Retailers and collective each seek leave to appeal private copying decision

The constitutionality of the levy scheme on blank CDs may again be debated judicially if the Supreme Court of Canada opts to hear an appeal of a lower court ruling by the Retail Council of Canada (RCC), supported by a phalanx of deep-pocketed retailers. The large chains of stores filed a leave to appeal application with the highest court on February 14, two months after the Federal Court of Appeal (FCA) found that the royalty scheme that applies a hefty levy to blank media such as CDs to compensate music copyright holders was not a tax. On the same day, the Canadian Private Copying Collective (CPCC), which administers the levy, filed its own application for an appeal of the same December 14 ruling, arguing that the earlier court ruling improperly removed the levy on a broad swath of devices, including a $25 surcharge on appliances such as the Apple iPod. The two sides are now asking the Supreme Court to revisit the issue, with both warning of dire consequences should the FCA ruling stand. The relevance of the private copying regime to the hot issue of music downloading has come to the fore in the legal debate. In its application, the retailers point out the complicated legal status quo that has emerged in the wake of several copyright-related rulings that rest on the private copying issue. The need for constitutional clarity before the legality of downloading can be decided, they argue, is critical. Some observers believe that downloading has become a legal activity in part because users pay a levy on blank recording media. The FCA’s December ruling seems to have upset that balance since downloading to an MP3 player would now no longer be considered legal. The retailers write: "Unless leave to appeal is granted, the Decision will fail to put to rest and may indeed exacerbate issues of great relevance to other pressing issues in this age of digital copying and the Internet. If the is not reversed, Canadian consumers of ordinary blank media such as blank CDs could face the prospect of both paying significant levies and being sued for copyright infringement, notwithstanding the apparent ‘quid pro quo’ aspect of the levy scheme...If this Court does not finally dispose of the question of the constitutional validity of this levy scheme, the issue will continue to arise in pending and future litigation." The leave to appeal is being made as the BMG Canada case, which sees the recording industry attempting to force ISPs to divulge the information of people it believes are illegally sharing music files, is set to be heard on April 20. The relationship between that case and the copying levy has created a complicated legal landscape that will likely end up being solved only by the Supreme Court, unless Parliament enacts legislation soon. For its part, the CPCC has asked the Supreme Court to reverse the FCA’s decision on the applicability of the levy regime to digital audio devices such as MP3 players. The collective notes that it had already collected $4.1 million in the ten-month period in 2004 when the levy applied, and estimates that rights holders will lose approximately $7 million in private copying revenues. The CPCC writes: "Given the drastic impact the Decision has had both on the rights of music creators and on music copiers in Canada, it is important that this Court intervene. In particular, the Court must intervene to clarify that the non-removable memory permanently embedded in a digital audio recorder is an ‘audio recording medium,’ that hundreds of thousands of Canadians are not infringing copyright, and that rights holders are entitled to a fair and equitable remuneration for this widespread activity." In its application for an appeal, the CPCC notes that the issue is unlikely to be solved by legislation. "A reform of the private copying provisions is not scheduled to take place in the planned first phase of Parliamentary reform. It is therefore unlikely that Parliament will intervene in the near future to deal with the questions raised by this case." In the lower court ruling, the retailers were almost successful in having the levy regime declared unconstitutional as an improperly created tax, but the FCA ruled that of five characteristics of a tax, the levy satisfied only four.

Retailers and collective each seek leave to appeal private copying decision

Broadcast | February 17, 2005

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