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A Clarifying Development – “Canadian Content” Tax Credit Regulations Amended

The October 4, 2014 Canada Gazette (being vol. 148, no. 40), contained something of note for Canadian film and TV lawyers: amendments to the Income Tax Act regulations which govern the “Canadian content” tax credits for audio-visual productions. The full text of the amendment in the Gazette can be accessed here.

What Was the Problem?

Before the October 4, 2014 amendments, it was not entirely clear who was to be considered an “owner” of copyright in a production, and there was further uncertainty regarding whether licensing someone exploitation rights or granting them a right to share in the revenues of a production could make them qualify as an “owner” of “copyright”. That led to confusion surrounding how to properly structure ownership, licenses and revenue participations so as not to inadvertently fall afoul of the regulations (and thereby render the production ineligible for “Canadian content” tax credits). The confusion was further compounded by some inelegant drafting.

So What Has Changed?

To borrow from the Gazette‘s description of the amendments, the regulation has been changed so that:

  • “copyright owner” is now a defined term in the regulation – one which uses terminology found in the Copyright Act (e.g., the definition uses terms such as “maker” and “copyright” that have particular meanings under the Copyright Act);
  • it is now definitively stated that a person having the right to share in revenues generated by a production is not in and of itself an interest or a right held by a copyright owner;
  • it is now definitely stated that the grant of an exclusive license does not constitute an assignment of copyright for purposes of the tax credit analysis
  • the definition of “excluded production” has been re-worded to make it clear that a production will be deemed to be an “excluded production” (and therefore ineligible for “Canadian content” tax credits) if someone other than a “prescribed person” owns copyright at any point during the first 25 years after the production has been completed; and
  • the list of “prescribed persons” has been expanded to include Canadian individuals, Canadian taxable corporations, and partnerships of prescribed persons.

The amendments will take effect forty days after October 4, 2014 (so, November 13, 2014), and will not be retroactively applied to any production if before November 13, 2014 (a) the Minister of Canadian Heritage has revoked or refused to issue a certificate of completion for it or (b) the Minister of National Revenue has assessed a return of income on the basis that the production is not a Canadian film or video production and that assessment’s basis is not vacated or varied on or after that date.

That’s Nice. So?

While not changing very much on a substantive level, these changes provide some comfort and further guidance on structuring elements that many of us rely on in structuring productions:

  • entering into a license or distribution agreement does not constitute a transfer of copyright
  • granting rights to participate in revenues (such as “back-end” or “net profit” participation) will not, in and of itself, cause the production to go “off-side” – while such “back-end” participations have often been granted to individuals providing services in connection with projects (such as directors or actors), these amendments appear to permit “hands-off” investors to be granted such participations as well, something which historically was regarded as somewhat risky
  • there is now greater flexibility in structuring productions because the list of acceptable (or “prescribed”) persons who can own a copyright interest in the production has been expanded to include not just Canadian corporations, but also Canadian individuals and Canadian partnerships (all of whose partners are prescribed persons)

Fine. Now Say Something Really Nerdy.

These amendments do something interesting with the term “maker”, which is defined in the Copyright Act as “the person by whom the arrangements necessary for the making of the work are undertaken”. The amendments, in the way that they define “copyright owner”, seem to imply that the “maker” of a production is the first “owner” of copyright in the production – however, a close reading of the Copyright Act reveals that the term “maker” is something of an analytical dead-end: being the “maker” of a production has no bearing on the ownership or authorship of that production for copyright purposes. In other words, by trying to tie “maker” and “owner” together, the amendments do something that not even the Copyright Act does. It’s not a problem – ownership for copyright purposes and for tax purposes can be different things – but it is interesting to note that the regulatory instinct is to rely on “maker” status in a way which is not present in the underlying copyright regime.

A Clarifying Development – “Canadian Content” Tax Credit Regulations Amended

Ken Dhaliwal: The Zenith (Award) of His Career

October 2, 2014 marked an important day in the history of the Dentons Canada LLP entertainment law practice group: David Steinberg wore a suit and tie for the entire day, and he was not scheduled to attend either a funeral or bar mitzvah.

