Federal Appeals Court Upholds File Sharing Decision

This morning the Federal Court of Appeal issued its much-anticipated decision on music file sharing. The court upheld the lower court decision by denying CRIA's request for the identities of the 29 alleged file sharers. The reason for upholding the decision was straightforward – CRIA's evidence contained a wide variety of shortcomings and the appellate court was not about to issue a disclosure order in the face of bad evidence.

The court focused much of its discussion on the privacy concerns associated with disclosing the identities of the file sharers. Although it noted the importance of intellectual property protection, it emphasized that in the Internet age "the potential for unwarranted intrusion into personal lives is now unparalleled." The court was clearly sympathetic to the privacy issues raised by the case and sought to map out some significant privacy protections. For example, it concluded that data associating users with an IP addresses goes stale very quickly and therefore evidence that is not current may be sufficient reason to dismiss a motion to disclose user identities. The court also noted that there must be care taken to ensure that personal information beyond the copyright allegations are not disclosed and that the identities of the individuals may be protected through confidentiality orders or by using initials.

While these protections are important, the court has certainly opened the door to new file sharing lawsuits. The court says that a "bona fide" standard is sufficient for disclosure, a different standard from the higher prima facie standard used by the trial judge. The court also left open many of the copyright issues, concluding that the trial judge should not have delved into the copyright analysis. While it raised some potential concerns with that analysis, the appellate court did not reach any definitive conclusions on the copyright issues.

This case will be dissected for weeks, but a quick analysis suggests there are three key long term impacts:

First, if the U.S. experience is any indication, we can expect thousands of suits against individual Canadians in the months ahead. The RIAA has already sued over 10,000 alleged file sharers in the U.S. While the suits have had no impact on rate of file sharing, the RIAA also shows no signs of abandoning its strategy. There is now every reason to think that Canadians will be subjected to a similar legal barrage. Moreover, while the lawsuits may have had little impact on file sharing activities, it is important to note that file sharing itself has not had a significant impact on the recording industry's bottom line. Although revenues have dropped over the past five years, a wide range of factors, including the popularity of DVDs and video games as well as the shift toward big box retailers as the primary retail channel (creating both pricing pressures and reduced availability of catalog sales) are clearly more important factors. Moreover, any loss in royalties for Canadian artists has been more than offset by the $120 million collected under the private copying levy.

Second, this decision should lay to rest claims that there is an urgent need for copyright reform in Canada. The government has indicated that it plans to establish a "making available" right, however, the Federal Court of Appeal ruling demonstrates that Canadian law does provide CRIA with the ability to purse its legal strategy, suggesting that this part of the reform package should be scrapped. While the making available right may not be necessary in Canada, the decision and the forthcoming suits point to the need for changes to Canada's statutory damages provisions. Those provisions could lead to hundreds of thousands of dollars in liability for individuals engaged in personal, non-commercial activity. By contrast, Napster now offers a catalog of more than 1 million songs for $15 per month. It is difficult to reconcile potential damage awards of hundreds of thousands of dollars given that the marketplace values the music in question at $15/month (or less under Yahoo!'s new service). The solution points to one aspect of urgent copyright reform — the elimination of the Copyright Act's statutory damage provisions in these non-commercial cases so that exhorbitant damage awards used to pressure costly settlements become a thing of the past.

Third, the decision demonstrates the growing concern for personal privacy in Canada. While CRIA recently described P2P services as "the number one threat to privacy on the Internet", the reality is that this court, much like Justice LeBel of the Canadian Supreme Court, have expressed deep concern about the intrusiveness of Internet monitoring. Canadians get this, the Supreme Court of Canada and the Federal Court of Appeal get this, and most ISPs get it. The question now is whether CRIA will get it and abandon its legal strategy.

One Comment

  1. Copying
    Perhaps if the CRIA is of the opionion that no one should copy any of their music they shouldn,t be receiving the “$120 million collected under the private copying levy.”
    Seems to me they are trying to have it both ways.