Royalties payable by online music services for on-demand streaming, but not downloads - International Law Office

Introduction
Facts
Decision
Comment

Introduction

According to the Supreme Court of Canada in Rogers Communications Inc v Society of Composers, Authors and Music Publishers of Canada,(1) music streamed from an online music service at the customer's request constitutes a "communication to the public" by telecommunication and, as such, is subject to a royalty.

The case demonstrates that when there is a series of point-to-point communications of the same musical work to different recipients, each transmission cannot be examined in isolation, even if it is at the request of the individual. To do so would make copyright protection dependent on the technicalities of transmission and would lose sight of the true character of the activity in question. Specifically, this appeal centres on, among other things, the meaning of the phrase 'to the public' in Section 3(1)(f) of the Copyright Act. Several online music services asserted that their use of music did not engage the right to communicate 'to the public', claiming that on-demand point-to-point communications are private and so do not fall within the purview of Section 3(1)(f). The Supreme Court of Canada held that streaming transmission of a file containing a musical work from an online service website to a customer's computer at the customer's request amounts to "communicat[ing] the work to the public by telecommunication".

Facts

The appellants - Rogers Communications Inc, Rogers Wireless Partnership, Shaw Cablesystems GP, Bell Canada and Telus Communications Company - offer online music services by making their audio files available to consumers for streaming and/or downloading. The respondent, the Society of Composers, Authors and Music Publishers of Canada (SOCAN), is a collective society of composers, authors and publishers of music. These proceedings were set in motion in 1995 when SOCAN first filed proposed tariffs for the transmission of various musical works that they considered to be communications to the public over the Internet. When objections were filed by the appellants, the Copyright Board undertook to establish which internet activities constituted a protected use of copyrighted music and found that a stream sent over the Internet falls within the creator's right to communicate to the public by telecommunication under Section 3(1)(f) of the act. The board proceeded to establish a tariff for the communication of musical works over the Internet between 1996 and 2006. The appellants' application for judicial review was dismissed by the Federal Court of Appeal.

Decision

The question of whether downloading music is a 'communication' under Section 3(1)(f) was left to a companion case, Entertainment Software Assn v Society of Composers, Authors and Music Publishers of Canada(2), in which the majority of the Supreme Court of Canada held that a downloaded work is not a work 'communicated'. The Entertainment Software Association did not challenge the Copyright Board's assertion that a 'stream' constitutes a 'communication' under Section 3(1)(f). The remaining question in this case was whether a stream from the Internet at the request of consumers constitutes a communication "to the public".

The court found that transmissions of musical works can be communications to the public, even though they occur between the online music provider and the consumers in a point-to-point fashion. In analysing the phrase 'to the public', Canadian courts have relied upon its ordinary meaning as well as the definition of 'public' in Article 1721(2) of the North American Free Trade Agreement (Can TS 1994 No 2), which states that to be "public", a communication must "be targeted at an aggregation of individuals, which is more than a single person but not necessarily the whole public at large".

The court made it clear that the appellants were in the business of making numerous sales of a given musical work, and that maximising the number of sales is the "very raison d'être" of music services. The implication of such a business model is that there will be multiple transmissions of the same work to many different consumers.

The appellants' argument throughout these proceedings - that a point-to-point transmission of a musical work is not a communication to the public - is largely based on the finding in CCH Canadian Ltd v Law Society of Upper Canada(3), that fax transmissions of copyrighted works by the Osgoode Hall Great Library to its patrons were private communications. The court distinguished the situation at issue from that in CCH, since in the latter case there was "no evidence that the Great Library was communicating the same works in a serial fashion or that the Great Library had made the works generally available at any lawyer's request". Further, in CCH the court stated that "a series of repeated fax transmissions of the same work to a number of recipients might constitute communication to the public".

The court explained that the application of CCH to the present case would lead to arbitrary results. It employed the example of a copyrighted work sent randomly to 100 recipients by email. According to the appellants' approach, this would be a "communication to the public". However, a sender should not be able to avoid copyright infringement simply by sending separate emails to each of the 100 recipients. The court emphasised that copyright protection should not depend on technicalities and the broader context must be considered to guarantee that form does not prevail over substance.

Emphasis was also placed on the fact that Section 3(1)(f) is technology-neutral, meaning that it must evolve to make certain that it remains relevant in an ever-changing technological setting. The court cited Apple Computer Inc v Mackintosh Ltd ([1987] 1 FC 173 (TD) aff'd)(4), for the proposition that the act should extend to technologies that were not or could not have been considered at the time of its drafting. Consequently, when a business conveys copyrighted material through a new method of communication, the end result should not necessarily differ from traditional methods of communication.

In simple terms, the court explained that anyone with internet access has the potential to access and acquire musical works from these service providers. Customers requesting streams are not members of a narrow group, but are instead 'the public'.

Comment

The transmission of a file containing a musical work, from an online service website to customers' computers at the customers' request, amounts to "communicat[ing] the work to the public by telecommunication". The practical result of this decision is that public performance royalties are payable by online music services for on-demand streaming, but not for downloads.

For further information on this topic please contact Christian Bolduc at Smart & Biggar/Fetherstonhaugh by telephone (+1 514 954 1500), fax (+1 514 954 1396) or email (cbolduc@smart-biggar.ca).

Endnotes

(1) 2012 SCC 35, July 12 2012, see http://scc.lexum.org/en/2012/2012scc35/2012scc35.html.
(2) 2012 SCC 34 , see http://scc.lexum.org/en/2012/2012scc34/2012scc34.html.
(3) 2004 SCC 13 , see http://scc.lexum.org/en/2004/2004scc13/2004scc13.html.
(4) 1990 2 SCR 209, see http://scc.lexum.org/en/1990/1990scr2-209/1990scr2-209.html.