Judgments

2004 FCA 424

A-9-04

Canadian Private Copying Collective (Applicant)

v.

Canadian Storage Media Alliance [Sony of Canada Ltd.; Verbatim Corporation; Fuji Photo Film Canada Inc.; Compaq Computer Corporation; Intel Corporation; Maxell Canada Corp.; Thomson Multimedia Ltd.; Imation Canada Inc.; Hewlett Packard (Canada) Ltd.; Apple Canada Inc.; Memorex Canada Ltd.; AVS Technologies Inc.; Dell Computer Corporation; Samsung Electronics Canada Inc.] and Canadian Wireless Telecommunications Association, Cognos Inc., Consumer Electronic Marketers of Canada, Costco Wholesale Canada Ltd., Intertan, Inc. (d.b.a. RadioShack Canada); London Drugs Limited; Retail Council of Canada; The Business Depot Ltd. (d.b.a. Staples Business Depot); Wal-Mart Canada Corporation; Future Shop Ltd., Hydraulic Design, Vencon Technologies Inc., Mr. Jeremy Hellstrom, Mr. Martin Hemmings, Mr. Brian M. Hunt, Mr. V. Kuz, Mr. Richard C. Pitt and Mr. Tom A. Trottier (Respondents)

and

Canadian Broadcasting Corporation (Intervener)

A-10-04

Apple Canada Inc., Dell Computer Corporation of Canada, Hewlett Packard (Canada) Co., and Intel Corporation (Applicants)

v.

Canadian Private Copying Collective (CPCC), Canadian Wireless Telecommunications Association (CWTA), Cognos Inc., Consumer Electronic Marketers of Canada (CEMC), "Retailers Coalition" (being Costco Wholesale Canada Ltd.; Intertan, Inc. (d.b.a. RadioShack Canada); London Drugs Limited; Retail Council of Canada; The Business Depot Ltd. (d.b.a. Staples Business Depot); Wal-Mart Canada Corp.; Future Shop Ltd.), Hydraulic Design, Vencon Technologies Inc., Mr. Jeremy Hellstrom, Mr. Martin Hemmings, Mr. Brian M. Hunt, Mr. V. Kuz, Mr. Richard C. Pitt, and Mr. Tom A. Trottier (Respondents)

and

The Copyright Board (Intervener)

A-11-04

Retail Council of Canada, Wal-Mart Canada, The Business Depot Ltd. (Staples Business Depot), London Drugs Limited, Intertan Inc. (RadioShack Canada), Future Shop Ltd. and Costco Wholesale Canada Ltd. (the "retailers") (Applicants)

v.

Canadian Private Copying Collective (CPCC) and Canadian Storage Media Alliance, Canadian Wireless Telecommunications Association, Cognos Inc., Consumer Electronic Marketers of Canada, Hydraulic Design, Vencon Technologies Inc., Mr. Jeremy Hellstrom, Mr. Martin Hemmings, Mr. Brian M. Hunt, Mr. V. Kuz, Mr. Richard C. Pitt and Mr. Tom A. Trottier (Respondents)

Indexed as: Canadian Private Copying Collective v. Canadian Storage Media Alliance (F.C.A.)

Federal Court of Appeal, Linden, Noël and Evans JJ.A. --Ottawa, October 12 and 13; December 14, 2004.

Copyright -- Judicial review applications of Copyright Board of Canada decision certifying levy rates imposed pursuant to Copyright Act, Part VIII on blank audio recording media for 2003-2004 -- Levies imposed to compensate authors, performers, makers of recorded music (rightsholders) for loss of exclusive reproduction rights due to legalization by Part VIII of copying recorded music for private use -- Board holding Act, Part VIII constitutionally valid federal copyright law imposing regulatory charge and not tax -- Applying pith and substance analysis, Part VIII copyright law -- Westbank First Nation v. British Columbia Hydro and Power Authority applied, Part VIII regulatory scheme, not tax -- Application challenging Board's decision as to constitutional validity of Part VIII dismissed -- Board holding "zero-rating program" (exempting registered users who do not private copy from paying levies) having no legal basis -- Of view Canadian Private Copying Collective (CPCC), which distributes levies collected to rightsholders, having no authority to create exemptions such as "zero-rating program" -- Although Board having no authority to determine legality of "zero-rating program", could disregard it in setting fair, equitable levy, a task falling within Board's regulatory expertise -- Decision withstanding review based on standard of reasonableness simpliciter -- Board not infringing on CPCC's common law right to waive payment of levies, simply saying such waiver will not be compensated -- Application challenging Board's decision as to legality of zero-rating program dismissed -- Board holding memories embedded in digital audio recorders subject to levies -- Legislative history of Bill C-32 reviewed -- Digital audio recorder not retaining identity as "audio recording medium", not coming within ambit of definition in Act -- Here, device defining element of levy, not memory incorporated therein -- Not open to Board to establish levy on such memory -- In event Court wrong, Board could set levy on embedded memory beyond that sought by CPCC -- Legislator free to remove administrative tribunals from constraints of ultra petita principle -- Here, Act, ss. 83(8), (9) show Board retaining discretion to establish "fair and equitable" tariff and set terms, conditions it considers appropriate -- Application challenging levy on memory in MP3 players allowed in part.

Constitutional Law -- Distribution of Powers -- Copyright Act, Part VIII legalizing copying recorded music for private use, entitling authors, performers, makers of recorded music (rightsholders) to compensation for loss of exclusive reproduction rights -- Whether Part VIII, pursuant to which levy on blank audio recording media imposed, in pith and substance copyright law -- Application of pith and substance doctrine: pith and substance of provision must concern matter falling within competence of Parliament; if intruding on powers of provincial legislatures, must be part of valid federal legislative scheme and sufficiently integrated in scheme and important to insure its efficacy -- Here, Part VIII tightly linked to Parliament's goal to compensate rightsholders, an essential element of federal legislative competence over copyright.

Constitutional Law -- Tax versus regulatory charge -- Whether levy imposed on blank audio recording media pursuant to Copyright Act, Part VIII a tax (and as such unconstitutional because not introduced in House of Commons by Ways and Means motion) or regulatory charge -- Criteria generally indicating presence of tax set out in Westbank First Nation v. British Columbia Hydro and Power Authority: tax enforceable by law, imposed pursuant to authority of Parliament, levied by public body, imposed for public purpose -- Other factor distinguishing fee from tax is nexus existing between quantum charged, cost of service provided -- First four criteria met -- However, criteria established in Westbank to identify regulatory scheme present: Part VIII complete, detailed code of regulation computed to advance statutory scheme; manufacturers, importers of blank media caused need leading Parliament to implement Part VIII; levy having regulatory purpose seeking to affect behaviour of individuals.

Construction of Statutes -- Copyright Act, Part VIII permitting imposition of levies on blank audio recording media to compensate authors, performers, makers of recorded music (rightsholders) for loss of exclusive reproduction rights resulting from legalization, also under Part VIII, of copying recorded music for private use -- Canadian Private Copying Collective (CPCC) responsible for collecting, distributing levies to rightsholders -- CPCC operating "zero-rating program", scheme pursuant to which registered purchasers not private copying not required to pay levies -- Well-recognized rule of statutory interpretation that expression of one thing in a statute usually suggests exclusion of another -- Part VIII containing two exceptions to levy -- Act, s. 87(a) providing Governor in Council, not Copyright Board of Canada or CPCC, empowered to make regulations respecting procedures for application of Act, s. 86 exemption -- Parliament clearly not envisaging that CPCC could create, administer exemptions such as "zero-rating program" -- Modern approach to statutory interpretation required to determine whether implicit authority for grant of exemptions underlying "zero-rating program" -- Board of view no such grant to CPCC.

Administrative Law -- Ultra petita principle -- Principle generally understood to mean court will not make ruling beyond that requested by parties -- However, legislator free to remove administrative tribunals from constraints of ultra petita as administrative tribunals generally created to advance interests possibly going beyond immediate interests of parties before them -- Here, Copyright Act, ss. 83(8), (9) show Copyright Board of Canada retaining discretion to establish "fair and equitable" tariff, set terms, conditions it considers appropriate -- Board not erring in setting levy at rate higher than applied for.

These were three applications for judicial review of a Copyright Board of Canada decision establishing levies imposed on blank audio recording media used to privately copy recorded musical works, performances and sound recordings (recorded music) for 2003 and 2004. These levies are established by the Board and collected by the Canadian Private Copying Collective (CPCC) pursuant to the Copyright Act, Part VIII of which legalizes copying recorded music for private use, and entitles eligible authors, performers and makers of recorded music (rightsholders) to compensation for their loss of exclusive reproduction rights. The levies collected by the CPCC are then distributed to the collective societies representing the rightsholders in the proportion determined by the Board. In the decision under review, the memories embedded in digital audio recorders were held to be subject to private copying levies. The Board also held that the "zero-rating program" operated by the CPCC, a scheme pursuant to which certain groups of purchasers (users who do not private copy and who have registered with the CPCC as such users) are not required to pay the levies (when they purchase blank media from authorized manufacturers), had no legal basis. The Board also upheld the constitutional validity of Part VIII as a federal copyright law that imposes a regulatory charge and therefore does not constitute a tax.

The application by the Retailers Coalition (a coalition of retailers of blank media) (Docket A-11-04) challenged the decision of the Board in so far as it upheld the constitutional validity of Part VIII. They argued that Part VIII is not, in pith and substance, copyright law. In the alternative, they argued that Part VIII gives rise to a tax, and as such, is unconstitutional because it was not introduced in the House of Commons by a Ways and Means motion. Lastly, they argued that the levy scheme was ultra vires the authority of Parliament because it is excessively broad and vague. The CPCC's application (Docket A-9-04) challenged the decision of the Board in so far as it held that the zero-rating program is illegal. As for the Canadian Storage Media Alliance (CSMA), which represents the major manufacturers and importers of blank media, its application (Docket A-10-04) challenged the Board's ruling that the memory embedded in MP3 players is leviable under Part VIII and its imposition of a levy thereon in an amount greater than that proposed by the CPCC. (The Act authorizes the CPCC to file a proposed tariff with the Board, which the Board considers, along with any objection to it, before certifying a tariff it determines to be fair and equitable.)

Held, the Retailers Coalition's application (Docket A-11-04) should be dismissed; the CPCC's application (Docket A-9-04) should be dismissed; the CSMA's application (Docket A-10-04) should be allowed in part.

A-11-04

The first question was whether Part VIII is in pith and substance copyright law. To be constitutionally valid the pith and substance of the provision must concern a matter that falls within the competence of Parliament. If it intrudes upon the powers of the provincial legislatures, it must be part of a valid federal legislative scheme. If it is part of such a valid legislative scheme, it must be sufficiently integrated into that scheme and sufficiently important to insure its efficacy. Viewed from their purpose and legal effects, all the provisions of Part VIII are tightly linked to Parliament's goal to compensate rightsholders in respect of the reproduction of music for private use. The Board did not err in concluding that Part VIII is in pith and substance copyright law.

As to whether Part VIII gives rise to a tax, the five criteria that generally indicate the presence of a tax were set out in Westbank First Nation v. British Columbia Hydro and Power Authority. The four traditional indicia of a tax are that it will usually be enforceable by law, imposed pursuant to the authority of Parliament, levied by a public body, and imposed for a public purpose. Another possible factor that generally distinguishes a fee from a tax is that a nexus must exist between the quantum charged and the cost of the service provided. The Board was wrong to find that the levy at issue was not intended for a public purpose or levied by a public body. The levy was collected for a public purpose, i.e. supporting the creators and the cultural industries by striking a balance between the rights of creators and those of users. The fact that the levy is paid directly to the rightsholders through the CPCC does not transform the Act into a statute whose prime purpose is to advance private interests. The levy is levied by a public body, since it is the Board, a public body, which sets it. Therefore, the four traditional indicia were present. However, with regard to the last criterion, the Board correctly held that Part VIII is a "regulatory scheme" (as opposed to a tax in the constitutional sense) and that the necessary connection between the levy and this scheme had been established. The indicia to identify a "regulatory scheme", identified in Westbank, were present: Part VIII is a complete and detailed code of regulation; the levy was clearly computed in order to advance the statutory scheme, as evidenced by the fact that in setting the levy, the Board must ensure that there is a correlation between the extent of the private copying that occurs by the use of the blank media and the levies that are certified with respect to such media; the manufacturers and importers of blank media allowed for the proliferation of consumer copying by providing consumers with the means by which private copying takes place, and thereby caused the need which led Parliament to implement Part VIII; and the levy has a regulatory purpose which seeks to affect the behaviour of individuals in that it encourages creation by ensuring that rightsholders obtain some financial reward for their creation in circumstances where they previously did not. For the same reasons, Part VIII was not unconstitutional by reason of being overly vague and insufficiently connected to copyright law.

A-9-04

The Board properly held that, in setting a levy that is fair and equitable, it should disregard CPCC's zero-rating program. The Board's inability to create exemptions from the levy was not contested and was consistent with the well-recognized rule of statutory interpretation that the expression of one thing in a statute usually suggests the exclusion of another (e.g. if a statute specifies one or more exceptions to a general rule, other exceptions are not to be read in). Part VIII contains two exceptions: (1) no levy is payable by manufacturers or importers where the blank medium is exported from Canada; and (2) no levy is payable where a manufacturer or importer sells or disposes of a blank medium to a society, association or corporation that represents persons with a perceptual disability (section 86 exemption). The Governor in Council is also empowered to exclude from liability certain media. Paragraph 87(a) of the Act provides that the Governor in Council, not the Board or collecting bodies, may make regulations respecting procedures for the operation of the section 86 exemption. Since Parliament reserved to Cabinet the task of creating procedures for administering a legislated exemption, it could not credibly be suggested that Parliament envisaged that the CPCC could create and administer exemptions in the form of the zero-rating program that are not explicitly created by the statute. However, the analysis must go beyond this rule of statutory interpretation. The Court must read the words of the Act in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. Although it may be possible to read into the Act the implicit authority for the grant of the exemptions which underlie the zero-rating program because it advances statutory objectives, it must be shown that Parliament intended such a grant. The Board was of the view that Parliament could not have intended such an extensive grant to the CPCC without providing a framework for its exercise.

