Copyright - 2017 Year in Review

April 4, 2018

By Jill Jarvis-Tonus, Catherine Lovrics, Max Rothschild, and Tamara Céline Winegust

In this article, we summarize our top picks of copyright decisions from the past year, including decisions that address:

  • fair dealing, and, in particular, the user right to parody, the ‘fairness’ of bright line thresholds in fair dealing guidelines of educational institutions, and ‘tributes’
  • what online services qualify for the information location tool exemption
  • protection for technological protection measures, and remedies for circumvention
  • independent creation
  • copyright in data and databases
  • statutory damages for copyright infringement and circumvention of technological protection measures
  • preliminary injunctions in copyright cases, and
  • decisions relating to the Copyright Board of Canada, and submissions on reform to the Board's powers and procedures.

Fair Dealing

Fair dealing is an integral part of the Copyright Act, and allows users to engage in some activities that might otherwise amount to copyright infringement. Fair dealing is understood as a user right in Canada, rather than simply a defence. 

There were several important developments in the law of fair dealing in 2017. The long-awaited decision looking at York University’s Fair Dealing Guidelines calls into question the ‘fairness’ of bright line thresholds in fair dealing guidelines for educational institutions (e.g. 10% or less of a work). Additionally, the first Canadian case to interpret fair dealing for parody indicates that this user right may be quite narrow. Below we discuss these and a few other fair dealing decisions of note. 

It is helpful to keep in mind that Canadian courts take a two-step approach to determine fair dealing. First, the dealing must be for an allowable purpose. Historically, these purposes were research, private, news reporting, review and criticism, and in 2012 this list was expanded to include education, parody and satire. Second, the dealing must be ‘fair’ in the surrounding circumstances. Courts will consider ‘fairness’ factors, including the purpose, character and amount of the dealing, the nature of the underlying work, the effect of the dealing on the underlying work, and alternatives to the dealing.

Fair Dealing Guidelines

In Canadian Copyright Licensing Agency v. York University (2017 FC 669), York University pointed to its Fair Dealing Guidelines to argue that staff who followed the Guidelines were fairly dealing when making copies of copyright protected works. The Guidelines set out that “short excerpts” could be copied, and defined such excerpts as being no more than the greater of either (1) 10% or less of a work; or (2) certain other set thresholds (e.g. one chapter from a book, a single article from a periodical, etc.). The Guidelines also included a caveat that no more of the work should be taken than required to achieve the fair dealing purpose. The Association of Universities and Colleges of Canada (“AUCC”) had drafted Fair Dealing Guidelines upon which York and other educational institutions based their Guidelines

Even though the dealings were for education, research or private study purposes, they were found not to be ‘fair’. The Court considered the Guidelines in light of the various fairness factors, and its decision turned on the amount of the dealing. The Court found the fixed thresholds in York’s Guidelines arbitrary and not soundly based in principle, essentially because the University could not explain why such thresholds were set or why they were “presumptively fair.” The University and the AUCC’s failure to justify the thresholds was seen by the Court to seriously undermine the overall fairness of the Guidelines. The Court noted that under the Guidelines different amounts of the same work could be copied depending on the source. As an example, the Court pointed to a Canadian children’s story, The Hockey Sweater, which it found “could be copied freely if it appeared in an anthology, but would [be limited] if copied on its own.” In coming to this conclusion, the Court did not appear to have given weight to the caveat and resulting discretion to staff.

The Court also considered the aggregate volume of copying by York, as well as by all post-secondary institutions, that could be allowed if the Guidelines or similar policies were widely adopted. This focus on the aggregate amount of copying, rather than on the individual use, is curious in view of the Supreme Court of Canada’s position in Society of Composers, Authors and Music Publishers of Canada v. Bell Canada (2012 SCC 36) that “aggregate” assessments are properly considered as relevant to the “character”, not the “amount”, of the dealing. In SOCAN, the SCC had cautioned against focusing on the “aggregate” to assess the “amount of the dealing” since this approach could run the risk of disproportionate findings of unfairness. The Court in York may have balanced its divergence from SOCAN by recognizing that while the copying in York occurred on an institutional scale, such institutional copying was not “inherently less fair” as compared to situational or spontaneous copying.

York has appealed to the Federal Court of Appeal. This case will be closely watched by educational institutions, as well as all copyright users, to see whether there may be judicial guidance on whether it is possible to set presumptively fair threshold amounts for fair dealing.

Another case in this area to watch will be Société québécoise de gestion collective des droits de reproduction (Copibec) c. Université Laval, which saw two major decisions in 2017. First, the Quebec Court of Appeal certified a proposed class action against the University, overturning a lower court’s decision to deny certification (2017 QCCS 199). Subsequently, the Quebec Superior Court denied Laval’s request for a stay of the proceedings pending the outcome of the appeal in the York University case discussed above (2017 QCCS 5417). Laval had pled that its copying policies were essentially the same as York’s, and that the Federal Court of Appeal’s decision in York would have a direct impact on the proceedings. The Quebec Superior Court disagreed, noting that Justice Phelan’s decision in York grounded its assessment of fairness in the specific facts of the case, and, without proof from Laval, it could not be taken as a given that Laval’s and York’s respective guidelines were the same. As a result, the interests of justice required that the matter proceed concurrently with the York appeal. It will be interesting to see if there will be a split in the law as a result of the Laval and York cases proceedings in parallel.

