On November 26, 2015, the Supreme Court of Canada released its decision in Canadian Broadcasting Corp. v. SODRAC 2003 Inc. The Court upheld the Copyright Board’s (Board) decision that broadcast-incidental copies of musical works are reproductions of such works under section 3(1)(d) of the Copyright Act. However, the Court dismissed the Board’s determination of the licence fees payable in respect of the making of such copies. The Court remitted the matter back to the Board for redetermination on the basis that, in determining the licence fees, the Board had failed to apply the principles of technological neutrality and balance.

Background

Section 70.2 of the Copyright Act provides the Board with the jurisdiction to fix royalties in individual cases for licences between a collective society and any person seeking to make use of a copyright protected work.

The Canadian Broadcasting Corp. (CBC) is a producer and broadcaster of television programs. The Society for Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC) is a collective society organized to manage the French-language music reproduction rights of its members.

In the course of producing programs, CBC makes several types of copies of musical works, including “synchronization copies” when it incorporates musical works into audiovisual programs and a “master copy” once the synchronization process is complete. As a broadcaster, CBC makes several more copies of musical works when it loads the master copy of a program into its digital content management system. This process results in the “broadcast-incidental copies” that were at the heart of the Supreme Court’s decision.

Judicial History

SODRAC applied to the Copyright Board to set the terms of a licence for the reproduction of musical works in its repertoire by CBC. The Board held that broadcast-incidental copies of musical works are reproductions within the meaning of s. 3(1)(d) of the Copyright Act, and that CBC required a separate licence to make such copies. The Federal Court of Appeal upheld the Board’s decision.

Broadcast-incidental Copies Engage Reproduction Rights

The central issue before the Supreme Court was whether the making of broadcast-incidental copies was an exercise of the reproduction right protected by s. 3(1)(d). The Supreme Court held that the ordinary meaning of the Copyright Act indicated that broadcast-incidental copies do engage the reproduction right and noted that the ephemeral recording exceptions under ss. 30.8 and 30.9 of the Copyright Act were further evidence that Parliament had intended that broadcast-incidental copies should engage the reproduction right.

The Court dismissed CBC’s argument that a licence for the making of broadcast-incidental copies should be implied from CBC’s synchronization licences. The Court held that synchronization copies and broadcast-incidental copies are tied to the fundamentally distinct activities of production and broadcasting, and therefore must be licensed separately. As such, the Court held that it was reasonable for the Board to reject CBC’s implied licence argument.

Principles of Technological Neutrality and Balance

The Supreme Court also addressed the Board’s determination of the royalties under the licence and held that the Board’s decision was unreasonable in that it failed to consider the principles of technological neutrality and balance.

The Court held that compensation under the licence must be valued in accordance with the principle of technological neutrality, which requires that the Board take into account the value that the reproductions of the copyright-protected work contribute in the digital as compared to the analog technology. More specifically, the Court held that the Board must determine the value of the right to the user.

The Court also held that the Board must consider the principle of balance, and must have regard to various factors in striking a balance between the rights of users and right-holders, such as the risks taken by the user, the extent of the investment the user made in the new technology and the nature of the copyright protected work’s use in the new technology. Reviewing the Board’s decision, the Court held that the Board had not applied these factors and that its valuation method was therefore not consistent with the principle of technological neutrality. As a result, the Court deemed the determination to be unreasonable and remitted it back to the Board to be reconsidered.

Dissenting Opinion

In a robust dissent, Justice Abella disagreed with the majority’s decision that broadcast-incidental copies are reproductions that engage the rights under s. 3(1)(d) of the Copyright Act. She criticized the majority’s approach as being wholly inconsistent with the established case law and principles of technological neutrality, and opined that the majority’s approach creates a layered licensing scheme, whereby rather than licensing the central activity of broadcasting, licences are granted for the central activity as well as for its components.

Implications of the Decision

The Supreme Court’s decision clarifies how the principles of technological neutrality and balance should be applied by the courts and the Board, and will no doubt influence how such valuations are determined in the future.