Federal Court Addresses Fair Dealing Exception to Copyright Infringement

Alexander Stross v. Trend Hunter Inc., Jeremy Gutsche, 2020 FC 201 was a copyright infringement action brought under the Federal Court’s simplified procedure relating to the alleged unauthorized use of six photographs (the “Photographs”). Ultimately, the Court found that the infringement in question was not saved by the fair dealing exception under the Copyright Act[1] (the “Act”) and awarded the plaintiff damages and compensation for lost profits.

The plaintiff, Alexander Stross, a professional photographer, was engaged by an architect to photograph a housing project in Texas. Subsequently, Mr. Stross registered the Photographs for copyright with the United States Copyright Office.

The defendant, Trend Hunter Inc. (“Trend Hunter”), is a market research company that advises clients on consumer trends and strategies for innovation. Jeremy Gutsche, the company’s founder and CEO, was named as a co-defendant in the action.

Trend Hunter operates trendhunter.com, a database that generates research data by crowdsourcing content and measuring users’ interaction with that content. Trend Hunter uses artificial intelligence and personnel to process data generated by trendhunter.com, which is used to prepare consumer trend reports for clients. Trend Hunter reproduced the Photographs on its website without a licence, for which Mr. Stross claimed copyright infringement.

Before dealing with the infringement issue, the Court addressed the defendants’ argument that Mr. Stross did not have the right to bring a copyright infringement case because he was not the owner of the Photographs. The defendants argued that Mr. Stross had licensed an exclusive right to bring the infringement claim to a US-based copyright enforcement agency. However, the Court dismissed this argument, noting that the evidence regarding the agreement between Mr. Stross and the copyright enforcement agency was not sufficiently clear, and that there was no express language indicating that any of the rights under subsection 3(1) of the Act had been assigned or exclusively licensed by Mr. Stross to the agency.

Copyright Infringement and the Fair Dealing Exception

The sole issue regarding copyright infringement was whether Tread Hunter’s use of the Photographs fell within either of the fair dealing exceptions to infringement as set out in sections 29 and 29.2 of the Act:

• s. 29 states that fair dealing for the purpose of research, private study, education, parody or satire does not infringe copyright; and
• s. 29.2 creates a similar exception for news reporting, which the Court found was unnecessary to address after deciding that the use of the Photographs fell within the research definition under s. 29.

The Court applied the two-part test set out by the Supreme Court of Canada in CCH Canadian Ltd. v. Law Society of Upper Canada[2](the “CCH Test”).[3]The first branch of the CCH Test requires a determination of whether the dealings fall within one of the allowable purposes under the Act. The second branch of the test requires a determination of whether the dealing was “fair”, having regard to several different factors.

1. Was the dealing for the purpose of research?

With respect to the first branch of the CCH Test, the question before the Court was whether the dealings were for the purpose of research or news reporting. The Court noted that “research” is to be given a “large and liberal” meaning. Despite the plaintiff’s argument to the contrary, the Court held that Tread Hunter’s activities fell within the scope of “research” and likened the company’s activities “to a computerized version of a market research study group.” This use, the Court held, was sufficient to meet the low threshold necessary to satisfy the first branch of the CCH Test.

2. Was the dealing “fair”?

The heart of the CCH Test is the second branch of the test, which considers whether the dealing was “fair” through a consideration of six factors. The Court noted that fairness is to be assessed using a holistic analysis of these factors, considering a balancing of interests and the practical and real dealing by the user of the owner’s work. The Court also stated that the evaluation of whether a dealing is “fair” must be considered with the public interest in mind. The six factors considered under the second branch are:

1. the purpose of the dealing;
2. the character of the dealing;
3. the amount of the dealing;
4. alternatives to the dealing;
5. the nature of the work; and
6. the effect of the dealing on the work.

After considering the six factors and the specific factual circumstances of the case, the Court found that the use in question was not a fair dealing and that copyright infringement should be found. Despite the fact that the effect of the use of the Photographs was not directly shown, the Court found that, when considered holistically, the circumstances of use and the ultimate purpose of the dealing did not support a finding of fair dealing.

Damages and Personal Liability of Mr. Gutsche

Under subsection 35(1) of the Act, a plaintiff may elect to recover statutory damages for infringement in lieu of damages and profits. As no election was made by the plaintiff in this case, the Court undertook an analysis of damages and profits stemming from the infringement.

Where damages are difficult to quantify under subsection 35(1), they may be assessed based on the licence fee that would otherwise have been charged if not for the infringement. After determining that there was insufficient evidence to establish a standard licensing fee for the Photographs, the Court awarded nominal damages in light of the lack of proof of actual damage, the short time the Photographs were posted, the de minimis profits made on the Photographs by Trend Hunter, and the steps taken by Trend Hunter to immediately remove the Photographs on notice. The damages awarded amounted to $3,983.40 CAD and the plaintiff was awarded costs in the amount of $9,493.94 CAD

The personal claim against Mr. Gutsche was dismissed for lack of evidence of his involvement.

Footnotes:

[1] Copyright Act, R.S.C. 1985, c. C-42. [2] 2004 SCC 13. [3] This test is set out in CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13.

Author: Matt McDonald