September 10, 2012 VIA E-MAIL Mr.

Gilles McDougall Secretary General Copyright Board of Canada 56 Sparks Street Suite 800 Ottawa, ON K1A 0C9 Dear Mr. McDougall:

D. Lynne Watt Direct 613-786-8695 Direct Fax 613-788-3509 lynne.watt@gowlings.com File No. 03370632

Re: SOCAN Tariff 24 (2003-2005 and 2006-2013) Ringtones and Ringbacks Application to Vary filed by Bell Mobility et al. This constitutes SOCANs response to the submissions filed by the Applicants on August 1, 2012, with supplementary submissions filed on August 24, 2012, in support of their application to vary the Boards decisions of August 18, 2006 and June 29, 2012, certifying SOCAN Tariff 24 (2003-2005) and Tariff 24 (2006-2013), respectively. While styled as an application to vary, the application is, in fact, an application to rescind and revoke the two certified tariffs, on the basis of the Supreme Court of Canadas decisions in Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34 (the ESA Decision) and Rogers Communications Inc. et al. v. SOCAN, 2012 SCC 35 (the Rogers Decision). In addition, the Applicants have unilaterally ceased paying licence fees under Tariff 24 (a fact that is not mentioned in their Application) and are, in effect, seeking a declaration from the Board in order to insulate them from the risk of having to pay statutory damages. SOCAN submits that the Board is the best forum to deal with the matter tabled by the Applicants, that the Board should entertain the application but should dismiss it for the reasons set out below. Summary of submissions 1. SOCAN submits that the ESA Decision can have no retroactive effect on Tariff 24 for the period 2003 to 2005, i.e. the tariff that was confirmed to be valid by the Federal Court of Appeal (FCA) in 2008 (with leave to appeal to the Supreme Court of Canada denied). The Applicants are precluded, because of the doctrine of res judicata, from applying to the Court to overturn the Boards decision of August 18, 2006 on Tariff 24 (2003-2005). SOCAN submits that they should not be permitted to make a collateral attack on that same decision under the guise of material change. Public policy rationales underlying the doctrine of res judicata, such as certainty and finality of judgments, should

preclude any party from attempting to re-litigate spent decisions (i.e. decisions that are out of the system) when the state of the law changes, whether by legislative amendment or by a judicial decision. To rule otherwise would have untenable consequences as it would make all prior decisions of a Tribunal (or a court) subject to attack whenever there is a change in the law. There are several important differences between the Supreme Courts decisions in ESA and Rogers which invalidated Tariff 22 in respect of downloads of videogames and musical works for the period 1996-2006 and the Applicants attempt to retroactively overturn a six year old decision of the Board. Tariff 22 for the years 1996-2006 was directly in issue before the Supreme Court in ESA and Rogers. By contrast, the Boards decision of August 18, 2006 on Tariff 24 (2003-2005) has already been reviewed by the FCA and upheld, with leave denied by the SCC. Tariff 24 (2003-2005) cannot subsequently be attacked. For the same reason, the Boards decision of June 29, 2012, certifying SOCAN Tariff 24 (20062013), is immune from attack. The Applicants had the statutory right to seek judicial review of the Boards decision but did not do so within the time permitted under the Federal Courts Act. That decision is therefore immutable. In the alternative, if the release of a Supreme Court of Canada decision or an amendment to the Copyright Act could amount to a material change, such a change should only take effect from the date of the material change in this case, July 12, 2012. 2. SOCAN submits that the ESA and Rogers Decisions in respect of Tariff 22 do not amount to a material change in respect of the Tariff 24 decisions of the Board. The factual bases upon which the ESA Decision was made in respect of the download of videogames, and subsequently applied in Rogers in respect of the downloads of full track musical works, do not apply equally to ringtones and ringbacks. In the alternative, there is not sufficient evidence to conclude definitively that this is the case, particularly in the case of ringbacks which were not even the subject of the Boards 2003-2005 decision and in respect of which no evidence was filed. The Board should be extremely cautious, when asked to apply a decision from one context to another, to ensure that the facts are identical and to ensure that it has sufficient evidence before it to make that decision. It is open to the Applicants, the next time there is a Tariff 24 hearing, to lead evidence as to why ESA should be applied to ringtones. SOCAN would have the opportunity to ask interrogatories, to file evidence on the issue and to challenge the evidence filed by the Objectors. 3. With respect to the Boards June 29, 2012 decision on Tariff 24 (2006-2013), that decision certified a tariff that was proposed by SOCAN and the Applicants (as signatories to the agreement the parties had signed). It was open to the parties to incorporate a material change provision but they chose not to do so. 4. Finally, if the Board were to conclude that the ESA and Rogers Decisions do amount to a material change sufficient to call into question their decisions in respect of Tariff 24, SOCAN submits that the Board should exercise its discretion not to interfere because of the imminent coming into force of Bill C-11 which will restore SOCANs right to collect royalties for downloads with the introduction of the making available right (MAR).

