Blacklock’s Reporter is a small Canadian online news agency. Like many publishers it has challenges in enforcing its copyrights against unauthorized digital copying. To protect its rights it uses a subscription model to license content. It attempts to keep materials from unauthorized access and distribution by using a paywall. Recently the Federal Court in 1395804 Ontario Ltd. (Blacklock’s Reporter) v. Canada (Attorney General), 2016 FC 1255 concluded that the copyright in Blacklock’s news articles was not infringed when copies of articles lawfully obtained under a subscription by one subscriber were emailed to the Department of Finance and were then forwarded to others within the department. The court found the copying was a fair dealing, an exception from infringement under the Copyright Act.
The decision is important as it addresses both the enforceability of (online) browsewrap agreements and the scope of the fair dealing copyright exception for research. The decision contains many troubling findings and statements about the law which leaves one questioning whether the decision was correctly decided.
The facts in the case were not really in dispute. Blacklock’s published two articles on the subject of a “Sugar Tax”. The articles were only made available pursuant to a paid subscription. The articles were otherwise protected by use of a password protected paywall that prevented access. Blacklock’s posted Terms and Conditions on its site (the “terms”) that set out the authorized and prohibited uses of its content. To enforce its rights it relied on both its copyrights and a browsewrap online contracting process.
The two articles were downloaded by the president of the Canadian Sugar Institute, one Sandra Marsden. She was concerned about the accuracy of the first article and subscribed to Blacklock’s so she could legally access it. She was worried that the article could damage her reputation with the Department of Finance (the Department) so she emailed a copy of the article and a second one she also obtained access to under her subscription on the same topic to Mr Halley of the Department. The articles were then forwarded by email to others within the Department. In total each article was emailed to four other individuals for a total of six individuals who received copies of articles allegedly not licensed by Blacklock’s.
There were two central issues in the case. First, whether Blacklock’s terms permitted or prohibited the copying and distribution in issue. Second, whether the copying and distribution of the articles within the Department was a fair dealing for copyright purposes. The court found the terms unenforceable and the copying to be fair dealings.
Enforceability of Blacklock’s terms
On the first issue, the court made three findings:
- Blacklock’s browsewrap (aka webwrap) terms were not binding on Ms Marsden.
- Even if they were, the terms permitted sending the articles to Mr. Halley.
- When Mr. Halley took possession of the articles he had the same rights to distribute them within the Department that Ms Marden had under the terms.
Each of the above findings is open to doubt.
Were the terms enforceable?
A browsewrap agreement is an online agreement that is sometimes used by website operators to obtain agreement to the use of a website and its contents. Unlike a “clickwrap” agreement, the terms are not expressly agreed to by clicking on an “agree” icon. Rather, agreement is manifested by use of the site, services or content with sufficient notice of the terms and knowledge that the use constitutes acceptance of the terms.
The trial judge, Justice Barnes, ruled that the browsewrap terms in issue were not binding on Ms Marsden. His reasons are set out in the following passages:
In this case Blacklock’s failed to ensure that its subscribers were aware of the Terms and Conditions it sought to impose. According to Mr. Korski and Ms. Doan, an astute or sophisticated subscriber to Blacklock’s would be aware of its limitations on use by the reference on the application form to bulk user access and by the generic reference to “Terms and Conditions” at the foot of every website page.
In my view Blacklock’s approach is deficient and potentially misleading to subscribers like Ms. Marsden. Because the Terms and Conditions of use were not clearly brought to Ms. Marsden’s attention for acceptance, she had no reason to think that by sharing the two Blacklock’s articles she was breaching Blacklock’s copyright or facilitating a breach by others.
The requirement for bringing contractual conditions to the attention of a subscriber at the time of purchase is well-known in the law. It is not something that is imposed by bare inference or by falling back on the supposed sophistication of users. At a minimum the party to be bound must be shown to have been aware of the Terms and Conditions at the time of purchase: see Kobelt Manufacturing Co v Pacific Rim Engineered Products (1987) Ltd, 2011 BCSC 224 at para 124, 84 BLR (4th) 189. (emphasis added)
The enforcement of browsewrap agreements has been canvassed in other cases. These types of agreements are often problematic to enforce. The test for their enforceability does not, however, depend on meeting the high standards described by the court. In particular, the portions of the reasons highlighted above do not accurately describe the general law applicable to enforcement of terms at common law in the so called “ticket cases” or what has been found to be required to enforce browsewrap agreements.
At common law, the terms would be binding on persons who contract for a subscription if Blacklock’s had taken steps that were reasonably sufficient to give subscribers notice of its terms. It did not have to ensure that subscribers were aware of the terms. Nor was it required to obtain any acknowledgement that the terms in question were read and accepted.
The court did not refer to any of the cases that have examined the applicability of these general principles to the enforcement browsewrap agreements. In the U.S., where browsewrap agreements have been given considerable judicial attention, a leading line of cases would enforce them based on either actual knowledge of the terms by the user or, failing that, constructive knowledge. Constructive knowledge is established where the website operator has put a reasonably prudent user on inquiry notice of the terms of the contract. Whether a user has inquiry notice in turn depends on the design and content of the website and the agreement’s webpages.
The leading case in Canada on the enforcement of browsewrap agreements is Century 21 Canada Limited Partnership v. Rogers Communications Inc., 2011 BCSC 1196. The court in that case accepted that the general principles in the common law ticket cases applied to determine if terms on websites are enforceable against website users.
Examples of the law addressing changing methods of contracting are the “ticket” cases that arose in the late 18th century. As public transportation developed the practical matter of establishing the terms of the agreement arose. The House of Lords in Hood v. Anchor Line (Henderson Bros.),  A.C. 837 (H.L.), stated that “if it is found that the company did what was reasonably sufficient to give notice of conditions printed on the back of a ticket, the person taking the ticket would be bound by such conditions”.
