Canadians Hit With Misleading Copyright Notices From Loophole-Exploiting U.S. Firm

Canada's copyright notice-and-notice system is less than two weeks old and, despite its good intentions, has already been misused. Rightscorp, a U.S.-based anti-piracy firm, has been using the system to send notifications to subscribers that misstate Canadian law, citing inapplicable U.S. damage awards and the possibility of Internet termination to sow fear among Canadians so that they might pay a settlement fee.

The longstanding debate over how Internet providers should respond to allegations of copyright infringement by their subscribers was resolved in Canada several years ago with the adoption of a "notice-and-notice" system. Unlike countries that require content takedowns without court oversight or go so far as to consider cutting off subscriber Internet access, the Canadian approach -- which operated informally for over a decade but kicked in as a law in 2015-- seeks to balance the interests of copyright holders, the privacy rights of Internet users, and the legal obligations of Internet providers.

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Under the notice-and-notice system, copyright owners are entitled to send infringement notices to Internet providers, who are legally required to forward the notifications to their subscribers. The notices must include details on the sender, the copyrighted works and the alleged infringement. If the Internet provider fails to forward the notification, it must explain why or face the prospect of damages that run as high as C$10,000. Internet providers must also retain information on the subscriber for six months (or 12 months if court proceedings are launched).

For Internet providers, the system creates significant costs for processing and forwarding notices. However, assuming they meet their obligations of forwarding the notice, the law grants them a legal "safe harbor" that removes potential liability for the actions of their customers.

There are important protections for Internet users as well. First, unlike the content takedown or access cut-off systems, the Canadian notice approach does not feature any legal penalties. The notices do not create any fines or damages, but rather are designed as educational tools to raise awareness of infringement allegations. Second, the personal information of subscribers is not disclosed to the copyright owner. When the Internet provider forwards the copyright notice, only they know the identity of the subscriber and that information is not disclosed to any third party.

If the copyright owner is unhappy with only sending a notification and wants to proceed with further legal action, they must go to court to obtain an order requiring the Internet provider to reveal the identity of the subscriber. Canadian courts have established strict rules and limitations around such disclosures.

Moreover, the law now also limits potential liability for Internet users for non-commercial infringement, capping damages at C$5,000 for all infringements. While that is not insignificant, it does mean that threats of tens of thousands of dollars in liability for unauthorized downloading are unfounded.

The inclusion of a settlement fee demand within Rightscorp's notices is the consequence of a loophole in the law, which arose due to Industry Minister James Moore's desire to implement the system without accompanying regulations. On Friday, Peggy Nash, an opposition member of parliament, called on the government to close the loophole, noting "the Conservatives have a duty to protect the public against companies that try to intimidate Canadians by sending them false legal information. They need to close the loopholes now."

Jake Enright, Moore's spokesperson, responded by stating that "these notices are misleading and companies cannot use them to demand money from Canadians," as Rightscorp was doing. Enright indicated that the government would be contacting Internet providers and rights holders to end the practice.

Yet it is not clear how the government can stop the practice without establishing new regulations. It engaged in a lengthy consultation process on notice-and-notice regulations after passing its 2012 copyright reform package. Internet providers argued that the system transferred significant costs to them in order to process notices and that there should be a fee charged to rights holders. Moreover, they noted that the law specified certain requirements for the notices, but did not establish any limitations on the inclusion of additional information nor any penalties for notices that contain false or misleading information.

Most stakeholders expected some regulations, but Moore decided to forge ahead with only the statutory provisions. As a result, companies are free to use the notice system to add information that extends beyond the minimum required by the statute.

The misuse of the Canadian system could have been avoided with more detailed regulations with explicit limits on the content of notices. Without such limitations, rights holders are free to exploit the loophole by using the system in a manner that was never envisioned by the government, sending millions of demand letters to unsuspecting Canadians at no cost to the rights holders.

Given the current situation, ISPs have started supplementing the notices with additional information to subscribers so that they better understand the context of threats. However, the bigger issue will be the government response.

Merely stating that the government disapproves of the misleading practices is not enough. The government should ask the Competition Bureau to conduct an investigation into the misleading conduct. Moreover, Moore should move quickly to implement regulations prohibiting the inclusion of settlement demands within the notices and create penalties for those companies that send notices with false or misleading information.

The Canadian government regularly cites the notice-and-notice system as a balanced approach. At its best, it is a system that has proven effective in raising public awareness about copyright, while safeguarding the identities of Internet subscribers, providing legal certainty to Internet providers, and leaving potential legal actions to the courts.

Its fairness is being undermined, however, with Canadians now facing the prospect of a barrage of misleading settlement demands and waiting for their government to take concrete action to stem the tide.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can be reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.