Canadian Broadcasting Corporation Appellant v. SODRAC 2003 Inc. and Society for Reproduction Rights of Authors,, 2015 SCC 57

SUPREME COURT OF CANADA Citation: Canadian Broadcasting Corp. v. SODRAC 2003 Inc., 2015 SCC 57, [2015] 3 S.C.R. 615 Date: 20151126 Docket: 35918 Between: Canadian Broadcasting Corporation Appellant and SODRAC 2003 Inc. and Society for Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC) Inc.

Respondents - and - Centre for Intellectual Property Policy, Ariel Katz, Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic, Canadian Musical Reproduction Rights Agency Ltd., Canadian Music Publishers Association, International Confederation of Music Publishers, Music Canada, International Federation of the Phonographic Industry, Canadian Council of Music Industry Associations, Canadian Independent Music Association and Association québécoise de l’industrie du disque, du spectacle et de la vidéo Interveners Coram: McLachlin C.J. and Abella, Rothstein, Cromwell, Moldaver, Karakatsanis, Wagner, Gascon and Côté JJ.

Reasons for Judgment: (paras. 1 to 116) Dissenting Reasons: (paras. 117 to 192) Dissenting Reasons: (paras. 193 to 195) Rothstein J. (McLachlin C.J. and Cromwell, Moldaver, Wagner, Gascon and Côté JJ. concurring) Abella J. Karakatsanis J.

Canadian Broadcasting Corp. v. SODRAC 2003 Inc., 2015 SCC 57, [2015] 3 S.C.R. 615 Canadian Broadcasting Corporation Appellant v. SODRAC 2003 Inc. and Society for Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC) Inc.

Respondents and Centre for Intellectual Property Policy, Ariel Katz, Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic, Canadian Musical Reproduction Rights Agency Ltd., Canadian Music Publishers Association, International Confederation of Music Publishers, Music Canada, International Federation of the Phonographic Industry, Canadian Council of Music Industry Associations, Canadian Independent Music Association and Association québécoise de l’industrie du disque, du spectacle et de la vidéo Interveners Indexed as: Canadian Broadcasting Corp. v.

SODRAC 2003 Inc. 2015 SCC 57 File No.: 35918. 2015: March 16; 2015: November 26.

Present: McLachlin C.J. and Abella, Rothstein, Cromwell, Moldaver, Karakatsanis, Wagner, Gascon and Côté JJ. on appeal from the federal court of appeal Intellectual property — Copyright — Licences — Collective societies — SODRAC administering reproduction rights ascollective society — Application by SODRAC to set terms and conditions of licence for reproduction by CBC of musical works inSODRAC’s repertoire from 2008 to 2012 — CBC making ephemeral synchronization copies, including musical works, as producer andephemeral broadcast-incidental copies, including musical works, as broadcaster — Synchronization copies made during productionsubject to licence — Whether broadcast-incidental copies engage reproduction right — If so, whether licence for broadcast-incidentalcopies should be implied in synchronization licences — If reproduction licence required for broadcast-incidental copies, whether Boarderred in valuation of licence — Whether Board applied principles of technological neutrality and balance properly — Copyright Act,R.S.C. 1985, c.

C-42, s. 3(1)(d). Intellectual property — Copyright — Interim licences — Collective societies — Board decision setting terms and conditionsof licence released after expiry of licence period — Board setting interim licence based on status quo — 2008-2012 licence selected asstatus quo — Whether Board erred in setting terms of interim licence — Copyright Act, R.S.C. 1985, c. C-42, s. 66.51. Administrative law — Judicial review — Standard of review — Copyright Board — Appropriate standard of review —Whether specific standard of review should be ascribed to each issue arising in decision under review.

CBC is both a producer and a broadcaster of television programs: it broadcasts its own original programs as well as thosethat it has licensed or bought from third parties, and it shows these programs on television and the Internet. SODRAC is a collectivesociety organized to manage the reproduction rights of its members. When broadcasters, including CBC, produce a program, they makeseveral kinds of copies. “Synchronization copies” incorporate musical works into an audiovisual program. A “master copy” is the finalcopy created when synchronization is complete.

CBC loads the master copy into its digital content management system and makesseveral copies of the completed program, and thus of the music incorporated into the program, for internal use. Where these copies aremade to facilitate broadcasting, they are called “broadcast-incidental copies”. Following Bishop v. Stevens, (SCC), [1990] 2 S.C.R. 467, in which it was held that “ephemeral” copies

engaged the reproduction right in s. 3(1) (

d) of the Copyright Act and that the right to make those copies is not implied by law in a broadcast licence, SODRAC began to differentiate between synchronization copies and copies made for other purposes. Initially, it granted free synchronization licences to licence holders, but it began asking producers to pay for those licences in or about 2006. In 2008, when SODRAC and CBC were unable to come to an agreement for the renewal of CBC’s licence, SODRAC asked the Board to set the terms of a licence for November 14, 2008, to March 31, 2012.

CBC argues that broadcast-incidental copies do not engage the reproduction right, or, in the alternative, that if a licence covering broadcast-incidental copies is required, it should be implied from its synchronization licences or the synchronization licences of third party producers. In 2012, the Copyright Board held that CBC’s broadcast-incidental copying activity engaged the reproduction right, that a licence for such copies could not be implied from synchronization licences covering the production process, and that CBC required a separate reproduction licence to legitimize its broadcast-incidental copying.

The Board valued this licence based on a ratio used in the commercial radio context and found to be equally applicable to the television context. The Board later issued an interim licence to take effect after the expiry of the 2008-2012 licence that extended the terms of that licence on an interim basis, subject to minor modifications. The Federal Court of Appeal upheld both the 2008-2012 licence and the interim licence that followed, subject to minor amendments.

Held (Abella and Karakatsanis JJ. dissenting): The appeal should be allowed; the 2008-2012 licence and the interim licence should both be set aside and the decisions of the Copyright Board should be remitted to the Board for reconsideration.

Per McLachlin C.J. and Rothstein, Cromwell, Moldaver, Wagner, Gascon and Côté JJ.: Because of the unusual statutory scheme under which the Board and the court may each have to consider the same legal question at first instance, the standard of correctness applies to whether broadcast-incidental copies engage the reproduction right, and thus whether the Copyright Act allows SODRAC to seek a licence for CBC’s broadcast-incidental copying. A standard of reasonableness applies to each of the remaining issues.

The Board was correct in finding that broadcast-incidental copying engages the reproduction right, consistent with this Court’s decision in Bishop and the context of the statutory scheme set out in the Copyright Act . Though this Court’s subsequent decisions in Théberge v. Galerie d’Art du Petit Champlain inc. , 2002 SCC 34 , [2002] 2 S.C.R. 336, and Entertainment Software Association v.

Society of Composers, Authors and Music Publishers of Canada , 2012 SCC 34 , [2012] S.C.R. 231, have refined the understanding of the purposes of copyright law, the central holding in Bishop , that ephemeral copies engage the reproduction right, remains sound. Ephemeral copies are not exempted by ss. 30.8 and 30.9, and nothing in the text, context or legislative history of ss. 3(1) , 30.8 or 30.9 supports the view that broadcast-incidental copies are not reproductions under the Act.

While balance between user and right-holder interests and technological neutrality are central to Canadian copyright law, they cannot change the express terms of the Act. The Board was also correct in finding that a licence to make broadcast-incidental copies should not be implied from synchronization licences issued by SODRAC. The synchronization licences do not give any indication that they included the right to make broadcast-incidental copies. The separation of synchronization and broadcast-incidental licences does not offend technological neutrality.

Recognizing production and broadcasting as distinct activities validly subject to disaggregated licences does not impose new layers of protections and fees based solely on technological change. Economic considerations also justified the practice of dividing synchronization and broadcast-incidental copy licences. However, the Board erred in failing to consider the principles of technological neutrality and balance in setting the valuation of this licence.

The principle of technological neutrality recognizes that, absent parliamentary intent to the contrary, the Act should not be interpreted or applied to favour or discriminate against any particular form of technology. In the regulatory context, the principle of technological neutrality applies to valuation of a reproduction licence, so the Board should compare the value derived from the use of reproduction in the old and new technologies in its valuation analysis.

