Industry Canada Studies Liability on the Internet

By Alan Gahtan - May 5, 1997

An Internet Liability Study (the "Study") commissioned by Industry Canada was recently released. The Study, which runs approximately 300 pages in length, is believed to be the first study conducted on the specific issues of liability for content on the Internet. It also addresses information controls, privacy issues and the protection of works on the Internet. Although Canadian in orientation, the contents of the Study will also likely be of interest to Internet users and service providers in the US, at least in respect of areas of law that are similar between the two countries.

The purpose of the Study was to assist Internet participants in better understanding their potential liability and rights. A better understanding of how existing law applies to the Internet can eliminate or reduce the uncertainty that currently exists. The Study can therefore be distinguished from previous government studies, such as those conducted by the Canadian Information Highway Advisory Council and the United States National Information Infrastructure Task Force, that were primarily concerned with policy issues.

The Study was made difficult by the almost complete absence of case law in Canada dealing with the application to the Internet of many traditional legal regulations. Although numerous Internet-related actions have been decided by U.S. courts in recent years, including those dealing with copyright infringement, obscene materials and defamation, the laws of Canada and the U.S. differ in certain areas. For example, with respect to copyright, U.S. law incorporates the concept of contributory infringement which is not found in the Canadian Copyright Act (although a similar concept of "authorizing infringement" exists). Also, U.S. copyright law is subject to "fair use" defences which are broader than the Canadian "fair dealing" defences.

The lack of significant precedents, combined with the fast pace of change, makes it difficult to provide any certainty with respect to liability. The Study itself acknowledges that "those seeking absolute answers concerning potential liability issues will be disappointed with this Study." The best it can provide "is an educated guess concerning future legal results based on analogies and analysis of prior cases in other areas."

The Study assumed that liability is possible on the Internet and focussed its analysis on who is or should be liable. Liability was analysed on the basis of specific actions or activities done by a specific individual rather than a more superficial attribution of liability based upon which category a person happened to fall into.

The topic areas covered in the Study include obscenity, child pornography, hate propaganda, civil liability, trade-marks and copyright. One issue of growing importance that was not examined or addressed was the potential regulation of certain Internet services, including telephony and real-time video, under broadcasting or telecommunications legislation. Many countries, including Canada, have in the past used regulation of traditional broadcasting mediums as a means of protecting their domestic cultural industries. Such countries may find themselves ill equipped to deal with the increasing proportion of foreign content being delivered through the Internet.

The Study highlights some of the potential problems of applying existing legislation and principles to this new media. For instance, a copyrighted work could be stored in multiple locations and assembled only when the work is accessed. As long as each part is not a "substantial part", it can be argued that the reproduction of each of these parts does not constitute infringement of copyright. An infringement would only occur if the parts were re-assembled into an entire work. However, due to the hypertext nature of the Web, this may not be necessary.

The Study is current as of the Fall of 1996 and does not reflect amendments to the Canadian Copyright Act introduced in Bill C-32 or the WIPO Treaties resulting from the Diplomatic Conferences on Certain Copyright and Neighbouring Rights held in Geneva in December 1996, although both are briefly mentioned in the Study. Although the issue of liability for Web linking is addressed, the Study does not deal with potential liability arising from inappropriate use of "frames technology" which was the basis of a law suit recently filed by CNN and other publishers against TotalNEWS.

The Study includes a reference to the recent controversy in Canada and the United States involving the ownership of materials written by freelance authors and subsequently re-utilized in non-print media by newspaper and magazine publishers. An analysis of this issue was however outside the scope of the Study.

The Study was conducted in the context that while local regulation may be required, the Internet extends beyond any single country or jurisdiction. Consequently, any local regulation should consider the Internet’s international dimension and how to deal with countries that have a differing legislative framework. It was recognized that if one country is quick to introduce poorly considered legislative changes regulating the Internet, or if legislative changes fail to balance the interests of all constituents, then this will result in certain groups simply moving their Internet-related activities to countries they consider more advantageous to their interests.

Some of the conclusions reached by the Study are:

• Although an individual hypertext link cannot be copyrighted, there may be copyright in a compilation or collection of links.

• Certain types of "caching" may constitute a reproduction of a copyrighted work.

• Implied licenses may cover certain activities involved in accessing an authorized copy of a work.

• In certain situations, intermediaries such as Internet Service Providers and On-line Services may be held liable for copyright infringement or defamation due to activities of their users and subscribers.

• An operator of a newsgroup, interactive chat group or mailing list could be liable for publication or distribution of obscene material especially if such activity is "moderated"

• In some cases, recipients of certain content may be liable. For instance, mere possession of child pornography (possibly even in the cache of a Web browsers) may be an offence.

• The gathering of personal information through Web sites may need to be performed in compliance with privacy legislation where potential visitors include residents of jurisdictions that have legislation governing such activities (such as Quebec).

The Study is not likely to prompt any quick or radical legislative changes. It advocates a slow, cautious approach to increased regulation. According to the Study, laws should only be modified when it becomes clear that changes are necessary. It suggests that where it can be reasonably interpreted that current laws will be applicable, the prudent policy approach should be to wait and see how courts apply existing laws to Internet-related activities. It also suggests that any necessary amendments should be done as narrowly and in a technology neutral fashion as possible.

Finally, the Study should not be considered as a definitive elaboration of an entity’s potential liability. Activities on the Internet are international in their effects and questions of liability will necessarily involve the laws of other jurisdictions. In fact, one area of high risk to many entities utilizing the Internet is the potential that they will inadvertently incur liability in other jurisdictions due to the global reach of the Internet.

The Study acknowledges that these issues of jurisdiction were beyond its scope to examine exhaustively. It suggests that a prudent approach mandates that users, publishers and other disseminators of content on the Internet conduct their activities in conformance with the strictest standards mandated by the application of all major legal systems.

A copy of the study is available at <http://strategis.ic.gc.ca/nme>

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