public version t.22a - so can appellants factum (fair dealing)-ott_law-2714605-v27

8/7/2019 Public Version t.22a - So Can Appellants Factum (Fair Dealing)-Ott_law-2714605-V27

1/47

Court File No.: 33800

IN THE SUPREME COURT OF CANADA(ON APPEAL FROM THE FEDERAL COURT OF APPEAL)

BETWEEN:

SOCIETY OF COMPOSERS, AUTHORS AND MUSIC PUBLISHERSOF CANADA

Appellant(Applicant on Judicial Review)

- and -

BELL CANADA, THE CANADIAN RECORDING INDUSTRY ASSOCIATION,

APPLE CANADA INC., ROGERS COMMUNICATIONS INC., ROGERSWIRELESS PARTNERSHIP, SHAW CABLESYSTEMS G.P., TELUSCOMMUNICATIONS INC., ENTERTAINMENT SOFTWARE ASSOCIATION,

ENTERTAINMENT SOFTWARE ASSOCIATION OF CANADA andCMRRA/SODRAC INC.

Respondents(Respondents on Judicial Review)

APPELLANTS FACTUM[REDACTED VERSION]

Martin W. Mason(613) 786-0159Gilles M. Daigle(613) 786-0217D. Lynne Watt(613) 786-8695Matthew S. Estabrooks(613) 786-0211

Gowling Lafleur Henderson LLPBarristers and Solicitors160 Elgin Street, Suite 2600Ottawa, ON K1P 1C3Tel: (613) 233-1781Fax: (613) 563-9869

Counsel for the Appellant


2/47

ORIGINAL TO: THE REGISTRAR

COPYTO:

Gerald (Jay) L. Kerr-WilsonAnne Ko

Fasken Martineau LLP55 Metcalfe StreetSuite 1300Ottawa, ON K1P 6L5Tel: (613) 236-3882Fax: (613) 230-6423

Counsel for the RespondentsBell Canada, RogersCommunications Inc.,Rogers Wireless Partnership,

Shaw Cablesystems G.P.,and Telus CommunicationsInc.

ANDTO:

J. Thomas CurryMarguerite Ethier

Lenczner Slaght Royce SmithGriffin LLP130 Adelaide Street, WestSuite 2600Toronto, ON M5A 3P5Tel: (416) 865-3096Fax: (416) 865-9010

Counsel for the RespondentCRIA

Colin Baxter

Cavanagh Williams ConwayBaxter LLP1111 Prince of Wales DriveSuite 400Ottawa, ON K2C 3T2Tel: (613) 569-8558Fax: (613) 569-8668

Agent for the RespondentCRIA

ANDTO:

Michael KochDina Graser

Goodmans LLPSuite 2400250 Yonge StreetToronto, ON M5B 2M6Tel: (416) 597-5156Fax: (416) 979-1234

Counsel for the RespondentApple Canada Inc.

Dougald E. Brown

Nelligan O'Brien Payne LLPSuite 150050 O'Connor StreetOttawa, ON K1P 6L2Tel: (613) 231-8210Fax: (613) 788-3661

Agent for the Respondent AppleCanada Inc.


3/47

ANDTO:

Casey M. ChisickTim Pinos

Cassels Brock & Blackwell

LLP1200 Scotia Plaza40 King Street, WestToronto, ON M5H 3C2Tel: (416) 869-5784Fax: (416) 644-9326

Counsel for the RespondentCMRRA-SODRAC Inc.

Eugene Meehan Q.C.

McMillan LLP

50 OConnor StreetSuite 300Ottawa, ON K1P 6L2

Tel: (613) 232-7171Fax: (613) 231-3191

Agent for the RespondentCMRRA-SODRAC Inc.

AND

TO:

Hafeez Rupani

Borden Ladner Gervais LLPWorld Exchange Plaza100 Queen Street, Suite 1100Ottawa, OntarioK1P 1J9Tel: (613) 369-4753Fax: (613) 230-8842

Counsel for the RespondentESA/ESAC


4/47

-i-

TABLE OF CONTENTS

PART I FACTS..................................................................................................1A. Overview ........................................................................................1B. SOCAN...........................................................................................2

C. Online Music Services....................................................................4

i. Generally .............................................................................4ii. Apples iTunes .....................................................................4

D. Previews.........................................................................................5E. Copyright Board .............................................................................7

i. Generally .............................................................................7ii. Tariff 22.A Decision .............................................................7

F. Federal Court of Appeal .................................................................9PART II ISSUES .............................................................................................11PART III ARGUMENT.....................................................................................11

A. General.........................................................................................11i. The collective administration of copyright ..........................12ii. The Board arrived at its decision on fair dealing

without hearing from the parties.........................................13B. Issue 1: The Online Music Services use of previews does

not satisfy the first step in the test for fair dealing undersection 29 of theAct.....................................................................14i. Definition of the term, research .......................................15ii. The Federal Court of Appeal adopted a definition for

research without considering the legislative purpose ......17iii. The purpose of the fair dealing provision is to foster

the creative process...........................................................17iv. The purposes enumerated in sections 29 to 29.2 are

purposes which promote the public interest.......................20v. The definition of research applied by the FederalCourt of Appeal is inconsistent with this Court's

decision in CCH.................................................................21vi. Parallels to US jurisprudence.............................................22vii. The interpretation of the term research adopted by

the Federal Court of Appeal is inconsistent with theway that term is used elsewhere in theAct........................24


5/47

-ii-

viii. The definition of research applied by the FederalCourt of Appeal is inconsistent with the purposes ofthe fair dealing provision and theActin general ................26

C. Issue 2: The manner in which the Online Music Servicesdeal with SOCANs copyright musical works is not fair.................27i. The purpose of the dealing: The purpose of the

Online Music Services use of previews is entirelycommercial ........................................................................28

ii. The character of the dealing: The Online MusicServices are widely distributing substantial parts ofthe musical works ..............................................................28

iii. The amount of the dealing: The amount of the dealingis unfair ..............................................................................29a. In this case, the amount of the dealing should

be an important factor in determining if thedealing is fair...........................................................29

b. The amount of the dealing ought to beconsidered in the aggregate....................................30

iv. Alternatives to the dealing: In this case, alternatives tothe dealing exist which achieve the purposes of theOnline Music Services without infringing theAppellants copyright..........................................................34

v. The nature of the works: The musical works arepublished and their use is subject to the collective

administration of copyright regime.....................................35vi. The effect of the dealing on the work: There is no

evidence in the record to support the Boardsconclusion that the Online Music Services dealinghas no negative effect on the Appellants works................36

D. The Online Music Services ought to compensate SOCAN forthis infringing use..........................................................................38

PART IV SUBMISSIONS ON COSTS ............................................................38PART V ORDER SOUGHT.............................................................................38PART VI TABLE OF AUTHORITIES...............................................................40PART VII STATUTES RELIED ON .................................................................43


6/47

-1-

PART I FACTS

A. Overview

1. The Appellant controls and administers the Canadian communication

rights in the world repertoire of copyright-protected music. The Appellant

does so in accordance with a collective licensing regime that is mandated

by the Canadian Copyright Act. This statutory regime guarantees music

users the right to access and use the Appellants musical works, while

ensuring that the authors, composers and publishers of music from

Canada and around the world are fairly compensated when their works

are used in Canada, pursuant to royalty tariffs approved by the Copyright

Board.

2. The decisions below have denied the Appellant and its members the right

to be compensated for an important use of their musical works by online

music retailers. The Copyright Board held that online music retailers are

not required to pay royalties to the Appellant for their use of previews of

musical works because that use constitutes fair dealing for the purpose

of research within the meaning of section 29 of the Copyright Act.

3. The Appellant submits that using previews in support of a purely

commercial retail operation cannot be considered research as

contemplated by the Copyright Act. In fact, neither the online music

retailers nor their customers are engaged in any type of research. The

online music retailers use music previews as free samples, which they

provide to their customers without consent and at the Appellants expense,

while their customers are merely shopping.

4. The Appellant submits that the interpretation of the term research

adopted by the Copyright Board constitutes an unwarranted expansion of

that terms meaning, which denies the Appellant and its members fair

compensation for the use of their musical works. The Copyright Boards

interpretation is inconsistent with the purposes of the Copyright Act and


7/47

-2-

brings about a result that was not intended by Parliament.

