Competition Policy and Canadas
New Breed of Copyright Law
Alex Cameron and Robert Tomkowicz*
Open digital networks present a number of challenges for
copyright holders. With a few clicks of a mouse, a digital work can
be copied perfectly and distributed globally without the copyright
holders knowledge or permission. In response to these challenges,
copyright holders have started using technological meanscalled
technological protection measures (TPMs)to control access to
and use of copyright works. They have also sought legal protections
for their TPMs through amendments to copyright laws. These legal
protections typically make it illegal to circumvent TPMs and, in some
countries, to make devices that circumvent TPMs. These are
commonly known as anticircumvention and anti-device
provisions, respectively. Although often overlooked, anticircumvention
and anti-device provisions are a new breed of copyright law that may
come to be implemented in Canada and that spawns substantial
implications and unintended consequences for Canadian competition
policy.
Identifying and addressing some of these implications and
consequences is the focus of this article. Part I briefly sketches the
traditional relationship between competition and copyright policy in
Canada. Part II sets out a basic framework for analysis by describing
copyright holders new technological controls, and the possible shape
of amendments to Canadian copyright law. Part III explores the new
competition policy issues spawned by legal protections for TPMs and
digital rights management. Finally, consistent with recent indications
from the commissioner of competition that intellectual property will
receive increased attention from the Competition Bureau, Part IV
discusses concrete ways that Canadas competition authority can
ensure that Canada maintains vibrant competition law and policy in the
face of possible changes to copyright law.
Les rseaux numriques ouverts prsentent un nombre de dfis
aux dtenteurs de droits dauteur. Avec quelques clics de souris, leurs
uvres numriques peuvent tre copies parfaitement et distribues
sans leur connaissance ni leur permission partout dans le monde. En
rponse ces dfis, les dtenteurs de droits dauteur adoptent de plus
en plus des mesures techniques surnommes mesures de
protection technique (MPT) afin de contrler laccs et
lutilisation de leurs uvres. Ces dtenteurs cherchent galement
obtenir une protection lgale pour leurs MPT. Cette forme de
protection juridique a gnralement pour objet de rendre illicite le
contournement des MPT, et, dans quelques pays, la fabrication de
dispositifs qui contournent
les MPT. Ces mesures anti-
contournement et anti-dispositif constituent une nouvelle espce de
droit dauteur et pourraient ventuellement tre adoptes au Canada.
Quoique souvent nglige, cette nouvelle forme de droit dauteur a
des implications importantes et des consquences imprvues sur la
politique de la concurrence au Canada.
Cet article a pour objet didentifier et dadresser quelques-unes
de ces implications et consquences. La Partie I brosse une esquisse
de la relation traditionnelle entre les politiques de la concurrence et
des droits dauteur au Canada. La Partie II prsente un cadre
danalyse par lentremise dune description des nouvelles mesures de
contrle technique employes par les dtenteurs de droit dauteur. La
Partie III explore les nouvelles questions de politique engendres par
le dveloppement de mesures de protection pour les MPT et pour la
gestion des droits numriques. Finalement, la lumire des indices
rcents du commissaire de la concurrence selon lesquels la proprit
intellectuelle recevra davantage dattention de la part du Bureau de la
concurrence, la Partie IV de larticle discute des faons concrtes
grce auxquelles lautorit de concurrence du Canada peut assurer un
droit et une politique de la concurrence vibrants face aux
changements ventuels aux droits dauteur.
* Alex Cameron, LL.B., LL.M, of the Bar of British Columbia, Doctoral Candidate and Part-time
Professor, University of Ottawa, Faculty of Law, and of Fasken Martineau DuMoulin LLP
Bar of New York State, Doctoral Candidate and Part-time Professor, University of Ottawa, Faculty of
Law
Award, National Competition Law Section, Canadian Bar Association, for the best scholarly paper on
a subject directly relating to Canadian competition law or policy. The authors wish to thank all those
who make the James H. Bocking Memorial Award possible, including the Bocking family, the
National Competition Law Section, and the Competition Bureau. The authors also wish to extend a
sincere thanks to the Hon. Howard Wetston, Q.C., the Hon. William P. McKeown, Q.C., Dr. Stanley
Wong, Professor Tom Ross, and Professor Abraham Hollander, who collectively comprised the jury
that selected this paper for the award and who provided valuable comments that have resulted in an
improved article. The authors are grateful to the Hon. William P. McKeown, Q.C. and Mark A.A.
Warner of Fasken Martineau DuMoulin LLP for their time and for the insightful comments they
generously offered.
Alex Cameron and Robert Tomkowicz 2007
To be cited as: (2007) 52 McGill L.J. 291
Mode de rfrence : (2007) 52 R.D. McGill 291
MCGILL LAW JOURNAL / REVUE DE DROIT DE MCGILL
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292
Introduction
293
295
300
300
302
306
308
308
312
314
319
321
324
324
326
329
331
332
334
336
I. Competition and Copyright
II. Technological Controls, Contracts, and Canadas New
Breed of Copyright Law
A. Technological Protection Measures and Digital Rights
Management
B. Canadas Proposed Implementation of the WIPO Treaties
C. Motivations for Digital Rights Management and
Anticircumvention Laws
III. New Competition Law and Policy Issues
A. Bigger and Stronger Intellectual Property
B. Exercising the Exclusive Right to Circumvent?
C. Tied Selling, Abuses, and Anticompetitive Practices
D. Security Research
E. Product Labelling and Deceptive Marketing Practices
IV. Creating a Competition Policy Framework for the
Twenty-first Century
A. Advocacy on Copyright is Essential
B. Infusing Competition Policy into Copyright Reform
C. Legislative Reform of the Competition Act
D. Enforcement
E. Digital Rights Management Technology and Standards
Setting
International Advocacy
F.
Conclusion
2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
293
Legal protection for TPMs is the equivalent of making
screw-drivers illegal because they can be used to break and
enter … Good legislation targets the illegal act, not the legal
tools the crook might use. Canada is already well-served by
laws protecting copyright. Outlawing the technological
toolsthe screw-drivers of the technology community
undermines Canadas commitment to fostering an economy
built on innovation and opportunity.
Bob Young, Red Hat Inc.1
Introduction
Open digital networks present a number of opportunities and challenges for
copyright holders. On the one hand, copyright holders are keen to exploit the increased
efficiencies of digital distribution, including the possibility for [s]uperdistribution,2
whereby consumers themselves become distributors of content.3 On the other hand,
copyright holders are wary of the fact that, with a few clicks of a mouse, their digital
works can be copied perfectly and distributed globally without their knowledge or
permission and often in violation of their legal rights.
these challenges, copyright holders have started using
technological meanstechnological protection measures (TPMs)to attempt to
control individuals access to and use of copyright works. TPMs are often combined
with other technologies to form complex digital rights management (DRM)
systems. As discussed in Part II.C of this article, DRM systems are used principally as
contract-enablers; the rights management in DRM is all about granting and
managing contractual (i.e., licence) rights to access and use creative works. DRM
gives copyright holders a powerful new ability to enter and technologically enforce
licence agreements with each individual end user. Such licence agreements and the
In response
to
1 Quoted in Canadian Internet Policy and Public Interest Clinic, Press Release, Proposed Copyright
Legislation Could Cripple Canadian Research and Businesses: IT Security Research and Technology
Facing Civil and Criminal Liability, (8 March 2005), online: CIPPIC
original].
2 Todd Beals, What Is the Term Superdistribution And How Does it Relate To DRM For Music?
(and Video and Books and Photos and … ) The Beals Media Update (1 September 2004), online:
CMS
3 See U.S., Piracy and Privacy: The Paradox of Illegal File Sharing on Peer-to-Peer Networks and
the Impact of Technology on the Entertainment Industry: Hearing Before the Senate Committee on
Governmental Affairs, 108th Cong. (30 September 2003) (statement of Jack Valenti, President and
CEO, Motion Picture Association), online: U.S. Senate
doubt, is the greatest delivery system yet known to this planet. … The movie industry is eager to use
the Internet to deploy our movies, thousands of titles of every genre, to homes in this country and
around the world).
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technologies that enforce them can sometimes go beyond the limited bounds of
copyright law, allowing copyright holders to replace copyright rules with an
automated contractual ordering. Copyright and competition law issues arising from
DRM can thus be thought of as being as much about contracting practices as they are
about the use of technologies.
Copyright holders have sought legal protections for their TPMs and DRM
systems through amendments to copyright laws around the world. These legal
protections typically make it illegal to circumvent TPMs or DRM systems and, in
some countries, to make or distribute devices that circumvent them. These are
commonly known as anticircumvention and anti-device provisions, respectively.
Anticircumvention and anti-device provisions are a new breed of copyright law.
The use of quotations around copyright here and in the title of this article is
intentional. One of the concepts explored here is that anticircumvention and anti-
device provisions might not be the proper subject matter of copyright, a consideration
that has implications for competition law and policy. For example, there are reasons
to question whether giving copyright holders the right to sue an individual who
circumvents a TPM or DRM technology, as an anticircumvention law would do, fits
into copyrights bundle of rights. Other commentators have picked up on this theme
and used the term paracopyright to describe the true character of anticircumvention
and anti-device provisions.4 This issue is explored in more depth in Part III.B.
Canadas Copyright Act5 does not currently contain anticircumvention or anti-
device provisions. In June 2005, the Liberal government tabled legislation aimed at
making changes to the Copyright ActBill C-60, An Act to amend the Copyright
Act.6 Legal protections for TPMs and DRM systems were among the main
components of the proposed law. As a result of the change in government in early
2006, Bill C-60 did not proceed past first reading and was not passed into law. The
shape of possible copyright reform in Canada remains uncertain. It is widely
expected, however, that anticircumvention provisions will again be proposed in
Canada.
Although underexamined to date in Canada, anticircumvention and anti-device
provisions, along with the DRM technologies and underlying contracting practices
that they tend to protect, may spawn substantial implications and unintended
consequences for Canadian competition policy, particularly for consumers and for
4 See e.g. David Nimmer, Puzzles of the Digital Millennium Copyright Act (1998-1999) 46
Journal of the Copyright Society of the U.S.A. 401 at 405; Jeremy F. deBeer, Constitutional
Jurisdiction Over Paracopyright Laws in Michael Geist, ed., In the Public Interest: The Future of
Canadian Copyright Law (Toronto: Irwin Law, 2005).
5 R.S.C. 1985, c. C-42.
6 1st Sess., 38th Parl., 2005. Bill C-60 was based on proposals announced by the Government a few
months earlier on 24 March 2005. See Industry Canada & Canadian Heritage, Government Statement
on Proposals for Copyright Reform (24 March 2005), online: Industry Canada
295
2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
small and medium-sized businesses.7 Identifying and addressing some of these
potential implications and consequences is the focus of this article.
Part I of this article briefly sketches the traditional relationship between
competition and copyright in Canada. Part II sets out a basic framework for analysis
by describing copyright holders new technological controls and contracting
practices, along with the possible shape of amendments to Canadian copyright law.
Part III explores the new competition policy issues that may be spawned by legal
protections for TPMs and DRM technologies and the contracting practices that
underlie them. Finally, consistent with recent indications from the commissioner of
competition that intellectual property will receive increased attention from the
Competition Bureau (Bureau),8 Part IV of this article discusses concrete ways that
Canadas competition authority can ensure that Canada maintains a vibrant
competition law and policy in the face of possible changes to copyright law.
I. Competition and Copyright
Competition and copyright policy exist in a close and complementary
relationship. Each area of law strives to achieve similar goals while maintaining a
balance among a number of competing societal interests.9 Since at least the early
1990s, intellectual property has been viewed as generally procompetitive in Canada
and in the United States.10 The Competition Bureau sees part of its role as protecting
the
laws from
anticompetitive conduct; such incentives are seen to contribute to the goals of
that are established under
intellectual property
incentives
7 There are a number of works addressing the general relationship between intellectual property and
competition law. However, there is a paucity of commentary in Canada on copyrights implications
for competition law and policy. For a good discussion in this area, see Michael Geist, Anti-
Circumvention Legislation and Competition Policy: Defining a Canadian Way? in Geist, supra note
4.
8 See e.g. Sheridan Scott, Commissioner of Competition, Competition Bureau, Competition Law
and Intellectual Property Law: Getting the Balance Just Right (Speech to the University of Victoria
Faculty of Law International Intellectual Property Law Symposium, 15 July 2006), online:
Competition
Sheridan Scott, Competition Bureau Progress and Priorities (Speech to the Canadian Bar
Association Annual Conference on Competition Law, Hilton Lac Leamy, Gatineau, Qc., 3 November
2005)
at 9-10, online: Competition Bureau
9 See generally Howard I. Wetston, Director of Investigation and Research, Consumer and
Corporate Affairs Canada, Competition Policy and Intellectual Property Rights: Complementary
Framework Policies for a Market Economy (Address to the Conference on Global Rivalry and
Intellectual Property: Developing Canadian Strategies, 25 April 1990), online: Competition Bureau
10 For a recent example confirming the Canadian view, see Canada, Competition Bureau, Canadian
Intellectual Property Enforcement Guidelines (Presentation before the U.S. Federal Trade
Commission and U.S. Department of Justice Hearings, Washington, D.C., 22 May 2002), online: FTC
Bureau
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competition policy.11 Thus, recognizing that competition law may result in
limitations on the terms and conditions under which the owners of IP rights may
transfer or license the use of such rights to others, and on the identity of those to
whom the IP is transferred or licensed … ,12 the Bureau has attempted to tread a
cautious and clearly delineated path where competition intersects with copyright.13
intellectual property. The first of these provisions reads as follows:
The Competition Act14 contains two key provisions that relate directly to
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32(1) In any case where use has been made of the exclusive rights and
privileges conferred by one or more patents for invention, by one or more
trade-marks, by a copyright or by a registered integrated circuit topography, so
as to
(a) limit unduly the facilities for transporting, producing, manu-
facturing, supplying, storing or dealing in any article or commodity that
may be a subject of trade or commerce,
such article or commodity,
(c) prevent, limit or lessen, unduly, the manufacture or production of
any such article or commodity or unreasonably enhance the price thereof,
or
(d) prevent or lessen, unduly, competition in the production, manu-
facture, purchase, barter, sale, transportation or supply of any such article or
commodity,
(b) restrain or injure, unduly, trade or commerce in relation to any
the Federal Court may make one or more of the orders referred to in subsection
(2) in the circumstances described in that subsection.15
11 See Canada, Competition Bureau, Intellectual Property Enforcement Guidelines (Ottawa:
Industry Canada, 2000), online: Competition Bureau
[IPEGs] (Competition laws may be invoked to protect these same incentives from anti-competitive
conduct that creates, enhances or maintains market power or otherwise harms vigorous rivalry among
firms at 1).
