The Supreme Court of Canada’s recent decision in Canadian Broadcasting Corp. v. SODRAC 2003 Inc., 2015 SCC 57 (“CBC v. SODRAC”) was a much anticipated ruling in the copyright community, helping to clarify the role of “technological neutrality” in the context of the Copyright Act. Another aspect of the Court’s ruling, however, has nothing to do with “technological neutrality”, but rather the enforcement of certain licences administered by collective societies. The Supreme Court held that copyright users mustconsent to be bound by the terms of such licences—the Copyright Board (the “Board”) cannot compel users to agree against their will. What impact this aspect of the decision will have on users remains to be seen. On the one hand, this could be a boon for users who decide not to be bound by a collective society’s licence because they believe their activity constitutes “fair dealing”, or does not engage the copyright for which compensation is sought. On the other hand, licenses fixed by the Board often have retroactive effect, and interim licenses are commonly issued by the Board to “bridge the gap” between the end of a licensing period and its fixing of a new license. Users who abided under the interim license, but are unhappy with the terms of the final version, may be left with no practical option but to agree to be bound, lest their actions under the interim license be found to be unlawful, and thus, infringing. The Supreme Court acknowledged this risk, but nevertheless held nothing in the Copyright Act compelled a user to be bound by licenses fixed by the Board.
By way of background, the Copyright Board is an administrative body, empowered by section 70.2 of the Copyright Act to fix royalties and their related terms and conditions upon application from a copyright collective society, such as SODRAC, or a user who seeks a licence to use a work. Either of the parties may apply to the Board if they are unable to agree on the royalties to be paid. In the past, the Board and the collective societies have taken the position that while users remain free to negotiate individual licences with rights holders, absent such a separate agreement, where a certain activity is the subject of a licence set by the Board, the user was liable to pay according to the terms of the licence.
CBC v. SODRAC appears to have turned this proposition on its head, narrowing the force and effect of these licences set and approved by the Board.
In the case, CBC, a national broadcaster, argued that the Board’s power was limited to fixing the royalty amount under s. 70.2 of the Act, but that it could not set the other terms and structure of a licence. CBC had sought a transaction based licence with SODRAC, a collective society which managed the reproduction rights for most Quebec musical artists. Under a “transactional” licence, CBC would only be required to pay for the works in SODRAC’s repertoire that it actually used. The Board, however, imposed a “blanket” licence, pursuant to which CBC would pay a flat fee that would cover use of any work in SODRAC’s repertoire. The Board countered that its power to enforce terms of a licence was a necessary by-product of its s. 70.2 powers, since otherwise its remedial jurisdiction would depend on the consent of the user, which would make it difficult for the Board to resolve disputes.
The Supreme Court held that the Board’s power did not extend to enforcement of a licence against a non-consenting user: “This grant of power [in s. 70.2] speaks of the Board’s authority to set down in writing a set of terms that, in its opinion, represent a fair deal to licence the use of the works at issue. It says nothing, however, about whether these terms are to be binding against the user.” [at para 104]. The Board’s power to “fix the royalties and their related terms and conditions” did not compel consent of users to the associated licenses.
To support its position, the Court pointed to the context of the Board’s s. 70.2 powers within the Copyright Act itself, as well as general legal principles on the scope of legal authority to bind persons to contracts. Regarding the Copyright Act, the Court discussed s. 70.4, which provides that a person “may” do an act with respect to which royalties and their related terms and conditions have been fixed under s. 70.2, in accordance with those terms and conditions. Because s. 70.4 is permissive, rather than mandatory, the Court held that licences crafted pursuant to s. 70.2 proceedings cannot automatically bind users. Further, the Court pointed to the general legal principle that “no pecuniary burden can be imposed upon the subjects of this country … except upon clear and distinct legal authority”, concluding that because there is no clear legislative intent in the Copyright Act to make s. 70.2 licences binding against users, the burdens of a licence should not be imposed on a user who does not consent to be bound by its terms.
Having made such a strong pronouncement, however, the Court was careful to note that the implications of its holding did not excuse unlicenced use. Should a user who has decided not be bound by a licence engage in unauthorized copying regardless, it will remain liable for infringement (although not as a licensee). Moreover, although recognizing that licences fixed by the Board are not de jure binding on users, the circumstances under which a licence is granted—and particularly a retroactive licence issuing from an interim licence—may very well mean the user does not have a de facto choice but to accept to be bound. By refusing to be bound by the final retroactive license, the user risks having his earlier compliant use under an interim license containing different terms rendered potentially infringing.
Notably, in pronouncing that licenses issued by collective societies are not binding upon users absent their consent, the Court did not decide whether the Board had power to bind the collective societies.