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37th PARLIAMENT, 1st SESSION

Standing Committee on Canadian Heritage

EVIDENCE

CONTENTS

Wednesday, May 29, 2002

1535

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.))

Mr. Michael Wernick (Assistant Deputy Minister, Department of Canadian Heritage)

1540

1545

1550

The Chair

Mr. Michael Wernick

1555

The Chair

Mr. Michael Wernick

The Chair

Mr. Abbott

Mr. Michael Wernick

1600

1605

Mr. Jim Abbott

Mr. Michael Wernick

Mr. Jim Abbott

Mr. Michael Wernick

Mr. Jim Abbott

Mr. Michael Wernick

1610

The Chair

Ms. Christiane Gagnon (Québec, BQ)

Mr. Michael Wernick

The Chair

1615

Ms. Christiane Gagnon

Mr. Michael Wernick

The Chair

Ms. Sarmite Bulte (Parkdale—High Park, Lib.)

Mr. Michael Wernick

1620

Ms. Michèle Gervais (Director, Intellectual Property Policy, Department of Industry)

Ms. Sarmite Bulte

Ms. Michèle Gervais

Ms. Sarmite Bulte

Ms. Michèle Gervais

1625

Ms. Sarmite Bulte

The Chair

Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.)

Mr. Michael Wernick

Mr. John Harvard

1630

Mr. Michael Wernick

Mr. Jeff Richstone (Legal Counsel, Department of Canadian Heritage)

The Chair

Mr. Dennis Mills (Toronto—Danforth, Lib.)

The Chair

Mr. Dennis Mills

The Chair

Ms. Wendy Lill (Dartmouth, NDP)

1635

Mr. Michael Wernick

1640

The Chair

Mr. Strahl

Mr. Michael Wernick

1645

Mr. Chuck Strahl

Mr. Michael Wernick

Mr. Chuck Strahl

The Chair

Mr. Dennis Mills

Mr. Michael Wernick

Mr. Dennis Mills

Mr. Michael Wernick

Mr. Dennis Mills

Mr. Michael Wernick

1650

Mr. Dennis Mills

Mr. Michael Wernick

Mr. Dennis Mills

Mr. Michael Wernick

Mr. Dennis Mills

Mr. Michael Wernick

Mr. Dennis Mills

Mr. Michael Wernick

Mr. Dennis Mills

The Chair

Mr. Jim Abbott

Mr. Michael Wernick

Mr. Jim Abbott

1655

Mr. Michael Wernick

The Chair

1700

Mr. Michael Wernick

The Chair

Ms. Sarmite Bulte

Mr. Michael Wernick

Mr. Bruce Stockfish (Director General, Copyright Policy, Department of Canadian Heritage)

1705

The Chair

Mr. Jim Abbott

The Chair

Mr. Jim Abbott

Mr. Michael Wernick

The Chair

1710

Mr. Michael Wernick

The Chair

CANADA

Standing Committee on Canadian Heritage

NUMBER 068

1st SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, May 29, 2002

[Recorded by Electronic Apparatus]

¹ (1535)

[English]

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): I would like to call to order the meeting of the Standing Committee on Canadian Heritage.

[Translation]

The Standing Committee on Canadian Heritage is meeting here today to study Bill C-48, an Act to Amend the Copyright Act.

[English]

We're pleased today to welcome, from the Department of Canadian Heritage, Mr. Michael Wernick, who has appeared before us several times, the associate deputy minister, Mr. Bruce Stockfish, director general of copyright policy, Mr. Jeff Richstone, legal counsel, and Mr. Michael Himsl, senior policy analyst. From the Department of Industry we have Madame Michèle Gervais, directrice, Politique de la propriété intellectuelle, Mr. Bruce Couchman, senior policy analyst, intellectual property policy, and Madame Anna Marie Labelle, avocate-conseil, Groupe du droit de la propriété intellectuelle.

Before I turn it over to the officials, I would ask the indulgence of the members. We've received a letter from the two ministers, the Minister of Industry and the Minister of Canadian Heritage, which I just got this afternoon. I have asked the clerk to photocopy it and give it to the members. It relates to the working of the process that is suggested for Bill C-48 and how they would give authority to the committee to look at draft regulations in due course. So I would like to ask you to stay for a few minutes after our hearing so we can discuss this. It won't take very long. At least we'd know, from now on, how to deal with Bill C-48.

Now, Mr. Wernick, the floor is yours.

[Translation]

Mr. Michael Wernick (Assistant Deputy Minister, Department of Canadian Heritage): Thank you, Mr. Chair. Given that you have already introduced our two teams, I will leave out my introductory remarks.

[English]

As I understand what would be helpful to the committee today, I would propose just to make a fairly brief introductory presentation, go through a little bit of the background of where this particular bill came from and what its intention is, accomplished in public policy terms, and then turn it over as quickly as possible to you for questions and so on. The purpose would not be to get into the fine points of the drafting of the bill or the associated regulations, but to deal with the policy thrust of the bill and why it is structured the way it is. But we'll be pleased to take any questions you pose, and we'll try to deal with them today or take them under advisement.

If, after you've heard the witnesses, you think it would be helpful for any of us to come back as a follow-up before you make your decision on the bill, we're obviously at your disposal for that as well. Then I can speak to the elements of the letter from the two ministers about the process going forward to bring the bill and the associated regulations in, of course, if that would be helpful to you.

This bill has had a fairly long history, almost a year and a half of evolution. It is a very narrow bill, but it has underlying it a very big issue. So I'll take you through a little of the history for it. I think there's a fair bit of concise information that's available. I would commend to the committee the consultation paper the government issued last June. It's fairly short, there's a lot of the background, there is an exposition on the two main options the government considered before tabling the bill, and I think you would find a lot of your basic factual questions answered in the discussion paper.

I also noted and read a backgrounder that was prepared by the Library of Parliament staff and circulated to the committee. It's a very good piece of work, very accurate, and would also be, I think, very useful to the committee. So I think you'll find a fair bit of background information.

There is, of course, a body of information contained in submissions that various stakeholders and associations provided to the government in our consultations last autumn. After having put this discussion paper out, we had a consultation process run through our websites. There's a body of about 40 submissions. A whole gamut of views on the issues is there, and they're obviously available to the committee. If you need hard copies or any assistance in that regard, we'll provide them to the committee staff.

Finally, of course, you're going to hear from witnesses, I presume, over the next little while, and they will have a fresh take on the issues and a number of points of view to bring to you. So you're going to hear an awful lot about this bill, as narrow as it is.

If I can just go through a little bit of why you're going to hear such firm and passionate views about this piece of legislation, it's because copyright and intellectual property laws in general are fundamentally important to the economy of the 2st century. Control over intellectual property, its use, its creation, is essentially--and I don't want to overdramatize this--the battleground of the new economy. You see that in biotechnology, you see it in other forms of intellectual property law, you see it in software development, patents, trademarks, and so on, and copyright is no different. The rights of the people who create works and the terms under which people will use them and have access to them are enormously important to everybody concerned. There's a great deal of money at stake for everybody. There's a marketplace that's built on a structure of buying, selling, and renting copyrighted material, and entire companies and industries rely on predictable and clear rules for copyright. So copyright legislation is inherently--and I know some of the members have had experience--controversial and hard-fought.

It's also, as I've discovered as a non-lawyer, very difficult to find the right wording, whether you're drafting statutory language or regulatory language, to accomplish what you want to do. When you draft anything, you seem to sweep in things that you didn't want to sweep in. You have to find ways to be very precise about the boundary lines you're drawing. That's a challenge you're going to see in any future piece of copyright legislation, and it has been one of the things that has bedeviled us over the last year, in particular in trying to find the language for the statute and, indeed, for the accompanying regulations.

¹ (1540)

So I think witnesses will be trying to plunge you immediately into the merits of one word or another, phrasing, a turn of phrase, a structure. These all have meaning, they will be read by the Copyright Board or by the courts in certain ways, and people are trying to gain advantage by having the wording harder or softer. The porridge is always too hot for one and too cold for the other, and you're going to get a lot of people who want to plunge you into drafting issues right away.

