Toronto Computers Lawyers Group (2006-2007)

8/14/2019 Toronto Computers Lawyers Group (2006-2007)

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Barry B. [email protected]

McTet2 #3697855

Toronto Computers

Lawyers GroupJune 26, 2007

The Year in Review(2006-2007)


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Contracting and E-

Commerce Issues


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Remedies for Breach of OutsourcingAgreementsVertex Data Science Ltd v Powergen Retail Ltd[2006] EWHC 1340 (Comm)

Vendor seeking to prevent customer from terminating a BPO outsourcingcontract where fees payable would be 1.1 billion over 10 years, where soletermination fee was 11.5 million and limit of liability was 12 million.

In these circumstances I do not consider that it is appropriate to grantinjunctive relief which will have the effect of compelling the parties to work

together. Nor do I consider that the terms of the contract are sufficientlyprecisely defined to indicate to Powergen precisely what is required of it if it isnot to prevent or hinder Vertex from performing its functions under the MSA

These sophisticated parties included in their contract clause 11 which excludesliability for loss of profit, loss of contract and loss of goodwill and imposes a capon each party's liability in the aggregate sum of 12 million. Of course there willbe issues as to the proper construction and applicability of these provisions andVertex also contends, somewhat implausibly as it seems to me, that they areunfair and as such unenforceable. However that may be, it is not immediatelyobvious to me that it would be unjust for Vertex to be confined to such remedyin damages as is determined to be the extent of the bargain which it struck.


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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 wouldfacilitate cooperation between CivicLife and SmartSources to build a

single portal that it planned to rollout on a national basis. The trialjudge found in effect that the actions of Industry Canada underminedthe reasonable expectations of the parties in five specific ways and didnot fit with what they had agreed upon. The trial judge used the termbreach of good faith to globally encompass his conclusion that IndustryCanada 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 IndustryCanada it took CivicLife at least twice as long to build its portal. Thebusiness efficacy of the contract was seriously affected.


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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 hasbeen found to be an implied term of the contract and groups them into threecategories: (a) those imposing a duty to cooperate in achieving the objectives of theagreement; (b) those imposing limits on the exercise of discretionary powers providedfor 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 theterms of their agreement but that has the effect of defeating rights under theagreement

Industry Canadas conduct appears to come within each of the three categoriesthat 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 Canadas misconduct should be characterized as a breach of theduty of good faith, as an abuse of the exercise of discretion or simply as underminingthe reasonable expectations of the parties to the agreement. The trial judge wasentitled to find, as he did, that Industry Canadas conduct breached its contractualobligations to CivicLife.


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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 Crownsubmitted that the presence of entire agreement clauses in the supply andI.P. agreements between CivicLife and Industry Canada precluded the trial judgefrom holding that Industry Canada breached its contract with CivicLife becausenowhere did the agreements say that there was a duty of good faith or a duty toexercise a discretion reasonably and fairly. There are several responses to this

submission. The first is that an entire agreement clause will not preclude theimplication of a term of the contract, such as a duty of good faith performanceor the duty not to abuse a discretion, because such a term is already part of theexisting agreement. The trial judge was not adding a term to the agreementthat was not part of the parties bargain; he was enforcing the reasonableexpectations of the parties under the agreement. Second, neither of the entireagreement clauses here says that their agreement contains no implied terms.Indeed, it would be difficult to set out every aspect of the expectations of theparties to a contract. The wording of the entire agreement clauses does notpreclude 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 biddingprices for search terms and by directing Advertising to generate clickson Payday's website by people or bots who had no purpose for visitingthe site other than to generate revenues for Findwhat and Advertising.Because this tactic would allow Findwhat to increase its profits solely atits discretion and with no benefit to Payday, it is plausible that it couldbe found to destroy[ ] or injur[e] Payday's rights under the contractItis furthermore likely that a reasonable advertiser entering into such acontract would expect that, whatever the external risks of unproductiveclicks, it would not be subjected to unbounded increases in its prices atthe hands of its promisor or at its promisor's direction.


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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 isenforceable, courts presented with the issue applytraditional principles of contract law and focus on

whether the plaintiffs had reasonable notice of andmanifested assent to the clickwrap agreementAbsent ashowing of fraud, failure to read an enforceableclickwrap agreement, as with any binding contract, willnot 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 toread it in its entirety does not defeat notice because there was sufficient noticeof 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 theterms was binding. The Agreement was presented in readable 12-point font. Itwas 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 versionwas made readily available. The user had ample time to review the document.

