Barry B. Sookmanbsookman@mccarthy.ca416-601-7949

McTet2 #3703278 v. 2

Recent Computer andInternet Law Developments in IP

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Intellectual Property - Trends

Kirkbi AG v. Ritvik Holdings Inc., [2005] 3 S.C.R. 245. per Lebel J. “The vast and expanding domain of the law of intellectual property is

going through a period of major and rapid changes.  The pressures of globalization and technological change challenge its institutions, its classifications and sometimes settled doctrines…”

  “Jurisprudence attempts to address — sometimes with difficulty — the consequences of these broad social and economic trends.”

“The economic value of intellectual property rights arouses the imagination and litigiousness of rights holders in their search for continuing protection of what they view as their rightful property. Such a search carries with it the risk of discarding basic and necessary distinctions between different forms of intellectual property and their legal and economic functions.”

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Influence of Foreign Laws

The Supreme Court of Canada increasingly looks to the laws of other countries in intellectual property cases. Kirkbi AG v. Ritvik Holdings Inc., [2005] 3 S.C.R. 245 (In considering the

functionality doctrine in trade-mark law) Veuve Clicquot Ponsardin v. Boutiques Clicquot 2006, S.C.C. 23

(Contrasting depreciation of the value of the goodwill under the Trade-marks Act with the United States cause of action for dilution)

Harvard College v. Canada (Commissioner of Patents), [2002] 4 S.C.R. 45 (Determining patentability of life forms)

SOCAN v Canadian Assn. of Internet Providers, 2004 SCC 45 [Tariff 22] (Extra-territoriality of Copyright Act)

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Importance of IP

Gowers Review of Intellectual Property (London, Nov. 2006) http://www.hm-

treasury.gov.uk/media/53F/C8/pbr06_gowers_report_755.pdf “The Intellectual Property (IP) system provides an essential framework both to

promote and protect the innovation and creativity of industry and artists”.

“Innovative ideas create value, whether they are improved products, new brands or creative expressions. As a result, IP rights – the means by which these assets are owned – have become a cornerstone of economic activity.”

“However, while global and technical changes have given IP a greater prominence in developed economies, they have also brought challenges. Ideas are expensive to make, but cheap to copy. Ideas are becoming even cheaper to copy and distribute as digital technology and the Internet reduce the marginal cost of reproduction and distribution towards zero. As a result, the UK’s music and film industries lose around twenty per cent of their annual turnover through pirated CDs and illegal online file sharing. Furthermore, global markets must contend with rights that remain largely national in scope.”

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Patent Issues

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Reforming Patent System

Council on Foreign Relations, “Reforming U.S. Patent Policy” CSR No. 19, Nov, 19, 2006.

“The BlackBerry case and Microsoft’s calls for reform symbolize an American patent system that is increasingly inefficient and costly for innovative firms. Its numerous structural problems are rooted in two fundamental misconceptions:

• The view – predominant in Congress and the courts – that patents are like tangible property and that owners of such property have the basic right to sell and license it (or not) as they wish; and

• The virtually unchallenged view that more patent protection necessarily provides greater incentives for innovation and commercialization of technologies.

Failure to rein in the patent regime could have global repercussions. To hinder innovation is to hinder the dynamic competitiveness of U.S. companies. While some aspects of the IPR system (such as copyrights) for American firms largely remain sound, significant problems with patents put the U.S. system at a disadvantage vis-à-vis more balanced and less costly foreign ones.”

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Reforming Patent System (cont’d)

Aerotel Ltd. v Telco Holdings Ltd & Ors [2006] EWCA Civ 1371 “…there is pressure from would-be patentees on patent offices. People are

applying for what are, or arguably are, business method and computer program patents in significant numbers…

This pressure in part stems from the fact that, following State Street (business methods) and Alappat (computer programs) people have been getting patents for these subject-matters in the USA. Since they can get them there, they must as a commercial necessity apply for them everywhere. If your competitors are getting or trying to get the weapons of business method or computer program patents you must too. An arms race in which the weapons are patents has set in. The race has naturally spread worldwide…

…Thirdly it by no means follows that because of pressure from applicants, the grant of patents for excluded categories should be allowed or that the excluded categories (particularly business methods and computer programs) should be construed narrowly. Just as with arms, merely because people want them is not sufficient reason for giving them.”

