Date: 20100902
Docket: A-521-07
Citation: 2010 FCA 221
CORAM: LÉTOURNEAU
J.A.
NADON
J.A.
PELLETIER
J.A.
BETWEEN:
ENTERTAINMENT SOFTWARE ASSOCIATION and
ENTERTAINMENT SOFTWARE ASSOCIATION OF CANADA
Applicants
and
SOCIETY OF
COMPOSERS, AUTHORS AND MUSIC PUBLISHERS OF CANADA
Respondent
and
CMRRA/SODRAC INC.
Interveners
REASONS FOR JUDGMENT
PELLETIER J.A.
INTRODUCTION
[1]
This is the
last in the series of applications for judicial review generated by the
Copyright Board’s (the Board) decision with respect to music on the Internet. This
application is brought by the publishers of entertainment software who take
issue with a number of the Board’s conclusions. The Board’s decision as to the liability
of internet game sites to a tariff is found in its decision dated October 18,
2007 (the Tariff 22.A Decision) while the specifics of the tariff itself are
found in the Board’s decision dated October 24, 2008 (the Tariff 22 B to G
Decision), specifically, that portion of the decision dealing with Tariff G –
Game Sites. On this application, only the Tariff 22.A Decision is in issue.
[2]
The
applicants, the Entertainment Software Association and the Entertainment Software
Association of Canada (collectively, ESA), are industry associations which
represent most of the publishers of interactive entertainment software products
in North America. The Society of Composers, Authors, and Music Publishers of
Canada (SOCAN) is a collective society which administers in Canada performing rights and the
right to communicate musical works to the public by telecommunication. The
interveners CMRRA/SODRAC are collective societies which
administer the right to reproduce protected musical works in Canada. For all intents and purposes, the
interveners support the position taken by SOCAN. As a result, references to
SOCAN should be taken as a reference to the respondents and the interveners.
[3]
ESA argues
that the Board erred in finding that the download of a video game which
includes music is a communication of that music to the public by
telecommunication as provided in paragraph 3(1)(f) of the Copyright Act,
R.S.C. 1985, c. C-42 (the Act). ESA also argues that the Board erred in
certifying Tariff 22.G when SOCAN submitted no evidence to show that the tariff
was just and equitable, as required by the Act. Finally, ESA pleads that the
Board erred in rejecting or failing to give effect to its evidence as to
industry practice with respect to securing rights to the musical content of
electronic games. It says that the Board’s failure to give effect to that
evidence will result in double compensation for those who composed the music.
[4]
In my
view, ESA’s arguments are not well founded. As a result, and for the reasons
which follow, I would dismiss the application for judicial review.
THE FACTS
[5]
The Board
summarized ESA’s evidence as follows:
The use of music in
online video games and on game publishers’ sites is marginal. Video games
consist of millions of line of software code which, when played by the end
user, process the data entered by the user and generate an audiovisual output.
That output is generally comprised of many components, including images of the
playing environment, characters and objects as well as full motion video
segments, narrative text and voice over, and sound effects. The music
component of a video game typically consists of a minute portion of the overall
audiovisual output and, in ESA’s submission, an equally negligible piece of the
overall software program that is a video game. Between 0 and 5 per cent of the
development budget of games can be attributed to music. Generally a video game
publisher will enter into an agreement with a third-party rights holder to
provide the music for incorporation into the video game. ESA argues therefore
that the rights holders are fully compensated in advance of the game’s
publication.
Tariff 22.A Decision at
paragraph 75.
[6]
ESA put
before the Board a number of sample agreements used by some of its members in
support of its position that rights holders were already fully compensated.
.
THE DECISION UNDER REVIEW
[7]
The Board
dealt with ESA’s arguments at paragraphs 122 to 126 of the Tariff 22.A
Decision.
[8]
The Board
dismissed ESA’s argument that game software is not music even though it may
contain musical segments. It held that the transmission of games over the Internet
involved the transmission of the music incorporated in the games just as the
transmission of a television program containing music was a simultaneous
transmission of the music contained in the television program.
[9]
As for the
argument that ESA members have acquired all the rights for which the tariff is
intended the rights holders, the Board found that, given the difference between
Canadian and American copyright law, ESA’s members have not acquired the rights
which they thought they acquired.
[10]
ESA argued
before the Board that SOCAN had not led sufficient evidence to allow the Board
to establish a just and equitable tariff. The Board also dismissed this
argument. It proceeded from the basis that SOCAN was entitled to a tariff. The
absence of evidence may well be relevant to the amount of the tariff but not to
the right to establish a tariff. Similarly, there is no de minimis rule
according to which a tariff could only be certified if a certain threshold of
musical content was reached.
[11]
Finally,
the Board rejected the argument that the issue of compensation for rights
holders ought to be dealt with by means of contracts between SOCAN and music
users such as ESA’s members. It held that the nature of the SOCAN regime
precluded this possibility, referring to one of its prior decisions in which it
discussed the issues raised in that approach.
[12]
In the
end, the Board dismissed all of ESA’s arguments against the establishment of a
tariff.
STATEMENT OF ISSUES
[13]
In this
Court, as it did before the Board, ESA challenged the determination that
downloads of music were communication of that music to the public by
telecommunication as provided in paragraph 3(1)(f) of the Act. That
issue was disposed of by this Court in a decision released concurrently with
this one, Bell Canada et al. v Society of Composers, Authors, and Music
Publishers of Canada, 2010 FCA 220 (Bell Canada) in which this
Court carefully reviewed the Board’s decision and the applicable jurisprudence and
concluded that the download of a music file or a stream did, in fact,
constitute a communication of that musical work to the public by
telecommunication and dismissed those applications for judicial review. As this
application was consolidated with those disposed of in Bell Canada, the conclusions in that case are also
binding on ESA. As a result, I do not propose to deal with that issue again in
these Reasons.
[14]
The
remaining issues raised by ESA can be stated as follows:
1-
Did the
Board err in finding that video game sites were subject to a tariff with
respect to the communication of musical works to the public, given the minor
role which music plays in video games?
2-
Did the
Board err in certifying a tariff when SOCAN failed to present adequate evidence
to justify the reasonableness of the tariff it proposed?
3-
Did the
Board err in failing to consider the evidence of the contractual agreements
between ESA members and music creators, in failing to properly weigh that
evidence, and in failing to provide adequate reasons for failing to consider
that evidence?
ANALYSIS
Standard of review
[15]
The Board
is a specialist tribunal which deals extensively with copyright matters. The
Act is its home statute. It is therefore entitled to deference with respect to
its interpretation of that Act: see Dunsmuir v New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, at
paragraph 54. The question in issue here is one of mixed fact and law. If the
Board is entitled to deference on pure questions of laws, and it is entitled to
deference with respect to findings of fact, it must necessarily be entitled to
deference on questions of mixed fact and law involving the application of its
home statute to the facts of a case.
1-
Did the Board err in finding that video games sites were subject to a tariff
with respect to the communication of musical works to the public, given the
minor role which music plays in video games?
[16]
In the
Tariff 22.A Decision, the Board rejected the notion that there is a de
minimis rule in relation to the certification of tariffs. So long as music
is performed or communicated to the public by telecommunication, SOCAN is
entitled to have a tariff certified in respect of that use. The amount of the
tariff may well vary with the amount of use, but it is the fact of performance
or communication which gives SOCAN the right to seek a tariff and justifies the
Board in certifying a just and equitable tariff in respect of that use.
[17]
Subsections
19(2) and 67.1(4) of the Act are reproduced below:
|
19. (1) Where a sound recording has been published, the
performer and maker are entitled, subject to section 20, to be paid equitable
remuneration for its performance in public or its communication to the public
by telecommunication, except for any retransmission.
(2) For the purpose of providing the remuneration mentioned in
subsection (1), a person who performs a published sound recording in public
or communicates it to the public by telecommunication is liable to pay
royalties
(a) in the case of a sound recording of a musical work, to the
collective society authorized under Part VII to collect them; or
(b) in the case of a sound recording of a literary work or dramatic
work, to either the maker of the sound recording or the performer.
67.1 (4) Where a
proposed tariff is not filed with respect to the work, performer’s
performance or sound recording in question, no action may be commenced,
without the written consent of the Minister, for
(a) the infringement of the rights, referred to in section 3, to perform
a work in public or to communicate it to the public by telecommunication; or
(b) the recovery of royalties referred to in section 19.
|
19. (1) Sous réserve de l’article 20,
l’artiste-interprète et le producteur ont chacun droit à une rémunération
équitable pour l’exécution en public ou la communication au public par
télécommunication — à l’exclusion de toute retransmission — de
l’enregistrement sonore publié.
(2) En vue de cette rémunération, quiconque exécute en
public ou communique au public par télécommunication l’enregistrement sonore
publié doit verser des redevances :
a) dans le cas de l’enregistrement sonore d’une oeuvre
musicale, à la société de gestion chargée, en vertu de la partie VII, de les
percevoir;
b) dans le cas de l’enregistrement sonore d’une oeuvre
littéraire ou d’une oeuvre dramatique, soit au producteur, soit à
l’artiste-interprète.
67.1
(4) Le non-dépôt du projet empêche, sauf autorisation écrite du
ministre, l’exercice de quelque recours que ce soit pour violation du droit
d’exécution en public ou de communication au public par télécommunication
visé à l’article 3 ou pour recouvrement des redevances visées à l’article 19.
|
[18]
These
dispositions make it clear that the mechanism for the collection of compensation
for the performance and communication to the public by telecommunication of
sound recordings is the enforcement of approved tariffs by collective societies.
