ESAC v. SOCAN – Battle Lines Drawn in Copyright Pentalogy

ESAC v. SOCAN – Battle Lines Drawn in Copyright Pentalogy

Entertainment Software Association of Canada v SOCAN was one of two 5-4 split decisions of the copyright pentalogy decisions released on July 12. Online media and software producers and distributors won a major victory. The Supreme Court ruled that the “communication to the public by telecommunication” right does not apply to downloads of a musical work. Only the reproduction right will apply. The case was largely confined to an interpretation of the word “communication” within the Copyright Act (Act). The split decision is explained not by vast divergence in legal analysis, but by the emergence of two rival camps over the proper approach to the interpretation of the Act. This conflict can be expected to become all the more important since Bill C-11, which introduces numerous changes to the Act, received Royal Assent merely three weeks ago.

The Entertainment Software Association of Canada (ESAC) is a coalition of video game producers and distributors. The Society of Composers, Authors and Music Publishers of Canada (SOCAN) is a collective society which administers various rights of composers, authors and publishers of musical works. With advances in video game technology it has become common for video games to include soundtracks with copyright-protected  musical works. Ordinarily, video game producers privately contract with rights holders for a licence, setting out compensation. This compensation was paid pursuant to the copyright owner’s sole right to reproduce the musical work (the “reproduction right”). In 2007, SOCAN brought a broad application to the Copyright Board seeking new tariffs pursuant to s. 3(1)(f), which provides copyright owners with the exclusive right to communicate works to the public through telecommunication (the “telecommunication right”).

ESAC made multiple arguments against the imposition of the new tariffs to both the Board and the Federal Court of Appeal, including:

  • Double compensation would result by the imposition of an additional tariff based on the “telecommunication right” because video game publishers already enter into contractual compensatory agreements with rights holders; and
  • A distinction should not be made between video games which are downloaded and those that are purchased in physical stores.

Both the Board and the Court of Appeal rejected all its submissions and upheld the new tariffs. At issue at the SCC was the interpretation of the word “communicate” in s. 3(1)(f):

In the case of any literary, dramatic, musical or artistic work, to communicate the work to the public by telecommunication,

More specifically, is the “telecommunication right” intended to apply to the downloading of video games (or other subject matter) solely by virtue of it having been “communicated” over the Internet, or is it solely a reproduction subject to the  “reproduction right”?

The majority decision written by Abella and Moldaver JJ (joined by McLachlin CJ, Deschamps and Karakatsanis JJ) found the “telecommunication right” inapplicable to permanent downloads of any sort. The minority decision of Rothstein J (Lebel, Fish, Cromwell JJ) came to the opposite conclusion. The distinction between the majority and the dissent can be demonstrated by reference to the opening paragraphs of their respective decisions. The majority introduced its decision as follows:

"In the video game publishing industry, the royalties for the reproduction of any musical works which are incorporated into the games are currently negotiated before the games are packaged for public sale.  Once these rights have been negotiated, the owner of the copyright in the musical work has no further rights when the game is sold.  The question in this appeal is whether the rights are nonetheless revived when the work is sold over the Internet instead of in a store.  In our view, it makes little sense to distinguish between the two methods of selling the same work."

While the minority provided following passage in the third paragraph of its decision:

"My colleagues Abella and Moldaver JJ. part company with me on some fundamental principles of copyright law.  In my view, precedents of this Court have established the principles that must govern the analysis in this appeal.  Copyright is a creature of statute.  Copyright is comprised of a bundle of independent statutory rights. Courts must give effect to these independent rights as provided by Parliament.  While courts must bear in mind that the Copyright Act “is ... a balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator” which balance requires “not only ... recognizing the creator’s rights but in giving due weight to their limited nature,” courts must still respect the language chosen by Parliament — not override it."

The majority guided its interpretation of the Act by reference to the policy considerations at issue. By contrast, while Rothstein J acknowledged a role for general policy considerations in the interpretive process, he reiterated the supremacy of clear and unambiguous statutory language, and tacitly suggested that the majority’s decision was at least partially an overextension of its jurisdiction.

The majority decision is grounded in policy arguments in support of the concept of technological neutrality. Namely, that the imposition of a separate tariff for the “telecommunication right” would create an additional cost on the distribution of products by way of downloading over the Internet, when compared to distribution in physical stores, and thus violate technological neutrality. The majority conceived of the Internet as merely an efficient delivery method for products that one could alternatively purchase in a store, or “a technological taxi that delivers a durable copy of the same work to the end user.” According to the Court, to hold otherwise would run contrary to Théberge and frustrate its set out purpose of copyright law - to balance the public interest in the encouragement and dissemination of works, with a just reward for creators.

The majority also drew some support for its analysis from the legislative history of the Act - finding that the “telecommunication right” has a historic relationship with performances of an impermanent nature, and as such it would be inconsistent to now include permanent downloads.

On the other side of the bench was the interpretive analysis of the dissent written by Justice Rothstein. The heart of the dissent’s judgment  was a detailed analysis of the statutory language of the Act. The dissent found that when the term “communicate” is read in its ordinary grammatical sense, and compared with dictionary definitions, no ambiguity can be alleged – rather 3(1)(f) clearly applies to all internet transmissions and there is no exception for downloads. This basic interpretation of “communication” was also consistent with both the SCC decision in SOCAN v CAIP, and the Federal Court of Appeal decision in SOCAN 24. On those grounds, even if the Internet is a “technological taxi,” downloading of video games or other permanent matter still falls within the right described in s. 3(1)(f).

Rothstein J openly undermined the significance of the policy reasons considered by the majority in its interpretation of the Act. He emphasized that rights found in s. 3 have long been recognized as separate and distinct – there is no legal reason to exempt downloads from the “telecommunication right” solely because the same act also covered by another right. Finally, while Rothstein J agreed that applying the concept of technological neutrality is generally favourable, he challenged the legitimacy of the majority’s emphasis on technological neutrality by stating that it is beyond the function of the Court to depart

“from the ordinary meaning of the words of the Act in order to achieve the level of protection for copyright holders that the court considers is adequate. Any concerns arising from the independent protected rights in the digital context are concerns of policy, which are properly within the domain of Parliament in defining the scope of copyright. …inferring limits into the communication right in the present case would be beyond the function of the courts” 

Both sides made convincing arguments as to the proper interpretive approach to provisions of the Act. On the one hand, it seems unlikely that Parliament would intend the Act to be interpreted to violate technological neutrality – this concept was cited as one of the policy goals of Bill C-11.  Yet, the majority stated that absent evidence of Parliamentary intent to the contrary, it would interpret the Act in a manner consistent with technological neutrality. This begs the question implied by Rothstein J – how much clearer must the statutory language be to demonstrate Parliamentary intent? The coming into force of Bill C-11 is likely to bring such questions to the forefront because a vast amount of new statutory language will require interpretation. Moreover, many new provisions, such as strict compliance with Technological Protection Measures, could demonstrate a Parliamentary intent to shift the balance of copyright away from technological neutrality. These provisions, and others, might be interpreted to run directly counter to the policy reasons embodied by Théberge and CCH, which were so enthusiastically supported by the majority of the Supreme Court in interpreting the Act in this case. To what extent the policy considerations will affect the future interpretation of Bill C-11 remains to be seen.


Ken Anderson is a JD candidate at Osgoode Hall Law School.