The Beat Goes On: Swapping Music Over the Internet

Seldom does a matter of law capture the attention of the Canadian public as has the issue of music swapping over the Internet. Moreover, one would be hard-pressed to recall a legal issue that has developed as rapidly as this issue has. In the Spring 2004 edition of In Brief, we reported on the Canadian debate relating to music swapping over the Internet. Since that time, the Federal Court of Canada has ruled on this issue during a preliminary motion in the case of BMG Canada Inc. et al. v. John Doe et al., coming down decisively in favour of music swappers.

The Federal Court case

The Federal Court lawsuit was commenced by a number of record companies which are members of the Canadian Recording Industry Association (the “Plaintiffs”), against “John Doe, Jane Doe and all those persons who are infringing copyright in the plaintiffs’ sound recordings.” The reason that the lawsuit was commenced against John Doe and others, is that the identity of the 29 music swappers alleged to have infringed the copyright of the record companies was not known. Although the Plaintiffs had identified the Internet Protocol (IP) addresses that they said had been used by these 29 individuals, the Plaintiffs were not aware of their names and addresses. For this reason, the Plaintiffs brought a preliminary motion against a number of Internet Service Providers (ISPs) (such as Bell, Telus and others) to have the Court order the ISPs to match those IP addresses to the users and provide their names and addresses from their subscription records. It might be noted that on a motion, where disclosure is sought from a person who is not a party to the lawsuit (such as the ISPs in this case), the legal test is quite stringent. A key element of this legal test is that the applicant first establish a strong case against the unknown alleged wrongdoer. As a result, the Plaintiffs were required to prove that music swapping over the Internet amounted to copyright infringement in musical works at this preliminary stage.

The ruling

The Copyright Act confers on the owner of copyright in a sound recording the sole right to reproduce that work in any material form, and to “authorize” others to do so. The Copyright Act also provides that it is an infringement for any person to do anything that only the owner of copyright has the sole right to do. At the same time, however, s.80 of the Copyright Act provides an exemption to infringement where a musical work is copied onto an audio recording medium for private use. The court addressed the issue of infringement on the basis that the 29 alleged infringers engaged in the acts of both downloading and uploading.

With respect to downloading, the court simply stated:

Nothing more was said about the issue of downloading other than this broad conclusion.

With respect to uploading, the court stated:

Therefore, the court concluded that uploading fell short of copyright infringement. Although uploaders do make copyright works “available,” it was the court’s view that their actions do not “authorize” the reproduction of those works by downloaders.

It is important to note that, in dismissing the Plaintiff’s motion, the court also considered several deficiencies in the Plaintiffs’ evidence, as well as the issue of privacy. These issues were important factors in the Court’s overall analysis, but are beyond the scope of this paper.

The implications

Although this decision was made in the context of a preliminary motion, the perceived effect of this ruling was to legitimize the act of music swapping over the Internet in Canada. In fact, the media portrayed this decision as a decisive victory for music swappers and those who advocate free exchange over the Internet. With that said, there are those on both sides of this issue who see this result as being unsatisfactory. Although the court did what it was required to do (i.e., interpret and apply copyright legislation in relation to a certain set of facts), the broader issue surrounding music swapping over the Internet remains largely unresolved; namely, whether it is fair that music swappers be entitled to copy something for which they have not paid.

This question of fairness is related to the popular view that current copyright legislation is not capable of addressing the relatively new technical issues involved in the transmission of works over the Internet and, in particular, the specific instance of computer users storing musical works on shared files on their hard drive with what appears to be an obvious intent that these files be copied by others. On this point, there are those who say that the general confines of the language in the Copyright Act and related jurisprudence prevent this issue of uploading from being addressed in the proper context, which led to the result in the BMG Canada Inc. et al. v. John Doe et al. With respect to downloading, they say that the private use exemption was really intended for those who first purchased a musical work (i.e., CD, audio cassette or vinyl LP) and then copied that work onto another medium for their own private use (e.g., CD to cassette, etc.). It was not meant to exempt one from making a copy of a musical work for which they did not pay. Although the private use exemption is coupled with a tariff on audio recording media that is intended to compensate copyright owners for the private use of their works, it is said that the tariff does not come close to matching the loss suffered by increasingly widespread music swapping. As proof of such loss, copyright owners point to the dramatic decline in CD sales revenue over the last few years, which is reported to be a loss of $425million since 1999.

On the other side of this more fundamental debate are those who say that music swapping over the Internet has had no material financial effect on copyright owners, and that the decline in CD sales revenue is a result of other factors. In support of this contention, they point to the recent empirical study (March 2004) by the Harvard Business School, that concluded: “that file sharing [had] no statistically significant effect on purchases of the average album in [its] sample.”

In fact, there are even some artists who believe that music swapping over the Internet increases CD sales, as widespread distribution over the Internet vastly increases their audience, which statistically speaking, increases the likelihood that more people will buy their complete CD release at the record store.

The one view that many commentators on both sides of this debate do share is that the current Copyright Act does not adequately address the issue of music swapping over the Internet. It is significant to note that this also appears to be the view of the new federal Heritage Minister, Hélène Scherrer, who announced in April that her department and Industry Canada will draft legislation to specifically address this issue. The substance and overall effect of the proposed legislation, however, is no secret, as Ms. Scherrer has suggested that the aim of the new legislation will be to make music swapping illegal.

In the meantime, the Plaintiffs in the case of BMG Canada Inc. et al. v. John Doe et al. launched an appeal on April 13, 2004, on the basis that, among other things, the Court did not properly interpret the existing provisions of the Copyright Act. Obviously, the debate over music swapping in Canada is far from over.

This article appeared in InBrief Summer 2004.  To subscribe to this publication, visit our Publications Request page.