[1]         Sharlow J.A.: These are two applications for judicial review of a decision of the Copyright Board of Canada [Board] dated April 8, 2009 (corrected May 6, 2009). The decision, reported as Satellite Radio Services—SOCAN (2005-2009); NRCC (2007-2010); CMRRA/SODRAC Inc. (2006-2009), certified certain royalty tariffs pursuant to section 70.15 [as enacted by S.C. 1997, c. 24, s. 46] of the Copyright Act, R.S.C., 1985, c. C‑42, payable by Sirius Canada Inc. (Sirius) and Canadian Satellite Radio Inc. (XM Canada) in relation to their satellite radio services.

[2]         The tariffs as certified are payable for the use of the repertoires of three collective societies: Society of Composers, Authors and Music Publishers of Canada (SOCAN) for the communication of musical or dramatico-musical works (2005–2009); Neighbouring Rights Collective of Canada (NRCC) for the communication of published sound recordings embodying musical works and performers’ performances of such works (2007–2010); and CMRRA/SODRAC Inc. (CSI) for the reproduction of musical works (2006–2009).

[3]         It was undisputed before the Board that SOCAN and NRCC were entitled to communication royalties from Sirius and XM Canada, the only dispute being the amount. It was also undisputed that CSI was entitled to certain reproduction royalties, but the extent of its entitlement was in dispute. The present applications, one by Sirius (A‑209‑09) and the other by CSI (A‑210‑09), challenge the Board’s determination of a number of legal issues relating to the royalty entitlement of CSI. The applications were heard together. These reasons address both applications.

[4]         The specific facts relating to each of the issues raised in these applications are set out with the analysis of each issue. The general background relating to the satellite radio services offered by Sirius and XM Canada during the years relevant to these applications is described by the Board in paragraphs 8 to 26 of its decision. The accuracy of that description is undisputed and it is reproduced here (footnotes omitted):

[5]         The tariffs set by the Board are stated as a percentage of the total revenues of Sirius and XM Canada. They are summarized in a table appended to its reasons. The main part of the table is reproduced below with an additional column added on the right to give an identifying designation to each tariff component:

[6]         The notes accompanying the full table in the Board’s decision explain that: (a) the C1 rate (0.10%) is subject to a 95% discount when no play copies are being made; (b) the C3 rate (2.90%) assumes that the receiver is also enabled for extended buffer and replay; and (c) the computed average rate (6.19%) is based on the assumption that 30 percent of subscribers have receivers with buffer and replay functions and 3 percent have MP3-like receivers.

[7]         These applications require consideration of the territorial scope of the Copyright Act, and consideration of what constitutes the “authorization” of a reproduction of a work. The relevant provisions of the Copyright Act read as follows [ss. 2 “copyright” (as enacted by S.C. 1997, ch. 24, s. 1), “infringing” (as am. idem), “musical work” (as am. by S.C. 1993, c. 44, s. 53), 3(1) (as am. by S.C. 1997, c. 24, s. 3), 27(1) (as am. idem, s. 15)]:

[8]         The core of the Board’s statutory mandate is the determination of an appropriate royalty tariff. Such determinations, when challenged on judicial review, are generally entitled to deference. However, such determinations sometimes require the Board to determine legal issues of general significance, including questions of the interpretation of the Copyright Act. A challenge to the Board’s determination of such legal issues are reviewed on the standard of correctness: Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, 2004 SCC 45, [2004] 2 S.C.R. 427, at paragraphs 49 and 50 (the Tariff 22 case).

[9]         Most of the issues in this case are similar in nature to the issues raised in the Tariff 22 case, in that the applicants are alleging that the Board has incorrectly determined general questions of copyright law. I have reviewed those issues on the standard of correctness. Other issues have been reviewed on the standard of reasonableness.

[10]        I propose to deal first with the Sirius application (A-209-09) and then with the CSI application (A-210-09).

[11]        Two tariff components are in issue in the Sirius application. One is the 1.87% component designated C2 in the table above. It is imposed in respect of satellite radio receivers with an “extended buffer” that automatically stores 44 to 60 minutes of programming that is broadcast on the channel to which the subscriber chooses to listen. The models with this feature are the Starmate Replay, the Starmate 4, the Sportster Replay, and the Stiletto (SL10 and SL100). A subscriber who has a satellite radio receiver with an extended buffer may press a button that causes live content to be paused and replaced with a replay of the stored content. Because the storage space in an extended buffer is limited, the oldest stored content is automatically replaced with new content once the buffer is full. The stored content is lost if the subscriber turns off the receiver, removes it from its docking station, or changes the channel.