Page 2

Background A tariff for ringtones was first approved by the Copyright Board in 2006 for the years 2003-2005. That decision was the subject of judicial review in the FCA, where the users (many of whom are the same companies as the Applicants in this matter) took the position, among others, that the Internet delivery of a ringtone did not constitute a communication within the meaning of section 3(1)(f) of the Copyright Act. The FCA dismissed the application (CWTA) and, subsequently, the Supreme Court of Canada dismissed the users application for leave to appeal. In June 2010, SOCAN and the Tariff 24 Objectors reached an agreement on the royalties to be paid for ringtones (and ringbacks) for the period 2006 to 2013, and asked the Board to approve the tariff in accordance with that agreement. The Board certified the tariff, as requested by the parties, on June 29, 2012. Shortly thereafter, the ESA Decision was issued on July 12, 2012. The majority in ESA referred to the CWTA decision and stated (incorrectly in our submission) that CWTA had not examined the legislative history behind the term communicate or the connection between communication and performance. 1 While the majority decided that the download of videogames and full-length musical works were not communications, the majority did not expressly overturn CWTA. CWTA is subject to the doctrine of res judicata The doctrine of res judicata is a fundamental doctrine of the justice system.2 The SCC has defined the doctrine as something that has clearly been decided and has passed into a matter adjudged.3 Therefore, a final judgment concludes the issues between parties.4 The effect of the doctrine is that when any possibility to appeal a decision has lapsed, that decision is final as between the parties, on that particular set of facts. Unless retroactive legislation is adopted, the parties have no recourse to substitute a decision even where future cases change the interpretation of a statute, or even if the statute itself is amended, repealed or struck because it is unconstitutional. Res judicata is grounded on several principles and policy rationales. Public policy dictates that it is in the interest of the public that an end be put to litigation. There is a social necessity requiring the finality and validity of judgments, on the basis that adjudicated issues are received as the truth.5 Res judicata is also based on the individual right that no one should be twice vexed by the same cause.

The fact that the FCA in CWTA did not expressly refer to the legislative history of s.3(1)(f) in its written reasons does not mean that it did not consider it. Both the appellants CWTA, Bell and TELUS, and the respondent SOCAN provided detailed argument in their written facta about the legislative history of the provision and made submissions in oral argument on the point. 2 R. v. Van Rassel, [1990] 1 S.C.R. 225 at 238. 3 R. v. Riddle (1979), 48 C.C.C. (2d) 365 (S.C.C.). at 369. 4 rd Donald J. Lange, The Doctrine of Res Judicata in Canada, 3 ed. (Markham: LexisNexis, 2010) at p. 4-5; Clark v. Phinney (1896), 25 S.C.R. 633 at 642-644. 5 Toronto (City) v. Canadian Union of Public Employees, Local 79, [2003] S.C.J. No. 64 at para. 55; Roberge v. Bolduc, [1991] 1 S.C.R. 374 at 402; Minott v. OShanter Development Co., (1999), 42 O.R. (3d) 321 (C.A.) at 329; Childrens Aid Society of the Niagara Region v. D.P., [2002] O.J. No. 4015 (S.C.J.). at para. 12.

