Docket: A-294-14
Citation:
2017 FCA 138
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CORAM:
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STRATAS J.A.
WEBB J.A.
SCOTT J.A.
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BETWEEN:
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RE:SOUND
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Applicant
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and
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CANADIAN ASSOCIATION OF BROADCASTERS, PANDORA MEDIA INC., CANADIAN
BROADCASTING CORPORATION, ROGERS COMMUNICATIONS INC., SHAW COMMUNICATIONS
INC., QUEBECOR MEDIA INC., ALLIANCE DES RADIOS COMMUNAUTAIRES DU CANADA,
ASSOCIATION DES RADIODIFFUSEURS COMMUNAUTAIRES DU QUÉBEC, and NATIONAL CAMPUS
AND COMMUNITY RADIO ASSOCIATION
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Respondents
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and
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SOCIETY OF COMPOSERS, AUTHORS and MUSIC PUBLISHERS OF CANADA
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Intervener
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REASONS FOR JUDGMENT
STRATAS J.A.
[1]
The applicant applies for judicial review from
the decision dated May 16, 2014 of the Copyright Board. In its decision, the
Board certified a Re:Sound tariff setting royalties for the use of published
sound recordings embodying musical works and performers’ performances of such
works in non-interactive and semi-interactive webcasting for the years
2009-2012.
[2]
The applicant alleges a number of grounds upon
which the Board’s decision must be quashed.
[3]
The standard of review is reasonableness. For
the reasons set out below, the Board’s decision is reasonable. In cases such as
this, the Board is entitled to a broad margin of appreciation when it
determines the right to equitable remuneration under section 19 of the Copyright
Act, R.S.C., 1985, c. C-42 and the Board was well within that margin of
appreciation. Therefore, I would dismiss the application with costs.
A.
Background
[4]
One of the Copyright Board’s functions under the
Copyright Act is to set fair and equitable rates in certifying the
proposed tariffs filed by collective societies. The appellant is one such
collective society.
[5]
In 1997, performers and sound recording makers
were given a new right—found in section 19 of the Copyright Act—to
receive “equitable remuneration.”
[6]
Under section 19, sound recording makers and
performers have a right to be paid for the public performance or the
communication to the public by telecommunication of published sound recordings
embodying performers’ performances of musical works. Royalties for this right
are allocated equally between the sound recording makers and the performers.
The Copyright Board determines the amount in accordance with Part VII of the Copyright
Act, discussed below.
[7]
Sometimes the rights of performers and sound
recording makers are called “neighbouring rights”
because they are similar to, but not the same as, the copyright granted to
authors in, for example, musical works. Instead of an exclusive copyright to
perform in public and communicate to the public by telecommunication,
performers and sound recording makers’ rights are non-exclusive rights to
receive equitable remuneration. See the Copyright Board’s decision in NRCC
Tariff 1.A, dated August 13, 1999, at p. 6.
[8]
The appellant, Re:Sound Musical Licensing
Company (“Re:Sound”), formerly Neighbouring Rights Collective of Canada
(“NRCC”), is a collective society that administers the right to receive
equitable remuneration.
[9]
The Society of Composers, Authors and Music
Publishers of Canada (“SOCAN”) is the collective society that collects
royalties for the use of the underlying musical works. It represents
songwriters, composers and music publishers. SOCAN members’ copyright in
musical works is distinct from Re:Sound members’ right to receive equitable
remuneration, but, as we shall see, the Board has consistently found that these
rights have the same economic value.
[10]
When a published sound recording of a
performance of a musical work is publicly performed, royalties are payable both
to SOCAN on behalf of the composer and publisher and to Re:Sound on behalf of
the performer and sound recording maker.
[11]
The second part of Part VII of the Act, entitled
“Collective Administration of Performing Rights and of
Communication Rights,” establishes the regime under which the Board
administers the proposed tariffs of both SOCAN and Re:Sound.
[12]
Under the Act, any collective society that
administers the right to perform musical works or sound recordings in public,
or communicate them by telecommunication to the public—this is, at present,
only SOCAN and Re:Sound—is governed by sections 67 to 69 of the Act.
[13]
Under these sections, each is required to file
with the Board proposed tariffs to receive royalties for the use of their
repertoires. The Board considers the proposals in light of any objections. In
the end, the Board certifies a tariff, with any changes it deems necessary.
[14]
Subsection 68(2) of the Copyright Act is
a key provision in this process. When examining a proposed Re:Sound or SOCAN
tariff, the Board is subject to three mandatory requirements. The royalties
paid must only cover eligible recordings, the Board must not place some users
at a greater financial disadvantage than others by virtue of linguistic or
content requirements and royalty payments must be made in a single payment.
Other than these requirements, the Copyright Act (in paragraph 68(2)(b)
empowers the Board to take into account “any factor
that it considers appropriate” in establishing the terms and conditions
of a tariff.