[12]        The other tariff component in issue in the Sirius application is the 2.90%  component designated C3 in the table above. It is imposed in respect of the block recording feature included in the “Stiletto” models of satellite radio receiver (SL10 and SL100). When a subscriber engages the block recording feature, the receiver stores several hours of broadcast content for later replay (the SL10 stores up to 10 hours of programming in 6-hour blocks, the SL100 stores up to 100 hours of programming in 6-hour blocks). If the subscriber presses the “love” button during a broadcast, the content then being played (plus whatever is accessible from the replay buffer) is stored in a “library”. The saved content may be played back by accessing the library. The stored content is automatically replaced by content newly stored from a broadcast and any MP3 files downloaded by the subscriber.

[13]        It appears that some Sirius receivers may also be used as MP3 players. The MP3 feature does not enable a satellite radio subscriber to record satellite radio broadcast content. However, the Board noted that Sirius markets itself as an alternative to iPods or MP3 players, apparently on the basis that the MP3 feature employs the buffer capacity of Sirius radio receiver as described above. In my view, the fact that some satellite radio receivers may function as MP3 players is not relevant to the issues considered in the Sirius application.

[14]        It is convenient at the outset to deal with a relatively minor preliminary point. The Board said that it relied in part on the agreement of the parties that what is stored in the extended buffer of a radio receiver is a copy of the content that is made by the subscriber (see the Board’s reasons, at paragraph 110). Sirius denies that it made any such concession, but it has not argued that the stored content is not a copy. Rather, Sirius has argued in one of its alternative arguments that the Board breached its duty to provide adequate reasons on the question of whether the content in the extended buffer—which Sirius characterizes as “ephemeral storage”—is a reproduction of a substantial part of a work. In my view, it was open to the Board to determine, based on the record, that stored broadcast content in the extended buffer is a copy made by the subscriber. Further, given that the extended buffer stores 44 to 60 minutes of broadcast content that can be replayed by the subscriber, the Board could not reasonably have concluded that what is stored in the extended buffer at any point in time is not a substantial part of a copied work.

[15]        The heart of the Sirius application is its challenge to the Board’s conclusion that a satellite radio service provider, by supplying a subscriber with a receiver having an extended buffer or a block recording feature, necessarily authorizes the subscriber to copy works that are subject to copyright. The issue for this Court is whether the Board erred in law in reaching that conclusion.

[16]        The Board’s analysis of this point is encapsulated in paragraph 113 of its reasons, which reads as follows:

[17]        The resolution of the main issue raised in the Sirius application turns on the meaning to be given to the closing words of section 3 [as am. by S.C. 1988, c. 65, s. 62; 1993, c. 23, s. 2; c. 44, s. 55; 1997, c. 24, s. 3] of the Copyright Act, which refer to the authorization of any of the acts set out in the opening words of subsection 3(1) or in paragraphs 3(1)(a) to (i). The relevant portions of subsection 3(1) read as follows (emphasis added):

[18]        There is a long and consistent line of jurisprudence that gives a relatively narrow meaning to the closing words of subsection 3(1) of the Copyright Act. That jurisprudence is reflected in what is the leading Canadian authority on that point, CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13, [2004] 1 S.C.R. 339 (the CCH case).

[19]        One of the issues in the CCH case was whether the Law Society of Upper Canada, by providing self-service photocopiers for the use of its patrons in the Great Library and not monitoring their use, had authorized the patrons to copy the works in the Great Library collection, thereby breaching the copyright of the owners and publishers of the works. The Law Society had posted [at paragraph 39] the following notice above each photocopier: “The copyright law of Canada governs the making of photocopies or other reproductions of copyright material. Certain copying may be an infringement of the copyright law. This library is not responsible for infringing copies made by the users of these machines.”

[20]        The Chief Justice, writing for the Court, explained the meaning of “authorize” as follows (at paragraph 38 of her reasons):

[21]        Applying these principles, the Chief Justice concluded that the Law Society had not authorized any copying in breach of the right of any copyright holder. I summarize as follows the analysis leading to that conclusion.