Page 3

The rule applies in all contexts, even in criminal law where the accuseds liberty is at stake. Criminal law is a very good example of the doctrine because it is the source of many appeals to the SCC, given that lower courts often apply provisions of the Criminal Code inconsistently. The principle is aptly illustrated by the SCC decision in R. v. Sarson.6 In that case, an accused was convicted of constructive murder under s. 213(d) of the Criminal Code. The accused pleaded guilty to the lesser included offence of second degree murder, and was sentenced to life imprisonment without the potential for parole for 15 years. Eleven months later, the SCC struck down s. 213(d) as unconstitutional in R. v. Vaillancourt.7 Having pleaded guilty, the accused had not sought any appeal of his sentence. The SCC held that he could not rely on the Vaillancourt decision and be released, even if he was convicted under a now unconstitutional provision of the Criminal Code. The Court held that an accused may rely on subsequently decided judicial authorities only if the accused is still in the judicial system. The rationale for this limitation is that finality, even in criminal proceedings where the accuseds liberty is at stake, is of the utmost importance and the need for finality is adequately served by the normal operation of res judicata: a matter once finally judicially decided cannot be re-litigated.8 In R. v. Sarson, the Court also opined, relying on its decision in Reference re Manitoba Language Rights,9 that res judicata would even preclude the reopening of cases decided by the courts on the basis of constitutionally invalid laws and would apply with at least as much force to cases decided on the basis of subsequently overruled case law. As a result, the Court held that, unless the accused is still in the judicial system, i.e. an appeal has been launched, an application for leave has been made, or an application for an extension of time has been granted, the accused will not be able to reopen his or her case and rely on subsequently decided judicial authorities, even where the provision under which the accused was convicted is subsequently declared constitutionally invalid. In SOCANs submission, the SCCs decision in Sarson would clearly apply to the CWTA ringtone decision. In addition to that case no longer being in the system, the ringtone providers have exhausted all of their appeal possibilities and leave to appeal to the SCC was dismissed. Therefore, the ringtone providers reliance on the ESA Decision would be an indirect attack if they brought an application for a declaration that CWTA was wrongly decided following the ESA Decision. The SCC in Sarson held that res judicata applied with greater force in the context of an indirect attack. 10 An application by the ringtone providers would be an indirect or collateral attack and would fail on the ground that the CWTA decision was made pursuant to the judgment of a court of competent jurisdiction. The fact that the Court may have made an error of law in applying a statute would not deprive the court of jurisdiction. The matters before the Court in the CWTA case are matters of settled law, and are subject to the doctrine of res judicata. The same must surely hold true for the decision of the Board that gave rise to the CWTA case. Tariff 24 for the period 2006-2013 was certified by the Board on June 29, 2012. The Applicants had thirty days in which to seek judicial review of the decision, including eighteen days following the release of the ESA and Rogers decisions. In other words, the Boards decision was in the legal system until July 30, 2012. However, the Applicants did not proceed to seek judicial review.
6 7

R. v. Sarson, [1996] 2 SCR 223. R. v. Vaillancourt, [1987] 2 S.C.R. 636. 8 R. v. Sarson, [1996] 2 SCR 223 at para. 26. 9 Reference re Manitoba Language Rights, [1985] 1 S.C.R. 721, at p. 757. 10 R. v. Sarson, [1996] 2 SCR 223 at para. 35.

Page 4

SOCAN submits, therefore, that the Boards June 29, 2012 decision, like its August 18, 2006 decision, is protected by the principles of res judicata and can no longer be attacked, either by way of judicial review or, indirectly, by way of an application for a declaration of material change based on a change in law. As noted above, there are strong policy reasons for this. To hold otherwise would allow any party vexed by a court decision or a tribunal decision to seek to overturn it, long after the fact, whenever there is a change in the law. This could present an enormous logistical challenge, substantially increasing the number of cases being litigated. More importantly, it would mean that no one could ever safely rely upon the finality of a decision. Tariff 24 is a good example: SOCAN, as is its usual practice, did not distribute any Tariff 24 royalties to its members while there were still legal challenges pending to the Boards 2006 decision certifying it. However, once the SCC denied leave to appeal, the CWTA decision became final and SOCAN proceeded to distribute royalties in reliance upon the fact that the certified tariff was valid. The parties, in good faith, have relied upon the validity of Tariff 24 since 2008: the users have (until very recently) remitted licence fees and SOCAN has made distributions to its members under it. Moreover, the parties then proceeded to negotiate and, in 2010, agree upon the form of Tariff 24 through to the end of 2013. Again, in reliance upon that agreement, the users have continued to pay licence fees and SOCAN has distributed royalties to its members. If the Board were to declare, now, almost ten years after the fact that all licence fees back to 2003 were invalidly collected and paid, it would work an enormous hardship, not to mention administrative burden, to have to recoup those payments from individual SOCAN members and remit them to the ringtone providers. More importantly, what would the impact be on the collective administration of rights? How could a collective society ever safely distribute royalties to its members, if payment under a tariff that was upheld by the Board and the courts could, at some point in the future, be overturned because of a decision relating to a different tariff (or even the same tariff for a different time period)? Tariff 22.A is different: the tariff for the entire 1996-2006 period was before the Board for Phase II in 2007 and was directly in issue before the FCA and SCC in ESA and Rogers. SOCAN has not distributed Tariff 22.A royalties to its members because of the on-going challenges to the validity of that tariff and, as a result of ESA, it can now refund royalties collected to the users who paid them under that Tariff ; however it began distributing Tariff 24 royalties once that tariff had finally been determined to be valid. If the ESA Decision applies to Ringtones, it should only apply prospectively For the reasons set out below, SOCAN submits that ESA does not apply to ringtones because of important factual differences between videogames and musical tracks on the one hand and ringtones on the other and so, even if the Applicants can now challenge that tariff, the challenge should be dismissed. In the alternative, if the Board concludes that the facts are sufficiently similar to be safely able to apply ESA to ringtones, then SOCAN submits that the challenge still fails because the ESA decision only applies prospectively. This argument has two facets: i) because of the doctrine of res judicata and the binding validity of CWTA, the Board was correct when it rendered its decision on June 29, 2012 certifying Tariff 24 for 2006-2013. Since there was no judicial review sought of that decision, Tariff 24 is valid to the end of the 2013 period;

Page 5

ii) alternatively, if the Board concludes that ESA has affected its jurisdiction to certify a tariff for ringtones, SOCAN submits that the change in the law only works from the date of the release of the SCC decision (i.e July 12, 2012) and any royalties payable prior to that date were validly collected. If Tariff 24 users had proceeded to file applications for judicial review of the Boards decision of June 29, 2012, they likely would have argued that notwithstanding the CWTA decision (and the dismissal of the application for leave to appeal that case), the Board did not have jurisdiction to certify a tariff for ringtones on June 29, 2012 in light of the subsequent ESA decision. Their argument would likely have been that the ESA Decision has a retrospective effect and that the Boards most recent Tariff 24 decision is not protected by res judicata. However SOCAN would have argued that the ESA Decision only applies prospectively. Since the Board had jurisdiction to certify the tariff at the time that it did (i.e. in June 2012), the application for judicial review would be unsuccessful. Usually, the SCCs practice seeks to avoid departing from its own precedents, unless there are compelling reasons to do so. Where the SCC overturns its own precedents (in this case overturning its previous decision to dismiss the application for leave to appeal the CWTA decision), the application of the new interpretation (i.e., the ESA Decision) generally applies only prospectively to decisions rendered after (i.e. after July 12, 2012). When the SCC overturns its own precedents, the decision may have retrospective effects but only for those cases that are not subject to the doctrine of res judicata. This principle was subject to discussion in Canada (Attorney General) v. Hislop, where Lebel and Rothstein JJ. held, for the Court, that the principle was derived from Blackstones famous aphorism that judges do not create law but merely discover it. In this perspective, courts grant retroactive relief applying existing law or rediscovered rules which are deemed to have always existed. However, Lebel and Rothstein JJ. acknowledged in Hislop that when the law changes through judicial intervention, courts operate outside of the Blackstonian paradigm. In those situations, it may be appropriate for the court to issue a prospective rather than a retroactive remedy. Moreover, Lebel and Rothstein JJ. also opined that when the SCC departs from its own jurisprudence by expressly overruling or implicitly repudiating a prior decision [...] such clear situations would justify recourse to prospective remedies in a proper context (emphasis added). In the end, Lebel and Rothstein JJ. stated that: People generally conduct their affairs based on their understanding of what the law requires. [...W]here a judicial ruling changes the existing law or creates new law, it may, under certain conditions, be inappropriate to hold the government retroactively liable. [...] In this way, a balance is struck between the legitimate reliance interests of actors who make decisions based on a reasonable assessment of the state of the law at the relevant time on one hand and the need to allow constitutional jurisprudence to evolve over time on the other.11 In light of the above, it is SOCANs submission that the CWTA decision is protected by the doctrine of res judicata and the Board should not vary its previous decisions.

11

Canada (Attorney General) v. Hislop, [2007] 1 SCR 429 at para. 103.

