Canada: Supreme Court Reaffirms Technological Neutrality In Copyright Royalty Disputes

Description of technological neutrality may be at odds with prior case law

In Canadian Broadcasting Corporation v. SODRAC 2003 Inc. (SODRAC),1 the Supreme Court of Canada unanimously reaffirmed the principle of technological neutrality in copyright law. However, the justices disagreed among themselves on how the principle should be applied. The issue in this case arose when SODRAC, a collective society that collects reproduction royalties on behalf of French-language musicians, began seeking additional royalties for incidental copies of music made by the Canadian Broadcasting Corporation (CBC) in the process of broadcasting programs that contain music produced by SODRAC members.

The majority held that the principle of technological neutrality cannot override the express words of section 3(1)(d) of the Copyright Act,2 which gives the creator the sole right to make reproductions of the work.3 In a concurring judgment, Justice Abella disagreed with this technical reading of the Copyright Act, and would have decided that the broadcast-incidental copies do not engage the authors' reproduction rights.4

What You Need To Know

  • While technological neutrality remains a fundamental principle of copyright law, it cannot override express statutory provisions.
  • The Copyright Act requires that users of content compensate creators for incidental copies created in the process of broadcasting, even if those copies are involuntary or mandated. This includes the "as aired" copies which the Canadian Radio-Television and Telecommunications Commission (CRTC) requires broadcasters to create and retain.
  • Copyright Board royalties must be set according to the "value derived" from a particular technology. Where different users of a copyrighted work derive the same value using different technologies, the copyright licensing costs to the users should be the same. However, where the user of one technology derives a greater value from a copyrighted work than a user of another technology, the copyright holder is entitled to a larger royalty from the user who obtains a greater value.

Background

SODRAC is a collective society that licenses the reproduction of its members' music. The CBC (or freelance producers who provide programs to the CBC) licenses the reproduction of music from SODRAC and pays licence fees for the master copy of any program that contains the music. The CBC also pays royalties for broadcasting to SOCAN, another collective society. SODRAC has no claim to royalties from broadcasting.

In 1998, SODRAC began to differentiate between the master copy and incidental copies made by broadcasters for other purposes, such as copies created in order to comply with various broadcasting regulations. At the time, SODRAC gave a free licence to broadcasters who created incidental copies. In 2006, SODRAC began to ask broadcasters to pay for copies incidental to broadcasting. When SODRAC and the CBC were unable to agree on a renewal of the CBC's licence, the matter was referred to the Copyright Board. The decision of the Copyright Board was appealed to the Federal Court of Appeal and eventually reached the Supreme Court of Canada.

The Supreme Court considered two questions. The first was whether incidental copies made in the process of broadcasting engage the copyright holder's reproduction rights. If they do, the Court had to determine the principles that the Board should apply in fixing royalties for these incidental copies.

On the first question, the CBC argued that a balancing of the interests of copyright holders and copyright users, including applying the principle of technological neutrality, dictates a finding that incidental copies do not trigger reproduction rights. The CBC also argued that imposing costs for using a digital broadcasting system that creates incidental copies amounts to inflicting a gratuitous cost for the use of a more efficient technology.5

On the second question, the CBC argued that if a licence is needed to make broadcast-incidental copies, it should be implied from the licence covering the master copy, and not be the subject of a further royalty.

The Supreme Court's Decision

The majority, led by Justice Rothstein, determined that copies that are incidental to broadcasting engage the mechanical reproduction right held solely by the copyright holder. The majority based its decision on a literal reading of section 3(1)(d) of the Copyright Act, which provides that the copyright holder has the sole right to 'make any sound recording, cinematograph film or other contrivance by means of which the work may be mechanically reproduced or performed." 6 Recourse to the principles of copyright law, such as balancing the interests of copyright holders with the interests of users, is not required because the language of the statute is clear.7 The majority also decided that it would be contrary to the clear intention of Parliament to apply the principle of technological neutrality to find that broadcast-incidental copies do not trigger reproduction rights.8

The majority then considered how royalties for incidental copies should be calculated. After defining and reaffirming the principle of technological neutrality—that the Copyright Act should not be interpreted or applied to favour or discriminate against any particular form of technology—the majority concluded that this principle applies to valuation of a reproduction licence. The majority found that the Copyright Board's decision was unreasonable in failing to consider the principle in setting the licence fees.

