Modernizing Canadian Copyright Laws — Federal Government Introduces New Copyright Bill

At long last, the Canadian government has introduced its proposed copyright amendments. Bill C-32, the Copyright Modernization Act, aims to address gaps in the current Copyright Act created by the Internet and other digital technologies and to bring the Canadian legislation in line with international standards. The changes include measures to implement the World Intellectual Property Organization (WIPO) treaties, a cap on statutory damages, a new exception for "mash-ups," clarification on the liability of Internet service providers (ISPs) for infringement by their subscribers, and a new cause of action for secondary infringement.

This bill is substantially different from its predecessors, Bills C-60 and C-61, and reflects new thinking by the government on how best to modernize the Copyright Act. While the bill is an advancement over previous attempts at copyright reform, it will require amendments to ensure it accomplishes the goals set out by the government and does not introduce unintended consequences.

The preamble to the bill describes its objectives, which include the following:

  • to create a marketplace framework law and cultural policy instrument that through clear, predictable and fair rules will support creativity and innovation in the knowledge economy;
  • to address opportunities and challenges that are global in scope for the creation and use of copyright works or other subject-matter;
  • to adopt coordinated approaches to copyright protection based on internationally recognized norms, including those reflected in the WIPO Copyright Treaty (WCT) and WIPO Performance and Phonogram Treaty (WPPT);
  • to provide rights holders with recognition, remuneration, and the ability to assert their rights;
  • to enhance users’ access to copyright works or other subject-matter; and
  • to enhance the protection of copyright, through the recognition of technological measures and other measures, in a manner that promotes culture and innovation, competition and investment in the Canadian economy.

Below are highlights of the proposed amendments.

Implementation of the WIPO Treaties (the WCT and the WPPT)

The bill contains amendments to create a making-available right and a distribution right for tangible goods, to protect rights-management information, and to provide legal protection for technological measures (TPMs). The TPM provisions are consistent with international norms and standards for these provisions, which require adequate legal protection and effective legal remedies against the circumvention of TPMs.

The bill contains exceptions to the prohibition on TPM circumvention to allow for reverse engineering, security testing and encryption research, creating interoperable computer programs, enabling persons with perceptual disabilities to access materials, and enabling consumers to protect their personal information.

There are also two new exceptions that did not exist in Bill C-61: one for temporary recordings made by broadcast undertakings, and another for unlocking a wireless device. The government has also retained the flexibility, through regulation, to broaden the class of exceptions where the public interest might be served, or to exclude certain classes of TPMs from protection where they would unduly restrict competition in the aftermarket sector.

The proposed language for the making-available right for sound recordings will need technical amendments to bring it into conformity with the stated intent of the government of conforming to the requirements of the WCT and WPPT. As drafted, it limits the exclusive making-available right for sound recordings to a right to collect royalties under a tariff and, in effect, prevents the assertion of this exclusive right against illegitimate pirate sites and services.

Exceptions for Certain Uses of Copyright Material for Private Purposes

The bill would create new exceptions for format-shifting onto any medium or device, making backup copies, and copying of broadcasts for time-shifting purposes. These are technologically neutral exceptions that extensively broaden what individuals can do with content. Copyright owners would not receive any remuneration under the private copying levy for such copying. These provisions go far beyond the exceptions proposed in Bill C-61, and will need to be studied carefully to ensure they do not have unintended consequences.

Exception for "Non-Commercial User-Generated Content"

The bill would create a new exception to enable individuals to use existing works in the creation of new works such as "mash-ups" and to permit the new works to be posted online. The provision is subject to the following conditions:

  1. the copying or dissemination of the new work must be done solely for non-commercial purposes;
  2. the source is mentioned "if reasonable in the circumstances";
  3. the individual has reasonable grounds to believe the existing work was not infringing copyright; and
  4. the copying or dissemination of the new work "does not have a substantial adverse effect, financial or otherwise, on the exploitation or potential exploitation of the existing work … or on an existing or potential market for it."

The government has stated that the intent of the provision is to protect the making and posting online of a home video of a friend or family member dancing to a popular song, or creating a "mash-up" of video clips. The breadth of the section suggests potential unintended consequences, however. For example, the new work could theoretically involve very substantial copying by an individual of very large parts of works or collections of works as long as some new work of whatever character or originality is created. There is no requirement that the copying be transformative or that the extent of the copying be fair in any way.