12 Ibid.
13 Courts have similarly walked a careful line at the intersection of intellectual property and
competition law. Competition law has occasionally been raised as a defence to allegations of
infringement of intellectual property rights. In such circumstances, courts have held that the defence
ex dolo malo non oritur actio is available only if, in order to prove the intellectual property
infringement, the plaintiff must prove that it is party to an agreement that is illegal from a competition
law perspective. See e.g. Philco Products, Ltd. v. Thermionics, Ltd., [1940] S.C.R. 501, 4 D.L.R. 1.
Competition law has also been raised as a defence against plaintiffs seeking equitable relief in
connection with intellectual property rights. See e.g. Eli Lilly and Co. v. Marzone Chemicals Ltd.
(1976), 29 C.P.R. (2d) 253 (F.C.T.D.). For an excellent discussion of these matters, see Stanley Wong,
Competition Act Implications for the Licensing of Intellectual Property Rights: 2002 Update (Paper
presented to the program Intellectual Property License Agreements, Canadian Institute, Vancouver,
24-25 June 2002), on file with author.
14 R.S.C. 1985, c. C-34.
15 Ibid., s. 32(1).
297
2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
Orders permitted by subsection 32(2) include an order that an intellectual property
licence is void and an order that the intellectual property be licensed on certain terms,
subject to subsection 32(3).16
In the Intellectual Property Enforcement Guidelines, the Competition Bureau has
made it clear that it will interpret the requirements of section 32 strictly and narrowly:
The Bureau will seek a remedy for the unilateral exercise of the IP right to exclude
under section 32 only if the circumstances specified in that section are met and the
alleged competitive harm stems directly from the refusal and nothing else.17 Thus,
section 32 permits competition challenges only where a competitive harm flows
directly from the mere exercise of an intellectual property right. The mere
exercise is defined in the IPEGs as the exercise of the owners right to unilaterally
exclude others from using the IP.18 If there is something more than a unilateral
refusal, then the remedies available under section 32 will not apply.
On top of these requirements, a second threshold must be met before section 32
will be applied.19 Gwillym Allen, a senior economic and strategic advisor at the
Competition Bureau, has indicated that the Bureau will only invoke section 32 with
respect to the mere exercise of an intellectual property right in the rare cases where it
is clear that the effect of issuing a remedy or issuing an order [under subsection
32(2)] would unlikely have any real adverse effect on innovation.20 The application
of section 32 has been rare indeed. As of September 2007, there have been no
contested cases decided under this section.
The Bureaus restrained approach to section 32 may be due to the fact that the
section is understood to be a criminal section.21 Although the section does not create
an offence per se, the Federal Court may only issue a remedy under section 32 on an
16 Subsection 32(3) prohibits the court from making an order that would be at variance with any
treaty, convention, arrangement or engagement regarding intellectual property to which Canada is a
party (ibid.).
17 IPEGs, supra note 11 at 9 [emphasis added].
18 Ibid. at 7.
19 For a good description regarding the two-step operation of section 32, see Calvin S. Goldman &
John D. Bodrug, Competition Law of Canada, looseleaf (New York: Juris, 2005) at 3.05, 3.06. See
also Wong, supra note 13.
20 Hearing on Competition and Intellectual Property Law and Policy in the Knowledge-Based
Economy (Panel participation at hearing hosted by the U.S. Department of Justice Antitrust Division
and the U.S. Federal Trade Commission, Washington, D.C., 22 May 2002) at 89, online: Federal
Trade Commission
IPEGs, supra note 11.
21 The authors are grateful to the Hon. William P. McKeown, Q.C. for alerting them to this aspect of
section 32.
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information exhibited by the Attorney General of Canada … 22 Apart from the fact
that the matter must be referred to the Attorney General of Canada for prosecution,23
it is important to note that the standard of proof in a criminal matter is beyond a
reasonable doubt.24 In matters of competition law and economics, this burden may
be particularly difficult to discharge. These facts severely limit the utility of section
32 in redressing a lessening of competition produced in connection with intellectual
property rights.
Not all commentators agree that section 32 is a criminal section. Stanley Wong,
for example, has challenged the notion that section 32 should be read as a criminal
section and that the criminal standard of proof should apply under the section.25
Nevertheless, either by reason that section 32 is a criminal section with a high onus of
proof, or by reason that clarity is lacking with respect to the nature or applicability of
the section, the section has been of limited practical utility to date. Part IV of this
article explores how changes to section 32 may be a key component in ensuring that
intellectual property rights are answerable to competition law and policy in
appropriate cases.
The second key provision in the Competition Act that relates to intellectual
property is found in the Abuse of Dominant Position provisions under subsection
79(5), introduced in the 1986 amendments:
For the purpose of this section, an act engaged in pursuant only to the
exercise of any right or enjoyment of any interest derived under the Copyright
Act, Industrial Design Act, Integrated Circuit Topography Act, Patent Act,
Trade-marks Act or any other Act of Parliament pertaining to intellectual or
industrial property is not an anti-competitive act.26
In the IPEGs, the Competition Bureau has confirmed the plain reading of this section:
The exercise of an intellectual property right or the enjoyment of an interest derived
from an intellectual property statute, without something more, is insufficient to
22 Competition Act, supra note 14, s. 32(2). The application for a special remedy brought by the
Attorney General has to contain proof of undue restraint of trade or lessened competition. See IPEGs,
supra note 11 at 8-9.
23 It is also relevant that the Federal Court does not have extensive criminal law experience. See
generally Ian Bushnell, The Federal Court of Canada: A History, 18751992 (Toronto: University of
Toronto Press, 1997). For example, although the Federal Court has concurrent jurisdiction with
provincial courts to hear and determine most matters under the Copyright Act, supra note 5, section 37
of that act states that the Federal Court does not have concurrent jurisdiction when it comes to the
prosecution of offences under the Copyright Act. For a provincial decision under the criminal offence
provisions of the Copyright Act, see R. v. Bonamy, 2000 BCCA 308, 6 C.P.R. (4th) 1.
24 R. v. Lifchus, [1997] 3 S.C.R. 320 at para. 12, 118 Man. R. (2d) 218, 150 D.L.R. (4th) 733.
25 Supra note 13 at para. 76 (suggesting that the standard might be substantial proof of harm or
perhaps even a balance of probabilities). The issue of the standard under section 32 has not been
addressed by a court.
26 Supra note 14, as am. by An Act to establish the Competition Tribunal and to amend the
Combines Investigation Act and the Bank Act and other Acts in consequence thereof, R.S.C. 1985, c.
19 (2d Supp.), s. 45 [emphasis added].
299
2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
constitute an anticompetitive act. Such acts cannot be found to be an abuse of
dominant position. That said, during his term as director of investigations and
research, the Honourable Howard Wetston stated that where an intellectual property
right is abused, as opposed to exercised, it may run afoul of the abuse of dominance
provisions in the Competition Act.27
In the fifteen years since Wetstons statement, the Competition Tribunal has not
demonstrated a strong interest in interfering with intellectual property rights on
competition law grounds. Although there have been two significant cases involving
refusals to license intellectual property,28 the tribunal held that no violation of the
Competition Act had taken place in either case.
The tribunal held that a refusal to license intellectual property, even when
motivated in part by competition issues, was not an anticompetitive act because it
amounted to an exercise of an exclusive right under the relevant intellectual property
statute. Something more than the mere exercise of a statutory right is required, even if
the exercise of the right is exclusionary in effect. In the Tele-Direct case, the tribunal
confirmed that because trademark owners have the exclusive power under the Trade-
marks Act29 to decide whom to license their marks to, a refusal to license could not be
an anticompetitive act: The respondents motivation for their decision to refuse to
license a competitor becomes irrelevant as the Trade-marks Act does not prescribe
any limit to the exercise of that right.30
As reflected in these decisions and in the approach of the Competition Bureau,
competition law has traditionally maintained a degree of distance from intellectual
property rights. This approach has been maintained in Canada at least since
intellectual property came to be viewed by the Competition Bureau as a
procompetitive policy instrument that is complementary to competition law in
promoting an efficient economy. However, new technological controls and automated
contracting practices used by copyright holders, combined with the possibility that a
new breed of copyright law will be implemented in Canada, suggest that it is time
for competition principles to play a markedly more active role in copyright law and
policy.
27 See Wetston, supra note 9.
28 See Canada (Director of Investigation and Research) v. Tele-Direct (Publications) (1997), 73
C.P.R. (3d) 1 (Competition Tribunal) [Tele-Direct]; Canada (Director of Investigation and Research)
v. Warner Music Canada (1997), 78 C.P.R. (3d) 321 (Competition Tribunal) [Warner]. In a more
recent case, the Bureau discontinued an inquiry regarding allegedly restrictive licence terms being
used by a printer manufacturer. The Bureau concluded that no tied selling had taken place and that the
licensing was merely an exercise of copyright and thus not anticompetitive pursuant to subsection
79(5). See Canada, Competition Bureau, Discontinued Cases in Annual Report of the Commissioner
of Competition for the Year Ending March 31, 2004 at Appendix 1, online: Competition Bureau
29 R.S.C., 1985, c. T-13.
30 Tele-Direct, supra note 28 at 33.
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II. Technological Controls, Contracts, and Canadas New Breed
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of Copyright Law
A. Technological Protection Measures and Digital Rights Management
Much has been written about TPMs and DRM.31 Rather than conducting a
comprehensive review of the literature, this part is intended to provide a basic
framework for thinking about how the use and legal protection of TPMs and DRM
technology can implicate competition law and policy.
The term technological measureor TPM as used in this articleappears to
have first gained widespread use in 1996 as a result of its inclusion in the World
Intellectual Property Organization (WIPO) treaties discussed below.32 The term
TPM is now commonly understood to refer to technologies that either control
access to or use of copyright works, or both.
A TPM that controls access to a work might be as simple as a password
protection. More complex access-control TPMs utilize cryptography to regulate
access to a work.33 Cryptography is used in a variety of different ways in different
TPMs, often to encrypt the copyright work and to permit decryption and access to the
work only to authorized users or devices.34 Use-control TPMs function to control the
uses that can be made of a work after a consumer is granted access to it. Although
use-control TPMs might control any number of uses, the most common type is a
copy-control mechanism that regulates or prevents duplication of all or part of a
work. TPMs are often used in combination with one another and with other
31 Descriptive material in this section is derived from Alex Cameron, Between Customers and
Content: Internet Service Providers in the DRM Debate (Masters Thesis, University of Ottawa, 2004)
[unpublished]. For a detailed discussion of TPMs and DRM, see e.g. Ian Kerr, Alana Maurushat &
Christian S. Tacit, Technical Protection Measures: Part ITrends in Technical Protection Measures
and Circumvention Technologies (2002), online: Canadian Heritage
Ian Kerr, Alana Maurushat, & Christian S. Tacit, Technical Protection Measures: Part IIThe Legal
Protection of TPMs (2002), online: Canadian Heritage
32 See infra notes 45 and 46 and accompanying text. Although the WIPO treaties seem to have
spawned the use of the term TPM on a broad scale, access- and use-based technological controls
were being discussed very early in the digital copyright context. See e.g. U.S., Information
Infrastructure Task Force, Intellectual Property and the National Information Infrastructure: The
Report of the Working Group on Intellectual Property Rights (Washington, D.C.: Information
Infrastructure Task Force, 1995) at 177-200, online: United States Patent and Trademark Office
33 See generally Kerr, Maurushat & Tacit, TPMs Part I, supra note 31.
34 See ibid. See also Dean S. Marks & Bruce H. Turnbull, Technical Protection Measures: The
Intersection of Technology, Law and Commercial Licences (2000) 22 Eur. I.P. Rev. 198 at 212.
301
2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
component parts and information35 to form part of larger, more sophisticated digital
rights management systems.
In general terms, DRM is a form of persistent technological protection that
travels with copyright works wherever they go, discretely managing licensed rights
regarding access to and use of works.36 DRM can be contained in operating systems,
software, hardware, or any combination of the three.37 DRM systems can also contain
tracking and reporting capabilities to provide copyright holders with information
regarding access to and uses of works, as well as about the habits of end users.38
As a corollary to controlling access to and use of works, DRM can also be used
to automate the enforcement of rights. For example, the terms of the licence may
establish that although a user may be permitted to read an article once for a fee, if the
user attempts to copy or quote from a portion of the article halfway through reading
it, the DRM system will automatically destroy the article.
A number of DRM systems are under development and are being implemented
worldwide.39 Perhaps because numerous TPMs and DRM systems have been
broken,40 or because software and hardware standardization for DRM have not
35 Information can include, for example, rights management information used by copyright
holders to manage rights in association with works. See generally Kerr, Maurushat & Tacit, TPMs
Part I, supra note 31.
36 See e.g. Mark Stamp, Risks of Digital Rights Management (2002) 45:9 Communications of the
ACM 120 at 120 (discussing persistent protection in DRM as a form of remote control over
works after the works have been delivered to users). For a more comprehensive discussion on the
same issue, see Mark Stamp, Digital Rights Management: The Technology Behind the Hype (19
December 2002) [unpublished], online:
37 See Chris Hoofnagle, Digital Rights Management: Many Technical Controls on Digital Content
Distribution Can Create a Surveillance Society (2003-2004) 5 Colum. Sci. & Tech. L. Rev. 3.
and Public
38 The Office of the Privacy Commissioner of Canada has proactively involved itself in the
copyright reform process in Canada, on the stated basis that DRM raises surveillance issues similar to
those raised by spyware. See Letter from Jennifer Stoddart, Privacy Commissioner of Canada, to the
Canadian Internet Policy and Public Interest Clinic (24 November 2004), online: Canadian Internet
Interest Clinic
[Letter
from Jennifer Stoddart].
39 For lists of DRM organizations, systems, and component developments, see e.g. Key DRM
Projects in Cover Pages, online: Cover Pages
Lyon, A Quick-Reference List of Organizations and Standards for Digital Rights Management
(National Institute of Standards and Technology Special Publication 500-241) (Washington, D.C.:
National Institute of Standards and Technology, 2002).
40 See e.g. Andrew Orlowski, iTunes DRM Cracked Wide Open for GNU/Linux. Seriously The
Register (5 January 2004), online: The Register
News.com (27 February 2004), online: CNet News.com
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adequately developed, copyright holders have not yet widely adopted DRM.41 Some
argue that DRM will never be successful.42 It remains to be seen whether such
arguments will stand the test of time. Copyright holders are likely to continue chasing
the promise of control through DRM so long as DRM technology improves and so
long as DRM technology receives a strong backing from law, as may soon occur in
Canada.43
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B. Canadas Proposed Implementation of the WIPO Treaties
As no technological measure can permanently resist
deliberate attacks, a TPM is only as good as its legal
protection.