Although the relevance of CPCC's zero-rating program to the setting of the levy raised a question of statutory interpretation, the Board was required to resort to its considerable rate-setting expertise. A degree of deference was owed to that aspect of the decision and the appropriate standard of review was reasonableness simpliciter. The Board's decision withstood the "somewhat probing examination" to which decisions reviewable for unreasonableness are subject, even though the Board had no statutory authority to pronounce on the legality of the zero-rating program. The holding by the Board that the zero-rating program is illegal simply meant that the Board would disregard that program when setting the levy. The Board may make pronouncements that impact on contractual rights (in this case, the CPCC's zero-rating program) if its rate-setting function so requires. The Board's decision did not remove the common law right of rightsholders to waive the payment of levies. The Board made it clear that the CPCC could forego the collection of levies legally owing to it. However, it could no longer expect that the Board would compensate it for the negative impact of the program on its revenues. The Board did not err when it declared the zero-rating program was not authorized under the Act because it would provide for an exemption from the scheme, contrary to Parliament's intention. CPCC's request for a stay of the Court's decision, and the Retailers Coalition's request for an order compelling the CPCC to comply with the Board's decision, were denied.

A-10-04

The Board held that digital audio recorders (MP3 players) are ordinarily used by individuals to copy music; and the memory embedded therein qualified as a medium within the definition of "audio recording medium" and was leviable. A permanently embedded or non-removable memory, incorporated into a digital audio recorder does not retain its identity as an "audio recording medium". It was not open to the Board to establish a levy on such memory under Part VIII. The Board's own reasoning and the tariff which it certified disclosed that the device is the defining element of the levy and not the memory incorporated therein. The Board could not establish a levy and determine the applicable rate by reference to the device and yet assert that the levy was being applied on something else (i.e. the embedded memory). Part VIII of the Act and the definition of "audio recording medium" gave the Board no such authority. The legislative history of Bill C-32, which amended the Act to include Part VIII, showed that Parliament's definition of "audio recording medium" stands in contradistinction with a recorder or similar devices known to exist at the time and whose function it is to record and play blank audio tapes. Such recorders do not come within the ambit of the definition, and similarly, a digital audio recorder is not a medium. The Board did not look at what was being sold or disposed of and determine whether the subject-matter of the sale came within the ambit of the definition, as it was required to do. If it had, it would have concluded that the subject-matter of the sale was a digital audio recorder, not a medium as defined, and as such, no liability could arise for the levy.

The Board set the rate on the embedded memory beyond that sought by the CPCC. The ultra petita principle is generally understood to mean that a court will not make a ruling beyond what is requested by the parties. However, the legislator is free to remove and often does remove administrative tribunals from the constraints of ultra petita, as administrative tribunals are generally created to advance interests that can go beyond the immediate interests of the parties who appear before them. In the present case, subsections 83(8) and (9) of the Act show that the Board retains the discretion to establish a tariff that is "fair and equitable", and to set "such terms and conditions related to those levies as the Board considers appropriate". Thus, the ultra petita principle did not prevent the Board from deviating as it did from the proposed tariff, and the Board did not err when it said that no unfairness would result from the increase which it authorized.

statutes and regulations judicially

considered

Canada Corporations Act, R.S.C. 1970, c. C-32.

Code of Civil Procedure, R.S.Q., c. C-25, Art. 468.

Constitution Act, 1867, 30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1) [R.S.C., 1985, Appendix II, No. 5], ss. 53, 54, 91(23), 125.

Copyright Act, R.S.C., 1985, c. C-42, ss. 79 (as enacted by S.C. 1997, c. 24, s. 50; 2001, c. 27, s. 240), 80 (as enacted by S.C. 1997, c. 24, s. 50), 81 (as enacted idem), 82 (as enacted idem), 83 (as enacted idem), 84 (as enacted idem), 85 (as enacted idem; 2001, c. 27, s. 240), 86 (as enacted by S.C. 1997, c. 24, s. 50), 87 (as enacted idem), 88 (as enacted idem).

National Telecommunications Powers and Procedures Act, R.S.C., 1985, c. N-20, ss. 1 (as am. by R.S.C., 1985 (3rd Supp.), c. 28, s. 301), 61.

cases judicially considered

applied:

Global Securities Corp. v. British Columbia (Securities Commission), [2000] 1 S.C.R. 494; (2000), 185 D.L.R. (4th) 439; [2000] 5 W.W.R. 1; 74 B.C.L.R. (3d) 1; 134 B.C.A.C. 207; 252 N.R. 290; 2000 SCC 21; Westbank First Nation v. British Columbia Hydro and Power Authority, [1999] 3 S.C.R. 134; (1999), 176 D.L.R. (4th) 276; [1999] 9 W.W.R. 517; 67 B.C.L.R. (3d) 1; 129 B.C.A.C. 1; [1999] 4 C.N.L.R. 277; 246 N.R. 201; Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357; [1931] 2 D.L.R. 193; Eurig Estate (Re), [1998] 2 S.C.R. 565; (1998), 40 O.R. (3d) 160; 165 D.L.R. (4th) 1; [2000] 1 C.T.C. 284; 23 E.T.R. (2d) 1; 231 N.R. 55; 114 O.A.C. 55; Bishop v. Stevens, [1990] 2 S.C.R. 467; (1990), 72 D.L.R. (4th) 97; 31 C.P.R. (3d) 394; 111 N.R. 376; Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, [2002] 4 F.C. 3; (2002), 215 D.L.R. (4th) 118; 19 C.P.R. (4th) 289; 290 N.R. 131; 2002 FCA 166.

considered:

Private Copying 1999-2000, [1999] C.B.D. No. 8 (QL); Private Copying 2001-2002, [2000] C.B.D. No. 16 (QL); Australian Tape Manufacturers Association Ltd. and Others v. Commonwealth of Australia (1993), 176 C.L.R. 480 (H.C.A.); Théberge v. Galerie d'Art du Petit Champlain inc., [2002] 2 S.C.R. 336; (2002), 210 D.L.R. (4th) 385; 23 D.L.R. (3d) 1; 17 C.P.R. (4th) 161; 285 N.R. 267; 2002 SCC 34; CTV Television Network Ltd. v. Canada (Copyright Board), [1993] 2 F.C. 115; (1993), 99 D.L.R. (4th) 216; 46 C.P.R. (3d) 343; 149 N.R. 363 (C.A.); Trans Mountain Pipe Line Co. Ltd. v. National Energy Board, [1979] 2 F.C. 118; (1979), 22 N.R. 44 (C.A.); Posen v. Minister of Consumer and Corporate Affairs Canada, [1980] 2 F.C. 259; (1979), 46 C.P.R. (2d) 63; 36 N.R. 572 (C.A.); FWS Joint Sports Claimants v. Canada (Copyright Board), [1992] 1 F.C. 487; (1991), 81 D.L.R. (4th) 412; 36 C.P.R. (3d) 483; 129 N.R. 289; 4 T.C.T. 6192 (C.A.).

referred to:

General Motors of Canada Ltd. v. City National Leasing, [1989] 1 S.C.R. 641; (1989), 58 D.L.R. (4th) 255; 24 C.P.R. (3d) 417; 93 N.R. 326; 32 O.A.C. 332; Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27; (1998), 36 O.R. (3d) 418; 154 D.L.R. (4th) 193; 50 C.B.R. (3d) 163; 33 C.C.E.L. (2d) 173; 221 N.R. 241; 106 O.A.C. 1; Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559; (2002), 212 D.L.R. (4th) 1; [2002] 5 W.W.R. 1; 166 B.C.A.C. 1; 100 B.C.L.R. (3d) 1; 18 C.P.R. (4th) 289; 93 C.R.R. (2d) 189; 287 N.R. 248; 2002 SCC 42, Royal Bank of Canada v. Sparrow Electric Corp., [1997] 1 S.C.R. 411; (1997), 193 A.R. 321; 143 D.L.R. (4th) 385; [1997] 2 W.W.R. 457; 46 Alta. L.R. (3d) 87; 44 C.B.R. (3d) 1; 8 C.P.C. (4th) 5089; 97 DTC 5089; 12 P.P.S.A.C. (2d) 68; 208 N.R. 161; R. v. Hydro-Québec, [1997] 3 S.C.R. 213; (1997), 151 D.L.R. (4th) 32; 118 C.C.C. (3d) 97; 24 C.E.L.R. (N.S.) 167; 9 C.R. (5th) 157; 217 N.R. 241; Friesen v. Canada, [1995] 3 S.C.R. 103; (1995), 127 D.L.R. (4th) 193; [1995] 2 C.T.C. 369; 95 DTC 5551; 186 N.R. 243; Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748; (1997), 144 D.L.R. (4th) 1; 50 Admin. L.R. (2d) 199; 71 C.P.R. (3d) 417; 209 N.R. 20; Toronto (City) v. C.U.P.E., Local 79, [2003] 3 S.C.R. 77; (2003), 232 D.L.R. (4th) 385; 17 C.R. (6th) 276; 311 N.R. 201; 179 O.A.C. 291; Johnston v. Buckland, [1937] S.C.R. 86; [1937] 2 D.L.R. 433; Corporation Agencies Ltd. v. Home Bank of Canada, [1925] S.C.R. 706; [1925] 4 D.L.R. 585; Thibaudeau v. Canada, [1995] 2 S.C.R. 627; (1995), 124 D.L.R. (4th) 449; 29 C.R.R. (2d) 1; [1995] 1 C.T.C. 382; 95 DTC 5273; 182 N.R. 1; 12 R.F.L. (4th) 1.

authors cited

Black's Law Dictionary, 7th ed. St. Paul, Minn.: West Group, 1999.

Canada. House of Commons. Standing Committee on Canadian Heritage. Minutes of Proceedings. Meeting No. 24, October 9, 1996.

Canada. House of Commons. Standing Committee on Canadian Heritage. Minutes of Proceedings. Meeting No. 27, October 22, 1996.

Canada. House of Commons. Standing Committee on Canadian Heritage. Minutes of Proceedings. Meeting No. 36, November 6, 1996.

Canada. House of Commons. Second Report of the Standing Committee on Canadian Heritage, December 1996.

Driedger, Elmer A. Construction of Statutes, 2nd ed. Toronto: Butterworths, 1983.

Sullivan, Ruth. Sullivan and Driedger on the Construction of Statutes, 4th ed. Toronto: Butterworths, 2002.

APPLICATIONS for judicial review of a decision of the Copyright Board of Canada (Copying for Private Use (Re), [2003] C.B.D. No. 7 (QL)) establishing the private copying levies to be collected by the Canadian Private Copying Collective for 2003 and 2004, and in doing so, finding that Part VIII of the Copyright Act was in pith and substance copyright law, that it was a regulatory scheme and not a tax (A-11-04); that the zero-rating program was not authorized by the Act and that its impact ought not be recognized in setting the levy (A-9-04); that permanently embedded or non-removable memory, incorporated into a digital audio recorder, retained its identity as an "audio recording medium" and could be levied as such under Part VIII, and finally, setting a levy on this embedded memory beyond that sought by the CPCC (A-10-04). Application (Docket A-11-04) dismissed; Application (Docket A-9-04) dismissed; Application (Docket A-10-04) allowed in part.

appearances:

David R. Collier for the Canadian Private Copying Collective.

J. Aidan O'Neill for the Canadian Broadcasting Corporation.

Howard P. Knopf and John S. Macera for the Retail Council of Canada.

Randall J. Hofley and Nicholas McHaffie for the Canadian Storage Media Alliance.

Mario Bouchard for the Copyright Board of Canada.

solicitors of record:

Ogilvy Renault, Montréal, for the Canadian Private Copying Collective.

Johnston & Buchan LLP, Ottawa, for the Canadian Broadcasting Corporation.

Macera & Jarzyna, Ottawa, for the Retail Council of Canada.

Stikeman Elliott LLP, Ottawa, for the Canadian Storage Media Alliance.

Copyright Board of Canada for the Copyright Board of Canada.

The following are the reasons for judgment rendered in English by

[1]Noël J.A.: These are three applications for judicial review of a decision of the Copyright Board of Canada [Copying for Private Use (Re), [2003] C.B.D. No. 7 (QL), hereinafter referred to as Private Copying III] (Board) which established the private copying levies to be collected by the Canadian Private Copying Collective (CPCC) for the years 2003 and 2004. The applications were joined and heard together by order of the Court.

Background

[2]The Board is an administrative tribunal created by the Copyright Act, R.S.C., 1985, c. C-42 (the Act). Among other things, the Board is responsible for the adoption of levies and their related terms and conditions in respect of the private copying of recorded musical works, performances and sound recordings (recorded music) on blank audio recording media (blank media or medium) that are sold or otherwise disposed of in Canada.

[3]Part VIII [sections 79-88 (as enacted by S.C. 1997, c. 24, s. 50; 2001, c. 27, s. 240)] of the Act legalizes copying recorded music for private use and thus provides a statutory exception to the exclusive reproduction rights of eligible authors, performers and makers of recorded music (rightsholders). At the same time, it entitles rightsholders to compensation for their loss of exclusivity by imposing a levy on media used to record music. For ease of reference, Part VIII is reproduced in full as Appendix 1 to these reasons.

[4]Since the coming into force of Part VIII in March of 1998, the Board has certified three private copying tariffs, and one interim tariff. In 1999, the Board issued its first decision regarding the tariff for private copying levies [Private Copying 1999-2000, [1999] C.B.D. No. 8 (QL)] (Private Copying I) and, in 2001, issued its second decision [Private Copying 2001-2002, [2000] C.B.D. No. 16 (QL)] (Private Copying II). In 2002, the Board, on application, reconsidered its second decision on the ground that a material change had occurred in the rapidly evolving market for blank media, and amended the tariff accordingly. The present applications are directed against the latest decision dealing with private copying which was rendered on December 12, 2003 (Private Copying III).

