2020 FCA 77, 2020 FCA 77

A-259-17 2020 FCA 77 York University ( Appellant ) v. The Canadian Copyright Licensing Agency (“Access Copyright”) ( Respondent ) and Universities Canada, Canadian Association of University Teachers, Canadian Federation of Students, Copyright Consortium of the Council of Ministers of Education, Canada, Association of Canadian Publishers, Canadian Publishers’ Council and The Writers’ Union of Canada ( Interveners ) Indexed as: York University v. Canadian Copyright Licensing Agency (“Access Copyright”) Federal Court of Appeal, Pelletier, de Montigny and Woods JJ.A.—Ottawa, March 5 and 6, 2019 and April 22, 2020.

Copyright — Infringement — Tariffs — Appeal from Federal Court decision allowing respondent’s action to enforce interim tariff issued by Copyright Board under Copyright Act, s. 68.2(1) — Respondent, collective society which administers reproduction rights in published literary works, collects royalties, distributes them to copyright holders — Appellant, Canada’s third-largest university — Both respondent, appellant parties to licence agreement permitting appellant’s professors to make copies of portions of textbooks, other published works in respondent’s repertoire — Later, given uncertainty about licence agreement renewal, respondent filing proposed tariff with Copyright Board for post-secondary educational institutions, applying to Board for interim decision — Asking that existing licensing regime continue to apply until Board certified tariff for period in question — Board finally issuing interim tariff, which incorporated licence agreement royalty rates — Appellant deciding to “opt out” of tariff — Appellant operating without benefit of licence from respondent, introducing its “Fair Dealing Guidelines for York Faculty and Staff” — Relying on Guidelines to help avoid copyright infringement — Appellant’s faculty, staff copied significant amounts of material for which appellant paid no licence fees or royalties — In action against appellant, respondent claiming appellant had infringed copyright in works in its repertoire; therefore, liable for amounts specified in interim tariff — Whether final tariff enforceable or “mandatory” — Tariff approved by Copyright Board not “mandatory” — Collective society/tariff regime are means of regulating licensing schemes which, by definition, are consensual — While modifications made in statutory language used between 1936 and 2012, continuous references to licensing schemes, retention of key elements of 1936 Copyright Act leaving little doubt that tariffs not mandatory — Thus, collective societies not entitled to enforce terms of their approved tariff against non-licensees — In conclusion, final tariff would not be enforceable against appellant because tariffs not binding non-licensees — Consequently, interim tariff also not binding — Acts of infringement not turning infringers into licensees so as to make them liable for payment of royalties — Therefore, validity of appellant’s Guidelines as defence to respondent’s action not arising because tariff not mandatory, respondent could not maintain copyright infringement action — Appeal from judgment on action to enforce interim tariff allowed.

Copyright — Infringement — Fair dealing — Appeal from Federal Court decision dismissing counterclaim against respondent’s action to enforce interim tariff issued by Copyright Board under Copyright Act, s. 68.2(1) — Both respondent, appellant parties to licence agreement permitting appellant’s professors to make copies of published works in respondent’s repertoire — Later, given uncertainty about licence agreement renewal, respondent filing proposed tariff with Copyright Board for post-secondary educational institutions, applying to Board for interim decision — Board issuing interim tariff, which incorporated licence agreement royalty rates — Appellant deciding to “opt out” of tariff, operating without benefit of licence from respondent — Appellant introducing its “Fair Dealing Guidelines for York Faculty and Staff” which appellant relied upon to help avoid copyright infringement — Appellant’s faculty, staff copied significant amounts of material for which appellant paid no licence fees or royalties — In counterclaim, appellant seeking declaration that any reproductions made in compliance with Guidelines constituting fair dealing under Act , s. 29 — Whether appellant’s Guidelines constituted fair dealing — Factors set out by S.C.C. in CCH Canadian Ltd. v.

Law Society of Upper Canada applied to Guidelines — Two-step process to assess fair dealing outlined in case law also applied — Person invoking “fair dealing” must satisfy both aspects of test — Appellant having to justify Guidelines since not attempting to show fair dealing of students — As copier, incumbent on appellant to ensure that Guidelines implemented according to their intent, since integrity of Guidelines, appellant’s practice at heart of its claim of fair dealing — Federal Court’s finding that safeguards absent undermined appellant’s claim to fair dealing — Federal Court entitled to inquire into appellant’s real purpose in using copyrighted work — Conclusions respecting appellant’s purpose in adopting Guidelines unequivocal, clear indication of unfairness — Federal Court not erring when concluding that Guidelines tending towards unfairness either in aggregate or in amount of copying, which appellant not justifying beyond invoking education as allowable purpose — Regarding amount of dealing, Federal Court considered this factor as core of fair dealing analysis — Concluded that nothing fair about amount of dealing contemplated by appellant’s Guidelines — Appellant trying to defend copying practices by reference to user’s perspective, not leading any evidence as to students’ use of copied works to show practice fair — To extent appellant relying on user’s perspective, not demonstrating either in Federal Court or on appeal how copying pursuant to Guidelines fair from students’ point of view — With respect to factor of alternatives to dealing, Federal Court found that appellant not considering existing or potential alternatives to dealing — No need to interfere with Federal Court’s conclusion on this factor — As to effect of dealing, Federal Court concluding that Guidelines causing, would cause material negative impacts on market for which respondent would otherwise have been compensated for appellant’s copying, that negative impacts pointing to unfairness — None of appellant’s submissions sufficient to show that Federal Court falling into palpable, overriding error on question of fact or mixed fact, law — In conclusion, given relief appellant seeking, incumbent thereon to justify Guidelines themselves to allow Court to declare that reproductions that fell within Guidelines were fair dealing but appellant not doing so — Appeal from judgment on counterclaim dismissed.

This was an appeal from a Federal Court decision allowing the respondent’s action to enforce an interim tariff approved by the Copyright Board and dismissing the appellant’s counterclaim.The respondent is a collective society which administers the reproduction rights in published literary works and collects royalties and distributes them to copyright holders. The appellant is Canada’s third-largest

university, having over 50 000 students and approximately 1 500 full-time faculty members. From 1994 to 2010, the respondent and appellant were parties to a licence agreement permitting the appellant’s professors to make copies of portions of textbooks and other published works in the respondent’s repertoire. In March 2010, when the respondent was uncertain if the renewal of the licence agreement could be finalized before its expiry, it filed a proposed tariff with the Copyright Board for post-secondary educational institutions covering the years 2011–2013.

In light of the rapidly approaching expiry date of the licence agreement, the respondent applied to the Board for an interim decision. It asked that the existing licensing regime continue to apply until the Board certified a tariff for the period in question. On December 23, 2010, the Board granted the respondent’s application and issued an interim tariff, which incorporated the licence agreement royalty rates. The interim tariff took effect on January 1, 2011.

Initially, the appellant complied with the terms of the interim tariff but, in July of 2011, the appellant formally notified the respondent of its decision to “opt out” of the tariff as of August 31, 2011. As of September 1, 2011, the appellant was operating without the benefit of a licence from the respondent. Instead, the appellant introduced its “Fair Dealing Guidelines for York Faculty and Staff”. It relied on these Guidelines, which were created to help the university avoid copyright infringement.

The appellant’s faculty and staff copied significant amounts of material for which the appellant paid no licence fees or royalties. The appellant’s decision to opt out of the tariff prompted the respondent to start an action in the Federal Court to enforce the interim tariff under subsection 68.2(1) of the Copyright Act .

The foundation of the respondent’s claim was that the appellant had infringed copyright in works in its repertoire and was therefore liable for the amounts specified in the interim tariff and that some of the appellant’s professors had, after September 1, 2011, made unauthorized copies of in-repertoire works. In response to the action, the appellant filed a counterclaim seeking a declaration that any reproductions made in compliance with its Guidelines constituted fair dealing under

section 29 of the Act . The Federal Court began its analysis by addressing the question of the mandatory effect of the tariff. A review of legislative history and statutory

interpretation led it to conclude that Board tariffs are mandatory. It then turned to the counterclaim and the appellant’s Guidelines. The Federal Court reviewed the extensive evidence on the quantity and quality of copying which took place at the appellant pursuant to the Guidelines. It then addressed the question of the fairness of the Guidelines by examining them in light of the factors to assess fairness used by the Supreme Court in CCH Canadian Ltd. v. Law Society of Upper Canada .

