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Explanations and Statutes Relating to The Recordable Media Levy Imposed January 1, 1999 by the Federal Government, as E-Mailed to Editor Andrew Marshall by Mario Bouchard, Counsel

Here is some information as a follow up on our conversation.

1) Individuals are entitled to copy sounds recordings of musical works onto an "audio recording medium" for their own private use.

2) Persons who own rights in those sound recordings (composers, authors, performers and producers) are entitled to receive a remuneration on account of those copies. This means that

a) the remuneration is solely on account of private copying taping for one's own personal use;

b) only persons who own rights in sound recordings of musical works are entitled to share in the remuneration. Owners of rights in other works (computer programs, movies, literary works) are not.

3) The remuneration is to be paid by manufacturers and importers of "blank audio recording media", in the form of a levy set in a tariff certified by the Board, to be collected on those media when they are sold or otherwise disposed of by the manufacturer or importer. This means that:

a) the Board must certify a tariff and set a levy, although the final content of the tariff and amount of the levy could be quite different from that the collective societies have asked for;

b) the levy cannot be imposed on anyone else, nor can it be set "at the retail level", as many objectors proposed;

c) the levy is payable by the importer or manufacturer without regard to its end use. That remains true even if the end-user is licensed to reproduce the works or is able to establish that a qualifying medium will not be used to copy sound recordings of musical works. The Act makes no provision for a refund mechanism of any sort, except in the case of societies that represent persons with perceptual disabilities. However, the fact that some qualifying media may be used for purposes other than reproducing sound recordings of musical works could be taken into account in setting the amount of the levy;

d) the Act exempts from the levies recording media that are sold to a society, association or corporation that represents persons with perceptual disabilities. There can be no other exemption.

4) Only "blank audio recording media" are subject to the levy. To meet the definition, a medium must (a) be of a kind that can be used to reproduce a sound recording, (b) be "of a kind ordinarily used by individual consumers for that purpose" AND (c) have never had sounds fixed onto it.

a) The levy can only be applied to qualifying media, which must be blank media. The levy could not, as one person suggested, be imposed on recorded media so that the cost of further recordings is paid for when purchasing the original.

b) Whether a kind of medium is "ordinarily used by individual consumers" will in turn raise two questions. First, what is an individual consumer? Second, at what point does a use become "ordinary"? Thus, it may be certain users are not individual consumers, that certain types of media are not "ordinarily used by individual consumers" or that individual consumers do not use them to reproduce sound recordings. Determining which media qualify for the purposes of the home taping regime, and which do not, is still an open question and will be an important part of the Board's job in this matter.

5) The levy will be collected by a single collecting body. That body will be a private organization. What it collects will be paid to the collective societies representing rights owners in the proportions set out by the Board. Once the Board has determined the share each collective society will get, those societies are free to distribute what they receive as they wish. As far as the Board knows, collective societies have not decided whether some or all of the levies will in fact be distributed based on the amount of air play received by each recording.

The following is the text of the relevant provisions of the statute

PART VIII

PRIVATE COPYING

Interpretation

Definitions

79. In this Part,

"audio recording medium"

"audio recording medium" means a recording medium, regardless of its material form, onto which a sound recording may be reproduced and that is of a kind ordinarily used by individual consumers for that purpose, excluding any prescribed kind of recording medium;

"blank audio recording medium"

"blank audio recording medium" means

(a) an audio recording medium onto which no sounds have ever been fixed, and

(b) any other prescribed audio recording medium;

"collecting body"

"collecting body" means the collective society, or other society, association or corporation, that is designated as the collecting body under subsection 83(8);

"eligible author"

"eligible author" means an author of a musical work, whether created before or after the coming into force of this Part, that is embodied in a sound recording, whether made before or after the coming into force of this Part, if copyright subsists in Canada in that musical work;

"eligible maker"

"eligible maker" means a maker of a sound recording that embodies a musical work, whether the first fixation of the sound recording occurred before or after the coming into force of this Part, if

(a) both the following two conditions are met:

