Date: 19990319
Docket: A-130-98
CORAM: DÉCARY J.A.
ROBERTSON J.A.
NOËL J.A.
IN THE MATTER of the Federal Court Act, R.S.C. 1985, c. F-7, as amended;
AND IN THE MATTER of the Copyright Act, R.S.C. 1985, c. C-42, as amended;
BETWEEN:
SOCIETY OF COMPOSERS, AUTHORS AND
MUSIC PUBLISHERS OF CANADA
Applicant
- and -
CANADIAN ASSOCIATION OF BROADCASTERS and
SOCIÉTÉ DU DROIT DE REPRODUCTION DES AUTEURS,
COMPOSITEURS ET ÉDITEURS AU CANADA
Respondents
Heard at Ottawa, Ontario, on Wednesday, February 10, 1999
Judgment delivered at Ottawa, Ontario, on Friday, March 19, 1999
REASONS FOR JUDGMENT BY: ROBERTSON J.A.
CONCURRED IN BY: DÉCARY J.A.
NOËL J.A.
Date: 19990319
Docket: A-130-98
CORAM: DÉCARY J.A.
ROBERTSON J.A.
NOËL J.A.
| IN THE MATTER of the Federal Court Act, R.S.C. 1985, c. F-7, as amended; |
| AND IN THE MATTER of the Copyright Act, R.S.C. 1985, c. C-42, as amended; |
BETWEEN:
SOCIETY OF COMPOSERS, AUTHORS AND
MUSIC PUBLISHERS OF CANADA
Applicant
- and -
CANADIAN ASSOCIATION OF BROADCASTERS and
SOCIÈTÈ DU DROIT DE REPRODUCTION DES AUTEURS,
COMPOSITEURS ET ÈDITEURS AU CANADA
Respondents
REASONS FOR JUDGMENT
ROBERTSON J.A.
[1] This application for judicial review reflects the latest battle between the Society of Composers, Authors and Music Publishers of Canada ["SOCAN"] and the Canadian Society of Broadcasters ["CAB"], since they began disputing tariff rates and alternative tariff structures each year since 1985. In issue in this case is whether the Copyright Board lacks jurisdiction to reduce Tariff 2.A (Television - Commercial Stations) from 2.1% to 1.8% of gross advertising revenues for the years 1994 to 1997 and to introduce the "modified blanket license", an optional tariff structure, for 1997. Alternatively, SOCAN submits that the Board's decision was patently unreasonable. As is so often the case today, these cases are won or lost on the basis of the proper standard of review to be applied.
[2] In 1994, another panel of this Court was confronted by the same parties and counsel as in this action with respect to Tariff 2.A.1 ["the tariff"].1 Interestingly, it was the CAB which sought judicial review of the Board's decision to maintain the tariff at 2.1%, claiming that the Board "erred in law, exceeded its jurisdiction or simply failed to exercise it". Five issues were submitted by the CAB as evidencing this lack of jurisdiction, three of which are similar to issues raised in this application; namely, the Board's alleged failure to consider comparable royalty rates in the United States, the Board's alleged mandate to approximate the free market price in setting the tariff rate, and the Board's alleged mandate to protect copyright users from the monopolistic powers of performing rights' societies. Justice Létourneau, writing the unanimous decision, found that the first issue was "without merit" and that there was "no valid ground for review" of the last two issues. He opined that:
| [t]he mandate of the Board is to set tariffs for the use of musical work which have a reasonable and suitable or rational basis .... There is no doubt that a fair and reasonable approximation of the market price is a possible rational basis for setting a tariff. However, it is one which the Board rejected in the Canadian context. Again, the decision of the Board was one within the domain of its expertise, or ... within its "home territory". I cannot say that its finding is patently unreasonable or, as contended, in excess of jurisdiction. [emphasis added] |
[3] With respect to the Board's alleged mandate to protect copyright users from owners, Justice Létourneau cited the Hanfstaengl case2 and noted that "the Board properly understood its function when it stated that it had to regulate the balance of market power between copyright owners and users", stating:
| [o]nce again, the Board is in a better position than this court to strike a proper balance between the interests of copyright owners and users and this court will not interfere unless the result reached is patently unreasonable. In this case, the applicant has failed to establish that the Board acted unreasonably or exceeded its jurisdiction in doing so. [emphasis added] |
[4] Since the CAB had challenged only the Board's decision to certify and maintain the tariff at 2.1% of annual advertising revenues, Justice Létourneau did not have to consider whether the Board also exceeded its jurisdiction in failing to implement a "modified blanket license" ["MBL"], which the CAB proposed at the 1993 Board hearing. The Board's decision to reject the MBL primarily for reasons of "public policy" was not challenged by the CAB at that time.
