Canada: Federal Court Of Appeal Finds That Tariffs Certified By The Copyright Board Are Not Mandatory, And Fair Dealing Guidelines Are Not A Shield

On April 22, 2020, the Federal Court of Appeal issued its long-awaited decision in York University v Canadian Copyright Licensing Agency (Access Copyright), 2020 FCA 77.

The appeal centered on two issues. Is Access Copyright's interim tariff mandatory? And are York's Fair Dealing Guidelines fair dealing?

As we reported at the time, Justice Phelan of the Federal Court found at trial that the interim tariff was mandatory and York's Fair Dealing Guidelines did not excuse it from having to pay royalties to Access Copyright – a collective that administers the rights of authors and publishers – for the copying activities of the University's staff and students. The Federal Court of Appeal decision overturns this, finding that Access Copyright's interim tariff is not mandatory. On fair dealing, however, the decision sides with Justice Phelan, upholding his finding that the Fair Dealing Guidelines are not fair.

The Dispute

Access Copyright represents writers, artists and publishers that own copyright in Canada. Prior to 2011, York University had been paying fees to Access Copyright for the right to copy from works in Access Copyright's repertoire. Access Copyright sought Copyright Board approval for an interim tariff. As of the beginning of the academic year in 2011, York took the position that the interim tariff was not enforceable or mandatory and opted out of the tariff. This appeal decision vindicates York's position that it was not obliged to accept Access Copyright's new terms and conditions for a license to make print and digital copies of the works in Access Copyright's repertoire for use in printed and online course materials. In particular, it was not obliged to pay the fees set under an interim tariff. 

York chose to operate without an Access Copyright licence, and implemented its own "Fair Dealing Guidelines". In Alberta (Education) v. Access Copyright, 2012 SCC 37, the Supreme Court had held (in a 5-4 decision) that it was fair dealing for elementary and secondary school teachers to copy short excerpts of copyright works to supplement student textbooks. To support a defence that Access Copyright's permission was no longer required, York published the Fair Dealing Guidelines, advising staff, among other things, to restrict copying from copyright works to "short excerpts". 

York's decision to opt out of the tariff prompted Access Copyright to bring an action to enforce the interim tariff, and York then counterclaimed, seeking a declaration that any copies made in compliance with its Guidelines constitute fair dealing. This appeal decision also vindicates Access Copyright's position that York was not entitled to avoid payment based on a "fair dealing" defence, despite the Fair Dealing Guidelines,

The "Tariff" Was Not Mandatory

Justice Pelletier framed the tariff issue before the Federal Court of Appeal in this way, seemingly foreshadowing the outcome:

Justice Pelletier then embarked on a lengthy review of the statutory scheme as it evolved from the 1921 Copyright Amendment Act, through the 1936 amendments, to the present. He found that the review showed that "the basis structure set out in the 1936 amendments [which corrected the quasi-monopoly mischief that performing rights societies had then achieved] has been preserved throughout this legislative history which supports the conclusion that the legislative intent has also remained the same."²

In a key finding made during the course of his review of the statutory regime, Justice Pelletier observed:

After observing that "the statutory mission of collective societies ... is to operate a licensing scheme for the benefit of those it represents"⁴, Justice Pelletier found:

With the Copyright Board's role being that of approving, but not establishing tariffs, and given that York had opted out of the tariff, and chose to operate without an Access Copyright licence, Justice Pelletier concluded that York was not bound by the interim tariff "because tariffs do not bind non-licensees."⁶ Justice Pelletier went on to observe:

As Access Copyright admitted that it cannot sue for infringement under its agreement with its members, Access Copyright was left with no available remedy; York is not a licensee, the tariff is not mandatory, and Access Copyright does not have standing to sue for infringement.

Access Copyright is different from performing rights societies, such as SOCAN, who administer rights relating to music used by businesses in Canada. The members of these performing rights societies assign their performing rights to the society. The difference is important. Under the Copyright Act, only a person with an ownership interest in the copyright can sue for infringement.