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Reforming Patent System (cont’d)

Aerotel Ltd. v Telco Holdings Ltd & Ors [2006] EWCA Civ 1371

“…The patent system is there to provide a research and investment incentive but it has a price. That price (what economists call "transaction costs") is paid in a host of ways: the costs of patenting, the impediment to competition, the compliance cost of ensuring non-infringement, the cost of uncertainty, litigation costs and so on. There is, so far as we know, no really hard empirical data showing that the liberalisation of what is patentable in the USA has resulted in a greater rate of innovation or investment in the excluded categories. Innovation in computer programs, for instance, proceeded at an immense speed for years before anyone thought of granting patents for them as such. There is evidence, in the shape of the mass of US litigation about the excluded categories, that they have produced much uncertainty. If the encouragement of patenting and of patent litigation as industries in themselves were a purpose of the patent system, then the case for construing the categories narrowly (and indeed for removing them) is made out. But not otherwise.”

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Injunctions

EBAY INC. et al. v. MERCEXCHANGE, L. L. C. (U.S. Sup. Ct. May 15, 2006) “And as in our decision today, this Court has consistently rejected invitations to replace traditional

equitable considerations with a rule that an injunction automatically follows a determination that a copyright has been infringed.”

Per Justices Kennedy, Stevens, Souter, and Breyer “In cases now arising trial courts should bear in mind that in many instances the nature of the

patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees…”

“For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent…”

“When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.”

“In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.”

“The equitable discretion over injunctions, granted by the Patent Act, is well suited to allow courts to adapt to the rapid technological and legal developments in the patent system. For these reasons it should be recognized that district courts must determine whether past practice fits the circumstances of the cases before them…”

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Copyright Issues

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Robertson v. Thomson Corp., [2006] 2 S.C.R. 363“Section 2 of the Copyright Act, as noted above, defines a compilation as an original work that is created as a result of selection or arrangement…We note that the use of the disjunctive “or” in s. 2 is significant.  The Copyright Act does not require originality in both the selection and arrangement.  Similarly, and with all due respect to Weiler J.A.’s contrary finding, we agree with the Publishers that a reproduction of a compilation or a collective work need not preserve both the selection and arrangement of the original work to be consistent with the Publisher’s reproduction rights.”  

Protection for Collective Works and Databases

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Protection for Collective Works and Databases (cont’d)

Robertson v. Thomson Corp., [2006] 2 S.C.R. 363 “Viewed “globally”, to use the language of this Court in CCH, Info Globe Online

and CPI.Q are different selections than the selections that they incorporate. They are compilations of individual articles presented outside of the context of the original collective work from where they originated.  The resulting collective work presented to the public is not simply each of the collective works joined together — it has become a collective work of a different nature.”

“Notwithstanding the foregoing, we part ways with Weiler J.A. regarding the CD-ROMs.  In our view, the CD-ROMs are a valid exercise of the Globe’s right to reproduce its collective works (or a substantial part thereof) pursuant to s. 3(1) of the Copyright Act.” 

“The user of the CD-ROM is presented with a collection of daily newspapers which can be viewed separately.  When viewing an article on CD-ROM after searching for a particular edition, the other articles from that day’s edition appear in the frame on the right-hand side of the screen.  To pass muster, a reproduction does not need to be a replica or a photographic copy.  But it does need to remain faithful to the essence of the original work.  And, in our view, the CD-ROM does so by offering users, essentially, a compendium of daily newspaper editions.” *(Emphasis added)

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Liability for Linking and Framing

Perfect 10 v. Google, Inc., 2007 WL 1428632 (9th Cir. 2007). “In considering whether Perfect 10 made a prima facie case of violation of its

display right, the district court reasoned that a computer owner that stores an image as electronic information and serves that electronic information directly to the user (“i.e., physically sending ones and zeroes over the [I]nternet to the user’s browser,” Perfect 10, 416 F. Supp. 2d at 839) is displaying the electronic information in violation of a copyright holder’s exclusive display right. Id. at 843-45; see 17 U.S.C. § 106(5). Conversely, the owner of a computer that does not store and serve the electronic information to a user is not displaying that information, even if such owner in-line links to or frames the electronic information. Perfect 10, 416 F. Supp. 2d at 843-45. The district court referred to this test as the “server test.” Id. at 838-39.

