This is the second in our 3-part employment law series.

Employees are often asked to sign a set of “restrictive covenants” as part of their employment agreement. This is the case in many competitive industries, and particularly in technology companies. These clauses can include non-competition restrictions, non-solicitation obligations, and other restrictions which bind the employee after termination. In Globex Foreign Exchange Corporation v. Kelcher , 2011 ABCA 240, the Alberta Court of Appeal reviewed the enforeability of these clauses. This case provides guidance for drafting and imposing restrictive covenants. Here is a summary of some of the court’s most important findings:

• Restrictive covenants can fail due to the “lack of consideration”. The employee has to receive something of real benefit in exchange for agreeing to be bound to the restriction. An employer who wants to impose a restrictive covenant in the middle of the employment relationship must take special care, since continued employment alone does not provide sufficient consideration for a new restriction to be imposed during the term of employment. This is because the employer is already required to continue the employment until there are grounds for dismissal or reasonable notice of termination is given.
• Non-solicitation and non-competition covenants are not enforceable unless they are reasonable. What’s reasonable will depend upon the circumstances of the industry, the employer and the employee. For one of the ex-employees in this case, the court found that the restriction was unreasonably wide, because it prevented him from soliciting any customer for a period of 18 months. In other words, this restriction was not limited to customers with whom the ex-employee had a relationship during employment. The employer in this case had no legitimate interest in protecting this category of customers from solicitation by the ex-employee.
• An employer remains free to dismiss an employee at any time provided there is just cause, or there is reasonable notice of termination, or payment in lieu of notice. If none of these occurs, then the employee has been wrongfully dismissed, and wrongful termination renders the restrictive covenants unenforceable. In other words, an employee who is not terminated for just cause, or given reasonable notice or payment in lieu cannot be held to the non-competition or non-solicitation restrictions that appear in the employment agreement.

Lessons for business? Review your restrictive covenants with experienced counsel. Carefully consider the process of introducing new employment terms in the middle of an employment relationship. And handle terminations very carefully to avoid the problems of wrongful dismissal.

Calgary – 07:00 MST

How easy is it to get an injunction against Google? In Nazerali v. Mitchell, a man complained of online defamation, and obtained a preliminary injunction against the author of the allegedly defamatory content, the hosting company (Nozone, Inc.), the domain name registrar (GoDaddy) and Google. The Court ordered the injunction, which included the order prohibiting Google “from permitting the Google.com or Google.ca search engines from returning any search result from www.deepcapture.com.”  Essentially this results in shutting down the (allegedly) offending website, since the court considered it “impossible surgically to eliminate just the offending phrases”. While this seems to be a dramatic result, considering it was obtained on an ex-parte basis (the other side did not appear at the hearing), it is not without precedent in Canada.

In Canadian National Railway Company v. Google Inc., 2010 ONSC 3121 (CanLII), the court issued an interim injunction requiring Google to remove a blog hosted on Google’s Blogspot platform.

The injunction in Nazerali v. Mitchell was time-limited and is set to expire tomorrow (December 2).

Hat tip to Alan Macek for highlighting this case.

Calgary – 07:00 MST

 

The Stop Online Piracy Act is a controversial U.S. bill now working its way through Congress. The proposed law is designed (in part) to knock-out foreign websites that are suspected of infringing intellectual property rights. By targetting foreign “rogue” websites and establishing new causes of action against website operators for copyright or trademark infringement, the legislation has raised concerns about ISP liability, and about  how it impacts the operation of the domain name system. SOPA permits the U.S. Attorney General to take action against a “foreign infringing site” such as a Canadian site, and obtain a court injunction against the site. Once an injunction is issued, the A.G. can serve a copy on a number of intermediaries, who must then take action within 5 days.

• ISPs can be ordered to block access to the site by preventing DNS resolution.
• Search engines can be ordered to block the site from search results. 
• Payment networks such as PayPal can be ordered to suspend transactions between the site and U.S. customers.
• Even ad networks can be ordered to stop serving ads on the site.

We will be monitoring the progress of this proposed IP law in the US.

Related Reading: Summary of SOPA, Concerns and Implications (PDF)

Calgary – 07:00 MST  

 

My recent article can be found here: Canada’s New Anti-Spam Legislation: How can it impact your business?

Related Reading: Canada’s “New” Anti-Spam Law

 

Calgary – 07:00 MST

 

My article Coming to terms with online copyright is published in the November 25, 2011 issue of the Lawyers Weekly. It reviews a recent decision of the B.C. Supreme Court in Century 21 Canada Ltd. Partnership v. Rogers Communications Inc. , [2011] B.C.J. No. 1679. The decision reviews the current state of the law in Canada on the topics of online contracting and copyright, and even the question of whether unauthorized access to a website constitutes trespass.

