Supreme Court rules ISP's can recover reasonable costs of Norwich order compliance.
17, September 17, 2018 - Filed in: Court Cases
"The Respondents are film production companies that allege that their copyrights have been infringed online by unidentified Internet subscribers who have shared their films using peer to peer file sharing networks. They sued one such unknown person and brought a motion for a Norwich order to compel his Internet service provider (“ISP”), Rogers, to disclose his contact and personal information. The respondents sought that the disclosure order be made without fees or disbursements payable to Rogers, relying on ss. 41.25 and 41.26 of the Copyright Act . These provisions, referred to as the “notice and notice” regime, require that an ISP, upon receiving notice from a copyright owner that a person at a certain IP address has infringed the owner’s copyright, forward that notice of claimed infringement to the person to whom the IP address was assigned. They also prohibit ISP's from charging a fee for complying with their obligations under the regime. The motion judge granted the Norwich order and allowed Rogers to recover the costs of all steps that were necessary to comply with it. He found that while the statutory notice and notice regime regulates the process by which notice of claimed copyright infringement is provided to an ISP and an Internet subscriber, as well as the retention of records relating to that notice, it does not regulate an ISP’s disclosure of a subscriber’s identity to a copyright owner. The Federal Court of Appeal agreed with the motion judge that the statutory notice and notice regime does not regulate the disclosure of a person’s identity from an ISP’s records, but it confined Rogers’ recovery to the costs of complying with the Norwich order that did not overlap with the steps that formed part of Rogers’ implicit obligations under the statutory regime. Rogers appealed."
The S.C.C. (9:0) allowed the appeal and remitted to the motion judge to determine the quantum of Rogers’ entitlement to its reasonable costs of compliance with the Norwich order.
Justice Brown wrote as follows (at paras. 1-4, 18-19, 47-48, 52-53, 55-59):
"Online infringement of copyright has become commonplace. Using peer to peer file sharing networks, Internet subscribers can download copyrighted content such as films and music, while simultaneously uploading that content for download by others who are thereby able to do the same. Through this concurrent downloading and uploading, peer to peer networks facilitate the rapid sharing of copyrighted content with multiple Internet subscribers simultaneously. And, due to the anonymity of the Internet, the identity of Internet subscribers who participate in this illegal sharing of copyrighted content is concealed from copyright owners.
In 2009, the Government of Canada launched a consultation on copyright modernization to address the issue of online copyright infringement. It heard both from copyright owners who demanded a way to discourage online copyright infringement, and consumers who requested a method to determine if they, or someone using their Internet Protocol (“IP”) address, could be infringing copyright.
Parliament responded to both sets of concerns by enacting the “notice and notice” regime contained within ss. 41.25 and 41.26 of the Copyright Act, R.S.C. 1985, c. C-42 — which regime was brought into force on January 2, 2015. Now, when a copyright owner gives notice to an Internet service provider (“ISP”) claiming that a person at a certain IP address has infringed the owner’s copyright, the ISP must forward that notice of claimed infringement to the person to whom the IP address (being “the electronic location identified by the location data specified in the notice” (s. 41.26(1) (a)) was assigned. While this regime is intended to deter the continued infringement of copyright online, it only goes so far. In particular, it does not require an ISP to disclose the identity of a person who has received notice to a copyright owner. For a copyright owner to obtain that person’s identity, the owner must proceed outside the regime — specifically, by obtaining a Norwich order compelling the ISP to disclose it (see Norwich Pharmacal Co. v. Customs and Excise Commissioners,  A.C. 133 (H.L.)).
This appeal requires this Court to consider who bears the ISP’s “reasonable costs of compliance” with such a Norwich order. At common law, that burden rests with the copyright owner. In enacting the notice and notice regime, however, Parliament prohibited ISPs from charging a fee for complying with their obligations under the regime (except, as I shall explain, where the Minister has fixed a maximum fee by regulation, which has not occurred to date). This leaves open the question of whether, if any of the steps taken by an ISP to comply with a Norwich order overlap with an ISP’s obligations under the notice and notice regime, the ISP can recover the costs of such duplicative steps as part of its reasonable costs of compliance with the Norwich order.
