INTELLECTUAL PROPERTY JOURNAL Revue de propriété intellectuel le CARSWELLCopyright Collectivity in the Canadian Academic Community: An Alternative to the Status Quo? Howard P. Knopp: In this article, the author makes a number of pointed criticisms of the activities and operations of CanCopy, which is the sole copyright collective to represent English-language publishers and authors in Canada, The author notes that professors, graduate students and others, who create large numbers of the publications used in colleges and universities, receive little in the way of compensation from CanCopy. To remedy the situation, iris suggested that academies in English Canada should take steps toward establishing a second reprography collective to compete with CanCopy. Dans cet article, Fauteur formule un certain nombre de critiques ciblées aM encontre des activités et des opérations de CanCopy, qui est la seule sociéré de gestion collective du dvoitd' auteur a représenter les auteurs er les éditew's anglophones au Canada, L'quteur souligne que les professeurs, les étudiants dipldmés et d'autres intervenants, qui créent un nombre important de publica- ions wilisées dans les colleges et les universités, recolvent peu de redevances de la part de CanCopy. Pour corriger cette situation, Fanteur suggere que la communauté universitaire du Canada anglais prenne des mesures en vue A'Erablir une deustime société de gestion collective en matiere de repro ‘graphic pour concurrencer CanCopy. T © 1999 Howard P. Knopf. Mr. Knopf Is Counset to Shapiro, Cohen of Oxia, Canada, The views expressed herein do not necessarily relect those of eny of his clients or his firm. This paper was originally presented in English a the Canadian ‘Association of Law Teachers conference in Sherbrooke, Quebec on June 3, 1989 ‘as parcof the uoinual Congress of the Soci Sciences and Humanities and wis Fist, Published in September, 1999 in the journal Cahiers de propritré incellectuelle.10 INTELLECTUAL PROPERTY JOURNAL [14 LP.., December 1999] CONTENTS 1, INTRODUCTION pee HO 2, BACKGROUND eee 3, ‘THE 1988 COPYRIGHT AMENDMENTS .. us 4. THE 1997 BILL C-32 AMENDMENTS, .-..0.0-00+ us 5. THE SUCCESSFUL POLITICS OF COLLECTIVE MOVEMENT. M7 6. THE ESSENCE OF THE BARGAIN WITH CANCOPY «..--eeescscseee 19 7. LEGAL QUESTIONS CONCERNING THE CANCOPY SCHEME 120 8. LEGAL CHALLENGES TO CANCOPY...+.++ soe 1D 9, ESTABLISHING A COMPETING COLLECTIVE. (2) The Option vse. seersosee eet rr Co) Analysis : fee 1S (©) ANow Collective? eceeeceeese m7 (@)_ Can Two Collectives Co-Exis? +... i see 19 (© Form of New Collective vitesse . 10 10, CANADIAN NON-COPYRIGHT PRECEDENTS oe 130 1, FINANCING OF ANEW COLLECTIVE 10 12, ADMINISTRATION, FACULTY CENTRED OR INDEPENDENT COLLECTIVE? .-..-s.+ eee nt IB.CASH FLOWS. 0.0.00 Rereete z a 14.CONCLUSION 132 1S.APPENDIX I : oe 12 a) The “Outsider” Problem .--..2+. 32 ()_ Bill C-32 and the Outsider Problem, BI INTRODUCTION Few Canadian academics expect, or actually ever receive, any remuneration for the photocopying of their scholarly works, However, quite apart from all of the money spent at the post secondary level by institutions, faculty and students in Canada for text books, journals, databases, library acquisitions, subscriptions, computer software and the countless other products that embody intellectual property, the Canadian post secondary system in English Canada alone is currently paying about $5.5 million a year to a small but rich organizationCOLLECTIVITY INTHE CANADIAN ACADEMIC COMMUNITY. 111 in Toronto named CanCopy? that does an extremely effective job of representing publishers and influencing the copyright laws of Canada, This is supposedly in consideration of the right to photocopy works that academics and other scholarly writers have written, often while they have been earning salaries and often getting SSHRC or NSERC or MRC or Canada Council grants by way of supplement, At the per student FTE level, this is not a lot of money. Maybe about $10 a year, for even less, depending on the institution and some other variables. Most university students can easily spend this in beer money at one lunch. The real issue is what is happening to your intellectual property, as well a8 your ability and that of your students to generate new intellectual property by having efficient access to and building upon older intellectual property. And we are also talking about today’s costs CanCopy is growing at the annual rate of at least 30 per cent, Today’s beer money will be tomorrow's sustenance. Another organization called the ERCC (Educational Rights Cot- lective of Canada), in association with Can Copy have also recently filed a new tariff before the Copyright Board that seeks $5.00 per student in a post secondary institution in respect of off-air taping, This will amount to a charge of at least $7,500,000 on its face in the community college system alone based upon a total enrolment in the college system of 1,550,000. In the university system, the figures may be even higher, depending on the number of part time enrollees who count for the same as FTEs under the proposed tariff “The recent revisions to the Copyright Act are intended to effec- tively force universities and colleges to belong to a collective, but there is no requirements that such a collective must be CanCopy. Make no mistake: CanCopy is in many respects a worthy organiza tion. They have been brilliantly successful as lobbyists, partly because 2 Based upon CanCopy’s published 1998 Annual Report. The breakdown as boweon universities und colleges is assumed to be approximately equal but this cannot be verified. Only CanCopy has the aggregated actus figures, The AUCC (Associa- tion of Universities and Colleges of Carda) will mot release figures for particular stitutions, It was understood in 1996-1997 thatthe univesitie paid CanCopy Pant“A” payments of $1.2 million based upon 450,00 FTEs and Part"B” payments of about $1.8 million, according to the AUCC. There is also x similar Quebec, based regime called COPIBEC which was formerly known us UNEQ. However, references inthis puper are to CanCopy unless otherwise indicated, 3. Based upon 550,000 FTEs plus 1,000,000 “continuing” education students Gn- cluding Quebeo),112 INTELLECTUAL PROPERTY JOURNAL 114 LP., December 1999], of their own abilities and partly because of the failure of their adversar- ies to match these abilities, CanCopy has a single-minded purpose to its exisience. CanCopy's adversaries sometimes see themselves as caught up in a mix of subtly interplaying agendas, the subtlety of which is so great that it seems to elude anyone's attention, much less understanding and agreement. CanCopy’s strategy has been brilliant, even if some may not be fond of it, They are hugely successful, in objective terms, much more so than their counterpart organization in the U.S.A. Therefore, in looking at alternatives to the current CanCopy regime, the question must be addressed as to whether the academic community should start their own collective. Itseems more than worthwhile to Consider the idea of a copyright collective of academics, for academics and by academics. This may be sound presumptuous. Or, it may be an idea that is ripe for pursuit. Or, it may bea utopian exercise in tilting at neo-conservative windmills in the age of Bill Gates and the ever merging and contracting circle of information age oligopolies and outright monopolies, Or, it may be a nonstarter because of the unique and frankly sometimes incestuous culture of bureaucracy and politics that affects the Canadian post sec- ‘ondary educational and research system. 2, BACKGROUND ‘The photocopier, and more lately the personal computer, have resulted in an extraordinary change in post secondary education. The XeroxTM machine, which achieved widespread proliferation in the 1960s, led to two major developments on campuses. The first was that students and professors could copy extensively from books and periodicals for the purpose of their own research. In practice, the only limitations on such copying were the limited number Of installed self-service machines, and the limited number of nickels, dimes and a quarters that one could afford or carry in one's pockets. 