Tuesday, May 30, 2017

The Canadian Nintendo Circumvention Decision – Should it be given “high precedential value”?

The Federal Court of Canada on March 1, 2017 rendered a lengthy judgment in favour of Nintendo dealing with copyright infringement and circumvention. It is the first significant reported superior court decision on the 2012 anti-circumvention measures in Canada’s Copyright Act.  The Court expressed explicit awareness of the potentially “high precedential value of the expected outcome” of this case. However, due to certain unusual aspects of how this case unfolded, jurists, academics, and future litigants might question the precedential value of the decision.

Here, in the Court’s words, is the explanation of how and why this judgment was rendered:
[11] As to the nature of the decision to be rendered in conclusion of the litigation, Counsel for the Applicant stated the Applicant’s interest in developing the law with respect to TPMs, their circumvention, statutory damages, and enforcement measures to the benefit of the industry concerned in Canada and globally. Given the high precedential value of this expected outcome, at my request, Counsel for the Applicant agreed to supply a final consolidated written argument stating the terms that the Applicant would prefer to be the substance of the final determination of the litigation, to be served and filed on Counsel for the corporate Respondent to allow a potential reply.
[12] The argument was prepared, served, and filed, and by letter dated December 19, 2016, Counsel for the corporate Respondent replied “kindly be advised that the Respondent will not be filing additional representations…”.
[13] In the result, to fairly and appropriately acknowledge the precise, clear, well supported, and effectively uncontested final argument prepared by Counsel for the Applicant, with which I fully agree, I find that the Applicant is entitled to have the final argument, as stated below, as my reasons for decision in the present litigation.
(highlight and emphasis added)

Here is some further context and analysis.

In the instant Nintendo decision, the Court awarded against the corporate defendant:
a. $11,700,000 in statutory damages pursuant to s. 38.1 of the
Copyright Act in respect of circumvention of technological
protection measures;
b. $60,000 in statutory damages pursuant to s. 38.1 of the Copyright Act in respect of copyright infringement of the Header Data works;
c. $1,000,000 in punitive damages
… [interest award]
f. costs, assessed under Column V of Tariff B to the Federal Courts Rules.

After the individual Respondent agreed to a consent judgment against him for $70,000, the case was “effectively uncontested”, as the Court noted. This was an “application” and not an “action”, which means that evidence can only be put in by affidavit and there are no “live” witnesses.   The Respondents had filed written representations before the commencement the hearing but provided no evidence and did not cross-examine any of Nintendo’s witnesses on their affidavits.

The Court requested and received further written final supplemental written submissions before the conclusion of the hearing.  The respondents did not, although entitled, reply. Indeed, the Respondent’s counsel did not appear for the final oral argument.

The Court proceeded on this basis to render a judgment in which all but the introductory 14 paragraphs of this 181 paragraph 51-page judgment are a virtually verbatim reproduction of Nintendo’s final supplemental written submissions. Paragraphs 14 and thereafter until the conclusion of the judgment track paragraphs 14 and thereafter of Nintendo’s supplemental written submissions.

There is nothing necessarily improper about a judge copying material from a party’s memorandum. The learned and very experienced trial judge provided acknowledgement of his request for the supplemental written submissions and how they were used. That satisfies a requirement that has been dealt with by the Federal Court of Appeal in Apotex Inc. v. Janssen-Ortho Inc., 2009 FCA 212 (CanLII), where the need for explicit “acknowledgment” of the adoption of a party’s written submissions was addressed. For those further interested in jurisprudence on what the Supreme Court of Canada recently referred to as “the long tradition of judicial copying”, see  Cojocaru v. British Columbia Women’s Hospital and Health Centre, [2013] 2 SCR 357, 2013 SCC 30.

The real issue here is that the judgment makes some sweeping pronouncements and awards an enormous amount of very likely uncollectable damages based upon “effectively uncontested” arguments and unchallenged evidence that, in the result, leaves the Court with something not much different than a default proceeding. This left the Court without the benefit of full submissions and argumentation on some of the key issues and relevant case law. That is not the way the adversarial process normally works when we depend on it to generate binding precedents. In this case, we now have a judgment that, with respect, may be wrong in certain important aspects because the Court did not have the benefit of opposing arguments.

Nintendo’s argument, as adopted into the decision resulted in an enormous – by Canadian standards – unprecedented award of statutory damages in respect of circumvention of TPM measures. It is based upon the Court’s conclusion that Nintendo is entitled to the maximum level of $20,000 of statutory damages are due “for each of the 585 Nintendo Games to which the Respondent’s circumvention devices provide unauthorized access” (para 141 if Judgement). (emphasis added).

