Blacklock’s Litany of Litigation Lengthens - Update on Four More Federal Court Actions

https://www.blacklocks.ca/ 

In the first month of 2017, Blacklock’s has commenced four more actions in the Federal Court against the Federal Government or an agency thereof. These are as follows:

T-117-17 Blacklock’s v. Attorney General of Canada re Health Canada for $90,100.55 + punitive damages of $25,000
T-132-17 Blacklock’s v. Attorney General of Canada re Employment and Social Development Canada (EDSC) for Statutory Damages + punitive damages of $20,000
T-133-17 Blacklock’s v. Attorney General of Canada re Transport Canada for $85,228.50 + punitive damages of $10,000
T-134-17 Blacklock’s v. FINTRAC for $11,470 + punitive damages of $5,000

Concerning the first Health Canada action, iPolitics says in the publicly posted intro to a paywalled article (to which I do not have access):

Blacklock’s Reporter is not backing down from its decision to aggressively sue multiple federal departments and agencies for copyright infringement — even after it lost a case against the Department of Finance late last year.

In a case that recently moved from Ontario Superior Court to the Federal Court of Canada, Blacklock’s Reporter — a subscription-based, online news outlet — is suing Health Canada for more than $115,000 for “the unauthorized use, distribution, and third party dissemination” of its paywalled content, and/or breach of contract.

An earlier action T-2042-16 filed on November 28, 2016 on which I reported here along with the older actions are under case management and the newer ones will also presumably be under the ever very efficient case management of Prothonotary Mireille Tabib. A case management conference is scheduled for March 6, 2017.  See here.

I will not comment specifically at this time on any of the allegations in these various actions, none of which have been proven in Court. That said, it does appear that each of these actions apparently allege somewhat different facts from the previously decided Federal Court case. However, Blacklock’s suffered a resounding defeat in the first case that was tried in the Federal Court on the basis of an "obviously" and clearly correctly applicable fair dealing defence asserted by the Government.  

That judgment of Justice Robert Barnes dated November 10, 2106 states:

[45] Blacklock’s maintains that this case challenges the viability of its business model including its right to protect news copy behind a subscription-based paywall. The suggestion that Blacklock’s business cannot survive in the face of the minor and discrete use that took place here is essentially an admission that the market places little value on Blacklock’s work-product. All subscription-based news agencies suffer from work-product leakage. But to customers who value easy, timely and unfettered access to news that may not be readily available from other sources, the price of a subscription is worth paying. It also goes without saying that whatever business model Blacklock’s employs it is always subject to the fair dealing rights of third parties. To put it another way, Blacklock’s is not entitled to special treatment because its financial interests may be adversely affected by the fair use of its material. Nothing in these reasons should however be taken as an endorsement of arguably blameworthy conduct in the form of unlawful technological breaches of a paywall, misuse of passwords or the widespread exploitation of copyrighted material to obtain a commercial or business advantage.

 (highlight and underline added)

It is important to recall that Blacklock’s has chosen not to appeal that original judgment. Interestingly, however, Blacklock’s instead chose to appeal the $65,000 costs award in which Judge Barnes stated:

[7] …I also reject the Plaintiff's argument that this case raised "strong public interest considerations". Rather, this case was about the Plaintiff's attempt to recover disproportionate damages without any apparent consideration to the legal merits of the claim or to the costs that it imposed on the taxpayers of Canada.

[8] Any reporter with the barest understanding of copyright law could not have reasonably concluded that the Department's limited use of the subject news articles represented a copyright infringement. Indeed, the fair dealing protection afforded by section 29 of the Copyright Act, RSC, 1985, c C-42, is so obviously applicable to the acknowledged facts of this case that the litigation should never have been commenced let alone carried to trial.

 [9] I am also troubled by Plaintiff's attempt to claim an excessive amount of damages beginning with its demand for compensation completely divorced from the Department's limited use of the two articles. In no circumstances would Blacklock's losses have exceeded the cost of individual subscriptions by the six officials who read the articles; yet Blacklock's demanded a license fee equivalent to its bulk subscription rate of over $17,000.00. This practice appears to be consistent with Blacklock's usual approach which is to hunt down, by Access to Information requests, alleged infringers and then demand compensation based on an unwarranted and self-serving assertion of indiscriminate and wide-spread infringement. The record discloses that in several instances government departments acquiesced for business reasons and paid the full amounts demanded. In this instance the Department appropriately took a hard line and succeeded in its defence.

(highlight added and emphasis added)

Costs judgments are normally very difficult to appeal successfully.  The $65,000 award in this instance flows directly from the normal  “mid-point of Column III” approach as explained by Justice Barnes in paragraph 6 of the costs judgment.  The Government was also able to benefit from the “double costs” rule because of “the failure by the Plaintiff to accept an early settlement offer in the amount of $2,000.00” (para. 4). Costs decisions by judges are “quintessentially discretionary” and are rarely set aside on appeal.

