Arecent decision of the Federal Courthas enforced technical protection measures under the Copyright Act. This is the first decision to do so.
Background
Both the WIPO Copyright Treaty and WIPO Performances and PhonogramsTreaty as well as Anti-Counterfeiting Trade Agreement provide that the contractingparties must provide adequate legal protection and effective remedies againstthe circumvention of technological measures that are used by authors,performers or makers of phonograms in connection with the exercise of theirrights and that restrict acts in respect of their works which were notauthorized by the rights owner or permitted by law.
Canada is a party to the treaties and the Agreement and the sectionsof the Act dealing with technologicalprotection measures (TPMs) were brought into force in late 2012 to allow Canadato fulfill its obligations under the treaties and Agreement.
Under the Act TPMs are definedas measures relating to controlling access (access control) or restricting theexercise of a right included within the rights available to a copyright owner (copyrightcontrol). The prohibitions applicable to circumventing technological protectionmeasures apply to controlling access or copyright control.
In the access control context a TPM means any effective technology,device or component that, in the ordinary course of its operation controlsaccess to a work, to a performer's performance fixed in a sound recording or toa sound recording and whose use is authorized by the copyright owner. In thiscontext "circumvent means" to descramble a scrambled work or decryptan encrypted work or to otherwise avoid, bypass, remove, deactivateor impair the TPM, unless it is done with the authority of the copyright owner.
In order to satisfy these definitions the technology, device orcomponent must be effective in the ordinary course of its operation to provideaccess control or copyright control as the case may be.
The Facts
Nintendoof America Inc., (Nintendo) initiated an application in the Federal Court andsought, among other things, a declaration that the individual and corporate respondentscircumvented, offered services to circumvent, and trafficked in devices whichcircumvent Nintendo’s TPMs contrary to Act.
Nintendois a famous video game company. It sells and distributes popular and well-knownvideo games and video game consoles in Canada. The popularity and success ofits video games are a result of substantial innovation, creativity, andfinancial investment into product development, intellectual property, andmarketing. Each of its video games can take years and millions of dollars todevelop.
Nintendosells hundreds of video games for its consoles in Canada. These video games aresold as game cards and discs. Purchasers of genuine Nintendo video games can playthese games on the appropriate Nintendo console by inserting the game card ordisc into the corresponding console.
Nintendoowns the copyright in the header data on its game cards, which is a part of itsTPM systems. The TPMs prevent users from playing unauthorized copies of videogames and from installing unauthorized software, including counterfeit gamesand software, on Nintendo consoles. The physical configuration of some of its gamecards utilize a specific shape, size, and arrangement of electrical connectionsthat is specifically designed for use only with the respective console.
Nintendoalso owns the copyright subsisting in its video games of which there are currently585.
Nintendoasserted that since at least 2013, the corporate respondent has advertised andoffered for sale, either through its websites or at its retail store, certaindevices which were designed to circumvent the TPMs employed on the Nintendogaming consoles. The individualrespondent is the sole director and officer of the corporate respondent.
Theapplication was initially heard by the judge in October of 2016 but there wasnot sufficient time to deal with the matter and it was adjourned to November2016 to allow counsel for the respondents to present argument. In November the court was advised that Nintendohad entered into a settlement with the individual respondent and that counselfor Nintendo wished to proceed against the corporate respondent. The respondents did not present any evidenceor cross-examine Nintendo’s witnesses and as a result the matter proceeded onan effectively uncontested basis.
Circumvention ofTechnological Protection Measures
TheAct provides that no person shall
circumventa technological protection measure,
offerservices to the public or provide services if the services are offered orprovided primarily for the purposes of circumventing a technological protectionmeasure, or
import,distribute, offer for sale or rental or provide — including by selling orrenting — any technology, device or component if the technology, device orcomponent is designed or produced primarily for the purposes of circumventing atechnological protection measure.
Thecourt found that the Nintendo TPMs were effective measures for controllingaccess to the Nintendo Games. In particular the physical configuration of theNintendo game cartridges, including the shape of the card and the arrangementof the electrical pins, was designed to fit specifically into a correspondingslot on each of its consoles. Together they operate much like a lock and key andwere effective in controlling access to genuine Nintendo Games.
Thecourt also found that the respondents had directly circumvented Nintendo’s TPMs,offered services for the purposes of circumventing and trafficked incircumvention devices.
Remedies
TheAct provides that the owner of the copyright in a work that has beencircumvented is entitled to all remedies — by way of injunction, damages,accounts, delivery up and otherwise — that are or may be conferred by law forthe infringement of copyright against the person who circumvented the work.
Nintendoelected for statutory damages and contended that statutory damages for TPMcircumvention ought to be calculated on a per-work basis, i.e. each copyrightedwork that the circumvention grants unauthorized access to attracts a separateaward of statutory damages. Nintendo sought a range of statutory damages between$294,000 to $11,700,000 for TPM circumvention of the 585 different NintendoGames, based on the statutorily mandated range of between $500 and $20,000 perwork.
Thejudge emphasized the need for deterrence. He referred to the fact thatParliament had clearly indicated its intention to protect investments made bythe creative industries, including specifically the video game industry. TPMs areimportant tools to protect these investments. An award of maximum statutory damagesreflects the disproportionate harm that may be caused to copyright owners bythose engaged in circumvention, as they provide access to entire libraries ofcopyrighted works while profiting from the investments of others.
Inaddition, there was evidence of recidivism by the individual respondent who hasbeen involved in similar activities in the past. The respondent’s business alsoappeared to be dedicated to its circumvention activities. Further, the respondentscontinued to promote illegitimate activities such as piracy of televisionprograms and circumvention devices for other platforms. All of this demonstrated an acute need fordeterrence.
Asa result the judge found that Nintendo was entitled to statutory damages of $11,700,000for TPM circumvention in respect of its 585 Nintendo Games and $1,000,000 inpunitive damages.
Comment
Thecourt was not reluctant to grant relief for TPM circumvention in this case. Thejudge said that the court should not hesitate to award the maximum amount ofstatutory damages in cases involving serial business infringements.
Itis important for the court to make it clear that this type of infringement isunacceptable. However, the amount of statutory damages ordered to be paid mayalso be a function of the fact that the case was in effect uncontested.
John McKeown
Goldman Sloan Nash& Haber LLP
480 UniversityAvenue, Suite 1600
Toronto, OntarioM5G 1V2
Direct Line: (416)597-3371
Fax: (416) 597-3370
Email: mckeown@gsnh.com
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