[5]CPCC is the "collecting body" designated by the Board under the Act to collect and distribute the levies to rightsholders. Manufacturers and importers of blank media sold in Canada must pay the levy to the CPCC. The collecting body must distribute the levy to the collective societies that represent the above-mentioned categories of rightsholders in the proportion determined by the Board.

[6]Although manufacturers and importers are charged with the payment of the levy under the Act, they do not necessarily assume its cost. In the normal course, manufacturers and importers will include the amount of the levy in their sale price to purchasers, with the result that consumers usually bear the cost of the levy.

[7]The Act authorizes the CPCC to file a proposed tariff with the Board for the benefit of rightsholders. After considering the proposed tariff and any objection to it, the Board must certify a tariff it determines to be fair and equitable.

[8]In its proposed tariff for 2003-2004, the CPCC asked that levies be imposed for the first time on several new types of recording media used to copy music such as recordable or rewritable "digital versatile disks" (DVDs), removable electronic memory cards, and non-removable memory permanently embedded in "digital audio recorders", a term used by the Board to identify MP3 players and similar devices.

[9]In the decision under review, the Board maintained the status quo for the levy rates applicable to audiocassettes, MiniDiscs, recordable compact discs (CD-Rs), rewritable compact discs (CD-RWs), recordable audio compact discs (Audio CD-Rs) and rewritable audio compact discs (Audio CD-RWs). The Board held that recordable or rewritable DVDs and removable electronic memory cards were not to be subject to private copying levies. However, it held that the memories embedded in digital audio recorders were.

[10]The levy rates certified by the Board were lower than those requested by the CPCC, except with respect to the $2 levy set by the Board on digital audio recorders. The CPCC had asked for a levy of 2.1 cents per megabyte for MP3 players with a storage capacity of less than 1 GB, which would have translated into levies of 67 cents and $1.34 respectively.

[11]In addition to establishing the private copying levies for 2003-2004, the Board also held that the so-called "zero-rating program" operated by the CPCC had no legal basis. The zero-rating program consists of a scheme operated by the CPCC since 1999, pursuant to which certain groups of purchasers are not required to pay the levy authorized by the Board.

[12]The Board also upheld the constitutional validity of Part VIII as a federal copyright law that imposes a regulatory charge and therefore does not constitute a tax.

The Litigants

[13]The CPCC is a non-share, non-profit corporation established under Part II of the Canada Corporations Act [R.S.C. 1970, c. C-32]. Its members are collective societies that hold private copying remuneration rights on behalf of rightsholders. As noted, it is the collecting body designated by the Board under the Act.

[14]The CPCC challenges the decision of the Board in so far as it held that the zero-rating program is illegal. The Canadian Broadcasting Corporation, as intervener, agrees with the position of the CPCC in this respect and submits that it should be entitled to continue to purchase blank media levy free under the program. The CPCC supports the decision of the Board in the other two applications.

[15]The "retailers", as they are referred to in the Board's decision, consist of a coalition of retailers of blank media represented by the "Retailers Coalition" who claim to sell about 75% of the blank media in Canada. The retailers challenge the decision of the Board in so far as it upheld the constitutional validity of Part VIII, but support the Board's ruling that the zero-rating program is illegal. Unlike to the other main participants, they did not participate in Private Copying I or Private Copying II.

[16]The Canadian Storage Media Alliance (CSMA) represents the major manufacturers and importers of blank media. The CSMA supports the decision of the Board as to zero-rating. However, it challenges the Board's ruling that the memory embedded in MP3 players is leviable under Part VIII and its imposition of a levy thereon in an amount greater than that proposed by the CPCC. The Board was granted leave to intervene on this last point. The retailers' involvement in this application essentially amounts to an endorsement of CSMA's position.

Order of Disposition

[17]These reasons first address the more general issue raised by the retailers' constitutional attack on Part VIII (Docket A-11-04). CPCC's attempt to uphold the zero-rating program will then be addressed (Docket A-9-04), followed by the more specific questions raised by the CSMA in Docket A-10-04 as to whether Part VIII extends to the memory embedded in MP3 players and whether the rate set by the Board in this respect was in breach of the ultra petita principle or was otherwise unfair.

Application A-11-04--The Constitutional Issue

[18]The retailers argue that Part VIII of the Act is not, in pith and substance, copyright law. In the alternative, they assert that the levy scheme established by Part VIII gives rise to a tax and, as such, is unconstitutional by virtue of section 53 of the Constitution Act, 1867, 30 & 31 Vict., c. 3 (U.K.), [as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1 [R.S.C., 1985, Appendix II, No. 5]] (the Constitution Act, 1867).

[19]Section 53 of the Constitution Act, 1867 provides that "Bills for appropriating any Part of the Public Revenue, or for imposing any Tax or Impost, shall originate in the House of Commons." Although Part VIII was introduced in the House of Commons, it is common ground that it was not treated as a tax and was not introduced by a ways and means motion (see section 54 of the Constitution Act, 1867 which requires that so called "money bills" be preceded by a "Message of the Governor General" recommending their passage).

[20]Lastly, the retailers argue that if the levy scheme does not give rise to a tax, it is ultra vires the authority of Parliament because it is excessively broad and vague, and not sufficiently connected to copyright law or any other matter within federal jurisdiction.

The Decision of the Board

[21]The Board identified two questions that go to the constitutional validity of the levy: is Part VIII copyright law in pith and substance and, if so, is the private copying levy a tax in the constitutional sense?

[22]With respect to the latter, the Board referred to its reasons in Private Copying I, where it held (at page 17):

The private copying levy is not a tax, but a compulsory charge, imposed pursuant to a regulatory scheme related to copyright. It is meant to provide for a payment, in lieu of a royalty, as compensation for the copying of copyrighted works as a result of the legalization of private copying of recorded musical works.

[23]In reaching this conclusion, the Board adopted the approach set out by the Supreme Court of Canada in Westbank First Nation v. British Columbia Hydro and Power Authority, [1999] 3 S.C.R. 134. After applying the five indicia adopted by the Supreme Court in that case, the Board concluded that the levy was not a tax but a regulatory charge.

[24]In Private Copying III, the Board reiterated the reasoning advanced in Private Copying I in response to the constitutional attack made at that time. It did so on the basis that nothing material had been brought forth by the retailers to warrant a change in the Board's earlier analysis of the issue.

[25]The Board further added that the question of nomenclature should be addressed. The Board rejected the retailers' argument that the overlap in the translation of "levy" and "redevance" involved the word "tax" because it would attach too much importance to mere labels. The Board preferred to ask whether the regime was, by design or in practice, a tax or a type of regulatory charge.

[26]The Board also stated that it remained of the view (expressed in Private Copying I) that the levies were not imposed by a public body, since the Board can neither set the tariff process in motion nor collect any amounts owing. Finally, the Board concluded that, although the Act was enacted at least in part to benefit the Canadian public, it was inaccurate to say the levies are for a public purpose.

[27]With respect to the first constitutional question (i.e., whether Part VIII is copyright law), the Board reiterated the view which it had expressed in Private Copying I that the pith and substance of Part VIII is copyright law.

[28]In order to determine the pith and substance of Part VIII, two aspects of the legislation must be examined: the purpose of the legislation and its legal effects. Part VIII was enacted to address the practical inability of rightsholders to enforce their reproduction rights in the context of mass infringement resulting from the accelerating access to blank media. This, according to the Board, goes to the "mischief" which Part VIII sought to address.

[29]The effects of the legislation address this mischief: consumers who indulge in private copying now do so legally and rightsholders are remunerated. The Board went on to conclude that Part VIII is a valid exercise of Parliament's jurisdiction over copyright law.

Analysis

[30]The issues to be decided are as follows:

1. Was the Board correct in ruling that the private copying levy is a validly enacted regulatory charge and not a tax in the constitutional sense?

2. Was the Board correct in ruling that Part VIII of the Act is constitutionally valid because, in pith and substance, it falls within Parliament's exclusive legislative authority over "copyrights"?

[31]Since these are questions of constitutional law, the Board's decision must be assessed against a standard of correctness.

The Pith and Substance Issue

[32]The argument that Part VIII of the Act is not in pith and substance copyright law can be disposed of fairly quickly. The essential element of the federal legislative competence over copyright, which is enumerated at class 23 of section 91 of the Constitution Act, 1867, involves the establishment of a legal framework allowing rightsholders to be rewarded for the reproduction of recorded music by third parties. That is precisely what Part VIII achieves. It legalizes private copying by a class of users while providing that rightsholders are compensated for the expropriation of their exclusive rights.

[33]In order for federal legislation to be constitutionally valid, the essential character or dominant purpose of the legislation--its pith and substance--must concern a matter that falls within the exclusive constitutional power of Parliament. Federal legislation which meets this test will be upheld as constitutionally valid, even if it has incidental effects on matters falling outside Parliament's constitutional competence (typically property and civil rights within the Province).

[34]The Supreme Court has refined the pith and substance doctrine for determining whether a particular provision in a federal statute is constitutionally valid (see General Motors of Canada Ltd. v. City National Leasing, [1989] 1. S.C.R. 641 as applied in Global Securities Corp. v. British Columbia (Securities Commission), [2000] 1 S.C.R. 494). The determination involves three basic questions:

1. Does the pith and substance of the provision concern a matter that falls within the competence of Parliament?

2. If the provision intrudes upon the powers of the provincial legislatures, is it part of a valid federal legislative scheme?

3. If it is part of a valid legislative scheme, is it sufficiently integrated into the legislative scheme and important to insure its efficacy?

[35]The retailers do not take issue with the legal approach used by the Board in reaching the conclusion that Part VIII is in pith and substance copyright law. Rather, they reiterate the argument that the levy scheme is not connected to "sound copyright law principles" and is thus not connected to copyright law.

[36]The argument essentially boils down to this. While Part VIII legalizes private copying and provides a practical means for rewarding rightsholders, the price of doing so is arguably borne, in part, by persons who do not private copy.

[37]The Board acknowledges as much in its reasons. However, the pith and substance analysis requires that, viewed from its purpose and its legal effects, every aspect of the regime must be tightly linked to Parliament's goal to compensate rightsholders in respect of the reproduction of music for private use. In my view, all the provisions of Part VIII are so linked.

[38]The retailers have been unable to point to any provision in Part VIII that is extraneous to that goal. I can detect no error in the Board's conclusion that Part VIII is in pith and substance copyright law.

Tax v. Regulatory Levy

[39]The analysis must begin with the five criteria set out by the Supreme Court in Westbank which, if they are all found to exist, will generally indicate the presence of a tax. The first four criteria reflect the traditional hallmarks of a tax as these were identified by the Supreme Court some 70 years ago in Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357. It was there noted (pages 362-363), that a tax will usually be: (1) enforceable by law, (2) imposed pursuant to the authority of Parliament, (3) levied by a public body, and (4) imposed for a public purpose. Still today, it is difficult to conceive of a tax in the absence of these four basic elements.

[40]The fifth criterion originates from a series of cases leading to the decision of the Supreme Court in Eurig Estate (Re), [1998] 2 S.C.R. 565. In that case, Major J., writing for the majority, noted (paragraph 21): "[a]nother factor that generally distinguishes a fee from a tax is that a nexus must exist between the quantum charged and the cost of the service provided." The Supreme Court in Westbank described this "nexus" as "another possible factor to consider" when attempting to distinguish a tax from a user fee (at paragraph 22). It held that user fees were "a subset of `regulatory charges'" (idem).

[41]This last criterion is conceptually distinct from the other four since it is derived from Canada's particular constitutional make-up. Speaking for a unanimous Court in Westbank, Gonthier J. said with respect to this indicium (paragraph 2):

The proper approach to characterizing a governmental levy has been considered on numerous occasions by this Court in various contexts. The characterization is relevant when determining the constitutionality of a provincial levy that has indirect tendencies, for if it is a regulatory charge, or otherwise is a component of a regulatory scheme, then the provinces are constitutionally competent to impose such a charge. It is equally relevant when considering s. 53 of the Constitution Act, 1867, because if the levy is a tax, then it must be imposed by the legislature. And, as I discuss below, if the levy is characterized as a tax, then it is constitutionally inapplicable to the other level of government.

[42]After setting out the constitutional principle which underlies section 125 of the Constitution Act, 1867 (the effect of which is to prohibit inter-governmental taxation as between the Provinces and Canada) he stated at the beginning of his analysis (paragraph 15):

It is these constitutional values [underlying section 125] that inform the constitutional distinction between "taxes" and "regulatory charges", and which explain why s. 125 applies to the former but not the latter.

[43]He went on to explain these values and the guiding structure [at paragraphs 17 and 19]:

The section [section 125] is one of the tools found in the Constitution that ensures the proper functioning of Canada's federal system. It grants to each level of government sufficient operational space to govern without interference. It is founded upon the concept that imposing a tax on a level of government may significantly harm the ability of that government to exercise its constitutionally mandated governmental functions. In M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), at p. 431, Marshall C.J. explained this concept as follows:

That the power to tax involves the power to destroy; that the power to destroy may defeat and render useless the power to create; that there is plain repugnance, in conferring on one government a power to control the constitutional measures of another, which other, with respect to those very measures, is declared to be supreme over that which exerts the control, are propositions not to be denied.

In Re Exported Natural Gas Tax, [1982] 1 S.C.R. 1004, the majority of this Court referred to these statements at p. 1056, explaining at p. 1065 that "s. 125 is plainly intended to prevent inroads, by way of taxation, upon the property of one level of government, by another level of government".

. . .