4 According to reported figures, CanCopy has income tht is about 25 percent that ‘ofits older American counterpan, Copyright Clearance Center, Ine, (CCC) which collected about US $55 million in 1998. See huy/www ifrorg. This is far in excess of the usa 10e1 ratios that apply in comparative U-S/Cunadian economic indicators in the intellectual propery area. This does not even account for the, ‘exint 25 per eent of 80 income from the Quebec counterpart to CenCopy, saely COPIBEC. Whether this reflects more Favourable (4@ Canopy) laws oF more ‘conipetence on the part @f CanCopy — which in any event i in large measure responsible forthe current Canadian laws — is us yet unknownCOLLECTIVITY INTHE CANADIAN ACADEMIC COMMUNITY 113 ‘The second was that in the 1970s to the 90s, high-speed and high- capacity photocopiers, Docutext, and now PC based desktop publishing technology became so accessible and inexpensive that is now easy for individual faculties and other units of post secondary institutions to get into “publishing” activity by creating and reproducing custom designed course packs and packages that are distributed free or at low-cost to the students of the professors who assemble them, usually with the goal of providing useful excerpts of a broad range of current materials to students who could not possibly afford to buy or be able to efficiently borrow or access all the sources from which the materials were copied. {twas not long until publishers began to realize that the billions of copies being made each year could generate very substantial revenues, even at the seemingly innocuous rate of only to 2 to 5 cents per page, and even if only a small amount of the copying resulted in a collection. Moreover, publishers worried that the widespread use of photocopiers for both research and “course packs” might be displacing sales that could have otherwise taken place.* ‘The main problem faced by publishers in collecting revenue from this activity was that it was not economical to do so without a collective mechanism in place. The laws of many countries, including Canada, ‘were seen to present serious barriers (even if more perceived than real) to the establishment of such collectives. Until 1988 with the coming into force of Canada’s Bill C- 60 “Phase I” copyright revisions on June 8, 1988, only collectives in the musical performing rights field enjoyed any reliable degree of immunity from competition laws. On their face, a collective of authors and/or publishers whose purpose was to set rates for photocopying of material owned or controlled by their members and collecting the resulting proceeds raised serious competition law issues at the time. Moreover, any individual non-commercial defendant would never be liable under the old laws to damages of more than a few dollars, since damages were basically limited to lost profits, or ‘maybe even the value of the copied book itself. This would never have {Justified a lawsuit, even of costs could have been recovered (which was certainly possible). ‘The Canadian musical performing rights collectives, which came into being as result of the monumental Parker commission repor of 5 OF courve, the concerted trend of corporate investment in uequisiion or at feast contol of all rights asvociated with STM (Scientific, technical and medical) publishing suggests othervise114 INTELLECTUAL PROPERTY JOURNAL [14 LP4., December 1999}, 1935, have enjoyed a special and sanctioned regime under Canada’s copyright laws since 1938. Their privileged immunity from prosecution for criminal conspiracy came at the cost of the regular oversight by the Copyright Appeal Board as it was known until 1988, and currently, the Copyright Board, ‘The call for changes to copyright legislation to benefit print book and journal publishers began in the Tate 1960s and early 1970s. A now somewhat quaint but surprisingly prescient article from 1970 written by an early pioneer in the Canadian Reprography collective field calls, for the following steps to be taken in Canada: We, therefore, start with the following propasitions which wontd be applicable ro any new legislation: 1 A new conying right could be created by statute. This right should be capable of being separately assigned just asthe performing right can be assigned toa royalty eullecting agency. There should be no requirement for prior authorization by the eopyright ‘owner far copying. but the user should be required to pay for such repro duction ata set rate of, say, two cemts per pase. Libraries, schools, research and other institutions wishing to eopy cops righted materials shld be licensed to do so. A central clearing house should be established and uperated by a joa Dvard of autiors, publishers and libvavians. This agency would collect urd diseibute copying revabies, 4r may not be necessary to lini the mosber of pages of work ae mage be expied by a licensed copier although Ii night be advisable to lint the total number of copies made ut one time Photographs, works of art, pris, maps, muse and dramatic works shoud be excluded from these copying provisions ‘The reproduction for personal use of minor extracts shot silt he subject tthe pricipte of "fir dealing”, but the fair dealing priciple should be clears emboxied fv the relevane copyright stature in wording that woul mae these limits clea rsh be made an offence for anyene to have inhis possession photocop= ies of a copyrighed work each page of which had not Been properly authenticated Dy the stamp ofa licensed copier. Ie should also be made an ‘offence for an unlicensed copier to supply copies ofa copyrighted work to any person, ov for a licensed copier to supply copies without properly stamping such copies and eollectng the appropriate rosalties. Consideration might be given to the desirabiity of providing rots stamps to be afied to copies made by unlicensed copiers copying for thelr ‘own use beyond te defined lis of fair dealing for private studyCOLLECTIVITY INTHE CANADIAN ACADEMIC COMMUNITY 115 10. All copying machines should be required by law to have a native afsed ‘and leary vieible explaning that es nla to haved ones passession Photocopies of a copyrighted work not authenticated by the stamp of a Ficensed copier o” which have not affixed to then the necessary royalty 11. The Copsrigle office should assume responsibility for the adniniration of ISBN in Canada With the exception of the recommendations referring to the quaint stamp regime idea (which recalls the 1765 Stamp Tex imposed by England that helped lead to the American Revolution) and the govern- ment administration of the ISBN system, this scheme has largely been adopted ‘The organization most closely associated with the collective ad- ministration fox reprographic copying in Canada is, of course, Can- Copy. Or, as Harry Arthurs (former President of York University) calls it, “Can't Copy”. In typical Canadian fashion, there is a Quebec counterpart called COPIBEC. 3. THE 1988 COPYRIGHT AMENDMENTS Almost immediately following the entry into force of the Phase 1 copyright amendments on June 8, 1988, the corporate predecessor to CenCopy came into being, Its income in 1989 was $27,000, with expenses of $169,000 and just one employee, In its most recent audited statements, CanCopy disclosed annual revenues of and more than $18 million with a staff of 35. Is annual growth rate has been virtually ‘exponential and has been as much as 50 per cent per annum, usually at least 30 t0 40 per cent ‘The main impact of Bill C-60 was simply to remove the possibility of prosecution under the Competition Act for behaviour as an illegal conspiracy. However, the real breakthrough for CanCopy came to us in Bill C- 32, which was passed in April of 1997 as virtually the last itern of business before the election held in that year. 4. THE 1997 BILL. 32. AMENDMENTS Bill C- 32 made several changes that were particularly beneficial to CanCopy. In fact, many these changes were, in effect, drafted by CanCopy or with CanCopy in mind, and reflect an extraordinarily © RoyC. Shurp.Q.C, Licensing the Photocopier, (1970) 62 CPR. 196.116 INTELLECTUAL PROPERTY JOURNAL 114 LPL, December 19991 successful effort at lobbying and regulatory capture of a very willing and uncritical bureaucracy, These changes include the following ‘+ establishment of a number of extremely narrow fair deal ceptions (such as of the right to manually make copies on a dry erase board), which were doubtless intended to have the effect of excluding, by virtue of expressio unius exclusio alterius, any hope of a broader American style “fair use” regime. The failure of the establishment academic community as represented by AUCC to achieve, much less to even demand, the more liberal American system of open ended, evolving and technology neutral “fair use” was a serious and perplexing disappointment to those who ‘watched Bill C-32 and who understood the consequences of what was unfolding. + establishment of minimum statutory damages ranging from $500 to $20,000 for infringement of copyright in each work + establishment of a new concept of a “wide injunction” proceeding that may be brought by a party, even without a direct interest in the copyright in question or when this work is not yet in existence. establishment of the new and probably unique, by international standards, concept of “commercially available”, which includes situations where the work is available through a collective and will have the effect of taking away certain fair dealing exceptions where a collective is in operation for the type of license in issue. + elimination of the common-law exception for liability for contrib- uutory infringement in connection with freestanding photocopying machines in cases where a collective is in operation + severe curtailment of parallel importation