“We believe we are taking the bolder, more principled and sustainable option, which best serves the fundamental and long-term interests of our academic community”, said David H. Farrar, Provost and Vice President Academic (Vancouver) and Doug Owram, Deputy Vice Chancellor and Principal (Okanagan). Yes, you are.

Universities who decided to sign a letter-of-intent to sign a license agreement with Access Copyright but have not yet signed the agreement will be listed in the Purgatory. If they decide to follow UBC’s lead they will be inducted into the Hall of Fame. Otherwise, they will join UofT and Western at the Hall of Shame.

Hall of Fame

The Purgatory

Hall of Shame

On Friday, the US District Court issued a 350 pages decision, dismissing 94 out of the 99 claims of copyright infringement. Of the initial 99 claims, only 75 reached the final stages of the trial. Some of the claims were dismissed on the grounds of de minimis copying, others on the ground that plaintiffs could not demonstrate that they were the owners, while the rest were found to be fair use. Infringement was found in only 5 cases. The court found that making small free excerpts from these books available to students would further the spread of knowledge, that copying caused no harm to the sale of any of the plaintiff’s books, and that here was no reason to believe that allowing unpaid, nonprofit academic use of small excerpts in controlled circumstances would diminish creation of academic works, or would appreciably diminish the Plaintiffs’ ability to publish high quality scholarly books. The court dismissed the plaintiffs’ argument that they might be forced to reduce publication of high quality scholarly works, describing it as “glib” that was unsupported by any evidence.

Despite some differences between American and Canadian copyright laws, Canadian universities should pay very close attention to this decision, not only because actual lawsuits, and judicial decisions, involving allegations of copyright infringement by educational institutions are extremely rare, but also because the reasons for the plaintiffs’ failure are highly relevant to Canada. In fact, possibly, had a similar case been brought in Canada, the result could be 99-0 for the defendants, not only 94-5.

The case should also provide food for thought for the universities that have to decide whether to capitulate to Access Copyright. It casts further doubts about the claims of the AUCC that the deal that it brokered with Access Copyright is the best possible outcome for Canadian universities.

I have had some discussions with different people in the university community, including in universities that are leaning towards signing the Model License, and it seems to me that it’s not the conviction that Model License provides any real benefits for universities that motivates them to sign it, but the fear of what would happen to them if they do not sign. This is an understandable approach. For almost two decades, most universities obtained licenses from Access Copyright, which provided some real, but mostly imaginary, comfort to university administrators that they don’t have to worry about copyright. As a result, very few universities developed any internal expertise on copyright or any internal mechanisms that would allow them to feel confident about operating without Access Copyright.

Things began to change about a year ago, when more than 30 universities decided to opt out of the interim tariff, get over their Access Copyright addiction and prepare for a new life of rehabilitation. Their plan comprised of four elements: obtaining direct licenses from publishers and other market intermediaries when necessary, relying on open-access materials when available, taking fair dealing and other users’ rights seriously, and lastly, more sophisticated risk management than the one they were used to before. In other words, many universities decided to regain ownership of their copyright lives and slowly develop confidence in their ability to do that. Even when UofT and Western decided to settle with Access Copyright, many of the opt-out universities remained resolved not to go back and confident that the AUCC would not cave in. But it did, and left many of its members confused, bewildered, under pressure to make quick decisions. Panic reaction ensued, and the option of signing the agreement—what they vowed not to do again—suddenly began looking like a comforting alternative.

From my conversations, the fear of being liable for copyright infringement plays an important role for the university administrators who lean toward signing the Model License. The fear is that despite their best efforts to secure licenses, encourage use of open access materials, and provide guidance about the scope of fair dealing and other exceptions, they may not be able to guarantee that all students and all faculty and staff will comply and some infringing copies will be made. They fear that Access Copyright might sniff around, look for evidence of infringement, and sue them. However, the GSU decision demonstrate why the fear of being sued and held liable might be overblown, and universities should conduct a much closer risk-assessment.

First, without getting into much detail, it is doubtful whether Access Copyright, who acts on behalf of copyright owners but is not the owner of copyrights, has any standing to sue for copyright infringement. Even if it has such standing, the copyright owner must normally be made a party. But the interests of Access Copyright and its members do not always align. For example, the owner may be an author, or an academic author, who has no objection for her works being used for teaching, or it may be a publisher for whom universities are important customers and suing them may or may not be perceived as good business.

Second, if contested, the plaintiff’s ownership cannot be taken for granted, and showing chain of title can be more complicated than ordinarily thought. For example, a publisher claiming to be an assignee of the copyright may not be able to produce the signed document on which the assignment depends, or it may turn out that the owner has transferred only some rights, but retained others (e.g., digital rights), etc. GSU is a case on point. 18 claims were dismissed because the plaintiffs couldn’t prove ownership.

Third, the copying itself might not be infringing at all. Even the copying was not covered by a license, many if not most, of the unauthorized copies made on campus may be permissible under fair dealing or other exceptions even before Bill C-11 becomes law. Save for blatant cases of infringement, copyright owners might be reluctant to risk another CCH­-like outcome in borderline cases. The GSU case confirms such prediction. It was a carefully planned case, and presumably, it would not have launched unless the plaintiffs believed that they had the best possible evidence. The fact that they lost 94 of 99 complaints is telling.

Let me now offer additional (and initial) observations on the GSU case from a Canadian perspective, which, I promise, will be interesting for my American readers as well.

Access Copyright and the Copyright Clearance Center

The plaintiffs in this case were Cambridge, Sage, and Oxford as plaintiffs, but the real entity behind the case was the Copyright Clearance Centre (CCC). When it comes to licensing educational institutions, the CCC is Access Copyright’s American little cousin. While most of Access Copyright’s income comes from the educational sector (more than 75%, according to the Friedland Report), educational licenses contributed only 12% to the CCC’s revenue. American universities, for the most part, were never convinced that the CCC could offer them anything valuable, except for being an occasional source of transactional licenses. The GSU case was brought as a test case. According to the court, CCC and the Association of American Publishers (AAP) organized the litigation, and they pay the plaintiffs’ expenses and attorneys’ fees. CCC and its counsel did the initial fact gathering concerning unlicensed copying of excerpts in the higher education community and then convinced the three publishers to join. The purpose of the lawsuit was not to recover any damages, but rather to force GSU, and convince all other universities, to obtain licenses from CCC. The availability of such licenses, what actually they would cover, was a central issue during trial. What has been revealed should be of particular interest to Canadian universities: those who already decided to sign an agreement with Access Copyright and those who contemplate doing so.

So here are some interesting facts. Like most American universities, GSU declined to obtain licenses from CCC. Occasionally it obtained some ad-hoc transactional licenses from the CCC, but the scale was rather low. In an earlier decision in this case, the court found that over a decade, GSU paid CCC less than $19,000 on license fees (i.e., less than $1,900 per year). Since GSU has approximately 32,000 students, these payments are the equivalent of less than ¢6 per student per year. Canadian universities paid Access Copyright $19 per student per year during the same period.

During trial, the CCC estimated that it would cost GSU $114,000 per year to participate in its annual licensing program (p. 29), which means that the fee per-student would be $3.56. Presumably, there is no significant difference between the repertoires of AC and CCC, because the two organizations cross-license their repertoires, but Canadian universities who sign the Model License would pay $26 per student. So when Canadian universities consider whether to sign the Model License that the AUCC claims is the “best possible outcome for Canadian universities”, they should look south of the border and think what could be the price if they weren’t so eager to be dependent on Access Copyright. This chart might help them.

Access Copyright’s Repertoire

Access Copyright’s repertoire is shrouded in mystery. This has been very convenient for Access Copyright, as well as for its licensees. Access Copyright has pretended that it can license almost every work that universities might use, and universities really wanted to believe that this was true. However, this “don’t ask, don’t tell” unwritten rule has become less stable as universities began obtaining permissions covering digital and print directly from publishers, and as many of Access Copyright’s members declined to let it authorize digital rights. As I have noted before, Access Copyright’s digital repertoire is significantly smaller than its (limited) paper repertoire. The GSU decision provides some interesting insights into the limited digital repertoire available to CCC. These insights may shed light on similar issues with respect to AC’s repertoire too.

For example, the court learned that CCC is able to license excerpts only from 60% of Cambridge’s works. Oxford estimated that CCC currently (in 2011) licenses the copying of excerpts from over 90% of its titles, but there was no evidence that all of Oxford’s works in question were available for licensing through the CCC, only that some of them were. CCC offers an Academic Repertory License Service, which affords subscribers access to excerpts from about nine million titles. In 2009 digital licenses for excerpts from a million and a half (seventeen percent) of these works were available (the veracity of these general nubers was not an issue in this case). The court attributed the lesser availability of digital excerpts to the following reasons: (1) some publishers are concerned that they may not have the right to authorize distribution in digital as opposed to print format; (2) some publishers are reluctant to place digital copies of their works in the stream of commerce; and (3) sometimes publishers, for whatever reason, simply prefer limiting sales to the whole book. Cambridge did not and does not participate in this program; Oxford participated in 2009 only with its journals, not with its books. Oxford currently participates in this program. Sage participates in this program currently and did so in 2009.” (pp. 28-29) In the end, of the 46 excerpts from Cambridge’s and Oxford’s works, licenses to make digital copies were shown to be available for only 13 excerpts.

Canadian universities that consider singing the Model License believing it provides them wide permissions to use works in digital form should think twice, and should demand to find out what exactly will they get in return for the hundreds of thousands of dollars that they would pay AC. They should recognize that the Model License that they are encouraged to sign treats digital copying quite differently from photocopies. While AC authorizes the making of digital copies for works within its repertoire, the size and scope of this repertoire is unknown. Moreover, while AC undertakes to indemnify universities who make digital copies of works not within its repertoire, the indemnity with respect to works in “born digital format” only if the work appears on the Inclusions List (if you’re surprised, read s. 13 of the Model License and the definition of the term “Repertoire Work”). To the best of my knowledge, this Inclusions List is not available.

GSU vs. CCH

The litigation strategy behind the GSU case is highly similar to that employed in other cases, notably, CCH v. LSUC. Like the CCC in the GSU case, the real entity behind the CCH case was AC, who hoped to gain a quick victory over the Law Society that would open for it new markets: law firms first, and then the broader corporate world. Like the CCC in the GSU case, AC bore the cost of the litigation. To its dismay, the CCH case ended with the worst possible outcome for AC.

