Guidance on Neighbouring Rights

Neighbouring rights rarely get much judicial review so the case of Re: Sound v. Fitness Industry Council of Canada 2014 FCA 48 gives some insight as to this regime.

Neighbouring rights[1], rights near to copyright, in this context are rights to “equitable remuneration” in published sound recordings (performers and makers) for the performance in public or the communication to the public by telecommunication in Canada of their recordings under Section 19 of the Copyright Act, R.S.C. 1985, c. C-42. Re:Sound is a not-for-profit collective society authorized under the Act to administer the performance rights of performers and record labels in sound recordings.

The Federal Court of Appeal noted that the right of performers and makers to an equitable remuneration is not an exclusive right: “unlike traditional copyright owners, holders of neighbouring rights in musical works cannot bring an action to recover equitable remuneration against a person who, without authorization, performs their recordings in public”. Instead the Court noted that the “only legal recourse they may have is against a collective society that has failed either to file a proposed tariff with the Board[2] … or to distribute to the beneficiaries the royalties that have been approved by the Board and collected from the users by the collective society”.

Similarly a collective society cannot “bring an action against a user to recover equitable remuneration when no tariff has been proposed, unless the Minister of Industry has given written consent[3]“. However, a collective society may recover royalty payments from defaulting users in a court of competent jurisdiction[4].

The Society of Composers, Authors and Music Publishers of Canada (SOCAN), the collective administering the public performance right under copyright, had already obtained a tariff for public performance of musical works to accompany dance, aerobics, body building and similar fitness activities in SOCAN Tariff 19 – Use of Recorded Music to Accompany Dance Instruction and Fitness Activities, 2011-2012.

The Copyright Board approved Re:Sound Tariff No. 6.BUse of Recorded Music to Accompany Physical Activities, 2008-2012. Tariff 6.B prescribed the amount of equitable remuneration to be collected by Re:Sound from those using published sound recordings of musical works to accompany fitness classes, skating, dance instruction, and other physical activities.

Beginning with SOCAN Tariff 19, the Copyright Board adjusted for the proportion of eligible recordings and Re:Sound’s repertoire to arrive at a flat fee per fitness venue. While flat fee tariffs are generally unsatisfactory as not accounting for the number of participants, nonetheless the Copyright Board choose a flat fee tariff as such minimizes administration and compliance effort.

The Court noted that recordings “emanating from the United States will normally not be eligible for equitable remuneration because the United States is not party to the Rome Convention. They can therefore be performed in public in Canada without the user being liable to pay a royalty under section 19”.

Re:Sound challenged the Board’s decision making process and also challenged the interpretation by the Board of Section 19.

The Federal Court of Appeal determined that a reasonableness standard of review was applicable to the Copyright Board’s interpretation of the aspects of the statutory scheme.

A key issue was around the Copyright Board’s use of certain confidential agreements obtained under SOCAN Tariff 19. The Boarddid not disclose all of those materials to Re:Sound, who did not ask for them, even though Re:Sound knew of their existence. The Court found that in the circumstances Re:Sound’s failure to ask for the contracts the Board did not unfairly deprive Re:Sound of its right to know and to respond to information in the Board’s possession.

A second issue was whether Re:Sound was deprived of a fair hearing because it had no prior notice of the basis of the Board’s decision, and thus had no opportunity to make submissions on the appropriateness of the Board’s methodology. In the present case, while the hearing had focused on the appropriateness of using other tariffs, including SOCAN Tariff 19, as benchmarks, the Board went on to base its decision on discount amounts paid to SOCAN under the confidential licensing agreements – a subject not discussed in the hearing. Thus, the Court found procedural unfairness as the tariff set by the Board was based on a methodology not raised at any point in the decision-making process.

After a review of the statutory provisions the Court found that the Copyright Act entitles Re:Sound to collect fees only on the basis of all sound recordings in Re:Sound’s repertoire and not all those eligible for equitable compensation, noting, among other reasons, that Re:Sound does not have a monopoly to act as the collective society and propose tariffs under Section 19.

Tariff 6.B applies to the use of music to accompany, not only fitness classes, but also skating, dance instruction, and other physical activities. Most of the submissions of Re:Sound were focused on fitness activities. With the limited information available to it the Board took the minimum royalty under SOCAN Tariff 19, which was reduced to reflect Re:Sound’s repertoire and the result is payable by each venue to Re:Sound as a flat annual fee. While not challenged the Court did set aside the tariff on these uses as it was based on the same approach as the fitness tariff, which the Court found breached procedural fairness.


[1]< New to Canada, neighbouring rights added to the Copyright Act in 1997 (S.C. 1997, c. 24) to implement obligations assumed by Canada on when Canada acceded to the Rome Convention) March 4, 1998 (the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, 26 October 1961, 496 U.N.T.S. 43).

[2] As required by 67.1(1) and (2) of the Copyright Act.

[3] Section 67.1(4), Copyright Act.

[4] Section 68(1), Copyright Act.

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