The Federal Court found that four of the factors, specifically, the character of the dealing, the amount of the dealing, the nature of the work and the effect of the dealing tended to show the unfairness of the Guidelines, while the other two factors, the purpose of the dealing and the alternatives to the dealing, tended to show their fairness. On appeal, the appellant argued that the Federal Court erred in concluding that copying which fell within its Guidelines was not “fair dealing” within the meaning of

section 29 of the Act ; that an interim tariff is not an approved tariff and is therefore unenforceable by action; and that in any event, even if the interim tariff was an approved tariff, it would only apply to those who chose to become licensees. The respondent argued the tariffs are mandatory and that the meaning of the word “tariff” is unequivocal and means “a

schedule or system of duties imposed by a government on goods” . This led it to conclude that a copyright tariff is imposed on users, whether the user agrees to be bound or not. The main issue on appeal was whether a final tariff is enforceable or “mandatory” and on the counterclaim whether the appellant’s Guidelines constituted fair dealing. Held , the appeal from the judgment on the action to enforce the interim tariff should be allowed and the appeal from the judgment on the counterclaim should be dismissed.

A tariff approved by the Copyright Board, as the appellant’s interim tariff was, is not “mandatory” in the sense that it is enforceable against anyone whose use of the protected works is an infringement of the copyright owner’s exclusive rights. It had to be determined whether the interposition of the Copyright Board between the user and the rights owner changes the relationship between them. This turned on the effect of the Board’s approval of a collective society’s proposed royalties. This was a question with a long history, which was best understood through a step-by-step historical review.

The collective society/tariff regime is a means of regulating licensing schemes which, by definition, are consensual. While there have been modifications in the statutory language used between 1936 and 2012, the continuous references to licensing schemes and the retention of the key elements of the 1936 Copyright Act left little doubt that tariffs are not mandatory, which is to say that collective societies are not entitled to enforce the terms of their approved tariff against non-licensees.

The advantage of collective societies is that they allow rights holders to pool their resources to enable them to economically enforce their rights. This advantage exists even in the absence of mandatory tariffs. Furthermore, to the extent that the Internet creates many opportunities for infringement, the enforcement of mandatory tariffs against many individual infringers is no different than prosecuting infringement actions against many individual infringers. The statutory remedy is collective enforcement, not the substitution of one prohibited act for another.

In conclusion, a final tariff would not be enforceable against the appellant because tariffs do not bind non-licensees. If a final tariff is not binding, the conclusion could hardly be different for an interim tariff. Acts of infringement do not turn infringers into licensees so as to make them liable for the payment of royalties. Infringers are subject to an action for infringement and liability for damages but only at the instance of the copyright owner, its assignee or exclusive licensee.

In the course of the hearing in this matter, the respondent candidly admitted that, given its agreement with its members, it could not sue the appellant for infringement in the event that some or all of the copies made by the appellant were infringing copies. However, the respondent claimed the right to enforce the tariff against non-licensee infringers; yet, if the tariff is not mandatory, then there can be no right to enforce it.

As a result, the validity of the appellant’s Guidelines as a defence to the respondent’s action did not arise because the tariff was not mandatory and the respondent could not maintain a copyright infringement action. With respect to the appellant’s counterclaim, the appellant sought a declaration that copies made in compliance with its Guidelines came within

section 29 of the Act as fair dealing. In other words, such copies are not an infringement of the rights holders’ copyright. The issue called for the application of the fairness factors set out in the Supreme Court of Canada’s decision in CCH Canadian Ltd. v. Law Society of Upper Canada to the Guidelines. Such factors include the purpose of the dealing; the character of the dealing; the amount of the dealing; alternatives to the dealing; the nature of the work; and the effect of the dealing on the work.

Furthermore, the two-step process to assess fair dealing outlined in subsequent Supreme Court case law was applied. The steps are whether the dealing is for the purpose of either “research” or “private study”, the two allowable purposes listed under

section 29 of Act . The second step assesses whether the dealing is “fair”. The onus is on the person invoking “fair dealing” to satisfy both aspects of the test.

Concerning the purpose of the dealing, since the appellant did not attempt to show the fair dealing of its students and given that it put its Guidelines at the centre of its justification, the appellant was bound to justify its Guidelines. As the copier, it was incumbent on the appellant to ensure that its Guidelines were implemented according to their intent, since the integrity of the Guidelines and the appellant’s practice were at the heart of its claim of fair dealing. The Federal Court’s finding that the safeguards were virtually absent undermined the appellant’s claim to fair dealing.

The Federal Court was entitled to inquire into the appellant’s real purpose or motive in using the copyrighted work, which it found was, in particular, to obtain for free that which the appellant had previously paid for. The Federal Court’s inquiry was legitimate, having regard to the Supreme Court’s teaching in CCH . The Federal Court erred but not for the reasons the appellant identified. It fell into palpable and overriding error in importing education as an “allowable purpose” into its analysis of the goal of the dealing.

Its conclusions with respect to the appellant’s purpose in adopting its Guidelines were unequivocal and were a clear indication of unfairness. Regarding the character of the dealing, since the issue in this case was the fairness of the appellant’s Guidelines, the application of the CCH analysis meant that the Federal Court did not err when it concluded that the Guidelines tended towards unfairness either in the aggregate or from the point of view of an individual student receiving 360 copies, an amount which the appellant did not justify beyond invoking education as an allowable purpose.

There was no reason to interfere with the Federal Court’s conclusion on this factor. As to the amount of the dealing, it is clear from the Federal Court’s reasons that it considered this factor to be the core of the fair dealing analysis, a factor which considers the proportion of a protected work which is copied and not the amount of copying in the aggregate. Unfortunately, the Federal Court muddied the waters by introducing references to quantitative elements in its analysis.

The Federal Court concluded that, with respect to this factor, there was nothing fair about the amount of the dealing contemplated by the appellant’s Guidelines. The appellant’s challenge to the Federal Court’s conclusions on this factor were based on the question of perspective whereby the appellant pointed to the Court’s focus on aggregate copying which highlighted the appellant’s perspective rather than the student’s. The Court’s digression into aggregate copying was its attempt to show that the copying in this case was anything but trivial or insignificant.

In doing so, the Court may have given more importance to a non-contentious point than it deserved, but that was not a reason to set aside the substance of its findings. The error may have been palpable but it was not overriding. The appellant’s allegations about the Court’s use of the wrong perspective continued to be wide of the mark. The objective of the appellant’s counterclaim was to have the Court give its imprimatur to its Guidelines. If it hoped to succeed in that endeavour, the appellant had to address the Guidelines themselves.

Rather than assuming its burden, the appellant tried to defend its copying practices by reference to the user’s perspective. While that is a perfectly acceptable approach to fair dealing, it requires the copier to explain how the user’s use is fair. The appellant did not lead any evidence as to students’ use of the copied works so as to show it was fair. Thus, the appellant’s focus on the student’s perspective did not advance its cause.

To the extent that the appellant relied on the user’s perspective, it did not demonstrate either in the Federal Court or on appeal how the copying pursuant to the Guidelines was fair from students’ points of view. Regarding the alternatives to the dealing, the Federal Court concluded that the use of copying was reasonably necessary to achieve the ultimate purpose of education, and that this factor favoured the appellant though not as significantly as the appellant asserted. The Federal Court found that the latter had not actively engaged in consideration or use of existing or potential alternatives.

It identified some possible alternatives and then pointed out that there were no reasonable free alternatives to copying. The Federal Court’s comments were understandable when considering its earlier conclusion that while the appellant’s overall purpose is education, the purpose or objective sought by the adoption of the Guidelines was to obtain for free that which had previously been paid for. Thus, there was no need to interfere with the Federal Court’s conclusion that this factor favoured the appellant although its effect was mitigated.

With respect to the fifth factor, the effect of the dealing, the Federal Court concluded that the Guidelines caused and would cause material negative impacts on the market for which the respondent would otherwise have been compensated for the appellant’s copying and that these negative impacts pointed to unfairness. In this case, the copying pursuant to the Guidelines was vastly more significant than it was in any of the leading cases on fair dealing examined.

