The decision on Wednesday marked an important victory for the country's ISPs, which were worried about being held legally or financially responsible for subscribers' use of peer-to-peer and other music downloading services.
A lower court decision had said that, in general, ISPs should not be responsible for their subscribers' actions, but creating locally stored versions of copyrighted content, even if they were made only temporarily during the transmission process, might be enough to trigger liability. The higher court disagreed.
"The creation of a cache copy is a serendipitous consequence of improvements in Internet technology, is content neutral...and ought not to have any legal bearing on the communication," the court said in its decision. "Caching is dictated by the need to deliver faster and more economic service and should not, when undertaken only for such technical reasons, attract copyright liability."
The decision follows almost a decade of litigation and national regulatory appeals. Canadian music publishers and songwriters had originally asked that ISPs and Web sites that distribute music pay a tariff similar to the one applied to blank tapes, CDs and, more recently, hard-drive MP3 players such as iPods. That tariff is aimed at compensating musicians for copyright infringement using those mediums, and the publishers thought Net services should also pay.
But Canadian law, like U.S. legislation, holds that ISPs simply serve as a conduit for content that flows to their subscribers from Web sites and other originating points. The court Wednesday said that shields them from copyright liability.
In theory, the process now will move on to determining how much other parties, such as Web sites, should pay. However, the Net has changed substantially since the proceeding started in 1995. Most music is now distributed either by licensed sites like Apple Computer's iTunes, which pays copyright holders directly, or through peer-to-peer networks such as Kazaa.
"It feels a bit archaic in that the specific tariffs are no longer focusing on the dominant way music is distributed," said Michael Geist, a professor at the University of Ottawa Law School.
Canada's courts have been active in copyright and Internet law recently, ruling in March thatinside that country's borders.