To maintain a balance between user and right-holder interests, the Board must also assess the respective contributions of the user and the copyright-protected works to the value enjoyed by the user. It must have regard for factors it considers relevant in striking a balance between user and right-holder rights when fixing licence fees. Relevant factors will include the risks taken by the user, the extent of the investment made by the user in the new technology, and the nature of the copyright-protected work’s use in the new technology.

The 2008-2012 licence is set aside as it relates to the valuation of CBC’s television and Internet broadcast-incidental copies and the decision of the Board in that regard is remitted to the Board for reconsideration of that valuation in accordance with the principles of technological neutrality and balance. The Board’s valuation methodology did not give any indication that the principles of technological neutrality and balance were considered in the way it fixed the SODRAC reproduction royalties payable by CBC.

The Board did not compare the value contributed by the copyright-protected reproductions in the old and new technology. It also failed to take into account the relative contributions made by the use of copyright-protected works and the risk and investment by the user in its new technology, as required by the balance principle. It was reasonable to use the interim licence to maintain the status quo and to use the 2008-2012 statutory licence as the status quo in this case.

However, because the interim licence was based on the terms of the 2008-2012 licence, it is set aside and the Board’s decision in that regard is also remitted for reconsideration consistent with the principles guiding the redetermination of the 2008-2012 licence. Finally, the Board has the statutory authority to fix the terms of licences pursuant to s. 70.2, but the user retains the ability to accept or decline those terms. Per Abella J. (dissenting): The Board’s decision to impose royalty fees for broadcast-incidental copies was unreasonable.

The Copyright Act strikes a careful balance between promoting the public interest in the encouragement and dissemination of creative works, and obtaining a just reward for creators. Maintaining the balance that best supports the public interest in creative works is the central purpose of the Copyright Act . The question is how to preserve this balance in the face of new technologies that are transforming the mechanisms through which creative works are produced, reproduced and distributed. The answer lies in applying a

robust vision of technological neutrality as a core principle of statutory

interpretation under the Copyright Act . A reasonable

interpretation of the scope of the reproduction right must consider the wording of ss. 3(1) and 3(1)(

d) in the context of the overarching purpose of the Copyright Act and the central principle of technological neutrality. Adopting a literal

interpretation of the right in s. 3(1)(

d) would leave no room for the principle of technological neutrality, which is rooted in the words “to produce or reproduce the work or any substantial part thereof in any material form whatever”. Technological neutrality ensures that copyright attaches to a particular activity based on the essential character of the activity or output, rather than to the process by which it occurs. Technological neutrality consists of media neutrality and functional equivalence.

Media neutrality seeks to ensure that copyright doctrine evolves to embrace new technologies, preserving copyright not only in the medium in which the work is created but all existing and future media in which the work might be expressed. As long as the creative expression survives the transfer to a new medium, copyright in the work will survive. Functional equivalence, on the other hand, focuses on what the technology at issue is doing, rather than on the technical modalities of how it is doing it. This leads to

interpretations of the Act that give functionally equivalent technologies similar treatment. It also avoids imposing copyright liability on technologies and activities that only incidentally implicate copyright. This case involves an application of functional equivalence. Broadcast-incidental copies are those created to achieve a broadcast by providing the necessary technical modalities. In the context of copyright law, their creation cannot be seen as distinct from the core activity of broadcasting.

A broadcast-incidental copy is not transformed into a separate reproduction of the work simply because the technical imperatives of effecting a broadcast require the presence of multiple copies. Broadcast-incidental copies do not, as a result, attract separate royalties. To conclude otherwise is to doom both technological neutrality and the ability of copyright law to preserve the delicate balance between the rights of copyright holders and the public’s interest in the dissemination of creative works. SODRAC holds only the reproduction rights in the works in its repertoire.

It is not entitled to royalties associated with the broadcasting of those works, which are paid to the Society of Composers, Authors and Music Publishers of Canada (SOCAN). SODRAC is attempting to claim royalties in this case for the method of broadcasting the musical works to the public, despite never before receiving royalties for broadcasting activities. Sections 30.8 and 30.9 of the Copyright Act were a legislative response to this Court’s holding in Bishop , which was based on a literal

interpretation of s. 3(1)( d ). It held that the licensing of a performance right did not implicitly authorize ephemeral recordings of the performance for the purposes of effecting the broadcast. These discrete legislative responses to a specific judicial

interpretation of the Copyright Act are far from representing the kind of express statutory language needed to displace such fundamental objectives and principles underpinning the Copyright Act as technological neutrality and balance. They were meant to provide greater certainty that certain classes of ephemeral recording are not to attract copyright liability and to maintain technological neutrality, not to be a defining statement on the content of the reproduction right, or which kinds of copies will trigger it.

The Federal Court of Appeal’s suggestion that “more copies mean more value and thus, more royalties” violates technological neutrality by imposing additional copyright liability on the use of more efficient copy-dependent broadcasting technologies, by erroneously tying the compensation owed to creators of copyrighted works to how efficiently the user exercises the right that was bargained for, and by artificially raising the cost of broadcasting.

It also fails to take account of the fact that broadcasters are required to make certain broadcast-incidental copies in order to comply with CRTC regulations and that the CBC already pays royalty fees for broadcasting rights to SOCAN. The principle of technological neutrality requires that the

interpretation and application of the Copyright Act focus on the essential character of the activity and not on the technical modalities by which it is achieved. Modern digital technologies that are dependent on the creation of incidental copies do not change the essence of the broadcasting activity, and imposing additional fees for such copies raises the cost of broadcasting, an expense the consumer will be made to bear.

Attaching copyright liability to incidental copies created as a result of improvements in broadcasting technologies therefore penalizes broadcasters and the public for utilizing new and improved technologies and artificially creates entitlements to compensation for creators that were never intended to be given under the Act .

The majority’s articulation and application of the principle of technological neutrality on the issue of valuation is wholly inconsistent with the established case law in that it ties copyright-holder compensation to actions of the user that are unrelated and irrelevant to the rights held in the protected works, and focuses the inquiry on the value that the technology is creating for the user.

The majority proposes two novel factors for the Board to consider when striking a balance between user and copyright-holder interests: (1) the nature of the copyright-protected work’s use in the new technology; and (2) the risks taken and the extent of the investment made by the user in the new technology. While the first factor is consistent with the balance articulated in Théberge , the second is not.

If this new second factor is followed to its logical conclusion, users who make a sufficiently large investment or take sufficiently high risks may, by doing so, deprive the copyright holder of any entitlement to compensation for the use of the protected works. As this Court confirmed in Entertainment Software Association , technological neutrality operates to prevent imposing additional, gratuitous fees on the user simply for the use of more efficient technologies.

Focusing the inquiry on the value that the technology is creating for the user, as opposed to the functional result created by the technology, misconstrues technological neutrality. A technological innovation may well create value for the user by increasing efficiencies, driving down costs, or allowing the user to remain competitive. But SODRAC, the copyright holder, is not entitled to be compensated for how efficiently the CBC uses technology to achieve its broadcast.

The question of whether the Copyright Board ought to have imposed royalty fees on the CBC for the creation of incidental copies that arise as a technical part of the digital broadcasting process, is at the heart of the Copyright Board’s specialized mandate and therefore reviewable on a reasonableness standard. Extricating the various components of the Board’s decision and subjecting each to its own standard of review analysis represents a significant and inexplicable change in this Court’s standard of review jurisprudence.

It risks creating an unworkable framework for the judicial review of administrative decision-making and may well be seen as a way to give

reviewing courts wider discretion to intervene in administrative decisions, as had been done in the pre-Dunsmuir era through the use ofthe “preliminary question doctrine”. Per Karakatsanis J. (dissenting): There is agreement with Abella J.’s decision on the merits and in the result, but not with herposition on the standard of review. Instead, there is agreement with the majority’s conclusion that the correctness standard applies towhether broadcast-incidental copies engage the reproduction right and that the reasonableness standard applies to the balance of thedecisions of the Copyright Board.

However, the general approach taken by the majority to their analysis of the standard of review is notendorsed. In this respect, although this Court’s jurisprudence permits the isolation of a particular question of law on an exceptional basis,it does not require a separate standard of review analysis for each issue. An issue-by-issue approach, within each decision, unnecessarilycomplicates an already overwrought area of the law. Cases Cited By Rothstein J. Applied: Théberge v. Galerie d’Art du Petit Champlain inc., 2002 SCC 34, [2002] 2 S.C.R. 336; Entertainment SoftwareAssociation v.

Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34, [2012] 2 S.C.R. 231; Mouvement laïquequébécois v. Saguenay (City), 2015 SCC 16, [2015] 2 S.C.R. 3; referred to: Bishop v. Stevens, (SCC), [1990] 2 S.C.R.467; Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35, [2012] 2 S.C.R.283; Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633; Tervita Corp. v. Canada (Commissioner ofCompetition), 2015 SCC 3, [2015] 1 S.C.R. 161; Smith v.

Alliance Pipeline Ltd., 2011 SCC 7, [2011] 1 S.C.R. 160; Alberta (Informationand Privacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R. 654; Dunsmuir v. New Brunswick, 2008SCC 9, [2008] 1 S.C.R. 190; Performing Right Society, Ltd. v.

Hammond’s Bradford Brewery Co., [1934] 1 Ch. 121; Rizzo & RizzoShoes Ltd. (Re), (SCC), [1998] 1 S.C.R. 27; Statement of Royalties to be Collected by CMRRA/SODRAC Inc. for theReproduction of Musical Works, in Canada, by Commercial Radio Stations in 2001, 2002, 2003 and 2004, decision of the Board, fileNo. 2001-2004, March 28, 2003 (online: http://www.cb-cda.gc.ca/decisions/2003/20030328-rm-b.pdf); Statement of Royalties to beCollected by SOCAN, Re:Sound, CSI, AVLA/SOPROQ and Artisti in Respect of Commercial Radio Stations, decision of the Board,July 9, 2010 (online: http://www.cb-cda.gc.ca/decisions/2010/20100709.pdf); Gosling v.

Veley (1850), 12 Q.B. 328, 116 E.R. 891;Ontario English Catholic Teachers’ Assn. v. Ontario (Attorney General), 2001 SCC 15, [2001] 1 S.C.R. 470; Attorney-General v. WiltsUnited Dairies, Ltd. (1921), 37 T.L.R. 884; Vigneux v. Canadian Performing Right Society, Ltd., (SCC), [1943] S.C.R.348; Hanfstaengl v. Empire Palace, [1894] 3 Ch. 109. By Abella J. (dissenting) Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34,[2012] 2 S.C.R. 231; Bishop v. Stevens, (SCC), [1990] 2 S.C.R. 467; Théberge v.

Galerie d’Art du Petit Champlain inc.,2002 SCC 34, [2002] 2 S.C.R. 336; Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of InternetProviders, 2004 SCC 45, [2004] 2 S.C.R. 427; Robertson v. Thomson Corp., 2006 SCC 43, [2006] 2 S.C.R. 363; Euro-Excellence Inc. v.Kraft Canada Inc., 2007 SCC 37, [2007] 3 S.C.R. 20; Society of Composers, Authors and Music Publishers of Canada v. Bell Canada,2012 SCC 36, [2012] 2 S.C.R. 326; Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright), 2012 SCC 37,[2012] 2 S.C.R. 345; Rogers Communications Inc. v.

Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35,[2012] 2 S.C.R. 283; Cinar Corporation v. Robinson, 2013 SCC 73, [2013] 3 S.C.R. 1168; Rizzo & Rizzo Shoes Ltd. (Re), (SCC), [1998] 1 S.C.R. 27; Council of Canadians with Disabilities v. VIA Rail Canada Inc., 2007 SCC 15, [2007] 1 S.C.R. 650;Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190; Canadian Union of Public Employees, Local 963 v. New BrunswickLiquor Corp., (SCC), [1979] 2 S.C.R. 227. By Karakatsanis J. (dissenting) Rogers Communications Inc. v.

Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35, [2012] 2S.C.R. 283. Statutes and Regulations Cited Copyright Act, R.S.C. 1985, c. C-42, ss. 2.4, 3(1), 30.7 [ad. 1997, c. 24, s. 18(1)], 30.8 [idem], 30.9 [idem], 66.51, 66.6(1), 70.2, 70.4. Copyright Modernization Act, S.C. 2012, c. 20,

summary. Television Broadcasting Regulations, 1987, SOR/87-49, s. 10(5). Authors Cited Convention concernant la télévision et la radio entre la Société du droit de reproduction des auteurs, compositeurs et éditeurs auCanada (SODRAC) et la Société Radio-Canada, 19 mars 1992, art. 2. Craig, Carys J. “Technological Neutrality: (Pre)Serving the Purposes of Copyright Law”, in Michael Geist, ed., The CopyrightPentalogy: How the Supreme Court of Canada Shook the Foundations of Canadian Copyright Law. Ottawa: University of Ottawa Press,2013, 271. Driedger, Elmer A. Construction of Statutes, 2nd ed.

Toronto: Butterworths, 1983. Gurry, Francis. “The Future of Copyright”, speech delivered at the Blue Sky Conference, Queensland University of Technology, Sydney,February 25, 2011 (online: http://www.wipo.int/about-wipo/en/dgo/speeches/dg_blueskyconf_11.html).

Hagen, Gregory R. “Technological Neutrality in Canadian Copyright Law”, in Michael Geist, ed., The Copyright Pentalogy: How the Supreme Court of Canada Shook the Foundations of Canadian Copyright Law . Ottawa: University of Ottawa Press, 2013, 307. Hutchison, Cameron J. “Case Comment: The 2012 Supreme Court Copyright Decisions & Technological Neutrality” (2013), 46 U.B.C. L. Rev. 589. Hutchison, Cameron J. “Technological Neutrality Explained & Applied to CBC v. SODRAC ” (2015), 13 C.J.L.T. 101.

Katz, Ariel. “Commentary: Is Collective Administration of Copyrights Justified by the Economic Literature?”, in Marcel Boyer, Michael Trebilcock and David Vaver, eds., Competition Policy and Intellectual Property . Toronto: Irwin Law, 2009, 449. Licence authorizing the Canadian Broadcasting Corporation to reproduce works in the repertoire of SODRAC for the period from November 14, 2008 to March 31, 2012 , file No. 70.2-2008-01, November 2, 2012, revised March 31, 2014, ss. 2.01, 5.03(2) (online: http://www.cb-cda.gc.ca/decisions/2012/licence-src- modifiee.pdf). McKeown, John S.

Fox on Canadian Law of Copyright and Industrial Designs , 4th ed. Toronto: Carswell, 2012 (loose-leaf updated 2015, release 4). Pallante, Maria A. “The Next Great Copyright Act” (2013), 36 Colum. J.L. & Arts 315. Richard, Hugues G., and Laurent Carrière et al., eds. Canadian Copyright Act Annotated , vol. 3. Toronto: Carswell, 1993 (loose-leaf updated 2015, release 8). Syrtash, Veronica. “Supra-National Limitations on Copyright Exceptions: Canada’s Ephemeral Exception and the ‘Three-Step Test’” (2005-2006), 19 I.P.J. 521.

Tussey, Deborah. “Technology Matters: The Courts, Media Neutrality, and New Technologies” (2005), 12 J. Intell. Prop. L. 427. Vaver, David. Intellectual Property Law: Copyright, Patents, Trade-marks , 2nd ed. Toronto: Irwin Law, 2011. APPEAL from a judgment of the Federal Court of Appeal (Noël, Pelletier and Trudel JJ.A.), 2014 FCA 84 , [2015] 1 F.C.R. 509, 457 N.R. 156, 118 C.P.R. (4th) 79, [2014] F.C.J.

No. 321 (QL), 2014 CarswellNat 808 (WL Can.), setting aside in part a decision of the Copyright Board of Canada, file Nos. 70.2-2008-01, 70.2-2008-02, November 2, 2012 (online: http://www.cb-cda.gc.ca/decisions/2012/DecisionSODRAC5andArbitration02-11-2012.pdf), [2012] C.B.D. No. 11 (QL), and affirming a decision of the Copyright Board of Canada, file No. 70.2-2012-01, January 16, 2013 (online: http://www.cb- cda.gc.ca/decisions/2013/sodrac-16012013.pdf). Appeal allowed, Abella and Karakatsanis JJ. dissenting. Marek Nitoslawski and Joanie Lapalme , for the appellant.

