aucc response to access copyright application for interim decision sent dec 10 2010

8/8/2019 AUCC Response to Access Copyright Application for Interim Decision Sent Dec 10 2010

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Osier, Hoskin & Harcourt LL PSuite 1900, 340 Albert StreetOttawa, Ontario, Canada K1R 7Y6613.235.7234 MAIN613.235.2867 FACSIMILE OSLER

Decem ber 10, 2010 le n A . B l o o mDirect Dial: [email protected] Our Matter No: 1059568

BY EMAIL

Mr. Gilles McD ougallActing Secretary GeneralCopyright Board of CanadaSuite 800 - 56 Sparks StreetOttawa, Ontario

K1A 0C9Dear Mr. McDougall:

Ap plication for an Interim Decision on the Access Copyright P ost-SecondaryEducational Institution Tariff, 2011-2013 (the "Proposed Tariff")

We are writing to you on behalf of the Association of Universities and Colleges ofCanada ("AUCC") pursuant to the Notice of the Board dated Novem ber 26, 2010and Ru ling of the Board dated December 8, 2010.

AUCC vigorously opposes Access Copyright's above application (the "Interim DeciApplication"). The Copy right Board of Canada (the "Board") has no ju risdiction to grantthe decision sought by Access Copy right, and n any event, the Interim DecisionApplication does n ot meet the established test for the issuance ofan interim decision.

AUCC

AUCC is the voice of Cana da's universities. It represents 95 Canadian publicand privatenot-for-profit u niversitiesand niversity-degre e level colleges. We w ill refer to bothuniversitiesan d university-degree level colleges collectively as "universities". The 9universities are listed inAppendix A.

History of the AU CC M odel Licence

Commencing in 1989 AUCC entered into discussions with Access Copy right, thenknow n as Can copy, regarding a reprography licence for AUCC m ember u niversitAUCC was subsequently mandated by its Board of Directors to negotiate a modelreprography licence. In 199 4, after an analysis by AUCC of copying practices for wcompensation was due to copyright owners and xtensive negotiations, AUCCand Access Copyright reached an agreement on a model licence (the "AUCC Model

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Licence"). A copy of the AUCC Model Licence is attached as Appendix B. The AUCCModel Licence has been renewed on a number of occasions. The current AUCC ModelLicence beca me effective September 1, 2003. A copy of that m odel licence is attachedApp endix B to the Interim De cision Application.

Although the terms and conditions of the AUCC Model Licence have changed over theyears, the basic structure of the agreements has remained the same. The licence grants anon-exclusive right to make copies of published works l . The licence is not confined topublished works in the repertoire of Access Copyright. Instead, specific published workslisted on an exclusions list are excluded from the scope of the licence 2. To protect a

university from liability for copyright infringement to a person whose published worksare not in Access Copyright's repertoire and are not on the exclusion list, AccessCopyright provided an indemnity 3. The indemnity holds the university harmless fromany claim brought against it for exercising its rights under the licence. The indemnity is asignificant portion of the value that the AUCC Model Licence brings to AUC C's membeuniversities. In effect, it provides the universities with an insurance policy against claimsfor copyright infringement by the numerous authors and publishers whose w orks are notin Access Copyright's repertoire and are not listed on the exclu sions list.

Another impo rtant feature of the AUCC Model Licence is the fact that the licence doesnot cover any dealing of any work for the purposes of private study, research, c riticism,review or newspaper summary 4. AUCC and Access Copyright have never agreed onwhat copyright constitutes fair dealing in the context of the copying activities of AUCCmember universities for which no permission of the copyright owner is required to makecopies.

Differences Between the AU CC M odel Licence and the Proposed Tariff

There are impo rtant and significant differences between the AUCC Model Licence and

the Proposed Tariff. Three of these differences are relev ant to the Interim TariffApplication. First, the scope of the licence granted under the Proposed Tariff is limited

to Repertoire Works, a term defined in the tariff as published works for which Access

Section 2 of the 1994 AUCC Model Licence and sect ion 2 of the 2003 A UCC M odel Licence.

Section 3(d) and schedule A of the 1994 AUCC Model Licence and section 3(d) and schedule A of the2003 AUCC Model Licence

Sect ion 24 of the 1994 AUCC Model Licence and sect ion 23 of the 2003 A UCC M odel Licence

Section 3(c) of the 1994 AUCC Model Licence and section 3(c) of the 2003 AUCC M odel Licence

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Copyright administers rights by assignment, licence, agency or otherwise 5. The rights tocopy granted under the Proposed Tariff are therefore substantially less than the rights tocopy under the AUCC Model Licence. Second, the Proposed Tariff does not include anyindemnity from suit in respect of copying of works outside Access Copyright'srepertoire. A substantial pa rt of the value of the AUCC Model Licence has thereforebeen removed from the licence under the Proposed Tariff. Third, the Proposed Tariffchan ges the tariff royalty structure. Under the AUCC Model Licence a university pays aflat rate based upon the number of full-time equivalent students ("FTEs"), the currentamount is the FTE multiplied by $3.38, plus $0.10 page for copies made for s ale to and

used by students, professors an d dministrative staff s. Separate payment rates are

specified for other specialized copying activities. The Proposed Tariff eliminates the perpage payment and instead arbitrarily increases the per FTE roy alty rate by a whopping1331 per cent to $45 per FTE,an am ount not tied to copying volume .

