Supreme Court of Canada Begins Hearing Arguments On Tariff 22

© 2003, Deeth Williams Wall LLP. All Rights Reserved.

By: Colin Adams, Student at Law

(December 18, 2003)

On December 3, 2003, the Supreme Court of Canada began hearing arguments on the question whether domestic and international Internet Service Providers (ISP) should pay a tariff for music downloaded by Canadians.

The case finds its origins in 1995 when Tariff 22 was proposed by the Society of Composers, Authors and Music Publishers of Canada (SOCAN), the body which administers the performing and communication rights of its members. Tariff 22 sought to compensate copyright holders of musical works for lost royalties as a result of the Internet transmission and downloading activities of ISP subscribers by charging ISPs a royalty fee. Given that it is not logistically feasible to seek royalty payments, or for that matter prosecute individual Canadian copyright infringers en masse, ISPs were targeted as the practical vehicle for recouping these lost royalties since an ISP represents a logical and efficient choke point in the system.

The Canadian Copyright Board (the "Board") decided to deal with the matter in two distinct phases. The step first was to determine which activities on the Internet, if any, constitute a protected use targeted by the tariff. The second would deal with who should pay the tariff as well as the tariff structure.

On October 27, 1999, the Board rendered its decision. The Board's decision was directed to resolving three major issues. First, the identification of activities that may give rise to copyright infringement under paragraph 3(1)(f) of the Copyright Act, namely the communication of the work to the public by telecommunication. Second, a consideration of the activities which are excluded from the definition of "communication" by virtue of paragraph 2.4(1)(b) of the Act. More commonly known as the common carrier exemption, this paragraph provides that a person does not communicate to the public by telecommunication if the only act performed in respect of the communication is the provision of the means of telecommunication necessary for one person to so communicate the work in question to another. In other words, this provision would protect those who were mere conduits in the communication. Third, the Board addressed the circumstances in which an Internet communication occurs in Canada and thereby become subject to a royalty imposed by the Board. In considering these issues, the Board made the following conclusions:

In fleshing out the meaning of "public" a bit further, the Board stated that an infringing communication "to the public" is satisfied whenever a content provider uploads material onto a server with the intention that the public or a segment of the public will have access to it, even though members of the public neither request nor receive the material simultaneously, and may receive it individually in private. However, "public" does not include an e-mail communication from one individual to another. As such, the thrust of the decision provided that if an ISP acted only as a conduit in the transmission of the musical work over the Internet, it did not "communicate" the work and thus, did not infringe copyright. Rather, the infringement lay with the user who made the work available to the public for download and, in so doing, wrongly purports to control the copyright.

Dissatisfied with this initial result, SOCAN appealed to the Federal Court of Canada. At the Federal Court of Appeal, SOCAN did not challenge many of the Board's findings. However, SOCAN did argue that operators of host servers who post music on them, or Internet access providers who either collaborate with content providers or themselves post music, should lose the protection of paragraph 2.4(1)(b). In considering this issue, the Federal Court of Appeal modified the Board's decision in two key respects. First, the court found that the operation of a cache is not protected by s. 2.4(1)(b) of the Act given that this function is unnecessary to communicate. Second, the court disagreed with the Board's finding that a communication by telecommunication occurs in Canada if it originates from a host server located in Canada. Instead, the court suggested that the Board undertake a case-by-case analysis using the "real and substantial connection" test.

Although interested parties at home and abroad eagerly await the Supreme Court's decision, they will likely have to wait six months or more. In the meantime, some commentators have continued to criticize the case. For exampled, they question why people using the Internet for perfectly legal reasons should see their ISP costs rise in order to pay for problems in the music industry. Others are dubious about the enforcement of such a tariff against foreign ISPs that allow Canadians to download music.

For a copy of the Copyright Board's decision, see: http://www.cb-cda.gc.ca/decisions/m27101999-b.pdf. For a copy of the Federal Court of Appeal decision, see: http://decisions.fct-cf.gc.ca/fct/2002/2002fca166.html. For more information, please see: http://www.lexum.umontreal.ca/csc-scc/en/com/2003/html/03-12-03.4.html; http://www.cbc.ca/stories/2003/12/03/copyright031203; and http://www.washingtonpost.com/wp-dyn/articles/A32610-2003Dec3.html.

Contact James Kosa for additional information on Tariff 22.