ARCHIVED — Media Content Coalition (MCC)

COPYRIGHT REFORM PROCESS

SUBMISSIONS RECEIVED REGARDING THE CONSULTATION PAPERS

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Documents received have been posted in the official language in which they were submitted. All are posted as received by the departments, however all address information has been removed.

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Submission from Media Content Coalition received on September 17, 2001 via e-mail

The Media Content Coalition is pleased to provide the attached comments with respect to the Government of Canada’s Consultation Paper on the Application of the Copyright Act’s Compulsory Retransmission Licence to the Internet.

The Media Content Coalition is comprised of the Canadian Association of Broadcasters, the Canadian Film and Television Producers Association, the Canadian Motion Picture Distributors Association, the Canadian Broadcast Rights Agency, and the Copyright Collective of Canada.

Sincerely,
Michael McCabe, President and CEO
Canadian Association of Broadcasters

Elizabeth McDonald, President and CEO
Canadian Film and Television Producers Association

The Hon. Douglas C. Frith, President
The Canadian Motion Picture Distributors Association

Media Content Coalition submission - PDF Version
Media Content Coalition submission attachment - PDF Version

Fostering Content by Protecting Rights

A call for urgent review of
Section 31 of the Copyright Act

A submission to:
Department of Canadian Heritage

Industry Canada
 
 

Prepared by:
The Media Content Coalition
The Canadian Association of Broadcasters
The Canadian Film and Television Producers Association
The Canadian Motion Picture Distributors Association
The Canadian Broadcasters Rights Agency
The Copyright Collective of Canada

September 15, 2000.2

Outline
Introduction..................................................................................................... 3
Background .....................................................................................................4
Internet Streaming ........................................................................................... 4
The Use of Internet Protocol Technology ......................................................... 5
Exceptions to Copyright Must be Construed Narrowly..................................... 5

Retransmission Exception Is Intended to Apply Only to Distributors
Comparable to Cable ...................................................................................... 6

The New Australian Model ............................................................................. 6

Public Policy Reasons Underlying a Cable & Satellite
Compulsory Licence do not apply to Internet Distributors ........................... 7

Internet Transmissions Should Not Qualify for the
Section 31 Exemption Because They Devalue Rights.................................. 9

No Copyright Board Tariff Could be Sufficient to
Compensate Rights Holders ..................................................................... 10

Irreparable Harm Will Result Without Clarification
that Section 31 Does Not Apply to Internet "Retransmission ..................... 11

The Solution.................................................................................................. 17
Conclusion .................................................................................................... 17
Schedule 1 ................................................................................................ Tab 1
Schedule 2 ................................................................................................ Tab 2
Schedule 3 ................................................................................................ Tab 3
Schedule 4 ................................................................................................ Tab 4
Schedule 5 & 6......................................................................................... Tab 5.3
 

INTRODUCTION
 

The Canadian Association of Broadcasters ("CAB"), Canadian Broadcast Rights Agency ("CBRA"), Canadian Film and Television Producers Association ("CFTPA), Canadian Motion Picture Distributors Association ("CMPDA") and Copyright Collective of Canada ("CCC") -collectively, the "Coalition" - hereby urge the Ministers of Canadian Heritage and Industry to address the need to make it clear that:
 

• distributors of television programming may transmit these works over the Internet only with the express authorization of rights holders, and not in reliance upon the narrow exception to copyright established by the Section 31 compulsory licence; and

• distributors operating pursuant to Section 31 must "shut off" subscribers who redistribute the primary retransmission service over the Internet.

The Coalition strongly believes that a joint departmental task force could be struck promptly to consider the need for and language of legislative change to effect such clarity. Alternatively, the Coalition believes that this clarity may be achieved much more simply by changes to the regulations, which may be introduced by the Governor in Council pursuant to subsection 31(3) or subsection 62(1)(b) of the Copyright Act.

While Internet upstart iCraveTV.com - which threatened the fundamental underpinnings of conventional television broadcasting and program exploitation - was shut down by aggressive legal action in Canada and the United States, the current lack of clarity of Section 31 invites new iCrave-like entrants. Indeed, as discussed more fully below, a numbered Ontario company (the "Objector") has filed an objection to the proposed retransmission tariffs, arguing that the tariffs should, but do not, deal with Internet "retransmissions". The Objector has also filed a request with the Copyright Board for the establishment of an interim tariff for 2001 to enable it to commence business on a model that appears to be substantially similar to that of iCraveTV.com. Since the Objector is not actually carrying on business, traditional injunctive relieve may be problematic. As such, there must be swift action or a clear statement of intent from the Government to ensure that the serious legal issue at hand is not considered by a regulatory tribunal pursuant to a mere rate-setting function.

Moreover, the broadcasting industry is beginning to witness the use of IP technology by distributors which, while stopping short of "retransmission" over the Internet, heightens rights holders' exposure to unauthorized international distribution of their works by an end-user. In particular, we note the recent application of Suite Systems Inc. (pursuant to CRTC Notice of Public Hearing 2000-7, July 14, 2000) for a "National, Internet-Protocol-based Class 1 Broadcasting Distribution Undertaking licence", discussed in more detail below.

This submission provides an historical overview of the legislative and legal context in which the
current Section 31 must be read and explains the section's unintended consequences in the face
of new technologies. In addition, the submission addresses:

1. the harm to rights holders and broadcasters of failing to clarify the limits of the Section 31 compulsory licensing regime;

2. the damage to Canadian public policy objectives and the implications of an abrogation of policy-making responsibility by deference to the Copyright Board or by delaying clarification of Section 31 to the next phase of copyright reform; and

3. the risk to Canada's international reputation as a country which respects and rewards the creators of intellectual property and the possible grounds for trade challenges if one of the two alternatives proposed herein (i.e. legislative or regulatory reform) is not expeditiously adopted.

BACKGROUND
Internet Streaming

Establishing a task force to review recommended changes to Section 31 of the Copyright Act or introducing immediate regulatory changes to clarify Section 31 is absolutely critical due to the unintended uncertainties of that section revealed by the recent activity of iCraveTV.com ("iCraveTV"). iCraveTV was an Internet website which, with no authorization whatsoever, and indeed in the face of substantial opposition by rights holders, streamed popular television services and programming onto the Internet and sold banner advertising around the signals. iCraveTV argued that the retransmission scheme in Section 31 of the Copyright Act applied to the Internet streaming of television programming and that it only need pay a tariff to be in complete satisfaction of all copyright obligations.

While iCraveTV stopped its unauthorized streaming pursuant to injunctions issued by the U.S. Court and out-of-court settlements in response to major Canadian and U.S. infringement actions against it, it gambled on the technical legality of its activities based on what it considered to be a loophole in Canada's Copyright Act. This apparent loophole invites an overly-broad interpretation of a narrowly-intended exception to rights holders' traditional "right of authorization" - i.e. the absolute right to say "yes" or "no" to the use of works - because it is drafted in what appears to be a technologically-neutral fashion. As such, legislative or regulatory change must make it clear that distribution on the Internet falls outside of the Section 31 compulsory licensing regime.

Internet distribution is of particular concern to rights holders because the Internet is a publicly accessible network of networks. Information flowing on it travels over non-proprietary routes.While certain alleged security measures or "firewalls" (the unreliable nature of which is further discussed below) may be put in place to limit access to Internet-delivered content to certain
groups or geographical areas, the relative ease with which such security may be "cracked" means that the content may be disseminated internationally on an instantaneous basis.

The Use of Internet Protocol Technology

Apart from averting the disastrous consequences that would arise should parties streaming broadcasting signals onto the Internet be permitted to benefit from the Section 31 compulsory licence, the section also requires clarification in connection with the action to be taken when any one or more signals retransmitted by a legitimate retransmitter are subsequently made available on the Internet by a rogue user.
 

This situation is most likely to arise in connection with the retransmitter's use of Internet protocol or "IP" technology. While the use of IP technology by a retransmitter does not necessarily mean that the retransmitter is streaming signals onto the Internet, it does move broadcast signals one step closer to Internet distribution. IP technology is technology that converts analogue or digital signals into "packets" of information could then be transmitted over closed or open systems for re-assembly at a certain end point. To the extent that the system over which the packets are transmitted are part of an entirely closed system with "dedicated" wires or wireless paths devoted solely to the transmission of such packets, the Coalition does not believe that the use of IP technology should disqualify a retransmitter from the compulsory licence. However, the fact that the retransmitter is taking the first Internet-friendly step of converting information into packets means that the retransmitter makes it easier for a hacker or, indeed, any subscriber, to redirect the signal onto the Internet.

As such, the Coalition believes that any legislative or regulatory clarification of Section 31 should not only exclude Internet retransmission, but should also require retransmitters to disconnect immediately any authorized user who transmits onto the Internet, directly or indirectly, any or all signals which the subscriber receives from the retransmitter.

