Rogers Communications Canada Inc. v. Society of Composers, Authors and Music Publishers of Canada

Rogers Communications Canada Inc. v. Society of Composers, Authors and Music Publishers of Canada
Court (s) Database
Federal Court Decisions
Date
2021-03-05
Neutral citation
2021 FC 207
File numbers
T-2046-12
Notes
A correction was made on August 20, 2021
Decision Content
Date: 20210305
Docket: T-2046-12
Citation: 2021 FC 207
Ottawa, Ontario, March 5, 2021
PRESENT: The Honourable Mr. Justice Lafrenière
BETWEEN:
ROGERS COMMUNICATIONS CANADA INC., BELL MOBILITY INC., AND QUÉBECOR MEDIA INC.
Plaintiffs / Defendants by Counterclaim
and
SOCIETY OF COMPOSERS, AUTHORS AND MUSIC PUBLISHERS OF CANADA (A.K.A. SOCAN)
Defendant / Plaintiff by Counterclaim
JUDGMENT AND REASONS
I. Overview
[1] The Copyright Act, RSC, 1985, c. C-42 [Copyright Act] sets out a detailed process by which artists’ works are protected and royalties collected and paid.
[2] The Plaintiffs are Canadian corporations that offer mobile communications services in Canada: Rogers Communications Partnership [Rogers], Bell Mobility Inc. [Bell], and Québecor Media Inc. [Québecor]. Québecor owns the telecommunications company Vidéotron, which is involved in Québecor’s wireline and wireless services.
[3] The Defendant, Society of Composers, Authors and Music Publishers of Canada [SOCAN], is a not-for-profit corporation incorporated under the Canada Not-for-profit Corporations Act, SC 2009, c 23, and a collective society as defined in section 2 of the Copyright Act. SOCAN carries on the business of granting licences for the public performance and communication to the public by telecommunication in Canada of dramatico-musical and musical works.
[4] By this action, the Plaintiffs seek to recover royalties paid over a period of ten years to SOCAN for the transmission of ringtones containing musical works within the SOCAN’s repertoire that were downloaded onto mobile devices of the Plaintiffs’ customers. SOCAN has counterclaimed, seeking payment of ringtone royalties that the Plaintiffs has refused to pay.
II. The Evidence
[5] The history of the proceedings between the parties is long and convoluted. Fortunately, much of the evidence at trial was in the form of an Agreed Statement of Facts and Book of Documents.
[6] In this decision, I will first set out the agreed facts, followed by areas of disagreement with the facts and then my analysis of the issues and findings.
A. Agreed Facts
[7] SOCAN owns and/or administers in Canada the performance and communication rights in the world repertoire of copyright protected music. Canadian rightsholders who may be entitled to royalties for the performance or communication of music can become members of SOCAN and assign their rights to SOCAN. Furthermore, as a result of reciprocal agreements between SOCAN and similar organizations in other countries, SOCAN controls and administers in Canada the performing and communication rights in all or virtually all musical works in the world repertoire of copyright music.
(1) Ringtones
[8] A ringtone is a digital file that contains all or a substantial part of a musical work. A ringtone is stored in the memory of a mobile device such as a cell phone and is intended to be played by the mobile device to indicate an incoming call or message.
[9] The Plaintiffs’ services with respect to the sale and delivery of ringtones work in the following manner:
a) a Plaintiff makes a selection of ringtones available to the subscribers of its service;
b) an individual subscriber may select, pay for and download a ringtone or ringtones that the service makes available which are then downloaded onto the subscriber’s mobile divide;
c) the ringtone can then be played on the subscriber’s mobile device to indicate an incoming call or text message.
(2) Tariffs – Generally
[10] The Copyright Board is the regulatory body established by the Copyright Act to certify tariffs, such as those that govern the payment of copyright royalties to SOCAN for, inter alia, the public performance or communication to the public by telecommunication in Canada of musical works.
[11] Pursuant to section 67.1 of the Copyright Act (as it was in force at the time), SOCAN files with the Board tariffs proposing the licence fees (or “royalties”) to be paid by music users who perform in public or communicate to the public by telecommunication musical works forming part of SOCAN’s repertoire. The tariffs proposed by SOCAN are subject to review and approval by the Board and, once approved and certified by the Board, are published in the Canada Gazette.
(3) Tariff 24 (2003-2005)
[12] Tariff 24 is the name given to SOCAN’s tariff of royalties for the use of musical works in ringtones.
