In Nicholas v. Environmental Systems (International) Limited, 2010 FC 741, Justice Russell awarded only nominal statutory damages for copyright infringement.
The Plaintiff alleged breach of copyright and breach of moral rights by the Defendants in a report entitled “Technical Evaluation and Report on the Patented ESIL Process” (the “Report”) which the Plaintiff authored. The Court found that the Report was produced and paid for so that it could be used to secure investors in ESIL, and the ESIL technology, and that no limitations were placed upon the way this was to be done at the time when the contract for the Report was entered into. The Court also found that the Plaintiff was willing to allow changes to the Report for the purpose of attracting investors. The Court concluded that the Defendants had a licence, or at the very least implied consent, to use the Report. However, the Court found that this licence or implied consent did not extend to allow the Report to be posted on a website or to be used in conjunction with the sale of goods and services. Since the Defendants also used the Report for these purposes, there was a technical breach of the Copyright Act.
During the course of the trial, the Plaintiff elected to claim statutory damages under section 38.1 of the Copyright Act in lieu of damages and profits which the Court found he could not prove. Section 38.1 provides that a copyright owner may, instead of actual damages or profits, elect to recover statutory damages for all infringements involved in the proceedings, with respect to any one work or other subject-matter, in a sum of not less than $500 or more than $20,000 as the Court considers just.
In assessing statutory damages the Court must address the factors set out in subsection 38.1(5) including: (a) the good faith of the defendant; (b) the conduct of the parties before and during the proceedings; and (c) the need to deter other infringements of the copyright in question. In considering these factors, the Court found as follows: (i) the Defendants may have been mistaken in their belief that copyright in the Report had been assigned, but there was no evidence to show that this belief was made in bad faith; (ii) the Defendants’ challenge to copyright in the Report was nothing more than a conventional response to the Plaintiff’s opportunistic claim of $27 million in damages; (iii) there was no high-handed or otherwise reprehensible conduct before or during the proceedings on the part of the Defendants - they had simply defended themselves as best they could in the face of a claim for a substantial sum of money; and (iv) there was no evidence to suggest that the use of the Report by the Defendants resulted in any damage to the Plaintiff. Specifically, the Court found that this was not a case where the Defendants had “sold multiple copies of the Report or earned significant revenues or profits from the breach.” On the facts, Justice Russell found that the Plaintiff was entitled to no more than $500 in statutory damages. The Court similarly refused to impose punitive or aggravated damages.
Bill C-32, the proposed Copyright Modernization Act, would, if passed, reduce the range of statutory damages to $100 to $5,000 with respect to all infringements involved in a proceeding if the infringements are made for noncommercial purposes or such lower amount where, in the Court’s opinion the strict mathematical application of the revised statutory damages provision would result in a total award that is grossly out of proportion to the infringement. Obviously, the Court will not have an opportunity to consider the effect of these revisions until the new legislation is passed into law – which, if it occurs, will likely not happen until much later this year.
This decision shows that the Court might, depending on the facts, only award nominal statutory damages for technical breaches of the Copyright Act. Furthermore, the decision also illustrates that, in at least some circumstances, courts are prepared to recognize an oral licence, or implied consent, to the party commissioning a work for the purposes for which that work was created.