Awaiting the Next Chapter in Canadian Copyright Law: Leave Granted to SCC for York University, et al. v Canadian Copyright Licensing Agency (Access Copyright)
A leave to appeal has been granted for Access Copyright by the Supreme Court of Canada in York University, et al. v Canadian Copyright Licensing Agency SCC 76224 (“Access Copyright”) this past October 15, 2020. This is the society’s last chance to counter the decision made by the Federal Court of Appeal in York University v Canadian Copyright Licensing Agency 2020 FCA 77 (“York”), against a determination that mandatory tariffs do not apply to those who commit copyright infringements outside of licence agreements. The Court of Appeal decision was a big win for York University (“York”) and the rest of the education community, although York was not completely satisfied with the Court’s fair dealing analysis. This leave was not granted as an automatic right, which means Access Copyright had to provide adequate reasons for the Supreme Court to hear this appeal.
Access Copyright serves as a collective society providing permission to copy Canadian and international published material from a vast majority of works it holds within its repertoire. The society was created to bridge the gap between owners of copyright works, publishers, and the public to offer rates that are cheaper than would be for institutions, such as universities, to deal exclusively with each copyright owner in obtaining a licence. The collective acts anonymously which means that the copyright owners do not compete with each other, but instead, set the price collectively for more convenient and economical access on behalf of its users. Access Copyright collects royalties from the licence agreements and distributes them to copyright holders.
Between 1994 and 2010, York and Access Copyright held a licence agreement together that permitted professors at York to make copies of textbooks and other published work that Access Copyright obtained licence agreements for (York, para 7). In the years that followed, because Access Copyright and York could not come to an agreement regarding the renewal terms of the licence, Access Copyright filed a proposed tariff with the Copyright Board (“Board”) for post-secondary educational institutions before its expiry (York, para 8). The Board granted Access Copyright an interim tariff incorporating the licence agreement royalty rate that had existed with York in the previous agreement. This “mandatory” new tariff meant that for every one infringing copy of work York produced, the university would be liable to pay the Board’s FTE rate for all students for the entire term of the tariff. At the time Access Copyright was dealing with York, the FTE rate it was contemplating was a flat annual royalty rate of $45 per FTE student per year. This means that if York University has 50,000 students, one instance of copyright infringement made on one work would cost York $2,250,000 for each year of the tariff (York, para 8).
York paid the tariffs until it decided to opt-out as of August 11, 2011 in time for the start of the new academic year. York formally notified Access Copyright of its decision, along with many other Canadian universities who also decided to opt out (York, para 10). Instead of operating within a licensing agreement, York relied on its Fair Dealing Guidelines, which were created to avoid copyright infringements. Under section 29 of the Copyright Act RSC 1985, c C-42, this allows for the reproduction of works for the, “purpose of research, private study, education, parody or satire” which can be done as an exception instead of holding a licence with the copyright owners.
At first instance, trial judge Justice Phelan ruled in favour of Access Copyright and rejected York’s fair dealing approach. Justice Phelan held that Access Copyright was entitled to a payment of royalties by York University and concluded that an interim tariff is mandatory and enforceable Canadian Copyright Licensing Agency v York University, 2017 FC 669 (“Copyright”) (Copyright, para 246). In deciding whether an interim tariff could be mandatory, the determination heavily rested on the meaning behind ‘tariff’, to which Justice Phelan pointed out, was non-existent in the Copyright Act itself (Copyright, para 190). Access Copyright’s theory was contingent on finding that the term tariff would imply a mandatory fee exercisable against any user who infringed copyright laws.
In his determination that an interim tariff was mandatory, Justice Phelan found that the term ‘tariff’ was frequently referred to in connection with fees that are binding (Copyright, para 192). The trial judge observed section 2 of the Interpretation Act RSC 1985, c I-21 which “refers to tariffs in respect of costs or fees within the definition of regulation,” and that it “connotes at least an element of compulsion or requirement to pay” (Copyright, para 193). After briefly reviewing the legislative history, Justice Phelan concluded that it was Parliament’s intent to account for “the difficulties copyright owners face in enforcing their rights individually against those who copied protected works” by establishing and expanding collective societies’ abilities under the Copyright Act. This now included enforcing tariffs against users who are not subject to an agreement and who reproduce without authority from the owners or benefit of an exception (Copyright, paras 195 – 204).
At the Federal Court of Appeal
The Court of Appeal dealt with two issues: 1) Whether the tariff is mandatory? and 2) If the tariff is mandatory, whether York can rely on its Fair Dealing Guidelines to avoid paying royalties for any “infringements” of copyright? Justice Pelletier, writing for the Court of Appeal, acknowledged and relied on Professor Ariel Katz’s article in addressing the enforceability of tariffs.
A few years prior to the beginning of this case, Katz published his argument that a mandatory tariff in copyright lacks any basis in law. He logically argued, if the user does not owe any payment, then they cannot be in default. Katz recognized that this case was not about copyright infringement, since Access Copyright is not an “owner” of any of the material works in its repertoire nor holds any property interest in the works. As a result, according to section 41.23(1) of the Copyright Act, only those who fall within one of the two categories just mentioned are entitled to initiate legal proceedings against infringement. Therefore, as Katz reasons, this case should not have continued its lengthy analysis into a consideration of York’s Fair Dealing Guidelines, but instead, should have stopped after concluding that a tariff is not mandatory but only applicable to licensees.
