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September 11, 2009

Public Interest Advocacy Centre
One Nicholas Street, Suite 1204
Ottawa, Ontario K1N 7B7

(613) 562-4002 x.25
The Public Interest Advocacy Centre

Introduction

Copyright is designed to balance the interests of creators with the interests of the public and consumers. Copyright is a legal principle which protects intellectual property such as books, music films or any other kind of idea or information that is substantive, discrete and fixed in a medium. Copyright provides a means for creative people to earn a living, along with performance and other rights. Copyright grants creators exclusive rights to make copies of their works as a reward for creativity and also serves as an incentive for the creation of new works.

Copyright is not an absolute right for a creator or rights holder to profit from their work. Copyright does not remove consumers' rights to make reasonable use of a protected work.

However, the present balance in copyright law is far from perfect. In fact, many consumer dealings with copyrighted content — ordinary dealings, like copying music onto your iPod, or using the digital video recorder that your cable company sold you — technically infringe copyright. In these and many other cases, the law is simply out of step with reality. Simple amendments to the Copyright Act can fix many of these omissions. Unfortunately, the Canadian government has proposed to expand the scope and reach of Canada's copyright laws in ways that may disrupt consumers' legitimate interests in their enjoyment of and access to the content that they have purchased.

The role of consumers in Canada's copyright debate is essential. Canadian consumers are a tremendously important market to creators and rights holders. However, consumer rights are threatened by individuals and organizations that claim to speak for consumers on copyright but owe their allegiances to either creator or other non-consumer groups. This short position paper will explain the position held by consumer groups, that is, groups representing the consumer interest with no financial interest in promoting a particular outcome. This report also seeks to address the questions posed by the copyright consultation document by expressing our point of view on a number of copyright.

Fair copyright laws and fair dealing

Copyright law necessarily implies a balance of interests between creators, rights holders and consumers. This is reflected in the Copyright Act, which allows for the use of copyright protected content for the specific purposes of research, private study, criticism, review or news reporting. In the landmark Canadian Supreme Court case of CCH Canadian v. Law Society of Upper Canada, the concept of fair dealing was redefined by the Court. The Court stated that fair dealing

… must be given a large and liberal interpretation to ensure that users' rights are not unduly constrained. 1

Canadian Supreme Court

This decision set the standard for future judicial interpretations of fair dealing. The Court adopted a much broader interpretation of fair dealing than any previous judgment in Canada and CCH set the tone for greater user and consumer rights.

Despite such an encouraging tack taken by the Supreme Court, the recent Bill C-61 did not follow the spirit of CCH and many important consumer aspects to fair dealing were overlooked. Many rights holders' groups oppose a broader definition to fair dealing and have openly said so in recent copyright consultations. It suits them more to have specifically enumerated uses for fair dealing, as the law exists now, than to have a more open, broad definition.

Fair dealing does not plainly apply to reverse engineering, time, space or format shifting, or transformative uses of works such as satire or parody, appropriation art, or digital sampling. All of these practices are at the core of the public policies that the Copyright Act is supposed to further. Parody, appropriation art, digital sampling and other forms of transformative use of content are also expressive practices that embody the essence of the values enshrined in the Charter of Rights and Freedoms. Copyright should permit these creative practices that benefit all Canadians.

A simple and effective way to do so would be to include the words "such as" in the list of enumerated uses in the Copyright Act. Presently, this list of uses (research, private study, criticism, review or news reporting) is exclusive, so any use outside of these ones does not qualify for protection. Including "such as" to the present definition of fair dealing test would make it an inclusive test. This would allow a more flexible approach for fair dealing. This potential approach is very similar to the fair use approach taken in the United States. In the United States, the use of a protected work is fair if it can satisfy a four step legal test. 2 This test can be applied to nearly any use of a protected work to determine whether it is fair or not. If this test were adopted in Canada, it would produce great benefits for consumers. This compromise still allows a court to decide which uses are fair, which makes the law even more adaptable.

Time, Space and Format Shifting

Canadian consumers interact with content in countless different ways. What is surprising is how some of these very common and innocent uses are technically violations of existing copyright laws. Time, space and format shifting are all technically prohibited by the Copyright Act and yet many consumers engage in some or all three of them every day.

