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Public Version t.22a - So Can Appellants Factum (Fair Dealing)-Ott_law-2714605-V27

Public Version t.22a - So Can Appellants Factum (Fair Dealing)-Ott_law-2714605-V27

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Court File No.

: 33800 IN THE SUPREME COURT OF CANADA (ON APPEAL FROM THE FEDERAL COURT OF APPEAL) BETWEEN: SOCIETY OF COMPOSERS, AUTHORS AND MUSIC PUBLISHERS OF CANADA Appellant (Applicant on Judicial Review) - and BELL CANADA, THE CANADIAN RECORDING INDUSTRY ASSOCIATION, APPLE CANADA INC., ROGERS COMMUNICATIONS INC., ROGERS WIRELESS PARTNERSHIP, SHAW CABLESYSTEMS G.P., TELUS COMMUNICATIONS INC., ENTERTAINMENT SOFTWARE ASSOCIATION, ENTERTAINMENT SOFTWARE ASSOCIATION OF CANADA and CMRRA/SODRAC INC. Respondents (Respondents on Judicial Review) APPELLANT’S FACTUM [REDACTED VERSION] Martin W. Mason (613) 786-0159 Gilles M. Daigle (613) 786-0217 D. Lynne Watt (613) 786-8695 Matthew S. Estabrooks (613) 786-0211 Gowling Lafleur Henderson LLP Barristers and Solicitors 160 Elgin Street, Suite 2600 Ottawa, ON K1P 1C3 Tel: (613) 233-1781 Fax: (613) 563-9869 Counsel for the Appellant

ORIGINAL TO: THE REGISTRAR COPY TO: Gerald (Jay) L. Kerr-Wilson Anne Ko Fasken Martineau LLP 55 Metcalfe Street Suite 1300 Ottawa, ON K1P 6L5 Tel: (613) 236-3882 Fax: (613) 230-6423 Counsel for the Respondents Bell Canada, Rogers Communications Inc., Rogers Wireless Partnership, Shaw Cablesystems G.P., and Telus Communications Inc. AND TO: J. Thomas Curry Marguerite Ethier Lenczner Slaght Royce Smith Griffin LLP 130 Adelaide Street, West Suite 2600 Toronto, ON M5A 3P5 Tel: (416) 865-3096 Fax: (416) 865-9010 Counsel for the Respondent CRIA AND TO: Michael Koch Dina Graser Goodmans LLP Suite 2400 250 Yonge Street Toronto, ON M5B 2M6 Tel: (416) 597-5156 Fax: (416) 979-1234 Counsel for the Respondent Apple Canada Inc. Colin Baxter Cavanagh Williams Conway Baxter LLP 1111 Prince of Wales Drive Suite 400 Ottawa, ON K2C 3T2 Tel: (613) 569-8558 Fax: (613) 569-8668 Agent for the Respondent CRIA Dougald E. Brown Nelligan O'Brien Payne LLP Suite 1500 50 O'Connor Street Ottawa, ON K1P 6L2 Tel: (613) 231-8210 Fax: (613) 788-3661 Agent for the Respondent Apple Canada Inc.

AND TO:

Casey M. Chisick Tim Pinos Cassels Brock & Blackwell LLP 1200 Scotia Plaza 40 King Street, West Toronto, ON M5H 3C2 Tel: (416) 869-5784 Fax: (416) 644-9326 Counsel for the Respondent CMRRA-SODRAC Inc.

Eugene Meehan Q.C. McMillan LLP 50 O’Connor Street Suite 300 Ottawa, ON K1P 6L2 Tel: (613) 232-7171 Fax: (613) 231-3191 Agent for the Respondent CMRRA-SODRAC Inc.

AND TO:

Hafeez Rupani Borden Ladner Gervais LLP World Exchange Plaza 100 Queen Street, Suite 1100 Ottawa, Ontario K1P 1J9 Tel: (613) 369-4753 Fax: (613) 230-8842 Counsel for the Respondent ESA/ESAC

-iTABLE OF CONTENTS PART I – FACTS..................................................................................................1 A. B. C. Overview ........................................................................................1 SOCAN...........................................................................................2 Online Music Services ....................................................................4 i. ii. D. E. Generally .............................................................................4 Apple’s iTunes .....................................................................4

Previews.........................................................................................5 Copyright Board .............................................................................7 i. ii. Generally .............................................................................7 Tariff 22.A Decision .............................................................7

F.

Federal Court of Appeal .................................................................9

PART II – ISSUES .............................................................................................11 PART III – ARGUMENT.....................................................................................11 A. General.........................................................................................11 i. ii. B. The collective administration of copyright ..........................12 The Board arrived at its decision on fair dealing without hearing from the parties.........................................13

Issue 1: The Online Music Services’ use of previews does not satisfy the first step in the test for fair dealing under section 29 of the Act .....................................................................14 i. ii. iii. iv. v. Definition of the term, “research” .......................................15 The Federal Court of Appeal adopted a definition for “research” without considering the legislative purpose ......17 The purpose of the fair dealing provision is to foster the creative process...........................................................17 The purposes enumerated in sections 29 to 29.2 are purposes which promote the public interest.......................20 The definition of “research” applied by the Federal Court of Appeal is inconsistent with this Court's decision in CCH .................................................................21 Parallels to US jurisprudence.............................................22 The interpretation of the term “research” adopted by the Federal Court of Appeal is inconsistent with the way that term is used elsewhere in the Act........................24

vi. vii.

-iiviii. The definition of “research” applied by the Federal Court of Appeal is inconsistent with the purposes of the fair dealing provision and the Act in general ................26

C.

Issue 2: The manner in which the Online Music Services deal with SOCAN’s copyright musical works is not fair.................27 i. The purpose of the dealing: The purpose of the Online Music Services’ use of previews is entirely commercial ........................................................................28 The character of the dealing: The Online Music Services are widely distributing substantial parts of the musical works ..............................................................28 The amount of the dealing: The amount of the dealing is unfair ..............................................................................29 a. In this case, the amount of the dealing should be an important factor in determining if the dealing is fair...........................................................29 The amount of the dealing ought to be considered in the aggregate....................................30

ii.

iii.

b. iv.

Alternatives to the dealing: In this case, alternatives to the dealing exist which achieve the purposes of the Online Music Services without infringing the Appellant’s copyright..........................................................34 The nature of the works: The musical works are published and their use is subject to the collective administration of copyright regime .....................................35 The effect of the dealing on the work: There is no evidence in the record to support the Board’s conclusion that the Online Music Services’ dealing has no negative effect on the Appellant’s works ................36

v.

vi.

D.

The Online Music Services ought to compensate SOCAN for this infringing use..........................................................................38

PART IV – SUBMISSIONS ON COSTS ............................................................38 PART V – ORDER SOUGHT.............................................................................38 PART VI – TABLE OF AUTHORITIES...............................................................40 PART VII – STATUTES RELIED ON .................................................................43

-1PART I – FACTS A. 1. Overview The Appellant controls and administers the Canadian communication rights in the world repertoire of copyright-protected music. The Appellant does so in accordance with a collective licensing regime that is mandated by the Canadian Copyright Act. This statutory regime guarantees music users the right to access and use the Appellant’s musical works, while ensuring that the authors, composers and publishers of music from Canada and around the world are fairly compensated when their works are used in Canada, pursuant to royalty tariffs approved by the Copyright Board. 2. The decisions below have denied the Appellant and its members the right to be compensated for an important use of their musical works by online music retailers. The Copyright Board held that online music retailers are not required to pay royalties to the Appellant for their use of previews of musical works because that use constitutes “fair dealing” for the purpose of “research” within the meaning of section 29 of the Copyright Act. 3. The Appellant submits that using previews in support of a purely commercial retail operation cannot be considered “research” as contemplated by the Copyright Act. In fact, neither the online music retailers nor their customers are engaged in any type of research. The online music retailers use music previews as free samples, which they provide to their customers without consent and at the Appellant’s expense, while their customers are merely shopping. 4. The Appellant submits that the interpretation of the term “research” adopted by the Copyright Board constitutes an unwarranted expansion of that term’s meaning, which denies the Appellant and its members fair compensation for the use of their musical works. The Copyright Board’s interpretation is inconsistent with the purposes of the Copyright Act and

-2brings about a result that was not intended by Parliament. 5. This Court has repeatedly held that the overarching purposes of the Copyright Act are twofold: promoting the public interest in the encouragement and dissemination of artistic and intellectual works, and justly rewarding the creator of the work. The fair dealing exception is intended to foster activities that further the purposes of the Copyright Act. Neither communicating nor listening to music previews furthers the purposes of the Copyright Act. These activities cannot be considered research because they do not promote the public interest in the encouragement and dissemination of artistic and intellectual works.
Robertson v Thomson Corp, 2006 SCC 43, [2006] 2 SCR 363 at para 69.

