Betamax by Joel (CC BY-NC-ND 2.0)

Betamax by Joel (CC BY-NC-ND 2.0)


Why the Federal Court Crackdown on Set-Top Boxes Threatens to Chill Canadian Tech Innovation

The ability to record television programs is a feature that most consumers take for granted today, but when the Sony Betamax was first introduced in the 1970s, it revolutionized television and sparked high profile lawsuits by the major Hollywood studios who wanted to block its availability. The battle between Universal Studios and Sony ultimately made its way to the U.S. Supreme Court, which ruled that Sony was not liable for contributing to copyright infringement since its product had substantial non-infringing uses.

My weekly technology law column (Toronto Star version, homepage version) notes that the battle between established players and distributors of disruptive technologies has since played out many times in courtrooms and legislatures around the world. From the introduction of the portable MP3 player (which the recording industry tried to stop in a 1999 case) to disputes over the availability of virtual private network services, judges and policy makers often return to the U.S. Supreme Court’s recognition that stopping the distribution of new technologies merely because they are capable of infringing copyrights would create an enormous barrier to new products and services that have many different uses.

While there have been fewer Canadian cases, the federal government has understood the need for an innovation balance that provides effective copyright protection and ensures that the law does not unduly inhibit new innovation. For example, the 2012 copyright reforms included a provision that targets Internet services that “enable” infringement, but limited its applicability to services that are “primarily” provided for the purpose of copyright infringement.

A recent federal court ruling could alter the innovation balance, however, by targeting a disruptive technology that everyone agrees has both legitimate and infringing uses. The case was launched by three of Canada’s largest communications and media companies – Bell, Videotron, and Rogers – against several distributors of the television set-top boxes that compete with the broadcasters’ own services and technology.

The set-top boxes turn standard televisions into “smart TVs”, enabling users to access a wide range of video content found online. By all accounts, this includes authorized content such as YouTube, Netflix or other online video providers, as well as unauthorized streaming services that offer access to unlicensed content. The set top box providers do not make the content available themselves, but rather sell a device preloaded with software that can be used to access both infringing and non-infringing content.

According to the ruling, Bell, Videotron, and Rogers have become increasingly concerned with the emergence of competing set top boxes, claiming that the pre-loaded software makes it easy to access infringing streaming content. Although the same could be said of most personal computers, they argue that the set top boxes increase the likelihood of consumers cancelling their cable or satellite service (often referred to as “cord cutting”) and infringing their copyrights.

Given their concerns, the companies asked the court to issue an injunction banning several companies from distributing any set top boxes with pre-loaded software, characterizing the technology as an “existential” threat to their business models.

The federal court surprisingly issued the injunction, ruling that the companies met the legal standard of demonstrating “irreparable harm.” Since recent data indicates that cord cutting is still a small part of the Canadian market and the competition from authorized services such as Netflix is widely viewed as a far greater competitive threat, the ruling is difficult to square with marketplace realities.

The set top box distribution companies have unsurprisingly appealed the ruling on those grounds, but the bigger issue revolves around the court’s willingness to block technologies with substantial non-infringing uses. Indeed, the court acknowledges that the set top boxes “display numerous legal applications and generally have the effect of turning a standard television into a ‘smart TV’.”

If the decision stands, the case has the potential to create a Canadian chill over new, disruptive technologies leaving courts to decide what can and cannot be preloaded onto computers and other electronic devices. With Minister Navdeep Bains launching a major new initiative last week on innovation, he will need to keep a close eye on a court case that could alter the innovation balance and convince some companies to stay out of the Canadian market.


  1. Hi Michael, I have to respectfully disagree with your assessment that these boxes are new and innovative. These Android TV boxes are the equivalent of buying an Android phone, online, and having it come with a pirate app store pre-configured along with the legitimate Google or Amazon stores . These boxes are not being sold by companies with R&D departments, they are being sold by people. These tech savvy people are being configuration middlemen installing and configuring content pirating software on the end users behalf. The pirate software they are installing is available on-line for free. When you buy one of these boxes you are paying for the physical box, plus for their time and knowledge to research, install and configure it. Also who know what other nefarious things these boxes that you willingly bring in to your home could be setup to do.

    • Devil's Advocate says:

      “The pirate software they are installing is available on-line for free.”

      Not sure what point you’re trying to make with this.
      The same can be acquired for your computer.
      Does that mean the computer should be deemed “illegal”??

      “These boxes are not being sold by companies with R&D departments…”

      None of what you’re saying makes any real sense.
      How many companies actually have “R&D departments”, and how does that pertain to the legitimacy of the product?

      People need to stop repeating all the propaganda being served to them, and start thinking for themselves.

      • The fact that these are essentially just computers running freely available software is exactly why this crackdown scares me.

