Videtron V Bell Quebec 2012

JS 0964
SUPERIOR COURT
CANADA
PROVINCE OF QUBEC
DISTRICT OF MONTRAL
No. 500-17 -027275-059
DATE: JULY 23,2012
IN THE PRESENCE OF: THE HONOURABLE JOEL A. SILCOFF, J.S.C.
VIDOTRON L TE.
-and-
VIDOTRON (RGIONAL) L TE.
-and-
CF CBLE TV INC.
Plaintiffs
and
VIDOTRON s.e.n.c.
Plaintiff in continuance of suit
v.
BELL EXPRESSVU LlMITED PARTNERSHIP
Defendant
JUDGMENT
1. INTRODUCTION ................................................................................. ~ ......................... 2
Il. THE PARTIES ............................................................................................................... 6
A. VIDOTRON ........................................................................................................... 6
B. GROUPE TVA INC. ("TVA") .................................................................................... 7
C. BEV ......................................................................................................................... 7
III. TECHNICOLOGICAL AND CONTEXTUAL OVERVIEW .............................................. 7
A. Direct Broadcast Satellite ("DBS") Systems: A CONCEPTUAL OVERVIEW ................... 7
B. SATELLITE TELEVISION PIRACY AND FRAUD IN NORTH AMERICA - A DESCRIPTIVE
OVERVIEW ................................................................................................................ 8
C. ANTI-PIRACY TECHNIQUES ........................................................................................ 13
D. BEV's ENTRY AND EXPERIENCE IN THE CANADIAN DBS INDUSTRY - A CONTEXTUAL
OVERVIEW .............................................................................................................. 15
IV. QUESTIONS OF FACT AND OF LAW ....................................................................... 2
V. OBJECTIONS TO BE AJUDICATED .......................................................................... 2
A. THE INADMISSIBILITY OF EXHIBIT 0-226 .................................................................... 2
B. THE INADMISSIBILITY OF EXHIBIT D-79A .................................................................... 2
C. EXPERT MICHAEL BARR'S lIMITED QUALIFICATIONS ................................................... 2
D. EXPERT DR. MATTHEW D. GREEN'S lIMITED QUALIFICATIONS .................................... 2
VI. EXHIBITS PRODUCED UNDER SEAL. ...................................................................... 2
VII. ADMISSIONS .............................................................................................................. 3
VIII. ANAL YSIS OF THE EVIDENCE - ORDINARY WITNESSES ..................................... 3
A. VIDOTRON & TVA .................................................................................................. 3
B. BEV ....................................................................................................................... 4
IX. EXPERT Evidence - JURISPRUDENTIAL PRINCIPLES ..................................................... 9
A. DUTIES AND RESPONSIBILITIES OF EXPERT WITNESSES .............................................. 9
B. ASSESSMENT OF CREDIBILlTY, RELlABILlTY AND PROBATIVE VALUE OF EXPERT EVIDENCE
92
X. ANALYSIS OF THE EVIDENCE - EXPERT WITNESSES .......................................... 9
B. SECURITY & AVAILABLE MEASURES TO PREVENT OR LiMIT SATELLITE SIGNAL PIRACY AND
ENSUING DAMAGES ................................................................................................. 94
VIDOTRON & TVA ........................................................................................................ 94
BEV ........................................ : ................................................................................... 113
C. QUANTIFICATION OF DAMAGES ............................................................................... 129
VIDOTRON & TVA .................................................... " .................................................. 129
BEV ............................................................................................................................ 138
1. APPLICATION AND DiSCUSSiON ........................................................................... 152
A. FAULT ................................................................................................................... 152
B. CAUSATION ........................................................................................................... 173
C. QUANTIFICATION OF DAMAGES ............................................................................... 185
Il. EXPERT EXPENSES ................................................................................................ 188
XIII. INTEREST ................................................................................................................. 192
XIV. FOR THESE REASONS, THE COURT: .................................................................... 192
A. OBJECTIONS ......................................................................................................... 192
B. MERITS ................................................................................................................. 193
ii
500-17 -027275-059 PAGE:2
1. INTRODUCTION
[1] History changed on October 4, 1957, when the Soviet Union successfully
launched Sputnik l, the world's first artificial satellite. It marked the start of the space age
and a scientific and technological baUle of epic proportions between the two world
titans.
1
[2] ln September 1997, approximately fort Y years later, ExpressVu Inc. (predecessor
of BEV) launched its programming service as a national Direct-to-home satellite
distribution undertaking. This event quickly gave rise to a multi-faceted commercial and
legal battle, also of epic proportions, between two Canadian telecommunications titans,
Vidotron, BEV and their respective parent corporations.
[3] ln their initial proceeding introductive of suit, Plaintiffs, Vidotron Lte., Vidotron
(Rgional) Lte. and CF Cble TV Inc. sought compensation from Defendant, Bell
ExpressVu Limited Partnership ("BEV") for loss of actual and potential revenues from
various services offered to potential subscribers to its pay television, Internet access and
telephony services, as weil as exemplary damages, as a direct consequence of its
alleged negligence to adequately control the black market pirating of its direct-to-home
satellite system ("Action # 1", or the "Vidotron Action").
[4] Vidotron (Rgional) Lte was subsequently merged into CF Cble TV Inc. It
was then liquidated into Vidotron Lte. Thereafter, Vidotron Lte transferred its assets
to Vidotron s.e.n.c., a limited partnership ("Vidotron").
[5] An appearance in continuance of suit was then filed by Vidotron. Vidotron is,
therefore, the sole remaining Plaintiff in this action.
[6] Vidotron originally quantified its claim as follows:
2
3
(i)
(ii)
$41,109,357 for loss of profits du ring the period commencing September
1, 2002 and terminating February 28, 2005 (the "Piracy Period,,)2;
$247,823,315 for loss of anticipated profits during the period commencing
March 1, 2005
3
and terminating December 31, 2015 (the "Post-Piracy
Period");
http://history.nasa.gov/sputnik/.
The duration of the Piracy Period has been variously defined by the parties and by different experts
heard in these actions. In Plaintiff counsel's oral argument, the Court was invited to modify the
commencement date of the Piracy Period, if necessary, in accordance with its appreciation of the
evidence.
The Post Piracy period also has been inconsistently described in various documents as beginnirig
March 1, 2005, March 31, 2005 and June 30, 2005. These differences are not material for the
purposes of the present judgment.
500-17 -027275-059 PAGE: 3
(iii) $10,000,000 as exemplary damages; and
(iv) Interest at the legal rate as weil as the additional indemnity provided under
Article 1619 of the Civil Code of Qubec (tiC. C. Q. ").
[7] ln an amended proceeding dated November 4, 2005, the total amount claimed in
compensatory damages and punitive damages was increased to $374,195,890.
[8] Following the conclusion of the evidentiary phase of the hearing and in the
course of Plaintiff's oral argument, Vidotron substantially reduced its claim for
damages, based upon the following alternative parameters referred to, in the report
prepared by its experts Navigant Conseil LJ Inc. ("Navigant" and the "Navigant
Report,,)4, as being appropriate in the circumstances:
Fixing the acceptable or tolerable level of piracy at 3%;
Accepting an annual "churn rate,,5 among Vidotron subscribers of 12.6%,
corresponding to an average period of subscription for its clients of 7.9
years;
Fixing Vidotron's share of the market in the regions serviced by it at 71 %;
and
Reducing the duration of the Post-Piracy Period during which damages
are claimed to a total of approximately 6.8 years, commencing March 1,
2005 and terminating December 31,2011.
[9] Moreover counsel invited the Court, if it deemed appropriate, to further reduce
the amounts awarded, depending on its determination of the date of commencement of
damages, that is the earliest date, after September 1, 2002, upon which the Court
concludes BEV could have effected the swap out fram its problematic existing DNASP2
conditional access system ("CAS") and smart cards to the upgraded and more secure
Aladin CAS and smart cards.
[10] The amount of the reduced claims for compensatory damages and the method of
calculation thereof are referred to in a letter, dated January 6, 2012, addressed to the
Court by Plaintiffs' counsel.
6
They vary from a high of $28,539,723 if the Piracy Period
and resulting damages are deemed to have commenced on April 1, 2003, and a low of
$7,476,524, if the Piracy Period and resulting damages are deemed to have
commenced on October 1, 2004. For the Post-Piracy Period, the amount claimed is
reduced to $144,593,886.
4
5
6
Exhibits P-363 A - P-363 H, (collectively the "Navigant Report").
Defined in Annex 1 to this judgement.
Exhibit P-388.
500-17 -027275-059 PAGE:4
[11] ln oral argument before the Court, counsel for Vidotron withdrew the claim for
exemplary damages on behalf of Vidotron but maintained it on behalf of TVA as
claimed in the TVA (Piracy) Action (hereinafter defined).
[12] BEV denied liability for ail of the amounts claimed. Its position is summarized in
paragraphs 1 to 15 of its Amended Defence and in greater detail in counsel's Plan of
Argument of Defendant, Complment au Plan and the Plan d'Argumentation
Additionnel. BEV contends, in particular:

Its actions at ail relevant times in preventing and opposing satellite signal piracy,
including the choice, implementation and use of its technology in that regard and
the conversion of its existing DNASP2 CAS to the new Aladin CAS were
commercially and scientifically reasonable and appropriate in the circumstances;
They were undertaken in a timely fashion based upon available technology at the
time;
It was not negligent;
It never tolerated piracy of its system and used commercially reasonable efforts,
in choosing and installing its satellite broadcast systems, ta fight piracy which
was, at the time, an industry and world-wide concern;
It undertook a great number of actions ta prevent and oppose signal piracy many
of which were at times simultaneous. These included interventionist legal actions
against persons engaged in signal piracy, repatriation programs ta incite pirates
ta become legitimate subscribers, implementation of an extensive program of
electronic counter-measures ("ECM"), implementation of the PRISM and BEATS
programs, a zero-tolerance policy, a public education campaign, marketing
techniques promoting the sale of programming packages with satellite receiver
equipment, cali-out programs, phone connection contractual requirements,
investigation and industry-wide cooperation, major smart card swaps and
continuing discussions and collaboration with the Canadian Radio-television and
Telecommunications Commission (the "CRTC") and law enforcement agencies
in the fight against piracy;
ln assessing fault and liability, the Court should respect the rule of deference ta
business decisions known as the "business judgment rule" in evaluating whether
BEV acted within the rules of conduct appropriate in the circumstances, usage or
law;
If Vidotron's submissions are ta be retained by the Court, they require more
than mere conjecture. They require credible evidentiary support of fault and
causality. It has failed to provide same;
Vidotron failed ta discharge its burden ta prove how the amounts claimed were
a direct and immediate consequence of the alleged fault of BEV and that they
reflected the real lasses incurred by it;
500-17 -027275-059 PAGE:5
The approach and methodology used by Vidotron's expert, Navigant, to quantify
the compensatory damages claimed is flawed and should not be retained;
Under reserve, should the Court find fault and causality, the quantification of
damages as proposed by BEV's expert, PricewaterhouseCoopers ("PwC") and
modified by counsel subsequently, should be retained;
It denies, as being unfounded in fact and in law, Vidotron's claim for exemplary
damages; and
Vidotron has failed to mitigate any losses resulting from any form of piracy for
which BEV might be held accountable.
[13] Although BEV denied liability for ail of the amounts claimed, under reserve and in
the event that the Court should find it liable to compensate Vidotron for the damages
claimed, counsel for BEV maintains that the appropriate quantification of damages
during the Piracy Period and the Post-Piracy Period should range from a high of
$861,000 if they aredetermined to have commenced on July 1, 2003 to a low of
$34,000 if they are determined to have commenced only on December 31,2004.
7
[14] The Vidotron Action was heard together with each of following three related
actions:
(i) 500-17 -027276-057: Groupe TVA Inc. v. Bell ExpressVu Limited
Partnership ("Action # 2" or the "TVA (Piracy) Action");
(ii) 500-17-018324-031: Groupe TVA Inc. v. Bell ExpressVu Limited
Partnership ("Action # 3" or the "TVA (Account Stacking) Action"); and
(iii) 500-17-022586-047: Groupe TVA Inc. v. Bell ExpressVu Limited
Partnership ("Action # 4" or the "TVA (lnjunction) Action").
(collectively, including the Vidotron Action, the "Related Actions")
[15] A total of 23 witnesses were heard over a period of almast 5 months on behalf of
one or other of the parties.
[16] Seeing the lack of identity of the parties and of the remedies sought in each of
the Related Actions and for, the purpose of clarity, separate judgments are rendered in
each of Actions # 1 and # 2; a third judgment is rendered combining Actions # 3 and #
4; (collectively the "Related Judgments"). The Related Judgments are released
concu rrently.
[17] For the reasons herein expressed and those expressed in each of the other
Related Judgments, the Court:
7
Exhibit D-292, Letter ta the Court by caunsel, January 12, 2012.
500-17 -027275-059 PAGE:6
(i) maintained in part the present action;
(ii) maintained in part the TVA (Piracy) Action;
(iii) dismissed the TVA (Account Stacking) Action; and
(iv) dismissed the TVA (Injunction) Action.
[18] The reader is encouraged to read each of the Related Judgments for a full
comprehension of the Court's determinations on the issues raised for determination in
this and each of the other Related Actions.
[19] The evidence offered by the parties in support of their respective contentions in
the Vidotron Action, is deemed to have been offered and ta form part of the Court
record in each of the other Related Actions.
[20] The Court will limit its analysis in this judgment to the issues raised and the
conclusions sought in the Vidotron Action. To the extent applicable, the findings and
analysis herein shall be deemed to form part of and to apply mutatis mutandis in each of
the other Related Judgments.
[21] Ali acronyms used but not otherwise defined herein, shall have the same
meaning as set out in the Glossary of Acronyms and Defined Terms annexed hereto as
Annex 1.
II. THE PARTIES
A. VIDOTRON
[22] Vidotron is a cable broadcasting distribution undertaking ("BDU") operating in
Ouebec. It offers subscribers analog and digital pay-television, Internet access and
telephony services. It also offers business telecommunications services, wireless
communication services. It also operates a chain of video stores. At ail times relevant, it
was in possession of licences issued by the CRTC to carry on a distribLition undertaking
in the various regions or territories serviced by it
8
.
[23] The predecessor corporations (Plaintiffs herein) of Vidotron became
subsidiaries of Ouebecor Media inc. ("QMI") in 2001.
8
Exhibit P-001 en liasse.
500-17 -027275-059
PAGE: 7
8. GROUPE TVA INC. ("TVA")
[24] TVA operates in the sector of television broadcasting. At ail times relevant to the
present proceedings, OMI was the majority shareholder of TVA.
[25] TVA broadcasts one free-to-air television channel, Le Rseau TVA, as weil as
twelve pay and specialty programing services, including Le Canal Nouvelles
LCN is distributed by ail BDUs doing business in Ouebec, including BEV. Its licence as
a programing undertaking was granted by the CRTC in its decision 96-615 on
September 4, 1996
9
.
[26] At ail times relevant to the present action, LCN was the only pay and specialty
programing undertaking available to BEV from TVA.
C. BEV
[27] BEV is a limited partnership formed under the Limited Partnerships Act (Ontario).
Its two partners are Bell ExpressVu Inc., its general partner and Bell Canada, its limited
partner.
[28] By decisions dated December 20, 1995 and corrected on January 11, 1996, the
CRTC granted ExpressVu Inc. (predecessor of BEV) a licence to carry on a national
Direct-to-home ("OTH") satellite distribution undertaking 10. BEV's licence has been
extended or renewed on several occasions sin ce and is still in full force and effect.
[29] BEV launched its programming service in September 1997. It distributes digital
television and radio programming through DTH satellite technology, sometimes also
known as a Direct Broadcast Satellite ("OBS") television system. .
III. TECHNICOLOGICAL AND CONTEXTUAL OVERVIEW
[30] While the underlying technology relevant to DBS television and conditional
access systems may be complex and, from a layman's perspective highly sophisticated,
and although the expert evidence offered on behalf of each of the parties is often
contradictory as to the adequacy of BEV's response to signal theft, there is nonetheless
a general consensus as to the description of the essential components and functioning
of a DBS system. The Court will attempt to synthesize the relevant technology.
A. Oirect Broadcast Satellite ("08S") Systems: A CONCEPTUAL OVERVIEW
[31] DBS television is a communications medium used to distribute television
programming from orbital locations in outer space to an unlimited number of receivers
over a large terrestrial footprint. For BEV, the footprint covers most of Canada. Direct-
9 Exhibit P-285.
10 Exhibit D-1.
500-17 -027275-059
PAGE:8
To-Home ("DTH") satellite television is another term sometimes used interchangeably
to describe a similar medium.
[32] BEV's expert, Michael Barr, describes how the DBS system functions as follows:
11. ( ... ) ln general terms, every DBS system has five major components ( ... )
12. First, each broadcaster sends its video and audio content into the sky via
one or more ( ... ) transmit antennas at an "uplink" center. Next, these signais are
received by the specific ( ... ) satellite they are aimed at, which is located in a
"geostationary" orbit that follows the Earth's daily rotation to keep it always above
the same fixed point on the Earth's surface. The satellite retransmits these
signais in a cone-like signal stream directed primarily at a specific "footprint" on
the Earth (e.g., the 48 contiguous United States). Individuals or organizations
wishing to receive signais from a specific satellite must aim a ( ... ) parabolic "dish"
antenna in its precise direCtion. The antenna gathers and amplifies the received
signais and forwards them along an attached coaxial cable to a ( ... ) set-top
box.
11
Next, the set-top box decodes the digital data it receives to display the
user-selected channel (e.g., ESPN) on an attached ( ... ) television.
12
[Internai footnotes omitted]
[33] To prevent unauthorized access to its signais, satellite broadcasters rely upon
Conditional Access System ("CAS") security and technology. According to Vidotron's
expert, Dr. John Markey:
The primary purpose of conditional access security on satellite and cable
television systems is to prevent the unauthorized access to programming content
and other information delivered by those technologies. Security of digital satellite
TV systems, in layman's terms, is achieved not through any one method or
component, but often is accomplished through security technology integrated in
many of the components and elements throughout the system.
13
Hence, the
ove rail strength of the satellite TV's se cu rit y is compromised if one or more of the
relevant parts to the security system becomes vulnerable ta hacking and piracy.14
B. SATELLITE TELEVISION PIRACY AND FRAUD IN NORTH AMERICA - A DESCRIPTIVE
OVERVIEW
[34] Satellite television piracy is defined by Vidotron's expert, James Shelton, as
follows:
11 The set-top box equipment may also be calied just a "set-top" or just a "box." More formaliy, it is an
"integrated receiver-decoder" (hence, "IRO") or just "receiver." Ali of these terms are interchangeable.
12 Expert Report of Michael Barr, September 30,2010 (the "Barr Report"), pp. 9-10, Exhibit 0-251.
13 The conditional access technology is integrated across numerous systems such as the broadcast
center, in the set-top-box receiver, and most importantly, in the smartcard technology.
14 Expert Report of Dr. John Markey, March 2010 (the "Markey Report"), p. 6, Exhibit P-350.
500-17 -027275-059 PAGE:9
Piracy is the unauthorized [and typically illegal] reproduction or use of another's
production, invention, or conception, especially involving infringement of a
copyright. In the area of pay TV, piracy typically entails violating state, provincial,
and/or federal criminal and civil laws, by obtaining telecom hardware and
software that permits a would-be or actual respectively, to view
content without paying for it, or to view content by paying less than what the
owner and/or distributor of that content typically charges. ( ... ) 15
[35] Satellite television piracy has been a concern since the inception of this form of
television broadcasting. The earliest satellite broadcasts, which began in 1975, were
used ta distribute new movies and live sporting events fram, for example, Home Box
Office (HBO) and Superstation WTBS ta local cable TV providers, for rebroadcast to
cable TV subscribers over the local wires.
[36] Barr describes the evolution of piracy since as follows:
22. Early satellite TV broadcasts weren't scrambled. Anyone with a large (6
foot diameter) "backyard dish" and receiver could watch them. In a sense, the
1986 introduction of encryption technology-after a decade of broadcasting video
channels in the clear-was the first anti-piracy measure. ( ... ) 1 n the intervening
decade, a generation of satellite TV enthusiasts and equipment providers was
established. ( ... ) Many of these people had acquired sufficient understanding of
the required technology to install and maintain complex antennas and receiving
systems. Despite what the broadcasters thought of them, it is likely that very few
thought of themselves as hackers or pirates.
23. Thus began a cat-and-mouse-game between those who would encrypt
satellite TV broadcasts to protect them and those who would decrypt them
without payment. A "backyard dish" technological arms race raged for over eight
years before the 1994 launch of the first mass market "small dish" DBS
systems-by DirecTV in the U.S. According to an estimate by a Plaintiff's expert
more than 80% of "backyard dish" owners would have used pirate devices in this
era. (Shelton p. 9) The purveyors of products and services to assist in piracy
profited and learned.
16
[37] He also describes the more common fraud and piracy techniques used to
receiving DBS television programming without payment or by paying less than the
appropriate amount
17
:
15 The armel Group Expert Report, March 2010 (the "Shelton Report"), p. 5, Exhibit P-356.
16 Barr Report, pp.14-15.
17 Ibid, pp. 15-22.
500-17 -027275-059 PAGE: 10
Grey Market
25. The grey market is a type of fraud that involves Canadian residents who
make unauthorized subscriptions to U.S. satellite TV services, such as DirecTV
or Dish Network. In grey market fraud, customers do pay fees for what they
watch. But by law Canadians aren't allowed to subscribe to U.S. broadcasts. A
grey market participant requires assistance in the form of a U.S. mailing address
and cross-border movement of receiving equipment (antenna, set-top box, and
access card) compatible with the target U.S. satellite TV system.
26. It is difficult to fight grey market fraud technologically. Canadian satellite
TV operators, su ch as Bell ExpressVu, cannot stop the grey market unless they
receive help from the U.S. satellite TV operators and law enforcement on both
sides of the border.
Account Stacking
27. Account stackingis a type of fraud that involves unauthorized location of
set-top boxes. In account stacking fraud, DBS subscribers purchase satellite TV
service for set-top boxes for additional rooms but instead place them in other
houses. ( ... ) ln this case, he lies to the satellite TV operator about the location of
the additional boxes to reduce his monthly bill. Account stacking can also be a
way of accomplishing grey market fraud-if, for example, a U.S. subscriber
purchases additional set-top boxes for dozens of "friends" in Canada.
28. Account stacking fraud has been a problem for ail satellite TV operators
since the inception of DBS services. ( ... )
29. Account stacking fraud is difficult to fight technologically. Because of the
one-way broadcast, the satellite TV operator cannot tell where receiving set-top
boxes are located. ( ... )
Vacation Stops
30. Vacation stoppage (a.k.a., vacation adjustment) is a type of fraud that
involves DBS subscribers who lie to the satellite TV operator. In this type of
fraud, the subscriber requests to have his account suspended for a period of
months but only removes his set-top boxes from the satellite signal for the first
few weeks (during which the downgrade command is initially sent and then
rebroadcast to his access cards). ( ... )
( ... )
Blocker Boards
32. Blocker boards are pirate devices that implement a "man-in-the-middle"
attack on a satellite TV system. Each blocker board is an electronic circuit board
500-17 -027275-059 PAGE: 11
inserted between a set-top box and its access cardo Once inserted, the blocker
board intercepts ail satellite communications and occasionally discards certain
types of commands, su ch as downgrade messages, so they do not reach the
access cardo Blocker board piracy is similar to vacation stop fraud, in that you
need a subscribed access card to begin the interception. ( ... )
( ... )
Emulation
34. Emulation is a piracy technique that involves replacement of the access
card in a set-top box with a pirate devlce that emulates ("pretends to be") the
access cardo The card substitute then replies ta ail requests from the set-top box,
including handing out decryption keys for any channel the pirate selects. Unlike
the other forms of fraud and piracy discussed sa far, emulation can be done by
someone who has never been a subscriber of any satellite TV provider.
35. There are two types of card substitutes that can be used for emulation:
( ... )
38. Emulation can be fought sufficiently with ECMs ta make it costly for
pirates. ( ... )
Card Modification
39. So-called "modified original smart cards" (MOSCs) are satellite TV
access cards with their internai data and/or software modified ta allow greater
access ta channels th an actually subscribed. To accomplish this, the access card
must be removed fram the set-top box, inserted into a smart card reader
(attached ta a personal computer running pirate software), modified, and then
reinserted into the set-top box.
40. There are several variations of the card modification technique:
( ... )
41 . It usually takes months or years for persistent and sophisticated hackers
ta reverse engineer a particular access card sufficiently to develop tools and
techniques ta make these sorts of modifications. The reason it is attractive to do
so, compared to the other methods described sa far, is that this attack uses the
satellite TV operator's own equipment. Many potential pirates will already have a
set-top box containing an access cardo With a smart card reader, a personal
computer, and some software he can modify his access cards himself. In effect,
this hack reduces the cost of piracy.
( ... )
500-17 -027275-059
PAGE: 12
Free-to-Air Receivers
43. Free-to-air (FTA) receivers are generic satellite TV set-top boxes
designed to receive unencrypted satellite TV broadcasts. These set-top boxes
can never be used by the legitimate subscribers of DBS operators like Bell
ExpressVu. However, some FTA receivers can be modified to intercept
encrypted channels. The piracy technique involves upgrading the factory
software inside the FTA receiver with special software available on the Internet.
The pirate software for the FTA receivers emulates the access card on the set-
top box's embedded microprocessor, in a manner similar to a green card or white
ca rd hack.
( ... )
Card Sharing
45. Card Sharing (a.k.a., Internet Key Sharing) is a pirate technique that
involves connecting multiple hacked FTA receivers over the Internet. In this
technique, a server computer is used to distribute the current decryption keys for
individual channels to ail of the connected FT A receivers. The server computer
gets the current keys from a paying subscriber's access cardo
46. Card Sharing is the only present vulnerability of the Bell ExpressVu
system, but does not involve hacked access cards and has very limited
commercial availability. ( ... )
[38] Summarizing the historical perspective of piracy, Shelton adds:
Piracy Today 1: Thus, today, ( ... ) four (4) key North American pay TV operators
are susceptible to se rio us piracy worries. These are the two (2) U.S. DBS
providers, Le., DirecTV and OISH Network (or EchoStar), as weil as the two (2)
DBS providers in Canada, Le., Star Choice and BEV.
Piracy Free 1: Among this group of four (4), DirecTV has been free of piracy
since it completed its card swap to the P-4 card, which to date remains
unhacked. However, DirecTV's first generation of smart ca rd was called the P-1.
The P-1 card was hacked in the fall of 1995 and was replaced by the second
generation P-2 ca rd in June 1997. By August of that same year, the P-2 card was
hacked prompting DirecTV to deploy the third generation P-3 ca rd in March
1999. The P-3 card remained secure until it was hacked in the fall of 2001.
DirecTV then issued the P-4 smart ca rd beginning in March 2002 using a custom
Application Specific Integrated Chip (ASIC). Since the completion of the P-4 card
swap, DirecTV has remained free of piracy.
Piracy Free 2: Canada's Star Choice pay TV operator has never been the victim
of piracy because it uses the same, never-hacked VideoCypher-1I Plus security
as does the North American C-Band industry.
500-17 -027275-059 PAGE: 13
Piracy Today 2: The remaining two (2) pay TV operators, DISH Network and
SEV, have serious piracy problems, going back to 1999, in both the U.S. and
Canada, respectively, in large measure because they both use the same
Conditional Access System (CAS) vendor, Nagravision, ( ... )18
C. ANTI-PIRACY TECHNIQUES
[39] Although there are serious differences between the parties as to the adequacy,
appropriateness and timeliness of the various anti-piracy techniques implemented by
BEV, there would appear to be a general consensus among the experts as to nature of
the more commonly available techniques used to combat piracy.
[40] Barr describes some of the relevant piracy countermeasure techniques:
Electronic Countermeasures
50. The definition of electronic countermeasure (ECM) varies according to
who you ask. ( ... ) 1 define ECM as any change to a satellite TV operator's
broadcast stream that thwarts or reduces piracy with no impact on legitimate
subscribers
19
. Each specifie ECM is designed to either permanently eliminate a
particular type of piracy or frustrate pirates by interrupting what they are watching
and making them work harder to keep their interception going.
51. There are a number of different ECM flavors, including but not limited to:
Key Changes involve changing the keys used to encrypt some or ail
channels. For example, if a particular decryption key is known to be
published on a piracy website, then that key can be changed over the
satellite. Alternatively, the frequency of key changes can be increased
from days to minutes or seconds so that certain pirate devices can't keep
up.
Card Upgrades are software downloads to an access ca rd to make the
system more secure. For example, if a bug is found in the software for an
access card, the code can sometimes be patched over the satellite.
Box Upgrades are software downloads to the set-top box to make the
system more secure. These may be to fight a particular pirate technique
or as part of a larger security upgrade. ( ... )
Card Kiiis are commands sent over the satellite to disable access cards
detected as used in piracy. ( ... )
18 Shelton Report, pp. 10-11.
19 Emphasis added. There may not be a consensus among the experts on this qualification regarding
"no impact on legitimate subscribers."
500-17 -027275-059 PAGE: 14

( ... )
Box Kills are commands sent over the satellite to disable set-top boxes
containing access cards detected as used in piracy. Because the box is
generally the property of the buyer, this is considered an aggressive anti-
piracy maneuver that could raise legal issues.
53. Ali of this tends toward an arms race. ECMs disable some types of
modifications with no impact on others; the pirate community learns how to make
tomorrow's modifications stronger; and then a new round of ECMs disables other
hacks. Once the secrets of a particular generation of access card have been
discovered by hackers, it is nearly impossible to use ECMs alone to stop piracy.
However, periodic ECMs can still be used to frustrate pirates and thus deter or
reduce the level of pirate activity.
Business Process Improvements
54. Sometimes, the level of fraud or piracy is affected by a feature of the
business processes (rather than the technology) of a DBS operator, who may
require hindsight to identify that the feature is exploited and time to develop cost-
effective alternatives. Thus, fram time-to-time, it may be helpful for the DBS
operator to change certain business processes in order to reduce the level of
piracy. Here are three examples:
Inventory Trackinq of set-top boxes and access cards from their source(s)
through distribution and retail channels can be used to identify those assisting
pirates. ( ... )
Telephone Connections are a part of the standard set-top box equipment. As
mentioned above, the satellite TV signal is a one-way broadcast from the
uplink center via the satellite to a huge geographic region. To allow for
"impulse" pay-per-view purchasing fram a subscriber's remote control, the
box is designed to make a monthly middle-of-the-night modem cali over the
subscriber's home phone line. During installation, a standard telephone
cable is to be connected from the wall outlet to the back of the set-top box.
( ... )
Customer Identification at the point of sale requires the retailer to send the
name, address, and phone number of the buyer of each specific set-top box
back to the satellite TV operator. By requiring the retailer to examine a photo
ID and take down a valid credit card number, the DBS operator gains both
the contact information for a new subscriber and take note of "unactivated"
equipment.
( ... )
500-17 -027275-059 PAGE: 15
Ca rd Swaps
56. One of the lessons learned by those fighting piracy in the "backyard dish"
era was that replacing set-top boxes every few years was cost prohibitive. What
was needed was a less expensive piece of hardware that could be less
expensively shipped to customers, with the effect of a complete security upgrade.
The solution was the emerging "smart card" technology, with its computer on a
credit card format. Thus was born the concept of "renewable security." The set-
top box could remain with the customer across several security upgrades of the
system as a whole. And new smart cards could 'be sent by mail.
57. But it is still a considerable expense to replace ail of the access cards in
every set-top box of every customer. The effort involves: engineering work to
develop and test the new solution; back-end system software and electronics
upgrades; ca rd manufacturing; mailing and logistics; and customer instructions
and hand-holding.
( ... )
D. BEV's ENTRY AND EXPERIENCE IN THE CANADIAN DBS INDUSTRY - A CONTEXTUAL
OVERVIEW
[41] The following is an oveNiew of the relevant events and milestones, commencing
in 1995 with theentry of BEV in the DBS market following receipt of a BDU licence from
the CRTC until February 2005, the date on which BEV began switching off channels
from the former Nagra DNASP-2 CAS to the new Aladin CAS. A more detailed analysis
of the events occurring during this period of reference is contained in the analysis of the
evidence found in Sections VIII and X hereof.
[42] Immediately following receipt of its licence from the CRTC, BEV management
named a special committee to evaluate the alternative technology available from
several CAS and equipment providers and to recommend an appropriate selection.
[43] The special committee met with representatives of the various potential
providers. After consideration, and for the reasons hereinafter expressed, the committee
recommended the selection of EchoStar Technologies Corporation ("EchoStar") as
BEV's system integrator. EchoStar was also responsible for designing and constructing
the set-top boxes ("STB") that were ultimately used by BEV.
[44] EchoStar was a multinational organization with vested interests in maintaining
the integrity of its technology given that it is not only a provider of equipment, but one of
its affiliates, Dish Network LLC, operates a substantial DTH satellite television
undertaking in the United States.
[45] ln choosing EchoStar, consideration was given to its relationship with
Nagravision USA ("Nagravision" or "Nagra"), a company within the Kudelski Group, a
European conglomerate headquartered in Switzerland. The Kudelski Group designs
500-17 -027275-059
PAGE: 16
and develops conditional access systems. These systems are the software platform that
allows for the transmission and reception of encrypted satellite signais. The Group also
design and develop the smart cards that enable the decryption of these signais.
[46] The EchoStar technology incorporated a CAS module engineered by
Nagravision SA and serviced and sold through NagraStar in North America. NagraStar
is a joint venture between EchoStar and Nagra and is the sales and service arm of
Nagravision SA products in North America.
[47] The EchoStar system that supported the Nagra CAS technology had been
integrated and tested and was available for deployment in a commercially feasible
manner.
[48] BEV considered and favourably evaluated EchoStar's capabilities to deliver a
turn-key solution which included the Nagra CAS and functioning STB's. Nagra's CAS
had the additional advantage of being renewable, in the sense that the smart cards
giving access to the programming were removable and replaceable in the STB's should
they be pirated in their original version. This feature was an important consideration for
BEV.
[49] On January 8, 1997, BEV entered into an agreement with EchoStar Satellite
Corporation and Houston Tracker Systems, Inc. (formerly EchoStar's supplier
subsidiary) (the "System Agreement,,)20 for the provision of hardware using the Nagra
designed CAS ("Nagra1 ").
[50] No formai agreement was ever entered into between BEV and Nagra regarding
the supply of the Nagra 1 CAS.
[51] Vidotron does not challenge BEV's initial choice of technology. At the time,
Nagra1 appeared to be a secure system, compared to the NOS system used in the
United States by DirecTV. It gave BEV the tt best shot of attaining their early market entry
objective with the least amount of risk. ,.21 However, referring to the System Agreement,
Vidotron's expert, Dr. Teresa Ferguson, criticizes the absence of specific protections
and remedies for BEV, in the agreement, in the event of what she refers to as the
inevitable occurrence of the incidence piracy. She notes:
There are no provisions for smart card change-outs or assignment of
responsibilities for su ch change-outs; no contractual arrangement for interim
countermeasures or other actions that should be taken to either prevent
breaches or thwart known compromises; no structure of any sort of investigative
efforts to at least set up routine monitoring of pirate web sites or recover hacked
cards and devices for re-engineering purposes and destruction. In fact, ail that
was recommended was that the contractor would "consult with ExpressVu and
20 Exhibit P-14.
21 Ferguson Report, p. 31, Exhibit P-31.
500-17 -027275-059 PAGE: 17
make recommendations to ExpressVu regarding the steps" they intend to take to
remedy piracy of the DBS signals.
22
Nothing was contractually in place between
ExpressVu and EchoStar or ExpressVu and Nagravision insuring that measures
were available for rapid deployment to battle compromises to its system as soon
as they became known.
[52] BEV began television programming in September 1997.
[53] ln late 1998, more than one year following the launch of its programming, BEV
attempted to negotiate a contract with Kudelski SA, providing for the warrant y and
maintenance of the Nagra1 CAS and the smart cards purchased from EchoStar
pursuant to the Supply Agreement. An unsigned draft agreement, dated October 23,
1998, was produced at trial during of the examination of lan Gavaghan, BEV's former
Vice President and General Counsel.
23
[54] The negotiations with Kudelski failed. The draft agreement was never signed.
[55] ln the summer of 1999, the National Football League ("NFL") and BEV
commenced negotiations for the distribution of the NFL Sunday Ticket. At the time, the
NFL was " ... most concerned about the security of [the BEV] distribution system".24
[56] ln an attempt to reassure the NFL as to the security of its system as opposed to
that of the EchoStar system, which had already been hacked at the time, Chris Frank
("Frank"), Vice President of Regulatory and Government Affairs, wrote a letter to the
NFL dated July 21, 1999, accompanied by a technical attachment prepared by Terry
Snazel ("Snazel"). Snazel asserted " ... [f]rom a security perspective, the EchoStar and
Express Vu systems ... are independent and incompatible. "
[57] This assertion proved to be incorrect.
25
BEV did not obtain the right to distribute
the NFL Sunday Ticket until to swap out to the new Aladin CAS.
[58] On March 31
S
\ 2000, Investigative Research Group (an independent research
organization) informed BEV's management of incidents of piracy on BEV's CAS.
26
[59] ln the months that followed, BEV management were made aware of numerous
additional cases of both hybrid and pure piracy. Piracy of the BEV signal was increasing
faster than had been expected. Management was advised by Nagra that a swap out of
its CAS was strongly recommended in order to address this problem.
22 Exhibit P-14, p. 35.
23 Exhibit 0-213.
24 Exhibit P-358.
25 Exhibit P-91; Shelton, transcript, September 21, 2011, pp. 156-160; Gee, transcript, November 23,
2011, pp. 94 - 95.
26 Exhibit P-91.2.
500-17 -027275-059 PAGE: 18
[60] Various analyses were performed by the Technology and Legal Departments of
BEV in 2001 and 2002 in an attempt to identify the nature of the piracy and to quantify
the extent thereof. See by way of example, "Fraudulent Activity Reports" for the months
ended September 2002 to October 2002.
27
[61] Various measures were adopted by BEV management in an attempt to combat
piracy. Some were more successful th an others. These included, inter alia,:

An extensive program of electronic counter measures;
Revisions to BEV's marketing practices, including those aimed at
controlling account stacking; and
Investigations and prosecution of manufacturers and suppliers of pirated
equipment and technology.
[62] There is contradictory evidence as to the volume, frequency and type of ECM's
performed by BEV, the sincerity of the revisions to the various marketing practices
adopted and the effectiveness of the investigations and prosecutions of pirates.
[63] The seriousness and increasing incidence in the volume of piracy and the
relative lack of success in controlling this problem was clearly evident to and stressed
by some of the responsible department heads and senior officers of BEV.
28
[64] For unexplained reasons, which will be discussed herein in Sections VIII and X,
the information as to the seriousness of the situation and the urgency of rectification
measures may not have been adequately communicated to the Board of BEV or that of
BCE.
[65] ln his examination on discovery held on September 26,2007, referring to
meetings in 2001 with Nagra, Snazel admitted having received a recommendation, at
the time, to swap its existing CAS and smart cards to the new DNASP-3 (Aladin)
system
29
. His testimony at trial on the subject was more nuanced:
A- Yes, the piracy of our system proceeded faster than we expected, and the
gist of the discussions very quickly moved to the need to do a change of
the conditional access system, that at some point, the ammunition that
Nagra had to fight the piracy would be no longer as effective as it was,
and that in their opinion, the solution for us was to do an exchange of our
conditional access system, a complete card swap.
771 Q- So that was Nagra's position?
27 Exhibits P-100 (en liasse).
28 Exhibits P-91 .3, P-91.4 & P-95.
29 See Exhibit P-1 98.1, first referred to in Nagravision User Guide, March 15, 2001.
500-17 -027275-059 PAGE: 19
A- Yeso
7720- Okay. So that was said in two thousand and one (2001)?
A- Yeah, the end of two thousand and one (2001) would have been ... maybe
early two thousand and two (2002), but the end of two thousand and one
(2001) would have been when we got to that level of discussion.3D
[66] On December 12, 2001, Virgino Trevisan ("Trevisan") and other Nagra
representatives, met with Snazel and Jessica Casavant ("Casavant") at SEV's offices
in Toronto, to present Nagra's new CAS, then called "NagraTV". NagraTV would later
be called "Aladin".
[67] The presentation contained a timetable for the implementation of the new CAS. It
proposes the migration: " ... could start 03 2002 ... and step by step ... at your own pace" till
032003.,,31
[68] At the trial, Snazel dismissed the December 12, 2001 presentation as " ... an
introduction to a new product that the sales people wanted us to be weil aware of". He
asserted that the Aladin CAS was not ready for implementation at the time.
[69] ln response to an undertaken made by Christophe Nicolas ("Nicholas") during
his examination on discovery held on March 12, 2010, counsel confirmed that the first
tests on an EchoStar Aladin system set top box were performed in December 2001
(10,000 cards delivered). The first volume delivery for a new client (no swap to be
performed) was done in June 2003. (Unofficial translation).32
[70] It would appear that some management of SEV, or at the very least, Casavant,
saw the necessity and urgency of implementing the Aladin CAS migration, discussed
during the December 2001 meeting with Nagra in Toronto. In a "talking memo" drafted
by Casavant for a discussion with Snazel in a meeting held in early 2002, she
recommended that BEV: "Evalua te and start to plan for the Aladin implementation. We need
to start evaluation of the processes required for the replacement of the smart cards in the field. "
[71] Nagra and SEV representatives next met to discuss the Aladin CAS migration at
a series of meetings held in Cheseaux, Switzerland, in March 2002. Several documents
outlining the features and pricing for the conversion to the new Aladin CAS were
presented to BEV during the meetings. Among the documents were:
The Aladin Installation Plan 2002-2003, which sets-out in details the
various steps to install the Aladin CAS 33;
30 Transcript, Examination on discovery, September. 262007, pp. 209-210.
31 Exhibit P-198.2, p. 24.
32 Exhibit P-283.
33 Exhibit P-201 .
500-17 -027275-059 PAGE: 20
ExpressVu Aladin Budger
4
;
ExpressVu Migration Options, which provides in depth details on the
various migration options to move from the legacy CAS to the new Aladin
CAS, the most relevant of which are Simulcrypt and Dual ECM. Bell
ExpressVu chose the Dual ECM solution as recommended by Nagra
35
;
.. Nagravision CAS 2002, prepared by Nicolas Bovard, specialist of the IMS
systems of Nagra
36
. Page 3 of this document demonstrates that IMS4 has
been in operation since 2000 for both the existing DNASP-2 CAS and the
Aladin CAS;37 and
NagraVision IMS4 Presentation, which sets out in detail the
characteristics, functionalities and the status of IMS4 as of March 17,
2002.
38
The last page of this document sets out the timelines of various
Nagra customer deployments of IMS4 in 2001 and 2002.
[72] Snazel claims to have met on two separate occasions with David McLennan
("McLennan"), then President of BEV, following the March meetings in Cheseaux to
discuss the Aladin proposaI. He claims to have briefed him that the migration to Aladin
was necessary and should be done sooner than later.
[73] During his cross-examination at trial, surprisingly, McLennan, had no recollection
whatsoever of these discussions with Snazel.
[74] Gavaghan and Snazel co-authored a report, dated April 5, 2002, entitled
"Switching Off Signal Piracy".39 Based upon random samplings, they conclude there is a
significant level of both hybrid and black market piracy of BEV's services. They explain
the various methods used by the pirates to steal BEV services, the investigation and
prosecution process and other methods used to deal with pirates. Although the
estimates of the levels of signal theft and the resulting losses in revenue appear to be
significant, strangely, the report does not suggest any sense of urgency of implementing
remedial measures.
[75] ln June 2002, a new budget for Aladin was presented to BEV by Nagra
40
. The
June budget is similar to that of March 2002, except for the increased pricing on the
new features requested by BEV.
[76] On July 8, 2002, Gavaghan prepared a memorandum for the newly appointed
President, Tim McGee ("McGee"), dealing with the theft of BEV's signals.
41
He
34 Exhibit P .201.1 - 02680.022.
35 Exhibit P-201.1 - 02680.001.
36 Transcript, November 10, 2011, p. 162.
37 Exhibit P-201.1 - 02680.086.
38 Exhibit P-201.1 - 02680.033.
39 Exhibit P-97.
40 Exhibit P-200.1 - 02679.001.
500-17 -027275-059 PAGE: 21
estimates that 45% of BEV's basic level subscribers are possibly thieves. In addition
there may be another 5% black market thieves. Again, no sense of urgency can be read
.in this memorandum, although the level of theft of the basic level subscribers grew from
40% on April 15, 2002
42
to 45% three (3) months later.
[77] On or around July 17, 2002, Nagra provided BEV with a document entitled "CAS
Upgrade 2002" dealing with the existing CAS upgrade to Aladin.
43
This document
estimated that the complete migration to the Aladin CAS could be done in a total of ten
(10) to twelve (12) weeks. It provided a detailed plan for the migration showing the
estimated duration of each task. The migration from IMS2 to IMS4 is estimated to be
five (5) weeks.
[78] On July 23, 2002, McGee, Snazel and the then Vice-President of finance, David
McGraw ("McGraw") met to discuss the Aladin project. During this meeting, a draft
working document entitled "Project Aladin Preliminary Outline of Business Case" was
presented, discussed and presumably approved by those present. It was prepared by
the Technology Department, presumably under Snazel's authority, and the finance
group led by McGraw.
[79] The document contains a financial analysis of the business case to be
considered in deciding whether or when to proceed with the Aladin project. The
document was finalized, presumably following the meeting. It is titled "project Aladin",
still bearing the date of July 23, 2002.
44
Both documents conclude with the following
recommendations:
Proceed with Phase 1 of the project so that implementation can begin in
2003
( ... )
"Based on current estimates of signal theft, do not proceed with card
swap out program."
[Emphasis added]
[80] Although he claims to have participated in the July 22, 2003 meeting, Snazel
testified he disagreed with the recommendation not to proceed with the swap out
program. Neither McGraw nor any other member of the BEV finance department
testified at trial.
41 Exhibit P-98.
42 Exhibit P-97.
43 Exhibit P-199.1.
44 Exhibit P-200.3.
500-17 -027275-059 PAGE: 22
[81] Casavant, claims she was not then informed of the recommendation not to
proceed with the Phase 3 swap out program.
45
[82] McGee and Alexander Ishankov ("Ishankov") testified that this recommendation
"not to swap" formulated on July 23, 2002, did not in any way hinder the migration to
Aladin. They claimed the delays in the implementation of the swap, if any, were not due
to any reasons other th an those of a technical nature. No credible explanation is
provided for their incomprehensible views.
[83] On October 10, 2002, BEV confirmed to Nagra its commitment to proceed with
Phase 1 of the CAS upgrade consisting only of the "Main Production System, Lab
System and Engineering Phase 1 ", conditional upon, inter a lia , receiving a 50%
discount. 46 This commitment by BEV dealt only with Phase l, i.e. the CAS upgrade. A
purchase order was issued by BEVan November 8, 2002 in fulfillment of this order.
47
[84] The funding approval for Phase 1 was, according to McGee, given by him without
any reference to the appropriate finance committee. He claims this was within his .
discretion to deal within the capital envelope already allocated to BEV.
48
[85] On or around October 28, 2002 McGee created a Counter-Piracy Task Force
(the "Task Force"). Casavant was appointed to lead the Task Force.
49
[86] ln a "Highly Confidentia1 Memorandum", dated December 9, 2002, widely
addressed to Martin Cullum, Senior executive at Bell Canada, with copies to "Executives
- Bell Express Vu, Jessica Casavant, Gary Swaffield, Janet Raabe, Alex Ishankov, Stephen
McDonnell, Robert Peter",50 Snazel summarized: "the status of the various components of the
Aladin project for use during the approval pro cess for Phase III." He describes the status, at
the time, of the proposed Aladin transition:
This note is to summarize to date the status of the various components of the
Aladin project for use during the approval process for Phase III.
Essentially, there are three (3) distinct phases to the project, each phase is a
step towards the final roll-out and the next step cannot be put in place until the
prior one is completed and operational. Conversely the project could be
terminated before each step, with the attendant benefits of each part intact.
46 Exhibit P-284.
47 Exhibit P-204.
48 Transcript, Oecember 7, 2011, p. 39.
49 Exhibit 0-154.
50 Exhibit 0-176.
[Emphasis added]
500-17 -027275-059 PAGE: 23
[87] He described each of the three Phases in the proposed transition and concluded,
with respect to Phase III:
Phase III
This is the critical phase to effecting any real improvement in signal piracy. The
current system is coming to the end of its secure life and although we still
continue an aggressive ECM Program the counter attack timeframe from the
. hacking community is getting shorter and shorter each time we implement a
measure.
( ... )
The final component of Phase III is to switch-off the data stream for the existing
systems. When this happens ail illegal devices using the existing system will no
longer work.
Changing out approximately 2 million smart cards is expensive and logistically
challenging. A task force from ail ExpressVu departments has been established
to plan and implement the project during 2003. Currently Phase III of the project
is going through a technical validation and budget approval process, with a target
of an early 2003 go ahead.
[88] Although the Task Force had yet to complete its mandate to identify and address
the problems with BEV's conditional access system and in what, it would appear, to be
parallel efforts to address the problems of piracy in late 2002 or early 2003, Martin
Cullum prepared his own draft recommendations concerning BEV's on-going
technology review. 51 The final version of these draft recommendations is contained in a
document entitled: "Express Vu Aladin Opportunity Review" dated January 14, 2002,52
curiously the day following the tabling of the Casavant Report on Counter-Piracy.
[89] The Task Force tabled its "Report on Counter-Piracy" on January 13, 2003.
53
The Report contains a detailed estimate as to the: "Incidents of Signal Theft (As of
November 2002)". However, a review of Appendix 1 of the Report reveals that the various
tests underlying the estimate were conducted between October 2001 and October
2002.
[90] On January 23, 2003, Casavant prepared a working document to be used in a
follow-up discussion with McGee addressing the proposed implementation of the
recommendations contained in the Report.
54
51 Exhibit P-202.01 - 02687.001.
52 Exhibit P-202.01 - 02687.006.
53 Exhibit P-106.
54 Exhibit P-1 06.1.
500-17 -027275-059 PAGE: 24
[91] A detailed analysis of the mandate, composition, findings and recommendations
of the Task Force is contained in the evaluation of the Casavant evidence found in
Section VIII of this judgment.
[92] On March 10, 2003, Nagra provided BEV with an update as to the status of the
Aladin migration. A proposed time-line contemplated the performance of system
acceptance tests from April 16 to May 2, 2003, production starting on June 12 and a
swap start in mid-July 2003. 55
[93] On March 10, 2003, BEV issued a purchase arder far the Aladin Phase 2 System
Upgrade; Phase Il Backup Production System, Engineering Phase Il and Aladin new
features. 56 Aladin Phase 1 was in the advanced stage of development at the time.
[94] The system acceptance tests for IMS4 were completed and approved on July 8,
2003.
57
The system acceptance tests were done for the main and back-up systems on
September 26,2003.
58
[95] According to Casavant and Ishankov
59
, from that time on, Aladin was ready for
production and for "Iaunching".
[96] The software download compatible with Aladin was first perfarmed on the BEV
STB model 5100 on October 6, 2003. New smart cards were first provided to a small
group of existing set top boxes in December 2003 and August 16, 2004. Mass
production started on January 4, 2005.
60
[97] Although testing and limited swap outs of the legacy BEV CAS to Aladin had
already begun, as indicated on page 2 of the May 12, 2003 BEV "Revised 2003 CapEx
BUdget"61, the capital expenditure for the card swap had yet to be authorized.
[98] On April 20, 2004, the BEV team charged with the implementation of the Aladin
CAS, under the direction of Andrio Barro, Project Manager and Casavant, Project
Leader, prepared a progress report entitled "Platform Security Implementation Plan".62
Among the objectives listed on page 2 of the report is the following: "Gain Executive
Appraval far funding ta praceed with pragram by April 22 ta prevent schedule
slippage."
55 Exhibit P-203.03 - 02702.050.
56 Exhibit 0-219.
57 Exhibit 0-220.
58 Exhibit P-208.1 , doc.1 .
59 Transcript, Casavant, November 2, 2011, p. 52; Ishankov, November 15, 2011, p. 203.
60 Exhibit P-214.
61 Exhibit P-274.01 -04381.006.
62 Exhibit P-220.
500-17 -027275-059 PAGE: 25
[99] A status report on the Aladin swap-out is contained in a document prepared
BEV representatives, dated May 18, 2004, entitled "Gard Swap Implementation Plan' 3
The report notes:
Aladin is a new generation Conditional Access System that has operated in
parallel with the legacy system since July 2003, ail set-top boxes shipped in 2004
have been with Aladin smart cards.
( ... )
There has been a successful trial card swap of 3,000 cards and software is
deployed on ail models of set-top boxes except 1000, 3500 and 4500. Software
for these models will be ready by June 2004. ( ... )
[100] Project milestones for the are found on page 16 of the May 18, 2004
Report. Funding approval was projected as "Iate-May" (2004).
[101] On February 28, 2005, BEV started to turn off certain channels from the legacy
DNASP-2 CAS, starting with adult pay-per-view services. LCN was turned off on May
24,2005.
64
[102] On July 15, 2005, BEV completely switched off ail channels from the legacy
DNASP-2 CAS data stream. The Aladin CAS and smart cards became fully integrated
in the BEV system.
IV. QUESTIONS OF FACT AND OF LAW
[103] The questions of fact and of law raised for determination in the Vidotron Action
are:
(i) Oid BEVabide by the legal standards which lie upon it in selecting and using
available satellite television technology, and in identifying and combating
"grey market" and "black market" piracy?
(ii) ln light of the evolving available technology, did BEV act in a prudent and
timely manner in maintaining and eventually updating its condWonal access
system sa as to minimize the impact of signal theft by pirates?
(iii) Are the compensatory damages claimed by Vidotron a direct and
immediate consequence of the alleged fault of BEV? and
(iv) Has Vidotron discharged its burden of quantifying the amount of damages
allegedly suffered by it as weil as future damages and for which BEV should
be held accountable?
63 Exhibit P-221.1, p. 6.
64 Exhibit P-225.
500-17 -027275-059 PAGE: 26
V. OBJECTIONS Ta BE AJUDICATED
[104] During the course of the evidentiary hearings, the Court advised the parties to
plead the merits of ail objections taken under reserve at the appropriate time in their
respective arguments, failing which such party will be deemed to have withdrawn its
objection.
[105] The following objections, raised by counsel for Vidotron and TVA, were so
pleaded. They relate solely to evidence led by witnesses called by BEV to testify in the
Vidotron Action and the TVA (Piracy) Action.
A. THE INADMISSIBILITY OF EXHIBIT 0-226
[106] Counsel argues:
3. In the course of her examination in chief, Ms. Casavant produced a chart
called "timeline of events which have been the subject of Ms. Casavant's
testimony" .
4. Plaintiffs objected to the use and production of such chart, since the
evidence in the record contradicts its content.
Jessica Casavant, Nov. 2, pp. 122-124
5. Plaintiffs maintain their objectio'n to the production of chart 0-226, content
of which is grossly misleading.
[107] The objection will be dismissed. Counsel was free to and did in fact bring to the
Court's attention the apparent inconsistencies between the content of the chart and the
evidence otherwise in the Court record. It remains now for the Court to assess, in this
judgment, the credibility and reliability of the proof in this regard.
B. THE INADMISSIBILITY OF EXHIBIT 0-79A
6. At trial, BEV filed an updated listing of ECMs conducted during the piracy
. period. D-79A.
7. There was already such a listing in the Court record, on which the
Plaintiffs had based their cross-examination of previous witnesses, Mr.
Snazel and Mrs. Casavant, who were personally involved in BEV's ECM
campaigns. D-79.
8. In Exhibit D-79A, there are several new ECMs listed which were
unaccounted for in BEV's log of ECMs and which were not mentioned by
BEV's own experts in their reports.
500-17 -027275-059
PAGE: 27
9. The Plaintiffs maintain their formai objection to the filing of this updated
Exhibit. Alexander Ishankov, Nov. 15, pp. 165-167.
10. The Plaintiffs submit that this document has so little probative value that
is should not be admitted into evidence.
11 . The original Exhibit 0-79 had Iittle probative value itself. Given that many
entries were based on chat room postings by pirates found in chat room
reports, it is uncertain whether a single ECM may have been counted
numerous times due to delays in posting comments on each ECM.
12. Exhibit 0-79A is of even less probative value, since it includes more
entries without any support from additional contemporaneous sources of
reliable information. The production of this document suggests that
previous testimonies concerning ECMs were inaccurate and that BEV's
own experts had not had ail the information yet.
13. Also, the use of Exhibit 0-79A in examination in chief was leading.
Alexander Ishankov, Nov. 15, pp. 123-144.
14. In any event, this Court should draw a negative inference on the reliability
and probative value of both Exhibits 0-79 and 0-79A given their
production at this late stage of the hearing, at which time no other witness
cou Id testify on the conduct of ECMs.
[109] The objection will be dismissed. Counsel was free to and did in fact argue the
probative value, or lack thereof, of Exhibit 79A. The Court has made such determination
in this regard as it determined appropriate in the context of ail the relevant evidence. As
for counsel's concerns regarding their original cross-examinations of Snazel and
Casavant, based only on Exhibit 0-79, they were free to recall either or both of these
witnesses in counter proof if they thought it necessary. They chose not to.
C. EXPERT MICHAEL BARR'S lIMITED QUALIFICATIONS
15. Expert Michael Barr was qualified by this Court as an expert in electrical
engineering, embedded systems, technology and security of satellite TV
systems and satellite piracy. Expert Michael Barr, Dec. 8, pp. 39-40.
16. Expert Barr, in cross-examination, admitted lacking direct and personal
knowledge of card swap operations. Expert Michael Barr, Dec. 8, p. 33.
17. Finally, Expert Barr conceded having no business experience in either a
DBS broadcast business, a conditional access system provider such as
Nagra or with a satellite television provider, contrary to the Plaintiffs'
Experts Ferguson, Markey and Shelton, respectively. Expert Michael
Barr, Dec. 8, p. 33.
500-17 -027275-059 PAGE: 28
18. Despite his general technical expertise compared to the specificity of the
instant case, Expert Barr attempted to give opinion on either business or
technical aspects over which he has no experience or knowledge.
19. The Plaintiffs maintain their objections to ail forms of opinion expressed at
trial by Expert Barr on television business aspects and technical actions
theses businesses implement to monitor and disrupt signal piracy, such
as ECMs and CAS upgrades or card swaps. Expert Michael Barr, Dec.
8, pp. 77-79, 90-93; Dec. 9, pp. 11-14,23-25,28-29.
( ... )
20. The Plaintiffs also objected to Expert Barr testifying on the accuracy of
BEV's own estimates of piracy, while these criticism were nowhere in his
report. They maintain their objections. P-366; Expert Michael Barr, Dec.
8, pp. 162-171, 206-209, 222-223
21. Expert Barr has no greater personal experience in quantifying the scope
of piracy than the makers of the supporting documents included in Exhibit
P-366 that he attempted to comment on. His opinion. on this regard is
sim ply irrelevant at helping this Court with the issue at bar.
[111] The objection will be dismissed. Counsel was free to and did in fact address
Barr's apparent lack of personal knowledge in the particular areas referred to by him
and argued that accordingly his opinions expressed in these areas have no probative
value. This particular lack of knowledge does not, in and of itself, disqualify him as an
expert witness in ail of theother areas addressed in his report and in his testimony.
Counsel's representations were duly noted and considered in assessing the credibility
and reliability of the proof in the areas objected to.
D. EXPERT DR. MATTHEW D. GREEN'S LlMITED QUALIFICATIONS
22. Expert Matthew D. Green was qualified by this Court as an expert in
computer science, computer systems and software security,
cryptography, conditional access systems technology and design and
encryption of broadcast signais. Expert Dr. Matthew D. Green, Dec. 13,
pp. 113-138.
23. During his cross-examination on qualification, Expert Green conceded
having no experience on conditional access components of a digital TV
satellite system. Expert Dr. Matthew D. Green, Dec. 13, p. 143.
24. Expert Green also admitted having no direct and personal knowledge or
experience with card swap operations, plans or costs. Expert Dr.
Matthew Green, Dec. 13, p. 143.
500-17 -027275-059
PAGE: 29
25. Finally, Expert Green conceded having no business experience in either a
DBS broadcast business, a conditionaJ access system provider or with a
satellite television provider, contrary to the Plaintiffs' Experts Ferguson,
Markey and Shelton, respectively. Expert Matthew D. Green, Dec. 13, p.
143.
26. Despite these limitations, Expert Green attempted to give his opinion on
either business or technical aspects of the DTH television industry over
which he has no direct and personal experience or, knowledge.
27. The Plaintiffs maintain their general objection to ail forms of opinion
expressed at trial by Expert Green on television business aspects and the
technical actions these businesses implement to monitor and disrupt
signal piracy, such as ECMs and CAS upgrades or ca rd swaps. Expert
Dr. Matthew D. Green, Dec. 13, p. 148-149, 193-194; Dec. 14, pp. 14-
15.
( ... )
[113] The objection will be dismissed. Counsel was free to and did in fact address
Green's apparent lack of personal experience in the areas referred to and to argue that
his ,opinions expressed in these areas, have little or no probative value. This does not
however, in and of itself, disqualify him as an expert witness in ail of the other areas
address in his report and in his testimony. The Court noted counsel's representations.
They Were considered in assessing the credibility and reliability of the proof in the areas
objected to.
VI. EXHIBITS PRODUCED UNDER SEAL
[114] A substantial number of exhibits, including sorne of the expert reports, were
produced under seal subject to confidentiality orders issued at the request of one or
other of the parties. Following an exchange of messages initiated by the Court with
counsel for each of the parties, Plaintiffs' counsel agreed that we were free to quote in
our judgments extracts fram whatever exhibit or expert reports we so wished without
any restrictions. Defendant's counsel agreed that we were free to quote su ch extracts
from Defendant's experts' reports or accounts and fram Exhibits P-106, P-1 06.00.01, P-
106.1 and P-100 (en liasse) that we considered necessary.
[115] Subject to the foregoing, and considering the confidentiality orders issued by the
Court regarding numeraus other exhibits, references in the analysis of the evidence to
their content and, in particular, to specifie financial information, will be general in nature
rather than specifie in order to respect the confidential nature of the information
contained therein.
500-17 -027275-059 PAGE: 30
VII. ADMISSIONS
[116] A vast majority of the exhibits entered in evidence were produced by consent
under such reserves as are indicted in the appropriate documentation filed in the Court
record. Those not produced by consent are enumerated and reflected in the minutes of
the hearings for each of the days in question.
VIII. ANALYSIS OF THE EVIDENCE - ORDINARY WITNESSES
A. VIDOTRON & TVA
(1) Pierre Karl Pladeau ("Pladeau")
[117] Pladeau is President, CEO and member of the Board of Quebecor inc. and
Quebecor Media inc. and Vice Chairman of the Board of TVA. He was previously
President and CEO of Vidotron from 2001 to 2003.
[118] He was examined in connection with the following subject matters:

the corporate structure of the various legal entities having an interest,
direct or indirect, in the present action and the other Related Actions;
the evolution of the cable television distribution industry in Qubec and
elsewhere;
the technology involved;
the entry into the market of direct broadcast satellite undertakings; and
the role of the CRTC in controlling access to the industry and the activities
of its members in combating piracy.
[119] Among the subject matters mentioned above, certain elements raised during his
examinations warrant specific attention and analysis.
[120] He described the nature of Vidotron and TVA's respective claims in the present
action and the other Related Actions and, in particular, in connection with:
the losses which Vidotron and TVA claim to have suffered resulting from
BEV's alleged inability to control piracy of its signal;
the losses which TVA claims to have suffered due to BEV's permitting the
practice of account stacking by its subscribers; and
the Order of Permanent Injunction sought by TVA in order to permit the
performance of an audit of the books and records of BEV to verify the
500-17 -027275-059 PAGE: 31
number of its subscribers to TVA's LCN programming and to verify the
accuracy of royalty payments otherwise made to it by BEV.
[121] He mandated investigations into the practices of BEV regarding account stacking
and what he claimed was the failure of BEV to control signal piracy. Although he
complained strongly to the CRTC regarding BEV's practices, and notwithstanding BEV's
undertakings to address his concerns, he claims the practices continued unabated.
[122] ln cross-examination he denies that his concerns were more with respect to
account stacking than to signal theft. An examination of the financial statements and
press releases of QMI (or its successor corporation) produced in evidence
65
discloses,
however, that mention of piracy appeared for the first time on June 21, 2002.
[123] He denies that BEV's high definition television service, launched in October
(some considerable time before that of Vidotron), gave BEV a competitive advantage
which may have contributed to Vidotron's failure to attract new subscribers.
(2) Pierre Dion ("Dion")
[124] Dion has been President and CEO of TVA since 2005. He was previously its
Executive Vice President and Chief Operating Officer from 2004 to 2005. He has been a
member of its Board of Directors since 2011.
the corporate relationship of TVA with QMI;
the operations of TVA: at present, it operates 13 television channels in
Qubec of which one, le Rseau TVA, is available without charge to
television viewers;
the LCN channel, one of the specialized channels available on the TVA
network;
during the Piracy Period (previously defined), LCN was the only speciality
channel available; and
the practice whereby TVA received monthly royalties at an agreed rate
from BEV pursuant to an affiliation agreement, written or oral (subject ta
dispute), based on the number of BEV subscribers having access to the
LCN.
examinations bath in chief and in cross, warrant specifie attention and analysis.
65 Exhibit D-160 (en liasse).
500-17 -027275-059
PAGE: 32
[127] He addressed the concerns of TVA as to the veracity and reliability of the
number of subscribers reported by BEV as having access to the LCN channel and the
unsuccessful efforts to have BEV consent to an independent audit to confirm this
information.
[128] Particular reference was made to the non-binding guidelines published by the
CRTC on April 18, 2005, entitled "Vrification comptable par les services de
programmation des renseignements sur les abonns dtenus par le distributeur,,66 and
the refusai by BEV to adhere to what Dion considered were the reasonable guidelines
referred to in paragraph 46 thereof.
[129] The differences between the parties regarding the appropriate interpretation of
the definition of "subscriber" as defined in the CRTC Rglement sur la distribution de
radiodiffussion (DORS/97-555) were addressed and highlighted in Dion's examination.
(3) Robert Dpatie ("Dpatie")
[130] Dpatie has been President and CEO of Vidotron since 2003. He was
previously Vice President of Marketing, Sales and Customer Service of Vidotron from
2001 to 2003 and President of VOX community channel from 2001 to 2003.
the various services offered by Vidotron to its customers;
the financial advantages to its customers of bundling discounts offered to
those who subscriber to two or more of the services offered; approximately
75% of its customers subscribe to at least two services and 51 % subscribe
to three or more services;
the evolution of the various services offered by Vidotron including its
conversion from analogue to digital service and thereafter to high definition
. service;
the difference between the concept of "penetration rate" and "market
share"; the former being the number of actual clients of the service
provider compared with the number of potential clients in the market; the
latter being the number of actual clients of the service provider compared
with the total number of existing clients in the market are a who subscribe
to a television broadcasting service; and
Vidotron's alleged zero tolerance level of signal piracy.
66 Exhibit P-314.
500-17 -027275-059 PAGE: 33
examinations warrant specifie attention and analysis.
[133] He testified as to the alleged practice by BEV and its retailers of permitting and
encouraging account stacking. He refers to a letter, dated May 3, 2002, addressed to
Mr. Randolph Hudson of the CRTC, by Philippe Labelle of TVA and to the transcript of a
telephone conversation of February 2002 between him and a representative of BEV
concerning the latter's policy of permitting multiple receivers at different locations and to
its tolerance of a practice of account stacking.
[134] On March 23, 2002, Dpatie purchased a kit fram an Espace Bell store which
would permit connection of multiple receivers at different locations. The invoice is
identified by him and praduced.
67
[135] He then described various methods employed by Vidotran to minimize losses
incurred by it resulting fram BEV's practices. Some were more successful than others.
[136] Although he insists that the decline in Vidotron subscribers during the Piracy
Period was due principally to piracy of BEV's signal, in crass-examination he
acknowledged that there may be other reasons why Vidotron had lost clients or
potential clients. In an exchange with counsel for BEV , Dpatie acknowledged:
290Q- Alors, durant toutes ces annes-l, deux mille (2000), deux mille un
(2001), deux mille deux (2002), deux mille trois (2003), vous dites que le
dclin des abonns tait reli principalement au piratage?
R- Je vais clarifier quelque chose, quand je ... et je veux, Monsieur le Juge,
tre juste prcis l-dessus.
En aucun cas on attribue la dcroissance complte de Vidotron
seulement le piratage. Bien au contraire, il y avait de la concurrence et
autres, on le sait fort bien.
On dit par contre que suite aux calculs, informations qu'on a reues de la
part de Bell ExpressVu, nos spcialistes ont compt et sont arrivs
la conclusion, l'aide des chiffres encore une fois de Bell
ExpressVu, qu'on avait perdu tant de clients potentiels et/ou
existants.
68
[Emphasis added]
[137] He was confranted by counsel for BEV with a tableau showing the gains and
losses in Vidotron's client base during the Piracy Period. Although the figures of gains
and losses reflect the financial data produced by Vidotron in its various statements,
67 Exhibit P-322.
68 Transcript, September7, 2011, pp. 138-139.
500-17 -027275-059
PAGE: 34
Dpatie did not agree with the methodology used to prepare the tableau. His
justifications are lacking in coherence or credibility.
[138] Finally, he was shown copy of an article, dated August 14, 2001, appearing on
the front page of the Financial Post section of the National Post
69
. The article described
the existing problems at Vidotron recognized by QMI following its acquisition of control.
ln particular, it described what is referred to as the "service horrendous" of the
customers of its newly acquired company.
[139] Dpatie takes issue with the contents of the Financial Post article. He claims he
had occasion to compare Vidotran's service with that of its competitors and concluded
there were no prablems or difficulties with customer service at the time in question or
any time thereafter.
[140] Finally, he acknowledges that there were many reasons why a customer would
choose one television broadcast service over another.
(4) douard Trpanier ("Trpanier")
[141] Trpanier was Vice-president of Regulatory Affairs of Vidotron fram 2002 to
2010. He was previously Chief of Regulatory Affairs - Radiocommunications of
Vidotron fram 1994 to 2001. He was employed by the CRTe for appraximately ten
years prior to joining Vidotron.
[142] He has been retired since 2010.
[143] He was examined in connection with the incidence of piracy in the industry and
the costs to Vidotran in terms of lost revenues fram potential subscribers who have
access to BEV's signal at little or no cost whatsoever (hybrid or pure pirates).
[144] He was examined, in particular, with respect to the issues complained of in a
series of letters addressed by him and Pladeau to the CRTC and BEV during the
period commencing June 21, 2002 and terminating October 22, 2003
70
regarding the
acts and omissions attributable to BEV as were more fully described in paragraphs 45
to 82 of Vidotran's Requte introductive d'instance en dommages-intrts precise et
R-R-amende.
[145] ln addition to the direct costs to Vidotran and TVA resulting from the piracy of
BEV's satellite signal, Trpanier testified about the alleged costs to ail of the composite
and related industries to television broadcasting resulting from the failure of BEV to
69 Exhibit 0-179.
70 Exhibit P-278 en liasse.
500-17 -027275-059 PAGE: 35
control signal piracy. He produced an analysis of these estimated costs under the title:
"Incidence culturel/es du vol de signaux satellite au Qubec,,71.
[146] Referring to numerous exchanges of correspondence on the matter, Trpanier
described BEV's policies which permitted a potential subscriber to purchase the
necessary equipment at one of the Espace Bell stores or at other authorized dealers
without being obliged to subscribe to a particular BEV service or package. This
permitted potential subscribers to purchase a pirated smart card elsewhere and to
access BEV's signal without monthly subscription payments.
[147] ln one such exchange, BEV acknowledged, in a letter dated July 26, 2002
addressed by lan Gavaghan to the Canadian Association of Broadcasters
72
:
Bell ExpressVu does not control the sale of ExpressVu compatible equipment in
Canada and never has. Bell ExpressVu is a service provider. Set top receivers
which are compatible with the ExpressVu service are manufactured, imported,
distributed and retailed by independent third parties.
[148] What Gavaghan omitted to mention is the fact that a substantial number of set
top receivers were sold through corporate owned or franchised Espace Bell Stores. The
allegations contained in the Gavaghan letter were credibly refuted in the relevant letters
and affidavits filed en liasse as Exhibit P-278.
[149] Trpanier testified about an exchange of correspondence between the respective
parties, as weil as with the CRTC, addressing the problems of piracy of the BEV signal,
the adequacy of the various measures undertaken to address the problem and the
elimination of the practice of account stacking.
[150] The CRTC formed a committee composed of CEO's of various interested parties
in the industry, known as the "CRTC/Broadcasting Industry CEG Consultation on
program Theft." The Committee met on several occasions. Their deliberations are
reported in a confidential draft of its minutes filed under seal.
[151] ln an Intervention enclosed with a letter, dated September 25, 2003, addressed
to the CRTC by Trpanier, on behalf of QMI, it requested the convocation of a public
hearing to make representations regarding the renewal of the BEV broadcast licence for
only a limited period and subject to certain strict contrais and requirements which went
beyond the norm at the time.
[152] The BEV braadcast licence was renewed in the fall of 2003 for a period of 7
years, notwithstanding the QMI objections and without any of the conditions sought by it
in its Intervention. QMI did not appeal the CRTC decision.
71 Exhibit P-278.01.
72 Exhibit P-324.
500-17 -027275-059
PAGE: 36
(5) Serge Bellerose ("Bellerose")
[153] Bel/erose was Senior Vice President, Specialty Channels and Business
Development of TVA from 2004 to 2006. He was previously Vice President, Specialty
Channels, Regional Channels and Corporate Affairs from 2002 to 2004; General
Manager, Specialty Channels and National Network from 2000 to 2001; General
Manager, Le Canal Nouvelles ("LCN") and National Network from 1999 to 2000; and
General Manager, LCN from 1998 to 1999.
[154] Since leaving TVA, he has worked as an independent expert consultant.
[155] He was responsible for the negotiation of the affiliation agreement with BEV
regarding the distribution of TVA's LCN channel.
[156] His examination confirms that:

Notwithstanding the exchange of numerous dratts, modified by one or
other of the parties, no formai written agreement was ever signed between
the parties
73
;
Serious differences remain outstanding between the parties regarding, in
particular, the issue of account stacking by BEV subscribers and the right
to audit each other's books and records; and
The parties did, however, agreed to the royalty rates payable by BEV to
TVA for the distribution of LCN's service to its subscribers: the rate varied
from $0.42 per subscriber in 1998 to $0.48 per subscriber in 2002.
[158] Bel/erose confirmed that the differences relating to the practice of account
stacking arise, in part from, the parties' differing interpretation of the definition of
"subscriber" .
[159] "Subscriber is defined in section 1 of the Broadcasting Distribution Regulations,
SOR/97-555
74
:
"subscriber" means
A household of one or more persons, whether occupying a single-unit dwelling or
a unit in a multiple-unit dwelling, to which service is provided directly or indirectly
by a Iicensee; or
73 See inter alia Exhibits P-20, P-21 , P-287.
74 Exhibit P-18 A (French language text).
500-17 -027275-059 PAGE: 37
the owner or operator of a hotel, hospital, nursing home or other commercial or
institutional premises to which service is provided by a licensee.
[160] He testified about an extensive exchange of correspond en ce between him, or on
his behalf, and various representatives of BEV and with those of the CRTC between
February 13, 2002 and March 17, 2004, in connection with the issue of account
stacking. These include a formai Demande de rglement d'un diffrend entre Groupe
TVA et 8ell ExpressVu en vertu de l'article 12 du Rglement sur la distribution de
radiodiffusion. ?5
[161] He was examined, in particular, in connection with TVA and LCN's complaints
resulting from its unsuccessful attempts to obtain an independent audit to verify the
amount of subscriber royalties' payable by BEV to TVA for its distribution of the LCN
service. He referred to an extensive exchange of correspondence by him, or on his
behalf, with various representatives of BV and with those of GRTe between May 14,
2003 and April 18, 2005, with respect to the audit issue.?6
[162] ln cross examination, Bellerose confirmed the difficulty in arriving at a mutually
agreeable affiliation agreement with BEV. He referred to the numerous fruitless efforts
to find an acceptable solution to this impasse and acknowledged that there was general
skepticism and a lack of confidence by TVA management with SEV's efforts to combat
account stacking.
[163] He was referred to a letter signed by him dated May 14, 2003, addressed to
Chris Frank, Vice-president of BEV regarding TVA's desire ta initiate an independent
audit of the information contained in BEV's database regarding multiple set-top boxes??
He was questioned, in particular, concerning the extensive scope of the audit he was
requesting in the following portion of the letter:
As Vou will recall, pursuant to our complaint to the CRTC of April 10, 2002,
Commission staff convened an exploratory meeting on June 5, 2002 involving
representatives of Groupe TVA and Bell ExpressVu. At the meeting, Groupe TVA
. and Bell ExpressVu agreed to the Commission staff's proposai to adjourn the
dispute resolution process in order to permit the negotiation of an affiliation
agreement between LCN and Bell ExpressVu. The Commission's staff had
hoped that the issues raised by Groupe TVA's complaint would be resolved in
the course of negotiating the affiliation agreement. Although some aspects of a
potential agreement have been settled, the basic underlying problem has not
been resolved and the anticipated affiliation agreement has not been concluded.
75 Exhibit P-293. Bellrose was examined as weil on the follawing letters and emails or as ta the subject
matter contained therein: 0-043, P-288, P-289, P-290, P-291, P-316, P-292, P-293, 0-050, 0-051, 0-
052, P-294, P-295, 0-053, 0-054, P-296, P-297, P-308, P-298, 0-056, 0-057, 0-058, 0-059, 0-060*
(struck from record), P-030 and 0-061.
76 See in this regard Exhibits P-296, P-297, P-308, P-309 (March 31, 2004 & May 13, 2004), P-310, P-
311, P-312, P-313 and P-314.
77 Exhibit P-296.
500-17 -027275-059 PAGE: 38
ln Iight of this underlying problem, Groupe TVA and LCN wish to initiate an
independent audit of the information contained in Bell ExpressVu's database in
regard to multiple decoders. We would Iike the audit to begin in about two weeks
time and not later th an May 28, 2003.The audit will be conducted at our expense.
Covering the last three years to April 30, 2003, the audit should obtain the
following information which is recorded in Bell ExpressVu's subscriber
management information system (SMIS), also called the customer service
representative system (CSG System) :
The number of Bell ExpressVu subscribers as "subscriber" is defined in
the CRTC's Broadcasting Distribution Regulations;
The volume of Bell ExpressVu's active and inactive subscribers, with a
breakdown according to the number of decoders (one, two, three, etc.)
assigned to these subscribers;
The volume of paid and unpaid subscribers to LCN, with a breakdown
according to the number of decoders assigned to these subscribers;
The number of Bell ExpressVu decoders assigned to the subscribers
registered on Bell ExpressVu's SMIS, but unregistered at the registered
subscribers' addresses (according to audits that Bell ExpressVu says it
has undertaken);
The number of LCN subscribers among Bell ExpressVu subscribers; and
The number of LCN subscribers among Bell ExpressVu subscribers who
identify themselves as French-language subscribers (i.e. request their
billing in French).
[164] Bellerose acknowledges that the letter, although signed by him, was drafted by
Mr. Labelle.
[165] He admitted not being aware of the customary methods used in the industry to
verify the number of subscribers receiving a particular service yet strangely he sought
access to what he knew or should have known was commercially sensitive and
praprietary information fram BEV which may not have been available or normally
pravided in the industry.
[166] He acknowledged having received a letter dated October 23, 2003, fram
Randolph Hutson, Director, Competitive Disputes of the CRTC that had been addressed
to him and to Chris Frank of BEV containing "a non-binding staff opinion concerning the
definition of 'service subscriber",78. BEV objected to the production in evidence of this letter. The
objection was taken under reserve. The Court sustained the objection in the judgment rendered
in the TVA (Account Stacking) Action and the TVA (Injunction) Action.
78 Exhibit D-60.
500-17 -027275-059 PAGE: 39
(6) Marie-Jose Marsan ("Marsan")
[167] Marsan is Vice President Finance, Information Technology and CFO of
Vidotron. She is responsible for the preparation of financial statements and the
disclosure of financial data.
[168] She identified the OMI annual report for 2002
79
and confirmed that, as reported,
Vidotron suffered a net loss of 79,000 subscribers that year.
[169] She further identified and confirmed the contents of an analysis entitled
"Situation de la clientele rsidentielle" reporting the number of "dbranchements"
(disconnects) by Vidotron subscribers during the years 2001 to 2006.
[170] She was referred to the consolidated financial statements of Vidotron for the
years 2002, 2003 and 2004 and in particular to the estimated average period that
subscribers generally remained connected to the network (the "Churn rate").
[171] ln cross examination, referring to the Table produced as Exhibit P-347, she
explained how the Churn rate is calculated.
[172] She was unable to explain or justify the apparent contradictions in the statistics
contained in Exhibits 0-183 and 0-184 (which she claims to have never seen) and
Exhibit P-347, previously referred to in examination in chief.
(7) Claude Hurteau (heard in camera) ("Hurteau")
[173] Hurteau has been Oirector of network integrity (Dpartement intgrit rseau) for
Vidotron since 2003. He was previously Oirector of technical operations for Vidotron
from 1996 to 2002.
[174] Hurteau's testimony was taken in camera pursuant to an Ordonnance de
confidentialit issued on September 13, 2011 at the request of Vidotron.
[175] He testified as to the rates of signal theft of Vidotron's analogue and digital
services and the methods used to combat piracy. He also explained the protocol and
procedure followed for the connection of new subscribers, as weil as that for
subscribers who have moved and subscribers who have chosen to terminate service.
[176] Considering he appeared in camera it would be inappropriate to refer in detail to
his testimony. What can be disclosed and retained by the Court is that Vidotron had
similar preoccupations as BEV with piracy and with the adequacy of measures and
strategies available to combat its problem.
79 Exhibit 0-159.
500-17 -027275-059 PAGE: 40
B. BEV
(1) Michael Neuman ("Neuman ")
[177] Neuman was CEO of BEV fram December 1997 to December 1999. He was
previously Interim CEO for a short period of time.
[178] Since leaving BEV he has held numerous positions with a variety of companies
in related industries operating in Canada, the United States and abroad. For a certain
period, he rejoined a BCE affiliate, Teleglobe, to attempt a turnaround of its business
activities. Ali of the positions held were relatively short Iived.
the development and evolution of the DBS industry in Canada;
the negotiations with EchoStar and Nagra, as weil as with other CAS
suppliers regarding the choice of technology;
the preparation for and eventual launch of BEV 's DBS service on
September 10, 1997;
the justification for dealing with EchoStar for the total supply of the end-to-
end system, rather than by way of a direct contract with Nagravision; and
the justification for aligning BEV's system with the Narga CAS, rather than
other systems available at the time.
[181] Neuman was aware, from the outset, of the industry wide concern regarding
signal security. He claims BEV's objective was to create a business that would be
secure and compete successfully with existing cable based operators.
[182] The evidence supports Neuman's preoccupations of choosing the best available
technology. He referred to the minutes of a meeting BEV's Board of Directors of
January 23, 1996
8
, and in particular to the discussion regarding the activities of the
technical working group charged with reviewing the various technology options available
at the time.
[183] The technical working group, under the direction of Snazel, was directed to
further review the available options and report back to the Board at its next meeting held
on February 19, 1996.
80 Exhibit P-73.
500-17 -027275-059 PAGE: 41
[184] At the February 19, 1996 meeting the Board authorized management to enter
into definitive negotiations with each of the three groups of technology suppliers
recommended to the meeting.
81
EchoStar was not one of the three groups.
[185] At the March 5, 1996 meeting, the Board authorized management to negotiate
definitive agreements with the Irdeto/Pace group and the Scientific AtlantafThomson
group for the purchase of the "System Equipment" for the corporation's DBS service
82
.
[186] Notwithstanding the authorization given by the Board to negotiate "definitive
agreements" with Irdeto et ais., at the request of Snazel and others and acting on the
latter's instructions, Bill Meeken visited the facilities of EchoStar on March 8 to explore
the possibility of an alignment with EchoStar. In a fax message dated March 11, 1996,
he reported to Snazel and others of his very favourable impressions of the EchoStar
system
83
.
[187] The subsequent receipt, by management, of other positive reports led to the
selection of the EchoStar system as the most appropriate at the time and one that
would meet BEV 's stated objectives.
[188] According to Neuman, there were substantial advantages in BEV aligning itself
with a major United States DBS provider. In addition to the quality of the technology, he
referred to other compelling reasons for selecting the EchoStar system: (i) the grey
market was growing quickly; (ii) at some time soon, it would be too large to fight alone;
(Hi) EChoStar, in concert with Nagra, had already developed ECM's to deal with existing
incidents of signal piracy; and (iv) the renewable smart card technology provided an
added layer of protection.
[189] The agreement between Houston Tracker Systems Inc. (an EchoStar associated
company), EchoStar Satellite Corporation and Expressvu Inc. is dated January 8, 1997
(the "EchoStar Agreement")84. It set out the rights and obligations of the parties inter
se. The issue of "Signal Protection" was addressed in Article 18 thereof. It would
appear, however, that it dealt with the concerns directed more to grey market piracy
than to black market piracy.
[190] The Court finds curious that BEV would have agreed to the disclaimer of
responsibility by Houston Tracker Systems Inc. for remedying a "Breach of Security", as
defined in the EchoStar Agreement. Since there was no formai contractual relationship
between BEV and Nargra, in the event of any breach of security, BEV was left with no
legal recourse against either its equipment supplier or, indirectly, against its CAS
designer.
81 Exhibit P-74.
82 Exhibit P-76.
83 Exhibit P-77.
84 Exhibit P-14.
500-17 -027275-059 PAGE: 42
[191] When questioned in cross-examination on this concern, Neuman responded that
in his opinion, having a formai contract with Nagra was of little importance. Having an
alignment with EchoStar was of prime importance; the relationship with Nagra was
secondary.
[192] His views on this subject seem to be at odds with that of Gavaghan. The latter
attempted to negotiate, after the fact and after the conclusion of the EchoStar
Agreement, a formai agreement with Nagra. Not surprisingly, he was unsuccessful.
(2) lan Gavaghan ("Gavaghan")
[193] Gavaghan was Vice President and General Counsel of BEV from summer 1999
to January 2003. He was thereafter a consultant for BEV until May 2003. He was
previously Senior Legal Counsel of BEV from March 1997 to summer 1999.
[194] He is a lawyer by profession and, in his own words, claims to have a "satellite
background". Questioned by BEV's counselas to the source of this "satellite
background", he responded it came from his academic studies at the Faculty of Law of
McGiII University. He apparently followed a course offered by the Institute of Air &
Space Law at the Faculty.
[195] Since leaving BEV, he was a part owner of, a small scale wind turbines and solar
energy company for a short period of time. Thereafter, since 2005, he has been in
private legal practice.
[196] Gavaghan was examined in connection with the following subject matters:
Legal actions commenced by BEV against grey market and black market
pirates;
Assessment of signal piracy and various anti-piracy initiatives to combat
same;
ECM's performed by BEV;
Account stacking policy/ instructions to dealers/ enforcement; and
Residential customer agreements and warranties.
[198] ln an Internai Memorandum dated August 24, 2000 addressed to "Executives" of
BEV
85
, Gavaghan summarized the matters discussed at a cross- functional piracy group
meeting held on August 10, 2000. He noted the "serious concern" that "cracked" smart
85 Exhibit P-91.04.
500-17 -027275-059 PAGE: 43
cards capable of pirating the BEV signal were increasingly being distributed by dealers
and other pirates.
[199] He appeared to be weil aware of the ensuing damages caused to other members
of the industry, such as major studios and programmers. He wrote at page 1 of the
Internai Memorandum:
Obviously the increase in distribution and use of E3M cards is of serious concern
to us. First, we do not have the same ability to track potential pirates as we do
with blocker cards, which require that the user at least activate the boxes through
our service. E3M cards also make the full range of services, including pay per
view, available to pirates. If we are not successful with counter-measures to
shut down these cards, we may need to report to our major .studios and
programmers that security is an issue and that our system has been
successfully hacked.
[Emphasis added]
[200] He expressed his concern as ta BEV's ability ta successfully combat signal theft
and ta conduct successful ECM's due to the nature of the contractual relationship
between BEV and EchoStar and the absence of any formai agreement with Nagra. He
wrote at page 2 of the Internai Memorandum:
There are a number of concerns with Nagra. First, we believe that they are
devoting insufficient resources both to the development of technical fixes and to
the investigatory processes needed to determine what current and prospective
threats to the Nagra CA System there are. Second, we have no contractual
relationship with Nagra that would allow ExpressVu to demand that Nagra
remedy attacks on its CA System. Third, their performance to date undermines
our confidence in their ability to provide a positive addressing system that would
allow us to routinely address issues su ch as abuses of the temporary vacation
stoppage and other matters that could be addressed automatically.
Nagra has currently hinted that changes in the Nagra CA system will eventually
limit the E3M market to a core group of dedicated hackers who have the ability to
reprogram their cracked smart cards themselves. However, that potential has not
yet been justified by our actual experience.
[Emphasis added]
[201] ln a Memorandum dated October 31, 2001, entitled "How Bell ExpressVu
Services are Stolen: A Brief Synopsis"s6, prepared by Gavaghan with the assistance of
Brian Johnson, lead anti-piracy investigator at the time, they explain the different ways
BEV's services are stolen. These include: multiple box theft, false vacation theft,
blocking turn-off signais and hacked signais.
66 Exhibit P-95.
500-17 -027275-059 PAGE: 44
. [202] ln an email message, dated July 17, 2002, sent by Joe Prodan to Gavaghan and
other senior BEV officers and department heads
87
, Prodan estimated the total number
of persons stealing its services at 72,000 and the total corresponding annual revenue
losses at $40 million.
[203] Gavaghan identified and produced a series of Fraudulent Activity Reports for the
months of July through October 2002
88
. He acknowledged having received these
Reports "in the context of the antipiracy group reporting system that we had in terms of
reporting statistics on potential pirates,,89.
[204] The Fraudulent Activity Reports were prepared by Allison Milborough and John
[family name not mentioned] with input from Joe Proden, "a more senior level employee."
[205] The following summarizes the estimated total number of pirates, pure and hybrid,
and the corresponding estimated annual revenue losses for each of the months in
question:
Month
July 2002
August 2002
September 2002
October 2002
Total Number of Pirates
83,000 (7%)
102,000 (8.5%)
125,000-196,000
(10% - 16%.)
180,000-250,000
(14% - 20%)
Total Annual Revenues Lost
$44,000,000
$54,000,000
$45,000,000 - $70,000,000
$74,000,000 - $100,000,000
[206] The following disclaimer appears at the end of each Fra udulent Activity Report:
This represents the best estimate given the information currently available to us.
These calculations are difficult to make and verify due to the fact that pirates are
not forth coming with Information and Bell ExpressVu's procedures for tracking
equipment is in the testing stages for improvement. However, we believe these
estimates do provide a useful bail park measure of the current impact of
signal piracy on Bell ExpressVu.
[Emphasis added]
87 Exhibit P-99.01.
88 Exhibits P-100 en liasse.
89 Transcript, October 20, 2011, p. 111.
500-17 -027275-059 PAGE: 45
[207] Notwithstanding the disclaimer, one would have thought that the contents of the
Fraudulent Activity Reports and the apparent seriousness of the rapid estimated
increase in the incidence of piracy should have been cause for concern. It seems
reasonable that it should have been acted upon by senior management in a more
effective and timely manner. As will be seen, there would appear to have been
unexplained conflicting interests and a systemic dysfunction within the technology
department that impeded senior management from taking appropriate coherent
responses to address This growing problem in a timely fashion.
[208] By November 20, 2002, the estimated incidents of signal theft had reached
252,882 or 20% of the total number of active BEV subscribers.
[209] Gavaghan acknowledged that the numbers contained in the Fraudulent Activity
Reports disclosed a serious problem. The following candid exchange during his
examination in chief reflects his awareness of the problem and is but one example of
the lack of departmental coherence in dealing with it:
( ... ) So, as coordinator of the anti-piracy committee, how did you ... what did
you understand fram those numbers, and how did you react to that?
A- Weil, my understanding was that we had a significant prablem, and our
reaction to these numbers were to, you know, advise ... or, sorry, to inform
the other executives that this was an issue, and just exactly how much of
an issue it was.
261 Q- And from your various investigations and inspections and monitoring and
so on, do you have any idea to explain to the Court how that increase,
according to this methodology, could have happened?
A- . Weil, we thought at the time that there were two (2) main reasons for this.
The first was that the so- called AVR card had been developed, it had
gone thraugh a series of developments, and in the end of the year,
immediately before two thousand and two (2002), it reached the stage
where we saw this so-called autorail and camless AVR being developed,
and it was pretty clear that that constituted a real threat to us fram a
technology perspective. And then, at the same time, in two thousand and
two (2002), the DirecTV praduct was starting to disappear both because
DirecTV had secured its service, and so the supplies of new boxes that
could be hacked was disappearing, and moreover, you know, we had
stepped up enforcement against the dealers because of the victory in the
Supreme Court that we'd had. So, basically, the U.S. black market
praduct was disappearing, or is becoming more difficult to sell, and at the
same time, there was a replacement product that was us, unfortunately.
262Q- 1 would refer you to ... before going to another document, have you been
made aware at sorne time in the fall of two thousand and two (2002)
that a task force on anti-piracy had been constituted at Bell
ExpressVu?
500-17 -027275-059 PAGE: 46
A- Yes, 1 was aware of that.
0- And were vou a member of that task force?
A- No, 1 wasn't a member.
2640- And did vou participate in their proceedings and ...
A- No, 1 did not. 90
[Emphasis added]
[210] On or about October 28, 2002, Timothy McGee, then President of BEV, named
Casavant to head the Counter-Piracy Task Force
91
. It is to be questioned why neither
Gavaghan nor Snazel were not included as members of the Task Force. Both of them
were presumably qualified as they had, in the past, been involved in tracking signal theft
and devising anti-piracy measures. Gavaghan had in fact been the head of the previous
anti-piracy committee.
[211] As will be seen and discussed subsequently in this judgment, the Task Force's
estimates of the level of signal theft were below those disclosed in the Fraudulent
Activity Reports, prepared for Gavaghan and other members of senior management
only some months earlier.
[212] The Court is perplexed and justified in questioning: (i) why were Gavaghan and
Snazel not named to the Task Force; and (ii) why were there significant differences in
the estimates of signal theft? Perhaps the answer lies in the candid and self-serving
inscription found at the bottom of the coyer page of the Report on Counter-Piracy:
(Prepared for and Submitted ta the Legal Department by the Counter-Piracy
T ask Force in contemplation of potentiallitigation)
[Emphasis added]
[213] More will be said on this matter in the analysis of the testimony of Snazel,
McGee and Casavant.
[214] Gavaghan described three situations and the corresponding BEV policies
relevant to account stacking by its subscribers: (i) vacation policy; (ii) cottage policy
(travelling STB); and (iii) multiple receiver fraud policy. They are described in various
BEV publications produced en liasse as Exhibit P-35.
90 Transcript, October 20,2011, p. 123.
91 Exhibits D-111 & D-154.
500-17 -027275-059 PAGE: 47
[215] He was questioned concerning a practice complained of by Bellerose in a letter
dated March 27, 2002 addressed to Chris Frank of BEV
92
. Bellerose referred to his
experience of having been offered, during a recent visit to a Radio Shack Store, BEV
service at two separate locations (his principal residence and his country residence) for
the cost of only one subscription. A similar offer was made at about the same time to
another employee of TVA (Dpatie) at an Espace Bell store. An invoice evidencing the
transaction complained of is attached to the March 2yth letter.
[216] Gavaghan responded, on behalf of Frank, to the Bellerose letter on April 3,
2002
93
. He neither admitted nor denied the existence of the policy complained of.
Rather, he noted that Radio Shack is an independent entity but, that he would
nevertheless contact its head office to ascertain what representations were being made.
With respect to the experience at the Espace Bell store, he noted that it may have been
an independent distributor. He undertook to contact Bell Distribution Inc. on this matter.
He concluded by writing:
For the last several years, Bell ExpressVu has advertised a program where a
subscriber may purchase two satellite dish antennae, to be physically installed at
their primary and secondary residences. The customer could then transport their
set-top box to the secondary residence in order to continue to enjoy the benefit of
their television programming subscription. The notations on the Espace Bell
invoice could weil have been intended to refer to that program.
[217] He was cross-examined regarding what BEV was telling its subscribers and
potential subscribers in its: (i) publicity; (ii) cali centers; and (iii) retail outlets. Particular
reference was made to a pamphlet entitled "More movies, Fewer mosquitos,,94 where
the practice of paying for one subscription, having two dishes installed at each
residence and transporting a set-top receiver from one residence to another is promoted
by BEV. At page 1395 of the pamphlet (Exhibit P-57), there is the following inscription:
Restrictions apply, If you have more than one digital receiver, ail receivers [must
bel connected to a phone line in a residence owned by the subscriber.
[Emphasis
added]
[218] Reference to the BEV policy on account stacking is made in greater detail in the
analysis of the testimony of other witnesses called by BEV.
[219] ln an Internai Memorandum, dated August 24, 2000, addressed by Gavaghan to
"Executives,,95, (previously referred to) he notes that "the increase in distribution and use of
E3M "cracked" cards is of serious concern to us. "
92 Exhibit P-289.
93 Exhibit P-290.
94 Exhibit P-57.
95 Exhibit P-91.4.
500-1 7-027275-059 PAGE: 48
[220] However, in a second Internai Memorandum of even date, addressed to "Ali
Employees" Gavaghan appears not to have the same "serious concern". His worry now
appears to be limited to the fact of EchoStar's programing having been "hacked" and
not that of BEV. In the second Memorandum he wrote:
Obviously, this is a con cern to ExpressVu because of the intrinsic similarity
between the Echostar and the ExpressVu systems. Sorne people have been
mistakenly led to believe that the ExpressVu system has suffered similar
attacks.
[Emphasis added]
[221] ln cross-examination, Gavaghan was referred to an internai BEV document
dated July 23, 2002 entitled: "Project Aladin Preliminary Outline of Business Case
96
".
For the reasons therein expressed, the Outline concluded with the following
recommendation: "Based on current estimates of signal theft, do not proceed with card
swap out program".
[Emphasis added]
[222] He acknowledged that there was a clear awareness in 2002 among senior BEV
management of the problems associated with signal theft and of the need to address
these problems. Although Vice President and General Counsel of BEV, he claims he
had no involvement in the drafting of this document, nor was it ever discussed with him.
According to him, the analysis set out in the document was extremely narrow and
focused and he disagreed with much it.
(3) Terry Snazel ("Snazel")
[223] Snazel was Vice President of Technology of BEV from 1995 to November 2008.
ln su ch capacity, he was .. .respansible for ail the aspects (. . .)related ta the end-ta-end
technical system that pro vides service ta custamers
97

[224] Since leaving BEV he purchased and operates a horse farm.
[225] He has no relevant formai higher education. Since leaving high school he
attended two years of a diploma course in Applied Physics but did not complete the
course. He attended the BBC Training Collegen North London and completed a course
in Broadcast Technology. He left the BBC and enrolled in a MBA program. He
completed one course in the program.
[226] He subsequently worked for various employers in the U.K. and in Canada in
various functions, including as: technical operator, camera man, technical producer and
96 Exhibit P-200.2.
500-17 -027275-059 PAGE: 49
officer and liaison between managers and technicians. In his words, "myexpertise was in
c%ur cameras. "
[227] He was subsequently employed for brief periods by the CBC as Manager of
Technical Services and in similar functions by other employers.
[228] He was then employed by TSN as Vice President of Operations to assist, fram a
technical perspective, the launching of its service. He was responsible for both the
technical side of operations and the engineering. After TSN, he was employed by Astral.
His duties were to recruit staff to develop their Pay TV networks.
[229] ln 1995 he was recruited by BEV as Vice President of Technology.
[230] He was a member of several industry related Associations and Committees.
[231] Snazel was examined in connection with the following subject matters:
Technological issues and choice of the technology pravider (testing,
meetings and discussions);
Negotiations of the Satellite Technology Agreement with Houston Tracker
Systems Inc. and EchoStar;
Nature of services provided by Nagra and EchoStar;
Assessment of piracy;
Web Monitoring;
Anti-piracy initiatives;
ECM's
BEVs anti-piracy laboratory;
New CAS - Aladin;
Grey market piracy; and
His role in correspondence with the CRTC.
[233] He was examined regarding the circumstances leading to the signature of the
EchoStar Agreement.
98
Annexed as Schedule 1 are the Functional Specifications
98 Exhibit P-14.
500-17 -027275-059 PAGE: 50
required to be performed by EchoStar and HTS. Snazel claims to have drafted these
specifications based upon his understanding of the requirements of the system.
[234] The Technical Specifications found in Schedule 2 of the EchoStar Agreement
were drafted by EchoStar.
[235] Seeing his lack of formai higher education and technical experience, the Court
has serious concerns as to whether BEV was weil served by allowing Snazel to define,
in Schedule 1, the relevant functional specifications required to permit the launch of a
secure DBS system. The evidence is silent as to the involvement of any other
competent officer having appropriate technical expertise.
[236] Snazel admitted that he did not attempt to negotiate a formai agreement with
Nagra. It was only, after the fact, that the legal department suggested to him the
advantages of a contractual relationship directly with Nagra. It would appear that, by
then, it was too late to require Nagra to agree to a direct contract with BEV. It had
already sold and been paid for its CAS through EchoStar. It had no incentive to agree to
provide the contractual guarantees and financial support sought by BEV in the event of
a breach of its system.
[237] Snazel was examined concerning a letter dated July 21, 1999, addressed by
Chris Frank to Tola Murphy-Baran, Senior Vice President, NFL Sunday Ticket
Enterprises regarding BEV's desire to licence the National Football League Sunday
Ticket for DBS distribution in Canada on a pay per view basis
99
. In his letter, Frank
assures Murphy-Baran of the security of the BEV DBS system. He wrote;
Based on the attached technical opinion from our chief technology officer,
we can state uneguivocally, that our distribution system - while sharing the
same underlying technology as EchoStar - is both independent and
uncompromised. The practical impact of this statement is that:
1. a regular paying EchoStar customer in the U.S. or Canada (grey market customer) cannot access.
Bell ExpressVu programming;
a pirate EchoStar receiver (containing an unauthorized smart card) in either
Canada or the U.S. cannot access Bell ExpressVu programming; and
thorough investigations through private investigation agencies and the Royal
Canadian Mounted Police ("RCMP", the Canadian equivalent of the Federal
Bureau of Investigation) have been unable to confirm the existence of a single
compromised Bell ExpressVu system
Consequently, we are of the strong belief that our system is secure and will stay
that way. ( ... )
99 Exhibit P-358.
500-17 -027275-059 PAGE: 51
[Emphasis added]
[238] The Technical Opinion attached to the Frank letter was drafted by Snazel. It
purports to confirm that the BEV CAS system is incompatible with the EchoStar system
and is uncompromised.
[239] The Frank letter was forwarded by Murphy-Baran to James Shelton on July 22,
1999.
[240] ln a letter dated August 13, 1999 addressed by Shelton to Snazel and Juneau 100,
he challenges Snazel's Technical Opinion regarding the incompatibility of the two
systems. Shelton wrote:
This report is a high level analysis on NagraVision piracy and the impact on the
ExpressVu system which uses NagraVision's conditional access system and
smart cards. (Page 1)
( ... )
Ove rail , since both EchoStar and ExpressVu both use NagraVision's conditional
access system and there is a commercial pirate hack tor EchoStar programming,
then pirates could if they desired, apply this hack to obtain ExpressVu's
programming. There is no technological reason this could not happen. (Page
5)
[241] Confronted with the clear contradiction between his opinion expressed in the
Technical Attachment to the July 21, 1999 Frank letter and that of Shelton in his August
13, 1999 Report, Snazel sim ply says he disagrees with Shelton without any credible
explanation. His justification for this disagreement reflects his rather cavalier approach
to the subject as weil as to other technical matters that he does not fully comprehend.
[242] He was examined as to the measures taken to combat signal piracy. He claims
the year 2000 was a busy year for anti-piracy activities. BEV became aware their
system had been breached in March 2000. Once they had confirmed the existence of
the breach, under his direction, BEV formalized a procedure for reporting instances of
piracy to management. He formed an anti-piracy committee chaired by Gavaghan.
Casavant was also member of the committee along with others. The Committee's focus
was to determine the extent of piracy.
[243] Snazel claimed to have participated actively in the committee to encourage
organization and practicality. He did not, however, agree with Gavaghan's assessment,
of the problems in implementing successful ECM's due to the alleged deficiencies in the
100 Exhibit P-91.
500-17 -027275-059 PAGE: 52
Nagra system and software, referred to in his InternaI Memorandum dated August 24,
2000
101