Blacklock’s tenacity is nothing if not noteworthy.  It has 13 actions pending against the Federal Government or its agencies, not to mention the appeal of its costs order in its unsuccessful original case against the Department of Finance.  

In Justice Barnes’ judgment, he stated:

[22] To resolve this matter I need only decide whether the conduct Blacklock's impugns is protected under the fair dealing provisions of the Act and, in particular, section 29. Although there are certainly some troubling aspects to Blacklock's business practices it is unnecessary to resolve the Attorney General's allegation that this litigation constitutes a form of copyright abuse by a copyright troll.

(highlight and underline added)

It will be interesting to see whether, and if so how, the Government deals with the “abuse” issue as this “litany of litigation” continues and unfolds and how the Court, in turn, may deal with it. In any event, the "obviously applicable" defence of fair dealing will presumably be in issue in each case and the Government will no doubt rely on Justice Barnes’ very solid decision.

Even if Blacklock’s is somehow able to establish copyright infringement in a particular factual situation, it remains to be seen what quantum of damages it might be awarded.  Without commenting on the Blacklock’s litigation, it is useful to remind readers that Canadian courts, unlike some American courts with juries, are very reluctant to award copyright damages that bear little or no relation to actual damages. Indeed, some significant checks and balances are hard-wired into the damages regime in the Canadian Copyright Act and solidly backed up by case law that prevent it from being used to obtain disproportionate damage awards that bear no relationship to actual damages suffered by the plaintiff or profits, if any, made by the defendant. Where a plaintiff elects to pursue statutory minimum damages rather than to prove actual damages, the case law is clear that the Court will still insist that there must be some correlation or relationship between actual damages and statutory damages. Moreover, since 2012, there has been a provision that limits statutory minimum damages to “a sum of not less than $100 and not more than $5,000 that the court considers just, with respect to all infringements involved in the proceedings for all works or other subject-matter, if the infringements are for non-commercial purposes.” (highlight added)

Speaking generally of damages in copyright cases, it is always timely and increasingly important in light of recent case law to remind readers that “success” in copyright litigation in Canada does not necessarily lead to a pot of gold and can indeed backfire and become a very expensive pyrrhic victory.

Perhaps the most notorious pyrrhic victory in Canadian copyright litigation was what I have called “A Cautionary Tale of Costly Copyright Litigation Consequences: How to Win a Little and Lose a Lot”. This was the relatively recent case of Leuthold v. CBC. As I summarized about this case, ‘Leuthold is an American photographer whose 9/11 images were used by the CBC, by way of an “honest mistake”, six times more than permitted by the original one-time license for which she was paid $2,500. She refused a settlement offer of $37,500 and went to trial, where she was awarded $19,200 ($3,200 times six) plus $168.73 as her portion of CBC’s “profits”’.  

Ms. Leuthold actually did technically succeed in proving copyright infringement but recovered less than 1/1,000th of her extravagant damages claim of about $21.5 million. Her claim was predicated upon a far-fetched and longshot liability theory that would have resulted in each of CBC’s 800 or so participating affiliated stations and Broadcasting Distribution Undertakings [BDUs] supposedly giving rise to a separate act of infringement. Because of the way the Federal Courts Rules on costs work, she predictably ended up being liable for a very large costs award even though she technically won her lawsuit.

I make no comment on whether the Leuthold case would be applicable to any of Blacklock’s cases in any particular respect.  Rather, I mention Leuthold’s case because it is the ultimate cautionary tale for every copyright claimant in Canada who may have expectations of substantial damages where actual damages cannot be calculated in a reliable manner or may actually be quite low by any reasonable measure. Thus, even a technical victory in a copyright case can be a costly proposition in Canada – especially if the defendant is savvy about the use of the settlement offer mechanism in the Federal Courts Rules. But even without successful recourse by a defendant to the “double costs” implications of a strategic settlement offer, it can obviously still be a pyrrhic victory if a plaintiff ends up spending far more in legal fees than the court awards in damages, and the normal costs award that may follow is insufficient to make the litigation cost effective. Needless to say, these various factors may discourage contingency fee arrangements in copyright cases, even when the cause of action seems solid but the potential damages may be modest. For better or worse, the calculus of costs is becoming increasingly important for all concerned with copyright litigation, and indeed all litigation.

Unlike the American system with its $150,000 per work statutory damages limit for copyright infringement and sometimes apparently absurd jury awards (e.g. $1.92 million for infringing 24 songs), Canadian courts are very measured and cautious about damages in copyright cases. There are no juries and no pots of gold in Canadian copyright litigation.

