Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue No. 9 - Evidence - November 3, 2016
OTTAWA, Thursday, November 3, 2016
The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:31 a.m. to study, and make recommendations on, the operation and practices of the Copyright Board of Canada.
Senator David Tkachuk (Chair) in the chair.
[English]
The Chair: Good morning and welcome to the Standing Senate Committee on Banking, Trade and Commerce. My named is David Tkachuk and I'm the chair of this committee.
By way of background, section 92 of the Copyright Act requires a statutory review the act to be undertaken by a committee of the Senate, the House of Commons or both houses of Parliament every five years. In 2017, the federal government is set to review the federal Copyright Act. Our committee thought it would be helpful at this time, in anticipation of this review, to hold a couple of hearings on the operations and practices of the Copyright Board of Canada. Today is our second meeting. We anticipate that we will report to the Senate with recommendations for the government to consider by the end of this month.
I'm pleased to welcome back in the first segment of our meeting, from the Copyright Board of Canada, Claude Majeau, Vice-Chairman and Chief Executive Officer; and Gilles McDougall, Secretary General.
Thank you for your interest and for being with us today. Please proceed with your opening remarks, and then we'll open the floor for questions and answers.
[Translation]
Claude Majeau, Vice-Chairman and Chief Executive Officer, Copyright Board of Canada: Mr. Chair, senators, I would like to thank you for giving me this opportunity to appear before you. I am accompanied by Gilles McDougall, Secretary General. The chairman of the board, the Honourable Justice Robert Blair, unfortunately cannot be with us today because he is presiding this week over cases before the Ontario Court of Appeal.
I am happy to engage in this discussion on the operation and practices of the board. The board is an integral part of a larger scheme set out in the act. The scheme supports collective administration of copyright and sets out some regulatory oversight, which was delegated to the board. Since the Copyright Board was established in 1989 as a successor to the Copyright Appeal Board, its mandate and workload have grown significantly with major revisions to the act in 1997 and 2012.
Decisions of the Federal Court of Appeal and of the Supreme Court of Canada continuously add to the legal, economic and procedural issues the board must address and take into consideration. Eight decisions of the Supreme Court, all but one resulting from parties' applications for judicial review of the board's decisions, have substantial bearing on the board's current and future activities. These decisions have also considerably complicated the board's role in the tariff-setting process.
A 2015 study by Professor Jeremy de Beer shows that the board certified 852 different tariff-units in respect of the 15-year study period between 1998 and 2013. The study further indicates that, on average, the board is asked to certify more than 70 tariff-units per year. The increasing volume and complexity of files that the board is required to deal with cannot be ignored or underestimated. Professor de Beer made the following comments in this regard:
The board's powers or procedures have been central to some of the most important copyright matters of the 21st century: music streaming, peer-to-peer file sharing, Internet service provider liability, iPods or other device levies, the use of educational materials, and much more.
Underlying the creation of the board was the recognized need for an organization mandated to assess opposing claims, to obtain reliable evidence, and to eventually strike an objective balance between the various competing interests at play in the setting of copyright royalties.
In striking this balance, the board is under a legal obligation to act judicially, that is, to act like a court of justice, in a rigorous, rational and unprejudiced manner. Acting judicially often also implicitly entails the obligation to decide matters freely, without external pressures, influence or solicitation, the only constraints stemming from the evidence adduced and the rule of law.
[English]
The Copyright Board of Canada is an independent, quasi-judicial tribunal created under the Copyright Act to establish the royalties to be paid for the use of works and other subject matters protected by copyright when the administration of these rights is entrusted to a collective society. Collective societies are entities that pool copyrights for efficient management purposes. In the 1980s there were approximately five collective societies, while today there are more than 35. The direct value of royalties set by the board's decisions is estimated to surpass $400 million annually.
Because the board acts as an economic regulator, it must issue decisions based on solid legal and economic principles, reflect a thorough understanding of constantly evolving business models and technologies such as music streaming, and be fair and equitable to both copyright owners and users.
The board bears similarities to a trial division of a court for all matters it determines. In particular, it deals extensively with complex facts and evidence based on testimony and expert reports. The board is also often the first to interpret new legislation or to apply legal principles established by the Supreme Court of Canada. The board's reasons must be reliable, understandable and convincing, drawing heavily on the board's resources and the skill and expertise of its members and staff.
In a 2016 study, Professor Paul Daly wrote that:
. . . the delays before the Copyright Board may well be caused, at the very least in part, by a prevailing culture that tends to drag out decision-making processes, and that the Copyright Board should be given the tools to shift the prevailing culture.
He added that:
It may be that these delays are unavoidable in an increasingly complex copyright world, which features a Copyright Board with limited resources.
As a matter of fact, considering all comments, studies and submissions made by stakeholders so far, we see little consensus emerging as to what changes are required. Each stakeholder has different views, which makes solutions quite numerous and inconsistent. For instance, the suggestion was made that the board could become something analogous to a business development office. It is difficult to understand what that means.
In any event, it would be inappropriate to use any review of the board's procedures to challenge the merits of the board's decisions outside the proper recourses before the courts.
The board cannot escape certain constraints set out by the legal framework within which it carries out its mandate. First, the board cannot avoid due process requirements such as seeking all party submissions and specific issues that arise in the course of the proceedings. This procedural requirement can significantly slow down the process, yet it cannot be bypassed.
Second, despite the flexibility afforded to administrative law processes, the board must account for the fact that the tariffs it certifies are of general application, contrary to court decisions that only bind the parties involved. The board's decisions must be made in the public interest, which means that it has to account for interests beyond the parties.
Third, despite the board being the master of its procedure, as recognized by the Supreme Court of Canada, procedural rules may never alter or preempt statutory obligations. For example, even if the parties reach an agreement on the tariff, the board must investigate to ensure that it is in the interest of parties who are not involved in the private negotiations. This creates pressure on the board's resources, pressure which is exponentially increased as new tariff proposals, as well as technological, economic and legal complexity, are added to the caseload. This increased workload has not corresponded to increased resources for the board.
The board is the first one to acknowledge that the current situation with respect to its processes needs to be improved. In this respect, the board took some measures, such as consolidating a number of processes into a single hearing. However, additional potential solutions need to be examined. We believe that the board should be part of the five-year review of the act to take place next year. Our contribution to this review would be structured around two themes: First, there is a need to announce the effective fulfilment of our mandate. In this respect, we will be working in close collaboration with officials of the Department of Innovation, Science and Economic Development.
Second, the inflow of cases needs to be addressed at the source, by analyzing the structures of the collective administration regimes provided for in the act. In particular, we will be looking at their functioning, the ways they can be streamlined in order to have fewer filings of proposed tariffs or more consolidated filings, and the status of agreements filed with the board. As such, we will not limit our contribution to the sole question of procedures. We will also be addressing some fundamental issues not necessarily addressed by others.
In this context, the board can offer an unbiased prospective and propose solutions that could improve the statutory schemes. We believe we can build on our institutional expertise and understanding of the ins and outs of the cultural industries. This concludes my presentation. I welcome any questions you wish to ask.
The Chair: Anything to add, Mr. McDougall?
Gilles McDougall, Secretary General, Copyright Board of Canada: No.
The Chair: Perhaps you could, before we get started, help me out as to what members — We have heard about part- time and full-time. I'm not sure what a secretary general is, but you're a full-time employee?
Mr. McDougall: Yes, I am an employee.
The Chair: Obviously, Mr. Majeau, you're the chief executive officer. Then, are the board members all part-time?
Mr. Majeau: No. I'm also a member.
The Chair: And you're a member, okay.
Mr. Majeau: The act says that the board comprises up to five members: a chair, which ought to be a judge, sitting or retired; a vice-chairman, who is also the CEO of the board — I'm that person — and up to three members. So, right now, the chair is a part-time chair, Justice Blair. I'm the full-time member, and there is a third member, Mr. Landry, who is a part-time member. So right now there are three members.
The Chair: So there are two part-timers and one full-timer.
Mr. Majeau: Exactly.
The Chair: Do they have to have expertise in copyright law?
Mr. Majeau: With respect to the chair, he has to have expertise in how to run the hearing. He has expertise in administrative law. He has expertise in commercial law. Copyright is a new topic for him.
The Chair: What about the other two members of the board?
Mr. Majeau: I'll speak about Mr. Landry. Mr. Landry has been in the intellectual property sector for all of his career, Ogilvy Renault in Montreal. As for me, I'm a lawyer, and I've been working on cultural industries for all of my career, actually. Before being the CEO or the vice-chair, I was the secretary general of the board. So I was in Mr. McDougall's position.
The Chair: How many employees would there be?
Mr. Majeau: We have 18 employees, but you have to realize one thing here. The board, according to the Financial Administration Act, is like a department, and I'm the deputy head of the department. We have no support, as such, from any of the departments, contrary, by the way, to other tribunals around the world, which receive support from, in the U.S., the Library of Congress; in the U.K., from the Intellectual Property Office; in Australia, from the Federal Court. So the board operates like any other department. Of the 18 employees, there are two economists, plus, right now, four lawyers. All the rest are supporting staff, finance, administration, so on, clerks of the board.
Mr. McDougall: Human resources staffing.
The Chair: So you can't go to Justice and say, "Hey, we're swamped. Do you have any copyright lawyers who could help us out for six months?''
Mr. Majeau: That's the last place we could go because we're independent. The Department of Justice would say, "No, we don't mingle with your operation.'' All of the lawyers in the departments are being kind of seconded from the Department of Justice to every department. That's not our case; our lawyers are our own lawyers. They belong to us; they don't belong to the Department of Justice.
The Chair: One more question before I get to my colleagues: Do you contract out a lot of work? Do you go to a law firm and contract out to a law firm to help you in your decisions?
Mr. Majeau: When we contract out, it has been mostly on administrative issues, access-to-information issues, budget issues, administration issues. Over 20 years, we have had some help from economists, at some point, to help us to summarize the evidence, but with respect to legal aid, contracting out in order to receive legal opinions has happened but not often. They were small contracts.