Colette Matteau and Lisane Bertrand , for the respondents. Howard P. Knopf , David Lametti and Ariel Katz , for the interveners the Centre for Intellectual Property Policy and Ariel Katz. David Fewer and Jeremy de Beer , for the intervener the Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic. Casey M. Chisick , Peter J. Henein and Eric Mayzel , for the interveners the Canadian Musical Reproduction Rights Agency Ltd., the Canadian Music Publishers Association and the International Confederation of Music Publishers. Barry B. Sookman and Daniel G. C.

Glover , for the interveners Music Canada, the International Federation of the Phonographic Industry, the Canadian Council of Music Industry Associations, the Canadian Independent Music Association and Association québécoise de l’industrie du disque, du spectacle et de la vidéo. The judgment of McLachlin C.J. and Cromwell, Moldaver, Wagner, Gascon and Côté JJ. was delivered by [ 1 ] Rothstein J. — Broadcasting a program that uses copyright-protected music engages the right to communicate the work to the public by telecommunication — a right that rests exclusively with the copyright holder for that musical work.

Thus, broadcasters must secure a licence to communicate the work. Broadcasting activities are complex, however, and broadcasters often engage not only in the telecommunication of musical works as part of the airing of a program, but also in making copies of programs, and thus of the music incorporated therein, for internal use. Where these copies are made to facilitate broadcasting, they may be described as broadcast-incidental copies. [ 2 ] Making copies of a copyright-protected work implicates the reproduction right, which also rests exclusively with the copyright holder.

This case concerns the relationship between broadcast-incidental copies and the reproduction right established by s. 3(1) (

d) of the Copyright Act , R.S.C. 1985, c.

C-42. [ 3 ] In 2012, the Copyright Board, in setting the terms of a licence between Canadian Broadcasting Corporation (“CBC”) and SODRAC 2003 Inc. and the Society for Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC) Inc. (collectively, “SODRAC”) for the 2008-2012 period, held that CBC’s broadcast-incidental copying activity engaged the reproduction right, that a licence for such copies could not be implied from synchronization licences covering the production process, and that CBC required a separate reproduction licence to legitimize its broadcast-incidental copying.

The Board further found that the appropriate valuation for this licence was more than nominal, and issued a licence authorizing CBC to reproduce works in the SODRAC

repertoire in conjunction with a list of activities, including the production of CBC’s in-house programs and the broadcasting of programson CBC’s television services and on the Internet: Licence authorizing the Canadian Broadcasting Corporation to reproduce works in therepertoire of SODRAC for the period from November 14, 2008 to March 31, 2012 (online) (“2008-2012 statutory licence” or “2008-2012licence”), s. 2.01. [4] It later issued an interim licence to take effect after the expiry of the 2008-2012 licence that extended the terms ofthat licence on an interim basis, subject to minor modifications.

The Federal Court of Appeal upheld both the 2008-2012 licence and theinterim licence that followed, subject to minor amendments. [5] The Board was correct in finding that broadcast-incidental copying engages the reproduction right, consistent withthis Court’s decision in Bishop v. Stevens, (SCC), [1990] 2 S.C.R. 467, and the context of the statutory scheme set out inthe Copyright Act. Though this Court’s subsequent decisions in Théberge v. Galerie d’Art du Petit Champlain inc., 2002 SCC 34, [2002]2 S.C.R. 336, and Entertainment Software Association v.

Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34,[2012] 2 S.C.R. 231 (“ESA”), have refined our understanding of the purposes of copyright law, the central holding in Bishop, thatephemeral copies engage the reproduction right, remains sound.

I further agree with the Board and the Federal Court of Appeal that alicence to make broadcast-incidental copies should not be implied from synchronization licences issued by SODRAC. [6] However, in my respectful opinion, the Board erred in failing to consider the principles of technological neutralityand balance in setting the valuation of this licence. I would remit this matter to the Board for reconsideration of the valuation of the2008-2012 licence for CBC’s television and Internet broadcast-incidental copies applying the principles of technological neutrality andbalance.

Because the interim licence that followed was based on the terms of the 2008-2012 licence, I would also set it aside and remit itfor redetermination. I. Facts [7] The appellant CBC is both a producer and a broadcaster of television programs: it broadcasts its own originalprograms as well as those that it has licensed or bought from third parties, and it shows these programs on television and the Internet.Where a program contains copyright-protected musical works, CBC must ensure that it has secured all necessary licences for that workin order to reproduce and broadcast the work as part of a television program.

Production and broadcasting may implicate bothreproduction and the telecommunication rights in a work. This appeal is concerned primarily with the reproduction right established by s.3(1)(

d) of the Copyright Act. [8] The respondent the Society for Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC)Inc. is a collective society organized to manage the reproduction rights of its members. Its focus is on French-language musicreproduction rights. Its members assign their reproduction rights to the collective society, which then stands in place of individual rightholders in negotiations with parties who seek permission to reproduce works in its repertoire. This repertoire comprises the majority ofFrench-language works written by Canadians. A.

Synchronization Copies and Broadcast-Incidental Copies [9] A producer who wishes to use a musical work in an audiovisual program must incorporate that work into theproduction copy of the program, a process known in the industry as “synchronization”. The parties do not dispute that thesynchronization process is an exercise of the reproduction right, and thus requires a licence if the musical work being incorporated isunder copyright. Once the synchronization process is complete, the final product is referred to as a “master” copy.

Where the producer isnot also a broadcaster, this copy is then passed on once the program has been sold or licensed to a broadcaster. [10] Once CBC is in possession of the master copy of a program, whether it has been produced in-house or by anindependent producer, the master copy is loaded into CBC’s digital content management system, a practice that has become widespreadamong broadcasters in recent years. Digital systems generally involve the storage of copies as electronic files on hard drives, while olderanalog systems stored copies on physical tapes.

CBC makes use of its digital content management system to perform a number offunctions that help prepare a program for broadcast. [11] These processes result in the creation of several copies, which are at the heart of this appeal. The parties refer tothese copies as “broadcast-incidental copies”. Broadcast-incidental copies may be made for several purposes. For example, a copy maybe made to reformat the master copy to suit CBC’s technical requirements, or to edit the copy for timing, language or closed captioningpurposes.

One or more additional copies may also be made to allow for screening of the program by various teams within CBC beforebroadcast. B. Licensing Practices [12] Broadly speaking, reproduction licences may take two forms: transactional or blanket. In a transactional licence, aprospective user seeks out the holder of the reproduction right in a particular work that the producer wishes to include in a program andnegotiates an individual licence agreement.

Blanket licences are negotiated between a producer and a collective society, and grant theproducer the right to reproduce all works within the collective’s repertoire, subject to the negotiated terms of the licence. [13] Parties negotiating a reproduction licence may also choose to structure it as a “through-to-the-viewer” licence, inwhich the right holder grants the authority to make all reproductions necessary to take a program from production through to its ultimatebroadcast to viewers.

Alternately, they may choose to structure it as a “bare” synchronization licence, which grants the authority to makesynchronization copies but does not cover additional copies made to facilitate broadcasting: decision of the Copyright Board, file Nos.70.2-2008-01, 70.2-2008-02, November 2, 2012 (online) (“Statutory Licence Decision”), at paras. 15-16.

As will be discussed below,however, CBC disputes whether bare synchronization licences are possible, or whether they must include an implied licence to makebroadcast-incidental copies. [14] Where CBC acts as a producer, its practice has been to seek transactional synchronization licences from individual

right holders where possible. When synchronizing French-language music, SODRAC exercises collective authority over the substantial majority of such works, and CBC has used blanket licences. Where CBC acts as a broadcaster of third party programs, it does not seek synchronization licences, as those licences will have been obtained by the producer before the final master copy of the program is handed over to CBC. [ 15 ] The issues in dispute on appeal arise in part from the history of dealings between CBC and SODRAC with regard to reproduction licences.

It is helpful to review this history in understanding the arguments presented by both parties. [ 16 ] In 1990, this Court, per McLachlin J. (as she then was), issued its decision in Bishop , holding that “the right to broadcast a performance under s. 3(1) of the Act does not include the right to make ephemeral recordings for the purpose of facilitating the broadcast”: p. 485.