Parody

2017 also saw the first decision to consider fair dealing for “parody”, namely United Airlines, Inc. v. Jeremy Cooperstock (2017 FC 616). The decision suggests that fair dealing for parody may be quite limited, and that this user right falls short of enabling consumer groups to criticize companies and brands using those businesses’ intellectual property. Generally, if followed, the decision suggests that parodies that are too unflattering, critical or disparaging are unlikely to be ‘fair’. The decision has been celebrated by brand owners as striking the right balance between permitting consumers to voice criticisms and protecting IP, by drawing a line and making it an infringement to use copyright protected assets, including branding, to deliver a disparaging message. On the other hand, the decision has been criticized by others that suggest it puts consumer and other advocacy groups on unfair footing. 

Since 1997, the defendant individual had operated a consumer criticism website at www.untied.com, providing information and complaints about United Airlines. In recent years, the defendant had added a logo resembling that of United Airlines, begun tracking with official website updates by United, and had generally updated the complaint website to conform with the appearance of the United website. Before initiating legal proceedings, United had demanded that the defendant make changes to the impugned website and add a disclaimer to state that it did not belong to United Airlines.

The Federal Court found the website qualified for the allowable purpose of “parody”. It interpreted “parody” as having two basic elements: (1) the evocation of an existing work while exhibiting notable differences and (2) the expression of mockery or humour. The Court declined to introduce a requirement that parody must comment, at least in part, on the underlying work, which is part of the US fair use test for parody. Both parody and satire are allowable fair dealing purposes in Canada. By contrast, in the US satire is not allowable, and the difference between parody and satire turns largely on whether the new work comments on the underlying work or something completely unrelated. It will be interesting to see how Canadian courts distinguish between satire and parody. The United Airlines decision suggests that a requirement to comment on the underlying works is not the key difference at law in Canada. 

Although the defendant’s “Untied” website and logo parodied the United Airlines website and logo, the Court found the dealings were not ‘fair’. When assessing the fairness factors, the Court reached its decision primarily because the dealing was unflattering. As a result, the user right may be limited to humorous parody that is not too critical or mocking. 

The decision also turned significantly on the degree to which the defendant’s website was confusing with United’s, effectively importing the trademark aspects of the decision into certain portions of the fairness analysis. This aspect of the United decision may ultimately be problematic since “confusion” is not a proper gauge of copyright infringement.

Reading the decision in United with the Federal Court’s decision in Cie générale des établissements Michelin-Michelin & Cie v. CAW – Canada ([1996] F.C.J. No. 1685), consumer groups, unions or other activist organizations may not have a ‘user right’ to disparage or criticize a company by using the company’s copyright-protected works (such as logos). Michelin involved a workers union that used trademark and copyright protected materials owned by the Michelin tire manufacturer to criticize that company’s labour practices. The union claimed it fair dealing for criticism, and claimed ‘parody’ was a form of criticism. The Federal Court in Michelin found the use did not qualify as ‘criticism’ and, even if the dealing was for an allowable purpose, it was not ‘fair’ because it did not treat the copyright in a fair manner, including that it held the work up to ridicule. Michelin was decided before fair dealing for parody was introduced, and also before the ‘fairness’ factors were expounded upon by the Supreme Court of Canada in CCH Canadian Ltd v Law Society of Upper Canada (2004 SCC 13). It will be interesting to see whether the Federal Court’s approach in Michelin will be revisited in view of the United decision.

United may be a case to watch in 2018 as it is currently before the Federal Court of Appeal.

Tribute, not an allowable purpose

The Quebec decision of Labelle c. Brilliant (2017 QCCQ 12285) also serves as a reminder that fair dealing in Canada is limited to the allowable purposes of research, private study, education, parody or satire, criticism, review and news reporting. In this matter before the Quebec Small Claims Court, the defendant singer-songwriter, Mr. Brillant, had released a track titled “Chérie ma pitoune” as a tribute to an old song they recalled hearing in their childhood. The issue was that the plaintiff songwriter, Mr. Labelle, who had composed the song the defendant recalled, claimed the new track was essentially the same as the original song from the 1990s. The Court found the similarity between the two works striking, and found infringement. The defendant’s claim of fair dealing was denied, in part, because the defendant did not prove “paying tribute” to the original song fit within any of the claimed fair dealing purposes. 

Unfair commercial reproduction of the essence of a work

The Quebec Superior Court also weighed in on fair dealing with the decision in Cedrom-SNI inc. c. Dose Pro inc. (2017 QCCS 3383), concerning Dose, a media monitoring aggregator service that reproduced the headlines and first paragraphs of articles from three Quebec newspapers. Dose operated both an ad-funded free service and a premium service without ads. The three newspapers and Cedrom (an authorized aggregator) sought an interlocutory injunction, alleging Dose infringed the newspapers’ copyrights in articles. The Court held that the headline and first paragraph were an important, substantial part of each article. They provide a hook for the reader, and distill the essence of the article. Dose was not fairly dealing with these elements for a number of reasons: Dose’s purpose was clearly commercial; evidence showed that Dose’s dealing decreased readership of the newspapers, and the effect of a drop in readership was counter to the nature of the works since newspaper articles are intended to be widely disseminated. Further, the multiple copies being made also weighed against fairness. Ultimately Dose was unable to justify its use of the plaintiffs’ copyright protected works, and the injunction was granted.

Independent Creation

In Stork Market Inc v. 1736735 Ontario Inc (2017 FC 779), the Federal Court dismissed the plaintiff’s claim for copyright infringement, while allowing related trademark infringement claims. Both the plaintiff and the defendant ran businesses renting out and installing lawn signs to commemorate special occasions. In this case, the issue pertained to signs announcing the birth of a child. Both parties rented out large signs that featured a stork with its arms raised above its head to hold up a banner or flag stating the gender of the newborn child, and included an image of a child. The plaintiff had commissioned its designs in 2007 and registered trademarks in the images in 2009, and then in 2012 (shortly after the commencement of the lawsuit) the plaintiff had entered into a written agreement with the artist (a friend of the plaintiff) that assigned all copyright in the images and waived any moral rights. By contrast, the defendant had begun using its stork-images in 2010, and continued to do so after receiving a cease-and-desist from the plaintiff in 2011.