While the primary constitutional value served by s. 125 is federalism, it also secondarily advances the constitutional value of democracy. As this Court recently explained in Eurig Estate (Re), [1998] 2 S.C.R. 565, at para. 30, the Canadian Constitution (through the operation of s. 53 of the Constitution Act, 1867) demands that there should be no taxation without representation. In other words, individuals being taxed in a democracy have the right to have their elected representatives debate whether their money should be appropriated, and determine how it should be spent. Intergovernmental taxation is prohibited, in part, because one group of elected representatives should not be allowed to decide how taxes levied under and within the authority of another group of elected representatives should be spent. At the same time, governments are not immune from paying user fees, such as water rates, in part because the government can choose whether to use the service, and the money charged is spent solely on providing that service: Attorney General of Canada v. City of Toronto (1892), 23 S.C.R. 514; Attorney-General of Canada v. Registrar of Titles, [1934] 4 D.L.R. 764 (B.C.C.A.), at pp. 771-72. In this way, imposing a user fee is more like charging a fee for a merchantable commodity than imposing any form of taxation.

[44]The Court then addressed the constitutional distinction between "regulatory charges" and "taxes". After referring to the four traditional indicia, Gonthier J. said [at paragraphs 22-23]:

These indicia of "taxation" were recently adopted by this Court in Eurig Estate, supra, at para. 15. Major J., writing for the majority of this Court, added another possible factor to consider when characterizing a governmental levy, stating at para. 21 that "[a]nother factor that generally distinguishes a fee from a tax is that a nexus must exist between the quantum charged and the cost of the service provided". This was a useful development, as it helps to distinguish between taxes and user fees, a subset of "regulatory charges".

A distinction is made between simple "taxation" and "regulation", or what has elsewhere been described as "regulatory charges": P. W. Hogg, Constitutional Law of Canada (loose-leaf ed.), vol. 1, at p. 30-28; J. E. Magnet, Constitutional Law of Canada (7th ed. 1998), vol. 1, at p. 481; G. V. La Forest, The Allocation of Taxing Power Under the Canadian Constitution (2nd ed. 1981). The distinction between taxes, on the one hand, and regulatory charges, on the other, was highlighted by the majority of this Court in Re Exported Natural Gas Tax, supra, at pp. 1055, 1070, 1072 and 1075. In that case, the majority explained at p. 1070 that a tax is to be distinguished from a "levy [imposed] primarily for regulatory purposes, or as necessarily incidental to a broader regulatory scheme".

[45]After stating that user fees cannot be considered to be "taxation" within the "constitutional meaning of the word", Gonthier J. went on to explain why the same is true with respect to regulatory charges [at paragraphs 32-33]:

Nor does s. 125 apply to other types of regulatory charges, as I have described them above. Where a charge itself is the mechanism for advancing a regulatory purpose, such as a charge that encourages or discourages certain types of behaviour, or where a charge is "ancillary or adhesive to a regulatory scheme" which may be used to defray the costs of that scheme, then they will usually be applicable to the other order of government. As the majority of the Court explained in Re Exported Natural Gas Tax, supra, at p. 1070:

If the primary purpose is the raising of revenue for general federal purposes then the legislation falls under s. 91(3) and the limitation in s. 125 is engaged. If, on the other hand, the federal government imposes a levy primarily for regulatory purposes, or as necessarily incidental to a broader regulatory scheme, such as the "adjustment levies" considered in Reference respecting the Agricultural Products Marketing Act, R.S.C. 1970, s. A-7 et al., [1978] 2 S.C.R. 1198 or the unemployment insurance premiums in Attorney-General for Canada v. Attorney-General for Ontario, [1937] A.C. 355, then the levy is not in pith and substance "taxation" and s. 125 does not apply.

By protecting each level of government from taxation, but not from other types of regulatory charges, the Constitution accords a degree of operational space to the governments in a manner which best advances the goals of Canada's flexible federalism. It is with these concepts in mind that I now turn to the governmental levy at issue in this case.

[46]This fifth indicium thus brings into the analysis a refinement of a different nature from the other four. In Canada, a levy which bears the features of a tax may nevertheless not be a tax, if it can be shown that the levy is so connected to a regulatory scheme that treating it as a tax would frustrate federalism, the primary constitutional value served by section 125 of the Constitution Act, 1867.

[47]Against this background, the decision of the High Court of Australia in Australian Tape Manufacturers Association Ltd. and Others v. Commonwealth of Australia (1993), 176 C.L.R. 480, on which the retailers place great reliance, is of little assistance on the question whether the levy is a tax or a regulatory charge.

[48]In that case, the High Court of Australia held, with respect to structurally similar legislation, that the levy was a tax. It did so after determining that the four traditional indicia to which I have referred were present. The fifth criterion was not addressed as Australia's Constitution does not call for the distinction which must be made in Canada between a tax and a regulatory charge.

[49]The retailers rely on the reasoning of the High Court of Australia to argue that the Board erred in holding that two of the four traditional indicia of a tax were not present. Specifically, the retailers take issue with the Board's finding that the levy was not intended for a public purpose or levied by a public body.

[50]In reaching this last conclusion, the Board reasoned that the levies were not imposed by it since it cannot set the tariff process in motion nor collect the amounts owing. Rather, the levies were imposed by the CPCC, an organization devoted to the protection of the private interests of the rightsholders, which by definition is not a public body. It also held that, although the Act was enacted for the benefit of the Canadian public, it is inaccurate to say that the levies were for a public purpose. In so holding, the Board was focussing on the immediate purpose of the levy which is to compensate the rightsholders for lost revenues resulting from private copying.

[51]It is difficult to support the conclusion reached by the Board with respect to either of these indicia. It seems clear that the levy was created for the purpose of supporting the creators and the cultural industries by striking a balance between the rights of creators and those of users. As Binnie J. states in Théberge v. Galerie d'Art du Petit Champlain inc., [2002] 2 S.C.R. 336, at paragraph 30:

The Copyright Act is usually presented as a balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator (or, more accurately, to prevent someone other than the creator from appropriating whatever benefits may be generated).

Part VIII of the Act fits within this balance. As such, the levy is collected for a public purpose. That the levy is paid directly to the rightsholders through the CPCC is not inconsistent with this purpose and does not transform the Act into a statute whose prime purpose is to advance private interests.

[52]The conclusion that the levy is not levied by a public body is equally problematic. Pursuant to section 83 of the Act, the Board is the entity that sets the levy, decides on the media to which it will be applied, and determines its quantum. Under paragraph 83(8)(c), the Board is vested with the authority to determine the levies and the terms and conditions relating to the levies. While the CPCC initiates the process and collects the levies, the Board sets the levy. As such the levy is levied by a public body.

[53]I am therefore of the view that the four traditional indicia of a tax are present which leaves the question whether the last criterion identified by the Supreme Court in Westbank is present, i.e., whether the levy can properly be labelled as a tax, or whether it is better described as a regulatory charge.

[54]According to Westbank, this requires an assessment of whether the levy is connected to a regulatory scheme. To the extent that it is, a further question arises about the extent of that connection or "nexus", since only a close and necessary connection can save what would be a tax, in the traditional sense, from being treated as such in the constitutional sense (Westbank, paragraph 24):

It goes without saying that in order for charges to be imposed for regulatory purposes, or to otherwise be "necessarily incidental to a broader regulatory scheme", one must first identify a "regulatory scheme". Certain indicia have been present when this Court has found a "regulatory scheme". The factors to consider when identifying a regulatory scheme include the presence of: (1) a complete and detailed code of regulation; (2) a specific regulatory purpose which seeks to affect the behaviour of individuals; (3) actual or properly estimated costs of the regulation; and (4) a relationship between the regulation and the person being regulated, where the person being regulated either causes the need for the regulation, or benefits from it. This is only a list of factors to consider; not all of these factors must be present to find a regulatory scheme. Nor is this list of factors exhaustive.

[55]Applying these factors, the Board held that Part VIII was a "regulatory scheme" and that the necessary connection between the levy and this scheme had been established.

[56]The retailers argue that the Board erred in so concluding as none of the factors identified by the Supreme Court in Westbank are present. In particular, the retailers argue that Part VIII does not provide for a complete and detailed code; that there are no actual or properly estimated costs relating to Part VIII, and that there is no direct relationship between persons being regulated and Part VIII, in that the persons charged with the payment of the levy have not benefited from nor caused the need for Part VIII.

[57]The retailers further argue that Part VIII is too vague to give any guidance and direction. This is amply demonstrated by the zero-rating program which, in the eyes of the retailers, highlights the uncertainty surrounding the fundamental question of the amount and manner of calculation of the levies.

[58]I note in this connection that any uncertainty which might have been created by the zero-rating program in the past has been eliminated by the Board's concurrent finding in Private Copying III that this program has no statutory legitimacy (see paragraphs 75- 127 of these reasons).

[59]In my view, the retailers have been unable to demonstrate that the levy is not intimately connected to the scheme which Part VIII of the Act implements, or that it is not necessarily incidental to that scheme. All the factors identified by the Supreme Court in Westbank point in that direction.

[60]Dealing with the first factor (the existence of a complete and detailed code of regulation), although the provisions in Part VIII are simply expressed and organized, the scheme which they implement is both complex and detailed.

[61]Section 79 provides definitions that determine who benefits from the levy. Section 80 legalizes copying recorded music onto blank media for private use; section 81 entitles rightsholders to be remunerated for such use; for that purpose, section 82 imposes a private copying levy on blank media sold by manufacturers and importers; section 83 prescribes how the levy is to be set; and subsection 83(9) requires that the levies which the Board sets be fair and equitable.

[62]Consistent with the objective of establishing a fair and equitable levy, the Board has adopted the valuation model developed by Messrs. Stone and Audley (the Stone and Audley model) in setting levy rates. This model has three basic elements: (a) the value of each private copy of a sound recording; (b) the estimated average number of private copies made onto each blank medium; and (c) the remuneration of rightsholders calculated as a fixed rate per unit.

[63]The formula involves identifying, first, the entitlement of the rightsholders by reference to the amount they are paid on a per unit retail sale of a pre-recorded CD, and then adjusting that amount according to the total number of blank CDs sold in Canada less those sold to persons other than individuals. Further deductions are made to account for individuals who do not copy and to account for the fact that a second copy has a lower value than the first (secondary value discount), and for waste and spoilage.

[64]It is not necessary to go into the details of this formula, which are set out in full in the Board's earlier decisions. Suffice it to say that the Board chose the Stone and Audley model because it fairly and equitably links the levy rate to the revenue shortfall for rightsholders resulting from copying by consumers through the use of the blank media with respect to which a tariff is certified (Private Copying III, at paragraphs 166-170).

[65]In my view, the scheme implemented by Part VIII is a complete and detailed code of regulation which comes within the description set out by the Supreme Court in Westbank.

[66]In establishing the third factor (actual or properly estimated cost of the regulation), the Supreme Court in Westbank first focussed on the correlation which usually exists between a service and a user fee. The Court noted that a feature distinguishing a "user fee" from a "tax" is that, in the case of the former, "a nexus must exist between the quantum charged and the cost the service provided." Drawing an analogy, the Court said that, like a user fee (paragraph 29), "[a] regulatory charge may exist to defray the expenses of the regulatory scheme, . . . or the regulatory charges themselves may be the means of advancing a regulatory purpose."

[67]In this case, the levy is clearly computed in order to advance the statutory scheme. In setting the levy, the Board must ensure that there is a correlation between the extent of the private copying that occurs by the use of the blank media and the levies that are certified with respect to such media.

[68]With regard to the fourth factor (whether the person being regulated caused the need for the regulation or benefited from it), it seems clear that, by making blank media available to consumers, the manufacturers and importers of blank media allowed for the proliferation of consumer copying and thereby caused the need which led Parliament to implement Part VIII. Nevertheless, the retailers argue that the manufacturers and importers are not responsible for the illegal acts of consumers.

[69]I accept that this may be so. However, to have "caused the need" for a regulation, it is not necessary for the manufacturers and importers to have been responsible for private copying in the legal sense. It is enough that they have provided consumers with the means by which private copying takes place, thereby giving rise to the need for Parliament's intervention.

[70]The remaining factor (that the levy has a regulatory purpose which seeks to affect the behaviour of individuals) is also present. The CPCC argues that, by legalizing the copying of recorded music, Part VIII enables and may encourage individuals to copy recorded music on blank media. This in turn may encourage the wider dissemination of recorded music and increase creative efforts by rightsholders through increased sales of blank media.

[71]The retailers submit that all this is within the realm of speculation. While there is a degree of speculation in what the CPCC asserts, I have no doubt that Part VIII encourages creation by ensuring that rightsholders obtain some financial reward for their creation in circumstances where they previously did not. As such, the levy affects the behaviour of individuals.

[72]In the end, it is apparent that the levy possesses all the characteristics of a regulatory charge as these were identified by the Supreme Court in Westbank. It is necessarily incidental to a detailed regulatory scheme which falls squarely within a federal head of jurisdiction. It follows that the Board correctly held that the levy was not a tax in the constitutional sense.

[73]The foregoing reasons also dispose of the retailers' alternative argument that Part VIII is unconstitutional by reason of being overly vague and insufficiently connected to copyright law.

[74]I would therefore dismiss the retailers' judicial review application, with costs.

Application A-9-04--The Legality of the Zero-Rating Program

[75]The zero-rating program was initiated by the CPCC on a voluntary basis. It allows certain users who do not private copy to purchase blank media levy-free from authorized manufacturers, importers and distributors. The program initially applied to four media formats: audiocassettes, MiniDiscs, Audio CD-Rs and Audio CD-RWs. It was subsequently expanded by the CPCC to include CD-Rs and CD-RWs. This occurred in September 2003, several months after the Board's hearing in Private Copying III, but before the decision was rendered.

[76]Under the CPCC's zero-rating program, users wishing to buy blank media levy-free must first register with the CPCC and obtain a certificate number allowing them to purchase media from authorized manufacturers, importers and distributors. In their agreements with the CPCC, users undertake not to sell or dispose of the blank media they acquire levy-free to any other person, and not to use the media for personal use or to copy music without authorization.

[77]Manufacturers, importers and distributors who wish to sell levy-free are also required to register with the CPCC and sign agreements. They may only sell levy-free to users holding a certificate from the CPCC. Authorized manufacturers, importers, and distributors must report their levy-free sales to the CPCC and are subject to audit. Retailers are not allowed to participate in the program.

