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September 11, 2009
Retail Council of Canada (RCC) has been the Voice of Retail in Canada since 1963. We speak for an industry that touches the daily lives of Canadians in every corner of the country — by providing jobs, career opportunities, and by investing in the communities we serve.
RCC is a not-for-profit, industry-funded association representing more than 40,000 store fronts of all retail formats across Canada, including department, specialty, discount, and independent stores, and online merchants.
RCC is a strong advocate for retailing in Canada and works with all levels of government and other stakeholders to support employment growth and career opportunities in retail, to promote and sustain retail investments in communities from coast-to-coast, and to enhance consumer choice and industry competitiveness.
The retail sector is now the largest employer in Canada, with over 2 million employees and was responsible for sales of more than $412 billion a year of goods and services in 2007, much of which involves products which relate to copyright law.
The RCC has nine main points to make about copyright but has one overall philosophy which is this:
Canadian copyright law should reward the real creators of our culture and technology and protect the users and consumers of the resulting creations in a way that is fair, flexible and permits the most efficient, competitive and innovative position for our country. Those who create deserve to be fairly paid and those who have paid for and use these creations have the right to use them in a flexible, innovative, and convenient way. Canadian consumers have the right to enjoy the fruits of this balance without fear of penalty or unnecessary complexity and inefficiency.
Our simplified nine points are these:
The 1997 revisions of the Copyright Act provided for "levies", commonly called "taxes", on blank audio recording media. These are set forth in Part VIII of the Copyright Act. The "quid pro quo" was that consumers would pay levies on blank audio recording media in return for the legalization of private copying. The levy principle is fundamentally an obsolete European concept that originated long ago in the analog cassette era. Such levies do not exist in the USA, UK, or Australia.
The Conservative Party's March 19, 2005 Policy Declaration called for repealing the levies. The levies on blank CDs are now $0.29 each, mostly paid by business users, and this is more than these CDs sell for retail in the USA, where there is no blank CD levy.
Because blank CDs are now themselves becoming obsolete, the receipts from levies are quickly evaporating and the Canadian Private Copying Collective ( "CPCC") will be asking for revision to Part VIII to enable levies — which will inevitably be called "taxes" — on iPods and similar "digital audio recorders." CPCC is seeking a legislative extension of the levy scheme because the Federal Court of Appeal has twice ruled that the 1997 legislation doesn't apply to "permanently embedded" memory in "devices" and the Supreme Court of Canada has refused to hear an appeal on this issue. Such an amendment would open the door to levies on personal computers themselves, not to mention cell phones, Blackberry's and other innovative devices.
Just a few years ago in 2002, the CCPC tried, ultimately unsuccessfully due to our Court challenge, to get a levy on digital media, that would have put a "tax" of $21 per gigabyte of memory in devices such as iPods. In other words, the current 120 gig iPod "Classic" that now sells for under $300 would have had a levy of $2,520 if the CPCC had succeeded. Even in its most recent efforts just two years ago, CPCC sought a levy of $75 on these devices. It is clear that any such levy would create a huge incentive for Canadians to buy these devices online from or in person in the USA, which has no such levy. These figures show how unworkable the levy system is in an age of rapid technological change.
Levies are also unfair because they lead to multiple payments for the same transaction. Why should a consumer have to pay a levy to copy a CD he/she buys in the store onto an iPod or for a backup copy or for use in a car or cottage?
The levy scheme in Part VIII of the Act should be repealed. The Act should provide an explicit exception recognizing that private copying for archival or backup purposes and for format shifting purposes by individuals of legitimately acquired copies of works or sound recordings and movies is legal. This should include private copying for such purposes as platform shifting, backup purposes, or the avoidance of obsolescence.
Canadians should not be sued for large statutory damage awards for private, non-commercial copying. Many leading Canadian artists have deplored such litigation. Among major developed countries, only the USA and Canada have such damages provisions. Accordingly, the statutory damages provisions of the Act should be amended so as simply not to apply to private copying activity by individuals.
Various interest groups are seeking significant and far reaching protection for TPMs and DRM technology controls as well as limiting what users can do with the electronic equipment and computer hardware and software they purchase, for example, manipulating digital media players to allow for the downloading of "free" applications. TPMs and DRM technology should not be used as a license by rights holders to lock out Canadians from accessing copyrighted work for legitimate purposes. RCC has no objection to the limited and legitimate use of such technology as long as it does not prevent Canadians from exercising their rights to access copyrighted material for legitimate purposes recognized under the Copyright Act, such as fair dealing, private copying, archival backup and time and format shifting for private purposes and access to public domain materials. Moreover, Canadians who circumvent such technology to access copyrighted materials for legitimate purposes should not fear prosecution or litigation from rights holders who use TPMs and DRM technology to digitally lock their works.