Canadian Recording Industry Association44
In December 1997, Canada indicated that it would sign the WIPO Copyright
Treaty45 and WIPO Performances and Phonograms Treaty46, known collectively as
the WIPO Treaties.47 Among other matters, these treaties require contracting
countries to amend their domestic laws to include a form of protection for TPMs.
Article 11 of the WCT provides as follows:
Contracting Parties shall provide adequate legal protection and effective
legal remedies against the circumvention of effective technological measures
that are used by authors in connection with the exercise of their rights under
this Treaty or the Berne Convention and that restrict acts, in respect of their
41 See John Borland, Group Calls for Copy Protection Rosetta Stone CNet News.com (20 July
2004), online: CNet News.com
42 See e.g. Cory Doctorow, Microsoft Research DRM Talk (Presentation to Microsoft employees
in Redmond, Wash., 17 June 2004), online: Craphound.com
Peter Biddle et al., The Darknet and the Future of Content Distribution [unpublished], online:
Stanford University
43 See e.g. Digital Rights Market to Boom, Study Says CNet News.com (1 July 2004), online:
CNet News.com
government has funded the development of DRM through its Electronic Copyright Fund. See
Canadian Heritage, Electronic Copyright Fund: Program Description and Application Guidelines
June 2004, online: Canadian Heritage
44 Submission of the Canadian Recording Industry Association in Respect of Consultation Paper on
Digital Copyright Issues (14 September 2001) at 17, online: Industry Canada
45 20 December 1996, 2186 U.N.T.S. 121, WIPO Publication No. 226 (entered into force 6 March
2002) [WCT].
2002) [WPPT].
46 20 December 1996, 2186 U.N.T.S. 203, WIPO Publication No. 227 (entered into force 20 May
47 See Canadian Heritage, News Release, Canada Commits to Sign International Copyright
Treaties (18 December 1997), online: Canadian Heritage
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works, which are not authorized by the authors concerned or permitted by
law.48
303
Article 18 of the WPPT contains a similar requirement in connection with TPMs used by
performers and producers of phonograms.49 In addition, Article 12 of the WCT prohibits
the removal of rights management information (RMI) from works and the trafficking in
works knowing that RMI has been removed.50
Fuelled by pressure to ratify the WIPO Treaties, there is a growing global body of law
designed to protect TPMs.51 A number of countries around the world have ratified the
WIPO Treaties, though their approaches have differed.52 The most widely known
example is the United States Digital Millennium Copyright Act of 1998.53
In general terms, the DMCA makes it illegal to circumvent TPMs that effectively
control access to copyright works,54 to remove or alter RMI attached to works,55 and to
make, sell, or otherwise provide any technology primarily intended to circumvent TPMs.56
The DMCA represents a strong approach to implementation of the WIPO Treaties because
it includes not only anticircumvention provisions, but also anti-device provisions. The
DMCA provides broad blanket protection for TPMs and includes criminal provisions.
Further, the DMCA has been interpreted to prohibit circumvention irrespective of
whether a copyright infringement takes place in relation to the underlying copyright
work: [T]he DMCA targets the circumvention of digital walls guarding copyrighted
material (and trafficking in circumvention tools), but does not concern itself with the
48 Supra note 45.
49 Supra note 46.
50 RMI is defined as information which identifies the work, the author of the work, the owner of
any right in the work, or information about the terms and conditions of use of the work, and any
numbers or codes that represent such information, when any of these items of information is attached
to a copy of a work or appears in connection with the communication of a work to the public (WCT,
supra note 45, art. 12). See also WPPT, supra note 46, art. 19.
51 As of August 2007, sixty-four states had signed the WCT and sixty-two states had signed the
WPPT. See WIPO-Administered Treaties, online: World Intellectual Property Organization
52 For review and analysis of the DMCA, infra note 53, the WIPO Treaties that led to the DMCA,
and examples of other similar laws, see Geist, Anti-Circumvention Legislation and Competition
Policy: Defining a Canadian Way, supra note 7; Mihly Ficsor, The Law of Copyright and the
Internet: The 1996 WIPO Treaties, Their Interpretation and Implementation (New York: Oxford
University Press, 2002); Jacques de Werra, The Legal System of Technological Protection Measures
Under the WIPO Treaties, the Digital Millennium Copyright Act, the European Union Directives and
other National Laws (Japan, Australia) (Paper presented to the Association littraire et artistique
internationale, Congress: Adjuncts and Alternatives to Copyright, June 2001), online: ALAI
Property and the Digital Economy: Why the Anti-Circumvention Regulations Need to Be Revised
(1999) 14 Berkeley Tech. L.J. 519.
53 17 U.S.C. 1201 [DMCA].
54 Ibid. 1201(a)(1)(A).
55 Ibid. 1202.
56 Ibid. 1201(a)(2), 1201(b).
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use of those materials after circumvention has occurred.57 Attempts at writing fair
use into the DMCA have met with opposition from lawmakers in the United States.58
Canadas intentions regarding the WIPO Treaties have been in doubt for some
time. However, in response to a 2004 Heritage Committee Reportcommonly
known as the Bulte Reportwhich called for the immediate ratification of the
WIPO Treaties,59 Canadas former government announced in March 2005 that it
intended to make a number of additions and amendments to the Copyright Act to
implement the WIPO Treaties.60 The official shape of the proposals was revealed in
June 2005 with the tabling of Bill C-60.61 Bill C-60 contained three subsections that
dealt with circumvention of TPMs. Bill C-60 did not appear to target devices, at least
not in the same way as the DMCA and other laws do.
With respect to the circumvention of TPMs, Bill C-60 would have added
subsection 34.02(1) to the Copyright Act, creating a general prohibition against
circumvention, where the circumvention was done for the purpose of the act that is
an infringement of the copyright in [the work] or the moral rights in respect of [the
work] … 62 At first glance, this section seems narrower than the DMCA, which
prohibits circumvention per se irrespective of whether the underlying work is
infringed or is intended to be infringed. However, it is important to note that Bill C-60
did not require that an infringement actually take place before infringement-by-
circumvention could be found. In other words, the link between copyright
infringement and circumvention was loose, requiring a determination of the purpose
for which the circumvention was undertaken.
58 See Anne Broache, Politicos Wary of Changes to Copyright Law CNet News.com (16
November 2005), online: CNet News.com
59 Standing Committee on Canadian Heritage, Interim Report on Copyright Reform: Report of the
Standing Committee on Canadian Heritage (Ottawa: Standing Committee on Canadian Heritage,
2004) (Chair: Sarmite D. Bulte) at 21, online: The Parliament of Canada
adopted by the Canadian Heritage Committee in November 2004. See House of Commons, Standing
Committee on Canadian Heritage, Minutes of Proceedings, 38th Parl., 1st sess. (3 November 2004),
online: The Parliament of Canada
60 Industry Canada, Frequently Asked Questions (24 March 2005), online: Industry Canada
careful to indicate that it wanted to be in a position to implement the treaties, but it did not state that
it had decided to formally ratify them. Implementing the treaties would mean that Canada would not
be legally bound to the treaties even though its amended domestic copyright law would likely fulfill
the standards enshrined in the treaties.
57 Universal City Studios v. Corley, 273 F.3d 429 at 443 (2d Cir. N.Y. 2001) [Corley] [emphasis in
original].
61 Supra note 6.
62 Ibid., cl. 27.
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The same clause of Bill C-60 would have also added subsection 34.02(2) to the
Copyright Act, prohibiting the provision of a service to circumvent, remove, or render
ineffective a TPM. The precise meaning of this section was unclear. It could have had
fairly limited application in practice given the requirement that the service provider
know[] or ought to know63 that providing the service would result in an
infringement of copyright. Yet, it is also possible that the subsection could have been
interpreted much more broadly to be a kind of anti-device provision.
It is important to note that the Canadian Recording Industry Association
(CRIA) has demanded that anti-device provisions be included in Canadian
copyright reform and is expected to continue to press for them.64 The CRIA has
already lobbied for device-based protections in the satellite radio context as follows:
[E]ach service must ensure that each digital receiver is self-contained, with no
digital output. If the receiver has a digital output, the device must employ the
appropriate digital rights management system to prevent any redistribution.65
In this instance, rather than lobbying for legal protections that protect against the
manufacture of devices that circumvent TPMs, the CRIA sought government-
mandated technological design aimed at precluding the possibility of unauthorized
use of copyright works. On the issue of anti-device provisions, the U.S. trade
representative has encouraged Canada to protect TPMs by outlawing trafficking in
devices to circumvent technological protection measures … 66 Because of the
possibility that anti-device provisions may yet be proposed in Canada, this article will
consider the important competition policy implications of these kinds of provisions.
Rounding out the anticircumvention provisions that were proposed in Bill C-60,
subsection 34.02(3) would have been added to the Copyright Act to give copyright
owners a cause of action against those who deal with works in certain ways (e.g., who
sell or rent out the work) when they know or ought to know that a TPM has been
removed or rendered ineffective. Importantly, this section would have applied even
where the TPM was removed or rendered ineffective in a completely legal manner,
including methods not in contravention of the anticircumvention provision contained
in subsection 34.02(1).
63 Ibid.
64 See CRIA, Submission, supra note 44. See also Graham Henderson, President, CRIA, A
National Dialogue on the Need to Safeguard and Promote Products of the Mind (Speech to the
National Press Club, Ottawa, 29 September 2005), online: CRIA
65 Graham Henderson, President, CRIA, Various Broadcast Applications (Transcript of
proceedings before the Canadian Radio-television and Tele-communication Commission, Gatineau,
Qc., 4 November 2004), online: CRTC
[CRIA Satellite Submissions].
66 Office of the U.S. Trade Representative, 2005 Special 301 Report (29 April 2005) at 38, online:
Office of the U.S. Trade Representative
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As mentioned at the outset of this article, Bill C-60 was not passed into law
because Canada held an election in early 2006. Although the shape of possible future
reform is unknown at this time, the provisions of Bill C-60 provide a useful frame of
reference.
[Vol. 52
C. Motivations for Digital Rights Management and Anticircumvention
Laws
Preventing copyright infringement is a key premise invoked in support of
anticircumvention provisions. This is the premise that has typically been used by
copyright industries to justify their use of DRM and to press for legal architectures
that protect DRM. As a starting point, some copyright holders have expressed the
view that they are unwilling to make content available in digital form (particularly
online) without having technological and legal means in place to prevent
infringement.67 From this perspective, DRM and anticircumvention laws can be
viewed in a positive light insofar as they will result in a greater amount of content
being disseminated to the public in creative and innovative ways.
Promoting authorized use of copyright materials is certainly one motivation for
DRM. However, some copyright holders are interested in DRM for reasons that go
beyond infringement. For example, some copyright holders and other intermediaries
in the copyright chain want to use DRM to deliver content because DRM allows them
to unbundle the myriad possible uses of copyright works and to develop new licence-
based business models to exploit the vast number of discrete uses of works.
Exploring this point from the consumer perspective, it is important to
acknowledge that DRM can be used in ways that address criticisms traditionally
directed against, for example, the recording industry. A common criticism of the
traditional recording industry model is that consumers are forced in most cases to
purchase an entire album when in fact they may have wished to purchase only one or
two songs. As demonstrated by Apples iTunes Music Store and other online music
services, one of the business models that DRM helps to enable is a model whereby
consumers can purchase what they really want (e.g., one song) rather than having no
choice but to purchase a whole album.
67 See e.g. U.K., All Party Parliamentary Internet Group, Digital Rights Management: Report of
an Inquiry by the All Party Internet Group (June 2006), online: All Party Internet Group
The Internet is inevitably going to radically alter all current content distribution
models; but DRM has the potential to speed up this process because many content
owners are unwilling to provide content in an innovative manner unless they can
prevent unauthorised copying. PACT put it another way, telling us that the movie
business analysis is that in order to beat piracy they must ensure that legal versions
are available, and they consider TPM essential for this (ibid. at para. 23).
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From the perspective of the copyright owner, DRM-enabled control over every
access to and use of a work means that the licensing opportunities for content are
virtually infinite. No longer will copyright vendors sell a tangible product to end-
users; instead, vendors will license discrete rights to access or use content, especially
digital content, delivered online. In essence, this is a transformation from a tangible-
goods market into a licensing market where individuals no longer purchase an object
in which they have classic property rights, like a book, a DVD, or a compact disc.
Rather, they purchase, via technologically perfected standard-form licences, discrete
rights to access and/or use content in specific ways.
DRM can thus be principally understood as a contract enabler. DRM allows
copyright holders or other intermediaries who deliver copyright content to effectively
rewrite copyright law in their own terms with a scope and efficiency unavailable to
them in the analogue world. Copyright law itself contains no limit on the ability to
contract68 and certainly no limit on the ability to perfect contracts through
technological controls. By virtue of the fact that DRM operates to create, manage,
perform, and enforce contracts with each user, copyright owners that use DRM are no
longer bound by the limits of copyright lawthey can efficiently contract around it.
Indeed, information protected by DRM need not be copyrightable at all and, unlike a
work subject to copyright for a limited term, DRM-protected works can be protected
indefinitely.69
Instead of having to engage inefficient legal mechanisms that may be limited by
geographic jurisdiction and the balanced70 bounds of copyright law, copyright holders
can write and technologically enforce their own rules. Unlike the rules in the
Copyright Actwhich, ironically, have been used as the basic justification for the use
and legal protection of DRMrules expressed in contract and in DRM code do not
necessarily reflect the interests of individuals or the public at large, the long term
interests of society as a whole, or any other limitation inherent in copyright.71
It is perhaps not surprising, then, that there is evidence, as discussed in Parts III.C
through III.E,
they enable, and
anticircumvention laws that protect them can sometimes be used in potentially
the contracting practices
that DRM,
that
68 The Competition Tribunal has recognized this power: The Copyright Act is similar to the Trade-
Marks Act, R.S.C. 1985, c. T-13, in that it allows the trade-mark owner to refuse to license and it
places no limit on the sole and exclusive right to license (Warner, supra note 28 at 333).
69 See e.g. Dan L. Burk & Julie Cohen, Fair Use Infrastructure for Rights Management Systems
(2001) 15 Harv. J.L. & Tech. 41.
70 The Supreme Court of Canada has made it clear that the purpose of copyright is a balance. See
e.g. Law Society of Upper Canada v. CCH Canadian, 2004 SCC 13, [2004] 1 S.C.R. 339, 236 D.L.R.
(4th) 395 [CCH], McLachlin C.J. (in Thberge … this Court stated that the purpose of copyright law
was to balance the public interest in promoting the encouragement and dissemination of works of the
arts and intellect and obtaining a just reward for the creator at para. 23).
71 Among other differences between contract-enabling DRM and copyright law, works protected by
DRM and contract need not respect the limited term of copyright, and in fact need not be protecting
copyright works at all.
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anticompetitive ways. DRM technology and contracting practices create new
competition policy issues, especially when combined with the legal backing of
anticircumvention laws.