AUCC acknowledges that the Proposed Tariff expands the scope of the copying rights toinclude the making of digital copies of ce rtain works but only in limited circumstances.The Proposed Tariff would permit an authorized person to make a digital copy byscanning a paper copy into electronic form, subject to various safeguards. Given today'stechnology, scanning is a costly and time consuming process for securing digital copies.AUCC member universities have elected models, described below, which enable them tosource digital copies directly from publishers or aggregators thereby reducing the costand delay of scanning, and provides to faculty, researchers and students a far more timelyand valuable research an d tudy resource. As a result, the value of the right to makedigital copies under the Proposed Tariff is only of margin al value to universities.

Access Copyright's Rights are Non-exclusive

Access Copy right only secures non-exclusive rights to administer the published works inits repertoire. As a result, in order to obtain consent to reproduce a work in its repertoirea prospective user does not require a licence from Access Copyright. In circumstances inwhich permission is required, the user can secure that permission directly from the

copyright ow ner, typically the publisher.

As merely a holder of a non-exclusive licence to the published works in its repertoire,Access Copy right does not have a monopoly over the granting of permissions forpublished works in its repertoire, and Access Copy right does not hold an interest in the

5

Proposed Tariff, sections 2 (definition of "Repertoire W orks")and 3

6 ections 2(a)and (b), 14(a)(iv) and 14(b)(i) of the 2003 AUCC Model Licence

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copyright in the works in its repertoire. Access Copyright cannot therefore sue forcopying infringement in its own name. The significance of this point will becomeapparent below.

In proceedings before the Board which resulted in the certification of the AccessCopyright Elementaryand Secondary S chool Tariff, 2005-200 9 the Executive Director oAccess Copyright testified as to scope of the rights of creatorsand publishers that itrepresents. In her witness statement the Executive Director states that over 7,000Canadian creatorsand publishers have signed an affiliation agreemen t with AccessCopyrightand that Access Copy right has obtained the right to adm inister the rights

foreign creatorsand publishers through bilateral agreements w ith foreign reproductiorights organizations ("RROs"). The witness statement attached a st andard form

affiliation agreement with creators and st andard form a ffil iation agreemen t withpublishers. The grant of rights in the creator's agreem ent reads as follow s:

You gra nt us, with respect to your Work s, the exclusivelicence to exerciseand manage the reproduction rights (the"Rights") listed in Appe ndix A throu gh collective licences.This grant of an interest in co pyright authorizes us tolicense other persons to copy you r Works, either directly orthrough agreements with other collective societies, and

applies only to the extent that you own or control theRights being granted. For greater certainty, you retain theright to license your Works through agencies and

organizations that are not considered to be collectivesocieties.

Although the first two sentences of the grant are in the terms of a grant ofan interest in acreator's copyright by w ay of exclusive license, the third sentence takes aw ay fromgrant. The effect of the third sentence is to render the grant non-exclusive.

With respect to foreign creators and ublishers, in her witness statement Access

Copyright 's Execu tive D irector further states that, as part of its pa rticipation in theInternational Federation of Reproduc tion Rights Organizations ("IFRR O "), AccCopyright has entered into bilateral agreements w ith RR O s in 23 countries. The bilatagreements w ere attached to the w itness statement, but w ere designated as confidenIFRRO does however make sample bilateral agreements available on its website.Pursuan t to these sample agreements, the RRO s who are parties thereto grant to each

7 opyright A ct,section36(1)

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other the non-exclusive right to enter into licensing agreem ents with u sersand to collectfees for the reprographic reproduction of the w orks of the rightsholders they represen

Evolution of Copyright Practices

As set out above, negotiations for the first AUCC M odel Licence w ere completed in 1and the licence w as last renegotiated for the academic year com men cing Septembe2003. Since 1994,and in particular over the period since September 1, 2003, the copyinpractices in AUCC's m ember u niversities have changed dram atically. The AUCC MoLicence has not been renegotiated to reflect these dramatic changes. The ch anges are sodramatic that a nu mber of A UCC m ember u niversities see no need to obtain permisfrom Access Copy right for their current copying practices.

At the tim e the AUCC M odel Licence w as negotiated, the Internet had only a vlim ited role in a cadem ic institutionsand digital copying was in its infancy. AUCCme mb er universities made pa per copies of published works for library reserve, hanout in the classroom, for administrative purposesand for inclusion in course pa cks forsale to students. In recent yea rs, the Internet, the publication of electronic jou rnaland ebooks, digital copyingand course management systems have revolutionized universitycopying practices.

The licensing by AUCC m emb er universities of entire catalogues of published w orelectronic form started in 20 00. In Janu ary 2000, 6 4 universities launched a pilot prthrough a conso rtium identified as the Canadian National Site Licensing Project("CNSLP") to secure for the u niversities multi-year digital site licences w ith publisherscience, engineering, healthand nvironmen tal disciplines. Ba sed up on $20 mill ionproject funding from the Canada Foundation for Innovation ("CFI")and $30 m illion fromprovincial governmen tsand participating universities, CNSL P en tered into seven m ultyear site licences w ith seven ma jor scientific publishers providing access to over 1,electronic journalsand ey citation databases for the universit ies. Through a m odenational site l icence developed by CNSL P (the "CRK N M odel Site Licence"), th

publishers granted the p articipating institutions, not only access to the publicationsthe right to m ake copies of the published works on pa perand in digital form.