Applying the server test, the district court concluded that Perfect 10 was likely to succeed in its claim that Google’s thumbnails constituted direct infringement but was unlikely to succeed in its claim that Google’s in-line linking to full-size infringing images constituted a direct infringement. Id. at 843-45. As explained below, because this analysis comports with PERFECT 10 v. AMAZON.COM 5769 the language of the Copyright Act, we agree with the district court’s resolution of both these issues.”

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Fair Use

Perfect 10 v. Google, Inc., 2007 WL 1428632 (9th Cir. 2007) “Although Perfect 10 has succeeded in showing it would prevail in its prima

facie case that Google’s thumbnail images infringe Perfect 10’s display rights, Perfect 10 must still show a likelihood that it will prevail against Google’s affirmative defense. Google contends that its use of thumbnails is a fair use of the images and therefore does not constitute an infringement of Perfect 10’s copyright. See 17 U.S.C. § 107.

The fair use defense permits the use of copyrighted works without the copyright owner’s consent under certain situations. The defense encourages and allows the development of new ideas that build on earlier ones, thus providing a necessary counterbalance to the copyright law’s goal of protecting creators’ work product. “From the infancy of copyright protection, some opportunity for fair use of copyrighted materials has been thought necessary to fulfill copyright’s very purpose . . . .” Campbell, 510 U.S. at 575. “The fair use doctrine thus ‘permits [and requires] courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.’ ” Id. at 577 (quoting Stewart v. Abend, 495 U.S. 207, 236 (1990)) (alteration in original)”

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Fair Use (cont’d)

Perfect 10 v. Google, Inc., 2007 WL 1428632 (9th Cir. 2007)

“Google’s use of thumbnails is highly transformative. Although an image may have been created originally to serve an entertainment, aesthetic, or informative function, a search engine transforms the image into a pointer directing a user to a source of information. Just as a “parody has an obvious claim to transformative value” because “it can provide social benefit, by shedding light on an earlier work, and, in the process, creating a new one,” Campbell, 510 U.S. at 579, a search engine provides social benefit by incorporating an original work into a new work, namely, an electronic reference tool. Accordingly, we conclude that Google’s inclusion of thumbnail images derived from infringing websites in its Internet-wide search engine activities does not preclude Google from raising a fair use defense.” (Emphasis added)

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Licenses Implied in Posting a Work to the Internet

Field v. Google, Inc., 77 U.S.P.Q. 2d (D. Nev. 2006). Field alleged that the search engine Google directly infringed his copyrights when a

Google user clicked on a "cached" link to the web pages containing Field's copyrighted works and downloaded a copy of those pages from Google's computers. “According to the undisputed testimony of Google's Internet expert, Dr. John Levine, website

publishers typically communicate their permissions to Internet search engines (such as Google) using "meta-tags." A website publisher can instruct a search engine not to cache the publisher's Website by using a "no-archive" meta-tag. According to Dr. Levine, the "no-archive" meta-tag is a highly publicized and well-known industry standard… Field concedes he was aware of these industry standard mechanisms, and knew that the presence of a "no archive" meta-tag on the pages of his Website would have informed Google not to display "Cached" links to his pages. Despite this knowledge, Field chose not to include the no-archive meta-tag on the pages of his site. He did so, knowing that Google would interpret the absence of the meta-tag as permission to allow access to the pages via "Cached" links. Thus, with knowledge of how Google would use the copyrighted works he placed on those pages, and with knowledge that he could prevent such use, Field instead made a conscious decision to permit it. His conduct is reasonably interpreted as the grant of a license to Google for that use.”

See also, Paperboy [2005] E.C.D.R. 7 (BGH (Ger)) (“A copyright owner who makes available a work protected by copyright to the public on the internet, but without technological measures, by doing so himself enables the uses which an on demand-user can make…in general no state of interference with copyright law is created if access to a work is facilitated by the setting of hyperlinks, or indeed in the form of deep links.”)

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Liability of Distributors of File Share Software and Services

Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 75 U.S.P.Q. 2d 1001 (U.S. 2005) Is a distributor of P2P software which is capable of both lawful and unlawful

uses liable for acts of copyright infringement by third parties using the software?

One who distributes a device with the object of promoting its use to infringe copyright, as shown by a clear expression or affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.

