Canada: Canadian Internet Law Update - 2015

This paper summarizes selected developments in Canadian Internet law during 2015. Internet law is a vast area that continues to develop rapidly. Reference to current legislation, regulatory policies, and guidelines and case law is essential for anyone addressing these issues in practice.

A. Trademarks

Keyword Advertising

Vancouver Community College v. Vancouver Career College (Burnaby) Inc., 2015 BCSC 1470, involved a dispute over the defendant's advertising and promotion of educational services in competition with the plaintiff's educational services. The plaintiff claimed that the defendant misrepresented the defendant's educational services as those of the plaintiff by using certain terms (including the plaintiff's trade name) as keywords for advertising on Internet search sites and by using the "VCCollege.ca" domain name. The plaintiff alleged passing off, and argued that the defendant's keyword advertising caused initial interest confusion. The court held that, for the purpose of assessing a likelihood of confusion, the relevant "first impression" occurs when an individual using an Internet search site accesses a listed website. The court reasoned that an Internet user understands that it is necessary to view a website to determine who owns the site, and it is at that point when the relevant first impression is made. The court concluded that the defendant's use of the plaintiff's trade name as advertising keywords did not cause confusion. The court also held that the evidence did not support the plaintiff's allegation that the defendant's use of the "VCCollege.ca" domain name caused confusion.

Trademarks in Metatags

Red Label Vacations Inc. v. 411 Travel Buys Ltd., 2015 FCA 290, dismissing appeal from 2015 FC 19, involved a dispute over the defendant's limited duration use in its travel business website of metatags (titles, descriptions, and keywords, including the plaintiff's trademarks) inadvertently copied from the plaintiff's travel business website. The plaintiff claimed that the defendant's use of the copied metatags constituted copyright infringement (discussed below), trademark infringement, passing off, and depreciation of goodwill in registered trademarks.

The trial judge held that the use of the copied metatags, which were not visible to website users, did not create a likelihood of confusion required for a successful trademark infringement or passing off claim. The trial judge held that the concept of "initial interest confusion" was not applicable because, while metatags may influence Internet search results, those results present searchers with a choice of links to websites, rather than directing searchers to a particular website, and each searcher retains the ability to choose which website to access and which website to use to purchase goods or services. The trial judge reasoned that trademark infringement and passing off require confusion as to the source of the goods or services advertised on a website. For those reasons, the trial judge held that the use of a competitor's trademark or trade name in metatags does not, by itself, constitute a basis for the likelihood of confusion required for passing off or trademark infringement. The trial judge noted that the defendant's website was clearly identified, and there was no likelihood of deception as to the source of the advertised services. The trial judge held that use of trademarks in non-visible metatags did not support a finding of depreciation of goodwill. The plaintiff appealed.

The court of appeal dismissed the appeal, primarily on the basis that the plaintiff failed to demonstrate that the trial judge made any palpable and overriding error in his determinative findings. Nevertheless, the court of appeal attempted to limit the scope of the trial judge's ruling regarding metatags. The court majority expressed the view (at para. 22) that "... in some situations, inserting a registered trade-mark (or a trade-mark that is confusing with a registered trade-mark) in a metatag may constitute advertising of services that would give rise to a claim for infringement ...". The concurring court of appeal justice stated (at para. 45): "The extent to which a trademark may be used in metatags without infringing the trademark is, of necessity, fact specific. These reasons ought not to be read as endorsing the Judge's remarks relating to 'initial interest confusion' or as endorsing every alternate basis on which the Judge dismissed the action".

3. Infringing Domain Name

British Columbia Recreation and Parks Assn. v. Zakharia, 2015 BCSC 1650, involved a dispute arising from the termination of the defendant's membership in the plaintiff Association. The defendant used the Internet to malevolently attack and defame the plaintiff and its chief executive officer. The defendant also registered and used the Internet domain name BCfit.ca, which incorporated the plaintiff's registered trademark BCFIT, for a website used to criticize the plaintiff association. The plaintiff sued for defamation, injurious falsehood, conspiracy to injure, false representations to the public, trademark infringement, and passing off. The plaintiff was successful in all of its claims. Regarding the trademark infringement and passing off claims, the court held that the defendant had used the BCfit.ca domain name to misrepresent and confuse Internet users and to create confusion about the plaintiff and its events. The court awarded the plaintiff $18,000 as damages for passing off and trademark infringement and ordered the defendant to transfer the infringing domain name to the plaintiff.

