Monday, May 01, 2017

Canada Won the Eli Lilly NAFTA ISDS Battle Bigly but Who Will Win the War?


https://upload.wikimedia.org/wikipedia/commons/5/5a/Lilly_Strattera_60mg_Capsule.jpg

As everyone knows by now, Canada supposedly “won” the Eli Lilly NAFTA case. Prof. Richard Gold suggested in a tweet that there is an analogy here to Vimy Ridge, which was recently and rightly on the mind of all thinking and caring Canadians.

Indeed, just like Vimy, the Eli Lilly win was costly, important and empowering. But just as WWI, which was supposed to be “the war to end all wars” went on for a long time afterwards and WWII soon followed, the Eli Lilly case was only a battleground victory and not the end of the Investor State Dispute Resolution (“ISDS”) wars.

Moreover, unlike Vimy, it may not have been necessary or even desirable for Canada to risk this Eli Lilly ISDS battle. However, we did and we “won”. Let Canada celebrate this success but it is much too early to declare victory in the ISDS wars. It may even be the case that this was a “Pyrrhic Victory”, as the influential scholar Robert Howse suggests and I discuss below.

Now that NAFTA is apparently about to be renegotiated in a very uncertain and unstable political and trade climate, it is important that Canada learn whatever lessons is can from this saga.

Background

It will be recalled that on May 13, 2013, a panel of the Supreme Court of Canada (“SCC”) with presiding Justice Marshall Rothstein (now retired) held an extraordinarily  rare and very patient oral hearing on whether Eli Lilly should be allowed leave to appeal in a case involving the “promise doctrine”. On May 16, 2013, the Court declined the leave application, as usual without reasons. Here is the webcast of that hearing.

Undaunted by the SCC’s leave refusal, which would absolutely have been the end of the litigation for any Canadian party, Eli Lilly and Company (“Eli Lilly”), an American “foreign investor” and the parent company of Canadian Eli Lilly  decided to launch a NAFTA challenge, which it commenced on September 12, 2013 under the ultra-controversial Investor State Dispute Settlement (“ISDS”) provisions of Chapter 11 of NAFTA. This ISDS mechanism has been used – and sometimes abused – to permit foreign investors to challenge domestic state actions that constitute illegal expropriation, denial of justice, or denial of “fair and equitable treatment”.  

The astonishing and arguably outrageous aspect of the Eli Lilly challenge was that it was frontally challenging a decision of Canada’s highest court. That is something that no Canadian litigant could possibly do – or would even think about. The only recourse to a Canadian litigant that has been to the SCC and has lost or been denied leave to appeal is to seek legislative change, which will rarely follow. That is the basis of the rule of law, the independence of the judiciary, and the sovereignty of this country.

Eli Lilly was not challenging the conformity of the Canadian patent statute with international law. If there were something substantively wrong with Canada’s Patent Act that makes it non-compliant with international law, it could have been challenged in a state to state procedure in the WTO. But that was not and is not the case. Likewise, the Patent Cooperation Treaty has a state to state dispute settlement provision involving recourse at the International Court of Justice.

So, Eli Lilly instead basically sought to have a NAFTA panel of three arbitrators overrule the SCC, which presumably saw no need to hear a case that challenged a long, evolutionary and clear line of Canadian case law. Oh, and by the way, Eli Lilly was now seeking damages in the amount of $500,000,000. A victory for Eli Lilly would not only have been very expensive for Canadian taxpayers. It would have set the stage for many further challenges to Canada’s judicial and political sovereignty and exponentially increased the danger of regulatory and legislative chill.

Here is the “Final Award” released March 16, 2017. Here is the ICSID Archive of all the background material.

Some Perceptions about the Award

Michael Geist, who is not shy when it comes to critical comment on Canadian policy, quickly opined  that:
The Tribunal decision represents an enormous win for the Canadian government and for the supremacy of Canadian law and the judicial system more broadly. The real fears that dispute settlement could be used to override Supreme Court of Canada decisions lies at the heart of concern with ISDS provisions that have found their way into trade agreements such as CETA and the TPP. (highlight added)

Richard Gold, a very independent and highly respected Canadian academic at McGill who is Canada’s leading patent law professor and scholar, has just published an encouraging op-ed in the Globe and Mail an April 6, 2017 in which he concludes:
The win over Eli Lilly only opens the door of possibility. It provides us freedom to do what we need to do to have a sustainable innovation policy and bring wealth and wellbeing to Canadians. Now, we face the hard part: What we do with that freedom.

Nathaniel Lipkus has stated in Policy Options on April 7, 2017 that:
The good news is that we no longer need to worry that trade tribunals will become supranational courts of appeal over domestic property law disputes.

As will be seen below, Robert Howse is more pessimistic and I tend to agree with him.

Why I am Less Enthusiastic

In my respectful view, Canada gambled and won an important victory in an arguably avoidable and unnecessary battle in this instance, but it is far from clear that that the ISDS wars are over. Canadian political and judicial sovereignty remain seriously at risk.

In the ISDS proceeding, Canada chose to acknowledge that “a State is responsible in international law for the conduct of its organs, including the judiciary”. (paras 175 and 186) and argued that “the only substantive obligation under NAFTA Chapter Eleven with respect to judicial measures is to ensure that the investments of an investor from another NAFTA Party are not denied justice. As Claimant has not claimed a denial of justice, the Tribunal need make no further inquiries.” (footnotes omitted, para 186). 

Basically, this means that unless there is proof of corruption or bias or other extremely serious denial of justice, the decisions of the judiciary should not be reviewable under ISDS. Since one cannot even imagine that there would be such a denial of justice in Canada and it was not alleged, that should have been the end of the matter.

However, Canada did not raise this as a preliminary jurisdictional challenge. As I have previously noted and questioned, Canada chose not to have this challenge dismissed initially on purely jurisdictional grounds, namely that the NAFTA ISDS mechanism does not permit a foreign investor to bypass or appeal from domestic courts – except in the obviously inapplicable circumstance in Canada of denial of natural justice such as a result of corruption or bias. One would have thought that there was little risk in such a challenge and that it had a good chance of success – and it turns out that that one would probably have been right. Australia resisted an ISDS challenge of its tobacco plain packaging by Phillip Morris on technical jurisdictional grounds and prevailed. Would a normal defendant refrain from relying on a jurisdictional defence - such as being dragged into the wrong court or a limitation period – in order to take the high road and have a civilized debate on the merits?

Canada argued that

“…that domestic courts are to be afforded substantial deference, and that NAFTA tribunals cannot “second-guess the reasoned decisions of the highest courts of a State”. Respondent relies upon the finding of the Mondev tribunal that even if a domestic court were to elaborate a new interpretation of the law, as Claimant alleges in this case, this is not unexpected in a common law jurisdiction. In the absence of a denial of justice, there would be no violation of Article 1105.” (footnotes omitted) (para 198) (highlight added)

With respect, this is much too polite. “Deference” is a concept that applies when higher courts review findings of fact, discretionary rulings, etc. of lower courts or tribunals. The concept of “deference” implicitly, if not explicitly, concedes that there is jurisdiction but that the higher court will defer to the lower in certain respects. There should be absolutely no jurisdiction for a NAFTA tribunal to review domestic Canadian courts absent evidence of denial of justice. This should not be about deference. It’s about simple and total lack of jurisdiction in the absence of a “denial of justice”.

