A Cautionary Tale of Costly Copyright Litigation Consequences: How to Win a Little and Lose a Lot

I blogged a few months ago about a case in which a former New Yorker named Catherine Leuthold sued the CBC for copyright infringement over the “honest mistake” (as the Court called it) of the unauthorized reuse of 18 seconds worth of a few of her still photographs in a documentary about 9/11. She tried to get $21,554,954.25 plus a portion of the CBC’s revenues. This astounding sum was based upon a theory, inasmuch as I can understand it, that each of the CBC’s 800 or so participating affiliated stations and Broadcasting Distribution Undertakings [BDUs] gave rise to a separate act of infringement. Not surprisingly, the Court did not agree. She was awarded $19,200 (six times $3,200) on the basis as found by the Court that “Miss Leuthold could have negotiated a higher license fee than the initial $2,500.00 in view of the repeated usage.”

This was not a case of “theft” or “piracy”. It was apparently nothing more than six inadvertent reuses beyond the original licensed use. She recovered less than 1/1,000 of what she sought. Her initial license fee for one use was $2,500.

As I said shortly after the decision:

…an American photographer named Catherine Leuthold sought $21,554,954.25 from the CBC and one of its employees personally for the mistaken re-uses of a few of her stills from 9/11.

At the end of the day, the Court quite predictably rejected her frankly astonishing suggestion that each transmission from each of the CBC’s hundreds of “distribution undertakings” warranted separate claims for damages, and awarded $3,200 for each of six unauthorized broadcasts, to which the CBC had admitted – i.e. $19,200. Even this amount was arguably generous under the circumstances and given the evidence.

The Court reduced Ms. Leuthold’s claim of $92,998 for her alleged entitlement to a share of Newsworld’s revenue to $168.74.

I also said:

The plaintiff was awarded about 0.0009 or less than one thousandth of what she was seeking. And she has yet to learn what the costs order will be. Her counsel apparently acknowledges … that costs could be awarded against her.

By seeking so much and recovering so little (and there were other unsuccessful claims for relief), the Plaintiff  was at very great risk for costs, if the CBC had availed itself of the benefit of the Federal Courts Rules by offering a timely and strategic settlement offer – which it turns out was exactly what happened. The case lasted for seven years and there was a six day trial and a very lengthy docket of motions, etc.

The costs issue has now come home to roost. In an order and reasons for order from Justice Scott dated October 29, 2012, the Court has predictably ruled under the Federal Courts Rules that Ms. Leuthold must pay CBC double the costs it would otherwise be entitled from August 9th, 2005. That was the date that the CBC served an offer to settle to the Plaintiff for an amount of USD $37 500 USD plus interest, which Ms. Leuthold rejected. The offer also included the costs of the action up to the date of the offer on a party and party basis.

Ms. Leuthold made some headway on this costs matter in a few respects. Most notably, the Court also allowed for a deduction on account of the “vexatious conduct of the defendant s during the discovery of [individual] defendant Jerry McIntosh”. But, but none of this is very significant in light of the foregoing ruling re double cost liability. The Court also added that she must pay for:

(a) the fees and disbursements of the experts heard at the hearing;

(b) all disbursements, including travel expenses for witnesses, photocopy fees, online research fees, transcript fees for examinations for discovery and the hearing, long distance fees, fax fees, postage and courier fees and other administrative fees;

(c) interest on fees and disbursements since June 14, 2012.

It goes without saying that she is also responsible for whatever she is obligated to pay to her own lawyer.

The Court notes that Ms. Leuthold’s taxable income in 2006 was $20,661 USD. The actual amount of costs assessed for the trial and proceedings leading up to it, which will then be doubled, has not yet been determined. However, it is safe to predict that it could be many, many times Ms. Leuthold’s taxable income for 2006.

