Canada: Canadian Internet Law Update – 2016

This paper summarizes selected developments in Canadian Internet law during 2016. Internet law is a vast area that continues to develop rapidly. Reference to current legislation, regulatory policies, guidelines and case law is essential for anyone addressing these issues in practice.

A. Intellectual Property - Trade-marks

1. Court-ordered Domain Name Transfer

Michaels v. Michaels Stores Procurement Co., Inc., 2016 FCA 88, involved a dispute over the use of the www.michaels.ca domain name that allegedly infringed Michaels Stores' trademarks and caused consumer confusion. Michaels Stores obtained default judgment against the appellants, including an order requiring transfer of the www.michaels.ca domain name to Michaels Stores. The appellants appealed and challenged the trial court's jurisdiction to order the domain name transfer. The court of appeal dismissed the appeal. The court confirmed that the trial court had jurisdiction to order transfer of the domain name pursuant to the Trade-marks Act and the Federal Courts Act, and held that the trial judge had not erred in exercising that jurisdiction. The court reasoned that the domain name was the mechanism by which Michaels Stores' trademarks were infringed and was the instrument of confusion in the marketplace.

2. Infringing Website and Domain Name

Thoi Bao Inc. v. 1913075 Ontario Ltd. (Vo Media), 2016 FC 1339, involved a dispute between two Vietnamese language news businesses. The plaintiff used the THOI BAO trademark and the www.thoibao.com domain name in association with its news business. Two former employees of the plaintiff established the defendant company and began operating a competing online Vietnamese language news website called TBTV, which used the www.thoibaotv.com domain name, included the plaintiff's trademarks in meta tags and hidden text, and redistributed the plaintiff's television shows and newscasts without authorization. The court held that the corporate defendant had infringed the plaintiff's trademark rights and violated the plaintiff's copyright in its daily news programs. The court held that the individual defendant had hands-on, personal involvement in the corporate defendant's infringing activities and therefore was personally liable. The court awarded the plaintiff $15,000 for trademark infringement (based on a royalty approach) and $10,000 statutory damages for two incidents of copyright infringement, but refused to award punitive damages on the basis that there was no evidence of malice, prolonged infringement, or profit. The court ordered the defendants to promptly transfer all infringing domain names and social media accounts to the plaintiff and granted an injunction prohibiting future unlawful conduct by the defendants.

3. Infringing Domain Names

Boaden Catering Ltd. v. Real Food for Real Kids Inc., 2016 ONSC 4098, involved a complicated dispute between competing catering companies. The defendant used the trademarks REAL FOOD FOR REAL KIDS and RFRK and the domain name rfrk.com. The plaintiff registered the domain names realfoodforrealkidss.com, realfoodforrealkidss.com, realffoodforkids.ca and realfoodforrealkidss.com, realffoodforkids.ca and rfrk.ca. The defendant successfully challenged those domain name registrations in arbitration proceedings under the Uniform Domain-Name Dispute- Resolution Policy and the CIRA Domain Name Dispute Resolution Policy, and the arbitrators ordered the domain names transferred to the defendant. The plaintiff then commenced the lawsuit for an order that the plaintiff was the lawful owner of the domain names. The court dismissed the plaintiff's claims regarding the domain names on the basis that the plaintiff had registered the domain names in bad faith for the purpose of exploiting the value of the defendant's trademarks or for illegitimate financial gain.

B. Copyright

1. Use of Photograph Posted on Instagram

Chung c. Brandy Melville Canada Ltd., 2016 QCCQ 2735, involved a dispute over the unauthorized use of a photograph, taken by the plaintiff professional photographer, of the defendant's employee modelling the defendant's clothing. The plaintiff, who was not paid for the photograph, agreed with the employee that the photograph could be posted on Instagram without the plaintiff's name but with a credit to the plaintiff by "tagging". The defendant downloaded the photograph from Instagram and used the photograph on a promotional postcard attached to the defendant's shopping bags. The defendant disputed the plaintiff's authorship of the photograph and argued (without supporting evidence) that Instagram rules provide that the authorized posting of an item to Instagram results in the loss of all intellectual property rights in the item. The court held that the plaintiff was the author of the photograph, and that the defendant's unauthorized use of the photograph constituted blatant infringement of the plaintiff's copyright and moral rights under the Copyright Act and an unlawful and intentional interference with the plaintiff's right to peaceful enjoinment and disposition of his property under the Quebec Charter of Human Rights and Freedoms. The court awarded the plaintiff $5,000 damages.

