Canada: Sellers Of Circumvention Devices Beware!

Last Updated: May 17 2017
Article by Lisa R. Lifshitz

On March 1, the Federal Court of Canada awarded Nintendo of America Inc. $12,760,000 in damages for copyright infringement and the circumvention of technological protection measures, or TPMs. The recent decision of Nintendo of America Inc. v. King marks the first time a Canadian court has provided comprehensive guidance on the Copyright Act's prohibition on the circumvention of TPMs and confirms the willingness of Canadian courts to significantly punish organization and individuals that attempt to circumvent TPMs used to protect valuable intellectual property rights.

Nintendo's use of TPMs

In 2012, the Canadian Copyright Act was amended to include provisions that prohibited circumventing TPMs and trafficking in circumvention devices in recognition of the importance of TPMs to protect copyrighted works, particularly in the video game industry.  

TPMs are devices, technologies or components that limit how protected works may be copied, accessed, shared or used. These "digital locks" allow owners to restrict how third parties interact with their works. Nintendo, the well-known video game company and seller of video game consoles such as Nintendo DS, 3DS and the Wii home video game console, uses TPMs to protect the products it manufactures and distributes to control access and use of the various video games that are used with its consoles. These measures include physical configurations, security checks, encryption and scrambling, data formatting techniques and unique tools and copy protection codes.

Go Cyber Shopping (2005) Ltd. runs a retail shop in Waterloo and several websites focusing on "mods and repairs for all major gaming consoles." Nintendo alleged that since 2013 Go Cyber advertised, sold and installed, through its storefront location and online, various devices designed to circumvent TPMs employed on Nintendo gaming consoles. Nintendo refers to these as devices as game copiers, and they allegedly allowed third parties to illegally download pirated versions of games and play them on Nintendo's consoles by mimicking game cards and discs. Additionally, Go Cyber marketed and sold "mod chips" designed to circumvent TPMs on the Wii console by modifying the firmware of the Wii console's disc drive or disabling various security routines so that users could play unauthorized copies of pirated Wii video games downloaded from the Internet.

In the interest of client service, Go Cyber even helpfully offered mod chip installation services where customers could drop off a Wii console to be "modded" with a mod chip. Go Cyber unabashedly promoted its activities through social media, including product announcements, actively engaged in discussions on social media regarding the status of new product shipments and took pre-orders for next-generation devices.

Before the court were three issues: (i) whether Go Cyber's actions had resulted in "secondary infringement" by contravening Nintendo's copyrights contrary to s. 27(2) of the act; (ii), whether Go Cyber had contravened the anti-circumvention provisions under s. 41(1) of the act; and (iii) the appropriate remedies if the court determined that Go Cyber had contravened the act.  

Claim of secondary infringement

The court considered two types of copyrighted words in the decision — the computer code and data used by Nintendo as part of its TPMs (header data) and the video games that Nintendo had developed for its video game consoles (Nintendo games). The header data consisted of three works in which Nintendo had registered copyright and each of the genuine game cards sold by the company contained two of the header data works. The header data contained code that represented Nintendo logos and were used by the consoles to display the logos on the screen when the device is turned on with a genuine card inserted. However, header data is also used by Nintendo as part its TPM system, since the header data must be present on the inserted game card in order for the Nintendo console to play a video game. Nintendo owns copyright in 585 video game works, with copyrights in 217 of the Nintendo Games registered in Canada.

Nintendo alleged that Go Cyber infringed its copyright in the header data contrary to s. 27(2) of the act in that (i) unauthorized copies of the works are either contained in the game copiers when they were sold by Go Cyber or are obtained by following Go Cyber's instructions; (ii) Go Cyber knew (or was willfully blind to the fact) that the game copiers contained such works; and (iii) Go Cyber sold, distributed and possessed the game copiers for the purpose of those activities.

