Canadian Musical Reproductions Rights Agency (CMRRA)

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May 28, 2021

This submission is being submitted by Canadian Musical Reproduction Rights Agency Ltd. (CMRRA). CMRRA is pleased to submit its comments on potential options for reform of the Copyright ActFootnote 1 in furtherance of the Government’s objectives regarding a modern copyright framework for online intermediaries.

CMRRA is a collective society that represents owners of copyright in musical works for the purpose of administering the right to reproduce those works in various media and for various licensing purposes in Canada. CMRRA’s membership is comprised of over 6,000 Canadian and foreign music publishers who range in size from large multinational music publishers to individual songwriters. These rightsholders own or administer the vast majority of songs recorded, sold, streamed and broadcast in Canada.

Introduction

CMRRA has filed a joint submission under the ACCORD coalition of music publishers, songwriters, and composers operating in English and French Canada, addressing each of the potential options for reform raised by the Government. In this submission, CMRRA will be providing its comments on 4.3.2 Greater Transparency from Rights Management Organizations, as well as a recommendation regarding an amendment to the Copyright Act to clarify the enforceability of Tariffs approved by the Copyright Board.

4.3. Increase transparency in remuneration process

4.3.2 Great transparency from rights management organizations

CMRRA has always valued transparency in its operations and provides detailed information to its clients and the public regarding the use of rightsholders’ works by online music services operating in Canada.

Through CMRRA Direct, an online portal, CMRRA’s clients can access rightsholders’ works, licence and royalty information in our Licence and Royalty Distribution System (LDS). Clients can also access their royalty statements via CMRRA Direct which include such information as payment amounts, commission amounts, exchange rate and tax deductions, where applicable, along with the net payable amount. These statements can also be broken down for an assessment of a client’s income based upon various uses, as well as a breakdown of income by licensee within each usage category. Clients can track their income by work and for online uses, they can access information on the types of uses reported, for example, permanent downloads, limited downloads, streams, etc.

Further transparency is provided through CMRRA’s Unclaimed Works Portal, which is accessible to both clients and the public via CMRRA Direct. CMRRA has invested in technology that allows for innovative matching and a claiming portal for musical works that allows rightsholders to search the active repertoire of online music services operating in Canada in order to identify as yet unmatched recordings, or unverified shares of matched works for claiming. CMRRA’s IT systems provides rightsholders with the unique ability to submit claims for usage of works for periods dating back to the launch date of the online music service in Canada. Once a claim is verified, or a share updated via the Unclaimed Works Portal, this information cascades across all of CMRRA’s lines of business resulting in multiple streams of potential royalty payments for previously unknown, unrepresented or unclaimed shares.

Recommendation

CMRRA already works with music publishers and songwriters to provide its services with transparency. Rights Management Organizations in Canada should continue to constantly consult with their respective rights holders on this issue and to regularly review and refine their service standards.

Enforcement of tariffs

Overview

On April 22, 2020, the Federal Court of Appeal issued its decision in York University v. The Canadian Copyright Licensing Agency (Access Copyright).Footnote 2 The Court concluded that “collective societies [such as Access Copyright] are not entitled to enforce the terms of their approved tariff against non-licensees.”Footnote 3

The York University decision has far-reaching implications for the collective administration of copyright in Canada, and in particular the enforceability of tariffs approved by the Copyright Board of Canada. The Supreme Court of Canada heard an appeal from the decision on May 21, 2021.

Issue

The objectives of the Copyright Act are to encourage the creation of works of the arts and intellect, to promote the dissemination of those works, and obtain a just reward for their creators. The purpose of collective administration is to fulfill those objectives and facilitate an efficient, functioning marketplace for the exchange of copyright-protected works. Collective administration promotes market efficiency for both creators and users by reducing the high transaction costs commonly associated with the individual exercise and enforcement of copyright and by helping creators assert their rights in markets where it is exceedingly difficult for them to manage their rights individually.

The Copyright Board of Canada and its tariff-setting process is a critical aspect of the collective administration regime. The Copyright Board’s mandate is to set fair and equitable rates, in the public interest, by balancing the interests of copyright holders with the interests of users of copyright-protected materials.

When a collective society and users of its repertoire cannot agree on licensing terms, the collective society can file a proposed tariff with the Copyright Board. Users are provided with notice of the proposed tariff, the opportunity to oppose the proposed royalty rates and terms and conditions, and the ability to file evidence and participate in the tariff hearing. In setting rates, the Board takes into account both the value of works in the collective’s repertoire and the impact of relevant users’ rights and exceptions enshrined in the Copyright Act, which often lead to discounts. When justified by the evidence before the Board, tariffs also include mechanisms that allow users to adjust the royalties they owe to reflect licences obtained directly from copyright owners.

