Another Win for Nintendo Giant: A Review of the Federal Court’s Decision on Technological Protection Measures
Windsor Law LTEC Lab Student Writer
In 2012, a separate legal framework was added to Canada’s Copyright Act (“the Act”), which prohibits the circumvention of technological protection measures (“TPMs”) and manufacturing and offering for sale devices that allow for the circumvention of TPMs. This framework was first applied by the Federal Court earlier this year in Nintendo of America Inc v Go Cyber Shopping (2005) Ltd et al., 2017 FC 246. Nintendo has been vehemently battling the piracy of its video games in different jurisdictions, and the Canadian decision illustrates the far reaching application of TPMs in Canada.
What are technological protection measures?
Under s. 41 of the Act, TPMs are defined as “any effective technology, device, or component” that either (a) controls access to a work protected by copyright or (b) restricts copying the materials. The Act prohibits the circumvention of access control TPMs, but does not prohibit the circumvention of copy control TPMs. The Act also prohibits entities from offering services or devices that facilitate the circumvention of TPMs.
Nintendo’s “Header Data” and video games
The material protected by copyright in this case were the video games designed by Nintendo, and Nintendo’s “Header Data”. The Header Data contains code that represents Nintendo’s logo. Nintendo uses Header Data, the physical shape of its consoles and encryption software to prevent unauthorized copying of their video games and to prevent the installation of counterfeit games. Since 2013, Go Cyber offered devices for sale that allowed users to play bootleg copies of Nintendo video games on popular Nintendo gaming consoles (DS, 3DS and Wii).
The Federal Court dealt with the issue of whether Go Cyber was liable for secondary infringement separately from the issue of whether there was TPM circumvention. Section 27(2) of the Act prohibits persons from selling or offering for sale copies of work that infringe copyright. This is secondary infringement. The test for secondary infringement was established in CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13: (1) the copy must be the product of primary infringement; (2) the infringer must have knowledge of the infringement; and (3) there must secondary dealing of the unauthorized copy, which includes an offer for sale.
Some of the devices sold by Go Cyber contained copies of Header Data. Other devices came with packaging that provided instructions on how to download copies of Header Data from third-party websites. Providing instructions on how to download unauthorized copies of the games was enough to satisfy the test from CCH. The Federal Court held that all of the Go Cyber devices at issue involved infringement contrary to s. 27(2) of the Act.
TPM Circumvention and Trafficking Circumvention Devices
Since this was the first case concerning the new TPM regime, the Federal Court had to answer the basic question of what protection mechanism can be considered a TPM.
The Federal Court looked at the UK decision on the matter. In the UK, different statutory language is used to refer to TPMs. The Copyright, Designs and Patents Act 1988 prohibits the circumvention of technical devices and “effective technological measures” (“ETMs”). In 2010, the High Court of Justice granted Nintendo’s application for summary judgement in Nintendo Company Ltd v Playables Ltd  EWHC 1932 (Ch). The High Court concluded that while the physical shape of the connector in the card slots may not amount to an ETM, the encryption software and Header Data were certainly ETMs.
The Federal Court noted that the UK definition of an ETM was narrower than the definition of a TPM in the Canadian legislation. ETMs are limited to devices that involve encryption, scrambling or some other transformation of the work, whereas TPMs include “any effective technology, device or component”. Circumvention in Canada is therefore not limited to descrambling, decryption or transformation; it can be extended to anything that “bypasses, removes, deactivates, or impairs” the TPM (paragraph 82).
The Federal Court held that the shape and design of the card slot on a Nintendo console is a TPM. By creating devices that were meant to slip into Nintendo card slots, Go Cyber had physically violated the anti-circumvention provisions.
While Go Cyber tried to make a distinction between replication of a TPM and circumvention of a TPM, the Federal Court rejected this argument. By replicating the shape and design of Nintendo’s TPM, Go Cyber had bypassed Nintendo’s security, which the Federal Court pointed out was analogous to a burglar bypassing the security of a house by using an illicitly copied key.
Go Cyber also tried to argue an “interoperability defence”. This defence is provided under subsections (1), (2) and (3) of s. 41.12. Under these subsections the anti-circumvention provisions do not apply where persons make it possible for computer programs to be interoperable with software that does not infringe copyright. Go Cyber argued that their devices were sold for the purpose of making Nintendo devices interoperable with “homebrew” software – third-party software designed for use on Nintendo consoles.