An earlier case that was crucial for these two cases is the 2^nd Circuit decision in American Geophysical Union v. Texaco. In that case, publishers of scientific and medical journals brought copyright infringement action against Texaco, who made unauthorized copies of copyrighted articles for use of its researchers. The 2nd Circuit rejected Texaco’s fair use defense and found in favour of the publishers. Even though, when analyzing the “effect on the market”, the court found that there was no persuasive evidence with respect to harm to the sales of subscriptions to journals, the court found that a finding of fair use would impair the ability of the publishers to license copying through the CCC, and held that the defense of fair use failed.

In the GSU case, the court accepted the Texaco approach and held that the availability of a license is relevant to the fair use analysis and would weigh in favour of the plaintiff. While the court noted the notorious circularity of the Texaco approach, it concluded that there is no ideal solution to this problem. The court’s solution seems to be treating the availability of a license as a necessary condition for defeating a fair use claim, but not a sufficient one.

In Canada, the Supreme Court avoided that circularity by rejecting the Texaco approach. Although that case is not mentioned in the decision itself, Texaco played an important role in AC’s strategy in the CCH case. AC, who was behind the litigation and granted intervener status at the Supreme Court, devoted a quarter of its intervener factum in CCH to the argument that “obtaining of licenses from collective societies constitutes a valid alternative to infringement and should be considered in the determination of the fairness of a particular dealing.” It submitted that the Court should follow Texaco and hold that “Where collective societies have created a workable market for institutional users to obtain licences for the right to reproduce works protected by copyright, courts should acknowledge that the reproduction of such works, absent a licence, will generally affect the potential market for those works, and take this factor into account in any analysis of whether a dealing is ‘”fair”.”

The Court in CCH listened to argument. The Court considered the argument. The Court rejected the argument. The Supreme Court held that

“The availability of a licence is not relevant to deciding whether a dealing has been fair. As discussed, fair dealing is an integral part of the scheme of copyright law in Canada. If a copyright owner were allowed to license people to use its work and then point to a person’s decision not to obtain a licence as proof that his or her dealings were not fair, this would extend the scope of the owner’s monopoly over the use of his or her work in a manner that would not be consistent with the Copyright Act’s balance between owner’s rights and user’s interests.”

Since the Supreme Court of Canada foreclosed a Texaco-style finding of infringement, the 5 successful claims in the GSU case might have failed in Canada like the rest of the 94.

Fair Use, Fair Dealing, and the Effect on the Market

I have recently blogged about the false claim that the “effect on the market” is the preeminent factor in fair use analysis in the US. The GSU case confirms this point: “It is hornbook law that there is no across the board rule for what weight should be given to each factor or how the factors should be applied.” (p. 19)

In that post I also discussed the fact that publishers have consistently failed to demonstrate any harm to their markets in virtually every reported case. The GSU case has now become just the latest chapter in a series of cases in which publishers make passionate claims about the harms of unauthorized copying for research or teaching but fail to support them with any credible evidence. As Judge Evans put it, these arguments are glib.

GSU, CCH, and the university’s liability

The named defendants in the GSU case were university officials. In an earlier decision the court held that they could not be liable for direct infringement or under vicarious liability but left open the possibility of contributory liability. At the close of Plaintiffs’ case, the court granted Defendants’ motion for judgment on Count II (contributory infringement), leaving only the claim under Count I that the 2009 Copyright Policy caused copyright infringement.

The court concluded the university was liable for the five cases of infringement, because GSU’s Copyright Policy “did not limit copying in those instances to decidedly small excerpts as required by this Order. Nor did it proscribe the use of multiple chapters from the same book. Also, the fair use policy did not provide sufficient guidance in determining the “actual or potential effect on the market or the value of the copyrighted work,” a task which would likely be futile for prospective determinations (in advance of litigation). The only practical way to deal with factor four in advance likely is to assume that it strongly favors the plaintiff-publisher (if licensed digital excerpts are available).” Still, the court believed that “Defendants, in adopting the 2009 policy, tried to comply with the Copyright Act. The truth is that fair use principles are notoriously difficult to apply. Nonetheless, in the final analysis Defendants’ intent is not relevant to a determination whether infringements occurred.” This is potentially another point which could turn out differently in Canada.

Normally in a similar factual setting in Canada, the university’s liability would depend on whether it would “authorized” the infringement. In CCH the Court adopted an approach that is likely to make it more difficult to hold the university liable. The Supreme Court emphatically emphasized that

While authorization can be inferred from acts that are less than direct and positive, a person does not authorize infringement by authorizing the mere use of equipment that could be used to infringe copyright. Courts should presume that a person who authorizes an activity does so only so far as it is in accordance with the law. This presumption may be rebutted if it is shown that a certain relationship or degree of control existed between the alleged authorizer and the persons who committed the copyright infringement.

Even though the Court relied on the lack of master-servant or employer-employee relationship between the Law Society and the patrons to support its conclusion that the Law Society lacked the necessary control over the library’s patrons, concluding that the existence of such relationships is sufficient to rebut the presumption that the activity was authorized only so far as it is in accordance with the law is would not only be a logical fallacy but it would also ignore the policy rationale behind the Court’s holding. In CCH the court declined the follow the Australian High Court decision in Moorehouse (which held that a university was liable for authorizing copying by library patrons becuase it failed to had taken reasonable steps to prevent an infringing copy from being made) stating that Moorhouse approach was “inconsistent with previous Canadian and British approaches to this issue,” but more importantly, it “shifts the balance in copyright too far in favour of the owner’s rights and unnecessarily interferes with the proper use of copyrighted works for the good of society as a whole.”

Moreover, despite being an employer of professors, the university is an inherently non-hierarchical organization. This is not a bug, but a feature. The very limited control that university administration has over professors choices of materials used for research or teaching is, in part, necessary to enable academic freedom, which is, as the Alberta Court of Appeal just confirmed, “an important value in Canadian society” and a value that is inextricably linked to freedom of expression protected by the Charter.  Academic freedom, of course, is not a free pass to professors to infringe copyright, but a university that would be liable for the infringement of its faculty—except in some extreme situations—would have to exert much greater level of control over its professors than it currently does. An interpretation of the Copyright Act that requires a high level of control runs the risk of being constitutionally invalid.

In addition, in CCH, the Court rejected the notion that the Law Society had to prove that all the copies made by the library’s patrons would constitute fair dealing. The Court held that it was not incumbent on the Law Society to adduce evidence that every patron uses the material provided for in a fair dealing manner, but that instead, it was sufficient for the Law Society to rely on its general practice to establish fair dealing.  “Persons or institutions relying on the s. 29 fair dealing exception need only prove that their own dealings with copyrighted works were for the purpose of research or private study and were fair. They may do this either by showing that their own practices and policies were research-based and fair, or by showing that all individual dealings with the materials were in fact research-based and fair.” (para. 63). The policy of the Great Library which the Court upheld as fair is much more general than the GSU policy, and does not seem to have the degree of specificity that Judge Evans requires in GSU.

The Canadian Paradox

As I write this post, Bill C-11 is under third readings at the House of Commons. Barring some unexpected development, “education” will be explicitly added to the fair dealing provision, removing any doubt that the Copyright Act allows fair dealing for this purpose. Bill C-11 will also reduce the risk of excessive statutory damages for non-commercial activities. The cumulative effect of this amendment the the Supreme Court’s holdings in CCH, will be an expanded ability of Canadian universities to pursue their mandate without being subject to Access Copyright’s de facto Education Tax, and without being liable for copyright infringement. To Supreme Court’s clear repudiation of Texaco gives Canadian universities a wider zone than that available to their American counterparts. Nevertheless, American universities are much more willing to assert and defend their rights, while many Canadian ones, short-sighted, extremely risk-averse, and ill-advised, still cling to their habit of being dependent on Access Copyright.

Still, the opposition to the AUCC-AC Model License continues to mount. The times they are a-changin’.

I’m usually skeptical about these types of rankings because the law is a very complex social phenomenon, but today I’ll stick to Independence Day’s celebratory mood. Still, I’m quite familiar with Israel’s IP laws, and how they compare to those of other countries such as Canada and the US, and I’m not surprised at all by the this report’s result: the public-interest orientation of IP law in Israel is deeply rooted among the judiciary, Parliament, and the legislative process is much less captured by the big-content lobbies. I’ve written a lot lately on fair dealing/fair use and education, so here’s what the Israeli Supreme Court said last summer on fair use and education:

[I]t should be emphasized that it is of utmost important to provide adequate protection for educational institutions, so that they would be able to perform the important mission bestowed on them to enrich and disseminate public knowledge, and educating the next generations of creators. It has been said, specifically with respect to post-secondary institutions, that “the needs of research and teaching necessitate special attitude in order to foster a rich intellectual environment based on academic freedom … . This need has become even more pressing in recent years, in light of technological innovations and subsequent changes in copyright law, which increased substantially the burden on post-secondary institutions … . Without firmly deciding the issue at the moment, the defense of fair dealing might allow educational institutions, under certain circumstances, to use parts of works for the purposes of teaching or research, thus allowing them to perform their important social mandate. This defense had been applied in the case law prior to the enactment of the new Act [the 2007 Copyright Act] … , and specifically enshrined in the s. 19 [of the new Act] … . S. 19 of the new Act specifically provides that on of the allowable purposes is “teaching and examination by an educational institution”

(the case is Hebrew University v. Schoken, here’s a link to the Hebrew judgment).

Israel may also be a live evidence that public-interest oriented IP laws do not deter innovation, but actually promote it. As I wrote in earlier post titled What Can Canada Learn from Israel about Copyright Reform?, Israel is an innovation leader in many areas. This point was made by many others as well, including a recent study by Richard Florida and other UofT colleagues at the Martin Prosperity Institute. Their study finds that Israel ranks first in the percentage of its total economic output devoted to R&D. Florida and his coauthors developed a Global Creativity Index (GCI), comprised of various measures categorized under three Ts: Technology, Talent, and Tolerance. This index provides some interesting comparative insights about Canada and Israel. On the Technology factor, Israel ranks 4 and Canada 11. On Talent, Canada ranks 17 and Israel 20, and on the Tolerance factor, Canada ranks 1 and Israel 66, which puts Canada ahead on the total GCI index at #7, compared to Israel at #24. But still, Israel’s GDP is higher than what its GCI would predict, while Canada’s is lower.

So maybe we can get the winning formula for innovation: combine Israel IP laws with Canada’s tolerance.  And this conclusion could also be my perfect birthday wishes for Israel, my country: You’re innovation laws and policies may be admirable and you a lot to be proud of; hopefully you’ll be just as great on tolerance.