Justice Douglas Campbell found that the game copiers sold by Go Cyber included the header data and that Go Cyber was aware of and had authorized the copying of Nintendo's copyrighted works without Nintendo's consent. Go Cyber was also found guilty of authorizing the infringement of Nintendo's works in providing guidance on how to download the header data. The court awarded Nintendo $60,000 in statutory damages pursuant to s. 38.1 of the act for Go Cyber's copyright infringement of the header data works.

Go Cyber's circumvention of TPMs

Nintendo employs detailed measures on its video game system to protect and control access to its copyrighted works, to prevent users from playing unauthorized copies of video games and from installing unauthorized software, including counterfeit games and software, on its consoles. In fact, the court found that Nintendo uses at least three different measures (physical configuration, boot up security checks and encryption and scrambling) on the Nintendo DS and 3DS consoles to control access, while the Wii console uses at least two different distinct control measures (format TPM and Wii copy protection codes).

In evaluating Go Cyber's circumvention of Nintendo's TPMs, the court outlined in detail the significance and need for TPMs to protect the rights of copyright owners in the digital age. The court recognized the substantial investment made by Nintendo in developing its works and that TPMs were critical in protecting Nintendo's intellectual property from "pirates" who attempt to benefit through unlawfully accessing and copying Nintendo's extensive library of creative works.   

Nintendo argued that the various control measures that it used to protect its video game system fell within the broad definition of "technological protection measures" in the act. Although there was no doubt that Go Cyber distributed various devices used to circumvent Nintendo's control measures, Go Cyber claimed that the control measures adopted by Nintendo did not fall within the TPM provisions of the act. Go Cyber argued that the physical configurations employed by Nintendo, such as the shape of the game card, did not meet the act's definition of a TPM. Go Cyber claimed that a TPM must create a barrier to the work being copied, as was suggested within the obiter dicta of a U.K. high court decision, and that Nintendo's physical configurations did not meet this requirement. Campbell decisively disagreed, finding that the TPM provisions of the Canadian act are broader than its U.K. equivalent, the Copyright, Designs and Patents Act. The court found that the physical configurations used by Nintendo met the requirements of the act for TPMs as they fall within the definition of "any effective technology, device or component that, in the ordinary course of its operation, (a) controls access to a work. . ."  

The court continued to adopt this broad interpretation of the TPM provisions, rejecting Go Cyber's argument that the term "circumvent" should be narrowly interpreted such that Go Cyber had only replicated and not actually circumvented Nintendo's control measures and, thus, avoided the act's TPM provisions.  

Determining the appropriate remedy for the circumvention of TPMs

Nintendo elected to recover statutory damages for both copyright infringement and TPM circumvention and the decision discussed in detail the court's approach to the damages award. Nintendo sought statutory damages for TPM circumvention on a per-work basis, i.e., a separate statutory damage award of $500 to $20,000 for each of the 585 Nintendo games made accessible by Go Cyber's circumvention devices.

Campbell awarded Nintendo the maximum award of $11.7 million in damages, in recognition of the value of the works protected, citing the need to deter future circumventers and also Go Cyber's bad faith (it had advertised itself as the "#1 Modchip Store") and misconduct. In addition to statutory damages, the court also awarded Nintendo $1 million in punitive damages to further deter these activities (and due to the fact that Go Cyber was actively taking pre-orders for TPM circumvention devices designed for the next generation of Nintendo consoles) and as discussed earlier, $60,000 in statutory damages for copyright infringement of the header data works. Nintendo also sought an injunction against Go Cyber to prohibit further copyright infringement in any other work owned by Nintendo and prevent further trafficking in any devices that circumvented Nintendo's TPMs and this was also granted, plus costs.

The Nintendo decision clearly recognizes that TPM's are critical for the protection of copyrighted works in the digital age and for promoting innovation. The mammoth statutory damages award, coupled with the levy of punitive damages, sends a strong signal that Canadian courts are willing to protect and enforce owners' rights and punish those who take steps to circumvent these protective measures.

Originally published by Canadian Lawyer Online - IT Girl Column

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.

Authors
Lisa R. Lifshitz
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
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