An interesting aspect of all of this is that Ms. Leuthold reportedly lived in New York on 9/11 and is now reported to be living in Maine. Security for costs is normal when a plaintiff is ordinarily resident outside of Canada. A plaintiff can avoid such an order if impecuniosity can be demonstrated and the Court is of the opinion that the case has merit. Curiously, the CBC - which is subsidized by taxpayers to the tune of more than $1 billion per year - did not ask the Court for an order for security of costs. Interestingly, Ms. Leuthold also has another action pending in the Federal Court against CABLE TV CAMROSE INC. ET AL that has been stayed pending the outcome of the CBC action.

The security for costs mechanism exists for the obvious reason that it can become much more difficult for a Defendant that has been awarded costs to collect costs from a Plaintiff outside of Canada, even if the Plaintiff has the means to pay such costs. The prospect of an order for security for costs can sometimes serve as a very useful reality check for foreign plaintiffs who may not have a strong case and/or do not fully understand the Canadian litigation system. I have used it elsewhere to precisely such effect.

Ms. Leuthold is certainly persistent and determined. She is pursuing her appeal of the substantive decision. The appeal book consists of ten volumes. This will be a costly appeal. It remains to be seen if she will also try to appeal the costs award. Depending on the outcome of all of this, she potentially may be on the hook for a great deal more costs.

Unless there is a surprise ending, it may turn out that Ms. Leutholds’ costs in this case could easily run well into at least six figures, all in order to recover a little over $19,000 when she had been offered $37,500.

While this saga is clearly not yet over, it’s safe to say once again that copyright plaintiffs may wish to consider – as I’ve often said – the old adage of “be careful what you wish for”.

HPK

Leuthold Loses Longshot Appeals In Her Litigation Against CBC

The Federal Court of Appeal on June 27, 2014 has given its judgments in Catherine Leuthold’s two uphill appeals in a case about which I have written earlier at length. Spoiler alert. Not surprisingly, she also lost on the appeals. However, the reasoning of the Federal Court of Appeal is more interesting and more far reaching than might have been expected, given the very peculiar circumstances of this case.

Leuthold is an American photographer whose 9/11 images were used by the CBC, by way of an “honest mistake”, six times more than permitted by the original one time license for which she was paid $2,500. She refused a settlement offer of $37,500 and went to trial, where she was awarded $19,200 ($3,200 times six) plus $168.73 as her portion of CBC’s “profits”.

However, what she sought from the Court was an award of $21,554,954.25 plus a portion of the CBC’s revenues. This astounding sum was based upon her theory, inasmuch as I can understand it, that each of the CBC’s 800 or so participating affiliated stations and Broadcasting Distribution Undertakings [BDUs] committed a separate act of infringement. Not surprisingly, the trial Court did not agree. It will come as no great shock that the Federal Court of Appeal also disagreed with her.

The appeal decision was penned by Pelletier, J.A. from whom we are hearing a lot lately about copyright and whose dissent was recently upheld by the SCC in the CARFAC case, concerning which I’ll have something to say in due course.

It contains some interesting comments on the case of Bishop v. Stevens, [1990] 2 S.C.R. 467, well known to copyright geeks, some of whom attempt to invoke it in favour of multiple and layered payments for the same transaction. The Court seems to suggest that this case might have helped her up to a point to a point but she did not refer to it. Instead, she apparently relied on s. 2.4(1) of the Copyright Act– which the Court regards as antithetical to her argument. Pelletier, J.A., , makes the following observations about technological neutrality, which may be of considerable interest in other matters now percolating at the Copyright Board and in the Courts:

[36]           Ms. Leuthold does not refer to this authority and instead relies on paragraph 2.4(1)(c) of the Copyright Act, R.S.C., 1985, c. C-42 (the Act) in support of her claim that each transmission to a BDU by the CBC is an infringement of copyright. Paragraph 2.4(1)(c) provides as follows:

2.4 (1) For the purposes of communication to the public by telecommunication, …

2.4 (1) Les règles qui suivent s’appliquent dans les cas de communication au public par télécommunication : …

(c) where a person, as part of     (i) a network, within the meaning of the Broadcasting Act, whose operations result in the communication of works or other subject-matter to the public, or … transmits by telecommunication a work or other subject-matter that is communicated to the public by another person who is not a retransmitter of a signal within the meaning of subsection 31(1), the transmission and communication of that work or other subject-matter by those persons constitute a single communication to the public for which those persons are jointly and severally liable.

