CBC v SODRAC Supreme Court of Canada decision expected Thursday, November 26, 2015 at 9:45 AM

The decision of the Supreme Court of Canada in CBC v SODRAC will be released Thursday Nov. 26, 2015 at 9:45 AM https://t.co/ZpeQwvRQMq

— Howard Knopf (@howardknopf) November 24, 2015

The decision will appear here at 9:45 AM or shortly thereafter. 

Here is the Court's unofficial summary of the issues:

Intellectual property law - Judicial review - Copyright - Licenses - Licensing societies - Royalties - Ephemeral copies - Application by broadcaster for review of licenses issued by Copyright Board allowed in part - Collective society imposing royalties on producers of content and broadcasters - Licences allow collective society to collect royalties for copies incidental to use of new broadcast technologies - Whether broadcast-incidental copies require a separate licence under a technologically-neutral interpretation of the Copyright Act, R.S.C. 1985, c. C-42 - If a licence is required in FCA File No. A-516-12, what is a technologically-neutral royalty rate for broadcast-incidental copies - Whether the Board err in law by granting an interim licence in FCA File No. A-63-13. 

Here is the link to all the factums.

I filed a factum on behalf of the Centre for Intellectual Property Policy of McGill University (headed by Prof. David Lametti, now David Lametti, M.P.) and Prof. Ariel Katz of the University of Toronto, both of whom appeared with me at the hearing.

A webcast of the hearing is available here.

HPK

The Copyright Board of Canada is Reversed Again by the Federal Court of Appeal: the CAFDE Decision

I recently wrote about the reversal by the Federal Court of Appeal (“FCA”) of the CAFDE decision by the Copyright Board in which the Board was held to have erroneously reversed its own originally erroneous decision. I indicated that that this ruling was notable not only for its nature but that it comes at an interesting time in the Board’s history. To wit, the CAFDE decision:

• follows an important decision concerning Re:Sound from February of this year from the pen of now retired Justice John Evans, the “dean” of  and reigning author and authority on Canadian administrative law, wherein the Board was very resoundingly reversed on the grounds of procedural fairness
•  follows the Board’s decision from earlier this year dealing the Pandora issue, which predictably resulted in a judicial review application 
•  follows judicial review now underway of the Board’s Netflix decision
•  follows the recent decision of the Supreme Court of Canada to grant leave to appeal to CBC in the case involving the Board’s SODRAC ephemeral rights decision. That case is related to the current CAFDE case. It arose out of the same decision of November 2, 2012 that gave rise to the judicial review proceedings on behalf of CBC. That case will clearly involve the issue of technological neutrality. The apparently obvious question is whether the SCC affirms that it said what it meant and that it meant what it said about technological neutrality in its 2012 ESA decision and quite possibly something about the status of Bishop v. Stephens. And there could be other interesting questions arising from and resulting pronouncements from this case. Stay tuned…

All of this happening while the Board also has on its table a complex and expensive process that has grown to involve foreign expert opinions in order to determine whether or not the 2012 Canadian domestic copyright modernization legislation created a new “making available” right that could result in an additional tariff layer. This is being done in the context of the following matter: CSI - Online Music Services (2011-2013); SOCAN Tariff 22.A - Online Music Services (2011-2013); SODRAC Tariff 6 - Online Music Services, Music Videos (2010-2013). This is taking place as the result of an apparent lack of agreement on the implications of the 2012 Supreme Court of Canada decision in 2012 in the ESA case which dealt, inter alia, with how s. 3 of the Copyright Act is to be construed.

Interestingly, this also comes at a time when the Board has - by its own admission – committed yet another “error”, concerning the issue to which I had alluded in my September 24, 2014  posting about the July 18, 2014 Netflix decision, in which judicial review is already underway as noted above. I indicated on September 24, 2014 that:

Also unresolved and up in the air are issues around “downloads” and “making available right” – on the one hand, the Board says that SOCAN not entitled  but then the tariff refers to liability for downloads.

Shortly after my September 24, 2014 posting, the Board on October 8, 2014 published this notice which discloses the error and which coincidentally came just a few days before the CAFDE decision of the FCA. It is interesting now to see how the Board apparently is going about the process to “proceed with the correction” of its erroneous decision by the simple “issuance of an erratum by which any reference to downloads would be deleted.”

