Still Unsure: Copyright Board Denies Application for Interim Tariff on UGC and Online Movie Delivery

In a decision dated February 17, 2012, the Copyright Board has denied the request made by SOCAN for an interim tariff which would have applied to the online delivery of movies and television shows and the use of musical works in “user generated content” (UGC) – the interim tariff would have applied to services such as Netflix, YouTube, MySpace and Facebook.

The arguments which SOCAN advanced, as summarized in the decision, were as follows:

• the websites who would be subject to the tariff use significant amounts of music and generate vast amounts of revenues, some of which is attributable to music contained with SOCAN’s repertoire
• no tariff is in place which applies to these websites, and a Copyright Board decision on the matter is unlikely to be released before 2013 (and then will be subject to appeal, etc.)
• the absence of a tariff (and the prospect of at least a year before we get a certified one) is unfair to both SOCAN’s members and to users of music: to members because they are not currently receiving any payments for the use of their works, to users because there is significant uncertainty as to how much they will eventually have to pay for the current uses (and so setting aside reserves for the liability becomes a matter of guesswork as much as anything else)
• there is a gap created by the certified Tariff 22.D, which covers webcasts provided by conventional TV services, but does not apply to services like Netflix (thereby imposing a competitive disadvantage)

The objectors to the application argued as follows (again, as summarized by the Board’s decision):

• the stringent tests for interim relief were not met by SOCAN
• significant uncertainty exists as to whether the Board even has authority to certify significant parts of the proposed tariff – the Supreme Court has yet to release its decision on the issue of whether a “download” is a “communication to the public by telecommunication” – if it is not, then the proposed tariff cannot be applied in the proposed
• current certified tariffs are user-based, whereas the proposed interim tariff is structured using a use-based approach – such a change should not be implemented without a full hearing on the advisability of it

The Board sided with the objectors, denying the SOCAN application, and based its decision on the following reasons:

• user-based tariffs are more easily adaptable to “the constantly evolving Internet environment” and the Board isn’t inclined to switch to use-based tariffs without at least some evidence being proffered to justify the switch
• the proposed interim tariff specifically targets certain services, which is a departure from previous tariffs which target activities
• no economic rationale had been provided by SOCAN for the rates it was proposing to charge under the interim tariff
• a number of issues arise in the context of the application (is SOCAN entitled to a tariff? who should pay it? what is the appropriate rate base?) which deserve a full hearing and so pre-empting the hearing by granting an interim tariff would be unadvisable
• finally, “there are no deleterious effects that cannot be remedied through the issuance of the final tariff”