Hall J., in Schuster v. Blackcomb Skiing Enterprises Ltd. Partnership (1994), 1994 CanLII 2855 (BC SC), 100 B.C.L.R. (2d) 298,  3 W.W.R. 443, at para. 14 (S.C.), provides a useful history and analysis of the “ticket” cases. He states:
It is to be noted that these were all what I think could properly be described as “ticket” cases but the principles that were there developed continue to be applicable today and in my judgment appear usually to turn on the question of the efficacy of notice to the customer. …
The defendants assert that the “ticket cases” do not address the issue of whether a contract was formed at all. That is, they start from the proposition that the parties know they are entering into a contract and then the issue addressed is whether they have sufficient notice of the terms of the contract. They know that they have the option of accepting the service offered and entering into an agreement or rejecting the offered service. Despite the fact that in ticket cases most consumers likely do not read the fine print they do know that they are entering into an agreement. They know that they are purchasing a service. The defendants submit that what the ticket cases really address is the issue of notice of the terms of a contract. They submit that in the world of the Internet there is no awareness that accessing a website forms a contract.
While the ticket cases deal with notice of contractual terms, the principles applicable can, in my view, be equally applied to the issue of contract formation in the sense that the formation of a contract requires that a party have knowledge or notice of an offer in order to accept it or reject it.
If notice of the terms is sufficient, the issue in principle then becomes whether or not the terms are accepted by confirmation either by express agreement or by implied conduct.
The court in the Century 21 case also reviewed leading cases from the U.S. on the subject of browsewrap agreements and concluded stating:
The question of the enforceability of Blacklock’s terms therefore depended on whether it had made reasonable efforts to bring its terms to the attention of users. The court never asked or answered that specific question. It came to the conclusion that Blacklock’s did not ensure that its users were aware of its terms merely by having “generic reference to ‘Terms and Conditions’ at the foot of every website page”. The reasons, however, did not expressly consider that Blacklock’s Membership Checkout webpages shown below (figures 1-4 ) also clearly identified the applicable “Terms and Conditions” just beneath the “Submit and Checkout” icon which a user must click on to subscribe. (See figure 4)
The last screen shown above might reasonably be considered as being reasonably sufficient notice of Blacklock’s terms. It is unclear whether the ruling on the enforceability of Blacklock’s terms might have been different had that screen been specifically considered by the court.
Consequences of terms not being enforceable
When Ms. Marsden sent the two articles to the Department she would necessarily have had to make reproductions of the articles. At the very least the articles were reproduced by her when she attached them to her emails. She would also have caused or authorized new copies to be created by causing the Department’s email system to receive, store and forward the e-mails to Mr. Halley. Making, causing and authorizing such reproductions to be made would implicate Blacklock’s exclusive rights of reproduction and authorization under the Copyright Act. Unless sending the emails was done with the express or implied consent of Blacklock’s or was otherwise excused by an exception under the Act, such actions would be infringing and the copies of the articles received by the Department would have been infringing copies.
The court did not expressly address the issue of express or implied consent for Ms. Marsden to make the copies involved in sending the articles to the Department. Rather, it focused on whether Blacklock’s terms prohibited the copying and distribution of the articles. The court appeared to have held that because the terms were not binding sending the articles was not prohibited by the Act.
In my view Blacklock’s approach is deficient and potentially misleading to subscribers like Ms. Marsden. Because the Terms and Conditions of use were not clearly brought to Ms. Marsden’s attention for acceptance, she had no reason to think that by sharing the two Blacklock’s articles she was breaching Blacklock’s copyright or facilitating a breach by others.
In so ruling, the court conflated two very different issues. The first was whether there were binding terms that prohibited copying and sending the articles to others. The second was whether Ms. Marsden had Blacklock’s consent to make the copies. No such consent was shown.
Copyright in a work is deemed to be infringed by any person who, without the consent of the owner of the copyright, does anything that according to the Act only the owner of the copyright has the right to do. A consent may be implied from the circumstances. However, the inference of consent must be clear before it will operate as a defence and must come from the person holding the particular right alleged to be infringed. The court made no finding that Blacklock’s gave any consent to make the copies. Nor would it be reasonable to infer any implied such consent in the circumstances, particularly given that access to the articles was only made available pursuant to a password protected paywall on a subscription basis.
The court did not consider whether Ms Marsden’s acts could have been exempted from infringement such as by being a fair dealing. In the CCH case, the Supreme Court established that a fair dealing defense can be made out by facilitating fair dealing research by third parties. The defense was successful in CCH, in part, because the Law Society was able to demonstrate it made and transmitted copies of articles to the legal profession to facilitate their research after being asked for copies and in accordance with its fair dealing policy. It would be a significant extension of the law, however, to hold that a fair dealing defense to infringement can be made out by a person’s unilateral decision to make and send a third party a copy of a work on the assumption that the person might also want to read it. In any event the court made a finding of fact that “Ms. Marsden sent the articles to Mr. Halley for a legitimate business reason (i.e.,to protect her business reputation and to manage her working relationship with the Department)” e.g. it was not sent to facilitate any the research the Department was engaged in.
Accordingly, if the terms were not binding as the court found, the copies of the articles received by Mr Halley would have been infringing copies transmitted by Ms Marsden in violation of Blacklock’s copyrights.
Did the terms permit sending the articles to the Department?
The court also held that even if Blacklock’s terms were enforceable, they would have permitted Ms. Marsden to make and send copies of the articles to Mr Halley. The terms did not permit this.
There was no dispute about what applicable terms were.
Blacklock’s Reporter and its contents are the property of 1395804 Ontario Ltd., and are protected, without limitation, pursuant to Canadian and foreign copyright and trademark laws.
You acknowledge and agree one subscription is allotted per subscriber. Distribution of articles, photographs, images, writings or other content of any kind by a single subscriber by paper, electronic file, disc, intranet or any and all methods is not permissible. For purchase of bulk subscriptions, see “Contact”.
