July 30 2012
In Entertainment Software Association v Society of Composers, Authors and Music Publishers of Canada(1) the Supreme Court of Canada held that the electronic delivery over the Internet of a permanent copy of a video game containing a copyrighted musical work does not entitle the copyright owner to additional royalties for communicating that musical work to the public by telecommunication, when the copyright owner has already received royalties for the reproduction of the musical work.
The Canadian Copyright Act provides that copyright owners have the sole right to communicate a literary, dramatic, musical or artistic work to the public by telecommunication. The Society of Composers, Authors and Music Publishers of Canada (SOCAN), a collective society that administers the right to communicate musical works on behalf of copyright owners, applied to the Copyright Board for a tariff covering downloads of video games containing copyrighted musical works over the Internet. The Copyright Board and the Federal Court of Appeal had concluded that SOCAN was entitled to a tariff for such downloads. The Supreme Court reversed these decisions, holding that the internet delivery of a permanent copy of a video game containing musical works does not amount to a communication of those works.
In the video gaming industry, royalties for the reproduction of any musical works that are incorporated into video games are negotiated before the games are sold to the public. Video game publishers pay reproduction royalties to the musical work copyright owners in respect of all copies sold, regardless of whether the copies are sold on a physical medium or downloaded over the Internet.
SOCAN is a collective society that administers performing rights and the right to communicate musical works on behalf of copyright owners. SOCAN applied to the Copyright Board to establish a tariff for the communication of musical works over the Internet between 1996 and 2006. The Copyright Board certified Tariff 22, entitling copyright owners of musical works to new fees whenever video games containing their works were downloaded over the Internet, even though the copyright owners had already received royalties for the reproduction of those musical works.
The Copyright Board's decision was upheld by the Federal Court of Appeal in an application for judicial review brought by the Entertainment Software Association and the Entertainment Software Association of Canada (ESA), which represent most publishers of interactive entertainment software products in North America. ESA then appealed to the Supreme Court of Canada, arguing that the act of downloading a video game incorporating musical works does not amount to a communication of those works to the public.
Section 3(1) of the act defines 'copyright' as the sole right to reproduce a work or any substantial part thereof in any material form, to perform the work or any substantial part thereof in public, or to publish an unpublished work or any substantial part thereof. Paragraphs (a) to (i) of Section (3)(1) then list specific rights that are included within this definition. Section 3(1)(f) provides that copyright includes - in the case of any literary, dramatic, musical or artistic work - the sole right to communicate the work to the public by telecommunication.
In a five-to-four split decision, the majority held that a separate communication tariff applied to downloaded video games incorporating musical works would violate the principle of technological neutrality, which requires the act to apply equally to traditional and more technologically advanced forms of the same medium. The court ruled that a download is merely an additional, more efficient way to deliver copies of games to customers. The downloaded copy is identical to copies purchased in stores or shipped to customers by mail, and game publishers already pay reproduction royalties for all downloaded copies. In the court's view, there is no practical difference between buying a durable copy of the game in a store, receiving a copy in the mail or downloading an identical copy online.
The appeal focused on the meaning of the word 'communicate' in Section 3(1)(f), as there is no definition of that word in the act. The court reviewed the legislative history of the act, which demonstrated that the right to communicate is historically connected to the right to perform a work and not the right to reproduce permanent copies of the work. Further, the introductory paragraph of Section 3(1) of the act exhaustively defines 'copyright'. The rights enumerated in the subsequent Paragraphs (a) to (i), including the right to communicate in Paragraph (f), are simply illustrative examples of the reproduction, performance and publication rights set forth in the introductory paragraph. The court concluded that the internet delivery of a permanent copy of a video game containing musical works constitutes a reproduction of those works, but does not amount to a communication of them.
Accordingly, the court allowed ESA's appeal.
This decision clarifies that the downloading of a permanent copy of a video game incorporating musical works is not a communication to the public of the musical works within the meaning of Section 3(1)(f) of the Copyright Act. More broadly, the court's reasoning appears to apply equally to the downloading of a permanent copy of any literary, dramatic, musical or artistic work.
(1) 2012 SCC 34, July 12 2012, see http://scc.lexum.org/en/2012/2012scc34/2012scc34.html
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