Canadian Lawyer InHouse

By Adrian Zahl SCC rules on copyright royalties O Top court finally addresses impact of new technologies on the sharing of works. copyright collectives. Collectives com- pensate copyright owners via copyright board approved tariffs for uses of works when it is impractical for the copyright owner to negotiate with users. New technologies have created dis- n July 12, 2012, the Supreme Court of Canada issued five decisions relating to royalties payable to method by which a work is sold to the user should not affect the copyright owner' putes between copyright collectives and those required to pay royalties. A theme of the decisions was that public access should be balanced with creators' rights to compensation, reflecting a shift from the historical purpose of copyright law of protecting the interests of creators. The decisions were as follows: 1.) Entertainment Software Association Copyright Licensing Agency (Access Copy- right): Access Copyright sought a royalty for photocopies made by teachers of short portions of textbooks for distribution to students, typically as a supplement to a primary textbook. The Court stated if the copying met a two part test for "fair dealing", no royalty would be payable. There was no dispute that the first part of the test was met, namely that the purpose was for "research or private studying. issue was whether the use was "fair." This " The v. Society of Composers, Authors and Music Publishers of Canada: SOCAN sought a royalty for music contained in video and computer games. Game publishers typical- ly negotiate rights to music embedded in games directly with the copyright holder of the music, with no further royalties being due when a physical copy of the game is sold. SOCAN sought a further royalty for games distributed online, based on s. 3(1) (f) of the Copyright Act, which gives a copyright owner the sole right to commu- nicate a work by telecommunication. The Court held the term "communi- cate," which is not defined in the act, relates to performing a work without generating a permanent copy; it does not include transmitting a work over the Internet for downloading by a customer. The principle of "technological neutrality" applies: the was considered to be a "matter of impres- sion" based on factors including the non- commercial motive of the teachers, the small proportion copied relative to the entire work, a lack of reasonable alterna- tives when only a short portion is used for classroom instruction, and no evidence of harm to copyright owners. As a result, the copying was considered fair dealing. 3) Rogers Communications Inc. v. SOCAN: Rogers provided an online ser- vice in which a customer could download or stream music to a computer. SOCAN sought a royalty based on s. 3(1)(f) of the Copyright Act which gives a copyright owner the sole right to "communicate the work to the public by telecommuni- cation." The tariff for downloading was rejected based on the companion ESA decision. The issue was whether a royalty applied to a "stream" whereby the user' s rights. The act does not create a separate right for a downloaded work additional to the distribution of a physical copy of the work. 2) Alberta (Education) v. Canadian s computer does not retain a permanent copy. A communication of a work "to the public" is not limited to broadcasting and other "push" technologies but can include "pull" communications at an individual user' s request. Although an online music service delivers works individually, work is delivered in serial fashion to an aggregation of users without any con- trol over the consumer request. SOCAN is thus entitled to a tariff the transmitted via non-downloadable stream technology. 4.) SOCAN v. Bell Canada: The respon- for a work Associations of Canada: The appellants sought a royalty for pre-existing record- ings incorporated into soundtracks. The request was based on s. 19 of the act, which provides for royalties when a "sound recording" is performed or communicated to the public by telecommunication. S. 19 is one of the "neighboring rights" provi- sions intended to compensate creators for non-traditional uses of works. However, s. 2 states that a "sound recording" does not include a "soundtrack" that accompanies a cinematographic work. The court ruled a "soundtrack" includes pre-existing works incorporated into a soundtrack; no addi- tional royalty is required for the work. IH Adrian Zahl is a partner of Ridout & Maybee LLP. He can be reached at azahl@ridoutmaybee.com CANADIANLAWYERMAG.COM/INHOUSE OCTOBER/NOVEMBER 2012 • 13 dents operated online music services that provided free previews of works through a "stream" in which a user could listen to a preview on a computer but could not save it. SOCAN sought a royalty for the previews. The court noted that a tool for achieving the balance between the rights of users and creators is "fair deal- ing", which allows certain activities that would otherwise infringe copyright. The use must be for private study or research and includes selecting music for purchase. The dealing must also be fair based on the quantity relative to the size of the work, alternatives to the dealing, and the effect on the work, which in this case would help rather than harm sales. 5) Sound v. Motion Picture Theatre

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