This past Monday, the Federal Court published the Honourable Justice Fuhrer's decision in the matter. We anticipate a full analysis and commentary on the decision on our site next week. But in the meantime, you can read Justice Fuhrer's decision .

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Ěý±đ»ĺľ±łŮ´Ç°ů Ěýoriginally reported on this case back in a September Ěýon the SCC’s decision to grant leave to appeal. The case arose out of the Board’s Ěýto collect royalties on these aforementioned ephemeral copies. The Ěýdisagreed on tech neutrality grounds, arguing that under those principles royalties should not be charged for incidental copies since payments are already made for the use of the original content in final broadcasts. The Board, finding for , relied on the SCC’s decision in , which determined that because incidental copies add value to a final broadcast they should attract separate royalties. Furthermore, the SCC in Bishop narrowly interpreted the Ěý(the “Act”) to conclude that incidental copies made in the process of creating a broadcast were not part of the broadcast right itself.

At the FCA, CBC argued that Bishop was no longer good law. As Ěýby some commentators on the case,ĚýCBC argued that the SCC inĚýfundamentally changed the law through its statements about tech neutrality. The Court however decided that neutrality did not override the language of the Act that gives owners of music works the exclusive right of reproduction. The FCA said in Ěýthat nothing in ESA “would authorize the Board to create a category of reproduction or copies which, by their association with broadcasting, would cease to be protected by the Act. ESA did not explicitly, or by necessary implication, overrule Bishop v Stevens.” The Court further stated that since the majority’s reasoning in ESA did not rely on or refer to technological neutrality the case did not provide guidance on applying the principle to the situation at hand.

The importance of this appeal has been discussed by many members of the IP world. One commentatorĚý that the greatest danger in this case is that the SCC could potentially “roll back its finding that technological neutrality is a foundational principle within the law.” Additionally, if the SCC rules that all copies, incidental or not, are copies under the ActĚýthere is “the very real possibility of payment demands for the myriad of copies that occur through modern technologies.” In this world of digital copies and Internet file sharing, accessing digital goods could potentially become an expensive task.

Although a webcast of the oral arguments was not available at the time of the writing this post, the parties’ Ěýare – and prove to be interesting reads. CBC Ěýthat SODRAC is the first copyright holder to “attempt to monetize broadcast-incidental copies…[which is] a subversion of the purpose of the Copyright Act in an attempt to generate economic rents through a layer licensing scheme.” CBC contends that the layered licensing scheme at question was upheld by the Court through a fundamental error of law, “namely the rejection of technological neutrality as a guiding principle in the interpretation and application of the Copyright Act.” CBC asserts in its factum that this layered approach to licensing is “impermissible double-dipping that violates technological neutrality.” It is also interesting to note one of CBC’s requests that if the SCC decides that a licence is indeed required for incidental copies then the royalty should be reduced to a nominal amount “to reflect the fact that broadcast-incidental copies do not have independent economic value.” This request seems to reflect the reality that incidental copies tend to be a part of the production process in creating content, and are not necessarily “valuable” items on their own.

The SODRAC Ěýon the other hand contends that CBC is attempting “to reverse decades of settled law” and does not mince words in its opening paragraphs:

This appeal amounts to an attempt by CBC to persuade this Court, through a misuse of the principle of technological neutrality, to upset the existing statutory balance in relation to broadcast-incidental copies and to substitute its own policy preferences for those of Parliament, enabling CBC to escape liability for copies it is making and deriving benefits from, and that it has been making and paying for, for decades.

It is also fascinating (and sort of juicy!) to scan through the SODRAC factum and see a couple portions crossed out, specifically the paragraph describing how CBC has made tape and digital broadcast-incidental copies over the years for its programs.

An attendee of the hearingĚýĚýon the opening stages of the appeal, saying that it did not start well for the CBC with the SCC being “clearly skeptical” of its arguments. In discussing technological neutrality however, one of the intervenors () suggested that a test should be established for when a copy should be treated as a copy under the Act. CIPPIC’s fear is that in this digital world that constantly uses ephemeral copying to function, literally interpreting the right to reproduction would give copyright owners control over everybody else’s access to digital content – which is not realistic.

It has been Ěýthat this caseĚýmay “serve to reinforce the importance of the technological neutrality principle and confirm that in the digital world, not ever copy is a copy for the purposes of the Copyright Act.”ĚýI agree with this position. Although SODRAC relies on the established law, the law must keep up with our ever-changing (and technologically advanced) world. It is simply impractical to suggest every copy is a copy under the Act when the way we access and store digital information heavily relies on ephemeral copying. To charge royalties on the digital content used in the production process before the final (valuable) broadcast is made seems to be an inappropriate cash-grab and abuse of copyright owners’ powers. However, the conclusion that the law may lend itself to could be completely different, and unfortunately we can never predict with certainty how the bench will sway. I guess we will just have to sit on the couch and find something else to watch until the final result is ready for the air.

Jaimie Franks is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.

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This case is particularly unique due to the criminal context. Typically, matters involving software code theft result in . However, after Aleynikov resigned to join a similar start-up company and was found to have copied sections of “High-Frequency Throughput” software code (which facilitates automated, high-speed stock trading), Goldman used their stature to involve the FBI. Aleynikov was arrested for theft, resulting in a federal conviction and 97-month prison term. Despite this conviction and that his contract strictly prohibited the transfer of data, which became the IP of Goldman upon creation by Aleynikov, the appellate court deemed the code “purely intangible property…beyond the scope of the [criminal theft legislation].”

