Executive Summary: Key Legal and Evidentiary Issues

• Bell Canada and Bell Aliant challenged the striking of their copyright misuse and secondary counterclaims related to the notice and notice regime.

• The court considered whether copyright misuse could be a valid defence under section 41.26 of the Copyright Act.

• Pleadings were struck primarily for failing to disclose sufficient material facts, not necessarily for legal insufficiency.

• The request for declaratory and injunctive relief was denied as the declarations amounted to statements of fact, not legal rights.

• Allegations against the law firm Aird & Berlis LLP were found too vague and speculative to proceed.

• The court allowed the appeal in part, granting Bell leave to amend its pleadings but awarded no costs to either side.

Facts and outcome of the case

Background and parties

The case involves a dispute between Bell Canada and Bell Aliant (collectively referred to as Bell), and a group of film production companies including Millennium Funding, Outpost Productions, Bodyguard Productions, Hunter Killer Productions, and Rambo V Productions. These film companies claimed copyright infringement related to their films, allegedly facilitated through Bell’s internet services via the BitTorrent peer-to-peer network. Aird & Berlis LLP, a law firm representing the film companies, was also named in Bell’s counterclaim.

Claims and counterclaims

The plaintiffs (film producers) alleged that Bell failed to comply with the “notice and notice” regime under sections 41.25 and 41.26 of the Copyright Act, which obliges Internet Service Providers (ISPs) to forward infringement notices to subscribers. The producers claimed Bell failed to forward 40,000 out of 81,000 notices and sought statutory damages of up to $400 million.

In response, Bell filed a counterclaim, alleging that the producers misused the notice and notice regime as part of a copyright enforcement program (CEP) intended not to protect copyright, but to intimidate users and extract settlements. Bell alleged various torts, including copyright misuse, abuse of process, unlawful means conspiracy, and included claims against Aird & Berlis for its alleged role in facilitating improper litigation.

Federal Court decisions

A case management judge initially granted a motion to strike Bell’s pleadings in full, without leave to amend. This included striking all allegations of copyright misuse and the secondary tort claims. A Federal Court judge upheld this decision, agreeing that Bell had failed to plead sufficient material facts and that the declarations sought were not actionable legal rights but merely factual assertions.

Issues on appeal

Bell appealed to the Federal Court of Appeal, arguing that the lower courts erred in striking the claims, particularly the misuse of copyright defence, and in denying leave to amend. The court considered whether copyright misuse could be a viable defence under section 41.26 and whether Bell’s pleadings met the legal standard.

Findings of the appellate court

The appellate court affirmed that copyright misuse could theoretically be a valid defence but found that Bell’s pleadings lacked sufficient material facts to sustain that defence or any of the secondary claims. The court emphasized the need for pleadings to clearly state who did what, when, where, and how the conduct constituted a legal wrong.

However, the court found legal error in the denial of leave to amend. It concluded that although Bell’s pleadings were deficient, it was not plain and obvious that the defects could not be cured through amendment. As a result, Bell was granted leave to amend the relevant sections of its defence and counterclaim.

Final outcome and costs

The appeal was allowed in part. The court set aside the decision only insofar as it denied Bell the opportunity to amend its pleadings. All other aspects of the Federal Court’s decision remained intact, including the striking of the original pleadings.

No costs were awarded to either party, including those from the earlier Federal Court motions, as success was divided.