Canada: YouTube, Facebook, Netflix Liable To Pay For Music In Canada Rules Copyright Board

On Friday, the Copyright Board released a decision and certified two SOCAN tariffs, Tariffs 22.D.1 (Internet – Online Audiovisual Services) and 22.D.2 (Internet – User-Generated Content). The years covered by the tariffs are 2007-2013.

The tariffs were certified based on agreements reached between SOCAN and objectors. Between the objectors and other entities which filed submissions, the heavyweights affected by the tariffs participated including Apple, Yahoo!, YouTube,  Netflix, Facebook, Cineplex, the members of the Canadian Association of Broadcasters (CAB), and the Canadian ISPS Rogers, Bell, and Shaw.

The decision of the Board is important. Its significance extends to both the issues its reasons expressly addressed as well as to those issues which its reasons are implicitly based on. Some of the important findings are summarized below.

Principle of technological neutrality

Netflix argued that it was not liable to pay royalties on free trials of its popular video service. It contended, firstly, that the principle of technological neutrality should be applied to the construction of the communication to the public right to make it inapplicable to such uses. It relied on the decision of the Supreme Court in the ESA case. That reliance was held by the Board to be inapposite.

In Canadian Broadcasting Corporation v. Sodrac 2003 Inc., 2014 FCA 84 the Federal Court of Appeal suggested that Supreme Court's majority reasons in ESA incorporate at least three views of technological neutrality:

a) Technological neutrality is media neutrality. Media neutrality is a statutory prescription arising from the opening words of section 3 of the Act, which protects the production or reproduction of works "in any material form whatever". Media neutrality was recognized by the Supreme Court in Robertson v. Thomson Corp., 2006 SCC 43 (CanLII), 2006 SCC 43, [2006] 2 S.C.R. 363 (Robertson), a case involving copyright in content originally published in a newspaper and then republished online.

b) Technological neutrality is a principle of statutory interpretation according to which, absent evidence of a contrary Parliamentary intention, the Act is to be interpreted so as to avoid imposing royalties according to the method of delivery of a protected work.

c) Technological neutrality is determined by functional equivalence so that if two technologically distinct operations produce the same result (delivering a copy of a work to the consumer), the incidence of royalties should be the same in both cases.

On the facts before the Board, neither possible interpretation was applicable. According to the Board:

The principle of technological neutrality is that, since only the reproduction right is triggered when a CD is sold in a store, only the reproduction right should be triggered when a digital album is sold online. The CD is an alternative technology to the digital download. There is no alternative-technology equivalent to a Netflix free trial. Video stores never offered a free month's membership with the right to rent as many videos as the customer wanted for no additional charge. Thus, there is no issue with technological neutrality.

Fair dealing

Netflix also wanted the Board to find that it's free trials are fair dealing in the same way that the Board and the Supreme Court in SOCAN v Bell Canada, [2012] 2 SCR 326 found that free previews of musical works offered by a music download service like iTunes can be a fair dealing. The Board rejected the contention distinguishing between free previews of musical works and free trials of an audiovisual service. It also rejected the argument for other reasons related to the certification process and the evidence before it.

First, the analogy between free previews and free trials is weak. In a free preview, the customer can hear a portion of a musical work in a degraded format. In a free trial, the customer can hear complete musical works, to the extent that such works are fixed in the audiovisual work being watched.

Second, it is not altogether clear that Netflix is the only provider that offers free trials. When the Board was examining the free previews offered by iTunes, it was possible to argue that iTunes was the dominant provider of permanent downloads. Thus, in examining the practices of iTunes, the Board was essentially examining the practices of the permanent-download industry. However, in the case of Netflix, it is not clear that they dominate the market for videos. Without the argument of market dominance, an analysis of Netflix's policy of free trials would necessarily be incomplete with respect to the overall video industry.

Third, and equally importantly, we do not have the evidentiary base with which to make that decision. While we could delay this decision for several more months during which time we would be collecting evidence from the parties on this issue, the fact that Netflix declined to participate in the process for many months is sufficient reason for us to decline to do so. If Netflix now wants to argue that it does not owe anything for its free trials, the appropriate forum in which to do so is not the Board.

Liability of service providers for communicating works

The Board only has authority to certify a tariff if there is a legal basis to do so. By certifying the tariffs the Board must have been of the opinion that service providers such as YouTube and Facebook which each provide online audiovisual and user generate content services communicate musical works to the public in the course of providing such services. In a prior decision in which the Board declined to certify tariffs for these services because of lack of evidence, it found that tariffs for them were justified and suggested that liability was joint and several between the service providers and users of the services. Since the terms covered by the tariffs include periods after the Copyright Modernization Act was proclaimed into force in November 2012, it must also be assumed that the Board was of the opinion that none of the amendments to the Copyright Act diminished the liability of service providers to SOCAN for communicating musical works to the public.

Liability of service providers for music downloads

In the ESA case, the Supreme Court ruled that the communication to the public right, as it then was, did not include the transmission of copies of music downloads to users as part of a music download service. This prompted the Board in its recent decision to observe that this "meant that SOCAN no longer had the right to collect royalties for permanent downloads and limited downloads". When the Copyright Act was amended by the Copyright Modernization Act, the communication to the public right for works was deemed to include the new right of making works available to the public. This raised the question, now before the Board in a separate proceeding, as to whether after November 2012 the communication to the public right includes the transmission or other making available of downloads of musical works to the public.

Despite all of this, the Board certified the online audiovisual service tariff defining the term "online audiovisual service" "as a service that delivers streams or downloads of audiovisual works to end users, other than a service that offers only streams in which the file is selected by the service and can only be listened to at a time chosen by the service and for which no advance play list is published". Since the Board's tariffs affect all users who engage in the activities covered by the tariff, it may affect service providers that exclusively offer only downloads of music audiovisual files.

The Board did not explain the legal basis for certifying a tariff that included royalties for a download audiovisual service prior to the Copyright Modernization Act coming into force. Was there something about these services that distinguish them from the download services considered by the Supreme Court in the ESA case? The Board doesn't say. The Board had a further legal basis for certifying such a tariff after the communication right was amended to include the right of making available (November 2012 and 2013). It rests on the legal premise that the amendments to the Act had the effect of overruling the decision of the Supreme Court in the ESA case.

First published on barrysookman.com.

To view the original article please click here.

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 Mondaq.com.

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

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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