June 2012

Intellectual Property Bulletin/Lexology

After several failed attempts, the federal government has finally passed copyright reform legislation, namely Bill C-11, the Copyright Modernization Act. The Bill will come into force on a day to be set by Cabinet.

Canada's Copyright Act has not been materially updated since 1997. Technology has come a long way since then and there is an urgent need for reform. Many activities taking place in Canadian households are technically copyright infringements, including:

transferring legally-purchased music or movies to a computer hard drive or digital music player;

recording a television programme to a VCR, DVD recorder or personal video recorder (PVR); and

creating a backup copy of a movie or video.

Among other things, the Bill's amendments are intended to usher the Copyright Act into the digital era, implement Canada's obligations under international treaties, and make the provisions of the Act technologically neutral.



The following summarizes some of the key amendments to the Copyright Act that will result from Bill C-11.

circumventing technological protection measures or rights management information

A key principle of the Bill is that it prohibits circumventing technological protection measures (or digital locks), which are technology or devices that control access to copyrighted material or that restrict the reproduction of material. For example, an e-book may be digitally locked such that it cannot be accessed or copied except on certain devices, or by certain persons, or during certain times. This prohibition on circumventing digital locks applies even if the work is legally acquired and overrides most other rights in the Bill, including the new backup copy rights, format-shifting, and time-shifting rights (described below). The Bill also bans the distribution and marketing of devices, such as software, that can be used to circumvent digital locks. Support for technological protection measures is a key element of the Bill and the penalties for circumventing them are significant. Circumvention for commercial purposes can attract criminal liability, with fines up to $1,000,000 and a prison term of up to five years in serious cases.

This approach to technological protection measures is similar to the U.S. Digital Millennium Copyright Act, though some Canadian commentators argue this approach shifts the copyright balance too far in favour of IP rights holders at the expense of consumers.

The Bill further protects works that incorporate "rights management information," sometimes also referred to as "metadata," being information attached to or embodied within a work that identifies such things as the work, the author, or the terms and conditions of use. Canadians are prevented from knowingly removing or altering such information if the person knows or should have known that the removal facilitates or conceals infringement or adversely affects royalty rights. In addition, Canadians who obtain a work that they know or should have known had rights management information removed or altered are forbidden from selling or renting it, distributing it to the owner's prejudice, communicating it to the public, or importing it to do the foregoing.

services enabling infringement

Under the updated Act, it will be an infringement of copyright to provide a service over the Internet or other digital network, primarily to enable copyright infringement if the service is actually used to infringe copyright. A number of factors will be taken into account in deciding whether the primary purpose of the service is to enable copyright infringement, including how the service is marketed and whether the service would be economically viable if not used to enable acts of infringement.

format shifting

The Bill allows individuals to transfer legally acquired works of all kinds, including musical recordings, from one format to another for private purposes, referred to as "format shifting". For example, an individual would be able to copy music on legally obtained CDs to digital music players or cell phones for that person's own private purposes.

However, there are numerous restrictions. Most notably, because the work to be "format shifted" must be legally obtained and not borrowed or rented, copying music from a friend's CD to an iPod would not be allowed. Moreover, the individual must own the medium on to which the work is transferred and the copy must not be distributed, even to friends for their own private use. Any copies made must be destroyed before the individual gives the original work to another person (so an individual cannot make a format-shifted copy and then transfer the original to another individual, retaining the copy). Finally, it would not be permissible to tamper with a technological measure or digital lock designed to prevent copying or access to the work. It is not clear whether these provisions would prohibit sharing copyrighted works over a home network, although a final revision to the Bill makes it clear that the reproduction must only be used for the individual's "private purposes" (as opposed to just generally for private purposes as originally drafted, a change that might exclude family members).

