Canada: Only in Canada, You Say? Perhaps Not: Court Rules on Internet Copyright

Last Updated: June 5 2002
Article by Michael Koch

Originally published on May 9, 2002


On Thursday, May 2, 2002, the Federal Court of Appeal partially upheld a Copyright Board decision regarding copyright liability on the Internet. In a ruling with broad implications, the Court reviewed the Board’s decision on Tariff 22, a proposed tariff relating to the communication of musical works over the Internet, filed by the Society of Composers, Authors and Music Publishers of Canada (SOCAN).

In its 96-page ruling the Court held:

  • With the exception of transmissions from a cache, the activities of Internet Service Providers (ISPs) in providing access to the Internet and hosting content on their servers do not make them liable for the communication of works over the Internet.
  • The Board’s jurisdiction to approve royalties is not limited to transmissions that originate from host servers located within Canada — rather, the Board must determine, on a case-by-case basis, whether there is a real and substantial connection between the relevant communication and Canada.

Subject to SOCAN now seeking leave to appeal to the Supreme Court of Canada, or ISPs challenging the exception made by the Court’s majority for "caching", the Court’s decision appears to settle the question of the liability of ISPs for the communication of works over the Internet. This will re-direct the spotlight under Tariff 22 to operators of Web sites, which are equally the target of SOCAN’s proposed tariff. The Court’s decision also leaves the Board with a practical challenge in applying its jurisdiction to host servers located beyond Canada’s borders.

Background - the Board’s Decision

On October 27, 1999, the Board issued a decision that concluded the first phase of a two-phase proceeding to consider Tariff 22. Tariff 22 targets the communication of musical works by means of computers or other devices connected to a telecommunications network where the transmission of those works can be accessed by a person independently of any other person.

Because objections to the proposed tariff raised important legal issues of a preliminary nature, the Board opted to conduct the hearing in two separate phases, the first of which was aimed at determining which activities on the Internet, if any, constitute a protected use targeted in the tariff. The second phase of the proceeding will address policy issues, including the structure of the tariff, and the amount of royalties payable.

In its decision concluding the first phase of the proceeding, the Board made a number of important determinations:

  • The transmission of a musical work over the Internet constitutes a "communication to the public by telecommunication" under the Copyright Act.
  • The work is communicated when it is actually transmitted; however, the person who posts a musical work on a site, or otherwise makes it available for transmission to the public, is responsible for the communication.
  • Internet intermediaries, including ISPs which merely provide their customers with connectivity to the Internet, do not themselves communicate or authorize others to communicate works over the Internet.
  • To occur in Canada, and hence to be subject to the tariff, a communication must originate from a server located in Canada on which content has been posted.

SOCAN applied for judicial review of certain key elements of the Board’s decision.

The Court’s Decision

SOCAN’s application raised essentially two substantive questions:

  • When material is transmitted on the Internet, is an intermediary such as an ISP that merely operates the server on which it is stored, and supplies the ultimate recipient with access to the Internet, liable for the transmission?
  • When material requested by an Internet user in Canada is stored on a server outside Canada, does a transmission from that server avoid liability in Canada?

Liability of Intermediaries

One of the principal issues to be decided by the Court was whether the Board was correct in its conclusion that intermediaries such as ISPs were generally not liable for the communication of musical works over the Internet, because their activities only provide "the means of telecommunication necessary for another person to communicate the work" within the meaning of the Copyright Act. A collateral issue was whether the ISP could otherwise be held to be liable as "authorizing" the communication.

The Court upheld the Board’s ruling that the core activities of operators of host servers and Internet access providers do not make them liable. In doing so, the Court rejected SOCAN’s argument that only traditional "common carriers" are protected from liability for the content of the communications that they transmit. The Court held instead that legislation should be interpreted, where permitted by its language and underlying rationale, in a way that takes account of technological developments.

In agreeing with the Board that the services and facilities provided by intermediaries are "necessary" for the communication, the Court held that it is irrelevant that the content provider might have chosen other, possibly less convenient, means of communicating the music, than posting it on a host server, such as making it available on the hard drive of his or her own Internet-accessible computer. Accordingly, the Court held that the operator of a host server is no less providing the means "necessary" to enable the content provider to communicate by telecommunication with end users than is the provider of Internet access.