Page 6

If the ESA Decision applies, then it should only apply prospectively, i.e. to decisions rendered after July 12, 2012. It will be open to the Objectors at the next Tariff 24 hearing to argue that the Board should apply ESA and Rogers to ringtones and ringbacks. It is open to the Applicants, the next time there is a Tariff 24 hearing, to lead evidence as to why ESA should be applied to ringtones. SOCAN would have the opportunity to ask interrogatories, to file evidence on the issue and to challenge the evidence filed by the Objectors. In the alternative, if the Board were to conclude that ESA and Rogers amount to a material change and that policy reasons should not preclude the Board from varying its decision, then SOCAN submits that such material change only affects the certified tariff from the date of the material change and not retroactively. The Board came to a similar conclusion in Retransmission of Distant Radio and Television Signals (Re) 12 where it allowed CBRAs application to vary the 1992-1994 tariff but only from the date of the coming into force of NAFTA, i.e. January 1, 1994. The tariff, as previously certified remained in effect up until the date of the material change and was varied only thereafter. Applied to the within case, SOCAN submits that the change in the law only works from the date of the release of the SCC decision (i.e July 12, 2012) and any royalties payable prior to that date were validly collected and are unaffected by the material change. Factual differences between ESA and Ringtones To be successful on a challenge to the ringtones tariff, the Applicants must convince the Board that ESA should be applied to ringtones in the same way as videogames and full tracks of musical works, notwithstanding some important factual differences. SOCAN concedes that the Board found that ringtones are audio files which are downloaded by the subscriber to his or her cell phones memory. However, one of the key bases upon which the Supreme Court concluded that downloads of videogames were akin to reproductions and not communications was the fact that the copy of the videogame that the user would download to his/her computer was identical in all respects to the physical hardcopy of the game that the user could purchase in a store. The same is not true for ringtones. There is no identical physical market for ringtones in which one can buy a ringtone CD in a store. Ringtones downloaded to the users cell phone are identical in all respects to a ringtone that can be purchased in a store. Secondly, there is no layering of rights which was another key concern of the Court - because CSI does not collect royalties for the download of ringtones in the way that it does for online music services. Finally, there may also be an issue as to whether the use of ringtones and ringbacks engages a public performance right that is authorized by the ringtone providers. There is an argument to be made that the activation of a ringtone in public results in the performance in public of the musical work each time the cellphone rings and that the ringtone provider has authorized such performances within the meaning of s.3(1) of the Act. This would be a free-standing right to collect license fees in respect of ringtones and ringbacks for which the SCC finding that communications must be akin to performances rather than reproductions would not be an impediment. None of these elements were considered by the Board when it certified Tariff 24 for the two periods under consideration.

12

[1996] CBD No 4

Page 7

Moreover, there was no evidence whatsoever before the Board in respect of ringbacks and the technology by which they are delivered to customers. SOCAN submits that such evidence as there is (which must be drawn from the evidentiary record that was before the Board in 2006 for the hearing of the 2003-2005 tariff which is the only evidence that the parties have had the opportunity to test) supports SOCANs position that ringtones are different from both videogames and full-length musical tracks and that it is not clear and obvious that ESA can be automatically applied to ringtones and ringbacks. The agreement between the Parties Another important difference between Tariff 24 (2006-2013) and Tariff 22 (1996-2006) is that the former was certified by the Board in terms agreed upon by SOCAN and the Applicants, whereas certification of Tariff 22 was opposed by many of the major users, including the Applicants. Tthe Applicants proceeded to negotiate and then to agree to a tariff for the download of ringtones at the very same time that they were arguing in Tariff 22 (as they previously had in CWTA) that downloads are not communications. They should be held to their agreement. In Tariff 22 Phase II, the Cable/Telcos (Bell Canada, Rogers Communications Inc., Shaw Cablesystems GP, and TELUS Communications Inc.) argued in their statement of case filed March 9, 2007, that: Downloading involves the electronic transmission of a file that contains a musical work over the internet so that a copy of the file is stored on the recipients computer or other device. The musical work is not immediately perceivable during the course of the transmission. When and where (or even if) the musical work contained in the file is eventually performed are decisions made individually by the recipient. Downloading is, in essence, a delivery function to transfer a reproduction of a musical work from one point to another.13 (emphasis added) ... With respect to the downloading of audio or audiovisual content over the internet, the Cable/Telcos take the position that the point-to-point transmission of individual files to consumers does not engage the right to communicate to the public by telecommunication since there is no communication of the musical work and the transmission is not to the public. Therefore, with respect to the sale and delivery to individuals of audio and audiovisual content for download over the internet (whether on a permanent or limited basis), no royalties should be payable to SOCAN.14 (emphasis added) This position was confirmed in oral argument before the Board.15

