In a decision released November 26, 2015, the Supreme Court issued a major decision on how the Copyright Board can set royalties rates for the use of copyrighted works and whether users are required to abide by statutory licences crafted by the Board. This decision will have a major impact on the broadcasting sector and other creative industries.
The victorious party on appeal was the CBC/Société Radio-Canada. CBC was represented by a team of lawyers from Fasken Martineau's Montreal office, who successfully obtained leave to appeal and then argued the case before the Supreme Court.
Lower courts had held that CBC was required to pay higher royalties to SODRAC (the collective society which manages the majority of French-language reproduction rights in Canada), as a result of CBC's adoption of digital technology, since digital broadcasting techniques involved making more copies of music than occurred in the analog broadcasting era.
The lower courts' decisions were unanimously set aside by the Supreme Court. The majority maintained the traditional view of the reproduction right under which even incidental or ephemeral copies are considered reproductions. Justice Abella wrote a strong dissent on this issue, arguing that the reproduction right should not capture purely incidental copies.
However, the majority adopted a new approach to how the Copyright Board should set royalty rates, ruling that technological neutrality was to govern the royalty-setting process. The majority also required the Board to take account of the creator-user balance when setting royalty rates, noting that the Board should consider investments by users in new technologies and the risks assumed by them in doing so.
The majority reasons also cast serious doubt on the Board's practice of using ratios to set royalty levels. Here, SODRAC's royalties had been set at 31.25% of those paid by CBC to SOCAN, the collective society that manages performance rights for music. The Supreme Court held this approach was unreasonable, since ratio-based royalties ignored the requirement for technological neutrality and user-creator balance.
Finally, the majority held that when the Board sets the terms and conditions of a licence by statutory arbitration under s. 70.2 of the Copyright Act, the user may decline to accept that licence and simply "walk away" from the package of rights and liabilities crafted by the Board. Of course, the user still has to comply with copyright law, and unauthorized use of protected works would remain an infringement of copyright. But the majority confirmed that the decision to accept or reject the licence remains with the user – not the collective society or the Board.