FWS Joint Sports Claimants Inc. v. Border Broadcasters Inc.

FWS Joint Sports Claimants Inc. v. Border Broadcasters Inc. Court (s) Database Federal Court of Appeal Decisions Date 2001-11-06 Neutral citation 2001 FCA 336 File numbers A-209-00 Notes Digest Decision Content Date: 20011106 Docket: A-209-00 Neutral citation: 2001 FCA 336 CORAM: STRAYER J.A. SEXTON J.A. EVANS J.A. BETWEEN: FWS JOINT SPORTS CLAIMANTS INC. Applicant - and - BORDER BROADCASTERS INC., CANADIAN BROADCASTERS RIGHTS AGENCY INC., CANADIAN RETRANSMISSION COLLECTIVE, CANADIAN RETRANSMISSION RIGHT ASSOCIATION, COPYRIGHT COLLECTIVE OF CANADA, MAJOR LEAGUE BASEBALL COLLECTIVE OF CANADA INC., AND SOCIETY OF COMPOSERS, AUTHORS AND MUSIC PUBLISHERS OF CANADA Respondents Heard at Toronto, Ontario, on Monday and Tuesday, November 5-6, 2001. Judgment delivered from the Bench at Toronto, Ontario on Tuesday, November 6, 2001. REASONS FOR JUDGMENT BY: EVANS J.A. Date: 20011106 Docket: A-209-00 Neutral citation: 2001 FCA 336 CORAM: STRAYER J.A. SEXTON J.A. EVANS J.A. BETWEEN: FWS JOINT SPORTS CLAIMANTS INC. Applicant - and - BORDER BROADCASTERS INC., CANADIAN BROADCASTERS RIGHTS AGENCY INC., CANADIAN RETRANSMISSION COLLECTIVE, CANADIAN RETRANSMISSION RIGHT ASSOCIATION, COPYRIGHT COLLECTIVE OF CANADA, MAJOR LEAGUE BASEBALL COLLECTIVE OF CANADA INC., AND SOCIETY OF COMPOSERS, AUTHORS AND MUSIC PUBLISHERS OF CANADA Respondents REASONS FOR JUDGMENT (Delivered from the Bench at Toronto, Ontario on Tuesday, November 6, 2001) EVANS J.A. A. INTRODUCTION [1] FWS Sports Claimants Inc. ("FWS") is the collective society that represents four professional sports leagues, the NFL, CFL, NHL and NBA, and administers their copyright in the live broadcasting of their games. FWS is dissatisfied with the share of the royalties payable for the retransmission of distant broadcast signals, typically by cable television companies, that the Copyright Board has allocated to FWS' members. [2] FWS argues that the basis on which the Board allocated the royalties significantly underestimated the value of sports to the cable companies' ability to attract and retain subscribers. In particular, it submits, determining that value by reference only to the percentage of time spent by subscribers in watching various kinds of programme is too narrow a measure of a complex economic fact. In the absence of a market in which to value retransmission rights, the Board should take account of a wider range of proxy evidence that indicates that cable companies and broadcasters attach much more economic value to sports programmes than that suggested by mere cumulative viewing data. [3] In this application for judicial review, FWS submits that, in adopting the cumulative viewing approach as the criterion of value, the Board committed three errors that warrant the Court's setting aside the aspect of the Board's decision of February 25, 2000, dealing with FWS' objection to the allocation of the royalties to its members. However, as will become apparent, the issues are somewhat difficult to keep in water-tight compartments. B. ISSUES AND ANALYSIS 1. The "use" issue [4] First, FWS argues that the Board made an error of law when it held that it was appropriate to determine how to allocate the $50 million of royalty payable in each of the years 1998-2000 by considering the length of time that subscribers spent watching various categories of programme, because "... it is the subscribers who ‘use' the cable services and who are in the best position to indicate the extent of actual use of its various components." Counsel argued that when subscribers view sports programmes they do not use copyright; the infringing activity is the cable companies' retransmission of sports events. [5] We have no difficulty with the legal proposition that viewing copyright material is not an infringing activity, but that retransmission is. However, FWS' argument is based on an erroneous premise, namely, that when the Board stated that " ... it is the subscribers who ‘use' the cable services ...", it meant that the subscribers were using the copyright material in breach of FWS' copyright. [6] It seems to us unlikely that, given the experience with copyright law that the Board has acquired in the context of setting and allocating royalties, it would have made such an elementary legal blunder. In our opinion, the passage from the Board's reasons quoted above is better understood as meaning that, since subscribers are the ultimate consumers of the programmes, their viewing preferences, as measured by the number of hours that they spend watching programmes belonging to the various collectives, are the appropriate criterion of the value of those programmes to cable companies. [7] In a variation of the "user argument", FWS also submitted that the Board's reasons indicated that it had allocated royalties on cumulative viewing data because it had taken the position that the allocation should reflect the value of programmes to subscribers, not to the cable companies. This "stunning reversal" of the position that the Board had taken in its 1990 decision on the same subject was an error of law, both because the Act did not permit it, and, if it did, the Board was under a legal obligation to provide a fuller justification for its U-turn than its reasons contained. [8] We cannot accept this argument. We agree with the respondents that the Board did not depart from its 1990 position, namely that the ultimate basis of the allocation of royalties was the value of programmes to the cable companies. In the decision under review, the Board was simply making it clear that, in the absence of a free market in retransmission rights, the number of hours that subscribers spent watching particular kinds of programming was the most reliable criterion for determining their value to cable companies' ability to attract and retain customers. 