EXCESS COPYRIGHT: More On Mass Copyright Litigation in Canada

I have recently been writing about copyright litigation directed at BitTorrent users in Canada which I have been doing since my posting almost exactly seven years ago on September 7, 2011 on Voltage Pictures attempt at that time to launch mass lawsuits against individuals in its Hurt Locker litigation. There have been several changes in strategy and law firms involved on the mass litigation front since then. Two of my recent posts deal with:

The refusal of the Supreme Court of Canada to grant leave to appeal to Voltage Pictures regarding the Federal Court’s order of February 2, 2017 – as upheld by the Federal court of Appeal – to pay $75,000 into court for security of costs forthwith. Since the payment has not been made, that litigation is presumably stalled if not dead. This litigation was launched by Mr. Kenneth (“Ken”) Clark of Aird & Berlis LLP.
The series of 16 lawsuits (attached below for reader’s convenience and reference purposes*) launched by various film companies against thousands of individual “Doe” defendants. Each of these lawsuits was filed as a “simplified action” with a filing fee of only $50.00 These were also started by Mr. Clark.

All that said, the following is, as usual on this blog but even more so, not to be taken as legal advice or to be relied upon by anyone for any particular purpose and is certainly not directed specifically at the above litigation. It is relevant to copyright ligation generally and may hopefully be of interest and assistance to lawyers who are not fully familiar with copyright law and certain provisions of the Federal Courts rules. I am pleased that lawyers are probably the most frequent readers of this blog.

Anyone who has been implicated in any copyright litigation and who does not know how to or does not wish to represent themselves should quickly consult with a lawyer who is fully familiar with this area of law and practice. I am aware of instances in which lawsuits against BitTorrent users have been dismissed with no settlement payment with the help of knowledgeable counsel at a very low cost. On the other hand, I and other knowledgeable copyright lawyers are asking what circumstances could result in any experienced IP lawyers consenting to judgments as high as $5,000 against an individual, presumably plus whatever fee they charge their clients for negotiating such high-end settlements. On this point, I’ve been quoted on August 22, 2018 in the very paywalled WireReport as follows:

“I can’t comment on any particular settlement because I don’t know the

specific facts,” Howard Knopf, a lawyer at Macera and Jarzyna, said in an

email. “However, $5,000 is the maximum statutory damages amount that

could ever be awarded for non-commercial activity in these types of cases

even in a contested proceeding.”

He added: “Canadian courts are clear that statutory damages must somehow

correlate to actual damages, which in these en masse BitTorrent situations

are arguably less than $10 for infringement of one work by one individual.

The minimum statutory damage award for non-commercial infringement is

$100. Generally speaking, even if a settlement amount has to be paid – which

is far from clear in these situations — one would expect that it would be at the

lower end and not the upper limit.”

(highlight and emphasis added)

References in the following to Rules are to the Canadian Federal Courts Rules are not directed specifically at any particular cases and are potentially applicable to any copyright BitTorrent litigation brought in the Federal Court of Canada:

1. Service of a statement of claim can be done by registered mail but is only legally effective if the individual being sued actually signs a post office receipt. (Rule 128(1)(e). Nobody is required to sign a post office receipt for an unexpected envelope from a law firm or any other party. Other methods of service are possible but will be more expensive and time consuming for the plaintiff.

2. When a plaintiff, such as a film company “is ordinarily resident outside Canada” or “has not provided an address in the statement of claim, or has provided an incorrect address therein, and has not satisfied the Court that the omission or misstatement was made innocently and without intention to deceive”, the Federal Court may order the plaintiff to give security for defendant’s costs. (Rule 416). Security for costs orders involving non-resident plaintiffs are routine and may require the plaintiff to pay several thousand dollars into court in order to proceed with the litigation against any individual who brings the appropriate motion. Normally such payments into court are made based on a consent order. Sometimes, foreign plaintiffs decide not to proceed when the security for costs issue is even raised. The recent refusal by the Supreme Court of Canada to hear on appeal of the order that Voltage Pictures post $75,000 for security of costs in a “reverse class action” underlines the importance of this rule. There is no reason why Rule 416 could not be applied by individual defendants in litigation targeting several hundred “Doe” defendants at a time. I have seen security of costs used as both a sword and shield. It can be effective in both respects - and any competent lawyer should be fully aware of the possibilities.

3. There are no judicial precedents in Canada establishing liability on the part of a BitTorrent user for copyright infringement. Moreover, there are no judicial precedents establishing liability on the part of an internet services account holder for someone else’s activity using that account, even if such activity may have infringed copyright. Moreover, many households have multiple users of an internet connection, including children, babysitters, etc. An unsecured router may provide access to many unknown persons. Indeed, there’s a recent very important decision in the USA – which though not binding in Canada – could be very influential. I recently wrote about this very important American appellate decision from the influential 9^th Circuit Court of Appeals in Cobbler Nevada v. Gonzales, wherein the Court stated:

The district court properly dismissed Cobbler Nevada’s claims. The direct infringement claim fails because Gonzales’s status as the registered subscriber of an infringing IP address, standing alone, does not create a reasonable inference that he is also the infringer. Because multiple devices and individuals may be able to connect via an IP address, simply identifying the IP subscriber solves only part of the puzzle. A plaintiff must allege something more to create a reasonable inference that a subscriber is also an infringer. Nor can Cobbler Nevada succeed on a contributory infringement theory because, without allegations of intentional encouragement or inducement of infringement, an individual’s failure to take affirmative steps to police his internet connection is insufficient to state a claim.

