Canada Gazette, Part I, Volume 153, Number 17: Regulations Establishing Time Limits in Relation to Matters Before the Copyright Board

April 27, 2019

Statutory authority
Copyright Act

Sponsoring departments
Department of Industry
Department of Canadian Heritage

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Copyright Board (the “Board”) is an administrative tribunal responsible for deciding royalty rates and related terms and conditions for uses of copyrighted content that is collectively managed, among other duties. Delays in the decision-making processes of the Board are a long-standing and significant issue. As a result of these delays, Board-set royalties are often payable retroactively. This state of affairs poses several related consequences:

• Marketplace uncertainty: Persons making use of copyrighted content subject to a Board proceeding before the Board has rendered its decision risk retroactive payment of royalties that could be greater than what users were expecting or had been paying previously. Businesses seeking to provide innovative services to Canadians that rely upon such uses (e.g. digital streaming services) may therefore delay or decide against doing so because their costs would be unknown at the time their services would have been provided. The development and growth of businesses in Canada would thus be limited. ^{footnote 1}
• Constrained rights holder and creator remuneration: Rights holders and creators could similarly be harmed through an underdeveloped market for copyrighted content in Canada and because delays may prevent them from receiving timely payment for corresponding uses or from being fully compensated because of difficulties with retroactive payment collection and distribution.
• Additional costs to participants: Decision-making delays also result in additional legal costs for participants while the Board remains seized of their matters. As a result, Board proceedings may be inaccessible to some would-be participants.
• Frozen capital: Pending a Board decision, some users may maintain reserves to account for possible increases in royalty rates. This capital, which could otherwise be put to more productive uses, is effectively frozen.
• Limited access to copyrighted content: These potential obstacles could deter the creation and dissemination of copyrighted content, which would harm Canadians generally given the significant and increasing ways in which such content features in daily life.

The proposed Regulations Establishing Time Limits in Relation to Matters Before the Copyright Board (the proposed Regulations) are a key element of the Government’s comprehensive plan to address the issue of decision-making delays of the Board, while preserving the independence of its decision-making process.

Background

The functions, independence and importance of the Copyright Board

The Board is an independent administrative tribunal created by the Copyright Act (the “Act”) primarily to facilitate the collective administration of rights established therein by setting royalty rates and related terms and conditions for the use of copyrighted content where such rates or terms and conditions cannot be independently determined. The Board sets such rates and terms and conditions through tariffs of general application as well as in certain individual cases.

The Board is an important Canadian institution, and increasingly so. In 2016, royalties generated by Board decisions amounted to approximately $478 million. Its decisions span a broad range of fields, including music played in public venues, music streaming, copying of educational materials and retransmission of distant radio and television signals. As innovative technologies have emerged and legislative reforms affecting copyright have been enacted, the Board has evolved to perform its functions in an increasingly dynamic landscape. The Board has been at the forefront of cases interpreting new provisions of the Act and applying them to changing uses and technologies relating to such issues as peer-to-peer file sharing, Internet service provider liability, levies upon digital audio recording media, cloud computing and digital interactive services, among many others. In all contexts, the success of this system is based, in part, upon the timeliness of decision-making processes relating to the Board.

Previous research regarding delays at the Copyright Board

Delays in Board decision making have been noted and studied by the Government, the Board and stakeholders for many years. A backlog of proposed tariffs was reported by the Board throughout the 1990s ^{footnote 2} and, although it abated somewhat in the early 2000s, the issue re-emerged prominently in 2014 when the Standing Committee on Canadian Heritage studied the music industry and recommended further study of the time it takes the Board to approve tariffs. ^{footnote 3}

A Government-commissioned study in 2015 found that, between 1999 and 2013, tariffs were approved an average of 3.5 years after being filed and proposed tariffs filed but not yet approved had been pending for an average of 5.3 years. ^{footnote 4} A 2016 report of the Standing Senate Committee on Banking, Trade and Commerce indicated that decision-making delays were increasing: at that point, it was taking an average of between 3.5 and 7 years for tariffs to be approved. The report concluded that the Board is “dated, dysfunctional and in dire need of reform.” ^{footnote 5} Related studies in which decision-making delays at the Board have been analyzed include a 2016 Governmentcommissioned paper ^{footnote 6} and a 2015 discussion paper by a working group convened by the Board to investigate and improve the efficiency and effectiveness of its decision-making processes. ^{footnote 7}

According to these studies and stakeholder consultations, a significant contributor to delays is the amount of time the Board takes to render decisions after final oral hearings or the filing of parties’ final written arguments. The 2015 Government-commissioned study found that the median time it took the Board to render a decision between 1999 and 2013 was 1.44 years following a final oral hearing. However, in certain cases, the study found that this waiting period could be up to 3 years following a final oral hearing.