A reasonably prudent internet user would have known of the existence of termsin the AdWords Agreement. Plaintiff had to have had reasonable notice of theterms. 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 excusehim 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 mustbid for keywords or Adwords, and the highest bidder is placedat the top of the advertising hierarchy. Prices are determinedby the market, with the keywords higher in demand garnering

higher prices. Plaintiff had to have been aware of andunderstood the pricing process. Each time that he purchasedkeywords, he engaged in this process. At oral argument,Plaintiff explained the process by which price was determinedand conceded that the process was outlined in theAgreement.FN3 (Hrg. Tr. at 17-18.) The court concludes thatthe Adwords Agreement is enforceable because it contained apracticable method of determining the market price withreasonable certainty.


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Tort Issues


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OSPs 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 13years old and lied about her age saying she was 18.

Plaintiffs seek to impose tort liability on MySpace allegingthat MySpace knew sexual predators were using the

service to communicate with minors and failed to reactappropriately.


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OSPs 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 ruleapplies to MySpace here. Plaintiffs allege MySpace can be liable under anegligence standard when a minor is harmed after wrongfully stating her age,communicating with an adult, and publishing her personal information. To imposea duty under these circumstances for MySpace to confirm or determine the age ofeach applicant, with liability resulting from negligence in performing or not

performing that duty, would of course stop MySpace's business in its tracks andclose this avenue of communication, which Congress in its wisdom has decided toprotect. The Court declines to extend premises liability cases to the internetcontext particularly where, as here, the Defendant provides its service to users forfree. Plaintiff has cited no case law indicating that the duty of a premises ownershould extend to a website as a virtual premises.

Accordingly, the Court finds Plaintiffs have failed to state a claim for negligenceor gross negligence because MySpace had no duty to protect Julie Doe from PeteSolis's criminal acts nor to institute reasonable safety measures on its website. Ifanyone had a duty to protect Julie Doe, it was her parents, not MySpace.


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Liability of Internet Intermediaries forPublishing Defamatory MaterialBunt v Tilley & Ors [2006] EWHC 407 (Q.B.)

In determining responsibility for publication in the context of the law ofdefamation, it seems to me to be important to focus on what the persondid, or failed to do, in the chain of communication. It is clear that thestate of a defendant's knowledge can be an important factor. If a personknowingly permits another to communicate information which is

defamatory, when there would be an opportunity to prevent thepublication, there would seem to be no reason in principle why liabilityshould not accrue. So too, if the true position were that the applicantshad been (in the Claimant's words) responsible for corporate sponsorshipand approval of their illegal activities.

I have little doubt, however, that to impose legal responsibility uponanyone under the common law for the publication of words it is essentialto demonstrate a degree of awareness or at least an assumption ofgeneral responsibility, such as has long been recognised in the context ofeditorial responsibility.


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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 datacognizable under New York law

Nationwide repossessed systems and denied Thyroffaccess to his computers, electronic records and data.Thyroff was unable to retrieve his customer informationand other personal information that was stored on thecomputers.


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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 andelectronic data is substantial, if not essential. Computers and digitalinformation are ubiquitous and pervade all aspects of business, financial andpersonal communication activities. Indeed, this opinion was drafted inelectronic form, stored in a computer's memory and disseminated to the Judgesof 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 productionby pen on paper or quill on parchment. A document stored on a computer harddrive 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 keeppace with the contemporary realities of widespread computer use. Wetherefore answer the certified question in the affirmative and hold that the type

of data that Nationwide allegedly took possession of-electronic records that werestored on a computer and were indistinguishable from printed documents-issubject to a claim of conversion in New York. Because this is the only type ofintangible property at issue in this case, we do not consider whether any of themyriad other forms of virtual information should be protected by the tort.


