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Timestamp: 2019-04-25 19:52:51+00:00

Document:
Judges McLachlin, Beverley; Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis; Deschamps, Marie; Fish, Morris J.
Neutral citation: 2004 SCC 45.
2003: December 3; 2004: June 30.
Present: McLachlin C.J. and Iacobucci, Major, Bastarache, Binnie, Arbour, LeBel, Deschamps and Fish JJ.
Constitutional law — Extraterritorial application of laws — Parliament’s legislative competence to enact laws having extraterritorial effect — Presumption that Parliament did not intend to do so in absence of clear words or necessary implication to contrary.
Copyright — Applicability of copyright legislation — Communication of music on Internet — SOCAN seeking to impose liability for royalties on Internet Service Providers — Whether real and substantial connection to Canada sufficient to support application of Copyright Act .
Copyright — Infringement — Communication to public by telecommunication — Communication of music on Internet — SOCAN seeking to impose liability for royalties on Internet Service Providers — Copyright Act deeming participants in telecommunication that provide only means of telecommunication not to be communicators — Whether Internet Service Providers providing solely a conduit for information communicated by others can claim benefit of s. 2.4(1) (b) of Copyright Act — Whether Internet Service Providers impart or transmit copyrighted music and thereby infringe copyright — Whether creation of “cache” of Internet material, even for a purely technical reason, infringes copyright — Copyright Act, R.S.C. 1985, c. C-42, s. 2.4(1) (b).
In 1988 Parliament added what is now known as s. 2.4(1) (b) to the Copyright Act which provides that persons who only supply “the means of telecommunication necessary for another person to so communicate” are not themselves to be considered parties to an infringing communication.
In 1995, the respondent applied to the Copyright Board for approval of Tariff 22 which proposed the amount and allocation of the royalty. The Board convened a hearing to determine which activities on the Internet attract liability under the tariff. The Board held that copyright liability attaches to content providers but that the normal activities of Internet Service Providers other than the content providers did not constitute “a communication” for the purpose of the Copyright Act and thus fall within the protection of s. 2.4(1) (b). Even where the intermediary does more than act as a conduit, the Board held that no copyright liability is incurred in Canada unless the communication originates from a server located in Canada (except perhaps if the content provider has “the intention to communicate it specifically to recipients in Canada”).
By enacting s. 2.4(1) (b) of the Copyright Act , Parliament made a policy distinction between those who use the Internet to supply or obtain content such as “cheap music” and those who are part of the infrastructure of the Internet itself. Parliament decided that there is a public interest in encouraging intermediaries that make telecommunications possible to expand and improve their operations without the threat of copyright infringement. Section 2.4(1) (b) indicates that in Parliament’s view, Internet intermediaries are not “users” at all, at least for purposes of the Copyright Act .
It is a different issue, however, whether Canada intended to exercise its copyright jurisdiction to impose copyright liability on every participant in an Internet communication with “a real and substantial connection” to Canada. This latter issue raises questions of statutory interpretation of the Copyright Act .
Section 2.4(1) (b) of the Copyright Act provides that participants in a telecommunication who only provide “the means of telecommunication necessary” are deemed not to be communicators. The provision is not a loophole but is an important element of the balance struck by the statutory copyright scheme. The words of s. 2.4(1) (b) must be read in their ordinary and grammatical sense in the proper context. In this context, the word “necessary” is satisfied if the means are reasonably useful and proper to achieve the benefits of enhanced economy and efficiency. The “means” include all software connection equipment, connectivity services, hosting and other facilities and services without which such communication would not occur. So long as an Internet intermediary does not itself engage in acts that relate to the content of the communication, but confines itself to providing “a conduit” for information communicated by others, then it will fall within s. 2.4(1) (b). The attributes of such a “conduit” 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. However, the protection provided by s. 2.4(1) (b) relates to protected functions, not to all of the potential activities of an Internet Service Provider.
A content provider is not immune from copyright liability by virtue only of the fact that it employs a host server outside the country. Conversely, a host server does not attract liability just because it is located in Canada. The liability of a host server should be determined by whether or not the host server limits itself to “a conduit” (or content-neutral) function and thereby qualifies for protection under s. 2.4(1) (b).
