Dockets:
A-516-12
A-527-12
A-63-13
Citation: 2014 FCA 84
CORAM:
NOËL J.A.
PELLETIER J.A.
TRUDEL J.A.
Docket:
A-516-12
|
BETWEEN:
|
CANADIAN BROADCASTING CORPORATION/
SOCIÉTÉ RADIO-CANADA
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Applicant
|
and
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SODRAC 2003 INC.
and
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SOCIETY FOR REPRODUCTION RIGHTS OF AUTHORS, COMPOSERS AND
PUBLISHERS IN CANADA (SODRAC) INC.
|
Respondents
|
Docket:
A-527-12
|
AND BETWEEN:
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ASTRAL MEDIA INC.
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Applicant
|
and
|
SOCIETY FOR REPRODUCTION RIGHTS OF AUTHORS, COMPOSERS AND
PUBLISHERS IN CANADA (SODRAC) INC.
|
Respondent
|
Docket:
A-63-13
|
AND BETWEEN:
|
CANADIAN BROADCASTING CORPORATION/
SOCIÉTÉ RADIO-CANADA
|
Applicant
|
and
|
SODRAC 2003 INC.
and
|
SOCIETY FOR REPRODUCTION RIGHTS OF AUTHORS, COMPOSERS AND
PUBLISHERS IN CANADA (SODRAC) INC.
|
Respondents
|
REASONS
FOR JUDGMENT
PELLETIER J.A.
[1]
In a decision dated November 2, 2012 (the Decision), the Copyright Board
(the Board) exercised its mandate under section 70.2 of the Copyright Act,
R.S.C. 1985 c. C-42 (the Act) to settle the terms of a licence to be granted to
two broadcasters by a collective society which administers reproduction rights.
The terms of the licence reflect the Board’s view that royalties were payable
with respect to ephemeral copies of works made by the broadcasters in the
normal course of their production or broadcasting activities. Ephemeral copies,
as will be seen, are copies or reproductions that exist only to facilitate a
technological operation by which audiovisual work is created or broadcast.
[2]
This aspect of the Board’s decision rests on the Supreme Court of
Canada’s decision in Bishop v. Stevens, [1990] 2 S.C.R. 46, in which the
Court held that ephemeral recordings of a performance of a work, made solely
for the purpose of facilitating the broadcast of that performance, were, if
unauthorized, an infringement of the copyright holder’s rights. In this
application for judicial review of the Board’s Decision, the broadcasters argue
that Bishop v. Stevens must be read in the light of Entertainment
Software Association v. Society of Composers, Authors and Music Publishers of
Canada, 2012 SCC 34, [2012] 2 S.C.R. 231, (ESA), a decision in which
the Supreme Court affirmed the principle of technological neutrality in
copyright matters. The result, in the applicants’ view, is that, today,
ephemeral copies should no longer attract royalties.
[3]
The Board’s decision raised other issues which will be discussed below
but the question that dominated the hearing of this appeal was the treatment of
ephemeral recordings in light of ESA.
[4]
For the reasons that follow, I am of the view that Bishop v. Stevens
continues to be good law.
THE DECISION UNDER REVIEW
[5]
These reasons apply to three applications for judicial review. In file
no. A-516-12, the Canadian Broadcasting Corporation/Société Radio Canada (CBC)
seeks to set aside several terms of the 2008-2012 licence issued to it pursuant
to the Decision. In file no. A-527-12, Astral Media Inc. (Astral) also seeks to
set aside a number of the terms of the 2008-2012 licence issued to it pursuant
to the Decision. Lastly, file no. A-63-13 involves another application for
judicial review by CBC, this time with respect to the Board’s January 16, 2013
decision extending the 2008-2012 licence to the 2012-2016 period on an interim
basis pending a final determination of SODRAC’s section 70.2 with respect to
that period. Both licences issued pursuant to the November 2, 2012 and the
January 16, 2013 decisions are subject to a stay of execution pursuant to an
order of this Court made February 28, 2013, pending the final determination of
these applications for judicial review.
[6]
These reasons deal with all three applications; a copy of them will be
placed on each file. Judgment will issue separately in each file, on the terms
provided in these reasons.
[7]
The Society for Reproduction Rights of Authors, Composers and Publishers
in Canada (Sodrac) Inc., and SODRAC 2003 Inc. (collectively SODRAC) are
collective societies responsible for the administration of the reproduction
rights on behalf of the holders of those rights.
[8]
CBC is Canada’s public broadcaster. CBC’s mandate with respect to Canada’s French speaking population is discharged by the Société Radio-Canada
(Radio-Canada) which, for many years, has produced and broadcast programs
incorporating music by Québec artists. Since SODRAC represents the majority of
Québec reproduction rights holders, Radio-Canada and SODRAC are well known to
each other.
[9]
Astral is a broadcaster specializing in specialty channels but unlike
the CBC, it does not produce any of its own programming. It purchases
audiovisual works for broadcast from producers, apparently on the understanding
that these producers have obtained the necessary rights to allow it to
broadcast the works without the payment of additional royalties
[10]
This dispute arises out of a particular historical context. Following the
decision in Bishop v. Stevens in 1990, SODRAC licensed broadcasters
making use of its repertoire to make ephemeral copies for broadcasting
purposes, and to incorporate works in its repertoire into their own
productions. These licences also covered producers who were commissioned by
these broadcasters to produce works containing SOCRAC material. Around 1998,
SODRAC began requiring such producers o obtain their own licence, though these
licences did not require the payment of royalties. Around 2006, SODRAC began
requiring producers to pay for the right to incorporate works from its
repertoire into their productions, even if the broadcaster commissioning the
work was licensed by SODRAC.
[11]
In 1992, CBC and SODRAC concluded an agreement that set the terms upon
which CBC was authorized to use works from SODRAC’s repertoire on radio, on
television and for certain ancillary purposes. This agreement was renewed from
time to time but as SODRAC’s licensing practices changed, they were unable to
come to an agreement on renewal. SODRAC invoked section 70.2 of the Act so as
to seize the Board with the question. More or less at the same time, SODRAC
also invoked section 70.2 of the Act in relation to Astral. The Board
consolidated the hearing of these two matters.
[12]
Section 70.2 of the Act provides for a form of arbitration in which
parties who are unable to agree on the term of a licence can apply to the Board
to fix those terms:
70.2 (1) Where
a collective society and any person not otherwise authorized to do an act
mentioned in section 3, 15, 18 or 21, as the case may be, in respect of the
works, sound recordings or communication signals included in the collective
society’s repertoire are unable to agree on the royalties to be paid for the
right to do the act or on their related terms and conditions, either of them
or a representative of either may, after giving notice to the other, apply to
the Board to fix the royalties and their related terms and conditions.
