In Win for Music Industry, 'Technological Neutrality' Falters in Canada

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Jeff John Roberts

Is the internet a “technological taxi?” Not anymore suggested the Supreme Court of Canada in a landmark copyright ruling.

Should broadcasters pay extra when their digital-era tools result in additional copies? Yes, says a major court ruling, in what could be a potential windfall for copyright owners and a setback for technology advocates. The ruling came from the Supreme Court of Canada, which backed away from its earlier embrace of the internet as a “technological taxi” to create a new type of music royalty. The decision is important because it prunes the idea of “technological neutrality” for copyright, while coinciding with other recent rulings in favor of content owners in the U.S. and Germany.

The Canadian case turned on when a broadcaster must pay royalties to a collection society, SODRAC, for reproducing music in a TV show. According to the Canadian Broadcasting Corporation, which brought the appeal to the Supreme Court, broadcasters should not have to pay extra for so-called “incidental copies” made in the course of preparing a master recording for a TV broadcast. The CBC argued instead that it had already paid once to obtain the music contained in the master copy, and again to “perform” the recording for its viewers—and that a handful of “incidental copies,” created for technical or regulatory reasons, should be included in those fees.

A majority of the court disagreed. In a 7-2 decision, it found copies made for technical reasons are still copies, and that the CBC must get permission to make them. The decision is likely to mean higher royalty costs for the CBC, and also for many other TV and online broadcasters that use digital editing processes to prepare their shows. (That’s because, as the ruling notes, broadcasters create “broadcast-incidental” copies when they undertake run-of-the-mill tasks like transferring a file to a content management system or ensuring file format compatibility).

The court’s conclusion is somewhat surprising since Canada received international attention in tech circlesin 2012 when it likened the internet to a “technological taxi” for copyright purposes. The metaphor came in a case involving royalties for video games purchased over the internet. The court explained, “In our view, there is no practical difference between buying a durable copy of the work in a store, receiving a copy in the mail, or downloading an identical copy using the Internet. The Internet is simply a technological taxi that delivers a durable copy of the same work to the end user.”

The taxi metaphor also arrived as part of a larger call by the court for “technological neutrality” theory in copyright questions. Loosely described, this called for judges to eschew a formalistic approach to digital copying and instead to look at the underlying reason for the copies. For example, copies made in the course of processes like internet caching or streaming should not be treated as reproductions for copyright purposes. As such, last week’s ruling in the CBC case means the court is turning away from this functional approach in favor of a more literal one.

This change of course, however, attracted some concern about the potential policy implications. In a sharp dissent, Justice Rosalie Abella suggested the court’s decision risked stunting digital technology while handing out gratuitous royalties. Here are some key passages (my emphasis):

The Board’s decision to impose royalties on the CBC for the creation of copies made incidental to the activity of broadcastingamounts to finding that broadcasting in the digital era, as opposed to the pre-digital era, should be subject to two fees for the same activity […]

The result of his approach is to penalize broadcasters for implementing advancements in
broadcasting technologies by creating artificial entitlements to compensation under the Copyright Act for incidental activities that were never intended to be covered […]

This results in the imposition of gratuitous costs on broadcasters merely for the use of more efficient technologies that do not engage with the legitimate interests of copyright holders

Abella also quoted the director of the U.S. Copyright Office, Maria Pallante, who has observed that “new technologies have made it increasingly apparent that not all reproductions are equal in the digital age.” (U.S. courts do not appear to have weighed as yet on the”broadcast incidental” copies at issue in the Canadian case).

The majority of the Canadian Supreme Court, however, rejected Abella’s criticism by saying theories of technological neutrality could not supplant the plain words of Canada’s Copyright Act.

The immediate result of the decision is that the case will go back before the country’s Copyright Board so that the board may determine the appropriate fee CBC should pay for the work. More broadly, it could embolden royalty collection societies that represent music and video owners in Canada and elsewhere to become more aggressive in demanding money for other instances of “incidental” copying.

Meanwhile, the Canadian ruling comes as content owners in the Germany and United States also notched major victories last week. In the latter case, a judge sided with the music industry and stripped awaythe so-called “safe harbor” that protected a cable company from being sued for copyright infractions carried out by its users. And in Germany, a court issued a ruling that copyright owners can orderinternet service providers to block piracy websites.

Taken together, these cases suggest judges worldwide may be growing skeptical of legal theories and policies that are intended to promote digital innovation by restricting the reach of copyright.

Here is a copy of the case (I’ve underlined some of the relevant parts of the dissent, which starts at paragraph 117). You can read more from those who like the decision here, and those who do not here.