[13] Pursuant to subsection 67.1(1) of the Copyright Act, SOCAN filed a proposed Tariff 24 for Ringtones, for each of the years 2003, 2004 and 2005 [Tariff 24 (2003-2005)] with the Board.
[14] Pursuant to subsection 67.1(5) of the Copyright Act, certain of the Plaintiffs (along with others) filed written objections with the Board to the proposed Tariffs for those same years.
[15] The Board convened a hearing in respect of Tariff 24 (2003-2005). Bell participated in the hearing as an Objector. In addition, the wireless industry association, the Canadian Wireless Telecommunications Association [CWTA], participated in the hearing as an Objector. Rogers is a member of the CWTA.
[16] This hearing led to the Board’s first ringtones decision, dated August 18, 2006 [Tariff 24 (2003-2005) Decision], in which the Board determined the royalty to be paid to SOCAN by services that offered ringtones during the period from 2003 to 2005.
[17] In its Tariff 24 (2003-2005) Decision, the Board concluded that the transmission of a ringtone is a communication of a musical work to the public by telecommunication, within the meaning of paragraph 3(1)(f) of the Copyright Act such that a licence would be required from and royalties payable to SOCAN.
[18] On August 18, 2006, the Board certified Tariff 24 for the years 2003 to 2005 pursuant to subsection 68(3) of the Copyright Act. The tariff set a royalty rate of 6% of the price paid for a ringtone, subject to a minimum royalty of $0.06 per ringtone.
[19] Three of the Objectors to the Tariff 24 (2003-2005) Board proceeding, including Bell, and the CWTA, sought judicial review of the Board’s certification decision.
[20] By letter dated November 17, 2006 from Mr. Howard Slawner, Director of Regulatory Matters with Rogers [Slawner Letter], SOCAN was put on notice that Rogers would seek reimbursement of any royalty payments made under Tariff 24 (2003-2005) in the event it was successful on judicial review or further appeal. Relevant portions of the Slawner Letter are reproduced below.
As stipulated by the SOCAN Tariff 24 decision of the Copyright Board of Canada dated August 18, 2006, please find enclosed Rogers Wireless Inc's ringtone royalty payment in the amount of $1,697,324.67. This amount is for the period beginning January 1, 2003 up to September 30th, 2006. It includes interest at the rate established by the Copyright Board as well as GST. The payment is made on behalf of both Rogers Wireless and FIDO.
Rogers continues its efforts to collect all the necessary data required to properly calculate its royalty payment. While we remain confident that the calculations we used to determine the enclosed payment are fundamentally correct, there does remain the possibility that a correction will be required, either higher or lower. While Rogers is proceeding to make its payment according to the Board's decision, we do reserve the right to make any necessary adjustments to future copyright payments should they be required.
This payment is being made consistent with the terms of the certified Tariff No. 24 - Ringtones dated 19 August 2006. However, as you are aware, the Copyright Board's decision certifying that Tariff is currently the subject of a judicial review application to the Federal Court of Appeal. In the event that the application, or any further appeal of that decision is successful, SOCAN will reimburse all royalty payments made pursuant to the Tariff including interest at the same rate specified by the Board in the Tariff. Rogers also reserves the right to setoff any amount owed to it by SOCAN against any other royalty payment made to SOCAN by the Rogers group of companies.
[21] The Objectors’ application was heard by the Federal Court of Appeal in October 2007. They argued that the transmission of a ringtone containing a portion of a musical work to a mobile device was not a communication of that musical work to the public by telecommunication, within the meaning of paragraph 3(1)(f) of the Copyright Act [the “Ringtone Download Issue”].
[22] On January 9, 2008, the Federal Court of Appeal dismissed the application for judicial review and upheld the Board’s decision: Canadian Wireless Telecommunications Assn. v. Society of Composers, Authors and Music Publishers of Canada, 2008 FCA 6 [CWTA]. The Federal Court of Appeal held that the Board correctly concluded that the transmission of a musical ringtone is a communication of the musical work to the public by telecommunication and as such falls within the scope of paragraph 3(1)(f) of the Copyright Act.
[23] On September 18, 2008, the Supreme Court of Canada dismissed the Objectors’ application for leave to appeal the CWTA decision.
(4) Tariff 24 (2006-2013)
[24] Pursuant to subsection 67.1(1) of the Copyright Act, SOCAN filed with the Board a proposed Tariff 24 for Ringtones for each of the years 2006 to 2010. For each of these years, SOCAN proposed an increase in the royalty rate from the 6% previously certified by the Board to 10%.