By 2004 CN SLP had m ore than doubled its initial content budgetand the benefit of thesite licensing of electronic journalsand citation databases has b een dem onstrated to theparticipating un iversities, CFIand he provincial governments. To perm it additionalun iversities to participate in the site licencesand to increase the conten t licensed, onApril 1, 2004 CNSL P w as incorporated as a n ot-for-profit corporationand subsequentlyrenamed Canadian Research Knowledge Network ("CRKN"). In 2007, through

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additional CFI fund ing of $19 m ill ion and ma tching funding from the provincesuniversities, CRKN wa s able to secure licences for the participating u niversities to acomplement of electronic journals, citation databases, ebooks and ther electronicpublications in both the science technologyand med icine ("STM") and social sciencesand the hu m anities ("SSH") disciplines. A list of the vast digital licensed c ontenattached asAppendix C. Even a brief review of Appendix C show s the extent to whicnow 74 participating un iversities hold digital licences through CRK N Elsvier:18titles from 5,000 inte rnational publishers; O xford University P ress Ebooks: 19 ,499ebooks; etc.

The CRK N licences are all based upon the CRK N Model Site Licence, a current cow hich is attached asAppendix D 8. Sections 2and 3 of the CRK N Model Site Licenceset out the ac cess rightsand usage rights granted by the pu blisher or aggrega tor. Theusage rights include m ore extensive rights than those rights l icensed p ursuan t toAUCC Model Licence Agreem ent or under the Proposed Ta riff . The licensed rigperm it the making of printed or electronic copies of single articles and distributing copiesof individual articles or items to all individual stude nts in a class witho ut further fee.

A nu mber of A UCC m ember u niversities have also expanded the scope of their licensw ith academic pu blishers through regional consortiaand directly with pu blishers. TheO ntario Coun cil of University Libraries ("OC UL") has, through a m odel licence "OC UL Model Site Licence") based upon the CR K N M odel Site Licence, entered licence agreements with publishersand aggregators to permit access to,and copying of,electronic journals, ebooks, databasesand other ma terials for the bene fit of a consortiumof 21 un iversity libraries in On tario. Attached asAppendix E is a copy of the list of theextensive research produc ts made a vailable to the consortium of O ntario universities byO CUL. Attached asAppendix F is a copy of the O CUL Model Site Licence upon w hichthe licences with the pu blishersand aggregators is based. Sections 2and 3 of the OCULModel Site Licence provides a royalty free perpetual licence to have access to thelicensed pub lications for personal research, teaching, private studyand administrative useand extensive usage rights including the inclusion of pap er copies in course packsand

electronic copies on electronic reserve. These usage rights are also more extensive rigthan those rights licensed pursuant to the AUC C M odel Licence or under the PropTariff.

Most of AU CC's mem bers also negotiate l icences directly w ith publishers to peraccess to,and copying o f, electronic journals, ebooks,and other digital materials.

8With the exception of the CRK N licence with the Canadian P ublishers' Council

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Through the licences negotiated under the CRKN Model Site Licence, licencesnegotiated through regional consortia such as those negotiated unde r the OCUL MSite Licence and the licence agreements that universities negotiate directly withpublishers (collectively the "Digital Licences"), AUCC's member universities now haccess to, and perm ission to copy,an extensive library of academ ic materials. As oneexam ple, the University of Ottaw a is a licensee under over 500 licences negotiated underthe CRK N M odel Site Licence, the O CUL M odel Site Licenceand the licences that it hasnegotiated directly with publishers.

The access and sage rights secured un der the Digital Licences are obtained at versignificant cost. The CR K N licences alone cost over $99 million in CR K N's fiscal 2009 to 2010and is budgeted to cost over $107 m illion for its current fiscal year.

The D igital Licences, the Internetand echnological advances have enabled AUCC 'smember universities to change their copyingand library practices to enhan ce research,teachingand ducation. Through secure password protected websites universities cprovide links to licensed req uiredand upplem ental reading ma terials for students in acourse of instruction including by way of course m anagem ent systems such as theBlackboard system. In addition, professors have course websites where they postlicensed course contentand provide links to requiredand supplemental reading.

There is now a real, practicaland more efficient alternative to Access Copy right securingcopyright permission for the copying activities of AUCC mem ber universities.

As a result of the Digital Licences and echnological advances, a nu mber of A UCCmem ber universities have concluded that they no longer requ ire a licence from A cCopyright. They are able to condu ct their copying practices in accordance w ith the teof the Digital Licences,and in reliance on fair dealing for the purpose of research, privatstudying, criticism, review or news sum ma ry,and other exceptions in theCopyright A ctsupplemented by individual transactional licences. These universities have decided the reduced value of the licence available und er the Proposed Ta riff, particularly duthe absence ofan indem nity provision in the Proposed Ta riff, clearly does not justify thmaintenance of even the existing royalty rates under the AUCC M odel Licence.

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Access Copyright made no Bona Fide A ttempt to Renegotiate the AU CC M odelLicence

In the Interim Decision Application Access Copyright provides a truncated historybehind the filing of the Proposed Tariff starting in October 2009 9. It concludes that,because AUCC advised Access Copyright in January 2010 that it did not have anegotiated m andate from its Board and would return to Access Copy right after its Boardmeeting in April 2010, Access Copy right had no o ption but to file a tariff. This truncatedhistory fails to show that discussions on a renewal of the AUCC Model Licencecommenced as early as April 2009, that Access Copyright significantly delayed

advancing a licence proposal, that the licence proposal finally submitted on October 21,2009 contained only a bare bones structure without any details of royalty fees, and thatAccess Copy right made no attempt to renegotiate the AUCC Model Licence after filingthe Proposed Tariff. The actual history demonstrates that Access Copyright did not enterinto bona fide negotiations to renew the AUCC Model Licence and instead had m ade thedecision to proceed w ith a tariff filing rather than a n egotiated licensing arrangement.