Later that day, we were thrilled to attend the Lexpert Zenith Awards ceremony, at which, among other luminaries, our own Ken Dhaliwal was feted for his achievements during the course of his entertainment law career.

The photo below, taken at the event, features all of the lawyers in the Toronto entertainment group, because none of us could bear to cede the spotlight to Ken for even a minute we wanted to show our support for our good friend and colleague. It was a complete coincidence that we are arranged, from left to right, in descending order of height.

Zenith Award

(L to R: Jim Russell, Bob Tarantino, Ken Dhaliwal, Jayme Alter, some random guy who stumbled into the photo David Steinberg)

 

Ken Dhaliwal: The Zenith (Award) of His Career

The Challenge of the Unlocatable Copyright Owner – Checklists!

As this blog has documented on numerous occasions (first; second; third), Canada’s Copyright Act contains an “unlocatable owner” licensing mechanism (sometimes referred to as the “orphan works” mechanism), which enables prospective users of copyrighted works to apply to the Copyright Board for a license to make use of a work where the user has been unable to find the owner of the work in question. As set out in Section 77 of the Copyright Act (Canada), if the Copyright Board “is satisfied that the applicant has made reasonable efforts to locate the owner of the copyright and that the owner cannot be located”, the Board can issue a license.

We’ve previously discussed in detail (see here) some of the limitations of the unlocatable owner mechanism, but if someone did want to make use of it, one issue which historically has remained unclear is what constitutes the “reasonable efforts” required by the Act as a condition to issuance of a license. (To make things more confusing, the Board’s own brochure which provides guidance on how to make unlocatable owner applications states that the Board must conclude that an applicant has “done everything you could to find the copyright owner”, which seems like a much higher bar to clear than “reasonable efforts”.)

While we still don’t have much more clarity on the issue from the Canadian Copyright Board, the United Kingdom’s Intellectual Property Office (which operates a similar unlocatable owner mechanism) has published three different brochures and checklists which sets out that office’s views on what constitutes a “diligent search” for unlocatable copyright owners. There are brochures and checklists for each of three “groups” of copyrighted works:

The checklists, in particular, offer very detailed guidance about potential sources of information regarding copyright owners – as such, though these guides are published for a UK audience, they offer some good inspiration for anyone undertaking clearance activities for any kind of project, including film and TV projects which incorporate pre-existing works.

The Challenge of the Unlocatable Copyright Owner – Checklists!

#Monkey-Selfie

[We proudly offer a guest post co-authored [ha! you'll realize that was hilarious once you read through the post] by our esteemed colleagues Aaron M. Milrad (J.D., B.A., Counsel at Dentons Canada LLP), and Christian R. Orton (J.D., M.A., Associate at Dentons Canada LLP). This post reflects the intellectual curiosity of the authors and does not constitute legal advice.]

The monkey is back!

The dispute between Wikipedia and the British photographer David Slater recently reported in various news outlets is not new. It is actually the continuation of a dispute that began in July 2011 between the UK based Caters News Agency, who had hired Slater to do a nature shoot in Indonesia, and the blog Techdirt.

According to reports at that time, the monkey picked up Slater’s camera while unattended and snapped a number of images while it looked at its own image in the lens. Slater later discovered the images and submitted them to the Daily Mail to be published – giving credit to Caters.  Soon after, the question was raised whether Caters was capable of claiming copyright as Slater had reportedly acknowledged that he was not involved in creating the images. The photographs were reproduced on the Techdirt blog which commented on the issue. Caters subsequently requested that the blog remove them for violation of copyright.  It declined and the debate commenced.

Techdirt considered Caters’ capacity to claim copyright under the various copyright legislation of the U.S., U.K. and Indonesia arriving at the conclusion that regardless of the regime only a photograph created by a human is capable of receiving copyright. So what about in Canada?

