Apology Not Accepted: Federal Court Sentences Defendant to Incarceration in Beast IPTV Case

The last few years have seen an increase in the number of decisions from the Federal and Ontario courts addressing contempt of court in copyright disputes. The latest development comes in the form of Justice Lafrenière’s decision in Warner Bros. Entertainment Inc. v. White (Beast IPTV),  2023 FC 907. One of the Defendants in this proceeding pled guilty to contempt in 2021 following an interim order designed to stop the operation of an unauthorized online streaming service called Beast IPTV. In a rare move, the Federal Court sentenced the Defendant to incarceration for 60 days, to be served intermittently on weekends.

Imprisonment under the Federal Court Rules is a penalty seldomly imposed for civil contempt. Judges exercise wide discretion to determine a fit penalty and typically impose fines, injunctions, and/or costs on a contemnor to deter and denounce unlawful conduct. Recently, as few as three Federal Court copyright cases have sentenced defendants to imprisonment. In this case, Justice Lafrenière agreed with the Plaintiffs’ sentencing recommendation of incarceration and costs, finding it to be reasonable and warranted given the Defendant’s “defiant and obstructionist conduct” in disobeying a court order.

Background

In the underlying action, several entertainment companies that were engaged in the production and distribution of motion pictures and television content, including Warner Bros., Netflix, Disney, Sony, and Universal, claimed copyright infringement against the two defendants, Mr. Wright and Mr. White, for  developing, operating, maintaining, promoting, and selling subscriptions to an online streaming service. Once litigation commenced, the Plaintiffs obtained an interim injunction to stop operation of the service. After the Defendants ignored the interim order, the Court ordered the defendants to appear for a contempt hearing in which they were both charged. On the appeals, the Court dismissed the charges against Wright, who apologized and took responsibility for his actions, while deferring the sentencing hearing for White to a later date. To read our report on the dismissal of the contempt charge against the first Defendant from January 2022, click here.

The Defendant’s Conduct

Under the terms of the interim order, White was required to disclose important technical information about the Beast IPTV Service and information pertaining to his personal finances. He was also prohibited from communicating with third parties for the purposes of interfering with the execution of the order, as well as from concealing evidence and disposing of his assets. In direct violation of the order, White refused to provide any of the information requested and communicated with several individuals involved in the operation of Beast IPTV. He also immediately began withdrawing money from his bank account.

Although White apologized and expressed remorse for his actions at the sentencing hearing, citing inadequate legal advice and personal hardships, Justice Lafrenière questioned White’s sincerity. On cross-examination, the Plaintiffs referred to evidence of White’s activities online, where he bragged about how much money he made from operating illegal streaming services and that he was unfazed by the possible legal consequences.

Determining a Fit Sentence

In reviewing White’s conduct, Justice Lafrenière noted several aggravating factors, including that the contempt was knowing and deliberate and that White knew the legal ramifications of his behavior. White’s failure to provide the Plaintiffs with the necessary technical information caused irreparable harm to the Plaintiffs, who were not able to secure and deactivate the Beast IPTV infrastructure. He also withdrew and depleted much of his assets before disclosing the financial information required of him under the order. This course of action allowed White to benefit from hundreds of thousands of dollars.

In the way of mitigating factors, Justice Lafrenière noted that White’s guilty plea saved some of the Court’s time and obviated the need for witness testimony at the contempt hearing. White was also a first-time offender. However, the Court was unconvinced by White’s apology, pointing out that it was seemingly offered only to reduce the sentence. Justice Lafrenière cited a telephone conversation in which White displayed a disdainful attitude towards the Court, dismissing it as being merely civil and not criminal.

After determining that the aggravating factors outweighed the mitigating factors, the Court determined that merely imposing a fine in an amount perceived by individuals like White as the cost of doing business would not deter similar conduct. Furthermore, the precise amount available to White was unknown due to his failure to disclose information about his financial circumstances. Justice Lafrenière cited the Federal Court’s prior reluctance to order incarceration in copyright matters as compared with provincial courts and stated that the “go-to forum for intellectual property matters” should not be more lenient than its provincial counterparts. Courts in Canada should be consistent in their approach to sentencing in contempt proceeding involving copyright matters (at para 165 of the decision).

Justice Lafrenière ultimately accepted the Plaintiffs’ recommendation and issued an order incarcerating White for two months, noting that it was “at the lower scale of the spectrum” and would have been higher had White not pled guilty. The Court also awarded costs on a solicitor-client basis.

Key Takeaways

Justice Lafrenière’s decision opens the door to the Federal Court’s more serious consideration of imprisonment as a penalty for contempt of court in copyright infringement cases where other penalties are unlikely to incentivize compliance with court orders. However, such a penalty will not be warranted in every case, and plaintiffs will likely need to show through supporting evidence why a contemnor deserves to be imprisoned. Proving that a defendant acted knowingly and deliberately in frustration of the fundamental purpose of a court order and that the breach caused irreparable harm are a few important factors. The contrasting outcomes for the two defendants in the underlying Beast IPTV case also illustrate that insincere apologies and disingenuous expressions of remorse from a defendant are likely not sufficient to avoid serious penalties, especially when offered too late in the proceeding and contradicted by other evidence.