Rogers v. SOCAN, 2015 FC 286 (O’Reilly J.)
March 6, 2015
Gerald Kerr-Wilson, Peter Mantas, Ariel Thomas and Yael Wexles, for Rogers Communications Partnership, Telus Communications Company, Bell Mobility Inc., and Quebecor Media Inc. (the “Telecoms”)
Lynne Watt , Matthew Estabrooks and Anca Sattler, for the Society of Composers, Authors and Musical Publishers of Canada (“SOCAN”)
The Telecoms brought an action to recover $15 million in royalties paid to SOCAN for ringtones downloaded by their subscribers between 2003 and 2012.
The royalties were paid pursuant to a tariff certified by the Copyright Board of Canada under paragraph 3(1)(f) of the Copyright Act, which governs communications of musical works to the public (“Ringtone Tariff”). The Telecoms unsuccessfully challenged the Ringtone Tariff before the Federal Court of Appeal (the “Ringtone Application”). After the Ringtone Application, the parties entered into an agreement that set out the terms and conditions for future ringtone royalties (the “2010 Ringtone Agreement”).
Later, in 2012, the Supreme Court of Canada released two decisions that cast doubt on the validity of the Ringtone Tariff and the correctness of the Federal Court of Appeal’s reasoning in the Ringtone Application. The Supreme Court held that a communication tariff on downloads, in addition to a reproduction tariff, violates the principle of technological neutrality. A download is simply a mechanism to deliver a copy of work to the individual user, and is not a communication of work to the public. The payment of reproduction royalties satisfies the objectives of the Copyright Act.
Following these Supreme Court decisions, the Telecoms stopped paying the ringtone royalties and brought this action for: (1) repayment on the basis that SOCAN had been unjustly enriched; (2) a tracing order; and (3) declaratory relief. SOCAN counterclaimed for $12 million owed since the Telecoms stopped payment.
As a preliminary matter, the Federal Court held that neither the Ringtone Application nor the 2010 Ringtone Agreement precluded the Telecoms from bringing the claim.
Justice O’Reilly dismissed SOCAN’s counterclaim. He held that the Supreme Court decisions were binding and rendered the Ringtone Tariff unenforceable. He further held that the 2010 Ringtone Agreement was unenforceable. It was entered into for the purpose of determining the quantum of royalties payable, and was premised on the belief that the royalties were required by law.
Justice O’Reilly also dismissed the Telecoms’ claim. Although the Telecoms established a prima facie absence of a juristic reason for the royalty payments, it was not until the Supreme Court decisions that the parties were put on notice that there was a serious possibility that the legal foundation for the Ringtone Tariff was faulty. Until that time, the reasonable expectations of the parties was that SOCAN was legally entitled to payment of the ringtone royalties and that the Telecoms were required to pay them. Had the Telecoms continued to pay royalties after the Supreme Court released its decisions, a tracing order might have been justified.
By: Lisa Bruni, Blaney McMurtry