The creation of a “cache” copy is a serendipitous consequence of improvements in Internet technology, is content neutral, and in light of s. 2.4(1)(b) of the Act ought not to have any legal bearing on the communication between the content provider and the end user. “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 and therefore comes within the shelter of s. 2.4(1) (b). The Board’s view is correct and its decision in that regard should be restored.
The Copyright Act is often presented as “a balance” between the rights of those who create works of the arts and the intellect and those who wish to use such works. However, the balance is only tangentially at issue here because Parliament has expressed the view in s. 2.4(1) (b) that those who provide internet infrastructure are not properly to be considered “users” of such works for purposes of the Act.
Per LeBel J.: Except for the analysis of the appropriate test for determining the location of an Internet communication under the Copyright Act , the judgment of the majority and the disposition of the appeal is agreed to. Parliament’s power to legislate with extraterritorial effect is well-settled as a matter of Canadian law. However, it is a common law presumption that Parliament does not intend legislation to apply extraterritorially. The presumption is rebuttable where the contrary intention is expressly stated or implied by the legislation. Nothing in the Copyright Act impliedly gives s. 3(1) (f) extraterritorial effect, particularly given the principle of territoriality of copyright law. Therefore, given that Parliament did not intend the Act to have effect outside Canada, an Internet communication only occurs within Canada where it originates from a host server located in Canada. In this way, the copyright works physically exist within Canadian territory and thus attract the protection of s. 3(1) (f). This test for determining the situs of a communication, which is the location of the host server, has the virtue of simplicity; it best accords with the principle of territoriality and harmonizes our copyright law with international treaty principles, and it diminishes privacy concerns. It is also sound from an operational perspective and it provides the requisite predictability and best accords with the meaning and purpose of the Act.
Referred to: Théberge v. Galerie d’Art du Petit Champlain inc.,  2 S.C.R. 336, 2002 SCC 34; CCH Canadian Ltd. v. Law Society of Upper Canada,  1 S.C.R. 339, 2004 SCC 13; Citron v. Zundel (2002), 41 C.H.R.R. D/274; Reference re Earth Future Lottery,  1 S.C.R. 123, 2003 SCC 10; Braintech, Inc. v. Kostiuk (1999), 171 D.L.R. (4th) 46; Dow Jones & Co. v. Gutnick (2002), 194 A.L.R. 433,  HCA 56; Goldman v. The Queen,  1 S.C.R. 976; Dr. Q v. College of Physicians and Surgeons of British Columbia,  1 S.C.R. 226, 2003 SCC 19; Tolofson v. Jensen,  3 S.C.R. 1022; Morguard Investments Ltd. v. De Savoye,  3 S.C.R. 1077; Unifund Assurance Co. v. Insurance Corp. of British Columbia,  2 S.C.R. 63, 2003 SCC 40; Libman v. The Queen,  2 S.C.R. 178; Canada (Human Rights Commission) v. Canadian Liberty Net,  1 S.C.R. 626; Kitakufe v. Oloya,  O.J. No. 2537 (QL); Hunt v. T&N plc,  4 S.C.R. 289; Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of),  3 S.C.R. 907, 2001 SCC 90; Spar Aerospace Ltd. v. American Mobile Satellite Corp.,  4 S.C.R. 205, 2002 SCC 78; Beals v. Saldanha,  3 S.C.R. 416, 2003 SCC 72; Bell ExpressVu Limited Partnership v. Rex,  2 S.C.R. 559, 2002 SCC 42; WIC Premium Television Ltd. v. General Instrument Corp. (2000), 8 C.P.R. (4th) 1; Re World Stock Exchange (2000), 9 A.S.C.S. 658; Commission of the European Communities, Commission Decision of 8 October 2002 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case No. COMP/C2/38.014 — IFPI “Simulcasting”); National Football League v. PrimeTime 24 Joint Venture, 211 F.3d 10 (2000); Los Angeles News Service v. Conus Communications Co., 969 F.Supp. 579 (1997); National Football League v. TVRadioNow Corp., 53 USPQ2d 1831 (2000); Trib. gr. inst. Paris, May 22, 2000 (UEJF v. Yahoo! Inc.); Yahoo! Inc. v. Ligue contre le racisme et l’antisémitisme, 145 F.Supp.2d 1168 (2001); Bishop v. Stevens,  2 S.C.R. 467; Compo Co. v. Blue Crest Music Inc.,  1 S.C.R. 357; Menear v. Miguna (1996), 30 O.R. (3d) 602, rev’d (1997), 33 O.R. (3d) 223; Newton v. City of Vancouver (1932), 46 B.C.R. 67; Sun Life Assurance Co. of Canada v. W. H. Smith & Son, Ltd.,  All E.R. Rep. 432; Electric Despatch Co. of Toronto v. Bell Telephone Co. of Canada (1891), 20 S.C.R. 83; Canadian Assn. of Broadcasters v. Society of Composers, Authors and Music Publishers of Canada (1994), 58 C.P.R. (3d) 190; Religious Technology Center v. Netcom On-line Communication Services, Inc., 907 F.Supp. 1361 (1995); Vigneux v. Canadian Performing Right Society, Ltd.,  A.C. 108; Muzak Corp. v. Composers, Authors and Publishers Association of Canada, Ltd.,  2 S.C.R. 182; Apple Computer Inc. v. Mackintosh Computers Ltd.,  1 F.C. 173, aff’d  2 S.C.R. 209; C.B.S. Inc. v. Ames Records & Tapes Ltd.,  1 Ch. 91; Godfrey v. Demon Internet Ltd.,  4 All E.R. 342; A & M Records, Inc. v. Napster, Inc., 114 F.Supp.2d 896 (2000), aff’d in part, 239 F.3d 1004 (2001).
Referred to: Croft v. Dunphy,  A.C. 156; Reference re Offshore Mineral Rights of British Columbia,  S.C.R. 792; Reference re Newfoundland Continental Shelf,  1 S.C.R. 86; Bolduc v. Attorney General of Quebec,  1 S.C.R. 573; Arcadi v. The King,  S.C.R. 158; Morguard Investments Ltd. v. De Savoye,  3 S.C.R. 1077; Beals v. Saldanha,  3 S.C.R. 416, 2003 SCC 72; Hunt v. T&N plc,  4 S.C.R. 289; R. v. Sharpe,  1 S.C.R. 45, 2001 SCC 2; Daniels v. White,  S.C.R. 517.
Constitution Act, 1982, s. 52(2) (b), (c), Sch., item 17.
Copyright Act, R.S.C. 1985, c. C-42, ss. 2 “telecommunication” [ad. 1988, c. 65, s. 61], 2.4(1)(b) [ad. 1997, c. 24, s. 2], 3(1) [repl. idem, s. 3(1) ], (f) [rep. & sub. 1988, c. 65, s. 62], 27(1).
Pietsch, Matthew V. “International Copyright Infringement and the Internet: An Analysis of the Existing Means of Enforcement” (2001-2002), 24 Hastings Comm. & Ent. L.J. 273.
1 Binnie J. — This appeal raises the difficult issue of who should compensate musical composers and artists for their Canadian copyright in music downloaded in Canada from a foreign country via the Internet. In an era when it is as easy to access a website hosted by a server in Bangalore as it is to access a website with a server in Mississauga, where is the protection for the financial rights of the people who created the music in the first place? Who, if anyone, is to pay the piper?
5 Parliament has spoken on this issue. In a 1988 amendment to the Copyright Act, R.S.C. 1985, c. C-42 , it made it clear that Internet intermediaries, as such, are not to be considered parties to the infringing communication. They are service providers, not participants in the content of the communication. In light of Parliament’s legislative policy, when applied to the findings of fact by the Copyright Board, I agree with the Board’s conclusion that as a matter of law the appellants did not, in general, “communicate” or “authorize” the communication of musical works in Canada in violation of the respondent’s copyright within the meaning of the Copyright Act .
11 The respondent, SOCAN, is a collective society recognized under s. 2 of the Copyright Act , to administer “performing rights” in Canada including those of (1) its Canadian member composers, authors and music publishers, and (2) foreign composers, authors and music publishers whose interest is protected by a system of reciprocal agreements with counterpart societies here and in other countries. Essentially, SOCAN administers in Canada “the world repertoire of copyright protected music”.
