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Supreme Court of Canada affirms principle of technological neutrality in Canadian copyright law

On November 26, 2015, the Supreme Court of Canada issued a 7-2 split decision affirming that even incidental copies of a work made to facilitate broadcasting will engage the reproduction right and require a license. In reaching its decision, the Supreme Court highlighted the central role that the principle of technological neutrality plays in Canadian copyright law. The principle of technological neutrality recognizes 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. The goal of technological neutrality is to preserve the traditional balance between authors and users in the digital environment.

The decision under appeal.  In CBC v SODRAC, 2015 SCC 57, the Canadian Broadcasting Corporation (CBC) disputed the finding of the Copyright Board and Federal Court of Appeal that the Copyright Act required a separate license for incidental copies of works made to facilitate broadcasting, and also disputed the valuation of the license fee.

The parties’ positions.  CBC is Canada’s public television broadcaster. The Society for Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC) is a collective management society that grants licenses to reproduce, or make copies of, copyrighted musical and artistic works. SODRAC does not grant licenses for broadcasting, since broadcasting rights are managed by a separate collective society.

The parties agreed that a license is required during production when copyrighted musical works are synchronized with video to produce finished television programs and movies, called “master copies”. In order to broadcast a master copy, CBC loads the master copy into its digital system and makes temporary copies for various purposes, such as for reformatting to meet technical requirements, editing for language or timing, and pre-screening. These copies are referred to as “broadcast-incidental” copies. The dispute involved SODRAC’s claim that a separate license is required for the broadcast-incidental copies.

To support its claim for a license over broadcast-incidental copies, SODRAC relied upon a previous decision of the Supreme Court (Bishop v Stevens, [1990] 2 SCR 467), which held that temporary musical recordings made to facilitate a later broadcast are considered reproductions under the Copyright Act.  In response, CBC argued that subsequent rulings by the Supreme Court favoured a finding that broadcast-incidental copies do not engage the reproduction right. Specifically, CBC relied upon the requirement to balance user and right-holder interests discussed in Théberge v Galerie d’Art du Petit Champlain inc, 2002 SCC 34, and the principle of technological neutrality discussed in Entertainment Software Association v SOCAN, 2012 SCC 34 (ESA).

The majority.  In its ruling, the majority held that the principles of balance and technological neutrality inform the interpretation and application of the Copyright Act, but cannot override its express wording. The majority determined that both the ordinary meaning of the text and the evidence of legislative intent support a conclusion that broadcast-incidental copies trigger the reproduction right set out in section 3(1)(d) of the Copyright Act.

Having affirmed the need for a license, the majority then held that the license fee was inappropriate since the Copyright Board failed to consider the principles of technological neutrality and balance between users and right-holders interests. The majority commented that relevant factors in setting the valuation of the license will include, but are not limited to, the risks taken by the user, the extent of the investment the user made in the new technology, and the nature of the copyright protected work’s use in the new technology. Since CBC took the risks of investing in and implementing the new technology and CBC’s use of the reproductions was incidental, the majority noted the license fees should be low.

The minority.  A strong minority decision would have held that in order to properly give effect to the principle of technological neutrality, broadcast-incidental copies should not be found to engage the reproduction right in the Copyright Act. The minority concluded that SODRAC was attempting to claim royalties for a particular method of broadcasting musical works as part of television programs and movies, despite never before receiving royalties for broadcasting. The minority agreed with CBC’s characterization that SODRAC was attempting to subvert the Copyright Act to generate economic gain through a layered licensing scheme.

The importance of technological neutrality.  While reaching different conclusions on the statutory interpretation of section 3(1)(d) of the Copyright Act as applied to broadcast-incidental copies, both the majority and minority emphasized the essential role of technological neutrality in interpreting and applying Canadian copyright law. It is clear that Canadian courts have an important role in future cases to ensure that the Copyright Act does not unfairly benefit or prejudice new and emerging technologies.

For further information regarding this topic, please contact a member of our firm’s Copyright & Media group.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.