Artists, copyright owners and content distributors should take note of the Supreme Court of Canada’s (SCC) recent ruling that royalties are owed when works are made accessible to the public through the internet, but no additional royalty is owed when those works are streamed or downloaded. In Society of Composers, Authors and Music Publishers of Canada v Entertainment Software Association, 2022 SCC 30, the SCC rendered its first judgment on section 2.4(1.1) of the Copyright Act — widely referred to as the “making available” provision, which was added in 2012. The Court held that the provision does not provide copyright owners with a separate compensable right and unanimously confirmed that the Copyright Act only requires users to pay one royalty fee for the musical work when the work is made available for streaming or downloading. This judgement further entrenches the SCC’s approach of focusing on technological neutrality while balancing the interests of copyright owners and users.
Key takeaways
- Section 2.4(1.1) fulfils Canada’s “making available” obligations under the WIPO Copyright Treaty through a combination of the “communication to the public,” reproduction, and authorization rights under section 3(1) of the Copyright Act.
- The act of performance (“communication to the public”) in the form of “making available” is completed by making a work available for on˗demand transmission. If a user later experiences this performance by streaming the work, they are experiencing an already ongoing performance, not starting a new one. Consequently, no separate royalty is payable.
- This approach adequately protects copyright owners: when a work is streamed or made available for streaming, the owner’s performance right is engaged. If a work is downloaded, the owner’s reproduction right is engaged. If a work is made available for downloading, the owner’s right to authorize reproductions is engaged.
- The SCC’s approach when making this judgement reflects the importance of technological neutrality and a need to balance competing interests between copyright owners and users. Previous SCC decisions on this matter remain good law, and this decision confirms that the medium of distribution (the technologies used to distribute and access works) is irrelevant to which copyright interest is engaged.
Procedural background
In 2012, the Copyright Modernization Act (CMA) amended the Copyright Act and introduced section 2.4(1.1). The new section provided an interpretive aid to section 3(1)(f), which gives authors the right to “communicate the work to the public by telecommunication,” by setting out that:
2.4(1.1) For the purposes of this Act, 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. (bolding added)
The CMA was proclaimed into force just days after the SCC rendered its judgement in Entertainment Software Association v Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34 and Rogers Communications Inc. v Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35— both of which considered whether works transmitted over the internet triggered the communication right under section 3(1)(f) of the Act. Notably, these cases determined that copyright owners of musical works could only charge one royalty when users accessed works as downloads or streams: a reproduction royalty for downloads or a performance royalty for streams. The stage was thus set: how should the new interpretive provision in section 2.4(1.1) be applied in light of the SCC decisions? Did section 2.4(1.1) give copyright owners a new right for which they could claim compensation, or was it merely illustrating how an already existing compensable right was to be applied?
In 2017, the Copyright Board decided on a tariff proceeding in which the Society of Composers, Authors and Music Publishers of Canada (SOCAN) argued that the implementation of section 2.4(1.1) rendered the SCC’s 2012 decisions irrelevant. This section created a new right permitting SOCAN to collect royalties when works were made available for a stream or download, in addition to the royalties it would already collect for said stream or download. In its decision, the Copyright Board agreed with SOCAN and found that rights-owners were entitled to collect royalties for making a work available and any subsequent transmission, stream or download. The Copyright Board considered Canada’s international obligations and relied on Article 8 of the WIPO Copyright Treaty to support its decision. Article 8 reads:
Without prejudice to the provisions of Articles 11(1)(ii), 11bis(1)(i) and (ii), 11ter(1)(i), 14(1)(i) and 14bis(1)(i) of the Berne Convention, authors of literary and artistic works shall enjoy the exclusive right of authorizing any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them.
The Copyright Board interpreted Article 8 to conclude that section 2.4(1.1) expanded the meaning of communication and triggered an additional royalty, notwithstanding the fact that this new royalty would not apply if a work was accessed via traditional, non-streaming methods, such as broadcast and physical media.
On appeal, the Federal Court of Appeal (FCA) quashed the Copyright Board’s decision. The FCA found the Copyright Board failed to adequately consider the SCC’s earlier decisions and misapprehended the relationship between international and domestic law. That being so, the FCA declined to provide its interpretation of section 2.4(1.1) but put forward its view that section 2.4(1.1) does not create a new right that can trigger additional royalties.
The Supreme Court of Canada’s decision
Echoing the FCA decision, the majority of the SCC found that the Copyright Board’s interpretation of section 2.4(1.1) was inconsistent with the Copyright Act, and the decision was contrary to the SCC’s earlier decisions which remained good law irrespective of the amendments made by the CMA in 2012.
