Canada: ISP Liability: Canada’s Proposed Copyright Reforms

Published in MLRC MediaLawLetter, May 2004.

By Andrew Bernstein and Tyson Dyck

Technology has always driven copyright reform. Each new medium—from audio recordings to television—has offered a new way to capture and disseminate ideas. Copyright law tries to balance this dissemination with the rights of the copyright holders.¹ Now faced with digital technology, copyright law must repeat this balancing act: excessive regulation hampers the potential of digital technology to be used to communicate ideas quickly; too little regulation, however, strips copyright owners of their moral control over and economic stake in their works. Many jurisdictions, particularly the United States and Canada, have balanced or are beginning to balance this conflict in similar ways. Indeed, proposed Canadian initiatives are likely to produce a regime of ISP liability in copyright similar to that in the United States.

U.S. copyright law regarding ISP liability has largely been codified in the Digital Millennium Copyright Act (the "DMCA")² and the Communications Decency Act (the "CDA").³ The CDA’s objectives are to prevent obscenity from being transmitted over the Internet and to promote the development of the Internet.⁴ To achieve these objectives, the CDA states that providers of interactive computer services, including ISPs, will not be treated as the publishers or speakers of information provided by a third party.⁵ This "Good Samaritan" clause was originally intended to encourage ISPs to monitor and edit content on their servers without fearing liability under defamation law as publishers or editors. However, this provision has been broadly interpreted and now protects all ISPs regardless of whether they edit or monitor their online content.⁶ The case of Gucci America v. Hall & Associates⁷ suggests that this limitation will only immunize ISPs against claims of online defamation. Still, the CDA treats ISPs as conduits, not sources, of objectionable information.

The DMCA follows this thinking with respect to copyright infringement. Under this Act, if an ISP creates a policy of terminating the accounts of repeat copyright infringers, it will not be liable for its own actions or for those of its infringing customers provided that its actions fall into one of four safe harbors. These harbors protect the following activities: acting as a mere conduit for infringing information;⁸ caching;⁹ innocently storing infringing information;¹⁰ and supplying information location tools (i.e., links) that might infringe copyright.¹¹ On the other hand, ISPs are responsible, on threat of civil liability, for administering a detailed notice and take-down system.¹² If an ISP becomes aware of an infringing activity, either through notice from the copyright holder or through other circumstances, it must take action.¹³ It must remove the allegedly infringing material, erring on the side of protecting the copyright holder; it need not assess the fair use of the material.¹⁴ However, to avoid a system of prior restraint of speech, the DMCA provides for "counter-notice," which permits the person posting the information to make a statement that the material does not infringe, and thereby permits the ISP to maintain the posted material online without threat of liability. This system, it is hoped, balances the rights of copyright holders with the practical difficulties of having ISPs monitor massive amounts of content.

Canada has no similar legislation applying to either online defamation or breach of online copyright. At least one case suggests that ISPs should be careful in exercising such control over the defamatory content so as not to ostensibly authorize it.¹⁵ The leading case on ISP liability in the copyright context is Tariff 22,¹⁶ which dealt predominantly with whether ISPs can be liable for communicating copyright-infringing works to the public (by letting them "flow" through their networks), copying the works (by caching them) or authorizing infringement and indirectly infringing copyright (by permitting users to use the Internet to infringe). The Federal Court of Appeal found that the person who posts the work, and not the ISP, communicates it to the public. The Court also found that to authorize an infringement, the ISP must "have enough control over the infringer to prevent the infringement and behave in a way that would lead a reasonable person to conclude that [the ISP] had approved or countenanced infringement."¹⁷ According to the Court, such a circumstance would be rare; it would require the ISP not only to approve the use of its equipment and transmission service for the infringing activity but also to purport to grant customers permission to infringe copyright.¹⁸ On the other hand, the Court found that ISP caching constituted copying, a finding that, we believe, may not find much support in the Supreme Court of Canada when it releases its reasons on this appeal.

