Five Cases That Shook the World: An Entertainment Lawyer's Guide to the Copyright Pentalogy

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Yowza. That disturbance in the force you felt on July 12, 2012 was the world of Canadian copyright law shifting slightly on its axis. The Supreme Court of Canada simultaneously released its decisions in five cases, cases which had been heard together in an unprecedented series of oral hearings in December 2011:

Dubbed the "Copyright Pentalogy", and coupled with the passage of Bill C-11 (The Copyright Modernization Act) in June, the decisions make 2012 one of the most consequential years in the history of Canadian copyright law. Many (many, many, many, many, many, many, many, many, many) others have weighed in with commentary and overviews of the Pentalogy - readers are encouraged to seek those out. The decisions, taken together, are lengthy and detailed - it will take months (even years) before their impact is fully appreciated. This post represents a preliminary attempt to outline what these decisions mean, in practical terms, for Canadian entertainment lawyers and their clients.

Before doing that, however, I wanted to take a moment to situate the Pentalogy decisions in terms of their broader context. (I sometimes joke that entertainment lawyers are the dumber cousins of intellectual property lawyers - well, that goes double for administrative law lawyers, so this post deliberately ignores all of the "standard of review" analysis in the Pentalogy cases, since it just gets in the way of the fun stuff.) Setting aside playful rhetoric, the impact of the decisions is not a copyri-pocalypse by any measure. But it is fair to say that the Pentalogy decisions represent a decisive shift in favour of a different orientation for Canadian copyright law: away from an owner-maximalist orientation and in favour of "users" - of course, in many circumstances, that's far too binary a distinction to draw, since so many are simultaneously "creators" and "users" (and "exploiters"). If I had to highlight three or four "big picture" results of the Pentalogy decisions, it would be these:

Robust Fair Dealing. The Supreme Court really wasn't kidding when it indicated in the 2004 CCH v LSUC (2004 SCC 13) decision that the Copyright Act's "fair dealing" provisions were to be given a "large and liberal interpretation". The SOCAN v Bell decision and the Alberta v Access Copyright decision are about as ringing an endorsement of an expansive approach to fair dealing as one can imagine. As will be noted below, this has important implications for a variety of actors in, and sectors of, the entertainment industries.

Technological Neutrality. It is striking how the notion of "technological neutrality" has become a guiding principle of Copyright Act interpretation - it is arguably the primary driver of the result in the ESA/C v SOCAN decision. The Supreme Court decisions seem keen on ensuring that the application of the Act is handled in a way which facilitates online delivery mechanisms. The primacy of "technological neutrality", which in effect seems to be aimed at reducing barriers to entry for online undertakings (or "leveling the playing field", depending on your preferences), is the subject of a stinging dissent penned by Justice Rothstein in the ESA/C v SOCAN decision.

Ratcheting Back of Rights-Maximalism / Impact on Collectives. It strikes me as difficult to escape the conclusion that the rights of content owners and collectives were diminished as a result of the Pentalogy decisions. In the simplest illustration of the trend, the decision in ESA/C v SOCAN means that the act of downloading musical content attracts liability for only one tariff (in respect of reproduction of the copyright in the musical composition) and not two tariffs (i.e., reproduction plus communication to the public). The Court decisively moves away from multiple layers of payments in respect of the same right (though, of course, whether the "same" right is being engaged is the source of the controversy - and it's not clear to me that the majority's reasoning on this point is as bullet-proof as it could be). Any such alteration in the rights/payment calculus necessarily means that rights-owners and their collectives will be making do with less revenue. In short, July 12, 2012 was a good day to be a user - not so much an owner or collective.

Whither the "Bundle of Sticks"? Forgive this brief digression into legal hermeneutics, but this strikes me as important. Paragraph 42 of the ESA/C v SOCAN decision contains the assertion that "copyright" consists of three rights: (1) to produce or reproduce a work in any material form, (2) to perform a work in public, and (3) to publish an unpublished work. All the other "examples" set out in Section 3(1) of the Copyright Act (Canada) (which include translations, communication to the public, etc.) are merely illustrations of those three "core" copyrights. The hoary metaphor of copyright consisting of a "bundle of sticks" appears to have been drastically reduced: evidently "copyright" consists of a bundle of three sticks, and everything else is just a different way of carving those sticks. It's unclear what the precise implications are of this re-casting of the metaphor (though we see some inkling in the ESA/C v SOCAN result), but I'm guessing this will prove important somewhere down the line.

