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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

Parliament Undertaking Media and Local Communities Study

Parliament is taking another careful look at the state of the country’s news media.

The Standing Committee on Canadian Heritage is in the midst of at least ten meetings in which it will collect evidence on “how Canadians, and especially local communities, are informed about local and regional experiences through news, broadcasting, digital and print media.” The committee has already heard from a swath of witnesses ranging from government ministries and agencies like the Departments of Industry and Heritage, the CRTC and the Competition Bureau, industry stakeholders like the Aboriginal Peoples Television Network and the Canadian Media Guild as well as a handful of journalism professors and industry observers.

As even the most casual observers of the news media well know, it’s ugly out there: the context of the committee’s investigation is a Canadian media space roiled by changing consumer habits and declining print media advertising revenues. As readers move online, it has become increasingly difficult to make a buck in the newspaper game – particularly for smaller, local papers. The Guelph Mercury, one of the oldest newspapers in Canada, printed its final edition a few weeks ago. This followed the shuttering of the 141-year-old Nanaimo News earlier this year. By one count, 22 newspapers have closed in the last five years.

This is not the first time that Parliament has taken a look at the news. As Jennifer Ditchburn has reported, at least four other federal studies have been undertaken on the country’s media – none of which, in Ditchburn’s view, led to significant action. Media outlets and content producers should, however, watch for the committee’s eventual recommendations so as to be better able to respond to potential regulatory consequences.

We invite you to return to the Signal for a follow-up post when the Media and Local Communities study is made public.

Parliament Undertaking Media and Local Communities Study

Canada’s Anti-Spam Law – New Guidance on Offering Apps, Software

Canada’s Anti-Spam Law (CASL) targets more than just email and text messages 

CASL also prohibits installing a “computer program” – including an app, widget, software, or other executable data – on a computer system (e.g. computer, device) unless the program is installed with consent and complies with disclosure requirements.  The provisions in CASL related to the installation of computer programs will come into force on January 15, 2015.

Application outside Canada

Like CASL’s email and text message provisions, the Act’s “computer program” installation provisions apply to persons outside Canada.  A person contravenes the computer program provisions if the computer system (computer, device) is located in Canada at the relevant time (or if the person is in Canada or is acting under the direction of a person in Canada).

Penalties

The maximum penalty under CASL is $10 million for a violation of the Act by a corporation.  In certain circumstances, a person may enter into an “undertaking” to avoid a Notice of Violation.  Moreover, a private right of action is available to individuals as of July 1, 2017.

CASL’s broad scope leads to fundamental questions – how does it apply?

The broad legal terms “computer program”, “computer system” “install or cause to be installed” have raised many fundamental questions with industry stakeholders.  The CRTC – the Canadian authority charged with administering this new regime – seems to have gotten the message.  The first part of the CRTC’s response to FAQ #1 in its interpretation document CASL Requirements for Installing Computer Programs is “First off, don’t panic”.

New CRTC Guidance 

The CRTC has clarified some, but not all of the questions that industry stakeholders have raised.  CRTC Guidance does clarify the following.

  • Self-installed software is not covered under CASL.  CASL does not apply to owners or authorized users who are installing software on their own computer systems – for example, personal devices such as computers, mobile devices or tablets.
  • CASL does not apply to “offline installations“, for example, where a person installs a CD or DVD that is purchased at a store.
  • Where consent is required, it may be obtained from an employee (in an employment context); from the lessee of a computer (in a lease context); or from an individual (e.g. in a family context) where that individual has the “sole use” of the computer.
  • An “update or upgrade” – which benefits from blanket consent in certain cases under CASL – is “generally a replacement of software with a newer or better version”, or a version change.
  • Grandfathering – if a program (software, app, etc.) was installed on a person’s computer system before January 15, 2015, then you have implied consent until January 15, 2018 – unless the person opts out of future updates or upgrades.

Who is liable?

CRTC staff have clarified that as between the software developer and the software vendor (the “platform”), both may be liable under CASL.  To determine liability, the CRTC proposes to examine the following factors, on a case-by-case basis:

  • was their action a necessary cause leading to the installation?
  • was their action reasonably proximate to the installation?
  • was their action sufficiently important toward the end result of causing the installation of the computer program?

CRTC and Industry Canada staff have indicated that they will be publishing additional FAQs, in response to ongoing industry stakeholder questions.

See:  fightspam.gc.ca  and consider signing up for information updates through the site.

 

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Canada’s Anti-Spam Law – New Guidance on Offering Apps, Software

Optioning Film or TV Rights in a Book – A Checklist

As Torontonians know, we are in the midst of a mayoral election campaign; in all the excitement surrounding the candidate debates, it may have slipped into the rearview mirror that last month it was announced that the film rights for Crazytown: the Rob Ford Story, Robin Doolittle’s bestselling book about Toronto’s current mayor, had been sold to a Toronto-based production company. What are some of the considerations to be taken into account when structuring and negotiating an agreement to make a movie based on a book?

