Bill C-11 has passed the committee stage last week and now seems slated to become law before the summer. The Bill C-11 legislative committee recently posted the remaining committee submissions (C-32 submissions here, C-11 here), which confirm that the government rejected the intense efforts of some groups to undo many of the user-oriented provisions. Some of the demands included:
- remove the user generated content provision
- create a new fair dealing test
- remove new statutory damages limits for non-commercial infringement
- remove a new exception for educational use of publicly available materials on the Internet
- add an iPod tax
- add statutory damages to circumvention of digital locks
- force ISPs to keep subscriber data for 3 years after an alleged infringement
While the extreme demands were rejected, the government also decided against proposed amendments from many groups such as those representing the visually impaired, documentary film makers, and librarians. One of the more notable decisions was to leave untouched a provision that could create some legal risks for cloud computing based services such as network-based PVRs. Both Rogers and Shaw raised concerns with the approach in Bill C-11, yet the government did not amend the provision in question despite a proposal on point from the Liberals.
The provision, Section 31.1(5) on network services, states:
Subject to subsection (5), a person who, for the purpose of allowing the telecommunication of a work or other subject-matter through the Internet or another digital network, provides digital memory in which another person stores the work or other subject-matter does not, by virtue of that act alone, infringe copyright in the work or other subject-matter.
The provision clearly covers hosting services, including cloud-based services. The problem, according to companies such as Rogers and Shaw, is that it remains unclear whether the transmission of the stored content is subject to a similar safe harbour. For example, Rogers states in its submission:
Should the hosting provision of Bill C-11 remain as it is now drafted, it could result in a number of serious consequences for Canadian consumers and policy makers. As drafted, Bill C-11 allows network service providers to host remote storage of personal time-shifted and format-shifted copies, but it is vague about the retrieval of those personal copies. We are concerned that we will face years of battling frivolous litigation to keep consumers from facing double payments for copyrighted works stored in the cloud because section.31.1(5) is ambiguous and unclear.
The consequence of this ambiguity in the section 31.1(5) will be to throttle innovation. We will likely see the delayed rollout and diminished adoption of next generation technologies like NPVRs. In fact, left unchanged, the law could have the effect of locking Canadians to set top PVRs and physical storage devices long after new solutions could have replaced them. Legal uncertainty could also lead to higher overhead costs for cloud storage providers and fewer options for consumers. Vague and ambiguous language in Bill C-11 could well conspire to leave Canadian investors and consumers looking enviously to other jurisdictions enjoying the benefits of new cloud storage solutions.
Shaw raised the same concerns:
The need for clarity is particularly important, given the amendments to section 2.4 of the Act. The new language that will be added at 2.4(1.1) will deem every single transmission over the internet to any individual to be a â€œcommunication to the public by the telecommunicationâ€ which is a separate act from the provision of digital memory referred to in the hosting exception. Since it is clearly the Government’s intention that the proposed exemption operate to shield host services from any copyright liability, Shaw submits that an amendment is required to remove any doubt in this regard. Any potential risk will act as a deterrent to the development of innovative new services in Canada.
The Liberals put forward a motion to amend this provision in a manner consistent with the ask from Rogers and Shaw. The Conservatives defeated the motion after a discussion that focused on whether there was anything in the bill to stop a business-to-business arrangement between broadcasters and broadcast distributors to create network PVRs.
Yet there was never anything to stop businesses from reaching agreements outside the Copyright Act. The ongoing concern – particularly given Canada’s highly concentrated broadcast and broadcast distribution sectors – is whether the law might help facilitate these services. Network-based PVRs do not touch the compensated broadcasting rights, but rather focus on whether additional payments may be needed to allow consumer to record programs they have effectively paid for, have them stored by the provider, and watch them on demand. The bill already allows consumers to record programs on their own PVRs or recording devices. The Conservatives asked whether double payment was possible for the network PVR and officials merely responded that it would depend on the facts of the case but there was nothing in the bill requiring double payment.
Given the decision to leave it unchanged, the provision will cover hosting of the programs, but will not cover services that transmit those hosted programs. This means companies must approach the large broadcasters (often their competitors) to ask whether they can offer competing services, invariably leading to double payments (one for broadcasting the program and another for transmitting the recorded program). If an agreement cannot be reached, the government has left legal risk for those seeking to introduce those cloud-based services into Canada.