A Losing Venture: Cost-Revenue Analysis Has Producers of Illicit Pre-Loaded Set-Top Boxes Coming Out $38M in the Red

March 4, 2022
By Adam Bobker and Mitchel Fleming

The most recent installment in a slew of high-damage award proceedings initiated by Canadian broadcasters, three Defendants implicated in the illicit sale of pre-loaded set-top boxes have been ordered to pay $38,810,000 in statutory damages pursuant to section 38.1 of the Copyright Act. This Default Judgment by Justice Fuhrer (Bell Canada v. Nie, 2022 CanLII 7552 (FC)) represents the continued willingness of the Federal Court to levy substantial damages awards against infringers who blatantly engage in activities which result in direct or indirect copyright infringement under sections 2.4(1.1), 3(1)(f) and 27(1) of the Copyright Act, including making copyrighted works available in a way that allows users of the sold technology to access those works by telecommunication from a place and time individually chosen by the user, authorizing the communication of the copyrighted works, and inducing users of the technology to initiate acts of infringement.

The three defendants – Ian Nie, William Browell, Mario DeFranco – were each ordered to pay statutory damages under section 38.1 of the Copyright Act in excess of $12,000,000. While not expressly discussed in the decision, the Federal Court would have decided upon the eventual statutory damages award after having taken into account the factors under section 38.1(5), namely the good or bad faith of the Defendants, the conduct of the parties before and during the proceedings and the need to deter other infringements of the copyrighted works in questions. In examining these factors, the Judge is required to find an appropriate per-work monetary figure between $500 and $20,000. Ultimately, after weighing all the relevant factors, the Court determined that a $10,000 per-work damages award was a fair and proportionate award. Together, the statutory damages totaled $38,810,000.

On top of the exceptionally high statutory damages award, each Defendant was further ordered to pay punitive damages in the amount of $100,000 as well as assume an equal share of costs ($12,500). Such substantial figures should be a caution to any individual looking to engage in the sale of technologies that facilitate copyright infringement by users, particularly where the number of discrete copyright infringements will be high and thus result in exceedingly high statutory damages awards.

Click here for our reporting on the last time the Federal Court awarded such a colossal damages award in Bell Canada v. L3D Distributing Inc. (INL3D), 2021 FC 832.

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