Canada's Copyright Board Shuts Down Industry's Request For 'You Must Be A Criminal Tax' On MicroSD Cards

Copyright

from the moore's-law-is-a-constant,-your-blank-media-levy-shouldn't-be dept

The Copyright Board of Canada (CBC) is hastening the demise of the “you must be a criminal” tax on blank media, at least in Canada. Granted, it’s chosen to allow the $0.29 per blank CD tariff to continue until that media form’s eventual demise, but it seems to be offering that to the CPCC (Canadian Private Copying Collective) in lieu of something it wanted much, much more — a tariff on microSD cards. (It could also be a form of stasis — something easier to maintain than uproot. The decision points out that levies on cassette tapes continued all the way through 2009.)

Even though it is allowing the levy on CDs to continue, the CCB points out how ridiculous this action is.

Blank CDs are low-price, low-margin goods. Increasing the per unit levy on them probably leads to an increase in price. Triggering an increase in the price of a good close to or at the end of its life cycle through an external factor such as a levy imposed by a government agency seems absurd.

Absurd? Absolutely. But there’s nothing about applying a “you must be a criminal” tax to blank media that isn’t.

There are several problems inherent in the CPCC’s tariff demands, not the least of which is the application of static rates to technology that increases in capacity while dropping in price. Here’s what the CPCC proposed back in 2011:

CPCC proposed to maintain the current rate of 29¢ per blank CD and to set rates of 50¢ per microSD card of one gigabyte or less, $1.00 per card of more than one but less than eight gigabytes, and $3.00 per card of eight gigabytes or more. It argued that both blank CDs and microSD cards qualify as audio recording media and that the proposed rates are reasonable.

And here’s what’s wrong with that proposal according to Michael Geist:

The financial impact of the levy would be significant. A 2GB SD card currently sells for about $6.00 and this would add an additional dollar or almost 15% to the cost. Given that the levy would remain static (or even increase) but the costs of SD cards are dropping by roughly 30% annually, the percentage of levy in the overall cost would likely gradually increase over time. Moreover, music plays a small role in the use of memory cards. A recent report indicates that digital cameras are the primary market for SD cards with smartphones the second biggest (and fastest growing) market. Music is a small part of the equation, yet the CPCC is demanding payment for every memory card sold in Canada regardless of its intended or actual use.

Geist wrote this back in 2011 when the CPCC was pursuing a tariff on nearly every form of blank media. Since then, prices have continued to drop and storage capacity has expanded, which would make the tariff the most significant portion of the purchase price if allowed. And, of course, the CPCC was basing this on the assumption that consumers primarily buy media cards in order to store pirated content, something that clearly isn’t true. (This argument is also deployed by entities like the MPAA in reference to other technological advances — for instance, it expressed concern that faster internet speeds will just help people infringe more efficiently.)

The CPCC must have at least partially understood the uphill battle it was fighting as it abandoned every other form of memory except microSD cards in September of 2011. Then the Canadian government gave it the shaft when it excluded microSD cards from tariffs with legislation enacted on October 18, 2012. What all this activity boils down to is the CPCC fighting for a chance to collect a retroactive tariff on microSD cards sold between Jan. 1, 2012 and October 17, 2012.

Even in that limited window, the CBC has chosen not to allow CPCC to pursue this tariff, primarily because the costs of determining what amount should be collected and the collection efforts themselves would far outweigh the income received, especially since the CCB would not allow the CPCC to use its outdated methodology (see above) to determine the levy rate.

[T]he royalties generated would most likely be relatively modest, and certainly less than what CPCC proposed for the following reasons. CPCC’s proposed rates rely on the Stohn/Audley model which determines royalty rates as the product of a price per track and the number of tracks copied onto the blank media. The price per track is the same for both microSD cards and blank CDs: one cannot expect it to be higher for the former than the latter. But because of its reliance on the number of tracks copied, the model tends to generate high royalty rates for microSD cards. Having decided to abandon the model for blank CDs, we would not use it either to set a levy on microSD cards. As a result, a strong possibility exists that the amounts to distribute would be less than the costs entailed in collecting and distributing the levy…

When taken as a whole, the circumstances of this case make any attempt at certifying a fair and equitable tariff for microSD cards impossible. The determination, implementation and enforcement of any potential tariff will almost inevitably be largely futile, certainly unfair and considerably disruptive. This is an exceptional situation, one that lends itself to the proper exercise of our discretion to refuse to certify a tariff not because of a lack of evidence, but because any tariff we would set would be, under these very special circumstances, manifestly unfair and inequitable.

The CBC does note, however, that its decision not to certify this tariff doesn’t completely shut down every avenue the CPCC might want to take in pursuit of fees it clearly believes it’s owed. It offers up this possible angle, which seems to contain a bit of a jab in the direction of industries that have tried to litigate themselves back into profitability.

Private parties are free to litigate even when this makes no economic sense. An application before the Board is not a civil cause of action.

So, there’s that, if the CPCC wants it. The consumer certainly doesn’t and probably doesn’t appreciate being charged a “pirate tax” for media that very possibly will be filled with content of their own creation.

Filed Under: canada, copyright levy, microsd