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SECTION I: DEPARTMENTAL OVERVIEW

Minister's Message

The Industry Portfolio experienced a busy and successful 2007-2008. As Minister of Industry, I am pleased with the progress made on our mission to foster a competitive, knowledge-based economy that benefits all Canadians.

A competitive economy is one that provides jobs and opportunity to Canadians, and top-quality products and services to consumers. Our economic performance underpins the quality of life we enjoy in this country, and the Copyright Board of Canada is making important contributions to this mission.

The Industry Portfolio is composed of Industry Canada and 10 other agencies, Crown corporations and quasi-judicial bodies. These organizations collectively advance Canada's industrial, scientific and economic development, and help ensure that we remain competitive in the global marketplace.

As a country, we must remain focused on how we can continue to provide an innovative and entrepreneurial economic environment, help our businesses capitalize on opportunities, and provide choice and quality to consumers. The global marketplace continues to evolve, changing with it the dynamics that influence Canada's performance. I am proud to say that the Industry Portfolio is playing its part:

• We are working to make our market for wireless services more competitive, this year launching the policy framework for the Advanced Wireless Services spectrum auction. The framework aims to provide more choice and better service for consumers and businesses - something that we believe will also lead to lower prices.
• We issued guidelines clarifying the application of the Investment Canada Act as it relates to foreign state-owned enterprises investing in our country to ensure that Canadians continue to enjoy all the benefits that foreign investment delivers.
• We instituted an independent Competition Policy Review Panel to review and report on key elements of Canada's competition and investment policies and to ensure that they are working to the full benefit of Canadians.
• We created an Automotive Innovation Fund to provide support to automotive firms undertaking large-scale, strategic research and development (R&D) projects to build innovative, greener and more fuel-efficient vehicles. Similarly, investments made through the Strategic Aerospace and Defence Initiative continue to encourage strategic R&D that will result in innovation and excellence in new products and services.

One of my key priorities as Industry Minister continues to be our country's science and technology (S&T) strategy, Mobilizing Science and Technology to Canada's Advantage, announced by Prime Minister Harper in May 2007.

• Budget 2008 included measures and initiatives in support of our S&T Strategy that total $654 million over the next three years.
• We put in place the new Science, Technology and Innovation Council to provide the government with objective policy advice on Canada's S&T issues.
• The government allocated $105 million in 2007-2008 to support the operations of seven new Centres of Excellence, pilot projects that have the potential to make Canada a global leader in fields of research that offer a strategic opportunity for Canadian industry.
• This past March, Canada's two-armed robot, Dextre, was successfully installed on the International Space Station.

This has been a year of progress and success, and it is my pleasure to present the Copyright Board's Departmental Performance Report for 2007-2008. I am committed to building on these successes in 2008 and beyond, and I will continue to work with officials in the Industry Portfolio to make Canada more efficient, productive and competitive.

_________________________________
Tony Clement
Minister of Industry

Management Representation Statement

I submit for tabling in Parliament, the 2007-2008 Departmental Performance Report (DPR) for the Copyright Board of Canada.

This document has been prepared based on the reporting principles contained in the Guide for the Preparation of Part III of the 2007-2008 Estimates: Reports on Plans and Priorities and Departmental Performance Reports:

• It adheres to the specific reporting requirements outlined in the Treasury Board Secretariat guidance;
  
• It is based on the department's approved Strategic Outcome and Program Activity Architecture that were approved by the Treasury Board;
  
• It presents consistent, comprehensive, balanced and reliable information;
  
• It provides a basis of accountability for the results achieved with the resources and authorities entrusted to it; and
  
• It reports finances based on approved spending numbers from the Estimates and the Public Accounts of Canada.

 

_________________________________
Stephen J. Callary
Vice-Chairman and Chief Executive Officer

Summary Information

Raison d'être

The Copyright Board of Canada's program objective is to set royalties which are fair and equitable to both copyright owners and users of copyright-protected works. This includes setting fair and equitable terms and conditions so as to permit the use of works when the owner of the copyright cannot be located.

The Board is an independent administrative agency that has been conferred department status for purposes of the Financial Administrative Act. The mandate of the Board is set out in the Copyright Act (the "Act"). The Board is empowered to establish, either mandatorily or at the request of an interested party, the royalties to be paid for the use of copyrighted works when the administration of such works is entrusted to a collective administrative society.

The Copyright Board of Canada is an economic regulator. It deals with complex social, cultural, demographic, economic and technological issues (e.g., communications technology, use of music over the Internet, blank CDs, software management systems to protect music or administer rights). The Board's decisions are not appealable, but can be the subject of judicial review by the Federal Court of Appeal. The Board has existed in one form or another since the 1930s, but its jurisdiction was significantly expanded in 1989 and 1997.

The program objective of the Board underlies the achievement of strategic outcomes related to innovation through new knowledge, which has become the main source of competitive advantage in all sectors of economic activity and is closely associated with increased exports, productivity growth, and the creation of new firms.

In this context, our country's handling of intellectual property matters is a critical element in our long-term success in innovation, and by extension, to our long-term economic health. The terms and conditions by which intellectual property owners (such as owners of copyrighted works) are compensated will largely define the incentive structure for innovation in and creation of copyrighted materials. In addition, the design and implementation of regulations can have a significant impact on innovation and competitiveness, particularly in the areas of intellectual property rights.

Mandate, Roles and Responsibilities

The Mandate of the Board

The 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 copyrighted works, when the administration of such copyright is entrusted to a collective-administration society. The Board also has the right to supervise agreements between users and licensing bodies and issues licences when the copyright owner cannot be located.

The Copyright Board of Canada was established on February 1, 1989, as the successor of the Copyright Appeal Board. Its responsibilities under the Act are to:

• certify tariffs for the public performance or the communication to the public by telecommunication of musical works and sound recordings [sections 67 to 69];
  
• certify tariffs, at the option of a collective society referred to in section 70.1, for the doing of any protected act mentioned in sections 3, 15, 18 and 21 of the Act [sections 70.1 to 70.191];
  
• set royalties payable by a user to a collective society, when there is disagreement on the royalties or on the related terms and conditions [sections 70.2 to 70.4];
  
• certify tariffs for the retransmission of distant television and radio signals or the reproduction and public performance by educational institutions, of radio or television news or news commentary programs and all other programs, for educational or training purposes [sections 71 to 76];
  
• set levies for the private copying of recorded musical works [sections 79 to 88];
  
• rule on applications for non-exclusive licences to use published works, fixed performances, published sound recordings and fixed communication signals, when the copyright owner cannot be located [section 77];
  
• examine, at the request of the Commissioner of Competition appointed under the Competition Act, agreements made between a collective society and a user which have been filed with the Board, where the Commissioner considers that the agreement is contrary to the public interest [sections 70.5 and 70.6];
  
• set compensation, under certain circumstances, for formerly unprotected acts in countries that later join the Berne Convention, the Universal Convention or the Agreement establishing the World Trade Organization [section 78].

In addition, the Minister of Industry can direct the Board to conduct studies with respect to the exercise of its powers [section 66.8].

Finally, any party to a licence agreement with a collective society can file the agreement with the Board within 15 days of its conclusion, thereby avoiding certain provisions of the Competition Act [section 70.5].

In order to effectively pursue its mandate, the Board aims to achieve the following strategic outcome, with its unique program activity:

Program Activity Architecture
STRATEGIC OUTCOME Fair decision-making to provide proper incentives for the creation and use of copyrighted works		PROGRAM ACTIVITY Render decisions and issue licences

Financial Resources, 2007-2008

Planned Spending	Total Authorities	Actual Spending
2,597	2,666	2,521

Total Human Resources, 2007-2008

Planned	Actual	Difference
17	17	0

Departmental Priorities

Name	Type	Performance Status
1. Ensure timely and fair processes and decisions	Ongoing	Successfully met
2. Advance the analytical framework for decisions and the regulatory processes for tariff-setting	Ongoing	Successfully met
3. Improve management practices	Ongoing	Successfully met

Summary of Performance in Relationship to Departmental Strategic Outcomes and Priorities

Strategic Outcome : Fair decision-making to provide proper incentives for the creation and use of copyrighted works
Program Activity	Expected Results	Performance Status	2007-08 ($ thousands)		Contributes to the following priority	Alignment to Government of Canada Outcomes
			Planned Spending	Actual Spending
Render decisions and issue licences	Fair and equitable tariffs and conditions	Successfully met	2,597	2,521	Priorities 1 and 2	An innovative and knowledge-based economy

Departmental Performance

Summary

The report documents the Copyright Board of Canada's contribution to the protection of the interests of Canadians by setting royalties which are fair and equitable to both copyright owners and users of copyright-protected works.

The Board held six hearings in 2007-2008. Two dealt with tariffs proposed by the Society of Composers, Authors and Music Publishers of Canada (SOCAN): Tariff 22 (Internet) for the years 1996-2006 and Tariff 16 (Background Music Suppliers) for the years 2007 and 2008. A third dealt with preliminary motions brought by the Canadian Storage Media Alliance and the Retail Council of Canada to quash the tariff proposed by the Canadian Private Copying Collective for iPods or MP3 players. The Board heard a first-time tariff proposed by Access Copyright, The Canadian Copyright Licensing Agency, for the rights of reprographic reproduction (photocopy) by primary and secondary schools for the years 2005-2009. It also reheard SOCAN and the Neighbouring Rights Collective of Canada (NRCC) Tariffs 1.A for commercial radio stations in furtherance of an order of the Federal Court of Appeal setting aside the tariff and directing the Board to justify the tariff established in October 2005 for the years 2003-2007. Finally, it jointly examined tariffs proposed by SOCAN, NRCC and CMRRA/SODRAC Inc. (CSI) for satellite radio services.

The Board issued four decisions dealing with the public performance of music: SOCAN Tariff 22.A (Internet - Online Music Services) for the years 1996-2006; the re-determination of SOCAN and NRCC Tariffs 1.A (Commercial Radio Stations) for the years 2003-2007; SOCAN Tariff 17 (Pay, Specialty and Other Television Services) for the years 2005-2008; and, the certification of various other SOCAN tariffs. It also issued four decisions dealing with private copying and another dealing with an application for an interim tariff filed jointly by the Audio-Video Licensing Agency (AVLA) and the Société de gestion collective des droits des producteurs de phonogrammes et de vidéogrammes du Québec (SOPROQ) for the reproduction of sound recordings by commercial radio stations for the years 2008 to 2011.

All of these decisions are described in greater detail in the 2007-2008 Annual Report of the Board.

The Board issued 21 licences under the provisions of the Act for the use of published works for which rights holders could not be found. One application was denied by reason that the applicant did not establish that the portion of the work he proposed to use was a substantial part of the subject work, with the result that a licence was not required.

Significantly, the Board adopted a policy on the issuance of licences for architectural plans held in municipal archives which has facilitated the obtaining of these documents. This was done after the Board conducted a review of the practice of certain municipalities to refuse to provide copies of architectural plans where the rights holder could not be found. This required consultation with the municipalities involved and the consideration of the right to information under the relevant Access to Information statutes.

In 2007-2008, the Board initiated the consolidated examination of the applications for tariffs by a number of collectives (SOCAN, NRCC, CSI, AVLA/SOPROQ and ARTISTI) for commercial radio for a hearing to be held in December 2008. This is the first time, with regard to commercial radio, that the Board will examine five tariff proposals involving two types of rights (communication and reproduction). The Board expects this streamlined process will expedite the valuation of the multiple rights involved.

Priorities

There are three priorities associated with the Copyright Board's strategic outcome:

1. Ensure timely and fair processes and decisions

In 2007-2008, the Board took steps which resulted in a reduction of the regulatory burden. For instance, when appropriate, the Board combined hearings processes which have resulted in some cost savings for the participants.

The Board's priority of timely and fair decision-making is challenged by an ever-changing technological environment, global events and new business models. These challenges continued to be met, and risk minimized, by engaging in pre-hearing consultations, information gathering and web site postings. These procedures assisted in conducting well-organized proceedings which address key issues facing copyright-related industries. Performance measures that are considered include the level of satisfaction of stakeholders with the Board's services, the proportion of decisions and tariffs that are published on its website and the time period to render decisions and licences.

