Canada: Recent Copyright Decisions

Last Updated: June 12 2006

Article by Pauline Wong and Lelia Costantini, ©2006, Blake, Cassels & Graydon LLP

This article was originally published in Blakes Bulletin on Intellectual Propery, May 2006

The Federal Court has recently confirmed or clarified several aspects of copyright law in cases that involve sports telecasts, encrypted signals and blank media.

First, in two decisions by Justice Hughes, the Federal Court emphasized the importance of proving a chain of title when making copyright claims. In 1395047 Ontario Inc. v. New Atlantico Café and Restaurante Inc. (New Atlantico) and Eurosport Event Management Ltd. v. 650621 B.C. Ltd. (Eurosport), both plaintiffs’ copyright infringement claims failed because they did not show they had properly acquired copyright in the materials. Second, in Columbia Pictures Industries, Inc. et al. v. Serge Gaudreault, the Court identified situations where violations of the Radiocommunications Act will not necessarily amount to copyright infringement. Finally, in Canadian Private Copying Collective (CPCC) v. Cano Tech Inc., the Court re-affirmed that the Canadian Private Copying Collective has the power to audit business records under the Copyright Act to ensure appropriate levies are paid.

1395047 Ontario Inc. v. New Atlantico Café and Restaurante Inc., and Eurosport Event Management Ltd. v. 650621 B.C. Ltd.

Background. In New Atlantico, the plaintiffs brought a motion for default judgment against the defendants who had failed to file a defence. The plaintiffs claimed they were the exclusive copyright and TV rights holders for broadcast in Canada for all Superliga (Portuguese Premiere Football League) soccer matches for the 2004/2005 and 2005/2006 seasons. They claimed that each Superliga match broadcast was a wholly original work, each telecast was a copyrightable work subject to the Copyright Act and that the plaintiff was the owner by assignment of such copyright for use in Canada. The plaintiffs claimed they purchased the copyright in each Superliga match broadcast from the Portuguese rights holder.

In Eurosport, the plaintiff brought a motion for default judgment against the defendants who had failed to defend the action. The plaintiff claimed that it was the exclusive distributor of commercial broadcasts in Canada for events such as the European Cup and other soccer matches in Europe. It claimed it received these rights from Setanta Sport, an Irish Company. Since both cases involved motions for default judgment, neither decision states what the defendants were alleged to have done to infringe copyright.

Federal Court Decisions. In both cases, the plaintiffs’ claim of copyright infringement ultimately failed. The Court concluded that although copyright subsisted in the works at issue, there was no evidence as to ownership of copyright before the Court. The respective licensors’ (being the Portuguese rights holder in New Atlantico and Setanta Sport in Eurosport) rights to the copyrighted material were unproven and, as a result, the Court concluded that the contract for the material merely purported to grant copyright to the plaintiffs. Since there was no proof as to what "rights", if any, the licensor had to the material there was no evidence that the plaintiffs had acquired those rights. The plaintiffs’ claim failed because they did not establish a proper chain of title for the copyrighted material at issue. As a result, the Court dismissed the motions in both cases.

Columbia Pictures Industries, Inc. et al. v. Serge Gaudreault

Background. Columbia Pictures Industries, Inc. and other rights holders (the Appellants) own the intellectual property rights in a number of films and sporting events which are transmitted by encrypted signals to viewers for a fee. Mr. Gaudreault was arrested and plead guilty to offences under the Radiocommunications Act involving the unauthorized decoding of these encrypted signals. The Appellants commenced an action for damages against him, claiming that Mr. Gaudreault sold and distributed decoders which were used to decode the encrypted television signals in breach of the Appellants’ copyright. In the course of this action, the Appellants brought a motion for summary judgment.

Federal Court Decision. In their motion for summary judgment, the Appellants attempted to rely on Mr. Gaudreault’s conviction under the Radiocommunications Act as proof that he had infringed their copyright. Mr. Gaudreault, however, claimed that he plead guilty to the offence solely for the purpose of avoiding the costs and inconvenience of a trial. Justice Hugessen concluded that although he did not necessarily find Mr. Gaudreault’s assertion to be true or credible, it was "evidence to the contrary" and there was no other evidence that Mr. Gaudreault committed the alleged acts. As a result the motion for summary judgment was dismissed.

Federal Court of Appeal. On appeal, the Federal Court of Appeal agreed with the lower court and dismissed the motion for summary judgment. The Court found that in this case, the admission of Mr. Gaudreault’s guilty plea did not disclose the offence to which he was convicted and that the Appellants could not rely on it as proof of illegal conduct.

The Appellants also alleged an interference with their authorized arrangements to reproduce and communicate their copyrighted works to the public by telecommunication. However, the Court found that the Appellants did not show how that interference amounted to infringement under the Copyright Act. The Court went on to state that it is the right to broadcast that is protected by the Copyright Act, not the right to receive a broadcast signal. The fact that the unauthorized decoding is prohibited by the Radiocommunications Act does not make it an act of infringement of copyright. As a result, the Court concluded that the unauthorized decoding of encrypted signals is, in itself, not infringement and dismissed the motion for summary judgment.

Canadian Private Copying Collective v. Cano Tech Inc.