However, the rights holders want much more. They want strong mandatory protection for TPMs and DRM technology that is in line with the US Digital Millennium Copyright Act ( "DMCA") which has lead to exorbitant penalties for circumvention and even the prohibition of some circumvention technology itself, much of which is capable of serving legal and essential purposes. Under the DMCA, creators of products and programs that have the ability to circumvent TPMs could be faced with civil remedies and criminal prosecution for the creation of these products or programs even though the products or programs themselves may not infringe copyright. While this type of circumvention technology may be used by individual for unlawful purposes, it is also an important asset to Canadians who wish to use copyrighted information for legitimate means. To impose civil and criminal sanctions against those that create the technology, would equate to imposing civil and criminal provisions on car manufactures that make cars that have the capability of traveling at excessive rates of speed. We do not charge vehicle manufactures when the end user chooses to use their vehicle in an unlawful manner. Why would we charge creators of circumvention technology when the creator cannot control how the end user uses these products?
The government must also recognize the need to circumvent TPMs and digital locks, to assist the perceptually disabled to convert copyrighted material to other formats when an accessible copy of the work is not available. As we move to a rapidly increasing digital world, we again need to ensure that TPMs and DRM technology does not prevent the perceptually disabled from the knowledge that is shared by the rest of society. In addition, anyone that uses TPMs or DRM technology to do so should be penalized.
Parallel imports are products made abroad absolutely legitimately and put on the market by the rights owner that are competitively imported through a channel other than the officially authorized "exclusive" national distributor. The existence of such competitive alternatives ensures that Canadian consumers will not be gouged by anticompetitive and inefficient so-called exclusive Canadian distributors and therefore have to pay more than world prices. This also protects Canadian retail jobs because Canadians consumers are experts at cross border shopping, when the conditions are right.
The RCC made the winning arguments in the important 2007 Supreme Court of Canada case of Euro-Excellence Inc. v. Kraft Canada Inc., 2007 SCC 37, about the parallel importation of Toblerone chocolate bars. However, it was a narrow and technical victory and the Court was seriously split in its reasoning. There is still a chill on legitimate parallel importation and some copyright owners are using technical and highly artificial "assignments" of artwork on packaging and label artwork to attempt to block such importation, in apparent conformity with the rulings of some of the Supreme Court justices.
While a cultural case can be made for market segmentation in the case of books (and perhaps sound recordings and DVDs) in order to subsidize Canadian publishers, there is no reason why copyright law should be used to block parallel imports of other products, especially products that are not protected by copyright at all or only in an incidental sense or where it is only the packaging or labelling that are protected. Australia had to amend its law to get to this result. With the lingering uncertainty after the Kraft decision, it would be desirable if Canada were also to clarify that copyright law cannot be used to block parallel imports on the basis of copyright in packaging, labelling or an incidental aspect of the product itself.
This creates no harm to copyright owners, since it encourages free trade in legitimate articles and promotes efficiency and more sales. Copyright owners always get paid in the case of parallel imports. This will not harm Canadian distributors, and will indeed benefit them, by making them more efficient and competitive. Canadian retailers clearly prefer to source their goods through Canadian distributors — but only if the wholesale prices are competitive. That is what free trade is all about.
Several of the Supreme Court justices were concerned that using copyright law to restrict parallel imports could amount to "misuse" or whether such law ought to be "transformed in this way into an instrument of trade control not contemplated by the Copyright Act." It is time to clarify our legislation so that this does not happen.
Consumers will be afraid to buy technology that cannot legally be used in a flexible and reasonable way so as to enjoy and preserve the entertainment and software products they have paid for. For this reason, it is important that the new bill completely repeal the possibility of statutory minimum damages being awarded against individuals engaging in any private and non-commercial activity. Apart from the USA, where such legislation has resulted in a jury award of $1.92 million against a young single mother for downloading and supposedly "making available" 24 songs, Canada is the only major country with such punitive and draconian awards. The RCC also believes that the Government should not listen to the inevitable call for "three strikes" legislation that would take away or degrade internet access on the basis of three allegations of infringement. Such a proposed law was held to be unconstitutional in France because access to the internet as we know it is now considered to be virtually a human right. We would not take away the family car if a teenager gets three speeding tickets, especially if the tickets are not even given out by a court but rather by an angry neighbour.
The RCC believes that Canadians deserve to be educated and informed and to use technology at least as well as their counterparts in other countries. This is especially important for our children and generations to come. In the 2004 landmark decision of the Supreme Court of Canada in CCH v. Law Society of Upper Canada, 2004 SCC 13, it was clearly stated that fair dealing rights are "users' right" and that these rights must be given a "large and liberal interpretation". There is a push back now against this decision, and Canadian educators, libraries and organizations that provide news and research related content are now paying excessive fees to copyright collectives for the use of copyrighted material that should be considered "fair dealing" under the Copyright Act.