5. This Court has repeatedly held that the overarching purposes of the

Copyright Act are twofold: promoting the public interest in the

encouragement and dissemination of artistic and intellectual works, and

justly rewarding the creator of the work. The fair dealing exception is

intended to foster activities that further the purposes of the Copyright Act.

Neither communicating nor listening to music previews furthers the

purposes of the Copyright Act. These activities cannot be considered

research because they do not promote the public interest in the

encouragement and dissemination of artistic and intellectual works.

Robertson v Thomson Corp, 2006 SCC 43, [2006] 2 SCR 363 at para 69.

6. In the alternative, the Appellant submits that the manner in which online

music retailers deal with the Appellants musical works is unfair. The

Appellant submits that both the Copyright Board and the Federal Court of

Appeal erred in the application of the test for fairness as set out by this

Court in CCH Canadian Ltd. v Law Society of Upper Canada.

B. SOCAN

7. The Appellant, Society of Composers, Authors and Music Publishers of

Canada (SOCAN), is a collective society as defined in section 2 of the

Copyright Act(the Act). TheActprovides for the collective administration

of copyrights. SOCAN was formed to administer the rights to perform

musical works in public and to communicate musical works to the public

by telecommunication.

Copyright Act, RSC 1985, c C-42, ss 2, 3(1) and 3(1)(f).

8. A collective society is an organization that controls and administers the

rights of multiple copyright owners. Collective administration of copyright is

widespread in Canada, particularly for music performance rights,

reprography rights and other mechanical reproduction rights. Some


8/47

-3-

collective societies are affiliated with foreign societies, which allows them

to administer the works of foreign copyright owners in Canada, as well as

domestic works.

9. SOCAN is affiliated with dozens of similar foreign performing rights

societies. As a result of reciprocal agreements between SOCAN and

these foreign affiliates, SOCAN controls and administers in Canada the

performing and communication rights in all or virtually all musical works in

the world repertoire of copyright music.

Copyright Board of Canada, Statement of Royalties to be Collected for thePerformance in Canada of Dramatico-Musical or Musical Works in 1991,decision dated July 31, 1991, File No 1990-4 at 286-287.

10. Many collective societies grant licences for the use of their members'

works and set the conditions for that use without resorting to the Copyright

Board (the Board)s tariff approval process. That is not the case for

SOCAN. TheActrequires SOCAN to file proposed tariffs for the Boards

approval and certification in the Canada Gazette, in the form of statements

of royalties called tariffs. A music user who pays the fees and meets the

other conditions set out in a certified tariff has the statutory right to use

SOCANs musical works in accordance with the terms of that tariff.

Copyright Act, RSC 1985, c C-42, ss 67-68.2.

11. The issues involved in this appeal arise out of proceedings before the

Board for the certification of a SOCAN tariff targeting the use of music on

the Internet. The tariff in issue is known as SOCAN Tariff 22.A. It applies

to the communication of musical works to the public by online music

services that sell and communicate recordings of musical works to

consumers through the Internet.

12. In certifying a tariff, the Board hears submissions from both the collective

society proposing the tariff and any affected copyright users who choose

to object to its approval. In the case of Tariff 22.A, the objectors consisted


9/47

-4-

of music users who operate businesses that sell music to the public

through the Internet or other similar means of telecommunication.

C. Online Music Services

i. Generally

13. The Respondents, Bell Canada, Rogers Communications Inc., Rogers

Wireless Partnership, Shaw Cablesystems G.P., Telus Communications

Inc. and Apple Canada, Inc. (the Online Music Services or Services)

operate services that sell musical works to the public through the Internet.

14. Although their respective operations and designs may differ somewhat,

the Online Music Services share many key features, including aninteractive interface that allows consumers to identify musical works by

title, album, genre and artist. Each Service also provides consumers with

the ability to listen to previews of musical works, whether or not they

decide to make a purchase.

Evidence of David Basskin before Copyright Board of Canada hearing inCMRRA/SODRAC Inc Reproduction of Musical Works (CSI - Online MusicServices), Exhibit SOCAN-10 at 136-204, Appellant's Record at 157-174.

Witness Statement of Eddy Cue before Copyright Board of Canada hearingin CMRRA/SODRAC Inc Reproduction of Musical Works (CSI - Online MusicServices), Exhibit Coalition-11C at paras 5-14, Appellant's Record at 213-216.

Coalition Statement of Case, Exhibit Coalition-1 at paras 17-27, Appellant'sRecord at 182-184.

Evidence of Alastair Mitchell, April 30, 2007, Transcripts Vol 9 at 1928-1938,Appellant's Record at 113-115.

15. The music catalogue of each Service is unique, but because SOCAN

administers the performing rights in virtually the entire world repertoire of

music, all or virtually all of the millions of musical works in the respective

catalogues of the Services are administered by SOCAN.

Decision of the Copyright Board, dated October 18, 2007 [Board Decision]at para 20, Appellant's Record at 14.


10/47

-5-

ii. Apples iTunes

16. Much of the focus before the Copyright Board and the Federal Court of

Appeal was on the iTunes service offered by the Respondent, Apple

Canada, Inc. and its U.S. parent company, Apple, Inc. This focus was dueto the fact that iTunes is the dominant player in Canada and the world,

and its witness, Apple Vice-President Eddy Cue, presented a substantial

amount of evidence in the proceedings before the Board. However, the

issues raised on this appeal apply equally to all of the Online Music

Services.

Evidence of Eddy Cue, May 1, 2007, Transcripts, Vol 10 at 1973-2041,Appellant's Record at 120-137.

D. Previews

17. Tariff 22, as filed by SOCAN over the years 1996-2006, targeted various

uses of music on the Internet, including the Online Music Services sale

and communication of musical works to consumers online. At the hearing

before the Board, SOCAN proposed that the tariff item applicable to online

music services provide for different levels of compensation based on

whether the retailer offered previews as part of its service.

18. Previews are a feature common to all of the Respondent Online Music

Services. All of the Respondents' online music stores allow consumers to

listen by way of a preview to an excerpt of a musical work. The Board

defined previews as follows:

[18] Previews are a marketing tool offered by online music services,among others. A preview is an excerpt (usually 30 seconds or less) of asound recording that can be streamed so that consumers are allowed to

preview the recording to help them decide whether to purchase a(usually permanent) download.

Board Decision at paras 18, 101, Appellant's Record at 14, 38.

Evidence of David Basskin before Copyright Board of Canada hearing inCMRRA/SODRAC Inc Reproduction of Musical Works (CSI - Online MusicServices), Exhibit SOCAN-10 at 200, Appellant's Record at 173.


11/47

-6-

19. The term stream in the passage quoted above refers to the ability of the

Online Music Services to communicate a temporary copy of a musical

work to a consumer in such a way that the consumers local computer

does not store a permanent copy of the work. Streaming can be

contrasted with downloading, a communication process that results in the

creation of a permanent copy of a musical work on the consumers local

computer.

20. With the iTunes service, each preview consists of a 30-second segment of

a song. Every song in the iTunes catalogue can be previewed and a

consumer can listen to previews of as many songs as she likes as many

times as she likes. Any visitor to the iTunes store can listen to previews,

regardless of whether she makes a purchase or has registered with the

service.

Evidence of Eddy Cue, September 18, 2006, Transcript at Copyright Boardof Canada hearing in CMRRA/SODRAC Inc Reproduction of Musical Works(CSI - Online Music Services), Volume 9, Exhibit Coalition-11C at 1722-1724,1733, 1741-1743, Appellant's Record at 230-231, 233, 235.

21. The evidence presented to the Board by Apple witness Eddie Cue was

that, on average, ten previews are communicated for each download of a

musical work sold.

Board Decision at para 101, Appellant's Record at 38.

22. During the year 2005, iTunes alone sold overCONFIDENTIAL downloads

in Canada. Based on Mr. Cue's evidence, these iTunes downloads

represented over CONFIDENTIAL previews or as many as

CONFIDENTIAL hours of SOCAN music used during the year 2005 for a

single online music retailer. Considering the growth of the online music

market in recent years, the number of previews communicated annually

since 2005 would have increased dramatically. Given the decisions below,

this extensive use of SOCANs copyright music remains uncompensated.

iTunes Music Store Business P&L, Exhibit C to Apples Responses to


12/47

-7-

Interrogatories, Exhibit SOCAN-17, Volume 3.6, Appellant's Record at 175-176 (filed separately in a sealed envelope).

