NOVEMBER
2008

Knowledge Bytes
November 2008

 

.TEL – NOT JUST ANOTHER NEW TOP LEVEL DOMAIN?

The Sunrise registration period starts on December 3, 2008 for domain names with the new .tel top level domain ("TLD"). In this article we will review the unique features of this new domain extension and examine whether or not it may be worthwhile to consider registering domain names with this new extension.

The .com TLD is easily the most prevalent, well–known and coveted domain name extension in the world. Most people are also aware of some of the other more popular generic TLDs, including .net and .org and some of the more popular country code TLDs, such as .ca, .cn, .eu, .co.uk and .de. Every few years it seems that the Internet Corporation for Assigned Names and Numbers ("ICANN") approves new generic and country code TLDs, such as .info, .pro, .tv, and the like. The rationale provided by ICANN is that most, if not all, of the desirable .com domain names have been registered and this is a method of opening up the field to more registrants. The increased registration fees generated by all those new registrations, of which ICANN receives a share, probably don't hurt either.

The result has been that many trade-mark and brand owners are becoming blasé about new generic TLD extensions and not worrying particularly if third parties decide to register the owner's brand or company names with obscure and underutilized extensions, as long as trade-mark and brand owners have locked up their core brands with the .com TLD and what they perceive to be the more important generic and country code TLDs.

Against this background, the .tel TLD was recently approved by ICANN. While .tel is technically a TLD, it doesn't operate like one and it doesn't link to a typical website. It operates like a centralized contact management system, storing all of the registrant's contact information in the Domain Name System (DNS) and resolving to a TelHosting server that ensures consistent behaviour (i.e. a standard template form of webpage for all) across all .teldomain names. A .tel can be configured to permit different levels of access to the registrant's contact information to different defined groups. It can also be configured to show different information at different times and on different days. Perhaps most importantly, a .tel can be configured to automatically send updated contact information to any person that has saved that .tel address in an electronic phone book, for example in a computer, PDA, cell phone and any other internet enabled device.

As with other important domain name extensions, trade-mark owners should strongly consider registering their core trade-marks, company and business names and the like with the .tel extension, particularly if they do not want to see a competitor or third party obtain registration of such domain names. During the Sunrise period, owners of "eligible trade-marks" can apply on a first-come, first-served basis to register such trade-marks with the .tel extension. To be eligible, the trade-mark in issue can be registered in any country or region in the world, but the application to register must have been filed prior to May 30, 2008 and the registration must have issued prior to the date that the .tel Sunrise application is submitted to the Registry.

The Sunrise Application Fee is expensive at $399, but that may deter some potential squatters. Upon conclusion of the Sunrise Registration period, the Landrush Registration period begins on February 3, 2009. During the Landrush Registration period, a premium registration fee of $379 applies, but anyone can apply for any available .tel domain name. On March 24, 2009, General Availability commences and the registration fee drops to $20. Trade-mark owners are well advised to carefully consider the benefits of a .tel registration before the December 3, 2008 start date for the Sunrise Registration period.

 

DIGITAL MUSIC PROVIDERS TO PAY THE COPYRIGHT PIPER

On October 24, 2008, the Copyright Board of Canada delivered the second part1 of its decision establishing copyright tariffs on music broadcast or made available over the Internet. The first part of the decision, delivered on October 18, 2007², addressed several preliminary legal issues dealing with the definition of "telecommunication" in the light of the Supreme Court of Canada's decision in SOCAN v. CAIP³; which held that previewing music before purchasing constitutes fair dealing under the Copyright Act; and established tariffs for downloadable music (with or without Digital Rights Management ("DRM")) and audio streaming.

In summary, in this second part, the Board held that music broadcast or made available over the Internet is subject to tariffs, as is traditional broadcast of music. The Board established tariffs for music broadcast over the Internet ("webcast") by radio and TV stations, audio websites⁴, and other entities that use music on their websites, as discussed below.

"Use-based" vs. "user-based" approach

The Board had two basic options for setting the tariffs: (1) a use-based option, advocated by Society Of Composers, Authors and Music Publishers of Canada ("SOCAN") and said to "favour users", whereby the tariff would depend on the use of music; and (2) a user-based option, whereby the rate paid would depend on who used the music, rather than how. The Board ultimately chose the latter approach on the basis that:

1. a use-based tariff may not adapt to the constantly evolving internet environment;

2. it may be difficult to match SOCAN's proposed uses to what actually occurs on the Internet; and

3. for users that already hold a SOCAN licence for their primary activity, the main purpose of their websites (including the audio component) is to simulate interests in the users' primary activity, rather than to generate revenue.

In coming to these conclusions, the Board considered three broad types of music uses: simulcasting an on-air signal over the Internet; webcasting an original signal; and "other activities", which includes audio visual webcasting and games.