Originally cast as an equitable bill of discovery (Norwich; Glaxo Wellcome PLC v. M.N.R.,  4 F.C. 439 (C.A.)), a Norwich order is a type of pre-trial discovery which, inter alia, allows a rights holder to identify wrongdoers (Alberta (Treasury Branches) v. Leahy, 2000 ABQB 575, 270 A.R. 1, at para. 59, aff’d 2002 ABCA 101, 303 A.R. 63). The elements of the test for obtaining a Norwich order (although sometimes described as “factors” to be considered (Leahy (Q.B.), at para. 106)), are not in dispute before us. A copyright owner must show:
(a) [a bona fide claim] against the unknown alleged wrongdoer;
(b) the person from whom discovery is sought must be in some way involved in the matter under dispute, he must be more than an innocent bystander;
(c) the person from whom discovery is sought must be the only practical source of information available to the applicants;
(d) the person from whom discovery is sought must be reasonably compensated for his expenses arising out of compliance with the discovery order in addition to his legal costs;
(e) the public interests in favour of disclosure must outweigh the legitimate privacy concerns. [Emphasis added.]
(see BMG Canada Inc. v. John Doe, 2005 FCA 193,  4 F.C.R. 81, at paras. 15 and 32, quoting BMG Canada Inc. v. John Doe, 2004 FC 488,  3 F.C.R. 241, at para. 13; Voltage Pictures LLC v. John Doe, 2015 FC 1364, at para. 37 (CanLII); see also Voltage Pictures LLC v. John Doe, 2014 FC 161,  2 F.C.R. 540, at para. 45)
Both Rogers and Voltage agree that the statutory notice and notice regime has not displaced the necessity of a copyright owner obtaining a Norwich order in order to compel an ISP to disclose the identity of a person who is alleged to have committed an infringement of copyright. Again, this appeal concerns the relationship between the steps necessary to comply with that statutory regime and the steps necessary to comply with a Norwich order, and the implications of that relationship for an ISP’s ability to recover the costs of complying with a Norwich order.
In brief, the three express obligations contained in ss. 41.26(1)(a) and 41.26(1)(b) carry with them several implicit obligations that an ISP must satisfy under the notice and notice regime. Specifically, s. 41.26(1)(a) requires an ISP to determine, for the purpose of forwarding notice electronically, the person to whom the IP address belonged. It also requires an ISP to take whatever steps that are necessary to verify that it has done so accurately lest it risk statutory liability for failing to actually forward notice to that person. It does not, however, require an ISP to determine the name and physical address of that person.
Similarly, the records that an ISP must retain under s. 41.26(1)(b) must be accurate. Any steps which are necessary to verify the accuracy of those records therefore form part of an ISP’s s. 41.26(1)(b) obligations. That said, while those records must be kept in a form and manner that allows an ISP to identify the name and address of the person to whom notice is forwarded under s. 41.26(1)(a), s. 41.26(1)(b) does not require that they be kept in a form and manner which would permit a copyright owner or a court to do so. The copyright owner would, however, be entitled to receive that information from an ISP under the terms of a Norwich order — which process, as I have already said, falls outside the ISP’s obligations under the notice and notice regime.
To be clear, there is a distinction between an ISP’s obligation under the notice and notice regime to ensure the accuracy of its records that allow the identity of the person to whom an IP address belonged to be determined, and an ISP’s obligation under a Norwich order to actually identify a person from its records. While the costs of the latter are recoverable, the costs of the former are not. Where, however, the steps that an ISP says it must take to verify the identity of a person in response to a Norwich order involve, in effect, verifying the accuracy of the very records which it was required by s. 41.26(1) to retain, the ISP cannot recover the resulting costs.
Finally, it bears mentioning that an ISP is not entitled to be compensated for every cost that it incurs in complying with a Norwich order (Voltage Pictures (2015)). Recoverable costs must (1) be reasonable, and (2) arise from compliance with the Norwich order. Where costs should have been borne by an ISP in performing its statutory obligations under s. 41.26(1), these costs cannot be characterized as either reasonable or as arising from compliance with a Norwich order.