31 In order to determine the level of intermediate participation in Internet transmission of musical works that could trigger liability for infringement under s. 3(1) (f) of the Copyright Act , the Board was required to interpret the scope of the limitation in s. 2.4(1) (b), which says that an Internet Service Provider does not “communicate” a copyrighted work if its “only act” is to provide “the means of telecommunication necessary for another person to so communicate the work” (emphasis added).
32 The Board rejected SOCAN’s argument that s. 2.4(1) (b) should be narrowly construed as an exemption to copyright liability. The Board held that where an intermediary merely acts as a “conduit for communications by other persons” (p. 453 (emphasis added)), it can claim the benefit of s. 2.4(1) (b). If an intermediary does more than merely act as a conduit (for example if it creates a cache for reasons other than improving system performance or modifies the content of cached material), it may lose the protection. Insofar as the Internet Service Provider furnishes “ancillary” services to a content provider or end user, it could still rely on s. 2.4(1) (b) as a defence to copyright infringement, provided any such “ancillary services” do not amount in themselves to communication or authorization to communicate the work. Creation of an automatic “hyperlink” by a Canadian Internet Service Provider will also attract copyright liability.
35 SOCAN’s application for judicial review was allowed in part. Evans J.A. concluded that the standard of review of the Copyright Board’s interpretation of the s. 2.4(1) (b) defence was correctness, but as to other issues involving the application of the Copyright Act to the facts, the proper standard of review was unreasonableness.
38 As to the limited protection of s. 2.4(1) (b), the majority opinion ruled that the Board erred in law when it held that an Internet Service Provider who caches material is thereby providing a means necessary for another to communicate it. The fact that the cache enhances the speed of transmission and reduces the cost to the Internet access provider does not render the cache a practical necessity for communication. To decide otherwise would further erode copyright holders’ right to be compensated for the use of their works by others.
39 Sharlow J.A. disagreed with the majority on the interpretation of “necessary” in s. 2.4(1) (b), and found that in the context of that paragraph, something should be considered “necessary” for communication if it makes communication practicable or more practicable. Sharlow J.A. therefore agreed with the Board’s conclusion that intermediaries who carry out caching activities are entitled to rely on s. 2.4(1)(b) of the Act.
42 It is an infringement for anyone to do, without the consent of the copyright owner, “anything that, by this Act, only the owner of the copyright has the right to do” (s. 27(1)), including, since the 1988 amendments, the right “to communicate the work to the public by telecommunication . . . and to authorize any such acts” (s. 3(1) (f) (emphasis added)). In the same series of amendments, “telecommunication” was defined as “any transmission of signs, signals, writings, images or sounds or intelligence of any nature by wire, radio, visual, optical or other electromagnetic system” (s. 2 ). The Board ruled that a telecommunication occurs when the music is transmitted from the host server to the end user. I agree with this. The respondent says that the appellants as intermediaries participate in any such transmission of their copyrighted works, and authorize others to do so, and should therefore be required to pay compensation fixed under Tariff 22.
53 It is a different issue, however, whether Canada intended to exercise its copyright jurisdiction to impose copyright liability on every participant in an Internet communication with “a real and substantial connection” to Canada. This second issue raises questions of statutory interpretation of the Copyright Act .
57 The applicability of our Copyright Act to communications that have international participants will depend on whether there is a sufficient connection between this country and the communication in question for Canada to apply its law consistent with the “principles of order and fairness . . . that ensure security of [cross-border] transactions with justice”; see Morguard Investments, supra, at p. 1097; see also Unifund Assurance Co. v. Insurance Corp. of British Columbia,  2 S.C.R. 63, 2003 SCC 40, at para. 56; Sullivan and Driedger on the Construction of Statutes (4th ed. 2002), at pp. 601-2.
59 So also, in my view, a telecommunication from a foreign state to Canada, or a telecommunication from Canada to a foreign state, “is both here and there”. Receipt may be no less “significant” a connecting factor than the point of origin (not to mention the physical location of the host server, which may be in a third country). To the same effect, see Canada (Human Rights Commission) v. Canadian Liberty Net,  1 S.C.R. 626, at para. 52; Kitakufe v. Oloya,  O.J. No. 2537 (QL) (Gen. Div.). In the factual situation at issue in Citron v. Zundel, supra, for example, the fact that the host server was located in California was scarcely conclusive in a situation where both the content provider (Zundel) and a major part of his target audience were located in Canada. The Zundel case was decided on grounds related to the provisions of the Canadian Human Rights Act , but for present purposes the object lesson of those facts is nevertheless instructive.