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OBG Limited and others v. Allan [2007] UKHL 21

The economic torts which I have discussed at length are highlyrestricted in their application by the requirement of an intention toprocure a breach of contract or to cause loss by unlawful means. Evenliability for causing economic loss by negligence is very limited. Againstthis background, I suggest to your Lordships that it would be an

extraordinary step suddenly to extend the old tort of conversion toimpose strict liability for pure economic loss on receivers who wereappointed and acted in good faith. Furthermore, the effects of such achange in the law would of course not stop there. Hunter v Canary WharfLtd. [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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OBG Limited and others v. Allan [2007] UKHL 21

This prompts a further question: why should this extension of the tort ofconversion be confined to cases where the intangible rights are speciallyrecorded in a document? I would like to think that, as a mature legalsystem, English law has outgrown the need for legal fictions. There was atime when John Doe and Richard Roe were popular characters. They had

to be parties to some forms of action. When they were in their primetheir names appeared again and again in the law reports. English law hasmoved on. John Doe and Richard Roe are no more. So here, if there is tobe a limit to the types of intangibles which attract a remedy inconversion, this limit should be capable of being articulated and justifiedopenly, not by reference to fiction piled upon fiction. per Lord Nicholls

of Birkenhead


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IP Issues


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Importance of IP

Gowers Review of Intellectual Property(London, Nov. 2006) http://www.hm-

treasury.gov.uk/media/53F/C8/pbr06_gowers_report_755.pdf TheIntellectual Property (IP) system provides an essential framework both topromote and protect the innovation and creativity of industry and artists.

Innovative ideas create value, whether they are improved products, newbrands or creative expressions. As a result, IP rights the means by whichthese assets are owned have become a cornerstone of economic activity.

However, while global and technical changes have given IP a greaterprominence in developed economies, they have also brought challenges.Ideas are expensive to make, but cheap to copy. Ideas are becoming evencheaper to copy and distribute as digital technology and the Internet reducethe marginal cost of reproduction and distribution towards zero. As a result,

the UKs music and film industries lose around twenty per cent of theirannual turnover through pirated CDs and illegal online file sharing.Furthermore, global markets must contend with rights that remain largelynational in scope.


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COUNTERFEITING AND PIRACY

Counterfeit Goods in Canada-AThreat to Public Safety,

Report of the Standing Committee on Public Safety andNational 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 ofexcluded Acts contained in the Regulations Excluding Certain Indictable Offencesfrom the Definition of "Designated Offence" (Proceeds of Crime).

That the Government of Canada strengthen civil remedies for counterfeiting andpiracy infringements.

That the Government of Canada make provisions for the imposition of personalliability on the directors and officers of a corporation that engages incounterfeiting or piracy, and shareholder liability if it is a shell corporation.

That the Government of Canada introduce administrative monetary penalties forthe importation and exportation of counterfeit and pirated goods. The penaltiesshould 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 initiativeand in accordance with due process and Canadian law. The CBSA should alsoimplement 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 pirateddigital works and who manufacture and/or distribute circumvention devices forcommercial gain liable.

That the Government of Canada ratify the World Intellectual Property

Organization (WIPO) Copyright Treaty and the WIPO Performances andPhonograms 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 Microsofts calls for reform symbolize an American

patent system that is increasingly inefficient and costly for innovative firms. Itsnumerous structural problems are rooted in two fundamental misconceptions:

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

The virtually unchallenged view that more patent protection necessarilyprovides greater incentives for innovation and commercialization oftechnologies.

Failure to rein in the patent regime could have global repercussions. To hinder

innovation is to hinder the dynamic competitiveness of U.S. companies. Whilesome aspects of the IPR system (such as copyrights) for American firms largelyremain sound, significant problems with patents put the U.S. system at adisadvantage vis--vis more balanced and less costly foreign ones.


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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 applyingfor what are, or arguably are, business method and computer program patents insignificant numbers

This pressure in part stems from the fact that, following State Street (businessmethods) andAlappat (computer programs) people have been getting patents forthese subject-matters in the USA. Since they can get them there, they must as acommercial necessity apply for them everywhere. If your competitors are getting ortrying to get the weapons of business method or computer program patents you musttoo. An arms race in which the weapons are patents has set in. The race has naturallyspread worldwide

Thirdly it by no means follows that because of pressure from applicants, the grantof patents for excluded categories should be allowed or that the excluded categories

(particularly business methods and computer programs) should be construednarrowly. Just as with arms, merely because people want them is not sufficientreason for giving them.


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Aerotel Ltd. v Telco Holdings Ltd & Ors [2006] EWCA Civ 1371

The patent system is there to provide a research and investmentincentive but it has a price. That price (what economists call"transaction costs") is paid in a host of ways: the costs of patenting, theimpediment to competition, the compliance cost of ensuring non-infringement, the cost of uncertainty, litigation costs and so on. There

is, so far as we know, no really hard empirical data showing that theliberalisation of what is patentable in the USA has resulted in a greaterrate of innovation or investment in the excluded categories. Innovationin computer programs, for instance, proceeded at an immense speed foryears before anyone thought of granting patents for them as such. Thereis evidence, in the shape of the mass of US litigation about the excluded

categories, that they have produced much uncertainty. If theencouragement of patenting and of patent litigation as industries inthemselves were a purpose of the patent system, then the case forconstruing the categories narrowly (and indeed for removing them) ismade out. But not otherwise.


