Copyright Board of Canada allows levies on MP3 players

August, 2007

The Copyright Board of Canada (“the Board”) ruled on July 19, 2007, that a copyright levy can apply to digital audio recorders, such as MP3 players and iPods.  The levy is meant to compensate artists, whose copyrighted works are reproduced onto digital audio recorders without any compensation.  The Board also appears to have left open the door to the application of the levy onto computers and cellular phones.  Copyright levies already apply to blank audio recording media, such as blank compact discs and blank cassettes.  The decision of the Board makes it possible to apply the levy onto digital audio recorders from January 1, 2008.  It has been reported that the Canadian Private Copying Collective (“CPCC”), who collects the levies applied by the Board, has already filed a motion with the Board requesting the following levies on digital audio recorders based on the size of the embedded memory: $5<1GB; $25 ≥1GB, <10GB; $50 ≥10GB, <30GB; $75≥30GB.  

2003 Board Decision

In 2003, the Board ruled that copyright levies could be applied to the memory components in digital audio recorders.[1]  In its decision, the Board used the term “digital audio recorders” to refer to products with non-removable memory capable of, and ordinarily used for, recording digitally any format of music.  The Board stated that MP3 players and similar devices would come within the definition of “digital audio recorders”.  As the levy is meant to compensate relevant persons, who own the copyright to sound recordings, by imposing a charge on the sale of blank audio recording media, the Board ruled that a digital audio recorder, onto whose components music could be recorded, was properly subject to the levy.

2004 Decision of Federal Court of Appeal

In 2004, the Federal Court of Appeal (“FCA”) overturned the decision of the Board on the ground that the Board was not authorized to establish a levy on the memory embedded in a digital audio recorder.[2]  The Board only had the authority under the Act to establish a levy on an audio recording medium, such as a cassette or compact disc.  Any expansion of the authority of the Board must come from Parliament.  The Act defines “audio recording medium” as a recording medium, regardless of its material form, onto which a sound recording may be reproduced and that is of a kind ordinarily used by individual consumers for that purpose, excluding any prescribed kind of recording medium.  This definition gave the Board no authority to look through the device being sold, a digital audio recorder, and define it as an audio recording medium because it had memory permanently embedded therein.

2007 Board Decision

On July 19, 2007, in what some commentators view as the Board overturning the ruling of the FCA, the Board made two rulings: (i) the law is not settled on whether a digital audio recorder is a “medium”, as the word is used in the definition “audio recording medium” in section 79 of the Copyright Act; and (ii) a digital audio recorder is a “recording medium, regardless of its material form, onto which a sound recording may be reproduced”.

Ruling 1: Law not Settled

The Board held that the FCA had only ruled that the Board could not authorize a levy on digital memory embedded in a digital audio recorder.  Although the FCA had stated that a digital audio recorder is not a medium, the Board held that such comment was obiter and not related to the instant legal issue before the FCA.  Therefore, the Board stated that the law was not settled about whether a digital audio recorder is a medium, as the word medium is used in the definition of “audio recording medium” in section 79 of the Act.

Ruling 2: Is a Digital Audio Recorder an “Audio Recording Medium” etc?  

By analyzing the definition of “audio recording medium” in the Act, the Board concluded that a digital audio recorder is an audio recording medium.  The reason is that a digital audio recorder stores relatively permanent reproductions of sound recordings; the presence of such storage capacity is the only requirement under the Act to satisfy the definition of audio recording medium.  (At this time, the Board did not ask the participants for any evidence on whether individual consumers are using digital audio recorders to reproduce sound recordings.)

As the FCA examined the issue of whether a digital audio recorder was an audio recording medium through the example of a cassette recorder/blank audio cassette dichotomy, the Board held more or less that such approach would not be useful for the analysis of a digital audio recorder.  A digital audio recorder is simultaneously a digital audio recorder and a digital audio player.  One should not look at a digital audio recorder as one part sound recording player and one part memory device.  The Board could not apply the levy to a cassette player not because such cassette player could play sound recordings, but rather because such player could not record sound recordings onto itself.  Simply because a digital audio recorder can play sound recordings does not mean it cannot still be an audio recording medium onto which sound recordings may be recorded.  According to the Board’s conceptualization of a digital audio recorder as an audio recording medium, the Board did have the power to authorize a levy over the digital audio recorder as a whole.  Further, the Board believes that the FCA would have come to the same conclusion if, when it interpreted the legislation, it had taken into account the digital audio recorder as a new technological development.

Conclusion

On the basis of the Board’s ruling that a digital audio recorder is an audio recording medium under the Act, if the CPCC or some other association is able to prove to the Board that certain digital audio recorders are ordinarily used by individual consumers to reproduce sound recordings, then as early as January 1, 2008, the Board will permit the levying of charges on such digital audio recorders.  That being said, it is very likely that the Board’s decision will be appealed.

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Ryan K. Smith is a lawyer and trade-mark agent at Feltmate Delibato Heagle LLP. He specializes in corporate and commercial law with expertise in intellectual property matters including trade-marks, copyrights, privacy, information technology, and confidential information.  You can reach Ryan at rsmith@fdhlawyers.com and (905) 287-2215.

 


[1] Tariff of levies to be collected by CPCC in 2003 and 2004 on the sale of blank audio recording media, in Canada, in respect of the reproduction for private use of musical works embodied in sound recordings, of performer’s performances of such works and of sound recordings in which such works and performances are embodied.

[2] Canada (Canadian Private Copying Collective) v. Canadian Storage Media Alliance, [2004] F.C.J. No. 2115 2004 FCA 424 Federal Court of Appeal.