[Translation]
Senator Massicotte: This is a very important topic, not only for authors and creators, but also for the Canadian economy. It is a matter of fairness and the commission has a very important role to play as a referee, and in defining the rules of the game with a critical mind, both for culture and for our country. Yesterday, we heard testimony that I am sure you are aware of. The main complaint, the gap, the main challenge, is the length of the delays, some other comments aside. No one is questioning the quality of the judgments that have been rendered, the tariffs or the structure. The question is about the work and the delays.
The delays, as you mentioned yourself, are not acceptable because they bring about uncertainty and cause money to be lost. We have no doubt that you are very capable and well organized people. However, knowing your laudable intentions and your competence, which is second to none, I wonder why the board has permitted all these delays? Of course, the workload is enormous, but you are proposing to look for solutions as part of the five-year review. Why have you waited until now to look for solutions yourselves? You say that the input and the comments do not come together, and that people are not in agreement, and I understand that. But, as the leader, the person responsible, you have to decide, even though there is no consensus, that you will still make such and such a decision to come up with concrete solutions to the problem of delays.
Mr. Majeau: Let me explain two things, senator. People are confusing two phases of the process. There is phase A, which takes place before and during the hearing, and phase B, once the matter has been heard. In general, a lot of people have proposals to make, but the proposals all deal with phase A. Some people suggest developing regulations, others are opposed, others want to change the guidelines on the procedure. Studies have been done, as you will hear today, by Professor Daly and Professor de Beer. Internal work has been done by two departments, Canadian Heritage and Innovation, Science and Economic Development Canada. We have done some work ourselves. It is all about phase A, once the file has arrived at the hearing stage. The problem that you have been hearing about is principally related to the time things take once a hearing has been held, not before.
Yes, there can be problems before we start a case, but, that is often because the parties are not ready. We are always ready. The board has never said that it is not ready to hear a case, because we always are ready. But often, the parties say that they have submitted too many tariffs and, this year, they do not have the resources to start such and such a hearing, so they choose to proceed with one specific file. These are often strategic choices. In phase A, they pay a tariff and then they negotiate. Phase B is the following stage, once the board has heard a case. Perhaps Mr. McDougall will be able to tell you about all the steps once a case has been heard.
Often, people look at statistics and say that the case has been heard and that the hearing finished on such and such a day. However, we are going to explain to you what happens then, and I will come back to explain something else.
It is a pity that we are forced to set priorities. While we are examining one file, a second one, a third one, and yet another one may arrive. These are major files that follow on from hearings. These files are extremely complex, and no one will deny that. With the few resources we have available, we have to set priorities. So, in principle, the first file we heard will get the first decision in terms of the tariffs.
Senator Massicotte: I will not go into the details too much, because you admit yourself that the delays are unacceptable. I am sure that there is a lot of work, but, whether the work is done in one month, three months or six months, it is still the same work. I do not understand why you could simply not move faster.
Mr. McDougall: At the moment, I am hearing a lot about the decision on online music services that is taking a long time to be rendered.
It has turned into what I would call a cluster of decisions to be made. The board had to make a number of decisions that required new methodologies to assess tariffs and obliged us to examine new statutory exceptions, meaning new factors in the act. The board had to work on a total of five major decisions for which priorities had to be set. As Mr. Majeau mentioned, the priorities are set according to the order in which the various hearings were held.
While we are working on the decision on commercial radio, the decision on online music services has to wait. We need several months to analyze the decision, consult the parties involved, and ensure that all the stages of the process are followed. We need several months to manage it all. That is why the delays are piling up and a lot of files are waiting.
Senator Massicotte: Some countries operate more quickly. In your presentation, do you refer to the fact that it is perhaps a matter of culture?
Strategically, it is perhaps in the interests of the parties to go to the board for a decision, not necessarily to settle everything mutually. I understand that the act often requires your approval. Would it be possible to be less dependent on the board to come to some conclusions? Also, why is it necessary for you to approve things that the parties already agree on?
Mr. Majeau: We are getting into matters that are a little more technical here. The fact remains that the reproduction of music and the public performance of music are mandatory schemes. The parties may agree, but they have no option to submit their agreements, especially when those agreements may often focus on one category of tariff. There may be agreements with an association, but, for us, the tariff applies generally and is not limited only to the parties that signed an agreement. We have to make sure that it is consistent with our other decisions and that it is in the public interest, because everyone is going to have to pay according to the tariff established by an agreement.
In this particular scheme, when agreements are submitted and the file is analyzed, we have to set the tariffs. It is mandatory. Once again, without wanting to go into questions that are too technical, I would say that other schemes are optional and the parties can either agree or submit a tariff to the board. When the parties agree after submitting a tariff, the agreements take precedence over our decisions. But often the same people who make the agreement in question submit it to the board. Without being required to do so, they submit it to the board and say that the agreement seems representative to them and that they would like it to apply to everyone.
Senator Massicotte: Is there a way to scale down the board's role?
Mr. Majeau: That is something we would like discussed. If you are asking us why it has not been done beforehand, it is because it may involve amendments to the act.
You might want to ask why the public performance of music is a mandatory scheme for some whereas, for all the other schemes, it is optional. You might also ask why, in a scheme like that, the agreements do not take precedence while, in another scheme, they do take precedence.
In my opinion, it must all be harmonized, and I say that without having analyzed it in depth. I am sticking my neck out a little by saying this, but perhaps there are reasons to justify keeping the two existing schemes or perhaps not to keep them any longer. There are inconsistencies between the two schemes, specifically those in which the old tariff that the board has approved continues to apply as long as there is no new tariff. For other schemes, there is a requirement to ask the board for the new tariff to be in effect provisionally. There are schemes that establish a one-time payment. In the print copy scheme, the board has to designate a collecting society rather than a management company. For retransmission, the board has to distribute royalties between different management companies.
We are bombarded with proposals for tariffs and I feel that there is a lot of work to be done. We have to arrange for consolidated tariff filing. For example, for Internet tariffs, do we want to go so far? It is not up to us, it is the departments' responsibility.
[English]
Senator Tannas: Thank you, gentlemen, for being here. Thank you also for your service to the country. It was wonderful to hear yesterday the witnesses talk about the respect they have for your organization and for the work you do. I think we did, in fact, get a consensus view on the issues from the two panels, roughly eight witnesses that we heard yesterday, around three areas. Number one was resources of the board. A number of them felt quite strongly that more resources need to put to your organization, first and foremost.
Second, there was potential for maybe some upfront case management that would make a last attempt to try to mediate, with the threat of a hearing being right there, and that mediation taking place with people who would be participating as part of that hearing, ultimately leading to recommendations and judgments. We have seen this in other areas of court proceedings, where somebody says, "Look, if I was the judge, here is how I would be ruling,'' to try to coach people. If somebody is offside, maybe they realize they are headed down a road that will deliver a result that they had not considered.
That kind of case management in the beginning was something that a couple of people raised. Then, when we fed that back to others, they nodded their head up and down and said, "Yes, that would maybe be a good idea.''
The final piece, gentlemen, was deadlines. There was full consensus that deadlines are something that will have to be looked at. If your organization was given a one-year deadline in which to reach decisions, how much money would you need in order to make that happen with the current workload? Would you need to double, triple, quadruple, quintuple, or is it absolutely impossible with all the money in the world?
Mr. Majeau: It's a valid question. First, on the question of budget, we were asked by the department to produce a business plan, if you wish. In other words, they are asking how much money do you need, and what would you do with it? It will give them a good idea of how we're going to be using the money.
We have a frank and open dialogue right now with the department. I wanted to stress that because it's an interesting and important development.
Second, the problem is what will be the sanction if we don't respect the deadline of one year? How do you do that?
Senator Massicotte: You get thrown in jail.
Mr. Majeau: Yes — community work, maybe.
I want to complete my answer to Senator Massicotte. Let's say this hearing stops today. Mr. McDougall started to elaborate a bit on the following steps: We go back to the parties. Very often, it's the parties themselves who say, "We cannot answer this because my expert is not available, has gone teaching, is on secondment, et cetera,'' so we're going to come back to you in three months. Then we analyze these answers.
Also, why do we go back to the parties? Because we have been asked repeatedly by the Federal Court of Appeal to make sure that we have all the evidence we need in order to render solid, thorough decisions. If we don't have it, we have to go back to the parties.
If you don't understand what they found or if some piece of evidence is missing, you have to go back to the parties in order to have good reasons. If not, we're going to tell you it was a bad decision and you should have asked the parties to complete.
It's not like before an ordinary tribunal where a judge has position A and position B, and during the hearing, he will question the expert report, but he will usually not go back after. He will decide A, B or C.
It's not the way we operate, and it's not the way we have been asked to operate.
So we go back to the parties. Then we also have to differentiate between the reasons supporting the tariff. The tariff is a complex regulatory instrument. The parties welcome the board going back to them with respect to the tariff. For instance, in one file regarding online music services, we had to go back to the parties on several questions. The tariff itself — it's multiple tariffs, by the way, involving three collective societies.
The collective societies didn't use the same terminology. They didn't propose similar methodology for calculating the tariff rate. We have to harmonize the tariff terminology because it's complex. It is difficult to harmonize the rates for the various collective societies when they use such different methodologies.
But once we have that, we also have to go back again to the other — at their own request, by the way — to make sure that the tariff itself is workable and makes sense, because there are reporting requirements. It happened in the past where we said, "No, don't put this.'' We have a constant dialogue on the tariff.
So there are two things here: There are the reasons and the evidence that need to support the reasons — call them the decisions, if you prefer — and the tariff, which is something else. The two together — what do you do if we have a one-year deadline and we have to go back to the parties because we don't understand a piece of evidence? The clock is running. Does it mean at some point that we have to stop the clock and say, "That's enough. We have a deadline and we're going to render a decision''? But they will be the first one going for judicial review.
Mr. McDougall: And what will probably happen at the Federal Court of Appeal is that the case will be remitted to us for re-determination. It's kind of a Catch-22.
Senator Tannas: This sounds like a wonderful merry-go-round.
