Illustrating Options:
Collective Administration of Intellectual Property for Canadian Cultural Heritage Institutions

6. Other Legal Factors Affecting Collective Administration

1. Anti-Competition Rules.
The Canadian Copyright Act encourages collective administration. Canadian legislators were very much aware of the potential conflict with anti-competition rules, such as those that exist in the United States. Antitrust accusations have marked the history of collective administration in the United States, and Canadian legislators sought to address this issue so that collective administration in Canada would not share a similar experience. By increasing the overseeing powers of the Copyright Board to set and review tariffs and other conditions associated with the allocation and collection of royalties, legislators sought to remove any potential conflict with Canada's Competition Act,¹² particularly Section 45 of the Act, which makes it is a criminal offence to conspire or agree to lessen competition by effectively enhancing the price of a good or service.¹³

Canadian performing rights societies are protected from certain accusations of anti-competitive behaviour because they are subject to the Copyright Board's jurisdiction in setting tariffs for royalties.¹⁴ For all other issues, performing rights societies and other collective societies are subject to anti-competition laws.

2. Exceptions to Copyright.
Amendments to Canada's Copyright Act¹⁵ in 1997 introduced specific exceptions to copyright for educational institutions and museums, archives, and libraries, which are excepted from copyright violation if they make a copy of a work in order to manage or maintain their respective collections (specific conditions are provided in the text of the legislation), or to carry out limited interlibrary loans. Exceptions to copyright are also provided to educational institutions for use of works inside a classroom or as part of an examination.¹⁶ Museums, libraries, and archives that are part of educational institutions may avail themselves of all of the exceptions. Certain exceptions for all these groups apply only when a copy of the work in question is not "commercially available," i.e., not available for licensing from a collective society.¹⁷

Some of the amendments of the 1997 legislation are not yet in force, so the impact of the exceptions on a collective's potential market is not known. However, one can assume that since educational institutions are one of the primary users of intellectual property from cultural heritage organisations, their direct use of this intellectual property for educational purposes may be exempt from copyright. In other words, educational institutions can use this intellectual property for the specific reasons defined by the Copyright Act (such as for use on a classroom overhead projector) without paying for such use or requesting prior authorisation, as long as museums, libraries, and archives do not make their intellectual property commercially available through a collective society. If these organisations do make their intellectual property available through collective societies, then educational institutions are required by law to use these collectives to obtain the works. Thus, under Canadian law, it is in the interests of cultural institutions to join collectives if they wish to receive financial payments from the educational markets using their intellectual property.

3. Fair Dealing.
"Fair dealing" is an exemption allowed in Canadian copyright law that allows a work to be used without prior authorisation for purposes of research, private study, criticism, review, or reporting, without violating copyright.¹⁸ The concept of fair dealing has been in existence since the Canadian Copyright Act was introduced in 1924. It is a defence that the user of copyright material can employ to justify use without prior authorisation. Unlike its "fair use" counterpart in the United States, fair dealing does not generate a great deal of litigation, and there are no written criteria (such as the "four factors" of fair use) for assessing fair dealing in Canadian legislation.

Once a user establishes that the use of a work falls into one of the categories of use under fair dealing, he or she must determine whether his proposed use of the work is "fair." The test of "fairness" may be based on whether a substantial part of the work is being used, and whether that will diminish the quality of the work, or increase the quantity of the work in circulation so as to diminish the return to the author.¹⁹ While the criteria of substantiality and effect on the market are similar to two of the four factors used in U.S. copyright law's fair use exemption, in Canada their interpretation has been much less precise. In the few court decisions that have interpreted fair dealing, what constitutes fair is based on a notion of "first impression." A leading court decision has described fair dealing as follows:

"To take long extracts and attach short comments may be unfair. But, short extracts and long comments may be fair. . . . after all is said and done, it must be a matter of impression."²⁰

The end result is that fair dealing is a vague concept that both users and copyright holders grapple with in order to determine how far a user can go in using a work before such use becomes unfair. Collective societies administering copyright inherit this dilemma. While collective societies do not try to define fair dealing in their licensing agreements, they do try to take fair dealing into account when setting royalty rates.²¹ The notion that fair dealing applies in a digital environment is contentious. What acts constitute fair dealing? Is browsing on the Internet fair dealing? The Canadian government's Information Highway Advisory Council²² supports the conclusion that fair dealing applies to the electronic environment. The government will be addressing new media issues in its next stage of copyright reform, which will occur over the next few years. For collectives trying to determine their operational boundaries, the uncertainty of applying fair dealing in analogue and print environments is compounded in an electronic one.

4. The Status of the Artist Act.²³
Canada's Status of the Artist Act, which provides minimum terms and conditions for freelance artists contracting with the federal government and its agencies, imposes a regulatory scheme for certifying associations of artists entering into freelance contracts with the federal government. Cultural heritage institutions that are agencies of the federal government are thus affected by this Act. The Status of the Artist Act allows artists' associations to negotiate collective agreements establishing minimum terms and conditions for individual artists in their freelance contracts. Under this Act, artists' associations can collectively negotiate these terms and conditions on behalf of their members, but individual members must subsequently sign their own agreements with the contracting federal agencies.²⁴ It is not clear whether artists' associations authorised to operate under the Status of the Artist Act can include royalty rates among the terms and conditions they negotiate. (Under the Copyright Act, the Copyright Board determines rates.) It is clear, however, that there is potential for overlap in this area between the Copyright Board and artists' associations authorised by the Status of the Artist Act.²⁵ The Copyright Board stated that replacing the administrative scheme in the Copyright Act with a system of collective bargaining (as provided for under the Status of the Copyright Act) is illogical if copyright is assigned to collective societies that are not part of the artists' associations and thus are not part of these associations' collective bargaining process.²⁶ The tribunal responsible for administering the Status of the Artist Act has concluded that an artists' association can negotiate certain uses for artistic works in a collective agreement that includes copyrights. However, the element of exclusive representation, common in the accreditation process in labour law and under the Status of the Artist Act, does not have to apply to copyright negotiations. Therefore, even if an artists' association is given the jurisdiction to negotiate copyright, each artist must have expressly assigned the copyright before the association can include copyright in its collective bargaining negotiations.²⁷