None of the appellant’s submissions were sufficient to show that the Federal Court fell into palpable and overriding error on a question of fact or mixed fact and law. The factor of the nature of the work did not figure in the Federal Court’s decision to any appreciable extent. After making its analysis, the Federal Court concluded that this factor tended to the negative end of the fairness spectrum due to the way in which the nature of the works is treated and the manner in which the Guidelines are applied.

This assessment was not challenged by the appellant and, in the present circumstances, it was sufficient to take note of the Federal Court’s conclusion. In conclusion, given the relief which the appellant sought, it was incumbent on it to justify the Guidelines themselves so as allow the Court to declare that reproductions that fell within the Guidelines were fair dealing. It did not do so. The appellant did not show that the Federal Court erred in law in its understanding of the relevant factors or that it fell into palpable and overriding error in applying them to the facts. STATUTES AND REGULATIONS CITED

An Act to amend the Copyright Act , S.C. 1997, c. 24, ss. 1, 3, 14, 45, 46, 50.

An Act to amend The Copyright Amendment Act, 1931 S.C. 1935, c. 8.

An Act to amend The Copyright Amendment Act, 1931 , S.C. 1936, c. 28, ss. 10(1),(2),(3), 10A, 10B(7),(8),(9), 67.1(3), 67.1(5), 68(1). Canada Transportation Act , S.C. 1996, c. 10, ss. 87 “tariff”, 113(2), 117, 118, 119(2), 120.1, 126. Copyright Act , R.S.C. 1970, c. C-30, s. 50(9). Copyright Act , R.S.C., 1985, c. C-42, ss. 2 , “collective society”, 3, 13(4), 15, 18, 19, 21, 29, 29.1, 29.2, 29.9(2), 34–38.1, 35, 66.6 (1), 67, 67.1, 67.2(1),(2), 68(4), 68.2, 70(1), 70.1–70.4, 70.1–70.191,70.11, 70.12, 70.13–70.19, 70.14, 70.15, 70.17, 70.18, 70.19, 70.191, 70.2–70.4, 70.3, 70.4, 76(4), 77(4), 81, 82(1)(a), 83(13)(b). Copyright Act, 1921 , S.C. 1921, c. 24.

Copyright Amendment Act, 1931 (The), S.C. 1931, c. 8. Copyright Modernization Act, S.C. 2012, c. 20.

Interpretation Act, R.S.C., 1985, c. I-21, ss. 2 “regulation”, 14. Revised Statutes of Canada,1985 Act, R.S.C., 1985 (3rd Supp.), c. 40, s. 12(a). CASES CITED APPLIED: CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13, [2004] 1 S.C.R. 339; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2S.C.R. 235; R. v. Summers, 2014 SCC 26, [2014] 1 S.C.R. 575. DISTINGUISHED: Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright), 2012 SCC 37, [2012] 2 S.C.R. 345. CONSIDERED: Canadian Broadcasting Corp. v. SODRAC 2003 Inc., 2015 SCC 57, [2015] 3 S.C.R. 615; Vigneux v.

Canadian Performing Right SocietyLtd., [1943] S.C.R. 348, ; Society of Composers, Authors and Music Publishers Canada v. 348803 Alberta Ltd. (1997),79 C.P.R. (3d) 449, (F.C.T.D.); Maple Leaf Broadcasting v. Composers, Authors and Publishers Association ofCanada Ltd., [1954] S.C.R. 624, ; Composers, Authors and Publishers Association of Canada, Limited v. SandholmHoldings Limited et al., (CA EXC), [1955] Ex. C.R. 244, (1955), 24 C.P.R. 58; Performing Rights Organization ofCanada Ltd. v. Lion d’Or

(1981) Ltée. et al. (1987), 16 F.T.R. 104, 17 C.P.R. (3d) 542 (F.C.T.D.); R. v. D.L.W., 2016 SCC 22, [2016] 1S.C.R. 402; Eli Lilly & Co. v. Novopharm Ltd., [1998] 2 S.C.R. 129, ; Canadian Copyright Licensing Agency v. ApexCopy Centre, 2006 FC 470, 290 F.T.R. 236; Canadian Copyright Licensing Agency (Access Copyright) v. Three Cent Copy Centre Ltd.,2012 FC 866; Canadian Copyright Licensing Agency v. U-Compute, 2005 FC 1644, 284 F.T.R. 116; Society of Composers, Authors andMusic Publishers of Canada v.

Kicks Roadhouse Inc., 2005 FC 528, 39 C.P.R. (4th) 238; Society of Composers, Authors and MusicPublishers of Canada v. Bell Canada, 2012 SCC 36, [2012] 2 S.C.R. 326. REFERRED TO: Euro-Excellence Inc. v. Kraft Canada Inc., 2007 SCC 37, [2007] 3 S.C.R. 20; Essar Steel Algoma Inc. v. Jindal Steel and Power Limited,2017 FCA 166; Namdarpour v. Vahman, 2019 BCCA 153, 23 B.C.L.R. (6th) 215; Nevsun Resources Ltd. v.

Araya, 2020 SCC 5, 443D.L.R. (4th) 183; Society of Composers, Authors and Music Publishers of Canada v. 728859 Alberta Ltd., , 6 C.P.R.(4th) 354 (F.C.T.D.); Canada (Society of Composers, Authors and Music Publishers) v. Bano Inc. (Green Bean Java Bistro), 2019 FC1011; CCH Canadian Ltd. v. Law Society of Upper Canada, 2002 FCA 187, [2002] 4 F.C. 213, revd on other grounds, 2004 SCC 13,[2004] 1 S.C.R. 339; Reprographic Reproduction 2005-2009, Re, 2009 CarswellNat 1930 (WLNext Can.). AUTHORS CITED Canada Gazette,

Part I, Vol. 144, No. 24, June 12, 2010. Fox, Harold G. The Canadian Law and Practice Relating to Letters Patent for Inventions, 4th ed. Toronto: Carswell, 1969. Government of Canada. “Parts of the Canada Gazette” (last modified 9 August 2019), online: <http://www.gazette.gc.ca/cg-gc/lm-sp-eng.html#a5>. Katz, Ariel. “Spectre: Canadian Copyright and the Mandatory Tariff –

Part I” (2015), 27 I.P.J. 151. MacMillan, Margaret. Paris 1919: Six Months That Changed the World. New York: Random House, 2002. APPEAL from Federal Court judgment and judgment on counterclaim (2017 FC 669, [2018] 2 F.C.R. 43) allowing the respondent’saction against the appellant to enforce the interim tariff issued by the Copyright Board under subsection 68.2(1) of the Copyright Act anddismissing the appellant’s counterclaim. Appeal allowed and counterclaim dismissed. APPEARANCES John C. Cotter and Barry Fong for appellant. Arthur B. Renaud and Asma Faizi for respondent. David W.

Kent and Jonathan O’Hara for intervener Universities Canada. Andrew Bernstein and Alicja Puchta for interveners Canadian Association of University Teachers and Canadian Federation of Students. Wanda Noel for intervener Copyright Consortium of the Council of Ministers of Education, Canada. Brendan van Niejenhuis, Tiffany O’Hearn Davies and Warren Sheffer for interveners Association of Canadian Publishers, CanadianPublishers’ Council and The Writers’ Union of Canada. SOLICITORS OF RECORD

Osler, Hoskin & Harcourt LLP , Toronto, for appellant. Arthur B. Renaud , Toronto, for respondent. McMillan LLP , Toronto, for intervener Universities Canada. Torys LLP , Toronto, for interveners Canadian Association of University Teachers and Canadian Federation of Students. Wanda Noel , Ottawa, for intervener Copyright Consortium of the Council of Ministers of Education, Canada. Stockwoods LLP and Hebb & Sheffer , Toronto, for interveners Association of Canadian Publishers, Canadian Publishers’ Council and The Writers’ Union of Canada.