Thus, reproductions made to facilitate broadcasting need to be authorized separate from the authorization to broadcast a performance to the public. [ 17 ] Following Bishop , in 1992, CBC and SODRAC first entered into a negotiated licence agreement permitting CBC to make synchronization copies and other reproductions of works within the SODRAC repertoire: Convention concernant la télévision et la radio entre la Société du droit de reproduction des auteurs, compositeurs et éditeurs au Canada (SODRAC) et la Société Radio-Canada , March 19, 1992 (“1992 Licence”), A.R., vol. IV, at p. 1.

This agreement did not disaggregate synchronization copies and broadcast- incidental copies, but rather granted to CBC the authority to make any copies of works in SODRAC’s repertoire in connection with its broadcasting activities: 1992 Licence, art. 2. The 1992 Licence was thus a blanket, through-to-the-viewer licence.

This licence also extended upstream authorization to third party producers to make synchronization copies in works commissioned for broadcast by CBC: Statutory Licence Decision, at para. 72. [ 18 ] In 1998, SODRAC began to differentiate between synchronization copies made by producers and copies for other purposes made by broadcasters.

It did so by announcing its intent to require producers to obtain synchronization licences, though it granted such licences for free where programs were commissioned by broadcasters who held licences to SODRAC’s repertoire, on the understanding that the broadcaster had paid for the licence necessary to cover the producer’s copying: Statutory Licence Decision, at para. 72. [ 19 ] In or about 2006, SODRAC began asking producers to pay for their synchronization licences.

These licences were structured to permit producers to make synchronization copies, but virtually all of them expressly barred producers from authorizing further downstream copying by broadcasters: Statutory Licence Decision, at para. 73. [ 20 ] In November 2008, after SODRAC and CBC were unable to come to an agreement for the renewal of CBC’s existing licence, SODRAC asked the Board, pursuant to s. 70.2 of the Copyright Act , to set the terms of a licence between the parties covering the reproduction by CBC of works in SODRAC’s repertoire for the period from November 14, 2008 to March 31, 2012: Statutory Licence Decision, at para. 3.

II. Proceedings Below A. Statutory Licence Decision [ 21 ] The Board issued its decision regarding the terms of the 2008-2012 statutory licence between CBC and SODRAC on November 2, 2012. This decision also set the terms of a licence between Les Chaînes Télé Astral and Teletoon (“Astral”) and SODRAC, and of a tariff covering certain reproduction activities related to the distribution of cinematographic works.

Neither the Astral licence nor the tariff is at issue before this Court. [ 22 ] The Board conducted its analysis from the understanding that broadcast-incidental copies are reproductions within the meaning of the Copyright Act , and that they are not subject to an exception for ephemeral copies under the Act: see Statutory Licence Decision, at paras. 12 and 72. [ 23 ] CBC and Astral argued in part that SODRAC’s layered licence strategy — under which both producers and broadcasters would each be expected to pay a licence fee for their respective reproduction activities — went against prevailing industry practice, and was inconsistent with a through-to-the-viewer licensing approach: Statutory Licence Decision, at paras. 41-42 and 65.

The Board remarked that the focus in this proceeding “must be to a large extent on SODRAC’s practices”: Statutory Licence Decision, at para. 64. Broader licensing practices were relevant, but not dispositive. [ 24 ] The Board found that “outright [through-to-the-viewer] buyouts are not the dominant model in Canada”, and that SODRAC “has issued few, if any, through-to-the-viewer [licences]”: Statutory Licence Decision, at para. 71.

Thus, the Board did not find that the weight of industry practice or of SODRAC’s past practices established through-to-the-viewer licensing as a binding norm that would invalidate a layered approach to licensing. [ 25 ] The Board turned to the question of how royalty payments under the licence should be valued. Regarding the relationship between technological innovation and licence valuation, the Board observed that [t]he adoption of copy-dependent technologies allows broadcasters to remain competitive and to protect their core business even when it does not generate direct profits.

These technologies are necessary for Astral and CBC to remain relevant so that services continue to be seen by the public. These are clear benefits arising from the copy-dependant technologies. Since these technologies involve the use of additional copies, some of the benefits associated with the technologies must be reflected in the remuneration that flows from these incidental, additional copies. [Endnote omitted; para. 81.] [ 26 ] The Board set out its analysis of the appropriate valuation of the royalties covering CBC’s television-related copying activity.

Regarding the broadcast-incidental copies at issue before this Court, the Board employed a ratio methodology and found that the appropriate royalty payable to SODRAC for these reproductions was to be determined as a percentage of the royalties CBC paid to secure communication rights for music that it broadcast on radio and television: Statutory Licence Decision, at paras. 108-9. The Board

applied its reasoning regarding television broadcast-incidental copies to copies related to Internet delivery as well: Statutory Licence Decision, at para. 148. B.

Interim Licence Decision [ 27 ] Following the release of its final decision regarding the 2008-2012 licence, the Board issued an interim decision in January 2013 extending the terms of the 2008-2012 licence on an interim basis pending the Board’s final determination of appropriate licence terms for the period from April 1, 2012 to March 31, 2016: Copyright Board file No. 70.2-2012-01, January 16, 2013 (online) (“Interim Licence Decision”). [ 28 ] In the Interim Licence Decision, the Board observed that “the best way to achieve the objectives of an interim decision is to maintain the status quo while avoiding a legal vacuum”, though circumstances may sometimes warrant a departure from the status quo: Interim Licence Decision, at para. 18.

The Board then found that the 2008-2012 licence was a more appropriate representation of the status quo than the 1992 agreement that preceded it: Interim Licence Decision, at para. 19. [ 29 ] Accordingly, the terms of the 2008-2012 licence were used to frame the interim licence. This structure included, among other things, a blanket synchronization fee, despite CBC’s expressed desire to move to a transactional model: Interim Licence Decision, at para. 8. C.

Federal Court of Appeal, 2014 FCA 84 , [2015] 1 F.C.R. 509 (“FCA Decision”) [ 30 ] The principal argument before the Federal Court of Appeal concerned whether the Board’s Statutory Licence Decision was inconsistent with the principle of technological neutrality as discussed by this Court in ESA : FCA Decision, at para. 26. [ 31 ] In analyzing the Board’s approach to valuing broadcast-incidental copies, the Federal Court of Appeal cited as a fundamental proposition the notion that, if technological advances require the making of more copies of a musical work in order to get an audiovisual work that incorporates it to market, those additional copies add value to the enterprise.

As a result, they attract additional royalties, not necessarily on a per-copy basis but on the basis of the additional value generated by those copies.

Simply put, more copies mean more value and thus, more royalties. [para. 28] It discussed the statements in ESA concerning the nature of technological neutrality, but did not find sufficient guidance to warrant its application to the facts of this case: paras. 40 and 44. [ 32 ] The Federal Court of Appeal affirmed the Board’s Statutory Licence Decision, subject to one technical amendment to the discount formula intended to capture CBC’s use of songs already subject to through-to-the-viewer licences: paras. 78-82. The court also affirmed the Board’s Interim Licence Decision: paras. 93-94. III.

Issues [ 33 ] This appeal raises the following issues:

(1) What is the appropriate standard of review?

(2) Do broadcast-incidental copies engage the reproduction right, and if so, should a licence for such copies be implied in synchronization licences?

(3) If a licence for broadcast-incidental copies was required, did the Board err in setting the value of that licence in view of the principles of technological neutrality and balance?

(4) Did the Board err in setting the terms of the interim licence? IV. Statutory Provisions [ 34 ] The relevant statutory provisions are set out in the Appendix. The provisions most directly at issue in this appeal are ss. 3(1) ( d ), 30.7 , 30.8 , 30.9 and 70.2 of the Copyright Act . V. Analysis A. Standard of Review [ 35 ] Whether broadcast-incidental copies engage the reproduction right, and thus whether the Copyright Act allows SODRAC to seek a licence for CBC’s broadcast-incidental copying, is a question of law.

This Court has established that there is a presumption that the decisions of administrative bodies should receive deference when interpreting or applying their home statute. However, because of the “unusual statutory scheme under which the Board and the court may each have to consider the same legal question [under the Copyright Act ] at first instance”, the presumption is rebutted here: Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada , 2012 SCC 35 , [2012] 2 S.C.R. 283, at para. 15 . Thus, a standard of correctness applies to this issue.