[22]        Where a person authorizes the use of equipment that may be used lawfully but may also be used unlawfully to infringe copyright, it must be presumed that the person authorized only the lawful use of the equipment (see paragraph 43). Although patrons of the Great Library could have used the photocopiers to infringe copyright, it is equally plausible that the patrons used the photocopiers without infringing copyright. Therefore, the Law Society was prima facie entitled to the benefit of the presumption against the authorization of an infringing act.

[23]        That presumption is not rebutted by a notice warning a person who is permitted to use equipment that certain uses could infringe copyright (paragraph 44). Specifically, the “disclaimer notices” posted near the photocopiers in the Great Library did not constitute express acknowledgement by the Law Society that the photocopiers would be used in an unlawful manner.

[24]        The presumption may be rebutted if the person authorizing the use of equipment is, by virtue of its relationship with the user of the equipment, in a position to control the use of the equipment such that it can be said to have sanctioned, approved, or countenanced any infringement resulting from the use of the equipment. However, even if some patrons of the Great Library used its photocopiers to infringe copyright, the Law Society lacked the degree of control over the Great Library’s patrons that would rebut the presumption. This point is explained in more detail, at paragraph 45 (citation omitted):

[25]        In this case, satellite radio service providers may be said to authorize their subscribers to use all features of the radio receivers with which they are supplied. It is appropriate that the satellite radio service providers be given, prima facie, the benefit of the presumption against the authorization of the use of the receivers to infringe copyright. The issue for this Court is whether the presumption has been rebutted.

[26]        In the circumstances of this case, the question of rebuttal turns on the degree to which satellite radio service providers control the use of the satellite radio receivers they supply to their subscribers. In that regard, I do not read the CCH case as authority for the proposition that the degree of control required to rebut the presumption necessarily requires a particular legal relationship between the user of equipment and the person authorizing its use. In my view, while the requisite degree of control may exist if there is, for example, a master-servant relationship or an employer-employee relationship, it may also exist in other circumstances.

[27]        Here, the relationship is one of satellite radio service provider and subscriber. The service provider supplies the subscriber with broadcast content (some of which, but not all, is subject to copyright) and a receiver that must be used to receive the broadcast content. The use of a receiver with an extended buffer automatically causes 44 to 60 minutes of broadcast content to be copied, and the use of a receiver with block recording feature that is engaged automatically causes up to 10 or 100 hours of broadcast content to be copied.

[28]        It is important, in my view, that the subscriber cannot prevent the copying of broadcast content without turning the receiver off or, if the receiver has a block recording feature, by disengaging it. Because the copying is automatic, the only control that can be exercised over copying initiated by the subscriber rests with the satellite radio service providers. They alone know what is being broadcast and when, and what broadcast content is subject to copyright. They alone have chosen to supply their subscribers with receivers that preclude them from exercising any choice as to what is copied in the extended buffer once the receiver is turned on, and any choice as to what is copied when the block recording feature, if any, is engaged.

[29]        It is true that not all broadcast content is subject to copyright. However, it is equally true that when a particular work is being broadcast on a particular channel, and a satellite radio receiver is turned on and tuned to that channel, some or all of that work will necessarily be copied to the extended buffer or, in the case of a receiver with a block recording feature that is engaged, to the block recording memory. In practical terms, the use of a satellite radio receiver as it is intended to be used will always result in the making of infringing copies because of the technological choices made by satellite radio service providers.

[30]        The element of automatic copying by a satellite radio receiver is a factor that was not present in the CCH case. Each patron of the Great Library could choose what to copy and what not to copy. By contrast, in this case a subscriber causes the copying of all received broadcast content merely by using the satellite radio receiver as it is intended to be used. In my view, in the circumstances of this case, the presumption against the authorization of an infringing act is rebutted in this case by the degree of control exercised by the satellite radio service providers over their broadcast content and the features included in the radio receivers supplied to their subscribers.

