Toronto Computers Lawyers Group (2006-2007)

Toronto Computers Lawyers Group June 26, 2007

The Year in Review (2006-2007) Barry B. Sookman [email protected] 416-601-7949

McTet2 #3697855

Contracting and ECommerce Issues

Remedies for Breach of Outsourcing Agreements Vertex Data Science Ltd v Powergen Retail Ltd [2006] EWHC 1340 (Comm)  Vendor seeking to prevent customer from terminating a BPO outsourcing contract where fees payable would be £1.1 billion over 10 years, where sole termination fee was £11.5 million and limit of liability was £12 million.  “In these circumstances I do not consider that it is appropriate to grant injunctive relief which will have the effect of compelling the parties to work together. Nor do I consider that the terms of the contract are sufficiently precisely defined to indicate to Powergen precisely what is required of it if it is not to prevent or hinder Vertex from performing its functions under the MSA…”  “These sophisticated parties included in their contract clause 11 which excludes liability for loss of profit, loss of contract and loss of goodwill and imposes a cap on each party's liability in the aggregate sum of £12 million. Of course there will be issues as to the proper construction and applicability of these provisions and Vertex also contends, somewhat implausibly as it seems to me, that they are unfair and as such unenforceable. However that may be, it is not immediately obvious to me that it would be unjust for Vertex to be confined to such remedy in damages as is determined to be the extent of the bargain which it struck.”

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Arbitrations in IT/IP cases Xerox Canada Ltd. v. MPI Technologies Inc., 2006 CanLII 41006 (ON S.C.) In breach of contract and copyright infringement case the arbitrators:  Decided to hear copyright claims where the arbitration agreement was silent as to such claims.  Added a non-party which owned the copyright to the arbitration proceedings.  Permitted one of the technical arbitrators to conduct extra-judicial investigations, and to act as a technical expert on panel.  Applied Ontario law (law of contract) to determine whether infringement outside Canada had occurred based on Article 28 of Model Law and then found copyright infringement because of high level “functional similarities”. The decision was only reviewable based on jurisdictional challenge and not for error of fact or law.

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Good Faith in Development Contracts Civiclife.com Inc. v. Canada (Attorney General), 2006 CanLII 20837 (ON C.A.)  “…the trial judge held that Industry Canada breached its duty of good faith”…  “…the overall intention of the parties was that Industry Canada would facilitate cooperation between CivicLife and SmartSources to build a single portal that it planned to rollout on a national basis.  The trial judge found in effect that the actions of Industry Canada undermined the reasonable expectations of the parties in five specific ways and did not fit with what they had agreed upon.  The trial judge used the term breach of good faith to globally encompass his conclusion that Industry Canada had acted in such a way as to undermine the very objectives of the contract.  He further found that as a result of the actions of Industry Canada it took CivicLife at least twice as long to build its portal.  The business efficacy of the contract was seriously affected.”

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Good Faith in Development Contracts

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Civiclife.com Inc. v. Canada (Attorney General), 2006 CanLII 20837 (ON C.A.)  “In his recent book, The Law of Contracts (Toronto: Irwin Law, 2005) at 784-805, Professor McCamus examines a number of Canadian cases in which good faith has been found to be an implied term of the contract and groups them into three categories: (a) those imposing a duty to cooperate in achieving the objectives of the agreement; (b) those imposing limits on the exercise of discretionary powers provided for in the contract; and (c) those precluding parties from acting to evade contractual duties, such as by engaging in conduct not strictly prohibited by the letter of the terms of their agreement but that has the effect of defeating rights under the agreement…”  “…Industry Canada’s conduct appears to come within each of the three categories that courts have recognized as giving rise to the imposition of a duty of good faith.  For the purposes of this appeal it is unnecessary for me to enter into the debate as to whether Industry Canada’s misconduct should be characterized as a breach of the duty of good faith, as an abuse of the exercise of discretion or simply as undermining the reasonable expectations of the parties to the agreement.  The trial judge was entitled to find, as he did, that Industry Canada’s conduct breached its contractual obligations to CivicLife.”

Good Faith in Development Contracts Civiclife.com Inc. v. Canada (Attorney General), 2006 CanLII 20837 (ON C.A.)  “Before leaving this point I wish to mention that in oral argument the Crown submitted that the presence of  “entire agreement” clauses in the supply and I.P. agreements between CivicLife and Industry Canada precluded the trial judge from holding that Industry Canada breached its contract with CivicLife because nowhere did the agreements say that there was a duty of good faith or a duty to exercise a discretion reasonably and fairly.  There are several responses to this submission.  The first is that an entire agreement clause will not preclude the implication of a term of the contract, such as a duty of good faith performance or the duty not to abuse a discretion, because such a term is already part of the existing agreement.  The trial judge was not adding a term to the agreement that was not part of the parties’ bargain; he was enforcing the reasonable expectations of the parties under the agreement.  Second, neither of the entire agreement clauses here says that their agreement contains no implied terms. Indeed, it would be difficult to set out every aspect of the expectations of the parties to a contract.  The wording of the entire agreement clauses does not preclude the implication of a term.” 

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Click Fraud Payday Advance Plus, Inc. v. Findwhat.com, Inc. 478 F.Supp.2d 496 (S.D.N.Y.,2007)  “The facts alleged in the Complaint, if taken to be true, suggest that Findwhat could have violated its implied covenant by inflating the bidding prices for search terms and by directing Advertising to generate “clicks” on Payday's website by people or “bots” who had no purpose for visiting the site other than to generate revenues for Findwhat and Advertising. Because this tactic would allow Findwhat to increase its profits solely at its discretion and with no benefit to Payday, it is plausible that it could be found to “destroy[ ] or injur[e]” Payday's rights under the contract…It is furthermore likely that a reasonable advertiser entering into such a contract would expect that, whatever the external risks of unproductive “clicks,” it would not be subjected to unbounded increases in its prices at the hands of its promisor or at its promisor's direction.”

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Click Fraud Findology Interactive Media Inc. v. Revquest Technologies Inc., 2007 NSSM 13 (CanLII)  “Based on the fact that the Defendant has not provided any corroborating evidence of the alleged fraudulent traffic, I dismiss that defence…  In doing so I am mindful of the language of the agreement which states that RevQuest may at its sole discretion credit back click through revenue which it believes are fraudulent or invalid in nature.  While the contract clearly gives RevQuest the discretion to do so, such discretion must be exercised in good faith and objectively and consistent with the parties’ expectations at the time of entering into the contract…  To put it plainly, the company in the position of RevQuest should be able to provide some objective verification of its position that the traffic was fraudulent.  It is not sufficient to in effect merely say it is fraudulent traffic because we say it is fraudulent traffic.  That puts the company in the position of Findology into an impossible situation.”

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Enforcement of Clickwrap Agreements Feldman v. Google, Inc. 2007 WL 966011 (E.D.Pa. Mar. 28, 2007)  “To determine whether a clickwrap agreement is enforceable, courts presented with the issue apply traditional principles of contract law and focus on whether the plaintiffs had reasonable notice of and manifested assent to the clickwrap agreement…Absent a showing of fraud, failure to read an enforceable clickwrap agreement, as with any binding contract, will not excuse compliance with its terms.”

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Enforcement of ClickWrap Agreements Feldman v. Google, Inc. 2007 WL 966011 (E.D.Pa. Mar. 28, 2007)  “That the user would have to scroll through the text box of the Agreement to read it in its entirety does not defeat notice because there was sufficient notice of the Agreement itself and clicking “Yes” constituted assent to all of the terms. The preamble, which was immediately visible, also made clear that assent to the terms was binding. The Agreement was presented in readable 12-point font. It was only seven paragraphs long-not so long so as to render scrolling down to view all of the terms inconvenient or impossible. A printer-friendly, full-screen version was made readily available. The user had ample time to review the document.”  “A reasonably prudent internet user would have known of the existence of terms in the AdWords Agreement. Plaintiff had to have had reasonable notice of the terms. By clicking on “Yes, I agree to the above terms and conditions” button, Plaintiff indicated assent to the terms. Therefore, the requirements of an express contract for reasonable notice of terms and mutual assent are satisfied. Plaintiff's failure to read the Agreement, if that were the case, does not excuse him from being bound by his express agreement.”

