Appeals court rules MP3 players now exempt from private copying regime

The Federal Court of Appeal has confirmed the Copyright Board of Canada’s controversial year-old private copying decision with respect to zero-rating and its constitutionality (CNM, Dec. 19/03). However, the court has reversed the board’s decision on the matter of levies on non-removable memory. The decision has led to widespread discussion about the legal status of music downloading. Some state that a ruling by Konrad Von Finckenstein last April that downloading is protected under the private copying regime is now no longer valid. The decision seems to point to the elimination of personal computers from the private copying regime as it delineates between memory and devices. Several controversial cases in recent months, including the CCH Supreme Court of Canada battle (CNM, March 17/04), and the decision by Von Finckenstein of the Federal Court of Canada to deny the recording industry access to the records held by ISPs that would identify over two dozen individuals accused of music piracy (CNM, April 2/04), seem to point to the legality of music downloading with the protection of the private copying regime. The Canadian Recording Industry Association (CRIA) has fought that interpretation of recent case law in public, and is cheering the decision exempting PCs and other devices from the regime. That ruling combined with a widely expected new right of making available as part of current copyright reforms, could make both up- and downloading from peer-to-peer file-sharing networks in Canada illegal. The early opinion of experts contacted by Canadian NEW MEDIA indicates that the area will likely remain grey, and future cases against accused downloaders could hinge on such minutia as whether hard drives, for example, are built into computers at the factory, installed as consumer options when ordering, or installed externally. Copyright expert and law professor Michael Geist tells CNM that the ruling opens an entirely new grey area with respect to downloading since how a computer is configured may now be a key factor in how cases against accused pirates are decided. "The court was in a sense trying to do away with a distinction that it thought was false…But, what they’ve done, instead, is create a whole series of new distinctions where (if) you’ve got someone who wants to avail themselves of the private copying exemption, I think what they then do is they need to establish their configuration such that they ensure that the copying goes to a medium. And, I don’t think that’s all that difficult to do. In a sense, it actually creates a competitive advantage for Canadian suppliers of mediums. Because, if you’re a Canadian supplier of mediums, you could, in theory, market that as something that is private copying applicable," Geist says. "I think this decision would suggest that those downloaders would have a harder time availing themselves of the private copying levy - the private copying exemption. I don’t think it takes it off the board, but I think it does certainly change the dynamic somewhat." In comments to CNM, CRIA head Graham Henderson notes, "The Federal Court of Appeal has made it clear digital memory is not covered by the private copying exception. This means unauthorized downloading to hard drives is illegal." He adds, however, that CRIA does not intend, as a result of the ruling, to pursue those who rip personal CD collections to their computers with lawsuits. As a result of the decision, observers are waiting to see how the recording industry’s suit against ISPs proceeds at the appeal level as it tries to overturn Von Finckenstein’s decision. In its July arguments filed with the appeals court, CRIA argued that Von Finckenstein misapplied the private copying law (CNM, July 23/04). Its memorandum to the court reads: "The motions judge did not turn his mind to whether the computer memory involved in this case would qualify as an audio recording medium within the meaning of the Copyright Act and thus erred in law by failing to address a prerequisite to the application of (the private copying regime). If this case were to proceed to trial, evidence would presumably be led by the parties to assist the trial judge to determine if the memory used in this case is an audio recording medium within the meaning of the section." It remains to be seen whether this private copying decision will be accepted by the court as a validation of CRIA’s position, or whether CRIA will launch a new spate of lawsuits with stronger evidence than Von Finckenstein ruled they presented in April. The Canadian Private Copying Collective (CPCC) says it is considering an appeal of the decision. In a media release issued on Dec. 17, CPCC director David Basskin says, "We disagree with the court’s finding on the levy with respect to media used in digital audio recorders. CPCC’s board of directors is actively considering an appeal on this issue to the Supreme Court of Canada and our decision on this question will be announced shortly." Notwithstanding the immediate fallout, the decision could result in a tortured logical path for future litigants and defendants as the application of the law to particular downloading cases is debated in court. Several experts have pointed to some of the unintended consequences of the regime in recent months as Canada pursues reform of its copyright laws, and the government has seen lobbying by stakeholders to either modify or remove it. Bruce Stockfish, director of Canadian Heritage’s copyright policy branch tells CNM that he and his staff have noted last week’s decision, and concedes that it will put additional pressure on the department to act on a review of the private copying regime that has already been promised for 2005. While the implications of the private copying decision will be highest-profile with respect to music downloading, it may well be the less sexy components of the ruling that ultimately vault the case into the Supreme Court. The court did not counter the board’s finding that the controversial zero-rating scheme that exempted some bulk buyers of recordable compact discs is illegal, though it ruled that it would not be illegal for the CPCC to waive charges of its own volition. The board will not have to offset the amount of such waivers, however, when setting tariffs for private copying. The court ruled, barely, that the private copying regime is a form of levy, and not a tax, and thus constitutional. Geist notes, "Both of those…ensure that the decision is destined to leave both sides unhappy, because, basically, it affirms the Copyright Board’s decision on both of those major points, which left them unhappy in the first place. I think it makes it very likely that there’ll be an attempt to appeal this to the Supreme Court... So, (the CPCC) sent a very clear message, even there, that they would appeal." In the decision, the court writes, "At the close of the hearing, the CPCC requested that, if the ruling of the board as to zero-rating is upheld, the decision of the court be stayed, pending an eventual leave application to the Supreme Court." That stay was not granted. The court writes, "The decision of the court is binding on the CPCC notwithstanding appeal. It follows that the CPCC can no longer promote the program on the basis that it has statutory legitimacy or justify its existence to rights holders..."

Appeals court rules MP3 players now exempt from private copying regime

News | 12/22/2004 5:00 am EST

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