The letter the two ministers have set out for you is essentially a proposal to move the initiative forward, which, of course, you're going to discuss and decide how you want to respond. But I think I would like to just explain the origins of the letter, because I participated in some of the discussions with the ministers that led to it.

The form of the bill the government put before you largely creates a regulation-making power. It adds to the Copyright Act the ability to clarify certain terms and applications through the use of regulation, and I'm sure we're going to get into discussion about the implications of that. It's meant that members of this committee and a number of stakeholders find themselves reluctant to pronounce on the merits of the bill, whether it's a good idea or a good approach or not, until they see the regulations. That's true of a number of forms of legislation, and it's not at all surprising. So you've got a number of contingent positions: we think it's a good idea, but we're unsettled; we don't think it's going to work unless we're convinced.

So we have tried, from the day of tabling, to craft regulatory language to give some shape and help the committee come to terms with what you are doing if you pass this piece of legislation. We've shopped around many drafts of the language with a wide range of stakeholders. I can't even count how many iterations my colleagues and I have been through in trying to find regulatory language. We could stay in that spin cycle for a very long time, and the bill will not be moving forward if people are looking for a standard of perfection. So what the ministers have proposed to you is that with your indulgence, there be a discussion on the basic design of the bill as to whether it accomplishes the policy objectives set out for it.

Rather than plunge into the regulatory language, which is normally an executive process that happens after a bill comes into force, we would have a one-year pause, a moratorium effectively, in which to continue the work on regulations. The government undertakes not to bring the regulations into force for a year, in order to allow that consultation to take place and a number of issues to be worked out.

Furthermore, the ministers are inviting the committee to be the forum to hear views on the regulations this fall or winter and hear witnesses and provide the government--the Minister of Industry technically is the one who would be proclaiming the regulations--with your views on whether they can be improved, softened, hardened, strengthened, or whatever, and you would be the forum for the regulations. There's an invitation, I think, in the letter to invite colleagues from the Standing Committee on Industry to participate in that discussion. That ensures that the committee would not be signing off a blank cheque in approving the legislation, that you will get a chance to participate in the crafting of the regulations, and furthermore, that everybody will get at least three shots at the regulatory language.

First, we are going to table with you today the drafting to date of the regulatory language, and people can take their shots at that and suggest whether it can be strengthened or improved. Second, you'll get a chance, if you agree to this process, to be the forum for the regulations in the winter. Third, there's the normal process government regulations go through of presenting a notice, having public comment, and so on before the minister would take any steps to bring them into force. So I think any regulatory language is, if this is the process, going to be aired out very thoroughly before the government takes any executive action to bring it into force.

The flip side is that we do need to bring regulations into force a year from now, and that is the language of the letter, that we need to provide some certainty that process is not going to spin forever, that it will be brought to an end, and at the end of the day, the government and the minister will take a decision and proclaim regulations a year from now that will provide the clarity in the marketplace that it requires. That is the important part of the letter.

¹ (1545)

The reason it has taken so long and it's already the end of May when we're before you is that people have delved into all sorts of issues in the nature of broadcasting distribution, the nature of redistribution, the nature of even Internet uses of broadcast signals. New issues have come to the fore. People have delved deep into technical issues with advertising, sports black-outs, parity or fairness of treatment, that is, whether we are treating cable, satellite, and media retransmitters equitably in the kinds of conditions that are placed on them. These are at the intersection of copyright and broadcast regulation. When it comes down it, they're really about regulating broadcast distribution behaviour. It obviously has implications for copyright. What happened in the process and discussions with stakeholders is that people were piling all these issues into the regulations and saying, can you add a little bit to this, can you add a piece on that, can you deal with banner advertising in the copyright regulations, can you deal with sports black-outs in the copyright regulations? The thing was getting more and more complicated.

What the ministers propose, or intend to proceed with, is that they will invoke one of the powers under the Broadcasting Act, which by now you're familiar with, the section 15 power. The government will ask the CRTC to conduct an inquiry and report back. That exercise, which would be completed, I think, by the end of December or January, depending on how the order is finally crafted, would provide a forum through the CRTC, which is a public, open, transparent process, where everybody can take their shot at it, to deal with the issues, which are really broadcasting issues.

I hope I'm not rambling too much in going through this. One of the reasons this bill is before you is that there was space created, a grey zone, by the decision of the CRTC in 1998, the famous “not regulate the Internet” decision. They passed an exemption order called the new media exemption order, which said, we are not going to impose the traditional broadcasting and licensing structures and regulatory structures on the Internet. The decision was very widely applauded and I think has a lot of support. It created a bit of uncertainty, a grey area, for businesses that have since emerged, which are Internet businesses, but use broadcasting signals. They take radio signals and television signals of licensed broadcasters, who are normally going through a CRTC process, and they put them on the Internet. That's the intersection of broadcasting and copyright. What we'll ask the CRTC to do is be the forum to re-examine that new media exemption order and re-peg the fence posts, if I can use that analogy.

In fact, to be very clear about it, because I know there are people behind me taking notes furiously, we cannot tell the CRTC to do anything other than give us a report. The CRTC will be masters of their own exercise and will make their own conclusions. Having heard all the submissions and views people will have about these issues, from banner advertising to sports black-outs, carriage conditions, whatever, they may come back and say, we're fine with the way it is, or they may reset the fence posts. They may add some pieces of broadcasting legislation, very narrowly, on the issue of businesses that use the Internet to retransmit radio and television signals.

This is not, I want to be very clear, opening up the whole issue of regulating the Internet. It is not an opening up of the entire new media exemption order. It is as narrowly crafted as we can possibly make it, and we're still working on the drafting to deal with Internet businesses that retransmit radio and television signals. It should be a very focused exercise, and the results should be very helpful.

By the time the CRTC has concluded that report, which, I repeat, is a very public exercise, and taken whatever steps they take, we will submit a set of regulations for your consideration. If they've cleaned up and dealt satisfactorily with a whole bunch of issues, the package of copyright regulations is likely to be shorter and smaller. If they haven't dealt with them, we may have to see if we can, or should, address them to copyright regulation.

¹ (1550)

This has some bearing on a number of the stakeholders who are going to come and see you, starting tomorrow. They have issues that are really of this regulatory nature. They will now be aware that the CRTC will be asked to look at some of these issues. We don't know with any certainty what the CRTC is going to do, but we do know the issues will get a full and fair hearing, and that will have a bearing on the final shape and substance of the copyright regulations we would put before the committee in the winter.

I don't know if I've made things murkier or clearer in regard to the process, but what we've been trying to do, under the minister's instructions, is create public-inclusive fora for this process to go on. That's the process point. I should double back to my notes and talk a little bit now about the bill, if that's clear to you. Or would you like me to pause there?

The Chair: May I ask you a question about process, Mr. Wernick, because I think all the members are just being informed of this right now? We just received the minister's letter, which has been distributed just a few minutes ago, so I wanted, for the benefit of all of us, to make sure we understand you rightly. These draft regulations we received, dated May 23, 2002, are they to be the starting draft that I imagine is examined by the CRTC?

Mr. Michael Wernick: No.

The Chair: But when they start their consultation, they will have this before them as well?

Mr. Michael Wernick: I'm sorry, I wasn't clear enough. There are two kinds of issues. One is Copyright Act regulations directly associated with the implementation of Bill C-48, and that is what you have in front of you. It essentially reflects the progress we've been able to make so far. It's a consultation document, it's not official drafting, it's not blessed by the Department of Justice, but it reflects as far as we were able to get in three months of discussion with the various stakeholders and among ourselves. That reflects our best efforts draft, if I can call it that, of the regulations that would be associated with this bill.

There are related issues that are more in the nature of broadcasting rules, and those are the ones we would ask the CRTC to look at. It's not the CRTC's job to look at copyright regulations or copyright rules. I'm sure they'll be informed by and take into account the fact that it has implications for copyright, but their job really is to deal with their mandate under the Broadcasting Act.

The two kind of intersect with each other, because it's rules of the game for the marketplace, and the final drafting of what we think we will need to implement Bill C-48 will be influenced enormously by what the CRTC has done. If they've cleared the underbrush of a whole bunch of ancillary issues, the copyright regulations will be simpler.

