Friday, February 24, 2017

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

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.  

[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.


No comments:

Post a Comment