From Quebec language laws to Internet lotteries, Canadian courts have addressed an unprecedented array of cyberlaw issues in 2002. This month, the Federal Court of Appeal entered the scene, issuing its much-anticipated "tariff 22" decision. The ruling provides the latest word on the dissemination of music on-line, the liability of Internet service providers, Internet jurisdiction, and the copyright law balance, all within the context of a potential on-line music royalty.
The tariff 22 case goes back to 1995, when the Society of Composers, Authors and Music Publishers of Canada (SOCAN) filed an application with the Copyright Board of Canada for the creation of a new royalty to cover music on the Internet.
SOCAN argued that all parties involved in an Internet transmission — from the one that posts material to the ISP to the recipient — are liable for the communication and thus all bear some responsibility to pay an appropriate licence or royalty fee.
Canadian ISPs led the opposition to the SOCAN proposal, characterizing themselves as mere intermediaries (much like a phone company) that should not be held liable for the content transmitted over their equipment.
Following extensive hearings, the Copyright Board issued a decision on the proposal in 1999. The board ruled that music transmitted over the Internet qualified as a public performance under the Copyright Act and therefore could be subject to a royalty. It also determined that ISPs could rely on a provision that exempts intermediaries from liability where they function strictly in an intermediary capacity. Furthermore, the board ruled that its reach was limited to Canada's borders so that the proposed royalty could only be applied to Canadian-based Web servers.
SOCAN appealed to the Federal Court of Appeal. After months of deliberations, the court arrived at four noteworthy conclusions. First, it upheld the board's determination that ISPs may rely upon the intermediary exemption in most circumstances, because they provide nothing more than the "means of telecommunications necessary" for their subscribers. The court identified at least one exception to this general conclusion, however. Focusing on the word "necessary," the court reasoned that ISPs that cache material to speed up delivery to subscribers go beyond what is strictly necessary to communicate. Accordingly, it ruled that caching was not protected by the exemption and that ISPs could be required to pay a royalty based on their caching activities.
Second, the court ruled that in most circumstances, ISPs cannot be said to authorize the communication of infringing material. Nevertheless, it did concede that there might be an implicit authorization where an ISP has been informed of the existence of infringing material on its server and has a reasonable opportunity to take it down.
Third, the court rejected the board's jurisdictional approach of limiting its reach to Canadian-based Web servers. It pointed to a series of cases that adopt a "real and substantial connection" test for determining when assertion of jurisdiction is appropriate. This points Canadian law toward a targeting-based analysis for jurisdiction, since the criteria for real and substantial connection in an Internet context is likely to rest on whether the party that posts material actively targeted Canada with its site.
Fourth, and perhaps most important, the court enunciated two broad principles for interpreting the Copyright Act. It rejected a SOCAN argument that the sole purpose of copyright legislation is to provide authors and artists with legal protection, ruling instead that the statute "should be interpreted with an eye to striking an appropriate balance between . . . competing interests."
Moreover, the court emphasized the need to adapt legislation to emerging technologies, noting that "where its language and underlying rationale permit, legislation should be interpreted in a way that takes account of technological developments."