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The State of File Sharing and Canadian Copyright Law

The recent Federal Court of Appeal music file sharing case, in which the court rejected the Canadian Recording Industry Association’s attempt to uncover the identities of 29 alleged file sharers, raises important privacy and copyright issues.  Last week’s column reviewed the court’s test to protect personal privacy; this week’s column assesses the copyright implications of that decision.

Although the court declined to articulate definitive conclusions on important copyright issues associated with file sharing, its decision will undeniably have a major impact on copyright policy. This impact is best addressed by analyzing three questions – can CRIA sue file sharers?  Can it win such suits?  And what legal reverberations might ensue if it does win?

The answer to the first question is relatively straight forward.  CRIA can sue file sharers in Canada and it has indeed asserted that the decision provides a blueprint for future suits. 

In the aftermath of last year’s trial decision, the recording industry expressed grave concern about the state of Canadian copyright law and lobbied aggressively for immediate changes. In light of the appellate decision, it is now safe to declare the copyright emergency over.  In fact, the fears of a devastating effect never materialized.  According to CRIA’s own figures, in the thirteen months of reported sales since the March 2004 decision, both sales and shipments have increased. 

The answer to the second question — whether CRIA can win file sharing suits — is open to debate, particularly with respect to suits filed against individuals that solely download music from peer-to-peer networks.  The complicating factor is the effect of Canada’s private copying system, which establishes a levy on blank media such as recordable CDs.  Anna Bucci, the Executive Director of the Canadian Private Copying Collective, the body that administers the $120 million in royalties that have been generated by the levy, last week described private copying as creating “a new right for the Canadian public — the right to make private copies of music for their own personal use.”

There are at least three objections raised to the application of this private copying right to P2P file sharing.  First, the right applies solely to copying, not to those who “upload” music on peer-to-peer networks.  This objection is certainly valid as neither the Canadian courts nor the Canadian Copyright Board have ever indicated that private copying could be used as a defense against the act of uploading.

Second, CRIA recently argued that the private copying right does not apply to copies made to personal computers.  A review of the legislative history of private copying provides little support for this interpretation, however, as the statute was intentionally drafted in a technology neutral fashion such that it could be applied to new copying media, including computer hard drives.

The primary impetus behind the creation of the private copying system was the Charter of Rights for Creators, a 1985 parliamentary committee report. That report explicitly declined to tie the levy to a particular technology, presciently noting that “future recording devices might not use blank tape, thereby making a tape royalty obsolete. The work could be stored in a computer memory with no independent material support at all.”

Eleven years later the Task Force on the Future of the Canadian Music Industry, which was co-chaired by the heads of CRIA and the Canadian Independent Record Production Association, continued to press for the creation of private copying levy to be applied to both media and devices.  The technology neutral levy was enacted into law soon after with the industry celebrating success after 15 years of lobbying but lamenting that the delay had “literally killed dozens of careers.”

While the levy was certainly intended to cover computer hard drives, the third objection is whether the provision, as currently drafted, actually achieves that goal.  This issue was thrown into some doubt by a Federal Court of Appeal decision last December that upheld the validity of the levy but tossed out its application to MP3 players such as the Apple iPod. 

That decision is currently under appeal to the Supreme Court of Canada.  If Canada’s highest court overturns the decision, the intent of the legislation will be restored and much of the doubt about its applicability to P2P downloaders will be removed. 

If the Supreme Court declines to hear the appeal or upholds the decision, the impact will extend well beyond music file sharing.  Some P2P downloading would no longer fall under the private copying right, though downloads to many external or removable hard drives would presumably still qualify.  More importantly, copying of store bought CDs onto Apple iPods, a common practice extolled by CRIA itself, would effectively be rendered unlawful in Canada (unless there is an implied right to copy such CDs, which would then call into question the need for a private copying system). 

The third question – what might follow if CRIA is successful in its suits – raises the prospect for copyright reform.  When the federal government established the private copying right in the late 1990s, it also created a statutory damages system.  This enables a copyright holder to obtain specified damages of between $500 and $20,000 per infringement without the need to prove actual damages.  There is, however, a saving provision that allows a court to order damages well below the statutory minimums if the total award is “grossly out of proportion to the infringement.”

The statutory damages provision raises several scenarios in the context of file sharing suits.  One possibility, common in the United States, is that cases do not actually proceed to trial since even innocent defendants will settle lawsuits to avoid the risk of a massive statutory damages award. Should a case proceed to trial, another scenario is that a court might indeed award damages of hundreds of thousands of dollars based on uploading 1,000 songs onto a P2P network. 

Given that fee-based services such as Napster already offer over 700,000 songs for only $14.99 per month, a raft of settlements or a massive award might lead to vociferous calls to Industry Minister David Emerson and Canadian Heritage Minister Liza Frulla for immediate reform to the statutory damages provisions so that a more appropriate remedy can be implemented.

Alternatively, a court might be faced with a sympathetic defendant who could prove that they had legitimately copied store bought CDs onto their computer and logged onto a P2P network in order to download a public domain document or open source software program.  In such a case, the judge might be inclined to use the saving provision and set a precedent of a minimal damages award for P2P activity.

The net result of current Canadian law is that file sharing suits are a risky strategy from both a privacy and copyright perspective.  The Federal Court of Appeal may have provided a roadmap for such suits, but it is apparent that traveling down that road raises many more questions than it answers.

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