Background. The Copyright Act sets out a system by which rights holders can receive remuneration through the imposition of a tariff or levy on manufacturers and importers of blank audio recording media sold in Canada. The rate of the levy is determined each year through the certification of a Private Copying Tariff (the Tariff) by the Copyright Board of Canada. The Canadian Private Copying Collective (CPCC) has been designated by the Copyright Board of Canada as the body to collect the levies for redistribution to the rights holders.

The defendant, Cano Tech, had a business primarily focused on the distribution of accessories for video and audio cassettes. It also sold blank recording media. Cano Tech failed to report its sales activities relating to blank recording media and to remit levies to CPCC for those sales. CPCC offered to settle the matter and waive the outstanding levies on the condition that an audit of Cano Tech’s files be completed to verify the accuracy of the information provided. A forensic accounting firm was hired to conduct the audit. During the audit it was discovered that Cano Tech was selling recordable compact discs, which Cano Tech had previously stated it did not carry. As a result, CPCC made an application seeking payment of the outstanding levies.

Federal Court Decision. Cano Tech argued that CPCC should not be able to recover the levies because the audit provisions of the Tariff are set out in the Copyright Act and are also a violation of section 8 of the Canadian Charter of Rights and Freedoms (the Charter).

Cano Tech argued that the Copyright Act does not grant any audit power. Instead, the power to conduct an audit is found in the Tariff. It further argued that, in seeking unfettered access to its records and inventory, the audit went beyond a verification of Cano Tech’s records and far exceeded the enabling portions of the Copyright Act. As a result, Cano Tech argued that the audit provisions in the Tariff should be struck out and all the evidence gathered by the audit, declared inadmissible.

The Court rejected this argument. It found that the Copyright Act conferred power on the Copyright Board of Canada to establish the Tariff and that the provision for verifying the information provided by manufacturers and importers by means of an audit is a term or condition related to the levies imposed. As well, the Court stated that there is an implied power to audit because, where the Copyright Board of Canada acts within its powers in fixing a levy, it is within the powers of the Board to prescribe the manner in which the amounts due are to be ascertained or verified.

Cano Tech also submitted that the audit of its records violated s.8 (the right to be secure from unreasonable search and seizure) of the Charter. It claimed that the audit essentially was a warrantless search and should be presumed unreasonable. The Court again disagreed with Cano Tech stating that in the case of a regulated business, the expectation of privacy is attenuated by the obligation to comply with the administrative inspections that are integral parts of regulatory regimes. A business’ expectation of privacy must adjust to accommodate the requirements of the regime. Furthermore, the Court found the conditions attached to the audit power in the Tariff to be reasonable and, therefore, was not a violation of s.8.

In one last attempt to claim that the audit provision was in violation of the Charter, Cano Tech argued that s.8 was violated because its confidential documents taken during the audit were filed with the Court and made publicly accessible. The Court rejected this argument stating that the information in question was not particularly sensitive and it would significantly impair CPCC’s ability to enforce its rights if it was unable to file documentation with the Court obtained in order to demonstrate that the company in question was in default of its obligations under the Tariff. As a result, the Court ordered Cano Tech to pay the outstanding levies.

IP Update

Bill C-29 Update. In 1989, the Canadian Patent Act was amended to include a "small entity" provision, which permitted applicants and patentees to pay fees at a reduced rate of 50% if they met the definition of a small entity (as defined in the Act).

In 2003, the Federal Court of Appeal, in the Dutch Industries Ltd. v. Canada (Commissioner of Patents) decision, held that if fees were incorrectly paid as a small entity, the fees would be treated as not fully submitted and, therefore, the subject application or patent could be found to be invalid for this reason.

As reported in Proposed Legislation Regarding Small Entity Fees, Blakes Bulletin on Intellectual Property, Special Edition, December 2004, the uncertainty resulting from the Dutch Industries case led the Canadian government to amend the Patent Act to allow for "top up" fees so that applicants could correct any defects in improperly-claimed small entity status. Bill C-29 added new section 78.6 to the Act, which allows for retroactive fee payment corrections.

Section 78.6 of the Patent Act went into effect on February 1, 2006 and provides a one-year period of time to take the necessary actions to "top up" any previously paid small entity fees.Please contact us should you have any questions or concerns regarding the above matter. For your convenience, we have established the following dedicated e-mail account to process inquiries relating to the Bill C-29 issue:

Supreme Court of Canada to Rehear Copyright Case

In an unusual move, the Supreme Court of Canada has decided to rehear a case involving the rights of freelance writers: Robertson v. Thomson Corporation. The case, discussed in Ontario Court of Appeal Examines Right of Freelance Authors, Blakes Bulletin on Information Technology, November 2004, involves a dispute between Canadian national newspaper The Globe and Mail and its freelancers over the right to use works in electronic form.

The class action was launched a decade ago when Robertson sued the newspaper on behalf of freelancers whose work was acquired for publication. The class seeks extra compensation for use of the articles in electronic form. The Court heard arguments in December 2005, but one judge who heard the case has since retired from the Court. Justice Rothstein, who has judicial experience in intellectual property law and joined the Court in March, can now participate in the decision.

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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