On June 26, 2009, the Copyright Board rendered its long awaited decision with respect to the tariff rates that will apply to the photocopying of copyright protected published works in Canadian elementary and secondary schools (except in Quebec, which deals separately with a collective known as COPIBEC, which represents a largely French-language repertoire). This decision, which followed a public hearing held before the Board during the summer and fall of 2007, constitutes the first time that the Board has certified tariff rates in relation to photocopying, or, in the wording of the tariff, “reprographic reproduction”. As such, the decision, and the tariff-setting methodology that it employed, will likely serve as a precedent for future tariff proposals involving Access Copyright, the copyright collective that represents Canadian authors and publishers of print material.

The Educational and Government Tariffs

This decision, relating to photocopying activities in Canadian public schools, represents the Board’s consideration of the first of two separate tariff proposals that Access Copyright had originally filed in 2004 and which were designed to apply during the 2005 to 2009 calendar years. Now that the Board has finally disposed of Access Copyright’s “educational tariff” proposal, it is expected that the collective will soon turn its attention to its second tariff proposal relating to the photocopying and digital copying of books, magazines and newspapers by employees of the provincial and territorial governments. This tariff proposal, which, when eventually approved by the Board, would likely have retroactive effect to January 1, 2005, was recently re-filed according to the requirements of the Copyright Act to apply during the 2010 to 2014 calendar years as well.

Unlike the case of Canadian Ministries of Education which had, prior to the recent certification of the educational tariff by the Board, been paying Access Copyright royalties pursuant to a single, previously negotiated, pan-Canadian licence agreement, the provincial and territorial governments have been paying royalties to Access Copyright pursuant to several separate agreements. Such being the case, once approved by the Board, the “government tariff” will, for the first time, bring every provincial and territorial government (except Quebec) under the same tariff umbrella. Because tariffs approved by the Board are typically updated and adjusted from tariff period to tariff period – often upwards – the government tariff, once certified, will likely represent the “groundfloor” for all future government tariff increases.

In its recent decision involving the educational tariff, the Board established the certified tariff rates by using a tariff methodology which was meant to approximate the fair market value of all of the pages copied by public schools. Because of this precedent, Access Copyright will likely propose that a similar methodology be used to determine the rates payable under the new government tariff.

The Educational Tariff

During the period of 1999 to 2004 when the previously negotiated pan-Canadian licence agreement was in place between the various provincial and territorial Ministries of Education and CANCOPY, Access Copyright’s predecessor collective, each educational institution in Canada (outside of Quebec) paid an annual royalty of approximately $2.30 per full-time equivalent student (referred to as an “FTE”) for the right to make photocopies in public schools. When it filed its educational tariff with the Board in 2004, however, Access Copyright requested a dramatic increase in this annual FTE rate to $12. Later, once empirical evidence had been presented to the Board at the time of the public hearing, Access Copyright argued that this evidence supported an annual FTE rate of $8.92. For their part, the coalition of Ministries of Education and school boards, known as the “Objectors”, that opposed Access Copyright at the hearing argued for an FTE rate of $2.43.

After considering the evidence and arguments submitted by both Access Copyright and the Objectors at the hearing, the Board found that an annual FTE rate of $5.16 was justified. Then, as it has often done in the past when approving new “inaugural” tariffs, the Board applied a 10% discount to the certified rate for the first four years of the tariff period. This was done to reflect the fact that the new $5.16 rate, at more than double the previous rate under the pan-Canadian licence, was a significant tariff jump for financially constrained Ministries of Education.

The Tariff Methodology

The Board set the annual FTE rate under the educational tariff by multiplying the number of pages triggering remuneration that were found to have been copied over the course of a school year by the estimated market value of each photocopied page to ascertain a total value for all copied pages, and then divided that total value by the estimated number of students – 3.8 million – attending school that year.

The Board determined the number of copied pages triggering remuneration by reviewing the results of a comprehensive “volume” study undertaken by Access Copyright and the Objectors which measured the amount of photocopying of protected published works that was undertaken in a sample of Canadian public schools in the 2005-2006 school year. The Board then subtracted several estimated page amounts attributable to copies for which Access Copyright could not collect royalties. These included copies of consumable or reproducible materials, copies that qualify under the Copyright Act’s “fair dealing” exception, and documents that are in the public domain or otherwise not part of Access Copyright’s repertoire. The Board then made minor adjustments up and down for, for example, photocopied pages of non-affiliated rights holders’ works (which also fall outside of Access Copyright’s repertoire).

The Board then determined the estimated value of each of the copied pages. It did this by taking the average “per page” retail price for schools of books, newspapers, and magazines. In doing this, the Board subtracted costs related to physical production and distribution to find the value of the creative contribution, or, the value for which authors have the right to be compensated. Finally the Board added back 30% of the price to represent the value added by the ability to select particular segments of works, such as a limited number of pages from a lengthy book. In this regard, by way of example, a single song costs more to purchase online than the average cost of each song when an entire album of songs is bought. This calculation by the Board yielded three separate values; one for each photocopied page of the average book, magazine, and newspaper.

Finally, the Board arrived at the final annual FTE rate of $5.16 by multiplying the value of each type of photocopied page by the volume of copied pages triggering remuneration, and then dividing that number by the total number of FTEs.

Fair Dealing

In arriving at its decision, the Board considered the Copyright Act’s “fair dealing” exception in great detail. This was done as part of its consideration of the number of photocopied pages that trigger remuneration in order to prevent the Ministries of Education from being required to pay Access Copyright for uses that do not infringe copyright.  

