On April 8, 2009, the Copyright Board certified a new tariff for Canada's two ssatellite radio providers: Sirius Satellite Radio (Sirius) and Canadian Satellite Radio Inc. (CSR). After launching their operations in 2005, satellite radio services reached over 1 million Canadian subscribers by the summer of 2008. Three Canadian copyright collectives, the Society of Composers, Authors and Music Publishers of Canada (SOCAN), the Neighbouring Rights Collective of Canada (NRCC) and CMRRA/SOBRAC Inc. (CSI), representing authors, composers, performers, record companies and publishers, filed tariffs with the Board, to collect royalties from the broadcast of music on this new medium.
Entitlement to Royalties
While the providers agreed that SOCAN and NRCC were entitled to communication right royalties, they contested CSI's claim on grounds that satellite radio does not involve the reproduction of works, pursuant to section 3(1) of the Copyright Act.
As a condition of their broadcast licences, the CRTC requires satellite radio providers to generate and deliver Canadian content. Both Sirius and CSR generate their Canadian content in Canada, by using either their own studios or third-party providers. While some of the Canadian content is stored on servers in Canada before being sent to the U.S., much of the content is copied directly onto servers in the United States.
The Board determined that the reproductions made for the purpose of broadcasting were made in the United States, and were thus subject to U.S. copyright law only. The fact that the authorization for the reproduction came from Canada was not sufficient to subject the satellite radio providers to Canadian copyright law. The Board determined that any copies on Canadian servers were temporary and made only for the purpose of content selection and not distribution. Therefore, the Board did not find an infringement of copyright on this basis.
The Board also considered whether the four-to-six second buffer between transmission and reception by the user's receiver also amounted to a reproduction. The Board determined that it did not. While buffering, like streaming, involves an act of copying, the Board concluded that this action does not meet the statutory threshold of a "substantial part" of a work. The Board came to the same conclusion for reproductions made in connection with Internet streams of satellite radio.
However, the recording feature on the user's receiver, also known as an "extended buffer feature," rendered the satellite providers subject to the statute. The Board agreed with CSI's submission that the providers authorize reproductions by allowing the receivers to permit copying of broadcasted music. The providers actively promote the extended buffer feature to potential subscribers. In the Board's words, the providers' activities are not "content neutral."
While the satellite providers pleaded fair dealing, the Board rejected the providers' defence, citing no evidence that the extended buffer features were used for the purpose of research or private study. By contrast, the evidence demonstrated that the feature was marketed to promote subscriptions to the service.
Extent of the Tariff
Finding that the providers were carrying out protected acts, the Board evaluated several expert proposals for the measure of the applicable tariffs. Ultimately, the Board adopted an approach similar to the one taken for digital pay audio services, subject to a number of adjustments.
The Board set tariffs requiring the providers to pay a total rate of about 6.2 per cent of their revenues for their use of copyright-protected music. In light of the extensive start-up costs incurred by the providers and in light of projected profitability in 2010, the Board discounted the rates for the period 2006 to 2009.