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Copyright Issues


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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 thepurposeof offering them for sale, selling them, and distributing them. In accordance with subsection27(3) of the Copyright Act, it is irrelevant whether the importer knew or should have knownthat the importation of the copy infringed copyright.

For the purposes of subsection 27(2)(b), I find that Inter-Plus distribution prejudiciallyaffected Microsoft. Apart from not gaining the profit to which it was entitled on the sale ofgenuine 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 lowprices prejudicially affected Microsofts relationship with its chain of legitimate suppliers.

Inter-Plus and Mr. Cerrelli are also liable under the Trade-marks Act and for much the samereasons. That Act, unlike the Copyright Act, does not specifically take into account the state ofmind of the defendants. However, even if it did, I am satisfied that Inter-Plus and CarmeloCerrelli knew or should have known that their activities infringed Microsofts rights under theAct. 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 theiractivities 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 ofthe goodwill attaching thereto, for the same reasons as given with respect to copyright.

P t ti f C ll ti W k d


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Protection for Collective Works andDatabases

Robertson v. Thomson Corp., [2006] 2 S.C.R. 363

Section 2 of the Copyright Act, as noted above, defines acompilation as an original work that is created as a result ofselection or arrangementWe note that the use of the disjunctiveor in s. 2 is significant. The Copyright Act does not requireoriginality in both the selection and arrangement. Similarly, and

with all due respect to Weiler J.A.s contrary finding, we agree withthe Publishers that a reproduction of a compilation or a collectivework need not preserve both the selection and arrangement of theoriginal work to be consistent with the Publishers reproductionrights.


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Liability for Linking and Framing

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 thatGoogle directly infringed Perfect 10s right to distribute its full-size images The districtcourt reasoned that distribution requires an actual dissemination of a copy. Id. at 844.Because Google did not communicate the full-size images to the users computer, Googledid not distribute these images. Id.

Again, the district courts 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 todistribute copies or phonorecords of the copyrighted work to the public by sale or othertransfer 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. TheSupreme Court has indicated that in the electronic context, copies may be distributedelectronically. See N.Y. Times Co. v. Tasini, 533 U.S. 483, 498 (2001) (a computerdatabase program distributed copies of newspaper articles stored in its computerized

database by selling copies of those articles through its database service). Googles searchengine communicates HTML instructions that tell a users browser where to find full-sizeimages on a website publishers computer, but Google does not itself distribute copies ofthe infringing photographs. It is the website publishers computer that distributes copies ofthe images by transmitting the photographic image electronically to the users computer.As in Tasini, the user can then obtain copies by downloading the photo or printing it.


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Fair use


We must be flexible in applying a fair use analysis; it is not to be simplified withbright-line rules, for the statute, like the doctrine it recognizes, calls for case-by-caseanalysis. . . . Nor may the four statutory factors be treated in isolation, one fromanother. All are to be explored, and the results weighed together, in light of thepurposes of copyright. Campbell, 510 U.S. at 577-78; see also Kelly, 336 F.3d at 817-18. 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. SonyCorp. 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 SoftCorp., which considered substantially the same use of copyrighted photographic imagesas is at issue here. See 336 F.3d 811. In Kelly, a photographer brought a directinfringement claim against Arriba, the operator of an Internet search engine. The

search engine provided thumbnail versions of the photographers images in response tosearch queries. Id. at 815-16. We held that Arribas use of thumbnail images was a fairuse primarily based on the transformative nature of a search engine and its benefit tothe public. Id. At 818-22. We also concluded that Arribas use of the thumbnail imagesdid not harm the photographers market for his image. Id. at 821-22.