In April 2009 Access Copy right promised to forward an outline of the proposed newlicence to AUCC by August 2009. By email dated July 8, 2009 AUCC advised AccessCopyright that it would need to consult with its community before it could enter into

negotiations regarding a possible future licence. The outline was only delivered toAUCC by email dated October 21, 2009. By email dated November 24, 2009 AccessCopyright acknowledged that it was late in providing the outline. By email datedNovember 25, 2009 AUCC advised Access Copyright that it was starting consultationwith its members and preparing B oard docum entat ion for i ts mid January Board m eetingOn January 18, 2010 AUCC advised Access Copy right that it expected to receive finalinstructions from its Board during its April Board meeting. Copies of email messagessubstantiating this actual history of the licence "negotiations" are attached at AppendixG .

Access Copy right did not approach AUCC to discuss renegotiation of the AUCC ModelLicence in lieu of the P roposed Tariff at any time a fter the filing of the Proposed Ta rif

AUCC submits that, given the past experience of the pa rties which showed that thenegotiation of model licence arr angement for Canada's university sector is a timeconsuming process, Access Copyright's late outline proposal, without a fee structure, and

Access Copyright's failure to follow-up, demonstrates that Access Copyright had decided

9 nterim D ecision Application, p. 3

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on its own to proceed to elect the tariff process. It was not in any way "forced" byAUCC to do so. Any "negotiation" by Access Copyright was not in good faith. Anydeleterious effect on Access Copyright of its election to pursue the tariff process is a neffect for which Access Copyright's must be responsible and not AUCC's memberuniversities.

Access Copyright's election to shift its focus from negotiating licences to pursuingcopyright tariffs is documented in the literature. In her chapter entitled Copy right,Collectives, and ontracts: New Math for Educational Institutions and ibraries,Professor Margaret An n Wilkinson states:

Access Co pyright, the print collective for English langua gerights for reproduction, which was just expanding itsnetwork of licences back in 2005, is now, in 2010, engagedin aggressively shifting its focus from the consensualnegotiation of licences to the forum of the Copyright boardand the tariff process.

The initial signal of what has become evidence as awholesale ch ange in Access Copyright's strategy was thedecision to take all the Ministers of Education (exceptQuebe c) to the Board for a Tariff for public schools.1

Section 70.17 Offers

When it became evident to AUCC that it was unlikely that the Proposed Tariff would notbe certified until well after the expiry of the licence agreements that its memberuniversities had with Access Copyright under the AUCC Model Licence, AUCC made arecommendation to its members that intended to operate under the Proposed Tariff ascertified to provide them with protection for their copying practices during the periodJanuary 1, 2011 to the date of the ce rtification of the Proposed Tariff. AUCCrecommended to its member universities that intended to operate under the ProposedTariff to make an offer to Access Copy right under section 70.17 of the Copyright Act.AUCC recommended that such members make the offer using a template offer letter, acopy of which is attached as Appendix H, and hat the offer letter be forwarded toAccess Copyright by December 31, 2010. A number of AUCC member universities haveforwarded offers to Access Copyright under section 70.17. For those universities that

10 Published in Geist, Michael From "Radical Extremism" to `Balanced C opyright": Canadian Copyand the Digital Agenda (Irwin Law: 2010)

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have forwarded the offer, section 70.17 prohibits the bringing of copyright infringementactions for copying conducted with the scope of the Proposed Tariff. The significance ofthis section is impo rtant .

The combined effect of section 70.17 and the retroactive effect of the certification o f theProposed Tariff back to January 1, 2011 ensures that there will be no legal vacuum forthe AUCC mem bers who intend to conduct their copying pract ices in accordance withProposed Tariff. Those AUCC members are immune to suit for copyright infringement,and the P roposed Tariff, once certified, will ensure that their copying activities w ithinscope of the Proposed Tariff are licensed.

As discussed above, having regard to the rights held by it, Access Copyright cannot suefor copyright infringement. However, owners of copyright in a work within AccessCopyright's repertoire are able to sue a member university for infringement of that workin circumstances in which permission of the copyright owner is required if the memberuniversity has not sent a section 70.17 offer. This ensures that there will be no legalvacuum for the AUCC members who intend to conduct their copying practices outside ofthe Proposed Tariff.

We will hereinafter refer to the period of time between January 1, 2011 and the date ofcertification of the Proposed Tariff for AUCC member universities who make an offer toAccess Copyright under section 70.17 as the "Payment Period".

The Interim Decision Application

In the Interim Decision Application Access Copyright seeks an interim decision licensingAUC C m emb er universities for the uses described in the Proposed Tariff for the PaymPeriod and requiring the universities to pay Access Copyright during the Payment Periodthe amounts payable under their agreement with Access Copyright which is to terminateDecember 31, 2010 1 1. Access Copyright describes the purpose of the application asbeing to extend the licensing regime during the Payment Period providing rightsholdersand users continuity and certainty1 2. Access Copyright contends that the interim decisionsought would prevent "a legal void" 1 3. Access Copyright relies on what it describes as a"substantial deleterious effect not only on Ac cess Copyright but also on its many crea

11 Interim LicenceApplication, 10 , 0 i and iP p ^) )

1 2 bid, p. 1

13 Ibid, p. 5

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and publishers operating in the post-secondary educational sector 1 4. Access Copyrightclaims that the revenue from post-secondary institutions amounts to almost 50 per cent ofits licensing revenue and is twice the amount of its total operating expenses 1 5. AccessCopyright also claims that, if the interim decision is not granted, it will be forced to cutoperating expenses, hampering its ability to, among other things, collect and distributeroyalties, develop essential dist ribution techn ology, engage in licensing activities outsidethe scope of its existing and proposed tariffs, an d fund these proceedings16.

