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Federal Court of Appeal Decision Means Lower Costs for Copyright Owners Seeking the Identity of Alleged Infringers

Internet users may consider their activities on the Internet to be anonymous. However, Canadian law has recently changed to make it easier, or at least less expensive, for copyright owners to obtain the identity of alleged copyright infringers.

Last year, Voltage Pictures, LLC (“Voltage”) was granted an order from the Federal Court of Canada requiring Rogers Communications Inc. (“Rogers”) to disclose the name and address of one of its Internet subscribers who was alleged to have infringed Voltage’s copyright:  2016 FC 881. This Internet subscriber is the proposed representative respondent in a “reverse” class action lawsuit being brought by Voltage against a number of as yet unidentified Canadians.  Voltage alleges these subscribers have infringed copyright in motion pictures owned by Voltage or related companies through unauthorized file sharing over the Internet.

Rogers was prepared to disclose the identifying information pursuant to a court order, but asked that Voltage be required to pay a fee of $100 per hour for work carried out by Rogers (plus HST). Voltage brought an appeal to contest the fee, arguing that the legislative regime precluded Rogers from charging anything, or alternatively that the fee was too high to be reasonable. In a recent decision, the Federal Court of Appeal agreed with Voltage and concluded that Roger’s fee cannot stand: 2017 FCA 97.

The Court analyzed the Notice and Notice regime. In particular, the Court discussed Rogers’ obligations pursuant to section 41.26 of the Copyright Act:

(1) A person described in paragraph 41.25(1)(a) or (b) [e.g. an Internet service provider] who receives a notice of claimed infringement that complies with subsection 41.25(2) shall, on being paid any fee that the person has lawfully charged for doing so,   a) as soon as feasible forward the notice electronically to the person to whom the electronic location identified by the location data specified in the notice belongs and inform the claimant of its forwarding or, if applicable, of the reason why it was not possible to forward it; and   b) retain records that will allow the identity of the person to whom the electronic location belongs to be determined, and do so for six months beginning on the day on which the notice of claimed infringement is received or, if the claimant commences proceedings relating to the claimed infringement and so notifies the person before the end of those six months, for one year after the day on which the person receives the notice of claimed infringement.

(2) The Minister may, by regulation, fix the maximum fee that a person may charge for performing his or her obligations under subsection (1).  If no maximum is fixed by regulation, the person may not charge any amount under that subsection.

The Court held that an Internet service provider, such as Rogers, has two sets of obligations under subsection 41.26(1) (at para. 40):

Overall, putting the two sets of subsection 41.26(1) obligations together, the internet service provider 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 noted that under subsection 41.26(2), the responsible Minister, the Minister of Industry, may, by regulation, fix the maximum fee that an Internet service provider can charge for performing the above obligations. When no maximum fee is fixed by regulation, the Internet service provider may not charge anything for performing these obligations. The Court noted that at present, no regulation has been promulgated. Therefore, Internet service providers like Rogers cannot charge a fee for performing their legal obligations under section 41.26. In other words, “no regulation and, thus, no fee” (at para. 48).

However, the Court held that an Internet service provider can charge a fee for the actual, reasonable and necessary costs associated with the act of disclosure, because the act of disclosure does not fall within the Internet service provider’s legal obligations under section 41.26. One example of the act of disclosure is the delivery or electronic transmission of the identifying information of an alleged infringer by an Internet service provider. In Rogers’ case, some evidence suggested that Rogers’ cost of disclosure was “at most” $0.50 per IP address, although the Court found that there was insufficient evidence to make a determination on this issue (at para. 76).

The Federal Court of Appeal’s decision may have important ramifications for both copyright owners and Internet users. The Court was careful to interpret the law in a manner to ensure that it would discourage hiding illegal infringement activities under “the cloak of anonymity on the internet”. Copyright owners seeking to enforce their rights can potentially be seeking the identity of thousands of alleged infringers.  Thus, over many subscribers, the cost to obtain the identity of those subscribers can be significant unless the fee to obtain the identity of each subscriber is relatively low. The Federal Court of Appeal’s decision clarifies that an Internet service provider cannot charge a fee for discharging its obligations under the notice-and-notice regime, although it can charge a fee for “the actual, reasonable and necessary costs” associated with disclosing identifying information. Thus, this decision ensures that the cost for copyright owners to obtain information as to the identity of subscribers who are alleged to have infringed copyright will be relatively low on a per-subscriber basis.

At the moment, it remains to be seen whether Voltage will ultimately succeed in having its proposed reverse class action certified. We continue to watch as the next steps in this case to unfold.

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