[15]
For reference, subsection 68(2) of the Copyright
Act provides as follows:
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68. (2) In
examining a proposed tariff for the performance in public or the
communication to the public by telecommunication of performer’s performances
of musical works, or of sound recordings embodying such performer’s
performances, the Board
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68. (2) Aux
fins d’examen des projets de tarif déposés pour l’exécution en public ou la
communication au public par télécommunication de prestations d’oeuvres
musicales ou d’enregistrements sonores constitués de ces prestations, la
Commission :
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(a) shall
ensure that
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a) doit veiller à ce que :
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(i) the
tariff applies in respect of performer’s performances and sound recordings
only in the situations referred to in the provisions of section 20 other than
subsections 20(3) and (4),
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(i) les
tarifs ne s’appliquent aux prestations et enregistrements sonores que dans
les cas visés à l’article 20, à l’exception des paragraphes 20(3) et (4),
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(ii) the
tariff does not, because of linguistic and content requirements of Canada’s
broadcasting policy set out in section 3 of the Broadcasting Act,
place some users that are subject to that Act at a greater financial
disadvantage than others, and
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(ii) les tarifs n’aient pas
pour effet, en raison d’exigences différentes concernant la langue et le
contenu imposées par le cadre de la politique canadienne de radiodiffusion
établi à l’article 3 de la Loi sur la radiodiffusion, de désavantager
sur le plan financier certains utilisateurs assujettis à cette loi,
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(iii) the
payment of royalties by users pursuant to section 19 will be made in a single
payment; and
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(iii) le
paiement des redevances visées à l’article 19 par les utilisateurs soit fait
en un versement unique;
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(b) may take into account any factor
that it considers appropriate.
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b) peut tenir compte de tout facteur qu’elle
estime indiqué.
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[16]
Although there are no pre-set criteria that the
Board must take into account when determining fair and equitable royalties, the
Governor in Council has the power to make regulations establishing criteria.
The power is found in section 66.91 of the Copyright Act.
[17]
Section 66.91 of the Copyright Act
provides as follows:
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66.91. The
Governor in Council may make regulations issuing policy directions to the
Board and establishing general criteria to be applied by the Board or to
which the Board must have regard
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66.91. Le
gouverneur en conseil peut, par règlement, donner des instructions sur des
questions d’orientation à la Commission et établir les critères de nature
générale à suivre par celle-ci, ou à prendre en compte par celle-ci, dans les
domaines suivants :
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(a) in
establishing fair and equitable royalties to be paid pursuant to this Act;
and
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a) la fixation des redevances justes
et équitables à verser aux termes de la présente loi;
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(b) in
rendering its decisions in any matter within its jurisdiction.
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b) le prononcé des décisions de la
Commission dans les cas qui relèvent de la compétence de celle-ci.
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[18]
The Governor in Council has not made any
regulations under this section. Accordingly, under the legislation as it
stands, the Copyright Board has a broad discretion when it sets equitable
remuneration.
B.
The standard of review
[19]
In making its decision, the Board had to
appreciate the scope of its powers under section 19 and the sections that
relate to it, above. In other words, either expressly or implicitly it had to
have a view or interpretation of these sections in mind. Then it had to apply
that interpretation to the facts of the case before it.
[20]
Thus, for the purposes of considering the
standard of review that we are to apply, the decision of the Board has two
components: the interpretation of section 19 of the Copyright Act and
the statutory provisions that relate to it and the application of the statutory
provisions to the facts of the case.
[21]
In my view, the Board’s decision on standard of
review is reasonableness on both components.
[22]
First, the issue of the Board’s statutory
interpretation. Normally an administrative decision-maker’s interpretation of a
statutory provision is reviewable on the standard of reasonableness: see, e.g.,
Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 at para. 54 (“[d]eference will usually result where a
tribunal is interpreting its own statute or statutes closely connected to its
function, with which it will have particular familiarity”); Alberta (Information
and Privacy Commissioner) v. Alberta Teachers' Association, 2011 SCC 61, [2011] 3 S.C.R. 654 at para. 34 (“unless the situation is exceptional…the
interpretation by the tribunal of ‘its own statute or statutes closely
connected to its function, with which it will have particular familiarity’
should be presumed to be a question of statutory interpretation subject to
deference on judicial review”); Edmonton (City) v. Edmonton East (Capilano)
Shopping Centres Ltd., 2016 SCC
47, [2016] 2 S.C.R. 293.
[23]
However, this context is unusual. When it comes
to interpreting many provisions in the Copyright Act, the Copyright
Board shares jurisdiction with the courts. Accordingly, the Board’s
interpretation of provisions in the Copyright Act that courts also
interpret is reviewable for correctness: Canadian Broadcasting Corporation
v. Sodrac 2003 Inc., 2014 FCA 84, [2015] 1 F.C.R. 509 at para. 27; Rogers
Communications Inc. v. Society of Composers, Authors and Music Publishers of
Canada, 2012 SCC 35; [2012] 2 S.C.R. 283.
[24]
But in this case, do courts interpret section 19
of the Copyright Act and related sections? Or is it a section that only
the Board interprets?
[25]
In Re:Sound v. Fitness
Industry Council of Canada, 2014 FCA 48, [2015] 2
F.C.R. 170, this Court held (at para. 46) that the standard of review is
reasonableness if the “shared primary jurisdiction
between the administrative tribunal and the courts” is not present.
[26]
In Fitness Industry Council, this Court
considered the Board’s approval of a royalty under subsection 68(3) of the Copyright
Act. Specifically, it considered whether a collective society was entitled
to a tariff on the basis of all eligible works or only those works which the
creators authorized the society to deal with. This
Court held that it was “theoretical and somewhat
remote” for a court to become involved in that
issue: Fitness Industry Council at para. 49. Accordingly, the normal presumption of reasonableness
review for interpretations of administrative decision-makers applied.
[27]
To be certain of its view that reasonableness
applied, the Court in Fitness Industry Council also examined the nature
of the Board’s decision. This confirmed its view that reasonableness was the
correct standard of review (at paras. 50-51):
[28]
Courts have long been familiar with the
individual law of copyright through their jurisdiction over infringement
actions. However, they have no similar knowledge of the statutory scheme for
the collective administration of the right to equitable remuneration, a complex
and technical matter that the Copyright Act entrusts almost exclusively
to the Board: compare Canadian Private Copying Collective v. Canadian
Storage Media Alliance, 2004 FCA 424, 247 D.L.R. (4th) 103 at para. 110.