The Court noted prior case law finding that “evidence of independent creation or use of a common source will serve to establish non-infringement.” The defendant had shown that its images were designed with a particular objective in mind that differed from that of the plaintiff’s images. Specifically, the defendant had designed its image to show a fully-clothed baby whose clothes could be customized (e.g. to be wearing a tiara or a baseball cap, at the client’s election), unlike the swaddled baby shown in all of the plaintiff’s signs. This resulted in somewhat different design choices than those demonstrated in the plaintiff’s images. Consequently, the Court did not find the similarities between the parties’ images to be so substantial as to reject the defendant’s evidence of independent creation, or to support a finding of copyright infringement.

Information location tools: Search engines vs. aggregators

The Ontario Superior Court’s decision in Trader v. CarGurus (2017 ONSC 1841) is the first Canadian case to interpret the ‘information location tools’ exemption under section 41.27 of the Act. The decision suggests that aggregators may be less likely to qualify as information location tools, as compared to, for example, search engines that link to information and content available through the Internet. 

CarGurus operates a search engine for the purchase and sale of new and used vehicles. As part of its search engine, CarGurus at one time indexed data from other websites (also known as “scraping” or “crawling”), and obtained data from other sources. CarGurus initially operated in the United States and then entered the Canadian market in 2015. CarGurus implemented practices similar to those used for its U.S. website. The plaintiff in this matter took issue with CarGurus’ indexing practices.

This decision suggests that linking to the original location of information may be a key element to qualify as an information location tool. The defendant CarGurus claimed that its website was an “information location tool” and its activities benefited from the exception for copyright infringement liability for “information location tools” set out in section 41.27 of the Copyright Act. The Court considered (a) the requirements for the exemption under section 41.27; (b) the background document to the Copyright Modernization Act, and (c) the intention of Parliament for these types of protections to apply where the internet service provider of search engine acts “strictly as [an] intermediary in communication, caching, and hosting activities.” The Court found the crux of the definition of “information location tool” is the locating of information – i.e. a tool that “makes it possible to locate information that is available through the Internet.” While CarGurus may have located information about a vehicle and provided it to the user through the CarGurus website, it did not enable the user to find this information where it was located on the Internet (i.e. the original dealer’s webpage for that vehicle listing). Since CarGurus’ model resulted in it acting as a liaison between the user and the original dealer, the Court found it was not strictly an “intermediary”. Based on this decision, tools that enable users to navigate and find information where it is located on the Internet are more likely to qualify as information location tools, while services that gather information from the Internet and make it available on their own website alone may not. It is worth noting that copyright owners are not entitled to claim any remedy other than an injunction against a service that avails itself of the information location tool exemption (provided certain conditions are met).

Copyright in data & databases

The past year also brought important decisions for copyright protection for databases as compilations, as well as in data itself.

In Geophysical Service Incorporated v EnCana Corporation (2017 ABCA 125) the Alberta Court of Appeal upheld the Alberta Court of Queen’s Bench’s earlier decision (2016 ABQB 230) that copyright subsists in seismic data, as well as in the compilation of such data. Although specific to the facts of the case, the finding of copyright in both raw and processed data is significant, since copyright is generally considered to protect expressions and compilations of data, but not the data itself. In the age of big data, this decision is noteworthy. 

Geophysical Service Incorporated (GSI) conducted offshore seismic surveys to be licensed to oil and gas companies, and which were provided to a number of energy boards in accordance with legislative requirements. GSI took issue with the energy boards making copies of the surveys publicly available after a confidentiality period (dictated by statute), and brought action against the boards for copyright infringement. A key issue was whether GSI’s seismic data, in either its raw or processed forms, constituted a protectable “work” under the Act. GSI argued that its raw data was original because it was created through the exercise of human skill and judgment with the aid of computers. Moreover, GSI also claimed copyright in “seismic sections,” graphical representations of processed data that could be displayed and interpreted by professional geophysicists. The defendant energy boards, meanwhile, argued that the raw data was created by computer programs that amounted to a purely mechanical exercise, and, hence, was not original or protectable under the Act.

In 2016, the Alberta Court of Queen’s Bench sided with GSI and found that copyright subsisted in both the raw data and the processed seismic sections. The Court held that the seismic sections were comparable to a map or chart, involving selection or arrangement of the underlying data. Additionally, the human processors of the data exercised skill and judgment in creating a useable product from the raw data. As for the raw data itself, the Court found that the seismic crew demonstrated skill and judgment in preparing the devices that collected the data, by selecting the proper location, angles, positioning, etc. for the instruments. The human seismic crew members were held to create the raw data, similarly to how photographers create photographs. The raw data was hence found to be an original literary work, and the processed data was both an original literary compilation and also an artistic compilation work. In any case, all forms of the data were protected by copyright.

Although GSI won on its claims for copyright, it was not successful in its claims as to the regulatory regime that empowered the energy boards. The Court held that Parliament’s specific intentions under the Canada Petroleum Resources Act (“CPRA”) supplanted the more general rights conveyed under the Copyright Act to the extent that the two statutes overlap. In GSI’s case, the CPRA empowered the energy boards to publicly disclose GSI’s data and seismic charts after the expiration of a confidentiality period. Although GSI was found to have copyright in its works, the energy boards did not infringe that copyright by acting in accordance with the CPRA. The Court observed that the CPRA applied to the extent it conflicted with the Act, and effectively set up a compulsory licence for GSI’s data to be released and used by the public, in perpetuity after the expiry of the confidentiality period.

