Carriers, SOCAN await court’s decision on ringtone money

OTTAWA — The Society of Composers, Authors and Music Publishers of Canada (SOCAN) outlined in Federal Court this week a multi-layered defence against an attempt by wireless carriers to reclaim about $12 million in royalties paid out for the downloading of ringtones. It argued that a 2012 Supreme Court decision that BCE Inc., Telus Corp., Rogers Communications Inc. and Quebecor Inc. base much of their argument on — involving the Entertainment Software Association (ESA) versus SOCAN, where the court found that the downloading of music was not a “communication” subject to tariff — was not relevant to Tariff 24 on ringtones. However, SOCAN said that if the court determines that the above-mentioned case does in fact establish that ringtone downloads are not a communication and therefore not subject to the jurisdiction of the Copyright Board of Canada, which sets tariffs, the precedent should not be applied retroactively and result in money owed back to the wireless providers. Also among SOCAN's arguments was that most of the money collected under the tariff in question has already been paid out to those represented by the collective, so it would be impractical to expect a refund for the carriers. The wireless carriers launched the case in 2012, following two related Supreme Court decisions that came in July of that year, including the ESA matter and another that saw Rogers battling SOCAN over tariffs on music downloads. With only $300,000 of the $12 million the carriers are seeking still in the collective’s hands, Lynne Watt, a lawyer for SOCAN, told the court this week it would be “unfair and unjust” to require the non-profit SOCAN to pay back that money. She added that, of the $12 million the carriers seek, $9.5 million was distributed as far back as 2009, and about $7 million was paid to foreign collectives that have since passed that money on to their members. She likened it to trying to retrieve money from an employee who accidentally received extra pay years ago; the money sought has likely already been spent. Peter Mantas, lawyer for the carriers, said it would be reasonable to require a tracing order for the money if SOCAN does not have it available. “They know who was paid the money, when and how much,” he said in court. Mantas added that he does not think a tracing order will be necessary. Jay Kerr-Wilson, another lawyer for the carriers, said during the hearing that SOCAN paid back about $20 million to various parties after the Supreme Court made its rulings in the ESA and Rogers cases. Watt said those cases were different because they were still in active dispute so funds collected from those tariffs had been frozen. Matthew Estabrooks, another lawyer for SOCAN, noted during the hearing that the ESA decision referred specifically to how a “permanent copy” of something transmitted through the Internet is not a communication subject to a copyright tariff. He said there are three characteristics of a “permanent copy” in this context: the product is not immediately perceivable after transmission; it competes with traditional forms of the product such as CDs; and it is essentially the same product as what can be attained from a more traditional medium. Estabrooks said a ringtone download is audible immediately after transmission, while the download of a video game, which was central in the ESA case, requires installation after a download in order to work properly. While proponents for the carriers have argued that ringtones, if already installed at the point of purchase or provided by CD, would not be subject to a tariff, Estabrooks said those practices are so rare that they can’t be seen as competing with the method of downloading ringtones. Estabrooks added that a ringtone is not comparable to any physical product because of the nature in which it is stored and used. “The ringtone lives on the handset and is bound to the handset,” he said, unlike a CD that can be used on different devices and borrowed by friends. On behalf of the carriers, Kerr-Wilson said this three-point test for what is a permanent copy was never outlined in either of the Supreme Court decisions that determined a download is not a communication. "It's simply not there," he said. "It's entirely an invention of SOCAN." Watt said that even if one accepts that the 2012 Supreme Court decisions involving ESA and Rogers set a precedent in the case of ringtones, there should be some respect for the principle of “finality” in regard to previous occurrences that have upheld the legality of ringtone tariffs. She said SOCAN could not properly function if every tariff was subject to refund in the event of a future court decision. She said two events should have been interpreted as putting this issue to rest. One was a Supreme Court decision in 2008 that denied the Canadian Wireless Telecommunications Association (CWTA) leave to appeal Tariff 24, which had been upheld by the Federal Court of Appeal despite the CWTA’s position that the download of a ringtone was not a communication. Watt said another instance that should have put closure on this matter was the Copyright Board’s certification in June 2012 of Tariff 24 that was to apply for 2006 through 2013. She noted that the board approved an agreement that was reached between SOCAN and the wireless carriers two years earlier, and the carriers did not initiate a judicial review of the tariff within the 30-day window it has to do so after certification. "Changes in the law do not invalidate previous decisions," Watt said. Kerr-Wilson said the Supreme Court decisions of 2012 did not mark "a change in the law; it was a change in the understanding of the law." He said that deal struck between carriers and SOCAN in 2010 was not binding because, as found in those higher court decisions in 2012, downloading music was never supposed to be subject to the Copyright Board’s jurisdiction. It’s this lack of jurisdiction of the Copyright Board that invalidates any payments made under Tariff 24 since it was first certified by that body in 2006 to cover the years 2003 to 2005, and certified a second time in 2012 to cover the years 2006 to 2013, lawyers for the carriers maintained throughout the hearing. Kerr-Wilson said a download is a reproduction, not a communication or a performance, and that members represented by SOCAN already receive payments for licensing the rights for the reproduction of their works, independently of SOCAN. "The two rights cannot apply to the same activity," he said of the downloading process. "It can't be a performance and a reproduction at the same time." A decision from the court is expected in the coming months, Kerr-Wilson said outside the courtroom. "I'll take whatever time I need to take before rendering a decision," Judge James O'Reilly said Thursday at the conclusion of 1 1/2 days of arguments. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Carriers, SOCAN await court’s decision on ringtone money

News | 09/04/2014 6:55 pm EDT

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