of used textbooks © partial establishment of the Nordic socialist concept of “extended licenses”, whereby virtually all authors are forced to join the prevailing collective, Most critically, the new law makes certain key exceptions and safeguards conditional upon @ university or college belonging to a collective, Most notably, these include exceptions for liability for activ- ity at free standing copiers, and limited immunity from the potential harshness of statutory damages (normal minimum of $500 per work infringed). This supposed advance for educators — actually it detractsCOLLECTIVITY INTHE CANADIAN ACADEMIC COMMUNITY 117 from the common law? — is only available for universities and colleges, that belong to a collective, However, nothing in the law indicates that any university must utilize CanCopy as its collective for these purposes. There is no impedi- ment to dealing; with another collective to take advantage of these provisions, jimited as they may be. The only impediment is that there does not yet exist another collective with which to deal. In essence, a collective is defined simply as an organization that carries on the business of collecting and distributing royalties and levies, or represents two or more copyright owners. Thus, it would be easy in principle to set up a new collective that meets the statutory definition, I will return to this concept in due course. In terms of the very limited “good news” for the academic commu- nity in Bill C-32, there were some relatively minor concessions on the issue of inter-library loan practices, which are of very limited utility in any event and are already obsolete given the rapid technological shift to digital media, 5, ‘THE SUCCESSFUL POLITICS OF COLLECTIVE MOVEMENT. CanCopy has been extremely adept not only at lobbying both at the federal and provincial level, but at securing lucrative licensing agreements at both levels of government. Indeed, this was crucial to their initial business plan. While these agreements have been relatively small items in the government scheme of things, typically negotiated at the middle management level by bureaucrats apparently eager to deal with CanCopy, they have been extremely lucrative to CanCopy and basically provided them with early cash flow of several miflion dollars per year. The first agreement with the Federal Govemment, for exam- ple, was worth about $13,000,000. This has enabled CanCopy to under- take the very aggressive lobbying and litigation campaign that has the Jed to its spectacular growth and success. In fact, CanCopy has received very litle effective opposition from any ofits major “clients”, The closest event to a contested confrontation occurred in 1996 when CanCopy sought to raise its per page licenses, on its expiring licensees from 3.5 to 5 cents @ page, a more than 40 per cent increase, Rather than avail themselves of the right to a heating before the Copyright Board, the AUCC basically agreed to the increase, 7 Moorehousev University of New South Wales, ISTOLRPC. 151 (Australia H.C),M18 INTELLECTUAL PROPERTY JOURNAL 1141.P),, December 1999}, Would CanCopy have actually gone to court when the previous licenses, with the Canadian universities expired and tried to obtain an injunction? Injunctions are not normally given when money will redress the prob- Jem and the balance of convenience favours the defendant. Could CanCopy have shut down the photocopiers in Canadian universities as the fall term was about to commence? Could they have achieved significant damages awards under the law at the time? We shall never know because the matter was settled. While CanCopy appears to be in an adversarial relationship with many of the institutions they license, itis interesting that CanCopy and some of the organizations that represent these licensees have been getting advice from the same sources in certain instances. Moreover, the AUCC (which represents University management) has been nego! ating in respect of rights that are probably owned by professors, andl not university entities (such as presses), given the general thrust of collective agreement and practices in Canada. It is ironic that CAUT* has allowed this to proceed as far as it has, ‘The strength of CanCopy has been its offer of a generally inresist- ible package to academic, library, and financial administrators that purports to provid a broad-based blanket license for most of the photo- copying activities that occurs inside the institution, along with ostensi- bly cost-saving measures in terms of internal personnel and resource requirements. Moreover, given the current combination of awe, fear, ‘and awareness, but ofien ignorance, as to important “details” such as case law in respect of intellectual property, most university and other post-secondary officials have been quite eager to comply with CanCo- py’s demands, and have simply passed the costs along to the students and taxpayers. A fortior’ for governments. ‘There is a culture in academia and the library community that is very averse 10 risk, and seems determined to avoid certain types of litigation at any cost. This has been well documented by an American law professor named Kenneth Crews.’ In fact, the one instance of which 1 am aware of, a reported copyright judgment against a university in Canada was at the suit of student, not a Publisher or CanCopy.” It involved the University of 8 Camadian Association of University Teachers. 9 Kenneth Crews, Copyright, Fair Use, and the Challenge for Universities: Pro- Imating the Progress of Higher Educaiore University of Chicago Press, 1993. 10. Boudreau v. Lin (1997), 150 DLR. (th) 324, 75 CPR, (ad) 1, 38 O-TC. 39 (Ont, Gen, Divs,COLLECTIVITY IN THE CANADIAN ACADEMIC COMMUNITY 119 Ottawa. This is not without irony because the University of Ottawa was, also implicated in a very notorious and messy criminal action involving copyright law, where CanCopy and collectives generally suffered @ serious embarrassment and setback in the courts." Nevertheless, prior to the enactment of Bill C-32 and even now, there were many good reasons why some institutions or organizations may have chosen or may not need take licenses from CanCopy. Al- though the risk cafculus has changed somewhat since Bill C32, and will change even more with the imminent proclamation of the statutory damages regime, there are still certain fundamental questions as to ‘CanCopy’s entitlement to demand blanket licences from post secondary ‘and other user institutions. There are also still questions why the AUCC, CLA, and the other bastions of the post secondary establishment, are so eager to endorse these licenses. There are alternatives, Before we look at alternatives, let us examine the strengths and weaknesses of the CanCopy regime. 6, THE ESSENCE OF THE BARGAIN WITH CANCOPY In the University situation, the license basically has the following features: 1, The University pays a “Part A” license fee of $2.50 per annum per FTE, This ostensibly permits “for free” distribution of materials in the class room, subject to certain severe limits. This material need not be accounted for in terms of record keeping. Of course, this raises interesting questions as to how the money can be property distributed. 2. The Universities and CanCopy agree to disagree on what is meant by fair dealing. This probably means that, in the end, the Universi- ties are paying for reproduction that they need not pay for because anything that is copied and falls within the meaning of fair dealing is simply legal and ought not generate any compensation, Can- Copy, of course, sees it the other way around and is forever threatening to raise the “Part A” rates to compensate for what they see as abuse of their generosity in allowing the “free” copying under “Part A”. TT Re» Lawrier Office Mart Inc, (1998), $8 CPR. (3d) 403 (Ont, Prov. Div), affirmed (1995), 63 CPR. (3d) 229 (Ont. Gen, Div).120 INTELLECTUAL PROPERTY JOURNAL [14 15., December 1999], 3, ‘The University pays an additional amount of “Part B” licensing revenue of $0.05 per page (with escalation provisions) for material that is sold to students and others, ie. course packs. Record keeping is required for this material, in order that supposedly accurate distribution can be made to the copyright owner. 