 [37]           According to Ms. Leuthold, this result flows from the following reasoning:

This section means, by way of example, that where Newsworld make two such transmissions to two BDUs, there would be two infringements under Section 3(1)(f) of the Copyright Act because the second person that communicates the work to the public (the second BDU) is a different person from the first instance, even when such transmissions occur simultaneously.

Appellant’s Memorandum of Fact and Law, at page 15, paragraph 47.

[38]           It seems to me that the better view is that paragraph 2.4(1)(c) legislates that the distribution of a network signal incorporating a protected work to BDUs and the subsequent communication of that work to subscribers is but a single network-wide infringement in which each participating BDU is jointly and severally liable along with the network. In that way, all those who benefit from the communication of the work share in the liability for compensating the rights holder, subject to whatever arrangements may be in place between them.

[39]           This reading of paragraph 2.4(1)(c) of the Act moves in the direction of technological neutrality in that the number of infringing acts does not vary according to the number of intermediaries in the transmission chain. This is consistent with the goal of technological neutrality which the Supreme Court articulated in Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34, [2012] 2 S.C.R. 231, at paragraphs 5-10.

[40]           There is one act of infringement whether the work is communicated to the public via one BDU or via hundreds of them. The measure of damages may depend upon the number of viewers of the work, which has a rational connection with compensation, unlike the number of intermediaries, which does not.

[41]           Paragraph 2.4(1)(c) serves to distinguish this case from Bishop v. Stevens where, as noted, each unauthorized reproduction was found to be a violation of the copyright holder’s rights. While that may have been the case for unauthorized communications to the public by telecommunication prior to the passage of paragraph 2.4(1)(c) and its companion disposition subsection 31(2) of the Act, it is no longer the case now.

[42]           I am of the view that paragraph 2.4(1)(c), properly interpreted, has the effect of making a network transmission of cable programming material to the public via BDUs a single infringement of a copyright holder’s rights if the network has not properly cleared the rights with respect to that transmission. In this case, the six transmissions of the documentary containing Ms. Leuthold’s images, in violation of her copyright, constituted six acts of infringement, as found by the Trial Judge.

(emphasis added)

Those who are “in denial” about the Supremes’ ESA decision should take note.

In the companion case, regarding application of the “double costs” rule that applies when a plaintiff fails to achieve as much after trial as the defendant has offered by way of settlement, Ms. Leuthold also failed to achieve success. She is now liable for a substantial amount of costs to the CBC. Whether the CBC will try to collect this money and whether Ms. Leuthold can afford to pay all or even any of it, given her declared taxable income of taxable income in 2006 was $20,661 USD remains to be seen. And presumably Leuthold will not see a penny of her $19,200 award, which is only a fraction of the costs that she now owes to CBC.

The CBC did finally ask for security for costs  in this case, but only after the appeal process was well underway. The CBC’s motion was turned down, under the circumstances.

The costs judgment contains some cautionary language for those who may contemplate high risk litigation. Pelletier, J.A. states that:

[13]           Finally, Ms. Leuthold argues that an order of costs ought not to be such as to bring the administration of justice into disrepute. Once again, this is an argument based on impecuniosity. The sad fact of the matter is that litigation produces winners and losers; that is why it is such a blunt tool in the administration of justice. But justice is not served by allowing persons who have imposed costs on others by pursuing or defending a claim which lacks merit to avoid the consequences of their behaviour. Such a policy would be more likely to bring the administration of justice into disrepute than the result in this case.

