Date: 20020501
Docket: A-764-99
Neutral citation: 2002 FCA 166
CORAM: LINDEN J.A.
EVANS J.A.
SHARLOW J.A.
BETWEEN:
SOCIETY OF COMPOSERS, AUTHORS AND MUSIC
PUBLISHERS OF CANADA
Applicant
and
CANADIAN ASSOCIATION OF INTERNET PROVIDERS,
CANADIAN CABLE TELEVISION ASSOCIATION,
AT & T CANADA LONG DISTANCE SERVICES COMPANY,
MCI COMMUNICATIONS CORPORATION,
BELL/EXPRESSVU, CANADIAN ASSOCIATION OF BROADCASTERS,
TELUS COMMUNICATIONS INC., BELL CANADA,
CANADIAN BROADCASTING CORPORATION,
CANADIAN MOTION PICTURE DISTRIBUTORS ASSOCIATION,
CANADIAN RECORDING INDUSTRY ASSOCIATION,
TIME WARNER INC., ALIANT INC., MTS COMMUNICATIONS INC.
and SASKATCHEWAN TELECOMMUNICATIONS
Respondents
and
THE CANADIAN RECORDING INDUSTRY ASSOCIATION and
NEIGHBORING RIGHTS COLLECTIVE OF CANADA
Interveners
Heard at Ottawa, Ontario, on September 25 and 26, 2001.
Judgment delivered at Ottawa, Ontario, on May 1, 2002.
REASONS FOR JUDGMENT BY: EVANS J.A.
CONCURRED IN BY: LINDEN J.A.
DISSENTING REASONS IN PART BY: SHARLOW J.A.
Date: 20020501
Docket: A-764-99
Neutral citation: 2001 FCA 166
CORAM: LINDEN J.A.
SHARLOW J.A.
BETWEEN:
SOCIETY OF COMPOSERS, AUTHORS AND MUSIC
PUBLISHERS OF CANADA
Applicant
and
CANADIAN ASSOCIATION OF INTERNET PROVIDERS,
CANADIAN CABLE TELEVISION ASSOCIATION,
AT & T CANADA LONG DISTANCE SERVICES COMPANY,
MCI COMMUNICATIONS CORPORATION,
BELL/EXPRESSVU, CANADIAN ASSOCIATION OF BROADCASTERS,
TELUS COMMUNICATIONS INC., BELL CANADA,
CANADIAN BROADCASTING CORPORATION,
CANADIAN MOTION PICTURE DISTRIBUTORS ASSOCIATION,
CANADIAN RECORDING INDUSTRY ASSOCIATION,
TIME WARNER INC., ALIANT INC., MTS COMMUNICATIONS INC.
and SASKATCHEWAN TELECOMMUNICATIONS
Respondents
and
THE CANADIAN RECORDING INDUSTRY ASSOCIATION and
NEIGHBORING RIGHTS COLLECTIVE OF CANADA
Interveners
REASONS FOR JUDGMENT
A. INTRODUCTION
[1] In a remarkably short time, the Internet has become a global mass medium of communication that operates sans frontières. As technical difficulties have been overcome, the transmission of music, generally recorded, but sometimes live or broadcast, has recently become an increasingly popular use of the Internet. The issue underlying this case is who can be made liable to pay royalties to the owners of the copyright in music that is transmitted on the Internet.
[2] At the end of the first phase of a proceeding to determine the amount and allocation of the royalty payable to copyright owners for the communication of music on the Internet, the Copyright Board held that a royalty can be imposed on those who post music on a server located in Canada to which Internet users have access. The Board also held that a royalty cannot be imposed on those whose only role in Internet transmissions is to operate a server on which music is stored, or to provide a recipient with Internet access. The normal activities of Internet intermediaries, it found, do not constitute a communication for the purpose of the Copyright Act, R.S.C. 1985, c. C-42, and thus do not infringe the exclusive communication rights of copyright owners.
[3] The Board's decision was rendered on October 27, 1999. It is reported as SOCAN Statement of Royalties, Public Performance of Musical Works 1996, 1997, 1998 (Tariff 22, Internet) (Re) (1999), 1 C.P.R. (4th) 417 ("Tariff 22"). It is also available in both official languages on the Copyright Board's Web site: www.cb-cda.gc.ca/decisions/music-e.html. Because the paragraphs of the Board's reasons are not numbered, references in my reasons are to page numbers in the print version.
[4] This is an application for judicial review under section 28 of the Federal Court Act, R.S.C. 1985, c. F-7, to set aside the decision of the Board excluding most Internet intermediaries from liability to pay royalties for copyright music transmitted on the Internet. The applicant is the Society of Composers, Authors and Music Publishers of Canada ("SOCAN"), which collectively administers in Canada the performing and communication rights of its members, and of foreign composers, authors and publishers. The applicant is supported by interveners representing performers of recorded music and recording companies. The respondents include an association of Internet access providers, associations of television cable companies, motion picture distributors and broadcasters, as well as individual broadcasters and telephone companies.
[5] The application for judicial review raises three substantive questions. First, when material is transmitted on the Internet, do the operator of the server on which it is stored, and the entity supplying the ultimate recipient with access to the Internet, only provide "the means of telecommunication necessary for another person to so communicate the work" within the meaning of paragraph 2.4(1)(b) of the Copyright Act? If they do, then operating a host server and providing Internet access do not constitute the communication by telecommunication of transmitted material and, hence, do not attract liability to pay a royalty.
[6] Second, when material requested by an Internet user in Canada is stored on a server outside Canada, does communication of that material occur only at the location of the server from which it is transmitted? If it does, then no breach of copyright will occur in Canada when material is transmitted to a recipient in Canada from a foreign server, and the Copyright Board cannot impose a royalty on the person who posted it.
[7] Third, can Internet intermediaries be required to pay a royalty because they "authorize" the communication of music transmitted on the Internet? In particular, does the operator of a host server authorize the communication of music that it is storing, or does an Internet access provider authorize the communication of the music requested by and transmitted to one of its subscribers?
[8] However, before the Court can decide whether the Board's conclusions on these issues are erroneous in law, it must determine the applicable standard of review.
B. FACTUAL BACKGROUND
[9] On the basis of the very substantial evidence that it heard, the Board has provided in its reasons for decision a thorough and lucid account of the essential operational features of Internet communication. None of the Board's factual findings has been challenged in this proceeding. Consequently, the factual background relevant to the issues raised in this application can be described quite briefly.
[10] The World Wide Web and e-mail are the most often used applications of the Internet. Indeed, most people regard the Internet and the World Wide Web as synonymous. In these reasons, I shall generally refer to the Internet. The Internet comprises a network of computers and a network of computer networks that enable those connected to them to gain access to data stored on computers around the world that are themselves connected to the Internet and have an Internet protocol (IP) address at which they can be located.
[11] The data available on the Internet may take a variety of forms, including text, pictures, videos and music, and is transmitted in "packets" of electrical impulses. The data is contained on Web pages which are assigned Universal Resource Locators (URLs) which may be translated into the IP address of the server on which the pages are stored. A Web site is a collection of pages available at the same general URL.
[12] The end nodes of the communication of data on the Internet are the computers of the content providers who post material on a host server, and of the end users who request and receive it.
[13] Material passes from the content provider to the end user through a number of other computers, including routers, which provide the Internet "backbone". They "read" the address on the packets of information passed to them, ensure that all the packets have arrived and are in the right order, and determine the next router to which the packets must be sent in order to reach their ultimate destination. The final router, operated by the end user's Internet access provider, directs the packets to the subscriber who requested the material. When the Internet access provider also operates a host server, as most Internet access providers in fact do, only the Internet access provider's router is used in the transmission of material requested from that server by the end user. Software on the end user's computer reassembles the packets of electrical impulses into a form that enables him or her to read, watch or hear the material that had been posted on the Internet by the content provider.
[14] Content providers may be commercial corporations, or individuals with a computer at home, the appropriate software and Internet access. Content may be uploaded onto a host server that is operated either by the content provider or, more typically, by another person with whom the content provider has a contractual arrangement to provide disk space on the server for storing material and to make it available on the Internet. In addition to providing disk space for Web sites, operators of host servers often supply other services, such as recording the number of "hits" that a site receives, and authenticating users.
[15] In their contract with content providers, operators of host servers may prohibit the posting of certain kinds of information, such as pornography or copyright material. If a content provider nonetheless uploads offending material, the operator of the server may remove it on discovering its presence, as a result of a complaint, for instance. Otherwise, the operator neither knows what material is being posted on the server, nor purports to exercise control over it, since the host server is programmed to send automatically, on an on-demand basis, material that is posted on it.
[16] In order to gain access to the wonders of the World Wide Web, a person needs the services of an Internet provider, who may be the local telephone company or some other entity, large or small, whose business includes the provision of Internet access. The "connectivity" services covered by the Internet access provider's fee typically comprise: providing an Internet protocol address and domain name to enable material requested by subscribers to reach them and to enable others to send material to them; installing on subscribers' computers the software necessary for them to connect to the Internet; interconnecting subscribers' computers to the Internet by wire, wireless or satellite; and operating a router that takes in packets of data on their way to or from the end user and determines how to get them to the end user or to the next router en route to their ultimate destination.
[17] The speed at which routers can read and direct the data passing through them is critically important to users. High speed is possible only if the information that routers must process is kept to a minimum. Although technically possible, it is currently impracticable for an Internet access provider to ascertain the content of the data passing through its router. In addition, an Internet access provider who announced that it was monitoring the content of data received and sent by its subscribers would likely find its customers taking their business elsewhere. Hence, routers normally only "look at" the address of the ultimate recipient, and the number and order of the packets containing the data in its electronic form.
[18] Internet access providers, and others, may also operate "cache" servers that temporarily store material requested by end users from a host server. Material requested from a host server by a subscriber may be automatically cached on the Internet access provider's server, so that when it is requested again the material will be delivered from the cache, not from the original host server. It will not be apparent to an end user whether the requested material has come from the original host server or from a cache. However, the content provider can control or prohibit caching by inserting non-visible data in the Web pages. And, in order to ensure that they have the latest version, end users can set their browsers to ensure that material is always taken from the original host server and not from a cache.
[19] Caches may be used to locate close to subscribers material stored on a distant server (in Europe or Australia, for example), or when the demand for particular material is very heavy. Caching cuts the cost of transmission for Internet access providers by reducing the bandwidth required to transmit, and expedites the transmission of material to end users.
[20] A final feature of the Internet of some relevance to this appeal is the use of hyperlinks to give access from one Web site page to other pages on the same site, or to pages on other sites located on the same or another server. When a hyperlink is embedded in a Web site page, access to other pages is automatic, in the sense that, having gained access to the first page, the end user need take no further action in order to gain access to linked pages.
[21] In its reasons for decision (supra, at page 441), the Board provided the following useful summary of the essential elements of the transmission of data over the Internet:
In order for a transmission to occur, the following events must take place. First, the file is incorporated to an Internet-accessible server. Second, upon request and at a time chosen by the recipient, the file is broken down into packets and transmitted from the host server to the recipient's server, via one or more routers. Third, the recipient, usually using a computer, can reconstitute and open the file upon reception or save it to open it later; either action involves a reproduction of the file, again as that term is commonly understood.
C. THE COPYRIGHT BOARD'S DECISION
[22] In 1995, SOCAN proposed the first tariff of royalties payable in respect of music transmitted on the Internet. This tariff, known as Tariff 22, covers the years 1996 to 1998 inclusive. Because of both the large number of potential participants in the proceeding to consider the tariff, and the range and complexity of the issues that it raised, the Board decided to divide the proceeding into two phases.
