Canada: Ex Parte Redux - Justice Hughes Revisits Without Notice Injunctions in Copyright Cases

Last Updated: May 22 2006

Article by Mark Hayes and Antonio Turco, ©2006, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Intellectual Property, Special Copyright Issue, May 2006

In Netbored Inc. v. Avery Holdings Inc. et al., the Federal Court confirmed that ex parte injunctions and Anton Piller orders are only to be granted in "exceptional cases" and that a party seeking such an order must make "full and frank" disclosure to the Judge hearing the application for the order.

The decision by Mr. Justice Hughes arose out of a motion to review an ex parte injunction and Anton Piller order granted in an action involving allegations of copyright infringement, breach of confidentiality and breach of fiduciary and contractual duties as between an employer and ex-employee.

Ex Parte Injunctions and Anton Piller Orders

An ex parte proceeding is one brought without notice to the other side. An Anton Piller order is a court order that compels the defendant, upon threat of a finding of contempt, to permit the plaintiff to enter upon the defendant’s premises in order to search for and remove certain specified items. Anton Piller orders are almost always obtained on an ex parte basis.

A critical factor in respect of a proceeding taken ex parte, and, in particular in Anton Piller situations, is the heavy obligation of the applicant to make full and frank disclosure of all material facts relating to the application, including facts detrimental to the applicant’s own case. The consequences of failing to make such disclosure can be severe, and include the setting aside of the order and an award of costs against the applicant.

To obtain an interim injunction, an applicant must establish that (i) there is a serious issue to be tried; (ii) if the injunction is not granted, it will suffer irreparable harm that cannot be compensated in damages; and (iii) the balance of convenience favours granting the injunction. If the injunction is to be granted without notification to the defendant, the applicant must also demonstrate why it is necessary to obtain the relief sought without giving the defendant notice of the hearing or providing it with an opportunity to be heard.

Anton Piller orders are extreme remedies that can easily be abused. Courts are, therefore, wary about granting them. One concern is that the order will amount to the judicial legitimization of a fishing expedition through a defendant’s records. Another concern is that there is a potential for the order to be sought for the sole purpose of destroying a defendant’s business.

Against this background, courts have set three essential pre-conditions for granting an Anton Piller order in addition to the usual requirements in an ex parte injunction application. First, there must be a strong prima facie case. Secondly, the damage, potential or actual, must be very serious for the plaintiff. Finally, there must be clear evidence that the defendants have in their possession incriminating documents or things, and that there is a real possibility that they may destroy such material before a motion on notice to the defendant can be made. A fourth condition was noted by Justice Hughes, namely that the inspection would do no real harm to the defendant or its case.

In his decision, Justice Hughes examined whether this case raised "exceptional circumstances", meeting the four criteria, and whether full and frank disclosure had been made by the plaintiff.

Background to the Case

The plaintiff Netbored Inc. (Netbored) is an Ontario-based corporation that offers its products, notably plasma television sets and audio equipment, to its customers exclusively via the Internet. Netbored operates a number of different Web sites through which it offers its products for sale, including www.plasma.com.

The defendant Avery Holdings Inc. (Avery) is also an Ontario- based corporation involved in a similar business, through its Web site, www.discount-plasma.com, which it launched in September 2003. Two other defendants were the principals of Avery. The final defendant was the brother of one of the Avery principals, who had previously worked for Netbored and provided assistance in designing Avery’s Web site.

The practice of offering and selling products to retail customers exclusively via the Internet is known as e-tailing. Customers usually located Netbored through Internet search facilities, the principal one being Google. It is important for an e-tailer to maximize the possibility that a customer will find its Web site through a search facility like Google. While the manner in which Google searches the Internet and ranks the results is not a matter of public record, it is widely believed to be influenced by meta tags (text which is contained in the coding of a Web site but is not ordinarily shown on the user’s display). It is also believed that Google changes the manner in which it ranks its results so as to frustrate those who may artificially seek high rankings. This is known in the trade as the "Google dance".

Netbored alleged that, in mid-October 2003, it noticed that traffic to its Web site, and its ranking on the Google search engine, had dropped significantly, resulting in a decrease in sales. Netbored discovered the existence of Avery’s Web site and alleged that much of the text, images and compilations of materials were identical or substantially identical to the material on Netbored’s Web site.

Netbored attempted to have Avery’s Web site, at the time hosted in the United States, taken offline through the "notice and takedown" provisions of the United States Digital Millennium Copyright Act. After being taken offline twice by its U.S. host at Netbored’s insistence, Avery moved the Web site to a Canadian server. Netbored continued to make demands of the host that the Web site be taken down. In an effort to cease this perceived harassment, Avery commenced an action in the Ontario courts against Netbored and its principal. At the time the Anton Piller order was issued in the Federal Court, the parties, through their lawyers, were discussing a date for the delivery of a statement of defence.