(i) the maker, at the date of that first fixation, if a corporation, had its headquarters in Canada or, if a natural person, was a Canadian citizen or permanent resident of Canada within the meaning of the Immigration Act, and

ii) copyright subsists in Canada in the sound recording, or

(b) the maker, at the date of that first fixation, if a corporation, had its headquarters in a country referred to in a statement published under section 85 or, if a natural person, was a citizen, subject or permanent resident of such a country;

"eligible performer"

"eligible performer" means the performer of a performer's performance of a musical work, whether it took place before or after the coming into force of this Part, if the performer's performance is embodied in a sound recording and

(a) both the following two conditions are met:

(i) the performer was, at the date of the first fixation of the sound recording, a Canadian citizen or permanent resident of Canada within the meaning of the Immigration Act, and

(ii) copyright subsists in Canada in the performer's performance, or

(b) the performer was, at the date of the first fixation of the sound recording, a citizen, subject or permanent resident of a country referred to in a statement published under section 85;

"prescribed"

"prescribed" means prescribed by regulations made under this Part. S.C. 1997, c. 24, s. 50.

Copying for Private Use

Where no infringement of copyright

80. (1) Subject to subsection (2), the act of reproducing all or any substantial part of

(a) a musical work embodied in a sound recording,

(b) a performer's performance of a musical work embodied in a sound recording, or

(c) a sound recording in which a musical work, or a performer's performance of a musical work, is embodied

onto an audio recording medium for the private use of the person who makes the copy does not constitute an infringement of the copyright in the musical work, the performer's performance or the sound recording.

Limitation (2) Subsection (1) does not apply if the act described in that subsection is done for the purpose of doing any of the following in relation to any of the things referred to in paragraphs (1)(a) to (c):

(a) selling or renting out, or by way of trade exposing or offering for sale or rental;

(b) distributing, whether or not for the purpose of trade;

(c) communicating to the public by telecommunication; or

(d) performing, or causing to be performed, in public. S.C. 1997, c. 24, s. 50.

Right of Remuneration

Right of remuneration

81. (1) Subject to and in accordance with this Part, eligible authors, eligible performers and eligible makers have a right to receive remuneration from manufacturers and importers of blank audio recording media in respect of the reproduction for private use of

(a) a musical work embodied in a sound recording;

(b) a performer's performance of a musical work embodied in a sound recording; or

(c) a sound recording in which a musical work, or a performer's performance of a musical work, is embodied.

Assignment of rights

(2) Subsections 13(4) to (7) apply, with such modifications as the circumstances require, in respect of the rights conferred by subsection (1) on eligible authors, performers and makers. S.C. 1997, c. 24, s. 50.

Levy on Blank Audio Recording Media

Liability to pay levy

82. (1) Every person who, for the purpose of trade, manufactures a blank audio recording medium in Canada or imports a blank audio recording medium into Canada

(a) is liable, subject to subsection (2) and section 86, to pay a levy to the collecting body on selling or otherwise disposing of those blank audio recording media in Canada; and

(b) shall, in accordance with subsection 83(8), keep statements of account of the activities referred to in paragraph (a), as well as of exports of those blank audio recording media, and shall furnish those statements to the collecting body.

No levy for exports

(2) No levy is payable where it is a term of the sale or other disposition of the blank audio recording medium that the medium is to be exported from Canada, and it is exported from Canada. S.C. 1997, c. 24, s. 50.

Filing of proposed tariffs

83. (1) Subject to subsection (14), each collective society may file with the Board a proposed tariff for the benefit of those eligible authors, eligible performers and eligible makers who, by assignment, grant of licence, appointment of the society as their agent or otherwise, authorize it to act on their behalf for that purpose, but no person other than a collective society may file any such tariff.

Collecting body

(2) Without limiting the generality of what may be included in a proposed tariff, the tariff may include a suggestion as to whom the Board should designate under paragraph (8)(d) as the collecting body.

Times for filing

(3) Proposed tariffs must be in both official languages and must be filed on or before the March 31 immediately before the date when the approved tariffs cease to be effective.

Where no previous tariff

(4) A collective society in respect of which no proposed tariff has been certified pursuant to paragraph (8)(c) shall file its proposed tariff on or before the March 31 immediately before its proposed effective date.

Effective period of levies

(5) A proposed tariff must provide that the levies are to be effective for periods of one or more calendar years.

Publication of proposed tariffs

(6) As soon as practicable after the receipt of a proposed tariff filed pursuant to subsection (1), the Board shall publish it in the Canada Gazette and shall give notice that, within sixty days after the publication of the tariff, any person may file written objections to the tariff with the Board. Board to consider proposed tariffs and objections

(7) The Board shall, as soon as practicable, consider a proposed tariff and any objections thereto referred to in subsection (6) or raised by the Board, and

(a) send to the collective society 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.

Duties of Board

(8) On the conclusion of its consideration of the proposed tariff, the Board shall

(a) establish, in accordance with subsection (9),

(i) the manner of determining the levies, and

(ii) such terms and conditions related to those levies as the Board considers appropriate, including, without limiting the generality of the foregoing, the form, content and frequency of the statements of account mentioned in subsection 82(1), measures for the protection of confidential information contained in those statements, and the times at which the levies are payable,

(b) vary the tariff accordingly,

(c) certify the tariff as the approved tariff, whereupon that tariff becomes for the purposes of this Part the approved tariff, and

(d) designate as the collecting body the collective society or other society, association or corporation that, in the Board's opinion, will best fulfil the objects of sections 82, 84 and 86,

but the Board is not obligated to exercise its power under paragraph (d) if it has previously done so, and a designation under that paragraph remains in effect until the Board makes another designation, which it may do at any time whatsoever, on application.

Factors Board to consider

(9) In exercising its power under paragraph (8)(a), the Board shall satisfy itself that the levies are fair and equitable, having regard to any prescribed criteria.

Publication of approved tariffs

(10) The Board shall publish the approved tariffs in the Canada Gazette as soon as practicable and shall send a copy of each approved tariff, together with the reasons for the Board's decision, to the collecting body, to each collective society that filed a proposed tariff, and to any person who filed an objection.

Authors, etc., not represented by collective society

(11) An eligible author, eligible performer or eligible maker who does not authorize a collective society to file a proposed tariff under subsection (1) is entitled, in relation to

(a) a musical work,

(b) a performer's performance of a musical work, or

(c) a sound recording in which a musical work, or a performer's performance of a musical work, is embodied,

as the case may be, to be paid by the collective society that is designated by the Board, of the Board's own motion or on application, the remuneration referred to in section 81 if such remuneration is payable during a period when an approved tariff that is applicable to that kind of work, performer's performance or sound recording is effective, subject to the same conditions as those to which a person who has so authorized that collective society is subject.

Exclusion of other remedies

(12) The entitlement referred to in subsection (11) is the only remedy of the eligible author, eligible performer or eligible maker referred to in that subsection in respect of the reproducing of sound recordings for private use.

Powers of Board

(13) The Board may, for the purposes of subsections (11) and (12),

(a) require a collective society to file with the Board information relating to payments of moneys received by the society pursuant to section 84 to the persons who have authorized it to file a tariff under subsection (1); and

(b) by regulation, establish the periods, which shall not be less than twelve months, beginning when the applicable approved tariff ceases to be effective, within which the entitlement referred to in subsection (11) must be exercised.

Single proposed tariff

(14) Where all the collective societies that intend to file a proposed tariff authorize a particular person or body to file a single proposed tariff on their behalf, that person or body may do so, and in that case this section applies, with such modifications as the circumstances require, in respect of that proposed tariff. S.C. 1997, c. 24, s. 50.

Distribution of Levies Paid

Distribution by collecting body

84. As soon as practicable after receiving the levies paid to it, the collecting body shall distribute the levies to the collective societies representing eligible authors, eligible performers and eligible makers, in the proportions fixed by the Board. S.C. 1997, c. 24, s. 50.

Reciprocity

85. (1) Where the Minister is of the opinion that another country grants or has undertaken to grant to performers and makers of sound recordings that are Canadian citizens or permanent residents of Canada within the meaning of the Immigration Act or, if corporations, have their headquarters in Canada, as the case may be, whether by treaty, convention, agreement or law, benefits substantially equivalent to those conferred by this Part, the Minister may, by a statement published in the Canada Gazette,

(a) grant the benefits conferred by this Part to performers or makers of sound recordings that are citizens, subjects or permanent residents of or, if corporations, have their headquarters in that country; and

(b) declare that that country shall, as regards those benefits, be treated as if it were a country to which this Part extends.

Reciprocity

(2) Where the Minister is of the opinion that another country neither grants nor has undertaken to grant to performers or makers of sound recordings that are Canadian citizens or permanent residents of Canada within the meaning of the Immigration Act or, if corporations, have their headquarters in Canada, as the case may be, whether by treaty, convention, agreement or law, benefits substantially equivalent to those conferred by this Part, the Minister may, by a statement published in the Canada Gazette,

(a) grant the benefits conferred by this Part to performers or makers of sound recordings that are citizens, subjects or permanent residents of or, if corporations, have their headquarters in that country, as the case may be, to the extent that that country grants those benefits to performers or makers of sound recordings that are Canadian citizens or permanent residents of Canada within the meaning of the Immigration Act or, if corporations, have their headquarters in Canada; and

(b) declare that that country shall, as regards those benefits, be treated as if it were a country to which this Part extends.

Application of Act

(3) Any provision of this Act that the Minister specifies in a statement referred to in subsection (1) or (2)

(a) applies in respect of performers or makers of sound recordings covered by that statement, as if they were citizens of or, if corporations, had their headquarters in Canada; and

(b) applies in respect of a country covered by that statement, as if that country were Canada.

Application of Act

(4) Subject to any exceptions that the Minister may specify in a statement referred to in subsection (1) or (2), the other provisions of this Act also apply in the way described in subsection (3). S.C. 1997, c. 24, s. 50.

Exemption from Levy

Where no levy payable

86. (1) No levy is payable under this Part where the manufacturer or importer of a blank audio recording medium sells or otherwise disposes of it to a society, association or corporation that represents persons with a perceptual disability.

Refunds

(2) Where a society, association or corporation referred to in subsection (1)

(a) purchases a blank audio recording medium in Canada from a person other than the manufacturer or importer, and

(b) provides the collecting body with proof of that purchase, on or before June 30 in the calendar year following the calendar year in which the purchase was made,

the collecting body is liable to pay forthwith to the society, association or corporation an amount equal to the amount of the levy paid in respect of the blank audio recording medium purchased.

If registration system exists

(3) If regulations made under paragraph 87(a) provide for the registration of societies, associations or corporations that represent persons with a perceptual disability, subsections (1) and (2) shall be read as referring to societies, associations or corporations that are so registered. S.C. 1997, c. 24, s. 50.

Regulations

87. The Governor in Council may make regulations

(a) respecting the exemptions and refunds provided for in section 86, including, without limiting the generality of the foregoing,

(i) regulations respecting procedures governing those exemptions and refunds,

(ii) regulations respecting applications for those exemptions and refunds, and

(iii) regulations for the registration of societies, associations or corporations that represent persons with a perceptual disability;

(b) prescribing anything that by this Part is to be prescribed; and

(c) generally for carrying out the purposes and provisions of this Part. S.C. 1997, c. 24, s. 50.

Civil Remedies

Right of recovery

88. (1) Without prejudice to any other remedies available to it, the collecting body may, for the period specified in an approved tariff, collect the levies due to it under the tariff and, in default of their payment, recover them in a court of competent jurisdiction.

Failure to pay royalties

(2) The court may order a person who fails to pay any levy due under this Part to pay an amount not exceeding five times the amount of the levy to the collecting body. The collecting body must distribute the payment in the manner set out in section 84.

Order directing compliance

(3) Where any obligation imposed by this Part is not complied with, the collecting body may, in addition to any other remedy available, apply to a court of competent jurisdiction for an order directing compliance with that obligation.

Factors to consider

(4) Before making an order under subsection (2), the court must take into account

(a) whether the person who failed to pay the levy acted in good faith or bad faith;

(b) the conduct of the parties before and during the proceedings; and

(c) the need to deter persons from failing to pay levies. S.C. 1997, c. 24, s. 50.

The Following is the text of the proposed tariffs as they were filed by the collective societies.