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Fair Use


Googles use of thumbnails is highly transformative. In Kelly, we concluded thatArribas use of thumbnails was transformative because Arribas use of the imagesserve[d] a different function than Kellys useimproving access to information onthe [I]nternet versus artistic expression. Kelly, 336 F.3d at 819. Although animage may have been created originally to serve an entertainment, aesthetic, orinformative 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 claimto transformative value because it can provide social benefit, by shedding lighton 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 workinto a new work, namely, an electronic reference tool. Indeed, a search enginemay be more transformative than a parody because a search engine provides anentirely new use for the original work, while a parody typically has the same

entertainment purpose as the original work Accordingly, we conclude thatGoogles inclusion of thumbnail images derived from infringing websites in itsInternet-wide search engine activities does not preclude Google from raising a fairuse defense. (Emphasis added)

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Fair Use


We conclude that the significantly transformative nature of Googles search engine,particularly in light of its public benefit, outweighs Googles superseding and

commercial uses of the thumbnails in this case. In reaching this conclusion, we note theimportance of analyzing fair use flexibly in light of new circumstances. Sony, 464 U.S. at431-32; id. at 448 n.31 ( [Section 107] endorses the purpose and general scope of thejudicial doctrine of fair use, but there is no disposition to freeze the doctrine in thestatute, especially during a period of rapid technological change. ) We are also

mindful of the Supreme Courts direction that the more transformative the new work,the less will be the significance of other factors, like commercialism, that may weighagainst a finding of fair use. Campbell, 510 U.S. at 579. (Emphasis added)

Accordingly, we disagree with the district courts conclusion that because Googles useof the thumbnails could supersede Perfect 10s cell phone download use and because theuse was more commercial than Arribas, this fair use factor weighed slightly in favor of

Perfect 10. Perfect 10, 416 F. Supp. 2d at 849. Instead, we conclude that thetransformative nature of Googles use is more significant than any incidental supersedinguse or the minor commercial aspects of Googles search engine and website. Therefore,the district court erred in determining this factor weighed in favor of Perfect 10.

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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 toinfringing copyright materials liable for authorizing infringement?

I conclude that, within the meaning of s.101(1A)(a), Mr. Cooper had power toprevent the copying in Australia of copyright sound recordings via his website.He had that power because he was responsible for creating and maintaining hisMP3s4FREE website. As stated above, the principal content of the website

comprised links to other websites and files contained on other servers. Seniorcounsel for Mr. Cooper conceded that, in effect, the overwhelming majority ofthe files listed on the website were the subject of copyright. The website wasstructured so that when a user clicked on a link to a specific music file a copy ofthat file was transmitted directly to the users computer.

It is immaterial, in my view, that Mr. Coopers website operated automatically

in the sense that, although he could edit links on the site, he did not control theusual way in which links were added to the site. The evidence also leads to theinexorable inference that it was the deliberate choice of Mr. Cooper to establishhis website in a way which allowed the automatic addition of hyperlinks.


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44I t fil f b it


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Is access to a file from a website zerorated 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), orwhere the holder of copyright enters into an agreement by which another personbecomes entitled to use the copyright. A typical example would be the grant of alicense to publish a particular work within a certain geographic location. Bothversions 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 therights attached to such intellectual property. To interpret section 10 so broadlythat it applies to a transaction of an entirely different nature, merely because oneof the incidents of the transaction happens to involve a permitted copying ofcopyright material, would be an unwarranted extension of the tax relief thatsection 10 was intended to achieve.

I characterize the transaction as the supply of access to the Dawns Place website,including a single copy of the contents of the Dawns Place website. The fact thatthe copy is made by the subscriber himself through his own computer is a necessaryincident of the supply. Indeed, there is no other way to access and retain materialon a website. However, that incidental copying does not change the essentialnature of the supply.

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Is transmitting a file over Bit Torrent adistribution? 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 computerand stored on his hard disk as an electronic document file. His friends A, B and Cask for copies. The academic creates electronic copies and sends the reproduceddocument files as e-mail attachments to A, B and C. Giving distribution itsordinary 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 andpurchases an online copy of such a program. He pays by credit card and a copy ofthe program is transmitted to him via the internet to be downloaded onto hiscomputer and activated to give protection against computer viruses. That copy isin 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 thatprogram. This is a common method adopted for distributing copies of computerprograms. Each electronic copy sold is distinguishable from any other such copyand each commonly requires a distinct code or product key for activation.


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47Is making a file available over a P2P


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Is making a file available over a P2Pservice a distribution?U.S. v. Shaffer472 F.3d 1219 (10th.Cir.2007)

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

To distribute something simply means to deliver or transfer possession of it to someoneelse.

We have little difficulty in concluding that Mr. Shaffer distributed child pornography inthe sense of having delivered, transferred, dispersed, or dispensed it to others.

