When you buy a business, it is common for the seller to agree to non-competition restrictions. In other words, the seller agrees not to compete against you for a certain period of time afterwards. These clauses are standard, but can be tricky to enforce, as shown in the recent decision in Belron Canada Incorporated v. TCG International Inc., 2009 BCSC 596 (CanLII). 

In 2005, Belron bought the Speedy Auto Glass business in Canada from TCG for about $53 million, a deal which included the trade-marks, franchise agreements and proprietary glass repair technology.  For this price, Belron expected that TCG would refrain from competing against Belron in the auto-glass repair business in Canada for seven years.

When TCG launched a website at www.windshields.com that seemed to target Canadian customers, Belron sued for breach of the non-competition promises, and sought an injunction to restrain TCG from operating the site in Canada. In this case, the court wasn’t convinced that the injunction should be issued, so the case will go to trial for a final decision on whether the site constitutes a breach of the non-competition obligations.  The Belron decision applied the recent Supreme Court of Canada decision in Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6, a case which debated the meaning of the phrase “Metropolitan City of Vancouver” in a non-competition clause. The Shafron decision also illustrates the importance of taking care in drafting clear non-competition clases.

The lessons for business?

• In any business acquisition, it is important for both sides to get advice on non-competition, non-solicitation and non-interference clauses to ensure the clauses are clear and enforceable;
• Where intellectual property assets are involved (as in the Belron case), special care must be taken to also review post-closing confidentiality and trade-secret obligations;
• “Injunctive Relief” clauses, which state that one party is automatically entitled to an injunction, are not necessarily enforceable. Belron had such a clause in its contract with TCG, but the court still did not issue the injunction order.

Calgary – 09:00 MST  

In our previous post on The Whisky Caper: Scotch Whisky Association vs. Glenora Distillers, we noted that a Canadian distiller won the right to use the word GLEN in its trade-mark for Canadian whisky, against the objections of the Scotch Whisky Association.  The Association has now announced  that it will appeal the decision up to the Supreme Court of Canada (SCC).  Even if the SCC agrees to hear the case, a decision won’t be expected for several years.

Calgary – 11:45 MST

Want to trade-mark the colour green? Just ask the makers of painter’s tape for some pointers.

They applied (several times) to register the colour GREEN as a trade-mark for their well-known green painter’s tape, based on use in Canada since 1993. 3M and others opposed the latest application, arguing that the trade-mark was not distinctive since many competitors also sold green tape products.

In the recent decision in 3M Company v. Tape Specialities Limited, 70 C.P.R. (4th) 138 (T.M.O.B.), the Canadian Trade-marks Opposition Board decided that the colour green was not distinctive of the applicant, and the application was refused (Trademark: COLOUR GREEN #3, Refused – Section 38(8), 1062931 )

Colour can be the subject of a trade-mark registration in Canada, but contrary to popular misconceptions, it does not provide the owner with a monopoly over the colour itself, just the colour as applied to a particular product – for example, Wedgwood was able to register the colour blue (specifically Pantone #658), as applied to boxes containing clocks (Trademark: Colour Blue design, Registered, 1166661, TMA689472 ). They claim use in Canada since 1800, making this arguably one of Canada’s oldest colour trade-marks (though I question whether Pantone #658 was around in the year 1800… but only lawyers quibble about such details.)

Calgary – 11:45 MST

Call it the “Facebook Factor”.  The way people use the internet and social media is colliding with litigation in ways that couldn’t have been foreseen even a few years ago:

• In a recent Nova Scotia case, a judge considered evidence of a plaintiff’s Facebook page in a personal injury lawsuit, and the evidence contradicted the plaintiff’s claim;
• In Murphy v Perger [2007] OJ No. 5511 (QL), a defence lawyer successfully forced production of post-accident Facebook pictures showing the plaintiff engaging in various social activities – pictures that were located on a private portion of the Facebook site;
• In Leduc v. Roman, 2009 CanLII 6838 (ON S.C.), the court permitted cross-examination of the plaintiff on the content he posted on his Facebook profile;
• In Australia and New Zealand, the courts have approved service of documents via a Facebook account (story: here and here);
• In the US, there have been a rash of similar cases (see links here, here, and here) leading to a mistrial in a drug-trafficking case (when jurors admitted that they researched the case via their iPhones and BlackBerrys), chaos in the federal corruption trial of a former state senator (jurors had posted updates on the case on Twitter and Facebook), and problems in a criminal case (a juror tried to “Friend” one of the witnesses).

Related content: free online webcast summit on “Copyright War,” June 9, 2009, including “Online Legal Issues: Facebook, MySpace, Twitter, YouTube, Blogs” 

Calgary – 10:30 MST

Maclean’s magazine (macleans.ca) interviewed Richard Stobbe, lawyer with the Technology & IP Group, for an article on defamation and internet law. The article takes a look at the “dark side” of anonymity on the internet and the state of the law in Canada.

Calgary – 9:45 MST

Rebranding is supposed to provoke a response, right? Consumer interest? Marketing awards? A trade-mark lawsuit?

Brick Brewing Co., an independent Ontario brewery, recently rebranded their Red Baron beer, updating the look with a new label, to the right.  The old label, at left, was used since the late 1980s and was registered as a trade-mark in 1991.

The new label attracted the attention of rival Labatt Brewing Company and last week Labatt sued for trade-mark infringement and sought an injunction, alleging that the new Reb Baron label was confusing with Labatt’s Brava label (left).  The Brava label was also registered as a trade-mark in April, 2009.

Though the word marks RED BARON v. BRAVA, for beer, are not at all similar, the look, colour, and layout of the labels is arguably more similar, since the word Baron is given more prominence in Brick’s new label.  This highlights the risks of rebranding.  The lessons for business?  Sometimes an updated label will be launched without the same level of scrutiny that is given to a new brand. Even with a “soft” launch such as this, trade-mark searches, trade-mark advice and industry awareness can help mitigate the risk of trade-mark disputes before a new brand or label is launched.

And sometimes, you get hit with a lawsuit just because your competitor is your competitor.

Calgary – 10:30 MST

ipblog.ca is available on your web browser from your BlackBerry or iPhone.  Bookmark the site for updates, articles and business tips on Canadian intellectual property law, trade-marks and internet law in the palm of your hand. 

Calgary – 10:00 MST

In the long-running IP battle between Mattel Inc., the makers of Barbie dolls, and MGA Entertainment Inc., the makers of rival Bratz dolls, a California federal court has issued a decision this week that appears to put a nail in the Bratz coffin.  The court dismissed MGA’s application to reduce the $100 million damage award granted to Mattel Inc. and went further. The court also implemented the order which bars MGA from making or selling the Bratz dolls.  A temporary receiver was also appointed to oversee MGA’s business.  The end of the battle appears to be near, through Bratz may still have some fight left.  The dispute arose after a designer, while he was under contract with Mattel, designed the Bratz concept, then secretly sold the concept to MGA.  The dispute centred on copyright and intellectual property claims that ultimately put the Bratz designs back into the possession of Mattel.

The lessons for business?  MGA obviously knew what it was doing, but to avoid the risk of inadvertently importing intellectual property belonging to a competitor, consider special clauses in employment and contractor agreements that can help mitigate the risks of hiring employees or contractors who bring trade secrets or IP with them when they join your company.

Calgary – 11:45 MST

It was another long battle for Microsoft, this time against a retail chain in Toronto trading under the banner “PC Village”.  In April, a Federal Court judge in Microsoft Corporation v. PC Village Co. Ltd. (2009 FC 401) awarded damages of $10,000 per copyright violation for a total of $150,000; plus $50,000 in punitive damages against all defendants jointly and severally; and a lump sum of $50,000 for solicitor/client costs and disbursements.  This means both the corporations and the individual employees are liable for the total award of $250,000.00 in damages.  The defendants initially resisted the allegations, retained a lawyer and appeared to mount a defence.  Then their defence collapsed, the defence lawyer resigned, and Microsoft won the case.