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Enforcing Agreements with No Definite Price Feldman v. Google, Inc. 2007 WL 966011 (E.D.Pa. Mar. 28, 2007) “The premise of the AdWords program is that advertisers must bid for keywords or Adwords, and the highest bidder is placed at the top of the advertising hierarchy. Prices are determined by the market, with the keywords higher in demand garnering higher prices. Plaintiff had to have been aware of and understood the pricing process. Each time that he purchased keywords, he engaged in this process. At oral argument, Plaintiff explained the process by which price was determined and conceded that the process was outlined in the Agreement.FN3 (Hrg. Tr. at 17-18.) The court concludes that the Adwords Agreement is enforceable because it contained a practicable method of determining the market price with reasonable certainty.”

Tort Issues

OSP’s Duty of Care Doe v. MySpace, Inc. 474 F.Supp.2d 843 (W.D.Tex.2007)  Julie Doe created a MySpace profile when she was 13 years old and lied about her age saying she was 18.  Plaintiffs seek to impose tort liability on MySpace alleging that MySpace knew sexual predators were using the service to communicate with minors and failed to react appropriately.

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OSP’s Duty of Care Doe v. MySpace, Inc. 474 F.Supp.2d 843 (W.D.Tex.,2007)  “However, the Court is unconvinced that any exception to the general no duty rule applies to MySpace here. Plaintiffs allege MySpace can be liable under a negligence standard when a minor is harmed after wrongfully stating her age, communicating with an adult, and publishing her personal information. To impose a duty under these circumstances for MySpace to confirm or determine the age of each applicant, with liability resulting from negligence in performing or not performing that duty, would of course stop MySpace's business in its tracks and close this avenue of communication, which Congress in its wisdom has decided to protect. The Court declines to extend premises liability cases to the internet context particularly where, as here, the Defendant provides its service to users for free. Plaintiff has cited no case law indicating that the duty of a premises owner should extend to a website as a “virtual premises.”  “Accordingly, the Court finds Plaintiffs have failed to state a claim for negligence or gross negligence because MySpace had no duty to protect Julie Doe from Pete Solis's criminal acts nor to institute reasonable safety measures on its website. If anyone had a duty to protect Julie Doe, it was her parents, not MySpace.”

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Liability of Internet Intermediaries for Publishing Defamatory Material Bunt v Tilley & Ors [2006] EWHC 407 (Q.B.)  “In determining responsibility for publication in the context of the law of defamation, it seems to me to be important to focus on what the person did, or failed to do, in the chain of communication. It is clear that the state of a defendant's knowledge can be an important factor. If a person knowingly permits another to communicate information which is defamatory, when there would be an opportunity to prevent the publication, there would seem to be no reason in principle why liability should not accrue. So too, if the true position were that the applicants had been (in the Claimant's words) responsible for ‘corporate sponsorship and approval of their illegal activities’.  I have little doubt, however, that to impose legal responsibility upon anyone under the common law for the publication of words it is essential to demonstrate a degree of awareness or at least an assumption of general responsibility, such as has long been recognised in the context of editorial responsibility.”

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Liability of Internet Intermediaries for Publishing Defamatory Material Bunt v Tilley & Ors [2006] EWHC 407 (Q.B.)  “More generally, I am also prepared to hold as a matter of law that an ISP which performs no more than a passive role in facilitating postings on the internet cannot be deemed to be a publisher at common law...  I would not, in the absence of any binding authority, attribute liability at common law to a telephone company or other passive medium of communication, such as an ISP. It is not analogous to someone in the position of a distributor, who might at common law need to prove the absence of negligence: see Gatley on Libel and Slander (10th edn) at para. 6-18. There a defence is needed because the person is regarded as having ‘published’. By contrast, persons who truly fulfil no more than the role of a passive medium for communication cannot be characterised as publishers: thus they do not need a defence.”

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Conversion of Intangibles Thyroff v. Nationwide Mut. Ins. Co., 8 N.Y.3d 283 (N.Y.C.A.2007)  Is a claim for the conversion of electronic data cognizable under New York law”  Nationwide repossessed systems and denied Thyroff access to his computers, electronic records and data. Thyroff was unable to retrieve his customer information and other personal information that was stored on the computers.

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Conversion of Intangibles Thyroff v. Nationwide Mut. Ins. Co., 8 N.Y.3d 283 (N.Y.C.A.2007) 

“It cannot be seriously disputed that society's reliance on computers and electronic data is substantial, if not essential. Computers and digital information are ubiquitous and pervade all aspects of business, financial and personal communication activities. Indeed, this opinion was drafted in electronic form, stored in a computer's memory and disseminated to the Judges of this Court via e-mail. We cannot conceive of any reason in law or logic why this process of virtual creation should be treated any differently from production by pen on paper or quill on parchment. A document stored on a computer hard drive has the same value as a paper document kept in a file cabinet…

 In light of these considerations, we believe that the tort of conversion must keep pace with the contemporary realities of widespread computer use. We therefore answer the certified question in the affirmative and hold that the type of data that Nationwide allegedly took possession of-electronic records that were stored on a computer and were indistinguishable from printed documents-is subject to a claim of conversion in New York. Because this is the only type of intangible property at issue in this case, we do not consider whether any of the myriad other forms of virtual information should be protected by the tort.”

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Conversion of Intangibles OBG Limited and others v. Allan [2007] UKHL 21  “The economic torts which I have discussed at length are highly restricted in their application by the requirement of an intention to procure a breach of contract or to cause loss by unlawful means. Even liability for causing economic loss by negligence is very limited. Against this background, I suggest to your Lordships that it would be an extraordinary step suddenly to extend the old tort of conversion to impose strict liability for pure economic loss on receivers who were appointed and acted in good faith. Furthermore, the effects of such a change in the law would of course not stop there. Hunter v Canary Wharf Ltd. [1997] AC 655, 694 contains a warning from Lord Goff of Chieveley (and other of their Lordships) against making fundamental changes to the law of tort in order to provide remedies which, if they are to exist at all, are properly the function of other parts of the law.” per Lord Hoffman

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Conversion of Intangibles OBG Limited and others v. Allan [2007] UKHL 21  “This prompts a further question: why should this extension of the tort of conversion be confined to cases where the intangible rights are specially recorded in a document? I would like to think that, as a mature legal system, English law has outgrown the need for legal fictions. There was a time when John Doe and Richard Roe were popular characters. They had to be parties to some forms of action. When they were in their prime their names appeared again and again in the law reports. English law has moved on. John Doe and Richard Roe are no more. So here, if there is to be a limit to the types of intangibles which attract a remedy in conversion, this limit should be capable of being articulated and justified openly, not by reference to fiction piled upon fiction.” per Lord Nicholls of Birkenhead

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Conversion of Intangibles OBG Limited and others v. Allan [2007] UKHL 21  “The better approach today is to discard the fictional significance of a piece of paper. Instead one should seek to identify the common characteristic of the intangible rights in respect of whose misappropriation English law, as a matter of reality, already provides the remedy of conversion. The common characteristic, it seems to me, is that the rights protected in this way are contractual rights. No principled reason is apparent for attempting, for this purpose, to distinguish between different kinds of contractual rights.” 

“Whether the law on conversion should extend beyond contractual rights and embrace other forms of intangibles is not a matter to be pursued on this occasion. This further step has been taken elsewhere in some parts of the common law world. But other forms of intangible rights, such as intellectual property, raise problems of their own. These problems are best considered when they arise.” Lord Nicholls of Birkenhead; see also Baroness Hale of Richmond.

