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SECTION I: DEPARTMENTAL OVERVIEW

Minister's Message

I am pleased to present the Copyright Board of Canada Departmental Performance Report for 2006-07.

My goal as Minister of Industry, and one of the top priorities of Canada's New Government, is to ensure we maintain a strong economic environment - one that allows Canadians to prosper in the global economy. We are seeing great changes in the international marketplace. New trade agreements, rapidly advancing technologies and the emergence of developing countries are all contributing to today's business environment. Canada needs to keep pace.

Part of my mandate is to help make Canadians more productive and competitive. We want our industries to continue to thrive and all Canadians to continue to enjoy one of the highest standards of living in the world.

For this to happen, the government is committed to maintaining a fair, efficient and competitive marketplace - one that encourages investment, sets the stage for greater productivity, and facilitates innovation. We are relying on market forces to a greater extent, regulating only when it is absolutely necessary. Our policies have helped turn research into new products and business processes. In addition, we are making efforts to increase awareness of sustainability practices among Canadian industry, emphasizing the social, environmental and economic benefits they bring.

The Department and the Industry Portfolio have made progress on a wide range of issues this past year, most notably in the areas of telecommunications, science and practical research, manufacturing, small business, consumer protection, patents and copyrights, tourism and economic development.

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.

We have accomplished much this year. Using Advantage Canada - the government's long-term economic plan - as our roadmap, we have made great strides toward many of our most important goals. We will continue to focus on these goals to support the conditions for a strong economy - an environment that Canadians expect and deserve.

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Management Representation Statement

I submit for tabling in Parliament, the 2006-2007 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 2006-2007 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 the treatment of copyrighted works in Canada. As noted in Canada's Performance 2006 (http://www.tbs-sct.gc.ca/report/govrev/06/cp-rc02_e.asp), in order to build a globally competitive economy, the Government of Canada is dedicated to pursuing its commitment to invest in skilled knowledge workers, cutting-edge research, science, and innovation. Innovation through new knowledge 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.

Innovation through new knowledge has become a main source of competitive advantage in all areas of economic endeavour. The use and re-use of cultural and entertainment content (such as musical works) have become widespread with the advent of new media and on-line services, new playback and editing technologies and new uses in conventional media. These matters manifest themselves in some of society's most complex and contentious issues, including the downloading of musical content over the Internet using file-sharing software, the use of digital decoders to receive scrambled TV signals and the proliferation of duplication technologies, including computers, which have the capability to make digital copies of CDs and DVDs.

The Copyright Board of Canada recognizes the need to ensure an effective and efficient copyright regulatory regime in order to attain the maximum productivity in those sectors that create and use copyrighted works. Further, the strategic outcomes of a fair and competitive marketplace and reasonable opportunities for Canadian firms to export copyright protected goods and services in the music, content creation and programming areas, as well as the downstream broadcasting, publishing and entertainment industries will be impacted by the performance of the Copyright Board.

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.

Total Financial Resources, 2006-2007

Planned	Authorities	Actual
2,580	2,631	2,364

Total Human Resources, 2006-2007

Planned	Actual	Difference
17	16	1

Summary of Performance in Relationship to Departmental Strategic Outcomes, Priorities and Commitments

Strategic Outcome	2006-2007 Priorities/ Commitments	Type	Planned Spending	Actual Spending	Expected Results and Current Status
Achieve fair decision-making to provide proper incentives for the creation and uses of copyrighted works.	Minimizing costs of participating in the hearings while ensuring a fair process and decision.	Ongoing	2,580	2,364	Lead to a more efficient process. Alternative procedural practices are being evaluated. Some specific hearings were combined.
	Facilitating the hearing process by providing appropriate guidance, information and analysis.	Ongoing			Lead to better-informed parties. Telephone advisories and case management meetings were conducted.
	Issuing timely, fair and consistent decisions.	Ongoing			Lead to decisions that take into account the ever-changing technological environment, global events and new business models.
	Increasing participant satisfaction in the hearing process.	Ongoing			Lead to a more efficient process. Informal information gathering from participants done.
	Demonstrating leadership in the domestic and international arenas to advance the analytical framework for decisions and the regulatory processes for tariff-setting.	Ongoing			To play a lead role in international activities such as sharing of procedures, data, analysis and other information. Organisation of next major international forum ongoing.
	Responding to the challenges of new technologies and their impact on the use of copyrighted works.	Ongoing			Ensures minimal impact of new technologies on relevant industries. The monitoring is ongoing.