¹ (1555)

The Chair: I guess I expressed myself wrongly. With these draft regulations, dated May 29, the process would be for the CRTC to conduct consultations. Based on what their findings are, you would then issue revised draft regulations, which you would then submit to a committee in more definite form, from your standpoint, for it to examine and get back to you. Is that the idea?

Mr. Michael Wernick: That's correct. The draft in front of you is to provide the committee with as much clarity as we can provide today on what regulations are likely to look at. There are inevitably going to be issues of defining things. There are issues with the geographic limitation of signals and so on. So we've put this in front of you as best we can, because it will help you, when the witnesses come before you, to understand why they have concerns about the regulations or about the approach we're taking. But it is not in any way the final draft of the regulations. The final draft would come in the winter, after we have the benefit of the CRTC process, and indeed the benefit of a few more months of feedback from all kinds of sources.

The Chair: Okay, I think that's quite clear. Are there any questions from members about the process?

Mr. Abbott.

Mr. Jim Abbott (Kootenay—Columbia, Canadian Alliance): Sometimes we're accused of seeing simple answers to complex questions because we don't understand the question. So on that basis, I am at something of a loss to understand why the departments would not have come forward with something far simpler in doing what has been characterized as an Internet carve-out. If I'm going to heat something, I can use a match, a candle, an electric range, or a microwave, and each one of those has its own component. It may arrive at the same destination, but each of those elements has its own characteristics. So we have on-air transmission, we have satellite transmission, we have Internet. I would suggest that Internet, because it knows no boundaries and, technologically, can be hacked at will, as we've seen with mafiaboy and everybody else.... I don't really understand why the government would not have... This goes to the process, because what I'm concerned about is that with this bill, and the fact that a bunch of novices--with all due respect to my colleagues, I will call myself a novice... We have experts in your departments, and the government has come to Parliament with a very complex bill that could be simplified with something like an Internet carve-out. If I understand what is being proposed, it's buffaloed all the bureaucrats and experts, the people who work in your department on this particular issue who have that expertise. Then you come to myself as a novice, along, perhaps, with a few other novices, and say, how would you like to do some regulations? I'm sorry, I don't understand this process at all. Why can't we just have an Internet carve-out?

Mr. Michael Wernick: That is the policy question for the committee, and it's an excellent question. Probably the best narrative in explaining that is the consultation paper from June 2001. There were two options we put out to the community for how to deal with the issues that are raised by Internet retransmitters. One was the approach I take it you're suggesting--it's certainly one of the two issues we said in the paper could be pursued--an Internet exclusion. The statutes say this licensing provision doesn't apply to Internet-based companies. There are a number of reasons why that was not the option the government landed on, and this reflects a lot of discussion before we tabled the bill. The alternative approach was the one you see in Bill C-48.

It's an excellent question and it deserves a careful answer. The impact of Internet retransmission is one of destabilizing the marketplace, for reasons that you've set out. There is a pyramid of intellectual property rights, producers' rights, creators' rights, broadcasters' rights, distributors' rights, and so on. People rely on a predictable marketplace to know on what terms they're buying, selling, renting content and so on and the terms by which consumers and others get access to that. There are characteristics of Internet businesses that are very destabilizing for that, as you mentioned, the fact that they tend to spill over national boundaries and be world-wide. When intellectual property is bought and sold and rented in geographic territories, that obviously is a threat.

There are other characteristics of it as well. They're set out fairly well in the paper, I think. To deal with that simply by saying we'll take the Internet out of the statute would have imported new sets of problems, because Internet protocol for moving data around on networks is already insinuating itself into the cable business and other parts of the distribution system. You would have swept in things that you didn't want to sweep in. You would've potentially destabilized some aspects of the cable business as it is today. You might have shut down innovation in business models and technologies that might turn out to be desirable and useful to consumers and useful to a number of people in business by using too blunt an instrument. The Internet carve-out or Internet exclusion is very blunt: it just says, you're out.

Ultimately, what you end up having to do if you want to go down that road is get into defining what you mean by the Internet. What you mean by “on the Internet”? Does it mean using Internet protocol for moving data around? Does it mean the fact that you're on a website? There are definitional issues that are raised by that approach, and I think you'll hear a lot from some of the witnesses, particularly the cable association, as to why that could be complicated for them. You end up either having blunt language in the statute, and the courts will, through litigation and people suing each other, define what Parliament meant--and that's what often happens in copyright legislation--or we'd have a bill before you that would be asking for regulation-making power to define a whole bunch of terms like Internet businesses and Internet retransmission.

So you end up with a lot of the same issues, you just end up getting at them through the same issue. The issues are about whether you can identify the customers, whether you have addressability, whether you have subscription models, whether you're using technological measures to encrypt the signal, and so on. A lot of the issues come up anyway in the kind of approach you're putting forward, so it's not necessarily simpler. You can hear from the witnesses on whether it would be simpler. It certainly would be more direct in its effect, but you might end up having to do other things to mitigate it, pull in the reins a little, and refine it's application.

That's basically the policy choice, and I think what you're going to hear from the witnesses is exactly that. There are behaviours and characteristics of Internet businesses that need to be addressed. They won in the marketplace when the compulsory licence was conceived in 1989-1990. We don't want to just leave it to the courts to decide this, we want Parliament to decide on what terms compulsory licence is the appropriate copyright regime.

º (1600)

We want to clarify the legislation in this regard and clarify the meaning of section 31 of the Copyright Act. So there were two approaches. One is to have a carve-out or exclusion or simple delete-the-Internet kind of approach, and the other was to say, okay, let's deal with the behaviours. What is it about Internet businesses that is destabilizing? Let's find regulations that curb those behaviours or fence it in or fine them. That, quite consciously, was to leave some room for innovation. The government is trying to accomplish two things. One is to defend intellectual property rights and the stability of these marketplaces, but it's also to leave some room for innovation in business models, technologies, and approaches, and if there are new ways for people to get audio-visual content that are consumer-friendly and people want and people can make a business out of, we didn't want to swat a fly with a huge weapon. There may be ways of developing business models that are appropriate, and because the Internet is such a fast-moving world and there are new technologies, new business approaches emerging every three or every six months, we felt that you could address the problem with well-crafted regulations and that you could also address any future evolution and changes, because regulations are easier to fine-tune than a piece of statutory language.

That's the choice. You're going to hear a number of people come before you and say, you should have gone with the other approach. You're going to hear some people say, no, this is the approach, and then they're going to quibble about the regulatory language.

º (1605)

Mr. Jim Abbott: That's an excellent answer to my first question. I thank you.

The second part of my question was the novice aspect of it. If we're going to move ahead with the passage of Bill C-48, if it is not going to come into effect for 12 months, if we, as novices, are going to be charged with the responsibility of overseeing the creation of regulations that have buffaloed your bureaucrats and your experts, what are we going to be accomplishing by passing Bill C-48 at this point?

Mr. Michael Wernick: The proposal of the ministers is not that we hold the bill. The bill will move forward as fast as Parliament's ready to deal with it in the time we've got left in this Parliament.

Mr. Jim Abbott: But what will that accomplish? I'm sorry, I'm not clear.

Mr. Michael Wernick: There are two things. One is that we'll have a clear airing-out of all these issues at this committee over the next couple of weeks, and you will come to your view about what to report back to the House. The other is that it sends a signal to the marketplace of where we're trying to go. It provides some clarity about the language on a number of issues, what kinds of definitions we have in mind, what approach to technical measures and encryption and subscription models. It airs out exactly the issue you've raised. Moving the bill forward provides some clarity of direction to the marketplace. It tells the courts where we're going, it tells the Copyright Board where we're going, it tells our trading partners where we're going, it tells all the stakeholders where the most likely outcome is going to be in a fairly short period of time. One of the worst things in the marketplace is uncertainty.

Mr. Jim Abbott: We do have uncertainty, because we don't have the regulations. That's my point. We have a skeleton, we have no sinew or muscle or anything else on the skeleton, because the skeleton is useful only when the regulations are in place. Is that not correct? If the regulations aren't in place for twelve months from now, what have we accomplished by putting the skeleton in place?

