Why crackdown on pirate set-top boxes is good for innovation: a reply to Michael Geist

Last week the Federal Court granted an interlocutory injunction restraining ITVBOX.NET, WATCHNSAVE INC, MTLFREETV.COM and others from selling set-top boxes preloaded with software. The software was specifically adapted to enable purchasers to stream and download infringing copies of programs made available by Bell, Bell Expressvu, Rogers, and Videotron on a subscription basis. The devices were advertised and promoted by prominently emphasizing these capabilities and as a way to obtain this content without paying.

The decision by Justice Tremblay-Lamer in Bell Canada v ITVBOX.NET 2016 FC 612 to grant the injunction was not surprising. The judge found there was a strong case that the defendants were infringing and inducing and authorizing copyright infringement and violating the Radiocommunication Act including by selling and advertising a technology specially designed to enable users to forgo legitimate distribution channels and to obtain the same content from illegal download, streaming and private IPTV services.

The decision was immediately criticized by the anti-copyright activist Michael Geist in an article in the Toronto Star claiming that “Set-top box crackdown will chill Canada’s tech innovation” and in a companion on blog post titled “Why the Federal Court Crackdown on Set-Top Boxes Threatens to Chill Canadian Tech Innovation”.

Geist claims that the ruling “could alter the innovation balance…by targeting a disruptive technology that everyone agrees has both legitimate and infringing uses. He asserts:

If the decision stands, the case has the potential to create a Canadian chill over new, disruptive technologies leaving courts to decide what can and cannot be preloaded onto computers and other electronic devices. With Minister Navdeep Bains launching a major new initiative last week on innovation, he will need to keep a close eye on a court case that could alter the innovation balance and convince some companies to stay out of the Canadian market.

Geist’s defense of the business model at issue and suggesting it is “innovative” is a familiar theme of free-culture advocates who argue that compensating copyright holders for the uses of their works hinders innovation and that new business models premised on unauthorized uses of copyright materials count as “innovative”.[1]

Geist’s alarmism over the ITVBOX.NET decision is itself of concern, especially in light of the research that overwhelmingly finds that piracy causes harm to producers by reducing legal sales and revenues[2] and empirical evidence which suggests that piracy causes long-term harm to consumers by reducing the supply and quality of new content.[3]

The motions court judge found that there was a serious issue to be tried that the defendants were direct infringers of the plaintiffs’ copyrights by having made their programs available to the public, a right (the “making available right”) which clearly became part of Canadian copyright law in 2012 pursuant to the Copyright Modernization Act.

She also made a finding that the defendants were not neutral intermediaries and hence could not rely on the “common carrier” exception in the Act.

This is not a case where the Defendants merely serve as the conduit, as was argued by Mr. Wesley. Rather, they deliberately encourage consumers and potential clients to circumvent authorized ways of accessing content — say, by a cable subscription or by streaming content from the Plaintiffs’ websites — both in the manner in which they promote their business, and by offering tutorials in how to add and use applications which rely on illegally obtained content. The statutory defence provided in paragraph 2.4(1)(b) of the Copyright Act does not apply to the Defendants who go above and beyond selling a simple “means of telecommunication”. They also engage in acts related to the content of the infringed communications (Society of Composers, Authors and Music Publishers of Canada v Canadian Assn of Internet Providers, 2004 SCC 45 at para 92). Consumers can consequently stream or download the Plaintiffs’ programs and store them on their device without authorization from the Plaintiffs. This constitutes prima facie copyright infringement pursuant to section 27 of the Copyright Act.

The judge also ruled there was a strong case that the defendants were violating the Radiocommunication Act:

I also find that the Plaintiffs have made a strong prima facie case that the devices sold by the Defendants are used to access content that may contravene paragraph 9(1)(c) of the Radiocommunication Act. Streaming sites that rebroadcast the Distribution Plaintiffs’ programming are not authorized to communicate those works to the public. A user who accesses these works might also contravene the Radiocommunication Act.

The judge found that the plaintiffs had shown a serious issue that the defendants were liable for inducing infringement. Users were induced to download and stream infringing content including content that had been stripped of encryption protecting it from being illegally copied. (The evidence in the record also showed that the defendants, among other things, acted in concert with the streaming sites and private IPTV service offerings to illegally stream programming and broadcast signals to users.)

In my view, the only reason why many users have access to infringing content is because set-top boxes preloaded with KODI (and the proper add-ons), Showbox or a private IPTV service make it extremely easy to do so. While some consumers might have the desire and technical knowledge to seek out and download such applications, many others might not. The Defendants market themselves to consumers specifically on the basis that their “plug-and-play” set-top boxes make it easy to eliminate the need for a cable subscription:

• The iTVBox Defendant declares itself to be the “Original Cable Killer” and provides detailed instructions to users on how to access copyright infringing content;
• The Android Bros Defendant assures users that they can “cancel cable today” and still watch all of their television programs for free;
• The WatchNSaveNow Defendant declares itself to be an expert in helping users cut their cable dependency;
• The My Electronics Defendant advertises its pre-loaded set-top boxes as providing free on-demand access to international channels and television programming;
• The MtlFreeTV Defendant advertises its pre-loaded set-top boxes as providing access to “Every Movie Ever Made”, “Every TV Show Ever Made” and “Live Sports and Events” and operates a YouTube channel on which it shares video tutorials instructing users on how to use its set-top boxes and the applications installed thereon.

For the above reasons, I am satisfied that the allegations of inducement constitute a serious issue.