Instead, Canada chose to take an arguably and unnecessarily dangerous high road and to let this line of argument blend in with the enormously complicated and expensive resolution on the merits.  Not only was this risky because Canada might have lost on the merits and lost half a billion US dollars and set a dreadful precedent. It dignified what should have been a clearly inapplicable process required spending about $CDN 6.5 million of taxpayers’ money – most of which was the time of civil service lawyers calculated at well below private sector rates. Of this amount.  Canada spent almost US $1.4 million on an outside law firm and several experts, including professors making six figure amounts. Canada will only be reimbursed for 75% of its costs of legal representation and assistance – in the amount of CAD $4,448,625.32. There is no explicit explanation for this shortfall of almost $CDN 2 million – despite Canada’s overall success and very discounted rates for its public servants’ time.

Canada predictably won on the “merits” of this dispute. This was hardly surprising. Canada’s case law on the promise doctrine and utility has evolved rationally and coherently over many years and through numerous Federal Court, Federal Court of Appeal and Supreme Court cases since the SCC Consolboard decision of 1981.

The Tribunal stated:

423. Furthermore, the Tribunal finds that Respondent has asserted a legitimate public policy justification for the promise doctrine. In particular, Respondent has explained that enforcing promises contained in the disclosure helps ensure that “the public receives its end of the patent bargain” (particularly but not solely in connection with “new use” and “selection” patents) and that it “encourages accuracy while discouraging overstatement in patent disclosures”. The Tribunal need not opine on whether the promise doctrine is the only, or the best, means of achieving these objectives. The relevant point is that, in the Tribunal’s view, the promise doctrine is rationally connected to these legitimate policy goals. [footnote omitted]

By way of conclusion, the Tribunal stated that:

442. For the above reasons, the Tribunal holds that even if it were to accept Claimant’s position regarding the legal standards applicable to its allegations of arbitrariness and
discrimination, Claimant has failed to establish the factual premise on which its allegations of arbitrariness and discrimination are based. The Tribunal has already concluded that there was no fundamental or dramatic change in Canadian patent law. In the circumstances presented in these proceedings, the evolution of the Canadian legal framework relating to Claimant’s patents cannot sustain a claim of arbitrariness or discrimination going to a violation of NAFTA Articles 1105(1) or 1110(1).
(highlight added)

What did Canada achieve with this arguably needless roll of the dice? Here’s my summary, which is explained a bit more below:

  •    Canada spent about $6.5 million on this case but only recovered about $4.5 million in costs
  •   The Tribunal ruled that “It is not the task of a NAFTA Chapter Eleven tribunal to review the findings of national courts and considerable deference is to be accorded to the conduct and decisions of such courts.” The door is still open to challenges of Canadian judicial decisions “in very exceptional circumstances, in which there is clear evidence of egregious and shocking conduct” (para. 224)
  • It is still open to challenge Canadian judicial decisions, since the Tribunal ruled that in each case, it “will be a matter for careful assessment in any given case, subject to the controlling appreciation that a NAFTA Chapter Eleven tribunal is not an appellate tier with a mandate to review the decisions of the national judiciary.”
  • The Tribunal stated that the Tribunal it was “unwilling to shut the door to the possibility that judicial conduct characterized other than as a denial of justice may engage a respondent’s obligations under NAFTA Article 1105.” (para 223) (highlight added)
  • A “fundamental or dramatic change” in Canadian IP law as determined by the Canadian courts may still open the door to another challenge. Guess what? There is sometimes “fundamental or dramatic change” in legislation or judicial interpretation.  That should not be any basis for an ISDS challenge. That’s why we have legislatures and an exemplary judicial system by any measure.

What Could be Next?

Accordingly, I believe that there could be news ISDS challenges that may slip through the door that the Tribunal is “unwilling to shut” based on these exceptions. Canada may be forced to defend these challenges at huge cost and risk. For example, there is a well-financed lobby of copyright content owners who believe that Canada has lost its way on copyright fair dealing, and who tried unsuccessfully to roll back the CCH v. LSUC decision. While their time may have run out on that and the 2012 amendments, they may be waiting for the next opportunity. We have also seen some blatant and histrionic attacks in recent years on the Copyright Board, including the “renegade” comment from former head of the Canadian Association of Broadcasters in 2005 and the shameful attempt by Music Canada in 2015 to lobby the new Chair, telling him in an astroturf campaign that:

This [Re:Sound Tariff 8] decision discards years of agreements freely negotiated between digital music service providers and the music industry and sends a message to the world that it does not value music as a profession.  This is inconsistent with Canadian values. 

These rates were unprecedented globally – they are one of the world’s worst royalty rates for non-interactive and semi-interactive music streaming.

That Copyright Board decision is now the subject of judicial review in the Federal Court of Appeal. Interestingly, this seemingly straightforward case has been pending after the hearing in February of 2016 for more than 14 months which is very unusual for a Court that normally hands down decisions in a few weeks or six months at the most. If this case turns out badly for the American record industry as represented by Music Canada, and the SCC either refuses leave to appeal or rejects an appeal, don’t be surprised if there is a NAFTA challenge – assuming we still have an NAFTA with ISDS provisions.

Or consider this overheated language from the usually more analytical Richard Owens in a posting last year based upon his op-ed of July 26, 2016 in the National Post concerning a study he did for the MacDonald Laurier Institute (“MLI”):

“Although the Alberta Education case is one of the most egregious examples, it is not in that case alone that the SCC has taken IP jurisprudence down a crooked path.”
(highlight added)

It’s an interesting coincidence that he uses the word “egregious”, which is the same word used by the NAFTA Tribunal to justify its refusal to “shut the door” to review of decisions of the SCC. What can be said about the “crooked path” comment, other than it is more or less contemporaneous with the “crooked Hillary” rhetoric was head before last year’s American election?

His commentary for MLI, which is referred to in the above postings, reads more like a lobbying brief for the publishing industry than any kind of careful analysis. He states:

How Heritage responds to the pressing needs of the educational publishing industry, and the egregiously bad state of copyright law affecting it, will be a real measure of its efficacy. (highlight added)

Words can matter. I don’t know the circumstances of how or why Richard wrote the above stuff. But if this commentary does reflect the view of Canada’s educational publishers, many of whom have foreign parents, we may be facing a NAFTA challenge based upon what Mr. Owens and some of his colleagues may consider to be “egregious” future decisions of our Copyright Board and Courts. Mercifully, any NAFTA claims based upon the 2012 legislation or the 2012 SCC rulings are now time barred. But we are still awaiting first instance decisions on fair dealing from the Federal Court in the Access Copyright v. York University litigation and from the Copyright Board in the Access Copyright Post-Secondary tariff hearing.

I only hope we are not getting into “alternative fact” and “alternative” legal territory Such provocations on the part of various copyright stakeholders and intemperate and even histrionic commentary are potentially worrisome in view of the Tribunal’s refusal to “shut the door” on challenges to domestic courts if somebody thinks and can afford to assert that our courts or legislature has made fundamental or dramaticchange to Canadian IP law. Sometimes, such change is required.

