The International Intellectual Property Alliance (IIPA), a lobby group that represents the major lobbying associations for music, movie, software, and book publishing in the United States, has released its submission to the U.S. government as part of the Special 301 process. The Special 301 process leads to an annual report invariably claiming that intellectual property rules in the majority of the world do not meet U.S. standards. The U.S. process has long been rejected by the Canadian government, which has consistently (and rightly) stated that the exercise produces little more than a lobbying document on behalf of U.S. industry. The Canadian position, as described to a House of Commons committee in 2007 (and repeated regularly in internal government documents):

In regard to the watch list, Canada does not recognize the 301 watch list process. It basically lacks reliable and objective analysis. It’s driven entirely by U.S. industry. We have repeatedly raised this issue of the lack of objective analysis in the 301 watch list process with our U.S. counterparts.

The lack of credibility stems in part from the annual IIPA submission. While the submission generates some media attention, this year’s falls squarely into the category of fake news. The IIPA focuses on three concerns: piracy rates in Canada, the notice-and-notice system for allegations of infringement, and fair dealing. None of the concerns withstand even mild scrutiny and each is addressed below.

1.    State of Canadian Piracy

Throughout the Canadian copyright reform process that led to the 2012 law, the IIPA and rights holder groups claimed that Canada was a piracy haven in need of copyright reform. Despite getting what it asked for – tough anti-circumvention rules similar to those found in the U.S., an ISP liability system, an enabler provision that makes it easy to target websites that primarily facilitate infringement, and retention of some of the biggest statutory damages for commercial infringement in the world – the IIPA has returned to the same playbook in advance of the review of Canadian copyright law scheduled for later this year.

The IIPA claims are presented without much evidence, presumably because it isn’t available. The real Canadian story is that infringement rates have consistently declined in recent years. For example, the Business Software Alliance’s annual report last showed Canada at its lowest software piracy rate ever and well below the global and European averages. The decline will not come as a surprise to anyone following the explosive growth of digital services in Canada. As many predicted, the availability of affordable, convenient services is easily the best method to counter infringement. In the case of Canada, Netflix is seemingly too popular for many in the cultural community as the millions of subscribers have transformed the sector and conclusively demonstrated that Canadian consumers are willing to pay for good entertainment services. The growth of these services is not limited to video. SOCAN, Canada’s largest music copyright collective, recently reported record earnings from Internet streaming services which increased by more than 460 percent (which followed from previous records) again confirming that Canadian consumers are paying for music online too.

But wait, says the IIPA. While it admits that Canadian law has been used to shut down piracy sites such as isoHunt and KickAss Torrents, it identifies a few other sites that it says have a Canadian connection. However, the IIPA neglects to mention that the U.S. government’s most recent report on notorious markets makes no reference to Canada. In fact, it identifies what it says are the most problematic online markets and sites in the world and the word “Canada” does not appear anywhere. More importantly, the IIPA acknowledges that the Canadian enabler provision has been effective in shutting down sites of this kind. The failure is not a function of Canadian law, but rather a failure of the IIPA and its members to use the very legal tools they demanded.

2.    Notice and Notice

The IIPA is also unhappy with Canada’s notice-and-notice system, which it says is inadequate, is not receiving full compliance from ISPs, and which hurts licensed services. As noted above, licensed services are experiencing record revenues and growth in Canada.  Further, there has been no public evidence that ISPs are not compliant with the law. It would be surprising if there was given that ISPs face financial penalties for failure to comply with the law.

With respect to whether the notice-and-notice system meets U.S. standards, it is worth noting that the U.S. government itself has acknowledged that it does. As part of the Trans Pacific Partnership treaty, the Canadian system was treated as equivalent to the U.S. system for the purposes of complying with ISP liability and safe harbour rules. All parties, including the U.S. and Canadian governments, asserted that no reforms would be needed in Canada to meet the TPP requirements. Moreover, promoting the U.S. system raises serious concerns, particularly since it is receiving increased scrutiny with reports that it generates millions of fake DMCA notices that have massively inflated claims of online infringement. In fact, Google has advised the Register of Copyrights that 99.95% of the processed URLs from Google’s trusted submitter program regarding search are machine-generated URLs that do not involve actual pages in the search index. In other words, the notice-and-takedown system is filled with fake notices and rife with abuse.