Exceptions to Copyright Must Be Construed Very Narrowly

The hallmark of copyright law is the owner's right to authorize a variety of uses of a work, including communication to the public by telecommunication. This right is paramount to enabling creators to ensure that their property rights are exploited in a way that guarantees them both fair payment, and that their works will not be devalued in the course of inappropriate exploitation. The basic right of authorization is fundamental to preserving creators' incentive to create and disseminate their works, and that society thereby has access to important intellectual works. Those two objectives are among the most basic purposes of copyright law.1 It is a well-accepted principle of copyright law that any derogation from the rights set out in the Copyright Act should only be permitted for absolute very compelling reasons.2 Clarifying Section 31 to ensure that its application does not extend beyond what was intended when the section was first introduced in 1990 is, therefore, completely consistent with copyright norms. Conversely, failure to clarify Section 31 immediately will lead to serious problems for Canadian rights holders and Canadian public policy.
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1 See for example David Vaver, Copyright Law (Toronto: Irwin Law, 2000), Chapter 1. 2 For example Marybeth Peters, the current U.S. Register of Copyrights, recently stated that:
"A compulsory licence mechanism is in derogation of the rights of authors and copyright owners. It should
be utilized only if compelling reasons support its existence"..

The Retransmission Exception Is Intended to Apply Only to Distributors Comparable to Cable

Section 31 was introduced to satisfy Article 2006 of the Canada-U.S. Free Trade Agreement (the "FTA"), which requires both countries to provide copyright protection to owners of programs broadcast in signals that are retransmitted beyond the reach of the local broadcaster. Section 31 provides an exception for "retransmitters", in limited circumstances, from the need to obtain authorization from rightsholders to communicate by telecommunication works carried in distant broadcast signals, subject to satisfying several criteria, including the payment of compensation set by the Copyright Board.

In implementing Canada's obligations under the FTA, the drafters of Section 31 of the Copyright Act used what appears, on its face, to be technologically-neutral language. Their American counterparts did not take the same approach, and as a result U.S. copyright law specifically references the kind of retransmitters which are permitted to take advantage of the retransmission exception - namely cable and direct-to-home satellite services.3 It is the apparent technological neutrality of Section 31 that iCraveTV relied upon to claim its activity was legal in Canada. Conversely, the technological specificity of the U.S. law helps American rights holders to assert their rights against services like iCraveTV in the United States.

Similarly, the U.K. Copyright Act also specifically names cable services as the beneficiaries of compulsory retransmission licences with respect to works contained in a broadcast signal carried by a cable programming service beyond the signal's local reception area.4 Notably, however, the compulsory licence is only available where the cable programming service has been required by law to carry the broadcast signals in question. Since Internet services are not required by U.K. law to carry any television signals, they do not appear to qualify for the U.K. version of the compulsory retransmission licence.

The New Australian Model

Finally, while the Australians, have just decided, pursuant to new copyright legislation, that a new statutory retransmission licence should operate primarily on a technologically neutral basis, they have been technologically specific in stating that the licence does not apply to Internet retransmission.

In particular, Part VC of The Copyright Amendment (Digital Agenda) Bill, 1999 (the "Australian Bill") establishes a compulsory licence scheme applicable to any "retransmitter" of free-to-air broadcasts. While Item 135ZZI defines a "retransmitter" broadly as "a person who makes a retransmission of a free-to-air broadcast", Item 13ZZJA makes it clear that:
 

          This Part does not apply in relation to a retransmission of a free-to-air broadcast if the retransmission takes place over the Internet.

Internet is not defined by the Australian Bill.

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3 U.S. Copyright Act, Sections 111 and 119, respectively - Schedule 2 to this Submission. 4 U.K Copyright, Designs and Patents Act, 1988. s. 73 - Schedule 3 to this Submission. 5 The Copyright Amendment (Digital Agenda) Bill, 1999, Part VC and explanatory notes, attached as Schedule 4(a)
and 4(b)..

The meaning of the new Australian model for dealing with Internet "retransmission" is described in explanatory notes to the Australian Bill as follows:
 

Amendment 90 amends Item 200 of Schedule 1 of the Bill by inserting new clause 135ZZJA. New clause 135ZZJA clarifies that Part  VC of the Act does not apply to the retransmission of free-to-air broadcasts via the Internet. Consequently, transmitters would be required to negotiate on a voluntary basis with all relevant underlying rights holders in a broadcast before transmitting a free-to-air broadcast via the Internet.

The Coalition strongly believes that the Australian model demonstrates that qualified technological neutrality is appropriate in our fast-evolving media landscape. It presents us with an approach to Internet streaming developed by a government in possession of all available knowledge concerning the Internet and its impacts. In light of such knowledge, this government was not content to leave the application of its new statutory licensing regime completely technologically neutral, nor, apparently, was it able to arrive at a fully technologically neutral, "purposive" definition of retransmitter that was capable of including cable and closed-system users of IP technology while excluding Internet "retransmitters". Nevertheless, the Australian government was bold enough to pass a provision recognizing that Internet "retransmission" had to be treated differently from other forms of transmission for purposes of copyright law. The Canadian government should adopt the Australian model, either through legislative or regulatory reform, in order to clarify Section 31 and affirm its purpose.

It is clear, pursuant to the objectives of the Copyright Act, the Broadcasting Act and the FTA, that the only plausible intention of the drafters was to apply Section 31 of the Copyright Act to retransmitters that were "comparable" to cable. Technological neutrality may be an ideal in legislative drafting so that legislation does not become prematurely obsolete. However, if an interpretation that hinges on such neutrality would completely undermine the purpose of the law in question, then a technology-neutral interpretation cannot be sustained. Parliament simply cannot be deemed to have intended such an absurd and destructive result.

Left unchanged and open to an interpretation that a "retransmitter" may include an Internet streamer of broadcast signals- an entity profoundly different from a cable company - the drafting oversight in Section 31 of Canada's Copyright Act could open the floodgates to program piracy and lengthy, expensive lawsuits that will prolong uncertainty and put a chill on the orderly development of new media activities in Canada.

Public Policy Reasons Underlying a Cable & Satellite Compulsory Licence Do Not Apply to Internet Distributors

Beyond the fact that the Internet is so different from any retransmitter conceived of when Section 31 was introduced that the section could not have been intended to apply to Internet distributors, it is instructive to consider the public policy reasons which originally underlay a cable and satellite compulsory licence. These were summarized by Marybeth Peters, U.S. Registrar of Copyrights, as follows:
 

The Section 111 license [the cable compulsory licence]…was tailored to a heavily-regulated industry subject to such requirements as must-carry, programming exclusivity and signal quota rules - issues that have also arisen in.8 the context of the satellite compulsory license. Congress has properly concluded that the Internet should be largely free of regulation, but the lack of such regulation makes the Internet a poor candidate for a compulsory license that depends so heavily upon such restrictions.

The U.S. regulatory requirements to which Marybeth Peters refers have close parallels in Canadian broadcasting law - namely mandatory and optional carriage rules, as well as simultaneous program substitution and simultaneous and non-simultaneous program deletion rules which apply, pursuant to the Broadcasting Distribution Regulations, in the context of the strictly defined geographical boundaries of broadcast distribution undertakings.7 These regulatory requirements, and the policy statements which underlie their adoption, make it clear that the broadcasting regulator in Canada - the Canadian Radio-television and Telecommunications Commission (the "CRTC" or "Commission") - has long understood that protecting the integrity of local programming rights is fundamental to the economic underpinnings of the broadcasting system, as well as its cultural objectives.

Not only are Internet distributors not subject to the same critical regulatory framework as conventional retransmitters; more fundamentally, the public interest in affording them an exception to copyright law simply does not exist.

Cable television in Canada was originally fostered by the CRTC to improve consumer signal choice, at the same time protecting rights holders through the regulatory mechanisms noted above. While Canadian broadcasters dispute the value which conventional distributors add to their services (particularly given the economic benefits which cable itself has reaped by retransmitting broadcasters' signals), they would agree with the following description of cable and satellite services by Marybeth Peters:

Copyright owners license broadcasters to perform their works via over-the-air
broadcasting, which has certain important limitations. There are topographical
limitations to over-the-air broadcasting, which limit certain viewers' ability to
receive a signal. There are also distance limitations to over-the-air broadcast

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6 Marybeth Peters, op. cit., extracted from a Letter of Marybeth Peters, Register of Copyrights, to the Honorable
Howard Coble, November 10, 1999. 7 Broadcasting Distribution Regulations, SOR/97-555, as amended, repealing and replacing the Cable Television
Regulations, 1986, SOR/86/831, as amended. 8 The need to recognize and protect the integrity of local programming rights was articulated by the CRTC as early
as 1971, when it proposed a number of policy alternatives to deal with the impacts of emerging cable television. In a policy paper issued February 26, 1971, just prior to the release of its new cable television policy, the Commission took the position that cable television should be permitted to develop, but only in a manner which would "avoid disrupting the system [and] enhance the capacity of the system to produce programs" (CRTC paper concerning policy alternatives for cable, February 26, 1971). More specifically, in struggling to arrive at regulations that would preserve the viability and value of the Canadian broadcasting system, the Commission observed that:
…unlimited penetration by United States stations on a wholesale south to north basis would
completely destroy the licensing logic of the Canadian broadcasting system as established by the
Broadcasting Act. If a solution were not found to integrate cable into the overall system, the
impact, by fracturing the economic basis of the private broadcasters, would also disrupt Canadian
cultural, educational and information imperatives of both the public and private sectors of the
Canadian broadcasting system..
 

signals that restrict how far a signal will travel. Cable eliminates these limitations by being a closed path transmission service…The same is true with satellite…

In order to achieve these benefits, cable and satellite distributors have invested billions of dollars in proprietary delivery systems. The current compulsory licence may be viewed as a mechanism necessary to encourage the needed infrastructure investments, make these businesses functional and, in so doing, fulfil public interest objectives.