Reproduction, duplication, or distribution of Blacklock’s Reporter and/or all or any part of its content for anything other than your personal, non-commercial use is a violation not only of these Terms and Conditions but also of copyright laws unless you have written permission from Blacklock’s Reporter. The content on Blacklock’s Reporter is made available to you for non-commercial, personal, or educational purposes only. The content may not be modified in any manner and the intellectual property notice must be included on every display and copy of the content. No other use is permitted. Nothing contained herein shall be construed as conferring any right under any copyright of Blacklock’s Reporter or any other person who owns the copyright in the content provided on Blacklock’s Reporter. (Emphasis added.)
The court found that the terms were ambiguous and that subscribers were authorized under the terms to distribute copies for non-commercial purposes.
…Blacklock’s Terms and Conditions…did not unambiguously prohibit the circulation of Blacklock’s copy for personal or non-commercial purposes…
Blacklock’s Terms and Conditions contain a material ambiguity concerning downstream distribution. On the one hand they seemingly prohibit distribution by subscribers but, on the other, they permit it for personal, or non-commercial uses…
As the drafter of the above conditions, Blacklock’s is bound to the interpretation most favourable to the users of its copy which, in this case, permitted Ms. Marsden’s distribution to the Department for a non-commercial purpose…
The terms may not have been a model of clarity, but under general principles of contract construction they do not reasonably have the meaning given to them by the court.
Terms in a license, like in any agreement, must be interpreted as a whole, giving the words used their ordinary and grammatical meaning. Courts construe contracts in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective. The contra proferentem maxim is only used when all other rules of construction fail to enable the court to ascertain the meaning of the agreement.
The court gave no real reasons for the finding that the terms permitted personal or non-commercial uses other than applying what was, in essence, the contra proferentem maxim. The court did not give the terms their ordinary and grammatical meaning. The first highlighted sentence in the second paragraph above clearly prohibits distribution of articles by electronic means. The highlighted portion of the third paragraph prohibits distribution except for “personal, non-commercial” uses. The court’s interpretation of the terms expressly reads in the word “or” between the word “personal” and “non-commercial”, although not present in the contract language. It thus reads out the important qualification that any distribution be for a “personal…use”, a concept that connotes use of an object only by the individual person licensed.
Thus, if the terms were enforceable, Ms Marsden did not have any license to distribute the articles to anyone else. In fact, that was contractually prohibited. To have done so in such circumstances would be a breach of contract and an infringement of copyright.
Did the terms apply to Mr. Halley?
In considering the scope of the terms, the court also expressed the opinion that they not only permitted distribution by Ms Marsden to the Department, but also distribution within the Department.
As the drafter of the above conditions, Blacklock’s is bound to the interpretation most favourable to the users of its copy which, in this case, permitted Ms. Marsden’s distribution to the Department for a non-commercial purpose, and by implication, permitted a similar use by Mr. Halley.
This holding also cannot be supported:
- This interpretation of the terms essentially held that Ms. Marsden had the right to grant the Department a sublicense to reproduce and distribute the articles. However, unless the intention is expressed or implied in a license, a licensee is not permitted to grant a sublicense without the permission of the licensor. There was no express term permitting any sublicense to be granted.
- No term can be implied in a license agreement that would be inconsistent with the terms of the license. Here, the license was by its express terms “personal”. The terms also included the statement that “No other use is permitted.”
- To imply a term, the term must be necessary to give business efficacy to the contract and be one that the parties would be assumed to have intended. It is hard to see how these conditions could be met in the circumstances.
The upshot of all this is the following:
- There was a reasonable basis for finding the terms to be enforceable against Ms. Marsden.
- The terms prohibited her from making and sending copies to the Department. Doing so would be a breach of contract and an infringement of copyright.
- The terms did not give the Department any right to make internal copies.
- If the terms were not enforceable, Ms Marsden’s reproducing and sending copies of the articles to the Department was an infringement of Blacklock’s copyrights.
- On either basis, the copies of the articles received by the Department were infringing copies.
The fair dealing defense
The court easily came to the correct conclusion that when Mr Halley distributed copies of the articles by email, he made reproductions of them and that such acts would infringe copyright if not saved by the fair dealing defense. The court also correctly found that to establish a fair dealing in the circumstances the Department had the burden of establishing that the copying was for the purpose of research and that it was fair. The court found that both prongs of the test were met.
The court’s analysis of the fair dealing issues raises questions about whether all of the fair dealing factors established by the Supreme Court were considered or properly applied. There are good reasons for concluding the court made significant errors rendering the finding of fairness unreasonable as a matter of law.
Was the copying for the purpose of research?
The court gave the following reasons for finding that the distribution of the articles within the Department was for the allowable research purpose.
The evidence establishes that Mr. Halley and Ms. Rubec were directly involved in responding to Mr. Korski…
Mr. Halley and Ms. Rubec therefore had an interest in correcting the record with Blacklock’s.
Mr. Halley’s further limited distribution of the articles to five departmental colleagues for their review also falls squarely within the scope of permitted research. Everyone involved had a legitimate need to be aware in the event that further action was deemed necessary…
In the portions of the reasons dealing with fairness, the court stated the following which also explains the reasons for the copying by the Department.
The Department received the articles unsolicited and used them (i.e., read them) for a legitimate business purpose (i.e., to consider whether the stories required a response or correction)…
The Department had a legitimate interest in reading the articles with a view to holding Blacklock’s to account for its questionable reporting.
The court correctly referred to the leading Supreme Court cases on the meaning of the term “research” in the fair dealing exception, CCH Canadian Ltd v Law Society of Upper Canada, 2004 SCC 13 and (CCH) and SOCAN v Bell Media, 2012 SCC 36 (SOCAN). The court noted that the Supreme Court had stated that the term research “must be given a large and liberal interpretation”; that research does not need to be undertaken for the purpose of the user engaging in its own act of authorship or creativity; and that research is not limited to creative purposes but can be “piecemeal, informal, exploratory, or confirmatory”, and can be undertaken for no purpose except personal interest.
The reasons, however, do not support the conclusion that the copying or all of it was for the purposes of research.