The Canadian notice-and-notice system needs amendment, but not for the reasons articulated by the IIPA. The Canadian government never intended for notice-and-notice to be used by rights holders to send thousands of settlement demands and scare recipients into paying settlements. The Canadian government’s own public documents make it clear that there is no obligation to settle and even the movie industry has established a website that tries to set the record straight. The misuse of the notice-and-notice system is the real story and one that requires reform when the government turns to copyright.  Notice-and-notice should not be used by rights holders to trick or scare users into paying hundreds of dollars for settlements as part of ethically questionable anti-piracy business tactics. Addressing the notice-and-notice loopholes in the system should be at the top of the 2017 reform list.

3.    Fair Dealing

The IIPA comments on Canada also focus on Canadian fair dealing law, as it points to the 2012 reforms and states “that none has had a more concrete and negative impact than the addition of the word ‘education’ to the list of purposes (such as research and private study) that qualify for the fair dealing exception.” Given that it is fair dealing/fair use week, it essentially to correct the record yet again.

i.    Fair Dealing Practices

First, the attempt to link fair dealing practices in Canada with the 2012 legislative reforms are false. Fair dealing includes multiple purposes that can be relied upon by educational institutions, including research and private study. The addition of education in 2012 was always evolutionary rather than revolutionary. Indeed, the proof is in the Supreme Court of Canada’s fair dealing copyright decisions, which ruled against Access Copyright without the benefit of an education fair dealing purpose.

The widely used fair dealing guidelines are based primarily on decisions from the Supreme Court of Canada, the Federal Court of Appeal, and the Copyright Board of Canada. Despite claims that fair dealing guidelines went beyond the law, Access Copyright has lost every legal attempt to challenge them. The courts and board have provided detailed guidance the scope of fair dealing, the appropriate test, and the applicability of insubstantial copying. Current practices have been influenced by what courts and tribunals have ruled, not what the government implemented in 2012. In fact, Canadian educators could rely far more on the 2012 reforms, including the use of Internet exception for education and the exception for non-commercial user generated content.

It is important to note that Canadian fair dealing practices are not inconsistent with many jurisdictions around the world. For example, the U.S. fair use provision is far broader than fair dealing with recent fair use decisions involving the legality of university copying, digitization practices, and use of APIs. Fair use can be found in other countries, some of which have practices that involve far more generous copying than Canada. For instance, copying 20% of a book is viewed as fair use in Israel, double the Canadian guideline. Most recently, the Australian Productivity Commission, a government-backed think-tank, recommended the adoption of fair use in that country.

ii.    The State of Canadian Educational Publishers

The IIPA repeats the oft-stated claim that Canadian educational publishers are struggling and seeks to draw a direct link to fair dealing. The claim is false. Publishers may be facing new challenges, but copyright is a minor part of the story as disclosed in their own corporate and legal filings. Pearson PLC, the world’s largest education company, recently warned of an unprecedented decline in the North American education publishing market. This primarily reflects U.S. developments and highlights how Canada is not an outlier in educational publishing.

Pearson is not alone. Ariel Katz has previously debunked claims regarding Oxford University Press, whose recent annual reports acknowledge changing market conditions around the world, with the company noting:

“the Higher Education textbook market shrank in important markets such as the UK, Canada, and the US, illustrating the contrasting array of market conditions to which OUP needed to adapt in 2014.”

Nelson Education is the largest Canadian educational publisher and its President and CEO Geoff Nordal identified the primary economic challenges in an affidavit:

In Canada, each province and territory has authority over curriculum development and education funding for the K-12 Market. Following a historic high in Canada in 2006 with respect to new curriculum development and spending, the K-12 Market contracted. The K-12 Market has been negatively affected by reduced spending on new curriculum by Canadian schools over the last five years, and in particular the spending decline in Ontario which represents the largest proportion of educational spending in Canada.

