This addresses the Supreme Court decision in the CBC Sodrac case.

1. McCarthy Tétrault LLP / mccarthy.ca
Copyright and Technological Neutrality:
CBC vs SODRAC
LSUC: 20th Annual IP Law:
The Year in Review
Barry B. Sookman
Direct Line: (416) 601-7949
E-Mail: bsookman@mccarthy.ca
January 26, 2016

2. McCarthy Tétrault LLP / mccarthy.ca
What is the principle?
¬ “The principle of technological neutrality is recognition that,
absent parliamentary intent to the contrary, the Copyright Act
should not be interpreted or applied to favour or discriminate
against any particular form of technology.”
¬ “The Federal Court of Appeal set out a fair reading of ESA when
it described it as establishing that “[t]echnological neutrality is
determined by functional equivalence: para. 39.”
¬ “technological neutrality required the consideration of the
difference between the old and new forms of delivery of works. In
the absence of any difference between them, no separate right
was engaged.”
¬ ““an additional layer of protections and fees” [should] not be
imposed based solely on technological change: ESA, at para. 9.”
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3. McCarthy Tétrault LLP / mccarthy.ca
Source of the principle?
“It is derived from the balancing of user and right-
holder interests discussed by this Court in Théberge
— a “balance between promoting the public interest in
the encouragement and dissemination of works of the
arts and intellect and obtaining a just reward for the
creator”: para. 30. Because this long-standing
principle informs the Copyright Act as a whole, it must
be maintained across all technological contexts: “The
traditional balance between authors and users should
be preserved in the digital environment”: ESA, at
para. 8.”
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4. McCarthy Tétrault LLP / mccarthy.ca
It’s place and role in the Act?
¬ “The Copyright Act as a whole is to be read having regard
to the principles of technological neutrality and balance,
unless its text indicates otherwise.”
¬ “the principles of balancing user and right-holder interests
and of technological neutrality are central to Canadian
copyright law, they cannot change the express terms of the
Copyright Act.”
¬ “Arguments based on purpose in the form of technological
neutrality and balance are advanced to come to the
opposite conclusion, but purposive construction is a tool of
statutory interpretation to assist in understanding the
meaning of the text. It is not a stand-alone basis for the
Court to develop its own theory of what it considers
appropriate policy.”
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5. McCarthy Tétrault LLP / mccarthy.ca
Scope in valuation contexts
¬ “Overall, the Board’s valuation analysis must comport with the
Copyright Act’s fundamental requirement to recognize
technological neutrality and balance between user and right-
holder interests.”
¬ “…where the right is engaged, the issue becomes one of
valuation of that right, and the principles of technological
neutrality and balance must be adapted to the valuation context.”
¬ “In the regulatory context, the principle of technological neutrality
applies to valuation of a reproduction licence, just as it does in
determining whether an activity implicates copyright at all.”
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6. McCarthy Tétrault LLP / mccarthy.ca
How the principle applies in valuation
contexts?
¬ “ technological neutrality requires that different
technologies using reproductions of copyright
protected work that produce the same value to the
users should be treated the same way.”
¬ “technological neutrality implies that it would be
improper to impose higher copyright licensing costs
on the user of one technology than would be
imposed on the user of a different technology.”
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7. McCarthy Tétrault LLP / mccarthy.ca
How the principle applies in valuation
contexts?
¬ “Conversely, different technologies using
reproductions that produce different values should not
be treated the same way.”
¬ “Where the user of one technology derives greater
value from the use of reproductions of copyright
protected work than another user using reproductions
of the copyright protected work in a different
technology, technological neutrality will imply that the
copyright holder should be entitled to a larger royalty
from the user who obtains such greater value.”
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8. McCarthy Tétrault LLP / mccarthy.ca
Valuation principles
“When it is tasked with fixing licence fees, the Board
must have regard to factors it considers relevant in
striking a balance between the rights of users and right-
holders. Relevant factors will include, but are not limited
to, the risks taken by the user, the extent of the
investment the user made in the new technology, and
the nature of the copyright protected work’s use in the
new technology. The Board must assess the respective
contributions of, on the one hand, the risks taken by the
user and the investment made by the user, and on the
other hand, the reproductions of the copyright protected
works, to the value enjoyed by the user.”
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9. McCarthy Tétrault LLP / mccarthy.ca
Value to users
“When it is tasked with determining the value of a
right, an important consideration for the Board is the
value of that right to the user. The value of the use of
reproductions in one technology may stem from
functional differences from use in another
technology. Value differences may also stem from
internal efficiencies between technologies. Ignoring
internal efficiencies would result in rights holders
being denied additional royalties when the use of
their copyrighted work in the more efficient
technology confers greater value to the user of that
technology.”
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10. McCarthy Tétrault LLP / mccarthy.ca
Result in the case?
“It is evident both from the Board’s reasons in this
case and the reasoning underlying the historical use
of the 1:3.2 ratio, that the valuation of the licence fee
covering CBC’s broadcast-incidental copying did not
apply a valuation method consistent with the principle
of technological neutrality because there was no
comparison of the value contributed by the copyright
protected reproductions as between CBC’s prior
technology and its new digital technology. It also
failed to take into account the relative contributions
made by the use of copyright protected works and the
risk and investment by the user in its digital
technology, as required by the balance principle. “
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11. McCarthy Tétrault LLP / mccarthy.ca
Implications
¬ Statutory construction contexts
¬ Interpretive principle
¬ Relevance of rights in analog technologies to digital
technologies?
¬ Recognition of additional rights based on
technological changes?
¬ Rate setting
¬ Just compensation
¬ Balancing of user and rights holder interests
¬ Technological neutrality analysis
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12. McCarthy Tétrault LLP / mccarthy.ca
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