Dan Glover Indirect theories of copyright liability

Osgoode IP Intensive Program - Indirect Infringement and the Internet 1McCarthy Tétrault Advance™Building Capabilities for GrowthOsgoode IP Intensive Program –Indirect Infringement and the InternetDaniel G.C. Glover, McCarthy Tétrault LLP McCarthy Tétrault LLP / mccarthy.ca / September 2011 10692141

Osgoode IP Intensive Program - Indirect Infringement and the Internet 2 What Is Indirect Infringement?“The Copyright Act does not expressly render anyone liable for infringementcommitted by another. … The absence of such express language in the copyrightstatute does not preclude the imposition of liability for copyright infringements oncertain parties who have not themselves engaged in the infringing activity. Forvicarious liability is imposed in virtually all areas of the law, and the conceptof contributory infringement is merely a species of the broader problem ofidentifying the circumstances in which it is just to hold one individualaccountable for the actions of another.” Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 at 434-35 (1984) Indirect infringement may occur when a third partyfacilitates an infringement, but does not directly carry it out.  BitTorrent Tracker = Air Traffic Controller for online infringement, but it doesn’t fly or land the plane What level or kind of participation is enough? McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 3Between Scylla and CharybdisPublic Public interestinterest in in theobtaining a encouragement & disseminationjust reward of works of thefor the arts & intellectcreator Théberge, 2002 The Legislator’s Three Goals: 1) Encourage the good actors; 2) Capture the bad actors (even in disguise); 3) Make the ones in between just a little bit nervousMcCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 4 The Restricted Acts3. (1) … “copyright” … means the sole right to produce or reproduce the work or anysubstantial part thereof in any material form whatever, to perform the work or anysubstantial part thereof in public or, if the work is unpublished, to publish the work orany substantial part thereof, and includes the sole right (a) to produce, reproduce, perform or publish any translation of the work, (b) … to convert [a dramatic work] into a novel or other non-dramatic work, (c) … to convert [a non-dramatic work] into a dramatic work, by way ofperformance in public or otherwise, (d) … to make any sound recording, cinematograph film or other contrivanceby means of which [a] work may be mechanically reproduced or performed, (e) … to reproduce, adapt and publicly present [a] work as acinematographic work, (f) … to communicate [a] work to the public by telecommunication, (g) to present at a public exhibition… an artistic work …, (h) … to rent out [a] computer program, and (i) … to rent out a sound recording …,and to authorize any such acts.27. (1) It is an infringement of copyright for any person to do, without the consent ofthe owner of the copyright, anything that by this Act only the owner of the copyrighthas the right to do. McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 5 What Does Authorization Mean?“‘Authorize’ means to ‘sanction, approve and countenance’…Countenance in the context of authorizing copyright infringementmust be understood in its strongest dictionary meaning, namely,‘[g]ive approval to; sanction, permit; favour, encourage’…Authorization is a question of fact that depends on thecircumstances of each particular case and can be inferred fromacts that are less than direct and positive, including a sufficientdegree of indifference... However, a person does not authorizeinfringement by authorizing the mere use of equipment thatcould be used to infringe copyright. Courts should presumethat a person who authorizes an activity does so only so far as itis in accordance with the law.” • CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339 at para. 38 McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 6 The Commonwealth Track Record Vigneux (PC, 1945): Defendant hires out a record player to a restaurant and supplies it with records via weekly rental  Not liable Muzak (SCC, 1953): Defendant lets broadcasting system and supplies electric compositions to be played  Not liable Ames (Eng. Ch, 1981): Defendant shop provides record library service and sells blank tapes  Not liable Amstrad (HL, 1988): Defendant manufactures, advertises and sells audio systems that record at high speed from prerecorded cassettes on to blank tapes  Not liable  Lead speech of Lord Templeman: “From the point of view of society the present position is lamentable. Millions of breaches of the law must be committed by home copiers every year… A law which is treated with such contempt should be amended or repealed.” Sirius (FCA 2010): Defendant supplies satellite radio receivers that automatically copy radio programs unless subscriber turns off default setting  Liable because of automatic copying feature McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 7Can the Common Law Fill the Gap?