There are, however, no like public interest objectives in facilitating Internet redistribution by the extension of the compulsory licence. Parties using the Internet to retransmit broadcast signals and the programming on such signals do not have to make billion-dollar investments in infrastructure: they simply use infrastructure that already exists. While they may develop some new software related to facilitating distribution or allegedly securing the streamed programming, this should not be considered a public interest contribution. Aside from the overarching harm which Internet distribution will cause, any new software is bound to be developed anyway by parties interested in legitimate and legal streaming activities, where all rights have been cleared. As such, the development of new Internet technologies will not be impeded by a clarification of Section 31; rather, such technologies will continue to be developed pursuant to audio-visual streaming activities in connection with which all rights have been cleared.

In fact, broadcasters and other program rights holders are likely to be amongst such legitimate users. Clearly, they can and do make use of the Internet to transmit their own programming, without the need for any Internet-intermediary. In short, Internet "distributors" add no value to the process, from a public policy perspective. They are simply taking others' property, not only adding no value but also, rather, threatening the complete devaluation of such property - either with the objective of making unearned money or of deliberately challenging the notion of intellectual property as our society knows it.

Internet Transmissions Should Not Qualify for the Section 31 Exception Because They Devalue Rights

It is obvious to point out that it was impossible for the drafters of Section 31 of the Copyright Act to conceive, when they drafted the section a decade ago, of the emergence, scope and impact of the Internet and the use of packet-based technology. Had they known, they likely would have drafted a much different definition of "retransmitter".

The key reason why a narrow exception to copyright cannot be afforded to an Internet streamer is that, unlike cable or other conventional distributors like DTH, an Internet streamer cannot contain his activity to a limited geographical area. Once content is on the Internet - which is an open or public system, whether or not the person who posts it claims that the "retransmission" can be contained to a limited territory by firewalls - it must be taken to be available throughout the world.

Because the value of rightsholders' copyrights is realized on a territory-by-territory basis,
uncontainable Internet transmissions will completely devalue the territorial broadcasting rights
that have been sold internationally. Furthermore, it means that by streaming broadcast content
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9 Marybeth Peters, op. cit..10

internationally, the Internet "retransmitter" trumps the rightsholder's sale of separate and valuable Internet rights, and his realization of the fair market value of his rights.

iCraveTV's principal, William Craig, tried to demonstrate to the American courts that his service could be contained to Canada. All security measures which he purported to rely on were, however, debunked by on-line experts in very short order. Because one Internet "hacker" can easily make on-line content available internationally, no standard of "reasonable security" or containment is sufficient. Security must be absolute, or the content is at significant risk of being transmitted around the world.

Recent press accounts indicate that William Craig is devising what he refers to as an "iWall", which he claims "can isolate users into so-called country-area networks or CANs".10 However, such claims must be read in the context of other recent web security developments, such as the propagation of the "I Love You" virus or the development of programs such as "Freenet". According to a news article concerning the effect of the Internet on copyright, "Freenet" is a program:
 

…intended to make it possible to share any kind of information anonymously while rendering it virtually impossible to remove it from the Internet once it is placed there.

"Freenet's" developer, Ian Clarke, also boasts in the same article that:

…he is confident that corporations trying to develop complex technologies to encrypt information or otherwise halt the full sharing of computer data will ultimately fail.

"I have two words for these companies: give up," he said.

These comments and the objectives they reflect underscore the fact that Internet "retransmission" can never be safe enough, no matter what purported security measures or firewalls are relied upon. The fact that security measures are put in place to attempt to limit access does not address the fact that the Internet is an open network of networks which must be taken to be accessible by the public at large.

No Copyright Board Tariff Could Be Sufficient to Compensate Rights Holders

No tariff set by the Copyright Board (the "Board") could ever adequately compensate rights owners for this result. In the first instance, the Board may well not factor damages to the value of Internet rights into such a tariff. More importantly, as a practical matter, it is unlikely that the Board would set a tariff that users cannot pay because it is perceived to be "too high", since the Board has a mandate to set "reasonable" rates. Because on-line audio-visual streamers may vary in size and economic power, trying to ensure fair access among them could cause the Board to set a tariff at an excessively low level or, perhaps, as a percentage of revenue garnered from streaming activities. Indeed, this latter possibility was originally suggested by iCrave.TV.com.
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10 "New TV-on-Web service can isolate users by nation", David Akin, National Post, May 4, 2000, p. C4. 11 "Napster debate about more than music", John Markoff, Globe and Mail, May 9, 2000, p. B14.

Furthermore, the current Objector, in its request for an interim tariff, indicates that its planned business model is centered on the sale of banner advertising, not subscriptions. As such, it proposes that it be included within the retransmission regime:

•  on a percentage of revenue basis (which it recommends be set at approximately 2.5% of its revenue); or

• pursuant to a premises-based fee, at a rate that is half that applicable to cable and DTH, payable upon the maximum number of simultaneous users at any time during a month, which the Objector currently sets at 4,000-6,000.

Without commenting upon the merits of any of the Objector's proposals or requests, the Coalition wishes to underscore the fact that payments such as those proposed by the Objector (or, indeed, any other internet streamer) could never compensate rightsholders adequately for what would amount to international distribution of their property. This is not only because many Internet streamers will not be high revenue earners, but also because even large entities may not seek large, capturable revenue in connection with streaming.

While some retransmission streamers may argue that their Internet distribution is containable or de minimus, Internet technology means that redistribution beyond contemplated boundaries and enumerated users can be easily facilitated.

Uncontainable redistribution creates a weak link in the value chain. Many Internet streamers will not be high revenue earners and because even large entities may not seek large, capturable revenue in connection with streaming. As a result, compensation through a tariff set by the Board would never sufficiently compensate owners or ensure that they could realize the full value of their rights and therefore compromises the entire value chain of from creator / rightsholder to distributor.

Irreparable Harm Will Result Without Clarification that Section 31 Does Not Apply to
Internet "Retransmission"

Parliament must take expeditious steps to clarify Section 31 of the Copyright Act, or the Governor in Council must act immediately to address the matter by means of regulation, or Canadian law will continue to encourage others to engage in unauthorized on-line "retransmission" activities similar to iCraveTV's. The emergence of "new iCraveTVs" would have devastating effects, not only for rights holders but ultimately for Canadian cultural sovereignty and the world's recognition of Canada as an on-line media leader:

1. The Destruction of the Canadian Market for Program Rights

Owners of program rights would refuse to licence broadcast rights to the Canadian territory and over-the-air broadcasters receivable in Canada, knowing well that if those broadcasters' signals were streamed onto the Internet they would be unable to control the distribution and exploitation of their product internationally. Simply put, the value of all other territorial sales would be seriously undermined if an Internet user anywhere in the world could simply receive the programming free from a Canadian-based web site..12 This would devastate a key pillar of broadcasting policy in Canada - namely the ability of Canadian broadcasters to cross-subsidize the production and exhibition of Canadian programming by licensing the Canadian rights to high-revenue generating foreign programming. The inclusion of and the political weight given to Article 2005 of the FTA, the so-called cultural industries exemption, suggests that Parliament would not, in introducing legislation to implement Article 2006, have put in place a measure which would completely broadside Canada's ability to maintain a strong and independent Canadian broadcasting system.

2. The Complete Devaluation of On-Line Rights

The "Internet rights" to programming - new rights which are very valuable since they authorize international exploitation of a work, would be rendered worthless, since a Canadian on-line retransmitter could "scoop" those rights based on the vagueness of Section 31. This would undermine completely the incentive of creators to originate and invest in new on-line works and frustrate the ability of rights holders to themselves choose whether and how to exploit their conventional programming on-line.

In making this point to departmental officials, Coalition members have met with the "rebuttal" that if rights holders speak of expropriated business opportunities, they themselves may not really take seriously the risk of on-line piracy. This suggestion is completely without merit, as well as irrelevant. Serious security risks do indeed exist, as do purported security measures. The real point is, however, that if rights holders are willing to either distribute their service internationally or rely on a purported security system in the course of making their own works available on-line, that is a risk that they should be entitled to assess and, if satisfied, voluntarily assume as copyright owners. Undoubtedly, as owners they will also ensure that they can cease streaming if significant security breaches occur or require their licensees to do so through appropriate contractual provisions of the licences. However, the power to undertake international exploitation or more limited exploitation that may result in irreparable harm to rights holders should lie with no one but themselves.