[78]The record before the Board indicates that, as of December 2002, approximately 50 manufacturers, importers, and distributors had signed zero-rating agreements with the CPCC authorizing them to sell blank media at a zero-rate to buyers certified by the CPCC.

[79]The certified buyers who can purchase blank media levy-free from authorized participants are institutions and entities who duplicate audio and data for business rather than personal use. Included within this class of users are educational institutions, broadcasters, law enforcement agencies, advertising agencies, the music, film and video industries, courts, tribunals and court reporters, religious organizations, telemarketing firms, software companies, duplication facilities, medical institutions, technology companies, conference and training companies, and government.

[80]Commencing in September 2003, the CPCC required contracting parties to pay an annual fee to offset the CPCC's costs of administrating the zero-rating program.

The Decision of the Board

[81]As the CPCC highlights in its submissions, the zero-rating program has been the subject of inconsistent rulings by the Board. However, the Board has throughout taken the position that the exemption extended by the CPCC under the program to persons who do not private copy is not authorized under the Act.

[82]In Private Copying I, the Board, without objecting to the zero-rating program, indicated that it could not take this program into account in setting the levy under the Act. It said (at page 57):

The Board cannot shelter from the levy users who do not make private copies. The only exception can be found in section 86 of the Act, which provides that no levy is payable on sales to associations representing persons with perceptual disabilities. Principles of statutory interpretation require the Board to conclude that it cannot create further exceptions.

Furthermore, it cannot be seriously argued that institutional or corporate buyers are exempt from the levy. The levy targets media, not persons. It is paid by manufacturers and importers, who are then free to integrate it to their pricing decisions in any manner they wish.

To help alleviate the effect of the levy on certain groups, CPCC has proposed to enter into agreements according to which manufacturers and importers would be allowed to sell recording media to certain categories of users without having to pay the levy. Much time was spent discussing CPCC's proposal. As the Board cannot create exemptions, the tariff is not the place to deal with such a scheme. Again, no account was taken of that proposal in setting the levy.

[83]Two years later, in Private Copying II, the Board held that, although it could not create exemptions, it could take the zero-rating program into account in setting the levy for audiocassettes (at page 16):

The Board continues to believe that it cannot itself create exemptions but concludes for legal, practical and public policy reasons that it is permissible to take the zero-rating scheme into account by excluding audio cassettes that are sold levy-free from the calculation of the levy.

First, this does not involve creating exceptions for anyone's benefit or including the scheme in the tariff. All that is done is to take into account, in setting the amount of the levy, a mechanism that is now a market reality, like any other.

Second, a tariff that did not take the zero-rating scheme into account would not be a fair tariff. In practice, the private copying regime's continued existence depends on the availability of some exemption scheme. Including zero-rating media in the calculation of the levy imposes on authors the cost of not collecting the levy as well as the cost of maintaining the administrative structure required to operate what is now an essential element of the system.

Third, excluding zero-rated media from the calculation of the levy ensures that a more targeted group, more likely to engage in private copying, bears the cost of the regime. This meets and promotes the regime's objectives. Far from weakening the nexus between the activity and the medium on which the levy is paid, it strengthens it.

[84]In Private Copying III, the Board reversed its position. It held both that it could not take the program into account in setting the levy and that the program had no legal basis and was therefore illegal (at paragraphs 82-83):

The Board believes that if Parliament intended to insulate non copiers from the effects of the regime, it could have and would have established mechanisms within the Act. Yet Part VIII includes only one exception, to accommodate perceptually disabled persons. The Governor in Council has the power to exclude from the regime media that would otherwise be subject to a levy. That power has not been exercised. Alternatively, Parliament might have provided the Board with the tools to accommodate those who do not use blank media to copy music. But the Act delegates no such authority to the Board.

All of these considerations suggest strongly that, under the existing legal framework, only those mentioned expressly were intended to be exempt from payment of the levies. It is not for the Board, nor CPCC, to assume the role of the legislator by implying additional exemptions, reasoning that they should be implied from the wording of the Act.

[85]The Board went on to conclude (at paragraphs 96, 98, 99 and 101):

As structured, the zero-rating program creates exemptions. For all these reasons, the Board considers that the program has no legal basis and is therefore illegal.

. . .

Aside from the lack of legal support for zero-rating, the Board has some serious reservations about the fairness of the proposed implementation of CPCC's extended program. The program has been tested on the audiocassette market, to the extent that end users complain much less about the levy on that medium. However, its possible effects on other markets, especially blank CD's, cause grave concerns.

First, the stakes are much higher in the context of blank CD's because of the number of units that might be zero-rated. . . . By even the most conservative estimates, one would not be surprised if tens of millions of units were diverted from existing channels of distribution. Second, objectors expressed reluctance to pay any registration fees. Some objectors also expressed concerns about the potential for arbitrary application of the program.

. . .

The potentially serious effects of zero-rating on the CD market are themselves sufficient to explain the change in the Board's views. Yet, to be blunt, the reason that the Board has reconsidered its response to zero-rating is that it could not foresee the effects of the program. . . . This decision is based upon a more complete record. [Emphasis added.]

[86]Consistent with this reasoning, the Board in Private Copying III did not take into account the zero-rating program in determining the amount of the levy which it certified except with respect to audiocassettes. In this respect, the Board noted that the levy rate should logically be adjusted. However, it did not do so because (Private Copying III, at paragraph 181):

. . . the audiocassette market has reached its maturity. Consumers have apparently accepted the levy on these media as an intrinsic component of the price. Thus, the rate should stay the same.

[87]Invoking a lack of clarity in the Board's decision, the CPCC chose to maintain the program in place for all blank media previously covered.

Objections Against the Decision of the Board

[88]The CPCC submits that the Board exceeded its jurisdiction in declaring to be illegal the zero-rating program and, by extension, the CPCC's zero-rating agreements with program participants.

[89]The CPCC submits that, although the Board has a broad statutory power to set levies and determine their terms and conditions, the Act does not grant the Board the power to rule upon the legality of private agreements between a collective society and third parties. In this respect, the CPCC relies on the decision of this Court in CTV Television Network Ltd. v. Canada (Copyright Board), [1993] 2 F.C. 115, in which it was held that the Board's incidental powers are limited to what is necessarily linked to the Board's rate-setting function.

[90]The CPCC argues that the Board does not have jurisdiction to rule upon the legality of the zero-rating program in order to fix the amount of the private copying levies or their terms and conditions. Instead, it should have limited its inquiry to whether the Board had the power under the Act to take the program into account in setting the levies. By going beyond this and declaring the program to be illegal, the Board ignored CPCC's right to waive the collection of statutory debts owing to it.

[91]If the Board does have jurisdiction to declare the zero-rating program illegal, the CPCC argues that the Board's decision is both incorrect in law, and unreasonable in that it cannot withstand "a somewhat probing examination."

[92]The CPCC submits that the reasonableness of the Board's decision is doubtful because it contradicts the Board's previous pronouncements on the same question which rest on more compelling reasoning. According to the CPCC, the Board got it right in the first place.

[93]Both the retailers and the CSMA oppose the position advocated by the CPCC and support the decision reached by the Board. They add that, in maintaining the zero-rating program in place, the CPCC is flouting the decision of the Board.

Analysis

[94]The principal issue to be decided is whether the Board erred in law when it held that, in setting a levy that is fair and equitable, it should disregard the CPCC's zero-rating program. First, though, it is important to deal with an issue on which the parties agreed: the inability of the CPCC or the Board to create exemptions from the levy. An analysis of this issue provides valuable context to the question of whether the Board may take the zero-rating program into account when setting the levy. It is also helpful in the resolution of the principal issue.

Exemptions from the Statutory Scheme

[95]The gist of the reasoning advanced by the Board for holding that the zero-rating program is not authorized by the Act is reflected in the following passage (Private Copying III, at paragraph 82):

The Board believes that if Parliament intended to insulate non copiers from the effects of the regime, it could have and would have established mechanisms within the Act. Yet Part VIII includes only one exception, to accommodate perceptually disabled persons. The Governor in Council has the power to exclude from the regime media that would otherwise be subject to a levy. That power has not been exercised. Alternatively, Parliament might have provided the Board with the tools to accommodate those who do not use blank media to copy music. But the Act delegates no such authority to the Board.

[96]As noted, the Board's conclusion that it does not have the power to create exemptions is not contested, and is consistent with a well-recognized rule of statutory interpretation. The rule is that the expression of one thing in a statute usually suggests the exclusion of another (expressio unius est exclusio alterius). Pursuant to this maxim, if a statute specifies one exception (or more) to a general rule, other exceptions are not to be read in. The rationale is that the legislator has turned its mind to the issue and provided for the exemptions which were intended.

[97]This principle was applied by the Supreme Court in Bishop v. Stevens, [1990] 2 S.C.R. 467, at pages 480 and 481, where at issue was whether the right to make ephemeral recordings is implicitly included in the Act as part of the right to broadcast a performance:

Furthermore, an implied exemption to the literal meaning of s. 3(1)(d) is all the more unlikely, in my opinion, in light of the detailed and explicit exemptions in s. 17(2) (now s. 27(2)) of the Act, providing for matters as diverse as private study, research or critical review, educational use, disclosure of information pursuant to various federal Acts, and performance of a musical work without motive of gain at an agricultural fair. [See also Black's Law Dictionary, 7th ed. St. Paul, Minn.: West Group, 1999, at page 192 and R. Sullivan, Sullivan and Driedger on the Construction of Statutes, 4th ed. Toronto: Butterworths, 2002, at page 241.]

[98]Applying this rule to Part VIII, the first exemption to the levy is found in subsection 82(2), which provides that "no levy is payable" by manufacturers or importers where the blank medium is exported from Canada. Subsection 86(1) contains the other exemption, providing that "[n]o levy is payable" where a manufacturer or importer sells or disposes of a blank medium to a "society, association or corporation that represents persons with a perceptual disability." Parliament also expressly empowered the Cabinet to exclude from liability certain media by virtue of section 79 and paragraph 87(b) of the Act.

[99]It is also worth noting that paragraph 87(a) of the Act provides that Cabinet, and not the Board or collecting bodies, may make regulations respecting procedures for the operation of the section 86 exemption. Given that Parliament has reserved to Cabinet the task of creating the procedures for administering a legislated exemption, it cannot credibly be suggested that Parliament envisaged that the CPCC could create and administer exemptions in the form of the zero-rating program that are not explicitly created by the statute.

[100]There is no doubt that the Board's conclusion is supported by the rule of construction which it invoked. However, the analysis must go beyond this. As the Supreme Court has repeated on numerous occasions and in various contexts (see for instance Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 R.C.S. 27; Bell ExpressVu Limited Partnership v. Rex, [2002] 2 R.C.S. 559; Royal Bank of Canada v. Sparrow Electric Corp., [1997] 1 S.C.R. 411; R. v. Hydro-Québec, [1997] 3 S.C.R. 213; Friesen v. Canada, [1995] 3 S.C.R 103) (E. A. Driedger, Construction of Statutes, 2nd ed. Toronto: Butterworths, 1983, at page 87):

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

[101]The strongest argument for reading into the Act the implicit authority for the grant of the exemptions which underlie the zero-rating program is the suggestion by the Board that this program goes some way to achieving statutory objectives. The Board said at paragraphs 94-95 of its reasons (Private Copying III):

There are valid arguments in favour of zero-rating. By definition, a business or other organization cannot engage in private copying. Thus, from a policy standpoint, they may not be the purpose for, nor the beneficiaries of the private copying regime. A mechanism that removes such stakeholders from the ambit of the levies might further strengthen the nexus between the regime and its goal, and might also reduce the incentive to turn to foreign suppliers for blank media purchases.

There are less compelling reasons for an exemption for individual consumers who do not private copy. The evidence suggests, for example, that 80-90 per cent of consumers use some blank CDs to copy music, and 40 per cent use blank CDs for no other purpose. Although not all individuals use all media for that purpose, we must bear in mind that the rate is discounted to reflect this fact. Also, the Act legalizes private copying in Canada; there is value in the option to private copy, even for those who choose not to exercise that option.

[102]An implicit power which can be shown to advance the object of the legislation within which it is said to exist is easier to read in. However, it must still be shown that Parliament intended such a grant.

[103]The Board confronted this question (Private Copying III, at paragraph 96):

. . . the question is not whether or not zero-rating is desirable, but whether or not the Board, or CPCC, is legally authorized to initiate such a program. Because there is no legislative guidance to the contrary, the Board believes it does not have the legal authority delegated from Parliament to exempt those who are, under the Act, liable for the payment of levies.

[104]In coming to this conclusion, the Board noted the total absence of legislative control over the power being claimed by the CPCC and the importance of the consequences flowing from the zero-rating program, particularly with respect to blank CDs (the Board noted that, by even the most conservative estimates, tens of millions of blank CDs could be diverted from existing channels of distribution (Private Copying III, at paragraph 99)).

[105]The Board saw that the CPCC would effectively regulate the market for blank CDs and was concerned by the serious distribution problems which the program could engender by forcing sales outside the normal supply chain (Private Copying III, ibid). The Board also expressed reservations about the fairness of CPCC's program and its potential for arbitrariness (Private Copying III, ibid). According to the Board (Private Copying III, at paragraph 97):

As the Act now stands, the most untenable response is to delegate ultimate control [of the program] to the beneficiaries of the regime.

[106]It seems clear that, given its past experience with the program, the Board became struck by the extent of the discretionary power which the CPCC would yield in the marketplace if the program was extended as proposed. Realizing the impact of the program, the Board did not accept that Parliament could have intended such an extensive grant without providing for a framework for its exercise.

Is the Zero-Rating Program Relevant to Setting the Levy?

[107]The question to be answered is whether Parliament intended the cost of the levy set by the Board to be passed on to all end users, or only to those who actually copy music. In the words of the Board (Private Copying III, at paragraph 93):

If Parliament intended the burden of the levy to be borne by all end users, except those specifically exempted by legislation, then zero-rating goes against that purpose. If instead Parliament intended the costs of the levy to be borne ultimately only by those end users who engage in private copying, then zero-rating works toward that end.