In the meantime, and without notice to Avery, Netbored commenced an action in the Federal Court. Netbored sought, ex parte, an interim injunction and an Anton Piller order. Netbored’s application was twice denied by one of the judges of the Federal Court who was not satisfied that a strong prima facie case had been made. On the third try, a different judge of the Federal Court heard the matter and granted the order sought by Netbored. The Anton Piller order was executed the next day.

The Review Motion

On the review motion, Justice Hughes found that there was no strong prima facie case of copyright infringement. The Court found Netbored had not properly pleaded or particularized the works in which it claimed ownership and there was no evidence that any of the works were owned or authored by Netbored, other than assertions from its principal.

Specifically, Netbored had been vague about what was the subject of its copyright claim. Justice Hughes made it clear in this case that copyright claims must be pleaded and proved with particularity. Specifically, he stressed that it is not sufficient to allege copyright infringement without elaborating on "what the particular subject matter is, how copyright in that subject matter subsists in Canada, and how it is that the plaintiff asserts ownership in that copyright".

Justice Hughes reviewed certain aspects of copyright law in Canada. The Copyright Act provides that copyright subsists in a variety of works and compilations provided that the author was a citizen of Canada or other qualified country (such as a Berne Convention country) and, if the work was published, it was first published in Canada or such country. Thus, a claim alleging copyright infringement must state the identity of the work, describe it as a work or compilation within the meaning of the Copyright Act, and state the nationality of the author and place of first publication. These elements were missing from the pleading. A copyright registration, while not required, provides prima facie proof of the requisite factors as to identity, authorship and publication. Even without such a registration, on a prima facie basis, the subsistence of copyright in an identified work will be presumed, as will the authorship and ownership if the name of the author and/or owner appear on the work. However, such facts were not pleaded.

The Court questioned whether meta tags possessed copyright at all or whether they were "simply formulae derived arrangements designed to serve a business function." The Court noted that the meta tags could be analogous to the arrangement of information in telephone directories discussed in Tele-Direct (Publications) Inc. v. American Business Information. With respect to confidential information, Justice Hughes noted that the Federal Court does not have jurisdiction to hear and determine issues as to confidential information.

On the issue of serious damage to Netbored, Justice Hughes found that no damage had been demonstrated by Netbored in the Anton Piller sense. He stated that the damage that must be alleged to obtain an Anton Piller order must be connected to the need to preserve documents and materials, rather than in respect of some continuing business activity as in the case of an ordinary injunction.

The plaintiff also alleged that it had suffered damage because Avery copied and used the plaintiff’s meta tags and, thereby, hurt the plaintiff’s Google ranking. The Court stated that this was ultimately an issue for trial and, at the preliminary stage of the action, that damage was largely speculative and unproven.

Finally, Justice Hughes found no basis to justify a finding of a real possibility that evidence may be destroyed by the defendants. He noted that much evidence upon which the plaintiff’s case rested, i.e., Avery’s Web site, was publicly available to anyone accessing the Web site.

Justice Hughes noted that what Netbored was really after was an interim injunction. He found that Netbored had failed to meet the test for an injunction since it had, at best, shown a possible monetary loss which was compensable in damages. In addition, there was no reason why such an injunction could not have been sought on notice to the defendants.

With respect to Netbored’s duty of candour, Justice Hughes found that Netbored’s submissions and evidence in support of the ex parte orders lacked candour in two important aspects. One was that Netbored had not disclosed to the Court that one of the premises it wanted to enter was a residential apartment leased to someone who is not a defendant. The second was the failure of Netbored to disclose the ongoing discussions between its lawyers and Avery’s lawyers in the context of the Ontario action.

For all these reasons, the Court vacated the interim injunction and the Anton Piller order. Another interesting aspect of the Court’s decision was how it dealt with costs. The principals of Avery were granted their costs on a full indemnity basis since "no case" had been made against them. As a result, the plaintiff will likely end up with a very expensive lesson in how not to seek ex parte relief.

Conclusion

The decision confirms that the bar is set very high for a plaintiff in terms of making full and frank disclosure in the context of seeking an ex parte injunction or Anton Piller order. A plaintiff must ensure that all relevant facts are disclosed to the Court, even where those facts are less than favourable to its position.

With respect to copyright pleading and proof, Justice Hughes’ decision reinforces that allegations of copyright must be fully pleaded and particularized and that issues of ownership and chain of title must be dealt with. Although these requirements have always been there, this decision, and others recently rendered by Justice Hughes, serve as a warning that from now on plaintiffs must plead and prove their copyright claims with greater particularity.

The authors successfully represented some of the defendants in the motion.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
26 Oct 2018, Other, Vancouver, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

30 Oct 2018, Other, Toronto, Canada

Please join us for discussions on recent updates and legal developments in pension and employee benefits as well as employment law issues.

12 Nov 2018, Other, Toronto, Canada

Stories aren’t falsehoods. Stories are the root of all effective human communications: they motivate, animate and clarify. If you aren’t telling stories, you probably aren’t getting your point across.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions