By Denis Carmel
IN A DECISION RENDERED last Thursday, the Federal Court of Appeal (FCA) dismissed an application for judicial review that had been brought by six broadcasting distribution undertakings (BDUs) and partially granted an application made by a group of nine collective societies.
The appeals stem from a decision from the Copyright Board of Canada (the Board), issued in August 2019 relating to royalties for the period 2014–2018.
In Canada, cable providers (BDUs) can distribute local over-the-air television signals for free and without permission from the signal owner. But, in the case of distant signals, the BDUs can distribute without permission but need to pay a royalty to the owners of copyright in works (television programs, films, music) that are carried on distant signals. That royalty is determined by the Board. This Distant Signal Regime has been in place since 1990.
The parties involved are encouraged to come to an agreement, as they did between 1993 and 2014, but they were unable to do this for the period of 2014–2018. Therefore, the Board had to hold a 15-day hearing, in 2015 and 2016.
To set the amount to be paid by the BDUs, both parties agreed to use a proxy methodology using “the market-based amounts paid by BDUs for permission to distribute various U.S. and Canadian specialty television services as a ‘proxy’ for estimating the value of distant television signals,” the FCA decision stated.
That amount is then subject to several downward adjustments to reflect the reality on the ground relating to cost of programming, market power and program substitutability.
All of this is based on assumptions, available data, and testimonies from experts. As the FCA said in a previous decision on a Copyright case: “… such decisions are suffused with subjective judgment calls, policy considerations and regulatory experience, and courts are not in the best position to opine on policy issues involving public interest and economic aspects.”
The application from the BDUs (Bell, Cogeco, Rogers, Shaw, Videotron and Telus) questioned the Board’s decision relating to the determination of the royalty, amongst others.
The FCA deferred to the Board’s expertise, especially since: “the enabling statute confers on a decision maker a broad policy mandate with an unconstrained range of options to choose from.”
In the case of the Collectives (the Copyright Collective of Canada, Border Broadcasters Inc., the Canadian Broadcasters Rights Agency, the Canadian Retransmission Collective, the Canadian Retransmission Right Association, Direct Response Television Collective Inc., FWS Joint Sports Claimants Inc. and the Major League Baseball Collective of Canada, Inc.), who would be receiving the payments, they argued that the Board had made a mistake by not using the most recent data available, which the BDU’s agreed with at the hearing. Therefore, in the FCA ruling, Justice Rennie wrote: “In my view, there is no doubt that the Board erred and relied on superseded information in calculating the total BDU payments to the proxy services.”
They also erred in another calculation regarding profit margins of proxy services.
In making their application, the Collectives, which are waiting for their money, urged the Court to set the tariff itself, which could have been relatively easy, but the Court felt it was the responsibility of the Board to make such a decision.
“I trust that the Board will be able to amend its tariff in conformity with these reasons in an expeditious way,” concluded Justice Rennie.
The Board estimated the annual royalties at about $123 million for 2014, $127 million for 2015, and $130 million for 2016–2018.