  • Option vs Purchase. Most often, the deal to make a movie based on a book takes the form of an exclusive “option” agreement. What that means is that the producer has acquired not the exclusive right to make the movie, but has acquired the exclusive right to purchase the right to make the movie. In other words, there are usually some conditions precedent which the producer needs to satisfy before they can actually go ahead and make the movie, the most important condition (from the author’s perspective) being the payment of a “purchase” price. Why are agreements structured as options? Because the producer usually needs time to make arrangements to actually finance the making of the movie – and while the producer is running around trying to gather the money to make the movie, they need to “secure” the exclusive rights in the book, so that the author doesn’t go and give the rights to some other producer. By entering into an option agreement, the producer is basically acquiring the right to go to potential investors and financiers of the movie and say “hey, I’ve got the exclusive right to make a movie based on this book – want to be a part of it?”
  • Who Owns the Rights?  For the film producer, it is critical to ascertain who actually controls the right to make an audio-visual project based on the book (what I’ll refer to throughout this post as the “AV rights”). Often the publisher of the book will have acquired the AV rights in their publishing contract with the author – but it certainly is not unusual for an author to have retained the AV rights. Even if a producer is able to satisfy themselves that the author has the AV rights, it will be prudent to obtain from the publisher a quitclaim or release wherein the publisher confirms that they do not control the AV rights.
  • Option Fee. The option fee is the amount which the producer pays to acquire the exclusive option. This fee is usually paid on signing of the option agreement (or very soon thereafter), and is often a relatively nominal amount – but is entirely open to negotiation. Only blockbuster bestsellers will see an option fee in the high five- or (even more rarely) six-figure range. An ancillary issue is whether the option fee is “applicable” against the purchase price – in other words, when the producer has to make payment of the purchase price (which we’ll discuss below) do they get to reduce the amount of the purchase price by the amount of the option fee (and any payments for extensions, also discussed below) which they have already paid? It is often the case that the initial option fee is “applied” against (i.e., reduces) the purchase price, but subsequent payments to extend the option period beyond its initial duration are not – again, however, the point is really a function of the negotiations between the parties.
  • Option Period and Payments for Extensions. How long the initial option period lasts for is likewise subject to negotiation, though there are some general parameters: producers will usually be reluctant to enter into an option period which is less than one year, and authors will usually be reluctant to agreement to an option period which is longer than two years – so an initial option period of 12-18th months is fairly common. Given the vagaries of the film/TV production process, however, the “initial” option period is usually just a starting point: producers will often want the ability to extend the option period beyond its initial duration – but it will cost them, and they will not be able to extend the option period indefinitely. The amount of any extension payment is usually a multiple of the initial option fee.
  • Purchase Price – Amount and Form. Here’s where things get funky. The purchase price is the amount which the producer has to pay in order to actually obtain the exclusive right to make the movie – payment of the purchase price is what converts the producer’s right from an option to an actual conveyance of rights. The amount of the purchase price is often related to its form: Is the purchase price simply a flat dollar amount which is pre-agreed by the parties at the time of entering into the contract? Or will the amount of the purchase price be determined by reference to a formula which takes into account the budget of the film or TV project? Authors will often want the purchase price to be determined by reference to a formula: the producer making a $3 million movie based on the book is a very different proposition than the producer making a $30 million movie based on the book. By contrast, the producer will often want to place some restrictions on the size of the purchase price they need to pay – and so the purchase price often is expressed as a percentage (usually somewhere between 1.5-4%) of the budget of the film/TV show, subject to a floor and ceiling on the amount. That way, the author knows they won’t get less than $x, and the producer knows they won’t have to pay more than $y. Easy enough, but which budget will be used as the reference point? The “in-going” budget which is used at the start of principal photography, or the “final” budget after all costs have actually been expended? Will there be any exclusions from the budget which is used to calculate the purchase price (such as deferred payments owing to cast and crew who agreed to forego an upfront payment in an effort to get the movie made)?
  • Purchase Price – Timing and Process. How the purchase price gets paid and how the option actually gets exercised should be the subject of close attention when drafting an option agreement. The process and payment mechanic (e.g., in order to exercise the option, the producer has to deliver a written notice to this particular person at this particular address, along with payment of the purchase price in this particular way (such as by money order or wire transfer)) should be spelled out in detail. Where the purchase price is to be determined by reference to the budget, there should also be a mechanism which allows for a portion of the purchase price to be paid “up-front” upon exercise of the option (because the relevant amount of the budget might not be known at the time of exercise of the option) with a “catch-up” payment to be made later on, once the final amount of the budget can be determined. Authors will want the option agreement to include a mechanism which makes it clear that the commencement of principal photography is deemed to be an automatic exercise of the option, necessitating payment of the purchase price.
  • Contingent Compensation. Another oft-contentious area – the possibilities for contingent compensation are limited only by the parties’ imaginations and tolerance for drawn-out negotiations. Contingent compensation might take the form of box office bonuses, net profit participation, additional payments to the author if the book achieves “bestseller” status on one chart or another, etc. Don’t forget audit and reporting language!
  • Subsequent Productions. If the producer is granted rights to produce more than one audio-visual project based on the author’s book, the agreement will need to spell out what sorts of payments (if any) the author is entitled to for such subsequent productions (which can include sequels, prequels, remakes, spin-offs, TV-series-based-on-movies, etc.).
  • Scope of Rights Granted. What exactly are the rights being granted to the producer? Is it the right to make a single audio-visual production? Or multiple productions? Can they make sequels? Prequels? Spin-offs? Remakes? Can they create merchandise based on the movie? Can they publish the movie’s screenplay as a stand-alone work? Can they create a theme park ride based on their movie? What about a videogame? Specificity in the wording of the nature of rights being granted will be rewarded down the road.
  • Credit. The precise form of the author’s credit will need to be determined. This can take multiple forms, whether on-screen or in promotional materials for the AV project. Some examples: the on-screen credit might read “Based on the book [insert title] written by [insert author name]” – but will that be a main title credit on a separate card, or just a credit in the end credit roll? Is the author going to get credit in paid advertising? Does the paid ad credit get included just in the “billing block” or does the credit get included in the “artwork” so that it is plainly visible to viewers of the ad? In really exceptional cases, the credit obligation might include the right/obligation to use the author’s name as part of the title of the movie (e.g., “John Grisham’s The Firm“). Oh, the contortions we go through in specifying these things…
  • Consultation/Approval/Participation. For the most part, unless the author is a J.K. Rowling or John Grisham calibre superstar, most producers are going to be loathe to give any sort of consultation or approval right to an author – the producer just wants to go off and get their movie made without interference from an author who thinks that their character would never say the lines in the screenplay. But, hey, it never hurts to try and ask for the right to approve or be consulted about things like the title, the casting, the screenplay, the promotional campaign, etc. If an author is feeling particularly bold, they might want to argue for a small role in the picture (non-speaking!), or to be engaged as a paid consultant on the project.
  • Reserved Rights. Properly drafted grants of rights should make it clear precisely what rights are being granted from the author to the producer – but it can be helpful to have just-as-clearly-drafted provisions which set out what rights are being retained (or “reserved”) by the author. This is often a jumble of “non-core” rights, but ones which can prove lucrative: radio rights, live stage rights, print publication (e.g., graphic novels), etc. Authors will want to make it clear that the author has the right to create “author-written” sequels to their own book.
  • Ownership of Development Materials. The producer will inevitably create what are referred to as “development” materials while they, er, “develop” their audio-visual project – things like draft screenplays or character designs if the project will be an animated one. Who gets to keep those materials if the option is not exercised should be addressed.
  • Reversion. Sometimes the producer will exercise their option, pay the purchase price and then… the movie/TV show never actually gets made. For the author, that’s a terrible position to be in: they have conveyed the AV rights in their book, and those AV rights are just sitting on a shelf, unexploited. In order to ensure that doesn’t happen, agreements will include a “reversion” clause, which stipulates that, even after exercise of the option, if the audio-visual project has not been commercially released within a certain number of years (usually somewhere between 4-7 years), the AV rights revert back to the author. The producer will try to make such reversion subject to the producer’s right to be repaid any costs which the producer expended in purchasing the rights and developing the project.