[29]
The superior expertise of the Board in the
setting of royalty rates for the collective administration of the right to
equitable remuneration further supports the conclusion that the Court should
apply a standard of reasonableness to the Board’s interpretation of the aspects
of the statutory scheme in question in this application for judicial review.
[30]
In my view, Fitness Industry Council and
its reasoning bind this Court. This case deals with the interpretation of a
similar regime and is not part of a shared jurisdiction with courts. Thus, this
Court will engage in reasonableness review of the Board’s interpretation of
section 19 of the Copyright Act.
[31]
As mentioned, the second component of the
Board’s decision was its application of the statutory provisions to the facts
of the case.
[32]
This is a factually suffused question of mixed
law and fact. We are to review this using the reasonableness standard of
review: Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, at
para. 53.
C.
Analysis
[33]
The Supreme Court has told us that
reasonableness is a range of acceptable and defensible outcomes or a margin of
appreciation: Dunsmuir at para. 47; McLean v. British Columbia
(Securities Commission), 2013 SCC 67, [2013] 3 S.C.R. 895 at para. 38.
[34]
Repeatedly, the Supreme Court has suggested that
reasonableness “takes its colour from the context”
and “must be assessed in the context of the particular
type of decision-making involved and all relevant factors”: Catalyst
Paper Corp. v. North Cowichan (District), 2012 SCC 2, [2012] 1 S.C.R. 5 at
para. 18; Canada (Citizenship and Immigration) v. Khosa, 2009 SCC 12,
[2009] 1 S.C.R. 339 at para. 59; Wilson v. Atomic Energy of Canada Ltd.,
2016 SCC 29, [2016] 1 S.C.R. 770 at para. 22; and many others.
[35]
In other words, certain circumstances,
considerations and factors in particular cases influence how we go about
assessing the acceptability and defensibility of administrative decisions: Catalyst
at para. 18; Doré v. Barreau du Québec, 2012 SCC 12, [2012] 1 S.C.R. 395 at para. 54; Halifax
(Regional Municipality) v. Nova Scotia (Human Rights Commission), 2012 SCC
10, [2012] 1 S.C.R. 364 at para. 44.
[36]
Looking at this from the perspective of
reviewing courts, if the circumstances, considerations and factors differ from
case to case, how reviewing courts go about measuring acceptability and
defensibility will differ from case to case; in other words, reasonableness
will “take its colour from the context” of the
case. Looking at this from the perspective of administrative decision-makers,
as a practical matter some decision-makers in some contexts seem to be given
more leeway or a broader “margin of appreciation”
than other decision-makers in other contexts.
[37]
For this reason, sometimes we see some
administrative decision-makers afforded a very broad range or margin of
appreciation and others less so: compare, for example, cases like John Doe v. Ontario (Finance), 2014 SCC 36, [2014] 2 S.C.R. 3, with Nor-Man
Regional Health Authority Inc. v. Manitoba Association of Health Care
Professionals, 2011 SCC 59, [2011] 3 S.C.R. 616.
[38]
This Court has followed the Supreme Court’s
guidance and has commented upon a number of factors that might affect the “colour” of reasonableness review or, put another way,
the intensity of review: see, e.g., Canada
(Attorney General) v. Abraham,
2012 FCA 266, 440 N.R. 201 at paras. 37-50, Canada (Attorney General) v.
Canadian Human Rights Commission, 2013 FCA 75, 444 N.R. 120 at paras. 13-14; Canada (Minister of
Transport, Infrastructure and Communities) v. Farwaha, 2014 FCA 56, [2015]
2 F.C.R. 1006; Canada (Attorney General) v. Boogaard, 2015 FCA 150, 474
N.R. 121. The Court of Appeal for Ontario has done this as well: Mills
v. Ontario (Workplace Safety and Insurance Appeals Tribunal), 2008 ONCA
436, 237 O.A.C. 71 at para. 22.
[39]
For a number of
reasons, the Board enjoys a broad margin of appreciation when setting “equitable remuneration” in a case like this.
[40]
First, the statutory words in issue in this case
are very broad indeed. The remuneration to be set is described in subsection
19(1) as “equitable.” The word “equitable” imports much discretion based on the
Board’s fact-based sense of fairness in light of all of the circumstances.
[41]
Sometimes statutory words direct an
administrative decision-maker to follow a particular recipe or restrict the
scope of discretion: see, e.g., Canada (Attorney General) v. Almon
Equipment Limited, 2010 FCA 193, [2011] 4 F.C.R.
203 at para. 53. This can constrain the number of acceptable and
defensible options available to the administrative decision-maker. Here, aside
from the three requirements set out in paragraph 68(2)(a) which are not
material here, there are no statutory words of direction or constraint.
[42]
Indeed, paragraph 68(2)(b)
instructs the Board that “[i]n
examining a proposed tariff for the performance in public or the communication
to the public by telecommunication of performer’s performances of musical
works, or of sound recordings embodying such performer’s performances, the
Board… may take into account any factor that it considers appropriate.”
[43]
Sometimes cases interpreting statutory words can
constrain the outcomes that an administrative decision-maker can reasonably
reach: Canada (Attorney General) v. Abraham, 2012 FCA 266, 440 N.R. 201; Canada (Attorney General) v.
Canadian Human Rights Commission, 2013 FCA 75, 444 N.R. 120. Here, no cases
have given the words of paragraph 68(2)(b) an interpretation that would
cut down their breadth.
[44]
Indeed, the legislative history of subsection
68(2) shows that Parliament intended the discretion of the Board in setting
equitable remuneration to be very broad.