[244] He testified that BEV only had "confirmed" evidence of piracy of its signal for the
first time in 2001 and that he discussed the problem with representatives of EchoStar on
the phone. He claims that they never mentioned considering a card swap to address the
problem in their own system.
[245] Piracy was a growing problem in 2002. Snazel attended with Casavant a
presentation by Nagra of their new Aladin CAS and smart card in Cheseaux,
Switzerlahd in March 2002. He identified a document and related documents which
formed the basis of the Nagra presentation.
102
[246] He acknowledged that he discussed with Casavant the nature of the ECM
program being pursued and the problems associated therewith. He acknowledged:
'" there was a meeting regarding ECMs and how they were being used and what
we could expect from them in the future from them with respect to ECMs. There
was a caution, 1 think. Perhaps it was a flag went off when we were in Cheseaux
that the ECM program may have a tinite lite and that, at sorne point in time,
which we knew perhaps intuitively, we were being apprised the ECM
program would be less effective.
[Emphasis added]
[247] According to Snazel, the Aladin project was still in the developmental stage at
the time of the Cheseaux meeting. This opinion was not shared by Casavant, or by the
Nagra representatives heard.
[248] Following the March 2002 meeting, Snazel claimed he " ... encouraged Nagra to
continue working on their Aladin project, although we had no formai authority to go along with
the Aladin project."
[249] Upon returning to Toronto, he claimed he reported his findings and made his
recommendations known to McLennan, then President of BEV. According to Snazel,
McLennan told him he would digest this "new information" and get back to him.
McLennan appeared to have no recollection of the discussion with Snazel, if indeed one
took place.
[250] He was referred ta a document prepared for senior BEV management authored
by Gavaghan and him entitled: "Switching off Signal Piracy: The Scope of the Signal
101 Exhibit P-91 .4.
102 Exhibits P-201 and P-201.1 (en liasse).
500-17 -027275-059 PAGE: 53
Piracy Problem with respect to Bell ExpressVu services, and our Strategy to defeat
it.
103
"
[251] He described, in particular, his efforts to persuade senior management to accept
the Nagra Aladin proposaI. The problems were made more difficult because of the
appointment in May 2002 of a new President of BEV, Tim McGee. According to Snazel,
"He had ta be canvinced. "
[252] He described the activities to deal with signal theft in 2003. These included
installation and testing of some new equipment.
[253] ln a Memorandum dated December 9, 2002, addressed to Martin Cullum with
copies to BEV Executives, Casavant, Ishankov and others
104
, Snazel provided a time
line for and describes the "Status of Aladin Conditional Access Transition." It is clear
from a reading of the Memorandum that, in Snazel's mind, the complete swap out had
not yet received formai budget approval from the appropriate sources in BEV or BCE.
He wrote, at page 3:
The final component of Phase III is to switch-off the data stream for the existing
systems. When this happens ail illegal devices using the existing system will no
longer work. Changing out appraximately 2 million smart cards is expensive and
logistically challenging. A task force fram ail ExpressVu departments has been
established to plan and implement the project during 2003. Currently Phase III
of the project is going through a technical validation and budget approval
process. with a target of an early 2003 go-ahead.
[Emphasis added]
[254] ln cross-examination, Snazel contradicted either his previous testimony or that of
other credible witnesses on no less than eleven occasions. His responses to legitimate
questions put to him by counsel are frequently evasive. His explanations are convoluted
and often incomprehensible. As Vice President of Technology of BEV, one would have
expected from him a demonstration of a certain level of technical expertise in his
responses to legitimate questions dealing with matters within the scope of his
responsibilities. Therewas no such display.
[255] The following are some of the more problematic contradictions:
He testified in chief that he had conducted "a high level review" of and was
familiar with the NOS conditional access system used by DirecTV. He was
referred to an analysis signed by him and Gavaghan dated April 5, 2002
entitled "Switching off Signal Piracy,,105, where they mention that, contrary to
the Nagra system used by BEV, the OirecTV system does not have the
103 Exhibit P-97.
104 Exhibit P-176.
105 Exhibit P-97.
500-17 -027275-059 PAGE: 54
ability to be updated or modified through software downloads. Confronted
with, or anticipating the contrary credible evidence by Dr. Markey (former
Vice-president-Technology of DirecTV), he attempted to distance himself from
the analysis by claiming that his name appeared on the document only
because he endorsed the technology comments. He refuses to admit that he
was wrong and insists that his "knowledge of the NOS OirecTV system is stil/ at a
high level." However, after a protracted and convoluted exchange with
opposing counsel as to the nature of the question, he grudgingly gave a
qualified response to the question by stating: "Mr. Markey would have had much
more knowledge of the OirecTV system than / wou/d."
He recalled having had discussions with McLennen, Neuman and Gavaghan
at a meeting held either in Neuman's office or his, about the hack of the BEV
system in March 2000. He claims Neuman was not surprized and that this
was but a confirmation of what he (Neuman) believed would eventually
happen. When pushed in cross examination on the circumstances of the
meeting, he claims to have a good recollection of the discussion and that
neither he nor Neuman were surprized. He was reminded that Neuman
resigned from BEV in December 1999 and left immediately thereafter for
England. He could not have spoken to him about the hack which he claimed
occurred in March 2000. Wh en confronted with this dilemma he retreats with
the following convoluted response:
But 1 am not so ... 1 can't be sort of clear now as to whether, in nineteen
ninety-nine (1999), we had that confirmation, whether the discussion
was as firm as that.
106
ln the Technical Attachment to the letter, dated July 21, 1999, addressed by
Chris Frank to Tola Murphy-Baran 107 (Re: NFL Sunday Ticket) he referred to
the smart cards devices which had already been successful in hacking
EchoStar signais. He was reminded that he testified in chief that the
EchoStar hack first occurred at the end of 1999, a date AFTER the date of
his Technical Attachment. The first EchoStar hack was confirmed by Shelton
to have taken place in October 1998
108
. His explanation and justification for
this contradiction is, once again, perplexing.
ln his testimony in chief, he denied that, at a meeting held with Nagra in
2001, it had recommended that BEV perform a card swap. Wh en suggested
that he was wrong and given the chance, in cross-examination, to correct his
testimony, he responded: "1 have no recol/ection of that occurring. ,,109 Snazel
107 Exhibit P-358.
108 Shelton report, Exhibit P-91, p. 4.
500-17 -027275-059 PAGE: 55
was examined on discovery on September 26, 2007. Regarding the
particular meeting held with Nagra in 2001, he testified:
( ... ) the gist of the discussion very quickly moved to the need to do a
change of the conditional access system that, at some point, the
ammunition that Nagra had to fight the piracy would be no longer as
effective as it was and that in their opinion, the solution for us was to
do an exchange of our conditional access system, a complete card
swap.
Q- So that was Nagra's position?
A- Yeso
ln his testimony in chief he insisted that at the time of his visit to Cheseaux in
March 2002, he was told by Nagra that IMS4, an essential component of the
Aladin CAS, was not yet ready for deployment. In cross examination, it was
suggested that he was specifically advised by Nagra in March 2002 that
IMS4 had been deployed for other clients of Nagra as early as 2001 and that
it was anticipated that other deployments would follow shortly. He responded:
"/ neither recall that, nor do the documents substantiate that. ,,110 He was then
shown a document entitled "Nagravision IMS4 Presentation Express Vu, March
2002,,111, the last page thereof entitled "IMS4 Customer Deployment". The
following exchange between Snazel and counsel demonstrates the
regrettable lack of transparency on his part:
38Q- ( ... ) Maybe the last page is more striking.
"IMS 4 Customer Deployment. First deployment, beta release
early two thousand and one (2001), 0 & 0 Cable Link. Two
thousand and one (2001), ail new customers, Optus, extend,
start migration Cablecom, Quero TV."
So, now, 1 will put to you my question again. Is it not a fact, Mr.
Snazel, that you were advised by Nagravision, in March two thousand
and two (2002),in Cheseaux, that IMS 4 was being deployed for other
clients of Nagravision as early as two thousand and one (2001)?
A- What is not a fact is that 1 was aware of that. This document looks
Iike an extensive presentation on the status of IMS 4. 1 was not
present at ail the meetings in Cheseaux. 1 was not present at ail
the meetings in Cheseaux. There were a series of meetings. We
were ... there was more than one (1) of us from ExpressVu. And in
particular, 1 was not present at meetings that were going through
111 Exhibit P-201, 1 Bates # 2680.33.
500-17 -027275-059 PAGE: 56
detailed discussions on some of the technology. This could weil
have been a meeting at which 1 was not present.
THE COURT:
390- Why not?
A- 1 was... there were different meetings going on, sometimes
simultaneously. 1 would go to a meeting and Jessica would go to
other meetings with different...ln fact, 1 can't even remember
precisely being in a meeting with Nicolas Aubert and Philippe
Landry on those dates, but the discussions 1 had in Cheseaux were
with, in many occasions, different people than Jessica and on
different topics. So this document doesn't look familiar to me, and
l'm sorry the presentation is not something 1 am familiar with.
Me PATRICK OUELLET:
400- Sir, Vou certainly were very affirmative yesterday when vou were
saying to this Court that in March two thousand and two (2002), IMS 4
was not ready. Now, l'm suggesting to Vou that Vou didn't even attend the
IMS 4 meetings and Vou have no idea what you're talking about. Is that
not a correct statement?
A- That is a very extravagant statement. 1 do not acknowledge it being
correct. The meetings that 1 was at, it was very c/early made ... it was
made very c/ear to me that, in fact, IMS 4 was not.
410- Was it not...
A- Was c/early not ready for us and, as it says in the documents, we
were undergoing the development process for IMS 4.
420- Sir, for IMS 4 to be ready for Bell ExpressVu, didn't Nagravision
need a go from Bell ExpressVu, which they did not have, and that's why it
wasn't ready for ExpressVu? Because they didn't have the okay to deploy
it? Isn't that why it wasn't ready?
A- 1 can't answer that question.
430- Fine. Now ...
A- Sorry, 1 can't answer because 1 don't know is what 1 meant. 1 didn't
mean that 1 know and l'm not going to answer. 1 meant that 1 don't know.
The Court finds it highly unlikely that Snazel did not attend this very critical
1 MS4 presentation in Cheseaux. Moreover, if he did not attend, such
absence would demonstrate a shocking lack of judgment on his part.
However, assuming for whatever reason he chose not attend, it is not
500-17 -027275-059 PAGE: 57

credible that: (i) he would have been unaware of the fact that the IMS4
system had been successful.ly deployed elsewhere as early as 2001; and (ii)
Casavant or any other members of the BEV delegation in attendance in
Cheseaux would not have fully briefed him on this important presentation.
He further contradicts himself and other credible evidence regarding: (i)
number of pirates hacking the BEV signal; (ii) the number, dates and
effectiveness of ECM's performed; (iii) the contractual relationship between
BEV and EchoStar and Nagra; and (iv) when final approval and budgetary
support was received to proceed with the full swap out to Aladin.
(4) Jessica Casavant ("Casavant")
[256] Casavant was Director, Systems Integration and Digital Technology of BEV from
late 2001 to fall 2007. She was previously Director of Digital Technology from 1999 to
late 2001 and Manager of Compression Systems from 1997 to 1999.
[257] Since leaving BEV in 2007 she has been C.E.D. and owner of a book publishing
and distribution company.
[258] She holds a degree in broadcast engineering from the University of Toronto and
a college diploma from Sheridan College in audio production techniques.
[259] Prior to joining BEV, she worked as a recording engineer for a film and post-
production studio in Toronto, Path Sound, and in various managerial and technical
positions for the Movie Network.
[260] Casavant was examined in connection with the following subject matters:

The installation, testing and configuration of the BEV DBS system prior to
and subsequent tolaunch its in 1997;
Technological issues and description of the functioning of the BEV DBS
system;
Assessment of level of piracy;
The March 2002 meeting with Nagra to presentthe Aladin CAS;
Counter-Piracy Task Force;
ECM's and other anti-piracy initiatives;
Web monitoring of piracy activity;
Anti-Piracy Task Force; and
500-17 -027275-059 PAGE: 58
New Aladin CAS.
[261] Among the subject matters mentioned above, certain elements raised during her
[262] With the aid of a schematic diagram, entitled "Bell ExpressVu Uplink Diagram,,112
she explained in detail the complex technical functioning of the BEV DBS system.
[263] She described the organizational structure of the Technology Department. She
explained that there were close to 300 people working in the department headed by
Snazel, of which some 30 were under her direct supervision. An organizational ch art
was produced describing the various department heads and their responsibilities.
113
[264] She was examined in connection with the various ECM's initiated by BEV and in
particular concerning "Project Liberty" and the results thereof described in a document
dated December 8,2003 outlining the Fall ECM Plan.
114
[265] She was questioned at length in connection with numerous proposais and
updates prepared by both Nagra and BEV and her involvement therein, dealing with the
various phases of an eventual migration to Aladin 115.
[266] Particular reference was made to the description of the complex, multi-phased
approach and to the estimated time-Iine in the transition from BEV's existing CAS to the
new Aladin CAS. Particular reference was made to an internai report prepared in
February 2003
116
entitled the "Nagra Aladin Conditional Access Exchange Program,,117.
[267] By January 2004, the proposed time-line had slipped due to alleged difficulties in
testing and problems with the software.
The Counter-Piracy Task Force
[268] The Counter-Piracy Task Force was created by McGee, th en President of BEV,
on or about October 28, 2002.lts Report on Counter-Piracy, (the "Report") 118 prepared
112 Exhibit 0-175A.
113 Exhibit 0-216.
115 Exhibits P-201.1, 0-217, P-200.1, 0-218, P-199.1, 0-218, P-202, P-204, 0-176, P-202.02, P-200.0.1,
P-203.1, P-203, P-203.3, P-219, P-203.4, 0-220, P-208.1, 0-123, 0-221, P-223.3, 0-222, 0-223, 0-
224, 0-225, P-218.1, P-220, P-221.1, P-218, P-226.1 and P-227.
116 The date on the exhibit is erroneously indicated as November 26, 2010 due to a technological glitch
in transforming the document in electronic form.
117 . Exhibit P-200.0.1.
118 Exhibit P-106.
500-17 -027275-059 PAGE: 59
and produced in less than three months following its creation, is dated January 13,
2003.
119
[269] Although the Report was prepared for the BEV Legal Department in
contemplation of potential litigation and is inscribed as "Privileged and Confidential", and
accordingly was filed in evidence under seal in these praceedings, it was referred to by
the various witnesses, including BEV's own experts, without objection on the part of
BEV. Moreover, as previously mentioned, in response to a request by the Court to
confirm the status and confidential nature of several exhibits filed "under seal", including
that of the Report, Defendant's counsel agreed that we were free to quote such extracts
fram the Report that we considered necessary. Plaintiff's counsel gave its unrestricted
consent.
[270] The purpose of the Task Force was described at page 3 of the Report.
1. PURPOSE
ln light of a recent letter received from Yves Mayrand of Cogeco Cable Inc. dated
November 11, 2002 and a letter from Edouard Trepannier of Quebecor Media
Inc. dated November 8. 2002, each alleging that they are suffering damage as a
result of signal theft of Bell ExpressVu satellite signais, the Legal Department
received a reguest by Tim McGee, President, to assess the scope and
magnitude of Bell ExpressVu's potential li ab i1it y if a successful claim was
made against it and to provide recommendations that would mitigate its
exposure and reduce its potential liability.
To assist the Legal Department in providing the proper advice to Tim McGee the
Counter-Piracy Task-Force was asked to prepare this report and is hereby
submitting it to the Legal Department for such purpose. This report has drawn
upon the assistance of many employees from a variety of business units at Bell
ExpressVu and ail material prepared in connection with this report, whether
Included or not, is privileged and confidential.
Bell ExprossVu faces a possible threat of litigation in light of the broadcast
industry's current heightened awareness of signal theft. In contemplation of such
litigation, the Counter-Piracy Task Farce (the "Task Farce") was asked to:
(1) Assess the scope and magnitude of signal theft of Bell
ExpressVu's television and audio service;
(2) Audit its current internai and external efforts to combat this theft;
and
(3) Provide recommendations and a strategy to implement them for
the purpose of mitigating risk and future losses.
119 The date of January 13, 2002 appearing on the Report is a typographical error. It should read:
January 13, 2003.
500-17 -027275-059 PAGE: 60
( ... )
[Emphasis added]
[271] The Task Force would appear to have replaced the former anti-piracy committee
headed by Gavaghan and assisted by Snazel and others. As previously mentioned,
curiously, neither Gavaghan nor Snazel were appointed to the Task Force.
[272] The methodology used by the Task Force in estimating the level of fraud and
theft is described in Annex A to the Report.
[273] Attached to the Report as Annex B is a document dated November 27, 2002,
entitled "Customer Segmentation project Status" prepared by Angoss Software
Corporation. Angoss had approached a member of the Task Force to do a "sales pitch"
on software they had developed that would allow BEV to perform different analyses and
research subscriber behavior. According to Casavant, "Angoss was really just used ta
validate our method%gy during those particu/ar tests.,,120
[274] A follow-up report entitled "Subscriber Signal Theft" was prepared by Angoss
Software Corporation dated February 5, 2003
121
, subsequent ta the Report on Counter-
Piracy. The February 5, 2003 Angoss report is referred to at length by Defendant's
expert, PricewaterhouseCoopers in its Report and in the testimony of its representative,
Pierre Maill. This evidence will be analyzed and addressed subsequently herein in the
apprapriate Sections dealing with the quantification of the alleged damages suffered by
Vidotron and TVA.
[275] Among the findings and recommendations contained in the Report, the following
extracts fram the Executive Summary found on pages 5 and following thereof are most
relevant for the purposes of these proceedings.
B. Incidents of Signal Theft (as of November 2002) 122
Active subscribers ("Hybrid"): 120,000 ta 133,000*
(9.5% ta 10.5%.of base of 1.2M)
Former subscribers (disconnects):
Never activated using our boxes:
Lost & Stolen Receivers/Smart Cards:
121 ExhibitP-107.
11,000 ta 13,000
27,000 ta 35,000 **
6,012
122 Although the estimate of the number of pirates is described in the Report as being "as of November
2002", a review of Appendix 1 of the Report indicates that the various tests which give rise to these
estimates were conducted between October 2001 and October 2002. The effective date of the
estimates is thus more appropriately at the latest, October 2002.
500-17 -027275-059 PAGE: 61
164,000 t0187.000
(12% to 15% of 1.2M sub base)
*In our view, there are 3 reasons why the Hybrid number is proportionally higher
than any other method of theft: (a) the easiest and cheapest method of pirating
the signal continues to be by reprogramming an activated smart card or AVR
board; (b) by paying Bell ExpressVu some kind of monthly fee, the pirate can feel
a little more at ease in that they are not stealing ail of Bell ExpressVu, and (c)
they view their subscription as a shield against prosecution (i.e., we wouldn't go
alter our own subscribers). As weil it Is known that pirates keep and then use
their legitimate ca rd any time countermeasures are launched to continue
watching a basic level of service until su ch time as a fix is released for the
counter piracy measures.
**This number was calculated by dividing the total number of receivers never
activated by a factor of 1.6 which is the current Bell ExpressVu average number
of active receivers per account.
C. Estimated Revenue 1055 per year.

Active subscribers. (Hybrid):
Never activated using our boxes
Total
$30M. to $33M
$6.2Mto$6M
$24Mto $31M
$60M to $71 M**
(10.30% to 14% of ove rail revenue)
**This is based on the assumption that the offending subscriber would pay our
programming ARS of $40.52. (Oct.2002) and our PPV ARS of $5.40 (2001 PPV
ARS whlch was the ARS prior to piracy becoming significant. Overal/ revenue as
of Nov 30 2002 was $580M.
D. Estimated One Time SAC loss over last 18 months:

Never activated using our boxes:
Total
$22Mto $28M
$ .8Mto $.9M
$22Mto$29M
ExpressVu subsidizes their STB's. The estimated loss was based on an
indemnity loss per receiver of $493.56. This is not additive to annual ~ o s s but a
500-17 -027275-059 PAGE: 62
one time loss only. One time lasses will continue ta have an impact as long as
boxes continue ta be sold without activation and fall prey ta pirates.
E. Short Term Recommendations (1 to 2 Months)
(1) Technological Recommendations
(a) Implement strategy of more aggressive measures that target subscribers
and non-subscribers caught during last two pop-up countermeasures. ( ... )
(2) Resources and. Staffing Recommendations
(a) The Task Force should continue to meet and address issues relating
to Signal Theft and fraud and operate in the Interim until a
permanent person is appointed.
(3) Recommendations and Strategies ta Discourage Signal Theft
( ... )
F. Long Term Recommendations (3 to 6 months)
(a) Bell ExpressVu should implement a new conditional access system in
2003 that would involve a complete swap out of existing smart cards. This
swap out should be completed in 2003. This new system would include
improved hardware technology for both the smart card arid the conditional
access system, improved system strength (security better than current with more
capabilities to combat any future piracy). By using a new patented algorithm, this
new system will also include a much stronger legal aspect to it allowing the
security vendor to fight any future piracy using copyright infringement charges if
necessary.
(2) Resources and Staffing Recommendations
(a) Appoint a permanent person to be responsible for its overall
strategy to combat Signal piracy and fraud. This person would report directly
to the President's Office and would have audit powers over other departments
regarding processes and procedures that may impact on piracy. This person
would also be responsible for liaising with other departments, Bell Regulatory,
other officers at Bell Canada, BCE and others appointed to work on any signal
piracy or fraud issues.
(3) Recommendations and Strategies ta Discourage Signal Theft
( ... )
[Emphasis added]
500-17 -027275-059 PAGE: 63
[276] The Task Force concludes: "Onlva full card swap out will allow us to permanently
turn off the existing conditional access signais on ail channels which will render ail
pirating devices inoperable. "
[Emphasis added]
[277] The Court is satisfied that the recommendations contained in the Report, in
particular the long term technical recommendation that BEV implement a new CAS that
should be completed in 2003, was based on reliable information known at the time. The
recommendation was an informed one based upon knowledge obtained by Casavant
and others during the meetings previously held with Nagra in Cheseaux in March 2002,
the follow up meetings thereto and the presentation made subsequently by
Nagra at the EchoStar offices in November 2002 23. In its presentation (page 17), Nagra
proposed that the swap-out to Aladin could be accomplished and completed by
December 2003. Casavant was weil aware of the various tasks involved in the proposed
swap-out to the new Aladin CAS and of the realistic time lines.
[278] BEV now contends the time line for the swap-out recommended in the Report
was unrealistic and unattainable. It argues the project was very complex and that,
accordingly, any delays in the implementation of the migration were due solely to
technological reasons and for no other reasons. Aside from su ch generalities referred to
by other witnesses, including IShankov, Nicholas and BEV's experts, as to the reasons
for the delays, there is no compelling evidence which would permit the Court to retain
this assessment that the alleged complexity of the project was the sole cause of the
delays.
[279] The Court is satisfied that the Task Force's estimate as the necessary time-line
to complete the migration in 2003 was not capricious, but rather realistic. It was a
well-informed-informed estimate. The recommendation was made by persons having
the necessary knowldge of the relevant technology involved.
[280] Accordingly the Court is satisfied that the Aladin swap-out was available and
ready for implementation by BEV in 2003 with a completion date no later than January
1, 2004. What appears to have been lacking, however, was the requisite internai
approval for the full implementation of the project.
124
[281] On January 23, 2003, Casavant prepared a working document to be used at a
planning meeting to be held with McGee and others in connection with the
implementation of the Task Force recommendations
125
. The following extract of the
working document addressing the implementation of the Aladin CAS is reproduced below.
123 Exhibit p-2ci2.00.01 - 02687.000.001; Transcript, November 8, 2011, Christophe Nicolas.
124 See, interalia, Exhibits D-176, P-105.1 and P-202.01.
125 ExhibitP-106.1.
500-17 -027275-059 PAGE: 64
AREA IRR RECOMMENDATION ACTION RISKS/COSTS
(h, m.l) PLAN/DETAILS
4. TECHNOLOGICAL 18. IMPLEMENT 18. PLAN: Aladin $6 Million priee
NEW CONDITIONAL system has been tag
ISSUE 1: ACCESS SYSTEM de1ivered and will
(Aladin) start ta be deployed
System has been in lab for testing
compromised. Too much end of January.
information about our
system available on 18. PRIME: T.
internet for long term Snazel
effective measures. 18.
Pirates also no longer COMPLETION
require prior activation. DATE: April
2002
126
19. PLAN: BeE
19. Swap out ail smart Board approval for Logistics of
cards to new Aladin swap out required swapping out 2.1
card 19. PLAN: Task million cards.
force for smart card $50 Million priee
swap out has been tag
struck ta study System could be
effort required. compromised a g a i ~ .
[282] During his examination, at trial, McGee took exception to Casavant's comments
in the working document that "BCE Board approval for swap out [wasJ required". He
explained that this type of approval for capital expenditures was dealt with by the
Investment Management Council ("IMC") and not at the BCE Board level. In the Court's
opinion, this distinction is a "red herring" and is of no consequence to the issues at
hand. Regardless of whether the appropriate approval was to come from the BCE
Board or the IMC, the fact remains and the numerous documents filed in evidence
subsequent to January 2003, clearly disclose that the requisite approval for funding had
not been obtained within the time frame proposed by the Task Force for the completion
of the Aladin CAS migration. Indeed it was not obtained until sometime long after the
2003 year end.
SVSTEMlC IMPEDlMENTS TO THE FUNCTlONNlNG OF THE TECHNOLOGV DEPARTMENT AND THE
PERFORMANCE BV CASAVANT OF HER RESPONSlBlLlTIES
[283] Casavant was cross-examined at length concerning the functioning of the
Technology Department, her role and responsibilities in the Department and her
126 Error in original text; should read "April 2003".
500-17 -027275-059 PAGE: 65
interaction with other senior members of the Department, notably Snazel and
Gavaghan.
[284] What became evident from her testimony was the serious lack of dialogue,
co-ordination and collaboration between Casavant, Snazel and Gavaghan.
Notwithstanding the fa ct that she was: (i) a member of the original anti-piracy
committee; (ii) a senior member of the Technology Department; and (iii) one of the most
technically qualified members of the Department, she was treated as an outsider,
perhaps not to be trusted, on numerous occasions involving important decisions
concerning piracy and other matters within the scope of her responsibilities. She was
frequently kept in the dark on important matters, for whatever unexplained reasons or
motives which Snazel and Gavaghan may have had at the time. The following examples
are among the more significant instances:
Attached to a letter dated July 21, 1999, addressed by Chris Frank to
Tola- Baron (N.F.L.)127 concerning the "N.F.L. Sunday Ticket" was a
"Technical Attachment" prepared by Snazel. He assured the NFL that the
BEV CAS had not been compromised and that, moreover it was
incompatible with that of EchoStar which had been recently compromised.
Casavant claims Snazel never discussed or sought her opinion on this
matter and that she had never seen the Technical Attachment before.
Considering her experience and technical expertise in the matter and the
corresponding lack thereof by Snazel, one expect that, at the very least,
he would have sought her input. Perhaps he intentionally chose not to. As
the credible evidence clearly demonstrates, Snazel was mistaken in his
opinion.
ln a letter dated August .13, 1999, James Shelton provided Snazel and
Juneau a high level analysis of Nagra piracy and the impact on the BEV
system which uses Nagra's CAS and smart cards
128
. At page 4 and 5 of
the letter, he described in detail the current pirate market and the future of
piracy. Referring to the BEV system, and its vulnerability to a commercial
hack similar to the one that occured in the EchoStar system, he
concludes, U[t]here is no technological reason this could not happen." Once
again, Casavant claims that Snazel never advised her of the Shelton
opinion.
Casavant was referred to a report entitled "EFU Changes to Date" dated
April 4, 2000, prepared by Geoff Collins and Murray Ho , both of whom
worked under Snazel's direction in the Technology Department. The
report refers to the incidence of "hybrid piracy" and documents certain
efforts initiated by BEV to combat piracy, including the targeting of circuit-
127 Exhibit P-358.
128 Exhibit P-91.
500-17 -027275-059 PAGE: 66
board smart cards and blocker cards. It concludes: "We know how to shut
the pirate systems down." She c1aimed she only first saw the report in
preparation for her appearance as a witness in these proceedings and that
Collins never shared this information with her. She testified: "Things were
very isolated from that topic."
Similarly, she was not copied on nor was she made aware of an Internai
Memorandum dated August 24, 2000 addressed by Gavaghan to
"Executives" ... summarizing information which came out of the August
10th cross-functional piracy group meeting". This memorandum indicated
that there was an increase in distribution and use of E3M cards (the
"Three Musketeers Card") and that this was a serious concern. Perhaps,
that explains why she appears to have been out of the loop. In response
to a question put to her as to whether she was aware that in 2000 and
2001, piracy was increasing and was more difficult to control, she replied:
No, my understanding was that, in two thousand and one (2001),
there was some piracy and that they initiated ECMs to target those
devices and contain the piracy. That was my understanding at the
time.
[285] ln fact not being aware of the statistics and financial information compiled in the
department, Casavant credibly believed ECM's were successful in containing piracy
weil into the early part of 2002.
[286] She was cross-examined at length concerning the meetings at the Nagra offices
in Cheseaux, attended with Snazel in March 2002. She acknowledged having attended
ail of the different meetings during which the subject matters discussed in the written
documents referred to in Exhibits P-201 and P-201.01 (en liasse) were presented by the
various Nagra representatives.
[287] She was shown copy of a document dated July 23, 2002 entitled "project Aladin
Preliminary Outline of Business Case". She claimed she did not receive a copy it and
was unaware of the recommendation not to proceed with the card swap out program at
the time.
[288] With respect to the delays in implementing the Aladin swap out program, the
following extract from the transcript of Casavant's cross-examination on November 3,
2011, warrants reproduction:
5930- Right. Now, you'lI agree with me, will you not Madame Casavant, that it
was extremely important to introduce new technology quickly in order to
capitalize on a maximum benefit of that technology; is that not the case?
A- Yes
500-17 -027275-059 PAGE: 67
594 O-And you'lI agree with me, will you not, that the fact that the Aladdin card
had in ... from the evidence we've seen, been used at least in a beta
format since two thousand and one (2001), and in an operational format
at least since two thousand and two (2002), that that new technology, by
two thousand and five (2005), was already getting a little bit long in the
tooth?
A- If you talk about the Aladdin technology, then 1 wouldn't cali it long in the
tooth, but it had its years of...
5950- Three (3) years of Iife on it already by the time it was ultimately ... the
DNASP-2 stream was switched off in July two thousand and five (2005)?
A- Yeso
5960- And you'lI agree with me, will you not, Madame Casavant, that that sim ply
was far, far too slow to achieve the maximum benefit of that new
technology that you could have achieved through a card swap program
initiated in two thousand and two (2002), or at the very latest in two
thousand and three (2003)?
A- Weil, the ca rd swap program or the Aladdin program started in that period
of time. The goal was always to finish sooner than it did. Unfortunately,
there were road blocks from the software development and testing, and
software on the set-top box being ready, that forced us to keep pushing
the date back. But the ultimate goal was always to try to do the swap as
quickly as possible.
5970- Right, but you'lI agree with me, will you not, Madame Casavant, that the
swap did not begin until August of two thousand and four (2004)?
A- The actual card swap, correct
5980- Yes, and that's what l'm talking about, the card swap that would have the
maximum impact on piracy.
A- Weil, in order to do the ca rd swap, you had to get the system in place,
and it took longer to get the system in place before starting the card
swap, so ...
5990- Three (3) years to get the system in place?
[289] The Court believes that, based on the limited and filtered information made
available to her, Casavant was competent in the performance of her functions as one of
the department heads and credible in her testimony in these proceedings. However, her
testimony discloses that her performance and the results she might otherwise have
achieved in successfully combatting piracy in a timely fashion, were hampered due to
the serious lack of communication or the furnishing of selective information by Snazel
500-17 -027275-059 PAGE: 68
and Gavaghan regarding important and, at times, critical matters. For reasons, allegedly
of security, she was kept in ignorant bliss. She was only provided with information on
what they believed to be "a need to know basis".
[290] Snazel and Gavaghan chose not to share relevant information and decisions with
her. If she had been properly aware she could have performed her responsibilities and
functions in an effective manner. She was a member of the original anti-piracy
committee and Chairman of the Counter-Piracy Task Force, one of the few senior
members of the department having the requisite ski Ils and technical knowledge to
advise the corporation and its directors in matters of piracy and apprapriate technology
to combat signal theft. Perhaps, that was her problem.
(5) Christophe Nicolas ("Nicholas")
[291] Nicholas is the Senior Vice President, Chief Technology Officer at Nagra since
2008. He was previously Chief Security Officer from 2006 to 2008; Vice President Card
and Security from 2001 to 2004; Group Leader and holder of several other positions
fram 1998 to 2006; and Software Developer from April 1996 to 1998.
[292] Nichols was examined in connection with the following subject matters:
ECM's;
New Aladin CAS; and
Discussions and collaboration with BEV regarding signal security, piracy
and anti-piracy initiatives.
[294] He described Nagra's role in coordinating with BEV, the designing and launching
ECM's in Canada.
[295] He also described in detail the March 2002 meeting in Cheseaux with
representatives of BEV and the marketing effort pursued by Nagra to sell the new
Aladin CAS and smart cards. He confirmed that, at times, the presentation broke out
into several sub-groups to discuss different aspect of the entire Aladin project.
[296] Contrary to: (i) the testimony of other witnesses, that Aladin was being rolled out
at the time in the EchoStar system; (ii) the evidence found in the Annual Reports
129
of
the Kudaski Group regarding other installations of Aladin elsewhere in the world; and
(iii) the timelines referred to in the various Aladin documentary presentations made in
March 2002
130
and subsequently thereto, Nicholas still insists that Aladin was NOT
129 Exhibit P-372.
130 Exhibits P-201 & P-201.01.
500-17 -027275-059 PAGE: 69
ready in March 2002 and that it required further development to adapt it to the BEV
system.
[297] He claims that between March 2002 and July 2005, there were no delays in
implementing the Aladin swap out for which BEV was responsible. This rather gratuitous
and unsubstantiated statement is, perhaps, best explained by the fact that BEV is still a
client of Nagra today.
(6) Virgino Trevisan ("Trevisan")
[298] Trevisan was Program Manager at Nagra from October 1996 to 1998. He was
also Vice President Services Americas fram 1998 to date.
[299] Trevisan was examined in connection with the BEV card swaps.
[300] Certain elements raised during his examinations warrant specifie attention and
analysis.
[301] He was the Nagra representative who first presented the Aladin project to Snazel
and Casavant in December 2001
131
He alerted them, at the time, of the vulnerability of
BEV's system. Following the December meeting, he organized the meetings in
Cheseaux in March 2002.
[302] Following these meetings, Nagra worked on a modification of their proposai that
addressed the specifie needs of BEV. A revised budget was'prepared and presented in
June 2002
132
to reflect the stated requirements of BEV.
(7) lan Gregoire ("Gregoire")
[303] Gregoire was Financial Controller for Bell Sympatico, Bell Canada Wireless, Bell
Voice Over IP, Bell IPTV from 2004 to 2007. He was also Director of Accounting and
Financial Controller of BEV from April 2001 to June 2007.
[304] Since leaving BEV and the BCE group of companies, he has been employed by
an investment banking company.
[305] Gregoire was examined in connection with accounting issues and auditing
processes at BEV. He also described the auditing practices of the industry and the
nature of the mandates given by members of the industry to an independent firm of
auditors - Broadcast Auditors Canada ("BAC").
[306] Relating to the calculations of royalties payable, he described the functioning of
the Customer Subscriber Base System ("CSG") and the Programing Payment System
132 Exhibits P-200.1.
500-17 -027275-059 PAGE: 70
("PPS") followed by BEV. He further explained the interrelation between the accounting
departments of BEV and Bell Canada. The later provided shared accounts payable
services for ail of the BCE business units.
[307] He identifies a document prepared by him dated December 16, 2002, wherein he
requests an Accounting Policy Ruling regarding whether BEV can capitalize the costs
related to a project (Aladin) that addresses piracy.
(8) Alexander Ishankov ("Ishankov")
[308] Ishankov is Directar of Digital Technology and Systems Integration at BEV since
2007. He was previously Associate director of Systems Integration from 2004 to 2007;
Manager of the System Administration - conditional access group fram 2002 to 2004
and Senior System Administrator fram 2001 to 2002.
[309] Ishankov was examined in connection with the following subject matters:
Technological issues;
Assessment of level of piracy;
ECM's and other anti-piracy measures; and
The new Aladin CAS.
[311] He described at length the various techniques used to address security issues
regarding BEV's signal. He described the ECM's, including transmission key changes,
"Kill ECM's" and "Nag ECM's" devised and implemented in collaboration with
representatives of EchoStar and Nagra.
[312] He testified in particular that BEV performed mare than a hundred transmission
key changes per year. In his opinion, these were relatively successful in combating
piracy. In cross-examination he had difficulty sustaining this number in light of other
credible evidence that disclosed a significantly lower number of annual key changes.
[313] He claimed he was not asked to and that accordingly he did not keep a log of
ECM's performed fram 2001 until 2005. However when referred, in crass-examination,
to what appears to be such a log of ECM's performed without mention of the " ... 100's of
key changes" alluded to by him 13 , he dismissed the document claiming it was prepared
by a co-worker, Louis Adriano, fram memory in response to a request fram Casavant
following a Court arder and that it did not include the " ... 1 OO's of key changes" previously
133 Exhibit P-156, Bates # 02476.
500-17 -027275-059 PAGE: 71
referred to or the "repeat ECM's". In a rather cavalier manner, he rejected the validity of
the Adriano log claiming he had "other priorities" at the time and that he didn't put much
effort into the preparation of this document even though it was prepared following a
Court order 134.
[314] He was actively involved, from the start, in the migration to the Aladin CAS. He
explained that one of the essential conditions for the deployment of Aladin was the
upgrading of the existing Integrated Management System ("IMS2") to IMS4. He
described that there were initial problems detected in the process which had to be
addressed and corrected. During the phase out period, they were required to add
additional components to the existing IMS2 and the new IMS4 to allow them to
"communicate" with both the existing DNASP2 system and the new Aladin system. They
were only able to "light up" Aladin in a limited manner during the fall of 2003.
[315] He explained the various technological aspects referred to in the various exhibits
filed in connection with the migration process to Aladin and the sequencing of the
shutdown of the previous system and the complete activation of the Aladin CAS
throughout its subscriber network.
135
.
[316] ln cross-examination, it was pointed out to him that there are inconsistencies in
certain Iists which purport to track the ECM's performed
136
as weil as in the Expert
Report prepared by Dr. Green 137 regarding the number of ECM's and the internet
postings, ("chatter"), which were monitored by them following each of the ECM's in
question.
[317] He was unequivocal in his testimony that that following every CM (including key
changes), he and his staff always verified the response of the pirate community by
monitoring and tracking the internet chatter in order to evaluate the success thereof.
[318] Confronted with the evidence that his department was only able to document
approximately 60 instances of such internet chatter
138
, he still claimed that substantially
more ECM's were performed. His justification for this "anomaly" in his evidence is lacks
credibility.
[319] He acknowledged having read the Green Expert Report and in particular Green's
monitoring of the pirate community postings' regarding the ECM's performed. He was
only able to identify a Iimited number of ECM's from the chatter. Although he read the
Green Report, he admits that he did not alert Green that he had missed the "100's of key
changes" which he claims had been performed.
135 Exhibits P-203.1, 0-220, P-203, P-198.1, P-203.4, P-208.1, 0-236, 0-222 & P-218.
136 Exhibits 0-71, 0-75 & P-156.
137 Exhibit 0-271, p. 40.
138 Exhibit P-93 (en liasse).
500-17 -027275-059 PAGE: 72
[320] His cavalier responses ta and lack of credible explanations as to the reasons for
these inconsistencies bring into question the credibility of these lists and his testimony
concerning the "100's of key changes" performed annually. The Court is disposed to
accept as more credible the fact that there were only some seven key changes made
during the three year period commencing August, 2001 until September 2004, as
reported by Green in his Report.
[321] Ouestioned by the Court as to his awareness of the serious increase in the
incidence of piracy in the years 2002 and following and whether he was so informed by
either Casavant or Snazel, he responded he was not so informed, although he was
aware of "a slight increase". On this matter, the Court finds him credible.
[322] Curiously, although he was Director of Digital Technology and Systems
Integration, a senior officer of the Technology Department, he was not made a member
of the Casavant Counter-Piracy Task Force. He was aware of the Task Force's
existence but, oddly, he was not made aware of its findings and recommendations.
139
(9) Steve Collette ("Collette")
[323] Collette is a Gestionnaire principal des enqutes la Sret de Bell Canada
since 2008. He was previously Enquteur la Sret de Bell Canada from 2003 to
2008.
[324] He was examined in connection witha series of reports documenting
investigations carried out b ~ him and Girard of the activities of suspected pirates and
their eventual prosecution 14 .
[325] He described, in particular, the types of investigations performed, at times in
collaboration with various police forces, Industry Canada, the CMPDA and other
interested agencies and organizations.
[326] He was examined in connection with the various legal proceedings instituted
before the Courts and the CRTC against retailers and suppliers of equipment and smart
cards used ta illegally access and compromise BEV's signal
141
.
Ouestioned by the Court as ta why BEV did not pursue the end-users, that is the
individuals with pirated satellite dishes and/or set top boxes and smart cards, he
responded that this was not a BEV's strategy or a priority.
139 Transcript, November 16, 2011, pp. 83-88.
141 Exhibit D-082.
500-17 -027275-059
PAGE: 73
(10) Martin Girard ("Girard")
[327] Girard is Directeur de la scurit of Bell Canada since 2008. He was previously
Directeur associ en charge du groupe des enqutes pour la rgion du Qubec fram
2003 to 2008; Enquteur fram 2000 to 2003; Analyste au centre de contrle de la
fraude fram 1996 to 2000; and responsable for Gestion du crdit et perception fram
1990 to 1996.
[328] He was examined in connection with investigations carried out of suspected
pirates and their eventual prosecution.
[329] His testimony corroborated that of Collette.
(11) Marci Peters ("Peters")
[330] Peters was Manager of Business Quality Assurance of BEV fram July 2005 to
July 2006. She was previously Manager of the Multiple Receiver Verification Pragram
fram 2002 to 2005; Manager of the Collections Department fram 2000 to March 2003;
and Team Manager for BEV's cali center in1999.
[331] Peters was examined in connection with the Multiple Receiver Verification
Pragram (the "MRVP"), the Cali-out pragram and other related activities to identify and
combat account stacking by BEV subscribers.
[332] She was also examined in connection with the Cali Center organization and
specifie internai written guidelines given employees of the department regarding
handling of subscribers having multiple receivers in secondary residences.
[333] ln cross-examination, she was referred to an email message dated April 5,2002,
(prior to her assuming the responsibilities for the Cali Out Center) addressed by Janis
Macasias to the Cali Centre and others regarding the Outbound Multiple Receiver
Campaign 142. The following "SPECIAL NOTE FOR HELP OESK" found on page 2 of the
message, appears to confirm, at the very least, BEV's tolerance of the practice of
account stacking at the time.
For now we will be giving sorne grace to customers who say they cannot verify
the location of ail receivers because sorne of the secondary receivers are located
at a cottage. We will be requiring them to fax proof of ownership of both
residences ( ... ) but we may need to cali them back in the near future for a follow-
up. This information is not to be shared with CSRs at this time as the
"cottage policy" is still under review by Executive Management...stay
tuned for updates!
500-17 -027275-059
PAGE: 74
[334] She was examined in particular with respect to a document dated July 2002
entitled "Multiple Receiver Outbound Campaign,,143. This document gives SEV
employees a sample response subscribers concerning account stacking:
If a Customer indicates that one or more receivers are located at a vacation
home:
"Thank you. Bell ExpressVu's policy states that ail receivers should be
associated with a single physical address, and we ask that ail receivers are
continuously connected to a single operating telephone line. However, the
policy is currently under review, so at this time we will simply note the
account and if we are unsuccessful in changing the poHcy, we will contact
you to advise of the steps that may need to be taken. Rest assured we are
constantly working to improve our customer service and ease ail processes.
Alternatively you can activate a new account just for your cottage receiver. Thank
you for your understanding."
( ... )
If customer indicates that Dealer told them it was OK to do this wh en he
purchased the additional receiver.
"Bell ExpressVu receivers are most often sold through independent sales
agents, but we have advised authorized dealers of the poHcy. Our policy
and enforcement practices are clear in our Customer Service Agreement
and on your account statement. We apologize for any misunderstanding."
[Emphasis added]
[335] Another document entitled "Multiple Receiver Verification Program,,144 is more
definitive as to SEV's policy requiring: "that ail receivers on any account should be
associated with a single physical address."
[336] ln a document, created by Peters, dated December 10, 2004, entitled
"Departmenta1 o verview: Fraud
14S11
at page 3 thereof, she gives a history of the
program history and notes:
Prior to 2002, Bell ExpressVu's Multiple Receiver Policy wasn't strictly enforced
with cottage/vacation properties because there wasn't a real issue due to the
cost of receivers. Most customers cou Id only afford one receiver and would take
it back and forth between their residence and cottage. As the priee of receivers
decreased, more and more customers were maintaining two active locations on
one account simultaneously, hence the creation of the Multiple Receiver
Verification Process [Policy].
143 Exhibit P-39.01 .
500-17 -027275-059 PAGE: 75
[337] A summary of the results of BEV's various efforts thraugh its Cali Out Pragram to
control account stacking is found in an internai document dated May 2005
146
. The
results of the Pragram are very positive.
(12) J.J.Gee ("Gee")
[338] Gee was Special Projects Manager and/or Director of Field Security and
Investigations of NagraStar fram January 2001 to date.
Investigations and satellite security; and
Collaboration with BEV regarding signal security, piracy and anti-piracy
initiatives.
[340] He described the joint efforts pursued with BEV personnel to track the activities
of the pirate community. He worked closely with Snazel and Casavant and their te am on
technology matters, legal prasecutions and for investigation work. The lines of
communication among these representatives were always informaI.
[341] Contrary to what Ishankov claimed, he maintained that BEV investigators did
NOT provide Nagra with copies of their investigatory work.
[342] Like BEV, Nagra never pursued end users of signal piracy. They preferred to go
after the suppliers.
[343] Contrary to Snazel's testimony and to his expressed opinions in the Technical
Attachment to the NFL Sunday Ticket letter of July 21, 1999
147
, Gee confirmed in
crass-examination that the Nagra CAS used by EchoStar was substantially similar to
the one used by BEV.
(13) David McLennan ("McLennan")
[344] McLennen was President of BEV from April 2000 to May 2002. He was
previously Interim President since 1999 and Vice President of Operations and Chief
Financial Officer fram 1997.
[345] Since leaving BEV he has been employed as Chief Financial Officer and
Corporate Secretary of Sierra Wireless.
[346] He holds a Bachelor of Commerce degree and a chartered financial analyst
designation. His work experience is exclusively related to business, financial and
146 Exhibit P-44.
147 Exhibit P-358.
500-17 -027275-059 PAGE: 76
investment analysis and support. He has no formai education or work experience in the
area of satellite broadcasting technology.
[347] McLennen was examined in connection with the circumstances surrounding the
selection of EchoStar as the BEV technology provider, the incidence of piracy in the
industry and his management philosophy during his tenure as President of BEV.
[348] Certain elements raised during his examinations warrant specifie attention and
analysis.
[349] His claims to have been a strong believer in delegating authority and
responsibility to senior management. Thereafter, he sim ply coordinated their activities.
He described his management style in the following manner:
ExpressVu had some talented people, ( ... ) responsible for the various franchises
within the company, people that 1 had worked with really since the launch of the
service. 80 ( ... )my management style with that team was to ( ... ) give them a
mandate to do their jobs, be a reference point for them as we dealt with issues
that we were faced, and also to make sure that we ( ... ) we were headed in the
right direction in terms of profitably growing the business.
( ... )
The way we managed the company at that time was ( ... ) we had a fairly tightly
focused senior management team. We had a standing weekly management
meeting where we would discuss ( ... ) issues that we were being faced with. 80
( ... ) piracy would be ( ... ) a topic during that regular dialogue among the senior
management team. 148 .
[350] He identified the senior management te am as being composed of himself,
Gavaghan, Frank, Snazel and others. Curiously his definition of the "senior
management team", did not include any of the members of the Technology Department
who had the requisite technological knowledge and experience, such as Casavant and
Ishankov.
[351] Considering that neither Gavaghan nor Snazel possessed the requisite technical
knowledge or experience and each of them tended to keep information they gathered to
themselves to be shared only on a "need to know basis", the Court can only question
whether the critical information necessary to make an informed decision was
communicated to McLennen during the standing weekly management meetings. The
Court finds his testimony concerning the nature and extent of the piracy problems that
existed at the relevant times reflected a shocking lack of awareness on his part of the
seriousness of the situation and the urgency to take remedial action.
148 Transcript, November 25, 2011, pp. 18 ft.
500-17 -027275-059
PAGE: 77
[352] His explanations as to the methods used to fight piracy are clothed in generalities
with little or no references to specifies. When asked if he was kept informed as to the
effectiveness of the various ECM's performed, he responded that this would have
occurred at the weekly senior management meetings.
[353] When asked whether the possibility of a card swap was ever discussed during
his tenure as President, he responded, quite candidly :
The concept of a card swap was certainly ... you know, we were certainly aware
of it you know, again, as yet another tool to ... you know, to manage piracy. A
specifie, you know, card swap, though, was... 1 don't recall a specifie
discussion around card swaps.149
[Emphasis added]
[354] He was questioned in cross-examination as to the internai capital investment
approval process at BEV and BCE. Considering his fin an cial background and
experience, and his responsibilities as President of BEV, one would think he would have
had a certain degree of knowledge and understanding of the process at the very least.
Yet, other than in broad generalities, he was unable to explain the process in place in
each of the entities.
[355] He was shown a report, dated April 4, 2000, prepared by Geoff Collins and
Murray Ho dealing with various campaigns and measures to address piracy and the
difficulties encountered
150
. He did not recall ever seeing this report or of having any
specifie discussions concerning the matters raised therein. He did not recall the
problems or piracy mentioned in the report as having been significant at the time.
151
[356] He was shown an InternaI Memorandum, dated August 24, 2000, addressed to
"Executives" by Gavaghan " ... summarizing the information which came out of the August 10
eross-functional piraey group meeting." 152 The Memorandum describes serious incidences
of piracy of the BEV system and proposes specifie measures to deal with the growing
problem. McLennan's only response upon being shown this important Memorandum
was: "l don't reeall this memo specifieally" 153
[357] He was shown and acknowledged having received an InternaI Memorandum
dated October 15, 2001, addressed to him and others by Snazel 154, dealing with anti-
piracy measures and, in particular, a key change on the system. Although the
Memorandum refers to some positive results, Snazel cautioned as to the bad news
regarding the reference in the internet chatter to "autoroll" now working so as to defeat
149 Ibid, pp. 27-28.
151 Transcript, November 25" 2011, pp. 56-57.
500-17 -027275-059 PAGE: 78
key changes which BEV may effect. McLennen's response to this concern was that,
notwithstanding Snazel's opinion at the time, he believed ECM's were effective. Despite
this testimony, the Court has serious doubts about whether McLennen knew what
"autoroll" was at the time or how it was " ... naw warking sa as ta defeat key changes" which
BEV may effect.
[358] He was shown a document, dated December 12, 2001, presented by Nagra at a
meeting held in Toronto with Snazel and others entitled "NagraTV- The new generation
Nagravision CAS products,,155. He did not attend this important meeting, nor does he
recall ever being informed of it or of the matters discussed in the presentations made by
Nagra.
[359] He was shown a document entitled "Countermeasure Strategy Planning
Discussion,,156, prepared by Casavant in early 2002 as talking points to be discussed in
a meeting with Snazel. At the last page, Casavant wrote as a conclusion:
Evaluate and start to plan for the Aladdin implementation. We need ta start
evaluation of the processes reguired for the replacement of smart cards in
the fields.
[Emphasis added]
[360] The following shocking revelation on this critical subject ensued in an exchange
between counsel and McLennan:
( ... ) Now, do you recall, seeing this document, that that was a subject of
conversation, at least by early two thousand and two (2002), that there was a
need ta replace smart cards in the fields?
No, 1 don't recall that being raised with me.
157
[Emphasis added]
[361] Regarding the March 2002 meeting with Nagra in Cheseaux, he claims:

He did not instruct Snazel to go to this meeting;
He does not recall him going there;
He was not aware of a document entitled "Express Vu Aladin Budget,,158
prepared by Nagra and presented at the March 2002 meetings;
155 Exhibit P-198.02.
156 ExhibitD-121.
158 Exhibit P-201.01.
500-17 -027275-059 PAGE: 79

He does not specifically recall being briefed by Snazel following his return
from the Cheseaux meeting; and
He doesn't recall being advised by Snazel of his opinion regarding the
necessity to perform a card swap.
[362] His testimony is in this regard is contradicted by Snazel. There are two possible
explanations for this, either: (i) McLennan was so informed by Snazel of these matters
and is not telling the truth, or (ii) he is telling the truth and Snazel withheld this
information of the Cheseaux meeting from him for whatever reason he may have had at
the time.
[363] The Court finds McLennan's testimony and apparent lack of knowledge of the
critical issues in question to be sincere and more credible. It is not conceivable that, if
he had been made aware of the important matters discussed at Cheseaux, he would
not have had any recollection of having been so informed. As an effective President,
McLennan should have been aware of these matters. Perhaps his self-described
"laissez faire" approach caused this to be. That is, however, another matter.
[364] McLennan's testimony reinforces the Court's belief and is but a further example
of the incoherent and dysfunctional lines of communication and coordination prevalent
during this critical time in the Technology Department.
(14) Bernard Asselin (" Asselin")
[365] Asselin was Vice President Marketing, Qubec and Senior Director of
Acquisitions of SEV for Canada from 2002 to September 2004. He was previously Vice
President Marketing for Qubec only from October 2000 to 2004.
[366] Since leaving SEV, he was employed by The Gazette as Vice President - Sales
and Marketing until 2010. Thereafter, he joined Bleublancrouge, an advertising agency,
as President, head of operations and partner.
[367] He was examined in connection with SEV's marketing and anti-piracy initiatives.
[368] Initially, he did not participate in the Management Committee. He joined the
Committee in 2002, after assuming the responsibilities of Vice President Marketing.
[369] He described SEV's increasing penetration of the Quebec market that he
attributed to the following factors: cost, flexible packages, additional local channels in
the regions, HO service, ongoing labour disputes and vandalism at Vidotron, PVR
superiority and its network of retail vendors throughout Qubec.
500-17 -027275-059 PAGE: 80
[370] He produced a series of publicity pamphlets in support of his pretentions
regarding SEV's superior marketing and promotional campaigns 159.
[371] He disputed the analysis and findings contained in the Navigant Report
160
regarding the relative similarity of the services, equipment and packages offered by
SEV and Vidotron.
[372] ln cross examination, he was referred to an internai SEV document dated August
5, 2003 entitled "ECM Communications Plan,,161. He was questioned regarding SEV's
estimates of the level of piracy referred to on page 2:
... on a base of 1 .3 M subscribers, 450K are pirating signais
300K of these are "hybrid" customers, paying for minimum service and
pirating the rest; Remaining 150K are black market users ( ... )
[373] Asselin was unable to or refused to confirm or comment on anything referred to
in this document. He claimed total ignorance of its content. In this instance, as in the
case of references to over ten other matters or documents of importance which, one
would have assumed, wou Id have been within his area of knowledge and responsibility,
his response was consistently: " ... c'est pas ma job, puis je suis pas impliqu ... "
[374] ln is worthy of note that in the case of the "ECM Communications Plan", he was
listed as one of two spokespersons for the Initial Announcement. The other being Tim
McGee, then President of SEV. When questioned on this anomaly, he claims he was
added as spokesperson for Qubec because McGee does not speak French. He
claims:
... j'tais le mouthpiece, l, j'tais juste le porte-parole ...
( ... )
R- ... le porte-parole de ... par exemple, je vois a, je vois mon nom ici, l. Alors,
porte-parole de ce qui tait ECM. Maintenant, le contenu et qu'est-ce que j'ai
dit, j'en ai aucune ide.
162
[Emphasis added]
[375] Questioned concerning the contents of other documents with which he appeared
to have an implication, he repeated his response that he was only "le mouthpiece".
160 P-363-A.
161 Exhibit D-91 .
500-17 -027275-059 PAGE: 81
(15) Chris Frank ("Frank")
[376] Frank was Vice President of Programming of BEV from 2005 to January 2011,
when he retired. He was previously Vice President of Regulatory and Government
Affairs from 1995 to 2005 and as weil, during that period, Vice President of
Programming from March 2001 to June 2003.
[377] He represented BEV before the CRTC during the months preceding the launch
of its service and thereafter. He was responsible for the negotiation of affiliation
agreements with the various rights owners, including with TVA for the rights to the LCN
channel.
[378] He was examined in particular regarding the preparation and exchange of
various drafts of a proposed affiliation agreement between BEV and TVA regarding the
LCN channel and the extensive correspondence in connection therewith 163. Except for
their agreement as to the amount of royalties payable by BEV to TVA, the parties failed
to arrive at a formai written agreement addressing other matters normally found in su ch
agreements.
[379] TVA contends that, notwithstanding the absence of a signed written agreement,
the parties are nonetheless presumed to be bound by an unwritten agreement
embodying the provisions customarily found in affiliation agreements of this nature. BEV
disputes TVA's contentions. .
[380] Frank was examined at length concerning the various complaints made by
Vidotron regarding BEV's alleged tolerance of account stacking by its subscribers. He
identified a series of correspondence between the parties and with the CRTC, ail to no
avail
164
. The dispute is one of the issues now raised for determination in one or more of
the Related Actions.
[381] On October 11, 2002, in a letter addressed to ail the major Broadcasting
Distribution Undertakings ("BOU") by the CRTC, they were asked to detail the steps
that they have taken to address signal piracy.165
[382] As requested, Frank responded in a letter addressed to the CRTC dated October
25, 2002.
166
He pr,ovided an historical overview of the problem and the magnitude
thereof. He then proceeded to describe BEV's anti-piracy initiatives including the
163 Seeinteralia Exhibits P-300, P-22, P-316, 0-51, P-19, P-316, P-23, P-297" P-25, P-298, 0-56, 0-57,
0-59, 0-58, 0-60 & 0-61.
164 See inter alia Exhibits P-291 , P-292, P-293, 0-50, 0-182, P-26, P-295, 0-53, P-296 & P-30.
165 ExhibitP-111.
166 Exhibit P-112.
500-17 -027275-059 PAGE: 82
consolidation of it anti-piracy activities under a new Director of Counter Piracy, whose
sole responsibility was the co-ordination of SEV's various efforts in this area.
[383] Frank acknowledged that his response was based on discussions held with
Snazel, Gavaghan, Casavant and others in the Technology Department.
[384] On October 28, 2002, he Canadian Cable Television Association (the "CCTA")
requested that the CRTC hold a public hearing, on an urgent basis, to investigate the
theft of SEV's signal by pirates.
[385] The CCTA argued that it was in the public interest to undertake such an
investigation. It complained:
This situation causes material and growing harm, and is extremely unfair to ail
stakeholders in the Canadian broadcasting system, including bona fide paying
customers of ail licensed Canadian distribution undertakings, competing
distributors Canadian programming services and Canadian program rights
holders. If left unchecked, the penetration of compromised Bell ExpressVu
decoder eguipment and related components being used to receive
programming services without the reguisite payment could cause serious
and irreparable harm to the entire Canadian broadcasting system.
[Emphasis added]
[386] Frank responded to the CCTA complaint in a letter dated November 8, 2002
167
.
He took issue with the "single minded facus af the eeTA with respect ta Bell ExpressVu" and
argued, as had the CRTC, that "unlawful receptian remains a seriaus problem far bath
satellite and cable". He contended this problem was an industry wide problem, not one
restricted to SEV.
[387] He identified a series of reports made by him and other senior SEV officers to the
CRTC and various responses received in the context of the ongoing CRTC Industry
Consultation on Signal Theft168.
[388] Regarding the NFL Sunday Ticket Sunday Ticket programming rights, he
identified a letter July 21, 1999, addressed by him to Tola Murphy-Saron and the
Technical Attachment prepared by Snazel. As he was not an engineer he thought that
the attachment from Snazel regarding the security of the existing SEV CAS would have
greater credibility.
[389] He described the process leading to the administrative extensions and ultimate
renewal by the CRTC of SEV's DTH Sroadcasting Licence.
167 Exhibit 0-45.
168 See, interalia, P-117, 0-35, P-5, P-118, P-119, 0-38,0-39,0-41,0-46, P-124, 0-47 & 0-49.
500-17 -027275-059
PAGE: 83
[390] Concerning Vidotron's allegations regarding SEV's misleading representations
to the CRTC, Frank testified
169
:
ln ail honesty, it would be totally counterproductive and it's counter-intuitive for a
company like Bell ExpressVu, which is an affiliate of a company like Bell Canada
whose many, many arms of business are regulated by the CRTC, with tens ...
hundreds of millions of dollars of revenue at stake, to sully its relationship with
the Commission by misleading it in one particular area.
( ... )
1 don't know of any evidence that we filed with the Commission that was
misleading.
[391] ln cross examination, he confirmed candidly that within SEV, information relating
to the whole area of security and piracy was compartmentalized and was available on a
"need to know basis" exclusively. What is surprising, however, is the fact confirmed by
him, that although he was Vice President of Regulatory and Government Affairs
charged with keeping the CRTC informed as required, he was unfortunately not one of
those on the "need to know" list. .
[392] Frank "do es not recal/" ever having seen the January 13, 2003 Report on
Counterpi racy170. It defies ail logic and credibility that he would have been kept in the
dark as to the findings and recommendations of this critical analysis, especially in light
of his professed openness and transparency in reporting on this issue to the CRTC.
[393] He acknowledged that he never saw an evaluation made by SEV of the degree
of piracy of its service, nor did he ever see any evaluation by SEV as to the rate of
increase of the piracy of its services.
[394] He innocently believed that rate of piracy of SEV's signal was within industry
norms. Yet, when shown internai reports
171
that disclosed a rate of piracy substantially
higher than the 3 to 6% industry norm he considered reasonable, he refused to
acknowledge his mistake and he grudgingly admitted that the rate might have been only
"somewhat higher".
[395] Frank testified that in the preparatiOn of his various reports and letters addressed
to the CRTC he worked in a "collegial manner" with those responsible and
knowledgeable such as Snazel, Gavaghan, Casavant, Ishankov and others. Before
releasing these reports and letters, those responsible for the relevant information
"signed off" on the information emanating from their particular department or area of
responsibility.
169 Transcript, December 1,2011, pp. 40-41.
170 Exhibit P-1 06.
171 See by way of example, Exhibit P-1 07.4.
500-17 -027275-059 PAGE: 84
[396] ln a letter, dated February 28, 2003 addressed by Frank to the CRTC
172
, in
response to questions and comments received on February 21 fram the Canadian
Cable Television Association ("CCTA"), Vidotran and Star Choice, Frank appears to
admit that no decision had yet been made, with respect to SEV"s future technology
upgrades, and in particular the swap out to the new Aadin system. He wrate:
Some propose that ExpressVu replace its CAS and ail existing smart cards.
ExpressVu notes that such technology upgrades are necessary fram time to
time, not only to combat piracy, but to enable the receivers to interact with new
software that enables introduction of new features and services. The question
arises whether technology conversions should be applied on a going forward
basis, or to apply it to the existing base. The importance and number of design,
firmware, and software changes for each generation of technology in the field
must be considered, because card swaps are intrusive for consumers. Another
consideration would be the effectiveness of current anti-theft measures relative to
the degree to which a new CAS can combat piracy. Finally, the new card and
CAS must be designed to assist the company to better meet the desires of its
legitimate subscribers for new services and features Hence, ail the elements
must be [to bel carefully considered to optimize the benefits. ExpressVu
continues to work with Nagravision to assess potential CAS upgrades that
will meet its reguirements, and will implement a card replacement program
if, as and wh en appropriate.
[Emphasis added]
[397] ln a document, dated August 19, 2003, entitled "Status of Bell ExpressVu Anti-
Piracy Actions, prepared by Frank for Michael Sabia and Tim McGee in anticipation of
their meeting with the CRTC and other braadcasting CEO's, he described, at pages 7
and 8, the praposed phases of transition to the new Aladin CAS. He noted, with respect
to the third and final phase, Phase 3:
If Phase 3 is undertaken and when complete, ail existing STB's will have had
their cards exchanged for new Aladin cards and the first CAS will be shut down,
rendering old cards useless.
[Emphasis added]
(16) Timothy McGee ("McGee")
[398] McGee was President of BEV from May 2002 to October 2004. He was
previously Chief Legal Officer of Be" Canada fram 2000 to 2002.
[399] Since leaving BEV he has been employed as C.E.O. of the Law Society of British
Columbia. .
172 Exhibit P-5.
500-17 -027275-059 PAGE: 85
[400] McGee was examined in connection with the following subject matters:
Management of BEV;
Assessment of Piracy;
Signal piracy problems - strategy;
Anti-piracy initiatives and Anti-piracy Task Force;
New CAS - Aladin;
CRTC relations;
Project Liberty and
Fair Warning Letters preceding ECM's.
[402] He described his management philosophy as one based on creating " ... a strong
tearn of direct reports."
[403] He was referred to a "Briefing Note" dated July 8, 2002, apparently prepared by
Gavaghan to provide a background explanation to theft of BEV services using pirate
devices. Based upon random samples, Gavaghan estimated approximately 45% of
basic level subscribers were using illegal devices to steal additional programming
("hybrid pirates") and, in addition to the 45% hybrid pirates approximately 5% of total
subscribers were stealing BEV services outright without any subscription ("pure or black
pirates").
[404] Based upon this information and other discussions and analyses, McGee
acknowledged it was clear to him at the time that ultimately BEV would require a full
swap out of its CAS.
[405] He was shown and identified a document dated October 2002 entitled "Technical
Options to Combat Piracy in Canada,,173. Although the document bears his name on the
front page, he claims it was prepared by Snazel and McGraw and presented to him for
his consideration and approval. He favoured option # 1, referred to on page 11, being
the introduction of the new Nagra system (Aladin).
173 Exhibit P-1 01.
500-17 -027275-059
PAGE: 86
[406] He acknowledges having seen the Fraudulent Activity Reports prepared for the
months of July through October 2002
174
. The reports revealed a fast growing level of
serious piracy.
[407] Although McGee had only assumed the role of President of BEV in May 2002
and had no previous technical training or experience in the area, he was quite
dismissive about the importance or value of these reports prepared by the very people
who he referred to as members of his "strong team". In his opinion:
The report struck me as moderately helpful. And the reason why 1 say
moderately helpful to the assessment of the prablem and something that could
help us in our decision-making about the fix, the reason why it was moderate is
these were, as they say, largely guesses based upon assumptions, and that is
the language of the reports, at least the September one we're looking at.
So it struck me that those, while somewhat interesting, were not essential to the
decision-making that 1 viewed was necessary in arder to get a fix to this problem,
which was what 1 was committed to. So 1 didn't ignore them, but the numbers
were ... the numbers contained in the reports and the methodology to get it was of
moderate interest to me.
[408] He constituted the Counter-Piracy Task Force in October 2002 headed by
Casavant. As previously mentioned, the Court has some concerns about the objective
and purpose of creating the Task Force. These concerns were discussed in the analysis
. of the testimony of Casavant and will be addressed in greater detail further on in this
judgment.
[409] He testified as to his main purpose in creating the Task Force:
My goals were ( ... ) to have an outcome which was a report which pravided the
best possible assessment of the scope of the piracy issue and its nature, but
perhaps more importantly to make recommendations as to ail aspects of how it
could be dealt with.
( ... )
[f]he two (2) main reasons why 1 wanted that task force ... 1 wanted a task force
ta come up with that outcome, ( ... )My sense was that the counter-piracy
efforts were largely concentrated in the Technology group and that the
solutions, the main solution which was a full swap, a new access system
was weil known and that that was the direction that we were headed.
( ... )
What was missing fram my perspective, and 1 viewed that as my job as CEG,
was to understand ail the other elements of this. So, for example, the point of
174 Exhibit P-1 00 (en liasse).
500-17 -027275-059 PAGE: 87
sale impact of piracy and whether that was contributing to the problem. How
public awareness fit into this and whether we were doing enough in that area.
What was our approach to our inventory control. We had other partners that
really had nothing to do with the Technology group that were still vital to this
issue.
175
[Emphasis added]
[410] McGee's declared purpose in constituting the Task Force is inconsistent with and
is in clear contradiction with the stated purpose mentioned on the cover page of the
Report on Counter-Pi racy176 (the "Report"), ("Prepared for and submitted to the Legal
Department by the Counter-Piracy Task Force in contemplation of potential litigation'j.
Moreover, it is totally inconsistent with the stated purpose described at page 3 of the
Report, repraduced at length herein in the analysis of the evidence of Casavant.
[411] The Court notes with interest, that Mtre. Alexander J. Du, in-house legal counsel
to BCE, was one of the members appointed to the Task Force. This, perhaps, explains
and adds credibility to the legitimacy of the purpose stated in the Report rather than that
espoused by McGee.
[412] The Court retains as more credible, the stated purpose for constituting the Task
Force described in the Report, that is, "in contemplation of potentiallitigation" fram Cogeco
Cable Inc. and/or Ouebecor Media Inc.
[413] Ouestioned as to his reasons for naming Casavant to chair the Task Force rather
than Snazel, he responded that Snazel was: " ... the Chief Technology otticer with
responsibility for ail aspects of the technology platform and its delivery ... service delivery, which
was a big job. And he had to manage a large group ... ,,177
[414] While the reason given may be credible as to why Snazel was not named to
chair the Task Force, the Court finds it curious why those senior officers most closely
involved and knowledgeable of the on-going efforts to combat piracy, Snazel, Gavaghan
and Ishankov, were not at least named as members. Gavaghan testified he did not
participate at ail in the Task Force; Ishankov, although consulted on occasion, was not
made aware of the findings and recommendations contained in the Report; and Frank,
BEV's liaison with the CRTC, did not recall ever having seen the Report.
[415] Other than to explain the choice of Casavant to chair the Task Force and aside
from generalities as to the composition its members, no particular explanation is given
as to the reasons for appointment of its other members.
[416] McGee was rather lukewarm in his acceptance of the findings and
recommendations of the Report. He chose to disregard or dismiss its findings regarding
175 Transcript, December 6, 2011, pp. 54-55.
176 Exhibit P-106.
177 Ibid, p. 57.
500-17 -027275-059 PAGE: 88
the rate of piracy. He claims his focus was not on the number of pirates. Rather, he
asserted with a certain degree of bravado, that in his mind: "any piracy" was
objectionable.
[417] He did not a send copy of the Report to the CRTC because " ... we did not view
[that this] was information that was reliable ar precise enough for [. .. ] public consumption or use
with the CR TC. 178"
[418] Similarly, the Report was not circulated among the BEV staff except : " ... the parts
of the report that needed to be followed up with staff and with the people at ExpressVu, ail of
that was shared, thase pieces were shared with the relevant people on the implementation
team." 179 He does not identify those persans. It would appear, however, from the
testimony of Ishankov and Frank that they were not one of those "relevant people".
[419] Regarding the dissemination of the Report, or the limited nature thereof, see the
analysis of the evidence on the subject by Dr. Ferguson contained at pages 65-66 in her
Expert Report dated March 2010, extracts of which are reproduced further on in this
judgment.
[420] McGee was referred to a written presentation made by him to the BCE Board
dated September 24, 2003
180
and, in particular, to the fact that it underlined the total
number of pirates ("Black Market" plus "Hybrid") estimated to be stealing BEV's services
was 450,000. Questioned on these numbers, he dismisses them as being estimates of
the "worst case scenario". He gives them Iittle credibility. It must be noted, however, that
no such qualification is to be found in the written presentation.
[421] ln cross-examination, he was referred to a series of critical documents, which he
claims ta have never seen or of which he was never made aware. These include:
"Countermeasure Strategy Planning Discussion,,181 a talking points memorandum
prepared in early 2002 by Casavant for discussion purposes with Snazel. She
concludes with the following comment: "Evaluate and start to prepare for the Aladin
implementation. We need to start evaluation of the pro cess required for replacement of
smart cards in the fields. ";
"Bell ExpressVu Aladin - Budget" dated March 2002
182
presented to Snazel and
Casavant at the Cheseaux meeting. He claims he was not briefed on this matter
when he arrived in May 2002. Nor was he aware of the December 2001
presentation made by Nagra to BEV in Toronto;
178 Transcript, December 6, 2011, p. 122.
179 Ibid, p. 122.
180 Exhibit P-1 08.
181 ExhibitD-121.
500-17 -027275-059 PAGE: 89
"Bell ExpressVu Aladin - Budget" dated June 2002,183 containing a pricing
summary for the years 2002 and 2003 of US$ 3,789,000 (received after
assuming his functions as President in May 2002); he does not recall having
been made aware of this Budget involving a substantial capital expenditure on
the part of BEV; and
"Memorandum" dated December 9, 2002
184
addressed by Snazel to "Executives
- Bell ExpressVU, and others concerning the "Status of Aladin Conditional
Access Transition". The Memorandum states: "Current/y, Phase 11/ of the project is
going through a technical validation and budget approval process, with a target of
an earlv 2003 go-ahead. "
[Emphasis added]
[422] He did, however, identify and acknowledge having seen a document, dated July
23, 2002, entitled "Project Aladin Preliminary Outline of Business Gase,,185 and recalls
the recommendation contained therein on page 18 thereof: "Based on current estimate of
signal theft do not proceed with card swap out program". He claims that, at the time he
received this recommendation, financial considerations were not that important to him.
[423] He was questioned as to the functions of the BCE Investment Management
Council ("IMC") and the process followed by BEV to obtain approval for major capital
expenditures su ch as the ones required for the Aladin CAS swap out. Counsel
suggested to him that, in October 2003 nd subsequent thereto, the IMC refused to
grant financial approval of the project. He refuses to accept that assertion. In a
convoluted and incomprehensible explanation as to the inner workings of the 1 MC, he
attempted, unsuccessfully, to convince the Court that the full swap out to the Aladin
project had indeed been approved at that time notwithstanding the clear October 2003
refusai.
[424] He was referred to a document entitled "Aladin GondWonal Access System
Platform Security Implementation Plan,,186 drafted on or about April 20, 2004
187
by
Casavant and others. Among the objectives noted was to: "Gain Executive Approval for
funding ta proceed with program by April 22 ta prevent schedule slippage. "
[Emphasis added]
[425] Despite what appears to have been a clear indication that as of April 20, 2004,
BEV had NOT obtained executive approval to proceed with the full Aladin project,
McGee was still adamant that the requisite approval had in fact been obtained.
184 Exhibit 0-176.
186 Exhibit P-220.
187 Exhibit P-220, Undertaking # Je-60.
500-17 -027275-059
PAGE: 90
IX. EXPERT Evidence - JURISPRUDENTIAL PRINCIPLES
A. OUTIES AND RESPONSIBILITIES OF EXPERT WITNESSES
[426] The duties and responsibilities of expert witnesses were discussed at length by
Cresswell, J. in the 1993 seminal and frequently cited
188
U.K. Queen's Bench Division
(Commercial Division) judgment in National Justice Compania Naviera S.A. v.
Prudential A$surance Co. Ltd. (''The Ikarian Reefer'i
89
.
The duties and responsibilities of expert witnesses in civil cases include the
following:
1. Expert evidence presented to the Court should be, and should be seen to
be, the independent product of the expert uninfluenced as to form or
content by the exigencies of Iitigation (Whitehouse v. Jordan, [1981] 1
W.L.R. 246 at p. 256, per Lord Wilberforce).
2. An expert witness should provide inde pendent assistance to the Court by
way of objective unbiased opinion in relation to matters within his
expertise (see Polivitte Ltd. v. Commercial Union Assurance Co. PIc.,
[1987] 1 Lloyd's Rep. 379 at p. 386 per Mr. Justice Garland and Re J,
[1990] F.C.R. 193 per Mr. Justice Cazalet). An expert witness in the High
Court should never assume the role of an advocate.
3. An expert witness should state the facts or assumption upon which his
opinion is based. He should not omit to consider material facts which
could detract from his concluded opinion (Re J sup.).
4. An expert witness should make it c1ear when a particular question or
issue falls outside his expertise.
5. If an expert's opinion is not properly researched because he considers
that insufficient data is available, then this must be stated with an
indication that the opinion is no more than a provisional one (Re J sup.).
ln cases where an expert witness who has prepared a report could not
assert that the report contained the truth, the whole truth and nothing but
the truth without some qualification, that qualification should be stated in
the report (Derby & Co. Ltd. and Others v. Weldon and Others, The
Times, Nov. 9, 1990 per Lord Justice Staughton).
6. If, after exchange of reports, an expert witness changes his view on a
material matter having read the other side's expert's report or for any
other reason, such change of view should be communicated (through
188 See, inter alia,: Widdrington (Estate of) v. Wightman, 2001 aces 1788 (appeal
pending)("Widdrington"); Comptables agrees (Ordre professionnel des) v. Blouin AZ-50775157,
par. 111.
189 [1993] 2 Lloyd's Rep. 68 at pp. 81-82.
500-17 -027275-059
PAGE: 91
legal representatives) to the other side without delay and when
appropriate to the Court.
7. Where expert evidence refers to photographs, plans, calculations,
analyses, measurements, survey reports or other similar documents,
these must be provided to the opposite party at the same time as the
exchange of reports (see 15.5 of the Guide to Commercial Court
Practice).
[427] ln a Discussion Paper of the Federal Court's Rules Committee on Expert
Witnesses entitled "Expert Witness in the Federal Courts,,190, referring with approval to
the analysis of Cresswell J. in the Ikarian Reefer, the Committee wrote at page 1:
Background
The role of the expert witness is to assist the court through the provision of an
independent and unbiased opinion about matters coming within the expertise of
the witness. This dut Y is paramount. It overrides the obligations of the witness to
the party on whose behalf he or she is cal/ed to testify. The evidence of an expert
witness should be the independent product of the expert and should not be
unduly influenced, in either form or content, by the exigencies of litigation.
[428] Since, to a greater or lesser extent, most, if not ail of the expert witnesses heard
on behalf of each of the parties could not resist addressing and opining on one or more
of the "ultimate issues" ("la question factuelle finale') raised for determination in this and
the Related Actions, a brief overview of the applicable principles on the subject is
appropriate.
[429] Although, in the past, the admissibility of an expert report or expert evidence that
purports to address the ultimate issue has been the subject of some controversy, it is
now generally accepted that both ordinary witnesses as weil as expert witnesses may
express opinions on the "ultimate issue" without thereby becoming disqualified
191
.
[430] ln R. v. Burns
192
, McLachlin J. (as she then was) , cautions, however:
The respondent does not argue that psychiatric evidence bearing on a witness'
behaviour is for that reason inadmissible. His objection is that "the opinion of Dr.
Maddess went to the very root of the issue before the learned trial judge" and
that "al/owing that opinion usurped the function of the trial judge": the so-cal/ed
"ultimate issue rule". However, the jurisprudence does not support such a strict
190 http://www.fca-caf.gc.ca/bulletins/notices/ExpertWitness_Discussion_en.pdf.
191 See in this regard: J. Sopinka, S.N. Lederman & A.W. Bryant, The Law of Evidence in Canada,
Second Edition, (Toronto: Butterworths, 1999) at pp. 634-635; Phipson on Evidence, Sixteenth
Edition, (London: Maxwell & Sweet, 2005) at pp. 973-975; Droit de la famille - 1618, J.E. 94-176
(CA) at p. 6; and Chambly Toyota Inc. V. Carignan (Ville de), J.E. 97-1876 at pp.8-9 and Jean-
Claude Royer, La Preuve Civile 3e edition, (Montreal, ditions Yvon Blais, 2003), p. 305 and Donald
Bchard, Ad.E., L'Expert (Cowansville, Qubec: ditions Yvon Blais, 2011) pp. 219-224.
192 [1994] 1 S.C. R. 656 at 666.
500-17 -027275-059 PAGE: 92
application of this rule. While care must be ta ken to ensure that the judge or
jury, and not the expert, makes the final decisions on ail issues in the case,
it has long been accepted that expert evidence on matters of fa ct should
not be excluded simply because it suggests answers to issues which are at
the core of the dispute before the court: Graat v. The Queen, [1982] 2 S.C.R.
819. See also Khan v. College of Physicians and Surgeons of Ontario (1992),9
a.R. (3d) 641 (C.A.), at p. 666 (per Doherty J.A).
[Emphasis added]
B. ASSESSMENT OF CREDIBILlTY, RELlABILlTY AND PROBATIVE VALUE OF EXPERT
EVIDENCE
[431] As a general principle, the credibility, reliability and probative value of expert
evidence is assessed in the same manner as is that of ordinary witnesses.
193
[432] ln his text L'Expert
194
, Bchard identifies, with appropriate authoritative
references, certain fundamental questions to be addressed in assessing the probative
value of expert evidence. Among the questions enumerated by him, the following find
particular application ta the experts heard in the present and the Related Actions:
17. Questions fondamentales concernant la force probante:
( ... )
2. Au-del de la qualification initiale de l'expert, quelle est la
qualification relle de l'expert par rapport au point en litige?
3. Quelles sont les qualifications de l'expert? A-t-il une exprience
pratique suffisante au-del de ses qualifications acadmiques?
4. Quelle est l'approche de l'expert face aux thories apportes par
les autres experts? Y apporte-t-il des lments?
5. Le travail de l'expert est-il srieux et peut-on suivre son
cheminement? (2842-1733 Qubec inc. c. Alistate du Canada, cie
d'assurances, [1998] R.R.A. 596, REJB 1998-04516 (C.S.)).
6. L'expert a-t-il fait preuve d'objectivit? (2842-1733 Qubec inc. c.
Allstate du Canada, cie d'assurances, [1998] R.R.A. 596, REJB 1998-
04516 (C.S.); Caisse populaire Desjardins de Drummondville c. Lvesque,
B.E. 2001 BE-344 (C.S.)).
193 Chubb du Canada, cie d'assurances v. ConstruCtion Guillemette et Beaulac inc., REJB 1997-03029
(C.S.) Rolland J., paras. 60-62; Kansa General Insurance Co. et al. v. Quincaillerie Roger Lambert
Ite, [1994] RRA 881, 883 (C.S.), Hbert J.
194 Bchard, Supra note 193 at p. 660.
500-17 -027275-059 PAGE: 93
( ... )
10. L'expertise est-elle contredite? (Simard c. Soucy. [1972] C.A. 640,
645).
11. L'expertise et le tmoignage sont-ils bass sur des faits plutt que
sur des gnralits? (2842-1733 Qubec inc. c. Allstate du Canada, cie
d'assurances, [1998] R.R.A. 596, REJB 1998-04516 (C.S.)).
( ... )
14. Existe-t-il une preuve de faits positifs par rapport la preuve
scientifique thorique? (General Accident Insurance Co. c. Cie de
chauffage Gaz Naturel, [1978] C.S. 1160).
( ... )
17. L'expert avait-il en sa possession tous les documents ncessaires
son expertise? (Blanger c. Robert (29 juillet 1993), C.S. Qubec, nO
200-05-000966-908, j. St-Julien).
18. L'expert a-t-il manifest un parti pris dmesur? (M. (O.) c. B. (O.),
REJB 1999-11836 (C.S.); Fortin c. Compagnie d'assurances Wellington,
B.E. 2000BE-416 (C.S.)).
( ... )
[433] Moreover, and in addition to the foregoing, Bchard identifies, withappropriate
authoritative references, certain restrictive notions applicable in assessing probative
value 195. They include:
195 Ibid.
L'expert a l'obligation d'tre neutre et objectif :196
Le juge n'est pas li par les tmoignages d'experts, et n'est pas tenu de justifier
pourquoi -il retient un lment plutt que l'autre, surtout lorsqu'il est en prsence
d'une preuve d'expertise contradictoire: 197
Les avis d'experts scientifiques exprims sous forme de probabilits statistiques
ou d'chantillonnages ne lient pas le juge. Les conclusions scientifiques ne sont
pas identiques aux conclusions juridiques :198 .
196 Bardiaux v. Leduc, 2009 QCCS 2194, Richer J., paras. 46-47; Audet v. Landry, 2009 QCCS 3312,
Hardy-Lemieux J., paras. 61-64, 93.
197 Entreprises d'lectricit Rial inc v. Lumen, division de Sonepar Canada inc., 2010 QCCA 655,
Dalphond, Dufresne & Kasirer JCA, para. 28; Rouiffard v. St-Martin, 2009 QCCA 2321, Dufresne,
Lger & Rochon JCA, para. 7.
500-17 -027275-059 PAGE: 94
La valeur probante de l'opinion d'un expert se mesure d'abord en fonction des
faits prouvs: 199
[434] The Court will assess the probative and determinative value of the evidence
adduced by each of the experts heard in light of one or more of the foregoing criteria.
X. ANALYSIS OF THE EVIDENCE - EXPERT WITNESSES
A. SECURITY & AVAILABLE MEASURES TO PREVENT OR LIMIT SATELLITE SIGNAL PIRACY
AND ENSUING DAMAGES
VIDOTRON & TVA
[435] Three expert witnesses testified on behalf of Vidotron and TVA on the issues of
technology raised for determination in this and the Related Actions: Dr. John K. Markey
("Markey"), James Shelton ("Shelton") and Dr. Theresa L. Ferguson ("Ferguson").
(1) Markey
[436] Markey was qualified by the Court as an expert in engineering, security of
contents, technology and operations in the fields of digital media and
telecommunications. His Expert Report, dated March 2010, was produced as Exhibit P-
350 (the "Markey Report").
[437] He has extensive academic and relevant industry experience in the areas for
which he was qualified as an expert. He received a PhD in Quantum Physics fram the
California Institute of Technology and has done post-doctoral studies in Cryptography
Theory and Practice at the University of California and in the Executive Program at the
Harvard Business School. He has approximately 18 years of employment experience in
the areas for which he was qualified. His skills and experience, employment history and
education background are detailed in a Curriculum Vitae, annexed to the Markey
Report.
[438] Markey described his mandate in the following manner:
Briefly summarize and compare, from a technical point of view, two leading
digital satellite TV systems, namely, DIRECTV in the United States, and BEV in
Canada;
Analyze and outline the key technical security features that would explain how
these two companies faired in preventing compromises to their conditional
access security systems, as weil as differences in their responses to signal theft;
198 Leduc v. Ttu, 2010 accs 623, Parent J., paras. 12-16.
199 Dicaire v. Chambly (Ville de), 2008 QCCA 54, Gendreau, Rochon & Robert JCA, para. 38.
500-17 -027275-059 PAGE: 95
... [P]rovide my technical opinion as to why OIRECTV was able to overcome the
security threat of piracy on its system many years sooner than SEV, although
both systems serve television households in their respective North American
markets with technology based on similar, but not identical, direct broadcast
satellite technology.200
[439] Markey provided an explanation of the fundamentals of digital satellite television
and of the security and technology of DBS systems. To the extent that the explanations
and descriptions on this subject are consistent one with the other, Markey's analysis,
along with that of other experts heard on behalf of the parties, is referred to previously in
Section III.
[440] Markey described five major differences between the DIRECTV and BEV
security systems. He concluded in ail five instances that, because of differences in the
structure and technology used, the BEV system was far more vulnerable to
unauthorized signal theft by hackers.
201
[441] He then compared the experiences and differences in technology and
operational responses to signal theft by the two companies. Referring to the DI RECTV
experience and reactions to signal theft, he concluded [the numbering of ail internai
footnotes in the following extracts has been modified to track the sequencing of
footnotes followed in this judgment]:
Among those requirements which differentiated OIRECTV from SEV, and in my
opinion, led to the more successful security system of OIRECTV, are:
Reliance on proprietary aspects of the system when possible, such as the
digital data stream packet format and programming data pack et payload
encryption methods.
Having a direct, contractual relationship with the set-top box
manufacturers and conditional access technology supplier. In addition, it
was important to maintain a separation of the relationships of the supplier
of set-top boxes from the supplier of the security technology.202
A yearly budget allocation for frequent ECM testing and implementation,
and dedicated in-house resources for signal theft prevention and
response (engineering staff, field resources to acquire signal theft
devices, laboratory facilities for testing and operational integration of ECM
deployments) .
Planned and budgeted smart card replacements were part of the
contractual arrangements with NOS, and were to be completed at least
200 Markey Report, p. 4.
201 Ibid, pp. 6-15.
202 Thomson-RGA, Sony, Hughes Electronics were the initial manufacturers for STBs; NDS provided the
conditional access technology and system for security protection.
500-17 -027275-059 PAGE: 96
once every twenty-four months.
203
The budget allocations included
staffing and other resources required to support efficient smart card
replacements.
Complete control and access to the technology implemented by ail
suppliers of the entire system.
The first two bullets above resulted in creating important barri ers to signal theft
on the DIRECTV system; that is, unlike the SEV situation, FTA receivers were
never supported by DSS, and accordingly, have never been able to access
content delivered by DIRECTV. ( ... )
The points listed in the next two bullets above, gave DIRECTV the advantage in
the fight against signal theft by putting in place the human and material resources
needed to quickly and aggressively address attacks on its conditional access
system. 204
[442] Markey then compared the incidents of signal theft at BEV with that of DIRECTV
and the electronic countermeasures ("ECM's") deployed by each of them to combat
this problem. He noted that in the year following BEV's launch of its Nagra CAS in 1997,
EchoStar (a.k.a. "Dish Network") operating a similar Nagra CAS, confirmed evidence
of the compromise of its system in the United States.
[443] He noted that it was only in 2001, while monitoring chat room activities on the
web, that BEV confirmed evidence of the compromise of its system. This evidence was
noted by Gavaghan in an internai confidential Memorandum dated October 31,2001.
205
By this time EchoStar had already begun deploying ECM's in the United States to
address this problem.
[444] He noted that, in the year following becoming aware of the compromise of its
system, BEV response was limited to " ... conduct[ing] studies fram October 2001 to October
2002, to understand the extent of signal theft. ,,206 SEV only launched its first ECM on January
24, 2002
207
and followed up thereafter with other ECM's on a more frequent basis. However,
according to Markey, SEV's response was " ... much less aggressively than what was performed
for EchoStar in the United States. "
203 The initial contract called for smart cards to be replaced at least once every two years. As piracy
became better understood, the timing of the replacement of smart cards was dictated more by the
development of the methods to defeat the evolving sophistication of piracy technology. The point here
is that very early on, the contractual arrangement with the smart card supplier recognized that piracy
was a fact of life, and that planning for the replacement of smart cards was the most effective method
for defeating piracy.
204 Markey Report, pp. 18-19.
205 Exhibit P-95.
207 Exhibit P-156 (ENG-CF # 115).
500-17 -027275-059 PAGE: 97
[445] ln the years 2002-2003, BEV was unsuccessful in stopping the ongoing attacks
on its security system notwithstanding the additional ECM's deployed by it.
[446] He made particular reference to one of the l o n ~ term recommendations of the
January 13, 2003 task force Report on Counter Piracy 08; that BEV " ... implement a new
conditional access system. in 2003 that would in volve a complete swap out of existing smart
cards. This swap out should be completed by 2003. "
[447] Markey compared the behavior of BEV with his own personal experiences at DIRECTV
in planning the prevention of signal theft. He concluded:
[A]t DIRECTV, piracy was a fight taken extremely seriously from the chief
executive officer at the top of the organization ail the way down to the lowly
customer service agent. Such sentiments are evident by the history of
investments, measures taken and resulting success that DIRECTV had in its fight
against signal theft. 1 did not discern such seriousness at any level at SEV.
To summarize, several critical decisions were taken by BEV executives which
ultimately determined the low probability of success to fight signal theft of the
BEVservice:
Lack of experience of the management in digital satellite broadcast
television, and failure to consider the importance of planning for the
fight against signal theft. including timely preparations for system
upgrades and smart card replacements. Even after BEV learned at the
latest in August 1999 209, if not sooner, that the Nagravision system had
been compromised in the Dish Network system in the United States, no
planning or resources were allocated to prevent piracy on its own system.
[ ... ]
. The choice to select EchoStar as the system integrator, even at a
time wh en it was known or should have been known to BEV that
signal theft was prevalent in the North American satellite market.
was not in and of itself imprudent. After ail, at that time, signal theft
existed in the DIRECTV system as weil. What was negligent, however,
were the decisions not to include in the contractual arrangement, strict
provisions regarding investments and actions which should be taken in
the event that SEV's system became compromised. [ ... ]
[ ... ]
Contrary to the recommendations in Ms. Casavant's Signal Piracy
Report,210 BEV did not implement a new card system by 2003. The decision
to upgrade to the Nagra Il conditional access system and Aladin smart card,
208 Exhibit P-106, p. 7.
209 See the Report fram James N. Shelton ta BEV (UTM-4), Exhibit P-91.
210 Exhibit P-106 (JC-1), Report entitled, "Report on Counter-Piracy."
500-17 -027275-059 PAGE: 98
displayed a complete lack of awareness with the problems associated with
EchoStar's recommended CA technology upgrades. Had appropriate in-house
technical expertise existed as weil as a willingness to seriously vet the
conditional access recommendations made by EchoStar, BEV's continuing
atlacks from signal pirates would have been significantly minimized if not
altogether eliminated.
ln my opinion, BEV acted negligently in the management and operation
of its system in an environ ment where it was known that piracy was or would
become a major issue. This negligence and the incompetence of the BEV
management team led to significant piracy of its system. Such piracy could
have been prevented or at least considerably reduced had the BEV management
team acted with the skills and competence one would expect of a prudent and
diligent company operating in the DBS sector.
211
[Emphasis added]
[448] Applying the "Questions fondamentales concernant la force probante" identified
by Bchard, previously cited in extract in Sections IX B. hereof, the Court retains as
credible and informative, the expertise of Markey contained in the Markey Report as
weil as that expressed in his testimony. His qualifications and experience, both
academic and practical are impressive, the reasoning and analysis contained in his
Report are both serious and coherent and his opinions, on ail relevant issues are
substantially based upon facts properly in evidence rather th an upon generalities.
[449] ln his conclusions cited above, Markey finds that BEV was negligent in failing to
act in a prudent and timely manner in maintaining and eventually updating its CAS. This
matter is one of the ultimate issues raised for determination by the Court in these
proceedings and the Court is not bound by his conclusions. However, for the reasons
previously mentioned in Sections IX A. hereof, this does not render his Report or
opinions expressed therein inadmissible.
[450] Based on its appreciation of ail the evidence the Court may, and in the present
case does, independently agree with Markey's conclusion as to negligence of BEV.
(2) Shelton
[451] Shelton was qualified by the Court as an expert in security of satellite and cable
signais and managing piracy. He co-authored, with Jimmy Schaeffler, the Expert Report
of the Carmel Group and Shelton & Associates dated March 2010 (the "Shelton
Report"). The Shelton Report was produced as Exhibit P-356
[452] Shelton obtained a Bachelor of Business Administration Degree from the
University of Oklahoma in 1978. Starting with the U.S. Air Force in 1971, and in a
variety of relevant positions subsequent thereto, he is a 37 year veteran of the telecom
211 Markey Report, pp. 27-29.
500-17 -027275-059 PAGE: 99
industry with specifie experience in encryption and signal security. He has extensive
relevant industry experience in the areas for which he was qualified by the Court.
[453] He has been a private security consultant since June 1995. His clients include
those operating in the cable industry, programmers, satellite carriers and security
vendors. His experience and employment background are detailed in a Curriculum
Vitae, annexed to the Shelton Report as Appendix 1 .
[454] Shelton's mandate is described in the Shelton Report as follows:
Based on our review of evidence received through examinations on discovery of
various BEV representatives, you have asked us to provide our opinion on the
conduct of BEV in relation to its efforts to prevent or limit the theft of its satellite
signals.
212
[455] He addressed, in Part C of his Report, the history of piracy on an industry wide
basis. His historical analysis, with that of other experts heard on behalf of the parties, is
referred to previously in Section III of this judgment. .
[456] Shelton identified "Numerous Unreasonable Actions and Inactions of BEV". The
following extracts highlight some of the more striking examples. [The numbering of ail
internaI footnotes in the following extracts has been modified to track the sequencing of
footnotes followed in this judgment].
6-Year Malfeasance: It took BEV almost six (6) years to comple'te its first card
swap (Le., 1999 hack-2005). In addition, during these same and later years, the
record suggests BEV implemented very few effective ECMs, further shirking its
duties and responsibilities. 213 Note that the industry definition of an effective
ECM is one that takes away the ability of the pay TV pirates to steal
programming for more than one hour, but, hopefully, for a period of days or
longer.
Improper Hiring 1: As alluded to in the study for the plaintiffs completed by
Teresa Ferguson, PhD., one of the most important actions a new DBS system
212 Shelton Report, p. 4.
213 Further evidence showing BEV's dearth of adequate ECMs comes from 1) Appendix 4, and 2) the
Ferguson Report. Speeifieally, Appendix 4 indieates that BEV did not undertake aggressive interim
measures until long after piraey was deteeted in the BEV system. Further, Appendix 4 shows that
BEV never developed or maintained its own ECM inventory, and BEV relied completely upon its
business partners, Nagravision and EehoStar, to do so. BEV finally began deploying ECMs via
business partner Nagravision in 2002 in response to its own piraey reports. This is the first time BEV
does so, even though it had been apparent that piraey was oeeurring on the EehoStar and BEV
systems for several years. Turning to the Ferguson Report, it notes that, "No eleetronie
eountermeasures were deployed by BEV before 2002"; that "In the first four months of 2002, BEV
deployed four more sets of ECMs ail of whieh were easily defeated by the pirates within weeks or
months after they were launehed"; and that "There was some eomfort among the hackers about the
ExpressVu system beeause 'they have never sent an eem down!!! 101'''.
500-17 -027275-059 PAGE: 100
operator can undertake is to hire the proper personnel to develop and implement
different systems within the company. BEV failed to properly hire the proper anti-
piracy personnel. A perfect example of BEV's actions and attitude in this regard
is the testimony of BEV's top anti-piracy official, Terry Snazel. During the first day
of his deposition in March of 2008, Mr. Snazel shows clearly that he is completely
unaware (and obviously unconcerned about) the educational background of his
so-called security expert, Mr. Rene Juneau. Other deposition comments of key
anti-piracy executives, such as Mr. Snazel's right-hand lieutenant, Ms. Jessica
Casavant, exemplify further lack of proper training, experience, attitude, and
actions.
Inadequate Experience: BEV's top anti-piracy official, Terry Snazel, is himself a
perfect example of this failing. Mr. Snazel has never completed any kind of
educational degree. He has obtained nothing more than a high school degree, in
fact, Mr. Snazel has never achieved a college, masters, or doctorate degree; he
also has never obtained any formai technical degree. Moreover, he has neither
the engineering training nor the specifie training in fighting piracy, to be capable
of using that experience to adequately design and implement an anti-piracy
system at BEV.
Improper Hiring 2: While at the CBC, for example, Terry Snazel worked, in his
own words, with the "best engineers" (page 15, deposition, September 25, 2007),
yet why then did he not employ the "best engineers" once he began running the
technical side of BEV?
Failings Understood: Nor can Mr. Snazel claim ignorance of BEV's serious
technical (including serious piracy) concerns. For example, Mr. Snazel, on page
27, of his September 25, 2007 deposition further notes, " ... there were such
shortcomings in the technologies that existed ... "
Improper Hiring 4: Mr. Snazel notes, in his September 25, 2007 deposition,
page 40, "My job was to do that, was to build and implement and create a
technical infrastructure that could allow people to create a business around it."
This statement constituted a misrepresentation of his job goals and capabilities,
because, without the proper and adequate education, training, and experience,
and without ever hiring the proper personnel to perhaps try to do what Mr. Snazel
himself could never do, neither Snazel, his team, nor BEV could ever properly
address the piracy concerns of any employer.
Poor Business Judgement: Completely contrary to standard business
practices, especially in the area of signal piracy, BEV failed to memorialize its
agreement with its sole conditional access and encryption system provider,
Nagravision. It is hard to understand and hard to accept su ch a lapse in business
judgement on the part of BEV. The most important component of a DBS system
is the security/encryption system. This is very important to copyright holders such
as TVA. However, BEV is n0t a copyright holder and did not ever bother to
understand the importance of security/encryption and the importance of a
prepared contractual plan in place for security warrant y, along with the
'Economies of Piracy". Mr. Shelton offered his security expertise back in August
500-17 -027275-059 PAGE: 101
1999 and could have helped BEV set up a security warrant y program and proper
contract terms with Nagrastar. Mr. Shelton also could have shown BEV how to
properly set up their financials for restoring security, as weil as tracking the cost
of security. Lastly, his expertise could have been utilized to identify pirates
through BEV's Conditional Access System database with 99.9% accuracy.
Nonetheless, BEV decided to manage these tasks alone with no prior experience
in security, which hurts the copyright holders, its competitors (such as Videotron),
and the content providers (such as TVA) more than it does BEV.
Inappropriate Responses: Thoroughly understanding and properly reacting to
piracy is critical because those actions control not only how your company is run
and its overall success, but your company's stock value, as weil. To not act in
such a manner, at the very outset of a pay TV endeavour, is similar to opening a
convenience store in a troubled urban neighbourhood, and not instituting a
proper theft prevention system. It is just not smart.
Ignoring Facts: BEV was clearly put on notice, in August 1999, as to the
presence and significance of the piracy problem within its system (and that of its
partner to the south, EchoStar). Yet, despite ample warnings, it took BEV until
late in 2005, almost six (6) years after the first Shelton report, to do its first card
swap.
( ... )
Piracy Reasons: First and foremost, BEV failed to ever adequately balance the
true cost of fighting piracy versus the true benefits of the anti-piracy battles and
war. The most likely reasons why BEV refused to fight piracy harder or earlier
include, 1) BEV found that it was easier to rush toward launch, and thus do
nothing to adequately address piracy; 2) BEV did not know what it was doing
(and, worse still, did not care); and 3) BEV realized that by doing next to nothing,
it still retained a victory of sorts, inasmuch as BEV pirates were almost certain to
never become subscribers of rival cable pay TV operators, such as Videotron.
Front- vs. Back-end: The only logical explanation for BEV's behavior is to
assume that it figured that when it would finally start fighting BEV pirates,
chances were good that those pirates would take the easy (i.e., the "same
hardware" 214) solution and sim ply become legitimate BEV subscribers, by
legitimately activating their existing hardware devices. That way, if BEV did not
win the pirates on the front-end, so to speak, it could certainly win them on the
"back end" of the BEV/pirate relationship.
214 "Same hardware" in this instance communicates the idea that a pirate will begin pirating, typically
using equipment provided by the pay TV vendor, but will then manipulate the equipment to steal
programming in one form or another. When the pirate has been notified and the piracy addressed, the
equipment usually still is installed at the former pirate location, and the new legitimized pirate can
then choose to merely activate and pay for the signal using the existing equipment.
500-17 -027275-059 PAGE: 102
Expense + Misunderstanding: BEV further failed to fight piracy harder or earlier
for a number of additional reasons, including 1) BEV determined that properly
fighting system piracy was too expensive; and 2) BEV never understood, nor did
it make reasonable efforts to understand, or implement, the aforementioned
system behind the "Economies of Piracy."
Inadequate Personnel + Reports: BEV took few, if any, steps to hire
competent, experienced, and respected piracy experts during the entirety of its
pay TV lifecycle. BEV failed this mission in terms of both the in-house BEV
personnel it hired, and in terms of the outside consultants it either did not hire or
did not Iisten to. Although BEV commissioned a couple of reports that identified
the piracy problem, no subsequent steps were ever taken to properly enact and
implement the needed recommendations.
BEV Knew: For example, the Shelton report, created for BEV and its partners
(Le., that of 1999), made clear the proper anti-piracy path Mr. Snazel and BEV
should have followed. Yet, these recommendations were ignored by Mr. Snazel,
his team, and thus by BEV.
Staggering Losses: ln short, BEV thought fighting piracy was too tough, so it
gave up. The losses were staggering. In 2003, BEV's "Report on Counter Piracy"
estimated. its lost revenue at $60 million to $71 million annually, which is
significantly more than the $60 million cost to restore security that was completed
in 2005.
( ... )
6-Year Delay: As but one more additional measurement of SEV's tepid anti-
piracy battles, the company waited nearly six (6) years after it knew there was a
hack, until 2005, to implement its first swap out of smart cards. This is an
exceptionally poignant example of SEV's inability to deal properly with its piracy
problem.
215
[457] Shelton concluded:
Worst Failure: ln ail our years of tracking pirates and piracy, globally,
The Carmel Group and Shelton & Associates have never experienced a
modern pay TV operator that has done such a deplorable job of
managing piracy as has BEV.
Summary: Ultimately, BEV has run its business poorly, in a negligent and
unprofessional manner. This report provides in-depth explanations to
support these findings and explains why it is logical to assume that BEV
acted deliberately in an attempt to increase its market shares, to the
detriment of its competitors, by allowing the pirates to access its
programming for free (or for less than the retail cost) for a lengthy period
of time. In an industry where companies like BEV distribute programming
215 Shelton Report, pp. 21-25.
500-17 -027275-059 PAGE: 103
signais belonging to others, like Plaintiff TVA, this behavior is simply
unacceptable. BEV's negligent actions and inactions caused significant
damages to the Canadian telecom industry as a whole, but especially in
the Province of Quebec, where BEV knew that piracy was rampant but
failed to act so as to eradicate this piracy. These actions and inactions by
BEV therefore caused significant damages to the Plaintiffs Videotron and
TVA in particular.
216
by Bchard, previously cited in m<tract in Section IX B. hereof and referred to in
assessing the credibility and prabative value of the Markey Report and Markey's
testimony, the Court reiterates and applies mutatis mutandis its findings and
conclusions regarding the credibility and probative value of the Shelton Report and
Shelton's testimony.
[459] ln particular, the Court concurs with and adopts as its own, each of Shelton's
enumeration of the "Numero us Unreasonable Actions and Inactions of BEV' referred to
above.
(3) Ferguson
[460] Ferguson was qualified, under reserve of counsel for SEV's objection, as an
expert in the development, strategie planning and management of telecommunication
delivery systems. BEV challenged her lack of technical expertise and independence.
Although in its Plan of Argument and oral argument counsel for BEV contests many of
the opinions expressed by Ferguson, the objection raised at the time of her qualification
as an expert witness was not renewed. Accordingly, for the reasons previously given
regarding the rulings on objections, the objection is deemed to have been withdrawn.
[461] Her report dated March 2010 was praduced as Exhibit P-361 (the "Ferguson
Report").
[462] Ferguson received a PhD in Administrative, Institutional and Policy Studies fram
the University of Chicago in 1984. Although she has no formai education in the areas of
technology relevant to the present action, she does have extensive industry experience
in the areas for which she was qualified as an expert. Her prafessional history is
detailed in her Curriculum Vitae, annexed to the Ferguson Report as Appendix A.
[463] Ferguson defined her mandate in the following manner:
[T]o describe and provide my opinion as to how a reasonably prudent and
diligent Direct Broadcast Satellite (DBS) company should conduct its business in
order to protect its satellite signais against piracy, fraud and signal theft; and
216 Ibid, p. 26.
500-17 -027275-059 PAGE: 104
[T]o evaluate the conduct of Bell ExpressVu in relation to its response to piracy,
fraud and signal theft, and from such an evaluation, provide my opinion with
regard to Bell ExpressVu's conduct. In short, you have asked me to compare the
conduct of Bell ExpressVu to that of a reasonably prudent and diligent DBS
company,.217
[464] The Ferguson Report provides an overview of satellite signal piracy, an historical
perspective of the origins of the problem and a summary of the various approaches or
methods available to prevent or eliminate piracy. To the extent that the explanations
and descriptions on this subject are consistent one with the other, Ferguson's analysis,
and that of other experts is referred to previously in Section III hereof.
[465] She described what she refers to as "A REASONABLE BUSINESS RESPONSE
, TO ADDRESS SIGNAL PIRACY". The following are some of the more salient responses
and requirements highlighted by Ferguson and retained by the Court as being of
particular relevance to the present action:

[A] statement of commitment from the highest executive that no amount
of piracy will be tolerated;
An engineering department staffed with competent experts and
technology specialists in their respective areas of expertise capable of
addressing actual and potential compromises to the company's
conditional access system;
The architecture of the DBS company's conditional access system must
be designed with the belief that signal theft is inevitable and impossible to
completely prevent. Therefore, from the outset, the requirement to
replace conditional access cards must be part of the budget
planning and Iife cycle of the business;
[A]ggressive interim responses are necessary to temporarily disable
illegal smart cards or otherwise frustrate users of illegal cards.
Consequently, it is important to develop and maintain a continuaI
inventory of electronic countermeasures (ECMs) that are capable of
such security measures;218
[Emphasis in original]
[466] Ferguson also stressed the importance and necessity of periodic replacement of
smart cards. She referred to the early experiences of signal theft at DI RECTV and
described the various card swaps conducted to combat this activity.
[467] Referring to the need to protect signal integrity, she noted:
217 Ferguson Report, p, 4.
218 Ibid, pp. 5-13.
500-17 -027275-059 PAGE: 105
j. A DBS company needs to be willing to go after the individual who uses a
compromised smart card to watch unauthorized television programming. In
many instances, the illegal users are also legitimate subscribers of other services
like the basic package. ("Hybrid pirates") As a result, a DBS company has to
consciously make the decision to shut down paying customers based on their
best evidence that they may also be an illegal user. This obviously comes with a
risk, but it shows the level that a responsible and prudent DBS company must go
to in order to be diligent in fighting signal theft.
219
[Emphasis and definition added]
[468] Ferguson then proceedeq to evaluate BEV's performance in light of her industry
experience and the analysis previously referred to. In a chapter entitled "AN
EVALUA TlON OF BELL EXPRESSVU'S PREVENTION OF AND RESPONSE TO
PIRACy,,220, she traced the chranology of events starting in 1995 when BEV received a
licence fram the CRTC to pravide DTH satellite braadcast services until its launch in
1997. She described how the business plan evolved during this period, how BEV
organized its resources to create and launch its service and addresses the deficiencies,
both in the planning and in the human and technical resources dedicated to this
process. She noted, in particular [the original numbering of ail internai references in
the following extracts has been modified to track the sequencing followed in this
judgment, the text of the references remain unaltered]:
b. In October 1995, then CEO Michael Neuman hired Terry Snazel as his
vice president of technology and chief technology officer. According to Mr.
Neuman, Mr. Snazel's responsibilities involved "the end-to-end architecture ... all
the technologies from the gathering and receipt of signais, encoding, encryption,
uplink, and at the point of reception, the set top box .... ,,221 [ ... ]There was serious
discomfort with the state of the technology at that point and the ability of the
technology to support the business.,,222 Mr. Snazel went on to say that "there
was no other sort of technical expertise on board,,223 at ExpressVu. Mr. Snazel
was "recruited specifically,,224 to "examine the technology and to get it to function,
.. , to bring the service to fruition and launch the service,,225 into the consumer
market. This included recruiting a staff of experts and engineering specialists
versed in the required DBS technologies.
219 Ibid, pp. 18-19.
220 Ibid, pp. 25 ft.
221 Examination on discovery of Michael Neuman, held on June 14, 2007, p. 53. In Mr. Snazel's
September 25, 2007 testimony he also noted that he had the initial responsibilities of running the
customer service organization and the information technology department until around the years 2000
and 2001.
222 Deposition of Terry Snazel, September 25,2007, p. 23.
223 Ibid, p. 26.
224 Ibid, p. 23.
225 Ibid, p. 24.
500-17 -027275-059 PAGE: 106
c. ( ... ) However, as the vice president of technology, it was his responsibility to
ensure that the engineers hired did have the appropriate education, degrees and
experience to perform and/or oversee the array of technical functions necessary
to launch and operate a successful and secure DBS service.
( ... )
f. ... Specialists in the art of signal protection techniques and the state of
conditional access technology were not employed during the evaluation period
when alternative partnerships and alignments were reviewed.
226
... In fact, Mr.
Snazel did not fill his conditional access position until 1997,227 the year
ExpressVu was launched into the market place.
( ... )
j. ( ... ) By 1996, when ExpressVu was re-structuring their business plan and
evaluating their satellite and technology options, the emergence of piracy of
DIRECTV signais in the United States became widely known in the industry.
This should have been an alarm, a red flag to any start-up DBS company
witnessing significant compromises of systems belonging to companies like
DIRECTV ...
k. ( ... ) During the evaluation period, ExpressVu did not test or perform any
sort of analyses to ascertain whether or not the hack of the DIRECTV system
could be used to compromise the EchoStar service ...
( ... )
n. Article 18 of the January 1997 contract between ExpressVu and
EchoStar, entitled "Signal Protection,"228 has nearly four pages devoted to
concerns about the grey market and "preventing members of the public from the
other's jurisdiction subscribing to its DTH Service." By comparison, only half a
page containing just three paragraphs in Article 20, "Breach of Security" is
devoted to the protection of the actual security of the system.
229
Signal security
clearly was not a top priority during negotiations. .
[469] Ferguson concluded:
When ExpressVu launched its DBS service into the Canadian market place in
1997, it did so without a sufficient infrastructure in place that would allow it to
respond to attacks on its security.230
226 See Exhibit P-15 (MN-5), "ExpressVu Technology Progress Report" March 18, 1996, for the
evaluation of the options being explored by ExpressVu.
227 Mr. Ren Juneau was employed fram 1997 until June 30, 2000. See Deposition of Terry Snazel,
September 25,2007, pp. 40-41, and answer to Undertaking UPLy-98.
228 See Exhibit P-14, pp. 28-31.
229 Exhibit P-14, p. 35.
230 Ferguson Report, p. 35.
500-17 -027275-059 PAGE: 107
( ... )
d. A reasonably prudent and diligent DBS company should have foreseen
that once DIRECTV solved the piracy problem, hackers would simply abandon
those systems and turn their efforts to stealing signais from the vulnerable
ExpressVu and Dish services. Indeed, had BEV behaved as a reasonably
prudent and diligent DBS company, they would have heeded their own
expert consultant's report that "[ilf there is rampant piracy on any one
security system then it effects ail in the DBS industry.,,231 Such a
declaration was not just homily, it was based on the evidence provided to
BEV that the same Canadian pirates who were attacking the DIRECTV/NDS
conditional access system, were also creating hacks on the EchoStar and
Bell ExpressVu conditional access technologies.
232
233
[Emphasis added]
[470] ln Section 3.4, 3.5 and 3.6 of her Report, Ferguson dealt with the crucial subject
of "SIGNAL PROTECTION IN THE ENGINEERING DEPARTMENT' in 1997-2000,
2001-2002 and 2002-2004.
1997-2000
[471] The following obseNations are of particular interest:
... [I]t was up to the ExpressVu's Chief Technology Officer, Terry Snazel, to hire
expert engineers to manage the EchoStar contract and to insure that adequate
provisions were in place at EchoStar and Nagravision to protect ExpressVu's
signal.
a. After ExpressVu was launched into the market in 1997, Terry Snazel was
given additional duties to his role as vice president of technology.234 This lasted
for nearly two years when in November 1999, a vice president of programming
was hired, and Mr. Snazel returned solely to managing the growing needs of
engineering.
b. Around June of 1997, Mr. Ren Juneau was hired to oversee and
implement the conditional access system that had been selected prior to his
employment.
235
ln this position, Mr. Juneau was the liaison to EchoStar and
Nagravision, and as such, was Mr. Snazel's key "conditional access engineering
231 Exhibit P-91 (UTM-4), report via facsimile to Terry Snazel and Ren Juneau entitled "NagraVision
Piracy", from Shelton & Associates, August 13, 1999, p. 6.
232 Exhibit P-91 (UTM-4), pp. 5-6.
233 Ferguson Report, pp. 35 ft.
234 His title changed to vice president of technology, programming and pay per view, and included
responsibilities such as the oversight of ail the contracts with the content providers as weil as
"creating and launching a Pay Per View service". Deposition of Terry Snazel, September 25, 2007, p.
48.
235 Deposition of Terry Snazel, September 25,2007, pp. 40-41.
500-17 -027275-059 PAGE: 108
person."236 ln a reasonably prudent and diligent DBS company, an engineering
position as important as Mr. Juneau's, would require the essential education,
skills and experience in the art of signal protection, cryptographie methods,
software security, hardware protection, semiconductor technology and the Iike.
However, when questioned, Mr. Snazel was not sure whether or not Mr. Juneau
even possessed a degree in engineering.
237
238
[472] It is noteworthy that, as previously mentioned, Mr. Juneau was not cal/ed as a
witness by either party.
[473] Ferguson continued her justified criticism of the dysfunctional internai BEV
organization :
c. Aiso hired in the same year as Mr. Juneau, was Jessica Casavant who
held a parallel position to Mr. Juneau's in the conditional access organization.
Her title was manager of digital services.
239
Ms. Casavant has an engineering
degree in sound techniques and TV broadcasting, and came to ExpressVu with
experience in sound production while employed at several television and cable
networks, and the Viewers Choice pay per view service operator.
240
Mr. Juneau
and Ms. Casavant "operated as two parallel directors,,,241 both reporting to
Mr. Snazel and neither possessing education in the science of signal
security. Ms. Casavant's responsibilities included "the digital multiplexing
242
and
the digital management system that digitized the signals.,,243 When Mr. Juneau
left the employ of ExpressVu in 2000, Ms. Casavant became "the person
responsible ... for ail our conditional access and our Nagra encryptions and ail the
other good stuff that we did for security."244 At the time when piracy was
epidemic in the United States, Mr. Snazel did not use this opportunity to hire an
expert in conditional access technology who could help the company prepare
and put measures in place, or who could effectively evaluate measures offered
by Nagravision to battle the theft of ExpressVu's signais.
d. Having a high cali ber engineering staff, especially those responsible
for protecting the security of the signal, was of vital importance. However,
neither Mr. Juneau or Ms Casavant possessed experience or training of any
sort to suggest that they were gualified to implement a conditional access
system as state-of-the-art as Nagravision's. 245
236 Deposition of Terry Snaze/, September 25,2007, pp. 42-43.
238 Ferguson Report, pp. 38-39.
[Emphasis added]
239 Deposition of Jessica Casavant, June 4, 2008, pp. 14-16.
240 Deposition of Jessica Casavant, June 4, 2008, pp. 14-16.
242 "Motor-plexing" is the word in the transcript, but 1 believe it should have read "multiplexing".
244 Deposition of Terry Snazel, September 25,2007, p. 56. Mr. Juneau left in June 2000.
500-17 -027275-059 PAGE: 109
( ... )
j. In August 1999, Mr. Snazel and Mr. Juneau received a report which
analyzed "NagraVision piracy and the impact on the ExpressVu system.,,246 The
report provided evidence that the NagraVision conditional access system used
by EchoStar in the United States had been hacked as early as 1998.
247
It further
provided evidence that the hack on EchoStar could be used lOto obtain
ExpressVu's programming.,,248 The Shelton report noted that OIRECTV's
conditional access system supplied by NOS had also been hacked and that
because they were very active in fighting these hacks, were experiencing relative
success in managing the piracy. By contrast, the Shelton report commented that
"programmers are concerned [about] whether EchoStar and NagraVision will
manage the commercial hack,,249 that their system was experiencing.
k. The Shelton report emphasized that an infrastructure needs to be in
place to manage piracy; "complimenting this infrastructure" is the need for
"renewal security". In other words, the periodic replacement of smart cards was
the best way to manage piracy because "[n]ew cards sent to consumers to renew
security take advantage of new chip technology and conditional access system
design enhancements" that, in turn "take advantage of lessons learned in prior
attacks. ,,250
1. Nearly a year after the Shelton report, in October 2000, Bell ExpressVu
created a security department under vice president lan Gavaghan, the executive
in charge of the legal department. A former RCMP officer, Brian Johnson, was
hired to conduct satellite piracy investigations. Mr. Johnson was the sole
employee of that organization until mid 2001, when bilingual investigator, Martin
Girard, was transferred from corporate security to ExpressVu's anti-piracy
department.
251
While the hire of Mr. Johnson was a start, ExpressVu still
seriously lacked the resources necessary to aggressively engage in
investigations or routinely monitor pirate web sites in order to ascertain the
imminence of the threat to ExpressVu or the on-going battles south of the border.
Such vigilance was necessary to detect the invasion of iIIegal activities on
Canadian OBS systems.
2001-2002
[474] The following observations are of particular interest:
246 Exhibit P-91 (UTM-4), report via facsimile entitled "NagraVision Piracy" by Shelton & Associates,
August 13, 1999. This report will be referred ta as the "Shelton" Report.
247 Exhibit P-91 (UTM-4), p. 4 and Exhibit 0 attachment ta the Report.
248 Exhibit P-91 (UTM-4), p. 5.
249 Exhibit P-91 (UTM-4), p. 4.
250 Exhibit P-91 (UTM-4), p. 5.
251 See response ta Undertaking UNM-13.
500-17 -027275-059 PAGE:110
c. The first comprehensive study detailing how Bell ExpressVu's services
were stolen was completed at the end of October, 2001.
252
It asserted that the
"theft of Bell ExpressVu services is a multi-faceted, growing problem, ,,253 and
came in two forms, namely, through fraud and piracy. [ ... ] The combat against
piracy, according to the study, would entail engineering efforts such as
downloads of software and/or ECMs. The report recommended such technical
procedures be developed and implemented. It also suggested that BEV "track
every system from manufacture to retail, and ... use that data to help determine
areas worthy of investigation.,,254 It did not recommend replacing their
customers' smart cards with more robust ones.
255
[Emphasis added]
2002-2004
[475] The following observations concerning the technical security measures employed
by BEV are of particular interest:
a. No electronic countermeasures were deployed by BEV before 2002.
256
ln
late 2001, BEV deployed several "key changes,,257 targeting their "older
generation smart card, which had been compromised and was being used with
modified blocker software.,,258 However, almost immediately pirates "introduced a
circuit board known as the AVR" that was used with the subscriber's valid smart
card,259 allowing the viewer to access higher tiered and premium programming
without paying for it. In the first four months of 2002, BEV deployed four more
sets of ECMs ail of which were easily defeated by the pirates within weeks or
months after they were launched.
b. ( ... ) Nearly ten countermeasures or software downioads
260
were
deployed; ail were promptly defeated by hackers. "The advancement in
technological piracy attacks and the steep learning curve enjoyed by the hackers
has made technological counter piracy measures by Bell ExpressVu and its
partners a very difficult challenge.,,261 ln 2002, the content providers were losing
confidence in Bell ExpressVu's ability to stop the proliferation of the theft of their
252 See Exhibit P-95 (UMN-5), "How Bell ExpressVu Services are Stolen: A Brief Synopsis, October 31,
2001."
253 Exhibit P-95 (UMN-5).
254 Exhibit P-95 (UMN-5).
255 Ferguson Report, pp. 46ft.
256 See Exhibit P-153 (UPLy-100).
257 See Exhibit P-156 (UNM-28).
258 Exhibit P-106 (JC-1), Bell ExpressVu report entitled "Report on Counter-Piracy", by Jessica Casavant
et al, January 13, 2003, p. 22.
259 Exhibit P-1 06 (JC-1), Bell ExpressVu report entitled "Report on Counter-Piracy", by Jessica Casavant
et al, January 13, 2003, p.22.
260 Exhibit P-156 (UNM-28). In addition, Exhibit P-156 (UNM-28) reports that only seven actual ECMs
were deployed.
261 Exhibit P-1 06 (JC-1), Bell ExpressVu report entitled "Report on Counter-Piracy", by Jessica Casavant
et al, January 13, 2003, p. 23.
500-17 -027275-059 PAGE:111
programming.
262
ln response, Tim McGee, then president
263
of Bell ExpressVu,
put together a task force in late 2002 giving it the charter to "assess the scope
and magnitude of Bell ExpressVu's potential liability ( ... ) and to provide
recommendations that would mitigate its exposure and reduce its potential
liability."264 The task force, led by Jessica Casavant,265 issued a report in
January 2003. (the "Report on Counter-Piracy,,).266
[Emphasis added]
[476] Ferguson referred to and commented at length on the findings of the Report on
Counter-Piracy and the failure by management to implement some of the more
important recommendations made to McGee, the then President of BEV. She noted, in
particular:
h. According to Mr. McGee, the report was provided to only two other
executives, namely, Ms. Sheridan Scott and Mr. Bernard Courtois who were
"regulatory officers" at Bell Canada
267
not individuals who would be on the front
line, so-to-speak, helping to secure and defend BEV from attacks and
compromises to its conditional access system. In fact, Mr. McGee treated the
report as a "privileged document" and "assumed" that people would learn
"indirectly what the report was advocating,,268 without establishing some formai
mechanism insuring that the Report's findings and recommendations were
indeed widely communicated within the company. What appears irresponsible,
was that after Mr. McGee had ordered the investigation into the extent of
the piracy problem, after he had authorized the research, data collection
. and statistical analyses documenting and verifying piracy's deleterious
impact on the present and future state of the business including very
thoughtful and comprehensive recommendations for addressing the
issues; Mr. McGee then suppresses and limits the report's distribution. If
his intent was "not to deprive people who needed the information to get
information,,269 his actions did not signal su ch an expectation. ( ... )270
[Emphasis added]
[477] Ferguson next addressed the Smart Card Replacements in the period 2002 to
2006. She was critical of the delays in implementing the card swap. She notes in
particular:
262 Exhibit P-278 (JC-2), letter to Mr. Chris Frank from Mr. Edouard G. Trepanier, vice president,
regulatory affairs, Quebecor Media, dated 8 November 2002.
263 Mr. McGee was president of BEV fram May 2002, until October 2004; see Deposition of Timothy
McGee, October 21, 2009, pp. 5-6.
264 Exhibit P-106 (JC-1), p. 3.
265 Deposition of Jessica Casavant, June 4, 2008, p. 26.
267 See Deposition of Timothy McGee, October 21, 2009, pp. 240-249.
268 See Deposition of Timothy McGee, p. 245.
269 Deposition of Timothy McGee, p. 247.
500-17 -027275-059 PAGE:112
o. Over five years had transpired from the acquisition of the
knowledge that the system had been pirated in 2000, to the conclusion of
the card swap in 2005. Moreover, it took over 1.5 years
271
for BEV to
complete the swap from the time it took the decision to proceed with the
swap. By contrast, DIRECTV took about 24 months from the time they leamed
about the hack of their P-1 ca rd until they introduced and completed their P-2
ca rd swap of a million more receivers than BEV changed out in the 2004/2005
time frame.
272
[Emphasis added]
[478] Sorne of her most serious conclusions are summarized in Section 4.0 her
Report:
... Either due to naivety, negligence or indifference, Bell ExpressVu
ignored or underestimated the extent to which the rising black
market throughout North America was a threat to its business, to that
of the content providers whose entertainment programming was
broadcast by Bell ExpressVu's satellites and to the industry as a whole.
( ... )
By 1999, BEV had full knowledge that EchoStar's conditional access
technology - the one that would be very similar to BEV's CA
system-- had been hacked as early as 1998. 73 Furthermore, EchoStar
had no solution to counter the compromises. At this point, a reasonably
prudent and diligent DBS company would have responsibly taken action
to insure that its system would not be vulnerable to such piracy, or at
least have the expertise and infrastructure in place to manage the
inevitable atlacks. Bell ExpressVu provided no documentation of any
such action. Instead, BEV remained unprepared to respond to the
inevitable atlacks on its encryption, and unprepared to effectively
participate in the design and development of its next generation security
system.
Bell ExpressVu knowingly hired a Chief Technology Officer and
engineering staff without the education or skill set needed to understand,
assist and/or challenge Nagravision's architecture for the conditional
access system at the launch of the business, security counter measures
during the operational phase, or its Aladin upgrade.
( ... )
At the time the decision was made to exchange ail BEV subscribers'
access cards with Aladin smart cards, neither Bell ExpressVu nor
271 Corrected by Dr. Ferguson during her testimony.
272 Ferguson Report, p. 75.
273 See Exhibit P-91 (UTM-4).
500-17-027275-059 PAGE:113
EchoStar had performed a card swap. It took Bell ExpressVu over [tAfOO]
one
274
years fram the time the decision was made to go ahead with the
card swap in order to plan, rail out and complete the swap out of cards to
less than three million receivers. This card swap was completed more
than five years after it was discovered by Bell ExpressVu that its
Conditional Access System had been compromised by hackers.
Aladin was nearly ready for deployment in early 2003, 50 the card
development itself did not affect the length of the schedule. The
inexperience of the staff at Bell ExpressVu no doubt slowed the roll
out, but this could have been mitigated by simply soliciting advice
from experienced and competent professionals. The top
recommendation of Ms. Casavant's Report on Signal Piracy stated
that Bell ExpressVu should implement a new card system in 2003
because of the rapid growth of piracy. Clearly, her sense of urgency
was not shared elsewhere within Bell ExpressVu.
275
[Emphasis added]
by Bchard, previously cited in extract in Section IX B. hereof and referred to in
assessing the credibility and probative value of both the Markey Report and the Markey
testimony as weil as that of the Shelton Report and the Shelton testimony, the Court
reiterates and applies mutatis mutandis its positive findings and conclusions regarding
the credibility and probative value of the Ferguson Report and the Ferguson testimony.
BEV
[480] Although the reports filed in evidence by each of BEV's expert witnesses were
initially filed under seal, in an e-mail message dated January 31, 2012, addressed to the
undersigned, counsel for BEV subsequently advised:
ln this regard, to ensure a full and complete comprehension of the reasons for
judgment, BEV does not wish to restrict you from quoting excerpts from any of
Defendant's experts' reports or accounts filed under seal that you may consider,
in your discretion, to be necessary for the reasons for judgment. Please accept
this e-mail as BEV's consent thereto.
[481] Two expert witnesses testified on behalf of BEV on the issues of technology
raised for determination in this and the Related Actions: Michael Barr ("Barr") and Dr.
Matthew D. Green ("Green").
274 Corrected by Dr. Ferguson during her testimony.
500-17 -027275-059 PAGE:114
(1) Barr
[482] Barr was qualified as an expert in electrical engineering, embedded systems,
technology and security of satellite TV systems and satellite piracy. His report dated
September 30, 2010, was produced as Exhibit 0-251; his updated Curriculum Vitae
dated Oecember 8, 2011, as Exhibit 0-250 along with his corrections to various pages
of the original report (collectively the "Barr Report").
[483] Barr obtained a Master of Science degree in Electrical Engineering from the
University of Maryland in May 1997 and a Master of Business Administration degree
from the same University in Oecember 2006. He is founder of and has been
President/Chief Technical Officer of Netrino Inc. since January 1999. In such capacity
he has provided executive management for his firm, created professional training
curriculum and courses for embedded software developers and performed engineering
design, consulting and training services for clients in industries ranging trom consumer
electronics to medical products. He has also acted as an expert witness in numerous
legal proceedings instituted by DI RECTV against satellite TV pirates. He was previously
employed as a software engineer by several companies operating in related industries.
[484] He has authored numerous articles and papers dealing with embedded systems
programming.
[485] Barr's mandate was to provide opinions on the following issues:
BEV 's choice of technology, including the choice of conditional access
system, (referred to in the Barr Report as "Mandate A");
The evolution of conditional access systems in light of worldwide piracy
attacks and how satellite TV operators have adapted to su ch piracy,
including BEV's current conditional access system, (referred to in the Barr
Report as "Mandate B"); and
Opinions expressed by Plaintiff's experts in their expert reports, (referred
to in the Barr Report as "Mandate C").276
[486] Barr provided an introduction to and explanation of the tundamentals of OBS
conditional access systems, the prevalent fraud and piracy practices and anti-piracy
techniques available to combat these practices. To the extent that the explanations and
descriptions on these subjects are consistent one with the other, Barr's explanations
and those of other experts is referred to previously in Section III of this judgment.
276 Barr Report, p. 6.
500-17 -027275-059 PAGE:115
MANDATE A: BEV's CHOICE OF TECHNOLOGY, INCLUDING THE CHOICE OF CAS
[487] For the reasons expressed in detail in his Report and referred to in summary
herein, Bar concluded:
Opinion A 1: SEV's adoption of the DVS standards was reasonable.
Opinion A2: The decision by SEV to enter into a partnership with EchoStar has
always made good business sense and was prudent.
Opinion A3: SEV's selection of Nagra's conditional access system has always
made good business sense and was prudent.
277
OPINION A1
[488] Barr compared the proprietary Digital Satellite System ("DSS") television
transport protocol used by DI RECTV's with the open standard Digital Video Broadcast
("DVB") selected by BEV. He noted, in particular, that the DVB standard is the most
popular format used in the industry and that its popularity has resulted in lowering the
priees of set-top boxes and related technologies.
[489] He acknowledged that "Piracy by FTA receivers is difficult for the numerous DVB-
based satellite TV services to fight precisefy because DVB's protocofs are so widefy adopted. ,0'278
[490] However, he dismissed this as a concern at the time BEV entered the market
since "[t]he possibifity of piracy-capabfe FTA receivers was not forseen by anyone in 1995 and
it woufdn 't be untif afmost eight years fater that such a threat actually existed. ,,279
[491] ln his testimony before the Court, referring to an analysis of the, DIRECTV
experience prepared by him contained in a chart entitled the "Piracy Outcome Chart,,28o,
he claimed that if BEV had chosen the DSS protocol instead of the DVB protocol, they
would nevertheless have been hacked.
OPINION A2
[492] Seeing the size of the potential BEV subscriber base and its lack of in-house
technological expertise, Barr opines that partnering with EchoStar was a way for BEV to
reduce costs, manage risk, reduce grey market piracy and enter the market in the
shortest delay.
[493] For the reasons expressed, Barr concluded that BEV's best option for a U.S.
partner was EchoStar.
277 Ibid, p. 7.
278 Ibid, p. 32.
279 Ibid, p. 33.
280 Exhibit 0-252.
500-1 7-027275-059 PAGE: 116
QPINIONA3
[494] Barr compared the key dates and timelines for five access cards (three OIRECTV
cards and two BEV Nagra cards) that had been hacked between June 1994 and
November 2005. He concluded that the first three OIRECTV cards were more quickly
compromised than either of the first two BEV cards.
[495] He claimed that NOS, the CAS supplier of OIRECTV failed to perform necessary
code reviews on OIRECTV's P1 and P2 access cards whereas Nagra did perform such
reviews. He bases his assertion on having read the transcript of the testimony of a
senior officer of Nagra, Christopher Nicolas, given in another totally unrelated
legal proceeding between Nagra and an undisclosed third party. For this reason
alone, the Court must attach little probative value to this evidence.
[496] He asserted that NOS failed to adequately test the OIRECTV P1 and P2 access
cards and that, in any event, they were less expensive to hack than the Nagra cards.
The source of this assertion is not clear.
[497] For the foregoing and other reasons, Barr concluded that, in 1996, selection of
the Nagra CAS was the mostreasonable option.
[498] This conclusion may or may not be supported by the admissible evidence
alluded to by Barr. However, this matter is academic since neither Vidotron nor its
experts seriously contest the propriety of the initial choice made by BEV of the EchoStar
and the Nagra CAS technology.
MANDATE B: THE EVOLUTION OF CAS IN L1GHT OF WORLDWIDE PIRACY
[499] For the reasons expressed in detail in his Report, Barr concluded with respect to
Mandate B:
Opinion B1: Bell ExpressVu deployed electronic countermeasures, including key
changes and software upgrades, in a useful and timely manner.
Opinion B2: Bell ExpressVu upgraded its business processes (e.g., inventory
tracking) in a useful and timely manner.
Opinion B3: Bell ExpressVu replaced access cards in a useful and timely
manner.
2B1
281 Ibid, p. 7.
500-17 -027275-059 PAGE:117
OPINION 81
[500] Barr reviews the evidence regarding the numeraus electronic countermeasures
("ECM's") performed by BEV. He refers in particular to the use of what are sometimes
known as "Box-kill ECM's" which have the effect of disabling set-top boxes of suspected
pirates. He notes at page 53 of the Report:
141. Despite the legal risks to the company and associated brand risks to its
parent (Bell Canada), Bell ExpressVu deployed box-killing ECMs at least seven
times between October 24, 2003 and May 19, 2004. [ ... ] ln addition to reducing
the level of piracy directly, the company intended that deploying this type of ECM
would send lia very clear message to the pirate community that Bell ExpressVu
will use ail tools at its disposa!." (JC-1 Document 1 p. 29)
142. To the best of my knowledge, despite its long fight against pirates,
DirecTV never deployed even one ECM that would disable a set-top box
suspected of use in piracy.
[501] He notes that during the period of known piracy, BEV deployed a minimum of 42
ECM's, on an average of at least one every 6 weeks. He concludes that this is a
reasonable pace of counter-attacks.
[502] It is noted that the number of ECM's referred to by Barr is substantially less than
those alleged by Ishankov to have been performed during the period in question.
OPINION 82
[503] Barr claimed that in the years following launch of its service, DIRECTV operated
its satellite TV service without purchaser identity contrais longer than did BEV. He
concluded BEV was no less diligent than DIRECTV in implementing apprapriate
contrais.
[504] He noted that while BEV initiated its service in September 1997 without a system
for tracking set-top boxes received fram suppliers thraugh to individual consumers, it did
ultimately institute effective contrais. .
152. [ ... ]In February 2002, it began to track this inventory via its Pre-
Registration Inventory and Sales Management ("PRISM") system By April 2003,
Bell ExpressVu started requiring a valid photo ID be shown to set-top box
retailers (UPl Y-24). By September 2003, a valid credit card was also required at
set-top box purchase (ENG-PlY-25). This system was fully implemented by ail
authorized dealers by December 2003 (UNM-21).
153. It took DirecTV at least 6.5 years ta fully track individu al consumers who
purchased compatible set-top boxes. It took Bell ExpressVu no longer than 6.25
500-17 -027275-059 PAGE:118
years to fully track individual consumers who purchased compatible set-top
boxes.
282
[505] Barr purports to support some of his opinions contained in his Report by
attempting to introduce in evidence in the present proceedings, evidence he claims to
have obtained resulting fram interviews he conducted as an expert witness and
testimony given by DIRECTV representatives in other unrelated proceedings
between DIRECTV and other unidentified parties.
[506] Regarding mandatory phone line connections, for the reasons expressed, he
dismissed this obligation as being of little value in fighting piracy.283
OPINION 83
[507] Barr claimed BEV replaced its access cards in a useful and timely manner and
consistent with what is reasonable for a DBS provider operating in the environment at
the time. He wrote: [t]here is no satellite TV industry standard or ideallength of time to use
one access card before replacing it with another.
284
[508] His opinion in this regard is not substantiated by any concrete evidence but,
rather, based on generalities and his own assessment. The credible evidence adduced
at trial by ail three of Vidotron's experts, Markey285, Shelton
2B6
and Ferguson
2B7
indicates the contrary.
[509] With respect, and considering their respective qualifications and experience, the
Court must retain as more credible and having greater probative value, the opinions
expressed on this subject by Vidotron's experts.
[510] Regarding the Nagra2 changeover, he writes at pages 62 and following:
169. In 2002, Nagra began development of the access cards and other
technology that would be called the Nagra2
288
conditional access system (the
numbering of internai footnotes is modified to respect the sequencing of this
judgment). This was before the 2003 appearance of the first FT A receivers
(Shelton p. 13), by which time development and internai testing of the Nagra2
access card and related conditional access system upgrades were complete and
Bell ExpressVu was testing Nagra2 access cards in several thousand customer's
homes. (UPl Y-131)
282 Ibid, p. 57.
283 Ibid, p. 58.
284 Ibid, p. 61.
285 Transcript, September 30, 2011, pp. 62-68.
288 Codename: Aladin.
500-17 -027275-059 PAGE:119
170. It wasn't until at least six months later, in the summer of 2004, that FT A
receivers overtook other forms of piracy in popularity. Internet postings 1 have
seen from this timeframe put the priee of the Blackbird FT A receiver in the
C$300-400 range.
289
Some pirates were willing to pay the priee because these
devices didn't need an access card and were not affected byall ECMs.
171. Thus FT A piracy was unknown when the Nagra2 condition al access
system was developed by Nagravision. Within approximately a year and a half,
Bell ExpressVu had completed the Nagra2 card swap and terminated the Nagra1
broadcast stream. Fortunately, the FT A receivers in use by pirates at that time
were no longer useful in piracy of Bell ExpressVu's signais.
[511] ln the original version of his report dated September 30,2010, Barr wrote:
Evidence: Bell ExpressVu's Nagra2 card swap was completed more
quickly than DlRECTV's P3 card swap.
[512] ln his testimony at trial, having heard the evidence of Vidotron's witnesses, he
asked to withdraw this assertion and to amend and correct the original Table 4 which
supported his initial assertion.
[513] Regarding his Mandate B, Barr concluded: "Bell ExpressVu's upgrade to the Nagra2
conditional access system was successful in reducing ail types of piracy, including piracy by
free-to-air receivers. ,,290 .In subsequent years, Barr's unsubstantiated generalization also
proved to be incorrect.
MANDATE C: OPINIONS EXPRESSED SY VIDOTRON'S EXPERTS
[514] For the reasons expressed in detail in his Report and referred to in summary
herein, Barr concluded:
Opinion C1: Bell ExpressVu never benefited from any type of piracy of its
system.
291
[515] Barr referred to an analysis of the "Impact of Various Forms of Fraud and Piracy
on BEV" contained in Table 5 of his original Report dated September 30, 2010. He
concludes:
"Evidence: BEV lost money each time a set-top box is purchased for use in
and
"Analysis: The net impact of each type of fraud or piracy on BEV is negative. "
289 For example, consider eBay.ca Satellite, Cable TV item Iist dated July 28, 2004 {Tab 17}.
290 Ibid, p. 64.
291 Ibid, p. 8.
500-17 -027275-059 PAGE: 120
[516] During the hearing, after having heard the evidence of Vidotron's witnesses, he
asked to correct and then once again to re-correct the original Table 5. Although he
corrected the erroneous elements of the original Table 5, strangely and for some
unexplained reason, he did not think it necessary to correct or modify the text of what he
refers to as his "Evidence" and ''Analysis'' attached to the revised Table 5.
[517] ln assessing the probative value of the Barr Report and his testimony in support
thereof, the Court reverts to four of the "Questions fondamentales concernant la force
probante" enumerated by Bchard and previously referred to herein
292
:
4. Quelle est l'approche de l'expert face aux thories apportes par les
autres experts? Y apporte-t-il des lments?
6. L'expert a-t-il fait preuve d'objectivit?
11. L'expertise et le tmoignage sont-ils bass sur des faits plutt que sur des
gnralits?
18. L'expert a-t-il manifest un parti pris dmesur?
[518] With respect to the questions #4 and # 11, the Court finds Barr's approach
lacking in coherence. His opinions on important issues relating to BEV's response to
piracy are, to a great extent, based upon his unsupported subjective assertions and
generalities. In some cases he made reference to and allegedly supported his views
with hearsay evidence obtained trom a witness who testitied in other unrelated
third party legal proceedings in which he had acted as an expert witness or in
emails received in connection therewith
293
.
[519] With respect to the questions # 6 and # 18, the Court has serious concerns as to
Barr's objectivity. He chose to ignore the credible evidence from both BEV's lay
witnesses as weil as that of its former expert, Shelton, regarding the failure of BEV to
upgrade its access cards, business processes and CAS in a timely fashion and the
consequences resulting therefrom. Rather, he adhered steadfastly to his unqualified
assertions referred to at paragraphs 166 and following of his Report that: [tjhere is no
satellite TV industry standard or ideal length of Ume to use one access card before replacing it
with another. As for BEV's business processes and the delays in swapping out to the
new Aladin CAS, his justifications are lacking in both objectivity and credibility.
[520] He described his mandate as including furnishing his opinion on the "Opinions
expressed by Plaintiff's experts in their reports". However, his Report and evidence in
this regard is seriously deficient. In instances where he does deal with this aspect of his
mandate, he sim ply reverts to generalities and fails to identify with precision the alleged
293 Barr Report, paras. 150, 173: reference to Larry Rissler, Director of Signal Integrity, DIRECTV.
500-17 -027275-059 PAGE: 121
errors or lack of scientific merit of these opinions. In other critical instances, he simply
chose to ignore Vidotron's experts' various opinions.
[521] Sy way of example, in one particular instance, notwithstanding the credible
evidence that SEV's smart cards had been illegally cloned by the pirate community, he
insisted that it was either impossible or very difficult to clone SEV's cards.
294
This
assertion was credibly refuted by Shelton in his testimony given in counter-proof.
Relying upon his personal knowledge of the piracy market prevalent in the industry at
the time, Shelton explained that the cloning of BEV's smart cards was both easy and
widespread during the entire period of reference, from 1999 until 2004.
295
[522] Shelton's testimony was corroborated by Gee in response to a question put to
him by the Court. He claimed there could potentially have been hundreds of clones of a
BEV card.
296
[523] ln another instance, and as a further example of Barr's lack of objectivity and
"parti pris dmesur", notwithstanding the credible and documented conclusions
expressed by ail three of Vidotron's experts to the effect that SEV's conduct was not
that of a reasonable DBS company operating in the circumstances prevailing during the
piracy period, he steadfastly asserts the contrary.297 His unqualified assertions
absolving BEV from any responsibility whatsoever for its conduct or for the delays in
effecting the swap-out to the Aladin CAS lack credibility.
[524] Moreover, and further diminishing the probative value of his evidence and
opinions, Sarr admitted in cross-examination that he had little or no experience with the
conditional access components of digital satellite systems such as the one operated by
SEV, nor did he have any direct knowledge or experience with card swap operations,
plans or costs. He further admitted that he had no business experience in a DBS
business, a satellite television provider or a conditional access provider
298
.
(2) Green
[525] Green was qualified as an expert in computer science, computer systems and
software security, cryptography, conditional access systems technology and design and
encryption of broadcast signais.
[526] His expert report dated September 29, 2010, was produced as Exhibit D-271 (the
"Green Report").
294 Barr, Transcript, December 8, 2011, pp. 101-112; December 13, 2011, pp. 33-36.
295 Shelton, Transcript, December 20, 2011, pp. 13-15.
296 Gee, Transcript, November 23, 2011, pp. 102-103.
297 Markey, Transcript, September 20, 2011, pp. 62-68; Shelton, Transcript, September 21, 2011, pp.
203-207; Ferguson, Transcript, September 27, 2011, pp. 54-64.
298 Barr, Transcript, December 8, 2011, p. 33.
500-17 -027275-059 PAGE: 122
[527] Green obtained a Master of Science degree in Computer Science fram Johns
Hopkins University in 2008 and a PhD in Computer Science fram the same University in
2008. His doctoral thesis was entitled: "Cryptography for Secure and Private Databases:
Enabling Practical Data Access without Compromising Privacy".
[528] He has authored numeraus research publications dealing with related matters.
[529] ln 2005 he co-founded, and remains to date CTO of, Independent Security
Evaluators, a company specializing in evaluation and design of security systems. He
was previously a Senior Technical Staff Member of AT&T Labs/Research fram 1999 to
2003.
[530] Green's mandate is described in the following manner:.
The mandate you have given me is to evaluate the technology and anti-piracy
efforts of Bell ExpressVu (BEV), and to answer the following questions:
Given their various business and technical requirements, did BEV employ
an appropriate technology to protect satellite television signais from
piracy?
Did BEV make reasonable efforts to detect and interrupt unauthorized
("pirate") television decoders on its network?
Was BEV's conduct comparable to that of the other major North American
satellite carriers during the same time period?
ln addition, you have asked me to consider the opinions put forward in reports
authored by Dr. Markel
99
and Dr. Ferguson
300
as weil as the joint report of Mr.
Schaeffler of the Carmel Group and Mr. Shelton
301
(these works are referred to
herein as the Markey, Ferguson and Carmel reports).
ln addition, you have asked me to consider the opinions put forward in reports
authored by Dr. Markel0
2
and Dr. Ferguson
303
as weil as the joint report of Mr.
Schaeffler of the Carmel Group and Mr. Shelton
304
(these works are referred to
herein as the Markey, Ferguson and Carmel reports) 305
[The numbering of internaI footnotes are modified to respect the
sequencing of this judgment].
299 John K. Markey. Digital Satellite TV Security: A White Paper, March 2010.
300 Teresa L. Ferguson. Signal piracy: Corporate prevention and response, March 2010.
301 Jimmy Schaeffler and Jim Shelton. Expert Witness Report of the Carmel Group and Shelton, March
2010.
302 John K. Markey. Digital Satellite TV Security: A White Paper, March 2010.
303 Teresa L. Ferguson. Signal piracy: Corporate prevention and response, March 2010.
304 Jimmy Schaeffler and Jim Shelton. Expert Witness Report of the Carmel Group and Shelton, March
2010.
305 Green Report, p. 3.
500-17 -027275-059
PAGE: 123
[531] Green provided an introduction to and explanation of the fundamentals of digital
satellite broadcasting (a.k.a. "DBS" or "DSS") systems and digital satellite television
piracy in North America. To the extent that his explanations are consistent one with the
other, these explanations and those of other experts are referred to in Section III of this
judgment.
[532] Green's conclusions are referred in summary form :
1. BEV was prudent in its selection of the EchoStar/Nagravision technology
platform.
2. From 1995-2004 the U.S. DirecTV system, rather than BEV or Dish
Network, was the primary target of piracy in North America.
3. DirecTV's inability to stem signal piracy on its network created an
unexpected set of financial and technical conditions that contributed to
piracy on BEV's network.
4. BEV aggressively monitored signal piracy levels and took actions to
thwart pirates.
5. BEV deployed a new smart .card (Conditional Access Module) to its
customers in a timely fashion, allowing for reasonable and prudent testing
and integration of the cardo
6. Smart card swaps are inherently risky, since a provider cannot predict the
resiliency and uncompromised Iifespan of the replacement smart card
technology.
7. The duration of BEV's 2003 card swap was similar to that of Dish
Network's card swap, and to the card swaps conducted by DirecTV in the
1990s.
8. It would have been difficult for BEV to develop its own Conditional Access
technology, or even substantially improve upon Nagravision's own efforts.
9. Regarding the claims of account stacking, most satellite providers do not
enforce the connection of telephone Iines to new Receiver installations,
and BEV's policies were consistent with this standard.
10. Moreover, many of the "industry standard" business practices described
by Plaintiffs' experts do not appear to have been consistently followed, or
indeed followed at ail by the industry.
11. BEV's selection of the Digital Video Broadcasting (DVB-S) standard for its
satellite broadcasting technology was appropriate, and a later switch
away from DVB would have been impractical.
500-17 -027275-059
PAGE: 124
ln summary, it is my conclusion that BEV aggressively fought signal
piracy using the best tools available, and was successful in its effort
to both interrupt service to and inconvenience the signal pirates on
its network. When an updated Conditional Access technology was made
available to SEV, the company rolled out smart cards in a period that was
consistent with some of the smart card swaps conducted by DirecTV in
the late 1990s, and very much consistent with the parallel ca rd swap
conducted by Dish Network.
3D6
[Emphasis added]
[533] These conclusions were elaborated upon in his "Detailed Findings" contained in
Section 5 of the Report.
[534] The following is a more detailed examination of a number of Green's
justifications for his "Findings". They are revealing of what Bchard refers to asa
witness having "manifest un parti pris dmesur".
"5.1 BEV was prudent in its selection of the EchoStarlNagravision
technology platform. "
[535] He dismissed the DIRECTV DSS platform developed by the NDS Group as a
suitable alternative to the EchoStar/Nagra technology chosen by BEV. He noted
DIRECTV was experiencing substantial problems with signal piracy of its system at the
time. He also dismisses the General Instruments DigiCipher platform used by PrimeStar
which, although not vulnerable to signal piracy, was nonetheless, in his words,.
technically inferior. He described, without any reserve or qualification, his reasons for this
assertion:
For one thing, the DigiCipher technology did not incorporate a replaceable
smart card (CAM), which would have limited its renewability in the event of
a compromise. Furthermore, it required specialized set top box technology that
might have dramatically increased the cost of SEV's service.
3D7
[Emphasis added]
[536] Having been present in Court during a substantial portion of the evidentiary
hearing, having heard evidence to the contrary and having had the opportunity of
correcting his opinion in this regard, Green held steadfast, again without any
qualification, to his views expressed above during his examination in chief on December
13,2011
308
. .
306 d
lb! , p. 4.
307 Ibid, p. 19.
30B Transcript, December 13, 2011, p. 169.
500-17 -027275-059
PAGE: 125
[537] On December 14, 2011, during cross-examination, when challenged with
Shelton's substantiated credible opinion to the contrary and when 'put to him that the
DigiCipher technology was indeed renewable, his evasiveness and reluctance to admit
his error was incomprehensible and, to say the least, troublesome.
[538] The following exchange between counsel and Green, when confronted with what
appears to have been an error or omission in his Report, discloses a certain
unnecessary lack of candour, independence and objectivity on a matter which, in and of
itself, would not otherwise be of crucial importance:
Now, Dr. Green, did you ever see one of these modules?
A-
950-
A-
960-
A-
970-
A-
1010-
A-
1020-
A-
1030-
A-
1 have seen a DigiCipher box, yeso
You have seen it?
1 have.
Now, you repeated this statement, by the way, in your examination in chief yesterday and
Mr. Shelton tells me that this is wrong, that Mr. Shelton was involved with General
Instruments with the design of these modules and that, in fact, the DigiCipher technology
was designed with a capacity for renewable security, it had a smart card slot. Is that not
the case, Dr. Green?
l'm not sure if we're talking about the digital DigiCipher or the analog DigiCipher, l'm not
exactly sure.
Weil, which one did you see?
1 am talking about the digital DigiCipher platform. 1 don't know what to say, but...
( ... )
Yes, but 1 said DigiCipher.
Based on my understanding and based ... 1 have not examined one of these boxes in
detail, but what 1 have seen in descriptions of these boxes is they use an internai
conditional access module that was actually connected to the circuit board. So that is
what 1 believe their conditional access module was based on.
So you ... if 1 understand your answer correctly, ail you saw was comments on the
module, you never actually saw the module, is that your. ..
No, l've seen a box and l've never examined it closely to look for a smart card slot.
So you don't know wh ether there's a slot or there isn't a slot in the box, do you?
1 don't know whether there's a slot, but 1 do ... 1 have examined... 1 have looked at
essentially descriptions of these technologies, and the description of this technology is
that the conditional access module was integrated inside of the box. If Mr. Shelton has
evidence to the contrary, 1 would correct myself.
309
[539] Shelton was re-examined in counter-proof on December 20, 2011. He confirmed
both that he designed the DigiCipher CAS module in early 1999 and that these modules
ail had renewable technology through the smart card slots at the rear of the units. His
testimony in this regard is credible and uncontradicted, except by Green.
309 ,Transcript, December 14, 2011, pp. 76-77.
500-17 -027275-059
PAGE: 126
"5.2 From 1995-2004 the U.S. DirecTV system, rather than BEVor
Dish Network, was the primarv target of piracv in North America. "
[540] Green claimed " ... there was no significant piracy on BEV until approximately 2000. ,,310
ln cross-examination, in a somewhat convoluted manner, he attempted to qualify his
comments by saying that he didn't mean that there was "no piracy" before 2000 but
rather that it became significant thereafter.
"5.7 The duration of BEV's 2003 card swap was simiJar to that of
Dish Network's card swap, and to the card swaps conducted bv
DirecTV in the 19905. "
[541] Green noted that the duration of the card swaps performed by BEV was
comparable with that of the Dish Network and more favourable then that of DIRECTV.
That may or may not be the case. However, what is relevant and what he conveniently
omits to address in this part of his Report are the comparable delays in initiating the
card swaps. In particular he substantially ignored and failed to justify the reasons for
the delays in the initiation of the swap-outs by BEV.
[542] Moreover, peculiarly, he neglected to address the evidence regarding the
significantly shorter time period required by other DBS companies in other parts of the
world to perform the swap-out of their existing system to the new Aladin CAS. The
inordinate delay by BEV to initiate and execute the swap-out is one of the main
criticisms of Vidotron. It is a fundamental issue raised for determination in this action.
[543] Green's failure to consider these material facts which, being within the s<?ope of
his professed expertise, one would have thought was known to him, brings into question
the reliability of his opinion. This is unexplainable and cause for concern.
[544] ln Section 6 of his Report, Green addressed certain opinions expressed by
Vidotron's experts. His comments in this regard as weil as his testimony are to a large
extent argumentative, founded in business and economic judgment rather than in the
technical expertise for which he was qualified. He should have abstained from opining
on these issues which fall outside his experience or expertise.
[545] Green concludes:
When BEV did confirm the existence of significant piracy on its network
(in late 2000 to 2001), it took a number of actions to combat the piracy. It
might have been ideal if BEV could have immediately deployed a new
Conditional Access System at that time, but in practice BEV (like most
satellite providers of its size) required a technology partner to develop the
CAS, integrate it with the platform, and test it and deploy it without
causing substantial interruption to its customer base. Nagravision was
already engaged in the process of developing such a CAS (the Aladin, or
310 Supra, note 308, p. 19.
500-17 -027275-059 PAGE: 127
DNASP-III system), and thus BEV began planning the switchover to this
system. While BEV could technically have switched to an alternative CAS
manufacturer, this might have added substantial integration time, and
might -not have reduced piracy. In my opinion, BEV made a prudent
decision to upgrade to the new Nagravision CAS.
Once an updated CAS technology was made available, BEV rolled
out the smart cards in a period that was consistent with some of the
smart card swaps conducted by DirecTV in the late 1990s, and very
much consistent with the paraI/el card swap conducted by Dish
Network. Furthermore, there is no reason to believe that a faster
roI/out would have prevented, or even delayed subsequent
compromises of the smart ca rd technology. 311
[Emphasis added]
[546] ln his testimony at trial, referring ta the swap-out process ta the Aladin CAS,
Green insisted that, in his unqualified opinion: "there was no de/ay in that process that was
not re/ated to a technica/ reason. That was my conclusion based on having examined this
history".
[547] On this subject, in cross-examination, Green was referred ta the document
previously referred ta, dated July 23, 2002 entitled "Project Aladin: Preliminary Outline
of Business Case" 312and in particular to the recommendation contained on page 18
thereof which read: "Based on current estima tes of signa/ theft, do not proceed with card swap
out program. "
[548] Although he makes no mention of it in his Report, or in his examination in chief,
Green acknowledged having seen this document before. On the pretext, according ta
him, that there was no proof as ta its author, he simply chose ta ignore it and disregard
its contents. He maintained his opinion that "there was no de/ay in that pro cess that was not
re/ated to a technica/ reason."
[549] This is an issue for the Court ta decide.
[550] At the moment, one can only wonder whether he even examined or was aware of
the fin an cial structure and the internai workings of the funding process among BCE and
its subsidiary and affiliated entities. In particular, the Court is perplexed how Green
could make this unqualified assertion regarding the absence of any delays li ... not re/ated
to a technica/ reason" in light of the credible evidence to the contrary regarding the delays
in obtaining funding for the project.
311 Ibid, pp. 33-34.
500-17 -027275-059
PAGE: 128
[551] The following exchange ensued between counsel for Vidotron and Green on
this subject:
3260- Dr. Green, l'II put the following the question to [you ... ] From your
attendance in Court over the last some forty-five (45) days, were you
aware that it is only in May of two thousand and four (2004) that the
funding approval to proceed with the ca rd swap was obtained?
A- The funding approval was obtained in May two thousand and four (2004)
to purchase the cards that would be used in the physical swapping of
cards.
3270- Right.
A- Yes, that is my understanding.
3280- Okay. And that the swap commenced in August of two thousand and four
(2004), you're also aware of that fact?
A- That is my understanding as weil.
3290- And despite those two (2) facts, you testified before the Court that the
only delays to proceed ( ... ) with the swap were technical in nature; that
was your evidence before the Court?
A- That is my belief, yeso 313
[552] The steadfast adherence by Green to this conclusion, without any qualifications
whatsoever on his part, is serious cause for concern as to the independence, objectivity
and probative value of his Report. It is a further example of his refusai to address
material facts that are were unfavourable to BEV and that challenge the validity of his
opinion.
[553] Moreover, the opinion that " ... there is no reason ta believe that a faster roI/out would
have prevented, or even delayed subsequent compromises of the smart card technology" is
unsubstantiated in fact. It has been contradicted by the credible evidence adduced by
Vidotron's expert and ordinary witnesses.
[554] ln assessing the probative value of the Green Report and his testimony in
support thereof, as in the case of the Barr Report, the Court applies the same
"Questions fondamentales concernant la force probante" enumerated by Bchard and
previously referred to herein
314
. For the same reasons expressed with respect to the
probative value of the opinions expressed in the Barr Report and for the additional
313 Transcript, December 14, 2011, p. 194.
500-17 -027275-059 PAGE: 129
reasons expressed above, the Court rejects the opinions expressed in the Green Report
and in his testimony in support thereof.
B. QUANTIFICATION OF DAMAGES
[555] The jurisprudential principles referred to in Section IX above will be similarly
applied in assessing the credibility of each of the expert witnesses examined at trial in
connection with the quantification of damages allegedly suffered by Vidotron and TVA.
VIDOTRON & TVA
[556] Two expert witnesses testified on behalf of Vidotron and TVA in connection with
the quantification of damages: Alain Lajoie ("Lajoie") and Jonathan Allard ("Allard")
both principles of Navigant.
(3) Lajoie
[557] Lajoie was qualified as an "Expert en juricomptabilit". His expert report, co-
authored with Allard and dated March 29, 2010, was produced as Exhibit P-363. They
were assisted in the preparation of the report by Guy St-Georges, a director of the
Montreal office of Navigant. A revised and consolidated report, dated October 3 & 5,
2011, was produced as Exhibit P-363i (the "Navigant Report"). He was solely
responsiblefor chapters 1 through 6 of the report and presumably shared responsibility
with Allard for chapters 8 and 9.
[558] He has practiced as a chartered accountant since 1978, received an MBA
degree from the University of Western Ontario in 1983, was named a chartered
accountant with an expertise in forensic accounting (CA-EJC) in 2000 and a Fellow of
the Order of Chartered Accountants of Quebec (FCA) in 2007. His full curriculum vitae
is annexed to the Navigant Report as Annex 1 .
(4) Allard
[559] Allard was also qualified as an "Expert en juricomptabilit". He co-authored the
Navigant Report with Lajoie. He was solely responsible for chapter 7 of the report and
presumably shared responsibility for chapters 8 and 9.
[560] He has practiced as a chartered accountant since 2005. He received a
Baccalaurat en sciences comptable (B.A.A) in 2002, an MBA in 2004, a Diplome in
investigative and Forensic Accounting (DIFA) in 2007. His full curriculum vitae is
annexed to the Navigant Report as Annex 2.
[561] Navigant's mandate is described in the following manner:
1.1 Les services de Navigant Conseil LJ Inc. (<< NCI ) ont t
500-17 -027275-059
Mission
confie
NCI
1.2
Conditions
de la
mission
315 Navigant Report, p.1.
PAGE: 130
retenus par Woods s.e.n.c.r.i., agissant titre d'avocats pour le
compte de Vidotron Lte, Vidotron (Rgional) Lte, CF Cble
TV Inc. (collectivement appeles Vidotron ) et Groupe TVA
Inc. (<< TVA ) (collectivement appeles les Demanderesses )
aux fins d'clairer le tribunal relativement aux:

dommages que Vidotron allgue avoir subis depuis le
1 er septembre 2002 et jusqu'au 31 aot 2005 suite aux
actes que celle-ci reproche Bell ExpressVu S.E.C.
(<< BEV );
dommages que Vidotron allgue avoir subis depuis le
1 er septembre 2005 suite aux actes que celle-ci reproche
BEV; et
dommages que TVA allgue avoir subis depuis le 1 er
septembre 2002 et jusqu'au 15 juillet 2005 suite aux actes
que celle-ci reproche BEV.
D'une part, vous nous avez demand, la lumire des donnes
disponibles mme la preuve dpose par les parties, de
dterminer travers le temps le nombre de pirates prsents sur
les territoires de Vidotron, ainsi que ceux qui auraient
normalement t des clients de cette dernire.
Dans un deuxime temps, vous nous avez demand, la
lumire des donnes disponibles mme la preuve dpose
par les parties, de dterminer travers le temps quel fut le
nombre d'abonns pour lesquels TVA fut prive de
redevances sur le territoire qubcois.
Finalement, vous nous avez demand, la lumire de
l'information financire historique des Demanderesses et des
donnes. disponibles mme la preuve dpose par les
parties, de dterminer les pertes de profit que les
Demanderesses auraient subies depuis le 1 er septembre
2002, incluant les pertes futures, permanentes ou
temporaires, attribuables la perte de clients cause par les
fautes que les Demanderesses attribuent BEV avant que
celle-ci ne procde un changement de ses cartes
d'accs.315
[Internai references omitted]
500-17 -027275-059 PAGE: 131
[562] The authors, with no apparent expertise or experience in the industry and with no
technical expertise relevant to piracy and signal theft in the DTH television industry,
purport to provide an analysis and historical perspective of the phenomenon not only in
Quebec and the rest of Canada, but as weil in other parts of the world. This analysis is
found in section 3.0 of the report.
[563] An extensive Iist of documents that Lajoie and Allard claim to have consulted for
the purposes of the report is contained in Annex 5. The authors refer as weil to an
additional source of information being: " ... discussions avec des reprsentants de
Vidotron et de TVA qui nous ont fourni certains renseignements, notamment de nature
financire et ce, dans le but de nous assister dans la dtermination du quantum. ,,316
With few exceptions, most of those representatives with whom the authors allegedly
met were not witnesses in these proceedings. There is no admissible evidence
emanating from them upon which the authors may appropriately rely in formulating their
opinions.
[564] ln cross examination regarding which documents each of them actually
consulted, Lajoie is uncertain'which he effectively examined as opposed to having had
them at his disposaI. A substantial number of relevant documents appear not to have
been examined al ail by either Lajoie or Allard, while, others, not in evidence appear to
have been examined and relied upon.
[565] The methodology used to calculate the damages allegedly suffered by Vidotron
and TVA is described in section 5.2 of the report:
Notre dmarche pour en arriver un calcul des dommages a
comport cinq (5) tapes, savoir:
1. partir de la documentation en main, la dtermination du nombre de
personnes qui pirataient le systme de BEV de 2002 2005 (Section 7.2).
2. La dtermination du nombre de pirates qui, s'ils n'avaient pu pirater le
systme de BEV, auraient t des abonns de Vidotron ou auraient pay des
redevances TVA (Section 7.3).
3. Le calcul des dommages pour la priode pr-aot 2005 pour Vidotron et
pr-juillet 2005 pour TVA (Section 9.0).
4. Le calcul des dommages pour la priode post-aot 2005 et jusqu'au 31
dcembre 2009 pour Vidotron (Section 9.0).
5. Le calcul des dommages pour la priode post-dcembre 2009 pour
Vidotron (Section 9.0).
316 Ibid, p. 21.
500-17 -027275-059 PAGE: 132
Dans le cas des tapes 3 5, la mthodologie utilise aux fins de dterminer les
dommages est explique plus en dtail la Section 8.0 du prsent rapport.
3i
?
[566] The authors referred the Court to Section 8.0 of the Report for a detailed
explanation of the methodology used for determining the damages evaluated un der
steps 3, 4 and 5 above. However, once again, in examining the source financial
information relied upon by the authors in determining the damages allegedly during the
three distinct periods in question, reference is made to financial information emanating
not only from Vidotron and TVA, but also to such information, not in evidence, from
other affiliates or sister companies.
[567] The information in question comes in part from what the authors refer to as "le
cahier". There appears to be no differentiation in the minds of the authors between
financial information in evidence in these proceedings and such information, not in
evidence, forming part of the financial books and records of the Plaintiffs and their
affiliate or sister companies. The authors acknowledge as much in the Report:
Travail de
validation
Une grande partie des informations qui nous furent
utiles dans la dtermination du quantum des
dommages dans le cas prsent furent extraites
principalement de la version annuelle des Cahiers.
Voici en substance les procds que nous avons
appliqus dans le cas prsent:
3i8
[568] A summary of Navigant's findings is contained Section 2.0 of the Report. The
following extracts warrant reproduction. They reflect a selective analysis and
appreciation of the evidence and a troubling lack of independence or objectivity.
Although the authors found it necessary to revise their Report on several occasions
since producing the original in March 2010, in many instances, either Allard or Lajoie,
who were in attendance during a considerable part of the evidentiary hearing, ignored
the oral and documentary evidence adduced during the hearing that was inconsistent
with their own analysis of the documentary evidence contained in their Report.
[569] The following summary, drafted in 2010, has not been amended even though, in
many respects, it reflects their appreciation or interpretation of the documentary
evidence which has proven, at trial, to be incorrect or at the very least misleading:
2.0 Sommaire
de nos
constatations
31? Ibid, p. 22.
318 Ibid, p. 58.
Nous avons d'abord examine l'offre des deux
tldistributeurs, savoir Vidotron et SEV, tant en
matire d'quipements que de chanes. La priode
couverte allait du 1 er septembre 2002 au 31 aot 2005.
Cette analyse fut faite partir des brochures
500-1 7-027275-059 PAGE: 133
publicitaires offertes aux consommateurs. Cet
exercice tait essentiel aux fins de dterminer si l'un
ou l'autre des tldistributeurs possdait un avantage
concurrentiel sur son comptiteur.
Nous concluons que les offres de BEV et de Vidotron en matire
d'quipements taient similaires, si ce n'est que BEV avait introduit
certains de ses rcepteurs/enregistreurs avant Vidotron avec un avantage
sur le prix.
Toutefois, en matire d'offre de chanes et de prix s'y rattachant, totltes
proportions gardes, les deux tldistributeurs avaient une offre similaire.
Lorsqu'il y avait un lger avantage pour l'un ou pour l'autre, cet avantage tait
ponctuel, temporaire et rapidement combl par son comptiteur.
Le piratage des signaux satellite de BEV est un phnomne pancanadien.
Toutefois, plusieurs lments de la preuve nous ont amen croire que le
piratage des signaux de BEV tait, l'poque des faits, plus rpandu au Qubec
que dans le reste du Canada.
Dans un premier temps, nous avons procd au calcul du nombre de foyers qui
pirataient la signal satellite de .BEV sur le territoire qubcois. Le cur de notre
mthodologie a repos sur un rapport prpar par le comit de lutte contre le
piratage de BEV intitul Report on Counter-Piracy et dat du 13 janvier 2003
(Pice P-1 06). Pour ce faire, nous avons utilis quatre mthodes, lesquelles ont
toutes point vers un rsultat similaire dmontrant que le nombre de foyers
piratant les, signaux satellite de BEV se serait situ entre 79500 (31 aot 2002)
et 158 000 (28 fvrier 2005).
Par la suite, nous avons transpos ces donnes et procd au calcul du nombre
de clients perdus par Vidotron. En appliquant un taux de piratage
acceptable de 0%, cette analyse nous a permis de conclure que
Vidotron avait perdu entre 41 200 (31 aot 2002) et 81 900 (28 fvrier 2005)
clients suite au piratage des signaux satellite de BEV. Ces chiffres sont
bien entendu infrieurs si nous utilisons un taux de piratage acceptable
suprieur.
Nous avons ensuite procd au calcul des revenus perdus. Cet exercice fut fait
sur une base de cot/revenu marginal et visait dterminer les flux montaires
gnrs par un abonn additionnel chez Vidotron. Comme un Client en
tldistribution pouvait aussi s'abonner d'autres services (internet, tlvision
par cble), ceci nous a amen dterminer les revenus par anne, pour chacun
de ces services et ce, pour la priode tudie, laquelle couvrait les exercices
financiers termins les 31 dcembre 2002 2009 inclusivement. Dans le cas de
TVA, nous avons calcul les redevances moyennes perdues par cette socit
pour la chane Le Canal Nouvelles (LCN) entre le 1 er septembre 2002 et le 15
juillet 2005.
500-17 -027275-059 PAGE: 134
Finalement, nous avons, partir des donnes dtermines prcdemment,
compil les revenus perdus par Vidotron et TVA pour les priodes du 1 er
septembre 2002 au 28 fvrier 2005 et du 1 er septembre 2002 au 15 juillet 2005
respectivement. En prenant comme hypothse un taux de piratage
acceptable 0%, les pertes de profits subies par Vidotron pour la
priode du 1
er
septembre 2002 au 28 fvrier 2005 se chiffreraient environ
37140714 $ et celles de TVA pour la priode du 1
er
septembre 2002 au 15
juillet 2005 environ 1 468174 $, le tout en dollars du 31 aot 2005. Ces
pertes de profits sont bien entendu infrieures si nous utilisons un taux de
piratage acceptable suprieur.
Quant aux pertes de Vidotron pour la priode suivant le 28 fvrier 2005,
elles dpendent de l'hypothse gue nous posons guant la migration des
clients perdus vers l'un ou l'autre des tldistributeurs suite au
changement des cartes. En effet, il est fort possible gu'une partie plus ou
moins importante des pirates ait pu dcider, suite au changement de carte,
de s'abonner (ou se rabonner) aux services de Vidotron. De mme, il est
fort possible qu'une partie plus ou moins importante des pirates ait pu
dcider, compte tenu qu'il possdait dj tout l'quipement ncessaire
pour capter le signal satellite de BEV (soucoupe, dcodeur, etc.), de
demeurer avec BEV.
Les signataires du prsent rapport soumettent donc respectueusement que
l'valuation de cette partie de la rclamation, savoir le nombre de pirates
qui ont migr vers Vidotron ou qui sont demeurs chez SEV, devrait faire
partie du mandat de la Cour, compte tenu de l'entiret de la preuve qui lui
sera prsente. De mme, nous estimons que la Cour, aprs tude de la
preuve, sera mieux place pour statuer sur un nombre d'annes post-
fvrier 2005 pendant lesquelles Vidotron a t, ou sera pour l'avenir,
prive de revenus suite au piratage.
Nous avons prpar diffrents scnarios de migration et nous laisserons donc
la Cour le soin de dterminer lequel serait le plus plausible dans les
circonstances, ainsi que la priode sur laquelle ces scnarios devraient tre
calculs. Dpendant du scnario et de la priode choisis, les profits perdus,
avec un taux de piratage acceptable 0%, se chiffrent dans une
fourchette entre 37 140 714 $ et 347 703 307 $, le tout en dollars du 31 aot
2005. Ces pertes de profits sont bien entendu infrieures si nous utilisons un
taux de piratage acceptable suprieur.
319
[Internai references omitted, Emphasis
added]
[570] The Court is troubled by and has serious concerns about the credibility of the
authors' opinions expressed in those portions of the Report, emphasized and
highlighted above.
319 Ibid, pp. 5-7.
500-17 -027275-059 PAGE: 135
(i) ALLEGED ABSENCE OF COMPETITIVE ADVANTAGE DURING THE PIRACY PERIOD
[571] ln concluding that neither party had any competitive advantage with respect to
equipment and channels offered, the authors admit that: "Cette analyse fut faite partir
des brochures publicitaires offertes aux consommateurs." On that basis alone, they
dismissed the possibility that the reduction in the subscriber base and the consequent
losses incurred by Vidotran could be due to consumer preferences for the service
offered by BEV. They ignore, or dismiss as of no consequence, the fact that high
definition television services were offered by BEV a considerable period of time before
that available to Vidotran subscribers. This fact might have given BEV a certain
competitive advantage and might have contributed to its loss of subscribers. Their
finding in this regard is unsubstantiated and moreover, in light of the evidence adduced
at trial by the President and C.E.O of Vidotron, Robert Dpatie on this subject,
incorrect.
[572] As previously mentioned, Dpatie acknowledged there may be "other" reasons
why Vidotran lost existing or potential clients. He testified candidly and credibly:
" En aucun cas on attribue la dcroissance complte de Vidotron seulement le
piratage. Bien au contraire, il y avait de la concurrence et autres, on le sait fort
bien." 320
(ii) ACCEPTABLE LEVEL OF PIRACY (<< TAUX DE PIRATAGE ACCEPTABLE )
[573] Although in their tables contained in the annexes to the report, the authors
provided calculations based upon other "acceptable" levels of piracy, it is significant that
for the purposes of their opinion and explanations and hotwithstanding the evidence
heard on behalf of each of the parties that a 0% level of acceptable piracy is
unattainable, they chose nonetheless to base their conclusions on this level of
acceptable piracy. This form of presentation clearly presents a far more dramatic
portrait of the consequences of piracy with losses calculated as high as $347,703,307.
The attempts at drama, however, detract fram the neutral objectivity one would have
hoped to see reflected in the Report.
(iii) LOSSES: PIRACY PERIOD
[574] ln calculating the losses for the Piracy Periods, the authors based their
calculations upon a 0% level of acceptable piracy, although acknowledging that the
losses would be inferior if they used a higher level of acceptable piracy.
500-17 -027275-059 PAGE: 136
[575] The calculations of the losses incurred by Vidotran are for the period fram
September 1, 2002 until February 28, 2005; and for TVA, for the period fram September
1, 2002 until July 15, 2005. Depending upon which of the 3 scenarios praposed by
Navigant is chosen, the authors conclude that Vidotran incurred losses ranging fram
$37,140,714 to $29,095.272 during the Piracy Period; TVA ranging fram $1,486,174
and $1,190,196.
[576] Once again, the authors chose to ignore the evidence heard at trial regarding the
timing of the availability of the Aladin CAS and the earliest possible date upon which
BEV could have performed the swap-out fram the legendary CAS to the Aladin CAS.
Although Lajoie and/or Allard were substantially present thraughout the evidentiary
phase of the hearings and either witnessed or were advised of the testimony, they
chose to ignore evidence and not to further amend their Report. They simply retain, as
apprapriate, the September 1, 2002 commencement date of the Piracy Period as
praposed in their Report.
[577] While the authors chose to ignore this evidence, Plaintiffs' counsel in their oral
argument, acknowledged that the earliest possible date at which BEV could have
performed the swap-out to the Aladin CAS would have been April 1, 2003 and not the
September 1, 2002 date relied upon by the authors. Counsel further acknowledged that
3% would be an apprapriate acceptable rate of piracy. This resulted in a reduction of the
damages claimed during the Piracy Period on behalf of Vidotron fram $37,140,714 to
$28,539,723 and a similar reduction on behalf of TVA from $1,486,174 to $1,088,940.
[578] ln a letter addressed to the Court dated January 6, 2012, Plaintiffs' counsel
acknowledged, presumably based upon the evidence heard at trial, that the calculation
of damages claimed should commence fram March 31, 2003 or, in the worst case
scenario, at the latest fram July 1 , 2003.
321
At the request of the Court, counsel pravided
the calculation of damages based upon other possible commencement dates
subsequent to July 1,2003.
[579] No such amendment was ever praposed by either Allard or Lajoie.
(IV) LOSSES: POST PIRACY PERIOD (VIDOTRON ONLV)
[580] ln their revised and consolidated report, the authors decline to quantify the claim
for damages incurred by Vidotran during the post piracy period. In particular they
decline to opine as to the number of subscribers who chose to either stay with BEV or
migrate to Vidotran. For some incomprehensible reason, and notwithstanding their
willingness to opine on the damages allegedly incurred during the Piracy Period, they
conclude this determination should be made by the Court" ... compte tenu de l'entiret de
la preuve qui lui sera prsente." Similarly, they decline to opine as to the duration of the
post piracy period.
321 Exhibit P-388.
500-17 -027275-059
PAGE: 137
[581] Rather, they provide different scenarios for the Court to adopt based upon what it
believes most appropriate. Depending on the scenario retained and with a 0% level of
acceptable piracy, according to the authors, the damages incurred during the post
piracy period would range from a low of $37,140,714 to a high of $347,703,307 ail
calculated in dollars discounted as of August 31,2005.
322
[582] For the foregoing reasons as weil as those expressed by
PricewaterhouseCoopers in the PwC Expert Report, reproduced below, with which the
Court concurs in ail material aspects, one cannot look to the Navigant Report for
assistance to quantify the claims in damages claimed by either Vidotron or TVA.
2.2 Summary of Comments on NCI's Report
We present below the summary of our comments on NCl's report:
The assumptions used in NCl's report to determine the number of alleged
pirates in Quebec are unsupported (see Section 2.3.1 and 2.3.2);
A scenario with a 0% tolerable piracy rate is unreasonable and overstates
the qUantum of the alleged damages (see Section 2.3.3);
Using the assumption that the pirate population behaved like the average
legitimate customer is speculative and overstates Vidotron's alleged lost
cliente le (see Section 2.3.4);
NCI does not consider any mitigating actions Vidotron could have
initiated to reduce its damages after the Swap End Date (see Section
2.3.5);
The utilization of bundling is unsupported and overstates the quantum of
damages suffered by Vidotron by including the cash flows lost for
services other than broadcast television in a proportion equal to the
contemporaneous bundling rate (see Section 2.3.6);
The selection by NCI of the end-of-period bundling rates to estimate the
cash flows lost overstates the damages related to bundling (see Section
2.3.7);
Nel fails to provide details on the composition of the direct costs and
operating expenses and as a result, it is difficult to comment on the
validity and reasonableness of the costs included and excluded from the
cash flow per subscriber (see Section 2.3.8);
322 Exhibit P-363i, Annexe 35.
500-17 -027275-059 PAGE: 138
Nel does not consider ail the cash flows related ta the costs from the
existing pirates at the beginning of the Piracy Periad, which overstates
the damages. On the other hand, Nel does not consider the acquisition
costs actually incurred by Vidotron in scenarios where former pirates
subscribed to Vidotron after the Piracy Period. This omission
understates their quantification of damages (see Section 2.3.9);
A portion of hybrid pirates were Iikely paying licensing fees to TVA and
TVA's damages as quantified by Nel would be overstated (see Section
2.3.10); and, [ ... ]323
[583] ln assessing the probative value of the Navigant Report and the testimony of
Lajoie and Allard in support thereof, the Court applies the same four "Questions
fondamentales concernant la force probante" enumerated by Bchard and previously
referred to herein in analyzing the evidence of other expert witnesses
324
. For the same
reasons expressed with respect to the probative value of the opinions expressed in the
Barr Report and the Green Report and for the additional reasons expressed above, the
Court rejects the opinions expressed by Lajoie and Allard in the Navigant Report and in
their testimony in support thereof.
BEV
[584] One witnesses, Pierre Maill ("Maill"), a principal of PricewaterhouseCoopers
("pwC"), testified on behalf of BEV with respect to the quantification of damages
claimed by Vidotron and TVA in this and one or more of the Related Actions.
[585] Maill was qualified as an "Expert en valuation d'entreprise et valuation de
dommages". His original Report, dated November 9, 2010, was produced as Exhibit D-
269C. A revised and consolidated Report, dated December 16, 2011, was produced as
D-269F (the "PwC Report").
[586] Maill received a Baccalaurat en commerce, Systmes d'information de gestion
et Finances in 1978 and a Matrise s sciences (M.Sc), option finance, in 1986. He
became a member of l'Institut canadien des experts en valuation d'entreprises (EEE) -
Canadian Institute of Chartered Business Valuators (CBV) in 1998. His considerable
experience in business evaluation and quantification of business operating losses is
detailed in his curriculum vitae, produced as Exhibit D-269A. As in the case of Lajoie
and Allard, he has no particular expertise or experience with piracy and signal theft in
the DTH television industry.
[587] PwC's mandate is described in the following manner:
323 PwC Report, pp.1 a & 11.
324 Bchard, Supra note 194, p. 660.
500-17 -027275-059 PAGE: 139
You have asked us, as independent experts specializing in business valuation
and financial litigation, to assist you in analyzing the financial issues relating to
two separate complaints fi/ed with the Court by the Plaintiffs against BEV. More
precisely, you have asked us to comment on the Plaintiffs' expert report on the
financial damages allegedly suffered by the Plaintiffs, prepared by NCI dated
March 29, 2010. Furthermore, you have asked us to assist you in analyzing the
financial damages, if any, pertaining to BEV's dispute with the Plaintiffs as at
NCI's Damage Quantification Date should the Court find BEV Hable for damages.
[ ]
325
... .
[588] The scope of the mandate, the documents consulted and reviewed and the
meetings. and/or correspondence with various employees of BCE are described in
Appendix 1 of the Report.
[589] PwC's analysis and comments on the Navigant Report are contained in Section
2 of the Report. An analysis and quantification of the alleged financial damages suffered
by Vidotron and TVA, in the event that the Court concludes that BEV is liable for
damages, are contained in Section 3 of the Report.
(1) COMMENTS ON THE NAVIGANT REPORT
[590] PwC concluded Navigant's methodology used to establish the number of lost
subscribers and to quantify damages was unreliable because, in particular, it (i) was
based upon speculative and unsupported assumptions; (ii) did not exclude categories of
pirates that, in ail probability, would not have been subscribers of Vidotron; and (iii) did
not consider the effect of attrition. A summary of PwC's comments on the Navigant
Report, contained at pages 10 and following of their Report is reproduced in its entirety
in the preceding sub-section of this judgment. The summary was elaborated upon in the
following pages of the Report. Certain of these comments warrant particular
consideration.
2.3.4 Analysis of Assumptions Regarding Pirates' Behaviour
One of NCI's key assumptions is that the pirates' behaviour would mirror the
average legitimate user's behaviour
326
. NCI recognizes that it is impossible to
establish with certainty the behaviour the pirates would have adopted, had they
not been able to engage in pi racY27. NCI nevertheless assumes that barring
BEV's signal piracy, the average pirate would have subscribed to Vidotron's
services in the same proportion as the average legitimate user had behaved
historically.
325 PwC Report, p. 1 .
326 Page 54 of NCI Report.
327 Page 53 of NCI Report.
500-17 -027275-059 PAGE: 140
NCI has not demonstrated that pirates would behave comparably to regular
users, and its expert report shows no indication of having analyzed possible
pirates' behaviour. In our view, assuming that the pirate population would behave
like the average customer is speculative and overstates Vidotron's alleged lost
c1ientele.
[ ... ]
2.3.4.2. Assumptions Regarding Vidotron's Market Share
NCI calculates the alleged loss of customers for Vidotran on the basis that, had
the piracy been prevented, pirates would have subscribed to the different
broadcast distribution undertakings in the same proportion as Vidotron's market
share during the Piracy Period. As noted earlier, this market share of 71 % is
applied consistently throughout the Piracy Period.
Based on our review of the evolution of market shares U in Vidotron's
territorl
28
and Lger Marketing's quarterly surveys fram June 2004 to March
2005, we note that the market shares used in NCI's report only include the
television broadcast undertakings and exclude non- subscribers, in effect
implying that, had piracy been prevented, ail Excess Pirates would have paid for
television braadcasting.
This assumption overstates the number of Vidotron's lost customers. We
consider that without BEV's signal theft, there would be three main options
available to the pirates: 1) Subscribe to one of the undertakings; 2) Off-air
television, or become a non-subscriber; 3) Pirating another system. We review
these options below:
Subscribe to one of the undertakers: NCI assumes this option as the only option
for the pirates.
Off-air television: according to NCI's repore
29
, it is estimated that between 13%
and 26% of Canadian households received television braadcasting through the
off-air system (i.e. free) between 1995 and 2005. Furthermore, according to the
Lger Marketing surveys referred to in NCI's Appendix 11, approximately 20% of
households with a television received television broadcasting through the off-air
system, as computed in Table 1 below:
328 Appendix 11 of NCI Report.
329 Table 1 of NCI Report, p. 14.
500-17 -027275-059 PAGE: 141
Table 1: Proportion of Off-Air Television Us ers
Respondents with off-air television seIVice
Tata! respondents
Proportion
Average
Source:
Jun-04
172
801
21%
20%
Sep-04
172
802
21%
Dec-04
155
802
19%
Lger M arketing's surveys for June 2004, September 2004, Oecember 2004 and M arch 2005
. Pirating another system: we understand that signal piracy is a recurring problem
in the industry and would not necessarily cease as counter-measures are applied
to one system.
Nel should therefore have adjusted Vidotron's coniputed market share to
include the proportion of pirates that would not have been Vidotron's or any
other broadcaster's customers even if the piracy had been prevented.
ln conclusion, Nel overstated Vidotron's potential stake of SEV's piracy market:
[ ... ]
2.3.5. Analysis of Assumption of Vidotron's Loss of Customers after
February 28, 2005
ln its calculation of the quantum of damages suffered by Vidotron, Nel uses five.
different scenarios to estimate the loss after February 28, 2005. In each of these
scenarios, Nel assumes that Vidotron would have kept the alleged lost clients
in the same proportion for a period of approximately 10.5 years (based on
scenarios of 0%, 25%, 50%, 75% and 100% of the February 28, 2005 level). We
consider this method of calculation as a mere sensitivity analysis using
unsupported assumptions.
Moreover, this assumption does not consider any attrition over the years.
Implicitly, this indicates that Nel does not consider any mitigating actions
Vidotron could have initiated to reduce its damages after the Swap End Date or
any efforts on the part of SEV and other competitors to increase their respective
subscriber base in a post-swap environment.
[ ... ]
2.3.6. Analysis of Bundling and Corresponding Lost Revenues in Other
Services
Nel presumes that SEV's television signal theft has impacted Vidotron's
Internet and cable telephony subscriber base. As such, lost profit margins on
those services offered by Vidotron are added to the alleged damages. To
Mar-OS
150
800
19%
500-17 -027275-059 PAGE: 142
quantify those damages, NCI further presumes that had piracy been prevented,
Vidotran would have gained subscriptions fram those calculated pirates at the
same bundling rate as its contemporaneous "Iegitimate" subscriber rate
330
,
implying that Vidotron's alleged lost subscribers due to piracy would have acted
the same way as the average subscriber in terms of services.
This presumption regarding pirates' behaviour is optimistic and speculative as
there are no indications that pirates were not able to subscribe to Vidotron's
other services even if they were stealing BEV's television signal.
[ ... ]
2.3.10 Analysis of Computation of TVA's Alleged Loss Over LCN
Subscribers
As discussed previously, in order to calculate the loss of profits related to the loss
of LCN subscribers, NCI multiplied total pirates net of tolerable pirates by the
licensing fee. By doing so, NCI presumes that ail clients lost due to piracy were
not paying to receive the satellite signal broadcasting LCN's content. Yet,
according to the data contained in Appendix 2 of NCI's letter dated March 31,
2019 addressed to Woods, in Canada, 47.4% of hybrid pirates subscribed either
to A la carte - programmation suprieure or Forfaits. We understand these
packages cou Id include LCN for the province of Quebec. In effect, NCI
erroneously presumes hybrid pirates were likely not subscribers to packages
including LCN.
[ ... ]331
[591] PwC's comments and observations highlighted above are both appropriate and
weil founded.
"BUNDLlNG"
[592] Since it represents a substantial portion of its claim for damages occurring du ring
the Post Piracy Period, it is appropriate to elaborate upon the comments of PwC's and
of SEV's counsel regarding Vidotron's claim for loss of revenues from potential
"bundling" opportunities.
[593] BEV's counsel contends Vidotron has not met the standard of proof necessary
to justify its claim as calculated by Navigant under this head of damages. The Court
concurs.
[594] Vidotron relies upon the reasoning of Mainville J. in Automobile Cordiale Lte v.
Daimler Chrysler Cana da 332, in particular that found at paragraphs [130] and following.
330 ln Appendix 29 of NCI Report.
331 PwC Report, pp.15 ff.
332 2010 QCCS 32 ["Automobile Cordiale"].
500-17 -027275-059 PAGE: 143
ln this case, Mainville J. included in the quantification of damages suffered fram the loss
of sales, the estimated loss of revenues fram derivatives such as the sale of parts and
accessories, labour for repairs under warrant y, as weil as fram financing and insurance
charges [para. 129]. In a similar manner, Vidotran contends, lost revenues fram
bundling should also be calculated in evaluating its damages.
[595] For the reasons expressed in its Plan d'Argumentation Additionnel de la
Dfenderesse, and with which the Court concurs, SEV's counsel contends Automobile
Cordiale is not applicable in the present context.
74. Or, contrairement au prsent dossier, la preuve des dommages et la
mthodologie propose par les experts de la partie demanderesse pour la
quantification des dommages dans l'affaire Cordiale n'ont pas t remis en
cause par la dfense. En effet: en cours d'audience, les procureurs de
Daim/erChrvs/er ont avis le Tribunal que /eur cliente ne remettait pas en
question l'exercice intellectuel effectu par Hamelin ni les chiffres
apparaissant au rapport d'expert, <par.133), et: Le tribunal doit donc
analyser la seule preuve d'expert disponible, soit celle de l'expert
Hamelin (par. 134)
75. Aucune preuve contradictoire n'a donc t administre dans
l'affaire Cordiale en ce qui concerne les services connexes,
76. En l'espce, .Ia rclamation pour pertes de profits relies aux services
connexes est vivement conteste par BEV pour les motifs suivants:
(i) Par, 713
333
: La preuve a dmontr que les experts de la firme
Navigant ont mis diverses hypothses pour la quantification des dommages qui
ne dcoulaient pas de leur champ d'expertise.
(ii) Par, 714 : En effet, ces experts ont admis qu'ils n'avaient aucune
exprience ou expertise pour comparer l'offre de comptiteurs dans le domaine
de tlcommunication ou pour dterminer le comportement et les gots des
pirates eu gard aux services tlvisuels et services connexes (internet et
tlphonie) (Lajoie, 3 oct., pp, 26 ligne 23 - 27 ligne 9; Allard, 4 oct. pp, 70
ligne 24 - 71 ligne 3; pp, 71 ligne 16 - 72 ligne 2),
(iii) Par. 761 : Dans le cadre de leur rapport d'expertise, les experts
de Navigant ont mis l'hypothse suivante relativement au comportement du
pirate:
Pour les fins de nos calculs, nous avons prsum que les pirates recenss se
seraient comports comme le client moyen et se seraient donc abonns aux
diffrents tl-distributeurs en fonction des parts de march de ces derniers. (P-
363i, p,55 - !!,),
333 References ta" Par." are ta paragraph numbers in the original Plan of Argument of Defendant.
500-17 -027275-059 PAGE: 144
(iv) Par. 769 : Par ailleurs, ils ont admis, qu'il y avait des incertitudes
importantes quant au comportement des pirates (P-363i, p.53 - ... ). Ils se sont
exprims ainsi:
Il nous est impossible d'tablir avec certitude le comportement qu'auraient eu
les pirates s'ils n'avaient pu pirater. En effet, nous ne disposons que de peu
d'indications quant aux caractristiques de la clientle pirate. De plus, bien que
nous le croyons possible, nous ignorons si la population de pirates se
comporte. dans ses dcisions relatives au service de tl-distribution. de la
mme faon que l'ensemble de la population. Nous nous questionnons
donc sur le niveau de service auquel ils se seraient abonns, les services
complmentaires qu'ils auraient achets (par exemple l'accs Internet),
leurs prfrences technologiques. leur localisation, etc.
c. Par. 770: Cette hypothse concernant le comportement des
pirates, qui au dpart n'tait pas supporte, a t clairement contredite par les
autres experts des demanderesses et, plus particulirement, par Shelton qui, le
22 septembre 2011, la page 128, s'est exprim ainsi:
The customer that used to stealeverything likes to continue because ifs like a
drug addiction. They are there used to getting everything for free, including Pay
Per View and if they can get that of a different system, then they will moved to
your system.
d. Par. 771 : Ainsi que par Ferguson qui s'est exprime ainsi, en
date du 27 septembre 2011 la page 51 :
Question: And if we look at the benefits side of the coin, just that first bullet
there: more opportunities to migrate customers, hybrid, black market customers
will see added reasons to be legitimate
Answer: They're ... pirates are opportunists, and where they see opportunity,
they will try to exploit that opportunity. So, if there is a short-term opportunity, of
course they may become legitimate for a short time, but Vou can't depend on
them staying legitimate. You can't even depend on them actually converting, and
not pirating other systems. It is wishful thinking in my experience.
e. Par. 782: Les pertes de profits relatives aux services
connexes sont normes. Elles reprsentent 18.5% des dommages rclams
pour la priode de piratage et ce pourcentage grimpe jusqu' 54% pour les
priodes de piratage et de post piratage combines. (0-2690, p.46 - ... )
f. Par. 783: La valeur probante de l'hypothse. utilise par les
experts de la firme Navigant a galement t remise en cause car les services
internet n'ont pas souffert ou diminu durant la priode de piratage. (0-2690, p.
46 - bates #17029 - Compendium #12 - Experts; Opatie, 16 janvier 2006,
pp.10, 11, 12 et 20; Lajoie, 5 oct., p. 121)
500-17 -027275-059 PAGE: 145
g. Par. 784 : Quant aux services de tlphonie, ils ne sont apparus
que vers la fin de la priode de piratage. Ils ne devraient donc pas tre
considrs car les clients perdus ont t rcuprs.
[Emphasis added - bold & double underlinedJ
(2) ANALYSIS AND QUANTIFICATION OF FINANCIAL DAMAGES
[596] PwC proceeded with an .analysis and quantification of the damages allegedly
suffered by Vidotron and TVA in the event the Court should find BEV Hable to
compensate them for their losses. The structure and methodology of the PwC analysis
is summarized under the following headings, the details thereof are described in the
pages that follow:
ln Section 3.1, we first provide our analysis of the trend in subscriptions for
Vidotron and BEV along with an overview of the evolution of key product
offering in the market throughout the Piracy Period. This analysis will serve as
the basis of our computation of Vidotron's potential loss of customers.
ln Section 3.2, we provide you with our estimate of BEV's piracy ( ... ) in
Vidotron's territory durinq the Piracy Period.
( ... ) ln Section 3.3, we provide you with our estimate of Vidotron's potential loss
of customers during the Piracy Period.
( ... ) Sections 3.4 and 3.5 present our evaluation of Vidotron's alleged financial
damages during and after the Piracy Period, respectively.
( ... ) Section 3.6 presents our evaluation of TVA's alleged financial damages in
relation to the loss of licensing fees for LCN.
334
.
[597] Certain extracts of this analysis warrant particular consideration.
3.1 Fluctuations in Vidotron's and BEV's Subscribers and Evolution of
=---=-=----=-'=---=--=- Offe-rinflri-tlie-Market - ;--
3.1.1 Chronology of Significant Events Surrounding Piracy Period
ln order to understand the state of the Quebec broadcasting market and its
influence on subscribers, we first tabled the significant events that occurred
between 2000 and 2005, focusing on BEV's and Vidotron's products and
company events. The table below presents a chronology of the evolution of the
product offering and other events relating to the Piracy Period.
J ... J
334 PwC Report, p. 26.
500-17 -027275-059 PAGE: 146
Overall
We understand that BEV entered the market at the end of 1997. Prior to that
date, Vidotron had a quasi-monopoly on the broadcast undertaking market. As
BEV was introducing a new offering on the market, it was expected that
Vidotron's subscriber base would be diluted through increased competition. As
we see in Chart 2 and Chart 3, as BEV was gaining customers, Vidotron
suffered a decline. Even in the absence of piracy, a fierce competition from BEV
would have contributed to Vidotron's dec/ine.
[ ... ]
3.2 Population of BEV's Signal Pirates in Quebec During the Piracy
Period
ln this section, we will analyze the pirate population, segregating hybrid pirates
from pure pirates. with the objective of presenting our calculation of piracy in
Quebec and in Vidotron's territory during the Piracy Period. We noted earlier in
Section 2 that Nel estimated piracy in Quebec based on several reports and
data prepared by BEV. Their calculation by type of pirates (Le.: hybrids,
disconnects. non-activated and lost or stolen decoders) is presented in Appendix
17 of their report.
We have reviewed their assumptions and methodology. analyzed the available
documentation provided by SEV, performed our calculation of piracy by type of
pirate and revised the proportion of piracy in Quebec. In essence, we are
presenting an adjusted version of NCI's Appendix 17, which will serve as a
basis for our own estimate of financial damages.
[ ... ]
3.2.6 Total Estimated Number of Pirates in Vidotron's Territory
Our detailed calculation of the number of pirates in Vidotron's territory during
the Piracy Period is presented in Appendix 2. Based on the above, we estimate .
at 37,000 the number of hybrid pirates and at 30.000 the number of pure
pirates for a total number of 67,000 pirates at the end of the Piracy Period.
[ ... ]
3.3 Pirate Population as Potential Subscribers for Vidotron's Services
Our quantification of Vidotron's alleged financial damages related to piracy of
BEV's signal .L.l begins with an evaluation of customers Vidotron allegedly lost.
500-17 -027275-059 PAGE: 147
( ... ) NCI recognizes that it is impossible to establish with certainty how pirates
would have acted had they not been able to pirate BEV's signal
335
. NCI has not
attmpted to demonstrate what could have been the pirates' choices had piracy
been prevented. While this is one of the most important parameters for NCI's
damage quantification assessment, they rely on an exaggerated and unfounded
assumption regarding Vidotron's market share.
ln our view, the only objective conclusion regarding Vidotron's lost customers
can be derived from an analysis of pirates subscribing to Vidotron's broadcast
television services during and after the SmartCard Swap. As such, we will
present in Section 3.3.1 our estimate of Vidotron's lost customers based on the
level of Videotron's subscriptions after BEV's SmartCard Swap. In Section 3.3.2,
we will present a second approach to validate the reasonableness of our
conclusions of Videotron's lost customers presented in Section 3.3.1.
[ ... ]
3.4 Evaluation of Vidotron's Alleged Financial Damages During the
Piracy Period
Once we estimated Vidotron's lost customers for each period, we calculated the
earnings it lost from September 1, 2002 to the Swap End Date. As explained
in Section 2, we cannot comment on the accuracy of the assumptions used to
determine the annual cash flow per subscriber as calculated by NCI in
appendices 23 and 25 of their report. However, for lack of validated information
over Vidotran's cash flows, we used the same assumptions as NCI regarding
the cash flow generated and the acquisition cost per subscriber.
To estimate the cash flows lost by Vidotron for each period, we multiplied the
average number of Vidotron's lost subscribers by the cash flow that would have
been generated by each subscriber. We then deducted fram that am ou nt the new
subscriber acquisition cost for each period, in turn, calculated by multiplying the
fluctuation in lost customers by the acquisition cost per subscriber.
As discussed in Section 2, we consider that the acquisition cost of Vidotran's
lost subscribers as at August 31, 2002 should also be deducted fram Vidotron's
quantification of damages. Therefore, those acquisition costs were deducted in
2002.
ln Section 2, we also noted that the inclusion of lost earnings due to
bundling of Internet and cable telephony services was unfounded.
Therefore, our valuation model does not include any 1055 related to
services other than those directly related to signal theft. Le. television
broadcasting.
335 Nel Report, p. 53.
500-17 -027275-059 PAGE: 148
Final/y, we indexed the subtotal obtained to NC/'s Damage Quantification Date
using the same indexation rate at NCI's. Based on our understanding of the
situation, we conclude that Vidotron's alleged financial damages during the
Piracy Period range fram U $3,424,000 to U $4,581,000; refer to U
Appendix 4 for our detailed calculation.
336
337
[The Court's emphasis in bold, double underligned, single
underlining in original text]
[598] The PwC Report then quantified the Vidotron damages during the Post-Piracy
Period (referred to as the "Mitigation Period") and those of TVA during the Piracy
Period.
3.5 Evaluation of Vidotron's Alleged Financial Damages After the
Piracy Period
Vidotron would and should have mitigated the number of customers it lost
during the Piracy Period in the period following the Swap End Date. The period
for which we calculated the damages after the Piracy Period is significantly
different than NCI's period of approximately Ll1 0% years.
338
We consider that a mitigation period of approximately six months is
adeguate, reflecting the period during which the pirates selected their post-
piracy television companies. For Vidotron, we considered this mitigation
period to represent the ( ... ) 5% months following the Swap End Date (i.e. the
third and fourth guarters of 2005) representing a damage mitigation period
extending from July 16,2005 to December 31,2005, using the premise that
the former pirates would have subscribed to Vidotron linearly during this
period.
Based on the information above, we quantified Vidotron's damages suffered
after July 15, 2005 by multiplying the mid-point number (4,500 to 6,000) of lost
customers by the cash flow loss per subscriber. We also considered the
acquisition costs Vidotron incurred for the pirates gained after the Swap End
Date. As for the lost earnings after the Swap End Date, we used the same cash
flow per subscriber th an Nel as we did not obtain any information that we
consider to be more appropriate and more accu rate at the date of this Report.
Final/y, we discounted the subtotal obtained to NCI's Damage Quantification
Date. As a result, we estimate that Vidotran's alleged financial damages for the
Post-Piracy Period range fram U $1,547,000 to U $2,063,000; refer to U
Appendix 5 for our detailed calculation.
339
336 Assumes a 0% rate of tolerable piracy and a commencement of the Piracy Period of September 1,
2002.
337 PwC Report, pp. 27 ff.
338 Now reduced by Vidotron to 6.8 years.
339 Supra, note 340, p. 50.
500-17 -027275-059 PAGE: 149
[599] As to the evaluation of TVA's financial damages:
3.6 Evaluation of TVA's Alleged Financial Damages
As further described in U Appendix 6 of this Report, we quantified TVA's
alleged financial damages regarding LCN's Iicensing fees by deducting from the
total population of pirates the .LJ. estimated number of pirates that would have
used off-air television broadcasting or would have continued to pirate another
undertaking, as explained in Section 2.
( ... )
This calculation provides the number of pirates from whom TVA could have
obtained licensing fees. Each period, we multiplied this number by the
percentage of Vidotron's customers who subscribed to LCN to obtain the total
number of pirates who would have reasonably subscribed to LCN. We have then
deducted the estimated number of hybrid pirates who .LJ were already
subscribing to LCN and paying for such services.
We finally indexed the subtotal obtained to NCl's Damage Quantification Date.
We estimate L1Jhe lost Iicensing fees at $527,000 for TVA.
340
[600] Like those of Navigant, the PwC evaluations referred to above contemplate a 0%
level of acceptable piracy. Based upon the evidence adduced at trial, it would appear
that calculation of damages at a 3% level of acceptable piracy would be more realistic
and appropriate. Accordingly, as previously mentioned, the Court requested counsel for
each of the parties to provide revised calculations of damages. Plaintiffs' counsel
provided the requested calculations in its letter dated January 6, 2012
341

[601] ln a letter dated January 12, 2012
342
, addressed to the Court, counsel for BEV
confirmed:
Vous nous avez demand de vous fournir les montants calculs selon la
mthodologie utilise par PwC en fonction de la reconnaissance des
demanderesses et selon le scnario avec un taux de piratage acceptable de
3 %. Ces montants sont les suivants:
. Si les dommages commencent courir au :
Date
1 er juillet
2003 :
340 Supra, note 340, pp. 50-51.
341 Supra, note 324.
342 Exhibit D-292.
Vidotron
648 000 $

