The recent decision of the Supreme Court of Canada in Society of Composers, Authors and Music Publishers of Canada v Canadian Association of Internet Providers [2004] 2 SCR 427 is significant for two reasons: (a) the Canadian Supreme Court held that Internet Service Providers should be exempted from copyright liability as long as they provide only a conduit service in transmitting copyright materials between Internet users (a point which is consistent with many national copyright laws); (b) the majority of the Canadian Supreme Court arrived at the conclusion that the appropriate test to determine whether an infringement for the unauthorized transmission of online copyright material has occurred within the Canadian jurisdiction is the 'real and substantial connection' test (LeBel J, however, dissented and was of the view that the correct test to apply is the 'host server' test). This paper studies these two tests as propounded by the Canadian Supreme Court and assesses their strengths and weaknesses, especially in light of the territoriality principle in copyright law.