To much fanfare and after years of debate and consultation, the government of Canada passed the most important reforms to Canadian copyright law in several generations. The Copyright Modernization Act (the "CMA”) became law on November 7, 2012, with a stated policy of striking “the right balance between the needs of creators and users”.

In addition to bringing Canadian copyright law into compliance with two World Intellectual Property Organization (“WIPO”) treaties to which Canada is a signatory (the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty), the CMA brings Canada’s copyright laws into the 21^st Century, recognizing technological advances since the last changes to the Copyright Act in 1997.

The changes are wide-ranging and significant.

The CMA greatly expands the concept of ‘fair dealing’ (ss. 29, 29.1 and 29.2), the Canadian equivalent of fair use, ie. those uses of copyrighted material which would otherwise be considered infringements. Prior to the CMA, fair dealing was limited to research, private study, criticism or review, and news reporting. The CMA introduced three new fair dealing defences: education, parody, and satire. Of course, whether a given use can be considered to fall within one of the fair dealing exceptions is up to the courts.

The CMA also created four new categories of acceptable fair dealing, primarily for personal use: format shifting, time-shifting, backup copying and user-generated content. Subject to certain limitations, s. 29.22, the format-shifting exception allows an individual to reproduce non-infringing copyrighted materials that were legally obtained (but not borrowed or rented) by the individual. For example, a person who legally purchases a non-infringing CD may now transfer the music embodied in that CD to an MP3 player without liability. The reproduction must be for the individual’s private purposes and cannot be given away. Technological protection measures cannot be circumvented to make the reproduction.

With certain limitations, the time-shifting exception, s. 29.23, authorizes an individual to fix a communication signal or reproduce a work, recording or performance that is being broadcast, provided that the fixation or recording is only used for the individual’s private purposes. This exception is premised upon the individual legally receiving the signal or broadcast, making only one recording, and not giving the recording away. The individual must not circumvent any technological protection measures and may only keep the recording as long as reasonably necessary to view or listen to it at a more convenient time.

Copying for the purpose of backing up is also now allowed under s. 29.24. A person may make such a copy if the sole reason for doing so is to guard against the copyrighted material being lost, damaged or otherwise unusable. As with the other exceptions, the original may not be an infringing copy, technological protection measures may not be circumvented, and the reproductions may not be given away.

Under the user-generated content provision (the so-called ‘YouTube’ exception), individuals can use existing work available to the public in creating a new work, and authorize dissemination of that new work, where the use and dissemination of the new work is solely for non-commercial purposes, the source material is mentioned in the new work where it is reasonable to do so, the individual had reasonable grounds to believe the existing work was not itself infringing copyright, and the use or authorization to disseminate the new work does not have a substantial adverse effect on the exploitation of the existing work. This provision enables, for example, the creation of “mash-ups” on YouTube.

The CMA introduces protection for technological protection measures. Generally, a technological protection measure is any technology, device or component that controls access to a work (access controls) or restricts the ability to exercise a copyright owner’s exclusive rights (copy controls). This includes, for example, passwords or encryption. Subject to certain exceptions, the circumvention of access controls is prohibited. The creation or offering of services or devices that are designed to circumvent technological protection measures are also now illegal. The CMA similarly prohibits the knowing removal of rights management information, which includes information such as the identity of a work or its author.

The CMA establishes two new rights for copyright holders. First, the copyright holder in a sound recording has the exclusive right to make a recording available by public telecommunication in a way that allows members of the public access to that recording at any time. Second, the copyright holder, where the sound recording is a tangible object, has the exclusive right to sell or otherwise transfer ownership of the tangible object provided that object has never previously been transferred in or outside Canada with the copyright holder’s authorization. The copyright holder of a sound recording in a performer’s performance has similar rights.

The CMA also creates a new basis of liability for copyright infringement: enabling. An infringement arises in this situation where a person, through a digital network or the Internet, provides a service with the primary purpose of enabling copyright infringement. Note that an actual infringement of copyright must have occurred as a result of use of the service.

The liability of persons who provide services related to the operation of the Internet or another digital network (for ease of reference, ISPs) for copyright infringement is now limited. This is the case as no copyright infringement occurs when a person or entity provides a means for the telecommunication or reproduction of a work (including caching or hosting the work, subject to certain requirements) through the Internet or other network and allegedly infringes copyright solely by reason of providing this service.

A copyright holder’s only recourse in such a situation is under the notice system (note that this aspect of the CMA has yet to become law). This system will allow a copyright owner to send a notice to the ISP, in the prescribed form, claiming an infringement. The ISP is then required to forward the notice to the alleged infringer and keep records related to the identity of the infringer for a set amount of time. If the ISP fails to forward the notice, it will be liable to the copyright holders for statutory damages between $5,000 and $10,000.

Other significant changes include:

• Limits to injunctive relief with respect to alleged infringements by Internet search providers;

• Moral rights in performances;

• Enhance infringement defences for educational institutions;

• Mandated review of the Copyright Act every five years by a Senate or House of Commons committee; and

• Absent an agreement, photographers now hold copyright in photographs for commissioned photographs.

As always, the precise legal meaning of many of these changes may not be known for years to come as they will need to be tested and interpreted in Canadian courts.

Christopher G. Graham is a Student-at-Lawand also contributed to this article.