Well, it’s been more than a month since the Copyright Board came out with its decision Private Copying III. For the sake of simplicity and to make future reference to the decision easier, I am putting up a little summary of the decision for those who are interested in its general content. We are bound to hear A LOT on it in the following months, so I thought that a summary would be helpful in any future discussions.

One aspect of this decision struck me in particular. The majority of the Board seems to have based much of the justifications for maintaining status quo of the current levy rates on the grounds of “uncertainties”. In fact, one has the feeling that the many of the rates established in the tariff was done by a lack of information. Very shaky ground I would say. For example, the Board agreed that individual consumers might use CD-Rs more than CD-RWs for the purpose of recording music, thus it would make sense to establish two different rates for these two media. However, the Board is “unable to update the valuation model” due to “uncertainties surrounding important figures”. Yet, this same kind of “uncertainty” didn’t stop the majority of the Board (agreed by the dissident) from assigning some rather poorly justified and “out there” levy rates to non-removable memories embedded in digital audio recorders. Another example would be the Board’s view on the effects of the black market (illegal) and the grey market (legal personal imports of blank music recording media from foreign suppliers). In response to arguments that higher levy rate might encourage smuggling and the prosperity of a black market (though without concrete evidence) and in fear of destabilizing the blank media market, “the best the Board can do is to proceed with caution. Keeping the rates at their current levels should avoid these pitfalls.” It’s a cry for help for intervention from a higher force!

Update: Retailers, device manufacturers and CPCC are all challenging the Copyright Board’s decision. There is no way out of this one!

• From: Copyright Board of Canada


• File: Private Copying 2003-2004


• Concerning: Copyright for Private Use


• Date: December 12, 2003


• Majority: Mr. Justice John H. Gomery, Mrs. Sylvie Charron and Mrs. Brigitte Doucet


• Dissident: Mr. Stephen J. Callary

Canadian Private Copying Collective (CPCC) submitted new proposed levies in respect of private copying for the years 2003-2004, which break down to the following:

• 0.51$ for audiocassettes of more than 40 minutes


• 0.59$ for CD-R of more than 100Mbs


• 0.49$ for CD-RW of more than 100Mbs


• 1.15$ for CD-R Audio


• 1.15$ for CD-RW Audio


• 1.15$ for MiniDisc


• 0.56$ for blank DVD


• 0.00221$ to 0.0055$/Mb for removable memory cards or hard drives


• 0.00193$ to 0.0108$/Mb for removable memory cards sold with a music device, non-removable memory or hard drive incorporated into a music device

• CPCC


• Canadian Storage Media Alliance (CSMA)


• Retailers of blank audio recording media


• Corporations and organizations who are users of the discussed items


• Manufacturers, marketers, other affected industries


• Plenty of other objectors

• Legality of private copying
  

  As a practical solution to unauthorized private copying of copyrighted sound recording embodying the performance of a musical work, the private copying regime was established in 1998. S. 80 of the Copyright Act creates an exception to exclusive reproduction rights by allowing private copying onto audio recording media in exchange for compensation to the authors, performers and makers (s. 81). Manufacturers and importers of blank audio recording media for the purpose of trade are responsible for this levy (s.82) which, in all economic sense, should eventually be paid by the end users, hopefully individual consumers who practice private copying.
  

  The Board emphasized that s.80 of the Copyright Act only permits copy made for private use by the person who made it, which excludes distributing, communication, performing in public, online or offline. It also points out that this decision does not deal with uploads and peer-to-peer networks. However, the Board does clarify its position in regards to the origin of the copies by noting that the private copy regime does not address the source of the music. “There is no requirement in Part VIII that the source copy be a non-infringing copy. Hence, it is not relevant whether the source of the track is pre-owned recording, a borrowed CD, or a track downloaded from the Internet.”
  

• Legality of CPCC’s zero-rating program
  

  CPCC has implemented an “exemption” program for certain eligible organizations to purchase media directly from certain specific manufacturers, importers and distributors without paying the applicable levy. The program was established voluntarily by CPCC following protests from organizations which do not use media to copy music. The Copyright Act has created only one statutory exemption from payable levy: societies representing the perceptually disabled (s. 86), but CPPC has taken upon themselves to extend the exemption to other categories of qualified users under certain conditions, such as an agreement restricting the use of the blank media, specific registered sellers, minimum purchase requirement, and payable administration and registration fees. The zero-rating program applied to audiocassettes, Audio CD-Rs, Audio CD-RWs and MiniDiscs, but CPCC agreed to extend the program to include CD-Rs and CD-RWs and other changes to accommodate more organizations and interested parties (retailers).
  