The term “research” is generally understood to involve the study of things. It involves an act of searching or investigating a specified thing or person. In CCH, the Supreme Court concluded that making photocopies for lawyers requesting copies was for the purpose of research because “the purpose of advising clients, giving opinions, arguing cases, preparing briefs and factums is nonetheless research”. In SOCAN, the Supreme Court agreed with the Copyright Board and the Federal Court of Appeal that an online music service that offers a short preview of a sound recording so that consumers can listen to the preview for the purpose of identifying and deciding whether to purchase a download did so for the purpose of research.
The Supreme Court interpretations of the term “research” do not support the proposition that making and sending unsolicited copies of works to others for the purposes of “reading” or to merely be “aware” of them, are research purposes. If merely reading (or listening) to a work or being made aware of it was research, then the Supreme Court would not have needed to engage in the detailed analysis it did to support the findings that the activities in issue in those cases were research. It would have had no reason to conclude that research could be “piecemeal, informal, exploratory, or confirmatory”. In short, the Supreme Court did not read a requirement for “research” out of the term “research”.
To fully make out the fair dealing defense in the circumstances, the Department had to establish that each copy made of each article was for the purpose of research. It may be that Mr Halley and Ms Rubec were engaging in research as they “were directly involved in responding to Mr. Korski…[and] had an interest in correcting the record with Blacklock’s” on behalf of the Department. The reasons do not support the conclusion that the other four individuals for whom copies were made were engaging in any research either alone or for the Department. The copies were being sent to them so that they might read them or could be “aware of them”.
Thus, at the very least, the copying involved in sending and receiving emails to these four individuals raises questions about whether the allowable purpose prong of the fair dealing test was made out.
Was the copying fair?
After finding that the purposes of the copying was for research, the court then addressed whether the copying was fair. The court found it was giving the following as the reasons.
In finding the scope of use of the articles to be fair I have considered the following factors, all of which favour the Defendant’s position:
(a) The articles were legally and appropriately obtained by Ms. Marsden who was a paid subscriber to Blacklock’s. Blacklock’s website was not hacked or accessed by illicit means. In the result, the articles were no longer behind Blacklock’s paywall when the Department obtained them.
(b) Ms. Marsden sent the articles to Mr. Halley for a legitimate business reason (i.e., to protect her business reputation and to manage her working relationship with the Department);
(c) The Department received the articles unsolicited and used them (i.e., read them) for a legitimate business purpose (i.e., to consider whether the stories required a response or correction);
(d) The articles were circulated among only six Department officials all of whom had a reason to see them;
(e) No commercial advantage was sought or obtained by the Department’s use of the articles nor were they republished in any form;
(f) The two articles represented only a small fraction of the protected news copy on Blacklock’s website and one of them was shortly-after publically exposed on Blacklock’s website;
(g) The articles contained information obtained from the Department in response to Mr. Korski’s queries. As a source, the Department had a direct and immediate interest in their content. Indeed, a finding of copyright infringement against a news source for the simple act of reading the resulting copy is likely to have a chilling effect on the ability of the press to gather information. Such a result cannot be in the public interest;
(h) Mr. Halley and Ms. Rubec had a reasonable basis for their concern that the articles misrepresented some of the information they had conveyed to Mr. Korski and that a correction might be warranted. The involvement of their colleagues in a possible follow-up was, in the circumstances, reasonable;
(i) Neither Ms. Marsden nor the Department were aware of, or agreed to, Blacklock’s Terms and Conditions. In any event and as noted below, those provisions did not unambiguously prohibit the circulation of Blacklock’s copy for personal or non-commercial purposes. If Ms. Marsden, as a subscriber, had the right to use and distribute the articles for a non-commercial purpose, those who received the articles lawfully could reasonably expect to enjoy the same privilege;
(j) What occurred here was no more than the simple act of reading by persons with an immediate interest in the material. The act of reading, by itself, is an exercise that will almost always constitute fair dealing even when it is carried out solely for personal enlightenment or entertainment; and
(k) While the public interest is served by the vigilance of the press, copyright should not be a device that serves to protect the press from accountability for its errors and omissions. The Department had a legitimate interest in reading the articles with a view to holding Blacklock’s to account for its questionable reporting.
All of this is not to say that subscribers like Ms. Marsden have unlimited rights of use of copyrighted material. Absent consent, subscribers and downstream users are subject to the obligations imposed on them by the Act. But at the same time they enjoy the considerable protection afforded to them under the statutory fair dealing provisions..
Blacklock’s maintains that this case challenges the viability of its business model including its right to protect news copy behind a subscription-based paywall. The suggestion that Blacklock’s business cannot survive in the face of the minor and discrete use that took place here is essentially an admission that the market places little value on Blacklock’s work-product. All subscription-based news agencies suffer from work-product leakage. But to customers who value easy, timely and unfettered access to news that may not be readily available from other sources, the price of a subscription is worth paying. It also goes without saying that whatever business model Blacklock’s employs it is always subject to the fair dealing rights of third parties. To put it another way, Blacklock’s is not entitled to special treatment because its financial interests may be adversely affected by the fair use of its material. Nothing in these reasons should however be taken as an endorsement of arguably blameworthy conduct in the form of unlawful technological breaches of a paywall, misuse of passwords or the widespread exploitation of copyrighted material to obtain a commercial or business advantage.
CCH and its progeny established a number of non-exclusive factors to assess the fairness of a dealing. The factors are (1) the purpose of the dealing (sometimes also referred to as the “goal of the dealing”); (2) the character of the dealing; (3) the amount of the dealing; (4) alternatives to the dealing; (5) the nature of the work; and (6) the effect of the dealing on the work.
In finding the dealing to be fair, the court placed significant reliance on the purpose or goal of the dealing as being fair. The treatment of this factor is in paragraphs (c), (g), and (h) above. The articles dealt with the Department and there was a reasonable basis for belief that the articles were inaccurate and a correction might be needed.