The Board receives tariffs applications from collective societies on or before March 31 of a given year in which a tariff is scheduled to terminate. The Board has some latitude in the scheduling of hearings and tries to initiate the procedure leading to a hearing as efficiently as possible. The Board posts its upcoming hearing schedule on its website (www.cb-cda.gc.ca). There are no statutory deadlines for the release of the Board's decisions. However, the Board endeavours to deal with all applications as expeditiously as possible, while keeping the interests and constraints of the parties in mind.

Greater participant satisfaction is closely linked to the timeliness and orderly conduct of formal proceedings. The Board continued to structure and sequence witnesses and hearing stages so as to eliminate duplication and maximize time spent on relevant issues.

Because the Board hearings involve adversarial parties, some of whom will likely experience direct economic gain or loss in association with an offsetting gain or loss to another party, the Board's decisions cannot be expected to be satisfactory to all parties at all times. However, the Board attempts to bring unbiased and rigorous reasoning to its decision-making. The Board also recognizes the need to provide clear and sufficiently detailed explanations in its decisions so as to assist parties in preparing for the next round of tariff-setting. The Board is considering various means for tracking or measuring constituent satisfaction with hearing processes.

In addition, the Board continued to examine alternatives to current procedures based upon input from hearing participants as part of a plan to develop and implement a more active involvement in pre-hearing information gathering aimed at reducing time and cost to participants while safeguarding the fairness of procedures.

2. Advance the analytical framework for decisions and the regulatory processes for tariff-setting

Leadership in copyright matters continued to build on the groundwork performed in the past, as noted in previous Departmental Planning Reports. The Board pursued its leadership role in the establishment and expansion of international activities such as sharing of procedures, data, analysis and other information.

The international initiative is also a key tool in addressing the challenges of changing technology and the impact of global events. By comparing experiences across different countries, the Board can gain early warning of significant developments and their likely impacts on the Canadian situation.

Among the most significant risks which the Board faces in achieving its strategic outcomes is the potentially disruptive impact of new technologies (i.e., in terms of how copyright material is utilized, distributed and monitored). The Board's approach to managing the technology risk is to systematically monitor relevant journals, other publications and web sites, and to attend industry seminars and conferences. Among the international fora of copyright specialists which the Board Members and staff attended in 2007-2008, the following are noteworthy: the Fordham University Annual Conference on International Intellectual Property Law and Policy (New York, April 2007); the Annual Conference of the Association littéraire et artistique internationale (ALAI) (Punta del Este, Uruguay, June 2007); and the Annual Congress of the Society for Economic Research on Copyright Issues (SERCI) (Berlin, July 2007). The Board was also represented at numerous similar national meetings in Canada. The rationale for the Board's "screening" activities is to identify and assess industry trends before they undermine existing copyright regimes.

3. Improve management practices

The Board continued to develop its management practices, working in a cluster group with three other small quasi-judicial agencies, the Competition Tribunal, the Canadian Artists and Producers Professional Relations Tribunal and the Transportation Appeal Tribunal of Canada.

In 2007-2008, the Board was included in the Round V process of the Treasury Board Secretariat's (TBS) Management Accountability Framework (MAF) assessment.

The MAF is a key part of the Treasury Board's approach to improving management across federal departments and agencies. The framework is composed of 10 interconnected elements, such as risk management and accountability, which departments and agencies are expected to implement in their organizations to ensure management excellence and proper oversight of management practices.

Following the assessment, there is one area where the Board has an opportunity to improve its performance. It is recommended that the Board track its performance expectations in the Report on Plans and Priorities (RPP) and report them in the Departmental Performance Report (DPR) from a Management, Resources, and Results Structure (MRRS) perspective.

The Board has put in place a policy on Performance Measurement Framework. This policy allows the Board to create and capture the information it needs with regard to its objectives and expected as well as achieved results. In conjunction with this policy, the Board has also prepared its MRRS. This will address the opportunity mentioned in the previous paragraph.

In 2007-2008, the Office of the Auditor General conducted a governance audit of federal small entities and the Board was chosen to participate in the audit. The following three areas were examined: reporting, portfolio coordination and shared services.

