Federal court considers wading into complex issue of copyright and the Internet

Canadian rights holders are appealing to the Federal Court of Appeal to decide once and for all whether Internet service providers (ISPs) should pay a royalty for music transmitted over the Internet. The question was to have been decided last October, when the Copyright Board of Canada released its decision on Tariff 22 - a landmark ruling that appeared to have established clear liability for companies that are involved in online copyrighted works (CNM Nov. 9/99). At the time, the Society of Composers, Authors and Music Publishers in Canada (SOCAN) declared the ruling a partial victory for rights holders. One of its main concerns, however, was that the decision did not state categorically that all ISPs are liable to pay copyright fees. The rights collective is also objecting to a line in the decision that effectively makes it impossible for copyright holders to collect royalties unless the web site is physically located in Canada. Consequently, the only way to ensure rights holders are compensated, according to SOCAN, is to target ISPs who are located in Canada. The collective had originally applied to the Copyright Board for a blanket tariff of 25 cents per subscriber month, or 3.5 per cent of gross revenues. The Federal Court has not yet granted leave to appeal, but it has been fast-tracking technical and copyright cases, and has cleared much of its backlog since an overhaul of the court last year. Challenging the ISP defence The Canadian Copyright Board's interpretation of who is liable on the Internet isn't necessarily shared by other countries. In Germany, for example, a federal court in Munich ruled on April 12 that AOL Germany broke copyright law by allowing subscribers to access a foreign web site that allowed downloading of music. AOL is appealing the court's decision, saying it can't monitor data flow. But the company, which hosted the web site, did close it down. Stephen Whitehead, a Canadian copyright lawyer with Johnston & Buchan, said there has to be fair compensation for creators, and the only practical way to collect royalties is by putting a levy on ISPs. Appearing April 14 before a Ottawa conference on communications law and policy, Whitehead suggested copyright holders may be able to pursue claims against ISPs if they have the technical means to block access to web sites holding illegally recorded music. But changes on the Internet have made that concept nebulous, since some companies that facilitate the movement of pirated songs do not offer them directly to customers. Whitehead cited the www.napster.com web site, whose creators insist they do not sell recordings — they simply offer software that allows access to a network of hundreds of privately owned PCs where the music is stored. The Napster case is shaping up to be a watershed for the recorded music industry, a fight similar to the one waged earlier this year against iCraveTV.com (CNM Dec. 23/99). Napster, a California-based site, has more than five million songs available through 3,500 computers linked by the company's software. While the number of songs available through the system has doubled in the past two months, the company does not sell advertising or charge for its software. An official of the company told Canadian NEW MEDIA that Napster is still working on its business plan. Copyright holders, including the Recording Industry Association of America, are suing Napster for payment of royalties for their songs. Speaking to delegates at the Canadian Bar Association's biennial conference in Ottawa, Whitehead noted that most large ISPs are losing their ability to claim they are true intermediaries. Companies like BCE Ltd's Sympatico, which is involved in a joint venture with Lycos, use content to differentiate themselves from their competition. "As the carriers and ISPs move into content, their ability to rely on the carrier exemption in the Copyright Act, as interpreted by the Copyright Board in the Tariff 22 Legal Issues Decision, will be reduced," said Whitehead. "Whether that reduction will be significant enough to allow SOCAN and other copyright collectives and owners to obtain fair compensation for the communication of protected works over the Internet is another matter," said Whitehead. As well, he argued that ISPs can't pretend they aren't part of the pirated music distribution system, since they target copyright violators and consumers by offering the high-speed access needed for downloading huge digital music files. "If a service such as Napster clearly offends the rights of copyright owners, why should ISPs be permitted to continue offering access to the website and, indeed, relying on the demand for access to the website as to promote their high-speed Internet access services without paying compensation to the owners," Whitehead asked. ISPs aren't ready to throw in the towel on this issue just yet. The Canadian Association of Internet Providers maintains that ISPs who act as pure access providers, and don't get involved in posted content, are not liable to pay copyright royalties. Former federal cabinet minister Ron Atkey, an entertainment lawyer who represents several large U.S. studios, says some of Canada's larger web sites, which offer original content, would actually prefer some form of licensing system for one-stop copyright clearance. "The idea of compulsory licensing by the Copyright Board is floating around in the air of this industry," he told CNM. Peter Grant, a senior partner at McCarthy Tetrault, and a lead lawyer in the Canadian civil action against iCraveTV, says he supports a licensing system, but wonders how the Copyright Board could put a value on material that goes on the web. He says a TV rebroadcasting site such as iCraveTV creates havoc for negotiators of international broadcast rights. "It's difficult for the Copyright Board to assess a licensing fee when the material could turn up in the United Kingdom on the 'Net and jeopardize the sale of U.K rights to television programs," he said. Technology exists to determine how many computers are accessing a web site, and where the viewers are, and Grant said the Copyright Board may be able to order the creation of a system to track viewership to assess rates.

Federal court considers wading into complex issue of copyright and the Internet

News | 04/20/2000 4:00 am EDT

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