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IP Issues

Importance of IP  Gowers Review of Intellectual Property (London, Nov. 2006) http://www.hmtreasury.gov.uk/media/53F/C8/pbr06_gowers_report_755.pdf “The Intellectual Property (IP) system provides an essential framework both to promote and protect the innovation and creativity of industry and artists”.  “Innovative ideas create value, whether they are improved products, new brands or creative expressions. As a result, IP rights – the means by which these assets are owned – have become a cornerstone of economic activity.”  “However, while global and technical changes have given IP a greater prominence in developed economies, they have also brought challenges. Ideas are expensive to make, but cheap to copy. Ideas are becoming even cheaper to copy and distribute as digital technology and the Internet reduce the marginal cost of reproduction and distribution towards zero. As a result, the UK’s music and film industries lose around twenty per cent of their annual turnover through pirated CDs and illegal online file sharing. Furthermore, global markets must contend with rights that remain largely national in scope.”

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Importance of IP Gowers Review of Intellectual Property  “Counterfeit goods and piracy are damaging the UK’s creative industries, as well as threatening jobs. The Review recommends, inter alia:  consulting to ensure that an effective and dissuasive system of damages exists for civil IP cases. This will provide an effective deterrent to IP infringement;  matching penalties in the physical and digital world for IP infringement. This will remove the current unjustifiable anomaly whereby infringement in the digital world carries softer penalties than infringement in the physical world. This is particularly important given that so much infringement now occurs via digital media”.

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COUNTERFEITING AND PIRACY  Counterfeit Goods in Canada-AThreat to Public Safety, Report of the Standing Committee on Public Safety and National Security (May 2007)  COUNTERFEITING AND PIRACY ARE THEFT: Report of the Industry Standing Committee on Industry, Science and Technology (June 2007)

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Industry Recommendations Include  That the Government of Canada enact legislation that clearly defines trademark counterfeiting as a specific criminal offence under the Trade-marks Act.  That the Government of Canada create a criminal offence for manufacturing, reproducing, importing, distributing and selling counterfeit goods.  That the Government of Canada remove the Copyright Act from the list of excluded Acts contained in the Regulations Excluding Certain Indictable Offences from the Definition of "Designated Offence" (Proceeds of Crime).  That the Government of Canada strengthen civil remedies for counterfeiting and piracy infringements.  That the Government of Canada make provisions for the imposition of personal liability on the directors and officers of a corporation that engages in counterfeiting or piracy, and shareholder liability if it is a shell corporation.  That the Government of Canada introduce administrative monetary penalties for the importation and exportation of counterfeit and pirated goods. The penalties should be set sufficiently high to act as an effective deterrent.

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Industry Recommendations Include  That the Government of Canada increase damages and penalties under the Copyright Act.  That the Government of Canada provide the Canada Border Services Agency (CBSA) and law enforcement officials with the express authority to target, detain, seize, and destroy counterfeit and pirated goods on their own initiative and in accordance with due process and Canadian law. The CBSA should also implement policies promoting the detection of such goods, such as mandatory reporting of brand information with shipments.  That the Government of Canada enact legislation clearly defining offences for commercial circumvention activities and making persons who distribute pirated digital works and who manufacture and/or distribute circumvention devices for commercial gain liable.  That the Government of Canada ratify the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty.

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Reforming Patent System Council on Foreign Relations, “Reforming U.S. Patent Policy” CSR No. 19, Nov, 19, 2006.  “The BlackBerry case and Microsoft’s calls for reform symbolize an American patent system that is increasingly inefficient and costly for innovative firms. Its numerous structural problems are rooted in two fundamental misconceptions: –

The view – predominant in Congress and the courts – that patents are like tangible property and that owners of such property have the basic right to sell and license it (or not) as they wish; and

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The virtually unchallenged view that more patent protection necessarily provides greater incentives for innovation and commercialization of technologies.

 Failure to rein in the patent regime could have global repercussions. To hinder innovation is to hinder the dynamic competitiveness of U.S. companies. While some aspects of the IPR system (such as copyrights) for American firms largely remain sound, significant problems with patents put the U.S. system at a disadvantage vis-à-vis more balanced and less costly foreign ones.”

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Reforming Patent System

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Aerotel Ltd. v Telco Holdings Ltd & Ors [2006] EWCA Civ 1371  “…there is pressure from would-be patentees on patent offices. People are applying for what are, or arguably are, business method and computer program patents in significant numbers…  This pressure in part stems from the fact that, following State Street (business methods) and Alappat (computer programs) people have been getting patents for these subject-matters in the USA. Since they can get them there, they must as a commercial necessity apply for them everywhere. If your competitors are getting or trying to get the weapons of business method or computer program patents you must too. An arms race in which the weapons are patents has set in. The race has naturally spread worldwide…  …Thirdly it by no means follows that because of pressure from applicants, the grant of patents for excluded categories should be allowed or that the excluded categories (particularly business methods and computer programs) should be construed narrowly. Just as with arms, merely because people want them is not sufficient reason for giving them.”

Reforming Patent System Aerotel Ltd. v Telco Holdings Ltd & Ors [2006] EWCA Civ 1371 “…The patent system is there to provide a research and investment incentive but it has a price. That price (what economists call "transaction costs") is paid in a host of ways: the costs of patenting, the impediment to competition, the compliance cost of ensuring noninfringement, the cost of uncertainty, litigation costs and so on. There is, so far as we know, no really hard empirical data showing that the liberalisation of what is patentable in the USA has resulted in a greater rate of innovation or investment in the excluded categories. Innovation in computer programs, for instance, proceeded at an immense speed for years before anyone thought of granting patents for them as such. There is evidence, in the shape of the mass of US litigation about the excluded categories, that they have produced much uncertainty. If the encouragement of patenting and of patent litigation as industries in themselves were a purpose of the patent system, then the case for construing the categories narrowly (and indeed for removing them) is made out. But not otherwise.”

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Copyright Issues

Remedies Against Counterfeiters Microsoft Corporation v. 9038-3746 Quebec Inc., 2006 FC 1509 (CanLII) 

“I find that Inter-Plus imported the counterfeit copyrighted works into Canada for the purpose of offering them for sale, selling them, and distributing them.  In accordance with subsection 27(3) of the Copyright Act, “it is irrelevant whether the importer knew or should have known that the importation of the copy infringed copyright.”

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 For the purposes of subsection 27(2)(b), I find that Inter-Plus’ distribution prejudicially affected Microsoft. Apart from not gaining the profit to which it was entitled on the sale of genuine copies, the evidence of Ms. Boyes that the prices at which Inter-Plus purchased from MBC were abnormally low was not contradicted.  I find sale of such counterfeit items at low prices prejudicially affected Microsoft’s relationship with its chain of legitimate suppliers.”

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“Inter-Plus and Mr. Cerrelli are also liable under the Trade-marks Act and for much the same reasons. That Act, unlike the Copyright Act, does not specifically take into account the state of mind of the defendants. However, even if it did, I am satisfied that Inter-Plus and Carmelo Cerrelli knew or should have known that their activities infringed Microsoft’s rights under the Act. They passed off the counterfeit wares as Microsoft wares, contrary to section 7 of the Act. Microsoft had the exclusive right to use its various trade-marks throughout Canada and so their activities constituted an infringement within the meaning of sections 19 and 20 of the Act.  They used the trade-marks in a manner likely to have the effect of depreciating the value of the goodwill attaching thereto, for the same reasons as given with respect to copyright.