4, If the University and College administrators do not enquire too deeply as to the issues behind the questionable indemnity scheme and the lack of chain of title (see below), they are getting a relatively worry free, though not bureaucracy free, situation, 5. Most institutions do require substantial resources to keep track of the records required to comply with CanCopy agreements, ‘Moreover, there has been a noticeable increase in inefficiency in some circumstances, as copying becomes moie centralized in order to fit into the institution’s compliance model, This can increase tumacound time as well as costs 7, LEGAL QUESTIONS CONCERNING THE CANCOPY SCHEME. There are some interesting questions that can be asked about the CanCopy regime arising from the fact that it does not have an adequate legal chain of title for much, if not most, of the “repertoire” used by Canadian universities, and the scheme is based upon a legally {questionable indemnification scheme. This is what is sometimes called the outsider” problem, which includes how to deal with the repertoire of those who have not joined the collective, Its in the ultimate interest of both the collective and the user to solve this problem. ‘By CanCopy’s own admission, according to current figures, they have only 3,698 Canadian creator members, Whoever these members may be, they are clearly only a smalt fraction of the number of profes- sors in the post secondary system and other scholarly or academic authors (of which practising lawyers ave a prolific example). ‘Also, by CanCopy’s own claims, they have a “repertoire” of only 1.7 million works to which they have any claim to a chain of title, Given the global “repertoire” of books and periodicals that exists and for which access is needed by serious scholars and teachers, this is probably a fairly small portion ‘The analysis in Appendix I of this paper is taken from a brief I filed in 1996 with the House of Commons Heritage Committee on behalf of Algonquin College in respect of the hearings on Bill C-32.COLLECTIVITY INTHE CANADIAN ACADEMICCOMMUNITY 121 Unfortunately, the Heritage Committee repeatedly refused to permit the presentation or public debate of this brief, which was far more critical ‘of CanCopy than anything filed by AUCC or CAUT. Thave attached the lengthy quote from the 1996 brief because these underlying problems still remain. It is still worth questioning, whether taxpayer's and student’s dollars should be spent without ques- tion on a scheme that is so inherently structurally problematic. ‘At least if the money were finding its way back to creators even if they do not belong to CanCopy — the scheme would seem more justifiable. However, CanCopy has an ever increasing “Undistributed Royalty” account that stood at over $18 million at the end of its last fiscal year. The interest on this is almost $1 million a year, even at today’s low interest rates. Even CanCopy is having trouble figuring out how to distribute this money, much less attribute it to its rightful owners, Other legally questionable problematic areas of CanCopy’s scheme of operation are these: > CanCopy itself is arguably engaging in copyright infringement by way of “authorization” contrary to s.3 of the Copyright Act, which makes one who authorizes infringement just a guilty as ‘one who does it. CanCopy explicitly, by way of its promotional literature and its model agreement, authorizes licensees to copy “published works”, except those few on the exchusion list, where CanCopy admits that it has no authority to do so.” Authorization means, essentially, to sanction, countenance, and encourage others to infringe copyright.” > CanCopy is offering to indemnify institutions against copyright infringement actions brought by third parties, if the institution copies such parties” repertoire without authorisation. Indemnifica- tion for illegal acts has always been problematic at common law. For example, it was the case at common law that contracts of 12. Any author or any publisher ean it would seem in principle, put their name on this exclusion list, At the moment, there are only & handful af entries that rance from the Harvard Business School to Playboy Magazine. Ir would be very interest- ing if numerous Canadian scholarly authors were to put their name on this list, ‘which is supposed to be updted periodically by CanCopy and furnished to all of iasTicemsees. 13. CBS, Songs Lad, x, Amstrad Consumer Electronies PLC, |1988} 1 A.C. 1013, [198812 AUER. 484 (U.K. HLL).122 INTELLECTUAL PROPERTY JOURNAL 114 LP3,, December 1999] indemnification with respect to libel were unenforceable. How- ever, because of the plain need for public policy grounds to Provide for a regime whereby responsible publishers can obtain libet insurance, modem statutes override this common law bar. There is no statutory override in this instance. If itis correct that the CanCopy’s agreement inevitably involves the committing of an offence" or other serious illegality, then it is egal and void.!* Among other possible consequences, it is simply not enforceable by either party.” > The Insurance Act* of Ontario and similar legislation ia other provinces requires that anyone who sells insurance or operates an insurance undertaking should be licensed, Tt is at least arguable that the indemnity scheme offered by CanCopy in its AUCC mode! agreement and elsewhere is an insurance scheme. CanCopy is offering to pay for damages sustained due to an unforeseen event at the suit of at third party. The last I checked, CanCopy ‘was not licensed under the Insurance Act of Ontario, Given this background, the question then arises whether there are any alternatives to the current CanCopy regime. 8, LEGAL CHALLENGES TO CANCOPY CanCopy’s licensing practices and the amounts that it charges could be contested before the Copyright Board or the courts or both. der s. 70.2(1) of the Copyright Act: Application ro fic umono of royalty, ete. 702 (1) Where a collective society aned any person not otherwise authorized to do a act mentioned in section 3,18, 18 07 21, as the case may e, tn respect of the works, sound recordings or communication signals included fa the eolletive society's repertoire are unable to agtee on the royalties tobe paid for the right to do the uct oF on their related terms and conultions, either of them or a representative of ether may, after giving notice to the ether, apply tothe Board tu fs the royalties end ther related terms and condiions 14 MeGuiness, The Law of Guarantee, Corswell, 1995, p, 670 15 CanCopy was quick ro support the Crown's case in Rv. Laurier Ofc Mart Ine (1994), 58 CPR. Gd) 403 (Ont. Prov. Div), affirmed 63 CPR. 34) 229 (Ont Gen, Div.) which entuiled the argument that utauthorized reproduction of material in course packs was a evimial often. 16 Cheshire, Fifoot, eal, Law af Contrac, (London: Butterworths, 1986), p. 36. 17 Cheshire, ie. p. 359. 18 Insurance Act, RSO., 1980, 18.COLLECTIVITY IN THE CANADIAN ACADEMIC COMMUNITY 123 Furthermore, the filed tariff in the off-air taping matter could be op- posed. Unfortunately, the Copyright Board has become a forum where only very well funded users can fully participate, Recent inaugural tariffs applications have become highly adversarial and more intrusive, Jitigious and expensive than even “normal” civil litigation, Unless the recently appointed judicial Chairman and new members are able to reverse the trend of the recent few years, the Copyright Board will soon become one of the most expensive fora in which a Canadian citizen ot taxpayer can participate. This could have been avoided by legislation cor even regulations in many cases. However, the Ministers responsible have chosen to Jeave much in the way of [aw making, as well as rate setting, to the Copyright Board, while at the same time providing it ‘with litle in the way of resources. This, of course, favours established or incumbent collectives — even if they need to borrow money for the ‘cost of mounting the hearing and starting the collective, Moreover, almost every major Copyright Board matter seems inevitably to involve judicial review in the Federal Court. In part this is because a long Tine of cases have held that the Copyright Board has Tittle if any adjudicative function to rule on the law, except t0 the ‘minimum extent necessary to deal with the narrow matier before it. ‘The opportunity to Ttigate by way of counterclaim or pre-emptive claim could also arise for a number of reasons in some scenarios if CanCopy were to attempt to force a license on an unwilling user who preferred to risk being sued for infringement and could raise valid defences as an alternative to proceeding before the Copyright Board Stich defences could be as simple, in some cases, asthe fact that certain institutions may be able to clear all of their copyright needs directly ‘without the assistance of CanCopy, or with their involvement only on a limited transactional basis. ‘These matters involve very complex factual and strategic determi nations and no general principles should be taken from the foregoing, ‘other than that there may be options in particular cases. Qualified, ‘expert, and independent counsel should be consulted in all cases. 