[108]In order to address this question, it is first necessary to determine the applicable standard of review on the basis of a pragmatic and functional analysis. Whether the Board may, must or must not take account of a factor in the exercise of its discretion in setting a "fair and equitable" levy is a question of statutory interpretation. Determining an appropriate levy is a discretionary decision that lies at the heart of the Board's mandate and expertise.

[109]Deciding what factors are relevant to fixing the levy is so intimately connected with determining what is "fair and equitable" as to fall within the Board's regulatory expertise. Thus, in Trans Mountain Pipe Line Co. Ltd. v. National Energy Board, [1979] 2 F.C. 118 (C.A.), at page 121, Pratte J.A. said, writing for the Court:

Whether or not tolls are just and reasonable is clearly a question of opinion which, under the Act, must be answered by the Board and not by the Court. The meaning of the words "just and reasonable" in section 52 is obviously a question of law, but that question is very easily resolved since those words are not used in any special technical sense and cannot be said to be obscure and need interpretation. What makes difficulty is the method to be used by the Board and the factors to be considered by it in assessing the justness and reasonableness of tolls. The statute is silent on these questions. In my view, they must be left to the discretion of the Board which possesses in that field an expertise that judges do not normally have. If, as it has clearly done in this case, the Board addresses its mind to the right question, namely, the justness and reasonableness of the tolls, and does not base its decision on clearly irrelevant considerations, it does not commit an error of law merely because it assesses the justness and reasonableness of the tolls in a manner different from that which the Court would have adopted. [Emphasis added.]

[110]Consequently, while the relevance of the zero-rating program to the setting of the levy raises an issue of statutory construction which may seem to point towards correctness as the appropriate standard of review, the Board resorted to its considerable rate-setting expertise in assessing the impact of the zero-rating program, and in concluding therefrom that the implementation of the program could not have been intended by Parliament. In my view, a degree of deference is owed to the Board on that aspect of the decision: see Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, [2002] 4 F.C. 3 (C.A.), at paragraph 51.

[111]Accordingly, the Court should not interfere unless it can be shown that the conclusion reached by the Board does not conform to reason. Absent a privative clause, and because the issue in dispute involves the interpretation of the Copyright Act, unreasonableness simpliciter would seem to be the appropriate standard of review.

[112]For the reasons that follow, it is my view that the Board's reasons easily withstand the "somewhat probing examination" to which decisions reviewable for unreasonableness are subject: Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at paragraph 56. Indeed, given my conclusion on the exemption issue, it would have been unreasonable for the Board to have concluded that it should take the zero-rating program into account.

[113]In Private Copying III, the Board explained that the levy was intended to apply to all blank media regardless of their use and that the zero-rating program created an exemption contrary to that intent in excluding from the levy persons who do not private copy (at paragraphs 80, 83 and 96):

. . . the private copying regime, in particular section 82, is universal. By this is meant that a levy is payable on every blank audio recording medium manufactured or imported in Canada for the purpose of trade. One limited exemption aside [section 86], the law states that every manufacturer or importer acting for the purpose of trade is liable to pay the levy on every audio recording medium, regardless of the ultimate purchaser's identity or the medium's ultimate use.

. . .

All of these considerations suggest strongly that, under the existing legal framework, only those mentioned expressly were intended to be exempt from payment of the levies.

. . .

As structured, the zero-rating program creates exemptions. [Footnote omitted.]

[114]These exemptions have a direct impact on the levies set by the Board. If the exemptions are not authorized, the levy must be calculated on the basis that all purchasers of blank media will pay it. If the exemptions are authorized, the levy must be adjusted upwards to account for the levy-free purchases of blank media under the program.

[115]The treatment of audiocassettes in Private Copying II illustrates this. Upon deciding, on that one occasion, that the impact of the program could be taken into account in setting the levy, the Board had to increase the levy by some 20 per cent in order to account for the sales on which the levy was no longer being collected by reason of the program (Private Copying II, at page 18). The question is thus inexorably linked to the exercise of the Board's rate-setting function.

[116]In my view, the holding by the Board that the zero-rating program is "illegal" simply means that the Board will disregard it when setting the levy. Nevertheless, the CPCC argues that the Board exceeded its jurisdiction by ruling on the legality of private agreements with the program participants. It quotes in this regard a passage of the decision of this Court in Posen v. Minister of Consumer and Corporate Affairs Canada, [1980] 2 F.C. 259 (C.A.), at page 262:

In my view, it is clear that Parliament never intended, in setting up the Copyright Appeal Board as a regulatory agency for rate-fixing that the Board also would have the power to adjudicate upon contractual rights between parties claiming an interest in performing rights. The Board sets the rates. The societies must still establish their legal right to collect the tariff and if a user contests that right, then the Courts are the proper forum for a determination of the rights of the respective parties, not the Board.

With respect, I do not think the Board had any jurisdiction to inquire into the matters raised before it by the applicants since the applicants did not contest the quantum of the tariffs either before the Board or at the hearing before us. In my view, that should have been an end of the matter since the quantum of the rates is the only matter entrusted to the Board by the statute.

[117]However, the rule set out in Posen is not absolute. As was held by this Court in FWS Joint Sports Claimants v. Canada (Copyright Board), [1992] 1 F.C. 487 (C.A.), the Board may indeed make pronouncements which impact on contractual rights if its rate-setting function so requires (at page 494).

As for the matter of the Board deciding questions of contractual rights, it is clear that the Board must do so, at least in a preliminary way, as a necessary incident to the exercise of its jurisdiction. It cannot value a right unless it exists. The Board's conclusion as to legal rights may not bind everyone for all time, but it cannot perform its mandate without making a legal determination about these rights. It may be different, however, where all that the Board is asked to do is to determine the rights of the parties (see Posen . . . .)

[118]In this instance, the Board decided that it had to resolve the ambiguity arising from its prior decisions by making it clear that the zero-rating program had no statutory underpinning and that the exemption from liability to pay the levy extended to program participants by the CPCC was therefore illegal. In my view, the Board said no more than this when it held (Private Copying III, at paragraph 96) that the program "has no legal basis and is therefore illegal."

[119]The CPCC suggests that the effect of the Board's decision is to take away the common law right of rightsholders to waive the payment of levies. According to the CPCC, the waiver by rightsholders of their right to collect levies is the sole legal basis for the program. Hence, the legality of the program does not rest on the Act, and the Board exceeded its jurisdiction in holding that the program and the underlying third party agreements are illegal.

[120]I agree that the Board had no statutory authority to pronounce on the legality of the program so described. However, I do not read the Board's decision as holding that the program, to the extent that it is based on the waiver by rightsholders of their rightful entitlement, is illegal.

[121]Indeed, the Board made it clear in the course of its reasons that the CPCC can forego the collection of levies legally owing to it, if it so wishes (Private Copying III, at paragraph 100). However, the CPCC can no longer expect that the Board will compensate it for the negative impact of the program on its revenues (Private Copying III, at paragraph 180).

[122]The CPCC argues that the Board has no choice but to take the impact of the program into account, once it is implemented, just as it must take into account any other market reality. This is how the Board summarized the argument (Private Copying III, at paragraph 91):

In the present proceedings, rights-holders [through the CPCC] argue that the Board has no control over, or power to stop them from, zero-rating. Once zero-rating has occurred, they say it is fair and equitable that they not suffer as a result. In short, rights-holders say zero-rating is only relevant to the Board as a market reality that should be accounted for after it has occurred.

[123]The Board rejected this proposition outright. It came to realize that the CPCC was attempting to introduce through the back door the very exemption which it had twice refused to recognize. Blank media sales to purchasers who do not private copy were being excluded from the levy base by the CPCC, and the Board was being told that it had no choice but to take account of the reduced number of units on which the levy was being collected.

[124]This is what led the Board in Private Copying III to hold, consistently with its prior rulings that the exemptions underlying the program were contrary to Part VIII, that it would no longer compensate rightsholders for the effect of the program on CPCC's revenues.

[125]In my view, the Board did not commit any reviewable error when it held that the zero-rating program is not authorized under the Act and "illegal" in that limited sense, and that it would no longer compensate the CPCC for the impact of the program on its revenues because that would, in effect, provide for an exemption from the scheme, contrary to Parliament's intention. The Board's decision is thus inexorably linked to its rate-setting function, and any impact which it might have on contractual rights is a necessary incident of the exercise of its jurisdiction (see FWS Joint Sports Claimants, at page 494).

[126]I therefore conclude that the Board properly held that the zero-rating program has no statutory underpinning and that, accordingly, its impact ought not to be recognized in setting the levy.

[127]The application for judicial review brought by the CPCC should accordingly be dismissed, with costs.

Interim Relief

[128]At the close of the hearing, the CPCC requested that, if the ruling of the Board as to zero-rating is upheld, the decision of the Court be stayed, pending an eventual leave application to the Supreme Court.

[129]The CPCC argued that participants have left the program as a result of the Board's decision and that it will suffer irreparable harm unless a stay is granted. According to the CPCC, the balance of convenience favours the issuance of a stay as nothing will be lost to anyone if a stay is granted.

[130]I do not believe that irreparable harm has been established, nor do I believe that the balance of convenience favours the issuance of a stay. I accept that signatories to the program may leave it as a result of the Board's decision, as confirmed by this Court. But this will not prevent the CPCC from recouping all participants in the event that the statutory legitimacy of the program is re-established on appeal. Furthermore, there is a public interest in ensuring that meanwhile, the program is understood for what it is, i.e., a voluntary waiver of levies and no more.

[131]The retailers have also asked for interim relief in the event that the Board's decision is confirmed. They ask for an order compelling the CPCC to comply with the Board's decision.

[132]There is no need for such an order. The decision of the Court is binding on the CPCC notwithstanding appeal. It follows that the CPCC can no longer promote the program on the basis that it has statutory legitimacy or justify its existence to rightsholders on the basis that they will be compensated for its negative impact on CPCC's revenues. I do not believe that an interim order is required to ensure this result.

Application A-10-04--Digital Audio Recorder (MP3 Player) Levy and Rate Setting

[133]The third judicial review application raises two issues. The first is whether a permanently embedded or non-removable memory, incorporated into a digital audio recorder (MP3 player), retains its identity as an "audio recording medium" and can be levied as such under Part VIII.

[134]The second is whether the Board could set a levy on this embedded memory beyond that sought by the CPCC and, if so, whether the levy in question was set within the bounds of fairness.

First Issue

[135]The term "audio recording medium" (medium) is defined in section 79:

79. . . .

"audio recording medium" means a recording medium, regardless of its material form, onto which a sound recording may be reproduced and that is of a kind ordinarily used by individual consumers for that purpose, excluding any prescribed kind of recording medium.

[136]The levy is imposed on a "blank audio recording medium" (previously identified as "blank media" or "blank medium") which is defined, in its relevant part, as (section 79):

79.

(a) an audio recording medium onto which no sounds have ever been fixed, and

(b) any other prescribed audio recording medium;

The Decision of the Board

[137]The Board denied CPCC's request to establish a levy on recordable or rewritable DVDs, removable memory cards and removable micro hard drives. It found that these were not ordinarily used by individuals for the purpose of copying music (Private Copying III, at paragraphs 146-151).

[138]However, it held that digital audio recorders (MP3 players) were so used and that the memory embedded therein qualified as a medium within the meaning of the definition. The fact that this memory was incorporated into a device did not cause it to lose its identity so as to take it outside the statutory definition.

[139]The Board's exact reasoning for holding that memory permanently embedded in a digital audio recorder was leviable rests on the above quoted definition of an "audio recording medium". The Board said (Private Copying III, at paragraph 117):

There are two aspects of [the definition] that are relevant to the Board in these proceedings. The first relates to the proper interpretation of the phrase "ordinarily used by individual consumers for that purpose". The second relates to the relevance of a medium's physical attributes ("a recording medium, regardless of its material form"), particularly the significance of its incorporation into a device.

[140]Addressing the first aspect, the Board held that the intrinsic physical attributes of a digital audio recorder, including its size, convenience and compatibility, supported the conclusion that it was "ordinarily used by individual consumers" for copying music (Private Copying III, at paragraph 155). It follows that the memory embedded therein was also so used. This conclusion so far as it goes is not contested.

[141]The reasoning with respect to the second aspect of the definition is a function of substance over form (Private Copying III, at paragraphs 126, 130 and 131):

A second aspect of the definition of an "audio recording medium" relates to the form of the medium. This issue is important because the Board was asked to establish a levy on memory in devices, although not on devices themselves. Hence, the question at this stage is whether or not the incorporation of a product into a device can affect its status as an audio recording medium.

. . .

As regards the physical characteristics of the product itself, the definition of an "audio recording medium" could hardly have been drafted more broadly. Specifically, the English version of the text contains the clause, "regardless of its material form". To the Board, the plain and ordinary meaning of this phrase rules out the possibility that the levy was intended to apply only to "removable" media, let alone only to audiocassettes.

This language also demonstrates that it is not determinative whether the medium is affixed, incorporated or otherwise integrated in a device. Its breadth supports the conclusion that liability to pay a levy cannot be dependant [sic] upon physical characteristics alone. A medium that is incorporated into a device remains a medium.

Alleged Errors in Decision under Review

[142]The four members of the CSMA who appear as applicants in this judicial review application argue that the Board erred in law in holding that a permanently embedded memory in a digital audio recorder (MP3 player) is a medium and, as such, leviable under Part VIII.

[143]The applicants argue that, when incorporated into a digital audio recorder, the embedded memory becomes integrated in, and inseparable from, this device, and thus loses its separate identity. Hence, it cannot be said that a manufacturer or importer who sells a digital audio recorder also sells the embedded memory.

[144]In the alternative, the applicants submit that the Board has created an exemption from the scope of Part VIII of the Act, by only imposing a levy on memory when it is embedded in digital audio recorders, and not when the identical memory is embedded in other electronic devices (such as heart-rate monitors, digital cameras, personal digital assistants or telephones).