Concerning the issue of costs, the Federal Court of Appeal in the Leuthold case provided what I then characterized as “some cautionary language for those who may contemplate high risk litigation” from Justice Denis Pelletier:

[13]  Finally, Ms. Leuthold argues that an order of costs ought not to be such as to bring the administration of justice into disrepute. Once again, this is an argument based on impecuniosity. The sad fact of the matter is that litigation produces winners and losers; that is why it is such a blunt tool in the administration of justice. But justice is not served by allowing persons who have imposed costs on others by pursuing or defending a claim which lacks merit to avoid the consequences of their behaviour. Such a policy would be more likely to bring the administration of justice into disrepute than the result in this case.

(emphasis added)

Blacklock’s’ resounding initial defeat on the fair dealing issue in Justice Barnes’ careful and convincing judgment (not appealed) and the resulting $65,000 costs award (which is being appealed) together with the Government’s clear and able determination to fight back and its success to date may be of interest to all Blacklock’s copyright litigation defendants, including those outside the Government, who may be considering with their counsel their next steps, such as whether or not to settle or to continue to fight back and to utilize strategic settlement offers.

I will endeavor to update after the case management conference on March 6, 2017 or sooner if events warrant.

HPK

Blacklock’s Fails in Copyright Litigation Against the Government of Canada – Fair Dealing is Upheld and Even Extended

https://www.blacklocks.ca/ 

The Attorney General of Canada has achieved a clear victory against Blacklock’s Reporter in the latter’s attempt to collect damages of $17,209.10 based upon its supposed institutional subscription rate because a few public servants in the Department of Finance received, read and distributed two Blacklock’s articles about a file they were closely involved in that had been sent to them by a Blacklock’s subscriber.

Here’s the judgment from Justice Robert Barnes – which is unequivocally favourable in terms of fair dealing and even pushes the envelope further by emphasizing that what went on here  was based upon a “legitimate business reason” on the part of the subscriber/sender to the material and a “legitimate business purpose (i.e. to consider whether the stories required a response or correction)” on the part of the Department.

The judgment clearly rejects the essence of Blacklock’s argument, which was tantamount to asserting that copyright includes the exclusive right to “read” copyrighted material. The judgment does not deal directly with copyright misuse or abuse, though it does note certain “troubling” aspects of Blacklock’s business model and mentions the allegation that this “litigation constitutes a form of copyright abuse by a copyright troll.”

[22] To resolve this matter I need only decide whether the conduct Blacklock's impugns is protected under the fair dealing provisions of the Act and, in particular, section 29. Although there are certainly some troubling aspects to Blacklock's business practices it is unnecessary to resolve the Attorney General's allegation that this litigation constitutes a form of copyright abuse by a copyright troll.

(highlight and underline added)

Here are other takeaway quotations from the judgment, which was promptly and decisively delivered by the very experienced Justice Barnes in less than two months from the end of the hearing:

[36] In finding the scope of use of the articles to be fair I have considered the following factors, all of which favour the Defendant’s position:

(a) The articles were legally and appropriately obtained by Ms. Marsden who was a paid subscriber to Blacklock’s. Blacklock’s website was not hacked or accessed by illicit means. In the result, the articles were no longer behind Blacklock’s paywall when the Department obtained them.

 (b) Ms. Marsden sent the articles to Mr. Halley for a legitimate business reason (i.e., to protect her business reputation and to manage her working relationship with the Department);

(c) The Department received the articles unsolicited and used them (i.e., read them) for a legitimate business purpose (i.e., to consider whether the stories required a response or correction);

(d) The articles were circulated among only six Department officials all of whom had a reason to see them;

(e) No commercial advantage was sought or obtained by the Department’s use of the articles nor were they republished in any form;

(f) The two articles represented only a small fraction of the protected news copy on Blacklock’s website and one of them was shortly-after publically exposed on Blacklock’s website;

(g) The articles contained information obtained from the Department in response to Mr. Korski’s queries. As a source, the Department had a direct and immediate interest in their content. Indeed, a finding of copyright infringement against a news source for the simple act of reading the resulting copy is likely to have a chilling effect on the ability of the press to gather information. Such a result cannot be in the public interest;

(h) Mr. Halley and Ms. Rubec had a reasonable basis for their concern that the articles misrepresented some of the information they had conveyed to Mr. Korski and that a correction might be warranted. The involvement of their colleagues in a possible follow-up was, in the circumstances, reasonable;

(i) Neither Ms. Marsden nor the Department were aware of, or agreed to, Blacklock’s Terms and Conditions. In any event and as noted below, those provisions did not unambiguously prohibit the circulation of Blacklock’s copy for personal or non-commercial purposes. If Ms. Marsden, as a subscriber, had the right to use and distribute the articles for a non-commercial purpose, those who received the articles lawfully could reasonably expect to enjoy the same privilege;

(j) What occurred here was no more than the simple act of reading by persons with an immediate interest in the material. The act of reading, by itself, is an exercise that will almost always constitute fair dealing even when it is carried out solely for personal enlightenment or entertainment; and

(k) While the public interest is served by the vigilance of the press, copyright should not be a device that serves to protect the press from accountability for its errors and omissions. The Department had a legitimate interest in reading the articles with a view to holding Blacklock’s to account for its questionable reporting.