[ 36 ] Whether a licence for CBC’s broadcast-incidental copying is implied in the associated synchronization licences involves both the scope of the reproduction right and the

interpretation of SODRAC’s synchronization licences. As this Court has recently observed, “[c]ontractual

interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual

interpretation are applied to the words of the written contract, considered in light of the factual matrix”: Sattva Capital Corp. v. Creston Moly Corp. , 2014 SCC 53 , [2014] 2 S.C.R. 633, at para. 50 . The licences here fall under that principle.

Accordingly, a standard of reasonableness applies when reviewing the Board’s determination regarding what may be implied from the relevant synchronization licences. [ 37 ] The Board’s decision establishing the monetary value of a broadcast-incidental copying licence involves the examination of how the user intends to make use of the licensed works in light of the legal principles relevant to the reproduction right, and thus involves questions of mixed fact and law. Accordingly, a standard of reasonableness applies: Tervita Corp. v.

Canada (Commissioner of Competition) , 2015 SCC 3 , [2015] 1 S.C.R. 161, at para. 40 ; Smith v. Alliance Pipeline Ltd. , 2011 SCC 7 , [2011] 1 S.C.R. 160, at para. 26 . [ 38 ] CBC challenges the Board’s interim order on two points. First, CBC argues that the 2008-2012 licence was not an appropriate status quo baseline for the interim licence. The selection of the baseline involves the exercise of the Board’s discretion to issue an interim licence under s. 66.51 of the Copyright Act .

This exercise of discretion is not shared with the courts, and thus will be reviewed on a reasonableness standard. [ 39 ] The second basis on which CBC challenges the interim order concerns whether the Board may impose a blanket synchronization licence on a user against that user’s wishes. CBC characterizes this as a question of the Board’s jurisdiction to issue certain types of licences, and argues that it should be reviewed for correctness. While it is possible to frame any

interpretation of a tribunal’s home statute as a question of whether the tribunal has the jurisdiction to take a particular action, this Court has rejected this definition of jurisdiction in the context of standard of review and emphasized that the category of “true questions of jurisdiction”, if it exists at all, is narrow: Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association , 2011 SCC 61 , [2011] 3 S.C.R. 654, at para. 34 .

As in Alberta Teachers’ Association , the parties have not presented argument on the question of whether the category of true questions of jurisdiction should continue to be recognized.

Assuming such questions exist, this issue is not one of the “exceptional” instances of a true question of jurisdiction. [ 40 ] The question of whether the Board is generally able to impose blanket synchronization licences under the Copyright Act against the wishes of a licensee is nonetheless a question of law, but it is not an interpretive question the Board shares with the courts at first instance: the courts can be seized of the question of whether the Board acted properly in structuring a licence only once there is a Board-imposed licence to review.

Accordingly, this issue attracts a standard of reasonableness. [ 41 ] Justice Abella objects to the segmentation of issues for the purpose of standard of review analysis and to the confusion she says this causes. This is the same objection she raised in Mouvement laïque québécois v. Saguenay (City) , 2015 SCC 16 , [2015] 2 S.C.R. 3, a decision issued by this Court in April 2015. Saguenay is the controlling authority and, on the issue of standard of review, these reasons apply Saguenay . [ 42 ] Justice Karakatsanis disagrees that a specific standard of review should be ascribed to each issue arising in the appeal.

However, she herself extricates the question of whether broadcast-incidental copies engage the reproduction right. Then she says that a reasonableness standard applies to the balance of the decisions under review. She does not explain how she could come to that conclusion without considering the issues in the balance of the decisions under review. With respect, every standard of review analysis requires identification of the issues under review: Dunsmuir v. New Brunswick , 2008 SCC 9 , [2008] 1 S.C.R. 190, at paras. 51-64 . She has simply done implicitly what these reasons do explicitly. B.

SODRAC May Choose to Require a Licence for CBC’s Broadcast-Incidental Copies in Addition to Related Synchronization Licences

(1) Broadcast-Incidental Copies Engage the Reproduction Right [ 43 ] Section 3(1) (

d) of the Copyright Act provides the copyright holder with the sole right “to make any sound recording, cinematograph film or other contrivance by means of which [a] work may be mechanically reproduced or performed”. [ 44 ] SODRAC’s efforts to seek licence payments for CBC’s broadcast-incidental copying have their origins in this Court’s decision in Bishop . This Court held that the making of “ephemeral” copies — in that case, recordings of a musical performance made to facilitate a later broadcast — does engage the reproduction right under the language of s. 3(1) (

d) of the Copyright Act , and that the right to make such copies is not implied by law in a broadcast licence: pp. 484-85. [ 45 ] CBC’s principal argument on appeal is that broadcast-incidental copies do not engage the reproduction right, and thus do not support SODRAC’s efforts to seek licence fees for such copies. In so arguing, CBC places considerable weight on two general principles of Canadian copyright law: the balancing of user and right-holder interests as discussed by this Court in Théberge per Binnie J., and the principle of technological neutrality discussed most prominently by this Court in ESA .

In CBC’s estimation, the development of these principles has resulted in a significant evolution of copyright law since Bishop . [ 46 ] CBC asserts that “[t]he scope of the reproduction right is determined by a balancing exercise between the legitimate interests of copyright holders and copyright users, such as the one this Court conducted in Théberge ” (A.F., at para. 81 ), and that a proper balancing of user and right-holder interests favours finding that broadcast-incidental copies do not engage the reproduction right.

It also asserts that the principle of technological neutrality is a means of protecting the proper balance between users and right holders in a digital environment: A.F., at para. 66. [ 47 ] To be sure, Théberge demonstrates how this Court’s understanding of the purpose of the Copyright Act has evolved since the pronouncement in Bishop that the “single object” of the Act was to benefit authors: Bishop , at pp. 478-79, quoting Performing Right Society, Ltd. v. Hammond ’s Bradford Brewery Co. , [1934] 1 Ch. 121, at p. 127 . Théberge observed that, when weighing

competing policy interests under copyright, “[t]he proper balance . . . lies not only in recognizing the creator’s rights but in giving dueweight to their limited nature”: para. 31. Similarly, in ESA, this Court observed that the principle of technological neutrality guardsagainst “impos[ing] a gratuitous cost for the use of more efficient, Internet-based technologies”: para. 9, per Abella and Moldaver JJ. Butin neither case did the Court go so far as to allow these principles to override express statutory terms. The scope of a right under theCopyright Act is determined, first and foremost, by the Act itself.

The principles at work in Théberge and ESA can inform theinterpretation and application of the terms of the Act, but they cannot supplant them. [48] The modern approach to statutory

interpretation requires that we examine the “words of

an Act . . . in their entirecontext and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention ofParliament”: E. A. Driedger, Construction of Statutes (2nd ed. 1983), at p. 87, approved and adopted in Rizzo & Rizzo Shoes Ltd. (Re), (SCC), [1998] 1 S.C.R. 27, at para. 21. [49] The ordinary meaning of the text of the Copyright Act indicates that broadcast-incidental copying activities doengage the reproduction right. As this Court held in Bishop, the text of s. 3(1)(

d) covers such activity by its terms. Making broadcast-incidental copies is the making of a “sound recording, cinematograph film or other contrivance by means of which the work may bemechanically reproduced or performed”: s. 3(1)(d). Though this Court’s understanding of the purpose of copyright has evolved since theobservation in Bishop that its “sole purpose” is protecting author interests, no recourse to this observation is required to read s. 3(1)(

d) asbeing engaged by broadcast-incidental copying activities: p. 470. The plain language of the statute itself establishes this much. [50] The broader statutory context of the Act further provides strong indications that the legislature intended forbroadcast-incidental copies to engage the reproduction right. Most significantly, ss. 30.8 and 30.9 (set out in full in the Appendix),enacted as part of a series of amendments to the Act in 1997, establish specific circumstances in which “[i]t is not an infringement ofcopyright” to make copies to facilitate broadcasting: S.C. 1997, c. 24, s. 18(1).

In order to gain the benefit of ss. 30.8 or 30.9,broadcasters must meet a list of stringent conditions concerning, among other things, the timing, record keeping, and destruction of thecopies. As counsel for CBC acknowledged during the hearing before this Court, CBC’s broadcast-incidental copying activities do not fitwithin the language of ss. 30.8 or 30.9: transcript, at p. 26. [51] If it were true, as CBC urges, that the Copyright Act should properly be read such that broadcast-incidental copyingdoes not engage the reproduction right, there would have been no need for the legislature to enact ss. 30.8 and 30.9.