3. The Perception of Canada as a Copyright-Free Zone & Possible Trade
Challenge

iCraveTV's argument that its activities were legal created a strong impression among our trading partners - particularly the U.S. - that Canada was a haven for copyright pirates. There was complete disbelief among the major foreign rights holders affected that Canada would tolerate what was revealed to be very weak law and, in so doing, show such profound disrespect for property rights. As noted above, the laws of the other major common law countries address compulsory retransmission licensing in a technologically-specific fashion that makes it much easier to establish that Internet retransmission is not included. The newest law on the matter - that of Australia - makes it crystal clear that Internet "retransmission" cannot benefit from compulsory licensing..13 A lack of protection for property rights holders could prove to be a significant embarrassment for Canada, and undermines the Government's efforts to advance Canada's reputation as an on-line leader. In other areas related to the new media and economy (such as matters of privacy and the recognition and enforcement of copyright in the digital era), Canada has taken a very proactive position. It has, for example, introduced Bill C-54 and has signed the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty (the "WIPO Treaties"). If Section 31 of Canada's Copyright Act is not clarified pursuant to the adoption of one of the two alternatives proposed in this submission, Canada could face a challenge at the WTO.

The Berne Convention, to which Canada has acceded, specifically limits the ability of member countries to grant compulsory retransmission licences to situations where the licences apply only in the country where they have been prescribed.
Therefore Internet compulsory licences can only be valid under the Berne Convention if they only permit such retransmissions to be received within the national boundaries of the country with the compulsory licensing regime. In considering whether such a scheme could ever be possible, the U.S. Register of Copyrights has stated:
 

Given the present state of the technology it appears unlikely that we could implement a Berne-compatible compulsory licensing regime that permits unencrypted retransmissions of television signals over the Internet.

To the extent that Section 31 is not clarified, therefore, Canada appears to be exposed to trade-related complaints. The WTO agreement on Trade-Related Intellectual Property ("TRIPs Agreement") incorporates by reference most of Berne's provisions, including that discussed above. This means that the Berne requirement with respect to the territorial limitation of compulsory licences is subject to WTO dispute resolution mechanisms. WTO member states (including the United States) could therefore request that a case be heard against Canada concerning Section 31 of its Copyright Act pursuant to the TRIPs Agreement.

4. The Denial of On-Line Opportunities to Canadian Media Players

While Canada wants its new media content providers to be able to develop their businesses in an unfettered fashion, that does not mean that those players should be allowed to undermine copyright law. If the latter is permitted, it will not only cause irreparable harm to rights holders; in addition, traditional Canadian media players who are devoting substantial resources into moving into on-line media will be placed at an unfair disadvantage vis a vis online players that stream broadcast signals.

For example, broadcasters might wish to stream their respective signals onto their web sites, but, quite properly, they simply cannot do so without licensing Internet rights. Were they to attempt what iCraveTV did, rights holders who are their key.14 suppliers would, with little doubt, deny them the right to obtain over-the-air broadcasting rights.

As a result, if left uncorrected, Section 31 could allow a Web streamer like iCraveTV to exploit the value of broadcasters' signals on-line while broadcasters themselves cannot. This would mean that Canadian users would have little incentive to visit a Canadian broadcaster's site.
Clearly, this is grossly unfair, but more importantly it creates a real public policy problem: the companies with established brands and relationships with audiences that can be used to attract Canadian viewers to sites with unique and important Canadian content will be completely prevented from doing so. iCraveTV provided no cultural value-added content to Canadians, and it is unlikely that most Internet streamers would. As such, if Section 31 of the Copyright Act is not amended or clarified by regulation to exclude Internet streaming explicitly, the policy objectives of drawing Canadians to Canadian content on the Internet will be undermined.

5. The Surrender of Policy-Making to Judicial and Quasi-Judicial Bodies

As discussed, a failure to close the perceived loophole in Section 31 of the Copyright Act will have serious negative impacts on Canadian public policy, the orderly development of the new media market in Canada and, potentially, on Canada's relationships with its trading partners. These matters are not properly left to the Copyright Board, and/or the Courts, whose functions are limited to statutory interpretation in the case of the Courts and, in the case of the Board, to tariff-setting and statutory interpretation in that limited context.

Absent immediate action to clarify Section 31, there is a strong possibility that the Copyright Board, and ultimately the Courts, will be required to interpret the existing language - particularly as the Board must now deal with objections to the proposed retransmission tariffs filed by rights holders collectives last spring. The fact that the Objector has not only objected to the proposed tariffs, but is pushing for prompt consideration of an interim tariff, underscores the fact that Government must turn its attention to this matter on an urgent basis. It's no longer a speculative issue.

While a Copyright Board decision or its jurisdiction may be challenged in court, the road to such a challenge is long and, at the end of the day, may well be unsuccessful. For example, in 1990 the Canadian Cable Television Association ("CCTA") challenged the Board's jurisdiction to set a tariff making cable systems liable for the payment of royalties to SOCAN in connection with the use of music on cable-delivered speciality television services. The jurisdictional argument raised by the CCTA was premised on alleged defects in the definition of "musical work" in the Copyright Act. The challenge was dismissed at successive courts (beginning with the Federal Court Trial Division, followed by the Federal Court of Appeal, with leave to appeal ultimately being denied by the Supreme Court of Canada). In the end, the Courts found that without any amendment to the Copyright Act, the Board was competent to deal with the matter and that there.15 was a statutory foundation for the tariff. However, the litigation took over three and a half years to conclude.

While the matter was before the Courts, the Board's process was stayed by Court order, although it had officially seized itself of the matter. Judicial consideration of the Board's jurisdiction did not, however, stop the legislature from amending the Copyright Act to clarify the defective sections and protect rights holder. Had the Act not been amended and had the Copyright Board proceeded to approve Tariff 17 in the face of legislative uncertainty, further legal challenges to the correctness of the Board's decision (a matter separate from that of its jurisdiction) would undoubtedly have been mounted. That would have drawn out the ultimate resolution of Tariff 17 for several more years. As it was, the Board did not certify the tariff until 1996 - seven years after it had originally been filed. The fact that the world is watching on this issue makes it critical that Canada not only act, but be seen to act, much more expeditiously. In businesses (broadcasting and on-line media) and an era where change happens at lightning speed, even if the Courts or the Copyright Board were to make a sound decision with respect to the scope of Section 31, the fact that it would take several years to do so, after all available appeals would have been exhausted, means that the provision of content on the Internet will be subject to complete uncertainty for an extended period, to the detriment of both rights holders and those wishing to proceed with on-line use.

On the other hand, the immediate establishment of a Task Force or new regulations will send a strong signal to the Board that the government will not abdicate its policy-making power.

The chain of events in connection with the first consideration of SOCAN Tariff 17 amply demonstrates that the government is fully empowered to step in while a matter is before the Courts, and after the Board has commenced its process. Had the Board - and not the Courts - been actively considering the tariff at that point, the legislature could have also clearly proceeded with an amendment.

The reason for this wide latitude for government intervention is the principle of Parliamentary supremacy, explained in a leading Canadian administrative law treatise as follows:

When it acts within its constitutional sphere of legislative
jurisdiction and observes the legislative and constitutional charters,
Parliament enjoys a practically unlimited discretion
…Paradoxically, this extreme freedom could not exist without the
fundamental limitation imposed by the impossibility of Parliament.
renouncing its ability to legislate upon a subject within its legislative
jurisdiction.

As such, any notion that a change to Section 31 cannot be made once the Board is seized, as has been informally suggested to the Coalition in prior consultations with officials, is completely unfounded. That being said, in order to keep the process as straightforward as possible, the Coalition strongly believe that it is imperative that the government take action before the Board enters into consideration of the proposed retransmission tariffs or objections thereto. The Coalition trusts that it is very clear to the government that where irreparable harm to the whole basis for program production and distribution is threatened and Canadian public policy objectives are at stake, corrective legislative or regulation-based action must be taken promptly.

The issues surrounding on-line retransmission are far too important to justify the abrogation by the Canadian government of its duty to implement sound, circumspect public policy. While it may be politically tempting to leave the matter to the Copyright Board, Canada is bound to find itself embroiled in many damaging disputes if Section 31 is not amended As such, the government must move as quickly as possible to prevent damage to signal that Canada is not a copyright-free zone.

6. Passive, Non-Consultative Reform of the Copyright Act

Not only is effective delegation of policy-making to the Copyright Board an abrogation of the government's responsibility, the Coalition, as noted above, considers it to be "passive copyright reform" in contempt of the need to consult the key stakeholders affected.

• In its prior meetings with officials on this matter, the Coalition has been asked, in effect, to justify why this issue merits "jumping the queue" of all other copyright stakeholders with an interest in digital copyright reform issues. The way in which the Coalition would like to rephrase and redirect the question to officials is why the government should be permitted, in effect, to legislate anew in a manner that strays far from original legislative intent simply:by doing nothing to clarify technical inadequacies of the old law,
• by ignoring the need to pro-actively consult interested parties and to analyse in detail the need for or the effects of the change and, finally,
• by completely disregarding the need to have significant changes in the law approved by the elected representatives of Canadians whether those representatives are exercising their power as members of the legislature or the Governor in Council.