Calgary – 07:00 MST

 

 

 

This post is the first in our 3-part employment law series.  Recent cases have again focused the spotlight on this vexing issue: when an employee leaves, do they take their social media contacts with them, or check them at the door?  Once upon a time, social media was something that employers asked you not to do while on the job. Now, Facebook, LinkedIn, Twitter, YouTube and Instagram feeds are not just idle time-burners, they might be part of your job description. In the UK case of Hays Specialist Recruitment (Holdings) Ltd. v. Ions, an employee was ordered to disclose his LinkedIn contacts when he left his employer, and a 2011 case in the US (PhoneDog v. Kravitz, 2011 WL 5415612 (N.D. Ca.; Nov. 8, 2011)) is grappling with this issue, where an employer claims $340,000 in damages from an ex-employee.  Lessons for business?

• Check your own employment policies to see whether this is covered, and if not, consider introducing effective policies to manage social media issues;
• Employees who are hired specifically for social media marketing are the obvious ones to look at, but salespeople, managers or executives should also be considered;
• Theft of trade-secrets is often claimed, but commonly fails on the grounds that the social media contacts are often available for all to see.

Calgary – 07:00 MST

 

   

For more, see mimiandeunice.com Calgary – 07:00 MST 

 

A simmering IP infringement case between Oracle and Google raises some fascinating copyright issues for software: what scope of protection is given to functional elements in an SDK (software development kit) or an API (application programming interface)? The case of ORACLE AMERICA, INC. v. GOOGLE INC. (Case No. 3:10-cv-03561-WHA) is in pre-trial contortions, with the trial currently slated for 2012. None of this has been decided in court, it merely focusses attention on a very narrow issue of copyright protection for certain elements of software code (there is a patent infringement claim on the table as well).  Oracle alleges that Google infringed copyright in Java code when it built the Android software platform. Specifically, Oracle complains that Google copied design specifications of some 37 APIs for Java libraries, as well as Java source code, object code and comments in 12 software files. In its defence, Google claims that the APIs are purely functional elements and are not eligible for copyright protection. Will this threaten Android ? Likely not. Google has articulated a compelling argument that there is no copyright in the Java APIs (see here (PDF)), but if the court disagrees and finds either copyright or patent infringement, it will merely trigger a damages calculations, and millions of dollars in royalty payments, not a death-knell for Android.

In Canada, the law is clear (see Delrina Corporation v. Triolet Systems Inc., a 2002 Ontario Court of Appeal decision) computer programming that is dictated by the operating system or reflects common programming practices is not original expression and will not receive copyright protection.  In the meantime, we will watch the Oracle vs. Google case to see if it goes to trial before the parties can reach settlement.

Further Reading including Google and Oracle Trial Briefs.

Calgary – 07:00 MST

 

Their December 1st Launch Party is just a few weeks away: Get tickets here. It’s an annual event for enterprising Calgary technology companies to spend a moment in the spotlight and get support and recognition from the tech community.

Calgary – 07:00

As we reported last January ( Intellectual Property Law in 2011) Canada passed an Anti-Spam Law in December 2010 with the unwieldly title of “An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act” (… guaranteed to trip up Twitter character limits).

The Anti-Spam Law, getting ready to celebrate its one-year birthday, is not yet in force.  It’s in a bureaucratic holding pattern as the regulations are drafted and redrafted. What this means in practice is that the government is navigating through the demands of various business and industry groups, all of whom want to avoid being saddled with high implementation costs. The law is not expected to take effect until 2012. Stay tuned.

Calgary – 07:00 MDT

 

I attended and spoke at the 3rd Cloud Computing conference today, and here are a few points to take-home:

• Pay attention to governing law clauses (which law applies) and dispute resolution procedures (how do we resolve disputes), particularly for cloud service providers whose customers are worldwide;
• Limitations of liability in the context of the “public cloud” are critical. These clauses can be upheld if drafted clearly and carefully, but they will be struck down if they are unclear, or if there are overriding public policy reasons. 
• If you are a cloud-service user, and your use of cloud services involves the hosting of personal information (for example, information of your own end-customers), consider this: if one of those customers withdraws consent to the use of his or her personal information, do you have a protocol in place to track that withdrawal back through the cloud service provider, to the host who may be holding the data?

 

For a copy of my paper, please email me.

