Yesterday, the Supreme Court of Canada issued much anticipated rulings on a series of cases concerning copyright royalties for downloading and streaming of various kinds of musical works over the Internet, classroom copying of literary and artistic works, and recorded music in soundtracks that accompany movies and TV shows.1 Following closely on the heels of June’s passage of Bill C-11, the Copyright Modernization Act, these cases herald significant changes to Canada’s copyright landscape this summer.

The full impact of the decisions on copyright stakeholders – rightsholders, distributors, consumers and the general public – will take some time to digest, as will the implications of those decisions on the interpretation of the Copyright Act in general. In the meantime, here is an initial overview of this week’s developments.

  1. Downloading Is Not a “Communication to the Public”...

Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada2 was the first of three rulings of the Court on tariffs proposed by the Society of Composers, Authors and Music Publishers of Canada (“SOCAN”) related to online communication of musical works. At issue was whether or not a tariff could apply to video games containing copyrighted musical works, when the games are sold online and downloaded over the Internet. The Copyright Board had agreed with SOCAN that, unlike games in physical formats sold in traditional retail outlets or by mail-order (the reproduction royalties for which are negotiated and concluded in advance of sales), transmitting games to customers over the Internet constitutes a “communication to the public by telecommunication” of the music they contain. As the “communication” right is separate from the reproduction rights protected by the Copyright Act (the “Act”), the downloads were therefore made subject to a copyright tariff in addition to the royalties already paid for the reproduction right.

In a 5-4 split, the Supreme Court disagreed with the Board and held that the principle of technological neutrality requires that the Copyright Act apply equally between traditional and more technologically advanced forms of the same media. Since there is no “practical difference” between buying hard copies of games in retail outlets and downloading purchased games from the Internet, the majority of the Court chose to interpret the Act “in a way that avoids imposing an additional layer of protection and fees based solely on the method of delivery of the work to the end user.”

In the Court’s view, the “communication” right under the Act has traditionally been associated with performance rights, and while streaming may be akin to “performance,” downloading is not. In this case, the Court held that only one activity takes place: the downloading of a copy of a video game containing musical works. Contrary to many observers’ understanding of the Court’s previous decisions in Compo v. Blue Crest Music and Bishop v. Stevens, the Court suggested that a single activity – in this case, the delivery of a permanent copy of a video game containing copyrighted musical works – cannot violate two separate rights at the same time.

On that basis, the Court found that downloading the games did not amount to a “communication.” As a result, a separate royalty could not apply to the downloaded games and the Court allowed ESA’s appeal. This will require SOCAN to refund any royalties that it has collected from video game sites since the tariff was first certified in 2007.

  1. ... But Streaming Is

The second decision, Rogers Communications Inc. v. SOCAN,3 considered a tariff certified for the communication of downloads and streams by online music services. In view of the Court’s decision in ESA, the download issue was moot; like video game downloads, music downloads are not “communications” and therefore do not implicate the communication right. Consequently, the only real question in this appeal was whether live streaming (as opposed to downloading) of content on-demand was a “communication to the public” that could attract a royalty.

In challenging the proposed tariff, the appellants had argued that streaming was a “point-to-point” communication of a discrete copy of single work and therefore a private transmission rather than one “to the public.” Writing for the majority, Rothstein, J. disagreed and found that providing music for on-demand, online streaming must be viewed in its overall context rather than on a transmission-by-transmission basis. In this context, streaming is a series of repeated transmissions of a work to different customers. As a result, streaming engages the “communication to the public” right and could therefore be subject to SOCAN’s proposed tariff.  

  1. Online Music Previews Are Fair Dealing for the Purpose of Research

In the third decision, Society of Composers, Authors and Music Publishers of Canada v. Bell Canada,4 SOCAN appealed a Copyright Board decision that free, 30-second online “previews” of musical works were exempt from royalty tariffs. Both the Board and the Federal Court of Appeal had decided that, although streaming previews does engage the authors’ “communication” right (which, given the decision in Rogers, is now perfectly clear), they fell within the “fair dealing” dealing exception to copyright infringement for purposes of research or private study. The Court dismissed SOCAN’s appeal.