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70.2 (1) À
défaut d’une entente sur les redevances, ou les modalités afférentes,
relatives à une licence autorisant l’intéressé à accomplir tel des actes
mentionnés aux articles 3, 15, 18 ou 21, selon le cas, la société de gestion
ou l’intéressé, ou leurs représentants, peuvent, après en avoir avisé l’autre
partie, demander à la Commission de fixer ces redevances ou modalités.
|
(2) The Board may fix the
royalties and their related terms and conditions in respect of a licence
during such period of not less than one year as the Board may specify and, as
soon as practicable after rendering its decision, the Board shall send a copy
thereof, together with the reasons therefor, to the collective society and
the person concerned or that person’s representative.
|
(2) La
Commission peut, selon les modalités, mais pour une période minimale d’un an,
qu’elle arrête, fixer les redevances et les modalités afférentes relatives à
la licence. Dès que possible après la fixation, elle en communique un double,
accompagné des motifs de sa décision, à la société de gestion et à l’intéressé,
ou au représentant de celui-ci.
|
[13]
The heart of the dispute between CBC and Astral (collectively, the
Broadcasters) on the one hand, and SODRAC, on the other, is SODRAC’s business
model which the Broadcasters say is inconsistent with the prevailing industry
model. The Broadcasters say that the normal practice in the industry is for the
producer of an audiovisual work (television program, movie or other
cinematographic work) to obtain a through-to-the-viewer licence from the rights
holder.
[14]
In its Decision, the Board described a through-to-the viewer licence as
follows:
Producers sometimes
secure a through-to-the-viewer licence. Such a licence authorizes all
copies of a musical work made by the producer or others in the course of
delivering the audiovisual work to the ultimate consumer in the intended
market, be it television, cinema, DVD, Internet or other. A buy-out licence
is a through-to-the-viewer licence in which royalties are set at a lump sum
paid up front. Other through-to-the-viewer licences give the producer the
option to extend the licence beyond a certain point in time, a certain
territory or a certain market at pre-determined prices. When a producer
exercises an option pursuant to a through-to-the-viewer licence, the related
rights are cleared for downstream users as well as for the producer.
Decision at
paragraph 15
[15]
The Broadcasters emphasize that this type of licence is consistent with
the producer’s intention in obtaining a licence, which is to create a product that
can be marketed to broadcasters or exhibitors who can then exploit it
commercially. The fact that the rights acquired under a through-to-the-viewer
licence may be limited in time or place does not detract from the essential
feature of such a licence, which is that the producer obtains or “clears” all
necessary rights for downstream users, within the temporal or geographical
limits of the licence.
[16]
As against this model, SODRAC has adopted a layered approach to
licensing in which each link in the distribution chain must acquire (and pay
for) the right to make the copies required for its commercial purposes. It is
reasonable to assume that SOCRAC’S position is designed to maximize revenue for
the artists it represents.
[17]
SODRAC’s change in strategy corresponds with the adoption of new
technology that generally requires producers to make multiple copies of a
musical work in order to incorporate it into an audiovisual work, a process
known as synchronisation. At the same time, computerized digital content
management systems and digital projection systems require broadcasters or
exhibitors of an audiovisual work to make multiple copies of the work in order
to broadcast or exhibit it. These copies, described earlier in these reasons as
ephemeral copies, are known as incidental copies and were described as follows
by the Board:
…Synchronization
refers to the process of incorporating a musical work into an audiovisual work.
Thus, a synchronization copy is any copy made in order to include the
work into the final (master) copy of an audiovisual work. A
post-synchronization copy of the music is made each time the audiovisual work
itself is copied, for example to broadcast, deliver or distribute the
audiovisual work.
An incidental
copy is necessary or helpful to achieve an intended outcome but is not part
of the outcome itself. A production-incidental copy is made in the
process of producing and distributing an audiovisual work, either before or
after the master copy is made: it is a form of synchronization copy. A broadcast-incidental
copy is made to facilitate the broadcast of an audiovisual work or to
preserve the work in the broadcaster’s archives, while a distribution-incidental
copy is made for the purpose of readying or preserving the motion picture
for distribution to the public: both are forms of post-synchronization copies.
Decision at
paragraphs 11-12 (emphasis in the original)
[18]
To round out this discussion of incidental copies, it is of interest to
note that the evidence before the Board was that a producer will reproduce a
musical work between 12 and 20 times in the course of the synchronization
process leading to a finished master copy. Television broadcasters, using
digital content management systems (which are now the industry standard), make
multiple copies of an audiovisual work in the course of editing (for example,
adjusting sound and colour balance), broadcasting and archiving the work. While
the making of incidental copies is not a new phenomenon (see Bishop v.
Stevens), it appears that technological advances may have increased the
number of incidental copies made in the course of commercial operations. The
Board says it did; the Broadcasters dispute this.
[19]
With that background, I turn to the Board’s decision. After having laid
out the historical and technological background summarized above, the Decision
then set out a few general legal principles, the most relevant of which is the
following:
Fourth, the Board
cannot impose liability where the Act does not or remove liability where it
exists. Consequently, the Board cannot decide who should pay, only what should
be paid for which uses, and only to the extent that the envisaged use requires
a licence.
Decision at paragraph
62
[20]
This principle is a partial answer to the Broadcaster’s argument with
respect to whether incidental copies should attract royalties. In the Board’s
view, liability to pay royalties is imposed by the Act and is based upon use of
the protected material. As a result, the Board cannot relieve a user of
protected material from the financial consequences of that use.
[21]
The Board then went on to consider what it called “contextual legal
principles”. Under this heading, the Board engaged in an examination of the
history and current state of SODRAC’s licensing practices. It acknowledged that
the use of through-to-the viewer licenses in some markets by some rights
holders was relevant but not determinative. The focus of the inquiry was on
SODRAC’s practices which, to the extent that they were both consistent and
significant in the relevant market, could not be ignored.
[22]
The Board’s review of the evidence, including SODRAC’s licensing
practices, led it to conclude that SODRAC had issued few, if any, through-to-the-viewer
licences. To the extent that SODRAC had issued licences granting the licencee
the right to authorize others to reproduce protected works, that right
generally resided with the broadcaster not with the producer. So it was that
CBC’s licence from SODRAC covered synchronization in audiovisual works
commissioned by CBC from independent producers. Under such licences, producers
did not acquire the right to authorize anyone “downstream” in the distribution
chain to reproduce a protected work.
[23]
As a result of its review of the evidence, the Board concluded that the
record before it was unambiguous. “In the most relevant market, the province of Québec, through-to-the-viewer licensing exists but is not the norm”: see
Decision at paragraph 78. This finding is significant because, to the extent
that the Board sets royalties and licence fees on the basis of the economic
value of the rights involved, the definition of the market for those rights is
a relevant consideration.