The following are the reasons for judgment rendered in English by Pelletier J.A. : Table of Contents Paragraph I. Introduction .. 1 II. Background . 5 III. The Decision Under Appeal 15 IV. York’s Statement of Issues . 27 V. Statement of Issues . 33 VI. Standard of Review .. 36 VII. Analysis . 37 A. Is a final tariff mandatory? . 37

(1) The rights conferred by copyright 50

(2) Legislative history: 1936 to 1985 . 57

(3) Legislative history: 1988 amendments . 87

(4) Legislative history: 1997 amendments . 117 B. Jurisprudence . 195 C. General considerations . 200 D. Conclusion . 204 VIII. York’s Counterclaim .. 207 A. Fair dealing . 210

(1) The purpose of the dealing . 212

(2) The character of the dealing . 242

(3) The amount of the dealing . 259

(4) Alternatives to the dealing . 284

(5) The effect of the dealing . 293

(6) Nature of the work . 307 B. Conclusion on the counterclaim .. 309 I. Introduction

[ 1 ] When licence renewal negotiations between York University (York) and the Canadian Copyright Licensing Agency (Access Copyright) were languishing, the latter applied to the Copyright Board for and was granted an interim tariff covering the copying of protected works in post-secondary educational institutions. York briefly complied with the terms of the interim tariff but then “opted out” and introduced its “Fair Dealing Guidelines for York Faculty and Staff (11/13/12)” (Guidelines).

Acting pursuant to the guidance offered in the Guidelines, York faculty and staff copied significant amounts of material for which York paid no licence fees or royalties. [ 2 ] Access Copyright sued York to enforce the interim tariff, seeking various remedies including royalties as provided in the tariff. York counterclaimed, seeking a declaration that all copying which fell within the terms of the Guidelines constituted fair dealing pursuant to sections 29 , 29.1 , or 29.2 of the Copyright Act , R.S.C., 1985 c.

C-42 (the Act ). [ 3 ] The Federal Court allowed Access Copyright’s action and dismissed York’s counterclaim, which gave rise to this appeal: see Canadian Copyright Licensing Agency v. York University , 2017 FC 669 , [2018] 2 F.C.R. 43 (reasons) . [ 4 ] For the reasons that follow, I would allow York’s appeal on the basis that a tariff approved by the Copyright Board (the Board), as the interim tariff was, is not “mandatory” in the sense that it is enforceable against anyone whose use of the protected works is an infringement of the copyright owner’s exclusive rights.

I would dismiss York’s counterclaim on the basis that its Guidelines do not ensure that copying which comes within their terms is fair dealing. II. Background [ 5 ] The respondent, Access Copyright, is a collective society which administers the reproduction rights in published literary works and collects royalties and distributes them to copyright holders. [ 6 ] The appellant, York, is Canada’s third-largest university. It has over 50 000 students and approximately 1 500 full-time faculty members. [ 7 ] From 1994 to 2010, Access Copyright and York were parties to a licence agreement.

This agreement permitted professors at York to make copies of portions of textbooks and other published works in Access Copyright’s repertoire. By 2010, the annual royalty payable pursuant to that licence was $0.10 per page and $3.38 per full-time equivalent (FTE) student. [ 8 ] In March 2010, when Access Copyright was uncertain if the renewal of the licence agreement could be finalized before its expiry, it filed a proposed tariff with the Board for post-secondary educational institutions covering the years 2011 – 2013. This proposed tariff contemplated a flat annual royalty of $45 per FTE student per year.

The proposal was published in the Canada Gazette [Part I, Vol. 144, No. 24] on June 12, 2010, and 101 persons and institutions filed timely objections. [ 9 ] In light of the rapidly approaching expiry date of the licence agreement, Access Copyright applied to the Board for an interim decision. It asked that the existing licensing regime continue to apply until the Board certified a tariff for the period in question.

On December 23, 2010, the Board granted Access Copyright’s application and issued an interim tariff, which incorporated the licence agreement royalty rate of $0.10 per page and $3.38 per FTE. [ 10 ] The interim tariff took effect on January 1, 2011. Initially, York complied with the terms of the interim tariff. However, in July of 2011, York formally notified Access Copyright of its decision to “opt out” of the tariff as of August 31, 2011, in time for the start of the new academic year.

Since 2011, several other Canadian universities have also decided to opt out of the Access Copyright tariff. [ 11 ] As of September 1, 2011, York was operating without the benefit of a licence from Access Copyright. Instead, York relied on its Guidelines, which were created to help the university avoid copyright infringement. In essence, the Guidelines direct York’s faculty and staff on how fair dealing under

section 29 of the Act applies to certain copying practices. The Guidelines specify that Short Excerpts (as defined in the Guidelines) may be copied for educational and research purposes. [ 12 ] By way of background, it was the Association of Universities and Colleges of Canada (AUCC) (now Universities Canada), that first developed a fair dealing policy in 2004 following the decision of the Supreme Court in CCH Canadian Ltd. v. Law Society of Upper Canada , 2004 SCC 13 , [2004] 1 S.C.R. 339 ( CCH ) ].

York first implemented its own fair dealing guidelines modelled on those developed by the AUCC in December of 2010. In 2012, the AUCC revised its fair dealing policy following the Supreme Court’s decision in Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright) , 2012 SCC 37 , [2012] 2 S.C.R. 345 ( Alberta Education ) , and the passage of the Copyright Modernization Act , S.C. 2012, c. 20 , after which York also revised its own Guidelines.

Many other Canadian universities use guidelines similar to those used by York. [ 13 ] York’s decision to opt out of the tariff prompted Access Copyright to start an action in the Federal Court to enforce the interim tariff under subsection 68.2(1) of the Act . The foundation of Access Copyright’s claim was that York had infringed copyright in works in its repertoire and were therefore liable for the amounts specified in the interim tariff and that some York professors had, after September 1, 2011, made unauthorized copies of in-repertoire works.

In response to the action, York filed a counterclaim seeking a declaration that any reproductions made in compliance with its Guidelines constitute fair dealing under

section 29 of the Act . [ 14 ] In this Court, a number of entities were granted intervener status, namely: Universities Canada, the Canadian Association of University Teachers and the Canadian Federation of Students, the Copyright Consortium of the Council of Ministers of Education, Canada, the Association of Canadian Publishers, the Canadian Publishers’ Council and the Writers’ Union of Canada. III. The Decision Under Appeal [ 15 ] The Federal Court began its analysis by addressing the question of the mandatory effect of the tariff.

It reviewed the use of the word “tariff” in cases dealing with various tribunals such as the Alberta Energy and Utilities Board, the Canadian Radio-Television and

Telecommunications Commission, the National Energy Board, the Nova Scotia Utility and Review Board, and the Ontario Energy Board. It also considered tariffs of fees fixed by various government agencies. All of these examples are instances of amounts which must be paid. The Court concluded that the word tariff connotes a mandatory fee. [ 16 ] The Federal Court then considered the scheme of the Act , beginning with subsection 68.2(1) of the Act , which Access Copyright relies upon as the statutory basis for its claim that it is entitled to collect royalties. At the material time, it read as follows: Effect of fixing royalties 68.2

(1) Without prejudice to any other remedies available to it, a collective society may, for the period specified in its approved tariff, collect the royalties specified in the tariff and, in default of their payment, recover them in a court of competent jurisdiction. [ 17 ] Subsection 68.2(1) applies in this case because subsection 70.15(2) provides that where a tariff is approved under subsection 70.15(1), as the interim tariff was, then subsection 68.2(1) applies with such modifications as the circumstances require. [ 18 ] In the Federal Court’s view, Parliament recognized the difficulties that individual copyright owners might face in enforcing their rights against infringers and so provided mechanisms for the collective enforcement of those rights.

The Court briefly reviewed the mechanisms in place prior to the 1989 amendments to the Act . Under the earlier regime, performing rights organizations filed with the Copyright Appeal Board statements of fees, charges, and royalties for the issuance of licences with respect to works in their repertoire. The Court found that under that regime, the performing rights organization’s enforcement action was limited to users who had entered into a licence agreement. [ 19 ] The Court then reviewed the legislative history of this provision.

In 1988, Parliament amended the Act to include the predecessor to subsection 68.2(1) , subsection 67.2(2) , which provided that a performing rights organization had the right to collect royalties specified in the statement filed with the Board or “in default of their payment, recover them in a court of competent jurisdiction” .

In the Court’s view, enforcement was no longer tied to the presence of a licence agreement. [ 20 ] The 1988 amendments also provided for new licensing bodies for the collective administration of exclusive rights recognized in the Act other than performing rights including, among others, reproduction rights. These licensing bodies did not have the ability to file statements of proposed fees, charges or royalties with the Board and had no statutory enforcement remedies equivalent to those of performing rights organizations.