In Canada, Roman Cisar recently suffered as Aleynikov, when he was sentenced to 30 months in prison for a similar software code theft from a former employer. However, in Cisar’s case, he utilized the code stolen from his relatively small-time employer to directly undercut their business through the creation of his own, while Aleynikov was only found to have copied the Goldman code for “personal use.” It is clear through these trial judgments that the courts are trying to develop criminal IP jurisprudence to protect companies from employees committing opportunistic digital thievery. Contrary to this end, by overturning the Aleynikov conviction under the premise that the code was not physical property, the Court deemed code as beyond the scope of criminal theft, leaving it to the realm of IP legislation. Thus, in future cases (e.g., the inevitable Cisar appeal), the role of the courts will be to establish whether such IP should be protected with criminal consequences.

A problem lies in the nature of the property being “stolen” and the scope of criminal laws against theft. Due to the nature of virtual data and the wording of legislation, it seems that the US Appellate Court made the correct ruling in Aleynikov. Unauthorized copying does not equal theft, as the copying of the code did not exclude the original owner from usage. With respect to Cisar (reasons of the court yet to be published), adoption of an intangible perspective of source code, should rule out criminal charges under . Copying the code did not preclude usage of the original company, which is a defining feature of criminal theft. Although it could be argued that unauthorized copying causes economic detriment to the companies employing the code, it is still very difficult to argue that this type of IP can be subject to theft, as the Court made clear in Aleynikov.

There is limited criminal recourse if theft is unavailable to the Crown. Generally, industrial software code is not truly protected by copyright, as it would require disclosure of , rendering ineffective. Moreover, s. 42 of the Copyright Act typically applies criminal recourse to , which was not evident in either Aleynikov or Cisar. Limited criminal action may be permitted through s. 430 criminal mischief if the copying of the code is used such that it causes egregious detriment to the violated party. However, the Criminal Code does not serve to protect exclusively abstract economic interests and applying it as such is inconsistent with the application of the Code. Furthermore, due to the higher standard of proof in criminal cases and the lack of economic restitution to the wronged party, civil suits are a more favourable recourse.

Certainly unfaithful acts such as those committed by Aleynikov and Cisar should be subject to civil lawsuits and potential remedies for lost profits or similar losses as a result of the usage of the code (in addition to contract breach, if applicable), but the nature of the software code as intangible property should preclude criminal action. If the courts are going to trend towards imposing criminal penalties on these types of IP incidents, it is essential that the legislature update statutory definitions of property and its theft to reflect the changing nature of property in the digital age.

Ryan Heighton is a JD candidate at Osgoode Hall Law School.

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The case centres around a video made by Bristol Film Studios (BFS) for one of Mr. Soloman's (aka Mr. Sullivan's) tracks. The video was uploaded to YouTube by BFS upon its completion. Mr. Soloman did not approve of the video and asked the company to remove it; it was taken down about 5 days after its initial posting. YouTube counted about 100 (non-unique) views of the video before it was removed. Mr. Soloman subsequently claimed that BFS owed him damages in the order of hundreds of thousands of pounds for those views. His claim was struck by the High Court, his appeal was dismissed.

In calculating the potential damages, the judge of first instance was generous: he assumed a maximum number of unique viewers (about 50), and that 80% of those might have bought the track had they not seen the video. He nonetheless dismissed damages for which there was no evidence.Ěý This led to a maximum claim of about ÂŁ50.

At a first glance at the decision from the Court of Appeal, it might appear that Soloman's claim was struck out merely because of that court's agreement with the court below, that the most generous measure of damages on Mr. Soloman's claim would be in the order of about ÂŁ50.Ěý Lewison L.J. points out that the high court is not required to use its resources to entertain claims of such magnitude, and the other Lords concur on this point. If the court's analysis were complete at this point, one might reasonably conclude that any small copyright claim may simply be seen by the courts as trivial or an abuse of process (as was found here). However, there are some important points made by the court in reaching its conclusion:

1. It is made clear early in the decision (though briefly) that Mr. Soloman has no remaining possibility for injunctive relief: the video was pulled upon his request, and BFS retained only one MP3 copy of his track (for litigation purposes). Additionally, BFS was willing to undertake not to make use of the track for any purpose other than litigation without leave of the court.

2. Much of the discussion in this decision focused on the idea of a proportional response. As Lewison L.J. put it "it is only if there is no proportionate procedure by which a claim can be adjudicated that it would be right to strike it out as an abuse of process." (Emphasis mine.) This comment has particular resonance in the current landscape of IP litigation: Sullivan was decided a short time after the UK's formation ofAs well, in January, the U.S. copyright office for suggestions on how to handle smaller IP claims in the U.S. In Canada, litigants already have this option.

3. Mr. Soloman agreed with the proposition that the court should strike his claim if the damages were in the order of ÂŁ50.

One question that arises from the court's calculation is whether their methods of calculating the measure of damages may be used by future claimants as a way of maintaining a relatively large claim (in this case, for instance, if the video had gone viral, the judge might have been looking at 1,000s of presumed unique views). In fact, whether this calculation is used by a future claimant may have to be a deciding factor in whether her claim is tenable. In this case, the court points out that had Mr. Soloman known more realistically the scale of damages, he might have had his case streamed into small claims initially - a proportionate response.

In my reading this case, it seemed that another very important factor affecting the outcome of the case was the fact that BFS had complied with Mr. Soloman's requests in a reasonable amount of time. This was not a case where a copyright holder's rights were flagrantly disregarded by another party. Here, BFS complied with Sullivan's request to take the video down and agreed to limit their future use of the copyrighted material forming the basis of the dispute to litigation purposes only (or where the court was otherwise amenable). I was left with the feeling that any remaining possibility for injunctive relief would have meant that Sullivan's claim might have been deemed appropriate for the high court stream.

Hayden McGuire is a JD candidate at the University of Saskatchewan, Faculty of Law.

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