Entertainment & Media Law Signal : Canadian Entertainment Lawyers for Licensing, Intellectual Property & New Media Matters

A further development (see our earlier posts on the topic: Previews of Music as Fair Dealing and Previews of Music as Fair Dealing (Redux)) in the SOCAN v Bell Canada, et al case - where the Federal Court of Appeal recently held that "previews" of songs offered by online music services constituted "fair dealing" for the purposes of research.  SOCAN has filed a motion for leave to appeal the Federal Court's decision to the Supreme Court of Canada.  SOCAN's motion can be found here (hat tip: Sookman).  The Memorandum of Argument begins on page 104 of 133.

SOCAN's primary argument is subtle, one which trades on the enriching of the fair dealing defence prompted by the Supreme Court of Canada's decision in CCH v LSUC (2004 SCC 13).  In essence, the argument is premised on the notion that a purposive approach to interpreting fair dealing necessarily involves a taking a highly fragmented approach to that interpretive exercise; in short, the argument seems to be, if you want to understand whether a particular activity constitutes "fair dealing" you must investigate that activity with full immersion in its factual circumstances - and if you do that, then the notion that an online preview constitutes "research" in the sense that the Copyright Act is intended to facilitate falls apart.  Put a different way, the argument is that the finding in CCH arose in very particular circumstances, which don't translate to the online exploitation of music.   From paragraphs 7-9 of the Memorandum of Argument:

The Applicant submits that in finding that the actions of the Respondents constitute fair dealing, the Court below has created a very significant and unwarranted expansion in the scope of the defence. This expansion disrupts the balance between creators and users that the Act was intended to strike and results in the complete removal of the Applicant’s rights over a significant use of its music repertoire on the Internet in a manner that is incompatible with the object, spirit and purpose of the Act.

The defence of fair dealing is intended to further the central purpose of copyright law, that is, to strike a balance between the public interest in the creation and dissemination of creative works and the interest of creators in obtaining a just reward for their efforts. The Act imposes two conditions on the availability of the fair dealing defence: the dealing must be for an allowable purpose as enumerated by the Act and the dealing must be, in fact, fair. The allowable purposes listed in section 29 of the Act are “research and private study.” In light of the purpose of the Act, the use of music previews by the Respondents cannot be considered either research or private study and the volume of previews transmitted by the Respondents is too large to be considered fair.

The decisions below imperil the balance between protecting the interest of creators and promoting the development of creative works by expanding the definition of the term “research” to include activities that do not encourage the creation and dissemination of new works and by failing to consider the amount of the dealing in the aggregate.

Because any eventual Supreme Court decision in this case would be one of the first opportunities for the Court to authoritatively describe the contours of fair dealing following CCH v LSUC, whether Court agrees to hear the appeal, almost as much as the decision itself, will be important.

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Further to this earlier post about the Federal Court of Appeal's decision in Society of Composers, Authors and Music Publishers of Canada v Bell Canada, et al., 2010 FCA 123, which held that an online "preview" of a music track constitute "fair dealing" for purposes of research, Emir Aly Crowne-Mohammed and Yonatan Rozenszajn have written a nice little summary of the decision over at the charmingly-named JIPLP (otherwise known as the "weblog of the Journal of Intellectual Property Law and Practice").  As Crowne-Mohammed and Rozanszajn note,

Given the nature of the ‘research’ involved in users listening to the 30-second clips or previews of songs online, the court felt that research be given its primary and ordinary meaning, this being the use of previews to help consumers in their search for a particular song as to ensure its authenticity and quality before purchasing it. In this context, ‘research’ included consumer research.

The court then examined whether a 30-second preview, or less, was fair. The Federal Court of Appeal agreed with the Copyright Board in holding that the amount of the dealing is presumptively fair, given the length of the complete work.

