Canada: 2012 Copyright Tariff Report Vol.2 – CPCC, ERCC & SODRAC File Tariff Proposals with the Copyright Board of Canada

Last Updated: November 10 2011
Article by Sundeep Chauhan

Every year on March 31 Canadian Collective Societies (Collectives) file tariff proposals with the Copyright Board of Canada. These tariff proposals set out what the Collectives believe businesses should pay for the use of music, audio-visual works (e.g. movies) and literary works (e.g. books).

In this second issue of the 2012 Copyright Tariff Report we look at the proposals published in the Canada Gazette on May 14, 2011 by the Canadian Private Copying Collective (CPCC) for private copying, the Educational Rights Collective of Canada (ERCC) for educational rights, and the Society for Reproduction Rights of Authors, Composers and publishers in Canada SODRAC for the use of music videos by online music services.

What is a Collective Society?

A collective society is an organization that administers rights in copyrighted works as set out in the Copyright Act of Canada (the "Act"), such as CDs, movies or books. Collectives operate on behalf of the thousands of copyright owners who are its members. Collectives monitor and collect compensation for the use of creative works where it would otherwise be unmanageable or inefficient for individual copyright owners to do so on their own due to the large number of users involved. For example, it would be challenging and costly for an individual copyright owner to monitor and collect compensation from restaurants across Canada who may play her music as background music. Collectives also simplify the act of licensing by allowing businesses to make one payment rather than potentially hundreds to use copyrighted works in their day-today operations.

Are Collective Societies legal?

Yes, under Canadian law Collectives are legal in Canada. Many Collectives are given rights under the Act or granted rights by the Copyright Board of Canada.

What is a tariff?

A tariff is a legal document drafted by a Collective which sets out the terms and conditions for using copyrighted works in a business. Tariffs set out the royalty (i.e. dollar amounts) a user must pay, how these royalties are calculated (e.g. based on square footage or a percentage of revenues) and any reporting or administrative provisions a user must comply with (e.g. reporting songs used or number of copies made). Tariffs can be proposed by the Collectives and certified by the Copyright Board of Canada to be paid for multiple years.

Who do tariffs apply to?

Tariffs apply to businesses that play music or show videos as background in their establishments (e.g. a fair, a restaurant or a fitness facility). Businesses who sell music are also required to pay tariffs (e.g. background music suppliers, online music retailers). Educational institutions or businesses that photocopy articles or textbooks must pay tariffs as well. Television and radio stations are required to pay tariffs for using copyrighted works such as music, movies, or television programs.

What is the Copyright Board of Canada?

The Copyright Board of Canada (the "Copyright Board") is an economic regulatory body located in Ottawa. The Copyright Board is empowered to establish and certify the tariffs to be paid for the use of copyrighted works in Canada, following a formal public legal proceeding. When the Copyright Board certifies a tariff this means that it has determined the tariff is enforceable under Canadian law.

Why do tariffs matter?

The enforcement of tariffs can result in businesses paying significant royalties that directly affect their bottom-line. Businesses may also be liable to make payments under more than one tariff. While large broadcasters are aware of their obligations to make royalty payments to the Collectives, many small Canadian businesses or industry associations may not be aware of the tariffs or the multitude of Collectives who administer these rights. While the tariff process may seem confusing or daunting, with expert advice the smallest player can advance its interests and meaningfully participate in Copyright Board proceedings, potentially influencing the outcome of decisions that directly impact profitability.

When do tariffs apply?

Tariffs apply for the entirety of the time frame proposed by the Collective and as approved by the Copyright Board. As a result, the tariffs discussed in this document that were filed on March 31, 2011 will apply from January 2012 onwards. While the formal certification process by the Copyright Board may take years (e.g. the tariff may not be certified until 2015), the Collective is within its rights to seek payment back to the beginning of the proposed period (i.e. January 1, 2012), with interest.

How to become a party to a Copyright Board proceeding?