SOCAN had argued that “research”, for the purposes of the Copyright Act, could not be defined so broadly as to include acts directed only at allowing consumers to identify particular items for purchase. The Court disagreed, holding that, on the “large and liberal interpretation” mandated by its decision in CCH Canadian v. Law Society of Upper Canada,5 “research” need not be for creative purposes only. The Court then determined that this research was “fair dealing” by applying the oft-cited factors from CCH (i.e., the purpose of the dealing, the character of the dealing, the quantity of the dealing, available alternatives to the dealing, the nature of the work and the effect of the dealing on the work), noting in particular that, on these facts, the “purpose” to be examined was that of the end user, not the copier, and that the relevant inquiry into “amount” was the amount of the work used in each individual dealing, not the aggregate amount of content used in the course of the system of dealing as a whole. The aggregate amount of dealing is to be considered as part of the “character of the dealing”, not the amount.

After applying the CCH factors to the previews, the Court concluded that the Board correctly balanced the interests of creating and disseminating works with ensuring that creators are fairly rewarded and accordingly dismissed the appeal.  

  1. Photocopies Made by Teachers for Students May Be Fair Dealing

The fourth decision was Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright).6 Access Copyright, a collective society that administers reproduction rights in literary and artistic works, applied to the Board for a tariff respecting photocopies made by elementary and secondary school teachers. At issue was whether these copies, which the Board found are distributed to students as complements to textbooks used in class, fell within the “fair dealing” exception to infringement for the purposes of research or private study. Both the Board and the Federal Court of Appeal found that, where copies were made on the teachers’ own initiative, rather than at the request of students, the true “purpose of the dealing” was “instruction” and not “private study” and the dealing was not fair. A coalition of provincial ministers of education appealed.

In another 5-4 split, the Supreme Court allowed the appeal. Writing for the majority, Abella, J. reinforced that “fair dealing” is a user’s right and that that “research” should not be limited to creative purposes. Because the parties had agreed that the copies at issue were for “private study”, and therefore satisfied the first step of the CCH test, the Court turned immediately to the application of the CCH fairness factors. As in SOCAN v. Bell, it held that the relevant “purpose” was that of the students as end users, not the teachers as copiers. Although a copier cannot “hide behind the shield of the user’s allowable purpose in order to engage in a separate purpose that tends to make the dealing unfair,” that was not the case on the facts before the Court. Here, the majority found that teachers as copiers and students as users share a “symbiotic purpose” in that the teachers’ instruction, by necessity, guides and facilitates the students’ research and private study. To the majority, separating study in a classroom setting from individual study and learning in “splendid isolation” was an artificial distinction, and the Court stated that once again.

After reviewing the remaining CCH factors – including by repeating the direction in SOCAN v. Bell that the aggregate amount of copying is not to be considered as relevant to the “amount of the dealing” but, instead, to the “character of the dealing”, and finding that there appeared to be insufficient evidence to support the Board’s finding that photocopying by schools had an adverse effect on the market for textbooks – the Court held that, on the facts before the Board, it was unreasonable to conclude that the copies in question were not “fair dealing.” It therefore remitted the matter back to the Board for reconsideration, with the CCH factors to be reapplied in light of the reasons of the majority.  

  1. No Public Performance Royalties for Movie Soundtracks Accompanying Films

The fifth and final copyright decision of the day was Re:Sound v. Motion Picture Theatre Associations of Canada.7 Re:Sound, formerly the Neighbouring Rights Collective of Canada, filed two tariff proposals claiming royalties for the performance in public, and the communication to the public, of pre-existing recorded music used in the soundtracks of movies and television programs. The Copyright Board refused to certify the tariffs, holding that, while the performance and communication of sound recordings does attract royalties in certain circumstances, the definition of “sound recording” in the Copyright Act specifically excludes soundtracks when they accompany cinematographic works. The Federal Court of Appeal upheld the decision of the Board.

The Supreme Court dismissed Re:Sound’s appeal. In a unanimous decision authored by LeBel J., it held that, under the Act, “[u]nless what is being performed or communicated to the public by telecommunication is a ‘sound recording’, the right to collect royalties on that communication or performance will not be triggered.” The Court agreed with the Board that even a pre-existing sound recording, when embodied in the “soundtrack” of a cinematographic work, is not a “sound recording” within the meaning of the Act “where it accompanies the cinematographic work.” In other words, while the owner of copyright in a particular sound recording may be entitled to royalties when the recording is performed or communicated separately from the soundtrack of a film or television program, there is no similar entitlement when that performance or communication takes place only as part of the performance or communication of the film or television program itself. .