Peer-to-Peer Downloading Legalized in Canada
Entertainment Law & Finance, January 2004.
By Steve Gordon



Before the Canadian Copyright Act was amended in 1998, copying any copyrighted sound recording for almost any purpose infringed copyright in Canada. The 1998 amendment legalized copying of sound recordings for the private use of the person who makes the copy. But it was unclear whether the amendment legalized Internet music downloading.

In Dec. 2003, the Canadian Copyright Board determined that downloading music from peer-to-peer file-sharing services is legal as long as the downloaded file is used as a "personal copy." The Copyright Board is an economic regulatory body empowered to establish, either mandatorily or at the request of an interested party, the royalties to be paid for the use of works protected by copyright, when the administration of these rights is entrusted to a collection society. In its recent determination, however, the Board didn't declare uploading to be legal and stopped shy of completely legalizing peer-to-peer music trading.

The 1998 amendment also imposed a levy on blank CDs and other digital audio recording equipment. But the Board's decision in December for the first time extended the levy to MP3 players to as much as $25 for iPod-like players.

For the period from Jan. 1, 2003, to Dec. 31, 2004, the Board certified the levy rates as follows:

For non-removable memory permanently embedded in a digital audio recorder: $2 for each recorder that can record no more than 1 GB of data, $15 for each recorder that can record more than 1GB and no more than 10GBs, and $25 for each recorder that can record more than 10GBs.

Manufacturers and importers are responsible for paying the levy on each of the above that they sell or otherwise dispose of in Canada. The monies collected from these levies go into a fund to compensate songwriters, recording artists, and record labels for revenues lost from personal copying by consumers. The Canadian Private Copying Collective (CPCC) has been designated as the collection and distribution body for the amounts generated by private copying levy. For example, the CPCC has indicated that it collected approximately $7 million in 2000, the first year of the regime, and about $24 million in 2001. These fees should be greatly enhanced by the new levy on MP3 players.

[In 1992, the U.S. Congress passed the Audio Home Recording Act (AHRA), an amendment to federal copyright law. The AHRA imposed relatively small levies for certain limited kinds of digital copying equipment, such as digital recording devices and digital audiotape and discs. But the law has not been expanded and the monies secured have been very limited. Congress did not anticipate 10 years ago that the AHRA would be inadequate to contain the impending home digital recording explosion that has been accelerated by the Internet.]

Moreover, in Dec. 2003, The Society of Composers, Authors and Music Publishers of Canada (SOCAM) and the Canadian Musical Reproduction Rights Agency (CMRRA) argued in front of Canada's Supreme Court that Internet service providers should pay a blanket royalty fee to cover the downloading of music over the Internet.

So far no lawsuits have been initiated against consumers who download or trade music files in Canada. In fact, the decision by the Canadian Copyright Board that downloading is legal will hamper the ability of record labels to sue Canadian citizens. Yet despite the Board's ruling, the Canadian Recording Industry Association (CRIA) announced only a few days later its plans to begin suing peer-to-peer file-swappers in that country early next year.

Steve Gordon is an entertainment attorney and consultant based in New York City who specializes in music, television and digital media. He has written a book, entitled "The Future of the Music Business" (Backbeat Books 2005). The author's Internet radio program on these topics can be heard at MyRealBroadcast.com. Web site: www.stevegordonlaw.com.