[ EEPI-Discuss ] File Sharing and Canadian Law

[Lauren Weinstein <lauren@vortex.com>]

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From: David Farber <dave@farber.net>
Subject: [IP] The State of File Sharing and Canadian Law
Date: Mon, 6 Jun 2005 07:54:55 -0400
To: Ip ip <ip@v2.listbox.com>


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From: Michael Geist <mgeist@pobox.com>
Date: June 6, 2005 7:32:27 AM EDT
To: dave@farber.net
Subject: The State of File Sharing and Canadian Law


Dave,

Of possible interest to IP - my regular Law Bytes column features the  
second part of an examination of the recent Canadian Federal Court of  
Appeal decision involving the recording industry's attempt to  
identify 29 alleged file sharers.

After considering the privacy issues last week, this column (posted  
below) moves to the copyright implications by considering three  
questions: can the Canadian recording industry sue file sharers? Can  
it win such suits?  And what legal reverberations might ensue if it  
does win? The answers require analysis of the Canadian private  
copying system and the effect of Canadian Copyright Act's statutory  
damages regime and lead to the conclusion that lawsuits are a risky  
strategy with many outstanding legal questions.

Freely available hyperlinked version at
http://www.michaelgeist.ca/resc/html_bkup/june62005.html

Toronto Star (reg required) version at
<http://geistfileshareparttwo.notlong.com/>

Part one examination of privacy implications at
http://www.michaelgeist.ca/resc/html_bkup/may302005.html

MG

THE STATE OF FILE SHARING AND CANADIAN LAW

The recent Federal Court of Appeal music file sharing case, in which  
the court rejected the Canadian Recording Industry Association's  
attempt to uncover the identities of 29 alleged file sharers, raises  
important privacy and copyright issues.  Last week's column reviewed  
the court's test to protect personal privacy; this week's column  
assesses the copyright implications of that decision.

Although the court declined to articulate definitive conclusions on  
important copyright issues associated with file sharing, its decision  
will undeniably have a major impact on copyright policy. This impact  
is best addressed by analyzing three questions - can CRIA sue file  
sharers?  Can it win such suits?  And what legal reverberations might  
ensue if it does win?

The answer to the first question is relatively straight forward.   
CRIA can sue file sharers in Canada and it has indeed asserted that  
the decision provides a blueprint for future suits.

In the aftermath of last year's trial decision, the recording  
industry expressed grave concern about the state of Canadian  
copyright law and lobbied aggressively for immediate changes. In  
light of the appellate decision, it is now safe to declare the  
copyright emergency over.  In fact, the fears of a devastating effect  
never materialized.  According to CRIA's own figures, in the thirteen  
months of reported sales since the March 2004 decision, both sales  
and shipments have increased.

The answer to the second question -- whether CRIA can win file  
sharing suits -- is open to debate, particularly with respect to  
suits filed against individuals that solely download music from peer- 
to-peer networks.  The complicating factor is the effect of Canada's  
private copying system, which establishes a levy on blank media such  
as recordable CDs.  Anna Bucci, the Executive Director of the  
Canadian Private Copying Collective, the body that administers the  
$120 million in royalties that have been generated by the levy, last  
week described private copying as creating "a new right for the  
Canadian public -- the right to make private copies of music for  
their own personal use."

There are at least three objections raised to the application of this  
private copying right to P2P file sharing.  First, the right applies  
solely to copying, not to those who "upload" music on peer-to-peer  
networks.  This objection is certainly valid as neither the Canadian  
courts nor the Canadian Copyright Board have ever indicated that  
private copying could be used as a defense against the act of uploading.

Second, CRIA recently argued that the private copying right does not  
apply to copies made to personal computers.  A review of the  
legislative history of private copying provides little support for  
this interpretation, however, as the statute was intentionally  
drafted in a technology neutral fashion such that it could be applied  
to new copying media, including computer hard drives.

The primary impetus behind the creation of the private copying system  
was the Charter of Rights for Creators, a 1985 parliamentary  
committee report. That report explicitly declined to tie the levy to  
a particular technology, presciently noting that "future recording  
devices might not use blank tape, thereby making a tape royalty  
obsolete. The work could be stored in a computer memory with no  
independent material support at all."

Eleven years later the Task Force on the Future of the Canadian Music  
Industry, which was co-chaired by the heads of CRIA and the Canadian  
Independent Record Production Association, continued to press for the  
creation of private copying levy to be applied to both media and  
devices.  The technology neutral levy was enacted into law soon after  
with the industry celebrating success after 15 years of lobbying but  
lamenting that the delay had "literally killed dozens of careers."

While the levy was certainly intended to cover computer hard drives,  
the third objection is whether the provision, as currently drafted,  
actually achieves that goal.  This issue was thrown into some doubt  
by a Federal Court of Appeal decision last December that upheld the  
validity of the levy but tossed out its application to MP3 players  
such as the Apple iPod.

That decision is currently under appeal to the Supreme Court of  
Canada.  If Canada's highest court overturns the decision, the intent  
of the legislation will be restored and much of the doubt about its  
applicability to P2P downloaders will be removed.

If the Supreme Court declines to hear the appeal or upholds the  
decision, the impact will extend well beyond music file sharing.   
Some P2P downloading would no longer fall under the private copying  
right, though downloads to many external or removable hard drives  
would presumably still qualify.  More importantly, copying of store  
bought CDs onto Apple iPods, a common practice extolled by CRIA  
itself, would effectively be rendered unlawful in Canada (unless  
there is an implied right to copy such CDs, which would then call  
into question the need for a private copying system).

The third question - what might follow if CRIA is successful in its  
suits - raises the prospect for copyright reform.  When the federal  
government established the private copying right in the late 1990s,  
it also created a statutory damages system.  This enables a copyright  
holder to obtain specified damages of between $500 and $20,000 per  
infringement without the need to prove actual damages.  There is,  
however, a saving provision that allows a court to order damages well  
below the statutory minimums if the total award is "grossly out of  
proportion to the infringement."

The statutory damages provision raises several scenarios in the  
context of file sharing suits.  One possibility, common in the United  
States, is that cases do not actually proceed to trial since even  
innocent defendants will settle lawsuits to avoid the risk of a  
massive statutory damages award. Should a case proceed to trial,  
another scenario is that a court might indeed award damages of  
hundreds of thousands of dollars based on uploading 1,000 songs onto  
a P2P network.

Given that fee-based services such as Napster already offer over  
700,000 songs for only $14.99 per month, a raft of settlements or a  
massive award might lead to vociferous calls to Industry Minister  
David Emerson and Canadian Heritage Minister Liza Frulla for  
immediate reform to the statutory damages provisions so that a more  
appropriate remedy can be implemented.

Alternatively, a court might be faced with a sympathetic defendant  
who could prove that they had legitimately copied store bought CDs  
onto their computer and logged onto a P2P network in order to  
download a public domain document or open source software program.   
In such a case, the judge might be inclined to use the saving  
provision and set a precedent of a minimal damages award for P2P  
downloading.

The net result of current Canadian law is that file sharing suits are  
a risky strategy from both a privacy and copyright perspective.  The  
Federal Court of Appeal may have provided a roadmap for such suits,  
but it is apparent that traveling down that road raises many more  
questions than it answers.

- --
**********************************************************************
Professor Michael A. Geist
Canada Research Chair in Internet and E-commerce Law
University of Ottawa Law School, Common Law Section
57 Louis Pasteur St., Ottawa, Ontario, K1N 6N5
Tel: 613-562-5800, x3319     Fax: 613-562-5124
mgeist@pobox.com              http://www.michaelgeist.ca


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