On March 16th, the Supreme Court of Canada (SCC) heard oral arguments in CBC v SODRAC . The SCC granted leave to appeal from the Federal Court of Appeal (FCA) decision back in September, which originally stemmed from a 2012 Copyright Board (the “Board”) decision. The issue centers on whether broadcasters should be required to pay royalties on ephemeral or incidental copies of audiovisual works that are created during the process of making a final copy for broadcast. However, what really is at stake here are the principles and scope of technological neutrality – and with a number of interveners and parties interested in the outcome, the IP world has its eyes turned to how this case unfolds.
IPilogue editor Adam Chan originally reported on this case back in a September post on the SCC’s decision to grant leave to appeal. The case arose out of the Board’s decision to collect royalties on these aforementioned ephemeral copies. The CBC disagreed on tech neutrality grounds, arguing that under those principles royalties should not be charged for incidental copies since payments are already made for the use of the original content in final broadcasts. The Board, finding for SODRAC, relied on the SCC’s decision in Bishop v Stevens, which determined that because incidental copies add value to a final broadcast they should attract separate royalties. Furthermore, the SCC in Bishop narrowly interpreted the Copyright Act (the “Act”) to conclude that incidental copies made in the process of creating a broadcast were not part of the broadcast right itself.
At the FCA, CBC argued that Bishop was no longer good law. As discussed by some commentators on the case, CBC argued that the SCC in ESA v SOCAN fundamentally changed the law through its statements about tech neutrality. The Court however decided that neutrality did not override the language of the Act that gives owners of music works the exclusive right of reproduction. The FCA said in paragraph 48 that nothing in ESA “would authorize the Board to create a category of reproduction or copies which, by their association with broadcasting, would cease to be protected by the Act. ESA did not explicitly, or by necessary implication, overrule Bishop v Stevens.” The Court further stated that since the majority’s reasoning in ESA did not rely on or refer to technological neutrality the case did not provide guidance on applying the principle to the situation at hand.
The importance of this appeal has been discussed by many members of the IP world. One commentator noted that the greatest danger in this case is that the SCC could potentially “roll back its finding that technological neutrality is a foundational principle within the law.” Additionally, if the SCC rules that all copies, incidental or not, are copies under the Act there is “the very real possibility of payment demands for the myriad of copies that occur through modern technologies.” In this world of digital copies and Internet file sharing, accessing digital goods could potentially become an expensive task.
Although a webcast of the oral arguments was not available at the time of the writing this post, the parties’ factums are – and prove to be interesting reads. CBC submits that SODRAC is the first copyright holder to “attempt to monetize broadcast-incidental copies…[which is] a subversion of the purpose of the Copyright Act in an attempt to generate economic rents through a layer licensing scheme.” CBC contends that the layered licensing scheme at question was upheld by the Court through a fundamental error of law, “namely the rejection of technological neutrality as a guiding principle in the interpretation and application of the Copyright Act.” CBC asserts in its factum that this layered approach to licensing is “impermissible double-dipping that violates technological neutrality.” It is also interesting to note one of CBC’s requests that if the SCC decides that a licence is indeed required for incidental copies then the royalty should be reduced to a nominal amount “to reflect the fact that broadcast-incidental copies do not have independent economic value.” This request seems to reflect the reality that incidental copies tend to be a part of the production process in creating content, and are not necessarily “valuable” items on their own.
The SODRAC factum on the other hand contends that CBC is attempting “to reverse decades of settled law” and does not mince words in its opening paragraphs:
This appeal amounts to an attempt by CBC to persuade this Court, through a misuse of the principle of technological neutrality, to upset the existing statutory balance in relation to broadcast-incidental copies and to substitute its own policy preferences for those of Parliament, enabling CBC to escape liability for copies it is making and deriving benefits from, and that it has been making and paying for, for decades.
It is also fascinating (and sort of juicy!) to scan through the SODRAC factum and see a couple portions crossed out, specifically the paragraph describing how CBC has made tape and digital broadcast-incidental copies over the years for its programs.
An attendee of the hearing commented on the opening stages of the appeal, saying that it did not start well for the CBC with the SCC being “clearly skeptical” of its arguments. In discussing technological neutrality however, one of the intervenors (CIPPIC) suggested that a test should be established for when a copy should be treated as a copy under the Act. CIPPIC’s fear is that in this digital world that constantly uses ephemeral copying to function, literally interpreting the right to reproduction would give copyright owners control over everybody else’s access to digital content – which is not realistic.
It has been said that this case may “serve to reinforce the importance of the technological neutrality principle and confirm that in the digital world, not ever copy is a copy for the purposes of the Copyright Act.” I agree with this position. Although SODRAC relies on the established law, the law must keep up with our ever-changing (and technologically advanced) world. It is simply impractical to suggest every copy is a copy under the Act when the way we access and store digital information heavily relies on ephemeral copying. To charge royalties on the digital content used in the production process before the final (valuable) broadcast is made seems to be an inappropriate cash-grab and abuse of copyright owners’ powers. However, the conclusion that the law may lend itself to could be completely different, and unfortunately we can never predict with certainty how the bench will sway. I guess we will just have to sit on the couch and find something else to watch until the final result is ready for the air.
Jaimie Franks is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.