The Board has updated its Human Resources Plan as this is an evolving document that needs to be reviewed to take into account changing priorities.

The Board has also implemented the Compensation Web Applications (CWA) for its employees. These new applications provide employees with easy, on-line, secure access to pay, benefits and pension information, as well as the tools to calculate pay and pension-related projections. The CWA also include on-line tools for compensation advisors to assist them in their daily operations.

Operating Environment

The mandate of the Copyright Board of Canada is set out in the Act as amended in 1997. The Board has powers of a substantive and procedural nature. Some powers are granted to the Board expressly in the Act, and some are implicitly recognized by the courts.

The Act requires that the Board certify tariffs in the following fields: the public performance or communication of musical works and of sound recordings of musical works, the retransmission of distant television and radio signals, the reproduction of television and radio programs by educational institutions and private copying. In other fields where rights are administered collectively, the Board can be asked by a collective society to set a tariff; if not, the Board can act as an arbitrator if the collective society and a user cannot agree on the terms and conditions of a licence.

The examination process is always the same. The collective society must file a statement of proposed royalties which the Board publishes in the Canada Gazette. Tariffs always come into effect on January 1. On or before the preceding 31st of March, the collective society must file a proposed statement of royalties. The users targeted by the proposal (or in the case of private copying, any interested person) or their representatives may object to the statement within sixty days of its publication. The collective society in question and the opponents will then have the opportunity to argue their case in a hearing before the Board. After deliberations, the Board certifies the tariff, publishes it in the Canada Gazette, and explains the reasons for its decision in writing.

As a rule, the Board holds hearings. No hearing will be held if proceeding in writing accommodates a small user that would otherwise incur large costs. The hearing may be dispensed with on certain preliminary or interim issues. No hearings have been held yet for a request to use a work whose owner cannot be located. The process has been kept simple. Information is obtained either in writing or through telephone calls.

The Board is responsible for tariffs that are estimated to be worth over $300 million annually. In fact, copyright tariffs underpin several industries which, according to a Conference Board of Canada study (Valuing Culture, Measuring and Understanding Canada's Creative Economy, Conference Board of Canada, August 2008), generated in 2007 an amount representing 7.4% of Canada's GDP when taking into account the direct, indirect and induced contribution. They also contributed 1.1 million jobs to the economy. The stakes are considerable both for copyright holders and for users of copyright. Consequently, interventions before the Board are thorough, sophisticated and often involving expert witnesses, litigation specialists and detailed econometric, business and financial studies, surveys and evidence.

The Board must consider the underlying technologies (such as the Internet, digital radio, satellite communications), the economic issues and the interests of owners and users in order to contribute, with fair and equitable decisions, to the continued growth of this component of Canada's knowledge industries. Sound tariff decisions avoid serious disruption in affected sectors of the national economy and costly and time-consuming court challenges.

The decisions the Board makes are constrained in several respects. These constraints come from sources external to the Board: the law, regulations and judicial pronouncements. Others are self-imposed, in the form of guiding principles that can be found in the Board's decisions.

Court decisions also provide a large part of the framework within which the Board operates. Most decisions focus on issues of procedure, or apply the general principles of administrative decision-making to the specific circumstances of the Board. However, the courts have also set out several substantive principles for the Board to follow or that determine the ambit of the Board's mandate or discretion.

The Board also enjoys a fair amount of discretion, especially in areas of fact or policy. In making decisions, the Board itself has used various principles or concepts. Strictly speaking, these principles are not binding on the Board. They can be challenged by anyone at anytime. Indeed, the Board would illegally fetter its discretion if it considered itself bound by its previous decisions. However, these principles do offer guidance to both the Board and those who appear before it. In fact, they are essential to ensuring a desirable amount of consistency in decision-making.

Among those factors, the following seem to be the most prevalent: the coherence between the various elements of the public performance of music tariffs, the practicality aspects, the ease of administration to avoid tariff structures that make it difficult to administer the tariff in a given market, the search for non-discriminatory practices, the relative use of protected works, the taking into account of Canadian circumstances, the stability in the setting of tariffs that minimizes disruption to users, as well as the comparisons with "proxy" markets and comparisons with similar prices in foreign markets.

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