Mr. Michael Wernick: Now you really are dragging me down into the bill, so I'm going to be careful about this. The approach of the bill is to establish qualifying conditions under which new entrants can come into the marketplace and to try to find a gate for innovative new businesses to come in and qualify for the compulsory licence.

Let me just add a short detour. This is only about the very narrow issue of the gate to compulsory licensing. Compulsory licensing means the use of other people's content without their consent. It doesn't mean you don't get paid for it. You do get paid for it, but you don't have to expressly consent to it. So cable systems and satellite systems get to use broadcasters' signals and pay for them--and they pay well for them--without the consent of the broadcasters. That's compulsory licensing. It is an exception to regular, normal, conventional copyright, which is more of a contractual thing, an exclusive right held by the owner of the intellectual property, and they decide whether to sell it to somebody else, to license its use, to rent it, or what not. Nothing about this bill will ever affect the ability of businesses to use ordinary copyright and contractual arrangements. If you can build an Internet business by licensing somebody else's content, by buying somebody else's content, by renting somebody else's content, you can do that. It's not affected by this bill one way or the other. This is only about compulsory licensing and under what terms you could apply to the Copyright Board for a compulsory licence and the appropriate tariffs. So it's a very narrow bill.

Underlying it is a very big issue, as I said at the beginning, the issue of control and the terms under which we will have innovation in the broadcasting world. It's urgent, because we've already had two entrants into the marketplace, through ICraveTV a couple of years ago and Jump TV now--and Jump TV is still in business. I'm not passing any judgment on Jump TV whatsoever, other than to say the fact that they are there, the fact that they are launching business models, the fact that they have made applications to the Copyright Board, which they subsequently withdrew, is immensely unsettling to the rights holders community. They've certainly been telling us loud and clear that moving forward with a clear sense of resolve that we're going to deal with the issue is useful to the marketplace. It gives investors the certainty under which they know what decisions to make and so on.

º (1610)

The Chair: Madame Gagnon.

[Translation]

Ms. Christiane Gagnon (Québec, BQ): I'm trying to understand here. In terms of the process, then, you're saying that you're going to work on making the criteria in the regulations more specific. That I understand, but at the same time, you're saying that the Minister of Industry will be the one implementing the regulations.

I really fail to see how come members sitting on the Standing Committee on Heritage are the ones studying this legislation when at the end of the day, the Minister of Industry is the one who will have the final word on the matter and the members of the industry committee will not have even taken part in the discussion on this issue. We are very well aware that the vision of the Minister of Industry and of the Minister of Heritage are quite different. I really fail to see how we are going to be able to develop a consistent approach to this issue if we work in this way. You said yourself that you find it quite difficult to come up with something. Therefore, imagine what it's like for poor novices like us. It's one thing to get a handle on what is happening, but it's quite another to come up with regulations on that matter. Consequently, I really don't see how Industry and Heritage can work together in a logical way on this process.

Why don't members of the industry committee sit on our committee? Both committees are attempting to get a handle on the same issues, which we are trying to exert some influence over. What I'm really trying to say here is that both committees are working on their own particular turf and at the end of the day, the MInister of Industry will be the one wielding the big stick. No matter what wonderful solutions we put forward, if industry wants to open up the market and open up new markets, and if our only concern is the pressing need to protect copyright, we will fail to come to an understanding.

Mr. Michael Wernick: There are several questions that require answers. Firstly, we have to clarify the fact that this is clearly a government bill. This bill reflects the government position endorsed by the cabinet. Therefore, the bill has been tabled as a government bill. The bill is being supported by all ministers. We undertook an intensive cooperation process in order to draft the consultation paper, the bill and the regulations. This process will continue.

Consequently, the document that will be before you in the fall will reflect the government's position, based on consultation and discussion between appropriate departments. It's often the case that several departments are involved in one particular bill. Sometimes, it might be Foreign Affairs for example, which has an international perspective. The Department of Justice provides expertise on how best to draft a bill from a legal standpoint.

You have our whole team of experts here in this room today. Therefore, you can see that we have a whole team of experts. I don't think that we have forgotten anyone. Therefore, this is the team that will be working on this issue for both ministers. They will be the ones making joint decisions. It is the case that the Copyright Act stipulates that the implementation of the act is the responsibility of the Minister of Industry, and one particular minister must be responsible for the regulations. This is stipulated in the act itself. It's always like this with any law. When one particular minister is designated, it is the Minister of Industry. Of course, from a technical point of view, Mr. Rock, the Minister of Industry will be the one to enact the regulations. However, this bill is most definitely a joint undertaking by both departments.

The Chair: I would just like to specify something here. In terms of the committee, Ms. Gagnon, the House of Commons refers these bills to the heritage committee. This is what happened with Bill C-32. This is how the system works. We work just like any other House committee studying a government bill. We are not a joint committee. The heritage committee was the committee that studied Bill C-32.

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Ms. Christiane Gagnon: However, the situation is not always as clear between Heritage and Industry. Indeed, several witnesses have told us that these committees should indeed be amalgamated with a view to developing a consistent approach to the various decisions that are made.

I would just like to ask one question. Why is it so difficult to develop regulations given the fact that we know that in other countries, such as Australia, this type of legislation already exists? Wouldn't the guidelines that exist in those countries be acceptable in Canada, or are we dealing here with a cultural difference?

Mr. Michael Wernick: Frankly speaking, I think that it is because we have learned lessons from the experience of other countries. It is true however that other jurisdictions have preceded us in some areas. The European Union and the United States undertook a major overhaul of their copyright law two or three years ago. Australia did the same. There have been repercussions, and we are seeing that in the court system currently. These jurisdictions are now regretting some of the decisions that were made and we are attempting to do better than they did, if possible, in order to find a solution which is, as far as possible, adapted to the Canadian reality.

[English]

The Chair: Madam Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): We're not getting to the substance here, we're just looking at the procedure. Under section 15, you're going to ask the CRTC to look at something, but you're not demanding they do something, as you would under, I believe, section 7. Why one rather than the other?

Second, Mr. Wernick, what happens if the CRTC comes back with the same conclusion? We're still faced with the situation where you have new media being transmitted on the Internet, and--I hate using these terms--they're just not on the same playing field as the broadcasters or the cable distributors, because they're licensed under a regime in Canada. What happens then?

Then from a procedural point of view, what's the trade side on this? I find it interesting. I'd like to hear Industry's side. You talk about this somehow precluding innovation. A carve-out is something that would preclude innovation, and this would somehow impede innovation. Creativity is the basis of innovation. Without creativity, we cannot innovate. If we do not foster an environment that protects our creators, there will be no innovation. I don't care what you say, it's not going to happen, so we're going to let it all go to the States. I'm concerned about the trade side of it. I'm not afraid of the Americans. Are we going to be put in the same Bill C-55 position again? You talk about innovation, and I have nothing against innovation--I have a husband who's a scientist, who's an innovator. But I would ask the Industry officials, is it wrong if someone sits down and takes my husband's patented software and re-engineers it and rehacks it? Is that okay? Or would that impede somehow? Because I would submit it would impede innovation.

Mr. Michael Wernick: On the narrow broadcasting issue, the reason we've chosen the section 15 approach and not the section 7 approach is that the section 7 approach is a very directed power. It gives a policy direction to the commission to move in a certain direction. It's been used extremely rarely. One of the reasons is that it's very slow. You have to table it in front of Parliament for a long period of time before it actually comes into force. It would mean they wouldn't really start to do anything until the spring of 2003. We believe they can move much more quickly to flip this into a public notice, have a process, and get some views back before the winter, and that will help disentangle--that's the verb I really rely on--the broadcasting issues and the copyright issues.

On the trade front, the bill is obviously in compliance with our international obligations. We wouldn't bring you forward a bill that wasn't. There would be some risk in not doing anything about this issue, because it is of concern to a number of our trading partners, and that's why it's important that there be a signal that we're moving forward to deal with this issue.

I'll turn now to my colleague.

