CIPPIC Intervention Bears Fruit: Default Judgement Denied in Voltage v Doe #1

Voltage Holdings, LLC V Doe#1 et al, 2022 FC 827, saw the first time a plaintiff in a Canadian copyright filesharing action sought a motion for default judgment against dozens of defendants. Voltage is no stranger to copyright litigation. The American film production company has been the plaintiff in numerous copyright infringement lawsuits around the world. These cases concern unauthorized online sharing of Voltage’s films by unidentified defendants. Voltage often opts to sue internet subscribers who were suspected to have unauthorized copies of Voltage’s films shared through their home networks, even if the subscriber and the person who shared the unauthorized copies were not necessarily one and the same.

In this case as in others, Voltage had taken no steps to identify the alleged direct infringers. Instead, the defendants were internet subscribers that Voltage found using their IP addresses, through information provided to them by ISPs via a Norwich order. These defendants had not responded to Voltage’s previous communications regarding the alleged infringements and had filed no defense. Voltage sought to obtain statutory damages for infringement through a default judgment.

If Voltage’s motion were to succeed, it would have grave implications for the future of copyright law. Copyright trolls would have had a much lower burden when making allegations of infringement, needing to only show evidence of an infringement and the subscriber associated with the site of the alleged infringement. This would make it easier for trolls to extract settlements. Additionally, Voltage’s interpretation of the authorization right was also problematic. This interpretation of authorization would have greatly expanded the scope of liability under the Act, imposing on subscribers and other intermediaries a positive duty to put an end to infringement by third parties over their network once notice has been received of the infringement. The motions judge, Justice Furlanetto, following past Federal Court jurisprudence on default judgements, divided her analysis into three parts:

Was service of the statement of claim sufficient to establish that the Default Defendants are in default?
Should default judgment be granted: Does the evidence establish that the Default Defendants, who are internet subscribers, have infringed copyright in the Work?
If so, what quantum of statutory damages is the Plaintiff entitled to? Though Justice Furlanetto found that Voltage had properly served the defendants, she ruled that Voltage did not provide enough evidence to establish any of the types of copyright infringement alleged. As a result, Justice Furlanetto did not address damages and costs. Justice Furlanetto ordered that Voltage could either proceed to trial or try to provide further evidence and apply for default judgment again.

1. Was service of the statement of claim sufficient to establish that the Default Defendants are in default?

Justice Furlanetto found that Voltage had properly served the Doe defendants. She dismissed CIPPIC’s argument that there was improper joinder of the defendants, and accepted Voltage’s argument that joinder should not be discussed, as it was not an issue raised by the plaintiff in the proceeding.

2. Does the evidence establish that the Default Defendants, who are internet subscribers, have infringed copyright in the Work?

Voltage claimed the internet subscriber defendants engaged in three types of infringement:

a. Direct infringement under s. 27(1) of the Copyright Act, which means that they themselves were the individuals who made unauthorized copies of Voltage’s film.

b. Authorization of infringement, which means that the internet subscriber defendants sanctioned or approved of infringements carried out by other individuals using their internet.

c. Secondary infringement under s. 27(2) of the Copyright Act, which means that the defendants sold or distributed Voltage’s film, or exposed it for sale.

a. Was there sufficient evidence of direct copyright infringement?

The Federal Court of Canada default judgement jurisprudence requires that all claims from a plaintiff be treated as denied. The moving party must provide sufficient evidence to allow the Court to accept their claims on a balance of probabilities. Voltage claimed that because the default defendants refused to defend themselves the burden of proof shifts in favour of the plaintiff. Justice Furlanetto rejected this argument, agreeing with CIPPIC’s stance on the matter. She also agreed with CIPPIC’s position that Voltage did have further options for discovery. Though she accepted Voltage’s point that many forms of discovery could be too invasive, she accepted CIPPIC’s argument that written discovery could be used to request that internet subscribers answer questions relevant for identifying infringers, such as how many users use their internet, how many devices there are connected to it, what the subscriber’s connection is to these users, and what kind of control their have over the users and the connected devices. Justice Furlanetto concluded that Voltage had not shown that the Doe defendants engaged in direct infringement.

b. Was there sufficient evidence the defendants authorized copyright infringement?

On the issue of authorization, the Supreme Court of Canada in CCH v LSUC, 2004 SCC 13 ruled that that defendants accused of authorization must “sanction, approve, or countenance” the alleged direct infringement, and “countenance” is given its strongest dictionary meaning: “give approval to; sanction, permit; favour, encourage”. Where a party provides equipment that is subsequently used to infringe copyright, the party is presumed to have authorized the use of the equipment for lawful purposes only. This presumption may be rebutted if the claimant can show that “a certain relationship or degree of control existed between the alleged authorizer and the person who committed the copyright infringement.” [CCH at para. 38]

Voltage insisted that because the default defendants did not stop the infringements from occurring, such as by changing their wi-fi password or blacklisting unauthorized devices, that they must have authorized these infringements. However, this threshold reflects an interpretation of authorization first adopted in an Australian case but explicitly rejected in CCH where authorization is found to occur if the defendant had the power to stop the infringement but did not. CIPPIC further argued that even if the Australian standard was used, it requires that the plaintiff provide evidence on (a) whether the alleged authorizer in fact has the power to prevent the doing of the act concerned, (b) the nature of the relationship between the proposed authorizer and infringer, and (c) whether reasonable steps were taken to prevent or avoid the act. Justice Furlanetto accepted CIPPIC’s argument, holding that even on the more relaxed standard, Voltage had failed to show with evidence the nature of the relationship between the subscriber and the filesharer, or the steps taken to prevent the alleged infringements.

c. Was there sufficient evidence of secondary copyright infringement?

The question of secondary infringement was simpler than those of direct infringement and authorization. Justice Furlanetto agreed with CIPPIC that Voltage did not provide evidence that the default defendants sold the work, distributed it, or exposed it for sale. Consequently, she did not find they had engaged in secondary infringement.

3. If infringement was found, what quantum of statutory damages is the Plaintiff entitled to?

Since Justice Furlanetto did not allow any of Voltage’s claims to succeed, she did not consider the question of damages.

Conclusion

Justice Furlanetto’s thorough and fact-based judgment denied all of Voltage’s copyright infringement claims, barring Voltage from obtaining default judgment against internet subscribers and avoiding the spectre of the Federal Court holding mere subscribers liable for infringing acts that they did not do. The decision strengthens Canadians’ protection against copyright trolls and respects the balance between the copyright owners’ rights and users’ rights.