You can Google it: Supreme Court of Canada grants leave to appeal global injunction

Alex Sarabura - 

The Supreme Court of Canada has granted leave to hear an important case respecting the ability of Canadian courts to enjoin the behaviour of organizations with respect to their operations outside of Canada.

On February 18, 2016, the Supreme Court of Canada granted Google Inc. leave to appeal the judgment of the British Columbia Court of Appeal in Equustek Solutions Inc. v. Google Inc., in which the BCCA upheld an interlocutory injunction prohibiting Google from including specific websites in its search results worldwide.

The plaintiff’s request for the injunction against Google arose from a lawsuit in which the plaintiff alleged that the defendant was passing off its goods as those of the plaintiff.

After the plaintiff commenced the proceeding, the defendant left BC while still selling the knock-off goods over the internet, relying on search results to reach customers.  The plaintiff alleged that it lacked an effective way of stopping the defendant’s conduct, and sought an interlocutory injunction prohibiting Google from displaying the defendants’ websites in its search results anywhere in the world.  The Supreme Court of British Columbia deemed the injunction necessary to ensure that the orders against the defendants were effective, and granted the injunction.

Google appealed, arguing that the injunction represented an impermissible exercise of extra-territorial jurisdiction; improperly ensnared an innocent third-party (Google); and exceeded the Court’s jurisdiction.  Google also argued that the injunction violated Google and the public’s right to freedom of expression.

The BCCA rejected every one of Google’s arguments:

  • The Court found that it had jurisdiction over Google, both because the underlying action was connected to BC and because Google conducted business in BC (in response to Google’s concern that this meant that Google conducted business everywhere, the Court responded that if so, it was because of Google’s business model and was therefore Google’s problem);
     
  • The Court found that it had the right to act globally, both based on historical precedent, and because doing so would not offend international comity;
     
  • The Court found that the fact that Google was a third-party didn’t allow it to avoid the Court’s reach, based on precedent related to Norwich orders (whereby third‑parties are ordered to provide assistance to the Court); and
     
  • The Court dismissed Google’s arguments related to free speech, asserting that speech designed to allow the infringement of intellectual property would rarely be protected.

In seeking leave to appeal, Google generally argued that the BCCA did not focus sufficiently on the public interest, particularly in respect of freedom of speech.  Beyond that, Google highlighted three issues raised by the BCCA decision.

  1. When should a court be able to block search results, given the importance of freedom of expression, and what limits should be imposed?
     
  2. Do Canadian courts have the authority to block extra-jurisdictional search results?
     
  3. When is a litigant entitled to an interlocutory injunction against an innocent third-party?  Should the current approach to granting injunctions against parties to litigation be properly applicable to non-parties to the litigation?

It is not clear why the SCC granted leave; however, it is interesting to note that the BCCA decision came out before the SCC’s decision in Chevron Corp. v. Yaiguaje, in which the SCC considered the scope of Canadian courts’ jurisdiction (albeit in the context of an action to enforce a judgment).  It is possible that the SCC will take the Google appeal as an opportunity to further clarify Chevron; it is also possible that the SCC simply sees a need to craft jurisdictional guidance for the internet age.  Whatever the result, both intellectual property owners and internet-based organizations will be watching closely.

Supreme Court of Canada addresses important issues in Canadian Copyright Law

Justine Whitehead and Gina Demczuk -

On December 23, 2013, a unanimous Supreme Court of Canada issued its decision in Cinar Corporation v Robinson. The decision provides clarification on a number of important issues in Canadian copyright law, including (but not limited to): (i) the appropriate test for determining if a substantial part of a copyrighted work has been reproduced; (ii) when expert evidence in respect of substantial taking should be adduced in copyright infringement cases; and (iii) several issues in respect of the calculation of damages and accounting of profits.

The Supreme Court decision is the last word in a case that has its genesis in actions undertaken decades ago. Claude Robinson began developing an idea for a children’s television show, The Adventures of Robinson Curiosity (Curiosity), in the early 1980’s. He spent more than a decade after that trying to get the project developed. During this time, Robinson shared his work (which included detailed sketches, storyboards, scripts and synopses), with several of the individual and corporate defendants (including Cinar Corporation).

In 1995, Robinson watched the first episode of a new children’s television show called Robinson Sucroë (Sucroë). He was stunned to see that the program was (in his view) “a blatant copy” of Curiosity.  He then found out that several parties to whom he had given access to his Curiosity project materials were involved in the production of Sucroë, and Robinson and his production company (Les Productions Nilem Inc.) commenced an action for copyright infringement.

Robinson was largely successful at trial: the trial judge concluded that the creators of Sucroë had infringed Robinson’s copyright and awarded damages and costs on a solicitor-client basis.  The decision on infringement was upheld by the Court of Appeal, but some changes were made to the damages awards. The Supreme Court of Canada also upheld the copyright infringement claim, but made some changes to the damages awards. A summary of some of the key parts of the Supreme Court’s decision in respect of the further appeals from the Quebec Court of Appeal is set out below.