E. Copyright Board

i. Generally

23. The Board is an administrative tribunal created by theActwhose mandate

is set out in sections 66 to 66.91. Along with other duties, the Board is

tasked with the oversight of the system set out in theActfor the collective

administration of copyright, which includes the consideration and approval

of royalty tariffs proposed by collective societies, including the Appellant.

24. The Board conducted the hearing of SOCAN Tariff 22 for the years 1996-

2006 in two phases. The first phase dealt with broad legal issuesregarding copyright and the use of music on the Internet. Several aspects

of this Phase 1 decision of the Board were appealed to this Court.

Society of Composers, Authors and Music Publishers of Canada vCanadian Assn of Internet Providers, 2004 SCC 45 [2004], 2 SCR 427.

25. This appeal arises out of the second phase of the Tariff 22 hearing before

the Board, which dealt with tariff valuation issues, that is, the quantum of

royalties to be approved for various Tariff 22 uses. That Phase 2 hearingtook place in early 2007.

ii. Tariff 22.A Decision

26. In its 2007 decision, the Board approved Tariff 22.A for the sale and

communication of full-length musical works by the Online Music Services.

However, the Board refused to approve a tariff component for their

communication of music previews because, in the Boards view, that

activity was covered by the fair dealing exception to copyright infringement

in section 29 of theActand, consequently, no tariff was certifiable for that

use.

27. Although SOCANs proposed tariff expressly sought to assign a value to

online music previews, at no time did any of the parties raise before the


13/47

-8-

Board the issue of whether the fair dealing exception might apply to such

previews. The Board raised and dealt with the issue on its own initiative,

without notice to or input from the parties, when it rendered its Phase 2

decision.

SOCAN Statement of Case, Exhibit SOCAN-1 at 8, Appellant's Record at145.

Society of Composers, Authors and Music Publishers of Canada v BellCanada, 2010 FCA 123 [Court of Appeal Decision] at para 10, Appellant'sRecord at 80.

28. In coming to its conclusion that the Online Music Services use of previews

constituted fair dealing, the Board relied on the decision of this Court in

CCH v. Law Society of Upper Canada (CCH). The Board purported to

adopt and to apply the guidance of this Court stipulating that the word

research be given a large and liberal interpretation.

Board Decision at para 104, Appellant's Record at 39-40.

29. The Board determined that the use of previews by the Online Music

Services constituted a dealing with a musical work for the purpose of

research. The Board focussed on the Services customers, i.e., the

recipients of the communications of the previews, and concluded that theironline requests for music previews constitute research within the meaning

of section 29:

Planning the purchase of a download or CD involves searching,investigation: identifying sites that offer those products, selecting one,finding out whether the track is available, ensuring that it is the rightversion or cover and so on. Listening to previews assists in thisinvestigation. If copying a court decision with a view to advising a clientor principal is a dealing for the purpose of research within the meaningof section 29, so is streaming a preview with a view to deciding whether

or not to purchase a download or CD. The object of the investigation isdifferent, as are the level of expertise required and the consequences ofperforming an inadequate search. Those are differences in degree, notdifferences in nature.


30. The above paragraph represents the totality of the Boards analysis of

whether the communication of music previews constitutes research


14/47

-9-

within the meaning of section 29 of theAct.

31. At paragraphs 110 to 115 of its decision, the Board reviewed the six

factors identified by this Court in CCH to determine whether the dealing

was, in fact, fair: the purpose, character and amount of the dealing;

alternatives to the dealing; the nature of the work and the effect of the

dealing on the work.

Board Decision at paras 110-115, Appellant's Record at 42-43.

32. The Board held that, according to its review of the six factors, the

practices and policies of the Online Music Services with respect to offering

30-second previews of musical works were "research-based and fair."


33. In particular, the Board considered the third factor, the amount of the

dealing, on an individual preview basis and examined the communication

of a single 30-second music preview to a single consumer, rather than in

the aggregate. As noted in above paragraph 22, iTunes alone

communicated, in the aggregate, overCONFIDENTIAL music previews to

Canadian consumers, representing CONFIDENTIAL hours of SOCANmusic use in 2005 alone. However, on an individual preview basis, the

Board concluded that 30 seconds was a fair amount of the work to use:

The third is the amount of the dealing. Streaming a preview to listen to itonce is a dealing of a modest amount, when compared to purchasing thewhole work for repeated listening. Helping the user to decide his courseof action with respect to a purchase of the whole file is presumptively fair.


F. Federal Court of Appeal

34. SOCAN sought judicial review of the Boards decision that the Online

Music Services use of previews constituted fair dealing for the purpose of

research within the meaning of section 29 of theAct.

35. The Court of Appeal considered it surprising that, on such an important


15/47

-10-

issue, the Board would come to a decision about the interpretation of the

fair use exception and its field of application without the benefit of

discussion with the affected parties.

Court of Appeal Decision at para 11, Appellant's Record at 80-81.

36. However, the Court of Appeal agreed with the Board that the term

research in section 29 of theActought to be defined as, the action or an

instance of searching carefully for a specified thing or person. The Court

of Appeal held that this definition was broad enough to include the

situation where a consumer is searching for an object of copyright that he

or she desires and is attempting to locate and wishes to ensure its

authenticity and quality before obtaining it. The Court of Appeal held thatthe purpose of previews was to assist the consumer in seeking and finding

a desired musical work.

Court of Appeal Decision at paras 20, 22, Appellant's Record at 83, 84.

37. The Court of Appeal went on to consider the Boards conclusion on

whether the amount of the dealing involved in the Online Music Services

use of previews was fair. SOCAN urged the Court of Appeal to measure

the fairness of the dealing by assessing the usage data on the aggregate

number of previews communicated and the resulting number of hours of

uncompensated music, as set out above.

38. While the Court of Appeal stated that it found the usage data surprising,

it did not elaborate further on that particular finding. Instead, it concluded

that it was unable to evaluate the appropriateness of SOCANs proposed

approach to measuring the extent of preview use, and that the yardstick

proposed by SOCAN raised its own set of questions, including whether it

makes the third factor (the amount of the dealing) the determinative factor

in an assessment of fairness.

Court of Appeal Decision at paras 28-30, Appellant's Record at 86.


16/47

-11-

PART II ISSUES

39. Whether the communication of previews of musical works by Online Music

Services constitutes fair dealing for the purpose of research within the

meaning of section 29 of the Copyright Act. The Appellant submits that itdoes not.

40. In the alternative, if the communication of music previews falls within the

meaning of research, whether the Online Music Services dealing with

the Appellants musical works for that purpose is fair. The Appellant

submits that it is not.

PART III ARGUMENT

A. General

41. The main issue in this appeal is essentially one of statutory interpretation.

The Appellant submits that the Board and the Court of Appeal below erred

by simply choosing one possible dictionary definition for the term

research without fully considering the statutory context surrounding the

term.

42. The correct interpretation of the term research must recognize the

objectives of Canadas copyright scheme, the purposes of theActand the

intention of Parliament in drafting section 29. Both the Board and the

Court of Appeal failed to undertake this purposive analysis.

43. In the alternative, if this Court agrees that the communication of music

previews by Online Music Services properly falls within the meaning of

research, the Appellant submits that, based on the applicable criteria

established by this Court, the Services dealing with the Appellants

musical works is not fair in the circumstances at hand.

44. In order to properly interpret theActand its administration, particularly as

it relates to the collective administration of copyright and proceedings

before the Copyright Board, it is necessary to discuss the tariff certification


17/47

-12-

process.

i. The collective administration of copyright

45. Several creative industries rely on the collective administration of

copyright to minimize the transaction costs of widespread dissemination of

creative works. Instead of each potential user of copyright content having

to negotiate a licence with each individual rights-holder, groups of rights-

holders form collective societies that centralize the licensing process.

46. The Act expressly provides for the creation and administration of these

collective societies and establishes procedures for setting their respective

tariffs in sections 67 to 76. Upon approval by the Board, these tariffs set

the royalties that collective societies can charge for the use of their works.

Copyright Act, RSC 1985, c C-42, ss 67-76.

47. The role of the Board is to establish values for the various uses of

copyright works in the repertoire of a collective society and certify a tariff

that reflects these values and related terms and conditions. Essentially,

satisfaction of the tariff requirements allows a user to do what would

otherwise be an infringement of the copyright in the works administered bya collective society, such as the Appellant.

48. In some cases, as a preliminary matter, the Board adjudicates on whether

a particular use would constitute an infringement of copyright before

approving a tariff for that use. At this stage, the Board is not concerned

with the value of the use, but simply whether the use in question can be

the subject of a tariff at all.

49. The question raised in this appeal is whether the Online Music Services

marketing practice of communicating 30-second previews of musical

works over the Internet without consent constitutes infringement of the

Appellants copyright. The amount of any royalties to be paid for the use of

such previews is irrelevant to the issues raised by this appeal.


18/47

-13-

50. Section 3(1)(f) of theActgrants to the copyright-holder the exclusive right

to communicate the work to the public by telecommunication. The

Federal Court of Appeal has established that 30-second music previews

constitute a substantial part of a musical work and that the Internet

communication thereof to consumers constitutes a communication to the

public by telecommunication within the meaning of section 3(1)(f).

Decision of the Copyright Board, dated August 18, 2006 at paras 37-46,aff'd Canadian Wireless Telecommunications Assn v Society ofComposers, Authors and Music Publishers of Canada, 2008 FCA 6.

Bell Canada v Society of Composers, Authors and Music Publishers ofCanada, 2010 FCA 220 at paras 37, 63.

51. The Respondents in this appeal do not dispute that the Internet

communication of previews of musical works constitutes a communication

of a substantial part of a copyright-protected work to the public by

telecommunication.

52. Unless a statutory exemption applies, this use of SOCANs musical works

requires a licence and a tariff for this use ought to have been certified by

the Board.

ii. The Board arrived at its decision on fair dealing without hearing fromthe parties

53. Previews perform essentially the same function in the online retail context

as free samples do in the traditional, physical retail context. In the physical

retail context, a supplier may chose to negotiate an agreement with a

retailer for the provision of free samples in order to attract customers. Both

the retailer and the supplier must agree on the terms of this promotion,

including which party will bear the cost of the free samples. In the absenceof an agreement, the retailer would have to use stock purchased from the

supplier as the source of the samples and bear the cost of free distribution

to consumers himself.

54. In the context of the collective administration of copyright, the parties do


19/47

-14-

not bargain directly; they participate in a hearing before the Board and the

Board certifies a tariff that is often intended to approximate the outcome of

a notional bargaining process. The parties to a hearing rely on the Board

to take all points of view into consideration and to reach conclusions

based on evidence and argument presented by the parties.

55. The Board short-circuited this process at the hearing between the

Appellant and the Online Music Services by coming to a conclusion that

was not advocated by either party. Neither the Appellant nor the Online

Music Services advanced (or were given the opportunity to advance)

evidence and arguments as to whether music previews could be

considered fair dealing for the purpose of research under the Act. By

proceeding in this way, the Board ruled on a question of law that has

significant consequences for the Appellant and the Respondents as well

as other creators and users of online copyright content without any input

from those creators and users.

Court of Appeal decision at para 11, Appellant's Record at 80-81.

56. The Board removed the subject of free samples from the bargaining

table and interpreted theAct in such a way that requires the Appellant to

bear the cost of the Services decision to distribute free samples, without

hearing the Appellants position on the issue. The Appellant submits that

Parliament did not intend theActto have this effect.

B. Issue 1: The Online Music Services use of previews does not satisfythe first step in the test for fair dealing under section 29 of theAct

57. This Court has established a two-step test to determine whether a given

activity qualifies as fair dealing pursuant to section 29 of theAct:

In order to show that a dealing was fair under section 29 of the CopyrightAct, a defendant must prove: (1) that the dealing was for the purpose ofeither research or private study and (2) that it was fair.

CCH Canadian Ltd v Law Society of Upper Canada, 2004 SCC 13, [2004] 1SCR 339[CCH] at para 50.


20/47

-15-

58. The enumerated purposes in section 29 form a threshold test for

establishing fair dealing. The Federal Court of Appeal in the CCHcase

explained the first stage of this test as follows:

If the purpose of the dealing is not one that is expressly mentioned in theAct, this Court is powerless to apply the fair dealing exemptions.

CCH Canadian Ltd v Law Society of Upper Canada, 2002 FCA 187 at para127.

59. In this case, in order to communicate music previews to the public without

paying a certified tariff rate, the Online Music Services must first prove that

such communications are effected for the purpose of research or private

study.

Drolet v Stiftung Gralsbotschaft, 2009 FC 17, [2010] 1 FCR 492 at paras 263-264.

60. The Appellant submits that the Federal Court of Appeal erred in

concluding that the term research includes communicating previews of

musical works over the Internet for the purpose of facilitating retail

transactions.

i. Definition of the term, research

61. The Court of Appeal considered four possible definitions for the word

research:

(a) TheConcise Oxford English Dictionary, which defines the term as

follows:

the systematic investigation into and study of materials and sources inorder to establish facts and reach new conclusions

(b) The Canadian Oxford English Dictionary, which defines the term as

follows:

the systematic investigation into and study of materials, sources, etc., inorder to establish facts and reach new conclusions

(c) The New Shorter Oxford English Dictionary, which defines the term


21/47

-16-

as follows:

1 The action or an instance of searching carefully for a specified thing orperson. Freq. foll. by after. Now rare. L16.

12 A search or investigation

undertaken to discover facts and reach new conclusions by the criticalstudy of a subject or by a course of scientific inquiry. Usu. inpl. M17. 3Systematic investigation into and study of materials, sources, etc. toestablish facts, collate information, etc

(d) The Random House Websters Unabridged Dictionary, which

defines the term as follows:

diligent and systematic inquiry or investigation into a subject in order todiscover or revise facts, theories, applications, etc.: recent research inmedicine

Court of Appeal Decision at para 17, Appellant's Record at 82-83.

The Concise Oxford English Dictionary, 10th ed, sub verbo "research".

The Canadian Oxford English Dictionary, Thumb Index ed, sub verbo"research".

The New Shorter Oxford English Dictionary, Thumb Index ed, sub verbo"research".

The Random House Websters Unabridged Dictionary, 2nd ed, sub verbo"research".

62. The Court of Appeal, relying on its observation that [t]he legislator chose

not to add restrictive qualifiers to the word research in section 29, chose

to rely on the initial, rare definition from The New Shorter Oxford English

Dictionaryand concluded as follows:

[19] If, in essence, the legal research such as that referred to inCCHhas a more formal and rigorous aspect, the same is not necessarilytrue for that conducted by consumers of a work subject to copyright,such as a musical work.

[20] In that context, it would not be unreasonable to give the word

research its primary and ordinary meaning. The consumer issearching for an object of copyright that he or she desires and isattempting to locate and wishes to ensure its authenticity andquality before obtaining it. I agree with the Board that [l]istening topreviews assists in this investigation. [emphasis added]

Court of Appeal Decision at paras 19-20, Appellant's Record at 83.

1This annotation indicates that this usage of the term first appeared in the late 16

thcentury and is

now rare.


22/47

-17-

63. The Appellant submits that both the Board and the Court of Appeal erred

in their interpretation of the term research as it is used in section 29 of

theAct. The definition adopted by both the Board and the Court of Appeal

fails to account for the purposes of the Act in general and the fair dealing

provision in particular.

ii. The Federal Court of Appeal adopted a definition for researchwithout considering the legislative purpose

64. Legislative terms must be interpreted according to the purpose of the

legislation. Where legislative terms can support more than one reasonable

meaning, the ordinary meaning of the words is less important and

recourse must be had to context and purpose. This Court expressed this

principle as follows:

It has been long established as a matter of statutory interpretation thatthe words of an Act are to be read in their entire context and in theirgrammatical and ordinary sense harmoniously with the scheme of theAct, the object of the Act, and the intention of Parliament: see 65302British Columbia Ltd. v. Canada, [1999] 3 S.C.R. 804, at para. 50. Theinterpretation of a statutory provision must be made according to atextual, contextual and purposive analysis to find a meaning that isharmonious with the Act as a whole. When the words of a provisionare precise and unequivocal, the ordinary meaning of the wordsplay a dominant role in the interpretive process. On the other hand,where the words can support more than one reasonable meaning,the ordinary meaning of the words plays a lesser role. The relativeeffects of ordinary meaning, context and purpose on the interpretiveprocess may vary, but in all cases the court must seek to read theprovisions of an Act as a harmonious whole. [emphasis added]

Canada Trustco Mortgage Co v Canada, 2005 SCC 54, [2005] 2 SCR 601 atpara 10.