Most of the intellectual heavy lifting in Geophysical happened in the 2016 trial decision, and it is worth noting that the lower court’s findings that copyright subsisted in the data and seismic sections were not appealed and, therefore the appeals court did not review these issues. However, 2017 saw two important developments at the appellate level in this case. In April 2017 the Alberta Court of Appeal confirmed the lower court’s decision that the CPRA created an exception to GSI’s exclusive rights under the Copyright Act to control, license, and charge a fee for dissemination or copying of the data/seismic sections. Finally, GSI then applied for leave to appeal to the Supreme Court of Canada but in November 2017 the SCC denied such leave .

While Geophysical encourages investment in the information economy by signalling that copyright may protect investment data and databases, the Federal Court of Appeal’s decision in Toronto Real Estate Board v. Commissioner of Competition (2017 FCA 236) stands in discouraging contrast. The Federal Court of Appeal denied that copyright subsisted in TREB’s Multiple Listing Service® database because there was insufficient skill and judgment to give rise to it being an original compilation work. Last year we cited the Competition Tribunal’s earlier decision on the matter (2016 CACT 7) as a potential case to watch in 2017 precisely for its appeal on this issue of originality in the creation of databases. Specifically, the Tribunal had found that the MLS® database amounted to a collection of factual information, assembled by REALTOR® agents and entered into the database in a mechanical fashion. On review, the Federal Court of Appeal found that the Tribunal had not applied the correct test for originality from CCH Canadian Ltd. v. Law Society of Upper Canada (2004 SCC 13), but had instead applied the out-of-date decision in Tele-Direct (Publications) Inc. v. American Business Information, Inc. ([1998] 2 FCR 22). However, the error was found to be of no consequence. The Federal Court of Appeal reached the same result after applying the appropriate test, noting “the process of data entry and its ‘almost instantaneous’ appearance in the database.” If the Federal Court of Appeal’s decision stands, copyright in electronic databases may be threatened, and courts may avoid a technologically neutral approach to assessing whether copyright subsists. TREB has sought leave to appeal to the Supreme Court. If leave is granted, the case may be one to watch not only for copyright protection of databases, but also for Supreme Court guidance on the intersection of copyright and competition laws.

Authorship of software 

In Gemstone Travel Management Systems Inc. v. Andrews (2017 FC 463), the sole issue before the Court was whether to expunge the defendant Andrews’ registrations from the Copyright Register. The case was “to a large extent a continuation” of Andrews v. McHale (2016 FC 624), which involved a dispute between a company and Andrews, who had formerly been both an employee and contractor of the company, and who claimed to have co-authored software developed by the company. In the 2016 decision, the Federal Court examined Andrews’ claimed contributions to the software including: creation of industry-specific content, solving data importation issues, development of a seat map, creation of systems, and development of algorithms to align data from separate functions of the software.

Based on scant evidence, the Court held that none of Andrews’ claims could be shown to “represent an exercise of skill and judgment of the type necessary to make Mr. Andrews an author,” and determined that his contributions “fall into the category of ideas, methods, procedures, algorithms or other categories of contributions” outside the scope of copyright protection. Although the Court came to this decision on limited evidence, it could still potentially diminish the types of contributions a software developer can claim give rise to co-authorship.

In 2016 the Federal Court found it did not have the jurisdiction to expunge Andrews’ copyright registrations from the Register because this relief had not been sought. In 2017 Gemstone Travel Management Systems Inc. brought an application “to remedy the [earlier] jurisdictional defect,” and the Federal Court granted the expungement. The case underscores that copyright registration merely creates a presumption of ownership, which can be negated by contradictory evidence. It also serves as a reminder of potential challenges to demonstrate authorship of software. 

Technological protection measures 

In Nintendo of America Inc. v. Go Cyber Shopping (2005) Ltd. et al. (2017 FC 246) the Federal Court released its first substantive decision on the technological protection measure (TPM) provisions in the Copyright Act. The decision has been celebrated by copyright owners, particularly those that rely on TPMs to protect their works. It signals a broad and purposive approach to TPM protections in Canada, and that courts are inclined to grant meaningful remedies against companies that trade in TPM circumvention technologies.

The Nintendo case concerned the sale of devices and technologies by an Ontario business-Go Cyber Shopping-that allowed users to play unauthorized version of Nintendo games on Nintendo gaming systems. At issue was whether these devices and technologies, and the defendant’s sale of them, constituted circumvention of TPMs as prohibited by the Act, as well as secondary copyright infringement. The TPMs at issue included game cartridges that had the same physical configuration (i.e. shape) as genuine Nintendo game cartridges, as well as boot up security checks, and encryption and scrambling code, copy protection code, and a proprietary unique data format.

Nintendo’s boot up security checks, encryption and scrambling code, and other code-driven technologies, were found to clearly be TPMs. In addition, the Court found that the physical shape of the cartridge could also function as a TPM, saying at paragraph 86 that,

the physical configuration of the Applicant’s game cartridges, including the shape of the card and the arrangement of the electrical pins, was designed to fit specifically into a corresponding slot on each of its consoles. Together they operate much like a lock and key. This measure is quite effective in controlling access to genuine Nintendo Games on the Applicant’s game cards.

Statutory Damages 

            Technological protection measures

Nintendo also provides guidance on calculating statutory damages for circumventing TPMs, and in particular, that damages for TPM circumvention should be awarded on a “per work” basis, rather than on a “per circumvented technology” basis. The Court found it appropriate to apply the statutory damages at the high end of the commercial scale: $20,000 per work potentially unlocked by a single circumvention technology. Further to this point, the Court also found that evidence of actual infringement is not a precondition to be awarded statutory damages for trading in TPM circumvention technologies, as this is not required by the scheme of the Act.