Indeed, if and when Canada enacts plain packaging requirements for tobacco, that industry will no doubt deploy every legal tool available to fight back. A few – or even several - million dollars for an ISDS challenge is small pocket change for this industry. Any delay in such measures or any lessening of their efficacy resulting from the chill effect of an ISDS challenge is money well spent as far as big tobacco is concerned. It seems abundantly clear that big tobacco will challenge any Canadian effort to implement plain packaging.

It may be noted that Phillip Morris International reported net revenues of $US 74.953 billion and net earnings of $US 6.967 billion in its annual report for 2016, which is replete with references to “plain packaging” and notes that Canada is “considering adopting plain packaging legislation”.

The new cannabis legislation, Bill C-45, includes plain packaging,  trademark and copyright related provisions that may well generate litigation focusing on “expropriation” of trade-mark rights and freedom of expression. Who knows if there are foreign investors waiting in the wings ready to light up an ISDS challenge?

Can Canada Afford ISDS?

ISDS, of course, is one of the main contributing factors to the controversy over CETA, the BREXIT crisis and the demise of the TPP. Hopefully, in any NAFTA renegotiation, Canada will be able to either get rid of ISDS or put in safeguards to ensure that nothing like the Eli Lilly case can ever happen again.

It has never been clear why the Canada thought that ISDS in NAFTA was a good idea, and it has certainly not worked to Canada’s advantage. A study published by the CCPA in 2015 documented:

“…. the 77 known NAFTA investor-state dispute settlement (ISDS) claims up to January 1 2015. These include 35 against Canada, 20 against the U.S., and 22 against Mexico. Canada has paid out NAFTA damages totaling over $CAD172 million, while Mexico has paid damages of $US204 million. The U.S. has yet to lose a NAFTA chapter 11 case. All three governments have incurred tens of millions of dollars in legal costs to defend themselves against investor claims.”
            (highlight added)

For those cynical types who look to the “school of legal realism” now and then to explain things, it might be noted that ISDS cases can be very lucrative for those involved. The ISDS community is small and rather closed. It is a very lucrative niche for some retired judges, certain academics and practitioners who are arbitrators – and for the experts involved, especially if there is repeat business. This an area of practice that will not likely go gently into any good night. There may even be some who aspire get into this small ISDS circle and may be reluctant to criticize it, even though they know its shortcomings. 

Some Canadian experts made substantial six figure amounts in this case. A Canadian professor from UNB, who was an expert witness for Eli Lilly was paid US $213,692. A Toronto lawyer, who was an expert witness for the Canadian Government, was paid more than CDN $492,000 – far more even than any of the arbitrators. Much, if not all, of this “expert” testimony would have almost certainly been inadmissible in any domestic Canadian judicial proceedings insofar as it dealt with Canadian law. There were also expensive expert reports about foreign and treaty law. Foreign law is normally irrelevant and wouldn’t be considered by a Canadian court – unless there is a void of applicable Canadian jurisprudence or the Canadian statute is somehow ambiguous and requires reference to a treaty, which was not the case here.

The three arbitrators, none of whom were Canadian and all of whom are clearly very well qualified, made US $259,734.75, $114, 359.20 and $138,872.07. Ironically, several of the “experts” made more than two of arbitrators and one made more than the Chair of the Tribunal, who presumably held the pen in writing the judgment. NAFTA arbitrators get paid US $3,000 per day, which may not seem to be a lot per diem compared to some routine commercial arbitration cases – but these NAFTA cases take a lot of time and the community of arbitrators is said to be rather small.

Eli Lilly spent over $US 8,000,0000 for legal fees and disbursement – mostly to a US law firm and $US 1.3 million on experts, arbitration costs and fees. Their Canadian firm, Gowlings, was paid US $1,577,017.

More detail, including names and amounts, are set out near the end of the award.

The costs of the many Canadian public service lawyers in the Trade Law Bureau who worked on this case were hourly billed at “hourly rates that are substantially lower than those charged in the private sector.” (FN 622 of award).

It may be noted that Eli Lilly USA reported revenue of US $21.2 billion and net income of US $2.7 billion for 2016 and did not even mention the NAFTA case in its 2016 annual report.

So, this is where we appear to stand:

This decision may not stop the next pharma, tobacco, copyright or whatever other ill-considered case from proceeding – at great cost and risk to Canada and pocket change costs to the claimants, who may predictably lose but foment sufficient expense, consternation, controversy and regulatory chill in the meantime to justify the relatively costs in terms of their rent driven revenues. Delay and indecision by Government can be very profitable for certain industries. Do not count on any ISDS tribunal readily declining jurisdiction.

I take some comfort that my general views are backed up by Professor Robert Howse, a distinguished Canadian academic now at NYU who has the best take yet in his piece called “Eli Lilly v Canada: A Pyrrhic Victory Against Big Pharma”
So, what is the real message of the Eli Lilly tribunal? They are not coming out and saying it, but, by implication, they encouraging future regulatory takings claims by implication that the concept of "expropriation" under NAFTA might well apply to require a host state compensate an investor even for jurisprudential shifts in the approach of a country's highest courts to that country's law (including its constitution), if that shift can be characterized as dramatic, radical, or fundamental. It is a matter of the Eli Lilly legal team simply not doing a good enough job proving that the jurisprudential developments in question were dramatic.

When high courts reconsider well established judicial doctrines in the face of social, economic, environmental or other forms of rapid change we experience in the world today they must now beware that any basic or fundamental reorientation of their jurisprudence could force the government of that state to pay out millions or billions to foreign corporations in the guise of an "expropriation" having occurred. Regulatory chill from ISDS is bad enough; but when it comes in a form that makes a nation's highest court choose between its duty as a guardian of the state's legal system (including the revision or reversal of important rulings for compelling reasons) and incurring the state's liability to foreign corporations, the attack is not only on domestic policy space as such but also on the judiciary as the guardian of the law.

Now Back to the Supreme Court of Canada

Of course, all eyes now shift back to the SCC, where the AstraZeneca case was heard on November 8, 2017, with materials available here.  The webcast of that hearing is available here.  It is well worth watching and seeing so many SCC judges so engaged in the intricacies of patent law and asking so many questions. Highest courts are normally very reluctant to get involved in patent cases, which usually turn more on evidence and fact finding than major legal issues.

I posted at length about this case the day before the hearing – and the NAFTA “rogue elephant lurking nearby and possibly even in in the room that I expect will remain almost completely silent and will likely be carefully ignored.”

One never knows exactly why the SCC decides to hear a case or not. As we all know, it decided early in 2013 not to hear about the “promise doctrine” in the Eli Lilly case. It will be recalled that the Eli Lilly NAFTA challenge was commenced on September 12, 2013. Not long thereafter, leave to appeal in was granted in the Sanofi case on January 30, 2014, where the “promise doctrine” was in issue. The Court was all dressed up and ready to go on the actual hearing on November 4, 2014– but the case was dramatically and very unusually settled literally on the eve of the hearing, which may have left the justices and interveners somewhat frustrated. I wrote about this at the time.