Their existence isstrong evidence that Parliament intended, as a baseline, that broadcast-incidental copies engage the reproduction right.

As noted above,though the principles of balancing user and right-holder interests and of technological neutrality are central to Canadian copyright law,they cannot change the express terms of the Copyright Act. [52] Abella J. is of the opinion that, in reaching this conclusion, these reasons employ a “literal approach to theinterpretation of s. 3(1)(d), reading the words of the provision without the benefit of the purpose and context of the Act to ascertain itstrue meaning”: para. 170. It is rather my colleague who uses the principle of technological neutrality to displace the words Parliamenthas used.

With respect, through her use of the principle of technological neutrality, she does not give sufficient attention to the text andcontext and the legislative history that explain the carve out from the reproduction right provided by ss. 30.8 and 30.9 and the residualbroad scope of s. 3(1)(d). [53] Subsequent to Bishop, in 1997, Parliament enacted ss. 30.8 and 30.9. Abella J. writes that these exceptions are not tobe understood as a “comprehensive statement on the content of the reproduction right, or which kinds of copies will trigger it”: para.175.

But before ss. 30.8 and 30.9 received royal assent, broadcasters asked Parliament to expand their scope. In their view, ss. 30.8 and30.9 unduly favoured the rights of copyright holders. The pleas of the broadcasters, however, went unanswered: see V. Syrtash, “Supra-National Limitations on Copyright Exceptions: Canada’s Ephemeral Exception and the ‘Three-Step Test’” (2005-2006), 19 I.P.J. 521, atpp. 530-32; J. S. McKeown, Fox on Canadian Law of Copyright and Industrial Designs (4th ed. (loose-leaf)), at pp. 23-62 and 23-63.Thus, the scope of ss. 30.8 and 30.9 was specific and deliberate.

Parliament could have adopted broader provisions. It chose not to. It isnot for the Court to do by “interpretation” what Parliament chose not to do by enactment. [54] The necessary implication of s. 30.7, also enacted in 1997, is that it absolves incidental, non-deliberate, inclusion ofa work from infringement — a sterile provision and of no practical effect had Parliament considered incidental inclusion to be outside s.3(1)(

d) in the first place. There is no doubt that this provision applies to broadcasting, among other activities, and that the use ofbroadcast-incidental copies is deliberate and thus not exempted. See D. Vaver, Intellectual Property Law: Copyright, Patents, Trade-marks (2nd ed. 2011), at p. 223. [55] Although made in the process of broadcasting, these broadcast-incidental copies nevertheless trigger thereproduction right. They are not exempted by ss. 30.8 and 30.9.

There is nothing in the text, context or legislative history of theseprovisions (or s. 3(1)) that supports the view that the broadcasting process obviates the fact that broadcast-incidental copies arereproductions under the Copyright Act. Arguments based on purpose in the form of technological neutrality and balance are advanced tocome to the opposite conclusion, but purposive construction is a tool of statutory

interpretation to assist in understanding the meaning ofthe text. It is not a stand-alone basis for the Court to develop its own theory of what it considers appropriate policy. Accordingly, theBoard was correct in proceeding on the basis that broadcast incidental copies engage the reproduction right under s. 3(1)(

d) of theCopyright Act.

(2) The Synchronization Licence Between CBC and SODRAC Does Not Imply a Licence to Make Broadcast-Incidental Copies [56] CBC argues in the alternative that if a licence covering CBC’s broadcast-incidental copies is required, it should beimplied from CBC’s synchronization licences or the synchronization licences of third party producers.

To hold otherwise, CBC asserts,would be to render synchronization licences “economically sterile” and would allow SODRAC to engage in “non-neutral royaltystacking”: A.F., at paras. 99-100. [57] CBC’s economic argument is based on the proposition that “a single master copy [made under a synchronizationlicence] is useless without a corresponding implied licence to make the necessary broadcast-incidental copies”: A.F., at para. 100.

Instead, it argues that a “technologically-neutral approach to a synchronization licence is one that implies the necessary incidental rights in order to achieve the licence’s agreed-upon purpose”: A.F., at para. 100. [ 58 ] I cannot agree. To the extent CBC’s implied-licence argument turns on the language of SODRAC’s actual synchronization licences, these licences do not give any indication that they ought to be read to include the right to make broadcast- incidental copies.

To the contrary, the Board found that “[v]irtually all SODRAC licences issued to producers that were filed in these proceedings clearly specify, in one form or another, that the producer cannot authorize copies made by broadcasters, distributors and other exhibitors”: Statutory Licence Decision, at para. 73. [ 59 ] Nor am I persuaded that licences to make broadcast-incidental copies should be implied under synchronization licences more generally, lest the synchronization licences be rendered sterile. Synchronization licences are intended to facilitate the production of audiovisual works.

That these works may ultimately be destined for broadcast does not make the production of the single master copy itself “useless”. A stand-alone synchronization right is far from useless when held by an independent producer who synchronizes a song into a master copy and then sells or licences the finished product to a broadcaster. In that case, the primary purpose of the master copy, from the perspective of the producer, was not for it to be broadcast, but for it to be sold or licensed to a broadcaster.

The synchronization licence is sufficient to meet the needs of such a producer. [ 60 ] Further, the Board identified certain economic considerations that it found justified the practice of dividing synchronization and broadcast-incidental copy licences into separate payments.

Separate licensing of synchronization and broadcast- incidental copies allows producers to “remain free to decide whether they wish to offer a turnkey service for the audiovisual works they licence, or whether they wish to pay only for the rights they use” (Statutory Licence Decision, at para. 83), a choice that may be particularly valuable for smaller producers with modest licensing budgets. [ 61 ] In this case, the Board’s decision does not raise the spectre of “double dipping”. The terms of the licence set by the Board expressly protected against this possibility here.

The 2008-2012 statutory licence includes a discount provision by which CBC’s licence payments for broadcast-incidental copying may be reduced to the extent that it broadcasts programs for which the producer has already cleared reproduction rights on a through-to-the-viewer basis: s. 5.03(2).

Though, as the Federal Court of Appeal noted, the Board’s original discount formula was flawed (paras. 74-82), the formula, as amended by the Federal Court of Appeal, adequately guards against concerns that SODRAC may engage in double dipping by charging multiple parties for the same authorization. [ 62 ] CBC’s attempts to cast the implied-licence issue in terms of the principle of technological neutrality are unavailing.

CBC has failed to highlight exactly how SODRAC’s desired practice of disaggregating synchronization and broadcast-incidental licensing would offend the principle as it has been understood by this Court.

Separation of licences into synchronization and broadcast- incidental arrangements does not, on its own, impose a “gratuitous cost” based on formal technological distinctions, as was the concern in ESA . [ 63 ] Nor does technological neutrality stand for the proposition, as CBC urges, that the Copyright Act prohibits the creation of “additional layers of royalties at the behest of collective societies” such that disaggregating synchronization and broadcast- incidental copying is legally impermissible: A.F., at para. 105. This argument reads ESA too broadly.

The difference between synchronization copies and broadcast-incidental copies is tied to the fundamentally distinct activities of production and broadcasting. They are different functions. This difference is not based on particular technological details; it would exist regardless of the technologies used either to produce or to broadcast.

Thus, a decision recognizing production and broadcasting as distinct activities, and thus as the valid subject of disaggregated licences, does not offend the principle that “an additional layer of protections and fees” not be imposed based solely on technological change: ESA , at para. 9. [ 64 ] Accordingly, it was reasonable for the Board to decline to identify an implied licence to engage in broadcast- incidental copying within the synchronization licences underlying the programs that CBC broadcasts. C.

In Not Taking Into Account the Principles of Technological Neutrality and Balance in Its Valuation Analysis, the Board’s Decision Was Unreasonable

(1) The Principle of Technological Neutrality is Relevant to Questions of Valuation [ 65 ] CBC asserts that the Board erred in failing to conduct its valuation analysis in accordance with the principle of technological neutrality.

SODRAC argues that, once it has been established that a copying activity engages the reproduction right, the principle of technological neutrality is spent and has no bearing on valuation. [ 66 ] The principle of technological neutrality is recognition that, absent parliamentary intent to the contrary, the Copyright Act should not be interpreted or applied to favour or discriminate against any particular form of technology.