Happy Independence Day.

These allegations are baseless. If there are provisions in Bill C-11 that are more suitable candidates for challenge are those that are designed to allow Access Copyright (which represents many of the publishers whose organization sent the letter) to appropriate to itself the copyrights of others and entrench its monopoly (I wrote about those in an earlier post). But as beneficiaries of this monopoly, these publishers are understandably silent about those provisions.

Still, one cannot help but wonder whether all the brouhaha about fair dealing and the other minor exceptions is just a red herring, designed to divert attention away from the real Big Access Copyright Grab.

Red herring image courtesy of Misocrazy. Some rights reserved.

On April 16, 2012 AUCC and Access Copyright agreed upon the terms of a model licence agreement which AUCC is recommending that its members outside Quebec enter into with Access Copyright. I enclosed a copy of the model licence agreement.

The licence agreement that an AUCC member enters into with Access Copyright based on the model licence agreement (the “Member Agreement”) will licence that member to copy published works within Access Copyright’s repertoire. A Member Agreement will be for a term commencing January 1, 2011 and terminating December 31, 2015. In view of section 70.191 of the Copyright Act, the Interim Tariff that issued in the proceedings before the Board concerning the Proposed Tariff, and the Proposed Tariff when certified, will not apply to any AUCC member who enters into a Member Agreement.

Access Copyright has also agreed with AUCC to support the position, if taken by an AUCC member that has signed a Member Agreement, that the member should not be required to further participate in proceedings before the Board concerning the Proposed Tariff, including participating in surveys or providing further information as to its copying activities.

In view of AUCC’s agreement with Access Copyright, AUCC hereby withdraws its objection to the Proposed Tariff.

This is a remarkable development. Unless all AUCC members have already informed it that they are planning to sign the Model Agreement (which seems highly unlikely), this outright withdrawal increases the pressure on universities to sign the agreement, which is an offer that they can’t refuse. If the AUCC thought that it would be in the universities’ best interest to settle with Access Copyright, it should have insistent that Access Copyright would withdraw the Proposed Tariff as part of such settlement, and then let universities decide whether they wish to sign an agreement or operate without a license from Access Copyright. Instead, AUCC negotiated a model license that forces universities to choose between a bad agreement and a combination of an even worse Tariff and continued litigation before the Board.

What’s even worse is that–setting aside the issue of cost–it is not even clear how a university that wishes to continue objecting to the Proposed Tariff could do that, because procedurally, individual universities were not “objectors”, only the AUCC was, and at this point its members have no independent standing in the proceedings. And substantively, it might as well be the case that the Board would regard the AUCC’s withdrawal of its objection as binding on its members. Unfortunately, the AUCC’s submission does not mention any agreement with Access Copyright that would allow AUCC members to continue to challenge the Proposed Tariff, nor asks the Board to make any order that would guarantee that. It would be an error for the Board not to allow remaining objecting universities to continue challenging the Proposed Tariff, or to view the AUCC’s withdrawal of objection as binding on them. However, this is a position that Access Copyright might indeed argue, and that if accepted could leave those universities in a very difficult situation.

All of this does not mean that the AUCC’s move necessarily forecloses all options for its members that do not wish to sign the agreement. They, as well as the other remaining parties should consider what their next moves should be. The “lead” objector has now withdrawn and apparently left many issues unresolved and many of its members dissatisfied and unrepresented. It would seem that those of its members that are unhappy with the situation may need to find someone else to advocate for them.

The Model License is quite similar to the unfortunate agreement that UofT and UWO signed a couple of months ago. Like the other agreement, this one suffers from the same conceptual flaws that I described in an earlier post. The two agreements also contain similar provisions that create unacceptable intrusion and limitation on academics’ ability to conduct research and teach. For example, s. 4(a) provides that “Except as specifically authorized under section 3(b), no Copies of Repertoire Works shall be made available, distributed, or transmitted to a person who is not an Authorized Person.” This appears to mean that even though the Agreement allows me to copy a journal article, I can’t share it with a colleague from outside my institution, even if that colleague is a co-author. Is this the best possible outcome? Really?

Or consider s. 4(c): “Copies of Repertoire Works shall not be stored or indexed with the intention of creating a library of Published Works, except as permitted by this agreement as part of a Course Collection.” I don’t know when was the last time the people who negotiated these license agreements conducted academic research, but I’m happy to break the news that since the photocopier appeared on campus (and perhaps earlier than that) copying works (such as journal articles), and storing them “with the intention of creating a library” has been integral to the researcher’s life. Some of us  annotate these copies, occasionally at least, and those who are better organized employ various methods for cataloging and indexing their collections. Believe it or not, some academics keep not only collections of photocopies but also collections of materials in electronic format called “pdf”. Yes, we sometimes do weird things up there in the ivory tower. Moreover–and I hope you’re ready for the shocking news–it has even been brought to my attention that some Canadian researchers use programs like Zotero, RefWorks, EndNotes, among others, in order to index those files for easy search, retrieval, and other seditious purposes. The agreements seem to prohibit that. Is this the best possible outcome? Really?

Or what would you say about the following gems, such as s. 5(a): “Digital Copies of Repertoire Works shall not be transmitted to, posted or uploaded to, or stored on any computer network other than a Secure Network”, and 5(b:) “Digital Copies of Repertoire Works stored on Secure Networks shall be made available and accessible only to Authorized Persons segregated by individual Course of Study”?

These prohibition seem benign enough until your read the definitions. A Secure Network is defined as: “a network that is operated by the Licensee [i.e., the licensed university, not the Authorized Person, AK], or for and subject to the control of the Licensee (such as a network hosted by a third party and/or accessible through a web interface) and which is only accessible by an Authorized Person who is approved by the Licensee by means of a process of authentication which, at the time of login, identifies the user as an Authorized Person, whether by user name and password or by some other equally secure method.” This definition inspired me to write the following short poem.

Bye bye CDs, au revoir USB drive,

Goodbye local hard-

disk and memory card.

No more Dropbox, no more Gmail,

Adieu, dear Cloud. Take care. Farewell.

Is this the best possible outcome, Really? And who the heck should be “segregated by Individual Course of Study”? Should the Digital Copies be segregated or the Authorized Persons?

And if that’s not bad enough, how about the “poison pill” in s. 5(d): “(d) Where the Licensee is no longer covered by this agreement, the Licensee shall immediately use reasonable efforts to (i) prevent access to Digital Copies of Repertoire Works made under this agreement and stored on a Secure Network under its control …” Get it? If the Access Copyright decides to terminate the Agreement, or if the university decides not to renew it, the university will have to block access to all the copies that you made. Immediately. Who wants to be the university administrator that will decide to divorce Access Copyright under such conditions? “Educational institutions and the publishing industry depend on one another,” said Greg Nordal, President, Nelson Canada and Access Copyright Board Member. They depend on each other so much, that care must be taken to avoid withdrawal symptoms. Thank you.

What else does the Agreement has to offer? Probably in response to the outcry over the surveillance provisions of the UofT-UWO agreements, the equivalent provisions under the AUCC Model License are more detailed and guarantee that “The Survey shall respect the principles of academic freedom, for example, by not providing access to the Licensee’s, its Students’ and academic staff’s chat rooms and e-mails” (s. 11(d)(iii)). What a relief. Your emails and chats won’t be put under surveillance, but everything else might. The best possible outcome, Really?

And now to the last nugget, which I saved to my faithful readers, my fellow Access Copyright geeks. Here’s one of the most interesting and worrisome aspects of the agreement, s. 18.

18.  Application of the Tariff
Consistent with section 70.191 of the Copyright Act, Access Copyright will not seek to enforce the Tariff, and any renewals, extensions or replacements of the Tariff, against the Licensee during the Term.

Why is it interesting? Because it indicates that the Agreement with the AUCC is not even part of a settlement of the Tariff proceedings before the Copyright Board. That is, Access Copyright does not intend to withdraw the Proposed Tariff but plans to use the Proposed Tariff as a threat against the Opt-Out institutions, those rebellious universities that decided to get over the Access Copyright addiction. As you may recall, the Proposed Tariff requested a fee of $45 per student, and included surveillance, monitoring, and auditing requirement that make the equivalent requirements under the Model License look like The Charter of Rights and Freedoms. Moreover, the Copyright Board has expressed the view that the option of opting out is merely theoretical, because the Final Tariff would apply to any institutions that made even a single copy of a single Repertoire Work, and will be levied retroactively.

One of the things that I learned over the last several weeks is that one of UofT’s motivations to settle the case was the realization that the AUCC was handling the Copyright Board challenge quite badly. Apparently, UofT concluded that it would rather settle than participate in funding a legal challenge that was handled in a way that guaranteed defeat. I suspect that additional universities have reached the same conclusion, and the result is a classic prisoners’ dilemma for the universities. If all of them could coordinate and mount a serious challenge they could win the case, but if they cannot coordinate to mount such challenge, then those who continue to fight would lose and be subject to a retroactive draconian Tariff, whereas those who settle will get a bad deal, but one that is not as bad as a retroactive Tariff.

To accelerate this outcome, Access Copyright and the AUCC even negotiated a Limited Time Offer of Discounted Pricing on Retroactive Payments, that provides relief from retroactive payments for the institutions that sign the agreement early. The message to university administrators is clear: “Yes, you can opt out and try to challenge the tariff; but you will lose anyway. Instead, here’s an offer that you can’t refuse.”

So no, Mr. Davidson. This deal is not the best possible outcome for universities. The AUCC may believe that under the current circumstances “this negotiated agreement provides the best possible outcome for universities”. But if such a dismal outcome is the best that Canadian universities believe they could get, then Mr. Davidson and other senior university administrators still owe faculty, staff, students, and taxpayers some serious explanations. They should explain how instead of coordinating and leading the academic community to set itself free from the tyranny of Access Copyright, they ended up colluding and brokering a deal with their bully. If they were advised, or came to the conclusion on their own, that this agreement is the best they could get, they should explain why they have used and have continued knowingly to seek legal advice from counsel who regularly advise and act for copyright collective and other big content owner interests. The AUCC and other senior university administrators should explain why retaining counsel who have lobbied on behalf of publishers and copyright collectives, and argued in the Supreme Court of Canada last December against a “large and liberal” interpretation of fair dealing that would be beneficial to academia was a wise decision to make.

We deserve to know why these flawed agreements are the best possible outcome for universities. We really do. Really.