The Test for Copyright Infringement

Copyright infringement occurs when a copyrighted work, or any substantial part of a copyrighted work, has been reproduced without the consent of the owner of the copyright. In considering what constitutes a “substantial part” of a work, the Supreme Court noted that it is a “flexible notion”, which is “a matter of fact and degree”.  In fact, the Copyright Act protects authors against both literal and non-literal copying, so long as the copied material forms a substantial part of the infringed work. However, the Supreme Court again cautioned about the need to strike an appropriate balance between giving appropriate protection to the skill and judgement of authors in their expression of ideas, and leaving ideas and elements in the public domain free to all to draw upon.

The trial judge had found that the Cinar appellants copied a number of features from Curiosity, including the character’s visual appearance, personality traits of the main character and other characters in the series, visual aspects of the setting, and recurring scenographic elements. He concluded that, considered as a whole, these features constituted a substantial part of Robinson’s work.

The Supreme Court noted that the trial judge’s conclusion on that point was entitled to appellate deference, since the issue of substantiality is one of mixed fact and law.  Following its decision in Housen v. Nikolaisen (Housen), the Supreme Court confirmed that an appellate court should defer to the trial judge’s findings on substantiality, unless those findings are based on an error of law or palpable and overriding errors of fact. The Supreme Court held that the trial judge committed no reviewable errors in finding that Sucroë reproduced a substantial part of Curiosity

The Cinar appellants had argued that the trial judge erred in not applying a three step approach requiring him to (i) determine what elements of Curiosity  were original, within the meaning of the Copyright Act; (ii) exclude non-protectable features of Robinson’s work, such as elements drawn from the public domain, and generic elements common place in children’s television; and (iii) compare what remains of Curiosity  after this “weeding-out” process to Sucroë, and determine whether a substantial part of Curiosity was reproduced.

While not ruling out the possibility that this approach might be useful in determining if other types of works, such as computer programs, have been copied, the Supreme Court noted that many types of works do not lend themselves to that type of reductive analysis. Rather, a qualitative and holistic approach must be adopted to assess substantiality, and a piecemeal approach should be avoided. To determine whether a substantial part of Robinson’s work was copied, the copied features must be considered cumulatively, to determine whether they amount to a substantial part of Robinson’s skill and judgement expressed in his work as a whole. In short, the substantiality analysis should focus on whether the copied features constitute a substantial part of the plaintiff’s work,and not whether they amount to a substantial part of the defendant’s work. “The alteration of copied features or their integration into a work that is notably different from the plaintiff’s work does not necessarily preclude a claim that a substantial part of a work has been copied”, because the Copyright Act states that infringement includes “any colourable imitation” of a work. That said, if differences are so great that the work viewed as a whole is not an imitation, but rather a new and original work, then there is no infringement.  Adopting the words of the Court of Appeal, the Supreme Court noted that “[e]verything is therefore a matter of nuance, degree and context”.

Use of experts in a copyright case:

The Supreme Court affirmed that the test for admissibility of expert evidence from R. v. Mohan applies equally to trials for copyright infringement (and other intellectual property cases). To be admitted, the evidence must be (a) relevant; (b) necessary; (c) not offend any exclusionary rule; and (d) involve a properly qualified expert.

At trial, Robinson introduced the evidence of a professor of semiology (the study of signs and symbols and how they create meaning). The expert opined that there were latent similarities in how the two works used atmosphere, dynamics, motifs, symbols and structure to convey meaning. The trial judge relied on this evidence in finding copyright infringement.

The Cinar appellants had argued that the expert evidence did not meet the necessity criterion because the question of whether a substantial part has been copied must be assessed from the perspective of the lay person in the intended audience for the works at issue.

In holding that the expert evidence was admissible, the Supreme Court noted that it was sometimes necessary to go beyond a rigid application of the lay person standard.  Here, the works at issue were intended for a young audience. A rigid application of the standard would shift the question to whether the copied features were apparent to a five-year-old. Second, the works at issue – an unrealized submission compared to a finished product – were not easily compared without an expert’s help.  Lastly, the works had both patent and latent similarities. Expert evidence was necessary to help distill and compare the “intelligible” aspects that affect a viewer’s experience indirectly, such as atmosphere, dynamics, motifs, and structure.  As a result, the Supreme Court held that the trial judge did not err in admitting the expert evidence.

Personal Liability of Directors for Copyright Infringement

The Supreme Court affirmed prior jurisprudence of the Federal Court of Appeal that held that for a director and/or an officer of a corporation to be held personally liable for his or her company’s infringement of a copyright, “there must be circumstances from which it is reasonable to conclude that the purpose of the director or officer was not the direction of the manufacturing and selling activity of the company in the ordinary course of his relationship to it but the deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it.”  An officer cannot be held personally liable merely on the basis of his hierarchical status as officer of a corporation.

Disgorgement of Profits

Under section 35 of the Copyright Act, a defendant can be ordered to disgorge its profit to the extent that such profit is caused by the infringement.  Disgorgement of profits is designed mainly to prevent unjust enrichment, although it can also serve the goal of deterrence. The necessity of a causal link between infringement and profit may require that profit be apportioned between that which is attributable to the infringement and that which is not.  In some cases, however, the two works may be so interwoven that separation is impossible. The Supreme Court affirmed that the apportionment of profits between infringing and non-infringing components of a work is a factual determination subject to judicial discretion. Under Housen, an appellate court may only disturb a trial judge’s findings on apportionment if there are errors of law or palpable and overriding errors of fact.

The Supreme Court found that the Court of Appeal erred in interfering with the trial judge’s conclusion that the profits from the soundtrack could not be dissociated from the profits derived from the infringing material.  There was no evidence that the soundtrack could have been commercialized as a separate product if Curiosity had not been infringed.  As a result, the Supreme Court upheld the trial judge’s conclusion that it was inappropriate to apportion profits to the soundtrack as a non-infringing component of the work.

In contrast, the Supreme Court overturned the trial judge’s finding that profits be disgorged on a solidary basis, holding that a defendant can only be made to disgorge profits that it made, as opposed to the profits of other defendants with whom it participated in an infringement.

Non-Pecuniary Damages and the Application of the Andrews Cap

Prior Supreme Court case law in the context of bodily injury set a cap on the non-pecuniary losses that can be recovered following bodily injury.  Non-pecuniary loss is a broad category that covers elements such as loss of enjoyment of life, physical and psychological pain and suffering, and inconvenience. The Cinar appellants had argued that this cap on non-pecuniary damages should be extended and imposed on all non-pecuniary damages, regardless of whether they stem from bodily injury.  

Holding that the policy concerns specific to bodily injury cases (the socially burdensome inflation of amounts awarded as non-pecuniary damages) was not made out in the context of copyright infringement cases, the Supreme Court declined to apply a cap on the non-pecuniary damages awarded to Robinson. Moreover, the Supreme Court confirmed that damage to physical health arising as a consequence of copyright infringement is not sufficient to allow characterization of the loss as one arising from bodily injury.

Punitive Damages:

In Quebec, punitive damages can only be awarded where they are provided for by statute. In this case, the evidence established unlawful and intentional interference with several of Robinson’s Charterrights, and therefore the Supreme Court agreed with the Court of Appeal that punitive damages were justified.  However, since there was no statutory basis to justify the award of punitive damages on a solidary basis, they must be individually tailored to each defendant against whom they are ordered.

In assessing the quantum of punitive damages awarded, the Supreme Court held that the gravity of the conduct was an important factor. The award must strike an appropriate balance between the overarching principle of restraint that governs punitive damages and the need to deter conduct of this gravity. As a result, the Supreme Court overturned the Court of Appeal’s reduction in damages and increased the award to $500,000, which was still $500,000 less than the trial judge’s original award of punitive damages.

Cost Awards

The Supreme Court noted that there were serious points of law to be argued in the appeals, and therefore declined to award solicitor-client costs for the appeals before the Quebec Court of Appeal and the Supreme Court. However, the Supreme Court allowed the trial judge’s award of $1,500,000 in solicitor-client costs for the proceedings at the trial level to stand.

No dice: Supreme Court declares Alberta privacy law unconstitutional in Palace Casino case

David Elder -

In a landmark ruling, the Supreme Court of Canada has declared Alberta’s Personal Information Protection Act (PIPA) to be invalid in its entirety, finding that it infringes the freedom of expression guaranteed by the Canadian Charter of Rights and Freedoms by limiting the ability of labour unions to videotape and photograph individuals crossing a picket line.

The declaration of invalidity is suspended for a period of 12 months to give the legislature time to decide how best to make the law constitutional. In light of the “comprehensive and integrated structure” of the law, the Court decided to strike PIPA down in its entirety, rather than declare as invalid particular provisions.

The Court’s ruling was made in the case of Alberta (Information and Privacy Commissioner) v. United Food and Commercial Workers, Local 401, which iscommonly referenced as the “Palace Casino” case, as the case arose in the context of a labour dispute between the management and employees of an Edmonton casino of that name.

As we noted in a previous post, the case considered complaints made by individuals who were videotaped by the union as they crossed the picket line in front of the casino.  Like other Canadian private sector privacy laws, Alberta’s PIPA generally requires the consent of individuals for the collection, use and disclosure of their personal information, including videotaped images of identifiable individuals.  The union, which did not obtain such consent, videotaped and photographed the picket lines in order to publicize the images of individuals crossing the lines.  An Adjudicator for the Information and Privacy Commissioner of Alberta found that the union had contravened the Act, and ordered the union to stop such collection and destroy any personal information obtained in breach of the Act.

The judgement focuses in particular on the breadth of PIPA, which the Court found limits the non-consensual collection, use and disclosure of personal information without regard for the nature of the information, or the purpose or context for its collection, use or disclosure. It is this approach, which the court found “deems virtually all personal information to be protected regardless of context,” which resulted in a finding of a Charter violation, since PIPA excludes any mechanisms by which a union’s constitutional right to freedom of expression may be balanced with the privacy interests protected by the Act.

