Towards A Fair Deal: Table of Contents and Introduction

Next: Part I - Copyright’s Dual Origins In Canada And Unfair Contracting Practices

TOWARDS A FAIR DEAL
Contracts and Canadian Creators’ Rights

Prepared for
the Creators' Copyright Coalition, and the
Creators' Rights Alliance/Alliance pour les droits des Créateurs

by Marian Hebb and Warren Sheffer

October, 2006

Hebb & Sheffer
www.hebbsheffer.ca

©2006 Marian Hebb and Warren Sheffer. This study was produced for Creators' Copyright Coalition and the Creators' Rights Alliance / Alliance pour les droits des créateurs with the generous support of the Department of Canadian Heritage, the Canada Council for the Arts and the Government of Ontario through the Ministry of Culture. You may reproduce and distribute this work for non-commercial purposes, in whole or part, provided you give credit to the authors, CCC and CRA/ADC. Please distribute freely.

Table of Contents

Introduction: The Economics Of Being A Creator

In almost all countries in the world, copyright contract law as the historically more recent and underdeveloped part or subsystem of copyright law needs adaptation and amelioration. This is true at least if one can accept that the preamble of the old and venerable Berne Convention…shall be taken at face value, namely that the countries of the Union are equally animated by the desire to protect, in as effective and uniform a manner as possible, the rights of authors in their literary and artistic works.1

— Adolf Dietz

Despite their rights under the Copyright Act,2 many creators in Canada have minimal control over their published works and are undercompensated for their use. The superior bargaining position of corporate producers when it comes to acquiring individual creators’ copyrights significantly speaks to both of these issues. In many cases, corporate intermediaries are able to impose “standard” contractual terms on creators and acquire, often in a no-strings-attached fashion, all rights granted under the Copyright Act, to be exploited exclusively in all forms now known or unknown, anywhere, for as long as possible. Creators are frequently required to waive their moral rights as well.

In 2001, the average annual earnings of employed and self-employed Canadian creators were $23,500.3 Close to one in two creators was self-employed,4 with earnings considerably less than this average and without the private and public employee benefits typically associated with paid, full-time work. By contrast, the average income of the entire working population in 2001, of whom fewer than 10% were self-employed,5 was $31,800.6

In most creative sectors there has been no substantial rise in income in decades. For example, the average net professional income of Canadian freelance book and periodical writers was measured at $11,480 in 1998, close to the level it had been in 1979, and this constituted only 39% of the average writer’s income, with 61% coming from teaching, editing and other work.7 Similarly, the annual average net professional income of a Canadian musician has been approximately $15,000 since the mid-1980s.8

Back in 1992, the Ministry of Culture and Communications in Ontario reported that between one-quarter and one-third of artists and cultural workers had earnings below the poverty line, for example, a typical lead dancer with a senior company and 10 years’ experience earning $12,000 to $15,000 for a 35-week season and an average actor earning $15,000.9 The authors of the report observed:

The impact of such low levels of income, when combined with unequal and limited access to the kinds of social security benefits and legal rights enjoyed by the majority of the workforce is serious. While artistic activity generates a significant amount of economic benefit, little of this economic benefit is returned to the individual artist.10

Current studies indicate that creators still struggle to get their fair share. In 2005 the Professional Writers Association of Canada (PWAC) found that the average annual income of respondent freelancers to its survey of members and non-members, including part-time freelancers who have other employment, was approximately $21,000. For PWAC members this was $24,035, significantly less than the $26,500 reported in 1995.11

Quebec respondents to PWAC’s national survey, with an average income of $24,082, were earning the highest pre-tax incomes.12 Consistent with this finding, a Quebec Government publication shows the annual income reported by creators in Quebec, where approximately 62% of creators reported self-employment income in 2001, to be somewhat higher than that of creators elsewhere in Canada. But, although the average total income of all Quebec creators, both employed and self-employed, in 2001 was $37,710, and $36,540 for self-employed, the average income for many was much less, for example, $20,215 for dancers and $27,741 for visual artists, and the median income of all Quebec creators was only $23,620.13 In the document releasing these figures, the Quebec Minister of Culture and Communications commented that the socio-economic profile of creators in Quebec reveals that a number of artists and other creators live a precarious economic existence or work at two jobs in order to live decently.14