 (highlight and underline added)

As to Blacklock’s business model, Justice Barnes explicitly stated that Blacklock’s own argument “is essentially an admission that the market places little value on Blacklock's work-product” and a clear confirmation that, whatever the business model, “it is always subject to the fair dealing rights of third parties”:

[45] Blacklock’s maintains that this case challenges the viability of its business model including its right to protect news copy behind a subscription-based paywall. The suggestion that Blacklock’s business cannot survive in the face of the minor and discrete use that took place here is essentially an admission that the market places little value on Blacklock’s work-product. All subscription-based news agencies suffer from work-product leakage. But to customers who value easy, timely and unfettered access to news that may not be readily available from other sources, the price of a subscription is worth paying. It also goes without saying that whatever business model Blacklock’s employs it is always subject to the fair dealing rights of third parties. To put it another way, Blacklock’s is not entitled to special treatment because its financial interests may be adversely affected by the fair use of its material. Nothing in these reasons should however be taken as an endorsement of arguably blameworthy conduct in the form of unlawful technological breaches of a paywall, misuse of passwords or the widespread exploitation of copyrighted material to obtain a commercial or business advantage.

 (highlight and underline added)

The judgment does not deal directly with TPMs – technical protection measures - or circumvention, despite Blacklock’s efforts. The issue was not pleaded and the Court refused to hear evidence or argument directed to that issue as such.

The Government gets costs, and there is a comment from the Court that “offers to settle may have been exchanged”, which may mean that the Government will be entitled to get “double costs” for some or all of this litigation, depending on the timing and content of any offers.  We shall see and report in due course.

All in all this is a very clear victory for the Attorney General of Canada and for the cause of fair dealing in Canada. A business model “is always subject to the fair dealing rights of third parties.”

Because a fair dealing analysis is essentially based on fact-finding, and because the fact-finding here was extensive and careful, it is would seem that a successful appeal would be an unlikely possibility. I will update in the event that a Notice of Appeal is filed, which would be due on December 12, 2016. It remains to be seen what effect this judgment will have on the many other outstanding Blacklock’s lawsuits against the Government of Canada, some of its agencies and others.

The Government was represented by Alex Kaufman and Orlagh O’Kelly from the Department of Justice. Blacklock’s was represented by Yavar Hameed.

HPK

Further Update on the Blacklock’s “Litany of Litigation” - First Trial Set For September 19, 2016

It is been a while since I’ve updated readers on the “litany of litigation” launched by Blacklock’s. What follows is an update of my earlier postings. See here and here.

Blacklock’s is the very  litigious and controversial “subscription based news Corporation that covers politics, bills and regulations, reports and committees, as well as the Federal Court and Public accounts in Canada”, according to the reasons for judgment dated June 27, 2016 of Justice Denis Gascon in a recent Federal Court ruling dismissing an appeal by Blacklock’s of earlier orders staying all but one of the 10 cases launched in that Court against various federal departments and agencies. One action, (the “Finance Action”) which is the most advanced, will proceed with a trial beginning on Monday, September 19, 2016 for five days here in Ottawa. I’m guessing it will be well attended and I hope that the Court schedules it in a large enough room.  The other nine cases will be stayed “until 45 days following the determination of the Finance Action”.

Justice Gascon’s ruling states:

 [8]   Blacklock alleges that the Defendants have unlawfully distributed its articles within their respective departments or agencies and have breached its copyright after having obtained the articles by way of single-use subscriptions or through third-party sources. According to the Defendants, Blacklock employs a pattern of writing misleading or inaccurate articles about an organization with the expectation that these articles would be accessed and shared internally. Blacklock then makes Access to Information Act requests for evidence of distribution, and claims damages through various means, including litigation.

As they say, none of these allegations have been proven in court.

It is certainly not obvious from a practical or costs standpoint why Blacklock’s would have wanted separate trials on 10 cases against the Federal entities. Alternatively, Blacklock’s wanted to:

"allow all actions to proceed until the pre-trial conference, and only then to consider how to manage the trials."

Perhaps Blacklock’s wanted to pursue each case separately in order to send a message to current and potential defendants that it is serious about litigating and that it expects substantial settlements in order to forestall or stop the litigation. However, that is only my speculation.

Here are Blacklock’s arguments on the appeal of the stay ruling. Here are the arguments of the Attorney General of Canada (“AGC”).