Isidor and Nathan Straus

This is not the first time that book publishers are unhappy about discounting resellers and collude to adopt a different model. A century ago, an industry-wide cartel of book publishers and traditional booksellers was formed in order to prevent the discounting of books. Some readers of this blog will be familiar with Bobbs-Merrill v. Straus, the US Supreme Court case from 1908, which established the first-sale doctrine.

Bobbs-Merrill was the publisher of a novel titled The Castaway. A notice printed on the book prohibited anyone from reselling it for less than $1, and threatened to treat any violation of this condition as copyright infringement. Macy’s, then a discount department store, purchased copies of the book from a distributor and sold them for ¢89 each. Bobbs-Merrill sued for copyright infringement. The Supreme Court dismissed the action, relying on the principle of exhaustion borrowed from earlier patent cases, as well as on the general policy against restraints on alienation.

The Court’s decision in Bobbs-Merrill case ends with a remark explaining that in light of the Court’s conclusion dismissing the copyright infringement claim, “it [is] unnecessary to discuss other questions noticed in the opinion in the circuit court of appeals, or to examine into the validity of the publisher’s agreements, alleged to be in violation of the acts to restrain combinations creating a monopoly or directly tending to the restraint of trade.”

This single allusion to antitrust, opens the door to a much richer antitrust history discussed in the lower courts’ decision, and reveals remarkable similarities to the current lawsuit against the publishers. It turns out that the dispute in Bobbs-Merrill did not involve a single publisher desiring to exercise control over the distribution system of its books. Rather, the case concerned an industry-wide cartel established in 1900, comprising the majority book publishers and booksellers who conspired to “correct some of the evils connected with the cutting of prices on copyright books” by requiring all publishers to fix the retail prices of their respective books, to prevent discounting, and eliminate discounters by collectively refusing to deal with them. Resale Price Maintenance (RPM) was the means to enforce the cartel and copyright was an effective method to enforce the RPM. The case was not about the vertical relationships between a publisher and a reseller, but had horizontal aspects as wide as horizontal aspects can be.

In fact, as early as 1903 Macy’s attempted to fight the cartel by suing the American Publishers’ Association and the American Booksellers’ Association relying on the Sherman Act and its equivalent New York Anti-Monopoly Act. Macy’s bid was only partially successful. The New York Court of Appeals found in favor of Macy’s on the basis that the publishers’ and booksellers’ rules sought to prevent the discounting of all books, copyrighted and non-copyrighted alike. Relying on Bement v. National Harrow, however, the court held that a combination to fix the prices of copyrighted books alone would be legal. Soon thereafter, the respective associations’ rules were amended to cover copyrighted books only, and Bobbs-Merrill commenced its copyright infringement suit against Macy’s. In its defence, Macy’s argued that the notice could not restrict the right of an owner of a copy of a book, lawfully printed and sold, to resell it as it saw fit. Macy’s further defended on the grounds that the lawsuit was an attempt to enforce an unlawful combination. The circuit court sided with Macy’s on both issues and refused to construe Bement v. National Harrow as broadly as the state court did. On appeal, the  Court of Appeals affirmed, but addressed only the copyright question. The Supreme Court, as noted above, mentioned the antitrust issue only in passing and based its decision solely on copyright grounds.

There are remarkable similarities between the turn of the 20th century case and the present one. Both of them involve resellers who revolutionized retail, and whose ability and willingness to sell books at discounted price threatened the existing business models of publishers and retailers. In both cases publishers had to collude among themselves and with some retailers in order to eliminate the threat of the discounting retailer and force a shift from a wholesale model to a model that allows the publisher to control the retail price. There are some differences, of course. The old case involved a retail innovator and collusion between publishers and resellers of yore, whereas the current case involves, in addition to publishers, two innovators (Amazon and Apple) and two innovations (retail innovation and product innovation).

But as the new case unfolds, it may be important to consider not only the antitrust aspects of the case but its copyright aspects as well. In Bobbs-Merrill, the Supreme Court avoided the antitrust questions and solved the case on copyright grounds, by establishing the first-sale doctrine. Since RPM was the means to enforce the cartel, and copyright was supposed to be the means to enforce the RPM, the Court’s decision destabilized the cartel. Thus, the Court broke the cartel by removing the ability of relyong on copyright law to maintain it.

The move to ebooks, however, and publishers’ tendency to “license” digital copies of content rather than “sell” it, put the first-sale doctrine under serious pressure. In a recent case, Vernor v. Autodesk, the 9th Circuit held that a software publisher could avoid the first-sale doctrine by licensing the software and including post-sale restraints in the license terms. If this approach is followed by other courts, there is danger that even if the DOJ wins the antitrust case, the victory may be short-lived.

The antitrust history of Bobbs-Merrill shows that post-sale restraints, enforceable with unexhausted IP rights have greater capacity to facilitate cartels and other types of anti-competitive behavior compared to contractual restraints. When the first-sale doctrine is inapplicable, publishers may use post-sale copyright restraints to support tacit collusion (or to collude without leaving incriminating evidence). The DOJ and the courts should remember this lesson not only in the current antitrust case but also when they decide whether and how to apply the first-sale doctrine to ebooks and other digitally distributed content.

_____________________

I explore this issue of the future of the first-sale doctrine in greater detail in this recent paper.

UPDATE: Kenneth Crews reminded me that Isidor Straus died 100 years ago today on the Titanic. Just another historic coincidence.

The Orphans, the Market, and the Copyright Dogma

At its core, copyright law is based on a very simple logic–market logic.  The law grants limited exclusive rights in creative works, with the expectation that such rights will then be voluntarily exchanged in a decentralized market place.

Whether we believe that exchange will provide the financial incentives for creating the works in the first place, or whether we have a different theory of copyright, the idea of a decentralized market place is central to copyright.

Indeed, the idea of a decentralized market was implanted in the DNA of copyright since the Statute of Anne, which hoped to dislodge the monopoly of the Stationers’ Company and replace it with a market-based system.

We should keep this point in mind when we think about solutions to the orphan works problem, and we should be cautious about solutions that bring back a new version of the Stationers’ Company, and entrust monopolies and bureaucracies as guardians of orphan works and gatekeepers of knowledge.

We all know that the general rule in copyright is that a user should contact the owner and ask permission before using the work. Generally, this permission-first rule makes lots of sense. It makes sense mainly because it is much less costly for a prospective user to approach the owner and ask permission before using, than for an owner to locate and go after all actual or potential users and ask them to pay. But generally is not always.  A permission-first rule only makes sense if the cost of getting permission is indeed low.  But if the cost of obtaining prior permission becomes prohibitively high, then a system demanding prior permission would result in a market failure—the very market the copyright law seeks to create.  In such cases we need an alternative rule.

But as it turns out, finding an alternative rule has been a challenge. And the question is why?

The Copyright Dogma

The reason why so far it has been so difficult to find a solution to the orphan works problem is that we often treat the permission-first rule as a dogma. We don’t treat it as a rule whose validity depends on how well it promotes the purpose of copyright law, but as “a belief held unquestioningly and with undefended certainty.”

As David Nimmer wrote, and Judge Chin accepted “[T]he law of the United States is that a copyright owner may sit back, do nothing and enjoy his property rights untrammeled by others exploiting his works without permission.”

Sit back and do nothing, regardless of the consequences. That’s the dogma. For the copyright dogma, the wrong in using someone else’s work without permission has nothing to do with impairing the ability of the copyright owner to participate in this marketplace, nor does it lie in any measurable concept of harm to the owner.

The dogma does not regard the use of works as something that ought to be celebrated and facilitated. Instead, the dogma considers the use of works as a sin that can only be avoided by seeking permission and paying a fee. This view of using a work as a sin motivates many of the proposed solutions to the orphan works problem. Many of them are based on the proposition that if the copyright owner is unlocatable, the user should get permission from and pay to, someone else.

So Canada has created a bureaucratic mechanism—and I may add useless—that allows the Copyright Board of Canada to grant permission to use an orphan work.  And the Board actually took it one step further and usually requires that payment will be made to a copyright collective.  So effectively, the Copyright Board created an Extended Collective Licensing regime.

Extended Collective Licensing (ECL) is another solution that has gained popularity in the aftermath of the rejection of the Google Books Settlement. Under ECL, a copyright collective can issue licenses not only with respect to the works of its members, but it can also authorize the use of the works of non-members, such as orphan works.

But these solutions don’t really solve the orphan works problem. These solutions merely pretend to solve the problem by requiring the user to pay money to someone else. However, if the owner is unlocatable, sending money to a copyright collective merely shifts the problem from the user to the collective. It is a good mechanism for collecting money from users, but it has nothing to do with facilitating transactions between owners and users.

The main rationales offered by the Copyright Board of Canada for its decision to create a de facto Extended Collective Licensing Regime are entirely moralistic. The Board believes that

• “it should not be in the business of issuing free insurance policies against prosecutions for violation of copyright.”
• It regards such payments as disgorgement of profit (hence the use as an offence),
• and finally it assumes that “given the choice, the unlocatable copyright owner would prefer that the royalties be paid to a group that represents interests similar to those of the owner than to see the user take advantage of the owner’s copyright for free.”

Indeed, the Copyright Board’s assumption only makes sense if the unauthorized use is viewed as a sin, and the user as a sinner.

Indulgences and the Copyright Hell

In fact, there are remarkable similarities between the emergence of this dogma and the emergence of some aspects of Catholic dogma in the Middle Ages. In the Middle Ages, the Catholic Church realized that since it couldn’t really prevent people from being sinful, it might as well monetize sin. And monetize sin it did. The most extravagant example of this mechanism was the widespread sale of indulgences. This became an extremely lucrative business, which helped preserving the dominance of the Church and enriched some of its highest priests.

Essentially, the Canadian solution and ECL offer nothing but indulgences for sale. They don’t really solve the orphan works problem, but they allow the Copyright Church to sell indulgences to users who want to save their souls from the copyright hell, and they allow some copyright owner to enrich themselves at the expense of other owners and users.

So now comes the big question: is there a better a solution to orphan works than the sale of indulgences?  Is there a solution that retains copyright law’s market orientation, facilitates the revival of orphan works and is also responsive to the wishes of copyright owners? The answer is Yes, and it is totally within our grasp. We can do it without monopolies or bureaucracies, and it does not require any substantial legislative reform.