[25] Pursuant to subsection 67.1(5) of the Copyright Act, all of the Plaintiffs (along with others) filed with the Board written objections to the proposed Tariff 24 for those same years.
[26] On October 17, 2008, counsel for SOCAN wrote to the Board requesting that it establish a schedule leading to an oral hearing for the purpose of considering Tariff 24 for the years 2006 to 2009.
[27] On October 22, 2008, Ms. Suzanne Morin, counsel to Bell, wrote to the Board to advise that some Objectors and SOCAN were interested in attempting to settle both the ringtone and ringback portions of proposed Tariff 24 for the years 2006 to 2009.
[28] On May 22, 2009, Ms. Morin wrote to the Board to confirm that SOCAN and the Objectors had reached “an agreement in principle on ringtones for the years 2006-2013” and also agreed to extend the period covered by the agreement from 2006 to 2013.
[29] In January 2010, SOCAN and the Plaintiffs (and others) concluded their agreement on the terms and conditions of Tariff 24 for the years 2006-2013 [the “2010 Agreement”]. The agreement was meant to settle a step in a regulatory proceeding before the Board, including the royalty rate for ringtones.
[30] Given its relevance to the issues, the body of the agreement is reproduced below in its entirety:
WHEREAS
The Copyright Board of Canada (the “Board”) last certified SOCAN Tariff 24 for Ringtones for the years 2003 to 2005 as set out in Appendix A (the “Approved Tariff”);
The Approved Tariff was certified by the Board on the basis of, among other things, the royalties paid for musical Ringtones in the Canadian reproduction rights market,
The royalties paid for musical Ringtones in the Canadian reproduction rights market have declined;
The parties agree that the size of the Canadian market for musical Ringbacks is extremely small and not ripe for rigorous copyright valuation analysis at the present time;
Pursuant to section 67.1(1) of the Copyright Act (the “Act”), SOCAN filed with the Board a proposed Tariff 24 for Ringtones and Ringbacks, for each of the years 2006 to 2010 (the “Proposed Tariff”);
Pursuant to subsection 67.1(5) of the Act, all or some of the Objectors filed with the Board written objections to the Proposed Tariff;
The parties have reached agreement on the terms and conditions of Tariff 24 for the period 2006 to 2013 and desire that the tariff be approved and certified by the Board in accordance with their agreement, as set out herein.
THE PARTIES THEREFORE AGREE AS FOLLOWS:
1. The tariff structure, royalty rates, terms and conditions of SOCAN Tariff 24 for the period January 1, 2006 to December 31, 2010 shall be as set out in Appendix “B”.
2. The Objectors shall withdraw their objections to Tariff 24 for the years 2006 to 2010 and the parties shall jointly request that the Board certify the tariff in accordance with Appendix “B”.
3. No later than March 31, 2010, SOCAN shall file Tariff 24 for the years 2011 to 2013 inclusively to reflect [Appendix B], for approval by the Board in accordance with the requirements of the Act. Provided that SOCAN is in compliance with this Agreement, the Objectors shall not file any objections to the 2010 to 2013 tariff proposal and the parties shall jointly request that the Board certify the tariff in accordance with Appendix “B” for that period.
4. The parties will execute and deliver such documents and make such appearances before the Board as may be reasonably necessary to support and obtain approval by the Board for Tariff 24 for the period 2006 to 2013 as contemplated in the present Agreement. In the event that the Board denies the joint request of the parties for approval of the tariff as contemplated herein, this Agreement shall become null and void.
5. The parties acknowledge and agree that:
a. Nothing in this Agreement shall prejudice the rights of any party in respect of any period subsequent to that covered herein or any music uses other than those contemplated herein,
b. Nothing in this Agreement shall constitute an admission by any party as to the value of or the royalties payable for the communication rights in musical works forming part of Ringtones and Ringbacks in any period subsequent to the year 2013;
c. The parties shall subsequently be free to take such positions and introduce such evidence or argument as to the value of or the royalties payable to SOCAN for any period subsequent to this Agreement as any party may deem advisable.
This clause shall survive the termination of this Agreement.
6. This Agreement shall be binding on the parties hereto and their respective successors and assigns.
[31] Pursuant to the terms of the 2010 Agreement, the royalty rate was continued at 6% for the period from January 1, 2006 to June 30, 2009, reducing to 5% for the period from July 1, 2009 to the end of the term on December 31, 2013. SOCAN subsequently filed Tariff 24 for each of the years 2011 through 2015 with the Board in accordance with the 2010 Agreement.