6.

In the alternative, the Appellant submits that the manner in which online music retailers deal with the Appellant’s musical works is unfair. The Appellant submits that both the Copyright Board and the Federal Court of Appeal erred in the application of the test for fairness as set out by this Court in CCH Canadian Ltd. v Law Society of Upper Canada.

B. 7.

SOCAN The Appellant, Society of Composers, Authors and Music Publishers of Canada (SOCAN), is a “collective society” as defined in section 2 of the Copyright Act (the Act). The Act provides for the collective administration of copyrights. SOCAN was formed to administer the rights to perform musical works in public and to communicate musical works to the public by telecommunication.
Copyright Act, RSC 1985, c C-42, ss 2, 3(1) and 3(1)(f).

8.

A collective society is an organization that controls and administers the rights of multiple copyright owners. Collective administration of copyright is widespread in Canada, particularly for music performance rights, reprography rights and other mechanical reproduction rights. Some

-3collective societies are affiliated with foreign societies, which allows them to administer the works of foreign copyright owners in Canada, as well as domestic works. 9. SOCAN is affiliated with dozens of similar foreign performing rights societies. As a result of reciprocal agreements between SOCAN and these foreign affiliates, SOCAN controls and administers in Canada the performing and communication rights in all or virtually all musical works in the world repertoire of copyright music.
Copyright Board of Canada, “Statement of Royalties to be Collected for the Performance in Canada of Dramatico-Musical or Musical Works in 1991”, decision dated July 31, 1991, File No 1990-4 at 286-287.

10.

Many collective societies grant licences for the use of their members' works and set the conditions for that use without resorting to the Copyright Board (the Board)’s tariff approval process. That is not the case for SOCAN. The Act requires SOCAN to file proposed tariffs for the Board’s approval and certification in the Canada Gazette, in the form of statements of royalties called “tariffs”. A music user who pays the fees and meets the other conditions set out in a certified tariff has the statutory right to use SOCAN’s musical works in accordance with the terms of that tariff.
Copyright Act, RSC 1985, c C-42, ss 67-68.2.

11.

The issues involved in this appeal arise out of proceedings before the Board for the certification of a SOCAN tariff targeting the use of music on the Internet. The tariff in issue is known as SOCAN Tariff 22.A. It applies to the communication of musical works to the public by online music services that sell and communicate recordings of musical works to consumers through the Internet.

12.

In certifying a tariff, the Board hears submissions from both the collective society proposing the tariff and any affected copyright users who choose to object to its approval. In the case of Tariff 22.A, the objectors consisted

-4of music users who operate businesses that sell music to the public through the Internet or other similar means of telecommunication. C. i. 13. Online Music Services Generally The Respondents, Bell Canada, Rogers Communications Inc., Rogers Wireless Partnership, Shaw Cablesystems G.P., Telus Communications Inc. and Apple Canada, Inc. (the Online Music Services or Services) operate services that sell musical works to the public through the Internet. 14. Although their respective operations and designs may differ somewhat, the Online Music Services share many key features, including an interactive interface that allows consumers to identify musical works by title, album, genre and artist. Each Service also provides consumers with the ability to listen to previews of musical works, whether or not they decide to make a purchase.
Evidence of David Basskin before Copyright Board of Canada hearing in CMRRA/SODRAC Inc Reproduction of Musical Works (CSI - Online Music Services), Exhibit SOCAN-10 at 136-204, Appellant's Record at 157-174. Witness Statement of Eddy Cue before Copyright Board of Canada hearing in CMRRA/SODRAC Inc Reproduction of Musical Works (CSI - Online Music Services), Exhibit Coalition-11C at paras 5-14, Appellant's Record at 213216. Coalition Statement of Case, Exhibit Coalition-1 at paras 17-27, Appellant's Record at 182-184. Evidence of Alastair Mitchell, April 30, 2007, Transcripts Vol 9 at 1928-1938, Appellant's Record at 113-115.

15.

The music catalogue of each Service is unique, but because SOCAN administers the performing rights in virtually the entire world repertoire of music, all or virtually all of the millions of musical works in the respective catalogues of the Services are administered by SOCAN.
Decision of the Copyright Board, dated October 18, 2007 [Board Decision] at para 20, Appellant's Record at 14.

-5ii. 16. Apple’s iTunes Much of the focus before the Copyright Board and the Federal Court of Appeal was on the iTunes service offered by the Respondent, Apple Canada, Inc. and its U.S. parent company, Apple, Inc. This focus was due to the fact that iTunes is the dominant player in Canada and the world, and its witness, Apple Vice-President Eddy Cue, presented a substantial amount of evidence in the proceedings before the Board. However, the issues raised on this appeal apply equally to all of the Online Music Services.
Evidence of Eddy Cue, May 1, 2007, Transcripts, Vol 10 at 1973-2041, Appellant's Record at 120-137.

D. 17.

Previews Tariff 22, as filed by SOCAN over the years 1996-2006, targeted various uses of music on the Internet, including the Online Music Services’ sale and communication of musical works to consumers online. At the hearing before the Board, SOCAN proposed that the tariff item applicable to online music services provide for different levels of compensation based on whether the retailer offered previews as part of its service.

18.

Previews are a feature common to all of the Respondent Online Music Services. All of the Respondents' online music stores allow consumers to listen by way of a preview to an excerpt of a musical work. The Board defined previews as follows:
[18] Previews are 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. Board Decision at paras 18, 101, Appellant's Record at 14, 38. Evidence of David Basskin before Copyright Board of Canada hearing in CMRRA/SODRAC Inc Reproduction of Musical Works (CSI - Online Music Services), Exhibit SOCAN-10 at 200, Appellant's Record at 173.

-619. The term “stream” in the passage quoted above refers to the ability of the Online Music Services to communicate a temporary copy of a musical work to a consumer in such a way that the consumer’s local computer does not store a permanent copy of the work. Streaming can be contrasted with downloading, a communication process that results in the creation of a permanent copy of a musical work on the consumer’s local computer. 20. With the iTunes service, each preview consists of a 30-second segment of a song. Every song in the iTunes catalogue can be previewed and a consumer can listen to previews of as many songs as she likes as many times as she likes. Any visitor to the iTunes store can listen to previews, regardless of whether she makes a purchase or has registered with the service.
Evidence of Eddy Cue, September 18, 2006, Transcript at Copyright Board of Canada hearing in CMRRA/SODRAC Inc Reproduction of Musical Works (CSI - Online Music Services), Volume 9, Exhibit Coalition-11C at 1722-1724, 1733, 1741-1743, Appellant's Record at 230-231, 233, 235.

21.

The evidence presented to the Board by Apple witness Eddie Cue was that, on average, ten previews are communicated for each download of a musical work sold.
Board Decision at para 101, Appellant's Record at 38.

22.

During the year 2005, iTunes alone sold over CONFIDENTIAL downloads in Canada. Based on Mr. Cue's evidence, these iTunes downloads represented over CONFIDENTIAL previews or as many as CONFIDENTIAL hours of SOCAN music used during the year 2005 for a single online music retailer. Considering the growth of the online music market in recent years, the number of previews communicated annually since 2005 would have increased dramatically. Given the decisions below, this extensive use of SOCAN’s copyright music remains uncompensated.
iTunes Music Store Business P&L, Exhibit C to Apple’s Responses to

-7Interrogatories, Exhibit SOCAN-17, Volume 3.6, Appellant's Record at 175176 (filed separately in a sealed envelope).

E. i. 23.

Copyright Board Generally The Board is an administrative tribunal created by the Act whose mandate is set out in sections 66 to 66.91. Along with other duties, the Board is tasked with the oversight of the system set out in the Act for the collective administration of copyright, which includes the consideration and approval of royalty tariffs proposed by collective societies, including the Appellant.

24.

The Board conducted the hearing of SOCAN Tariff 22 for the years 19962006 in two “phases.” The first phase dealt with broad legal issues regarding copyright and the use of music on the Internet. Several aspects of this “Phase 1” decision of the Board were appealed to this Court.
Society of Composers, Authors and Music Publishers of Canada v Canadian Assn of Internet Providers, 2004 SCC 45 [2004], 2 SCR 427.

25.

This appeal arises out of the second phase of the Tariff 22 hearing before the Board, which dealt with tariff valuation issues, that is, the quantum of royalties to be approved for various Tariff 22 uses. That “Phase 2” hearing took place in early 2007.

ii. 26.