The damage claims in each case are relatively modest as these things go, “ranging from $10,000 to $55,000 when they are specified”. Justice Gascon noted that:

[11]           In her decisions, Prothonotary Tabib acknowledged that the facts of each case are different as both the alleged copyrighted materials and the specific alleged acts of infringement are distinct to each case. However, she stressed that “commonality and similarities” reside in the defences raised in the ten actions. These common defences are: whether Blacklock owns the copyright in the articles alleged to have been infringed; the novel defence of abuse of copyright; the defence of fair dealing when articles are copied/used for internal government reporting purposes; the proper assessment of damages (whether they be loss of profit apportioned per article or the value of an institutional licence); and the availability of punitive damages. Prothonotary Tabib also noted that the amounts claimed in the actions filed by Blacklock are modest, ranging from $10,000 to $55,000 when they are specified. 

From Blacklock’s standpoint, the cost consequences of losing or even winning these cases could conceivably far exceed the upside of winning, given the way the Federal Courts costs rules can work with strategic and timely settlement offers where only modest amounts of money are recovered or recoverable. The most obvious cautionary tale is that of Catherine Leuthold, who sued the CBC for more than $22 million but recovered only US $19,200 damages and $168.74 by way of disgorgement of profits.  While she technically “won” her lawsuit, she was ordered to pay the CBC some $80,000 in costs, which included double costs pursuant to Rule 420, due to her refusal to accept a timely settlement offer of US $ 37,500. The costs order was upheld on appeal.  Needless to say, I have no knowledge of whatever settlement offers may or may not have been made by any party in the Blacklock’s litigation. Even the trial judge will not know about any such offer(s), if they exist, before he or she delivers judgment and will only know afterwards if double costs pursuant to Rule 420 become an issue to be determined by the Trial Judge pursuant to the Rules.  However, all experienced Federal Court litigators are aware of these costs rules. Presumably, the calculations have been done and the bets have been placed, so to speak.

Moreover, Blacklock’s has already faced some significant costs consequences. It lost at first instance with costs payable to each defendant in ten different actions on its efforts to oppose the Government’s stay motion and proceed with separate trials for all ten federal cases, and lost the appeal of Prothonotary Tabib’s ruling of March 3, 2016 before Justice Gascon as noted above. This has resulted in some fairly harsh costs awards as far as these things go against Blacklock’s to date. See here for Justice Gascon’s costs award from August 16,  of 2006 which calls for costs of $10,500 payable within 30 days of the Order and here’s the Court’s Order dated October 26, 2015 which awarded  costs to  the Government of $4,000.  This Order indicates rather strong language and a very significant costs order as far as these things go. Here’s the Court’s Order dated October 26, 2015:

 The motion was contested, it was contested extensively and it took a lot of time. There was a need for cross-examination. In the course of the argument, I made comments to the effect that the Plaintiff’s argument and choice of the way in which it chose to understand questions or construed questions was obtuse to the point of being obstructive. 

Justice Gascon commented on the decision below from Prothonotary Tabib regarding the stay motion: 

[43] In her Orders, Prothonotary Tabib concluded that it was in the interests of justice to stay the Nine Actions given that 1) the issues raised by the various actions significantly overlapped, 2) a stay would avoid costly duplication of judicial and legal resources, 3) a real risk of contradictory decisions existed, 4) Blacklock would not suffer prejudice, and 5) proceeding with the ten actions would cause prejudice to the Defendants. I am of the view that each of these five considerations fall well within the discretion of Prothonotary Tabib and that none of them reflects a reliance on a wrong legal principle or a misapprehension of the facts in granting the stays of proceedings sought by the Defendants.
  [44] In fact, I am convinced that Prothonotary Tabib was right to take these factors into account in her assessment of the interest of justice at stake in this case and in ensuring the just, most expeditious and least expensive determination of the Nine Actions and the Finance Action.
  [45] First, I agree with the Defendants and Prothonotary Tabib that there is a significant overlap of issues and facts between the Nine Actions and the Finance Action, and that this was a proper consideration to retain. This overlap includes the ownership of copyright by Blacklock, the defences of copyright misuse and fair dealing, as well as the proper assessment of damages and the availability of punitive damages. Blacklock tries to distinguish the Finance Action from the other actions because the distributed articles were obtained from a third party and not through its subscription. However, the Finance Action concerns the same pattern of conduct and core issues as the other actions. In addition, the issue of copyright ownership in the Finance Action relates to the defence of abuse of copyright raised in all actions. Lastly, the assessment of Blacklock’s actual damages and availability of punitive damages is a recurring theme in all actions.
… 

[47] Second, Prothonotary Tabib was not clearly wrong in relying on the avoidance of costly duplication of judicial and legal resources in support of her decisions. The Orders considered the judicial resources that would be saved by the stay, such as a multiplicity of pre-trial conferences and likely procedural motions, and several separate trials resulting in weeks of hearings. Prothonotary Tabib further estimated that even a consolidated trial would require at least three weeks and would delay the determination of even the most advanced actions.