2. The "fettering" issue [9] FWS' second argument was that, by setting its face against any evidence of the value of programming to cable companies, other than viewer numbers, the Board had unlawfully fettered its discretion. Counsel focussed particularly on a passage in the reasons where the Board stated: "... the whole of FWS' valuation approach, as well as any other similar to it must be rejected for reasons of principle, rather than methodology." [10] In our opinion, the key to what the Board meant here is to be found later in the same paragraph when it set out the three principles on which the Board had proceeded; taken together, these principles constitute the Board's conclusion that the value of sports programmes to broadcasters is not a good proxy for the value of the cable companies' retransmission rights in those particular programmes. Thus, while broadcasters may be willing to pay copyright owners a high price for permission to broadcast professional sports events, because of the amount of advertising revenue that they could generate, it does not follow that the inclusion of sports programmes as one component of a broadcast signal carried by a cable company is a similarly powerful inducement to subscribers to purchase a package of programmes. The Board did not reject FWS' evidence, but its approach to ascertaining the value to the cable companies of programmes owned by particular collectives. [11] This kind of determination falls squarely within the domain of the Board as a specialist administrative tribunal entrusted with the broad statutory discretion to set royalties payable by cable companies for retransmitting copyright material and then to allocate them among the various copyright owners: subsection 73(1) of the Copyright Act, R.S.C 1985 c. C-42. On four previous occasions this Court has held that, when exercising its discretion to set royalties, the Board is operating in its "home territory" and its decisions are reviewable only for patent unreasonableness: see, for example, Réseaux Premier Choix Inc. v. Canadian Cable Television Association (1997), 80 C.P.R. (3d) 203 at paras.15-17; Society of Composers, Authors and Music Publishers of Canada v. Canadian Association of Broadcasters (1999), 1 C.P.R. (4th) 80. It is not the function of the Court on a judicial review application to opine on whether, if the Court had been in the Board's position, it would have found the cumulative viewing approach more or less plausible than that advanced by FWS. [12] We are not persuaded that the Board's allocation of the royalties among the various claimants should be reviewed on a different standard from that applied to setting royalties. Both involve the exercise of a broad statutory discretion, policy elements, the use of economic and statistical data, and an understanding of the cable industry and the related technology. Further, while copyright owners may have a similar interest vis-à-vis retransmitters, they have competing interests when it comes to the allocation among them of the total award of royalties. Hence, in assessing the relative merits of the various copyright owners, the Board is engaged in a polycentric exercise in that, since the share of the royalties allocated to one owner has an impact on the share available to others, the Board's assessments involve weighing the claimants'relative merits. [13] The Supreme Court of Canada has stated that, when performing exercises of the kind performed by the Board in this case, administrative agencies are entitled to the highest level of judicial deference: Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982 at para. 36. In our opinion, the Board cannot be said to have made a patently unreasonable decision when it retained the cumulative viewing criterion for determining the value of sports programmes to cable companies, a criterion that it had used on two previous occasions, is relatively simple to administer, and is more hard-edged than the multi-faceted and, in the Board's view, less reliable approach to determining value advocated by FWS. [14] However, this is not to say that it is open to the Board in future royalty allocation proceedings categorically to refuse to look at any evidence of value to the cable companies other than that of viewer numbers. It may not preclude the possibility a priori that any other approach is a more effective measure of that value. The Board must do what it did in this case: critically examine the evidence tendered of the value of programmes to cable companies in order to determine the soundness of the approach that the evidence purports to support. [15] Accordingly, we would reach the same conclusion as the Court in FWS Joint Sports Claimants Inc. v. Copyright Board (1991), 36 C.P.R. (3d) 483 at 489, when it considered the same issue in respect of the Board's 1990 decision: "The Board did not ignore the evidence, it just did not accept it." This is not to say, of course, that the Board may not consult its previous decisions, and decide whether new evidence justifies