Tariff 22.A Decision In its 2007 decision, the Board approved Tariff 22.A for the sale and communication of full-length musical works by the Online Music Services. However, the Board refused to approve a tariff component for their communication of music previews because, in the Board’s view, that activity was covered by the fair dealing exception to copyright infringement in section 29 of the Act and, consequently, no tariff was certifiable for that use.

27.

Although SOCAN’s proposed tariff expressly sought to assign a value to online music previews, at no time did any of the parties raise before the

-8Board the issue of whether the fair dealing exception might apply to such previews. The Board raised and dealt with the issue on its own initiative, without notice to or input from the parties, when it rendered its Phase 2 decision.
SOCAN Statement of Case, Exhibit SOCAN-1 at 8, Appellant's Record at 145. Society of Composers, Authors and Music Publishers of Canada v Bell Canada, 2010 FCA 123 [Court of Appeal Decision] at para 10, Appellant's Record at 80.

28.

In coming to its conclusion that the Online Music Services’ use of previews constituted fair dealing, the Board relied on the decision of this Court in CCH v. Law Society of Upper Canada (CCH). The Board purported to adopt and to apply the guidance of this Court stipulating that the word “research” be given a large and liberal interpretation.
Board Decision at para 104, Appellant's Record at 39-40.

29.

The Board determined that the use of previews by the Online Music Services constituted a dealing with a musical work for the purpose of research. The Board focussed on the Services’ customers, i.e., the recipients of the communications of the previews, and concluded that their online requests for music previews constitute research within the meaning of section 29:
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. Board Decision at para 109, Appellant's Record at 42.

30.

The above paragraph represents the totality of the Board’s analysis of whether the communication of music previews constitutes “research”

-9within the meaning of section 29 of the Act. 31. At paragraphs 110 to 115 of its decision, the Board reviewed the six factors identified by this Court in CCH to determine whether the dealing was, in fact, fair: the purpose, character and amount of the dealing; alternatives to the dealing; the nature of the work and the effect of the dealing on the work.
Board Decision at paras 110-115, Appellant's Record at 42-43.

32.

The Board held that, according to its review of the six factors, the practices and policies of the Online Music Services with respect to offering 30-second previews of musical works were "research-based and fair."
Board Decision at para 116, Appellant's Record at 44.

33.

In particular, the Board considered the third factor, the amount of the dealing, on an individual preview basis and examined the communication of a single 30-second music preview to a single consumer, rather than in the aggregate. As noted in above paragraph 22, iTunes alone communicated, in the aggregate, over CONFIDENTIAL music previews to Canadian consumers, representing CONFIDENTIAL hours of SOCAN music use in 2005 alone. However, on an individual preview basis, the Board concluded that 30 seconds was a fair amount of the work to use:
The third is the amount of the dealing. Streaming a preview to listen to it once is a dealing of a modest amount, when compared to purchasing the whole work for repeated listening. Helping the user to decide his course of action with respect to a purchase of the whole file is presumptively fair. Board Decision at para 113, Appellant's Record at 43.

F. 34.

Federal Court of Appeal SOCAN sought judicial review of the Board’s decision that the Online Music Services’ use of previews constituted “fair dealing for the purpose of research” within the meaning of section 29 of the Act.

35.

The Court of Appeal considered it surprising that, on such an important

-10issue, the Board would come to a decision about the interpretation of the fair use exception and its field of application without the benefit of discussion with the affected parties.
Court of Appeal Decision at para 11, Appellant's Record at 80-81.

36.

However, the Court of Appeal agreed with the Board that the term “research” in section 29 of the Act ought to be defined as, “the action or an instance of searching carefully for a specified thing or person.” The Court of Appeal held that this definition was broad enough to include the situation where a “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.” The Court of Appeal held that the purpose of previews was to assist the consumer in seeking and finding a desired musical work.
Court of Appeal Decision at paras 20, 22, Appellant's Record at 83, 84.

37.

The Court of Appeal went on to consider the Board’s conclusion on whether the amount of the dealing involved in the Online Music Services’ use of previews was fair. SOCAN urged the Court of Appeal to measure the fairness of the dealing by assessing the usage data on the aggregate number of previews communicated and the resulting number of hours of uncompensated music, as set out above.

38.

While the Court of Appeal stated that it found the usage data “surprising”, it did not elaborate further on that particular finding. Instead, it concluded that it was unable to evaluate the appropriateness of SOCAN’s proposed approach to measuring the extent of preview use, and that the yardstick proposed by SOCAN raised its own set of questions, including whether it makes the third factor (the amount of the dealing) the determinative factor in an assessment of fairness.
Court of Appeal Decision at paras 28-30, Appellant's Record at 86.

-11PART II – ISSUES 39. Whether the communication of previews of musical works by Online Music Services constitutes fair dealing for the purpose of “research” within the meaning of section 29 of the Copyright Act. The Appellant submits that it does not. 40. In the alternative, if the communication of music previews falls within the meaning of “research”, whether the Online Music Services’ dealing with the Appellant’s musical works for that purpose is “fair”. The Appellant submits that it is not. PART III – ARGUMENT A. 41. General The main issue in this appeal is essentially one of statutory interpretation. The Appellant submits that the Board and the Court of Appeal below erred by simply choosing one possible dictionary definition for the term “research” without fully considering the statutory context surrounding the term. 42. The correct interpretation of the term “research” must recognize the objectives of Canada’s copyright scheme, the purposes of the Act and the intention of Parliament in drafting section 29. Both the Board and the Court of Appeal failed to undertake this purposive analysis. 43. In the alternative, if this Court agrees that the communication of music previews by Online Music Services properly falls within the meaning of “research”, the Appellant submits that, based on the applicable criteria established by this Court, the Services’ dealing with the Appellant’s musical works is not “fair” in the circumstances at hand. 44. In order to properly interpret the Act and its administration, particularly as it relates to the collective administration of copyright and proceedings before the Copyright Board, it is necessary to discuss the tariff certification

-12process. i. 45. The collective administration of copyright Several creative industries rely on the collective administration of copyright to minimize the transaction costs of widespread dissemination of creative works. Instead of each potential user of copyright content having to negotiate a licence with each individual rights-holder, groups of rightsholders form collective societies that centralize the licensing process. 46. The Act expressly provides for the creation and administration of these collective societies and establishes procedures for setting their respective tariffs in sections 67 to 76. Upon approval by the Board, these tariffs set the royalties that collective societies can charge for the use of their works.
Copyright Act, RSC 1985, c C-42, ss 67-76.

47.

The role of the Board is to establish values for the various uses of copyright works in the repertoire of a collective society and certify a tariff that reflects these values and related terms and conditions. Essentially, satisfaction of the tariff requirements allows a user to do what would otherwise be an infringement of the copyright in the works administered by a collective society, such as the Appellant.

48.

In some cases, as a preliminary matter, the Board adjudicates on whether a particular use would constitute an infringement of copyright before approving a tariff for that use. At this stage, the Board is not concerned with the value of the use, but simply whether the use in question can be the subject of a tariff at all.

49.

The question raised in this appeal is whether the Online Music Services’ marketing practice of communicating 30-second previews of musical works over the Internet without consent constitutes infringement of the Appellant’s copyright. The amount of any royalties to be paid for the use of such previews is irrelevant to the issues raised by this appeal.

-1350. Section 3(1)(f) of the Act grants to the copyright-holder the exclusive right to “communicate the work to the public by telecommunication.” The Federal Court of Appeal has established that 30-second music previews constitute a substantial part of a musical work and that the Internet communication thereof to consumers constitutes a communication to the public by telecommunication within the meaning of section 3(1)(f).
Decision of the Copyright Board, dated August 18, 2006 at paras 37-46, aff'd Canadian Wireless Telecommunications Assn v Society of Composers, Authors and Music Publishers of Canada, 2008 FCA 6. Bell Canada v Society of Composers, Authors and Music Publishers of Canada, 2010 FCA 220 at paras 37, 63.

51.

The Respondents in this appeal do not dispute that the Internet communication of previews of musical works constitutes a communication of a substantial part of a copyright-protected work to the public by telecommunication.

52.

Unless a statutory exemption applies, this use of SOCAN’s musical works requires a licence and a tariff for this use ought to have been certified by the Board.

ii. 53.

The Board arrived at its decision on fair dealing without hearing from the parties Previews perform essentially the same function in the online retail context as free samples do in the traditional, physical retail context. In the physical retail context, a supplier may chose to negotiate an agreement with a retailer for the provision of free samples in order to attract customers. Both the retailer and the supplier must agree on the terms of this promotion, including which party will bear the cost of the free samples. In the absence of an agreement, the retailer would have to use stock purchased from the supplier as the source of the samples and bear the cost of free distribution to consumers himself.