In a departure from the Board’s decision, however, the majority of the Court held that an Internet intermediary who caches material is not similarly providing the means necessary for the communication. In the majority’s view, "the fact that the cache enhances the speed of transmission and reduces the cost to the Internet access provider does not render the cache a practical necessity for communication." In the Court’s view, therefore, the operator of a cache is liable for the communication of the music. The distinction created by the Court between caching and other activities of ISPs is not without its difficulties. It appears to be based on the Court’s characterization of caching as involving the selection of the material to be cached, thereby taking this activity outside the exception from liability created for those exercising a merely passive function.

The Court also upheld the Board’s ruling that operators of host servers and Internet access providers do not effectively control the content of what is transmitted:

"…while perhaps theoretically possible, it is not practicable for Internet access providers to "read" and, in effect, to block requests from end users for copyright material, nor to screen out copyright material from being transmitted over their routers to the end user, without slowing to an unacceptable extent the transmission of data."

Finally, although it did not agree with the Board’s analysis of this issue, the Court did agree with the Board’s conclusion that Internet intermediaries were not authorizing the communication of musical works by those posting this material. The Court held that those providing access services cannot be said to be authorizing content providers, particularly since these two parties often have no contractual relationship.

With respect to host server operators, in a finding that may have wider relevance for ISPs’ liability, the Court allowed that an implicit authorization to communicate infringing material might be inferred based on the facts of a particular case — for example, where a host server operator fails to remove material after being advised of its presence and having a reasonable opportunity to take it down. The Court ultimately concluded, however, that Tariff 22 did not target behaviour on this limited factual basis.

Location of the Server

SOCAN is only entitled to a royalty in respect of copyright infringements that occur in Canada. The Board stated that an Internet communication occurs in Canada if it originates from a server in Canada.

The Court overturned the Board’s ruling, stating that the location of the communication should not be determined solely by that of the host server, especially since the communication is only ever effected at the request of the end user.

The Court recognized that the Board’s decision might not only have the effect of denying a royalty to owners of other intellectual property rights that are not recognized in certain other jurisdictions, such as the rights of performers and of sound recording makers, but might also create a double royalty risk where a communication originating in Canada might be seen to have occurred in a second jurisdiction. The Court ultimately acknowledged that the resolution of some of the trans-border problems associated with Internet communications will require supranational solutions.

In the meantime, the Court tried its hand at fashioning a test for locating the communication and adopted the "real and substantial connection" test used in other legal contexts. This test requires an examination of all connecting factors for the purpose of identifying communications that occur in Canada and can therefore attract liability to pay a royalty to SOCAN. The following connecting factors were assumed to be the most important:

  • the location of the content provider;
  • the location of the end user; and
  • the location of the intermediaries, in particular the host server.

The Court cited the location of the end user as being "particularly important", given the policy of protecting copyright in the Canadian market.


It is too early to tell whether SOCAN will try to have one more kick at the "ISP can" or ISPs will challenge the ruling regarding caching, and apply for leave to appeal the Court’s decision to the Supreme Court of Canada. While the chance of a successful appeal may be uncertain, the relative difficulty of enforcing a tariff against other parties in the Internet chain may dictate a further appeal by SOCAN. The difficulties for ISPs presented by the Court’s finding regarding caching equally may lead to an appeal.

Once the legal issues have been finally resolved, Tariff 22 will proceed to a hearing on the second phase before the Copyright Board, to determine who will pay a royalty for the communication of music over the Internet, and how that royalty will be calculated.

If the Court’s ruling remains unchallenged or is upheld, then it can be expected that Web sites, including Canada’s largest portals, will become a major focus for the determination of an appropriate royalty. The structuring of a tariff will prove particularly complex given the still-developing state of Internet business models, and the fact that many of the largest Web sites are not, or are only minimally, involved in the posting of music. Finally, the Court has handed the Board a monumental challenge in requiring that it consider all relevant connecting factors in order to determine whether a communication from a host server located outside of the country creates a liability in Canada.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions