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Opting Out: Copyright Board Tariffs are not Mandatory

The Federal Court of Appeal’s decision in York University v. The Canadian Copyright Licensing Agency (Access Copyright) is a lengthy judgment with important ramifications on the  collective copyright regime.

Background

Access Copyright is a collective society that administers certain rights of its member copyright owners. The Copyright Board granted Access Copyright an interim tariff for the copying of works by post-secondary institutions. York University introduced its “Fair Guidelines for York Faculty and Staff” which set rules for copying permitted at the university. York then “opted out” of the tariff (i.e. refused to pay). Access Copyright sued York to enforce the tariff, including for payments of royalties. York counterclaimed, seeking a declaration that all copying within the terms of its Guidelines constituted fair dealing. The Federal Court allowed Access Copyright’s action and dismissed York’s counterclaim. York appealed.

Tariffs are not Mandatory

The first issue was whether a tariff is mandatory, such that a user becomes liable for payment of the stipulated royalties if it engages in any infringing activity. The Court noted that the question is one “with a long history, which is best understood through the laborious process of a step by step historical review.” The decision involved extensive review of the jurisprudence and history of the Copyright Act from 1921 to present.

The Court of Appeal ruled that tariffs are not mandatory, a decision which effectively overturns the prevailing view. There have been a number of cases where collective societies successfully sued for tariff royalties. However, none of the cases addressed enforceability of tariffs in detail and the Court of Appeal noted “[t]his appears to have led to the general view that tariffs are mandatory since the measure of damages for infringement has been held to be the amounts prescribed by the tariff.” This enforcement of tariffs “is the result of the confounding the enforcement of the tariff with awarding damages based on tariff amounts.”

The Court found that Access Copyright misapprehended the effect of a tariff. Collective societies operate a licensing scheme. Approved tariffs set the royalties to be collected for issuing those licences and the instrument which makes the tariff enforceable against a user is the licence which the user accepts from the collective society. This requires the user’s consent. The tariff-setting process exists to limit the market power of collective societies which, by reason of that power, are in a position to impose terms on users. The Court found this was a continuous thread running through the legislative history. Access Copyright relied principally on the absence of references to licences in various provisions. The Court found that Access Copyright’s interpretation was inconsistent with the statutory language and Parliament would not “disturb long settled law by means of modest omissions while largely retaining the text and structure of the provisions upon which the previous law was founded.”

A license is consensual by nature. Individual copyright owners cannot impose terms on users. The remedy for infringement is an action for damages, not the unilateral imposition of a license. If an individual copyright owner cannot impose terms on those who do not agree to become licensees, it follows that a collective society, who acquires rights from copyright owners, is legally in no better position to impose terms. The portions of the Act dealing with collective societies were intended to regulate the licensing practices of societies and not to replace them by a non-consensual scheme. In other words, the normal rules as to copyright licensing were not abrogated by the introduction of the collective society regime.

The Act does not unambiguously state that infringers are liable to pay tariff royalties. The Court found that such liability would radically transform the existing scheme. Societies would not be limited to collecting royalties from those who agreed to take a license but would be free to collect royalties from anyone who infringed. Infringers would become non-consensual licensees. The Court could not reconcile this approach with the usual conception of a licensing scheme and held that such a change would render redundant the statutory provisions which provide for damages for infringement.

The Court held that tariffs are not statutory instruments. The Copyright Board does not make or establish tariffs. Rather, the Act only gives the Board the power to approve, with or without modifications, fees proposed by a society. The Court commented that the purpose of a tariff is public notice of the terms on which the society is willing to grant a license.  The advantage of collective societies is that they allow rights holders to pool their resources to enable them to economically enforce their rights. This advantage exists even in the absence of mandatory tariffs. The question of whether non-binding tariffs make financial sense to collective societies is important but did not affect the interpretation of the Act.

Ultimately, “the collective society/tariff regime is a means of regulating licensing schemes which, by definition, are consensual.” Acts of infringement do not turn infringers into licensees and make them liable for the tariff royalties. Infringers are subject to an action for infringement and liability for damages but only at the instance of the copyright owner, its assignee or exclusive licensee.

Access Copyright could not maintain a copyright infringement action due to the agreement it had with its members (i.e. it did not hold those rights). Access Copyright had no right to enforce the tariff since tariffs are not mandatory and cannot bind non-licensees. As Access Copyright was unable to sue for infringement and could not enforce the tariff, the Court dismissed Access Copyright’s action with costs, allowing York’s appeal and setting aside the judgment below.

York’s Use was not Fair Dealing

York’s counterclaim sought a declaration that any copying under its Guidelines would be fair dealing. The Court of Appeal upheld the Trial Judge’s finding that there was no fair dealing.  The Guidelines “are the heart of York’s position in this litigation” and it was incumbent on York to justify the Guidelines to allow the Court to declare that such copying is fair dealing. The Court reviewed fair dealing factors established in CCH Canadian Ltd.

When looking at the purpose of the dealing in the case of an institutional claim based on general practice, it is the institution’s perspective that matters. The Trial Judge used strong language in describing that York’s purpose was “to obtain for free that which [it] had previously paid for” and “to keep enrolment up by keeping student costs down and to use whatever savings there may be in other parts of the university’s operation”. The Court of Appeal agreed.

The character of the dealing refers to the number of pages copies. York argued that its Guidelines only allowed one copy of a short excerpt per student in a course and took issue with the Trial Judge’s reliance on aggregate data of the amount of total copying (which was substantial). The Court of Appeal upheld the Trial Judge’s finding. In any event, each student received an average of 360 copies, which was far above the 4.5 copies per student in the previous Alberta Education case. York provided no justification for this level of copying whether from an aggregate or individual perspective.

The Court found no palpable and overriding error regarding the amount of the dealing. York’s argument that the Trial Judge should have used the student’s perspective rather than York’s “continue[d] to be wide of the mark”. York led no evidence of students’ use of the works to demonstrate fairness, so focusing on that perspective could not advance its cause.

For the effect of the dealing there must be a causal link between the copying and the negative impacts. Evidence of the impact was mostly general insofar as it was not specific to York, but the Trial Judge found it established a likelihood of negative impacts given the “massive” amounts of copying, the prior history of payments before York “opted out”, and the size of the university. The Court of Appeal found no error in the Trial Judge’s conclusion. The copying in this case was vastly more significant than that addressed in the jurisprudence on this factor. The Court also upheld the findings on alternatives to the dealing and nature of the work.

This case establishes that a copyright policy itself will not shield institutions from copyright infringement. Since the Court found that York’s copying amounted to infringement, the dismissal of Access Copyright’s action is unlikely to be the final word in this saga.

A copy of the decision can be found here.