54.

In the context of the collective administration of copyright, the parties do

-14not bargain directly; they participate in a hearing before the Board and the Board certifies a tariff that is often intended to approximate the outcome of a notional bargaining process. The parties to a hearing rely on the Board to take all points of view into consideration and to reach conclusions based on evidence and argument presented by the parties. 55. The Board short-circuited this process at the hearing between the Appellant and the Online Music Services by coming to a conclusion that was not advocated by either party. Neither the Appellant nor the Online Music Services advanced (or were given the opportunity to advance) evidence and arguments as to whether music previews could be considered fair dealing for the purpose of research under the Act. By proceeding in this way, the Board ruled on a question of law that has significant consequences for the Appellant and the Respondents as well as other creators and users of online copyright content without any input from those creators and users.
Court of Appeal decision at para 11, Appellant's Record at 80-81.

56.

The Board removed the subject of free samples from the “bargaining table” and interpreted the Act in such a way that requires the Appellant to bear the cost of the Services’ decision to distribute free samples, without hearing the Appellant’s position on the issue. The Appellant submits that Parliament did not intend the Act to have this effect.

B. 57.

Issue 1: The Online Music Services’ use of previews does not satisfy the first step in the test for fair dealing under section 29 of the Act This Court has established a two-step test to determine whether a given activity qualifies as fair dealing pursuant to section 29 of the Act:
In order to show that a dealing was fair under section 29 of the Copyright Act, a defendant must prove: (1) that the dealing was for the purpose of either research or private study and (2) that it was fair. CCH Canadian Ltd v Law Society of Upper Canada, 2004 SCC 13, [2004] 1 SCR 339 [CCH] at para 50.

-1558. The enumerated purposes in section 29 form a threshold test for establishing fair dealing. The Federal Court of Appeal in the CCH case explained the first stage of this test as follows:
If the purpose of the dealing is not one that is expressly mentioned in the Act, this Court is powerless to apply the fair dealing exemptions. CCH Canadian Ltd v Law Society of Upper Canada, 2002 FCA 187 at para 127.

59.

In this case, in order to communicate music previews to the public without paying a certified tariff rate, the Online Music Services must first prove that such communications are effected for the purpose of research or private study.
Drolet v Stiftung Gralsbotschaft, 2009 FC 17, [2010] 1 FCR 492 at paras 263264.

60.

The Appellant submits that the Federal Court of Appeal erred in concluding that the term “research” includes communicating previews of musical works over the Internet for the purpose of facilitating retail transactions.

i. 61.

Definition of the term, “research” The Court of Appeal considered four possible definitions for the word “research”: (a) The Concise Oxford English Dictionary, which defines the term as follows:
the systematic investigation into and study of materials and sources in order to establish facts and reach new conclusions

(b)

The Canadian Oxford English Dictionary, which defines the term as follows:
the systematic investigation into and study of materials, sources, etc., in order to establish facts and reach new conclusions

(c)

The New Shorter Oxford English Dictionary, which defines the term

-16as follows:
1 The action or an instance of searching carefully for a specified thing or person. Freq. foll. by after. Now rare. L16.1 2 A search or investigation undertaken to discover facts and reach new conclusions by the critical study of a subject or by a course of scientific inquiry. Usu. in pl. M17. 3 Systematic investigation into and study of materials, sources, etc. to establish facts, collate information, etc…

(d)

The Random House Webster’s Unabridged Dictionary, which defines the term as follows:
diligent and systematic inquiry or investigation into a subject in order to discover or revise facts, theories, applications, etc.: recent research in medicine Court of Appeal Decision at para 17, Appellant's Record at 82-83. The Concise Oxford English Dictionary, 10th ed, sub verbo "research". The Canadian Oxford English Dictionary, Thumb Index ed, sub verbo "research". The New Shorter Oxford English Dictionary, Thumb Index ed, sub verbo "research". The Random House Webster’s Unabridged Dictionary, 2nd ed, sub verbo "research".

62.

The Court of Appeal, relying on its observation that “[t]he legislator chose not to add restrictive qualifiers to the word ‘research’ in section 29,” chose to rely on the initial, rare definition from The New Shorter Oxford English Dictionary and concluded as follows:
[19] If, in essence, the legal research such as that referred to in CCH has a more formal and rigorous aspect, the same is not necessarily true for that conducted by consumers of a work subject to copyright, such as a musical work. [20] In that context, 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. I agree with the Board that “[l]istening to previews assists in this investigation”. [emphasis added] Court of Appeal Decision at paras 19-20, Appellant's Record at 83.

1

This annotation indicates that this usage of the term first appeared in the late 16th century and is now rare.

-1763. The Appellant submits that both the Board and the Court of Appeal erred in their interpretation of the term “research” as it is used in section 29 of the Act. The definition adopted by both the Board and the Court of Appeal fails to account for the purposes of the Act in general and the fair dealing provision in particular. ii. 64. The Federal Court of Appeal adopted a definition for “research” without considering the legislative purpose Legislative terms must be interpreted according to the purpose of the legislation. Where legislative terms can support more than one reasonable meaning, the ordinary meaning of the words is less important and recourse must be had to context and purpose. This Court expressed this principle as follows:
It has been long established as a matter of statutory interpretation that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: see 65302 British Columbia Ltd. v. Canada, [1999] 3 S.C.R. 804, at para. 50. The interpretation of a statutory provision must be made according to a textual, contextual and purposive analysis to find a meaning that is harmonious with the Act as a whole. When the words of a provision are precise and unequivocal, the ordinary meaning of the words play a dominant role in the interpretive process. On the other hand, where the words can support more than one reasonable meaning, the ordinary meaning of the words plays a lesser role. The relative effects of ordinary meaning, context and purpose on the interpretive process may vary, but in all cases the court must seek to read the provisions of an Act as a harmonious whole. [emphasis added] Canada Trustco Mortgage Co v Canada, 2005 SCC 54, [2005] 2 SCR 601 at para 10.

65.

If the meaning of a term in a statute is clear, then the ordinary meaning will dominate; if the meaning is not clear, then the words must yield to an interpretation that best meets the overriding purpose of the statute.
Celgene Corp v Canada (Attorney General), 2011 SCC 1 at para 21.

66.

In the case of Tariff 22.A, the meaning of the term “research” is not clear. The Appellant submits that when faced with more than one plausible interpretation, the Court of Appeal erred in simply selecting one without

-18any consideration of the purpose of section 29 in particular or the Act in general. iii. 67. The purpose of the fair dealing provision is to foster the creative process The purpose of Canada’s copyright regime is to ensure the orderly production and distribution of, and access to, works of art and intellect. This purpose is aligned with the history and purpose of copyright at the international level and is solidly anchored in economics.
Daniel J Gervais, “The Purpose of Copyright Law in Canada”, (2005) 2:2 UOLTJ 315.

68.

Similarly, this Court has repeatedly held that the overarching purposes of the Copyright Act are twofold: promoting the public interest in the encouragement and dissemination of artistic and intellectual works, and justly rewarding the creator of the work. In the specific context of the Internet, this Court commented:
The capacity of the Internet to disseminate “works of the arts and intellect” is one of the great innovations of the information age. Its use should be facilitated rather than discouraged, but this should not be done unfairly at the expense of those who created the works of arts and intellect in the first place. Robertson v Thomson Corp, 2006 SCC 43, [2006] 2 SCR 363 at para 69. Théberge v Galerie d'Art du Petit Champlain inc, 2002 SCC 34, [2002] 2 SCR 336 at paras 5, 30-31. Society of Composers, Authors and Music Publishers of Canada v Canadian Assn of Internet Providers, 2004 SCC 45, [2004] 2 SCR 427 at para 40.

69.

The fair dealing provisions in sections 29 to 29.2 serve to encourage the creation of artistic and intellectual works by allowing certain uses of copyright-protected material as part of the creative process. This acknowledges the collaborative and interactive nature of cultural creativity and creates “breathing space” in the copyright system by allowing for uses of copyright-protected works that are fair and for purposes that lead to the creation of new works.

-19Carys Craig, “The Changing Face of Fair Dealing in Canadian Copyright Law: A Proposal for Legislative Reform”, in In the Public Interest: The Future of Canadian Copyright Law, Michael Geist, ed (Toronto: Irwin Law, 2005) at 437.

70.

