The Federal Court of Appeal has overturned the Copyright Board's (the Board) interpretation of the Copyright Act's "making available" provision in a strongly-worded rebuke of the Board's approach to statutory interpretation and the role of international treaties in understanding domestic legislation.
In ESA v. SOCAN et al (2020 FCA 100), the Court reviewed the Board's decision on the scope and meaning of the "making available" provision at p. 2.4(1.1) of the Copyright Act, which was added by the Copyright Modernization Act in 2012 and reads:
"For the purposes of this Act, communication of a work or other subject-matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public."
As part of its hearing into the royalties to be paid by online music services, including Spotify, Google Play and Apple Music, the Board had to consider whether subsection 2.4(1.1) gave SOCAN the right to collect royalties when musical works are "made available" for the purpose of downloading as well as on-demand streaming.
In a July 2012 decision in ESA v. SOCAN, which was released before the "making available" provision came into force, the Supreme Court of Canada overturned the Copyright Board and held that the right to communicate a musical work to the public by telecommunication is not infringed when a copy of the work is transmitted over the internet as a download. The Supreme Court determined that transmitting a download of a copy of a work is an act of reproduction, not a public performance, and that the communication right only applies to public performances. As a result of the Supreme Court's decision SOCAN was not entitled to collect royalties for the downloading of musical works.
Copyright Board Revisited Supreme Court Decision on Downloads
During the Online Music Services hearing before the Copyright Board in November 2013, SOCAN argued that with the coming into force of subsection 2.4(1.1) in November 2012, it was entitled to royalties whenever a musical work is "made available", even if it's for the purpose of downloading. The Board initiated a separate proceeding to consider the "making available" issue and invited any interested party to participate. Users, including the Entertainment Software Association of Canada, argued that the "making available" provision only applies when works are made available for the purpose of a public performance in keeping with the Supreme Court decision. SOCAN and other organizations representing copyright owners argued that subsection 2.4(1.1) applies in any circumstances where works are made available.
One of the issues considered by the Board was the impact of Article 8 of the WIPO Copyright Treaty, which provides the obligation for countries to provide copyright protection when works are made available online. The parties adduced evidence in the form of opinions from Canadian and international legal scholars Mihaly Ficsor, Sam Ricketson, Jane Ginsburg, Silke von Lewinski and Jeremy de Beer. These experts split on whether Article 8 requires making available to apply to both downloads and on-demand streaming.
On the basis of its interpretation of Article 8, the Copyright Board determined that subsection 2.4(1.1) applies to both streaming and downloading so that SOCAN would be entitled to royalties when musical works are made available for the purpose of downloading. The Board also decided that "making available" is a separate act from the subsequent transmission so that SOCAN would be entitled to two royalties. However, the Board declined to approve a rate for making available citing a lack of sufficient evidence on the value of that act.
Federal Court of Appeal Rebuked Board's Approach
On judicial review, the Federal Court of Appeal was sharply critical of the Copyright Board's approach. In a unanimous decision the Court found that the Copyright Board had given insufficient weight to the Supreme Court's interpretation of the communication right in ESA v. SOCAN, and had instead relied on its own unsubstantiated interpretation of Article 8 of the WIPO Copyright Treaty. Justice Stratas, writing for the Court suggested the Board had a destination in mind:
"Nowhere did the Board explicitly say that it had a desired result in mind and that it was going to interpret subsection 2.4(1.1) in a manner to get that result. But looking at the reasons as a whole, whether it intended to do so or not, that is exactly what the Board did: it skewed its analysis in favour of one particular result."
The Court said the Board went beyond using Article 8 of the WIPO Treaty as one element of its interpretation of subsection 2.4(1.1):
"[The Board] developed its own robust view of article 8, offering nothing in support, and forced subsection 2.4(1.1), a provision in domestic legislation, to fit its view, calling subsection 2.4(1.1) a 'deeming provision'."
The Court also overturned the Board's decision that "making available" and the subsequent transmission are two separate acts of communication with royalties payable for each act. The Court found that "making available" is a preparatory act and it would be contrary to the policy of the Copyright Act to establish a tariff on a preparatory step "as this would constitute disaggregating rights for the purpose of adding an additional layer of royalties."
Court Declines to Provide its Own Interpretation
Interestingly, while the Court overturned the Board's interpretation of subsection 2.4(1.1), it declined to offer its own interpretation of the scope and meaning of the provision, citing the lack of a comprehensive alternative interpretation by the Applicants. It also declined to send the matter back to the Board for redetermination, saying no purpose would be served by sending it back.
On June 5, the Federal Court of Appeal also issued its decision on another set of judicial review applications arising from the Copyright Board's Online Music Services decision that set the rates payable by music services and was a companion decision to the making available decision.
In joint reasons dealing with both CMRRA v. Appel et al and SOCAN v. Apple et al (2020 FCA 101), the Court upheld the Board's decision to lower the royalties paid for on-demand streaming that were the result of a different valuation methodology. The Court's decision reinforced the considerable amount of deference that Court will give the Board when it is exercising its core rate-setting function. The Court said "the Board has just about the widest discretion know to law" when setting rates.