Fair Dealing Exemption Broadly Interpreted by SCC to Cover the “Research” of Streamed Music Previews

Published July 25th, 2012

Society of Composers, Authors and Music Publishers of Canada (“SOCAN”) v. Bell Canada, 2012 SCC 36

Summary – Streamed music previews communicated over the internet are excluded from works for which royalties are payable to composers, authors, music publishers and administrators in respect of performance and communication rights.

In dismissing the appeal and upholding the decision of the Federal Court of Appeal (the “FCA”), which in turn, upheld the decision of the Copyright Board (the “Board”) that music previews communicated over the internet fell within the scope of the “fair dealing” exception under the Copyright Act (the “Act”), the Supreme Court of Canada (“SCC”) applied the two step test for fair dealing:  first, determine whether the dealing is for the purpose of “research” or “private study” and second, determine whether the dealing is “fair”.

The SCC confirmed that “research” is not limited to creative purposes and it is the perspective of the end consumer that is considered and not the internet service provider.  The use of the music previews constituted fair dealing and did not require the payment of royalties, having regard to several factors:  (i) the purpose of the previews, (ii) there were reasonable safeguards in place to prevent further use and copying of the works, (iii) there were no reasonable alternatives to the preview system, (iv) the previews did not compete with the full length works, and (v) the intended balance of creators’ rights and user rights under the Act.

Analysis – Music previews, which can generally be defined as short selections of musical works (30 seconds or less in length) of low quality that are accessed from the internet but not downloaded by users, are commonly used by commercial internet sites in the business of the sale of music to allow consumers to preview musical works prior to purchase.

SOCAN filed proposed tariffs with the Board for musical works communicated to the public over the internet which included a tariff for music previews.  The Board rejected the tariff request for music previews on the basis that music previews do not infringe copyright in the works since use in this manner is “fair dealing” for the purpose of research under section 29 of the Act[1].  Accordingly, no royalties were required to be paid for the use of works as music previews.

SOCAN unsuccessfully appealed the Board’s decision to the FCA and raised the following arguments in support of their appeal to the SCC:

1. “research” was interpreted too broadly by the Board and the FCA as no creative purpose is involved in the use of music previews;

2. “research” should have been interpreted from the perspective of the internet service provider and not the end consumer; and

3. The use of the music previews is not “fair” as the purpose is purely commercial.

In rejecting SOCAN’s submissions, the SCC noted that copyright requires a balance between the promotion of public interest in the encouragement and dissemination of works and the intellect and just reward of the creator, with users’ rights being an essential part of furthering the public interest objectives of the Act.

The proper test for assessing fair dealing detailed by the SCC in CCH Canadian Ltd. v. Law Society of Upper Canada[2] (“CCH”) involves a two-step analysis:  it must first be determined whether the dealing is for the purpose of “research” or “private study” and, if so, it must then be determined whether the dealing is “fair”.  The six fairness factors to be used as guidance are the purpose, character, and amount of the dealing, existence of alternatives to the dealing, the nature of the work and the effect of the dealing on the work.

Applying the two-part CCH test and fairness factors, the SCC rejected SOCAN’s arguments based on the following considerations:

1. The concept of “research” in s.29 of the Actshould not be interpreted so narrowly as to require the presence of a creative element – research can be undertaken for mere personal interest and result in no new facts or conclusions.  SOCAN’s reliance on American jurisprudence relating to the US concept of “fair use” and the underlying requirement of a transformative purpose of the use was considered inapplicable given the fundamental differences in the Canadian and US legislative schemes for copyright.  In Canada, research must be given a fair and liberal interpretation to ensure users’ rights are not “unduly constrained”.

2. In assessing whether the use of music downloads was for “research”, the assessment based on the use by the end consumer rather than the internet service provider was appropriate.  The service provider’s purpose in making the works available is not the relevant perspective from which to assess the qualification of the use as “research”.  As noted in CCH, fair dealing is described as the “user’s right” which in the present case is the end consumer and not the internet service provider.

3. The determination of what constitutes “fair” dealing must be assessed based on the facts in each case considering the 6 fairness factor guidelines.  Music previews are used by service providers for the purpose of allowing end users to research and identify musical works.  Reasonable safeguards were in place to ensure use for the purpose of research (the previews were short, of low quality than the actual work and were streamed, not downloaded meaning no copies were kept or made by the user).  There were no reasonable alternatives to the preview system and none of the alternatives suggested by SOCAN were capable of demonstrating the sound of the work to the consumer.  The fact that musical works were available for purchase without first previewing the work did not support the conclusion that there was no beneficial effect on dissemination of the work as a result of the previews.  Finally, given the short duration and low quality of the music previews, they cannot be considered works that compete with the full length musical work available for purchase.

Accordingly, the SCC concluded that neither the Board nor the FCA erred in concluding that the short, streamed, low quality musical previews accessed by end users constituted fair dealing research under s.29 of the Act and use of the works in this manner did not constitute copyright infringement or require payment of royalties.

Practice Point – The assessment as to whether or not a communication is considered “fair dealing” must be approached from the perspective of the end user with a focus on user’s rights and the promotion of public interest in the encouragement and dissemination of works but balanced with the intellect and just reward due to the creator of the work.  There is no requirement that the use result in creative output to be considered fair dealing “research”.  Having the proper safeguards in place, including preventing the user from retaining copies of the work for future use and/or copying appears to be a persuasive factor in the assessment.  Arguably, the SCC’s decision signals a broad interpretation of “fair dealing” under s. 2 of the Act.

 


[1] R.S.C. 1985, c-42, s. 29 “Fair dealing for the purpose of research or private study does not infringe copyright.”