This Court has held that the exceptions to infringement found in the Act are necessary to allow for creative innovation and to further the long-term interests of society as a whole, namely the continued creation of new works of art and intellect. These exceptions include the fair dealing provisions.
Théberge v Galerie d'Art du Petit Champlain inc, 2002 SCC 34, [2002] 2 SCR 336 at para 32.

71.

Professor Drassinower has suggested that the fair dealing exceptions recognize that fair users of copyright are authors as well. The fair dealing provisions allow users to copy protected works to the extent necessary to engage in the creation of their own works. It is in this sense that fair dealing is a “user’s right”:
The defence of fair dealing, then, permits the defendant to establish that, in spite of the appearance of infringement as a result of the defendant’s act of substantial reproduction, the defendant’s work is after all his own, not truly a copy of the plaintiff’s. A finding of fair dealing means precisely that the act of substantial reproduction that gives rise to the fair dealing inquiry fails to mature into a finding of infringement. The defence gives the defendant the opportunity to show that his substantial reproduction of the plaintiff’s work does not negate his own authorship. Fair dealing stands for the proposition that responding to another’s work in one’s own does not mean that one’s work is any less one’s own. Thus the defendant who makes out the fair dealing defence is an author in her own right. It is as author that the defendant is a fair user. … The reason fair dealing affirms the free availability of another’s expression only where such expression is reasonably necessary to one’s own is that the “fairness” in fair dealing operates bilaterally. Fair dealing must be fair to both plaintiff and defendant. Nor could we conceive “fairness” otherwise. This means that fair dealing must impose limitations not only on the plaintiff’s copyright but also on the kinds of uses that the defendant can make of the plaintiff’s work. Thus the defendant can legitimately use the plaintiff’s work only where the purpose of such use engages the defendant’s authorship and only to the extent that such purpose reasonably requires. … This is why the fair dealing purposes allow certain copying but do not thereby legitimate all or any copying. The fairness of the dealing operates as a balanced recognition of the parties’ equal claims as authors. It affirms and sustains the higher

-20principle of authorship to which both parties appeal and to which they must both be subject. [emphasis added] Abraham Drassinower, “Taking User Rights Seriously” in In the Public Interest: The Future of Canadian Copyright Law, Michael Geist, ed. (Toronto: Irwin Law, 2005) at 470-472. Euro-Excellence Inc v Kraft Canada Inc, 2007 SCC 37, [2007] 3 SCR 20 at para 79.

72.

The fair dealing exceptions exist to facilitate those authorial actions of copyright users that are fair and necessary to further the public interest. The actions of the Online Music Services in communicating previews of musical works are neither acts of authorship nor are they necessary to promote the public interest.

iv. 73.

The purposes enumerated in sections 29 to 29.2 are purposes which promote the public interest Other than “research and private study” in section 29, the other fair dealing provisions allow fair dealing for the purposes of “criticism and review” and “news reporting.” These additional purposes share a common element: the activities they encourage are those that promote the public interest.
Copyright Act, RSC 1985, c C-42, s 29, 29.1, 29.2.

74.

Criticism and review involves the exercise of creative effort: the critic or reviewer adds his or her own expression of skill and judgment to passages of another work copied legitimately, thus creating a new literary work. By exempting criticism and review from copyright infringement liability, the Act promotes the public interest in both freedom of expression and the dissemination of new creative works.

75.

Similarly, if a journalist copies a protected work or a substantial part thereof pursuant to section 29.2, he or she adds content to the copied work, which results in a new creation for dissemination in a newspaper, radio broadcast, etc.

-2176. The Appellant submits that the term “research and private study” in section 29 ought to be interpreted to include uses that contribute to the creative process in ways similar to those in sections 29.1 and 29.2. 77. Research and private study are different from criticism, review and news reporting in that the former terms do not describe the action of creating new works directly. However, a person engaging in either research or private study has as his goal the cultivation of a mental environment that is conducive to the creative process. Research and private study are thus often preliminary steps in the creation of new works of skill and judgment. 78. The Appellant submits that the proper definition of the term “research” as it is used in section 29 must be bipartite: the definition will include the searching element identified by the Court of Appeal, but the goal of this search must be to fuel the creative process. 79. This bipartite definition of "research" is entirely consistent with this Court's decision in CCH, where the research at issue had as its goal the creation of new works of skill and judgment in the form of opinions, court submissions and legal advice. v. 80. The definition of “research” applied by the Federal Court of Appeal is inconsistent with this Court's decision in CCH In CCH, this Court considered the copies of various legal publications made at the request of legal researchers to be made “for the purpose of research” because they were made as part of the legal research process. This Court was careful to distinguish between the act of copying itself and the research that the copying facilitated:
Although the retrieval and photocopying of legal works are not research in and of themselves, they are necessary conditions of research and thus part of the research process. The reproduction of legal works is for the purpose of research in that it is an essential element of the legal research process. There is no other purpose for the copying; the Law Society does not profit from this service. Put simply, its custom photocopy service helps to ensure that legal professionals in Ontario can access the materials necessary to conduct

-22the research required to carry on the practice of law. In sum, the Law Society’s custom photocopy service is an integral part of the legal research process, an allowable purpose under s. 29 of the Copyright Act. [emphasis added] CCH at para 64.

81.

The key distinction to be made between the facts of this case and those in CCH is the role that the infringing activity plays in the dealing. In CCH, the legal professionals were requesting copies for the “purpose of research on a specific legal topic” and the photocopy service formed an “integral part of the legal research process,” a process which results in the creation of new works of skill and judgment.
CCH at paras 64, 67.

82.

The music previews communicated by the Online Music Services are not research in and of themselves: unlike the copies made for lawyers in CCH, the communication of previews is not a necessary condition to the creation of new artistic or intellectual works; nor do previews form part of any research process that could lead to the creation of such works. Consumers listening to music previews are not engaging in acts of authorship, they are merely shopping. Previews are merely a convenient tool that facilitates the shopping process and assist the Online Music Services in their marketing efforts.

vi. 83.

Parallels to US jurisprudence The role that fair dealing plays in the creative process is also recognized in U.S. jurisprudence through the common law requirement in that country that fair uses be transformative uses.

84.

Although there are differences between Canadian and American copyright legislation, the Federal Court of Appeal in the CCH case recognized that Canadian courts may "find some assistance in examining the experience in the United States."
CCH Canadian Ltd v Law Society of Upper Canada, 2002 FCA 187 at para

-23148 citing Estey J in Compo Co Ltd v Blue Crest Music et al, [1980] 1 SCR 357 at 367.

85.

U.S. courts have consistently held that for a use to fall within the ambit of fair use, it must not be a mere substitute for the original work. That is, the use must be “transformative.”
Campbell v Acuff-Rose Music, 510 US 569 (1994) at 579.

86.

Recently,

the

New

York

District

Court

considered

whether

the

transmission of music previews as a marketing tool to sell musical ringtones for mobile phones could be considered fair use. The Court concluded that the “applicant’s use of previews, for the purpose of allowing its customers to sample a musical ringtone before purchasing it, cannot fairly be described as ‘criticism, comment, news reporting, teaching… scholarship, or research.’” The Court also held that the use of previews to sell ringtones was not a transformative use:
[A]lthough applicant’s previews are comprised of shortened versions of the musical works from which they are copied, they do not “enrich” a separate work protected by the Copyright Act, but rather serve only to facilitate applicant’s sales of ringtones and ringback tones from applicant’s website and wireless device application “for commercial gain.” United States v ASCAP, 599 F Supp 2d 415; 2009 US Dist LEXIS 31999; 2009-1 Trade Cas (CCH) P76, 512 at p 10 [emphasis added].

87.

In reaching this conclusion, the Court distinguished the case of Kelly v Arriba Soft. In Kelly, the defendant had created a search engine that crawled the world wide web for images and then built a searchable catalogue of smaller, “thumbnail” versions of those images. The Court held that the database of thumbnails served a transformative purpose and that the thumbnails were a fair use of the plaintiff’s copyright images. The Court’s reasoning focused on the benefit that the Defendant’s service provided the public.
Kelly v Arriba Soft Corp, 336 F 3d 811 (9th Cir 2003).

88.

In ASCAP, the Applicant argued that the thumbnails in Kelly were simply

-24advertisements for the underlying full-size images and that its previews of ringtones served the same purpose. The Court distinguished Kelly as follows:
The [Ninth] Circuit noted that "Arriba was neither using Kelly's images to directly promote its web site nor trying to profit by selling Kelly's images." Kelly, 336 F.3d at 818. While Arriba's search engine helped users navigate a sea of information including images already publicly available on the internet, applicant's previews merely allow users to sample selections of a database of copyrighted information, collected, organized and provided to users by applicant. It is difficult to characterize applicant's use of previews as serving a "public benefit" when the previews' purpose is to benefit applicant by facilitating sales of its own product. Again, applicant fails to establish that its use of ASCAP music serves a transformative use under the fair use doctrine. [emphasis added] United States v ASCAP, 599 F Supp 2d 415; 2009 US Dist LEXIS 31999; 2009-1 Trade Cas (CCH) P76, 512 at pp 10-11.