Rates

With respect to simulcasting, the Board found that the regular broadcasting tariff was an appropriate measure since there was no fundamental difference between the two, as the Internet is simply another broadcast medium. The Board rejected SOCAN's assertion that broadcasting over the Internet is inherently more profitable because of lower costs.

A similar conclusion was reached with respect to webcasting of an original signal, on the assumption that such Internet-only broadcasting is also fundamentally similar to the user's regular non-Internet broadcasting.

With respect to other activities – "audiovisual webcasting, games, and other uses" – the Board could not quantify the contribution of these uses to a user's Internet-related revenue and concluded that "these activities should be considered at once, and the conventional [tariff] be applied."⁵

Although the Board agreed that in some cases a rate adjustment was appropriate to reflect the difference in relative use of music between regular broadcasting and the Internet, it found that for the most part it lacked the evidence to make such an adjustment. In the case of audio websites, the Board segregated them into categories depending on music use, and set different rates for each.

Rate Base Adjustments

The Board generally recognized several general types of "Internet-related revenues", such as advertising, subscription fees, and "sums the operator of a site gets every time a visitor clicks to be transferred to another site", in other words, click-through revenue. However, in the absence of evidence demonstrating exactly how users' websites generate income, the Board included all Internet-related revenues in the "rate base" to which the rate would apply.⁶ The rate base would then be discounted by a minimum, generally arbitrary, discount based on the type of the user, and, if the user wished to invest the money and effort, would be further discounted to correspond to the actual ratio of music to non-music page hits on the user's site. Furthermore, the Board assumed that only "a small proportion of communications that end outside of Canada are nevertheless communications in Canada", and it allowed most sites to discount substantially all non-Canadian visits.

All Other Sites

The Board expressly refused to impose a tariff on "all other sites", which use "music in different ways but for which the main activity is not related to the use of music", such as restaurants, hotels, bars, amateur podcasts, social networking and video sharing sites (e.g. Facebook, MySpace, YouTube), and all other non-commercial sites that use music. Although the Board believed that tariff was justified for these sites, it based its refusal on the following reasons:

• these sites are used primarily to publicize a brand or a store, and do not directly generate revenue;
• these sites, for the most part, use minute amounts of music;
• in the absence of detailed and reliable evidence on which to determine the amount of the tariff and the details of its application, a tariff of such a broad scope could be highly disruptive and thus ipso facto unfair;
• many of types of such sites, such as social networking and video sharing, are a "relatively new phenomenon" making any tariffs generated from 1995 to 2006 probably quite modest; and
• in the absence of evidence, the Board could not impose the tariff and provide adequate reasons explaining how it arrived at the rate.

Importantly, the Board's decision with respect to these sites concerned only the tariff on transmission of music. If such sites make music available for download or streaming, each song is still subject to reproduction Tariff 22.A established in the Board's first decision.

Concerns/Issues Going Forward

While the decision certainly goes a long way towards resolving the issue of tariffs to be applied to the use of music on the Internet, it also raises some new issues, which may or may not result in further litigation.

The Board provided an extensive definition of "Internet-related revenues." Despite this fairly extensive definition, the Board acknowledged that determination of such revenue may raise issues despite its "sufficiently clear" language.⁷ Given the history of the disputes between SOCAN, the Board, and the various users, it seems more likely than not that significant issues, requiring further litigation, will arise with respect to the determination of Internet-related revenues.

Another potential issue may arise in respect of calculation of page impressions, which are defined as "a request to load a single page from a site." It is unclear how dynamic pages, or Java/ActiveX applets which "push" information to the user, rather than provide individual pages in response to user requests, will be accommodated in this definition and in the calculation of the discount to be applied.

Finally, while the Board refused, in the absence of evidence, to set a tariff for "other sites", it also clearly indicated that some kind of a tariff is warranted. Given the popularity of video sharing websites such as YouTube, and the ever-increasing use of audiovisual content on social networking sites such as Facebook and MySpace, it is likely that the amount of music used on these sites will warrant another effort by SOCAN to collect relevant evidence and undertake another tariff application to the Board. Thus, the free ride may not last.

References

1. Decision of the Copyright Board of October 24, 2008, certifying SOCAN Tariffs Nos. 22.B to 22.G (Internet – Other Uses of Music) for the years 1996 to 2006 ("Second Decision").
2. Decision of the Copyright Board of October 18, 2007, certifying SOCAN Tariffs No. 22.A (Internet – Other Uses of Music) for the years 1996 to 2006.
3. Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, [2004] 2 S.C.R. 427, 2004 SCC 45.
4. "Audio websites" was defined as "sites for which the main activity or purpose is listening to audio files": Second Decision, at para. 86. The Board further found that the "programming time of music" on such sites is close to 100%: Ibid., at para. 93.
5. Second Decision, at para. 48.
6. For non-commercial radio, the rate base was the station's expenses associated with its website: Second Decision, at para. 50.
7. Second Decision, at para. 130.

 

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