SOCAN Tariffs 22.D.1 (Audiovisual Webcasts) and 22.D.2 (Audiovisual User-Generated Content) for 2007-2013

October 8, 2014

NOTICE OF THE BOARD

On July 18, 2014, the Board issued its decision (the “Decision”) for the Statement of Royalties to Be Collected by SOCAN for the Communication to the Public by Telecommunication, in Canada, of Musical or Dramatico-Musical Works [SOCAN Tariffs 22.D.1 (Internet – Online Audiovisual Services) and 22.D.2 (Internet – User-Generated Content), 2007-2013] (the “Tariffs”). The Tariffs were published in the Supplement of the Canada Gazette, Part I, Vol. 148, No. 29, on Saturday, July 19, 2014.

The Decision was clear with respect to the Board’s intention related to the fact that SOCAN did not have the right to collect royalties for permanent and limited downloads. In fact, paragraph 14 of the Decision reads as follows:

The decision of the Supreme Court of Canada in ESA v. SOCAN meant that SOCAN no longer had the right to collect royalties for permanent downloads and limited downloads. This was reflected in the Board’s recent decision on online music services which had been structured the same way. As a result, neither agreement filed by SOCAN makes reference to downloads.

Although the Board’s intention was clear, the Board made an error in assuming that neither agreement made reference to downloads, and in certifying, as requested by the parties, Tariffs that reflected the terms and conditions of the agreements. Thus, the certified Tariffs do not express the intention of the Board and contain provisions related to downloads. In particular, the definitions and reporting requirements refer to downloads of audiovisual works, limited downloads and permanent downloads.

The Board’s preliminary view is that the Tariffs can be corrected in order to reflect the conclusions of the Board clearly conveyed in its Decision, for the following reasons:

·         First, the Board committed an error when it certified the Tariffs;

·         Second, the error committed by the Board is in expressing its intention with respect to the rights of SOCAN to collect royalties for downloads;

·         Third, the Board’s intention is manifest in paragraph 14 of its Decision;

·         Fourth, because of this error in expressing its manifest intention, the Board is not functus officio; and,

·         Fifth, the Board has the inherent authority to correct such error.

The Board would like to proceed with the correction of the Tariffs by the issuance of an erratum by which any reference to downloads would be deleted. For convenience, we have attached to this notice a marked version of the proposed, corrected Tariffs.

The Board would like to know whether any party objects to this proposal no later than Friday October 17, 2014. If no objection is received, the Board will proceed accordingly.

(highlight added)

The Board has published a proposed redlined version of the proposed deletions  that would be involved, which are quite extensive. Apparently, no parties objected prior to October 17, 2014 as to the Board’s proposed course of action. This remarkable announcement is in in the current issue of the Canada Gazette. Whether this unusual turn of events and the FCA’s CAFDE decision of October 20, 2014 will find their way into the Netflix judicial review proceedings underway or have any other repercussions remains to be seen. 

All of this is also happening as the Board continues to be caught between a rock and hard place on the Access Copyright Post-Secondary tariff, wherein the objectors have withdrawn from the hearing and Access Copyright is already setting the stage for judicial review and the Board has apparently been unable to decide whether to have an oral hearing or to proceed on paper. In the latter case, Access Copyright may have additional grounds for review, if it doesn’t like the outcome. The K-12 hearing process also seems to remain quite open and active, despite the original hearing having taken place in April and early May of this year. Both of these matters could result in rulings with potentially controversial implications concerning the “mandatory tariff” issue. I will have more to say about these proposed educational tariffs in due course….

And all of this is happening as the Board sits without a Chair. The term of past Chair, retired Judge William Vancise from Saskatchewan, expired on May 13, 2014. He could not have been reappointed beyond that date because that’s the way the statute works. His jurisdiction to remain seized of unfinished matters is spelled out as follows in the Copyright Act:

Concluding matters after membership expires

66.5 (1) A member of the Board whose term expires may conclude the matters that the member has begun to consider.

Marginal note: Decisions

(2) Matters before the Board shall be decided by a majority of the members of the Board and the presiding member shall have a second vote in the case of a tie.

R.S., 1985, c. 10 (4th Supp.), s. 12.

It may not be absolutely clear what is meant by “may conclude matters that the member has begun to consider”.  Whether this could or will become an issue in any of the several outstanding matters now before the Board remains to be seen. Clearly, it would not be appropriate to discuss this question with respect to any particular outstanding matters.