---
12 Dussault, Rene and Louis Bourgeat, Administrative Law: A Treatise. Second Edition, Volume 1, Toronto:
Carswell, 1985, at p. 340..17

THE SOLUTION

As noted, the Coalition believes that the problem raised by unauthorized Internet retransmission can be addressed in one of two ways: a legislative amendment pursuant to a task-force recommendation, or a change to existing regulation made expeditiously by the Governor in Council.

The amended legislative provision which the Coalition proposes is attached as Schedule 5. It is based on the Australian model of an explicit Internet carve out and supplemented by a retransmitter "shut off" requirement with respect to rogue users.

A regulatory amendment by which the Governor in Council could accomplish the clarification of Section 31 is attached as Schedule 6.

Such an amendment, which would be a simpler means of clarifying the law, would follow from the Governor in Council's ability under subsection 62(1)(b) of the Copyright Act to:

make regulations…

(b) generally for carrying out the purposes and provisions of this Act.

The foregoing account of the history of Section 31 makes it clear that Parliament never intended the section to apply to Internet "retransmitters" and that a refusal to clarify the section in the face of new knowledge concerning the unintended consequences of the drafting will undermine some of the most fundamental tenets of the Copyright Act.

The simplest way to understand the absurdity of the purported loophole is to consider the purpose of Section 31 and its effect if it is not made clear that Internet "retransmission" is not subject to compulsory licensing. Section 31 was introduced to give program rights holders some protection against retransmitters who distribute their works beyond the broadcast areas for which they have licensed their use. If not clarified, however, the section will be relied upon to justify the complete devaluation of the property of those same rights holders.

CONCLUSION

Canada has an important creator community with a significant public policy role to play in the cultural life of the country. Canada also has valuable trading relationships which it has an interest in maintaining. Canada prides itself on the extent and foresight of its international copyright commitments under the Berne Convention, the Rome Convention and the WIPO Treaties. Finally, Canada has taken important steps to ensure that while on-line businesses can flourish in Canada, they flourish in the context of fair business practices (e.g., Bill C-54).
For all of these reasons, an urgent amendment to Section 31 of the Copyright Act or the
introduction of new regulations pursuant to that section is the only sensible solution to the
looming problem of unauthorized, on-line streaming of television programming..18

Schedule 5

Retransmission

Interpretation
31.     (1) In this section,

"retransmitter" means a person who performs a function comparable to that of a cable retransmission system, but does not include a person who retransmits a signal by means, in whole or in part of, the Internet.

"signal" means a signal that carries a literary, dramatic, musical or artistic work and is transmitted for free reception by the public by a terrestrial radio or terrestrial television station.

Retransmission of local signals

(2) It is not an infringement of copyright for a retransmitter to communicate to the public by telecommunication any literary, dramatic, musical or artistic work if
 

(a) the communication is a retransmission of a local or distant signal;

(b) the retransmission is lawful under the Broadcasting Act;

(c) the signal is retransmitted simultaneously and in its entirety, except as otherwise required or permitted by or under the laws of Canada;

(d) in the case of the retransmission of a distant signal, the retransmitter has paid any royalties, and complied with any terms and conditions, fixed under this Act.

(3) In the event that a retransmitter becomes aware that an authorized user of its service is retransmitting or has retransmitted by means of the Internet a local or distant signal provided as part of the retransmitter's service, the retransmitter shall immediately discontinue its service to such user.
Regulations

(4) The Governor in Council may make regulations defining "local signal" and "distant signal" for the purposes of this section.

Schedule 6

Regulation Concerning the Scope of Section 31

(1) Section 31 does not apply in relation to a communication to the public by telecommunication of any literary, dramatic, musical or artistic work if the communication takes place, in whole or in part, by means of the Internet.

(2) In the event that a retransmitter becomes aware that an authorized user of its service is transmitting or has retransmitted by means of the Internet a local or distant signal provided as part of the retransmitter's service, the retransmitter shall immediately discontinue its service to such user.
 

------------------------------------------------------------------------

CONSULTATION PAPER
on the APPLICATION of the COPYRIGHT ACT’S
COMPULSORY RETRANSMISSION LICENCE TO THE
INTERNET

A submission to:

Department of Canadian Heritage
Industry Canada

Prepared by:
The Media Content Coalition

The Canadian Association of Broadcasters
The Canadian Film and Television Producers Association
The Canadian Motion Picture Distributors Association
The Canadian Broadcasters Rights Agency
The Copyright Collective of Canada

September 17, 2001

TABLE OF CONTENTS

EXECUTIVE SUMMARY

SUBMISSION 1
 

PRINCIPLES    1

Shared access by Canadians to a vibrant broadcasting system    1

Equitable balance among stakeholders    3

Technological neutrality 4

Certainty 5

DETAILED COMMENTS REQUESTED IN THE CONSULTATION PAPER 5

Definition of “retransmitter” 5

Territorial Restriction 6

Reasonable Technological Measures 7

    Monitoring 8

    Corrective action 8

    Remedies 8

    Additional Conditions 9

    Other Jurisdictions 10

    Consultation Paper on Digital Copyright Issues 10

ADDITIONAL COMMENTS 11

SUMMARY OF RECOMMENDATIONS 12

EXECUTIVE SUMMARY

The Media Content Coalition (MCC) is a coalition of the Canadian Association of
Broadcasters (CAB), Canadian Film and Television Production Association (CFTPA) and
The Canadian Motion Picture Distributors Association (CMPDA). The MCC was formed
for the purpose of lobbying for legislative change that would effectively exclude Internet
retransmitters (such as iCraveTV) from the benefits of the compulsory licence in the
Canadian Copyright Act. Extension of a compulsory licence to Internet retransmission
would interfere with the market value of program rights and would result in significant
harm to the business models supporting the broadcasting system. As a result of the MCC’s
efforts, the Government of Canada has published a Consultation Paper and inviting
submissions. The main points of the MCC’s draft submission are:

1. The compulsory licence for retransmission should be confined to specified
technologies, which, in addition to conventional retransmission technologies, could
include Internet Protocol technology used to retransmit works over a closed network
in a secure and private manner, but should exclude the retransmission of works over
an open network, such as the World Wide Web, accessible using web browser
software.

2. The definition of “retransmitter” should be contained in Regulations so as to permit
more rapid, flexible adaptation to new technologies.

3. Eligibility criteria should be updated to include the following:

(a) The definition of "retransmitter" should more clearly state that any eligible
retransmitter (except unscrambled LPTVs) must perform the function of a cable
system, including offering retransmitted signals only to members of the public in
Canada who have paid a lawful fee or other charge for access.
(b) Eligible retransmitters should be required to establish and maintain reasonable
technological measures to restrict their reception to authorized subscribers in
Canada, i.e. “measures which persons without specialist knowledge could not
reasonably be expected to circumvent except with outside assistance.” (LPTVs
excepted.)
(c) Eligible retransmitters should be required to use technology that does not allow
any inadvertent reception.

4. Amendments to the Act should include appropriate monitoring obligations, corrective
action (including notification) and remedies.

5. Retransmitters should be obliged to retransmit each signal “simultaneously and
without alteration” rather than “simultaneously and in its entirety” (the current
language). The simultaneity requirement may be subject to “any reasonable delay, or
loss of information (which lost information is not evident to a viewer) arising solely
from steps necessary to convert a signal into a format suitable for retransmission.”

6. Retransmitters should not be permitted (without the consent of the affected
broadcaster) to transmit any advertisements perceivable by recipients simultaneously
with the retransmitted signals, unless as a result of the recipient’s own actions which
are not necessary to render the content of the signal itself perceivable.

7. In any event, any retransmission system that requires ISPs in order to effect its
retransmission should not be eligible for the Licence until appropriate notice and
takedown provisions for ISPs are added to the Copyright Act.

SUBMISSION

1. This is the submission of the Media Content Coalition (the MCC) in response to
Consultation Paper on the Application of the Copyright Act’s Compulsory
Retransmission Licence to the Internet (the Consultation Paper) published by the
Departments of Canadian Heritage and Industry (the Departments) on June 22, 2001.

2. The MCC is the Canadian Association of Broadcasters (CAB), Canadian Film and
Television Production Association (CFTPA) and The Canadian Motion Picture
Distributors Association (CMPDA).

3. The Coalition has had a number of informal exchanges with officials of the
Departments of Canadian Heritage and Industry (the Departments) on this topic. We
are pleased with the way in which the Consultation Paper sets out the issues and the
positions of the respective stakeholders. We do not, therefore, intend to repeat
submissions that we have already made. For the sake of comprehensiveness of the
public record of these proceedings, a copy of our submission of September 15, 2000
is attached. We will restrict our comments in this submission to a review of the
principles listed in the Consultation Paper and a response to the Departments’
requests for specific comments.
PRINCIPLES

4. The Departments list four (4) principles intended to inform and direct this review:
•Shared access by Canadians to a vibrant broadcasting system
•Equitable balance among stakeholders
•Technological neutrality
•Certainty
Shared access by Canadians to a vibrant broadcasting system

5. The MCC notes that the Consultation Paper’s elaboration of this principle states that
“The Licence should continue to support the achievement of the objectives of the
broadcasting policy for Canada set out in the Broadcasting Act.” We further note that
the Consultation Paper emphasizes the policy of providing access to Canada’s
broadcasting system.