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POST UPDATED

This post is somewhat curious to write - it is about a decision of the Canadian Federal Court of Appeal which, at the moment, appears not to be available online, thus limiting discussion of the appeal to what has been reported in other blogs and news outlets.  Here is what we know at this time (this post will be updated when the full decision is made publicly available - UPDATE May 25, 2010: the text of the decision is available here):

• Barry Sookman has reported that at some point last week the Federal Court of Appeal issued a decision in the ongoing judicial review of the Copyright Board of Canada's decision regarding SOCAN's Tariff 22.A - according to Sookman, the Court of Appeal has, confirming the decision of the Copyright Board, ruled that offering an online "preview" of a song in order to enable a consumer to decide whether to purchase that song constitutes an example of "fair dealing" for research purposes, and hence no public performance royalty is payable to SOCAN in connection with that preview
• The Copyright Board of Canada's original decision (released on October 18, 2007) which was the subject of the appeal to the Federal Court, is available here.  The Board's conclusion regarding "previews" begins at page 31 of the .pdf.
• Michael Geist, in his post discussing the FCA decision, evidently has access to a copy of the decision (where does he get those wonderful toys?), and reproduces a passage from the decision which indicates that the FCA has vigorously adopted the Supreme Court of Canada's guidance in the CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, 2004 SCC 13 that the "fair dealing" provisions in the Copyright Act should be given a liberal and purposive interpretation

As Geist notes, the implications of the decision are "very significant".  In declining to accord the word "research" a restricted interpretation (as Sookman notes, "SOCAN had argued before the Court that the term “research” applied to activities involving investigation, systematic research, critical analysis, scientific inquiry and factual discoveries arising and being carried out in a formal setting"), the FCA has affirmed that, in Geist's words, "the door is open to creative uses of the fair dealing provision in Canada consistent with the Supreme Court of Canada's view of a copyright balance between user rights and creator rights".

What may be most significant about the decision is that it may work to undercut the arguments of those (including this writer) who have argued in the past that a "fair use" approach to user's rights may be more beneficial than the "fair dealing" mechanism currently found in Canadian copyright law.  ("Fair dealing" provides for a prescribed and limited set of acceptable uses (research, private study, criticism or review and news reporting) which fall outside the ambit of a copyright owner's exclusive rights, while "fair use" is an American concept which allows for an open-ended assessment of the purposes, and so is not limited to the five acceptable purposes found in Canadian law.)  

Counter-intuitively, with respect to online "previews" of music, "fair dealing" has proved to be more accommodating than "fair use" - as Sookman notes, in the US decisions on this matter (United States v. American Society of Composers, Authors and Publishers, (In re AT&T Wireless), 599 F.Supp. 2d 415 (S.D.N.Y. 2009) and Video Pipeline v. Buena Vista Home Entertainment Inc. 342 F.3d 191) the US courts have held that offering an online "preview" is not fair use, and that a public performance royalty is payable.  A reassessment of the purported limits of "fair dealing" may be in order.

Though the issue appears settled in Canada, it continues to be live in the United States (at least one of the aforementioned decisions is currently on appeal). Greg Sandoval wrote a detailed article canvassing the various arguments surrounding whether online previews should be considered fair use, which is well-worth reading.

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Robert Andrews, writing at paidContent.org, provides a link-rich post on YouTube's ongoing negotiations with UK and European music collectives regarding royalties payable each time a composition is streamed on the site.  Particularly interesting is the breakdown of what the "standard" royalty rates are for online on-demand streaming (YouTube evidently manages to negotiate more favourable rates than the standard) and what they translate into in terms of actual revenue for publishers and artists.

As Andrews notes, PRS for Music (the UK performing and mechanical rights society) has an on-demand streaming rate of £0.00085 per track - which means that a track played one million times in the UK via on-demand streaming merits £850 in royalty payments (which would then presumably be split among the publisher and composer(s)).  GEMA, the German collecting society, has a standard royalty rate of €0.1278 (£0.11) - meaning that the same track streamed one million times in Germany results in £110,000 in royalty payments - or, as Andrews notes, approximately 130 times what is payable in the UK.

The Canadian approach is slightly different - and also much more confusing.  The approach used by SOCAN in its tariffs setting royalties for online music use, such as those set out in Tariff 22A and Tariff 22F (each applicable through 2006), set a "royalty" rate which is calculated as a portion of the service provider's revenues, rather than being a fixed amount per track.  That being said, none of the existing tariffs (B through G are currently under appeal in the federal courts) apply to social networking sites or user-generated content sharing sites (such as YouTube).  McCarthy Tetrault provides a useful overview of the tariffs in this short article by Barry Sookman and Daniel Glover.

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