While this factor is an important one, it must be properly weighed with all the other factors and considerations. The reasons raise questions about whether all of the other fairness factors and considerations were considered, properly analyzed and weighed by the court.
The court recognized that in assessing the fairness of a dealing the manner in which it was accessed or obtained is a relevant consideration. In this regard, the court agreed with Blacklock’s that “the deliberate breach of the accepted terms of access to and use of copyrighted material, whether protected by a paywall or not, is a relevant consideration in applying the fair dealing provisions of the Act”. The court’s finding in this regard is consistent with the earlier decision in Blacklock’s Reporter v Canadian Vintners Association, 2015 CanLII 65885 (ON SCSM) (summarized here) wherein an Ontario court held that a dealing could not be fair if the copy used for the dealing was obtained by circumventing a technological protection measure which protected content behind Blacklock’s paywall.
The court in this case also relied on the facts that the “articles were legally and appropriately obtained by Ms. Marsden who was a paid subscriber to Blacklock’s” and that “Blacklock’s website was not hacked or accessed by illicit means. Thus, the articles “were no longer behind Blacklock’s paywall when the Department obtained them”.
The analysis of the legality of the access in the fairness portion of the reasons, however, was coloured by the court’s findings on the enforceability of the terms, how they should have been interpreted, and the conclusion that if the terms were not binding, Ms. Marsden had the right to copy and distribute the articles to Mr. Halley. For the reasons explained above, however, there are good reasons to doubt that Ms. Marsden had the right to make and send copies of the articles to Mr Halley and the copies of the articles that were received and forwarded were infringing copies, reasonably likely also to have been made and distributed contrary to Blacklock’s terms. Thus, the manner of access should arguably have been a factor weighing against rather than for a finding of fairness.
Blacklock’s infringement claims related to distribution of the articles by Department in October 2013. Prior to distributing the articles there was an exchange of emails between Blacklock’s and Ms Rubec, the Manager of Media Relations for the Department, about obtaining a subscription to Blacklock’s Reporter. The e-mails between Holly Doan of Blacklock’s and Ms Rubec indicate that the Department was informed that Blacklock’s subscription model required payment of fees in return for a license to internally distribute articles within the Department. Blacklock’s terms were also specifically brought to the attention of the Department. It declined to take a subscription, although it did pay for other subscriptions such as for The Hill Times and IPolitics which also have terms limiting digital distribution of articles.
The record shows that prior to making the unauthorized copies Ms Rubec, had several email exchanges with Blacklock’s about potentially subscribing to the service. The e-mails are reproduced in the Appendix. On September 11, 2013, Holly Doan of Blacklock’s wrote to Ms Rubec asking about whether the Department wanted to subscribe and specifically drew to Ms Rubec’s attention Blacklock’s terms stating
Are you still interested in a subscription? Please check Terms and Conditions on our website. Happy to arrange an affordable product for distribution any time.
In a subsequent email the same day, Ms Rubec wrote back to Blacklock’s stating that
Unless a subscription to Blacklock’s allows for the circulation of an article within the Department, we cannot subscribe. If you have such a subscription, please let me know.
As the follow-up emails in the Appendix show, there were further email exchanges in which Blacklock’s provided the Department with its rates which included the right to distribute articles within the Department.
Moreover, although the allegations of infringement relate to copying by the Department of Finance, that department is one of many departments and agencies of the government of Canada and the evidence adduced in the case indicated that other individuals within the government were aware of Blacklock’s terms. In fact, at least three government entities had settled infringement claims made by Blacklock’s before Mr Halley received and then recirculated the two emails.
Thus, if the relevant knowledge was the knowledge of the Department or that of Canada, the finding that the copying was done without knowledge is open to doubt. If true, this would further suggest that the consideration of whether the Department knew or ought to have known that the copies of the articles it received were infringing should have weighed against a finding of fairness.
The character of the dealing factor looks at how the works were dealt with. If a single copy of a work is used for a specific legitimate purpose, then it may be easier to conclude that it is a fair dealing. If multiple copies of the work is widely distributed, this will tend to be unfair.
In finding the dealing to be fair, the court noted that the “articles were circulated among only six Department officials all of whom had a reason to see them”. One might argue that six copies is a small number and would thus justify this factor as weighing towards fairness. However, one might contend that this factor should also have taken into account the number of copies made in support of the allowable research purpose. With this in mind, perhaps only two copies (one for Mr. Halley and one for Ms Rubic) could be justified.
The court also considered that the copying and distribution could be justified on the basis that the Department enjoyed the same privilege as Ms. Marsden under the terms. Yet, the court found the terms to be unenforceable and, as shown above, even if they were, they could not have applied to the Department.
The court also stated that:
What occurred here was no more than the simple act of reading by persons with an immediate interest in the material. The act of reading, by itself, is an exercise that will almost always constitute fair dealing even when it is carried out solely for personal enlightenment or entertainment.
This statement is also problematic. The alleged infringement here was not the act of reading. It was the unauthorized copying of the articles. Further, while copying such as buffer copying for the purposes of reading will often be permitted under an express or implied license or be covered by another exception in the Act, there is no general right to make copies under the fair dealing exception to read materials. The copying is only excused under the fair dealing exception where it is for an allowable purpose and the overall dealing is fair having regard to the six non-exclusive fairness factors.
For these reasons, it is arguable that the character of the dealing factor was not correctly applied or weighed.
The amount of the dealing factor looks at the amount of the dealing and importance of the part of the work allegedly infringed. It looks at the proportion of the excerpt used in relation to the whole work. It may be possible to deal fairly with a whole work where that is shown to be necessary for the dealing, such as where an entire academic article or an entire judicial decision must be copied to support the allowable purpose.
On the facts of case, the entirety of the articles were fully copied in the emails sent around the Department. It appears from the facts, however, that only a portion of each article might actually of been of concern, thus raising the question as to whether the entirety of each article had to be copied. The court did not expressly consider this factor or consider whether there was a need for copying of the entirety of the articles.
