JASON S.T. KOTLER is a lawyer at the Toronto law firm of McMillan Binch and a member of the firm’s KNOWlaw^TM Group. This article was prepared with the assistance of DENIS FLEMING.

A Quebec Superior Court Judge has recently ruled that the pirating of U.S. satellite TV signals is not against Canadian law (unless you pirate the signals from a ‘lawful’ Canadian satellite distributor).

This latest case is only one of a growing list of judicial decisions on the issues of ‘grey’ and ‘black’ marketing of satellite systems carrying U.S. television signals.

The problem is that these decisions don’t always agree with one another – with the result that we still don’t know for certain whether these practices are legal or illegal in this country.

In this article, we’ll look at what the courts have decided, and at what the future may hold.

The background

First, the basics.

The CRTC’s mandate is to protect Canada’s broadcasting landscape by fostering the production of Canadian content and ensuring Canadian ownership of its airwaves.

The CRTC has only licensed the Canadian companies Bell ExpressVu and Star Choice Communications to distribute direct-to-home satellite signals in Canada.

The CRTC requires Bell ExpressVu and Star Choice to use a portion of their revenues from Canadian subscribers to financially contribute to the production of Canadian television programming. Since the CRTC has not licensed any U.S. distributors of satellite services to distribute signals in Canada, these U.S. distributors are under no obligation to make such a financial contribution.

Grey vs. black market

Grey and black market systems receive a U.S. satellite signal that carries U.S. television channels (many of which are not available on ExpressVu and Star Choice). But these signals don’t carry Canadian local news, programming and specialty services, any of the ‘must carry’ channels such as the CBC and French-language television, or any of the Canadian advertising that fuels the economics of Canadian broadcasters.

In the ‘grey’ market scheme, Canadian viewers actually subscribe and pay for the U.S. programming, but through a third-party address in the U.S., usually a post office box.

In the ‘black’ market scheme, Canadian viewers avoid paying any programming fees, usually by modifying the U.S. DirecTV or Dish Network boxes or by using pirated access cards used to unscramble the signals. (This second method is vulnerable to failure since the access card codes are routinely changed or ‘zapped’ by the U.S. satellite distributors.)

Aren’t there laws against

this sort of thing?

There’s basically one section of one piece of legislation that’s at issue.

Section 9(1)(c) of Canada’s Radiocommunications Act prohibits anyone from decoding an encrypted subscription programming signal or encrypted network feed otherwise than with the authorization of a lawful distributor of the signal or feed.

A ‘lawful distributor’ is defined in the Act as a person who has the lawful right in Canada to transmit an encrypted subscription programming signal and authorize its decoding.

A ‘subscription programming signal’ means radiocommunication that is intended for reception either directly or indirectly by the public in Canada or elsewhere on payment of a subscription fee or other charge.

Court-TV

While Section 9(1)(c) and the definitions seem straightforward enough, various courts in Canada have interpreted them to have different meanings.

In 1997, the Federal Court kicked things off with its decision in ExpressVu v. NII Norsat International by ‘illegalizing’ the burgeoning grey market. Grey market distributors quickly found themselves subject to arrest, fines and search warrants by the RCMP.

From this point on more than 20 decisions across the country have ruled on the subject.

British Columbia

Most recently, the British Columbia Court of Appeal upheld lower court rulings in favor of grey market practices.

In Bell Expressvu v. Rex, the Court favored a narrow reading of Section 9(1)(c), reasoning that where there is no lawful Canadian distributor of a signal there could be no one to authorize the decoding of the signals. The Court reasoned that since no one in Canada has the lawful right to distribute a U.S. signal, and since the Act prohibits only the unauthorized decoding of signals distributed by the lawful distributor, then the decoding of unregulated signals originating from the U.S. can’t be considered to be in contravention of Section 9(1)(c).

The Court also stated that if Parliament had intended to prohibit the reception of foreign encrypted signals it could easily have done so when drafting the Act. Since the Court found that Parliament didn’t explicitly intend to regulate signals originating from the U.S., the Court refused to read this meaning into the Act.

Ontario follows B.C.

The Ontario Court of Appeal in the case of A.G. Canada v. Branton affirmed the B.C. Court of Appeal’s reasoning.

