• FCA: Broadcasters Required to Pay for Ephemeral Copies
  • April 15, 2014 | Authors: Adrian J. Howard; Beverley Moore; Chantal Saunders; Ryan Steeves
  • Law Firm: Borden Ladner Gervais LLP - Ottawa Office
  • Canadian Broadcasting Corporation v. Sodrac 2003 Inc., 2014 FCA 84

    These reasons applied to three applications for judicial review. In two of those applications, the CBC and Astral Media each sought to set aside several terms of the 2008-2012 license issued to it pursuant to the respective decisions of the Copyright Board (the “Board”). The third application for judicial review dealt with Board’s decision extending the 2008- 2012 license to the 2012-2016 period on an interim basis pending a final determination of SODRAC’s request under section 70.2 of the Copyright Act (the “Act”) for that period.

    Section 70.2 of the Act provides for a form of arbitration in which parties who are unable to agree on the term of a license can apply to the Board to fix those terms. The disputes involving the CBC and Astral Media, and SODRAC, were focused on SODRAC’s business model, which the CBC and Astral Media argued is “inconsistent with the prevailing industry model”. The CBC and Astral Media argued that the normal practice is for the producer of an audiovisual work to obtain a license-to-the-viewer license from the rights holder (i.e. where the producer obtains or ‘clears’ all necessary rights for downstream users). In comparison to this model, SODRAC has adopted a layered approach to licensing in which each link in the distribution chain must acquire (and pay for) the right to make the copies required for its commercial purposes. The Court of Appeal noted that SODRAC’s strategy corresponds to
    the adoption of new technology that generally necessitates, for example, multiple copies (i.e. ephemeral copies) of a musical work in order to incorporate it into an audiovisual work. The Board then set the various terms of licenses to the CBC and Astral Media.

    The main argument put forth by the CBC and Astral Media before the Court of Appeal was that the analysis by the Board flew in the face of the principle of technological neutrality established by the Supreme Court of Canada in ESA v. SOCAN, 2012 SCC 34 (“ESA”). The Board’s decision was grounded in the Supreme Court of Canada’s decision in Bishop v. Stevens, a case in which the Supreme Court held that each of the rights enumerated in subsection 3(1) of the Act was a separate right reserved to the owner of copyright, whose use by another attracted liability for the payment of royalties. Therefore, the Court of Appeal held that unless Bishop v. Stevens had been overturned or disavowed by the Supreme Court (in ESA), it would determine the outcome of this branch of the applications for judicial review. The CBC and Astral Media argued that Bishop v. Stevens has been overturned by ESA.

    The Court of Appeal acknowledged that the Supreme Court in ESA affirmed the principle of technological neutrality. However, the Court of Appeal held that in view of the different views of technological neutrality articulated in ESA, “it is difficult to know how one is to approach technological neutrality post-ESA.” The Court of Appeal held that “ESA, while restating the principle of technological neutrality in copyright law, provides no guidance as to how a court should apply that principle when faced with a copyright problem in which technological change is a material fact.” The Court of Appeal found that nothing in ESA authorized the Board to create a category of reproductions or copies which, by their association with broadcasting, would cease to be protected by the Act. As such, the Court of Appeal held that ESA did not overrule Bishop v. Stevens. The arguments made by the CBC and Astral Media with respect to technological neutrality therefore failed, in the Court of Appeal’s view.

    The CBC and Astral Media also raised a number of other issues with the Board’s decision, only one of which was successful. In objecting to a ‘blanket license’, the CBC objected on the basis of a discount formula, which is designed to give broadcasters credit when they broadcast a program in which the producer has in fact obtained a through-to-the-viewer license from SODRAC. The Court of Appeal reviewed the ‘discount formula’ and found that it was flawed. As a result, the Court of Appeal allowed the applications in part to allow for the amendment of the ‘discount formula’.

    With respect to the application for judicial review of the interim license, the Board disagreed with the CBC that the license did not represent the status quo given its significant differences from the parties’ prior pattern of dealings. The Court of Appeal held that once the Board made the order with respect to the 2008-2012 period, the terms of that order became the new status quo. Given that the Court of Appeal proposed to uphold the 2008-2012 license (with the one small change), it saw no reason not to treat that order as the status quo. Therefore, the Court of Appeal dismissed this application for judicial review.

    The Court of Appeal allowed the applications for judicial review (Re: ephemeal copies) in part, but only for the purpose of amending the ‘discount formula’. The Court of Appeal also dissolved the stays of execution of the licenses issued by the Board, and awarded costs to SODRAC, but reduced by 10% for CBC and Astral Media’s partial success.