US embassy cable - 05OTTAWA1168

UNCLAS SECTION 01 OF 03 OTTAWA 001168 
 
SIPDIS 
 
DEPT PASS USTR FOR CHANDLER AND ESPINEL 
4320/ITA/MAC/WH/ONIA/ for GWORD 
 
E.O. 12958: N/A 
TAGS: KIPR, ETRD, ECON CA, Technology, Copyright 
SUBJECT: Canadian Reaction to GOC's Proposed Copyright Law Amendments 
 
REF: 04 OTTAWA 893 
 
1.  (U) Summary:  On March 24th, GOC released its highly 
anticipated response to the 2002 Heritage Committee report on the 
need for copyright reform.  Many Canadian observers had hoped that 
the GOC's recent announcement would adequately address remaining 
IPR questions, but the government's goals for proposed legislation 
appear to fall short in key areas such as ISP liability and 
technological protection measure (TPM) circumvention: GOC is 
proposing 'notice and notice' rather than 'notice and takedown' 
and the proposed definition of TPM circumvention may require that 
rights holders prove the circumvention was with the intent to 
infringe.   Overall, however, Canadian stakeholders are unable to 
clearly judge the impacts of the proposed amendments because the 
legislative text is not available and the details of the 
legislation will be critical.  We expect renewed lobbying after 
the draft text of the legislation is available.  End Summary. 
 
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The Devil's in the details, and he won't hold still 
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2. (U) We have spoken to a number of Canadian IPR stakeholders, 
including the Canadian Recording Industry Association, the 
Canadian Motion Picture Distributors Association, the Canadian 
Publishers Council, and the Entertainment Software Association to 
get their views on the substance of the GOC's announcement of 
intent to table broad legislation this spring to comply with WIPO 
obligations and address a number of other IPR issues.   The draft 
text of the legislation is not yet available, and Embassy contacts 
suggest that it may be a long time coming; one senior official 
suggested that the GOC will not table a draft before June.  All 
reactions to the proposed amendments thus far are based on three 
documents released by GOC in late March: a backgrounder, a 
statement, and a series of frequently asked questions.  These 
documents are often vague, and industry analysts fear that the 
devil may be in the details that have not yet been drafted.  For 
the GOC's full documentation on proposed amendments, see 
http://strategis.ic.gc.ca/epic/internet/incrp - 
prda.nsf/en/rp01140e.html. 
 
3. (U) Even between the three released GOC documents, there are 
differences.  For example, the GOC's Backgrounder and FAQ clearly 
state that circumvention of TPM or alteration of rights management 
information (RMI) would constitute an infringement of copyright 
when done with intent to infringe, but the GOC's Statement seems 
to imply that 'enabling' infringement would also be illegal. 
Industry analysts who sought to clarify this difference have told 
us that they received contradictory answers depending on which 
agency they asked (Comment: Both Heritage Canada, which has 
traditionally supported IP rights holders, and Industry Canada, 
which tends to side more with free-use rights and promotion of new 
technologies, have responsibility for the content of this 
legislation, which will be drafted by Justice Canada.  Frustrated 
industry analysts have described the relationship between the two 
policy-making agencies as dysfunctional, with Industry holding de 
facto veto power and Heritage over-willing to compromise.  These 
observations are supported to some extent by Embassy experience 
with the agencies: at an IPR meeting hosted by the Embassy in 
December 2004, Heritage representatives seemed far more eager to 
move on the issue.  End comment.) 
 
