SCC Ruling in CBC v SODRAC: Per Rothstein J.: “I find that licences fixed by the Board do not have mandatory binding force over a user…”

(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)

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[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

CBC v SODRAC Supreme Court of Canada decision expected Thursday, November 26, 2015 at 9:45 AM

The decision of the Supreme Court of Canada in CBC v SODRAC will be released Thursday Nov. 26, 2015 at 9:45 AM https://t.co/ZpeQwvRQMq

— Howard Knopf (@howardknopf) November 24, 2015

The decision will appear here at 9:45 AM or shortly thereafter. 

Here is the Court's unofficial summary of the issues:

Intellectual property law - Judicial review - Copyright - Licenses - Licensing societies - Royalties - Ephemeral copies - Application by broadcaster for review of licenses issued by Copyright Board allowed in part - Collective society imposing royalties on producers of content and broadcasters - Licences allow collective society to collect royalties for copies incidental to use of new broadcast technologies - Whether broadcast-incidental copies require a separate licence under a technologically-neutral interpretation of the Copyright Act, R.S.C. 1985, c. C-42 - If a licence is required in FCA File No. A-516-12, what is a technologically-neutral royalty rate for broadcast-incidental copies - Whether the Board err in law by granting an interim licence in FCA File No. A-63-13. 

Here is the link to all the factums.

I filed a factum on behalf of 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.

A webcast of the hearing is available here.

HPK

Video of CBC v SODRAC oral arguments in Supreme Court of Canada now Available

The video of the oral arguments in the recent Supreme Court of Canada hearing in CBC v. SODRAC is now finally available here. 

My submission re the "mandatory tariff" theory on behalf of the McGill Centre for Intellectual Property Policy and Ariel Katz starts at at ~ the 152.00 mark.

Here are the factums.

I'm not sure why this was not webcast live on March 16, 2015 when it was heard.  Apparently, some underlying material was designated as "confidential" by the Copyright Board, which happens all too frequently in Board cases - notwithstanding the fundamental principle of open courts in Canada. In any event, we now have the video.

HPK

Leuthold Loses Longshot Appeals In Her Litigation Against CBC

The Federal Court of Appeal on June 27, 2014 has given its judgments in Catherine Leuthold’s two uphill appeals in a case about which I have written earlier at length. Spoiler alert. Not surprisingly, she also lost on the appeals. However, the reasoning of the Federal Court of Appeal is more interesting and more far reaching than might have been expected, given the very peculiar circumstances of this case.

Leuthold is an American photographer whose 9/11 images were used by the CBC, by way of an “honest mistake”, six times more than permitted by the original one time license for which she was paid $2,500. She refused a settlement offer of $37,500 and went to trial, where she was awarded $19,200 ($3,200 times six) plus $168.73 as her portion of CBC’s “profits”.

However, what she sought from the Court was an award of $21,554,954.25 plus a portion of the CBC’s revenues. This astounding sum was based upon her theory, inasmuch as I can understand it, that each of the CBC’s 800 or so participating affiliated stations and Broadcasting Distribution Undertakings [BDUs] committed a separate act of infringement. Not surprisingly, the trial Court did not agree. It will come as no great shock that the Federal Court of Appeal also disagreed with her.

The appeal decision was penned by Pelletier, J.A. from whom we are hearing a lot lately about copyright and whose dissent was recently upheld by the SCC in the CARFAC case, concerning which I’ll have something to say in due course.

It contains some interesting comments on the case of Bishop v. Stevens, [1990] 2 S.C.R. 467, well known to copyright geeks, some of whom attempt to invoke it in favour of multiple and layered payments for the same transaction. The Court seems to suggest that this case might have helped her up to a point to a point but she did not refer to it. Instead, she apparently relied on s. 2.4(1) of the Copyright Act– which the Court regards as antithetical to her argument. Pelletier, J.A., , makes the following observations about technological neutrality, which may be of considerable interest in other matters now percolating at the Copyright Board and in the Courts:

[36]           Ms. Leuthold does not refer to this authority and instead relies on paragraph 2.4(1)(c) of the Copyright Act, R.S.C., 1985, c. C-42 (the Act) in support of her claim that each transmission to a BDU by the CBC is an infringement of copyright. Paragraph 2.4(1)(c) provides as follows:

2.4 (1) For the purposes of communication to the public by telecommunication, …

2.4 (1) Les règles qui suivent s’appliquent dans les cas de communication au public par télécommunication : …

(c) where a person, as part of     (i) a network, within the meaning of the Broadcasting Act, whose operations result in the communication of works or other subject-matter to the public, or … transmits by telecommunication a work or other subject-matter that is communicated to the public by another person who is not a retransmitter of a signal within the meaning of subsection 31(1), the transmission and communication of that work or other subject-matter by those persons constitute a single communication to the public for which those persons are jointly and severally liable.

 [37]           According to Ms. Leuthold, this result flows from the following reasoning:

This section means, by way of example, that where Newsworld make two such transmissions to two BDUs, there would be two infringements under Section 3(1)(f) of the Copyright Act because the second person that communicates the work to the public (the second BDU) is a different person from the first instance, even when such transmissions occur simultaneously.

Appellant’s Memorandum of Fact and Law, at page 15, paragraph 47.

[38]           It seems to me that the better view is that paragraph 2.4(1)(c) legislates that the distribution of a network signal incorporating a protected work to BDUs and the subsequent communication of that work to subscribers is but a single network-wide infringement in which each participating BDU is jointly and severally liable along with the network. In that way, all those who benefit from the communication of the work share in the liability for compensating the rights holder, subject to whatever arrangements may be in place between them.

[39]           This reading of paragraph 2.4(1)(c) of the Act moves in the direction of technological neutrality in that the number of infringing acts does not vary according to the number of intermediaries in the transmission chain. This is consistent with the goal of technological neutrality which the Supreme Court articulated in Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34, [2012] 2 S.C.R. 231, at paragraphs 5-10.

[40]           There is one act of infringement whether the work is communicated to the public via one BDU or via hundreds of them. The measure of damages may depend upon the number of viewers of the work, which has a rational connection with compensation, unlike the number of intermediaries, which does not.

[41]           Paragraph 2.4(1)(c) serves to distinguish this case from Bishop v. Stevens where, as noted, each unauthorized reproduction was found to be a violation of the copyright holder’s rights. While that may have been the case for unauthorized communications to the public by telecommunication prior to the passage of paragraph 2.4(1)(c) and its companion disposition subsection 31(2) of the Act, it is no longer the case now.

[42]           I am of the view that paragraph 2.4(1)(c), properly interpreted, has the effect of making a network transmission of cable programming material to the public via BDUs a single infringement of a copyright holder’s rights if the network has not properly cleared the rights with respect to that transmission. In this case, the six transmissions of the documentary containing Ms. Leuthold’s images, in violation of her copyright, constituted six acts of infringement, as found by the Trial Judge.

(emphasis added)

Those who are “in denial” about the Supremes’ ESA decision should take note.

In the companion case, regarding application of the “double costs” rule that applies when a plaintiff fails to achieve as much after trial as the defendant has offered by way of settlement, Ms. Leuthold also failed to achieve success. She is now liable for a substantial amount of costs to the CBC. Whether the CBC will try to collect this money and whether Ms. Leuthold can afford to pay all or even any of it, given her declared taxable income of taxable income in 2006 was $20,661 USD remains to be seen. And presumably Leuthold will not see a penny of her $19,200 award, which is only a fraction of the costs that she now owes to CBC.

The CBC did finally ask for security for costs  in this case, but only after the appeal process was well underway. The CBC’s motion was turned down, under the circumstances.

The costs judgment contains some cautionary language for those who may contemplate high risk litigation. Pelletier, J.A. states that:

[13]           Finally, Ms. Leuthold argues that an order of costs ought not to be such as to bring the administration of justice into disrepute. Once again, this is an argument based on impecuniosity. The sad fact of the matter is that litigation produces winners and losers; that is why it is such a blunt tool in the administration of justice. But justice is not served by allowing persons who have imposed costs on others by pursuing or defending a claim which lacks merit to avoid the consequences of their behaviour. Such a policy would be more likely to bring the administration of justice into disrepute than the result in this case.

