Law Times

Page 8 February 1, 2016 • Law Times www.lawtimesnews.com FOCUS ON Intellectual Property Law THE MOST COMPLETE DIRECTORY OF ONTARIO LAWYERS, LAW FIRMS, JUDGES NEW EDITION Perfectbound Published December each year On subscription $80 One time purchase $83 L88804-764 Multiple copy discounts available Plus applicable taxes and shipping & handling. (prices subject to change without notice) Visit carswell.com or call 1.800.387.5164 for a 30-day no-risk evaluation With more than 1,400 pages of essential legal references, Ontario Lawyer's Phone Book is your best connection to legal services in Ontario. Subscribers can depend on the credibility, accuracy and currency of this directory year after year. More detail and a wider scope of legal contact information for Ontario than any other source: • Over 27,000 lawyers listed • Over MBXȮSNTBOEDPSQPSBUFPGȮDFTMJTUFE • 'BYBOEUFMFQIPOFOVNCFSTFNBJMBEESFTTFTPGȮDFMPDBUJPOTBOEQPTUBMDPEFT Includes lists of: • Federal and provincial judges • Federal courts, including a section for federal government departments, boards and commissions • Ontario courts and services, including a section for provincial government ministries, boards and commissions • Small claims courts • The Institute of Law Clerks of Ontario • Miscellaneous services for lawyers ORDER YOUR COPY TODAY! Untitled-3 1 2016-01-25 12:43 PM Netflix case raises questions about tariff, free trials BY MICHAEL MCKIERNAN For Law Times N etf lix will get another shot at blocking roy- alties on its free trials after the Federal Court of Appeal ordered the Copyright Board of Canada to reopen a certi- fied tariff on audiovisual webcasts. The board certified tariff 22.D.1, covering the years 2007- 2013, in July 2014 after a settle- ment agreement between the Society of Composers, Authors and Music Publishers of Canada, and numerous Internet and tele- communications companies who had objected to the tariff, includ- ing Facebook, Apple, and Shaw Communications, among others. The online streaming service initially missed the opportunity to get involved in negotiations because it never objected to ver- sions of the tariff published prior to the settlement in November 2012. Netf lix changed its tune when the settlement tariff was unveiled, revealing a royalty on free trials of subscription servic- es, something none of the other objectors offered, and none of the previously published versions of the tariff contained. However, the copyright board rejected Netf lix's attempt to file evidence on the free trial issue, and in its certification decision, dismissed the company's argu- ments that free trials constitute fair dealing and that royalties on them violates the principle of technological neutrality. The board concluded in the July 2014 decision certifying the tariffs that there was "no issue with technological neutrality" because there was "no alternative technology equivalent to a Net- f lix free trial." Netf lix based its argument that its free trials constitute fair dealing on a comparison with iTunes free previews, where 30-second snippets of songs are made available without attract- ing royalty payments. However, the copyright board rejected the argument for three reasons: First, it concluded the analogy was "weak" because Netf lix free trials made complete works available to consumers; second, it was uncon- vinced that Netf lix maintained a dominance over video streaming comparable with iTunes' over the permanent download market, calling into question how ref lec- tive Netf lix's practices are of its overall industry. "Third, and equally important- ly, we do not have the evidentiary base with which to make that de- cision. While we could delay this decision for several more months during which time we would be collecting evidence from the par- ties on this issue, the fact that Net- f lix declined to participate in the process for many months is suffi- cient reason for us to decline to do so," the board continued. In his Dec. 17 judgment grant- ing Netf lix's application for judi- cial review of the copyright board decision, Federal Appeal Court Justice Marc Nadon agreed "that such evidence was not before the Board but I must point out that such evidence was not before the Board because the Board refused to allow it in. "The Board's refusal to allow Netf lix to put forward its posi- tion constitutes, in my respectful view, a breach of Netf lix's proce- dural right to be heard," Nadon continued on behalf of a unani- mous three-judge panel of the court, setting aside the board's decision "insofar as it pertains to royalties on free trials." David Kent, a partner in the intellectual property practice group at McMillan LLP who acted for Netf lix, says he was "very happy to get the relief we were looking for." Toronto-based Kent says it isn't "economically rational" to impose a royalty on a free trial when the rest of the roy- alties on subscription services are calculated as a percentage of the total amount paid by subscribers. The certified tariff provided for a 6.8-cent monthly fee per free- trial subscriber from 2007 to 2010, rising to 7.5 cents per month per subscriber from 2011 to 2013. Lynne Watt, who acted for SOCAN in the judicial review, says she's looking forward to get- ting back before the copyright board, where she will get a chance to challenge Netf lix's fair dealing claim. "There's really no compari- son between a 30-second song preview that the Supreme Court has found is fair dealing versus an all-you-can-eat, 24/7 buffet that Netf lix offers for 30 days. The concept just doesn't translate," says Watt, a partner in the Ottawa office of Gowling Laf leur Hen- derson LLP. "I agree that there are legitimate business reasons for offering free trials, but that doesn't mean there's no value to their use." Adam Jacobs, an intellectual property lawyer with Toronto firm Hayes eLaw LLP, points out a further wrinkle to the Netf lix case caused by Nadon's order that the matter be returned for redetermination by "a differently constituted panel" of the copy- right board, which normally sits as a panel of three adjudicators. "That's going to be nearly impossible to do," says Jacobs, noting that of the three current members of the copyright board, two of them — Claude Majeau and Nelson Landry — were part of the panel that delivered the certification decision Nadon has just partially overturned. Ontario Appeal Court Justice Robert Blair, recently named the copyright board's chairman, is the only new appointment to the board since the decision. "Perhaps the parties will come to an agreement, or Justice Blair could sit on his own, which I don't believe is a very common practice. Otherwise, you can't get a completely reconstituted panel," Jacobs says. LT Lynne Watt says she agrees there are legitimate business reasons for offering free trials, but that doesn't mean there's no value to their use. There's really no comparision between a 30-second song preview that the Supreme Court has found is fair dealing versus an all-you-can- eat, 24/7 buffet that Netflix offers for 30 days. The concept just doesn't translate. Lynne Watt

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