The Federal Court of Appeal delivered its long-awaited decision the York University v. Access Copyright case yesterday, setting aside the lower court ruling that I had described as “a complete victory” for Access Copyright. The latest ruling will not leave York University and the education community completely happy given the court’s fair dealing analysis, but winning on the mandatory tariff issue removes both the threat of mandated payments to Access Copyright as well as the possibility of a copyright infringement lawsuit by the copyright collective. That represents an enormous win both for York and for a fair approach to copyright licensing that ensures users have licensing choice.

Access Copyright quickly claimed the decision was a “mixed outcome”, but losing on the mandatory tariff issue eliminates its ability to force the education community to enter into its licence. The copyright collective has spent much of the past decade lobbying the Canadian government to reverse the 2012 copyright reforms that added the education purpose to fair dealing. That approach was rejected by the Government’s copyright review, which opened the door to a further expansion with a “flexible fair dealing” model. But the real story of education and copyright in Canada for the past twenty years has been the string of appellate decisions that have largely unravelled the legal underpinnings of the Access Copyright model. The Supreme Court’s CCH decision brought user rights and an emphasis on fair dealing. The Access Copyright v. Alberta decision ended the claim that there was a meaningful distinction between student copying and teachers’ copying for students. This latest decision addresses the mandatory tariff issue, confirming that educational institutions can opt-out of the Access Copyright licence as appropriate and that any claims of infringement will be left to copyright owners to address, not Access Copyright.

To be clear, the decision does not mean that there is no compensation for authors and publishers nor that their copyrights are unenforceable. Copyright law still grants them exclusive rights over their works subject to users’ rights such as fair dealing. This right includes the ability to pursue infringement claims backed by statutory damages. Rather, users have choice in how they obtain the necessary rights for the works they use. Access Copyright has long claimed there was effectively no choice as its approach was mandatory once copying was captured by the licence. This decision canvasses decades of legislative history to conclusively demonstrate that this was never the case. Instead, the Access Copyright licence – even once certified by the Copyright Board – is an option available to users.  However, educational users today have a wide range of alternative options including site licensing, open access materials, transactional licences, and fair dealing. Many institutions now use a combination of these paid and unpaid approach as a better approach.

Where does that leave Access Copyright? The copyright collective must compete in the market by offering a compelling value proposition to potential licensees, who will compare the Access Copyright licence to the other available licensing options. If authors or publishers believe that that licensing still leads to infringement, they – not Access Copyright – are entitled to pursue statutory damages in court.

The decision represents a major validation for University of Toronto professor Ariel Katz, whose 2015 Spectre article made the convincing case that “the spectre of a ‘mandatory tariff’ lacks any basis in law” and Howard Knopf, who has been emphasizing the importance of the mandatory tariff issue for many years. In fact, Katz’s article was directly acknowledged by the court.

No Mandatory Tariff

Access Copyright has long argued that licences established by the Copyright Board have a mandatory binding force over users, likening it to a mandatory arbitration process. That was thrown into doubt by the Supreme Court of Canada in the CBC v. SODRAC decision, where Justice Rothstein concluded the opposite:

licences fixed by the Board do not have mandatory binding force over a user; the Board has the statutory authority to fix the terms of licences pursuant to s. 70.2, but a user retains the ability to decide whether to become a licensee and operate pursuant to that licence, or to decline.

The Federal Court of Appeal does a nice job of explaining the mandatory issue and why it is relevant for liability purposes:

Since much of the argument was framed in terms of whether Copyright Board approved tariffs are mandatory, it is perhaps useful to begin by clarifying what it means to say that a tariff is mandatory. When Access Copyright says that the tariff in issue here is mandatory, it means that a user becomes liable for payment of the royalties stipulated in the tariff if it engages in any copying which constitutes infringement, i.e., copying which was not authorized by the copyright holder or which does not come within any of the users’ rights set out in the Act, such as fair dealing. A user’s liability to pay royalties depends upon his or her use of works in Access Copyright’s repertoire and not upon any assumption of liability for payment.

There is an important distinction between liability for royalties and liability for damages for infringement. In the absence of a tariff, a user who infringes copyright becomes liable for damages for infringement in an amount equal to damages the owner of the copyright has suffered as a result of the infringement: see Act, s. 35(1). Those damages are assessed by a court. However, in the case of a mandatory tariff, the owner’s remedy is an action to enforce the tariff. In effect, the royalties set out in the tariff become a form of statutory damages.

In other words, the question is not whether there is potential liability for infringement (there is), the issue what liability – payment of a tariff or statutory damages. The problem for Access Copyright is that it cannot enforce its licence against non-licensees, leaving it to the original copyright owners to file infringement claims where appropriate.