Overall Departmental Performance

Summary

The report documents the Copyright Board'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 two hearings in 2006-2007. The first, which lasted ten days in September 2006, examined the tariff proposed by CMRRA/SODRAC Inc. (CSI) for the reproduction of musical works by online music services for the years 2005-2007. The other, held in October 2006, was on Private Copying for the years 2005-2007. At the end of the reporting period, the decision on Private Copying was still under advisement.

In 2006-2007, the Board issued eleven decisions. Four of them established royalties to be paid to the Society of Composers, Authors and Music Publishers of Canada (SOCAN) under Tariff 19 (Fitness Activities and Dance Instruction) for the years 1996-2006, Tariff 15.A (Background Music) for the year 2005, Tariff 23 (Hotel and Motel In-Room Services) for the years 2001-2006, Tariff 24 (Ringtones) for the years 2003-2005. Another dealt with royalties to be paid to the Neighbouring Rights Collective of Canada (NRCC) under Tariff 3 (Use and Supply of Background Music) for the years 2003-2009 and another reinstated, on an interim basis, the SOCAN-NRCC 2003-2007 tariff for commercial radio stations, pending its re-examination by the Board further to an order by the Federal Court of Appeal. Finally, on November 30, 2006, the Board ruled on an application filed by Standard Radio Inc. regarding the "Regulations Defining Advertising Revenues".

Two decisions dealt with royalties to be paid to CSI for the reproduction of musical works; one by commercial radio stations for the year 2007 and the other by online music services for the years 2005-2007. Another decision established royalties to be collected by the Educational Rights Collective of Canada (ERCC) from educational institutions in Canada for the reproduction and performance of works or other subject-matters communicated to the public by telecommunications for the years 2007-2011. Finally, the Board issued a decision setting the levy to be paid, on an interim basis, for the private copying of sound recordings of musical works for the year 2007.

As for unlocatable copyright owners, 21 licences were issued by the Board for the use of published works for which rights holders could not be found; the nature of works varied from architectural plans to literary and artistic works.

In 2006-2007, the Board also initiated procedures leading to hearings to be held later in 2007 and early 2008. One will re-examine the SOCAN-NRCC Commercial Radio tariff, as per the order of the Federal Court of Appeal. Another will jointly examine tariffs filed by SOCAN, NRCC and CSI targeting subscription radio services, and the last will deal with SOCAN Tariff 16 targeting background music suppliers for the year 2007.

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 together generated in 2004 an amount representing 4.5% of Canada's GDP, and grew between 1997 and 2004 at a rate exceeding that of the Canadian 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.

Mandate, Roles and Responsibilities

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 an agreement on a licence 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].

Decisions and Licences

During 2006-2007, the Board held two hearings and issued eleven decisions. In addition, important decisions were issued by the Federal Court of Appeal. What follows is a brief summary of these activities listed on the basis of the various legal regimes which apply to each category. For further detail, please refer to the Board's 2006-2007 Annual Report that can be found at www.cb-cda.gc.ca.

1. Public Performance of Music

In 2006-2007, the Board rendered six decisions with regard to tariffs and one in respect of an application:

• Tariff 19 of the Society of Composers, Authors and Music Publishers of Canada (SOCAN) for physical exercises and dance courses for the years 1996 to 2006 (April 21, 2006).
  
• SOCAN Tariff 15.A for background music for the year 2005 (June 2, 2006).
  
• SOCAN Tariff 23 for hotel and motel in-room services for the years 2001 to 2006 (June 30, 2006).
  
• SOCAN Tariff 24 for ringtones for the years 2003 to 2005 (August 18, 2006).
  
• Tariff 3 of the Neighbouring Rights Collective of Canada (NRCC) for the use and distribution of background music for the years 2003 to 2009 (October 20, 2006).
  
• Interim SOCAN-NRCC Tariff for commercial radio stations for the years 2003 to 2007 (November 24, 2006).
  
• Board's decision with respect to the application filed by Standard Radio Inc. regarding the "Regulations Defining Advertising Revenues" (November 30, 2006).

2. Private Copying

In October 2006, the Board held a hearing on Private Copying for the years 2005-2007.

On December 14, 2006, the Board issued an interim decision extending for 2007 the application of the Private Copying Tariff, 2003-2004.

3. Collective Administration (General Regime)

In 2006-2007, the Board held a hearing on the tariff proposed by CMRRA/SODRAC Inc. (CSI) for the reproduction of musical works in Canada, by online music services, for the years 2005 to 2007. The hearing, which lasted ten days, was held in September 2006.

In addition, the Board rendered three decisions certifying tariffs either for the reproduction of musical works or for the reproduction and performance of works of other subject-matters.