In the AstraZeneca case, the Appellant, AstraZeneca made the Court aware on the record in the leave to appeal material and its factum of the Eli Lilly NAFTA challenge. Whether this challenge played any role in the Court’s decision to hear the case is something we may never know. However, it is interesting that the Court has agreed twice since the initial refusal to grant leave in the Eli Lilly case to hear about the “promise doctrine”. Both of these leaves were granted after the Eli Lilly NAFTA challenge was launched.

If the SCC had any intention of ruling in advance of the NAFTA tribunal, it is now, of course, too late. A strong ruling either way might have been of interest to the NAFTA tribunal, which might have had to hear further submissions. But that has not happened.

Indeed, counsel for the respondent in the AstraZeneca case on March 22, 2017 has made the Court aware of the Eli Lilly NAFTA ruling as a “supplementary authority”.  There has apparently been no response. My guess is that the Court will not react to the NAFTA ruling one way or the other, unless by way of obiter dicta, which could be very interesting. The whole point is that Canada’s SCC should have the final word on the application and interpretation of Canadian law and a NAFTA Tribunal has no jurisdictional basis to “second-guess” the decision of any Canadian court, much less the SCC (other than in a “denial of justice” case, which is unthinkable in Canada). So, the SCC has no compelling reason to be interested in anything coming from a NAFTA tribunal.

That said, it would now be ironic if the SCC were to undo a long line of Canadian case law on the “promise doctrine” and to effectively, in its forthcoming AstraZeneca ruling, vindicate Eli Lilly’s position in its unsuccessful NAFTA case and the appeal it declined to hear in 2013.  Tempting as it may be, I will refrain from predicting the outcome. As Yogi Berra said, “It's tough to make predictions, especially about the future'”.  In this instance, one might say that it’s especially tough to make a “sound prediction.”

HPK


Blacklock’s Back in Court on May 2, 2017 – How Long will this Litany of Litigation Last?

On Tuesday, May 2, 2017, the Blacklock’s case is back in Court at 9:30 AM in Room 702 at 90 Sparks St. in Ottawa for a case management hearing, where lengthy motion, cross motion and response records and oral submissions will be considered by Prothonotary Tabib. There will likely be a host of counsel representing Blacklock’s and many of the 11 Government of Canada departments and agencies that Blacklock’s has sued. Canadian taxpayers are no doubt going to pay a lot to monitor and participate, even passively, in this “litany of litigation” even while the Attorney General of Canada (“AGC”) takes the lead for the Government. The departments and agencies that have retained counsel other than the AGC are generally using large law firms.

It will be recalled that Blacklock’s badly lost its first test case against Finance Canada in a judgment dated November 10, 2016 that was not appealed. Then, on December 21, 2017 Justice Barnes awarded the Government $65,000 in costs, which was conceivably much less than might have awarded in all the circumstances. Blacklock’s has appealed this award, even though appeals of cost awards are very rarely successful.  In his reasons for the costs award, the learned Judge’ commented that:
[7] …I also reject the Plaintiff's argument that this case raised "strong public interest considerations". Rather, this case was about the Plaintiff's attempt to recover disproportionate damages without any apparent consideration to the legal merits of the claim or to the costs that it imposed on the taxpayers of Canada.
[8] Any reporter with the barest understanding of copyright law could not have reasonably concluded that the Department's limited use of the subject news articles represented a copyright infringement. Indeed, the fair dealing protection afforded by section 29 of the Copyright Act, RSC, 1985, c C-42, is so obviously applicable to the acknowledged facts of this case that the litigation should never have been commenced let alone carried to trial.
(highlight and emphasis added)

This could suggest that future losses by Blacklock’s could result in even higher costs awards against it.

In a nutshell, Blacklock’s wants to go forward with one particular case against the Attorney General of Canada (“AGC”), namely that against Health Canada and one against one of the non-AG Government of Canada agencies, i.e. Bank of Canada, Canadian Transportation Agency of the Library of Parliament. It’s rather unusual for a plaintiff to file and then seek to stay almost all of its own cases – but virtually everything about this litigation has been unusual. Here are Part 1, Part 2 and Part 3 of Blacklock’s Motion Record dated March 21, 2017.

The Government and the other agencies and departments want to ahead with one of the actions on a summary judgment basis because it is said to be indistinguishable on the facts from the previous Finance case, which Blacklock’s lost badly and did not appeal. More interestingly, The Government Respondents want to get a preliminary determination on two threshold questions which potentially affect and, indeed, could effectively bring to an end all the cases, namely:
  •            Whether Blacklock’s even has standing to sue, in light of chain of title and retroactive assignment issues involving the articles alleged to have been infringed
  •       Whether Blacklock’s’ can expect to recover sufficient actual or statutory minimum damages, should it so elect, in an amount sufficient to justify any of this “litany of litigation”.  As I have previously pointed out, there is a limit of $5,000 on statutory minimum damages where the activity is for “non-commercial purposes”. I have also previously mentioned the cautionary tale of Catherine Leuthold, who had hoped to collect $22 million from the CBC, but recovered only $19,200 and was ordered to pay about $80,000 in costs.

Here is the Cross Motion Record of the AGC dated April 4, 2017. Finally, here is Blacklock’s Response to the AGC’s Cross Motion dated April 18, 2018.

An interesting sidebar has begun to emerge prominently from this mass of material and concerns two individuals, namely Nick Fillmore and Mark Taliano. I have previously posted the pleadings in Blacklock’s Ontario Superior Court case against them. See the Statement of Claim against Fillmore and Taliano here  and the Statement of Defence here. The AGC included in its Motion Record dated April 4, 2017 a short Affidavit from Mr. Nick Fillmore (highlight added) in which he explains why he and Mr. Taliano, as individuals, agreed on December 16, 2016 to pay Blacklock’s a total of $21,750 within 60 days. He also noted that they had incurred legal and mediation fees of about $8,000.

This was apparently included and referred to by the AGC to make the point, inter alia, that “The Court has found that Blacklock’s claims disproportionate damages, and that other institutions have settled for business reasons”. The AGC notes  that “a community organization made up of volunteer retirees  was forced to settle because its members could not afford to pay the substantial legal fees required to defend themselves against Blacklock’s” and suggests that that the Court should “strive for proportional procedures that will achieve a just result”.

Interestingly, about a week after the AGC’s motion record was served, Blacklock’s published on April 11, 2017 one of its few unlocked articles entitled $22K Copyright Settlement By Canadian Facebook Bloggers. It begins by stating that:
A bootleg news aggregator has settled a $21,750 copyright claim after republishing articles on a Facebook blog, the largest known settlement of its kind in Canada. The defendants’ lawyer was Professor David Fewer, director of the University of Ottawa’s Canadian Internet Policy & Public Interest Clinic. [CIPPIC]
Blacklock’s Reporter in 2015 sued the blog operators for $20,000 as well as punitive damages and costs for republishing dozens of password-protected articles. In an unusual settlement, the aggregator One Big Campaign paid $21,750, volunteered a public apology and waived all confidentiality of settlement terms.

Actually, as I noted earlier  when first mentioning this particular lawsuit, Mr. Fewer was acting “not in his capacity as Director of CIPPIC, but rather in his personal capacity”. Blacklock’s also labels Mr. Fewer as “a copyright adviser to the Department of Justice”, which I understand not to be the case.  

