Thursday, September 14, 2006

SONY Settlement Unsettling?

The almost but not quite done deal of the SONY class action settlement process in Canada is raising some seriously troubling questions.

Michael Geist has managed to to do a great expose and get a copy of the infamously missing Exhibit "C" , which is a an astonishing and hitherto well hidden affidavit from Sony’s Canadian Vice President, Legal and Business Affairs, Christine J. Prudham.

That affidavit purports to explain why Canadians should be content to settle for no injunctive relief, whereas Americans will get injunctive relief against SONY’s outrageous conduct.

The affidavit contains some ludicrous arguments and statements that are clearly intended to pander to Canadian lawmakers who SONY hopes will deliver DMCA North to Canada in short order, and at the same time to get approval from a Canadian court of a settlement that is much worse even than the highly criticized US settlement.

Here is some of what she swears in her affidavit:

10. SONY BMG does not believe that the Injunctive Provisions are necessary in Canada for three reasons: (1) the Injunctive Provisions were specifically based on the US Government Inquiries, for which there is no counterpart in Canada; (2) the Injunctive Provisions may prove incompatible with Canada's international copyright obligations; and (3) the Injunctive Provisions may prove incompatible with forthcoming federal copyright legislation.


The fact that there were government inquires in the USA and not in Canada does not reflect well on Canada’s Competition Bureau. However, it is no reason to avoid an injunction in Canada. There are - unfortunately - lots of things that the Bureau takes a pass on when it should jump in. That does not validate them. The US claims would be presumably have been pursued in contract, nuisance, negligence and trespass or similar causes of product liability action, and Canadian and American law are generally similar in these respects.

Canada has no international obligation to allow companies like SONY to intentionally or recklessly inflict major damage on the computers of hundreds of thousands of Canadians. I have no idea of what fantasy is on her mind.

As to incompatibility with forthcoming federal copyright legalisation, what does she know that the rest of us do not? And even if she is right, then one hopes that the legislation will rewritten or withdrawn before it hits the floor of the House of Commons. To state the obvious, there is no legislation now. A law that might or might not be passed someday is almost invariably irrelevant to a case at hand, especially when the nature of the law is supposedly unknown. If she has specific information on this supposed new legislation, then someone in Government is leaking big time.

She also says:

15. Until the contemplated new legislation has been introduced and passed, SONY BMG is of the opinion that there is a legal vacuum around TPMs in Canada.
SONY BMG Canada is unwilling to accept Injunctive Provisions that derive from the US Government Inquiries, which were based on United States legislation. To impose in Canada the Injunctive Provisions provided for in the US Settlement because of the US Government Inquiries, based on U.S. legislation, would amount to adopting in Canada the U.S. approach to the 1996 WIPO Treaties without giving the Canadian Government the opportunity decide what its policies will be on TPMs in light of the 1996 WIPO Treaties. The prevailing U.S. approach is inconsistent with Canada's historic approach to copyright, is arguably inconsistent with Canada's international copyright treaty obligations (which are not identical to the United States' obligations in that regard), and is not a valid basis for restricting the use of TPMs in Canada. Until the Canadian government resolves this issue, SONY BMG Canada is not willing to potentially prejudice itself by agreeing to the Injunctive Provisions in the Canadian Agreement.

16. Moreover, as an aspect of copyright it is arguable that the scope and protection of TPMs fall under the exclusive jurisdiction of the Federal Court pursuant to s. 20(1)(a) of the Federal Courts Act. SONY BMG is therefore concerned about conceding provincial Superior Court jurisdiction over TPMs, as would be implicit in agreeing to the Injunctive Provisions as part of a settlement of the instant class proceedings.

(Emphasis added).


Maybe I’m missing her point, but the DMCA (which is apparently what she is talking about but doesn’t bother to specify) was not a problem for SONY in the USA. In fact, it their crutch and their creation. They badly want similar legislation in Canada. I hope - but will not hold my breath - that SONY’s bold apparent defence of Canadian policy sovereignty regarding the DMCA in this assertion will be used to argue against the DMCA North legislation that SONY so desperately wants in Canada.

