Bill C-48: An Act to amend the Copyright Act (LS-420E)

HOUSE OF COMMONS		SENATE
Bill Stage	Date	Bill Stage	Date
First Reading:	12 December 2001	First Reading:
Second Reading:	22 February 2002	Second Reading:
Committee Report:		Committee Report:
Report Stage:		Report Stage:
Third Reading:		Third Reading:

Royal Assent: Statutes of Canada N.B. Any substantive changes in this Legislative Summary which have been made since the preceding issue are indicated in bold print.

Bill C-48, An Act to Amend the Copyright Act, was introduced and given First Reading in the House of Commons on 12 December 2001. Tabled in response to the actions of iCraveTV and JumpTV, this bill sets the framework for non-conventional retransmitters of broadcast programming to operate under the terms of the compulsory retransmission license established in section 31 of the Act. Regulations would set the conditions under which this might happen.

In December 1999, iCraveTV (a Toronto-based company) began to “stream” broadcast programming over the Internet. The company provided Internet users with access to nine Canadian and eight U.S. over-the-air television signals which it received off-air in the Toronto area, converted into an Internet-compatible format, and then streamed over the Internet.

Reaction to iCraveTV’s operation was swift. Alleging copyright infringement, many industry “heavyweights” – including the Canadian Association of Broadcasters, Twentieth Century Fox, Disney Enterprises, Paramount Pictures, Time Warner Entertainment Co., and Universal City Studios – threatened or actually took legal action against the company.

In February 2000, a U.S. court issued a preliminary injunction against iCraveTV enjoining it from streaming its signals into the United States. However, the Canadian courts did not have the opportunity to consider the matter because, in late February, the company succumbed to legal pressure and agreed to discontinue its streaming operations in return for the withdrawal of all actions against it. The company also agreed to withdraw its December 1999 request to the Canadian Copyright Board for an interim Internet retransmission tariff for the years 1999 and 2000, with a final tariff to be determined in due course. (The measures enacted in relation to retransmissions are discussed below.)

Several months later, JumpTV (a Canadian company) decided to follow in iCraveTV’s footsteps. In contrast to its predecessor, however, JumpTV applied to the Copyright Board to establish a new tariff for Internet transmissions before commencing operations.

Prior to 1988, Canada’s Copyright Act conferred on copyright owners the exclusive right to communicate their works by “radio communication.” This right was interpreted by the Exchequer Court of Canada (now the Federal Court) to apply only to communications effected by means of “electro-magnetic or Herzian waves through the ether” (commonly referred to as “over-the-air” signals).(1)

Given this decision, communications effected through other means – such as co-axial cable – were not encompassed within the radio communication right. Consequently, cable operators in Canada were free to retransmit broadcast programming to their paying subscribers without infringing copyright or having to pay royalties to the copyright owners whose programming they retransmitted.

As cable became more widespread in Canadian homes, the “free ride” enjoyed by cable operators became a growing concern. American copyright owners were particularly irate because it was mostly their television programming that was being appropriated by Canadian cable operators who captured the over-the-air broadcast signals from U.S. border stations and channelled them “royalty-free” to their paying subscribers in Canada.

A Sub-committee of the House of Commons(2) – which believed that copyright owners should be compensated for the retransmission of their works – recommended the enactment of a retransmission right in a 1985 report entitled A Charter of Rights For Creators. The creation of a retransmission right also became a requirement under the Canada-U.S. Free Trade Agreement (article 2006 of the FTA).

Acting on this obligation, the Canadian government introduced Bill C-2, the Canada-U.S. Free Trade Agreement Implementation, to amend the Copyright Act (among others). Passed in December 1988, Bill C-2 replaced the narrower radio communication right with a more comprehensive and technology-neutral right to communicate a work to the public “by telecommunication.” Bill C-2 also set up a form of compulsory license (actually cast as an exemption) that would allow the retransmission of broadcast programming under specified conditions, namely, where:

Under this scheme, royalties would be payable only in relation to the retransmission of “distant signals.” Royalties did not have to be paid for the retransmission of “local signals,” in part because of the following fact: these signals could be received over-the-air by the broadcaster’s normal viewing audience which could be accounted for in the price paid by the broadcasters to air the programming. In contrast, the “enlarged” viewing audience made possible through the retransmission of distant signals was not accounted for in the price paid for the programming rights. This resulted in the obligation under the compulsory license to pay royalties in relation to distant signals only, as opposed to the local ones.

Additional amendments were also made to broaden the mandate of the Copyright Board by explicitly requiring it to set the tariff (i.e., the royalty rates) for the retransmission of “distant signals.” This tariff would apply not only to cable operators, but also to other broadcasting distribution undertakings (BDUs) engaged in the retransmission of distant signals, such as direct-to-home satellite and multipoint wireless distribution systems.

Had this compulsory license scheme not been enacted, cable operators and other BDUs would have had to obtain the authorization of all the copyright owners whose programming they proposed to retransmit. As this would have been a near-impossible task to accomplish given the large number of copyright owners involved, it was felt that a compulsory license of the type enacted was justified in the circumstances.

When iCraveTV and JumpTV requested the Copyright Board to set an Internet retransmission tariff, questions were raised about whether Internet-based retransmissions were in fact covered by the retransmission regime set out in section 31 of the Act. Questions were also raised about whether such retransmissions ought to be covered by section 31 or whether they should be excluded.

One of the reasons cited for excluding Internet retransmissions from the compulsory licensing regime centred on the concern of copyright owners that to include them might jeopardize the marketing of their programs in other jurisdictions. Because Internet access is worldwide and security measures to restrict access on a territorial basis are not considered to be totally reliable, copyright owners argued that if their programming was imported into a foreign territory via the Internet, the value of the foreign rights for that programming could be undermined.

There was also concern that because Internet retransmitters are not currently subject to regulation under the Broadcasting Act, they would have a competitive advantage over the conventional broadcasting distribution undertakings (the BDUs) which must comply with the broadcasting requirements. For example, in contrast to the conventional BDUs, Internet retransmitters need not carry specified signals under the “must-carry” rule. They need not carry out simultaneous program substitution in applicable cases. Nor are they required to contribute a percentage of their gross revenues to the creation of Canadian programming, as must the larger conventional BDUs under the Broadcasting Act.

Among the views expressed in support of extending the compulsory license to Internet retransmissions was the argument that the Internet was simply a new technical means of providing essentially the same type of service that the conventional BDUs provided. Consequently, the same public policy reasons for allowing compulsory licensing in relation to the latter should apply with equal force with respect to the former.

It was also argued that to exclude the Internet from the compulsory licensing regime would favour the older technologies at the expense of the new ones. Excluding the Internet might also inappropriately limit the ability of conventional BDUs to adopt the most effective technologies available to them.

The government invited members of the public to submit comments on the numerous issues raised in the Consultation Paper by 15 September 2001. Several months later, on 12 December, it tabled Bill C-48 in the House of Commons.

In the companion news release and backgrounder issued on the date of tabling, the government indicated that Bill C-48 would establish a new regulation-making power under the Copyright Act to allow new types of distribution systems, including the Internet, to be used to retransmit broadcast signals if they meet the conditions set out in the regulations. Noting that the amendments would create an even playing field for current as well as future players in the broadcasting system, it added that the proposed changes would create new opportunities for Canadians in the knowledge-based economy and would stimulate entrepreneurship and innovation.

The government also pointed out that Bill C-48 would not be proclaimed in force until the first set of regulations was ready. These regulations, it was stated, would be drafted according to principles that would ensure that:

Current section 2.4(3) of the Copyright Act specifies that a work is not communicated to the public by telecommunication when the signal carrying the work is retransmitted to a retransmitter to whom section 31 applies.

Clause 1 of the bill amends this section by replacing the words “to whom section 31 applies” with the words “within the meaning of subsection 31(1).” This change is consequential to the amendment proposed in clause 2(1) to specifically define the term “retransmitter” under section 31(1) of the Act.

Current section 31(1) of the Act does not define the term “retransmitter”. It merely sets out who is not a “retransmitter” for the purposes of section 31.

Clause 2(1) changes this by providing an exhaustive definition of “retransmitter” covering both conventional BDUs, as well as newer entrants, such as those who retransmit works via the Internet.

A retransmitter could qualify either under section 31(1)(a) of the proposed definition, which applies to distribution undertakings governed by the Broadcasting Act, or under section 31(1)(b), which applies to those who retransmit a signal and meet the qualifying conditions prescribed by regulations made under the authority of proposed new section 31(3)(b) of the Act.

