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Copyright and Technological Neutrality: CBC v Sodrac


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This addresses the Supreme Court decision in the CBC Sodrac case.

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Copyright and Technological Neutrality: CBC v Sodrac

  1. 1. McCarthy Tétrault LLP / Copyright and Technological Neutrality: CBC vs SODRAC LSUC: 20th Annual IP Law: The Year in Review Barry B. Sookman Direct Line: (416) 601-7949 E-Mail: January 26, 2016
  2. 2. McCarthy Tétrault LLP / What is the principle? ¬ “The principle of technological neutrality is recognition that, absent parliamentary intent to the contrary, the Copyright Act should not be interpreted or applied to favour or discriminate against any particular form of technology.” ¬ “The Federal Court of Appeal set out a fair reading of ESA when it described it as establishing that “[t]echnological neutrality is determined by functional equivalence: para. 39.” ¬ “technological neutrality required the consideration of the difference between the old and new forms of delivery of works. In the absence of any difference between them, no separate right was engaged.” ¬ ““an additional layer of protections and fees” [should] not be imposed based solely on technological change: ESA, at para. 9.” 215214445
  3. 3. McCarthy Tétrault LLP / Source of the principle? “It is derived from the balancing of user and right- holder interests discussed by this Court in Théberge — a “balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator”: para. 30. Because this long-standing principle informs the Copyright Act as a whole, it must be maintained across all technological contexts: “The traditional balance between authors and users should be preserved in the digital environment”: ESA, at para. 8.” 315214445
  4. 4. McCarthy Tétrault LLP / It’s place and role in the Act? ¬ “The Copyright Act as a whole is to be read having regard to the principles of technological neutrality and balance, unless its text indicates otherwise.” ¬ “the principles of balancing user and right-holder interests and of technological neutrality are central to Canadian copyright law, they cannot change the express terms of the Copyright Act.” ¬ “Arguments based on purpose in the form of technological neutrality and balance are advanced to come to the opposite conclusion, but purposive construction is a tool of statutory interpretation to assist in understanding the meaning of the text. It is not a stand-alone basis for the Court to develop its own theory of what it considers appropriate policy.” 415214445
  5. 5. McCarthy Tétrault LLP / Scope in valuation contexts ¬ “Overall, the Board’s valuation analysis must comport with the Copyright Act’s fundamental requirement to recognize technological neutrality and balance between user and right- holder interests.” ¬ “…where the right is engaged, the issue becomes one of valuation of that right, and the principles of technological neutrality and balance must be adapted to the valuation context.” ¬ “In the regulatory context, the principle of technological neutrality applies to valuation of a reproduction licence, just as it does in determining whether an activity implicates copyright at all.” 515214445
  6. 6. McCarthy Tétrault LLP / How the principle applies in valuation contexts? ¬ “ technological neutrality requires that different technologies using reproductions of copyright protected work that produce the same value to the users should be treated the same way.” ¬ “technological neutrality implies that it would be improper to impose higher copyright licensing costs on the user of one technology than would be imposed on the user of a different technology.” 615214445
  7. 7. McCarthy Tétrault LLP / How the principle applies in valuation contexts? ¬ “Conversely, different technologies using reproductions that produce different values should not be treated the same way.” ¬ “Where the user of one technology derives greater value from the use of reproductions of copyright protected work than another user using reproductions of the copyright protected work in a different technology, technological neutrality will imply that the copyright holder should be entitled to a larger royalty from the user who obtains such greater value.” 715214445
  8. 8. McCarthy Tétrault LLP / Valuation principles “When it is tasked with fixing licence fees, the Board must have regard to factors it considers relevant in striking a balance between the rights of users and right- holders. Relevant factors will include, but are not limited to, the risks taken by the user, the extent of the investment the user made in the new technology, and the nature of the copyright protected work’s use in the new technology. The Board must assess the respective contributions of, on the one hand, the risks taken by the user and the investment made by the user, and on the other hand, the reproductions of the copyright protected works, to the value enjoyed by the user.” 815214445
  9. 9. McCarthy Tétrault LLP / Value to users “When it is tasked with determining the value of a right, an important consideration for the Board is the value of that right to the user. The value of the use of reproductions in one technology may stem from functional differences from use in another technology. Value differences may also stem from internal efficiencies between technologies. Ignoring internal efficiencies would result in rights holders being denied additional royalties when the use of their copyrighted work in the more efficient technology confers greater value to the user of that technology.” 915214445
  10. 10. McCarthy Tétrault LLP / Result in the case? “It is evident both from the Board’s reasons in this case and the reasoning underlying the historical use of the 1:3.2 ratio, that the valuation of the licence fee covering CBC’s broadcast-incidental copying did not apply a valuation method consistent with the principle of technological neutrality because there was no comparison of the value contributed by the copyright protected reproductions as between CBC’s prior technology and its new digital technology. It also failed to take into account the relative contributions made by the use of copyright protected works and the risk and investment by the user in its digital technology, as required by the balance principle. “ 1015214445
  11. 11. McCarthy Tétrault LLP / Implications ¬ Statutory construction contexts ¬ Interpretive principle ¬ Relevance of rights in analog technologies to digital technologies? ¬ Recognition of additional rights based on technological changes? ¬ Rate setting ¬ Just compensation ¬ Balancing of user and rights holder interests ¬ Technological neutrality analysis 1115214445
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