13

Statement of case of Bell Canada, Rogers Communications Inc., Shaw Cablesystems GP, and TELUS Communications Inc. (Cable/Telcos), Exhibit Cable/Telco-1, File: SOCAN Tariff 22 (Background Music) 1996 2006, para 4 14 Ibid., para 11 15 Transcript, May 8, 2007, Page 2477

Page 8

This position was repeated by the Cable/Telcos before the Federal Court of Appeal on judicial review of the Boards Tariff 22 decision. In their notices of application dated November 19, 2007, the Applicants plead that the Board exceeded its jurisdiction and erred in law in holding that the transmission of a download over the internet communicates the content of the download.16 Despite making these submissions before the Board in 2007 and before the Federal Court of Appeal on judicial review, the same Cable/Telcos executed the Tariff 24 agreement. The agreement was dated January 31, 2010 and was subsequently filed with the Board by SOCAN on behalf of all parties. The Tariff 24 agreement formed the basis upon which the Board certified the Tariff. In that agreement, the Applicants contractually agreed to the royalty rates and terms for licences for ringtones and ringbacks for the periods January 1, 2006 to December 31, 2010 and January 1, 2001 to December 31, 2013. It is important to note that the article 5 of the Tariff 24 agreement reserves the following rights to the signatories: a. Nothing in this Agreement shall prejudice the rights of any party in respect of any period subsequent to that covered herein or any music uses other than those contemplated herein; Nothing in this Agreement shall constitute an admission by any party as to the value of or the royalties payable for the communication rights in musical works forming part of Ringtones and Ringbacks in any period subsequent to the year 2013; The parties shall subsequently be free to take such positions and introduce such evidence or argument as to the fees payable to SOCAN for any period subsequent to this Agreement as any party may deem advisable. This clause shall survive the termination of this Agreement. The parties did not, however, reserve the right to apply to the Board to vary the certified tariff in the event that there was a change in the law. This is in contrast to the agreements that various Objectors to SOCAN Tariff 22.D (again, many of whom are the same as the Applicants in this case) have recently entered into with SOCAN, wherein the Objectors requested, and SOCAN agreed to, a clause that stipulates: 9 a. Nothing in this Agreement shall prejudice the rights of any party in respect of the outcome and effects of the pending decisions of the Supreme Court of Canada ("SCC") in Court files 33922 and 33921. In particular, subject to the ultimate passage and coming into force of Bill C-11 (Copyright Modernization Act), if the SCC finds, without limitation, that the point-to-point transmission over the Internet of a discrete copy of a work to an individual is not a communication of that work to the public by telecommunication within the meaning of paragraph 3(1)(f) of the Copyright Act, the Agreement shall be null and void to the extent that it purports to apply to those transmissions; accordingly, the Objectors shall no longer have any obligations pursuant to the terms of the Agreement and/or Tariff 22.D.1, including payment and
16

b.

c.

Notice of Application, Court File A-519-07 and Notice of Application, Court File A-520-07