All of this is happening as there is much speculation and suspense about who the Government will appoint as a new Chair and when this will happen. I have taken the liberty months ago of suggesting that the appointment of the next Chair be made from the ranks of sitting or retired judges of the Federal Court or Federal Court of Appeal, many of whom already have considerable expertise not only in copyright law but in administrative law, and in some cases in constitutional, competition, communications and/or other often useful and relevant aspects of the law that can arise before the Board – and the Federal Court of Appeal.  All of the sitting federal courts judges reside in the National Capital region. Some of the retired judges still do. This fact alone would have the additional advantage of saving the government a lot of money.  All of the judicial chairs of the Board since it was established in 1989 have been from the courts of the provinces. Perhaps the time has come for the Government to make an appointment from the ranks of the sitting or retired judges of the Federal Courts.

I have suggested earlier this year that the Board is at a cross-roads. Michael Geist has been far more blunt, saying that “The Board may keep a steady stream of lawyers and economists busy, but it is time to acknowledge that it is broken”. There is increasing concern that that:

• The Board’s hearing process regularly takes years longer than what we see in the Courts and other comparable tribunals, even in some far more complex cases that may involve patent, competition or communications law. It often takes four years or more for a proposed tariff just to get to the hearing stage at the Board and another two years or more for the Board to render a decision. One of the results of these long time lines can be tariffs with a sometimes very long retroactive reach that can come as a shock to many users who are without effective representation at the Board and may have been unaware of the looming liability. 
•  While the great cost of Board hearings was once considered a safe investment with a virtually guaranteed lucrative return by most collectives and even by bank lenders, this is probably no longer the case. The very high cost of Board proceedings has always been a problem for users, especially those who cannot pass the costs on to their customers. However, these high costs and delays and the uncertainty of the cost/beneficial outcome are now a problem for collectives too. 
•  The Board’s decisions are, it seems, increasingly and sometimes dramatically being reversed by the Federal Court of Appeal and the Supreme Court of Canada (“SCC”). The SCC decided five cases from the Board in 2012. While the Board was upheld in three of those cases, it was dramatically reversed in two of them. As noted above, the SCC has just taken on another important case involving technological neutrality and possibly other issues. 
•  While there are calls for greater resources for the Board, it is not clear that this would solve any problems. As I have earlier written, with about 16 full time equivalent employees (FTEs), plus up to five full or part time Board members themselves, this Board is already by far the largest organization of its kind anywhere in the world. It will have a net cost of operations for 2014 in excess of $3.5 million. It is an interesting fact that the Copyright Board already has almost 10% of the budget of the Supreme Court of Canada. The Copyright Board’s net cost of operations for 2014 will be more than $3.5 million. That of the Supreme Court for 2013 was less than $41 million. The Copyright Board typically renders only about two or three (more or less) substantive decisions a year that typically require several years to reach the hearing stage. The hearings are rarely longer than a week or two. There is typically a 1.5 to 2 year (or even more) delay after the hearing before a decision is rendered, and the decisions are often then reversed after judicial review. By contrast, the Supreme Court of Canada in 2013 received 529 applications for leave to appeal, heard 75 appeals and rendered judgment in 78 cases. The average time between a hearing and the rendering of a judgment was 6.2 months. More statistics on the SCC can be found here.

If the Government is sufficiently concerned about these issues, progress can be made in the short and medium term in two tangible and achievable ways, as I have earlier suggested:

• By appointment of a Chair who can hit the ground running at least in terms of both copyright and administrative law, and quite possibly some other useful field such as communications or competition law. As I have suggested, such a person might be found from the ranks of the sitting or retired judges of the Federal Court or the Federal Court of Appeal    
• Through regulations that the Government can implement pursuant to the existing legislation, either at the behest of the Board or the Departments or both, in order to provide more certainty and efficiency. Examples of such clearly articulated and time-tested regimes can be found close at hand, for example with respect to the Competition Tribunal, the Canadian Industrial Relations Board, the Canadian International Trade Tribunal, the CRTC and other comparable federal tribunals.

While there is much to be said for the informality and normally high degree of collegiality among counsel and in the way the Board works with counsel, the fact remains that there is wide-spread concern that, at the end of the day, things take much too long and costs are much too high for all concerned, including the collectives themselves. With respect to certain issues such as:

•  the order of proceedings (the apparently unique process of interrogatories first and “pleadings” only  at the very end);
•  departure from the normal rules of evidence, especially regarding expert witnesses; and,
•  timing benchmarks,

it would seem that the Board has arguably departed from conventional practices and procedures in the federal administrative law context, where cases are often far more complex and financially significant than Copyright Board cases. For example, the Competition Tribunal recently dealt with the massive and complex Visa and MasterCard credit card case in well under three years from beginning to end.