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Protection for Collective Works and Databases Robertson v. Thomson Corp., [2006] 2 S.C.R. 363 “Section 2 of the Copyright Act, as noted above, defines a compilation as an original work that is created as a result of selection or arrangement…We note that the use of the disjunctive “or” in s. 2 is significant.  The Copyright Act does not require originality in both the selection and arrangement.  Similarly, and with all due respect to Weiler J.A.’s contrary finding, we agree with the Publishers that a reproduction of a compilation or a collective work need not preserve both the selection and arrangement of the original work to be consistent with the Publisher’s reproduction rights.”  

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Protection for Collective Works and Databases Robertson v. Thomson Corp., [2006] 2 S.C.R. 363  “Viewed “globally”, to use the language of this Court in CCH, Info Globe Online and CPI.Q are different selections than the selections that they incorporate. They are compilations of individual articles presented outside of the context of the original collective work from where they originated.  The resulting collective work presented to the public is not simply each of the collective works joined together — it has become a collective work of a different nature.”  “Notwithstanding the foregoing, we part ways with Weiler J.A. regarding the CDROMs.  In our view, the CD-ROMs are a valid exercise of the Globe’s right to reproduce its collective works (or a substantial part thereof) pursuant to s. 3(1) of the Copyright Act.”   “The user of the CD-ROM is presented with a collection of daily newspapers which can be viewed separately.  When viewing an article on CD-ROM after searching for a particular edition, the other articles from that day’s edition appear in the frame on the right-hand side of the screen.  To pass muster, a reproduction does not need to be a replica or a photographic copy.  But it does need to remain faithful to the essence of the original work.  And, in our view, the CD-ROM does so by offering users, essentially, a compendium of daily newspaper editions.” *(Emphasis added)

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Liability for Linking and Framing

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Perfect 10 v. Google, Inc., 2007 WL 1428632 (9th Cir. 2007).  “In considering whether Perfect 10 made a prima facie case of violation of its display right, the district court reasoned that a computer owner that stores an image as electronic information and serves that electronic information directly to the user (“i.e., physically sending ones and zeroes over the [I]nternet to the user’s browser,” Perfect 10, 416 F. Supp. 2d at 839) is displaying the electronic information in violation of a copyright holder’s exclusive display right. Id. at 843-45; see 17 U.S.C. § 106(5). Conversely, the owner of a computer that does not store and serve the electronic information to a user is not displaying that information, even if such owner in-line links to or frames the electronic information. Perfect 10, 416 F. Supp. 2d at 843-45. The district court referred to this test as the “server test.” Id. at 83839.  Applying the server test, the district court concluded that Perfect 10 was likely to succeed in its claim that Google’s thumbnails constituted direct infringement but was unlikely to succeed in its claim that Google’s in-line linking to full-size infringing images constituted a direct infringement. Id. at 843-45. As explained below, because this analysis comports with PERFECT 10 v. AMAZON.COM 5769 the language of the Copyright Act, we agree with the district court’s resolution of both these issues.”

Liability for Linking and Framing

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Perfect 10 v. Google, Inc., 2007 WL 1428632 (9th Cir. 2007) 

“The district court also concluded that Perfect 10 would not likely prevail on its claim that Google directly infringed Perfect 10’s right to distribute its full-size images… The district court reasoned that distribution requires an “actual dissemination” of a copy. Id. at 844. Because Google did not communicate the full-size images to the user’s computer, Google did not distribute these images. Id.



Again, the district court’s conclusion on this point is consistent with the language of the Copyright Act. Section 106(3) provides that the copyright owner has the exclusive right “to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.” 17 U.S.C. § 106(3). As noted, “copies” means “material objects . . . in which a work is fixed.” 17 U.S.C. § 101. The Supreme Court has indicated that in the electronic context, copies may be distributed electronically. See N.Y. Times Co. v. Tasini, 533 U.S. 483, 498 (2001) (a computer database program distributed copies of newspaper articles stored in its computerized database by selling copies of those articles through its database service). Google’s search engine communicates HTML instructions that tell a user’s browser where to find full-size images on a website publisher’s computer, but Google does not itself distribute copies of the infringing photographs. It is the website publisher’s computer that distributes copies of the images by transmitting the photographic image electronically to the user’s computer. As in Tasini, the user can then obtain copies by downloading the photo or printing it.”

Fair Use Perfect 10 v. Google, Inc., 2007 WL 1428632 (9th Cir. 2007)  “Although Perfect 10 has succeeded in showing it would prevail in its prima facie case that Google’s thumbnail images infringe Perfect 10’s display rights, Perfect 10 must still show a likelihood that it will prevail against Google’s affirmative defense. Google contends that its use of thumbnails is a fair use of the images and therefore does not constitute an infringement of Perfect 10’s copyright. See 17 U.S.C. § 107.  The fair use defense permits the use of copyrighted works without the copyright owner’s consent under certain situations. The defense encourages and allows the development of new ideas that build on earlier ones, thus providing a necessary counterbalance to the copyright law’s goal of protecting creators’ work product. “From the infancy of copyright protection, some opportunity for fair use of copyrighted materials has been thought necessary to fulfill copyright’s very purpose . . . .” Campbell, 510 U.S. at 575. “The fair use doctrine thus ‘permits [and requires] courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.’ ” Id. at 577 (quoting Stewart v. Abend, 495 U.S. 207, 236 (1990)) (alteration in original)”

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Fair use

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Perfect 10 v. Google, Inc., 2007 WL 1428632 (9th Cir. 2007)  “We must be flexible in applying a fair use analysis; it “is not to be simplified with bright-line rules, for the statute, like the doctrine it recognizes, calls for case-by-case analysis. . . . Nor may the four statutory factors be treated in isolation, one from another. All are to be explored, and the results weighed together, in light of the purposes of copyright.” Campbell, 510 U.S. at 577-78; see also Kelly, 336 F.3d at 81718. The purpose of copyright law is “[t]o promote the Progress of Science and useful Arts,” U.S. CONST. art. I, § 8, cl. 8, and to serve “ ‘the welfare of the public.’ ” Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429 n.10”  In applying the fair use analysis in this case, we are guided by Kelly v. Arriba Soft Corp., which considered substantially the same use of copyrighted photographic images as is at issue here. See 336 F.3d 811. In Kelly, a photographer brought a direct infringement claim against Arriba, the operator of an Internet search engine. The search engine provided thumbnail versions of the photographer’s images in response to search queries. Id. at 815-16. We held that Arriba’s use of thumbnail images was a fair use primarily based on the transformative nature of a search engine and its benefit to the public. Id. At 818-22. We also concluded that Arriba’s use of the thumbnail images did not harm the photographer’s market for his image. Id. at 821-22.”

Fair Use Perfect 10 v. Google, Inc., 2007 WL 1428632 (9th Cir. 2007) “Google’s use of thumbnails is highly transformative. In Kelly, we concluded that Arriba’s use of thumbnails was transformative because “Arriba’s use of the images serve[d] a different function than Kelly’s use—improving access to information on the [I]nternet versus artistic expression.” Kelly, 336 F.3d at 819. Although an image may have been created originally to serve an entertainment, aesthetic, or informative function, a search engine transforms the image into a pointer directing a user to a source of information. Just as a “parody has an obvious claim to transformative value” because “it can provide social benefit, by shedding light on an earlier work, and, in the process, creating a new one,” Campbell, 510 U.S. at 579, a search engine provides social benefit by incorporating an original work into a new work, namely, an electronic reference tool. Indeed, a search engine may be more transformative than a parody because a search engine provides an entirely new use for the original work, while a parody typically has the same entertainment purpose as the original work… Accordingly, we conclude that Google’s inclusion of thumbnail images derived from infringing websites in its Internet-wide search engine activities does not preclude Google from raising a fair use defense.” (Emphasis added)

40

Fair Use Perfect 10 v. Google, Inc., 2007 WL 1428632 (9th Cir. 2007)  “We conclude that the significantly transformative nature of Google’s search engine, particularly in light of its public benefit, outweighs Google’s superseding and commercial uses of the thumbnails in this case. In reaching this conclusion, we note the importance of analyzing fair use flexibly in light of new circumstances. Sony, 464 U.S. at 431-32; id. at 448 n.31 (“ ‘[Section 107] endorses the purpose and general scope of the judicial doctrine of fair use, but there is no disposition to freeze the doctrine in the statute, especially during a period of rapid technological change.’ ”)… We are also mindful of the Supreme Court’s direction that “the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.” Campbell, 510 U.S. at 579. (Emphasis added) 

Accordingly, we disagree with the district court’s conclusion that because Google’s use of the thumbnails could supersede Perfect 10’s cell phone download use and because the use was more commercial than Arriba’s, this fair use factor weighed “slightly” in favor of Perfect 10. Perfect 10, 416 F. Supp. 2d at 849. Instead, we conclude that the transformative nature of Google’s use is more significant than any incidental superseding use or the minor commercial aspects of Google’s search engine and website. Therefore, the district court erred in determining this factor weighed in favor of Perfect 10.”

41

Liability for Linking and Framing Universal Music Australia Pty Ltd. v. Cooper, [2006] FCAFC 187 (18 Dec. 2006)  Is the operator of a web site that has structured in-line (automated) links to infringing copyright materials liable for authorizing infringement?  “I conclude that, within the meaning of s.101(1A)(a), Mr. Cooper had power to prevent the copying in Australia of copyright sound recordings via his website. He had that power because he was responsible for creating and maintaining his MP3s4FREE website. As stated above, the principal content of the website comprised links to other websites and files contained on other servers. Senior counsel for Mr. Cooper conceded that, in effect, the overwhelming majority of the files listed on the website were the subject of copyright. The website was structured so that when a user clicked on a link to a specific music file a copy of that file was transmitted directly to the user’s computer.  It is immaterial, in my view, that Mr. Cooper’s website operated automatically in the sense that, although he could edit links on the site, he did not control the usual way in which links were added to the site. The evidence also leads to the inexorable inference that it was the deliberate choice of Mr. Cooper to establish his website in a way which allowed the automatic addition of hyperlinks.”

42

Is access to a file from a website zero rated for GST purposes? Canada v. Dawn’s Place Ltd., 2006 FCA 349 (CanLII)  “Specifically, the question is whether access to an internet website operated by a Canadian enterprise (which is a supply of intangible personal property) is a zero-rated supply to any non-resident recipient (who is not a GST registrant), because the recipient has the right to download and retain a copy of copyrighted material accessed on the website.”  “A supply of an invention, patent, trade secret, trade-mark, tradename, copyright, industrial design or other intellectual property or any right, licence or privilege to use any such property, where the recipient is a non-resident person who is not registered under Subdivision d of Division V of Part IX of the Act at the time the supply is made.”

43

Is access to a file from a website zero rated for GST purposes?  “[The section] contemplate[s] a transaction in which the copyright itself is transferred from one person to another (for example, an assignment or sale), or where the holder of copyright enters into an agreement by which another person becomes entitled to use the copyright. A typical example would be the grant of a license to publish a particular work within a certain geographic location. Both versions require consideration of the meaning of the “use” of copyright.”  “Section 10, read in its entirety, clearly is addressed to transactions that represent certain dealings in the rights of copyright and other intellectual property, and the rights attached to such intellectual property. To interpret section 10 so broadly that it applies to a transaction of an entirely different nature, merely because one of the incidents of the transaction happens to involve a permitted copying of copyright material, would be an unwarranted extension of the tax relief that section 10 was intended to achieve.”  “I characterize the transaction as the supply of access to the Dawn’s Place website, including a single copy of the contents of the Dawn’s Place website. The fact that the copy is made by the subscriber himself through his own computer is a necessary incident of the supply. Indeed, there is no other way to access and retain material on a website. However, that incidental copying does not change the essential nature of the supply.

44

Is transmitting a file over Bit Torrent a “distribution”?

45

 Chan Nai Ming v HKSAR [2007] HKEC 908 (H.K.C.A.)  “The point may be illustrated by two commonplace examples:   (a) An academic publishes a book review which he has written on his computer and stored on his hard disk as an electronic document file.  His friends A, B and C ask for copies.  The academic creates electronic copies and sends the reproduced document files as e-mail attachments to A, B and C.  Giving “distribution” its ordinary meaning, he has distributed electronic copies of his work without delivery of any physical storage device to the recipients.  (b) A computer user decides to install anti-virus software on his computer and purchases an online copy of such a program.  He pays by credit card and a copy of the program is transmitted to him via the internet to be downloaded onto his computer and activated to give protection against computer viruses.  That copy is in electronic form and has been bought, sold and delivered via the medium of the internet without anyone delivering a disk or other storage medium containing that program.  This is a common method adopted for distributing copies of computer programs.  Each electronic copy sold is distinguishable from any other such copy and each commonly requires a distinct code or “product key” for activation.”

Is transmitting a file over Bit Torrent a “distribution”? Chan Nai Ming v HKSAR [2007] HKEC 908 (H.K.C.A.)  “There is also no legal reason to confine distribution of copies to cases involving delivery by physical means.  “Distribution” is not defined in the Ordinance and should be given its ordinary meaning.  In the present case, the evidence showed that upon being accessed by downloaders seeking to obtain a copy of the relevant film, the appellant’s computer reproduced the infringing electronic copy (which remained on his hard disk) in the form of packets of digital information which were sent to the downloaders and reassembled by their computers in the correct sequence to constitute an entire infringing copy of that film.  In my view, that process in aggregate is aptly described as involving the appellant’s creation of infringing electronic copies (transient or otherwise) of the film and their distribution directly or indirectly to each member of each swarm.”

46

Is making a file available over a P2P service a “distribution”? U.S. v. Shaffer 472 F.3d 1219 (10th .Cir.2007) 

“Under Section 2252A(a)(2), it is unlawful for a person knowingly to distribute child pornography by any means, including by computer.”



“To distribute something simply means to deliver or transfer possession of it to someone else.”



“We have little difficulty in concluding that Mr. Shaffer distributed child pornography in the sense of having “delivered,” “transferred,” “dispersed,” or “dispensed” it to others. He may not have actively pushed pornography on Kazaa users, but he freely allowed them access to his computerized stash of images and videos and openly invited them to take, or download, those items. It is something akin to the owner of a self-serve gas station. The owner may not be present at the station, and there may be no attendant present at all. And neither the owner nor his or her agents may ever pump gas. But the owner has a roadside sign letting all passersby know that, if they choose, they can stop and fill their cars for themselves, paying at the pump by credit card. Just because the operation is self-serve, or in Mr. Shaffer's parlance, passive, we do not doubt for a moment that the gas station owner is in the business of “distributing,” “delivering,” “transferring” or “dispersing” gasoline; the raison d'etre of owning a gas station is to do just that. So, too, a reasonable jury could find that Mr. Shaffer welcomed people to his computer and was quite happy to let them take child pornography from it.”

47

Is making a file available over a P2P service a “distribution”?