[31]        This leads me to consider the question of disclaimer notices, which were the subject of considerable discussion in the hearing of these applications. Notices that are somewhat analogous to the disclaimer notices in the CCH case appear in the “user guide” and the “end user licence agreement” for Stiletto receivers. CSI argues statements from those documents could be interpreted by users as a “signal” that the copying of copyright material on the receiver is permitted. The Board appeared to accept this submission at paragraph 113 of its reasons, the last sentence of which reads as follows:

[32]        The notices to which this Court was referred read as follows:

[33]        As I read these notices, they are intended primarily to warn subscribers about certain impermissible uses of copies of broadcast content stored in the satellite radio receiver that may be subject to copyright. The notices might have been more thorough if they had expressly informed subscribers that merely receiving broadcast content on a receiver equipped with an extended buffer or a receiver equipped with a block recording feature that is engaged may result in the making of an infringing copy of broadcast content that is subject to copyright. Nevertheless, I am not inclined to conclude, as the Board apparently did [at paragraph 113], that the absence of that information justifies the conclusion that a subscriber might presume that the satellite radio service providers “purport to have the authority to allow private copying.” I would say, however, that the satellite radio service providers could not realistically have advised their subscribers against making infringing copies, because copying was automatic in the case of a receiver with an extended buffer, and in the case of a receiver with a block recording feature when it was engaged.

[34]        For these reasons, I conclude that the Board did not err in law when it concluded that the satellite radio service providers, by supplying a subscriber with a radio receiver having an extended buffer or a block recording feature, thereby authorized the subscriber to copy all broadcast content, including broadcast content that was subject to copyright. It follows that the Sirius application cannot succeed.

[35]        CSI asserts a number of challenges to the Board’s decision. Its challenges fall into two general categories. The first category relates to the determination of the location of the copying of a work and whether an infringing authorization can occur in relation to a copy made outside Canada. The second category relates to the copies of broadcast content made in the four-, six- or ten-second buffer memory found in all satellite radio receivers.

[36]        A copy of each work available for broadcast by Sirius and XM Canada resides in a main server located in the United States. When Sirius and XM Canada instruct their scheduling software to play a specific work, the instruction is sent to the United States main server, and the track for that work is uplinked from the United States main server to the satellite for transmission to Canada in the course of their Canadian broadcast activities.

[37]        Some of the electronic copies of works residing in the United States main server are created by transmission from a party located in the United States based on instructions from Sirius and XM Canada. Others are transmitted from the Canadian studios of XM Canada as a step in the programming of its Canadian channels. 

[38]        Programming entails the selection of works, some obtained in the form of CDs and some by direct electronic transfer from DMDS-Musicrypt to XM Canada’s computer in Canada. Once the XM Canada music director in Canada selects a work to be added to the XM Canada playlist, he or she engages a technological device that causes the electronic music file to be transferred from Canada to a main server located in the United States, where it remains permanently available for uplink to the satellite and transmission to Canada.

[39]        The issues raised by CSI in relation to the copies of works residing in the United States main server are whether the Board erred in law when it concluded that: (a) the Board has no jurisdiction to impose a royalty tariff in respect of a copy of a work made in the United States as a direct result of an act taken by XM Canada in Canada; (b) the Board has no jurisdiction to impose a royalty tariff in respect of XM Canada’s authorization in Canada of the making in the United States of a copy of a work; (c) Sirius and XM Canada did not authorize the copying in the United States of any works.

[40]        The Board concluded that, when an electronic copy of a work is transmitted to and stored on the United States main server solely as a result of the act of a person in Canada, the copying occurs in the United States and therefore the Board has no jurisdiction to impose a royalty tariff in respect of that copying. In reaching that conclusion, the Board reasoned that the act of reproduction occurs in the place where the creation of the copy is completed, so that an electronic copy of a work comes into existence in the United States when it is received by the server located in the United States. Therefore, that copy is made in the United States even if the mechanism by which the copy was created was activated in Canada.

[41]        CSI argues that where the copying is initiated in Canada, the act of copying occurs in Canada because there is no person outside Canada who can be held responsible for it. This argument assumes that the making of the copy in these circumstances cannot be subject to the copyright laws of the United States, and that the owner of the United States server who permits it to be used as the repository for copies of musical works cannot be held liable under the copyright laws of the United States. This Court was referred to nothing in the record and no jurisprudence that could support this assumption, and I see no basis for accepting it.

[42]        CSI also relies on the decision of eBay Canada Ltd. v. M.N.R., 2008 FCA 348, [2010] 1 F.C.R. 145, at paragraph 52, for the proposition that information stored on a computer in the United States is in law capable of being located in Canada for the purpose of section 231.6 [as am. by S.C. 2000, c. 30, s. 177] of the Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1. CSI argues that, based on the reasoning in that case, the electronic copy of a musical work stored on the United States server may be treated as being located in Canada for the purposes of the Copyright Act.