The potential liability for indirect infringement remains less clear. The Canadian court in Apple Computer, Inc. v. Mackintosh Computer Ltd. suggested that once someone has actual or imputed knowledge that a particular work may be infringing copyright, he or she is obligated to ensure that it does not continue to do so.¹⁹ This thinking parallels the notice and take-down provisions in the DMCA; however, its application in Canadian law is vague. The issue has not been considered in the context of ISP liability and leaves potential for liability.

Faced with these uncertainties, the Canadian federal government has begun reforming the Copyright Act to resolve these issues. On June 22, 2001, it released its Consultation Paper on Digital Copyright Issues (the "Consultation Paper").²⁰ In its section on the liability of network intermediaries, the Consultation Paper acknowledges that Canadian copyright law does not specifically deal with the role of ISPs. It therefore recommends a system similar to that set out in the DMCA—a complaints-driven notice and take-down procedure that recognizes both the interests of copyright holders and the infeasibility of requiring ISPs to monitor all their online content.²¹ This proposed procedure would have the following features: an ISP would not be liable for the copyright infringements of third parties who use its facilities to disseminate copyrighted information to the public. Nor would an ISP be liable for reproducing copyrighted material for caching or website hosting. An ISP could, however, be liable if it failed to block access to the infringing material after receiving proper notice from the copyright holder.²² Finally, an ISP that acted in good faith to comply with this notice and take-down procedure would not be liable for the economic harm suffered by the copyright owner or by the infringer. Like that in the DMCA, this procedure would recognize ISPs’ role as intermediaries but encourage them to fill this role responsibly.

The Canadian debate on copyright reform continues today. ISPs have submitted their opinions to the House Standing Committee on Canadian Heritage. They agree with limiting ISP liability but propose a notice and notice, rather than a notice and take-down, process.²³ The Canadian Association of Internet Providers (CAIP), a collection of ISPs that provide about 80% of Internet connections in Canada, states that its ISP members will not knowingly host illegal content. If a copyright holder gives an ISP clear notice of an infringement, the ISP will then relay this notice to its customer and advise the Canadian Recording Industry Association (CRIA) that it has done so. ISPs will take down the infringing material only upon a court order if the notice and notice does not result in voluntarily removal.²⁴

The federal government is considering these proposals, and new legislation is likely to be introduced during 2005.²⁵ In the federal government’s March 24, 2004, Status Report on Copyright Reform,²⁶ it considers two directions for this reform: first, to exempt ISPs from liability when they act as intermediaries, but to leave the possibility of civil sanctions if they do not help remove infringing material, perhaps using a notice and notice procedure; and second, to subject ISPs to liability for the infringing material on their facilities, which they could escape by meeting certain conditions, such as responding to the requests of copyright holders to remove infringing material or to collect royalties.²⁷ In practice, these approaches might function similarly; in both cases, ISPs have some duty to respond to the requests of copyright holders. The difference lies in the initial presumption of liability. Whether ISPs will be prima facie liable for hosting infringing content will most likely depend on the Supreme Court’s decision in Tariff 22.²⁸ The federal government will also consider the systems established in other jurisdictions, including the United States.²⁹

Whatever direction it chooses, the federal government is likely to follow the Federal Court of Appeal’s analytical framework in Tariff 22, and grant ISPs some type of protection from liability. The outstanding issues concern the process by which ISPs will enjoy this protection. The Canadian federal government has reacted more slowly to the issue of ISP liability than has the U.S. government, but in doing so, it seems to have gained from the American experience. It will undoubtedly incorporate that experience into new Canadian copyright legislation that will deal with the rights of copyright holders in a new digital environment.

Andrew Bernstein is a litigation lawyer with substantial experience in intellectual property matters. As a member of Torys’ Intellectual Property and Technology Groups, a significant portion of his practice involves patents, copyright, trademarks, domain names and trade secrets issues.

Tyson Dyck is an articling student at Torys LLP.

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