[23] This application for judicial review concerns Phase I of the proceeding. It was held to determine which activities of the various Internet actors infringed copyright and thus made them potentially liable to pay a royalty and, in particular, whether Internet intermediaries "communicated" to the public music transmitted to end users. Only those whose activities were found at the end of Phase I to infringe copyright would need to participate at Phase II, when the Board would determine which of them should be required to pay a royalty, on what basis the royalty should be calculated, and at what rate it should be set. The Phase II hearing has not yet started.
[24] The Phase I hearing lasted 11 days, during which the Board heard evidence from leading experts on the nature and functioning of the Internet. In addition, interested parties made extensive written submissions on the issues in dispute. The Board rendered lengthy reasons for decision in both official languages.
[25] The reasons reflect the three principal lines of enquiry that the representations addressed. First, the Board identified activities that may give rise to copyright infringement under paragraph 3(1)(f) of the Copyright Act, namely the communication of the work to the public by telecommunication. Second, it considered which activities are excluded from the definition of "communication" by paragraph 2.4(1)(b) of the Act. This provides that a person does not communicate to the public by telecommunication if the only act performed in respect of the communication is the provision of the means of telecommunication necessary for one person to so communicate the work in question to another. Third, the Board addressed the circumstances in which an Internet communication occurs in Canada and thus may be subject to a royalty imposed by the Board.
[26] In the course of addressing these issues, the Board made other important legal rulings on the application of the Copyright Act to the transmission of music on the Internet. On these issues, the Board agreed for the most part with SOCAN and its conclusions have not been challenged by the respondents. SOCAN has not challenged the Board's conclusion (supra, at pages 446-48) that a musical work transmitted on the Internet is communicated by telecommunication for the purpose of the Act, even though, after it has been requested from a server, it is broken into small packets of data in digital form that contain only fragments of the original material that are not recognizable as music until they are reassembled by the end user's computer.
[27] Nor has SOCAN challenged the Board's holding (supra, at pages 450 and 455-56) that a person who posts music on a server thereby authorizes its communication, and communicates it when, in response to requests from end users, it is transmitted from the host server on which it is stored. Even when material is transmitted from a cache, or from a mirror server on which the content of other Web sites is copied, it is still communicated by the content provider: supra, at page 459. However, content providers do not communicate in Canada material that they have posted on servers located in other countries, unless, perhaps, the material is specifically intended to be accessed by recipients in Canada: supra, at pages 459-60. Further, the statutory requirement that an infringing communication must be "to the public" is satisfied whenever a content provider uploads material onto a server with the intention that the public or a segment of the public will have access to it, even though members of the public neither request nor receive the material simultaneously, and may receive it individually in private: supra, at pages 445-46.
[28] However, SOCAN does challenge the Board's conclusion that the typical activities of operators of host servers and Internet access providers do not constitute communication by telecommunication as defined in the Copyright Act, and thus do not give rise to liability to pay a royalty. The services and equipment that they normally supply to enable subscribers to obtain access to music bring them within paragraph 2.4(1)(b). That is, Internet intermediaries are not communicating by telecommunication because their only act in respect of a communication consists of providing the means of telecommunication necessary to enable another person to so communicate it. However, if operators of host servers also post music on them, or Internet access providers either collaborate with content providers, or themselves post music, they lose the protection of paragraph 2.4(1)(b). The Board's analysis of these issues is found supra, at pages 451-53.
[29] The Board also held (supra, at pages 458-59) that the transmission of music from a cache or a mirror site does not normally constitute communication. The poster remains the communicator and the communication occurs at the location of the source server. On the other hand, a person who makes other pages or Web sites automatically accessible to an end user by means of an embedded hyperlink thereby authorizes the communication of the material available on those sites. SOCAN, however, maintains that, like transmissions from the original host server, transmissions from caches or mirror sites constitute communication by telecommunication.
[30] SOCAN submits that the Board's decision excluding Internet intermediaries from liability is likely to make it difficult for SOCAN effectively to protect its members' copyright from infringing Internet communications in Canada, because it limits to content providers and their collaborators the range of Internet actors who can be required to pay a royalty. Content providers are numerous, anonymous and often of limited financial means; hence, SOCAN may have difficulty in obtaining payment from them. Further, SOCAN argues, the decision also damages its members' interests because it exempts content providers from liability to pay a royalty in respect of material transmitted from a host server located outside Canada.
D. LEGISLATIVE FRAMEWORK
[31] The following provisions of the Copyright Act are of most immediate relevance to the determination of this application for judicial review.
Copyright Act, R.S.C. 1985, c. C-42
| 2. "telecommunication" means any transmission of signs, signals, writing, images or sounds or intelligence of any nature by wire, radio, visual, optical or other electromagnetic system;
2.4 (1) For the purposes of communication to the public by telecommunication, ...
(b) a person whose only act in respect of the communication of a work or other subject-matter to the public consists of providing the means of telecommunication necessary for another person to so communicate the work or other subject-matter does not communicate that work or other subject-matter to the public; and ... |
2. « télécommunication » vise toute transmission de signes, signaux, écrits, images, sons ou renseignements de toute nature par fil, radio, procédé visuel ou optique, ou autre système électromagnétique.
2.4 (1) Les règles qui suivent s'appliquent dans les cas de communication au public par télécommunication_: ...
b) n'effectue pas une communication au public la personne qui ne fait que fournir à un tiers les moyens de télécommunication nécessaires pour que celui-ci l'effectue; ... |
|
3. (1) For the purposes of this Act, "copyright", in relation to a work, means the sole right to produce or reproduce the work or any substantial part thereof in any material form whatever, to perform the work or any substantial part thereof in public or, if the work is unpublished, to publish the work or any substantial part thereof, and includes the sole right ...
(f) in the case of any literary, dramatic, musical or artistic work, to communicate the work to the public by telecommunication, ...
|
3. (1) Le droit d'auteur sur l'oeuvre comporte le droit exclusif de produire ou reproduire la totalité ou une partie importante de l'oeuvre, sous une forme matérielle quelconque, d'en exécuter ou d'en représenter la totalité ou une partie importante en public et, si l'oeuvre n'est pas publiée, d'en publier la totalité ou une partie importante; ce droit comporte, en outre, le droit exclusif_: ...
f) de communiquer au public, par télécommunication, une oeuvre littéraire, dramatique, musicale ou artistique; ...
|
|
and to authorize any such acts.
|
Est inclus dans la présente définition le droit exclusif d'autoriser ces actes. |
[32] The Copyright Act also constitutes the Copyright Board, and defines its powers and functions. The Board held the hearing on Tariff 22 under subsection 68(1), which authorizes it to approve tariffs proposed by collective societies carrying on the business of " ... collecting royalties for the communication to the public by telecommunication of musical works ..." (paragraph 67(b)). Hence, the Board could not approve the imposition of a royalty on a person who was not infringing paragraph 3(1)(f) by communicating musical works to the public by telecommunication. Other statutory provisions relating to the Board that are less central to this application are referred to in the course of these reasons.
E. ISSUES AND ANALYSIS
[33] It was agreed by the parties that the Court has jurisdiction to review the Board's Phase I determination of the activities of Internet intermediaries for which the Board could require them to pay a royalty, even though it has not yet decided who will be required to pay, the total amount of the royalty payable, or the basis on which it will be allocated among those liable to pay.
[34] I have no doubt that the parties are correct in this. The broad jurisdiction to review and set aside any "decision, order, act or proceeding" of a federal administrative tribunal conferred by the Federal Court Act, paragraph 18.1(3)(b), is equally applicable to tribunals that are reviewable at first instance in this Court under subsection 28(1), such as the Copyright Board: subsection 28(2).
[35] Thus, the Court's judicial review jurisdiction is not limited to administrative tribunals' decisions, much less decisions that ultimately dispose of a matter. The Board's determination in Tariff 22 of the parties' potential liability to pay a royalty is obviously a reviewable "decision" under paragraph 18.1(3)(b) that can be set aside for error of law under paragraph 18.1(4)(c).
Issue 1: The Standard of Review
[36] SOCAN submitted that, in order to determine whether the Board's decision was erroneous in law, the Court must decide for itself whether the Board had correctly resolved the legal issues in dispute. The respondents, on the other hand, contended that the Court should afford a measure of deference to the Board and only intervene if it found that the Board's rulings were either patently unreasonable, or simply unreasonable. For the reasons that follow, it is my opinion that the Board's interpretation of the provisions of the Copyright Act relevant in this case is reviewable on a standard of correctness, while deference is due to the Board's application of them to the facts.
I The Authorities
[37] It would be enormously wasteful of resources, and introduce undue uncertainty into an already nuanced and contextualized approach to judicial review, to require reviewing courts to fashion anew the appropriate standard of review in respect of each section or word of the statute administered by an agency. Once a court has pronounced on the standard of review applicable to the interpretation by a given agency of a provision in its enabling statute, that standard should generally be applied to the same agency's interpretation of other provisions of its legislation when an agency decision is challenged on an application for judicial review.
[38] Normally, a different standard should be applied only if an applicant persuades the reviewing court that the standard already established was inappropriate, or that the nature of the statutory provision in dispute in the second case is so manifestly different from those considered in earlier cases that a pragmatic or functional analysis requires the application of a different standard of review. Thus, for example, if a reviewing court has applied a deferential standard to an agency's interpretation of a particular provision in its enabling statute, the same standard presumptively governs the interpretation of other provisions in the statute, unless, for instance, they do not engage the expertise of the agency, are so closely defined in the statute as to leave no room for the exercise by the agency of any interpretative choice, or affect individual rights in different ways.
[39] Since the standard of review applicable to the Copyright Board's interpretation of the Copyright Act has been considered comparatively recently by this Court, I shall first examine those decisions to see if they settle the issues raised in this application.
(i) AVS TechnologiesInc. v. Canadian Mechanical Reproduction Rights Agency
[40] The respondents rely heavily on AVS Technologies Inc. v. Canadian Mechanical Reproduction Rights Agency (2000), 7 C.P.R. (4th) 68 (F.C.A.) ("AVS") as authority for the proposition that the Board's interpretation of the Copyright Act is reviewable in this Court only for patent unreasonableness.
[41] The issue in AVS, supra, was whether importers and manufacturers could be required to pay a levy on certain compact discs (CDs), on the ground that they were likely to be used for the private copying of copyright material. Liability to a levy depended on whether the CDs constituted an "audio recording medium" within the meaning of section 79 in Part VIII of the Copyright Act, in that they were "ordinarily used by individual consumers" for the purpose of copying sound recordings for reproduction.
[42] The Copyright Board held that, for the purpose of section 79, the CDs were "ordinarily" used by individual consumers for copying copyright work. Provided that their use for other purposes was not negligible, the Board held, it was irrelevant that copying was not the sole or even the primary purpose for which consumers used the CDs. In rejecting the proposition that "ordinarily used" means "most frequently used", the Board was clearly deciding a question of statutory interpretation, because the question in dispute was sufficiently general that it could arise in other proceedings before the Board and in copyright infringement proceedings in court.
[43] On an application for judicial review of the Board's decision, Linden J.A., writing for the Court, said (AVS, supra, at paragraph 5) this about the standard of review applicable to the Board's interpretation of the words "ordinarily used by individual consumers":
In our view, this issue is mainly a question of law, that is, the interpretation of legislation that the Board administers. Such a determination falls squarely within the jurisdiction of the Board. It is in its home territory. The issue is a polycentric one dealing with the interests of artists, manufacturers, importers, consumers who record sound, consumers who do not record sound and others. The purpose of Part VIII of the Act is mainly an economic one - that is, to fairly compensate artists and the other creative people for their work by establishing fair and equitable levies. These are matters within the expertise of the Board which has been given the authority to decide inter alia the manner of determining the levies, who pays, how much they pay and the terms and conditions of the payment. (See subsection 83(8).) The Board, therefore, should know the industry it is regulating better than the Court. Hence, applying the "functional and pragmatic" test of Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982, and having looked at the factors outlined, the proper standard of review on this issue, even though there is no privative clause, is patent unreasonableness, as considerable curial deference is due to this Board on this question. (Emphasis added.)