[Vol. 52
III. New Competition Law and Policy Issues
A. Bigger and Stronger Intellectual Property
Canadas proposed copyright amendments in Bill C-60 represented a substantial
addition and expansion of rights for copyright holders, not only in relation to the
anticircumvention provisions but in other respects as well. For example, Bill C-60
would have added a ma[king] available right,72 additional rights for performers,73
and additional rights for photographers.74
Such an expansion of copyright, and particularly the increased control that
copyright holders could exercise through legally protected DRM, poses an internal
tension for copyright policy itself. Some copyright industries argue that they need
stronger copyright laws, including anticircumvention laws, in order to stimulate
certain kinds of investment and innovation in the digital environment.75 Copyright
law certainly does appear to play an important role in stimulating innovation and
is generally acknowledged by all copyright
investment
stakeholders, however, that there is a point at which an overbroad copyright law
would exceed an optimal level of protection, thereby stifling innovation and reducing
innovation.76 It
in
72 Bill C-60, supra note 6, cls. 2, 8(1), 10.
73 Ibid., cls. 9, 15, 16, 17.
74 For more discussion of photography issues in copyright reform, see Alex Cameron, Lights,
Camera, … Harmonize: Photography issues in copyright reform in Geist, supra note 4.
75 See Canadian Recording Industry Association, Press Release, Music Industry Welcomes Federal
Government Commitment to Copyright Revisions (24 March 2005), online: CRIA
76 Analysis of this issue is beyond the scope of this article. However, it is important to note that there
are those who argue that intellectual property laws may actually have little to do with many kinds of
creative innovation. See generally Ove Granstrand, Innovation and Intellectual Property Rights in
Jan Fagerberg, David C. Mowery & Richard R. Nelson, eds., Oxford Handbook of Innovation
(Oxford: Oxford University Press, 2005) at 266-90; Peter S. Menell & Suzanne Scotchmer,
Intellectual Property (UC Berkeley Public Law Research Paper No. 741724), online: Social Science
Research Network
lectual Property Institutions and the Pandas Thumb: Patents, Copyrights, and Trade Secrets in
Economic Theory and History in M.B. Wallerstein, M.E. Mogee, & R.A Schoen, eds., Global
Dimensions of Intellectual Property Rights in Science and Technology (Washington, D.C.: National
Academy Press, 1993) at 19-61; Nancy Gallini and Suzanne Scotchmer, Intellectual Property: When
Is It the Best Incentive System? (Economics Department, UC Berkeley, Working Paper E01-303),
online: California Digital Library
Kretschmer, Artists Earnings and Copyright: A Review of British and German Music Industry Data
in the Context of Digital Technologies, online: (2005) 10:1 First Monday 1
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or eliminating the benefit the public receives from it. Copyright stakeholders typically
disagree on the level of protection that achieves the optimal balance.
This tension inherent in the creation and exercise of stronger intellectual property
rights was recently touched on by Justice Binnie of the Supreme Court of Canada. He
pointed out that the exercise of excessive control pursuant to intellectual property
rights may undermine some of the very objectives of those rights: Excessive control
by holders of copyrights and other forms of intellectual property may unduly limit the
ability of the public domain to incorporate and embellish creative innovation in the
long-term interests of society as a whole, or create practical obstacles to proper
utilization.77 Although these remarks are made in the context of balance in
copyright law, they are directly relevant to competition policy as well.78 The basic
point is that, as a general principle, the vesting of increased control and power with
copyright holders through DRM technology, contract, and anticircumvention law is a
phenomenon that might in itself suggest that Canadas competition policy needs
reassessing.79
Although it need not be so, anticircumvention and anti-device laws can have
negative impacts on consumers and result in anticompetitive effects in markets for the
licensing of intellectual property rights, processes incorporating such rights, and
products and services incorporating such rights. Examples of such effects can be
gleaned from the U.S. experience under the DMCA as discussed below in Parts III.C
through III.E. Before discussing some specific examples, however, a few words are in
order regarding the general competition implications of DRM technology and
contracting practices backed by law.
First, the use of legally protected DRM may impose additional costs on
consumers in connection with activities that are lawful under copyright law. Some
access to and uses of copyright works that traditionally have not involved any cost for
consumers may become subject to a technologically enforced licensing system that
will extract additional benefit for copyright holders at a direct cost to consumers. This
is not to suggest that such metering is illegitimate per se or undesirable from a
copyright or competition policy perspective, but rather that it may raise copyright and
competition issues as discussed in the final paragraphs of this section.
77 Thberge v. Galerie dArt du Petit Champlain, 2002 SCC 34, [2002] 2 S.C.R. 336 at para. 32, 210
D.L.R. (4th) 385 [Thberge]. See also CCH, supra note 70 at paras. 41-42.
78 In fact, the point made by Binnie J. has been expressed in similar terms by representatives of the
Competition Bureau. Gwillym Allen, a senior economic and strategic advisor at the Bureau, has said
that the architecture of the law can change such that the objectives in the intellectual property are
actually being undermined by their very use. And as a marker that that may be happening would be
the effects on competition (DOJ/FTC Hearing, supra note 20 at 141-42). This statement from the
Bureau is discussed further in Part IV.D, below.
79 Such a shift may require the Bureau to approach mere exercises of intellectual property rights
with greater scrutiny, or more generally to revise its deferential approach toward the exercise of
intellectual property rights.
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Further, even when consumers are legally entitled to circumvent DRM in order to
access works, to exercise fair use rights, and to engage in other noninfringing
activities, as a practical matter they may often not be able to engage in such
circumvention. DRM systems are neither designed to be circumvented nor are they
designed to permit noninfringing access to and use of works. Increasingly, consumers
may find themselves unable to circumvent DRM unless they invest significant time
and resources in determining how to circumvent.80 This cost is on top of the cost of
the increased legal risk that consumers will face in gaining access to and making
noninfringing use of DRM-protected works. This potential cost for consumers could
be increased by another degree through licence provisions that could contractually
prohibit circumvention for any reason, even if the circumvention would be
permissible under copyright law.
Thus, in addition to the potential direct cost of individuals having to pay for
traditionally free accesses and uses, the use of legally protected DRM may impose
two more general costs on consumers and society at large. The first is a specific cost
of engaging in legitimate noninfringing access to and use of copyright works arising
from (a) the need to figure out how to circumvent, and (b) the increased legal (i.e.,
anticircumvention and contract-based) risks for consumers. The second is a more
general cost in connection with reduced access, use, and dissemination of copyright
works: creators and others may be reluctant or unable to incur the cost of
circumvention, and this may potentially lead to less innovation. In other words, the
use of DRM may harm innovation by reducing access to copyrighted works, an
element necessary for the process of building new innovation.81 This second cost is
effectively the result of DRM and contract shutting out access to, and noninfringing
uses of, the underlying copyright work.
80 See APIG, DRM Report, supra note 67, which states:
[T]he current generation of TPMs are far from secure against determined attackers who
intend to copy the material at a commercial scale (so-called pirating). However,
where TPM systems have been implemented in hardware rather than software they
have proved significantly harder to overcome. It has also been rather simpler for rights
holders to disrupt the marketing and distribution of hardware adapters (mod chips)
than of software modifications (hacks).
…
In the future it must be expected that TPMs will rely more and more upon specialist
hardware functionality and that some systems will prove to be extremely complex to
overcome and to develop generic evasion technology for. It would therefore be unwise
to base public policy upon a continuation of the situation that TPMs are relatively easy
to overcome. It may well be that propping up technical measures with legislation will
become entirely irrelevant. Equally, assuming that egregious problems caused by TPMs
can be addressed by just breaking into the system may become unrealistic (ibid. at
paras. 18, 21).
81 This is fundamentally the point made by Binnie J. in Thberge, supra note 77.
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In some cases, consumers, businesses,82 and society at large may bear indirect
costs and harms because DRM can sometimes weaken the security of computer
systems, exposing them to greater risk of, inter alia, harmful computer viruses.83 This
harm can also raise national security issues. In late 2005, the U.S. Computer
Emergency Readiness Team, a division of the Department of Homeland Security,
issued an unequivocal public warning in connection with copyright industries use of
DRM: Do not install software from sources that you do not expect to contain
software, such as an audio CD.84 It is somewhat ironic that this statement comes
from a government department of the country that has provided among the strongest
legal protections for DRM.
The costs identified above call attention to the potential effects of DRM and
anticircumvention laws from a copyright and competition policy perspective. On a
micro scale, they can result in economic inefficiencies and shift a disproportionate
share of total innovation benefits from individuals and the public to copyright
owners, simultaneously increasing the cost of obtaining access to the fruits of
innovation. On a macro scale and over the longer term, innovation may suffer given
the resulting decrease in practically and efficiently accessible and utilizable
innovation upon which further innovation can be built.85
Increased breadth and scope of intellectual propertybased controls in the market
may raise competition issues that should be addressed through competition and
copyright policy reform and through the application of competition law in intellectual
property casesthe Competition Bureau should not fetter its role and responsibility
by taking a narrow approach to sections 3286 or 79, let alone the general provisions of
the Competition Act that might apply in a given case. At the very least, copyright
holders ability to exercise a much greater degree of technology- and contract-based
control over works may be a signal that competition considerations need to play a
more prominent role in the formulation of copyright policy. On this point, it is
important to note that the Competition Bureau has given an indication that it does not
feel it is appropriate to use enforcement mechanisms in order to address overbreadth
82 See e.g. Ingrid Marson & Graeme Wearden, Sony Rootkit Prompts Office Clampdown on CD
Use CNet News.com (14 November 2005), online: CNet News.com
83 See e.g. Joris Evers, Microsoft Will Wipe Sonys Rootkit CNet News.com (13 November
2005), online: CNet News.com
84 U.S., Computer Emergency Readiness Team, First 4 Internet XCP (Sony DRM) Vulnerabilities
(18 November 2005), online: U.S. Computer Emergency Readiness Team
85 See Thberge, supra note 77 at para. 32, Binnie J.
86 It is openly acknowledged that, without legislative reform to section 32, the Bureau may be
limited in its ability to modify its approach to the section if the section is considered to be criminal in
nature. The possibility of law reform in this area is discussed in Part IV, below.
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in intellectual property rights but that it can use advocacy to influence legislative
change.87
[Vol. 52
B. Exercising the Exclusive Right to Circumvent?
As noted at the outset of this article, anticircumvention and anti-device provisions
may be viewed as a new breed of copyright law. The problems caused by their
novel character are evident when one attempts to transpose them onto the notion of a
bundle of rights of copyright and onto the wording of the Competition Act. The
creation, implementation, and application of these new provisions, which are unlike
any previous form of intellectual property rights, demands scrutiny on competition
grounds.
Copyright is traditionally understood as a statutorily defined bundle of time-
limited exclusive rights granted to copyright holders. In Canada, this is established in
section 3 of the Copyright Act: [C]opyright, in relation to a work, means the sole
right to produce or reproduce the work or any substantial part thereof in any material
form whatever … 88 An infringement of copyright takes place when someone
exercises one or more of the copyright holders bundle of exclusive rights without
their permission. This is true in the United States as it is in Canada:
It is important to understand precisely what reward is offered by the IP
laws. Each type of IP right provides exclusivity for its owner. What does this
exclusivity mean? It does not mean a right to commercialize any invention or
creation. … Instead, what IP rights provide is the right to exclude others. The
right to exclude is not simply one of the rights provided by intellectual property,
it is the fundamental right, the foundation upon which the entire IP system is
built.89
Anticircumvention and anti-device provisions do not fit this paradigm of a bundle
of exclusive rights. It is easy to understand that copyright owners have the exclusive
right to copy their work and that their exclusive right is infringed when someone else
copies the work without their permission. It is something else, however, to
conceptualize copyright holders as having the exclusive right to circumvent TPMs
that they apply to their works, or the exclusive right to make and distribute devices
that enable or facilitate circumvention of TPMs.90 Even if these problems could be
overcome, attempting to force anticircumvention and anti-device provisions to fit the
87 See DOJ/FTC Hearing, supra note 20 at 140-41.
88 Supra note 5, s. 3(1).
89 R. Hewitt Pate, Competition and Intellectual Property in the U.S.: Licensing Freedom and the
Limits of Antitrust (Speech at the 2005 E.U. Competition Workshop, Florence, Italy, 3 June 2005) at
3, online: U.S. Department of Justice
90 Ironically, copyright holders have effectively strived to achieve something tantamount to this
exclusive right with respect to devices because they have attempted to have legislators dictate to
technology companies what functionality their devices must and must not include. See discussion in
Part IV.D, below.
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mould of a bundle-of-rights paradigm seems to necessitate adding a number of related
rights to the bundle, including the exclusive right to apply a TPM to a copyright
work.91
This problem also manifests itself under the Competition Act because subsections
32(2) and 79(5) refer, respectively, to the exclusive rights and privileges conferred92
and the exercise of any right or enjoyment of any interest derived … 93 If
anticircumvention and anti-device provisions do not fit with the bundle-of-rights
paradigm under the Copyright Act, then subsection 32(2) of the Competition Act
might not apply to practices involving anticircumvention and anti-device provisions.
The same may be true of contractual or technological practices that fall outside, or go
beyond, the limited bounds of copyright law. In other words, it is not at all clear that
the use of DRM and contracting practices under such provisions would amount to a
unilateral exercise of an intellectual property right to exclude.94 If using DRM,
contracting beyond copyright, or suing on the anticircumvention provision does not
amount to the exercise of an exclusive right under the Copyright Act, then section 79
of the Competition Act would apply to the conduct.
The use of DRM, contracts, and anticircumvention laws to exclude fair dealing
with copyright works underscores the points raised in the foregoing paragraphs.95 Fair
dealing activities fall outside the copyright owners power to control and license
under copyright law. The Copyright Act permits various types of fair dealing as
defences to what would otherwise be an infringement of an owners exclusive right
under copyright.96 Although copyright places no limit on a copyright owners ability
to contract, it is unclear whether copyright could or should be interpreted to permit
copyright owners to use DRM and contract to exclude all fair dealing. This important
issue is far from settled in copyright and is beyond the scope of this article.97
However, there is an argument that such exclusion is not permissible in copyright
given that fair dealing can be understood as an integral component of balance in
copyright (and given that fair dealing has recently been elevated to a user right by the
91 The difficulty in mapping anticircumvention onto copyright seems to reinforce the idea that
anticircumvention is not the proper subject of copyright, potentially raising constitutional problems for
its inclusion in the Copyright Act, supra note 5 in Canada. See generally deBeer, supra note 4.
92 Supra note 14, s. 32(2).
93 Ibid., s. 79(5).
94 That said, there may be an argument that such practices would fall under the interest derived
portion of section 79, that DRM is really a part of exercising a right of exclusion, or that the right to
sue for illegal circumvention is the exercise of an exclusive right under the Copyright Act, supra
note 5.