The Court found that these limitations were corrected when the Act was amended again in 1997. In the Court’s view, these amendments gave the licensing bodies, now known as collective societies, the right to file tariffs for approval by the Board, as an alternative to entering into licence agreements with users.

These amendments also gave these bodies the same right to collect the amounts specified in approved tariffs and, in default of payment, the right to recover the royalties by action in a court of competent jurisdiction, including the Federal Court: reasons, at paragraph 203. [ 21 ] The Court then turned to statutory

interpretation. It noted that the

Interpretation Act , R.S.C., 1985, c. I-21 defined “regulation” [at

section 2 ] to include a tariff of costs or fees so that a tariff was “subordinate legislation” which is consistent with compulsion, as opposed to a voluntary licensing scheme. The Court also found that the procedural aspects of the tariff-setting process such as public notice and Board certification were consistent with a mandatory scheme. [ 22 ] The Court then distinguished the Supreme Court’s decision in Canadian Broadcasting Corp. v. SODRAC 2003 Inc. , 2015 SCC 57 , [2015] 3 S.C.R. 615 ( SODRAC ) to which we shall return later in these reasons.

The Court reasoned that the statutory provisions in issue in SODRAC — sections 70.2 to 70.4 — do not deal with tariff-setting, which is set out in sections 70.1 to 70.191. The Court noted that the tariff-setting provisions are mandatory while the dispute resolution provisions in sections 70.2 to 70.4 are optional. [ 23 ] In the end, the Court found that legislative history and statutory

interpretation led to the conclusion that Board tariffs are mandatory. [ 24 ] The Federal Court then turned to the counterclaim and York’s Guidelines. They provide that York faculty and staff can copy Short Excerpts of a copyright protected work, which includes literary works, musical scores, sound recordings, and audiovisual works (collectively, a Work ) within the university environment for the purposes of research, private study, criticism, review, news reporting, education, satire or parody. The critical provision of the Guidelines is the definition of Short Excerpt which is reproduced below: 2.

The copy must be a “ Short Excerpt ”, which means that it is either: 10% or less of a Work, or no more than: (

a) one

chapter from a book; (

b) a single

article from a periodical; (

c) an entire artistic work (including a painting, photograph, diagram, drawing, map, chart and plan) from a Work containing other artistic works; (

d) an entire newspaper

article or page; (

e) an entire single poem or musical score from a Work containing other poems or musical scores; or

(

f) an entire entry from an encyclopedia, annotated bibliography, dictionary or similar reference work, whichever is greater. [25] The Court reviewed the extensive evidence on the quantity and quality of copying which took place at York pursuant to theGuidelines.

It then addressed the question of their fairness by examining them in the light of the factors used by the Supreme Court toassess the fairness of the custom photocopying service operated by the Law Society of Upper Canada in CCH. [26] For present purposes it is sufficient to say that the Court found that four of the factors, specifically, the character of the dealing,the amount of the dealing, the nature of the work and the effect of the dealing tended to show the unfairness of the Guidelines, while theother two, the purpose of the dealing and the alternatives to the dealing, tended to show their fairness.

I will return to these factors(collectively, the CCH factors or the fairness factors) in my analysis of the fairness of York’s Guidelines. In the end, the Court declinedto issue the declaration sought by York and dismissed the counterclaim. IV. York’s Statement of Issues [27] In its notice of appeal, York submits that the Federal Court made several errors. [28] York argues that the Court erred in concluding that copying which fell within its Guidelines was not “fair dealing” within themeaning of

section 29 of the Act. York also appeals on the basis that an interim tariff is not an approved tariff and is thereforeunenforceable by action. In any event, York submits that even if the interim tariff was an approved tariff, it would only apply to thosewho chose to become licensees. York relies upon the decision in SODRAC as authority for the proposition that Access Copyright canonly sue to recover royalties in default of payment from users who choose to become licensees under an approved tariff.

In particular,York points to the following passage from paragraph 108 of SODRAC in support of its position, to which I have appended, andunderlined, the sentence which follows immediately after the sentences quoted by York: …. However, this power [to fix royalties] does not contain within it the power to force these terms on a user who, having reviewed theterms, decided that engaging in licensed copying is not the way to proceed. Of course, should the user then engage in unauthorizedcopying regardless, it will remain liable for infringement.

But it will not be liable as a licensee unless it affirmatively assumes thebenefits and burdens of the licence. [My emphasis.] (SODRAC, at paragraph 108.) [29] York also points to

section 70.13 of the Act, which applies to Access Copyright, to show that an approved tariff deals withroyalties due from licensees. Filing of proposed tariffs 70.13

(1) Each collective society referred to in

section 70.1 may, on or before the March 31 immediately before the date when its lasttariff approved pursuant to subsection 70.15(1) expires, file with the Board a proposed tariff, in both official languages, of royalties to becollected by the collective society for issuing licences. [My emphasis.] [30] York concludes by pointing out that there are regimes under the Act that do create mandatory liability to pay on the part of thetarget group such as, for example, subsection 19(2) which provides that users are “liable to pay” equitable remuneration in certaincircumstances or paragraph 82(1)(

a) which stipulates that the manufacturers or importers of blank tape are “liable … to pay a levy”.These are examples of Parliament’s use of clear language to impose mandatory obligations when it chooses to do so. [31] York’s position that approved tariffs are only binding on those who choose to be licensed by a collective society is stronglysupported by the interveners Universities Canada, the Canadian Association of University Teachers, and the Canadian Federation ofStudents (collectively Universities Canada). They invoke the Supreme Court’s decision in Vigneux v.

Canadian Performing RightSociety Ltd., [1943] S.C.R. 348, (Vigneux) in support of the position that approved tariffs are not mandatory.

Relying onVigneux, Universities Canada says that the provisions of the Act dealing with tariffs were introduced, not to protect copyright holders butrather to protect the public from the monopoly power of performing rights organizations: .… it is evident that the legislature realized in 1931 that this business in which the dealers [in performing rights] were engaged is abusiness affected with a public interest; and it was felt to be unfair and unjust that these dealers should possess the power so to controlsuch performing rights as to enable them to exact from people purchasing gramophone records and sheets of music and radio receivingsets such tolls as it might please them to exact. (Vigneux, at page 353.) [32] Both York and these interveners cite an

article by Professor Ariel Katz, “Spectre: Canadian Copyright and the Mandatory Tariff –Part I” (2015), 27 I.P.J. 151, that I found very useful in addressing the question of the enforceability of tariffs. V. Statement of Issues

[33] I will begin with the issue of the enforceability of the tariff. The question of fair dealing only arises if the tariff applies to York. Itis only if a final tariff is “mandatory” that York must rely on its Guidelines to show that compliance with them is fair dealing, a user’sright. [34] I propose to deal with Access Copyright’s claim by first reviewing some of the concepts which will recur in the discussion. I willthen review the statutory provisions in issue in Vigneux and trace their legislative development through to the Copyright ModernizationAct.

This review will show that the basic structure set out in the 1936 amendments has been preserved throughout this legislative historywhich supports the conclusion that the legislative intent has also remained the same. Similarly, the use of the expression “licensingschemes” throughout this history also suggests a continuity of purpose.

I will deal with various ancillary arguments as they arise in thecourse of this legislative history. [35] As noted earlier, I will deal with York’s Guidelines by examining the Federal Court’s reasoning and the parties’ submissions inlight of the teachings of the three relevant Supreme Court decisions. VI.

Standard of Review [36] Given that this is an appeal of a decision of the Federal Court after a trial, the standard of review is set out in Housen v.Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, namely, correctness for questions of law, and palpable and overriding error for questionsof fact and questions of mixed fact and law, except where an extricable question of law arises. VII. Analysis A.

Is a final tariff mandatory? [37] Since much of the argument was framed in terms of whether Copyright Board approved tariffs are mandatory, it is perhapsuseful to begin by clarifying what it means to say that a tariff is mandatory. When Access Copyright says that the tariff in issue here ismandatory, it means that a user becomes liable for payment of the royalties stipulated in the tariff if it engages in any copying whichconstitutes infringement, i.e., copying which was not authorized by the copyright holder or which does not come within any of the users’rights set out in the Act, such as fair dealing.