The foregoing list does not address provisions which are not specific to option agreements, such as representations and warranties, “no injunctive relief” clauses, dispute resolution, etc.; nor does it address extra-contractual matters such as the need for conducting a chain of title review on the project.

A final thought: perhaps moreso than other film/TV-related contracts, option agreements require significant input from author’s agents, who can advise on what is “market” for certain elements of the agreement with reference to the particular book being optioned, particularly those relating to payment and credit.

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Optioning Film or TV Rights in a Book – A Checklist

ALIS – A Legal Guide for Writers

The good folks at Nova Scotia’s Artists’ Legal Information Society (ALIS) have published their free Legal Guide for Writers, a solid plain-English resource which will prove useful both for authors and their lawyers. Published under a Creative Commons BY-NC-ND license, the Guide explains how contractual relationships in the book publishing industry are structured, explores how copyright protection arises and can be registered and how copyright can be infringed, with reference to relevant fair dealing concepts.

Of perhaps most use to those trying to navigate their way through a book publishing contract, the Guide also contains explanations of common concepts and clauses, such as royalty provisions and author representations/warranties, and provides advice on clauses which authors should negotiate (e.g., reversion on bankruptcy, non-competition restrictions). The impact of digital books, and how “traditional” clauses may need to be modified to take account of e-book exploitation, is also addressed. Finally, the Guide contains some helpful guidance on agent contracts.

While nothing is a substitute for the advice of a lawyer who has experience reviewing and negotiating publishing agreements, the ALIS Legal Guide for Writers provides quality information in an easy-to-understand and -navigate format – interested authors and lawyers should definitely check it out.

ALIS – A Legal Guide for Writers