Canada: Case Comment: Arbitration of Copyright Disputes in light of the Supreme Court of Canada’s decision in LES ÉDITIONS CHOUETTE (1987) INC., ET AL. V. DESPUTEAUX

Last Updated: May 11 2004
Article by Colm Brannigan

Recent Canadian case law clearly shows that courts in Canada are increasingly showing a tendency towards enforcement of arbitral agreements and limiting the scope of judicial review over arbitral awards. Although arbitration is often used in labour, construction and insurance matters, it has not been in copyright cases. There is no legislation in Canada specifically prohibiting arbitration in intellectual property matters, but some Canadian courts have referred to a public policy or interest doctrine, that the courts, not private parties behind closed doors, should resolve issues, which affect the interests of the public. The Supreme Court of Canada in Chouette seems to have rejected this argument in favour of allowing private alternative dispute resolution.

The facts of Chouette are basically that the parties formed a partnership, which resulted in the Caillou series of books for children. Between 1989 and 1995, a number of contracts were entered into including a 1993 licensing agreement. In 1996, there were difficulties in respect of the interpretation and application of the licence contract, and the plaintiff brought a motion to secure recognition of its reproduction rights. In response, a motion was brought to have the matter referred to an arbitrator. The Superior Court in Quebec, finding that the contract itself was not in issue, and no allegations regarding its validity raised, referred the matter to arbitration.

The arbitrator decided that his mandate included interpreting all the contracts and the rider. In the arbitrator's view, Caillou was a work of joint authorship. With respect to the licence and the rider, the arbitrator concluded that the plaintiff held the reproduction rights and that it alone was authorized to use Caillou in any form and on any medium, provided that a court agreed that the contracts were valid.

The Superior Court dismissed a motion for annulment of the arbitrator’s award based on the assertion that the arbitrator decided on an issue that was not before him. The Court of Appeal in Quebec reversed that judgment and set aside the award stating that the Copyright Act does not allow for arbitration and by deciding on the legal status of the parties towards Caillou, a work protected by the Copyright Act, the arbitrator exceeded his jurisdiction. The Court of Appeal also concluded that:

The right precisely to credit for paternity of a work, like the right to respect for one's name, gives a purely "moral" connotation to the dignity and honour of the creator of the work. From these standpoints, the question of the paternity of copyright is not a matter for arbitration.

On appeal to the Supreme Court of Canada allowed the appeal and restored the arbitrator’s decision. The Supreme Court held that the arbitrator acted in accordance with his terms of reference and made no error such as would permit annulment of the arbitration award. Furthermore, the Copyright Act does not prohibit an arbitrator from deciding issues pertaining to copyright. Since The Copyright Act protects the economic aspect of copyright, this is not part of the legal capacity referred to in the Civil Code.

Mr. Justice LeBel at paragraph 54 of the Supreme Court’s decision wrote that:

"Public order arises primarily when the validity of an arbitration award must be determined. The limits of that concept's role must be defined correctly, however. First, as we have seen, arbitrators are frequently required to consider questions and statutory provisions that relate to public order in order to resolve the dispute that is before them. Mere consideration of those matters does not mean that the decision may be annulled. ...the award as a whole be examined, to determine the nature of the result. The court must determine whether the decision itself, in its disposition of the case, violates statutory provisions or principles that are matters of public order... An error in interpreting a mandatory statutory provision would not provide a basis for annulling the award as a violation of public order, unless the outcome of the arbitration was in conflict with the relevant fundamental principles of public order. That approach ... corresponds to the approach taken in the law of a number of states where arbitration is governed by legal rules analogous to those now found in Quebec law. The courts in those countries have limited the consideration of substantive public order to reviewing the outcome of the award as it relates to public order...In applying a concept as flexible and changeable as public order, these fundamental principles must be adhered to in determining the validity of an arbitration award."

This important decision stands for the principles that:

  1. Parties can identify the disputes that they wish to have subject to arbitration.
  2. Issues set out within the arbitration agreement, and all issues closely connected with the agreement, are within the arbitrator's mandate.
  3. Of greatest potential impact for practitioners in this field:

  4. The Copyright Act does not prohibit arbitrators from ruling on questions of copyright.

This decision reaffirms the growing judicial acknowledgment of the important role of arbitrators in the resolution of copyright and other intellectual property matters. Since arbitrators can, by agreement of the parties, award remedies similar to those usually awarded by the courts, such as damages and, injunctions, usually in far more speedy fashion than the courts, practitioners should consider the addition of arbitration provisions in their agreements and contracts involving copyright matters.

Footnotes:

1. [2003] 1 S.C.R. 178. Available at http://www.lexum.umontreal.ca/csc-scc/en/pub/2003/vol1/html/2003scr1_0178.html

2. [2001] R.J.Q. 945

3. Ibid at paragraphs. 40 and 44.

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.

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