95 The exclusion of access to works may also underscore these points.
96 Supra note 5, ss. 29-32.2.
97 For a discussion of the interplay between copyright and contract, see Lucie M.C.R. Guibault,
Copyright Limitations and Contracts: An Analysis of the Contractual Overridability of Limitations on
Copyright (London: Kluwer Law International, 2002).
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Supreme Court of Canada).98 Fair dealing and access to creative works can also be
understood as essential for creators to build new innovation based on existing works
and as an essential component of recognizing the public interest in copyright.99 Put
another way, if every copyright work came with a contract that excluded all fair
dealingsomething that would be tantamount to simply removing fair dealing from
the Copyright Act altogetherthen the balance struck by the Copyright Act would
seem to unfairly tilt toward the short-term interests of copyright holders and away
from the short- and long-term interests of individual end users and society at large.
Whether or not copyright owners should be able to block the public out of fair
dealing through technology or contract remains an unsettled issue in copyright law.
However, this issue has important implications from a competition perspective
because excluding fair dealing raises competition law and policy issues. Excluding
fair dealing is arguably something more than a mere exercise of an intellectual
property right and, as such, it might be regulated on competition grounds.
Thus, the character of anticircumvention and anti-device provisions may create
uncertainty in the application of the Competition Act. However, in considering what
scope the current act could have in relation to some of the DRM competition issues
discussed in this article, it is important to note that the interpretation suggested above
could leave a wide scope for competition-based regulation of the use of DRM,
contracts, and anticircumvention provisions. As something more than a mere exercise
of an intellectual property right, DRM-related technology and contracting practices,
including practices based on anticircumvention or anti-device provisions (should they
become law in Canada), would fall to be regulated under the general provisions of the
Competition Act, including under subsection 79(5).100
C. Tied Selling, Abuses, and Anticompetitive Practices
Competition is linked to innovation and sustained economic growth.101 This link
is particularly strong in technologically advanced sectors where innovation is seen as
98 In CCH, supra note 70, the Supreme Court of Canada adopted Professor Vavers views that
[u]ser rights are not just loopholes. Both owner rights and user rights should therefore be given the
fair and balanced reading that befits remedial legislation (David Vaver, Copyright Law (Toronto:
Irwin Law, 2000) at 171, cited in CCH, supra note 70 at para. 48).
99 See e.g. CCH Canadian Ltd. v. Law Society of Upper Canada, 2002 FCA 187, [2002] 4 F.C. 213
at para. 126, 212 D.L.R. (4th) 385.
100 For a helpful chart explaining the difference between the application of the general provisions
and the application of section 32, see Competition Bureau, FTC/DOJ Presentation, supra note 10 at
slide 24.
101 See Ramon Marimon & Vincenzo Quadrini, Competition, Innovation and Growth with Limited
Commitment (10 October 2006) [unpublished], online: European University Institute
Porter, The Competitive Advantage of Nations (London: Macmillan Press, 1990); Phillipe Aghion &
Peter Howitt, Endogenous Growth Theory (Cambridge, Mass.: MIT Press, 1998); Mark Lorell, The
315
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a way to escape competition.102 The inverse is also true: new innovations fuel
competition by providing alternatives for existing products and services. As a basic
proposition, DRM technology can make innovating more difficult, particularly under
the potentially innovation-stifling cloud of anticircumvention laws.
DRM technology can make innovating difficult by controlling access to and use
of innovative products, including those that may contain little or no copyright
portions. Circumventing these controls can be cumbersome, discouraging research
and innovation. An even greater competition problem arises when circumvention of
DRM is prohibited by law. Even when an anticircumvention law provides an
exception for reverse engineering for interoperability, as the DMCA does in a limited
form,103 researchers and innovators are unlikely to engage in their work on a best
guess as to whether a court would find them to fit within the exception. The U.S.
experience suggests that this combination of technology and law can have adverse
effects on product and innovation markets.104 DRM technology and the DMCA are
powerful weapons that can be used to prevent competition through a combination of
tied selling and legal threats.105
As reflected in the examples and cases discussed in the following paragraphs, the
adverse effects of DRM and anticircumvention laws on innovation may be most
likely to arise in cases of products that are more functional but that are nevertheless
protected by copyright, such as computer software. As demonstrated by the Apple
iTunes example discussed below,106 however, potentially adverse effects on
innovation can also arise in cases where the works protected by DRM are more
creative than functional, such as with musical works.
Tied selling arises when a vendor supplies a product on condition that the
purchaser acquires another product or on condition that the purchaser refrains from
using or distributing another product.107 This practice often arises as a result of
express contractual terms and, when it does, it can be easy to spot and prosecute.108
U.S. Combat Aircraft Industry, 19092000: Structure, Competition, Innovation (Arlington: Rand,
2003).
102 See Philippe Aghion et al., Firm Entry, Innovation and Growth: Theory and Micro Evidence
(20 August 2004) [unpublished], online: Harvard University
103 Supra note 53 1201(f)(1).
104 The U.S. experience is discussed below in this section.
105 See generally Chris Sprigman, Copyright Versus Consumers Rights: How Companies are
Using the Digital Millennium Copyright Act to Thwart Competition in FindLaws Legal
Commentary, online: FindLaw
106 See Apples Are Not the Only Fruit, infra note 127 and accompanying text.
107 See Competition Act, supra note 14, s. 77(1).
108 This is demonstrated by the Digital Equipment Canada (DEC) case where DEC used
integrated service policies to tie service to the sale of its products. See Goldman & Bodrug, supra note
19 at Appendix F8.1 (Digital EquipmentCompetition Bureau News Release), Appendix F8.2
(Digital EquipmentUndertaking); George N. Addy, Director of Investigation and Research,
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However, the Competition Tribunal has ruled that coercion for the purpose of tied
selling does not have to be expressed contractuallyit may include economic
conditions that effectively preclude a consumers choice.109 This broad interpretation
of tied selling allows for treating technology and its dominant effects in the same way
that contractual conditions are treated. Indeed, as the practice of using DRM suggests,
technology backed by legal protections can be a much more effective means of
engaging in tied selling, even if DRM is not used to implement express contractual
terms.110
Tied selling can have anticompetitive consequences. Commentators emphasize its
adverse effect on entry into the market of competing products and increasing
transaction cost.111 Those effects are amplified when the tied selling is enforced by
technological controls. DRM does not just make it more difficult for competing
products to enter the market for tied goods, it makes it virtually impossible because it
denies access to and use of the tying product. This potentially anticompetitive effect
of DRM can be further amplified by anticircumvention laws. The effect can be a
monopoly in the market for tied products. The U.S. experience in the market for laser
and ink-jet printer toner cartridges provides a useful illustration of this problem.
Some printer manufacturers in the United States have attempted to use DRM
technologies and anticircumvention laws to prevent competitors from entering the
toner cartridge aftermarket with less expensive products. These manufacturers placed
security chips in their printers and cartridges in order to authenticate the manufacturer
of a cartridge.112 If a toner cartridge manufactured by a competitor was detected, the
printers would not operate. Chip-makers then began selling chips that enabled less
expensive aftermarket cartridges to work with brand name printers.
In 2003, Lexmark, the second largest printer vendor in the United States, sued a
chip manufacturer, Static Control Corp., asserting that Static Control had violated the
DMCA by circumventing DRM technology that controlled access to Lexmarks
printers.113 The U.S. District Court sided with Lexmark, ruling that by allowing its
Bureau of Competition Policy, Competition Policy and Intellectual Property Rights: Complementary
Framework Policies for a Dynamic Market Economy (Notes for address delivered to the 36th World
Congress of the AIPPI, Montreal, 29 June 1995), online: Competition Bureau
109 See Tele-Direct, supra note 28 at 173.
110 See e.g. Declan McCullagh, StorageTek Wins Copyright Injunction CNet News.com (12 July
2004), online: CNet News.com
111 See e.g. C.J. Michael Flavell & Christopher J. Kent, The Canadian Competition Law Handbook
(Scarborough: Carswell, 1997) at 72-77.
112 See Barry Nalebuff, Bundling, Tying, and Portfolio Effects (February 2003) at 79-82, online:
Centre for Industrial Economics at the Ecole des Mines de Paris
105.
113 Lexmark International v. Static Control Components 253 F. Supp. 2d 943 (E.D. Ky. 2003)
[Lexmark].
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chips to mimic Lexmarks cartridge authentication procedure, Static Control was
circumventing Lexmarks DRM in violation of the DMCA. The court granted
Lexmark a preliminary injunction prohibiting the sale of Statics chips.
The U.S. Court of Appeals for the Sixth Circuit reversed the judgment of the
lower court.114 The appeals court decided that in order to receive the protection of the
DMCAs anticircumvention provisions, the challenged circumvention device must
control access to a work protected under the copyright statute. Since Lexmarks
cartridge was not a work protected under the copyright statute, circumvention of the
authentication procedure did not trigger application of the DMCA.115
Lexmark is an example of an attempt to use DRM and anticircumvention laws to
monopolize markets for complementary products by controlling compatibility and
interoperability. In effect, this is a tied selling of two products where the tying is
expressed in technology (backed by legal threats). This form of tying is pervasive and
guarantees that only products of one brand can be compatible with one another. Such
monopolization can have an adverse economic effect on consumers.116 The market for
printer cartridges gives a good indication of how prices in the concerned markets can
be affected. In 2003, Lexmark was selling one model of its printer cartridges
protected by DRM technology for about $375. A customer could buy an equivalent
remanufactured cartridge of comparable quality for about $165. All else being equal,
consumers would likely not have bought Lexmarks cartridges if a cheaper equivalent
was available.117
It has been suggested that competition in the foremarkets prevents manufacturers
from exercising market power in the aftermarkets.118 This is far from certain,
however, when high-cost equipment is involved. In two cases decided by the
Supreme Court of the United States, Eastman Kodak v. Image Technical Services119
and Virtual Maintenance v. Prime Computer,120 the court found that the high cost of
114 Lexmark International v. Static Control Components, 387 F.3d 522 (6th Cir. 2004).
115 Ibid. at 548.
116 See Severin Borenstein, Jeffrey K. MacKie-Mason & Janet S. Netz, Exercising Market Power
in Proprietary Aftermarkets (2000) 9 Journal of Economics & Management Strategy 157. However,
the effect of competition in foremarkets on price increases in aftermarkets is open to debate. See e.g.
Nalebuff, supra note 112 at 82-83; Eric R. Emch, Does Opportunism Explain Markups in Laser
Printer Toner and Memory? No and Yes. Evidence on Pricing in Laser Printer Aftermarkets (2002)
[unpublished], online: Social Science Research Network
Eastman Kodak v. Image Technical Services, 504 U.S. 451, 112 S. Ct. 2072, 119 L. Ed. 2d 265 (1992).
Lexmarks pricing policy, however, suggests that the customers already locked-in in the market of
toner cartridges for Lexmarks printers would be adversely affected.
117 See Sprigman, supra note 105.
118 See Mark A. Glick & Duncan J. Cameron, When Do Proprietary Aftermarkets Benefit
Consumers? (1999) 67 Antitrust L.J. 357.
119 Supra note 116.
120 957 F.2d 1318 (6th Cir. 1992), cert. granted, judgment vacated, 506 U.S. 910, 113 S. Ct. 314, 121
L. Ed. 2d 235 (1992), on remand, 995 F.2d 1324 (6th Cir. 1993), opinion withdrawn and superseded,
11 F.3d 660 (6th Cir. 1993), cert. dismissed, 512 U.S. 1216, 114 S. Ct. 2700, 114 S. Ct. 2700 (1994).
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switching to a different brand of equipment allowed manufacturers of original
products to exercise market power in the aftermarket. Indeed, many of the antitrust
cases involving aftermarkets show evidence of the high cost of switching.121 These
costs are particularly high for sophisticated electronic equipment, including
computers and some software.122
In addition to eliminating competition in the aftermarket, the practice of tied
selling guarded by DRM technology and anticircumvention laws has adverse effects
on competition in the foremarket. By deriving high benefits in the aftermarket, the
manufacturer of the equipment can keep the prices in the foremarket artificially low,
thus preventing potential competitors who do not have an established market for
aftermarket products from entering the foremarket.
The practice of using DRM to tie equipment with complementary products, and
using anticircumvention laws to reinforce the tying and to prevent competition, is not
limited to toner cartridges. In fact, it is becoming widespread in information
technology goods and services markets. The technology has been employed by
mobile phone vendors to ensure that the phones they sell only operate with
authorized batteries (i.e., those not originating from a competitor).123 Manufacturers
of garage door systems have attempted to prevent interoperability of their products
with door openers supplied by competitors.124 Producers of video game consoles have
attempted to use DRM to prevent use of their video games on PCs.125 One video game
maker applied for a patent that would allow it to tie a video game to one particular
console, rendering it ineffective on another persons console and thereby preventing
the sharing or sale of video games.126
One of the latest examples has arisen in the market for digital music distributed
online. The songs offered by Apples iTunes music download service can be played
only on the iPod players manufactured by Apple.127 Such tying of content to devices
has sparked a debate on the appropriate character and consequences of such selling,
121 See Borenstein, MacKie-Mason & Netz, supra note 116 at 162.
122 See Ross Anderson, Trusted Computing Frequently Asked Questions (August 2003), online:
University of Cambridge
123 NEC, a Japanese electronics giant, began to market its software that detects nonoriginal battery
products in mobile phones and digital still camera batteries. NEC is considering bundling the
technology into hardware options (NEC, Press Release, NEC Electronics Software for
Microcontrollers Verifies Authenticity of Mobile Phone and Digital Still Camera Batteries (6 July
2004), online: NEC Electronics
124 See Chamberlain Group v. Skylink Technologies, 381 F.3d 1178 (Fed. Cir. 2004), affg 292 F.
Supp. 2d 1040 (N.D. Ill. 2003) [Skylink].
125 See e.g. Sony Computer Entertainment v. Connectix, 203 F.3d 596 (9th Cir. 2000); Sony
Computer Entertainment America v. Bleem, 214 F.3d 1022 (9th Cir. 2000).
126 See Cory Doctorow, New Sony Lockware Prevents Selling or Loaning of Games (12
November 2005), online: BoingBoing
127 See Apples Are Not the Only Fruit The Economist 380:8485 (8 July 2006) 70 at 70.
2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
as well as the appropriateness of legal intervention in the market on competition law
grounds:
319
…
Apples business model, however, turns this on its head. Apple makes its
money from sales of the iPod, not sales of music; the printer, not the cartridge;
the razor, not the blade. As Bill Shope, an equity analyst at JPMorgan, puts it,
the music store is a loss leader that serves only to boost sales of the iPod. It is
as if record stores existed only to sell record players.
