Canada: SCC Releases Five Decisions Relating To Copyright Tariffs (Intellectual Property Alert - Week of July 13, 2012)

Last Updated: July 18 2012
Most Read Contributor in Canada, November 2017

Edited by Chantal Saunders and Beverley Moore

On Thursday, July 12, the Supreme Court of Canada (SCC) released 5 decisions, providing guidance with respect to a number of tariffs. These decisions have been eagerly awaited and together with the Royal Assent of the Copyright Modernization Act, represent significant activity in the area of copyright law in Canada.

Downloads held not to be Communications

Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada

In this case, the SCC considered whether a tariff should apply to video games containing musical works that are downloaded over the internet as compared to those that are sold in the store. The focus was on the meaning of the word "communicate" in the Copyright Act. The SCC discussed the history of communications pursuant to the Copyright Act as well as the distinction between performance based rates and reproduction based rights. The SCC held that extending the term "communicate" to capture the internet delivery of a permanent copy of a work goes far beyond what the term was ever intended to capture.

The SCC also considered the principle of technological neutrality which requires that the Copyright Act apply equally notwithstanding the diversity of different forms of media. The SCC held that there is no practical difference between buying a durable copy of the work in a store, receiving a copy in the mail or downloading an identical copy using the internet. The SCC held that the internet is a "technological taxi" that delivers a durable copy of the work to the user. The Copyright Act is to be interpreted in a way that avoids an additional layer of fees based solely on the method delivery to the user. Thus, the Copyright Board's (the Board's) conclusion that the internet delivery of a permanent copy of a video game containing musical works amounted to a "communication" was set aside and the appeal was allowed in a 5-4 decision.

Streaming Music is a Communication to the Public

Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada

In this case, the SCC was also considering tariffs for communication and musical works over the internet. These particular communications consisted of downloads of files such as sound recordings and streaming of data allowing the user to listen to or view the content. The SCC adopted its finding from the ESA decision above that musical works are not "communicated" when they are downloaded. Thus, the question of whether online music services are communicating to the public by offering downloads became moot, and the appeal was allowed for the reasons set out in the ESA decision above.

However, the SCC came to a different conclusion with respect to music streaming. The SCC held that online music services have a business model premised on the expectation of multiple sales of musical works. This necessarily implies that there will be a series of repeated transmissions of the same work to numerous recipients. The musical works are indiscriminately made available to anybody with internet access to the online music services website. Thus, consumers requesting the streams are not members of a narrow group such as family or friends, they are members of "the public". As a result, the SCC held that streaming files containing a musical work, from the online services website, to the customers computer, at the customer's request, constitutes communicating to public by telecommunication and the tariff was upheld.

Previews are Not Subject to Tariff as they are Fair Dealing

Society of Composers, Authors and Music Publishers of Canada v. Bell Canada

In this case, the SCC considered SOCAN's appeal from a refusal to set a tariff for free previews on music services sites. The Board had held that the use of previews was not an infringement of copyright as this was "fair dealing" for the purpose of research and the Federal Court of Appeal upheld the Board's decision.

However, the SCC came to a different conclusion with respect to music streaming. The SCC held that online music services have a business model premised on the expectation of multiple sales of musical works. This necessarily implies that there will be a series of repeated transmissions of the same work to numerous recipients. The musical works are indiscriminately made available to anybody with internet access to the online music services website. Thus, consumers requesting the streams are not members of a narrow group such as family or friends, they are members of "the public". As a result, the SCC held that streaming files containing a musical work, from the online services website, to the customers computer, at the customer's request, constitutes communicating to public by telecommunication and the tariff was upheld.

The SCC set out the test to determine fair dealing and then considered what should count as research. The SCC held that an important goal of fair dealing is to allow users to use copyrighted works in a way that helps them make creative works. However, this is not the only activity that would qualify as research under the Copyright Act, as private study is also considered to be fair dealing and it has no intrinsic relationship to creativity. The SCC held that limiting research to creative purposes would also run contrary to the ordinary meaning of research.

The SCC held that from the perspective of the consumer, the previews are used for the purpose of researching which music to purchase. The SCC then considered whether that use was "fair". The SCC held that the Board properly concluded that previews satisfy the requirements of "fair dealing" and thus, the online service providers do not infringe copyright. Furthermore, the SCC held the Board properly balanced the purposes of the Copyright Act by encouraging the creation and dissemination of work while ensuring that creators are fairly rewarded. Thus, the appeal was unanimously dismissed.

Issue of Photocopies Made by Teacher for Use by Students Remitted to Board

Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright)

The issue to be determined by the SCC was stated to be "whether photocopies made by teachers to distribute to students as part of class instruction can qualify as fair dealing". The parties were in agreement that photocopies made for the teachers or at the request of a student qualified as fair dealing.

The Board held that these photocopies were made for the allowable purpose of research or private study, but did not constitute fair dealing and were therefore subject to a royalty. The SCC held that the decision by the Board was not made following the guidance set out in CCH Canadian Ltd. v. Law Society of Upper Canada ("CCH") and remitted the matter to the Board for reconsideration. In particular, the SCC indicated, in a 5-4 decision, concerns with the consideration by the Board of the "purpose of the dealing", "amount of the dealing" and "alternatives to the dealing" factors set out in CCH.

Pre-existing Sound Recordings Excluded from "Sound Recording"

Re:Sound v. Motion Picture Theatre Associations of Canada

The issue to be determined by the SCC was stated to be "whether the broadcasting of sound recordings incorporated into the soundtrack of a cinematographic work can be subject to a tariff under the Act or whether such broadcasts are excluded by virtue of the definition of 'sound recording' in s. 2." The SCC considered the legislative scheme, the principles of statutory interpretation, and comparative law and international rules.

The decision of the SCC was unanimous that the Board was correct that the word "soundtrack" includes pre-existing sound recordings. As a result, pre-existing sound recordings are excluded from the definition of "sound recording" when they accompany a cinematographic work.

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