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Royalties in Online Copyright Content

Royalties in Online Copyright Content

Author: Marsha Simone Cadogan, Barrister & Solicitor

The Supreme Court of Canada (SCC) has ruled[1] that placing copyrighted works on the internet is not a separate compensable activity that royalties can be applied to. The Society of Composers, Authors, and Music Publishers of Canada (SOCAN) and Music Canada appealed to the SCC after the Federal Court of Appeal held that the Copyright Board could not charge a separate royalty when authors  make their content available on the internet.  The issue concerned whether the act of making content available on the internet is a compensable activity to which royalties should apply, separate and apart from when the content is downloaded or streamed. The SCC (by majority) held that while the authors’ economic rights are important, they must be balanced with the right of users to access these works. The Copyright Act grants [2] three broad and exhaustive interests to authors: the right to produce and reproduce their work, the right to communicate their work to the public, and the right to publish an unpublished work. There was no legislative intention to allow authors to charge users double royalties – one for when the content is made available online and another when it is downloaded or streamed.

Three factors were significant in the reasons handed down by the Court.

WIPO Copyright Treaty to be interpreted with reference to Canada’s Copyright Act

At the centre of the dispute between SOCAN and Music Canada’s was the claim that the WIPO Copyright Treaty intended the act of making available copyright materials to the public by telecommunication be treated as a right on its own. In recognizing the increased digitization of creative content, the WIPO Copyright Treaty (Treaty)[3] give authors rights over their content in digital environments. Canada is a party to the treaty. The Copyright Modernization Act (CMA – 2012) amended the Copyright Act to make allowance for the rights and interests of authors in works engaged with online. Article 8 of the treaty give authors the exclusive right to communicate their work to the public on digital platforms, at a time or place that the user chooses to engage with the content. Therefore, this provision gives authors the exclusive right to authorize downloads or online streaming of their content. The Court reasoned that there was no ambiguity between the treaty and the Copyright’s Act provision on the author’s right to make available their work to the public by telecommunication. While the treaty specifies that the author has this right, it was not a stand alone or sui generis right but must be interpreted in line with the Copyright Act, in particular, in accordance with the three economic rights which the Act gives to authors.

Authors have three interests in their works

Since the Copyright Act, the SCC reasoned, exhaustively mandates for authors to have three interests their works, recognizing a fourth right would be contrary to legislative intent. If it were intended for authors to have a compensable right when works are placed on the internet separate from the downloading or streaming of their content, the Copyright Act would have made this specific. Therefore, when users download copyright content, the right of reproduction is engaged. The streaming of online content engages the copyright owner’s right to authorize the public performance of their creative content. Each activity (download or streaming) is not associated with more than one right at the same time.

The Copyright Act supports Technological Neutrality

If the Court were to permit two royalties to apply to online copyright content that is either downloaded or streamed, the principle of technological neutrality[4] would be violated. Canadian jurisprudence supports the principle of technological neutrality. This principle holds that copyright content will not be treated differently when it is accessed on the internet, compared to when it is made available for use offline. Therefore, authors’ rights over their copyrighted works should be treated the same, regardless of how it is accessed (online or in physical formats). If users must pay two royalties to access a content in one specific way (for example, by downloading a song), the principle of technological neutrality would not be upheld.

Standard of Review – A New Correctness Category

The Court also recognized a sixth correctness category for the judicial review of administrative decisions. When the legislature gives concurrent jurisdiction to administrative tribunals and a court of first instance, a correctness standard of review is to apply to decisions of administrative bodies. This, the Supreme Court reasoned, give effect to legislative intent, and promotes the rule of law. Vavilov,[5] the court’s previous precedent setting decision, had not closed the door to whether a new correctness category (of standard of review) can be recognized. New categories of standard of review can only be recognized in rare and exceptional circumstances. The Supreme Court reasoned that the circumstances in SOCAN was such a case.

[1] Society of Composers, Authors and Music Publishers of Canada and Music Canada v Entertainment Software Association, Entertainment Software Association of Canada, Apple Inc., Apple Canada Inc. Bell Canada, Quebecor Media Inc; Rogers Communication Inc, Shaw Communications Inc., Pandora Media Inc.2022 SCC 30 (SOCAN).

[2] Copyright Act, RSC 1985, c C-42 s.3(1).

[3] World intellectual Property Organization (WIPO) Copyright Treaty, (Adopted in Geneva on December 20, 1996).

[4] Para 69-73.

[5] 2019 SCC 65.

This article is for general information purposes only and is not intended to be legal advise. For legal advise on copyright matters, contact Marsha Simone at 416-748-9236 ext. 2.