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Reverse Class Actions in Canada: A New Form of IP Litigation

On September 8, 2021, the Federal Court of Appeal (FCA) in Canada released its decision in Salna v. Voltage Pictures, LLC, 2021 FCA 176 which considered whether a reverse class action, a term used colloquially to describe where a plaintiff seeks certification of a respondent/defendant class proceeding, could be pursued in connection with a copyright infringement claim. Rather than in a typical class action where the plaintiff is the class, in these proceedings, the respondents/defendants make up the class. A reverse class proceeding is a proceeding where a plaintiff or specific plaintiffs bring a proceeding against a class of respondents/defendants for common or similar facts.

This decision relates to allegations by various film production companies that their copyrights in several films had been infringed online by multiple persons. The various film production companies (plaintiffs) sought to certify a reverse class in the action against multiple individuals engaging in illegal uploading and downloading of their films using peer-to-peer networks.

At the trial level, the Federal Court had previously refused to certify the plaintiffs’ proposed class in this proceeding and found that the plaintiffs failed to provide sufficient evidence about the actual existence of a class of two or more persons as the respondents/defendants. As such, the plaintiffs’ pleadings did not disclose a reasonable cause of action for such a class action proceeding. It went on to say that a class proceeding was not the preferable procedure because the plaintiffs’ application predominantly raised individual issues within the proposed class of the respondents/defendants. Therefore, the plaintiffs’ pleadings did not disclose a reasonable cause of action against multiple respondents/defendants as a class.

On appeal, the FCA recognized that “the proposed reverse class action tests the limits of what constitutes copyright infringement. It is also an innovative development in the means by which authors attempt to protect their work in a digital environment.”[1] The FCA noted that the novelty of the proposed class action is not a reason to deny an application to certify the proceeding. Rather, the FCA stated that

the objectives of class proceedings are well known: (i) facilitating access to justice through the distribution of legal fees across a large number of class members, (ii) conserving judicial resources by reducing unnecessary duplication in the fact-finding and legal-analysis process, and (iii) modifying harmful behaviours by ensuring that actual and potential wrongdoers take into full account the harm they are causing or might cause. These advantages exist not only in a typical plaintiff class proceeding, but also in the case of a reverse class proceeding, where specific plaintiffs bring a proceeding against a class of defendants”.[2]

Notably, the FCA confirmed that a reverse class action may be an appropriate tool to advance a claim where there are multiple respondents/defendants that are each potentially liable for small amounts of money.[3] In determining whether it is appropriate to certify such an action, the FCA confirmed that “the primary question to be answered is whether the class proceeding would be a fair, efficient, and manageable method of advancing the claim.”[4]

In this case, the FCA held that the plaintiffs had shown that (i) they have a novel but arguable claim, with pleadings that disclose a reasonable cause of action for direct copyright infringement, (ii) there is some basis in fact that there is a class of two or more persons (the respondents/defendants) and (iii) there are common issues of fact and law. But, the FCA held that it could not decide whether this proceeding as a class action is the preferable procedure for the just and efficient resolution of the claims before it. Consequently, the FCA set aside the Federal Court’s decision to refuse to certify the class of respondents/defendants and ordered the certification motion to be returned to the Federal Court for consideration in light of the FCA’s reasons.

In its reasons, the FCA indicated that a reverse class action for copyright infringement can be appropriately advanced by the plaintiff litigant. The FCA confirmed that in reserve class action proceedings:

  1. sub-classes of the class/defendants can be created to address any differences in fact scenarios;[5]
  2. a court-supervised individual assessment process can be instituted to deal with the apportioning of damages amongst class members[6];
  3. if the individual circumstances of various class members become determinative of liability on a case-by-case basis, then those individual, or smaller group, questions can be appropriately handled by the court[7]; and
  4. a common resolution or framework for resolution, applicable to even some of the common questions of fact and law in a class proceeding, will save judicial resources and reduce inconsistencies that can arise should similar, individual actions come before the courts.[8]

The FCA’s decision provides helpful insight on the use of a reverse class action as an appropriate tool for plaintiffs seeking to resolve one or more claims, including copyright infringement claims, involving numerous respondents/defendants each potentially liable for small amounts of money.

It will be interesting to see how this case moves along and whether the reverse class action proceeding is in fact beneficial to the plaintiffs in stopping copyright infringement and obtaining relief from the Court including injunctions and damages.

 

[1] 2021 FCA 176 at para 4.

[2] Ibid, at para 67.

[3] Ibid, at para 115.

[4] Ibid, at para 102.

[5] Ibid, at para 103.

[6] Ibid.

[7] Ibid, at para 116.

[8] Ibid