Microsoft appears to be continuing its piecemeal strategy of battling software piracy one pirate at a time. (See: Microsoft Scores Software Piracy Win and Copyright Infringer Hit with Fine )

Calgary – 15:30 MST

Two Canadian domain name decisions:

• In the saga of the domain name forsale.ca, another chapter has been written.  This domain name was the subject of an earlier battle between Globe Media and the then-owner, Dawn Internet (Globe Media International Corporation v. Dawn Internet Telephony Systems Inc, CIRA Decision 00059 (2006).  Globe Media failed in that dispute because any rights it claimed arose after the original registration of the domain name in 2000.  The domain name registration then lapsed, and was snapped up by a new registrant in January, 2009.  Globe Media offered to buy the domain name for $5,000, but by then the domain name had been flipped and sold to Bonfire Development, Inc. for $30,000.  Globe Media launched this complaint in February.  The panel found that the domain name “is so clearly generic that its registration cannot be seen as being registered in bad faith.” The complaint was dismissed. Further, the panel awarded costs of $5,000 against Globe Media for “reverse domain name hijacking“, the first award of its kind. Case Decision

 

• At first glance, this is a case determining that Americans cannot hold dot-ca domain names.  In a dispute over the domain name clearlylasik.ca, the complaint was summarily dismissed because the US complainant, who claimed rights to the mark ‘Clearly Lasik’ in Canada and carries on business in Canada under that name, failed to satisfy the Canadian presence requirements.  In fact, it appears the complainant does hold a registered trade-mark for CLEARLY LASIK, but failed to submit evidence of this.  The complaint would have likely succeeded since there was no response.  The disputed domain names now resolve to the Complainant’s site, suggesting that the matter was likely settled after this decision was rendered. Case Decision 

 

Calgary – 10:30 MST

A Quebec Superior Court judge has approved a class action in the case of Electronic-Rights Defence Committee ERDC c. Southam Inc. 2009 QCCS 1473 (search for ERDC in Superior Court judgements), a copyright case dealing with the inclusion of freelance articles in online databases, which could prove to be as important as the 2006 Supreme Court of Canada decision in Robertson v. Thomson Corp., 2006 SCC 43 [See: New Copyright Decision Released], the copyright battle pitting freelance writer Heather Robertson against the publishers of the Globe and Mail.

The impact on business? Just because you think you own the copyright in a particular work, don’t assume that right includes the right to reproduce the work in any and all media. We have been advising clients to include contractual language to clarify the rights of reproduction to include digital media.

Calgary – 18:20 MST

Last Friday, the Supreme Court of Canada upheld the decision in Fromm v. Warman, to award $30,000 in damages for internet defamation. The judgment of the Court of Appeal for Ontario, 2008 ONCA 842, handed down in December, 2008 [Link to Court of Appeal Decision] was upheld. Warman brought an action against Fromm for defamatory postings on various internet websites. Fromm took the position that the comments were “fair comment” on matters of public interest. The court upheld the finding that the postings were defamatory.

Calgary – 09:30 MST

On Friday, the federal government introduced long-overdue draft anti-spam legislation, the Electronic Commerce Protection Act. The law would allow civil lawsuits against spammers, and is designed to target email spam, as well as spam directed to cellphones and mobile devices. The proposed law would be enforced by the Privacy Commissioner, the Competition Bureau, and the CRTC, which raises questions about effective coordination of enforcement across multiple branches of government and quasi-government bodies. The law contemplates fines of up to $1 million for individuals and $10 million for corporate offenders.

