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Copyright Board Issues Online Music Decision

Friday March 16, 2007

The Copyright Board of Canada this afternoon issued its much-anticipated decision involving online music services.  The decision sets a tariff for the online music services to be paid for the reproduction of music.  I blogged about the hearings in the fall, which pitted the CMRRA against CRIA and the online music services. 

The Copyright Board was asked to choose between two benchmarks in establishing the tariff.  CMRRA wanted to use the recent ringtone decision as the starting point, while CRIA argued that traditional CDs served as the more appropriate starting point.  The Board sided with CRIA, ultimately arriving at a tariff of 7.9 percent of the retail price per "permanent" download (ie. a download from Apple iTunes) with a minimum payment of 5.3 cents per download. Note that CRIA also sought to become a sub-licensee of the CMRRA repertiore, but the Board rejected that request.

The decision also includes some important language with respect to private copying and DRM.

On private copying, there was some discussion about authorized vs. unauthorized copying.  The Board rejected the distinction, noting that "a private copy is a private copy, whether or not is was authorized."  This statement is important as provides support for the view that peer-to-peer downloading may in some circumstances be covered by private copying, since the issue of authorization is not relevant.

The Board also rejected an initial attempt to mandate DRM for online music services.  As my colleague Jeremy deBeer pointed out, the initial wording of the tariff appeared to require the use of DRM.  The Board dropped that requirement - it does not specify any use of DRM - picking up on the recent Puretracks decision to offer DRM-free downloads.

While both sides will find things to criticize in the decision (with the online music services likely the happiest of the bunch), the bigger question is why this tariff exists in the first place.  Not only are many of the same parties preparing for a second tariff for the same services but a different right next month (Tariff 22), but many might well ask why the parties simply could not have negotiated a similar agreement.  The need for Board-mandated tariffs may make sense for efficiency sake or where a market-based solution is unlikely.  That is not the case here - the parties reached an interim agreement years ago and there was seemingly no need to have an expensive, government-funded system to sort things out.

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