 … 

 [54] I emphasize that there are numerous common legal issues raised by the Defendants in the ten actions. The Defendants rely on the doctrine of abuse of copyright as a basis to justify their assertion that Blacklock’s actions in a given context amount to copyright trolling. While this matter will be ultimately determined on the facts adduced in each specific case as to whether there has been copyright misuse, there are nonetheless common underlying legal issues being raised. Similarly, while the questions relating to damages, the value of Blacklock’s license for its product and the defence of fair dealing are questions where the factual assessment of the evidence will play a role, they raise comparable underlying legal questions that can be determined and that could be narrowed in the Finance Action.

(highlight added) 

Blacklock’s is clearly the underdog in terms of resources. It is apparently a family business up against 10 Federal Government departments or agencies. And, notwithstanding its legal victory in an earlier decision from the Ottawa Small Claims Court in 1395804 Ontario Limited (Blacklock’s Reporter) v Canadian Vintners Association (“CVA”), 2015 CanLII 65885 (ON SCSM), it must frankly be said that it faces an uphill battle in the Federal Court. From what I’ve seen of the pleadings, which are linked to below, the Feds would seem to have a very strong case in many ways, including but not limited to fair dealing. After all, if a government department can’t avail itself of the fair dealing users’ rights provisions in the Copyright Act for the purpose of research into or criticism of what the media are saying about its public policy positions and the law itself, then what is the purpose of s. 29 of the Copyright Act?  Moreover, the Government apparently has a serious case on copyright misuse and abuse. The Government explicitly alleges that “The Plaintiff is a copyright troll”.

Here is the Statement of Claim and Amended Statement of Defence in T-1391-14, the “Finance” action which has emerged as the lead case. Both of these pleadings are surprisingly brief and general in nature. However, both sides have very able counsel – and hopefully the issues with be dealt with fully and on the merits.

Commentary on Small Claims Court decisions is rare, given that they have no precedential status in higher courts. However, in this case there was a lot of commentary. See, for example the views of Canadian law professor Teresa Scassa here and the redoubtable Mike Masnick on the internationally widely read Techdirt website.  See also other legal commentary that seems mostly negative or deeply sceptical about the decision, e.g. here and here,  here and  here, and a good comment from an IP Osgoode student here. I’m only aware of one commentator who thinks that the Small Claims Court got it right – and she is not a copyright lawyer or expert, as far as I know. See here.

The fact that the Small Claims Court ruling was not appealed likely results from pragmatic considerations.  Moreover, the Canadian Vintners Association presumably has more compelling concerns from its viewpoint than copyright law. Whatever the reason, one can’t fault the Vintners from not appealing this Small Claims Court decision. In any case, the decision not to appeal doesn’t really matter anyway because the Small Claims Court decision – while it got a lot of media attention – has no precedential effect in the Federal Court or the Ontario Superior Court.

Interestingly, I am advised that Blacklock’s has launched at least three actions in the Ontario Superior Court. One of them is being defended by David Fewer, not in his capacity as Director of CIPPIC, but rather in his personal capacity. See the Fillmore Statement of Claim here and the Statement of Defence here. It is not known where these three matters stand and whether there is any serious possibility of future developments that may conflict with the Federal Court decision(s).

Given the apparently litigation-based strategy of the plaintiff on the one hand and the resources and the apparent concern for public policy on the part of the Government, it seems likely that the outcome of the trial set to begin on September 19, 2016 may very well be appealed by one side or the other. That appeal would be heard by the Federal Court of Appeal, which is normally very receptive to helpful interventions.

I agree with Prof. Teresa Scassa that this is an important case to watch this fall.

HPK

Access Copyright Compares Itself to Government Tax Collector & Rewrites Copyright & Competition Law Principles

Michael Geist alerts us to an astonishing announcement by Access Copyright (AC). 

It would appear that AC has just unilaterally re-written some basic aspects of copyright and competition law, not to mention basic economics. It’s an extraordinary statement, presumably  in response to Michael and my recent posts and AUCC’s letter to the Copyright Board.

AC says that:

The application of any mechanism designed to encourage and facilitate respect for copyright has to make sense, or nobody will use it. The enormous investment the Canada Revenue Agency has made to facilitate tax filing is all about ensuring compliance by making it easy. The assumption is always that most people will do the right thing if you don’t put impediments in their way. The same holds true with licensing.

Transactional licences for secondary uses of works are often not suited to the demands of the new digital economy. Impractical to implement and costly to administer, they have the added weakness of being unable to capture uses that should be compensated. They do not ensure that all secondary uses are legal, on the contrary, their very impracticality is an incentive to infringe.

A comprehensive licence, on the other hand, is a fast, easy and cost-efficient way to clear copyright protected works. It ensures that uses of works are cleared and tracked in a consistent and structured way. As always, publishers also have the option to clear the rights themselves directly with educational institutions, in accordance with their individual business interests.