[24]
The Board next embarked on an analysis of the economic value of
reproduction rights in the hands of broadcasters and producers, an analysis that
proceeded on the basis of two fundamental propositions:
a) The
copy-dependent technologies adopted by producers and broadcasters add value to
their businesses, by allowing them to remain competitive, even if they do not
generate direct profits. Since part of this value arises from the use of
additional copies, some of the benefits flowing from those copies should be
reflected in the remuneration paid for the additional copies.
b) The Board cannot,
under the umbrella of a section 70.2 arbitration between two parties, dictate
how either of the parties should conduct their business generally, or how they
should deal with third parties such as producers. In other words, it is not for
the Board to force SODRAC to issue through-to-the-viewer licenses or to establish
through-to-the-viewer licences as a standard arrangement.
[25]
After establishing these principles, the Board’s decision went on at
some length in setting the financial terms of the licences to the CBC and to
Astral. After making allowance for the fact that SODRAC did not represent all
of the rights holders for music incorporated into the Broadcasters’ offerings,
the Board then addressed the quantification of the fees to be paid by the latter
under various headings. The Board set the licence fees for broadcast-incidental
copies in radio and television as well as the fees payable by CBC with respect
to synchronization licences. Finally, the Board dealt with licence fees payable
for internet TV, sales of programs to consumers for private use (DVDs and
downloads), and fees for licensing of CBC programs to third parties.
[26]
The Broadcasters’ principal argument before us was that the analysis
adopted by the Board flew in the face of the principle of technological
neutrality established by the Supreme Court in ESA. As a result, in
order to simplify the analysis, I propose to deal with the issue of
technological neutrality at this point, deferring the analysis of the other
arguments made by the Broadcasters until later in these reasons.
ANALYSIS
[27]
The Board is unusual among specialized administrative tribunals in that
its decisions on question of law are reviewable on the standard of correctness:
see Rogers Communications Inc. v. Society of Composers, Author sand Music
Publishers of Canada, 2012 SCC 35, [2012] 2 S.C.R. 283 at paragraphs 10-15.
Questions of fact are only reviewable if they are "made in a perverse or
capricious manner or without regard for the material before it [the
tribunal]": see section 18.1(4)(d) of the Federal Courts Act,
R.S.C. 1985, c. F-7. In Canada (Citizenship and Immigration) v. Khosa,
2009 SCC 12, [2009] 1 S.C.R. 339 (Khosa), the Supreme Court of Canada
described this provision as providing “legislative precision to the
reasonableness standard of review of factual issues falling under the Federal
Courts Act”: Khosa, at paragraph 46.
[28]
Earlier in these reasons, I set out two fundamental propositions that
inform the Board’s reasoning: see paragraph 25. The first is that, if
technological advances require the making of more copies of a musical work in
order to get an audiovisual work that incorporates it to market, those
additional copies add value to the enterprise. As a result, they attract
additional royalties, not necessarily on a per-copy basis but on the basis of
the additional value generated by those copies. Simply put, more copies mean
more value and thus, more royalties.
[29]
The Broadcasters challenge this proposition on two interrelated but
distinct grounds. First, they say that copy-dependent technology does not add
value to an enterprise and as a result, there is no additional value to share
with artists who, incidentally, bear none of the costs of acquiring and maintaining
the new technology. This is essentially an economic argument, on which the
Board heard extensive evidence and on which it came to a conclusion for which
there is an evidentiary foundation. As a result, this Court is not in a
position to interfere with the Board’s conclusion on the economic justification
for its conclusion.
[30]
The Broadcasters’ second argument is a legal one: the Board’s decision
fails to give effect to the principle of technological neutrality articulated
by the Supreme Court in ESA. The Broadcasters concede, as they must,
that the incorporation of a musical work into an audiovisual work
(synchronization) is a reproduction that attracts royalties. However, they go
on to argue that copies of the work that are made purely to meet the
requirements of the technological systems used by producers and broadcasters
ought not to attract royalties. Changes in technology should not automatically result
in changes in royalties. Otherwise, intellectual property rights become a drag
on technological innovation and efficiency.
[31]
The Board’s reasoning is grounded in the Supreme Court’s decision in Bishop
v. Stevens, a case in which the Supreme Court held that each of the rights
enumerated in subsection 3(1) of the Act was a separate right reserved to the
owner of the copyright, whose use by another attracted liability for the
payment of royalties. Section 3(1) of the Act is reproduced below for ease of
reference:
3. (1) For the purposes of this
Act, “copyright”, in relation to a work, means the sole right to
produce or reproduce the work or any substantial part thereof in any material
form whatever, to perform the work or any substantial part thereof in public
or, if the work is unpublished, to publish the work or any substantial part
thereof, and includes the sole right
(a) to produce, reproduce,
perform or publish any translation of the work,
…
(d) in the case of a literary,
dramatic or musical work, to make any sound recording, cinematograph film or
other contrivance by means of which the work may be mechanically reproduced
or performed,
(e) in the case of any
literary, dramatic, musical or artistic work, to reproduce, adapt and
publicly present the work as a cinematographic work,
(f) in the case of any
literary, dramatic, musical or artistic work, to communicate the work to the
public by telecommunication,
…
and to authorize any such acts.
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3. (1) Le
droit d’auteur sur l’œuvre comporte le droit exclusif de produire ou
reproduire la totalité ou une partie importante de l’œuvre, sous une forme
matérielle quelconque, d’en exécuter ou d’en représenter la totalité ou une
partie importante en public et, si l’œuvre n’est pas publiée, d’en publier la
totalité ou une partie importante; ce droit comporte, en outre, le droit
exclusif :
a) de
produire, reproduire, représenter ou publier une traduction de l’œuvre;
…
d) s’il s’agit
d’une œuvre littéraire, dramatique ou musicale, d’en faire un enregistrement
sonore, film cinématographique ou autre support, à l’aide desquels l’œuvre
peut être reproduite, représentée ou exécutée mécaniquement;
e) s’il s’agit
d’une œuvre littéraire, dramatique, musicale ou artistique, de reproduire,
d’adapter et de présenter publiquement l’œuvre en tant qu’œuvre
cinématographique;
f) de
communiquer au public, par télécommunication, une œuvre littéraire,
dramatique, musicale ou artistique;
…
Est inclus
dans la présente définition le droit exclusif d’autoriser ces actes.
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[32]
More specifically, Bishop v. Stevens decided that ephemeral
recordings made solely for the purpose of facilitating the broadcast of a work were
caught by paragraph 3(1)(d) of the Act and were not implied in the right
to broadcast a work: see Bishop v. Stevens at paragraphs 22-25. To that
extent, Bishop v. Stevens is directly on point and, unless it has been
overturned or disavowed by the Supreme Court, it determines the outcome of this
branch of the applications for judicial review.
[33]
The Broadcasters say that Bishop v. Stevens has been overtaken by
ESA.
