A recent Ontario Superior Court ruling has attracted the attention of the copyright law community. On January 24th 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, 2nd 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):
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.
3 Responses
Although the situation at issue is often referred to as “equitable ownership” it probably should more properly be called “equitable assignment”, as the UK cases simply would require the “legal” owner to assign the copyright to the “equitable owner” in accordance with either a contract that does not satisfy the requirements of the Copyright Act or an implied term in a contract that does not explicitly assign the copyright.
This is not really that revolutionary, and the UK courts have in most cases made it clear that there must be something more in the contract or the relationship between the parties than the creation of a copyright work and some payment by the plaintiff in order to engage the court’s equitable jurisdiction.
I disagree with the substantive remarks in the previous comment. An equitable assignee of copyright (or any other IP right) is the equitable owner of the copyright (or other right) and has rights that she can deal with and sue on immediately – just as a legal assignee is the legal owner and can act accordingly.
If the commentator is also saying that more is required in the English and other Commonwealth cases than an oral agreement to transfer, plus payment of the consideration, to create equitable ownership, I should again disagree – at least in the absence of there being some further equitable defect such as fraud or overreaching. The situation is not well understood in the Canadian courts, including the Federal Court, although it was discussed, largely correctly, in the British Columbia decision in Century 21, as Ms Brunsdon points out in her initial Note.
I deal with the position in the 2nd edition of Intellectual Property Law: Copyright, Patents, Trade-marks (Irwin Law, Toronto, 2011), at pp 584-585. I have reread the relevant section and do not resile from one word of it insofar as it states the position in the common law (and equitable) provinces. I would hope that Quebec civil law would reach the same result, if not necessarily by the same reasoning, just as Scottish courts do: Tayplan Ltd v D & A Contracts [2005] ScotCS CSOH 17 – though there is so far little sign of that yet occurring with Quebec-based cases. It would be disappointing, to say the least, if substantive rights in copyright (or other federal IP rights) differed between provinces even though the identical oral agreement or unsigned writing was in issue.
Here are extracts from the relevant passages of my book [footnotes omitted]:
“It is sometimes thought that an oral contract gives the assignee or licensee no rights if the statute requires writing. This is not true. IP laws are passed in the context of mature existing systems of law, including principles of equity. These principles continue to apply, unless they are plainly inconsistent with the right involved. For example, to hold and exercise a trade-mark in trust may cause the mark to lose distinctiveness and become invalid. But can it be true that a person who bought, paid for, and acted on an IP right gets nothing — except a right to a refund — simply because the seller refused to sign a writing? The short answer is no: in equity, the seller is but owner in name, while the buyer is owner in reality. All the buyer needs formally to become a full legal owner is a written assignment from the seller or his agent — but a court order can compel that result.”
“The promisor is treated in equity as promising to assign the future right once the work is created. At that point, the promisee becomes the equitable assignee and beneficial owner of the right, and the promisor is the equitable assignor with a bare legal title; that is, once again, the promisee is the real owner, the promisor is just the owner in name. The assignee may qualify as the assignor’s successor in title and have its interest perfected by a court order that either compels the assignor to put the assignment in writing or authorizes the registrar of the court to sign a writing binding the assignor.”
[…]
“An equitable title is still less than a legal one. For example, the legal owner may divest the equitable owner’s interest by a transfer to a bona fide buyer without notice. The equitable owner can then sue the assignor only for restitution or breach of contract. And an equitable owner may usually obtain only interlocutory, not final, relief without joining the legal owner or producing or undertaking to produce a legal assignment. He cannot usually recover monetary relief for the period his title was still equitable. But, if a court is convinced that the defendant will not be sued for the same cause twice over, even an equitable owner may be allowed to recover final relief.”
David Vaver
Thanks Mark for taking the time to read the article and respond with your thoughts, even if in disagreement.
Professor Vaver – your expertise and insights are well taken. Your 2nd edition of Intellectual Property Law: Copyright, Patents, Trade-marks (Irwin, 2011) is a fantastic resource that I’d recommend to all readers of this article and ensuing exchange. Also in regards to your comments about the importance of having a somewhat national approach to substantive rights in copyright, couldn’t agree more. Without knowing the details of Quebec civil law, but having lived in the province for many years, certainly the ethos of equitable ownership of copyright is one that would seem to resonate on a social and cultural level.
Delighted to see quality dialogue sparked here.
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