MICHAEL GEIST
Thursday, November 18, 1999
Following more than four years of anticipation, the Copyright Board of Canada has released its ruling on a proposed new Internet royalty.
The resulting decision impacts Internet users nationwide and provides Canada with its most comprehensive official analysis of how copyright law intersects with the Internet.
Although the ruling, released last month, will not result in an immediate Internet royalty -- the board will address the issue of who pays how much in a second round of hearings -- it creates increased legal certainty for many Internet users and businesses.
For example, the ruling gives Internet service providers a clear indication of their liability for copyright infringement. It also provides Internet content creators with a better sense of the consequences of posting content on-line and linking to third-party Web sites.
The process began in September, 1995, when the Society of Composers, Authors and Publishers of Music in Canada filed an application for a new royalty to cover music on the Internet.
SOCAN, representing thousands of Canadian music copyright holders, was concerned about the growing popularity of the Internet as a means of disseminating music and the corresponding prospect of lost royalties. It proposed a new Internet royalty, now commonly referred to as Tariff 22, to address its interests.
SOCAN argued that all parties involved in an Internet transmission -- from the poster to the ISP to the recipient -- are liable for the communication and thus all bear some responsibility to pay an appropriate licence or royalty fee.
Not surprisingly, the ISPs led the opposition to this approach. They argued that music played on the Internet was more like a private communication than a public broadcast. The ISPs also characterized themselves as mere intermediaries (much like the phone company) who should not be held liable for the content transmitted over their equipment.
In its lengthy ruling, the board arrived at several important conclusions. First, it held that music transmitted over the Internet did in fact qualify under the Copyright Act as a public performance of the work and could be subject to a royalty.
Second, the board ruled that ISPs could rely upon a provision in the Copyright Act that exempts intermediaries from copyright liability -- provided that they function strictly as a conduit.
When an ISP takes on a greater role -- for example, when they post content themselves or take steps to modify or block content -- they cease to function as intermediaries and face liability as a party to the transmission.
The board also considered the point at which authorization of a communication occurs on the Internet. This is an important determination, since authorizing a communication is also covered under the Copyright Act and carries the same liability as actually communicating a work.
The board ruled that authorization takes place as soon as the content is made available on the Internet. For example, if someone posts a pirated music file to a Web site, he or she would be liable under the Copyright Act regardless of whether someone else downloads it.
Also touched on in the ruling was the issue of linking. The board ruled that user-activated hyperlinks -- those links that require a user to click -- were the equivalent of an electronic directory and therefore did not raise copyright-liability concerns for Web site owners.
Automated hyperlinks, which are contained within the code of a Web page and play automatically, were treated as an authorization to communicate and thus raise copyright liability for the page owner.
What I found to be the most troubling aspect of the ruling was the board's position on Internet jurisdiction. The board effectively limited potential royalties to content hosted on Canadian-based Web servers by tying jurisdiction strictly to the location of the server.
In doing so, the board dismissed as irrelevant the location of the person posting the content.
This stands in sharp contrast to most other areas of Internet law where the residence of the person is the determining factor. In criminal law, for example, it matters little where the server is located. When a Canadian resident commits a crime on the Internet, Canadian law likely applies regardless of the server's location.
The problem with the board's approach is that it could lead to a race to the bottom in Internet law, where firms relocate to the location with the least restrictive regulatory framework.
So Canadians may quite reasonably post any content that might require a licence outside the country to avoid SOCAN royalties. The end result may well be continued lost revenue for Canadian copyright holders as well as lost business for Canadian ISPs who will see their clients move offshore.
Although the Tariff 22 ruling is technically limited to musical works, its impact is likely to be felt in all aspects of Internet content. It provides Canadians with an important starting point for Internet law debate and analysis.
Michael Geist is a law professor at the University of Ottawa School of Law specializing in Internet and electronic-commerce law. He can be reached at mgeist@uottawa.ca and on the Web at http://www.lawbytes.com.
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