[45]
Bill C-32, An Act to Amend the Copyright Act,
was introduced to Parliament in 1997. On the issue of setting tariffs
concerning neighbouring rights, the Bill set out pre-set criteria that the
Board would have been required to take into account when setting equitable
remuneration.
[46]
At first reading, paragraph 68(2)(b)
stated:
(2) …the
Board
(b) shall
take into account
(i) that
the tariff applies only in respect of the portion of the total programming of a
user that corresponds to performer’s performance and sound recordings, and
(ii) that
some users, while using music to generate revenue, assist the sale of sound
recordings through the playing of that music[.]
[47]
The House of Commons Standing Committee on
Canadian Heritage studied this version of the Bill. On this portion of the
Bill, it removed the criteria in subsection (2). Based on testimony before it,
it rejected the idea of limiting the Board’s discretion in setting rates:
Canada, Senate, Evidence of the Standing Committee on Transport and
Communications, 35th Parl., 2nd Sess., No. 13 (April 14, 1997). Much of the
testimony was aimed at identifying the myriad of considerations that could bear
upon the Board’s determination of equitable remuneration. The thrust of the
testimony was that the Board should have flexibility to use its specialized
knowledge to react appropriately to the many different circumstances that come
before it.
[48]
Another part of the “context”
here that affects the “colour” of reasonableness
is the nature of the Board’s decision in setting equitable remuneration. It is
one suffused by considerations of expertise about this regulated sector,
regulatory experience, policy appreciation, subjective weighings and
assessments and factual appreciation. It is a matter that is more suited to
evaluation by the executive branch. It is less suited to the judicial branch
because of the limited legal content in the decision.
[49]
The case law shows that these considerations
affect the reviewing court’s application of the reasonableness standard. A
decision-maker that has been given a broad policy mandate has a broad range of
options it can legitimately choose from: Farwaha, above at para. 91. Where the decision is suffused with
subjective judgment calls, policy considerations and regulatory experience or
is a matter uniquely within the ken of the executive, the margin of
appreciation will be broader: Gitxaala Nation v. Canada, 2016 FCA 187 at
para. 149, citing Paradis Honey Ltd. v. Canada, 2015 FCA 89, 382 D.L.R.
(4th) 720, at para. 136. Courts are “poorly positioned”
to opine on policy issues with “public interest
components” and “economic aspects” and so
“by legislative design the selection of a policy choice
from among a range of options lies with the [administrative decision-maker]
empowered and mandated to make that selection”: FortisAlberta Inc v. Alberta (Utilities Commission), 2015 ABCA 295, 389 D.L.R. (4th) 1 at paras. 171-172; to
similar effect, see Rotherham v. Metropolitan Borough
Council v. Secretary of State for Business Innovation and Skills, 2015 UKSC
6 at para. 78 (policy based decisions of this
type are “particularly difficult for a court to evaluate
and therefore to criticise, and therefore to condemn”).
[50]
A decision about the quantum
of “equitable remuneration,” such as the one in this case, is not a simple
one, arrived at by processing information objectively and logically against
fixed, legal criteria. Rather, it is a complex, multifaceted decision involving
sensitive weighings of information, impressions and indications using criteria
that may shift and be weighed differently from time to time depending upon
changing and evolving circumstances. Accordingly, the Board’s decision on such
an issue is entitled to considerable leeway. See, e.g., Canada (Attorney General) v. Boogaard,
2015 FCA 150; 474 N.R. 121 at para. 52.
[51]
Previous decisions of this Court recognize the
foregoing and acknowledge that the Board is entitled to considerable leeway in
decisions concerning the quantum of “equitable
remuneration.” According to this Court, Parliament gave the Board “a very wide royalty certification discretion”: Neighbouring
Rights Collective of Canada v. Society of Composers, Authors and Music
Publishers of Canada, 2004 FCA 302, [2004] 1 F.C.R. 303.
[52]
In finding that the Board was entitled to
significant leeway in setting the quantum of an
equitable tariff, I do not suggest for a moment
that it is anything close to immune from review. Its discretion is not absolute
or untrammelled. Even the broadest grant of statutory power must be exercised
in good faith, in accordance with the purposes of the tariff regime and the Copyright
Act:
In public regulation of this sort
there is no such thing as absolute and untrammelled “discretion”, that is that
action can be taken on any ground or for any reason that can be suggested to
the mind of the administrator; no legislative Act can, without express
language, be taken to contemplate an unlimited arbitrary power exercisable for
any purpose, however capricious or irrelevant, regardless of the nature or
purpose of the statute. Fraud and corruption in the Commission may not be
mentioned in such statutes but they are always implied as exceptions.
“Discretion” necessarily implies good faith in discharging public duty; there
is always a perspective within which a statute is intended to operate; and any
clear departure from its lines or objects is just as objectionable as fraud or
corruption.
(Roncarelli v.
Duplessis, [1959] S.C.R. 121 at page 140, 16 D.L.R. (2d) 689.)
[53]
Before the Board, Re:Sound urged the Board to
set the equitable remuneration at market rates. To this end, the applicant put
before the Board several agreements that it submitted represented market rates
for webcasting sound recordings. In doing so, it urged the Board to deviate
from a particular approach it has followed in previous cases. In those cases,
the Board has set Re:Sound’s tariffs in relation to the pre-existing SOCAN
tariffs for the same uses, and has applied a one-to-one ratio between the rates
on the basis that there is no greater value in the sound recording than there
is in the underlying musical work.
[54]
In this case, the Board did not deviate from its
previous cases. It chose to set the rates in this case in accordance with the
one-to-one ratio without regard to the market conditions evidenced by the
contracts the applicant put before it. In doing so, it offered a number of
rationales, all of which are factual in nature and informed by the Board’s
expertise.
