This afternoon, the government introduced the Copyright Modernization Act (or Bill C-32), the long-awaited copyright reform bill [ the bill is not yet online , but I attended the media lockup in Montreal]. It is nearly two years since C-61 was introduced and nearly a year since the national copyright consultation, yet discouragingly some things have not changed. As I reported several weeks ago, Canadian Heritage Minister James Moore won the internal fight over Industry Minister Tony Clement for a repeat of C-61's digital lock provisions and against a flexible fair dealing approach and today's bill reflects those policy victories.

However, over the past month, Clement made steady in-roads in trying to restore some balance in the bill and achieved some wins. The bill contains some important extensions of fair dealing, including new exceptions for parody, satire, and (most notably) education. It also contains more sensible time shifting and format shifting provisions that still feature restrictions (they do not apply where there is a digital lock) but are more technology neutral than the C-61 model. There is also a "YouTube exception" that grants Canadians the right to create remixed user generated content for non-commercial purposes under certain circumstances. While still not as good as a flexible fair dealing provision, the compromise is a pretty good one. Throw in notice-and-notice for Internet providers, backup copying, and some important changes to the statutory damages regime for non-commercial infringement and there are some provisions worth fighting to keep.

Yet all the attempts at balance come with a giant caveat that has huge implications for millions of Canadians. The foundational principle of the new bill remains that anytime a digital lock is used – whether on books, movies, music, or electronic devices – the lock trumps virtually all other rights. In other words, in the battle between two sets of property rights – those of the intellectual property rights holder and those of the consumer who has purchased the tangible or intangible property – the IP rights holder always wins. This represents market intervention for a particular business model by a government supposedly committed to the free market and it means that the existing fair dealing rights (including research, private study, news reporting, criticism, and review) and the proposed new rights (parody, satire, education, time shifting, format shifting, backup copies) all cease to function effectively so long as the rights holder places a digital lock on their content or device. Moreover, the digital lock approach is not limited to fair dealing – library provisions again include a requirement for digital copies to self-destruct within five days and distance learning teaching provisions require the destruction of materials 30 days after the course concludes.

The digital lock provisions are by far the biggest flaw in the bill, rules that some will argue renders it beyond repair. I disagree. The flaw must be fixed, but there is much to support within the proposal. There will undoubtedly be attacks on the fair dealing reforms and pressure to repeal them, along with the U.S. and the copyright lobby demanding that their digital lock provisions be left untouched. If Canadians stay quiet, both are distinct possibilities. If they speak out, perhaps the bill can be fixed. I'll post an update of my 30 things you can do shortly. In the meantime, I'm relaunching Speak Out on Copyright to focus on this bill and encouraging Canadians to join the Fair Copyright for Canada Facebook group (to get active) and the Fair Copyright for Canada Facebook Page (to stay updated).

What's in the Copyright Modernization Act?

This is a complicated bill that will require detailed study (and envisions a mandatory review of Copyright Act every five years), but it boils down to three groups of provisions: sector-specific rules, compromise provisions, and the no compromise digital lock provisions.

1. Sector-specific Rules

Bill C-32 contains many provisions that are designed to address a single constituency or stakeholder concern. I'll post more on many of these in the coming days, but immediate sector-specific changes worth highlighting include:

new performers rights as demanded by ACTRA (and as needed for WIPO Internet treaty implementation)

new photographers rights as long demanded by photographer groups

new exception that addresses potential concerns from companies like Research in Motion for temporary copies for technological processes

new BitTorrent provision which establishes infringement for providing services via the Internet that a person knows or should have known is designed primarily to enable acts of copyright infringement

new ephemeral exception as lobbied for by Canadian broadcasters

new library provisions to allow for digital distribution (but subject to digital locks and destroying the copies after five days)

new distance learning teaching exceptions that encompass podcasts (but subject to digital locks and destroying lessons within 30 days of conclusion of the course)

a return of the Internet exception for education

new "YouTube" remix exception for user generated content that permits non-commercial use of works under certain circumstances

new technology-neutral format and time shifting provisions legalizing common consumer activities such as recording television shows and shifting CDs to iPods (but still subject to digital locks)

new backup copy provision (subject to digital locks)

expansion of the exception for the visually impaired

The sum total of these exceptions make for a more complicated Copyright Act, but also provide something for just about every stakeholder group.

2. Compromise Provisions

Copyright reform invariably involves compromise and several tough issues were clearly resolved with an attempt to balance interests through compromise provisions. Three areas in particular are worthy of discussion: fair dealing, intermediary liability, and statutory damages.

Fair Dealing. As reported earlier, the government rejected a made-in-Canada flexible fair dealing provision as Moore emerged as the anti-exception Minister. Despite that initial starting point, there are many exceptions that address creators (parody and satire), education (education exception, education Internet exception), consumers (time shifting, format shifting, backup copies), and user generated content (USG exception). While this leaves innovative businesses without the benefit of flexible fair dealing and Canada still short of the U.S. fair use provision, it is a pretty good compromise.

Intermediary Liability. For the third consecutive bill, the government has opted for a notice-and-notice system for Internet providers. The system is costly for Internet providers, but has proven successful in discouraging infringement. It is also far more balanced than the U.S.-backed notice-and-takedown approach or the incredibly disproportionate three-strikes model that would result in terminating subscriber access.

Statutory Damages. Many groups called for changes to the current statutory damages system that treats large-scale counterfeiting in the same manner as non-commercial cases. The new rules reduce statutory damages for non-commercial cases to as low as $100 along with a maximum of $5000. That is not insignificant, but it is well below the current $20,000 maximum. In other words, there are still tough potential damages but the law finally distinguishes between commercial and non-commercial infringement. Note that the bill also provides the prospect of targeting sites that facilitate infringement with aggressive new penalties.

3. No Compromise Provisions

The one area where there is no compromise are the digital lock provisions. The prioritization of digital locks is the choice of the U.S. DMCA and is now the choice of the Canadian DCMA. In fact, the Canadian digital lock provisions are arguably worse than those found in the U.S., with fewer exceptions and greater difficulty to amend the rules. The Canadian DCMA provisions are virtually identical to the U.S. – a handful of hard-to-use exceptions, a ban on the distribution and marketing of devices (ie. software) that can be used to circumvent, and a presumption that any circumvention is an infringement. The only significant difference between this bill and C-61 on digital locks is the inclusion of an exception for unlocking cell phones.

It is important to emphasize that this need not be the Canadian choice. Canada could comply with the WIPO Internet treaties (which serve as the impetus for these provisions), provide legal protection for digital locks, and still preserve the copyright balance. Doing so would simply require a provision confirming that circumvention of a digital lock is not prohibited when undertaken for lawful purposes. Similar language can be found in other countries' digital lock legislation and – as the top issue raised during last summer's copyright consultation – should have made it into this bill. Clement has indicated that the government is open to amendments and the opposition parties should place reform of the digital lock provisions at the very top of the list.

I will be posting much more in the days and weeks ahead on the bill, but the initial reaction depends on whether you are a glass half full or glass half empty person. For the glass half-full, the compromise positions on fair dealing, the new exceptions, and statutory damages are not bad – not perfect – but better than C-61. For the glass half-empty, the digital lock provisions are almost identical to C-61 and stand as among the most anti-consumer copyright provisions in Canadian history. Not only are they worse than the U.S. DMCA, but they undermine much of the positive change found in the rest of the bill. In the days and weeks ahead, Canadians must speak out to ensure that the compromise positions found in C-32 remain intact and that the digital lock provisions move from the no-compromise category to the compromise one.