The section also extends to authorizing commercial entities to disseminate the new work unless the damages suffered by the rights holder reach the level of "a substantial adverse effect" on the exploitation or potential exploitation of the existing work. The intermediary would be immunized from liability. This section, together with the new hosting exception, would undermine current business models where content is licensed for online uses and is not consistent with the government’s stated intent.

Exceptions from Infringement to Clarify the Liability of ISPs

The bill contains very broad exceptions for Internet intermediaries and network providers, including exceptions for providing network services, caching, hosting, and providing information location tools (ILT). These provisions are very similar to the exceptions in Bill C-61, except that the network service provider and ILT exceptions are not applicable to sites that are primarily designed to enable acts of copyright infringement such as illegitimate peer-to-peer (P2P) file-sharing services.

Many of the standard conditions associated with these types of exceptions worldwide are not in the bill. For example, these exceptions are not conditioned on the ISP being unaware of infringing activities or being required to takedown or disable access to infringing content. The ISP exceptions are also not conditioned on ISPs having a policy to curb copyright infringing activities on their networks or to comply with generally accepted industry codes, as is the case in other countries.

The bill contains the "notice and notice" system that was in Bill C-61. There is no "notice and takedown" system, something that has been implemented in other countries, and that is required to effectively deal with operators of pirate sites that infringe content on a substantial scale. The "notice and notice" system would likely fail to deal promptly with time-sensitive postings, such as postings of pirated movies, video games or albums prior to their official release, which can thwart the commercial viability of new releases.

Cap on Statutory Damages

The bill creates a cap applicable to infringements for non-commercial purposes. It also permits a judge to reduce these damages even further for a number of reasons, including if they would be disproportionate.

Exception for Broadcasters to Copy Music for their Operations

This exception significantly widens the current exception to the broadcast mechanical reproduction right in the Copyright Act. This amendment would prospectively eliminate the existing music publishers’ and the proposed record labels’ broadcast mechanical tariffs for ephemeral copying, which have now been certified.

Other Exceptions

The bill would create also create:

  • New exceptions to permit:
    • reverse engineering of computer programs for interoperability purposes, encryption research, and network security vulnerability testing purposes; and
    • temporary copying such as buffer copying that is an essential part of the execution of a technological process.
  • Three new categories of fair-dealing exceptions: exceptions for parody, satire, and education.
  • New exceptions for distance learning and accessing publicly available information from the Internet.

These exceptions will have to be studied carefully, as their wording and scope departs significantly from the approach taken in other jurisdictions for exceptions of these kinds.

Secondary Infringement Cause of Action for Enabling Infringement

Bill C-32 creates a new cause of action against a person who provides a system that he or she knows, or should know, is "designed primarily to enable acts of copyright infringement." This is intended to target pirate services such as illegal P2P file-sharing sites. The bill creates an open-ended set of factors that are intended to guide courts in applying this new rule, including:

  1. whether the person expressly or implicitly marketed or promoted the service as one that could be used to enable copyright infringement;
  2. whether the person had knowledge that the service was used to enable a significant number of acts of copyright infringement;
  3. whether the service has significant uses other than to enable acts of copyright infringement;
  4. the person’s ability, as part of providing the service, to limit acts of copyright infringement, and any action taken by the person to do so;
  5. any benefits the person received as a result of enabling the acts of copyright infringement; and
  6. the economic viability of the provision of the service if it were not used to enable acts of copyright infringement.

The drafting of this section will need a close review to ensure that the stated policy objective of making "the enabling of online copyright infringement itself an infringement of copyright" is achieved. For example, the requirement that Internet services must not be "designed primarily to enable acts of copyright infringement" may be too narrowly stated to adequately catch all online piracy threats.

The cause of action is also a limitation to only two of the new safe harbours available to Internet intermediaries, namely the network services and information location tool exceptions. Curiously, there is requirement in the caching or hosting services safe harbours that ISPs are on-side of the provision. This creates potentially very significant unintended consequences, particularly when the section is read together with the very broad hosting exception.

Also, the new cause of action does not permit the recovery of statutory damages against these pirate enablers, thus undermining the intent of the government to allow copyright owners to fight Internet piracy by pursuing those entities that promote illegal P2P file-sharing.

McCarthy Tétrault Notes

Bill C-32 is long and complex, and will require close reading to fully understand its scope and application. It is clear from a first reading that the bill attempts to address many of the challenges posed by the Internet and digital age. However, many provisions in the bill need ironing out to ensure it meets the government’s stated objectives without creating material unintended consequences.