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Ms. Michèle Gervais (Director, Intellectual Property Policy, Department of Industry): Internet retransmission is very complex and it's a very difficult issue. The digital technology that is involved is in a state of constant evolution. This technology, however, has the potential of becoming an important platform for the dissemination of content, audio-visual material for example. We believe that with appropriate safeguards that acknowledge and protect a broadcaster's and a rights holder's legitimate interests, Internet technologies can be an important part of Canada's broadcasting system. Allowing the new technologies to be exploited to their utmost potential, in our view, will further the government's innovation and connectiveness agenda, and would be consistent with this agenda. It's also important from a broadcasting policy perspective, as it supports the principle of affordable, efficient access to programming for all Canadians in all communities by using the latest technologies.

If I may add, this compulsory licence in the Copyright Act is already extensively used by the cable industry and the satellite industry, and therefore what is being proposed is to consider expanding it to the Internet technology.

Ms. Sarmite Bulte: Madame Gervais, I'm very well aware of that, and I'm very familiar with what the compulsory retransmission licence does. However, the cable industry and the broadcasting industry are regulated. We live in a regulated environment. The Internet is not regulated. It's not the same thing, so that's comparing apples and oranges. Nobody has a problem with broadcasting happening, but people have to pay for it, they can't hack at it and tune it in and somehow transmit it and give it away free, to the detriment of our own Canadian broadcasting companies, our cable companies, which tend to be territorial and Canadian. To me, there's a difference between the two, and it's a glaring one. I don't understand how you can compare the two on the same level.

Ms. Michèle Gervais: You will hear from witnesses who will be able to explain to you that they believe they have the technology to ensure that there will not be hacking. And I would like to add that what we're contemplating in our policy development is having provisions in the regulations that would allow some mechanisms, if there is hacking, to put an end to the retransmission.

Ms. Sarmite Bulte: But where do these Internet companies fit into our broadcasting system and our cable system that contributes to the Canadian Television Fund? Canadian content, that's what we're looking at. Canadian content is very important--I think even Mr. Abbot will agree with that. Money goes into the broadcast licence fees. We had another bill in front of us on intervenor status. Bill S-7 looked at taking money from the broadcasters. The broadcasters and the cable companies are all participating, they're part of the regulatory regime, but how do the Internet transmitters get within that and share the same burden and obligations our own Canadian industries, I would submit, have? Help me.

Ms. Michèle Gervais: I think your concern will be addressed through the referral the Minister of Canadian Heritage is contemplating requesting the Cabinet to take, as explained in the letter of the two ministers that was circulated to you a moment ago. It's basically the CRTC referral we talked about earlier.

º (1625)

Ms. Sarmite Bulte: That is a position under section 15 of the Broadcasting Act. These are precatory words, they're not mandatory words. We're asking for them to do something. They may very well come back and say, we can't do anything. So it won't necessarily be taken care of, Ms. Gervais. I just want to make sure everybody's clear on this.

The Chair: Mr. Harvard.

Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.): I'll try to contain myself. Her emotions are infectious.

I find the exchange between Ms. Bulte and Ms. Gervais a little strange, and perhaps a little disturbing. As the heritage committee, we have a responsibility, with respect to cable and satellites and broadcasting, without violating our trade obligations, to protect these vital industries. At least one intent of this bill is to try to protect people who invested a lot of their time, their lives, their expertise, and their knowledge, to prevent people from just coming and basically stealing their work. I don't think that's the way you build a country. That's all I'll say on that.

I have a couple of other observations before I have a question for Mr. Wernick. My good colleague here uses the word novice: we politicians are novices when it comes to this regulatory work we're being asked to do. That's true, Jim, we are novices, but that's not unusual around Parliament Hill. Politicians are asked all the time to work in areas where they're novices, be it defence, health care, taxation, whatever, but ultimately, it does come across our desk, and that's why we have these wise people here, people like Wernick, who tear their hair out trying to help us. So I take novice in this context as a bit self-denigrating, and as a politician, I don't like to be denigrated.

The other thing I have was also raised by Mr. Abbott, wondering why we would proceed with the bill now if our work on regulation may not happen for, say, five months. It seems to me--and I think Mr. Wernick could address this as well--that the regulatory work we're asked to do cannot be some hypothetical exercise, it has to pertain to a real bill. It seems to me that a real bill, to actually become legislation, doesn't happen until it goes through the House of Commons. Once it goes through the House of Commons, Parliament has, in effect, said, here's the bill, it's very real, we've pronounced ourselves on it, now, committee and others, we want you to do the regulations. So I don't find it strange at all that we would pass the legislation and do the regulation work after.

Mr. Wernick, are we talking about retransmission of signals both going out of the country and coming into the country? Are we going to be regulating both retransmission signals?

Mr. Michael Wernick: No. Let me start with the back end. A law of Canada only pertains in Canada. It deals with activity inside Canada and has meaning in jurisprudence in the legislation. It means taking the broadcast signal and retransmitting it to somebody else. It doesn't mean repeater stations, where a station in Vancouver bounces into the interior of B.C., and it doesn't mean transmitting. So if a broadcaster decides of their own volition that they want to put their radio or television signal on a website, so you can go and look at the news or the hockey game or what not, that's a transmission, because they're transmitting their content. Retransmission is somebody else doing it, a cable company, a satellite company, a wireless company, or in this case, an Internet business, and of course, this only regulates activity in Canada. We're not going to regulate foreign websites or businesses, we can't do that.

Mr. John Harvard: This may show that I'm perhaps even more of a novice than you are, Jim. Let's just take an old-fashioned Canadian broadcast of one kind or another being sent, let's say, to the United States, where they have a carve-out or there's no protection. Somebody then wants to use the Internet to return that program to Canada. Are we then protected under this proposed legislation? Does the protection kick in before it's sent out to the United States, or would it kick in when it returns to Canada?

º (1630)

Mr. Michael Wernick: I think I will have to turn to my legal counsel. The activity of any website or facility in the United States is covered by American copyright law and American broadcasting law, and they have very stringent law.

Mr. Richstone might help.

Mr. Jeff Richstone (Legal Counsel, Department of Canadian Heritage): I hope I can provide a bit more clarity here. If you're talking about the signal itself, remember that section 31 only deals with the over-the-air signal. So something that is retransmitted through wire is not what section 31 is about. We only deal in section 31 with over-the-air signals sent over the air for free public reception. All other signals that are sent not for free public reception are not subject to the compulsory licence. People who take that signal and retransmit it through wire have to pay for it. Those are the specialty channels we know about, pay TV, etc. We're just talking about free over-the-air signals. So anything that comes in through any other means is not covered by section 31. There are other sections in the Copyright Act that may apply to communicating that signal into Canada, but it's not what you are dealing with here and not what this bill aims to achieve. This bill is just dealing with those free over-the-air signals that are coming into Canada or are in Canada, received by retransmitters, as defined in the legislation, and then transmitted to Canadian homes.

I'll leave it at that.

The Chair: Before I turn it over to Ms. Lill, then Mr. Strahl, I wanted to make a point, because I think there's a bit of confusion about regulation and the bill being passed. I've sat on many committees and been involved with many bills, as you have. I remember several bills where we passed the bill and didn't even see the regulations afterwards at all. They were issued maybe two years after, according to the process for regulations. This time it seems to me it's a big advantage that the ministers are entrusting to the committee, and I understand it's only the second time it's been done, once in Immigration and here. The fact that we are going to be able to oversee the regulations seems to me a big step forward. In other words, in passing the bill, we pass everything. We passed Bill C-10, for example, and we don't know what the regulations are going to look like, they will go through the public process. But this time we'll have the chance to look at the regulations, which seems to me an advantage, rather than the other way.

Mr. Dennis Mills (Toronto—Danforth, Lib.): Mr. Chairman, with respect, could I react to that?

I think we've become, as parliamentarians, over the years too comfortable about passing bills where we really haven't taken the time to look at regulations. I find that right now we're being governed not by bills per se, but more enabling legislation, and most of the time we're governed in this country by regulations we've never seen. I think we have to get back to knowing what the hell we're approving, rather than giving an instrument to the officials, whereupon they go off and do whatever the hell they want with whoever the hell they talk to, and we're totally outside the loop.

The Chair: So we're saying the same thing.