If there were a deadline, unless there was a mutual agreement to extend it by the parties, which was also given as a further refinement, it sounds to me — I'm glad you're here and that's why you're here. We didn't understand that you can't just hold a hearing and say, "Okay, we've had our hearing. You guys were supposed to be here with all the information that we needed to make a decision, and we're going to make it based on what happened in the hearing,'' which is kind of the way it works for any court thing I've been involved in. I don't get a chance to mail more information, and the judge doesn't get a chance to ask me more questions that occur to him later.
This is a structural issue. What other countries have this kind of a structure? Does the U.S. have this structure? I know we don't always need to look to the U.S., but it is the greatest free market for exactly what we're talking about here — music, books and so on. Do they actually go through this tortured process?
Mr. Majeau: Frankly, I don't know; I don't know if they go through a similar process. I know their process in general, but I couldn't go into specifics. Do they go back to the parties to say they're missing something? I couldn't tell you.
Senator Tannas: Would you be able to find out?
Mr. Majeau: I can certainly undertake that.
Senator Tannas: Because if this is a structural problem you've got that others in other countries have, including the one we maybe ought to think about copying, if that's the problem, then that will help us make some recommendations and shine some light on maybe a solution. If you would do that, that would be great.
Mr. Majeau: Yes, we will undertake to provide the committee as soon as possible with the way they operate. I agree that it could be helpful, so thank you for your suggestion.
The Chair: Just to go back to a question I had asked at the beginning about part-time and full-time, you said that the chair was overseeing — that he was at a trial or something. I'm not really sure. Is the chair a full-time judge? Who is the chair, anyway?
Mr. Majeau: It's Justice Robert A. Blair. He sits at the Ontario Court of Appeal. This week, he sits on cases, so he's a full-time judge. He sits and he chairs all the matters before the court this week in Toronto, but he is part-time.
The Chair: He's a part-time judge?
Mr. Majeau: No, he's a full-time judge, part-time chair of the board.
The Chair: He gets a full judge's salary.
Mr. Majeau: Yes.
The Chair: Does he then contribute his time to the Copyright Board, or does he get paid extra?
Mr. Majeau: No, he is not being paid extra.
The Chair: So it's all part of his work?
Mr. Majeau: He calls it service to the public.
The Chair: That's good. Is that problematic, though? My point is that he's not there and there's stuff to do. Doesn't it pile up?
Mr. Majeau: No. The truth of the matter is that he comes as often as needed. We have working sessions, and the panel itself is being seized of a matter, so matters are under advisement, and you have also meetings with the professional staff, the lawyers and economists.
So he is totally dedicated and will come as often as needed to the board. It's not an issue.
The Chair: In a month, what would he put in? A couple days?
Mr. Majeau: It could vary. If we sit, he will be there.
The Chair: On average?
Mr. Majeau: It's hard to say. I would have to ask him. Before sitting, he will read all the evidence. Before a case, he will read all of the analyses of the evidence.
I would have to ask him how many hours he puts in every month, but it is not an issue at all. He puts in the time.
It's the same with the part-time members. They have no limit on the time they need to put in, and they do, by the way; they put in all the time required. It is no problem; there's no issue here.
Senator Black: I apologize for being late. I was at a service of remembrance.
I want to underline what all my colleagues have said: Our view and the view of all the witnesses we've heard is that you do a tremendous job of the work that you are doing. You need to know that.
Having said that, I do not want you to misunderstand the tenor of my questions that will now follow, because I do respect what you're doing.
The Chair: He's just buttering you up.
Senator Massicotte: Be careful, be careful.
Senator Black: Both Senator Tannas and I are senators from Alberta, and while that's a very good thing, sometimes the downside is that we tend to be very impatient with things that just don't work for reasons that don't seem to make sense. With the greatest of respect, that's what I'm hearing today. I'm hearing that there's a clear understanding of the problems but either no willingness or no acknowledgement that they need to be solved.
You are the linchpin of an extraordinarily important industry in Canada, existing and growing. We are hearing, in the strongest but most respectful of terms, that it's broken. So, when suggestions come forward, such as the suggestion that my colleague Senator Tannas just made around a one-year timeline, then your response — and I accept that — was, "Yes, but what is a sanction, and what if it's not met?'' I'm a lawyer, as you are, and, in every other forum I know, whether it's court, the discovery process, the National Energy Board, there are timelines. If the parties don't align with the timelines, they suffer the consequence. There's no, "Oh, well, do the best you can.'' Unacceptable.
I would suggest to you that I would rather see you folks design a process, fill your complement of board members and add three or four board members and get the money you need, rather than having a committee of the Senate have to publicly go through this process to say, "Guys, it's not getting done.'' My view is that it's not getting done, and my view, respectfully, is that it's unacceptable.
So we have given you any number of suggestions on time, streamlining, more members, more resources, and all I hear is, "Well, we've tried that, or we're going to have a meeting, or it can't be done, or it's the parties who are responsible.'' That is a barricade, in my view, to commerce in this country, and I would rather hear from you that you accept that there's a problem and that you're going to deal with it on a timely basis, rather than have us tell you that there's a problem and that it needs to be dealt with on a timely basis.
So I apologize for being a little sharp, but I find it incredible that we're taking time to discuss this, frankly.
Mr. Majeau: If I may, senator —
Senator Black: Of course.
Mr. Majeau: To the question — I'll start in reverse order — of resources, this issue has been on the table forever. When there was that parliamentary committee, the Canadian Heritage Committee of the House of Commons, on the future of music, almost all if not all of those who appeared before the committee said, "There is a resource issue.'' You have to realize that it's not in our control. We ask. Actually, when I met with Minister Moore — and it was a very good discussion — he asked, "How can I help you? I will do whatever.'' He talked to me about everything. "Do you need a regulation? Do you need a directive? Do you need this? I'm going to support my agency 100 per cent. Don't talk to me about budget, however; that's the only thing I don't want to hear.''
Do I have a minute, maybe, to quote what the Honourable Stéphane Dion said in his report? That's a supplementary report, a complementary report. He said:
It is recommended that in keeping with Section 66.8 of the Copyright Act (2012), the Government of Canada undertake as soon as possible a consultation with the Copyright Board in order to analyze the delays in rendering decisions, notably in the digital context, and to establish, with the Commission, a level of funding that is adequate for the timely delivery of its mandate.
This died on the Order Paper. It's been resurrected lately, and we're working on it. I want you to understand that it's —
Senator Black: That's helpful.
Mr. Majeau: You understand it's not —
Senator Black: I do; I've got it.
Mr. Majeau: Sorry, what were your other issues?
The Chair: We have a little supplementary here, just to clarify something. Paul, is that what it is?
Senator Massicotte: Yes.
The Chair: Because Senator Black does have the floor.
Senator Massicotte: Again, I would somewhat support his point. You seem to be waiting for somebody else, the government, to sort of get it done. Why not the self-initiative of saying, "We've got a problem; we're going to solve it.''
Mr. Majeau: Which problem? Not the resource problem.
Senator Massicotte: The delays.
Mr. Majeau: The delays are because they are delays that are due, in my opinion, to the structure of the act, and there needs to be modification to the act.
Senator Black: That's good.
Mr. Majeau: I'm not responsible for the legislation. There are two departments responsible for it, and they have —
Senator Massicotte: There's nothing you can do to resolve the issue, in your mind?
Mr. Majeau: There are two distinct things, again. There is phase one, which was prior to —
Senator Massicotte: I heard all of that, yes.
Mr. Majeau: Prior to this, I want to address the question of sanction. Yes, you are right. We could have sanctions — the parties should file their brief by such a date. If not, blah, blah, blah. You should see their reaction, however, whenever we do it right now. Maybe we're not firm enough, and maybe we have been —
Senator Black: Not firm enough.
Mr. Majeau: We have not been firm enough.
The Chair: Senator Tannas has a little follow-up there. Sorry, Senator Black, we're turning this into a conversation, but that's okay.
Senator Black: It's helpful.
Senator Tannas: Minister Moore said, "What do you need other than money?'' Did you say to him, "We need to change this act?'' Because what I've heard from you is that all the money in the world can't get you to a one-year deadline based on the structure.
Did you say, "Listen, you need to change the act, and here are some areas that would make it move faster?'' What reaction did you get to that?
Mr. Majeau: A very good reaction. He said, "It's a valid contribution of the board. I most welcome it, and it's going to take place in the five-year review stage.''
Senator Tannas: Okay, good.
Mr. Majeau: I want to go back again to —
Senator Greene: That's an important point.
The Chair: I know this is an important point, but we've had people come here and say, "Well, we had an agreement, and we put the agreement on the table at the board. The board took a year to deal with an agreement that we both agreed to.'' What has that got to do with the act?
Mr. Majeau: Again, this has to do more with resources and priorities and the number of files we have to deal with. I agree, that has nothing to do with the act.
The Chair: But this is an agreement that's agreed to by two parties. We're not talking about a murder trial here. We're talking about tariffs. We're talking about, "How much money do I get paid for this, and how much money do I get paid for that?'' How long could that possibly take?
Mr. McDougall: If I can add to that, you have to remember that a tariff is of a general application. It applies to everybody in the industry. Usually, an agreement is made with one particular class of users. It could happen that these users are the big ones. It could happen that it's a trade association of the smaller ones. Our job is to make sure that the representativeness of the people involved in the agreement reflects the entire industry to which this will apply, so we need to do research. We need to convince ourselves. We need to make sure that it's going to be fair and equitable to everybody to which it will apply, not just the persons who have agreed on the tariff.
The Chair: Okay, I'm going to go to Senator Black to finish because poor Senator Black —
Senator Black: No, actually, that's fine.
The Chair: We're using all your time and I apologize. We have time, but I have Senator Ringuette and Senator Enverga.
Senator Black: No, I'm done. I just wanted to table my concerns. We had a conversation.
The Chair: You were very strong, Senator Black. You stimulated a lot of discussion. Senator Enverga?
Senator Enverga: Thank you for coming here today. I understand that your role is very important, and I also know that there are a lot of complications in your endeavours.