On to the decisions themselves. 

SOCAN v Bell (2012 SCC 36)

What Happened?

Online "previews" of songs were held to constitute "research" for the purposes of "fair dealing", and, as such, are not a compensable activity, meaning that no license is required, and no fee/royalty needs to be paid, for such previews. (Technically, the decision means that the Copyright Board's decision regarding Tariff 22.A that previews are not to be taken into account in setting the tariff amount has been confirmed.) It's worth noting that this means that Canadian copyright law is now more accommodating of online previews than is U.S. law, since in the U.S. online previews do attract royalty payments and are licensed by collectives. The decision also took pains to stress that there is a "low threshold" for assessing whether a particular activity falls within the ambit of the fair dealing categories (research, private study, criticism, review, news reporting and, once the provisions of the Copyright Modernization Act (Bill C-11) are proclaimed into force, parody, satire and education). If there's one criticism to be made of the reasoning in the "previews" case, it's that the meaning of "research" seems to have been blown wide open - it's become difficult to say what isn't research. Interestingly, the decision also states that "dissemination of works", with or without creativity, is one of the Act's purposes and is in the public interest. Of course, as the court is also careful to note, any fair dealing analysis is a two-stage process: once something is deemed to fall within the enumerated categories, it still must be assessed for its "fairness", using the six-point test set out in CCH v LSUC.

That's Nice - So?

A robust and expansive interpretation of "fair dealing" will encourage more aggressive assertions of rights to use copyrighted material without obtaining permission from or making payments to rights-owners. The most obvious beneficiaries in the entertainment industry will be documentary filmmakers, who will likely want to read the "news reporting" and/or the "criticism/review" categories as encompassing their activities; other obvious beneficiaries will be producers and broadcasters of comedic materials which make use of parody and satire (once the relevant provisions of The Copyright Modernization Act are proclaimed in force). Online service providers can also take guidance from the decision, as this may have an impact on things like providing thumbnails of photos, snippets of videos and other "fragmentary" uses of copyrighted works. More generally, counsel's assessments of activities which could prima facie constitute infringement will need now to be modified to take into account the, seemingly drastically, expanded ambit of what constitutes "fair dealing" at all (while bearing in mind that the six-element "fairness" test will always need to be satisfied). What the Supreme Court giveth, the Spureme Court taketh away: content owners will need to reassess when it makes sense to claim infringement and also will need to review any existing revenue streams to try and ascertain whether those revenues are liable to reduction as a result of licensees being able to re-characterize their activity to fall into fair dealing. 

ESA/C v SOCAN (2012 SCC 34)

What Happened?

The court held that downloading a file containing a videogame which included a song (focusing, for these purposes, on the copyright in the musical composition contained therein) does not engage the "communication to the public by telecommunication" right of the owner of the musical composition rights in the song - and so SOCAN, the collective which represents owners of copyright in musical compositions, is not able to collect a license fee in respect of that right for that activity. While that might seem a fairly narrow set of circumstances, the impact of the decision is not limited to those specific facts, and will reverberate throughout the world of tariffed uses of music (and other works). On one hand, this does not alter the status quo all that much: the same set of owners would still be entitled to collect a license fee in respect of the reproduction right (through a different collective), they just aren't entitled to two different revenue streams in respect of the same activity. On the other hand, that last element has implications for all kinds of rights owners.

That's Nice - So?

The decision means that rights owners and collectives who were hoping to access multiple revenue streams from discrete activities will need to reorganize their forecasts. By drawing a distinction between online transmissions which are "reproduction"-like (e.g., downloads) and online transmissions which are "performance/communication"-like (e.g., streaming), and holding that transmissions so categorized are only entitled to get compensated for one tariff, the decision represents an abrupt alteration in how Canadian collectives and rights-owners have been conducting (and planning) their activities. It means that there is a bit of a settling-down of the tariff landscape for online services: coupled with the decision in Rogers v SOCAN (discussed next), we're (finally) starting to get some predictability in terms of which tariffs will survive and be applicable to online services, which is always useful for providing guidance to clients hoping to determine set-up and operating costs. 