He may not have actively pushed pornography on Kazaa users, but he freely allowedthem access to his computerized stash of images and videos and openly invited them totake, or download, those items. It is something akin to the owner of a self-serve gasstation. The owner may not be present at the station, and there may be no attendantpresent at all. And neither the owner nor his or her agents may ever pump gas. But theowner has a roadside sign letting all passersby know that, if they choose, they can stopand 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 amoment 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 dojust that. So, too, a reasonable jury could find that Mr. Shaffer welcomed people to hiscomputer and was quite happy to let them take child pornography from it.



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Is making a file available over a P2Pservice a distribution?U.S. v. Shaffer472 F.3d 1219 (10th.Cir.2007)

Though the question how Section 2252A applies to peer-to-peer file sharing programs may berelatively novel, at least one other court has faced the question we do today and reachedprecisely the same conclusion. In United States v. Abraham, the court held that the defendantdistributeda visual depiction when as a result of the defendant's installation of an internet peer-to-peer video file sharing program on his computer, a Pennsylvania state trooper was able todownload 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 similarlyharmonious 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 pornographythrough 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]sfor his argument that he did not engage in distribution because his computer automaticallydistributed 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, 83Ohio St. 3d 41, 697 N.E. 2d 624, 628 (1998) (Posting software on a bulletin board where otherscan access and download it is distribution.); United Statse v. Todd, 100 Fed. Appx. 248, 250 (5thCir. 2004) (unpub.) (user of file-share software who downloaded child pornography images andma[de] them accessible to others through file sharing met the definition of trafficking forpurposes of a sentencing enhancement).



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Is making a file available over a P2Pservice a distribution?

U.S. v. Shaffer472 F.3d 1219 (10th.Cir.2007)

Even the Supreme Court has described the users of peer-to-peernetworks in terms of the distribution of files. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, ----, 125 S. Ct.2764, 2771, 162 L. Ed. 2d 781 (2005)(Some musical performers, forexample, have gained new audiences by distributing their copyrighted

works for free across peer-to-peer networks, and some distributors ofunprotected content have used peer-to-peer networks to disseminatefiles, Shakespeare being an example.) (emphases added); id. at2770 ([P]eer-to-peer networks are employed to store and distributeelectronic files by universities, government agencies, corporations,and libraries, among others.) (emphasis added); id. at 2771.


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Privacy


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Jurisdictional Reach of PIPEDA

Lawson v. Accusearch Inc., 2007 FC 125

It would be most regrettable indeed if Parliament gave theCommissioner jurisdiction to investigate foreigners who have Canadiansources of information only if those organizations voluntarily namenames. Furthermore, even if an order against a non-resident might beineffective, 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 aninvestigation was not contingent upon Parliament having legislatedextraterritorially as permitted by the Statute of Westminster.


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Does PIPEDA Apply to Swift?

The first question for me to address is that of the Acts application. SWIFT operates in

Canada. It collects personal information from and discloses it to Canadian banks as partof a commercial activity; SWIFT charges a fee to the banks for providing this service; 14of its shareholders are Canadian; and one of its Directors is from a Canadian bank. Whileit is true that SWIFTs operations in Canada make up only a small percentage of theorganizations total global business operations, the reality is that SWIFT has a significantpresence in Canada. The vast majority of international transfers involving personalinformation 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. SWIFTs presence in Canada is real andsubstantial, and it must therefore abide by Canadian laws, such as the Act, that providerules 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 outsidethe 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 ormore jurisdictions will not alleviate it of its obligations to comply with Canadian law.

55Does PIPEDA Permit a Data collector to


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Does PIPEDA Permit a Data collector tocomply with Foreign Law? While I do not hesitate to conclude that the Act governs SWIFTs 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 organizationsuch as SWIFT to be able to abide by the legitimate laws of the othercountries in which it operates. This, therefore, brings me to an interpretationof the Act that recognizes that some organizations operate in more than onejurisdiction.

Paragraph 7(3)(c) allows an organization to disclose personal informationwithout knowledge or consent in response to a subpoena or warrant issued oran order made by a court, person or body with jurisdiction to compel theproduction of information. Must a subpoena or warrant as contemplated inparagraph 7(3)(c) be issued onlyby a body within Canada that has therequisite 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 totake a modern approach to interpreting legislation by reading the words ofthis section in their entire context, in their grammatical and ordinary senseharmoniously with the scheme of the Act, the object of the Act and theintention of Parliament.