65. If the meaning of a term in a statute is clear, then the ordinary meaning

will dominate; if the meaning is not clear, then the words must yield to an

interpretation that best meets the overriding purpose of the statute.

Celgene Corp v Canada (Attorney General), 2011 SCC 1 at para 21.

66. In the case of Tariff 22.A, the meaning of the term research is not clear.

The Appellant submits that when faced with more than one plausible

interpretation, the Court of Appeal erred in simply selecting one without


23/47

-18-

any consideration of the purpose of section 29 in particular or the Act in

general.

iii. The purpose of the fair dealing provision is to foster the creative

process

67. The purpose of Canadas copyright regime is to ensure the orderly

production and distribution of, and access to, works of art and intellect.

This purpose is aligned with the history and purpose of copyright at the

international level and is solidly anchored in economics.

Daniel J Gervais, The Purpose of Copyright Law in Canada, (2005) 2:2UOLTJ 315.

68. Similarly, this Court has repeatedly held that the overarching purposes ofthe Copyright Act are twofold: promoting the public interest in the

encouragement and dissemination of artistic and intellectual works, and

justly rewarding the creator of the work. In the specific context of the

Internet, this Court commented:

The capacity of the Internet to disseminate works of the arts andintellect is one of the great innovations of the information age.Its use should be facilitated rather than discouraged, but thisshould not be done unfairly at the expense of those who createdthe works of arts and intellect in the first place.

Robertson v Thomson Corp, 2006 SCC 43, [2006] 2 SCR 363 at para 69.

Thberge v Galerie d'Art du Petit Champlain inc, 2002 SCC 34, [2002] 2 SCR336 at paras 5, 30-31.Society of Composers, Authors and Music Publishers of Canada vCanadian Assn of Internet Providers, 2004 SCC 45, [2004] 2 SCR 427 atpara 40.

69. The fair dealing provisions in sections 29 to 29.2 serve to encourage the

creation of artistic and intellectual works by allowing certain uses of

copyright-protected material as part of the creative process. This

acknowledges the collaborative and interactive nature of cultural creativity

and creates breathing space in the copyright system by allowing for uses

of copyright-protected works that are fair and for purposes that lead to the

creation of new works.


24/47

-19-

Carys Craig, The Changing Face of Fair Dealing in Canadian CopyrightLaw: A Proposal for Legislative Reform, in In the Public Interest: TheFuture of Canadian Copyright Law, Michael Geist, ed (Toronto: Irwin Law,2005) at 437.

70. This Court has held that the exceptions to infringement found in the Act

are necessary to allow for creative innovation and to further the long-term

interests of society as a whole, namely the continued creation of new

works of art and intellect. These exceptions include the fair dealing

provisions.

Thberge v Galerie d'Art du Petit Champlain inc, 2002 SCC 34, [2002] 2 SCR336 at para 32.

71. Professor Drassinower has suggested that the fair dealing exceptions

recognize that fair users of copyright are authors as well. The fair dealing

provisions allow users to copy protected works to the extent necessary to

engage in the creation of their own works. It is in this sense that fair

dealing is a users right:

The defence of fair dealing, then, permits the defendant to establish that,in spite of the appearance of infringement as a result of the defendantsact of substantial reproduction, the defendants work is after all his own,not truly a copy of the plaintiffs. A finding of fair dealing means preciselythat the act of substantial reproduction that gives rise to the fair dealing

inquiry fails to mature into a finding of infringement. The defence givesthe defendant the opportunity to show that his substantial reproduction ofthe plaintiffs work does not negate his own authorship. Fair dealingstands for the proposition that responding to anothers work in ones owndoes not mean that ones work is any less ones own. Thus thedefendant who makes out the fair dealing defence is an author inher own right. It is as author that the defendant is a fair user.

The reason fair dealing affirms the free availability of anothersexpression only where such expression is reasonably necessary to onesown is that the fairness in fair dealing operates bilaterally. Fair dealing

must be fair to both plaintiff and defendant. Nor could we conceivefairness otherwise. This means that fair dealing must impose limitationsnot only on the plaintiffs copyright but also on the kinds of uses that thedefendant can make of the plaintiffs work. Thus the defendant canlegitimately use the plaintiffs work only where the purpose of suchuse engages the defendants authorship and only to the extent thatsuch purpose reasonably requires. This is why the fair dealingpurposes allow certain copying but do not thereby legitimate all or anycopying. The fairness of the dealing operates as a balanced recognitionof the parties equal claims as authors. It affirms and sustains the higher


25/47

-20-

principle of authorship to which both parties appeal and to which theymust both be subject. [emphasis added]

Abraham Drassinower, Taking User Rights Seriously in In the PublicInterest: The Future of Canadian Copyright Law, Michael Geist, ed.(Toronto: Irwin Law, 2005) at 470-472.

Euro-Excellence Inc v Kraft Canada Inc, 2007 SCC 37, [2007] 3 SCR 20 atpara 79.

72. The fair dealing exceptions exist to facilitate those authorial actions of

copyright users that are fair and necessary to further the public interest.

The actions of the Online Music Services in communicating previews of

musical works are neither acts of authorship nor are they necessary to

promote the public interest.

iv. The purposes enumerated in sections 29 to 29.2 are purposes whichpromote the public interest

73. Other than research and private study in section 29, the other fair

dealing provisions allow fair dealing for the purposes of criticism and

review and news reporting. These additional purposes share a common

element: the activities they encourage are those that promote the public

interest.

Copyright Act, RSC 1985, c C-42, s 29, 29.1, 29.2.

74. Criticism and review involves the exercise of creative effort: the critic or

reviewer adds his or her own expression of skill and judgment to passages

of another work copied legitimately, thus creating a new literary work. By

exempting criticism and review from copyright infringement liability, theAct

promotes the public interest in both freedom of expression and the

dissemination of new creative works.

75. Similarly, if a journalist copies a protected work or a substantial part

thereof pursuant to section 29.2, he or she adds content to the copied

work, which results in a new creation for dissemination in a newspaper,

radio broadcast, etc.


26/47

-21-

76. The Appellant submits that the term research and private study in

section 29 ought to be interpreted to include uses that contribute to the

creative process in ways similar to those in sections 29.1 and 29.2.

77. Research and private study are different from criticism, review and news

reporting in that the former terms do not describe the action of creating

new works directly. However, a person engaging in either research or

private study has as his goal the cultivation of a mental environment that is

conducive to the creative process. Research and private study are thus

often preliminary steps in the creation of new works of skill and judgment.

78. The Appellant submits that the proper definition of the term research as it

is used in section 29 must be bipartite: the definition will include the

searching element identified by the Court of Appeal, but the goal of this

search must be to fuel the creative process.

79. This bipartite definition of "research" is entirely consistent with this Court's

decision in CCH, where the research at issue had as its goal the creation

of new works of skill and judgment in the form of opinions, court

submissions and legal advice.

v. The definition of research applied by the Federal Court of Appeal isinconsistent with this Court's decision in CCH

80. In CCH, this Court considered the copies of various legal publications

made at the request of legal researchers to be made for the purpose of

research because they were made as part of the legal research process.

This Court was careful to distinguish between the act of copying itself and

the research that the copying facilitated:

Although the retrieval and photocopying of legal works are notresearch in and of themselves, they are necessary conditions ofresearch and thus part of the research process.The reproduction oflegal works is for the purpose of research in that it is an essentialelement of the legal research process. There is no other purpose forthe copying; the Law Society does not profit from this service. Putsimply, its custom photocopy service helps to ensure that legalprofessionals in Ontario can access the materials necessary to conduct


27/47

-22-

the research required to carry on the practice of law. In sum, the LawSocietys custom photocopy service is an integral part of the legalresearch process, an allowable purpose under s. 29 of the Copyright Act.[emphasis added]

CCHat para 64.