Other causes of delays in Board decision making include improperly calibrated timelines currently set out in the Act (e.g. the times by which proposed tariffs are to be filed, the minimum proposed duration of tariffs and the length of time during which objections to proposed tariffs may be filed) and party conduct during proceedings (e.g. protracted discovery processes and multiple procedural motions) as well as outside of proceedings (e.g. requests that the Board delay the initiation of proceedings).

Government and Copyright Board action regarding delays

The Government has taken significant action to address the problem of decision-making delays. In collaboration with the Board, the Government undertook extensive technical consultations in 2017 seeking stakeholder input on potential legislative and regulatory changes to the Board’s decision-making processes. ^{footnote 8} In parallel, Budget 2018 increased the Board’s parliamentary appropriation by over 30% so it could hire additional staff and implement new systems, including case management, which received strong support in the consultations. The Governor in Council (“GIC”) also appointed a new Vice-chair and additional Board members in the fall of 2018. Legislative amendments to the Act flowing from the consultations were included in the Budget Implementation Act, 2018, No. 2, which came into force on April 1, 2019. The legislative changes notably include a direction requiring the Board to deal with all matters before it as informally and expeditiously as the circumstances and considerations of fairness permit, the empowerment of case managers to ensure parties more efficiently work towards the final stages of Board proceedings, and the requirement for collective societies to file proposed tariffs earlier and for longer effective periods. The objective of these new measures is to facilitate faster proceedings and more tariffs being approved before their effective dates. In parallel, the Board is preparing regulations to provide further clarity on various procedural matters.

The legislative changes also include a new power allowing the GIC to set regulations governing timelines for any step of Board proceedings, including the time the Board takes to render decisions. Such deadlines are the subject of the current regulatory proposal.

Objectives

The immediate objective of the proposed Regulations is to prescribe the amount of time the Board may take to render decisions, in accordance with the reasonable expectations of stakeholders and the public, while ensuring that the independence of the Board is preserved and that it has the necessary time to render decisions effectively and fairly. More broadly, the proposed Regulations are a central part of the overall suite of reforms, as described above, that will make the Board’s decision-making processes more efficient and its decision-making timelines more predictable.

Description

The proposed Regulations would specify deadlines by which the Board must render final decisions in its proceedings, which would vary according to the types of such proceedings:

• In a tariff proceeding where no hearing of the matter is held, the Board would release its final decision before the effective period of the proposed tariff is to begin.
• In a tariff proceeding where a hearing of the matter is held as well as in an individual dispute proceeding, in which a hearing of the matter always occurs, the Board would release its final decision no later than 12 months after the conclusion of the hearing.

In this context, a hearing of the matter would constitute the final submissions of every party’s arguments or evidence in support of the party’s position on the substance of the matter — submitted either at a party’s own initiative or in response to a query by the Board — as opposed to potentially earlier submissions limited to procedural issues. Such hearings could be scheduled by the Board upon the request of a party or by the Board’s own initiative regardless of a party’s request. The hearing structure would be flexible: it could be held in multiple phases and could proceed orally or in writing, or a combination of both.

Whether a hearing would be held in a given tariff proceeding would be at the Board’s discretion based on the particular facts of each case, subject to potential Board regulations limiting that discretion in certain cases. Nevertheless, it is anticipated that circumstances in which the Board would likely not hold hearings — and whereby the shorter decision-making deadline specified above would apply — could include cases concerning a proposed renewal tariff that is unopposed and has not substantially changed over its predecessor tariff, in that the proposed renewal tariff

• (a) changes only the dates of its predecessor tariff’s effective period;
• (b) includes, in the Board’s preliminary view, only minor changes to the definitional provisions of its predecessor tariff;
• (c) changes only the royalty rates of its predecessor tariff in such a way that, in the Board’s preliminary view, approximates an inflationary adjustment; or
• (d) includes some combination of factors (a), (b) or (c).

