Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 17 - Ninth Report of the Committee


MONDAY, April 21, 1997

The Standing Senate Committee on Transport and Communications has the honour to present its

NINTH REPORT

Your Committee to which was referred Bill C-32, an Act to amend the Copyright Act, has, in obedience to the Order of Reference of Thursday, April 10, 1997, examined the said Bill and now reports the same without amendment but with the following observations and recommendations:

Bill C-32 is a comprehensive piece of legislation that touches upon many important sectors of the copyright economy. The Bill constitutes the second phase of copyright revisions to Canada's Copyright Act, proclaimed in force in 1924. The first phase was completed in 1988 with the adoption of Bill C-60.

By its nature, copyright legislation seeks to strike a balance between the legitimate, but often conflicting, needs of users and the rights of creators of literary, musical and other creative works. It involves complex and technical policy issues, and solutions are not simple.

Your Committee recognizes that some measures contained in the Bill do not go as far as some interested parties might wish; conversely, some measures go too far in the view of other parties. Given the divergent views of creators and users, your Committee believes that a compromise totally satisfactory to all parties would have been impossible to achieve.

In the course of its hearings on Bill C-32, your Committee received submissions and heard testimony from a broad cross-section of creators and users. While several witnesses endorsed the Bill and recommended that it be adopted in its current form, a number of groups and individuals who appeared before your Committee expressed concerns about particular aspects of the proposed legislation and recommended that it be amended.

Bill C-32 is a detailed piece of legislation, but some salient aspects may be highlighted. Through the enactment of "neighbouring rights", the Bill will entitle producers and performers of recorded music to be paid royalties when their music is played in public. It will create an exemption allowing libraries to provide a copy of an article to library patrons. It will introduce a levy on blank audio media to compensate the music industry for the unlawful copying of their recordings. It will allow broadcasters to include incidentally protected materials in their programs without running the risk of infringement. It will protect exclusive book distributors in Canada by placing restrictions on "parallel" book imports. It will enable special-format materials to be produced for persons with perceptual disabilities. It will provide copyright owners with improved remedies, notably statutory damages and wide injunctions. It will enable educational institutions to tape broadcast programming in order that they may take advantage of that "teachable moment". It will prescribe a fixed term of protection for unpublished works and create an exemption allowing archival material to be reproduced for research purposes. On most of these issues, views expressed before your Committee were conflicting, dividing user and creator interests.

Your Committee is fully aware that the law of copyright is complex. Bill C-32 does not assist in making copyright law more accessible to those who are affected by it in their everyday activities. We note that the words "perceptual disability", "country" and "sculpture" are defined in this Bill, whereas "remaindered books" and "performers" are not. Moreover, what is prohibited or permitted by Canadian copyright law is not readily ascertainable.

Your Committee notes that provisions in the Bill restricting the "parallel importation" of books will apply to used textbooks. Some parties argued that this provision could adversely affect university students seeking to purchase used books at discounted prices. Although used textbooks are not exempted from the parallel import restrictions by virtue of paragraph 45(1)(e), the Government has undertaken to exempt them from the regime by passing regulations under subsection 27.1(6). Your Committee recommends that used textbooks not be made subject to the import restrictions unless there is compelling evidence that their sale in Canada is adversely affecting exclusive Canadian distributors and that there is an overriding public interest that the importation of such books should be restricted.

Your Committee notes that the levy on blank audio media, to be imposed to compensate the rightsholders of recorded music for the unauthorized copying of their recordings, will apply exclusively to blank audio media and not to other recording media such as video cassettes. The precise amount of the levy will be fixed by the Copyright Board after consultations with interested parties. Your Committee notes that the levy will be imposed at the manufacturing level, and consequently all sales taxes will be paid on the amount of the levy. Manufacturers of blank audio tapes strongly opposed the levy, and predicted that the impact of the levy would be to create a "grey market" in Canada for blank audio tapes. Your Committee therefore recommends that the Government monitor market behaviour in Canada to assess the impact of the levy on sales of blank audio media, and to determine whether a similar levy should also be applied to the other recording media.

Bill C-32 will enact "neighbouring rights," which will require broadcasters to pay royalties to recording artists and record producers. The neighbouring rights regime was generally opposed by broadcasters. However, broadcasters will pay only a flat fee of $100 on the first $1.25 million of advertising revenues. This preferential rate will cover about 65 per cent of Canadian radio stations. Royalties, as fixed by the Copyright Board and to be phased in over three years, will have to be paid on any advertising revenues above $1.25 million. Since the United States does not recognize "neighbouring rights", Canadian broadcasters will not be obliged to make payments in relation to sound recordings made in the U.S. However, the U.S. will enforce "neighbouring rights" related to digital radio offered to consumers on a subscription basis. Your Committee therefore recommends that the Government immediately undertake an in-depth study of the new digital technologies, in particular the Internet, and the impact their widespread commercial deployment might have on the payments Canadian broadcasters may have to make to both Canadian and foreign rightsholders.

