Copyright Monetization (IPIC McGill Aug 8 2014)

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Transcript of Copyright Monetization (IPIC McGill Aug 8 2014)

Issues relating to the monetization and exploitation of copyright Part I

Issues relating to the monetization and exploitation of copyright

August 8, 2014

Lisa Abe-Oldenburg, B.Comm., JD

IPIC-McGill 2014

Copyright Master Class

Key contractual issues relating to development by others and licensing of software and other content

Dealing with source material

Escrow issues

IP due diligence for transactions

2

Issues relating to the monetization and exploitation of copyright

Parties

Who is the Developer , Vendor, Assignor or Licensor? Are they solvent and able to honor their obligations under the contract? Are parental guarantees needed?

Will there be use by third parties, e.g. affiliates, customers, outsourcers, subcontractors, agents? If so, will they be directly licensed or will the license be sublicensable or transferable to them? Will they get direct benefit of indemnities and protection under limitations clauses? Will they have right to sue or be sued directly? (See Nautical Data v. C-Map below)

IP rights in the software or content

What is the subject matter? Code, databases, documents, multimedia?

Ensure assignment or license of rights wording is consistent with statutory rights in the applicable territory

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Key contractual issues relating to development by others and licensing of software and other content

E.g. In Canada, s. 3(1) Copyright Act right to produce, reproduce, perform, publish, communicate to the public by telecommunication, and depending upon the work, convert, adapt, present, and for software - rent; and s.14.1, moral rights of author (integrity, association, pseudonym, anonymous)

Which IP rights does the Purchaser, Licensee or Assignee, need to ensure it can meet its intended future use? Which IP rights does the Developer, Vendor, Assignor or Licensor need to continue its business? Type of license or assignment required?

Will there be any changes/modifications/updates to the software or content? If so, the contract will also need to address right to source code and ownership of the newly developed works, licenses back, etc.

SaaS/Cloud models is a copy being made? How about a communication to the public?

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Key contractual issues relating to development by others and licensing of software and other content

Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34, [2012] 2 S.C.R. 231

Issue: Is transmission of musical works contained in a video game through an Internet download a communication to the public Copyright Act, R.S.C. 1985, c. C-42, s.3(1)(f)

Copies are identical to copies purchased in stores or shipped by mail

Royalties for reproduction rights were already negotiated

SOCAN applied to copyright board for additional tariff covering the downloads

Copyright Board and Federal Court of Appeal allowed tariff, saying that downloading of file is a communication to the public by telecommunication

SCC held: Internet download of a copy of a work/file, is not a communication to the public by telecommunication. Based on history that communication right is connected to performance-based activities, not to capture activities that resemble reproduction.

Dissent: Communication right is self-standing and independent of performance right

Note: May have been a different outcome if the work had not been a permanent copy

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Key contractual issues relating to development by others and licensing of software and other content

Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35, [2012] 2 S.C.R. 283

Issue: Is streaming of music files from the Internet (online music services) triggered by individual users, a communication to the public Copyright Act, R.S.C. 1985, c. C-42, s.3(1)(f)

A stream is a transmission of data that allows the user to listen to or view a work at the time of the transmission, resulting in a temporary copy of the file on the user's hard drive.

Copyright Board set a tariff for streaming, and Federal Court of Appeal dismissed the appellant's application for judicial review of the Board's decision.

SCC Held: Appeal allowed in part. In respect of downloads, Court referred to Entertainment Software Association v. SOCAN and allowed the appeal. Transmission of a single copy of a work to a single individual is not a communication to the public.

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Key contractual issues relating to development by others and licensing of software and other content

However, in respect of streamed music from the Internet, appeal was dismissed. Where there is a series of repeated transmissions of the same work to different recipients, each transmission cannot be analyzed in isolation, even if each transmission is initiated at the request of an individual. True character of the activity engages the exclusive right to communicate to the public.

Nothing in s.3(1)(f) of the Act excludes pull technologies from its scope or restricts communications to the public to a purely non-interactive context. The section is technology-neutral.

It matters little for the purposes of copyright protection whether the members of the public receive the communication in the same or in different places, at the same or at different times, or at their own or the sender's initiative.

A stream of a musical work from the Internet is not a private transaction outside the scope of the right to communicate to the public.

Note: Analysis can be applied to software streaming, cloud computing, and "pull" technologies that distribute software and content.

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Key contractual issues relating to development by others and licensing of software and other content

In 2012, Bill C-11 amended the Copyright Act

New Section 2.4(1.1) of Act - For the purposes of this Act, communication of a work or other subject-matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public.

New Section 19.1 of the Act - Despite subsection 2.2(1), a sound recording that has been made available to the public by telecommunication in a way that allows a member of the public to access it from a place and at a time individually chosen by that member of the public, or that has been communicated to the public by telecommunication in that way, is deemed to have been published for the purposes of subsection 19(1).

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Key contractual issues relating to development by others and licensing of software and other content

Software and content test versions/samples fair dealing exemption?

Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, 2012 SCC 36, [2012] 2 S.C.R. 326

Issue: Whether the use of previews constitutes "fair dealing" exception to copyright infringement under Copyright Act, R.S.C. 1985, c. C-42, s. 29

Copyright Board and FCA found that 30-90 second excerpts of musical works that can be listened to by consumers prior to purchasing the work, was "fair dealing" for the purpose of research under s. 29 of the Act

SCC Held: Agreed with Copyright Board. Test for fair dealing in CCH Canadian Ltd. v. Law Society of Upper Canada, involves 2 steps:

Is the purpose for one of the two allowable purposes under s. 29: "research" or "private study"?

Given large, liberal interpretation

From the perspective of the consumer/user, not the online service provider

Research to identify which music to purchase need not be for creative purposes only

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Key contractual issues relating to development by others and licensing of software and other content

Is the dealing "fair" based on factors of purpose, character and amount of dealing, existence of alternatives, nature of work and effect of dealing on that work?

Again, from the perspective of the consumer

Reasonable safeguards in place to ensure previews are being used for this purpose

Users don't keep permanent copy of preview file is streamed and automatically deleted from user's computer once heard

Copies cannot be duplicated or further disseminated

Look at proportion of preview in relation to the whole work, not the aggregate amount of music heard

Several seconds is modest amount when compared to whole work

No alternatives to dealing that effectively demonstrate to consumer what music sounds like

Previews reasonably necessary to help consumers research what to purchase

Short, low-quality previews do not compete with or adversely affect the downloading of the works themselves. Instead, effect is to increase sales

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Key contractual issues relating to development by others and licensing of software and other content

Type of license: non-exclusive, sole or exclusive?

To be able to sue for copyright infringement, must be owner or have exclusive license Nautical Data v. C-MAP (2013 FCA ) and s. 2.7 and 36(1) of the Copyright Act

Examples of sole or exclusive license conditions :

obligation on the Licensee to exploit, effectively market and advertise, meet minimum performance/volume goals, profits, sales, royalty structure

restricted territory, channels of distribution, markets, products, specific technology

Licensee maintaining certain product quality standards

requirement on Licensee to provide Licensor with samples, inspections, testing

license to convert back to non-exclusive if c