B. Copyright

Copyright Act Amendments—Notice and Notice Regime

Copyright Act, ss. 41.25, 41.26 and 41.27(3), which implement a "notice and notice" regime for Internet copyright infringement, came into force on January 2, 2015. The regime provides a mechanism for copyright owners to give a prescribed form of notice of Internet-related copyright infringement claims to certain Internet intermediaries (Internet service providers, digital memory/storage providers, and search engine providers), who are required to respond to a notice in a specified manner or face liability.

Tariff 24 Royalties for Ringtone Downloads

Rogers Communications Partnership v. Society of Composers, Authors and Music Publishers of Canada, 2015 FC286, involved a renewed challenge to the validity of Tariff 24 established by the Copyright Board of Canada, which requires the payment of royalties in respect of ringtone downloads to the defendant society (which collects and distributes royalties for public performances of works on behalf of composers, authors, and publishers). The plaintiffs had previously unsuccessfully challenged the Tariff, and had paid royalties under the Tariff for many years. After the Supreme Court of Canada determined in 2012 that the Internet delivery of downloads of musical works and downloads of video games containing musical works did not constitute the communication of those works to the public by telecommunication (Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35 and Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34), the plaintiffs stopped paying royalties and renewed their challenge to the Tariff. Following the Supreme Court decisions, the court held that the Internet transmission of a ringtone download constitutes a reproduction, rather than a communication, of the ringtone. For that reason, the court held that the Tariff became unenforceable after the 2012 Supreme Court of Canada decisions, but the defendant society was not required to refund royalties paid before the Supreme Court of Canada decisions.

3. Copied Metatags

Red Label Vacations Inc. v. 411 Travel Buys Ltd., 2015 FCA 290 dismissing appeal from 2015 FC 19, involved a dispute over the defendant's limited duration use in its travel business website of metatags (titles, descriptions, and keywords) inadvertently copied from the plaintiff's travel business website. The plaintiff claimed that the defendant's use of the copied metatags constituted copyright infringement as well as trademark infringement, passing off and depreciation of goodwill in registered trademarks (discussed above). The trial judge held that the plaintiff's metatags were not sufficiently original to be protected by copyright, there had not been a substantial copying in any event (the copied metatags were from only 48 pages of approximately 180,000 pages of the plaintiff's website), and the innocent infringement would have justified only injunctive relief. The court of appeal dismissed the plaintiff's appeal on the basis that the plaintiff failed to demonstrate that the trial judge made any palpable and overriding error in the determinative finding that the plaintiff's metatags were not sufficiently original to be protected by copyright.

4. Circumvention of Technological Protection Measures

1395804 Ontario Ltd. (Blacklock's Reporter) v. Canadian Vintners Assn., 2015 CanLII 65885 (ONSCSM), involved a small claims court lawsuit over the defendant's unauthorized access to and distribution of the plaintiff's paywallprotected article available online to subscription customers only. The article was of interest to the defendant, but instead of paying a modest subscription fee for the article the defendant obtained a copy of the article from a paying subscriber, contrary to the plaintiff's website terms and conditions of use. The court held that the defendant had obtained a copy of the article in violation of Copyright Act s. 41.1(1), which prohibits circumvention of a technological protection measure (the paywall) that controls access to a copyright-protected work. The court held that the defence of fair dealing was not available to the defendant because it obtained a copy of the article in violation of Copyright Act s. 41.1(1) and in circumstances in which the dealing was not "fair". The court awarded the plaintiff compensatory damages equivalent to a one-year subscription for an institutional licensee ($11,470), $2,000 as punitive damages, interest, and costs.

C. Contracts

1. Email Notice of Contract Termination

Muhammad v. Canlanka Ventures Ltd., 2015 ABQB 145, involved a dispute over the defendants' refusal to complete a residential property transaction. The defendants asserted that an email exchange had terminated the transaction, and relied on the Electronic Transactions Act (Alberta) to support the argument that termination notice by email was valid. The court rejected the defendants' assertion on the basis that the substance of the emails did not terminate the transaction. The court also held that an email could not qualify as a valid termination notice under the purchase contract, which expressly specified that contractual notices must be in writing and delivered in person or delivered or faxed to a specified address. The court expressed doubt that the electronic equivalency provisions of the Act were applicable because s. 8 of the Act provides that consent is necessary in order to provide or accept information or a record in electronic form and it was not reasonable to infer consent to email notices where the relevant contract contains a clear notice provision that does not contemplate notice by email.

