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$29M Statutory Damage Award for Copyright Infringement Includes Finding of “Inducement”

August 13, 2021

By Adam Bobker and Martin Brandsma

It is settled law in Canada that one who induces another to infringe a patent is guilty of patent infringement.1 But what about other intellectual property rights? On a recent ex parte default judgment motion in the Federal Court of Canada, the Court awarded over $29M in statutory damages for a claim of copyright infringement brought by a group of media broadcasters against sellers of pre-programmed set-top boxes for streaming alleged pirated content. While the Court found the Defendants had infringed the Plaintiffs’ statutory rights under the Copyright Act, including the right to communicate a work to the public by telecommunication (ss. 3(1)(f)) and the making available right (s. 2.4(1.1)), as well as authorizing such acts without consent, it also found as a separate cause of action that the Defendants knowingly induced copyright infringement. The finding is notable given the paucity of Canadian authority relating to inducing copyright infringement, and what may be the first application of a common law inducement test—regularly applied in the context of patent law—to an instance of copyright infringement.

In Bell Canada v. L3D Distributing Inc. (INL3D), 2021 FC 832 (“L3D Distributing”), a group of well-known Canadian broadcasters and content providers commenced an action in 2016, including for copyright infringement. The named Defendants were businesses and individuals alleged to have advertised, offered for sale, and sold pre-loaded set-top boxes and internet protocol television (IPTV) services to stream pirated content. After various Anton Piller and contempt proceedings, the Plaintiffs brought a motion for default judgement against the Defendants, who neither responded to nor participated in the action.

To succeed on a motion for default judgement, plaintiffs have the burden of establishing by way of evidence that: (1) the defendants are in default; (2) the claims as set out in their statement of claim, on a balance of probabilities; and (3) entitlement to the relief sought. The Court readily found the Defendants were in default, having been personally served with the statement of claim and a previous interlocutory injunction order, as well as being put on notice of their default status.

With respect to the allegations of infringement, the Plaintiffs’ evidence established the Defendants advertised, offered for sale, and sold online and through brick-and-mortar stores the pre-loaded boxes along with subscriptions to unauthorized IPTV services. The Plaintiffs’ investigators, among other things, purchased the boxes from the Defendants and determined that the devices provided unauthorized access to the Plaintiffs’ stations and programs, including over a thousand different individual on-demand and live works owned or licensed by the Plaintiffs. Notably, the decision does not refer to any evidence of the Defendants’ customers actually accessing the Plaintiffs’ impugned content.

The Court found copyright subsists in the works, and that the copyright was either owned or licensed exclusively by the Plaintiffs. On the issue of infringement, the Court found that by selling the pre-loaded set-top boxes, the Defendants “made [the Plaintiffs’] works available to the public without the Plaintiffs’ permission” contrary to ss. 3(1)(f), 13(7), 2.4(1.1) and, 27(1) of the Copyright Act (L3D Distributing, para. 56). In particular, the Court held: “[i]n my view, providing users with the ability to access and install add-ons via the pre-loaded set-top boxes … makes the Plaintiff’s Programs or Works available to the public by telecommunication” (L3D Distributing, para. 63). Canada’s Copyright Act does provide an exception to infringement where a person only provides a neutral means of communicating a work to the public by telecommunication (ss. 31.1(1)), but the Court found the Defendants’ apparent business model of promoting, offering for sale, and selling the pre-loaded set-top boxes meant their activities were not “technologically neutral”.

After also finding the Defendants liable for authorizing infringement, the Court considered the Plaintiffs’ allegation of copyright infringement by inducement. Canada’s Copyright Act does not specifically refer to inducing copyright infringement. Notwithstanding, the Court held: “I am satisfied that the common law cause of inducement also is available to [the Plaintiffs] in the circumstances” and that the Defendants “knowingly induced infringement” of the Plaintiffs’ copyright in the works by offering for sale and selling the pre-loaded set-top boxes (L3D Distributing, para. 71). In conducting its analysis, the Court applied the well-established “common law” test for inducing patent infringement, namely:

  1. the act of infringement was completed by a direct infringer;
  2. completion of the act of infringement was influenced by the acts of the inducer, without which influence the infringement otherwise would not have taken place; and
  3. the inducer seller knowingly exercised the influenced; that is, the seller knew their influence would result in the completion of the act of infringement.

In finding each element satisfied, the Court held: “I see no reason why this principle [inducement] should be restricted to any particular type of intellectual property rights, such as patents” (L3D Distributing, para. 74). Despite the Court’s reference to the “common law”, its Order relating to inducement cites the Copyright Act, stating: “… the Respondent Defendants have knowingly induced users of pre-loaded set-top boxes to initiate acts of infringement of the Plaintiffs’ Copyright, contrary to the Copyright Act sections 2.4(1.1), 3(1)(f) and 27(1)”. The finding is notable given the paucity of Canadian decisions relating to inducing copyright infringement. There is also no discussion in the decision about the application of a common law doctrine in the context of copyright law. Previous decisions have routinely established that copyright law in Canada is purely statutory, with the rights and remedies exhaustively set out in the Copyright Act (which makes no reference to inducement). As held by Canada’s Supreme Court, copyright law “neither cuts across existing rights in property or conduct nor falls between rights and obligations heretofore existing in the common law. Copyright legislation simply creates rights and obligations upon the terms and in the circumstances set out in the statute”.2

After granting the Plaintiffs’ requested declarations and injunctions, the Court considered the Plaintiffs’ $58M claim for statutory damages, which was based on the maximum $20,000 per work at issue. Applying the factors set out in ss. 38.1(5) of the Copyright Act, the Court focused on whether the claimed amount was grossly out of proportion to the infringement, reasoning instead that $10,000 per infringed work ($29,300,000 in total) was more proportionate, given the Plaintiffs’ intention to pursue default judgments against future defendants, and the Plaintiffs’ admission that declines in their content subscriptions were only partly due to piracy.  The Court also found the Defendants’ choice “to operate in an industry that inherently and blatantly disregards the Plaintiffs’ rights”, amounted to “egregious conduct” warranting punitive damages of $100,000 against each Defendant (L3D Distributing, para. 107).

While the Court’s damage award is significant, the damage award is likely to have constrained precedential value given its unique facts including the large number of works at issue, the Defendants’ blatant disregard of the Plaintiffs’ rights, and that the decision was decided in the context of an ex parte motion for default judgement.

 

1Corlac Inc. v. Weatherford Canada Inc., 2011 FCA 228 at 162.

2Compo Co. Ltd. v. Blue Crest Music et al., [1980] 1 SCR 357 at 372-373.

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Author(s):

Adam Bobker Adam Bobker
B.Sc. (Elec. Eng.), LL.B.
Partner
416.957.1681  email Adam Bobker
Martin Brandsma Martin Brandsma
HBSc., MSc., J.D.
Associate
416.957.1627  email Martin Brandsma