  2. I think the products in question are junk for a few reasons, but they’re essentially just computers with readily available software. It seems to me that our telco giants are targeting the wrong parties…

    • TrophyWife says:

      I have been messing with this free streaming software (Android version) for months now, and it’s pretty much junk. One day a link might work, the next day it won’t. More links do not work than those that do. In my opinion, anyone who is not very technical, and likes their remote to change channels, would be very unhahppy with this software. Changing a channel on an Android box is sort of like doing a Google search every time you want to watch something different, and over half the time the connection fails, at least from Canada. Yes you can buy a remote/air mouse, but it’s still downright cumbersome to navigate this streaming software. And there are virtually no traditional North American Sports (Hockey, Baseball, or Football) that work on this software from Canada. None. Nada. Oh, the software developers say it’s the Add-Ons that are the problem, that the Add-Ons are independent and not supported by the software developers. That is true, but in reality, the naked software without add-ons to stream content is of no value at all to the average TV viewer.

      In my house, I use this streaming software on my Windows Laptop for the occasional thing I want to watch. But it could never, ever replace regular TV viewing for my non-techy, impatient husband.

      I understand the addon repositories on this streaming software and how to add things in from them and from .zip files. I understand how to get software and add-on updates. Anyone with a bit of tech knowledge and patience can do it. But it takes tons of time to keep it running right.

      I returned my Android box to Costco. Now I’m playing with a Nvidia K1 Tablet streaming to Chromecast, but that his issues as well, and still no live Canadian Sports.

      It’s all a pain in the ass.

  3. Devil's Advocate says:

    This is just another example of how government and the legal system are used to protect the revenue stream of large incumbent providers. These companies, who themselves help promote “disruptive” technologies, should be made to adapt to the new, rather than be propped up by their money and our courts (and our money).

    It’s really quite obvious – if you allow competition to sell STBs, the incumbents lose a monopoly they’re currently milking for the rental fees. (Remember “converters”?)

    And the spin is always the same – things that put money INTO the pockets of these large incumbents are always described as “innovative” things that “improve your experience”, while things that take money OUT of their pockets are always painted as “instruments of pure piracy” that will “degrade your experience”.

    This is also another reason why service providers should not be allowed to also operate as content providers and/or media company owners. There are too many conflicting interests at work.

    As touched upon by Dr. Geist, there have been, over time, many examples of legacy industries trying to sue any innovative competitors that threatened to dilute the profits they previously enjoyed from monopoly, as well as any users who dared explore alternate methods of acquiring their content.

    Service providers are no different. They’re also media companies, advertisers, content providers and equipment promoters. They have a vested interest in keeping the profits within the “established circle”.

  4. Willie Wonka says:

    There is a lot of legal content on the internet where by simply connecting a PC to a big screen via HDMI can give a very great experience where cable is no longer required.

  5. The argument is disingenuous. The banned devices are advertised as pirate devices – never pay for cable again. There are other set top boxes like Roku and Apple TV that provide legitimate cut-the-cable services. A business that sells itself as breaking the law should not be allowed.

  6. My (inexpert) reading of the reports suggest the court understood that the vendors could continue to sell their machines, but only without the list of so-called pirate sites.

    I suspect it is only a stopgap. I have a mental picture of a machine that listens to port 666 for multicast advertisements of the form { “evil stolen porn channel”: “” } and append the new ones to a list of available channels

  7. Greg A. Woods says:

    The court is clearly at fault here and hopefully the appeal overrules the errant judgement.

    We cannot have innovation and allow corporations and/or the courts, or even the government itself, to allow incumbents to defend their legacy business from competition. This is ultimately got to be a binary decision — it can only be one way or the other.

    It is also very interesting to note that not all distributors of such devices have been named in the injunction. Take for example Apple and their AppleTV device. The only thing really different about it is that Rogers and Bell have their own online streaming services available (“pre-loaded” even) on AppleTV.

    • Devil's Advocate says:

      Goes along with what I’ve been saying about the incumbents operating an “established circle” of “friends”. Each one takes their turn protecting another, where needed.

  8. Devil's Advocate says:

    I’d also like to know where people are seeing these boxes “advertised as pirate devices”.

  9. I’m a cord-cutter. I don’t subscribe to any of these boxes. I cut cable primary because cable is way too expensive now, and I was paying for 500 channels of crap I didn’t watch. Even basic cable didn’t appeal too me. Why would I support a service I don’t use, and is largely obsolete.

    The future of content is within apps compatible on a wide range of devices. Yet again, we see this area of the digital paradigm shift being under-serviced purposely (often requiring a cable package to obtain content digitally from the broadcasters so it has nothing to do with copyright) by these amigo’s and claiming piracy as being the root of their problems.

    If they wanted to be proactive, they should start servicing content digitally like the rest of the developed world. Include content apps with internet packages. They are already doing that in the first place, but not to the extent they should be. There isn’t a lot of choice being offered outside of cable packages by these guys. Progressive policy needed, not regressive policy.

  10. Smart “pirates” can easily broadcast any web content on TV using ROKU or buying from amazon what they need. Building a Raspberry Pi smart TV box is not that difficult and can make a TV a true smart TV. It is the usual attack on windmills…

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