Authorship

Copyright is accommodated in Canada through the Copyright Act, providing both economic rights to control the reproduction of a creative work and the profit generated from it, as well as ‘moral rights’ associated with the work. In order for something to have copyright protection it must: be original, correspond to one of the four prescribed categories of works (literary, dramatic, musical and artistic), and be created by an author. Usually, the author will be the first owner of the copyright, which can then be sold or licensed according to the author’s interests (except for the moral rights which cannot be sold but can be waived).

Authorship refers to the person responsible for original expression embodied in a work, and not necessarily the creator of it. It is recognized that in various media the creative force behind a work is not necessarily the person who writes, executes or fabricates it. An architect, for example, retains rights in a building despite the fact that an independent contractor built it. In complex creations such as films, there are various layers of authorship present. The director will generally have authorship of the film, but the set designer will retain authorship rights to the set and so on. Finally, in certain circumstances there can be multiple authors for a single work. In such a collaborative work, the creators will be co-authors provided that their contributions are not distinguishable and separable.

Though the Copyright Act does not provide a definition of ‘author’, it does state that an author must be a citizen or a person who is resident in a country that is part of the international regime of copyright protection. This implies that there can be no copyright without the author being human, and Canadian courts have agreed with this interpretation.

Camera-Monkey

As the law appears to only contemplate human authors, it follows that an animal cannot be an author. It also follows that a work created by an animal cannot receive copyright protection unless it can be argued that the work is really created by a human, such as the animal’s owner. The photography of Cooper ‘the-photographer-cat,’ whose pictures became an online sensation a few years ago for their unique depictions of feline encounters, illustrate this point of law. In fact Cooper was neither selecting the images or operating the camera. His owners had fastened a camera to Cooper’s collar and arranged for the camera to record a new image at two minute intervals as Cooper wandered randomly through his environment.

The final consideration in establishing if there can be copyright in animal created images is whether there was sufficient originality involved in their creation. The Act does not define what constitutes ‘originality’ so the task fell to the Supreme Court of Canada, which determined that originality must comprise of the exercise of skill and judgment that is not so mechanical as to be trivial.  In the context of photography this has been interpreted as considering the personal efforts of the photographer with regard to the choice, layout and posture of the subject, and the selection of camera angle and lighting.

If a picture taken of a passing scene with a cell-phone camera is worthy of copyright, certainly the images produced as a result of the unique camera configuration devised by the owner of Cooper the-photographer-cat would equally well be worthy of copyright.  But how is copyright to be assigned in the case of the curious macaque monkey? A copyright decision would probably be dependent on consideration of the actual events prior to the monkey operating the camera. Two scenarios are plausible. If Slater had set the camera up on a tripod and deliberately selected the camera angle before the monkey began playing with it and pressed the button, it might be argued that Slater was the author by devising a situation where a work would be created and that the images were sufficiently original as a result. However, if the camera was merely laid down for a few minutes before the monkey’s curiosity led it to pick up the camera and accidentally take the images as a result of playing with the camera, it would be difficult to argue either that Slater was the author or that the images possess sufficient originality. In the second scenario the image would presumably be without copyright.

Animal Auteur

The question remains; what decision is to be made when there is a convincing argument that the human is not the author? Animal art is not a new phenomenon, and has had a market at least since the late-1950s when a chimpanzee named Congo was encouraged by zoologist and anthropologist, Desmond Morris, to paint. Congo went on to create more than 400 drawings and paintings demonstrating an exceptional degree of creative independence—he was very much in control of his work and would only stop working when he was satisfied that it was complete.  Congo’s creations were by no means value-less artworks. In fact, in 2005 three of Congo’s paintings sold for £14,400 through a reputable British auction house. This was a price considered to be nearly 20 times their estimated value. As an interesting aside; on that same day works by Andy Warhol and Renoir attracted so little interest that they were withdrawn from the auction.

Another example is the work of Tillamook Cheddar, a Jack Russell terrier residing in Brooklyn, New York, who has gained considerable notoriety as an abstract expressionist.  As one of the more successful animal artists in the world, her work has been shown in more than fifteen solo exhibits, and her pieces have sold for hundreds, sometimes thousands of dollars to collectors across America and Europe.

