Canada: E-News @ Gowlings - October 2006

Last Updated: November 9 2006

Edited by Louis Benoit


  • Court Denies Request for Spamhaus Domain Suspension
  • Court Sides With Google in Dispute Over Trademark Use
  • New Jersey Sales Tax Now Applicable to Downloaded Music and Video
  • Google to Acquire Youtube for $1.65 Billion
  • American Jury Awards $11.3 Million for Defamatory Blog Posting
  • U.S. Outlaws Online Gambling
  • ICANN Will be Set Free of U.S. Commerce Department to the Applause of the EU
  • Spam Maker Sees Trademark Bid Canned
  • Web-Based Alerts for High Risk Offenders May Soon be Available Across Canada

Court Denies Request For Spamhaus Domain Suspension

Spamhaus, a prominent anti-spam service based in London, has chosen to ignore a $11.7 million USD judgment against it by a U.S. federal judge since it can’t be enforced in the United Kingdom. In response, a motion was brought to the U.S. District Court for an order requiring that both the Internet Corporation for Assigned Names and Numbers ("ICANN") and Tucows suspend the organization’s domain. ICANN is the non-profit organization that manages the domain name system, while Tucows is the registrar for The original judgment required to pay damages to an e-mail marketing company and to remove the company’s name from its database of known spammers. This blacklist is used by a number of technology vendors, including Microsoft, because it helps to block between 8 and 10 billion spam messages per day. However, the U.S. District Court recently issued an order denying the motion asking for the suspension of the domain, saying that the relief sought was too broad to be warranted under the circumstances.

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Court Sides With Google In Dispute Over Trademark Use

Google's practice of selling keyword advertisements has been under attack recently in U.S. and French courts, and a recent case has yielded a judgment in favour of Google. Computer repair company, Rescuecom, sued Google in a U.S. District Court in early 2005, alleging that Google had violated Rescuecom's trademark by selling advertisements to its competitors. The advertisements appeared next to the search results when "Rescuecom" was entered in Google's search engine. Rescuecom argued that Google had violated its trademark by "free-riding" on the goodwill associated with Rescuecom's name, preventing Google searchers from reaching Rescuecom's website. The court rejected the arguments and found that the facts did not establish trademark use as a matter of U.S. law. This case is rather interesting in that it finds that selling keyword advertising is not a trademark use in commerce.

Rescuecom may appeal the ruling. Google has lost similar trademark cases in French courts, and settled a similar U.S. case a year ago brought by insurance company Geico.

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New Jersey Sales Tax Now Applicable To Downloaded Music And Video

In an effort to recover from a $4.5 billion USD budget deficit, New Jersey governor Jon Corzine announced an increase in the New Jersey sales tax rate from 6% to 7%. Additionally, the legislature approved an expansion of the goods and services subject to sales tax. The 7% tax is now applicable to downloaded music and video, along with data processing and various other goods and services. These changes, which apply to the increasingly popular iTunes business operated by Apple, took effect on October 1, 2006.

More information available at:

Google To Acquire Youtube For $1.65 Billion

On October 9, 2006, Google Inc. agreed to acquire YouTube for $1.65 billion in stock. The acquisition will combine the largest online search company with one of the largest video sharing sites. YouTube is a popular web site that lets users upload, view, and share video clips for free. YouTube is unique in that it allows registered users to upload and share clips, join and create groups of people with similar interests, and subscribe to members' videos. As a result, content providers and analysts have criticized YouTube for offering videos that include copyrighted material. To address this problem, YouTube has signed ad-revenue-sharing deals with record companies and TV networks. In addition, the company recently announced deals with CBS Corp., Sony BMG Music Entertainment and the Universal Music Group. Google also announced its own separate deals with BMG and Warner Music Group Corp. By the end of the year, YouTube plans to launch technology that will enable copyright holders to remove unauthorized content from the site or share in ad-revenue, by leaving it up. However, it is not clear whether YouTube will remove illegal content on its own or wait for copyright holders to offer notification.

More information available at: ?articleId=193200106

American Jury Awards $11.3 Million For Defamatory Blog Posting

A Florida jury recently awarded a woman $11.3 million USD for defamatory statements posted on a blog. The defendant posted messages accusing the plaintiff of being a "crook", "con-artist", and "fraud". The shocking award is thought to be the largest ever for postings on an Internet blog.

The plaintiff stubbornly pursued the litigation, even paying court costs, despite the fact that there was little to no chance that the defendant would actually be able to pay the award. Indeed, the defendant, recently displaced by Hurricane Katrina, did not hire a lawyer or even show up for trial. However, the plaintiff was determined to make her point, stating that "[p]eople are using the Internet to destroy people they don't like, and you can't do that." Over the past two years, more than fifty lawsuits have been commenced in the United States as a result of blog postings and online message boards. This may be the beginning of a future trend of increased litigation over online messages.