[34]
The issue in ESA was whether a download of a game containing
music is a communication of the musical work to the public by
telecommunication, one of the rights reserved exclusively to the copyright holder
by the Act: see paragraph 3(1)(f). If it is, then the publishers of the
game, who had already paid for the right to reproduce the music
incorporated in the game, were liable to pay royalties with respect to the
download (the communication to the public by telecommunication). As a
result, recourse to a technologically advanced method of delivery would create
liability for additional royalties that were not paid or payable when the game
was sold on a traditional physical medium, such as a CD-ROM.
[35]
In its decision, reported at (2007) 61 C.P.R. (4th) 353, the
Board found that the download of a game containing music was a communication of
the musical work to the public by telecommunication, a decision that was
confirmed by this Court at 2010 FCA 221. The majority of the Supreme Court
reversed this Court and, in the course of doing so, affirmed the principle of
technological neutrality.
[36]
The Supreme Court began by articulating its view of the source and
effect of technological neutrality:
In our view, the
Board's conclusion that a separate, "communication" tariff applied to
downloads of musical works violates the principle of technological neutrality, which
requires that the Copyright Act apply equally between traditional and more
technologically advanced forms of the same media: Robertson v. Thomson Corp.,
[2006] 2 S.C.R. 363, at paragraph 49. The principle of technological neutrality
is reflected in s. 3(1) of the Act, which describes a right to produce or
reproduce a work "in any material form whatever". In our view, there
is no practical difference between buying a durable copy of the work in a
store, receiving a copy in the mail, or downloading an identical copy using the
Internet. The Internet is simply a technological taxi that delivers a durable
copy of the same work to the end user.
ESA at
paragraph 5 (my emphasis).
[37]
A slightly different view of technological neutrality emerges from
paragraph 9 of the majority’s reasons:
SOCAN has never been able to charge royalties for copies of video
games stored on cartridges or discs, and bought in a store or shipped by mail.
Yet it argues that identical copies of the games sold and delivered over the
Internet are subject to both a fee for reproducing the work and a fee for communicating the work. The principle of technological
neutrality requires that, absent evidence of Parliamentary intent to the
contrary, we interpret the Copyright Act in a way that avoids imposing an additional layer of protections
and fees based solely on the method of delivery of the work to the end user. To do
otherwise would effectively impose a gratuitous cost for the use of more
efficient, Internet-based technologies.
(My emphasis.)
[38]
Finally, a third view of technological neutrality is found in paragraph
10 of the majority’s reasons:
The Board's misstep
is clear from its definition of "download" as "a file containing
data ... the user is meant to keep as his own" (paragraph 13). The
Board recognized that downloading is a copying exercise that creates an exact,
durable copy of the digital file on the user's computer, identical to copies
purchased in stores or through the mail. Nevertheless, it concluded that
delivering a copy through the Internet was subject to two fees - one for
reproduction and one for communication - while delivering a copy through stores
or mail was subject only to reproduction fees. In coming to this conclusion,
the Board ignored the principle of technological neutrality.
(My emphasis.)
[39]
A careful reading of these passages shows that the Supreme Court’s
majority reasons incorporate at least three views of technological neutrality:
a) Technological neutrality
is media neutrality. Media neutrality is a statutory prescription arising from
the opening words of section 3 of the Act, which protects the production or
reproduction of works “in any material form whatever”. Media neutrality was
recognized by the Supreme Court in Robertson v. Thomson Corp., 2006 SCC
43, [2006] 2 S.C.R. 363 (Robertson), a case involving copyright in
content originally published in a newspaper and then republished online.
b) Technological
neutrality is a principle of statutory interpretation according to which,
absent evidence of a contrary Parliamentary intention, the Act is to be
interpreted so as to avoid imposing royalties according to the method of
delivery of a protected work.
c) Technological
neutrality is determined by functional equivalence so that if two
technologically distinct operations produce the same result (delivering a copy
of a work to the consumer), the incidence of royalties should be the same in
both cases.
[40]
In light of these different views of technological neutrality, it is
difficult to know how one is to approach technological neutrality post-ESA.
This is particularly true when one considers that in both Robertson and ESA
the Court’s decision was reached following an analysis that did not rely on any
of the possible variants of technological neutrality.
[41]
In Robertson, the issue was whether the Globe and Mail infringed
the copyright of freelance contributors when it contributed their work to
electronic databases. The case was one of overlapping copyrights as the
freelance contributors retained the copyright in their article while the Globe
and Mail had the copyright in the newspaper as a whole, whether considered as a
compilation or a collection: see Robertson, at paragraph 31. The
majority in the Supreme Court held that the databases infringed the
freelancer’s copyright because the databases did not involve a reproduction of
the newspaper as such but of discrete elements such as articles, even though
these were tagged with the name of the original publication, date of
publication and other publication specific identifiers. The basis of the
Supreme Court’s decision is that the database reproduced the freelance
contributor’s, not the newspaper’s, originality. The result was that the
inclusion of the article in the database was an infringement of the
freelancer’s copyright and was not covered by the newspaper’s copyright.
[42]
The decision in Robertson turned on the originality of the work
being reproduced and not on the nature of the medium on which the articles were
republished. While the Court’s conclusion was technologically neutral, in the
sense that the medium on which reproduction occurred was not a relevant
consideration, its decision provided no guidance as to how technological
neutrality was to be achieved.
[43]
Similarly, the majority decision in ESA was the result of an
analysis of the legislative history of the Act and of the jurisprudence showing
that communication to the public by telecommunication was historically an aspect
of the performance right, and that this right did not include the delivery of a
permanent copy of the work. Since the download did result in the creation of a
permanent copy of the work on the downloader’s computer, it was not a
performance and thus not a communication of the work to the public by
telecommunication.
[44]
The majority’s analysis did not rely on nor refer to any of the shades
of technological neutrality that it discussed in the earlier part of its reasons.
As a result, ESA, while restating the principle of technological
neutrality in copyright law, provides no guidance as to how a court should
apply that principle when faced with a copyright problem in which technological
change is a material fact.
[45]
Bishop v. Stevens was just such a case. In it, the broadcaster
argued that the right to broadcast a performance necessarily included the right
to make ephemeral recordings in support of the broadcasting activity. The
broadcaster argued that pre-recording was virtually essential “to ensure the
quality of broadcasts and to enable broadcasters to offer the same programming
at convenient times across five different time zones”: see Bishop v. Stevens,
at paragraph 23. This argument was rejected on the basis of the statutory
distinction between the right to make a recording of a work and the right to
perform that work.
[46]
The Supreme Court’s reasoning in Bishop v. Stevens is worth
repeating here as it foreshadows the arguments made in this case:
In sum, I am not convinced that
there is any reason to depart from the literal meaning of s. 3(1)(d) and the
introductory paragraph to s. 3(1) of the Act, which on their face, draw a
distinction between the right to make a recording and the right to perform.
Neither the wording of the Act, nor the object and purpose of the Act, nor
practical necessity support an interpretation of these sections which would
place ephemeral recordings within the introductory paragraph to s. 3(1) rather
than in s. 3(1)(d). On the contrary, policy considerations suggest that if such
a change is to be made to the Act, it should be made by the legislature, and
not by a forced interpretation. I conclude that the right to broadcast a
performance under s. 3(1)(d) of the Act does not include the right to make
ephemeral recordings for the purpose of facilitating the broadcast.
Bishop v. Stevens, at
paragraph 33
[47]
This reasoning is taken up in the following passage from ESA:
40 SOCAN submits
that the distinction between reproduction and performance rights in Bishop
actually supports its view that downloading a musical work over the Internet
can attract two tariffs. Since reproduction and performance-based rights are
two separate, independent rights, copyright owners should be entitled to a
separate fee under each right. This is based on the Court's reliance in Bishop,
at p. 477, on a quote from Ash v. Hutchinson & Co. (Publishers),
Ltd., [1936] 2 All E.R. 1496 (C.A.), at p. 1507, per Greene L.J.:
Under the Copyright
Act, 1911 [on which the Canadian Act was based], ... the rights of the
owner of copyright are set out. A number of acts are specified, the sole right
to do which is conferred on the owner of the copyright. The right to do each of
these acts is, in my judgment, a separate statutory right, and anyone who
without the consent of the owner of the copyright does any of these acts
commits a tort; if he does two of them, he commits two torts, and so on.
[Emphasis added.]
41 In our
view, the Court in Bishop merely used this quote to emphasize that the
rights enumerated in s. 3(1) are distinct. Bishop does not stand for the
proposition that a single activity (i.e., a download) can violate two separate
rights at the same time. This is clear from the quote in Ash v. Hutchinson,
which refers to "two acts". In Bishop, for example, there were
two activities: 1) the making of an ephemeral copy of the musical work in order
to affect a broadcast, and 2) the actual broadcast of the work itself. In this
case, however, there is only one activity at issue: downloading a copy of a
video game containing musical works.
ESA at
paragraphs 40-41
[48]
In my view, this passage reaffirms the fundamental distinction between
reproduction and performance (communication to the public by telecommunication)
that the Court articulated in Bishop v. Stevens. Nothing in this
passage, or elsewhere in ESA, would authorize the Board to create a
category of reproductions or copies which, by their association with
broadcasting, would cease to be protected by the Act. ESA did not explicitly, or
by necessary implication, overrule Bishop v. Stevens.
[49]
As a result, I am unable to accept the Broadcasters’ argument that the
comments about technological neutrality in ESA have changed the legal
landscape to the point where the Board erred in finding that incidental copies
are protected by copyright. The Broadcasters’ argument with respect to
technological neutrality fails.
ADDITIONAL GROUNDS OF REVIEW
[50]
The Broadcasters raise a number of other issues in their attack on the
Board’s Decision. They can be summarized as follows:
1- The Board failed
to carry out or to properly carry out its role as economic regulator by wrongly
deciding a number of questions that arose before it in the course of its
decision.
2- The Board
exceeded its jurisdiction when it imposed a general licence on the Broadcasters
notwithstanding the latter’s expressed preference for transaction-based
licences if the Board ordered the payment of royalties for ephemeral
reproductions.
3- The Board failed
to consider a relevant factor when it refused to take into account the CBC’s
ability to pay when fixing licence fees that were substantially more than those
which CBC has paid historically.
I will now
address each of these in turn.
1- The
Board failed to carry out or to properly carry out its role as economic
regulator by wrongly deciding a number of questions that arose before it in the
course of its decision.
[51]
This heading covers a number of distinct findings by the Board whose
common denominator is their economic impact. Most of these findings relate to
the exercise of the Board’s judgment in assessing the evidence put before it by
the parties and in putting a value on reproduction rights in different
contexts, such as radio, television, internet, and film and DVD distribution.
[52]
Such questions are reviewable on the standard of reasonableness since
they inevitably involve the weight to be given to the evidence heard by the
Board and the conclusions to be drawn from that evidence. Reasonableness, in
this context, means “within the range of acceptable outcomes that are
defensible in terms of the facts and the law”: Dunsmuir v. New Brunswick,
2008 SCC 9, [2008] 1 S.C.R. 190, at paragraph 74.
[53]
Many of the points raised by the Broadcasters are an attempt to re-argue
before us the evidence that was before the Board. In essence, the questions
raised by the Broadcasters turn on whether ephemeral copies have economic value
and, if so, the proper quantification of that value in the setting of
royalties.
[54]
The Broadcasters’ first approach to the question of the value of
ephemeral copies was to argue that any value attached to ephemeral copies was
compensated in the through-to-the-viewer licence issued to the producers who
paid for a synchronization licence with respect to an audiovisual work. A good
deal of evidence was led to show that the through-to-the-viewer licence was the
industry standard in Canada and that the terms of such a licence made the issue
of broadcast-incidental copies redundant since all downstream reproductions are
covered by the terms of the licence. The Broadcasters say that the Board cannot
or should not make an order contrary to established commercial practice in the
broadcasting industry.
[55]
Notwithstanding the Broadcasters’ attempt to make this a question of
law, it is one of fact. Did the producers from whom they obtained programs
(with respect to which SODRAC administered the reproduction rights) obtain a
through to the viewer licence from SODRAC? If the answer to the question is no,
it is of no assistance to the Broadcasters to say that they thought the
producers had obtained such licences or that they ought to have.
[56]
The Board examined the evidence submitted by the parties on this
question, including a number of synchronization licences issued by SODRAC and
came to the conclusion that “in the relevant market, the province of Québec, through-to-the-viewer licensing exists but is not the norm”: Decision, at paragraph 78.
It is not this Court’s role to review the evidence and to decide if it would
come to the same conclusion. The Board’s conclusion is based on the evidence,
it is intelligible and it is within the range of acceptable outcomes, having
regard to the facts and the law.
[57]
The Broadcasters also challenge the Board’s conclusion that Québec is
the relevant market but in light of the fact that SODRAC represents the
majority of reproduction rights holders in Québec (see Decision, at paragraph
18), it is not unreasonable to consider the market where SODRAC is the most
active as the relevant market.
[58]
The Broadcasters go on to say that the formula devised by the Board to
credit them in cases where programs which they broadcast have cleared to the
viewer is wrong and produces an absurd result because even if all programs
broadcast in a given period were cleared to the viewer, the formula would still
require them to pay royalties with respect to those programs. For reasons that
will become apparent, I believe that this issue is best dealt with under the
heading dealing with the Board’s power to issue a blanket licence over CBC’s
objections.