It seems that the Government is indeed aware of the possibility and need of Board reform through regulations, which can originate either from the Departments or the Board itself or both. Hope springs eternal that we might actually see something sooner rather than later. See the Government Response: Fifth Report of the Standing Committee on Canadian Heritage, "Review of the Canadian Music Industry" (Presented to the House on October 10, 2014).  This report from the Minister of Canadian Heritage indicates that:

On the time it takes for the Copyright Board to issue decisions, the Copyright Act provides the Board with authority to set its internal procedures. I understand that the Board is currently reviewing these procedures in an effort to streamline the royalty-setting process. Changes to that end could be considered as early as fall 2014. Beyond this, the next mandated Parliamentary review of the Copyright Act will be an opportune moment to consider important copyright issues, such as the broader framework in which the Copyright Board operates.

(highlight added)

This may refer to the process announced by the Board about two years ago to embark upon an internal review to be led by the Board’s former General Counsel that was to involve a select few invited outside counsel with experience before the Board, The mandate from the Board’s Vice-Chair was:

….. I expect that the committee will wish to focus generally on (a) proposing possible changes to procedures and processes that may lead to Board proceedings being more efficient and, possibly, less costly, (b) considering improvements to other aspects of Board processes and operations that may enhance the quality of the Board’s services to collectives, copyright users and the public in general, and (c) identifying other issues where improvements may be required and which may be addressed as time and resources allow. As part of this exercice [sic], the committee might also wish to identify more specific recommendations, on a small number of issues, and that can be addressed relatively easily, in the hope of delivering significant improvements fairly rapidly.

(highlight added)

There was notably no mention by the Board of potential suggestions for regulations to be proposed either by the Board or the Government or both.  There was clearly a hint about the possible need for more resources. There was clearly a suggestion that that there are only a “small number of issues” that need be addressed in this process. At the present time, the closest thing that the Board has to rules or regulations is its “Model Directive on Procedure”, which provides little or no guidance to solving the problems as currently perceived.

While it is possible that this non-transparent process may soon provide a report to the Board, the process for dealing with that report in turn is unknown, much less its substance. It would appear unlikely that any dramatic results, much less regulations, will come from this process. All of this may be contrasted with the much more open process of implementing regulations that the Government of Canada through the its departments normally employs.

There is no question that, even though things seem to move very slowly at times at the Board, it has over the last 25 years or so produced a huge volume of tariffs, important decisions and countless procedural rulings that have had an enormous impact on the copyright collective management sector that now generates about $500 million in revenues per annum in Canada. The challenge now is to lower the overall transaction costs of the Board process so that the creators actually reap the benefits they deserve from the copyright system through collective management and users are able to enjoy their rights under the legislation without paying for unnecessary tariffs and with a reasonable degree of certainty at a reasonable cost and in a timely and minimally retroactive manner when tariffs are appropriate. 

 HPK

Follow Up on "Pending Lists" Class Action Settlement - Approval of Counsel Fees and Disbursements

The news about the certification of the class action by lawyers against Westlaw led by my classmate Lorne Waldman reminds me that I have been remiss in updating about the “pending list” class action, on which I blogged extensively before. This involved allegedly unpaid musical “mechanical” copyright royalties on about 300,000 titles and, hence, potential statutory minimumdamages ranging between about $150 million to $6 billion based on the normal $500 - $20,000 range set out in the statute, although the latter figure was never really a serious possibility.

This action settled for what still appears to be a lot of money, namely about $47 million. This is about a third of what an ostensibly “minimum” statutory damages award might have yielded based upon 300,000 songs at the presumptive minimum of $500 each (the court can lower this based on factors including the “good faith” the defendant.)  It is also less than the amount of $50 million that was allegedly unpaid according to the allegations in the Statement of Claim. Class counsel is seeking approval of fees in the amount of approximately 15% of the value of the settlement fund, which works out to $6,950,000 plus disbursements for a total of $7,647,583.85.

The action was originally filed in the name of the Estate of Chet Baker, although the lead plaintiff was changed amidst some apparent mystery and controversy midway. Some of the documents concerning this litigation are available here. 