In result, Nintendo was awarded damages on the very high end—$11,700,000 for TPM circumvention in respect of the 585 video games in Nintendo’s library, $60,000 for copyright infringement, plus an additional $1,000,000 in punitive damages for the respondent’s recidivism and failure to stop the circumvention activities after warnings by the rights holder. The Court further awarded an injunction against the Respondents, an order for delivery up of the infringing goods, plus elevated costs. Deterrence, as well as the need for retribution and denunciation, compelled the $1,000,000 punitive damages award. The Court found that the defendant showed “callous disregard for the Applicant’s rights” and deliberately sold and promoted the circumvention devices for years, and intended to expand its TPM circumvention activities to future generations of Nintendo’s systems. The Respondents’ limited admissions of wrongdoing did little to sway the Court, since they were “calculated to limit liability rather than address the full nature and extent of its infringing activities”. Interestingly, the fact that Nintendo did not issue a cease-and-desist letter prior to commencing this proceeding did not impact its entitlement to punitive damages.

            Special case lowering statutory damage awards

2017 also saw the lowest per work statutory damage award to date for commercial copyright infringement: $2 per work. The usual per work statutory damage award ranges from $500 to $20,000 per work, but Courts have the discretion to reduce the per work award in ‘special cases’ involving more than one work in a single medium, where awarding the minimum amount of $500 per work would result in a total award that is grossly out of proportion of the infringement. In the aforementioned Trader v. CarGurus decision, the Ontario Superior Court applied this discretion, and reduced the statutory damages award to about $2 per work. The Court awarded a total of $305,064, finding the plaintiff’s claim for over $98 million (based on the $500 minimum) would have resulted in a total award that was “grossly out of proportion to the infringement”. 

In coming to this conclusion, the Court in CarGurus found all of the infringements occurred in a single medium (a website accessible via traditional browsers and an app). It was also important to the judge (particularly in denying a punitive damages award) that the defendant did not act in bad faith, since CarGurus was using the same business model as it did in the US, which assumed the individual car dealers owned the images of cars they posted to their own websites (and which was true in the US). Notably, the Court acknowledged that while additional due diligence may have alerted CarGurus to the plaintiff’s ownership of some of the photos (about 5% of those on dealers’ websites), the fact that CarGurus failed to do so was not held against it. The Court noted that Trader had not indicated its ownership in the photos until shortly before filing the lawsuit (at which point CarGurus removed the photos). In setting the $2 per work amount, the Court took into account: the usual syndication fee charged by Trader; the number of dealers involved; what Trader’s competitors charge for similar services; Trader’s own costs in providing its service; CarGurus’ lack of profits in Canada during the time in question; Trader’s admission that it suffered no monetary damages and lost no business as a result of the infringement; and the need for deterrence to push companies to perform better due diligence on copyright clearance in the future.

            Lower statutory damage award where no bad faith

The aforementioned Labelle c. Brilliant decision is also a further example of a statutory damages assessment by Canadian courts. This decision involved reproducing a substantial part of a song, as a ‘tribute’ to it. On the assessment of statutory damages, the Court reduced the plaintiff’s claim from $10,000 to $3,000 on the basis that the defendant had clearly not acted in bad faith. While the defendant’s attempts to trace the author of the original song were found insufficient, the defendant intended to tribute the earlier song, and reacted quickly to limit distribution when it received the plaintiff’s initial demand, immediately ceasing broadcast of the track and removing it from SOCAN’s repertoire. There was also no evidence that the defendant had actually profited from the tribute.

Injunctions 

A rights-holder’s ability to seek preliminary injunctive relief is important to prevent harm from copyright infringement from occurring, or to stop it from continuing to occur where the infringement is ongoing. Canadian courts consider three factors when assessing whether to grant a preliminary injunction:

  1. there must be a serious issue to be tried;
  2. the moving party must be vulnerable to irreparable harm if this injunction is not granted; and
  3. the court must consider the balance of convenience as between the parties and the public at large.

A number of decisions in 2017 developed the law on the irreparable harm and balance of convenience factors for granting preliminary injunctions in copyright cases. 

In Cedrom-SNI inc. c. Dose Pro inc., the Quebec Superior Court granted an interlocutory injunction against the defendant news aggregator. The Court observed that a finding of blatant copyright infringement is itself sufficient to demonstrate irreparable harm. This is consistent with several older cases such as Diamant Toys Ltd. v. Jouets Bo-Jeux Toys Inc (2002 FCT 384 at paragraph 56), and is a helpful finding for copyright owners, particularly where there is a degree of knowledge or recklessness on the part of the defendant. It is noteworthy that the Court in Dose gave weight to the evidence tendered by the newspapers that Dose’s service resulted in a decrease in their readership. Since irreparable harm was established, the Court found the balance of convenience factor less relevant, although it did note that this third factor likewise favoured the plaintiffs because the defendants could simply use a less substantial portion of the plaintiff’s works (e.g. just the headline with a link to the article on the newspaper’s website).

Another case of significant note is Vancouver Aquarium Marine Science Centre v Charbonneau, where the British Columbia Court of Appeal found that freedom of expression and fair dealing considerations may be relevant to an assessment of the balance of convenience (2017 BCCA 395). The Aquarium had claimed copyright in certain images and videos made by Aquarium employees or taken on Aquarium property, which the defendant then obtained on Google and incorporated into a documentary about the Aquarium’s treatment of whales and dolphins.