[44] Counsel for SOCAN argued that AVS, supra, is distinguishable, on the ground that the legal questions in dispute in Tariff 22 were "jurisdictional" in nature, since the Board had to determine for which activities a person could be liable in law to pay a royalty before it proceeded to Phase II of its inquiry. Hence, SOCAN submits, the Board's decision on Phase I is subject to review for error of law on a standard of correctness.
[45] In my view, however, on this reasoning, the interpretation of the phrase, "audio recording medium" in AVS, supra, could equally have been characterized as a "jurisdictional" question. That is, the Board could not proceed to determine what levy it would impose on the manufacturers and importers of the CDs until it had decided that the CDs fell within the definition of an "audio recording medium" and that a levy could legally be imposed on them. I cannot agree, therefore, that AVS, supra, can be distinguished from the case at bar in the manner suggested by counsel for SOCAN.
[46] More important, the pragmatic or functional analysis is now the accepted methodology for setting the standard by which a court will review a specialist administrative agency's determinations of questions of law. In my opinion, we have almost reached a stage in the development of the law of judicial review of administrative action in Canada when the concept of jurisdiction can safely be abandoned as a useful determinant of the standard of review applicable to a specialist administrative agency's interpretation or application of a provision of its enabling legislation on which the agency based its decision.
[47] The eclipse of jurisdiction in this context has been expressly recognized by the Supreme Court of Canada in Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982, at paragraph 28, and by this Court in Halifax Longshoremen's Assn., Local 269 v. Offshore Logistics Inc. (2000), 257 N.R. 338, at paragraph 15 (F.C.A.), and VIA Rail Canada Inc. v. Cairns, [2001] 4 F.C. 139, 2001 FCA 133, at paragraph 36. Hence, when the statutory provision in dispute is one that the agency is authorized to interpret and to apply in order to render a decision, the invocation of jurisdiction does not dispense with the need to conduct a pragmatic or functional analysis to determine the applicable standard of review. Nonetheless, the Supreme Court does not yet appear ready to jettison the concept of jurisdiction as an analytical tool for determining the standard of review: Pushpanathan, supra, at paragraph 28. Rather, the Court seems to have relegated it to being merely one of the factors to be considered in the pragmatic or functional mix: see Chieu v. Canada (Minister of Citizenship and Immigration), 2002 SCC 3, at paragraph 24, which I examine more fully at paragraphs 63-65 of these reasons.
[48] In my opinion, therefore, AVS, supra, cannot be distinguished from the case at bar, at least in so far as the questions decided by the Board in both cases involve the interpretation of the Copyright Act. The statutory provisions in question in both decisions might have to be interpreted by a court in the course of infringement proceedings. Further, I see nothing in the language of the phrases, "the means of telecommunication necessary", and, "ordinarily used by consumers", to justify the application of different standards of review to the Board's determination of their meaning.
[49] Nonetheless, in my respectful view, the reasoning of the Court in its application of the pragmatic or functional analysis to the Copyright Board's interpretation of the Act in AVS, supra, is open to criticism on the following three grounds.
[50] First, when applied to administrative agencies' interpretation of provisions in their "home" legislation that are not on their face discretionary in nature, the patent unreasonableness standard seems rarely to be used in the absence of a strong preclusive clause. The review of labour arbitrators' interpretation of collective agreements is something of an exception to this general proposition, in that arbitral decisions of this nature are normally subject to review for patent unreasonableness, although they are normally protected only by exclusive jurisdiction and finality clauses. However, this strong policy of curial deference is explained by a variety of policy considerations peculiar to the regulation of labour relations, as well as by the location of labour arbitration on the divide between public and private law.
[51] Second, the Court in AVS, supra, appears to have found support for patent unreasonableness as the applicable standard of review in cases dealing with the Board's exercise of its discretionary powers when determining the basis for and the amount of a royalty. Thus, the Court refers (supra, at paragraph 5) to the following cases as "applying this [the patent unreasonableness] standard to this Board in other technical matters": Canadian Assn. of Broadcasters v. Society of Composers, Authors and Music Publishers of Canada (1994), 58 C.P.R. (3d) 190 (F.C.A.); Réseaux Premier Choix Inc. v. Canadian Cable Television Assn. (1997), 80 C.P.R. (3d) 203 (F.C.A.); Society of Composers, Authors and Music Publishers of Canada v. Canadian Association of Broadcasters, (1999), 1 C.P.R. (4th) 80 (F.C.A.).
[52] However, these cases involved the review of the Board's exercise of its overtly discretionary powers. In relying on them to support its conclusion, the Court in AVS, supra, may have overlooked the possibility that a less deferential standard of review should be applied to the Board's interpretation and application of provisions in the Act that do not on their face confer a discretion.
[53] Third, and perhaps most significantly, the Court in AVS, supra, did not mention the fact that questions of law decided by the Board may also have to be decided by a court in the exercise of its original jurisdiction over copyright infringement proceedings. The fact that the Board does not have exclusive authority to interpret a provision of the Copyright Act would seem to suggest that it is not so much better placed than the Court to decide these questions that Parliament should be taken to have intended its decisions to be subject to the most deferential standard of review.
[54] In my respectful opinion, the authority of AVS, supra, is seriously weakened because the Court appears not to have taken into account this latter consideration. Instead, it seems to have collapsed the standard of review applicable to the Board's exercise of discretion when setting and allocating royalties, and that governing its interpretation of provisions defining infringing conduct.
[55] For these reasons I cannot regard AVS, supra, as settling the standard of review applicable to the Board's interpretation of the provisions of the Copyright Act in dispute in this application for judicial review.
(ii) Society of Composers, Authors and Music Publishers of Canada v. Canadian Association of Broadcasters ("CAB (1999)")
[56] The applicant relies on CAB (1999), supra, for the proposition that the statutory provisions defining legal liability are jurisdictional in nature and that a standard of correctness should be applied to the Board's interpretation of them.
[57] Thus, Robertson J.A. held (CAB (1999), supra, at paragraph 10) that it was a question of jurisdiction whether the Board could issue a multiple blanket licence under its broad statutory power to set tariff rates and to append "related terms and conditions" to its decision by virtue of the Copyright Act, paragraph 67.2(1)(b). Hence, because the scope of the Board's remedial powers was a "jurisdictional" question, the Board's interpretation of the relevant statutory provision was reviewable for correctness, a standard which, Robertson J.A. concluded, the Board in that case had satisfied.
[58] It is not obvious to me why, if this reasoning is sound, it is not equally applicable to the questions before the Board in Tariff 22, including the definition of what is capable in law of constituting "the means of telecommunication necessary" for the purpose of the Act.
[59] With the greatest respect, I cannot regard the reasoning in CAB (1999), supra, as persuasively establishing correctness as the standard of review applicable to the Copyright Board's interpretation of every provision of the Act. Having characterized the interpretation of the Board's remedial powers as a "jurisdictional" question, and therefore reviewable on a standard of correctness, Robertson J.A. apparently did not find it necessary to conduct a functional or pragmatic approach in order to determine the standard of review. However, since the Board was clearly required to interpret the paragraph conferring its remedial powers in order to dispose of the proceeding, I cannot agree that the standard of review can be determined by pinning the label "jurisdictional" on the disputed question decided by the tribunal.
[60] In addition to the reasons that I gave at paragraphs 46-47 for concluding that the concept of jurisdiction has lost its former significance as a determinant of the standard of review in administrative law, the Supreme Court of Canada has specifically refuted the notion that statutory provisions defining an agency's remedial powers must always be characterized as limiting or conferring jurisdiction and their interpretation ineluctably subject to review for correctness. Thus, writing for the Court in Canadian Union of Public Employees, Local 301 v. Montreal (City), [1997] 1 S.C.R 793 ("CUPE, Local 301"), L'Heureux-Dubé J. held that the pragmatic or functional approach is as relevant for determining the standard of review applicable to a specialist administrative agency's interpretation of its remedial powers as to any other provision in its enabling statute. Thus, she said (supra, at paragraph 44):
On the basis of this Court's decision in Acadie, supra, [Syndicat des employés de production du Québec et de l'Acadie v. Canada Labour Relations Board, [1984] 2 S.C.R. 412] the Court of Appeal characterized the Council's remedial provisions as jurisdiction-limiting. The order was therefore subjected to review by the court on a correctness standard. This application of the case law regarding jurisdictional questions was in error. As I have stated, this Court's decision in Bibeault, supra, [U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048] mandates the application of a pragmatic and functional approach to interpreting the enabling legislation. This approach must be applied even to those provisions which appear to limit a tribunal's jurisdiction. ... (Emphasis added)
[61] In my opinion, the reasoning by which the Court in CAB (1999), supra, determined the standard of review applicable to the Board's interpretation of its remedial powers is not consistent with either the philosophy underlying the pragmatic or functional approach in general, or with the analysis of L'Heureux-Dubé J. in CUPE, Local 301, supra, in particular.
[62] I do not say that CUPE, Local 301, supra, necessarily establishes that in CAB (1999), supra, the Court should have reviewed the Copyright Board's interpretation of its remedial powers by applying a deferential standard of review. For one thing, unlike the Copyright Act, the statute considered in CUPE, Local 301, supra, contained a preclusive clause. I do say, however, that CUPE, Local 301, supra, demonstrates that talk of jurisdiction does not enable a court to determine the standard of review applicable to an agency's remedial powers without first undertaking a pragmatic or functional analysis.
[63] I would only note that, more recently, the Court in Chieu, supra, regarded as a jurisdictional question the interpretation of the statutory discretion conferred on the Immigration Appeal Division of the Immigration and Refugee Board to allow an appeal from a deportation order made against a permanent resident when "having regard to all the circumstances of the case, the person should not be removed from Canada".
[64] In deciding whether the Board had erred in law by interpreting this provision as precluding it from considering any potential hardship that an appellant was likely to experience in a foreign country if removed from Canada, Iacobucci J. characterized the issue as one of the Board's jurisdiction and stated (at paragraph 24): "Administrative bodies generally must be correct in determining the scope of their delegated mandate, given that they are entirely the creatures of statute." The emphasis is mine.
[65] The Court then considered other elements of the pragmatic or functional approach before concluding that correctness was the appropriate standard of review. The novel twist introduced into the law by this case is that the Court did not regard the "jurisdictional" nature of the question decided by the Board as necessarily determinative of the standard of review, but as merely one factor pointing in the direction of the correctness standard.
[66] Given the relegation in importance of the concept of jurisdiction as an analytical determinant of the standard of review, it would be inappropriate to rely on CAB (1999), supra, as authority for the proposition that the correctness standard applies generally to the Board's interpretation of provisions in the Act, including those with which the present application is concerned. The authority of CAB (1999),supra, for this proposition is in my view undermined, because the Court relied on the concept of jurisdiction without conducting a pragmatic or functional analysis to determine the standard of review applicable to the Board's interpretation of its remedial powers.
(iii) Conclusion
[67] In summary, the soundness of the reasoning in both AVS, supra, and CAB (1999), supra, is sufficiently problematic that, in the case at bar, the Court must embark on a pragmatic or functional analysis in order to determine the standard of review relevant to the issues decided by the Board that are in dispute in this application for judicial review.