(Emphasis added)

First, the reference to “The enormous investment the Canada Revenue Agency has made to facilitate tax filing ...” is ironic at several levels. It’s true that many regard AC as a tax collector. The only problem is that it is a self-appointed tax collector and, unlike CRA, its systems largely don’t work. If nothing else, this is an interesting admission.

The AC declaration makes no legal or economic sense. It ignores fundamental legal, economic and antitrust axioms:


1. IP owners have exclusive rights, which are normally dealt with in transactions with users. Doing something without permission for which permission is required entails infringement. Transactions may be virtually automatic, such as the sale of a book or a CD. Or they may be highly complex and intensely negotiated, such making a feature film. But their essence is that they are individual transactions. If I go into CD Warehouse or online to iTunes to buy Leonard Cohen’s latest album, I will not be forced to buy the entire store or online catalogue in order to buy one album.


2. Collective exercise of these rights is inherently anticompetitive and virtually all sophisticated countries provide oversight mechanisms to ensure that collectives do not abuse the extraordinarily anticompetitive and in many cases even monopolistic power exceptionally allowed to them. Collectives are an exception to the normal principles of antitrust law, which may be more tolerant than it once was about IP misuse and abuse. However, today’s declaration may provoke reaction from the watchdogs who have been waiting to push back the antitrust pendulum in respect of IP in Canada.


3. One of the first thing every law student learns is “nemo dat quod non habet” -  you can’t give what you don’t have. It’s difficult to imagine how AC could have any chain of title to a vast amount of the “repertoire” needed in any university. And much of what is now used is already paid for through licenses or doesn’t require payment - i.e. is fair dealing or is in the public domain. AC has been unable or unwilling to provide evidence of its actual repertoire to date. Given all of this, it’s particularly astonishing for it to insist that universities either pay for it all (whatever “all” may be) or get nothing.  To the limited extent that “blanket licenses” are legally and economically justifiable in Canada, there must be a large enough actual repertoire to justify such licenses. We don’t have “extended collective licensing” in Canada, no matter how much AC may wish that it were so.


“Respect for copyright” should entail behavior consistent with basic legal and logical principles and norms. Collectives, too, are bound by copyright law. Users, too, have copyright rights.

AC has just effectively filed a declaration of independence from such ground rules in stirring language , viz:

Transactional licences - licences issued on a pay-per-use basis - were more effective as a business model for secondary uses of published works when paper ruled the world of publishing and copying. Transactional licences were a practical alternative when copying was centralized and compliance was easily monitored. This is no longer the case.

(emphasis added)

This astonishing declaration - and indeed confession and admission - cries out for appropriate action. All eyes now on the institutional objectors and the Copyright Board to see what’s next.

Here’s a hint of what may be worth considering. In view of these recent developments concerning  transactional licenses and the lack thereof, and the two pending cases for which leave has been granted  in the Supreme Court of Canada that go to the root of fair dealing, should thought be given to a stay of the Copyright Board hearings? 


And, BTW, AC’s refusal to issue transactional licenses could be a very interesting and important issue in any litigation involving material for which a request for transactional license has been refused.  My understanding is that many publishers  are referring such requests to AC, which then refuses to deal, as the Competition Act so nicely puts it.


I should remind readers that, apart from suing small corner mom & pop type copy shops, AC’s copyright litigation record shows no victories of which I am aware against any institution, individual or large established corporate defendant in Canada. It has just made its odds of success in any infringement action connected with an academic environment even lower than before. 


HK

AUCC complains to Copyright Board re AC Refusal to Provide Transactional Licenses

In the Access Copyright quest for a 1,300% increase in its post secondary tariff, Athabasca University - one of Canada’s smallest but definitely most innovative universities and bravest advocates - initially put forward some of the strongest arguments against the tariff and - particularly the very controversial so-called “interim” tariff that is likely to last for at least three years and to cost taxpayers and students about $48 million as I have earlier explained. After the objectors lost the battle on the interim tariff and it was clear that there would not even be an attempt at judicial review, Athabasca eventually stopped filing its own submissions, and threw its lot in with the AUCC, to which it had contributed its portion of an approximately $2 million budget to fight this tariff. 

Athabasca had pointed out to the Board on several occasions in connection with “interim” tariff application that AC should at least be required to continue to provide “transactional” licenses so as to facilitate an institution’s presumably voluntary choice to clear material only when such clearance was necessary without being forced to sign on for more repertoire, more rights and more money than was necessary and that AC may have lacked the power to license in any case. Ariel Katz, who also provided cogent and forceful arguments, had similar submissions related to the need for continuing the status quo of voluntary transactions, given that the Board supposedly did not intend that the interim tariff be mandatory. The Board declined Athabasca’s very reasonable request regarding transactional licenses.