"Fair Dealing" – York's Guidelines were not a Defence to Infringement

The York decision is also a significant fair dealing decision. Fair dealing is a 'user right', and a defense to copyright infringement. 

At the heart of York's position on fair dealing are York University's Fair Dealing Guidelines (the "Guidelines"). York took the position that copies made following its Guidelines would be fair dealing, and therefore not infringing. The Federal Court rejected this argument (see our discussion of the trial decision here). The Court of Appeal agreed with the trial court, though distinguished somewhat in its reasons.  

The Court of Appeal affirmed that, in cases where an institution (in this case, York) acts as a copier-for-others (in this case, students), the institution can invoke fair dealing by showing either (i) its users actually dealt with copies in a fair dealing manner or (ii) by relying on a 'general practice' to establish fair dealing. York aimed to demonstrate fair dealing on the basis of its Guidelines to support a general practice. As a result, it was incumbent on York to demonstrate the integrity of the Guidelines and to demonstrate its practices and safeguards ensured that the Guidelines were implemented according to their intent.

The "Guidelines" that York gave to its faculty and staff restrict the amount of copying from printed materials that York would allow for use in course materials. The Copyright Act provides that "fair dealing for the purpose of research, private study, education, parody or satire" by the user of copyright content, does not infringe copyright. York had relied on the CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13 decision in which the Court found a library policy for making photocopies of reported Court decisions established a "fair dealing" defense to infringement. That decision established six non-exhaustive factors to be considered in a fairness analysis: a) the purpose of the dealing; b) the character of the dealing; c) the amount of copying; d) alternatives to the dealing; e) the nature of the work; and f) the effect of the dealing on the work. The Court felt the CCH case was different. The library was making copies for others under the supervision of librarians. York instructors were making copies for their own purposes without any supervision.

In this case, the first prong of the fair dealing test – the allowable purpose - was met. It was not contentious that the copying was for allowable educational purposes. The decision focusses on whether or not the dealings at issue were 'fair'. The Court reviewed the non-exhaustive "fairness" factors. In terms of the analysis, the reasons on appeal turned largely on whose perspective – York, the institution vs. students, the users – was relevant. The Court found that the institution's perspective matters when fair dealing is based on a general practice. This was particularly significant when considering the goal or true purpose of the dealing, where York's purpose included 'to obtain for free that which [it] had been previously paid for' and 'to keep enrollment up by keeping student costs down', which were a 'clear indication of unfairness'. Consideration and weight was also given to the identity of the person or entity engaging in the unauthorized activity (the institution or the user, and in this case, it was the institution). York's attempts to argue the Federal Court erred by focusing on the institution's activities, rather than the user's perspective, was undercut by the lack of evidence related to the students'/users' perspective and actual copying. As a result, York was left to defend its Guidelines and practices without such evidence.  

The reasoning suggests that systematic copying (with guidelines being at the heart of the 'system') may be presumptively less fair and may create separate onuses, compared to ad hoc copying. Moreover, various arguments were advanced by York that the fair dealing analysis should be applied in a manner that prevents bias against large institutions who will naturally engage in mass copying. Despite such arguments having traction, the decision suggests that large institutions may nevertheless have a higher bar to meet, as their activities may be presumptively less fair by virtue of the volume/scale of aggregate copying. Following the decision, how future courts will approach, for example, the character of the dealing and specifically the aggregate copying at the institutional level remains to be seen.

Going Forward

As it stands, York University is still liable to pay something. The copying "Guidelines" that York gave to its faculty and staff do not exempt York from infringement (and payment) under the "fair dealing" doctrine under the Copyright Act. Tariff amounts (and the amounts other universities are paying) will likely still be relevant factors when determining an appropriate license fee for past and future copying of the works in Access Copyright's repertoire for use in printed and online course materials.