II A Pragmatic or Functional Analysis
[68] Before considering the various elements of the pragmatic or functional analysis for determining the standard of review, a reviewing court should not lose sight of the ultimate question that this approach is designed to answer: did Parliament intend the tribunal or the court to determine the disputed issue? The answer to this question, in turn, ultimately depends on whether the court or the administrative agency under review is better placed to decide the issues in dispute: Domtar Inc. v. Québec (Commission d'appel en matière de lésions professionelles), [1993] 2 S.C.R. 756, at paragraph 34.
[69] An analysis of these questions includes the following factors: (i) the scope of the expertise of the Board; (ii) the nature of the disputed issues decided by the Board, including the relevance of the Board's expertise to their determination; and (iii) the statutory provisions relating to the review of Board decisions.
(i) Expertise of the decision-maker
[70] The Copyright Board is an independent administrative tribunal. Members of the Board are appointed by the Governor in Council for a term of no more than five years, with the possibility of a second term, and are removable only for cause: Copyright Act, subsections 66(1), (4) and (5). While members may be appointed to serve on either a full-time or a part-time basis (subsection 66(2)), the Board should be regarded as a permanent body and not, like most labour arbitration boards for instance, appointed ad hoc.
[71] The Act also ensures that the Board possesses legal expertise by providing that its chair must be a sitting or retired judge of a superior or district court, although the office of chair was vacant when Tariff 22 was decided: subsection 66(3). The Act does not prescribe qualifications for other members, who may be as many as four in number, including a vice-chair: subsection 66(1). In order to assist members in the performance of their duties, the Board can augment whatever expertise members bring to their deliberations by retaining on a temporary basis persons with technical or specialized knowledge: subsection 66.4(3).
[72] The Board's specialized function is to decide whether to approve tariffs for the payment of royalties proposed by collective societies in the business of granting licences or collecting royalties for, among other things, the communication to the public by telecommunication of their members' musical works: sections 67 and 68.
[73] On receiving a proposal for a tariff, the Board must publish it in the Canada Gazette and notify prospective users of the material to which the tariff relates, or their representatives, that they have sixty days to file objections with the Board: subsection 67.1(5). The Board must send copies of objections to the proponent of the tariff, who is entitled to an opportunity to respond; objectors have a corresponding right to see that response and to reply to it: subsection 68(1). To enable it to conduct effective hearings, the Board has the general powers of a superior court of record: subsection 66.7(1). Further details of the Board's procedure are contained in a directive issued by the Board, although, with the consent of the Governor in Council, the Board may give its practice and procedure a statutory foundation by promulgating regulations: subsection 66.6(1).
[74] Taken as a whole, the Board's procedure has many of the characteristics of an adjudicative hearing. In this case, the Board heard the parties' evidence orally, but their legal submissions were written. The Board's procedures clearly provide ample opportunity for those interested in a proposed tariff to participate effectively in the decision-making process.
[75] The Board exercises a very broad discretion when determining who should pay a royalty and on what basis the royalty should be calculated. Thus, in addition to some specific criteria to which the Board is statutorily required to attend, "[it] may take into account any factor that it considers appropriate": paragraph 68(2)(b). In effect, it is thereby entrusted with the polycentric task of setting royalties in a manner that strikes a reasonable balance among the competing interests of the various participants in the regulatory process.
[76] In short, the claim that the Board possesses the kind of expertise that attracts judicial deference is supported by its independence, permanent nature, the legal and other expertise available to it, its participatory procedures and the broad discretion conferred on it when allocating in the public interest the cost of using copyright material.
(ii) Nature of the issue decided by the Board
[77] The different kinds of question that an administrative agency must decide in the course of discharging its statutory mandate are not necessarily subject to the same standard of review. Thus, for example, since a tribunal's interpretation of its enabling legislation is likely to have a precedential effect, it is apt to attract less judicial deference than a simple application of the statute to the facts of a particular case that does not purport to decide some more general question of law: Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at paragraphs 36-37. Conversely, a tribunal's findings of fact and its exercise of discretion will normally be reviewed only for irrationality: Stelco Inc. v. British Steel Canada Inc., [2000] 3 F.C. 282 (C.A.); Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817, at paragraph 66.
[78] Moreover, the same standard of review will not necessarily apply to an administrative agency's determinations with respect to every provision in its constitutive legislation. As Major J. noted in Canada (Deputy Minister of National Revenue - M.N.R.) v. Mattel Canada Inc., [2001] 2 S.C.R. 100, 2001 SCC 36, at paragraph 27 ("Mattel"): " ... different standards of review will apply to different legal questions depending on the nature of the question to be determined and the relative expertise of the tribunal in those particular matters." Thus, the Court held, while determinations by the Canadian International Trade Tribunal of questions of law "of a highly technical nature" are reviewable for unreasonableness (Mattel, supra, at paragraph 32), other questions "that require the application of principles of statutory interpretation and other concepts which are intrinsic to commercial law" (Mattel, supra, at paragraph 33) will be reviewed for correctness.
[79] Nonetheless, it has also been said that a tribunal's familiarity with a general legal concept, as applied in a particular statutory context, may persuade a reviewing court to defer to the tribunal's determinations: Ivanhoe Inc. v. United Food and Commercial Workers, Local 500, 2001 SCC 47, 201 D.L.R. (4th) 557, at paragraph 26.
(a) a question of law or mixed law and fact?
[80] As I have already noted, in Southam, supra, the Court stated that an interpretive ruling by an administrative tribunal that is not limited to the facts of the case before it, but is likely to have a precedential effect, is a factor militating in favour of a correctness standard. Such questions are characterized as questions of law. On the other hand, a ruling that primarily involves applying the statute to the facts found by the tribunal may be characterized as a question of mixed law and fact and, as such, subject to a deferential standard of review: West Coast Energy Inc. v. Canada (National Energy Board), [1998] 1 S.C.R. 322, at paragraph 38. Further, when it is apparent that the tribunal has correctly directed itself on the meaning of the statutory provision in question, its application to the facts may itself be purely a question of fact: Housen v. Nikolaisen, 2002 SCC 33. In these circumstances, it would seem, when a matter comes before the Court by way of an application for judicial review, the tribunal's application of the statute to the facts is reviewable only under paragraph 18.1(4)(b).
[81] Of course, the distinction between the interpretation of a statutory provision and its application to the facts of a given case is one of degree: reviewing courts must determine where on the spectrum ranging from "pure" interpretation to "mere" application the issue in dispute before them falls. For example, in the case at bar, the Board was deciding a question at the interpretation end of the spectrum when it held that "means of telecommunication" within the meaning of paragraph 2.4(1)(b) are not limited to physical facilities, such as telephone poles, but can also include services.
[82] On the other hand, the Board was deciding a question closer to the application end of the spectrum when it concluded on the evidence before it that Internet intermediaries play an essentially passive role in Internet communications, because the operators of host servers and Internet access providers have so little control over the content of material transmitted that they are merely supplying the means of telecommunication and therefore are not themselves communicating anything. Different evidence, including, for example, technological developments that make it practicable for Internet access providers to monitor the content of the material being requested by their subscribers, might result in a different decision in a royalty-setting proceeding for another year.
[83] The Board stated another general principle of law when, relying on an earlier decision of this Court, it held that an infringement of copyright does not occur in Canada when the place of transmission from which the communication originates is outside Canada. The application to the Internet of this principle, derived from a broadcasting case, also raises a question of considerable generality. Whether the location of a host server outside Canada means that material transmitted from it to, and at the request of, an end user in Canada is generally communicated outside Canada and, hence, is not subject to a royalty imposed by the Board, is not a question that is limited to the facts specific to this case.
(b) a question of general or special law?
[84] A second aspect of the nature-of-the-question-decided element of the pragmatic or functional analysis is whether the question in dispute is familiar to the courts because it may come before them for determination in other legal contexts. If it is, then it will not be within the unique area of the tribunal's expertise, thus weakening the tribunal's claim to be better situated than the courts to decide it.
[85] In our case, the disputed questions arose in the context of the Board's consideration of SOCAN's proposed tariff for the payment of royalties for the communication of copyright music transmitted on the Internet. Royalty-setting is within the exclusive jurisdiction of the Board. However, the question of whether the core activities of either Internet access providers, or operators of host servers, infringe copyright by communicating material to end users could also arise in proceedings for copyright infringement instituted under the Copyright Act, in either the Federal Court, or the superior court for a province.
[86] Thus, for example, if the Copyright Board's decision in Tariff 22 were upheld, a copyright owner might subsequently institute infringement proceedings against an Internet access provider, alleging that it had communicated copyright material by telecommunication when it provided subscribers with Internet "connectivity". In such a case, the court would have to determine if the Internet access provider's activities were within the protection of paragraph 2.4(1)(b). Indeed, all of the issues in dispute in this application could arise in the course of infringement litigation in a court.
[87] It is inaccurate, therefore, to regard as part of the Board's "home territory" the interpretation of provisions of the Copyright Act that may also be litigated in infringement proceedings. With respect to these matters, the Board and the courts occupy shared space. Moreover, there is no reason to conclude that the meaning of the operative statutory words depends on whether the issue arises in the context of an administrative proceeding to set a royalty, or of an action for copyright infringement.
(c) impact of the Board's decision on the parties' rights
[88] In this case, the "general law" nature of the questions decided by the Board overlaps with the impact of the Board's decision on the parties' legal rights. Accordingly, it is convenient to consider this latter dimension of the pragmatic or functional analysis under the general rubric of the nature of the questions decided by the Board.
[89] First, while the resolution of the legal questions raised in Tariff 22 are undoubtedly of significant commercial interest to the parties, and to Internet end users, the interests at stake are primarily monetary in nature. The decision of the Copyright Board in this case cannot be said to impinge on constitutional or quasi-constitutional rights, and may therefore attract less intense judicial scrutiny than, for example, determinations made by agencies responsible for administering legislation relating to human rights or refugee status.
[90] Second, the impact of the Board's decisions on the parties' legal rights is limited. For example, a decision of the Board that a participant is not liable to pay a royalty, because its conduct is non-infringing, does not have a determinative impact on the legal rights of SOCAN and its members. For example, subject to the exercise of a court's discretion to apply the doctrine of estoppel (Danyluk v. Ainsworth Technologies Inc., [2001] 2 S.C.R. 460, 2001 SCC 44, a copyright owner may still sue for infringement, despite a determination by the Board in royalty tariff proceedings that the defendant has not engaged in an activity that is an exclusive right of a copyright owner.
[91] The limited life span of tariffs approved by the Board also serves to reduce the impact of the Board's decisions on the rights of the parties. Thus, Tariff 22 applies only to the years 1996 to 1998 inclusive. While the Board may be reluctant in proceedings relating to other years to reopen questions decided in Phase I of the Tariff 22 proceedings, it is not necessarily bound by its earlier determinations. Indeed, it would be obliged by the duty of fairness to consider any new evidence that the parties wished to present to support a different conclusion on the application of the statute to the facts or, subject to the doctrine of res judicata, a new legal argument on a question of law that had not been settled by the courts.
[92] This is not to trivialize the adverse impact that the Board's decision in the case at bar may have on SOCAN's members. The regime for the collective administration of copyright through a royalty scheme administered by the Board is no doubt a much more attractive enforcement mechanism to most copyright owners than civil litigation by individuals for particular acts of infringement. If SOCAN were unable to impose liability on either Internet access providers or operators of host servers to pay a royalty for the transmission of infringing material, its members' financial interests could be adversely affected to a significant degree.
[93] Thus, neither the nature of the rights affected by the Board's decision, nor the seriousness of its impact on them, indicates that the Court should review the Board's legal determinations on a standard of correctness.
