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Ottawa Launches Overhaul of Cultural Policy

The Department of Canadian Heritage has launched a review of the federal government’s cultural policy toolkit that could bring significant changes to the governance framework that underpins the broadcasting, media and cultural industries.

Announced this past weekend by Heritage Minister Mélanie Joly, the review is a response to the digital shift that is transforming the creative sector. The stated goal of the review is to ensure that Canadian content is positioned to succeed in an increasingly global marketplace which, as stakeholders well know, has been buffeted by the rapid evolution of new technologies that have changed the ways content is created and consumed.

Minister Joly made it clear in an interview with the Globe and Mail that each of the main governance levers – laws, policies, institutions and programs – will be evaluated. She told the Globe that she believes “the current model is broken, and we need to have a conversation to bring it up to date” and that “everything is on the table”.

Beyond a generally “digital approach”, it’s anyone’s guess as to what the policy outcomes of the review will be. The minister has indicated that she doesn’t want to go into consultations with preconceived notions of what they might yield, and has refused to speculate about eventual changes. However, the “drivers of change” articulated in the announcement of the review provide some sense of the likely focus:

  1. A fluid environment that blurs traditional categories like “creator” and “user”, “artists” and “audience”, and “professional” and “amateur”;
  2. The emergence of new players and intermediaries that have disrupted traditional business models;
  3. An increasingly open and interconnected world in which access to a global marketplace comes at the price of stiff competition in formerly local cultural markets; and
  4. Changes in consumer expectations driven by increased digital connectivity and mobility.

The consensus from the commentariat is that the review will be the most comprehensive re-evaluation of the industry since the Mulroney government revised the Broadcasting Act in 1991.

Content producers and other stakeholders should note that an online “pre-consultation questionnaire” can be accessed on the ministry’s website until May 20, 2016. The pre-consultation will help define the scope of the public consultation which will begin this summer and wrap up by the end of the year. An expert advisory group will be struck to shepherd the review, which is officially called Strengthening Canadian Content Creation, Discovery and Export in a Digital World.

Ottawa Launches Overhaul of Cultural Policy

A Brief History of the Broadcast Reproduction Right

The following is a timeline of broadcast reproduction copyright developments, leading to yesterday’s Supreme Court of Canada decision in CBC v. SODRAC.

1980’s: SODRAC, a copyright collective society managing (largely French-language) music reproduction rights, licences the reproduction of musical works in its repertoire to television producers.

1990: Bishop v. Stevens [1990] 2 S.C.R. 467 – The Supreme Court determines that “ephemeral” copies made by a TV broadcaster engage the reproduction right under the Copyright Act. Making copies of musical works to facilitate a broadcast, and actually broadcasting musical works, engage two different rights. Each of those rights may be licensed and paid for separately. Following this decision, SODRAC begins to distinguish between synchronization licences and copies made for other purposes.

1992: CBC and SODRAC negotiate a licence agreement for all copies made by CBC – synchronization and any other copies – for radio and TV. According to SODRAC, this is the first general reproduction rights agreement with a radio and television broadcaster in North America.

1990’s: CBC and other broadcasters begin to make greater use of digital systems to prepare programming for broadcast, gradually replacing older analog systems.

2002: Théberge v. Galerie d’Art du Petit Champlain inc. [2002] 2 S.C.R. 336 – The Supreme Court examines the nature of the reproduction right (must a work be multiplied to be ‘reproduced’? – yes) and emphasizes the balance between the rights of users and copyright owners:

“The proper balance among these and other public policy objectives lies not only in recognizing the creator’s rights but in giving due weight to their limited nature. In crassly economic terms it would be as inefficient to overcompensate artists and authors for the right of reproduction as it would be self-defeating to undercompensate them. Once an authorized copy of a work is sold to a member of the public, it is generally for the purchaser, not the author, to determine what happens to it.”

November 2012: Copyright Board SODRAC-CBC Arbitration Decision – The Board confirms that broadcast-incidental copies are reproductions under the Act, and do not benefit from a statutory exception. The Board finds that there are “clear benefits [to CBC] from copy-dependant technologies”, and SODRAC is entitled to remuneration that reflects those benefits.