It’s interesting that Fillmore and Taliano were not represented by CIPPIC itself, and therefore had to pay Mr. Fewer’s legal bill. Mr. Fillmore states in his affidavit that “we feared that, even if we won, our expenses might run as high as $40,000 or $50,000”. This suggests that they were expecting a very much higher legal bill at the end of the day, even if they won. Presumably, if CIPPIC had represented them, they would not have had to pay their own legal costs. CIPPIC’s mission is stated to be:
CIPPIC has a dual mission:
·         to fill voids in public policy debates on technology law issues, ensure balance in policy and law-making processes, and provide legal assistance to under-represented organizations and individuals on matters involving the intersection of law and technology; and
·         to provide a high quality and rewarding clinical legal education experience to students of law.
(highlight added)

Inexplicably, Blacklock’s seems to focus attention in its article on Mr. Fewer, and even includes an enlarged picture of his signature at the top of the article.

Blacklock’s also suggests that Fillmore and Taliano “rejected a $5,000 settlement offer from Blacklock’s”, which is apparently contradicted by Mr. Fillmore’s affidavit – upon which Blacklock’s has chosen not to cross-examine. Indeed, Mr. Filmore swears that he and Mr. Taliano offered to pay $5,000, which Blacklock’s “declined”. Blacklock’s makes a number of other contentious assertions in the article, and fails to note that its assertions have not been tested in Court. In its response dated April 18, 2017, Blacklock’s is attempting to put a lot of additional evidence concerning Messrs. Fillmore and Taliano on the record through an assistant’s affidavit, and, as noted, has chosen not to cross-examine Mr. Fillmore.

Without in any way commenting on the substance of the Fillmore and Taliano settlement, there are some aspects to this situation that would clearly seem to invite interest. In any event, the AGC and Blacklock’s have both pushed this issue into the limelight.

The amount of the settlement, $21,750, is more than the amount sought in the lawsuit, which in the case was $20,000 (forget about the demand for “punitive” damages). We do not necessarily know all that happened in this case. The Ontario Superior Court, unlike the Federal Court, does not provide an online docket, which usually gives some idea of what it happening in a case. I have asked Mr. Fewer to call me about this case, but he has not done so. In any event, he would presumably by constrained to some extent by solicitor-client privilege.

The settlement comes after Blacklock’s resounding loss in the Federal Court on November 10, 2016 and after the appeal period had passed. Not only was there a very favourable and detailed ruling in place from a very experienced Judge. The Government had left a legacy of applicable case law and material on the public record that was available to any other litigants.

Settlements of litigation are usually confidential. However, in this instance, it appears that Fillmore and Taliano felt compelled to not only let Blacklock’s exploit their unhappy result in public but, indeed, to agree to publicly apologize. Their Facebook page now appears to be dead in the water. On December 20, 2016, the Facebook page “Campaign to Build One Big Campaign’ posted an apology and a notice that “This site is now closed”. Ironically, the “unusually trenchant costs award” against Blacklock’s in Federal Court came out the very next day.

I have no idea what the merits or lack thereof of the lawsuit against Fillmore and Taliano may have been and will not speculate because nothing has been proven in Court. Second-guessing in this case about the lawsuit or the settlement could be inappropriate and inaccurate, and I am not doing so.  Messrs. Fillmore and Taliano had experienced counsel. However, it is worth recalling that, if the activity involved was for “non-commercial purposes”, the maximum amount of statutory minimum damages would arguably have been $5,000 – unless Blacklock’s could have somehow proven more in actual damages, which would have been extremely unlikely. Nonetheless, according to Fillmore’s affidavit which has not been cross-examined upon, he and Taliano – for whatever reason – felt “seriously intimidated” and settled for more than four times this amount.

What is interesting about this Fillmore and Taliano sidebar is the apparently disproportionate and defensive attention given to it by Blacklock’s. Perhaps more will become apparent on May 2, 2017.

Overall, this case has elicited much attention. On the one hand, Blacklock’s is arguably attempting overall to build a business model based, in effect, on a legally non-existent ability to control the “right to read” and to make this a test case for the future of journalism, even though Blacklock’s cannot readily be compared to the Globe and Mail, the Toronto Star, the New York Times of The Economist or any other readily apparent established and successful journalism model. Perhaps its closet analog is the Hill Times, which is a very successful Ottawa family owned publication with a much friendlier business model that has operated with great success for almost three decades.  A much-valued feature of its business model includes the ability to buy a single story issue in electronic form for $5.00. This is in sharp contrast to Blacklock’s business model. To the best of my knowledge, the Hill Times has never sued anyone. Indeed, the Hill Times business model seem to depend on quality, value and the very considerable goodwill of its customers, which would seem to be very similar to the same Ottawa government and NGO base that Blacklock’s is so busy suing.

Justice Barnes’ stern words in his costs award should be recalled:
[9]    I am also troubled by Plaintiff’s attempt to claim an excessive amount of damages beginning with its demand for compensation completely divorced from the Department’s limited use of the two articles. In no circumstances would Blacklock’s losses have exceeded the cost of individual subscriptions by the six officials who read the articles; yet Blacklock’s demanded a license fee equivalent to its bulk subscription rate of over $17,000.00.  This practice appears to be consistent with Blacklock’s usual approach which is to hunt down, by Access to Information requests, alleged infringers and then demand compensation based on an unwarranted and self-serving assertion of indiscriminate and wide-spread infringement. The record discloses that in several instances government departments acquiesced for business reasons and paid the full amounts demanded. In this instance the Department appropriately took a hard line and succeeded in its defence.
(highlight added)

HPK

PS - May 2, 2017

Case management conference adjourned to May 12, 2017. Court looking for solution on consent in #Blacklock’s unique "litany of litigation".

HPK

Friday, April 14, 2017

Fair Dealing in Canada: Dry Erase Boards and Overhead Projectors - Believe It Or Not? Updated

(Wikimedia)

Believe  it or not, the following was in Canada's Copyright Act until 2012:

Reproduction
for instruction
29.4 (1) It is not an infringement of copyright for an educational institution or a person
acting under its authority
(a) to make a manual reproduction of a work onto a dry-erase board, flip chart or other
similar surface intended for displaying handwritten material, or
(b) to make a copy of a work to be used to project an image of that copy using an overhead
projector or similar device for the purposes of education or training on the premises of an educational institution.

Thankfully, those provisions are now gone and those responsible for them are doing other things or have retired.

Mercifully, the Supreme Court of Canada was much smarter than these drafters and said that fair dealing is "always available" and must be given a "large and liberal interpretation" and we shouldn't have to look at these particular (and IMHO sometimes silly) little exceptions when the general provision in s. 29  is applicable.

I am glad we never had to test what would happen if the janitor used a wet cloth to clean chalk off a blackboard after school (I may be dating myself) or whether computer projectors would be considered a "similar device" to the long obsolete "overhead projector".

HPK

PS:
April 28, 2017

A copyright nerd from Queen's Law School has provided me with a recent picture that illustrates the ongoing presence of both the dry erase board and the overhead projector at that institution.



