Canada Supreme Court ends royalties for music downloads

TORONTO Thu Jul 12, 2012 6:52pm EDT

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TORONTO (Reuters) - Canada's Supreme Court dealt a blow to artists and a benefit to telecoms and gaming companies by scrapping some fees for music downloaded via the Internet or used in videogames as part of five copyright rulings on Thursday.

The court also ruled that previews of songs in online digital stores such as Apple Inc's iTunes are not an infringement of laws and do not merit royalty payments.

Canada's performing rights society previously collected fees for both streamed and downloaded music on the Internet on behalf of artists. Following the rulings, the group will only collect fees on streamed music.

"The big picture is that the Supreme Court has continued to favor user rights in fair dealing issues and they have limited the rights of SOCAN - the performing rights society - to collect separate tariffs for communication to the public," said Brian Gray, an expert on patent law with Norton Rose in Toronto.

"It's a disappointment on the previews and a disappointment, though a more complex one, on downloads," said Eric Baptiste, who heads the Society of Composers, Authors and Music Publishers of Canada, which collects and distributes royalties to artists.

The ruling on previews went against claims by SOCAN, which said that providers of such 30-second music clips like Apple, Rogers Communications Inc and others, ought to pay tariffs for such previews.

If the ruling had gone the other way, providers such as Rogers and Apple would have had to choose between charging customers to browse their online catalogs before buying, absorbing the costs themselves, or blocking previews.

The court maintained that music streamed from a website -- a practice that is growing in popularity as customizable radio stations such as Rdio and Slacker emerge -- constitutes a performance and therefore must continue to pay the fee.

Downloading is merely a delivery mechanism, much like a courier, and did not justify a performance fee, the court said.

The court's distinction between downloads and streaming is similar to the difference between buying a compact disc -- in which case the recording company collects -- and listening to a song on the radio, where the station typically pays the artist via the music publisher or a copyright collective.

The court tried "to strike a balance between the need for rights holders to be paid and the desire to keep the Internet free from an extra layer of obligations to pay" merely for its ability to distribute content, said Barry Sookman, a lawyer at McCarthy Tetrault involved in one of the cases.

It is rare for the country's highest court to rule on so many cases at one time, say experts. The judgments clarify much of Canadian copyright law, in particular as it pertains to digital media.

The court also ruled in favor of teachers who photocopy excerpts from textbooks for classroom instruction, a blow to publishers of educational material, and said that performance royalties are not collectable on music that has been licensed for use in films and television programs or online video games.

The rulings are "definitely good for Internet service providers and bad for songwriters and owners of copyright," said David Donahue, a copyright lawyer at Fross Zelnick Lehrman & Zissu in New York, who was not involved in the case.

The cases are: Society of Composers, Authors and Music Publishers of Canada (SOCAN) et al v Bell Canada et al. (33800); Entertainment Software Association et al v. SOCAN (33921); Rogers Communications Inc. et al. v. SOCAN (33922); Province of Alberta as represented by the Minister of Education et al. v. Canadian Copyright Licensing Agency operating as "Access Copyright" (33888); and Re: Sound v. Motion Picture Theatre Associations of Canada et al. (34210).

(Editing by Peter Galloway and Andrew Hay)

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