SCC: Internet downloads not “communication” under Copyright Act

Nathan Fan
Published July 23rd, 2012

Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada 2012 SCC 34

Summary – In a split 5-4 decision, the Supreme Court of Canada (“SCC”) ruled that Internet downloads of permanent copies of works are subject only to “reproduction” rights and not “communication” rights under the Copyright Act (the “Act”).  In applying the principle of technological neutrality, the majority of the SCC held that there was no practical difference between buying a durable copy of the work in a store and downloading an identical copy over the Internet.

Background – Section 3(1) of the Act provides copyright owners a set of exclusive rights, such as the sole right to reproduce, perform or communicate a work.

The Society of Composers, Authors and Music Publishers of Canada (“SOCAN”) is a collective society that administers its members’ rights of performance and communication of musical works under the Act.  In an application by SOCAN to the Copyright Board (the “Board”) to set a tariff that covered Internet downloads of musical works, the Board concluded that Internet downloads were “communications” to the public under the Act and would thus be subject to a tariff covered by the communications right under the Act.  The Entertainment Software Association (“ESA”) appealed the decision, arguing that the Board erred in deciding that downloads of permanent copies of video games that contained musical works (for which royalties for reproduction rights had already been negotiated with the copyright owners) were also subject to tariffs as “communications” to the public.  On judicial review, the Federal Court of Appeal upheld the Board’s decision.

Analysis – The focus of the appeal before the SCC was the interpretation of the word “communicate” in s.3(1)(f) of the Act, which covers a “communication” right that provides the copyright owner the sole right:

… in the case of any literary, dramatic, musical or artistic work, to communicate the work to the public by telecommunication.

The majority of the SCC held that the Board improperly concluded that Internet delivery of copies of games containing musical works amounts to “communicating” the works to the public, having erred on two fronts:  (1) by ignoring the principle of technological neutrality and (2) by ignoring the connection between communication rights and performance rights and the distinction between performance-based rights and reproduction-based rights.

The principle of technological neutrality requires that the Act be applied equally between traditional and more technologically advanced forms of the same media.  Absent Parliament’s intention to the contrary, the Court should not impose additional layers of protection based solely on the method of delivery (para. [9]).  In reference to sales via brick-and-mortar retail stores, likewise the majority stated that “[t]he Internet is simply a technological taxi that delivers a durable copy of the same work to the end user” (para. [5]).  The Board, having recognized that downloading is an act of reproduction that results in an exact, durable copy of the digital file on the end user’s computer (i.e., identical to the copy bought in the store), failed to apply the principle of technological neutrality when it concluded that delivery via Internet download was subject to both reproduction and communication rights, but delivery via a store or mail was subject only to reproduction rights.

In reviewing the legislative history of s.3(1)(f) of the Act, the majority held that it has been  Parliament’s long-held intention for communication rights to require some connection to performance.  The communication right exists as a category of performance rights, meaning “communication” cannot be extended to involve the transmission of data that gives end users a permanent copy of the work without some performance to the public.  On this point, the majority noted that the Board erred in failing to distinguish between an Internet “download” and “streaming”, where only the latter is akin to a broadcast or performance and thus a “communication”.

The majority also held that it has been Parliament’s long-standing intent to distinguish reproduction and performance rights under s.3(1) of the Act.  A performance, being impermanent in nature, is fundamentally different than a reproduction, which exists as a durable copy of the work.  Thus, the Board erred in extending the term “communicate” to encompass the Internet delivery of durable copies of a work.

The dissent, authored by Justice Rothstein, criticized the majority’s over-reliance on the principle of technological neutrality, stating that the majority’s approach would override the language of the Act and bar the application of different rights intended by Parliament.  Instead, the dissent chose to utilize the dictionary definition of “communication”, which meant any transmission of data, including downloads of durable copies of a work.  Further, the dissent was of the view that based on the current wording of s.3(1) of the Act, the communication right is a self-standing right independent of the performance right.  Thus, it is irrelevant whether the communicated work is a durable copy or a temporary copy, or whether the work is perceivable immediately by the user or at a later time.

Practice Point – In clarifying that Internet downloads of durable copies of musical works do not amount to a “communication”, this decision has essentially altered the previous understanding that all transmissions over the Internet can be subject to both reproduction and communication rights.

The majority also emphasized that the principle of technological neutrality is required when interpreting the rights provided under the Act, and that this principle is consistent with the balance in copyright between promoting the public interest in disseminating works and the just reward for creators.  The application of this ruling would appear to extend to downloads of durable copies of any literary, dramatic, musical or artistic works.

The SCC’s ruling in this decision should be contrasted with another SCC decision released the same day – Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada 2012 SCC 35 – which held that the streaming of a musical work over the Internet was a “communication” of the work to the public by telecommunication.

Thus, having modified the extent of copyright liability for Internet transmissions, these decisions will likely have a significant impact on the future of Internet licensing practices.

 

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