Moreover, the Court noted that picketing represents a particularly crucial form of expression, and that the restrictions imposed by the statute impaired the ability of the union to communicate with and persuade the public, one of its most effective bargaining strategies in the course of a lawful strike. As a result, the Court found that the infringement of the freedom of expression was not justified under s. 1 of the Charter.

The ruling will have significant implications for other private sector privacy laws in Canada, and particularly with the existing provincial privacy laws in British Columbia, Québec and Manitoba (although the latter is not yet in force). Implications for the federal law, the Personal Information Protection and Electronic Documents Act, which applies in the remaining provinces, are less clear, since the federal applies to the collection of personal information from the public only in the course of commercial activities, which would not appear to include the activities of a union during a labour dispute.

Supreme Court issues clear warning of need to respect the "Patent Bargain"

Ian P. Goodman -

On Thursday, November 8, 2012, a unanimous Supreme Court of Canada issued a decision with significant implications for those wishing to obtain or enforce Canadian patent rights.  Owners of issued patents seeking to enforce such rights should carefully scrutinize the disclosure and claims of their issued patents in light of this decision, and patent applicants should consider this decision when drafting the specifications of new applications.

The case of Teva Canada Ltd. v. Pfizer Canada Inc.  arose out of a Patented Medicines (Notice of Compliance) [PMNOC] proceeding in which Novopharm Limited (now, Teva Pharmaceuticals Limited) sought approval from Health Canada to market and sell a generic version of Pfizer’s Viagra-branded sildenafil tablets.  To obtain such approval, the decision-maker had to be convinced that Pfizer’s patent (the ‘466 Patent) was invalid. However, Teva was unsuccessful at both the Federal Court of Canada and the Federal Court of Appeal, each of which held that Teva’s allegations of invalidity were not justified.

Teva appealed to the Supreme Court. The primary issue on appeal was whether Pfizer complied with section 27(3) of the Patent Act and properly disclosed its invention in the ‘466 Patent.  In considering this issue, the Supreme Court reiterated the importance of a patent applicant respecting the “patent bargain”.  The essence of the patent bargain is that in exchange for a time limited monopoly granted to an inventor for a new and useful invention, the inventor discloses this invention to the public so that society can benefit from the inventor’s knowledge.  From a societal perspective, the patent bargain exchanges short term inefficiencies (the potential for “monopoly” rents for the patent rights) for long-term gains (the encouragement of efficiencies gained through innovation). However, the bargain cannot be one-sided: adequate disclosure in the specification is a precondition for the granting of a patent. 

Pfizer’s ‘446 Patent is directed to compounds for treating erectile dysfunction (ED). The claims are arranged in a cascading structure in which claim 1 is directed to over 260 quintillion compounds (i.e. 260,000,000,000,000,000,000!), claims 2 to 5 directed to gradually fewer compounds, and claims 6 and 7 each directed to a single compound.  Most importantly, claim 7 is directed to sildenafil, which is the only active ingredient in Pfizer’s Viagra product.

Section 27(3) of the Patent Act requires that the “specification of an invention must correctly and fully describe the invention and its operation or use as contemplated by the inventor…”.  The “specification” includes both the claims of a patent and the disclosure made in the patent.

The Supreme Court affirmed previous decisions that a patent specification must answer two questions: (1) what is the invention; and (2) how does it work? If the patent disclosure answers these questions, the applicant has held up his or her part of the patent bargain. More particularly, the specification must provide sufficient information to enable a person of skill in the art to which the invention relates to be able to use the invention, using only the instructions of the specification.

The Supreme Court was of the view that the lower courts erred in considering the sufficiency of disclosure (and therefore the validity) of a single claim independently of the rest of the specification. As a result, the lower Courts erroneously confused the principle that the claims of a patent define the scope of the exclusive right being sought with the principle that the content of the specification determines whether the disclosure requirements have been met. 

The Supreme Court found that Pfizer was aware through testing, as of the filing date of the ‘466 Patent, that only sildenafil was effective in treating ED, and that none of the other compounds were effective in treating ED.  Despite this, Pfizer provided no indication in its disclosure as to which one of the preferred compounds was effective in treating ED. The Supreme Court held that by failing to expressly disclose the use of sildenafil to treat ED, Pfizer did not adequately disclose the invention in its specification. 

Pfizer had argued that its specification was adequate, because one of the claims in the ‘466 Patent clearly described the use of sildenafil as effective in treating ED. The Supreme Court did acknowledge that a skilled reader would know that “when a patent contains cascading claims, the useful claim will usually be the one at the end concerning an individual compound”. However, this acknowledgement did not assist Pfizer because in the case of the ‘466 Patent, the cascading claim ended with two individually claimed compounds, thereby obscuring the true invention.  A person skilled in the art would still have to perform further testing to determine which of the two compounds was actually effective in treating ED. The Supreme Court therefore held that the specification of the ‘466 Patent did not meet the requirements of section 27(3) of the Patent Act.

