August 26, 2021
In Bell Canada v L3D Distributing Inc., 2021 FC 832, the Federal Court (the “Court”) granted default judgment and awarded significant damages in favour of the Plaintiffs, Bell Canada and other Canadian media companies, relating to various infringements of the Copyright Act and Radiocommunication Act.
Bell and the other Plaintiff companies broadcast or retransmit broadcasts of a wide variety of television programming in Canada, including live television, on-demand television, and live sporting events. The Defendant companies – L3D Distributing, Morcor, and Ottawa Tek – advertised and sold pre-loaded set-top boxes and Internet Protocol Television (IPTV) services in Canada online and at brick-and-mortar stores, providing unauthorized access to the Plaintiffs’ content.
The Plaintiffs brought an action against the Defendants for copyright infringement and unlawful dealing in prohibited equipment. The Defendants did not respond to or participate in the action in any way. Accordingly, the Plaintiffs sought default judgment along with permanent injunctions as against each of the Defendants, statutory damages, punitive damages, lump-sum costs, and several declarations concerning the subsistence of copyright in their works.
To succeed on their motion for default judgment, the Plaintiffs were required to not only (1) establish that the Defendants were in technical default, but also (2) prove the claims set out in their Statement of Claim, on a balance of probabilities, and (3) lead evidence in support of the relief sought.
(1) Were the Defendants in default?
The Court found that the Defendants were in default. They failed to respond to the Plaintiffs’ action within the 30-day time limit stipulated in r. 204(a) of the Federal Court Rules. The Defendants also failed to take any step in the action, such as expressing an intention to defend, despite being put on notice of the possibility of default judgment.
(2) The Plaintiffs’ Claims:
The Court also found that the Plaintiffs had established the claims set out in their Statement of Claim on a balance of probabilities.
(i) Copyright Infringement
The Court determined that the Plaintiffs hold copyright in their works in two ways, depending on the particular work: (i) as the ‘maker’ of specified original cinematographic works, pursuant to section 2 of the Copyright Act; or (ii) as the exclusive licensees of specified works or television programs in Canada. The Court observed that, in either case, the sole right to communicate a work in which copyright subsists to the public by telecommunication is one of the bundle of rights a copyright owner in Canada holds: Copyright Act, s. 3(1)(f).
The Court concluded that the Defendants had infringed, and had authorized others to infringe, the Plaintiffs’ copyright by making those works available to the public without the Plaintiffs’ permission. In particular, by advertising and facilitating the installation of preconfigured set-top boxes with settings for streaming unauthorized content, the Defendants encouraged consumers to bypass legitimate ways of accessing the Plaintiffs’ works.
For similar reasons, the Court found that the Plaintiffs also met the test for the common law cause of inducement, which occurs when someone knowingly induces or procures infringement of the intellectual property right of another.
(ii) Contravention of the Radiocommunication Act
The Court further held that the Defendants had contravened the Radiocommunication Act, giving rise to a civil right of action and entitling the Plaintiffs to relief. Paragraph 9(1)(d) of the Radiocommunication Act makes it an offence to operate a radio apparatus to receive encrypted signals that have been decoded without authorization. The Court agreed with the Plaintiffs that a pre-loaded set-top box is a type of radio apparatus and that the Defendants’ activities fell within the prohibition contemplated by the Act.
(3) Relief Granted
Given the above findings, the Court granted default judgement to the Plaintiffs. The Court permanently enjoined the Defendants from (i) manufacturing, selling, and/or possessing pre-loaded set-top boxes; and (ii) authorizing or inducing anyone to infringe the Plaintiffs’ copyright.
Importantly, the Court awarded substantial statutory damages to the Plaintiffs, totalling $29,300,000, ($10,000 per work infringed). This figure, awarded on default judgment without participation or input from the Defendants, nearly triples the largest statutory damages award previously granted by the Court in Nintendo of America v King, 2017 FC 246 (see paragraph 98 of the Court’s decision).
In arriving at this award, the Court put significant weight on (i) the bad faith actions of the Defendants and the harm caused to the Plaintiffs; (ii) the complete failure of the Defendants to respond to or participate in the action in any capacity; and (iii) the growth of the illicit pre-loaded set-top box industry and the need to deter further infringements.
In addition, the Court awarded punitive damages in the amount of $300,000 and lump-sum costs of $75,000. The Court also ordered that post-judgment interest be paid on all amounts at a rate of 2% per annum, not compounded.
Finally, the Court found Raheel Rafiq, the sole director of Ottawa Tek, jointly and severally liable in his personal capacity for Ottawa Tek’s copyright infringement. The Court found that Rafiq deliberately, wilfully, and knowingly pursued a course of conduct that was likely to constitute infringement or, at the very least, exhibited indifference to its risk.
Authors: Luke Devine and Larissa Fulop