The Supreme Court of British Columbia had ordered an interlocutory injunction, prohibiting the further screening or display of certain portions of the defendants’ documentary (2016 BCSC 625). The Court had concluded that the issue of fair dealing was one that was highly dependent on the facts and did not “so clearly apply as to render the claim frivolous” leaving it a “fair question to be tried.” On the balance of convenience factor, the Court had noted that this favoured the Aquarium because damages were not considered to likely be an adequate remedy in the event the Aquarium prevailed at trial. The judge took care to precisely tailor the injunction to only those segments of the documentary containing the works over which the Aquarium claimed copyright, which amounted to less than five minutes of a 60+ minutes long documentary. 

However, in 2017 the BC Court of Appeal overturned the lower decision and held an injunction should not have been granted, largely based on the “balance of convenience” factor. The Court confirmed that public interest arguments such as freedom of expression should be addressed under the “balance of convenience” portion of the test, and can be used to “tip the scales of convenience” in favour of one party. The Court observed that the question is whether “the Charter value of freedom of expression [weighs] against granting the injunctive relief”. Additionally, in considering the “serious issue” factor, the Court confirmed that freedom of expression and fair dealing being at play will not elevate the bar to show a “serious issue”, and that this injunction factor does not involve a prolonged examination of the merits unless the injunction would in effect amount to a final determination of the action.

In contrast to this approach on the “serious issue” factor in BC, the Ontario Superior Court in Wiseau Studio et al. v. Richard Harper (2017 ONSC 6535) dissolved a previously granted interim injunction after a lengthy examination of the “serious issue” factor, and despite ultimately noting that the plaintiffs had met the “low bar” threshold.

At the federal level, in Wesley (Mtlfreetv.com) v. Bell Canada (2017 FCA 55) the Federal Court of Appeal upheld an injunction granted by the Federal Court against a seller of TV set top boxes that came pre-loaded with applications allowing the downloading and streaming of pirated content. As discussed in last year’s review, the Federal Court’s decision in Bell Canada v 1326030 Ontario Inc (2016 FC 612) remains noteworthy for granting an injunction against a party selling devices preloaded with apps that allow infringement. In its review of the decision, the Federal Court of Appeal again noted the record of uncontradicted evidence “including the advertisement that these pre-loaded set [top] boxes are a way to access free [TV] content and avoid cable bills” and upheld the lower court’s finding that the injunction would prevent irreparable harm to the plaintiffs.

Copyright under direction and control of the crown 

This appellate decision of a case covered in last year’s review also touches upon copyright in contents of a database. Keatley Surveying Ltd. v. Teranet Inc. (2017 ONCA 748) involved a proposed class action by Ontario land surveyors against Teranet, a Ontario corporation who managed the Ontario electronic land registry system. Teranet provides copies of land surveys to the public for a fee without paying royalties to the surveyors. Keatly claimed this infringed land surveyors’ copyright. Teranet operates its system as a service to the province of Ontario, which claimed control or ownership of the surveys under section 12 of the Copyright Act. Section 12 sets out the circumstances under which the Crown owns copyright in a work, including where a work is published “under the direction and control” of the Crown.

The Ontario Court of Appeal came to the same conclusion as the lower court that section 12 of the Act gave the province copyright ownership and control over the surveys. The lower court had found that Ontario controlled the surveys by virtue of provincial legislation which dictated that the province gained control once the surveys were registered and deposited in the Ontario Land Registry System. However, the Court of Appeal differed from this approach, and held that it was section 12 of the Act, alone, that brought the survey under provincial ownership and control as a consequence of the plan, once registered, being published “under the direction and control” of the provincial government. The required direction and control required by Section 12 could be found in various provincial statutes governing the Ontario Land Registry System. The Court of Appeal dismissed the proposed class proceedings, and Keatley has sought leave to appeal to the Supreme Court of Canada.

Continuing reverse-class-action saga 

The Federal Court of Appeal also applied a strict interpretation of the Act in its review of Voltage Pictures, LLC v. John Doe. As discussed in last year’s review, Voltage brought a “reverse class action” against a representative defendant, alleging that the defendant and others had illegally shared digital files, infringing copyrights belonging to Voltage and other applicants. The representative defendant had only been identified by its IP address, and Voltage was pursuing disclosure of the defendant’s identify from its ISP, Rogers Communications.

The Federal Court had ordered Rogers to disclose the defendant’s identity, but allowed it to charge a $100 compliance fee to call up and disclose the defendant’s customer details associated with the IP address (see 2016 FC 881). Voltage appealed on the grounds that the Act prohibits Rogers from charging anything, and that even a modest fee would be cost prohibitive in a reverse class action against thousands of suspected infringers.

In 2017, the Federal Court of Appeal considered Voltage again (2017 FCA 97) and assessed the applicable sections 41.25 and 41.26, and the purpose for which those sections were added to the Act in 2012. The Court found that since “[t]he overall aim [of the Act], then, is to ensure that… the balance between legitimate access to works and a just reward for creators is maintained” then the legislative regime required that “[t]he internet must not become a collection of safe houses from which pirates, with impunity, can pilfer the products of others’ dedication, creativity and industry.” The Court observed that section 41.26(1) allows ISPs to charge “any fee that the [entity] has lawfully charged” to provide information (such as the defendant’s identity) to rights holders. However, 41.26(2) provides that the Minister may set the maximum amount of such fees, and that “[i]f no maximum is fixed by regulation, the person may not charge any amount under that subsection.” Voltage argued that since no maximum had been set, Rogers could not lawfully charge anything to provide the information, and the Federal Court of Appeal agreed.

Voltage remains a case to watch in 2018, as Rogers has successfully sought leave to appeal to the Supreme Court of Canada.