In other contexts, animal art has been used to raise money for charitable causes. A prominent example of this is the Asian Elephant Art & Conservation Project conceived of by conceptual artists, Komar and Melamid.  Started in 1998 at the Thai Elephant Conservation Center in Lampang, Thailand, this is a non-profit organization that trains elephants to make marketable paintings, the profits of which are used for various habitat conservation and animal awareness projects. Not all elephants are successful artists, and after a week of training only those with aptitude are encouraged to continue.

Evidently, the animal art market is not economically insignificant. Animal works are sold by the same business models as artworks created by humans, and appear to increase and decrease in value in response to market demand in a similar way. However, because they are not created by human authors, they are not protected by copyright legislation. Instead, the sellers or ultimate owners of the artworks tend to employ contracts to impose specific restrictions on the use and reproduction of the artwork that are congruous to copyright protection. However, any violation of the agreement would not be subject to the remedies offered by the Copyright Act, and would have to be resolved as any other contract would—potentially a more expensive and time consuming process.

In light of the apparent economic impact of animal art, the question might be asked whether copyright law should be expanded to include works created by animal authors, and if so how?

Intelligent Agents

Part of the requirement for originality discussed by the Supreme Court is that the exercise of skill and judgment must not be so trivial that it could be characterized as a purely mechanical exercise. It must necessarily involve intellectual effort, where the policy behind copyright protection is to protect the unique expression of an idea in producing an original work.  The question then arises whether animals are capable of having ideas and their creations are expressions of those ideas, or whether they are simply behaving as trained?

Indeed the very protections offered by the Copyright Act cast doubt on whether animals could ever be capable of authorship. If an animal were to be an author within the scope of the Copyright Act and become the first owner of its work, then how would it enforce its rights to exclusive reproduction in the face of infringement when it cannot gain standing as a competent plaintiff in court? Furthermore, unlike the economic benefits associated with copyright, moral rights are attributed to the intrinsic expression of the copyrighted work to protect its integrity and are inalienable from the author. How would an animal express moral indignation at its work being trivialized or mutilated or reproduced without proper attribution? Finally, what would the effect be on the various rights that accompany copyright known as ‘related rights’? Would circus animals, race horses and show dogs be granted corresponding performers rights?

The idea of making the animal a bearer of copyrights would appear to be a counterproductive exercise that would pose the threat of opening a Pandora’s box of legal inconsistencies. However, while statutory reform for the sake of animal rights may strike some as bananas, the suggestion of expanding copyright protection to works created by non-human actors has received attention with regard to robots, referred to as ‘intelligent agents’, that employ artificial intelligence to create work products. An example of this might be an online news aggregation software that learns, adapts and develops as it acquires more information producing unique and truly original works. While this technology is in its infancy, it is expected to grow into a lucrative industry, and the desire to exploit the commercial value of the works created through copyright is significant.

Various solutions have been advanced that would allow for copyright to fall to the right place but nothing has been done yet to change the law accordingly. Indeed considering that the last reforms to the Copyright Act were surrounded by controversy, it may be a while before the federal government is willing to venture down that road again. Perhaps when the economic impact of intelligent agent technology is sufficient to warrant further revisions to copyright law, it may be possible to advocate for the extension of copyright protection to animal created works. But, for now, any discussion of the animal auteur is strictly for the birds.

#Monkey-Selfie

Insensitive – Copyright Implications of Jann Arden’s Stand

Twitter began to light up on August 7, 2014 when Canadian singer/songwriter Jann Arden (@jannarden) began to object, via a series of tweets, to the practice of Calgary radio station 90.3 AMP of playing shortened versions of songs. From a CBC news story on the matter, the station “essentially slashes Top 40 songs in half so the station can run 24 songs an hour instead of 12″; evidently 90.3 AMP is drawing on the work of Sparknet Communications, which provides “Quickhitz™ remixes”. Arden’s objections eventually culminated in her call to boycott the station for “butchering” and “disrespecting” artists and their work.