The tariff's publication in the Canada Gazette serves as official notice to Canadians of the tariff's existence. A business wishing to object to a tariff proposal filed by a Collective must, on its own or through its representative, file a notice to the Copyright Board within 60 days of its publication in the Canada Gazette. The business then becomes an "Objector" and is entitled to make its views known as part of the royalty rate-setting proceeding at the Copyright Board.

What generally happens during a Copyright Board proceeding?

Once the list of objectors has been confirmed, the Copyright Board will set a schedule for the formal legal proceeding in consultation with the Objector(s) and the Collective that filed the tariff. This schedule includes the opportunity to ask questions of the other parties. Following a period of questions, each party will file their Statement of Case (the Collectives generally go first) and the Collective will also file a Reply Case in response to the arguments of the Objector(s). The proceedings occur in Ottawa and can last anywhere from a day to a few weeks depending on the complexity of the proposed tariff.

CPCC

The Canadian Private Copying Collective (CPCC) is the agency tasked with collecting and distributing private copying royalties. A "private copy" is a copy of a song that is made by an individual for their personal use. The tariff applies to blank media such as CD's and DVD's but not digital audio recorders (e.g. an iPod). CPCC represents songwriters, recording artists, music publishers and record companies.

On May 14, 2011, CPCC's Private Copying Tariff 2012-2013 was published in the Canada Gazette thus opening the period for objections. Interested parties have until July 13, 2011 to file an objection to the tariff proposal with the Copyright Board. Filing a timely objection will ensure that an objector is made a party to the proceeding.

Private Copying 2012-2013

The tariff imposes levies on blank audio recording mediums such as blank CD's and DVD's. In the 2012-2013 levy CPCC is proposing levies for the first time on electronic memory cards. The proposed rates for memory cards are:

  • 50¢ for each electronic memory card with 1 gigabyte of memory or less;
  • $1.00 for each electronic memory card with more than one gigabyte of memory but less than 8 gigabytes of memory; and
  • $3.00 for each electronic memory card with 8 gigabytes of memory or more.

In regards to CD-R, CD-RW, CD-R Audio or CD-RW Audio, the proposed levy rate for 2012 is identical to the certified 2011 levy of 29¢ for each. Once again, no levy is payable for:

  • a sale (or other disposition) that is to be (and is) exported from Canada; or
  • a medium sold (or disposed of) to a society, association or corporation that represents persons with a perceptual disability.

Reporting Requirements

Every manufacturer or importer is required to provide a variety of information to CPCC depending on its particular corporate structure. Examples of the type of information which must be provided to CPCC are:

  • name of the corporation
  • jurisdiction of incorporation
  • name of the proprietor of an individual proprietorship
  • names of the principal officers of all manufacturers or importers
  • any trade name under which it carries on business
  • the address of its principal place of business

Manufacturers or importers of bank media are also required to provide CPCC with:

  • the number of units of each type of blank audio recording medium on account of which the payment is being made
  • the number of each type of blank audio recording medium exported or sold or otherwise disposed of to a society, association or corporation that represents persons with a perceptual disability

ERCC

The Educational Rights Collective of Canada (ERCC) administers a tariff allowing educational institutions to make a copy of a work and to use that copy in the classroom without the permission of the copyright owners. ERCC has hundreds of affiliated rights holders including Canadian and non-Canadian producers, distributors, private and public broadcasters and music rights societies.

On May 14, 2011, ERCC's Educational Rights Tariff 2012-2016 was published in the Canada Gazette thus opening the period for objections. Interested parties have until July 13, 2011 to file an objection to the tariff proposal with the Copyright Board. Filing a timely objection will ensure that an objector is made a party to the proceeding.