Solution: Remedy Tweaking

My proposal is simple common law solution: Remedy Tweaking. My proposal is not based on defining conditions that would create immunity from liability, and it does not depend on defining what an orphan work is, because the concept of an orphan work is highly elusive. Instead, my proposal treats the problem at the remedial stage. I propose that the fact that the owner was unlocatable should be a factor considered by the court when determining the proper remedy after a finding of infringement. In some cases this consideration would justify a denial of an injunction. The court may still order to pay damages, or account for the profit attributable to the infringed work, but if these approximate what the parties would have agreed had a license been negotiated in advance, the orphan works problem would be seriously diminished.

Statutory damages, to the extent that they are mandatory and the court cannot reduce them to zero when appropriate, still pose a problem, so perhaps this is the only aspect of my proposal that may require legislative intervention (this solution is similar to the Copyright Office’s original proposal, but I can discuss some differences in the Q&A).

Why is remedy tweaking a better solution? To answer this question we need to understand why we an orphan work to begin with.

Usually, the orphan works problem is described from the demand side. What we have in mind is a user who finds it prohibitively costly to locate the owner. But this description ignores the supply side. It doesn’t explain why copyright owners choose not to make themselves easily locatable. This isn’t a trivial question, because copyright owners also lose if users can’t transact with them, so we might think that copyright owners would have good incentives to make themselves locatable. This could suggest that maybe there isn’t really an orphan works problem and that the problem it will take care of itself as digital technologies and markets mature. Patience, therefore, would be the best recommendation.

While I have some sympathy to this point of view, I think that it is only partly correct. The orphan works problem is deeper because it reflects discrepancy between the social benefits of using works and the private benefits accruing to the owner. The reason for this mismatch is that a copyright owner has to incur some expenses in order to maintain herself locatable. However, the owner will incur those costs only if the present value of the benefits that she expects to gain is larger than the costs that she needs to incur today. The problem is that the owner cannot expect capturing the full social benefit from using her work, only a portion of it. In addition, whatever she might expect to earn in the future is discounted because the future is in the future and the future is unknown.

Therefore, because of this is mismatch between the public and private benefits, owners will make sub-optimal investments in maintaining themselves locatable. We can also restate the problem in terms of costs.  We have an orphan works problem because owners don’t internalize the full cost of their works becoming orphan, and the current system does not provide them enough incentive to invest in making themselves locatable.

Now that we’ve stated the problem in terms of costs that are not fully internalized, we can immediately notice that the orphan works problem becomes a familiar problem. It’s not a problem unique to copyright, but a problem that is pervasive throughout the law. It’s a problem that has familiar solutions.

Copyright Owners are the Least-Cost Avoiders

One familiar solution is to ask who is the “least cost avoider”. That is, who is the party that is better positioned to reduce the cost of an activity. If we identify such a party we want to maker sure that it has the right incentives to reduce the cost. In our case, it is clear that the copyright owner is the least cost avoider, because she’s the one who always knows who she is and where she can be found. No one else knows better than her.

If the copyright owner is the least-cost avoider of the problem but doesn’t have good incentives to maintain ownership information available, the law can create these incentives with sticks, carrots, or both. This is what my proposal does. We can formulate my proposed solution as a stick (“if you don’t make yourself easily locatable ex ante you will be entitled to less ex post”), or we can formulate it as a carrot (“you, the owner, can choose between investing today in order to keep yourself locatable in the future, in which case you will be entitled to all the remedies, OR you can choose to invest less today, but earn less in the future).

Note that I’m not proposing immunity for users, or a blanket exception to liability. My proposal allocates the cost of maintaining a market system between users and owners: the user has the best information about his contemplated use and therefore should take reasonable steps to communicate his plans to the owner by seeking permission; the owner, on the other hand, has the best information about her identity and how she can be reached, and therefore should take reasonable steps to make this information available to potential users. Remedy tweaking will shift some of the risk of using orphan works from the user to the owner. It will adjust the user’s duty to seek ownership information and permission with a corresponding duty of the owner to provide such information.

While my solution may sound inconsistent with the copyright dogma, it is highly consistent with other aspects of the law. It is based on the general principle of the “duty to mitigate”. This principle plays out in various forms in contract law, in tort law, in property law, and in other areas. This solution will maintain the market orientation of the copyright system by encouraging owners to make themselves locatable, and reduce the risk of using works when the owners aren’t locatable. If it hasn’t been applied to copyright law, then it’s only because we have been captive by the Dogma, but we can set ourselves free.

Decline the New Stationers’ offer

To sum, the copyright system is based on market logic, but developed markets cannot exist without clear sense of who owns what, and without rules that encourage participants to provide information that is crucial for the ability to transact. Most of the proposed solutions are based on putting the entire onus on the user, whereas the least-cost avoiders are owners. If we want to solve the orphan works problem we have to make sure that owners have good incentives to make themselves locatable.

The solution is not to replace the market with regulated monopolies, or to establish new bureaucracies, and make them gatekeepers to knowledge. We should respectfully decline the offer of the New Stationers to regain control, and we should not substitute an industry of indulgences for a market for creative works.

Glover and Sookman acted as counsel for three publisher associations who were interveners in the in the recent K-12 fair dealing case (Province of Alberta v. Canadian Copyright Licensing Agency), one of the five cases argued before the Supreme Court of Canada last December. Sookman is also a registered lobbyist for the Canadian Publishers’ Council (and other copyright owners’ organizations), and the arguments in the blog are similar to those made in the publishers’ factum, by Mr. Sookman in oral argument, and by Access Copyright and other interveners who supported it. Howard Knopf and I wrote an intervener’s factum in the same case on behalf of the Centre for Innovation Law and Policy at the Faculty of Law, University of Toronto, and our position is clearly very different.

Both Howard Knopf and Michael Geist are internationally recognized, respected, and accomplished authorities on copyright. Both are clearly motivated in improving both domestic and international copyright law in accordance with the purpose of balancing “the public interest in promoting the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator”, as articulated by the Chief Justice of Canada in CCH v. LSUC. I am confident that Glover and Sookman share the same view about the purpose, even though they have a different view about how to achieve it. So let’s stop the personal attacks and nonsensical rhetoric about Orwell, crusades, and “ideologically friendly academic texts”, and talk seriously about the “effect on the market factor” and about the sudden recent demand for legislation that clarifies that the “effect on the market” is the pre-eminent factor in the fair dealing test.

All of the points that he makes were forcefully argued in CCH but rejected. It is legitimate to ask the Court to overrule its earlier decision or to ask Parliament to overrule the Court’s decision. However, it is hoped that anyone who asks to overrule a recent and unanimous decision, would be, at the minimum forthright about what he requests and why.

The “Effect on the Market” is unquestionably an important factor

It is unquestionable that the effect of unauthorized copying on the market of the copied work is a highly important factor in determining whether the dealing is fair. The list of authorities supporting this proposition is longer and older than the authorities that Mr. Glover relies on. But equally unquestionable is the proposition that the fair dealing (or fair use) inquiry cannot and has never been reduced to a single factor. As Lord Denning famously wrote in Hubbard v. Vosper (and cited with approval by the Supreme Court in CCH):

It is impossible to define what is “fair dealing.” It must be a question of degree. You must consider first the number and extent of the quotations and extracts. Are they altogether too many and too long to be fair? Then you must consider the use made of them. If they are used as a basis for comment, criticism or review, that may be fair dealing. If they are used to convey the same information as the author, for a rival purpose, that may be unfair. Next, you must consider the proportions. To take long extracts and attach short comments may be unfair. But, short extracts and long comments may be fair. Other considerations may come to mind also. But, after all is said and done, it must be a matter of impression.

Similarly, when US Congress codified fair use in 1976, the House Report explained the following:

Although the courts have considered and ruled upon the fair use doctrine over and over again, no real definition of the concept has ever emerged. Indeed, since the doctrine is an equitable rule of reason, no generally applicable definition is possible, and each case raising the question must be decided on its own facts. On the other hand, the courts have evolved a set of criteria which, though in no case definitive or determinative, provide some guage for balancing the equities. These criteria have been stated in various ways, but essentially they can all be reduced to the four standards which have been adopted in section 107: “(1) the purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.”

I would agree with Mr. Glover that “there is a grave risk of killing copyright incentives if the law regards as “fair” acts of copying that hollow out markets for works”. But the law does not do that in any jurisdiction of which I am aware. Moreover, whether this could be the case in any particular dispute is far from self-evident. As Professor Sag writes in a recent article,

Although market effect has the ring of an objective factual investigation, it is in fact a highly subjective assessment. In most cases, the judgment as to whether the defendant’s conduct falls foul of the fourth factor is somewhat elastic because to ascertain the extent of potential market effect, courts must first determine whether a given use is within the potential market. The proper scope of the plaintiff’s current and future copyright markets is thus an input, throughput, and output of this analytical process. In light of this imprecision, the apparent symmetry between the way judges describe the fourth factor and the outcomes of fair use cases raises the suspicion that market effect is no factor at all.

He continues,

The question then becomes: Is there any empirical content to the fourth statutory factor, or is it merely a legal conclusion? The simplest way to understand the market effect factor is as an inquiry into competitive injury or lost sales. Conceived as such, the empirical question is just a matter of finding that injury or those lost sales. This inquiry is easy to conceive but harder to implement because the extent of past losses and probable extent of future losses are keenly contested elements in most fair use trials. (p. 17)

That is why the courts in all Anglo-American jurisdictions prefer a multi-factor and flexible analysis over one that focuses on a single factor.

Indeed, we can describe the essence of the fair dealing (or fair use) inquiry as an exercise in determining the location of the particular use on a spectrum between two end-points. On one end are uses that are unquestionably beneficial because they add or contribute to the stock of human knowledge while depriving the copyright owner of nothing. If those were not allowed, copyright law would discourage the very creativity that it seeks to foster. At the other extreme are uses that do not add anything to the stock of human knowledge, constitute no more than direct substitution to and competition with the copyright owner, deprive the copyright owner of the opportunity to earn a return on her investment, and that unless prohibited, would similarly discourage the very creativity that the law seeks to foster. Most adjudicated cases fall somewhere between these two extremes, and all the factors that courts have used over the years are simply aids in making this inquiry more nuanced and accurate. Time and again courts emphasized that this task requires a case-by-case analysis, and that the inquiry defies bright-line rules.

Glover misstates English law

English law is no different. This would have been apparent had Mr. Glover quoted the full paragraph from the recent UK Ashdown case, not only the selected lines. Here are the lines that Mr. Glover quotes:

[70] … by far the most important factor is whether the alleged fair dealing is in fact commercially competing with the proprietor’s exploitation of the copyright work, a substitute for the probable purchase of authorised copies, and the like. If it is, the fair dealing defence will almost certainly fail.