This case has important repercussions when drafting a patent application. While emphasis is typically placed on the claims because they define the scope of the monopoly, this case shows that identifying the invention in the specification can be equally important, particularly in relation to pharmaceutical patents. The Supreme Court has clearly warned patent holders against “playing games” with the public by not providing a complete disclosure of the invention and therefore not upholding their end of the patent bargain.

Interestingly, the Supreme Court’s remedy was to “invalidate the patent”. Normally in an appeal of a PMNOC proceeding and given the Supreme Court’s findings, the remedy would be to deny Pfizer’s application seeking obtain a prohibition order, thereby permitting the Minister of Health to issue Teva a Notice of Compliance and thus allowing Teva to manufacture and sell sildenafil tablets.  The Court may give further directions in this respect.

Crossing the line: Supreme Court of Canada to consider balance between privacy rights and freedom of expression in picket line videotaping case

David Elder -

In an important constitutional case, the Supreme Court of Canada has granted leave to hear an appeal from a decision that found that the application of privacy law to the videotaping of individuals crossing picket lines infringed the Canadian Charter of Rights and Freedoms.

 As we noted in a previous post, the judgment in question considered the activities of a union that had videotaped picketing activity during a strike at an Edmonton casino.  Like other Canadian private sector privacy laws, Alberta’s Personal Information Protection Act (PIPA), generally requires the consent of individuals for the collection, use and disclosure of their personal information, including videotaped images of identifiable individuals.  The union, which did not obtain such consent, videotaped and photographed the picket lines in order to publicize the images of individuals crossing the lines. 

Several of the individuals in question complained to the Information and Privacy Commissioner for Alberta.  An adjudicator for the Commissioner found that in failing to obtain the consent of the individuals being videotaped, the union had violated PIPA.

The Alberta Court of Appeal found that the application of PIPA to the union’s activity in the context of a labour dispute violated the right of the union to freedom of expression guaranteed by s. 2(b) of the Charter.  The Court accordingly declared that the application of PIPA to the activities of the union was unconstitutional.

While the facts under appeal relate only to the application of Alberta’s private sector privacy law, the decision on the appeal may also affect the application of substantially similar laws in British Columbia and Québec, as well as the federal law, the Personal Information Protection and Electronic Documents Act.

The outcome of the appeal to the Supreme Court may have important implications well beyond the legality of surveillance activity in connection with picket lines, as it explores the intersection between privacy law and other conflicting rights, potentially calling into question the adequacy of the typically narrow exceptions to the consent requirement in privacy statutes.   In considering the balance between consent requirements and free expression, the appeal may also have important implications for the application of Canada’s Anti-Spam Law (not yet in force), which includes restrictive consent requirements with respect to the sending of commercial electronic messages.

See Information and Privacy Commissioner et al. v. United Food and Commercial Workers, Local 401 et al. (Alta.) (Civil) (By Leave) (34890)

Supreme Court of Canada says reasonable expectation of privacy for workers continues on employer-supplied laptops

David Elder -

Employees in Canada retain some reasonable expectation of privacy in personal data stored on an employer-supplied laptop, even where workplace policies and practices provide that all information stored or generated on such devices is the property of the employer, says the Supreme Court of Canada. However, the implications of this criminal law case remain unclear for private sector employers.

In its judgement in R. v. Cole, on appeal from a decision of the Ontario Court of Appeal, the Court considered the case of an Ontario high-school teacher, on whose school board-supplied laptop a school technician found nude images of a student. The technician copied the photos in question onto a disk for the school’s principal, who seized the laptop and informed police, who took possession of the laptop and disks, then examined their contents. The police did not obtain a warrant before seizing the equipment or examining the contents.

For employers, it is important to note that the real focus of the decision is on criminal law: the guarantee in the Canadian Charter of Rights and Freedoms against unreasonable search and seizure and the failure of police to obtain judicial authorization before accessing the laptop in question -- not on the rights or powers of private sector employers to audit employee use of company equipment. In fact, the majority decision explicitly notes that it leaves “for another day the finer points of an employer’s right to monitor computers issued to employees.”

However, notwithstanding this Charter focus, the decision may nonetheless provide important guidance to private sector employers as well.

In its judgement, the Supreme Court drew an important distinction between the search and seizure of the laptop by school officials, and its subsequent search and seizure by police. The Court found that school officials had a statutory duty to maintain a safe school environment, and therefore, by necessary implication, a reasonable power to seize and search a board-issued laptop. However, while it found that the school was legally entitled to inform the police of its discovery, this entitlement, and the lawful authority of the employer to seize the device, did not extend to provide authorization to the police to examine the contents of the laptop – an act that is prima facie unreasonable without prior judicial authorization.

By analogy, private sector employers would also have clear duties to maintain safe, non-discriminatory workplaces, and to protect the interests of their workforce and shareholders generally – and may therefore also have reasonable powers of search and seizure to protect these interests, as well as the legal authority to advise law enforcement authorities of employee device usage that may be in breach of law. However, language in the ruling suggests that such authority by employers may extend only to content and behaviour that is reasonably connected to these objectives; not necessarily to all personal data that may be contained on an employer supplied device or network.

