Digital copyright: Nation of pirates

It has been 13 years since Canada signed a global treaty on copyright. So why are we still international outlaws?

See also: ” Playing catch-up on copyright

Loreena McKennitt is trying to figure out how she became the owner of a struggling small business. It was only slightly more than a decade ago that McKennitt, known throughout the world for her unique spin on Celtic music, was selling millions of albums through her own Quinlan Road label, based in Stratford, Ont. To support the increased demand for her material, McKennitt hired 15 staff that helped manage all areas of her business. She successfully licensed her material, including her album, Book of Secrets, to other labels and distributors, with that record selling more than three million copies worldwide on its own.

Calling from her office, McKennitt says her business these days is in disarray. Music sales have plummeted, and she’s cut 10 employees from her staff while at the same time tracking 48,000 free downloads of her entire catalogue of albums over a period of just more than a month.

“From the inside, this looks like a nuclear war,” she says. “The damage is nearly total, and what exists now is the skeleton of an industry.”

For McKennitt, it isn’t just major record labels run by companies like Universal and Warner that have been affected as free downloading of music became a pandemic over the past decade. She says job losses have been felt throughout the artistic community, with even highly skilled studio recording engineers who have worked with McKennitt in the past finding themselves out of work. At the same time, she says the Canadian government has dithered on an update to the country’s intellectual-property laws that might have presented a glimmer of hope.

“The food chain runs deep,” she says of the job losses. “This is like the end of the family farm for many people. You have to wonder how we got here.”

That’s the question many are asking as the country’s government once again promises to enact legislation designed to offer more support to those working in areas involving intellectual property, one of the significant areas of growth in the country’s labour market. In the throne speech given in March by Stephen Harper’s Conservatives, the party pledged to “strengthen laws governing intellectual property and copyright,” in order to “encourage new ideas and protect the rights of Canadians.”

It isn’t that Canada hasn’t tried before to update its copyright legislation — it is just that the slow-moving machinery behind the country’s democratic process has hindered any progress. It has been 13 years since Canada signed on the World Intellectual Property Organization’s treaty on intellectual property, agreeing to eventually incorporate it into the country’s law. WIPO, one of the specialized agencies associated with the United Nations, was designed to address copyright concerns in the digital era. While dozens of other nations, from U.S. to Albania, signed the WIPO treaty and made it part of their domestic policies, Canada put its signature on it but didn’t move forward. Though the Copyright Act was amended several times starting in 1988 through to the mid-1990s, few changes were introduced in response to the cultural tsunami that came with the increased popularity of the Internet. Since then, the government has had several consultations with the public and industry about copyright, and has twice proposed amendments to the copyright law. Neither bill successfully made it into law, due to an election in the first instance and pressure for increased public consultation in the second case. As a majority of the rest of the world moved forward in enacting legislation designed to deal with the Internet, our efforts amounted to nothing.

As Canada toyed with what to do with its copyright law, growth in the Internet expanded rapidly (the country is currently fifth in broadband penetration, according to the Gartner Group), and with it came soaring online piracy rates. The music industry, perhaps the most vocal advocate of copyright reform over the past decade, was also the most affected by Internet piracy as it witnessed the total number of albums sold in Canada slide from a high of 58 million in 1998 to 35 million last year, a decline that led to hundreds of job cuts. Given lax law enforcement and powerful tools for digital copying and downloading, it shouldn’t have come as a surprise that Canadians admitted to being a nation of pirates, with research firm Environics finding that 31% of those between the ages of 18 and 29 owned up to taking music freely over the Internet in 2008, while one-quarter of Canadians said they purchased a counterfeit movie. The charge that Canada was a haven for thieves was bolstered by the fact that several of the largest file-sharing sites in the world, including isoHunt and, have continuing operations in the country.