Mr. Dennis Mills: Yes, I know, but I want to be on the record, because this is the problem we have with endangered species and a couple of other bills. We've got to change this thrust completely. I don't like this.

Mr. John Harvard: Are we the endangered species?

Mr. Dennis Mills: There's a campaign to make us endangered.

The Chair: Ms. Lill.

Ms. Wendy Lill (Dartmouth, NDP): I just want to make one comment and ask a question.

It seems to me that this tiny little piece of the copyright puzzle is maybe one one-thousandth of what needs to be done now in moving our copyright legislation ahead. Probably, by the time those thousand pieces are moved ahead, we're already far behind again. It's a continual process that must cause nightmares with people such as yourselves, who are realizing how far back we're getting--and how much farther we're probably getting back even as we're all sitting in this room. It seems to me you may be trying to put forward a model of how we can maybe move more quickly in this very fast moving area. Is that true? Are you, in fact, putting this forward as a way of trying to speed things up, so you're moving at the same time as you've got something set in place? You've got this whole idea of sending a signal as to where we're going, and then trying to move ahead as you're moving regulations at the same time.

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Mr. Michael Wernick: There are two important parts about the way this bill is being handled, or the way the ministers proposed to handle it. Let me say at the outset, this isn't my bill, this is the ministers' bill, and the ministers are quite consciously trying to accomplish both of the things. This is what the ministers want to do about the copyright legislation. One is, to take your second point, to find a way to move copyright legislation forward. It is inherently difficult. I hope there are not a thousand more of these exercises, or we're all going to quit. It is messy, it's contentious, it's technical. Members of this committee have been through it before on Bill C-32 and others.

In the consultation paper “Framework for Copyright Reform”, which came out last June, we did propose another approach, and time will tell whether it works or not, which is to try to avoid an omnibus piece of legislation that tackles 15 different copyright issues and invites a whole bunch of trade-offs and log rolling among stakeholders and among parliamentarians, and ends up being a very large ,messy affair, which is what American copyright law was, what European copyright law was, what the last experience in the Canadian situation was. We, perhaps naively, hope we can parcel copyright issues into clusters and deal with them more as a convoy of ships all moving across at different speeds, at different times. It's possible to have a bill before the House on one issue and, at an advanced stage of deliberation, discussion papers and web consultations and policy work going on other issues, and we would do several bills over the life of the Parliament moving the agenda forward. It's more like the way the Criminal Code is done, income tax reform, or other pieces where you're constantly renovating a statute. Copyright legislation will never be finished. You'll always have to loop back and deal with the next technical issue and so on.

If you go to that framework paper, you will see an architecture of 11 or 12 clusters of issues, and Internet retransmission of broadcast signals was one of those clusters. It happens to be the first one through this committee. It could have been something else, but it happens to be this one, and I'm sure the ministers will want to bring other bills before you in the next year or two. One of the milestones that's coming before you is the section 92 report, where the minister has to report on the state of the Copyright Act and some of the issues and invite a parliamentary review of the copyright legislation. Those five years are up this fall, and there will a fairly substantial look at the copyright agenda this fall and winter anyway. Which committee that goes to is Parliament's prerogative, obviously.

So, yes, we're trying to get to smaller, more frequent bills and moving many issues forward in parallel, rather than constructing omnibus legislation.

The second point, to go to Mr. Mills' comment, is that the ministers want a great deal of parliamentary input on the regulations. Unlike Bill C-32, where we were doing regulations on book importation two years after the bill was passed by Parliament, we want, and the ministers want, an opportunity for the parliamentary committee to engage the regulatory issues now. We've given you draft legislation, and you will undoubtedly hear stakeholder views on that legislation, that it's too hot or too cold. And there's a formal role in the winter in being the penultimate advisors on those regulations before the minister does anything about it.

So quite contrary to the model Mr. Mills has described, where it'll be done in a back room, which is never the case, in the sense that regulations are always gazetted for public comment, the ministers are providing the committee with their assurance that it would be the forum for fine-tuning the regulations before the ministry does anything with them. I can't compare it to other pieces of legislation you have as a committee, but it's intended to be a very high degree of parliamentary input.

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The Chair: Mr. Strahl.

Mr. Chuck Strahl (Fraser Valley, Canadian Alliance): Thank you.

I'm fairly new to the committee, so I'm just coming in on the tail end of this. I know, when Jim gave the speech on the second reading in the House, which we supported, he said, I hope, when we get to third reading, we'll have stapled on the back of this bill the regulations required to give it some effect.

I don't disagree with what's been said here. I agree with Dennis and others who appreciate the minister's coming to us and saying, we want your input on the regulations. I think that's great. I wish they'd done it on Bill C-68 and all the other bills that ended in 8. It would have been great, and we would have had lots of input on lots of them. The problem I see on a bill like this is that it has no other effect, unless I'm misreading it. The only thing that matters is the regulations. So to come to us as an opposition party, or even the government members, and say, just approve the bill; if we get the regulations right on the carve-out it's great, if we get it wrong, it's a disaster, but approve the bill, and within a year something will happen.... I like your your picture of the convoy, that we should say to this, let's get on then with the review, let the CRTC, if they're going to take it first, do their thing. We're going to take it second, we'll take it when they're done. But I don't think we should approve the bill prior to the regulations. It just seems to me we should get on with other work, and we'll get the regulations when they're in their more advanced draft form. In the meantime we'll continue with some hearings and whatever we're going to do. Why would we approve the bill without the regulations?

An hon. member: It's done all the time.

Mr. Chuck StrahI: I know it's done all the time.

Mr. Jim Abbott: This is a totally different bill.

Mr. Chuck Strahl: Yes, because this bill is only about the regulations. It's not like creating a Criminal Code offence for something, it's only about the regulations. So if you pass a bill and the regulations aren't right, we could be back here. The regulations are more important than the bill, or they are one and the same. I just don't know what purpose we would be serving by passing the bill separately.

Mr. Michael Wernick: I think you'll have to come to that decision after you've heard the witnesses as to what you want to do next in your report to the government. But to look at why the ministers have brought it forward, passing the bill does have legal effect. It changes the rules of the game from what they are now. If we take no action, what we have is the current Copyright Act drafted in 1989, passed in 1990, and the potential for people to pursue compulsory licensing, to take applications to the Copyright Board. There would be litigation, as there was in the United States. This would largely be out of the hands of Parliament and in the hands of either judges or administrative tribunals, like the Copyright Board. The attempt was to get Parliament to pronounce on what these rules should be. You have to come to your view as to whether we've got the design right. That's exactly the issue the ministers are asking you to consider, and your advice to the government on whether we got the design right or not is fundamentally important. Do you go with an Internet carve-out, or do you go with regulating the behaviours of Internet businesses? That's the policy choice, and you're not wasting your time hearing witnesses and coming to a view on that.

Underneath that are a whole bunch of regulatory issues to do with definitions and the meaning of language, which you'll also hear, and that creates a public, inclusive forum for people to argue those issues. Instead of coming and arguing their case to me, ministers, or anybody else, they'll do it here in front of this committee, and I'm sure there'll be a lot of back and forth about this language. So it's a more democratic way of dealing with the regulations, I'd argue.

As to the legal effect, I don't want anybody to be under any misunderstanding about that. If you pass the bill, if it actually gets proclaimed into force, and the regulations have not come into force, it changes the rules of the game. It effectively says to the cable and satellite people, you have nothing to worry about, you're in, you have compulsory licensing, you've not been disturbed, and it says to new media businesses, there's no door to knock on yet, there's no way to qualify, the conditions have not been established. So it closes the door to these new media Internet businesses until such time as we can get the qualifying conditions set up in the regulations, decide whether that gauge should be this narrow or this wide, this restrictive or this liberal--if I can use that word--and put those regulations into force. It has effect and meaning to pass the bill. It does change the rules of the game for the marketplace, and I'm sure you're going to hear that from witnesses.

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Mr. Chuck Strahl: I don't disagree. It does change the rules, but to what, we don't know, and that, to me, is always a problem. I agree with others, I appreciate the minister and others saying the committee at public hearings should have their oars in the water on this. I do like that approach. With this particular bill,we slightly disagree on how much effect it will have; it will tell people out there things are changing, but you just don't know what it's changing to.