Once tariffs are approved by the Copyright Board, section 73 of the Copyright Act provides that the collective society may collect the royalties specified in the tariff and, “in default of their payment, recover them in a court of competent jurisdiction.” Until the York University decision, both CMRRA and the commercial users it dealt with understood that section to mean that tariffs approved by the Board were enforceable against users who engage in the activities covered by the tariff. But the York University decision turned that understanding on its head. If that decision was correct, it appears that the only binding enforcement option available to CMRRA and its affiliated rightsholders is for the rightsholders themselves to commence copyright infringement proceedings, either individually or, where possible, by class action.

Copyright infringement proceedings are complex and often impractical mechanisms to enforce the rights of CMRRA and its affiliates. They are particularly inefficient and impractical remedies for mass reproductions of musical works, such as by online music services and commercial radio stations. In each infringement proceeding, the rightsholder is required to locate infringing users, prove infringing uses, and establish chain of title for every work infringed. It is almost impossible for individual creators to monitor the endless possible uses of their works by any number of possible users. In any given case, users may copy millions of copyright-protected works, and each use may trigger multiple copyrights owned or administered by multiple rightsholders, resulting in many micro-transactions per use of any individual copyright-protected work.

Before commencing a copyright infringement claim for a relatively low-value use, any potential upside needs to be weighed against the expense, time, and unpredictability of litigation proceedings. CMRRA’s smaller affiliated rightsholders may not have the necessary resources to enforce their rights against large, multinational users. Even larger rightsholders may balk at investing significant time and money in pursuing remedies that may yield relatively little financial return on an individual basis. These are precisely the problems that collective administration was intended to solve—and that the York University decision has now brought back to the forefront.

In addition, tariffs approved by the Copyright Board regularly take effect long after the periods for which the approved rates apply because the Board often takes years to approve proposed tariffs and its decisions are regularly subject to judicial review. Sometimes, the result of the judicial review process requires the Copyright Board to redetermine the rates, adding to the number of years before a tariff is put in place.Footnote 4 For example, the Copyright Board did not release its decision in Online Music Services, 2010-2013 until August 2017. That decision was judicially reviewed by the Federal Court of Appeal and the reasons for judgment were not released until June 2020. If a user were to “opt out” of the approved tariff at that point, CMRRA’s affiliated rightsholders would be required to commence infringement proceedings for uses of music dating back as far as 2010.

Considered in this context, the York University decision raises both practical issues, including the difficulty of gathering evidence of infringement many years after the fact, and potential limitations problems. If the decision stands, CMRRA’s affiliated rightsholders might have little alternative but to commence copyright infringement proceedings—for every work used by every online music service, broadcaster, or other user—at the same time as CMRRA pursues costly tariff proceedings before the Board. Needless to say, that would be a hugely inefficient and impractical use of resources for all concerned: collectives, rightsholders, users, the Board, and the courts.

Requiring rightsholders and users to rely on the courts to resolve these types of licensing matters would also signal an unstable and inefficient market. Business certainty and efficiency are essential to the proper functioning of an effective marketplace, and CMRRA’s affiliates have embraced collective administration for providing those benefits to both rightsholders and users. Collective administration ensures that all represented works will be available to users throughout the country and that rightsholders will be fairly compensated for the use of their repertoire. Removing this certainty would force rightsholders to focus their resources towards inefficient means of doing business.

Collective administration helps to provide a more level playing field by treating all rightsholders equally—in terms of royalty rates and enforcement remedies—regardless of the size of a company or the relative commercial success of any particular work. Undermining the effectiveness of collective administration by treating approved tariffs as unenforceable disproportionately prejudices smaller rightsholders.

Recommendation

For decades, collective administration has brought efficiency and predictability to markets in which it would otherwise be impractical for copyright owners to secure payment for the use of their music and for users to obtain the rights they need, at fair and equitable rates, to operate without infringing copyright. The York University decision, if upheld by the Supreme Court, will rob the system of those undeniable benefits and make both the Copyright Board and its tariffs all but useless. Parliament must eliminate the uncertainty created by the York University litigation by amending the Copyright Act to make clear that any tariff approved by the Board under the general regime is enforceable against all users who engage in an activity covered by the tariff unless their activities are authorized by direct licence or otherwise permitted by law.