This has placed Canada under increasing international scrutiny. In May 2009, a special report from the U.S. Trade Representatives cited Canada on its “priority watch list” of those who don’t protect copyrighted materials, alongside knock-off specialists like China and Pakistan. The report noted Canada’s weak border was a “serious concern” for owners of intellectual property, adding the country’s inability to deal with online piracy was a primary consideration for adding it to the list. More recently, the issue of Canada’s perceived weak copyright law was raised as part of Canada’s free trade negotiations with the European Union.

And if international pressure isn’t enough, there’s plenty at stake on the domestic front. The latest round of the battle over copyright reform comes at a time when Canadian industry is becoming less reliant on traditional manufacturing and more focused on employment involving intellectual property. Over the five years starting in 2004, Canada lost approximately 540,000 manufacturing jobs, while copyright-related “culture” jobs totalled more than 1.1 million in 2007, according to a Conference Board of Canada report. Former Communications Minister Perrin Beatty, now chief executive of the Canadian Chamber of Commerce, points to burgeoning areas of the economy, like the more than 400 companies involved in Waterloo, Ont.’s high-tech sector, or the 18,000 jobs relating to pharmaceutical research, as other examples of industries that need strong intellectual-property regulations in order to continue expanding.

“This is not something that is esoteric,” he says. “This is a major employer in Canada with the potential to grow even more. These are well-paid, sustainable, long-term jobs we are talking about.”

Beatty feels the Conservative government recognizes the need to finally reform the country’s copyright laws, a fact confirmed by Industry Canada, which has said amendments to the Copyright Act should hit Parliament this spring.

“They recognize there’s no sense in making the commitment and leaving it to dangle, especially when a key part of their agenda is innovation,” says Beatty, whose organization represents more than 175,000 businesses across the country. “[Copyright] is one of the legs on the stool.”

Just because the government says it is once again moving forward with reform doesn’t mean there is any consensus on the type of law that should result. While hardly central to discussions at Canadian dinner tables or around company water coolers, few areas of the country’s law are more hotly contested than copyright.

“I’ve had a long experience with this coming from my time in Parliament, and I came away from it then feeling the problem was the word ‘right’ in copyright,” says Beatty. “You get sharply divided camps with people feeling on one side saying God himself has ordained you with the right to unfettered access to someone’s property or the right to have protection.”

One of the most vocal advocates for a more consumer-centric position on the issue of copyright is University of Ottawa law professor Michael Geist. A media gadfly whose left-leaning views on the issue are openly disparaged by many in Canada’s corporate sector, Geist says copyright is attracting more attention because Canadians are recognizing the impact it has on their everyday lives.

“I think the much broader interest comes from the recognition that copyright directly affects individuals in a way that I don’t think most individuals understood in the 1990s,” he says, adding that copyright previously was considered a “commercial law” that didn’t affect regular Canadians. “And I think that stems from the fact that many reforms were targeted at individuals. The [suggested changes to the law] on the table are more significant because they are attuned to individual users, and partly because of the Internet, more people are aware of these things.”

Among the key issues that concern Geist is legislated support for technical protection measures that would limit the ability for consumers to make personal copies of purchased software such as video games, and amendments to the fair-dealing provision that is designed to allow copyrighted material to be used in private study, or for criticism or review. He’s also afraid that changes to the law are being made rashly in the hope that they will help foster innovation and curtail theft of intellectual property, something that he says has not been true in other countries that adopted WIPO-compliant laws.

“Thinking that this is the magic bullet that will solve anything is just wishful thinking,” Geist says. “The U.S. has had these rules for more than 10 years, and we have the same kinds of services and the same kinds of issues relating to peer-to-peer, for example. The idea that passing a law will change that is simply not going to be the case.”

Geist adds there is no direct correlation between lack of Canadian investment or innovation and the lack of a copyright law. He says many Canadian businesses based around intellectual property are flourishing without the implementation of new copyright protections, citing the video-gaming business as one example.

“There’s a lot of growth there, and [that business] faces the same issues when it comes to piracy,” he explains.

