Productivity Commission: Tales of the Widespread Demise of Canadian Publishers are Just That

Earlier today, Australia’s Productivity Commission released its long-awaited Inquiry Report on Intellectual Property Arrangements. The Productivity Commission was set up by statute to provide the Australian Government independent research and advisory body on a range of economic, social and environmental issues, in order to help governments make better policies, in the long term interest of the Australian community.

The lengthy report and its recommendations should be of interest to many readers of this blog. With respect to copyright, one of the Commission’s main areas of study was whether Australia should adopt an open and flexible fair use regime and abandon its currently restrictive fair dealing approach. The Commission strongly recommends that it does. Of particular interest is the Commission’s analysis (and emphatic rebuttal) of the various claims made by copyright holders’ groups on the allegedly devastating impact of the recent developments in Canadian copyright law on Canadian authors and publishers.

For starters, the Report’s overview rejects the argument that the recent developments in Canada show that fair use would significantly reduce right holders’ incentives to create and invest in new works, and that fair use will equate with ‘free use’, particularly by the education sector. The Commission describes these claims as “ill-founded and premised on flawed (and self-interested) assumptions”, and notes “Changes in Canada’s publishing industry had little to do with copyright exceptions (where fair dealing still prevails) and more to do with other market factors.”[1]

The analysis in the body of the Report becomes even more interesting and essentially echoes many of the points that I have made before in a series of blog posts from June 2014. Here’s what the Report says beginning on p. 178, in a section entitled “Tales of the widespread demise of industries are just that”:

Many rights holders made dire predictions about the impact of transitioning to fair use. In making their case, many pointed to the Canadian experience. For example, several publishers and other representative bodies argued Canada provided a case study on the impact that adopting fair use in Australia would have on educational publishing, including (among others) McGraw‑Hill Education (Australia) (sub. 14), Cambridge University Press (sub. 22), UNSW Press Ltd (sub. 27), the Australian Copyright Council (sub. 36), Hachette Australia (sub. 41), the Australian Publishers Association (sub. 48) and the International Publishers Association (sub. 57). In part, this fear stems from the inclusion of education as an illustrative use in the ALRC’s recommended fair use exception (section 6.4 discusses illustrative use further).

Typical of the observations made, Oxford University Press (which also has a Canadian presence) argued that a range of impacts flowed from Canada’s broader fair dealing exception, in particular:

• A reduction in royalties paid by the education sector, directly impacting the financial viability of education publishing in Canada.
• Closure, sale and bankruptcy of publishers, and relocation or rationalisation of distribution activities to the United States. (sub. 8, p. 1)

Oxford University Press went on to argue:

If similar revisions are made to the definition and terms of ‘fair dealing’ or ‘fair use’ provisions in Australia, Oxford University Press in this country will be exposed to huge financial risk, and its authors and creators will be significantly impacted. (sub. 8, p. 2)

The Commission devoted considerable time to dismissing the arguments and predictions made in a PwC study, commissioned by several right holders’ groups. That study, which describes the Canadian experience, incorporated many of the claims that appeared in an earlier PwC study that Access Copyright had commissioned. Here’s what the Commission said on the PwC study:[2]

And if that’s not enough, consider this:

The PwC report contains a number of serious methodological flaws which not only call into question the accuracy of its conclusions but also undermine arguments that may rely on its evidence (such as some of those made by the Copyright Agency (sub. DR510)).”[3]

Ouch.

The Commission went on. In asking whether Canada is a good example of the impact of fair use, the Commission endorsed many of the rebuttals that The Australian Digital Alliance provided in its response to the PwC study, where it questioned the reliance on Canada as the base case for expected changes, and outlined a number of other concerns with the findings, including:

• the assumption fair use tilts copyright ‘away from creators’, when evidence suggests most fair use cases in the US are about subsequent (often transformative) uses of copyright material by follow‑on creators, rather than copying of original works
• the estimates of transaction litigation costs are based on faulty assumptions, including the assumption that collecting societies would cease to exist under fair use
• the analysis is at best a partial assessment of changes occurring in the production, transformation and distribution of copyright material, and takes no account of dynamic, long-term outcomes from digital innovation (sub. 141).[4]

The Commission cited other submissions where other participants noted that

the Canadian educational books sector was already struggling by 2012, and a range of other factors have contributed to the decline in revenue for the sector, limiting the lessons that can be drawn from the Canadian experience.”