The grounds upon which Access Copyright relies to suppo rt the Interim DecisionApplication do not hold up to scrutiny. As described above, in view of the section 70.17

offers and the retroactive effect of ce rtification of the Proposed Tariff, there will be nolegal void. On Access Copyright's own admission, without licensing revenue from post-secondary institutions, its other licensing revenue fully covers its operating expenses. Asa result, during the Payment Period Access Copyright will be able to fully continue itsoperations, but may be required to defer expenditures on other activities such asdeveloping dist ribution technology an d ngaging in licensing activities outside itsexisting an d proposed tariffs.

Although Access Copyright refers to the roy alties certified in the K to 12 tariff in theInterim Decision Application, royalties which now form approximately one third of itslicensing revenue, it indicates that it cannot u se approximately on e half of that revenufund its operating expenses until all appeals are final 1 7. Access Copyright does notrequ ire that revenue to fund its operating expenses as its other licensing revenue is doits operating expenses. Furthermore, in 2009 Access Copy right received a windfall ofretroactive payments in excess of $40 million upon certification of the K to 12 tariff.Surely this windfall amou nt w ill go a long wa y to cover Access Copyright 's non-essenoperating expenses during the Payment Period. What Access Copyright has notexplained is that it is prevented from using ha lf of its revenue from the K to 12 tariff uall appeals are final, but seems to be fully intending to use the revenue requested in itsInterim Decision Application despite the fact that, there is a clear prospect that theroyalty rates will be reduced and substantial refunds will be required.

14 Ibid, p. 6

15 Ibid, p . 6

16Ibid, p. 6

17 Ibid, p . 7

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A final point regarding the deleterious effect that Access Copyright claims the delay incertification of the Proposed Tariff will have on Access Copyright and its creators and

publishers is that none of the statements made in the Interim Decision Application aresupported by affidavit or documentary evidence. All Access Copyright has done tosupport its request for an interim decision is to furnish bald statements from its formercounsel. Although the jurisprudence is clear that the Board can rely on representationsand no evidence in making an interim decision, AUCC submits that the Board shouldtreat with caution the representation by Access Copyright about the financial impact on itshould the Board refuse to issue the interim decision requested. There are two reasons todo so. First, Access Copyright did not suppo rt is representations with documentation. Itwould have been a simple matter to do so. Second, Access Copyright made no referenceto the magnitude of the recent retroactive payments under the K to 12 tariff or them agnitude of the revenu e it receives under its other licensing activities.

The B oard's Jurisdiction

Section 66.51 of the Copyright A ctprovides the Board with jurisdiction to make interimdecisions. In addition, by reason of section 70.2 of the Act, on applicat ion the B oard hasthe power to fix the royalties and their related terms and conditions where a collectivesociety, such as Access Copyright, and a user or a representative are unable to agree. Asmany decisions of the Board discussed below show, an interim decision m ay be made inthe pending ce rtification of a tariff or pending a final determination of an applicationunder section 70.2.

AUCC submits that the Interim Decision Application for a decision extending theexisting licensing regime amounts to a request to fix royalties and their related terms and

conditions where the Access Copyright and AUCC's member universities, among others,have been unable to agree upon the terms and conditions. AUCC submits that the Boardhas no jurisdiction under section 66.51 to extend the licensing regime and ix theroyalties and elated terms and onditions. It can only make such a decision in a napplication made under section 70.2. AUCC also submits that Access Copyright shouldbe barred from making a future application under section 70.2 because it has notdemonstrated that it made bona fide efforts to renegotiate the AUCC Model Licence. Acollective society should be barred from availing itself of the provision of section 70.2 inthe absence of showing a bona fide negotiation.

The Test for Granting an Interim Decision

If the Board decides that, contrary to AUC C's subm issions, it has the jurisdiction to mthe interim decision requested by Access Copyright, the Board must then determine

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whether, in the Interim Decision Application, Access Copyright has met the conditionsfor granting an interim decision. In Bell Canada v. Canada Justice Gonthier of theSupreme Cou rt of Canada sum marized the test for makingan interim decision as follows:

Traditionally, such interim rate orders dealing in a ninterlocutory manner with issues which remain to bedecided in a final decision are granted for the purpose ofrelieving the applicant from the deleterious effects causedby the length of the proceedings. Such decisions are madein an expeditious manner on the basis of evidence whichwould often be insufficient for the purposes of the final

decision. The fact that an order does not make an y decisionon the merits of an issue to be settled in a final decisionand the fact that its purpose is to provide temporary reliefagainst the deleterious effects of the duration of theproceedings are essential characteristics of an interim rateorder'$.