[55]
For one thing, the agreements stood pretty much
alone in the record. The Board heard no evidence as to why the agreements were
signed and what factors may have led to their signing.
[56]
The Board analyzed the agreements and found that
they would be an inappropriate basis for the tariff. One of the concerns it had
was that the Canadian webcasting market is in its infancy and the agreements
were too new to yield any data showing how they were working in practice (at
para. 144):
The Canadian market for webcasting is
nascent and underdeveloped. Relying on the agreements as proxies carries a
greater risk than within a mature market, warranting a more cautious approach
in assessing their suitability as proxies. Furthermore, since the agreements
were very recent at the time of the hearings, no data were available regarding
their workings, such as whether the per-play rate or the percentage-of-revenue
rate was triggered or whether any options were exercised by the parties.
[57]
Re:Sound urges us to find that the Board’s use
and evaluation of the agreements was unreasonable.
[58]
Given the type and breadth of discretion
available to the Board and the nature of reasonableness review, described
above, I reject this submission. The Board’s approach was an acceptable and
defensible application of the facts and the law.
[59]
This Court has said that in assessing whether an
administrative decision is reasonable, a reviewing court can be assisted by the
presence of certain “badges” or “indicia.” For example, in Delios v. Canada (Attorney General), 2015 FCA 117, 472 N.R. 171 at para.
27, this Court observed the following:
The
evidentiary record, legislation and case law bearing on the problem, judicial
understandings of the rule of law and constitutional standards help to inform
acceptability and defensibility. Here, certain indicators, sometimes called “badges of unreasonableness,” may assist: Farwaha, above at paragraph 100. For
example, a decision whose effects appear to conflict with the purpose of the
provision under which the administrator is operating may well raise an
apprehension of unreasonableness: Montréal (City) v. Montreal Port Authority, 2010 SCC 14, [2010]
1 S.C.R. 427 at paragraphs 42 and 47. In that sort of case,
the quality of the explanations given by the administrator in its reasons on that point may matter a great
deal. Another badge of unreasonableness is the making of key factual findings
with no rational basis or entirely at odds with the evidence. But care must be
taken not to allow acceptability and defensibility in the administrative law
sense to reduce itself to the application of rules founded upon badges.
Acceptability and defensibility is a nuanced concept informed by the real-life
problems and solutions recounted in the administrative law cases, not a jumble
of rough-and-ready, hard-and-fast rules.
[60]
In League for
Human Rights of B'Nai Brith Canada v. Odynsky, 2010 FCA 307, [2012] 2 F.C.R. 312 at para. 87, this Court found that a rationally defensible application
of a previously announced, unchallenged policy should be taken as a
badge of reasonableness under Dunsmuir.
[61]
In my view, the same
may be said for an administrative decision that, absent new and different
circumstances, applies its previous jurisprudence in the same way on similar
facts. A number of decisions of this Court are consistent with this: see, e.g.,
HBC Imports (Zellers Inc.) v. Canada (Border
Services Agency), 2013 FCA 167, 446 N.R.
352 at paras. 38-39; Maritime Broadcasting System Limited v. Canadian Media
Guild, 2014 FCA 59, 373 DLR (4th) 167 at paras. 38 and 74; Baragar v. Canada (Attorney General), 2016 FCA 75, 483 N.R. 52 at para. 20; Jolivet v. Canada
(Correctional Service), 2014 FCA 1, 456 N.R. 236 at para. 4.
[62]
The Board has been consistent on this issue and
this supports the reasonableness of its decision. In this case, it followed the
same approach it has followed in its cases since 1999, a number of which have
been upheld as reasonable by this Court. Under that approach it sets Re:Sound’s
tariffs in relation to the pre-existing SOCAN tariffs for the same uses, and
applies a one-to-one ratio between the rates on the basis that there is no
greater value in the sound recording than there is in the underlying musical
work. Consistently, it has not been persuaded that it should have much if any
regard to market rates. Often, as is the case here, it is not persuaded because
of the quality of the evidence provided.
[63]
First, I shall examine the Board’s jurisprudence
on the market rates issue.
[64]
In 1999, in setting the inaugural NRCC Tariff
1.A, the Board identified a number of characteristics of the right to receive
equitable remuneration that, in its view, were relevant to its task of rate
setting: NRCC Tariff 1.A, dated August 13, 1999. It then identified
guiding principles to be used when it fixed the royalties. These came from the Copyright
Act itself. Drawing upon its earlier decisions, it ruled that the tariff
should reflect Canadian circumstances, be simple to administer, transparent and
comprehensible and be based on a set of statistics for a test period.
[65]
In NRCC Tariff 1.A, NRCC proposed a
higher rate than SOCAN’s commercial radio rate. It pointed to several proxies,
all of which were based on a “willing buyer and willing
seller” market model. But in its discretion and based on the evidence,
the Board disagreed. It found that the NRCC’s rights are equal in value to
SOCAN’s rights (at p. 32). It used the SOCAN commercial radio tariff as a proxy
and found that the sound recordings in NRCC’s repertoire were played on the
radio half as often as the musical works in SOCAN’s repertoire. Thus, NRCC’s
rate was set at half the rate payable to SOCAN for musical works.
[66]
On previous occasions, based on the facts before
it, the Board has rejected market evidence as bearing on the problem before it.
[67]
For example, In NRCC Tariff 1.8 (1998-2002),
NRCC argued that the price for neighbouring rights should be reflective of
market, i.e., the price that a willing seller and a willing buyer would
agree. It offered the Board proxy market transactions to consider. The Board
rejected these, opting to use the pre-existing SOCAN tariff as the starting
point for setting the tariff. It held that the market evidence offered by the
NRCC was “a series of anecdotal, impressionistic
statements that often pulled either way” (at p. 30).
