Leuthold Loses Longshot Appeals In Her Litigation Against CBC

The Federal Court of Appeal on June 27, 2014 has given its judgments in Catherine Leuthold’s two uphill appeals in a case about which I have written earlier at length. Spoiler alert. Not surprisingly, she also lost on the appeals. However, the reasoning of the Federal Court of Appeal is more interesting and more far reaching than might have been expected, given the very peculiar circumstances of this case.

Leuthold is an American photographer whose 9/11 images were used by the CBC, by way of an “honest mistake”, six times more than permitted by the original one time license for which she was paid $2,500. She refused a settlement offer of $37,500 and went to trial, where she was awarded $19,200 ($3,200 times six) plus $168.73 as her portion of CBC’s “profits”.

However, what she sought from the Court was an award of $21,554,954.25 plus a portion of the CBC’s revenues. This astounding sum was based upon her theory, inasmuch as I can understand it, that each of the CBC’s 800 or so participating affiliated stations and Broadcasting Distribution Undertakings [BDUs] committed a separate act of infringement. Not surprisingly, the trial Court did not agree. It will come as no great shock that the Federal Court of Appeal also disagreed with her.

The appeal decision was penned by Pelletier, J.A. from whom we are hearing a lot lately about copyright and whose dissent was recently upheld by the SCC in the CARFAC case, concerning which I’ll have something to say in due course.

It contains some interesting comments on the case of Bishop v. Stevens, [1990] 2 S.C.R. 467, well known to copyright geeks, some of whom attempt to invoke it in favour of multiple and layered payments for the same transaction. The Court seems to suggest that this case might have helped her up to a point to a point but she did not refer to it. Instead, she apparently relied on s. 2.4(1) of the Copyright Act– which the Court regards as antithetical to her argument. Pelletier, J.A., , makes the following observations about technological neutrality, which may be of considerable interest in other matters now percolating at the Copyright Board and in the Courts:

[36]           Ms. Leuthold does not refer to this authority and instead relies on paragraph 2.4(1)(c) of the Copyright Act, R.S.C., 1985, c. C-42 (the Act) in support of her claim that each transmission to a BDU by the CBC is an infringement of copyright. Paragraph 2.4(1)(c) provides as follows:

2.4 (1) For the purposes of communication to the public by telecommunication, …

2.4 (1) Les règles qui suivent s’appliquent dans les cas de communication au public par télécommunication : …

(c) where a person, as part of     (i) a network, within the meaning of the Broadcasting Act, whose operations result in the communication of works or other subject-matter to the public, or … transmits by telecommunication a work or other subject-matter that is communicated to the public by another person who is not a retransmitter of a signal within the meaning of subsection 31(1), the transmission and communication of that work or other subject-matter by those persons constitute a single communication to the public for which those persons are jointly and severally liable.

 [37]           According to Ms. Leuthold, this result flows from the following reasoning:

This section means, by way of example, that where Newsworld make two such transmissions to two BDUs, there would be two infringements under Section 3(1)(f) of the Copyright Act because the second person that communicates the work to the public (the second BDU) is a different person from the first instance, even when such transmissions occur simultaneously.

Appellant’s Memorandum of Fact and Law, at page 15, paragraph 47.

[38]           It seems to me that the better view is that paragraph 2.4(1)(c) legislates that the distribution of a network signal incorporating a protected work to BDUs and the subsequent communication of that work to subscribers is but a single network-wide infringement in which each participating BDU is jointly and severally liable along with the network. In that way, all those who benefit from the communication of the work share in the liability for compensating the rights holder, subject to whatever arrangements may be in place between them.

[39]           This reading of paragraph 2.4(1)(c) of the Act moves in the direction of technological neutrality in that the number of infringing acts does not vary according to the number of intermediaries in the transmission chain. This is consistent with the goal of technological neutrality which the Supreme Court articulated in Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34, [2012] 2 S.C.R. 231, at paragraphs 5-10.

[40]           There is one act of infringement whether the work is communicated to the public via one BDU or via hundreds of them. The measure of damages may depend upon the number of viewers of the work, which has a rational connection with compensation, unlike the number of intermediaries, which does not.

[41]           Paragraph 2.4(1)(c) serves to distinguish this case from Bishop v. Stevens where, as noted, each unauthorized reproduction was found to be a violation of the copyright holder’s rights. While that may have been the case for unauthorized communications to the public by telecommunication prior to the passage of paragraph 2.4(1)(c) and its companion disposition subsection 31(2) of the Act, it is no longer the case now.

[42]           I am of the view that paragraph 2.4(1)(c), properly interpreted, has the effect of making a network transmission of cable programming material to the public via BDUs a single infringement of a copyright holder’s rights if the network has not properly cleared the rights with respect to that transmission. In this case, the six transmissions of the documentary containing Ms. Leuthold’s images, in violation of her copyright, constituted six acts of infringement, as found by the Trial Judge.

(emphasis added)

Those who are “in denial” about the Supremes’ ESA decision should take note.

In the companion case, regarding application of the “double costs” rule that applies when a plaintiff fails to achieve as much after trial as the defendant has offered by way of settlement, Ms. Leuthold also failed to achieve success. She is now liable for a substantial amount of costs to the CBC. Whether the CBC will try to collect this money and whether Ms. Leuthold can afford to pay all or even any of it, given her declared taxable income of taxable income in 2006 was $20,661 USD remains to be seen. And presumably Leuthold will not see a penny of her $19,200 award, which is only a fraction of the costs that she now owes to CBC.

The CBC did finally ask for security for costs  in this case, but only after the appeal process was well underway. The CBC’s motion was turned down, under the circumstances.

The costs judgment contains some cautionary language for those who may contemplate high risk litigation. Pelletier, J.A. states that:

[13]           Finally, Ms. Leuthold argues that an order of costs ought not to be such as to bring the administration of justice into disrepute. Once again, this is an argument based on impecuniosity. The sad fact of the matter is that litigation produces winners and losers; that is why it is such a blunt tool in the administration of justice. But justice is not served by allowing persons who have imposed costs on others by pursuing or defending a claim which lacks merit to avoid the consequences of their behaviour. Such a policy would be more likely to bring the administration of justice into disrepute than the result in this case.

(emphasis added)

BTW, in 2007, Leuthold sued a long list of cable companies, but that action was stayed in 2012.

HPK

PS - Leuthold applied to the Supreme Court of Canada for Leave to Appeal. Not surprisingly, her application was dismissed with costs payable to the  CBC, as usual without reasons, on April 30, 2015.