The case also underlines the importance of employers having clear, documented polices for the use of workplace computers and networks, particularly if employees are permitted some personal use, as well as communications and compliance programs to regularly remind employees of these policies. For the purposes of a Charter analysis, the Supreme Court found that such policies and practices served to diminish, but not eliminate, the reasonable expectation of privacy that an employee would otherwise have in personal content stored on an employer-supplied computer. From the perspective of Canadian private sector privacy laws, such policies help to establish the requisite knowledge and consent of employees to the collection, use and disclosure of their personal information.

Finally, although the Court stresses that device ownership is not a determining factor in assessing the reasonable expectation of privacy that an employee may have on stored personal data, the Court’s decision may nevertheless have important implications for the increasing trend toward “Bring Your Own Device”, whereby employers allow employees to use their own devices for work purposes and to access employer networks. If employees retain even a diminished expectation of privacy in personal data stored on an employer-supplied device, employees who own the devices they use for work purposes might enjoy an even higher expectation of privacy in such stored information.

Previews of musical works do not infringe copyright

As we've discussed in a number of recent blog posts, the Supreme Court of Canada this week released a number of major copyright-related decisions. In one of these cases, Society of Composers, Authors and Music Publishers of Canada v. Bell Canada (SOCAN), the Supreme Court considered whether there would be a tariff for the communication of previews of musical works over the internet.

Online music previews are short extracts of musical works and assist a consumer in deciding musical purchases. The Copyright Board concluded that those who make previews available, and the users that listen to previews, were entitled to avail themselves of the fair dealing exception under section 29 of the Copyright Act, as listening to the previews constituted research of a purchasing decision (see our previous post). The Federal Court of Appeal upheld the Copyright Board’s decision and SOCAN sought leave to appeal to the Supreme Court of Canada.

In upholding the decisions below, the Supreme Court concluded that the previews constituted fair dealing, applying the test articulated by the Court in CCH Canadian Ltd v. Law Society of Canada (CCH).

In applying the first step of the test and determining whether the previews are provided for the purpose of “research”, the Court rejected arguments limiting the definition of “research” and affirmed that the term be given a “large and liberal interpretation”. Whether the dealing constitutes “research” should be analyzed from the perspective of the user or consumer rather than the online service provider since it is the consumer who uses the preview for the purpose of conducting research to identify which musical work to purchase. As a result, the Court concluded that the previews were provided for the purposes of research.

The second step of the test required determining whether the use of the previews was “fair” in accordance with the six CCH factors: (i) the purpose, (ii) character and (iii) amount of the dealing, (iv) the existence of any alternatives to the dealing, (v) the nature of the work, and (vi) the effect of the dealing on the work. The Court concluded that: (i) the main purpose to provide previews was to facilitate the consumer’s research purposes; (ii) the previews were streamed and not downloaded, after listening, the preview was automatically deleted from the user’s computer, and copies could not be duplicated or further disseminated; (iii) regarding the quantity, the Court confirmed the “amount” meant the “quantity of the work taken”, the proportion of the excerpt used in relation to the whole work; (iv) previews were found to be reasonably necessary to help consumers research what to purchase since there were no other reasonable alternatives that could effectively preview the musical work; (v) previews were also necessary in disseminating the work because dissemination required a consumer to be able to locate and identify a work he or she wanted to buy; (vi) since the previews served to increase the sale of the work, they could not be said to be in competition with it, and thus the dealing did not adversely affect the work.

Performers and makers of film soundtracks not entitled to broadcast royalties

In a ruling issued July 12, 2012, the Supreme Court upheld the decisions of the Federal Court of Appeal and the Copyright Board in Re: Sound v. Motion Picture Theatre Associations of Canada, concluding that performers and makers of sound recordings are not entitled to royalties for the broadcast of their recordings in film or on television as part of a movie soundtrack.

Under section 19 of the Copyright Act, performers and makers of sound recordings are entitled to remuneration when their recordings are performed or telecommunicated to the public. However, the section 2 definition of “sound recording” excludes a “soundtrack of a cinematographic work where it accompanies the cinematographic work.” “Soundtrack” is not defined, but the appellants had argued that it means the whole aggregate of sounds accompanying the film, and not the individual pre-existing sound recordings incorporated into the soundtrack. They contended, therefore, that royalties should be collected when those recordings are broadcast as part of a film’s soundtrack.

In its analysis, the Court found that the ordinary meaning of “soundtrack” includes pre-existing sound recordings. These recordings, then, would be captured within the section 2 exclusion, absent a clear contrary expression of intent by Parliament. The Court also noted that this interpretation is supported by the legislative history of the Act, particularly comments made at the Standing Committee on Canadian Heritage.

The Court rejected the appellants’ arguments that the Copyright Board’s decision is incompatible with Canada’s obligations under the Rome Convention, pointing out that the Rome Convention contemplates only protection of “exclusively aural fixation of sounds.” The Court also discounted the precedential value of Australian and U.K. jurisprudence because of significant differences in wording between Canadian and foreign copyright laws.