6. The policy objectives of the Broadcasting Act are set out in the 20 paragraphs of
subsection 3(1). Most of these policy objectives refer to the content of the
broadcasting system, rather than the technology used to deliver it. In particular,
programming is said to be the vehicle through which the broadcasting system
provides a service that is “essential to the maintenance and enhancement of national
identity and cultural sovereignty.”

7. No technology contributes to a broadcasting system that can “safeguard, enrich and
strengthen the cultural, political, social and economic fabric of Canada” if the
potential commercial risks resulting from the use of that technology threaten the
existence of conventional broadcasters.?2

8. Broadcasting policy does not permit licensed broadcasting distribution undertakings
(BDUs) to do whatever is technologically possible in order to provide access to the
broadcasting system. Rather, they are required to comply with the Broadcasting Act and
Regulations, applicable CRTC Public Notices, individual conditions of licence, in
addition to their contractual obligations and the relevant provisions of the Copyright Act.

9. Exempt BDUs, however, are not required to support the policy objectives in the
Broadcasting Act by adhering to the regulatory regime that governs licensed BDUs,
except to the extent that those policies are set out in the relevant exemption order itself.

10. In 1999 the CRTC published an exemption order for new media broadcasting
undertakings (the Exemption Order), which unconditionally exempted "new media
broadcasters" from regulation under the Broadcasting Act. The Exemption Order
defined “new media broadcasters” as those which “provide broadcasting services
delivered and accessed over the Internet.”

11. In the Exemption Order the CRTC said that “regulation of these undertakings would
not contribute in a material manner to the implementation of the broadcasting policy
set out in section 3(1) of the [Broadcasting] Act.”

12. Approximately 3 weeks before the CRTC released the Exemption Order,
iCraveTV.com had commenced unauthorized streaming of Canadian and US signals
on its Internet site. This activity had received substantial, prominent press coverage.
In exempting Internet broadcasters from the regulation, the CRTC did not take into
account the consequences for copyright owners, nor are such concerns within the
CRTC’s mandate.

13. The MCC endorses the maintenance of the current requirement that exempt
retransmissions be “lawful under the Broadcasting Act”. The principles of equitable
balance among stakeholders and certainty should be the primary guides in the
copyright reform process, recognizing that the process should also be informed by the
policy objectives of the Broadcasting Act.

14. Internet retransmitters are not essential in order to ensure that all Canadians have
access to the broadcasting system. Conventional BDUs already offer services
throughout Canada.

15. Internet retransmitters are not a substitute for conventional BDUs. Conventional
BDUs are subject to a number of regulations (or conditions in the case of exempt
BDUs), all of which promote public policy objectives, and none of which would be
requirements for Internet retransmitters. For example, Internet retransmitters would
not be required to offer a preponderance of Canadian signals – indeed, they would not
be obliged to offer any Canadian signals at all.

16. Unlike conventional BDUs, Internet retransmitters would not provide an essential,
expensive technological link between broadcasters and distant viewers. The
technology available to Internet retransmitters is equally available to broadcasters
themselves. To allow Internet retransmitters to distribute broadcasters’ signals
without authorization, when broadcasters themselves cannot, is wholly inequitable; it
essentially creates a non-level playing field where the Internet retransmitter is
favoured.?3

17. Internet retransmitters are not able to offer the selection of services necessary to make
them a substitute for conventional BDUs. Most of the signals offered by conventional
BDUs are specialty and pay services, whose operators do not have Internet rights. If
and when specialty and pay service operators negotiate with program suppliers for
Internet rights, they will supply their Internet subscribers directly, rather than through
an intermediary like an Internet retransmitter.

18. Internet retransmitters would use untried, unregulated retransmission technology.
Their service would not be a substitute for cable and DTH services and would not
reach any Canadian household that does not have access to conventional services. We
submit that this would not support Canadian broadcasting policy objectives.
Equitable balance among stakeholders

19. As stated in the Consultation Paper, the compulsory retransmission licence (the
Licence)
authorizes third parties to make non-consensual use of rights holders’ copyrighted works, and
that authorization should be limited to the extent necessary to achieve the public policy objectives
which underlie the Licence, while ensuring that rights holders are treated in a fair and equitable
manner. [Emphasis added.]

20. The essential function of copyright law is that it requires a bona fide user of a
copyrighted work to have the consent of the owner. A compulsory licence removes
the owner’s right to choose how, when and by whom his/her works will be used and
replaces the right to choose with a right to a “fair and equitable” royalty determined
by an administrative tribunal. Such a mechanism treats all works as fungible goods,
paid for in a way that is, at best, only fair and equitable on average.

21. A compulsory licence is an extraordinary limitation on owner’s rights, all the more so
if available to a technology (such as the Internet), which has the potential to destroy
the established domestic and international markets for uses that are authorized.

22. The Canadian broadcasting system is vitally dependent on programs created and
financed by copyright owners, and in that context, program rights are the linchpin of
the system. Without a vibrant marketplace for program rights, creators cannot be
properly compensated and the objectives of the Broadcasting Act will not be able to
be achieved. That is why any resort to a compulsory licence regime should be strictly
confined and limited in its application.

23. A compulsory licence is a form of expropriation: private property is made available
for uses that the owner has not authorized (and would not voluntarily authorize), for
royalties determined by a tribunal. Regulated royalties cannot rebalance the resulting
inequities when the tribunal setting those royalties must take into account the user’s
ability to pay, rather than the fair market value of the subject rights and the harm done
to the rights holders.

24. Therefore, in taking into account the principle of equitable balance among
stakeholders, it should be acknowledged that the Licence is an exceptional privilege
granted to retransmitters to the detriment of rights holders. The resulting imbalance
can only be corrected if the Licence is narrowly applied and includes appropriate
safeguards.?4

25. MCC submits that, for reasons outlined in this and in its earlier paper, the damage to
other stakeholders, including producers and broadcasters, would render an extension
of the compulsory licence to Internet retransmitters wholly inequitable.
Technological neutrality

26. The Consultation Paper states:
The principle that wherever possible legislation should be drafted in
technologically-neutral terms contributes to long-term legislative stability by
reducing the need for ongoing amendments arising from unforeseen technological
change.

27. The MCC submits that the language of s. 31 of the Copyright Act is not entirely
technologically neutral. Section 31 applies only to the retransmission of works on
signals that are “transmitted for free reception by the public by a terrestrial radio or
terrestrial television station.” Furthermore, “retransmitter” is defined so as to exclude
certain persons who use Hertzian waves to retransmit a signal.

28. To the extent that the language of s. 31 is technologically neutral, it has not
“contributed to long-term legislative stability by reducing the need for amendments
arising from unforeseen technological change,” which the Consultation Paper gives as
the basis for this principle. The Internet is the first unforeseen distribution technology
since the Licence was implemented and has already resulted in legal actions in
Canada and the US, a major proceeding before the Copyright Board and this
consultation process.

29. We submit that unforeseen technological changes are likely to require legislative
change, whether the legislation is expressed in technologically neutral or
technologically specific language.

30. Technologically neutral language is more likely to include unforeseen technologies,
while technologically specific language is more likely to exclude them. Neither
necessarily promotes legislative stability, however technologically specific language
does promote the principles of equitable balance and certainty.

31. Technologically specific language is preferable when drafting exemptions from
copyright liability in order to be consistent with the principle of equitable balance
among stakeholders as described in the Consultation Paper, i.e., that the Licence
“should be limited to the extent necessary to achieve the public policy objectives
which underlie the Licence, while ensuring that rights holders are treated in a fair and
equitable manner.” Technologically neutral language tends to broaden exemptions in
unforeseen ways, which are not consistent with the principle of equitable balance.

32. Technologically neutral language in an exemption from liability is also contrary to the
principle of certainty. Copyright owners and authorized users are forced to negotiate
without knowing what new unauthorized users may arise during the term of their
negotiated agreements.

33. The MCC submits that it is desirable, from a public policy point of view, that new
technologies be eligible for the Licence deliberately (rather than accidentally) and
only after careful consideration of public policy and consultation with stakeholders.?5

34. It appears that the principle of legislative stability is preferable to the principle of
technological neutrality. Legislative stability is a principle that the MCC endorses,
and which we believe is supported by our proposal (discussed more fully below) that
the definition of "retransmitter" be moved to a Regulation. We submit that moving
the definition to a Regulation would both promote legislative stability and provide an
appropriate degree of flexibility with respect to future technological innovations.