Because the music store is only compatible with the iPod, a customer who
wants to abandon Apple’s player in favour of something else must replace all
the music he downloaded from the store. It is as though a person’s entire record
collection worked on only one brand of gramophone. Hence with each song a
customer buys, he binds himself a little more tightly to the iPod. Apple offers its
customers a Trojan horse, according to Mr Shope. Customers embrace its
iconic device, and then, like the hapless Trojans, find they have fallen into the
hands of the gift-givers.
One need not worry about switching costs if there will never be anything to
switch to. Applied to Apple, this argument goes something like this: every time
someone buys a song on iTunes, he becomes a little less likely ever to abandon
the iPod and makes the potential market for iPods rivals a little smaller.128
…
In sum, DRM can be a powerful way to engage in practices that may be
anticompetitive, particularly when it is legitimized, strengthened, and reinforced by
anticircumvention laws that provide copyright holders with a legal weapon to
brandish as a threat against potential competitors.
D. Security Research
DRM technology can be used in positive ways to improve the security of the
information it protects.129 DRM can be adapted to secure any type of information, and
so in addition to protecting copyright works, it can be used as a tool for individuals to
secure and control their own personal information.130 In the same way that
anticircumvention laws can have adverse effects on reverse engineering for
128 Ibid.
129 See e.g. John T. Mitchell, DRM: The Good, the Bad, and the Ugly (Presented at the
Symposium sponsored by the Center for Intellectual Property in the Digital Environment, University
of Maryland University College, Adelphi, Md., 10-11 June 2004), online: InteractionLaw
Electronic Rights Management and Digital Identifier Systems, online: (March 1999) 4:3 Journal of
Electronic Publishing
130 See e.g. National Research Council Canada, Towards Meeting the Privacy Challenge: Adapting
DRM by L. Korba & S. Kenny (Ottawa: National Research Council Canada, 2002).
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interoperability and innovation as described above, they can have a specific impact
on computer and network security research.
In 2002, Richard Clarke, former White House cybersecurity advisor, stated that
the DMCAs anticircumvention provisions had had a chilling effect on vulnerability
research in the United States.131 Two years earlier, Princeton Professor Edward
Felten engaged in research regarding a DRM technology designed to protect digital
music; his research was encouraged by the very producer of the technology at that
time. When Felten discovered a weakness in the DRM and prepared to present his
findings at an academic conference, the producer threatened legal action under the
DMCA.132 Effects of this kind of activity have not been lost on lawmakers in the
United Kingdom. In 2006, a report of the All Party Internet Group included the
following statement:
We have considerable sympathy for the view that lack of research will
mean that critical weaknesses in TPM systems will fail to be examined, leading
to unnecessary problems for the content industry. The furore over Professor
Feltens work in the US on the SDMI Challenge has not been replicated in the
UK, but we do not see it as being in anyones long term interest for academics
who spot flaws in systems to end up in court … 133
Such legal threats to security researchers can take even more drastic forms.
In 2001, Russian programmer Dmitry Sklyarov was arrested and jailed for several
weeks after speaking at a conference in Las Vegas regarding Adobe DRM technology.
Adobe alleged that Sklyarov and his employer had violated the criminal provisions of
the DMCA by creating software that circumvented Adobes DRM technology to
enable use of legitimately purchased electronic books on portable devices. Users of
this software included blind people. Sklyarov was later released and his employer was
acquitted of all charges. Nevertheless, the proceedings sent a chill through the
scientific community.134 Many foreign researchers became concerned with the way
the DMCA was being used and refused to travel to the United States, boycotting
scientific conferences.135
In Canada, the Canadian security research and business community wrote directly
to the Canadian government to express concern regarding the direction that copyright
131 Quoted in Hiawatha Bray, Cyber Chief Speaks on Data Network Security The Boston Globe
132 See Pamela Samuelson, Anticircumvention Rules: Threat to Science (2001) 293 Science
(17 October 2002) C2.
Magazine 2028.
133 APIG, DRM Report, supra note 67 at para. 65.
134 See Lawrence Lessig, Jail Time in the Digital Age New York Times (30 July 2001) A17; Lisa
Bownam, Elcomsoft Verdict: Not Guilty CNet News.com (17 December 2002), online: CNet
News.com
135 See Will Knight, Computer Scientists boycott US over Digital Copyright Law New Scientist
(23 July 2001), online: New Scientist
taking
in Canada.136 This community was concerned
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that
reform was
anticircumvention provisions could be used to thwart scientific research and its
potential commercialization. Even if adequate exemptions for research were included,
the threat of litigation would have a chilling effect on many legitimate and innovative
research initiatives, just as it has in the United States, with consequent impacts on
innovation markets and for innovative products.137
321
E. Product Labelling and Deceptive Marketing Practices
The Consumer Packaging and Labelling Act138 and the Competition Act regulate
product labelling and representations regarding products and services. For example,
the Competition Act prohibits representations that are false or misleading in a material
respect.139 Similarly, the Consumer Packaging and Labelling Act prohibits false or
misleading representations, including any description or illustration of quality,
performance, or function.140 These provisions are significant in the DRM context
because there is evidence that DRM-protected content and devices are often not
clearly labelled and do not perform as might be expected.
As a result of DRM technology implemented in compact discs and devices, some
CDs issued today (and in the past) will not play in some devices, including, for
example, car stereos.141 The restricted functionality of such CDs and devices has
generally not been reflected in their labelling. Indeed, the misrepresentation in some
cases is so material that it goes to the fundamental nature of the actual product being
136 See e.g. Letter from Coalition of Canadian Security Businesses to Industry Minister David
Emerson and Minister of Canadian Heritage Liza Frulla (8 March 2005), online: Canadian Internet
Policy and Public Interest Clinic
1.
137 There is ample evidence from the United States that, when faced with imminent litigation,
researchers choose to decline presenting their projects or findings rather than risk legal proceedings,
although some have started to release their findings anonymously. See e.g. Robert Lemos, Security
Workers: Copyright Law Stifles CNet News.com (6 September 2001), online: CNet News.com
Technology Review (November 2001), online: Technology Review
138 R.S.C. 1985, c. C-38.
139 In the Competition Act, supra note 14, both s. 52, establishing criminal track, and s. 74.01,
establishing civil track, contain the same prohibition. The Misleading Advertising Guidelines stipulate
that nondisclosure of information that would likely have a tendency to affect a purchasing decision
may be a misleading representation. See Canada, Competition Bureau, Misleading Advertising
Guidelines (Ottawa: Consumer and Corporate Affairs Canada, 2001) at 8, online: Industry Canada
140 Supra note 138, s. 7.
141 See e.g. Martin H. Bosworth, Coldplay Cant Play: Bands New CD Comes with Onerous
Limitations (4 January 2006), online: Consumer Affairs
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purchased. According to Philips, a Dutch company that created the compact-disc
format along with Sony, CDs containing DRM cannot be classified as CDs at all
and should not use the CD logo.142 To do so misleads consumers as to the quality
and functionality of the product being purchased. A French court recently confirmed
this conclusion in a case involving DRM-protected CDs.
In 2003, a French consumers organization commenced an action against EMI
Music France. The group alleged that use of DRM technology by EMI, without
proper notification to consumers, constituted a misleading and deceptive practice in
violation of French consumer protection law. In this case, there was evidence that the
CDs could not be played on personal computers or in car stereos. Although the label
on the CDs indicated that the CD contained anticopying technology, it did not specify
that the CD might not play in certain devices. The French court found that the
practice was misleading and ordered EMI to use a clear warning on its CD labels.143
In April 2005, another French court reached a similar conclusion regarding
DRM-protected DVD movies.144 This ruling effectively rendered eighty per cent of
the DVDs in France illegal. The court found that the use of the mark CP in small
print (to indicate copying prohibited) was insufficient notice to consumers and
ordered the DVDs pulled from store shelves.
In the online context, DRM-enabled content delivery services have also been
shown to disrupt consumer expectations regarding the nature of what they are
purchasing and what they can do with the content they purchase.145
Gone are the days of switching from vinyl to cassette tapes to CDs over a period
of decades and years. Modern consumers must often navigate their way through non-
standard, proprietary DRM technologies applied to content, software, and devices.
The potentially adverse effects of such practices on consumers has been
acknowledged by copyright holders themselvesa vice-president at Warner Music
142 See ibid.
143 See C.A. Versailles, 30 September 2004, S.A. EMI Music France c. Association CLCV, 1re
chambre, 1re section. For a brief discussion of the case and of the lower courts decision, which the
court of appeal followed, see Natali Helberger, Thou shalt not Mislead thy Customer! The Pitfalls of
Labelling and Transparency, online: (2005) 1 Indicare Monitor 198
online: Euro-Copyrights.org
144 See C.A. Paris, 22 April 2005, Perquin c. Universal Pictures Video France, 4me chambre,
section B. For a brief discussion of the case, see J. David Goodman, Consumers Fight Copy
Protection International Herald Tribune (11 November 2005), online: International Herald Tribune
145 See Deirdre K. Mulligan, John Han & Aaron J. Burstein, How DRM-Based Content Delivery
Systems Disrupt Expectations of Personal Use (Paper presented at the Third Association for
Computing Machinery Workshop on Digital Rights Management, Washington, D.C., 27 October
2003), online: Association For Computing Machinery
323
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Group has stated that we will begin to see people with large libraries of content that
wont play with their devices.146
In late 2005, a major public outcry erupted when Sony BMG was discovered to
have sold CDs containing DRM software that installed itself secretly on consumers
computers, arguably without adequate labelling or notice to consumers.147 The
installed DRM was virtually invisible to consumers. Making things worse, the DRM
could not be removed without damaging the operating system of the computer.148 This
DRM system created a serious threat to individual privacy and computer security,
resulting in virus infections in more than 500,000 computer networks, including
government and military sites.149 In addition to class action lawsuits commenced
against Sony BMG in Canada and the United States, the Attorney General of Texas
commenced an action against Sony BMG, alleging, inter alia, that the DRM system
violated the states spyware.150 The Sony BMG case provides an illustration not only
of potential problems and harms of DRM, but also of how DRM can be used without
providing consumers sufficient information or notice.
The preceding discussion illustrates that there are reasons to ask whether DRM
and anticircumvention laws will produce a market for copyright goods that offers
Canadian consumers competitive pricing or product choices. Even if labelling were
146 Kevin Gage, quoted in Stefanie Olson, Piracy Fears Threaten Hollywood Innovation
TechRepublic (29 September 2004), online: TechRepublic
147 Sonys software, while one of the most intrusive, was not the first installed by computer and
entertainment industries without disclosure. This practice is becoming increasingly widespread. See
e.g. John Borland, Who has the right to control your PC? CNet News.com (21 November 2005),
online: CNet News.com
148 See Andrew Orlowski, Removing Sonys Rootkit Kills Windows The Register (1 November
2005), online: The Register
Russinovich has written about his own experience with the rootkit, stating that [t]he entire experience
was frustrating and irritating. Not only had Sony put software on my system that uses techniques
commonly used by malware to mask its presence, the software is poorly written and provides no
means for uninstall. Worse, most users that stumble across the cloaked files with a RKR scan will
cripple their computer if they attempt the obvious step of deleting the cloaked files (Personal Blog,
online: Technet
149 See Quinn Norton, Sony Numbers Add Up to Trouble Wired News (15 November 2005),
online: Wired News
150 See Office of the Attorney General of Texas, Press Release, Attorney General Abbott Brings
First Enforcement Action in Nation against Sony BMG for Spyware Violations (21 November 2005),
online: Attorney General of Texas Greg Abbott
$750,000 and a refund to all consumers affected by its software. See Jim Welte, Sony BMG to pay
$1.5M
(20 December 2006), online: MP3.com
rootkit case
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adequate, challenges are raised by the changing technological environment of formats
and devices.
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IV. Creating a Competition Policy Framework for the Twenty-first
Century
A. Advocacy on Copyright Is Essential
its mandate
The Bureau may use
to promote
competition and the efficient allocation of resources to
intervene in policy discussions and debates regarding the
appropriate scope, definition, breadth and length of IP
rights.
IPEGs151
The Competition Bureau has a unique opportunity and responsibility to infuse
competition considerations into copyright law as Canada considers whether to amend
its copyright law. Participating in government consultations and hearings in order to
influence policy is exactly the kind of activity that the Bureau has indicated to the
International Competition Network is an essential function of an effective
competition authority.152 This article has outlined a number of reasons why DRM and
anticircumvention provisions raise critical competition issues that demand advocacy
by the Competition Bureau. In the area of personal privacy, for example, the privacy
commissioner of Canada did not wait to be consulted by copyright policy makers
she contacted them.153 The Bureau could follow this lead immediately and fully
participate when hearings and public consultations on copyright begin.154
Indeed, in late 2005, Commissioner of Competition Sheridan Scott stated
publicly that advocacy in the area of intellectual property would be a priority for the
Competition Bureau: Increasingly … we will turn our attention to two relatively new
151 Supra note 11 at 15.
152 Sally Southey, the assistant commissioner of communications at the Competition Bureau,
remarked on this in a recent presentation to the Network (Improving the Effectiveness of
Competition Advocacy (delivered at the Third Annual International Competition Network
Conference, Seoul, Korea, 21-22 April 2004) [unpublished]). See also Sheridan Scott, Opening
Remarks (delivered at the Canadian Bar Association Annual Fall Conference on Competition Law,
Gatineau, Qc., 3 November 2005), online: Competition Bureau
153 See Letter from Jennifer Stoddart, supra note 38.
154 The Bureau has appeared at a number of hearings on matters related to intellectual property
industries and the cultural sector, including most recently the Canadian feature film industry. Gaston
Jorr, the senior deputy commissioner of competition at the Competition Bureau, recently provided a
description of the Bureaus position in that matter and in past matters. See Gaston Jorr, Study of the
Canadian Feature Film Industry (Remarks to the Standing Committee on Canadian Heritage, 10 May
2005), online: Competition Bureau
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areas that I believe would benefit from careful input: intellectual property and
health.155 The commissioner referenced the following four-point strategic framework
developed by the Bureau in determining how to set its priorities:
325
Does a ready forum to present information exist?
Can the Bureau bring its unique perspective to bear on this issue in a useful
way?
Will we be able to gauge or measure any effects our advocacy efforts may
have?
Will our advocacy efforts have clear benefits for Canadians?156
Although the commissioner has not publicly addressed the answers to each of
these questions in the context of copyright reform, it is clear that each one militates in
favour of active advocacy by the Bureau. First, the Bureau can immediately present
information directly to the two ministries overseeing copyright reformCanadian
Heritage and Industry Canadaand in a more formal way to the committee(s) of the
House of Commons expected to engage in public consultations regarding future
copyright reform.