It is derived from the balancing of user and right-holder interests discussed by this Court in Théberge — a “balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator”: para. 30.

Because this long-standing principle informs the Copyright Act as a whole, it must be maintained across all technological contexts: “The traditional balance between authors and users should be preserved in the digital environment . . .” ( ESA , at para. 8). [ 67 ] In the regulatory context, the principle of technological neutrality applies to valuation of a reproduction licence, just as it does in determining whether an activity implicates copyright at all.

The Board operates pursuant to the Copyright Act , and in its regulatory role of fixing royalties under s. 70.2 , it may not simply set aside the principles that guide its

interpretation of the Act once it has begun its valuation analysis. While the Board’s valuation analysis will vary according to the facts of each case, it is unreasonable for the Board to ignore the principle of technological neutrality in that analysis in cases where it is implicated. [1] [ 68 ] Indeed, it would be inconsistent to require a technologically neutral

interpretation of the Copyright Act but not require a technologically neutral application of the Act. As Professor Vaver has written, “Copyright law should strive for technological neutrality”: p. 172.

Interpretation and application of the Act are both important in seeking this objective.

[ 69 ] In reviewing the Board’s decision, the Court of Appeal remarked upon the principle of technological neutrality, but declined to apply it, as that court felt that it had insufficient guidance from this Court on how it should be applied. These reasons aim to provide such guidance.

(2) Technological Neutrality in Valuation [ 70 ] Because rights holders have the exclusive right to reproduce their works under s. 3(1) ( d ), they are entitled to be justly compensated for the use of that right. One element of just compensation is an appropriate share of the benefit that the user obtains by using reproductions of their copyright-protected work in the operation of the user’s technology. That just compensation must be valued, however, in accordance with the principle of technological neutrality.

While highly unlikely, where users are deriving the same value from the use of reproductions of copyright-protected works using different technologies, technological neutrality implies that it would be improper to impose higher copyright-licensing costs on the user of one technology than would be imposed on the user of a different technology. To do so would privilege the interests of the rights holder to a greater degree in one technology over the other where there is no difference between the two in terms of the value each user derives from the reproductions. [ 71 ] The converse is also true.

Where the user of one technology derives greater value from the use of reproductions of copyright-protected work than another user using reproductions of the copyright-protected work in a different technology, technological neutrality will imply that the copyright holder should be entitled to a larger royalty from the user who obtains such greater value.

Simply put, it would not be technologically neutral to treat these two technologies as if they were deriving the same value from the reproductions. [ 72 ] In determining whether a separate communication right was engaged in ESA , this Court held that technological neutrality required the consideration of the difference between the old and new forms of delivery of works.

In the absence of any difference between them, no separate right was engaged: “In our view, 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 Internet is simply a technological taxi that delivers a durable copy of the same work to the end user”: ESA , at para. 5. Similarly, in the valuation of a right, technological neutrality requires that different technologies using reproductions of copyright-protected work that produce the same value to the users should be treated the same way.

Conversely, different technologies using reproductions that produce different values should not be treated the same way. [ 73 ] In this case, if CBC derives greater value from the use of broadcast-incidental copies in its digital technology than it did under its prior analog technology, this is a factor in favour of the copyright holder being entitled to greater royalties for use of its copyright-protected work in CBC’s digital technology. Technological neutrality requires that the Board compare the value derived from the use of reproduction in the two technologies in its valuation analysis.

As will be explained, it did not do so in this case, nor did it take into account the principle of balance, to which I now turn.

(3) Balance in Valuation [ 74 ] It is well established that copyright law maintains “a balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator” of those works: Théberge , at para. 30 . This balance “lies not only in recognizing the creator’s rights but in giving due weight to their limited nature.

In crassly economic terms it would be as inefficient to overcompensate artists and authors for the right of reproduction as it would be self-defeating to undercompensate them”: Théberge , at para. 31 . [ 75 ] When it is tasked with fixing licence fees, the Board must have regard to factors it considers relevant in striking a balance between the rights of users and right holders. Relevant factors will include, but are not limited to, the risks taken by the user, the extent of the investment the user made in the new technology, and the nature of the copyright-protected work’s use in the new technology.

The Board must assess the respective contributions of, on the one hand, the risks taken by the user and the investment made by the user, and on the other hand, the reproductions of the copyright-protected works, to the value enjoyed by the user. In this case, where the financial risks of investing in and implementing new technology were undertaken by the user and the use of reproductions of copyright-protected works was incidental, the balance principle would imply relatively low licence fees to the copyright holder.

As will be explained, the Board’s valuation methodology did not give any indication that the principles of technological neutrality and balance were considered in the way it fixed the SODRAC reproduction royalties payable by CBC on the basis of the SODRAC/SOCAN ratio. [ 76 ] Justice Abella argues that the extent of the investment made by the user in its technology and the risks undertaken in relation to that technology are “unrelated and irrelevant to the rights held in the protected works”: para 180. I cannot agree.

In an unregulated market, a commercial user will always consider whether it makes economic sense to pay the licence fee demanded by the copyright holder. A licence fee that precludes the user from recovering what it considers an adequate return on its investment in its technology will result in there being no licence and no royalty. In the regulated context, it is the Board that must take account of such considerations.

They are far from irrelevant. [ 77 ] Contrary to what Justice Abella asserts, it will never be the case that, because a user makes a significant investment in technology or assumes substantial risk, royalties for the rights holder will amount to zero. From the moment the right is engaged, licence fees will necessarily follow.

The amount of the fee will depend upon the Board’s consideration of the evidence in each case, always having regard to the principles of technological neutrality and balance and any other factors it considers relevant. [ 78 ] Justice Abella also says that these reasons represent “a significant departure from the principle [of technological neutrality] as it was articulated in Entertainment Software Association ”: para. 181 .

The issue in ESA (and Rogers ) was whether the telecommunication right was engaged; whether one technology achieved a result more efficiently than another was irrelevant to whether the right was engaged. [ 79 ] Here, where the right is engaged, the issue becomes one of valuation of that right, and the principles of technological neutrality and balance must be adapted to the valuation context. When it is tasked with determining the value of a right, an important consideration for the Board is the value of that right to the user. The value of the use of reproductions in one technology may stem from

functional differences from use in another technology. Value differences may also stem from internal efficiencies between technologies. Ignoring internal efficiencies would result in rights holders being denied additional royalties when the use of their copyrighted work in the more efficient technology confers greater value to the user of that technology. This would hardly constitute “gratuitous fees”, as asserted by Justice Abella: para. 182.

(4) The Board Did Not Consider the Principle of Technological Neutrality or Balance in Setting the Value of CBC’s Broadcast- Incidental Copying Licence With SODRAC (

a) The Board’s Statutory Licence Decision [ 80 ] The Board received a detailed picture of the structure of both CBC and Astral’s broadcast systems, the copies that were made in those systems, and what purposes they served, largely through the testimony and report of Dr. Michael Murphy and CBC’s responses to interrogatories. Further, CBC and Astral’s statement of the case before the Board expressly identified technological neutrality as a relevant consideration: The Board must apply the principle of technological neutrality.

One should not artificially introduce technology issues that are unrelated to the nature of the work being valued. To the knowledge of Astral and SRC/CBC, there is not a single television producer in North America who has ever been required by a composer, screenwriter or other rights holder to pay a greater license fee for music because of alleged technological efficiencies. These are simply irrelevant considerations in the marketplace in view of the nature of the work being licensed. There is no reason for broadcasters to be treated any differently because the issue is brought before the Board. [A.R., vol.

II, at pp. 190-91] [ 81 ] Neither the record nor the Board’s Statutory Licence Decision, in which it used a ratio based on the royalties CBC pays to the Society of Composers, Authors and Music Publishers of Canada (‟SOCANˮ) to license performance rights to determine SODRAC royalties, gives any indication that the Board considered balance and technological neutrality in arriving at a valuation of the copyright-protected work.

There is no indication that the relative value derived from the use of copyright-protected works in CBC’s digital technology as compared to its prior analog technology, or the relative contributions of the CBC and SODRAC to the analog and digital technologies were considered. [ 82 ] The Board concluded in this case that, “[s]ince these [digital content-management] technologies involve the use o

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