A user’s liability to pay royalties depends upon his or her use of works in AccessCopyright’s repertoire and not upon any assumption of liability for payment. [38] There is an important distinction between liability for royalties and liability for damages for infringement. In the absence of atariff, a user who infringes copyright becomes liable for damages for infringement in an amount equal to damages the owner of thecopyright has suffered as a result of the infringement: see Act, subsection 35(1). Those damages are assessed by a court.

However, in thecase of a mandatory tariff, the owner’s remedy is an action to enforce the tariff. In effect, the royalties set out in the tariff become a formof statutory damages. This distinction becomes blurred when Courts use the tariff as a means of calculating damages.

One example ofthis approach among many is Society of Composers, Authors and Music Publishers Canada v. 348803 Alberta Ltd. (1997), 79 C.P.R.(3d) 449, (F.C.T.D.), where the following appears (at page 452): Where it is customary to licence the use of a work, music in this instance, damages may be measured on the basis of the usual royaltyor licence fee.

The licence fees for music are calculated using given figures and rates from the Copyright Board Tariffs and variousstatistics as to the operation of the licensee. [39] This approach may have contributed over time to the assumption that collective societies can enforce a tariff against infringers,the very question raised by this appeal. [40] York attempted to avoid infringement by only copying protected materials to the extent provided in its Guidelines. In a relativelysmall number of cases, some of its copying fell outside its Guidelines.

Access Copyright says that, in either case, York is liable forroyalties to the same extent as if it had agreed to pay them. [41] York argues that Access Copyright’s position means that, given the form of the tariff in issue, a single infringing act couldsubject it to a significant liability for royalties for an entire year. Access Copyright replies that York’s argument is an argument interrorem and that it would respond reasonably to isolated acts of infringement.

Access Copyright undoubtedly has the right to waive itsclaim for royalties in cases where infringement is inconsequential, but this does not derogate from its argument that tariffs are mandatory. [42] Access Copyright’s argument that tariffs are mandatory is based upon the text of the material portions of the Act, their contextand their purpose. [43] Beginning with the text, Access Copyright argues that the meaning of the word “tariff” is unequivocal and means “a

schedule orsystem of duties imposed by a government on goods”.

This leads it to conclude that a copyright tariff is imposed on users, whether or notthe user agrees to be bound or not. [44] Access Copyright also relies upon the change in the wording of the remedies provision in the portion of the Act dealing withcollective administration of copyrights, specifically the removal of the reference to “licences” in the remedies provision of the Act.Access Copyright argues that the absence of the words “in respect of the issue or grant by it of licences” in subsection 68.2(1) means thatits ability to collect royalties is no longer tied to the issuance of a licence but arises as soon as there is infringement of a work in itsrepertoire.

[ 45 ] As for context, Access Copyright points to paragraph 70.12(

b) and

section 70.191 which it says are inconsistent with a “voluntary tariff” . Access Copyright argues that since the tariff is only engaged when users have not entered into an agreement with the collective society under those sections, it would be incongruous to require the consent of the user to make the tariff enforceable. [ 46 ] Finally on the issue of purpose, Access Copyright asks why a collective society would engage in the lengthy, time-consuming tariff process if, at the end of it all, users could simply “opt out” of the tariff.

Access Copyright points out that the scheme of the Act provides for the protection of copyright owners’ rights while ensuring, by means of the tariff-setting process, that the fees charged for the use of works in a collective society’s repertoire are fair and reasonable. [ 47 ] In my view these textual arguments are best dealt with in the legislative context in which they arose. [ 48 ] I propose to proceed by first discussing the Vigneux decision in which the Supreme Court dealt with the original legislative response to performing rights societies and their monopoly or their market power with respect to performing rights.

I will then trace the historical evolution of that legislative response to that mischief from the 1930’s to 1985. I will then review the 1988, 1997 and 2012 amendments to the Act to see if they have changed the legislative scheme so that it supports Access Copyright’s claim that the tariffs are mandatory. This will involve consideration of changes in the wording of the relevant provisions including subsection 68.2(1) , as well as consideration of the meaning of terms used in the Act , notably “licences” and “tariff” .

I will then deal with some of the inconsistencies and the incoherence which Access Copyright says would result if tariffs are not mandatory. [ 49 ] Because this analysis will require references to the Act as it read at different points in time, I will indicate the version of the Act to which I am referring by placing the year of the version or the amending act in parentheses.

Thus, a reference to the version of the Act found in the Revised Statutes of Canada, 1985 will read “the Act (1985)” while a reference to the Act as it read after the 1936 amendments to the Act , enacted in An Act to amend The Copyright Amendment Act, 1931 , S.C. 1936, c. 28, will appear as “the Act (1936)” .

(1) The rights conferred by copyright [ 50 ] In the interval between the Copyright Act, 1921 , S.C. 1921, c. 24, and the 1985 revision of the statute book, the Act has defined the rights conferred by copyright in substantially the same form, that is: 3. (1) …“copyright” means the sole right to produce or reproduce the work or any substantial part thereof in any material form whatever, to perform, or in the case of a lecture to deliver, the work or any substantial part thereof in public or, if the work is unpublished, to publish the work or any substantial part thereof, and includes the sole right (

a) to produce, reproduce, perform or publish any translation of the work, … and to authorize any such acts. (See Act (1985), subsection 3(1).) The list of rights associated with copyright is considerably longer than the portions which I have reproduced above but, since this appeal deals with reproduction rights, I have referred only to those rights. [ 51 ] This is to say that there are two kinds of rights flowing from copyright under the Act : the exclusive right to deal with the work in certain ways, in this case, to reproduce it, and the right to authorize others to exercise those rights.

Since copyright is a form of property, copyright owners can assign their copyright to others who can then exercise all the rights of ownership: see Euro-Excellence Inc. v. Kraft Canada Inc. , 2007 SCC 37 , [2007] 3 S.C.R. 20 , at paragraphs 27 – 28 , 116 – 117. [ 52 ] The Act describes a copyright owner’s authorization of a third party to exercise one of their exclusive rights as a licensee. For example, subsection 13(4) of the Act (1985) reads as follows: 13. … Assignments and licences

(4) The owner of the copyright in any work may assign the right, either wholly or partially, and either generally or subject to territorial limitations, and either for the whole term of the copyright or for any other part thereof, and may grant any interest in the right by licence, but no assignment or grant is valid unless it is in writing signed by the owner of the right in respect of which the assignment or grant is made, or by his duly authorized agent. [ 53 ] Monetizing one’s copyright often takes the form of licensing others to exercise one or more aspects of that right.

If one sets aside issues of collective societies and tariffs for a moment, it ought not to be contentious to say that a licensing transaction between a copyright owner and a licensee is a consensual arrangement. An individual cannot acquire a licence without the consent of the copyright owner and a copyright owner cannot impose financial or other terms, on a person who has not agreed to become a licensee.

This is not to say that a copyright owner has no recourse against a person who infringes their copyright but the remedy is an action for damages for infringement: see Act (2012), sections 34 – 38.1. [ 54 ] If an individual copyright owner cannot impose terms on a person who has not agreed to become a licensee, it follows that, at common law, a group of copyright owners or persons who have acquired certain rights from copyright owners are legally in no better position to impose terms on those who have not agreed to become licensees. As we shall see, this is the effect of the Supreme Court’s

decisions in Vigneux and SODRAC . [ 55 ] In practical terms, even though copyright owners acting collectively have no greater legal rights than an individual copyright owner, they can exercise market power if they control a sufficient portion of the market for the rights which they control. Market power can also be acquired by a single copyright holder who has acquired, by assignment or otherwise, a large enough repertoire that it has, in effect, cornered the market.

This is what happened with performing rights in the early part of the 20th century, giving rise to the legislative response of interest in this appeal. [ 56 ] The question in this appeal is whether the interposition of the Copyright Board between the user and the rights owner changes the relationship between them. This turns on the effect of the Board’s approval of a collective society’s proposed royalties. This is a question with a long history, which is best understood through the laborious process of a step by step historical review.

(2) Legislative history: 1936 to 1985 [ 57 ] The state of affairs existing in the late 1920’s and early 1930’s was described by the Supreme Court in Vigneux . In his reasons, Chief Justice Duff described the environment which led to a series of amendments to the Act as it stood in 1921 (at pages 352 – 353): Seven years after the Act of 1921 came into force the legislature realized that in respect of performing rights a radical change in the statute was necessary.

