Supreme Court of Canada Releases Decision Affecting Arbitration of IP Disputes

The Supreme Court of Canada ("SCC") has released its decision in Editions Chouette (1987) Inc. v. Desputeaux. This decision will have a significant impact on the future use of arbitration in the resolution of intellectual property rights disputes. This case arose out of a dispute concerning the ownership of copyright in the Caillou character appearing in a popular series of children's books. A motion was brought seeking to have the parties referred to an arbitrator by virtue of section 37 of the Quebec Act respecting the professional status of artists in the visual arts, arts and crafts and literature, and their contracts with promoters (the "ARPSA"). Section 37 of the ARPSA provides that every dispute arising from the interpretation of a contract between an artist and a promoter shall be submitted to an arbitrator. The Quebec Superior Court found that the existence of the contract was not at issue and that there were no allegations relating to its validity and therefore, referred the case to arbitration. After the arbitrator made his decision, a motion for annulment of the arbitration award was brought before the Quebec Superior Court, which was subsequently dismissed. The Quebec Court of Appeal reversed that judgment. In part, it was the opinion of the Court of Appeal that section 37 of the Copyright Act prevented the arbitrator from ruling on the question of copyright, holding that section 37 of the Copyright Act assigned exclusive jurisdiction to the Federal Court, concurrently with the provincial court, to hear and determine all proceedings relating to the Copyright Act. In reversing the decision of the Court of Appeal, the SCC held that "the arbitrator acted in accordance with his terms of reference and made no error such as would permit annulment of the arbitration award". The SCC decided that s. 37 of the Copyright Act did not prevent an arbitrator from ruling on the question of copyright. The Court pointed out that this provision of the Copyright Act had "two objectives: to affirm the jurisdiction that the provincial courts, as a rule, have in respect of private law matters concerning copyright and to avoid fragmentation of trials concerning copyright that might result from the division of jurisdiction ratione materiae between the federal and provincial courts in this field". The Court stated that the provision was not intended to exclude arbitration, and that it simply identified the court which, within the judicial system, would have jurisdiction to hear cases involving a particular subject matter. The court made it clear that if Parliament had intended to exclude arbitration in copyright matters, it would have clearly done so. The Court went on to conclude that section 37 of the Copyright Act was "sufficiently general to include arbitration procedures created by a provincial statute". In addition, the SCC also held that the Court of Appeal had erred in "holding that cases involving ownership of copyright may not be submitted to arbitration, because they must be treated in the same manner as questions of public order, relating to the status of persons and rights of personality". In particular, the SCC stated that "an error in interpreting a mandatory statutory provision would not provide a basis for annulling the award as a violation of public order, unless the outcome of the arbitration was in conflict with the relevant fundamental principles of public order". Finally, the Court held that the Court of Appeal had also erred in deciding that the fact that a copyright arbitration decision may be used against everyone, including third parties, was a bar to the use of arbitration in copyright disputes. Specifically, the SCC pointed out that, in this case,

[t]he arbitrator ruled as to the ownership of the copyright in order to decide as to the rights and obligations of the parties to the contract. The arbitral decision is authority between the parties, but is not binding on third parties who were not involved in the proceeding. To illustrate this point, there would be nothing to prevent someone who was not a party to the arbitration agreement who had also been involved in writing the texts for the Caillou books from applying to a court to have his or her copyright recognized.

For a copy of the decision, visit: http://makeashorterlink.com/?Z3F8213F3