In order to inform parties about which decision-making deadline they should expect in tariff proceedings, the Board would be required to inform every party to such a proceeding, no later than two months after the objection-filing period, whether a hearing would be held. The Board need not schedule a hearing at that time, however.

The proposed Regulations would also allow the Board to take time to render its decisions beyond the deadlines mentioned above in exceptional circumstances and following public notification as to the reasons for the delay and the timeline by which the decision will be released. The Board would be required to provide this public notification before the otherwise applicable deadline. The precise thresholds for such exceptional circumstances and public notification would be determined on a case-by-case basis. However, exceptional circumstances could include situations outside the Board’s control (e.g. release of a court decision on issues being considered by the Board or filing of terms of settlement between parties after the Board’s hearing of a matter).

Regulatory development

Consultations

In the 2017 technical consultations mentioned above, the majority of participating stakeholders expressed strong support for applying decision-making deadlines to the Board. Specific suggestions included a deadline following final oral hearings (e.g. 3, 6 or 12 months) by which the Board must render its final decisions; an overall deadline following the initiation of proceedings (e.g. 24 months) by which the Board must render its final decisions; and a requirement that tariffs simply be approved before their proposed effective dates in all cases.

A minority of participating stakeholders opposed the concept of decision-making deadlines for the Board. The primary concerns of these stakeholders were that the volume and complexity of the Board’s work does not fit neatly into a one-size-fits-all approach and that deadlines that are too short or inflexible could raise issues of procedural fairness and thus increase the frequency of courts’ judicial review of Board decisions. The Board shares these concerns.

As detailed above, these concerns have been taken into account by prescribing decision-making deadlines to the steps after the conclusion of parties’ substantive arguments, tailoring the deadlines to the different types of Board proceedings, and including a mechanism to deal transparently with exceptional circumstances where additional decision-making time is required.

Modern treaty obligations and Indigenous engagement and consultations

As required by the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, the proposal’s possible treaty implications were assessed. No such implications were identified, including with respect to the issue of jurisdiction.

Instrument choice

In developing the proposal, a range of substantive options were considered. Taking no action was one such option, but it was decided against given the urgent need to make the Board’s decision-making processes more efficient and timelines more predictable as well as stakeholder consensus that deadlines would be helpful to those ends. Different deadlines were also considered, including an overall time limit for Board proceedings as well as deadlines that were shorter or longer than what are proposed. The model and deadlines proposed were ultimately selected because they are expected to achieve timeliness in line with the reasonable expectations of stakeholders and the public while also ensuring that the Board has the necessary time to render decisions effectively and fairly.

Other instruments for implementing decision-making deadlines were considered as well. The possibility of the Board enacting deadlines by way of its own regulations or a practice notice published on its website was one such alternative, but the Government believes that the seriousness of the issue of delays in Board decision making warranted deadlines being established independently. Significantly, Parliament purposefully provided a new provision in the Act to allow for this approach.

Regulatory analysis

Benefits and costs

Implementation of the proposed deadlines would result in faster decision making by the Board in many cases. Moreover, it is anticipated that the majority of proposed tariffs would be subject to the shorter decision-making deadline, thereby eliminating retroactivity in the large majority of cases. In all cases, parties would also have greater insight into the times by which they could expect Board decisions regarding matters affecting their interests.

No incremental source of funding would be required to implement the proposal. The cost of the resources required to meet the deadlines proposed, most notably staff (e.g. economists and lawyers), would be fully covered by the Board’s existing level of funding. As noted above, the Board’s annual budget going forward includes a 30% increase over its 2017–2018 level of funding, as adopted in Budget 2018 as part of Canada’s Intellectual Property Strategy. Such funding was provided to fund the implementation of reforms, including the establishment of a case management system and new decision-making deadlines. The Board is also planning to change its administrative practices in order to meet the deadlines proposed.

Small business lens

In accordance with the Policy on Limiting Regulatory Burden on Business, the proposal is not anticipated to have any associated costs for small businesses. Rather, it is expected to benefit small businesses by providing greater market certainty, among other benefits explained above.