While the earnings that most creators derive from their works stagnate or even decline, developing digital technologies are expanding the ways in which old and new works may be created and distributed and are bringing major change to the cultural industries throughout the world. Many of the abuses of creators’ rights have been intensified by the new technologies, but an opportunity exists for creators to benefit from those new technologies and to improve their economic status. However, such opportunity will not be realized so long as creators who remain reliant on publishers or producers to distribute their works are required, as one commentator has stated, “to strip away their rights and get published, or walk away tarred.”15

The inequality in bargaining power between creators and publishers is reflected in problematic copyright contracting issues and practices in various Canadian cultural sectors, including the ones set out below, some of which have been dealt with considerably more extensively by Ontario journalist John Lorinc and Quebec lawyer Maryse Beaulieu:16

Books, Magazines and Newspapers
  • Royalties paid by book publishers are usually insufficient to support trade book authors, even authors of bestsellers, without supplemental jobs and grants.
  • In the textbook market, publishers frequently pay minimal royalties to authors who often share little in the success of the books they write, perhaps tolerating this because they gain prestige or career advancement from their writing and most have salaries from teaching.
  • Freelance rates paid by magazines have remained stagnant for many years typically ranging from $0.40 to $2 per word.
  • In the 1990’s, magazine and newspaper publishers began regularly to demand, on a take-it-or-leave-it basis, that freelancers grant electronic rights to their articles in perpetuity, typically in exchange for 5% of the original fee.
  • Translators are insufficiently acknowledged by publishers.
Photography
  • Photographers are expected to relinquish digital rights to publishers for nominal compensation – their issue being similar to that facing freelance writers.
  • Photographs are often cropped or digitally altered without the photographer’s consent.
  • It is not uncommon for photographers to find their images, only licensed for one-time use, on third-party websites without authorization.
Visual Arts
  • Galleries and museums typically ask artists to waive their exhibition right (and fee) and, in some instances, their moral rights as well.
Music
  • Music publishers frequently require a complete waiver of moral rights or at least a modified waiver from songwriters.
  • Recording companies normally treat the costs of recording as a recoupable advance and do not always share advances they receive from a label or other third party with the songwriters and musicians.
Film
  • Film directors are not given any authorship credit for their films and despite this are asked to waive the moral rights accorded by copyright legislation to an author. Nor are screenwriters credited with any authorship of a film, only of their screenplay. Where the moral rights waiver by these creative participants is not express, it may be implicit in other contractual provisions with respect to approvals and credits.
  • When producers acquire film rights to an author’s book, they almost invariably demand that the author waive his or her moral rights to the integrity of the work.
Theatre
  • Theatres that commission or produce the first production of a play often demand participation in the playwright’s subsequent earnings from that play – a practice that has spread from the United States.
Performing Arts
  • Dancers, actors and musicians engaged and treated by producers as self-employed contractors are sometimes considered by governments to be employed creators and unable to deduct their expenses from taxable income.
All Sectors
  • It is not uncommon for producers, including governments and government institutions, to require from the creator a very broad grant of rights or a grant of all rights in a work and then only to make use of a particular right.
  • There is frequently confusion over ownership of copyright where a work may have been “commissioned”.
  • Clauses requiring an author to acknowledge that he or she has been engaged to create a “work-for-hire”, a concept codified in and imported from the copyright legislation of the United States whereby the author gives up all rights to the work to the producer, are appearing in more and more contracts between Canadian authors and Canadian producers.
  • Producers insist on unexpected and unfair terms of contract after a work or performance has been delivered or given as a condition of its acceptance and payment for it.
  • Producers require warranties and indemnities that inappropriately shift legal risks onto creators.
  • Producers frequently ask creators to grant them rights for the full term of copyright. There is no automatic reversion of rights to a creator after a fixed period, not even when the producer goes out of business.
  • Creators usually lose all accrued royalties and fees still owing when publishers become insolvent, and in many instances their rights as well.