Bankruptcy and copyright 

The impact of bankruptcy proceedings on copyright holders can be frustrating as they try to parse out the overlap between the Copyright Act and the Bankruptcy and Insolvency Act (BIA). Two 2017 decisions provided guidance on the sometimes confusing interplay between these two federal regimes.

In Syndic of DEP Exclusive Distribution Ltd. (2017 QCCS 1186), the Canadian artist Roch Voisine, sought to (a) terminate an agreement with DEP, a bankrupt record distributor and (b) have unsold copies of his albums returned. Shortly before DEP declared bankruptcy, Voisine had provided them with artistic materials for reproduction and distribution of a new album, in accordance with a distribution agreement. On March 9, 2017, DEP informed Voisine that it would be unable to pay the contract-stipulated advance, or complete the album’s distribution. Voisine responded the same day with a formal notice of termination of the agreement (notwithstanding a 20 day notice requirement). DEP filed for bankruptcy protections on March 13, 2017, and Voisine sought to have his materials returned from the trustee, in order to maintain the scheduled March 31 album release date, as well as all other artistic materials held by DEP’s trustee.

The Quebec Superior Court was asked to terminate the agreement pursuant to the March 9 notice, but observed that the 20 day notice requirement put termination after the bankruptcy filing. The Court then turned to section 83(1)(a) of the BIA, which dictates that any agreement between a bankrupt entity and the author of an artistic manuscript (or their heirs) shall be cancelled and that copyright and copies of the manuscript shall be returned to the author/heirs. The Court held that this section also applied to sound recordings, subject to compensating the bankrupt distributor for any already incurred production costs. The Court also denied the trustee’s request to apply a limitation right under section 84.2(1) of the BIA, which prevents the cancellation of contracts with the bankrupt because they have become bankrupt. The Court noted that section 84.2(6) qualifies this limitation right where its application would cause the other contracting party serious financial hardship. In this case Voisine had satisfied “[t]he criteria of urgency, colour of right and irreparable harm…” The Court declared the contract unenforceable (although not terminated) and ordered the return of Voisine’s artistic materials.

In Ankenman Associates Architects Inc. v. 0981478 B.C. Ltd. (2017 BCSC 333), the B.C. Supreme Court heard a copyright infringement claim against a party that had purchased architectural plans during a foreclosure proceeding. Ankenman Associates Architects Inc. (AAAI), had prepared architectural plans under contract to a company called Murray’s Walk Development Ltd. (MWDL). Subsequently, MWDL went bankrupt and failed to pay all fees owed to AAAI. AAAI had filed a builder’s lien against MWDL, and later MWDL’s primary lender commenced foreclosure proceedings against MWDL. In April 2014, the defendant, The Newark Group, purchased the project site and all related personal property from MWDL during the foreclosure proceedings. This process also discharged AAAI’s builder’s lien. AAAI received no money from the sale and afterwards the defendant contracted a new architect to complete the project using the existing architectural plans. AAAI objected to their use.

The Court reviewed unsettled case law on whether the defendant had a right to use AAAI’s architectural plans despite AAAI not having been paid in full by MWDL. The contract stated that AAAI would provide the architectural plans and services to MWDL and that AAAI would retain copyright, but was otherwise silent on the right to use the plans. AAAI argued that the contract only created an implied, non-proprietary licence which could be revoked where consideration had not been given. The defendant argued that (a) consideration had been given since AAAI had been paid nearly $300,000, and (b) since the contract did not include a revocation provision of any license to use (a standard term in a form contract typically used in BC) it should be construed against AAAI, who drafted the contract. The Court held that any consent was contingent on full payment, as demonstrated by AAAI’s conduct in registering a builder’s lien. Even if defendant had acquired a licence to use the architectural plans, since AAAI had not received any consideration for the defendant’s particular use, then AAAI had not granted consent, which was reflected in their letters to the defendants requesting payment. The Court awarded damages equal to the unpaid remainder of AAAI’s fees owed by MWDL, as well as costs.

Copyright board matters and related developments 

2017 was full of developments involving the Copyright Board of Canada, the economic regulatory body empowered with setting the value for particular uses of copyright protected works (e.g. the royalties to be paid for downloads of musical works).

In June The Federal Court of Appeal dismissed Re:Sound v. Canadian Association of Broadcasters (2017 FCA 138), involving an application by the collective Re:Sound for judicial review of the Copyright Board’s 2014 decision certifying Re:Sound’s Tariff No. 8. The tariff set the royalty rates payable to performers and sound recording makers for non-interactive and semi-interactive webcasts (i.e. streaming music that gives users a limited ability to select or skip songs) for the years 2009-2012. The FCA rejected Re:Sound’s submission that the Board acted unreasonably by disregarding (a) negotiated agreements as evidence that equitable remuneration should be set at market rates, and (b) Re:Sound’s proposal that the Board was required to apply market rates. Justice Stratas afforded the Board significant discretion in its finding that the agreements were an inappropriate basis for a tariff applied to a new and underdeveloped market. The FCA further observed that section 19 of the Act entitles performers and sound recording makers to “equitable remuneration” when sound recording are publicly performed or communicated to the public by telecommunication, but does not provide these rights-holders the ability to exclude users from doing so (in contrast to the owners of rights under section 3 of the Act). This placed the matter more squarely within the particular expertise of the Board.

The FCA’s analysis is of further note for its application of the principle of technological neutrality as explained by the Supreme Court of Canada in Canadian Broadcasting Corp. V. SODRAC 2003 Inc. (2015 SCC 57). In SODRAC, the SCC held that the Board must balance the rights of users and rights-holders in valuing rights. One factor for the Board to consider was the investments made by users in new technologies. Re:Sound had argued that SODRAC dictated that the Board must consider the costs incurred by producers and performers when setting Tariff No. 8, but the FCA rejected this suggestion as a misinterpretation of SODRAC. Justice Stratas stated that SODRAC permits the Board to consider investments as a factor but does not mandate it, and that the Board retains wide discretion to balance the rights of users and rights-holders.