Societies, associations and companies had become active in the business of acquiring such rights, and the respondents in this case admittedly have more or less successfully endeavoured to get control of the public performing rights in the vast majority of popular musical and dramatico-musical compositions which are commonly performed in public.

The legislature evidently became aware of the necessity of regulating the exercise of the power acquired by such societies (I shall refer to them as dealers in performing rights) to control the public performance of such musical and dramatico-musical works…. … .… it is evident that the legislature realized in 1931 that this business in which the dealers were engaged is a business affected with a public interest; and it was felt to be unfair and unjust that these dealers should possess the power so to control such performing rights as to enable them to exact from people purchasing gramophone records and sheets of music and radio receiving sets such tolls as it might please them to exact.

It is of the first importance, in my opinion, to take notice of this recognition by the legislature of the fact that these dealers in performing rights, which rights are the creature of statute, are engaged in a trade which is affected with a public interest and may, therefore, conformably to a universally accepted canon, be properly subjected to public regulation. [ 58 ] It can thus be seen that the mischief which Parliament sought to correct was the quasi-monopoly which performing rights societies had achieved by acquiring performing rights from the original owners of the copyright.

The scheme which Parliament enacted in The Copyright Amendment Act, 1931 , S.C. 1931, c. 8 and An Act to amend The Copyright Amendment Act, 1931 S.C. 1935, c. 8, was consolidated in the Act (1936). The discrete elements of the scheme are summarized below. The references are to the Act (1936).

Mandatory filing of a statement of the works in a society’s repertoire (subsection 10(1)); Mandatory filing of a statement of proposed fees, charges or royalties to be charged for issuing licences (subsection 10(2)); No action for infringement without the consent of the Minister where the filing requirements have not been complied with (subsection 10(3)); Notice of the proposed statement to, and a right to be heard by, the society and the public (section 10 A ); Approval of the statement of fees, charges or royalties, with or without alteration (subsection 10 B (7)); Amounts in the approved statement are the fees, charges or royalties which the society may lawfully sue for or collect for the grant or issuance of licences for the performance of works in their repertoire (subsection 10 B (8)); No action for infringement against any person who has tendered or paid the amounts set out in the approved statement (subsection 10 B (9)). [ 59 ] Because this constellation of features survived successive revisions and amendments, it is useful to briefly review their effects and the expected consequences of their application. [ 60 ] The obligation imposed on performing rights societies to disclose their repertoire could be expected to serve a public notice function so that users might know if they had to deal with a given performing rights society in order to obtain licence to perform a given work.

This presumptive purpose would be enforced by the provision which prohibited a performing rights society from suing for infringement of a work which was not included in its statement of its repertoire. [ 61 ] A performing rights society’s obligation to file a statement of its proposed fees, charges or royalties and the publication of those proposed amounts allowed the public and more particularly, those who produced performances of copyrighted works, to know what the society was proposing to charge in the coming year.

The right to be heard before the proposed fees were approved gave users some input into the approval process. [ 62 ] Because of their recurrence in subsequent versions of the Act , certain provisions deserve to be reproduced now. First among these is subsection 10(1) of the Act (1936), which identifies those who are subject to these provisions (which I have been referring to as performing rights societies): 10.

(1) Each society, association or company which carries on in Canada the business of acquiring copyrights in dramatico-musical or musical works or performing rights therein, and which deals with or in the issue or grant of licences for the performance in Canada of

dramatico-musical or musical works in which copyright subsists, shall, from time to time, file with the Minister at the Copyright Officelists of all dramatico-musical and musical works, in current use in respect of which such society, association or company has authority toissue or grant performing licences or to collect fees, charges or royalties for or in respect of the performance of its works in Canada. [63] This shows Parliament’s intention to regulate the practices of those that (

a) engaged in the business of acquiring copyrights indramatico-musical works or the performing rights in those works and (

b) who dealt in the grant or issuance of licences for theperformance of those works. It is important to note the emphasis on the “granting or issuance of licences”. This criterion recurs in allsubsequent versions of the Act.

This supports the dicta in Vigneux to the effect that the amendments were directed to the existing way ofdoing business with a view to regulating it by countering the effects of market power which performing rights societies had acquired: seeVigneux, at page 352. [64] A second provision of the Act (1936) whose modification in subsequent versions of the Act is frequently the subject of commentis subsection 10B(8) which deals with the effect of the Copyright Office’s approval of the performing rights society’s proposed fees,charges or royalties: 10B…. …

(8) The statements of fees, charges or royalties so certified as approved by the Copyright Appeal Board shall be the fees, charges orroyalties which the society, association or company concerned may respectively lawfully sue for or collect in respect of the issue or grantby it of licences for the performance of all or any of its works in Canada during the ensuing calendar year in respect of which thestatements were filed as aforesaid. [65] This provision was carried forward, almost verbatim, to the 1985 revision of the statute book.

By stipulating that the approvedfees are the fees which may be sued for or collected by a society, this provision, by implication, prohibited the collection of fees inexcess of the approved fees.

In addition, this provision is an explicit limitation on performing rights societies’ ability to maintain actionsfor amounts in excess of the approved fees, charges or royalties. [66] As we shall see, modifications of this provision in the post-1985 amendments figure prominently in Access Copyright’sarguments in favour of mandatory tariffs. [67] The final element of this scheme which can usefully be reproduced is subsection 10B(9) of the Act (1936): 10B. … …

(9) No such society, association or company shall have any right of action or any right to enforce any civil or

summary remedy forinfringement of the performing right in any dramatico-musical or musical work claimed by any such society, association or companyagainst any person who has tendered or paid to such society, association or company the fees, charges or royalties which have beenapproved as aforesaid. [68] As we shall see, this provision has been carried forward to the most recent amendments to the Act which are relevant to thisappeal. [69] The Courts confirmed the limited scope of this scheme in a series of cases.

In Vigneux, the Supreme Court, after summarizing therelevant provisions of the Act (1936), wrote: The copyright holder is under no obligation to allow the public performance of any work or to grant a license for that purpose.

He hasall the rights of the ordinary owner; and, subject to any special provision of the Copyright Act expressly stating otherwise, he may protecthis ownership, or any infringement thereof, by means of an injunction. (Vigneux, at page 364.) [70] These words succinctly confirm that the pre-amendment rights and obligations of copyright holders and users remain in forceexcept to the extent that they have been expressly modified. [71] One such modification was the stipulation found at subsection 10B(9) according to which a person who paid the approved fee,charge or royalty could not be sued for infringement.

It is a reasonable assumption that this provision was introduced to preventperforming rights societies from withholding licences as a way of improving their position by demanding payment of a greater amount inadvance so that the restrictions on their ability to set prices unilaterally were rendered ineffective. [72] Subsequent to the Supreme Court’s decision in Vigneux, the effect of these amendments was considered in a number of cases,including Maple Leaf Broadcasting v. Composers, Authors and Publishers Association of Canada Ltd., [1954] S.C.R. 624, (Maple Leaf Broadcasting).

In that case, Maple Leaf failed to pay an approved royalty which was calculated as a percentage of itsrevenue. The copyright holder (CAPAC) sued, not for royalties but for damages for infringement. Maple Leaf argued that a delay inapproving CAPAC’s statement beyond the end of the year meant that it could not know, at the beginning of the following year, theamount which it would have to pay to “avail [itself] of the protection against an action for infringement afforded by

section 10B(9)”:

Maple Leaf Broadcasting, at page 629.

The Court held that this deficiency was not a sufficient reason to declare the tariff invalid but itrecognized that: …. [Maple Leaf] would, however, still be in ignorance as to what percentage of this revenue he would be required to pay for a licenseand it is at least conceivable that there might be cases in which such [broadcaster] would decide against taking a license at the feestipulated in the statement filed but would be willing to take a license at the fee finally certified by the Board. (Maple Leaf Broadcasting, at page 630.) [73] This passage confirms that a user was free to choose whether or not it would take a licence from CAPAC on the terms set out inthe approved statement.

It is clear from this that the scheme set out in the Act (1936) did not displace the pre-amendment way of doingbusiness but simply regulated it. It is clear as well that the decision to become (or not) a licensee was a matter to be decided by the user.Maple Leaf did not become a licensee by the mere fact of having infringed CAPAC’s copyright. [74] In Composers, Authors and Publishers Association of Canada, Limited v. Sandholm Holdings Limited et al., (CA EXC), [1955] Ex.

