(Wikimedia)
The Supreme Court of Canada issued an
immensely important ruling today in the case of Canadian Broadcasting Corp. v. SODRAC 2003 Inc., 2015 SCC 57 , which was mostly about technological neutrality, “ephemeral
rights” and “incidental copies” in the broadcasting realm. However, while others are attempting to unpack
the implications of this ruling on technological neutrality, broadcasting, etc.,
there are about a dozen paragraphs of potentially very great interest and significance
to those, such as educators, who are concerned with even broader issues about whether tariffs can
be “mandatory” and whether a collective or the Board can “impose” a licence or royalty fees on an unwilling user, and even whether and to what extent tariffs can be
retroactive. I should disclose that I was the Counsel for the Centre for
Intellectual Property Policy of McGill University (headed by Prof. David
Lametti, now David Lametti, M.P.) and Prof. Ariel Katz of
the University of Toronto, both of whom appeared with me at the
hearing. Here is a link to our factum,
which is closely reflected in these paragraphs from the 7-2 majority reasons by Rothstein J., who has now retired from the Court:
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(2) The Board May Not Compel a User to Agree to the Terms
of a Licence Against the Will of the User
(101)
CBC
argues that, while the Board may fix the royalties to be paid under the
statutory licensing procedure created by s. 70.2 of the Copyright Act, the Board may not set the other terms or structure
of that licence. Specifically, CBC takes issue with the Board’s decision to
impose an interim licence on a blanket basis, such that CBC pays for access to
the entire SODRAC repertoire, rather than on CBC’s preferred transactional
basis, whereby CBC would pay only whenever it actually used a work from the
SODRAC repertoire. A blanket licence grants access to SODRAC’s entire
repertoire for its duration, and thus reduces CBC’s ability to control its
licensing costs. Under a transactional licence, by contrast, CBC may choose in
any given situation whether it wishes to licence a particular work or forego
making use of SODRAC music. CBC argues that if the collective organization and
the user disagree over the model a licence is to take — blanket or
transactional — the Board lacks the power to compel the execution of a licence.
(102)
SODRAC
counters that the Board has the power to issue licences in either blanket or
transactional form, and should have this power in all proceedings under s.
70.2. To hold otherwise, it argues, would be “to make the Board’s remedial
jurisdiction under section 70.2 dependent upon the consent of a user, [and]
would be at odds with its mandate to resolve disputes”: R.F., at para. 133.
(103)
Though
CBC first raised this issue in the context of the Board’s Interim Licence Decision, the dispute relates generally to the
Board’s power to structure licences, whether interim or not: Does the Board’s
power to set the terms of a licence include the power to bind the parties to
those terms?
(104) I do not read the Copyright Act to necessitate that decisions made pursuant to the
Board’s licence-setting proceedings under s. 70.2 have a binding effect against
users. Section 70.2 itself provides that where a collective organization and a
user cannot agree on the terms of a licence, either party may apply to the
Board to “fix the royalties and their related terms and conditions”: Copyright Act, s. 70.2(1). This grant of power speaks of
the Board’s authority to set down in writing a set of terms that, in its
opinion, represent a fair deal to licence the use of the works at issue. It
says nothing, however, about whether these terms are to be binding against the
user.
(105)
The
statutory context supports the conclusion that licences crafted pursuant to s.
70.2 proceedings are not automatically binding on users. Section 70.4 of the
Act provides:
70.4 Where any royalties are
fixed for a period pursuant to subsection 70.2(2), the person concerned may,
during the period, subject to the related terms and conditions fixed by the
Board and to the terms and conditions set out in the scheme and on paying or offering
to pay the royalties, do the act with respect to which the royalties and their
related terms and conditions are fixed and the collective society may, without
prejudice to any other remedies available to it, collect the royalties or, in
default of their payment, recover them in a court of competent jurisdiction.
(106) This provision makes it clear that a
user whose copying activities were the subject of a s. 70.2 proceeding may avail itself of the terms and conditions established by
the Board as a way to gain authorization to engage in the activity contemplated
in the Board proceeding. The
language of s. 70.4 does not, of its own force, bind the user to the terms and
conditions of the licence.