(iii) Access to judicial review
[94] The Copyright Board's decisions are neither protected by any kind of preclusive clause, nor subject to a right of appeal. Rather, the Board is within the supervisory jurisdiction of this Court by virtue of paragraph 28(1)(j) of the Federal Court Act and, as a result of subsection 28(2), its decisions are reviewable on all the grounds listed in subsection 18.1(4). That the Court may set aside the decision of a tribunal in judicial review proceedings for error of law does not, of course, necessarily mean that the Court should decide whether the tribunal has erred in law by applying a standard of correctness to the tribunal's determinations of questions of law.
[95] Given the diminution of the distinctions between rights of appeal on questions of law and applications for judicial review that are not limited by a preclusive clause, I cannot regard the absence of an express statutory provision in the Copyright Act governing access to the Court as anything more than a weak indicator of Parliament's intention that the Court should show restraint when reviewing the Board's decisions.
(iv) Conclusions
[96] If an administrative agency's enabling statute contains neither a right of appeal on the one hand nor, on the other, a strong preclusive clause, reasonableness appears increasingly to be the "default" standard applied by the courts when reviewing the interpretation and application of its constitutive legislation by a specialist, independent administrative agency with a participatory procedure. Given that the Copyright Board broadly fits this description, has legal expertise and renders decisions that have a limited impact on legal rights of an economic nature, the question is whether there are reasons to apply a standard other than unreasonableness to the Board's determination of the questions under review.
[97] Parliament's decision to entrust both the Board and the courts with responsibility for interpreting the same provisions of the Copyright Act, admittedly in the context of different proceedings, refutes the claim that these issues are within the unique expertise of the Board, even when they arise in the course of a proceeding in the exclusive jurisdiction of the Board. In other words, on a comparison of the respective expertise of the Board and the Court, it cannot be said that the Board's claim is superior. Courts in general, and the Federal Court in particular, have a long history in the law of copyright, and the questions of interpretation in dispute in this case are squarely within the domain of the judiciary.
[98] The heart of the Board's expertise is in the administration of those provisions of the Copyright Act pertaining to the setting and allocation of royalties. While necessary for enabling the Board to perform that function, its decisions defining activities that infringe copyright have implications that "stray from the core expertise of the tribunal": Pushpanathan, supra, at paragraph 38.
[99] Further, it could be inefficient for the Court not to decide for itself the issues of interpretation in dispute here, because the Court might have to determine them for itself if they subsequently arose in infringement proceedings. Why should the Court duck issues when they are presented in judicial review proceedings and leave them to be litigated in infringement proceedings? Why not decide them now, rather than later? Limiting the intensity of judicial review in the interests of expeditious decision-making in this context does not seem an adequate reason to adopt a less searching standard of review than correctness. Royalty-setting proceedings tend to be complex and time-consuming, and participants typically have considerable financial resources at their disposal.
[100] The standard of review in respect of questions that could arise for decision in proceedings before either an administrative tribunal or a court has also been considered in connection with the scheme created by the Ontario Insurance Act, R.S.O. 1990, c. I-8, sections 279-83, for the administration of statutory insurance benefits for those who have sustained personal injuries in automobile accidents. After compulsory mediation, the parties may choose to proceed before either a court or an arbitrator, or a question of law may be stated to the court.
[101] The question of interest for present purposes arising from this scheme is the standard of review applied on an appeal of a decision by an arbitrator, bearing in mind that, if the parties had chosen to go directly to court, or a question of law had been stated, the applicable standard would have been correctness. Although some cases go the other way (see, in particular, Federation Insurance Co. of Canada v. Vineski, [1997] O.J. No. 4304 (Ont. Ct. Gen. Div., Div. Ct.)), the weight of authority favours correctness as the standard for reviewing legal determinations of arbitrators under the Insurance Act.
[102] Thus, in Kirkham v. State Farm Mutual Automobile Insurance Co. (Ont. Ct. Gen. Div.; March 31, 1998, unreported; leave to appeal refused, [1998] O.J. No. 2872), O'Leary J. stated in the endorsement ([1998] O.J. No. 6459):
While the Director's Delegate came to the correct decision as to the limitation period created by Section 281(5) we feel it important to note had he reached the wrong decision, such decision would not have been protected by curial deference. The Legislature gave an injured insured the choice of pursuing a benefits claim in either the court or by arbitration under the Insurance Act. The Legislature could not have intended that the limitation provision set out in Section 281(5) could vary dependent on where the claim was made. The court in interpreting the limitation provision is restricted to a standard of correctness. For consistency and fairness the Ontario Insurance Commission must be bound by the same standard.. [emphasis added]
[103] This reasoning was followed in H'ng v. Allstate Insurance Co. of Canada, [2000] O.J. No. 3589 (Ont. Sup. Ct.). Further, in Luu v. Zurich Insurance Co. (1997), 32 O.R. (3d) 807 (Ont. Ct. Gen. Div., Div. Ct.), Saunders J., without expressing a definitive view, said (at pages 809-10) that the interests of consistency favoured the correctness standard. While the Court of Appeal reversed and upheld the arbitrator's decision, it did so "whether the standard of review is patent unreasonableness or correctness": (1999), 43 O.R. (3d) 484, per Finlayson J.A. (Ont. C.A.).
[104] In my opinion, the scale is tipped decisively in favour of correctness review by the fact that the Copyright Board's interpretation of provisions of the Copyright Act in dispute here are not within its exclusive domain, but may arise in court proceedings other than judicial review applications. This is both because the Board's expertise on these issues cannot be said to be greater than the Court's and because, in the context of the administration of this statute, judicial deference is unlikely to serve the interests of consistency, adjudicative efficiency and economy.
[105] Accordingly, in my respectful opinion, the Court was wrong in AVS, supra, to prescribe patent unreasonableness as the standard of review applicable to the Board's interpretation of those provisions of the Copyright Act that are not within the Board's exclusive domain. Taken as a whole, the scheme of the Copyright Act indicates that, on an application for judicial review, the Court should apply a standard of correctness to the Board's interpretation of those provisions of the Copyright Act that could also be the subject of infringement proceedings in the courts.
[106] Hence, this application for judicial review may be allowed for error of law if SOCAN establishes that the Board was wrong to hold that, by virtue of paragraph 2.4(1)(b), the core activities of Internet intermediaries do not constitute the communication of transmitted material. The same is also true of the Board's conclusion that the territorial reach of the Copyright Act does not extend to communications by telecommunication that are transmitted from host servers outside Canada.
[107] On the other hand, issues of statutory application to the facts as found are better left to the Board and made subject to a more deferential standard of review. The application of the Act to any given case must be decided, as the Board did, in light of the evidence relating to such matters as whether it is practicable for operators of host servers to monitor and intercept material requested by or sent to end users. The absence of a preclusive clause, as well as the legal component of the decision to be made, persuade me that simple unreasonableness, rather than patent unreasonableness, is the appropriate standard of review of the Board's decision in this case, in so far as it essentially involves the application, rather than the interpretation of the statute.
Issue 2: Did the Board err in law in its interpretation of paragraph 2.4(1)(b) of the Copyright Act?
[108] Regardless of the particular medium involved, communications to the public by telecommunication are governed in Canada by relatively short and apparently simple provisions of the Copyright Act. In contrast, in the United States, detailed legislation has been enacted to deal specifically with the liability of Internet intermediaries: see the Digital Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat. 2860, 17 U.S.C. § 512 (1998).
[109] Paragraph 3(1)(f) of the Copyright Act does not define the words, "communicate ... by telecommunication". However, a negative definition is found in 2.4(1)(b) of the definitional section of the Act. Its effect is to exclude from paragraph 3(1)(f) conduct by intermediaries that might otherwise have constituted communication by telecommunication.
[110] Accordingly, whether the typical activities of Internet access providers and host server operators constitute communication by telecommunication depends on the interpretation of paragraph 2.4(1)(b) which, for convenience, I set out again:
| 2.4 (1) For the purposes of communication to the public by telecommunication, ... (b) a person whose only act in respect of the communication of a work or other subject-matter to the public consists of providing the means of telecommunication necessary for another person to so communicate the work or other subject-matter does not communicate that work or other subject-matter to the public; and ... |
2.4 (1) Les règles qui suivent s'appliquent dans les cas de communication au public par télécommunication_: ... b) n'effectue pas une communication au public la personne qui ne fait que fournir à un tiers les moyens de télécommunication nécessaires pour que celui-ci l'effectue; ...
|
[111] Hence, three things must be established for an intermediary's activity to fall within paragraph 2.4(1)(b), and thus not to attract liability for infringing copyright by communicating a work to the public by telecommunication. First, the intermediary's activities must amount to the provision of "the means of telecommunication"; second, these means must be "necessary" for enabling another person to communicate a work to the public; and third, the activities in question must constitute the intermediary's "only act" with respect to the communication. I shall deal in turn with each element of this definition.
(i) "means of telecommunication"
[112] SOCAN submits that the Copyright Board erred in law when it held that the core activities of operators of host servers and Internet access providers do not constitute the communication by telecommunication of material transmitted to end users within paragraph 3(1)(f) of the Act. More particularly, SOCAN argues, these Internet intermediaries cannot rely on paragraph 2.4(1)(b) as a defence, because the phrase, "the means of telecommunication", cannot include the kind of services and active equipment that they provide.
[113] The principal difficulty with SOCAN's position is that it requires the Court to read into paragraph 2.4(1)(b) of the Copyright Act words that are not there, namely, "physical", or "facilities", when Parliament has used the more expansive and unmodified word, "means". It is not evident from either the language of the paragraph, or its underlying rationale, why those who supply the equipment and services that are necessary to enable others to access music on the Internet do not thereby provide the means of telecommunication necessary for the content provider to communicate the music to end users.
[114] Nonetheless, SOCAN makes two submissions in support of its argument that, properly interpreted, paragraph 2.4(1)(b) cannot include equipment and services of the kind provided by Internet intermediaries.
[115] First, it complains that the Board dealt directly with the interpretation of paragraph 2.4(1)(b) without first determining whether, but for that paragraph, the typical activities of operators of host servers and Internet access providers would amount to the communication of music to the public by telecommunication under paragraph 3(1)(f). Counsel for SOCAN argued that the Board was required to take this step because, if it found that these Internet intermediaries were communicating in breach of paragraph 3(1)(f), it was bound to interpret paragraph 2.4(1)(b) narrowly, since it is a statutory exemption from liability for those whose activities would otherwise be an infringement of copyright.
[116] I do not agree. Paragraph 2.4(1)(b) is in my view simply part of the definition of the phrase "communicating by telecommunication", and is intended to clarify what might otherwise be an uncertainty about the scope of the word "communicate". Even without this paragraph, it could have been argued that the word "communicate" implicitly excludes merely enabling another to communicate. That paragraph 2.4(1)(b) should be regarded as definitional, rather than as an exemption, is also suggested by its location in the definitions section of the Copyright Act. Hence, paragraph 2.4(1)(b) should not be given a narrow interpretation as an exemption from liability for copyright infringement.
[117] In any event, even if paragraph 2.4(1)(b) were properly regarded as an exemption from the liability imposed by paragraph 3(1)(f), it would still not be justifiable to substitute the narrower word "facilities" for the broader word "means", or to read into paragraph 2.4(1)(b) the adjective, "physical", as a modifier of the noun, "means".
[118] Counsel for SOCAN argued that, since the underlying purpose of copyright legislation is to provide authors and artists with a legal protection that did not exist at common law, any limitations on the right should be construed narrowly. However, in my opinion, the existence of this purpose does not justify interpreting a statutory provision in a way that is inconsistent with the language in which it is couched. As McLachlin J. (as she then was) said in Bishop v. Stevens, [1990] 2 S.C.R. 467, at paragraph 22, a case that also concerned the meaning of a provision of the Copyright Act, "The interpretation of a statute must always begin with the ordinary meaning of the words used ... ."