(emphasis added)

BTW, in 2007, Leuthold sued a long list of cable companies, but that action was stayed in 2012.

HPK

PS - Leuthold applied to the Supreme Court of Canada for Leave to Appeal. Not surprisingly, her application was dismissed with costs payable to the  CBC, as usual without reasons, on April 30, 2015.

SOCAN's Quest for a new "Making Available Right" Tariff at the Copyright Board in the Post ESA v. SOCAN and Post Bill C-11 World

As anyone who is interested in Canadian copyright knows, the Supreme Court of Canada ruled on July 12, 2012  in the decision in ESA v SOCAN  at the able behest of Barry Sookman that the “communication” right did not give rise to a separate right upon which the Copyright Board could certify a tariff with respect to the delivery of digital files of music for permanent download over the internet, i.e. the there could not be a valid tariff for the delivery of copies of works which were substitutes for the distribution of physical hardcopies on which performance royalties were not payable. As the Court stated:

[43]  In our view, therefore, the Board’s conclusion that the Internet delivery of a permanent copy of a video game containing musical works amounted to a “communication” under s. 3(1)(f) should be set aside.

The SCC was explicitly concerned with technological neutrality, avoidance of “double dipping” and ensuring that collectives and tariffs serve to enhance economic efficiency rather than impede it. The decision was based upon the statute in effect before Bill C-11 became law. The decision can be expected to have a profound effect on the increasingly complex layering and multiplicity of tariffs and collectives that had been occurring in Canada.

SOCAN is now taking the position that the new “making available right” (“MAR”), as SOCAN calls it, found in Section 2.4(1.1) of the Copyright Act now in force in the form of amendments resulting from the Copyright Modernization Act that came into force on November 7, 2012 creates a new right and warrants a new tariff.

The Copyright Board has called for submissions on this issue and SOCAN has now filed its memorandum of submissions and the expert opinion of Mihaly Ficsor. These are being posted now because of the important public interest aspect of this case.

To quote from SOCAN’s submission filed today with the Copyright Board:

SOCAN’s position is that, as a result of new section 2.4(1.1), Internet music services are liable to SOCAN when they post musical works on their Internet servers in a way that allows customers to have access to them from a place and at a time chosen by each customer, irrespective of whether the musical works are subsequently transmitted to end-users by way of downloads, streams or at all.

There are many interesting issues here. However, SOCAN will have to deal with the majority ruling in the ESA decision that:

[41] In our view, the Court in Bishop merely used this quote to emphasize that the rights enumerated in s. 3(1) are distinct.  Bishop does not stand for the proposition that a single activity (i.e., a download) can violate two separate rights at the same time.  This is clear from the quote in Ash v. Hutchinson, which refers to “two acts”.  In Bishop, for example, there were two activities: 1) the making of an ephemeral copy of the musical work in order to effect a broadcast, and 2) the actual broadcast of the work itself.  In this case, however, there is only one activity at issue: downloading a copy of a video game containing musical works.

[42]  Nor is the communication right in s. 3(1)(f) a sui generis right in addition to the general rights described in s. 3(1).  The introductory paragraph defines what constitutes “copyright”.  It states that copyright “means” the sole right to produce or reproduce a work in any material form, to perform a work in public, or to publish an unpublished work.  This definition of “copyright” is exhaustive, as the term “means” confines its scope.  The paragraph concludes by stating that copyright “includes” several other rights, set out in subsections (a) through (i).  As a result, the rights in the introductory paragraph provide the basic structure of copyright.  The enumerated rights listed in the subsequent subparagraphs are simply illustrative: Sunny Handa, Copyright Law in Canada(2002), at p. 195; see also Apple Computer Inc. v. Mackintosh Computers Ltd., [1987] 1 F.C. 173 (T.D.), at p. 197.  The rental rights in s. 3(1)(i) referred to by Justice Rothstein, for example, can fit comfortably into the general category of reproduction rights.(emphasis added)

I won’t comment further for the moment, since I (along with most other active copyright counsel in Canada) am involved in this case. The first round of responses to SOCAN’s submissions is due April 5, 2013.

HPK