Canada: Supreme Court Of Canada Upholds Global Injunction For IP Infringement

In Google Inc. v. Equustek Solutions Inc., 2017 SCC 34, the Supreme Court of Canada has upheld the injunctions issued by lower courts that required Google to globally de index a defendant's websites which were unlawfully being used to sell the intellectual property of another company.

In a 7-2 majority decision, the Supreme Court concluded that where it is necessary to ensure an injunction's effectiveness, a court can grant an injunction enjoining conduct anywhere in the world. In the case of the Internet, it "has no borders — its natural habitat is global." Therefore, the only way to ensure that the injunction attained its objective was to have it apply globally.

Background and Facts

Equustek is the plaintiff in an underlying action against Datalink for infringement of certain intellectual property rights.  Equustek is in the business of manufacturing networking devices for complex industrial equipment.  Equustek launched an action in the Supreme Court of British Columbia claiming that Datalink, while acting as a distributor of Equustek's products, began to re label one of the products and pass it off as its own. Datalink was also accused of acquiring confidential information and trade secrets belonging to Equustek, and using them to design and manufacture a competing product.

Initially, Datalink filed statements of defence disputing Equustek's claims, but eventually abandoned the proceedings and left British Columbia.  Subsequently, Equustek successfully obtained a number of orders against Datalink, including a Mareva injunction freezing Datalink's worldwide assets (including its entire product inventory), and an interlocutory injunction prohibiting Datalink from dealing with broad classes of intellectual property. 

Despite the court orders prohibiting the sale of inventory and the use of Equustek's intellectual property, Datalink continues to carry on its business from an unknown location, selling its impugned product on its websites to customers all over the world.

Not knowing where Datalink or its suppliers were, and finding itself unable to have the websites removed by the websites' hosting companies, Equustek approached Google and requested that it de index Datalink's websites. While initially Google refused, Google asked Equustek to obtain a court order prohibiting Datalink from carrying on business on the Internet, as Google indicated that it would comply with such an order by removing specific webpages. 

Subsequently, an injunction was issued by the Supreme Court of British Columbia ordering Datalink to cease operating or carrying on business through any website.  Google proceeded to de-index 345 specific webpages associated with Datalink; however, it did not de index all of Datalink's websites. As a result, Datalink was able to simply move the objectionable content to new pages within its websites, thus circumventing the court orders.

Moreover, Google had limited the de indexing to searches conducted on google.ca.  As a result, potential purchasers could access Datalink's websites by using a different country's Google URL.  This was particularly a problem for Equustek, as the majority of Datalink's unlawful sales were to purchasers outside of Canada.  Equustek therefore obtained an interlocutory injunction to enjoin Google from displaying any part of Datalink's websites on any of Google's search results worldwide. This global interlocutory injunction was upheld on appeal, following which Google appealed to the Supreme Court of Canada.

Supreme Court's Analysis and Decision

The entire Court agreed that it had jurisdiction to maintain the injunction against Google to globally de-index Datalink's websites from Google's search results. However, the Court split, 7-2, in concluding that it should affirm.

According to RJR MacDonald, Equustek needed to establish that there was a serious issue to be tried, that it would suffer irreparable harm absent the injunction, and that the balance of convenience was in favour of granting the injunction. The parties agreed that there was a serious issue for trial and that Datalink was causing Equustek irreparable harm. However, Google argued that the injunction should be lifted for reasons including:

  1. as a non-party, Google should be immune from the injunction;
  2. the worldwide effect of the injunction made it improper; and
  3. freedom of expression concerns should have tipped the balance of convenience against issuing the injunction.

These arguments failed to persuade the majority.

Injunction can apply to a non-party

The majority held that "[n]ot only can injunctive relief be ordered against someone who is not a party to the underlying lawsuit, the contours of the test are not changed." Whether an injunction affects non-parties is a factor for a court to consider when determining whether to grant an injunction, but does not affect the court's authority to grant an injunction. The majority cited analogous jurisprudence in which Norwich orders and Mareva injunctions had been applied to non-parties, and found that the injunction against Google was necessary "in order to prevent the facilitation of Datalink's ability to defy court orders and do irreparable harm to Equustek."

Injunction can apply extraterritorially

The majority held that "[w]hen a court has in personam jurisdiction, and where it is necessary to ensure the injunction's effectiveness, it can grant an injunction enjoining that person's conduct anywhere in the world." The majority deferred to the trial judge's finding that "to be effective, even within Canada, Google must block search results on all of its websites."

Google argued that a global injunction would violate international comity because it was possible that the injunction could not have been obtained in a foreign jurisdiction or that Google's compliance could result in its violating foreign laws. The majority found those concerns to be theoretical, noted that most countries likely recognize the intellectual property rights underlying the injunction, and commented that Google could apply to have the injunction varied if necessary for international comity.

The majority consequently concluded as follows:

"The only way to ensure that the interlocutory injunction attained its objective was to have it apply where Google operates – globally. As [the trial judge] found, the majority of Datalink's sales take place outside Canada. If the injunction were restricted to Canada alone or to google.ca, as Google suggests it should have been, the remedy would be deprived of its intended ability to prevent irreparable harm."

Irreparable harm outweighs freedom of expression

The majority acknowledged the importance of being respectful of freedom of expression concerns, particularly in the context of international comity. However, the majority found that those concerns did not tip the balance of convenience in favour of Google:

"This is not an order to remove speech that, on its face, engages freedom of expression values, it is an order to de-index websites that are in violation of several court orders. We have not, to date, accepted that freedom of expression requires the facilitation of the unlawful sales of goods."

Even if the injunction had engaged freedom of expression issues, the majority commented that they would have been "far outweighed" by the need to prevent irreparable harm resulting from Datalink's breach of court orders.

Additional considerations

The majority considered a handful of additional factors in maintaining the injunction:

  • the injunction did not force Google to cease being a content neutral search provider, as it did not require Google to monitor Internet content;
  • the balance of convenience did not favour Google because the only obligation the injunction created was for Google to de-index Datalink websites, which was only a slight expansion of removing individual URLs, which Google was already doing; and
  • the injunction's duration alone did not convert the injunction from being interlocutory to being final.

Dissent

The minority would not have maintained the injunction against Google. The minority's view was that the Court should have applied judicial restraint and lifted the injunction on the bases that the injunction was effectively a permanent injunction, Google was a non-party, the injunction was mandatory (i.e., it required ongoing modification and supervision in view of Datalink's continuing circumvention attempts), the injunction had not been shown to be effective, and alternatives to the injunction were available.

Conclusion

The IP infringer's activities and behaviour in this particular case were undoubtedly egregious.  Nevertheless, this decision has the potential to open the door to other rights holders enforcing their IP rights in Canada for purposes of obtaining international injunctive relief.  As the Supreme Court stated, in the case of the Internet, it "has no borders — its natural habitat is global".  Thus, the Court has recognized that businesses that offer products for sale online are doing so across national borders.  Where those sales activities infringe upon IP rights recognized by a Canadian court, the IP rights holder may be able to obtain a global injunction to prohibit those activities and compel others (such as search engines) to cease facilitating those activities.

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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