81. The key distinction to be made between the facts of this case and those in

CCHis the role that the infringing activity plays in the dealing. In CCH, the

legal professionals were requesting copies for the purpose of research on

a specific legal topic and the photocopy service formed an integral part

of the legal research process, a process which results in the creation of

new works of skill and judgment.

CCHat paras 64, 67.

82. The music previews communicated by the Online Music Services are not

research in and of themselves: unlike the copies made for lawyers in

CCH, the communication of previews is not a necessary condition to the

creation of new artistic or intellectual works; nor do previews form part of

any research process that could lead to the creation of such works.

Consumers listening to music previews are not engaging in acts of

authorship, they are merely shopping. Previews are merely a convenient

tool that facilitates the shopping process and assist the Online Music

Services in their marketing efforts.

vi. Parallels to US jurisprudence

83. The role that fair dealing plays in the creative process is also recognized

in U.S. jurisprudence through the common law requirement in that country

that fair uses be transformative uses.

84. Although there are differences between Canadian and American copyright

legislation, the Federal Court of Appeal in the CCHcase recognized that

Canadian courts may "find some assistance in examining the experience

in the United States."

CCH Canadian Ltd v Law Society of Upper Canada, 2002 FCA 187 at para


28/47

-23-

148 citing Estey J in Compo Co Ltd v Blue Crest Music et al, [1980] 1 SCR357 at 367.

85. U.S. courts have consistently held that for a use to fall within the ambit of

fair use, it must not be a mere substitute for the original work. That is, the

use must be transformative.

Campbell v Acuff-Rose Music, 510 US 569 (1994) at 579.

86. Recently, the New York District Court considered whether the

transmission of music previews as a marketing tool to sell musical

ringtones for mobile phones could be considered fair use. The Court

concluded that the applicants use of previews, for the purpose of

allowing its customers to sample a musical ringtone before purchasing it,

cannot fairly be described as criticism, comment, news reporting,

teaching scholarship, orresearch. The Court also held that the use of

previews to sell ringtones was not a transformative use:

[A]lthough applicants previews are comprised of shortened versions ofthe musical works from which they are copied, they do not enrich aseparate work protected by the Copyright Act, but rather serve only tofacilitate applicants sales of ringtones and ringback tones fromapplicants website and wireless device application for commercialgain.

United States v ASCAP, 599 F Supp 2d 415; 2009 US Dist LEXIS 31999;2009-1 Trade Cas (CCH) P76, 512 at p 10 [emphasis added].

87. In reaching this conclusion, the Court distinguished the case of Kelly v

Arriba Soft. In Kelly, the defendant had created a search engine that

crawled the world wide web for images and then built a searchable

catalogue of smaller, thumbnail versions of those images. The Court

held that the database of thumbnails served a transformative purpose and

that the thumbnails were a fair use of the plaintiffs copyright images. TheCourts reasoning focused on the benefit that the Defendants service

provided the public.

Kelly v Arriba Soft Corp, 336 F 3d 811 (9th Cir 2003).

88. InASCAP, the Applicant argued that the thumbnails in Kellywere simply


29/47

-24-

advertisements for the underlying full-size images and that its previews of

ringtones served the same purpose. The Court distinguished Kelly as

follows:

The [Ninth] Circuit noted that "Arriba was neither using Kelly's images todirectly promote its web site nor trying to profit by selling Kelly's images."Kelly, 336 F.3d at 818. While Arriba's search engine helped usersnavigate a sea of information including images already publiclyavailable on the internet, applicant's previews merely allow users tosample selections of a database of copyrighted information,collected, organized and provided to users by applicant. It isdifficult to characterize applicant's use of previews as serving a"public benefit" when the previews' purpose is to benefit applicantby facilitating sales of its own product. Again, applicant fails toestablish that its use of ASCAP music serves a transformative use underthe fair use doctrine. [emphasis added]

United States v ASCAP, 599 F Supp 2d 415; 2009 US Dist LEXIS 31999;2009-1 Trade Cas (CCH) P76, 512 at pp 10-11.

89. Under the Canadian regime, the public benefit to be gained from fair

dealing is the same public benefit fostered by the Act itself: encouraging

the creation of new works. The requirement in the US jurisprudence that

the use be transformative is consistent with the intent behind limiting the

purposes for which the defence of fair dealing is available pursuant to

sections 29 to 29.2 of the Canadian Act. Both the Canadian and US

doctrines require the person claiming the exemption to be engaged in an

act of authorship.

90. Like the ringtone retailers in ASCAP, the Online Music Services are not

creating anything new by offering free music previews. The Online Music

Services are simply allowing their customers to sample selections of a

database of copyright-protected information that is collected, organized

and communicated to consumers by the Services.

vii. The interpretation of the term research adopted by the FederalCourt of Appeal is inconsistent with the way that term is usedelsewhere in theAct

91. It is a basic principle of statutory interpretation that a word within a statute

bears the same meaning wherever it is used in that statute. There is a


30/47

-25-

presumption that statutes contain consistent expression.

R v Zeolkowski, [1989] 1 SCR 1378.

Ruth Sullivan, Sullivan on the Construction of Statutes, 5th

ed (Markham:LexisNexis, 2008) at 214-215.

92. If the Court of Appeals interpretation of research is applied to that term

as it appears in other sections of the Act, it becomes clear that the Court

of Appeals interpretation was not intended by Parliament.

93. Section 30.2 exempts libraries, archives and museums from liability for

making copies of articles in periodicals and older newspapers if those

copies are made for the purpose of research or private study. Section

30.2 provides, in part, as follows:

Research or private study

30.2 (1) It is not an infringement of copyright for a library, archive ormuseum or a person acting under its authority to do anything on behalfof any person that the person may do personally under section 29 or29.1.

Copies of articles for research, etc.

(2) It is not an infringement of copyright for a library, archive or museum

or a person acting under the authority of a library, archive or museum tomake, by reprographic reproduction, for any person requesting to use thecopy for research or private study, a copy of a work that is, or that iscontained in, an article published in

(a) a scholarly, scientific or technical periodical; or

(b) a newspaper or periodical, other than a scholarly,scientific or technical periodical, if the newspaper orperiodical was published more than one year before thecopy is made.

Restriction

(3) Paragraph (2)(b) does not apply in respect of a work of fiction orpoetry or a dramatic or musical work.

Copyright Act, RSC 1985, c C-42, s 30.2.

94. This section was clearly intended to apply only to copies made in pursuit

of research that fosters the creation of new works and not simply the


31/47

-26-

action or an instance of searching carefully for a specified thing or

person.

95. All library patrons are searching carefully for a specified thing. If this

definition were applied to the term research in section 30.2, the section

would become redundant; a library, archive or museum would be

authorized to copy all works of the types enumerated in paragraphs 2(a)

and (b) for all patrons. The qualifier that the copy be used for research or

private study would be meaningless. This cannot be Parliaments

intention for this section.

viii. The definition of research applied by the Federal Court of Appeal is

inconsistent with the purposes of the fair dealing provision and theActin general

96. For the reasons set out above, the Appellant submits that the proper

meaning of the term research in section 29 of theActis, the systematic

investigation into and study of materials and sources in order to establish

facts and reach new conclusions. This definition is consistent with the

plain meaning of the term research and it is consistent with the purposes

of both section 29 in particular and theActas a whole.

The Concise Oxford English Dictionary, 10th ed, sub verbo "research".

97. The Appellant further submits that when the Online Music Services

communicate previews of musical works to consumers to assist those

consumers in searching for a musical track to purchase, neither the Online

Music Services nor the consumers are engaged in research.

98. This Court has called fair dealing a users right. But, as the text of theAct

and this Courts jurisprudence reveal, this users right is not an unlimited

right to use. The limited purposes for which the fair dealing defence is

available and this Courts guidance on determining whether a particular

dealing is fair circumscribe the defence of fair dealing and restrict its

application to those circumstances where the user herself is participating


32/47

-27-

in an activity that furthers the public interest purposes of theAct.

