Wealth Destroyers and End Game for the Copyright Modernization Act (Bill C-11)

Some of you may have noticed that I’ve been away for a while. Sorry about that for those of you who missed me. Let’s just say that I learned the hard way the steep cost of blogging, twitter, facebook, writing for the Globe and Mail, all for free, while holding down a real paying job where one has to actually teach, research and contribute to the department you’re in. There’s only so many hours in a day.

While away there’s been a mounting backlog of stuff to write about, and over the next few weeks I’ll unfold a series of blogs, but let me kick off with the current state of play for the Copyright Modernization Act (Bill C11). This is the fourth effort to revamp copyright law in Canada in the last seven years, and things are rapidly coming to head.

The bill itself has numerous elements that are actually not bad as currently written (no term extension for copyright holders, a very limited role for ISPs, search engines and others as ‘digital gatekeepers’, an innovative user created content add-on to fair dealing, etc.), but deeply troubling aspects as well (the digital locks provisions, notably). While the Bill has passed second reading and finished committee review yesterday (March 7), during the latter stage the ‘copyright maximalists’ lined up one after another in a last ditch push to convince MPs that the bill needs to be radically overhauled so as to stuff it with all sorts of things that have thus far been rejected.

The bill goes back to Parliament for a clause-by-clause reading on Monday and while there’s still third reading and Senate review to pass, its now or never to make sure that last ditch attempts by a few lobbyists to rewrite the bill never see the light of day.

What kind of stuff, you no doubt ask? Here’s just a partial list, culled mostly from the music and gaming industry lobbyists and like-minded legal advisors (see here and here):

1. Tough rules that could require intermediaries from ISPs through to search engines (e.g. Google), social networking sites (e.g. Facebook, Digg, Twitter) and data/web hosting sites (e.g. BlackSun and other ‘cloud’ providers) to block access to websites and others alleged to enable copyright infringement;
2. The substitution of a ‘notice and take-down’ and graduated response regime that would see ISPs disconnect subscribers accused of repeated infringement instead of the much less intrusive ‘notice-and-notice‘ regime already included in the bill and practiced as a matter of course by all of Canada’s major ISPs.
3. Claw backs to the innovative user-generated content (UGC) clause of the act that allows people to make mashups and remixes for non-commercial uses.
4. Copyright term extension from lifetime of the creator plus 50 years to life + 70 years.

The chances of any of these things being adopted is uncertain, but it needs to be stated clearly that any attempt to stuff the bill full of SOPA like provisions is a non-starter. For those not in the know, SOPA stands for the Stop Online Piracy Act in the US that gained so much notoriety earlier this year that its backers finally put a stake through its heart, at least for the time being, but only after an extraordinary outcry against the bill and after Wikipedia, Firefox, Google, and thousands of other sites went black for a day on January 18th, 2012.

SOPA would have required: (1) ISPs to block access to ‘rogue websites’, (2) search engines to make such sites disappear from their results, (3) payment providers like Paypal and Visa cut-off payments, (4) advertisers to cut-off suspect sites from advertising placement, etc. The fundamental remaking of the Internet such activities contemplated unleashed a firestorm of protest, in the US and globally, ultimately leading to a tactical withdrawal of SOPA. Yet as SOPA was being withdrawn in the US, the copyright maximalists here in Canada were on a roll and began pushing what looks like much of the same thing.

The first indication of this can be seen in the language used, with the copyright maximalists such as Barry Sookman, James Gannon, the Entertainment Software Association of Canada (p. 6) and the Canadian Federation of Musicians carving up the world into “good guys” and “bad guys”, backed by repeated references to “wealth destroyers”. This stuff is imported directly from copyright maximalists as Daniel Castro at the supposedly ‘non-partisan’ Information Technology and Innovation Foundation (ITIF) in the U.S. who referred to “parasites”, “rogues” and “leeches” to make his case for the ‘mother of SOPA’ early last year.

I’ve done this before but it bears repeating that the claims of wealth destruction are bogus. The trick is simple when it comes to the music industry, which in the present case has been bandying about a figure of $800 million dollar as having simply disappeared. That figure has been subsequently recycled by those on the committee, notably by Dean Del Mastro of the Conservatives, who stated on opening day, and drawing directly on the lobby group Music Canada:

“over $800 million a year [is] going missing. That’s coming right out of the pockets of artists, and that’s money that’s not being invested in this country (at 1645-50 in the transcripts).”

I have no idea where this figure has been tallied from, but it seems to be a magnification of already circumspect numbers that have been used in the past. The ruse in all this, as I’ve shown in earlier posts, is to take just one part of music industry revenues — recorded music sales (cds, LPs, etc.) — that really have suffered badly, i.e. dropping about $550 million (not $800m) in the past eight years, and then let this one segment stand for all revenues across the music industries as a whole. Looking at just the single category of recorded music industries, the situation does look dire, indeed, as the following diagram shows.

‘Recorded Music Industry’ Revenues in Canada, 1998 – 2010

The music business only appears to be in dire straits if we look at things from this cock-eyed view of the world. It looks entirely different when we include the recorded music segment and the three fastest growing segments of the business: (1) concerts; (2) internet and mobile phones; (3) publishing rights. Once we do that, the world looks entirely different, as the figure below shows:

‘Total Music Industry’ Revenues in Canada, 1998 – 2010

Source: Statistics Canada; PriceWaterhouseCooper; Socan.

And this is not just the case for the music industry, but the movie industry as well. Again, the following chart helps illustrate the point (If you can’t see the figure below, click here).

Source: MPAA (2011). Theatrical Market Statistics.