(emphasis added)

BTW, in 2007, Leuthold sued a long list of cable companies, but that action was stayed in 2012.

HPK

PS - Leuthold applied to the Supreme Court of Canada for Leave to Appeal. Not surprisingly, her application was dismissed with costs payable to the  CBC, as usual without reasons, on April 30, 2015.

Copyright Litigation Mathematics in Canada: How to Turn $21,554,954.25 into $19,368.74

Aspiring copyright litigants in Canada from the largest of corporations to the lowliest little guy should take sobering note of the case of Leuthold v. CBC 2012 FC 748 decided on June 14, 2012.

In case anyone was not already aware, Canadian copyright litigation is not a lottery. One cannot necessarily expect to receive $21.5 million from the proceeds of a lawsuit against a public broadcaster involving a mistaken re-use – or even six such re-uses - of 18 seconds worth of still photographs in a feature length CBC documentary, when the original license was given for $2,500.

However, an American photographer named Catherine Leuthold sought $21,554,954.25 from the CBC and one of its employees personally for the mistaken re-uses of a few of her stills from 9/11.

At the end of the day, the Court quite predictably rejected her frankly astonishing suggestion that each transmission from each of the CBC’s hundreds of “distribution undertakings” warranted separate claims for damages, and awarded $3,200 for each of six unauthorized broadcasts, to which the CBC had admitted – i.e. $19,200. Even this amount was arguably generous under the circumstances and given the evidence.

The Court reduced Ms. Leuthold’s claim of $92,998 for her alleged entitlement to a share of Newsworld’s revenue to $168.74.

It declined to award exemplary and punitive damages or to find the individual personally liable.

It did order the CBC to remove the offending 18 seconds worth of stills, except for one archival copy.

It has reserved judgment on costs, having noted the rules dealing with cost awards when a settlement offer has been made. It will be very interesting to see, at the end of the day, who will have to pay costs to whom and how much. It would not be surprising if Ms. Leuthold were to be in store for a very unpleasant surprise when costs are determined. 

The Canada.com story by Don Butler reports as follows on statements by Ms. Leuthold's counsel and a CBC spokesman:

O'Connor said Leuthold is "quite devastated" by the outcome of the case. "We thought that the arguments were sound."

The decision was not what his client had expected "in terms of both her and my analysis of the situation, the facts and the law," he said. "But the judge is the trier of those matters, and the decision says what it says." The decision, he added, "may have significant effects in both Canadian copyright and broadcasting law."

An appeal is under serious consideration, O'Connor said. "There may be room for interpretation, and conceivably there may have been an error made. It may not be the final chapter in this lengthy saga."

Because an appeal is still possible, a CBC spokesman would only say the broadcaster is "satisfied" with the decision.

It's not yet clear what will happen with legal costs in the case, which began in 2005. Costs could be awarded against Leuthold if the CBC made an offer to settle that was greater than the amount awarded by the court, O'Connor said. "That may come into play."

This trial took place over the course of six days.

The plaintiff was awarded about 0.0009 or less than one thousandth of what she was seeking. And she has yet to learn what the costs order will be. Her counsel apparently acknowledges in the above quote that costs could be awarded against her.

If this decision is to indeed have “significant effects in both Canadian copyright and broadcasting law” as her counsel suggests, I suspect that it will be to remind potentially aspiring litigants and their counsel that litigation is in Canada is not like a lottery and Canadian judges do not hand out gigantic jackpots like American juries sometimes do. One can normally expect that Canadian Courts will follow the maxim as stated by Justice Scott of the Federal Court in this case that: 

Fundamentally, the Court‘s discretion is broad but its assessment of damages must be based on common sense.

HPK

PS - July 26, 2012 
There is an appeal underway by Ms. Leuthhold.