Calgary – 12:30 MDT

 

 

 You’re in good company. Even the late Steve Jobs had his complaints about this. In a biography of the Apple founder, Mr. Jobs complains that Android was “grand theft”, and he vowed to fight back. Is Android a rip-off of the iPhone? It certainly followed Apple.  The iPhone was launched in 2007, Android was launched in October, 2008. Apple introduced its App Store in July, 2008. Android Market came out a few months later. Even though it entered the marketplace later, by 2010, Android captured 44% of all mobile app downloads in Q2 2011, passing Apple’s 31% stake (see CNET report) The numbers are hard to crunch (remember, iOS is on multiple hardware devices made by one manufacturer, and Android sits on over 40 smartphones made by six manufacturers), and Apple’s system comes out on top by some measures, but by August 2011, some estimates put Android at a leading 48% of the smartphone market share.

So there is no doubt that Android has stormed from behind as a credible alternative to Apple’s ecosystem, but does that make it a “stolen idea”? Not from the perspective of intellectual property law, since there is no protection in the overall idea of a mobile platform that can run third-party apps. The real question is whether Google copied iOS code (there’s been no suggestion of that), used Apple’s trade-marks (nope), or infringed any of Apple’s patents (see this story for one of the many Apple vs. Android patent fights). 

In any event, there is a fine line between infringement and inspiration. Legend has it that Mr. Jobs was “inspired” by the mouse he originally saw at a Xerox research facility. Neither did Mr. Jobs invent the MP3 player or the idea of a mobile device running third-party apps. My Palm Treo was doing that years before the iPhone was launched.

Calgary – 07:00 MDT

 

A reminder: next week on November 1 & 2, 2011, the 3rd Cloud Computing Law conference will be held in Calgary, hosted by Federated Press. Richard Stobbe will be presenting on the topic of risk-allocation in cloud-based services such as iCloud and other enterprise cloud computing contracts, including warranties, indemnification and limitation of liability clauses.  

IT lawyers and in-house counsel from top companies will review:

• the risks & legal pitfalls of cloud computing
• legal and compliance issues 
• the implications of virtual storage on legal jurisdiction questions
• key issues that need to be addressed when negotiating and drafting a cloud computing agreement  

For registration details: Cloud Computing Law Conference (Calgary) 

Readers of ipblog.ca are eligible for a 15% discount – use this code when registering: CCL1111/PR 

Calgary – 07:00 MDT

 

iOS devices generate a trove of personal information. Do app-developers have access to the personal information of iOS device users? This is the basis of a complaint launched by a US group, as a nationwide class action lawsuit against Apple and a number of iOS app developers. The claim suffered a setback in September when a US judge dismissed the suit (see the PDF; the dismissal makes for interesting reading), with leave to amend.

There are more than 200 million iOS devices in play around the planet, several hundred thousand available apps, and reams of personal info generated by users: address book entries, cell phone numbers, file systems, geolocation data, subscriber identity numbers, keyboard cache, photographs, SIM card numbers, and unique device identifiers.  Who has access to this info, and for what purpose, are questions that have cast a cloud over Apple’s popular ecosystem. 

This story is one that will likely come back through an amended complaint.

Calgary – 07:00 MDT

This is a story we’ve been following for several years (see our past posts here: Update: Canadian Online Defamation & Hyperlink Case). It’s based on an allegation of online defamation brought by businessman Wayne Crookes, which ultimately focussed on one issue. To succeed in an action for defamation, a person must prove on a balance of probabilities that the defamatory words were “published”. If you hyperlink to defamatory content, can you be liable for “publishing” that defamatory content?

In a decision this week in the case of Crookes v. Newton, 2011 SCC 47, the country’s top court has upheld the lower court decisions, and decided that there was no publication of the defamatory content in this case. A hyperlink, by itself, is not “publication” of the defamatory content to which it refers. To decide otherwise would “seriously restrict the flow of information on the Internet and, as a result, freedom of expression,” according to the court.

Some in the court pointed out that a blanket statement that hyperlinks can never constitute publication is too broad, since links can take many forms. The consensus is that a mere general reference to a website is not enough to find publication. Anyone who links to salacious gossip can now breathe a little easier.

Calgary – 07:00 MDT

 

Just when you thought it was safe to go back in the water….along comes another change to the domain name world.

This is a final reminder that the Sunrise period for the .XXX blocking process runs until Friday, October 28, 2011, to protect Canadian trade-marks. To be eligible for this procedure, the request must correspond to a trade-mark that was registered by Sept. 1, 2011. For more info, see this link. 