However, the decision will tend to increase the complexity and cost associated with the collective administration of the copyright in the Access Copyright works. Access Copyright does not own copyright in the works in its repertoire. This means if Access Copyright and a particular user cannot reach an agreement on the terms and conditions for a license, Access Copyright and/or its members (assuming that Access Copyright and its members agree to an amendment that assigns or otherwise provides exclusive rights to Access Copyright) may need to bring infringement proceedings. They will need to establish that they have legal standing to sue for infringement. It will be interesting to see how that standing issue is resolved. If not resolvable, the decision could drive Access Copyright to consider class action proceedings. In recent years, class actions have been used to redress copyright infringement where multiple copyright owners' works have been infringed. While cases like the York case may theoretically lend themselves to class certification, class actions could present practical challenges to Access Copyright's current model, flowing from how the class is defined and how damage awards are calculated and distributed.

Copy policies and practices and other 'systematic approaches' to copying should be reviewed following the decision. Following the decision, it seems unlikely that reliance on guidance documents, policies and the like, alone, will shield infringement claims, particularly where the entity itself makes the copies for users (vs. a customer/user making the copies for themselves using resources provided or within a framework). This is important for entities that facilitate copies for users, without permission or license from the copyright owner – from educational institutions, to businesses, to website operators, etc. It is also true for entities that have policies that govern internal copying - for example, employers that have employee-facing fair dealing or copying guidelines. 

Ultimately, the decision means that fair dealing guidelines and copy policies, while being intended as a tool to manage risk, have the potential to invite tremendous liability and should be treated with extra care. The decision affirms that institutions who permit copying can establish fair dealing by showing the institution's practices and policies were fair. 

There are several tips hidden in the decision, including:

• Guidelines should clearly identify allowable purposes.
   
• Guidelines that set bright lines for what amount can be fairly copied (e.g. 10%, a single chapter, a single article, etc.) may be dangerous. This is true even if the line is not so 'bright'. In fact, while York's policy set thresholds, it said that no more of a work should be copied than reasonably necessary to achieve the fair dealing purpose, though nothing appears to have turned on this. If a bright line is set, it is important to ensure that there is a clear and justified rationale that can be evidenced in support of the bright line. While there may be ways to defend bright lines, particularly with respect to when safeguards should be triggered (e.g. an earlier Supreme Court case noted that request to copy more than 5% of would be reviewed by a reference librarian before being approved), a cautious approach is advisable.
   
• Guidelines should restrict aggregate copying at the user level. This is with a view to support fairness of an institution's overall aggregate copying. Large institutions will have larger aggregate copying, and if a policy and other safeguards are in place to control the amount of copying at the individual level, then the institution's copying may be more likely to be considered fair overall.    
   
• Guidelines should try to avoid loopholes. For example, ensure that the way the policy is stated, an entire work cannot be copied simply on the basis of publication format (e.g. in a compilation work, a single chapter or even a page may also be an entire independent work).
   
• Guidelines should preclude and prohibit permanent copies, sharing or downstream copying and redistribution, and require deletion once a copy is no longer necessary for the allowable purpose.
   
• Guidelines aimed at an institution's staff that relate to copying for users, should require staff to remind users of any limitations on their use of copies provided.
   
• Perhaps most importantly, additional safeguards should be implemented. The signal from the Court is that guidelines and policies may not substitute the need for oversight over copying being done. 

Practically, copy policies and fair dealing guidelines are likely to remain an important tool for institutions, employers, etc., but care should be exercised when relying on them. There is significant risk if, when an entity is faced with an infringement claim, it points to a policy, and cannot identify other practices and safeguards to demonstrate the policy was followed and copying was actually done for an allowable purpose. The risk clearly applies where an entity makes the copies on behalf of users, and it remains to be seen whether following this decision, other practices safeguards will also become a more relevant consideration in cases where copies are made at the hands of the user.  

This case raises important economic issues for both writers, artists and publishers on the one hand, and universities in Canada, on the other. It is always possible that the Supreme Court will hear the case and give further direction, or that Parliament will make amendments to the Copyright Act to address the issues that the Federal Court of Appeal's decision has created. In the meantime, both creators and users will need the advice of copyright experts when considering the ramifications of this decision for their businesses.

Footnotes

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