4. The US Court’s stance on contributory infringement is consistent with the Supreme Court of Canada’s position on “authorization” in the 2004 decision in CCH Canadian v Law Society of Upper Canada, in which the SCC held that:

…a person does not authorize infringement by authorizing the mere use of equipment that could be used to infringe copyright. Courts should presume that a person who authorizes an activity does so only so far as it is in accordance with the law. (para 38).

5. Here is a recent important law review article entitled “Defense Against the Dark Arts of Copyright Trolling” the lead author of which, Matthew Sag, is a prominent American copyright law professor and the co-author Jake Haskell is a Chicago practitioner. While this article is based upon American law and practice, much of it may be of interest and potential utility in the Canadian context. Law review articles are often provided as an “authority” in a court case, if relevant to the issues before the court. It would not be surprising if this article were to be put on the record in any Canadian litigation involving BitTorrent litigation, if the litigation proceeds any distance. This article shows, among many things, that virtually none of these proceedings ever go to trial – which raises some very interesting questions about the intentions of the plaintiffs. As the abstract says, “The plaintiffs bringing these cases target hundreds or thousands of defendants nationwide and seek quick settlements priced just low enough that it is less expensive for the defendant to pay rather than to defend the claim, regardless of the claim’s merits.”

6. Even when liability can be proven, unless a plaintiff can establish substantial actual damages, the usual recourse is to “statutory minimum damages”, which under Canadian law must bear some correlation to what actual damages would have been. Where the activity is “non-commercial”, the maximum amount of statutory minimum damages is $5,000 and the minimum is $100. There are no reported binding precedents establishing any particular amount of damages on the part of an individual for non-commercial BitTorrent activity in Canada. The plaintiff’s actual loss for the cost of any given stream or download would likely be a few dollars at the most, so even $100 seem like a stretch – but Parliament has made this minimum if this provision is invoked. Moreover, use of this provision in a judgment – even a consent judgment, will have the following effect:

If a copyright owner has made an election under subsection (1) with respect to a defendant’s infringements that are for non-commercial purposes, every other copyright owner is barred from electing to recover statutory damages under this section in respect of that defendant for any of the defendant’s infringements that were done for non-commercial purposes before the institution of the proceedings in which the election was made. (Copyright Act, s. 38.1(1.20)

7. There is a mechanism in the Federal Court rule that is intended to encourage strategic settlement offers. If a strategic settlement offer is made in a timely and proper manner, and the plaintiff does not ultimately recover at least as much as that offer, the plaintiff will be liable for double the defendant’s legal costs calculated according the Court’s formula after the date of the offer. In a case of non-commercial copyright infringement on the part of an individual, the starting point of damages that a court could award is $100. Here’s what the Federal Court Rules say:

Consequences of failure to accept defendant’s offer

420(2) Unless otherwise ordered by the Court and subject to subsection (3), where a defendant makes a written offer to settle,

· (a) if the plaintiff obtains a judgment less favourable than the terms of the offer to settle, the plaintiff is entitled to party-and-party costs to the date of service of the offer and the defendant shall be entitled to costs calculated at double that rate, but not double disbursements, from that date to the date of judgment; or

· (b) if the plaintiff fails to obtain judgment, the defendant is entitled to party-and-party costs to the date of the service of the offer and to costs calculated at double that rate, but not double disbursements, from that date to the date of judgment.

General Observations on Mass Litigation

As the study by Sag and Haskell above shows, the plaintiffs in most mass litigation cases have no intention of proceeding to trial and are hoping to extract the highest possible settlement at the lowest possible cost. A number of lawyers in Canada are beginning to look at these types of lawsuits and possible steps to protect the interests of individual defendants at an early stage and with a minimum amount of expense. There are concerns about how mass copyright litigation has been dealt with by Federal Court. More to follow at a later date…

Anyone who has actually been served with a lawsuit is foolish to ignore it. The result may be a default judgment for a substantial amount of money that may be difficult, if not impossible, to set aside. Therefore, it is important to consult counsel who are experienced in both copyright law and the Federal Court Rules. It is legitimate for any person involved in mass litigation to ask any lawyer who is recommending substantial settlements – especially at the high end of non-commercial statutory minimum liability, namely $5,000 – why he or she is making such a recommendation.

HPK

*AIRD & BERLIS LLP “DOE” CASES

2016-2018

As of August 29, 2018 (Revised August 31, 2018)

FCT File #

Style of Cause

Type of Case

Date

T-662-16

VOLTAGE PICTURES ET AL v. JOHN DOE ET AL (Salna)

2016-04-26

T-1614-16