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Does PIPEDA Permit a Data collector tocomply with Foreign Law? Multi-national organizations must comply with the laws of those jurisdictions in

which they operate. Thus, while they operate in Canada, they obviously mustcomply with Canadian law. However, to ask the organization to ignore thelegitimate laws of other jurisdictions in which they operate is unrealistic andunworkable. Moreover, it has the potential of being interpreted as an infringementby Canada on that nations sovereignty. It is for this reason that, in my opinion, theAct acknowledges that an organization that is subject to the Act and that haslegitimately 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 torespond to a valid subpoena issued in the United States.

Such an interpretation of the Act provides as much protection over personalinformation as possible when it comes to organizations that operate both within andoutside 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, forexample, the non-consensual disclosure of the personal information held by SWIFTin another country to a data broker or marketing firm operating in that country.



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Does PIPEDA Permit a Data collector tocomply with Foreign Law? Furthermore, in my opinion, SWIFTs disclosure to the UST was appropriate in

the circumstances, as per subsection 5(3). That is, a reasonable person wouldexpect SWIFT to abide by a legitimate subpoena served on it in a jurisdiction inwhich it operates.

Moreover, I am mindful that individuals using a Canadian financial institution toperform an international transaction can easily inform themselves by reviewingthe 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 privacypolicy will also indicate that personal information may be located outside ofCanada. As indicated in a finding issued by our Office in 2005 that centred on afinancial institutions outsourcing to a third party processor that solely operatedin the United States (Case Summary 313), while customer personal informationis in the hands of a foreign third-party service provider, it is subject to the lawsof 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 operatingboth within and outside of Canada, such as SWIFT.

See also, Responsibility of Canadian financial institutions in SWIFT's disclosure ofpersonal information to US authorities considered, 2007CanLII 11733 (P.C.C.)

58Requirement to Maintain Copies and


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Requirement to Maintain Copies andProcess Information in Canada

April 20, 2007 amendments to Bank Act, the Insurance Companies Act andthe Trust Companies Act removed the requirement for an ExemptionOrder to be issued by OSFI before data could be processed or stored off-shore.

245. (1) If the Superintendent is of the opinion that it is incompatiblewith the fulfilment of the Superintendents responsibilities under this Actfor a bank to maintain, in another country, copies of records referred toin section 238 or of its central securities register or for a bank to process,in another country, information or data relating to the preparation andmaintenance of those records or of its central securities register or ifthe 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 thoseactivities in another country the Superintendent shall direct the bankto 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 orto process the information or data only in Canada.


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Enforcement of Foreign Orders

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 onehand, frontiers remain relevant to national identity and jurisdiction, but on the otherhand, the globalization of commerce and mobility of both people and assets make themless 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 lawrule that prevents the enforcement of foreign non-money judgments is compelling. Butsuch changes must be made cautiously. Although I recognize the need for a new rule, itis 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 andsubstantial connection test and the enforcement of equitable relief granted in foreigncountries 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 mustbe cautious to preserve their nations values and protect its people. The time is ripe tochange the common law rule against the enforcement of foreign non-monetaryjudgments, but, owing to problems with the orders the appellant seeks to haveenforced, the Court cannot accede to its request.

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The evolution of the law of enforcement does not require me, at thispoint, to develop exhaustively the criteria a court should take intoaccount. As cases come up, appropriate distinctions can be drawn. Forpresent purposes, it is sufficient to underscore the need to incorporate thevery flexibility that infuses equity. However, the conditions for recognitionand 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 thedomestic court to enforce. Comity does not require receiving courts toextend greater judicial assistance to foreign litigants than it does to itsown litigants, and the discretion that underlies equitable orders can beexercised by Canadian courts when deciding whether or not to enforceone.

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The consent decree and the contempt order were not enforceable.These orders are problematic from many points of view. The contemptorder is quasi criminal in nature, and a Canadian court will not enforcea penal order, either directly or indirectly.

If injunctive relief is to be enforced, its territorial scope has to bespecific and clear. Here, the intended territorial scope of the injunctiverelief in the consent decree is uncertain. In the absence of explicitterms making the settlement agreement a worldwide undertaking, theconsent 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 personalinformation that mayprima facie be protected from disclosure. Courtsshould be mindful of the quasi constitutional nature of the protection ofpersonal information.


