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Canadian buyers of CDs and many other recordable media have been given a year-long reprieve on the prices they have to pay.
In a surprise move, the Copyright Board of Canada froze levies at their current level until the end of 2004. The music industry had put intense pressure on the board to raise the levies dramatically.
"The board majority found that, based on the available evidence, increasing existing levy rates … was not justified at this time," secretary general of the board Claude Majeau said, "and that fairness and equity dictated that the status quo for the existing levies be maintained."
But the board added some new levies on non-removable memory permanently embedded in digital audio recorders, such as MP3 players. Those players equipped with a memory capacity of up to 1 Gigabyte will be charged a levy of $2 per device. Each recorder with a memory capacity of 1 GB up to 10 GB will be levied at $15, and each recorder with memory capacity of more than 10 GB will carry a $25 levy.
Under the music industry's original proposal, an MP3 player with a 20GB minidisk hard drive would have been subject to a levy that would have boosted the price by about $125. Manufacturers filed objections to the Copyright Board over that plan, arguing that the levies would price their products out of the market.
The Canadian Recording Industry Association, the Society of Composers, Authors and Music Publishers of Canada (SOCAN) and others working through an industry association called the Canadian Private Copying Collective reacted predictably. Lucie Beauchemin, vice-president of the CPCC, called the decision "perplexing and disappointing" at a press conference Friday afternoon.
"The Copyright Board's decision is a very important one because it confirms that Canadians continue to acknowledge the right of creators and artists to live from their work, like every other hard-working individual," said CBCC Chairwoman Claudette Fortier in a statement.
The board denied requests made by the CPCC to establish a levy on blank DVDs, removable memory cards (such as SmartMedia, CompactFlash and Secure Digital Memory cards) and removable micro hard drives. The board concluded that these media are not regularly used by individuals for the purpose of copying music, and should therefore be exempt from levies.
The board argued that "the evidence available at this time does not clearly demonstrate that these recording media are ordinarily used by individuals for the purpose of copying music."
The current levies of 29 cents for audio cassette tapes of 40 minutes or longer (no levy applies to tapes of shorter length), 21 cents on recordable CDs and re-recordable CDs, and 77 cents on CD-R Audio, CD-RW Audio and MiniDiscs will remain in effect.
The CPCC had asked the board to raise the levies to 51 cents for each audiocassette, 59 cents for each CD-R of 100MB or more, 49 cents for each CD-RW of 100 MB or more, $1.15 for each CD-R Audio and CD-RW Audio or MiniDisc, and 65 cents for each blank DVD.
The CPCC also sought a rate increase from 0.221 cents to 0.55 cents for each megabyte for removable electronic memory cards, or for a removable hard drive. It also proposed rates from 0.193 cents to 1.08 cents for each megabyte depending on capacity for removable electronic memory cards sold with a music device, a removable micro-hard drive sold bundled with a music device, or non-removable memory incorporated into a music device, or a hard drive incorporated into a music device.
The CPCC would not say that downloading music files from the Internet is illegal under Canadian law, but also said that the board's decision did not legitimize the practice.
"That is a question that is sometimes disputed, and it will have to be clarified," said Paul Audley, policy adviser to the CPCC.
The Copyright Board is a federal regulatory body that establishes the royalties to be paid for the use of works protected by copyright those rights are entrusted to a collective society. It also supervises agreements signed between users and collective societies and can issue licences when the copyright owners cannot be located.
The Copyright Act was amended in 1998, to legalize private copying of sound recordings of musical works onto audio recording media for private use. The amendment also made provision for the imposition of a levy on blank audio recording media to compensate authors, performers and makers who own copyright in eligible sound recordings being copied for private use.
Manufacturers and importers of blank audio recording media sold in Canada are required to pay private copying levies to the CPCC to compensate the industry for losses due to the proliferation of unauthorized digital versions of their music products traded freely on networks such as Kazaa.
To date, the CPCC says it has collected $59.3-million through the existing levies, and has disbursed about $10-million of that.
The CPCC says that according to surveys it has conducted, Canadians downloaded about 1.1 billion tracks of recorded music between July 2001 and June 2002, of which only 3 per cent were authorized.
The amounts collected by the CPCC are distributed to eligible authors, performers and producers of recorded musical works copied by individuals for personal use in Canada.
The Copyright Board's Mr. Majeau said that the board had listened to more than 1,500 parties and individuals in making its decision to freeze the rates.
"The board faced many difficult challenges in these proceedings, including conflicting evidence concerning the size of the Canadian market for blank audio recording media required to update existing levies, significant developments in digital recording media technologies and controversial issues relating to the legal status of CPCC's zero-rating program, among others," Mr. Majeau said.
"The board majority found that, based on the available evidence, increasing existing levy rates as proposed by the CPCC was not justified at this time, and that fairness and equity dictated that the status quo for the existing levies be maintained."
In 2000, the CPCC introduced the "zero-rating" program under which manufacturers and importers of blank audio recording media were permitted to sell media without levies to religious organizations, broadcasters, law-enforcement agencies, courts, tribunals, court reporters, provincial ministers of education and members of the Association of Universities and Colleges of Canada, music and advertising industries.
The zero-rating program, which institutes levies but which sets them at zero cost, covered audio cassettes, CD-R Audio, CD-RW Audio and MiniDiscs. The CPCC announced some time ago its plan to extend its zero-rating program to include CD-Rs and CD-RWs.
But the CPCC's zero-rating program was criticized as being illegal and unfair. The Copyright Board concluded that just as it does not have the legal authority to create levy exemptions under the Copyright Act, either does the CPCC. The board then concluded that CPCC's existing or proposed expanded zero-rating program is illegal.
In a dissenting opinion, board vice-chairman Stephen Callary expressed concern for organizations that have relied on the existence of a zero-rating program. He said that they could now find themselves faced with a major unexpected potential liability.
The Copyright Board's decision, released Friday morning, had already been delayed for several months.
Instituted in 1999, the Copyright Board's levies were revised for 2001 and 2002. Since 2002, interim levies, identical to those in the two previous years, have been set in place.
By JACK KAPICA
Globe and Mail Update