November 2012: The Copyright Modernization Act – a broad set of amendments intended to better reflect copyright in the context of modern technologies – enter into force. Among other things, the “ephemeral exception” for broadcast copies is amended and expanded in part.

December 2012: Entertainment Software Association v. SOCAN [2012] 2 S.C.R. 231 – In one of the 2012 “pentalogy” of copyright cases, the Supreme Court determines that the Copyright Board was incorrect to apply a separate “communication” tariff – over and above the reproduction right payment – to downloads of musical works for video games. The principle of technological neutrality requires that the Copyright Act apply equally between traditional and more technologically advanced media.

“There is no practical difference between buying a durable copy of the work in a store, receiving a copy in the mail, or downloading an identical copy using the Internet. Absent evidence of Parliamentary intent to the contrary, we interpret the Act in a way that avoids imposing an additional layer of protections and fees based solely on the method of delivery of the work to the end user. To do otherwise would effectively impose a gratuitous cost for the use of more efficient, Internet-based technologies. The Internet should be seen as a technological taxi that delivers a durable copy of the same work to the end user. The traditional balance in copyright between promoting the public interest in the encouragement and dissemination of works and obtaining a just reward for the creators of those works should be preserved in the digital environment.”

January 2013: Copyright Board Interim SODRAC-CBC Arbitration Decision – The Board extends the 2008-2012 licence on an interim basis pending its final determination of terms to 2016. The Board rejects CBC’s argument that the Copyright Modernization Act amendments provide a statutory exception for its broadcast-incidental copies.

March 2014: CBC v. SODRAC Federal Court of Appeal, [2015] 1 F.C.R. 509. The Federal Court of Appeal rejects the broadcasters’ argument that the Supreme Court’s decision in ESA has overtaken Bishop v. Stevens. Broadcast copies are reproductions under the Act. The Court states, however, that it is “difficult to know how one is to approach technological neutrality post-ESA”, and finds that Bishop v. Stevens determines the outcome unless Bishop is “overturned or disavowed by the Supreme Court”.

November 2015: CBC v. SODRAC Supreme Court 2015 SCC 57.  In a 7-2 split decision, Justice Rothstein, for a majority of the Supreme Court, confirms that broadcast-incidental (or “ephemeral”) copies that facilitate broadcasting are reproductions under the Copyright Act. The bulk of the decision then focuses on valuation of the reproduction right. The majority finds that the Board failed to take the principles of technological neutrality and balance into consideration when setting the fees for the copies.

The majority expressly responds to the Court of Appeal’s call for guidance on how to approach technological neutrality.  Pursuant to ESA, if there is no practical difference in the value to a user as between its old and new technologies, then there should be no difference in valuing the right. The Copyright Board should compare the value derived by the user from the use of the reproduction, considering older and newer technologies. In the present case, if CBC derives greater value from using broadcast-incidental copies in digital technology than it did with its old analog technology, then the copright owner has become entitled to greater royalties for the copies.

The majority recalls that in Théberge, the Court established that copyright law maintains a balance between the rights of copyright owners and users, and that it would be as inefficient to overcompensate artists as it would be self-defeating to undercompensate them. Relevant factors in valuation include the user’s risk and investment in using new technologies, and how making reproductions contributes to value to the user. In this case, the user’s risk and investment were high, and the value of the reproductions to the user were low.  The matter of valuation is sent back to the Copyright Board for reconsideration.

Justice Abella writes a vigorous dissent, agreed to in part by Justice Karakatsanis. The dissent takes issue with the majority’s approach to the principle of technological neutrality, which effectively ties copyright owner compensation to users’ actions that are irrelevant to the rights, and focuses on the value that new technologies create for the user. The dissent distinguishes “media neutrality” (focused on the medium of expression) from “functional equivalence” (focused on what the technology actually does), stating that functionally, broadcast-incidental copies are simply part of the core activity of broadcasting. Just as the Court confirmed in ESA, “technological neutrality operates to prevent imposing additional, gratuitous fees on the user simply for the use of more efficient technologies” […] “SODRAC is not entitled to be compensated for how efficiently CBC uses technology to achieve its broadcast”. The Board’s decision to impose fees for broadcast-incidental copies is unreasonable.

