Friday, October 19, 2018

Voltage Pictures and the Massive Mass Litigation Mess in Canada

Voltage Pictures has been trying to sue 55,000 Canadians all at once through an unprecedented federal “reverse class action” in which one defendant was singled out and expected to defend the interests of the entire so-called class. Voltage seems to have picked its fight with the wrong defendant – Mr. Robert Salna - who is a landlord and who is sufficiently principled and financially able to have retained capable counsel. In the course of this quest, Voltage Pictures also managed to fight with Rogers as an ISP from which it sought disclosure of names and addresses. Both of the fights found their way to the Supreme Court of Canada, which recently declined to hear Voltage's appeal in one case and ruled against Voltage in the other. 
The Supreme Court of Canada (“SCC”) ruled on September 14, 2018 in   Rogers Communications Inc. v. Voltage Pictures, LLC, 2018 SCC 38 (CanLII), that Rogers is entitled to be reimbursed for “its reasonable costs of compliance with the Norwich order” to disclose the names and addresses of alleged copyright infringers. Here is the webcast of the SCC hearing that took place on April 26, 2018. This was in the context of the controversial “reverse class action” by Voltage Pictures against 55,000 or so individuals. The ruling will clearly affect future mass litigation and should have a serious and chilling impact on other pending mass litigation, of which there are at least 17 examples in the Federal Court involving thousands of individual “Doe” defendants. These 17 or so actions are not reverse class actions but typically sweep in hundreds of “Doe” defendants alleged to have infringed the same movie using BitTorrent.  All of these cases have been launched by Mr. Kenneth Clark of Aird and Berlis LLP

These costs – to be determined by the motions judge and this time with an adequate evidentiary record – can include only the steps above and beyond those already required by the Copyright Act pursuant the Notice and Notice regime. The SCC decision is notable for many reasons.

The issuance of the decision followed unusually quickly – less than five months after the April 26, 2018 oral hearing. The Court usually takes about six months or so.

It follows the major SCC setback for Voltage when on August 9, 2018 the SCC dismissed Voltage Pictures et al’s application for leave to appeal from a judgment from the Federal Court of Appeal (FCA) affirming the Federal Courts’ February 2, 2017 order regarding security for costs but for very different reasons. Voltage had been ordered to pay $75,000 into court for security for costs forthwith – which dates back to February 2, 2017 – more than 19 months ago. This payment apparently still has not been made, so the “reverse class action” has presumably fizzled fatally and finally. The reverse class action never got to the “certification” stage, where it would very likely have failed. The astonishing concept of forcing one individual chosen by the plaintiff to retain counsel and defend a class of 55,000 others - each of whom may have a different story to tell – was apparently predicated upon an untested reading of the Federal Courts Rules, which have not been and almost certainly were never meant to be used in the reverse mode as contemplated in this way.

This hearing was about an interlocutory procedural matter involving an apparently very small amount of money with an inadequate evidentiary record and very little explanation by the motions judge of why he thought $100/hour was appropriate – or a suggestion as to how many hours would be required. The SCC rarely gets involved in such matters but obviously saw the importance of this issue. Given the inadequate record below, the SCC hearing at times resembled a motion in the Federal Court with experienced lawyers and justices at times seeming to speak the language of systems analysis.

Oral arguments can and do matter - and Voltage said some things discussed below that may have backfired in this case and may cause it problems in the future beyond the obvious fact that it and others will now have to pay an amount – not necessarily “negligible” – for the details of each alleged infringer’s name and address.

It is clear that the SCC is concerned about the torrent of BitTorrent litigation in Canada. It has been clear since 2011 that Voltage and some apparently related entities are trying to unleash a Torrent of “BitTorrent” litigation. There have been changes in lawyers and strategies along the way in the quest to bring what many would call “copyright trolling” litigation – or worse - to Canada.

Justice Abella challenged Mr. Kenneth Clark, the counsel from Aird & Berlis LLP, for Voltage in the SCC hearing, as to whether his concerns that “The sky isn't necessarily fallen, but it has certainly caused a lot of damage” was based upon actual evidence or “just anecdotal.” He had no good answer. Indeed, he told her that “The United States has been complaining about Canada's position as a copyright infringer for a long time and in our materials we included a 2017 report saying Canada is still a haven for copyright pirates.” Voltage placed a lot of reliance on anecdotal and unreliable secondary sources – such as an IIPA report from 2017.   That report was  an IIPA report from 2017, which is an annual report from an American lobbying firm used to heavily influence USTR “301” reports. These reports are argumentative, mostly anecdotal and virtually devoid of scholarly rigor or actual evidence.  As I said in 2010 about these IIPA reports, the IIPA is the powerful Washington lobbying organization that is highly influential in the content of the notorious annual USTR “Special 301" report - which provides predictable and perennial negative commentary about Canada that our own Government says "lacks reliable and objective analysis". They are not taken seriously by the Canadian government. It is hardly a legal authority and should never have been filed as an authority in the SCC. Clearly, the SCC wisely ignored it.