Time shifting is the recording of a broadcast for later consumption. A very typical time shifting scenario is a consumer using a VCR to record a television show onto a video tape so that they can view the show later. A more modern scenario would involve a consumer recording a show with a personal video recorder (PVR). In both cases, the consumer would technically be violating existing copyright laws. This is even more remarkable since many cable distributors rent and sell PVRs to their clients to record the shows that they broadcast to them. The ability to record a television show is a legitimate consumer expectation and yet there is no law that expressly permits this practice.

Space shifting occurs when a person converts media from one format to another that is compatible with a completely different kind of device. A common consumer practice involving space shifting would be a person converting audio tracks from their CD collection into electronic files for use on their computer or portable digital audio player, such as an iPod. Once again, this practice is common and reasonable for consumers but remains technically illegal.

Format shifting is when a person converts media on one format to another similar format. A consumer example of this might be a person who took an old collection of Betamax videotapes and converted them to VHS format video tapes. Consumers engaged in format shifting very likely do so without realizing that the practice is technically illegal.

All of these prohibitions exist to the detriment of consumers since they are not able to make the best use of media they already own. It is fair and reasonable for a consumer to be able to consume media they have paid for legitimately at a time and in a format of their choosing. Rights holders should not be able to dictate this to consumers anymore, particularly in an era of digital media where all three of these forms of shifting have become trivially easy.

Expand consumer back-up rights

Under the current copyright regime in Canada, it is legal for a consumer to make a back up copy of a piece of software that they own. This rule recognizes that software media such as magnetic and optical disks, as well as hard drives are fragile and may become scratched, inoperable or otherwise fail. Such a rule is very reasonable, as a consumer should be able to protect their investment, regardless of the weaknesses of the format which contains it.

Unfortunately for consumers, the right to back up content currently applies exclusively to software and not any other form of content. This is problematic since many forms of content such as music and video are stored on fragile media such as optical disks. Optical disks can easily be easily rendered unreadable and unusable thanks to wear, accidents and use and abuse from young children or pets. Consumers should enjoy the right to make a back up copy of this media to preserve their investment. It would be unfair for rights holders to expect consumers to repurchase the same content over and over just because the media used to deliver it fails. This right should be included in the Copyright Act just as the right to back up software is currently included.

Eliminate statutory damages for consumer copyright infringement

The minimum penalty for copyright infringement in Canada is wildly out of step with the real world costs of infringement. This is particularly true in today's digital age where copying and distribution costs over the internet are minimal. The rights holder has the option of requiring anyone found liable for infringement to pay statutory damages, ranging from $500.00 to $20,000.00 per violation. Such high amounts were justifiable in previous times to dissuade commercial pirates, however they are far too onerous for consumer who copy works privately.

Statutory damages are awarded at the rights-holder's option, irrespective of any actual damages suffered or proven by the rights-holder. If you were found liable by a judge for photocopying an article from a newspaper and distributing it to fifty friends and colleagues, your minimum damages would be $25,000. A judge could potentially award up to $20,000.00 per infringement which would amount to a whopping one million dollars in damages. Considering that daily newspapers cost about a dollar each, this minimum damages award is completely out of step with the actual cost of infringement.

We see this phenomenon at work in the United States. Rights holders are using the threat of enormous statutory damages to extort settlements in file-sharing lawsuits, despite the fact that these rights holders have failed to prove that file-sharing is responsible for any economic harm to their businesses. Furthermore, when defendants do not settle, courts deliver often stunning judgements in favour of rights holders. In one recent example, Joel Tenenbaum, a recent student, downloaded 24 songs and was sued for copyright infringement. Despite the efforts of a Harvard law professor defending her, Mr. Tenenbaum was ordered to pay $1.92 million in statutory damages, or $80,000 per song. For downloading music worth about twenty five dollars, Mr. Tenenbaum will likely declare personal bankruptcy or remain debt ridden for the remainder of his life.

Cases such as the Tenenbaum case in the United States provide a chilling example of what could happen in Canada. Statutory damages should be eliminated for instances of infringement by consumers who have no intent to commercially redistribute works and any damages awarded by the courts should reflect the actual harm caused by the infringement.