departing from the approach that it has taken in the past. 3. Adequacy of the Board's examination of the evidence [16] The third error that FWS says that the Board committed was that its examination of the evidence adduced by FWS through its expert witnesses was no more than cursory. In particular, it is said, the Board's reasons make no mention of the evidence of the only economist to testify or of a former chief executive officer of a cable company. It also dismissed survey evidence on the opinions of cable company managers on the economic value of sports programmes to the success of their business, without mentioning the high statistical reliability of the survey evidence. [17] In our opinion, it cannot be said that the Board either failed to give adequate reasons for rejecting evidence, or made findings of fact in a perverse or arbitrary manner, or without regard to the material before it so as to justify quashing the decision under paragraph 18.1(4)(d) of the Federal Court Act, R.S.C. 1985, c. F-7. The Board's reasons deal, albeit somewhat briefly with weaknesses that it perceived some of the evidence to have, including the "absurd results" that would in its opinion follow from the adoption of an approach based on the survey's findings, and the difficulties of applying to Canada assumptions made in the U.S. royalty context and of working with survey data that did not consistently differentiate among distant and local signals, and specialty services. [18] In evaluating the adequacy of the Board's reasons, and in determining whether it can be inferred from them that the Board's findings were made in a perverse or arbitrary manner, or without regard to the material before it, we have noted that this is the third time that FWS has made similar arguments to the Board, albeit with somewhat different evidence, and attempted to persuade it to adopt other measures for determining the value of sports programmes to cable companies. It is appropriate to read the relatively brief treatment of FWS' evidence in light of the fact that FWS was taking what one of its witnesses aptly called, "an improved kick at the can." Finally, although legally inadequate reasons cannot be cured by reference to the transcript, we would note that it is apparent from the discussions between Board members and the witnesses that the Board came to grips with their evidence. [19] In all the circumstances, we are satisfied that, while not necessarily addressing every item of evidence in great depth or, in some instances, at all, the Board's reasons adequately explain why it did not accept FWS' approach or its evidence, and that its factual conclusions are supported by the record. C. CONCLUSIONS [20] For these reasons, the application for judicial review will be dismissed with costs. "John M. Evans" J.A. FEDERAL COURT OF CANADA Names of Counsel and Solicitors of Record DOCKET: A-209-00 STYLE OF CAUSE: FWS JOINT SPORTS CLAIMANTS INC. Applicant - and - BORDER BROADCASTERS INC., CANADIAN BROADCASTERS RIGHTS AGENCY INC., CANADIAN RETRANSMISSION COLLECTIVE, CANADIAN RETRANSMISSION RIGHT ASSOCIATION, COPYRIGHT COLLECTIVE OF CANADA, MAJOR LEAGUE BASEBALL COLLECTIVE OF CANADA INC., AND SOCIETY OF COMPOSERS, AUTHORS AND MUSIC PUBLISHERS OF CANADA Respondents DATES OF HEARING: MONDAY & TUESDAY, NOVEMBER 5-6, 2001 PLACE OF HEARING: TORONTO, ONTARIO REASONS FOR JUDGMENT BY: EVANS J.A. Delivered from the Bench at Toronto, Ontario on Tuesday, November 6, 2001. APPEARANCES BY: Mr. Gregory A. Piasetzki Mr. David F. Fernandes For the Applicant FWS Joint Sports Claimants Inc. Mr. Randall J. Hofley For the Respondent Border Broadcasters Inc. Page: 2 APPEARANCES BY: Mr. Glenn Hainey (Cont'd) Mr. Aaron Schwartz For the Respondent Copyright Collective of Canada Mr. David W. Kent For the Respondents Canadian Broadcasters Rights Agency Inc. and (for this application) the Canadian Retransmission Right Association Mr. Richard Storrey For the Respondent Major League Baseball Collective of Canada Inc. Mr. Mark Polley For the Respondent Canadian Retransmission Collective SOLICITORS OF RECORD: PIASETZKI & NENNIGER Barristers & Solicitors 120 Adelaide Street West, Suite 2308 Toronto, Ontario M5H 1T1 For the Applicant FWS Joint Sports Claimants Inc. STIKEMAN, ELLIOTT 50 O'Connor Street, Suite 914 Ottawa, Ontario K1P 6L2 For the Respondent Border Broadcasters Inc. Page: 3 SOLICITORS OF RECORD: SMITH LYONS (Cont'd) Suite 6200 - Scotia Plaza, 40 King Street West Toronto, Ontario M5H 3Z7 For the Respondent Copyright Collective of Canada McMILLAN BINCH Suite 3800 - South Tower, Royal Bank Plaza Toronto, Ontario M5J 2J7 For the Respondents Canadian Broadcasters Rights Agency Inc. and (for this application) the Canadian Retransmission Right Association GOODMANS LLP 2400-250 Yonge Street Toronto, Ontario M5B 2M6 For the Respondent Major League Baseball Collective of Canada Inc. McCARTHY TÉTRAULT Toronto Dominion Bank Tower, Suite 4700 Toronto, Ontario M5K 1E6 For the Respondent Canadian Retransmission Collective FEDERAL COURT OF APPEAL Date: 20011106 Docket: A-209-00 BETWEEN: FWS JOINT SPORTS CLAIMANTS INC. Applicant - and - BORDER BROADCASTERS INC., CANADIAN BROADCASTERS RIGHTS AGENCY INC., CANADIAN RETRANSMISSION COLLECTIVE, CANADIAN RETRANSMISSION RIGHT ASSOCIATION, COPYRIGHT COLLECTIVE OF CANADA, MAJOR LEAGUE BASEBALL COLLECTIVE OF CANADA INC., AND SOCIETY OF COMPOSERS, AUTHORS AND MUSIC PUBLISHERS OF CANADA Respondents REASONS FOR JUDGMENT