Canada’s Approach to Intermediary Liability for Copyright Infringement: the Notice and Notice Procedure

In 2012, Canada adopted the Copyright Modernization Act as a comprehensive reform of Canadian copyright law and addressed the issue of liability for copyright infringement by online intermediaries. Rather than adopting a “Notice and Takedown” procedure like the United States did at § 512 of the Digital Millennium Copyright Act (DMCA), Canada’s new Copyright Act enacts a “Notice and Notice” procedure at §§ 41.25 and 41.26. Those provisions are not yet in force, but the Canadian Government announced in October 2013 that they would be in the “near future.”

This post describes the differences between the respective approaches of the United States and Canada, addresses their pros and cons, and discusses how the recently leaked Trans Pacific Partnership agreement may require a harmonized approach in the two countries.

Differences between U.S. and Canadian Regimes

Section 512 of the DMCA sets a procedure by which, under certain conditions, online service providers (“OSPs”) are not liable for monetary relief for copyright infringement that occurs on their networks. One of those conditions is compliance with the Notice and Takedown procedure: upon notification of claimed infringement by a copyright owner, the OSP must remove the material from its network. Recent cases on this provision include Second Circuit’s Viacom v. YouTube (Second Circuit and district court on remand) and Ninth Circuit’s UMG v. Shelter Capital Partners. The European Union opted for a regime similar to Notice and Takedown at Article 14 of the E-Commerce Directive (for a comparative analysis between the U.S. and European regimes, see Béatrice Martinet Farano’s paper).

The Canadian system differs in two major ways with its U.S. counterpart. First, the Canadian Notice and Notice procedure does not provide a duty for OSPs to take down allegedly infringing content. Second, OSPs are granted a safe harbor independently from their compliance with the Notice and Notice system. Under § 31.1 of Canada’s Copyright Act, OSPs are “exempt from liability when they act strictly as intermediaries in communication, caching and hosting activities” (Government of Canada’s Q&A on The Copyright Modernization Act).

The Notice and Notice procedure begins with a notice of claimed infringement sent by a copyright owner to a service provider. Sections 41.25 provides that the notice must identify the work to which the claimed infringement relates, specify the electronic location to which it relates, and specify the infringement that is claimed. Upon reception of such a notice, the service provider does not have to remove the alleged infringing content, but must forward the notice to the alleged infringer (§ 41.26(1)(a)). The OSP also has to retain records that will allow the identity of the alleged infringer to be determined for a period of 6 months or, if court proceedings are initiated by the right owner against the infringer, for a year starting from the reception of the notice by the alleged infringer (§ 41.26(1)(b)). If a service provider fails to comply with any of its duties under the Notice and Notice procedure, the right owner is entitled to statutory damages between 5 000 CAD and 10 000 CAD (§ 41.26(3)).

Despite the fact that the provisions are not in force, the notice-and-notice procedure is the codification of an industry practice that was going on for a number of years. In their 2010 submission on the copyright reform, major Canadian telecommunication companies claimed that they had been collaborating with rights owners since the beginning of the 2000’s by forwarding, at their own expense, “millions of copyright infringement notices to subscribers who are alleged to have infringed copyright.”

Pros and Cons of the U.S. and Canadian Regimes

As a general matter, supporters of the U.S. Notice and Takedown regime argue that it is effective at preventing copyright infringement on the Internet by providing a fast and efficient mean to remove infringing material. Critics of the U.S. regime contend that it creates an incentive for OSPs to remove alleged infringing content from their network even in cases where the said material is not infringing. Under the scheme set out in § 512 of the DMCA, an OSP will lose its safe harbor if it does not remove the allegedly infringing material and be exposed to secondary liability for copyright infringement committed by its users. However, if it removes non-infringing content, it does not face legal consequences.