Monday, April 03, 2017

Canadian Embassy IP Event in Washington on April 5, 2017: Where's the Canadian Content?


This looks like an interesting and timely event with some high powered people. But where's the Canadian content?

HPK

Saturday, April 01, 2017

Moral Rights in America: “the only thing we have to fear is...fear itself”


The US Copyright Office, to its credit, has recently launched a consultation on moral rights, an issue that has struck fear into American corporate copyright interests for almost a century, since the concept was embraced in the Berne Convention in 1928. This fear resulted in a less than convincing accession to the Berne Convention in 1988. The late Director General of WIPO, Dr. Arpad Bogsch, compromised his once considerable credibility by turning a blind eye to fact that the USA basically did not provide adequate, if any, moral rights protection as required by the Berne Convention. Indeed, a few years later, the USA managed to exempt moral rights from dispute resolution proceedings under the WTO TRIPS agreement. The current consultation is at least an implicit if not explicit recognition that something needs to be done.

To date, the only explicit moral rights protection in US law is for visual artists as a result of a bill championed by the late Senator Edward Kennedy. Canada has had explicit moral rights protection consistent with the Berne Convention since 1931. There has been little litigation and little controversy, and the provisions have been updated as needed. See s. 14 here  and s. 28 here.

Controversy and misunderstandings about moral rights continues unabated. For example, not long ago in 2012 the iconic IPKat blog hosted this blog by Mira Rajan, which then blogmeister Jeremy Phillips characterized in prefacing her rejoinder as having “become more or less instantly one of the most controversial pieces to appear on the 1709 Blog”. My own take on this controversy can be found here.

So, it is not altogether surprising that there continues to be misunderstandings about moral rights, even on the part of some who one would expect to be better informed and more pro-creator. For example, I am surprised and disappointed to see the Electronic Freedom Foundation (“EFF”) opposing moral rights reform in the USA and stating bluntly that “Importing new moral rights would undermine settled law to the detriment of the public and with little corresponding benefit to authors.” Here’s the EFF’s website posting entitled “EFF Says No to So-Called “Moral Rights” Copyright Expansion”.

Likewise, Public Knowledge (“PK”) states that “We are concerned that extending additional statutory protection to include rights of attribution and integrity would be difficult to define with sufficient precision and predictability, and may have little benefit.”

EFF and PK – which are both normally defenders of balanced, principled and well-informed advocacy about copyright – find themselves here in apparent substantial agreement with the Motion Picture Association of America (“MPAA”) which states that:
Granting creative contributors statutory rights of attribution and integrity vis à vis the producer of a motion picture risks undercutting the ability of that producer to distribute the work in the way it finds most desirable; threatens conflict with fundamental principles of copyright law (including the work for hire doctrine) that have well served all players in the motion picture ecosystem; and would potentially violate the First Amendment rights of producers, artists, and third parties who wish to make lawful use of others’ works. For these reasons, among others, the MPAA believes new legislation in this area is ill-advised.  

A very sensible and much better researched position on moral rights comes, not surprisingly, from the Authors’ Alliance led by Pam Samuelson which reiterates its position that:
The law should recognize the right of authors to be acknowledged as creators of our
works. This is especially important for those of us who create in order to contribute to
knowledge and culture. Attribution serves not only our interests as authors, but also the reading public’s interest in knowing whose works they are consuming and society’s
interest in an accurate record of the intellectual heritage of humankind.

Politics often makes strange bedfellows.  Other comments submitted by the initial deadline of March 30, 2017 can be found here. There are surprisingly only 42 submissions, perhaps reflecting cynicism about the difficulty of progress, confirmed by the fact that the EFF and PK on the one hand are in agreement with the MPAA. The deadline for commenting on these submissions is May 15, 2017.

One hopes that Americans will eventually realize that, when it comes to moral rights, they should do the right thing and that “the only thing we have to fear is...fear itself”.

HPK



Wednesday, March 29, 2017

No Leave to Appeal Sought in Access Copyright K-12 Tariff Case - Is this "The End"?

I can now report that neither side in the Access Copyright K-12 tariff matter that was the subject of judicial review by the Federal Court of Appeal ("FCA") has sought leave to appeal to the Supreme Court of Canada. The deadline was yesterday.

Does this mean "The End" for the matters that were at stake, most notably substantiality, repertoire, fair dealing and the burden of proof re fair dealing?

Another shoe has yet to drop in the Access Copyright Provincial Tariff case, which was heard several months earlier in the FCA. For reasons which remain unexplained, that case - which involved several similar issues -  was heard by a different panel, even though the issues overlapped and the counsel were the same on both sides of both cases. So, it is possible, in principle, that we could see diverging views from the FCA. That would be interesting.

And we wait and wait for the Copyright Board to rule on the effectively unopposed Access Copyright Post-Secondary tariff file, which as been ongoing since 2010 and in which the effectively unopposed hearing concluded  in January, 2016.

Of course, we still await Justice Phelan's ruling on Phase I of Access Copyright's litigation  against York University (oral arguments completed in June, 2016) - in which York's fair dealing guidelines were put on trial.

"The End"?  

I don't think so...

HPK

PS:

The following is my post from February 1, 2017 which originally appeared here

***************
On March 15, 2016 I initially wrote about the Copyright Board’s decision on the Access Copyright K-12 tariff here.  

On April 14, 2016 I further wrote regarding the Copyright Board’s K-12 tariff decision as follows:
Not surprisingly, Access Copyright (“AC”) is pursuing judicial review (“JR”, or an “appeal” in layperson’s terminology). Except for the surprising outcome that would potentially give it almost $10 million per annum based almost solely on the reproduction of “consumables” (assuming all school boards actually decide to pay – which is very doubtful - see below), AC lost badly on just about every other conceivable aspect – including some very important ones such as fair dealing, insubstantial copying, and its agency by ratification argument, about which the Board has effectively, even if belatedly, done a 180 degree turn around. Here is AC’s comparatively fulsome JR Notice of Application.
Somewhat surprisingly in view of the arguably much too high FTE rate of $2.46, CMEC [the “Consortium”], which represents school boards outside of Quebec, is not seeking JR. For those interested in Federal Court of Appeal procedure, there is no such thing as “cross” judicial review. Each party needs to launch its own JR on or before the 30 day deadline. In this case, only AC did so. CMEC (Council of Ministers of Education, Canada) will no doubt ably defend AC’s JR but has not commenced its own, perhaps for the reasons I speculate about below.
Well, the Federal Court of Appeal has now ruled on AC’s JR proceeding. The issues as defined by the FCA were as follows:
[10] I have regrouped the issues raised by Access under the following headings:
A. Repertoire
(1) Did the Board err in ignoring expert evidence provided by Access to correct and clarify the breadth of its repertoire as described in the volume study?
(2) Did the Board err in restricting the “substantiality” (term used by the parties) of compensable exposure under section 3 of the Act?
B. Fair Dealing
(1) Did the Board err in its application of the burden of proof?
(2) Did the Board breach its duty to act fairly?
(3) Was the Board’s methodology unreasonable and did it err in assessing the relevant factors?
A. Repertoire
(1) Did the Board err in ignoring expert evidence provided by Access to correct and clarify the breadth of its repertoire as described in the volume study?