[119] In any event, although originally enacted to provide a statutory protection to intellectual property rights that the common law did not recognize, the Copyright Act is not concerned exclusively with advancing the interests of writers, composers, artists and other creative people. As Binnie J. said in Galerie d'Art du Petit Champlain Inc. v. Théberge, 2002 SCC 34, at paragraph 30:
The Copyright Act is usually presented as 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 (or, more accurately, to prevent someone other than the creator from appropriating whatever benefits may be generated). ...
Hence, its provisions should be interpreted with an eye to striking an appropriate balance between these competing interests.
[120] Second, counsel for SOCAN submitted that paragraph 2.4(1)(b) should be interpreted in light of the fact that it was intended to protect traditional common carriers from liability for the content of the communications that they transmitted. The services and facilities provided by Internet intermediaries are quite unlike the purely passive physical facilities provided by traditional common carriers, such as poles, cables and wires. On the other hand, he was prepared to concede that routers, the "backbone" or infrastructure of the Internet, were analogous to the physical means of telecommunication that paragraph 2.4(1)(b) was intended to cover. Further, counsel argued, operators of host servers and Internet access providers are in the business of selling their services to subscribers. Knowledge of the content available on the Internet, including "free" music, and of end users' interest in accessing it, are powerful inducements for end users to sign up with access providers, and content providers with operators of host servers.
[121] There may well be differences between the equipment and services provided by Internet service providers and the physical telecommunications equipment typically associated with traditional common carriers. However, the question is whether the differences are legally relevant in this context.
[122] No doubt, SOCAN is correct to argue that paragraph 2.4(1)(b) was inserted with traditional common carriers in mind. However, this is because, when the paragraph was added to the Act in 1997, the potential of the Internet as a medium for the transmission of music and other copyright works was not fully appreciated. Where its language and underlying rationale permit, legislation should be interpreted in a way that takes account of technological developments.
[123] For their part, Internet service providers claim that the services and equipment that they provide to enable individuals to make available, and to obtain access to, material on the Internet, are like the traditional physical facilities necessary for other forms of telecommunication. In particular, the role of Internet intermediaries is passive, because they do not have the practical capacity to exercise control over the content of the material that is transmitted. Consequently, their activities should be regarded as constituting only the means of telecommunication.
[124] In my opinion, the Board was correct to conclude that the word, "means", is capable of describing a wider range of services and equipment than those provided by traditional common carriers. Accordingly, it should not be given the narrow interpretation urged by SOCAN. An important indicator that a person is providing the means to enable others to communicate by telecommunication is that the person lacks the practical ability to control and monitor content, and hence plays only a passive role in the communication.
[125] Having correctly directed itself in law that paragraph 2.4(1)(b) requires it to have regard to the issue of passivity, the Board had to decide on the evidence before it whether the equipment and services typically supplied by operators of host servers and Internet access providers have a sufficiently passive role in the transmission of data that their only act is to provide the means of enabling others to communicate by telecommunication. Since the Board's determination of this issue is specific to these parties and to this proceeding, it falls at the statute-application end of the spectrum and, hence, is reviewable only for unreasonableness.
(ii) "necessary"
[126] Like Parliament, the Board did not define when an activity constitutes the means necessary for enabling a work to be communicated by another person. However, in its reasons for decision (supra, at page 452), the Board did state:
[A]n Internet intermediary is not precluded from relying on paragraph 2.4(1)(b) simply because it provides services that are ancillary to providing the means of telecommunication or because it performs certain steps or procedures (such as caching) to improve performance.
[127] The question is whether the Board misinterpreted "necessary" when it held that it extended to an activity that merely improves the quality of Internet communication. A cursory examination of some dictionaries reveals that "necessary" has a range of meanings.
[128] For example, The New Shorter Oxford English Dictionary (Oxford: Clarendon Press, 1993) reports only a relatively strict meaning of "necessary"; the synonyms given include, that which is "indispensable", "requisite" or "essential". However, Black's Law Dictionary, 6th ed. (St. Paul, Minn.: West Publishing, 1990) states that the word, "necessary", "must be considered in the connection in which it is used, as it is a word susceptible of various meanings", ranging from "absolute physical necessity" to "reasonably useful" and "of greater or lesser benefit or convenience". Since Black's is concerned to provide the meanings of words when used in legal contexts, it might be thought particularly persuasive. However, the entry for "necessary" has disappeared from the seventh edition, published in 1999.
[129] The equivalent word in the French text of paragraph 2.4(1)(b) is "nécessaires". The synonyms for "nécessaire" given by Le Nouveau Petit Robert (Paris: Les Dictionnaires Robert, 1996) include, "indispensable" and "essentiel", which have the same meaning as the synonyms for "necessary " in the Shorter Oxford. However, Le Petit Robert also includes "utile", which indicates that "nécessaire" can be used in a less stringent sense that parallels Black's report that, depending on the particular legal context in which it appears, synonyms for the word, "necessary", can include "useful" or "of benefit".
[130] Given that, on the evidence of the sixth edition of Black's Law Dictionary and Le Petit Robert , the words "necessary" and "nécessaires" can be used to mean something less than "essential" or "indispensable", the statute must be consulted for an indication of the particular shade of meaning in which Parliament used the words in paragraph 2.4(1)(b).
[131] An argument for adopting a more permissive interpretation is that, given the rapid and recent development of Internet communication, the Act should not be interpreted in a way that would obstruct improvements in the quality of Internet communication, or reductions in the price at which data can be made available, made possible by rapid and fundamental technological advances. On the other hand, a relatively strict interpretation of "necessary" may be indicated by the fact that paragraph 2.4(1)(b) reduces the range of potential sources from whom authors and composers can recover a royalty for the unauthorized communication of their work by removing entities that benefit commercially from the availability on the Internet of copyright music, virtually free of charge to the end user.
[132] On the basis of all these considerations, I have concluded that the words "necessary" and "nécessaire" are normally understood in ordinary speech in a relatively strict sense, but that in some contexts they can bear a more relaxed meaning. In my opinion, the context of paragraph 2.4(1)(b), including the existence of the competing policy considerations outlined above, does not justify interpreting "necessary" in paragraph 2.4(1)(b) in a sense that is at odds with its most familiar meaning. Hence, a person provides only the means of telecommunication necessary for another person to communicate when, without that person's activity, communication in that medium of telecommunication would not be practicable or, in all probability, would not have occurred.
[133] Whether something is "necessary" for the purpose of paragraph 2.4(1)(b) should be determined when the transmission of material from the server occurs, and not when the content provider chooses the means through which to communicate. When the content provider has posted music on a host server, the operator of the host server is then providing the means necessary to enable the content provider to communicate by telecommunication with end users, because, without the disk space provided by the operator of the host server, the end user's request could not be answered. It is irrelevant that the content provider might have chosen other, possibly less convenient, means of communicating the music, such as radio or television, or might have made it available on the hard drive of his or her own Internet-accessible computer. Consequently, I am not persuaded that the Board erred in law on this issue.
[134] However, in my opinion the Board did err in law when it held (supra, at page 452) that an Internet intermediary who caches material is thereby providing the means necessary for another to communicate it. The Board's reasons for this conclusion were that the cache is used to improve Internet performance and its operation by an intermediary is an activity that is ancillary to communication by the content provider.
[135] In my opinion, however, the fact that the cache enhances the speed of transmission and reduces the cost to the Internet access provider does not render the cache a practical necessity for communication. Desirable as these features may be, they do not justify giving the word "necessary" a broader meaning than it normally bears, especially when this would further erode copyright holders' right to be compensated for the use of their works by others. The relevant meaning of "necessary" was more accurately captured by the Board when it said (supra, at page 452) that paragraph 2.4(1)(b) includes not only the routers, but all the equipment and services "without which [Internet] communication would not occur".
[136] Moreover, even the Board had not clearly misdirected itself on the meaning of "necessary" in paragraph 2.4(1)(b), a finding that the operation of a cache is necessary would have been an unreasonable application of the statute to the facts and hence erroneous in law. The evidence did not indicate that, without a cache, the transmission of music from certain Web sites would have been so slow that end users were unlikely to have requested that the music be communicated to them, or so expensive that the cost to Internet access providers of transmitting material from them would have made the communication of music from some sites economically unfeasible. To the contrary, the evidence was that caches are used relatively infrequently to transmit music.
[137] Finally, the operation of a cache could not be a practical necessity for communication by others, because, even after frequently requested material has been cached, an end user can always set the browser on his or her computer to ensure that material requested from a Web site is transmitted directly from the original host server, and not the cache. End users may do this to ensure that they have the most up-to-date information; when new information is added to a Web page, the cache is not necessarily also updated.
[138] If operating a cache is not protected by paragraph 2.4(1)(b), the question remains whether the operator of a cache communicates by telecommunication to end users the material that is transmitted to them from the cache, and thereby infringes the exclusive right of the author or composer to communicate a musical work to the public. In my view it does, because the cache operator selects which material will be cached, and programmes the computer to transmit it from the cache when it is requested. The operator of a cache is thus not merely a passive transmitter of data.
[139] Caching is no doubt a relatively minor adjunct to the core activities of Internet service providers which, as the Board correctly found, do not amount to the infringement of copyright. Accordingly, it would be open to the Board to take this consideration into account at Phase II of the hearing in Tariff 22 when fixing the quantum of the royalty payable with respect to particular infringing activities. Thus, if an Internet access provider only cached 1% of the material accessed by its customers, it might be required to pay a royalty that reflected that only a very small proportion of all its Internet communication-related activities were infringing.
(iii) "only act"
[140] The third requirement to be satisfied for an intermediary to fall within paragraph 2.4(1)(b) is that its only act with respect to a communication consists of providing the means of telecommunication necessary for that communication to occur. Thus, if an Internet access provider was acting in concert with content providers or was operating a cache, its activities respecting those communications would be removed from the shelter provided by paragraph 2.4(1)(b).
[141] The Board held that an Internet intermediary's activities are still only the means of telecommunication when they are ancillary to its provision of the necessary means of telecommunication by others, provided that these additional activities do not themselves amount to communication. Thus, operators of host servers do not lose the protection of paragraph 2.4(1)(b) by providing their normal facilities and services, such as, housing and maintaining the servers, and monitoring "hits" on particular Web pages, because these are merely ancillary to the provision of disk space and do not involve any act of communication, regardless of the limits on the definition of communication contained in that paragraph. I agree with this.
[142] In contrast, operating a cache is not within paragraph 2.4(1)(b), because, as we have seen, a cache is not necessary to enable another to communicate. In addition, when operated by an Internet access provider, a cache may also take its operator outside the protection of the paragraph because operating a cache is communicating, and the Internet access provider's activities in respect of that particular communication are no longer related only to the provision of the means of telecommunication necessary for communication by others.
Issue 3: Did the Board commit a reviewable error when it concluded on the evidence before it that, for the purpose of paragraph 2.4(1)(b), the services and equipment typically supplied by operators of host servers and Internet access providers constituted only the means of telecommunication necessary for enabling another so to communicate?
[143] SOCAN contends that the evidence before the Board indicates that the equipment and services provided by operators of host servers and Internet access providers enable them to exercise a degree of control over the content transmitted. Hence, the Board erred when it held that the equipment and services typically provided by Internet intermediaries were essentially the wires used by telephone companies for enabling telephonic communication to occur.
[144] In my opinion, there was ample evidence before the Board to justify its conclusion that operators of host servers and Internet access providers do not effectively control the content of what is transmitted, that their role is passive and that therefore their activities usually consist only of the provision of the means of telecommunication for the purpose of paragraph 2.4(1)(b), properly interpreted.