[59]
The remaining “economic” issues involve questions such as the fixing of
SODRAC’s royalties as a percentage of royalties payable to SOCAN, and the fact
that some royalties imposed by the Board (e.g. Internet TV) are inconsistent
with those ratios. These decisions are based upon the evidence that the Board
had before it and to which it makes reference in its Decision. The Board has
expertise in the setting of appropriate royalties as a result of its long
experience in doing so. It has the advantage of having heard all the evidence
as well as having an in-depth understanding of the context in which these
questions arise. These factors suggest that we should defer to the Board’s
expertise, unless it can be shown that the Board has come to an unreasonable
conclusion. That has not been shown with respect to these issues.
2- The Board exceeded its jurisdiction when it imposed
a general licence on the Broadcasters notwithstanding the latter’s expressed
preference for transaction-based licences in the event that the Board ordered
the payment of royalties for ephemeral reproductions.
[60]
CBC argues that the Board exceeded its jurisdiction when it imposed a
blanket synchronization licence. CBC says that it indicated to the Board that,
at the royalty rates proposed by SODRAC, it would proceed by way of transactional
licences as the need arose. This argument does not arise for Astral as it is
not a producer of audiovisual works and therefore does not require a
synchronization licence.
[61]
CBC’s argument is based on the wording of section 70.2 of the Act, the
provision that permits the Board to set the terms of a licence between two
parties as opposed to fixing a tariff:
70.2 (1) Where a collective
society and any person not otherwise authorized to do an act mentioned in section
3, 15, 18 or 21, as the case may be, in respect of the works, sound
recordings or communication signals included in the collective society’s
repertoire are unable to agree on the royalties to be paid for the right to
do the act or on their related terms and conditions, either of them or a
representative of either may, after giving notice to the other, apply to the
Board to fix the royalties and their related terms and conditions..
(2) The Board may fix the
royalties and their related terms and conditions in respect of a licence
during such period of not less than one year as the Board may specify and, as
soon as practicable after rendering its decision, the Board shall send a copy
thereof, together with the reasons therefore, to the collective society and
the person concerned or that person’s representative.
(My emphasis.)
|
70.2 (1) À
défaut d’une entente sur les redevances, ou les modalités afférentes,
relatives à une licence autorisant l’intéressé à accomplir tel des actes
mentionnés aux articles 3, 15, 18 ou 21, selon le cas, la société de gestion
ou l’intéressé, ou leurs représentants, peuvent, après en avoir avisé l’autre
partie, demander à la Commission de fixer ces redevances ou modalités.
(2) La
Commission peut, selon les modalités, mais pour une période minimale d’un an,
qu’elle arrête, fixer les redevances et les modalités afférentes relatives
à la licence. Dès que possible après la fixation, elle en communique un
double, accompagné des motifs de sa décision, à la société de gestion et à
l’intéressé, ou au représentant de celui-ci.
(Je souligne.)
|
[62]
CBC’s argument is that the power to “fix the royalties and their related
terms and conditions” does not include the power to decide if the parties will
enter into a licensing agreement at all. If the parties do not agree that they
wish to enter into a licence agreement, there is no agreement with respect to
which the Board may fix the royalties and the terms and conditions. Thus, if “CBC
does not want a blanket synchronization licence, the Board has no jurisdiction
to impose it”: Broadcasters’ Memorandum of Fact and Law, at paragraph 18.
[63]
SODRAC points out that CBC has the right to refrain from using music in
the SODRAC repertoire, in which case the question of the form of licence simply
does not arise. However, where CBC chooses to use the SODRAC repertoire in its
productions, it requires a licence. If it is not able to agree on the terms of
that licence with SODRAC, then the latter is entitled to apply pursuant to
section 70.2 of the Act to have the Board set the royalties and the terms and
conditions which apply to them, including the basis upon which those royalties
are calculated.
[64]
In its submissions before the Board, CBC seems to have conceded that the
Board could impose a blanket licence. At paragraph 119 of its Decision, the
Board summarizes one of the options put forward by CBC’s experts with respect
to a blanket through-to-the-viewer licence for CBC. Later on, at paragraph 132,
the same experts propose a discount to the royalty payable pursuant to the
proposal for a blanket licence favoured by the Board.
[65]
Finally, CBC’s own submissions to the Board appear to have accepted that
the Board could impose a blanket licence:
12.1 The Board
should issue a blanket license covering all television production and
broadcasting activities of SRC/CBC.
Joint Application
Record, Vol. 1 Tab 1
[66]
CBC’s response to these facts is to say that the Board could impose a
blanket licence with its consent but not without it.
[67]
If that is so, then the Board’s remedial jurisdiction under section 70.2
is dependent upon the consent of one of the parties to the statutory
arbitration. On its face, such a proposition is at odds with the objective of
section 70.2, which is to resolve disputes that the parties have been unable to
resolve themselves. In this case, CBC, having failed to agree with SODRAC on
the terms of a licence, claims the right to decide that in the future, it will
proceed by agreement with SODRAC.
[68]
CBC claims that its position is supported by a decision of this Court, CTV
Television Network v. Canada (Copyright Board), [1990] 3 F.C. 489. In
that case, the issue was whether CTV, as a network, was liable to pay royalties
with respect to communication of a work to the public by telecommunication. That
issue had been determined against the Copyright Board and the collective
societies involved in CAPAC v. CTV Television Network Ltd., [1968]
S.C.R. 676 (Capac) but, following amendments to the Act, the Board
proposed, once again, to consider a tariff payable by the network. The Federal
Court agreed with CTV that the amendments had not had the effect proposed by
the Board. In the course of its reasoning, the Court said that the Board’s only
function was to fix the royalties that the collective societies could charge.
On appeal, the Federal Court’s decision was upheld though this Court took a
broader view of the Board’s jurisdiction. It quoted the following passage from Bell Canada v. Canada (Canadian Radio-Television and Telecommunications
Commission), [1989] 1 S.C.R. 1722, at page 1756:
The powers of any
administrative tribunal must of course be stated in its enabling statute but
they may also exist by necessary implication from the wording of the act, its
structure and its purpose. Although courts must refrain from unduly broadening
the powers of such regulatory authorities through judicial law-making, they
must also avoid sterilizing these powers through overly technical
interpretations of enabling statutes.
[69]
In my view, this statement remains good law. As a result, CAPAC
is of no assistance to CBC. Its argument on this issue fails.
[70]
That said, the issue of the discount formula may go some way to meeting some
of CBC’s objections to a blanket license. The discount formula is a formula
designed to give the Broadcasters credit when they broadcast a program in which
the producer has in fact obtained a through to the viewer licence from SODRAC.
[71]
Before dealing with the specifics of the operation of the discount
formula, it may be useful to review the context. At paragraph 62 of its Decision,
quoted at paragraph 19 of these reasons, the Board held that liability for
royalties exists only to the extent that the “envisaged use” requires a
licence. The corollary of this proposition is that, to the extent that a
licence has been obtained by others for the benefit of a broadcaster, no
royalties are payable.