In a nutshell the bottom line of this 35-page decision is as follows:

-        AC scored a minor legal point but a potentially commercially significant point by convincing the FCA that the Board essentially ignored certain evidence as to its repertoire. The FCA states that:
[19] It is not disputed that if Circum’s calculations had been accepted, this would represent a sizeable increase in the royalties to be paid to Access, which it estimates to represent approximately $500,000.00 per year, or $3 million dollars over the two tariff periods. Before us, the Consortium did not offer any other estimate of the potential impact of these coding errors, saying that it would have to review the validity of Access’ calculations should the matter be reconsidered by the Board as its experts had not yet had the opportunity to comment on Access’ calculations.
….
[22] Although the Consortium argued that this finding was based on the weight given to the evidence by the Board, a matter with which this Court should not lightly intervene, it is difficult to conclude anything other than that the Board, through oversight, overlooked the expert evidence and submissions it accepted as exhibits AC-114 and AC-114A on December 5, 2014.
[23] The Board’s clear wording that Access provided no evidence rebuts the presumption that a decision-maker has considered all the evidence before it.
[24] There is no ambiguity in the reasons expressed at paragraph 405 of the Board’s Reasons reproduced above. The Board failed to consider that expert evidence had been filed to estimate the degree of the underestimation, that Access had chosen to correct the underestimation and that it explained in detail why it had not done so before. Access’ statement that the corrections proposed by its expert did not result from an expansion of Access’ repertoire in the years subsequent to the data collected in the 2005-2006 volume study was not challenged before us. Thus, the Board’s refusal to consider whether the repertoire was underestimated is unreasonable.
(highlight added)
On virtually all other issues as defined by the FCA, CMEC prevailed, although not necessarily for all the reasons that it may have wished.

The FCA supported the Board’s decision “that it could not rely on the Guidelines for the purpose of setting the royalty rates (Reasons at paras. 233-234). “. These were the guidelines propounded in Wanda Noel’s booklet Copyright Matters!.
[58] The Consortium chose to present its case using two different approaches. First, the Consortium presented evidence in respect of guidelines issued in 2012 (see Copyright Matters! Some Key Questions & Answers for Teachers, 3rd ed., Respondents’ Record [RR], Vol. 1 at Tab 4) (the Guidelines)), and the fact that they had been widely distributed to K-12 school teachers. This was presented as evidence of a general practice of the type referred to at paragraph 63 of CCH. The Consortium argued that any copy made following those Guidelines would necessarily be fair (presumably these would only be relevant for the period covered by the Second Tariff). Ultimately, the Board found that it could not rely on the Guidelines for the purpose of setting the royalty rates (Reasons at paras. 233-234).
[59] Although both parties were clearly disappointed by the fact that the Board did not offer any detailed comments on their evidence relating to those Guidelines, Access did not challenge this finding, which was based on its assessment of the weight of the evidence. This was a wise decision, for indeed, the Board’s conclusion was clearly open to it on the evidentiary record.
[60] Access argued extensively in its memorandum (not at the hearing or in its outline of oral argument) that the Board was wrong to discard the Guidelines as they were the best evidence of the behaviour to be assessed to determine the issue of fairness. This resulted, according to Access, in the rejection of what Access believed was the Consortium’s better case. Yet, in my view, Access does not indicate how the Board’s actions on this point render its analysis unreasonable.
[61] That said, contrary to Access’ submissions, the Guidelines were not the only evidence tendered by the Consortium to meet the second part of the CCH test (i.e. weighing the fairness factors).
[62] It is apparent from a review of the expert report filed by the Consortium (RR, Vol. 2 at Tab 17) that the Consortium did present a second approach based on an evaluation of the CCH factors. I note that the Consortium’s experts even offered alternative calculations, for example, in respect of “the amount of the dealing” factor, although it assumed based on the instructions received, that reproduction of 10% or less of a book would be considered fair, the said experts also calculated the impact of the Board’s finding that only the reproduction of 7%, 5%, 3% or 1% of each work would be fair (RR, Vol. 2, Tab 17 at 438).
[63] Access had, for its part and as mentioned, marshalled evidence in respect of the sixth factor given that in its view, this factor militated towards finding that the dealing was not fair because of the considerable effect that copying had on the market for those works. Its expert had also calculated what would be fair by using and adjusting the Board’s previous calculations in 2009 to account for what it considered fair based on Alberta (Applicant’s Record [AR], Vol. 1, Tab I at 887-889). Access had also taken the position that the Guidelines were flawed and indeed promoted unfairness (Reasons at para. 231). In its view, the Board could only deduct the exposures that Access had conceded met the fairness test.
(highlight added)

For convenience, here are paras 233 and 234 of the Board decision discussing the Guidelines:
[233] However, in this matter, the parties have asked the Board to treat the Volume Study as representative. Thus, on one hand, the Board is being asked to consider the effect of the Guidelines on the copying behaviour of the Objectors, and on the other hand, to evaluate the copying captured by the Study. These two approaches are not readily reconcilable. If the Guidelines have modified the copying behaviour of the Objectors, then the Volume Study is no longer representative. If the Volume Study is representative, then the introduction of the Guidelines has not had a pronounced effect on the copying behaviour of the Objectors.
[234] Much of the evidence presented by the Objectors related to only certain schools or school boards. Evidence showed that while the Guidelines may have been distributed, and may even be known by, teachers and other persons that make copies of published works, there was insufficient evidence of the extent of the compliance with those Guidelines. Indeed, cross-examination of Objectors’ witnesses showed that there was little or any emphasis on monitoring and compliance with the Guidelines.147 As such, we cannot conclude that there is a generally uniform practice among all the elementary schools, secondary schools and school boards that can be evaluated for fairness in the manner contemplated in CCH.
(highlight added)

So, for better or for worse, we still have no explicit commentary on the substance of the Guidelines from either the Copyright Board or the Federal Court of Appeal. These are essentially the same Guidelines that are now, for better or worse, “on trial” in the Federal Court in the York University litigation. I have written extensively about whether letting the York Fair Dealing Guidelines be put on trial could have been avoided. We will likely know soon enough what Justice Phelan thinks about these guidelines when his decision on Phase I of that monumentally complex litigation that might have been greatly simplified is released. The final arguments in the Phase I hearing took place on June 22-24, 2016.

Here are some other observation on the FCA decision, which is complicated, lengthy and important and which no doubt requires much more detailed scrutiny by university counsel and the library community that is increasingly becoming involved in copyright issues.

