Telcos take to Supreme Court to fight performance royalty on music downloads

Several major communications companies are now gearing up for a major legal battle before the Supreme Court that will determine a multi-million dollar question surrounding whether the download of a musical work online can give way to the charging of performance rights under the Copyright Act. In two separate but related cases before the Supreme Court, the Entertainment Software Association of Canada (ESA), Bell Canada, Rogers Communications Inc., Shaw Communications Inc. and Telus Communications Co. are challenging key decisions of the Federal Court of Appeal issued in 2008 and 2010 that reviewed earlier Copyright Board decisions. Those court decisions determined that the download of a work online constitutes a communication of the work to the public under the Copyright Act. That means collective rights societies such as the Society of Composers, Authors and Music Publishers of Canada (SOCAN) can apply to the Copyright Board for performance rights tariffs from distributors of music online (or video games incorporating copyrighted music). Music services such as iTunes, or Bell's and Telus' online music services, already pay a reproduction right to distribute music online, and the companies argue that charging for an additional performance right goes too far. At issue before the Supreme Court is a phrase in section 3(1)(f) of the Copyright Act, which says copyright includes the sole right “to communicate the work to the public by telecommunication.” The ESA, in a factum submitted to the Supreme Court in June, argues that Parliament intended this section of the act apply to broadcasting activities, not distributing files. “The essential nature of a broadcast is to deliver content to a public audience for immediate listening or viewing. Nothing in the legislative history shows any intention by Parliament to create a second overlapping right in s. 3(1)(f) of reproduction or distribution of works,” the ESA wrote. The association added that it is “very concerned that the Decision will, in effect, create an extra layer of rights that only applies to the distribution of copies of works delivered digitally.” Barry Sookman, who is serving as counsel to the ESA but spoke to The Wire Report on his own behalf as a partner and copyright expert at McCarthy Tetrault in Toronto, said the Copyright Act was intended to be technology-neutral, but the case is putting that into question. “It's a very important case,” Sookman said. “It's really about whether an additional royalty should be paid. At a high level, it's about overlapping rights and whether on the Internet you have overlapping rights.” The appeals from the ESA and major telecom companies are being treated as separate cases (under case numbers 33921 and 33922, respectively) but are scheduled for a single hearing at the Supreme Court on Dec. 6. The ESA, Bell, Rogers, Shaw and Telus argue that consumers who download video games or music from online services are involved in a private transaction that does not constitute a communication to the public. The telcos wrote in a factum filed with the Supreme Court that Parliament intended the phrase “to the public” to serve as a limitation on the performance right “to distinguish private, point-to-point transmissions” such as a commercial transaction “from transmissions that are truly 'to the public' such as radio, television and cable broadcasting activities.” Sookman said the outcome of the case will determine whether tens of millions of dollars in performance royalties will flow to SOCAN. “It's costing consumers money. If everybody has to pay for this new performance right, obviously that has to get included in the price,” Sookman said. “You're talking about every single digital item—that has music and is purchased on the Internet—that would be subject to this tariff.” The telcos note in their factum that the performance right does not apply to music sales that “do not involve the Internet.” “ubjecting an Internet transmission to an additional layer of copyright obligations, when no such additional obligation is imposed on transmissions and transactions that do not involve the Internet, would create a significant barrier to the advancement of the Internet in Canada and would discourage, and not facilitate its use,” the companies wrote. In an email response to questions, Craig McTaggart, director of broadband policy and regulatory affairs at Telus, said the company has been in litigation over whether a download constitutes a “communication to the public” since 2006. “In our view, there is no reason why an album downloaded over the Internet should be subject to an additional royalty that does not apply when the same album is bought in a store,” McTaggart said. He said the level of the royalty to be collected is currently before the Copyright Board, for which a hearing was held in summer 2010. The court case is being heard as the Conservative government prepares to table another omnibus copyright reform bill to amend Canada's Copyright Act. The government has said it intends to seek “swift passage” of the bill under its new majority mandate. The bill, expected to be introduced in the fall, will be the government's third attempt at passing legislation. Two previous bills, C-61 and C-32, died in the Commons due to prorogations and elections. The Harper government is introducing a new “making available right” in the bill as part of its efforts to implement the Internet treaties of the World Intellectual Property Organization (WIPO). McTaggart said Bill C-32's approach to the provision outlined a communication to the public as including making a file available for download, which “would have implemented the making available right in a way that deemed all Internet downloads to be communications to the public by telecommunication.” The provision could have also impacted cloud computing and remote storage technologies by allowing the application of performance or making available rights, he said. McTaggart said Telus hopes the next bill is silent on that point so that the Supreme Court “can decide it once and for all.” He added that Telus hopes to see the next copyright bill “distinguish between those who make works available to anybody online without authorization and licensed services that are authorized to sell copies, by virtue of paying reproduction right royalties.” Telus recently announced an agreement with the Rdio subscription music service and plans to shut down its full-track download service on Aug. 31, McTaggart said. The company remains a party to the Supreme Court appeal but is withdrawing its objections to tariffs filed with the Copyright Board. SOCAN has not yet filed its response with the Supreme Court and declined to comment for this story because the issue remains before the court. The group has previously said that the rights won through court decisions provide an important support mechanism for songwriters and music publishers. In arguments before the Copyright Board, SOCAN has said its tariff proposals are justified and that they reflect distinct music uses on the Internet, where music is an important piece of new media content. The issue is also playing out in the U.S. legal system. In September 2010, in a case known as United States v. ASCAP, a U.S. appeals court ruled that the download of a song is not a public performance. The American Society of Composers, Authors and Publishers (ASCAP) has asked the U.S. Supreme Court to review the ruling. sdoyle@thewirereport.ca

Telcos take to Supreme Court to fight performance royalty on music downloads

Broadcast | August 4, 2011

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