Risks of Selling Set-Top Boxes – Could You Be Inducing Copyright Infringement?

The Internet has made pirated content widely available. But there has been a practical hurdle limiting the distribution of pirated content: the inability of users to find and access pirated content. While there are apps that provide access to pirated content, many (perhaps most) people do not have the necessary technical knowledge to use these apps with their TVs.

Set-top boxes are popular, and make it easier for the “average Joe” to find shows, movies and other content and stream them on TV. Set-top boxes are devices that can be connected directly to a TV, allowing for capabilities like a “smart TV” (i.e. Internet access). Most set top boxes are pre-loaded or pre-installed with apps that provide access to content – Netflix, YouTube, HBO GO, Skype, etc. More recently, there has been a spike in pre-loaded set top boxes that are rife with apps that are a gateway to pirated content. Such devices are problematic not only for making the content readily accessible, but also, and perhaps more so, because they may leave the impression that the content that “average Joe” is accessing is legal - "It must be legal because I'm getting the content through this box I bought legally. I'm not searching out pirated content."

A recent Federal Court case, Bell Canada v 1326030 Ontario Inc. 2016 FC 612 (“Bell”), took a closer look at set-top boxes that were pre-loaded with apps and marketed as, for example, being “the original cable killer” and allowing the user to “cancel cable today and still watch all programs for free”. The Federal Court ordered an injunction against a number of individuals and companies that sold set-top boxes pre-loaded with apps that provide access to pirated content. The case is notable for a few reasons.

First, Bell is another example of a preliminary injunction being granted in a copyright case. In the IP world, preliminary injunctions can be notoriously difficult to obtain, particularly in trademark cases. In Bell, the Court ordered an interlocutory injunction against the defendants, as well as any potential defendants that the plaintiffs may find also selling pre-loaded set-top boxes. The Court went through the three prong test for granting an interlocutory injunction, and found that (1) there was a serious question to be tried as evidenced by both a strong prima facie case for copyright infringement and a strong prima facie case for breach of the Radiocommunication Act; (2) the continued sale and advertisement of the boxes could lead to the loss of customers and therefore constitutes irreparable harm, and; (3) the balance of convenience favours the plaintiffs since there would not be undue restraint on the defendants – the defendants merely had to refrain from advertising and selling the set-top boxes containing pre-loaded applications, they could still market their legitimate products. The decision demonstrates that if an IP owner can show that an activity is likely to result in loss of customers, the normally difficult step of proving irreparable harm may be more easily satisfied. The Court also indicated that the “strength of one part of the test ought to be permitted to compensate for the weaknesses on another”. Similar findings have been noted in previous cases, in particular a trademark case from last year, where court found irreparable harm based on loss of customers (Reckitt Benckiser LLC v Jamieson Laboratories Ltd, 2015 FC 215).

Second, Bell would appear to leave the door open for Canadian copyright law to permit infringement based on "inducing" infringement. Under Canadian law, "authorizing" an infringement is, in and of itself, a type of infringement: "authorizing" has been interpreted by the Supreme Court of Canada to mean "to approve, sanction or countenance". However, the law has not gone so far as to expand to cover the US concept of "inducing" infringement. For example, in Muzak1, the Supreme Court found “authorize means to sanction, approve and countenance”. Later, in CCH2, the Supreme Court found that “countenance in the context of authorizing copyright infringement must be understood in its strongest dictionary meaning, namely “give approval to; sanction, permit, favour, encourage”. Perhaps, though, not too much should be read into the finding on “inducement”, given there was a claim under the Radiocommunication Act, which may alone have been support enough for there being a serious issue to be tried, even though the court referred more squarely to “copyright” infringement.

Third, and perhaps most notable, is that it is interesting that action was successfully taken against the party that was selling the devices, and not the party creating the apps and providing the service that results in direct access to the pirated content. When Canadian copyright laws were recently amended, a new type of infringement was introduced to address “services” that primarily enable acts of infringement. Factors for determining such infringement include whether the person expressly or implicitly marketed the services as one that could be used to enable acts of copyright infringement; whether the person had knowledge that the services was used to enable a significantly number of acts of copyright infringement; whether the services has significant legitimate uses; and whether the person enabling the acts of copyright infringement benefited from such infringement. This type of infringement covers services, not devices. In this case, the set-top boxes were marketed as being “the original cable killer” or “cancel cable today and still watch all programs for free”. Even so, it is interesting that the Court did not formally analyze the other factors that would have been canvassed to determine if a service is "primarily for the purpose of enabling acts of infringement". Rather, the Court found that the defendants’ actions went “above and beyond selling a simple means of communication”. By encouraging users to access pirated content, and in some cases actually teaching them how to do so, the defendants were found to provide services that primarily enable acts of infringement. Furthermore, the defence under section 2.4(1)(b) of the Radiocommunications Act, selling only a means for communication, did not apply.

The case should be noted by anyone in the tech world that selects apps that will be loaded on a device or that will accompany a device, or that deliberately promotes such services in a way that may leave the impression that the device can be used to avoid having to pay for lawful content. Greater reliance may be put on indemnity clauses from app providers before being pre-loaded onto a device in future.