The fair dealing exceptions, like other exceptions in the Copyright Act, are users' right. In order to maintain the proper balance between the rights of copyright owners and users' interests, they must not be interpreted restrictively. They should be interpreted with flexibiltiy and be considered as inclusive and not exhaustive examples of "fair dealing." This approach would help clear up any ambiguity and alleviate potential lengthy and costly litigation. Canadians should be free from the burden of the fear of prosecution and litigation when they use and/or access copyrighted materials legitimate purposes.
The Copyright Act must:
The Copyright Act should include a provision similar to §110(7) of the US legislation that provides an exception for the use of music in stores for the purpose of selling copies of the sound recording, video or game being played or for the purpose of the demonstration of audio, audiovisual, game or other electronic and related equipment, such as loudspeakers or headphones. The American provision, which has been in place for 40 years is known as the "record store exemption" and is as follows:
§ 110. Limitations on exclusive rights: Exemption of certain performances and displays
Notwithstanding the provisions of section 106, the following are not infringements of copyright:
(7) performance of a nondramatic musical work by a vending establishment open to the public at large without any direct or indirect admission charge, where the sole purpose of the performance is to promote the retail sale of copies or phonorecords of the work, or of the audiovisual or other devices utilized in such performance, and the performance is not transmitted beyond the place where the establishment is located and is within the immediate area where the sale is occurring;
The two major performing rights collectives in Canada, namely SOCAN and NRCC, have demanded excessive and unreasonable payments from retailers for the use of music to sell sound recordings and audiovisual and related equipment. An unsuccessful attempt was made several years ago at the Copyright Board to reduce SOCAN's background music tariff when music is played to sell sound recordings. It makes no sense for retailers to pay very substantial license fees to SOCAN and NRCC under these circumstances, especially when the remaining traditional Canadian record stores are fighting for their very survival. Nor should retailers be exposed to the costs and uncertainties of proceedings before the Copyright Board.
Many retail establishments — from the very largest of big box chain stores to small and specialized photography stores — provide services for printing photographs for clients ranging from amateur consumers to professional photographers. The work may be done by employees or through the use of self-service machines. The potential threat of statutory damages for unauthorized reproduction of photographic images has impeded the market for these services, to the detriment of both retailers and their customers. Today's high quality digital cameras can enable ordinary consumers to take pictures that appear to be "professional" in quality, making some providers of photo finishing services nervous about printing reproductions of such high quality images. RCC believes that no harm would be done and retailers, consumers and professional photographers would be more efficiently served by providing a specific exception that would remove the possibility of liability on the part of any photo finisher acting in good faith who relies upon the written authorization of the customer.
RCC believes that Canada could ratify the 1996 WIPO treaties but only if the blank media levy scheme in Part VIII is repealed and if any technical protection measures ( "TPM") are reasonable. Otherwise, the "national treatment" obligations of these treaties inevitably lead to a requirement that all performers and makers of sound recordings in other countries must be compensated and the result would be almost precisely the doubling of whatever levy rates would otherwise be in effect. There is no serious dispute on this point, which inevitably flows the applicable law and arithmetic. Thus, if the music industry succeeds in getting a $75 levy on iPods, which is what it asked for two years ago, and Canada then ratifies the WIPO treaties, the rate would double to $150 and potentially hundreds of millions of dollars would flow out the country. Or, Canadians would stop buying iPods and similar devices in Canada and get them abroad. Either scenario is undesirable.
One of the most contentious aspects of the DMCA is the "notice and takedown" regime that applies to Internet Service Providers ( "ISP"), which many advocates for stronger copyright protection in Canada, are asking for. This provision, which requires ISPs to remove website content or links to website content that are allegedly "infringing" before it has even been established that the use of the material is infringement or that the individual making the request is in fact the rights holder, in essence, finds the alleged copyright infringer guilty until proven innocent. A "notice and takedown" provision would cause a serious disruption in the flow of electronic information and have a dramatic impact on on-line commerce.
In addition, the "notice and takedown" provision places the onus on the ISP to decide whether copyright infringement does exist, something which they do not have the legal authority to do. At no point is the ISP required to determine whether the alleged copyright infringer is guilty or not guilty. This must still be decided by the courts, if and when rights holder files a claim against them.
The cost associated with managing a "notice and takedown" system would be exorbitant. The costs incurred by the ISP would be passed onto consumers in the way of higher Internet access fees and other services charges and companies and other organizations would be faced with the disruption of the services they provide on their website if a critical component of that website is removed.
The RCC acknowledges that the current de facto "notice and notice" system makes it often difficult and costly for the rights holder to assert their rights to protect their work. However, in the US model, it has been shown that alleged rights holders have abused the "notice and takedown" provision in an attempt to disrupt or stop the activities of individuals who wish to complain or provide information that may be seen as disparaging to the rights holder's business interests.