Canada's proposed new copyright reform bill, initially expected to be tabled in mid December 2007, has been put on hold due to an outpouring of public objection. According to public policy activists, the government was unprepared for the level of controversy the bill would generate and immediately decided it would be safer to temporarily delay the bill's introduction, at least until after Parliament resumes at the end of January.

A lack of public consultation is the primary ground for opposition to the bill. Activists have accused Industry Canada Minister Jim Prentice of failing to meet with universities, libraries, consumer groups, artists and the general Canadian public for inclusion in the consultation process. Critics of the bill argue that the Minister found the time to meet with lobbyists from U.S. entertainment companies which, critics argue, have a direct interest in tightening up Canadian copyright laws, at the expense of the Canadian end user. It is feared that the proposed legislation will be equivalent to the U.S. Digital Millennium Copyright Act (the “DMCA”), which takes a notoriously hard line approach against the copying of all forms of digital materials, including products which have been legally purchased.

The proposed tabling of the bill prompted a digital protest in the form of a Facebook group set up by leading Canadian internet expert Michael Geist. After its first week, the site had already attracted 12,000 supporters to join the cause, many of whom have already sent letters to the Industry Canada Minister and various other MPs expressing their dissatisfaction with what is seen as the exclusion of the Canadian public in the legislative process.

U.S. Digital Millennium Copyright Act

The DMCA was enacted in the United States in 1998 and implements the 1996 World Intellectual Property Organization (WIPO) Copyright Treaty and WIPO Performance and Phonograms Treaty. It supports criminalization of the production and dissemination of technology, devices, or services that are used to circumvent technological protection measures (TPM’s) which control access to copyrighted works, commonly known as Digital Rights Management. The DMCA is considered to be a particularly restrictive piece of legislation because it criminalizes the act of circumventing an access control, even when there is no infringement of copyright itself. It also heightens the penalties for copyright infringement on the Internet.

Anti-Circumvention Legislation

Anti-Circumvention legislation supports the use of TPMs by content providers, often in the form of digital locks, which make it very difficult for anyone to copy works in digital format. The legislation is controversial because it is considered to provide an extra layer of copyright protection, in addition to the traditional set of rights granted by copyright law. Copyright holders acquire extra protection because anti-circumvention laws make it an infringement to break or circumvent a digital lock in order to access the copyrighted work. The making available of tools or devices to break the locks is also often prohibited under the legislation.

The practical effect of the proposed legislation in Canada would make it illegal to tamper with a digital lock, meaning that consumers would be prohibited from viewing a legally purchased DVD on a player outside its designated region or country, or from copying music or other material from a legally purchased CD for even personal use, or from using a cell phone overseas with a phone company outside the network of the Canadian provider. Simply put, the wording of the proposed bill could make what have become everyday habits of many Canadians, illegal.

Public policy copyright experts argue that anti-circumvention legislation does not address copyright or copyrighted works because it aims to protect the TPM, rather than the underlying content. This has produced the unintended consequence in the United States where litigants have invoked anti-circumvention laws to protect a variety of devices which have no connection with copyright whatsoever, for example, garage door openers and printer cartridge refills. Critics of the legislation argue that these types of cases constitute an abuse of process and have the potential to dissuade other companies from entering the market or from developing new products, creating a range of competition law concerns.

Time Shifting

Anti-circumvention legislation also commonly prohibits time shifting, an action which is not expressly permitted in the Canada Copyright Act. Time shifting refers to recording a television program to enable users to shift the time when they wish to watch the program. Viewers are usually unaware that copying a television program may be a form of copyright infringement. Although time shifting has long been an accepted practise, for example, with analog VCR’s which make it difficult to record around commercials, new digital technologies such as TIVO and personal video recorders have made such practices far easier, much to the chagrin of broadcaster and advertisers. Concerns have arisen that broadcasters will introduce TPM’s to prevent the time shifting of their programs and will then try to rely on anti-circumvention legislation to prevent viewers from circumventing broadcasting controls. Copyright experts believe that Canadian law needs an explicit time shifting right together with a parallel circumvention right that preserves the ability to time shift.

Conclusion

Public policy activists in Canada have stated that they are not opposed to copyright reform, provided the government engages in a public consultation process. The government last consulted Canadians on digital copyright issues in 2001 and technology has changed dramatically since then. It is expected that the bill will be introduced in the early spring of 2008 but it is likely to face tough opposition from those who believe it strengthens the rights of copyright holders at the expense of the general public.

Canada’s Federal Court of Appeal recently confirmed a 2004 Federal Court ruling that iPods^TM and other portable memory devices (which the Court classified as “digital audio recorders”) are not subject to the private copying levy which applies to blank recordable media such CD-Rs and CD-RWs. If successful, the levy would have added between $5 to $75 to the cost of every portable memory device sold in Canada, depending on the amount of memory storage in such device.