Given the statutory prohibition on the recovery of costs arising from the notice and notice regime, motion judges should carefully review an ISP’s evidence to determine whether an ISP’s proposed fee is “reasonable”, in light of its obligations under the notice and notice regime. The evidence here, for example, is that Rogers undertakes an eight step manual process when it is ordered by a court to disclose the identity of one of its subscribers. These eight steps, as described by a Rogers employee, are:
1. The request is logged by a security analyst. The analyst enters the date, time, information requested, affected services, due date, and information about the requester into a database.
2. In the case of an IP address lookup, when the log entry enters the work queue to be processed, the IP is checked against an internet resource by a second security analyst to verify that it is indeed a Rogers Cable IP address.
3. The security analyst assigned to process the request searches the IP address against a dedicated Rogers database that records all the users of any given IP address within the past 12 months (approximately). The query is narrowed to specific date and time parameters in order to identify a specific modem.
4. The modem identification information is queried against a duplicate modem list, to determine whether the modem has been cloned.
5. The modem is searched in the Rogers customer database. Three separate verifications are then performed to ensure that the correct customer has been identified.
6. Screenshots are made of the information generated in steps 2 through 5 and saved to a file as backup documentation.
7. The security analyst creates a document with the requested results and logs the completion date.
8. An Investigator in the [Lawful Access Response] group then reviews the screenshots and results document. If the Investigator is satisfied with the result, it will be forwarded to the requesting parties. Investigators log their participation in the process and then close the file.
(A.R., at p. 120)
In my respectful view, the motion judge erred in law by failing to interpret the full scope of an ISP’s obligations under s. 41.26(1), and then by failing to consider whether any of these eight steps overlap with Rogers’ statutory obligations for which it was not entitled to reimbursement. The Federal Court of Appeal therefore correctly set aside the motion judge’s order. That said, I find myself in respectful disagreement with the Federal Court of Appeal’s decision that the costs for which Rogers may recover in complying with the Norwich order are limited to those incurred in the act of disclosure — although I do agree that Rogers is entitled to recover those costs. As I have explained, the statutory notice and notice regime, as I read it, does not require an ISP to maintain records in a manner or form that would allow copyright owners or a court to discern the identity and physical address of the person to whom notice was sent. In response to a Norwich order requiring it to furnish such information (or other supporting information), an ISP is therefore entitled to the reasonable costs of steps that are necessary to discern a person’s identity from the accurate records retained under s. 41.26(1)(b). While these costs, even when combined, may well be small, I would not assume that they will always be “negligible”, as the Federal Court of Appeal anticipates.
I do, however, agree with the Federal Court of Appeal that, on this record, it is impossible to determine Rogers’ reasonable costs of compliance in this case. As indicated above, to the extent the motion judge assessed the fee charged by Rogers, that assessment was not undertaken with reference to s. 41.26 , properly interpreted. In the circumstances, which include the difficult and novel questions of statutory interpretation presented by this appeal, I would return this matter to the motion judge to allow Rogers to prove its reasonable costs of compliance. And, given those same circumstances, Rogers should be entitled to adduce new evidence to prove its reasonable costs of compliance with the Norwich order.
I would therefore allow Rogers’ appeal. Rogers is entitled to its reasonable costs of compliance with the Norwich order. The quantum of its entitlement is remitted to the motion judge at the Federal Court to be determined in accordance with this Court’s interpretation of ss. 41.25 and 41.26 of the Act.
As to costs, it is a precondition of a Norwich order that an ISP is entitled to its reasonable legal costs incurred in Norwich order proceedings (BMG Canada Inc. (C.A.), at paras. 15 and 35). I would therefore restore the motion judge’s order awarding Rogers its legal costs of $500. Given the unusual circumstances of this appeal which I have already described, however, as well as the divided success throughout these proceedings, I would direct that the parties bear their own costs at this Court and at the Federal Court of Appeal (see Cartier International AG v. British Telecommunications plc,  UKSC 28,  1 W.L.R. 3259, at para. 38)."
Note: The summary and body are drawn from Eugene Meehan’s SupremeAdvocacy Weekly Updates for the Law Community.