From a procedural standpoint, this litigation did not get very far and the settlement took place at an early stage. There is no indication that a statement of defence was ever filed. There was presumably no formal discovery.  Certification was not contested. Given the highly technical settlement documentation that clearly reflects detailed knowledge of the music business in Canada, it would seem that defendants’ counsel were very cooperative and may have had a major role to play in drafting the settlement documents. Indeed, as I pointed out last year, CMRRA/SODRAC will receive 10% of all payments made out of the Settlement Trust as “commission” for acting as “settlement administrator”. Presumably, this will be in addition to the regular remuneration that CMRRA/SODRAC receives from copyright owners. They will not have to pay anything to the copyright owners. See here

and here. 

From informationprovided to the Court, 16 named class lawyers and an unknown number of unnamed students and associates at two law firms and a legal clinic at the University of Ottawa have docketed about $2.2 million in time on this case. That amount will more than treble if the 15% contingency fee they seek is approved.

The Motion Record for Approval of Class Counsel Fees etc. contains the following information concerning the docketed time of some of the lawyers:

• The lead lawyer at Harrison, Pensa, Jon Foreman, docketed $747,348 of time.
• Three other members of his firm docketed between $146,422.50 and $180, 127.50 of time.
• The lead lawyer at Bates Barristers, Paul Bates, docketed $565,427.50 of time.
• CIPPIC, the public interest legal clinic at the University of Ottawa, was also involved. Those associated with CIPPIC whose time is accounted for are:
• David Fewer, currently Director of the legal clinic CIPPIC at the University of Ottawa, Faculty of Law: $106,766.67,
• Pippa Lawson, former Director of CIPPIC: $20,249.25
• Tanya Woods: $40,000
• Students: $33,709.50

Presumably, these amounts will more than treble if the 15% contingency fee is approved.

There will be further billings at normal hourly rates for the administration of the settlement, if the Court approves.

The lead plaintiffs, Ms. Carol Baker and her replacement, Mr. Craig Northey, have indicated that although they have no “expectation” of an “honorarium”, they would be “grateful” for whatever the Court may approve.

Disbursements amounted to an additional $87,788.66 including tax. These ranged from a low of $20 for taxis/Parking to $27,928.28 to Jeremy Debeer, a law professor at the University of Ottawa and a member of Centre for Law, Technology and Society, which provides guidance, as an internal advisory board, to CIPPIC. The payment to Prof. Debeer was for preparation of an affidavit and for attendance for cross-examination, including travel expenses.

  

The motion to approve these fees was apparently to be put to the Court on November 27, 2011. There is no indication on the class website whether any other submissions were received or whether the Court has yet ruled.

The settlement mechanism considers any unpaid amount over $2,500 to be a “high value item”.  If counsel fees are approved as asked on the basis of 15% of the value of the settlement, and CMRRA/SODRAC (CSI) gets paid a 10% commission, the payment for the 300,000 works will come from a pool of approximately $36 million. This suggests that the average payment for each work will be more or less about $120. 

The $45,000,000 Chet Baker Estate Copyright Class Action Settlement - The February 9, 2011 Deadline

The class action on behalf of Chet Baker against the major record labels in Canada has been settled, according to a press release The labels will reportedly pay out about $45 million. That sounds like a lot - and indeed it is by any measure in Canadian copyright litigation. However, this figure can better be seen in perspective when one reads the Fresh as Amended Statement of Claim  (“the Claim”), which alleges that there were 300,000 (not a misprint) works on the “pending lists”  “for which no license has been obtained and no compensation has been paid to the class owners.”  The Claim states that “According to the Record Companies, the lists reflect liability for unpaid royalties in excess of $50,000,000." 

Initial reports had the law suit valued at $6 billion based upon statutory damages of $20,000 a piece for 300,000 works.

After an unspecified number of millions more in legal fees, disbursements and commissions are paid out from the settlement funds, something likely well under an average of $135 will be paid to copyright owners for each work allegedly infringed. This may not sound like very much. Indeed, if the figures in the Claim are accurate, it’s less than the face amount of what is owed.  However, it is a significant chunk of what was allegedly owed and is far better than nothing. Whether it is enough is for class action members and their advisors  to decide, assuming that they are aware of the deadline of February 9, 2011 to voice their objections prior to the scheduled approval hearing date which is set for February 15, 2011.

In any event, the record companies and CSI (CMRRA + SODRAC) appear to be very happy with this result, which is hardly surprising considering that they are apparently, according the Claim, paying less than the face value of the amount owing after several years and after legal costs. Arguably, they are about to get, effectively, a judicially sanctioned retroactive compulsory license on a massive scale.
   
Although announced on January 10, 2011, this has received remarkably little attention, especially considering that it is probably the largest ever class action copyright settlement in Canada, and is worth more than four times the $11 million settlement in the Robertson case that went to he Supreme Court of Canada. However, despite the large sounding figure - is not notably generous to the class members, who will receive at the end of the day, which could be a very long time from now if at all (assuming that they can be found), something likely well under an average of $135 per title infringed. This is far less than the $20,000 first forecast per infringement and less than a third of the normal minimum statutory damages amount of $500 per work - BEFORE further legal and other costs (which could be very substantial) are taken into account.   

And the obvious fact is that this involved alleged infringement by the worlds biggest record companies, which are commercial businesses.

All of this arises from allegations “that the Record Companies are liable for copyright infringement by reproducing certain musical works in sound recordings released in physical formats in Canada, without securing licenses from the owners of copyright in those musical works and/or without payment of the necessary royalties”.

Once upon a time (prior to 1988) we had a compulsory mechanical license system in Canada. A record company could use this license to make a sound recording by paying the required fee.  The USA still has this system. Now, we have a system where licenses (i.e. permission) is supposed to be obtained in advance for each recording, and the agreed amount must be paid. Enter CMRRA (English Canada) and  SODRAC (French Canada), which can provide many but not all necessary licenses on behalf of many but not all music publishers and copyright owners These organizations had a very small footprint prior to 1988.  CMRRA/SODRAC represents music publishers. However, a good chunk of the music publishing business is owned by the record companies. Interestingly, CMRRA was largely responsible for the abolition of the mechanical license in 1988 - based upon the memorable slogan of “Two cents too long.”

According to the Court approved Notice:

    The “Pending Lists”

    The class action pertains to a process whereby the Record Companies maintain lists, usually referred to as “Pending Lists”, pursuant to mechanical licensing agreements with CMRRA. Those lists itemize musical works that have been reproduced by the Record Companies in sound recordings (and in some cases, video products) released in physical formats in Canada, for which the Record Companies have not, for various reasons and despite ongoing efforts, secured licences from and/or paid royalties to the owners of copyright in those musical works. 

Also, according to this Notice:

    CMRRA and SODRAC agreed to and have provided the plaintiffs with evidence, cooperation and assistance to the plaintiffs in exchange for a release of the claims made against them.  

This is somewhat odd since CMRRA and SODRAC would have had to provide evidence in any event, if pressed,  through the discovery process. After all, they were named as Defendants. Needless to say, CMRRA and SODRAC are in an interesting position here, given their relationship with the big record companies on the one hand and composers and publishers on the other hand, particularly considering that the record companies have very major publishing interests.

In the end, not only are CMRRA and SODRAC let off the hook in the settlement - they indeed will actually benefit from it with the 10% “commission” they will receive - see below. This is presumably in addition to the amounts they would normally earn from their licensing activities.

It is possible that the normal minimum statutory damages award amount of $500 was negotiated down for a number of reasons, which could include the provisions of the statute itself allowing this where there are a large number of works and the ostensible three year limitation period in the statute. The limitation period issue might have been very interesting, it’s far from clear how that  limitations period might have applied  in a situation such as this, where much of the alleged infringement may not have been reasonably discoverable by many of the plaintiffs.

For reasons which are explained further below, it is not clear from the available documents how the settlement will resolve the issues that led to this litigation on a going forward basis.

Some limited documentation is available on the Plaintiff’s lead counsels' website. These documents indicate that:

•    The four labels will pay collectively a minimum of $750,000 for “partial indemnity costs”.
•    Additional payments for legal fees and disbursements will come out of the Settlement Trust as approved by the Court. The available documentation does not indicate what this amount will be. It is likely that the amount sought will be substantial. However, it is not apparent how far along this case got in the litigation process beyond the statement of claim and the certification stage.
•     CIPPIC, the legal clinic at the University of Ottawa Faculty of Law, which has a mandate to “provide legal assistance to under-represented organizations and individuals on matters involving the intersection of law and technology”,  is listed on the Statement of Claim with its current director (David Fewer)  and former director (Phillippa Lawson) as co-counsel for the class plaintiffs along with counsel in two private law firms. Their role in this case and financial involvement in this settlement and the expected multimillion dollar legal fees are not apparent in the currently publicly available settlement documentation. 
•    CMRRA/SODRAC will receive 10% of all payments made out of the Settlement Trust as “commission” for acting as “settlement administrator”. Presumably, this will be in addition to the regular remuneration that CMRRA/SODRAC receives from copyright owners. They will not have to pay anything to the copyright owners.
•    Notice costs to a maximum of $150,000 will be paid out of the Settlement Trust. These notices, usually in the form of newspaper ads, are often the only vehicle by which class members become aware of their entitlement, the deadlines and procedures for making a claim and, of course, the deadliness and procedures to opt out of the settlement and to seek their own redress if they are not satisfied with the award.
•    For reasons which are not apparent the “opt-out” threshold will be provided to the Court for approval on a confidential basis.       
•    A number of documents referred to in the available settlement documents, such as the potentially very important CSI (CMRRA + SODRAC) “term sheet” are not available.

Thus, the net average payment per work alleged to have been infringed will be something probably well below an average of $135 after CMRRA and SODRAC and the plaintiff’s class action counsel get paid.
   
For better or worse, settlements have no binding precedential value as such in the Courts for future court cases. It would have been very interesting and informative had this matter gone to trial, but we will presumably never know why it did not. Nonetheless, there are some interesting and ironical lessons that some might argue are can be gleaned from this settlement, if it is approved.

For example, the American international parents of the same record companies that are getting off the hook for less than $150 per alleged infringement in Canada are asking for and pushing with all their considerable might for  $62,500 for each of the 24 songs that Jamie Thomas-Rasset, a single native American mother,  downloaded and "shared" in litigation brought by in the USA.

This is even more ironic because the head of the Canadian Recoding Industry Association, Graham Henderson, is on record as complaining that Bill C-32 gives those engaged in non-commercial activity a “license to steal”, even though they could be found liable for far more than $150 per work to a maximum of $5,000. A $5,000 damages award to an individual is far more severe than a $50,000,000 hit that retroactively and with an apparently very substantial discount wipes the commercial mechanical license infringement slate clean for an industry that still takes in about a $1,000,000,0000 a year in Canada from various revenue sources. One might even say that the operative rule that eventually led to this litigation could have been to the effect of "exploit now, pay later if at all."

One positive potential lesson here, but which will likely be lost upon many who could learn from it, its that overly risk-averse management and counsel of Canadian educational institutions who are constantly alarmed by Access Copyright’s veiled threats of statutory damages could take some considerable comfort here.  If this case is any guideline, even mass systematic commercial infringement will settle at a discount. Needless to say, universities are not engaged in such activity. And Access Copyright would likely never have as good as case as the plaintiffs had in this instance.

Thus, it seems that in a very big copyright action involving an extremely large number of titles and owners, a settlement at significant discount may be the logical and even inevitable result if the case is well fought.  In any copyright action involving even one title, there can be fatal difficulties in proving chain of title - especially where there is no timely registration and the actual creator and/or copyright owner are not eager to get involved - and especially so when they are not in Canada.  In mass infringement, there can presumably be mass difficulties.

Facts about the Settlement:
   
The documentation available on the lead law firm’s website is not detailed.  For example, there is no indication of the contents of the CSI “term sheet” that is mentioned many times, nor how CMRRA/SODCRAC will deal with the issues that have arisen in the future. While the Google Book Settlement documentation was enormously voluminous and complex, this documentation is on the other extreme. We do not know, for example, how much the lawyers for the class plaintiffs will receive at the end of the day from the settlement proceeds, or even what they are asking for.  We do not know what the “opt out” threshold will be and why this is confidential. We do not know what is in the CSI “Term Sheet”.

In fact, some key information found in the Wire Report story of January 11, 2011 is more revealing than the settlement documentation. It indicated that CMRRA will, interestingly enough, rely on s. 77 of the Copyright Act to deal with unlocatable owners:

    Basskin [of CMRRA] said the new platform will prevent labels' pending lists from building up anew.

    “We will be assisting the record companies in obtaining licences from the Copyright Board of Canada pursuant to section 77 of the Copyright Act,” he said.

   

    “Under the Copyright Act, if a person who wants to use a copyright has made reasonable attempts to find the owner, but has been unable to do so, he can apply to the Copyright Board for a licence to close that gap. The Copyright Board then takes care of the process of issuing the licence, collecting the royalties and basically advising the public at large, 'if this is yours, come forward and get your money.'”

   

    The CMRRA and SODRAC will also create a website where the public can verify if any of their works are on a pending list.