But did the court in Ashdown really endorse an unequivocal view that effect on the market is the most important factor? Read the entire paragraph and the subsequent paragraph and judge to yourself.

70.  Authority is very sparse in relation to the defence of fair dealing in the context of reporting current events … . The Vice-Chancellor [in the court below] commented with approval, however, on the summary of the authors of Laddie, Prescott & Vitoria, The Modern Law of Copyright and Designs, paragraph 20.16, on the test of fair dealing in the general context of s.30. We also have found this an accurate and helpful summary and set it out for the purpose of discussion.

“It is impossible to lay down any hard-and-fast definition of what is fair dealing, for it is a matter of fact, degree and impression. However, by far the most important factor is whether the alleged fair dealing is in fact commercially competing with the proprietor’s exploitation of the copyright work, a substitute for the probable purchase of authorised copies, and the like. If it is, the fair dealing defence will almost certainly fail. If it is not and there is a moderate taking and there are no special adverse factors, the defence is likely to succeed, especially if the defendant’s additional purpose is to right a wrong, to ventilate an honest grievance, to engage in political controversy, and so on. The second most important factor is whether the work has already been published or otherwise exposed to the public. If it has not, and especially if the material has been obtained by a breach of confidence or other mean or underhand dealing, the courts will be reluctant to say this is fair. However this is by no means conclusive, for sometimes it is necessary for the purposes of legitimate public controversy to make use of ‘leaked’ information. The third most important factor is the amount and importance of the work that has been taken. For, although it is permissible to take a substantial part of the work (if not, there could be no question of infringement in the first place), in some circumstances the taking of an excessive amount, or the taking of even a small amount if on a regular basis, would negative fair dealing.”

71. These principles are based on a summary of the authorities before the Human Rights Act came into force. They are still important when balancing the public interest in freedom of expression against the interests of owners of copyright. It is, however, now essential not to apply inflexibly tests based on precedent, but to bear in mind that considerations of public interest are paramount (emphasis added).

When read in their entirety, the paragraphs from Ashdown teach us the following about English law: (1) precedent authority is sparse; (2) the Laddie et al. summary is accurate and helpful summary of the authorities that predate the Human Rights Act; (3) that although these considerations are still important, they are not controlling; (4) because it is now essential not to apply inflexibly tests based on precedent, but to bear in mind that considerations of public interest are paramount.

There are enough similarities between the Human Rights Act and Canada’s Charter of Rights and Freedoms that the caution expressed by the Ashdown court is also applicable to a Canadian court reading Ashdown (which is a UK Court of Appeal and not a House of Lords (now Supreme Court) decision). In any event, Canada’s Supreme Court is not obliged to follow UK law and has notably departed from decisions of its counterparts in copyright cases.  For example, in CCH the Court expressly indicated that the Australian High Court’s Moorehouse decision on authorization is not good law in Canada.

Therefore, Ashdown, does not stand for the proposition that under current English law the effect on the market is the pre-eminent consideration. Rather, it supports the proposition that “considerations of public interest are paramount.”

Glover misstates American law

If English law does not support Mr. Glover’s argument, does American law support it? Apparently not. It is correct that in Harper & Row, decided in 1985, the U.S. Supreme Court noted that the effect on the market is “undoubtedly the single most important element of fair use”. Unfortunately, Mr. Glover fails to mention that nine years later the U.S. Supreme Court, in Campbell v. Acuff-Rose abandoned the idea that this or any factor enjoys primacy. As Campbell instructs,

The task is not to be simplified with bright line rules, for the statute, like the doctrine it recognizes, calls for case by case analysis. … The text employs the terms “including” and “such as” in the preamble paragraph to indicate the “illustrative and not limitative” function of the examples given, … which thus provide only general guidance about the sorts of copying that courts and Congress most commonly had found to be fair uses. Nor may the four statutory factors be treated in isolation, one from another. All are to be explored, and the results weighed together, in light of the purposes of copyright (emphasis added).

The fact that in Campbell the US Supreme Court retracted the “single most important” view is well noted. It was explicitly noted in American Geophysical Union v. Texaco, a case that I will return to below, where the Court of Appeal of the 2nd Circuit noted that

Prior to Campbell, the Supreme Court had characterized the fourth factor as “the single most important element of fair use,” Harper & Row, 471 U.S. at 566, 105 S.Ct. at 2233; … . However, Campbell‘s discussion of the fourth factor conspicuously omits this phrasing. Apparently abandoning the idea that any factor enjoys primacy, Campbell instructs that `[a]ll [four factors] are to be explored, and the results weighed together, in light of the purposes of copyright.’

Similarly, the 2nd Circuit noted in Castle Rock Entertainment, Inc. v. Carol Pub. Group, Inc. that

The Supreme Court has recently retreated from its earlier cases suggesting that the fourth statutory factor is the most important element of fair use, see Harper & Row, … recognizing instead that “[a]ll [factors] are to be explored, and the results weighed together, in light of the purposes of copyright,” Campbell, 510 U.S. at 578, 114 S.Ct. 1164;

Similarly, in Perfect 10, Inc. v. Amazon.com, Inc., the Court of Appeal of the 9th Circuit concluded that

the significantly transformative nature of Google’s search engine, particularly in light of its public benefit, outweighs Google’s superseding and commercial uses of the thumbnails in this case. In reaching this conclusion, we note the importance of analyzing fair use flexibly in light of new circumstances.

The “effect on the market” is NOT the preeminent factor in the US

Indeed, since Campbell, as recent empirical studies show, there has been a noticeable trend in the US fair use jurisprudence. Moreover, these recent studies show that US fair use jurisprudence has become much predictable that commonly suggested. According to Neil Netanel, courts now emphasize the ”transformative use paradigm, as adopted by the Supreme Court in Campbell v. Acuff-Rose, over the market-centered paradigm of Harper & Row v. The Nation and its progeny.” In light of this evidence, the Bouchat case that Mr. Glover refers to, which does not notice the change that occured between Harper & Row and Campbell, is an outlier.

Matthew Sag’s empirical study reaches similar results. He finds that “the evidence from litigated cases … confirms the centrality of transformative use” (p. 36) and that “the amount and substantiality” of the defendant’s unauthorized use of the plaintiff’s work is also a strong predictor of fair use.  He notes that

Although the effect is not as large as was transformative use, there is clear evidence confirming that partial copying weighs in favor of the defendant’s assertion of fair use. At a practical level, this reinforces the wisdom of minimizing the extent of unauthorized use when relying on the fair use defense. However, it is also apparent from the data that there are many strong cases of fair use involving copying the entirety of the plaintiff’s work. Technologies that rely on digital processing of entire copyrighted works, such as Internet search engines and plagiarism detection software, nonetheless present a very strong case for fair use. (p. 37).

He further finds that “there is no evidence that commercial use (in contrast to direct commercial use)[1] reduces the defendant’s chance of maintaining a fair use defense,” and that courts do not show bias in favour of the underdog defendant. He concludes that his findings

tell us a great deal about the broader nature of the doctrine. Fair use is not a timid exception to the rights of copyright owners or a compulsory form of copyright charity; it is an integral part of the copyright system. The right to make fair use of a copyrighted work is equally applicable to Fortune 500 companies as it is to struggling artists. Fair use creates breathing space for cultural engagement in the form of reinterpretation and remixing of copyrighted content. Just as importantly, fair use also makes it possible for large commercial entities to build tools such as search engines that make the Internet work and to create platforms such as YouTube and Facebook for sharing individual self-expression. (p. 38).

Sag’s conclusions about the state of US fair use jurisprudence sound like a very close summary of CCH.

It follows that Mr. Glover’s statement about the “effect on the market” being “the single most important element of fair use” not only misstates the law as laid down by the US Supreme Court, it also misdescribes the way lower courts implement it.

Mr. Glover is not a law professor, so he cannot be faulted for not keeping up with “fresh from the oven” studies, such as those by Netanel and Sag. But Mr. Glover is a lawyer at a top law firm, graduate of top law school, and he surely knows how to retrieve US Supreme Court cases and how to check their currency. On a blog, relying on an earlier Supreme Court decision that supports a proposition while ignoring a later decision that refutes it (i.e., invoking Harper & Row while ignoring Campbell) might be embarrassing but excusable. On a blog, it is somewhat amusing that he accuses Howard Knopf of quoting “from ideologically friendly academic texts to misstate the law” because that would also mean that the US Supreme Court in Campbell, to which Knopf also refers, is equally “ideologically friendly”.

But regrettably, the intervener factum that Mr. Glover submitted last fall (with Mr. Sookman) misstated US law in the same manner. In para. 22 of the factum, Glover and Sookman wrote, quoting Harper & Row, that “In the USA, the Supreme Court has called the effect on the market factor “undoubtedly the single most important element of fair use.” The paragraph did not mention Campbell or any of the appellate cases that unequivocally interpreted Campbell as modifying Harper & Row.[2]

That statement about US law is incorrect. As US law stands today, the effect on the market is undoubtedly not the single most important factor. Ignoring this in a factum submitted to the Supreme Court of Canada resembles the kind of advocacy that Judge Posner recently described as the “ostrich-like tactic of pretending that potentially dispositive authority against a litigant’s contention does not exist”—advocacy which I find not amusing, and indeed, quite disappointing.

Which brings us back to Canada and the current controversy.

The attack on CCH and fair dealing

Clearly, Mr. Glover takes issue with the Supreme Court’s holding in CCH that fair dealing should be given “large and liberal interpretation”, with Bill C-11’s proposed explicit recognition of “education” in the fair dealing provision, and with the combination of both. He writes:

Unlike the current education-specific sections of the Copyright Act, the educational fair dealing right is not limited to specific activities carried out in actual educational institutions. Anyone might benefit from it in any context. I could “educate” myself about the works of Judd Apatow by downloading pirated copies of his movies, and then erasing them once I have been “educated” to ensure my actions are “fair”. It sounds outrageous until you look at the language of the Supreme Court’s 2004 decision in CCH, and understand how powerfully its words about fair dealing purposes receiving a “large and liberal interpretation” have been applied on the ground. Fingers are poised above copy buttons as I write.

Apparently, in Glover’s view the Justices who decided CCH also participate in Knopf’s and Geist’s imaginary “crusade to open Canadian copyright law so wide”, and the only difference is that Knopf ‘s and Geist’s crusade takes place offline whereas the Supreme Court’s crusade happens online.