60 The “real and substantial connection” test was adopted and developed by this Court in Morguard Investments, supra, at pp. 1108-9; Hunt v. T&N plc,  4 S.C.R. 289, at pp. 325-26 and 328; and Tolofson, supra, at p. 1049. The test has been reaffirmed and applied more recently in cases such as Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of),  3 S.C.R. 907, 2001 SCC 90, at para. 71; Spar Aerospace Ltd. v. American Mobile Satellite Corp.,  4 S.C.R. 205, 2002 SCC 78; Unifund, supra, at para. 54; and Beals v. Saldanha,  3 S.C.R. 416, 2003 SCC 72. From the outset, the real and substantial connection test has been viewed as an appropriate way to “prevent overreaching . . . and [to restrict] the exercise of jurisdiction over extraterritorial and transnational transactions” (La Forest J. in Tolofson, supra, at p. 1049). The test reflects the underlying reality of “the territorial limits of law under the international legal order” and respect for the legitimate actions of other states inherent in the principle of international comity (Tolofson, at p. 1047). A real and substantial connection to Canada is sufficient to support the application of our Copyright Act to international Internet transmissions in a way that will accord with international comity and be consistent with the objectives of order and fairness.
64 In a recent decision of the European Commission involving “simulcasting”, a model reciprocal agreement approved by the Commission was based on the country-of-destination principle. The decision commented that according to the principle “which appears to reflect the current legal situation in copyright law, the act of communication to the public of a copyright protected work takes place not only in the country of origin (emission-State) but also in all the States where the signals can be received (reception-States)”: Commission Decision of 8 October 2002 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case No. COMP/C2/38.014 _ IFPI “Simulcasting”), para. 21 (emphasis added).
. . . authors of literary and artistic works shall enjoy the exclusive right of authorizing any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them.
66 In 2000, the European Commission issued what is known as its E-Commerce Directive; see Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (“Directive on electronic commerce”),  O.J. L. 178/1. Its purpose was to ensure the free movement among Member States of “information society services”, defined as “any service normally provided for remuneration, at a distance, by means of electronic equipment . . . and at the individual request of a recipient of a service” (Preamble, clause 17). The E-Commerce Directive preferred as a matter of policy the law of the Member State on whose territory the service provider is established (art. 3(1) ). It was thought that “[i]nformation society services should be supervised at the source of the activity . . . to that end, it is necessary to ensure that the competent authority provides such protection not only for the citizens of its own country but for all Community citizens” (Preamble, clause 22 (emphasis added)). The Directive notes that the place where a service provider is established should be determined by the case law of the European Court of Justice, which holds that the proper situs is not the place where the technology is, or the place where the person accessing the service is, but rather where the service provider’s centre of activities is (Preamble, clause 19); see G. J. H. Smith, Internet Law and Regulation (3rd ed. 2002), at p. 269.
67 Supranational organizations such as the European Commission may thus allocate responsibility among their member States _ whether the state of transmission or the state of reception _ as a matter of policy. In the absence of such regional or international arrangements, the territorial nature of copyright law must be respected.
. . . it is clear that PrimeTime’s uplink transmission of signals captured in the United Sates is a step in the process by which NFL’s protected work wends its way to a public audience. In short, PrimeTime publicly displayed or performed material in which the NFL owns the copyright. Because PrimeTime did not have authorization to make such a public performance, PrimeTime infringed the NFL’s copyright.
Under the plain language of the Act, the subject footage was “displayed” on television sets within the United States within the meaning of the Copyright Act . To find otherwise would leave a substantial loophole in the copyright laws. Broadcasters could deliberately transmit potentially infringing material from locations across the U.S. borders for display in the United States without regard to the rights of copyright owners set forth in the U.S. Copyright Act.
communicate means make available online or electronically transmit (whether over a path, or a combination of paths, provided by a material substance or otherwise) a work or other subject‑matter.
