Canada: Litigation Update: SPAM

In this decision released in June, the plaintiffs brought a motion for a mandatory interlocutory injunction requiring the defendant Internet service provider (ISP) to reactive their website, which the defendant had disconnected after warning the plaintiffs that it did not allow unsolicited bulk e-mail to be distributed through its system. In concluding that the plaintiffs had not met the tripartite test for an interlocutory injunction established in RJR-MacDonald Inc. v. Canada, [1994] 1 S.C.R. 311, Wilson J. considered the power of the Internet as a legitimate commercial tool and recognized that without some degree of regulation, the integrity and utility of this new medium could be jeopardized.

The defendant Nexx was an ISP whose primary business was hosting websites on the Internet. Nexx entered into a one-year contract with the plaintiff, Codes Communications Inc., a web page design company working exclusively for the plaintiff 1267623 Ontario Inc., an e-commerce home furnishing company, to host their website www.beaverhome.com.

Several months after Nexx entered into the one-year service agreement with the plaintiffs, it began to receive complaints from other Internet users concerning the distribution of unsolicited bulk e-mail, known colloquially as "spam". Nexx informed the plaintiffs that unsolicited bulk e-mail was not permitted and that continuation of such activity could lead to the termination of service. Subsequent to this warning, the plaintiffs retained a third party to send the bulk e-mail on their behalf, at a rate of 200,000 messages per day. Although the bulk e-mail was sent randomly to any Internet users, some Nexx clients received the unsolicited advertising. As a result of the plaintiffs’ continued practices, Nexx deactivated their website, alleging that such unsolicited bulk e-mailing constituted a breach of contract by violating the rules of Netiquette. In response, the plaintiffs claimed that the deactivation by Nexx was a breach of the service contract between the parties.

While the governing contract did not specifically forbid bulk e-mail advertising, under the contract the client did agree to follow generally accepted "Netiquette" when sending e-mail messages or posting newsgroup messages. The contract also permitted Nexx to add terms to the contract so long as the client was reimbursed for the balance owing under the contract if they did not agree with the new term. The plaintiffs argued that the sending out of bulk e-mail through a third party was not a breach of Netiquette and one of the main issues to be determined by the court on this motion was whether unsolicited bulk e-mail offended what it described as "the growing body of acceptable, though as yet largely unwritten, etiquette with respect to conduct by users of the Internet."

The Court ultimately concluded that unless a service provider specifically allows in the contract for unsolicited commercial bulk e-mail to be distributed, sending out such e-mail for commercial advertising purposes was contrary to the emerging principles of Netiquette. In so doing, Wilson J. relied on jurisprudence from the United States regarding unsolicited bulk e-mail, literature about the costs of spam to both ISPs and the consumer targets of spammers, the complaints tendered in evidence from several Nexx customers who were victims of the plaintiffs’ junk e-mail campaigns, as well as the fact that after the deactivation the plaintiffs were unable to find another ISP who would permit bulk e-mail advertising.

Wilson J. also considered that under the governing service contract, Nexx had the power to add terms to the contract so long as they were willing to reimburse the balance owing under the contract if the client was not in agreement with the new term. She held that as a result of this particular provision, Nexx would be entitled to add a term to the contract prohibiting unsolicited commercial bulk e-mail upon payment of the prorated balance of the fees that were pre-paid for the one-year term of the contract.

In the course of her reasons, Wilson J. acknowledged the Internet as a potent and legitimate means of advertising, with selling on the Internet being of benefit to retailers and consumers alike. However, she also recognized the fact that the use of the Internet is in its relative infancy and in most instances, operates without written rules of conduct or formal regulation. Wilson J. stated at page 48 that:

This last remark is also interesting in that the Court characterizes e-mail addresses as essentially personal, thereby highlighting the potential privacy issues being raised by spam and junk e-mail, although they did not specifically arise in the case at bar. Her mention of the American case of Parker v. C.N. Enterprises, No. 97-06273 (Tex. Travis County Dist. Ct. Nov. 10, 1997), where a Texas court found that the unauthorized use of the plaintiff’s e-mail address through the defendant’s bulk e-mailing practices constituted common law nuisance and trespass, illustrates how the Court recognized that spam, while possessing little, if any, inherent value, has the potential to inflict a harm on several different levels.

In this decision, the Court interpreted and ultimately enforced the unwritten, good-neighbour rules of conduct that have come to be known as Netiquette in order to preserve and protect the integrity and utility of the Internet on the basis of a broad term in the service contract between the parties. It remains to be seen whether a service contract which does not explicitly require the user to adhere to Netiquette would also be interpreted as prohibiting unsolicited bulk e-mail, based on an implied condition to follow a generally understood code of Internet communication.

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