[5] In the case at hand, SOCAN argued both that the reduction in the tariff rate from 2.1% to 1.8% and the introduction of the MBL were outside the jurisdiction of the Board. Thus, the 1994 decision of this Court is only helpful in establishing the standard of review for the former issue, that is, whether the Board exceeded its jurisdiction in reducing the tariff rate, as alleged by SOCAN. I propose to briefly consider the bases upon which the Board decided that a 15% reduction in the tariff was appropriate, before going on to consider the second issue, that is, whether it was within the jurisdiction of the Board to introduce the MBL as an alternative tariff structure.
[6] The majority of the Board agreed with the CAB that the tariff rate should be lowered for a combination of the following five reasons: (1) the environment has changed, in that it is more competitive and the public policy framework is more market-oriented; (2) Americans pay less for music performing rights; (3) broadcasters have derived less value from SOCAN's license over time; (4) composers' revenues might increase if the tariff rate is lowered; and (5) music is only one input in a complex entertainment product, and it has been well compensated and over-valued relative to other inputs. Since it is squarely within the Board's statutory mandate and expertise to consider which factors are relevant to tariff-setting, I respectfully agree with Justice Létourneau that the standard of review is "patent unreasonableness". (Justice Linden carefully analyzed the various factors in determining the standard of review in the context of tariff reduction by the Copyright Board in Les Réseaux Premier Choix Inc. v. Canadian Cable Television Association et al.3, and came to the same conclusion.) In my respectful opinion, it has not been adequately demonstrated that the Board's decision to lower the tariff rate was "patently unreasonable" or "clearly irrational", as that term is defined in the Supreme Court jurisprudence.4 Even the dissenting reasons of Vice-Chairman Hétu do not support such a characterization of the majority's reasons.
[7] With respect to the Board's introduction of the MBL, I propose to first define the MBL, then summarize the parties' submissions and, finally, consider the relevant standard of review. Essentially, the MBL enables stations to reduce their royalty obligations to SOCAN by allowing them to deduct from their gross advertising revenues those revenues attributable to programs which do not contain music from SOCAN's repertoire, that is, music which is "cleared at source". SOCAN submits that the MBL will reduce SOCAN's revenues which, in combination with a lower tariff rate, will reduce composers' income, causing them to enter into direct negotiations with broadcasters in an attempt to earn more income. But because SOCAN requires composers to grant it an exclusive license over performing rights for two years, composers will be forced to leave SOCAN in order to negotiate those rights with broadcasters. SOCAN submits that not only will the collective administration of composers' rights be threatened, but composers will ultimately earn less income, because broadcasters have much more market power than composers and are overtly interested in reducing costs. This change in institutional arrangements is extraneous to the Board's mandate of fixing royalties, according to SOCAN.
