Supreme Court of Canada affirms principle of technological neutrality and clarifies its application.
Copyright is a creature of statute. It is a right granted to creators by statute only. It is comprised of a bundle of independent rights (synchronization, reproduction, communication, performance) conferred on authors and creators by Parliament. Given its nature, the Courts must respect the Copyright Act and avoid implying terms or overriding the law as it is plainly written.
The purpose of technological neutrality is to preserve the traditional balance between the rights of creators and the public as new technologies are developed to facilitate the dissemination of works that attract copyright.
ORIGINS
Technological Neutrality is a theory of law, enunciated in Entertainment Software Association v. SOCAN, 2012 SCC 34 (ESA) by a majority of the Supreme Court of Canada (the “Court”) that requires the Copyright Act to be interpreted in a way that avoids “imposing an additional layer of protections and fees based solely on the method of delivery of the work to the end user.” [1]
In ESA, the Court considered the relationship between the reproduction and communication rights under the Copyright Act, and applied the principle of technological neutrality to hold that downloading a work (in this case a video game) engaged only the reproduction right, and not the communication right.
Absent evidence of Parliament’s intent to the contrary, the technological neutrality principle requires that the Copyright Act be interpreted to avoid penalizing the user for providing an alternative, technologically advanced method, for delivering copies of an artistic work.[2]
CBC v. SODRAC
On November 26, 2015 the Court found that even incidental copies of a work made to facilitate broadcasting will engage the reproduction right and require a license. Notably, the Court reaffirmed the central role that the principle of technological neutrality plays in Canadian copyright law: the principle of technological neutrality requires that the Copyright Act should not be interpreted or applied to favour or discriminate against any particular form of technology. Further, the Court delineated the factors to apply when technological change is a material fact.
In CBC v. SODRAC, 2015 SCC 57, the Canadian Broadcasting Corporation (CBC) appealed the finding of the Copyright Board, and the affirmation of the Federal Court of Appeal, that required the CBC to pay for a separate license for “broadcast-incidental” copies of a work, and disputed the valuation of that license.
FACTS
The parties agreed that a license is required during production when copyrighted musical works are synchronized with video to produce movies and television programs called “master copies”. However, in order to broadcast a master copy, CBC uploads the master to their digital database and makes temporary copies for the purposes of formatting, editing for language or timing, and other broadcasting purposes. These reproductions are the “broadcast-incidental” copies for which SODRAC sought an additional license.
The Société du droit de reproduction des auteurs, compositeurs et éditeurs au Canada (SODRAC)[3] relied upon an earlier decision of the Court in Bishop v. Stevens, [1990] 2 SCR 467 which held that temporary musical recordings made to facilitate a broadcast are reproductions under the Copyright Act. The CBC countered that subsequent decisions of the Court in Theberge v. Galerie d’Art du Petit Champlain Inc., 2002 SCC 34 which requires the Court to balance user and right-holder interests generally, and ESA which enshrines the technological neutrality principle, favoured a finding that broadcast-incidental copies no longer engage the reproduction right.
MAJORITY
The majority of the Court held that the principle of technological neutrality, and the requirement to balance the rights of right-holders and the public inform the interpretation of the Copyright Act but cannot override the express wording of the statute. Therefore, given the ordinary meaning of the statute broadcast-incidental copies do trigger the reproduction right as set out in section 3(1)(d)[4] of the Copyright Act.
Having found that the reproduction right had been engaged, a majority of the Court found that the license fee fixed by the Copyright Board was inappropriate as the Board had failed to apply the principle of technological neutrality in exercising its rate-setting function. The Court found that the license fee in this case should be lowered.
The principle of technological neutrality requires that the value delivered to end-users must be taken into account. When fixing license fees, the Court requires the Copyright Board to take into account the following relevant factors:
- The risks taken by the user;
- The extent of the investment the user made in the new technology;
- The nature of the copyright-protected work’s use in the new technology;
- Internal efficiencies gained by using a particular technology; and
- The value derived from the use of the copyright-holder’s rights.
Where the user derives greater value from the use of copyright – resulting from greater efficiencies or a change in the nature of the copyright-protected work’s use – this would be a factor favouring increased royalties to the right-holder. Conversely, where the user undertakes financial risk in developing and implementing new technology, and the use or reproduction of copyright protected work is incidental, the balance principle favours a lower royalty.
Based on these factors the Court found that the licence fee should be lowered and remitted the matter to the Copyright Board for reconsideration.
OUTLOOK
Many commentators, both academic and in practice, admonished the Court for failing to define technological neutrality in ESA in a way that one could apply the principle, and predict outcomes to any reasonable degree. The Federal Court of Appeal itself commented that ESA “provides no guidance as to how a court should apply (the) principle when faced with a copyright problem in which technological change is a material fact.”[5]
This majority decision, aptly written by Rothstein J. clearly provides the legal community and interested parties with the relevant factors one should analyse in order to apply the principle of technological neutrality, as well as the principle of balance.
[1] ESA at para 9.
[2]It was clear in the majority’s reasoning that the internet was simply another, more efficient means of delivering the same end product that could be bought in a store or received through the mail. Since the Society of Composers, Authors and Music Publishers of Canada (SOCAN) had already been compensated by way of reproduction royalties, they were not entitled to an additional communication royalty simply because the video games were being delivered over the internet rather than in physical form.
[3] The Society for Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC) is a collective management society that grants licences to reproduce, or make copies of, copyrighted musical and artistic works. SODRAC does not grant licenses for broadcasting as these rights are managed by another collective society.
[4] Section 3(1)(d) states: “For the purposes of this Act, “copyright”, in relation to a work, means the sole right to produce or reproduce the work or any substantial part thereof in any material form whatever, to perform the work or any substantial part thereof in public or, if the work is unpublished, to publish the work or any substantial part thereof, and includes the sole right in the case of a literary, dramatic or musical work, to make any sound recording, cinematograph film or other contrivance by means of which the work may be mechanically reproduced or performed, and to authorize any such acts.”
[5] At para 44 of CBC v. SODRAC, 2014 FCA 84.
Daniel Nashid
Barrister & Solicitor
416.892.2509
[email protected]