On November 26, 2015, the Supreme Court of Canada delivered its ruling in the matter of Canadian Broadcasting Corp. v SODRAC 2003 Inc. The Canada Broadcasting Corporation (“CBC”) is a producer of works, and also a broadcaster. In the course of preparing for a broadcast, the CBC makes copies of musical works, including copies for synchronizing music and audio visual work, as well as creating copies for internal uses, such as copying to a digital content management system. These copies, which have become common practice in the industry, are called “broadcast-incidental copies” and current broadcasting technology renders them necessary in the production of a program which will be broadcasted to the public.
The main issue in this case was whether these broadcast-incidental copies, which current broadcasting technology requires, are protected by copyright, and whether broadcasters should be required to pay royalties for these incidental copies. In other words, would creating these broadcast-incidental copies constitute an infringement of copyright by the broadcaster if they were made without consent of the copyright owner, thus requiring the broadcaster to obtain a separate license to create them, or, in the alternative, would these copies already be covered by a standard license that CBC would already have with content owners.
In this case, the Court invoked the principle of “technological neutrality” which it stated as being “recognition that, absent parliamentary intent to the contrary, the Copyright Act should not be interpreted or applied to favour or discriminate against any particular form of technology” (Canadian Broadcasting Corp. v SODRAC 2003 Inc., at paragraph 66). The principle is derived from balancing the rights of users and copyright owners, i.e., encouraging public interest in the production and dissemination of creative works and intellect, while providing a just reward for the creator. The SCC stated that this long standing balance between authors and users, which the Copyright Act aims to achieve, must be maintained across all technological contexts and continue to be preserved in the digital environment. Further, regulators may not forgo this principle, and it should be used to guide their analysis when deciding the valuation of royalties or licenses.
The CBC argued that the principle of technological neutrality would render the incidental copies unprotected by copyright since they are part of the broadcasting process, which means that it should not pay for the incidental copies since it already pays for the use of the work which it broadcasts. The incidental copies do not generate any revenue and are only created to assist in the use of the music which is already paid for through a separate copyright license.
On the other hand, The Society for Reproduction Rights of Authors, Composers and Publishers in Canada (“SODRAC”) argued that that incidental copies and broadcast reproductions are distinct, and require separate licenses and thus separate royalties.
The SCC held that incidental copies are protected by copyright, and are subject to a royalty payment separate from those covering the broadcast itself. The Court also underscored the importance of technological neutrality and ruled that it is necessary to take this principle into account when setting the royalty structure, noting that the idea that “more copies mean more value and thus, more royalties” is out of step with the principles of technological neutrality that are meant to balance the interests of the user and copyright holder. The SCC sent the case back to the Copyright Board on the issue of determining the royalty structure, for a reconsideration of valuation of the license that takes into account the principles of technological neutrality and balance between user and right‑holder interests.
This decision will likely have implications that reach far beyond the broadcast issues that are discussed, and will potentially be given significant weight by the courts when addressing issues related to copies of works that are reproduced through non-traditional methods including through the internet. Charities and not-for-profits working in the digital arena should consult legal counsel before signing any agreements, or when negotiating copyright licenses, to ensure that their interests are properly represented in light of this decision.