Both Courts decided that there was an ambiguity inherent in Section 9(1)(c). And since there can be penal consequences for those who contravene this section, they determined that the ambiguity must be resolved by choosing an interpretation that favors the accused and therefore the section should be read narrowly.

Five days after the Ontario Court of Appeal’s decision in Branton, the Ontario Superior Court of Justice was faced with a case involving both grey and black market satellite dealings in Bell ExpressVu v. Tedmonds.

The Court’s decision makes it clear that the Court would have preferred a reading S.9(1)(c) of the Act that would have made all grey and black market activity illegal in Canada, as the Court considered these practices not to be in line with the thrust and purpose of Canada’s telecommunications policies.

Ultimately, though, the Court found itself bound by decisions of the higher Courts of Appeal. As a result, the Court lifted an existing injunction that had prohibited the defendant from selling its grey market systems until trial.

The Court did draw the line at black marketing. Based on the reasoning in the Branton decision, the Court held that it is very likely that black market activities could be prohibited under the Act. The Court ordered that the injunction preventing the defendant from selling black market devices was to remain in force until that issue was ultimately decided at trial.

The Quebec decision: le domaine public

In the most recent and certainly the most laissez-faire interpretation of the Act thus far, a Quebec Superior Court judge has given the judicial stamp of approval to black market pirating activities in Canada.

The Quebec Court in The Queen v. Gregory Electronique went even further than either of the B.C. or Ontario Courts of Appeal. Its view was that the protection offered by the Act did not extend to unlawful distributors such as DirecTV and other U.S. satellite distributors.

The judge even went so far as to characterize U.S. satellite signals as part of Canada’s ‘public domain,’ and consequently available to everyone to capture and decode.

Not surprisingly, this case has been appealed to the Quebec Court of Appeal.

Let the Supreme Court decode

The Supreme Court of Canada will be hearing an appeal of the B.C. Court of Appeal’s decision later this year. The Supreme Court will be forced to make a tough decision, given the fervent Canadian cultural protectionism concerns that it will be facing and the broad range of case law.

One interpretation of the Act is that Section 9(1)(c) provides for an absolute prohibition against the decoding of any encrypted subscription programming signal, except as expressly authorized by the CRTC, whether it originates from within Canada or the U.S.

The other interpretation would see only those who decode signals originating from lawful Canadian distributors as being illegal, thereby officially sanctioning the grey market and possibly even the black market.

Even if the Supreme Court decides that Section 9(1)(c) doesn’t prevent grey marketing or black marketing, that probably won’t be the end of the story. At that point it will be up to the federal government, possibly under pressure from participants in Canada’s culture industry and from U.S. content producers, to decide whether it wants to revise the Radiocommunications Act so that grey market and black market satellite services are made clearly illegal in Canada.

A decision to illegalize the reception of U.S. satellite signals would mean that the RCMP could be knocking down the doors of grey and black market satellite system distributors (and maybe even some unsuspecting consumers) the very next day.

WWF SmackDown!

In late-breaking related news, the World Wrestling Federation is suing numerous bars across Canada that it alleges are illegally showing WWF pay-per-view specials, either on black or grey market systems or without a public viewing licence.

The WWF filed its claim in Federal Court on July 17, seeking $1.7 million in damages from establishments that the WWF says are not authorized to distribute its monthly PPV telecasts.

Free Trade

Ironically, there is a growing ‘reverse grey market’ in the U.S. and Mexico.

It seems Canadian expatriates, wintering Canadian snowbirds and foreigners who have a yearning for Canadian sports, drama and news are using programming brokers to set up access to Canadian satellite signals by subscribing via a Canadian address. It’s estimated that the current subscriber base is only several thousand, but it’s growing exponentially.

It should be pointed out that neither Canadian DTH distributor condones the marketing of their services outside of Canada. To legitimately sell Canadian DTH services in the U.S. would require special licensing from the Federal Communications Commission.

The bottom line

So for all the late-breaking news on this issue, stay tuned to your local Canadian broadcasters – it’s not something that you’re likely to hear about on C-SPAN!

(THIS article contains general comments only. It is not intended to be exhaustive and should not be considered as advice in any particular situation.)