The Copyright Board of Canada and Collective Copyright Administration after the Access Copyright Decision

I participated last week in a discussion organized by ALAI Canada on the Supreme Court of Canada’s recent decision in York University v. Canadian Copyright Licensing Agency (Access Copyright), 2021 SCC 32. This was a very important decision for the Copyright Board of Canada and for “collective societies” like Access Copyright (see Michael Geist and Howard Knopf). The most significant aspect of the decision is that tariffs set by the Copyright Board at the request of collective societies are not binding on the users of material identified in the tariff. This arose in the context of an action (not an application for judicial review) between Access Copyright as plaintiff and York University as respondent.

On the mandatory tariff point, the Supreme Court of Canada unanimously found in favour of York University and against Access Copyright, as had the Federal Court of Appeal. Of the 13 judges who considered the issue, only Phelan J, who heard the matter at first instance, accepted the collective society’s mandatory tariff theory. Nonetheless, the analysis is worth probing, not least because of the consequences it is likely to have on the Copyright Board.

I have three broad points to make about this decision. First, that the discussion of the raison d’être of the Copyright Board and collective societies does not help to answer questions about the enforceability of tariffs. Second, that the real issue here was allocating rights as between users and collective societies, which arose in part because of the awkward procedural posture of the case. Third, that the United Wilts Dairies principle (that an obligation to pay must have specific statutory authority) is a poor fit for this sort of case. Lastly, I will make some observations about the role of the Copyright Board more generally, especially in view of the surprising fact that in an upcoming Supreme Court appeal none of the parties is arguing that the courts owe deference to the Copyright Boar on matters of law.

First, my jumping off point is provided by Professor Joseph Heath’s recent book, The Machinery of Government: Public Administration and the Liberal State (OUP, 2020). Professor Heath argues that governmental programs in the administrative state are almost invariably motivated by a desire to respond to market failures of one sort or another. Governments regulate, provide services and even distribute benefits in the interests of efficiency.

There is no doubt, as both Pelletier JA (who wrote extremely lucid, historically grounded reasons) and Abella J recognized, that the Copyright Board was created to respond to market failure. Initially, the market failure was the dominant position of collective societies, which created an imbalance of economic forces in the first half of the 20th century. Life has moved on significantly since then, of course, not least because of significant legislative and (especially in Canada) judicial reform of copyright law.

The difficulty with the ‘market failure’ rationale is that it does not provide much insight into the question at issue in Access Copyright. Section 68.2(1) of the Copyright Act (now s. 73) provides as follows:

Without prejudice to any other remedies available to it, a collective society may, for the period specified in its approved tariff, collect the royalties specified in the tariff and, in default of their payment, recover them in a court of competent jurisdiction.

Are the “royalties specified in the tariff” mandatory? That is, if someone uses tariffed material without paying, can the collective society “recover” royalties in a court of competent jurisdiction?

Knowing that the legislation responds to a market failure does not help to answer that question.

Indeed, there were significant problems with the positions advanced by both parties.

The problem with Access Copyright’s position is the ‘Sword of Damocles’ objection:

The legal consequence of Access Copyright’s mandatory tariff theory would be that a user would be liable to pay royalties in full as soon as it became responsible for any infringing use of a work within a collective society’s repertoire. Under the final 2011-2014 Access Copyright tariff for post-secondary educational institutions, for example, York would be liable to pay $24.80 for each of its 45,000 full time equivalent students, totalling over one million dollars per year, as soon as it made a single infringing use within Access Copyright’s repertoire. For a university that attempts to clear its copyright obligations using alternative licences and fair dealing, a single infringing use — one that was not authorized by fair dealing or independently licensed — could thereby become a tripwire making the university liable to pay the full royalties in a tariff. This “Sword of Damocles”, as the intervener the Canadian Association of Research Libraries aptly put it, renders a university’s freedom to clear its copyright obligations without involving Access Copyright completely illusory (at para. 72).

The problem with York University’s position is the ‘What’s the Point?’ objection. As Pelletier JA put it, “Access Copyright raises a legitimate question when it asks why collective societies would incur the costs and delay inherent in having a tariff approved if it is not mandatory?” (2020 FCA 77, at para. 200). Moreover, one might ask, what is the point of a collective society in a non-mandatory-tariff world?

