_MG_2839 by Zlatko Unger (CC BY-NC-ND 2.0) https://flic.kr/p/FqWho

_MG_2839 by Zlatko Unger (CC BY-NC-ND 2.0) https://flic.kr/p/FqWho

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Canadian DMCA in Action: Court Awards Massive Damages in First Major Anti-Circumvention Copyright Ruling

The Federal Court of Canada has issued a massive damage award in the first major Canadian digital lock copyright ruling involving circumvention of technological protection measures.  The ruling, which is the first to conduct an extensive examination of the anti-circumvention rules established in 2012, adopts expansive interpretations to the digital lock protections and narrow views of the exceptions. The case confirms that Canada has tough anti-piracy laws with one of the most aggressive digital lock laws in the world and will fuel calls to re-examine the effectiveness of the anti-circumvention exceptions in the 2017 copyright review.

The case stems from a lawsuit launched by video game maker Nintendo against Go Cyber Shopping, a modchip seller that operated a retail store in Waterloo, Ontario and several online stores. Go Cyber Shopping offered a wide range of products that allow users to circumvent the digital lock controls on the Nintendo gaming console (such as the Wii) and play unauthorized games including “homebrew” games.  Go Cyber Shopping argued that it provided other services but the court says that it did not tender any evidence in that regard.

The court concluded that the modchip seller engaged in copyright infringement and circumvented technological protection measures. In fact, it went out of its way to emphasize the importance of TPM protection. It adopted a broad interpretation of a technological protection measure – rejecting a UK case that used a narrower interpretation – in favour of an approach that covers access controls that go beyond restrictions on copying.  It states:

having regard to Parliament’s express intent to give copyright owners the power to control access to works, the principle of technological neutrality, the scheme of the Act, and the plain meaning of the definitions for TPM and “circumvent”, it is clear that access control TPMs do not need to employ any barrier to copying in order to be “effective”.

In other words, Canadian copyright law is no longer just about copying as the digital lock rules create legal rights to limit access even without any actual copying.

The court also resoundingly rejected defences to the circumvention claims, concluding that circumvention should also be broadly interpreted while adopting a restrictive approach to the anti-circumvention exceptions. For example, Go Cyber Shopping argued that its modchips allowed users to play “homebrew” games that are designed for use on Nintendo consoles but not owned or licensed by the game maker.  Canadian copyright law includes an exception for interoperability, which conceivably could be applied to such games.  However, the court rejected the argument, concluding that homebrew usage was dwarfed by infringing activity.

Of considerable concern is the court’s conclusion that the availability of a Nintendo-approved interoperability approach would be enough to eliminate the availability of the anti-circumvention interoperability exception.  The court stated:

the Applicant’s evidence establishes that there are legitimate paths for developers to develop software on its consoles without circumventing the Applicant’s TPMs. There is no need for any TPM circumvention to achieve interoperability

Much like fair dealing – which Canadian courts have ruled is still available even where a licence is available – the anti-circumvention exceptions should be available even if there are other mechanisms to address the concern. For example, there are currently anti-circumvention exceptions for access to materials for the visually impaired, to protect personal information, and for security research. Those exceptions should not be dismissed simply because there may alternate ways to safeguard privacy or conduct security research. Indeed, the use of circumvention may be a necessity given the possibility that companies could offer opportunities for third-party security research but subject to restrictions or conditions that limit the effectiveness of the research activity.

With the court clearly concluding that Go Cyber Shopping was a bad actor, it proceeded to lower the boom with massive damages.  It concluded that statutory damages can be applied to circumvention, ruling that the $20,000 maximum per infringement should be applied for a total of $11.7 million.  Moreover, it concluded that there was a need for further deterrence and it awarded another $1 million in punitive damages.

The case is a big win for Nintendo and an exceptionally aggressive application of the new anti-circumvention rules.  It leaves no doubt that Canada has one of the most restrictive and potentially punitive digital lock rules in the world, with the court adopting expansive interpretations to the digital lock protections and dangerously narrow views of the exceptions. The government emphasized that the digital lock exceptions would help maintain the copyright balance, but the court pays little regard for balance in the ruling. With the government set to conduct its review of the Copyright Act later this year, the decision reinforces that Canada already has some of the most powerful anti-piracy laws in the world and that the government must now work to address the ineffectiveness of the anti-circumvention exceptions, most notably by closing the fair dealing gap.

39 Comments

  1. Terminalinsanity says:

    So the public loses its freedoms to protect a foreign company’s profits.

  2. Ken Panton says:

    Does the judgement – punitive and overreaching as it is, if I cam correctly paraphrasing your opinion – infer a lack of quality in the defence arguments?

    Being a non-lawyer I do not know how much courts bring “balance” to the process (if that is the correct word) of their own accord regardless of the “quality” of the arguments presented. That is, how much do courts go beyond the arguments presented at trial to reach verdicts and judgments?

  3. This is understated: what if I buy a “mod chip” for my tractor that allows me to use software the manufacturer does not approve of? Well, $20,000 maximum per infringement and such punitive damages as the court may see fit to award.

  4. I don’t see the copyright infringement. He paid Nintendo for the console, they got their money. He didn’t copy the device hardware or software and try to replicate it to give away or sell, therefore no copyright was infringed.
    If he used a third party device to play a game Nintendo didn’t make, he didn’t steal a game either!
    The court, the law, no Nintendo are being ludicrous.
    Thanks for killing a business and unemploying more Canadians for the sale of an obscenely rich company that’s not suffering in the slightest.

    • I think the concern was that the customers were buying copies of games from one another, when Nintendo wants each person to buy a seperate game.

      Nintendo was calling these “stolen games”, and saying the mod chip was primarily a tool for running them. The believed the DMCA was a tool to prevent the “theft” in the first place (really copyright breach), and included a prohibition on devices that allow or enable copying.

      I don’t happen to agree (see above), but they weren’t out in lef t field.

      –dave

  5. Strange isn’t it how “technical protection measures” can be implemented to “protect” the revenue stream of business – yet “technical protection measures” (or as I like to call it “encryption”) is not afforded the same court and legislative protection for the general public when sending private messages to each other …

  6. Does that imply the software loaded on Chrome devices to stream copyrighted movies/TV shows are circumventing the copyright?

  7. Note to self: continue to never buy anything from Nintendo, or affiliated companies

    • Novay Jose says:

      I came here to say the same as Randy. I was considering upgrading to a Wii U, but if I can’t run my own homebrew on hardware that I PAID FOR, that’s an absolute deal-breaker. I’ll never buy from Nintendo again.

      • Novay Jose says:

        $20,000 per infringement is also absolutely absurd. Let’s pretend I wanted to use a modchip for piracy instead of “only” backing up my property and running my own code on my own property… EVEN IF I wanted to use it for piracy, $20,000 is four hundred $50 games, or a THOUSAND $20 games I’m supposed to pirate instead of buying? What the actual ####?

    • Also, apply to the Director of Investigation and Research at the Restrictive Trade Practices Commission in the Ministry of Consumer and Corporate Affairs, and ask him to investigate Nintendo.

      Why? Because we amended the law to allow him to investigatre “tied selling”, which is already illegal in come cases. See http://digitalcommons.osgoode.yorku.ca/cgi/viewcontent.cgi?article=2151&context=ohlj

    • Right On. When laws are tyrannical it is the duty of citizens to resist. In this case, with our pocketbook. As for the company, I hope they had good corporate protections. With a judgement like that you simply put your keys in the door.

      The irony of it all is that these chips are still going to be sold underground. You cannot stop sharing and cannot control all citizens’ private life.

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  9. Note to self: cancel that summer trip to Canada…

  10. Next is trying to export this approach to Europe through CETA’s ISDS provisions. But do expect the Europeans to revolt.

  11. What this decison means i reality is that other countries, like China, with more liberal interpretations of the copyright laws, will go forward in technology developement, and Canada will go backward.

    • Isn’t it ironical that China and Russia have become the countries of Hope? That being said, this is just one decision. At least we escaped the disaster that the TPP was going to unleash (does anyone realize how many lawsuits have been brought against the Canadian Government for loss of profits as a consequence of federally enacted laws?)

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