Supreme Court of Canada Decision on Tariff 22: ISPs not Liable for Music Caching

Internet Service Providers were able to celebrate a day early for Canada Day. On June 30, 2004, the Supreme Court of Canada handed Canadian ISPs a 9-0 victory in what has been an almost decade-long copyright battle with music rights collectives over the Copyright Board's proposed "Tariff 22". The issue has been who should be liable for royalties on copyright-protected music transmitted over the Internet. (For more background, see "Tariff 22 Decision Heading to Supreme Court" in an earlier issue of E-TIPSâ„¢, (Vol 1, No 22, April 10, 2003) and see also the article by Colin Adams: "Supreme Court of Canada Begins Hearing Arguments on Tariff 22" (http://dww.local/?page_id=1017)). In the Supreme Court's decision, styled as Canadian Association of Internet Providers v Society of Composers, Authors and Music Publishers of Canada, the Court found that ISPs do not "communicate" music files by transmitting them on demand over the Internet. Also, settling a controversial issue left from the prior Federal Court of Appeal decision, the Supreme Court held that ISPs do not infringe copyright by temporarily storing (caching) files in the course of transmitting them. The Court applied section 2.4(1)(b) of the Copyright Act which deems that providers of "the means of telecommunication" do not "communicate" works for the purpose of copyright infringement. The Court found that caching files was a "serendipitous consequence of improvements in Internet technology" and should not cause ISPs to lose the benefit of this exemption. Writing for the majority, Mr. Justice Binnie said that "by enacting s. 2.4(1)(b) of the Copyright Act, Parliament made a policy distinction between those who abuse the Internet to obtain 'cheap music' and those who are part of the infrastructure of the Internet itself. It is clear that Parliament did not want copyright disputes between creators and users to be visited on the heads of the Internet intermediaries." Applying the CCH Canadian Ltd case (see "Long Awaited Supreme Court of Canada Decision on Copyright in Legal Reasons" in an earlier issue of E-TIPSâ„¢, (Vol 2, No 20, March 17, 2004)), the Court also said that ISPs do not "authorize" communication of music files in the ordinary course of providing the facilities for telecommunication. However, Justice Binnie offered that such "authorization" might be found if an ISP became aware of infringing material on its system and failed to take remedial action. The Court also considered what jurisdictional principles should apply in identifying violators of Canadian copyright law in Internet transactions. Justice Binnie left this to a case-by-case determination, saying that infringement liability could attach whenever there was a "real and substantial connection" to Canada. He overturned the Copyright Board's initial ruling in which liability would follow the jurisdiction of the host server. In separate reasons (on this issue only), Mr. Justice LeBel upheld the Copyright Board's bright-line test of the host server jurisdiction, saying that this standard has the virtue of simplicity, and would also promote respect for users' privacy rights (as it would not require scrutiny of individual users' surfing and downloading activities). The Court referred the case back to the Copyright Board for determination of the scale of royalties to be payable for Internet-transmitted music works. The decision has implications for music rights collectives who may now be forced to pursue royalties from individual Internet users (some of which have no physical presence in Canada) instead of the better financially-equipped, and easier-to-track Canadian ISPs. A copy of the decision is available at: http://www.lexum.umontreal.ca/csc-scc/en/rec/html/2004scc045.wpd.html. News coverage can be found at: http://www.cbc.ca/cp/business/040630/b0630110.html; and http://makeashorterlink.com/?H20E26BB8. Summary by: Jennifer Jannuska