Web operators must pay SOCAN for music videos

Google Inc., Facebook Inc. and Netflix Inc. must pay Canadian songwriters and publishers for music videos viewed on their services, the Copyright Board of Canada ruled on Friday. The board certified two tariffs from the Society of Composers, Authors and Music Publishers of Canada (SOCAN) that cover both official music videos and user-generated content on the Internet viewed online from 2007 to 2013. Websites such as YouTube, owned by Google, and Facebook, where users can view official music videos and upload their own, as well as Netflix, which allows users to stream content covered by SOCAN agreements, will have to pay a tariff of 1.7 per cent or 1.9 per cent to the collective, based on a usage formula. SOCAN and various parties, including Apple Inc., Rogers Communications Inc. and the Canadian Association of Broadcasters, came to an agreement on the first tariff, 22.D.1, which covers “audiovisual webcasts” that are not user-generated, in November 2012. Yet while the board was examining the agreement, Netflix and Facebook filed to intervene in the issue and obliged the Copyright Board to reopen the matter. The board also rolled Tariff 22.D.2, which covers user-generated videos, into the process. Both tariffs were first proposed by SOCAN in 2006 and came before the Copyright Board in 2007. According to a recent MTM report, YouTube is the most popular music-streaming service in Canada. Lawyer Barry Sookman of McCarthy Tétrault said the board had to throw out the proposed agreement to deal with a new legal issue raised by Netflix, which argued that it had a “fair dealing” defence for providing free trials to its service. In its submission, the streaming service compared its free trials to Apple’s song previews, offered through its iTunes music store, which are considered to be outside the purview of SOCAN thanks to a 2013 decision by the Supreme Court of Canada. Facebook submitted an argument that, since much of its content is user-generated and it uses software called Audible Magic to screen for copyrighted content, the tariff should be tweaked to more clearly exempt it and similar sites. “The intervention of Facebook and Netflix may have slowed the proceedings down,” Sookman said in a phone interview. “If it did, it delayed the proceedings but it didn't have any effect on it.” The board found neither position credible. Netflix, it said, was misusing the fair dealing defence because there was no comparison between full access to the complete streaming Netflix library for a limited time in the company’s free trial and a short, poor-quality iTunes preview. “In a free trial, the customer can hear complete musical works, to the extent that such works are fixed in the audiovisual work being watched,” the board said in its decision. The board said the proceeding was not the right venue for Netflix to argue its case on free trials. “While we could delay this decision for several more months during which time we would be collecting evidence from the parties on this issue, the fact that Netflix declined to participate in the process for many months is sufficient reason for us to decline to do so,” the board said in its decision. “If Netflix now wants to argue that it does not owe anything for its free trials, the appropriate forum in which to do so is not the Board.” The Copyright Board also rejected Facebook’s arguments, declining to rule on the social network’s contention that it did not meet the criteria for paying SOCAN fees. “The Board has long held that when it certifies SOCAN tariffs, these are tariffs of general application,” the board said in its decision. “If Facebook does not engage in the protected acts whose price the tariff sets, it does not have to pay the tariff. Facebook would have the Board determine that it does not engage in these protected acts as a finding of fact; the Board declines to do so as this is an issue for another forum.” Sookman said under the ruling, although it took many years, “everybody wins.” “The one thing these companies want to have is legal certainty,” he said. “They have agreements and they carry on business around the world. They just want to pay; it's the cost of doing business. The ruling essentially just legalized the use of music in audiovisual performances and makes sure rightsholders get paid.” Sookman pointed out that the ruling affected not only large providers such as Facebook and YouTube, but every website using SOCAN content. The biggest issue, he said, would be for the rights group to track down those using its music and get back pay for the years the two tariffs cover. He said he does not foresee a website taking any content down, though, because most of those who use copyrighted material understand they have to pay. What the case shows, Sookman said, is the necessity for change at the Copyright Board. Although he praised the board’s work, Sookman said it must move to a system with mandated time limits for submissions or some other method of controlling cases so that decisions can be issued within months, rather than years. “It would be better for the board because they wouldn't be criticized for the delays,” he said. “And it would be better for users who would know what they have to pay, and frankly it would be good for rightsholders who could collect much quicker.” The decision will provide a guideline for future SOCAN tariffs, Sookman said. — With reporting by Peter Henderson at phenderson@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

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Web operators must pay SOCAN for music videos

Broadcast | July 22, 2014

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