CBC Fails to Obtain Security for Costs Order Midway Through Leuthold’s Appeal

On November 18, 2012 I wrote about the curious case of Ms. Catherine Leuthold, an American gardener and photographer, who believes that she is entitled to about $21.5 million in damages because the CBC inadvertently reused, without adequate clearance, some of her still photos from 9/11. At trial, she was awarded $19,200. However, she is on the hook for an enormous amount of costs because she turned down an offer for a higher amount than the trial Court finally awarded. She is appealing both the trial judgment and the costs ruling. Her theory of damages is apparently predicated upon the proposition that CBC’s transmissions from each of the its 800 or so participating affiliated stations and Broadcasting Distribution Undertakings [BDUs] gave rise to a separate act of infringement.

I also noted that the CBC - which is subsidized by taxpayers to the tune of more than $1.1 billion per year – had not asked the Court for an order for security of costs. Ms. Leuthold is not resident in Canada and such security for costs orders are quite normal in the case of non-residents. A plaintiff can avoid such an order if impecuniosity can be demonstrated and the Court is of the opinion that the case has merit. Without commenting on this particular case, such orders can be very effective at stopping speculative litigation brought by non-residents of Canada. I have not hesitated to use this tool when necessary. And it has worked. 

 So, the CBC eventually got around on December 21, 2012 – well into the appeal process and a month or so after I raised the issue on this blog - to asking for security for costs in the modest amount of $50,000. It did not cross-examine on Ms. Leuthold’s affidavit resisting this motion, which indicated that her average yearly taxable income is less than $15,000.00 US and her assets are of limited value. In the words of Noël, J.A.:

The appellant resides in the United States. She is self-employed as a gardener on a seasonal basis (Affidavit of Catherine Leuthold, Appelant’s Motion Record, p.1, paras. 4 and 5). She also occasionally licenses photographs which she takes (ibidem). Her average yearly taxable income is less than $15,000.00 US and her assets are of limited value (Affidavit of Catherine Leuthold, Appelant’s Motion Record, p.2, paras. 6 and 8; Exhibit CL-1, Appellant’s Motion Record, p.5; Exhibit CL-2, Appellant’s Motion Record, p.60).

 The Federal Court of Appeal has concluded that it is possible she might recover more than the original award of $19,200 and that ordering security for costs would result in discontinuance of her appeal. The Court refused to grant CBC’s motion for security, which is not surprising under all the circumstances and at this late date.  However, why CBC did not seek such an order at the beginning of this proceeding is not apparent. 

Interestingly, the Court makes a very pointed observation:

[7]   Amongst the questions in issue on appeal is whether a communication to the public for purposes of the Copyright Act, R.S.C. 1985, c. C-42 takes place when the photos are transmitted to the broadcasting distribution undertakings or on each occasion when the broadcasting distribution undertakings retransmit the photographs to the public (Amended Notice of Appeal, Appellant’s Motion Record, pp. 85 and 86, paras. II and III). The number of instances when the appellant’s copyright was infringed turns on this question (Motion Record, Reasons, p. 62, para. 105).

 [8]  While I do not believe that the appellant can seriously envisage obtaining an award of the magnitude which she claims, I am unable to conclude that the issue raised on appeal cannot lead to an award that is more favourable to the appellant. To that extent, I am satisfied that the appeal has been shown not to be without merit and I exercise my discretion so as to allow it to proceed.

(Emphasis added)

This is hardly a victory for Ms. Leuthold.  It simply means that she can continue to pursue her quest for a $21.5 million damage award based upon a very novel theory of liability. Clearly, the Federal Court of Appeal has already expressed some explicit skepticism in the above passage on the likelihood of success on this point. Whether the Federal Court of Appeal finds that there is substantively anything more to this case than an ‘honest mistake” and inadvertent failure by a large bureaucracy to pay for a few reuses remains to be seen. The trial Judge apparently did not seem to think so.

So – taxpayers will likely have to absorb all of CBC’s doubtlessly very high costs on this case, which has been going on for years, no matter what the outcome may be. It is difficult to see how the CBC could be able to collect its costs from someone living in the USA on a taxable annual income of less than $15,000. If the CBC had asked for security for costs early on, things might have been very different.