In this case, Voltage’s counsel told the Supreme Court that he was trying “to make copyright infringement akin to a parking ticket” and that he was looking for “$100 or $200, in the ballpark…” per defendant. So, why has he been looking for $5,000 settlements in the 17 other mass litigation BitTorrent actions he has been pursuing in the Federal Court beginning in 2016? $5000 is quite a parking ticket. It’s the maximum the statute allows for statutory damages for non-commercial infringement and 50 time more than the minimum of $100. And why would anyone ever agree to settle at the max at the beginning of a process that is extremely unlikely to go to trial?

Voltage and other will now have to come up with real money when the Federal Court determines reasonable costs of compliance with Norwich orders. In the past, Voltage fizzled when it came to paying $33,380 costs in the TekSavvy case and now has failed to pay $75,000 into court for security of costs in this reverse class action case.

Above all, the SCC has made it explicitly clear that merely “being associated with an IP address that is the subject of a notice under s. 41.26(1)(a) is not conclusive of guilt”.  The SCC also clearly stated in the 2004  CCH v. LSUC decision that liability for “authorization” must entail “sufficient control” over the person doing the infringing, which is surely an oxymoron when it comes to teenage children and their friends using the household Wi-Fi with numerous devices. So, it’s open to question now whether there can even be any massive drift net type of action based upon any sustainable one-size-fits- all pleading – especially by way of a simplified action involving BitTorrent activity.

The Court’s judgment should put the brakes on some of the arguably overly informal procedures and accommodating rulings in the name of efficiency by the Federal Court in these 17 actions. This approach has apparently been based upon the sweeping dicta of Justice Stratas in the FCA decision below that culminated in his urging that these cases be dealt with “as quickly, easily and efficiently as possible while ensuring fair treatment of all.” Hopefully, more attention will now be paid on the “fair treatment for all” rather than the “quickly” and “easily” wording.

Here are perhaps the two most consequential paragraphs in the judgment – which put a severe chill on all the legal basis of the outstanding mass BitTorrent cases:
[35] I acknowledge that there will likely be instances in which the person who receives notice of a claimed copyright infringement will not in fact have illegally shared copyrighted content online. This might occur, for example, where one IP address, while registered to the person who receives notice of an infringement, is available for the use of a number of individuals at any given time. Even in such instances, however, accuracy is crucial. Where, for example, a parent or an employer receives notice, he or she may know or be able to determine who was using the IP address at the time of the alleged infringement and could take steps to discourage or halt continued copyright infringement. Similarly, while institutions or businesses offering Internet access to the public may not know precisely who used their IP addresses to illegally share copyrighted works online, they may be able, upon receiving notice, to take steps to secure its internet account with its ISP against online copyright infringement in the future.

[41] It must be borne in mind that being associated with an IP address that is the subject of a notice under s. 41.26(1)(a) is not conclusive of guilt.  As I have explained, the person to whom an IP address belonged at the time of an alleged infringement may not be the same person who has shared copyrighted content online. It is also possible that an error on the part of a copyright owner would result in the incorrect identification of an IP address as having been the source of online copyright infringement. Requiring an ISP to identify by name and physical address the person to whom the pertinent IP address belonged would, therefore, not only alter the balance which Parliament struck in legislating the notice and notice regime, but do so to the detriment of the privacy interests of persons, including innocent persons, receiving notice.
(highlight and emphasis added)

Even if these comments from the SCC go beyond the narrow “ratio decidendi” (what is actually decided and what is generally rooted in the facts) to the those that are “obiter dicta”, the latter type of comments can still be authoritative if they are closely related to “ratio decidendi”.  Those who are curious about the role of SCC “obiter dicta” may want to read the SCC’s own important 2005 decision regarding this issue. See  R. v. Henry In this instance, these comments were arguably closely related to the “ratio” and should now be regarded as binding authority.

Hopefully, these statements from the SCC will send a clear signal to the case management prothonotaries and judges in the Federal Court to proceed with caution, to ask the necessary questions in default proceedings, and not to inappropriately sign default judgments or even consent judgments that do not appear to be appropriate in individual cases. Above all, the SCC judgment may serve to prevent hundreds or thousands of unsuspecting individuals having judgments entered against them en masse in default proceeding for up to $5,000 each– with all the attendant consequences that could follow.

We are, unfortunately, seeing American-style mass litigation in Canada predicated upon the notion that few defendants will retain counsel to fight a “parking ticket” but will settle for some portion or, inexplicably in some cases apparently even all -  of the maximum amount of $5,000. This is being fueled by lack of access to justice. Sadly, the law school clinics are not stepping up to the plate. In some cases, lawyers may be giving questionable advice. All of this will hopefully somehow soon stop. Presumably, the Federal Court will get the message from the SCC.


PS - update of January 2, 2019

Voltage has paid the required $75,000 into court on November 9, 2018 and steps are being taken to determine Rogers' "reasonable costs", pursuant to the ruling of the SCC. Here's the docket: 

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