9, ESTABLISHING A COMPETING COLLECTIVE ‘There are 30,000+ university professors in Canada, Many are prolific authors of material that is used by other professors and students for research, and excerpts of which are sometimes incorporated into124 INTELLECTUAL PROPERTY JOURNAL [14 LPs., December 1999] course packs. Copyright license fees for this material are now being collected by CanCopy, an organization founded and dominated by publishers. CanCopy’s income for 1997-1998 was more than $18 mil- lion of which $5.5 million came from universities and colleges. These figuses are rising at an average annual rate of about 30 per cent. Very little of this money appears to find its way back to professor authors, Few such authors are believed to eam more than $75 to $100 Year from reprography royalties from CanCopy. At the close of the 1997-1998 financial year, CanCopy had more than S18 million in undistributed royalties, and no apparently adequate systematic way of determining to whom this money belongs. (a) The Option ‘There is significant interest in establishing a second reprography collective in English Canada, There is probably enough potential reve- ruc in the system to sustain such a collective. The existence of such a collective would result in more competition, efficiency and less arro- gant behaviour on the part of the existing collective. Some significant portion of the revenues could be used for socially and academically useful purposes. However, there will be significant costs and risks in establishing such a collective, Not the least of these risks is that CanCopy, like any good monopolist, will likely attempt or offer to “meet or beat” any terms that the new collective may offer and thereby prevent it from getting off the ground. From an economic standpoint, this may be a short term satisfactory result in the mind of some, but the benefit would be transient. In any case, the start up costs still need to be paid for. ‘Some organization will need to become more actively engaged in the copyright arena in order that this and other philosophically and politically related policy initiatives achieve sufficient credibility and resources, Although both AUCC and CAUT have shown some interest in this issue in the past, neither organization seems willing at present to take the responsibility, devote the resources, oF risk the political consequences of proceeding unilaterally on such a possibility. It would seem that the CAUT potentially has the will but not the way, while the AUCC potentially has the way but not the will. In the short term, this exercise could cost users more money and is not without legal or political risks. However, in the long run, it may be viable and could bring much more efficiency and academic integ to the campuses of Canada.COLLECTIVITY IN THE CANADIAN ACADEMIC COMMUNITY 125 (b) Analysis CanCopy is very unpopular in certain academic circles because of the “copyright chill” that has been introduced onto campuses, the perceived inefficiency and problematic legal basis of their operation, the new photocopying bureaucracies on campuses, and the fact that institutions are being forced, in effect, to pay for the use of material in their own classrooms, when it has already been paid for at least once by the taxpayers.” The resulting payments are not necessarily going to any apparent g00d or logical use or distribution. In fact, CanCopy’s “repertoire reward” scheme set up a “repertoire fund” and purports to allocate funds that arise from sources where insufficient bibliographic informa- tion is available to creators in equal shares who have signed up before. years’ end, and to the publishers, notwithstanding that the creator's work does not show up in sampling or other tracking methods. This suggests an effort to sign up creators and to reward signers with the royalties of those who have not signed, This begs the question of fair distribution amongst deserving creators, and suggests the misuse of funds that might rightfully belong to those who have not, for whatever reason, signed with CanCopy. Interestingly, CanCopy distributes 100% of the collections from scholarly periodicals to publishers on the assumption that the relevant rights are always assigned to the publisher. This, of course, may be the desired norm as far as publishers are concerned, but it is not always the case. There are numerous other examples of controversial or legally problematic practices by CanCopy. As earlier indicated, CanCopy’s basic premise entails the licensing and indemnity for the use of reper- toire in which it often has no rights. This may raise issues under insurance legislation and clearly raises questions in terms of their legal capacity to offer such ficenses and to enforce them, ‘The fact that universities have chosen to participate in this questionable scheme of convenience does not render it any the less problema 19 As Harry Anurs (at various times a professr, author, dean and university presi= ‘ent has pointed ou professor typically is pada sary and receives a SSHRC lor NSERC or MRC grant for major research, both of which are publicly funded, 20 CanCopy Distribution Fact Sheet May 1999.126 INTELLECTUAL PROPERTY JOURNAL. 114.1P3., December 1999] CanCopy sometimes sends gratuitous cheques of a few hundred dollars to small associations and professional organizations with appar- ently no strings attached in consideration of past copying of their repertoire. However, there is implicitly if not explicitly a suggestion that the organization also become formally affiliated with CanCopy and obtain a license from CanCopy at a cost that would normally greatly exceed the proffered revenues. CanCopy has also used the advocacy tool of disseminating a legal opinion from a prominent lawyer concerning making photocopies of periodical articles and book excerpts by business and commerciat firms jin Canada. This opinion would strike most readers as favourable to CanCopy’s apparently very narrow view of the allowable ambit of fair dealing in Canada, namely that the copying of an entire article or a book chapter can never be fair dealing, at least in business or comme: cial firms. The opinion deals with very complex questions of Canadian and American law in less than two pages, Suffice it to say that not all copyright experts would agree with its conclusions. Interestingly, those who believe that fair dealing can never entcom- pass the whole of a work should note the thorough analysis of Canadian and Commonwealth law by Glenn Bloom’ in 1994. He concludes that the reproduction of an entire work under Canadian Jaw as it then ‘was “may in certain circumstances be within the scope of fair deal- ing” He also specifically concluded that: By applying these factors and observations t0 the copying by a student of a entire peviodieal of a sciensfi and techuical nanive for the purposes of the {nuden’s private study, irs readily apparent that fr dealing excepts the copy rons copyright infringement. To the best of my knowledge, CanCopy does not circulate Mr. Bloom's analys In any event, careful note should be taken of a Canadian appellate decision subsequent to both of these analyses. In Allen ¥. Toronto Star, the Ontario Divisional Court stated: 21 Of Osler, Hoskin and Harcourt, Mr. Bloom has advised both CanCopy and the AUC on copyright matters 22 Glenn Bloom, A Framework for the Application of Fair Dealing in Canedain Copyright In Transition Conference, Canadian Intellectual Property Init (CIPH, 1994, tab 13 (out of prin, 23 Bloom, sip. 17 24 Bloom, op. ct p. 52.COLLECTIVITY INTHE CANADIAN ACADEMIC COMMUNITY 127 1m ow view, the test of fair dealing is essentially purpasive. It i not simply mechanical test of measurement of the extent of copying involved. We were referred 1 the case of Zamacois v. Doville, 1944] Ex. CR. 208,2 CPR. 270, dadecision of Angers J. in the Exchequer Court of Canada. To the extent tha this decision Is considered an authority forthe propesition that reproduction of at ‘entre newspaper article or, a thls case, a photograph ofa magazine corer eat never be considered a fair dealing with the article (or magazine cover) for uvposes of nes summary or reporting, we respecfuly disagree ‘This coutd clearly inject a new and very important element in the law of fair dealing in Canada. (©) Anew collective? ‘The question arises as t0 whether a new collective, possibly with an even broader based membership than university teachers™ would be. useful and viable. Competing collectives have a long history in the world of copy- right, Canada had competing major collectives in the musical per- forming rights area for about 50 years, until recently when the wo major societies, namely CAPAC and PRO CANADA merged in 1990.2 ‘The USA has had three competing collectives in the performing rights area for over 50 years, one of which is privately owned. The second largest U.S. music collective, BMI, which was also active in Canada for about 50 years, was initiated by disaffected users (broadcasters) who were unhappy with the licensing practices of the monopolistic main collective at the time in 1940, ‘The strategy of a competing collective must entail some or all of the followin operate more efficiently with lower overhead than the incumbent be less burdensome on users in terms of reporting charge less to users than the incumbent pay more to copyright owners either directly or indirectly than the incumbent, or at least pay earlier or in the form of “advances” to attract new members at little actual cost, or pay in a way that is + + . . Allen Toronto Star Newspapers Lid. (1997), 36 O.R. (38) 201, 78 CER. (34) 15 (Ont. Di, Ch), reversing (1995), 26 OR, (Bd) 308, 63 CPR. (3d) $17 (Ont Gen, Dis). : 26 Such as community college faculty. fectance authors and clasieal music compos 27 Some users and members ate now quietly beginn this merger to question the wisdom of128 INTELLECTUAL PROPERTY JOURNAL. 