Law Times

Law Times • December 7, 2015 Page 13 www.lawtimesnews.com Case deals with licensing 'ephemeral copies' Supreme Court walks tightrope in CBC copyright case BY DAVID DIAS For Law Times ounsel on both sides of the dispute are declar- ing victory as the Su- preme Court of Can- ada hands down a decision that protects new media from higher licensing costs but also requires them to purchase licences for each of the "ephemeral" copies needed to piece together a pol- ished program or publication. The ruling, CBC v. SODRAC, is a finely constructed decision that performs a tricky balanc- ing act between the rights of copyright holders and users, as well as between the literal law and technological re- ality. Written by now-retired jus- tice Marshall Rothstein on be- half of the major- ity, the judgment involves an ap- peal of a Copy- right Board of Canada decision in favour of SO- DRAC, a collec- tive management society that han- dles negotiations between media outlets and fran- cophone copy- right holders. The CBC had argued that technology had made it neces- sary to create multiple copies — for example, multiples of an audio file that are combined to create a single news segment — and that it shouldn't have to pay additional licensing fees for these incidental copies. SODRAC, meanwhile, had argued that each copy of an art- ist's work created value for the CBC, and so each copy warrant- ed a separate royalty. Ultimately, the Copyright Board sided with SODRAC, and then set a price for the licensing using its standard ratio system — a methodology that the CBC argued was inf lating the cost of licensing. In late November, the SCC upheld the board's reasoning with respect to the licensing of ephemeral copies, but it struck down the methodology, ruling that the doctrine of "technologi- cal neutrality" protected new forms of media from any addi- tional tariffs. So, in a nutshell, copyright users would have to license the incidental copies they create, but the cost of that licensing will have to ref lect whatever minimal value they extract from those copies. The decision, then, sets aside the board's licensing decision "as it relates to the valu- ation of CBC's television and Internet broadcast-incidental copies . . . ." "The Board did not compare the value contributed by the copyright-protected reproduc- tions in the old and new tech- nology. It also failed to take into ac- count the relative contributions made by the use of copyright- protected works and the risk and investment by the user in its new technology, as required by the balance principle." Lawyers on both sides are calling it a win. Marek Nitoslawski, the law- yer at Fasken Martineau Du- Moulin LLP who represented the CBC before the SCC, says the decision is a "substantial" victory that "dis- avows the Copy- right Board's approach . . . of applying the sim- ple ratio to deter- mine the repro- duction rights. . . . It was a very facile approach." Instead, says Nitoslawski, the board will be forced to accept that "technologi- cal neutrality is the law," and that any evaluation of a tariff structure should avoid ad- ditional costs for copies that ulti- mately create little to no value. "It's a huge decision," he says, "allowing the appeal from a Copyright Board decision that . . . imposed unreasonable royal- ty fees for an activity that gener- ates no value or very little value for broadcasters." Barry Sookman, the Mc- Carthy Tétrault LLP tech law- yer who intervened on behalf of Canadian music associations, is also hailing the decision as a victory, although for opposite reasons. The CBC's appeal, he says, "was an attempt to effectively override the clear wording of the act by looking at whether something should be a copy as opposed to whether it really was a copy, which would have dramatically introduced uncer- tainty in the law. "Justice Rothstein came out clearly and squarely expressing the view that, if a reproduction occurs, it's a copy. And it doesn't matter if it's an ancillary copy, if it's an ephemeral copy, it's still covered by the act." Sookman says that if the Su- preme Court had supported the CBC's appeal in its entirety — by using the principle of tech neu- trality to delegitimize the rights of copyright holders — the court would have effectively rewritten legislation that had already been clearly worded. He acknowledges, however, that the decision is the first to apply the doctrine of techno- logical neutrality to rate setting, which could have broad impli- cations for copyright law. "It does require the board to now engage in an exercise that they typically have not before. So it will potentially change the kind of evidence that has to be adduced before the Copyright Board, and perhaps also in copyright infringement cases. "The court is saying that the principle of technological neu- trality has to apply in every case, so there is a possibility that the decision would be applied as well in a damages case to an in- fringer." LT Untitled-3 1 2015-12-02 11:30 AM The ultimate source for WRGD\·VOHJDOSURIHVVLRQ! Subscribe to Canadian Lawyer today IRURQO\ Each issue of Canadian Lawyer is packed with unbiased in-depth case analyses, valuable strategies, expert insights, and a wealth of information that will allow readers to prepare for cases and effectively manage their practice. 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