The first one, rendered on February 16, 2007, certified the royalties to be collected by CSI for the reproduction, in Canada, of musical works by commercial radio stations in 2007. The second one, rendered on March 16, 2007, certified the royalties to be collected by CSI for the reproduction, in Canada, of musical works by online music services for the years 2005 to 2007. And finally, the third one, also rendered on February 16, 2007, certified the royalties to be collected by ERCC for the reproduction and performance of works and other subject-matters communicated to the public by telecommunications for the years 2007 to 2011.

4. Arbitration Proceedings

Pursuant to section 70.2 of the Act, on application of the society or the user, the Board can set the royalties and other terms of a licence for the use of the repertoire of a collective society subject to section 70.1, when the society and a user are unable to agree on the terms of the licence.

In July 2005, MusiSélect inc. had filed such an application asking the Board to fix the terms and conditions of a licence for the reproduction of sound recordings in the repertoire of the Audio-Video Licensing Agency (AVLA). On May 18, 2006, MusiSélect Inc. informed the Board that an agreement had been reached with AVLA. In compliance with subsection 70.3(1) of the Act, the Board did not proceed with the application.

5. Unlocatable Copyright Owners

During the fiscal year, 43 applications were filed with the Board and 21 non-exclusive licences were issued for the use of published works for which rights holders could not be found; the nature of works varied from architectural plans to literary or artistic works.

6. Agreements Filed with the Board

In 2006-2007, 93 agreements were filed with the Board as per section 70.5 of the Act.

Access Copyright, The Canadian Copyright Licensing Agency, which licenses reproduction rights such as digital licensing and photocopy rights, on behalf of writers, publishers and other creators, filed 61 agreements granting various educational institutions, language schools, non-profit associations and copy shops a licence to photocopy works in its repertoire.

The Société québécoise de gestion collective des droits de reproduction (COPIBEC) filed 19 agreements. COPIBEC is the collective society which authorizes in Quebec the reproduction of works from Quebec, Canadian (through a bilateral agreement with Access Copyright) and foreign rights holders. The agreements filed in 2006-2007 have been concluded with various organisations, municipalities as well as Bibliothèque et archives nationales du Québec.

The Audio-Video Licensing Agency (AVLA), which is a copyright collective that administers the copyright for owners of master and music video recordings, filed 6 agreements.

The Canadian Musical Reproduction Rights Agency (CMRRA), a Canadian centralized licensing and collecting agency for the reproduction rights of musical works in Canada, has filed for its part four agreements it concluded with Warner Music Canada, EMI Music Canada, SONY BMG Canada and Universal Music Canada.

Finally, the Canadian Broadcasters Rights Agency (CBRA) filed three agreements it entered into with regard to media monitoring by non-commercial services, namely the Government of Alberta, the Government of British Columbia and the Government of Ontario. CBRA represents various Canadian private broadcasters who create and own radio and television news and current affairs programs and communication signals.

7. Court Decisions

On October 14, 2005, the Board certified the SOCAN-NRCC Commercial Radio Tariff, 2003-2007. That tariff significantly increased the royalties that commercial radio stations pay to broadcast musical works and sound recordings. The Canadian Association of Broadcasters (CAB) applied for judicial review of that decision on two grounds: failure of the Board to consider an objection by CAB to the tariffs proposed by the collectives and inadequacies in the Board's reasons.

The Court rejected CAB's first argument, but found that the Board did no give adequate reasons for its finding that a historical undervaluation warranted an increase of 10 per cent while increased efficiencies in the use of music warranted an increase of 7.5 per cent. As a result, the Court set aside the Board's decision and remitted the matter to the Board to re-determine the issues in respect of which the reasons were found to be inadequate.

In October 2006, the Federal Court of appeal dismissed an application for judicial review filed by the Canadian Recording Industry Association. The application challenged a ruling of the Board that ordered the association to communicate certain information to its members in the context of proceedings that will lead to the examination of CSI's proposed tariff for online music services.

Modern Comptrollership

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. The cluster group focused on the implementation of the new Public Service Modernization Act, particularly developing an Informal Conflict Management System, and preparing for the Management Accountability Framework Assessment scheduled for the fall of 2007.

The Board also focused on the development of a Performance Measurement Framework. This framework which is still under development will allow the Board to create and capture the information it needs with regard to its objectives and expected as well as achieved results.

The Board prepared and put in place its Business Continuity Plan. The primary objective of this plan is to enable our organization to survive a disaster and to re-establish normal business operations.

As part of the Public Service Modernization Act, the Board worked with other small organizations on the development of a Labour Management Consultation Committee which is an umbrella type structure for micro and small agencies. This Committee is now fully functional.

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