Page 9

reporting obligations; and SOCAN shall return any amounts paid pursuant to the Agreement and/or Tariff 22.D.1 within 120 days of the SCCs judgment. SOCAN submits that if the Applicants had wished to make the Tarif 24 agreement subject to the ultimate decision on the meaning of communication to the public in Tariff 22, they could have done so in the same way that they reserved that right to themselves in Tariff 22.D. They knew, at the time they executed the Tariff 24 agreement, that they were advancing the argument in the Tariff 22 judicial reviews that downloads were not communications within the meaning of s.3(1)(f) of the Act. Bill C-11 Bill C-11, the Copyright Modernization Act, received royal assent on June 29, 2012 but is not yet in force. The bill is expected to be proclaimed into force, in whole or in part, later this Fall, once a number of regulations have been established by cabinet. The MAR amendment in Bill C-11 reads: Section 2.4 of the Act is amended by adding the following under subsection (1): (1.1) For the purposes of this Act, communication of a work or other subject-matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public. The MAR is the legislative means by which a number of European countries and now Canada have clarified their domestic copyright legislation to ensure the protection of copyright works in the digital world, including the Internet. It stems from Article 8 of the WIPO Copyright Treaty ("WCT"), which reads as follows: Without prejudice to the provisions of Articles 11(1)(ii), 11bis(1)(i) and (ii), 11ter(1)(ii), 14(1)(ii) and 14bis(1) of the Berne Convention, authors of literary and artistic works shall enjoy the exclusive right of authorizing any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them. What did the drafters of the WIPO treaties intend? The preparatory documents underlying the introduction of the MAR provide considerable insight into the intended substance of the right. In a paper discussing the umbrella solution which was presented to the WIPO committee at the Harvard Symposium (a preparatory session which led to the copyright treaty), Mihaly Ficsor (former Assistant Director General of WIPO) wrote: The intention behind this solution is not just to get rid of the problem at the international level and pass it over to national laws, without appropriate guarantees for efficient protection. Therefore certain elements of such a solution are to be quite precisely identified as a condition of its workability; namely that: the relevant acts should be described as making available (works or objects of neighbouring rights) to the public;

Page 10

 this making available to the public should cover all cases of making available, irrespective of the purpose of the act, namely irrespective of whether it is for the purpose of perceiving, studying, watching, listening to (with only at most a transient reproduction that may be necessary for such purposes) and/or it is for the purpose of making copies (permanent or temporary);17 [emphasis added] Similarly, the notes which accompanied the draft wording which eventually became Article 8 provided as follows: 10.09 The provisions of Article 10 [which was renumbered as Article 8] consist of two parts. The first part extends the exclusive right of communication to the public to all categories of works, including any communication by wire or wireless means 10.10 The second part of Article 10 explicitly states that communication to the public includes the making available to the public of works, by wire or wireless means, in such a way that members of the public may access these works from a place and at a time individually chose by them. The relevant act is the making available of the work by providing access to it. What counts is the initial act of making the work available, not the mere provision of server space, communication connections, or facilities for the carriage and routing of signals. It is irrelevant whether copies are available for the user or whether the work is simply made perceptible to, and thus usable by, the user. 18 [emphasis added] Other Jurisdictions that have implemented the MAR as a broad communication right Other than in the US, the MAR has been introduced into domestic legislation as a new right that covers a separate protected activity that applies to all forms of internet delivery, be it via download or stream. In the UK, the MAR provision in s. 20 of the Copyright, Designs and Patents Act 198819 has been applied to illegal P2P file-sharing sites that necessarily involve downloading.20 In Australia, the Copyright Law Review Committee tasked with making recommendations for copyright reform in Australia expressly rejected the American approach and confirmed the intent to introduce a broadly based right of communication which includes a right of making available that would cover all means of transmission. 21

17

M Ficsor, International Harmonization of the Protection and Management of Copyright and Neighboring Rights, in Naples Forum Book, 137-8, cited in M. Ficsor, The Law of Copyright and the Internet: The 1996 WIPO Treaties, their Interpretation and Implementation (Oxford: Oxford University Press, 2002) at 208. 18 Records of the Diplomatic Conference at 204, cited in Ficsor, supra note 17 at 243. 19 Copyright, Designs and Patents Act, 1988 c.48 20 Polydor Ltd. & Ors v Brown & Ors , [2005] EWHC 3191 (Ch); Dramatico Entertainment Ltd & Ors v British Sky Broadcasting Ltd &Ors, [2012] EWHC 268 (Ch 21 Copyright Law Review Committee, Simplification of the Copyright Act 1968 PART 2: Categorisation of Subject Matter and Exclusive Rights, and Other Issues (February 1999), <online: http://www.ag.gov.au/Documents/CLRC%20Simplification%20of%20the%20Copyright%20Act%201968%20%20Part%202.pdf> at para. 4.14