Contributory infringement occurs by intentionally inducing or encouraging direct infringement. An affirmative intention to induce copyright infringement may be inferred from advertising an infringing use or instructing how to engage in an infringing use. Liability for inducing infringement need not be found only on the basis of presuming or imputing fault based upon product characteristics, but from inferring a patently illegal objective from statements and actions of the defendant.

The defendants intentionally encouraged direct infringement. First, the defendants aimed to satisfy a known source of demand for copyright infringement, the market composed of former Napster users. Second, the defendants did not attempt to develop filtering tools to diminish copyright infringing activity using the software. Third, the defendants earned advertising revenue by streaming advertising onto the software interface. The revenue grew with higher-volume use of the software, through more downloading of copyrighted files.

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Universal Music Australia Pty Ltd. v. Sharman License Holdings Ltd., [2005] FCA 1242 Is a distributor of P2P software (kazaa) which is capable of both lawful and

unlawful uses liable for authorizing acts of copyright infringement by third parties using the software?

The respondents had long known that the Kazaa system is widely used for the sharing of copyright files.

Sharman included on the Kazaa website exhortations to users to increase their file-sharing.

There are technical measures (keyword filtering and gold file flood filtering) that would enable the respondents to curtail – although probably not totally to prevent – the sharing of copyright files. The respondents have not taken any action to implement those measures.

It would be against their financial interest to do so. It is in the respondents’ financial interest to maximize, not to minimize, music file-sharing. Advertising provides the bulk of the revenue earned by the Kazaa system.

Sharman infringed copyright by authorising Kazaa users to make copies of those sound recording and to communicate those recordings to the public.

Liability of Distributors of File Share Software and Services (cont’d)

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Is transmitting a file over Bit Torrent a “distribution”?

Chan Nai Ming v HKSAR [2007] HKEC 908 (H.K.C.A.)

“The point may be illustrated by two commonplace examples: 

(a) An academic publishes a book review which he has written on his computer and stored on his hard disk as an electronic document file.  His friends A, B and C ask for copies.  The academic creates electronic copies and sends the reproduced document files as e-mail attachments to A, B and C.  Giving “distribution” its ordinary meaning, he has distributed electronic copies of his work without delivery of any physical storage device to the recipients.

(b) A computer user decides to install anti-virus software on his computer and purchases an online copy of such a program.  He pays by credit card and a copy of the program is transmitted to him via the internet to be downloaded onto his computer and activated to give protection against computer viruses.  That copy is in electronic form and has been bought, sold and delivered via the medium of the internet without anyone delivering a disk or other storage medium containing that program.  This is a common method adopted for distributing copies of computer programs.  Each electronic copy sold is distinguishable from any other such copy and each commonly requires a distinct code or “product key” for activation.”

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Chan Nai Ming v HKSAR [2007] HKEC 908 (H.K.C.A.) “There is also no legal reason to confine distribution of copies to cases

involving delivery by physical means.  “Distribution” is not defined in the Ordinance and should be given its ordinary meaning.  In the present case, the evidence showed that upon being accessed by downloaders seeking to obtain a copy of the relevant film, the appellant’s computer reproduced the infringing electronic copy (which remained on his hard disk) in the form of packets of digital information which were sent to the downloaders and reassembled by their computers in the correct sequence to constitute an entire infringing copy of that film.  In my view, that process in aggregate is aptly described as involving the appellant’s creation of infringing electronic copies (transient or otherwise) of the film and their distribution directly or indirectly to each member of each swarm.”

Is transmitting a file over Bit Torrent a “distribution”? (cont’d)

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Is making a file available over a P2P service a “distribution”?

U.S. v. Shaffer 472 F.3d 1219 (10th.Cir.2007) “Under Section 2252A(a)(2), it is unlawful for a person knowingly to distribute child

pornography by any means, including by computer.”

“To distribute something simply means to deliver or transfer possession of it to someone else.”

“We have little difficulty in concluding that Mr. Shaffer distributed child pornography in the sense of having “delivered,” “transferred,” “dispersed,” or “dispensed” it to others. He may not have actively pushed pornography on Kazaa users, but he freely allowed them access to his computerized stash of images and videos and openly invited them to take, or download, those items. It is something akin to the owner of a self-serve gas station. The owner may not be present at the station, and there may be no attendant present at all. And neither the owner nor his or her agents may ever pump gas. But the owner has a roadside sign letting all passersby know that, if they choose, they can stop and fill their cars for themselves, paying at the pump by credit card. Just because the operation is self-serve, or in Mr. Shaffer's parlance, passive, we do not doubt for a moment that the gas station owner is in the business of “distributing,” “delivering,” “transferring” or “dispersing” gasoline; the raison d'etre of owning a gas station is to do just that. So, too, a reasonable jury could find that Mr. Shaffer welcomed people to his computer and was quite happy to let them take child pornography from it.”