The court also stated in the fairness portions of the reasons that the “two articles represented only a small fraction of the protected news copy on Blacklock’s website”. However, the amount of the dealing factor inquiry was not about whether copying a small portion of all of Blacklock’s copyright works was significant. The issue was whether copying the entirety of each article was significant.
Thus, one may reasonably ask whether the “amount of the dealing” factor was assessed or properly assessed as there was no express finding of any need to copy the entirety of each article and the court appeared to assess the amount of the dealing factor by reference to all of Blacklock’s copyrights and not those in issue in the case.
The alternatives to the dealing factor examines if the copying was reasonably necessary to achieve the ultimate purpose and if there was a non-infringing manner of carrying out the dealing. A dealing is less fair if is there is a non-copyrighted equivalent of the work that could have been used instead of the copyrighted work.
The court also did not expressly deal with this factor. Here there were multiple possible alternatives to the dealing one could posit. Mr. Halley, for example, could have summarized the article in an email, quoting only the portions thereof that were of concern. Or, he could have printed one copy and showed it to his co-workers in person or allowed them to view it on his computer screen. Of course, Ms. Marsden could also have printed a copy of the article and shown it to Mr Halley and others avoiding completely putting them in the situation where any unauthorized electronic coping by them would have occurred.
Based on the foregoing, one may reasonably also ask whether the “alternatives to the dealing” factor, had it been assessed, would also have tended towards a finding of unfairness.
The effect of the dealing on the work factor looks at the effect of the dealing on the work and whether the dealing adversely affects or competes with the work or is a substitute for the probable purchase of authorized copies, and the like. If it would the dealing is unlikely to be fair. Although not yet expressly recognized by the Supreme Court, but firmly established in the United States, this factor not only looks at the extent of the market harm caused by the particular actions of the alleged infringer, but also whether widespread conduct of the sort engaged in by the defendant would result in a substantially adverse impact on the potential market. In other words, the central question is not whether a defendant’s use of a plaintiff’s work caused the plaintiff to lose some potential revenue. Rather, it is whether the defendant’s use, taking into account the damage that might occur if everybody did it, would cause substantial economic harm such that allowing it would frustrate the purposes of copyright by materially impairing the incentive to publish the work.
The reasons for decision do address the effect of the dealing on the market factor. However, the reasons that deal with this factor are also problematic.
Blacklock’s business model was the creation and publication of content. Its major customers are government departments and agencies that purchase subscriptions as part of their media monitoring functions. Blacklock’s like other press publishers charge subscription fees for access to publications, which fees often increase where the departments want the right to circulate articles within the departments including by e-mail. As noted above, the Department had considered purchasing a subscription which would have included a right to distribute copies within the Department, but declined to do so. Thus, when Ms. Marsden distributed the articles to Mr Halley and he distributed the articles within the Department, it deprived Blacklock’s of the very subscription fees it would have charged the Department. Thus, the dealing was a substitute for the probable purchase of authorized copies of the articles from Blacklock’s.
Blacklock’s had claimed that if subscribers like The Sugar Institute could purchase subscriptions and circulate copies of articles to government departments which would in turn could circulate them internally that such dealings would undermine its market for subscriptions. The court rejected this assertion stating
The suggestion that Blacklock’s business cannot survive in the face of the minor and discrete use that took place here is essentially an admission that the market places little value on Blacklock’s work-product. All subscription-based news agencies suffer from work-product leakage.
The central issue in the case was not, however, if Blacklock’s business could “survive” unauthorized copying, a threshold for fair dealing no court has ever endorsed. Further, it was not even whether the specific copying in issue would adversely affect its business. It was whether if government departments can avoid paying license fees by shielding their copying from infringements by relying on the fair dealing defense including when they obtain access to articles from other paying subscribers Blacklock’s subscription based business could be adversely affected. In other words, it wasn’t a death by a single cut Blacklock’s was concerned about; it was a death by “a thousand cuts”. This was not a hollow fear of Blacklock’s. It has multiple other cases pending against the government for unauthorized copying and distribution of its content where the fair dealing defense will likely also be raised.
One might well question whether the court properly assessed the effect on the market factor by focusing only on the copying in issue and not on the broader consequences of permitting such copying.
The court also justified the effect of the dealing on the market factor as being fair stating that Blacklock’s “is not entitled to special treatment because its financial interests may be adversely affected by the fair use of its material.” This reasoning, in effect, improperly flips the fairness analysis in a way that would almost always result in this factor being considered as being fair i.e. it presupposes fairness even if there is market harm and assumes that market harm should be tolerated if the dealing is otherwise fair. However, any “work-product leakage” arising from unauthorized copying would be an infringement of Blackock’s copyrights unless the fair dealing defense can be made out. In considering if the dealing is fair, adverse financial interests must be considered.
It is also not true that “whatever business model Blacklock’s employs it is always subject to the fair dealing rights of third parties”. While fair dealing has been characterized as a “user right”, it operates as a defense to copyright infringement and under the current state of the law provides no ‘right” that can be positively asserted against third parties. Thus, if Blacklock’s (or another subscription service’s) terms prohibit copying and distributing works to third parties, those contractual terms can be relied upon to prevent the contracting party from engaging in prohibited conduct that might otherwise have been a fair dealing. But, the court’s statement suggests that third parties who obtain content lawfully downloaded from a subscription service from a subscriber who has contractually agreed not to distribute it are in a better position than the person who illegally copied and electronically transmitted the copy.
The court’s statement that “All subscription-based news agencies suffer from work-product leakage” is also problematic. It may be interpreted as a normative statement that unauthorized copying is not only to be expected but also overlooked, or worse that copyright law should be interpreted to countenance such copying because it happens so often and so copyright law should not provide effective means to combat it. Such an approach to copyright infringement would run counter to the usual application of the rule of law that treats other violation of property rights seriously. For example, while retailers might expect a certain amount of inventory shrinkage due to shoplifting, these transgressions are still considered breaches of the civil and criminal laws and there is a recognition that the ability to enforce these laws has a deterrent effect that is in the public interest. Shoplifters don’t get a “free-pass” from liability because others also steal from retailers. Retailers and other property owners are not expected to forego their rights to pursue thieves and neither should copyright owners be without remedies for unauthorized copying that infringes their rights.