89.

Under the Canadian regime, the public benefit to be gained from fair dealing is the same public benefit fostered by the Act itself: encouraging the creation of new works. The requirement in the US jurisprudence that the use be transformative is consistent with the intent behind limiting the purposes for which the defence of fair dealing is available pursuant to sections 29 to 29.2 of the Canadian Act. Both the Canadian and US doctrines require the person claiming the exemption to be engaged in an act of authorship.

90.

Like the ringtone retailers in ASCAP, the Online Music Services are not creating anything new by offering free music previews. The Online Music Services are simply allowing their customers to sample selections of a database of copyright-protected information that is collected, organized and communicated to consumers by the Services.

vii.

The interpretation of the term “research” adopted by the Federal Court of Appeal is inconsistent with the way that term is used elsewhere in the Act It is a basic principle of statutory interpretation that a word within a statute bears the same meaning wherever it is used in that statute. There is a

91.

-25presumption that statutes contain consistent expression.
R v Zeolkowski, [1989] 1 SCR 1378. Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed (Markham: LexisNexis, 2008) at 214-215.

92.

If the Court of Appeal’s interpretation of “research” is applied to that term as it appears in other sections of the Act, it becomes clear that the Court of Appeal’s interpretation was not intended by Parliament.

93.

Section 30.2 exempts libraries, archives and museums from liability for making copies of articles in periodicals and older newspapers if those copies are made for the purpose of “research or private study.” Section 30.2 provides, in part, as follows:
Research or private study 30.2 (1) It is not an infringement of copyright for a library, archive or museum or a person acting under its authority to do anything on behalf of any person that the person may do personally under section 29 or 29.1. Copies of articles for research, etc. (2) It is not an infringement of copyright for a library, archive or museum or a person acting under the authority of a library, archive or museum to make, by reprographic reproduction, for any person requesting to use the copy for research or private study, a copy of a work that is, or that is contained in, an article published in (a) a scholarly, scientific or technical periodical; or (b) a newspaper or periodical, other than a scholarly, scientific or technical periodical, if the newspaper or periodical was published more than one year before the copy is made. Restriction (3) Paragraph (2)(b) does not apply in respect of a work of fiction or poetry or a dramatic or musical work. Copyright Act, RSC 1985, c C-42, s 30.2.

94.

This section was clearly intended to apply only to copies made in pursuit of research that fosters the creation of new works and not simply “the

-26action or an instance of searching carefully for a specified thing or person.” 95. All library patrons are searching carefully for a specified thing. If this definition were applied to the term “research” in section 30.2, the section would become redundant; a library, archive or museum would be authorized to copy all works of the types enumerated in paragraphs 2(a) and (b) for all patrons. The qualifier that the copy be used “for research or private study” would be meaningless. This cannot be Parliament’s intention for this section. viii. The definition of “research” applied by the Federal Court of Appeal is inconsistent with the purposes of the fair dealing provision and the Act in general For the reasons set out above, the Appellant submits that the proper meaning of the term “research” in section 29 of the Act is, “the systematic investigation into and study of materials and sources in order to establish facts and reach new conclusions.” This definition is consistent with the plain meaning of the term “research” and it is consistent with the purposes of both section 29 in particular and the Act as a whole.
The Concise Oxford English Dictionary, 10th ed, sub verbo "research".

96.

97.

The Appellant further submits that when the Online Music Services communicate previews of musical works to consumers to assist those consumers in searching for a musical track to purchase, neither the Online Music Services nor the consumers are engaged in research.

98.

This Court has called fair dealing a “users’ right.” But, as the text of the Act and this Court’s jurisprudence reveal, this “user’s right” is not an unlimited right to use. The limited purposes for which the fair dealing defence is available and this Court’s guidance on determining whether a particular dealing is fair circumscribe the defence of fair dealing and restrict its application to those circumstances where the user herself is participating

-27in an activity that furthers the public interest purposes of the Act. 99. Professor Scassa explains that fair dealing is not an unlimited right to use, but rather a right to participate in the uses the Act was intended to encourage:
The fair dealing exceptions in ss. 29, 29.1 and 29.2, for example, give a strong indication that they exist so as to ensure that freedom of expression is not unduly curtailed by the exercise of an author’s economic rights. We are permitted, so long as our dealing is fair, to criticize or comment on works, to use works where they are relevant for the reporting of news, and to carry out research and private study. The interpretation of these sections should reflect not simply a right to use, in general terms, but a right to engage intellectually, critically, and creatively with existing works. Teresa Scassa, “Overbalancing: The Supreme Court of Canada and the Purpose of Canada’s Copyright Act” (December 2009) CIPR Vol 25, No 2 at 199. [emphasis added]

100.

The decisions below have expanded the scope of the exception in section 29 from a “users’ right” into a “right to use, in general terms.” The Appellant submits that this expansion is unwarranted. The actions of the Online Music Services in communicating previews of musical works do not engage intellectually, critically or creatively with existing works and therefore do nothing to promote the public interest purposes of the Act.

101.

Similarly, the customers of the Online Music Services do not “engage intellectually, critically [or] creatively with existing works” when they listen to previews. They are doing nothing more than engaging in a shopping activity during which they identify and assess products for potential purchase, as they do for a myriad of other products they may have an interest in purchasing. But that process falls far short of any “research” activity of the type contemplated by the Act.

C. 102.

Issue 2: The manner in which the Online Music Services deal with SOCAN’s copyright musical works is not fair In the alternative, if the communication of 30-second previews of musical works to consumers of the Online Music Services is indeed “research,” the

-28Appellant submits that this use cannot qualify as “fair dealing” because the manner in which the Online Music Services use the works in the Appellant’s repertoire is not fair. 103. This Court in CCH set out the factors for determining whether a dealing is “fair”: the purpose of the dealing, the character of the dealing, the amount of the dealing, alternatives to the dealing, the nature of the works and the effect of the dealing on the work.
CCH at para 53.

104.

The Appellant submits that a consideration of these factors with respect to the communication of music previews reveals that the dealing at issue in this appeal cannot be considered fair.

i. 105.

The purpose of the dealing: The purpose of the Online Music Services’ use of previews is entirely commercial Like the Great Library in CCH, the Online Music Services do not conduct research, but instead facilitate the research of their consumers. The Board held that this entitled the Online Music Services to avail themselves of the fair dealing exception:
Services that supply previews do not conduct research. It must therefore be demonstrated that they supply previews with the view to facilitate the research of others. Only then can it be argued that previews are offered “for the purpose of research”. Board Decision at para 108, Appellant's Record at 41-42.

106.

The Appellant submits that the purpose of communicating 30-second previews of musical works is purely commercial. From the perspective of the Online Music Services, the commercial purpose of the dealing is to sell musical works; for customers of the Online Music Services, the commercial purpose of the dealing is the potential purchase of musical works. This Court has recognized that research done for commercial purposes may not be as fair as research done for charitable purposes.

-29CCH at para 54.

ii. 107.

The character of the dealing: The Online Music Services are widely distributing substantial parts of the musical works In assessing the character of a dealing, courts must examine how the works were dealt with. Making a single copy of a single work may be fair; however, if multiple copies of works are being widely distributed, this will tend to be unfair.
CCH at para 55.

108.

In this case, the record shows that the Online Music Services communicate (distribute), on average, ten times the number of previews as they do full-length musical works. Given the evidence before the Board on the number of downloads communicated by the Services, this amounts to CONFIDENTIAL of previews communicated over the 1996-2006 period covered by the tariff. These previews are distributed to millions of consumers across Canada.

iii. a. 109.

The amount of the dealing: The amount of the dealing is unfair In this case, the amount of the dealing should be an important factor in determining if the dealing is fair In CCH, this Court provided for a flexible application of the six fairness factors and stated that each factor may be more or less relevant depending on the factual context of the allegedly infringing dealing. The Appellant submits that in the context of this appeal, the amount of the dealing is especially relevant.
CCH at para 60.

110.