Second, the Competition Bureau can bring its perspective to bear on copyright in
a useful way. Thus far in the copyright reform process in Canada there appears to
have been little or no analysis of the competition policy implications, and no public
consultation with the Bureau. The Bureau can bring to the process much-needed
expertise in competition law and policy.
With respect to the third factor, the Competition Bureau will be able to gauge and
measure the effects of its advocacy in a number of different ways. The effects of the
Bureaus advocacy might be openly identified and explained by Canadian Heritage
and Industry Canada in the course of consultations. The Bureaus advocacy might
also be measured by actual changes to future anticircumvention legislation or the
Competition Act in some of the ways identified in this article. Finally, the Bureau
might be able to gauge the effects of its advocacy over the long term by assessing the
number of competition issues arising from changes to copyright law, particularly as
compared to countries like the United States that have arguably failed to adequately
address competition issues in copyright reform.
Finally, on the fourth point raised by the commissioner, it is beyond question that
Canadians would benefit from the Competition Bureaus advocacy on copyright. At
the most basic level, Canadians would benefit from an inclusive and holistic approach
to potential copyright reform that includes all stakeholders and perspectives. At a
minimum, this could help avoid unintended consequences for competition law and
155 Scott, Bureau Progress and Priorities, supra note 8 at 10. In some cases, these two priorities
may actually overlap because DRM may have applications in the area of pharmaceuticals. See Part
IV.E, below.
156 Ibid. at 9.
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policy. A number of commentators have criticized the Canadian copyright reform
process thus far, suggesting that public consultations principally reflected the
concerns, interests, and lobbying efforts of large multinational music recording
companies represented by the CRIA.157 Many commentators, including artists
themselves,158 argue that the voices of creators and artists, ordinary consumers, the
public at large, and small and medium-sized businesses have been largely, if not
completely, overlooked in this process. These stakeholders will benefit from the
Bureaus advocacy to the extent that the Bureau would represent their interests. The
protection of the interests of consumers and small to medium-sized enterprises is in
fact one of the key purposes of the Competition Act.159
The fact that competition and intellectual property share similar objectives further
suggests that the Competition Bureaus participation as an advocate in copyright
reform is a natural fit. Adopting an advocacy approach to copyright reform and the
impact of DRM technologies is also consistent with the idea that the advocacy of
competition authorities is an effective way to address intellectual property rights and
competition in the context of complex technologies and innovation.160
B. Infusing Competition Policy into Copyright Reform
DRM technology can pose serious challenges for competition policy. These
challenges appear to be aggravated and multiplied when DRM is protected by
anticircumvention laws, especially in the form of anti-device provisions.
One possible way to limit the anticompetitive uses and effects of DRM would be
to deny it legal protection as an independent addition to copyright, particularly in the
case of anti-device provisions. Anti-device provisions that directly regulate
157 See generally Laura Murray, Copyright Talk: Patterns and Pitfalls in Canadian Policy
Discourses in Geist, supra note 4. Murray writes:
[T]he music industry has not had to justify its location at centre-stage of copyright
discussion. The recording industry lobby has been extraordinarily effective, such that
music file-sharing is commonly taken to be the predominant Internet activity and policy
problem that sets the tone for or even trumps all others. …
(ibid. at 27-28).
Music file-sharing is behind every tree for members of the Heritage Committee
158 The Canadian Music Creators Coalition, which has numerous well known Canadian musicians
as members and which seeks to influence Canadian copyright law, is a manifestation of this
frustration. See online: Canadian Music Creators Coalition
159 Supra note 14, s.1.1.
160 See Robert D. Anderson & Nancy T. Gallini, Summary and Conclusions in Robert D.
Anderson & Nancy T. Gallini, eds., Competition Policy and Intellectual Property Rights in the
Knowledge-Based Economy (Calgary: University of Calgary Press, 1998) 463 (Ensuring an
appropriate balance between competition and IP policies, especially as they apply to complex
technologies, may best be served by the participation of the competition authorities in reviews of the
relevant legislation at 469).
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2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
technology can result in chilling effects on innovation.161 Even if some type of
anticircumvention provision were determined to be a necessary addition to copyright,
the provision could be added in such a way as to promote copyright goals while at the
same time ensuring that adverse competition issues are kept to a minimum.
For example, rather than creating an independent cause of action for
circumvention, the Copyright Act might incorporate circumvention into the analysis
of remedies where actual copyright infringement has taken place. The Copyright Act
could direct courts to consider circumvention as an aggravating factor in cases of
infringement, possibly indicating a higher degree of intent to infringe and justifying a
commensurate remedy or penalty. This would keep the focus of copyright on
copyright and minimize copyright owners ability to use anticircumvention laws in
anticompetitive ways. In a related way, the Copyright Act might also provide
Canadians with an affirmative right to circumvent when the person does not engage
in infringement of the underlying work.
With respect to promoting security research and reverse engineering to achieve
innovation and interoperability, it is important to note that the DMCA permits
circumvention of DRM for reverse engineering purposes. The exception, however, is
narrowly crafted and applies only to computer software.162 Canada might allow a
broader range of reverse engineering for any purpose where infringement of the
underlying work is not involved. In doing so, however, Canada must recognize the
limited value of such exceptions from a competition perspective. First, the potential
threat of litigation has a chilling effect on reverse engineering and security research.
Second, reverse engineering often requires significant resources and a high level of
161 This point is made in the quote from Bob Young reproduced at outset of this article. At the other
end of the spectrum, it is interesting to note that Japan has enacted anti-device provisions in its
competition legislation, stating that unfair competition includes, for example
acts of assigning, delivering, displaying for the purpose of assignment or delivery,
exporting or importing (a) devices (including machines incorporating such devices)
having the sole function of enabling the viewing of images or hearing of sounds, the
running of programs, or the recording of images, sounds or programs which are
restricted by technological restriction measures that are used in business … (Fusei
Kyoso Boshiho [Unfair Competition Prevention Law], Law No. 14 of 1934, as am. by
Law No. 47 of 1993 and Law No. 75 of 2005, art. 2(1)(x), trans. online: Nagoya
University, Graduate School of Information Science
For a discussion of the provision, see de Werra, supra note 52.
162 The DMCA, supra note 53 authorizes the circumvention of DRM for the sole purpose of
identifying and analyzing those elements of the program that are necessary to achieve interoperability
of an independently created computer program with other programs … (1201(f)(1)). The exemption
applies only to interoperability between programs; thus, using reverse engineering to achieve
interoperability between hardware products would be prohibited. Such narrow interpretation of this
exemption was supported in Corley, supra note 57 and Universal City Studios v. Reimerdes, 111 F.
Supp. 2d 346 (S.D.N.Y. 2000). The exemption, however, seems to have been expanded in Lexmark,
supra note 113 and Skylink, supra note 124.
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expertise, making this option potentially unrealistic for small and medium-sized
competitors. This is a critical shortcoming in an information society where fast-
moving start-ups can drive innovation and competition in markets.
In the face of these limits, other mechanisms could be used to advance the policy
goal of promoting creativity and innovation by ensuring proper access to protected
content. One possibility is mandatory licensing of DRM technology to competitors.
This would help ensure that the problem of copyright infringement is addressed and
would at the same time ensure that competitors in relevant markets are not prevented
from innovating and supplying competing products by reason of technological
constraints and legal threats. Although some might argue that mandatory licensing is
an overly invasive solution,163 it may be warranted when interoperability disclosures
are essential for preserving competition in a market.
An appropriately tailored system of exceptions could theoretically limit the
anticompetitive effects of DRM technology.164 It would, however, do less to eliminate
the chill on innovation and creativity created by anticircumvention laws. One possible
way to help address this problem would be to include in the Copyright Act a
provision similar to the equitable doctrine of copyright misuse in the United States,
which could be invoked in cases where copyright or anticircumvention provisions are
used for purposes other than copyright protection.165 Although U.S. courts have not
recognized the misuse doctrine in the context of DMCA circumvention claims,166 the
doctrine normally allows a copyright defendant to defend an infringement action on
the ground that the plaintiff has used its copyright in an anticompetitive manner. The
doctrine of copyright misuse has been increasingly used in cases where copyright law
is employed to protect information technologies.167 Canadian courts have not yet
163 The doctrine of monopoly leveraging has been rejected by the U.S. Supreme Court in Verizon
Communications v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 124 S. Ct. 872, 157 L. Ed. 2d
823 (2004), which may suggest different standards for mandatory licensing in the United States and
the European Union. It has also been argued that mandatory licensing can have negative effects on
economic welfare. See Claude Crampes & Abraham Hollander, Competition and Intellectual
Property in the European Union (2005) [unpublished], online: Institut dconomie industrielle
164 Graham Henderson, President of the CRIA, claims that exceptions are the entire answer to critics
of DMCA-style anticircumvention (supra note 65).
165 The U.S. doctrine of copyright misuse was first mentioned in Morton Salt v. G.S. Suppiger, 314
U.S. 488, 62 S. Ct. 402, 86 L. Ed. 363 (1942), a U.S. Supreme Court case that established the patent
misuse doctrine. However, it remained largely undeveloped until the 1990 decision in Lasercomb
America v. Reynolds, 911 F.2d 970 (4th Cir. 1990). See generally Wong, supra note 13 at 13-14.
166 See e.g. Lexmark, supra note 113 at 965; Sony Computer Entertainment America v.
Gamemasters, 87 F. Supp.2d 976 (N.D. Cal. 1999) at 989.
167 See Robert P. Merges, Peter S. Menell & Mark A. Lemley, Intellectual Property in the New
Technological Age, 3d ed. (New York: Aspen, 2003) at 494.
329
2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
adopted the doctrine. It is arguable that importing it into Canadian copyright law
could help further both copyright and competition policy goals.168
Competition in the digital environment could also be enhanced by labelling
requirements referring specifically to DRM technology. Because the technology is
very flexible, products implementing DRM may have very different functionality
despite appearances of similarity. Compelling manufacturers to reveal DRM
restrictions would not only help ensure a level field for competition but also protect
consumers against false, misleading, or deceptive statements. This approach has
already been proposed in the United States169 and has been discussed and
recommended in the United Kingdom:
The rights holders stressed to us that if TPMs were unpopular then the
market would automatically fix the problem over time. We agree with this
view, but it is crucial to note that the market cannot function efficiently when
consumers are unaware of the presence of TPM mechanisms, fail to understand
what acts will be forbidden, or when they have no real choice because
particular content is only available with TPM restrictions.170
The existing provisions of the Consumer Packaging and Labelling Act seem to
be insufficient; although that legislation does prohibit vendors of products from using
labels that would be false or misleading,171 it does not require them to be frank and
forthcoming about the technological functionality of their products. The order of the
French court in the CD case discussed in Part III.E of this article represents an
example of a forthcoming disclosure.172 Labelling and description of DRM
restrictions could be made mandatory, failing which consumers might be provided the
unfettered right to circumvent the protection.
C. Legislative Reform of the Competition Act
In addition to infusing competition policy into the copyright reform process as
suggested above, legislators could change competition law itself. Part I of this article
outlined some limitations of section 32 of the Competition Act.173 One of those limits
168 See Mark A. Lemley, Beyond Preemption: The Law and Policy of Intellectual Property
Licensing (1999) 87 Cal. L. Rev. 111 (noting the departure of the copyright misuse doctrine from
antitrust principles to copyright policy). The American doctrine of copyright misuse has been applied
as an affirmative defence. See Novell v. CPU Distributing, 2000 U.S. Dist. LEXIS 9952 (S.D. Tex.
2000) at 15-16. To increase its effectiveness, however, Canadian legislation might recognize copyright
misuse as an independent claim for affirmative relief.
169 The U.S. Senate is considering a bill that would require the Federal Trade Commission to issue
rules regarding the disclosure of technological measures that restrict consumer flexibility to use and
manipulate digital information and entertainment content. See U.S., Bill S. 692 Digital Consumer
Right to Know Act, 108th Cong., 2003.
170 APIG, DRM Report, supra note 67 at para. 96.
171 Supra note 138, s. 7.
172 See supra note 143 and accompanying text.
173 Supra note 14.
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was based on the assumption that section 32 is a criminal section requiring the
involvement of the Attorney General. Competition policy could benefit by changing
section 32 to a civil matter in the Competition Act as a reviewable matter. This would
put beyond question the nature of the section and the standard of proof required. It
would also free the Competition Bureau to engage and control the application of
section 32 more effectively in appropriate cases involving intellectual property rights.
Changing section 32 would also be consistent with a recent trend in competition law
to move matters that are clearly not criminal in nature outside the realm of criminal
law. For example, merger and monopoly provisions were removed to the civil side in
1985.174
Dr. Stanley Wong has expressed a view of the appropriate approach to section 32
that appears to be consistent with the suggestion for reform described above. He
offers a possible explanation for why section 32 was not included in Part VIII of the
Competition Act in the first place:
Section 32 should be considered a reviewable matter and would likely have
been put into Part VIII but for the fact that only the Federal Court has
jurisdiction over s. 32. It may not be constitutionally permissible to transfer
jurisdiction over s. 32 to the Competition Tribunal since the Federal Court has
supervisory jurisdiction over registration of statutory intellectual property
rights.175
The potential jurisdictional problem referenced in this passage is not explained. It
may refer to the exclusive authority of the Federal Court to cancel or amend an entry
on the Copyright Registry,176 which is a possible outcome in adjudication under
section 32.
Although a detailed analysis of the jurisdiction question is beyond the scope of
this article, it may be possible to address the matter by granting the Competition
Tribunal concurrent jurisdiction to make changes to the copyright registry in cases
involving competition law. This would not be an entirely novel approach to
jurisdictional issues involving copyright. At present, the Federal Court and provincial
courts have concurrent jurisdiction over litigation for infringement of copyright,177
which does not prevent provincial courts from effective adjudication in cases that
require subsequent changes to the copyright registry. Also, the six judicial members
of the Competition Tribunal could be vested with exclusive jurisdiction over the
intellectual property remedies listed under section 32. This second solution may be
preferable given the Competition Tribunal members relative expertise in the field of
competition law.
174 See An Act to establish the Competition Tribunal and to amend the Combines Investigation Act
and the Bank Act and other Acts in consequence thereof, supra note 26.
175 Supra note 13 at 17-18.
176 See Copyright Act, supra note 5, s. 57(4).
177 See ibid., s. 37. See also Vaver, supra note 98 at 253-54.
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D. Enforcement
Legislative changes addressing the possible anticompetitive uses of DRM and
anticircumvention laws are necessary but insufficient. Legislative change must be
followed by active enforcement by the Competition Bureau. As copyright continues
on its expanding course, investigating the effects of DRM and anticircumvention laws
on competition should be made a priority at the Bureau and should be clearly
communicated to the business community. There is at least one indication that
competition enforcement in the area of intellectual property will in fact become a
priority of the Bureau. The commissioner of competition has publicly stated that the
Bureaus enforcement actions will be informed by its advocacy priorities, including
intellectual property.178
Recognition of the anticompetitive potential of DRM and anticircumvention laws
should also be reflected in the guidelines issued by the Competition Bureau.179 For
example, to clarify the Bureaus position on technological tying, the IPEGs could
include a section dedicated to tied selling, similar to the Antitrust Guidelines for the
Licensing of Intellectual Property issued by the U.S. Department of Justice and the
Federal Trade Commission.180 Similarly, a section on misleading advertising and
deceptive practices could give notice of the Bureaus enforcement practices in
situations where consumers are misled regarding DRM restrictions.