The restrictions on "format shifting" described above will not apply to certain types of blank media. Canada's private use levy system will continue to permit Canadians to make a private copy of an audio recording onto certain blank audio recording media for which a federally-imposed levy has been collected (such as CDs and tapes). The amounts collected under those levies are then to be distributed to content creators as remuneration for this private use.

time shifting

Recording broadcast television, radio programs or Internet programming using any recording device will be permitted under the amended Act provided that the program is recorded only once and is kept "no longer than necessary in order to listen to or watch the program at a more convenient time." Furthermore, the copy made must be for the private purposes of the individual who recorded it and cannot be given away. Of course, it would be illegal to circumvent a digital lock to record the program. These rights do not apply to on-demand services. Commentators have criticized the stringent limitations of the time-shifting right, such as the fact that it would be illegal for a person to create a library of his or her favourite shows for multiple re-watching, even if maintained strictly for private use. In particular, many commentators take issue with the two main restrictions specific to time-shifting—that only one copy must be made, and that the individual must keep it only as long as needed to view or listen to it at a later time—as being contrary to how PVR and similar devices are marketed, such as with the ability to record hundreds of hours of programming, storing programs for long periods of time or even archiving them, recording multiple occurrences of programs or series, or rewinding and re-watching already viewed material.

interoperability, security assessment, and encryption research

The Bill contains specific exemptions for (a) backup copies of copyrighted works, where the backup must be used only if the source is lost and must be destroyed once the source is given away, (b) reproductions of a computer program necessary to obtain information about making it interoperable with another computer program as long as that information is not shared except as necessary to so make the program interoperable or to assess interoperability, (c) reproductions of copyrighted works for assessing security vulnerabilities, and (d) reproductions of copyrighted work for the purposes of encryption research used for non-criminal purposes as long as it is not practical to carry out the research without making the copy and the researcher has informed the copyright owner. In addition, the encryption research and security exemptions only apply to computer programs if the researcher in question gives adequate notice of any vulnerability or flaw located to the copyright owner before making it public, unless making it public "outweighs the owner's interest in receiving that notice."

The encryption research and security exemption has sparked concerns from commentators about "chilling effects" on academic freedom, as well as whether it is proper to use copyright law to limit, or at least create potential liability for, legitimate academic research that advances the state of the art of computer programs. In the constant "arms race" among illegitimate hackers, legitimate security researchers, and software vendors, these provisions will likely become a focus of attention.

exception for user generated content

What some are calling the "YouTube" exception will permit individual Canadians to create remixed user generated content for noncommercial purposes under certain circumstances. An individual will be able to incorporate existing copyrighted materials into a new work, such as an Internet "mash-up," and disseminate it publicly as long as the new work is created for non-commercial purposes, the source/author of the existing materials is mentioned where reasonable to do so, the existing materials were legitimately acquired and the new work is not a substitute for the original material and does not negatively impact the markets for the original materials. The exception does not seem to address organizations' user-generated content, or even non-commercial use by non-profits, religious institutions or charities.

network service providers

Internet Service Providers (ISPs) will now be exempt from liability for copyright infringement when they are acting solely as intermediaries or engaging in caching to make Internet communications more efficient. Nevertheless, the Bill suggests that ISPs do indeed have a role in preventing infringement.

The Bill enacts a "notice and notice" system for informing suspected copyright infringers of a copyright owner's desire to enforce its rights. The system involves a two-step process whereby (i) notification from a copyright holder in a prescribed format is sent to the ISP, and (ii) the ISP then forwards this notification to the subscriber. The ISP is not required to take any further action, such as removing the content in question (as required under the American and Australian regimes) and consequently some commentators say the approach lacks teeth. The ISP is, however, required to store the subscriber's IP information for six months, or a year if a court action stems from the infringement. Failure to maintain such information could make the ISP liable to statutory damages in the $5,000 to $10,000 range.

Similarly, a new exemption clarifies that web-hosting service providers may store works without infringing copyright, unless the web host knows of a court decision holding that the stored material infringes copyright.

Search engines (referred to as information location tools in the Bill) are also subject to the notice and notice system. However, unlike ISPs, under the amended Act search engines will still be liable for infringement for caching content and displaying that cache to the public. Search engines keep "cached" copies of works so that search results can be quickly indexed and displayed without reliance on the Internet-available copy. However, provided the search engine meets certain conditions, a copyright holder's only remedy against the search engine for this activity will be an injunction, such as an order requiring removal of a work from the cache.

new categories of fair dealing

The Bill expands the concept of "fair dealing," an exception to copyright infringement that formerly permitted the use of copyrighted material for the purposes of private study and research, criticism and review, and news reporting. Fair dealing will be expanded to include the use of works for parody, satire and education.

