SCC and Technological Neutrality

The Supreme Court of Canada released an important ruling today on the role of technological neutrality in copyright law. In a 7-2 split decision in Canadian Broadcasting Corporation/Société Radio-Canada v. SODRAC 2003 Inc., et al., Justice Rothstein writing for the majority affirmed the principle of technological neutrality and held that royalties must be paid for ephemeral copies of works made by broadcasters for the purpose of facilitating broadcasting. However the majority also remanded a determination of the value of the licenses for those copyrights to the Copyright Board in order to take into account technological neutrality. A strong dissent by Justice Abella (agreed to in part by Justice Karakatsanis) disagreed that copyright applied to ephemeral copies, at all.

The decision is Canadian Broadcasting Corporation/Société Radio-Canada v. SODRAC 2003 Inc., et al2015 SCC 57, an appeal from the Federal Court of Appeal 2014 FCA 84.

This case came to the Supreme Court from judicial review applications of a decision (PDF) of the Copyright Board to settle the terms of a licence to be granted to two broadcasters, Canadian Broadcasting Corporation/Société Radio Canada and Astral Media Inc. (collectively the “Broadcasters”), by SODRAC, a collective society that administers reproduction rights. The key issue was whether royalties are due on ephemeral copies of works made by broadcasters for the purpose of facilitating broadcasting. Both the Copyright Board and the Federal Court of Appeal answered in the affirmative, relying on the 1990 Supreme Court decision in Bishop v. Stevens, [1990] 2 S.C.R. 46. In that case, the Supreme court had held that each of the rights set out in subsection 3(1) of the Copyright Act was a separate right and that use by another attracted royalty payments. Thus royalties were payable for the making of temporary copies of musical works made between the time that a recording of a musical work was received by the broadcaster and the time when the work was broadcast as part of broadcaster’s signal.

Before the Federal Court of Appeal, the broadcasters argued, unsuccessfully, that Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, [2012] 2 S.C.R. 231 (“ESA”), one of the Supreme Court’s 2012 “pentalogy” of copyright cases that discussed technological neutrality, had overtaken Bishop v. Stevens. The Federal Court of Appeal stated that it was “difficult to know how one is to approach technological neutrality post-ESA”  and that since Bishop v. Stevens was “directly on point”, it determined the outcome unless it was  “overturned or disavowed by the Supreme Court”.

Justice Rothstein wrote for the majority in his last copyright decision on the Supreme Court (he had retired in August) and Justice Abella wrote a strong dissent. The majority held that broadcast-incidental copies should not be implied from synchronization licenses and thus royalties were due for such copies. However, the majority remitted back to the Copyright Board for reconsideration the value of the license by applying the principles of technological neutrality.

The majority started with a plain reading of s.3(1)(d) of the Copyright Act and held that such a reading covered broadcast-incidental copies given the reference to the making of “sound recording, cinematograph film or other contrivance by means of which the work may be mechanically reproduced or performed”. This was supported by CBC’s acknowledgement that broadcast incidental copies did not fit within sections 30.8 and 30.9 of the Copyright Act, which establish specific circumstances in which it is not an infringement of copyright to make copies to facilitate broadcasting.  Justice Rothstein stated while “the principles of balancing user and right-holder interests and of technological neutrality are central to Canadian copyright law, they cannot change the express terms of the Copyright Act” [51].

Despite relying upon a plain reading of the Copyright Act, Justice Rothstein emphasized the relevance of technological neutrality to copyright law:

[66] The principle of technological neutrality is recognition that, absent parliamentary intent to the contrary, the Copyright Act should not be interpreted or applied to favour or discriminate against any particular form of technology. It is derived from the balancing of user and right-holder interests discussed by this Court in Théberge — a “balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator”: para. 30. Because this long-standing principle informs the Copyright Act as a whole, it must be maintained across all technological contexts: “The traditional balance between authors and users should be preserved in the digital environment”: ESA, at para. 8.

Given the Federal Court of Appeal’s remarks that it had insufficient guidance from the Supreme Court on how technological neutrality should be applied, the majority expressly stated that the reasons are aimed at providing such guidance. It was emphasized that technological neutrality requires a consideration of the difference between the old and new forms of delivery of works, as well as a comparison of the value derived from the use of reproduction in the technologies in a valuation analysis. The majority found that the Copyright Board failed to take into account certain fundamental principles underpinning the Copyright Act, such as technological neutrality and the balance between users and owners, and thus remitted the issue of valuation of the license for broadcast-incidental copies to the Board. Interestingly, Justice Rothstein further noted that the statutory licensing scheme fixed by the Board pursuant to s.70.2 does not have a mandatory binding effect against users. Thus a user retains the ability to decide whether to become a licensee and operate pursuant to that licence, or to decline (and risk an infringement suit).

Justice Abella in a strongly-worded dissent held that the imposition of royalty fees for broadcast-incidental copies violated the principle of technological neutrality and upset the balance between users and owners. Justice Abella found that broadcast-incidental copies go to the core of broadcasting: a broadcast-incidental copy is not a separate reproduction as its sole purpose is to effect the broadcast. The minority found that the majority employed too literal an approach to interpreting the Copyright Act, thus leaving no room for the principle of technological neutrality in the interpretation of rights enumerated in s.3(1) of the Act. The correct approach, according to the minority, was to apply a robust vision of technological neutrality as a core principle of statutory interpretation under the Copyright Act.

The question in this case, as phrased by the minority, was: “how to preserve this balance in the face of new technologies that are transforming the mechanisms through which creative works are produced, reproduced and distributed.” Justice Abella agreed with CBC’s argument that monetizing broadcast-incidental copied was an attempt to generate economic gains through a lawyered licensing scheme:

[164] … The principle of technological neutrality requires that the interpretation and application of the Copyright Act focus on the essential character of the activity and not the technical modalities by which it is achieved. The essential character of the broadcasting activity does not change with the adoption of modern digital technologies that are dependent on the creation of incidental copies in order to accomplish the activity. Each broadcast-incidental copy is not a separate reproduction of the work under the Act simply because the technical imperatives of effecting a broadcast require the presence of multiple copies. They do not, as a result, attract separate royalties. To conclude otherwise is to doom both technological neutrality and the ability of copyright law to preserve the delicate balance between the rights of copyright holders and the public’s interest in the dissemination of creative works.

For now, both users and creators are claiming wins from the Supreme Court’s decision in this case. The only certainty is that technological neutrality has central importance in copyright law in Canada and has been strongly affirmed by our highest court.

This is a guest post by Sangeetha Punniyamoorthy, one of my partners at Dimock Stratton LLP.

[This post has been updated since first posted.]