In the higher education market, Nordal focused on the following issues:

The Higher Education Market has been negatively affected by, among other things: a lack of clarity at universities with respect to ‘ancillary fees’; with certain institutions banning digital homework solutions with added fees; increased traction in the open textbook movement due in part to government funding in a number of provinces; and the use of used books, rental books and peer-to-peer sharing, impacting the demand for new textbooks at universities and colleges in Canada. The impact caused by used books and rental books is mitigated by revisions cycles and new textbook editions, the adoption of digital materials and increased use of custom and indigenous products. In addition, the Higher Education Market is in transition from traditional books to digital products, which is having a transformative effect on the business.

Nordal’s emphasis on reduced provincial spending (for K-12) and the digital shift (for higher education) is consistent with the data from other sources. The 2010 report on K-12 publishing commissioned by Canadian Heritage also pointed to the long pilot periods delaying purchasing decisions and the increased use of alternative and digital resources.

These findings are also consistent with a 2015 study prepared for Creative BC and the Association of Book Publishers of British Columbia. The study characterizes the challenge for educational publishing as follows:

Scholarly and educational publishers share some of the same issues as trade publishers, but they face other unique challenges. Tablet and other nonprint use will increase in the school systems here and abroad, changing how educational materials are bought, used and updated. Scholarly publishers and trade publishers that sell into the academic market are struggling with the impact on their sales of Open Access and fair use policies, tailored subscription services such as Scribd’s Edelweiss, used book sales, student piracy and increased library use for class reading lists.

None of this will surprise anyone on campuses or in schools in Canada. As the B.C. study on the publishing industry notes, open access and free online alternatives do represent a business threat to the conventional publishing industry. Several provinces have invested heavily in developing quality, peer-reviewed online materials that can be freely used by any school. For example, Open School BC, backed by the province, has modules in the sciences, social sciences, and languages. The B.C. Open Textbook Project has over 150 open textbooks that has saved students millions of dollars. E-learning Ontario has an online resource bank featuring thousands of resources from students from kindergarten to Grade 12.

Meanwhile, Canadian post-secondary institutions continue to spend hundreds of millions of dollars each year on licensing from publishers. As the Canadian Association of Research Libraries (CARL) noted at the start of this academic year:

The 31 member libraries of the Canadian Association of Research Libraries (CARL) spent $293 million on information resources in 2014-15, demonstrating a clear commitment to accessing print and digital content legally and rewarding content owners accordingly. Universities are actively engaged in outreach to their faculty, staff, and students, educating them on their rights and responsibilities under the Copyright Act and ensuring that uses of material under copyright fall well within the provisions of the law. Where educational uses are more substantive and therefore fall outside of fair dealing, the content is either purchased to be added to licensed collections, or rights clearances are obtained and royalties are paid for these uses. Trained, knowledgeable library staff support these activities.

The IIPA and its allies have engaged in a fake news effort to malign fair dealing in Canada. The actual numbers and evidence tell a far different story: paying for content remains by far the largest method of acquiring access to content for educational institutions. In fact, the spending from just the 31 CARL libraries on information resources are more than 14 times the total revenues for Access Copyright for all its licences.

The Future of Canadian Copyright Reform

The issue of copyright reform will unquestionably be on the policy radar screen starting later this year and continuing into 2018. Changes are needed: as discussed above, the government should address the misuse of notice-and-notice. With the Canadian recording industry now admitting that the WIPO Internet treaties were a wrong guess, the government should fix the fair dealing gap by creating a clear exception in the anti-circumvention rules for fair dealing.  Further, it should consider expanding fair dealing to a fair use model (by adding “such as” to the list of fair dealing purposes), which would be more consistent with the intent of the law and create the necessary pro-innovative policies that we see in places like the U.S., Singapore, and Israel. As the government moves forward with the review process, it will be essential that the debate focus on the real state of Canadian copyright, not the fictional one portrayed by the IIPA.