(107) The
conclusion that Board licences established pursuant to s. 70.2 are not binding
on users comports with the more general legal principle that “no pecuniary
burden can be imposed upon the subjects of this country, by whatever name it
may be called, whether tax, due, rate or toll, except upon clear and distinct
legal authority”:
Gosling v. Veley (1850), 12 Q.B. 328,
116 E.R. 891, at p. 407, as approved and adopted in Ontario English Catholic Teachers’ Assn. v. Ontario (Attorney General),
2001 SCC 15, [2001] 1 S.C.R. 470, at para. 77, and Attorney-General v. Wilts United Dairies, Ltd. (1921), 37 T.L.R.
884 (C.A.), at p. 885. To
bind a user to a licence would be to make it liable according to its terms and
conditions should it engage in the covered activity. In the absence of clear
and distinct legal authority showing that this was Parliament’s intent, the
burdens of a licence should not be imposed on a user who does not consent to be
bound by its terms.
(108)
SODRAC’s
framing of the issue is not entirely wrong: the Board does have the power under
s. 70.2 to “fix the royalties and their related terms and conditions”. That is,
the Board may decide upon
a fair royalty to be paid should the user decide to engage in the activity at
issue under the terms of a licence. However, this power does not contain within
it the power to force these terms on a user who, having reviewed the terms,
decided that engaging in licensed copying is not the way to proceed. Of course,
should the user then engage in unauthorized copying regardless, it will remain
liable for infringement. But it will not be liable as a licensee unless it
affirmatively assumes the benefits and burdens of the licence.
(109)
The
matter is complicated
considerably by the fact that the Board’s statutory licence decisions have, in
recent years, taken on an increasingly retroactive character. CBC’s
statutory licence in this case provides an example: the licence covers the
period from November 2008 to March 2012, but the Board’s final decision was
issued on November 2, 2012, after the term of the licence had expired. In
situations like these, the Board may issue interim licences that seek to fill
the legal vacuum before the final decision is ready, but this leaves a user to
operate based on assumptions about how their ultimate liability for actions
taken during the interim period will be evaluated.
(110)
Should
a user engage in copying activity under an interim licence, and then find
itself presented with a final licence whose terms it would not voluntarily
assume, the user is left in a difficult position: accept the terms of an
undesirable licence, or decline the licence and retroactively delegitimize the
covered activity engaged in during the interim period, risking an infringement
suit. This dilemma may mean that a user who operates under an interim licence
has no realistic choice but to assume
the terms of the final licence.
(111) While I find this possibility troubling,
I do not find that this result would detract from the more general proposition
that there is no legal basis on which to hold users to the terms of a licence
without their assent. The
licence is not de jure binding
against users, even if the particulars of a specific proceeding, and a user’s
decision to engage in covered activity during an interim period, may mean that
the user does not de facto have a
realistic choice to decline the licence.[1]
(112)
I
conclude that the statutory licensing scheme does not contemplate that licences
fixed by the Board pursuant to s. 70.2 should have a mandatory binding effect
against users. However, this case does not require this Court to decide whether
the same is true of collective organizations. It may be that the statutory
scheme’s focus on regulating the actions of collective organizations, and the
case law’s focus on ensuring that such organizations do not devolve into
“instruments of oppression and extortion” (Vigneux
v. Canadian Performing Right Society Ltd., [1943] S.C.R. 348, at p. 356,
per Duff J., quoting Hanfstaengl v.
Empire Palace, [1894] 3 Ch. 109, at p. 128) would justify finding that the
Board does have the power to bind collective organizations to a licence based
on the user’s preferred model — transactional or blanket — on terms that the
Board finds fair in view of that model. However, this issue was not argued in
this case.
(113)
I find that licences fixed by the
Board do not have mandatory binding force over a user; the Board has the
statutory authority to fix the terms of licences pursuant to s. 70.2, but a
user retains the ability to decide whether to become a licensee and operate
pursuant to that licence, or to decline.
(highlight added)
[1] During the
hearing before this Court, counsel for the interveners the Centre for
Intellectual Property Policy and Ariel Katz briefly raised concerns regarding
the Board’s power to issue retroactively binding decisions in general. That
issue was not squarely before this Court in this case, and I do not purport to
decide broader questions concerning the legitimacy of or limits on the Board’s
power to issue retroactive decisions here.
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HPK
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