[32] SOCAN and the Plaintiffs submitted the 2010 Agreement to the Board on June 7, 2010 and requested that Tariff 24 be approved and certified by the Board for the years 2006 to 2013 in accordance with the terms of the agreement.
[33] In its decision dated June 29, 2012, the Board approved the 2010 Agreement and certified Tariff 24 in the form set out in the agreement for the period January 1, 2006 to December 31, 2013 [Tariff 24 (2006-2013)].
[34] On June 30, 2012, the certified Tariff 24 (2006-2013) was published in the Canada Gazette.
[35] No party sought judicial review of the Board’s Tariff 24 (2006-2013) Decision of June 29, 2012.
(5) Tariff 24 Payments by the Plaintiffs
[36] Between November 14, 2006 and July 12, 2012, the Plaintiffs made payments totalling $6,852,563.00 to SOCAN in accordance with Tariff 24:
a) Rogers: $4,251,005;
b) Bell: $2,586,772; and
c) Québecor/Vidéotron: $14,786.
[37] As discussed below, the Plaintiffs have objected to the applicability of SOCAN’s rights under the Copyright Act to downloads of musical works in the context of both the Tariff 22 and Tariff 24 proceedings.
(6) Distribution of Royalty Payments
[38] When SOCAN receives royalty payments pursuant to Tariff 24, they are allocated to a specific distribution pool for Tariff 24. After deducting an amount for overhead, SOCAN then distributes the royalties to its members and to affiliated foreign societies according to the SOCAN Distribution Rules.
[39] SOCAN’s ringtones distributions are offset from the date of performance by a number of months. For example, distributions are made in the fourth quarter of the year for performances that took place in the first quarter of that year.
[40] SOCAN at times freezes distribution from a distribution pool—in whole or in part—if a dispute is raised about royalties. In the case of the ringtones royalty pool, when the Board’s Tariff 24 (2003-2005) decision was under judicial review, the Plaintiffs (along with other Tariff 24 licensees) continued to make royalty payments pursuant to the tariff as certified, but SOCAN froze distribution of these royalties.
[41] Following the Supreme Court of Canada’s dismissal of the application for leave to appeal the Federal Court of Appeal’s decision in CWTA on September 18, 2008, SOCAN released the freeze on the ringtones royalties. In November 2009, SOCAN distributed $9,474,580 in accumulated ringtones royalties to its Canadian members and to affiliated foreign societies for distribution to their respective members.
[42] Between November 2009 and August 2012, SOCAN distributed an additional $3,246,314 of ringtones royalties.
[43] SOCAN froze distributions from the ringtones pool again when the Plaintiffs applied to the Board to rescind Tariff 24 in August 2012 (as discussed further below). As a result, $300,000 remains undistributed of the net income in the ringtones distribution pool.
(7) Tariff 22
[44] SOCAN Tariff 22 is a separate SOCAN tariff that sets royalties for other uses of music on the Internet. For the period 1996 to 2006, SOCAN filed a series of proposed tariffs (entitled 22.A to 22.G) proposing the royalties to be paid for the transmission of musical works over the internet or similar digital network (including mobile networks).
[45] On October 18, 2007, the Board issued its decision in respect of Tariff 22.A for the period 1996 to 2006 and certified Tariff 22.A for those years. Tariff 22.A set the royalties to be paid when musical works are downloaded or streamed over the Internet or a mobile network. The Board held that the download of a musical work over the Internet or other networks is a communication to the public by telecommunication, within the meaning of paragraph 3(1)(f) of the Copyright Act. The Board also held that streaming musical works to individual subscribers (i.e. “point to point transmissions”) is a communication to the public by telecommunication, within the meaning of paragraph 3(1)(f) of the Copyright Act.
[46] Some of the Plaintiffs, as well as other Objectors, applied to the Federal Court of Appeal for judicial review of the Board’s decision to certify Tariff 22.A. In the application, the applicants argued that the download of a musical work is not a communication to the public by telecommunication, within the meaning of paragraph 3(1)(f) of the Copyright Act.