114.PA., December 1999} ‘more acceptable, such as for the purpose for a Canadian research fund, “genius award” or other acceptable purpose, ¢ provide heiter service to creators and users Jn the musical field in the USA, this strategy has proven to be very successful and pro-competitive. It also worked well in Canada, until the merger of the two societies in 1990. This strategy might work particularly well in the present miliew because CanCopy has the following weaknesses: — CanCopy is trying without success to fairly and logically distrib- le revenues from a very disparate group of users to a very large group of unascertainable owners.* Many if not most of the actual creators of copied repertoire have no owners. actual legal affilia- tion with CanCopy. Cancopy's undistributed revenue is almost the same as their income, namely about $18 million, This ratio of virtually 1:1 for revenues received as compared to revenues dis- tributed in the course of @ given year is very controversial and probably reflects a number of factors, including its incomplete repertoire base, inadequate database of ownership, inadequate technology, and lack of an underlying accepted formula or algo- rithm for distribution, ¢ — CanCopy paid insufficient attentio ogy to “manage” a collective # — CanCopy has had the luxury of dealing with politically motivated uusers who have signed deals that sometimes appear to be very favourable to CanCopy at the taxpayer's expense. It has concen- trated on lobbying (at which it excels) anc! not on systems, ily to efficient technol. On the other hand, an academic collective could rely on the following strengths: + The new collective could start with new technology. This would involve a combination of “off the shelf” and custom software. Government funding or subsidy may be available to pay for this in whole or in part. The new collective's initial users might likely be universities and colleges that are members of AUCC and ACCC (Association of Community College of Canada), They will not readily want to 28 1,7 milion copyright owners aecording to their own figuresCOLLECTIVITY INTHE CANADIAN ACADEMIC COMMUNITY 129 pay an additionat license fee over and above the current CanCopy fee, They will have to be convinced that moneys paid to the collective will ultimately be in lieu of moneys owing to CanCopy, if not immediately, then in the very near future. The willingness of institutions to pay two sets of fees will depend on convincing ‘them that, in the fong run, this will be less expensive and that in the short and medium term, they will benefit from a source of service and advice on copyright matters, a fully “resourced” and dedicated lobbying entity, and a competitive force to CanCopy © Users would need to have the will to play hard-ball with CanCopy to reduce their license fees to CanCopy by an amount correspond ing to the value of the license fees to the new collective, There is ample precedent for this exercise in the musical rights field $ The new collective could provide an educational role and service. This could be web based, with limited access to accredited mem- bers. 4 For exemple, the new collective could educate scholarly writers fs to the pros and cons (mostly cons) of assigning copyright to corporate journals. This is now a raging issue in the USA. (a) Can Two Collectives Co-Exist? ‘The answer is yes, at least probably yes. This has been proven in Canada and the USA as noted above. It has happened in the music field, It has even proliferated in the musical field, with the existence of at Ieast five niche musical collectives at the present time in Canada alone, However, the reprographic rights movement has shown some disineli- nation to tolerate any competition, That too may be changing. For example authors for non-scholarly periodicals and literary agents ap- pear to taking matters into their own hands in the USA” Some post-secondary institutions have shown their interest in forming a new collective, or at least considering an altemative to the CanCopy scheme. They might be the nucleus of a new alliance. 29 “Thomas G. Field, J. “Publishers" Rights and Wrongs inthe Cyberage”, Fotheom. ing 39 Idew 429 (1999), See also: Steven Bachrach et al, "Who Should Own ‘Scientific Papers?" 281 Science 1459 (1998): Floyd E. Bloom, "The Righness of Copyright,” 281 Science 1451 (1988); see also the September 1998 anicle in Aianie Monthly by Charles C. Mann “Who will own Your next Idea?” Sill tvailable on Hine ats ptheatiaatie comfissues/¥sepyeapy.him 30 Sce the Authors Registry Website: hps/iwwwatuthorsrogisty.or130 INTELLECTUAL PROPERTY JOURNAL 114 LPS., December 1999] Some overlap is not inconceivable or even unwelcome, Many institutions may tolerate licenses from two or more collectives. Thi hhas been the norm in the broadcasting field for decades. The rates and structures of the licenses would need to evolve to contemplate thi possibility. This has been the history in the USA and in Canada until recently where there have been multiple collectives. As noted above, multiple collectives are now re-emerging in Canada in the music indus- try. (©) Form of New Collective ‘The new collective must have a form that is broadly acceptable to the academic profession. Although good arguments can be made for a privatised “for profit” operation, this option may create controversy based upon misunderstanding. Altematively, there are options for “not for profit” organization and “cooperative “ organization ‘These are, in the end, legal governance issues and are capable of solution, 10. CANADIAN NON-COPYRIGHT PRECEDENTS A very interesting organization that bears some scrutiny as a precedent, and may be helpful in terms of expertise and networking, is the Canadian Universities Reciprocal Insurance Exchange CC.URLE.”) This is « highly specialized organization of some 4.5 FTEs that serves as the main insurer for most property and liability risks (except for ordinary risks such as automobile insurance) for almost all Canadian universities outside of Quebec. It was created by and for the universities themselves in the 1980's when premiums and coverage for the major commercial insurers became unreasonable, unstable, and unresponsive to the special needs of Canadian universities — which have “unusual” risks ranging from athletic injuries, to sexual harass- ment, to nuclear contamination. This tiny organization insures many billions of dollars worth of risk and functions with a tiny full time staff. It-was started with expertise from the private sector. 11, FINANCING OF A NEW COLLECTIVE Even the most efficient new collective will require a small staff of at least 3 people for minimal operations. Computer hardware and soft- ware — some of which will need to be customized — will be required. 31 See hupyjwun.curieorgCOLLECTIVITY INTHE CANADIAN ACADEMIC COMMUNITY 131 ‘There will be accounting and legal start up costs that will need to be paid for oF contributed in some way. There will need to be a careful feasibility study and the development of @ good business plan. itis possible — but only with appropriate institutionat partnership —that some of this could be funded to a greater or lesser extent through the Canadian Foundation for Innovation or one or more of the three major federal granting councils. Or, one entrepreneurial university could take the lead, by contributing some cash flow and some minimal resources such as space, 42, ADMINISTRATION, FACULTY CENTRED OR INDEPENDENT COLLECTIVE? ‘The question needs to be asked whether any new collective should be initiated by administration or faculty, None of the usual suspect organizations has shown much inclination to date to take the lead on issue, Neither is in a position to do so. In principle, the initistive might better come from the faculty organization, but this is the organi- zation with less resources and currently less in-house experience in these matters Probably, the collective should be independent of both of the currently established groups. After all, one of the chief advantage of having a new independent collective is that it should be independent, or at least as independent as any organization can be in Canada in such a politically and bureaucratically charged arca. The existing organiza- tions have not been able to succeed to date in achieving a clear goal in terms of lobbying and advocacy, perhaps because of the many agendas they need to balance. Since lobbying should be a major focus of any new collective, sufficient independence would be desirable. 