99. Professor Scassa explains that fair dealing is not an unlimited right to use,

but rather a right to participate in the uses the Act was intended to

encourage:

The fair dealing exceptions in ss. 29, 29.1 and 29.2, for example, give astrong indication that they exist so as to ensure that freedom ofexpression is not unduly curtailed by the exercise of an authorseconomic rights. We are permitted, so long as our dealing is fair, tocriticize or comment on works, to use works where they are relevant forthe reporting of news, and to carry out research and private study. Theinterpretation of these sections should reflect not simply a right touse, in general terms, but a right to engage intellectually, critically,and creatively with existing works.

Teresa Scassa, Overbalancing: The Supreme Court of Canada and thePurpose of Canadas Copyright Act (December 2009) CIPR Vol 25, No 2 at199. [emphasis added]

100. The decisions below have expanded the scope of the exception in section

29 from a users right into a right to use, in general terms. The

Appellant submits that this expansion is unwarranted. The actions of the

Online Music Services in communicating previews of musical works do not

engage intellectually, critically or creatively with existing works and

therefore do nothing to promote the public interest purposes of theAct.

101. Similarly, the customers of the Online Music Services do not engage

intellectually, critically [or] creatively with existing works when they listen

to previews. They are doing nothing more than engaging in a shopping

activity during which they identify and assess products for potential

purchase, as they do for a myriad of other products they may have an

interest in purchasing. But that process falls far short of any research

activity of the type contemplated by the Act.

C. Issue 2: The manner in which the Online Music Services deal withSOCANs copyright musical works is not fair

102. In the alternative, if the communication of 30-second previews of musical

works to consumers of the Online Music Services is indeed research, the


33/47

-28-

Appellant submits that this use cannot qualify as fair dealing because the

manner in which the Online Music Services use the works in the

Appellants repertoire is not fair.

103. This Court in CCHset out the factors for determining whether a dealing is

fair: the purpose of the dealing, the character of the dealing, the amount

of the dealing, alternatives to the dealing, the nature of the works and the

effect of the dealing on the work.

CCHat para 53.

104. The Appellant submits that a consideration of these factors with respect to

the communication of music previews reveals that the dealing at issue in

this appeal cannot be considered fair.

i. The purpose of the dealing: The purpose of the Online MusicServices use of previews is entirely commercial

105. Like the Great Library in CCH, the Online Music Services do not conduct

research, but instead facilitate the research of their consumers. The Board

held that this entitled the Online Music Services to avail themselves of the

fair dealing exception:

Services that supply previews do not conduct research. It must thereforebe demonstrated that they supply previews with the view to facilitate theresearch of others. Only then can it be argued that previews are offeredfor the purpose of research.

Board Decision at para 108, Appellant's Record at 41-42.

106. The Appellant submits that the purpose of communicating 30-second

previews of musical works is purely commercial. From the perspective of

the Online Music Services, the commercial purpose of the dealing is to sell

musical works; for customers of the Online Music Services, the

commercial purpose of the dealing is the potential purchase of musical

works. This Court has recognized that research done for commercial

purposes may not be as fair as research done for charitable purposes.


34/47

-29-

CCHat para 54.

ii. The character of the dealing: The Online Music Services are widelydistributing substantial parts of the musical works

107. In assessing the character of a dealing, courts must examine how the

works were dealt with. Making a single copy of a single work may be fair;

however, if multiple copies of works are being widely distributed, this will

tend to be unfair.

CCHat para 55.

108. In this case, the record shows that the Online Music Services

communicate (distribute), on average, ten times the number of previews

as they do full-length musical works. Given the evidence before the Boardon the number of downloads communicated by the Services, this amounts

to CONFIDENTIAL of previews communicated over the 1996-2006 period

covered by the tariff. These previews are distributed to millions of

consumers across Canada.

iii. The amount of the dealing: The amount of the dealing is unfair

a. In this case, the amount of the dealing should be an important factor

in determining if the dealing is fair

109. In CCH, this Court provided for a flexible application of the six fairness

factors and stated that each factor may be more or less relevant

depending on the factual context of the allegedly infringing dealing. The

Appellant submits that in the context of this appeal, the amount of the

dealing is especially relevant.

CCHat para 60.

110. Unlike CCH, this case involves the dissemination of works over the

Internet, which allows for widespread distribution of content. The infringing

activity at issue in CCHwas done using a restricted number of photocopy

machines located at one physical location and fax machines under the

control of the librarians. In this case, the protected communications occur


35/47


36/47

-31-

115. The Appellant submits that both the Board and the Court of Appeal erred

in adopting a consumer-centred approach to assessing the amount of the

dealing. Rather,the dealing should be examined from the point of view of

the Online Music Services, who are the users of the copyright in the

musical works in the Appellants repertoire. The amount of the dealing

ought to be assessed from this perspective for two reasons: first, following

this Courts guidance in CCH, fair dealing refers to a practice or system of

dealing as a whole; second, from a copyright liability perspective, it is the

Online Music Services who are using the Appellants musical works, by

communicating them to the consumer.

116. In CCH, this Court examined a situation where patrons of the Great

Library were able to make photocopies and request copies of copyright-

protected works. When this Court assessed the amount of the dealing in

CCH, it intentionally determined the amount from the perspective of the

Great Library, not the individual patrons:

This raises a preliminary question: is it incumbent on the Law Society toadduce evidence that every patron uses the material provided for in a fairdealing manner or can the Law Society rely on its general practice toestablish fair dealing? I conclude that the latter suffices. Section 29 of the

Copyright Act states that [f]air dealing for the purpose of research orprivate study does not infringe copyright. The language is general.Dealing connotes not individual acts, but a practice or system.

CCHat para 63.

117. Where fair dealing relates to a system of uses, it is an error to assess the

amount of the dealing by examining a single transaction within that

system. The Board erred by examining the amount of the dealing as a

ratio between a single preview and a single musical work despite having

concluded that the communication of previews was fair dealing on the

basis that the practice and policies of the Online Music Services were

research-based and fair.

CCHat para 63.

Board Decision at para 113, 116, Appellant's Record at 43, 44.


37/47

-32-

118. An approach that examines the amount of the dealing in the aggregate is

also consistent with the manner in which the rights to the musical works

are administered. Pursuant to Tariff 22.A, the Online Music Services are

entitled to use the musical works in the Appellants repertoire on an

aggregate basis and there is no need for the licensing of any work on an

individual basis.

119. Furthermore, Tariff 22.A governs the relationship between the Appellant

and the Online Music Services and does not apply to individual consumers

of the Services. Individual consumers are not liable to the Appellant for

listening to a preview. It is the Online Music Services who must avail

themselves of the fair dealing exception. Therefore, it must be from the

perspective of the Online Music Services that the amount of the dealing

ought to be assessed.

120. Considered from this aggregate perspective and measured on the basis of

the amount of music communicated to consumers, music previews

represent 125% of the music sold by way of a purchased download. This

figure is based on an assumed length of four minutes for an average

musical work, the evidence that ten previews are communicated perpurchase and a preview length of 30 seconds (10 x 30 seconds = 5

minutes = 125% of 4 minutes).

121. In CCH, this Court suggested that a dealing may be unfair if it involves a

series of multiple copies:

the dealings might not be fair if a specific patron of the Great Librarysubmitted numerous requests for multiple reported judicial decisionsfrom the same reported series over a short period of time

CCHat para 68.

122. The Appellant submits that the amount of the dealing cannot possibly be

considered fair when it involves a series of multiple copies that amount to

more than 100% of the legitimate, licensed use of the works in the


38/47


39/47

-34-

CCHat para 68. [emphasis added]

127. In this case, a 30-second preview represents 12.5% of an average

individual musical work. The Appellant submits that this percentage, when

repeated over numerous requests and multiple works, is unreasonable

and unfair.

128. The Appellant submits that, regardless of whether the dealing is assessed

on an individual or aggregate basis, the amount of the dealing involved in

this case is manifestly unfair.

iv. Alternatives to the dealing: In this case, alternatives to the dealingexist which achieve the purposes of the Online Music Services

without infringing the Appellants copyright

129. Apples witness recognized that previews are not the only feature of the

iTunes store that is designed to allow consumers to find, identify and

purchase music. Apple Vice President, Eddie Cue, testified, [w]hat we try

to do is to give them [the consumers] as many ways possible to find the

content that they are looking for. Communicating free previews is only

one of those ways. The iTunes store also provides album artwork, textual

descriptions and user-generated album reviews to assist the consumer to

find content.

