Court orders $12.7M in damages in 1st digital lock rules case

A Federal Court judge ruled last week that a defendant must pay damages for selling products that allowed users to bypass another company’s technological protections, in the first such ruling in Canada. The case sets a precedent that will have a ripple effect on other industries, including media, according to McCarthy Tétrault LLP intellectual property lawyer Barry Sookman. In a case between Nintendo Co. Ltd. and a Waterloo-Ontario based company called Go Cyber Shopping (2005) Ltd., judge Douglas Campbell determined that Go Cyber violated Nintendo’s technological protection measures (TPMs), including its boot up security checks, encryption and scrambling technologies and the physical configuration of the game cards by allowing users to circumvent them and illegally download and play the games from the Internet. While there have been similar cases in other countries, this is the first Canadian case involving TPMs, such as digital locks, since the Copyright Modernization Act came into force in 2012, Sookman said in an email. “Technological measures are used ubiquitously by the creative industries to protect content,” Sookman said, adding the decision in his view is a positive development and one that aligns with the intentions of Parliament in drafting the legislation. Those measures are “used both to protect content on physical media such as on CDs and DVDs and also those that can be accessed online.” The decision “has consequences both for protection and physical goods containing intangible information as well as information behind paywalls,” he said. The book publishing industry, e-books, entertainment and other software, music streaming services, television programming and movies are among those that use TPMs to protect content and are therefore affected by the decision, Sookman noted. Had the decision gone the other way and undermined legal protection for TPMs, it would have weakened business models that rely on those protection measures, Sookman added. “This would have been bad for the businesses and ultimately for consumers who want innovative services based on new delivery models that rely on technical protection measures,” he said. University of Ottawa law professor Michael Geist had a different interpretation of the ruling, writing in a blog post last week that the decision “leaves no doubt that Canada has one of the most restrictive and potentially punitive digital lock rules in the world, with the court adopting expansive interpretations to the digital lock protections and dangerously narrow views of the exceptions.” If the precedent is followed by other courts, “the ruling could similarly restrict the applicability of privacy, security research, and access for the blind exceptions found in the law,” he wrote. The ruling is the “latest in a growing line of cases in which Canadian courts have used the law to shut down cutting-edge technologies that have both infringing and non-infringing uses,” Geist said, citing an injunction against pre-loaded set-top boxes ordered by a court last year. According to a document authored by Industry Canada (now Innovation Canada) in 2010 and included in the court documents, setting out the rationale for protecting TPMs, “protecting digital locks gives copyright industries the certainty they need to roll out new products and services.” According to the Copyright Act, amendments were introduced in 2012 partly to address the challenges of digital works and the Internet. Japanese video game creator Nintendo, which uses TPMs to authenticate legitimate copies of games, filed the original application on Feb. 9, 2016, according to court documents. Go Cyber Shopping Ltd. operates websites and as a retailer in Waterloo, Ont. and sold products that worked on Nintendo’s DS, 3Ds and Wii consoles. In his decision, Campbell found Go Cyber committed “secondary infringement” by using Nintendo’s copyrighted code on its products to circumvent the security protections and boot the devices, as well as showing users where to obtain code to make their product work. It also heavily promoted its services on social media, according to the decision. Go Cyber had argued that the intention behind its products was to make Nintendo’s systems work with “homebrew” software — third-party software designed for use by Nintendo’s system, a use that would trigger the “interoperability” exception under the law, as well as to allow users to access Nintendo’s operating system. The court said despite these possible uses, "the scale of such activities is dwarfed by the market for illicit and infringing activities.” “The fact that the Game Copiers may have additional functions beyond circumventing the Applicant’s TPMs is irrelevant for the purpose of this analysis,” the decision read. The court awarded Nintendo a total of $12.7 million in damages and a permanent injunction against the infringing activity. Under the law, the range of penalties for copyright infringement with a commercial purpose is $500 to $20,000 per work. The court awarded damages based not only on cases where a TPM was circumvented, but also considered instances where they could potentially have been, noting that actual “infringement of copyright is not necessary for an award of statutory damages for TPM circumvention… the copyright owner is entitled to all remedies where 'a technological protection measure has been or could be circumvented'.” Sookman said in the email that while the decision will be helpful in future cases, considering how rampant piracy is in Canada, “the legal protection for TPMs will not by any means eliminate piracy in Canada.” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Court orders $12.7M in damages in 1st digital lock rules case

Broadcast | March 8, 2017

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