Peer to peer (P2P) file sharing

For more than a decade, Canadians have been using P2P file sharing networks to download all kinds of digital content such as music and videos. Rights holders have responded by shutting down various file sharing networks, locking content with DRM and suing consumers. Suing consumers has proven to be a very controversial measure and has not stopped or even slowed the tide of P2P users downloading files. That fact remains that P2P is more widely used than ever and artists are not being compensated for their work by P2P users.

Suing consumers in an effort to make examples of a small number of P2P users who are caught is not an effective revenue model for the industry. It also places a terrible burden on those that are ordered to pay statutory damages as the Tenenbaum case in the United States and others have proven. A separate consultation on how to deal with the issue is the only responsible way to proceed. A system of compensation for artists needs to be devised to ensure that they continue to benefit from their work. In exchange for this compensation, artists and rights holders must agree not to hold P2P users liable for infringement on any works downloaded that they have paid to access. At the same time, whatever system is implemented needs to reflect the realities of file sharing today and be flexible enough to adapt to any future changes in technology.

Anti-Circumvention Laws

The WIPO Internet treaties oblige Canada, among other things, to create legal protections for technological measures, like digital rights management (DRM) systems, that protect digital content. These digital locks are becoming more and more common as Canadian consumers buy more DVDs, copy-protected CDs and DRM locked software. Rights holders argue that these locks are a benefit, since they protect their content and allow them to keep producing it for consumers to enjoy. Yet these digital locks, and possible laws that protect them, have the potential to seriously disadvantage Canadian consumers. Consumer privacy, computer security and an open, competitive marketplace in Canada are all threatened by anti-circumvention laws. Similar laws have been enacted in places like the United States and these laws have had a number of serious and unforeseen effects that have affected consumers.

Many DRM systems pose unacceptable privacy and security risks to consumers. A great number of DRM systems "call home" to rights holders or creators. These systems report on their users' activities, usage patterns, preferences and even their geographic location and personal details. Some DRM systems have created serious security risks on computers belonging to consumers as well. One such example is the Sony Rootkit, which was a form of copy protection that Sony included on some of its musical recordings in 2005. The Rootkit software installed automatically when a consumer placed the CD in his or her computer to play. There was no warning or other indication to the consumer that the installation was taking place. The Rootkit was designed to prevent consumers from copying the music contained on the disk. Unfortunately, the Rootkit also created a number of serious security vulnerabilities on consumers' computers. These vulnerabilities made consumers' computers more vulnerable to worms and viruses. These vulnerabilities would have been unknown to consumers, as the Rootkit installed itself surreptitiously and was not mentioned at all in the end user licence agreement or any other documentation provided with the music CDs. As a result of the serious security and privacy issues created by Rootkit, Sony was investigated by the state of Texas, the Federal Trade Commission as well as the Italian Financial Police. Sony was also subject to class action suits launched by plaintiffs in California and New York and Canada. The Sony Rootkit debacle serves as a strong warning of the perils the DRM systems can produce

We do not believe that Canada requires laws protecting digital locks that hinder consumers' reasonable use of copyrighted materials. The Canadian market for cultural products such as books and CDs is strong. Those seeking to change the law need to show that the marketplace is failing in some way and that a change in the law can correct this problem. Supporters of anti-circumvention laws in Canada have failed to do this. In fact, Canadian cultural industries are continuing to succeed in the absence of anti-circumvention legislation. Industry Canada publishes statistics that examine different sectors of the Canadian economy and their performance. The "Information and Cultural Industries" pertains to movie, music and print publishing, broadcasting and other culture-related industries. This dataset reveals that these industries have on average continually increased their capital investment every year since 1999. 3

Furthermore, Statistics Canada reports indicate that both the sound recording industry and film and video distribution industry remain quite profitable, even in the absence of anti-circumvention legislation. 4

Another important fact to consider is that existing copyright law already provides penalties for infringing copyright. If someone circumvents digital locks, and accesses material in a way that infringes copyright, copyright law offers copyright owners a remedy. Groups that want anti-circumvention laws need to demonstrate why they need a second layer of legal protection. Digital locks create a great hindrance to consumers making the media they purchase more difficult to use. Rights holders have not proven that the benefit that they will get from anti-circumvention legislation will outweigh the harm it does to the public.

