The case had been brought by the Society of Composers, Authors and Music Publishers of Canada (SOCAN), which was seeking an order that would force ISPs to pay blanket royalty fees to cover the music downloaded using their services.
In the US, the Recording Industry Association of America has taken direct action against users of unauthorised file-sharing services like Kazaa. To date it has sued 3,429 individuals. But the Canadian music industry attempted a different approach.
SOCAN proposed that ISPs pay a royalty of CAN$0.25 per subscriber per year as well as 10% of any gross profit that ISPs make through the sale of advertising.
SOCAN also wanted the court to decide whether or not ISPs should be accountable for web content hosted in other countries but accessed by Canadians.
The Canadian Association of Internet Providers (CAIP) – which counts IBM, AOL and Yahoo! among its members – defended the action. CAIP argued that royalties should be sought from web site operators rather than ISPs, who were just being used as a convenient target.
The case revolved around the definition of an ISP: is it merely a conduit for the transportation of digital information, or is it actually communicating that information in some way that makes it responsible for the content? On Wednesday the Canadian Supreme Court ruled unanimously that it is the former.
According to Justice Ian Binnie, who wrote the majority opinion for the court, "It is clear that Parliament did not want copyright disputes between creators and users to be visited on the heads of the internet intermediaries, whose continued expansion and development is considered vital to national economic growth."
The Canadian Copyright Act, he explained, "as a matter of legislative policy established by Parliament, does not impose liability for infringement on intermediaries who supply software and hardware to facilitate use of the internet."
He continued:
"The attributes of such a 'conduit', as found by the Board, [Canadian Copyright Board] include a lack of actual knowledge of the infringing contents, and the impracticality (both technical and economic) of monitoring the vast amount of material moving through the internet, which is prodigious."
However, warned Binnie, "an Internet Service Provider in Canada can play a number of roles. In addition to its function as an intermediary, it may as well act as a content provider, or create embedded links which automatically precipitate a telecommunication of copyrighted music from another source. In such cases, copyright liability may attach to the added functions."
The Court particularly considered the question of caching – where temporary copies of data packets (which combine together to create a completed web page or music file) are kept on a local server for a short time in order to speed up transmission – and whether the storage of this on local servers gave ISPs more responsibility for the data than they would otherwise have had.
But, according to Justice Binnie, "caching is dictated by the need to deliver faster and more economic service, and should not, when undertaken only for such technical reasons, attract copyright liability".
According to Jay Kerr-Wilson, Vice-President, Legal Affairs of the Canadian Cable Television Association:
"To impose copyright liability on ISPs for providing access, hosting, caching and transmission services would have resulted in significantly higher costs to consumers and would have discouraged the investment and innovation necessary for the development of the internet economy in Canada".