The Federal Court found that the prevalence of homebrew software was dwarfed by the prevalence of pirated Nintendo video games. Go Cyber’s website and other evidence showed that the primary purpose of Go Cyber’s devices was to circumvent Nintendo’s TPMs to support other infringing activities. The Federal Court reached the same conclusion as the High Court in the UK that a single non-infringing purpose was not a valid defence.
The Court held that Go Cyber was liable for trafficking circumvention devices and for the circumvention of Nintendo’s TPMs contrary to s. 41.1 of the Act.
Nintendo elected for statutory damages under the Act. Because this was the first case that dealt with TPM circumvention in Canada, the Court had to determine the appropriate method to calculate damages. Under s. 38.1(1) of the Act, the range for statutory damages for copyright infringement for commercial purposes is between $500 and $20,000 “with respect to all infringements involved in the proceedings for each work or other subject-matter”. Subsections (2) and (4) of s. 41.1 provide that an owner of copyright whose work has been subject to TPM circumvention is entitled to all remedies available under the Act for copyright infringement. The Federal Court interpreted these sections as meaning that the amount of statutory damages should be calculated on a “per work” basis, rather than on a “per TPM circumvented” basis.
The Federal Court held that the maximum award of $20,000 per work was justified. In total, the Federal Court awarded $11,700,000 for infringement of 585 Nintendo video games, and $60,000 for the three Header Data works that were infringed. The Court also awarded $1,000,000 in punitive damages as a response to Go Cyber’s “callous disregard” for Nintendo’s rights.
What commentators have to say
In a blog post [hyperlink: http://www.michaelgeist.ca/2017/03/canadian-dmca-in-action-court-issues-massive-damage-award-in-first-major-anti-circumvention-copyright-ruling/], University of Ottawa law professor, Dr. Michael Geist, criticized the Federal Court for the “little regard for balance” in the Nintendo decision. The reasons for the lack of balance in the decision become apparent when considering the greater context of the case. Nintendo had been successful in the UK decision mentioned above, and other decisions across Europe. Perhaps recognizing the abundance of international case law against him, the individual defendant Jeramie King settled with Nintendo after evidence was filed. Justice Campbell asked Nintendo to submit a written argument, which he would later adopt as his own judgment. The corporate defendant Go Cyber did not take the opportunity to respond to Nintendo’s argument. The result is an aggressive application of the TPM circumvention provisions with clear preferential treatment towards the gaming giant.
The Federal Court applied the TPM circumvention provisions broadly, so that they were applied not on the video game software owned by Nintendo, but on the consoles. These consoles are not copyright protected works, and as a result, the application of TPM provisions not only curbs piracy of video games but also activity that does not infringe copyright. In an article for online magazine Slaw [hyperlink: http://www.slaw.ca/2017/04/27/nintendo-v-go-cyber-shopping-glosses-over-important-issues-in-the-new-digital-locks-regime/], University of Alberta law professor, Cameron Hutchison compares the outcome of the Nintendo decision to a US Court of Appeal (Federal Circuit) decision, Chamberlain Group v Skylink Technologies 381 F.3e 1178 (2004). In that case, Chamberlain, a maker of garage door openers, sued the smaller company Skylink for violation of the anti-circumvention provisions under the US Digital Millennium Copyright Act, for making a remote control device compatible with Chamberlain’s products. The US Court of Appeal ruled in favor of Skylink, and held that prohibited circumvention must be connected to copyright infringement in order to sustain a cause of action under the DMCA. Hutchison notes that the Canadian Federal Court did not cite any US case law and did not address the issue of whether there must be a connection between infringement and circumvention to succeed in an action under the circumvention provisions of the Act.
For Windsor Law Professor Pascale Chapdelaine, “the Nintendo decision illustrates the breadth of the Copyright Act’s definition of TPM, the Court assimilating Nintendo game consoles to TPMs. Whether game consoles could constitute a TPM was answered in the affirmative by the European Court of Justice in 2014 in Nintendo Co. Ltd v PC Box Srl., subject to a principle of proportionality on the scope of protection afforded to such TPMs. Here the Federal Court viewed Nintendo game consoles and other devices as TPMs without giving any consideration to the significance of granting such protection to game consoles.”
The corporate defendant has not filed an appeal and is unlikely to do so as it declined to respond to Nintendo’s written argument at the Federal Court level. While we may not see a change in this case law anytime soon, the Act is up for a statutorily mandated review this year. This decision may prove influential on future modifications to the Act, as Parliament may choose to address concerns about the overbreadth of circumvention provisions.
 C-355/12  ECDR 6 online: <http://curia.europa.eu/juris/liste.jsf?num=C-355/12>