Existing DRM systems also have a very poor record for effectiveness. The examples of DVD and HD–DVD format movies serve as an excellent example. Both formats touted the fact that they had very strong digital locks that would be extremely difficult to break. The DRM for both formats was defeated in very short order and software to defeat the digital locks was posted widely on the internet. In both cases the supposedly strong DRM failed to deliver on its promise. Similarly, legislation that aims to outlaw the circumvention of DRM in jurisdictions such as the United States has not succeeded either.

The United States crafted its anti-circumvention laws — the Digital Millennium Copyright Act, or DMCA — in 1998. In the decade since enactment, the DMCA has created many problems — anti-competitive abuses, stifling criticism, repressing security research, undermining security, etc. — but it has not encouraged any additional investment in digital distribution models. Anti-circumvention law proponents cannot credibly point to a single market that has emerged because of anti-circumvention laws. Canadians enjoy virtually all of the same digital services that Americans enjoy.

Similarly, the DMCA has had no impact on copyright infringement levels. After a decade under the DMCA, infringement of movies over file-sharing networks in the US is at an all-time high. There is no evidence to suggest that similar laws will produce a different effect on infringement in Canada.

In imposing anti-circumvention laws on Canadian consumers, the Canadian government would intervene directly in the marketplace in favour of certain copyright owners. Anti-circumvention laws protect technology, not content, and in so doing privilege business models that rely on that technology — including those involving technological measures and all of their inherent competitive, security, and privacy risks. Government should instead take a neutral stance, working to ensure a level competitive playing field that benefits consumers rather than privileging particular business models. It is only with an open, fair market that all parties, creators, rights holders and consumers will prosper.

If Canadian lawmakers choose to legislate anti-circumvention laws, they must take great care to minimize the negative impact those laws will have on consumers. Important issues such as consumer privacy, computer security and a free and open market place must remain at the forefront of lawmakers' minds if they are to craft fair legislation. Canada should learn from the mistakes of nations who have already implemented anti-circumvention laws and avoid repeating these mistakes.

Anti-circumvention laws come in two varieties: those that regulate access to content, and those that regulate dealings with content. The WIPO Internet Treaties speak to the latter, not the former. Any Canadian anti-circumvention law should do the same: consumers should only be liable for circumventing technological measures when their intent is to infringe copyright.

We say this for three reasons: first, anti-circumvention laws that favour technologies that regulate access to content effectively create a new access right that copyright owners do not currently enjoy under the Copyright Act.

Second, an access right like this seriously tips the balance, inherent in copyright law, towards the interests of copyright owners (not creators), by effectively eviscerating essential rights of users, consumers, libraries, archives, museums, researchers, educational institutions, persons with disabilities, innovators and follow-on creators. Undermining these user rights undermines copyright itself.

Third, adoption of an access right — one that goes beyond the requirements of the WIPO Internet treaties — is a policy choice: no international treaty or trade agreement requires Canada to adopt such a right.

Governments should not legislate failing business models back to health by giving rights holders unfair and overly broad legal powers. The WIPO Internet Treaties exist to regulate dealings with content, not make it difficult to access. Furthermore, governments should respect the rights of Canadian consumers who are their constituents. Some principles for crafting responsible anti-circumvention laws are listed below.

Circumvention for legal purposes

Consumers enjoy certain rights to use content without infringing copyright. The presence of technological measures doesn't change that, and neither should anti-circumvention laws. Consumers must be able to circumvent technological measures, like DRM, providing that their access to the underlying content does not infringe copyright. These consumer rights fulfil important public policy goals, preserving consumer welfare, free speech, and innovation. The use of technological measures already threatens these values. Anti-circumvention laws shouldn't statutorily undermine them as well.

No legislation against devices and services

Around the world, even under the most restrictive anti-circumvention regimes, users enjoy certain exceptions to liability for circumvention of technological measures. However, prohibitions on selling the tools, devices and services that permit circumvention frustrate these exceptions. Anti-circumvention legislation should not prevent people from developing, selling and using tools, devices and services for circumventing technological measures for legal reasons.

