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Take Notice! Statutory Damages Against Internet Service Providers for Failure to Comply with the Copyright Act Notice-and-Notice Regime Are to be Sought by Action

March 24, 2021

By Tamara Céline Winegust and Bruna Kalinoski

Internet Service Providers (“ISPs”) play a critical role in copyright enforcement. Rights holders may obtain Norwich orders from the courts, which orders can require ISPs to disclose identifying information about their allegedly infringing customers. Rights holders will also send notices alleging infringement to ISPs who, in Canada, are obligated to pass on the notice to the user—known as the “notice-and-notice regime”. Adherence to the notice-and-notice procedure protects ISPs from liability. Failure to do so can give rise to damages under the Copyright Act, RSC 1985, c C-42.

The Federal Court’s recent decision in TBV Productions, LLC v Doe, 2021 FC 181 confirmed that where an ISP failed to forward a notice of infringement, and the issue of their disclosure of the identities of the alleged infringers (which would be the subject of a Norwich order) has been settled separately with the rights holder, any damages arising from the ISP’s failure to forward a notice must be sought by way of separate action against the ISP—the rights holder cannot do so via a motion in the action against the alleged infringers. In rendering the decision, Justice O’Reilly was careful to distinguish an earlier decision of the court in ME2 Productions Inc. v Doe, 2019 FC 214, where Justice Pentney found no reviewable error in a prothonotary’s decision to permit the rights holder to couple a motion for a Norwich order with a request for damages against the ISP for failure to comply with its obligations under the notice-and-notice regime. From a practical perspective, Justice O’Reilly’s decision suggests the procedure approved in the ME2 decision is an outlier. As a general rule, the proper procedure is to seek damages from an ISP for failure to adhere to their obligations under the notice-and-notice regime will be by way of separate action.

Canada’s Notice-and-Notice Regime

Canada’s notice-and-notice regime creates a procedure that allows the owner of a copyrighted work to send a notice of claimed infringement to an intermediary that provides services related to the operation of the Internet or other digital network through which the claimed infringement is occurring—usually an ISP, but may also be a social network or other internet-based service. Upon receipt of such notice, the intermediary must promptly forward the notice to the person/user specified in the notice—typically, the user is identified by their internet protocol (IP) address, which the rights holder obtained through a third-party service that tracks potentially infringing behavior. Adherence to this procedure allows intermediaries to escape liability for what would otherwise be considered “secondary” copyright infringement. In other words, it creates a “safe harbour” for ISPs, but a different “safe harbour” than arises under the U.S. “notice-and-takedown” regime (under the U.S. system, the intermediary must remove the allegedly infringing material upon receipt of a notice, instead of simply forwarding the notice).

If an ISP fails to discharge its obligations (and also to retain records of the customer’s identity for the purpose of an enforcement proceeding),1 the Act entitles the copyright owner to pursue statutory damages against the ISP. The damages award may be between $5,000 and $10,000.2

TBV and the proper procedure for seeking damages from ISPs

In BV Productions, LLC v. Doe, 2021 FC 181, the plaintiff, TBV Productions, LLC (“TBV”), claimed that its copyright in the motion picture, “I Feel Pretty”, was infringed by the defendant Does, who downloaded or otherwise made the movie available over the Internet. To identify the Does, TBV brought a motion for a Norwich order against three third-party ISPs—Bell Canada, SaskTel, and Xplornet Communications Inc. (the “third-party ISPs”). In the same motion, TBV sought statutory damages on the grounds that the ISPs had failed to discharge their obligations to forward notices of infringement to their subscribers. TBV sought $10,000 for each allegedly undelivered notice, totaling $600,000 in damages.

TBV and the ISPs separately settled the issue of disclosure, that would have been covered by the Norwich order. However, TBV continued to seek damages, and requested that this issue be adjudicated at a hearing within the existing motion. TBV pointed to the Federal Court’s decision in ME2 Productions Inc. v. Does et al., 2019 FC 214 (“ME2”) as support for the position that damages could be sought against third-party ISPs by way of motion to the main copyright infringement action. In ME2, Justice Pentney found no reviewable error in a case management judge Order that allowed the copyright owner to pursue its claim for damages against the ISP (in that case, TekSavvy), in the context of the Norwich order motion. The three ISPs in TBV, however, took the position that TBV’s claim for damages should be brought by way of a separate action against the ISPs.

Justice O’Reilly agreed with the ISPs. He found that ME2 featured “special circumstances”—an intertwining of the issues of disclosure and statutory damages—which were not present in TBV’s disclosure motion.

Of note, Justice O’Reilly characterized the questions at issue in ME2 and TBV as fundamentally different. The question before court in ME2 was a matter of judicial review assessed for palpable and overriding error—i.e., “whether a case management judge in the exercise of discretion may allow a damages claim to be determined in conjunction with a related Norwich Order motion”. By contrast, the question in TBV was “whether there is a legal basis for allowing a damages claim to proceed by way of a motion unconnected to a Norwich Order motion”—a legal question relating to proper procedure:

“[I]t is not clear that a free-standing claim of damages under the notice-and-notice regime can be initiated by motion. A claim for damages for non-compliance with the notice-and-notice scheme is not identified as a proceeding that can be determined in a summary way by application or action (Copyright Act, s 34(4)). The procedure for advancing a claim under the notice-and-notice regime is not specified in the Act (see s 41.26(3)). The general rule, therefore, that liability and damages should be decided by way of an action, applies here.”

Justice O’Reilly agreed with the ISPs that TBV’s position would effectively permit copyright holders to expose third-parties to liability for substantial damages while depriving them of the usual procedural protections afforded to defendants (i.e., the exchange of pleadings, an opportunity for discovery, and the presentation of evidence and testimony at trial). As such, “[i]t would be unfair to permit substantial damage claims against [ISPs] for alleged failures under the scheme to be prosecuted other than through the usual process of an action.”

Conclusion

Justice O’Reilly’s concern with striking a fair balance between the rights of all interested parties (i.e., copyright holders, ISPs, search engine providers, and Internet users) adds a layer of complexity to notice-and-notice regime matters. Future cases may well recognize other “special circumstances” that justify the pursuit of damages against intermediaries outside the general rule recognized by Justice O’Reilly.


1 Subsection 41.26(1)(b)

2 Subsection 41.26(3)

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Author(s):

Tamara Céline Winegust Tamara Céline Winegust
B.F.A., J.D.
Associate
416.957.1651  email Tamara Céline Winegust
Bruna D.D. Kalinoski Bruna D.D. Kalinoski
LL.B., L.L.M.
Associate
416.957.1648  email Bruna D.D. Kalinoski