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U.S. Outlaws Online Gambling

The online gambling industry was dealt a major blow this month as U.S. regulators passed a bill that effectively outlaws online wagering in the United States. The bill prohibits the use of credit cards, cheques and online fund transfers for online gambling. Following the announcement, shares of online gambling companies operating in the U.S. plummeted. Industry giant PartyGaming, the largest online gambling company and one that generates nearly 78 percent of its worldwide revenue in the U.S., was particularly hard hit. Immediately following the announcement, its shares lost 55 percent of their value resulting in a $3.8 billion USD loss in market capitalization. Canadian companies involved in the industry also felt the effects of the announcement.

In light of this new legislation, many online gambling companies are moving to expand their businesses outside America. 888 Holdings, another online gaming company, anticipated the move by U.S. lawmakers and began early emphasizing growth in other parts of the world. It now says that 68 percent of its new customers are from outside North America, up 56 percent from a year earlier. PartyGaming also reports huge increases in its number of players outside the U.S. So far, British law is the only one that officially legalizes and regulates the online gambling industry. Following suit, Italy has indicated its intention to legalize and regulate online gambling websites as early as 2007. Online betting is a $12 billion global industry.

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ICANN Will Be Set Free Of U.S. Commerce Department To The Applause Of The EU

The U.S. Commerce Department has recently entered into a new agreement with the California organization that handles network-address issues, the Internet Corporation for Assigned Names and Numbers ("ICANN"). The new agreement loosens the grip the Commerce Department has had over ICANN and focuses on greater accountability and transparency of the organization to the Internet community at large.

The move has been welcomed by the European Commission which plans to monitor the process carefully. "A new and final chapter opened this weekend. We welcome that ICANN will be set free in a process over the next three years" Commission spokesperson Martin Selmayr told a news briefing on October 2. The United States control of ICANN has become a source of frustration with many countries in recent years resulting in a call for a takeover of the management of the organization by the UN or another global body.

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Spam Maker Sees Trademark Bid Canned

Hormel Foods, trademark owner for the spiced-ham food product Spam, has failed in its attempt to register "spam" as a European Union-wide trademark. In recent years, Hormel has become increasingly touchy about the use of the word "spam" to describe one of modern society's worst digital menaces. Last year, Hormel sued anti-spam company SpamArrest for trademark infringement over its use of the word "spam" in its company name. More recently, Hormel attempted to register spam as a trademark when used to refer to "services to avoid or suppress unsolicited e-ails" and the "providing of expertise, engineering services and technical consulting services." Hormel argued that the general public would not immediately recognize the use of the word spam as pertaining to junk e-mail but would instead associate it with "a kind of spicy ham" food product. Trademark officials disagreed and dismissed the appeal stating that products aimed at tackling the problem of spam were aimed at IT professionals who would not confuse junk e-mail with the meat product. In addition, a Google search returned more hits for spam junk e-mail than for the canned meat, emphasizing that the word was also used by the general public to refer to unsolicited mail. Hormel has made several attempts to extract the name from generic use, including an advertising campaign in 2004 and attempts to invalidate the Spambuster name in the U.K. High Court in 2005. That court case also failed.

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Web-Based Alerts For High Risk Offenders May Soon Be Available Across Canada

Web-based criminal profiles may soon be Canada wide, as other provinces and territories examine the programs implemented by Alberta and Manitoba. The concept was first introduced by Alberta in May 2002, whereby profiles of high-risk offenders were posted in the "Crime Prevention" section of the Alberta Solicitor General website. The profiles include a photograph, physical description of the offender, the general area in which they reside, and list the offences committed. The program is aimed at alerting the public to high-risk offenders living in their area. All the information released on the website has been previously made public. Manitoba followed Alberta's lead, launching a website in April 2003 to notify the public of high-risk sex offenders. Manitoba's website can be access by the public through the Manitoba Justice Web site.

These Web-based alerts were a subject of discussion at a meeting of the federal, provincial and territorial justice ministers in Newfoundland. Most ministers have yet to publicly comment on such future plans, however, a spokesperson for Saskatchewan's Justice Minister Frank Quennell confirmed that his department has discussed plans to develop a similar website. A formal announcement is expected next month from Saskatchewan Justice detailing the launch of similar Web-based profiling. Given the recent discussions of the justice ministers and increasing use of the Internet as a source of public information, it may not be long before the rest of Canada follows suit.

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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.

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