2. Sponsorship Agreement Made by Emails

Vancouver Canucks Limited Partnership v. Canon Canada Inc., 2015 BCCA 144, dismissing appeal from 2013 BCSC 866, involved a dispute over an alleged sponsorship agreement. The parties engaged in negotiations for the renewal of an equipment supply agreement and a related sponsorship agreement through discussions confirmed by email correspondence that referred to the terms of the previous agreement between the parties. The email correspondence did not state that there would not be a binding agreement until formal contract documents were signed. The parties completed the business discussions and the plaintiff fully activated the defendant's sponsorship benefits. The parties then began negotiating the written contracts and signed a written equipment supply contract. The parties disagreed over the termination provisions of the sponsorship contract, and the defendant ended the negotiations taking the position that there was no binding sponsorship agreement. The plaintiff sued the defendant for breach of contract, alleging that a binding sponsorship agreement was formed through email correspondence. The defendant argued that the emails were an incomplete and unenforceable agreement to agree that was conditional on the negotiation and execution of a written contract. The defendant also argued that its representative who sent the emails did not have authority to bind the defendant. The trial judge rejected the defendant's arguments and held that there was a binding sponsorship agreement created by email. On appeal, the court of appeal held that there was an evidentiary basis for the trial judge's critical findings: a reasonable bystander would conclude the parties intended to be bound by the terms of the emails; the emails, by reference to the previous agreements, included all essential terms for the sponsorship agreement; and the resulting sponsorship agreement was not conditional on subsequent review and approval.

3. Cancelled Online Order Due to Pricing Error

Faucher v. Costco Wholesale Canada Ltd., 2015 QCCQ 3366, involved a dispute over the defendant retailer's refusal to accept an online order for erroneously priced computers. The plaintiff ordered ten computers for the incorrectly advertised price of $2 each (the real price ought to have been approximately $1,000). The next day the defendant sent to the plaintiff a notice cancelling the order and advising that the plaintiff's credit card had not been charged. The defendant relied on its website terms and conditions, accessible through a link at the bottom of each webpage, which expressly permitted the defendant to cancel an order if the online price was incorrect. The court held that, due to the website terms and conditions, the defendant could not be compelled to accept the order, and that the advertised price was an obvious error that vitiated the defendant's consent to form a contract. The court further held that the defendant's website advertisement, which was viewed by consumers without solicitation, constituted a proposal rather than an offer to form a distance contract governed by the Québec Consumer Protection Act. The court further held that the defendant had not engaged in misleading advertising because the defendant did not intend to deceive and the plaintiff was not misled by the obviously incorrect pricing. The court dismissed the plaintiff's claims and ordered the plaintiff to pay the defendant's costs.

D. Privacy and Personal Information Protection

1. Digital Privacy Act

The Canadian government enacted the Digital Privacy Act, which makes a number of important changes to the Personal Information Protection and Electronic Documents Act, including adding provisions regarding disclosure of personal information in a business transaction, data breach notification and record-keeping requirements, employee information and work product information exceptions, and additional powers for the Privacy Commissioner to enter into enforceable compliance agreements. One of the most significant changes is a new, additional requirement for "valid consent" to the collection, use, and disclosure of personal information. Some of the amendments came into force on June 18, 2015, while others (including data breach notification and record-keeping requirements) will not come into force until a later date yet to be fixed.

2. Proposed Class Action for Breach of Privacy

Douez v. Facebook, Inc., 2015 BCCA 279, involved an application for certification of a class proceeding against Facebook, Inc. for alleged violations of the statutory privacy tort created by the Privacy Act (British Columbia) resulting from Facebook's "Sponsored Stories" program. Facebook challenged the court's jurisdiction on the basis that the Facebook Terms of Use specified that claims by users are governed by California law and must be adjudicated in California courts. The chambers judge rejected Facebook's challenge to the court's jurisdiction primarily on the basis that Privacy Act, s. 4 gave the British Columbia Supreme Court exclusive jurisdiction to hear claims in respect of the statutory privacy tort, and that if the court declined jurisdiction the plaintiff would have no other forum to bring that claim. The chambers judge certified the class proceeding. Facebook appealed. The court of appeal allowed the appeal on the basis that the chambers judge erred in her interpretation of Privacy Act, s. 4. The court of appeal reasoned that the Privacy Act, when interpreted to give effect to the principle of territoriality, did not exclude the jurisdiction of foreign courts to consider Privacy Act claims and was not intended to render void a contractual forum selection clause that might deprive British Columbia residents of the right to bring Privacy Act claims in the British Columbia Supreme Court. The court of appeal held that the plaintiff had not shown strong cause to not enforce the contractual forum selection clause. Consequently, the court of appeal held that the forum selection clause should be enforced and the action stayed.

3. Proposed Class Action for Breach of Privacy

Condon v. Canada, 2015 FCA 159, involved an application for certification of a class proceeding arising from the loss of a computer hard drive containing the personal information of approximately 583,000 individuals relating to their participation in the Canada Student Loans Program. The motions judge certified the class proceeding for various causes of action, but not for claims for negligence or breach of confidence because the judge determined that those claims would fail for lack of compensable damages (see 2014 FC 250). The court of appeal held that the motions judge erred by evaluating the merits of the claims based on the evidence adduced in support of the motion rather than on the facts as pled, including "costs incurred in preventing identity theft" and "out-of-pocket expenses". The court of appeal granted the appeal and ordered the claims for negligence and breach of confidence be included in the class proceeding.

4. Court Jurisdiction over Data Breach Lawsuit

Zuckerman v. Target Corporation, 2015 QCCA 1809 granting appeal from 2015 QCCS 1285, involved a putative class action against Target Corporation for damages resulting from a 2013 cyber-attack in the United States that resulted in the theft of the personal information of millions of customers in the United States and Canada. The defendant applied to dismiss the plaintiff's certification application on the basis that Québec courts lacked jurisdiction. The motions judge granted the application reasoning that the defendant had not committed any fault in Québec (because the data breach occurred in the United States and related to customer data collected in the United States) and the litigation did not involve any activities by the defendant in Québec. The plaintiff appealed. The court of appeal held that the motions judge erred because the plaintiff's alleged harm and expense suffered in Québec were sufficient to give Québec courts jurisdiction over the claim. The court of appeal further held that the motions judge erred by considering circumstances (including the magnitude of the plaintiff's alleged harm, which the motions judge characterized as "ordinary annoyances, anxieties and fears that people living in society routinely, if sometimes reluctantly, accept") that were irrelevant to the jurisdiction issue, and were more appropriate for an application to decline jurisdiction or to certify the proposed class. The court of appeal granted the appeal, but reserved the defendant's right to argue that the court ought to decline jurisdiction on the basis of forum non conveniens.

5. Regulatory Proceedings Regarding Targeted Advertising

The Office of the Privacy Commissioner of Canada issued PIPEDA Report of Findings #2015-001 regarding Bell's targeted online advertising program, which delivered targeted advertising to Bell customers based on their Internet browsing activities and other account information. The Office of the Privacy Commissioner of Canada found that the program did not comply with the Personal Information Protection and Electronic Documents Act and set out a number of criteria that needed to be met, including providing proper notices to customers about the program, obtaining meaningful and valid opt-in consent due to the sensitive nature of the collected information, and the proper implementation of withdrawals of consent. Bell argued that opt-in consent was not required, and relied on Privacy and Online Behavioral Advertising Guidelines previously issued by the Office of the Privacy Commissioner of Canada. The Finding clarified that Bell's advertising program went beyond the type of personal information and advertising contemplated by those guidelines.

6. Regulatory Guidance

Privacy Commissioners issued guidance for compliance with Canadian personal information protection laws in connection with Internet activities, including the following:

  •  Privacy Commissioner of Canada—Collecting from kids? Ten tips for services aimed at children and youth, to assist organizations that collect, use, and disclose information about youth in connection with online services.
  •  Privacy Commissioner of Canada—Interpretation Bulletin—Safeguards, to provide guidance for compliance with statutory obligations to safeguard personal information.
  •  Privacy Commissioner of Canada—Privacy and Cyber Security, Emphasizing privacy protection in cyber security activities, to assist organizations in balancing the tensions between privacy and cyber security measures.  Privacy Commissioners of Canada, Alberta, and British Columbia—Is a bring your own device (BYOD) program the right choice for your organization?, to assist organizations in determining whether and how to implement a BYOD program that effectively protects an organization's information and respects the privacy rights of employees and customers.
  •  Information and Privacy Commissioner of Ontario—Transparency, Privacy and the Internet: Municipal Balancing Act, to assist municipalities in balancing the need to protect the privacy of their community members and the need to meet their other legislated obligations.
  •  Privacy Commissioner of British Columbia—IT Security and Employee Privacy: Tips and Guidance, to provide guidance for employers considering implementing IT security tools that collect employee personal information.

Download - Canadian Internet Law Update - 2015

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