On January 27, 2016, the Federal Court of Appeal released its decision on an appeal from the decision of O’Reilly J. of the Federal Court on a motion that determined certain questions of law relating to the validity of Tariff 24 (Download of Music Ringtones). Various telecommunications companies, including Rogers Communications, Telus Communications, Bell Mobility and Quebecor Media commenced an action in Federal Court to recover $15 million in ringtone royalties paid to SOCAN under Tariff 24 that they claimed should not have been collected. The plaintiffs claim that the Supreme Court of Canada’s decisions in ESA1 and Rogers2 with respect to downloads of musical works also apply to ringtones. They took the position that since the SCC decided in July 2012 that the communication right is not engaged by the distribution of downloads, Tariff 24 was invalid. SOCAN disagreed, arguing that the SCC decisions in ESA and Rogers related to a different tariff (Tariff 22) filed a counterclaim seeking payment of ringtone royalties that the plaintiffs had refused to pay once the Supreme Court rendered its rulings in the other two cases.
The parties, on consent, submitted six questions to the Court for determination under R. 220 of the Federal Courts Rules, in the hopes that getting answers to those questions would resolve or substantially narrow the issues in the case. The Rule 220 motion was heard and decided by Justice O’Reilly of the Federal Court. (For a summary of that decision, click here.)
Before the Federal Court and on appeal, SOCAN argued that the claim for restitution was a collateral attack on the Copyright Board’s decisions to certify Tariff 24 and that the plaintiffs were precluded from challenging those decisions by the doctrine of res judicata. While Justice Ryer, writing on behalf of the Federal Court of Appeal, agreed with Justice O’Reilly that the first two criteria of the doctrine were made out, namely, that the same question was decided in an earlier proceeding and the parties to both proceedings were the same, they disagreed as to whether the decisions of the Board were “final”. Justice O’Reilly had held that in light of s.66.52 of the Copyright Act, which enables the Copyright Board to vary a tariff certification decision if there has been a material change in circumstances since the decision, decisions of the Board are “never really final”. Accordingly, Justice O’Reilly held that the doctrine of res judicata could not be made out.
Justice O’Reilly’s determination that the Board’s decisions are never really final was a cause of great concern for collective societies who are responsible for the collection, administration, and distribution of royalties collected under tariffs certified by the Copyright Board. The Board certified Tariff 24 (2003-2005) on August 18, 2006; the Federal Court of Appeal dismissed an application for judicial review in 2008, and the Supreme Court denied leave to appeal. However, Justice O’Reilly held that even in such a situation, the Board’s decision was not necessarily final.
Significantly, the Federal Court of Appeal stated that even if s. 66.52 of the Copyright Actentitles the Board to overturn its own decisions because of changed circumstances, the SCC’s decisions in ESA and Rogers did not constitute “a material change in circumstances since the decision was made” within the meaning of s. 66.52 allowing the Board to alter a certification decision. The Federal Court of Appeal stated that even though those subsequent decisions changed the law, that is not a basis for reconsidering previously decided decisions. Thus, the Federal Court of Appeal held that Justice O’Reilly erred in finding that the final criteria of issue estoppel had not been satisfied in terms of the Board’s decision to certify Tariff 24 (2003-2005).
Further, pursuant to an agreement between SOCAN and the service providers, the Board had extended Tariff 24 for the years 2006-2013. The Federal Court of Appeal held that since the Board’s decision for this second time period had not been challenged by the service providers even after the ESA and Rogers decisions were released, once the time period for applying for judicial review had passed, the Board’s second decision became also final. Therefore, Justice O’Reilly also erred in finding that the third criteria of issue estoppel had not been made out with respect to the Board’s decision to certify Tariff 24 (2006-2013).
The Federal Court of Appeal also addressed Rule 220(1)(a) of the Federal Courts Rules. The Court took a narrow interpretation of the rule and refused to consider the correctness of Justice O’Reilly’s answers to any questions that did not raise pure questions of law. Consequently, the Court held that Justice O’Reilly should have refused to answer whether the 2010 Agreement prevented the plaintiffs from claiming the relief they sought. The Court also felt the Federal Court erred in not declining to answer whether SOCAN was unjustly enriched when it received Tariff 24 royalties and whether the plaintiffs were entitled to a tracing order. The Federal Court of Appeal felt that these questions were not pure questions of law and that these questions should be determined by the Judge who conducts the trial.
The Federal Court of Appeal’s decision on the issue of finality has important implications for collective societies that rely on decisions of the Board and the Courts with respect to tariffs. Once a decision about a particular tariff becomes final, a collective society can now proceed to distribute royalties without fear that those funds might later have to be returned.