However, it is very doubtful that Nintendo was entitled to damages for “each” of these 585 works when there was no evidence that any of them were actually illegally copied by anyone. Moreover, it appears that the Court was not provided with arguably very relevant case law that might have at least resulted in an award of a nominal fraction the maximum statutory damages of $20,000 per work. One can only begin to imagine the absurd result if such an approach to damages were used, for example, against a researcher (e.g. a university professor or student) who somehow gains unauthorized access to a newspaper website or other research database, perhaps reads a single article, is found to have “circumvented” a TPM, and is then held liable for $20,000 for each the tens or hundreds of thousands of individual articles that were never downloaded or even read on the website.

The reasoning with respect to the physical configuration of the Applicant’s game cards as an effective TPM for controlling access to the Nintendo Games is seriously worrisome. Does this mean that an arbitrary un-patentable design for a cable connector or any other physical interface involved in a so-called proprietary system can become a TPM for Copyright Act purposes? This could have immensely anti-competitive implications, for example with respect to the market for ear buds or selfie sticks or another smart phone accessories.

In my respectful view, given the “effectively uncontested” nature of this proceeding and the novel and important issues that were raised, the learned Judge could or should have merely entered a non-precedential decision with a minimal recitation of the “effectively unopposed” factual outline, just as he did for the individual respondent.  That would serve a deterrent effect – just as the consent order for an enormous judgment against Gary Fung and iSoHunt has no doubt done to some extent – but not result in any legal precedent and particularly not an arguably incorrect legal precedent. Such a non-precedential decision would have consistent with Chief Justice Crampton’s recent NOTICE TO THE PARTIES AND THE PROFESSION PUBLICATION OF DECISIONS OF PRECEDENTIAL VALUE June 19, 2015, which allows for:
Non-Precedential Decisions
Final decisions that are considered by the presiding judicial officer not to have precedential value are normally issued in the form of a “Judgment”, without detailed reasons. These decisions will not be given a neutral citation number and will not appear on the Court’s website. Interlocutory decisions that are considered not to have precedential value are normally issued as an “Order,” again without detailed reasons, in which case they are not given neutral citation numbers and are not posted on the Court’s website. This category typically includes “speaking orders” or “endorsement”-style decisions, including judgments rendered orally in open court and reduced to writing thereafter.
Interestingly, the same learned Judge in 2013 awarded an eye-catching sum of $10.5 million of statutory damages in a default judgment in Twentieth Century Fox v. Hernandez. This was, quite properly, an unreported case. Nonetheless, it got some attention in the media and blogosphere. Here is Prof. Scassa’s comment and here is a link to a privately posted copy of the judgment as provided by Prof. Scassa. Once again, although the Nintendo case was not technically a default situation, it was quite close to it for practical purposes. It might have been better if the learned judge had used a similar approach here to send a message without necessarily setting an arguably binding and arguably substantively incorrect precedent.  This would have received lots of attention but not resulted in potential questions as to the very precedential value or weight of the decision.
On the one hand, one can be sympathetic to Nintendo wanting a precedential judgment in this proceeding, given the resources it applied to the case and the issues at stake. To Nintendo’s credit, this was not a “default” proceeding – although it effectively comes quite close. It does not, however, necessarily follow that this decision should be given “high precedential value”.
On the other hand, one must be wary of the potential that powerful parties can effectively write their own judgments by suing much weaker parties who don’t simply default but cannot begin to fully fight back. One thoughtful commentary on this case comes from Ariel Thomas at Fasken’s, who at least poses the questions of “Can a party write its own judgment?” and “Is this the first of several judgments to come that is actually written by one of the parties?”.
Most of the comments to date have uncritically suggested the precedential importance of this case without digging deeper into the circumstances behind it.
Michael Geist was perhaps first out of the gate to point out how sweeping the decision is, although he does not question its precedential value.  John McKeown, another respected commentator, has written about the decision but questions it only to the extent of noting that “the amount of statutory damages ordered to be paid may also be a function of the fact that the case was in effect uncontested”. There have been a number of other commentaries, and ALAI has even scheduled an event on April 30, 2017 about this case.
In the end, the process in this case did not provide the trial judge with the benefit of a balanced adversarial exploration of the critical issues before him. A full hearing is crucial to the fundamental principle of stare decisis. The Nintendo decision raises some interesting questions in this respect and should not, as a result, be given “high precedential value”.

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