Mr. Michael Wernick: You do have in front of you right now a very close approximation to what we think is appropriate regulation that we would recommend to our ministers. It deals with the definitional issues, it deals with important issues like the spillover, the signal outside national boundaries. You're going to hear arguments put forward on whether encryption should be in there, whether certain other kinds of technical measures should be mandatory, and so on, and it would be useful to have these issues aired out.

I understand that the bill puts parliamentarians in a position of wondering how much trust you have in the outcome of the regulatory process. That's the case with any bill, and it's certainly the case with this bill. The regulations are enormously important to this particular piece of legislation. But we've given you everything we can in regard to what it's likely to look like. We're giving you a forum to hear witnesses and stakeholders say, make it tougher, make it lighter, add this, take that out, and I think you can, after you've heard these witnesses, come to a view as to whether this is going to work or not.

Mr. Chuck Strahl: I agree. I guess we're just disagreeing on whether it includes the regulations, or we have the act first and the regulations later. I agree with you, though, we'll hear the witnesses, we'll hear both sides. It's just that I'd like to hear it in one fell swoop.

The Chair: Mr. Mills.

Mr. Dennis Mills: Thank you, Mr. Chairman.

Mr. Wernick, have you had representation from the Canadian Football League and the National Hockey League about the challenges of their properties being retransmitted over the Internet for broadcast properties?

Mr. Michael Wernick: I'm aware of the National Hockey League's representations and correspondence.

Mr. Dennis Mills: Well, the same principle applies to the Canadian Football League.

Mr. Michael Wernick: Yes.

Mr. Dennis Mills: We know this is causing great harm to the value of their product, especially those properties that are in smaller market communities in Canada, where they do not have the choice of the major markets. These organizations are struggling as it is to maintain a presence on the North American professional sport stage, and this retransmission of their properties through the Internet is a further damage to their capacity to stay viable. Could you please help me understand what we would be voting on in the next few days, or before Parliament adjourns, here in Bill C-48? Will you tell me how what we're going to do deals with that issue in a fair way for those small market communities in Canada that have professional sport organizations?

Mr. Michael Wernick: I think you should hear from them.

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Mr. Dennis Mills: I have heard from them, and I'm asking you if you've heard from them, you who have put forward on paper for us ways in which we have to address our constituents. I'm wondering if their views are reflected in the work we've received from you, or where it will be reflected.

Mr. Michael Wernick: They are, as I understand it--and I don't want to speak for them--advocates of an Internet exclusion model. You will hear a number of people put that forward, so you can hear them out on why they think that's a good idea. But they have also raised issues about the use of their signals within the national borders of Canada. A lot of their issues, as I understand them, have to do with blackouts and the ability to create geographic territories associated with the sports franchises inside Canada. It's an intra-Canada issue, as I understand it, about the rights associated with the Edmonton Eskimos, the rights associated with the Montreal Canadiens, and so on and their ability to protect the integrity of those geographic territories.

Mr. Dennis Mills: The dilution of their property.

Mr. Michael Wernick: Right, as they would see it. So what we offer them is the CRTC process, and these are very much the kinds of issues that don't lend themselves to a copyright solution, as far as we can tell. They're really about terms of broadcasting use, of broadcasting signals, and the CRTC process is the best possible forum for those sports bodies to go to and argue what kind of rules they think are appropriate. They deal with satellite already, they deal with cable systems and so on, so this is about parity of treatment across different kinds of retransmitters.

Mr. Dennis Mills: So you're saying, let them go into the CRTC process, which will be approximately a year?

Mr. Michael Wernick: No, we think they'd be done by Christmas, give or take.

Mr. Dennis Mills: That's at least most of another season for all those properties. Isn't there some mechanism or some way when we know this hurts viability? Isn't there some mechanism for dealing with this?

Mr. Michael Wernick: But as I understand it—and my colleagues will correct me—the answer is the one to the previous question. If the bill is proclaimed, if there's enough life left in this Parliament to pass the bill and proclaim it, that shuts the door to Internet retransmission.

Mr. Dennis Mills: Fair enough. Thank you.

The Chair: Mr. Abbott.

Mr. Jim Abbott: So if I understand the process, we will have consultations, we will hear witnesses, and then presumably, this being a government bill, it would be passed in Parliament. Then the CRTC would have consultations and hear witnesses, and then they would report to the justice department, which would put the regulations together. Then we would have consultations and hear witnesses. Does this strike you as being just a tad redundant?

Mr. Michael Wernick: No. I would add a couple of nuances. One is that the CRTC process can start right away, as soon as we can get an order drafted and approved by Governor in Council, which is a matter of a week or two. The CRTC will have been notified, and they can turn it into a public notice fairly quickly. It's their call, but we think they'll be able to turn it into a public notice and seek views very quickly. So that process of engaging the issues more to do with broadcasting will take place over the summer. There'll be a chance for people to have their input and argue their points of view. Whether there are hearings or not would be the CRTC's prerogative to decide. That issue will be joined very quickly.

The results of that would come back, we think, around Christmas, perhaps a little before, perhaps a little after. That then allows us to give our best advice to the ministers on what the regulations for the copyright act should look like. If they have cleaned up a lot of the underbrush, dealt with a number of issues, and clarified the boundaries of the new media exemption order, we'll have a simpler task with the copyright regulations. If they haven't and there's no guarantee of a CRTC outcome, then we're going to have more complicated copyright regulations.

Mr. Jim Abbott: To come back to Mr. Mills' argument, where we're talking about the broadcasters, owners of the properties, the sports broadcasters, and so on, the people who own those properties, I'm taking a look at the regulations that are the starting point, or however we want to characterize them. I'm looking at “Other Conditions”, paragraph 4(1)(b): “the new media retransmitter maintains effective technological measures to limit reception of the retransmission only to authorized users”; and (c) “the new media retransmitter has the means to effectively verify, and seeks to verify that each instance of reception of the retransmission which it permits following...” We get into encryption and all the rest of it. I don't know if there's anyone in this room who still believes in Santa Claus, but they would also believe you can't have a gray market, because all those signals are encrypted. They might also believe mafiaboy in Canada, our very own creation, didn't exist. That being the case, are we not arriving at the same conclusion we started off with?

I find myself talking out of two sides of my mouth. Hopefully, all of us on the committee, all the politicians here believe that indeed, this a unique bill, in that it is nothing without the regulations. Whereas with the majority of the other bills we deal with, the regulations are an important part, but the bills are nonetheless substantive, this bill is not substantive unless the regulations are there. That's the key to it. This is simply an enabling bill for the regulations. If we're in agreement on that, it just strikes me that on one side of the coin, I certainly agree with my colleague, the chair, and others that it is a good process for the ministers to permit the parliamentarians to have direct input into the regulation-making process. That's the good part.

Now I'll talk out of the other side of my mouth and say, just a second, if we're going to arrive at the conclusion these preliminary regulations you have presented to us today have arrived at, and we don't believe there can be ultimate protection on the Internet, then what of paragraph 4(1)(b), “the new media retransmitter maintains effective technological measures to limit reception of the retransmission only to authorized users”? Okay fine, then we've just said this is an Internet carve-out. We've arrived at that conclusion anyway. Why don't we have that regulation? Why don't we have those regulations? Why don't we have them in front of us right now as part of Bill C-48, so we can pass Bill C-48 knowing that's going to be in the bill?

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Mr. Michael Wernick: First, we do not agree that it's only an enabling bill. Passing the bill has legal effect. It changes the rules of the marketplace. The bill creates a regulation-making power to establish conditions by which new people will enter the marketplace. In the absence of those regulations, there's no door, there's no gateway. So compared to the status quo, passing the bill has an effect. It's not an empty gesture to pass the bill. The regulations obviously are very important, because they determine the nature of that gateway.

