Visit to a weird planet: Canadian copyright and trade

Woodrow Wilson International Center for Scholars, Internet Piracy: Copyright Law in Canada and the United States (webcast)

Canada is back on the US IP watch list. The Canada Institute commissioned a report written by Eric Schwartz and Barry Sookman discussing the issues.

Steven M. Tepp (moderator), Senior Counsel for Policy and International Affairs, U.S. Copyright Office, drafter of the US Model FTA on IP

Eric J. Schwartz, Partner, Mitchell Silberberg & Knupp LLP, Washington, D.C., and former Acting General Counsel, U.S. Copyright Office

We don’t generally subsidize the arts in the US; we rely on investment incentives to generate art, and that’s why we need copyright. On the US presenting itself as a model: look at history—Dickens complained fervently about US law, and the US took a while to harmonize its law with the broader, formality-free framework. It wasn’t until the growth of the international market for copyrighted goods in the 1980s that harmonization seemed vital. TRIPs was concluded Dec. 1991, pre-internet; even 1996 agreements were pre-P2P. Technology neutral but nonetheless reflect the thinking of the day.

The US cares because studies show that IP is responsible for 8% of US employment, and the salaries in copyright industries are 30% above average. This isn’t unique: 50,000 jobs in Lebanon are in the core copyright industries, 4% of GDP.

DMCA success story: DVD market was able to grow as a result of the DMCA, because the studios had some comfort level with CSS as a speed bump. The average person didn’t care because s/he was willing to pay the price and wouldn’t spend time breaking the code to get an unauthorized copy. (Comment: the DMCA affected this dynamic how?) Now film is more available than ever before. There are still some concerns about availability—orphan works legislation might help. With notice and takedown as well as §1201, a lot of material is available that wasn’t available 10 years now.

The “making available” right/the collapse of the exclusive rights. Consumers now decide when and how they want to get works. US has a treaty obligation to recognize a making available right, but some courts have struggled to find it in the distribution/public performance right. Problem of proof: if a work is posted, there should be a “deemed” or implied distribution—this is a way to find a making available right in existing law, but not all the courts have gotten there yet. Likewise, with public performance, there are issues as with the Cablevision case—he says (with Jane Ginsburg) that was flat wrong. Individuals receiving a performance in their homes are getting a public performance. Private performance/copying rights would obliterate copyright. (!) So too with temporary/buffer copies—it’s about the ability to control works in whole or in part and license that way. Most temporary copies would be included in licenses anyway. (Comment: this is a wishlist for increasing US rights. I’m not entirely clear why our trade relations with Canada require these things.)

While hard copy piracy remains an issue, it’s all about digital piracy right now. Users, disseminators (ISPs), and others need to see efficient enforcement, data retention for enforcement, cooperation with notice and takedown, penalties for repeat infringers, and some privacy protections. Growth of graduated responses: France is working through developing cooperation between rights owners and disseminators of copyrighted material (comment: an interesting characterization of ISPs).

Courts have struggled to understand what “storage” means in the DMCA and that’s been a problem in that they’ve expanded the concept. Likewise, they’ve been very harsh about what constitutes “red flag” knowledge of infringement for ISPs. Difference between US and Canada: fairly well-developed third party liability law in the US. Post-Grokster, there is an understanding of the activities of inducement, but how and where a third party crosses the line is not clear. He sees the language of a test emerging, but not the details—general knowledge plus the availability of “simple measures” that weren’t used equals third-party liability. Future courts will track technological advances; when simple measures exist to police a site, failure to use them should incur third-party liability. Need more cooperation between disseminators and rightsholders; DMCA has been okay, allowing some measure of security for rightsholders and some understanding for users that they have a right to counternotify. (Query: how would this concept of user rights cohere with his endorsement of “simple measures,” as to which no counternotification opportunity is required, as we’ve seen with YouTube’s deployment of screening technologies?)