As to lack of jurisdiction in the Courts of the Provinces to deal with TPM’s , this is utter nonsense as Michael points out. It’s an insult to the intelligence of anyone who has ever heard of the Federal Court Act or the Copyright Act. The courts of the provinces basically can do anything that the Federal Court can do in copyright except to expunge a copyright registration or to do judicial review of the Copyright Board. In fact, the Court of the Provinces can also do a whole lot more than the Federal Court, such as rule on tort and contract and other common law and consumer protection claims - which is what this case would be primarily about if were to go to trial.

It’s really a pity that nobody will likely get to cross examine Ms. Prudham on this affidavit. Unless, perhaps, if the settlement unravels...

And then, it would be interesting to see if she were to try to invoke solicitor client or litigation privilege....


Speaking of going to trial, I sympathize with the class action lawyers here. This may be the best that they could do - and some of the them are very experienced at this. This case might not be as slam dunk as it might seem if it were to go to trial. The damages suffered by individuals could vary greatly and may be hard to quantify financially. SONY can and doubtless would try to spend any class action lawyers into the ground - and the class action lawyers might blow out their brains and time out for nothing. Their clients might - in theory - even be on the hook for costs. The disbursements could be enormous. As for the risk of suffering bad publicity, SONY clearly doesn’t mind. If SONY can support the American style of litigation against little children and dead grandmothers (which they tried but failed to pull of in Canada), and inflict the ROOTKIT in the first place, bad publicity must feel like good testosterone to such a company.

But the overall question remains - is this settlement worse than no settlement? The compensation paid to the class members who are even aware of the action will be minimal. Precisely $7.50 plus 12% [sic?] for GST and PST plus the great honour of some free SONY downloads, presumably uninfected - which presumably cost SONY nothing to provide. (It would be nice if the artists or songwriters got paid, but I doubt it - royalties are rarely paid on “free goods”).

Some deal. Michael says that the deal could be worth $25 million. But if it remains as well hidden as it has to date, and it requires too much hassle to collect the eight bucks, it will likely cost SONY next to nothing because very few people bother to take them up on this waste of time for eight bucks in change and a few freebie downloads. Ironically, they can probably get these downloads in short order for nothing in Canada by downloading them for free and DRM free via P2P courtesy of the blank media tax (oops - levy) that SONY and its colleagues in CRIA so desperately wanted just a few years ago - and the proceeds of which they still are pleased to enjoy while they last.

The cost of the deal in terms of public policy will be potentially very serious.

In particular, some officials at the Department of Canadian Heritage who ought to know better may say “This system works. We have a settlement in Canada. Nobody needs legislated protection FROM DRM and TPM.”

If this is how the system works, then we need to change the system.

As to the class action process, the NOTICE TO CLASS MEMBERS, was published, so I’m told in the last week of August in the Globe and Mail, Maclean’s Magazine, and one or two French language outlets. The deal will be presumably approved the Court in Ontario on September 21, 2006 and the deadline for objection is September 18, 2006 - next Monday.

There’s an old joke in Ottawa. If you want to keep something secret, be sure to publish it in the Canada Gazette. That’s more or less what seems to have been done here.

I’m no expert in class actions - but:

• what is the hurry and apparent rush to judgment here?
• why was this NOTICE published apparently only one time and at a time when almost nobody would have seen it (end of August)?

This may arguably be the best possible settlement under the circumstances. But that does not necessarily mean that is a good one. The question is whether it is actually better from a public policy standpoint than no settlement. With no settlement, SONY will have no basis boast to a Parliamentary Committee about how responsive it is to its victims (oops, customers) and to argue that the system works and there is no reason to worry about irresponsible deployment of DRM and TPM in the future.

I hope that this will not be the end of the story. If so, the settlement story will have an unsettling ending.

Those who wish to unsettle the settlement should visit the SONY class action settlement website and file their objection according to the instructions by Monday, September 18, 2006. That's NEXT Monday.


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