First Issue: Is the Tariff Mandatory?
Justice Pelletier begins by clarifying what it means when a tariff is mandatory. He explains that a copyright user becomes responsible for payment of royalties stipulated in the tariff when the user engages in copying that is not authorized by the copyright holder or that does not come within any of the users’ rights set out in the Copyright Act (York, para 37). Justice Pelletier also emphasized an important distinction between liability for royalties and liability for damages of infringement, stipulating that these cannot occur at the same time (York, para 38). He states,
In the absence of a tariff, a user who infringes copyright becomes liable for damages for infringement in an amount equal to damages the owner of copyright has suffered as a result of the infringement: see Copyright Act, s. 35(1) (York, para 38).
After reviewing the legislative history, Justice Pelletier revisits this logic and applies the necessary distinction to his explanation about why tariffs cannot be mandatory.
The Court of Appeal thoroughly reviews the legislative history from 1936 until the 1997 amendments, while also diligently combing through the jurisprudence. Justice Pelletier conducted side-by-side comparisons of each new version of the sections in the Act, which guided his assessment that Parliament recognized in 1936 that collective administration for copyright was an efficient and convenient way to administer copyrights for both users and owners. However, at the same time, Justice Pelletier recognized that when the collective societies become large enough, there is a threat in a monopoly for abuse of that power. Parliament’s solution was to regulate this industry by providing a Copyright Board to approve the price for licenses, effectively taking away power from the collectives to exclusively dictate the terms of trade. Justice Pelletier determined that this goal did not change over the years after each subsequent amendment to legislation.
Justice Pelletier concludes the history by noting that the absence of the word “licence” in section 68.2(1) of the Copyright Act cannot change the statutory mission of collective societies, which is to operate as a licensing scheme for the benefit of those it represents. If the scheme is a mandatory tariff scheme, the Court of Appeal was unable to reconcile where the obligation would lie to pay royalties instead of damages due to an infringement, circling back to the important distinction made earlier between damages and royalties (York, para 160).
The jurisprudence dealing with the Act made it clear that the legislative scheme did not give any additional remedies to what they already had through their licence agreements: “The instrument which makes the tariff enforceable against a user is the licence which the user accepts from the collective society” (York, para 190). Justice Pelletier concludes by stating, “Tariffs do not bind non-licensees…” and “If a final tariff would not be binding, the conclusion can hardly be different for an interim tariff” (York, para 204). This ruling confirms that educational institutions can opt out of the Access Copyright license since it is not mandatory, and any claims of copyright infringement will be left to the owners to address.
Second issue: If the tariff is mandatory, can York rely on its fair dealing guidelines to avoid paying royalties for any “infringements” of copyright?
York’s Fair Dealing Guidelines were submitted as a defence to Access Copyright’s action and also as a means to obtain the stamp of approval from the court to ensure that anything done with respect to the use of future copyright works would be immune from infringement. The Court of Appeal found deficiencies in the Guidelines and unfortunately for York, did not give its certificate of approval. Justice Pelletier applied the fairness factors set out at paragraph 54 in the Supreme Court case of CCH Canadian Limited. v Law Society of Upper Canada 2004 SCC 13: 1) the purpose of the dealing; 2) the character of the dealing; 3) the amount of the dealing; (4) alternatives to the dealing; 5) the nature of the work; and 6) the effect of the dealing on the work (York, para 209).
When a case is appealed from a lower court, the standard of review for a finding of fact is whether there was a palpable and overriding error made by the lower court when applying the law. The Court of Appeal reviews the lower court’s decision and looks for correctness in a question of law. Justice Pelletier concluded that York had not shown that the Federal Court erred in law in its understanding of the relevant factors. He also did not find that the lower court fell into error in applying the factors to the facts. Ultimately, Justice Pelletier did not dispute that the Guidelines York’s copying complied with was necessarily fair dealing (York, para 311).
Critiques of this decision, including Access Copyright who published a statement about the decision, view it as “deeply detrimental to a well-functioning copyright regime,” and see it as a threat to content creators and the publishing industry. Collective societies operate in a monopolistic industry to provide advantages, such as efficiency and cost reductions for a wide range of works and to the public as users; however, regulation must exist to ensure there is no abuse of power. If Access Copyright was successful in its appeal, it would mean that Copyright owners can not only form strong monopolies and eliminate competition completely, but also have complete control over the market and use that power to force users to pay Access Copyright even if what they are doing with the copyright works does not involve the need for their licence. Parliament recognized this issue and created the Board to limit collective societies’ ability to aggressively control the market as they realized with a good a thing, there can always be the flip side to that same coin.
After reading through the Court of Appeal and Trial Judge’s analysis, as well as academic commentary, I am a proponent of the sound logic behind Ariel Katz’s argument in that there is no logic in law in making tariffs mandatory. The Supreme Court decision to be hopefully rendered in 2021, will be greatly anticipated to determine a final outcome to this debate. I believe the Supreme Court will likely follow the Court of Appeal’s footsteps in avoiding a potential monopolistic power that could become too powerful to regulate if they could enforce tariffs against any infringer. Access Copyright has nothing to lose and potentially a lot to gain with this leave being granted. What will be interesting to see is whether York will apply to the Supreme Court to review their Fair Dealing Guidelines in the hopes of having another attempt to gain a certificate of approval for future immunity after the Court of Appeal failed to do so.