ISP are often ordered to disclose subscriber information to copyright holders seeking to vindicate their rights. Prior to the Copyright Modernization Act, ISPs were entitled to be paid reasonable compensation for compiling and disclosing the information. In an important ruling yesterday in Voltage Pictures, LLC v Joe Doe #1 2017 FCA 97, the Federal Court of Appeal ruled that the notice and notice regime established under the CMA changed the law. According to the Court, ISPs are now expected to retain and verify subscriber information without payment of any fees. They may only charge their costs for disclosing this information, costs that the Court stated were likely to be negligible.
The Court began its reasons by summarizing the purposes of the 2012 notice and notice regime contained in the CMA stating the following:
The legislative regime is designed to reduce the complications and answer many of the questions that can arise when a Norwich order is sought. In this way, it makes the process more administrative in nature, more predictable, simpler and faster, to the benefit of all involved—but most of all to copyright owners who need to protect and vindicate their rights.
As we shall see, the legislative regime protects and vindicates the rights of copyright owners in other ways, such as by putting suspected infringers on notice so that they may cease any further infringing conduct.
The protection and vindication of the rights of copyright owners is no small thing. That is a central feature of the Copyright Act. It is also a central feature of the Copyright Modernization Act, the statute that added the legislative regime to the Copyright Act. These statutes don’t just identify the purpose of protecting and vindicating the rights of copyright owners; they also tell us why this purpose matters.
The preamble to the Copyright Modernization Act tells us, among other things, that it is to “update the rights and protections of copyright owners” and to “enhanc[e] the protection of copyright works or other subject-matter” in order to promote “culture and innovation, competition and investment in the Canadian economy.” Economic growth creates wealth and employment. The Copyright Modernization Act is needed because of “advancements in…information and communications technologies that…present…challenges that are global in scope.” Further, “the challenges and opportunities of the Internet” need to be addressed. The preamble to the Copyright Modernization Act also reminds us that the Copyright Act is “an important marketplace framework law and cultural policy instrument that, through clear, predictable and fair rules, supports creativity and innovation and affects many sectors of the knowledge economy.”
The Copyright Act itself aims at “a balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator”: Théberge v. Galerie d’Art du Petit Champlain Inc., 2002 SCC 34, 2 S.C.R. 336 at para. 30. Or as the Supreme Court also put it, “to prevent someone other than the creator from appropriating whatever benefits may be generated”: ibid.; see also CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13, 1 S.C.R. 339 at para. 23.
The overall aim, then, is to ensure that in the age of the internet, the balance between legitimate access to works and a just reward for creators is maintained. The internet must not become a collection of safe houses from which pirates, with impunity, can pilfer the products of others’ dedication, creativity and industry. Allow that, and the incentive to create works would decline or the price for proper users to access works would increase, or both. Parliament’s objectives would crumble. All the laudable aims of the Copyright Act—protecting creators’ and makers’ rights, fostering the fair dissemination of ideas and legitimate access to those ideas, promoting learning, advancing culture, encouraging innovation, competitiveness and investment, and enhancing the economy, wealth and employment—would be nullified.
Thus, to the extent it can, the legislative regime must be interpreted to allow copyright owners to protect and vindicate their rights as quickly, easily and efficiently as possible while ensuring fair treatment of all.
The Court then embarked on analysis of Section 41.26 of the Act. It concluded that ISPs (and other service providers to which the provisions apply such as hosting providers and search engines)
must maintain records in a manner and form that allows it to identify suspected infringers, to locate the relevant records, to identify the suspected infringers, to verify the identification work it has done (if necessary), to send the notices to the suspected infringers and the copyright owner, to translate the records (if necessary) into a manner and form that allows them both to be disclosed promptly and to be used by copyright owners and later the courts to determine the identity of the suspected infringers, and, finally, to keep the records ready for prompt disclosure.
The Court concluded that since the Act requires ISPs to perform these activities, ISPs are not entitled to be compensated therefore when ordered to provide subscriber information pursuant to equitable bills of discovery, also known as Norwich orders. However, as the Court noted, the legislative regime contemplates that regulations could be established setting out maximum fees for such activities. However, no regulations were promulgated following a consultation on the issue.
The Court also found that the Act did not regulate proceedings for disclosure of subscriber information including compensation for costs associated with the disclosure process. Thus, ISPs are entitled to be reimbursed for such costs, costs which the Court suggested would likely be negligible.
The internet service provider can charge a fee for the actual, reasonable and necessary costs associated with the act of disclosure. The act of disclosure does not fall within subsection 41.26(1) and, thus, is not subject to the “no regulation and, thus, no fee” default rule in subsection 41.26(2).
What do we mean by the act of disclosure? It will be recalled that after the internet service provider has performed its subsection 41.26(1) activities, it is holding records that are in a manner and form that allows them to be used by copyright owners and courts to determine the identity of suspected infringers and in a manner and form that allows prompt disclosure. All that is left is the delivery or electronic transmission of these records by the internet service provider to the copyright owner and the internet service provider’s participation in the obtaining of a disclosure order from the Court.
The actual, reasonable and necessary costs of delivery or electronic transmission of the records by the internet service provider are likely to be negligible.
Similarly, the costs associated with a motion for a disclosure order are likely to be minimal. A single disclosure order can authorize the release of the identifying information of many suspected infringers, perhaps even thousands. Except in extraordinary cases, the motion for a disclosure order would proceed as a Rule 369 motion in writing on consent or unopposed, with standard material and a standard draft order placed before the Court. That standard draft order could include a standard amount, likely nominal, to compensate the internet service provider for its disclosure activities, and nothing else.