Additionally, in August 2017 the Copyright Board certified the Online Music Services Tariff (CSI: 2011-2013; SOCAN: 2011-2013; SODRAC: 2010-2013)[1]. Online music services that comply with the tariff, including making the specified royalty payments, can reproduce and communicate to the public by telecommunication musical works in the repertoires of CMRRA, SOCAN and SODRAC. This Board decision coincided with, and incorporated, a companion decision, on the making-available right.[2] This was the first decision of the Board to consider the legal effect and value of the making-available right, enacted as section 2.4(1.1) of the Act, pursuant to the Copyright Modernization Act in 2012. The Board recognized that the making-available right deemed the act of placing a work on a server of a telecommunication network, in a way that allows a member of the public to trigger a transmission of the work (including either as a download or a stream), to itself be a communication to the public by telecommunication of that work (whether or not such subsequent transmission ever occurs).The Board held that this act was separate and distinct from any subsequent act of transmission, such that the act of making a work available did not then merge with any resulting transmission; rather the two acts are legally distinct and separately valuable (i.e. the making-available of a work gives rise to a royalty, and any resulting transmission of that work as a download or stream triggers an additional and separate royalty). However, the Board declined to set a value for the making-available right due to a lack of evidence. Therefore, although the certified Online Music Services Tariff recognizes the making-available right, it does not set a payable royalty for it (or address the possible value of exercising the making-available right, in relation to exercising other rights of copyright).

This tariff decision in 2017 reflects the larger issue of the Copyright Board’s timeframes for copyright administration in Canada. This Online Music Services Tariff (CSI: 2011-2013; SOCAN: 2011-2013; SODRAC:2010-2013) was released in 2017, after hearings concluded in the spring of 2014, and retroactively covers uses that occurred in 2010 through 2013. Numerous parties have sought judicial review of the tariff by the Federal Court of Appeal, including users and rights-holder collectives. At the same time, the Board intends to proceed with a new hearing that consolidates proposed tariffs from Artisti, CSI, Re:Sound, and SOCAN, covering various online uses of music during the years 2013-2018.

At the same time, the Departments of Canadian Heritage and Innovation, Science and Economic Development have launched a formal consultation on possible reform to the Copyright Board. In August 2017, the consultation committee requested rights-holders and users file comments on potential changes to the legislative and regulatory framework of the Board’s powers and procedures. The consultation comes after years of requests from various stakeholders, as well as the Board itself, for the Canadian government to reform the Copyright Board in a way that would alleviate the backlog of cases and permit decisions to be issued more quickly. More than two dozen submissions were made.

Additionally, the aforementioned York University case provided further Copyright Board-related guidance on the legal status of tariffs set by the Board. In 2015, the SCC in SODRAC found that the Board’s powers under section 70.2 of the Act (to set licensing terms for parties on application) were not binding on users due to the permissive “may” language of section 70.4. This finding that Board-arbitrated licences are not mandatory posed practical as opposed to legal tensions where licenses are issued retroactively. The SCC was clear that in such cases users may have no choice but to accept the terms set by the Board. In York University, the school had attempted to rely on the SODRAC decision to argue that an interim tariff set by the Board was not mandatory or enforceable. Justice Phelan held that the interim tariff was mandatory, not voluntary, rooting his decision in both the plain meaning of the word “tariff” and the scheme of sections 70.12 through 70.4 of the Copyright Act. Justice Phelan held these sections demonstrate that “either a tariff is filed or the relevant parties enter into an agreement. The agreement option is voluntary and is in contrast to the mandatory nature of a tariff.” This provides welcome clarity on the status of interim tariffs, and presumably applies by extension for certified (i.e. final) tariffs as well.

Stay tuned…

2017 was an exciting year for copyright law in Canada, and 2018 looks to keep up the pace of new developments. It will be interesting to see if there are any substantive results from the government’s consultation on the Copyright Board’s powers and procedures before the end of the year. More broadly, at the very end of 2017 the government initiated the five-year parliamentary review of the Copyright Act. The review was launched by the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, in conjunction with the Honourable Mélanie Joly, Minister of Canadian Heritage, and shall be conducted by the Standing Committee on Industry, Science and Technology. The Standing Committee just recently announced that the review will take place in three phases, including testimony from witnesses representing a range of different stakeholders including industry representatives, Indigenous communities, and legal experts. The Committee aims to complete all three phases by early 2019. Although it is unlikely that we will see any substantive news from the review this year, this is an exciting development that could bring about extensive changes to Canadian copyright laws. The last major set of changes to the Copyright Act came in 2012 as a result of the Copyright Modernization Act. The decisions in 2017 demonstrate that the impacts of the Modernization Act are still being fully appreciated today. Hopefully, 2018 will bring news of what directions further review is taking. In the meantime, the courts will continue to push copyright law forward.


[1] Collective Administration of Performing and of Communication Rights, Re (2017 CarswellNat 4233)

[2] Collective Administration of Performing and of Communication Rights, Re (2017 CarswellNat 4235)

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Author(s):

Jill Jarvis-Tonus Jill Jarvis-Tonus
B.F.A., LL.B.
Counsel
Catherine Lovrics Catherine Lovrics
B.A., LL.B.
Partner
Max  Rothschild Max Rothschild
B.A., J.D.
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Tamara Céline Winegust Tamara Céline Winegust
B.F.A., J.D.
Associate