Kraft Canada: Skill and Judgment Plus?
On July 26th, the Supreme Court of Canada (“SCC”) released their decision in Euro-Excellence Inc. v Kraft Canada Inc.,  3 SCR 20 [Kraft Canada]. We here at The Court first looked at this case back on May 10, where Jakki Warkentin looked at the consequences of allowing authorized exclusive distributors to use copyright as a means of controlling parallel imports. Kraft Canada, who was the authorized distributor and the copyright license holder in this case, claimed secondary infringement of their copyrighted logos under s.27(2) of the Copyright Act, RSC, 1985, c C-42 when goods legitimately purchased elsewhere were imported and distributed in Canada.
The SCC overturns the Federal Court of Appeal’s ruling, and finds that Euro-Excellence did not secondarily infringe Kraft Canada’s licensed copyright in their chocolate bar logos, despite the fact that Kraft Canada had an exclusive distribution deal.
This decision is broken down into 4 parts, 3 concurring judgments which form the majority panel of 7 judges, and a minority judgment backed by 2 others. Professor Geist at the University of Ottawa has a good summary of the different positions here. While this is a meaty decision which may have consequences on a range of topics including the rights of a copyright licensee versus that of a copyright assignee, I want to focus my comments on the implications for the threshold conditions of garnering copyright protection. On this point, the majority panel had conflicting opinions, where a plurality of 3 judges in a judgment penned by Bastarache J. was at odds with the 3-judge opinion voiced by Rothstein J.
Since the SCC’s judgment in CCH Canadian Ltd. v Law Society of Upper Canada,  1 SCR 339 [CCH], the main criterion for copyright protection was that of originality, widely recognized as an exercise of “skill and judgment”:
For a work to be ‘original’ within the meaning of the Copyright Act, it must be more than a mere copy of another work. At the same time, it need not be creative, in the sense of being novel or unique. What is required to attract copyright protection in the expression of an idea is an exercise of skill and judgment. By skill, I mean the use of one’s knowledge, developed aptitude or practised ability in producing the work. By judgment, I mean the use of one’s capacity for discernment or ability to form an opinion or evaluation by comparing different possible options in producing the work (CCH, para 16).
In coming to his decision in Kraft Canada, Bastarache J. limits the scope of copyright protection to only protect “legitimate economic interests.” Bastarache J. writes,
The Act protects only the legitimate economic interests of copyright holders. It protects the economic benefits of skill and judgment; it does not protect all economic benefits of all types of labour. Section 27(2) of the Act is meant to prohibit secondary infringement resulting from the wrongful appropriation of the gains of another’s skill and judgment by way of the acts enumerated in paras. (a) to (c). Conversely, other economic interests – although they may seem to be closely associated with the interests legitimately protected as emanating from that skill and judgment – are not protected. In particular, if a work of skill and judgment…is attached to some other consumer good …, the economic gains associated with the sale of the consumer good must not be mistakenly viewed as the legitimate economic interests of the copyright holder of the logo that are protected by the law of copyright (para 85). [Emphasis added]
Though Bastarache J. reasons his decision in terms of stopping the expansion of copyright rights into realms it was never intended for, he may have incidentally introduced an additional requirement for protection under copyright law. Rothstein J.’s judgment points this out by saying:
Bastarache J. relies on a distinction between copyrighted works that are sold and works that are ‘merely incidental’ to the item being sold. … I understand this distinction to be the crux of his analysis. However, I see no statutory authority for the proposition that ‘incidental’ works are not protected by the Copyright Act, R.S.C. 1985, c. C-42. This Court’s holding in CCH confirms that all artistic works receive the protection of copyright if they meet the requisite standards of ‘skill and judgment’: CCH, at para. 16. The Copyright Act does not exempt so called ‘incidental”’ works from its protection. Neither Bastarache J. nor any of the parties contest that the …logos resulted from exercises of skill and judgment. As such, they are legitimate subjects of copyright (para 4).
In response, Bastarache J. contends that he didn’t go so far as to exclude protection for works that are incidental to a consumer good, saying,
Contrary to what Rothstein J. seems to argue at para. 4, the previous analysis does not suggest that the simple fact of a work being attached to a consumer good would preclude that work from copyright protection: the Act is clear that protection extends to, inter alia, works produced or reproduced ‘in any material form whatever’ (s. 3(1)). The ‘merely incidental’ analysis goes to secondary liability under s. 27(2) only; rather than being about what is and is not copyrightable, its intention is to prevent that section from being improperly leveraged to use the Copyright Act as a protection of commercial interests completely unrelated to copyright’s intended domain (para 95).
He further explains,
to be brought within the protection of s. 27(2), a copyrighted work must be more than merely incidental to the consumer good to which it is affixed. Only when that condition is satisfied can it accurately be said that it is the copyrighted work itself which is the subject of one of the activities described in paras. (a) to (c) of s. 27(2) (para 100).
Though Bastarache J. limits his “legitimate economic interests’”requirement to works under the scrutiny of secondary infringement, I prefer Rothstein J.’s position in disposing of this case on a strict interpretation of s.27(2). By introducing this concept into copyright eligibility, limited though it may be, Bastarache J. risks introducing requirements for copyright protection that the Act never intended. Though I’d agree with his viewpoint that copyright needs to be a proper balance between rightsholders and the public, Rothstein J.’s criticism of lack of statutory basis seems more compelling. In CCH, the balance struck was one based on the Fair Dealing provision of the Copyright Act. In comparison, there does not seem to be any such provision holding up the position espoused by Bastarache J.