The court’s statement that “All subscription-based news agencies suffer from work-product leakage” also considerably understates the problems facing Canadian press publishers. The challenges faced by the media were recently examined by the Standing Committee on Canadian Heritage. The committee was told that the Canadian media are facing a “crisis” as market forces shrink newsrooms, leaving fewer journalists to report the news vital to a vibrant democracy. According to Torstar chair John Honderich, this puts Canadian democracy at risk. The Canadian Newspaper Association appeared before the committee, arguing the need for updated fair dealing laws that would address widespread digital copying, particularly by large digital platforms such as Google, Facebook, and Twitter.
In the digital age, unauthorized copying and distribution of creative content is a scourge that undermines investment in the creation and dissemination of creative works. A notion that news agencies should not have any remedies against “work-product leakage” runs counter to other jurisprudence of the federal court which has recognized that copyright law provides incentives to create and distribute works which can be undermined by unauthorized digital copying.
Thus, as a matter of policy including the policies behind copyright law, there are good reasons for being concerned about “work-product leakage” and for not interpreting the fair dealing defense in a manner that countenances or encourages it.
Based on the foregoing, there are multiple reasons for questioning the court’s findings regarding the effects of the dealing on the market factor.
In the final analysis, whether something is “fair” is a question of fact and a matter of impression. However, a finding of fairness can be unreasonable if it misapplies or fails to apply the CCH factors. Based on the foregoing there are multiple basis to conclude that the conclusions of the court on the fair dealing defense were unreasonable.
Subsequent to the release of the decision, a Supplementary Judgment and Reasons (2016 FC 1400) were made public. These reasons dealt with the appropriate costs award to be made against Blacklock’s as the losing party. In these reasons the trial judge made this statement about the merits of the case brought by Blacklock’s:
Any reporter with the barest understanding of copyright law could not have reasonably concluded that the Department’s limited use of the subject news articles represented a copyright infringement. Indeed, the fair dealing protection afforded by section 29 of the Copyright Act, RSC, 1985, c C-42, is so obviously applicable to the acknowledged facts of this case that the litigation should never have been commenced let alone carried to trial.
For the reasons given above, I have to respectfully disagree with the trial judge.
It is unfortunate that the decision in the case was not appealed. Nevertheless, the decision should be carefully considered by future courts and should not be uncritically followed or applied.
 Union Steamships Limited v. Barnes,  SCR 842, Schuster v. Blackcomb Skiing Enterprises Ltd. Partnership, 1994 CanLII 2855, Promech Sorting Systems B.V. v. Bronco Rentals & Leasing Ltd., 1995 CanLII 11033 (MB CA) and the cases relied upon therein.
 Specht v. Netscape Communication Corp., 306 F. 3d 17 (2d. Cir. 2002); Schnabel v. Trilegiant Corp., 697 F. 3d 110 (2nd. Cir. 2012). See also, Nguyen v. Barnes and Noble, Inc., 763 F. 3d 1171 (9th.Cir. 2014) suggesting a more stringent standard.
 “While the ticket cases deal with notice of contractual terms, the principles applicable can, in my view, be equally applied to the issue of contract formation in the sense that the formation of a contract requires that a party have knowledge or notice of an offer in order to accept it or reject it.”
 The court also explained the policy rationale supporting the enforcement of web site terms:
The evolution of the Internet as an “open” medium with its ability to hyperlink, being key to its success, does not mean it must function free of traditional contract law. It is simply the manner of contracting that has changed, not the law of contract. The acceptance of click wrap and browse wrap agreements acknowledges the right of parties to control access to, and the use of, their websites.
Just because a party chooses to do business on the Internet should not mean they relinquish their rights to control access to their business assets and information. The defendants’ submission would deny that right to the plaintiff Century 21. In turn, that would decrease their motivation to create and operate their Website.
 Bishop v. Stevens,  2 S.C.R. 467
 CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13
 See, generally, Salah v. Timothy’s Coffees of the World Inc. (2010), 2010 ONCA 673, Sattva Capital Corp. v. Creston Moly Corp.,  2 SCR 633, Consolidated-Bathurst v. Mutual Boiler,  1 SCR 888
 Judge Barnes also gave no explanation for his finding that the distribution to the Department was for a non-commercial purpose. In the fair dealing portion of his decision he found that the distribution of the articles to the Department was “for a legitimate business reason (i.e.,to protect her business reputation and to manage her working relationship with the Department)”. This raises the question as to whether the distribution was for a commercial purpose. The Canadian Sugar Institute is a non-profit association. According to its website it is funded by for profit Canadian producers of sugar (sucrose) from sugar cane and sugar beets. One of its mandates is to pursue fair treatment on international trade policies, agreements, and disputes. The term “commerce” can be construed to be limited to buying and selling or trading or exchange of articles. It might also connote an activity having profit as the primary aim. But, the term “commercial” is a vague term and may capture activities that are more or less commercial even when engaged in by not for profit organizations. See, Pinebrook Gold & Country Club v. Alberta Assessment Appeal Board, 1984 ABCA 194 (CanLII), Order P2007-007, 2008 CanLII 88789 (AB OIPC), Decision P2013-d-01, 2013 CanLII 6291 (AB OIPC), Rodgers v. Calvert, 2004 CanLII 22082 (ON SC).
 Eli Lilly & Co. v. Novopharm Ltd.,  2 SCR 129
 See, M.J.B. Enterprises v. Defence Construction (1951) Ltd.,  1 S.C.R. 619, C.P. Hotels v. Bank of Montreal,  1 S.C.R. 711 , Le Sueur v. Morang & Co. (1910), 20 O.L.R. 594 (C.A.) at 598-599, affirmed (1911), 45 S.C.R. 95, Vestergaard Frandsen A/S v Bestnet Europe Ltd.,  UKSC 31 (22 May 2013)
 Hager v. ECW,  2 F.C. 287 (F.C.T.D), Drolet v. Stiftung Gralsbotschaft, 2009 FC 17, 2009.
