage do your organization and the publishers put in the formula — and I suppose it is a formula — between the original copy and all the copies that will be made from that specific piece?

Ms. deBruijn: There is no formula. The price remains stable at the negotiated price for the term. If that price is deemed to be inappropriate at the end of the term, then there are further negotiations at the renewal points. There is no formula. There is no transactional cost for reproduction.

Senator Massicotte: I have a couple of quick questions for either Mr. Reynolds or Mr. Harnum. You are seeking clarification to the proposed act. What is the case in the United States? We were told that our legislation resembles very much what is in the United States. What is their case? Is it more specific than our proposed act?

Mr. Reynolds: The regulations in the U.S. specifically talk about the replacement value, the market ability of the product and the loss of market. In terms of the educational exemption, fair dealing is the opportunity for the publisher to be compensated. If a sale is lost, then it is not fair use. If under normal circumstances a product is purchased as opposed to copied, then it is not fair use. That is the essence, if you will, of the difference.

Senator Massicotte: Did you wish to add, Mr. Harnum, or is it clear enough?

Mr. Harnum: I think that is clear.

Senator Massicotte: The Supreme Court issued criteria to determine, one of which is no prejudice to the author. Would that not be the same thing as the Americans have? If you suffer, then it is not fair use.

Mr. Harnum: The six-step guideline, which is in the CCH Canadian Ltd. decision, is just that. It is non-exhaustive. You do not have to cross each "t" and dot each "i." Market damage specifically in the decision has been cited as neither the most important nor determining importance in deciding whether use is fair. That is the contrast between our situation and the American situation. The three-step test is exhaustive. You must do all three things for an exception to be considered fair under fair dealing and for an exception to be considered acceptable.

There is a difference.

[Translation]

Senator Maltais: Mr. Reynolds, you are the Chief Executive Officer of Pearson Education Canada, a company that has been around for many years. Earlier, you gave us two examples of publications that could not survive with the current legislation. Could you now give us two examples of great successes for your company and for authors?

[English]

Mr. Reynolds: I could give you many more than two examples. Over the past 40 years I have been in the business after starting out as a physics editor. The books that I edited back in the early 1970s were an adaptation of an American product adapted for Canadian use for the specific pedagogy curriculum within the province of Ontario. It was a hugely successful program in the sense that it sold for the better part of two decades. That is the type of product that any commercial publisher or commercial entity would like — something that essentially is an annuity as it continues to sell year after year. Certainly, I was specifically involved with that one.

The company I lead now has been at the forefront of mathematics education in Canada. We have published several very successful mathematics programs for K to 12 and K to 6, with extensions into middle and high school, which were written specifically for the Canadian marketplace. The exception is our national program and the opportunity to adapt for the curriculum of the provinces of Alberta and Ontario and for the Maritimes. Those programs have been immensely successful for us.

[Translation]

Senator Maltais: When you publish a document intended for a very specific clientele, such as the second example you gave us — an introduction-to-French book used in the fourth year in Saskatchewan — are you not taking a risk in the first place, since you know very well that you will not be able to sell the book in Alberta, Manitoba, British Columbia, Newfoundland, Ontario, New Brunswick? Would that not rather be an experience that would help you sell other books for which you would be well-paid?

[English]

Mr. Reynolds: There is no easy answer to that because each program is specific to the situation. The grade 4 book for all of Canada is essentially for students studying French as a second language. The grade 7 book for Saskatchewan was produced on a custom basis. We were the only company that was going to produce this book for the province of Saskatchewan. However, there is no guarantee that anyone will buy it. In many circumstances, we need to go out and buy it, so there is an inherent risk. Of course, the risk is less when you are the only publisher. In the case of the K to 6 elementary math program I mentioned, we have three and sometimes four competitors.

[Translation]

Senator Maltais: You said earlier that, once a book has been edited, you have to sell it to school boards and schools, but now you are saying that you receive an order.

[English]

Mr. Reynolds: No, we were given the right to produce that product. At that point, the school boards have to buy it. In this specific case, the province dictates what the curriculum will look like. It is not necessarily a board decision to purchase that product. They can implement the curriculum in a variety of ways. Yes, there is an inherent risk in any program; it depends very much on the circumstances.

[Translation]

Senator Maltais: In closing, I think that the volume you printed was ordered by the government and imposed on school boards.

[English]

Mr. Reynolds: No, in most cases it is not.

[Translation]

Senator Maltais: So why did you create it if it had not been imposed on school boards?

[English]

Mr. Reynolds: It is an experience.

[Translation]

Senator Maltais: So we are talking about an experiment? Great. You do know that, when it comes to experiments, they can result in a success as well as a failure?

[English]

Mr. Reynolds: Absolutely.

The Chair: Witnesses, that concludes the questions we have for you today. We thank you very much for appearing before us. It has been very helpful.

(The committee adjourned.)