861 000 $
TVA
334 000 $
500-17 -027275-059 PAGE: 150
1 er janvier 295 000 $ 262 000 $
2004 :
383 000 $
1 er juillet 138 000 $ 169 000 $
2004 :
172 000 $
31 dcembre 34 000 $ 77 000 $
2004 :
[602] Applying a 3% rate of tolerable piracy, the revised amounts calculated for both
the Piracy Period and the Post Piracy Period (Mitigation Period) discounted to the
Navigant Damage Quantification Date (August 31, 2005) would range from $861,000 to
$34,000 for Vidotron. For TVA, the damages for the Piracy Period only range from
$344,000 to $77,000. There is no Post Piracy Period for TVA.
[603] Clearly there are fundamental differences in the approach and methodology
followed by Navigant and PwC in calculating the size of the population of BEV signal
pirates (both hybrid and pure) during the Piracy Period. Similarly, there are fundamental
differences in the calculation of the duration of the Post Piracy Period. These are one of
the material reasons why there are significant variations in the calculation and
quantification of the damages suffered by Vidotron and TVA.
[604] NCI estimated its level of piracy in Quebec upon its selective extrapolation of
information from several reports and data prepared by BEV, including, in particular, the
Report on Counter Piracy.343 Its calculation by type of pirates (i.e.: hybrids, disconnects,
non-activated and lost or stolen decoders) is presented in Appendix 17 of its Report.
[605] Although the reports referred to, including in particular, the Report on Counter-
Piracy,344 would appear to have some merit and probative value, Navigant has chosen
to base its analysis and conclusions on a selective consideration of the Report's
findings and applied these findings in a subjective manner favourable to the Plaintiffs.
Where the analysis fails, however, is when unsupported assumptions or considerations
are brought into the process that allow Navigant to arrive at unjustified conclusions.
[606] PwC analyzed the relevant available documentation including a series of
analyses prepared by Angoss Software Corporation ("Angoss")345, reviewed and
challenged several of the assumptions and methodology followed by Navigant and, for
343 Exhibits P-256, P-106, P-159, P-160, P-273 and P-262.
344 P-106.
345 Exhibit P-1 07 (January 27, 2003 & February 5, 2003).
500-17 -027275-059 PAGE: 151
the reasons expressed in sub-section 3.2.1 of its Report, arrived at an adjusted estimate
of the level of piracy in Ouebec substantially below that retained by Navigant.
[607] PwC presented an adjusted version of Navigant's Appendix 17, which it
considers more reliable and which forms the basis for its own estimate of financial
damages. Notwithstanding some concerns regarding certain anomalies in the Angoss
analysis, the Court finds, on balance, that the PwC use of the Angoss findings and its
conclusions to be apprapriate and credible. Its conclusions regarding the estimated
number of pirates are reasonable and justified in light of the evidence.
[608] Two additional differences exist between Navigant and PwC with respect to the
calculation of damages: (i) the alleged lost earnings by Vidotron emanating fram
"bundling" of Internet and cable telephony services; and (ii) the duration of the
"migration period" - the Post Piracy Period.
(i) "BUNDLlNG" OF INTERNET AND CABLE TELEPHONY SERVICES
[609] PwC contends that the utilization of bundling is unsupported and that the
quantum of damages suffered by Vidotron was overstated by including the cash flows
lost for services other than braadcast television in a proportion equal to the bundling
rate. Navigant presumes that if BEV had prevented piracy, Vidotron would have gained
subscriptions fram the pirates at the same bundling rate as its legitimate subscriber
rate.
346
[610] PwC argues:
This presumption regarding pirates' behaviour is optimistic and speculative as
there are no indications that pirates were not able ta subscribe to VidOtron's
other services even if they were stealing BEV's television signal. 347
[611] Succinctly, the Court concurs.
(ii) THE DURATION OF THE "MIGRATION PERIOD" - THE POST PIRACY PERIOD.
[612] PwC contends the mitigation period of appraximately 10 % years proposed by
Navigant, now reduced by Vidotran to 6.8 years, is unjustified and is unsupported by
the evidence. Navigant originally calculated the total damages incurred by Vidotran
during the Piracy Period and the Post Piracy Period, and depending on which of its
three scenarios the Court choses to retain, at between $29.1 million and $347.7 million.
[613] PwC considers a mitigation period of appraximately 5 % months to be adequate
following the swap end date du ring which the former pirates selected their post piracy
pravider.
346 Appendix 29, Navigant Report.
347 PwC Report, p. 22.
500-17 -027275-059 PAGE: 152
[614] The Court concurs. The PwC analysis is reasonable in the circumstances and
consistent with the credible evidence.
[615] Applying the "Ouestions fondamentales concernant la force probante" identified
by Bchard, previously cited in extract in Section IX B. hereof, the Court retains as
credible and informative, the expertise of Maill contained in the PwC Report as weil as
that expressed in his testimony. His qualifications and experience, both academic and
practical are impressive. The reasoning and analysis contained in the Report are both
serious and coherent. The opinions expressed, on ail relevant issues, are based
substantially upon facts properly in evidence, rationally applied and analyzed, rather
than upon unsupported speculation and unsustainable premises.
XI. APPLICATION AND DISCUSSION
A. FAULT
[616] Two distinct legal regimes find application in one or other of the Related Actions.
The general regime of extra contractual civil responsibility, codified in Article 1457
G.G.O., governs the Vidotron Action. The general regime of contractual civil
responsibility, codified in Article 1458 G.G.O., governs the TVA (Piracy) Action, the TVA
(Account Stacking) Action and the TVA (lnjunction) Action.
(1) STANDARD / DuTY OF CARE / BURDEN / FAULT SV OMISSION
[617] The distinction between the obligation of means and the obligation of result
applies in both extra-contractual and contractual circumstances.
348
The obligation of
means is the appropriate standard of conduct applicable in assessing liability in the
present proceedings. The standard of conduct applicability to BEV is that of a
reasonably prudent and diligent comparable person in the same or similar
circumstances.
349
[618] Wh en it is proven that a party had a dut Y of care to address and rectify a
situation that caused damages to a third party of which it: (i) was aware, (ii) was, in part,
responsible, and (iii) had the capacity to eradicate, then the aggrieved party has met its
burden of proving prima facie extra-contractual fault. In such instances, the burden is de
facto reversed and then falls upon the defendant to rebut the presumption of fault with
comprehensive, convincing and concordant evidence.
35o
348 L'cuyer v. Quait, AZ-91011735, J.E. 91-1095 [1991] R.RA 482 (CA); Hansebout v. Qubec
(Procureur gnral), AZ-88011521, J.E. 88-634, [1988] R.RA 243 (CA).
349 Ventilabec inc. v. Patrick Garneau & Associs inc., 2009 QCCS 2811, aff'd. 2011 QCCA 1166.
350 Automobile Cordiale Ite v. DaimlerChrysler Canada Inc., 2010 QCeS 32, aff'd. 2011 QCCA 2066,
Mainville J. ["Automobile Cordiale" J.
500-17 -027275-059
PAGE: 153
[619] See also in this regard: Lo Ducharme, Prcis de la preuve, 6th ed?S1
De mme, dans les actions en responsabilit civile, si le demandeur russit
tablir par prsomption de fait que le dommage rsulte selon toute probabilit de
la ngligence du dfendeur, il appartient alors ce dernier de prouver qu'il n'a
pas commis de faute. .
[620] Contrary to that which may exist in the common law Provinces, the regime of
extra-contractual civil liability in Qubec does not require proof of a breach of a specifie
dut Y of care between a party and its victim where the act complained of is one of fault
byomission.
[621] The Court adopts by reference and with approval, the analysis of the relevant
authorities on this subject found in Plaintiffs' Outline of Argument, at paragraphs 562
and following:
562. Professor Daniel Jutras commented on this important difference between
common and civillaw in a recent academic publication:
Wrongdoing and unlawful behaviour are never understood or described in
relational terms. Despite the use of the language of "duties" in Article
1457 GGQ, Quebec civil law contains no conceptual equivalent to the
restrictive, relation concept of the "dut Y of care" which plays such a key
role in Anglo-American common law. Anv failure to meet the ordinarv
standard of reasonable behaviour in the circumstances can be viewed as
wrongful, and amount to a fault.
[Our emphasis]
Daniel Jutras, Quebec in Vernon Valentine Palmer &
Mauro Bussani, ed, Pure economic loss: New Horizons in
Comparative Law, (New York: Routledge-Cavendish, 2009)
114, pp. 114-115, [ ... ]
563. Authors Baudouin & Deslauriers share Professor Jutras' view in their
seminal treaty La responsabilit civile au Qubec:
1-183 ( .. .) propos de la faute d'omission, il existe une confusion, plus
apparente que relle, chez certains auteurs et certaines dcisions.
D'aucuns, en effet, prtendent que l'omission n'est fautive que s'il existe
un devoir ou une obligation spcifique d'agir. On voit ici une influence de
la common law qui, pour qu'il y ait responsabilit, impose comme
pralable d'analyse juridique un dut Y to act . Gette proposition n'est
pas exacte en droit civil et mrite d'tre nuance. [. .. ] D'autre part, s'il est
certain que l'omission pure et simple constitue une faute lorsqu'il existe
une obliqation d'agir, il n'est pas, pour autant, indispensable que ce
351 Montreal: Wilson & Lafleur, 2005, p. 298.
500-17 -027275-059 PAGE: 154
devoir soit spcifique c'est--dire lgislativement impos pour qu'il v ait
faute extra contra ctuelle. En effet, l'obligation gnrale de se comporter
en personne prudente et diligence contenue l'article 1457 C.c. en
respectant les rgles de conduite qui s'imposent elle, est, notre avis,
suffisante pour fonder une faute d'abstention, en l'absence d'une
disposition lgale ou rglementaire touchant l'activit particulire que
devait avoir le dbiteur. 1/ convient donc, cet gard, de se mfier de
l'analogie avec la common law ou le droit pnal qui, pour sa part, prvoit
plutt une srie de devoirs ou d'obligations spcifiques. (. . .)
[Our emphasis]
Jean-Louis Baudouin & Patrice Deslauriers, La responsabilit civile,
Vol. 1, 7
th
ed., (Cowansville, Quebec: Yvon Blais, 2007), p. 164, [ ... ]
564. In the reeent decision Vibron Ltd v. Patrick Garneau & Associs inc., the
Court of Appeal expressly referred, with approval, to the opinion of Baudouin and
Oeslauriers quoted hereinabove.
565. The trial judge upheld the action in damages, finding that Vibron did not
aeted reasonably in omitting to proceed with the tests specified in the technical
requirements of the order, despite having not been a party to the contraet that set
out these specifie tests:
[134] Ce retard imputable au manque de diligence de Vibron constitue
donc une ngligence fautive. Elle sait ou aurait d savoir que des cots
supplmentaires d'installation dcouleraient de ce long dlai de livraison.
Vibron manque ainsi son devoir gnral d'agir de faon raisonnable .
. Elle ne se soucie pas du prjudice prvisible que ce retard causera,
tout le moins de faon probable, ce sous-traitant (. . .).
Ventilabec Inc. v. Patrick Garneau & Associs Inc., 2009 accs 2811,
aff'd 2011 QCCA 1166, [ ... ]
566. The Court of Appeal affirmed the trial judge's decision and added the
following comments regarding the scope of liability by omission under s. 1457
CCQ:
[46] (. . .) Il est faux de prtendre que l'omission est fautive seulement s'il
existe un devoir ou une obligation d'agir comme ce serait le cas en
common law ou en droit pnal. La faute d'abstention peut tre retenue
pour un manquement au devoir gnral de ne pas causer prjudice
autrui.
Ventilabec Inc. v. Patrick Garneau & Associs Inc., 2009 accs 2811,
aff'd 2011 aCCA 1166, [ ... ]
500-17 -027275-059 PAGE: 155
567. This recent appellate ruling is unequivocal. Extracontractual liability can
be triggered for an omission likely to cause harm to another, notwithstanding the
absence of a close relationship between the wrongdoer and the victim, as it
would be required under the common law tort of negligence. A civil fault exists
where one does something that is not reasonable in light of the circumstances
and is likely to cause damages to another.
[622J The Court will now revisit the evidence relevant to Vidotron's allegations of fault
on the part of BEV. This will be done in the context of each of the subject matters
considered below in sub-sections 3, 4,5 and 6 of this Section XI. In particular, the Court
will analyse the evidence regarding BEV's awareness and tolerance of the growing
incidence of piracy long after the first attack of its signal was first confirmed and its
failure to take appropriate remedial.
(2) BUSINESS JUDGMENT RULE
[623J Relying on the "business judgment rule" described in recent decisions of the
Supreme Court of Canada, BEV contends that it should not be held accountable for
damages because its conduct reflected reasonable decisions it took in light of business
and technological circumstances then existing. Counsel argues:
6) ln evaluating the conduct of SEV under article 1457 of the Civil Code of
Quebee, the Court should apply the line of reasoning provided by our
courts known as the business judgment rule, whereby deference will be
shown to SEV's business decisions made in good faith, as long as those
decisions were one of several reasonable alternatives, taking into
account the business and technological circumstances at the time
when those decisions were made.
352
[ ... ]
11) This line of reasoning has been applied in several decisions of the
Supreme Court of Canada and the Courts in Qubec:
Sharbern Holding ine. v. Vancouver Airport Center Ltd., [2011] 2 S.C.R.
175.
BCE Ine. V. 1976 Debentureholders, ("BeE") [2008] 3 S.C.R. 560, para.
40.
Kerr V. Danier Leather, [2007J 3 S.C.R., paras. 56-58.
Peoples Department Stores V. Wise, [2004] 3 S.C.R. 461, at para. 64.
Grant e. Dion, 2007 QCCS 4833, para. 117-120.
352 Plan of Argument of Defendant, p. 6.
500-17 -027275-059
PAGE: 156
Forget c. Socit financire Oesjardins-Laurentienne inc:, REJ B 1999-
10474 (C.S.), para. 82-103.
See also from the Ontario Court of Appeal: Maple Leaf Foods Inc. v.
Schneider Corp. (1998),42 O.R. (3d) 177, para. 36.
12) Consequently, the central issue is not whether SEV's decisions
regarding technology and security were perfect or proved to be
successful after the fa ct. It is rather whether the business decisions
in question were part of the reasonable options available to SEV at
the time they were made.
[Emphasis added]
[624] The business judgment rule has been consistently and fairly uniformly defined by
the authorities cited above. It was described by the Supreme Court of Canada in the
2008 BCE decision as follows:
[40] ln considering what is in the best interests of the corporation,
directors may look to the interests of, inter alia, shareholders, employees,
creditors, consumers, governments and the environment to inform their
decisions. Courts should give appropriate deference to the business judgment of
directors who take into account these ancillary interests, as reflected by the
business judgment rule. The "l;>usinessjudgment rule" accords deference to a
business decision, so long as it lies within a range of reasonable alternatives: see
Maple Leaf Foods Ine. v. Schneider Corp. (1998), 42 O.R. (3d) 177 (C.A.); Kerr
v. Danier Leather Ine., [2007] 3 S.C.R. 331, 2007 SCC 44. It reflects the reality
that directors, who are mandated under s. 102(1) of the CaCA to manage the
corporation's business and affairs, are often better suited to determine what is in
the best interests of the corporation. This applies to decisions on stakeholders'
interests, as much as other directorial decisions.
[99] Under the business judgment rule, deference should be accorded to
business decisions of directors taken in qood faith and in the performance
of the functions they were elected to perform by the shareholders.
[Emphasis added]
[625] The business judgment rule has evolved in both the common law and civil law. It
is an attempt to pratect corporate directors and their respective corporations from
judicial interference or "second guessing" with the decision making pracess. It shields
directors fram personal liability arising fram bona fides decisions made in good faith and
in the interest of the corporation but that subsequently praved to be detrimental to its
interests.
[626] The business judgment rule cannot, however, be applied and should not be
relied upon to shield a corporation fram liability to third parties where the acts or
500-17 -027275-059 PAGE: 157
omissions of the directors and the resulting conduct of the corporation causes damages
to such third parties. Such proposition is without precedent or authority and justly so.
[627] While the business judgment rule may shield directors fram personal liability for
prejudicial decisions made or abstained from in good faith and in the interest of the
corporation, it would be unconscionable to extend its application to shield and exclude a
corporation fram the general rules of extra-contractual liability described in Articles 300
and 1457 GGQ, for the sole reason that the decision complained of was made and
approved bya Board of Directors.
(3) SELECTION OF ECHOSTAR AS THE EQUIPMENT VENDOR AND THE IMS 2 & DNASP-2
TECHNOLOGY
[628] Vidotron does not seriously challenge SEV's initial selection of EchoStar as the
equipment vendor and the IMS 2 (lntegrated Management System) and DNASP-2
(Digital Nagra Advanced Security Processor) technology.
[629] Ferguson acknowledged at page 31 of her Report: "To align with a DBS company is
not a bad strategy from a business and competitive prospective. "
[630] She cautioned, however that: " ... a reasonably prudent and diligent DBS company
taking this short-eut approach ta market would also have put in place, at a minimum,
arrangements between the two companies to insure the security of the system. "
[631] There were no such contractual arrangements put in place. The evidence does
disclose that attempts were made by BEV to enter into a formai support agreement with
Nagra more than a year after the launch of its service. A draft agreement between BEV
and Kudelski S.A. (Nagra) dated October 23, 1998 was entered in eVidence
353
, but it
was never signed.
[632] Markey concurred with Ferguson that the selection of EchoStar was not in and of
itself imprudent. He acknowledged in his Report:
The choice to select EchoStar as the system integrator, even at a time
when it was known or should have been known ta BEV that signal theft
was prevalent in the North American satellite market, was not in and of
itself imprudent. After ail, at that time, signal theft existed in the
DIRECTV system as weil. What was negligent, however, were the
decisions not to include in the contractual arrangement, strict
provisions regarding investments and actions which should be
taken in the event that SEV's system became compromised. For
example, there was no atlempt ta directly align with the security
technology supplier, or at the very least, establish expectations and
sanctions in the EchoStar contract in the event of a security atlack.
353 Exhibit D-213.
500-17 -027275-059
PAGE: 158
The consequences of not having a direct contractual relationship with the
security technology supplier were disastrous. In short, it led to weak
support for countermeasures, delayed system improvements and smart
card replacement, and no technical enhancements designed to eliminate
smart ca rd vulnerability:
>- Semiconductor security features
>- Cryptographie design (secret methods)
>- Software robustness to attack
BEV's complete delegation of the subscriber equipment and conditional
access responsibilities to EchoStar led to weak field operations of signal
theft device investigation, no insight into the analyses of illicit pirating
devices, no say regarding countermeasure specifications and
deployments, in short, no responsibility in the combat against signal theft.
As a result, BEV had no in-house expertise or resources able to respond
to signal theft or to constructively participate in the design and
development of improvements of the security system. Furthermore, BEV
gave the responsibility for the technology to prevent signal theft to a
supplier with which it had no contractual relationship either directly or
indirectly.354
[Emphasis added]
[633] The inadequacy of the measures available for BEV to deal with signal theft, of
which Markey cautioned, became obvious within a relatively short time after the start-up
of its service.
[634] The lack of a formai contractual relationship with Nagra may or may not have
had an impact on the ability of BEV to adequately deal with signal theft. These concerns
and the evidence in this regard will be dealt with in the context of the following sub-
section (4) of this Section XI A in the context of the design and coordination of ECM's.
(4) DEPLOYMENT OF PRECAUTIONARY MEASURES, MARKETING PRACTICES, ELECTRONIC
COUNTER-MEASURES ("ECM's") AND OTHER ANTI-PIRACY MEASURES IN A USEFUL
AND TIMELY MANNER
[635] BEV contends it acted in a reasonable and diligent manner in deploying
precautionary measures to combat signal theft consistent with the technology available
at the time. It argues that the ECM's, both in type and frequency, were deployed at
acceptable intervals and consistent with the technological and business options
available at the time. The expert and lay evidence heard is, at best, contradictory on the
subject.
500-17 -027275-059 PAGE: 159
[636] BEV stresses that in addition to deploying ECM's, it initiated other actions to
combat signal theft. These included the PRISM and BEATS programs, concerted legal
campaigns and prosecutions directed against suppliers of equipment, repatriation
programs and campaigns to sensitize the public as to the illegality of piracy.
[637] These actions and the evidence in support thereof are referred to at length in the
Plan of Argument of Defendants at pages 58 to 76.
[638] With the exception of the inordinate delays incurred in effecting the swap-out to
the Aladin CAS, the Court is unable to conclude, as Vidotron suggests, that BEV's
short term responses to the piracy problem through the deployment of ECM's and other
precautionary measures were inadequate in light of the technology available at the time.
Vidotron has not, in the Court's opinion, discharged its burden in this regard.
(5) ACCEPTANCE OF "ACCOUNT STACKING" AND ADEQUACY OF BUSINESS PROCESSES TO
COMBAT THE PRACTICE
[639] Account stacking is briefly described in Section III B. hereof.
[640] BEV asserts it never promoted or knowingly permitted this practice among its
subscribers. Vidotron disputes BEV's assertions. However, it makes no monetary
claims for damages in this action as a result of BEV's alleged tolerance of this practice.
The only monetary claims related to this practice are made in the TVA (Account
Stacking) Action and, indirectly, in the TVA (Injunction) Action.
(6) UPGRADE OF TECHNOLOGY: IMS 4 & DNASP-4 (ALADIN)
[641] The appropriate standard with which to evaluate the conduct of BEV in its efforts
to combat signal theft is that applicable to a prudent and reasonable DTH satellite
distributing undertaking that: (i) is fully aware of the serious breaches of its CAS and the
consequent damages of such breaches to itself and others; (ii) has the technological
and administrative means available to address this problem; and (iii) fails to act in a
timely manner to rectify the situation.
[642] For the reasons hereinafter expressed, the Court finds that BEV's failed to meet
the appropriate standard.
(i) AWARENESS OF THE SERIOUS BREACHES OF ITS CAS AND THE CONSEQUENT
DAMAGES OF SU CH BREACHES TO ITSELF AND OTHERS
[643] BEV likely first became aware of the serious breaches in the NagraStar CAS,
used at the time by EchoStar (Dish Network), at a meeting attended by Ren Juneau, at
the time a senior engineer in the BEV technology department, held at the offices of
Nagra in Denver, Colorado.
500-17 -027275-059 PAGE: 160
[644] ln its most essential features the EchoStar CAS was " ... substantially similar in form
and function to the ExpressVu System." 355
[645] Snazel disputed the fact that the EchoStar CAS was substantially similar to the
ExpressVu System. He is alone to do so. He even argued that, on the contrary: "Bell
ExpresVu's security system is incompatible with the EchoStar System. ,,356
[646] Snazel is incorrect. He was credibly contradicted by the substantiated testimony
of Shelton and by the contents of his letter, dated August 13, 1999 addressed to Snazel
and Juneau warning " ... [t]here is no technological reason this [pirate hack] could not
happen." 357
[647] ln August 31, 1999, BEV's Senior Legal Counsel, Gavaghan, was informed by
the Investigative Research Group ("IRG") that: " ... it would be just a matter of time before
major technology has been uncovered in order to capture Express Vu signaIs. ,,358
[648] When asked what was done in response to the IRG warning letter, Gavaghan
stated quite astonishingly: " ... / read it, and filed it. 1 mean, we continued to do other
investigations on a regular basis in order to track down any other rumours or innuendo that we'd
heard.,859
[649] Notwithstanding his earlier testimony to the contrary and after some prodding in
cross-examination, Snazel admitted that the BEV management definitively became
aware of the successful hacks of BEV's CAS by the fall of 1999.
360
[650] By August 2000 the incidence of piracy of BEV's signal was weil known to
management and it was an urgent concern. In an Internai memorandum, dated August
24, 2000, addressed to "Executives" by Gavaghan, he emphasized the seriousness of
the problem. He noted that the "E3M 'cracked' cards are appearing in greater numbers"
and that:
If we are not successful with counter-measures to shut down these cards, we
may need to report to our major studios and programmers that security is an
issue and that our system has been successfully hacked.
361
[651] It is curious and, perhaps, reflective of the dysfunctional technology department,
that the very same day Gavaghan wrote the "Executives" advising them of the serious
incidence of piracy of BEV's system, in a separate memo addressed by him ta "Ali
355 Markey, Transcript, September 19, 2011, pp. 197-201; Gee, Transcript, November 23, 2011, pp. 95-
99; Exhibit P-376, para. 14. .
356 Snazel, Transcript, October 25, 2011, pp. 173-175; Exhibit P-358, p. 1 of "Technical Attachment".
357 Shelton, Transcript, September 21 , 2100, pp. 156-160; Exhibit P-91, p. 5.
358 Exhibit P-91 .1 , p. 11.
359 Transcript, October 20,2011, p. 69.
360 Transcript, October 26,2011, pp. 182-185; 204-206; and 211-212.
361 Exhibit P-91.04, p. 1; Transcript, October 21, 2011, pp. 141-142.
500-17 -027275-059 PAGE: 161
Employees" referring to incidences of piracy in the Echostar systems, he wrote:
" ... [sjome people have been mistakenly led to believe that the ExpressVu system has suffered
similar attacks. ,,362.
[652] On October 31, 2001, in a "highly confidential" memorandum, Gavaghan wrote:
"The theft of Bell ExpressVu services is a multi-faceted, grawing prablem. ,,363 As was
discussed in Section VII hereof, and as will be further elaborated upon, Gavaghan's
warning was either not taken seriously or, more Iikely, due to the failure of management
of the Technology Department to properly sensitize the BEV and BCE Boards as to the
urgency of the problem, seemed to fall on deaf ears.
(ii) TECHNOLOGICAL AND ADMINISTRATIVE MEANS AVAILABLE TO ADDRESS THIS
PROBLEM
[653] Technological and administrative means to address the problems of signal theft
were available to BEV long before the July 15, 2005 completion of the swap-out to the
Aladin CAS. For a variety of reasons previously discussed in Sections VII and X hereof
and summarized below, management and the Board chose to defer implementation of
the available technology.
[654] The Aladin CAS, in one form or another, was available to the market at least as
early as March 2001. Contemporaneous discussions about the need to replace the
existing CAS were ongoing between Snazel and others at BEV and Nagra towards the
end of 2001 or early 2002.
7690- And what was the gist of the discussions that took place during these
meetings?
A- The ...
7700- Beginning in two thousand and one (2001).
A- Yes, the piracy of our system proceeded faster than we expected, and the
gist of the discussions very quickly moved to the need to do a change of
the conditional access system, that at some point, the ammunition that
Nagra had to fight the piracy would be no longer as effective as it was,
and that in their opinion, the solution for us was to do an exchange
of our conditional access system, a complete card swap. 364
[Emphasis added]
[655] ln contradiction to his testimony referred to above given during examination on
discovery, in his examination in chief at trial he recanted his previous testimony and
362 Exhibit D-18.
363 Exhibit P-95, p. 2.
364 Examination on Discovery-Snazel, Transcript, September 26,2007, pp. 209-210.
500-17 -027275-059 PAGE: 162
denied ever having received a recommendation from Nagra to proceed with the card
swap in 2001.
365
Paradoxically, and without any substantiating evidence, in cross-
examination at trial, he agreed that his testimony given in the matter during his
examination on discovery was also true. The Court accepts as more probable, his
recollection of the events of 2001 as disclosed during his examination on discovery.
[656] A written presentation entitled "ITM DNASP-j (Aladin) Version 3.7.3 User Guide"
describing the features of the new CAS was made to BEV. The document appears to
have been first published, March 15, 2001 and subsequently revised on numerous
occasions until November 2002.
366
[657] Since, as Casavant claimed, she and other members of the Technology
Department held weekly meetings with Nagra's technical people, one would assume
that the existence and availability of the new Aladin CAS must have been discussed
sometime prior to the 2001 discussions referred to by Snazel in the extract reproduced
above.
[658] At a meeting held in SEV's Toronto offices on December 12, 2001, attended by
Snazel and Casavant, Trevisan and others, Nagra representatives made a formai
presentation of Nagra's new CAS, (then called "NagraTV" and which would later be
called Aladin) (the "Toronto Presentation,,)367.
[659] The Toronto Presentation described the advantages and characteristics of this
new CAS, described a methodology to effect the migration from the current system and
set out a timeline of approximately one year for its implementation.
[660] Contrary to Snazel's assertions that the Aladin CAS was not available at the time
of the 2001 Toronto Presentation, it would a p ~ e a r that Aladin was being used in beta
tests for EchoStar as early as December 2001. 68
[661] The Court finds, once again lacking in credibility, Snazel's assertions that the
Toronto Presentation was but a "Sales Pitch" and that, according to him, the new CAS
was not ready at the time.
[662] ln the weeks following the Toronto Presentation, Casavant drafted a discussion
document ("Talking points for Terry") entitled "Countermeasure Strategy Planning
Discussion" based on her belief that the Aladin CAS was then available for
implementation. She concluded with the following recommendation: "Evalua te and start ta
plan for the Aladin implementation. We need ta start evaluation of the pro cesses required for the
replacement of the smart cards (inaudible). ,,369
366 Exhibit P-198.1 , p. ii of iL .
368 Exhibit P-283.
369 Exhibit D-121; Transcript, November 3,2011, pp. 122-123.
500-17 -027275-059 PAGE: 163
[663] A series of follow-up meetings were then held in Cheseaux, Switzerland, in
March 2002 during which numerous written presentations were made to BEV, outlining
the features, pricing and timelines to implement the new Aladin CAS.
37o
[664] As previously mentioned herein in the analysis of the testimony of both Snazel
and McLennan, Snazel testified that upon his return form Che seaux, he met with him,
then to brief him on the Aladin proposaI. According to Snazel, McLennan's response
was: "Weil, this is new information to me too. 1 need to digest this a !ittle bit and 1 need to
discuss it with my superiors and l'II get back to you. ,,371
[665] Questioned on the a l l e ~ e d briefing by Snazel, McLennan's response was: "1 don't
specifically reca/! that meeting." 72 This is surprizing given the importance of the subject
matter.
[666] McLennan was also questioned about the alleged subsequent meeting which
Snazel claims to have had with him where he supposedly told him that " ... the necessity
of starting to get into a card swap frame of mind were important." Once again McLennan's
response was, in the same vein: "You know, 1 candidly don't remember that conversation". 373
[667] As previously mentioned, McLennan's "Iack of recollection" of these two alleged
meetings with Snazel is both perplexing and disturbing.
[668] On April 5, 2002, Gavaghan and Snazel co-authored a confidential document
entitled "Switching off Signal Piracy". The document was intended to brief management
of BEV, Bell Canada and BCE. 374 The authors claim that, as of April 2002, 40% of
BEV's basic level subscribers (approximately 29,000) were likely hybrid pirates and that
an additional 37,500 people were black-market pirates, for a total of 66,500 pirates.
[669] What is noteworthy, notwithstanding Snazel's presumed awareness, having
attended both the Toronto and the Cheseaux Nagra presentations, of the possibility of
seriously addressing signal theft by means of a migration to the Aladin CAS, the only
oblique reference to this poss.ibility is found in section (e) of the document where, the
authors wrote: "Ultimately, we expect to replace elements of each subscriber's conditional
access system in order to take security to the next level. ,,375
[670] The Court has little doubt that, at the time, the Board of Directors of BEV, Bell
Canada and BCE wei"e unaware of the technological and administrative means
available to address this problem. There is no evidence that explains the motives of the
senior officers of the Technology Department of BEV to suppress this crucial
370 Exhibits P- 201, P-201.01 (02680.01, 02680.022, 02680.033, 02680.086 & 02680.117).
371 Transcript, October 26, 2011, pp. 52-53.
372 Transcript, November 25, 2011, pp. 79-80.
373 Ibid, p. 80.
374 Exhibit P-97.
375 Ibid, p. 9.
500-17 -027275-059 PAGE: 164
information that could have permitted them to act in an appropriate manner consistent
with its obligations as a prudent and reasonable DTH satellite distributing undertaking.
[671] This apparent ignorance of the options available by the Boards at that time and
their consequent failure to respond to the situation resulted in a dramatic and
exponential increase in the level of piracy of BEV's service du ring the year 2002, and
continuing thereafter from 2003 to early 2005.
376
[672] Whatever Iimited involvement McLennan may have had in the attempts to
address signal piracy and whatever views he may have had regarding the advisability of
a full migration to the Aladin CAS, became of Iittle value. He was replaced by McGee as
President of BEV in May 2002. This, no doubt, caused additional delays in the decision
making process resulting in a further delay in the migration. .
[673] McGee was supposedly brought up to speed as to the extent of the problem of
signal theft and the means available to address this problem in a "Briefing Note" dated
July 8, 2002. Gavaghan reiterated that approximately 45% of basic level subscribers
were hybrid pirates and an additional 5% were pure pirates.
377
[674] On or around July 17, 2002, BEV received an updated proposai from Nagra
dealing with the Aladin migration. It provides a timeline of between ten (10) and twelve
(12) weeks to complete the migration. Despite BEV's unsupported contentions
regarding technological impediments, according to Nagra, the migration from the
existing IMS 2 system to the IMS 4 system could have be accomplished in a relatively
short time and performed in parallel with other necessary efforts in the migration
process.
378
.
[675] To conclude, the Court is therefore satisfied that, at the latest, as of January 1,
2004, BEV could have substantially rectified what had become a growing problem of
uncontrolled signal theft.
[676] As will be seen, in the next subsection, BEV failed to apply the available
technology in a timely manner.
(iii) FAILURE TO ACT IN A TIMELY MANNER TO RECTIFY THE SITUATION
[677] On July 23, 2002, a meeting was held between the newly appointed President,
McGee, Snazel and the Vice-President of finance, David McGraw ("McGraw"). It is
uncertain whether Gavaghan was also in attendance at the meeting.
376 Exhibit P-366.
377 Exhibit P-98.
378 Exhibit P-199.1 .
500-17 -027275-059 PAGE: 165
[678] During this meeting, a document dated July 23, 2002, entitled "Project Aladin
Preliminary Outline of Business Case" was tabled for discussion purposes.
379
The
finalized version of this document, entitled "project Aladin", also bearing the date of July
23, 2002 is filed in evidence.
380
[679] These documents were prepared by the Technology Department, under Snazel's
authority, and the finance group led by McGraw. They addressed in great detail many
issues raised for determination in the present proceedings. Their contents are
accurately summarized in Plaintiff's Outline of Argument at pages 33 and 34,
reproduced below:
The estimated annual revenue loss to piracy, based on the estimated number
of 72,000 pirates (p. 2 of P-200.2);
BEV's awareness of the fact that the Aladin CAS is currently rolling out on the
EchoStar system (p. 3 of P-200.2);
The fact that the proposed Aladin CAS pravides opportunity to increase
revenues by converting some of the pirates to paying customers (p. 3 of P-
200.2);
A description of the various phases of the migration to Aladin, Le.
Phase 1 (the construction of the Aladin CAS), Phase 2 (the hardware
and software to support the new services) and Phase 3 (the
replacement of ail existing cards with new secured cards and the shut-
down of the legacy CAS) (p. 7 of P-200.2);
The financial benefits of the migration to the new Aladin system, i.e. the
revenues and profits which could be derived fram the conversion of the
pirates or would be pirates to legitimate customers, including the incremental
revenues earned in perpetuity from would be pirates who are converted to
paying customers; (p. 9 of P-200.2);
Other financial considerations including the fact that the results of this project
are driven by conversion of some non paying users and the assumption that
the new CAS would remain secure for a period of three (3) years; (p. 10 of P-
200.2);
The costs of Phase 3 (the card swap), which at that time were evaluated at
$61.8M; (p. 12 of P-200.2);
An analysis of the revenue opportunities to be derived from conversion of the
pirates and would be pirates to legitimate subscribers, including the estimated
impact of churn reduction (p. 1 $ of P-200.2);
500-17 -027275-059 PAGE: 166
A sensitivity analysis, suggesting that even if BEV were successful in
securing 50% conversions of never activated systems and 33% conversions
of the disconnected subscribers, the net present value would be of negative
$21.6M, which would not even to come close to breaking even (p. 15 of P-
200.2);
The project risks, including the risks of not proceeding (piracy will continue to
grow, BEV will become the weakest DBS system, piracy will escalate
dramatically, etc.) and the risks of proceeding (p. 17 of P-200.2);
The recommendation and next steps, Le. to proceed with Phase 1 of the
Project but "based on current estimate of signal theft, do not proceed
with card swap out program" (p. 18 of P-200.2).
[Emphasis added]
[680] It is curious that, among the "Risks of not proceeding", the authors do not include
the damages to the industry including competitors, content providers and pay-television
distributors, as a growing percentage of the market were able to access television
programming without authorization or payment. In particular, the authors do not address
the potential liability of BEV to members of the industry, including Vidotron and TVA,
for damages resulting from theft of its signal. The threat of litigation is only first
acknowledged in the Report on Counter-piracy in January 13, 2003 when it became a
primary concern. It was this threat that prompted the constituting the Task Force in
October 2002.
381
[681] It would appear that the financial analyses performed and the considerations
dictated by the Finance Department of SEV were the primary "drivers" of the
recommendation not to proceed with the card swap-out program in 2002.
[682] Snazel testified that he disagreed with this recommendation. Curiously, neither
the author of this recommendation, McGraw, Vice-President of Finance, nor any other
member of SEV's Finance Department were called testify at trial and to explain SEV's
intentions and concerns in this regard.
[683] The Court considers the July 23, 2002 document to represent a credible
reflection of SEV's volonte relle at the time and a candid acknowledgement that the
decision not to: " ... proceed with the card swap out program" was based primarily on
financial or budgetary considerations.
[684] On October 10, 2002, SEV confirmed to Nagra its commitment to proceed with
Phase 1 of the project. The second CAS was to run in parallel with the current system to
381 Exhibit P-1 06, Cover page and page 3.
500-17 -027275-059 PAGE: 167
be installed only on equipment delivered to new subscribers and on VOD PVR'S.382 A
purchase order was issued in fulfillment of this commitment on November 8, 2002.
383
[685] A memorandum entitled "Technical Options to Combat Piracy in Canada", was
prepared in October 2002, bearing the name "Timothy McGee" on the cover page.
384
Notwithstanding McGee's name on the cover page, the authors of this memorandum
are uncertain. He presumes that it was drafted by McGraw and Snazel.
385
The authors
recommend BEV proceed with a full card swap-out program to eradicate piracy. The
proposai called for an allocation of " ... $60M in capital for the card swap out program to be
completed in 2003. "
[Emphasis added]
[686] Based on the substantial evidence emanating from Nagra regarding the time-line
necessary to complete the full card swap-out program, the Court is satisfied that in
proposing a completion of the program in 2003, the authors were weil aware of what a
full card swap entailed, the technical issues to be addressed and what would a
reasonable delay for its completion would be.
[687] Clearly, as of October 2002, funding for the full swap-out had not yet been
approved by the relevant Boards or committees of BEV or, to the extent necessary,
BCE.
[688] It would appear that the October 2002 memorandum was filed in thesame filing
cabinet like its predecessors. Virtually contemporaneously with the receipt of the
"Technical Options to Combat Piracy in Canada" memorandum and despite the
overwhelming evidence of the necessity to proceed with a full card swap as quickly as
possible, in late October 2002, McGee created the Task Force on Counter-piracy. He
appointed Casavant as its leader. As previously mentioned, neither Snazel nor
Gavaghan were named to the Task Force.
[689] The Task Force then duly produced its Report on Counter-piracy in January
2003
386
, Amongst its recommendations was the following:
"F. Long Term Recommendations (3 to 6 months)
(a) Bell ExpressVu should implement a new conditional access
system in 2003 that would involve a complete swap out of existing smart
cards. This swap out should be completed in 2003. ( ... )"387
382 Exhibit P-284.
383 Exhibit P-204.
384 Exhibit P-1 01.
385 Transcript, December 6,2011, pp. 47-49; December 7,2011, pp. 55-60.
386 Exhibit P-1 06.
500-17 -027275-059
PAGE: 168
[Emphasis added]
[690] The Report concluded:
Only a full card swap out will allow us to permanently turn off the existing
conditional access signais on ail channels which will render ail pirating
devices inoperative. 388
[691] More than one year later, the Task Force recommended precisely what Nagra
had first proposed in the Toronto Presentation in December 2001 and what was
elaborated upon in the meetings held in Cheseaux in March 2002.
[692] ln formulating the recommendations contained in the Report on Counter-Piracy,
Casavant was no doubt aware of the features of the Aladin CAS and of the tasks
involved in migrating to the new system. The Court is satisfied that in suggesting that
the complete swap-out be completed in 2003, Casavant knew full that this was realistic
and feasible.
[693] What is clear, however, notwithstanding McGee's convoluted attempt to convince
the Court otherwise, is that as of January 2003, the technology to perform the full card
swap-out program recommended by both the Task Force and, previously, by other
members of the Technology Department, had been tested and available for immediate
implementation.
[694] What lacking at the time, and for some time thereafter, was the necessary
funding approval fram the appropriate sources, be it the Boards of BEV, BCE or its
Investment Management Council.
[695] The lack of funding necessary to complete the final phase of the full swap-out is
highlighted in a Memorandum, dated December 9,2002 addressed by Snazel to Martin
Cullum, Senior Executive in the technology group of Bell Canada.
389
[696] The following extract of the Memorandum shows that BEV did not have the go-
ahead, at the time, to praceed with the full card swap-out.
"This note is to summarize to date the status of the various components of the
Aladin project for use during the approval process for Phase" 1.
Essentially, there are three (3) distinct phases to the project, each phase is a
step towards the final roll-out and the next step cannat be put in place until the
prior one is completed and operational. Conversely the project could be
terminated before each step, with the attendant benefits of each part intact.
387 Ibid, p. 7.
388 Ibid, p. 28.
389 Exhibit 0-176.
500-1 7-027275-059 PAGE: 169
Phase 1 Headend Uplink Hardware/Software Installation
This phase of the project must be in place and be fUllY tested before any further
action can occur [ ... ]
The Aladin system allows several new business features not available with the
current system, notably [ ... ]. These features will only be available to subscribers
who have new cards made available in Phase Il, Phase III.
[ ... ] The Aladin headend system will be completed early in 2003 and should
Phase Il or Phase III not be implemented for any reason, the back-up
redundancy features will remain for the existing CAS system.
Phase Il
Phase Il of the project is to change to Aladin smart cards on ail new set-top-
boxes sold [ ... ] The benefit of Phase 1/ is that there will be no more existing smart
cards available for illegal purposes, limiting the pirate smart card hacks to cards
sold before the cut over date. These new subscribers will also be able to
subscribe to the new services without needing a change out of their cards.
[ ... ]
Phase III
This is the critical phase to effecting any real improvement in signal piracy. The
current system is coming to the end of its secure life and although we still
continue an aggressive ECM Program the counter attack timeframe from the
hacking community is getting shorter and shorter each time we implement a
measure. (So much is now known about the internai workings of the card and the
hacker/dealer internet communication system is extremely efficient).
[ ... ]
[ ... ] Currently Phase III of the project is going through a technical validation and
budget approval process, with a target of an early 2003 go ahead."390
[Empt:Jasis in bold added by the Court and in Plaintiff's Outline of Argument]
[697] The Memorandum and Snazel's testimonl
91
show clearly that, as of December
9, 2002: (i) BEV did not have the necessary go ahead for the full card swap-out, (ii) it
was possible ta stop the project after Phase 1 or after Phase Il and (iii) the full card
swap-out could have begun in early 2003 and that the only impediment was the budget
approval process.
390 Ibid, pp.1 ft.
391 Transcript, Oct. 27, 2011, p. 22.
500-17 -027275-059 PAGE: 170
[698] The following time line for the proposed Aladin migration was contained in a
subseauent Security Presentation made by Nagra to BEV on or about December 19,
2002.
392
Phase 1 - 02-2003
Install Aladin system in parallel of current dnsap2 system for new subscribers
Phase 2 - 03-04-2003
Swap dnasp2 smartcards with Aladin smartcards and tu rn-off dnasp2 streams,
expected duration of the swap 2-3 months
Phase 3 - 01-2004*
Install Aladin new features, not related to security (ISUS, PVR, etc ... )
* Not relevant for the purposes of these proceedings
[Emphasis added]
[699] BEV contends the time lines proposed by Nagra in its various presentations were
unreliable and did not consider the complexity of the existing BEV CAS. It argues that
the migration process to Aladin was technically problematic, dynamic and subject to the
justified delays incurred in its implementation. It contends that ail of the time Iines
proposed by Nagra as weil as those proposed by the members of the BEV Technology
Department were just estimates and that until appropriate testing and trials were done
and performed, there could be no reliable way of calculating what delays would be
reasonable.
[700] BEV argues that the process was further delayed due to unavoidable technical
problems associated with the delays in obtaining the STB swap software provided by
EchoStar as weil as other technological difficulties.
[701] The evidence in support of BEV's argument is, at best, unconvincing. No credible
technological explanation for failing to swap earlier was ever given in a comprehensive
and coherent way by any of BEV's witnesses. To accept the reasons advanced by BEV
would necessitate a finding that the various proposais made by Nagra, as weil as the
testimony of Markey in this regard, were unreliable and unrealistic. The Court is unable
to arrive at this conclusion.
[702] Even if the Court were satisfied, which it is not, that the delays in implementing
the Aladin project were due solely for technological reasons, the fact remains that the
392 Exhibit P-202.00.02.
500-17 -027275-059 PAGE: 171
authorization for the necessary funding to complete the final phase of the project, the
swap-out of the existing subscribers, was not obtained until long after BEV became
aware of the necessity to perform the Aladin migration.
[703] The Court shares the views of Vidotron's counsel who stated that:
It is simply preposterous that it would take over three years from the date of the
availability of the Aladin solution to the piracy problem to complete the card
swap, when it took 8 months to create and launch the service in 1997, when the
expected secureolife of a new generation of cards was three to four years, the
Aladin 101 being first used in 2001.
393
[704] An examination of the credible and coherent evidence concerning the budget
approval process for Phase III of the Aladin migration reveals why the delays were
incurred. Contrary to its contentions raised at trial, BEV's failure to act in a timely
manner was not related to technological reasons but rather to purely business-oriented
and strategic considerations.
[705] It would appear that serious efforts to obtain budget approval only commenced in
the fall of 2003, almost two years after the December 2001 presentation of the Aladin
CAS to Snazel and Casavant in Toronto. The request for funding to proceed with the
ca rd swap was formally discussed for the first time almost two years later during an
October 2003 meeting of the BCE Investment Management Council ("IMC") convened
to discuss the overall 2004 Capex Plan Review. However, because of the gap between
the requirements of the various BCE business units and the level of affordability (a gap
of $457M), the card swap program was deemed "out of affordability" at that time and the
request for funding was denied.
394
[706] ln a report dated April 20, 2004, the te am responsible for the Platform Security
Implementation Plan of the Aladin CAS, headed by Andrio Barro, Project Manager and
Casavant, Project Leader, prepared an assessment of the current level of signal theft
and the ineffectiveness of the ECM program to address this problem.
395
Under the
heading "Objective & Exec Summary, the authors list one of the objectives: "Gain
Executive Approval for funding to proceed with program by April 22 to prevent schedule
s/ippage".396
[707] Notwithstanding McGee's assertions to the contrary, it was clear to the authors of
the Report that, as of April 20, 2004, funding for the final swap-out had not been
obtained.
393 Plaintiffs' Reply Argument, p. 11.
394 Exhibit P-254B.
395 Exhibit P-220.
396 Ibid, p. 2.
500-17 -027275-059 PAGE: 172
[708] A revised and updated Gard Swap Implementation Plan dated May 18, 2004,
was prepared to support a renewed request for funding for the final swap-out project.
397
The Executive Summary, merits reproduction in full. It is an objective "snapshot in time"
and a long overdue acknowledgment of the rampant and growing level of piracy of
BEV's signal and the ineffectiveness of ECM's to address this phenomenon.
Executive Summary
Current and future expected signal theft situation in Canada requires a complete
swap-out of ail smart cards to secure ExpressVu's conditional access system
Estimated number of 450K pirates expected to grow as new devices (e.g.
Blackbird) infiltrate the market
ECMs are becoming increasingly ineffective against piracy
DirecTV has completed a ca rd swap program and Echostar is implementing anti-
piracy initiatives leaving ExpressVu as the only alternative for thieves
Investment in new smart cards required to prevent further deterioration in
shareholder value
Combined with a new Conditional Access System (Aladin), these smart cards
provide a secure platform
A comprehensive Card Swap program yields almost $200M in incremental long-
term value
Required $44M capital investment ($26M in 2004; $18M in 2005)398 .
[709] On May 19, 2004, the IMC approved, only in part, the capital costs for the
project. An amount of $20M was approved rather than the $26M requested for 2004.
399
[710] On August 16, 2004, less than three months after recelvlng IMC funding
approval, BEV commenced a second employee trial for the card swap and initiated the
first mass mailing of new cards for the card swap. The last mass mailing was on April 9,
2005.
400
[711] Between February 28 and April 3, 2005, BEV turned off six channels from the
existing DNASP-2 CAS data stream, starting with adult pay-per-view services. The LCN
channel was turned off on May 24, 2005.
401
397 Exhibit P-221 .1 .
398 Ibid, p. 2.
399 Exhibit P-254A -doc. 1, p. 3.
400 Exhibits P-217 & P-223.
401 Exhibit P-225.
500-17 -027275-059 PAGE: 173
[712] On July 15, 2005, BEV completed the swap-out and switched off ail remaining
channels from the DNASP-2 CAS data stream.
402
[713] The Courtfinds relevant certain observations contained in an analysis entitled
"Pro je ct Aladin Post Mortem" , dated June 3, 2005, prepared by Dietrich van
Weesenbeek, ("van Weesenbeek") a BEV employee.
403
He notes that the Aladin smart
card replacement project was initiated in 2002. He also notes that: "Approval ta go
officially launch the program" was only obtained in May 2004.
[714] The author summarized what he believed "Worked" and "What did not work ... ".
The following observation under the heading "What did not work" is noteworthy: "Project
was kept a secret for tao long a time,,404
[715] Van Weesenbeek's observations are consistent with and corroborated by the
credible evidence.
[716] For the foregoing reasons, the Court concludes that BEV: (i) was fully aware of
the serious breaches of its existing CAS and the consequent damages of such
breaches to itself and others, (ii) had the available technological and administrative
means available to address this problem and (iii) failed to act in a timely manner to
rectify the situation.
[717] Its efforts to address the serious breaches of its CAS in an effective and timely
fashion were ineffective and neither prudent nor reasonable.
B. CAUSATION
(1) LEGAL PRINCIPLES AND CONCEPTS
[718] Having concluded that BEV fai/ed to respect the appropriate standards in its
efforts to combat signal theft, the Court must now determine whether the damages
claimed by Vidotron are the direct and immediate consequence of such acts or
omissions.
405
[719] The fault attributable to BEV results from the inadequacy of the measures taken
or the acts of omission ("faute d'abstention', in its efforts to address the excessively
high incidence of piracy of its signal.
[720] Article 1457 G.G.O. permits recovery for a relational pure economic loss in cases
of fault by omission.
4oB
402 Exhibit P-228.
403 Exhibit P-227, pp. 3ff.
404 Ibid, p. 5.
405 Articles 1457 & 1607 G.G.Q.
406 Daniel Jutras, Civil Law and Pure Economie Loss: What Are We Missing?, (1986-87) 12 Cano Bus.
500-17 -027275-059 PAGE: 174
[721] Vidotron has the burden to prove that the damages it claims are the direct and
immediate consequence of BEV's fault.
407
What is in dispute in the present case is the
standard of proof required and whether Vidotron has discharged its burden.
[722] Baudouin et Deslauriers, describe the burden in the following manner :
( ... ) (L)es tribunaux n'exigent pas que le demandeur tablisse le lien causal au-
dessus de tout doute et d'une manire certaine. Il suffit simplement que la
preuve rapporte rende simplement probable l'existence d'un lien direct. La
preuve par prsomption de fait est donc ouverte et, devant l'impossibilit
d'une preuve directe, on admet le rclamant procder par limination. Ce
genre de preuve consiste dmontrer que, parmi toutes les causes possibles du
dommage, seule l'une d'elles, qui le relie au dfendeur, est probable. Il doit s'agir
cependant de probabilits et non de simples conjectures ou hypothses
lointaines
40B