Supreme Court clarifies scope of fair dealing

On July 12, 2012, the Supreme Court of Canada clarified the scope of the “fair dealing” exception to copyright infringement, found in section 29 of the Copyright Act (the Act), which allows copies to be made for research, private study, criticism and review. 

Facts and Judicial History

As stated in a previous blog post, the case of Alberta (Education) v Canadian Copyright Licensing Agency surrounds the contention over whether elementary and secondary schools can claim the benefit of “fair dealing” exception for copies of works made at the teacher’s initiative for the student’s use.

The Copyright Board (the Board) distinguished between copies made by the teacher at the request of a student and copies made by the teacher without prior request from a student. It concluded that copies made by teachers for student use were made for the allowable purpose of “research or private study”, but found, applying the CCH fairness factors articulated in CCH Canadian Ltd v Law Society of Upper Canada, that the copies did not constitute fair dealing and were therefore subject to a royalty. The Federal Court of Appeal upheld the Board’s conclusion.

The Supreme Court

The decision of the Court hinged on its interpretation of the two-part test for fair dealing, articulated in CCH. There was no dispute on whether the first step was met; therefore, the Court reviewed the Board’s analysis of the second step of the test, namely whether the copies were “fair” according to the factors set out in CCH. In a 5-to-4 split decision, the majority determined that the Board’s finding of unfairness was based on a misapplication of the CCH factors and therefore, its outcome was unreasonable. The CCH factors underlying what is fair will be examined in turn below.

Purpose of the Dealing

The Court continues to favor user’s rights in fair dealing issues as evidenced in its analysis of the “purpose of the dealing” factor. Referencing CCH, the Court concluded that photocopies made by a teacher and provided to primary and secondary students are an essential element in the research and private study undertaken by those students. The Court felt that the Board’s distinction between copies made by the teacher at the request of a student and copies made by the teacher without a prior request from a student drives an artificial wedge into the unified purpose of research and private study. The Court noted that the copier’s purpose will be relevant to the fairness analysis if the copier “hides behind the shield of the user’s allowable purpose” in order to engage in a separate purpose – such as a commercial one (para 22). In this case, the Court held that there was no separate purpose on the part of the teachers.

Amount of the Dealing and Character of the Dealing

The Court emphasized that assessing fair dealing and the amount of the work being copied is not a quantitative assessment based on aggregate use, but rather an examination of the proportion between the excerpted copy and the entire work. The quantification of dissemination should be assessed under the “character of the dealing” factor.

Alternatives to the Dealing

The Court cited CCH in that “a dealing may be found to be less fair if there is a non-copyrighted equivalent of the work that could have been used, or if the dealing was not reasonably necessary to achieve the ultimate purpose” (para 57). It concluded that buying books for each student is not a realistic alternative to teachers copying short excerpts of the work.

Effect of the Dealing on the Work

As for the “effect of the dealing on the work” factor, the Court concluded that there was no evidence to link photocopying short excerpts with a decline in textbook sales and therefore the Board’s analysis was unreasonable.

Free delivery! Supreme Court rules no copyright royalties for internet transmission of downloads

David Elder -

In a major, but slim, victory for proponents of electronic commerce, a majority of the Supreme Court of Canada has ruled that online sellers of music and video game downloads are not required to pay more copyright royalties than their “bricks and mortar” counterparts, solely because the products from the virtual stores are delivered via the internet.

In addition, although not considered by the Court, these rulings would also suggest that another copyright tariff, for the delivery of ringtones to mobile phones, may be invalid.

In two decisions that form part of the unprecedented “copyright pentalogy” of copyright tariff appeals heard by the top court last year, the Supreme Court considered whether a download of a recording of a musical work, either on its own or when incorporated into a video game, constituted a “communication to the public by telecommunication,” such that a download could attract a distinct copyright royalty, in addition to the royalty payable to the copyright holder for the reproduction of the work on the buyer’s computer or device. 

In overturning decisions of the Federal Court of Appeal, which had upheld decisions of the Copyright Board, a five Justice majority found that using the internet to transmit to a buyer a permanent reproduction of a work did not amount to a “communication” under the statute.

Among other rights, the Copyright Act grants rights holders both the sole right to reproduce and authorize the reproduction of their works, as well as the right to communicate their works to the public by telecommunication and to authorize such communication. Under these provisions, the Copyright Board of Canada had approved tariffs requiring royalty payments to the Society of Authors, Composers and Music Publishers of Canada (SOCAN) for the communication of downloads of recordings of musical works and for the communication of downloads of recordings of musical works incorporated into video games; as well as a separate tariff, payable to different copyright collective societies, for the reproduction of musical works in permanent downloads, limited downloads and on-demand streams of music transmitted over the internet. Royalties for the reproduction of musical works incorporated into games are individually negotiated with rights holders.

