May 2003


The Supreme Court of Canada is to review the position of Internet Services Providers who facilitate the transmission of music on the internet. The case in question, known as the ‘Tariff 22 case’ began in 1995 when the Society of Composers, Authors and Publishers of Music in Canada (SOCAN) filed an application with the Copyright Board of Canada for the creation of a new royalty to cover music on the Internet. SOCAN argued that all parties involved in an Internet transmission – from the poster to the Internet service provider to the recipient – are liable for the communication and thus all bear some responsibility to pay an appropriate licence or royalty fee. Canadian Internet service providers (ISPs) led the opposition to the SOCAN proposal arguing that as mere intermediaries (much like phone companies) who should not be held liable for the content transmitted over their equipment.

In 1999 the Copyright Board ruled that music transmitted over the Internet qualified as a public performance under the Copyright Act and therefore could be subject to a royalty. It also determined that ISPs could rely on a provision that exempts intermediaries from liability where they function strictly in an intermediary capacity. Furthermore, the Board ruled that that the proposed royalty could only be applied to Canadian-based Web servers.

SOCAN appealed that decision to the Federal Court of Appeal, In May 2002 the Federal Court upheld the board’s determination that ISPs may rely upon the intermediary exemption in most circumstances, since they provide nothing more than the “means of telecommunications necessary” for their subscribers to communicate on the Internet. But the Court identified at least one exception to this general conclusion. Focusing on the word “necessary,” the court reasoned that ISPs that facilitate the speedy delivery of material to subscribers go beyond what is strictly necessary to communicate. Accordingly, it ruled that this ‘caching’ was not protected by the intermediary exemption and that ISPs could be required to pay a royalty.

The court rejected the Board’s jurisdictional approach of limiting the reach of the proposed tariff solely to Canadian-based Web servers and adopted a “real and substantial connection” test for determining when assertion of jurisdiction is appropriate.

The Supreme Court of Canada will now have the final say on these issues.

This update is taken from an article by Professor Michael Geist, a law professor at the University of Ottawa. Professor Geist is also technology counsel with law practice Osler Hoskin & Harcourt LLP. See

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