Law Times

Page 9 Law Times • January 28, 2013 Focus On Intellectual Property/Trademark Law Telcos battle SOCAN over ringtones Lawsuit follows July SCC ruling on downloaded video games BY MICHAEL McKIERNAN Law Times B uoyed by victories in the Supreme Court of Canada's copyright rulings last summer, cellphone providers have launched a $15-million lawsuit against the Society of Composers, Authors, and Music Publishers of Canada that aims to recover a decade's worth of ringtone royalties. In a statement of claim filed on Nov. 13, Rogers Communications Inc., Telus Communications Co., Bell Mobility, and Quebecor Media Inc. say the Copyright Board of Canada got it wrong when it certified SOCAN's ringtone tariff back in 2006. Now they want their money back despite an earlier ruling by the Federal Court of Appeal that backed the copyright board's decision to certify the tariff on the basis that the ringtone downloads sold to customers were communications "to the public by telecommunication" under the Copyright Act. The Supreme Court refused leave to appeal that decision before going on to hear the five cases. The phone companies claim the reasoning in two of the five decisions, Entertainment Software Association v. Society of Composers, Authors, and Music Publishers of Canada and Rogers Communications Inc. v. Society of Composers, Authors, and Music Publishers of Canada, also applies to ringtones and effectively overturns the copyright board's decision on the issue and the appeal court ruling that backed it. "It's clear that the Federal Court of Appeal decision is no longer good law and cannot be relied upon," says Jay Kerr-Wilson, the partner at Fasken Martineau DuMoulin LLP's Ottawa office who represents the phone companies in the new action. In Entertainment Software Association, which involved computer games downloaded by users containing portions of musical works, game manufacturers had already negotiated a reproduction royalty Heydary-2_LT_Dec3_12.indd 1 'This is a tariff that was certified twice by the board and never successfully challenged,' says Lynne Watt. with copyright holders before selling their products. The 5-4 Supreme Court majority ruled that the application of a separate communication tariff "violates the principle of technological neutrality" by adding an extra layer of fees for downloaded versions that didn't apply to hard copies bought in a shop or delivered in the mail. The court adopted the same reasoning on downloaded music files in a companion decision to the Rogers ruling. "According to the Supreme Court of Canada, a download is not a communication to the public," says Kerr-Wilson. "That applies directly to this case where the claim is based on downloads of a ringtone." The copyright board first certified the ringtone tariff back in 2006 at a rate of six per cent of the price paid by the downloader for downloads dating back to 2003. A renewed tariff in June 2012 set a reduced rate of five per cent for downloads between 2009 and 2013, just weeks before the Supreme Court's copyright decision. Then in August, the phone companies ceased paying ringtone royalties and asked the copyright board to repeal the tariff. But SOCAN is fighting them and has moved to have the restitution action stayed pending the outcome of the copyright board's reconsideration. Lynne Watt, a partner at Gowling Lafleur Henderson LLP's Ottawa office who represents the collective, says there are important differences in the ringtone market that prevent the Supreme Court's reasoning in Entertainment Software Association and Rogers from applying. "The Supreme Court of Canada focused on layering of rights. They said it wasn't fair to the telcos to have to pay reproduction and communication royalties. With ringtones, there's no layering because they're not paying reproduction royalties," she says." In addition, she says the alternative physical market for music and video games mentioned by the Supreme Court www.lawtimesnews.com simply doesn't exist for ringtones. "You can't go into Walmart and buy a CD with a ringtone on it," says Watt. Even if the copyright board rules against SOCAN on the ringtone tariff, Watt says it would be unfair to force the group to refund royalties paid before the July Supreme Court decision that changed the law. "This is a tariff that was certified twice by the board and never successfully challenged," she says. "If the board and the Federal Court of Appeal, on a different fact situation, comes to the same conclusion as the Supreme Court of Canada came to in July, you can't go back and retroactively invalidate things that were legally done at the time." But Kerr-Wilson says the phone companies will oppose the stay motion and push for a refund. "The effect of the Supreme Court decision is that SOCAN didn't have the right to collect for downloads and it never had the right to collect for them," he says. According to Howard Knopf, counsel to Ottawa intellectual property firm Macera & Jarzyna LLP, the recent introduction of the Copyright Modernization Act could complicate the fight as it has opened up a potential new route for SOCAN to claim royalties on downloads. The act expanded the communication to the public right to include making a work "available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public." "SOCAN is saying basically that Bill C-11, by adding this making-available right, makes the Supreme Court of Canada decision moot because it was rendered under the old law," says Knopf. One way or another, he doesn't expect a resolution to the case in the near future. "It looks like it will go on for years," says Knopf. "SOCAN has a whole lot of money behind it." LT 12-11-29 11:46 AM

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