Unlike CCH, this case involves the dissemination of works over the Internet, which allows for widespread distribution of content. The infringing activity at issue in CCH was done using a restricted number of photocopy machines located at one physical location and fax machines under the control of the librarians. In this case, the protected communications occur

-30online, where it is possible for any number of the millions of customers of the Online Music Services to listen to any number of previews simultaneously from any place having access to the Internet. 111. In this case, the number of 30-second previews of musical works distributed by the Online Music Services is in the CONFIDENTIAL annually. The Appellant submits that, given this factual context, the amount of the dealing ought to be a significant factor in determining whether the dealing is fair. b. 112. The amount of the dealing ought to be considered in the aggregate The Board assessed the amount of the dealing by examining the ratio between the length of a music preview and the length of the average musical work in the catalogue of the Online Music Services. The Board concluded as follows:
Streaming a preview to listen to it once is a dealing of a modest amount, when compared to purchasing the whole work for repeated listening. Helping the user to decide his course of action with respect to a purchase of the whole file is presumptively fair. Board Decision at para 113, Appellant's Record at 43.

113.

Despite the fact that there was no evidence before the Board on the average length of a musical work, the Court of Appeal agreed with the Board that this approach was reasonable and that it “considered the user’s objective of researching a purchase.”
Court of Appeal Decision at para 27, Appellant's Record at 86.

114.

The Court of Appeal held that the use of music previews must be evaluated from the consumer’s point of view:
We must consider previews from the point of view of the person for whom they are intended: the consumer of the subject-matter of the copyright. Their purpose is to assist the consumer in seeking and finding the desired musical work. Court of Appeal Decision at para 22, Appellant's Record at 84.

-31115. The Appellant submits that both the Board and the Court of Appeal erred in adopting a consumer-centred approach to assessing the amount of the dealing. Rather, the dealing should be examined from the point of view of the Online Music Services, who are the users of the copyright in the musical works in the Appellant’s repertoire. The amount of the dealing ought to be assessed from this perspective for two reasons: first, following this Court’s guidance in CCH, fair dealing refers to a practice or system of dealing as a whole; second, from a copyright liability perspective, it is the Online Music Services who are using the Appellant’s musical works, by communicating them to the consumer. 116. In CCH, this Court examined a situation where patrons of the Great Library were able to make photocopies and request copies of copyrightprotected works. When this Court assessed the amount of the dealing in CCH, it intentionally determined the amount from the perspective of the Great Library, not the individual patrons:
This raises a preliminary question: is it incumbent on the Law Society to adduce evidence that every patron uses the material provided for in a fair dealing manner or can the Law Society rely on its general practice to establish fair dealing? I conclude that the latter suffices. Section 29 of the Copyright Act states that “[f]air dealing for the purpose of research or private study does not infringe copyright.” The language is general. “Dealing” connotes not individual acts, but a practice or system. CCH at para 63.

117.

Where fair dealing relates to a system of uses, it is an error to assess the amount of the dealing by examining a single transaction within that system. The Board erred by examining the amount of the dealing as a ratio between a single preview and a single musical work despite having concluded that the communication of previews was fair dealing on the basis that the “practice and policies” of the Online Music Services were “research-based and fair.”
CCH at para 63. Board Decision at para 113, 116, Appellant's Record at 43, 44.

-32118. An approach that examines the amount of the dealing in the aggregate is also consistent with the manner in which the rights to the musical works are administered. Pursuant to Tariff 22.A, the Online Music Services are entitled to use the musical works in the Appellant’s repertoire on an aggregate basis and there is no need for the licensing of any work on an individual basis. 119. Furthermore, Tariff 22.A governs the relationship between the Appellant and the Online Music Services and does not apply to individual consumers of the Services. Individual consumers are not liable to the Appellant for listening to a preview. It is the Online Music Services who must avail themselves of the fair dealing exception. Therefore, it must be from the perspective of the Online Music Services that the amount of the dealing ought to be assessed. 120. Considered from this aggregate perspective and measured on the basis of the amount of music communicated to consumers, music previews represent 125% of the music sold by way of a purchased download. This figure is based on an assumed length of four minutes for an average musical work, the evidence that ten previews are communicated per purchase and a preview length of 30 seconds (10 x 30 seconds = 5 minutes = 125% of 4 minutes). 121. In CCH, this Court suggested that a dealing may be unfair if it involves a series of multiple copies:
…the dealings might not be fair if a specific patron of the Great Library submitted numerous requests for multiple reported judicial decisions from the same reported series over a short period of time… CCH at para 68.

122.

The Appellant submits that the amount of the dealing cannot possibly be considered fair when it involves a series of multiple copies that amount to more than 100% of the legitimate, licensed use of the works in the

-33Appellant’s repertoire. 123. In the alternative, if the Court of Appeal is correct in concluding that an assessment of the amount of the dealing ought to consider “the user’s objective of researching a purchase,” then this assessment must look at the entirety of this research process and take into account the fact that each consumer listens to an average of ten 30-second previews as part of the process involved in purchasing one full-length work.
Court of Appeal Decision at para 27, Appellant's Record at 86.

124.

On the evidence that was before the Board, the average course of “research” engaged in by each consumer involves ten previews and one purchased download. It is inconsistent, then, for the Board to assess the fairness of the amount of this dealing by reference to the ratio between one preview and one download.

125.

If the proper ten-to-one ratio is used, the amount of the dealing involved in an average course of “research” is five minutes. This constitutes 125% of the amount of music involved in an average four-minute full-length musical work.

126.

Even if the Federal Court of Appeal was correct in measuring the dealing individually, the Appellant submits that the amount of the dealing in this case is unfair. In CCH, this Court evaluated the access policy of the Great Library to determine whether the amount of the dealing with individual works was reasonable:
The Access Policy states that the Great Library will typically honour requests for a copy of one case, one article or one statutory reference. It further stipulates that the Reference Librarian will review requests for a copy of more than five percent of a secondary source and that, ultimately, such requests may be refused. This suggests that the Law Society’s dealings with the publishers’ works are fair. Although the dealings might not be fair if a specific patron of the Great Library submitted numerous requests for multiple reported judicial decisions from the same reported series over a short period of time, there is no evidence that this has occurred.

-34CCH at para 68. [emphasis added]

127.

In this case, a 30-second preview represents 12.5% of an average individual musical work. The Appellant submits that this percentage, when repeated over numerous requests and multiple works, is unreasonable and unfair.

128.

The Appellant submits that, regardless of whether the dealing is assessed on an individual or aggregate basis, the amount of the dealing involved in this case is manifestly unfair.

iv.

Alternatives to the dealing: In this case, alternatives to the dealing exist which achieve the purposes of the Online Music Services without infringing the Appellant’s copyright Apple’s witness recognized that previews are not the only feature of the iTunes store that is designed to allow consumers to find, identify and purchase music. Apple Vice President, Eddie Cue, testified, “[w]hat we try to do is to give them [the consumers] as many ways possible to find the content that they are looking for.” Communicating free previews is only one of those ways. The iTunes store also provides album artwork, textual descriptions and user-generated album reviews to assist the consumer to find content.
Evidence of Eddy Cue, May 1, 2007, Transcripts, Vol 10 at 2016-2017, Appellant's Record at 130-131. Witness Statement of Eddy Cue, Exhibit Coalition-5 at para 9, Appellant's Record at 198-199.

129.

130.

The true objective of the Online Music Services in offering previews is to increase sales of musical works. Therefore one clear alternative to offering previews is for the Online Music Services to increase the amount spent on advertising.

131.

This increased advertising could be direct, such as offering tracks to consumers at the expense of the Online Music Services, or it could be indirect, such as increasing the amount spent on traditional print, Internet

-35and television advertising. Both of these alternatives would serve the same purpose as previews without infringing the Appellant’s copyright. 132. Apple's evidence before the Board was that previews are "a marketing tool [that] should be understood primarily as eliminating consumers' risk of purchasing the 'wrong song'." Similarly, Alastair Mitchell, CEO of the Online Music Service, Puretracks, testified that the purpose of previews is to allow the consumer to verify her purchase. This purpose may be achieved simply by offering consumers the ability to return a song and be reimbursed the purchase price. In fact, Apple already allows returns to the iTunes Store.
Witness Statement of Eddy Cue, Exhibit Coalition-5 at para 11, Appellant's Record at 199-200. Evidence of Eddy Cue, May 1, 2007, Transcripts, Vol 10 at 1989-1993, 2031, Appellant's Record at 124-125, 134. Evidence of Alastair Mitchell, April 30, 2007, Transcripts Vol 9 at 1934-1936, Appellant's Record at 114-115.

133.

The Appellant submits that, rather than implement these alternatives, the Online Music Services have chosen to save on costs by offering for free something that is not theirs to give away: substantial portions of the Appellant’s musical works.

v. 134.