The Board has applied those remarks in considering a request for an interim decisionunder section 66.5119

The Proposed Tariff is an inaugural tariff. Although it has been proposed in the context

of a voluntary licensing scheme which will terminate December 31, 2010, asdemonstrated above, the structure and scope of the tariff licence and the other terms and

conditions of the tariff differ substantially from the structure, scope of the licence and theother terms and conditions of the AUCC Model Licence. Granting the interim decisionrequested and issuing an interim tariff would be an unprecedented step by the Board inproceedings involving an inaugu ral tariff.

The Board's Interim Decisions

The Board's interim decisions fall into three categories. The first category are interimdecisions made pending ce

rtification of an inaugural tariff, the second are interim

decisions to extend the terms of a certified tariff or an existing licence agreement and thethird category are interim decisions in applications unde r section 70.2 in circumstan ce

18 [1989] 1 S.C.R. 1722 at p . 1754

19 Interim Statement of Royalties to be Collected by SOCAN and NRC C in respect of Commercial Radiofor the Years 2003-20 07, Novemb er 24, 2006

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w hich there is no prior licence agreement or in which there is a new use not presentprior licence a greement.

We are aware of only three applications for an interim decision made pendingcertif ication of an inau gural tariff. Each of those ap plications wa s unsu ccessful. Boa rd's decisions on the app lications are as follows:

(a ) Ruling on CBRA's Application for an Interim Tariff, May 3, 2001("Media Monitoring 1");

(b ) Ru ling of the Board regarding CBR A M edia Monitoring Tariffs, June 12003 ("Media M onitoring 2");and

(c ) Statement of Royalties to be Collected by AVLA/SOPROQ for theRep roduction of Sound Recordings, in Canada, by Comm ercial RadioStations for the Years 2008 to 2011, February 29, 2008("AVLA/SOPROQ").

In Media Monitoring 1 C BR A applied foran interim decision in the form ofan interimtariff in the context of a proposed inau gural tariff. The B oard stated:

CBR A's application foran interim tariff is denied. As this

ma tter deals with a cu rrently unc ertified tariff, issuinga ninterim tariff could be interpreted as setting a policypreceden t on a subst antive matter not yet properly heard bythe Board. The legal issues raised in these proceedings arenot sufficiently c omplex to justify their being exam inedseparately from the subst antive issues. Furthermore, areasonable dispute exists on legal issues such as theexistence of rightsand retroactivity. In the Board's view , itw ould be best if those issues, including those regardingquantumand erms and onditions of the tariff, be fu llyaddressed at a hearing20.

The CB RA made a subsequ ent application for an interim tariff in the same inaugtariff proceedings. In M edia Monitoring 2 the Boa rd denied the ap plication for the sreasons as in Media Monitoring 1.

20 Media Monitoring 1, 1g P

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In AVLA/SOPROQ, the collective society AVLA and SOPROQ applied for an interimtariff pursuant to section 66.51 in the context of a proposed inaugural tariff. The Boardrefused the application on grounds that collectives had not established sufficientdeleterious effects of the proceedings. The collectives asserted deleterious effects onseveral grounds, one which is relevant to the Interim Decision Application. Thecollectives asserted that they had no tariff income to fund the proceedings. However, theBoard pointed to AVLA and SOPROQ's significant licensing income and millions ofdollars received from NRCC as the maker's share of equitable remuneration pursuant tosection 192 1which could be used to subsidize the proceedings before the Board. The lackof income under the tariff pending ce rtification is not a deleterious effect caused byproceedings before the Board. AVLA and SOPROQ also sought to rely on the Board'sdecision in SO CA N -NR CC Interim Com m ercial Radio Tariff, 2005-20072 2. In that case,the interim tariff was issued in the context of an existing certified tariff. The Boarddistinguished that decision on grounds that setting an interim tariff in AVLA/SOPROQwould require recalculations and money changing hands as the interim tariff wouldcertainly not be the sam e as the final tariff23.

The second category of interim decisions of the Board is decisions to extend the terms ofa certified tariff or an existing licence agreement. AUCC submits that these decisionsmust be considered with caution in relation to the Interim Decision Application because

of the differences in the circum stances from those in the present m atter.

The Board has issued a number of interim decisions under section 65.51 where theobjective was to extend a licensing regime. The interim decision in Cancopy v. A UCCand Wilfrid Laurier University (the "Cancopy Decision") is an example2 4. In that case,member universities of AUCC had licence agreements with Access Copyright, thenknown as Cancopy, which were to expire August 31, 1996. On August 13, 1996 AUCC,on behalf of the universities, applied to the Board under section 70.2 of the A ct for a oneyear renewal of the licence agreement on the same terms, and applied under section 66.51for an interim licence for a period to expire August 31, 1997. Access Copyright wasprepared to consent to an extension of the licence agreem ents, but at a royalty rate grethan the amount specified in the prior agreement. The Board maintained the status quoand extended the agreement as requested by the applicants. The effect of the decision in

21 ALVA/SOPROQ, para 422 Novembe r 24, 2006

23 ALVA/SOPROQ, para 9

24 September 13, 1006

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the Cancopy Decision was to avoid a legal void on the expiry of the licence agreementspending determ ination of the application under section 70.2.

Another circumstance in which the Board has issued an interim decision extending anexisting licence agreement is illustrated by the decision in SODRA C v. ADISC2 5. Thatcase also related to an application under section 65.51 foran interim decision pending theissuance of the decision on a section 70.2 application. The Board observed that it was a nopen question that a decision on a section 70.2 application could be made retroactive tothe date of the application. The Board observed that the only way to prevent the statusquo ante from becom ing afait accompli w as to issuean interim decision26.