The DMCA thus creates a strong incentive for OSPs to remove content. According to critics of the procedure, this situation can lead to free speech violations, restrictions on creativity, deterrence of technological innovation, and decrease access to creative works by Internet users. For instance, works like parodies, which are generally not infringing under the fair use defense, are traditionally at risk under Notice and Takedown. Because an OSP is not likely to undertake a fair use analysis to decide whether or not it has to remove the allegedly infringing material upon receiving a notification of claimed infringement. In an empirical study, Jennifer Urban and Laura Quilter observed “a surprisingly high incidence of flawed takedowns.” The Electronic Frontier Foundation publishes the “Takedown Hall of Shame” where it displays examples of flawed or even malicious takedowns.

The issues mentioned above are mostly resolved under a Notice and Notice procedure. In its legislative summary, the Library of Parliament mentioned “concerns [that] had been raised that a “notice-and-takedown” regime would create incentives for ISPs to remove content without warning or evidence of actual infringement.” It noted how such a situation can have an adverse effect on free speech. The Canadian system likely reduces risks on free speech and other types of flawed takedowns. Its critics however claim that it is inefficiently preventing online copyright infringement.

Unsurprisingly, the major Canadian Internet service providers (ISPs) have supported the adoption of a statutory Notice and Notice procedure by claiming that the voluntary Notice and Notice system implemented between ISPs and right holders had been efficient. Rogers, one of those ISPs, represented that approximately 5% of its users typically receive a notice. Out of those, 5% will receive a second notice. A third of this group would get a third notice. According to law professor Michael Geist, this data shows the efficiency of the Notice and Notice system. Another professor, Gregory Hagen, argues that the “success of the [Notice and Notice] system is indicated by the fact that copyright owners have rarely, if ever, gone to the next step and enforced their statutory rights in Canadian courts against file sharers” (at p. 387).

Also without surprise, the content industry has pushed for the adoption of a Notice and Takedown procedure. The Canadian Conference of the Arts, which regroups more than sixty associations of rights owners, argued that Notice and Notice “puts entirely on creators the onus to police infringement while giving a free ride to infringers and allowing Internet Service Providers (ISPs), once they have notified an infringer, to have no further responsibility […] even when they have actual knowledge that they are contributing to infringements and do nothing to stop it.” The Society of Composers Authors and Music Publishers of Canada (SOCAN) has not requested the adoption of a Notice and Takedown procedure, but has suggested that service providers should be required to comply with the Notice and Notice provisions in order to benefit from safe harbor protection.

Others have suggested that the Notice and Notice system actually creates a de facto Notice and Takedown because upon receiving a notice from a right holder, the service provider would have knowledge of the infringing activity, thus making it liable if it does not remove the content. Lawyer and blogger Barry Sookman submits that alleged infringers in such a situation receive no statutory protections as they do under the DMCA, such as the counter notification procedure at § 512(g) and the award of damages in a case of misrepresentation by the sender of the notice at § 512(f).

Hagen raises similar concerns, noting that the statute “does not make clear the legal effect of a failure to take down content that the host knows is infringing” (at p. 370). Commenting on the Bill that was adopted, Hagen argues that it should “be clarified to ensure that, where a notice of alleged infringement has been received by an ISP in relation to some subject matter, it is not liable for failure to prevent future infringement in relation to that subject matter.” The issue of a de facto Notice and Takedown remains open as the safe harbor provisions of the Canadian Copyright Act have not been tested before the courts yet.

Trans Pacific Partnership Agreement

Despite its recent adoption, the Canadian model may be jeopardized due to international pressure, mainly from the United States. A leaked negotiation draft of the Trans Pacific Partnership Agreement’s Intellectual Property Chapter reveals confrontation between the Canadian and U.S. respective visions on intermediary liability (learn more about the TPP here and here). Michael Geist points out that the United States, supported mainly by Australia, is trying to include a clause requiring all signing parties of the treaty to adopt a Notice and Takedown procedure as a condition for service providers to receive safe harbor protection. Critics of the Notice and Takedown procedure Electronic Frontier Foundation and Public Knowledge have published webpages here and here denouncing the TPP Agreement’s Intellectual Property Chapter.

In a recent call for consultation on regulations to implement the Notice and Notice provision, the Government of Canada mentioned that it was its “goal that a system be in place that is both balanced and functional; but, most importantly, it must endeavour to deter infringement.” The question is whether Canada will continue to claim that its system is adequate or if it will yield to international pressure.