In addition, the Competition Bureau could be actively engaged in bringing an
increased number of cases before the tribunal and the courts in the context of DRM
and anticircumvention. This step would be consistent with the Bureaus confirmation
that the purpose behind subsection 32(2) was to adapt to new intellectual property
architectures that expand the breadth and scope of intellectual property rights. In
response to the idea that intellectual property has been expanding over the past
decade with direct effects on competition, including through anticircumvention laws
like the DMCA, Gwillym Allen of the Bureau stated the following regarding the role
of the Bureau in using subsection 32(2) to address intellectual property expansion:
178 See Scott, Bureau Progress and Priorities, supra note 8 at 8-10. The commissioner also
indicated that one of the Bureaus top enforcement priorities is ensuring accurate information in the
marketplace (ibid. at 8). This has obvious importance in connection with the product labelling and
deceptive marketing issues described in Part III.E, above.
179 The Standing Committee on Industry, Science and Technology recommended [t]hat the
Competition Bureau review its enforcement guidelines, policies and practices to ensure appropriate
emphasis is placed on dynamic efficiency considerations in light of new challenges posed by the
knowledge-based economy … (Standing Committee on Industry, Science and Technology, A Plan to
Modernize Canadas Competition Regime (Ottawa: Standing Committee on Industry, Science and
Technology, 2002), recommendation 2, online: The Parliament of Canada
180 U.S., Federal Trade Commission & U.S., Department of Justice, Antitrust Guidelines for the
Licensing of Intellectual Property (6 April 1995) 5.3, reprinted in 4 Trade Reg. Rep. 13,132,
online: U.S. Department of Justice
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[T]he architecture of the law can change such that the objectives in the
intellectual property are actually being undermined by their very use.
And as a marker that that may be happening would be the effects on
competition. And that may be that competition law or authority should step in
and try to readjust the balance or at least put it before a courtand in our case
its the Federal Courtto consider the readjustment of that balance.181
In spite of the foregoing arguments in support of vigilant enforcement by the
Competition Bureau, it must be acknowledged that the Bureau has other enforcement
priorities and a limited budget for enforcement efforts. This practical limitation on the
ability to enforce does not suggest that enforcement should not be a matter of priority
in the area of intellectual property. On the contrary, intellectual property is critical for
many businesses in modern markets. On the one hand, intellectual property can be an
essential asset for companies of all sizes and types. On the other hand, intellectual
property can create a significant barrier to innovation and competition in almost every
market, particularly for small and medium-sized businesses. This is particularly true
in the context of DRM and anticircumvention laws. The effects of intellectual
property on competition ought to receive priority enforcement attention from the
Competition Bureau.
Finally, it is important to note that there are at least two means by which to
circumvent the problem of budgetary limitations facing the Bureau. One obvious
solution is to increase the budget. Another solution is for the Bureau to invest in
preventative measures, like advocacy, to help ensure that copyright reform does not
cause downstream competition law problems that need to be enforced. Examples of
such measures are described in Parts IV.A and IV.B of this article.
Before leaving the issue of enforcement, it is important to qualify the idea that
vigilant enforcement and legislative change may be necessary responses to Canadas
possible copyright amendments. Just as intellectual property overbreadth can
undermine the objectives of intellectual property law, so too could competition
overbreadth (in the form of overly strong competition laws or overly aggressive
enforcement in the area of intellectual property). Although intellectual property must
be answerable to competition law in appropriate cases, competition law must also
tread carefully so as to avoid undermining the objectives of intellectual property law.
E. Digital Rights Management Technology and Standards Setting
DRM technology is relatively new and its effects on the interoperability of
various products and on competition in affected markets are only beginning to be felt.
However, DRM is spreading rapidly. Its potential to create new competition law
problems and to extend existing ones cannot be ignored. Some commentators
envisage DRM unmoor[ing] itself from copyright and transforming into Property
181 DOJ/FTC Hearing, supra note 20 at 141-42.
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2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
Rights Management, a system controlling and managing rights in a broad array of
traditional tangible goods.182
A recent development in DRM technology, already partially implemented by
Microsoft in its next generation of operating systems, is known as trusted
computing (TC). TC involves binding computer operating systems with hardware
components to create a secure computing platform that cannot be tampered with.183
TC is controversial because, although it purports to offer increased security for
computer users,184 it can be used in anticompetitive ways. One of the prominent
features of TC is remote attestation of the computer system. This means that if a
computer system is found to be altered or to be using unapproved software, it will
be considered untrusted and will not be able to exchange data or files with other
programs or systems. In effect, the companies creating the software and platforms
will be able to control compatibility and to manage the markets for complementary
products, software in particular, by holding consumers underlying data hostage in the
TC system. This could have adverse effects on competition in the computer software
market, particularly because it exponentially increases the cost of switching from one
system to another, in the broadest sense of that term.185
In addition to keeping abreast of developments in DRM technology, including
TC, the Competition Bureau ought to consider monitoring and possibly becoming
involved in DRM standards setting. Although standards can promote interoperability,
stimulating innovation and competition, they can also stifle competition:
Compatibility between products can greatly enhance their value to
consumers and businesses. For example, technical standards for digitizing data
have proven vital for the usefulness and commercial viability of cellular
phones, CDs, CD players, Internet communications, and a host of other
products. However, the standard setting process generally requires that
competitors come together to coordinate on a technological standard. In such a
setting, there are opportunities for anticompetitive behavior as companies exert
their influence over the process. After a standard has been established, there are
many issues regarding access to the technology embodied in the standard;
limited access could restrict the number of competitors in a market and severely
182 Ed Felten, DRM Wars: Property Rights Management, online: Freedom to Tinker
183 See Anderson, supra note 122.
184 See Seth Schoen, Trusted Computing: Promise and Risk, online: Electronic Frontier
Foundation
185 See ibid. The cost referenced here is much more than the cost of purchasing and learning new
systems. If an individual or companys data (e.g., word processing documents, financial records,
presentations, photographs, etc.) is tied to the initial TC system and cannot be easily extracted for use
in another system, or if it cannot be extracted at all, then the cost of switching to another system is not
easily quantified. As anyone who has lost a laptop computer will attest, the real cost is not merely
the cost of the equipment but more importantly the lost data. The underlying data has tremendous
value to individuals and companies. By tying such data to a TC system, the data can be leveraged by
TC providers in an attempt to retain customers.
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inhibit entry. In some cases, we might want to consider whether consumer
welfare is best served by having the industry settle on a single standard or by
encouraging the development of multiple competing standards.186
In a related way, the Bureau could monitor and provide input in situations where
copyright holders seek to have regulators mandate design requirements for
information technology and electronic devices to suit the interests of copyright
holders. This has been a recurring phenomenon in the United States that is now
appearing in Canada.187 If adopted, such interventionist government-mandated
technology design could have disastrous effects on innovation and competition. Such
mandates should be rejected on competition grounds for the same reason that anti-
device provisions should be avoided in the Copyright Act.
F.
International Advocacy
[W]e [the private sector] respectfully urge that the
[International Competition Network]
initiate a
competition/intellectual property working group to examine
core issues such as the legal standard for monopolization
and abuse …
…
James F. Rill188
Competition regulation is increasingly a global issue and nowhere is this felt
more than in the case of the exercise and exploitation of intellectual property rights.
This is particularly true in light of increased harmonization of copyright laws around
the world.
Canada has been an active leader in international competition organizations and
should continue in that role. Canada can also learn from the experience of
competition authorities in other countries. Although Canada has not yet studied the
interface between competition and
in detail,
representatives from the Competition Bureau participated in extensive public
hearings on the subject in the United States before the Federal Trade Commission and
the U.S. Department of Justice in 2002. A number of the views expressed at those
hearings by the Bureau have been identified in this article and could form the basis
for further consultations on copyright reform in Canada. More recently, the
intellectual property
rights
186 Charles A. James, Assistant Attorney General, Antitrust Division, U.S. Department of Justice
(Comments made at the Joint DOJ-FTC Hearings on Competition and Intellectual Property Law and
Policy in the Knowledge-Based Economy, 6 February 2002), online: U.S. Department of Justice
187 See e.g. Jonathan L. Rubin, AAI Research Fellow Jonathan Rubin Explains Anticompetitive
Issues in Broadcast Flag Op-Ed, Reprinted from FTC: WATCH (23 October 2003), online: American
Antitrust Institute
supra note 65.
188 International Competition Network: The Perspective of Non-Governmental Advisors (2002),
online: International Competition Network
2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
commissioner of competition participated in the first formal trilateral meeting
between the competition authorities of Canada, the United States, and Mexico.
Perhaps not surprisingly, the commissioner reported that one of the topics discussed
was intellectual property:
335
We also discussed another important driver of productivity and competitiveness
in our respective economies, innovation, in the context of the interface between
competition policy and intellectual property. It is my view that the links
between competition and innovation need to be better examined.189
Harmonization of domestic competition laws and possibly the establishment of
an international intellectual property competition authority are two possible ways to
mitigate competition issues that arise in connection with the global exploitation of
intellectual property.190 Such measures could be considered consistent with, or a
natural reaction to, the recent trend toward increased harmonization of intellectual
property laws around the world.191 Given that the objectives of competition and
intellectual property are similar, and that the harmonization of intellectual property is
increasingly being tied to international trade agreements, competition law might
follow suit to ensure that its objectives are promoted in the same way that intellectual
property is attempting to promote its objectives. In other words, competition law
might take a lesson from copyright when it comes to ensuring that its objectives are
achieved in a global economy.192
Some might argue that these are extreme ways to address competition issues in
connection with international exploitation of intellectual property. However, Canada
could consider these options and share the experience, knowledge, and expertise in
dealing with copyright that it may develop in connection with future copyright
189 Scott, Opening Remarks, supra note 152.
190 See e.g. ibid.
191 See Kim Nayyer, Globalization of Information: Intellectual Property Law Implications (2002)
7:1 First Monday, online: First Monday
192 In the international context, it is worth noting that the OECD, in part because of the efforts of the
Bureau at the OECD Competition Committee, held a roundtable in October 2006 on Patents,
Competition and Innovation. See OECD, Compendium of OECD Work on INTELLECTUAL
PROPERTY (IP) (2007) at 7-8, online: OECD
Property Rights and the Transfer of Technology: Issues for Further Discussions in View of UNCTAD
X in The Role of Competition Policy For Development in Globalizing World Markets (Paper
presented at the Pre-UNCTAD X Seminar, U.N. Conference on Trade and Development, Geneva, 14-
15 June 1999) 39, online: U.N. Conference on Trade and Development
competition law. Intellectual property is exploited internationally, and my last examples have pointed
to the conflicts that may arise if antitrust law is enforced on a territorial basis only at 46); Keith E.
Maskus, Regulatory Standards in the WTO: Comparing Intellectual Property Rights with
Competition Policy, Environmental Protection, and Core Labor Standards (2000) 1 World Trade
Review 135.
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reform. Competition authorities in many other countries are or will soon be faced
with competition issues arising from DRM and anticircumvention laws.
[Vol. 52
Conclusion
Copyright and competition policy share a close relationship and related
objectives. This relationship is challenged by copyright holders emerging DRM
technologies, the contracting practices that they enable, and a new breed of
copyright lawanticircumvention and anti-device legal protections for TPMs and
DRM. These elements spawn a number of implications and unintended consequences
for Canadian competition policy.
At a general level, this article has asserted that copyright holders can exercise a
much greater degree of control over creative works using DRM technology and
contracts, particularly when such practices are protected by anticircumvention and
anti-device laws. Through the use of DRM and contracts to control access to and use
of copyright works, the interests of copyright holders, individuals, and society at large
can come to be defined by private contractual ordering rather than by copyright law.
This article has argued that this private reordering of copyright interests by copyright
holders may in itself suggest that Canadian competition policy needs reassessing,
particularly in light of possible legal protections for such practices and the
complementary objectives of copyright and competition law.
This article has also asserted that further evidence of the competition policy
implications arising from DRM, contracts, and anticircumvention and anti-device
laws is found in the increased costs to consumers resulting from those elements
costs that include financial costs for traditionally free access and use; costs of
engaging in legitimate circumvention; costs in the form of increased legal risk under
anticircumvention laws and contracts; indirect costs when DRM weakens computer
security; and, finally, broader costs in the form of reduced access, use, and
dissemination of copyright works, and ultimately potentially less new innovation
resulting from creators and others reluctance or inability to incur the cost of
circumvention. These costs can result in economic inefficiencies and can shift a
disproportionate share of total innovation benefits from individuals and the public at
large to copyright owners. Over the long term, these costs may cause innovation to
suffer further by decreasing the amount of practically and efficiently accessible and
utilizable innovation upon which further innovation depends.
This article has also identified a number of the ways that anticircumvention and
anti-device provisions do not appear to fit under copyrights traditional bundle of
rights, leading some to characterize such provisions as paracopyright. As
explained in Part III.B, the character of anticircumvention and anti-device provisions,
along with the issue of whether the use of DRM and contracts (particularly in the area
of fair dealing) amount to an exercise of an intellectual property right, has
implications for the potential application of the Competition Act. To address these
implications, possible legislative reform of the Competition Act was discussed in Part
IV.C.
337
2007] CAMERON & TOMKOWICZ CANADAS NEW BREED OF COPYRIGHT LAW
Rounding out the competition law and policy implications discussed, this article
has examined the ways that DRM, contracts, and anticircumvention laws can
contribute to problems in the area of tied selling, abuses and anticompetitive
practices, security research, and product labelling and deceptive marketing practices.
This article has asserted that possible changes to Canadian copyright law that
would protect TPMs and DRM and the contracting practices under them should be
critically assessed from a competition law perspective. To this end, this article has
suggested that Canadas competition authority should consider escalating its domestic
and international advocacy on issues of competition and intellectual property. In the
domestic context specifically, there are a number of concrete ways that the
Competition Bureau can infuse competition policy into copyright reform. The
Bureaus involvement in the reform process is critical. These measures, along with
appropriate enforcement, reform to the Competition Act, and ongoing awareness
about DRM technology development, are necessary to ensure that copyright responds
to competition law in appropriate cases and that Canada maintains competition policy
objectives in the face of new technological developments and possible copyright law
reform.