Barry Sookman, Partner and Co-chair, Technology Law Group, McCarthy Tétrault LLP, Toronto

Canada is in the midst of copyright reform. The use of P2P networks is very high in Canada; it’s home to some of the world’s most popular illegitimate filesharing sites; the amount of filesharing facilitated in Canada internationally and at home is staggering; pirate sites view Canada as having weak laws and thus gravitate there. Of the top 10 Bittorrent sites ranked by total number of visits, Canada has 5, and 2 of the others were ordered shut down. Isohunt indexes over 92 million files available to anyone, anywhere to download. 12 million peers sharing files at the time he took a snapshot. Isohunt claims that it’s just like Google.

Over 27% of visitors to Isohunt are from the US. 6% from Britain. It’s a significant contributor to US filesharing—roughly 1.3 million visits/month from Americans. Canadian use is 30%. Similarly, BTJunkie moved to Canada for legal reasons, but 27% of visitors are from the US; 636,000 US visits/month. TorrentPortal: same story; maintains that it’s just like Google. TorrentPortal advises users that Canadian users are immune from lawsuits for P2P use—tells them that Canadian laws are weak and haven’t implemented the WIPO treaties. 26% of visitors are from the US.

Canada also has “leech” services, allowing people to get any number of movies: e.g., IWannaDownload, a pay service ($4.95/month). Publicized with the tagline that “Canadian service = completely legal.” Many nonCanadian users. Graboid, an “innovative” pirate service for getting stuff from Usenet—say they’ve studied the law and that they’re legal in Canada. 30% of users are from US.

Other innovations: BT Guard: masks the identity of users from rightsholders. Says: Set up specifically in Canada for proximity to the US; helps avoid disconnection by US ISPs. PeerGuardian: another filesharing anonymity site—says on the site that “outside Canada” downloading via P2P puts you at legal risk. 48% of its users are from the US. Hexagon: sharing files over social networking systems.

International reputation: About.com says that file-sharing is legal in Canada, consistent with a lot of other commentary.

Canadians are high users of P2P: Canadian use of mininova is 3x higher than that in the US—over 3 million Canadian visits/month. Torrent sites beat out nhl.com in popularity, which really means something in Canada. Canada also has a lax border enforcement problem for counterfeiting/piracy. Also a real problem for transshipment of pirate goods from Canada to the US.

What is needed? Notice and takedown. Notice and notice has been proposed in Canada, uniquely in the world. Canada has weak secondary liability provisions, which is a real concern. Need injunctive relief against ISPs to prevent third-party infringement. Reform is needed; it’s not simply a domestic problem but a trade problem.

Q: What about that Google analogy? So what’s the holdup in Canada for fixing the law?

Sookman: Google is watching the Isohunt litigation with interest—any secondary liability developments have an impact on them, even though Isohunt isn’t the same as Google. Google worries that bad facts will make bad law for Google. Politically: might be because of successive minority governments, where proposals have never made it to fruition. Canada is also late in implementing digital treaties, and since those early days there’s been more of an anticopyright movement who use digital media to popularize anticopyright sentiment. There’s a perception that the public may not appreciate new legislation.

Schwartz: In the US, Google has been sued for direct and third-party infringement, and they were successful in defense. That case has now come to Canada, though Canada’s “acting in concert” third-party liability is a lot looser and he can’t predict what will happen.

Q: What remedies do exist now in Canada? Are non-digital intermediaries liable? Without DMCA notice and takedown, what should a copyright owner do?

Sookman: Canada does have laws! It’s a member of Berne and TRIPs. Reproduction, communication to the public right exist. Damages (including small statutory damages), accounting, and injunctive relief are available. Intermediary liability depends on what the intermediaries are doing. Distributing infringing copies can lead to liability—selling bootleg copies of movies, for example. Flea market: when it’s not direct acts of selling, but fostering infringement, that’s where there’s a real weakness in digital and nondigital scenarios. There is no effective way to require an ISP to do a takedown. Rightsholders can acquire information, go to court, and get an injunction, but there’s no way short of suit. Note normal rule: prevailing party is entitled to attorneys’ fees.

Q: What can/should a US policymaker do about this?

Schwartz: Continue to press the Canadian government in bilateral negotiations. No country is ever forced to do anything—countries decide to do things in trade negotiations because it’s in their own interests; they decide that one thing is worth more to them than to the other country, and trade apples with oranges. Copyright is important to the US economy, and because of the ability of countries with weaker laws to harm the US within its borders, we work with countries to improve their laws up to the international laws and, where treaties apply, up to their treaty obligations. (Plus extra with our FTAs, of course.) Does it benefit the local constituency? Yes, it would help Canadian authors and tech investment in Canada, but at the end of the day the US is advocating for the US. This is a longstanding irritant.

Sookman: Ensure that ministers in charge in Canada understand why the issue is important—explain the reasons to protect copyright that are in the Canadian as well as the US interest. The link between protection and creativity; the link between protection and enabling dissemination for the benefit of the public. Canada lacks the online services the US have, and partly that’s because companies have no assurance that they’ll make money if they develop the marketplace.

Schwartz: Sometimes local rightsholders say that US negotiators are better at getting the ear of policymakers, precisely because local content production is undeveloped. The US can engage in education, but at the end of the day it has to be self-interest.

UK has concluded that effective response is possible: their study shows that graduated response would reduce downloading by 78%, or 100 million pounds for the British recording industry. There can be real economic/cultural benefits to taking the right steps. Take what works and show it to Canadian decisionmakers. Next generation of issues: go beyond implementing WIPO treaties, and begin implementing graduated response, not necessarily three strikes but more nuanced. Laws can work, have worked, and have real positive benefits.

Sookman: in the UK, the largest growing music service is Spotify, coming to the US—a free download service. 80% of their users say they’ve stopped filesharing (according to Spotify). If you give people the opportunity to get licensed material, and add in notice plus consequences—not just notice and notice—it works, just like when Homer Simpson decided to steal cable and got electrocuted, though he doesn’t advocate electrocution as a penalty for downloading. (I note that Spotify appears to offer the opportunity with no change in the consequences, and seems to be working; I would like to hear about the added value of “consequences.”)

Q: Canada wants so much from us, why haven’t they given in?

Sookman: Torrent sites are actually submitting comments and participating in copyright reform in Canada. One sued the RIAA. Only in Canada would this happen. (Yes, how dare they participate in the legislative process! I guess they should go for armed rebellion instead, like proper pirates.) There’s been a lot of popularization of anticopyright positions in Canada, but the minority government is really a bigger problem.

Q: What can we learn positively from Canada on copyright issues, or is Canada just completely at fault? It seems dishonest to portray the DMCA and other US laws as wonderful examples. Canada has been trying to learn from the US experience. The DMCA inspired a number of movements focusing on its problems.

Sookman: Canada has waited too long. There are lessons learned around the globe: more or less homogenous laws dealing with digital problems, coming from the treaty framework. We could develop laws based on the best experiences around the world, and that’s a chance for redemption. But today, it’s just a very dark situation. Enforcement and digital issues need modernization, and Canada is contributing to infringement around the world.

Schwartz: The DMCA is not the be-all end-all, and we need graduated response and effective tools against P2P; the US isn’t the right measure, but treaty compliance is. Canada is now a victim of time delay, because businesses become entrenched, and a populist movement supporting free and convenient access has developed, which doesn’t help the government meet its treaty obligations.

Q for Sookman: You’re for the UK solution?

Sookman: They’ve been studying the issue and set a goal, unlike other countries, to enact laws which would reduce illegitimate filesharing by 70%. He likes that. Then they decided that a graduated response would work, then they studied what would be procedurally fair. This is a good precedent of going beyond WIPO treaty implementation. Steps taken in the face of the same popular discontent as there is in Canada.

Comment from Canadian embassy: Canada has passed legislation to address camcording: can move quickly.

Q: Canada can be a world leader: tracking/regulation of toxic chemicals is a success under minority governments. Canada wants the US to reverse “buy American” policies, as do many other countries. Why not do a deal on copyright?

Sookman: Canada does express a desire to be a world leader on copyright; some trade is necessary.