Canada: Federal Court Rules Internet Provider Should Not Recover Costs Of Informing Clients Of Motion For Customer Information

In Voltage Pictures LLC v. John Doe, the Federal Court ruled that TekSavvy Solutions Inc. (TekSavvy), a non-party Internet service provider, could not recover costs related to its decision to inform 200,000 of its customers of a pending motion seeking TekSavvy customer information. The motion was brought in a class action lawsuit alleging online piracy of the movie The Hurt Locker. The Court found it was not necessary for TekSavvy to inform its customers about the pending motion with the result that TekSavvy could not recover the costs related to its voluntary decision to notify. 

FACTS

Voltage Pictures LLC (Voltage) started a class action against unidentified "Doe" defendants, alleging they had engaged in illegal file sharing over the Internet in violation of its copyright in the film The Hurt Locker. Voltage identified at least 4,500 IP addresses that had allegedly engaged in this conduct. Voltage asked TekSavvy to provide the names and addresses of its customers associated with 2,411 of the IP addresses. TekSavvy asked Voltage to obtain a court order but said it would not oppose the motion. Voltage then brought a motion for a Norwich order, asking the court to compel TekSavvy to provide it with the names and addresses it sought. A Norwich order allows the party seeking the order to gain pre-litigation discovery from a non-party. 

TekSavvy notified its affected customers of the pending motion. A few days later, TekSavvy sent another notice to more than 200,000 unaffected customers, informing them of Voltage's pending motion. These notices generated a significant volume of telephone calls and emails, as well as a hacker attack on TekSavvy's website. To deal with these consequences, TekSavvy paid a company to upgrade its customer-facing systems and to increase its security against hackers.

On the motion, Prothonotary K.R. Aalto ordered TekSavvy to provide the names and addresses associated with the IP addresses that Voltage had requested. Voltage was also ordered to pay TekSavvy "[a]ll reasonable legal costs, administrative costs and disbursements incurred by TekSavvy in abiding by this Order." TekSavvy provided the requested names and addresses and sent Voltage a bill for more than C$300,000 for, among other things, all costs for responding to customers after the two notices it sent and for upgrading its customer-facing systems and defences against hacking. Voltage argued it should not have to pay these costs.

For more a more detailed background on the case, please see our March 2014 Blakes Bulletin: I Know What You Downloaded Last Summer: Disclosure of Internet User Identity. 

NO REIMBURSEMENT FOR COSTS RELATED TO UNNECESSARY NOTICES

The Court sided with Voltage. The Court found that, in the right circumstances, a party complying with a Norwich order might be able to claim consequential costs arising from compliance. Still, it found that nothing in the jurisprudence on such orders required that an innocent party be fully compensated for any and all costs incurred in connection with such an order. The Court noted that the Federal Courts Rules did not require TekSavvy to notify its affected clients and that TekSavvy had not provided any reasonable explanation for notifying more than 200,000 unaffected customers.

The Court went on to note that piracy of copyrighted material on the Internet is a serious issue and that the Court's general policy should be to support measures that reasonably deter such illegal conduct. Courts should not allow an Internet service provider to unduly interfere with a copyright holder's efforts to pursue customers, unless a good reason exists to support such interference. 

The Court concluded that TekSavvy should only be allowed to recover the costs that were reasonably incurred in complying with the Norwich order, and excluded all costs that resulted from TekSavvy voluntarily giving notice of the motion for customer information to more than 200,000 of its customers. The Court awarded TekSavvy a total of C$33,380 in costs, which included legal fees related to the motion and all reasonable costs related to complying with the court order. 

ONLY REASONABLE COMPLIANCE COSTS WILL BE COVERED

Internet service providers who are forced to provide customer information pursuant to a Norwich order should be careful to take only those steps required by the order. Courts will generally not allow companies to claim reimbursement for voluntary steps taken in response to a Norwich order.

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