When interpreting section 2.4(1.1)’s language, the SCC’s key considerations focused on whether Canada implemented its international obligations as dictated by the WIPO Copyright Treaty (WCT) and looked to Article 8 of the WCT to examine how it may colour the Court’s interpretation. This multilateral treaty was negotiated in 1996 to adapt international copyright rules to new and emerging technologies. The SCC found that the overarching purpose of this treaty was to fill potential gaps in the Berne Convention, which was created by the emergence of new internet technologies. The Court found it was clear that the Berne Convention protected copyright owners when their works were distributed through “push” technologies like radio and cable, but it was unclear whether it protected owners when their works were distributed through “pull” technologies like on-demand streaming. The Court reasoned that in the absence of WCT, there would be significant gaps in copyright protection, leaving owners with no recourse against individuals who illicitly make their works available online for downloading or streaming.
The SCC found that Article 8 of the WCT resolved this ambiguity because it clarified that the right of “communication to the public” applied to on˗demand transmissions. The Court agreed with legal texts that the WCT’s principal innovation was its specification that the right of communication to the public includes a right of “making available.” The Court found this right targets on-demand transmissions because it makes clear that the members of the public may be separated in space and in time. The SCC confirmed this Article has two goals: “(1) clarify that on-demand transmissions are captured by the right to communicate works to the public; and (2) ensure that authors can control the act of making their works available online.” The SCC summarized Canada’s obligations under Article 8 as follows:
[85] This persuasively establishes that art. 8 requires that member countries give authors the right to control when and how their work is made available for downloading or streaming. This conclusion is in full accordance with the wording of art. 8, which entitles authors to control the act of making a work available in a way that the public “may access” it. Actual transmission is not required. It is also supported by the explanatory notes accompanying art. 8 (then art. 10), which explain that the relevant act protected by art. 8 is the “initial act” of providing “access” to the work.
Notably, the Court also held that the WCT could be implemented in multiple ways, including through a combination of rights:
[90] In sum, the umbrella solution gave “relative freedom [to] national legislators in choosing the right of distribution, the right of communication to the public, the combination of these rights, or a new right, to fulfil obligations under Article 8”… Accordingly, provided that the Copyright Act gives effect to art. 8’s goals through any combination of rights, Canada will be in compliance with its obligations under art. 8.
The SCC’s decision reflects the view that Article 8 only functions to protect on-demand transmissions and give copyright owners a right to control over how their works are transmitted, but the Article does not dictate how treaty signatories are to give effect to these obligations. Accordingly, after looking at the text, structure, and purpose of the Copyright Act and the context of section 2.4(1.1), the Court held that the correct interpretation of the provision is solely to clarify that the communication right in section 3(1)(f) applies to on-demand streams, and that a work is deemed “performed” as soon as it is made available for streaming. Section 2.4(1.1) does not require that making the work available and accessing the work be treated as separate compensable acts. The Court held:
[100] The work is performed as soon as it is made available for on-demand streaming. At this point, a royalty is payable. If a user later experiences this performance by streaming the work, they are experiencing an already ongoing performance, not starting a new one. No separate royalty is payable at that point. The “act of ‘communication to the public’ in the form of ‘making available’ is completed by merely making a work available for on˗demand transmission…In other words, the making available of a stream and a stream by a user are both protected as a single performance — a single communication to the public.
Importantly, the SCC found this interpretation fulfilled Canada’s obligations under Article 8 through a combination of the performance, reproduction, and authorization rights under section 3(1), while remaining technologically neutral. The principle of technological neutrality has been of central importance in the Court’s interpretation of copyright law. In the SCC’s 2015 decision, CBC v SODRAC 2003 Inc., the Court held that technological neutrality requires considering the benefits obtained by users in the operation of particular technologies. If two users using different technologies derive the same benefit from a protected work, then licensing costs should be equal. If one user derives a greater benefit, then a copyright holder should be entitled to a higher royalty from that user. This means that a medium of distribution is irrelevant to which copyright interest is engaged; instead, the copyright interest at play primarily depends on the ultimate product or experience obtained by the user. Further, in its 2022 decision, the Court also set out how this interpretation leaves no gaps in copyright protection:
[8] If a work is streamed or made available for on-demand streaming, the author’s performance right is engaged. If a work is downloaded, the author’s reproduction right is engaged. If a work is made available for downloading, the author’s right to authorize reproductions is engaged.
This decision may be viewed as Canada’s highest court eliminating a potential source of revenue for artists and copyright holders, but it more importantly confirms that the current legislative scheme sufficiently protects all copyright interests engaged. Notably, a more practical impact is that this decision supports the proposition that a royalty is owed once a work is made accessible to the public, regardless of whether or not the work is ever downloaded or streamed.
For more information, please reach out to the authors, Jaskaran Grewal and Bob Tarantino.