[72]
A second factor to be taken into account is that the formula for
royalties payable in a given month reflects the fact that music from the SODRAC
repertoire is only a fraction of the total music used by a broadcaster in any
given month. As a result, in calculating the royalty rate for SODRAC, the Board
allowed a “repertoire adjustment”. Thus at paragraph 93 of its decision, the
Board identified the portion of a broadcasting service’s offerings which were
drawn from the SODRAC repertoire. By way of example only, it found that music
from the SODRAC repertoire was 46.33% of the music used on CBC television. To
obtain the net royalty rate, the Board multiplied the base royalty rate by the
repertoire adjustment. For CBC television, the base royalty rate of 31.25% was
reduced by 46.33% to yield a net royalty rate of 14.78% : see paragraph 110 of
the Decision.
[73]
As for the formula itself, SODRAC points out in its Memorandum of Fact
and Law that the Board proposed the discount formula to the parties in
pre-hearing mediation. When it introduced the discount formula the Board
explained it as follows:
Nouvelle
disposition dont je suis maintenant autorisé à vous faire part. L’intention est
de permettre à la SRC [Société Radio Canada] (et à Astral) de ne payer aucune
redevance pour les reproductions incidentes de diffusion (broadcast incidental
copies) si le producteur de l’émission a effectivement obtenu une licence
« through to the viewer ».
New provision which I am now
authorized to share with you. The intention is to allow SRC [Société
Radio Canada] (and Astral) to not pay any royalties for
broadcast incidental copies if he producer of the program has in fact obtained
a “through to the viewer” licence.
Application Record, Vol. 23 Tab 14
Article 6.03, Footnote 10
[74]
It bears repeating that the royalties payable to SODRAC are only payable
for the use of music in the SODRAC repertoire. Taking the Board at its word, if
all the programs using music from the SODRAC repertoire in a given month were
cleared through to the viewer, then the formula should result in a discount
equal to the total royalties otherwise payable for that month.
[75]
The Board expressed the formula in terms of a discount per program. The
formula itself is as follows:
Discount per
program = A x B / C
Where
A = the monthly
rate applicable to the service that broadcasts the relevant program,
B = the program’s production cost,
in the case of a CBC program, and the program’s acquisition cost, in the case
of another program, and
C = the total production and
acquisition costs for the programs broadcast by the service during the month.
[76]
While the formula is calculated on a program basis and the royalties are
calculated on a monthly basis, the monthly discount is necessarily the sum of
all the individual program discounts for a given month. So, if the relevant
costs for all SODRAC material “cleared to the viewer” broadcast in a month are
aggregated under item B, the formula will yield the monthly discount.
[77]
In a given month, the royalty payable by a broadcaster is the net
royalty rate less the total of the discounts for programs containing music from
the SODRAC repertoire that have been cleared to the viewer. If the formula is
properly constructed, in a month where all the music used from the SODRAC
repertoire was cleared to the viewer, the discount should equal the net royalty
rate so that, in that month, no royalties would be due. In order for the
discount to equal the net royalty rate (item A in the formula), the fraction
B/C must equal 1.
[78]
However, we know from the repertoire adjustment that music from
the SODRAC repertoire is only 46.33% of all music broadcast by CBC television.
As a result, item C in the formula, the total production and acquisition costs
for the programs broadcast by the service during the month, will always be
larger than item B since item the latter (music from the SODRAC repertoire)
represents only 46.33% of the music broadcast in a month and presumably roughly
the same proportion of the total production and acquisition costs of all
programs in a month. So, in a case where all music from the SODRAC repertoire
broadcast in a month had been cleared to the viewer, the total discount for
that month would be in the order of 46%, such that a royalty of 54% would be
payable in a month in which all rights had already been cleared to the viewer.
[79]
Such a result is contrary to law, in the sense
that royalties are not payable where the rights to use the music have already
been cleared. The Board recognized this when it proposed the formula as a means
of allowing the broadcaster an exemption for cleared to the viewer programs. In
my view, the Broadcasters are correct when they say that the formula is flawed
and needs to be corrected.
[80]
In order for the discount formula to work as
intended, C must represent the production or acquisition cost of all music from
the SODRAC repertoire that has been broadcast in the reference month. Where all
of that music has been cleared to the viewer, then B/C will equal 1. In a case
where some of the music has been cleared to the viewer and some has not, this
amendment to the formula will reduce the royalties payable in proportion to the
extent to which music has been cleared to the viewer.
[81]
This discussion is no doubt difficult to follow
in the abstract. As a result, I have included an example demonstrating both the
flaw in the formula as drafted by the Board, and the effect of the amendment to
the formula that I propose, in an appendix to these reasons.
[82]
In the end result, I would allow the applications
in part to allow for the amendment of the discount formula.
3- The Board failed to consider a relevant factor when
it refused to take into account the CBC’s ability to pay when fixing licence
fees that were substantially more than those which CBC has paid historically.
[83]
CBC bases this argument on a heading at p. 50 of the Board’s decision:
Summary of the Rates to be Certified, Estimated Royalties and Ability to Pay
(my emphasis). CBC points out, correctly, that nowhere in the two paragraphs that
make up this portion of the Board’s decision is the subject of ability to pay
discussed. Furthermore, CBC says that the Board committed a reviewable error in
ordering a four-fold increase in royalties payable at a time when, according to
the evidence, CBC’s revenues have diminished drastically.
[84]
This argument can be disposed of summarily. CBC is a publicly funded
broadcaster whose basic allocation is voted by Parliament. If the CBC is not
properly funded, as its submissions suggest, it is not the role of the artists
whose works it uses in its broadcasts and productions to make up the shortfall
by accepting less than the economic value of their rights under the Act. The
Board’s role as economic regulator does not extend to protecting CBC from the
cost consequences of the programming choices it makes. This argument fails as
well.
[85]
This disposes of the matters raised by the Broadcasters in files no.
A-516-12 and A-527-12. The terms of the judgment to be issued pursuant to these
reasons will be dealt with below. I now turn to the subject matter of file no
A-63-12.
The application for judicial review of
the interim licence issued on January 16, 2013
[86]
The licences issued by the Board following its November 2, 2012 Decision
expired on March 31, 2012 (CBC) and August 31, 2012 (Astral). However, in 2009,
the Board made an interim order continuing the then existing licences in place
until it rendered its decision with respect to the 2008-2012 period. Those
interim orders were of no further effect as of November 2, 2012 when the Board
issued its Decision and the concomitant licences. This left a legal vacuum as
the 2009 interim licences were at an end and the new licences had already
expired.
[87]
In order to fill this legal vacuum, on January 16, 2013, the Board
ordered that the licences for the 2008-2012 periods would continue in effect
from the date of their expiry until the Board rendered a final decision with
respect to the section 70.2 application made by SODRAC for the 2012-2016 periods.
The Board’s interim decision and the licences issued as a result are the
subject of the third application for judicial review by CBC.