In its submission, the National Copyright Unit, COAG Education Council addressed the points made by Oxford University Press, and highlighted some of the other factors that explained the changing fortunes of the Canadian education book sector.

• In the Oxford University Press (OUP) 2013‑14 Annual Report, copyright reform is not mentioned, however it does state that OUP’s decision to wind back its schools division in Canada followed ‘a decade‑long decline in the Canadian market for educational resources during which purchases of materials have fallen by nearly 50 per cent.’ OUP added that the decision to wind back in the schools market does not affect the company’s other activities in Canada ‘including our market‑leading Higher Education and ELT programmes.’
• OUP also asserts that the 2012 copyright reforms were the reason that Canadian educational publisher Nelson Education Ltd failed. And yet, an affidavit filed by Nelson’s chief executive officer in what were effectively bankruptcy proceedings, the company lists reduced spending on new curriculum by Canadian schools, increasing use of open education resources, the use of used textbooks, and the transition from traditional print books to digital products (which is said to be ‘having a transformative effect on the business’) as matters that adversely affected the company’s profitability. (sub. 97, pp. 41–42)

More critical again, academics from the Program on Information Justice and Intellectual Property at the American University Washington College of Law stated:[5]

Ultimately, evaluating the impacts of fair use, or any specific policy change, is hard work. The diffuse and forward-looking benefits of open exceptions like fair use may be hard to measure, but they are no less real. The PWC’s evaluation of the costs and benefits of fair use are not real. It is full of imagined horror stories that are unlikely to take place in fact and should be disregarded in their entirety. (sub. DR149, p. 3)

The Commission further relied on a study that Australia’s Department of Communications and the Arts had commissioned from Ernst & Young and was equally dismissive of the PwC study.[6]

It is nice to see that the Commission recognized that the tales of the demise of Canadian publishers are just that, and that the Commission saw the same flaws that I saw since Access Copyright began propagating these falsehoods in 2014. Even more remarkable is the fact that Access Copyright (as well as some of its members and their Australian counterparts) have never responded or attempted to correct the flaws that I identified in their made-up “evidence” 2.5 years ago. Rather, unbothered by the evident fallacy of their arguments, they have chosen to make bogus claims a centerpiece of their advocacy.

While it is encouraging to see that at least the Australian Productivity Commission has not been swayed by this campaign of misinformation, it is nonetheless regrettable that Access Copyright and its counterparts have chosen to maintain it. But it is also sad that instead of focusing on spreading knowledge, reputable publishers, including Oxford University Press, have chosen to tarnish their own reputation and propagate falsehood.

[1] Productivity Commission 2016, Intellectual Property Arrangements, Inquiry Report No 78, Canberra, (Dec 20, 2016), online: http://www.pc.gov.au/inquiries/completed/intellectual-property/report, at 10.

[2] Id, at 179.

[3] Id, at 661.

[4] Id, at 180.

[5] I was one of the co-authors of this submission, see Peter A. Jaszi, Michael S. Carroll, Sean M. Flynn, Michael Palmedo, et al., “Evaluating the Benefits of Fair Use: A Response to the PWC Report on the Costs and Benefits of ‘Fair Use'” (2016). Online: http://works.bepress.com/ariel_katz/34/

[6] Id. at 180-81. The EY Report was also made available to the public yesterday, see Ernst & Young, Cost benefit analysis of changes to the Copyright Act 1968, Department of Communications and the Arts (Dec 20, 2016), online: https://www.communications.gov.au/documents/cost-benefit-analysis-changes-copyright-act-1968