[145] For example, there was unchallenged evidence that, given current technology, it is not economically feasible to prevent the transmission of material on a server whenever it is requested: servers are programmed to transmit on-demand whatever is requested. It is true that contracts between host server operators and content providers may stipulate that particular kinds of content, such as copyright material, may not be posted on the server, and that offending material can be removed when it comes to the attention of the server operator. However, this limited kind of contractual and after-the-fact control over content is not sufficient to deprive the Board's conclusion of a rational basis.
[146] Similarly, the evidence was that, while perhaps theoretically possible, it is not practicable for Internet access providers to "read" and, in effect, to block requests from end users for copyright material, nor to screen out copyright material from being transmitted over their routers to the end user, without slowing to an unacceptable extent the transmission of data. While Internet access providers can block access to certain addresses, this is expensive and, as a method of screening out copyright music, ineffective, because the addresses of servers storing such music can be readily changed. Further, the Internet access provider's router does not even reassemble the packets of data into which music is broken for transmission on the Internet. This operation is performed by the end user's computer.
[147] Thus, on the facts found, it was far from unreasonable (let alone patently unreasonable) for the Board to conclude that the normal activities of host server operators and Internet access providers fall within paragraph 2.4(1)(b).
[148] On the other hand, for reasons given above, the Board's conclusion that operating a cache is necessary for another person to communicate was based on an erroneous interpretation of paragraph 2.4(1)(b). This tainted the Board's conclusion that transmitting music from a cache was not communicating for the purpose of the Act: Housen v. Nikolaisen, supra, at paragraphs 33-35. On what is in my view the correct interpretation of "necessary" in paragraph 2.4(1)(b), it was not open to the Board on the evidence before it to conclude that operating a cache is necessary to enable others to communicate by telecommunication.
Issue 4: Did the Board err in failing to conclude that, in providing their core services and equipment, Internet intermediaries "authorize" the communication of material requested by end users from host servers?
[149] SOCAN submits an alternative argument in the event that the Court upholds the Board's conclusion that providing Internet access does not constitute "communication" by virtue of paragraph 2.4(1)(b). The argument is that Internet intermediaries authorize content providers to communicate copyright material from the host servers.
[150] Authorizing a communication by telecommunication is a discrete infringement under subsection 3(1) (Compo Co. Ltd. v. Blue Crest Music Inc., [1980] 1 S.C.R. 357, at page 373). Further, paragraph 2.4(1)(b) does not apply to the act of authorizing any of the infringing acts set out in sub section 3(1), including the communication by telecommunication of a copyright work. Thus, even though the core activities of operators of servers and Internet access providers do not constitute communication by virtue of paragraph 2.4(1)(b), they may still be required to pay a royalty if they can be said to be authorizing the content provider to communicate the material.
[151] I have not found the Board's analysis of the authorization issue easy to follow. The Board held, first, that, by posting material on the Internet, the content provider authorized its communication to end users who requested it: supra, at pages 455-57. This conclusion has not been challenged. Nonetheless, since the content provider has been held to communicate the material when it is requested and received by an end user, nothing is likely to turn on whether, by making the material available on the Internet, the content provider is also liable for authorizing its communication.
[152] The Board did not deal at any length with the second authorization issue: by providing the means of communication, do Internet intermediaries thereby authorize content providers to communicate the material to end users? The Board did not come to any definitive conclusion on this question, which it regarded as looking at the issue "from the wrong end of the telescope" (supra, at page 458), and as unimportant in light of its interpretation of paragraph 2.4(1)(b). I understand the Board's reference to "the wrong end of the telescope" to mean that it thought that the proper question was whether the content provider was authorizing the Internet intermediaries to communicate, and not vice versa.
[153] On the other hand, I do not understand why the Board thought that its analysis of paragraph 2.4(1)(b) made it unnecessary to consider fully whether Internet intermediaries can be said to authorize content providers to communicate. Paragraph 2.4(1)(b) does not shelter content providers, nor those who, while not themselves communicating, are authorizing others to communicate to the public. Hence, if the activities of either Internet access providers or host server operators constitute the authorization of communication by the content provider, and hence attract liability to pay a royalty, an important source of potential compensation would become available to copyright owners.
[154] Let me deal first with the position of Internet access providers. I fail to see how an Internet access provider, who typically has no contractual or economic relationship with content providers, can be said implicitly to authorize them to communicate material requested from a host server operated by another, simply as a result of providing its customers with connectivity to the Internet. As I have already noted, the evidence before the Board was that it is not feasible for Internet access providers to monitor and control in a systematic way the content of the material transmitted to their subscribers. It is clear, therefore, that it was open to the Board to conclude that, by performing their core functions, Internet access providers do not authorize content providers to communicate material from the Web site at the request of their customers, the end users.
[155] The position of the operators of host servers from which infringing material is transmitted is somewhat different, in that they do have a contractual relationship with the communicator, namely, the content provider. In addition, since the function of host servers is not to route material to the end user, but to store it, perhaps for a considerable time, speed is not so essential to their operation. Hence, the longer that material remains on the server, the greater the operator's opportunities to take it down. Accordingly, it might be thought that operators are in a position to exercise sufficient control over the use of their equipment that they may be held implicitly to authorize content providers to communicate the material stored on the servers.
[156] Nonetheless, it seems counterintuitive to conclude that a person who supplies the means to enable another to communicate material thereby authorizes, as opposed, say, to facilitates, its communication by that other person. The concept of "authorizing" implies that the person who is alleged to have authorized has the right to give any requisite permission. It is thus different from the notion of what is, in effect, vicarious liability used, for example, in the law of copyright infringement in the United States.
[157] Not surprisingly, therefore, courts have generally rejected the argument that the authorization of communication can be inferred merely from the supply of equipment that enables another to communicate or to perform a work: see, for example, Vigneux v. Canadian Performing Rights Society, [1945] A.C. 108 (P.C.); Muzak Corporation v. Composers, Authors, and Publishers Association of Canada, [1953] 2 S.C.R. 182 ("Muzak"). The inability of the supplier of equipment to control the use to which the equipment is put indicates that the supplier is not impliedly authorizing a communication or performance of a work.
[158] Since operators of host servers only provide the passive means for others to communicate, they are not in any real sense approving, consenting or claiming the right to permit content providers to communicate the material stored on their servers: Apple Computer Inc. v Mackintosh Computers Ltd., [1987] 1 F.C. 173, at page 211, aff'd. [1990] 2 S.C.R. 209. Thus, since it cannot be inferred from their activities that Internet intermediaries "sanction, approve or countenance" (Muzak, supra, at page 193, per Kellock J.) the communication of material stored by others on their servers, they normally cannot be said to authorize content providers to communicate infringing material.
[159] No doubt, a provision in the contract between the host server operator and the content provider prohibiting the posting of infringing material would help to make it clear that the operator does not "sanction, approve or countenance" the communication of copyright material. However, in my opinion, it would be unduly formalistic to conclude that, by omitting such a clause, the host server operator was authorizing the content provider to communicate material that he or she was storing on the operator's server. It would be equally inappropriate to regard the inclusion of such a contractual provision as conclusive proof that the host server operator did not authorize the communication of copyright material.
[160] On the other hand, since host server operators can examine the content of material posted on their servers, and remove offensive material, an implicit authorization to communicate infringing material might be inferred from their failure to remove it after they have been advised of its presence on the server and had a reasonable opportunity to take it down. Thus, in Apple Computer, supra, at page 208, the Court quoted from C.B.S. Inc. v. Ames Records & Tapes Ltd., [1982] Ch. 91 at page 110 (Eng. Ch.D.), to the effect that "... indifference, exhibited by acts of commission or omission may reach a degree from which authorisation or permission may be inferred. It is a question of fact in each case." However, the Board did not deal with these situations since SOCAN did not specifically seek to hold host server operators potentially liable to pay a royalty on such a limited basis.
[161] Whether conduct amounts to authorization is, as stated above, largely a factual question and, since the Board did not misdirect itself in law by adopting an erroneous test, its conclusion that the normal activities of the operators of host servers and of Internet access providers do not "authorize" the communication of material to the end user, including infringing material, can only be set aside on the ground of unreasonableness. In my opinion, on the evidence before the Board, it was not unreasonable for it to conclude that the normal activities of host server operators do not implicitly authorize content providers to communicate the material that they have posted on the server.
[162] I would note in this context that in some other jurisdictions, including Australia, the European Union, Japan and the United States, legislation has been enacted to shield Internet intermediaries from copyright liability in respect of material stored on their servers, unless, after receiving notice of infringing material, the operator fails to take appropriate action. Failure to remove the material may expose the host server operator to liability. See further, Consultation Paper on Digital Copyright Issues, (Intellectual Property Policy Directorate of Industry Canada and the Copyright Policy Branch of Canadian Heritage; June 22, 2001), at pages 21-28.
Issue 5: Did the Board err when it found that the Copyright Act generally does not apply to communications by telecommunication, including the Internet, that originate from outside Canada, because a communication occurs at the place from which the transmission originates?
[163] It is common ground that SOCAN is only entitled to a royalty in respect of copyright infringements that occur in Canada. Since the principal infringement relied on in this case is that of communicating copyright works to the public by telecommunication, the Board can only approve a royalty payable for the communications that occur in Canada. In addition, when liability can be founded on the basis of the authorization of a communication, the location of the authorization may have to be determined.
[164] In its short discussion of the location issue (supra, at page 459), the Board relied on Canadian Association of Broadcasters v. SOCAN (1994), 58 C.P.R. (3d) 190 (F.C.A.) ("CAB (1994)") as authority for the proposition that a communication occurs only at the place where the transmission originates. The CAB (1994) case arose from a royalty hearing in respect of the performance of music in public by television broadcasters.
[165] On the basis of this case, the Board stated that an Internet communication occurs in Canada if it originates from a server in Canada. Thus, a content provider is subject to a royalty approved by the Board if, but only if, the content is posted on a server located in Canada.
[166] The Board also held that content providers require licences from SOCAN for authorizing the communication of a musical work when they post it on a host server in Canada, but not otherwise. However, as I have already indicated, a content provider can only be liable for authorizing communication when the person authorized is engaged in activities that can amount in law to communication. Because of paragraph 2.4(1)(b), the activities in question do not include the core activities of Internet access providers or operators of host servers.
[167] In addition, the Board held that, when infringing material is stored on an original host server outside Canada, its transmission from a mirror site in Canada may also attract liability to pay a royalty approved by the Board. Similarly, if a hyperlink is inserted in a Web page posted on a server outside Canada which takes the end user to a site on a server located in Canada, a transmission from that linked site is a communication in Canada. Conversely, it presumably follows from the Board's reasoning that, if the original site is in Canada, and the linked site is not, a transmission from the linked site would not be a communication in Canada.
[168] On the other hand, the Board concluded that the operation of a cache by an Internet access provider is irrelevant to the location of a communication, which continues to depend on the location of the original host server or of a mirror site. Unlike a mirror site, a cache can be operated without the knowledge or consent of the content provider, although the content provider can prevent caching by inserting the appropriate data in the Web page. Consequently, the Board reasoned, when material posted on a Web page on a host server outside Canada is temporarily stored on a cache located in Canada, the content provider has not thereby authorized its communication in Canada. Moreover, when material requested by an end user from a Web site located on an out-of-Canada host server is transmitted from a cache in Canada, it is not communicated in Canada and cannot be made subject to a royalty payable to SOCAN.
[169] The Board qualified its conclusion in one respect. It left open the possibility (supra, at page 460) that content stored on a host server outside Canada might be found to be communicated in Canada if the material was aimed specifically at end users in Canada. However, there was no evidence before the Board of the existence of such situations.
