Canadian appeals court dismisses tariffs on MP3 players

By Scott M. Fulton, III, BetaNews

January 14, 2008, 12:17 PM

A move by that country's Copyright Board to exact a toll from the sale of personal digital audio devices was soundly defeated last week. But now, the cost of CD-Rs there could rise even further.

A three-judge panel of the Canadian Court of Appeal in Ottawa has unanimously dismissed a decision that would have enabled the country's primary collector of royalties for sound recordings to apply a tariff to the sale of MP3 players there, including Apple's iPod.

Federal law already allows the Canadian Private Copying Collective (CPCC) to collect 24¢ from the sale of each audio cassette of 40 minutes running time or longer, and 21¢ from the sale of each recordable optical disc such as a CD-R or DVD-R. A Canadian Copyright Board proposal last February sought to raise both those fees to 29¢ per tape or disc, but would then add new tariffs of 85¢ per CD-R Audio or DVD-R Audio disc or MiniDisc, and between $2 and $10 for each flash memory card sold depending on capacity.

While that part of the order may still go into effect, what the Court of Appeal rejected last Thursday was a tariff on MP3 devices that don't use external media such as memory cards. A device with 1 GB of flash memory built in could be tariffed $5, and an iPod or other brand with a 30 GB hard drive or larger could be tariffed as much as $75.

A complaint brought before the Appeal Court by Apple, Microsoft, Dell, Sony, and SanDisk argued that such a tariff could not be ordered under Canadian law, on the basis of the legal standard of correctness -- specifically, that the device cannot be tariffed as though it were media. The three-judge panel agreed.

Citing prior case law, Judge J. A. Sharlow saw good reason for the applicants to argue that, "the Copyright Board has no legal authority to certify a tariff on digital audio recorders or on the memory permanently embedded in digital audio recorders. It follows that the Copyright Board erred in law when it concluded that it has the legal authority to certify the tariff that CPCC has proposed for 2008 and 2009 on digital audio recorders, and in dismissing the applicants' motions."

At the dawn of the video cassette era, the first studios to swallow the notion that home recordings would be a fact of everyday life, proposed the imposition of tariffs on recording media. That notion was eventually rejected in America, though it was accepted in Canada.

In order for "private copying" to be ruled legal there, the media tariff was deemed a respectable compromise, in order to compensate rights holders for each commercial copy of their product that they then did not sell to consumers by virtue of the private copy.

"A 'private copy' is a copy of a track, or a substantial part of a track, of recorded music that is made by an individual for his or her own personal use," reads an explanation on the CPCC Web site. "A compilation of favorite tracks is a good example of how people typically use private copies. In contrast, a copy made for someone else or for any purpose other than the copier's own use is not a private copy. Nor is a copy of anything other than recorded music...In Canada, private copying is legal and does not infringe copyright. It is because, in exchange, copyright holders in recorded music have a right to receive compensation in the form of royalties for private copying."

As the law happens to be written, this compensation is exacted from the sale of the recording medium. (Canada grants an unusual exemption from tariff for individuals with hearing impairments who may be unable to hear the copies they make; those people can actually purchase CD-Rs and other media through a special service.) The Copyright Board had assumed that the recording medium, in the case of embedded devices, could still be tariffed as such; the Appeal Court ruled otherwise.

The fate of possible new tariffs for external memory cards, for now, remains unchanged -- those fees may go into effect in Canada this year.