Blank media levy is unconstitutional, Copyright Board hears in final arguments

The Copyright Board of Canada’s hearing on proposed new blank recording media tariffs wrapped up with oral arguments February 17 and 18, with anti-levy forces decrying the tariff as unconstitutional while rights groups argued that nothing has changed since a 1999 board ruling that allowed collections to proceed. Counsel representing both storage media companies and major retailers such as Future Shop and Radio Shack hammered home their point that the new tariffs include a broad new range of devices never foreseen by Parliament, that the zero-rating scheme renders the regime arbitrary and that the connection between those paying the levy and those receiving it has become increasingly tenuous as a smaller proportion of payees actually use blank media to copy music. The Canadian Private Copying Collective (CPCC), however, countered that the levy is fair and that retailers and manufacturers are profiting from private copying despite the levy. Opening final arguments on behalf of the retailers, John Macera went straight to the heart of the group’s argument on the legality of the private copying regime. "The argument that I intend to make today is that section 82 and to an extent section 81 of the Copyright Act are ultra vires…In the 1999 decision the Board stated that in pith and substance," he said. "Part VIII deals with the rights of copyright holders and those who copy the works, but that’s not the whole picture here. A party to the Copyright Act also deals with manufacturers and importers of blank media…What I want to look at is whether or not sections 81 and 82 truly are founded in copyright law." Macera, and others, frequently made reference to the recent Supreme Court of Canada Théberge decision (CNM, May 1/02). For the retailers, the decision was clear indication that copyright law is fundamentally about rights attached to copying, something they say is missing in the private copying regime. "Blank audio recording media have absolutely no attributes of copyright. That particular thing is devoid of copyright. It is everything that copyright isn’t and copyright is everything that it isn’t…Blankness or voids can’t be copied…They have no functional connection to copyright and a levy on blankness or a void is even further removed from copyright. If the media were somehow defined differently, for example if the Act said those who do the copying pay the levy, that would be different. But that’s not what it says. The levy is on literally a null void," Macera argued. "There is no legislative foundation in copyright law for section 82," he added. "Copyright law cannot require payment for something which cannot have anything whatsoever to do with copyright, which is devoid of all the attributes of copyright…It cannot be sustained under the federal copyright power." Macera concluded: "My submission is that the levy scheme cannot be said to be incidental to a broader regulatory scheme, that the levy scheme was not intended to affect the behaviour of individuals, that the people liable to pay the levy, the manufacturers and the importers, they do not benefit in return for payment of the levy, that no service is provided to manufacturers or importers in return for payment of a levy. "The levy is not a payment by an individual who engages in private copying. The levy is paid on blank recording media, even if such media is never used or intended to be used to copy music. The levy scheme lacks the necessary corelation between the persons paying the levy, the uses to which the media are made and the performers and authors and creators who may ultimately receive the benefit of the monies raised. The zero-rating scheme demonstrates that the levy scheme is arbitrary in who can be zero-rated and what products it applies to. For all these reasons, the levy is a tax and did not properly become law through a ways and means motion, then it is void." Randall Hofley, representing the Canadian Storage Media Alliance (CSMA), picked up on the theme. "In considering the submissions of all parties over the course of these two days, it is our submission that these non-private copying payers of the levy will increase in number and importance for the CPCC," he said. "This is because of course the CPCC is spreading its net ever-wider in an attempt to capture media and now devices which have many uses. Indeed, some of these media – we say devices – are such that the vast majority of persons who purchase these products will not use the media for private copying of music. It has been and remains our submission that to the extent that the CPCC’s proposals involve remuneration for persons who do not private copy music, the links between Part VIII of the Copyright Act and the copyright infringement which it was intended to address become ever the more tenuous." For that reason, Hofley made an appeal to the board not to levy the tariff on a score of devices and memory types initially proposed by the CPCC, including some types of electronic memory cards and recordable DVD. David Collier, representing the CPCC, didn’t accept that the proposed tariffs were any more unconstitutional than they were four years ago when the board ruled that it had the power to set levy rates. Nothing new, he argued, has been presented to the board to make it decide otherwise. He also countered that despite the retailers and manufacturers’ many assertions during the month-long hearing that the levy will hurt businesses, Canada’s private copying regime is actually good for them. "The CSMA and the retailers complain that the levies are bad for business. What they fail to acknowledge, however, is that a big part of their blank media business, not to mention their PC and music copying software business, is built on Canadians’ relatively free access to recorded music and their propensity to record it. CSMA and the retailers are making profits from private copying. They are selling the media on which private copies are made and yet they continue to claim that music rightsholders have no right to receive fair market value for their works." Nor, he argued, was the levy set too high. "What about the amounts being paid? (A study by Circum Réseau prepared for the CPCC, CNM, Dec. 20/02) calculates that approximately one billion tracks were copied in the two months covered by the report. During that time, approximately $28 million in royalties was collected by the CPCC. "That translates into a payment of $0.028 per track. That 2.8 cents per track has some meaning. I submit, and can better be understood, if you recall that the mechanical royalty, that is the amount charged to reproduce a musical work fixed by the Copyright Act back in 1924, was two cents per song." Finally, Howard Knopf, also on behalf of the retailers, summed up much of the opposition to the proposed tariff, asking of the board, "If they are going to draft a tariff that is incomprehensible and offends the rule of law and can’t enable people to predict what’s happening, then I think the simple answer is: resolve it for the benefit of the consumers, resolve it in accordance with well-established Supreme Court jurisprudence and say, ‘no, try again in two years. If you can make it clear, then we will reconsider it. But, for the moment, no.’" The board will likely take about two months to make a determination on whether to apply the blank media levy to a new range of memory types and how high those tariffs will be.

Blank media levy is unconstitutional, Copyright Board hears in final arguments

Broadcast | March 6, 2003

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