[47] On October 25, 2008, the Board issued its decision in respect of Tariffs 22.B to 22.G for the period 1996 to 2006 and certified Tariffs 22.B to 22.G for those years. In its decision, the Board held that the download of a video game that contains a musical work or substantial portion of a musical work is a communication of that work to the public by telecommunication within the meaning of paragraph 3(1)(f) of the Copyright Act, similar to its decision the year before in Tariff 22.A.
[48] The Entertainment Software Association [ESA] and the Entertainment Software Association of Canada [ESAC] applied to the Federal Court of Appeal for judicial review of the Board’s decision to certify Tariffs 22.B to 22.G. In their application, ESA and ESAC argued that the download of a video game that contains a musical work or substantial portion of a musical work is not a communication of that work to the public by telecommunication within the meaning of paragraph 3(1)(f) of the Copyright Act.
[49] In May 2010, the judicial review applications related to the Board’s Tariff 22.A and Tariffs 22.B to 22.G decisions were heard together by the Federal Court of Appeal.
[50] On September 2, 2010, the Federal Court of Appeal issued its decisions on the applications for judicial review of the Board’s decisions. The Court dismissed the applications and upheld the Board’s decisions: Entertainment Software Association v Canada (Society of Composers, Authors, and Music Publishers), 2010 FCA 221 and Shaw Cablesystems GP v Society of Composers, Authors and Music Publishers of Canada, 2010 FCA 220.
[51] On March 24, 2011, the Supreme Court of Canada granted the applications for leave to appeal the Tariff 22.A and Tariffs 22.B to 22.G decisions rendered by the Federal Court of Appeal. The appeals were heard together on December 6, 2011.
[52] In SOCAN’s factum filed with the Supreme Court of Canada on September 9, 2011 (incorrectly dated September 8, 2012) [SOCAN’s Factum], SOCAN argued that if the Court ruled in favour of the appellants (as it did), the decision would also apply to ringtone downloads that were the subject of Tariff 24, the tariff in issue in this case. Relevant extracts of SOCAN’s factum are reproduced below.
52. The arguments advanced by the Appellants are counter to these principles of interpretation and, if accepted, would not only erode copyright holders' rights to compensation for the communication of their works, but would in fact completely eliminate their right to such compensation for both present and future uses of their music in several important respects. In fact, all current and future copyright works that are transmitted on the Internet in a manner that does not result in the immediate listening or viewing upon reception would be excluded from protection under section 3(1)(f).
53. This broad restriction would apply not only to SOCAN 's musical works, but to all types of works protected under the Act, including literary works (which include computer programs), musical, artistic and dramatic works (including movies and television programs). In the case of SOCAN, there would be no legal basis for retaining or continuing to collect royalties for the Internet transmission of musical works by popular downloading services such as iTunes, Puretracks, Napster and ArchambaultZiq under Tariff 22.A, ringtones under Tariff 24, and other audio and audio-visual downloads presently covered by Tariffs 22.B-G.
54. In addition, current uses of music in traditional media for which commercial entities have been paying communication royalties to SOCAN for years would suddenly find themselves without any legal obligation to continue to pay those fees and would undoubtedly seek refunds for past periods…
[underline added].
(8) Tariff 22 Supreme Court Decision
[53] On July 12, 2012, the Supreme Court of Canada rendered two decisions: Entertainment Software Association v Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34 [ESA] and Rogers Communications Inc v Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35 [Rogers SCC].
[54] In these cases, the Supreme Court determined the proper scope of the exclusive rights granted to authors of musical works in section 3 of the Copyright Act and, in particular, paragraph 3(1)(f).
[55] In ESA, the Supreme Court of Canada held that the downloading of a musical work is not a communication to the public by telecommunication and does not therefore infringe paragraph 3(1)(f) of the Copyright Act.
[56] In Rogers SCC, the Court confirmed that streaming musical works to individual subscribers (i.e. “point to point transmissions”) is communication to the public by telecommunication. The Rogers SCC decision also adopts the ESA finding that a download is not a communication.
[57] Following the release of the ESA and Rogers SCC decisions, SOCAN returned all the royalties it had collected in respect of the downloading of musical works pursuant to Tariff 22.A for the entire period covered by the tariffs (i.e. back to 1996) but distributed the royalties it had collected in respect of streaming musical works.
[58] In light of the ESA decision, the Plaintiffs took the position that Tariff 24 (2003-2005) and Tariff 24 (2006-2013) in respect of ringtones were without legal foundation and should be set aside. The Plaintiffs ceased making payments to SOCAN for the download of ringtones pursuant to Tariff 24, but continued to transmit ringtones containing musical works within SOCAN’s repertoire to their customers.