13, CASH FLOWS According to CanCopy’s figures, about 76 per cent of its distribu- tion is on account of Canadian creators and copytight owners. Even if anew collective could achieve a 25 per cent penetration into CanCopy's markets, it could be looking at a cash flow of about $4 to $6 million in the first few years. Naturally, Government and corporate users would be appropriate customers for licensing and should welcome the compe tition, if it is well presented, Initia collective overhead costs are typically about 20 per cent of revenues. This declines over time, ideally to 15 per cent or less.132 INTELLECTUAL PROPERTY JOURNAL 114 LP, Desember 19991 Tf members ate prepared to initially forego or postpone a distribu- tion or agree to use some of the initial cash flow for other start up purposes, this would greatly help in financing and business planning, ‘This is what CanCopy itself appears to have relied upon, along with lucrative deals with governments Another tool that would greatly help would be a small membership contribution by professors — perhaps $10 to $20 per year, preferably more and preferably through a CAUT levy. The tangible quid pro quo for this could be web based advice on copyright matters including publishing agreements and standard clauses that protect authors rather than publishers, 14. CONCLUSION There are alternatives to the present regime of deating with Can- Copy. They involve some risks butt great possibilities. Tenured profes- sors with responsibility for taxpayer funds and their institution's prestige should give these possibilities serious consideration. 18, APPENDIX I (a) The “Outsider” Problem + CanCopy does not have any right or title with respect to much of the repertoire in which it deals, The repertoire, apart from the licensed repertoire and the expressly excluded repertoire in Sched: tule “B'® of the model agreement is referred to in academic discussions in this context as that of “outsiders” or “outsice reper toire”. * The CanCopy method of using an indemnity with respect to outside repertoire appears to be similar to the scheme now prac- tised in the UK by the Copyright Licensing Agency (CLA) for reprography. However, there are at least two key differences be- tween the CanCopy case and that of CLA. ‘+ Inthe UK, since the major revision of that country's copyright Jw in 1988, there isa statutorily implied right of indemnity by collective in favour of a user with respect to activities by the user 32 Froma 1996 brief field on behalf of Algonquin College tothe House of Commons Heritage Commiisee re Bill C.32, 33. This depends upon receipt of u natice form the concerned copyright owner and is wallable presurubly annually. Quuere how many individual copyright ‘owners und publishers are aware of this fist.cou ECTIVITY INTHE CANADIAN ACADEMIC COMMUNITY | 133 within the “apparent” mandate of the collective, This is under s, 136 of the UK statute. + Even in the UK system, the licensee may not know whether such ‘an assumption is correct or safe. The leading British text suggests, ‘as an example, that the indemnity would apply “where the license might cover all books published by a certain group of publishers, but the copyright in some works may belong to the authors", ‘This strongly suggests that the statutory indemnity is not intended to cover all works of any nature, A less restrictive view of the indemnity scheme suggested by another British scholar, namely that“... licenses are subject to a statutory implied indemnity by the licensor covering infringement of any work which the license purports to cover in its “blanket” but which ia fact is not within the licensor’s authority to grant." © Under the UK statute, a person is: ‘within the apparent sope ofthe Tcense if tis not apparent From inpection ‘of the Ficense and the work that it daes nor fall within the description of | ‘works £0 which the Hicense applies and the license does nor expressly provide tht it does not extend to copyright of the description infinged *7 In practice, the question of indemnity in the UK would seem to be of lesser importance than in Canada since CLA is said to have agreements with 8,000 authors and 900 publishers representing 94 per cent of the repertoire being copied.* + Inessence, the British scheme provides a statutory requirement for an indemnity in respect of “outsider” repertoire, This would appear to legitimize a practice that otherwise appears to emount to the authorization of copyright infringement + Itis important to note that the UK system also includes broad, but specific, powers to the effect that the Secretary of state can extend the coverage of a scheme or license, following a recommendation by an inquiry.” “This is to meet the case where an individual ‘copyright owner or group of owners do not join existing license 34 Copyright, Designs and Potent Aet 1988 (CDPA) s. 136. 35° Luddie, Prescott and Victoria, The Modern Low of Copyright and Designs London, Butterworhs, 199, p. 662. 36 WR. Cornish, United Kingdom Copyright Law, in P. Geller, International Copy right Law and Practice, M, Bender, 1994, UK63, se. 8 [2] |b] 37. CDPAs. 1363). 38 Laddie, supra note 35 at p. 668. 39. CDPASS, 137-140134 INTELLECTUAL PROPERTY JOURNAL 1141P2,, December 1999) schemes or institute a scheme of their own. These provisions are very detailed. They clearly contemplate the protection of both copyright owners and users, while encouraging the activity of collectives. They feature safeguards and due process. Still, they appear to stop short of the “extended collective” mechanism used in the Nordic countries which is described below. ‘+ Thus, the CanCopy scheme is not without some precedent. How- ever the apparent model for the basis on which CanCopy does its ‘work it that of the Copyright Licensing Agency (CLA) in the UK." It must be noted, however, that the CLA depends to a very large extent on a significantly different statutory basis for legitimacy. + The problems inherent in the CanCopy modet have also been dealt with to a certain extent in the Nordic countries, by imple- mentation of a system known as “extended collective licensing’ (ECL). This entails a system whereby a collective representing “a large number of national authors of a certain category of work” are given the right to represent all authors in this category, including Intemational authors, whether or not they are members, unless they specifically exclude themselves:* ‘Thus, there is a kind of compulsory licensing aspect of this system for non-members.!* ‘The system also allows for arbitration and for the exclusion of certain reproduction rights that might be best dealt with individu- ally. ‘© This system is widely regarded as useful and perhaps as a model for Europe and other fora, It is, essentially, what CanCopy is now practising in Canada, However, the extraordinarily important point is that the model is inconsistent with current and even proposed Canadian law, and even its most fervent exponents are quick to point out that an explicit, unusual and potentially contro- versial legislative mandate is required for it, + Forexample, Prof, Kamell, an advocate of the ECL system in the Nordic countries, points out that the ECL system is insufficient to protect users against threats based upon the criminal law 40 Laddle, etal. supra note 35 at p. 663, 41 Testimony of Ms. Lucy White of CanCopy inthe course ofthe proceedings in R. Laurier Office Mart Ine, Oct. 17, W94 at p. 106 of rascript 42M, Flesor, Collective Administration of Copyright and Neighbouring Rights WIPO, Geneva, 19910, p. 35 ff 43 Fsor, op. cit. p. 36.COLLECTIVITY INTHE CANADIAN ACADEMIC COMMUNITY 135, “The possible defence on the part of users that they be users in good faith, lunintentonst infingers, etc, By sheer fact tha they have agreements with si orgunization of right owners with an accepted standing nationally is of ‘questionable value, to say the lest, as tong as there is n0 formal legisstve backing ofits representativeness. As answers tothe problem of outsiders? his such talk may have some persuasive power against an unwilling ‘outsider, but they do nat provoke the appropriate and presetly ever more desired watertight guarantees, Sometimes, they only serve 10 sweep the problem under the eet +The Nordic system and its incomprehensibility to those not famil- iar with it are also well described in an important comment by Prof. H, Lund Christiansen.