And again, as with the music industry, these figures for “Box Office Revenues” are only half the matter, actually a little less than half the matter. When we open our eyes wider to look at all revenue sources for the film industry, including pay-per view tv, cable and satellite channels, video rentals, rapidly declining dvd sales, and fast rising new areas such as online subscriptions and digital downloads, the picture changes dramatically.

Doing that, it is clear that the movie business is doing even better than the box office numbers suggest, rising sharply on worldwide basis from $46.5 billion in 1998 to $87.4 billion in 2010. Table 1 below shows the trend.

Table 1:  Worldwide Film Industry Revenues, 1998 – 2010 (US$ Millions)

	1998	2000	2004	2008	2009	2010*	Change %
Film	46,484	52,803	82,834	82,619	85,137	87,385	+ 88%

Sources: PriceWaterhouseCoopers (2010; 2009; 2003), Global Entertainment and Media Outlook.

The same case can be made for the electronic software and video gaming industries, the constituents of the Entertainment Software Association of Canada (ESAC) and their corporate lobbyists who have also been out their plying their trade, backed by similar dubious assertions.

The biggest problem with all of this is not the underlying faulty economics and total absence of meaningful evidence, but rather the complete bankruptcy of the lawyers and lobbyists peddling the case. They appear to have no moral compass when it comes to these matters and would just as easily turn ISPs, search engines and social networking sites into online gatekeepers working on their behalf as they’d toss their grandmothers overboard if she hacked a digital lock.

That their positions are indeed those of radical extremists can be seen by, for example, comparing them with other interests in the mainstream of business thinking, such as the Business Coalition for Balanced Copyright. The BCBC group represents most of the major ISPs in Canada (Bell, Rogers, Telus, SaskTel, MTS Allstream), Google, Yahoo, eBay,  and so forth.

Thus, whereas the ESA (p. 7), Canadian Federation of Musicians, Canadian Independent Music Association (pp. 8-9), and copyright lawyers like Sookman and Gannon, call for a “much stronger and enforceable” notice-and-takedown regime, and graduated responses that would require ISPs to disconnect internet users accused of repeatedly infringing copyright material, the Business Coalition for Balanced Copyright forcefully rejects “notice-and-takedown and graduated response policies, which would turn intermediaries into ‘copyright police'” (p. 6). The group also rejects such a role being imposed on other digital intermediaries such as Google and social media services.

This is not unusual. To its credit, one of the world’s largest telecom and internet gear manufacturers, Ericsson, makes the same case in perhaps even more expansive language. Indeed, while supporters claim that the “graduated response” and digital intermediary strategy have only a minimal impact on individual liberties (see here and here), a recent UN Internet & Human Rights minced no words when it argued exactly the opposite point of view:

“. . . [C]utting off users from Internet access, regardless of the justification provided, including on the grounds of violating intellectual property rights law, [is] disproportionate and thus a violation of article 19, paragraph 3, of the International Covenant on Civil and Political Rights” (p. 21).

As for the attempted claw back on user-generated content, once again we see the copyright maximalists as not just being out of step with others but so wedded to a restricted view of the world that they think that copyright law is all about them. Yet, as James Boyle observes in The Public Domain: Enclosing the Commons of the Mind (pp. 66-70), copyright sets out rights for creators and owners, on the one side, and users, readers and audiences to do as they please with media acquired legitimately, on the other.

From the blinkered, ego-centric position if the maximalists, it’s easy to understand the drive to extend copyright terms from life of the author plus fifty years to seventy, but why not in perpetuity? That they have not pursued this is mere capitulation to political reality versus any kind of principled stance.

Reading any of the above ‘copyright maximalists’ interventions one would be hard pressed to know that copyright law is about two sets of interests: copyright holders and media users. Thus, from the position of the ESA (p. 7), Canadian Federation of Musicians, Canadian Independent Music Association and copyright maximalist lawyers like Sookman and Gannon, the idea that the Copyright Modernization Act (Bill C-11, sec. 22) would carve out space for non-commercial user-generated content is completely unacceptable, akin to a tax, a subsidy, a sop thrown to the masses. It is not, it is simply recognizing that people have rights too.

Nowhere is this idea more evident than in the digital locks provisions of C-11. Indeed, whilst the bill contemplates some reasonable measures and in fact does acknowledge a new user right with the user created content provision, the fact of the matter is that the restrictions on tampering with digital locks effectively nullifies those rights. In other words, what the bill gives with one hand, it taketh away with the other.

Again, the Business Coalition for Balanced Copyright is much more onside in this matter than the content and entertainment industries. Indeed, they are emphatic that the greater articulation of user rights in the Bill is an advance, and that this is especially so with respect to the user created content right, but state equally emphatically that “the digital locks provisions render them illusory” (p. 4).

Ericsson stakes out a similar position, setting out three general principles that ought to govern whatever digital locks mechanisms that are used and backed by the force of law:

1. They should be “built on an interoperable set of proprietary standards or consist of DRM technologies that are based on open industry-wide standards;
2. “Must not limit individuals’ statutory right to make legal private copies of Music, Books and AV works;
3. “[C]ontract law and technical standards should not be allowed to override statutory exceptions such a fair use regime or private copy exemptions, thereby limiting the availability of lawfully acquired content to format or device shift within the scope of the private sphere” (p. 6).

My point in all this is not to make a fetish out of those who make, own and run the pipes that make up the Internet and the networked, digital public sphere. Instead, it is to highlight some of the mainstream currents of thinking on the issues at hand and to highlight those who are now trying to stuff Bill C-11 with SOPA-stlye restrictions that will gut the Internet for what they are: radical extremists, and well in the minority.