For the most part, Canada’s policymakers and judges are seemingly unaware of the prevalence of these problems, and of the fact that the copyrights prescribed by the Copyright Act are the essential legal tool enabling creators who are not employed or subsidized to negotiate the contracts that provide them with compensation. They seem similarly unaware that the compensation for most independent creators is low.

In October 2002, Industry Canada published Supporting Culture and Innovation: Report on the Provisions and Operation of the Copyright Act – which sought to address both cultural and economic policy objectives. The Report, which specifies “remuneration and control for rightsholders” and “dissemination and access to their works” for users as the two fundamental principles of Canadian copyright policy,17 was much criticized by creator groups, who felt that much more emphasis was placed on the latter than on the former.

Also in 2002, the Supreme Court of Canada boldly declared that the Copyright Act is usually presented as a balance wherein the equipoise “lies not only in recognizing the creator’s rights but in giving due weight to their limited nature.”18 “In crassly economic terms,” the Court continued, seemingly unmindful of the economic circumstances of most Canadian creators, “it would be as inefficient to overcompensate artists and authors for the right of reproduction as it would be self-defeating to undercompensate them.”19 Notwithstanding the fact that most Canadian creators are clearly undercompensated, the Supreme Court of Canada has recently found it appropriate to emphasize the “limited nature” of creators’ rights and to refer to the statutorily prescribed copyright exceptions as “user rights”20. In this way, the Supreme Court’s new interest in creating and “balancing” copyright policy has arguably resulted in a general derogation of copyright and a creeping alignment of Canada’s copyright law with that of the United States.

The Supreme Court’s foray into copyright policy has been celebrated by those who believe that copyright mainly benefits corporations to the detriment of the public’s interest in the broad dissemination and use of works. There are also those who believe that the individual creator reliant on copyright to earn a living is largely part of “traditional copyright mythology” -- a fiction or out-dated romantic construction.21 For those who hold both beliefs, creators are weightless on the scales of “balance”: there are simply the interests of corporate “rights-owners” on one side and the “public interest” on the other.

However, there is nothing notional about approximately 140,000 creators who belong to member organizations of the Creators’ Rights Alliance/Alliance pour les droits de créateurs or the 130,700 creators identified in Canada’s 2001 Census and the many thousands more presumably not readily reflected in Statistic Canada’s occupational categories.22 And as Dutch law professor Bernt Hugenholtz observes, fostering these very real independent creators is more important than ever before in light of the fact that our information society is increasingly dominated by powerful media interests that seek, through contracts, to “grab” creators’ economic and moral rights.23

While the “copyright grab” issue is undoubtedly one of great concern, it is a faulty premise upon which some look to dismiss the importance of copyright.24 In short, copyright matters to creators; they are able to negotiate the contracts that bring them remuneration for the use of their work only because they own copyright, and they are affected directly and indirectly when it is weakened. If Canadian legislators are in fact animated by a desire to protect the rights of creators, they should be more concerned with how to put creators who have little bargaining power in a better position to negotiate fair deals with producers. Relatively speaking, the issue of whether creators need either more copyrights or fewer “user rights” is a moot point.

Largely by way of examination of European copyright laws and consideration of current copyright contracting practices and issues in Canada, it is the purpose of this paper to explore ways in which the status of Canadian creators may be improved. It is suggested here that implementing legislative measures to redress inequalities in Canadian copyright contracting would be consistent with the purpose of Canadian copyright law and its traditions, including Canada’s acceptance of droit d’auteur principles in domestic and international contexts, and with Canadian labour law.

In Part I we will discuss copyright and its dual origins in Canada and, against this backdrop, some of the unfair contractual practices that work against the interests of Canadian creators, notwithstanding the copyrights they derive from national law in the context of international treaties. In Part II, we will outline legislative provisions designed to ameliorate the effect of structural imbalances in contract negotiations between creator and producer as they are found in the copyright laws of some European countries.25 In Part III, we will discuss and critique briefly certain aspects of Canadian law that alleviate such structural imbalances to a certain degree. Finally, with reference to the preceding parts, we will conclude with some suggestions on how creators, “the heart of copyright,”26 may ultimately be enabled to negotiate fair contracts.

Next: Part I - Copyright’s Dual Origins In Canada And Unfair Contracting Practices

 

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