Educational Rights Tariff 2012-2016

The Educational Rights Tariff applies when an educational institution (or person under its authority) makes a single copy of a work or subject matter protected by copyright that is communicated to the public by telecommunication, or performs that copy in public for educational or training purposes before an audience consisting primarily of students of the institution. The Tariff does not apply when (and thus no royalties are payable to ERCC) an educational institution (or person acting under its authority):

  • performs a sound recording or work on the premises of the institution for educational or training purposes and not for profit before an audience consisting primarily of students, or instructors, or persons directly responsible for setting curriculums for the institution
  • performs a work or other subject matter by telecommunication for educational or training purposes and not for profit, before an audience consisting primarily of students, or instructors, or persons directly responsible for setting curriculums for the institution
  • makes a single copy of a news program (or news commentary program) excluding documentaries, if the copy is destroyed within a year of when it was made, and performs it before an audience consisting primarily of students of the institution (or instructors, or persons directly responsible for setting curriculums)
  • makes a single copy of a work or other subject matter for telecommunication if the copy is destroyed within 30 days after it was made and is not performed in public.

An educational institution may elect for i.) a Comprehensive Tariff,or ii.) a Transactional Tariff. If no election has been made, the institution is deemed to operate under the Transactional Tariff. An educational institution is limited to change the tariff under which it operates once per year. Elections must be made before the start of the reporting period for which they apply.

i.) Comprehensive Tariff: The proposed royalties for 2012-2016 payable under the Comprehensive Tariff, which are identical to the certified rates for 2007-2011, are the total of:

  • $1.73 per pre-school, elementary and secondary FTE student per year; and
  • $1.89 per other FTE student per year.

A pre-school, elementary or secondary FTE student means two pre-school students or one elementary or secondary level student whose enrolment was reported to the Minister of Education. A "other FTE student" means one full-time student (other than a pre-school, elementary or secondary student), or 3.5 par time students, enrolled in an educational, cultural or recreational activity taking place on the premises (or being administered by) an educational institution whose enrollment was reported to Statistics Canada.

Under the Comprehensive Tariff there are criteria as to how long a copy can be kept and performed by the institution if it elects to later operate under the Transactional Tariff. Similarly, there are modifications to the royalty rate for copies made under Comprehensive Tariff which are retained under a Transactional Tariff.

ii.) The Transactional Tariff: The royalties payable under the transactional tariff are broken down for a.) pre-school, elementary or secondary students, and b.) other students. The proposed rates are identical to the certified rates for 2007-2011:

  1. For copies intended for pre-school, elementary or secondary students ERCC is proposing:

    • $0.13 per minute or part thereof if the copy was made from a radio signal
    • $1.60 per minute or part thereof if the copy was made from a television signal

  2. For copies intended for other students ERCC is proposing:

    • $0.17 per minute or part thereof if the copy was made from a radio signal
    • $2.00 per minute or part thereof if the copy was made from a television signal

Under the Transactional Tariff, a copy made from the Internet is deemed to have been made from a television signal unless there is no visual component to the copy, other than alphanumeric or still images (including graphic images), in which case it is deemed to have been made from a radio signal. The number of minutes it takes to perform the copy is the number of minutes used to determine the amount of the royalties.

SODRAC

The Society for Reproduction Rights of Authors, Composers and publishers in Canada (SODRAC) administers the reproduction rights of authors, composers and music publishers.

In the 2012 Copyright Tariff Report Vol.1 we looked at the Online Music Services 2012 and Non-Commercial Radio 2012 tariff proposals SODRAC filed jointly with the Canadian Musical Reproduction Rights Agency (CMRRA).

On May 14, 2011, SODRAC's Tariff No. 6 Online Music Services, Music Videos 2012 was published in the Canada Gazette thus opening the period for objections. Interested parties have until July 13, 2011 to file an objection to the tariff proposal with the Copyright Board. Filing a timely objection will ensure that an objector is made a party to the proceeding.

Tariff No. 6 - Online Music Services: Music Videos 2012

SODRAC's Tariff 6 entitles an Online Music Service (and its authorized distributors) to:

  • reproduce all or part of a musical work embedded in a music video for the purposes of transmitting the work in a file as a permanent download to consumers in Canada via the Internet or another similar computer network, including by wireless transmission;
  • authorize a person to reproduce the musical work embedded in a music video for the purpose of delivering to the service a file that can then be reproduced and transmitted; and
  • to authorize consumers in Canada to further reproduce the musical work embedded in the music video for their own private use, for purposes of the permanent downloading of music videos.

