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Federal Court of Appeal Keeps Possibility of Reverse Class Actions for Online Copyright Infringement Alive

The possibility of large-scale copyright infringement lawsuits against online file sharers remains a reality in Canada with the Federal Court of Appeal (FCA) overturning in part the Federal Court (FC) decision Voltage Pictures, LLC Canada v. Salna, 2019 FC 1412 (“Salna FC”). Specifically, the FCA’s decision keeps the door open for copyright owners to pursue reverse class actions that allow them to pursue large numbers of online copyright infringers in a single proceeding.

In Salna FC, Voltage Pictures, LLC (“Voltage”) sought to certify a reverse class action proceeding against a group of respondents that allegedly infringed Voltage’s copyright in five films via BitTorrent peer-to-peer file sharing. Generally, reverse class actions are class action proceedings wherein a single plaintiff initiates a claim against a class of multiple respondents. Such proceedings have not, to date, been used in the context of seeking remedies for copyright infringement, but they are an attractive option for copyright holders.

Specifically, the cost of pursuing a single legal action against a single infringer can far outweigh any damages that might be recovered from that infringer, and the deterrent effect of suing only one infringer out of thousands is limited.  So traditional legal actions to enforce copyright against online file sharers are not particularly cost-effective for copyright holders.  But by combining multiple defendants into one single action, the amount of damages and the breadth of the deterrent effect achieved is significantly increased.  Thus, such reverse class actions are appealing to copyright holders because they represent a potentially effective means of enforcement and deterrence of infringing activities.

As with all class actions, the threshold step in a reverse class action is certification of the proposed class. Pursuant to the Federal Court Rules, the court must certify a class action if the statutory test for certification is met, which requires that:

  1. the pleadings disclose a reasonable cause of action;
  2. there is an identifiable class of two or more persons;
  3. the claims of the class members raise common questions of law or fact;
  4. a class proceeding is the preferable procedure for the just and efficient resolution of the common questions of law or fact; and
  5. there is an adequate representative applicant or respondent.

The FC denied Voltage’s certification motion in Salna FC on the basis that the test for certification had not been met. Specifically, the FC found that Voltage’s certification motion satisfied none of the five criteria for the test for certification. Voltage subsequently appealed the decision to the FCA.

On 8 September 2021, the FCA released its decision in Salna v. Voltage Pictures, LLC, 2021 FCA 176, granting Voltage’s appeal in part and holding that the FC erred in applying the test for certification. Broadly, the Court observed that the FC erred in considering whether a reasonable cause of action was disclosed in Voltage’s certification application and that if the FC’s overall reasoning were followed, parties in Voltage’s position would likely be without any remedy for alleged infringement of their copyrighted works given the expense and complexity of pursuing each individual infringer in a separate legal proceeding.

With respect to the test for certification, the Court concluded that the FC made reversible errors in considering each of the five criteria. On the first three criteria, the FCA reversed the FC’s holdings and concluded that the pleadings disclosed a reasonable cause of action, that there was an identifiable class of two or more respondents, and that there were common questions of fact and law. However, the FCA found that the FC provided insufficient reasons for the last two criteria, concerning the preferability of a class proceeding and the adequacy of the proposed representative respondent. Accordingly, the motion for certification was returned to the FC for consideration on these two criteria.

Finally, the Court commented that while Voltage’s proposed reverse class action “tests the limits of what constitutes copyright infringement”, its novelty was not a reason to deny certification. It further noted that while the proposed class action may ultimately fail, the court below erred in presuming that the action would fail at such an early stage.

We await further guidance on these issues once the FC reconsiders its earlier decision.  In the meantime, those who engage in online file sharing activities should be aware of the potential risk of getting caught up in a large-scale copyright infringement action if more copyright holders choose to explore this potential avenue for enforcement of their rights.

See 2019 FC 1412 and 2021 FCA 176 for the full decisions from the FC and the FCA, respectively.

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