Tuesday, August 23, 2022

There is No New “Making Available” Right: The Copyright Board Got It Wrong


On July 15, 2022 the Supreme Court of Canada (“SCC”) rendered a lengthy, nuanced and very important judgment  in Society of Composers, Authors and Music Publishers of Canada v. Entertainment Software Association, 2022 SCC 30 (CanLII), <https://canlii.ca/t/jqgw0>.

Objectively, the decision affirmed that:

1)     There is no new “making available right" as such resulting from the 2012 amendments to the Copyright Act. The new definition added as s. 2.4(1.1) merely clarified the meaning of the existing right under s. 3(1)(f) to “communicate to the public by telecommunication”, and did not create a standalone new right or a justification for stacking on an additional tariff.

2)     SOCAN was not entitled to stack a new royalty on top of existing tariffs simply by virtue of a user making a work available for streaming or download. Such activity is already covered by existing rights and tariffs, and the 2012 amendment clarifying the definition of “communication of a work or other subject matter” in s. 2.4(1.1) doesn’t create new liability.

3)     The “definition” provisions in s. 2 of the Copyright Act do not add new rights. The rights of owners of “works” are found in the first paragraph of s. 3(1). As ably stated by ESA, “These rights are the right to reproduce, perform, and publish the work or any substantial part thereof.” The “making available” provision, however, is not contained in this rights-granting section but rather in definition section 2.4(1.1).

4)     The Court once again affirmed the importance and centrality of the doctrine of technological neutrality to applying the Copyright Act.

5)     The Court once again affirmed the principle of balance in copyright law:

   “[5] I cannot agree with the Board’s interpretation of s. 2.4(1.1). The Copyright Act does not exist solely for the benefit of authors. Its overarching purpose is to balance authors’ and users’ rights by securing just rewards for authors while facilitating public access to works. When this balance is achieved, society is enriched. Authors are encouraged to produce more works, and users gain access to works which they can use to inspire their own original artistic and intellectual creations.”

6)     The Court once again affirmed the rule that one activity (here, streaming or downloading) can only give rise to one royalty payment, and that payment of two royalties for the same activity is prohibited.

7)     The domestic legislation is what is determinative – not the treaty. Without being as blunt and even apparently sarcastic as Justice Statas was in the Federal Court of Appeal when he  he referred to “the vibe” of international law, the SCC affirmed Justice Statas’ general approach to use of international law to interpret domestic statutes.  

8)     The Copyright Board was wrong – i.e. not “correct” - in its interpretation of the 2012 legislation. The Copyright Board will be held to the “correctness” standard of review when it comes to interpreting the Copyright Act because it shares concurrent first instance jurisdiction with the Superior Courts. The Board will be given no deference for being “reasonable” in its interpretation of the substantive provisions of Copyright Act. It must be correct. Importantly, this is the first new category of correctness review since the landmark Vavilov decision. Two of the judges disagreed and would have applied the more deferential “reasonableness” standard. That said, they found that the Board’s decision was unreasonable in this case.

9) Justice Rowe states and reiterates that “If a work is made available for downloading, the author’s right to authorize reproductions is engaged.” (paras. 8, 108). Moreover, the meaning of “authorize” has been considered in greater depth in a number of prior SCC decisions. It will be interesting to see whether future courts look more to ESA or to earlier cases like CCH when confronted with this issue.

10) Finally, this decision may or may not have some potential application to infringement cases, given the closing comment from Justice Rowe:

 [113]  Before concluding, I would note that the value of these rights is not in issue in this appeal. Setting the appropriate royalties to compensate authors when these rights are engaged is a matter for the Board to decide. Similarly, the considerations that a court might have regard to in assessing monetary remedies for infringement is a matter to be decided if and when such a case arises. 