[68]
Three years later, in its DPA 2002 Decision
dated March 15, 2002, the Board again declined to adopt a market approach. The
NRCC argued that “equitable remuneration necessarily
reflects the price that a willing seller and a willing buyer would come to in a
competitive market.” The NRCC proposed different approaches regarding
how the market might be assessed. The Board rejected them all. In rejecting the
free-market standard, it said (at pp. 7-8):
The price that would be arrived at by
a willing buyer and a willing seller in a real or hypothetical free market is
useful as a starting point only when it offers some basis for comparison with
the industry under examination.
…
The absence of a usable free-market point is
not in itself problematic. While free market transactions are both important
and relevant, they are not the only factor to look at.
[69]
Before us, Re:Sound submitted in the face of
this jurisprudence and the broad statutory wording canvassed above that the
Board is required to apply market rates in setting royalties. I reject this.
The Board is not required in any way to do that. In para. 68(2)(b) of
the Copyright Act, Parliament has defined the Board’s task as setting “equitable remuneration” based on “any
factor that it considers appropriate.” The
statutory wording under which the Board is operating can hardly be much
broader.
[70]
Before us, Re:Sound submitted that the Board did
not consider its evidence as to the market. I disagree. At paras. 128-131 of
its decision, the Board did not find the agreements put to it by Re:Sound to be
fair proxies, some of the agreements were experimental and not reflective of
those reached by a mature business, and the agreements were aligned with
conditions in the United States, not the different conditions in Canada.
[71]
Another way in which the Board has been
consistent in its approach to rate setting—thus enhancing the reasonableness of
its decision in this case—is its maintenance of a “one-to-one
ratio” between SOCAN and NRCC/Re:Sound. It has applied this consistently
in nine tariff proceedings. A brief summary of this jurisprudence follows.
[72]
In Tariff 1. C—CBC Radio in 1998, 1999, 2000,
2002, dated September 29, 2000, the Board stated (at p. 6):
[T]he SOCAN and NRCC tariffs deal
with a similar use in a similar market. There is no reason to believe that
sound recordings are more valuable in radio airplay than the underlying works.
They involve the same uses, the same recordings, the same broadcasters. In the
absence of evidence to the contrary, a pre-recorded performance is no more and
no less valuable to a broadcaster than a pre-recorded work.
[73]
In the DPA 2002 Decision dated March 15,
2002, the Board applied the one-to-one ratio. It stated (at p. 14) that “all things being equal, authors and composers should get the
same as performers and makers.”
[74]
The Board also adopted this approach in NRCC
Tariff 1.8 (1998-2002). In this decision the Board considered what
adjustments to the pre-existing SOCAN rate were necessary in order to set the
appropriate rate for NRCC. In doing so, it established the one-to-one ratio
between SOCAN and NRCC, a ratio that it has used ever since (at p. 32):
The Board prefers deciding on the
basis that there is no reason to believe that the use of sound recordings on
radio stations has any greater value than the use of the underlying works. Several
reasons point to this solution. First, nothing requires the Board to look to
the market (especially a different market) for guidance; it is within its
discretion to decide that this approach is reasonable. Second, these are
similar uses of the same recordings by the same broadcasters. Third, it can be
readily argued that a pre-recorded performance is worth no more to broadcasters
than a pre-recorded work: in both cases, one is dealing with something that has
already been fixed. Fourth, it matters not that one party was paid more than
the other for making the fixation in the first place; we are dealing with two
different markets and two different rights: the right to make the recording and
the right to communicate it.
[75]
In the DPA (2003-2006) decision dated
February 25, 2005, the Board maintained the one-to-one ratio without explicit
discussion of the matter.
[76]
In its decision in SOCAN/NRCC Tariff 1.A
(2003-2007), dated October 14, 2005, the Board considered an attempt by
NRCC to disconnect itself from the SOCAN tariff and displace the one-to-one
ratio. Drawing on its consistent jurisprudence since 1999, the Board rejected
this and offered a detailed rationale:
NRCC’s attempts to
disconnect itself from the SOCAN tariff remain unconvincing. For the reasons
set out in 1999, the Board remains of the opinion that the NRCC rate should be
set as a function of the SOCAN rate.
The Board has
consistently set a one-to-one ratio between both rates since certifying the
first NRCC tariff in 1999. NRCC did not challenge that approach until 2002,
when the Board certified the pay audio services tariff. It then asked the
Federal Court of Appeal to review the approach; the court rejected the
application.
NRCC again
attempts to convince the Board to abandon the one-to-one ratio. It proposes to
allocate roughly one third of the royalties to authors, one third to makers and
one third to performers before any repertoire adjustment. This proposal relies
on two main arguments. First this corresponds to what happens in the
prerecorded CD market. Second, all things being equal, each of the three
colleges of rights holders involved should be treated equally.
The Board did not hear any new
evidence or argument that might convince it to change the relative value of the
repertoires. Once again, the Board concludes that the communication of a
musical work should trigger the same remuneration as the communication of a
sound recording, subject to repertoire adjustments. In this respect, the Board
still agrees with its statement from the 1999 decision.
[77]
In five later decisions, the Board maintained
its position on the one-to-one ratio, referring to its earlier jurisprudence: NRCC
Tariff 3 (Background Music) 2003-2009, dated October 20, 2006 at paras. 70,
84 and 89; SOCAN/NRCC Tariff 1.A Commercial Radio (2003-2007)
Redetermination, dated February 22, 2008 at paras 5, 45 and 94; Satellite
Radio Services Tariff SOCAN (2005-2009), NRCC (2007-2010), CSI
(2006-2009), dated April 8, 2009 at para.169; Re:Sound Tariff 6.B – Use
of Recorded Music to Accompany Physical Activities (2008-2012), dated July
6, 2012 at para. 25; Re:Sound Tariff 8 – Simulcasting and Webcasting
(2009-2012), dated May 16, 2014 at para. 164.