(9) Application to Vary the Board’s Decision
[59] On August 1, 2012, the Plaintiffs applied to the Board pursuant to section 66.52 of the Copyright Act, to vary, by rescinding, its decisions in relation to Tariff 24 in light of the decisions in ESA and Rogers SCC.
[60] The Board released its decision on January 18, 2013 in which it denied the Plaintiffs’ application to vary Tariff 24 (2003-2005) and Tariff 24 (2006-2013), holding that the Board did not have the power under the Copyright Act to rescind a previously certified tariff.
[61] The Plaintiffs did not seek judicial review of the Board’s decision.
(10) Present Action Before This Court
[62] On November 13, 2012, the Plaintiffs commenced the present action seeking, amongst other relief, a declaration that the transmission of a copy of a ringtone containing a portion of a musical work is not a communication to the public by telecommunication of the musical work for the purpose of paragraph 3(1)(f) of the Copyright Act as well as, restitution in the amount of $15,000,000.00 (although the Plaintiffs’ actual damages are less, as set out above).
[63] The Plaintiffs seek in the alternative a declaration that the payments made by the Plaintiffs to SOCAN are infused with and have been held by way of constructive trust on behalf of the Plaintiffs, and an order that the payments be delivered to the Plaintiffs forthwith. The Plaintiffs also seek an accounting of those payments and a tracing order with respect to those payments.
[64] In its Statement of Defence, SOCAN raises a number of defences to the Plaintiffs’ claim, including that the ESA and Rogers SCC decisions do not apply to the download of ringtones and that the decisions of the Board certifying Tariff 24 (2003-2004) and Tariff 24 (2006-2013) are res judicata and not subject to retrospective attack.
[65] The Plaintiffs ceased paying licence fees under Tariff 24 following the release of the ESA decision in July 2012, but continued to sell ringtones. Each of the Plaintiffs ceased selling ringtones at different times: Rogers in June 2012; Québecor in March 2014; and Bell in June 2015.
[66] By way of counterclaim, SOCAN seeks payment of unpaid licence fees owing under Tariff 24 for the period from July 12, 2012 to March 6, 2015 (or such earlier date as each Plaintiff stopped selling ringtones). SOCAN’s counterclaim also seeks entitlement to recovery for royalties related to the new making available right introduced into the Copyright Act in November 2012.
[67] SOCAN also seeks statutory damages pursuant to subsection 38.1(4) of the Copyright Act in a sum of not less than three and not more than ten times the outstanding royalties due and payable to SOCAN.
(11) Procedural History and Decision in This Matter
[68] The issues for determination at trial have been the subject of judicial consideration and comment.
[69] On March 6, 2014, this Court directed the preliminary determination of six questions of law pursuant to Rule 220(1)(a) of the Federal Courts Rules, SOR/98-106 [the Rules]. In a decision dated March 6, 2015, the motions judge, Mr. Justice James O’Reilly, reformulated and answered the six questions: Rogers Communications Partnership v. Society of Composers, Authors and Music Publishers of Canada, 2015 FC 286 [Rogers FC].
[70] A critical issue question before the Court was whether the Plaintiffs’ claim had already been decided against them. Justice O’Reilly found that the Plaintiffs were not precluded from pursuing the action by virtue of the previous decisions of the Board and the Federal Court of Appeal.
[71] Justice O’Reilly held that the Ringtone Download Issue was the essential issue raised in the action and was the same issue that was decided in CWTA. In addition, he found that the parties to the action and the prior litigation were the same. As such, he concluded that the first two criteria before the doctrine of res judicata could apply were met. However, Justice O’Reilly found that the third criterion was not met because “a decision of the Board is never really final” by virtue of section 66.52 of the Copyright Act, which empowers the Board to vary a tariff certification decision if there has been a material change in circumstances since the decision.
[72] On appeal, the Federal Court of Appeal determined that three questions referred to the Court for preliminary determination were not properly before Justice O’Reilly and should not have been answered because they were not pure questions of law: Rogers Communications Partnership v. Society of Composers, Authors and Music Publishers of Canada (SOCAN), 2016 FCA 28, at para 126 [Rogers FCA]. The Court of Appeal proceeded to decide the three other questions as follows.