More subjectively:

 1)     To put it bluntly, when the Copyright Board strays out of its permitted and mandated narrow lane of rate-setting (see Prof. Katz’s factum on this point)  and presumes to interpret the substantive provisions of the Copyright Act – much less international law – it had better be “correct” and just not merely “reasonable”. While the SCC recognizes that there can be many “reasonable” outcomes, there is normally only one “correct” outcome.  This clarifies a residual issue from Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (CanLII), [2019] 4 SCR 653, <https://canlii.ca/t/j46kb> concerning the standard of review for the Copyright Board. This is bound to upset the Copyright Board, following less than a year after the SCC declared that Copyright Board tariffs are not mandatory for unwilling users in the York v. Access Copyright decision, which I wrote about herePer Abella, J:

 [39]     As matter of legislative coherence, it would be incongruous if royalties fixed in the context of licence negotiations between a collective society and a specific user were voluntary, but those set in a general tariff were mandatory. https://www.canlii.org/en/ca/scc/doc/2021/2021scc32/2021scc32.html

2)     This clearly very expensive and lengthy detour could have been avoided if the Board had not called for extensive submissions on the implications of the WIPO treaties – which numerous well-resourced parties went along with resulting in a pantheon of experts’ opinions. All of this could and should have been avoided if the Board had simply allowed or denied SOCAN’s submissions on the basis of the Canadian Copyright Act, the 1996 WIPO treaties, and existing authorities on the subject. Then, the FCA could have resolved the issue on judicial review. Canada does not need a panoply of “experts” to read a domestic statute, and if appropriate, an international treaty and published commentary on it. We don’t need a monumentally expensive, dilatory and gratuitous display of the “the vibe” of international and treaty law in what should have been a rate setting exercise. The Board’s decision to proceed the way it did could potentially have set a dreadful precedent in terms of access to justice in situations wherein objectors do not have the resources that were available in this instance.

3)     Ironically, after recognizing that a freestanding “making available right” existed, the Board nonetheless refused to value the making-available tariff because ‘the evidence before it was inadequate to warrant the setting of a tariff for ‘making available’’. This was upheld as “reasonable” in the companion decision of the FCA. CMRRA-SODRAC Inc. v. Apple Canada Inc., 2020 FCA 101 (CanLII), <https://canlii.ca/t/j82gf>. Arguably, that should have been the end of the matter for the Board, especially since the Board recognized more than a decade earlier in another proceeding for a SOCAN tariff on “other sites”  that “in the absence of proper and reliable evidence, it would be irresponsible to certify a tariff that could potentially have such a broad scope of application” and this was upheld by the FCA, in a decision in which I played a leading advocacy role.
Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, 2010 FCA 139 (CanLII), <
https://canlii.ca/t/29z9n>, which Justice Stratas cited in 202 FCA 101.

4)     Interestingly, the issues of royalty stacking and the effort to twist or elevate definitions into new rights has a long history:

a)     The monumental Report of Judge Parker from 1935 outlined the concerns with the attempts by the predecessors of SOCAN to impose “additional” costs on motion picture exhibitors as a result of the new technology of the day – namely “talking pictures” and such practices as the notorious attempt imposition of a “score charge” to “to recoup for the producer his cost, and perhaps a profit, on what was involved in putting the sound track on the film or record the sound on a disc, timed in relation to the film." This was a blatant and early attempt at royalty stacking – and it prompted the establishment of the Copyright Appeal Board in Canada, which worked very well in Canada until the Copyright Board came along more than five decades later.

b)     Kraft tried to twist the s. 2.7 definition of an “exclusive licence” added in 1997 to the Copyright Act into a right to “thwart” the importation of perfectly authentic Toblerone chocolate bars based on copyright in a small picture on the packaging. I successfully thwarted this argument on behalf the Retail Council of Canada as an intervener when this case went to the SCC resulting in the decision in Kraft Canada Inc. v. Euro Excellence Inc., 2004 FC 652 (CanLII), [2004] 4 FCR 410, <https://canlii.ca/t/1h3qj>

c)     In one of the 2012 “Pentalogy” cases at the SCC, the Motion Picture Association of Canada incongruously argued, in effect, that the word “excludes” in the definition of “sound recording” actually means “includes”. The definition in question was: “sound recording” means a recording, fixed in any material form, consisting of sounds, whether or not of a performance of a work, but excludes any soundtrack of a cinematographic work where it accompanies the cinematographic work. (underline added). Needless to say, the SCC wasn’t impressed and the only mystery was why it even heard the case in the first place. See Re:Sound v. Motion Picture Theatre Associations of Canada, 2012 SCC 38 (CanLII), [2012] 2 SCR 376, <https://canlii.ca/t/fs0vc>

BTW, I was not alone in finding the hearing to be rather confusing. Even the judges were wondering at times about who was agreeing or disagreeing with whom and about what. Here’s the webcast.

Some of the parties seemed to depart from their factums – which in some cases were much more clear than their oral arguments. Perhaps the most useful factum was that of ESA, which can be found here.