Supreme Court rulings align copyright with digital reality

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The Supreme Court has dashed the hopes of Canadian composers and music publishers with a series of rulings on copyright that includes a declaration that music publishers should not receive more money when their songs are downloaded over the Internet than when they are bought in a store.

The decisions mean online stores such as Apple's iTunes will not have to pay copyright holders when they offer free streaming samples to consumers.

But while the practical effect on consumers may be minimal because of the small amount of money involved, advocates of Internet freedom are cheering the court for stripping away some hurdles to online commerce.

The rulings help untangle the confusing web of language in the Copyright Act addressing commercial activity on the Internet, and help create case law affirming that online commerce should not have more barriers than transactions in the real world.

"These five rulings are of real importance in setting the future course of Canadian copyright law," said Carys Craig, an associate professor at Osgoode Hall Law School who specializes in intellectual property.

As technologies evolve, "the focus is increasingly on the obligations of intermediaries like Internet service providers, and the tariffs to be paid to licensing agencies."

In one of the rulings, which pitted video-game publishers and distributors against music composers, the court ruled that performance royalties do not need to be collected for music used in video games that are downloaded over the Internet, since they aren't collected when those same games are purchased at a store.

In doing so, the court affirmed the importance of technological neutrality, which dictates that all technologies should be treated equally.

"There is no practical difference between buying a durable copy of the work in a store, receiving a copy in the mail, or downloading an identical copy using the Internet," the court wrote in one of the decisions.

Two of the five rulings delivered Thursday bring the way music is licensed online closer to the way it is elsewhere.

When someone creates a recorded piece of music, they earn a handful of rights that they can license and monetize: A reproduction licence lets a person sell physical or digital copies of music, while a performance licence involves playing the music, as on the radio.

The Society of Composers, Authors and Music Publishers of Canada (SOCAN) collects royalties for these performance rights, and, because of unclear language in the Copyright Act, asserted the right to collect fees for both downloaded and streamed music.

It has collected close to $24-million since 2004 but has not distributed any funds because of the outstanding legal questions. Some of those monies related to downloading may now be returned to the original retailers. SOCAN may continue to collect royalties on streaming music from services such as Rdio, Slacker Radio, and online radio stations.

The second royalty case was instigated by the country's largest Internet service providers – among them Rogers, Bell and Telus – who appealed to the Supreme Court over fees charged to their proprietary music download services.

"The laws weren't clear between downloading and streaming," said Richard Sutherland, a Mount Royal University professor who studies the Canadian music industry's interactions with government. The ruling "decisively sets them apart as different animals."

The court also rejected SOCAN's appeal that online music stores should pay royalties on so-called "song previews" of 30 to 90 seconds. In 2007, the Copyright Board ruled these previews "research," which did not infringe copyright. Thursday's ruling affirmed that position.