[170] In my opinion, in ruling that a communication by telecommunication occurs at the place from which the transmission originates, the Board was determining a general question of law that was not confined to the facts of the case before it and, hence, its ruling is reviewable in this Court on a standard of correctness.
[171] The Board was also deciding a general question of law when it held that the principle that a communication occurs at the place of transmission locates a communication on the Internet at the site of the host server where the communicated material is stored. In so ruling, the Board was clearly purporting to decide an issue that was not confined to the evidence before it in this particular case. As with other general questions of law decided by the Board, the applicable standard of review is correctness.
[172] As I have already indicated, the Board relied solely on the decision in CAB (1994), supra, a case concerning television broadcasters, for the proposition that communications by telecommunication occur at the place of origin of the transmission. However, in my opinion, this case does not support the Board's conclusion.
[173] First, CAB (1994), supra, involved a ruling by the Board that a performance occurs at the time of its transmission, irrespective of whether and when viewers watch it. In the case at bar, the question concerns the location of the communication, not its timing. This is an issue that the Court in CAB (1994), supra, simply does not address. Whether CAB (1994), supra, should be regarded as inferentially determining the location of an Internet communication can only be decided after a more extensive consideration of the underlying question in dispute.
[174] Second, a performance, with which CAB (1994), supra, was concerned, is not necessarily the same as a communication, which is the act at issue in the case at bar. In Tariff 22, the Board reasoned (supra, at page 449) that, just as a performance can exist even when no one watches it, so a communication on the Internet can occur even if the recipient does not see or hear it. This may be true in the sense that, even when end users receive data in a form that requires them to open the file to listen to the music after downloading it onto their hard drive, the music is communicated when it is received on the computer of the end user who requested its transmission, whether or not it is in fact ever heard.
[175] In my opinion, however, the very notion of communication requires a communicator and an intended recipient, in this context, the end user who has requested and received the material on her or his computer. As McIntyre J. said in Goldman v. The Queen, [1980] 1 S.C.R. 976, at page 995: "A communication involves the passing of thoughts, ideas, words or information from one person to another." In contrast, a performance does not necessarily imply an audience separate from the performers; the performance of music purely for the pleasure of the performer is a very familiar idea.
[176] Thus, apart from the absence of authority supporting the Board's conclusion, these considerations strongly suggest that the location of the communication should not be determined solely by that of the host server, especially since, as the Board itself found, the Internet communications under consideration here are only ever effected at the request of the end user.
[177] In addition, a test that determines the location of an Internet communication without regard to the fact that the end user of copyright material is in Canada would seem inconsistent with one reason why the Copyright Act protects copyright owners from infringements in Canada, namely, the protection of the economic value of authors' work in the Canadian market. This is because an end user in Canada who receives copyright music over the Internet may be less likely to purchase a recorded copy of it. Hence, since no infringement occurs in Canada if the server is not in Canada, the Board's decision provides SOCAN's members with relatively little by way of compensation for a potential loss of music sales in the Canadian market as a result of the receipt in Canada of copyright music on the Internet.
[178] For these reasons, I am not prepared to infer from the decision in CAB (1994), supra, the principle that an Internet communication occurs only at the location of the server on which the infringing material is stored.
[179] The Board's conclusion that an Internet communication only occurs at the location of the host server does not necessarily deny Canadian composers a royalty in respect of music transmitted to an end user in Canada from a server located in, for example, the United States. This is because SOCAN has reciprocal arrangements with sister organizations in the United States, and other countries, with which it can agree on an allocation of royalties with respect to cross-border Internet transmissions.
[180] However, the Board's decision may have the effect of denying a royalty to the owners of other intellectual property rights. For example, the rights of performers and of sound recording makers are recognized in Canada, but not universally. On the Board's theory of the location of Internet communications, these persons would be deprived of a right to a royalty in respect of music posted on servers located in a jurisdiction that does not recognize their intellectual property rights. In the absence of any universally agreed basis or mechanism for the collection and distribution of royalties for music internationally transmitted on the Internet, any test adopted in one country may potentially lead to the imposition of either double royalties or no royalty.
[181] Indeed, the Board itself recognized the potential double royalty problem when it said (supra, at page 466, note 53) that a communication originating in Canada, and thus, on the Board's analysis, subject to a royalty in Canada, may also constitute an infringement of the exclusive communication right in the jurisdiction where it is received. Moreover, if music is posted on a server located in a jurisdiction that does not provide copyright protection, then, on the test adopted by the Board for locating Internet communications, a royalty would not be payable anywhere in respect of music transmitted to end users in Canada. Ultimately, the satisfactory resolution of these trans-border problems will require supranational solutions at either government or industry levels, or both.
[182] Parliament may find it necessary to amend the Copyright Act to make express provision to deal with this and other particular copyright problems raised by the Internet, as it has done in the past in response to other technological advances, commercial developments and international agreements, such as cable and satellite television, the sale of blank tapes and compact discs, and the North American Free Trade Agreement.
[183] Indeed, active consideration is already being given by the Government to the implications for domestic copyright law of two important treaties concluded in 1996 by the World Intellectual Property Organization, the Copyright Treaty (WCT) and the World Performances and Phonograms Treaty (WPPT), which, among other things, deal with copyright and related issues arising from networked technologies: see, for example, Consultation Paper on Digital Copyright Issues, supra. Legislative reforms of copyright law to implement provisions in these treaties have already been enacted in the United States (Digital Millennium Copyright Act), in Australia (Copyright Amendment (Digital Agenda) Act, 2000) and in the European Union (Directive 2001/29/EC).
[184] Meanwhile, in the absence of any directly relevant judicial authority or statutory provisions, or of much guidance from the Board on an issue that was apparently not of paramount importance when it was considering Tariff 22, the Court must undertake its own analysis and fashion as best it can a rule that has regard to the policy of the Copyright Act and other legal contexts raising somewhat analogous issues.
[185] As already indicated, the principal infringing activity in this case is communication by the content provider, copyright material is not communicated until it is received on the end user's computer, and the location of the host server cannot alone determine where the communication occurs. The question remains: what test for locating the communications under consideration here would be most consistent with the policy of the Copyright Act and other legal principles?
[186] In my view, a royalty may be made payable in Canada in respect of communications by telecommunication that have a real and substantial connection with Canada. I would also apply the real and substantial connection test to locating the infringing activity of authorizing a communication that occurs when a content provider posts copyright material on a host server.
[187] A real and substantial connection test is also used in other legal contexts to decide questions involving more than one jurisdiction. For example, it is used to determine whether a court has and will exercise jurisdiction to adjudicate a claim arising from a tort that has foreign elements: Moran v. Pyle National Ltd., [1975] 1 S.C.R. 393; Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077.
[188] Thus, in Braintech Inc. v. Kostiuk (1999), 171 D.L.R. (4th) 46 (B.C.C.A), the Court refused to enforce the judgment of a Texas court awarding damages in respect of information posted on an Internet bulletin board, in the absence of evidence of a real and substantial connection between the action and Texas. In particular, the court noted that there was no evidence that anyone in Texas had seen the offending material. Similarly, in Gutnick v. Dow Jones & Co Inc., [2001] V.S.C. 305 (Sup. Ct. Vic.), the Supreme Court of Victoria in Gutnick, supra, applied a real and substantial connection test to conclude that it was the appropriate forum for deciding a defamation action in respect of material uploaded onto the defendant's server in New Jersey and downloaded by end users in Victoria.
[189] In addition, the test was used in WIC Premium Television Ltd. v. General Instrument Corp. (2000), 8 C.P.R. (4th) 1 (Alta. C.A.), where the statement of claim alleged, among other things, that the defendants' transmissions from the United States that reached Canada breached the plaintiff's copyright. Service on the out-of-country defendants was permitted, on the ground that the plaintiff's action had a sufficiently real and substantial connection with Alberta to justify the Court in asserting jurisdiction over the defendants.
[190] A real and substantial connection test has been used to determine if a criminal transaction falls within Canada's territorial jurisdiction: see, for example, in R. v. Libman, [1985] 2 S.C.R. 178. And, in Canada (Human Rights Commission) v. Canadian Liberty Net, [1998] 1 S.C.R. 626, a "real and substantial connection to Canada" test was applied to determine whether the Canadian Human Rights Commission had jurisdiction when a recorded message on a telephone number in Canada referred callers to a New York number where an alleged hate message could be heard.
[191] In my opinion, therefore, the Copyright Board erred in law when it ignored all connecting factors other than the location of the host server for the purpose of identifying communications that occur in Canada and can therefore attract liability to pay a royalty to SOCAN. No doubt some latitude should be given to the Board to determine, case-by-case, how to apply the real and substantial connection test. The most important connecting factors will, I assume, normally be the location of the content provider, the end user and the intermediaries, in particular the host server. However, such a connection will surely exist when each of the end nodes, namely the content provider, the communicator of the material, and the end user, is in Canada.
[192] Indeed, I would go further and say that, since the policy of the Act is to protect copyright in the Canadian market, the location of the end user is a particularly important factor in determining if an Internet communication has a real and substantial connection with Canada. On the other hand, in the absence of an end user, the location of the server will be a weightier factor in determining whether the authorization of a communication has a real and substantial connection with Canada. The real and substantial connection test is also applicable to communication from caches and hyperlinks; the location of a cache or a linked site from which material is transmitted will provide an additional potentially connecting factor.
F. CONCLUSIONS
[193] For these reasons, I would dismiss the application, except with respect to those parts of the Board's decision holding that transmission from a cache is protected by paragraph 2.4(1)(b) and that a communication by telecommunication occurs in Canada if, but only if, the communication originates from a host server in Canada. I would set aside those parts of the decision of the Board and direct the Board to act in accordance with these reasons when setting royalties in Phase II of Tariff 22.
[194] In view of the novelty, difficulty and public importance of the issues raised in this application, as well as the parties' divided success, I would not award any costs.
"John M. Evans"
J.A.
"I agree
A.M. Linden"
SHARLOW J.A. (dissenting in part)
[195] I agree with the reasons of my learned colleague Evans J.A., except on the meaning of "necessary" in paragraph 2.4(1)(b) of the Copyright Act. I reproduce that provision for ease of reference:
| 2.4(1) For the purposes of communication to the public by telecommunication, |
2.4(1) Les règles qui suivent s'appliquent dans les cas de communication au public par télécommunication_: |
| [...] |
[...] |
| (b) a person whose only act in respect of the communication of a work or other subject-matter to the public consists of providing the means of telecommunication necessary for another person to so communicate the work or other subject-matter does not communicate that work or other subject-matter to the public [...]. |
b) n'effectue pas une communication au public la personne qui ne fait que fournir à un tiers les moyens de télécommunication nécessaires pour que celui-ci l'effectue [...]. |
[196] According to the evidence before the Board, the capacity of the Internet is vast but not unlimited. The function of caching is to enhance the speed and efficiency of Internet communications. Thus, caching improves Internet communications, even if there are particular Internet communications that occur without caching because of a choice made by the originator or the recipient. Based on that evidence, the Board characterized caching as an activity that is ancillary to Internet communication, and concluded that an Internet intermediary whose only activity is to provide caching is entitled to the protection of paragraph 2.4(1)(b). In my view, that conclusion is correct.
[197] The word "necessary" in legislation that is intended to describe the technology of communication must be interpreted with enough flexibility to recognize incremental technological improvements. It seems to me that in the context of paragraph 2.4(1)(b) of the Copyright Act, something should be considered necessary for communication if it makes communication practicable or more practicable, which is the meaning that the Board has implicitly adopted. To insist, as Evans J.A. does in paragraph 135 of his reasons, that something is necessary for a communication only if it is something without which the communication probably would not occur, is to set the bar too high.
"K. Sharlow"
J.A.