To the surprise and disappointment of some, neither of the main objector associations, namely AUCC and ACCC, sought judicial review of the interim decision, despite their apparently vigorous protest against it and despite what appeared to be arguably solid grounds for review. Contrary to beliefs held by some, this ruling arguably went well beyond a mere fact finding and procedural exercise by the Board. It was eminently reviewable and reversible in my view. It may be that the decision not to seek judicial review - which is normally quick and relatively inexpensive - was motivated more by practical and political rather than legal reasons. The interim tariff provided institutions with the comfort of the status quo, if they chose to use it, and the ability to pass the costs along to the students anyway to a very large if not total extent.

So, armed with the Board’s refusal to impose a requirement for transactional licenses, as explicitly and reasonably sought by Athabasca, AC is now entirely predictably as foreseen by Athabasca, allegedly refusing to issue such licenses. Whatever the motivation for this refusal, the result is pressure on institutions to sign on to the supposedly voluntary interim license.

After many copyright administrators have complained privately about AC’s refusal to issue transactional licenses, and Michael Geist made this public,  AUCC is now protesting this to the Board and asking the Board to amend the interim tariff. AUCC relies on Athabasca’s and Ariel Katz’s earlier submissions. Here is AUCC’s submission, which states that “this tactic is a gross abuse of the collective administration of copyright and an improper use of collective monopoly power.”

If the Board does not provide appropriate relief here very quickly, some may wish to consider seeking remedies under the Competition Act, or persuading the Commissioner of Competition to intervene in this proceeding.  There is also a procedure whereby any “six citizens” can effectively force the Commissioner to launch an “inquiry” into an issue. Competition law and procedures are quite complex - but potentially the Commissioner will take on appropriate cases and fight them at taxpayers’ expense. Here, there may be good reasons to think about whether there is an illegal  “refusal to deal” or an illegal “abuse of dominance”, and if so, what should be done about it.

If the Copyright Board does not provide a remedy rather quickly, the Competition Act may prove to be an interesting and fertile potential resource since this “interim” tariff could last for several years, given the usual rate of proceedings at the Board and likely subsequent judicial review.

The Commissioner of Competition - despite an explicit statutory invitation which is really not necessary - has never before become involved in a Board hearing or file. Perhaps it is now time. Better late than never. 

HK

Watching Getty Images Watching Canadians

I have become aware of multiple instances recently in which Getty Images has been sending demand letters by e-mail to Canadians whose websites allegedly have unlicensed copies of images allegedly owned by Getty Images. They are probably using some sort of “bot” to find these images.

Assuming that these demands actually emanate from Getty Images, they raise some serious questions.

Getty Images is demanding exorbitant amounts of money for what appear to be trivial infringements at the most in the case of which I am aware, and the demands are far in excess of what any Canadian court would ever likely award even after a trial. The actual damages in terms of the alleged infringer’s profits are likely zero, since the alleged infringers are not selling the images as such or directly profiting in any way from their use. The cost of an actual license in many cases would be quite low and a very small fraction of the demand. Even statutory minimum damages would likely be at the minimum end of the scale, which is $500 per work, which can in turn be reduced to $200 in some cases, and even less still per work where there are many works involved in appropriate circumstances.

The settlement rhetoric I have seen or heard about is extremely formulaic, aggressive and threatening, and the settlement offers are still far beyond what a Court would likely award, absent commercial intent and behaviour by the defendant.

Naturally, it is rarely going to be cost effective for any of the recipients of these letters to retain counsel to actually fight Getty Images in court over a few thousand dollars. This is the nasty, brutish economics of statutory damages at work - as practised most obviously up to now by the RIAA.

But likewise, it may not be cost effective for Getty Images to actually sue someone where there is no real commercial aspect of the alleged infringement and the actual damages recoverable in court may be only a few hundred dollars at most, if properly defended. A bad result in a test case could prove very problematic for Getty Images.

This all raises questions about misuse and abuse of copyright rights. Read Justice Bastarache’s comments in the Supreme Court of Canada's landmark decision in Kraft v. Euro Excellence at para. 98 on this point. While these comments were admittedly obiter dicta, two of his colleagues joined in and the comments as such were not contradicted. The issue of abuse and misuse of copyright rights is now open for serious argument in Canada. . In principle, the copyright misuse doctrine could render any copyright rights unenforceable.

I have spoken to David Fewer, Counsel at the wonderful CIPPIC clinic at the University of Ottawa, who has agreed to keep track of these demands from Getty Images and to consider CIPPIC’s possible involvement. He can be reached at 613-562-5800 ext. 2558. His e-mail is:

dfewer@uottawa.ca

All rights holders are certainly entitled to enforce their legitimate rights in a legitimate way. But they should not be permitted to do so in a manner that is abusive and/or to misuse these rights. This is Canada and such behaviour is likely to prove most unwelcome in Canadian courts, especially after the signal sent by Justice Bastarache.

Policy makers thinking about a Canadian DMCA should take note. If this type of thing is happening now, what may we expect if these types of American enforcement techniques are made even easier and more potent?

Getty Images should know that they, too, are being watched.

HK