Calgary – 20:45 MST

A year ago we posted a Patent Infringement Update on this case; earlier this month the USPTO rejected all 57 claims in a course-management software patent that US-based Blackboard Inc. used to successfully sue its Canadian competitor, Desire2Learn. The most recent rejection relates to claims added during the re-examination process [copies of the documents are posted here].  Blackboard originally obtained the software patent in 2006, but the patent was criticized for its broad claims covering technology that had been used by educational institutions and others for years at the time of filing. The battle is likely to continue, as Blackboard has since filed a new patent, and is suing its rival again for infringement of the new patent.

Calgary – 11:00 MST

A US appeals court has permitted an attack against Google’s (in)famous AdWords program by allowing a trade-mark infringement lawsuit to proceed.  The lawsuit was brought against Google by Rescuecom Corp., a computer service and support company.  Rescuecom alleged that Google’s AdWords program (its practice of selling the Rescuecom trade-mark to other advertisers, thereby triggering the appearance of a competitor’s advertisements and links when a Google user launched a search of Rescuecom’s trade-marks) was a violation of trade-mark rights.

On April 3, the US Second Circuit Court of Appeals ruled that Rescuecom’s lawsuit could proceed.  The outcome of this suit will be closely watched.

Related Reading: Trademark Infringement and Google AdWords  

Calgary – 14:00 MST

VANOC, the organizer of the 2010 Olympics, has launched another lawsuit in the lead-up to the 2010 Winter Games, this time to block ticket scalping. The suit filed in March against Coast2Coast Tickets alleges trade-mark violations in the effort to curb unauthorized ticket resales. The claim alleges the ticket reseller is using protected Olympic marks to give the public the impression that there is some affiliation with VANOC.  Over the past few years VANOC has also pursued trade-mark remedies against:

• a domainer who registered the domain names vancouver2010.org, vancouver2010.net, vancouverwhistler2010.net and vancouverwhisterler.com ;
• the owners of a business calling itself “Whistler Olympic Real Estate” and operating a website using the Internet domain name  ; and
• a distributor, Teepee Handicrafts Ltd., who sold and distributed merchandise bearing marks such as VANCOUVER 2010 and 2010 VANCOUVER WHISTLER without the permission of VANOC  .

Olympic litigation is likely to increase over the next year, as ambush marketing and unauthorized sales heat up in advance of the games.

Related Reading: VANOC Ticket Broker Suit Raises Concerns about Reach of Official Marks

Calgary – 10:30 MST

What happens when a licensor becomes insolvent?

When Body Blue Inc., a Canadian consumer products company, stumbled financially, a receiver was appointed in Canada under the Bankruptcy and Insolvency Act.  In its attempt to restructure the company and satisfy creditors, the receiver sold the company’s assets in May, 2006 for $7 million to a competitor consumer products company.  The assets expressly included certain technology which was the subject of an earlier license to Herbal Care, a US health products company. 

Herbal Care argued that its license remained unaffected.  However, a Canadian Court can allow a trustee to transfer the technology assets of a bankrupt company free and clear of any existing license.

In the final decision in Royal Bank of Canada v. Body Blue Inc., 2008 CanLII 19227 (ON S.C.), the Canadian Court affirmed that the new owner acquired the transferred assets free and clear of any claim of Herbal Care.  Herbal Care lost its license when the assets were transferred during the bankruptcy.

This result can be contrasted with Synergism Arithmetically Compounded Inc. v. Parkwood Hills Foodland Inc., 2000 CanLII 22781 (ON S.C.), where certain intellectual property assets – in this case, an insolvent company’s trade-marks and franchise agreements – were the subject of a security agreement.  A secured creditor stepped in, enforced its security, and acquired all the insolvent company’s trade-marks and franchise agreements.  Because the trade-marks were acquired by the secured creditor outside the bankruptcy, they never passed through the hands of the trustee, and they were transferred with the license rights intact.  Thus the new owner was entitled to sue for breach of the license, and trade-mark infringement, since it had acquired those rights along with the trade-mark assets.