48

U.S. v. Shaffer 472 F.3d 1219 (10th.Cir.2007) 

“Though the question how Section 2252A applies to peer-to-peer file sharing programs may be relatively novel, at least one other court has faced the question we do today and reached precisely the same conclusion. In United States v. Abraham, the court held that “the defendant distributed a visual depiction when as a result of the defendant's installation of an internet peerto-peer video file sharing program on his computer, a Pennsylvania state trooper was able to download the child pornography from the defendant's computer to the trooper's computer.” No. 05-344, 3006 WL 3052702 at *8, 2006 U.S. Dist. LEXIS 81006 at *22 (W.D.Pa. Oct. 24, 2006) (emphasis added); see also id. At *7-8 (looking to dictionary definitions for plain meaning). Courts faced with related issues have, in a variety of other contexts, issued rulings similarly harmonious with our own. See United States v. Mathenia, 409 F.3d 1289, 1290 (11th Cir. 2005) (upholding 15-level sentencing enhancement for, inter alia, distributing child pornography through peer-to-peer file-sharing groups); United States v. Gunderson, 345 F3d 471, 473 (7th Cir. 2003) (affirming 5-level increase in base-offense level for distribution for pecuniary gain; “[a]s for his argument that he did not engage in distribution because his computer automatically distributed files, the fact that his computer traded files automatically is irrelevant: Gunderson is the person who programmed his computer to trade files in this manner”); State v. Perry, 83 Ohio St. 3d 41, 697 N.E. 2d 624, 628 (1998) (“Posting software on a bulletin board where others can access and download it is distribution.”); United Statse v. Todd, 100 Fed. Appx. 248, 250 (5th Cir. 2004) (unpub.) (user of file-share software who downloaded child pornography images and “ma[de] them accessible to others” through file sharing met the definition of “trafficking” for purposes of a sentencing enhancement).”

Is making a file available over a P2P service a “distribution”? U.S. v. Shaffer 472 F.3d 1219 (10th.Cir.2007)  “Even the Supreme Court has described the users of peer-to-peer networks in terms of the distribution of files. See Metro-GoldwynMayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, ----, 125 S. Ct. 2764, 2771, 162 L. Ed. 2d 781 (2005) (“Some musical performers, for example, have gained new audiences by distributing their copyrighted works for free across peer-to-peer networks, and some distributors of unprotected content have used peer-to-peer networks to disseminate files, Shakespeare being an example.”) (emphases added); id. at 2770 (“[P]eer-to-peer networks are employed to store and distribute electronic files by universities, government agencies, corporations, and libraries, among others.”) (emphasis added); id. at 2771.”

49

Privacy

Can a Company Collect Voice Characteristics of Employees?

51

Wansink v. Telus Communications Inc., 2007 FCA 21  Is it reasonable to use voice recognition technology (e.Speak) to collect voice characteristics of employees for authentication to computer networks under S5(3) of PIPEDA?  “The judge went on to find, on the facts, that a reasonable person would find the use of that new technology to be reasonable in the circumstances. I…endorse it in its entirety:” “Taking into account the foregoing, and against the above brief analysis of: the degree of sensitivity associated with voice prints as personal information; the security measures implemented by Telus; the bona fide business interests of Telus as established on the evidence before the Court and to which the collection of voice prints is directed; the effectiveness of the use of voice prints to meet those objectives; the reasonableness of the collection of voice prints against alternative methods of achieving the same levels of security at comparable cost and with comparable operational benefits; and the proportionality of the loss of privacy as against the costs and operational benefits in the light of the security that Telus provides; I conclude that the collection of the voice print information here at issue would be seen by a reasonable person to be appropriate in the circumstances, as they existed at all times relevant to this matter, and against the security measures adopted by Telus.”  But, consent is needed from employees and S 7(1) exceptions do not apply.

Jurisdictional Reach of PIPEDA Lawson v. Accusearch Inc., 2007 FC 125  “It would be most regrettable indeed if Parliament gave the Commissioner jurisdiction to investigate foreigners who have Canadian sources of information only if those organizations voluntarily name names. Furthermore, even if an order against a non-resident might be ineffective, the Commissioner could target the Canadian sources of information.”  “I conclude as a matter of statutory interpretation that the Commissioner had jurisdiction to investigate, and that such an investigation was not contingent upon Parliament having legislated extraterritorially as permitted by the Statute of Westminster.”

52

The Swift Opinion  Privacy Commissioner’s Report of Findings April 2, 2007 re, disclosures of personal information by Swift in response to subpoenas from US Treasury  “SWIFT is the financial industry-owned co-operative supplying secure, standardized messaging services and software to over 7,900 financial institutions in more than 200 countries. SWIFT is solely a messaging intermediary for transmitting secure and confidential financial messages on behalf of, and between, financial institutions. It is not a bank, nor does it hold accounts or assets of any customers of any financial institution.”  “There are two key issues to address in this complaint: does the Personal Information Protection and Electronic Documents Act (the Act) apply to SWIFT’s collection, use and disclosure of personal information in the course of its operations in Canada; and was the personal information collected by SWIFT from Canadian financial institutions disclosed to US authorities in accordance with the Act?”

53

Does PIPEDA Apply to Swift? 

“The first question for me to address is that of the Act’s application. SWIFT operates in Canada. It collects personal information from and discloses it to Canadian banks as part of a commercial activity; SWIFT charges a fee to the banks for providing this service; 14 of its shareholders are Canadian; and one of its Directors is from a Canadian bank. While it is true that SWIFT’s operations in Canada make up only a small percentage of the organization’s total global business operations, the reality is that SWIFT has a significant presence in Canada. The vast majority of international transfers involving personal information flowing to or from Canadian financial institutions use the SWIFT network, which is an integral part of the Canadian financial system.



On this basis, I am satisfied that SWIFT is engaged in a commercial activity within Canada, as per paragraph 4(1)(a) of the Act. SWIFT’s presence in Canada is real and substantial, and it must therefore abide by Canadian laws, such as the Act, that provide rules applicable to the activities undertaken by SWIFT in Canada.”



“I must stress that organizations operating in and connected in a substantial way to Canada are subject to the Act. While organizations can obviously also operate outside the country, if they cross into Canada to collect, use or disclose personal information, they must abide by the Act. Simply because an organization might operate in two or more jurisdictions will not alleviate it of its obligations to comply with Canadian law.”

54

Does PIPEDA Permit a Data collector to comply with Foreign Law?  “While I do not hesitate to conclude that the Act governs SWIFT’s actions as they pertain to what SWIFT does with the personal information it collects, uses and discloses in Canada, it is clear that the Act allows for an organization such as SWIFT to be able to abide by the legitimate laws of the other countries in which it operates. This, therefore, brings me to an interpretation of the Act that recognizes that some organizations operate in more than one jurisdiction.  Paragraph 7(3)(c) allows an organization to disclose personal information without knowledge or consent in response to a subpoena or warrant issued or an order made by a court, person or body with jurisdiction to compel the production of information. Must a “subpoena or warrant” as contemplated in paragraph 7(3)(c) be issued only by a body within Canada that has the requisite authority? In answering this question, it is important to bear in mind what the Supreme Court of Canada has stated, namely, that it is necessary to take a modern approach to interpreting legislation by reading the words of this section in their entire context, in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament.”

55

Does PIPEDA Permit a Data collector to comply with Foreign Law?

56

 “Multi-national organizations must comply with the laws of those jurisdictions in which they operate. Thus, while they operate in Canada, they obviously must comply with Canadian law. However, to ask the organization to ignore the legitimate laws of other jurisdictions in which they operate is unrealistic and unworkable. Moreover, it has the potential of being interpreted as an infringement by Canada on that nation’s sovereignty. It is for this reason that, in my opinion, the Act acknowledges that an organization that is subject to the Act and that has legitimately moved personal information outside the country for business reasons may be required at times to disclose it to the legitimate authorities of that country. In this case, I am of the view that paragraph 7(3)(c) operates to allow SWIFT to respond to a valid subpoena issued in the United States.”  “Such an interpretation of the Act provides as much protection over personal information as possible when it comes to organizations that operate both within and outside Canada. For example, while it is permissible for SWIFT in this case to disclose data held in the US to the UST, the Act would still operate to prohibit, for example, the non-consensual disclosure of the personal information held by SWIFT in another country to a data broker or marketing firm operating in that country.”

Does PIPEDA Permit a Data collector to comply with Foreign Law?  “Furthermore, in my opinion, SWIFT’s disclosure to the UST was appropriate in the circumstances, as per subsection 5(3). That is, a reasonable person would expect SWIFT to abide by a legitimate subpoena served on it in a jurisdiction in which it operates.”  “Moreover, I am mindful that individuals using a Canadian financial institution to perform an international transaction can easily inform themselves by reviewing the privacy policy of a bank that uses the SWIFT system that their personal information may be transferred to a third party (such as SWIFT). The privacy policy will also indicate that personal information may be located outside of Canada. As indicated in a finding issued by our Office in 2005 that centred on a financial institution’s outsourcing to a third party processor that solely operated in the United States (Case Summary 313), “…while customer personal information is in the hands of a foreign third-party service provider, it is subject to the laws of that country and no contract or contractual provision can override those laws.” I am of the view that the same is true for an organization that is operating both within and outside of Canada, such as SWIFT.”  See also, Responsibility of Canadian financial institutions in SWIFT's disclosure of personal information to US authorities considered, 2007 CanLII 11733 (P.C.C.)

57

Requirement to Maintain Copies and Process Information in Canada

58

 April 20, 2007 amendments to Bank Act, the Insurance Companies Act and the Trust Companies Act removed the requirement for an Exemption Order to be issued by OSFI before data could be processed or stored offshore.  “245. (1) If the Superintendent is of the opinion that it is incompatible with the fulfilment of the Superintendent’s responsibilities under this Act for a bank to maintain, in another country, copies of records referred to in section 238 or of its central securities register or for a bank to process, in another country, information or data relating to the preparation and maintenance of those records or of its central securities register — or if the Superintendent is advised by the Minister that, in the opinion of the Minister, it is not in the national interest for a bank to do any of those activities in another country — the Superintendent shall direct the bank to not maintain those copies, or to not process the information or data, as the case may be, in that other country or to maintain those copies or to process the information or data only in Canada.”

Jurisdiction

Enforcement of Foreign Orders

60

Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52  Will a Canadian court enforce a foreign contempt order?  “Modern-day commercial transactions require prompt reactions and effective remedies.  The advent of the Internet has heightened the need for appropriate tools. On the one hand, frontiers remain relevant to national identity and jurisdiction, but on the other hand, the globalization of commerce and mobility of both people and assets make them less so. The law and the justice system are servants of society, not the reverse.  The Court has been asked to change the common law. The case for adapting the common law rule that prevents the enforcement of foreign non-money judgments is compelling.  But such changes must be made cautiously.  Although I recognize the need for a new rule, it is my view that this case is not the right one for implementing it.”  “Private international law is developing in response to modern realities.  The real and substantial connection test and the enforcement of equitable relief granted in foreign countries are but two examples of its evolution.  The Internet puts additional pressure on the courts to reach out to the same extent as the Web. At the same time, courts must be cautious to preserve their nation’s values and protect its people.  The time is ripe to change the common law rule against the enforcement of foreign non-monetary judgments, but, owing to problems with the orders the appellant seeks to have enforced, the Court cannot accede to its request.”

Enforcement of Foreign Orders Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52  “The evolution of the law of enforcement does not require me, at this point, to develop exhaustively the criteria a court should take into account.  As cases come up, appropriate distinctions can be drawn.  For present purposes, it is sufficient to underscore the need to incorporate the very flexibility that infuses equity. However, the conditions for recognition and enforcement can be expressed generally as follows: the judgment must have been rendered by a court of competent jurisdiction and must be final, and it must be of a nature that the principle of comity requires the domestic court to enforce. Comity does not require receiving courts to extend greater judicial assistance to foreign litigants than it does to its own litigants, and the discretion that underlies equitable orders can be exercised by Canadian courts when deciding whether or not to enforce one.”

61

Enforcement of Foreign Orders Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52  The consent decree and the contempt order were not enforceable. These orders are problematic from many points of view.  The contempt order is quasi‑criminal in nature, and a Canadian court will not enforce a penal order, either directly or indirectly.   If injunctive relief is to be enforced, its territorial scope has to be specific and clear. Here, the intended territorial scope of the injunctive relief in the consent decree is uncertain.  In the absence of explicit terms making the settlement agreement a worldwide undertaking, the consent decree cannot be said to clearly apply worldwide.   Finally, there are public policy concerns regarding parts of the contempt order inasmuch as it requires the disclosure of personal information that may prima facie be protected from disclosure. Courts should be mindful of the quasi‑constitutional nature of the protection of personal information.

62

Power to Grant Extra-territorial Injunctions 

Impulsora Turistica de Occidente, S.A. de C.V. v. Transat Tours Canada Inc., 2007 SCC 20



First, we agree with Dussault J.A. that the Superior Court had jurisdiction over the application for an injunction and other incidental relief.  He stated the following, at paras. 32-36: 

63

 [TRANSLATION] I cannot accept the respondents’ argument that a court of competent jurisdiction could lack the power to issue an injunction with purely extraterritorial effects.  On the one hand, article 46, paragraph 1 C.C.P. provides that “[t]he courts and judges have all the powers necessary for the exercise of their jurisdiction”.  On the other hand, insofar as article 3148 C.C.Q. defines the scope of the jurisdiction of Quebec courts under private international law and as, in the instant case, the Superior Court has jurisdiction pursuant to subparagraph (3) of the first paragraph of that article to decide the dispute, that court has the power to issue an injunction against the respondents.  The possibility that the Superior Court would have difficulty sanctioning a failure to comply with its orders does not affect its power to issue an injunction.  As Barclay J. of the Saskatchewan Court of Queen’s Bench pointed out, “[a]lthough the Courts are reluctant to grant injunctions against parties not within the jurisdiction, the power does exist”…   

Rather, it is when the court exercises its discretion under article 3135 C.C.Q., which authorizes it, “[e]ven though [it] has jurisdiction to hear a dispute, . . . exceptionally and on an application by a party, [to] decline jurisdiction if it considers that the authorities of another country are in a better position to decide”, that it will have to take difficulties in sanctioning a failure to comply with the requested order into consideration (I.C.F. Spry, The Principles of Equitable Remedies, Scarborough, Carswell, 1984, at p. 38).

Extra-territoriality of Copyright Act  Subscription Radio Services: SOCAN Tariff 25 (2005-2007), NRCC Tariff 4 (20072010), CMRRA/SODRAC Inc. - Multi-Channel Subscription Radio Services (2006-2009), Ruling of the Copyright Board (Claude Majeau April 20, 2007)  Does the Copyright Act apply to foreign reproductions?  “Further to the motions filed pertaining to unsatisfactory/incomplete responses to interrogatories, the Board rules as follows.  Subject to what follows, the responses the objectors have provided to date are sufficient. CSI is not entitled to dictate the format in which the information is to be provided. Third parties are not obliged to provide information in response to interrogatories. Sirius Canada has made reasonable efforts to obtain third party information. The attempt to obtain information that would be relevant to the proposed tariff that CSI recently filed for 2008-2009 is clearly improper. The fact that Sirius Canada contractually agrees to pay royalties pursuant to the tariff is not relevant to the issue of whether or not Sirius Canada (or anyone else) is liable pursuant to the Copyright Act to pay those royalties. It is highly doubtful that the Board can set royalties for reproductions made outside of Canada. The "real and substantial connection" test clearly applies to the communication right; it is doubtful that it applies to the reproduction right.”