87 Parliament did not say that the intermediaries are engaged in communication of copyright content but enjoy an immunity. Instead, s. 2.4(1)(b) says that such intermediaries are deemed, for purposes of the Copyright Act , not to communicate the work to the public at all. Whether or not intermediaries are parties to the communication for legal purposes other than copyright is an issue that will have to be decided when it arises.
88 The respondent contends that s. 2.4(1)(b) is an exemption from liability and should be read narrowly; but this is incorrect. Under the Copyright Act , the rights of the copyright owner and the limitations on those rights should be read together to give “the fair and balanced reading that befits remedial legislation” (CCH, supra, at para. 48).
90 The 1988 amendments, including the predecessor to s. 2.4(1)(b), followed on the recommendation of an all party Sub-Committee on the Revision of Copyright of the House of Commons Standing Committee on Communications and Culture. Its report, entitled A Charter of Rights for Creators (1985), identified the need for a broader definition of telecommunication, one that was not dependent on the form of technology, which would provide copyright protection for retransmissions. This led to the adoption of the broad definition of communication in s. 3(1) (f). In conjunction with this, the Committee recommended, at p. 80, that those who participate in the retransmission “solely to serve as an intermediary between the signal source and a retransmitter whose services are offered to the general public” should not be unfairly caught by the expanded definition. The ostensible objective, according to the Committee, was to avoid the unnecessary layering of copyright liability that would result from targeting the “wholesale stage” (p. 80).
101 I conclude that the Copyright Act , 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. The attributes of such a “conduit”, as found by the 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. We are told that a large on-line service provider like America Online delivers in the order of 11 million transmissions a day.
107 It is on this aspect of the test that I respectfully disagree with my colleague LeBel J., who accepts the Board’s geographic limitation, i.e., that for copyright purposes there is no communication in Canada unless a communication “originates from a host server located in Canada. . . . [This] provides a straightforward and logical rule” (para. 146). My colleague agrees that in the first instance the liability of a host server provider, as with any other Internet Service Provider, should be determined by whether or not the host server provider limits itself to “a conduit” function, as discussed above, and thereby qualifies for protection under s. 2.4(1)(b). However, in my colleague’s view, even those participants in an Internet telecommunication who step outside the “conduit” role, and who would otherwise be liable for copyright infringement, will be exempt from liability for Canadian copyright unless the host server itself happens to be located here. In my view, with respect, such an added requirement would be unduly formalistic and would tilt the balance unfairly against the copyright owners. If there are to be formalistic rules they should be imposed by Parliament.
108 My colleague LeBel J., at para. 149, also relies on art. 8 of the WIPO Copyright Treaty, which gives the copyright owner the exclusive right of “making available to the public . . . their works”, but as previously noted, the Board found that in copyright terms it is the content provider, not the host server provider, that makes the work available. Accordingly, as I see it, the issue of the relevance of art. 8 to the interpretation of the Copyright Act does not arise.
110 However, to the extent the host server provider has notice of copyrighted material posted on its server, it may, as the Board found, “respond to the complaint in accordance with the [Canadian Association of Internet Providers] Code of Conduct [which] may include requiring the customer to remove the offending material through a ‘take down’ notice” (p. 441). If the host server provider does not comply with the notice, it may be held to have authorized communication of the copyright material, as hereinafter discussed.
120 Authorizing a communication by telecommunication is a discrete infringement of s. 3(1) ; see Compo, supra, at pp. 373 and 376.
126 In the present appeal, the Federal Court of Appeal stated that, in the case of host servers, “an implicit authorization to communicate infringing material might be inferred from their failure to remove it after they have been advised of its presence on the server and had a reasonable opportunity to take it down” (para. 160). Reference was made to Apple Computer Inc. v. Mackintosh Computers Ltd.,  1 F.C. 173, aff’d  2 S.C.R. 209, at pp. 211 and 208, citing C.B.S. Inc. v. Ames Records & Tapes Ltd.,  1 Ch. 91, at p. 110, i.e., an Internet Service Provider may attract liability for authorization because “. . . indifference, exhibited by acts of commission or omission, may reach a degree from which authorisation or permission may be inferred. It is a question of fact in each case . . . .” See also Godfrey v. Demon Internet Ltd.,  4 All E.R. 342 (Q.B.).