[78]
It should also be noted that this Court has
upheld the reasonableness of the Board’s approach: Neighbouring Rights
Collective of Canada v. Society of Composers, Authors and Music Publishers of
Canada, 2004 FCA 302, [2004] 1 F.C.R. 303. Re:Sound has not submitted that
this Court was manifestly wrong in doing so: Miller v. Canada (Attorney
General), 2002 FCA 370, 220 D.L.R. (4th) 149. Thus, this Court is bound to
follow Neighbouring Rights Collective.
[79]
I now turn to a number of subsidiary arguments
that Re:Sound advanced in this Court. However, all of them fail to persuade me
that the Board’s decision is unreasonable.
[80]
Re:Sound submits that Parliament used the term “equitable remuneration” in the Copyright Act
to describe a different kind of remuneration from the royalties to which
copyright owners like SOCAN’s members are entitled.
[81]
In my view, this submission is based on a
misinterpretation of the Copyright Act. “Royalties”
throughout the Act refers to the amounts that users pay and that Re:Sound and
SOCAN receive under their tariffs. But “equitable
remuneration” in section 19 refers to the type of right that has been
granted to Re:Sound’s members. It is a counterpart to the “sole right” that is granted in section 3 of the Act.
Put another way, the entitlement to equitable remuneration is different from
the entitlement to exclude users that is contained in the exclusive rights
given to SOCAN in section 3 of the Copyright Act.
[82]
Re:Sound’s members are not authors who create a
musical work. They are performers and sound recording makers. Parliament has
granted exclusive reproduction rights in the sound recordings, but where those
sound recordings are to be performed in public or communicated to the public by
telecommunication, the performer and makers are not entitled to exclude users
from doing so. Under the Copyright Act, they are entitled only to
equitable remuneration and, because of subsection 67.1(4) of the Act, must
exercise this right by way of Board-certified tariffs.
[83]
Re:Sound also submits that in granting
Re:Sound’s members their rights, Parliament was implementing international
treaties. Re:Sound says that these treaties require the quantum of equitable
remuneration to be determined on a market basis. The Board was obviously not
convinced of this and for good reason. First, had that been Parliament’s
intention, it would have been much more clear on that. And it certainly would
not have empowered the Board under paragraph 68(2)(b) to take into
account “any factor that it considers appropriate”
in establishing the terms and conditions of a tariff. Further, the
international treaties to which Canada is a party do not differentiate between
musical works and sound recordings in their use of the term “equitable remuneration.” For example, under the Berne
Convention, authors, performers and makers are all entitled at a minimum to “equitable remuneration”: Berne Convention for the
Protection of Literary and Artistic Works, September 28, 1979, arts. 11bis(2)
and 13(1). Further, the text of the Rome Convention does not mention use of a “market rate” as a standard that must be used to
determine the quantum of equitable remuneration.
[84]
Re:Sound also submits that the decision of the
Board is unreasonable because it is not technologically neutral. It notes that
the Supreme Court in Entertainment Software Association v. Society of
Composers, Authors and Music Publishers of Canada, 2012 SCC 34, [2012] 2
S.C.R. 231 requires that the Copyright Act must be applied in a technologically
neutral manner.
[85]
Between the date of the Board’s decision and the
hearing of this judicial review the Supreme Court of Canada released Canadian
Broadcasting Corporation v. SODRAC 2003 Inc., 2015 SCC 57, [2015] 3 S.C.R.
615. In SODRAC the Supreme Court affirmed the importance of the
overarching principle of balance both when interpreting and applying the Act,
including when the Board is valuing rights: paras. 74-75.
[86]
In oral argument before this Court, Re:Sound
argued that the principle of balance required the Board to consider costs
incurred by producers and performers as a factor when setting the tariff. The
Board’s failure to consider input costs renders the decision inconsistent with SODRAC
and unreasonable.
[87]
In response, the respondents argued that the
applicant’s argument misconstrues SODRAC. While SODRAC mandates
the Board to consider the principle of balance when determining which factors
to consider in setting tariffs, it does not mandate that input costs be one of
those factors. The Board retains discretion under para. 68(2)(b) to “have regard to factors it considers relevant in striking a
balance between the rights of users and rights-holders”: SODRAC at
para. 75.
[88]
I agree with the respondents. The Board’s
decision not to consider input costs is reasonable in light of the Supreme
Court’s guidance in SODRAC. Nowhere in SODRAC are input costs
discussed, never mind mandated. Further consideration of the principle of
balance confirms this.
[89]
Even before the Supreme Court’s decision in SODRAC,
it was well settled that the dual purposes of the Copyright Act—encouraging
creativity and providing reasonable access to the fruits of creative
endeavour—require careful balancing of user and creator rights: Reference re
Broadcasting Act, S.C. 1991 (Canada), 2012 SCC 68, [2012] 3 S.C.R. 489 at
para. 36. In Théberge v. Galerie d'Art du Petit Champlain Inc., 2002 SCC
34 [2002] 2 S.C.R. 336 at para. 30, Binnie J. described this as “a balance between promoting the public interest in the
encouragement and dissemination of works of the arts and intellect and
obtaining a just reward for the creator (or, more accurately, to prevent
someone other than the creator from appropriating whatever benefits may be
generated).”