64

Extra-territoriality of US Patent Act  Microsoft Corp v AT&T Corp. 82 USPQ2d 1400 (U.S.Sup.Ct. 2007)  It is the general rule under United States patent law that no infringement occurs when a patented product is made and sold in another country.  Section 271(f) of the Patent Act, adopted in 1984, provides that infringement does occur when one "suppl[ies] ... from the United States," for "combination" abroad, a patented invention's "components." 35 U. S. C. §271(f)(1).  “Congress is doubtless aware of the ease with which software (and other electronic media) can be copied, and has not left the matter untouched. In 1998, Congress addressed "the ease with which pirates could copy and distribute a copyrightable work in digital form." Universal City Studios, Inc. v. Corley, 273 F. 3d 429, 435 (CA2 2001). The resulting measure, the Digital Millennium Copyright Act, 17 U. S. C. §1201 et seq., "backed with legal sanctions the efforts of copyright owners to protect their works from piracy behind digital walls such as encryption codes or password protections." Universal City Studios, 273 F. 3d, at 435. If the patent law is to be adjusted better "to account for the realities of software distribution," 414 F. 3d, at 1370, the alteration should be made after focused legislative consideration, and not by the Judiciary forecasting Congress' likely disposition.”

65

Extra-territorial Effect of Competition Act R. v. Stucky, 2006 CanLII 41523 (ON S.C.)  s.52 (1) No person shall, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, knowingly or recklessly make a representation to the public that is false or misleading in a material respect.  “This now takes me back to the 1974 statement of the Honourable Herb Gray, and the conclusion urged upon me by Mr. Porter, that the amendments summarized above were enacted for the benefit of the consumer located in Canada and not for consumers located extraterritorially who might be affected by the representations of Canadian businessmen. I find this analysis not only compelling, but also supported by the language of other sections in the Competition Act, if not by the rule of statutory interpretation, sometimes referred to as the ‘original meaning rule.”

66

Personal Jurisdiction Over Operator of Foreign Websites

67

Desjean v. Intermix Media Inc., 2006 FC 1395 Action under Competition Act for bundling spyware and adware with free software that is downloaded from foreign website, where 2.5 to 5.3% of downloads are to Canadians. …the Ontario Court of Appeal, in Muscutt v. Courcelles 2002 CanLll 44957 (ON C.A.), (2002), 213 D.L.R. (4th) 577, developed eight factors which courts should look to when dealing with questions of assumed jurisdiction, in order to ensure jurisprudential clarity and certainty. These factors are: 1.   The connection between the forum and the plaintiff’s claim; 2.   The connection between the forum and the defendant; 3.   Unfairness to the defendant in assuming jurisdiction; 4.   Unfairness to the plaintiff in not assuming jurisdiction; 5.   Involvement of other parties to the suit; 6.   The court’s willingness to recognize and enforce an extra-provincial judgment rendered on the same jurisdictional basis; 7.   Whether the case is interprovincial or international in nature; and 8.   Comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere.

Personal Jurisdiction Over Operator of Foreign Website

68

Desjean v. Intermix Media Inc., 2006 FC 1395 

“…it would be manifestly unfair to subject Intermix to this Court’s jurisdiction since it would, in effect, mean a U.S.-based operator of a website, with no business assets in Canada and no physical presence in the jurisdiction, could be sued in this country as well as in any other country from which a plaintiff might choose to download its products. Despite the inconvenience for plaintiffs in similar situation of having to pursue their claims in foreign jurisdictions, this is only one factor to be taken into consideration. As the law now appears to stand, this is not enough to bring a claim within the jurisdiction of a Canadian court. It would put much too great an onus on foreign website operators or any foreign commercial undertakings with no real presence in Canada which happen to deal with Canadian residents. 



With respect to the fourth factor, Intermix could not reasonably expect to be sued in Canada for allegedly breaching the criminal provisions of Canadian competition legislation because of alleged false advertising on its website – one which is solely supported by a server located in the U.S. Clearly, any alleged false representations, if made, were made by Intermix in the U.S., hosted by a server situated in the U.S. and thus not within this Court’s jurisdiction. Jurisdiction cannot be founded simply upon the fact that the plaintiff was in Canada when he downloaded the foreign content. Plaintiff’s inconvenience in suing Intermix in the U.S. is also insufficient to justify this Court’s jurisdiction.”

Most Stupid Cases

Does the GPL violate antitrust laws?  Wallace v. International Business Machines Corp. 467 F.3d 1104 (7th.Cir. 2006)  “Daniel Wallace would like to compete with Linux-either by offering a derivative work or by writing an operating system from scratch-but maintains that this is impossible as long as Linux and its derivatives are available for free. He contends that IBM, Red Hat, and Novell have conspired among themselves and with others (including the Free Software Foundation) to eliminate competition in the operating system market by making Linux available at an unbeatable price. Under the GPL, which passes from user to improver to user, Linux and all software that incorporates any of its source code will be free forever, and nothing could be a more effective deterrent to competition, Wallace maintains. The GPL is the conspiracy as Wallace sees things; it is a joint undertaking among users and creators of derivative works to undercut the price of any potential rival.”

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Does the GPL violate antitrust laws?  Wallace v. International Business Machines Corp. 467 F.3d 1104 (7th.Cir. 2006)  “It does not help to characterize people who accept the GPL as “conspirators.” Although the antitrust laws forbid conspiracies “in restraint of trade,”, the GPL does not restrain trade. It is a cooperative agreement that facilitates production of new derivative works, and agreements that yield new products that would not arise through unilateral action are lawful.  Nor does it help to call the GPL “price fixing.”… Intellectual property can be used without being used up; the marginal cost of an additional user is zero (costs of media and paper to one side), so once a piece of intellectual property exists the efficient price of an extra copy is zero, for that is where price equals marginal cost. Copyright and patent laws give authors a right to charge more, so that they can recover their fixed costs (and thus promote innovation), but they do not require authors to charge more. No more does antitrust law require higher prices. Linux and other open-source projects have been able to cover their fixed costs through donations of time; as long as that remains true, it would reduce efficiency and consumers' welfare to force the authors to levy a charge on each new user.”

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Enforcement of WebWrap Agreements  Internet Archive v. Shell, 2007 WL 496680 (D.Colo., Feb.13, 2007)  Shell's website contains a Copyright Notice, stating that  “IF YOU COPY OR DISTRIBUTE ANYTHING ON THIS SITE-YOU ARE ENTERING INTO A CONTRACT. READ THE CONTRACT BEFORE YOU COPY OR DISTRIBUTE. YOUR ACT OF COPYING AND/OR DISTRIBUTING OBJECTIVELY AND EXPRESSLY INDICATES YOUR AGREEMENT TO AND ACCEPTANCE OF THE FOLLOWING TERMS:”  These terms include charging the user $5,000 for each individual page copied; granting Shell a perfected security interest of $250,000 “per each occurrence of unauthorized use” of the website in all of the user's land, assets and personal property, the user agreeing to pay “$50,000 per each occurrence of failure to pre-pay” for use of the website, “plus costs and triple damages”.  Shell discovered that the Wayback machine had reproduced and archived the contents of her website 87 times and displayed her entire website to the public daily during that time period.

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Enforcement of WebWrap Agreements  Internet Archive v. Shell, 2007 WL 496680 (D.Colo., Feb.13, 2007)  “Shell's complaint states that an advisement of the contract “is published on every page” of the website... While Internet Archive alleges that the terms of use do not appear until after the website is reproduced, this allegation is contained in Internet Archive's motion to dismiss… The allegations in Shell's complaint are sufficient to put Internet Archive on notice of the nature of her claim…  Similarly, while Internet Archive states that no human being from Internet Archive actually knew of the terms of use of Shell's website, Shell has alleged that Internet Archive expressly entered into a contract with Shell through her Copyright Notice, and that Internet Archive “possesses the capacity and authority to enter into contracts.” Shell does not have to allege in her complaint every fact necessary to prove breach of contract…While Internet Archive may be correct that the absence of human consent to this contract dooms Shell's claims, Shell has not had the opportunity to develop a factual record on this point. Shell has alleged the existence of a contract, breach and damages, which is sufficient to make out a claim for breach of contract.”

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Toronto Computers Lawyers Group June 26, 2007

The Year in Review (2006-2007) Barry B. Sookman [email protected] 416-601-7949

McTet2 #3697855