As always, careful drafting and preventive steps can mitigate these risks.

Links to the case decisions:

Royal Bank of Canada v. Body Blue Inc.

Synergism Arithmetically Compounded Inc. v. Parkwood Hills Foodland Inc.
Calgary – 10:00 MST

 

A recent survey shows that departing employees are leaving the office with more than the photos of their kids – they’re walking off with trade secrets and confidential company information. A majority of the survey respondents said they burned confidential information onto a CD or DVD, around 40% dragged it to a USB drive or e-mailed documents to themselves. 

In Canada, the Supreme Court of Canada recently weighed in on this area of law. In RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54 , virtually all of the investment advisors at an RBC branch walked out one day (without notice) and joined RBC’s competitor, Merrill Lynch.  RBC sued its departing employees and also sued Merrill Lynch and its manager.  The case went up through trial, to the BC Court of Appeal, and was appealed up to the Supreme Court of Canada.  The court decided that the departing employees owed a duty of “good faith” to RBC, but that none of them was a “fiduciary”  – a special category which applies to employees with a special relationship to the corporation, such as senior managers, executives, directors and officers.  In the absence of a non-competition clause or fiduciary relationship, the departing employees had the legal right to leave RBC and to compete with their former employer. However, the court was clear that a departing employee might be liable for specific wrongs, such as improper use of confidential information of the former employer. 

Watch for our seminar on this and other topics at our Events page.

 

Calgary 11:30 MST

American computer giant Dell Inc. has launched a challenge against Canadian computer maker Psion Teklogix Inc. and its ownership of the trade-mark NETBOOK.  Psion registered the mark NETBOOK in both Canada and the US in 2000 (based on its original application filed in 1996), and now Dell is challenging that registration.  Lawyers for Dell argue that Psion has abandoned the mark by failing to use it in connection with laptops, or alternatively, they argue that the mark is generic and therefore not eligible to function as a trade-mark, since “the primary significance of the term to the relevant public is as the name for small and inexpensive laptop computers.”  Psion has an uphill battle since competitors are using the mark in a generic way, and are even filing trade-mark applications, including for COBY NETBOOK, WIND NETBOOK and G NETBOOK for personal computers, all of which erode the distinctiveness of NETBOOK as a mark that identifies Psion. To protect this mark the owner will have to fight off Dell’s challenge, oppose the multiple trade-mark applications by competitors, then go out and sue infringers across the industry. 

A good example of a once-unique mark that has fallen into a “dead zone” which makes it expensive to salvage.  The lesson for brand owners is two-fold: use-it-or-lose-it, and fiercely defend at the first sign of infringement.

Related reading: Generic Domain Names in Canada  and Update: Generic Trade-marks  

Calgary – 10:30 MST

 

UPS has a label-printing and shipment-tracking software program that is installed on a customer’s computer. So what happens when the UPS technician (rather than the customer’s own employee) installs the software, scrolls past the license agreement, and clicks “I accept”?

This situation was reviewed in the recent case of Via Viente Taiwan, L.P. v. United Parcel Service, Inc., 2009 WL 398729 (E.D. Tex. February 17, 2009).  When UPS was sued in Texas, it tried to deflect the lawsuit to the State of Georgia, the forum selected in the license agreement.  The customer argued that the license agreement was not binding because it was the UPS employee who clicked through, and the customer never actually agreed to the terms. The court upheld the agreement (and the forum-selection clause) because the customer should have been aware that the license agreement was part of the deal when it signed the general UPS Carrier Agreement that required the use of the software. Secondly, the court reasoned that the UPS technician likely would have been supervised by Via Viente employees during the software installation. Lastly, the customer had enjoyed the benefit of the agreement – including the UPS shipping services and the use of the software – so it wouldn’t have been fair to permit it to “pick and choose” and avoid the terms of the license agreement. The lawsuit was transferred to the Northern District of Georgia.

 

Calgary – 10:00 MST