[73] First, in terms of whether the doctrine of issue estoppel, or res judicata, should apply to bar the Plaintiffs’ claim, the Court held that Justice O’Reilly had erred in his conclusion that the finality criterion of issue estoppel was not met in relation to the Board’s decision to certify Tariff 24 (2003-2005). It found that all three requirements of the doctrine were present and that the Ringtone Download Issue was finally decided. The Court of Appeal directed that the judge who conducts the trial of the action must determine whether, in the exercise of such judge’s discretion, the doctrine of issue estoppel should be applied in respect of the claims made by the Plaintiffs.
[74] Second, the Federal Court of Appeal agreed with Justice O’Reilly that the Internet transmission of a ringtone file is not a communication of musical work to the public. The Court noted that this was in line with the Supreme Court’s finding in ESA and Rogers FCA, although the decisions did not address Tariff 24 (2003-2006) or Tariff 24 (2006-2013).
[75] Third, the Federal Court of Appeal concluded that the Copyright Board had the jurisdiction to certify Tariff 24. It found that Tariff 24 was challenged when it was first certified, was upheld by the Federal Court of Appeal in CWTA, and there was at the time no judicial or administrative decision striking down the said tariff.
[76] The Federal Court of Appeal directed the judge who conducts the trial of the action to determine the following questions without regard for the decision of Justice O’Reilly.
1) Based on their 2010 Agreement with SOCAN, are the Plaintiffs precluded from claiming the relief they seek?
2) Was SOCAN unjustly enriched when it received Tariff 24 royalties?
3) Are the Plaintiffs entitled to an order tracing the distribution of Tariff 24 royalties?
B. Evidence Adduced at Trial
[77] In addition to the agreed facts and documents, each party called one witness to provide factual and contextual background that is not subject to agreement. The parties also relied on read-ins from the opposing party’s examination for discovery. The additional evidence focussed on the issues that remain at play in the proceedings.
[78] The Plaintiffs called three witnesses: Mr. Nauby Jacob for Bell, Mr. Upinder Saini for Rogers, and Ms. Antoinette Noviello for Québecor.
[79] Mr. Jacob is the Vice President of Products Services at Bell. He is responsible for product development and management for multiple products at Bell. Ringtones was one of the products for which he was responsible. Mr. Jacob started working with Bell in 2007. Mr. Jacob worked for Telus previously where he was also responsible for ringtones.
[80] Mr. Saini is the Senior Vice President of Product Management and Development at Rogers. He has held several executive positions at Rogers, including Vice President of Internet Services and Vice President of Product Development. He has worked with Rogers for twenty years and he has been involved with ringtones “right from the get-go”.
[81] Ms. Noviello is the Vice President, Corporate Controller at Québecor. She is responsible for Québecor’s financial operations, including financial operations for Vidéotron. She has held that position since 2015. She worked with Québecor from 1995 to 2000 and from 2011 onwards. Ms. Noviello testified in French and by way of video conference from Montreal.
[82] The Plaintiffs’ witnesses provided general information regarding their company’s ringtone business and their business relationship with SOCAN. They set out the chronology of events leading to the establishment of royalties under Tariff 22 and Tariff 24, and provided their companies respective positions regarding payments to SOCAN under the tariffs and pursuant to the 2010 Agreement.
[83] SOCAN called Jennifer Brown to testify on its behalf. Ms. Brown is the Senior Vice President of Operations and Reproduction Rights at SOCAN, where she oversees the licensing department, which collects licence fees from domestic sources, and the distribution department, which pays royalties to songwriters and publishers. She has held that position since 2017, but she has worked with SOCAN for twenty-four years in various departments. She has had responsibility for, and knowledge of, ringtones.
[84] Ms. Brown covered much of the same terrain as the Plaintiffs’ witnesses. She also provided background and general information about SOCAN, including its purpose, mandate and structure. She explained how the performance and communication rights are administered, how tariffs are fixed and certified, how records are kept, and how the tariffs are collected and distributed to rightsholders and affiliated foreign societies.
(1) Points of Disagreement
[85] The evidence of the witnesses is largely consistent with respect to the material facts at issue, but diverges on four significant points: (1) the relationship between the parties; (2) the alleged linkage between Tariff 22 and Tariff 24; (3) the proper interpretation of the 2010 Agreement; and (4) the significance of arguments raised in SOCAN’s Factum. In order to provide the necessary context, I will first summarize the points of disagreement between the parties before setting out other relevant facts that I have found based upon the evidence I have heard and seen at trial.