Rogers v SOCAN (2012 SCC 35)

What Happened?

In many ways, this decision is the other side of the coin to that in ESA/C v SOCAN. Here, the Court held that the "streaming" of a song to an individual user who "requested" that stream was nevertheless a "communication to the public", despite the fact that there was only one originating point and one recipient at a time. As a result, SOCAN is entitled to license (and collect a fee) for streaming activities on the internet. While in ESA/C the Court advanced a technology-neutral analysis (and knocked out a tariff applicable to downloading), Rogers may be better understood as advancing a technology-agnostic approach (and confirming the applicability of a tariff to streaming): the nature of the activity (streaming) is assessed in a way which reaches across the precise elements of the technology being used and adopts a conclusion which aims to preserve rights.

That's Nice - So?

As with ESA/C v SOCAN, this decision further clarifies what online activities will incur liability for which tariffs. Such clarification (i.e., in both ESA/C and Rogers) benefits both rightsowners and users - certainty assists in planning, which is particularly useful for capital-intensive projects like massive online offerings of libraries of works. ESA/C and Rogers together represent an emerging rationalization of the copyright framework (particularly with respect to tariffs) applicable to online activities in Canada. 

Re:Sound v MPTAC (2012 SCC 38)

What Happened?

The Supreme Court essentially confirmed that the Act means what it says: that performers and owners of sound recordings are not entitled to payments when their performances and recordings are incorporated into the "soundtrack" of audio-visual works like movies and TV shows and those works are performed in public.

That's Nice - So?

This is largely a technical decision, and is unlikely to alter any behaviour: the immediate impact is that the tariff proposed by Re:Sound will not be approved and so Re:Sound and its members will not be able to enjoy an additional revenue stream, and those who would have been subject to the tariff (e.g., theatre owners) and any subsequent tariffs (which would have followed a success for Re:Sound) will not have to make the contemplated payments. 

Alberta v Access Copyright (2012 SCC 37)

What Happened?

The Court held that copying materials for classroom use falls within the "fair dealing" category of "research or private study". Essentially an application of the approach identified in SOCAN v Bell (discussed above), the question of whether the particular uses in question were actually "fair" has been remitted back to the Copyright Board.

That's Nice - So?

Authors and publishers (and their collective representatives) will presumably be negatively affected by the decision in that an expansion of fair dealing will, all things being held equal, result in lower license fees being paid (though whether the particular uses contemplated here will actually constitute fair dealing is yet to be determined by the Copyright Board (a decision which itself will likely be appealed)). The inclusion of "education" as a fair dealing category in The Copyright Modernization Act will presumably mean that an even broader set of activities will be capable of falling into the ambit of fair dealing (presumably "education" must mean something other than "research or private study"). At the same time, authors and publishers are users in addition to being owners, so they should assess their clearance procedures in light of this new expansion - for example, textbook writers may be able to make more expansive use of existing materials in creating new materials without the need for permission and/or payment. 

Whew. That's a lot of copyright law. Of course, these brief summaries don't do justice to the breadth and depth of the changes wrought by the Pentalogy - but a full appreciation will take time as the reasons are read closely and applied by lower courts. The Pentalogy and The Copyright Modernization Act represent (he said without hyperbole) seismic changes in Canadian copyright law - I anticipate that we will hereafter refer to Canadian copyright law as having "before" and "after" epochs. Some of the changes made redound to the benefit of owners, some to users, some to what I'll call "exploiters" or "intermediaries" - but in all cases, virtually all clients will be affected in some fashion or other - and many clients, because they simultaneously occupy more than one role (e.g., film producers are both creators and users), will be affected in a multiplicity of ways.

 

Published In: Administrative Agency Updates, Art, Entertainment & Sports Updates, Civil Procedure Updates, Communications & Media Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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