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Canadian Copyright Decisions: Canadian Supreme Court Ends Royalties for Online Music Downloads

Copyright Patent

Entertainment Software Association (ESA) v. Society of Composers, Authors and Music Publishers of Canada (SOCAN), 2012 SCC 34; Rogers Communications Inc. v. SOCAN, 2012 SCC 35, SOCAN v. Bell Canada, 2012 SCC 36.

Opinions available at the Supreme Court of Canada.

In three copyright decisions on July 12, the Canadian Supreme Court interpreted the scope of rights in musical works under Canada’s Copyright Act. In Entertainment Software Association (ESA), the court overturned a finding of the Canadian Copyright board that when a user downloads a song from an online music store, it is not a communication to the public. In Rogers, however, it found that streaming a song from an online music service was “a communication to the public” requiring a royalty payment to the artist for a performance of the song. Finally, in Bell, the court held that the 30–90 second streaming previews of songs available from stores like iTunes do not require payment of a royalty to the artist. Together, the rulings significantly change the status quo for royalties collected by SOCAN (Society of Composers, Authors and Music Publishers of Canada) on behalf of artists for digital performances of their works.

Reuters has an overview of the decisions. Techvibes discusses the impact of the Entertainment Software Association decision on the video game industry.

In ESA and Rogers, the court interpreted s. 3(1)(f) of the Copyright Act, which gives owners of copyrights in musical works the right “to communicate the work to the public via telecommunication.” Copyright Act, R.S.C. 1985, c. C-42, s. 3(1)(f) (Can.). According to Reuters, prior to the court’s rulings, the Copyright Board had determined that downloading and streaming songs from online services were all covered by s. 3(1)(f). Royalties for these performances were collected and distributed to the artists by the performing rights society SOCAN. SOCAN also collected royalties for musical works contained in video games that users downloaded from online services, even though the video game producers had already paid for reproduction rights prior to producing the games.

In ESA, the Court found that s. 3(1)(f) implies a principle of “technological neutrality . . . which describes a right to produce or reproduce a work ‘in any material form whatever’. In [the court’s] view, there is no practical difference between buying a durable copy of the work in a store, receiving a copy in the mail, or downloading an identical copy using the Internet. The Internet is simply a technological taxi that delivers a durable copy of the same work to the end user.” In support of this conclusion, the court argued that absent any evidence to the contrary, Parliament would not have intended a scheme that imposed the end user with more fees simply for using “more efficient, Internet-based technologies.”

In Rogers, the court found that its decision in ESA and its explanation of the technology neutrality principle precluded the charging of royalties for songs downloaded from online music stores like Apple’s iTunes. However, the court rejected an argument by telecommunications providers and online music services that streaming of a musical work to an individual user, as done by interactive services like Rdio, should not be considered “to the public,” since the single work would be conveyed multiple times to many users. This, too, was supported by the neutrality principle in s. 3(1)(f), since to hold that interactive streaming services do not transmit “to the public” would be to treat these services differently from other means of performing via telecommunication, such as traditional radio.

Finally, in Bell, the court rejected SOCAN’s appeal from a Copyright Board decision that 30–90 second streaming previews of musical works offered in online stores like iTunes should be excepted from the kind of royalty payments for streaming communications upheld by Rogers. That is because s. 29 of the Copyright Act allows for “fair dealing” in activities that would otherwise be infringement for the purpose of research. From the perspective of the consumer, these previews constitute research because they help consumers decide whether to purchase the song. The court further found that this use was “fair” under previous precedent on s. 29 because, inter alia, it was confined to the intended research purpose and constituted a small portion of the total work.

The Halifax Chronicle-Herald calls the court’s decisions “common sense” for copyright. The paper argues that the court’s neutrality principle was logical in light of the popularity of online delivery services for digital content. It further suggests that the decisions will be good for content creators in the long run by facilitating increased online distribution of content.

Andrew Crocker is a 3L at Harvard Law School.