Canadian Supreme Court Issues ISP & Net Music Decision

[David Farber <dave () farber net>]

Begin forwarded message:

From: Michael Geist <mgeist () pobox com>
Date: June 30, 2004 12:04:07 PM EDT
To: dave () farber net
Subject: Canadian Supreme Court Issues ISP & Net Music Decision

Dave,

The Canadian Supreme Court issued the long-awaited Tariff 22 decision  
this morning.  The court allowed the appeal, overturning a Federal  
Court decision to impose liability on ISPs for caching of content.  The  
case also has a key jurisdictional element as the court ruled that  
there may be liability under Canadian copyright law at both the country  
where the music was transmitted as well as where it was received and  
has further implications for file sharing lawsuits.

The bottom line -- the ISPs are big winners as they have had their  
position as an intermediary strongly affirmed by the court.  When  
combined with another Supreme Court decision from earlier this year  
(CCH), the Canadian Supreme Court has made it very clear that ISPs  
should not be held responsible for copyright holders claims of  
infringement where they act as conduits for the transmission of data.

There are three other key elements to the case.  First, the court  
addresses the issue of Internet jurisdiction and rightly concludes that  
Canadian law may extend outside the country in certain circumstances.   
Second, it raises the prospect for a notice and takedown system,  
suggesting that the government should consider establishing rules  
around this issue.  Third, one judge dives into the peer-to-peer file  
sharing case, expressing significant concern over the prospect for  
monitoring end users downloading habits and cautioning that copyright  
law should be interpreted with full respect for privacy rights.

As you may know, the case literally dates back to 1995 when SOCAN, a  
leading Canadian music collective, applied for a new tariff for  
downloading online music.  After four years of hearings and waiting,  
the Copyright Board of Canada issued a decision in 1999 that largely  
absolved ISPs from collecting such a tariff.  The case was appealed to  
the Federal Court of Canada where the court ruled that ISPs could face  
liability for the caching of content on their servers since such  
activity was not strictly necessary to deliver content and thus fell  
outside of the conduit exemption in the Copyright Act.  The Canadian  
Supreme Court heard the appeal last December.  The decision is online  
at
http://www.lexum.umontreal.ca/csc-scc/en/rec/html/2004scc045.wpd.html

The key points of the decision are as follows:

1.      The court overturned the Federal Court on the caching issue.   
The court again turned to its emphasis on balance in copyright in  
noting that the exemption for intermediaries is not a loophole but  
rather a critical part of the balance.  The court concludes that:

"As long as its role in respect of any given transmission is limited to  
providing the means necessary to allow data initiated by other persons  
to be transmitted over the Internet, and as long as the ancillary  
services it provides fall short of involving the act of communicating  
the work or authorizing its communication, it should be allowed to  
claim the exemption."

It adds that ISPs fall into the conduit category given their lack of  
knowledge of the content and impracticality of monitoring Internet  
activity.

2.      The court again addresses the issue of what it means to  
authorize copyright infringement.  Just as it did several months ago in  
a case involving photocopiers, the court ruled that:

"when massive amounts of non-copyrighted material are accessible to the  
end user, it is not possible to impute to the Internet Service  
Provider, based solely on the provision of Internet facilities, an  
authority to download copyrighted material as opposed to  
non-copyrighted material."

The court does, however, raise the specter of a notice and takedown  
system in Canada as it notes that failing to take action with knowledge  
of infringing content might in some circumstances lead to a finding of  
authorization.  Given the challenges with what constitutes effective  
notice, the court calls on the government to adopt a notice and  
takedown system.

3.      The court addresses the jurisdictional reach of Canadian  
copyright law.  It adopts a broad approach, finding that a  
communication occurs not just when it originates in Canada.  Rather, it  
might originate anywhere depending on an analysis of connecting factors  
to Canada.  Those connecting factors include the situs of the content  
provider, the host server, the intermediaries and the end user.

4.       A concurring judgment from Justice LeBel raises an important  
issue for the peer-to-peer file sharing lawsuits.  The judge argues  
that the Court should interpret the Copyright Act in a manner that )  
"respects end users' privacy interests, and should eschew an  
interpretation that would encourage the monitoring or collection of  
personal data gleaned from Internet-related activity within the home."   
Moreover, he was very troubled by any test that might encourage  
monitoring of Internet user activity, noting that "the privacy  
interests of individuals will be directly implicated where owners of  
copyrighted works or their collective societies attempt to retrieve  
data from Internet Service Providers about an end user's downloading of  
copyrighted works."

Incidentally, the case now heads back to the Copyright Board for "phase  
two" of the proceedings which will be used to determine the amount of  
the tariff (phase one addressed the legal issues associated with who is  
subject to the tariff).

If you're looking for more information, I've actually written about the  
case at each stage.  For more on the 1999 Copyright Board decision, see
<http://www.theglobeandmail.com/servlet/ArticleNews/printarticle/gam/ 
19991118/TWGEIS>

For more on the 2002 Federal court decision see
<http://www.theglobeandmail.com/servlet/ArticleNews/printarticle/gam/ 
20020516/TWGEIS>

Best,

MG

--

**********************************************************************
 Professor Michael A. Geist
 Canada Research Chair in Internet and E-commerce Law
 University of Ottawa Law School, Common Law Section
 Technology Counsel, Osler, Hoskin & Harcourt LLP
 57 Louis Pasteur St., Ottawa, Ontario, K1N 6N5
 Tel: 613-562-5800, x3319     Fax: 613-562-5124
 mgeist () pobox com              http://www.michaelgeist.ca

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