[8] The CAB contends that the MBL is an optional, alternative tariff structure, which does not force composers to leave SOCAN, but which enables composers to negotiate directly with broadcasters on a more-or-less even footing. While the CAB concedes that the combination of lower tariffs and the MBL may prompt composers to leave SOCAN, and cause SOCAN to abandon its exclusive licensing requirement, the CAB argues that these changes are not necessarily detrimental to the interests of composers, since many composers already negotiate directly with producers, for example, with respect to commissioned music and synchronization rights. Counsel for the CAB, Mr. Kent, proffered the analogy of a double locked door -- with one side locked by SOCAN's exclusive licensing requirement, and the other by the CAB's desire for a permissive regime in which composers can negotiate directly with broadcasters -- in order to make the argument that the Board had to start somewhere, so it "unlocked" the CAB's side of the door, as it lacked the jurisdiction to compel SOCAN to abandon its exclusive licensing requirement. The CAB notes that both SOCAN's economic expert, Dr. Liebowitz, and the dissenting Board member, Vice-Chairman Hétu, agreed with the MBL in principle, but disagreed with its implementation on other grounds.
[9] With respect to the appropriate standard of review, SOCAN submits that the recent Supreme Court decision in Pushpanathan v. Canada (Minister of Citizenship and Immigration)5 demonstrates that the "correctness" standard is applicable to jurisdictional questions. SOCAN contends that the Board erred in law or as to its jurisdiction in introducing the MBL, and that its decision was based on irrelevant considerations and facts unsupported by the evidence. The CAB submits that the Board is entitled to a high degree of appellate deference, since it is an expert tribunal dealing with complex matters within its core competence which are better understood by it than an appellate court; thus, the standard of review is "patent unreasonableness". According to the CAB, the Board's decision was not patently unreasonable.
[10] In my view, Pushpanathan reinforces the notion that courts must utilize the "pragmatic and functional approach" in order to ascertain the applicable standard of review once it has been determined that the tribunal had statutory authority to decide the matter before it. In the case before us, however, the Board's statutory authority under the Copyright Act was directly in issue. SOCAN challenged the Board's authority to introduce the MBL as "extraneous" to its mandate of fixing royalties proposed by SOCAN and outside its jurisdiction. Therefore, it is necessary to consider the relevant statutory provisions in order to determine whether the Board exceeded its statutory authority in this case. Adopting the language of Justice Cory in PSAC, supra, the Board must be "correct" in its determination as to whether it had jurisdiction to introduce the MBL. The following provisions of the Copyright Act were in force at the time of the Board's decision6:
| 67(1) Each society, association or corporation that carries on the business of granting licences for the performance in Canada of dramatico-musical or musical works shall, from time to time, file at the Copyright Office lists of all dramatico-musical and musical works in current use in respect of which the society, association or corporation has authority to grant performing licences. (2) Each society, association or corporation referred to in subsection (1) shall, on or before the first day of September next preceding the date when its last statement approved pursuant to subsection 67.2(1) expires, file with the Board a statement in both official languages of all royalties that the society, association or corporation proposes to collect for the grant of licences for the performance of its works in Canada ... 67.1(1) As soon as practicable after the receipt of a statement filed pursuant to subsection 67(2), the Board shall publish it in the Canada Gazette and shall give notice that, within twenty-eight days after the publication of the statement, prospective users or their representatives may file written objections to the statement with the Board. (2) The Board shall, as soon as practicable, consider a statement and any objections thereto referred to in subsection (1) or raised by the Board and (a) send to the society, association or corporation concerned a copy of the objections so as to permit it to reply; and (b) send to the persons who filed the objections a copy of any reply thereto. 67.2(1) On the conclusion of the Board's consideration of a statement, any objections to it and any reply to the objections, the Board shall (a) certify the statement as approved, with or without such alterations to the royalties and related terms and conditions specified therein as the Board may make; (b) publish the approved statement in the Canada Gazette as soon as practicable; and (c) send a copy of the approved statement, together with reasons for the Board's decision, to the society, association or corporation concerned and to any person who filed an objection. [emphasis added] |