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A Brief History of the Broadcast Reproduction Right

The Complexities of Canada’s Extension of Copyright Protection for Sound Recordings

On June 23, 2015, Royal Assent was given to Parliament’s Bill C-59, otherwise known as the Economic Action Plan 2015 Act, No. 1, otherwise known as the federal government’s 2015 budget. Contained in the legislation are provisions which amend the Copyright Act (Canada) to extend the duration of Canadian copyright protection for sound recordings. For how long has copyright protection been extended? Well… it’s complicated – most reports have described the change as extending protection from 50 years to 70 years; but that description is incomplete. A more complete description would say that copyright protection for sound recordings has been extended from 50 years from the end of the calendar year in which recording (or “fixation”) occurred to 70 years from the end of the calendar year in which publication occurs. But even that remains incomplete – here is a chart which attempts to summarize the changes (which are found in Sections 81 and 82 of Bill C-59, and which replace Sections 23(1)(b) and 23(1.1) of the Copyright Act):

Duration of Canadian Copyright in Sound Recordings

Activity

Copyright Act

Recorded (but no publication)

Publication

Before June 23, 2015 50 years 50 years
After June 23, 2015 50 years Earlier of (i) 70 years from publication and (ii) 100 years from recording

 

“Publication” is defined in Section 2.2 of the Copyright Act as meaning “making copies of a sound recording available to the public”; but the provision goes on to say that “publication” does not include “the performance in public, or the communication to the public by telecommunication” of a sound recording. That has some interesting implications for what I’ll call “amateur” or “non-commercial” sound recordings. As you can see from the foregoing table, while most “commercial” sound recordings (such as the recordings released by a major record label) will benefit from a term of protection of at least 70 years from the year of publication (i.e., the year in which the record was “released” for commercial sale to the public), a 70 year term will not apply to many “amateur” or “non-commercial” sound recordings unless copies of them are made available to the public. So, for example, the sound recording that you create when you play a cover song in your bedroom and then upload to YouTube – that will only be protected for a period of 50 years from the year of recording, because uploading a clip to YouTube does not constitute “publication” for purposes of the Copyright Act (in order to obtain the full 70 year term of protection, you’d have to make copies of the recording “available to the public”, for instance by offering CDs for sale (or files for digital download). It is therefore dangerous to assume that all sound recordings will benefit from a 70 year term of protection – some will have only a 50 year term (i.e., recordings for which “publication” never occurs, or only first occurs more than 50 years from the year of recording), while others will be protected for 70 years from the year of public release, which may be much later than the year of initial recording.

The new provisions also cap the duration of protection: not every sound recording which achieves “publication” will benefit from 70 years of protection from the year of its publication – there is an “outside date” of 100 years from the year of recording. Let’s imagine a sound recording which takes place in 2015 in the course of the creation of a new album by, say, current Canadian star Shawn Mendes; we’ll call the track “Party’s Over”. Upon recording (or “fixation”) of the track, “Party’s Over” will benefit from a period of copyright protection equal to 50 years (i.e., copyright would expire on December 31, 2065). If “Party’s Over” gets released by Shawn’s record company to the public in 2015, then the track will benefit from a period of copyright protection equal to 70 years (i.e., copyright would expire on December 31, 2085). But let’s imagine that the record company is unhappy with “Party’s Over” for some reason, and elects not to release it to the public – instead they elect to “keep it in the vault” so to speak. In the absence of publication, the track will still benefit from the “default” period of protection of 50 years, unless and until copies of it are made available to the public (i.e., “publication” occurs), in which case it will benefit from a period of copyright protection expiring on the earlier of 70 years from the year of publication or 100 years from the year of recording. So, if “Party’s Over” gets released to the public as part of a Shawn Mendes “Greatest Hits” package in, say, 2020, then it will be protected by copyright until 2090 (i.e., 70 years from publication) – but if the track doesn’t get released until, say, 2050 (as part of career retrospective, let’s say), then it will be protected until 2115 (i.e., 100 years from fixation), not 2120 (i.e., 70 years from publication). Trust me, this kind of thing is going to be giving lawyers conniptions for decades to come.