I noticed that 71 per cent did not involve any hearing, and still it took you 3.2 years, on average, to fix it or to have a resolution. How come it is still taking too long? Are there any low-hanging fruits in your area for which you can say, "This is it?'' In the courts, there are parking tickets; there is small claims court. Is there anything like that, where you can categorize all the things you have been hearing? Maybe we could fast-track certain areas? I know we're affecting maybe hundreds of thousands of stakeholders, all those struggling artists that are being strangled by this process. Is there any way that we can maybe facilitate a fast way to solve some issues there right now?
Mr. Majeau: On this, senator, most, if not all, of these tariffs are no longer contested because there is an agreement in place. So, by virtue of the act, the previous certified tariff by the board continues to apply.
In other words, we have decided to package these uncontested tariffs when we have time — we see a window at the board — because we put our priority with the big files that follow the public hearings. They are a huge file.
We have the choice between putting our priorities with these big files for which there have been long public hearings or with uncontested tariffs. Between the two, we felt we should go with the big files.
It means that these uncontested tariffs are not being certified as expeditiously as we would like, but at the end of the day, it doesn't change the fact that the previous tariff continues to apply.
Senator Enverga: Yes, but why is it still taking three years?
Mr. Majeau: Because there is a —
Senator Enverga: It should be simple, right?
Mr. Majeau: They are certainly simpler, and maybe Mr. McDougall would like to address the fact that there are still logistics involved in order to certify these uncontested tariffs.
Mr. McDougall: I think you are aware that we have, on average, about 70 tariff units filed with the board every year. It's impossible to put a process in place for 70 different tariff units every year. Nobody, not the board nor the parties, would have the resources to do that.
We select the one that we need to examine. The others, and it's mostly the unopposed, are put in a basket, knowing that they continue to apply on an interim basis in any case. Once we get to them, we again need to examine all of the tariffs individually as a piece of regulation and make sure that they're consistent with our past practices. It doesn't take years of work, but it still takes some resources from the board in order to actually do the work and publish them in the Canada Gazette.
We normally bundle together a set of unopposed tariffs and also some other tariffs that were opposed but for which there were some agreements. In that case, we have to do the analysis that we mentioned before of representativeness or not of the parties to the agreement.
It's these steps that are bundled together that consume some resources of the board.
Senator Ringuette: I think there's consensus around this table that we have to deal with the complexity of the legislation. It has to be streamlined, first, and the occasion is coming up in the next few months to do that.
What I absolutely do not understand, and I'm supposing — correct me if I'm wrong — that it's part of the act, is this challenging of agreements. I was under the impression that you set a benchmark on a tariff. Is that not what you do?
Mr. Majeau: What do you mean by "benchmark''?
Senator Ringuette: For instance, I look at SOCAN. Yesterday, they told us that within their group, they have 25 different tariffs. I'm assuming that for their 25 tariffs, you have benchmarked a price for that tariff, and maybe on a two- or three-year cycle you review that benchmarked tariff.
Isn't that the way you operate? Yes or no? It's a simple question, and it's a yes-or-no answer.
Mr. Majeau: No.
Senator Ringuette: It's not?
Mr. Majeau: It is not exactly the way you describe it.
Senator Ringuette: Is that a problem within the act, or is that a problem within the board?
Mr. Majeau: It's neither. I need an explanation here, if you will allow me.
Senator Ringuette: No, I don't —
Mr. Majeau: Sorry, I'm going to give you an explanation. The tariffs are being proposed. There is a price being proposed by SOCAN. Sometimes SOCAN will file for two, three or four years, but usually they file for one year. They propose a tariff, and there are people who might object to it.
When you say there is a benchmark, what if SOCAN says, "For this particular use, we are increasing the rate by 25 per cent''? Then there are objectors to it, so we have to hear what the objectors have to say about it.
Senator Ringuette: Is that process within the act, or is that an in-house process? It's within the act?
Mr. Majeau: It's partly within the act, yes. The proposed tariff is in the act. Objection to a tariff is in the act, as is the fact that the board has to come up with reasons in a certified tariff.
Senator Ringuette: Are you working right now on a proposal to streamline and simplify the act and the entire process?
Mr. Majeau: What we want to be doing this year is to propose and make recommendations for the five-year review. But again, I have to specify something: We are not responsible for the legislation. We apply the legislation. We will be working closely with —
Senator Ringuette: We understand that. Don't be offended. We understand that you have to apply the legislation.
I was under the impression that in regard to tariff application, it was an entirely new scenario of provider and user, and you, therefore, had to establish a new tariff; that for all the 852 units that you have, you have established a benchmark for the users and the suppliers within that tariff; and that there was a process of two- or three-year review of each one of them. But that's not the process you're indicating is happening at all.
Mr. Majeau: You're right.
Senator Ringuette: So no wonder that everyone is complaining about time.
Senator Day: You referred to Minister Moore. He said, "Talk to me about anything other than money.'' You indicated you did talk to him about a number of changes you felt should be made, and it was indicated that that would be in the next five-year plan. Did I get that right?
Mr. Majeau: Yes, you got that right. I said that we will come up with recommendations. I have ideas, and I will give you an idea, for instance. Each time there is one side that proposes an interim tariff, the other side objects to it; if the collective society proposes an interim tariff, the other side objects, and if the users propose an interim tariff, the collective society objects.
With this is one issue that we have been struggling with: Why isn't it possible even to force both sides to agree on an interim tariff? Let's say you have six months to agree on an interim tariff, and if you don't, tough luck, the board could adopt proposal A, B or its own proposal. I don't know, but this is something we want to explore. I'm not saying it's the best solution. I'm saying we want to explore ideas like this, again, in conjunction with the two departments responsible for the legislation.
Senator Day: Had you prepared for Minister Moore a list of improvements that you felt should be made? You're talking about doing something for the next year's review. What about when you met with Minister Moore? Did you have anything you could share with us?
Mr. Majeau: No, because the purpose of the meeting was not that I arrive with a list.
Senator Day: So you don't have something you could share with us that was prepared back then?
Mr. Majeau: No.
Senator Day: The only other question I have is a clarification of your submission that was made available to us. Thank you for preparing that. It's very helpful, and I've had a chance to review it. You indicated that Professor Daly did a study for you earlier this year. Professor Daly wrote:
. . . the delays before the Copyright Board may well be caused, at the very least in part, by a prevailing culture that tends to drag out decision-making processes . . . .
Do you admit that you're running an organization that has a "prevailing culture'' of dragging out decisions?
Mr. Majeau: Yes. In that sense, I would agree with Senator Black. This is, again, the sanctions that we don't have. When I was referring to sanctions, I was not only referring to Part B, to the time it takes for us to render a decision, and what happens if we don't render a decision within a one-year time frame. There are sanctions that we could have also for the parties who don't file at the appropriate moment.
It is true that we have been probably too soft. "We cannot file it by such a date. We cannot sit next May. We have this; we have that.'' That I totally admit. This is a change of culture, but the change of culture has to come also from the stakeholders. Frankly, I haven't seen much of it from them so far, but probably it's our own fault. Maybe we should not consult with them but say, "Tough luck; from now on, this is it.''
Senator Day: We need more resources, change in a number of regulatory issues and a change in prevailing culture. That's what we need to work on.
Mr. Majeau: If you allow me, it's going to be very short; I want to complete what —
The Chair: You kind of summed up. We'll go to Senator Smith and Senator Greene. You can answer his question, hopefully, through the other two.
Senator Smith: Just to follow up on Senator Tannas and Senator Day and Senator Black, just quickly going through the considerations, 17 and 18 — and this may reinforce some of the thought — "The board's decisions must be made in the public interest, which means that it has to account for interests beyond the parties.'' It's a very interesting phrase because it appears to say — Maybe you can tell me what it does say because that should be my question. Point number 18, for example: "Even if the parties reach an agreement on a tariff, the board must investigate to ensure that it is in the interests of parties who were not involved in the private negotiations.'' So I do understand the verbiage, but I just comment on that because it may fall into the theme that we're talking about. Who makes that decision? When is the decision made? Is there a cut-off point? The culture of your organization will reinforce how you do it, so maybe you can just address that.
Mr. McDougall: That comes back to the idea of a general application of a tariff. When we say "parties involved,'' we mean the actual objectors to a particular tariff or the actual participants in an agreement discussion. We recognize that these guys, as important as they might be in their own industry, are not the entire industry. Parties who were not involved in the private negotiations also have to be considered by us in terms of public policy objectives, to make sure that they won't be adversely affected.
Senator Smith: If I understand what you're saying, you're going to scope out other people in the industry affected to make sure their rights are going to be respected. Is that correct?
Mr. McDougall: That is correct.
Senator Smith: You go through that process, but there has to be a point of time where you have to stop navel gazing and sort of saying, "These problems exist.'' At some point in time, you have to make a call. Maybe one of the issues is that you need to have full-time resources that are going to be able to support your ability to make decisions. I'm not trying to be rude. It just sort of snapped out when I went through it. You always look for things that connect to the discussions. I'm just wondering where you folks are at.
Mr. McDougall: I agree with you. We would need the resources to be able to correctly, and within correct timelines, do what there is there. I think there is an additional dimension that is important. Our decisions are being reviewed by the Federal Court of Appeal, which can sometimes give us directions as to the process to follow. In this case, even our processes, the fairness of the process, is being reviewed by the Federal Court of Appeal.
Senator Smith: You have a lot of people second-guessing.
Mr. McDougall: Yes.
Senator Greene: I have a very short question. It seems to me that almost no matter what we do here, we're going to be fixing it just around the edges, rather than in any wholesale way. I'm just wondering what your reaction would be, and what maybe you think the industry's reaction would be, if we simply eliminated what you do entirely and moved to a complete market system? It sounds like a radical idea for this industry, but not for most other industries in the Western world. So, please comment. So let the marketplace reign.
Mr. Majeau: You find it radical. I would agree; it's quite radical. For instance, how would collective societies deal with all of the restaurants across the country? They will go knock on the door of every restaurant and negotiate with each of them, with each radio station, each television, each Internet service provider?