131 Nevertheless, by enacting s. 2.4(1) (b) of the Copyright Act , Parliament made a policy distinction between those who abuse the Internet to obtain “cheap music” and those who are part of the infrastructure of the Internet itself. 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.
132 This appeal is only tangentially related to holding “the balance” between creators and users. Section 2.4(1) (b) indicates that in Parliament’s view, Internet intermediaries are not “users” at all, at least for purposes of the Copyright Act .
134 Among the difficult issues raised by this appeal is how to determine, under the Copyright Act, R.S.C. 1985, c. C-42 , whether an Internet communication occurs in Canada. I have read my colleague Binnie J.’s reasons and, although I agree with his judgment in all other respects and with his disposition of the appeal, I respectfully disagree with his analysis of the localization issue. My disagreement is confined to the appropriate test for determining the location of an Internet communication under the Copyright Act and does not touch on determining liability. For the reasons that follow, I would affirm the Board’s determination that an Internet communication occurs within Canada when it originates from a server located in Canada.
135 Determining whether an Internet communication occurs within Canada is critical to phase two of the Tariff 22 hearings and to future infringement enforcement proceedings because it will determine who will be liable in Canada to pay musical composers and artists for their copyright in works under the Copyright Act . A vast amount of information is distributed by the Internet every day. This includes a high volume of music and other potentially copyrighted works. Internet stakeholders need to know with a degree of certainty whether they will be liable in Canada for a communication of copyrighted works. In my opinion, the test provided by the Board — the location of the host server — is sound from an operational perspective; it provides the requisite predictability and best accords with the meaning and purpose of the Act. By contrast, importing the real and substantial connection test that was developed in a very different context is, in my view, inappropriate to determine whether a communication occurred within Canada.
137 The Board’s decision is more nuanced than Binnie J. avers to. The Board held that a communication occurs in Canada, under s. 3(1)(f) of the Act, where it originates from a host server located in Canada. The location of the content provider — the person who uploads content onto a host server — is irrelevant. The location of the end user — the person making the request — is also irrelevant. The Board held it is only when the copyrighted work is posted on a Canadian host server that the rights to authorize or communicate must be obtained from the person administering those rights in Canada. Foreign content providers who post content on a Canadian host server must, therefore, obtain a licence from the Canadian rights holder.
Once it is found that a particular topic of legislation is among those upon which the Dominion Parliament may competently legislate . . . their Lordships see no reason to restrict the permitted scope of such legislation by any other consideration than is applicable to the legislation of a fully Sovereign State.
The Privy Council held that the British North America Act, 1867 (now the Constitution Act, 1867 ) imposed no restriction on the scope of Parliament’s plenary legislative power (p. 167).
142 Any doubts in this regard had been put to rest shortly before Croft v. Dunphy, was heard by the Privy Council, when the Imperial Parliament passed the Statute of Westminster, 1931 (U.K.), 22 Geo. 5, c. 4. Section 3 provides: “It is hereby declared and enacted that the Parliament of a Dominion has full power to make laws having extra-territorial operation.” The Privy Council, however, did not need to consider whether s. 3 had retroactive effect because it decided that Parliament had the requisite power under the British North America Act, 1867 standing alone. Of course, the Statute of Westminster, 1931 has now been incorporated into our Constitution: see Constitution Act, 1982, s. 52(2) (b) and (c), and the Schedule, item 17.
143 Parliament’s power to legislate with extraterritorial effect is well settled as a matter of Canadian law: see, e.g., Reference re Offshore Mineral Rights of British Columbia,  S.C.R. 792, at p. 816; Reference re Newfoundland Continental Shelf,  1 S.C.R. 86, at p. 103. I would not want Binnie J.’s use of a real and substantial connection test to be understood as a limit on Parliament’s power to legislate with extraterritorial effect. The real question is whether Parliament did in fact intend that s. 3(1) (f) of the Copyright Act apply extraterritorially. If not, what then constitutes a communication within Canada?
The purpose of art. 8 of the WCT is to harmonize domestic copyright laws in the party States with respect to the right of communication of copyrighted works. We should not ignore that fact.

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