The nature of the works: The musical works are published and their use is subject to the collective administration regime In CCH, this Court considered the nature of the work to be a factor relevant to determining whether the dealing is fair. Where the nature of the work is such that fair dealing increases the public dissemination of the work, then the dealing is more likely to be fair:
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. CCH at para 58.

-36135. The converse of this premise is that reproducing a work that, by its nature, is already capable of legitimate wide dissemination may be less fair because, in that case, the dealing does less to advance the purposes of copyright law. 136. The works in question in this case are accessed and disseminated pursuant to the collective administration of copyright regime set out in the Act. In the case of SOCAN, this regime is compulsory and ensures that music users have unfettered access to SOCAN’s repertoire, as long as they pay the fees set out in the applicable tariffs approved by the Board. Under this system, it is impossible for SOCAN to restrict or hinder the legitimate dissemination of its musical works. Once the Board certifies a tariff for a certain use and the terms and conditions of the tariff are met, SOCAN has no right to restrict access to or use of any of its works.
Copyright Act, RSC 1985, c C-42, s 68.2.

137.

Accordingly, in this case, the nature of SOCAN’s works and the compulsory nature of the regime to which they are subject already ensure the wide public dissemination of the works and there is no need to resort to the fair dealing exception for that purpose. Consequently, based on the guidance of this Court, the Online Music Services' dealing with the Appellant’s musical works should be seen as unfair.

vi.

The effect of the dealing on the work: There is no evidence in the record to support the Board’s conclusion that the Online Music Services’ dealing has no negative effect on the Appellant’s works When examining this factor, the effect of the dealing on the market for the original work is relevant. If the reproduced work is likely to compete with the market of the original work, this may suggest that the dealing is not fair.
CCH at para 59.

138.

139.

The Online Music Services argued before the Court of Appeal and in

-37response to the Appellant’s application for leave in this appeal that this factor should weigh in their favour because offering free previews actually positively affects the market for the Appellant’s works. There are a number of problems with this argument.
Memorandum of Apple Canada, Inc at Federal Court of Appeal (Court File No A-514-07) at paras 9, 67-69.

140.

First, because the fair dealing issue was raised by the Board on its own initiative after the hearing, there was no evidence on the record that would tend to establish this assertion. If the use of music previews increases the online sale of full-length musical works, that fact was not proven before the Board.

141.

Music previews can be used for a number of reasons that will not necessarily increase the sale of protected works. Consumers may access any number of previews, whether or not they have any intention of making a purchase. Those who access Online Music Services with the intention of spending a set amount of money on music will do so irrespective of their use of previews. Yet others may use previews to help them choose one work over another but that, in and of itself, may not lead to “additional” sales.

142.

Ultimately, the Online Music Services’ argument that offering free previews benefits the Appellant through increased sales is paternalistic. The Appellant is in the best position to assess the most efficient and valuable means of marketing its musical works, including whether it is in the best interests of its members to bear the cost of communicating free previews to consumers or to charge a fee to the Online Music Services for that use.

143.

Canada is a signatory to international conventions that restrict the scope of exceptions to copyright to only those uses which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the

-38legitimate interests of the author.
The Berne Convention for the Protection of Literary and Artistic Works 1886, Art 9(2).

144.

Clearly, there is a market for music previews, as evidenced by the Online Music Services’ demand for them, and the recognition in the United States that the owners of previews are entitled to negotiate a fee for their use. The Board’s application of the fair dealing exception to deny the Appellant a tariff for music previews conflicts with the normal exploitation of the Appellant’s works by negating its ability to “negotiate”, before the Board, compensation for that entire category of use. This result is particularly unfair in the light of the Board’s acknowledgement that “Some users may use previews in a manner that does not constitute fair dealing”.
Board Decision at para 116, Appellant's Record at 44.

D. 145.

The Online Music Services ought to compensate SOCAN for this infringing use Before the Copyright Board, SOCAN had asked for a higher tariff rate to be applied to Online Music Services that offer music previews. The Appellant submits that the communication of previews of musical works in the Appellant’s repertoire is not fair dealing pursuant to section 29 of the Act.

146.

To the contrary, the use of music samples by online retailers to promote the sale of music does not further the purposes of the Act and is precisely the type of commercial activity that should give rise to compensation for the creators of those musical works.

147.

Consequently, a tariff is required for the use of music previews and the Board should proceed to hear the parties as to the value of this use. PART IV – SUBMISSIONS ON COSTS

148.

The Appellant requests the costs of this appeal and in the court below.

-39PART V – ORDER SOUGHT 149. The Appellant seeks an order: (a) (b) setting aside the decision of the Federal Court of Appeal; and declaring that the Internet communication of previews of musical works does not constitute fair dealing pursuant to section 29 of the Copyright Act. All of which is respectfully submitted this 18th day of April, 2011. ___________________________ Gowling Lafleur Henderson LLP

-40PART VI – TABLE OF AUTHORITIES Authority Case Law Bell Canada v Society of Composers, Authors and Music Publishers of Canada, 2010 FCA 220. Campbell v Acuff-Rose Music, 510 US 569 (1994). Canada Trustco Mortgage Co v Canada, 2005 SCC 54, [2005] 2 SCR 601. CCH Canadian Ltd v Law Society of Upper Canada, 2002 FCA 187. CCH Canadian Ltd v Law Society of Upper Canada, 2004 SCC 13, [2004] 1 SCR 339 [CCH]. Citing Paragraphs 50 85 64 58, 84 57, 80, 81, 103, 106, 107, 109, 116, 117, 121, 126, 134, 138 65

1 2 3 4 5

6 7

Celgene Corp v Canada (Attorney General), 2011 SCC 1.

50 Decision of the Copyright Board, dated August 18, 2006, aff'd Canadian Wireless Telecommunications Assn v Society of Composers, Authors and Music Publishers of Canada, 2008 FCA 6. Drolet v Stiftung Gralsbotschaft, 2009 FC 17, [2010] 1 FCR 492. Euro-Excellence Inc v Kraft Canada Inc, 2007 SCC 37, [2007] 3 SCR 20. Kelly v Arriba Soft Corp, 336 F 3d 811 (9th Cir 2003). R v Zeolkowski, [1989] 1 SCR 1378. Robertson v Thomson Corp, 2006 SCC 43, [2006] 2 SCR 363. Society of Composers, Authors and Music Publishers of Canada v Canadian Assn of Internet Providers, 2004 SCC 45, [2004] 2 SCR 427. 59 71 87 91 5 24, 68

8 9 10 11 12 13

-41-

14 15

Théberge v Galerie d'Art du Petit Champlain inc, 2002 SCC 34, [2002] 2 SCR 336. United States v ASCAP, 599 F Supp 2d 415; 2009 US Dist LEXIS 31999; 2009-1 Trade Cas (CCH) P76, 512. Legislation and Treaties

68, 70 86, 88

16 17

Copyright Act, RSC 1985, c C-42. The Berne Convention for the Protection of Literary and Artistic Works 1886. Secondary Sources

7, 10, 46, 73, 93, 136 143

18

Abraham Drassinower, “Taking User Rights Seriously” in In the Public Interest: The Future of Canadian Copyright Law, Michael Geist, ed. (Toronto: Irwin Law, 2005). Carys Craig, “The Changing Face of Fair Dealing in Canadian Copyright Law: A Proposal for Legislative Reform”, in In the Public Interest: The Future of Canadian Copyright Law, Michael Geist, ed (Toronto: Irwin Law, 2005). Copyright Board of Canada, “Statement of Royalties to be Collected for the Performance in Canada of DramaticoMusical or Musical Works in 1991”, decision dated July 31, 1991, File No 1990-4. Daniel J Gervais, “The Purpose of Copyright Law in Canada”, (2005) 2:2 UOLTJ 315. Memorandum of Apple Canada, Inc at Federal Court of Appeal (Court File No A-514-07). Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed (Markham: LexisNexis, 2008). Teresa Scassa, “Overbalancing: The Supreme Court of Canada and the Purpose of Canada’s Copyright Act” (December 2009) CIPR Vol 25, No 2. The Canadian Oxford English Dictionary, Thumb Index ed.

71

19

69

20

9

21 22 23 24

67 139 91 99

25

61

-4226 27 28 The Concise Oxford English Dictionary, 10th ed. The New Shorter Oxford English Dictionary, Thumb Index ed. The Random House Webster’s Unabridged Dictionary, 2nd ed. 61, 96 61 61

PART VII – STATUTES RELIED ON Copyright Act, R.S.C., 1985, c. C-42

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