  CSMA argued that CPCC’s program is flawed and illegal, so did the retailers; while the end users expressed concerns in regards to its administration and its application. Some point out the dilemma of having the beneficiaries of the levy design and administer a voluntary exemption; and should there be a zero-rating program, the Board should overlook its administration. Manufacturers, importers and retailers are of the opinion that zero-rating is simply illegal since exemptions can only be statutory. In the alternative, if it is legal, the Board cannot delegate such responsibility to CPCC, and excluding the participation of retailers should not be permitted. The rights-holders argue that the Board has no control over zero-rating, it is only relevant to the Board in terms of a market reality in calculating levy rates.
  

  The Board saw no quiet way out of this one. It is true that a business or other organization cannot engage in private copying by definition, so they should not be affected by a private copying regime. As to individual consumers, it is true that not all blank media are used by individual consumers for private copying, but the established rate reflects such consideration already. In the end, the majority is of the opinion that neither the Board, nor the CPCC, has the authority to initiate such a program, not even within the broad discretionary power to establish terms and conditions related to tariffs. S. 82 of the Copyright Act established an universal private copying regime: a levy is payable on every blank audio recording medium manufactured or imported in Canada for the purpose of trade, regardless of its ultimate use or the end user’s identity. Except for the societies representing the perceptually disabled, the Parliament did not choose to establish any other exemption or mechanism to exclude certain categories of users from the levy, nor did the Parliament delegate such power to the Board or to CPCC. As to the argument that fair dealing (s. 29 and 29.1) should be considered as an example of exemption from the levy, the Board is of the view that it is irrelevant to the issues discussed since all private copying, regardless of its previous status, now falls under the private copying regime, thus part of the exemption of s. 80. The majority took comfort in the fact that the Governor in Council can always use its power to exclude media from the regime, which has not been exercised so far.
  

• Audio recording medium subject to a levy
  

  The term “audio recording medium” is defined as a recording medium, regardless of its material form, onto which a sound recording may be reproduced and that is of a kind ordinarily used by individual consumers for that purpose, excluding any prescribed kind of recording medium in s. 79. The Board analyzed the meaning of “ordinarily used by individuals for recording music” and concluded that recordable or rewritable CDs fall into this category while blank DVDs and removable memory (whether cards or micro hard drives) don’t. Factors that will determine whether or not a medium is ordinarily used by individual consumers for copying sound recordings include the rate of adoption in the market, the apparent purpose of the medium (through its invention, design and promotion), and its actual use (through surveys or otherwise). Surveys demonstrate that 80% to 90% of individual consumers buy blank CDs for the specific purpose of copying prerecorded music, 40% do so for no other purpose.
  

  As to the question of whether the tariff could apply to medium integrated into devices (i.e. non-removable memory), the Board notes that the definition of a audio recording medium cannot be more broad when it comes to its material form. Removable or not, incorporated or not, a medium remains a medium. However, the Board believes that most removable memories are not ordinarily used by individual consumers to recording music; while non-removable memories integrated in certain devices (called “digital audio recorder” hereafter) are ordinarily used for that specific purpose. A digital audio recorder is defined as any product with non-removable memory capable of, and ordinarily used for, recording digitally any format of music. Thus, a device like Apple’s iPod is considered to be an audio recording medium.
  

• Other issues discussed in the decision
  

  The levy is not a tax, but a type of regulatory charge.
  

  An ad valorem levy rate proportionate to the sale price would undermine the value of intellectual property as the latter is not related to the change of the price of a blank media.
  

  When an authorized music download market becomes established, it would be a better indicator than remuneration from prerecorded CD sales in determining the levy rates.
  

  The issue of incompatibility of DRMs and TPMs with private copying levies (effective control of rights-holders’ works versus compensation for unauthorized private copies) is a topic to be discussed with the legislators, not the Board.
  

Certified tariff:

• 0.29$ for audiocassettes of more than 40 minutes


• 0.21$ for all CD-R


• 0.21$ for all CD-RW


• 0.77$ for CD-R Audio


• 0.77$ for CD-RW Audio


• 0.77$ for MiniDisc


• 2.00$ for non-removable memory permanently embedded in a digital audio recorder of less than 1 Gb


• 15.00$ for non-removable memory permanently embedded in a digital audio recorder of more than 1 Gb but less than 10 Gbs


• 25.00$ for non-removable memory permanently embedded in a digital audio recorder of more than 10 Gbs

• Such developments (in regards to TPM and DRM) were applauded by CPCC as a “holy grail”.


• By removing those who cannot copy music from the effects of the regime, CPCC likens itself to Michelangelo removing marble to reveal a pre-existing sculpture. That is, Parliament must have intended CPCC to insulate them from the scope of the regime through zero-rating.


• The Act legalizes private copying in Canada; there is value in the option to private copy, even for those who choose not to exercise that option.


• There is no requirement in Part VIII that the source copy be a non-infringing copy. Hence, it is not relevant (to the private copying regime) whether the source of the track is pre-owned recording, a borrowed CD, or a track downloaded from the Internet.


• In principle, levies may thus be phased out as paid downloads and free samples become more prevalent. For now, however, the Board has no convincing evidence oh how extensive these transactions are.