According to the majority, "technological neutrality" means considering the benefit obtained by the user in the operation of a particular technology. Where two users derive the same value from a protected work using different technologies, the licence costs to the two users should be the same. However, where one user using one technology derives a higher value from the work than another user who uses a different technology, the copyright holder is entitled to a higher royalty from the user who derives more value. In this case, it was found that the CBC derives greater value from the use of broadcast‑incidental copies in its digital technology than it did under its prior analog technology. This was a factor in favour of SODRAC receiving higher royalties.9

The majority ultimately allowed the appeal and remitted the matter to the Copyright Board to consider the principle of technological neutrality and engage in a balancing to determine the appropriate royalty.

Justices Abella and Karakatsanis wrote separate judgments. Justice Abella focused her reasons on copyright issues. While she agreed with the majority in allowing the appeal, she would have done so for very different reasons and with a different outcome. She would have found that copies that are incidental to broadcasting do not engage reproduction rights and that the CBC does not have to pay any royalty. Justice Abella also disagreed with some of the principles of valuation set out by the majority. Justice Karakatsanis, who agreed with Justice Abella on the issues of copyright law, focused her reasons on administrative law principles.

Analysis

This case represents a significant evolution of the principle of technological neutrality. The requirement to analyze the "value" derived by a user from its technology in setting copyright royalties is a new development that arguably shifts the balance in favour of copyright holders.

Furthermore, past decisions of the Supreme Court, including ESA v. SOCAN 10 and SOCAN v. CAIP,11 focused on the central activity performed by the user of a protected work. In ESA v. SOCAN, users were permitted to download copies of gaming software containing copyrighted works via the Internet, and SOCAN argued that a broadcasting licence was required in addition to a reproduction licence. The Supreme Court held that the central activity was the creation of a durable copy by the user, and a reproduction licence was sufficient.12

Similarly, in SOCAN v. CAIP, the Supreme Court held that Internet service providers' central activity was the provision of content-neutral Internet services, so that they are not liable in copyright for making temporary incidental copies of protected works on their servers.13 In both cases, the Supreme Court considered the true nature of the activity rather than the technological method of accomplishing it.

The majority's decision in SODRAC appears to be a bit of a step backward in the cause of a truly technologically neutral approach to copyright law as it appears to mandate a consideration of the value derived from the use of different technologies, rather than focusing on the central activity performed by the user. This will impose further costs on the users of copyrighted works, to the benefit of creators. While the "balance" principle may keep these costs modest, that will ultimately be up to the Copyright Board, whose tariff quantification decisions (unlike its interpretations of the Copyright Act) are entitled to considerable deference.

Footnotes

1. Canadian Broadcasting Corporation v. SODRAC 2003 Inc., 2015 SCC 57 (SODRAC).

2. Copyright Act, R.S.C., 1985, c. C-42, s. 3(1)(d).

3. SODRAC at para. 49-51.

4. SODRAC at paras. 168-170.

5. SODRAC, para. 63.

6. Copyright Act, R.S.C., 1985, c. C-42, s. 3(1)(d).

7. SODRAC at para. 49.

8. SODRAC at para. 52.

9. SODRAC at para. 70-71.

10. Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34 ("ESA v. SOCAN").

11. Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, 2004 SCC 45 ("SOCAN v. CAIP").

12. ESA v. SOCAN at paras. 40-43.

13. SOCAN v. CAIP at para. 115.

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
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
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