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    Does Bill C-11 Create Barriers to Network PVRs and Cloud Services in Canada?

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    Wednesday March 21, 2012
    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 “communication to the public by the telecommunication” 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.
    Comments (18)add comment

    Anarchist Philanthropist said:

    Does Bill C-11 Create Barriers to Network PVRs and Cloud Services in Canada?
    Yes it does, and a lot more!

    With harper in control even George Orwell would be scared!
    March 21, 2012

    Ki said:

    ...
    Definitely. Canada has decided to follow the disastrous DMCA rather than try to come up with their own viable solution. Only hope is that it treads too much in provincial matters, forcing the law to be changed.
    March 21, 2012

    IamME said:

    Well Duh!!!
    It's a cloud service...Internet...International!! Why in God's name would I operate a cloud service in Canada? Between the restrictive laws, the insane licensing, the telecom oligopoly with its stranglehold over the industry and substandard physical networks, there is little incentive to innovate in Canada and between C-11 and C-30, quickly increasing liability risks. If I had the money and were looking to get in to the cloud computing business, I would be looking for partners in more innovation/Internet friendly countries such as The Netherlands, Norway, Indonesia, Japan, among others. These countries actually understand the importance and potential of the Internet. Canada understands neither.

    C-11 is the first step in keeping us in the dark ages of the Internet. Netflix will begin to recede, if it has not already, not expand, and will likely pull out of Canada over the next couple years as people get sick of the same old content. We have essentially no decent Internet media services when compared with that of the US and many European countries and they wonder why people download crap. Netflix is really the only decent video streaming service we have and it's a pale shadow of it's American counterpart. Canadians aren't stupid, nor are they blind, we see what's available in the rest of the world on American TV and news. More and more people are wondering why are similar things not available here? Even Youtube...more and more content is being locked out of Canada, I was browsing through some stuff last night and almost every second thing I picked was not available in Canada...and I was only looking at music videos and movie trailers.

    Canada is being locked out of more and more Internet media. It's truly makes me sick. Here dawns the age of proxy server and VPN services. This is where one should be investing their money. As the great Internet lock-down continues, people will be looking to become more and more anonymous. The Internet will become a shadow of its former self and will become solely a marketplace as its more social aspects fragment in to private, regional Internets, sub-networks and dark-nets. This is where we're headed if governments and the media industry are not reigned in. The greatest communication tool of out time will be destroyed.

    I think we should completely shut the Internet off right now and lets see just how much the world economy hurts. I bet it hurts A LOT more than the meager amount the sudden stop in piracy puts back in to the economy. Lets see just how dependent the media Industry is on this service they are so desperately trying to kill. It would never happen, but it's dream. The many governments at the behest of the media industry as a whole are quickly becoming Internet Nazis, in turn, I'd like to see the media industry truly crippled, much like post WWII Germany. It's coming, oppressive regimes never last and almost always end badly for the oppressor. But, will it come before irreparable damage is done to the Internet? Probably not.
    March 21, 2012

    Ki said:

    ...
    I think that the current government is stuck in the mindset that the only thing Canada has going for it are our natural resources. Everything else is secondary importance to them. Unfortunately this means that the brain drain will start again.
    March 21, 2012

    Oh no... said:

    What does this mean?
    Will I be arrested for downloading a legally bought game from Steam? Will I get in trouble for downloading files for my online game (a game I legally bought), from it's own patcher?

    Is the internet really over in Canada?

    Please someone help me out here, I'm really scared and really worried about all of this.

    March 21, 2012

    Mark said:

    ...
    If you think these unintended consequences are bad, wait til you see what happens after the bill is actually passed. We ain't seen nothin' yet.
    March 21, 2012

    Wait, what? said:

    So that means....
    That Canada will have no internet? And anyone who uses it, even to watch media they legially bought or rented, will go to jail?

    This makes no sense at all!
    March 21, 2012

    Mike said:

    Stop this Insanity
    With all these groups, professionals and citizens advising against this change, is there no law that can stop/overturn the current governments decision to send Canada into the dark ages? Is there no way to kick these MP out of office when they don't listen to their citizens? I thought they worked for us and not for an industry that has decided to change the worlds laws and to better their product. Can you imagine if Sony forced governments to make their citizens buy Beta or they would go to jail? Where would we be now?
    March 22, 2012

    JCubedS said:

    Is it me...?
    Is it me... or as we find out more about bill C-11, it feels like one of the most poorly written bills? Every time I read up one of Michael's blog, another section seems to be vague and open to interpretation.