[88]
In its January 16, 2013 reasons (available online at http://www.cb-cda.gc.ca/decisions/2013/sodrac-16012013.pdf),
the Board canvassed the factors that were relevant to the making of an interim
order. It noted that an interim decision was intended to avoid the negative
consequences resulting from lengthy proceedings and avoided the creation of a
legal vacuum. It disagreed with CBC’s argument that the 2008-2012 licence did
not represent the status quo given its significant differences from the
parties’ prior pattern of dealings. The Board found that the status quo
represented the state of the relationship between the parties at a given time,
regardless of how long that state of affairs had been in place. Once the Board
made the order with respect to the 2008-2012 period, the terms of that order became
the new status quo.
[89]
CBC also argued that legislative changes and the Supreme Court’s recent
jurisprudence had or would significantly change the landscape between it and
SODRAC. The Board held that the positions put forward by CBC on these issues
(the effect of the Supreme Court’s decision in Society of Composers, Authors
and Music Publishers of Canada v. Bell Canada, 2012 SCC 36, [2012] 2 S.C.R.
326 and the effect of the amendment to the Act, particularly section 30.9) were
hardly non-contentious. The Board was of the view that these matters were more
appropriately dealt with in the course of a full hearing rather than on an
interim basis.
[90]
However, the Board was conscious of the fact that the parties might well
choose to organize their affairs differently following the issuance of the
2008-2012 licence. It was of the view that any interim licence should
facilitate that process without pre-empting it. As a result, it held that the
blanket synchronization licence which it imposed, over CBC’s objections, for
the 2008-2012 period should be discounted by 20% during the interim period so
as to facilitate the migration to a new way of doing business, if the parties
were motivated to do so.
[91]
Before us, CBC made the same arguments as it had before the Board. It
stressed that the status quo, in fact, was the state of affairs that was
in place prior to the issuance of the 2008-2012 licence, particularly since the
execution of that licence was stayed pending the outcome of these proceedings. It
also pointed to the effect that it says the newly added section 30.9 of the Act
will have on the question of incidental licences. That section provides an
exemption in favour of broadcast undertakings reproducing a protected work
solely for the purpose of their broadcasting, subject to certain conditions.
[92]
Finally, CBC questions whether SODRAC would be in a position to repay
any amounts paid to it pursuant to the interim licence if it is successful in
its challenge to the latter.
[93]
I agree with the Board that once it settled the terms of the 2008-2012
licence, it became the status quo between the parties, notwithstanding
the stay of execution of that licence. Given that I propose to uphold the
2008-2012 licence with one small change, I can see no reason not to treat that
order as the status quo. As for the changes in the way the parties do
business in the future, in light of the 2008-2012 licence, legislative
amendments and developments in the jurisprudence, this is a matter best
considered by the Board in the hearings on the merits for the 2012-2016 licence
which, as I understand it, were to begin within days of the hearing of this
appeal.
[94]
As a result, I would dismiss the application for judicial review in file
no. A-63-13.
CONCLUSION
[95]
For the reasons set out above, I would allow the applications for
judicial review in part in files no. A-517-12, A-527-12 and A-63-12, but only
for the purpose of amending the discount formula. I would amend the formula by
defining element C of the formula where it appears at subsection 5.03 (2) of
the CBC licence and subsection 6.03(2) of the Astral licence so that it reads
as follows:
(C) represents the total production
and acquisition costs for all programs containing music from the SODRAC
repertoire Broadcast by the service during the month.
[96]
The stays of execution of the licences issued by the Board on November
2, 2012 and January 16, 2013 are hereby dissolved.
[97]
SODRAC is entitled to one set of costs for all applications. However, in
light of the Broadcasters’ partial success, the amount of the costs, otherwise
determined, will be reduced by 10 per cent.
"J.D. Denis Pelletier"
“I agree
Marc Noël J.A.”
“I agree
Johanne Trudel J.A.”
APPENDIX
For the purposes of this example, I assume
the following facts:
CBC television’s repertoire adjusted
royalty rate is 14.78 per cent of the royalty base (the amount of which
royalties are calculated): paragraph 110 of the Decision.
The average amount of music from the SODRAC
repertoire broadcast by CBC in a month is 46 per cent: paragraph 93 of the
Decision.
The total production costs and acquisition
costs of programs containing music from the SODRAC repertoire in the reference
month is $100,000.
The total production costs and acquisition
costs of all programs broadcast in the reference month is $210,000
The acquisition/ production costs of all
programs containing music from the SODRAC repertoire in the reference month is
as follows:
Program 1 - $15,000
Program 2 - $25,000
Program 3 - $14,000
Program 4 - $16,000
Program 5 - $30,000
$100,000
Assuming that rights to Program 1 have been
cleared to the viewer, the royalties payable by the broadcaster for that month
would be calculated on the basis of the discount formula A x B/C, where
A = the royalty rate otherwise payable,
B = the acquisition/production cost of the
cleared program, and
C = the total acquisition/production cost
of programs broadcast in the reference month.
Therefore
A = 14.78% B = $15,000 C
= $210,000
Discount Program 1 = 14.78% x $15,000/$210,000
=14.78% x .071= 1.03%
Therefore, the royalties payable by the
broadcaster in the reference month would be
14.78% - 1.03% =
13.75% x the royalty base
The discount for each of the other
programs, in the event that the producer has cleared the rights to the viewer,
applying the same formula, would be:
Program 2 = 1.77%
Program 3 = 0.88%
Program 4 = 1.12%
Program 5 = 2.11%
If all five programs had been cleared to
the viewer, the total discount, as per the formula would be:
1.03% + 1.76% + .98% + 1.12% +
2.11% = 7%
The result would be the same if the
acquisition/production costs were aggregated for the month, as shown below:
14.78 x $100 000/$210 000 =
14.78 x .476 = 7%
As a result, in a case where all programs
containing music from the SODRAC repertoire had been cleared to the viewer, the
discount formula established by the Board would result in the broadcaster
paying royalties of:
14.78% - 7% = 7.78% of the
royalty base
in a month in which there was no liability
to pay royalties. This is contrary to law and to the Board’s own stated
objectives.
This can be remedied by defining C in the
formula as the total acquisition/production cost of all programs containing
music from the SODRAC repertoire broadcast in the reference month.
Using this formula, if the rights for the
music from the SODRAC repertoire had been cleared to the viewer, the discount
for Program 1 would be
A=14.78% B=$15,000 C=$100,00\
Discount Program 1 = 14.78% x
$15,000/$100,000 = 14.78 x .15 = 2.22%
Royalties payable in reference
month = 14.78% - 2.22% = 12.56%
If all programs broadcast in the month had
been cleared to the viewer, the discount would be
A=14.78% B=$100,000 C=$100,000
Discount = 14.78% x
$100,000/$100,000 = 14.78% x 1 = 14.78%
Royalties payable: 14.78% -
14.78% = 0 x royalty base = $0
This is the result intended by the Board.