Senator Greene: They all have associations.
Mr. Majeau: Yes, but very often the associations don't necessarily have the mandate of their members, and the associations don't represent the whole industry that their members represent.
Mr. McDougall: I just want to add a little something to this, the other side of the market. The collective societies de facto become a monopoly because they own the entire rights that a particular user needs to operate. That monopoly, if it's not being regulated by an organization, will fix monopoly prices. That's the role of the board, to prevent this from happening.
The Chair: What is your budget?
Mr. McDougall: The total budget is $3.2 million per year.
The Chair: Okay. We have to wrap this up. We're at 22 minutes to, and we have to change witnesses. If the new witnesses would hurry, that would be great.
This is the second part of the meeting. Welcome back to the Standing Senate Committee on Banking, Trade and Commerce. My name is David Tkachuk, and I'm the chair of this committee. We're continuing our second hearing on the operation and practices of the Copyright Board of Canada. We are pleased to welcome today a number of copyright licensing bodies and representatives of content creators. We have with us Michael A. Geist, Canada Research Chair in Internet and E-commerce Law, University of Ottawa - Faculty of Law; Paul Daly, Senior Lecturer in Public Law, University of Cambridge and the Derek Bowett Fellow in Law, Queens' College, Cambridge, by video conference; Ariel Katz, Associate Professor, Innovation Chair—Electronic Commerce, University of Toronto - Faculty of Law; Jeremy de Beer, Full Professor, University of Ottawa - Faculty of Law; Daniel Glover, Partner, Intellectual Property, McCarthy Tétrault LLP; and Howard P. Knopf, Counsel, Macera & Jarzyna LLP/Moffat & Co Patent & TM Agents.
We have a lot of lawyers here. We have a lot of intellectual power, so we should be able to find about how the world began with all of this.
We do want to take advantage of your expertise, so please proceed, Mr. Geist.
Michael A. Geist, Canada Research Chair in Internet and E-commerce Law, University of Ottawa - Faculty of Law, as an individual: Good morning. My area of specialty is digital policy, with an emphasis on intellectual property. I have been active on copyright issues for many years, editing three books on Canadian copyright reform and court jurisprudence and regularly appearing before committees on the issue. I appear today, though, in a personal capacity representing my own views.
There is no shortage of criticism of the Copyright Board. Indeed, in a field that is often sharply divided, disenchantment with the board is sometimes the one thing people seem to be able to agree on.
It seems to me that the criticism typically comes down to two broad issues. Sometimes it's the substance of the decisions; and the other, of course, is the way those decisions are rendered. I think the committee should pay little attention to the substantive criticism of Copyright Board decisions. As the former chair of the board, the Honourable William Vancise, noted earlier this year, criticism of the substance of decisions usually comes down, as he said, to whose ox is being gored. In other words, if you like the decision, you're okay with the board; if not, you think the board is dysfunctional and needs an overhaul.
I have been critical and supportive of past board decisions. I think the board was slow to acknowledge and implement copyright decisions delivered by the Supreme Court of Canada, particularly around fair dealing. But that has begun to change, and decisions are now more reflective of the court's jurisprudence. Decisions are and will continue to be challenged, yet we should recognize that there is an established system to address those appeals. Reform isn't needed on the substance.
Contrast that, as you have been doing on the substance side, with administrative concerns. How the board reaches decisions, the costs involved, the timeliness of those decisions and the ease of participation are issues that are very much up for review.
We have thus far seen two different initiatives aimed at identifying potential reforms. As you know, the board established a working group of lawyers and experts who regularly appear before it as part of a consultation process. That process didn't seem to go very far, though, with some seeming reluctance of those who regularly appear before the board to criticize it and some of the processes on the record.
More recently, as you also know, there have been two important studies conducted by Professors de Beer and Daly, with more extensive recommendations. I think both of those studies are enormously valuable contributions and provide insightful recommendations on potential reforms. I'm also — as I am sure you are — looking forward to their contributions here.
From my perspective, there is unquestionably a need to develop reasonable timelines and deadlines for conducting hearings and issuing decisions. At times, parties may be content to rag the puck, so to speak, without urgency on board processes. Given the importance of Copyright Board decisions beyond the immediate parties, timeliness is crucial.
We see that in many other areas. The CRTC, for example, provides all parties with greater certainty around timelines and reduces some of the costs that come from long delays and retroactive application of decisions.
Yet, beyond the timelines and deadlines, I wanted to focus a few remarks on the lack of public participation in board processes. It's actually further to the question that Senator Smith raised.
Towards the end of the last session, we talked about the role that the public interest plays in the decisions of the board itself. The exclusion or the seeming exclusion of the public from active participation in many of these hearings stands in sharp contrast to other boards, tribunals and agencies that address issues with individual parties but whose decisions have ramifications for a far broader group of stakeholders. For example, both the CRTC and the Competition Bureau have taken steps in recent years to involve the public and engage the public more directly in policy-making activities, hearings and other issues.
A perfect example is taking place literally at this moment at the CRTC, which is conducting a hearing on differential pricing, just across the river, and they have found a number of ways to engage the public, going even so far as to engage in a public discussion on the website Reddit to try to engage the public and get their perspective. All of that participation then goes on the public record, which allows for better-informed decision makers and I think leads to increased confidence in the decisions themselves.
By contrast, the Copyright Board does little to encourage public participation, despite the fact that its decisions have an impact that extends beyond the parties before it. When it was asked about accessibility and participation concerns, the board pointed to that working group as evidence that it regularly reviews its practices. It compared itself to the Federal Court of Appeal, noting, "Of course they [the public] don't participate, because they don't really belong there, per se.''
With all respect, I think the board is wrong. I think the impact of the decisions extend far beyond the limited number of parties that participate in the hearing, yet the board seems to think that its stakeholders are limited largely to the IP lawyers, the copyright collectives and perhaps some of the businesses that might not be there directly.
Decisions have a direct impact on certainly other commercial users, but also on the broader public and on our understanding of copyright law. This then has implications for things like consumer pricing, as well as copyright practices on issues such as fair dealing and the public domain.
Many branches of government and administrative agencies have recognized the need to engage the public and develop better decision-making processes by maximizing public participation and engagement. To date, the board has not done so. Its processes, as you have already heard, are costly, lengthy and, for all practical purposes, inaccessible to the general public. I think that needs to change.
I look forward to your questions.
The Chair: Very good. Four minutes, 51 seconds.
Mr. Daly.
Paul Daly, Senior Lecturer in Public Law, University of Cambridge and the Derek Bowett Fellow in Law, Queens' College, Cambridge, as an individual: Thank you. I appear here today as well in a personal capacity. I should say that I'm on secondment from a class I teach on Thursday afternoon — ironically enough, legislation and the legislative process.
Obviously the committee's interest in my presence has its origin in the report I prepared earlier this year for Canadian Heritage and Innovation, Science and Economic Development Canada. My report, prompted by Professor de Beer's report, is independent and does not reflect the reviews of the government departments involved, still less the views of the Copyright Board. I've provided copies of my report to members of the committee in both official languages, and I note from the last session that you have read them very carefully. The executive summary and recommendations provide a useful overview, if you have not read the report in detail. For the purposes of this introduction, I just make some general background remarks about the production of the report.
First, I'm a generalist rather than a specialist. My primary area of academic expertise is the general principles of administrative law, how administrative bodies should be structured and how their decisions should be reviewed by the courts. While I'm conversant with the overarching and important principles of intellectual property law, and I'm well aware of the problems caused by increased technological and commercial complexity, I am not an expert on the intricacies of copyright law, unlike the other witnesses who are before you this afternoon.
Perhaps counterintuitively, this assisted me in the production of this report. Sometimes it is desirable, and even necessary, to bring in objective outside observers. I would say this is the case in respect of the board. The subject matter experts have fought themselves to something of a standstill in the various forums by the board. The unfortunate result is that although there is widespread agreement that the board is struggling to deal with the challenges of contemporary copyright law, now underpinned by the empirical analysis carried out by Professor de Beer, there is no agreement on how the board ought to address those challenges.
The advantage I had, not having a dog in the fight, was the ability to bring an external perspective to bear on the board's operations. Accordingly, I did not feel I was bound in any way by the board's existing practices or the preferences of parties who appear before the board.
While copyright practitioners might protest that their domain is sui generis, such that reference to other decision- making bodies fails to account for the unique nature of contemporary copyright and its challenges, my view is that the comparison with peer decision makers that I conducted has thrown some valuable light on the board's operations.
In some ways, the board is out of line with comparable bodies, and given the slow pace of some of its decision making, as outlined by Professor de Beer and which I think is broadly recognized, the onus should be on the board to demonstrate why it should not emulate peer tribunals that discharge their mandates more efficiently.
Second, all of the available evidence, especially the inability of the board's stakeholders to formulate agreed positions about how the board can address the challenges it faces, suggests that the prevailing culture before the board is problematic and needs to be changed. I refer here more to the participants than to the board, but that's something we could perhaps discuss later.
It is possible that culture change could be effected without making changes to the board's procedures; however, the board has not proved capable of effecting such a culture change, despite occasional exhortations to the parties to conduct themselves more appropriately. As a result, I doubt that cultural change can be achieved without expanding the range of tools the board has at its disposal to shape the behaviour of the parties that appear before it.
Of necessity, this requires the board to move into line with peer tribunals — for instance, by being enabled through legislation to issue cost awards against parties that abuse or misuse its procedures — and by having presumptive formal rules approved by the federal cabinet that condition the expectations of the parties that appear before it.
Following my recommendations would give the board the best of all possible worlds: Procedures would come into line with those of peer tribunals, and it would have the available tools to effect necessary culture change.
Finally, in my view, creative leadership and wise husbandry of resources would permit the board to implement my recommendations without additional funding. Whether additional funding is justifiable is difficult to assess. As I note in my report, a much more detailed comparative study would be needed to prove beyond all reasonable doubt the need for extra resources.