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U.S. v. Shaffer 472 F.3d 1219 (10th.Cir.2007) “Though the question how Section 2252A applies to peer-to-peer file sharing programs may

be relatively novel, at least one other court has faced the question we do today and reached precisely the same conclusion. In United States v. Abraham, the court held that “the defendant distributed a visual depiction when as a result of the defendant's installation of an internet peer-to-peer video file sharing program on his computer, a Pennsylvania state trooper was able to download the child pornography from the defendant's computer to the trooper's computer.” No. 05-344, 3006 WL 3052702 at *8, 2006 U.S. Dist. LEXIS 81006 at *22 (W.D.Pa. Oct. 24, 2006) (emphasis added); see also id. At *7-8 (looking to dictionary definitions for plain meaning). Courts faced with related issues have, in a variety of other contexts, issued rulings similarly harmonious with our own. See United States v. Mathenia, 409 F.3d 1289, 1290 (11th Cir. 2005) (upholding 15-level sentencing enhancement for, inter alia, distributing child pornography through peer-to-peer file-sharing groups); United States v. Gunderson, 345 F3d 471, 473 (7th Cir. 2003) (affirming 5-level increase in base-offense level for distribution for pecuniary gain; “[a]s for his argument that he did not engage in distribution because his computer automatically distributed files, the fact that his computer traded files automatically is irrelevant: Gunderson is the person who programmed his computer to trade files in this manner”); State v. Perry, 83 Ohio St. 3d 41, 697 N.E. 2d 624, 628 (1998) (“Posting software on a bulletin board where others can access and download it is distribution.”); United Statse v. Todd, 100 Fed. Appx. 248, 250 (5th Cir. 2004) (unpub.) (user of file-share software who downloaded child pornography images and “ma[de] them accessible to others” through file sharing met the definition of “trafficking” for purposes of a sentencing enhancement).”

Is making a file available over a P2P service a “distribution”? (cont’d)

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U.S. v. Shaffer 472 F.3d 1219 (10th.Cir.2007) “Even the Supreme Court has described the users of peer-to-peer networks

in terms of the distribution of files. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, ----, 125 S. Ct. 2764, 2771, 162 L. Ed. 2d 781 (2005) (“Some musical performers, for example, have gained new audiences by distributing their copyrighted works for free across peer-to-peer networks, and some distributors of unprotected content have used peer-to-peer networks to disseminate files, Shakespeare being an example.”) (emphases added); id. at 2770 (“[P]eer-to-peer networks are employed to store and distribute electronic files by universities, government agencies, corporations, and libraries, among others.”) (emphasis added); id. at 2771.”

Is making a file available over a P2P service a “distribution”? (cont’d)

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Is File Sharing “Fair Use”

BMG Music v. Gonzalez No. 05-1314 (7th Cir.2005) “With all of these means available to consumers who want to choose

where to spend their money, downloading full copies of copyrighted material without compensation to authors cannot be deemed “fair use.” Copyright law lets authors make their own decisions about how best to promote their works; copiers such as Gonzalez cannot ask courts (and juries) to second-guess the market and call wholesale copying “fair use” if they think that authors err in understanding their own economic interests or that Congress erred in granting authors the rights in the copyright statute. Nor can she defend by observing that other persons were greater offenders…”

See also United States v. Slater 69 U.S.P.Q. 2d 1081 (7th Cir. 2003) Not fair use for an organization called “Pirates With Attitudes” (PWA) to make software freely available over the internet for downloading. The court stated “It is preposterous to think that Internet piracy is authorized by virtue of the fair use doctrine.”