(a) Relationship between the Parties
[86] Mr. Jacob described his company’s relationship with SOCAN as wide, that goes across not just Mobility, but also their wire line business (TV and Internet), and media division. While there might be disagreement about whether a payment should be made, Bell’s goal was always to avoid tension. Once the Copyright Board set a tariff for a particular use, Bell did not consider it set in stone forever. According to Mr. Jacob, “it was just very fluid”. It was always Bell’s expectation that “if we win our arguments then we should get the money back for what we should not have paid.”
[87] Mr. Saini testified that Rogers’ relationship with SOCAN was typical. SOCAN would generally suggest a particular tariff, the parties would appear before the Copyright Board to provide their point of view and the Board would decide whether the tariff is applicable or not. It was also “a fairly regular practice” to have the parties agree to implement the proposed tariff and wait for the Board’s decision, as Mr. Saini explained below.
The normal course of business that you will have agreement in principle, established some sort of payments, and then based on the final outcomes of what the decisions come out eventually, you will either pay up more if you were paying less or you will get the refunds if you were paying in excess. That is typically how the nature of the relationship is with SOCAN and that is typically how we have dealt with the tariffs as you carry on business.
[88] If there was a disagreement about the rate, Rogers and SOCAN would go through an appeal process and then the courts to arrive at a final tariff. After the final tariff was decided, Rogers and SOCAN would settle payments to reflect that rate. Mr. Saini cited Tariff 22 as a example where the streaming tariff was invalidated. In that case, SOCAN paid back the money. Rogers and SOCAN would sometimes agree to some sort of payment plan, and after the final tariff is decided, Rogers or SOCAN would true up its payments (pay the difference) to the other.
[89] Ms. Noviello considered SOCAN to be a business partner of Québecor and Vidéotron. She explained that where circumstances have changed, or an interpretation of the law has proven that amounts paid were paid unjustly or incorrectly, it is a normal process to correct the situation, reclaim amounts owed or pay out amounts that are owing.
[90] Ms. Brown agreed that SOCAN had a good working relationship with the Plaintiffs and worked together collaboratively. Once a tariff was approved, the Plaintiffs’ operations teams and SOCAN’s licensing and data teams would work together to figure out the best way for timely reporting and payment of royalties.
[91] She disagreed, however, with Mr. Jacob’s characterization of SOCAN’s relationship with its licensees as being fluid. She maintained that SOCAN had very rigid distribution rules in place. Their goal was to pay royalties that were accurate and timely and consistent to members and rightsholders. There were also strict reporting terms that licensees had to adhere to, such as payment dates and the usage information that licensees must provide in order that SOCAN can distribute the royalties.
[92] According to Ms. Brown, there were times when an interim tariff was in place and the licensee would pay SOCAN based on the interim tariff. If the tariff was subsequently certified at a different rate, a true-up under the certified tariff would be arranged with the licensee. However, until SOCAN was satisfied that it was a final and certified tariff, or that all court avenues related to the particular tariff had been exhausted, distribution of the licence fees would be put on hold. This was done in order to avoid having to claw back royalties from members and other rightsholders around the world.
(b) Alleged Linkage between Tariff 22 and Tariff 24
[93] Mr. Jacob and Mr. Saini testified that Tariff 22 and Tariff 24 were considered by their company to be the exact same thing, whether it was downloading a full song or only part of a song, or the song was downloaded to a laptop or cell phone. From the Plaintiffs’ perspective such downloads did not constitute the performance of a musical work.
[94] According to Mr. Jacob, while the parallel proceedings related to Tariff 22 and Tariff 24 were making their way through the various levels of appeal, Bell drew no distinction between the two. They always viewed the dispute leading to the Supreme Court of Canada’s decisions related to Tariff 22 as applicable to Tariff 24.
[95] Mr. Saini expressed the same view. Rogers anticipated receiving a refund for its Tariff 24 payments after the ESA and Rogers SCC decisions were released.
[96] Ms. Noviello stated that it is normal business practice that if payments are made under certain assumptions that later turn out to be incorrect, there is normally a settlement process that is under taken with the other party. It was Québecor’s expectation that payments related to Tariff 24 would be refunded following the release of the ESA decision. On cross-examination, Ms. Noviello acknowledged that from a financial perspective, every tariff has a specific calculation and a specific royalty or percentage that is paid for each tariff.
[97] The Plaintiffs admitted on discovery that no one from their companies ever alerted SOCAN to the fact that if they were successful on its Tariff 22 judicial review, that they would seek