Page 11

The Canadian implementation In Canada, the recent amendments to the Copyright Act were intended to bring Canada in line with its WIPO Treaty obligations. Section 3 of the amending legislation adds a new subsection to the definitions in section 2.4 of the Act: (1.1) For the purposes of this Act, communication of a work or other subject-matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public. The Government issued several statements describing the Governments vision for the new Act and its objectives for Bill C-11: What the bill will do This bill will implement the rights and protections of the World Intellectual Property Organization (WIPO) Internet treaties and give Canadian creators and consumers the tools they need to remain competitive internationally. The WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty, negotiated in 1996, established new rights and protections for authors, sound recording makers and performers of audio works. Through this legislation, the Government will: modernize the Copyright Act to bring it in line with advances in technology and international standards; advance the interests of Canadians, from those who create content to the consumers who benefit from it; provide a framework that is forward-looking and flexible, and that will help protect and create jobs, stimulate the Canadian economy, and attract new investment to Canada; and establish rules that are technologically neutral, so they are flexible enough to evolve with changing technologies and the digital economy, while ensuring appropriate protection for both creators and users. The following is a summary of what the provisions of the Copyright Modernization Act mean for Canadians. Creators, performers, and copyright owners New rights for Canadian creators

Page 12

Canadian creators, performers, and artists will benefit from the full range of rights and protections in the WIPO Internet treaties, including an exclusive right to control how their copyrighted material is made available on the Internet.22 Industry Canada goes into further detail on the implementation of the WIPO treaties as follows: The WIPO Copyright Treaty and the Performances and Phonograms Treaty, collectively known as the WIPO Internet treaties, establish new rights and protections for authors, performers and producers. Canada signed the treaties in 1997. The proposed Bill will implement the associated rights and protections to pave the way for a future decision on ratification. All copyright owners will now have a "making available right", which is an exclusive right to control the release of copyrighted material on the Internet.23 [emphasis added] The glossary to the Governments public description of the Bill suggests that services like iTunes would be covered by the MAR: Making available right An exclusive right of copyright owners to authorize the communication of their work or other related subject matter in a manner in which the time and place of receiving the communication can be individually chosen by members of the public (e.g., iTunes).24 These statements confirm that the Government conceived of the MAR as a communication right that encompasses all forms of Internet distribution, consistent with the intentions of the WIPO drafters and the legislatures of the UK and Australia cited above. Section 2.4(1.1) deems all acts of making available to be acts of communication A review of the literature surrounding the formation of the WPIO treaties and examination of the implementation of the MAR in other commonwealth countries and in Canada confirms that the MAR amendment should be considered a deeming provision that transforms all acts of making available into communications. The MAR is a new right (and conceptually distinct from a simple communication) that, pursuant to s. 2.4(1.1), is deemed a communication to the public by telecommunication. Aside from the initial reproduction that may be involved in uploading a digital file to an Internet server, all subsequent dealings with that file by the public, if any, would be protected under the MAR, regardless of whether the subsequent dealing was in the form of a download or stream. The person operating a server with musical works requires authorization from the copyright holder in

22

Government of Canada, Copyright Modernization Act Backgrounder, <online: http://www.ic.gc.ca/eic/site/crpprda.nsf/eng/h_rp01237.html> 23 Government of Canada, What the Copyright Modernization Act Means for Copyright Owners, Artists and Creators, <online: http://www.ic.gc.ca/eic/site/crp-prda.nsf/eng/rp01189.html> 24 Government of Canada, Glossary, <online: http://www.ic.gc.ca/eic/site/crp-prda.nsf/eng/h_rp01190.html>

Page 13

order to make the files accessible to any member of the public. In this way, it does not matter if the file is actually downloaded or streamed at all. What matters is that the public has access to the file.25 It is SOCANs position that with the coming into force of Bill C-11, the introduction of the MAR reestablishes SOCANs right to require licences and the Boards jurisdiction to certify tariffs in respect of the downloading of musical works made available to the public in such a way that members of the public may access the musical works from a place and at a time individually chosen by them. This would cover ringtones and ringbacks, as well videogames and full-length musical tracks. In the circumstances, the Board should decline to act upon the application to vary filed by the Applicants even in the event that the Board were to conclude that the ESA decision amounts to a material change. In the alternative, if the Board were to conclude that ESA invalidates the basis upon which SOCAN is entitled to collect licence fees for the download of ringtones, such invalidation should run only from July 12, 2012 (the date of the material change) until the coming into force of the amendment to s. 2.4 of the Act. Yours very truly,

D. Lynne Watt DLW:dlm

OTT_LAW\ 3299187\5

25

Note that this situation would be similar to a television broadcast that no one watches. In Canada, this still constitutes a communication to the public.

Page 14