Arden’s tweets were sometimes profane and often humorous – here’s one that we’re comfortable reproducing on a suitable-for-families blog and which pithily summarizes her concerns with the practice:

For the record, I know of no such art gallery.

The initial reaction of experienced entertainment lawyers to the story should have been: How can I make money off of this? Just kidding! No, the reaction of experienced entertainment lawyers to the story should have been: figuring out the legal implications of what’s going on here is going to be complicated. For this post, rather than get too far down any convenient rabbit holes, we’re going to limit ourselves to considering whether Ms Arden might be able to assert a legal claim on the basis that shortening her songs constitutes an infringement of her moral rights in the musical compositions she has written.

(Throughout this discussion it needs to be kept in mind that there are (at least) two separate copyrighted works at play here when we’re talking about a “song” being shortened and broadcast: the musical composition and the recording of that musical composition. We’re going to focus in this post only on the musical composition aspect, and ignore moral rights relating to the performance as well as copyright considerations relating to the sound recording.)

At first it might seem obvious that Arden could assert a moral rights-based claim against the station. As Section 28.2 of the Copyright Act provides,

The author’s or performer’s right to the integrity of a work or performer’s performance is infringed … if the work or the performance is, to the prejudice of its author’s or performer’s honour or reputation … distorted, mutilated or otherwise modified

We can see two different elements are required for an infringement of a songwriter’s right to the integrity of their composition: there must have occurred (1) a distortion, mutilation or modification of the work which (2) has a prejudicial effect on the author’s honour or reputation. Shortening a song clearly counts as a “modification” of a work – but how would we determine whether it had a “prejudicial effect” on the songwriter’s honour or reputation? It’s a bit hard to say: of the limited number of moral rights cases which Canadian courts have considered, some (such as Snow v Eaton Centre (1982), 70 CPR (2d) 105, wherein sculptor Michael Snow successfully claimed infringement of his moral rights when the managers of the shopping mall in which his sculptures of ducks in flight were festooned with red ribbons to mark the Christmas season) indicate that the artist’s own views are to be given considerable weight so long as they were “reasonably arrived at”; others (e.g., Prise de Parole Inc v Guerin, Editeur Ltee (1995), 66 CPR (3d) 257) indicate that an aggrieved composer needs to provide objective, expert evidence which corroborates the prejudicial effect. In either case, it probably wouldn’t be too terribly difficult to get Ms Arden to testify that she feels that her reputation has been besmirched or to find multiple experts who could testify that shortening a song could result in reputational damage.

But there’s a complicating factor here: it’s quite possible that Arden has waived her moral rights in a manner on which 90.3 AMP could rely. To understand why that might be the case it is important to remember that Arden likely does not own all of the copyright in the compositions she has written. That’s because at least some of the copyright in the compositions and almost certainly all of the administration rights in the compositions have been assigned to a music publisher. In the publishing agreements that she signed with her music publisher, Arden would likely have been obliged to waive her moral rights – not only in favour of the publisher, but in favour of any licensee or assignee of the music publisher’s rights. And on that basis, 90.3 AMP might be able to raise a defence: they might be able to argue that they obtained a license (whether written or implied by a course of conduct) from the music publisher to reproduce, modify and otherwise make use of the composition, and that they enjoy the benefit of the waiver of moral rights which Arden signed in favour of the publisher. Without knowing the actual arrangements in place between the broadcaster and the publisher, it’s hard to say anything definitive – we would certainly welcome further insights in the comments from anyone familiar with the situation.

One other possible target of a claim might be Sparknet Communications itself (i.e., the folks who actually do the editing of the songs) – it’s not clear what arrangements, if any, they have in place with the music publishers who own and administer the songs which are being edited.

The Twitter storm over 90.3 AMP appears to have subsided over the last couple of days – whether this ends up being merely an insensitive (see what I did there?) breach of etiquette or the basis for a claim, whether on moral rights or other copyright grounds, remains to be seen.

Insensitive – Copyright Implications of Jann Arden’s Stand