ISPs protected from liability

By Alan Gahtan - July 15, 2002

Canada ’s Federal Court of Appeal recently issued a decision regarding the liability of Internet intermediaries in respect of unauthorized music made available on the Internet.  SOCAN v. CAIP, 2002 FCA 166 (May 1, 2002), was an application for judicial review of an October 27, 1999 decision of the Copyright Board, 1 C.P.R. (4^th) 417 (“Tariff 22”) which considered an application by the Society of Composers, Authors and Music Publishers of Canada (“SOCAN”) to seek tariffs from certain Internet intermediaries.  Subject to two limited exceptions, the Court dismissed the application and affirmed that Internet service providers (ISPs) in Canada are generally not liable for infringing activities conducted by their users.

 The decision is important because unlike a number of other jurisdictions, Canada lacks legislation to generally shield Internet intermediaries from copyright liability.  In Australia , The European Union, Japan and the United States ,  Internet intermediaries are not liable for copyright infringement in respect of material stored on their servers, unless, after receiving notice of infringing materials, the operator fails to take appropriate action.

SOCAN sought to impose a tariff on Internet Access Providers, the Internet intermediaries that provide access to the Internet to end users.  An ability to charge Canadian Internet Access Providers a per subscriber fee was seen as the most efficient means of collecting a royalty for the use of music accessible on the Internet.  This was in contrast to the approach taken by ASCAP and BMI , US copyright collectives, who sought instead to license US website operators who wished to utilize musical works on their web sites.

SOCAN did not challenged the Board’s holding that a person who posts music on a server thereby authorizes its communication, and communicates it when, in response to requests from end users, it is transmitted from the host server on which it is stored.  The statutory requirement that the infringing communication must be “to the public” is satisfied whenever a content provider uploads material onto a server with the intention that the public, or a segment of the public, will have access to it, even though members of the public neither request nor receive the material simultaneously, and may receive it individually in private.

However, SOCAN challenged the Board’s conclusion that the typical activities of Internet Access Providers and operators of host servers do not constitute communication by telecommunication as defined in the Copyright Act, and thus do not give rise to liability to pay a royalty.  The Board had held that the services and equipment they normally supply to enable subscribers to obtain access to music bring them within an exemption contained in paragraph 2.4(1)(b) of the Copyright Act, which provides that “a person whose only act in respect of the communication of a work or other subject-matter to the public consists of providing the means of telecommunication necessary for another person to so communicate the work or other subject-matter does not communicate that work or other subject-matter to the public”.

Three things must be established for an intermediary’s activity to fall within paragraph 2.4(1)(b), and thus not attract liability for infringing copyright by communicating a work to the public by telecommunication.  First, the intermediary’s activities must amount to the provision of “the means of telecommunication”; second, those means must be “necessary” for enabling another person to communicate a work to the public; and third, the activities in question must constitute the intermediary’s “only act” with respect to the communication.

The Court affirmed the Board’s conclusion that the word “means” is capable of describing a wider range of services and equipment than those provided by traditional common carriers and should be interpreted in a way that takes account of technological developments.  An important indicator that a person is providing the means to enable others to communicate by telecommunication is that the person lacks the practical ability to control and monitor content, and hence plays only a passive role in the communication.

In general, the activities of Internet intermediaries was found to be protected.  For example, Internet Access Providers were not found to generally be engaging in activities that would attract liability for infringement.  Likewise, the normal activities of host server operators were not held to implicitly authorize content providers to communicate the material that they were posting, another form of copyright infringement.  Of course, if Internet intermediaries either collaborate with content providers, or themselves post music, they would also lose the protection of paragraph 2.4(1)(b).

However, one important exception to this general finding concerns the operation of “cache servers”.  These are servers operated by Internet Service Providers that temporarily store material requested by end users from a remote host server.  Material requested from a host server may be automatically cached on an intermediate server, so that if it is requested again (whether by the same user or a different user), such material will be delivered from the cache rather than the original host server.  The use of such cache servers was found to be not “necessary” to the provision of Internet connectivity but rather is used to improve performance by reducing the amount of information that needs to be retransmitted from remote servers – thereby, conserving bandwidth and improving response time for end users.  The result is that the operator of a cache may now be held liable for infringing the exclusive right of an author or composer to communicate a musical work to the public.

The Court also disagreed with the Copyright Board on its determination of when liability for infringement should apply when a web server is not located in Canada .  The Copyright Board had adopted a general principle that a communication occurs at the place of transmission (where the host server containing the applicable content is located), but left the imposition of liability open where material is aimed specifically at end users in Canada.  According to the Court, the appropriate test is whether the transmission has a “real and substantial” connection with Canada .  Along with the locations of the content provider, the host server and the various Internet intermediaries, the location of the end user is a particularly important factor in determining if an Internet communication has a real and substantial connection with Canada .

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