There are two other aspects to the amendments to the Act which bear attention:

  • there is no “revival” of copyright in sound recordings whose protection had expired on December 31, 2014 – anything which was in the public domain on June 23, 2015 remains in the public domain
  • the amendments also have the effect of extending the duration of copyright protection in certain performer’s performances which are fixed in a sound recording – while the “default” duration of protection for performances remains at 50 years, if a sound recording in which the performance is fixed is published before the copyright expires, the copyright in the performances continues until the earlier of (i) the end of 70 years after the end of the calendar year in which the publication occurs and (ii) the end of 100 years after the end of the calendar year in which the fixation of the performance (i.e., the recording) occurred

UPDATE: June 25, 2015 – I have revised the table to correct a possible misinterpretation: the left-most column is not intended to set out the year of the recording, but rather the year of the Copyright Act, with the goal of showing the change as between the Copyright Act before the 2015 budget, and the Copyright Act after the 2015 budget. For clarity, any sound recording which was still protected by copyright in 2015 will be subject to the new regime – the analysis is not different for sound recordings created before the budget implementation bill received Royal Assent on June 23, 2015.

The Complexities of Canada’s Extension of Copyright Protection for Sound Recordings

Balancing the Budget …and Balancing Copyright

The Government of Canada’s Budget Plan for 2015 proposes various measures within the expected areas of tax relief, job creation and economic growth measures.  It also includes a very unexpected proposal to extend the copyright term for sound recordings, to benefit record labels and performers.  The Economic Action Plan puts this forward as follows:

Protection of Sound Recordings and Performances

Economic Action Plan 2015 proposes to amend the Copyright Act so that the term of protection of performances and sound recordings is extended from 50 years to 70 years following the date of the release of the sound recordings.

The mid-1960s were an exciting time in Canadian music, producing many iconic Canadian performers and recordings. While songwriters enjoy the benefits flowing from their copyright throughout their lives, some performers are starting to lose copyright protection for their early recordings and performances because copyright protection for song  recordings and performances following the first release of the sound recording is currently provided for only 50 years.

Economic Action Plan 2015 proposes to amend the Copyright Act to extend the term of protection of sound recordings and performances from 50 to 70 years following the first release of the sound recording. This will ensure that performers and record labels are fairly compensated for the use of their music for an additional 20 years.

The copyright proposal is surprising not only for its inclusion in a budget document, but also for its appearance so soon after the government heralded its delivery of the Copyright Modernization Act.  The 2012 Act was intended to balance and modernize Canada’s entire copyright regime, and was enacted following lengthy and detailed consultations with representatives of all affected stakeholders.

The 2012 Press Release, Harper Government Delivers on Commitment to Modernize Canada’s Copyright Laws,  includes the following statements:

“Our Government recognizes the critical role that modern copyright laws play in protecting and creating jobs in Canada’s digital economy,” said Minister Paradis. “We have delivered on our commitment to modernize Canada’s copyright legislation and strike the right balance between the needs of creators and users.”

“This is the most comprehensive effort to modernize our copyright laws in over a decade,” said Minister Moore. “It is widely supported by creator groups, consumer organizations and the businesses that drive Canada’s economy.”

A critical element of the Copyright Modernization Act is the requirement that Parliament revisit the Copyright Act every five years. This will serve as a reminder to current and future Parliaments and governments of the important role that modern and updated copyright laws play in our economy.

Indeed, section 92 of the Copyright Act calls for a statutory review of the Act every five years by a committee of the Senate, House of Commons, or both.  Section 92 does not preclude amendments between those statutory reviews.  However, the government and stakeholders alike have all recognized that copyright calls for balance.  Achieving that balance calls for careful review and input from all stakeholders.

A further 20 years of protection and fees for sound recordings has been welcomed by the music industry in Canada.  But will this proposed budgetary measure have the effect of making a real difference for the Canadian economy?  And on the copyright side, will it “strike the right balance between the needs of creators and users”?