A third category of interim decisions arises in circumstanc es in w hich a collective socseeks an order of the Board under section 70.2 where there is no prior licence agreementor where there is a new use not present in a prior licence agreement. The Boardsummarized its approach to granting an interim decision both where there is an existingagreement and when there is no agreement or a new use in SODR A C v. Les Chanes TlAstral 2 7. In that case the Board stated:

When an agreement exists between the pa rties, it isgenerally preferable to extend that agreement on an interimbasis. When there is no agreement or when new uses areinvolved, the Board prefers to establish a symbolic royaltyfor the purpose of the interim licence "unless the contextrequires a different approach".28

An example of an interim decision in which there was no existing licensing arr angementwith the Board setting a nominal fee is SOD RA C v. M usicPlus Inc.2 9. n that case, insetting a nominal fee of $1 per month, the Board expressed the question to address inconsidering an application foran interim decision as follows:

The true question is whether denying SODRAC's requestmay result in rightsowners being deprived of fair royalties

25 August 31, 1999

26 Ibid, p. 4

27 December 14, 2009

28 Ibid, p. 3 to 4

29 November 22, 1999

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for the period between now [the date considering theapplication for the interim decision] and he finaldetermina tion or in the [collective] society being co mp elledto resort to lengthyand costly legal proceedings .

The Interim D ecision Application does not meet the Test

As stated above, we a re not aw are of any decision of the Board w hereby the Board issan interim decision in an inaugural tariff. We submit that the Board should only issue a n

interim decision in such a case for the most compelling reasons. There are no suchreasons in this case and n fact the Board's decisions in Media Monito ring 1, MediaMonito ring 2 and AVLA/SOPROQ are compelling precedents for rejecting the InterimDecision Application.

In the matter at hand there are significant legal issues relating to the entitlement ofAccess Copyright to collect royalties in relation to a substantial po rtion of copies madeby AUCC's member universities. The evidence will show that most of the copies nowmade by the universities are made with the permission of the copyright owner, e.g.through the Digital Licences, or fall within an exception established by the CopyrightAct, e.g fair dealing. These issues cannot be addressed without a full hearing and

determina tion of wha t materials are copied by the universities, the purposes for w hichcopies are made, and the extent to which the universities have otherwise securedpermission to make the copies. It is necessary that these issues be address at a fullhearing. The Board should re frain from issuing the decision requested in the InterimTariff Application to avoid setting a policy precedent on a subst ant ive m atter which w illbe before the Boa rd on the hearing of these proceedings.

In addition, Access Copyright claims that the length of these proceedings will cause itdeleterious effects because, without the payment of royalties, it would be significantlyhampered in distributing royalties and funding these proceedings. There is no doubt thatAccess Copyright has significant licensing income including millions of dollars that itreceives under its K to 12 tariff. There is no doubt that Access Copy right will in duecourse receive the tariff royalties certified by the Board from the AUCC memberuniversities that require the licence under the tariff. There is no risk that the amount ofthe tariff certified by the Board as properly owing will not be paid. The finding inAVLA/SOPROQ applies. Access Copyright can use its existing significant licensing

30 Ibid, p. 2

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income and ariff revenues to fund its operations, and f required, to subsidize theseproceedings before the Board.

A further reason for rejecting the Interim Decision Application is that the royalties in theProposed Tariff as certified will most certainly differ from the royalties that AccessCopyright seeks by way of the interim Decision Application. Having regard to theDigital Licences and the extensive ch anges in the copying practices and technology sincethe AUCC Model Licence was last renegotiated, there can be little doubt that the royaltyrates that will be certified will be less than those sought by Access Copyright in theInterim Decision Application. Issuing the interim decision requested by Access

Copyright will require recalculations on the ce rtification of the P roposed Tariff requiringrefunds of substantial royalties paid. To the extent that royalty payments are passedthrough to students by AUCC member universities the repayment by Access Copyrightw ill place the universities in a difficult position in determining how the repaym ent shbe distributed.

A consideration of the second and third categories of the Bo ard's interim decisions show sthat an interim decision is appropriate to extend an existing licence arr angement pendinga final decision by the Board where there would otherwise be a legal void, e.g. theun law ful use of the repertoire of a collective society or to deal w ith the uncertainty of

retroactivity of a decision under section 70.2. In the present circumstances there is nolegal uncertainty. The AUCC member universities who intend to operate with a licenceunder the Proposed Tariff have, or by December 31, 2010 will have, made an offer undersection 70.17 of the Act, and there is certainty that the decision in this tariff application,contrary to the circumstances in an application under section 70.2, will be retroactive toJanuary 1, 2011, the day following the expiry of the existing licence agreements betweenAUCC member universities and Access Copy right.

Because of the long st anding established practice of the Board, found ed in the provisionof the Copyright Act, a tariff once certified has retroactive effect. Therefore, the secondreason for making an interim decision in cases involving licensing arr angeme nts does notapply.