These provisions do not address infringement of the moral rights of the creator of a work. It is an infringement of the creator's moral rights to distort, mutilate or otherwise modify a work to the prejudice of the honour or reputation of the creator. It will be interesting to see how the new parody and satire exceptions run up against moral rights.

new rights—making available and distribution

The amended Act gives copyright owners two new rights. The first comes through a technical adjustment to the definition of what it means to communicate a work to the public by telecommunication. With the Bill's amendments, copyright holders now have the exclusive right to make a work available to the public by telecommunication in a manner that allows a member of the public to have access to it at the time and place of his or her choosing. This right will mean that peer-to-peer Internet file-sharers are committing infringement by simply making a copy of a work available to the public, not only when transmitting an infringing copy of a work to another person.

Secondly, there is a new right of first distribution. The copyright owner now has the right to distribute a copyrighted work in a tangible form (e.g., a DVD or a CD) for the first time as long as it has not "previously been transferred in or outside Canada with the authorization of the copyright owner." At first blush, this right appears to be a codification of what is known as the "doctrine of first sale" (i.e., that the copyright owner has the right to sell a tangible work but that afterwards it may be resold without the copyright owner's permission). However, it also has implications for the liability of retailers who break the "street date" of a work by selling it early, and may also impact grey market distribution of copyrighted works legally obtained in another jurisdiction.

performers' rights

The Bill seeks to give performers additional rights in their performances. The Bill will extend moral rights to a performers' performance. Moral rights include the right to the integrity of the work and the right to be associated with a work or to remain anonymous. Moral rights are currently available to authors of copyrighted works. The Bill will also update the term of protection for performers' performances. Lastly, the new "making available right" described previously, will give performers the exclusive right to make a sound recording of their performance available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time chosen by that member of the public.

ownership of copyright in photographs and portraits

The Bill brings the ownership of copyright in photographs and portraits in line with other works. Presently, the person who commissions such items is deemed to be the first owner of the copyright. Photographers and artists, therefore, have had to rely on contractual arrangements to obtain rights to reproduce their works. Under the updated Act the photographer or artist will now be the owner of copyright in commissioned photographs and portraits. The person who commissioned the photograph or portrait will have limited rights to use it for personal or non-commercial use without the photographer or artist's permission, subject to any contract that specifies otherwise.

statutory damages

The Bill will decrease the statutory damages available where an individual infringes copyright for non-commercial purposes. Previously, statutory damages ranged from $500 up to a maximum of $20,000, per work infringed. Under the new rules, statutory damages in non-commercial cases could be as low as $100 up to a maximum of $5,000 for all infringements in a single proceeding for all works. This reduced damage award would likely apply, for example, to individuals who download music from peer-to-peer file sharing services. It has been argued that a reduction in statutory damages balances the interests of copyright owners and those of users.

use of copyright material by educational institutions

The Bill introduces a number of exceptions for use of copyrighted works by educational institutions, which build on the existing exceptions for such institutions and are aimed at addressing use of digital materials and materials available on the Internet.

One of the more interesting exceptions allows educational institutions to copy material publically available on the Internet only if such materials are legitimately posted, are not clearly marked as prohibiting such reproduction and if the educational institution is not aware that the materials were posted on the Internet in violation of the owner's rights.

Other provisions will facilitate distance learning by permitting institutions to communicate lessons to the public over the Internet for educational or training purposes, subject to any digital locks and as long as the lessons are destroyed within thirty days of conclusion of a course.

libraries

The Bill permits libraries to distribute materials digitally; however, the library must take measures to ensure that the client only prints one copy of the digital form, does not communicate the copy to another person and ensures that the copy is destroyed within five days after using it. Digital distribution is only permitted if there are no digital locks on the materials.

some final remarks

As with its predecessors, Bill C-11 has been the topic of intense debate among stakeholders and practitioners in the copyright field, as well as politicians. The "digital lock" provisions have been very contentious, particularly since they trump many of the new reproduction rights added by the Bill.



Canada has been under pressure from other nations to strengthen its intellectual property laws. Time will tell whether these changes, once enacted, are sufficient to appease those calling for reform and whether Canadians feel the amendments strike an appropriate balance between the rights of users and owners of copyrighted works.



by Ryan J. Black and Alison Hayman, with contributions from Peter Wells and Sarah Kilpatrick