But I say this out of academic caution: Lawyers can rarely prove a hypothesis to be fully true or absolutely false. Nonetheless, my report and Professor de Beer's report provide information that, if used with common sense and practical wisdom, will be valuable to legislators and others participating in the review process.
Thank you.
The Chair: Thank you very much. Mr. Katz, please go ahead.
Ariel Katz, Associate Professor, Innovation Chair—Electronic Commerce, University of Toronto - Faculty of Law, as an individual: Thank you, Mr. Chairman and members of the committee. I teach mainly intellectual property and issues at the intersection of intellectual property and competition law. Before I came to Canada, I was a staff lawyer with the Israeli Antitrust Authority, and one of my main projects was to design and implement a regulatory system for copyright collectives under the Israeli competition act.
You have heard many complaints about the procedures of the board, and I won't repeat those. I agree with many of them, but I don't think that those are the real problems. I want to talk today talk about the real underlying problems with the board, how to fix them and why I think most of it can be done within the current legislation without any major reform.
What is the problem? The board is probably one of the larger and better funded tribunals of its kind in the world. It lacks resourcefulness, not resources. The problem with its procedures is that the board does not have a good, substantive theory of regulations.
The board has described itself as an economic body, an independent, quasi-judicial tribunal, and explained that its role is to set fair and equitable royalties. The board can describe what it does, but it is not very capable of telling us why it exists and what problem it is supposed to solve. More specifically, the board's decisions do not convey a coherent view of why the royalties that it sets are indeed fair and equitable and how to distinguish those royalties from those that are unfair or inequitable.
Similarly, the board views itself as a regulator, but it is sometimes confused about the identity of those "regulatees.'' Does the board exist to regulate copyright collectives because they would otherwise set prices that are too high? Or is its job to regulate the users because they would otherwise pay too little?
These are fundamental questions, and different answers to these different questions would entail different regulatory mechanisms and different procedures. The answers would also determine the issues that need to be proven, the kind of evidence that the board should consider, who should produce the evidence and who would have the burden of proving various issues. They might determine the constitutional validity of certain aspects of the scheme and whether it is within federal or provincial subject matter.
Without a clear vision of the board's regulatory mission, the board's mission has become vague and creeping, and the current practices reflect that. I would be happy to expand more during questions.
How did that happen? That hasn't always been the case. The board, the first of its kind in the world, was established following the recommendation of the Parker Commission in 1936. The commission understood that the administration of copyright presents a competition policy problem, not a copyright doctrine problem. It explained that when copyrights are administered collectively: "Competition no longer exists. A monopoly, or a super-monopoly, has arisen.'' The commission recognized that, at the same time, collective administration could be the most convenient way to grant licences and described the collectives as an inevitable monopoly.
So the commission viewed the regulatory challenge as a familiar one, namely, the regulation of natural monopolies. It was of the opinion that, like other types of natural monopolies that provide important services, collectives should be regulated to prevent them from abusing their market power or exercising it arbitrarily. The Copyright Board of Canada was set up specifically to implement this recommendation.
This rationale has also been predominant in the academic literature and the legislative history, including the major reforms in the 1980s and 1990s. It's also reflected in the decisions of the Supreme Court, the Privy Council and most of the lower court decisions that discuss those issues.
More recently, the board began taking the view that its role is not really to control the exercise of market power by collectives, but instead to preserve and balance the market power between collectives and users. That's a very different type of job. The board at times even went further and stated that its role is actually to protect the collectives from the users.
This might be a classic example of what is called "regulatory capture,'' where the regulator, over time, begins to identify with the regulated and forget its public interest mandate. There might be a secondary type of capture, which is capture by the small bar of copyright lawyers whose practices revolves around the board, and they might be served well by this byzantine scheme that has emerged.
The result was a dramatic but unaccountable shift in the board's view of its own mandate, which resulted in vague shifting and indeterminate standards that is the source of the present state of affairs, I believe.
What can we do to fix it? To fix it, we need to adopt a principled regulatory scheme. As its basis, the scheme should acknowledge that collective administration of copyright is an anomaly in the market economy. Very rarely does the law allow competitors in an entire industry to deal with their users collectively instead of competing with each other.
In my view, a rational regulatory scheme should comprise the following three elements: screening, minimal impairment of competition, and periodical review and reversibility.
The goal of screening is to identify those situations where collective administration genuinely increases efficiency, as opposed to circumstances where collective administration only increases copyright owners' market power and profit, without clear offsetting benefits to users and the public.
The second element, in line with modern approaches to the regulation of monopolies, is that even if we identify those situations where collective administration would be justified — passing the first step — the regulation should not focus exclusively on rate setting but should also focus on identifying and removing barriers to competition to increase the competitive pressures on the collective.
The third element is the periodical review. The finding from the first two elements should be reviewed on a periodical basis — not only the rates but also the justification. Technological change and new business models can enable new competitive licensing models, even if in the past they have not been possible. Therefore, care must also be taken to prevent the regulatory scheme from becoming a barrier to competition, and the measures that are being taken should minimize the danger that the monopolistic structures would be entrenched. I think we have a lot of that today in Canada.
The Chair: We're almost at time.
Mr. Katz: I'm at my last point. How can we do it? Who can do it? It may seem ambitious, but most of it can be done within the current framework. What we need for that is a Copyright Board that actually understands its mandate and is willing to pursue it. That is there in the legislative history. If necessary, regulation could help in doing that, but one component that is dearly missing in Canada is the role that the Competition Bureau could play.
We need a Competition Bureau that is willing to assist the board and to take a much more active role than it has ever taken to date, and I could elaborate on that more.
If I could only make one recommendation to you, in addition to what you might recommend to do with the board, you could also recommend that the Competition Bureau at least use some of its power to study the situation and use the mandate that it has under the Copyright Act, but also under the Competition Act, to be much more active in this regulatory scheme.
The Chair: Thank you, Mr. Katz. Mr. de Beer?
Jeremy de Beer, Full Professor, University of Ottawa - Faculty of Law, as an individual: My name is Jeremy de Beer. Before my career as a law professor, I worked inside the Copyright Board as legal counsel. I appear today as an individual to speak independently about what I experienced and what I have since taught, researched and studied.
My core point is that challenges in the tariff-setting process transcend the Copyright Board. Problems at the board cannot be understood, let alone solved, in isolation from the underlying statutory scheme, the strategic behaviour of the parties affected by that scheme and the constraints imposed upon the board by reviewing courts.
You have my study on the tariff-setting process, and I have also provided an infographic that summarizes some of the key points. I'd encourage you to have a look at that.
When one examines the time taken from proposal to certification of a tariff, ranging from 1 to 12 years, an extraordinary variety of events may occur.
In the 15-year time period covered by my study, following the major legislative overhaul in 1997, 850 tariffs were certified by the Copyright Board, each of them covering different rights, different collectives, different users, different activities and/or different years. There were also 209 tariffs still pending when I completed my study. I don't cite these thousand-plus tariffs to praise the board's productivity but to show the proliferation of matters that the board has a statutory duty to deal with. Obviously, not all of these tariffs are equal, so of course the board distinguishes among them procedurally. We can presume that the highest-value tariffs, the most complex and the most controversial tariffs are the 28 per cent that involved a hearing.
Here are some key highlights with respect to those proceedings. They took an average of 4.4 years from proposal to certification. However, that was as of 2013. If all of the 209 pending tariffs were certified on the day I submitted my report, March 31, 2015, the average processing time would have been 5.3 years. As of today, I'd estimate that the backlog has already been pending roughly for seven years, on average. Yes, the process is long, and, apparently, it's getting longer. However, there is no consensus about how long the process should take, let alone root problems or appropriate solutions.
Why is this happening? I'm going to raise three possibilities.
The first and perhaps the most important factor, in my opinion, is the underlying statutory scheme that the board is mandated to administer. Yesterday, you asked witnesses about the similarities and differences that various collectives and user groups face. There are, in fact, at least six fundamentally different processes that major statutory reforms in 1989, in 1997 and, perhaps, in 2012 — we haven't seen the impact of those fully yet — have created or complicated.
The United States' board, which we have heard much about, deals with a fraction of the matters that the Copyright Board of Canada deals with. So I would suggest that without fundamental legislative reform and a major shakeup of collective administration of copyright in Canada, those American deadlines are inappropriate comparators. The United States may offer us lessons, however, such as fully staffing a board with relevant expertise, instead of leaving positions vacant or part time.
A second factor is that parties in the tariff-setting proceedings, and objectors, collectives, and their lawyers are very good at using procedures to gain strategic or substantive advantages. This is not a criticism of their culture — the party's culture, not the board's culture — but a compliment about their effectiveness. What else would one expect with hundreds of millions of dollars' worth of royalties at stake every year?
Contrary to what you heard yesterday, I don't think the parties are happy to accept "good enough'' if it prejudices their interests, and their actions suggest otherwise. If you look at the time frame that I've depicted, it takes over three years, on average, just to get to a hearing. The board is not dragging its feet in these cases. For one thing, collectives and objectors can't afford to have a hearing every year, so they stockpile tariffs and deal with them in batches. That affects the time that it takes. Meanwhile, the board is actively managing disputes about everything from standing to evidence and deals with the requests and the requirements of the parties.
My final point is that when the board has taken initiative to streamline proceedings, the parties frequently complain to the courts, often as collateral attacks on rates that they don't like. As a result of the judicial reviews and subsequent appeals, the third factor increasing the complexity and leading to delay is the constraints of administrative law. I notice we have Professor Daly, perhaps the world's leading expert on that topic, here, and I would be pleased to speak to that in questions.
So, in sum, this isn't merely a case-management or a resource issue. More resources may help as an immediate first step, but that won't address the increasingly complex legislative framework, the self-interested behaviour of stakeholders, or the constraints of administering an increasingly complex law.
Daniel Glover, Partner, Intellectual Property, McCarthy Tétrault LLP, as an individual: I'm an intellectual property lawyer at McCarthy Tétrault. I represent both creators and users before the board and all the way up to the Supreme Court, but today, as with the others, my opinions are my own.