As I said on July 12, 2012:

 In case anyone was not already aware, Canadian copyright litigation is not a lottery. One cannot necessarily expect to receive $21.5 million from the proceeds of a lawsuit against a public broadcaster involving a mistaken re-use – or even six such re-uses - of 18 seconds worth of still photographs in a feature length CBC documentary, when the original license was given for $2,500.

…

If this decision is to indeed have “significant effects in both Canadian copyright and broadcasting law” as her counsel suggests, I suspect that it will be to remind potentially aspiring litigants and their counsel that litigation is in Canada is not like a lottery and Canadian judges do not hand out gigantic jackpots like American juries sometimes do. One can normally expect that Canadian Courts will follow the maxim as stated by Justice Scott of the Federal Court in this case that: 

Fundamentally, the Court‘s discretion is broad but its assessment of damages must be based on common sense.

HPK

Blacklock’s Litany of Litigation Lengthens - Update on Four More Federal Court Actions

https://www.blacklocks.ca/ 

In the first month of 2017, Blacklock’s has commenced four more actions in the Federal Court against the Federal Government or an agency thereof. These are as follows:

T-117-17 Blacklock’s v. Attorney General of Canada re Health Canada for $90,100.55 + punitive damages of $25,000
T-132-17 Blacklock’s v. Attorney General of Canada re Employment and Social Development Canada (EDSC) for Statutory Damages + punitive damages of $20,000
T-133-17 Blacklock’s v. Attorney General of Canada re Transport Canada for $85,228.50 + punitive damages of $10,000
T-134-17 Blacklock’s v. FINTRAC for $11,470 + punitive damages of $5,000

Concerning the first Health Canada action, iPolitics says in the publicly posted intro to a paywalled article (to which I do not have access):

Blacklock’s Reporter is not backing down from its decision to aggressively sue multiple federal departments and agencies for copyright infringement — even after it lost a case against the Department of Finance late last year.

In a case that recently moved from Ontario Superior Court to the Federal Court of Canada, Blacklock’s Reporter — a subscription-based, online news outlet — is suing Health Canada for more than $115,000 for “the unauthorized use, distribution, and third party dissemination” of its paywalled content, and/or breach of contract.

An earlier action T-2042-16 filed on November 28, 2016 on which I reported here along with the older actions are under case management and the newer ones will also presumably be under the ever very efficient case management of Prothonotary Mireille Tabib. A case management conference is scheduled for March 6, 2017.  See here.

I will not comment specifically at this time on any of the allegations in these various actions, none of which have been proven in Court. That said, it does appear that each of these actions apparently allege somewhat different facts from the previously decided Federal Court case. However, Blacklock’s suffered a resounding defeat in the first case that was tried in the Federal Court on the basis of an "obviously" and clearly correctly applicable fair dealing defence asserted by the Government.  

That judgment of Justice Robert Barnes dated November 10, 2106 states:

[45] Blacklock’s maintains that this case challenges the viability of its business model including its right to protect news copy behind a subscription-based paywall. The suggestion that Blacklock’s business cannot survive in the face of the minor and discrete use that took place here is essentially an admission that the market places little value on Blacklock’s work-product. All subscription-based news agencies suffer from work-product leakage. But to customers who value easy, timely and unfettered access to news that may not be readily available from other sources, the price of a subscription is worth paying. It also goes without saying that whatever business model Blacklock’s employs it is always subject to the fair dealing rights of third parties. To put it another way, Blacklock’s is not entitled to special treatment because its financial interests may be adversely affected by the fair use of its material. Nothing in these reasons should however be taken as an endorsement of arguably blameworthy conduct in the form of unlawful technological breaches of a paywall, misuse of passwords or the widespread exploitation of copyrighted material to obtain a commercial or business advantage.