Of course, collective societies might still use the tariff-setting process because it reduces transaction costs (2020 FCA 77, at paras. 200, 203), or pursue infringement actions against those who refuse to pay the tariff (2021 SCC 32, at para. 74; this would necessitate a change in Access Copyright’s business model). This is unlikely, however. As a practical matter, as commentators such as Geist and Knopf have recognized, this decision drains the Copyright Board and Access Copyright of vitality. As such, it is legitimate to ask why Parliament would have created a regime in which the Copyright Board and collective societies are centrally important without providing for equally important enforcement mechanisms.

Either way, the ‘market failure’ rationale does not, in my view, provide a convincing response to either of these problems.

Rather, second, as Professor Heath observes, sometimes the decision to intervene to correct a market failure creates winners and losers. In such situations, there will generally be a need to distribute resources. This case was, really, about whether the collective societies or users (represented by York University) should win. Unfortunately, the analysis was not couched in these terms, which serves to obscure the underlying issue about the creation of winners and losers. This is a striking contrast with the Supreme Court’s typical approach in copyright cases, where the judges openly grapple with the balance to be struck between competing groups.

In striking an appropriate balance, it is useful to consider systemic consequences. I appreciate that this exercise will take us some way from the text of the Copyright Act but would argue that it forms part of the interpretive context and sheds light on the intention of Parliament in establishing Canada’s copyright regime. The systemic consequences for the Copyright Board and Access Copyright are very serious. With tariffs unenforceable, the Copyright Board is drained of vitality. Access Copyright, meanwhile, is left without realistic means of enforcing the interests of its members. It is no answer to say that Access Copyright can reform its business model by changing the terms of its relationship with its members so as to give it the ability to initiate infringement action (2021 SCC 32, at para. 74), because this answer is unrealistic. Reproduction of copyrighted work in universities (and, for that matter, elementary and high schools) takes place in private rooms and online forums which are not publicly accessible. If a bar, restaurant or department store is playing music without permission, any member of the Society of Composers, Authors and Musicians can gather material which could be relied on in litigation. Without access to the places in which unauthorized reproduction is taking place, however, amassing the evidence necessary to mount an infringement action is nigh-on impossible. Both the Copyright Board and collective societies have a statutory basis: as such, it seems to me that the consequences of judicial decisions for their operations are legitimate considerations in the search for the intention of Parliament.

It is worth noting, moreover, that the problem with Access Copyright’s position arose as a result of the procedural posture of the litigation. Recall that the enforceability of a tariff made by the Copyright Board is the central issue here. But a tariff can be attacked in judicial review proceedings. Phelan J observed at first instance:

York now says that the Interim Tariff is not enforceable. It contends that the Interim Tariff is not an approved tariff. However, York was in a position to apply to judicially review the Board’s decision and had sufficient knowledge and the legal status to do so – it did not. It waited until these proceedings to question the Board’s decision… Judicial review is an important process in this case. The scope and enforceability of the Interim Tariff are matters squarely within the Board’s jurisdiction. The resolution of these issues would engage the Board’s expertise – something which Parliament clearly intended as a matter of substance (see SODRAC). These issues are ones for which the Board is entitled to deference by this Court (2017 FC 669, at paras. 226, 231).

Had the issue arisen on judicial review, the courts could have determined that the ‘Sword of Damocles’ objection was fatal to the validity of the tariff and remitted the matter to the Copyright Board to create a more appropriately tailored tariff. It is true that a tariff-setting process is “inherently limited” (2021 SCC 32, at para. 73) but, frankly, the Copyright Board is in the best position to assess those limitations. The point is that, had this matter proceeded by way of judicial review rather than by way action, the ‘Sword of Damocles’ problem could have been addressed in appropriately tailored fashion. As it was, however, the courts were presented between a binary choice between enforceability and non-enforceability and ultimately thought the ‘Sword of Damocles’ objection was more powerful than the ‘What’s the Point’ objection.

Again, express consideration of the winners and losers created by the systemic consequences of coming down on one side or another would have made the appellate decisions more convincing.

