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    The Failure of Canada's Private Copying System

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    Monday August 08, 2005
    Appeared in the Toronto Star on August 8, 2005 as Copying Levy Hasn't Worked Well For Anyone
    Appeared in the Ottawa Citizen on August 11, 2005 as Lose the Levy

    The private copying system, which establishes a levy on recording media such as blank CDs in return for the right to make personal, non-commercial copies of music, has long ranked as one of the most contentious aspects of Canadian copyright law.  Consumers dislike paying what resembles a tax, retailers complain that it drives business out of the country, and artists doubt its effectiveness in light of the inexcusably slow rate of royalty distributions.

    While in theory the private copying system provides consumers with the right to copy and artists with appropriate compensation for that copying, it is time to acknowledge that the system has failed and must be dramatically reformed or scrapped entirely.

    Private copying was added to the Copyright Act in the late 1990s following 15 years of lobbying by the Canadian Recording Industry Association.  CRIA argued that home taping resulted in millions of dollars in lost revenue each year.  After several policy studies and task force reports, the levy eventually made its way into Canadian law.  

    The levy ran into criticism from its inception. The Copyright Board of Canada was faced with the unenviable task of setting the rate of the levy.  That process left virtually everyone unhappy.  Some argued that the levy was too high and thus encouraged consumers to avoid it by buying blank media outside the country.  Others maintained it was too low and therefore failed to provide adequate compensation.  Moreover, consumers and businesses that purchased blank media for purposes other than copying music plausibly argued that they were effectively subsidizing those that did copy music.

    The beginning of the end may have finally come late last month, when the Supreme Court of Canada let stand a December 2004 Federal Court of Appeal decision that affirmed the legality of the levy but rejected an attempt to apply it to digital audio recorders such as the Apple iPod. Since the Canadian Copyright Act does not feature an exception to permit copying personal CDs onto an iPod, many argue that the decision renders such copying illegal.

    Incredibly, the Canadian government plans to further constrict the rights enjoyed by consumers under the private copying levy.  Bill C-60, Canada’s copyright reform bill, includes a provision that allows the music industry to prohibit private copying on CDs that contain anti-copying technologies such as those used on the latest CD from the popular group Coldplay.  This provision seemingly contradicts CRIA’s pledge in yesterday’s Star that it will take no legal action against consumers who legally acquire music and copy it to their hard drives or portable devices.

    Should this provision become law, Canadians would pay tens of millions of dollars in levy fees, yet they would be precluded from copying their CDs onto their iPods or, in the case of “copy-controlled” CDs, making any private copies at all.

    If that were not bad enough, the millions of dollars collected through the levy does not appear to be making its way to Canadian artists.  Although the levy has generated more than $120 million over the past five years, Canadian Private Copying Collective (the administrator of the levy) has only distributed about 25 percent of those funds.

    In light of these developments, the Retail Council of Canada, along with a group of leading retailers, recently notified the Copyright Board of Canada that they believe that the levy should be drastically reduced to reflect consumers’ increasingly inability to exercise their private copying rights. Moreover, they note that the music industry should not collect collecting millions from the levy yet simultaneously argue that it does not permit private copying on peer-to-peer networks. In fact, the retailers even urged the Board to replace the CPCC, arguing that has been “inexcusably dilatory” in distributing proceeds to the intended recipients.

    Industry Minister David Emerson and Canadian Heritage Minister Liza Frulla have indicated that the government plans later this year to consult on the future of private copying.  With few remaining supporters – even one-time private copying champion CRIA welcomed the Supreme Court decision - change is urgently required.

    One approach would be to expand the levy so that it better reflects current copying practices.  Using the model of several European countries, the levy would grow in size, but so too would the rights of consumers to copy both audio and video for personal purposes.  In fact, such an approach would provide the music industry with multiple revenue streams since it would collect the levy for peer-to-peer music file sharing, while also enjoying the benefits of a thriving commercial download market.

    However, given the opposition to the levy system, the better alternative might be to simply drop it completely.  In its place, Canada could adopt a “fair use” provision that would allow consumers to copy their own CD collection onto another device along with the elimination of statutory damages provisions for such copying cases.  The fair use approach would match the U.S. model, where the recording industry has acknowledged that consumers have the right to copy their own CDs without reference to a private copying levy.  

    There is no question that the introduction of the private copying system was intended to provide artists with compensation and consumers with legal certainty.  It has done neither.  The time has come to replace it with a fair use system that would be more equitable to all Canadians.

    Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.


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