Evidence of Eddy Cue, May 1, 2007, Transcripts, Vol 10 at 2016-2017,Appellant's Record at 130-131.

Witness Statement of Eddy Cue, Exhibit Coalition-5 at para 9, Appellant'sRecord at 198-199.

130. The true objective of the Online Music Services in offering previews is to

increase sales of musical works. Therefore one clear alternative to offering

previews is for the Online Music Services to increase the amount spent on

advertising.

131. This increased advertising could be direct, such as offering tracks to

consumers at the expense of the Online Music Services, or it could be

indirect, such as increasing the amount spent on traditional print, Internet


40/47

-35-

and television advertising. Both of these alternatives would serve the

same purpose as previews without infringing the Appellants copyright.

132. Apple's evidence before the Board was that previews are "a marketing tool

[that] should be understood primarily as eliminating consumers' risk of

purchasing the 'wrong song'." Similarly, Alastair Mitchell, CEO of the

Online Music Service, Puretracks, testified that the purpose of previews is

to allow the consumer to verify her purchase. This purpose may be

achieved simply by offering consumers the ability to return a song and be

reimbursed the purchase price. In fact, Apple already allows returns to the

iTunes Store.

Witness Statement of Eddy Cue, Exhibit Coalition-5 at para 11, Appellant'sRecord at 199-200.

Evidence of Eddy Cue, May 1, 2007, Transcripts, Vol 10 at 1989-1993, 2031,Appellant's Record at 124-125, 134.

Evidence of Alastair Mitchell, April 30, 2007, Transcripts Vol 9 at 1934-1936,Appellant's Record at 114-115.

133. The Appellant submits that, rather than implement these alternatives, the

Online Music Services have chosen to save on costs by offering for free

something that is not theirs to give away: substantial portions of theAppellants musical works.

v. The nature of the works: The musical works are published and theiruse is subject to the collective administration regime

134. In CCH, this Court considered the nature of the work to be a factor

relevant to determining whether the dealing is fair. Where the nature of the

work is such that fair dealing increases the public dissemination of the

work, then the dealing is more likely to be fair:

Although certainly not determinative, if a work has not been published,the dealing may be more fair in that its reproduction withacknowledgement could lead to a wider public dissemination of the work one of the goals of copyright law.

CCHat para 58.


41/47

-36-

135. The converse of this premise is that reproducing a work that, by its nature,

is already capable of legitimate wide dissemination may be less fair

because, in that case, the dealing does less to advance the purposes of

copyright law.

136. The works in question in this case are accessed and disseminated

pursuant to the collective administration of copyright regime set out in the

Act. In the case of SOCAN, this regime is compulsory and ensures that

music users have unfettered access to SOCANs repertoire, as long as

they pay the fees set out in the applicable tariffs approved by the Board.

Under this system, it is impossible for SOCAN to restrict or hinder the

legitimate dissemination of its musical works. Once the Board certifies a

tariff for a certain use and the terms and conditions of the tariff are met,

SOCAN has no right to restrict access to or use of any of its works.

Copyright Act, RSC 1985, c C-42, s 68.2.

137. Accordingly, in this case, the nature of SOCANs works and the

compulsory nature of the regime to which they are subject already ensure

the wide public dissemination of the works and there is no need to resort

to the fair dealing exception for that purpose. Consequently, based on the

guidance of this Court, the Online Music Services' dealing with the

Appellants musical works should be seen as unfair.

vi. The effect of the dealing on the work: There is no evidence in therecord to support the Boards conclusion that the Online MusicServices dealing has no negative effect on the Appellants works

138. When examining this factor, the effect of the dealing on the market for the

original work is relevant. If the reproduced work is likely to compete withthe market of the original work, this may suggest that the dealing is not

fair.

CCHat para 59.

139. The Online Music Services argued before the Court of Appeal and in


42/47

-37-

response to the Appellants application for leave in this appeal that this

factor should weigh in their favour because offering free previews actually

positively affects the market for the Appellants works. There are a number

of problems with this argument.

Memorandum of Apple Canada, Inc at Federal Court of Appeal (Court FileNo A-514-07) at paras 9, 67-69.

140. First, because the fair dealing issue was raised by the Board on its own

initiative after the hearing, there was no evidence on the record that would

tend to establish this assertion. If the use of music previews increases the

online sale of full-length musical works, that fact was not proven before

the Board.

141. Music previews can be used for a number of reasons that will not

necessarily increase the sale of protected works. Consumers may access

any number of previews, whether or not they have any intention of making

a purchase. Those who access Online Music Services with the intention

of spending a set amount of money on music will do so irrespective of

their use of previews. Yet others may use previews to help them choose

one work over another but that, in and of itself, may not lead to additional

sales.

142. Ultimately, the Online Music Services argument that offering free

previews benefits the Appellant through increased sales is paternalistic.

The Appellant is in the best position to assess the most efficient and

valuable means of marketing its musical works, including whether it is in

the best interests of its members to bear the cost of communicating free

previews to consumers or to charge a fee to the Online Music Services forthat use.

143. Canada is a signatory to international conventions that restrict the scope

of exceptions to copyright to only those uses which do not conflict with a

normal exploitation of the work and do not unreasonably prejudice the


43/47

-38-

legitimate interests of the author.

The Berne Convention for the Protection of Literary and Artistic Works1886, Art 9(2).

144. Clearly, there is a market for music previews, as evidenced by the OnlineMusic Services demand for them, and the recognition in the United States

that the owners of previews are entitled to negotiate a fee for their use.

The Boards application of the fair dealing exception to deny the Appellant

a tariff for music previews conflicts with the normal exploitation of the

Appellants works by negating its ability to negotiate, before the Board,

compensation for that entire category of use. This result is particularly

unfair in the light of the Boards acknowledgement that Some users may

use previews in a manner that does not constitute fair dealing.


D. The Online Music Services ought to compensate SOCAN for thisinfringing use

145. Before the Copyright Board, SOCAN had asked for a higher tariff rate to

be applied to Online Music Services that offer music previews. The

Appellant submits that the communication of previews of musical works in

the Appellants repertoire is not fair dealing pursuant to section 29 of the

Act.

146. To the contrary, the use of music samples by online retailers to promote

the sale of music does not further the purposes of the Actand is precisely

the type of commercial activity that should give rise to compensation for

the creators of those musical works.

147. Consequently, a tariff is required for the use of music previews and the

Board should proceed to hear the parties as to the value of this use.

PART IV SUBMISSIONS ON COSTS

148. The Appellant requests the costs of this appeal and in the court below.


44/47


45/47


46/47

-41-

14 Thberge v Galerie d'Art du Petit Champlain inc, 2002 SCC34, [2002] 2 SCR 336.

68, 70

15 United States v ASCAP, 599 F Supp 2d 415; 2009 US Dist

LEXIS 31999; 2009-1 Trade Cas (CCH) P76, 512.

86, 88

Legislation and Treaties

16 Copyright Act, RSC 1985, c C-42. 7, 10, 46,73, 93, 136

17 The Berne Convention for the Protection of Literary andArtistic Works 1886.

143

Secondary Sources

18 Abraham Drassinower, Taking User Rights Seriously in Inthe Public Interest: The Future of Canadian Copyright Law,Michael Geist, ed. (Toronto: Irwin Law, 2005).

71

19 Carys Craig, The Changing Face of Fair Dealing inCanadian Copyright Law: A Proposal for LegislativeReform, in In the Public Interest: The Future of CanadianCopyright Law, Michael Geist, ed (Toronto: Irwin Law,2005).

69

20 Copyright Board of Canada, Statement of Royalties to beCollected for the Performance in Canada of Dramatico-Musical or Musical Works in 1991, decision dated July 31,1991, File No 1990-4.

9

21 Daniel J Gervais, The Purpose of Copyright Law inCanada, (2005) 2:2 UOLTJ 315.

67

22 Memorandum of Apple Canada, Inc at Federal Court ofAppeal (Court File No A-514-07).

139

23 Ruth Sullivan, Sullivan on the Construction of Statutes, 5thed (Markham: LexisNexis, 2008).

91

24 Teresa Scassa, Overbalancing: The Supreme Court ofCanada and the Purpose of Canadas Copyright Act(December 2009) CIPR Vol 25, No

public version t.22a - so can appellants factum (fair dealing)-ott_law-2714605-v27

Documents