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Obtaining Infringers’ Identities

Cinepoly Records Company Limited v. Hong Kong Broadband Network Limited [2006] 1 HKLRD 255 (26 January 2006) “The Internet is invaluable and even indispensable, some would suggest,

to the free communication, dissemination and sharing of information in modern societies… Users of the Internet, like any individuals, must abide by the law. And the law protects the users’ rights as much as others’ legitimate rights, including those of the copyright owners. Some online copyright infringers may well think that they will never be caught because of the cloak of anonymity created by the P2P programs. They are wrong. And from now on, they should think twice. They can on longer hide behind the cloak of anonymity. The court can and will, upon a successful application, pull back the cloak and expose their true identity. It is not an intrusion into their privacy. It does not even lie in their mouths to say so. For protection of privacy is never and cannot be used as a shield to enable them to commit civil wrongs with impunity.”

Interscope Records v. Duty, 79 U.S.P.Q.2d 1043 (D.Ariz.2006) “Duty alleges that the Recording Companies committed this tort by

"invading” [her] alleged computer.“…More specifically, it appears that Duty claims that the Recording Companies committed this tort by accessing her Kazaa share folder, which is reproduced as exhibit B to the complaint… it is undisputed that the share file is publically available, and therefore Duty cannot show that the Recording Companies intruded upon her private affairs. Accordingly, the Recording Companies' motion to dismiss Duty's intrusion upon seclusion claim is granted.”

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Copying to iPods, mobile phones and computers

Private Copying 2008-2009, Board Decision July 19, 2007 “The meaning of ‘audio recording medium’ should be determined by

examining the plain and ordinary meaning of section 79, in a manner consistent with the object and purpose of the Act and Parliament’s intention. Sound recordings can be reproduced onto a digital audio recorder. The purpose of the Act as stated in Théberge and other recent decisions of the Supreme Court of Canada is to achieve “a balance between promoting the public interest in the encouragement and dissemination of works of the art and intellect and obtaining a just reward for the creator”. Parliament’s specific intention in enacting Part VIII was to deal with a market failure by allowing individual consumers to make private copies onto audio recording media without infringing copyright and to compensate rights holders for the private copying of their music, performances and sound recordings. To rule that digital audio recorders are not audio recording media does not serve the purpose of the Act or that of Part VIII. It instantly makes the conduct of millions of Canadians illegal, and even possibly criminal.”

What will the Federal Court of Appeal do?

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Tariff 22 (Communication Right)

“Attempts to distinguish streams from downloads are based on technical and legal assumptions that are incorrect. Both are broken down into packets and transmitted, on request, to each end user individually, in separate transmissions and at different times. Neither is audible during the communication. Both must be stored, even if only temporarily, before they can be played. The only difference is that a stream is programmed to appear to be erased as it is played, while a permanent download is not. If the transmission of a download does not involve a communication, then neither does the transmission of a stream. This would mean that CBC does not communicate the news items it posts for later webcasts or the contents of its broadcast signal when it is simulcast. This would also mean that none of the items in proposed Tariff 22 has any legal foundation whatsoever.”

Tariff No. 22.A (Internet – Online Music Services) 1996-2006, October 18, 2007

Are downloads a “communication”?

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Tariff 22 (Communication Right) (cont’d)

“Second, the transmission of a download to a member of a public is a communication to the public. Downloads are “targeted at an aggregation of individuals”. They are offered to anyone with the appropriate device who is willing to comply with the terms dictated by the person who supplies the downloads. One or more transmissions of the same work, over the Internet, by fax or otherwise, to one or more members of a public each constitute a communication to the public. Any file iTunes offers to its clients is communicated to the public as soon as one client “pulls” the file.”

What will the Federal Court of Appeal rule in the Tariff 24 (ringtones) case?

Are on-demand transmissions to the public?

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Tariff 22 (Communication Right) (cont’d)

“Section 29 of the Act only applies to research and private study. The Supreme Court of Canada has made it clear that “research is not limited to non-commercial or private contexts.” Planning the purchase of a download or CD involves searching, investigation: identifying sites that offer those products, selecting one, finding out whether the track is available, ensuring that it is the right version or cover and so on. Listening to previews assists in this investigation. If copying a court decision with a view to advising a client or principal is a dealing “for the purpose of research” within the meaning of section 29, so is streaming a preview with a view to deciding whether or not to purchase a download or CD. The object of the investigation is different, as are the level of expertise required and the consequences of performing an inadequate search. Those are differences in degree, not differences in nature.”

“We conclude that generally speaking, users who listen to previews are entitled to avail themselves of section 29 of the Act, as are those who allow them to verify that they have or will purchase the track or album that they want or to permit them to view and sample what is available online. Some users may use previews in a manner that does not constitute fair dealing; this does not compromise the position of the services, so long as they are able to show “that their own practices and policies were research-based and fair”.