Finding a serious issue to be tried in those circumstances is consistent with other authorities which have found liability for copyright and other intellectual property rights infringement where

• the alleged infringer supplies the means of infringement to others together with instructions or directions as to how to use it in a manner that will cause infringement and knowing that it will be used to so infringe;
• the alleged infringer engages in advertising and product marketing intentionally leading a user to purchase an article and use it in an infringing manner;
• the alleged infringer or users act in concert with sites that offer unauthorized streaming or downloads; or
• the alleged infringer procures and induces users to access illegal steaming sites and to thereby cause infringing communications to occur.[4]

Geist was wrong to suggest that the case is a worrisome legal development because there were some legitimate (substantial non-infringing) uses for the products in issue. Under Canadian law a person can be liable for secondary infringement either by selling a device which has no substantial non-infringing uses or by selling a device and inducing the buyer to use it for an infringing purpose. In this respect, Canadian secondary infringement law has parallels with the U.S. doctrines of contributory infringement  pursuant to which a person can be liable either for inducing infringement or for selling a device or offering a service that has no substantial non-infringing purpose.[5]

The judge also found a strong case for infringement by authorization had been made out:

Similarly, with regard to the issue of authorization, many consumers may not realize that the content they are accessing infringes copyright law. The Plaintiffs make a strong prima facie case that the Defendants, through their products and advertising, sanction and encourage accessing copyrighted content through streaming sites or private IPTV services.

This holding is also consistent with authorities that have held that infringement by authorization may occur where the means of infringement are supplied and such supply is bound to lead to an infringement and was made specifically for that purpose.[6]

The ITVBOX.NET case thus fits fairly comfortably within long lines of cases which have protected intellectual property rights in analogous situations. Further, the injunction granted by the judge did not ban the sale of the set-top boxes in issue. Rather, the order prohibited the sales thereof bundled with the software that was clearly intended to be used for an infringing purpose or to violate the Radiocommunication Act.

The case is not, as Geist suggests, a court chilling technological innovation. Rather, it is an example of a court enjoining a business model premised on procuring the use of technologies for infringing purposes and engaging in acts of direct infringement and violating a law designed to protect broadcast and distribution undertakings against content theft.

Some of Geist’s blog readers do not agree with his views about the case either. A reader identified as “Stephen Pate” made the following comment in response to Geist’s argument:

The argument is disingenuous. The banned devices are advertised as pirate devices – never pay for cable again. There are other set top boxes like Roku and Apple TV that provide legitimate cut-the-cable services. A business that sells itself as breaking the law should not be allowed.

A reader named “Jodi” posted this comment to make the point that the case was not about enjoining some “new and innovative” technology.

Hi Michael, I have to respectfully disagree with your assessment that these boxes are new and innovative. These Android TV boxes are the equivalent of buying an Android phone, online, and having it come with a pirate app store pre-configured along with the legitimate Google or Amazon stores . These boxes are not being sold by companies with R&D departments, they are being sold by people. These tech savvy people are being configuration middlemen installing and configuring content pirating software on the end users behalf. The pirate software they are installing is available on-line for free. When you buy one of these boxes you are paying for the physical box, plus for their time and knowledge to research, install and configure it. Also who know what other nefarious things these boxes that you willingly bring in to your home could be setup to do.

Is the case a cause for concern? Hardly. But, it would have been if the defendants had been allowed to continue to market and promote devices for the purposes of infringing copyright and violate the Radiocommunication Act and to thereby undermine legitimate markets and investments in the creation and dissemination of creative content.

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[1] See, Terry Hart, Remix Without Romance: What Free Culture Gets Wrong

[2] Michael Smith The Truth About Piracy, Barry Sookman Is unauthorized online copying theft and does it hurt creators?

[3] Michael Smith Piracy and the Supply of New Creative Works

[4] Apple Computer Inc. v. Mackintosh Computers Ltd. (1987), 14 C.P.R. (3d) 1 (F.C.T.D.), CBS Shows Ltd. v. Amstrad Plc., [1988] 2 All. E.R. 484 (H.L.), Twentieth Century Fox Film Corp. v. Newzbin Ltd., [2010] EWHC 601 (Ch.), National Rugby League Investments Pty Limited v. Singtel Optus Pty Ltd., [2012] FCAFC 59 (April 2012)., Twentieth Century Fox Film Corporation & Ors v Sky UK Ltd & Ors [2015] EWHC 1082 (Ch) (28 April 2015) , Football Dataco Ltd & Ors v Stan James Plc &Ors, [2013] EWCA Civ. 27 (06 February 2013), Proctor & Gamble Co. v. Bristol-Myers Canada Ltd. (1978) 39 C.P.R. (2nd) 145 (Fed. T.D.), McLennan v. Produits Gilbert Inc., 2008 FCA 35, Windsurfing International v. Trilantic (1985) 8 C.P.R. (3d) 241 (F.C.A.).

[5]  Ibid; for U.S. law see, Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 US 913

[6] Moncton v. Pathé Freres Pathephone Ltd., [1974] 1 K.B. 403, Evans v. E. Hulton & Co. Ltd., [1924] All E.R. 224, Falcon v. Famous Players Film Co., [1926] 2 K.B. 474 (Eng. C.A.), Twentieth Century Fox Film Corp. v. Newzbin Ltd., [2010] EWHC 601 (Ch.), Sirius Canada Inc. v CMRRA/SODRAC, 2010 FCA 348.