But nothing in CCH seriously suggests that this was the Court’s view in 2004 or that this is the view of the Court in its present composition. In fact, during oral argument in the K-12 case, the justices directed many of their questions toward better understanding whether and, if so, to what extent, the copying by teachers indeed harmed publishers. Mr. Sookman’s own account of the oral argument confirms that.

So what is it about CCH that troubles Mr. Glover? Obviously, the concept of users’ rights, and the notion of giving them “large and liberal interpretation” trouble him, but less than a decade after CCH it seems very unlikely that the Court would retract on these points. Therefore, the attempt to reverse CCH must concentrate on less salient points, such as the following.

Avoiding considering harms and benefits

The first is the Court’s holding, in para. 59 that the “effect on the market” is “neither the only factor nor the most important factor that a court must consider in deciding if the dealing is fair.” Even though this holding it entirely consistent with US law and English law, and even though the Court clearly acknowledged that “[i]f the reproduced work is likely to compete with the market of the original work, this may suggest that the dealing is not fair,” Mr. Glover is still dissatisfied. Why? Because when the Court instructs to consider all the relevant factors in a purposive and non-mechanical manner, and to refrain from elevating one of them over the others a priori, it orders lower courts to defy rhetoric and conduct exactly the kind of fact-based and evidence-based inquiry that his publisher clients would surely dread.

When courts need to consider seriously all relevant factors, it becomes more difficult to get traction with unfounded claims about harm. Each of the six factors puts the alleged harm (as well as the defendant’s denial thereof) under closer scrutiny. In effect, the various factors institute a sort of cross-examination of the parties’ claims. They force the parties’ to answer each others’ claims about harms and benefits. The plaintiff cannot simply claim harm, and even proving harm is not sufficient, in the same way that claiming, or even showing, that the copying was done for a legitimate purpose is not sufficient. The factors force the courts to consider whether the alleged harm is of the kind that copyright law is meant to prevent; if it does, what is the causal connection between the defendant’s act and this harm; and whether prohibiting the defendant’s activities may in and of itself frustrate the purposes of copyright law. In the same vein the factors force the courts to consider the benefit arising from the unauthorized use in light of the harm, are there ways to achieve them without causing harm, etc. The following quote from Campbell, in which the Court explains why there cannot be a presumption of harm save in very limited circumstances, illustrates this point.

No “presumption” or inference of market harm that might find support in Sony is applicable to a case involving something beyond mere duplication for commercial purposes. Sony‘s discussion of a presumption contrasts a context of verbatim copying of the original in its entirety for commercial purposes, with the non commercial context of Sony itself (home copying of television programming). In the former circumstances, what Sony said simply makes common sense: when a commercial use amounts to mere duplication of the entirety of an original, it clearly “supersede[s] the objects,” … of the original and serves as a market replacement for it, making it likely that cognizable market harm to the original will occur. …

But when, on the contrary, the second use is transformative, market substitution is at least less certain, and market harm may not be so readily inferred. Indeed, as to parody pure and simple, it is more likely that the new work will not affect the market for the original in a way cognizable under this factor, that is, by acting as a substitute for it … This is so because the parody and the original usually serve different market functions. …

We do not, of course, suggest that a parody may not harm the market at all, but when a lethal parody, like a scathing theater review, kills demand for the original, it does not produce a harm cognizable under the Copyright Act.

When Mr. Glover suggests that the Court or Parliament or both should  “clarify” that the “effect on the market” is the pre-eminent consideration, he aims at avoiding this kind of inquiry. His objective is to make it easier for copyright owners to prevent socially desirable uses that produce no cognizable harm, or simply to threaten them with infringement claims and charge money in the form of license fees or settlement payments even when they don’t necessarily wish to prevent them. This may be good for Mr. Glover’s clients, but the public may be shortchanged.

Avoiding the need to prove harm

The second related point is the Supreme Court’s holding in para. 72 of CCH, that, because the defendant “lacked access to evidence about the effect of the dealing on the publishers’ markets”, the burden of producing such evidence, and establishing causal connection between the defendant’s copying and the harm lies with the publishers.” The Court found that

If there had been evidence that the publishers’ markets had been negatively affected by the Law Society’s custom photocopying service, it would have been in the publishers’ interest to tender it at trial.  They did not do so. The only evidence of market impact is that the publishers have continued to produce new reporter series and legal publications during the period of the custom photocopy service’s operation.

Mr. Glover’s publisher clients have very good reasons to try avoiding the need to prove harm. It is probably not a result of inadvertence or omission of the publishers’ lawyers that no evidence of harm was brought in CCH. There are not many reported cases dealing with the effect of photocopying on publishers, but in all of the cases that I am aware of, there was no proof of harm. When copyright owners prevailed in such cases it was only when courts merely assumed harm or legally constructed it. CCH is, of course, an example of a case of the first kind. The pending K-12 case is an example of the second.  

During oral argument in the K-12 case in the Supreme Court of Canada on December 7, 2012, some of the judges seemed to be troubled with the possibility that a finding for the Appellants (the educators) might have a non-negligible negative affect on textbook publishers. This concern was mainly based on some lines in the Copyright Board’s reasoning, which Access Copyright stressed constituted a finding of fact that the disputed copies caused harm. Access Copyright also stressed that this case should be distinguished from CCH, where there was no proof of harm, on this basis. The key holding on this issue can be found in para. 111 of the Board’s decision, where the Board explained:

We conclude that the impact of photocopies made … , while impossible to quantify, is sufficiently important to compete with the original to an extent that makes the dealing unfair.

Yet the only evidence before the Board for the existence of harm to publisher was evidence that textbook sales have shrunk by more than 30 per cent in 20 years.  While the Board clearly acknowledged that “several factors contributed to this decline, including the adoption of semester teaching, decrease in registrations, longer lifespan of textbooks, use of the Internet and other electronic tools, resource based learning and use of class sets” and noted that it could not “determine precisely to what extent each factor contributed to this decline” it still held that because schools have copied approx. 250 millions copies this amount of copying must have contributed to the decline in sales.

But this is not evidence of harm, let alone proof that the copying caused the harm—the Board just presumed that. But even if there was causal connection between copying and reduced sales this is not proof of harm. While reduction in sales could lead to reduction in profit, the one does not prove the other. Nor can lower profit be inferred from lower sales. Indeed, reduced sales can be the result of an increase in market power, which allows a publisher to increase profit by selling fewer books at higher prices.[3] The “incentive” that copyright is designed to provide publishers depends on profit, not on the number of sales. There was no evidence for reduction in profit, and as in CCH, there was evidence that the industry is healthy. Moreover, even if harm existed, the Board did not consider whether it would seriously undermine the incentive to publish new books, or whether the social benefits or education outweigh this harm.

No evidence of harm in other comparable cases

Lack of proof that photocopying caused harm was a key issue in the landmark Williams & Wilkins Co. v. U. S. case from 1973, a case involving copying of scholarly articles by libraries at research institutions. The US Court of Claims found that the copying was fair use. The case was affirmed by an equally divided Supreme Court. The plaintiff (a publisher of scientific journals) insisted that it has been financially hurt by the photocopying practices of the research institutes and of other libraries. The trial judge, applying logic remarkably similar to that of the Copyright Board, thought that

it was reasonable to infer that the extensive photocopying has resulted in some loss of revenue to plaintiff and that plaintiff has lost, or failed to get, “some undetermined and indeterminable number of journal subscriptions (perhaps small)” by virtue of the photocopying. He thought that the persons requesting photocopies constituted plaintiff’s market and that each photocopy user is a potential subscriber “or at least a potential source of royalty income for licensed copying.”

The appellate court disagreed. It noted that “studies rejecting as “fair use” the kind of photocopying involved here have also assumed, without real proof, that the journal publishers have been and will be injured,” and emphasized that “the record made in this case does not sustain that assumption.” The defendants brought unrefuted evidence that the publisher’s business was growing and healthy, income on the rise, “plaintiff’s business appears to have been growing faster than the gross national product or of the rate of growth of manpower working in the field of science” and the record was “also barren of solid evidence that photocopying has caused economic harm to any other publisher of medical journals.”

The court continued to reject the plaintiff’s theory of harm and its line of reasoning.

Plaintiff has never made a detailed study of the actual effect of photocopying on its business, nor has it refuted defendant’s figures. It has relied for its assumption (in the words of the chairman of its board) on “general business common sense and things that you hear from subscribers, librarians and so forth.” Its argument-and that of the other supporters of its position is that there “must” be an effect because photocopies supplant the original articles, and if there were no photocopying those who now get the copies would necessarily buy the journals or issues.

The court, then, repudiated a line of reasoning that is exactly the one adopted by the Copyright Board in the K-12 case, currently under appeal. It continued.

But this untested hypothesis, reminiscent of the abstract theorems beloved of the “pure” classical economics of 70 or 80 years ago, is neither obvious nor self-proving. One need not enter the semantic debate over whether the photocopy supplants the original article itself or is merely in substitution for the library’s loan of the original issue to recognize, as we have already pointed out, that there are other possibilities. If photocopying were forbidden, the researchers, instead of subscribing to more journals or trying to obtain or buy back-issues or reprints (usually unavailable), might expend extra time in note-taking or waiting their turn for the library’s copies of the original issues-or they might very well cut down their reading and do without much of the information they now get through NLM’s and NIH’s copying system. The record shows that each of the individual requesters in this case already subscribed, personally, to a number of medical journals, and it is very questionable how many more, if any, they would add. The great problems with reprints and back-issues have already been noted. In the absence of photocopying, the financial, time-wasting, and other difficulties of obtaining the material could well lead, if human experience is a guide, to a simple but drastic reduction in the use of the many articles (now sought and read) which are not absolutely crucial to the individual’s work but are merely stimulating or helpful. The probable effect on scientific progress goes without saying, but for this part of our discussion the significant element is that plaintiff, as publisher and copyright owner, would not be better off. Plaintiff would merely be the dog in the manger.

The court further continued to cite additional studies concluding that photocopying had no adverse impact on publishing.

Economic studies explain the lack of evidence of harm

Even though such findings seem somewhat counter-intuitive, subsequent studies explained why this was the case, and documented the ways in publishers reacted to the advent of photocopying by changing their pricing structures, and have learned to take advantage of the fact of photocopying and actually become more profitable.

One of the classic studies on this issue was a study by economist Stan Liebowitz. The study, titled The Impact of Reprography on the Copyright System, was commissioned by Industry Canada, and a later version was published in the prestigious Journal of Political Economy, and became a classic piece in the economic study of copyright.