Are previews a “fair dealing”?

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Copyright Reform

Counterfeit Goods in Canada-AThreat to Public Safety, Report of the Standing Committee on Public Safety and National Security (May 2007)

COUNTERFEITING AND PIRACY ARE THEFT: Report of the Industry Standing Committee on Industry, Science and Technology (June 2007)

Ministers Prentice, Day, Emerson and Nicholson October 17, 2007 letters to the Standing Committee on Industry, Science and Technology and the Standing Committee on Public Safety and National Security:

“this government is committed to the importance of providing a robust framework for intellectual property rights…to foster an environment conducive to innovation, in an effort to further attract investment and high paying jobs to this country’s growing knowledge-based economy”

“the Government is working towards bringing Canada’s copyright regime into conformity with the…(WIPO) Internet Treaties. We call on all parties to support the Government’s efforts in this regard so as to ensure the protection of the rights of creators and the ability of all Canadians to use and enjoy copyrighted material in a fair, clear and predictable environment.”

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Jurisdiction Issues

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Extra-territoriality of Copyright Act

• “SOCAN v. CAIP (SCC) settles this issue. Using a server located outside of Canada does not of itself isolate a content provider from liability under the tariff. The applicability of the Act to communications that have international participants will depend on whether there is a real and substantial connection between Canada and the communication. According to Binnie J., “a telecommunication from a foreign state to Canada, or a telecommunication from Canada to a foreign state, ‘is both here and there’.”

• The problem with this proposition is that it requires looking at each communication individually to determine if the connection to Canada is sufficiently strong for the communication to happen “here”. In practice, this is impossible to do. As a result, we will have to resort to rough approximations to determine what is included in the tariff and what is not. The proposition also creates the possibility of a “layering of royalty obligations” which might need to be addressed in future proceedings.”

• Tariff No. 22.A (Internet – Online Music Services) 1996-2006, October 18, 2007

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Extra-territoriality of Copyright Act

Subscription Radio Services: SOCAN Tariff 25 (2005-2007), NRCC Tariff 4 (2007-2010), CMRRA/SODRAC Inc. - Multi-Channel Subscription Radio Services (2006-2009), Ruling of the Copyright Board (Claude Majeau April 20, 2007)

Does the Copyright Act apply to foreign reproductions?

“Further to the motions filed pertaining to unsatisfactory/incomplete responses to interrogatories, the Board rules as follows.

Subject to what follows, the responses the objectors have provided to date are sufficient. CSI is not entitled to dictate the format in which the information is to be provided. Third parties are not obliged to provide information in response to interrogatories. Sirius Canada has made reasonable efforts to obtain third party information. The attempt to obtain information that would be relevant to the proposed tariff that CSI recently filed for 2008-2009 is clearly improper. The fact that Sirius Canada contractually agrees to pay royalties pursuant to the tariff is not relevant to the issue of whether or not Sirius Canada (or anyone else) is liable pursuant to the Copyright Act to pay those royalties. It is highly doubtful that the Board can set royalties for reproductions made outside of Canada. The "real and substantial connection" test clearly applies to the communication right; it is doubtful that it applies to the reproduction right.”

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Patent Liability Where Essential Component is Outside U.S.

NTP Inc v. RIM 418 F.3d 1282 (Fed.Cir.2005) The question before the Federal Circuit was “whether the using, offering to

sell, or selling of a patented invention is an infringement under section 271(a) if a component or step of the patented invention is located or performed abroad.”

The Court decided that the use of a claimed system under section 271(a) is “the place at which the system as a whole is put into service, i.e., the place where control of the system is exercised and beneficial use of the system obtained”.

Court found it was proper for the jury to have found that use of NTP’s asserted system claims by RIM’s customers occurred within the United States.

“RIM’s customers located within the United States controlled the transmission of the originated information and also benefited from such an exchange of information. Thus, the location of the Relay in Canada did not, as a matter of law, preclude infringement of the asserted system claims in this case…”

“When RIM’s United States customers send and receive messages by manipulating the handheld devices in their possession in the United States, the location of the use of the communication system as a whole occurs in the United States. This satisfactorily establishes that the situs of the “use” of RIM’s system by RIM’s United States customers for purposes of section 271(a) is the United States.”

