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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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McCarthy Tétrault LLP / mccarthy.ca
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: bsookman@mccarthy.ca
January 26, 2016
McCarthy Tétrault LLP / mccarthy.ca
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
McCarthy Tétrault LLP / mccarthy.ca
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
McCarthy Tétrault LLP / mccarthy.ca
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
McCarthy Tétrault LLP / mccarthy.ca
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
McCarthy Tétrault LLP / mccarthy.ca
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

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Copyright and Technological Neutrality: CBC v Sodrac

  • 1. McCarthy Tétrault LLP / mccarthy.ca 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: bsookman@mccarthy.ca January 26, 2016
  • 2. McCarthy Tétrault LLP / mccarthy.ca 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. McCarthy Tétrault LLP / mccarthy.ca 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. McCarthy Tétrault LLP / mccarthy.ca 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. McCarthy Tétrault LLP / mccarthy.ca 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. McCarthy Tétrault LLP / mccarthy.ca 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. McCarthy Tétrault LLP / mccarthy.ca 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. McCarthy Tétrault LLP / mccarthy.ca 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. McCarthy Tétrault LLP / mccarthy.ca 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. McCarthy Tétrault LLP / mccarthy.ca 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. McCarthy Tétrault LLP / mccarthy.ca 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
  • 12. McCarthy Tétrault LLP / mccarthy.ca VANCOUVER Suite 1300, 777 Dunsmuir Street P.O. Box 10424, Pacific Centre Vancouver BC V7Y 1K2 Tel: 604-643-7100 Fax: 604-643-7900 Toll-Free: 1-877-244-7711 CALGARY Suite 4000, 421 7th Avenue SW Calgary AB T2P 4K9 Tel: 403-260-3500 Fax: 403-260-3501 Toll-Free: 1-877-244-7711 TORONTO Suite 5300, TD Bank Tower Box 48, 66 Wellington Street West Toronto (Ontario) M5K 1E6 Tel: 416-362-1812 Fax: 416-868-0673 Toll-Free: 1-877-244-7711 MONTRÉAL Suite 2500 1000 De La Gauchetière Street West Montréal QC H3B 0A2 Tel: 514-397-4100 Fax: 514-875-6246 Toll-Free: 1-877-244-7711 QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7e étage Québec QC G1R 5G4 Tel: 418-521-3000 Fax: 418-521-3099 Toll-Free: 1-877-244-7711 UNITED KINGDOM & EUROPE 125 Old Broad Street, 26th Floor London EC2N 1AR UNITED KINGDOM Tel: +44 (0)20 7786 5700 Fax: +44 (0)20 7786 5702 15214445