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Even hidden, the Devil scares rights holders 
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4. (U) What details can be found in the GOC's documents have 
rights holders associations alarmed.  Various interlocutors have 
mentioned two items in particular as particularly threatening to 
intellectual property rights: 
 
--Technological Protection Measures and Rights Management 
Information: The GOC's backgrounder and FAQ clearly imply that 
circumvention of TPM or alteration of rights management 
information would constitute an infringement of copyright only 
when done for infringing purposes.  Most analysts are reading this 
as a reversal of the U.S. standard of burden of proof: rights 
holders would have to prove that the circumvention or alteration 
was intended to infringe, just the action would not be enough. Our 
contacts were discouraged by the GOC's apparent reluctance to 
outlaw devices that have no conceivable legal purpose, such as 
adaptors that allow video game players to play pirated games. 
(Comment: this is somewhat akin to a homeowner having to prove 
that a burglar not only picked the lock, but did so with the 
intent to steal.  More than one analyst pointed out that this 
would represent a step back in Canadian law, since sections 351 to 
353 of the Criminal Code make it illegal to own breaking and 
entering tools, regardless of any proof of 'intent to infringe'.) 
As one interlocutor explained, if the rights holder has to prove 
infringement, this new language does not provide any new power to 
fight infringement assistance, since once infringement is proven, 
current law is sufficient to charge the infringer.  Another 
industry analyst bewailed the fact that this weakness in the law 
will mean that rights holders have no way of going after 
traffickers, but will be forced to continue suing users (as he put 
it: adding one more charge when the rights holder is stuck suing 
some kid is a PR nightmare.) 
 
5. (U) Some rights holders associations are pinning their hope on 
a phrase in the GOC's `Statement', which added the concept that 
circumventing TPM or altering RMI would constitute an infringement 
if the person acted to "enable or facilitate circumvention".  This 
added phrase could cover the hacker who cracks RMI for fun and 
posts the information on the internet (that is, not profiting from 
the action but enabling others to profit.)  However, this phrase 
does not appear in the rest of the documentation (the Backgrounder 
or the FAQs), and industry analysts tell us that attempts at 
clarifying the situation with Canadian Heritage or Industry have 
been met with confusion.  Multiple industry reps mentioned that, 
without appropriate measures to counter trafficking, these 
amendments may not bring Canada into compliance with the WIPO 
treaties to which it is a signatory.  (Comment: more than one 
expert referred us to a book by Mihaly Ficsor called "The Law of 
Copyright and the Internet: The 1996 WIPO Treaties, Their 
Interpretation and Implementation", which provides a list of 
requirements to meet the WIPO treaties.  According to industry 
reps, Ficsor's argument suggests that the weakness of GOC's 
amendments with regards to traffickers means that these amendments 
will not bring Canada into compliance with the WIPO Performances 
and Phonograms Treaty (WPPT). End comment) 
 
Notice and Notice:  If I've told you once, I've...told you once 
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6. (U) On the subject of notice and notice (as opposed to the 
preferred U.S. model of notice and takedown), industry opinions 
vary.  Although some stakeholders have described the GOC's intent 
to instigate notice and notice as a major flaw of the proposed 
copyright amendments, local industry reps have suggested to us 
that, although industry groups will lobby for notice and takedown, 
internet file-sharing may have moved past the point where notice 
and takedown was once critically important.  A year ago when 
Canada's supreme court issued a controversial decision describing 
peer-to-peer filesharing as legal, the filesharing profile of such 
programs as Napster involved large caches of files on individual 
websites; in this situation notice and takedown could prove 
beneficial in combating pirated downloads by requiring that ISPs 
remove these caches of files.  However, the current popularity of 
such programs as BitTorrent and Grokster, where files are 
fragmented and not centrally located, means that notice and 
takedown may not be an effective tool to combat illegal downloads. 
 