“Copyright legislation simply creates rights and obligations upon the termsand in the circumstances set out in the statute. This creature of statute hasbeen known to the law of England at least since the days of Queen Annewhen the first copyright statute was passed. It does not assist theinterpretive analysis to import tort concepts. The legislation speaksfor itself and the actions of the appellant must be measured accordingto the terms of the statute.” ¬ Compo Co. v. Blue Crest Music Inc., [1980] 1 S.C.R. 357 at 372-373“The fact that in this country … the law of copyright, like the law relating topassing off, has been stretched to give protection to creative talents andactivities the protection of which was probably never in the contemplation,and indeed in some cases cannot have been in the contemplation, of thosewho from time to time have been responsible for the framing of successivestatutes. Language can be and has been stretched beyond the limitsthat most people would attribute to the words used in successiveCopyright Acts, but there must be a breaking point. The question iswhether it has been reached.” ¬ CBS v. Ames, [1982] Ch. 91 (UK 1982)McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 8 The Creator’s “Ocean Problem” “Chasing individual consumers is time consuming and is a teaspoon solution to an ocean problem.” - Randal C. Picker, "Copyright as Entry Policy: The Case of Digital Distribution," 47 Antitrust Bull. 423, 442 (2002) In 1911, copying and distributing a work required major effort. Infringers were not a moving target and facilitators not a concern. Creating a novel, software, or film remains labour- and capital-intensive. Now, intermediaries profit by facilitating the making of infringing copies. In doing so, they usually need not infringe copyright directly. Thanks to the Internet, direct infringement can take place anywhere, often invisibly, and at a minimal cost. Yet the current Act targets the old actors and activities, not the new. If you use “specifically designed plates” to infringe, watch out (s. 27(4))! If you run a BitTorrent tracker in Toronto, the Act has no easy answers. McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 9The Host’s Ocean ProblemIntroduction to Digital Britain, Final Report (2009)“On 26 August 1768, when Captain James Cook set sail forAustralia, it took 2 years and 320 days before he returned todescribe what he found there.“Yesterday, on 15 June 2009, 20 hours of new content were postedon YouTube every minute*, 494 exabytes of information weretransferred seamlessly across the globe, over 2.6 billion mobileminutes were exchanged across Europe, and millions of enquirieswere made using a Google algorithm.” (1 EB = 1,000,000,000,000,000,000 bytes of information)* We’re now up to 48 hours of new content posted onYouTube every minute (7.9 years/day)McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 10 Varieties of Indirect Infringement¬ Common design = where two or more persons act in concert with one another pursuant to a common design in the infringement  Incandescent Gas Light Company, Ld. v. The New Incandescent Mantle Company, (1898) 15 R.P.C. 8: Defendant A sells fittings downstairs, and Defendant B upstairs in the same building sells the mantles to go with the fittings.¬ Aid and abet = where a person knows that anothers conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other  Pirate Bay, Finreactor: “By providing a website with advanced search functions and easy uploading and downloading facilities, and by putting individual filesharers in touch with one other through the tracker linked to the site, the operation … has … facilitated and, consequently, aided and abetted these offences.” McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 11 Varieties of Indirect Infringement (cont.)¬ Contributory liability = where a person induces, causes or contributes to infringing conduct of another with knowledge of the infringing conduct  Limewire: 93% of files made available & 98.8% of files requested for download likely to be infringing. Software distributed with awareness of the purpose to which it would be put, and was marketed to encourage it. No meaningful steps taken to mitigate infringement.¬ Vicarious liability = where a person is liable for indirect infringement because the person has the right and ability to supervise infringing conduct and has a direct financial interest in such activities  Fonovisa v. Cherry Auction, 76 F.3d 259 (9th Cir. 1996): Defendant ran a swap meet where independent vendors sold bootleg Latin music tapes. Promotion of the meet, collection of rental and admission fees, and being “in a position to police the vendors” supported liability. McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 12 Round One – VCRs/Cassette Tapes“Now, the question comes, well, all right, what is wrong with the VCR. One of theJapanese lobbyists … has said that the VCR is the greatest friend that theAmerican film producer ever had. … I say to you that the VCR is to the Americanfilm producer and the American public as the Boston Strangler is to the womanhome alone.” ¬ Jack Valenti, Motion Picture Assn. of America, at hearings before Subcommitee on Courts, Civil Liberties and the Administration of Justice, 1982The Results:¬ Amstrad: Since authorise under the 1911 Act means “to grant, or purport togrant, expressly or by implication, the right to do the act complained of”, thedefendants by selling a high-speed twin-tape recorder might facilitate the copying bypurchasers of material in breach of copyright but did not "authorise" it. There was nocommon design because all Amstrad did was sell the recorder to purchasers withunknown purposes. There was no contributory liability because the recorders mightbe used for lawful purposes and there were no positive acts of inducement.