Under the fair dealing exception, copies made for the purposes of research, private study, criticism or review, and news reporting, if made fairly, do not infringe copyright. The Supreme Court of Canada, in its landmark 2004 decision in CCH Canadian Ltd. v. Law Society of Upper Canada, directed courts to interpret these categories liberally. In the CCH case, the Court found that lawyers who requested photocopies of legal materials at the Great Library at Osgoode Hall in Toronto were performing “research”. Moreover, the photocopying was being done fairly because the Great Library had a written policy in place meant to ensure that this was so.

In its educational tariff decision, among other findings, the Board found that many of the copies made in public schools could not qualify as fair dealing because the copies were requested by a teacher for use by the students, rather than by the student directly. As such, in the view of the Board, these copies were made for the purpose of instruction rather than for private study.

The Objectors’ Judicial Review Application

The Objectors to Access Copyright’s tariff proposal, in accordance with the requirements of the Federal Courts Act, have applied to the Federal Court of Appeal for judicial review of the Board’s decision. Their grounds for review include the argument that the Board interpreted the “fair dealing” exception too restrictively and not in the broad and liberal manner set out in the Supreme Court’s CCH decision.

The way in which the Federal Court of Appeal ultimately interprets the “fair dealing” exception in this judicial review application could have farreaching implications for copyright “users” well beyond the immediate parties to the Board’s educational tariff decision. Although the Supreme Court in the CCH case stated that the “research” category – and, by implication, the other fair dealing categories – should be defined broadly, it did not flesh out what this means in practical terms. As such, cases like the Objectors’ judicial review application could be instrumental in establishing the future bounds of fair dealing pursuant to the Copyright Act.

The Provincial and Territorial Government Tariff

Access Copyright’s proposed tariff for provincial and territorial governments is similar in structure to the educational tariff that has just been approved by the Board. Like the educational tariff, it requests the Board to certify an annual royalty based on a fixed fee multiplied by the number of full-time equivalent employees (also termed “FTEs”). However, it requests a tariff rate far higher than that either requested of the Board, or certified, in the Board’s educational tariff decision. In this regard, in Access Copyright’s government tariff proposal for 2005 to 2009, it requested an annual FTE of $15, whereas it has recently filed for a rate of $24 for the 2010 to 2014 tariff period.

During the course of the process leading up to the public hearing in relation to the educational tariff, both Access Copyright and the Objectors agreed on the general methodology to be used to determine the eventual tariff rate. This required a study of the volume of photocopying of protected published works occurring in public schools, as well as an analysis of the fair market value of these works on a “per page” basis. Given its experience in the educational tariff proceeding, it is likely that Access Copyright will propose that a similar methodology be used in any hearing to consider its government tariff proposal. This will raise delicate issues relating to the willingness of provincial and territorial governments to cooperate with Access Copyright in any eventual study that involves reviewing, in some depth, the scope and nature of government photocopying activities. Certainly, it can be expected that these governments may be reluctant to allow monitors from Access Copyright to enter into their offices and other work places in order to ascertain what, and how much, is being currently photocopied.

Objections

As permitted by the Copyright Act, every provincial and territorial government in Canada, with the exception of Quebec, has filed a statement of objections to Access Copyright’s proposed government tariff. These objections to the tariff proposal include, among other things, that there is no link between the status of FTE employee and an individual employee’s use of copyrighted works, that the value of the royalty is not fair, reasonable or appropriate, that if the royalty is not calculated with respect to the actual use made of works, it constitutes an unlawful tax, and, finally, that the tariff, as a whole, extends beyond the rights granted to authors under the Copyright Act.

The various statements of objection also argue that the proposed tariff does not take into account copies made under the fair dealing exception. Considering that much of the copying done within governments is likely for the purpose of research, the scope of this exception will be a major issue at any eventual Board hearing. This argument also highlights the importance of the judicial review application that is underway with respect to the educational tariff.

Finally, the Objectors argue that the provincial and territorial governments have insufficient information on the scope of Access Copyright’s repertoire – that is, the works for whose use it is licensed to collect royalties – to be able to properly assess the proposed tariff rate. This difficulty would, of course, be resolved in the event Access Copyright is able to perform a volume study, like that done in the educational tariff proceeding, which identifies those works that it represents that are photocopied, and the number of copies made. This methodology, if implemented, would enable both Access Copyright and the various governments to have a better idea of the scope of the photocopying that lies at the heart of any Board consideration of this proposed tariff. It would only be then that the parties could make any determination as to what an appropriate FTE rate may, in fact, be.

The Importance of the Government Tariff

Invariably, in Copyright Board proceedings, each tariff for one specific use becomes the basis for the next tariff applied to that same use. As this is the first tariff proposal that Access Copyright has applied to governments, any Board decision will likely establish a method for calculating the tariff rate that will be applied to all future rate adjustments. Once this tariff is approved by the Board, the provincial and territorial governments will be required to make substantial annual payments to Access Copyright that probably exceed the rates that have been privately negotiated in the past. This is due to the fact that any eventual tariff will necessarily be based on evidence relating to the amount of photocopying performed. In these circumstances, it is in the interests of these governments that they marshall all of their efforts – on a collective basis – to oppose Access Copyright’s tariff proposal.

For the first time, a rate will be set by the Board that reflects actual photocopy usage for governments. In the development of this evidence, it is imperative that all appropriate copyright exemptions be utilized to ensure that Access Copyright only receive payments for the reproduction of those works that properly fall into its repertoire and for which payment is required by law. This was the experience of the Objectors in the educational tariff. The counting of the photocopied pages that should either be added to, or deleted from, the total number of pages on which the tariff will be set will be of primary concern to the Board. The other important question relates to the estimated value, on a “per page” basis, that the Board should give to the photocopying of copyrighted print material by government Ministries. These two issues, together, represent the principal ground over which this upcoming copyright battle will be fought.