While a victory on one front for consumers and retailers in Canada, the ruling leaves the legality in Canada of ripping music to digital music players in a legal gray area. What is clear is that a legitimately purchased musical recording can be copied by its owner to a blank recordable media such as a CD-R, CD-RW, mini-disc or cassette (remember those?) on which a blank media levy has been paid, provided such copy is made for personal use. The blank media or private copying levy was created in 1998 as a way for stakeholders in the recording industry to be compensated for such copying, which everyone in the industry knew was taking place. The levies are collected by the Canadian Private Copyright Collective and distributed to songwriters, performers, record labels and music publishers pursuant to a specified formula. Such levies have been criticized by some groups, particularly in the technology industry, since the levy is payable regardless of whether music is copied onto the blank media or not.

The imposition of this levy on iPods^TM and other similar devices would have given greater weight to the argument that ripping legitimately purchased recordings to such devices is also expressly permissible, and also would potentially have given weight to the argument that non-legitimately obtained recordings can similarly be copied – which is why the Canadian Recording Industry Association was arguing against the imposition of the levy. Some commentators have suggested that the Canadian government should impose legislation making it clear that such “format shifting”, particularly of a legitimately purchased copy, is both legal and not subject to any levy or tariff, as has recently been proposed in the UK.

In Agresso Corporation v. Temple Insurance Company 2007 BCCA 559, the BC Court of Appeal has upheld a denial of coverage on an Information Technology Errors and Omissions policy based on the insured's failure to disclose a potential claim on the insurance application. The case does not create new law but serves as a warning to insureds about the perils of withholding information.

Agresso designed, installed and maintained computer software systems. In September and October, 2000, the company entered into software licence, implementation and maintenance agreements with Sault College of Applied Arts and Technology for an academic management information system. The maintenance agreement was to continue until September 24, 2005 unless cancelled earlier by one of the parties.

On January 14, 2002, Agresso applied for an Information Technology Errors and Omissions insurance policy from Temple Insurance Company. The policy covered the period from February 28, 2002 to February 28, 2003.

Agresso ran into problems implementing the academic management information system. By January 20, 2003, Agresso was aware Sault College was not satisfied with Agresso's progress on solving a major problem. An internal Agresso e-mail bearing that date reflected Sault College complaints including an expressed belief that Agresso could not solve the problem and a suggestion that Agresso use outside resources.

On February 21, 2003, Agresso applied for a second E&O policy from Temple Insurance. The application included these questions:

42. Please attach a list and status of all claims, disputes, suits or allegations of non-performance made during the past five years against the Applicant or any director, officer, employee or partner of the Applicant.

43. Is the Applicant or any of his/her employees aware of any facts, circumstances or situations which may reasonably give rise to a claim other than as advised above?

The application also stated that if there was knowledge of any such fact, circumstance or situation, any claim or action subsequently emanating therefrom was excluded from coverage under the proposed insurance.

Agresso answered in the negative to both questions 42 and 43.

In April, 2003, Sault College abandoned the Agresso contract. On June 30, 2003, counsel for Sault College notified Agresso of a potential claim and requested a mediated settlement. On February 10, 2004, Temple Insurance advised Agresso there was no coverage due to the non-disclosure of this potential claim in the application form on February 21, 2003. Sault College commenced an action against Agresso on August 12, 2004. Temple Insurance denied coverage and Agresso commenced a coverage action.

The trial judge in the coverage action concluded that Agresso had provided an inaccurate response to question 43. She found that a reasonable person in Agresso's position at the time of the application for insurance would have been of the opinion that the circumstances indicated there was a reasonable likelihood that a claim would be made by Sault College. The trial judge was satisfied that if Temple Insurance had been informed of the situation, the insurer would have acted differently by refusing to accept the risk or by imposing special conditions. The judge declared the policy void pursuant to section 13 of the Insurance Act.

The trial judge did not consider Agresso's answer to question 42 to be inaccurate. She found that the phrase "allegations of non-performance" was very broad and quite ambiguous. Given that the phrase followed the words, "claims", "disputes", and "suits" and because question 43 asked about "circumstances or situations which may reasonably give rise to a claim other than as advised above", the judge interpreted "allegations of non-performance" narrowly so as to require some sort of active legal matter.

The BC Court of Appeal agreed with the trial judge regarding Agresso's answer to question 43 but, in a puzzling turn, disagreed regarding question 42. The Court of Appeal ruled that the same "fact, circumstance or situation" that required an affirmative answer to question 43, similarly required an affirmative answer to question 42. This is perplexing since question 43 specifically addresses itself to facts, circumstances or situations "other than as advised above".

In the end result, both the trial judge and the Court of Appeal ruled there was no coverage and Agresso presumably learned to be more forthcoming with its insurers.

The full text of the Court of Appeal decision can be found here: http://www.courts.gov.bc.ca/Jdb-txt/CA/07/05/2007BCCA0559.htm.