This tariff was previously proposed for 2011 but has yet to be certified by the Copyright Board of Canada. The rate proposal for 2012 is identical to the 2011 proposal. SODRAC is proposing that the royalties payable in a quarter by an Online Music Service for each permanent download containing a work in the repertoire shall be equal to the greater of:

  • 9.9 per cent of the amount paid by a consumer to the online music service or its authorized distributor for the permanent download, and
  • twice the sum payable by the Online Music Service pursuant to SOCAN Tariff 22 (2012) for such a download.

There is a minimum royalty per permanent download of 4.4¢ per work in the repertoire of SODRAC embedded in a music video or twice the minimum payable by the online music service pursuant to SOCAN Tariff 22 (2012) for such a download, whichever is greater. This minimum applies to a bundle that contains 15 or more files. In all other cases, a minimum per permanent download, containing a work in the repertoire of SODRAC, is proposed at 6.6¢ per work in the repertoire embedded in a music video or twice the minimum payable by the online music service pursuant to SOCAN Tariff 22 (2012) for such a download, whichever is greater.

There are alternate rate proposals when SODRAC does not hold all the rights in a musical work. Where SODRAC does not hold all the rights in a musical work, the applicable rate shall be the relevant proposed rate multiplied by SODRAC's share in the musical work. Where SODRAC does not hold rights in all of the musical works embedded in the music video, the applicable proposed rate shall be the relevant rate multiplied by the number of works in which SODRAC holds rights divided by the total number of musical works embedded in the music video. These rate calculations are subject to the same minimums described in comparable circumstances above.

Also of note, an online music service that complies with this tariff does not incur any royalty obligation in relation to streams of 30 seconds or less when they are offered i.) free of charge to promote the online music service permanent downloading activity, or ii.) to allow consumers to preview a file.

The tariff sets a number of restrictions on the license. For example:

  • the tariff does not authorize the reproduction of a work in a medley, for the purpose of creating a mashup, for use as a sample or, in association with a product, service, cause or institution
  • the tariff does not authorize the production of a music video or the synchronization of a musical work in a music video, but only the online distribution of an existing music video in which the musical work is already embedded

Reporting Requirements

Every Online Music Service is required to provide a variety of information to SODRAC depending on its particular corporate structure. Examples of the type of information which must be provided to SODRAC are:

  • name of the person who operates the service
  • name of a corporation
  • jurisdiction of incorporation
  • name of the proprietor of an individual proprietorship
  • names of the principal officers of any other service
  • any trade name under which the service carries on business
  • Uniform Resource Locator (URL) of the service

Online Music Services must also provide information about the videos reproduced. Examples of the type of information which must be provided to SODRAC are:

  • title of the music video and of each musical work embedded in the music video
  • name of each author of each musical work embedded in the music video
  • name of each performer or group to whom the sound recording embedded in the music video is credited
  • the name of the person who released the sound recording or, if different, the name of the person that released the music video
  • International Standard Recording Code (ISRC) assigned to the sound recording
  • if the sound recording is or has been released in physical format as part of an album, the name, identifier, product catalogue number and Universal Product Code (UPC) assigned to the album, together with the associated disc and track numbers
  • if the file is being offered as part of a bundle, the name and identifier of the bundle as well as the identifier of each file in the bundle
  • if the service believes that a SODRAC licence is not required, information that establishes why the licence is not required
  • the Global Release Identifier (GRID) (if available)

Online Music Services are also required to submit sales information to SODRAC. Examples of the information which must be provided to SODRAC include:

  • total number of permanent downloads
  • total number of bundles supplied
  • total amount paid by consumers for bundles
  • total amount paid by consumers for other permanent downloads
  • total number of permanent downloads that may require a SODRAC licence and the total amount paid by consumers for such downloads

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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