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E i i li f C i h A


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Extra-territoriality of Copyright Act

Subscription Radio Services: SOCAN Tariff 25 (2005-2007), NRCC Tariff 4 (2007-

2010), 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 tointerrogatories, the Board rules as follows.

Subject to what follows, the responses the objectors have provided to date aresufficient. CSI is not entitled to dictate the format in which the information is to beprovided. Third parties are not obliged to provide information in response tointerrogatories. Sirius Canada has made reasonable efforts to obtain third partyinformation. The attempt to obtain information that would be relevant to theproposed tariff that CSI recently filed for 2008-2009 is clearly improper. The factthat 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 liablepursuant to the Copyright Act to pay those royalties. It is highly doubtful that theBoard can set royalties for reproductions made outside of Canada. The "real andsubstantial connection" test clearly applies to the communication right; it isdoubtful that it applies to the reproduction right.


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E t t it i l Eff t f C titi A t


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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 orindirectly, the supply or use of a product or for the purpose ofpromoting, directly or indirectly, any business interest, by any meanswhatever, knowingly or recklessly make a representation to the publicthat is false or misleading in a material respect.

This now takes me back to the 1974 statement of the Honourable HerbGray, and the conclusion urged upon me by Mr. Porter, that theamendments summarized above were enacted for the benefit of theconsumer located in Canada and not for consumers locatedextraterritorially who might be affected by the representations ofCanadian businessmen. I find this analysis not only compelling, but also

supported by the language of other sections in the Competition Act, ifnot by the rule of statutory interpretation, sometimes referred to asthe original meaning rule.

67Personal Jurisdiction Over Operator


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Personal Jurisdiction Over Operatorof Foreign WebsitesDesjean v. Intermix Media Inc., 2006 FC 1395

Action under Competition Act for bundling spyware and adware with free software that is downloadedfrom 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), 213D.L.R. (4th) 577, developed eight factors which courts should look to when dealing with questionsof assumed jurisdiction, in order to ensure jurisprudential clarity and certainty. These factorsare:

1. The connection between the forum and the plaintiffs 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 courts willingness to recognize and enforce an extra-provincial judgment rendered onthe 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.


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Most Stupid Cases

70Does the GPL violate antitrust laws?


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oes t e G v olate a t t ust 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-butmaintains that this is impossible as long as Linux and its derivatives areavailable for free. He contends that IBM, RedHat, and Novell haveconspired among themselves and with others (including the FreeSoftware Foundation) to eliminate competition in the operating systemmarket by making Linux available at an unbeatable price. Under theGPL, which passes from user to improver to user, Linux and all softwarethat incorporates any of its source code will be freeforever, andnothing could be a more effective deterrent to competition, Wallace

maintains. The GPL is the conspiracyas Wallace sees things; it is ajoint undertaking among users and creators of derivative works toundercut the price of any potential rival.

71Does the GPL violate antitrust laws?


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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 GPLdoes not restrain trade. It is a cooperative agreement that facilitates productionof new derivative works, and agreements that yield new products that would notarise 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 ofmedia and paper to one side), so once a piece of intellectual property exists theefficient price of an extra copy is zero, for that is where price equals marginalcost. Copyright and patent laws give authors a right to charge more, so that theycan recover their fixed costs (and thus promote innovation), but they do notrequire authors to charge more. No more does antitrust law require higherprices. Linux and other open-source projects have been able to cover their fixedcosts through donations of time; as long as that remains true, it would reduceefficiency and consumers' welfare to force the authors to levy a charge on eachnew user.


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Enforcement of WebWrap Agreements


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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 everypage of the website... While Internet Archive alleges that the terms of use do notappear until after the website is reproduced, this allegation is contained inInternet Archive's motion to dismiss The allegations in Shell's complaint aresufficient 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 InternetArchive expressly entered into a contract with Shell through her Copyright Notice,and that Internet Archive possesses the capacity and authority to enter intocontracts. Shell does not have to allege in her complaint every fact necessary toprove breach of contractWhile Internet Archive may be correct that the absenceof human consent to this contract dooms Shell's claims, Shell has not had theopportunity to develop a factual record on this point. Shell has alleged theexistence of a contract, breach and damages, which is sufficient to make out aclaim for breach of contract.


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Barry B. [email protected]

Toronto Computers

Lawyers GroupJune 26, 2007

The Year in Review(2006-2007)

Documents

Toronto Computers Lawyers Group (2006-2007)