The Government of Canada has promised to balance the budget.  As the copyright term extension proposal moves forward, we look forward to further discussion on balanced copyright.

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Balancing the Budget …and Balancing Copyright

Ginuwine Concerns for Management Contracts

[We proudly offer a guest post authored by esteemed colleague and articling student Ben Iscoe, with an assist from yours truly. I’m proud to say that I actually knew Ginuwine’s real first name before I read this article.]

Elgin Baylor Lumpkin (the performing artist better known as “Ginuwine”) is being sued by his former manager.  For those familiar with the R&B star, one could make the (terrible) pun that he is being asked to “Pony” up dough for outstanding royalties.[1]  But how did this lawsuit come about?  It is unlikely that Ginuwine and his manager entered into their artist/manager relationship with the expectation that it would culminate in litigation.  What went wrong?  Could Ginuwine have done anything differently to avoid this costly and time consuming ordeal?

Musicians, generally speaking, are not business people; they are musicians.  Elvis, “The King”, may be one of the most iconic musicians of all time, but behind the scenes Colonel Tom Parker was managing his way (in the extreme case) to half of The King’s earnings.  Was this a good deal for the King?  The answer depends on one’s point of view.   Elvis himself said “I don’t think I’d have ever been very big if it wasn’t for [Parker]” reminding one of the adage “50% of something is better than 100% of nothing.”

So how does an artist know if they are entering into a favourable, or even equitable, manager/performer relationship?  How do future Ginuwines minimize their risk of litigation or more generally, entering into an unfair agreement?  Artists spend their time composing that addicting hook coming out of the bridge; Business 101 is likely on the backburner.

Below are general guidelines for artists when contemplating whether to enter into a management agreement.  This list is not exhaustive, but merely meant to be a helpful tool and should not be interpreted as a substitute for obtaining legal advice.

1. Defining Expectations

Almost all artists will say that they want their manager to help them grow/make a livelihood performing their art.  What does this mean?  Vague terminology is a recipe for future tension.  For instance, does the artist want to handle their own merchandise or have the manager handle this?[2]  Does the artist want to plan their own tours and just have their manager shop their album?  It is impossible to include every detail, but artists should be as specific as possible to ensure that all parties are of the same understanding.  It is better to disagree on specifics up front (when there is little or no commitment) as opposed to when the relationship is long established.

2. Duration

How long do you want the artist/manager relationship to last?  It is probably advantageous for the artist to enter into a short term contract, and then renew if the manager is delivering to the artist’s satisfaction.  However, if the artist is unknown, it is unlikely that much income will be generated in the first couple of years.  Therefore, the manager will want a longer contract as they would find it unjust (and a horrendous commercial practice) to allow another manager to reap the fruits of their labour (i.e. they spend the first couple of years helping the artist establish themselves only to have another manager start collecting 20% once the artist begins generating significant revenue).

This is an area where the artist, especially an unknown artist, will have to give the manager some slack.  Whatever the case, specify a period of time.

3. Exclusivity

Does the artist expect to be the manager’s sole client?  If so, it is important to specify.  For an unknown artist, this is an unrealistic ask.  As mentioned above, it will likely be a while until an unknown artist will start to generate significant revenue.  Asking a manager to rely on a percentage of a minimal (or perhaps non-existent) income for any period of time is unreasonable.

4. Territory

Where does the manager have connections?  Are they a mover and shaker locally, but not nationally?  Perhaps they have every domestic record exec on speed dial, but have no international connections.  In a smaller market, Canada being a prime example, artists may have interests in growing outside their national borders (i.e. in the US).  In such a situation, the artist may want to be mindful to specify what areas are covered by the management agreement?  For instance, emphasize that one manager will be the artist’s exclusive representative in Canada, but not the US.

Keep in mind, people respond to incentives.  If an artist wants to penetrate the US market and their manager will not generate any revenue from the artist’s activity there, why would the manager make any efforts south of the border?  Carving up territories should be used if the artist believes that they can establish themselves in a specified market without the manager’s assistance.  This may be accomplished by either (a) the artist’s own connections to the market; or (b) another manager who will have exclusive responsibility to that other market (i.e. the artist will have multiple managers to cover multiple markets).