2. Pre-trial Injunction against Online Video

Vancouver Aquarium Marine Science Centre v. Charbonneau, 2016 BCSC 625, involved a dispute over the defendants' publication of a video entitled "Vancouver Aquarium Uncovered" that purported to expose the truth about whales and dolphins in captivity. The plaintiff aquarium claimed the video included fifteen video and image segments, comprising approximately five minutes of the 61-minute video, owned by the plaintiff and used without permission in violation of the plaintiff's copyright and in breach of a contract signed by one of the defendants. The plaintiff applied for a pre-trial injunction to stop the publishing of the video with the fifteen segments. The court held that there was a fair question to be tried regarding the plaintiff's copyright infringement claims and potential fair dealing defences. The court held that there would be irreparable harm if the injunction were not granted because it would be impossible to calculate or repair the damage to the plaintiff caused by the unauthorized, derogatory use of the fifteen segments. The court concluded that the balance of convenience would be achieved by ordering the defendants to remove the fifteen segments from the video. The court issued an injunction restraining the defendants from publishing in any manner (including online publication) the offending video (with the fifteen segments), requiring the defendants to remove the offending video from all online sources, and requiring any person to remove the offending video from any public location within seven days after receiving notice of the order. The court clarified that the injunction did not prohibit publication of a modified version of the video without the fifteen segments.

3. Fair Dealing Defence for Use of Paywall Protected Content

1395804 Ontario Ltd. (Blacklock's Reporter) v. Canada (Attorney General), 2016 FC 1255, involved a dispute over the distribution within the Department of Finance of copies of two news articles critical of the Department that were published by the plaintiff online news agency. The plaintiff used a paywall to protect its online news articles against unauthorized access, and sold paid subscriptions available through an online application. An employee of the Department purchased a subscription to access the articles, and then forwarded copies to other Department officials. Only six Department officials received copies of one or both articles. The plaintiff sued for copyright infringement. The defendant admitted that the articles were protected by copyright and used without payment or consent, but argued that the use was fair dealing for research purposes permitted under Copyright Act, s. 29. The court held that the use of the two articles constituted fair dealing because the articles were circulated for a proper research purpose and the scope of use was fair. The court reasoned that all six Department officials had a legitimate reason to read the articles with a view to holding the plaintiff accountable for its questionable reporting. The court acknowledged that a deliberate breach of accepted terms of access to copyrighted material was a relevant consideration in assessing fair dealing, but held that the plaintiff's Terms and Conditions were either not binding or ambiguous. The court rejected the plaintiff's argument that fair dealing with its news articles challenged the viability of its business model, reasoning that all subscription-based news agencies suffer from work-product leakage and that the plaintiff was not entitled to special treatment because its financial interests might be adversely affected by fair use of its articles. The court cautioned, however, that its reasons should not be taken as "an endorsement of arguably blameworthy conduct in the form of unlawful technological breaches of a paywall, misuse of passwords or the widespread exploitation of copyrighted material to obtain a commercial or business advantage". The court dismissed the action.

4. Pre-trial Injunction against Sale of Pre-loaded Set-top Boxes

Bell Canada v. 1326030 Ontario Inc. (iTVBox.net), 2016 FC 612, involved a dispute over the sale of preloaded "plug-and-play" set-top boxes that contained software applications designed to access and download unauthorized copies of the plaintiffs' copyright protected works from illegal online streaming websites and illegal Internet protocol television sites. The plaintiffs sued individual and corporate resellers of the set-top boxes for copyright infringement and violation of the Radiocommunication Act. A defendant argued that the pre-loaded set-top boxes were analogous to a computer on which anyone can install freely available applications and were nothing more than a conduit with substantial non-infringing uses. The defendant also invoked the defence for Internet intermediaries provided by Copyright Act, s. 2.4(1)(b) on the basis that the defendant was simply providing a means of telecommunication for use by another person. The court rejected the defendant's arguments. The court held that the plaintiffs had demonstrated a serious issue to be tried as to whether the defendants were inducing or authorizing copyright infringement. The court held that the defence for Internet intermediaries was not applicable to the defendants because they deliberately encouraged and assisted customers and potential customers to access the plaintiffs' content without the need for a cable subscription. The court held that the plaintiffs would suffer irreparable harm if the injunction was not granted because the continued sale of the preloaded set-top boxes would allow consumers to continue to access copyrighted content, even if the plaintiffs were successful at trial, and because the defendants were unlikely to have the financial resources required to compensate the plaintiffs for their losses. The court held that the balance of convenience favoured an injunction because the defendants would not unduly suffer from being restricted to selling and advertising set-top boxes with only legal, non-copyright-infringing applications. The court granted an injunction restraining the defendants from configuring, advertising, offering for sale or selling set-top boxes adapted to provide users with unauthorized access to the plaintiffs' works, but refused the plaintiffs' request to extend the injunction to persons who were not named defendants.

5. Damages for Unjustified Takedown Notice

Whyte Potter-Mäl c. Topdawg Entertainment Inc., 2016 QCCQ 11725, involved a claim for damages after one of the plaintiff's songs was taken down from YouTube and SoundCloud for two months due to the defendants' report that the song infringed their copyright. The plaintiff sought damages in the amount of $15,000. The defendants did not contest the application. The court concluded that the plaintiff's income and reputation were negatively affected by the defendants' false copyright infringement report. The court awarded the plaintiff $5,000 in moral and material damages to be paid by the defendants jointly, and $1,000 per defendant as an additional indemnity.

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