Intellectual Property Institute of Canada (IPIC) (00416)

May 31, 2021

Intellectual Property Institute of Canada (IPIC) Response to the Consultation on a Modern Copyright Framework for Online Intermediaries

Submission to Innovation, Science and Economic Development Canada

Introduction

The Intellectual Property Institute of Canada (IPIC) is the professional association of patent agents, trademark agents and lawyers practicing in all areas of intellectual property law. Our membership totals over 1,700 individuals, consisting of practitioners in law firms and agencies of all sizes, sole practitioners, in-house corporate intellectual property professionals, government personnel, and academics. Our members’ clients include virtually all Canadian businesses, universities and other institutions that have an interest in intellectual property (e.g. patents, trademarks, copyright and industrial designs) in Canada or elsewhere, as well as foreign companies who hold intellectual property rights in Canada.

IPIC is pleased to have the opportunity to participate in the government’s consultation on a modern copyright framework for online intermediaries.

We want to begin by commending this government for its leadership in tackling the very important issues relating to the liability of online intermediaries and the related topics covered in the Consultation Paper. IPIC welcomes the opportunity to lend its technical expertise and continue to assist the government in crafting solutions to these complex problems.

4.1 Clarify Intermediaries’ safe harbour protections

In general, intermediary liability for the infringing content of its users should be directly tied to the degree of involvement of the intermediary with the content – whether storing, curating, determining, optimizing, or profiting from the content in any way. Eligibility to shelter under a safe harbour should apply only where the intermediary acts in a neutral manner with respect to the copyright-protected content concerned. We deal with specific issues raised by the Consultation Paper below.

4.1.1 Recalibrate the knowledge standard for eligibility 

Under section 31.1 (5) of the Copyright Act^{Footnote 1} (“CA”), the eligibility of a host to shelter under a safe harbour is lost only where a host knows of a court decision to the effect that a person who has stored content in the host's digital memory infringes copyright, either by storing the copy or by the way in which the person uses the content. This standard is not practical as it sets the bar for knowledge too high. It is also out of step with international standards including those in the European Union and the United States.

Section 31.1(5) CA should be amended so that eligibility of the host to shelter in a safe harbour would be lost where it has other, broader and sometimes even constructive knowledge of infringement.

The standard of a host’s knowledge should be changed to encompass broader grounds of knowledge. For example, the safe harbour should not apply in respect of an infringement using a host's digital memory where the host has actual knowledge of the infringement or, in the absence thereof, is aware of facts or circumstances from which the infringement would be apparent.

We have not had sufficient time to consider whether the refinements mentioned above should be limited to the "hosting" safe harbour or extended to the "mere conduit" or "caching" safe harbours as well. Similar considerations apply to information location tools. We agree that distinctions should be considered depending on the degree of involvement of the intermediary. Where an intermediary’s role in respect of the alleged infringer is more content-oriented, such as where the intermediary curates or determines content, whether in an automated manner or not, that intermediary should be deemed to have constructive knowledge of the infringement and should lose its ability to shelter in the safe harbour. The determination of the standard for eligibility can also be guided by the level of knowledge attributable to an innocent intermediary as discussed in Section 4.1.2 below.

There should also be no general obligation on the part of intermediaries to monitor all or almost all of the data relating to their users to prevent or stop any future infringement. This safeguard should not hinder the ability of courts to impose injunctions on intermediaries to prevent or stop specific infringements.

4.1.2 Clarify the permitted involvement of qualifying intermediaries.

We agree that one or more of the safe harbours should apply only where an intermediary acts in a neutral manner with respect to the copyright-protected content concerned.

We also agree with the Government’s position that, to be protected, an intermediary's involvement must be limited to the provision of merely technical, automated services and must not amount to an active role in the infringing activity. We have not had sufficient time to consider the specific factors to be specified as indicating what is an active role. However, those who are not storing data or providing digital memory or involved in any manner with content development – whether curating, determining, optimizing, or profiting from the content in any way – should retain their eligibility to shelter under safe harbours. We believe that guidance for the standard can be derived from the Supreme Court of Canada in Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers^{Footnote 2} (defining an innocent intermediary for the purpose of para. 2.4(1)((b) CA) , Crookes v. Newton^{Footnote 3},  (defining innocent disseminator for the purpose of libel law), and decisions in the European Union interpreting the Directive on electronic commerce^{Footnote 4} such as Google France SARL et al. v. Louis Vuitton Malletier SA et al.^{Footnote 5} and L’Oreal v. eBay^{Footnote 6}. These decisions suggest that an innocent intermediary is an entity that acts in a content neutral manner, having no actual knowledge of an alleged infringement, and not being aware of circumstances to put it on notice to suspect an infringement, or being negligent in failing to find out about it, and whose role in the dissemination of the information is merely passive, instrumental, and automated.

We agree that it should further be clarified that the safe harbours should apply only where an intermediary lacks a financial stake in the infringing activity at issue. To be protected, an intermediary should not receive a financial benefit directly attributable to the infringing activity, with the exception of payment for its services of a technical, automated nature.