35. The Consultation Paper states that if Internet retransmission were to be excluded,
“Internet” would have to be defined. We recommend instead that technologically
specific and inclusive language be used so that only those technologies that are
specified may benefit from the Licence. Excluded technologies, such as the Internet,
will not have to be defined.
Certainty

36. The MCC agrees, for the reasons stated in the Consultation Paper, that certainty is an
important principle.
The proper scope of the Licence should be readily apparent to both rights holders and
retransmitters so that neither unlawful activities may be sheltered behind, nor lawful uses be
inhibited by unnecessary ambiguity.

37. In our submission, technological neutrality is inherently ambiguous. Negotiated
transactions related to the transmission and retransmission of copyrighted works often
extend over a broad geographical territory and for a term of years. The incentive to create
such works depends on the expectation of being able to license them. Both parties to
negotiated licences require certainty. They need to know that the implementation of new
technology will not result in the value of the rights they have bargained for being diluted.

38. The principle of certainty supports our proposal that all permitted technologies be
specified and that all unspecified technologies be excluded.

39. Generally, the MCC submits that the principles of equitable balance among
stakeholders and certainty should guide this process. The policy objectives of the
Broadcasting Act should inform this consultation, but the role of the Copyright Act is
not to support broadcasting policy, which was created to address different priorities.
The principle of technological neutrality should be abandoned: there are other ways to
address legislative stability, which better respect the principles of balance and certainty.
DETAILED COMMENTS REQUESTED IN THE CONSULTATION PAPER
Definition of “retransmitter”

40. The MCC recommends that the definition of “retransmitter” be amended so as to indicate
more clearly that any retransmitter must perform the function of a cable system. One of the
characteristics of existing cable and satellite retransmitters which should be specified more
clearly in the Act is that an eligible retransmitter is one that offers retransmitted signals
only to members of the public in Canada who have paid a lawful fee or other charge for
access to the retransmitted signals. We would agree to an exception from this requirement
for operators of unscrambled LPTV systems, whose technology provides an unencrypted,
wireless service that is not amenable to a subscription model. We note the geographical
limitations inherent in unscrambled LPTV technology.?6

41. A subscription model is more conducive to effective technological measures that will
prevent any unauthorized reception, including reception outside Canada. This is
particularly significant if the Departments reject our submission that Internet
retransmission should be excluded. Internet technology is more potentially damaging
to the interests of rights holders than any technology already used by retransmitters
due to the relative ease with which recipients may "pass on" a streamed signal.
Mandatory use of the subscription model would facilitate tracing of such activity.

42. Use of the subscription model would facilitate the setting of fair and equitable
royalties, as a “per subscriber” rate as in the current tariff model.

43. The definition of “retransmitter” should specify the technologies that an eligible
retransmitter may utilize. The MCC would support the inclusion of all of the
technologies referred to in the Television Retransmission Tariff – “a cable system
(including a master antenna system), a LPTV system, a multipoint distribution system
(MDS) or a direct-to-home satellite system (DTH system).”

44. We also support inclusion of the use of Internet Protocol technology to retransmit
works over a closed network in a secure and private manner, which does not include
the retransmission of works over an open network such as the World Wide Web
accessible using web browser software.

45. The MCC recommends that elements of the definition of “retransmitter” that list the
eligible technologies be moved from the Copyright Act to a Regulation. This would
allow the definition to be more responsive to amendments, thus avoiding improperly
limiting the appropriate technological development of the Canadian broadcasting
distribution sector and contributing to legislative stability.

46. The Broadcasting Act and Regulations, CRTC Public Notices, etc. may provide
useful guidance with respect to any necessary definition of an eligible technology.

47. The current Act defines “retransmitter,” but the term is not used except in 31(2)(d).
We therefore recommend that the opening language of s. 31(2) be amended by adding
the phrase “for a retransmitter”:
(2) It is not an infringement of copyright for a retransmitter to communicate to the
public by telecommunication any literary, dramatic, musical or artistic work if
Territorial Restriction

48. The MCC agrees with the proposal in the Consultation Paper that a territorial
restriction should be imposed on all retransmitters.

49. In the Consultation Paper, the Departments ask for comment on whether and how a
territorial restriction might take account of concerns that
[A] territorial restriction imposed without regard to the legality of the activity, and the availability
of mandatory compensation under the laws of other countries would be inconsistent with the
growing internationalization of Canada’s satellite infrastructure. For example, the potential
future use of Canadian satellite facilities to retransmit signals to locations in both Canada and the
United States, consistent with all applicable Canadian and US laws might be hindered by a
territorial restriction.

50. The MCC submits that the internationalization of Canada’s satellite infrastructure is
unlikely to be materially adversely affected if the consent of content owners is
required for the export of Canadian over-the-air signals (as it is for the export of pay
and specialty signals).

51. Furthermore, we submit that it should not be the policy of the Canadian Government
to promote the export of Canadian signals and Canadian programming for use by
non-Canadians at low, compulsory license rates, which would result in economic
harm to Canadian rights holders with no corresponding benefit to Canadian citizens.

52. In any event, we note that US copyright law provides impediments to the importation
of retransmitted over-the-air signals, which would prohibit “the potential future use of
Canadian satellite facilities to retransmit [over-the-air] signals to locations in both
Canada and the United States.” The compulsory retransmission licence in the US
allows the retransmission of Canadian signals by cable only where the community
served by the cable system is located within 150 miles from the US-Canadian border
and is north of the 42nd parallel of latitude. Mexican signals (also subject to certain
restrictions) are the only other non-US signals that may be retransmitted by cable in
the US under their compulsory licence. US DTH services may not retransmit any
signals under their statutory licence other than those that originate within the United
States, or which are affiliates of a US network.
Reasonable Technological Measures

53. The MCC agrees with the proposal in the Consultation Paper that reasonable
technological measures for territorial restriction must be established and maintained.
We urge that eligible retransmitters, be required to take reasonable technological
measures to restrict the reception of their service to subscribers in Canada.

54. We also agree that “reasonable technological measures” could be “measures which
persons without specialist knowledge could not reasonably be expected to circumvent
except with outside assistance.” However, it may be appropriate to have different
standards for different types of technology. For example, any retransmission through
a network that interconnects with other networks not owned or controlled by the
retransmitter should be required to meet a higher standard.

55. If the Departments determine that all retransmitters must meet all conditions of
eligibility for the Licence, then we submit that all retransmitters ought to meet the
conditions necessary to safeguard rights holders from the technologies that are the
most insecure and the most potentially damaging.

56. Although we accept that circumvention of technological measures may occur, we submit that
retransmitters should not be eligible for the Licence if their technology allows any
inadvertent reception, that is, reception by a non-subscriber who has made no efforts to
circumvent the retransmitter’s technological measures. No eligible technology should “leak.”

57. The only compensation to copyright owners from exempt retransmissions is payment of
royalties set by the Copyright Board. No compensation would be payable for “inadvertent”
recipients. It is not consistent with the principles of equitable balance, neither is it
supportive of broadcasting policy to permit unauthorized retransmission by any technology
that does not meet this minimum requirement absolutely.?8
Monitoring

58. If the technologies which eligible retransmitters may use are specified, we would not
object to exempting those whose technologies are relatively “safe” from monitoring
obligations.

59. Technical measures intended to restrict access to authorized subscribers should be
monitored. Retransmitters should be obliged to log all instances of unauthorized
reception, whether in Canada or elsewhere. Reports from this monitoring activity
should be made available to any law enforcement agency and to any retransmission
collective, which may in turn make this information available to rights holders.

60. Retransmission collectives should have a right to audit the results of the monitoring
process and the process itself, on terms and conditions to be determined by the
Copyright Board.
Corrective action