5. Expenses

As mentioned above (and to be reiterated throughout), a manager is unlikely to be making much money off of the artist in the artist’s early days.  Despite this lack of revenue, the manager may need to spend money to assist the artist’s career.  If the manager is going to survey a venue, s/he will need to drive to the venue and park; who should pay for their gas and parking?  If the artist is hoping to have their manager arrange a tour, the manager will likely need to call a plethora of out of town venues; who should pay for their long distance calls?

These trivial sounding expenses may rapidly culminate in a bill the artist is ill equipped to pay.  At the start of the relationship the artist and the manager should specify what expenses the artist will cover.  It is not feasible to cover all possible scenarios, but a management agreement should attempt to cover general categories (like those identified above) to avoid future disagreements.  The artist may also consider creating caps for certain categories.  For example, in a given month, if long distance costs exceed ‘x’ dollars, then additional permission from the artist is required.  It is important to consider how much discretion or oversight the parties want built into the relationship.

Whatever your arrangement, it is crucial that any expenses require receipts.

6. Compensation

The days of Colonel Parker and managers receiving 50% are over.  Seemingly, a manager’s commission floats between 15-20% of the artist’s gross income.  This may seem significant, but in the early stages of the artists career 20% of nothing is still nothing.  This number may only lead to significant income for the manager once the artist has made it big, and there is likely a direct correlation between the rise in the manager’s income and the value the manager has added to the artist’s career.

There is no reason for a manager to receive any payments upfront.  A manager’s revenue should derive from the fruits of their labour, not an artist’s vain desire to say “I have a manager.”  Artists should be mindful of indirect attempts for managers to elicit money up front.  For example, artists should be wary of the manager who has a financial interest in the studio where (a) s/he wants the artist to record their next album; or (b) have promotional photography done.  That is not to say that these facilities should never be used, but rather that artists should be cautious to ensure that the rates at which they are being charged remain competitive with the industry norm.  If in doubt, artists may be wise to use other facilities (and see if their manager maintains their interest in representation).

Compensation should also specify for what activities the manager should collect a commission.  What about merchandise?  What if the artist begins writing with or producing for other artists?  What if the artist gets into acting?  What about the artist’s pre-existing revenue streams (e.g. endorsement deals)?  Or as in the case of Ginuwine, how should royalties be determined?

7. Option/Exiting

A management agreement will likely contain a provision that allows a manager to extend the relationship.  Such a provision is somewhat standard, but the nature of the option to extend must be clearly defined.  The option should specify (a) how often the option may be extended; and (b) for how long the relationship may be extended with each option.

Conversely, the management agreement should state how either party may exit the relationship.  The desire to exit the relationship may be difficult to visualize at the time of formation; at this time the manager and the artist should be enthusiastic about one another (if not why enter such a trusting relationship).  The terms of the agreement should address what happens when this relationship is no longer harmonious, more specifically what are each parties’ obligations when either party wants to end the relationship.

What compensation will the manager be entitled to once the artist/manager relationship has concluded?  The manager will argue that a portion of the artist’s revenue received after the artist and manager have parted ways derives from the labour of the manager (e.g. the manager secured the recording contract that continues after the conclusion of the artist/manager agreement).  Consequently, the artist and manager should consider sunset provisions.  These provisions entitle the manager to a certain declining percentage of the artist’s revenue in the years following the conclusion of the contract (e.g. 15% for the first year after the conclusion of the contract; 10% in the 2nd year; 5% in the 3rd year; and no compensation going forward).

8. Power of Attorney

Does the artist want the manager to be able to sign on their behalf, or only after checking with the artist first?  Can the manager sign on the artist’s behalf when it comes to certain contracts, but not others?  Include in any management agreement a power of attorney that clearly demonstrates under what circumstances the manager may sign on the artist’s behalf.  For logistical reasons, this type of provision may prove helpful; sending an email to a manager to give them permission to sign a document on the artist’s behalf could save valuable time and money.



[1] For those unfamiliar with the R&B Star, 1996’s “Pony” was the name of arguably Ginuwine’s most well-known single.

Ginuwine Concerns for Management Contracts