Canadian broadcasters strongly opposed the "ephemeral recording" and "transfer of formats" exemptions set out in the Bill. These exemptions would essentially allow broadcasters to make recordings and keep them for up to 30 days, although the exemption would no longer apply if a collective exists to grant a recording licence. Your Committee notes that, while broadcasters are strongly opposed to these provisions, which they find too restrictive, they will nonetheless have 30 days within which to seek authorization if they wish to retain a recording for a longer period of time. Finally, while your Committee agrees that re-recording music every 30 days could be time-consuming and cumbersome for broadcasters, based on the testimony before the Committee, we estimate that licensing fees should be quite modest, should licences become available.

Your Committee notes that the definition of "commercially available" was the subject of some controversy among interested parties. Originally, the term "commercially available" signified that educational institutions and libraries could make a copy of a work under selected exemptions if a copy could not be obtained on the market. A new definition was inserted into the Bill, however, according to which "commercially available" signified the period of time to obtain a work through a collective licence. User groups argued before your Committee that the definition as altered was much too broad and open-ended, and that the original definition should be restored.

Your Committee notes that, while educational institutions and libraries originally would have been exempted from liability for infringements carried out by means of self-serve copiers installed on their premises, the Bill was changed so that these institutions would be absolved from liability only if they obtained a licence. The affected user institutions vigorously opposed the amended version, while creators had strongly objected to the original measure, which they argued went too far in expropriating their rights. Your Committee notes that, as collectives already exist to issue reprographic licences, the requisite licences will be readily obtainable by educational institutions and libraries.

Your Committee notes that, according to the original section 29.6 of the Bill, educational institutions would have been allowed to record news programs and news commentary programs and to play them on the institution's premises for up to one year. This exemption was modified expressly to exempt documentaries. Your Committee notes that, while this change was made to clarify the scope of the exemption, which was never intended to apply to documentaries in the first place, interested parties will not have to incur expenses for litigation on this matter. Your Committee further notes that it will still be possible to tape documentaries for educational purposes, although such recordings will be subject to the different regime for taping other programs set out under section 29.7.

Some parties expressed concern that, under section 38.1 of the Bill, it will be possible to obtain statutory damages, even against innocent infringers. However, in cases of innocent infringement, the court will have the discretion to lower the amount of statutory damages to $200 from the otherwise applicable range of between $500 to $20,000. Thus, the Bill makes allowances for innocent infringements, without however exculpating totally the defendant. Your Committee notes that educational institutions, libraries, archives and museums will be exempted from statutory damages only if they are licensed in the circumstances set out in section 38.2. Your Committee notes that while exemptions from statutory damages originally applied only to educational institutions, the Bill was amended to include libraries, archives and museums. The exemption was thus broadened in favour of institutional users and at the expense of creators.

A number of the concerns raised before your Committee related to the amount of royalties that would have to be paid if Bill C-32 were enacted. This issue was particularly contentious regarding the proposed levy on blank audio media to compensate music authors, performing artists, and record producers for the unauthorized copying of their recordings. Your Committee wishes to point out that the amount of this levy is not fixed under the Bill. Rather, it will be determined by the Copyright Board following consultations with all interested parties. Whether a given royalty will be subject to the Board's mandatory pre-approval, as will be the case in relation to the proposed levy on blank audio media and the neighbouring rights royalties, or whether the parties will themselves be able to determine the amount of royalties to be paid on the basis of a voluntary agreement, as will be the case in relation to the making of multiple copies of special-format works for persons with perceptual disabilities, interested parties will have the opportunity to take an active part in the process and bring all of the relevant facts to bear on the issue.

Your Committee notes that Bill C-32 is the result of nearly ten years of negotiation and consultation. It is, moreover, the second phase of an ongoing review process. Phase III is to deal with copyright issues related to the Information Highway. Given the current context of rapid technological change in communications, especially the rapid growth of digital delivery systems and the Internet, Bill C-32 may prove inadequate to deal with copyright issues in the very near future. Your Committee believes that, in order to avoid possibly protracted and costly litigation, it will be necessary to undertake Phase III reforms in a timely fashion so that legislative reform can keep pace with the rapidly-evolving developments in society.

Your Committee notes that the Bill calls for a review of the implementation of the Act within five years of its coming into force. Given the divergent views that were expressed in relation to some of the Bill's provisions, your Committee recommends that the review be completed within three years of the Act's coming into force in order to monitor developments under the revised legislation and to assess progress on the Phase III revisions.

In a letter tabled with the Committee by the Honourable Sheila Copps, P.C., M.P., Minister of Canadian Heritage, the Minister made the following commitment:

I undertake, therefore, that within three years after the coming into force of section 92(1), I shall cause to be laid before both Houses of Parliament a report on the provisions and operation of this Act, including any recommendations for amendments to this Act. This will allow sufficient time to assess the impact of the renewed Act and to bring about any changes that may be required in the new communications environment. (Letter to the Honourable Lise Bacon, Chair, Standing Senate Committee on Transport and Communications, April 21, 1997, p. 2)

Respectfully submitted,

LISE BACON

Chair