Setback for Bell Canada in $400m Movie Piracy Lawsuit

On January 2, 2015, a new system designed to assist copyright holders and better protect consumers went live in Canada.

Under the ‘Notice and Notice’ regime, ISPs are required to forward rightsholders’ copyright infringement notices to subscribers, in most cases those linked to the downloading and sharing of movies using BitTorrent. While generally considered a step forward, some warned that aggressive rightsholders would leverage the system to benefit themselves.

Late 2018, after some companies did exactly that, the Canadian government amended the Copyright Act to prohibit the inclusion of settlement demands in warning notices. Since then, rightsholders have filed dozens of applications at Federal Court to obtain the identities of tens of thousands of subscribers – many of whom were alleged notice recipients – so they could be sent cash settlement demands.

Same Core Companies, Same Core Business Model

Companies including Millennium Funding, Outpost Productions, Bodyguard Productions, Hunter Killer, and Rambo V Productions, make regular appearances in copyright lawsuits in the U.S. It was inevitable that their settlement model would eventually target Canadian subscribers but anyone paying attention would’ve known that was only the warm-up act.

Under common ownership, the same companies have also been suing and obtaining settlements from intermediaries in the U.S. including hosting companies, VPN providers, and the latest targets, internet service providers.

Regardless of jurisdiction, these actions operate along broadly the same lines; identify areas where intermediaries have allegedly failed to meet their piracy-fighting obligations, and then ruthlessly pursue high-value claims until a settlement begins to sound more appealing than the alternatives.

In their lawsuit against Bell, Millennium Funding and the other companies assert copyrights in half a dozen movies which may have been worth less than $1 million in damages in a U.S. lawsuit, give or take. In Canada, intermediaries who fail to meet their obligations under the Notice and Notice scheme face statutory damages of between CAD$5,000 and $10,000.

The movie companies claim that they sent over 81,000 notices to Bell between February 2019 and June 2021 but Bell failed to forward almost 40,000 of them. As a result, the plaintiffs believe they can multiply each of those notices by CAD$10,000 and file a claim against Bell for CAD$400 million.

First Bell Subscribers, Now Bell Itself

During a court hearing earlier this year dealing with the case against Bell, a lawyer for Bell Canada described the studios’ settlement model targeting internet users as “extortion.”

An attorney representing the studio’s legal team said that if Bell had an issue with handing over its customers’ details as part of the Notice and Notice scheme, it could have mentioned that earlier – when handing over its customers’ details as part of earlier applications, for example.

While the “extortion” comment was later withdrawn, allegations in a Bell counterclaim filed in response to the original CAD$400 million lawsuit had already gone much further. In a somewhat unusual move, Bell sued Aird & Berlis LLP, the law firm hired by the studios to send the infringement notices and the architect of their enforcement program in Canada.

Bell’s defense is relatively straightforward. The ISP admits that not all of the notices sent by the Millennium plaintiffs were forwarded to subscribers but any shortfall was for legitimate reasons. In some cases, the plaintiffs’ notices were not sent or not received by Bell. Other notices were not forwarded to subscribers because they contained inaccurate information, were duplicates of notices already sent, or Bell was unable to forward them because it had no email addresses on file for customers.

Bell Comes Out Fighting

In its counterclaim, Bell accused the plaintiffs and Aird & Berlis of engaging in conduct that constitutes misuse of copyright, abuse of process, and champerty and maintenance, whereby a third-party pays some or all of the litigation costs in return for a share of the proceeds. An “illegal and unlawful means conspiracy” that runs counter to public policy and the public interest, the company added.

In his order last June, Case Management Judge Kevin R. Aalto began with an analogy.

“It is often said in sports that the best defense is a good offense. Sometimes the same can be said for litigation. That is what Bell is trying to achieve here by suing by way of counterclaim the law firm acting for Millennium and raising what are policy issues relating to the Copyright Act,” Judge Aalto wrote.

“That is not the purpose of litigation. That is a matter for Parliament. Bell’s attempt to turn this case into an inquiry on the propriety of copyright enforcement arising from the Notice and Notice Regime is misplaced.”

Bell said that Aird & Berlis intimidated alleged infringers and forced settlements greater than actual damages suffered. Judge Aalto pointed out that the Notice and Notice regime facilitates no direct communication between rightsholders and alleged infringers. Contact only takes place after the plaintiffs obtain their identities as part of a separate process.

More fundamentally, Judge Aalto said no facts supported Bell’s allegation of misuse of copyright, even if misuse of copyright was a cause of action, which it is not. If misuse of copyright was applicable at all, that would be for alleged infringers to address, not Bell.

Allegations, But Little to Support Them

In another setback for Bell, the abuse of process and unlawful means conspiracy allegations performed no better than the allegations of champerty and maintenance.

“There are no material facts whatsoever to connect the dots as to how [Aird & Berlis] and Millennium are not in a solicitor-client relationship that somehow amounts to the tort of abuse or unlawful means conspiracy,” Judge Aalto added.

With that, Bell’s allegations of copyright misuse, champerty and maintenance, abuse of process and unlawful means conspiracy were struck out, without leave to amend. Bell went on to appeal and in an order dated May 31, 2023, Judge Angela Furlanetto mostly found in favor of the Case Management Judge and by extension, the movie companies.

Bell Canada wasn’t the first and certainly won’t be the last to describe settlement schemes as extortion. Equally, the companies in this particular action won’t be the last to remind people that in the face of large-scale piracy, plaintiffs are legally permitted to run right up against the limits of the law until lawmakers decide otherwise.

In that respect, not a single inch of progress was made in the last 15 years, globally, but it’s the tendency for defendants to settle that provides the most fuel. The question is whether Bell will decide to make a stand or top up the tank along with its customers.

Millennium Funding, Inc. v. Bell Canada: Proceedings and May 31, 2023 Order