Next up:  The Canadian Internet Registration Authority (CIRA) recently announced its own changes within the .CA domain. CIRA is currently proposing to introduce French-accented letters. The current system only recognizes .CA domain names in ASCII or non-accented letters (a-z) and numbers. CIRA is considering the implementation of French Internationalized Domain Names (IDNs) at the second level (to the left of the dot). What does this mean? This would permit the use of accented letters such as those listed below:

1. é, ë, ê, è
2. â, à
3. ô
4. ù, û, ü
5. ç
6. î, ï

Yes, this would come complete with its own Sunrise period, to permit existing registrants to preregister and a landrush protocol which is similar to other domain name changes such as the introduction of the .XXX domain. For more info on CIRA’s proposed changes, see this link. Calgary – 07:00 MDT

 

Here are two recent U.S. software decisions to note. Both decisions strengthen the hand of software vendors:

1. In a follow-up to our earlier post (Software License Upheld), the Ninth Circuit Court of Appeals decision in Vernor v. Autodesk Inc. has been denied leave to appeal, meaning the US Supreme Court has elected not to review the decision. This case dealt with resales by Vernor of used copies of AutoCAD software. Vernor claimed the resales were permitted under the “first sale doctrine”. The decision stands for the proposition that a software license is an important exception to the “first sale” defence. This is because the court found that Autodesk had not sold copies but merely licensed copies of the copyrighted work. 
2. In another Ninth Circuit decision ( Apple Inc. v. Psystar Corp., 9th Cir. Cal. Sept. 28, 2011), a small computer reseller operated a business re-selling Mac OS X pre-installed into non-Apple computers.  Apple complained that this was an infringement of copyright and a breach of the Mac OS X license agreement. Specifically, Apple’s software license agreement requires Mac OS X users to run their copies only on Apple computers. Psystar raised the defence that this was restrictive and constituted “copyright misuse”. The court sided with Apple, pointing out that to demonstrate “copyright misuse”, the license agreement would have to restrict creativity or restrict competition. In this case, the Mac OS X license agreement did neither. Apple’s license does not restrict a competitor’s ability to develop its own software, nor does it prohibit customers from using non-Apple components with Apple computers. Instead, Apple’s license merely restricts the use of Apple’s own software to its own hardware.

Calgary – 07:00 MDT

In our previous post (Privacy & Freedom of Expression: Alberta Court Says Privacy Law is Unconstitutional), we discussed the recent Alberta decision that struck down portions of a provincial privacy law (the Personal Information Protection Act), because of the way it limited protections for organizations other than “pure journalists”. Let me put this another way: collection and use of personal information is regulated by PIPA; in that Act, if you collect personal information for “journalistic purposes” and no other purposes, then you would be exempt from the regulations set out in PIPA. It’s like a get-out-of-jail card for journalists. The hitch is that the collection of personal info has to be “journalistic purposes” and no other purposes. However the court in United Food and Commercial Workers, Local 401 v. Alberta (Information and Privacy Commissioner), 2011 ABQB 415 (CanLII) said that is an infringement of the right to free expression for all those organizations who aren’t “pure journalists” – that is, organizations who might collect personal info for some purpose other than journalism. The Supreme Court of Canada in its 2009 decision of Grant v. Torstar Corp. (2009 SCC 61), defined “journalist” broadly to include bloggers and anyone “publishing material of public interest in any medium”.  So is the effect of these two decisions to create a loophole for anyone to collect personal information so long as they are “publishing material of public interest”? Anyone with an internet connection can set up a blog, Facebook page or Twitter account (or all three) in about 5 minutes, so the barriers to entry to qualify as a “journalist” and start publishing personal information appear low. It appears we have a pretty big hole in Alberta’s privacy laws.   Calgary – 07:00 MDT

The Globe and Mail carries an interesting article penned by John Manley on intellectual property protection for software and IT companies and the trouble with patent trolls: Intellectual property: A new kind of arms race, with patents as ammo.

Calgary – 07:00 MDT 

 

In Louis Vuitton Malletier SA v. Akanoc Solutions, Inc., No. 10-15909 (9th Cir. Sept. 12, 2011) the US Ninth Circuit Court of Appeals found that “providing direct infringers with server space” qualifies as a material contribution for contributory copyright infringement of copyright. In Canada, we have the concept of a “authorizing infringement”, but generally, a person does not authorize infringement by authorizing the mere use of equipment (such as server space) that could be used to infringe copyright (according to the Supreme Court in the CCH case).  “Authorize” means to approve, permit and encourage the infringement. However, a court in Canada may find that copyright infringement is “authorized” in circumstances where there is something less than less than direct and positive approval and encouragement, for example, if there is some level of control over the infringing actions. This concept dates back to early cases  from the 1920s (Falcon’s case) and 1940s where “certain mechanical contrivances” (transcription turntables) were used to copy musical recordings, and became the subject of copyright infringement claims.

Calgary – 07:00 MDT