Equitable Copyright on The Table

A recent Ontario Superior Court ruling has attracted the attention of the copyright law community. On January 24^th Master Abrams allowed the Delta Hotels v. Backus-Naur et al. motion pleading equitable ownership of copyright, an equity doctrine in many Commonwealth countries that is currently not legally recognized in Canada.

Ultimately the case for equitable ownership of copyright divides into three points.

I. Relevant UK Law

This was the main issue addressed in the Master’s decision. “Equitable ownership of copyright is a recognized principle in the United Kingdom,” she wrote. “While I accept, as [defendant counsel] Mr. Seed has argued, that there is now no precedent in Canadian law for the alternative plea proposed, I cannot say that it necessarily follows that on the specific facts of any given case, or this case, there could never be. To say that foreign copyright cases may not be easily transferable to Canada as the Supreme Court did in CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13 (CanLII), [2004] 1 S.C.R. 339, para. 22 is not to say that they are at no time and under any circumstances transferable.” The judge expressed agreement with the plaintiff’s counsel that though the equitable copyright claim is “novel”, it may yet have a place in Canadian law.

II. Historical Antecedents and Modern Interpretation

This argument is further validated when reviewing closely the clause on which the potential equity claim hinges, section 89. Section 89 expressly allows actions for breach of trust or confidence:

89. No person is entitled to copyright otherwise than under and in accordance with this Act or any other Act of Parliament, but nothing in this section shall be construed as abrogating any right or jurisdiction in respect of a breach of trust or confidence.

Moreover, s. 89 of the Canadian Copyright Act is taken directly from the 1911 UK Copyright Act. It’s this same original provision that is being used in UK copyright equity cases today. Even by the strictest interpretation of s. 89, there is room for a claim in equity. When considering the modern applicability of the UK statue and subsequent precedent, the argument becomes even stronger.

III. Canadian Court Dicta

The Supreme Court wrote in Compo Co. Ltd v. Blue Crest Music at 372-73: “copyright law is neither tor law nor property law in classification, but is statutory law… Copyright legislation simply creates rights and obligations upon the terms and circumstances set out in the statute.” The Canadian Copyright Act is a code, but only partly. The Supreme Court’s interpretation in Compo is not comprehensive.

Wrote IP Osgoode's Professor David Vaver in Intellectual Property Law: Copyright, Patents, Trade-Marks, 2^nd ed. at 19-20, “This clarification forestalls arguments that common or civil law principles automatically solve a copyright dispute, or that the Copyright Act is merely a backdrop of such principles… The situation is nevertheless more complex than the Supreme Court’s statement implies, for the Act is only a partial code. It leaves much unsaid about copyright: for example, whether copyright can be inherited, co-owned, seized by unpaid creditors, or used as securities to raise money.”

The Master said in her judgment that there is yet no direct discussion in Canadian jurisprudence either for or against equitable ownership of copyright. But if you consider the following trifecta of cases, two Canadian as well as one recent one from the UK, we're certainly getting close.

There is obiter dictum in a federal case by Harrington J in Jordan Video Inc. v. Elmaleh, 2009 FC 488 at [18] that suggests the potential to joint interests applying to copyright.

“Their relationship may be a joint venture, principal and agent, assignor and assignee, or licensor or licensee, be it on an exclusive or non-exclusive basis. Section 36 of the Copyright Act contemplates that an assignor may be named as a co-plaintiff. One might also have to consider the distinction between legal ownership on the one hand, and beneficial ownership on the other.”

As well, the Supreme Court has applied equitable principles to personalty in Pecore v Pecore 2007 1 SCR 795. Certainly the closeness of personalty and copyright in intellectual property makes a distinction for legal purposes difficult. The law is conclusively stated in Performing Right Society v London Theatre of Varieties [1924] AC 1 169 (HL). Assuming the Supreme Court would follow such precedent – a fair assumption – it paints a clear guideline.

“The appellants are therefore equitable assignees of these performing rights. It has been established by a long series of cases that an action for an injunction to restrain an infringement of copyright can be brought by an equitable owner in his own name.”

And on a final argumentative note, the British Columbia Supreme Court recently used Performing Right Society, as well as Professor Vaver's analysis, to apply the principles of equity ownership in deciding to award an injunction in Century 21 Canada Limited Partnership v. Rogers Communications Inc., 2011 BCSC 1196. This cutting edge case answered important questions about website copyright and digital "Terms of Use" contracts, as covered by IPilogue here. The case specifically stated (emphasis added):

"With respect to the lack of a provision relating to future created Works the agreement does not address the issue of past, present or future works. Copyright in a non-existent (future) work cannot be assigned, just as you cannot transfer property in non-existent land or goods. However, on the authority of Performing Right Society v. London Theatre of Varieties, [1924] A.C. 1 at 13 (HL) when a work that is not yet created is assigned, parties are treated in equity as promising to assign the future copyright once the work is created. At that point, the promisee becomes the equitable assignee and the beneficial owner of the copyright, and the promissor is the equitable assignor with a bare legal title: David Vaver, Intellectual Property Law (Irwin Law: Toronto, Ont, 1997) at 245. The power of assignment is not confined to an assignment of the legal property, but will apply to the transfer of any interest, whether legal or equitable: Performing Right Society at 18. As a result, the assignment of future created works is still valid in equity as between the parties provided it is made for valuable consideration. As soon as the works are created the copyright is validly assigned to the assignee."

Conclusion

Ultimately, regardless of outcome, a shortcoming is clear. The state of Equity education in modern day Canadian legal education is insufficient.

"Since the teaching of Equity as a subject is so rare these days in Canadian law schools, many lawyers are going into practice inadequately prepared to understand the interplay of law and equity,” said Professor Vaver.

“Even in Quebec, the injustice that equity corrects in common law jurisdictions should be addressed by comparable doctrine, as it is in civilian jurisdictions elsewhere. When a formality of federal law is involved, it would be anomalous if the result of a case differed according to where in Canada the transaction took place."

Hopefully this case is the first of many that wakes up the Canadian legal establishment to the fact that even with a decided Copyright Act, there is still much to be decided.

Plaintiff’s counsel relied on Succar v. Wawanesa Mutual Insurance Co., 2006 CarswellOnt (S.C.J.), at paras 2, 8-9, as well as Professor Vaver’s Intellectual Property Law: Copyright, Patents, Trademarks, 2d ed., at 140. These issues are also addressed in IP Osgoode Founder and Director Giuseppina D’Agostino’s Copyright, Contracts, Creators: New Media, New Rules at 55, 72-75, 135-137.

Finally, for unquestionable hipster meme proof of the value of equitable ownership of copyright, please review this UK case synopsis regarding the important issue of cat illustrations.

Denise Brunsdon is a JD/MBA candidate at Western University.

Editor's note (22/02/13): This article was updated to correct a typo that incorrectly referred to Master Abrams using a male pronoun.