 (highlight and underline added)

It is important to recall that Blacklock’s has chosen not to appeal that original judgment. Interestingly, however, Blacklock’s instead chose to appeal the $65,000 costs award in which Judge Barnes stated:

[7] …I also reject the Plaintiff's argument that this case raised "strong public interest considerations". Rather, this case was about the Plaintiff's attempt to recover disproportionate damages without any apparent consideration to the legal merits of the claim or to the costs that it imposed on the taxpayers of Canada.

[8] Any reporter with the barest understanding of copyright law could not have reasonably concluded that the Department's limited use of the subject news articles represented a copyright infringement. Indeed, the fair dealing protection afforded by section 29 of the Copyright Act, RSC, 1985, c C-42, is so obviously applicable to the acknowledged facts of this case that the litigation should never have been commenced let alone carried to trial.

 [9] I am also troubled by Plaintiff's attempt to claim an excessive amount of damages beginning with its demand for compensation completely divorced from the Department's limited use of the two articles. In no circumstances would Blacklock's losses have exceeded the cost of individual subscriptions by the six officials who read the articles; yet Blacklock's demanded a license fee equivalent to its bulk subscription rate of over $17,000.00. This practice appears to be consistent with Blacklock's usual approach which is to hunt down, by Access to Information requests, alleged infringers and then demand compensation based on an unwarranted and self-serving assertion of indiscriminate and wide-spread infringement. The record discloses that in several instances government departments acquiesced for business reasons and paid the full amounts demanded. In this instance the Department appropriately took a hard line and succeeded in its defence.

(highlight added and emphasis added)

Costs judgments are normally very difficult to appeal successfully.  The $65,000 award in this instance flows directly from the normal  “mid-point of Column III” approach as explained by Justice Barnes in paragraph 6 of the costs judgment.  The Government was also able to benefit from the “double costs” rule because of “the failure by the Plaintiff to accept an early settlement offer in the amount of $2,000.00” (para. 4). Costs decisions by judges are “quintessentially discretionary” and are rarely set aside on appeal.

Blacklock’s tenacity is nothing if not noteworthy.  It has 13 actions pending against the Federal Government or its agencies, not to mention the appeal of its costs order in its unsuccessful original case against the Department of Finance.  

In Justice Barnes’ judgment, he stated:

[22] To resolve this matter I need only decide whether the conduct Blacklock's impugns is protected under the fair dealing provisions of the Act and, in particular, section 29. Although there are certainly some troubling aspects to Blacklock's business practices it is unnecessary to resolve the Attorney General's allegation that this litigation constitutes a form of copyright abuse by a copyright troll.

(highlight and underline added)

It will be interesting to see whether, and if so how, the Government deals with the “abuse” issue as this “litany of litigation” continues and unfolds and how the Court, in turn, may deal with it. In any event, the "obviously applicable" defence of fair dealing will presumably be in issue in each case and the Government will no doubt rely on Justice Barnes’ very solid decision.

Even if Blacklock’s is somehow able to establish copyright infringement in a particular factual situation, it remains to be seen what quantum of damages it might be awarded.  Without commenting on the Blacklock’s litigation, it is useful to remind readers that Canadian courts, unlike some American courts with juries, are very reluctant to award copyright damages that bear little or no relation to actual damages. Indeed, some significant checks and balances are hard-wired into the damages regime in the Canadian Copyright Act and solidly backed up by case law that prevent it from being used to obtain disproportionate damage awards that bear no relationship to actual damages suffered by the plaintiff or profits, if any, made by the defendant. Where a plaintiff elects to pursue statutory minimum damages rather than to prove actual damages, the case law is clear that the Court will still insist that there must be some correlation or relationship between actual damages and statutory damages. Moreover, since 2012, there has been a provision that limits statutory minimum damages to “a sum of not less than $100 and not more than $5,000 that the court considers just, with respect to all infringements involved in the proceedings for all works or other subject-matter, if the infringements are for non-commercial purposes.” (highlight added)

Speaking generally of damages in copyright cases, it is always timely and increasingly important in light of recent case law to remind readers that “success” in copyright litigation in Canada does not necessarily lead to a pot of gold and can indeed backfire and become a very expensive pyrrhic victory.