Clause 2(2) amends current section 31(2) of the Act by adding a new condition under which retransmissions would be allowed under the compulsory license created by that section. The new condition requires a retransmitter to comply with any applicable conditions prescribed by regulations made under new section 31(3)(c) of the Act. This condition is in addition to the four existing conditions, discussed earlier, which would be retained under the revised section, namely:

Clause 2(2) also brings the French text of current section 31(2) into line with the English text by setting out each condition under a separate paragraph. In the current Act, the French text sets out all of the conditions under a single paragraph.

Finally, clause 2(2) broadens the regulation-making authority under current section 31(3) by also allowing regulations to be made in relation to:

Clauses 3 and 4 respectively amend current sections 72(1) and 73(1)(a)(i) of the Act to specify that the retransmitters referred to in these sections are retransmitters “within the meaning of subsection 31(1).” The insertion of the words “within the meaning of subsection 31(1)” is consequential to the amendment proposed in clause 2(1) of the bill to provide a specific definition of the term “retransmitter” under section 31(1) of the Act.

Clause 5 stipulates that the Act comes into force on a day fixed by order of the Governor in Council.

By tabling Bill C-48, the Canadian government signalled that it was open to allowing Internet-based retransmissions under compulsory license. It does not follow, however, that Canadians will soon be able to receive statute-sanctioned broadcast programming via such means. This will be determined by the regulations developed under new section 31(3)(b) and (c). These regulations can make it either easy or difficult for Internet retransmitters to operate in Canada. Arguably, the regulations could also block them from doing so for the time being, thus providing the government with more time to monitor developments both at home and abroad, and take appropriate action.

The retransmission of broadcast programming in Canada affects two distinct groups of rights holders:

When iCraveTV began its streaming operations, several organizations of rights holders formed a group called the Media Content Coalition (the Coalition). Its members consisted of the Canadian Association of Broadcasters, the Canadian Film and Television Producers Association, the Canadian Motion Picture Distributors Association, the Canadian Broadcast Rights Agency, and the Copyright Collective of Canada. The Coalition submitted a detailed response to the federal government’s Consultation Paper on the Application of the Copyright Act’s Compulsory Retransmission License to the Internet, in which it urged the federal government to take immediate action to exclude Internet-based retransmissions from the compulsory licensing regime.

These and other rights holders – both in Canada and abroad, notably in the United States – might therefore oppose Bill C-48 on a number of grounds, including that they should have full authority to negotiate their rights and determine how their works should be exploited.

Conversely, organizations that might be interested in entering the Internet-retransmission market are likely to express support for the bill. For example, in its response to the Consultation Paper, the Canadian Cable Television Association (the CCTA) – noting that cable operators might want to use the Internet in future to deliver retransmission services to their subscribers – indicated that amending the Copyright Act was unnecessary and that the Copyright Board should be given the opportunity to render a decision in relation to JumpTV’s application for an Internet-specific retransmission tariff. In the alternative, the CCTA argued that if amendments were made to the Act, it was imperative that the compulsory license in section 31 remain technology-neutral. It felt, however, that imposing a territorial restriction to the Internet retransmissions would be appropriate in the circumstances.

Upon learning that the federal government was poised to amend the Copyright Act to deal with Internet retransmissions, JumpTV withdrew its tariff application before the Copyright Board in October 2001. Because the rules of the game would undoubtedly change under the forthcoming legislation, the company saw no point in pursuing the application.

In its Consultation Paper, the federal government indicated that it was unaware of any jurisdiction that expressly permitted Internet-based retransmissions under the terms of a compulsory license. It added that Australia appeared to be the only country to have taken specific legislative action in this area. It passed the Copyright Amendment (Digital Agenda) Act in 2000 which, among other things, expressly excluded retransmissions of free-to-air broadcasts effected via the Internet from the compulsory retransmission licensing scheme.

* Notice: For clarity of exposition, the legislative proposals set out in the Bill described in this Legislative Summary are stated as if they had already been adopted or were in force. It is important to note, however, that bills may be amended during their consideration by the House of Commons and Senate, and have no force or effect unless and until they are passed by both Houses of Parliament, receive Royal Assent, and come into force.

(1) Canadian Admiral Corporation, Ltd. v. Rediffusion Inc., [1954] Ex.C.R. 382.

(2) The Sub-committee on the Revision of Copyright of the now defunct House of Commons Standing Committee on Communications and Culture.