Analysis

[145]It is not necessary to undertake a lengthy analysis to ascertain the applicable standard of review as it turns on the definitions set out in section 79 and this Court has already held that the Board's interpretation of these definitions must be assessed against a standard of correctness.

[146]In Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, this Court said [at paragraphs 98, 104 and 105]:

The heart of the Board's expertise is in the administration of those provisions of the Copyright Act pertaining to the setting and allocation of royalties. While necessary for enabling the Board to perform that function, its decisions defining activities that infringe copyright have implications that "stray from the core expertise of the tribunal": Pushpanathan, supra, at paragraph 38.

. . .

In my opinion, the scale is tipped decisively in favour of correctness review by the fact that the Copyright Board's interpretation of provisions of the Copyright Act in dispute here is not within its exclusive domain, but may arise in court proceedings other than judicial review applications. This is both because the Board's expertise on these issues cannot be said to be greater than the Court's and because, in the context of the administration of this statute, judicial deference is unlikely to serve the interests of consistency, adjudicative efficiency and economy.

Accordingly, in my respectful opinion, the Court was wrong in AVS, supra, to prescribe patent unreasonableness as the standard of review applicable to the Board's interpretation of those provisions [specifically, section 79] of the Copyright Act that are not within the Board's exclusive domain. Taken as a whole the scheme of the Copyright Act indicates that, on an application for judicial review, the Court should apply a standard of correctness to the Board's interpretation of those provisions of the Copyright Act that could also be the subject of infringement proceedings in the courts. [Emphasis added.]

[147]Although the CPCC maintains that the meaning of "audio recording medium" as defined in section 79 has no infringement implications, this is not so. If, indeed, digital audio recorders (or the memories embedded therein) fall outside the scope of the definition, copyright infringement could result from the use of such devices to private copy. Consistent with the proposition set forth in the above passage, the decision of the Board must be tested against the standard of correctness.

[148]Applying this standard, I do not believe that it was open to the Board to establish a levy on memory embedded in digital audio recorders. In my respectful view, Part VIII of the Act and the definition of "audio recording medium" gave the Board no such authority.

[149]The Board established the levy on the basis that it could, in effect, look through the device being sold and reach the permanently embedded memory found therein. The Board twice noted that the levy sought by the CPCC, and approved by it was on "memory in devices" but not on "devices" (Private Copying III, at paragraphs 126 and 194).

[150]The conceptual difficulty inherent in the exercise on which the Board embarked in certifying a levy on the memory embedded in a device, but not on the device itself, is illustrated by the tariff which it certified (Private Copying III, at paragraph 225):

For non-removable memory permanently embedded in a digital audio recorder, the Board adopts rates of $2 for each recorder that can record no more than 1 Gb of data, 15$ for each recorder that can record more than 1 Gb and no more than 10 Gbs of data, and $25 for each recorder that can record more than 10 Gbs of data. [Emphasis added.]

[151]Although the Board purported to establish a levy on the embedded memory, it acknowledged that this memory could not, looked at on its own, allow for the establishment of the levy; the device into which the memory was embedded had to be considered (Private Copying III, at paragraph 153):

Hard discs in personal computers are technically indistinguishable from those in some digital audio recorders. It appears therefore, inappropriate to generalize about the uses of all embedded memory. However, the distinction, in the Board's view, is that where a medium is permanently incorporated into a certain type of device, it becomes possible to categorize that medium and evaluate its use as a unique "kind" of "audio recording medium", based on the intrinsic characteristics of the device into which the medium has been incorporated. [Emphasis added.]

Hence according to the Board, permanent memory embedded in an MP3 player comes within the definition, whereas the identical memory embedded into other devices does not (Private Copying III, at paragraph 155).

[152]It can be seen from the Board's own reasoning and from the tariff which it certified that it is the device that is the defining element of the levy and not the memory incorporated therein. The Board cannot establish a levy and determine the applicable rates by reference to the device and yet assert that the levy is being applied on something else.

[153]One can readily understand why the Board wanted to go as far as it could to bring MP3 players within the ambit of Part VIII. The evidence establishes that these recorders allow for extensive private copying by individuals. Their use can potentially inflict on rightsholders harm beyond any "blank audio recording medium" as this phrase has been understood to date. However, as desirable as bringing such devices within the ambit of Part VIII might seem, the authority for doing so still has to be found in the Act.

[154]The Board found this authority in the definition of "audio recording medium". It focussed on the phrase "regardless of its material form" to hold that Parliament intended that a levy be established on a medium, regardless of its incorporation into a device. In the words of the Board, "A medium that is incorporated into a device remains a medium" (Private Copying III, at paragraph 131).

[155]There are a number of problems with the Board's analysis. First, according to the Board's own reasoning, a memory does not become an "audio recording medium" unless and until it is incorporated into the appropriate device (Private Copying III, at paragraphs 152 and 161). It is therefore difficult to see how such a memory can be said to remain a medium when embedded into a device.

[156]Second, upon being incorporated into a device, a memory undergoes no change in form. It is therefore difficult to see how the Board can rely on the phrase "regardless of its material form" to justify its conclusion. Furthermore, to rely on this phrase, the Board first had to identify an "audio recording medium". According to its own reasons, a memory is not an "audio recording medium" unless and until embedded into a digital audio recorder.

[157]It is apparent that the phrase on which the Board relied to "see through" a digital audio recorder and reach the memory embedded therein does not support its conclusion when regard is had to its own findings.

[158]The Board acknowledges that, when it enacted Part VIII, Parliament could not have envisioned recent technological developments (Private Copying III, at paragraph 133). Indeed, the legislative history of Bill C-32, which amended the Act to include Part VIII, shows that at the time, Parliament was looking at blank audio tapes as the cause of the harm to rightsholders and had been made aware of proposals in other countries (including the U.S.) to extend the levy to the hardware which recorded and played these blank audio tapes. Nevertheless, Parliament chose to limit the levy to blank medium (House of Commons, Standing Committee on Canadian Heritage, Minutes of Proceedings, Meeting No. 24, October 9, 1996, at 2150; Application Record, Vol. III, Tab 5-B-13, pages 651-662; House of Commons, Standing Committee on Canadian Heritage, Minutes of Proceedings, Meeting No. 36, November 6, 1996, at 2035, where the Société professionelle des auteurs et des compositeurs du Québec submitted as a flaw that "Bill C-32 makes no provision for the payment of levies by manufacturers of recorders," Application Record, Vol. III, Tab 5-B-15, at page 682; House of Commons, Standing Committee on Canadian Heritage, Minutes of Proceedings, Meeting No. 27, October 22, 1996, at 1925 (B. Andriessen); Application Record, Vol. III, Tab 5-B-14, at pages 663-674; House of Commons, Second Report of the Standing Committee on Canadian Heritage, December 1996; Application Record, Vol. III, Tab 5-B-16, at pages 698-717).

[159]This shows that Parliament's definition of "audio recording medium" stands in contra-distinction with a recorder or similar devices as these were known to exist at the time and whose function it is to record and play blank audio tapes. No one has ever pretended that tape recorders came within the ambit of the definition.

[160]A digital audio recorder is not a medium; the CPCC recognized so much when it asked that the levy be applied on the memory found therein but not on the recorder itself. The Board erred when it held that it could certify a levy on the memory integrated into a digital audio recorder.

[161]Subsection 82(1) of the Act imposes a levy on manufacturers and importers of blank media. By the words of paragraph (a) thereof, the liability for the payment of the levy can only arise "on selling or otherwise disposing of those blank audio recording media".

[162]The Board therefore had to look at what was being sold or disposed of by the importers (it is common ground that there are no manufacturers of digital audio recorders in Canada), and determine whether the subject-matter of the sale or disposition came within the ambit of the definition.

[163]The Board did not ask itself that question. However, it seems clear that if it had, the subject-matter of the sale or disposition was a digital audio recorder or a device as the Board called it, but not a medium as defined. In the absence of such a sale, no liability can arise for the levy.

[164]In my respectful view, it is for Parliament to decide whether digital audio recorders such as MP3 players are to be brought within the class of items that can be levied under Part VIII. As Part VIII now reads, there is no authority for certifying a levy on such devices or the memory embedded therein.

[165]I would therefore allow the judicial review application in so far as the first issue raised by the applicants is concerned.

Second Issue

[166]Given this conclusion, it is not necessary to dispose of the second issue. However, in the event that I am wrong on the first issue, it is useful to deal with the second. The question to be decided in this respect is whether the Board erred in setting the rate for permanently embedded memory in a digital audio recorder at an amount in excess of the amount proposed by the CPCC and published in advance of the hearing.

The Decision of the Board

[167]The Board held that it could not set the rate based on the model proposed by the CPCC because it was too complex. As a result, it set the levy at $2 for each recorder with a memory capacity of up to 1 gigabyte. The CPCC had asked for a levy of 2.1¢ per megabyte for non-removable memory with a storage capacity of less than 1 gigabyte, which would have translated into levies of 67¢ and $1.34 respectively.

[168]The Board explained why it decided to authorize a levy beyond that requested (Private Copying III, at paragraphs 201, 202 and 226):

. . . the Board cannot set the rate based on the model proposed by CPCC. Instead, it establishes the rate by combining some of the principles underlying CPCC's proposal with other observations from the record about this kind of media. The levy rate for non-removable memory permanently embedded in^. a digital audio recorder is set at $2 for each recorder that can record no more than 1 Gb of data, $15 for each recorder that can record more than 1 Gb and no more than 10 Gbs of data, and $25 for each recorder than can record more than 10Gbs of data.

. . .

The Board is conscious that the rate certified for low-capacity recorders is higher than the rate proposed by CPCC. This decision is unavoidable considering the Board's wish to simplify the rate structure for those particular media as much as possible. Finally, given the small difference between the proposed and the certified rates (a matter of a few pennies or a dollar per recorder, at most) the Board is of the view that the unfairness created by overly complicating the rate structure would far outweigh any increased benefits that may result of capping the rate to the amounts proposed by CPCC.

Alleged Errors in Decision under Review

[169]The CSMA members submit that nothing in the Act empowers the Board to disregard the ultra petita principle. In accordance with subsection 83(6) of the Act, proposed tariffs are published in the Canada Gazette and stakeholders are given a 60-day period within which to file written objections to the tariff with the Board. According to the applicants, if the Board could unilaterally certify a tariff higher than that proposed, the purpose of the statutory notice period would, to a large extent, be undermined.

[170]Alternatively, the applicants argue that setting a levy beyond the tariff published is fundamentally unfair to those who might have intervened if the approved rate had been advertised.

Analysis

[171]The standard of review must be ascertained by reference to the question to be decided. There are two such questions: the first is whether the ultra petita principle applies to the decisions of the Board establishing tariffs pursuant to Part VIII. This raises a question of general law, with precedential effect on tariff setting decisions (compare Toronto (City) v. C.U.P.E., Local 79, [2003] 3 S.C.R. 77 on the application of abuse of process doctrine to arbitral proceedings). As such, correctness seems to be the appropriate standard.

[172]The second question is whether, assuming that the ultra petita principle does not apply, the levy set by the Board was unfair. The answer to this question requires an evaluation of the purpose of the public notice of proposed tariffs pursuant to the Act, and whether concerned persons were unfairly treated by virtue of the tariff being set at an amount greater than that announced. This last aspect raises an issue of procedural fairness, on which it is generally accepted that no judicial deference is owed.

[173]Turning to the first question, the ultra petita principle is generally understood to mean that a court will not make a ruling beyond what is requested by the parties. For instance, a judgment which grants a monetary award that goes beyond that sought by the claimant is said to be ultra petita or extra petita.

[174]At civil law, this principle is codified in Article 468 of the Code of Civil Procedure [R.S.Q., c. C-25]. At common law, it is recognized by the case law (see for instance, Johnston v. Buckland, [1937] S.C.R. 86; Corporation Agencies Ltd. v. Home Bank of Canada, [1925] S.C.R. 706; Thibodeau v. Canada, [1995] 2 S.C.R. 627, per McLachlin J. (as she then was) in dissent).

[175]The legislator is free to remove administrative tribunals from the constraints of ultra petita. This will often be the case, as administrative tribunals are generally created to advance interests that can go beyond the immediate interests of the parties who appear before them (see for example section 61 of the National Telecommunications Powers and Procedures Act, R.S.C., 1985, c. N-20 s. 1 (as am. by R.S.C., 1985 (3rd Supp.), c. 28, s. 301), as it read prior to its repeal in 1993, which conferred on the CRTC the right to grant relief "in addition to . . . . that applied for").

.

[176]In the present case, subsections 83(8) and (9) of the Act are particularly relevant:

83. . . .

(8) On the conclusion of its consideration of the proposed tariff, the Board shall

(a) establish, in accordance with subsection (9),

(i) the manner of determining the levies, and

(ii) such terms and conditions related to those levies as the Board considers appropriate, including, without limiting the generality of the foregoing, the form, content and frequency of the statements of account mentioned in subsection 82(1), measures for the protection of confidential information contained in those statements, and the times at which the levies are payable,

(b) vary the tariff accordingly,

(c) certify the tariff as the approved tariff, whereupon that tariff becomes for the purposes of this Part the approved tariff, and

(d) designate as the collecting body the collective society or other society, association or corporation that, in the Board's opinion, will best fulfil the objects of sections 82, 84 and 86,

but the Board is not obligated to exercise its power under paragraph (d) if it has previously done so, and a designation under that paragraph remains in effect until the Board makes another designation, which it may do at any time whatsoever, on application.

(9) In exercising its power under paragraph (8)(a), the Board shall satisfy itself that the levies are fair and equitable, having regard to any prescribed criteria.

[177]While this language is not as clear as that just cited, it can be seen that, upon being seized with a proposed tariff, the Board retains the discretion to establish a tariff that is "fair and equitable" (subsection 83(9)), and to set "such terms and conditions related to those levies as the Board considers appropriate" (subparagraph 83(8)(a)(ii)) (emphasis added).