In the view of objectors to the SOCAN tariff at issue, the tariff amounted to “double dipping” in that both a communication royalty and a reproduction royalty arose from the same act or transaction (the downloading of a work), whereas only the reproduction royalty was payable with respect to a tangible copy of the work (such a CD or game cartridge) in a retail store.

In Entertainment Software Association v. SOCAN, which considered the application of the “communication by telecommunication” right to downloads of video games incorporating musical works, the majority of the court found that the Act must be interpreted in light of the principle of technological neutrality, avoiding the imposition of additional layers of protections and fees based solely on the method of delivery of the work to the end user. In this regard, the majority found that the internet was simply an alternative form of delivery. The majority also found that the legislative history of the Act demonstrated that the right to “communicate” was connected to the right to perform a work, not to the right to reproduce permanent copies of the work, and that the performance right did not contemplate the delivery of permanent copies of the work.

No liability for defamation for basic hyperlinks, says Supreme Court

David Elder and Lindsay Gwyer -

Bloggers, tweeters, webpage owners and other providers and hosts of internet content can breathe a little easier today following a decision of the Supreme Court of Canada that ruled that merely providing hyperlinks to defamatory content cannot make them liable for defamation.

That said, while the decision provides clear support from the highest court in the land for both free expression and the preservation of the nature and benefits of the internet as whole, it stops short of giving hyperlinkers a “Get Out of Jail Free” card for all uses and presentations of links to defamatory material. 

The much-anticipated decision in Crookes v. Newton, 2011 SCC 47concerned a defamation action grounded on the posting by a website operator of two simple hyperlinks to defamatory content located on other sites. The website operator refused to remove the links upon request by the plaintiff, and the plaintiff brought an action in defamation in British Columbia, where he was unsuccessful both at trialand at a subsequent appeal to the B.C. Court of Appeal. At issue before the Supreme Court was the question of whether a simple hyperlink reference to defamatory information could constitute a “publication,” a key element of the tort of libel.

The case had been very closely watched by the internet community, as a negative ruling had the potential to impose an unprecedented chilling effect on the way content is shared online, effectively subverting one of the fundamental underpinnings of the design of the World Wide Web.

While the majority acknowledged in their judgement that the internet is a potentially powerful vehicle for defamatory expression, they also explicitly recognized the indispensability of hyperlinks in facilitating access to online information, and ruled so as to preserve the ability of users to provide basic links to third party content without fearing that they will become legally responsible for that content. The majority likened simple hyperlinks (which merely reference the existence and location of content) to footnotes or references, noting that both are necessarily content-neutral, with the poster having no control over the content to which they refer, and that both require some act on the part of the reader before the content can be accessed.   This type of basic link, the Court ruled, does not amount to an expression of meaning and cannot possibly be a publication of defamatory material.

While the decision provides clear immunity for providing simple hyperlinks to defamatory content, the three separate judgements that underlie the decision (either concurring or concurring in the result) leave the door open to potential liability for hyperlinking in other ways and contexts. Moreover, the decision may have significant implications with respect to liability for hyperlinking other types of prohibited or unauthorized content

Beyond the scenario of simple hyperlinking, which the Court found will not attract liability, things get murkier. The majority appears to conclude that for those hyperlinking to third party content, only repetition of the defamatory statement in the link or associated text will attract liability; however, in joint concurring reasons, Chief Justice McLachlan and Justice Fish purported to “clarify” that, notwithstanding the apparent bright line test set out in the majority judgement, defamation would also be possible where the text indicates adoption or endorsement of the hyperlinked content, even if it doesn’t repeat the defamatory statement. In a separate judgement that concurred in the result, Justice Deschamps favoured a more nuanced approach, where content posters would attract liability for defamation if they deliberately make the defamatory information readily available to a third party in a comprehensible form (although the defence of innocent dissemination may still be available). In light of these varying approaches, it will be interesting to see how Canadian courts may deal with hyperlinking liability issues on different facts and in different contexts.

The majority also noted that, in an era of rapidly evolving technologies, it may become necessary to consider in the future the liability that could be attracted by other types of links, which are or may become available, such as embedded or automatic links. (The facts before the Court involved one “shallow” link to a site’s homepage and one “deep” link to a specific page further down in the site’s hierarchy of content).

Finally, while the Crookes decision dealt exclusively with publication in the context of defamation, it may have broader implications for liability for hyperlinking to other types of prohibited or unauthorized content. For example, some commentators have argued that the Court’s interpretation of publication may have implications for the meaning of “publication” or “reproduction” under the Copyright Act.  

The approach could also conceivably raise implications for criminal liability. For example, the offence of public incitement of hatred focuses on the act of “communicating statements” in a public place.Bill C-51, introduced in the last session or Parliament, but yet to be reintroduced, following the spring election, included a provision that would have amended the offence to indicate that “communicating” would include “making available,” which, as pointed out by the accompanying Legislative Summary, would include providing a hyperlink to the offending material.

Although the Crookes ruling is an important victory for content posters and internet supporters generally, there are still many aspects of the legal implications of linking to unauthorized or illegal content that remain to be definitively settled in Canadian law.