This is really interesting because s. 77 of the Copyright Act was arguably never intended to set up mass clearances by the Board of thousands of works, especially where the circumstances will be different and difficult by definition in each case. Handing this issue over to the Board and expecting the Board to bless massive numbers of mechanical licenses in bulk for supposedly “unlocatable” copyright owners and deal with the proceeds and claims looks a lot like a compulsory license regime, with the potentially considerable administration costs borne at least in large part by taxpayers. The Board is rarely reticent about asking for more resources, even though it is already apparently by far the largest Board of its type anywhere in the world.

As noted above. that CMRRA expects a 10% commission on the proceeds it distributes for the Settlement Fund, in other words to the locatable owners. This presumably will be in addition to whatever else it gets paid for its agency services.

In any case, the Board has had apparent difficulty handling the relatively small number of requests it has hitherto received in a timely manner. About half of the applications take more than eight weeks to process. It is unclear whether any of the Board actually have any hands on involvement with this process. (The Board has held only one actual “hearing” on an unlocatable issue and the result was a very  troublesome 3-2 split decision). The Board currently estimates that a reasonable normal time delay would be about 45 days, which is likely unsuitable for the music industry.  Currently, the Board receives only a few dozen applications a year for “unlocatable” licenses. In 2008-2009, it received only 28 applications and issued only 14 licenses.  Even with all of its resources, which were recently augmented, the Board still requires as much as 18 months or more from the conclusion of a hearing to issue decisions from the few hearings it holds each year.  (This year, there are none scheduled). What the Board will do with an ongoing  list of conceivably thousands or more of unlocatable copyright owners remains to be seen.

While it is understood that informal talks may have taken place with the Board, it is also understood that there is no formal or official arrangement in place. Nor is there any reference in the available settlement documents to this information disclosed to the media by CMRRA.
   
Approval Hearing of February 15, 2011 and Deadline of February 9, 2011:

Those who may wish to object to the terms of the settlement for any reason should note the following, from the notice approved by the Court and very short deadline from now for making submissions (February 9, 2011) in advance of the approval hearing itself (February 15, 2011). It is unclear to what extent notice of this key step in the proceeding has been given to class members. There are lots of interesting questions in this instance, which may or may not be answered if and when we see more documents.

Note the following from the "Notice of Approval and Settlement Certification Hearing" document:

A hearing to approve the settlements entered into between the Plaintiffs and the Defendants will be held by the Ontario Superior Court of Justice in Toronto on Tuesday, February 15, 2011 at 10:00 am.


Class Members are permitted to appear and make submissions at the hearing with respect to the settlements or to make submissions in writing. If you wish to comment on or make an objection to the settlements, a written submission must be delivered to Class Counsel by fax or regular mail at the contact particulars listed below by Wednesday, February 09, 2011. Class Counsel undertake to forward all such submissions to the Court and to counsel for the Defendants for consideration. If the settlements receive court approval, further notices will be published to advise of such court approval.


Class Members who do not oppose the proposed settlements need not appear at the hearing or take any other action at this time to indicate their desire to participate in the settlements. The process for Class Members to make a claim for settlement benefits will be explained in the future within a subsequent notice.

The Fax number for Jonathan Foreman at Harrison Pensa, the lead counsel, is:
Fax: (519) 667-3362

Anyone wishing to object to this settlement should fax Harrison Pensa IMMEDIATELY - and in no case later than February 9, 2011.
   
CONCLUSION

Like many class actions that are settled, this one raises as many questions or more than it answers. However, settlements that are in the interests of all parties are clearly preferable to protracted litigation. 

This settlement appears to result in the paying of a significant portion of money that has been owing for a long time. The settlement apparently works very well for the record companies, CMRRA/SODRAC and the many lawyers involved for all parties.

While the record companies are no doubt pleased that they have been able to “exploit now and pay later”, at an apparent discount, the ironies of this position are open for discussion in future policy and even legal confrontations. If these commercial enterprises can do this, can they in turn, wearing their copyright owner hats, henceforth continue to express outrage about non-commercial private use and to seek the right to collect disproportionate statutory damages from non-commercial users such as students and single mothers? Will the potential ironies of this approach affect the ability of other would be copyright claimants - such as Access Copyright - to credibly threaten large statutory damage awards in non-commercial contexts, such as educational institutions and governments, where non-clearance is bound to be inadvertent and anything but systematic?

Invariably last, but not least, are the artists and creators. Whether the terms are adequate for them - assuming that they know about it - will be decided very soon on February 15, 2011 in a Court in a Toronto court room. Any objections by them must be filed with class counsel by February 9, 2011.

HK