Third, consider the United Wilts Dairies principle, “that taxes or charges may not be levied by the State or public authorities in the absence of express words.The courts will not permit the imposition of a tax or other fiscal measure through the use of slack or oblique language” (Hogan, Morgan and Daly, Administrative Law in Ireland, 5th ed., at para. 12-40). The principle was used as a tie-breaker by Abella J for the Supreme Court:

Where Parliament sees fit to create a mandatory duty to pay, it does so with “clear and distinct legal authority showing that this was Parliament’s intent” (Canadian Broadcasting Corp. v. SODRAC 2003 Inc., 2015 SCC 57 (CanLII), [2015] 3 S.C.R. 615, at para. 107, per Rothstein J.). Under s. 19, for example, a performer is “entitled . . . to be paid equitable remuneration” and a user is “liable to pay royalties”. Under s. 81, eligible authors, performers and makers have a “right to receive remuneration” from manufacturers and importers of blank media, and s. 82(1) prescribes a corresponding duty to pay, stating that manufacturers and importers are “liable . . . to pay a levy to the collecting body”. There is no such language creating a duty to pay approved royalties to a collective society that operates a licensing scheme anywhere in the Act (2021 SCC 32, at para. 32).

Following this approach allows one to avoid the winners vs losers question. It is a shortcut to determining who wins and who loses without having to address the systemic consequences of the answer. As such, United Wilts Dairies is an important part of the Supreme Court’s analysis.

Notice that the Access Copyright decision rests quite heavily on the SODRAC decision mentioned in the passage just quoted. Indeed, if the licensing regime considered in SODRAC in 2015 is not mandatory, then there is a powerful argument that the tariff regime considered in Access Copyright is not mandatory either. As a simple matter of legislative coherence, similar schemes should operate similarly, and it is true (as Pelletier JA and Abella J observed) that tariffs and licenses have much in common, as one would expect given that they reside in houses in the same neighbourhood (Part VII) of the Copyright Act.

Nonetheless, this simply prompts me to reframe the question. Was Rothstein J right in SODRAC to rely on the United Wilts Dairies principle? Here, there is room for doubt. United Wilts Dairies is based on the constitutional fundamental that there shall be no taxation without representation. The principle has its greatest force in situations where state and citizen find themselves opposed. But in the area of copyright law, state and citizen are not opposed; rather, a state body is arbitrating between citizens. Moreover, dressing a mandatory tariff up as a coercive measure is somewhat misleading. The citizens here — York University on one side, Access Copyright on the other — are consenting adults. No one is coerced into reproducing copyrighted material, just as no one is coerced into seeking to protected copyrighted material. Therefore, the usual conditions for the United Wilts Dairies principle are absent: the relationship is citizen-citizen, not citizen-state; and there is nothing coercive about the relationship.

In all of this, I find myself looking in vain for an argument which tips the balance in favour of York University and Access Copyright, notwithstanding the extensive scholarly analysis of Pelletier JA at the Federal Court of Appeal and Abella J at the Supreme Court. The conclusion is clear, however: Access Copyright and the Copyright Board are significant losers; users of copyrighted material are big winners. Only Parliament can alter the courts’ distribution of wins and losses to the players on the Canadian copyright scene.

This leads me to a final observation about the Copyright Board. I was very surprised to learn that in the Entertainment Software Association appeal, no party or intervener is arguing that the courts owe deference to the Copyright Board on questions of law (you can read the materials here in advance of the hearing of the appeal in January 2022). Of course, there is authority for the application of the correctness standard (see my comment on the 2012 Rogers decision, published in this edited collection), but its compatibility with the Supreme Court’s Vavilov framework is doubtful, at least in my view (see here and here (p. 39). At the very least, the argument for deference deserves a hearing.

Indeed, the systemic consequences of deference might be quite positive in this area. For the most part, Canadian copyright law has been developed by the courts in recent years, especially the Supreme Court, with Parliament satisfied to tinker around the edges of the legislative regime. Giving deference to the Copyright Board on questions of law would give another actor — with specialized expertise — a voice in working out the details of copyright law. Too many cooks would spoil any broth, but an extra pair of hands is always useful: the copyright kitchen is no different.

This content has been updated on November 26, 2021 at 19:01.