SOCAN v ESA: Royalties in the Age of Streaming

SOCAN v ESA: Royalties in the Age of Streaming

HeadshotEmily Chow is an IPilogue Writer and a 2L JD Candidate at Osgoode Hall Law School.

On July 15, 2022, the Supreme Court of Canada (“SCC”) released its decision for the case Society of Composers, Authors and Music Publishers of Canada (“SOCAN”) v. Entertainment Software Association (“ESA”). The unanimous decision written by Justice Rowe clarified provisions of the Copyright Act  (the “Act”), ruling that the Act only requires users to pay one royalty fee to stream works online as opposed to the two fees proposed by SOCAN.

Judicial History

In 2012, Parliament amended the Copyright Act to align copyright legislation with the World Intellectual Property Organization’s (“WIPO”) Copyright Treaty, which Canada signed in 1997. Among the changes was the addition of section 2.4(1.1), which was meant to clarify subsection 3(1)(f)  defining “communication of a work or other subject‑matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public.”

As the central authority for the approval of tariffs, the Copyright Board of Canada held proceedings to determine the amount of royalties to be paid, receiving submissions from various groups on how to interpret the new sections of the Copyright Act. SOCAN, a music licensing organization representing over 175,000 music creators, publishers and visual artists, argued that s. 2.4(1.1) required royalties to be paid whenever a copyrighted work was posted on the Internet for public access. The Copyright Board concurred, deeming that the act of making works available was in itself a separately protected and compensable activity. In effect, there would be two payable royalties: one for when the provider makes the work available online, and another for when a user actually streams or downloads a work.

The Federal Court of Appeal overturned the Copyright Board’s decision, concluding that Parliament did not intend to introduce the two-royalties system for users accessing works online.

Key Takeaways

Although differing in the exact standard of review for the Copyright Board’s decision, the SCC unanimously dismissed SOCAN and Music Canada’s appeal. The SCC found that the Copyright Board and SOCAN’s interpretation of the Copyright Act’s new sections undermined the purpose of the Act itself. As per the principle of technological neutrality, “distributing functionally equivalent works through old or new technology should engage the same copyright interests […] what matters is what the user receives, not how the user receives it” absent parliamentary intent to the contrary. Section 2.4(1.1) merely clarifies that a work is “communicated” when it is made available or uploaded – as “one continuous act”, streaming begins when the work was made available online and continues throughout to the end user’s accessing of the work. Thus, section 2.4(1.1) does not entitle authors to an additional “making available” royalty for making the work available online. It is merely part of the public performance right enshrined in section 3(1)(f).

The SCC also addressed two non-copyright specific issues relevant to the larger practice of law in Canada. Firstly, the SCC recognized a new category of correctness review under Vavilov to apply for instances of concurrent first instance jurisdiction, which allows both administrative bodies and courts to have this first instance jurisdiction over a legal issue in a statute (paras 26-28). Secondly, the Court reiterated the role international treaties play in statutory interpretation. Although WIPO’s Copyright Treaty is relevant to the statutory interpretation of the Act, it cannot “overwhelm clear legislative intent” (para 48). The SCC found that the Copyright Board erred by privileging the Copyright Treaty and Canada’s signatory obligations over the domestic Copyright Act in its interpretation.

The Copyright Society of the USA will host a discussion about SOCAN v ESA, breaking down the decision and exploring its broader implications for all stakeholders in the arenas of licensing, collective administration, and enforcement. The event features IP Osgoode’s own Professor David Vaver alongside Professor Ysolde Gendreau from the University of Montreal. It will be taking place virtually on Wednesday, August 3, 2022, at 12pm EST. Details and registration information can be found here.

Further reading:

Breakdown of SOCAN v ESA’s administrative law related holdings:

US Government’s Making Available Study: