The slippery slope that left Canada’s newly implemented notice-and-notice system open for abuse
Less than a week after it came into effect, Canada’s new copyright notice-and-notice system, which requires Internet service providers to forward warning notices issued to customers by rights holders, was already marked with controversy. Described as a “loophole in the new law,” the government’s failure to implement statutory regulations addressing the content of these notices has allowed the system to be subject to abuse. First revealed on his blog on January 8, Michael Geist identified the U.S.-based anti-piracy firm Rightscorp as the first to use the new system as a way of forcing Canadian ISP companies to participate in a practice that is pejoratively known as “copyright trolling.” Acting on behalf of BMG Rights Management, Rightscorp required ISPs to forward notices issued to their customers warning them of potential liabilities for alleged copyright infringement. The first part of the controversy lies in the fact that these notices falsely state Canadian law—describing U.S. penalties of up to $150,000 per infringement rather than citing Canada’s $5,000 statutory limit on liability—and fail to inform the customer that these are merely allegations that have not yet been proven in court. The system was justified as an attempt to educate the public about copyright infringement and raise awareness about its deleterious effect on the Canadian economy, yet Rightscorp’s actions demonstrate just how poorly the system operates to achieve that purpose.
As an aside, it is interesting to note that Rightscorp is no stranger to controversy. While self-proclaimed as the leading provider of “monetization services for artists and holders of copyrighted Intellectual Property,” many describe the company’s practices as nothing more than copyright trolling. In March 2014, the California-based company announced that it was seeking to expand its services into Canada and retained Gowling Lafleur Henderson LLP, as its legal counsel. Looking back on the course of events, it’s arguable that Rightscorp was simply positioning itself in anticipation of the new system coming into effect. Unlike cases involving a Norwich order where, as a result of the decision in TekSavvy, demand letters are subject to defined safeguards, the letters issued in the notice-and-notice system receive no oversight ensuring that customers are not intimidated into making payments without the benefit of understanding their legal rights and obligations. In essence, for companies who operate under a model involving the issuing of demand letters and the threatening of litigation, the notice-and-notice system provides the ability to do an end-run around the user protections created in TekSavvy.
To appreciate the second aspect of this controversy, it is important to understand the events that led up to the system coming into effect at the beginning of this year. The notice-and-notice system was one of several reforms to Canadian copyright law contained within the Copyright Modernization Act, also known as Bill C-11. While the majority of these changes took effect in 2012 with its passing, the notice-and-notice provisions were deliberately held back in order for the government to engage in a consultation process regarding the possibility of issuing statutory regulations. Nearly a full year later, through Industry Canada and Canadian Heritage, Industry Minister James Moore launched a consultation process where submissions were made by several parties recommending that statutory regulations be issued that, among other things, prescribed the contents of the notice forms, and relieved ISPs of liability for failing to forward notices where they where shown to be intentionally misleading or threatening.
As the law is currently written, notices are only required to include: the claimant’s name and address; identification of the material alleged to be infringed; the claimant’s interests or rights in that material; the location data for the electronic location relating to the alleged infringement; the infringement that is claimed; and the date and time when the alleged infringement occurred. Although there are no restrictions that preclude a rights holder from including additional information, there are no penalties for making false or misleading statements in these notices. Further, an ISP is not given any discretion with respect to these notices and faces liabilities of between $5,000 and $10,000 for failing to forward a notice that has been issued to one of its customers. This is of significance because, previously, in order to send a demand letter to an alleged infringer, rights holders would be required to obtain a Norwich Order to obtain the identity of that individual from the ISP. However, there is no longer a need for rights holders to know these identities since ISPs are obliged to comply with the new law. In light of these considerations, the potential for the system to be abused by copyright trolls becomes readily apparent. In fact, it would seem that the rules create a perverse incentive for copyright trolls to abuse the system in this way.
Despite a lengthy consultation process, in the end, none of these recommendations were implemented and, instead, Moore chose to bring the law into effect in its current form with no further regulations. As Geist pointed out during the consultation process, the language used in the request for submissions strongly implied that there was little interest in departing from the form initially proposed. However, it is not evident that this was always the attitude. Through documents obtained under the Access to Information Act, Geist reveals that an earlier draft of the letter stated, “It is important that the system be balanced and functional for both copyright owners and Internet intermediaries.” This was subsequently rewritten to read, “It is our goal that a system be in place that is both balanced and functional; but, most importantly, it must endeavor to deter infringement. It is not clear at this time that regulation beyond the legislation will help better achieve this.” Without further information, one can only speculate on what prompted a change in focus from balancing the interests of all parties to simply protecting the economic interests of the rights-holder.
What all of this shows is that Moore stood in a position to implement the necessary reforms to the notice-and-notice system that would have prevented rights-holders from using ISPs as instruments for copyright trolling. As it currently stands, the government is left looking a fool for allowing such a situation to develop after not only having fair warning from ISPs and other stakeholders, but it was also revealed that Industry Canada had prepared a memo outlining these very issues as early as July 2012. The fact that Moore now faces the very predicament he was advised of speaks either to the Minister’s arrogance or stupendous ignorance in these matters. That aside, the real question is how the Minister intends to resolve this controversy. Reflective of true Canadian politics, Moore publicly announced the government’s disapproval of misleading practices such as those seen by Rightcorp, but this amounts to little more than casting a dirty look in the company’s direction. A proper response should do more than just identify bad behaviour; it should seek to prevent it from occurring at all. It has been suggested that the most obvious solution would be to do what should have been done in the first place—implement the very regulations that were so quickly and easily dismissed by Moore back in June 2014. In the meantime, while ISPs have no authority to make substantive corrections to the content of these misleading notices, they are taking the initiative to include additional information that advises customers of their legal rights. Though not a perfect response to the problem, it will have to suffice until Moore decides to take a more meaningful stance on the issue. Clearly he has been sent the proverbial memo, he merely needs to pull his head from the sand and actually read it.