¬ Sony: U.S. Supreme Court rules that sale of the VTRs to the general public doesnot constitute contributory infringement of respondents copyrights because (a) onthe record, users’ time-shifting of a free TV program was a fair use; (b) the VTRswere therefore capable of substantial noninfringing uses. McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 13 Round Two – Grokster“While there is doubtless some demand for free Shakespeare, theevidence shows that substantive volume is a function of free access tocopyrighted work. Users seeking Top 40 songs, for example, or the latestrelease by Modest Mouse, are certain to be far more numerous than thoseseeking a free Decameron, and Grokster and StreamCast translated thatdemand into dollars.” - United States Supreme Court, MGM v. Grokster 545 U.S. (2004)“Napster Inc. has announced that it will soon begin charging you a fee.That’s if the courts don’t order it shut down first. What will you do to getaround it?” - StreamCast proposed advertisement cited by Supreme CourtThe Result:One who distributes a device with the object of promoting its use to infringecopyright, as shown by clear expression or other affirmative steps takento foster infringement, going beyond mere distribution with knowledgeof third-party action, is liable for the resulting acts of infringement by thirdparties using the device, regardless of the device’s lawful uses. McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 14 Round Three – User-Posted Content1) Viacom v. YouTube 2) Capitol v. MP3Tunes YT operates “User-posted content” site.  Defendant operates storage locker and On start-up, founder states in email that if it integrated “sideloading” site.“just removed the obviously copyright  Users populate lockers and streaminfringing stuff,” traffic would “go from 100,000 music to PCs or other devices.views a day to about 20,000 views.”  Defendant sells subscriptions for YT implements policy to take down content storage space on locker site.only after receipt of demand letter.  Sideloading site points to many Users could be counted upon to upload infringing files (as high as 97%) andduplicate files following takedown provides lists of “most popular songs”. Competitors screened uploaded videos for  One click allows for storage of sideloadunauthorized copyrighted content. songs in locker. YT rejected request to implement digital  Defendant takes down sideload linksfingerprinting technology. on receipt of notice, but does not trace In 2006, YT did internal study that found through to lockers.that most viewed videos were 70%+  Defendant does not seek out titlescopyrighted, with only 10% licensed. described in non-compliant notice. YouTube users now upload 48hrs of  Officers and employees of Defendantcontent per minute. personally sideload infringing songs. McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 15 Hosting Safe Harbours – Canada2.4 (1) For the purposes of communication to the public by telecommunication, … (b) a person whose only act in respect of the communication of a work or other subject-matter to the public consists of providing the means of telecommunication necessary for another person to so communicate the work or other subject-matter does not communicate that work or other subject-matter to the publicHowever…“copyright liability may well attach if the activities of the Internet ServiceProvider cease to be content neutral, e.g. if it has notice that a contentprovider has posted infringing material on its system and fails to takeremedial action.” - SOCAN v. CAIP, [2004] 2 S.C.R. 427 at para. 124And…New ISP safe harbours are expected in copyright legislation this fall. McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 16 Hosting Safe Harbour – DMCA§ 512. Limitations on liability relating to material online(c) Information Residing on Systems or Networks At Direction of Users.—(1) In general.— A service provider shall not be liable for monetary relief, or, except as provided insubsection (j), for injunctive or other equitable relief, for infringement of copyright by reason ofthe storage at the direction of a user of material that resides on a system or networkcontrolled or operated by or for the service provider, if the service provider—(A) (i) does not have actual knowledge that the material or an activity using the material onthe system or network is infringing;(ii) in the absence of such actual knowledge, is not aware of facts or circumstances fromwhich infringing activity is apparent; or(iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disableaccess to, the material;(B) does not receive a financial benefit directly attributable to the infringing activity, in acase in which the service provider has the right and ability to control such activity; and(C) upon notification of claimed infringement as described in paragraph (3), respondsexpeditiously to remove, or disable access to, the material that is claimed to be infringing orto be the subject of infringing activity.…(m) Protection of Privacy.— Nothing in this section shall be construed to condition theapplicability of subsections (a) through (d) on—(1) a service provider monitoring its serviceor affirmatively seeking facts indicating infringing activity McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 17DMCA Eligibility Conditions§ 512. (i) Conditions for Eligibility.—(1) Accommodation of technology.