Concerning “substantiality”, there was a discussion of the Supreme Court’s decision in CINAR and the FCA’s acceptance that the burden of proof was on AC to establish that copying was “substantial” in order to be eligible for payment. All of this is in the context of the very problematic volume study relied on by both sides, which was undertaken a year of so after CCH but which failed to take that decision adequately into account.
[37] I have not been persuaded by Access that the Board ignored any evidence produced by Access. Indeed, the Board considered it and found that it did not provide a reasonable basis to assess the qualitative nature of the thousands of copying excerpts at issue.
[38] That said, the Board had a couple of options. First, if it had applied the approach proposed by Access in respect of the Consortium’s burden of proof under the fair dealing analysis (see paragraph 81 below), the Board could have concluded that Access had not established that the exposures reported in the volume study amounted to reproduction of “a substantial part of the books” in its repertoire (this is the only genre in respect of which the finding of the Board is contested) given the lack of probative evidence produced by Access in this respect. Second, and what the Board chose to do, was to determine that because it did not have the benefit of a qualitative analysis applicable to the majority of cases, it was reasonable in the particular circumstances of the matter before it (fulfilling its statutory mandate to set a tariff where the parties only presented evidence on an aggregate basis) to infer that the copying of one or two pages from a book was not qualitatively substantial. This approach resulted in a smaller volume of copying being classified as non-substantial than if a threshold of 1% of each such work was adopted (Reasons at paras. 226-227).
[39] It is the task of a tribunal or trial court to fulfil its mandate, despite the paucity or quality of the evidence before them. Such decision-makers must determine if they are satisfied that a certain question of fact has been established. This task is at the very core of the expertise of tribunals such as the Board. Inferences, like findings of facts, are owed considerable deference.
[40] In my view, in the particular circumstances of this case, and considering the mandate of the Board under the Act, it was not unreasonable for the Board to infer that the copying of one or two pages of a book did not constitute reproduction of a “substantial part of the work” within the meaning of section 3 of the Act. It should be clear however that, in my view, such an inference would rarely be within the range of acceptable outcomes when there is evidence produced about each work at issue and would normally constitute an overriding and palpable error in the context of civil litigation proceedings where infringement is at issue.
[41] Finally, I note that considering the application of fair dealing and of section 29.4 of the Act to the exposures, most of the so called “non-substantial copying” in respect of books would have been deducted anyway from the compensable exposures (see tables 24 and 25 of Appendix A to the Reasons).
          (Highlight added)

It is clear that the Board made many of its findings based upon “impression” and “inference”, simply because there was inadequate evidence both in terms of data and expert testimony to fully analyse the thousands of copying events recorded back in 2005 in a flawed survey. The highlighted passage above makes is clear that the FCA would frown on such an approach in “civil litigation proceedings where infringement is at issue.”

It is also interesting that the Court suggests at para. 38 that the Board “could have concluded that Access had not established that the exposures reported in the volume study amounted to reproduction of “a substantial part of the books” in its repertoire (this is the only genre in respect of which the finding of the Board is contested) given the lack of probative evidence produced by Access in this respect.”

The Board instead chose “to infer that the copying of one or two pages from a book was not qualitatively substantial.”  This would seem to suggest that AC was indeed very lucky to get anything, based upon the problems with its evidence and its burden of proof on this issue.

On fair dealing, there is lengthy and useful analysis from the Court. However, one paragraph merits comment because it may be seized upon by those eager to repeal “fair dealing” to some extent.
[45] In Alberta, the Supreme Court focused on fair-dealing for the purpose of private study. The Court had to deal with the viewpoint from which fair dealing for this purpose is to be assessed – the teacher or the student, particularly when multiple copies are made for one or more classes. Shortly thereafter, the Act was amended to include “education” as another purpose in respect of which users could rely on section 29 of the Act. In my view, this addition removed the dichotomy between teachers’ or students’ viewpoints under the section 29 analysis, when education is the relevant purpose.
(highlight added)

With respect, I believe that the “dichotomy between teacher’s or students’ viewpoints” was resolved in paras. 42 to 45 the Province of Alberta decision of the Supreme Court of Canada under the law in place before s. 29 was amended. In this respect, the SCC had accepted arguments on this point that I made along with Prof. Ariel Katz and his institute at U. of T.

There are extensive comments that will encourage the educational community about how the Board was right in not relying solely on the “aggregate volume of pages copied or otherwise”. In fact, the Court states at para. 93 that “I find no reviewable error on the part of the Board in this respect. In fact, this finding is reasonable even if one were to consider that the overall number of copies represents approximately 90 pages per student per year.”

The FCA also supported the Board’s finding that the declining book sales could be caused by such factors as “open educational resources movement, digital sharing and the general emergence of new technologies” (para. 98)

This is an important decision that comes at an interesting time. We can only speculate as to if and how it may, or may not, affect the following pending decisions, which have been argued and which are under reserve as I have previously noted:
-        AC Provincial Government tariff, which was heard on June 20, 2016 by the Federal Court of Appeal, in which fair dealing and non-substantial copying were also major issues. For reasons which are not apparent, these cases were heard by different panels on different dates. So, it will be interesting to see whether the Provincial Government case – which was heard several months before the current case – will be consistent with the current decision.
-       decision from the Copyright Board in the AC Post-Secondary tariff case, from which the interim tariff that gave rise to the York University litigation arose. This case, which began in 2010, was finally heard by the Copyright Board in January of 2016. For all practical purposes, it was a default proceeding. The Copyright Board “ordinarily” and, indeed, often takes two years or more to render decisions – a delay that is unusual by any measure. So, a decision in 2017 – while certainly reasonably to be expected – cannot be assured unless the new Chairman is able to change the way the Board has worked for very many years.
-        The AC v. York University litigation, in which York’s fair dealing guidelines are very similar to those that were in issue – but which escaped detailed comment – in the K-12 Board decision and the current FCA decision.
It will be interesting to see whether AC seeks leave to appeal the current decision to the Supreme Court of Canada. It has 60 days to do so, i.e. until Tuesday, March 28, 2017. If the “other” case involving the Provincial Governments tariff does not come down in the meantime, or comes down within that time in manner that is notably inconsistent with the current decision, such a leave application would not be surprising. However, if the FCA’s ruling in the Provincial Government case, whenever it is released, is reasonably consistent with the current ruling, it would seem that a successful application for leave to appeal would be a long shot for AC in either case in all the circumstances.

Hanging over all of this, of course, is the question of whether Copyright Board tariffs are “mandatory”. One would have thought that the Supreme Court of Canada clearly indicated in CBC v. SODRAC that they are not, a subject that I have written about extensively here and elsewhere. (I successful argued the issue in the Supreme Court of Canada on behalf of Ariel Katz and David Lametti’s Centre at McGill). However, just like the CCH decision in 2004, it seems that it is taking a very long time for the good news to sink in and be understood by those who stand to benefit.

It’s therefore nothing if not ironic that AC is once again trying to reinvent the wheel. It recently sent out this message to its affiliates, which I am one:
We could use your help. Our innovation team is aiming to re-invent Access Copyright’s offerings for universities and colleges and needs help finding students and professors willing to sit for 1-hour research interviews on the topic of content use and technology.  

I may have more to say about this invitation later. However, in the meantime certain things would seem obvious if AC wishes to survive. How about, for example, for starters:
-        Offering easy and inexpensive transactional licenses online for repertoire for which it actually has a chain of title?
-        Not purporting to license repertoire for which it claims title only on the basis of “implied agency” or any other dubious or discredited theory?
-        Not purporting to license the public domain, or to “sell the Brooklyn Bridge”, as I have suggested?
-        Offering a clearly non-mandatory but enticing blanket license at really low cost for a really large repertoire with really generous terms of use that would make it efficient and inviting for schools, colleges and universities to consider?
-        Not suing its customers?
Or is this too much to expect?
-         
-        HPK