67(1) Chaque association, société ou personne morale dont l'activité est d'octroyer des licences pour l'exécution, au Canada, d'oeuvres musicales ou dramatico-musicales est tenue de déposer périodiquement au Bureau du droit d'auteur le répertoire de toutes les oeuvres musicales et dramatico-musicales d'exécution courante qui peuvent faire l'objet d'une licence. (2) Chaque association, société ou personne morale visée au paragraphe (1) doit déposer à la Commission, au plus tard le 1er septembre précédant la cessation d'effet d'un tarif homologué au titre du paragraphe 67.2(1), un projet de tarif, dans les deux langues officielles, des droits à percevoir pour les licences qu'elle accordera pour l'exécution, au Canada, des oeuvres du répertoire. ... 67.1(1) Dès que possible, la Commission fait publier dans la Gazette du Canada le projet de tarif et donne un avis indiquant que tout utilisateur éventuel, ou son représentant, peut s'opposer au projet. L'opposition est déposée à la Commission par écrit dans les vingt-huit jours suivant la publication. (2) La Commission procède dès que possible à l'examen du projet de tarif et des oppositions mentionnées au paragraphe (1) ou qu'elle peut, d'office, soulever. Elle communique d'une part à l'association, à la société ou à la personne morale en cause un double des oppositions, leur permettant d'y répondre, d'autre part aux opposants la réponse de celles-ci. 67.2(1) Lorsqu'elle a terminé son examen, la Commission certifie le projet de tarif, dont elle pourra avoir modifié les droits ou les modalités y afférentes, qui est dès lors le tarif homologué. Elle le fait publier dès que possible dans la Gazette du Canada et en communique un double, accompagné des motifs de sa décision, à l'association, à la société ou à la personne morale en cause, ainsi qu'aux opposants. |
[11] In short, section 67 of the Copyright Act requires SOCAN to file a statement of proposed royalties for performing rights with the Board for the year. The Board then notifies users of their right to file objections to the proposed tariff within a specified time period. After considering SOCAN's statement, any objections and any reply to the objections, the Board is required to certify the statement "with or without such alterations to the royalties and related terms and conditions specified therein as the Board may make". In my opinion, the discretion accorded to the Board under the Act to set tariff rates and append "related terms and conditions" is sufficiently broad to encompass the MBL. If this Court accepted SOCAN's argument, it would limit the Board's jurisdiction to setting the numerical basis of the tariff. That limitation is untenable in light of the Board's prerogative to impose terms and conditions. In my view, the Board has the jurisdiction and obligation to fix not only the tariff rate, but also to determine the manner of calculating the revenue base to which that rate will apply. For example, it seems both reasonable and necessary that the Board retain the flexibility to determine whether revenues derived from certain sources are to be excluded from the revenue base, including music commissioned by a broadcaster directly from a composer.
[12] Applying the standard of correctness, I am not prepared to say that the Board lacked jurisdiction to adopt the MBL. I note once again that Vice-Chairman Hétu did not take issue with the Board's jurisdiction to adopt the MBL; he merely disagreed with the majority as to whether it was appropriate to do so in the circumstances. This leads to the final question: did the Board reach a patently unreasonable conclusion by introducing the MBL? Once again, I am not prepared to say that the Board's decision was irrational. The introduction of the MBL may well prove to be an unwise policy decision, but even the Board majority recognized that this issue can be revisited if the doomsday scenario outlined by SOCAN materializes.
[13] In conclusion, I am unable to say that the Board's decision to reduce the tariff rate and to introduce the MBL was "patently unreasonable". I would dismiss the application for judicial review with costs.
"J.T. Robertson"
J.A.
"I agree
Robert Décary, j.a."
"I agree
Marc Noël, J.A."
__________________1 Canadian Association of Broadcasters v. Society of Composers, Authors and Music Publishers of Canada (1994), 58 C.P.R. (3d) 190 (F.C.A.).
2 Hanfstaengl v. Empire Palace; Hanfstaengl v. Newnes, [1894] 3 Ch. 109 (C.A.).
3 [1997] F.C.J. No. 1723 (C.A.). See, in particular, paragraphs 15 to 17.
4 See Canada (Attorney General) v. Public Service Alliance of Canada , [1993] 1 S.C.R. 941 at 964, Cory J.
6 Copyright Act, R.S.C. 1985, c. C-42, as amended ["the 1993 Act" or "the Copyright Act"].