Perhaps the most notorious pyrrhic victory in Canadian copyright litigation was what I have called “A Cautionary Tale of Costly Copyright Litigation Consequences: How to Win a Little and Lose a Lot”. This was the relatively recent case of Leuthold v. CBC. As I summarized about this case, ‘Leuthold is an American photographer whose 9/11 images were used by the CBC, by way of an “honest mistake”, six times more than permitted by the original one-time license for which she was paid $2,500. She refused a settlement offer of $37,500 and went to trial, where she was awarded $19,200 ($3,200 times six) plus $168.73 as her portion of CBC’s “profits”’.  

Ms. Leuthold actually did technically succeed in proving copyright infringement but recovered less than 1/1,000th of her extravagant damages claim of about $21.5 million. Her claim was predicated upon a far-fetched and longshot liability theory that would have resulted in each of CBC’s 800 or so participating affiliated stations and Broadcasting Distribution Undertakings [BDUs] supposedly giving rise to a separate act of infringement. Because of the way the Federal Courts Rules on costs work, she predictably ended up being liable for a very large costs award even though she technically won her lawsuit.

I make no comment on whether the Leuthold case would be applicable to any of Blacklock’s cases in any particular respect.  Rather, I mention Leuthold’s case because it is the ultimate cautionary tale for every copyright claimant in Canada who may have expectations of substantial damages where actual damages cannot be calculated in a reliable manner or may actually be quite low by any reasonable measure. Thus, even a technical victory in a copyright case can be a costly proposition in Canada – especially if the defendant is savvy about the use of the settlement offer mechanism in the Federal Courts Rules. But even without successful recourse by a defendant to the “double costs” implications of a strategic settlement offer, it can obviously still be a pyrrhic victory if a plaintiff ends up spending far more in legal fees than the court awards in damages, and the normal costs award that may follow is insufficient to make the litigation cost effective. Needless to say, these various factors may discourage contingency fee arrangements in copyright cases, even when the cause of action seems solid but the potential damages may be modest. For better or worse, the calculus of costs is becoming increasingly important for all concerned with copyright litigation, and indeed all litigation.

Unlike the American system with its $150,000 per work statutory damages limit for copyright infringement and sometimes apparently absurd jury awards (e.g. $1.92 million for infringing 24 songs), Canadian courts are very measured and cautious about damages in copyright cases. There are no juries and no pots of gold in Canadian copyright litigation.

Concerning the issue of costs, the Federal Court of Appeal in the Leuthold case provided what I then characterized as “some cautionary language for those who may contemplate high risk litigation” from Justice Denis Pelletier:

[13]  Finally, Ms. Leuthold argues that an order of costs ought not to be such as to bring the administration of justice into disrepute. Once again, this is an argument based on impecuniosity. The sad fact of the matter is that litigation produces winners and losers; that is why it is such a blunt tool in the administration of justice. But justice is not served by allowing persons who have imposed costs on others by pursuing or defending a claim which lacks merit to avoid the consequences of their behaviour. Such a policy would be more likely to bring the administration of justice into disrepute than the result in this case.

(emphasis added)

Blacklock’s’ resounding initial defeat on the fair dealing issue in Justice Barnes’ careful and convincing judgment (not appealed) and the resulting $65,000 costs award (which is being appealed) together with the Government’s clear and able determination to fight back and its success to date may be of interest to all Blacklock’s copyright litigation defendants, including those outside the Government, who may be considering with their counsel their next steps, such as whether or not to settle or to continue to fight back and to utilize strategic settlement offers.

I will endeavor to update after the case management conference on March 6, 2017 or sooner if events warrant.

HPK