AUC C subm its that the Board m ust not only consider the deleterious effects of the lenof these proceedings on Access Copyright, it must consider such effects on AUCCmember universities and hose ultimately responsible for increased costs due to thepaym ent of the amou nt of royalties requ ested by Access Copy right, in this case univestudents. As discussed above, there is a compelling case for the need for the royalty ratein the Proposed Tariff to be set substantially lower than the rates in the current licenceagreements between AUCC member universities and Acce ss Copyright. The nee d for the

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recalculation on certification of the Proposed T ariff of royalties paid,and the complexqu estions of redistribution of am ounts paid imp oses a deleterious effect not onlyinstitutions. What in effect Access Copyright is requ esting is the imposition of roypaym ents, in circum stances w here there is no legal void, w ith the tariff proceedings bfunded on the backs of students. Access Copyright prefers funding these proceedibased on student paym ents which AUCC subm its will be shown to be excessive, witsubsidization from its substantial other tariff revenue or other licensing income. It wbe an enormousand virtually impossible task for a university to refund am ounts paid bstudents to cover the overpaym ent of the royalties, especially w here, at the t ime refund, the students are no lon ger students of the un iversity.

Ultima tely, the Board w ill have to weigh the balance of the effect of n ot issuing theinterim decision requ ested on Access Copyrightand the rightsholders it represents withthat on the users, including AUCC member universities and heir students. AUCCsubmits that the only effect on A ccess Copyrightand the rightsholders it represents isdelay in receipt of paym ent. This delay in paym ent is fully attributable to the steps tby A ccess Copyright. Access Copyright was fully aw are of the length of time taken bytariff proceedings through its experience with the K to 12 tariff. There w as nothingprohibited Access Copyright from filing the Proposed Tariff a num ber of years agtake effect January 1, 2011. It wou ld have been possible for Access Copyright to hsecured a decision on the tariff before expiry of the existence licence agreements.Instead, it elected to delay filing the P roposed Tariff to March 2010 know ing full wthat i t would not have a decision before D ecember 3 1, 2010. The alleged deleterieffect of the delay in paym ent of tariff royalties attributable to Access Copy right's delay is far outweighed by the deleterious effects on users, including AUCC memuniversitiesand their studen ts,and the inevitable interpretation of the Board's interimdecision, as requested by Access Copyright, as setting a precedent on policy and

substantive matters that have not been properly heard by the Board on the evidence.

The Terms of Any Interim Tariff

In the event that, despite these submissions, the Board decides that it would beappropriate to issuean interim de cision extending the provisions of the existing licencagreemen ts, AUCC su bmits that the decision apply only wh ere:

(a) An institution intend s to avail itself of the uses de scribed in the P roposTariff for which it does not otherw ise have the permission of the copyrigholders or for w hich permission is not required;and

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(b ) he institution has not forwarded to Access Copyright an offer undersection 70.17 of theA c t.

It is arguable that, in those circumstances, there would be a legal void because, fromJanuary 1, 2011 to the date of the ce rtification of the tariff, the institution w ould be liablefor copyright infringemen t to the copyright ow ner.

With respect to the royalty rate to be established in the interim decision, AUCC submitsthat there is a compelling reason that the Board set a nominal fee of $1 per month. TheBoard would thereby avoid creating the inevitable interpretation that the Board has set a

precedent on policy and substant ive matters without a proper hearing on the evidence .Urgency

The interim decision requested by Access Copyright is a very serious matter for AUCCmember universities and their students. AUCC submits that a decision in this matter bevery carefully considered. If the Board decides that, based on the face of therepresentations as to the financial consequences for Access Copyright and herightsholders it represents, an interim decision should issue, AUCC submits that theBoard provide the pa rties with an opportunity, through or al testimony and rossexam ination, to test the veracity of the those represen tations.

There is no urgency in having the Interim Decision Application disposed of beforeJanuary 1, 2011. The licence agreements that AUCC member universities have withAccess Copyright provide for quarterly payment. Clause 16(b) of the 2003 AUCC ModelLicence provides as follows:

The Institution shall remit to Access Copyright within 60days of March 31, June 30, September 30 and December 31of each year during the term of this Agreement the amountpayment for the previous calendar qua rter calculatedpursua nt to clauses 14(b) through (g) of this Agreem ent.

Access Cop yright will receive the last paymen ts under the existing licence agreem entdays after December 31, 2010. The first payments for 2011 if the Board extends theexisting licence agreements would not be due until 60 days after March 31, 2011. Thereis ample time for the Board to give this serious matter full consideration as to AccessCopyright's representations of dire f inancial consequences and ross examinationsthereon, before the f irst payment for 2011 w ould be payable at the end of M ay 2011.

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Conclusion

AUCC u rges the Board to reject the Interim Decision Applicationand accede to AUCC'srequest in its letter of objection dated July 15 , 2010 to promptly initiate these proceedto ensure that the B oard w ill be able to issue its decision at the earliest date.

Rejecting the Interim D ecision A pplication w ill also serve asan incentive for AccessCopyright to procee d expeditiously in these procee dings. It is telling that, despite haAUC C's objection since July 15, 2010 in w hich AUCC e xpressed the desire that tproceedings be promptly initiated, Access Copyright has not approached A UCCdiscuss a timetable for advancing these proceedin gs nor to discuss developing a propfor a bibliographic or volume survey of AUCC member universities who intend tocondu ct their copying ac tivities under the Proposed Tariff. These proceedings neemove forward quickly. The best means of ensuring that that will happen is to denyAccess Copy right's application.

Yours very truly,

Glen A. BloomGAB:cmsEnclosurec. [email protected] and [email protected]

[email protected]

[email protected]@athabascau.ca

[email protected]

[email protected]@uot tawa.ca

[email protected] ason. [email protected]. ca [email protected]. ca

[email protected]@blakes.ca and [email protected]

[email protected]

rideau3@gmail co [email protected]

[email protected]

[email protected]

aucc response to access copyright application for interim decision sent dec 10 2010

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