Without a tariff, there is, practically speaking, no right to compensation. Such
a regime does not lend itself to the application of a de minimis rule. The
Board’s conclusion on this issue is reasonable.
2-
Did the Board err in certifying a tariff when SOCAN failed to present
adequate evidence to justify the reasonableness of the tariff it proposed?
[19]
ESA argued
that the Board erred in certifying a tariff when SOCAN did not present evidence
to justify the “fair and equitable” character of the tariff. The Board has
previously rejected arguments of this nature. In Re Statement of Royalties
to be collected for Performances or Communication by Telecommunication, in
Canada, of Musical or Dramato-Musical Works in 1994, 1995, 1996, and 1997,
(1997) 71 C.P.R. (3d) 199, the Board wrote at p. 202:
As the Board has stated
several times, the ordinary rules relating to evidence and the burden of proof
do not apply. SOCAN is entitled to a tariff. Users cannot expect the Board to
abolish a tariff merely because, in their view, SOCAN has not “proven its case”
on a balance of probabilities or, as stated by counsel to the Association, “on
the basis of lack of evidence.”
[20]
I agree
with these comments. The collective administration regime depends upon the
certification of tariffs. This system, which seeks to balance the rights of
creators and users, cannot be hobbled by an overly rigid approach to the
assessment of the basis upon which a tariff is certified. In this case, the
base rate of .08 per cent of revenues was initially suggested by ESA itself and
was eventually accepted by the Board. The Board’s decision on this issue is
reasonable.
3-
Did the Board err in failing to consider the evidence of the contractual
agreements between ESA members and music creators, in failing to properly weigh
that evidence, and in failing to provide adequate reasons for failing to
consider that evidence.
[21]
ESA’s
argument on this point amounted to arguing, on the basis of a sample of
agreements used by some of its members, that all of its members used similar
agreement to secure all applicable rights from all rights holders. The
difficulty with this approach was made clear by a concession made by ESA’s counsel
before the Board:
THE CHAIRPERSON: You
indicate in your submission and in your evidence that you don’t use SOCAN’s
repertoire.
MS. BERTRAND: Rarely,
but it might occur.
THE CHAIRPERSON: But it
might occur?
MS. BERTRAND: Yes, and
then the reality is that if it occurs, we are there.
SOCAN’s Memorandum of
Fact and Law, at paragraph 40.
In
this context, I take “there” to mean that SOCAN would be entitled to have a tariff
certified.
[22]
In
addition, SOCAN conceded in its Memorandum of Fact and Law that:
To the extent that the
operator of a videogame website can establish that all of the music rights with
respect to the music used on its site have been cleared for use in Canada, the operator
of that website would not be required to pay the SOCAN royalty and/or to obtain
a SOCAN licence.
SOCAN’s
Memorandum of Fact and Law, at paragraph 37.
[23]
In this
context, it is clear that ESA was overreaching when it argued, based on a
sample of some contracts in use, that no tariff should be certified. In
practice, in those cases where the game site operator had the right to
communicate the music to the public, no royalties would be payable pursuant to
any tariff certified by the Board. Where the operator could not show that it
had the rights it claimed, the royalties would be payable according to the
tariff.
[24]
It is
clear that the Board had ESA’s evidence in mind in coming to the decision it
did though it did not give that evidence the effect which ESA sought for it,
namely, the refusal to certify a tariff. The Board’s decision on the merits is
reasonable.
[25]
That said,
the Board’s laconic reasons on this point were non-responsive to ESA’s argument.
In my view, they would not satisfy any of the purposes identified by this Court
at paragraph 16 of Vancouver International Airport Authority v. Public
Service Alliance of Canada, 2010 FCA 158, [2010] F.C.J. No. 809 at
paragraph 16.. Notwithstanding the manifest inadequacy of the Board’s reasons
on this issue, I am not inclined to return this matter to the Board for better
reasons with respect to this point. First, these matters have been pending
before the Board since 1996. The interest in finality is substantial. Second,
the deficiency in the Board’s reasons relates to a single discrete issue. Finally,
while the adequacy of the reasons is an independent question from the merits of
the decision, there is little advantage for the parties or the Board in sending
a matter back for further and better reasons where the reasonableness of the
decision is apparent on its face. As a result, I would not give effect to this
ground of judicial review.
CONCLUSION
[26]
I would
dismiss ESA’s application for judicial review with costs to SOCAN. The
interveners shall bear their own costs.
"J.D.
Denis Pelletier"
“I
agree.
Gilles Létourneau”
“I
agree.
M. Nadon”
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