In a nutshell, Liebowitz showed that while photocopying could substitute the purchase of original journals, the feasibility of photocopying has two other important effects: (1) because the materials can be inexpensively copied, there is an increased demand for them as copyable originals (i.e., the demand of copiers can be indirectly appropriated by copyright owners), and (2) the total value of the copyrighted good may be dramatically altered. Because of these two effects, photocopying need not have a detrimental impact on the revenues of copyright holders, and in fact it did not have such effect. Instead, the effect was salutary. By increasing the subscription prices to institutional subscribers, publishers were able to indirectly capture the value created by photocopying and their profits increased accordingly.

There is so little evidence about the actual effect of photocopying in the K-12 case that it is difficult to draw serious conclusions. However, the Board did mention the practice of buying class sets. Class sets are sets of books intended to remain in a specific place at all times and be shared by students. These books may be used by more than one class or by various students in the same class. Obviously, when schools use class sets (instead of supplying new books to every student each year) they purchase fewer books. However, Liebowitz’s study would predict that publishers would adapt by increasing the price of the books to capture the value of sharing. Therefore, the decline in the number of copies sold says nothing about harm to profit, and the fact that the industry has been consistently healthy during the time of decline in sales is consistent with what Liebowitz’s study would predict.

An interesting moment occurred during the oral argument in the K-12 case, in an exchange between Mr. Sookman and Justice Abella. Mr. Sookman highlighted the importance of effect on the market factor, and stressed that the CCH framework could cause real economic harm. “So what are the impacts on the authors and the publishers if the cascading effects of the Appellants’ submissions are given effect to?” he asked, and continued.

We submit” that the Appellants’ propositions would reduce publishers and authors’ incentives to make investments in the creation of educational materials. This would reduce access and dissemination of these materials. In the long run, it would shrink the inventory of materials available to the public, including materials that would be available to be used for a fair dealing purpose. And such a result would neither be in the public interest nor in the interest of publishers.

In response, Justice Abella asked him if there was any study that confirmed what he suggested. “I appreciate we can use common sense. But is there empirical basis for your suggestion that people will stop writing books because people are making copies of them instead of buying them?” Mr. Sookman replied that the Appellant’s factum included a reference to “a study in the UK for example that looked at reprographic copying and which made the point that if extensive reproraphic copying is made then that could have that impact.”

I couldn’t find a reference to any such study in the Appellant’s factum or in any other party’s submissions. The closest thing is a decision of the UK Copyright Tribunal, referenced in Sookman’s clients’ factum, which quotes the UK Whitford Report from 1977. The quoted part, however, contains no empirical support for the proposition, and as noted above, the economic literature draws an entirely different picture. The only additional “empirical” support that Mr. Sookman could offer was telling Justice Abella, on the basis of his experience in working in the industry, that international publishers have choices and therefore, might decide to locate their investments in other countries if they cannot get sufficient return in Canada. Even if this was an admissible testimony (which it is not) that carries any weight, it does not support the claim about the alleged detrimental effect of applying fair dealing to education.

There is no adjudicated case involves photocopying in which publishers were able to prove harm resulting from photocopying, and there is ample theoretical and empirical evidence that supports the view that photocopying has been harmless or even beneficial for publishers. Lest I be accused of being on a crusade on copyright, I wish to clarify that the lack of evidence of harm in these settings does not mean that harm does not or cannot exist in other setting. These findings cannot also be used to justify uplifting all restrictions on copying. However, these findings support the view, which is currently the law in both the US and Canada that harm cannot be presumed and needs to be proved, as well as weighed against the social benefits that could arise from copying. It is clear why publishers would prefer a system that allows them merely to assert harm.

The irrelevance of availability of license, and how Texaco was mysteriously forgotten

The third reason why CCH seems to trouble Mr. Glover is the Court’s abundantly clear holding, in para. 70, that

“The availability of a licence is not relevant to deciding whether a dealing has been fair.  As discussed, fair dealing is an integral part of the scheme of copyright law in Canada. If a copyright owner were allowed to license people to use its work and then point to a person’s decision not to obtain a licence as proof that his or her dealings were not fair, this would extend the scope of the owner’s monopoly over the use of his or her work in a manner that would not be consistent with the Copyright Act’s balance between owner’s rights and user’s interests.”

This point is one that many publishers dread and copyright collectives abhor, because they have been consistently promoting collective licensing as an alternative to fair dealing. As I noted in an earlier post, Access Copyright tried to stress this point in oral argument. And this brings us to the 2nd Circuit decision in American Geophysical Union v. Texaco, which I mentioned earlier.

In that case, publishers of scientific and medical journals brought copyright infringement action against Texaco, who made unauthorized copies of copyrighted articles for use of its researchers. The 2nd Circuit rejected Texaco’s fair use defense and found in favour of the publishers.

On its face, Texaco seems be the perfect case that Access Copyright and its supporting interveners and advocates would rely on. Not only the outcome is similar to that which the Access Copyright and publishers wish to achieve, the decision contains language that they must read with delight. For example, the court notes that “As with the development of other easy and accessible means of mechanical reproduction of documents, the invention and widespread availability of photocopying technology threatens to disrupt the delicate balances established by the Copyright Act.” The court even suggests that had it not been bound by precedent, “it would seriously question whether the fair use analysis … developed in an effort to adjust the competing interests of authors-the author of the original copyrighted work and the author of the secondary work that “copies” a portion of the original work in the course of producing what is claimed to be a new work” is applicable to “[m]echanical “copying” of an entire document, made readily feasible and economical by the advent of xerography, [which] is obviously an activity entirely different from creating a work of authorship.” What a delight (at least at first sight)!

Moreover, even though, when analyzing the “effect on the market”, the court found that there was no persuasive evidence with respect to harm to the sales of subscriptions to journals, the court found that

Though the publishers still have not established a conventional market for the direct sale and distribution of individual articles, they have created, primarily through the CCC, a workable market for institutional users to obtain licenses for the right to produce their own copies of individual articles via photocopying. … [A]nd since there currently exists a viable market for licensing these rights for individual journal articles, it is appropriate that potential licensing revenues for photocopying be considered in a fair use analysis.

The CCC is the Copyright Clearance Center, which is an organization similar to Access Copyright (although different in significant respects). Therefore, according to the court in Texaco, a finding of fair use would deny the ability of the CCC to collect royalties. That, according to the court, was a recognizable harm to the market—exactly the kind of circular argument that Access Copyright often makes.

Why, then, neither Mr. Glover post, nor his factum (or that of Access Copyright and the other interveners supporting it) mention such a delightful decision from the US? I assume that the reason is not lack of access to American cases. Therefore, I can only assume that the answer is that Texaco’s appeal is only superficial. I don’t know if that was the actual reason, but if I had acted for the publishers I would be concerned that, upon a closer reading, relying on Texaco before the Supreme Court of Canada could easily backfire for the following reasons.

First, while delightful to a commercial publisher’s ears, Texaco’s view of copyright is inconsistent with the Supreme Court of Canada’s recognition of users’ rights. Second, as noted earlier, Texaco clearly acknowledges that Harper & Row’s comment about the supremacy of the effect on the market test is no longer good law after Campbell. Relying on Texaco would have exposed the flaw of urging the Supreme Court of Canada to adopt Harper & Row. Third, the harm that Texaco recognized is exactly the kind of harm that CCH rejected in para. 70. Fourth, if the Texaco harm is irrelevant, then Texaco can be added to the list of cases, just like Williams & Wilkins and CCH, in which the publishers failed to produce evidence of harm. Moreover, mentioning Texaco would necessarily draw attention to Williams & Wilkins, which, as noted above, convincingly exposes the flaw of the logic that informed the Copyright Board’s “finding” or harm.

Therefore, if the publishers wanted to rely on Texaco, they would have to convince the Supreme Court of Canada that almost every element of CCH had been wrongly decided.

In fact, Access Copyright and Copibec, which were interveners in CCH, had relied heavily on Texaco. Indeed, they devoted a quarter of its intervener factum in CCH to the argument that “obtaining of licenses from collective societies constitutes a valid alternative to infringement and should be considered in the determination of the fairness of a particular dealing.” They submitted that “[f]ollowing this logic, the U.S. Court of Appeal of the Second Circuit in Texaco, expressly considered the existence of collective societies similar to Copibec and Access Copyright as a relevant factor against a finding of “fair use”, and then concluded that

the obtaining of photocopy licences, when they are offered by collective societies that are authorized by copyright owners to grant licences on their behalf, is an established and readily available alternative to the dealing. Where collective societies have created a workable market for institutional users to obtain licences for the right to reproduce works protected by copyright, courts should acknowledge that the reproduction of such works, absent a licence, will generally affect the potential market for those works, and take this factor into account in any analysis of whether a dealing is ‘”fair”.

Institutional users may currently obtain photocopy licences in Canada. In fact, Access Copyright has on several occasions offered licenses to the Law Society, thus providing it with a readily available alternative to copyright infringement.

The Court in CCH listened to argument. The Court considered the argument. The Court rejected the argument, and it in the clearest of words. Not that there’s anything wrong with urging the Court to overrule its previous decisions, if there are good reasons for doing so. However, the publishers and their astute lawyers probably believed that there is very little likelihood that the Court would reverse a unanimous and internationally acclaimed landmark decision less than eight years after it was rendered.

That is presumably why they chose to camouflage their attack on CCH by misstating American and English and invoking the red-herring of the Berne Convention and the Three-Step Test (a point that Howard Knopf has recently reiterated).

Conclusion

The “effect on the market” has always been an important consideration in fair dealing and fair use analysis. But this consideration is neither the single factor nor the pre-eminent one. When courts are instructed to consider all the relevant factors they are instructed to understand whether harm exists, whether it is a cognizable harm, and whether there are social benefits that outweigh it.

Mr. Glover is absolutely correct when he writes “there is a grave risk of killing copyright incentives if the law regards as “fair” acts of copying that hollow out markets for works.” But the crucial word is “if”. The law as it stands in Canada, the US and England does NOT do that and will indeed result in a finding of infringement when the facts so warrant. There is not the slightest indication that Canadian law post-CCH treats as fair any acts of copying that hollow out markets for works, and there is no evidence whatsoever that Canadian post-CCH law has killed or will kill copyright incentives. Mr. Sookman’s “trust me” reply to Justice Abella does not change that.

Where there is sufficient evidence that the acts of copying would indeed hollow out markets for works and the incentive to create works, both Canadian and American courts under the current law will find infringement. However, to prevail on the “effect on the market” factor, the law requires evidence and not mere rhetoric.