Double-Dipping: the New Reality

Over the last decade or so, the lines separating the fields of telecommunications and broadcasting have become harder and harder to distinguish. This convergence has lead to difficulties in determining the applicability of laws to activities enabled by new technologies.

On September 18, the Supreme Court of Canada (“SCC”) refused leave to appeal in Canadian Wireless Telecommunications Association, et al v SOCAN, a case where this convergence played a central role. By refusing leave to appeal, the Federal Court of Appeal’s (“FCA”) decision (2008 FCA 6) stands as the last word in setting an interesting precedent that seemingly holds wireless carriers as both vendors and broadcasters of copyrighted works with regards to ringtones.

The Decision

This case involved the judicial review of the Copyright Board’s decision to certify a tariff for wireless transmission of ringtones from wireless carrier to cellphone owners. The main issue was whether the transmission constituted a communication to the public by telecommunication for the purposes of s. 3(1)(f) of the Copyright Act, RSC 1985, c C-42. In upholding the Board’s decision, the FCA concluded that there was a “communication,” and that it was also “to the public.” As such, they held that the tariff was properly set.

It should be noted that the s. 3(1)(f) right is a right that is separate and distinct from the reproduction right in a copyrighted work. As such, the wireless carriers were not arguing that they should not have to pay compensation for the musical works (they already had deals with other reproduction rights societies to reproduce the ringtones). Instead, they were trying to argue they should not have to pay additional compensation merely for delivering the ringtone via telecommunications. In effect, they were arguing that the authors, composers, and music publishers should not be able to “collect a second time for the same use of the musical works for which they are already being compensated” (para 14).

Despite the seeming intuitiveness of such a position, the court based their determination strictly on the applicability of s. 3(1)(f), and held that the wireless carriers need to pay for the s. 3(1)(f) right.

This is so even though the FCA noted that the s. 3(1)(f) right was originally added for the purposes of public performance by radio broadcasting (para 26). That is, the separate right was to clearly delineate the ability of the copyright owners’ to receive compensation for the additional use of the musical work apart from the sale of the physical copy. The FCA did not address this historical context with too much significance; instead, the court merely used the history to show that ringtone transmission is a “communication.”

The Implications

With the broad interpretation of communication to the public given by the FCA (and the SCC’s refusal to intervene), it seems that any online distributor of music may now also need to pay additional royalties for the s. 3(1)(f) right, even if they are already paying for the reproduction rights. Thus, they will be penalized merely for using telecommunication as a medium of communication – a result which seems counter-intuitive to achieving a more efficient society.

Additionally, it has been noted that this decision is consistent with a ‘making available’ right that will likely make it into the next round of copyright reform in Canada. While such a right is intended to ensure protection for copyright owners without requiring unauthorized reproduction of the musical work (prosecuting peer-to-peer uploaders, for example), it seems that if this case is any indication, the side effect may be that copyright owners will be able to collect an additional royalty for the same use of the musical work.