One-for-one rule

In accordance with the Red Tape Reduction Act, the Red Tape Reduction Regulations and the Policy on Limiting Regulatory Burden on Business, the one-for-one rule does not apply to this proposal because it would not impose or change any administrative costs to businesses. Rather, the proposed regulatory change would apply to a government entity that does not have a competitive or for-profit motive (i.e. the Board).

Regulatory cooperation and alignment

The proposal is unrelated to a work plan or commitment under a formal regulatory cooperation forum to which Canada is subject.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this proposal.

Implementation and compliance and enforcement

Implementation

The proposed decision-making deadlines would enter into force on the day on which the Regulations are registered and would be implemented in respect of proceedings commenced by or subsequent to that time, ensuring the Board would have sufficient time to realign its resources and practices in all such cases.

The effectiveness of the proposed deadlines in resolving the issue of delays in Board decision making would be assessed through existing mechanisms, namely regular stakeholder engagement by the departments as well as future parliamentary reviews of the Act.

Compliance and enforcement

The Board’s compliance with the proposed decision- making deadlines would be assessed in several ways: the departments’ ongoing monitoring of the Board’s operations and stakeholder engagement, and the Board’s annual report on its activities to Parliament.

Contacts

Martin Simard
Director
Copyright and Trademark Policy Directorate
Innovation, Science and Economic Development Canada
235 Queen Street
Ottawa, Ontario K1A 0H5
Telephone: 613‑291‑3163
Email: martin.simard@canada.ca

Kahlil Cappuccino
Director
Copyright Policy
Department of Canadian Heritage
25 Eddy Street Gatineau, Quebec K1A 0M5
Telephone: 819‑934‑2826
Email: kahlil.cappuccino@canada.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to paragraphs 66.91(2)(a) ^{footnote a} and (d) ^{footnote b} of the Copyright Act ^{footnote c}, proposes to make the annexed Regulations Establishing Time Limits in Relation to Matters Before the Copyright Board.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Martin Simard, Director, Copyright and Trademark Policy Directorate, Innovation, Science and Economic Development Canada, 235 Queen Street, Ottawa, Ontario K1A 0H5 (tel.: 613‑291‑3163; email: martin.simard@canada.ca) or Kahlil Cappuccino, Director, Copyright Policy, Department of Canadian Heritage, 25 Eddy Street, Gatineau, Quebec K1A 0M5 (tel.: 819‑934‑2826; email: kahlil.cappuccino@canada.ca).

Ottawa, April 11, 2019

Jurica Čapkun
Assistant Clerk of the Privy Council

Regulations Establishing Time Limits in Relation to Matters Before the Copyright Board

Interpretation

Definition of Act

1 In these Regulations, Act means the Copyright Act.

Time Limits

Proposed tariff

2 The Board must make a decision with respect to the approval of a proposed tariff under subsection 70(1) or 83(8) of the Act

• (a) in the case where the Board holds any oral or written hearings in respect of the matter, within 12 months after the conclusion of those hearings; or
• (b) in any other case, before the day on which the effective period for the proposed tariff begins.

Royalty rates or related terms and conditions

3 The Board must fix the royalty rates or their related terms and conditions, or both, as the case may be, under subsection 71(2) of the Act within 12 months after the conclusion of any oral or written hearings that are held by the Board in respect of the matter.

Notice to parties

4 The Board must, within two months after the expiry of the period referred to in subsection 68.3(2) or 83(5) of the Act, notify the collective society that filed a proposed tariff and any person or entity that filed an objection to the proposed tariff of whether the Board will hold an oral or written hearing in respect of the proposed tariff.

Extension of time limit

5 (1) Despite sections 2 and 3, the Board may, to take into account the existence of exceptional circumstances, give a direction or make an order that extends the time limit for the making of a decision by a period that is referred to in the direction or order.

Notice

(2) After giving a direction or making an order referred to in subsection (1), the Board must publish a notice of the direction or order that sets out the extension of the time limit, the exceptional circumstances that justify the extension of the time limit and the extended period.

Board’s decision

(3) The Board must make the decision within the period that is referred to in the direction or order.

Coming into Force

Registration

6 These Regulations come into force on the day on which they are registered.