[Emphasis added]
[723] ln Mu/ti Portions inc. v. Fullum
409
, Gagnon J. describes "cause direct et
immdiate "in the following manner :
[78] Baudouin et Oeslauriers commentent longuement les difficults de
discerner dans la jurisprudence qubcoise, des lignes directrices claires et
prcises permettant au juge du procs de discerner ce qui est la cause directe et
immdiate, plutt que la simple occasion, du prjudice de la victime,
particulirement quand il faut choisir entre plusieurs facteurs qui ont tous
contribu la ralisation de ce prjudice
410
.
[79] Ces auteurs minents parviennent tout de mme dgager des rgles
dont le Tribunal doit ici faire usage:
Le lien de causalit est essentiellement une question
de fait, confie l'apprciation du juge
411
.
L'approche de la causalit adquate invite distinguer la
cause vritable, des simples circonstances ou occasions
du prjudice
412

L.J. 295, pp. 295 & 310; Daniel Jutras, Ouebe in Vernon Valentine Palmer & Mauro Bussani, ed,
Pure economic loss: New Horizons in Comparative Law, (New York: Routledge-Cavendish, 2009)
114, p. 114.
407 Article 2803 C. C. Q.
408 Jean-Louis BAUDOUIN et Patrice DESLAURIERS, La responsabilit civile, 7
e
d., Cowansville,
ditions Yvon Blais, 2007, n1-644, p. 638.
409 Mufti Portions inc. v. Fullum, 2007 OCCS 3777; 2008 OCCA 2358 (appeal dismissed).
410 J.-L. BAUDOUIN et P. DESLAURIERS, supra note 356, nO 568, p. 453.
411 Ibid, at nO 580, p. 458.
412 Ibid, at n588, p. 463.
500-17 -027275-059

L'approche de la prvision raisonnable, galement valable,
demande d'identifier quels faits ont rendu
objectivement prvisible la cration du prjudice, dont
les consquences aient t normalement prvisibles
par l'auteur de la faute
413

Il peut y avoir rupture du lien de causalit, en cas
d'vnement fautif ou non fautif subsquent qui, lui, est en
lien direct avec le prjudice
414
.
1/ faut envisager un partage de responsabilit quand il y a
deux ou plusieurs acteurs fautifs (la victime pouvant tre
l'un d'entre eux)415.
La jurisprudence est moins exigeante, au stade de la
vrification du lien de causalit, en prsence d'une faute
lourde
416
.
PAGE: 175
[Emphasis added]
[724] The Court adopts by reference the analysis contained in the Plan
d'Argumentation Additionnel de la Defenderesse on this subject. It does so, however,
without agreeing with or accepting counsel's application of the principles referred to
therein to the factual context of the present prdceedings. The following extracts of the
Plan represent an appropriate summary of the state of the law on the subject.
23. En droit qubcois, la rgle de la causalit exige que le dommage soit
une suite logique directe et immdiate de la faute. Comme l'noncent les auteurs
Baudouin et Deslauriers, cette rgle rvle un dsir de restreindre le champ de la
causalit et de ne retenir comme cause que le ou les vnements ayant un
rapport logique et intellectuel troit avec le prjudice dont se plaignent les
demanderesses. (Voir Jean-Louis Baudouin et Patrice Deslauriers, La
responsabilit civile, 7
e
d., 2007, Cowansville, Yvon Blais, [ ... ] n 1-622, aux
pp. 624-25)
24. Comme la Cour suprme du Canada l'a nonc dans Laferrire c.
Lawson, le lien causal, comme la faute et les dommages, doit tre tabli selon la
balance des probabilits. (Voir Laferrire c. Lawson, [1991] 1 S.C.R. 541, [ ... ]
la p. 602)
25. Par ailleurs, la demande peut recourir des prsomptions de fait
pour tenter de rencontrer son fardeau de preuve.
413 Id., n 589, p. 464-465.
414 Id., n592, p. 466.
415 Id., n596, p. 468.
416 Id., n582, p. 459.
500-17 -027275-059
2804. La preuve qui rend
l'existence d'un fait plus
probable que son
inexistence est suffisante,
moins que la loi n'exige
une preuve plus
convaincante
PAGE: 176
2804. Evidence is
sufficient if it renders the
existence of a fact more
probable than its non-
existence, unless the law
requires more convincing
proof.
26. Bien que BEV reconnaisse que les prsomptions de faits peuvent
servir tablir la causalit, le fardeau de preuve de cet lment gnrateur
de responsabilit demeure celui des demanderesses. (Voir St-Jean c.
Mercier, [2002] 1 S.C.R. 491, 2002 SCC 15, [ ... ] aux pp. 48-50)
27. Le renversement du fardeau de la preuve n'entre en jeu que lorsque la
demande a elle-mme rencontr son propre fardeau de preuve.
28. Afin de conclure qu'une preuve a t tablie par prsomption, l'article
2849 C.c.O. est clair, seules les prsomptions graves, prcises et
concordantes doivent tre prises en considration:
2849. Les prsomptions
qui ne sont pas tablies
par la loi sont laisses
l'apprciation du tribunal
qui ne doit prendre en
considration que celles
qui sont graves, prcises
et concordantes.
2849. Presumptions which
are not established by law
are left to the discretion of
the court which shall take
only serious, precise and
concordant presumptions
into consideration.
29. La Cour d'appel a d'ailleurs dfini ce que constituent les critres de
prcision, de gravit et de concordance pour conclure l'existence de
pr$omptions. (Investissements Mont cho inc. c. Banque Nationale du
Canada, 2008 QCCA 315, j. Brossard, Otis, and Duval Hesler, [ ... ]
[60J La Cour, dans l'arrt Longpr c. Thriault, dfinissait comme suit les
critres de prcision, de gravit et de concordance prvus par l'ancien
Code civil du Bas-Canada, et repris par le Code civil du Qubec, pour
conclure l'existence de prsomptions:
Les prsomptions sont graves, lorsque les rapports du fait connu
au fait inconnu sont tels que l'existence de l'un tablit, par une
induction puissante, l'existence de l'autre ( . .).
500-17 -027275-059 PAGE: 177
Les prsomptions sont precIses, lorsque les inductions qui
rsultent du fait connu tendent tablir directement et
particulirement le fait inconnu et contest. S'il tait galement
possible d'en tirer les consquences diffrentes et mme
contraires, d'en infrer l'existence de faits divers et
contradictoires. les prsomptions n'auraient aucun caractre
de prcision et ne feraient natre que le doute et l'incertitude.
Elles sont enfin concordantes, lorsque, ayant toutes une origine
commune ou diffrente, elles tendent, par leur ensemble et leur
accord, tablir le fait qu'il s'agit de prouver (. . .J. Si (. . .) elles se
contredisent (. . .) et se neutralisent, elles ne sont plus
concordantes, et le doute seul peut entrer dans l'esprit du
magistrat.
[Tel qu'annot dans l'original]
30. La Cour doit tre satisfaite que la cause allgue est la cause probable
du dommage et que sans cela, le dommage ne serait pas survenu. (Voir Liberty
Mutuallnsurance Co. c. Sanborn's Motor Express (Qubec) Inc, EYB 1991-
57483 (C.A.), [ ... ]
31. Une prsomption de fait ne peut tre dduite d'une pure hypothse,
d'une spculation, de vagues soupons ou d'une simple conjecture. Le fait
inconnu que les demanderesses veulent tablir ne sera pas prouv si les faits
connus rendent plus ou moins vraisemblable un autre fait incompatible avec celui
que l'on veut prouver ou s'ils ne permettent pas d'exclure raisonnablement une
atre cause d'un dommage subi. Il faut que les prtentions des demanderesses
soient supportes par des faits prcis, graves et concordants. (Voir Vtements
Paul Allaire inc. c. Citadelle, cie d'assurances gnrales, [2000] R.R.A. 957
(C.S.), AZ-00022046, j. Dalphond; Cie d'assurances Blair c. Accessoires
lectroniques Bomar inc., REJB 2005-92106 (C.S.), AZ-50320663, j. Emery;
et Metivier c. Groupe C. Laganire (12 octobre 2001), SOQUIJ AZ-50101612
(S.C.), j. Tellier)
[ ... ]
[51] cet gard, le professeur Jean-Claude Royer crit dans son
manuel sur la preuve civile:
Le lgislateur a ainsi c o d i f i ~ des critres qui taient dj retenus par les
tribunaux. Dans l'arrt Longpr c. Thriault [[1979] C.A. 258], M. le juge
Lamer dclare: [ ... ]
Une prsomption de fait ne peut tre dduite d'une pure hypothse,
de la spculation, de vagues soupons ou de simples conjectures.
Le fait inconnu qu'un plaideyr veyt tablir ne sera pas moyy. si les
500-17 -027275-059 PAGE: 178
faits connus rendent plus ou moins vraisemblable un autre fait
incompatible avec celui Que l'on veut prouver ou s'ils ne permettent
pas d'exclure raisonnablement une autre cause d'yn dommage subi.
Les indices connus doivent rendre probable l'existence du fait
inconnu. sans Qu'il soit ncessaire toutefois d'exclure toute autre
possibilit.
Cie d'assurances Blair c. Accessoires lectroniques Bomar inc.,
REJB 2005-92106 (S.C.), AZ-50320663, j. Emery, [ ... ]
[Emphasis (plus double bold) added]
(2) CONTEXTUAL APPLICATION
[725] Vidotron contends that BEV was weil aware that the increasing incidence of
piracy of its signal was causing damages to the industry as a whole and to the
broadcasters in particular. As more and more television viewers were able to access
BEV's signal and services without authorization or payment, this phenomenon resulted
in increasing damages not only to BEV but, as weil, to the other members of the
industryas a whole, including Vidotron. Why would a television viewer pay for services
offered by BEV or its competitors when it could readily pirate BEV's signal with impunity
for the relatively minimal one time cost of purchasing the necessary hardware or pirated
smart cards from the multitude of suppliers, both on-line and in retail outlets?
[726] It cannot be disputed that BEV was weil aware that this was happening and that
damages were being caused as a direct and immediate consequence of its failure to
adequately secure its signal. Initially, it chose to ignore the gravit y of the problem. It
then unduly delayed taking appropriate measures to rectify the situation until weil into
May 2004 when final approval of the necessary funding to pertorm the card swap was
obtained. The full swap-out was only completed in July 2005. See in this regard:
Exhibit P-1 01, (''Technical Options to Combat Piracy in Canada" Timothy
McGee -October 2002) at p. 6: "Revenue fast ta copyright hafders,
programmers and DTH and cabfe-distributars is purparted ta be $400M
annua/ly. ";
Examination: Michael Neuman :
940- You'll agree with me, will you not, Mr. Neuman, that in the event of
significant pirating of your competitors' signal, that that could cause significant
lasses for BEV?
A- Yeso
950- And, indeed, for everyone involved in the television broadcasting
business?
500-17 -027275-059 PAGE: 179
A- Yes.
417
;
Examination: Timothy McGee:
100Q-Now, one thing you did c1early understand, did you not, Mr. McGee, was
the fact that the Bell ExpressVu signal being stolen hurt everybody in the system.
That was clear to you, was it not?
A- Yes, 1 understood that signal theft in ail its forms hurts the distributors and
has downstream effects as weil. That's why we took out an integrated approach
to this.
101 Q- Weil, not just the distributors. It hurts everyone in the industry, if someone
can access signal for free, whereas they have to pay another broadcaster for
their signal.
A- 1 agree with that, My Lord, and that's ... and we were very clear in ail of our
public pronouncements and in our press releases and in our public awareness
campaign. We made that point very c1ear that my friend has indicated. 418;
Examination on discovery: Timothy McGee:
581 Q - Did you not understand that the fact that people were stealing or could
steal the Bell ExpressVu signal caused damages not only to Bell ExpressVu and
its broadcasting partners, but also to oth.er distributors such as Vidotron,
Cogeco, Star Choice? Was that-did you understarid that? That tnat--that they--
that they were deprived of potential subscribers by the fact that people could
steal--
A Right.
582 Q -- the signais?
A Oh, my view was we were ail in the same boat.
583 Q-Okay
A Anybody stealing is denying everybody-I mean, no matter who they
choose to go to, whether they want satellite or cable or whatever. 419
[727] BEV contends that Vidotron failed to discharge its burden of proving that the
compensatory damages claimed were the direct and immediate consequence of BEV's
fault. In particular, it contends that the causes of Vidotron's alleged loss of profits
during the Piracy Period were for reasons other than those alluded to by Vidotron. In
417 Transcript: October 19, 2011 p. 73.
418 Transcript: December 7,2011, pp. 51-52.
419 Transcript: October 21 , 2009, pp. 90-91.
500-17 -027275-059 PAGE: 180
its Plan d'Argumentation Additionnel de la Dfenderesse counsel cites 23 factors which
cou Id explain this loss.
50. La preuve administre par la dfenderesse a dmontr divers facteurs
qui peuvent expliquer la perte de clients chez Vidotron durant la priode
de piratage:
(i) Le choix des consommateurs durant cette priode tait davantage
tourn vers les services de tlvision par satellite [ ... ]
(ii) Malgr les reprsentations des demanderesses, la preuve a
rvl que l'offre de BEV et Vidotron n'tait pas similaire durant
la priode de piratage.
(iii) Rappelons tout d'abord que l'analyse comparative effectue par
Navigant s'est limite aux quipements, aux prix, aux forfaits et
aux chanes disponibles chez Vidotron et BEV. [ ... ]
(iv) Cette analyse est nettement incomplte, puisqu'elle ne tient pas
compte de ce qui fait habituellement partie d'une analyse de veille
concurrentielle savoir: la technologie utilise et notamment de
la qualit de l'image, du son et de la fiabilit du service, du service
la clientle, du service d'installation, du service de rparation,
des cots d'installation des quipements et des conditions et
restrictions qui s'y rattachent, des possibilits de location, des
promotions-rabais offerts pour les quipements et/ou les frais
d'installation, des promotions-rabais offerts au niveau des chanes
et des forfaits ou des efforts publicitaires et de marketing en
gnral chez les deux comptiteurs. (Lajoie, 5 oct., pp. 15 ligne 4
- 28 ligne 19; Asselin, 29 nov., p. 67, ligne 11 p. 68 ligne 24)
(v) Au niveau technologique; la preuve a dmontr que la technologie
numrique tait suprieure la technologie analogique. (0-245-
[ ... ]- Asselin, 29 nov., pp. 50 ligne 6 - 51 ligne 4, Pladeau, 6
sept., p. 166 lignes 3 7, Opatie, 7 sept. p. 167 ligne 13 p. 169
ligne 21)
(vi) BEV a lanc la technologie numrique partout au Canada ds
1997 alors que Vidotron tait limite par des contraintes
d'optimisation de rseau. Le service numrique chez Vidotron a
t rendu disponible partout au Qubec qu'en 2001.
(vii) En 2001, 90% des clients de Vidotron taient toujours des
abonns au cble analogique, alors que 8% taient des abonns
au numrique. (Opatie, 7 sept., p. 89 ligne 18 p. 90 ligne 1)
(viii) En comparaison avec le cble analogique de Vidotron, le service
numrique de BEV offrait plusieurs avantages dont une
supriorit au niveau de l'image et du son, plusieurs centaines de
500-1 7-027275-059 PAGE: 181
canaux dont une multitude de canaux de tlvision payante, une
flexibilit accrue, le guide interactif, le time-shifting, la disponibilit
du PVR, ainsi que le parental lock feature. (0-165, [ ... ] et Asselin,
29 nov., pp. 48 ligne 20 - 50 ligne 4 et pp. 54 ligne 11 - 56 ligne 7)
(ix) Bernard Asselin a galement tabli qu'en 2002, BEV a ajout des
postes locaux, comme TVA Rimouski ou TVA Sherbrooke pour
rpondre une demande de la population. (Asselin, 29 nov., p. 41
lignes 14-24)
(x) Bernard Asselin a aussi tmoign que le rseau de distribution de
BEV avait un haut taux de pntration au Qubec, ce qui
reprsentait un autre avantage concurrentiel. (Asselin, 29 nov.,
pp. 41 ligne 25 - 42 ligne 6) :
(xi) BEV a lanc son rcepteur vido personnel un (1) an avant
Vidotron (octobre 2001 vs novembre 2002) et le service haute
dfinition plus de deux (2) ans avant Vidotron (aot 2000 vs.
dcembre 2002 (pour la rgion de Montral seulement)). (Lajoie,
5 oct., pp. 28 ligne 20 - 36 ligne 7).
(xii) BEV possdait galement un avantage par rapport Vidotron au
niveau de son service la clientle durant, tout le moins, une
partie de la priode de piratage.
(xiii) En effet, malgr le refus de M. Robert Opatie (( Opatie )
d'admettre qu'il y avait, notamment en 2001, un srieux problme
de service la clientle chez Vidotron, la preuve a clairement
dmontr le contraire.
(xiv) Le rapport annuel de Quebecor pour l'anne 2003 annonce que
Vidotron a d dployer des efforts considrables pour amliorer
son service la clientle, passant d'un taux de rponse de 70%
l'intrieur des dlais requis 93% [ ... ] :
(xv) Le sondage effectu par la firme de recherche Dcima en 2003
confirme galement que le taux de satisfaction des clients,
relativement au service la clientle de Vidotron, tait infrieur
celui de Cogeco, BEV et Star Choice. (P-279 [ ... ])
(xvi) Ces donnes objectives contredisent le tmoignage rendu par
Dpatie et confirment plutt les dclarations de M. Luc Lavoie
(<< Lavoie ), porte-parole de Vidotron au National Post (0-179 -
[ ... ]) :
Luc Lavoie, the company's spokesman, yesterday portrayed
Videotron as a lazy, spendthrift monopoly with "Iegendary"
customer service problems: "The customer service is absolutely
horrendous," Mr. lavoie said. "It's almost legendary in Montreal
500-17 -027275-059 PAGE: 182
that if you cali Videotron for service you may wait forever and
ever and ever and ever. We have competition from the direct-to-
home satellite companies, and they don't seem to have the same
problems at ail.
(xvii) La pice 0-207 - [ ... J, qui concerne l'historique de l'attrition des
abonns chez Vidotron durant la priode de 1996 2009, a
dmontr que le taux d'attrition de Vidotron pour les priodes pr
et post-piratage est trs similaire au taux d'attrition en 2004 et
2005, soit en plein cur de la priode de piratage. (Donnes
internes de Vidotron, 0-185 - [ ... J et l'aide au tmoignage de
Navigant, P-363C - No Compendium)
(xviii) Durant les annes 2000, 2001, 2002 et 2003, des vnements,
qui n'entrent pas dans le cours normal des affaires, taient
prsents chez Vidotron, soit l'acquisition hostile de Vidotron par
Ouebecor, les problmes de service la clientle et le conflit de
travail prolong. (Lajoie, 5 oct., p. 38 ligne 8 - p. 59 ligne 15)
(xix) La grve s'est droule sur une priode de 11 mois et demi, de
mai 2002 avril 2003. (Pladeau, 6 sept., p.167)
(xx) La grve tait donc en cours durant la priode des
dmnagements en 2002.
(xxi) Cette grve, qui impliquait deux mille deux cents (2 200)
employs de Montral et Oubec a t dclenche parce que
Vidotron a dcid de vendre son service d'installation et de
rparation Entourage, dans le but de rduire ses cots en raison
de la concurrence. (0-206 en liasse; Lajoie, 5 oct. p. 54 ligne 18
p. 55 ligne 4)
(xxii) Des actes de vandalisme et de sabotage ont t perptrs dans le
cadre de la grve chez Vidotron, cela ayant caus des
interruptions de service aux abonns de Vidotron (0-206 en
liasse).
(xxiii) Dans son rapport annuel de 2003, Oubcor Inc. a comment les
impacts occasionns par le conflit de travail, notamment comme
suit:
Sur le plan des relations de travail, une nouvelle
convention collective de travail a t signe entre Vidotron
et ses employs des rgions de Montral et de Oubec le
29 avril 2003, mettant ainsi fin au conflit de travail qui avait
500-17 -027275-059
dbut en mai 2002. Tout en permettant de raliser des
rductions de cots et des gains de productivit, les
nouvelles conventions collectives ont procur Vidotron
une flexibilit accrue dans la gestion de ses oprations.
(D-159 (005) [ ... ])
Le bnfice d'exploitation a atteint 14,4 millions de
dollars, contre 27,3 millions en 2002. Cette chute s'explique
par la baisse des revenus, la rduction des marges brutes
cause par la svrit des conditions sur le march, la
diminution de la capitalisation et les cots encourus en
2003 lis au rglement de litiges. Il est noter que les
rsultats de 2002 avaient t affects par l'impact des
actes de vandalisme perptrs lors du conflit de travail
chez Vidotron. (D-159 (005) [ ... ])420
PAGE: 183
[728] BEV contends that if, indeed, piracy of BEV's signal during the Piracy Period and
its inability to address this problem in a timely fashion, were the principal causes of
Vidotron's loss of profits, Vidotron was in a position to administer the necessary
evidence, through its data banks, in support of its allegations. No such evidence was
administered. Rather, counsel argues, Vidotron presented, through the Navigant
Report, in the case of Vidotron, 255 possible scenarios as to the cause of damages
and, in the case of TVA, 15 possible scenarios. Counsel argues further and notes in its
Plan d'Argumentation Additionnel:
61. Les experts de la firme Navigant ont refus d'mettre une opinion
quant au scnario le plus plausible ou probable parmi tous les
scnarios prsents. Ce faisant, les experts des demanderesses ont
reprsent la Cour que tous les scnarios prsents taient aussi
possibles l'un gue l'autre.
62. Ce n'est qu'en plaidoirie que les demanderesses ont suggr la Cour
de retenir un scnario trs spcifique l'intrieur des 255 scnarios
prsents par Navigant, toutefois, sans que ce scnario ait t support
et/ou endoss par leurs propres experts retenus pour la quantification des
420 Pp. 1 Off.
500-17 -027275-059 PAGE: 184
dommages et malgr le fait que la mthodologie derrire ce scnario ait
t svrement critique par les experts de la firme PwC.
63. Par ailleurs, par lettre date du 6 janvier 2012, les demanderesses ont
transmis des suggestions de scnarios additionnels dans l'ventualit o
la quantification des dommages, qui pourrait tre retenue si elles
obtenaient gain de cause, ne se retrouverait pas l'intrieur des 255
scnarios prsents par Navigant. 421
[Emphasis added]
[729] BEV contends the fact that piracy may have caused damages to the industry at
large is not relevant for the purposes of these proceedings. What, it argues, is relevant
is the absence of credible evidence supporting Vidotron's claim that BEV's acts and
omissions are the direct and immediate cause of the damages suffered by it.
[730] ln particular, BEV contends Vidotron has failed to specifically prove that the
source of its lost profits emanates either from: (i) those of its former subscribers, who
left Videotron with the intention of pirating the BEV system, or (ii) those potential
subscribers who did not join Vidotron but rather BEV with the intention of becoming
pure or hybrid pirates.
[731] ln the circumstances of the present case, the burden of establishing causality by
means of direct evidence, which BEV would have the Court impose on Vidotron, would
be difficult if not impossible to discharge. Rather a moreappropriate and acceptable
standard would be that of the "approche de la prvision raisonnable" referred to in the
citation of Baudouin and Deslaurier referred to above.
[732] Vidotron has identified, through the credible evidence adduced at trial and
referred to in this judgment, su ch evidence that should have rendered objectively
predictable to BEV, the source and cause of the damages for which Vidotron now
claims compensation. While other reasons were given as contributing to Vidotron's
loss of profits during the Piracy Period, these do not absolve BEV of responsibility for
the damages claimed. The impact of these other identified sources of lost profits, if any,
is not readily quantifiable.
[733] BEV was or should have been aware of the likelihood and predictable
damageable consequences of its acts and omissions. The evidence is more th an
sufficient in law to establish causality. It renders the existence of the facts that give rise
to the "lien de causalit" more probable than its non-existence.
422
The Court is satisfied,
on the balance of probabilities, that the failure to take adequate and available measures
421 P.15.
422 Article 2804 GGQ.
500-17 -027275-059 PAGE: 185
that could have avoided or minimized the damages claimed by Vidotron is in fact the
cause of these damages.
423
C. QUANTIFICATION OF DAMAGES
(1) COMPENSATORY DAMAGES
[734] The quantification of compensatory damages in the context of the present
proceedings presents considerable challenges. The various methods of calculating the
loss of potential subscribers, the income generated therefrom and the resultant loss of
profits are, at best contentious. Clearly, the significant differences in the evaluation of
damages arrived at by the financial experts retained by each of the parties t6 assist the
Court in the quantification of damages reflect the extent of the challenge.
[735] However, the presence of these challenges does not negate the right of recovery
of an aggrieved party when, as in the present case, fault, causation and the existence of
damages has been adequately proven on the balance of probabilities. The Court's role
in such circumstances is to arbitrate the quantum of damages based upon whatever
credible evidence may be available to it.
[736] See in this re2ard : Renaud v. Socit de gestion des activits communautaires
de l'Ife Notre-Dame : 24
[26] Ce faisant, le juge arbitrait les dommages et intrts comme il se
devait de le faire dans les circonstances. Ayant conclu l'existence de divers
manquements leurs obligations de la part des appelantes, manquements qui
selon toute probabilit avaient t dommageables pour l'achalandage de
l'entreprise exploite par l'intime, il lui fallait rechercher dans la preuve la
dmonstration probable du montant du prjudice financier subi par
l'intime. C'est ce qu'il a fait, conformment au principe nonc dans l'arrt
Rothpan c. Drouin, [1959] B.R. 626, principe que le juge en chef adjoint
Hugessen de la Cour suprieure avait formul en ces termes dans la dcision
Raymor Painting Contractors (Canada) Ud c. Purolator Courier Ud, [1976] C.S.
468, la page 472 :
Even where the assessment of damages in a contractual matter is extremely
difficult, it is the dut Y of the court, once it is tolerably clear that there have been
some damages suffered, to attempt to estimate them in much the same manner
as a jury would be called upon to do.
[Emphasis added]
423 See in this regard, by analogy : Jacques Ghestin, Genevive Viney & Patrice Jourdain, Trait de droit
civi/- Les conditions de la responsabilit, 3
rd
ed., (Paris: L.G.D.J., 2006), p. 201.
424 BE 2001 BE-525 (8. C.) atf'd JE 2004-778 (C.A.).
500-17 -027275-059 PAGE: 186
[737] See as weil: Provigo Distribution Inc. v. Supermarch A.R.G. Inc.:
425
La prsence de nombreux facteurs difficilement prvisibles ou apprciables
rendait l'valuation du prjudice fort complique. La difficult supplmentaire
prouve par cette Cour d'valuer le dommage en ne tenant compte que de la
preuve constitue au dossier l'excusera sans doute de ne pas pouvoir y
appliquer une rigueur strictement mathmatique. Elle doit donc procder ce
calcul en faisant appel une certaine approximation, un certain degr
d'apprciation et sa discrtion. C'est cependant l le rle des juges.
Comme il a dj t mentionn, l'valuation de la capacit de gains futurs d'une
entreprise peut s'appuyer sur sa performance passe, si la priode de rfrence
est suffisamment longue pour tre significative. ( ... )
La mthodologie propose par Parent [l'expert], sous rserve de certaines
corrections, est donc parfaitement acceptable et la juge de la Cour suprieure a
eu raison de la retenir.
( ... )
Nous avons exprim l'avis que si le rapport Parent devait servir de base
l'valuation du prjudice, ses conclusions devaient nanmoins tre nuances
pour tenir compte de l'ensemble des facteurs dj identifis et qui en affectent la
justesse. Le jugement entrepris a valu l'un d'eux, les invitables imprvus et
impondrables propres toute entreprise commerciale, en rduisant
gnralement de 10% l'indemnit propose par l'expert et a donc utilis un mode
d'apprciation estimatif. Cette mthode est valide mme si, par dfinition, elle
n'offre pas un haut degr de prcision scientifique. Elle se justifie par un examen
global de l'affaire partir de faits prouvs et de critres connus, pour dgager
une solution quitable et juste dans les circonstances. " cause de ces
caractristiques, elle est difficile d'application. Son utilisation doit par consquent
se faire avec grande prudence et lorsque toutes les autres techniques ou
solutions sont exclues. C'tait le cas en l'espce.
[Emphasis added]
[738] For the reasons previously expressed regarding the probative value of the expert
evidence concerning the quantification of the damages claimed by both Vidotron and
TVA, the Court retains as more credible and reliable, the methodology and analysis
adopted by PwC and the conclusions expressed in its Report. Their analysis and
methodology are coherent and reflect an unbiased appreciation of the relevant
evidence. Its estimates as to the level of piracy are reasonable and consistent with the
credible evidence. Similarly, the quantifications of the damages incurred by Vidotron
du ring the Piracy Period as weil as during the Post Piracy Period, and that of TVA
during the Piracy Period alone, are reasonably supported by the evidence.
425 J.E. 98-39; pp. 84-85 & 92(C.A.) ("Provigo'?
500-17 -027275-059
PAGE: 187
[739] Sub-section 3.4 and Appendix 4 of the Revised PwC Report contain its analysis
and conclusions regarding the valuation of Vidotran's damages during the Piracy
Period. Sub-section 3.5 and Appendix 5 contain its analysis and conclusions regarding
the damages during the Post Piracy Period (referred to by PwC as the "Mitigation
Period").
[740] Unlike Navigant who refused to opine on the duration of the Post Piracy Period
and left the determination to the Court without any credible and coherent guidelines,
PwC for reasons expressed in its revised Report and elaborated upon by BEV's counsel
in a response to a message by the Court for a clarification, concluded that the Post
Piracy Period extended for a period of approximately 5.5 months fram July 16, 2005 to
December 31, 2005. PwC's assessment of the Iimited duration of the Post Piracy Period
is based upon the premise that ail former pirates who might otherwise have used
Vidotron's services in the past, would Iikely have subscribed to Vidotran linearly by
the end of this period.
[741] The Court considers PwC reasoning in this regard reasonable and credible.
[742] The evaluations contained in both Appendices 4 and 5 are based upon a 0%
level of acceptable piracy. During the course of oral argument, and at the Court's
request, counsel for the respective parties quantified the amount of revised damages
claimed, calculated based upon the Navigant methodology or in part upon the PwC
methodology, as the case may be and subject to the following criteria:
(i) a 3% level of acceptable piracy; and
(ii) a commencement date for the start of the Piracy Period varying from April
1,2003 to December 31,2004.
[743] Applying the above criteria, the damages claimed by Vidotron du ring the Piracy
Period varied fram a high of $28, 539, 723 if the damages for which BEV is accountable
are deemed to have commenced on April 1, 2003 and a low of $338,847 if they are
deemed to have commenced on October 1, 2004. As for Post Piracy Period damages,
the damages claimed for the period commencing February 28, 2005 and terminating
6.8 years later on December 31,2011 using the 3% lev.el amount to $144,593,886.
[744] Applying the above criteria, according to BEV, the damages incurred by
Vidotron during the Piracy Period and the Post Piracy Period (of 5.5 months) combined
varied froma high of $648,000 to $861,000 if the damages for which BEV is found
accountable are deemed to have commenced on July 1, 2003 and a low of $34,000 if
they are deemed to have commenced on December 1, 2004.
[745] For the reasons previously expressed, the Court will retain as more reliable and
sustainable, the quantification of damages as performed by PwC. In so deciding the
Court has also taken into consideration possible additional sources of lost profits, other
500-17 -027275-059 PAGE: 188
than piracy of BEV's signal, which may have contributed to its losses during the Piracy
Period.
[746] Based upon the evidence, the Court concludes that had BEV acted in a
reasonable and diligent manner it could have effected the swap-out to the Aladin CAS
at the latest by January 1, 2004. Thus, for the purpose of the quantification of the
damages incurred during the Piracy Period, it is deemed to have commenced on that
date.
[747] Applying the methodology retained by PwC for the quantification of damages
based upon a 3% level of acceptable piracy as reflected in counsel's letter of January
12, 2012,426 the amount of damages should range fram a maximum of $383,000 to a
low of $295,000. In the absence of any justification to the contrary, the Court considers
a reduction of the maximum amount retained by PwC to $339,000, being the mid-point
between these two amounts, as a just and equitable evaluation of the damages incurred
both for the Piracy period and the Post-Piracy Period. In so deciding the Court has also
acknowledged and considered an apprapriate reduction fram the maximum amount
based upon what was referred to by the Court of Appeal in Provigo as " ... Ies invitables
imprvus et impondrables propres toute entreprise commercial". 427
[748] Accordingly, BEV will be condemned to pay Vidotran the amount of $339,000 in
compensation for the damages incurred both during the Piracy Period and the Post
Piracy Period.
(2) PUNITIVE DAMAGES
[749] Although in its Requte introductive d'instance en dommages-intrts prcise et
amende, Vidotran initially sought an additional award of $10 million as punitive
damages, no representations were made by counsel other than a passing reference
made during its oral presentation. Detailed representations concerning rights to punitive
damages were limited to those of TVA in the other Related Actions.
[750] The Court assumes that Vidotran, apprapriately, desisted fram its claim for
punitive damages in the present action.
XII. EXPERT EXPENSES
[751] Substantial expenses were incurred by each of the parties for the services of
their respective experts.
PLAINTIFFS' EXPERTS:
Markey (P-353 and P-353A) =
426 Exhibit D-292.
427 Pro vigo, p. 92.
$184,991.00
500-17 -027275-059
Shelton (P-359 and P-359A) =
Ferguson (P-362 and P-362A) =
Navigant (P-364 and P-364A) =
TOTAL FOR PLAINTIFFS =
DEFENDANT'S EXPERTS:
Barr (0-268 and 0-268A) =
Green (0-281 and 0-281A) =
PwC (0-282 and 0-282A) =
TOTAL FOR DEFENDANT =
$410,638.35
$262,144.92
$696,636.62
$1,554,410.89
$398,154.50
$755,657.67
$879,038.69
$2,032,850.86
PAGE: 189
[752] Article 477 CCP codifies the criteria established by the case law for the
admissibility of expert expenses as costs of the action:
477. The losing party must pay ail costs, including the costs of the
stenographer, unless by decision giving reasons the court reduces or
compensates them, or orders otherwise.
As weil, the court may, by a decision giving reasons, reduce the costs
relating to experts' appraisals reguested by the parties, particularly if, in
the opinion of the court, there was no need for the appraisal, the costs are
unreasonable or a single expert's appraisal would have been sufficient.
ln a personal action, and subject to article 988, the amount of the costs of suit,
except costs of execution, that the defendant who loses may be required to pay
shall not exceed the amount of the condemnation, if that is not greater than the
amount contemplated in paragraph a of article 953, unless the court, by judgment
giving reasons, orders otherwise.
[Emphasis added]
[753] The "costs" to which Article 477 CCQ refer are those provided for in Article 12 of
the Tariff of judicia1 fees of a dvo ca tes. 428
12. The cost of exhibits, copies of plans, deeds or other documents, as weil
as the cost of expert's reports filed shall be included in the bill of costs,
unless the judge orders otherwise.
[754] The amendments to Article 477 CCQ in January 2003 and the codification
thereby of the powers previously exercised by the Court to mitigate the amount of
428 RRQ, c. B-1 , r 22.
500-17 -027275-059 PAGE: 190
expert expenses included in the costs of the action
429
, are consistent with the principle
of proportionality reflected in Article 4.2 CCP.
[755] ln order that expert expenses be admissible as "costs", the services must have
been at the very least useful, if not essential, and the expenses incurred reasonable in
the circumstances.
430
[756] Expert evidence was clearly essential in the context of the present proceedings.
However, as will be explained, what is reasonable is indeed problematic.
[757] Expert evidence was received concerning two distinct subject matters:
(i) Security & Available Measures to Prevent or Limit Satellite Signal Piracy
and Ensuing Damages ("Prevention of Piracy"): and .
(ii) Quantification of Damages ("Quantification of Damages").
[758] Regarding the expert evidence received concerning the Prevention of Piracy, for
the reasons previously expressed and elaborated upon below, the Court retains as
more credible, the evidence offered by Vidotron and TVA's experts, Markey, Shelton
and Ferguson.
[759] The issues raised for determination in the Vidotron Action as weil as in the other
Related Actions are indisputably highly complex and technically sophisticated. They
required credible, coherent and unbiased explanations by the experts heard and,
hopefully, a comprehension by the Court, of the underlying technology relevant to the
design and operation of a sophisticated DBS television and conditional access system
such as that operated by BEV.
[760] The required explanations were credibly and coherently provided by Markey,
Shelton and Ferguson. For the most part, each of them addressed different aspects of
the relevant technology with minimal duplication, one to the other. There is no doubt
that the expert evidence offered was not only useful, but rather essential to a
comprehension of the relevant technology. It enabled the Court to assess and evaluate
the lay evidence in the appropriate technological context.
[761] Regarding the expert evidence offered by Lajoie and Allard (Navigant)
concerning the Quantification of Damages, for the reasons previously expressed, the
Court is unable to retain their evidence as either credible or useful. Their evidence did
not assist the Court in reaching its conclusion and therefore their expenses in the
amount of $696,636.62 will not be included in the calculation of costs on either the
Vidotron Action or the TVA (Piracy) Action. Rather the Court has relied upon and
429 See by way of example : Berthiaume v. Val Royal Lasalle Ite. [1992] R.J.O. 76 (C.S.).
430 Tessier-Biron v. Verrier, J.E. 2006-1092 (CA); A.D.S. Associs Ite. v. Village de St-Basile Sud
(Municipalit du) B.E. 2001 BE-286 (CA); Gadoua v. Beaudoin J.E. 99-1724 (C.S.).
500-17 -027275-059 PAGE: 191
retains as more credible and useful in quantifying the amount of damages in each of the
two actions, the expert evidence offered, under reserve, by Maill (PwC) heard on
behalf of BEV.
[762] Moreover, under reserve of the Court's views regarding the usefulness and
credibility of the expert evidence offered by Maill and the lack thereof of that offered by
Lajole and Allard, since BEV has pa id PwC $879,038.69 for its services which, seeing
the conclusions in each of the two actions, will not be recoverable from Vidotron or
TVA, it would be unjust to have BEV pay, in addition, the amounts charged by
Navigant.
431
[763] The amounts originally claimed in the Amended Motions Introductive of Suit filed
in the Vidotron Action and in the TVA (Piracy) Action were substantial. They totaled in
excess of $387 million ("somme parfaire") plus interest, the additional indemnity
provided for in Article 1619 eco and costs including extra-judicial costs. 432
[764] Although, following the termination of the evidentiary portion of the hearings and
consistent with the evidence adduced, their respective claims were substantially
reduced to a fraction of the original amounts, nevertheless, both Vidotron and TVA, on
the one part, and BEV on the other were requimd to prepare for and lead expert
evidence either in support of or in contestation of the significant monetary
condemnations originally sought in each of the Related Actions.
[765] BEV will be condemned to pay to Vidotron, in the present action and to TVA in
the TVA (Piracy) Action, substantially reduced portions of the amounts originally
claimed by each of them in their respective actions.
[766] The initial quantifications of the damages claimed by Vidotron and TVA were, in
the opinion of the Court, grossly exaggerated. Had the initial claims been of the reduced
magnitude now claimed by each of them in oral argument rather than the three hundred
and eighty-seven million plus dollars ($387,000,000) initially claimed, perhaps Vidotron
and TVA might have limited the number of experts, especially in the area of technology,
to one or two and thereby reduced the expenses for their services.
[767] Clearly, Vidotron and TVA were free to engage and pay for as many experts as
they thought necessary. What remains to be determined in this judgment, however, is
whether some or ail of these expenses should be mitigated or totally excluded from the
costs of the Vidotron Action and/or of the TVA (Piracy) Action for which BEV will be
held accountable.
[768] The expenses incurred for the services of the three experts regarding Prevention
of Piracy total $857,774.27. This amount weil exceeds the combined total of the
condemnations to be awarded in both the Vidotron Action and the TVA (Piracy) Action.
431 See in this regard: Cadieux v. Martineau, [2005] R.RA 892 (C.S.).
432 Amended Motions dated November 4,2005: Vidotron $374,195,890; TVA $13,670,019.
500-17 -027275-059 PAGE: 192
Applying the principles of proportionality, the Court finds this amount unreasonable in
light of the amounts legitimately in dispute. While BEV will be condemned to pay the
costs in each of the two actions, it should not be required to bear the financial burden of
reimbursing Vidotron and TVA for the full amount of these services. Although these
expenses might have been reasonable and justified to support the $387 million plus
dollar actions, they cannot be justified in light of the amount of damages awarded in
each of these two actions. The amounts originally claimed were unsupported by the
evidence and were never realistically the amounts in dispute.
[769J Had Vidotron and TVA initially realistically quantified their respective claims in
amounts similar to those presented by counsel in oral argument or in the amounts
determined by the Court in this judgment and the judgment in the TVA (Piracy) Action,
they would normally have sought means to limit their expert expenses in the area of
Prevention of Piracy by engaging one or two experts instead of the three in question.
Accordingly, consistent with this premise and applying the principles of proportionality,
the Court exercising its discretion will reduce by 50% to a total of $428,887 the amount
of expert expenses that will form part of the costs in the two actions in question. This
amount will be allocated between the Vidotron Action and the TVA (Piracy) Action in
the following manner as agreed to by the parties: Vidotron: $385,998; TVA: $42,888.
433 Although this amount exceeds the amount of the condemnation in the Vidotron
Action, for the reasons previously expressed, the Court considers it justified.
XIII. INTEREST
[770J The amount of damages awarded in the present judgment is calculated based on
the methodology favoured by PwC using the Navigant quantification date of August 31,
2005. Accordingly, interest as weil as the additional indemnity calculated in accordance
with Article 1619 GGQ will run on the amount of the award as and from September 1 ,
2005.
XIV. FOR THESE REASONS, THE COURT:
A. OBJECTIONS
[771 J DISMISSES Vidotron's objections regarding the admissibility of Exhibits 0-226
and 0-79A;
433 By agreement between the parties, as confirmed in a message addressed to the Court on June 19,
2012, in the event of a condemnation in damages or a dismissal in either the present action or the
TVA (Piracy) Action, the expert expenses determined ta be admissible in calculating the casts of each
of the two actions are to be allocated in the following proportion: Vidotron Action 90%, TVA (Piracy)
Action 10%.
500-17 -027275-059 PAGE: 193
[772] DISMISSES Vidotron's objections regarding the Barr Expert Report and the
Green Expert Report;
B. MERITS
. [773] MAINTAINS, in part, Plaintiff in continuance of suit Vidotron s.e.n.c.s Requte
introductive d'instance en dommages-intrts prcise et R-R-amende;
[774] CONDEMNS Defendant Bell ExpressVu Limited Partnership to pay to Vidotron
s.e.n.c. the sum of $339,000, with interest thereon calculated at the legal rate as weil as
the additional indemnity provided in Article 1619 G.G.Q, both as and from September 1,
2005;
[775] THE WHOLE with costs, including expenses of expert witnesses fixed at
$385,998.
- ~ - - - T - - - - ~ - ~ - ~ ~ ~
SILCOFF, J.S.C.
500-17 -027275-059
PAGE: 194
Mtres James A. Woods, Patrick Ouellet, Emmanuel Laurin-Lgar, Alexandre Paul-Hus a d
Samuel Bachand
WOODS S.E.N.C.R.L.
Attorneys for Plaintiffs
Mtre Genevive St-Georges
Attorney for Quebecor Media lnc.
Mtres William J. Atkinson, Jean Lortie, Chantal Tremblay, Nicolas Trottier, Shaun Finn,
Sean Griffin, Emmy Serikawa, Marc-Andr Russell and Kim Nguyen.
McCARTHY TTRAULT S.E.N.C.R.L, S. R.L.
Attorneys for Defendant
Mtre Alexander J. Du
Attorney for BCE
Dates of hearing :
September 6, 7,9, 12, 13, 14, 19,20, 21, 22, 26, 27; October 3,
4,5,6,18,19,20,21,25,26,27,28; November1,2,3,8,9, 10,
11,15,16,17, 18,23,25, 29,30; December1, 6, 7,8,9,13,14,
15, 16, 19,20, 2011; January 4, 5, 6, 9, 10, 11 & 12, 2012.
500-17 -027275-059 PAGE: 195
APPENDIX 1
GLOSSARY OF ACRONYMS AND DEFINED TERMS
(1) Acronyms
ASIC Application-specifie integrated chip
AVR Audio Video Replicator
BOU Broadcasting Distribution Undertaking
BEATS Bell ExpressVu Asset Tracking System
CAK Conditional Access Kernel
CAM Conditional Access Module
CAS Conditional Access System
CSA Common Scrambling Algorithm
CSR Customer Service Representative
DBS Direct broadcasting satellite
DES Data Encryption Standard
DNASP Digital Nagra Advanced Security Processor
DSS Digital Satellite System
DTH Direct-to-home
DVB Digital Video Broadcast
EBITDA Earnings before interest, taxes, depreciation, and amortization
ECM Electronic Counter Measure
ECM Entitlement Control Message (as in dual-ECM)
EEPROM Electrically Erasable Programmable Read-Only Memory
EMM Entitlement Management Message
FTA Free-to-air Receiver
GI General Instrument
IMC Investment Management CounciJ
IMS Integrated Management Systems
IRD Integrated Receiver-Decoder
ISO International Standards Organization
ITM Interactive Transaction Manager
IVR Interactive Voice Response
LNB Low Noise Blocker
MOSC Modified original smart ca rd
MRVP Multiple Receiver Verification Program
Nagra NagraVision and/or NagraStar
500-17 -027275-059 PAGE: 196
NOS News Digital Systems
PPV Pay-Per-View
PRISM Pre-registration Inventory and Sales Management System
PVR Personal Video Recorder
SAT Service Assurance Team
SAT System Acceptance Test
STB Set-top box
SW Software
VC2 Videocipher Il
VCRS Videocipher Renewable Security
(2) Defined terms
434
Application Specifie Integrated Circuit (ASie): A specialized silicon chip designed for
a particular application or purpose. ASICs can be purchased "off the shelf" or built to
custom specifications.
Blocker card: A pirate device, typically inserted between the IRD (receiver) and smart
card. Blockers were designed to stop certain messages from reaching the smart card.
They were used with legitimate (subscribed) smart cards and with pirate cards.
Challenge-response protocol: An interactive authentication protocol, typically
executed between an IRD (receiver) and smart card. In a typical challenge-response
protocol, one party generates a random number (challenge), and the other party
performs some computation on that value, often using a cryptographic algorithm and
key. The original party can verify the correctness of this response, and thus be assured
of the other party's legitimacy.
Churn rate: Ratio of subscribers discontinuing their services to the global subscriber
base over a given time period.
Common Scrambling Aigorithm (CSA): A digital cipher, also known as an encryption
algorithm, designed ta ensure the canfidentiality of satellite television programming in
the DVB standard. CSA uses a 64-bit key which is necessary ta encrypt and decrypt
programming. In typical implementatians, the CSA descrambler resides in the IRD
(Receiver), and abtains the necessary keys from the Conditianal Access Module.
Conditional Access System (CAS): A security system designed to allow autharized
users to view satellite programming, while preventing unauthorized access. The CAS
includes the equipment, management systems and palicies required for both
broadcasting and receiving the satellite television signal.
434 Source, (except for definition of Churn rate), Expert Report of Matthew D. Green, PhD, September 29,
2010.
500-17 -027275-059 PAGE: 197
Conditional Access Module (CAM): A component of the Conditional Access System.
The CAM is incorporated into the Set Top Box (Integrated Receiver/Decoder) and
allows authorized users to view satellite programming. Modern satellite CAMs are
frequently implemented in a replaceable smart card form factor.
Data Encryption Standard (DES): A digital cipher, also known as an encryption
algorithm. DES uses a 56-bit key (with an additional 8 bits of parity checking) which is
necessary to encrypt and decrypt programming. DES is used within the Nagravision and
NDS/DirecTV conditional access modules to protect keys.
Dish Network: U.S. satellite television service offered by EchoStar Inc. Uses
technology based on the DVB standard with Conditional Access technology developed
by Nagravision.
Digital Video Broadcasting (DVB-S, DVB-S2): International satellite television
standards promoted by the DVB consortium. The DVB standards specify many of the
physical and logical parameters for DVB-compliant satellite networks and devices. DVB-
S service is available worldwide, and is used in North American by Dish Network and
BEV. DirecTV also employs the DVB-2 standard for High-Definition programming.
DirecTV: U.S. satellite television broadcaster. DirecTV uses technology based on the
Direct Satellite System (DSS) with a Conditional Access technology developed in
collaboration with NDS. Recently, DirecTV has also begun to use the DVB-2 standard
for high definition content. .
Direct Satellite System (DSS): a proprietary satellite broadcasting technology used in
the DirecTV system in North America, and (at various points) the Sky TV system in the
United Kingdom. The DSS specification defines many of the physical and logical
parameters used by DSS-compliant satellite technology
Electronic Countermeasure (ECM): A digital message designed to interrupt pirate
CAMs and receiver devices. ECMs are transmitted within the satellite broadcast stream,
and consist of signal elements such as key changes, obfuscated software code, and
configuration changes.
Entitlement Management Message (EMM): A digital message designed to enable or
disable program reception on subscribers' satellite receivers. EMMs are transmitted via
the satellite broadcast stream. They may contain commands and/or digital decryption
keys.
Electrically Erasable Programmable Read-Only Memory (EEPROM): A memory
element on a smart card that can be re-written with new information. This area typically
contains software and/or encryption keys.
Free to Air (FT A) Receiver: A third-party receiver device designed to receive free-to-air
satellite television programming. In many cases FTA receivers included, or could be
updated with software that would allow their use in pirating subscription content.
500-17 -027275-059
PAGE: 198
Integrated Receiver/Decoder (lRD): A dedicated "set top box" containing circuits to
tune and decode satellite television signais. The digitallRD is typically connected to a
small fixed satellite dish via a length of coaxial cable. Commercial satellite television
receivers contain circuits for descrambling the program signal, and frequently include a
slot for a smart ca rd based Conditional Access Module (CAM).
Internet Key Sharing: A technique by which a single, authorized CAM (smart card) is
shared among many users by distributing program keys over the Internet. This does not
require that the conditional access technology be compromised. Rather, the keys are
extracted from a pirated IRD or from the digital interface between the smart card and
IRD.
Nagravision: A Conditional Access technology manufacturer. Nagravision technology is
employed by the U.S. Dish Network and BEV service.
Nagra 1 CAS (DNASP-II): A Conditional Access technology developed by Nagravision.
Nagra 1 was used in the initial deployment of BEV and Dish Network systems. The
Conditional Access Module was implemented within a replaceable smart card.
Nagra 2 "Aladin" CAS (DNASP-III): A Conditional Access technology developed by
Nagravision. The Nagra 2, or "Aladin" technology was deployed by BEV and Dish
Network following a ca rd swap in 2003.
Nagra 3 CAS: A Conditional Access technology developed by Nagravision. The Nagra
3 technology was deployed by BEV and Dish Network from approximately 2008 on.
NDS (NDS Group): Conditional Access technology manufacturer, formerly known as
News Datacom Ltd.
P1, P2, P3 and P4 CAMs (DirecTV): A series of Conditional Access Modules
developed jointly by NOS and DirecTV and used within the DirecTV system from its
launch. The P1, P2 and P3 cards were each compromised, necessitating replacement
of the CAM (card swap). The P4 and later variants has proven resistant to piracy.
Set Top Box (STB): See Integrated Receiver/Decoder (IRD).
Smart cardo A miniaturized computing device with a standardized physical profile and
digital interface. Smart cards have limited computing and storage capability, and may
incorporate tamper-resistant components to prevent reverse-engineering. The ISO/IEC
7816 specification defines the interface to the card, but not necessarily its internai
operation.
435
435 CardWerk. The ISO 7816 Smart Card Standard: Overview. Available fram http://www.cardwerk.com/
smartcards/smartcard_standardJS07816.aspx.

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