The court engages in a lengthy historical analysis of the copyright collective provisions in the law (drawing heavily from Professor Katz’s work), leading to the following:

All of this emphasizes the fact that the collective society/tariff regime is a means of regulating licensing schemes which, by definition, are consensual. While there have been modifications in the statutory language used between 1936 and 2012, the continuous references to licensing schemes and the retention of the key elements of the 1936 Act leave little doubt that tariffs are not mandatory which is to say that collective societies are not entitled to enforce the terms of their approved tariff against non-licensees.

As a conclusion to the issue, it states:

Acts of infringement do not turn infringers into licensees so as to make them liable for the payment of royalties. Infringers are subject to an action for infringement and liability for damages but only at the instance of the copyright owner, its assignee or exclusive licensee. In the course of the hearing before this Court, Access Copyright candidly admitted that, given its agreement with its members, it cannot sue York for infringement in the event that some or all of the copies made by York are infringing copies. However, Access Copyright claims the right to enforce the tariff against non-licensee infringers; yet if the tariff is not mandatory then there can be no right to enforce it.

York University was therefore successful in the appeal: the tariff is not mandatory, Access Copyright cannot maintain a copyright infringement action, and the York University fair dealing guidelines are rendered irrelevant in the case given that absence of a copyright infringement action.

Fair Dealing

York counterclaimed in this case, arguing that its copies fell within fair dealing and were therefore not infringing. The trial judge rejected York’s claim and this decision revisits that fair dealing analysis. I argued in this post that the trial judge was frequently at odds with Supreme Court jurisprudence. My post references the three major fair dealing cases: CCH, SOCAN, and Access Copyright v. Alberta. While the Alberta case would seem like the most obvious comparator – it is the only educational copying case of the three – the Federal Court of Appeal is clearly uncomfortable with it. The court treats it as an outlier, distinguishing it from both the other Supreme Court cases and the York case. For example, it incorporates the idea that the copying in Alberta was “ad hoc”, whereas York was “systematic.” No such language is used in the Alberta Supreme Court case.

The crucial issue in those cases is whose perspective matters for the purposes of fair dealing. For example, in Alberta, the Supreme Court ruled that the teacher and student shared a symbiotic purposes, noting there was no separate purpose for the teacher. The same approach was taken in SOCAN case, where song previews made available through services such as Apple iTunes were viewed from the perspective of the listener, not the music service.

Yet in the York case, the trial judge ruled that there was not a symbiotic purpose between institution and student, but rather two purposes:

In this case, there are two users – the university which is assembling material, copying, and distributing the material as the publisher, and the student who is the end user of the material.

As for the university’s purpose, the trial judge ruled it was to facilitate enrollment through reduced
costs. I remain convinced that is an error.  Based on Supreme Court jurisprudence, the trial judge should have found that there is no separate purpose. The fair dealing is the students’ users’ right and the purpose clearly permissible. Further, even if focused on York’s purpose, the characterization of it as cost savings to drive enrollment is hard to square with the Supreme Court’s CCH decision, which was comfortable with the fair dealing of commercial copying on behalf the legal profession.

Yet the Federal Court of Appeal was unconvinced, arguing that York did not adduce evidence of the perspective of the students and that since it was relying on its guidelines, “it is the institution’s perspective that matters.” That then led to the arguments that York did little to stop potential violations of the guidelines and that its purpose was to save money. Assuming the case is appealed, this issue will likely be revisited by the Supreme Court.

So too will be the analysis on the “amount of the dealing”. The Supreme Court ruled in Alberta:

as discussed in the companion case SOCAN v. Bell, the “amount” factor is not a quantitative assessment based on aggregate use, it is an examination of the proportion between the excerpted copy and the entire work, not the overall quantity of what is disseminated.

The trial judge effectively rejected the Supreme Court analysis:

It is relevant to consider the aggregate volume of copying by all post-secondary institutions that would be allowed if the Guidelines or similar policies were adopted. There is a problem with the current data because of unreported copying. However, when all such institutions were licensed, they produced 120 million exposures of published works per year in printed coursepacks alone.

This appeared to be an obvious error. Indeed, even Access Copyright acknowledged the potential error, arguing instead that an error on any one of the six factors was not sufficient to undo the overall fair dealing analysis. The Federal Court of Appeal effectively agreed, finding that “the error may be palpable but it is not overriding.” Given the remainder of the fair dealing analysis (some siding with York, most with Access Copyright), the court left the fair dealing ruling untouched, dismissing the counterclaim and setting up the possibility of another fair dealing battle at the Supreme Court of Canada. If leave is granted, the Supreme Court will once again be asked if meant what it said in CBC v. SODRAC and the fair dealing cases: that tariffs are not mandatory and that fair dealing is a users’ right that must be interpreted in a liberal manner.