Details on a proposed class action that’s been hovering under the radar have exploded on the web, where the buzz has been as big as its potential outcome.
In December, law professor Michael Geist, who holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa’s Faculty of Law, drew attention to the proceeding, The Estate of Chet Baker v. Sony BMG Music et al., which was filed in the Ontario Superior Court of Justice in August 2008.
'The sheer scope and size of the alleged infringements is huge by Canadian standards,' explains Geist, who is an advisor to the U of O-based Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic, which serves as co-counsel to the plaintiffs — although Geist is not involved in the case.
Canada’s recording industry giants — Sony BMG Music (Canada) Inc., EMI Music Canada Inc., Universal Music Canada Inc., Warner Music Canada Co., along with their parent, subsidiary and affiliated companies — could be on the hook for more than $6 billion, according to Geist. He says that amount is based on the option of statutory damages — set at a maximum of $20,000 per infringement — in a case that involves over 385,000 sound recordings.
However, calculating statutory damages is an issue the court might have to resolve. Is an infringement based on a single reproduction of a musical work or an entire run of multiple copies?
Geist notes that while class actions involving copyright are rare, there have been notable exceptions, primarily with Robertson v. Thomson Corp., [2006] 2 S.C.R., in which the plaintiffs will receive $11 million in a settlement reached last year. But he says that in terms of size, the case involving the estate and management company of the late jazz musician Chet Baker as lead plaintiff could be bigger.
The statement of claim alleges that since at least 1988, the defendant record companies 'knowingly and deliberately infringed class members’ copyright in musical works by systematically… making and authorizing the making of sound recordings of the musical works of plaintiffs and the class members without securing a license to do so' and 'selling or renting out… copies of sound recordings of class members that the companies knew or should have known infringed the copyright of the plaintiffs and the class members.' It’s expected that many of the works at issue were reproduced as compilations or presented as live recordings.
The plaintiffs also seek a declaration that the defendant record companies 'have been unjustly enriched by their failure or refusal to compensate the class members for the exploitation of their musical works.' In addition, the plaintiffs want a court order requiring the labels to pay for and submit to an independent audit of their books and records, including the contents of the 'pending lists' concerning musical works produced by them without license and 'any gains made as a result of such reproductions' as well as unpaid mechanical royalties (the current rate is about nine cents per recorded work) and any interest earned on them.
A pending list features recordings for which record labels — based on a variety of reasons such as the inability to locate the copyright owner — have not obtained licenses or paid royalties. The statement of claim alleges such lists facilitate the record companies’ 'systematic ‘exploit now, pay later, if at all’ approach.'
In an affidavit, David Basskin, president and CEO of the Canadian Musical Reproduction Rights Agency (CMRRA) Ltd., addressed the serious concern the music-licensing agency has with the pending lists.
(Named as a defendant with the copyright collective, the Quebec-based Society for Reproduction Rights of Authors, Composers and Publishers (SODRAC) Inc., CMRRA and SODRAC both reached a settlement in October 2008 with the plaintiffs, which requires court approval. Were the settlement to be approved, both organizations would seek leave to intervene to assist in the adjudication of the dispute.)
'The sheer magnitude of the problem,' involving more than 385,000 line items (such as sound recordings for which a license may not have been obtained), 'coupled with CMRRA’s limited resources and the apparent unwillingness or inability of the record labels to address the problem in a meaningful way, has made it next to impossible for us to make any significant progress toward ensuring that copyright owners are paid for the use of their musical works,' wrote Basskin.
According to the lists produced by the record companies and given to CMRRA, the defendants owed $54.2 million in unpaid royalties as of the third quarter of 2008. But that amount does not include interest, nor does it 'reflect the value of compensation for infringement of copyright,' and the liabilities 'presume that a license can be obtained from the copyright owner in exchange for payment of the prevailing ‘industry rate’ payable for mechanical reproduction of musical works,' says the statement of claim.
A motion for certification will be heard in September. However, even if the case doesn’t go to trial, there may be impact on the public perception of the recording industry, says Geist.
In seeking punitive and exemplary damages, the statement of claim alleges that by exploiting the musical works of the class members without securing a license or paying royalties, the record companies have been 'reckless, arrogant and high-handed.' Their conduct, it adds, 'is aggravated by their strict and unremitting approach to the enforcement of their copyright interests against consumers.'
Says Geist: 'There is no bit of irony here that the industry finds itself subject possibly to the largest copyright class action lawsuit in Canadian history.'
But Basskin, who declined to discuss details about the Baker case, says that neither the CMRRA nor the record labels 'want to sue anybody' over copying music recordings at the consumer level. However, their 'number one issue' — championed by the Canadian Private Copying Collective (CPCC), which has distributed nearly $200 million in royalties over the past decade — is to have the private copying levy that currently applies to blank audiocassettes and CDs extended to digital audio recorders, such as Apple Inc.’s iPods.
The Federal Court of Appeal has twice now ruled that the Copyright Board has no legal authority to impose such a tariff given the current wording of the legislation. Basskin says that it’s up to the federal government to clarify the issue in its amendments to the Copyright Act, expected later in 2010, by reaffirming the technology-neutral intent of the law and including digital audio recorders, such as iPods and MP3 recorders, in the definition of 'audio recording medium.'
'When you buy an iPod, Apple, the manufacturers of the device and the internal components, the retailer, wholesaler, the government, through tax revenue, all get paid — everybody except the people who make the music, which is the motivation for people to have an iPod in the first place,' says Basskin, a lawyer, who previously served as legal counsel to CTV Television Network Ltd. and a board member of the CPCC.
Yet as far as the plaintiffs in the Baker case are concerned, it’s the record labels that owe copyright owners massive amounts of money in what is being characterized as an unprecedented class action suit.
'I am unaware of a copyright problem in the country of this size and scope,' says Jonathan Foreman, a partner with London, Ont.-based Harrison Pensa LLP, which serves as co-counsel for the plaintiffs.
'I expect more class actions to be brought forward involving the Copyright Act.'
But while Toronto intellectual property lawyer Barry Sookman says the plaintiff claims damages for infringement of copyright in the Chet Baker estate case, the complaint really involves payment of royalties due under an industry-wide agreement.
He explains that in the proceeding against The Globe and Mail in Robertson, the issue was one of whether publishers had obtained the consent from freelance writers before posting their articles on electronic databases. In the Chet Baker estate-led action, record labels, music publishers and songwriters have agreed to certain royalties through mechanical licensing agreements.
'There’s no question there was consent and the issue really is how much is left outstanding to be paid,' says Sookman, a partner with McCarthy Tétrault and co-chair of the firm’s technology law group, who has represented the music industry in the past but is not involved in the class action proceeding.
'If you closely examine the case, at best, it’s really a claim for breach-of-contract where there’s been a failure to pay royalties.'
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