— The limitations on liability established by this section shall apply to a service provider only if the service provider—(A) has adopted and reasonably implemented, and informs subscribers and account holders of the service provider’s system or network of, a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers; and(B) accommodates and does not interfere with standard technical measures.McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 18 The U.S. “Red Flag” Doctrine“If the service provider becomes aware of a ‘red flag’ from which infringingactivity is apparent, it will lose the limitation of liability if it takes no action.’” - H.R. Rep. No. 105-551(II), at 53.“The Court does not read section 512 to endorse business practices thatwould encourage content providers to turn a blind eye to the source ofmassive copyright infringement while continuing to knowingly profit,indirectly or not, from every single one of these same sources until a courtorders the provider to terminate each individual account.” - Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1146, 1177(C.D. Cal. 2002)“If investigation of ‘‘facts and circumstances’’ is required to identify materialas infringing, then those facts and circumstances are not ‘‘red flags’’ ’. Thatobservation captures the reason why awareness of pervasive copyright-infringing, however flagrant and blatant, does not impose liability on theservice provider. It furnishes at most a statistical estimate of the chanceany particular posting is infringing – and that is not a ‘red flag’ marking anyparticular work. - Viacom v. YouTube, 2010 U.S. Dist. LEXIS 62829 McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 19 The U.S. “Red Flag” Doctrine “The case law interpreting the statutory ‘red flag’ standard suggests the flag may need to be an immense crimson banner before the service provider’s obligation to intervene comes into play.” - Jane C. Ginsburg, “User-Generated Content Sites and Section 512 of the US Copyright Act” “When a website traffics in pictures that are titillating by nature, describing photographs as ‘illegal’ or ‘stolen’ may be an attempt to increase their salacious appeal, rather than an admission that the photographs are actually illegal or stolen. We do not place the burden of determining whether photographs are actually illegal on a service provider.” - Perfect 10, Inc. v. CCBill LLC, 481 F.3d 751, 763 (9th Cir. 2007) McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 20 A Challenge to the “Red Flag”“A ‘red flag’ standard that demands greater certainty from the outset risks allowingthe service provider to ‘turn a blind eye’ to infringements because the provider couldclaim that the possibility that some files might not be infringing means thatinfringement can never be ‘apparent’ as to any file. By the same token, section512(m)’s dispensation of service providers from ‘affirmatively seeking factsindicating infringing activity’, should not entitle the service provider to passive-aggressive ignorance.” - Jane C. Ginsburg, “User-Generated Content Sites and s. 512 of the US Act”“Congress clearly signaled its intention to trigger this exclusion whenever oneencounters any combination of ‘facts or circumstances’ sufficient to raise a ‘red flag’warning the service provider that it is likely hosting acts of infringement. And theflexible character of this exclusion is further confirmed by Congress’s choice totrigger the exclusion once ‘infringing activity’—not particular and identifiable acts ofinfringement— becomes apparent.“Indeed, requiring item-specific, location-specific knowledge to establish‘aware[ness] of facts or circumstances from which infringing activity is apparent,’converts the awareness exclusion into a superfluity, because it would be satisfiedonly when the ‘knowledge’ exclusion also is satisfied.” - Viacom Appellate Brief, 2d Cir, December 2010 McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 21 Back to Neutrality?“The legal rules should enable us to have it both ways … Anentrepreneur who adopts what I’ll call a passive-aggressiveapproach to user conduct that the entrepreneur reasonablyshould anticipate (and indeed may intend) will collectively beinfringing on a large scale may in fact be building its business atthe expense of authors and right owners. In that event, it shouldnot matter how anodyne in the abstract the technology may be;by failing to take steps to forestall ‘massive’ infringement, theentrepreneur may in fact be encouraging unlawful user conduct,and may thereby be exposing itself to liability, at least undercommon law principles of secondary liability.” - Jane C. Ginsburg, “User-Generated Content Sites” McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 22 Bill C-32 Enablement ProvisionThe Stated Goal: To crack down on “wealth destroyers” attacking the creative industriesThe Amendment:27 (2.3) It is an infringement of copyright for a person to provide, bymeans of the Internet or another digital network, a service that the personknows or should have known is designed primarily to enable acts ofcopyright infringement if an actual infringement of copyright occurs bymeans of the Internet or another digital network as a result of the use ofthat service.The Question: Does the enablement provision in Bill C-32 meet the stated goal? McCarthy Tétrault LLP / mccarthy.ca

Osgoode IP Intensive Program - Indirect Infringement and the Internet 23Questions?McCarthy Tétrault LLP / mccarthy.ca

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Dan Glover Indirect theories of copyright liability

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Dan Glover Indirect theories of copyright liability — Presentation Transcript