Anti-circumvention laws must be narrowly targeted to prevent behaviour that infringes copyright. These laws should not be so broad that they undermine innovation. Devices like PVRs (Personal Video Recorders), iPods, and the services that permit them to function, enhance consumer welfare and the vibrancy of the digital entertainment marketplace. Their developers should not have to run the risk of being found liable for violating anti-circumvention laws.

Preserve rights and expectations that consumers have under copyright law

Consumers expect that they will be able to deal with their digital content in certain important ways. For example, consumers expect that they will be able to make software backups, rip a new CD they've purchased to play it on n iPod or similar device, and quote passages from a book in a review. Copyright law protects some of these dealings; others are simply expectations derived from common practices. Anti-circumvention laws potentially undermine consumers' legitimate expectation that they will continue to enjoy these rights.

Excessive anti-circumvention laws have the potential to harm consumers by stripping them of these rights and frustrating these legitimate expectations:

  1. consumer electronics will cost more and have fewer functions;
  2. consumers will not be allowed to transfer legal, paid-for content to devices of their choice;
  3. it will be illegal for consumers to backup their legal, paid-for content to protect their investments against accidental destruction or erasure; and
  4. it will be illegal for consumers to convert legal, paid-for content to formats that will function on new devices.

Preserve copyright law exceptions

Since anti-circumvention laws privilege access to content, tipping the balance of copyright in favour of private interests, they must incorporate certain exceptions to liability. Those exceptions should mirror every exception that currently exists in the Copyright Act. These exceptions are important; they further crucial public policies, including consumer welfare, innovation, freedom of speech, and security. Specific exceptions to liability for circumvention should include:

  1. access for people with disabilities;
  2. benefits for educational institutions;
  3. benefits for libraries, archives and museums;
  4. reverse engineering;
  5. incidental inclusion;
  6. ephemeral recordings;
  7. private copies of musical sound recordings;
  8. back-ups of computer programs; and
  9. fair dealing.

Protect consumer privacy

Many technological measures, like DRM systems, make access to content conditional on consumers' surrendering their privacy. This practice is invasive and has nothing to do with protecting intellectual property. These systems target consumers' personal information and personal habits. Anti-circumvention laws should not protect technologies that do not respect these privacy rights:

  • consumers should retain the right to enjoy works privately;
  • access to content must not be conditional on the surrender of consumer privacy; and
  • circumvention, in order to protect privacy rights, should be permitted.

Protect the public domain

Technological protection measures may potentially eliminate public access to content that is in the public domain. Anti-circumvention laws offer content distributors a way to circumvent the bargain inherent in copyright's grant of exclusive but limited rights. Copyright in every work, from the banal to the sublime, expires. All work eventually joins the common heritage that is the public domain. It should always be legal to circumvent technical protection measures or DRM in order to access works that are no longer protected by copyright.

Fair copyright laws for consumers

In order for Canada's copyright laws to be fair, they must do no harm to consumers. This should be the guiding principle for our legislators who are accountable to Canadian consumers. We must enact changes that promote consumer welfare and protect education, freedom of expression, privacy and security. We want laws that will not harm small business, stifle innovation, or that cost Canadians millions of dollars. Nearly all Canadians are consumers and it makes sense to craft laws that will benefit the greatest number of people. Canadians deserve nothing less.


1[2004] 1 S.C.R. 339, 2004 SCC 13, para 51. (Return to text.)

2 The Copyright Act of 1976, 17 U.S.C. § 107 outlines the test as follows:

Notwithstanding the provisions of sections 17 U.S.C. § 106 and 17 U.S.C. § 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include:

  1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
  2. the nature of the copyrighted work;
  3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  4. the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors. (Return to text.)

3See "Capital Investment; Information and Cultural Industries (NAICS 51) for details. <http://www.ic.gc.ca/cissic/cis-sic.nsf/IDE/cis51inve.html> (Return to text.)

4See the "Financial statements and performance tables" available online at <http://cansim2.statcan.gc.ca/cgiwin/cnsmcgi.pgm?Lang=E&SP_Action=Result&SP_ID=1522&SP_TYP=5&SP_Sort=1&SP_Portal=2> (Return to text.)