4.1.3 Enact new obligations for qualifying intermediaries

For both of the matters discussed below, intermediaries should adopt standards for the reporting of infringements and mechanisms for responding to such reports and should clearly communicate those standards and mechanisms to users and to the public.

a. notification and action mechanisms

We agree with the proposed concept requiring intermediaries to implement a written policy and mechanisms allowing persons to notify them of specific instances of claimed infringement being facilitated by the intermediaries' services and requiring the intermediaries to take some action in response, where they believe it would be justified.

It should also be provided that anyone who knowingly materially misrepresents that certain content or activity facilitated by an intermediary is infringing should be subject to penalties.

b. mechanisms for dealing with repeated alleged infringers

We agree with the concept of requiring intermediaries to implement a policy and mechanisms for action to be taken in respect of their users who have been identified as repeat alleged infringers, through the mechanism noted above or the "notice and notice" regime. Any specific decision made by an intermediary should be made according to the intermediary’s judgment and should not be mandated by the Act.

We have not had sufficient time to consider who would be considered a “repeat infringer”. The definition should not catch someone who is reported multiple times for the same infringement within a very short interval. We are also concerned that anonymous infringers may open multiple “new” accounts and thereby avoid the repercussions of being repeat offenders and suggest that this problem be addressed.

It should be made clear that intermediaries should not be liable for any damages resulting from good faith disabling of access to or removal of content pursuant to these schemes.

The Government must also consider how other statutory obligations, such as net neutrality or the protection of personal information, may limit how intermediaries can implement these new obligations.

Sections 4.2 – 4.3 Compel remuneration through collective licensing – increase transparency in remuneration process

4.2(a) Compulsory licensing schemes

The Consultation Paper identifies compulsory licensing schemes as an option for reform to Canada’s copyright framework for online intermediaries. IPIC has concerns with this proposal because the compulsory licensing scheme as proposed would violate the three-step test enshrined in the Berne Convention.

The first step of the Berne three-step test requires that any limitation or exception to a copyright owner’s exclusive rights be limited to a “certain special case,” meaning the limitation or exception must be “clearly defined,” narrow in scope and reach, and justified on a sound policy rationale.^{Footnote 7} As it currently stands, the proposal simply states that “certain intermediaries could be permitted to host uploads incorporating right holders’ content without requiring their authorization in exchange for payment of royalties.” As currently described, the proposal does not provide any certainty on what is legally permitted.

In addition, such a compulsory licensing scheme is not narrow in scope and reach. The proposal does not define to which intermediaries, types of uses, works, or other rights it might apply. The proposal seems to suggest that such a compulsory licensing scheme could capture all literary, musical, dramatic, and artistic works that are uploaded online, in addition to all sound recordings, performer’s performances and communication signals. While presumably the Government is considering a compulsory licensing scheme for a narrower set of users, uses, and rights than currently encompassed by its wording, the scheme is currently of an unprecedented and overly broad scope, is not “a certain special case” and would thus be in violation of the three-step test.

In addition, a compulsory licensing scheme for online intermediaries is likely to conflict with the normal exploitation of the work and fail the second step of the Berne three-step test. Rights holders often license the use of their content online – including the hosting of uploads by online intermediaries – and various business models (current and future) exist for online licensing in all sectors. IPIC is unaware of any need to introduce a compulsory licensing mechanism in any industry or sector, particularly a scheme that would undercut the existing, exclusive rights of copyright owners and the licensing models that are already in place. The Government must take care not to undermine existing or future business models by introducing a licensing scheme that takes away the rights of copyright owners in order to allow online intermediaries to host uploads of copyright-protected content without the authorization of the copyright owner. Such an approach would conflict with the normal exploitation of right holders’ works and would thus be in violation of Canada’s treaty obligations.

Finally, the third step of the Berne three-step test requires that the scheme not unreasonably prejudice the legitimate interests of right holders. A limitation or exception will “unreasonably prejudice the legitimate interests” if it unreasonably deprives the copyright owner of the right to enjoy and exercise the right of reproduction (or other right) fully, or where it could cause an unreasonable loss of income to the copyright owner.^{Footnote 8} Remuneration – as proposed in the Consultation Paper – can be considered under this step.

The third step requires a balancing between the interests of right holders and public interests. In IPIC’s view, a compulsory licensing scheme as proposed in the Consultation Paper would fail the third step because it would, essentially, eliminate copyright owners’ exclusive rights to exploit their content online. 

For all of these reasons, it is IPIC’s view that a compulsory licensing scheme that takes away the copyright owner’s rights as proposed in the Consultation Paper would not be in compliance with Canada’s treaty obligations. Aside from whether compulsory licensing is permissible under international copyright norms, online intermediaries should not under any circumstances allow or promote copyright infringement, or more generally give users unfettered rights to use content that the right holder has not granted. The content must be legally authorized at source as a first qualifying step. Compelling remuneration through collective licensing is therefore not a viable proposal for the authorization of online intermediaries. Online intermediaries will continue, as some do now, to seek licences from the collective societies that manage a repertoire of right holder rights, but should not be automatically entitled to such a licence without authorization from the right holder or a collective society entitled to provide such a licence.

4.2 (b) Extended Collective Licensing (ECL)

The paper also identifies extended collective licensing (“ECL”) as an option for reform. ECL may be appropriate for certain right holders, in certain industries, for certain uses, but in the view of IPIC ought not be considered as an option for reform to deal generally with the authorization of online intermediaries to host uses of right holders’ content.

If a restriction on rights, ECL must comply with the requirements of the three-step test. If applicable to exclusive rights, ECL would constitute a limitation on such rights, because it deprives right holders who have not directly mandated a collective society of their exclusivity to authorize uses of their works. Like compulsory licensing, ECL cannot be implemented across the board, as this would violate the first step of the three-step test. Similarly, where existing business models are in use or potentially available for use, ECL could violate the second and third steps.

In IPIC’s view, a prerequisite to any ECL is that a very high threshold of relevant rights holders have authorized the collective society -- indicating that certain specified uses can only be managed by a collective society and not by rights holders individually. 

In addition, rights holders must be entitled to opt out of any licence administered by the collective. The Consultation Paper proposes that rights holders be allowed to opt out of ECL, but then states that opted-out rights holders “would not [be] able to sue the relevant intermediaries for infringement in respect of the types of uses administered by the collective society." Not being entitled to sue would eviscerate the defining characteristic of an exclusive right – the ability to enforce it – and thereby conflict with the second and third steps of the three-step test. An ECL without a corresponding right to opt-out or sue for infringement would be an unacceptable form of ECL.

The European Union has recently specified necessary conditions for imposition of ECL in the Directive on Copyright in the Digital Single Market (the "DSM Directive").^{Footnote 9} The DSM Directive concludes that ECL may be applied by European member states only "within well-defined areas of use, where obtaining authorisations from rights holders on an individual basis is typically onerous and impractical to a degree that makes the required licensing transaction unlikely, due to the nature of the use or of the types of works or other subject matter concerned", and only provided that it "safeguards the legitimate interests of rights holders."^{Footnote 10} IPIC submits that any Canadian ECL scheme should comply with these conditions. 

The EU DSM Directive also insists on the principle of "contractual freedom", specifically that "rights holders should not be obliged to give an authorisation or to conclude licensing agreements."^{Footnote 11} IPIC emphasizes that this principle should also inform Canada's consideration of compulsory licensing or ECL schemes. Rights holders must be able to decide whether or not their copyright works or other subject matter are used by online intermediaries, and to set individual conditions for such use.

IPIC submits that collective societies designated to implement ECL necessarily must have the same rights and obligations that other collectives enjoy under the Copyright Act, including both the ability to negotiate and license directly with rights holders and to apply for tariffs.  We note that if ECL is made available to collective societies and becomes applicable in connection with certain specified rights, it is most likely existing collective societies that will seek designation as providers of ECL.

4.4 Clarify or Strengthen Enforcement Tools Against Online Infringement

Internet intermediaries that facilitate access to illegal content are best placed to reduce the harm caused by online piracy. This principle has been long recognized throughout the Europe Union (EU) where Article 8(3) of the EU Information Society Directive^{Footnote 12} has provided the foundation for rights holders to obtain no-fault injunctive relief against intermediaries whose services are used by third-parties to infringe copyright, including not only judicial site-blocking orders against ISPs but also other forms of injunctive relief, such as delisting orders against search engines; injunctions against hosting providers; and injunctions against domain name registrars and registries. Building on precedents that already exist in Canada, the Copyright Act should be amended to expressly allow rights holders to obtain no-fault injunctions against intermediaries whose services are used to infringe copyright (including “dynamic”^{Footnote 13} and “live” site-blocking orders that provides flexibility to cover repeat infringement, delisting orders, as well as injunctions against payment processors and ad networks).

As noted in the consultation paper, while there is already a legal basis in Canada for rights holders to be able to obtain such orders through the courts’ equitable jurisdiction (e.g. Google v. Equustek Solutions^{Footnote 14} and Bell Media v. GoldTV.biz^{Footnote 15}), amending the Copyright Act to expressly allow rights holders to obtain expedient and effective forms of no-fault injunctive relief against commercial-scale online infringers, as rights holders are able to do in other jurisdictions (e.g. the EU, United Kingdom, Australia, etc.), would help clarify and strengthen the tools available in Canada to rights holders in their online enforcement efforts.

Expressly setting out this remedy in legislation (which would remain subject to the courts’ discretion to grant such orders), would assist in streamlining costly and time-consuming litigation while simultaneously helping to achieve the policy goals of protecting and encouraging the use of copyright-protected content online, dissuading online piracy as a commercial venture, facilitating a flourishing digital market, and safeguarding individual rights and freedoms.