Yes, Canada has the third-largest video-game industry in the world, points out Danielle Parr, executive director of the Entertainment Software Association of Canada, adding that the sector now employs 14,000 Canadians in well-paying jobs while generating $2 billion in revenue and $1.7 billion in direct economic activity for the country. However, piracy of games is also skyrocketing, Parr says, making it riskier for those who put tens of millions of dollars into the development of a single title. Parr says her organization tracked approximately 750,000 instances of games freely taken through Canadian Internet service providers in 2008, the organization claims, and 670,000 more through the first half of 2009. If these rates were to decline, Parr says, more investment would flow into the industry, consumers would have more choice in how they obtain their games, and in turn more jobs would be created.

Geist isn’t buying that. “We’re seeing lots and lots of development and lots and lots of investment, and the fact that Canada hasn’t enacted new copyright laws doesn’t seem to be an issue at all,” he says.

Copyright proponents bristle at that, pointing to new business models in the U.S. and U.K. that have not appeared within our borders as proof that Canada is falling behind and consumers are missing out. The Canadian Motion Picture Distributors Association, which has been actively battling camcording of first-run films and lobbying for increased copyright protection, points to dozens of businesses, like downloading service BT Vision, Amazon’s video-on-demand offering, and Bebo’s video service as business models that would come to Canada if the country had stronger IP laws.

Parr says it should be consumers, not pundits, who ultimately decide whether they are willing to accept business models that utilize copyright technologies like digital locks.

“I’ll try to avoid sounding like Ronald Reagan here, but the market will decide that,” she says. “If nothing else, the Internet and the online environment provide more choice for consumers than ever. What the law needs to do is allow the widest range of business models. We have talked about this until we are blue in the face. There have been massive national consultation processes. There’s been discussion ad nauseam. Now what we need is leadership.”

Leadership is the central component that has been missing in the debate, says noted Toronto intellectual-property lawyer Mark Hayes. While the issue of copyright reform continues to polarize many business and consumer advocates, Hayes says Canada should be taking the time to consider how the law fits into an overall economic strategy. Hayes, who has represented broadcasters in matters relating to IP, points to the United Kingdom and Australia as examples of countries that devised a strategy for their respective digital economies and then determined how copyright laws could support it.

“Look at the U.K.,” he says. “They did a comprehensive look at their digital economy. And whether you agree with their conclusions or not, it is quite a breathtaking undertaking. From there, they made changes to their copyright based on that overall strategy. Many other peer countries have done this overall strategy and decided where copyright protection fits.”

Hayes says rather than seeing Canada’s 13-year delay in updating its copyright laws as a lengthy setback, the country should take advantage of it by creating a law that lifts the best of legislation from other nations. “Whether our minority Parliament allows us to do that or not, I don’t know,” he says. “We have the chance to look at what other countries have done and consider it in a much wider context. Whether we will do it or not, who can say?”

It is a position that has the support of Parr’s organization.

“Canada’s future as a world leader in producing and exporting intellectual property is at stake,” she says. “This needs to be part of a broader strategy.”

Until some decision is made on how Canada is going to deal with its intellectual property ownership concerns going forward, McKennitt remains in Stratford trying to decipher all of the political arguments on the subject. Even with her past successes, she’s not sure what her next move should be. She admits to paying careful attention to the costs of running her label versus the returns, and is trying to determine whether to record another album. As piracy of music continues unabated, and as the Canadian government and pundits endlessly debate the merits of copyright policy, McKennitt recognizes she will have to make some tough decisions without expecting much protection for her art.

“Revenue is down significantly for us,” she explains. “And though it shouldn’t be perceived as I’m poor or anything, there’s a certain cost of infrastructure that is needed to do customer service or even plan the next tour. And I’ve trimmed it down to a core until I survey the landscape and figure out what to do.”

Even in her own small way, her Quinlan Road Records is like many Canadian businesses that are concerned about investing in their operations without a degree of certainty that they will be protected by the law.

“I don’t want to spend a lot of money making the next recording when I don’t even know who will be standing to put it out and distribute it,” she says.

She pauses to sigh.

“It is a lockdown way of thinking,” she concludes. “And I’m not alone in this.”