[43]        Nothing in eBay compels the conclusion that, for the purposes of the Copyright Act, an electronic copy of a musical work stored in a server in a particular country is also located in another country merely because there is a person in that other country who can access the copy. I would reject any such interpretation because it would necessarily mean that a specific copy of a work may, at the same moment, be within the territorial scope of the Copyright Act and the territorial scope of any number of the copyright laws of any number of other countries. That would not be consistent with the well established and well understood territorial limitation of the Copyright Act (see the Tariff 22 case, at paragraph 56).

[44]        Nor can I accept the argument of CSI that the copying occurred in both Canada and the United States, so that the location of the copying for purposes of the Copyright Act should be determined on the basis of the “real and substantial connection” test as applied in the Tariff 22 case. The Tariff 22 case required a determination, for the purposes of the Copyright Act, of the location of a communication initiated in one country and received in another. Given that a communication cannot be complete without both a sender and receiver, it was necessary to adopt a principled basis for choosing whether the communication would be situated at the location of the sender or the location of the receiver. The principle applied in that case—the real and substantial connection test—is not required to determine the location of the act of copying where, as in this case, the completed copy exists only in one location.

[45]        I agree with the Board that the making of a copy is not complete until it exists in some material form (see subsection 3(1) of the Copyright Act). I also agree that the electronic copies of works stored in the United States main server are outside the Board’s jurisdiction, even if the copying was initiated in Canada. I am compelled to conclude that CSI’s challenge to that aspect of the Board’s decision cannot succeed.

[46]        CSI argues in the alternative that a person who initiates, in Canada, the making of an electronic copy of a work in the United States has authorized the copying, and has thereby infringed in Canada the copyright attached to the work by virtue of the closing words of subsection 3(1) of the Copyright Act. The Board, based on its interpretation of subsection 3(1), concluded that the act of authorizing in Canada is not actionable under the Copyright Act where the primary infringement occurs outside Canada. I agree.

[47]        As I interpret the closing words of subsection 3(1), the authorization of a particular act infringes copyright only if the authorized act is itself an act of infringement. Therefore, when the Board concluded correctly that it has no jurisdiction to impose a royalty tariff in relation to the copying of a work located in the United States, it was compelled to conclude that it has no jurisdiction to impose a royalty tariff in relation to the authorization of that copying, even if the authorization took place in Canada.

[48]        CSI also argues that the Board should have concluded that Sirius and XM Canada authorize the copying of all musical works on the United States servers, including copies created by the act of a person in the United States. That argument too must fail, based on the interpretation of subsection 3(1) of the Copyright Act set out in the previous paragraph.

[49]        The remaining challenges by CSI to the Board’s decision relate to the four- to ten-second buffer memory found in all satellite radio receivers supplied by Sirius and XM Canada to its subscribers. The buffer memory automatically records four to ten seconds of broadcast content. The recorded content is continuously replaced as new content is received so that at any point in time, only the last four to ten seconds of broadcast content is in the buffer. The content is played to the listener in a “rolling” fashion to provide for smooth listening, with none of the interruptions that might be caused by momentary interruptions in transmission.

[50]        The specific questions are whether the Board erred in concluding that: (a) a work is not copied when four- to ten-second segments of the work are copied in the buffer memory of a satellite radio receiver or a personal computer; and (b) a four-  to ten-second segment of a work is not a substantial part of the work.

[51]        CSI argues that the Board erred in law in determining that the rolling four to ten seconds of broadcast content stored momentarily in the temporary memory of a satellite radio receiver is not a copy of the work, or a copy of a substantial part of a work. The Board’s conclusion on this point is primarily a finding of mixed law and fact but CSI argues, in essence, that the Board misdirected itself by reasoning that a copy of a work or a substantial part of a work would exist only if a complete reproduction of the work exists at one point in time.

[52]        While the Board clearly considered it relevant that the four- to ten-second buffer does not cause a copy of the entire work to exist at any point in time, I do not read its reasons as indicating that this was determinative. As I understand the Board’s reasons, its conclusion was influenced, not only by the fact that a copy of no more than four to ten seconds of content could exist in the buffer at any one time, but also by the fact that there would at no time be a choice as to what goes into the buffer and when it comes out. In my view, the Board’s conclusion that the buffered content was not a copy of an entire work or a copy of a substantial part of a work was reasonably open to it on the record and was not based on an error of law. CSI’s application cannot succeed on this ground.

[53]        I would dismiss both applications for judicial review with costs.