C.R. 244, (1955), 24 C.P.R. 58 (Sandholm Holdings) a cabaret owner agreed to take a licence from the plaintiffperforming rights society (CAPAC) and made a partial payment of the licence fee. When the cabaret owner failed to pay the balance,CAPAC cancelled the licence, sued for the licence fees for the year and for damages for infringement for the period after the licencecancellation.

The Exchequer Court held that CAPAC could not collect both licence fees and damages for the same use of its repertoire: Since the plaintiff is entitled to license fees for the years 1952 and 1953 it is obvious that it cannot also recover damages forinfringement of copyright during these years. The two remedies are inconsistent. … If during the currency of this license, the defendantperformed any of such musical works it did so with the plaintiff’s consent [by virtue of being a licensee] and could not be an infringer ofits copyright. (Sandholm Holdings, at page 68, cited to C.P.R. [at pages 253–254 of Ex.

C.R.]) [75] This passage confirms, once again, that the normal rules as to licensing were not abrogated by the introduction of the statutoryscheme with respect to performing rights societies. Even if the Exchequer Court had not said so, it would nonetheless be self-evident thatone cannot be a licensee and an infringer at the same time. The Court expressed this in terms of the impossibility of being an infringer ifone is a licensee.

Logically, the opposite must be equally true: the fact of infringing means that one is unauthorized, i.e., not a licenseeand therefore not liable for licence fees. [76] In Performing Rights Organization of Canada Ltd./ Société de droits d’exécution du Canada Ltée v. Lion d’Or

(1981) Ltée. et al.(1987), 16 F.T.R. 104, 17 C.P.R. (3d) 542 (F.C.T.D.), the Federal Court again considered the operation of the statutory scheme. Thedefendant was a cabaret owner who refused to take a licence from the plaintiff but nonetheless used works from the plaintiff’s repertoirein his cabaret. The plaintiff sued for infringement. In the course of dealing with the claim, the Federal Court opined that the remediessection of the Act (subsection 50(9) of the 1970 version of the Act, found at R.S.C. 1970, c.

C-30, which reproduces subsection 10B(8)of the Act (1936)) only applied to persons who had agreed to take a licence from the plaintiff. In the absence of a licence, the plaintiff’sremedy was an action for infringement.

In coming to this conclusion, the Federal Court relied on the specific wording of the remediessection which provided that the amounts in the approved statement were those which a society could lawfully sue for or collect “inrespect of the issue or grant by it of licenses”. [77] In my view, the portions of the Act dealing with performing rights societies, as interpreted by this jurisprudence, were intended toregulate the licensing practices of performing rights societies and not to replace them by a non-consensual scheme.

This view issupported by the repeated references to licences and licensing schemes in the text of these provisions. It is also supported by the limited,though important, interference in the performing rights societies’ business. [78] The one change in the scheme which went beyond regulation was the provision for immunity from prosecution for infringementfor those who tendered or paid the amounts set out in the approved statement of fees charges or royalties.

As noted previously, thismeasure was presumably intended to prevent performing rights societies from circumventing the statutory scheme by withdrawing theirrepertoire from the market by refusing to issue licences. [79] The right to perform a work upon payment of theapproved rate is often referred to as a Statutory Licence. This is misleadingbecause the performing rights society has not agreed to authorize such a user to perform a work in its repertoire and therefore, there is nolicence. Rather, the society has lost its right to collect or recover by action any amount in excess of the approved rate.

While the practicaleffect is the same as a licence, the means by which that effect is produced is substantially different. [80] A licence is an authorization to exercise a copyright holder’s exclusive right while a limitation on a remedy deprives a rightsholder of a remedy for the unauthorized exercise of its exclusive right. [81] As a result, I do not subscribe to the views expressed by the Exchequer Court to the effect that the Act (1936) effected a radicalchange to the licensing regime: ….

The result is that the performing rights societies have now no right to fix the fees, charges or royalties for the issue or grant of theirlicenses but in lieu of their former right have been given a statutory right to sue for or collect the fees certified as approved by theCopyright Appeal Board. The fees for a license to perform the musical works in which a performing rights society owns the performingrights are no longer a matter of contract between the society and the user of the music but a matter of statutory fixation by the Copyright

Appeal Board. ( Sandholm Holdings , at page 67 [cited to C.P.R., at page 253 of Ex. C.R.].) [ 82 ] It is important to understand what the legislation authorizes the Copyright Appeal Board to do. The Board’s only power is to approve, with or without modification, the fees proposed by the society.

While the fees are “set” in the sense that the society is precluded from suing for or collecting any other amount, the fees remain the society’s fees and not the Board’s. [ 83 ] Similarly, it is not accurate to say that the society is given “a statutory right to sue for or collect the fees certified as approved by the Copyright Appeal Board” . In fact, the effect of the remedies provision (subsection 10 B (8) of the Act (1936), subsection 70(1) of the Act (1985)), is to limit the amount which a performing rights society can sue for or collect.

This does not, in my view, represent a statutory right; it is a statutory limitation on remedies. Performing rights societies had the right to sue for and collect their licence fees prior to the introduction of the 1936 amendments.

The effect of the amendment is to limit the amount they could collect or recover by action for a performing rights licence. [ 84 ] The only statutory right conferred by these provisions is the immunity given to users who pay or offer to pay the approved amount to perform a protected work without the consent of the copyright holder. [ 85 ] All of this to say that the performing rights regime introduced into the law by the Act (1936) did not transform the pre- amendment consensual licensing scheme into a non-consensual scheme.

Given that subsequent amendments and revisions up to and including the 1985 revision of the statute book did not alter the scheme introduced by the Act (1936), the law remained as it was declared in Vigneux until then.

This conclusion does not, however, settle the question of whether amendments subsequent to the 1985 revision of the Act changed the nature of the statutory scheme. [ 86 ] As a point of clarification before moving on, because of the wide currency of the phrase “Statutory Licence” , I will continue to use it to refer to the immunity from action available to those who pay or offer to pay the approved licence fees.

(3) Legislative history: 1988 amendments [ 87 ] As a result of one of the accidents of timing which may occur in the statutory revision process, amendments to the Act which were passed and given royal assent after 1985 were included in the Supplements to the revised statutes: see Revised Statutes of Canada 1985 Act , R.S.C., 1985 (3rd Supp.), c. 40, paragraph 12 (a). [ 88 ] The 1988 amendments, found at [ Copyright Act ] R.S.C., 1985 (4th Supp.), c. 10 are noteworthy for two reasons.

First, the amendments provided a first legal framework for the collective administration of copyrights other than performing rights. This is significant for this appeal, which arises in the context of the collective administration of reproduction rights. While the 1988 amendments were only a first step in this process, which was completed with the 1997 amendments, they provide some insight into the kind of collective administration which Parliament had in mind. [ 89 ] Collective administration differs significantly from the business model in effect at the time of the Act (1936).

The “dealers in performing licences” whose conduct prompted legislative intervention acquired performing rights from rights holders and then exploited them for their own benefit. Collective administration is the administration of rights by rights holders (via an organization which they control) for their own benefit.

The question which will have to be addressed is whether this change resulted in a modification of the objectives of the statutory scheme. [ 90 ] The second reason the 1988 amendments are noteworthy is that they recognized “licensing bodies” , the precursors of collective societies, as a vehicle by means of which the collective administration of copyrights could be carried out.

Once again, this change came to full term in the 1997 amendments when all those who administered rights for and on behalf of the rights holders became collective societies which were entitled to engage in the collective administration of the full range of copyrights. [ 91 ] Finally, the 1988 amendments are noteworthy from the point of view of the administration of performing rights because of the amendment to the remedies provision which, as noted earlier, figures prominently in Access Copyright’s argument for mandatory tariffs. (

a) Performing rights societies [ 92 ] The 1988 amendments introduced a number of modest changes to the performing rights portion of the Act , such as limiting the repertoire disclosure limit in subsection 67(1) to works in current use, and the inclusion of the requirement in subsection 67(2) to file statements of proposed amounts to be collected in “both official languages” . This last change is not a modest change from the point of view of our linguistic heritage but it is modest from the point of view of collective administration. [ 93 ] Another such change is the use of the word “royalties” to describe the

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