The language you pointed to in section 4 is essentially a multi-layered way of saying, you can't put it on the World Wide Web, you can't just throw it out there for the planet to see. There may be business models where, if you can encrypt the signal, or use passwords, or use gateways and know who it's going to, if there's an authorized user at the other end, or if there is a way of verifying who it's going to, if you have all kinds of technical measures in place that will make it a closed loop, essentially, that somebody has paid for or subscribed to, that's not just throwing it out on the World Wide Web, and it doesn't have the destabilizing effect the broadcasters and rights holders are worrying about. If there is a closed loop system, that may turn out to be a perfectly legitimate business model that will sit side-by-side with conventional broadcasting.

So this is a way of trying to say, you can't put it on the WWW. Now you will get views saying, well, this word isn't right, and you should have used the word encryption, and you should have done that, but that's basically what it says.

My last point is, any law or any regulation runs the risk that people will not obey it and will cheat. So enforceability is an issue for any piece of legislation. You have to come to a view as to whether this is enforceable or not. But there are all kinds of remedies out there. Criminal theft is criminal theft, copyright infringement is copyright infringement. If somebody hasn't met the conditions that are established through these regulations, they're not entitled to the compulsory licence. They need the consent of the owner of the intellectual property, and if they don't have it, you sue them for copyright infringement. That's the most effective discipline there is in the marketplace.

The Chair: Before I give it to Ms. Bulte, just to fill out Mr. Mills' question about the NHL and the remarks of Mr. Strahl and Mr. Abbott, the way I look at this bill, isn't it correct that the main purpose of it is to change the substance and the provisions regarding retransmission, so that in proposed subsection 31.(1), where retransmission is defined in a certain way, it enlarges it to the extent that if the bill is passed, retransmission is a very different set-up from yesterday or today? Is that not correct?

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Mr. Michael Wernick: It has two effects. One is to clarify who's in. We were attempting to provide the cable, satellite, wireless, and other retransmitters with the clarity that they're in, they're not disturbed by this. The definition of retransmitter clarifies, in the first instance, who's in. Then it sets up this gateway of other qualifying conditions for potential new entrants.

The Chair: Ms. Bulte.

Ms. Sarmite Bulte: To answer Mr. Strahl's and Mr. Abbott's concern that this is nothing without the regulations, it's my understanding--correct me if I'm wrong here--that although you amend subsections 31(2) and 31(3) and say it is not an infringement of copyright--so you're kind of saying it backwards--if the transmitter complies with the applicable conditions as set out in paragraph 3(b), and then subsection 31(3) sets out the process for doing those conditions, it can't be legal until the regulations are there. It's convoluted. So with Dennis' concern about the NHL or the CFL, passing this makes them automatically safe until whatever condition...

Maybe Mr. Richstone or Mr. Stockfish could help me on this. My understanding of why we've undertaken this is that there was some legal question as to whether Jump TV already was a retransmitter and was entitled to this compulsory retransmission licence, and that's why they launched their application before the Copyright Board, without any conditions. Is that correct?

Mr. Michael Wernick: Let me try a construct on you, and then my colleagues can help. You should think of section 31 as a set of hurdles that people have to jump, and the right to use compulsory licensing is the goal at the end of that. If you can't cross the hurdles, you don't get to compulsory licensing and you're infringing on somebody else's copyright. So the question is, is these the right set of hurdles? Are they too high, are they going to trip people up who we don't want to trip? We're here precisely because there's some uncertainty about whether certain kinds of businesses could jump the hurdles now, under the law as currently drafted, and we are intending to provide clarity.

Bruce, do you want to talk about the legal risks we're running right now by doing nothing?

Mr. Bruce Stockfish (Director General, Copyright Policy, Department of Canadian Heritage): The problem with section 31 now is that there is a definition of retransmitter in subsection (1), but it's a negative definition. All it does is indicate who's not covered by the concept of a retransmitter. Some people, like Jump TV, would argue that Internet retransmitters are covered by this definition. Many others argue that they're not. Of course, there's the risk of protracted litigation before the courts, before the Copyright Board, which could go on for years, and it was the government's decision to intervene and try to clarify section 31 as it stands.

So in clause 2 of the bill there is a definition of retransmitter. It's a positive definition, and in paragraph (a) it refers to licensed broadcasting distribution undertakings or persons subject to a mandatory carriage order. Basically, this is meant to refer to existing conventional BDU retransmitters, such as cable and satellite. That makes it clear who is covered. They are covered in the bill. The bill goes on in paragraph (b) of that clause to allow for regulations that would cover other forms of retransmitters, to allow for new forms of technology. And of course, reading between the lines, we're talking about the Internet. It's there that the regulations are important. The regulations are necessary in order to give effect to paragraph (b) of this definition. But that doesn't take away from paragraph (a), and if the bill is passed, it makes it very clear that these are the transmitters who are covered, the existing conventional retransmitters.

The government, in order to give effect to Internet retransmitters, would have to make appropriate regulations under paragraph (b), and that is what the government is undertaking to do. Of course, the commitment is to have this in place by next fall, after having taken into account the CRTC process referred to earlier. Without those regulations in place, internet retransmitters would not be covered by the bill, but the bill would, once it's passed, make it very clear that conventional, existing retransmitters would be the only ones that would be covered. As I say, though, it's the government's commitment to develop regulations that would appropriately deal with Internet retransmitters, and the regulations we're talking about are not to ensure that Internet retransmitters are covered, but to set the appropriate standard, in order to ensure that rights holders and, indirectly, broadcasters' interests are appropriately addressed. If Internet retransmitters, such as Jump TV, are able to meet those standards, those conditions in the regulations, it's certainly the government's view that the interests of the rights holders would be appropriately taken care of. This is what we're committed to do by next spring.

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The Chair: Mr. Abbott.

Mr. Jim Abbott: I hope this is my last question. The letter from the ministers, in clause 5, says “prior to coming into force of the regulations one year from now.” Under normal circumstances, the opposition is always saying, how quickly is the government going to act, what's going to happen? So under normal circumstances, I'd be pretty happy to see that “one year from now”, but I'm asking the question because it strikes me as possible that we could arrive at the same point one year from now, the process, for whatever reason, having bogged down, so all of a sudden, the regulations are, boom, imposed. So I'm asking if it might not be preferable to go back to the ministers and have the document read “will come into force once regulations have been finalized”, as opposed to putting “one year from now”.

The Chair: If I may intervene, I think this is the ministers' suggestion. We don't have to be bound by this letter. We can decide ourselves when the bill takes effect, so it could be one year from now or coming into force with the regulations, whichever is first.

Mr. Jim Abbott: Okay, I respect that intervention, but I wonder if the witnesses would have an opinion about that.

Mr. Michael Wernick: I tread carefully, because, as Mr. Lincoln's pointed out, we're not in any way usurping Parliament's prerogative to amend the bill, pass the bill, or vote the bill down. If the bill never comes into force, it makes the whole regulatory question moot, we're not going to be talking about regulations. And issues would come up if Parliament is prorogued and we have to start all over again in the new Parliament.

The “one year” language is a two-edged sword, it is intended to do two things. For the rights holders it provides assurance that the door is closed for a year, and it will provide a window to work out all kinds of issues. So from the rights holders' point of view, it should be a good thing. For the other interests, who would like to innovate and develop new business models, and to prevent a spin cycle of people arguing about these regulations for ever and ever, the Minister of Industry has said, after a year, after all the input, if Parliament's passed the bill, we'll take our best shot at it, and we're going to go forward with regulations. But there are a lot of pieces of input before we get to that point.

The Chair: Are there any other questions?

I think we'll discuss the question of the letter I wanted to bring forward. There's a motion from Mr. Abbott that is being circulated. I hope we can deal with it tomorrow prior to starting our hearings. We'll just work in camera for 15 minutes to deal with it. Third, Mrs. Bulte gave me a note to remind all of us that the Canadian theatre conference is opening today, and there's a reception tonight in room 200 of the West Block. It's open to all members--a non-partisan issue. It represents all the English language theatre professionals across Canada.

I'd like to thank you, Mr. Wernick and Madame Gervais and all your colleagues, for a very interesting session. I think we've learned a lot today.

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Mr. Michael Wernick: Thank you, Mr. Chairman. I think we've all been in the hot seat today.

The Chair: Thank you.

The meeting is adjourned.