7. (U) However, the proposed notice and notice model provides 
little benefit to rights holders beyond ensuring documentation of 
their complaints to ISPs (comment: the documentation of complaints 
is useful, however, and some industry analysts fear that ISPs will 
lobby to remove even that responsibility as onerous.  In addition, 
rights holders groups expressed concern at the GOC's open-ended 
statement that fees may be required to be paid by rights holders 
to ISPs for processing such notices.  End Comment.)  In discussing 
future lobbying options, one industry analyst explained that 
notice and notice could be helpful in combating peer-to-peer 
filesharing if the addition of a 'cease and desist' clause could 
be negotiated.  That is, if ISPs were required to give notice to 
an offending filesharer, that notice could include some reference 
to the fact that the user's internet activity was being monitored 
and, if infringement continued, the ISP would act to terminate the 
user's account.  This type of addition would amount to a 'repeat 
offender' clause under notice and notice.  The industry analyst 
mentioned that a best-case scenario would involve GOC's provision 
of statutory language for such notices, eliminating confusion 
among rights holders and taking some of the burden of public 
disapproval away from ISPs. 
 
As in music, timing is everything 
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8. (U) Most analysts are withholding final judgment until they can 
see the actual draft legislation of the amendments.  However, the 
current political turmoil as Canada's minority government faces 
inquiry into a vast ethical scandal suggests that legislative 
language may not be available soon.  One industry analyst told us 
that, even optimistically, it would be an example of "blinding 
speed" if the bill was drafted before June.  If the opposition 
forces an election, this legislation is likely to fall behind. 
The development of this legislation was a major factor in 
decisions on Canada's Special 301 placement, and the Embassy 
recommended an out-of-cycle review to keep track of and encourage 
progress on the legislation. 
 
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A summary of the proposed amendments 
-------------------------------------- 
9. (U) WIPO treaty issues 
 
The proposed amendments that are intended to implement the WIPO 
treaties (as described by GOC) include: 
--clarifying the existing exclusive communication right of authors 
to include control over the making available of their material on 
the internet; 
--providing sound recording makers and performers with the right 
to control the making available right of their sound recordings 
and performances on the internet; 
--making the circumvention for infringing purposes of 
technological protection measures (TPMs) applied to copyright 
material an infringement of copyright; 
--making the alteration or removal of rights management 
information (RMI) embedded in copyright material (when done to 
further or conceal infringement) an infringement of copyright; 
--providing rights holders with the ability to control the first 
distribution of their material in tangible form; 
--making the term of protection for photographs the life of the 
photographer plus 50 years; 
--introducing a full reproduction right for performers in sound 
recordings; 
--modifying the term of protection provided to sound recording 
makers so as to extend to 50 years from the publication of the 
sound recording; 
--providing performers moral rights in their fixed and live 
performances. 
 
10. (U) ISP Liability 
 
Proposed amendments concerning internet server provider (ISP) 
liability include: 
--making ISPs exempt from copyright liability in relation to their 
activities as intermediaries (comment:  one industry analyst 
worries that the phrasing of this exemption could be far too broad 
and might encourage the creation of small ISPs dedicated to 
hosting illegal copies but not-liable due to this part of the law. 
As with many reactions to the proposed amendments, much depends on 
the final phrasing of the legislative text.); and 
--establishing a "notice and notice" regime in relation to the 
hosting and file-sharing activities of an ISP's subscriber (that 
is, when an ISP receives notice from a rights holder that one of 
its subscribers is allegedly hosting or sharing infringing 
material, the ISP would be required to forward the notice to the 
subscriber and to keep a record of the relevant information for a 
specified time.) 
 
11. (U) Conclusion:  The GOC's proposed amendments to the 
Copyright Act appear to fall short in key areas such as ISP 
liability and technological protection measure (TPM) circumvention 
and in fact may not be sufficient to bring Canada into compliance 
with the WIPO treaties.  Canadian stakeholders are as yet unable 
to judge the impact of the proposed amendments because the 
legislative text is not available.  We expect intense lobbying 
once the draft language is available if the draft text does not 
adequately address the questions of ISP liability and trafficking. 
Post is also watching upcoming court cases and GOC's deliberations 
on educational use of the internet (a question which was removed 
from the current proposed amendments so that the GOC can obtain 
further input on this contentious issue.)  Post will continue to 
work with stakeholders and GOC agencies to encourage legislation 
to bring Canada into compliance with the WIPO treaties.  End 
Conclusion.