 In SOCAN, the court stated the following to support the finding that the previews were offered for a research purpose.
The Board defined “previews” as
a marketing tool offered by online music services, among others. A preview is an excerpt (usually 30 seconds or less) of a sound recording that can be streamed so that consumers are allowed to “preview” the recording to help them decide whether to purchase a (usually permanent) download.
Based on the evidence it heard about the purpose of previews and the way they were used by consumers, the Board concluded that previews were used “either to determine whether the track suits the user’s tastes or to verify that the track is the one the user wants to buy” (para. 101). Listening to previews helped users identify what music to purchase. Since planning the purchase of a download involved “searching [and] investigation”, the Board was of the view that previews amounted to “research” under s. 29 of the Copyright Act (para. 109).
The Federal Court of Appeal endorsed the Board’s view that listening to previews was part of planning the purchase of a download of a musical work and was therefore “for the purpose of research”, concluding:
it would not be unreasonable to give the word “research” its primary and ordinary meaning. The consumer is searching for an object of copyright that he or she desires and is attempting to locate and wishes to ensure its authenticity and quality before obtaining it. . . . “[L]istening to previews assists in this investigation”….
Similarly, in considering whether previews are for the purpose of “research” under the first step of CCH, the Board properly considered them from the perspective of the user or consumer’s purpose. And from that perspective, consumers used the previews for the purpose of conducting research to identify which music to purchase, purchases which trigger dissemination of musical works and compensation for their creators, both of which are outcomes the Act seeks to encourage.
 The summary of the fair dealing factors below, unless otherwise noted, is taken from these Supreme Court of Canada cases: CCH, SOCAN, and Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright),  2 SCR 345.
 See CCH in dealing with the “nature of the work factor” “Although certainly not determinative, if a work has not been published, the dealing may be more fair in that its reproduction with acknowledgement could lead to a wider public dissemination of the work — one of the goals of copyright law. If, however, the work in question was confidential, this may tip the scales towards finding that the dealing was unfair. See Beloff v. Pressdram Ltd.,  1 All E.R. 241 (Ch. D.), at p. 264”; also, Wales Cricket Board Ltd & Anor v Tixdaq Ltd & Anor  EWHC 575 (Ch) (18 March 2016)
In Ashdown Lord Phillips cited with approval at  the following summary of the law in Laddie, Prescott & Vitoria, The Modern Law of Copyright and Designs (3rd edition, 2000) at 20.16:”… The second most important factor is whether the work has already been published or otherwise exposed to the public. If it has not, and especially if the material has been obtained by a breach of confidence or other mean or underhand dealing, the courts will be reluctant to say this is fair. However this is by no means conclusive, for sometimes it is necessary for the purposes of legitimate public controversy to make use of ‘leaked’ information.
 “If Ms. Marsden, as a subscriber, had the right to use and distribute the articles for a non-commercial purpose, those who received the articles lawfully could reasonably expect to enjoy the same privilege;”
 See paras. 9 and 10 of the reasons.
 See also, Wales Cricket Board Ltd & Anor v Tixdaq Ltd & Anor  EWHC 575 (Ch) (18 March 2016) in quoting from the Ashdown v Telegraph Group Ltd  EWCA Civ 1142 case, the court described this factor as being
whether the alleged fair dealing is in fact commercially competing with the proprietor’s exploitation of the copyright work, a substitute for the probable purchase of authorised copies, and the like. If it is, the fair dealing defence will almost certainly fail. If it is not and there is a moderate taking and there are no special adverse factors, the defence is likely to succeed, especially if the defendant’s additional purpose is to right a wrong, to ventilate an honest grievance, to engage in political controversy, and so on.
 Harper & Row Publishers v. Nation Enters., 471 U.S. 739 (1985), Cambridge University Press v. Patton, 769 F.3d 1232 (11th Cir., 2014).
 See, 1395804 Ontario Ltd. (Blacklock’s Reporter) v. Canada (Attorney General), 2016 FC 719
 “Canadian media ‘crisis’ puts democracy at risk, says Torstar chair John Honderich”, Sept 29, 2016 thestar.com
 See, Heritage Committee, May 31, 2016 Bob Cox, Publisher, Winnipeg Free Press John Hinds, CEO, Newspapers Canada http://newspaperscanada.ca/wp-content/uploads/2016/06/Op-Ed-Newspapers-Canada-Canadian-Heritage-Presentation-May-2016.pdf
 See, BMG Canada Inc. v. Doe, 2005 FCA 193
Copyright law provides incentives for innovators – artists, musicians, inventors, writers, performers and marketers – to create. It is designed to ensure that ideas are expressed and developed instead of remaining dormant. Individuals need to be encouraged to develop their own talents and personal expression of artistic ideas, including music. If they are robbed of the fruits of their efforts, their incentive to express their ideas in tangible form is diminished.
Modern technology such as the Internet has provided extraordinary benefits for society, which include faster and more efficient means of communication to wider audiences. This technology must not be allowed to obliterate those personal property rights which society has deemed important. Although privacy concerns must also be considered, it seems to me that they must yield to public concerns for the protection of intellectual property rights in situations where infringement threatens to erode those rights.
 See Access Copyright, “This Court in CCH stated that whether something is “fair” is a question of fact and “a matter of impression” (para. 52, citing Hubbard v. Vosper,  1 All E.R. 1023 (C.A.), at p. 1027). As a result, the Board’s decision as to whether the photocopies amount to fair dealing is to be reviewed, as it was by the Federal Court of Appeal, on a reasonableness standard. Because the Board’s finding of unfairness was based on what was, in my respectful view, a misapplication of the CCH factors, its outcome was rendered unreasonable.”
Appendix A –Copies of e-mails between Blacklock’s and The Department