Senators, the board is a vital economic body. It serves the public interest only if it promotes transactions that get content to users quickly and justly compensate creators.
These goals can be achieved via framework rules that allocate resources where they are most needed. The board's role should be to foster collective licensing, especially to avoid market failure or potential abuses by collectives or users. But, while digital technologies evolve in the blink of an eye, the tariff system does not appear to be keeping pace.
The board process unwinds very slowly, even for uncontested tariffs, as has been observed today. As of 2015, the many tariffs before the board had an average wait time of more than five years. The Tariff 22 case, which went up to the Supreme Court twice, took 17 years to resolve from the date the tariff was filed. The pivotal making-available case has been awaiting decision, after the hearing, for more than three years, and that was done on a paper record only.
Eight other recent cases were awaiting resolution between 20 and 36 months after their hearing date. This is the Phase B that Member Majeau was speaking of earlier today.
At a certain point, no matter who wins, the uncertainty impacts all stakeholders.
The root causes of delay are very complex. I have outlined a few of them in the written version of this presentation, and others have been addressed today. What I would say, though, is that some may require fundamental changes, changes possibly to the act, as opposed to the way the board governs itself, in order to address those causes.
As a lawyer who advises both creators and users, I can confirm that delay causes great anxiety for everyone. Let me provide three quick examples: First, on the user side, content providers face a black box of liability, with the ultimate rates coming from a tariff unknown for years, even after the tariff expires. This hurts new business models and may result in innovative services avoiding Canada. Too much risk.
Second, creators face significant holdbacks years after their works are used. A holdback occurs because the collective doesn't know what the ultimate rate will be, and if it's getting money under an interim tariff, it has to hold the funds back rather than flowing them through to the creators.
On the creator's side, if users manage to knock out a tariff on legal grounds long after that interim tariff is put into place, collectives may face claims for unjust enrichment in the courts. The longer the delay, the greater the potential liability.
Last, technologies evolve rapidly. The longer a decision takes, the less likely that the board's holdings will reflect how a given technology works. This leads to unpredictability in the marketplace as parties are left to guess how the board might treat new and emerging business models.
There's a valid interest in having board matters proceed more swiftly and exploring if many or most tariff proceedings could be put on an alternative track. In many other countries, the norm is that the parties are given the chance to work it out. If they do, there is no need for a tribunal to intervene. There is no stamp of certification.
Now my partner Barry Sookman canvassed international models this May at the ALAI conference, and I provided the clerk with a copy of his remarks. These international models increase speed and predictability, build specific timelines into law, encourage experimental licence and require board members to possess specific kinds of expertise, such as economic and legal.
Other countries have invested a great deal of time and thought in ensuring that collective licensing is swift, fair and predictable. Not all of these ideas are necessarily right for Canada, but all should be carefully considered.
The bottom line is that in the five-year review Parliament must carefully study the role and functions of the board and, frankly, be creative. Other countries have lived this experience, and it is worth considering their systems. In particular, you should ask whether it makes sense to enable creators and users in the performing rights environment to enter into direct licensing agreements rather than requiring board certification in each and every instance. This concludes my presentation.
The Chair: Thank you very much. Mr. Knopf, please proceed.
Howard P. Knopf, Counsel, Macera & Jarzyna LLP/Moffat & Co Patent & TM Agents, as an individual: Thank you, senator. I may ask you for an extra minute or so because certain of the things that Mr. Majeau said require refutation, and I took some notes. But I'll get on with it.
My message is very simple. The board needs more regulations, and I've given you a specific list on page 2 of my brief of regulations that the government could start on next week if it wants to. It doesn't need to wait until 2017.
The board needs fewer resources, not more, and when Graham Henderson and I agree on something, which is almost unheard of, it's maybe something you want to take seriously because we're probably right.
Yesterday was very interesting. We did not hear from the usual institutional objectors such as the broadcasters or cable companies. I'm not quite sure why.
Before I forget, I want to deal with the points that deal with the points that Mr. Majeau made. Somebody asked about whether legal services are contracted out. If you go to the board's website, you'll see a lot of management services are contracted out, and recently they allocated $128,000 for a part-time lawyer to assist Mr. Majeau, in addition to the four full-time lawyers they have on staff.
I was surprised to learn that they have 18 full-time employees now. That makes them six times larger than the staff of the U.S. board. Several of the senators have asked, "Well, why can't the board get to deal with agreements that have been worked out between very sophisticated parties?'' If you look at the Competition Tribunal, they do that all the time. In fact, a recent very high profile case, the Stargrove case that Professor Geist has written about extensively, was all about copyright, and it's been settled very quickly by an agreement, which the Competition Tribunal obviously accepted.
Several senators have asked: "Well, how come you keep coming back after the hearing, the board keeps coming back, the parties keep coming back?'' I mean, I wish I could go back to the courts sometimes and say, "Gee, I wish I had made this point,'' or if the court comes back to me and says, "Can you improve on that point?'' I only wish I could do that, but it doesn't happen. When it's over, it's over, except at the board. It goes on forever.
We keep hearing about these 852 tariffs. Well, until the board got Professor de Beer's study, by its own taxonomy, there were only 74 tariffs over that period of 14 years, and it works out to 4.9 tariffs a year, not 70. Professor de Beer is a good friend of mine, but honestly, the 70 tariffs per year is frankly absurd. The board certifies fewer than five tariffs a year, only holds two or three hearings a year and only renders two or three serious decisions a year.
There is also a statement about budget. The last I checked — and it's in my material — it's $3.5 million a year, not $3.2 million, which is a lot more than the Competition Tribunal, by the way.
Let me try to get back on track here.
The board takes more than four years typically to get to a hearing. It takes more than two years usually after that to reach a decision in a contested hearing. There's a serious retroactivity issue that we've heard about that's now on the blinking radar screen of the Supreme Court, thanks to the intervention I made on behalf of Professors Katz and Lametti.
By the way, SOCAN yesterday confirmed what I'm saying. Even SOCAN, which is the granddaddy of all collectives, said they only have 25 tariffs. What Professor de Beer does is break them down paragraph by paragraph and then multiply it by each year. It's completely unrealistic.
The board has reached the point where one of its most important cases ever, involving post-secondary, which Ms. Finlay referred to several times yesterday, is proceeding by default. The big institutional objectors, the universities and the colleges, walked away, withdrew after having spent $3 million that we know about basically only to help Access Copyright, and they withdrew. We don't know why, but it looks like they got worn out and ran out of money. It looks that way.
It has been mentioned that the board is still deliberating about the 2012 Supreme Court case and legislation on "making available'' for three years. That could have been sent to the Court of Appeal and been over and done with a long time ago. We keep hearing, "Oh, the laws have changed, and the Supreme Court keeps giving us new jurisprudence.'' Guess what? Every court in this country and the Supreme Court have to deal with new laws and jurisprudence every day, but they don't go, frankly, whining to the government and saying, "We need more resources to read a Supreme Court case.'' They're supposed to know the law. All the lawyers here at this table and in this room know what happened in 2012. It seems the board, however, is having trouble figuring it out and needs more resources. I don't know why.
How does this compare with other tribunals? It doesn't compare well. Most first-instance tribunals or courts hold a hearing within a year, two years at the outset, and in the Federal Court, really complicated cases get to trial within two years at the most. In the notorious Patented Medicines Notice of Compliance regime that you may have heard about, it has to be over and done with within two years start to finish. Sharpens the mind. That's the law, and they never miss the deadline.
The Canadian Judicial Council has said that except in the most complex matter where there are special circumstances, decisions should be rendered within six months from the time of a hearing. That's the Canadian Judicial Council. There's nothing special about anything at the board that would take it away from that.
My friend Professor Katz mentioned regulatory capture. Yes, there is regulatory capture. A small group of lawyers and so-called experts have convinced the board that there's something mystical going on here about copyright that sets it apart from the normal rules of gravity. That's not the case.
Yes, we need deadlines. We need case management. We need rules about evidence, confidentiality, confidential documents and whatever. Professor Daly, with respect, missed an opportunity to suggest some specific regulations. I've got them here — I didn't get paid for this study — along with machinery changes that I've recommended.
As for the best model, we can look at the United States, much to learn there. The best model is just down the street from the Copyright Board. The Copyright Board is No. 56 Sparks Street, and the Competition Tribunal is No. 90. The Competition Tribunal works really well: smaller budget, far more productive, much bigger and more complicated cases than the board ever hears, and it gets them out. It just did the huge Toronto Real Estate Board case that you may have read about and which was almost all about or significantly about copyright, in less than five years from start to finish. That would be warp speed at the board.
The board is 600 per cent larger than anywhere else, and as several people said, it's not working. So I've given you 10 specific ways that the government could implement recommendations starting next week, if it wants to, and three or four ways that can be dealt with in 2017 by way of machinery including cost awards, et cetera.
To sum up, what we need here is less resources, more regulations, including deadlines, and less excuses. Thank you.
The Chair: Thank you very much. Senator Massicotte.
Senator Massicotte: Thank you all for being here; we much appreciate it.
The good news is we all agree there's a problem; even the board agrees there's a problem. And the significant problem is delay — unfair, unsuitable, inappropriate and so on.
You largely agree that the major problem is process management; it's how to get better results, more efficient results, and some of you also contribute, and it seems to be part of the problem, the structure or the legislation is such that it incites these delays, and probably there should be some changes to legislation and a different cultural orientation. I buy that. I think that's my own summary.
A five-year review is coming up next year by a parliamentary process, but what's the next step? We can do all this over again. The issues are somewhat complex. There are people who study process, per se, how to make it more suitable. What's the next step? Should we propose to hire or should we have the board hire a couple of experts to come up with specific recommendations? You're not going to seek consensus because of contrary interests. How do we get the real results where we're happy two years from now saying this did cause change and resolved the issue? Talking is good, but how do we get real results?
Mr. Glover: You might want to do an informational dive on how it's done elsewhere. We're not inventing a new solution here. There are a lot of other countries that have a board structure, but the board structure is a backstop when there's a problem of market failure.
