On November 26, 2015, the Supreme Court of Canada (SCC) issued its decision in the case of Canadian Broadcasting Corp v SODRAC. In allowing SODRAC’s appeal, the SCC decided that royalties are payable for ephemeral copies of works that are made as part of the broadcasting process, but the principle of technological neutrality should be considered when setting the royalty rate. 

In accordance with the Copyright Act (the Act), the CBC pays royalties to SODRAC for the right to broadcast musical works as part of its programming. Broadcast-incidental, or ephemeral, copies are made by broadcasters in the process of preparing broadcasts.  The question at issue in this case was whether technological neutrality should prevent additional royalties being payable on ephemeral copies.

In its initial decision, the Board found that ephemeral copies engaged the reproduction right of rightsholders. The courts were faced with deciding whether the 2012 case of ESA v SOCAN (ESA), where the SCC highlighted the importance of technological neutrality in copyright, overruled the SCC’s earlier decision in Bishop v Stevens, a 1990 case that explicitly stated that royalties are payable for ephemeral copies. 

The CBC argued that the principle of technological neutrality in ESA marked an evolution in copyright law since the Bishop Case. However, the Court found that the principles of technological neutrality and balanced copyright “can inform the interpretation and application of the terms of the Act, but they cannot supplant them”.

The SCC found that nothing in the Act, its context or its legislative history suggested that ephemeral copies should be exempt from the payment of royalties. The SCC did find, however, that the Board erred in failing to consider technological neutrality in setting the value of ephemeral copies. The SCC therefore remitted the matter back to the Board for reconsideration.

In dissent, Justice Abella found that the imposition of royalties on ephemeral copies not only violates the principle of technological neutrality, but distorts the accepted balance between the interests of copyright owners and the public interest. As the CBC already pays fees to SODRAC for broadcasting, additional royalties “artificially raise the cost of broadcasting television programs, resulting in an increased cost to consumers for the same product.” Justice Abella found that penalizing broadcasters, and the public, for new and improved technologies creates entitlements for copyright owners that are not contemplated by the Act.

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