Online Streaming: Supreme Court of Canada Clarifies Royalty Entitlements

Are you the author of a creative work that is streamed online?

Perhaps you are a regular user of online streaming services?

How should a copyright holder get compensated when letting users stream their content?

In this article, I will look over the Supreme Court of Canada’s recent judgment on this matter in the case Society of Composers, Authors and Music Publishers of Canada v. Entertainment Software Association, 2022 SCC 30.

In its judgment, the Supreme Court of Canada clarifies what royalties copyright holders are entitled to receive when their work is uploaded online and then streamed by users.

Let’s get started!

Copyright Protection

In Canada, the Copyright Act provides protection to original creative works such as music, art, songs, writings, poems, or other works.

When a person creates an original work, the law grants the author copyright protection to decide how the work will be performed or reproduced in the future.

Copyright holders will generally monetize their works by charging a fee, commonly referred to as royalties, from anyone who wishes to use their creative works.

For instance, the copyright holder of a software product can request a fee from users to use the software solution.?

Similarly, a singer or musician can ask for a fee to have their original works reproduced or performed by others.?

In essence, copyright laws are designed to protect the creative rights of artists and creators so they are encouraged to produce more creative works and be fairly compensated for their hard work.?

Communication Rights

As part of the copyright protection afforded to authors and creators of original work, the Copyright Act grants them the right to "communicate" their work to the public.?

For example, if you want to play a song on the radio, you need to get permission from the copyright holder of that song.

The copyright holder of the song is the only person who has the right to communicate the work to the public by means of telecommunication.

Similarly, the copyright holder has the right to make the song “available” online by uploading it to the Internet or some online platform.

This means that if someone wants to upload a creative work to the Internet, they must obtain the copyright holder’s permission as it’s a way to communicate the work to the public by telecommunication.

Royalty Rights on Streaming Works Online

What happens when a piece of creative work is made available online and is streamed by users?

Will the author attract a royalty for having made the work available online and another royalty for users streaming the same content?

This is exactly the question the Supreme Court of Canada considered addressed in the case Society of Composers, Authors and Music Publishers of Canada v. Entertainment Software Association, 2022 SCC 30.

In this case, the Society of Composers, Authors and Music Publishers of Canada (“SOCAN”), a federal administrative body, is mandated to collect and distribute royalties for music creators, publishers, and visual artists.

SOCAN presented a submission to the Copyright Board of Canada indicating that an author who “makes works available” online should attract separate royalty than when the work is streamed online.

In other words, one royalty fee to cover the permission to post a song online and another royalty fee to cover the streaming process.?

The Copyright Board of Canada accepted SOCAN’s submission.

However, the case was then appealed to the Federal Court of Appeal.

The Federal Court of Appeal overturned the Copyright Board of Canada’s decision by indicating that the Copyright Act does not create the right to a royalty for uploading a work on the Internet and another royalty for streaming the content.?

Ultimately, SOCAN brought the matter to the Supreme Court of Canada.?

Supreme Court of Canada’s Ruling

On July 15, 2022, the Supreme Court of Canada rendered its judgment where it rejected SOCAN’s arguments and sided with the Federal Court of Appeal’s rationale.?

Justice Malcolm Rowe, writing for the majority of judges, indicated that the Copyright Board's interpretation of the Copyright Act was inconsistent with the text and purpose of the law.

Justice Rowe stated that "the Copyright Act does not exist solely for the benefit of authors."?

While it's important to protect the rights of creators and ensure they are fairly compensated for their work, it's also important to consider the broader implications of copyright law for society as a whole.

Justice Rowe also highlighted the concept of technological neutrality.?

This principle states that the law should treat online work and offline work equally, regardless of how they are accessed by end users.

In other words, a user accessing a song on the Internet should not be treated differently than the user listening to the song on the radio.

Based on the Copyright Board's interpretation of the law, users would have to pay more to access works online when compared to other means of communication, such as radio.

As such, by charging more fees to access music online, the Supreme Court considered that there was a violation of the principle of technological neutrality that is required in copyright laws.

Justice Rowe argued that what matters is what the user receives, not how they receive it.?

This means that if a user accesses a work, whether online or offline, they should be treated the same way under the law.?

As such, if there’s one royalty fee charged for listening to the song on the radio, there should only be one royalty fee charged if the song is streamed online.?

Particularly in regard to the “streaming” process, the Supreme Court clarified that the new section of the Copyright Act states that when a work is uploaded to the Internet, the work is “communicated” to the public by means of telecommunication, which attracts a royalty fee.

However, if a user streams the same work that was already communicated, this process should not attract additional royalty.

The “streaming” is considered to be "one continuous act" that began when the work was made available online.?

Takeaways

The Copyright Act provides the legal foundation to protect authors and their creative works.

Particularly, the copyright laws in Canada are designed to enable copyright holders to decide when and how they permit their works to be communicated and performed.

In light of the Supreme Court of Canada’s decision in Society of Composers, Authors and Music Publishers of Canada v. Entertainment Software Association, 2022 SCC 30, we now have more clarity on how royalties can be attracted for the communication and performance of work online through a streaming service.

In essence, a copyright holder attracts royalties for making the work available online for other users to access but does not attract further royalties when the same work is streamed by a user.

Ultimately, the Supreme Court of Canada indicated that the Copyright Act must protect authors so they are compensated for their hard work and efforts.

However, the application of the Copyright Act should not be prejudicial to society as a whole.