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Patent Liability Where a Method Step is Outside U.S.

NTP Inc v. RIM 418 F.3d 1282 (Fed.Cir.2005) The Court stated that under section 271(a), “the concept of ‘use’ of a

patented method or process is fundamentally different from the use of a patented system or device.”

“Because a process is nothing more than the sequence of actions of which it is comprised, the use of a process necessarily involves doing or performing each of the steps recited. This is unlike use of a system as a whole, in which the components are used collectively, not individually.”

On the basis of this distinction the Court held that “a process cannot be used ‘within’ the United States as required by section 271(a) unless each of the steps is performed within this country.”

Thus, the Court agreed with RIM that a finding of direct infringement by RIM’s customers under section 271(a) of the method claims that recited an “interface switch” or an “interface” was precluded by the location of RIM’s Relay in Canada.

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Was the NTP v RIM case Rightly Decided?

Zoltek Corporation v. United States Case No. 04-5100, 5102 (Fed.Cir. March 31, 2006) Court questioned whether the “control and beneficial use test” formulated in

Decca and which was the basis for the decision in the RIM case had any application to infringement under § 271(a).

Circuit Judge Gajarsa wrote a concurring opinion in the case stating: • “the NTP proposition is … the result of an unchecked propagation of error in our case

law, and its viability may eventually be challenged”. • “The NTP court should not have articulated such a relationship, especially not through

reliance on logically flawed dicta, and I can see neither the need nor the clear basis for us—at least in this case—to attempt to support through logic, post hoc, what the NTP court has wrought through folly.”

He then went on to address “the ignoble history of the NTP proposition”.

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Hearing Foreign Claims in Canada

Research in Motion Limited v. Atari Inc., 2007 CanLII 33987 (ON S.C.) “Paragraphs 1(a) and 1(d) of RIM’s statement of claim specifically request

relief pursuant to the laws of the United States.” “Where a case has a real and substantial connection to both Ontario and to a

foreign jurisdiction, the court may still decline to exercise its jurisdiction to hear the case but only if the other forum is clearly more appropriate. In my view there is a real and substantial connection between Ontario and the claim being asserted by RIM and Atari.  Atari conducts business in Ontario, including the distribution of the products at issue, and also claims to hold copyright in Breakout and Asteroid in Ontario.  Atari was well aware that RIM was headquartered in Ontario and it is a fair conclusion to draw that Atari ought to have known that RIM might seek declaratory relief here in respect of its threats to sue RIM anywhere in the world.”

Court also holding it had power to grant declaratory relief.

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Wallace v. International Business Machines Corp. 467 F.3d 1104 (7th.Cir. 2006)

“Daniel Wallace would like to compete with Linux-either by offering a derivative work or by writing an operating system from scratch-but maintains that this is impossible as long as Linux and its derivatives are available for free. He contends that IBM, Red Hat, and Novell have conspired among themselves and with others (including the Free Software Foundation) to eliminate competition in the operating system market by making Linux available at an unbeatable price. Under the GPL, which passes from user to improver to user, Linux and all software that incorporates any of its source code will be free forever, and nothing could be a more effective deterrent to competition, Wallace maintains. The GPL is the conspiracy as Wallace sees things; it is a joint undertaking among users and creators of derivative works to undercut the price of any potential rival.”

Does the GPL violate antitrust laws?

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Does the GPL violate antitrust laws? (cont’d)

Wallace v. International Business Machines Corp. 467 F.3d 1104 (7th.Cir. 2006)

“It does not help to characterize people who accept the GPL as “conspirators.” Although the antitrust laws forbid conspiracies “in restraint of trade,”, the GPL does not restrain trade. It is a cooperative agreement that facilitates production of new derivative works, and agreements that yield new products that would not arise through unilateral action are lawful.

Nor does it help to call the GPL “price fixing.”… Intellectual property can be used without being used up; the marginal cost of an additional user is zero (costs of media and paper to one side), so once a piece of intellectual property exists the efficient price of an extra copy is zero, for that is where price equals marginal cost. Copyright and patent laws give authors a right to charge more, so that they can recover their fixed costs (and thus promote innovation), but they do not require authors to charge more. No more does antitrust law require higher prices. Linux and other open-source projects have been able to cover their fixed costs through donations of time; as long as that remains true, it would reduce efficiency and consumers' welfare to force the authors to levy a charge on each new user.”