** + The following analysis of the “problem of outsiders” is quoted from the Kopinor Website. Kopinor is the important and presti- ‘gious Norwegian collective and one of the authors is Jukka Liedes, a leading Norwegian government expert and chair of many im= portant WIPO expert meetings: “The problem of oulsiders as been approsched in different ways indifferent ‘counsis. One sterative i 1 incorporate into an agreement an inderaity clase by ‘which the orgunization assumes the lability forthe payment of remonerae tion to non-represented right owners. This alternative, however, does not uke the use of non-represented works permissible but only eliminates Financia Hibilty under civil nw, Agreements cannot transfer ibility ander criminal laws the user is ulways responsible for any infringements he hcommitted, This sluernative does no rhereforesufegusd the postion ofthe use ‘Another aliemative isto incorporate into the law provisions by which a ‘copyright organization is given a general authorization to represent right ‘owiers or by which its presumed thatthe organization has such ight. The practical effects of this altemative hardly differ from those of extended Ticence, which, however does not give the organization a genera sight of represencition but only extends an agreement concluced by the organizs- tion aso to cover non represented ‘A tied ternative isto inconporate int the nw provisions of por-volunary licence (e.g. statutory or legal Ficence) whenever permitted by international ‘conventions In this ense the consent of right owners forthe ws of protected ‘materials snot needed at al.'They have only aright to remuneration, Non- ‘Voluntary licence is a considerably farther-reaching Himiation on rights H Prot. G, Kurnell, Outsiders” Rights: A dilemma for Collective Administration sy [1992] IV EIPR 430 a 433. 45. HAL. Chuisiansen, The Nordic Licensi ‘Agreement Licensing, {1991] 9 EIPR 345. Systems — Extended collective136. INTELLECTUAL PROPERTY JOURNAL, 114 LP, December 1999), than is extended Hicence, and it significantly weakens the negotiating posi ‘ion of right owners. emphasis added) + Another analysis published by the European Community confirms that even the basic concept of an extended collective and an indemnity does not solve all problems for users and does require specific legislation [As in the case of direct licensing, the user can never be sare that fe has sor all necessary licences 10 create a multimedia product. No collective ‘orgonisation represents all national snd international right owners. There are yet different legal techaiques which allow grant covering licences. The ‘organisation may assume to the user tht the remuneration will be paid to the non-represented right owners (contracts with indemnity clauses). In ‘Nodic countries, collecting societies may ram an extended collective licence where the agreement is by law made binding on non-represented sight owners. Finally, the law may contsin provisions tothe extent tht the ‘organisation is presumed to represent all right owners. Only inthe hater ‘ise of the Jegal presumption, the organisation is_entilles to represen! ‘usider, Inthe other two cases, non-represenie Fight owners can prohibit the use oftheir works and ean sl claim individual remuneration” (Emphases added) + Thus there is clear international authority that the system practised by CanCopy requires an explicit legislative mandate that is un- usual and controversial, It certainly does not exist in Canada. Even Bill C32 will not go this far, for it does not properly address the question of the authority of the collective to represent outsid- ers. It does, on its face, limit the recovery an outsider can obtain, in certain cases, to the rate charged by a collective; this, however, is subject to a potential price, Not only does this scheme stop far short of the Nordic ECL model, it may, i fact be inherently an competitive, as will be discussed below. ‘+ Indeed, the lack of authority for CanCopy’s operation under the current Copyright Act is demonstrated in s. 70.2 which explicitly refers to the Copyright Board’s role in dealing with disputes “in respect of the works included in the licensing body’s repertoire”. (emphasis added). {46 _ See: hupuwwwopinor.no/Englishlext-eng him 47 hupilww2.echo Juflegalfenfnoertic2 nmCOLLECTIVITY IN THE CANADIAN ACADEMIC COMMUNITY 137 (b) Bill C-32 and the Outsider Problem + Bill C-32 has certain provisions which may partially alleviate the difficult leget position of a reprography collective seeking to operate in Canada with respect ta the outsider problem, However it does not solve the corresponding public policy issues. + Bill C-32 contains statutory minimum damages provisions which can give rise to substantial liability for very little in the way of infringement, These are discussed in greater detail below. How- ever, for present purposes, suffice it to say out that an institution can be liable for 2 minimum civil lability of $500.00 per infring- ing work, with no need for proof of damages. Thuis, an inadvertent failure to clear copyright could give rise to thousands or even hundreds of thousands of dollars of minimum liability for one day's activity on a college campus. + Algonquin notes that Bill C-32 does attempt to shield the college community from the potential excesses of statutory damages. It does so in the following ways. + Proposed s, 38.2 (1) would supposedly prevent the application of statutory damages to educational institutions in circumstances wherein the institution is sued by a copyright owner who has not assigned or licensed a work to it collective, and where the institu- tion is party to an agreement with a collective covering the appli- cable category of work, ‘+ Inthis case, the copyright owner can only recover the amount that would have been payable to the collective with the highest rates for the applicable category of work (s. 38.2 (3)) * Algonquin notes that the provisions in s. 38.2 (3) at first appear to be of benefit to the academic community. However, upon closer analysis, these provisions are a potentially anti-competitive inclusion that substantially tits the balance of-power in favour of collectives. + Inthe first place, these provisions essentially force creators to join a collective, even if they do not wish to do so. They virtually amount to a compulsory Ticense for creators, most likely authors, sho wish to either withhold reproduction of their work, or may swish to demand special terms, conditions, or a higher than normal royalty. All of these potential demands are, of course, within their rights in a free and democratic society. These provisions may well raise significant issues under the Charter of Rights and Freedoms,138 INTELLECTUAL PROPERTY JOURNAL [14 LPS. December 1999] ‘+ It should be open to a ereator fo refrain from participation in collective activity and for a user to deal directly with the author. To require orto, effectively, force participation otherwise smacks of socialist intervention. Creators, as such, are not members of Iabour pools and do not need to be forced to associate or behave collectively. That they have the freedom do so is more than suffi- cient. The new Status of the Artist Act, R.S.C. 1995, ¢. 19.6 pro- vides more than enough collective tools for a ereator to use, if deemed necessary. + Secondly, these provisions encourage collectives to hold out os- fensible authority for the right to copy with respect to works outside of their repertoire. Such authorization would otherwise be flagrantly illegal by virtue of s. 3(1) of the current and proposed Copyright Act and at common law. + Iisa trite and basic principle of law and common sense that one cannot give what one does not own. Nemo dar quod non haber. Not just anyone can sell the Brooklyn Bridge. ‘+ There is a superficial advantage to this cap of damages in favour of educational institutions. However in the Jong run, the result will be the legitimization of a practice already begun by CanCopy of trading in repertoire for which the collective holds no rights. ‘The collective will simply collect money for all except those who {g0 to some length to exchide themselves, Some of this money will eventually be passed on to authors and owners who are not members of the collectives, after the collective has eared interest ‘on this money for some considerable time. Even if the author or owner has specifically excluded his or herself from the collective, the maximum amount recoverable will be that which the collec- tive would have charged. This would likely, in any given instance, be literally a few cents or a few dollars. Hence, no law suit and no recovery. Hence, the effective grandfathering of existing reprography collectives in Canada and the problematic scheme that resulis in collection for many works outside of its repertoire. + Thirdly, the provisions virtually force educational institutions into signing an agreement with a collective, notwithstanding the “out= sider problem”, Some institutions may be capable of clearing rights directly with publishers, Others may need only limited - repertoire. For a number of reasons, it may not be desirable to force institutions to sign blanket licenses if they do not need or swish to do 80.COLLECTIVITY INTHE CANADIAN ACADEMIC COMMUNITY 139 It should also be noted that in spite of the apparent protection offered to acatlemic institutions from statutory damages where a collective agreement is in place, there is no offer of immunity from criminal protection, No collective, including CanCopy, can indemnify against criminal activity. If a university copies works that ste ou'side a collective's repertoire there could be criminal charges laid