Administrative law – Intellectual property – Copyright – Levies and taxes – Recorded music – Decisions of administrative tribunals – Copyright Board – Judicial review – Compliance with legislation – Standard of review – Correctness – Reasonableness simpliciter
Canada (Canadian Private Copying Collective) v. Canadian Storage Media Alliance,  F.C.J. No 2115, Federal Court of Appeal, December 14, 2004, Linden, Noel and Evans JJ.A.
The Copyright Board of Canada (the “Board”) is an administrative tribunal created by the Copyright Act (the “Act”). One of the Board’s responsibilities is to adopt levies and their related terms and conditions in respect of the private copying of recorded musical works performances and recorded music on blank audio recording media that are sold or otherwise disposed of in Canada.
In the decision being reviewed by the Federal Court of Appeal, the Board maintained the same rates for levies applicable to audiocassettes, MiniDiscs, CD-Rs, CD-RWs, Audio CD-Rs and Audio CD-RWs. In addition, the Board held that recordable or rewritable DVDs and removable electronic memory cards were not to be subject to private copying levies, but that the memories embedded in digital audio recorders were subject to the levies.
The Board also decided that a “zero-rating” program operated by CPCC, under which certain groups of purchasers are not required by CPCC to pay the levy authorized by the Board, had no legal basis.
Third, the Board upheld the constitutional validity of Part VIII as a federal copyright law that imposes a regulatory charge, rather than a tax. Applying a standard of correctness to the constitutional law issue, the Court of Appeal determined that the Board was correct in ruling that the private copying levy was a validly enacted regulatory charge and not a tax in the constitutional sense. The Court of Appeal also upheld the Board’s ruling that Part VIII of the Act was, in pith and substance, within Parliament’s exclusive legislative authority over copyrights.
On the question of whether the levies were truly taxes or regulatory charges, the Court applied the four criteria from Lawson v. Interior Tree Fruit and Vegetable Committee of Direction,  S.C.R. 357. 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.
The Court also considered a fifth criterion arising from the Supreme Court decision in Eurig Estate (Re),  2 S.C.R. 565: for an item to be considered a fee rather than a tax, a nexus must exist between the quantum charged and the cost of the service provided. This fifth criterion was said to be unique to Canada’s particular constitutional makeup: “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…” (para. 46)
The Court held that the first four indicia of a tax were present, but that the levy is nonetheless merely a regulatory charge because it is necessarily incidental to a detailed regulatory scheme which falls squarely within a federal head of jurisdiction.
The judicial review application of the retailers on the constitutional question of the levy was therefore dismissed.
The Court then went on to consider whether the Board erred in law when it held that, in setting a fair and equitable levy, it should disregard the CPCC’s zero-rating program. Applying a reasonableness standard of review, the Court of Appeal held that Parliament never intended that the Board would also have the power to adjudicate upon contractual rights between parties claiming an interest in performing rights.
On the zero-rating issue, the Court concluded:
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.
The third judicial review concerned whether a permanently embedded (non-removable) memory in an MP3 player retains its identity as an “audio recording medium” such that it can be levied under Part VIII, and if so, whether the Board could set a levy on this medium beyond that sought by the CPCC and whether the levy in question was set within the bounds of fairness.
The Court considered the Board’s decision against a standard of correctness and concluded that the Act did not contain any authority for certifying a levy on MP3 players or the memory embedded therein.
Although the Court held that it was unnecessary to rule on whether the Board erred in setting the levy at a rate higher than that sought by the CPCC, the Court of Appeal nonetheless concluded that the Board committed no error in so doing.
The application for judicial review on the levies on MP3 players was allowed while the judicial review applications on the issues of the constitutional validity of Part VIII of Act and the zero-rating program respectively were dismissed.
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