David Kent is a litigation partner and a member of the KNOWlaw Group in the Toronto law firm McMillan Binch. This is the first in an occasional series of articles on copyright reform.

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After fierce lobbying, inter-departmental rifts and last-minute amendments, Parliament finally passed the ‘Phase ii’ amendments to the Copyright Act in April. The legislation was pushed through the Senate and received Royal Assent only one day before it would have died as a result of the spring election. The amendments reflect copyright reforms which various governments have promised to implement ‘imminently’ ever since the Phase i reforms of 1988.

Bill C-32 is a confusing hodgepodge of amendments ranging from rights to remedies. What makes it more confusing is that only selected portions are currently in force. The rest of the Bill awaits further government action to be implemented.

One central feature of the Bill is the creation of new rights known as ‘neighboring rights.’ But not all residents of the old copyright neighborhood are happy with their new neighbors.

What are neighboring rights?

Neighboring rights earned that nickname because they are linked to traditional copyright works without always falling into traditional copyright categories. There are three new neighboring rights: performers’ rights (not to be confused with performing rights), sound recording rights and communication signal rights.

Performers’

performances

Performers’ rights lie in their performances of, for example, dramatic or musical works. The performance right is distinct from the copyright in the work being performed. That traditional copyright continues to be held by the person who created the work.

So Sonja Smits, for example, will own the performer’s right in her particular performance of a Traders script while the scriptwriter will own the copyright in the script itself. Similarly, Holly Cole will own the right in her renditions of the songs on her newest disc while the composers and lyricists of those songs will maintain their traditional copyrights.

Performers have the right to control the ‘fixation’ of their performances and the reproduction of any fixation (e.g. of a record, film or tv production) made for a purpose other than that for which authorization was given. But performers in film and tv productions will lose the ability to exercise those rights when they authorize the embodiment of their performances in the productions.

Sound recordings

The basic sound recording right essentially continues a traditional package of rights. It protects master recordings and gives producers control over the reproduction of specific performances of musical works. This does not add anything new.

Communication signals

The signal right gives broadcasters copyright in their communication signals. This is a limited right. It only covers traditional over-the-air signals. It gives broadcasters the right to control taping and the performance of television signals to a paying audience. However, it does not give broadcasters the right to control the retransmission of their signals by non-broadcasters such as cable and satellite services. And broadcasters have been excluded from sharing in the proceeds of the blank tape levy to be imposed under the Bill.

New performing rights

Performing rights royalties have traditionally been collected in Canada by socan and, before it, by capac and procan. These royalties compensate the composers, lyricists and publishers of music for the public performance of their works.

The new neighboring rights regime extends performing rights to performers and producers, but only for sound recordings and not for other works such as films or tv productions. So beginning in 1998, in addition to creators and publishers, performers and producers will be entitled to performing rights royalties when sound recordings are performed in public (e.g. in bars or dance halls) or communicated to the public by telecommunication (e.g. by radio).

But not all sound recordings will qualify. The copyright life of a sound recording (all apart from the copyright in the music it contains) ends 50 years after the year in which the recording was made. Records first made in 1947 will be in the public domain (as to the record, but not the music) in 1998. And only recordings produced by citizens or permanent residents of Canada or countries which adhere to the Rome Convention or in Canada or another Rome Convention country are eligible. Take note – the u.s. is not a Rome Convention country.

Neighboring rights royalties

The neighboring rights provisions only came into force on Sept. 1 but are already making their impact felt. Two organizations have filed proposed royalties for the public performance of sound recordings. These royalties must be split equally between performers and producers.

The main target of the neighboring rights claimants is radio: commercial, cbc, other non-commercial, and pay audio.

It is not surprising that the new collectives view radio as fertile ground. In 1996, socan collected over $23 million in traditional performing rights royalties from commercial radio alone. This was based on a royalty rate of 3.2% of revenues, with a discounted rate of 1.4% for low music use stations.

Commercial radio stations will effectively pay no neighboring rights royalties on the first $1.25 million of their annual advertising revenues. However, on the balance, one of the two neighboring rights collectives is asking for up to 6.33% in 1998 for its repertoire alone. This rate is proposed to rise to 9.78% by 2002.

Not to be left behind, socan has asked to increase its standard rate from 3.2% to 5% for 1998, an increase of 56%. This is apparently an effort to benefit from any reexamination of royalty rates which is triggered by the introduction of the neighboring rights regime.

The combined impact of the new requests in 1998 could be radio royalty payments at a maximum combined marginal rate of 11.33% of advertising revenue. This would represent a one-year increase at the top marginal rate of 264%.

The royalty claims made by socan and the neighboring rights groups will be resolved by the Copyright Board. While they are expected to be effective as of Jan. 1, 1998, they are not likely to be set before late 1998 at the earliest.

The introduction of neighboring rights is just one of the many fundamental changes to Canada’s copyright regime which occurred this year. However, they are the first to have significant impact. Other changes, which promise to have additional long-term effects, will be examined in later articles.

(This article contains general comments only. It is not intended to be exhaustive and should not be considered as advice in any particular situation.)