The Devil is in the Details: Copyright Claim Struck for Failure to Plead “Written” Licence

As noted recently by Canada’s Federal Court: “the Copyright Act is, at the risk of understatement, complex”. Commencing a claim for copyright infringement requires satisfying various conditions precedent set out in the Copyright Act. For example, ss. 41.23(1) provides that to commence an infringement proceeding as a licensee, a plaintiff’s right or interest by grant (i.e., the license) must be “in writing”. If a plaintiff licensee fails to explicitly plead in its statement of claim that its license is “in writing”, is the claim liable to be struck? That was precisely the issue in Sony Music Entertainment Canada Inc. v. SUVA Beauty Inc. et al, T-1256-21, where the Federal Court was tasked on a motion with determining whether Sony Music Canada’s statement of claim detailing copyright infringement should be struck in its entirety for not disclosing a reasonable cause of action.

In the action, Sony Music Canada, an exclusive Canadian licensee, alleged that Suva Beauty Inc., a cosmetics and beauty company, and its CEO Shaina Azad (collectively, the “Defendants”), infringed copyright in 88 Sony sound recordings, and separately, the performers’ performances they contained. The statement of claim did not identify the maker of each recording, the copyright owner, or the identity of the performers whose rights were alleged to be infringed, other than the artist. The Defendants argued that the statement of claim should be struck in its entirety because Sony Music Canada did not have the standing to bring the action.

It is settled law that to strike a statement of claim, it must be plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action. The Federal Court found that Sony Music Canada, based on the facts as presented in the statement of claim, was not the owner of the copyright but rather was an exclusive licensee. The Court held that ss. 41.23(1) of the Copyright Act requires a plaintiff licensee to expressly plead that its relevant right or interest by grant (i.e., the licence) was “in writing”. As the statement of claim had no express statement that Sony Music Canada’s license was in writing, the Court held that the claim failed to assert facts that, if presumed to be true, would give Sony Music Canada standing to sue the Defendants. Notwithstanding, the Court noted that Sony Music Canada further missed an opportunity to include express language detailing the written nature of the licence in its response to a demand for particulars. The Court held that such omissions could not be remedied by the Court, as the subsistence of a written licence could not be presumed. The Court emphasized that ultimately, pleadings must be assessed on what they say and not what can be assumed. While Sony Music Canada furnished evidence on the motion from its Senior Vice-President that the relevant licence was in fact in writing, the Court held that rule 221(2) of the Federal Courts Rules prohibited evidence on the motion. Since the statement of claim, together with the response for particulars, did not meet the requirements of ss. 41.23(1) of the Copyright Act, the Court struck the claim with leave to amend.

The Defendants also moved to strike the claim on the basis that Sony Music Canada failed to add all copyright owners as parties to the lawsuit. Subsection 41.23(2) of the Copyright Act provides that a copyright owner shall be made party to a proceeding. However, a Court may find that it is in the interests of justice to dispense with adding copyright owners as parties to the action after considering a number of factors.^[1] The plaintiff bears the onus to persuade the Court that copyright owners should not be parties to the litigation. On the motion, the Court held that Sony Music Canada failed to meet its burden to demonstrate that it was in the interests of justice that certain non-Sony copyright owners not be added as parties to the litigation. The Court held that whether the non-Sony Owners were aware of this action or had consented to Sony Music Canada taking action on behalf of their copyrighted works, was “at best, unclear”. The Court held that if the statement of claim were not struck for failing to plead the written licence, it would have stayed the proceedings until the relevant owners were added.

The Defendants also moved for further particulars on the motion. The Defendants’ sought various information regarding the sound recordings at issue, including the identity of the maker and the country of first publication. The Court ruled that certain information, including the identity of the maker for each recording, should have been produced to allow the Defendants to understand the claim and prepare a responsive answer. Requests for other information such as the maker’s country of residence were dismissed on the grounds that the information or some sufficiently reliable proxy was already included in the statement of claim. Similarly, the Defendants’ request for “the demand of the public at the time of first publication” of the recordings, the identities of all predecessors in title and copies of any and all assignments, were held by the Court as unnecessary. The Defendants also moved for particulars relating to Sony Music Canada’s allegations of infringement related to performers’ performances, such as the name of each “performer” and a copy of each assignment or other transfer in writing of any rights from the performer. The Court held that if the proceeding was limited to a single song, particulars of who the performers are may be reasonable. But since there were almost 100 recordings at issue, providing the information would be disproportionate to the value of moving the matter forward. The Defendants did not “require the particulars of who the drummer was on item 85 in the chart attached to the statement of claim any more than they need the identity of the backup singer in item 33 to prepare an informed defence”. Moreover, the production of licence agreements with performers was held not a proper request for particulars under Rule 181, but rather a request for documents under Rule 206 (i.e., producing documents referred to in a pleading).

While in this instance Sony Music Canada was ultimately granted leave to amend its pleading, litigants claiming copyright infringement should take note to ensure all necessary facts to support their cause of action are pleaded, particularly any “written” licence if the action is being brought by a licensee. Furthermore, it is incumbent on any plaintiff to ensure that all proper parties to the litigation are named, specifically the copyright owner, unless sufficient evidence can demonstrate that it is in the interests of justice that the owner not be named. For further details regarding the factors underpinning the “interests of justice” analysis, see our summary of the recent decision in Allarco Entertainment 2008 Inc v Staples Canada ULC, 2021 ABQB 340.