Supplement Canada Gazette, Part I June 13, 1998

COPYRIGHT BOARD

Statements of Proposed Levies to be Collected for the Sale, in Canada, of Blank Audio Recording Media for the Years 1999 and 2000

In accordance with subsection 83(6) of the Copyright Act, the Copyright Board publishes the statements filed by the following collective societies on March 31, 1998, with respect to the levies they propose to collect, effective on January 1, 1999, for the sale, in Canada, of blank audio recording media: Canadian Musical Reproduction Rights Agency (CMRRA) — Neighbouring Rights Collective of Canada (NRCC) Société de gestion des droits des artistes-musiciens (SOGEDAM) Société du droit de reproduction des auteurs, compositeurs et éditeurs au Canada (SODRAC) Society of Composers, Authors and Music Publishers of Canada (SOCAN)

And in accordance with the provisions of the same subsection, the Board hereby gives notice that any person who wish to object to the statements may file written objections with the Board, at the address indicated below, within 60 days of the publication hereof, that is no later than August 12, 1998.

Ottawa, June 13, 1998

CLAUDE MAJEAU Secretary to the Board 56 Sparks Street, Suite 800 Ottawa, Ontario K1A 0C9 (613) 952-8621 (Telephone) (613) 952-8630 (Facsimile)

CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY (CMRRA)

PRIVATE COPYING 1999 2000 1. Definitions In this tariff: (a) the terms "audio recording medium", "blank audio recording medium" and "collecting body" have the same meanings as those set out in Part VIII of the Copyright Act; (b) "importer" means a person, firm or corporation which imports a blank audio recording medium into Canada for the purpose of trade, whether by sale or other form of disposition; (c) "manufacturer" means a person, firm or corporation which manufactures a blank audio recording medium or who assembles a blank audio recording medium from the components thereof in Canada for the purpose of trade, whether by sale or other form of disposition.

2. Levy

2.1 Pursuant to section 82 of the Copyright Act, manufacturers and importers of blank audio recording media shall pay to the collecting body, for the years 1999 and 2000, in respect of the reproduction for private use of sound recordings, musical works and performances of musical works embodied therein levies of: — 25¢ per portion of 15 minutes, or part thereof, of each analog audio recording media sold or imported — 50¢ per portion of 15 minutes, or part thereof, of each digital audio recording media sold or imported 2.2 No levy is payable with respect to blank audio recording media which a manufacturer or importer exports from Canada, provided that the manufacturer or importer maintains books and records satisfactory to CMRRA verifying such export.

3. Administrative Provisions

3.1 The levy shall be paid on a monthly basis by the manufacturer or importer to the collecting body within 30 days of the end of each month.

3.2 Payment of the levy is to be accompanied by a statement of the number and duration of analog blank audio recording media and of digital blank audio digital recording media, sold or imported in the relevant month, as well as the number of blank audio recording media exported, if any, during the relevant month.

3.3 Payments of the levy received later than the date set out in paragraph 3.1 will incur interest at the Bank of Canada rate plus two per cent (2%) per month.

3.4 Manufacturers and importers shall keep books and records in proper form to record all information pertaining to their obligations hereunder in accordance with Generally Acceptable Accounting Practices and the collecting body shall have the right to audit and examine, not more than once in any calendar year, such books and records in order to verify the accuracy thereof and the payments made hereunder. The collecting society may, in addition, request the provision of further documentation respecting the manufacturer's or importer's obligations hereunder, and the manufacturer shall provide the collecting society with such documentation. Where an audit determines that levies have been understated by an amount in excess of ten per cent (10%) of the total amount of levies paid during the period of the audit, the manufacturer or importer will pay the entire costs of the audit on demand by the collecting body.

4. Payment to CMRRA 4.1 One-half of all monies (net of operating costs) collected by the collecting body will be distributed to CMRRA and all other claimants on the levy representing the interests of authors and music copyright owners ("songwriter/publisher share").

4.2 The collecting body will distribute to CMRRA a portion of the songwriter/publisher share in accordance with any agreement arrived at between CMRRA and the other claimants of the songwriter/ publisher share or, in the absence of such agreement, in accordance with any applicable decision of the Board with respect thereto. Such payment will be made not later than 30 days after the receipt of monies by the collecting body.

4.3 With the leave of the Board, CMRRA may supplement or amend this tariff with further terms and conditions respecting the matters set out herein.