The legislation of these other countries speaks for itself. The procedures speak for themselves; they are objective in the sense that you can see how other major trading partners are doing things. My recommendation would be that you take a look at that.
Senator Massicotte: That's for sure. We can always learn lots from somebody else. Is there any other comment?
Mr. Geist: I actually think 2017 is the right time to do this. You've heard from a number of the witnesses here and over the course of the last two days that this is a little bit like a big ball of yarn, and when you pull on one piece there are implications elsewhere. The linkages that exist between certain aspects of the Copyright Act and the functioning of the Copyright Board can't be so easily separated.
We've heard a lot about some of the more administrative case management stuff that perhaps could be put on a rocket docket to try to address. Some of the more fundamental questions that I think have been raised are really worthy of a review as part of that 2017 review.
Frankly, regarding some of the changes that took place in 2012, it's really in my view almost premature to have a full understanding of the implications of those changes. We just heard that in some cases the board hasn't even ruled on them yet. But, the board's at one of those long-standing issues that weren't addressed fundamentally in 2012, and to make the 2017 process one of the core elements of what the government tries to do is actually a worthwhile mechanism to approach this.
Mr. Katz: Mr. Glover emphasized a couple of times the issue of market failure, and I think that's a fundamental issue. I've studied a lot of collectives in Canada and elsewhere and historically, and I have tons of examples. I could spend hours with you on that, but the point is that when you actually dig a little deeper you see that often the market failures that are assumed do not exist. And many times the collectives themselves are the source of the market failure. They took strategic advantage of the regulatory system to create inefficiencies that then they solve by licensing and collecting fees for them.
That's the underlying assumption of the regulatory scheme: it is supposed to solve a market failure. Instead of assuming that those market failures exist, we could investigate whether they do exist and when and only allow the cases where we understand that there is a serious market failure and that collective administration is the best solution to the market failure. But if we do it seriously, I'm convinced that we would see that the number of instances when we need tariffs is much smaller than we have. And that, of course, would reduce the number of tariffs and the number of cases, the delay and all the complexity that we have.
Again, the board, in my view, has the mandate to do it, if you understand the legislative history and what Parliament intended to achieve. But if the board doesn't understand it, again, the Competition Bureau clearly has this mandate, and they should just exercise it. They're scared of doing that, but they should do it.
Mr. Knopf: It's too bad in a way that royal commissions have gone out of favour in this country because I've provided you, through the clerk, with a copy of the legendary 1935 Parker Commission report that set up the Copyright Appeal Board that Senator Day asked about yesterday. We're celebrating the eightieth anniversary this year. That report reads as beautifully today as it did back then if you substitute the word "radio'' with "TV'' and "talking pictures'' with "Internet.'' We probably won't get another royal commission, but if there's a long-range study, I can think of two or three excellent retired judges who might be capable of leading that very well.
In the meantime, I urge you to look at the 10 regulations I'm suggesting and two or three specific machinery changes. I've given them a lot of thought. I think they're relatively non-controversial. I think maybe even Graham Henderson and I would agree on a lot of them; maybe Mr. Glover too. And if that's the case, there's something to proceed with there that does not require a lot of study or studies that recommend more studies. That's the worst thing because it will just slow things down for years.
Mr. de Beer: If we are to engage in an international comparison, which is one of the questions that the department posed to me, as to whether I would recommend that, if we do that it's not the practices but the mandates of other tribunals that ought to be explored because the Canadian system is unique. No other tribunal is tasked under the statutory scheme to do what we have asked the Canadian tribunal to do — the Copyright Board of Canada.
I think the key lesson for the 2017 amendments is to be very, very careful before we further complicate copyright by adding layer after layer after layer of new rights. That's what happened in 1997, and that's what happened that caused the problems that are now coming home. We're only seeing the effects decades down the road, and so that should be a cautionary tale for the next time we embark on copyright amendment. There are long-term, serious implications that need to be thought through, and that wasn't done.
Senator Enverga: I think most of the questions have been answered, but thank you for being here. There is a lot of reading I have to do still, but I will skip my question at this time.
Senator Greene: Can I assume that most of you are saying in a general way that we ought to push the industry and the board towards more private sector solutions and let the marketplace decide these issues to the extent we can? Is that a common view amongst you?
Mr. Knopf: That's clearly the case in the United States. In the United States another thing that has not been mentioned is that the two major collectives, BMI and ASCAP, which together compromise what we have as SOCAN, have for decades since the 1930s and 1940s been under what's called a consent decree mechanism where each one of them is regulated on by a district court judge that has considerable expertise. Eventually they retire and another one comes in. However, they work out an awful lot of stuff between themselves, and if the judge looks at it and says it seems sensible between very sophisticated organizations, it's approved.
The same goes for the Copyright Royalty Board. There's an incentive to approve here, but we've heard so often here that the board is supposedly so concerned with the public interest that it takes a year or two to approve an agreement. Well, it shouldn't. Again, you have sophisticated parties. The public has had a chance. It maybe needs more of an open chance through less formal submissions. We can talk about that. We have the Internet now.
I remember Mr. Sookman, with whom I rarely agree, Dan's partner, said a similar thing at the big conference back in May, marketplace solutions. I think Professor Katz thinks the same way. When the marketplace comes to a solution, the board should listen.
Why don't we have Pandora in Canada? Because it doesn't make any sense for them in the marketplace. Why should they have to come here and spend millions and millions of dollars on lawyers and experts, wait years and years for a retroactive decision to enter the Canadian market? The Canadian market is no bigger than California or Texas or New York state, for goodness sake. It's not worth it to them to bother. We make it so hard with these procedures we're talking about today.
Mr. Katz: In response to Senator Greene's question, yes, I would push, or I would urge you to push — you have more power perhaps — the parties to rely more on market mechanisms.
But I'm saying the with a huge caveat, because the point is not to let the collectives get rid of the regulation and just let the collective deal with the users. Then we only aggravate the problem, or at least we don't solve it. If we have collectives, then we have to make sure they don't abuse their market power.
My issue is that I don't think we need as many collectives administering as many rights as we have.
Senator Greene: The Competition Bureau could help us.
Mr. Katz: Yes, yes, exactly.
The Chair: Mr. Daly, did you have anything to add?
Mr. Daly: This is in answer to the first two questions. I suppose the reality is that scrapping the Copyright Act and starting afresh from zero is not really realistic. What might be possible to consider in terms of pushing parties to seek market-based solutions or pushing the board to be proactive in adopting new regulations, like the regulations that Mr. Knopf has so kindly prepared for them, would be to set out in the next set of revisions to the Copyright Act some performance benchmarks that could be imposed on the board relating to timelines for decision and so on. Obviously that has to be done with some care, but I think it's something that could be looked at in your review.
You set the benchmarks, and then the board and the parties, and by extension the parties who appear before the board, would have to use their ingenuity and expertise to find ways of satisfying them.
Mr. Glover: I would draw a contrast between the functioning of the market in the 1930s when the board was established and the way the market functions now. In the 1930s, the board was established in part because performing rights organizations were scooping up all sorts of rights and exercising a monopoly power over small users. There was a definite market imbalance.
Today the objectors that you often find before the board are really sophisticated companies like Google, Bell, Rogers, SiriusXM. In many cases, not all, there is a complete balance between the parties, and the parties could, if given the ability to do so, work it out privately without ever reverting to the board, without adding to the board's workload.
In other situations, the board will be necessary. The model that you see in different countries is that a matter comes to their tribunal only if a user or a collective asks for it to because negotiations have failed. That's a model you might look at.
Mr. Geist: I just wanted to quickly respond to a couple of the comments to note that of course it's very tempting to say why can't the parties just go solve this by themselves and let the market address the issue. While it's true that it's typically sophisticated users that appear before the board as objectors, the issue I was trying to raise is that there are many others who are not sophisticated for whom these kinds of decisions and these issues have enormous implications, and they don't appear.
So that public interest isn't something that you say, "Can't you just get on with it?'' It's actually one of the fundamental flaws about the way the system is functioning right now. We don't hear from those groups, and yet the implications and the impact on our education system in Canada, on individual consumers and Canadians more broadly are directly implicated by this. They are not sophisticated. They do not appear, and unless we ensure that those voices are heard as well, simply saying "let the market decide'' means that those perspectives won't get factored in at all.
Mr. Katz: I just want to add on that point. In competition law, in economics there is a theory called raising rivals' costs. There are various versions of that, but one variant is you have firms with market power that actually agree to all sorts of regulatory schemes to entrench their own monopoly.
Another thing we have to be worried about, just echoing the two points, if you take the big, fat type of users, like the cable companies or Google, yes, they can handle many of those things themselves, but there is a possibility that the tariff they agree to or the royalty that they would agree to pay sets a standard that makes it much more difficult for new entrants to enter the market.
Again, I suspect there is evidence of that going on. That gives the whole thing of regulatory capture a third or fourth layer and leaves the public interest outside, which neglects the basic point: Whenever we have a heavily regulated industry without a clear sense of what we are regulating and why, we would see those kinds of pathologies. That's why we always have to go back to the first question: Why are we doing that?
Mr. Daly: Just briefly on Professor Geist's point about public participation, which is an important point, on page 37 of my report you'll see a reference to the Competition Tribunal's consent order regime where parties can agree. There is no rubber-stamping by the tribunal. It's an informed decision based on the evidence by the tribunal. So it might be possible to have market-based solutions with the Copyright Board acting in an oversight role but ensuring that there is some public deliberation and some public participation in the process, not merely rubber-stamping solutions that the parties agreed to on their own.
The Chair: I think I agree. That's why this weekend I'll be watching the NFL Network and the business networks not in HD, because of the regulatory framework that prevents them from broadcasting in that particular fashion because certain monopolies are holding that up.
Nonetheless, this has been a great hearing. You gentlemen have been just terrific. We have learned so much. I think one of our recommendations will be that whoever is doing the review, whether it's the House of Commons or the Senate, this panel would be of very much interest to them. Gentlemen, thank you so much.
(The committee adjourned.)