61. Corrective action should include prompt notification to all collectives of anyone
reasonably believed to be
•receiving the retransmitter’s service without the retransmitter’s authorization
•retransmitting the retransmitter’s service, or
•otherwise using the retransmitter’s service to infringe.
62. Such notification should include any information that could be used to identify
unauthorized recipients and infringers.
63. Corrective action in particular cases must include prompt discontinuance of service to
anyone reasonably believed to be
•receiving the retransmitter’s service without the retransmitter’s authorization
•retransmitting the retransmitter’s service, or
•otherwise using the retransmitter’s service to infringe.
64. Retransmitters should not be eligible for the Licence unless they are technically able
to promptly discontinue service to any identifiable recipient.
65. An eligible retransmitter should be required to take prompt and effective corrective
action whenever the retransmitter has reasonable grounds to believe that effective
circumvention devices or components are, or effective advice, is being offered to the
public, whether or not for a fee.
66. Standards for determining whether systemic circumvention is occurring should not be
quantitative, that is, should not be dependent on the commercial success of those who
circumvent, or who assist others to circumvent protective technology.
Remedies
67. The Licence is an exemption from liability for infringement. Section 31(2) states, “It is
not an infringement of copyright to communicate to the public by telecommunication
any literary, dramatic, musical or artistic work” if a number of conditions are met.
Thus any retransmission that does not comply with the requirements of the Licence is an
infringement of the right to communicate a work to the public by telecommunication.?9
68. The MCC submits that all of the remedies available for other acts of infringement
should be available, including injunctive relief, damages, and statutory damages.
Remedies should be accessible pursuant to a summary procedure.
69. The Departments have expressed concern in the Consultation Paper that a
retransmitter subject to an injunction or otherwise required by law to immediately
discontinue service to unauthorized users, may be unable to comply with such
conditions, except by the termination of all retransmission. The Departments are
concerned that this might “have the disproportionate effect of denying Canadian
households access to broadcasting services and thus be inconsistent with Canadian
broadcasting law and policy.”
70. Retransmission services, which use technologies that are able to comply with the
corrective action that we propose, are already available throughout Canada. There is,
therefore, no risk of denying Canadian households access to broadcasting services by
excluding those that cannot.
71. Furthermore, we submit that such a condition would in fact support broadcasting
policy by discouraging the use of technology that cannot protect the programming
that makes the broadcasting system’s service “essential to the maintenance and
enhancement of national identity and cultural sovereignty.”
Additional Conditions
Definition of “signal”
72. The MCC recommends amending the definition of “signal” so that it includes any
subsidiary signal transmitted by the originating broadcaster and intended to be
received simultaneously with the principal signal. This would assure, for example, the
availability of Special Audio Programming and closed captions. This should not be
left to the CRTC, particularly as retransmitters may operate under an exemption
order.
Simultaneity and entirety
73. The MCC proposes that all eligible retransmitters be required to retransmit each
signal “simultaneously and without alteration,” rather than “simultaneously and in its
entirety,” as currently stated, so as to more clearly comply with the provisions of the
Canada/United States Free Trade Agreement (CUSFTA).
74. The MCC accepts the Departments’ proposal that the simultaneity requirement should
be subject to “any reasonable delay, or loss of information (which lost information is
not evident to a viewer) arising solely from steps necessary to convert a signal into a
format suitable for retransmission.” This is understood to encompass the conversion
of a broadcast program from the analog format to compressed digital format, in the
course of continuous streaming of the signal, but does not include the holding of any
information for a longer period of time than that strictly necessary to reformat it.
Banner Advertising
75. The Departments have asked for comment on the potential effect that banner
advertising could have on over-the-air broadcasters if retransmitters were afforded the
benefit of the Licence even though they employ banner advertising.?10
76. In accordance with the objectives of the Broadcasting Act, retransmitters licensed by
the CRTC are not permitted to sell advertising. Section 7 of the Broadcasting
Distribution Regulations precludes licensed BDUs from inserting advertising or
otherwise altering a signal. Inserting advertising content of any type is clearly not a
function of a cable retransmission system.
77. If retransmitters were allowed to sell advertising of any type they would be
competing with over-the-air broadcasters for advertising revenue. Retransmitters,
whose inventory is acquired under a compulsory licence, should not be permitted to
compete with broadcasters, who negotiate payment and other terms with rights
holders.
78. Any further reduction in their advertising revenue would reduce the ability of
broadcasters to satisfy their Canadian programming obligations, a key, vital element
of Canadian broadcasting policy. This diminished investment would have deleterious
consequences for Canadian producers and Canadian talent of every description,
weakening the entire Canadian creative community. Television advertising revenues
are already in decline. Fragmentation in the marketplace led to a drop of 5% in local
time sales from 1999-2000, according to recent CRTC revenue data for the industry.
79. The addition of advertising by a retransmitter would also arguably be a breach of the
CUSFTA requirement that signals be retransmitted without alteration. However, in
the interests of clarity, the MCC submits that eligible retransmitters should be
precluded from selling advertising. We are sympathetic to concerns of conventional
retransmitters and agree that they should not lose their eligibility for the Licence
merely because, for example, their subscribers are able to access the Internet, and thus
advertising on other web sites, simultaneously with their access to the retransmitted
signals. We therefore suggest the following prohibition, which is a variation of the
proposal in the Consultation Paper:
Without the consent of the affected broadcaster, no information of a commercial nature shall be
transmitted by the retransmitter, or a person acting in association with the retransmitter, and no
information of a commercial nature transmitted by anyone else is to be rendered perceivable by a
recipient’s broadcasting receiving apparatus at the same time as is the content of the signal,
unless as a result of the recipient’s own actions which are not necessary to render the content of
the signal itself perceivable and which do not result in a reduction in the cost to the recipient of
receiving the signal.
Other Jurisdictions
80. It is our information that in the U.S. the issue of Internet retransmission is not in
contention. The generally accepted view is that expressed by Marybeth Peters who, as
Registrar of Copyright, has an official and objective point of view. A contrary view
expressed by the Director of Digital Media Association is one which should be
evaluated in the context of the interests of that Association.
Consultation Paper on Digital Copyright Issues
81. If ISPs are necessary for any eligible retransmitters, the technologies used by such
retransmitters should not be permitted until appropriate notice and takedown
provisions are added to the Copyright Act.?11
ADDITIONAL COMMENTS
82. The Coalition is concerned about the schedule for this process. As the Departments
know, the Copyright Board has commenced a process whereby it will determine
whether an Internet retransmitter is eligible for the Licence under the current Act. The
Board’s hearing is scheduled for December of this year, with a Decision anticipated
in 2002. If the Board determines that JumpTV is eligible, the tariff-setting portion of
the process will commence promptly, possibly simultaneously with applications for
Judicial Review of the Board’s Decision.
83. The Board, possibly the courts, and all of the parties to the Board’s process will be
expending considerable public and private resources on this process, much of which
will be wasted when section 31 is clarified.
84. It is therefore desirable that the Departments proceed as swiftly as reasonably
possible to a resolution of this matter.
85. The MCC appreciates the obvious efforts of the Departments to address the necessary
amendments to the retransmission regime. We look forward to participating in the
balance of this process.?12
SUMMARY OF RECOMMENDATIONS
1. The principles of equitable balance among stakeholders and certainty should guide
this process and the policy objectives of the Broadcasting Act should inform it.
2. The principle of technological neutrality should be replaced with the principle of
legislative stability.
3. The definition of “retransmitter” should be rewritten and moved to a Regulation.
4. Eligible retransmitters should be restricted to eligible technologies, which should be
specified and which should include, in addition to the technologies specified in the
current Interim Television Retransmission Tariff, Internet Protocol technology used to
retransmit works over a closed network in a secure and private manner, but excluding
the retransmission of works over an open network, such as the World Wide Web,
accessible using web browser software.
5. The definition of “retransmitter” should more clearly state that any eligible
retransmitter (except unscrambled LPTVs) must perform the function of a cable
system, including offering retransmitted signals only to members of the public in
Canada who have paid a lawful fee or other charge for access.
6. Subsection 31(2) should be amended by adding the phrase “for a retransmitter”:
7. Eligible retransmitters should be required to establish and maintain reasonable
technological measures to restrict their reception to authorized subscribers in Canada.
8. “Reasonable technological measures” could be “measures which persons without
specialist knowledge could not reasonably be expected to circumvent except with
outside assistance.” (LPTVs excepted.)
9. Eligible retransmitters should be required to use technology that does not allow any
inadvertent reception.
10. Technical measures intended to restrict access to authorized subscribers should be
monitored.
11. Retransmitters should be obliged to log all instances of unauthorized reception and
make reports available to any law enforcement agency and to any retransmission
collective, which may in turn make this information available to rights holders.
12. Retransmission collectives should have a right to audit the results of the monitoring
process and the process itself, on terms and conditions to be determined by the
Copyright Board.
13. Corrective action should include prompt notification to all collectives of anyone
reasonably believed to be
•receiving the retransmitter’s service without the retransmitter’s authorization
•retransmitting the retransmitter’s service, or
•otherwise using the retransmitter’s service to infringe.
14. Such notification should include any information that could be used to identify
unauthorized recipients and infringers.?13
15. Corrective action in particular cases must include prompt discontinuance of service to
anyone reasonably believed to be
•receiving the retransmitter’s service without the retransmitter’s authorization
•retransmitting the retransmitter’s service, or
•otherwise using the retransmitter’s service to infringe.
16. Retransmitters should not be eligible for the Licence unless they are technically able
to promptly discontinue service to any identifiable recipient.
17. An eligible retransmitter should be required to take prompt and effective corrective
action whenever it has reasonable grounds to believe that effective circumvention
devices or components are, or effective circumvention advice is, being offered to the
public, whether or not for a fee.
18. All of the remedies available for other acts of infringement should be available with
respect to ineligible unauthorized retransmissions.
19. The definition of “signal” should include any subsidiary signal transmitted by the
originating broadcaster and intended to be received simultaneously with the principal
signal.
20. The phrase “simultaneously and without alteration” should be substituted for
“simultaneously and in its entirety.”
21. The simultaneity requirement may be subject to “any reasonable delay, or loss of
information (which lost information is not evident to a viewer) arising solely from
steps necessary to convert a signal into a format suitable for retransmission.”
22. The proposal from the Consultation Paper restricting unauthorized advertisements
should be added as a condition of the Licence.
23. If ISPs are necessary for any eligible retransmitters, the technologies used by such
retransmitters should not be permitted until appropriate notice and takedown
provisions are added to the Copyright Act.