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Canada last overhauled its copyright law in 2012, bringing to a conclusion more than a decade of failed bills and lobbying pressure.

The public debate over the Copyright Modernization Act was often framed by disputed claims that Canada was weak on piracy, with critics arguing that updated laws were needed to crack down on copyright infringement. As the government prepares to conduct a statutorily-mandated review of the law later this year, the landscape has shifted dramatically with court cases and industry data confirming that Canada is now home to some of the toughest anti-piracy rules in the world.

The change in Canadian law is best exemplified by a ruling last week from the Federal Court of Canada involving the sale and distribution of "modchips," which can be used to circumvent digital controls on video-game consoles. Nintendo filed a lawsuit against a modchip retailer in 2016, arguing that the distribution of modchips violated the law, even without any evidence of actual copying.

The federal court agreed, pointing to the 2012 anti-circumvention rules that largely mirror legal restrictions on bypassing copy and access controls found in the United States, and awarding $12.7-million in damages. The court adopted an aggressive approach in interpreting the digital-lock provisions, while also taking a narrow view of exceptions that were designed to safeguard legitimate reasons to circumvent such as interoperability of computer programs. If 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.

The decision 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. Last year, the federal court issued sweeping injunctions against multiple distributors of set-top boxes that turn standard televisions into "smart TVs" by enabling users to access a wide range of video content found online. This includes authorized content such as YouTube, Netflix or other online video providers, as well as unauthorized streaming services that offer access to unlicensed content.

Canadian copyright law has also been used to shut down websites whose primary purpose is to enable infringement with rights holders relying on a first-of-its-kind "enabler provision" contained in the 2012 reforms. The provision appears to have worked, as the U.S. government's most recent report on notorious online markets makes no reference to Canada. Moreover, the Business Software Alliance reports that Canada is at its lowest software-piracy rate ever, well below global and European averages.

Canadians have also demonstrated a willingness to pay for content online. Netflix had not even entered the Canadian market when the bill that led to the 2012 reforms was introduced, but it has since enjoyed explosive growth in Canada with more than half of English-language households subscribing to the video service. SOCAN, Canada's largest music-copyright collective, recently reported a 460-per-cent increase in earnings from Internet music streaming services. In fact, even in the education sector, where critics have expressed frustration with fair-dealing rules, spending on licensed access to digital materials runs into the hundreds of millions of dollars annually, far outpacing declines in copyright-collective revenues.

If anything, the experience of the past five years suggests that the two ministers responsible for copyright – Innovation, Science and Economic Development Minister Navdeep Bains and Canadian Heritage Minister Mélanie Joly – should be working to tweak the law to address concerns involving misuse and restrictions on innovation. The notice-and-notice system deployed by copyright owners to alert Internet users of alleged infringements has been widely misused with the inclusion in e-mail notices of demands for settlements that were never envisioned by policy makers. Long overdue regulations to crack down on misleading notices would be an obvious step to address the problem.

Further, the absence of fair use may hamstring innovation as it leaves Canadian companies at a disadvantage when compared with innovative, fair-use-based economies such as the United States, Israel, South Korea, and Singapore. When coupled with the restrictive digital-lock rules that suffer from narrowly interpreted exceptions, many may find the current Canadian copyright law environment supportive of cracking down on infringement but lacking the flexibility needed for new creativity and innovation.

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