[90]
The Board’s analysis, focusing on the value of
the sound recording rather than input costs, is fully consistent with this
balance. Copyright protection exists because we find the works it protects
valuable. There are many ways in which they may be valuable—encouraging
learning, spreading knowledge, fostering creativity, exciting discussion,
providing enjoyment, triggering reflection and promoting human flourishing: See
David Lametti, “Laying Bare and Ethical Thread: From IP
to Property to Private Law?” in Intellectual Property and the Common
Law, Shyamkrishna Balganesh, ed. (Cambridge: Cambridge University Press,
2013). It is because of all of these potential benefits that we both desire to
encourage copyright protected works and also desire to provide wide access to
them.
[91]
The root of this value and genesis of these
benefits are the ideas that the work embodies. This must be so as the very
thing that copyright protects is the expression of ideas in works: CCH
Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13, [2004] 1 S.C.R.
339 at para. 8. The mere production of a work is not enough to warrant
copyright protection, no matter how costly. To gain copyright, a creator must
express originality in a work through the exercise of skill and judgment: CCH
at para. 16. Similarly, once a copyright has been assigned, copyright
protection focuses on parts of a work that represent the skill & judgement
of the creator: Robinson v. Films Cinar Inc., 2013 SCC 73, [2013] 3
S.C.R. 1168 at para. 26.
[92]
Because the value of a work is derived from the
ideas embodied within it, it may be that a work’s value may not have any
relation to the economic costs of inputs. This is why in setting methodology
for valuing the reproduction right, the Supreme Court in SODRAC
highlighted the importance of considering the value to users, but did not
analyze the cost to the right holder at any point: “When
it is tasked with determining the value of a right, an important consideration
for the Board is the value of that right to the user”: para. 79.
Similarly, the Board has taken this approach to valuing rights for over 15
years.
[93]
In summary, if we protect works for their value
and their value is not correlated to their input costs, the purposes of
copyright—which are articulated in the principle of balance—do not require
those costs to be considered. It was thus reasonably open to the Board to
ignore these costs in its analysis.
[94]
Finally, even though the Board’s reasoning does
not explicitly address the balance issue it must be noted that the Board did
not have the benefit of the SODRAC decision at the time it made its
decision. Further, the issue of balance was not an issue put to it by either of
the parties. Still, the reasons of the Board demonstrate that they were alive
to the argument that there was a risk that new sound recordings would not be
created if returns were too low: at para. 87. In the Board’s view, however,
this risk was minimal as music streaming tariffs could not be considered in
isolation. Total compensation from all channels must be considered and any rate
imbalance between authors and producers/performers may be pursued by the labels
on the free market for exclusive reproduction right: at para. 90. The Board’s
approach and underlying rationale are therefore reasonable in light of the
principle of balance.
[95]
In its reply factum the applicant raised the
issue of technological neutrality, arguing that the Board’s decision ignored
critical differences between commercial radio and webcasting. The principle of
technological neutrality “requires that different
technologies using reproductions of copyright protected work that produce the
same value to the users should be treated the same way. Conversely, different
technologies using reproductions that produce different values should not be
treated the same way”: SODRAC at para. 72. Simply put, if users
of webcasting derive greater value from the same sound recording than
commercial radio users, copyright holders should receive greater royalties from
webcasters: SODRAC at paras. 70-71.
[96]
Orally, the applicants argued that the Board
found technological differences between commercial radio and webcasting, but
failed to engage in any analysis of the resulting valuation differences. In
support of their argument they cite a statement by the Board (at para. 70) that
it was unnecessary to comment on “the difference in
costs between conventional radio and webcasting; or the impact of recent
technological advances on the value of the communication of sound records.”
[97]
Consistent with the argument of the applicant,
throughout the decision the Board acknowledges differences between commercial
radio and webcasting which may impact the value of sound recordings: difference
cost structures (para. 158), differences in ability to target specific
audiences (para. 171) and the value of interactivity through skipping tracks
and personalizing webcasts (para. 179). However, the Board repeatedly concludes
that there is not enough evidence for them to quantify what affect these
differences have on the value of a sound recording: see, e.g., paras.
156 and180.
[98]
In the fee-setting context, the Supreme Court in
SODRAC noted that technological neutrality will require the Board to
consider particular factors: “[r]elevant factors will
include, but are not limited to, the risks taken by the user, the extent of the
investment the user made in the new technology, and the nature of the copyright
protected work’s use in the new technology.”: SODRAC at para. 75.
However, before getting to these factors, there must be evidence upon which the
Board may consider them. It is for the Board to determine how evidence should
be presented and what onus should be placed on whom: SODRAC at para. 93.
[99]
In this case it was reasonable for the Board not
to perform the precise technological neutrality analysis mandated by the
Supreme Court given the dearth of evidence on this before it. While experts did
comment on the increased value of sound recordings in the webcasting setting,
no expert provided any indication of how to quantify those differences. The
applicant points to their agreements with webcasters as an indicator of this
value. However, the agreements alone are not helpful. The technological
neutrality analysis is relative, comparing the value of the sound recording
under the new and old technology: SODRAC at para. 73. Therefore, the
Board would need equivalent market agreements for commercial radio to make a
useful valuation. With no expert evidence, it was reasonable for the Board to
refuse to assign a value to these technological differences beyond requiring
payment for partial plays, which they believed captured the value of
interactivity: para. 177.
[100] To reiterate, overall the Board was entitled to a broad margin of
appreciation in considering the complex and specialized issues in this case.
The applicant has not persuaded me that the Board’s decision was outside of
that margin of appreciation.
D.
Proposed disposition
[101]
For the foregoing reasons, I would dismiss the
application with costs.
“David Stratas”
“I agree
Wyman W. Webb J.A.”
“I agree
A.F. Scott J.A.”
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