    With all these concerns different groups has, I can't believe this bill can pass as law as it is.
    March 23, 2012

    Anon-K said:

    @JCubedS
    I am not sure it is any more poorly worded than any other bill... by way of example I offer up the sheer number of cases that go to the courts and the courts need to clarify the law. Thing is that you can't please everyone (taxpayers, both human [in this case content producers and content consumers] and corporate). The reason this one seems to be noticed more is that it is getting a lot more critical review outside of Parliament.

    In Canada we also have this tendency to go for infrequent but big updates to our laws, rather than an incremental re-examination every couple of years. This isn't helped by the fact that bills that are on the order paper are shelved whenever an election is called.

    Now, add to this a tendency in some segments of Canadian society (and this occurs on both the left and right ends of the political spectrum) that we want the government to do exactly what we want and to hell with the desires and/or needs of someone else and you end up with a quagmire that makes getting a balanced bill even more difficult. At the end of the day it appears that governments (of all parties) tend to craft a bill to appeal to their supporters and leave it to the courts to sort out the mess.
    March 23, 2012

    doog said:

    have they never heard of spotify?
    I mostly agree with what IamME said, although I don't think Netflix is doomed here. But music streaming services like spotify, rdio, and iTunes match are certainly boned now. How could those idiots miss such a big problem? And to make it worse, Rogers friggin pointed it out for them! What does it take for these guys to friggin do their job - if I did such bad work at my job, i'd be fired by now!
    March 23, 2012

    oldguy said:

    @Anon-K

    "tend to craft a bill to appeal to their supporters"

    An astute observation. Which is probably why governments that sit in the middle of the "left-right" spectrum have traditionally been the most successful in crafting our laws.

    Now if we could just get honesty and integrity out of them as well..

    March 23, 2012

    Jack Robinson said:

    C-11's Intentional Murkiness Obscures a Trip-Wired Pooh Trap, kidz...
    Once again, being rope-a-dope punchy but still compelled to re-assert and regurgitate what should be apparent to anyone not cortex comatose from the shrill cacophany of Tiny Fist Ire from file-sharers, U-Tuber-brained junk junkies and digital lock-shocked Angry Bird Twits continue to obsess over... whilst the Trojan Horse on yer front porch agenda of this Blunderbuss Bilge is to potentially Criminalize Anybody and their equally guilty by-association Grannies that Harper's New Rome North Oligarchy either fears or disdains.
    March 24, 2012

    cndcitizen said:

    @from torrentfreak.com how political abuse puts jobs at rick - "quote"
    However, this gift isn’t as free as it may seem. Dotcom says that the witch hunt against his company is putting the US technology sector at a disadvantage.

    “The MPAA / White House corruption has weakened US technology leadership. Internet businesses, hosting, cloud, payment processors, ad networks, etc. are going to avoid the US,” Dotcom told TorrentFreak.

    “There is an opportunity for liberal countries to welcome those businesses with better laws,” he predicts. “The loss of IT business & jobs in the US will substantially outweigh the inflated losses claimed by the MPAA & their billionaire club.”
    March 26, 2012

    ME said:

    .....
    Who's going to protest on the 31st in your province that they set up on facebook? Geist may think this will likely pass before summer but I'll be optimistic, it's not over yet until the fat lady sings we must get this heard of the news loud like Bill C-30!
    March 26, 2012

    John said:

    CONS
    I'm always hearing the CONS say they promised to pass these laws 100 sitting day, who the hell did they promise I know for sure they didn't promise us shit because we the people never wanted C-10 , C-11, C-30 but yet I still hear them saying the people want this uh hmmmmm does he see the online petitions of 60,000 or more people signing them
    March 27, 2012

    Developer said:

    Will China become the new Free World?
    I'm a software developer and I've spent months working to develop new and yet to be released PVR applications that would allow set top PVR owners to manage their recordings far easier and quicker. These apps wouldn't break digital locks and would only allow recordings to played back on the original accounts. But now because this law is so extreme and unclear, I am throwing away my months of profitless work. Now I know what it must feel like to live in Iran or Syria where the extreme right wing takes away your freedoms and your profits.
    April 02, 2012

    Odjin said:

    Stuiped Canadians.
    -_- Guys, Harper has already crippled our Postal service, Made it illegal to post information on his government on T.V that isn't supplied by his Government (renamed the Harper Government from the Government of Canada) The last form of spreading information about him to the people is the Internet, of COURSE HES going to destroy that too! Power corrupts absolutely.
    July 03, 2012

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