[178]In this instance, the Board explained that it could not set the rate based on the model proposed by the CPCC because it was too complex (Private Copying III, at paragraph 201). Instead, the Board chose to set the rate based on its own model which resulted in a marginal increase (Private Copying III, at paragraph 224).

[179]In fixing royalties the Board must take account of numerous factors, including the competing interests of the parties and the requirement that the levy be fair and equitable. Given the Board's role, its broad discretion and the language of subsections 83(8) and (9), I am of the view that the ultra petita principle did not prevent the Board from deviating as it did from the proposed tariff.

[180]Turning to the issue of fairness, the applicants allege that certain importers who could have participated in the Board's hearing might not have done so on the belief that the tariff would not be higher than that published.

[181]In considering this argument, it is important to recall that the levy of $2 only exceeds the amount requested by CPCC for two of the four typical formats of non-removable solid state or "flash" memory incorporated into digital audio recorders (32, 64, 128 and 256 megabytes). Conversely, the levy is less than the $2.68 and $5.37 which would have applied to recorders containing non-removable flash memory of 128 or 256 megabytes if CPCC's proposed rate of 2.1 cents per megabyte had been accepted by the Board. Furthermore, the levy of $2 certified by the Board is far less than the $21 per gigabyte levy sought by CPCC for non-removable hard disk with one gigabyte of memory.

[182]It is significant that the applicants have led no evidence remotely suggesting that concerned persons who did not participate in the Board's hearing would have done so if they had known that the resulting tariff would be marginally higher than that applied for. This shows in my view that the Board properly assessed the situation and arrived at the correct conclusion when it said (see paragraph 168 above), that no unfairness would result from the increase which it authorized.

[183]For these reasons, I conclude that the Board committed no error in setting the levy at a rate higher than that applied for.

[184]I would nevertheless allow the application for judicial review on the first issue and grant the applicants their costs.

Linden J.A.: I agree.

Evans J.A.: I agree.

APPENDIX I

PART VIII

PRIVATE COPYING

Interpretation

79. In this Part,

"audio recording medium" means a recording medium, regardless of its material form, onto which a sound recording may be reproduced and that is of a kind ordinarily used by individual consumers for that purpose, excluding any prescribed kind of recording medium;

"blank audio recording medium" means

(a) an audio recording medium onto which no sounds have ever been fixed, and

(b) any other prescribed audio recording medium;

"collecting body" means the collective society, or other society, association or corporation, that is designated as the collecting body under subsection 83(8);

"eligible author" means an author of a musical work, whether created before or after the coming into force of this Part, that is embodied in a sound recording, whether made before or after the coming into force of this Part, if copyright subsists in Canada in that musical work;

"eligible maker" means a maker of a sound recording that embodies a musical work, whether the first fixation of the sound recording occurred before or after the coming into force of this Part, if

(a) both the following two conditions are met:

(i) the maker, at the date of that first fixation, if a corporation, had its headquarters in Canada or, if a natural person, was a Canadian citizen or permanent resident within the meaning of subsection 2(1) of the Immigration and Refugee Protection Act, and

(ii) copyright subsists in Canada in the sound recording, or

(b) the maker, at the date of that first fixation, if a corporation, had its headquarters in a country referred to in a statement published under section 85 or, if a natural person, was a citizen, subject or permanent resident of such a country;

"eligible performer" means the performer of a performer's performance of a musical work, whether it took place before or after the coming into force of this Part, if the performer's performance is embodied in a sound recording and

(a) both the following two conditions are met:

(i) the performer was, at the date of the first fixation of the sound recording, a Canadian citizen or permanent resident within the meaning of subsection 2(1) of the Immigration and Refugee Protection Act, and

(ii) copyright subsists in Canada in the performer's performance, or

(b) the performer was, at the date of the first fixation of the sound recording, a citizen, subject or permanent resident of a country referred to in a statement published under section 85;

"prescribed" means prescribed by regulations made under this Part.

Copying for Private Use

80. (1) Subject to subsection (2), the act of reproducing all or any substantial part of

(a) a musical work embodied in a sound recording,

(b) a performer's performance of a musical work embodied in a sound recording, or

(c) a sound recording in which a musical work, or a performer's performance of a musical work, is embodied

onto an audio recording medium for the private use of the person who makes the copy does not constitute an infringement of the copyright in the musical work, the performer's performance or the sound recording.

(2) Subsection (1) does not apply if the act described in that subsection is done for the purpose of doing any of the following in relation to any of the things referred to in paragraphs (1)(a) to (c):

(a) selling or renting out, or by way of trade exposing or offering for sale or rental;

(b) distributing, whether or not for the purpose of trade;

(c) communicating to the public by telecommunication; or

(d) performing, or causing to be performed, in public.

Right of Remuneration

81. (1) Subject to and in accordance with this Part, eligible authors, eligible performers and eligible makers have a right to receive remuneration from manufacturers and importers of blank audio recording media in respect of the reproduction for private use of

(a) a musical work embodied in a sound recording;

(b) a performer's performance of a musical work embodied in a sound recording; or

(c) a sound recording in which a musical work, or a performer's performance of a musical work, is embodied.

(2) Subsections 13(4) to (7) apply, with such modifications as the circumstances require, in respect of the rights conferred by subsection (1) on eligible authors, performers and makers.

Levy on Blank Audio Recording Media

82. (1) Every person who, for the purpose of trade, manufactures a blank audio recording medium in Canada or imports a blank audio recording medium into Canada

(a) is liable, subject to subsection (2) and section 86, to pay a levy to the collecting body on selling or otherwise disposing of those blank audio recording media in Canada; and

(b) shall, in accordance with subsection 83(8), keep statements of account of the activities referred to in paragraph (a), as well as of exports of those blank audio recording media, and shall furnish those statements to the collecting body.

(2) No levy is payable where it is a term of the sale or other disposition of the blank audio recording medium that the medium is to be exported from Canada, and it is exported from Canada.

83. (1) Subject to subsection (14), each collective society may file with the Board a proposed tariff for the benefit of those eligible authors, eligible performers and eligible makers who, by assignment, grant of licence, appointment of the society as their agent or otherwise, authorize it to act on their behalf for that purpose, but no person other than a collective society may file any such tariff.

(2) Without limiting the generality of what may be included in a proposed tariff, the tariff may include a suggestion as to whom the Board should designate under paragraph (8)(d) as the collecting body.

(3) Proposed tariffs must be in both official languages and must be filed on or before the March 31 immediately before the date when the approved tariffs cease to be effective.

(4) A collective society in respect of which no proposed tariff has been certified pursuant to paragraph (8)(c) shall file its proposed tariff on or before the March 31 immediately before its proposed effective date.

(5) A proposed tariff must provide that the levies are to be effective for periods of one or more calendar years.

(6) As soon as practicable after the receipt of a proposed tariff filed pursuant to subsection (1), the Board shall publish it in the Canada Gazette and shall give notice that, within sixty days after the publication of the tariff, any person may file written objections to the tariff with the Board.

(7) The Board shall, as soon as practicable, consider a proposed tariff and any objections thereto referred to in subsection (6) or raised by the Board, and

(a) send to the collective society concerned a copy of the objections so as to permit it to reply; and

(b) send to the persons who filed the objections a copy of any reply thereto.

(8) On the conclusion of its consideration of the proposed tariff, the Board shall

(a) establish, in accordance with subsection (9),

(i) the manner of determining the levies, and

(ii) such terms and conditions related to those levies as the Board considers appropriate, including, without limiting the generality of the foregoing, the form, content and frequency of the statements of account mentioned in subsection 82(1), measures for the protection of confidential information contained in those statements, and the times at which the levies are payable,

(b) vary the tariff accordingly,

(c) certify the tariff as the approved tariff, whereupon that tariff becomes for the purposes of this Part the approved tariff, and

(d) designate as the collecting body the collective society or other society, association or corporation that, in the Board's opinion, will best fulfil the objects of sections 82, 84 and 86,

but the Board is not obligated to exercise its power under paragraph (d) if it has previously done so, and a designation under that paragraph remains in effect until the Board makes another designation, which it may do at any time whatsoever, on application.

(9) In exercising its power under paragraph (8)(a), the Board shall satisfy itself that the levies are fair and equitable, having regard to any prescribed criteria.

(10) The Board shall publish the approved tariffs in the Canada Gazette as soon as practicable and shall send a copy of each approved tariff, together with the reasons for the Board's decision, to the collecting body, to each collective society that filed a proposed tariff, and to any person who filed an objection.

(11) An eligible author, eligible performer or eligible maker who does not authorize a collective society to file a proposed tariff under subsection (1) is entitled, in relation to

(a) a musical work,

(b) a performer's performance of a musical work, or

(c) a sound recording in which a musical work, or a performer's performance of a musical work, is embodied,

as the case may be, to be paid by the collective society that is designated by the Board, of the Board's own motion or on application, the remuneration referred to in section 81 if such remuneration is payable during a period when an approved tariff that is applicable to that kind of work, performer's performance or sound recording is effective, subject to the same conditions as those to which a person who has so authorized that collective society is subject.

(12) The entitlement referred to in subsection (11) is the only remedy of the eligible author, eligible performer or eligible maker referred to in that subsection in respect of the reproducing of sound recordings for private use.

(13) The Board may, for the purposes of subsections (11) and (12),

(a) require a collective society to file with the Board information relating to payments of moneys received by the society pursuant to section 84 to the persons who have authorized it to file a tariff under subsection (1); and

(b) by regulation, establish the periods, which shall not be less than twelve months, beginning when the applicable approved tariff ceases to be effective, within which the entitlement referred to in subsection (11) must be exercised.

(14) Where all the collective societies that intend to file a proposed tariff authorize a particular person or body to file a single proposed tariff on their behalf, that person or body may do so, and in that case this section applies, with such modifications as the circumstances require, in respect of that proposed tariff.

Distribution of Levies Paid

84. As soon as practicable after receiving the levies paid to it, the collecting body shall distribute the levies to the collective societies representing eligible authors, eligible performers and eligible makers, in the proportions fixed by the Board.

85. (1) Where the Minister is of the opinion that another country grants or has undertaken to grant to performers and makers of sound recordings that are Canadian citizens or permanent residents within the meaning of subsection 2(1) of the Immigration and Refugee Protection Act or, if corporations, have their headquarters in Canada, as the case may be, whether by treaty, convention, agreement or law, benefits substantially equivalent to those conferred by this Part, the Minister may, by a statement published in the Canada Gazette,

(a) grant the benefits conferred by this Part to performers or makers of sound recordings that are citizens, subjects or permanent residents of or, if corporations, have their headquarters in that country; and

(b) declare that that country shall, as regards those benefits, be treated as if it were a country to which this Part extends.

(2) Where the Minister is of the opinion that another country neither grants nor has undertaken to grant to performers or makers of sound recordings that are Canadian citizens or permanent residents within the meaning of subsection 2(1) of the Immigration and Refugee Protection Act or, if corporations, have their headquarters in Canada, as the case may be, whether by treaty, convention, agreement or law, benefits substantially equivalent to those conferred by this Part, the Minister may, by a statement published in the Canada Gazette,

(a) grant the benefits conferred by this Part to performers or makers of sound recordings that are citizens, subjects or permanent residents of or, if corporations, have their headquarters in that country, as the case may be, to the extent that that country grants those benefits to performers or makers of sound recordings that are Canadian citizens or permanent residents within the meaning of subsection 2(1) of the Immigration and Refugee Protection Act or, if corporations, have their headquarters in Canada; and

(b) declare that that country shall, as regards those benefits, be treated as if it were a country to which this Part extends.

(3) Any provision of this Act that the Minister specifies in a statement referred to in subsection (1) or (2)

(a) applies in respect of performers or makers of sound recordings covered by that statement, as if they were citizens of or, if corporations, had their headquarters in Canada; and

(b) applies in respect of a country covered by that statement, as if that country were Canada.

(4) Subject to any exceptions that the Minister may specify in a statement referred to in subsection (1) or (2), the other provisions of this Act also apply in the way described in subsection (3).

Exemption from Levy

86. (1) No levy is payable under this Part where the manufacturer or importer of a blank audio recording medium sells or otherwise disposes of it to a society, association or corporation that represents persons with a perceptual disability.

(2) Where a society, association or corporation referred to in subsection (1)

(a) purchases a blank audio recording medium in Canada from a person other than the manufacturer or importer, and

(b) provides the collecting body with proof of that purchase, on or before June 30 in the calendar year following the calendar year in which the purchase was made,

the collecting body is liable to pay forthwith to the society, association or corporation an amount equal to the amount of the levy paid in respect of the blank audio recording medium purchased.

(3) If regulations made under paragraph 87(a) provide for the registration of societies, associations or corporations that represent persons with a perceptual disability, subsections (1) and (2) shall be read as referring to societies, associations or corporations that are so registered.

Regulations

87. The Governor in Council may make regulations

(a) respecting the exemptions and refunds provided for in section 86, including, without limiting the generality of the foregoing,

(i) regulations respecting procedures governing those exemptions and refunds,

(ii) regulations respecting applications for those exemptions and refunds, and

(iii) regulations for the registration of societies, associations or corporations that represent persons with a perceptual disability;

(b) prescribing anything that by this Part is to be prescribed; and

(c) generally for carrying out the purposes and provisions of this Part.

Civil Remedies

88. (1) Without prejudice to any other remedies available to it, the collecting body may, for the period specified in an approved tariff, collect the levies due to it under the tariff and, in default of their payment, recover them in a court of competent jurisdiction.

(2) The court may order a person who fails to pay any levy due under this Part to pay an amount not exceeding five times the amount of the levy to the collecting body. The collecting body must distribute the payment in the manner set out in section 84.

(3) Where any obligation imposed by this Part is not complied with, the collecting body may, in addition to any other remedy available, apply to a court of competent jurisdiction for an order directing compliance with that obligation.

(4) Before making an order under subsection (2), the court must take into account

(a) whether the person who failed to pay the levy acted in good faith or bad faith;

(b) the conduct of the parties before and during the proceedings; and

(c) the need to deter persons from failing to pay levies.