A brand is brought into sharp relief in the glare of the media spotlight. 

On a “tip” (from an investor short-selling Lululemon shares), the share price of the Canadian apparel-maker went for a ride this week.  The reputation of the LULULEMON ATHLETICA brand came under scrutiny amid allegations over the seaweed content of the company’s VITASEA clothing line.  Today the company countered with assurances about the results of independent tests and the share price was back up.

The brand lessons for business?

• In a fast-paced media environment, a small story can snowball and grab world headlines.  The response must be quick but also consistent across the company.  Confusion within will only fuel speculation.  Lululemon quickly engaged one of its contractors to re-test the fabric and put the matter to rest.
• If there were problems with the fabric, then the contracts with manufacturers and suppliers would quickly come into play. As a preventative measure, quality assurance provisions and warranties are critical components of any outsourcing agreement such as a manufacturing agreement or product supply contract.

 

Calgary – 14:20 MST

In Canada, many contracts contain “limitation of liability” clauses – in the intellectual property context, this can include technology licenses, software development contracts, outsourcing agreements and so on. For example, a typical clause may indicate that, regardless of the cause of the breach, the liability of one party is limited to a certain dollar amount.

Can these clauses actually limit liability? Generally, if the clause is well-drafted, clear, and isn’t buried in the fine-print then yes, a limitation of liability will be upheld by courts in Canada. There are exceptions: A court will refuse to uphold a limitation of liability clause if there has been a “fundamental breach” of the contract; in other words, a breach which goes to the very heart of the contract, and one party is deprived of the whole benefit of the contract. Courts will also look at whether the parties are in an equal bargaining position. And whether the limitation will result in an “unfair and unreasonable result”.
Here are a few examples, from the internet law context and also from general commercial law:

Zhu v. Merrill Lynch HSBC, 2002 BCPC 535 (CanLII) : this is an interesting internet law case in which Mr. Zhu first placed, then cancelled, an online sell order for shares on Merrill Lynch HSBC’s NetTrader system. He then placed a second sell order. The first sell order was never cancelled, with the result that two sell orders were processed, leaving Mr. Zhu in a short position. He claimed losses of $9,000 for having to make up the shortfall. Merrill Lynch HSBC sought to rely on the limitation of liability clause in its terms of service, but the court refused to uphold it. Two significant factors were the lack of evidence that Mr. Zhu ever assented to the terms, and also the higher degree of care required when handling financial investments.

Whighton v. Integrity Inspections Incorporated, 2007 ABQB 175 : a recent Alberta case where a house inspection failed to disclose the extent of repairs required; the house inspector sought to rely on a $10,000 limitation of liability. The court pointed to unequal bargaining power and relied on the “unfair and unreasonable result” argument to deny the limitation clause.

Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co., 1997 CanLII 4452 (ON C.A.): in this Ontario case, the Court of Appeal upheld a limitation of liability clause on behalf of a security company whose security system failed during an armed robbery of a jewelry store. The store sued after losing $50,000 in diamonds, and the security firm pointed to its contract which limited liability to “a sum not exceeding the annual service charge of $890”. The court upheld the limitation clause.

Calgary – 21: 35

The question is whether the trade-mark PERFUMEBAY is confusingly similar to EBAY for online sales of perfume. Yesterday after a lengthy battle, the court came down in eBay’s favour.

eBay Inc. secured broad protection for its famous EBAY mark in the decision released on Monday in Perfumebay.com Inc. v. eBay Inc., (Ninth Circuit Court of Appeals No. CV-04-01358-WDK, November 5, 2007). The decision upholds a permanent injunction against Perfumebay, stopping it from using the marks PERFUMEBAY (and variations such as perfumebay, perfume-bay or PerfumeBay). The injuction did not extend to “non-conjoined variants” (don’t you love lawyers?); in other words, eBay couldn’t prevent the use of “Perfume Bay” as two separate words. This is a minor and largely meaningless concession considering that Perfumebay’s business is all online and “non-conjoined variants” can’t function as domain names. This leaves Perfumebay without an internet storefront.

The Court reiterated the factors to be considered in determining trade-mark confusion in the internet context:

1. the similarity of the marks,
2. the relatedness of the goods and services, and
3. the parties’ simultaneous use of the Web as a marketing channel.

A mark can only enjoy protection within its field of use. Significantly, the Court defined eBay’s field of use as “the sale of products on an internet-based marketplace”. This appears to extend eBay’s trade-mark monopoly to include any mark that contains the suffix “bay” and involves online sales of any kind.
Calgary – 09:22 MST

Rather than becoming a mature, stable industry, the domain name world is still a shifting target. The release of new top-level domains provides fertile ground for domainers and cybersquatters. Trade-mark owners and their lawyers scramble to keep up with the steady stream of developments. If the WIPO dispute resolution statistics are any measure, we’re heading into another period of intense activity, not seen since the days of the 2000 dot-com boom. In 2000 WIPO handled a record 1,857 domain name cases; that record looks like it will be surpassed this year.

On the Canadian front, CIRA is working on its revised WHOIS Privacy Policy, with implementation scheduled for March 2008.

Internationally, the following is the current list of generic top-level domains and their sponsors:

• The .aero domain is reserved for members of the air-transport industry and is sponsored by Société Internationale de Télécommunications Aéronautiques (SITA).
• The .asia domain is restricted to the Pan-Asia and Asia Pacific community and is operated by DotAsia Organisation.
• The .biz domain is restricted to businesses and is operated by NeuLevel, Inc.
• The .cat domain is reserved for the Catalan linguistic and cultural community and is sponsored by Fundació puntCat
• The .com domain is operated by VeriSign Global Registry Services.
• The .coop domain is reserved for cooperative associations and is sponsored by Dot Cooperation LLC.
• The .info domain is operated by Afilias Limited.
• The .jobs domain is reserved for human resource managers and is sponsored by Employ Media LLC.
• The .mobi domain is reserved for consumers and providers of mobile products and services and is sponsored by mTLD Top Level Domain, Ltd.
• The .museum domain is reserved for museums and is sponsored by the Museum Domain Management Association.
• The .name domain is reserved for individuals and is operated by Global Name Registry.
• The .net domain is operated by VeriSign Global Registry Services.
• The .org domain is operated by Public Interest Registry. It is intended to serve the noncommercial community, but all are eligible to register within .org.
• The .pro domain is restricted to credentialed professionals and related entities and is operated by RegistryPro.
• The .tel domain is reserved for businesses and individuals to publish their contact data and is sponsored by Telnic Ltd.
• The .travel domain is reserved for entities whose primary area of activity is in the travel industry and is sponsored by Tralliance Corporation.

The following are reserved for US government uses or international organizations:

• The .gov domain is reserved exclusively for the United States Government. It is operated by the US General Services Administration.
• The .edu domain is reserved for postsecondary institutions accredited by an agency on the U.S. Department of Education’s list of Nationally Recognized Accrediting Agencies and is registered only through Educause.
• The .mil domain is reserved exclusively for the United States Military. It is operated by the US DoD Network Information Center.
• The .int domain is used only for registering organizations established by international treaties between governments. It is operated by the IANA .int Domain Registry.

Calgary – 10:35 MST

Imagine an outraged citizen who sues the government for confiscating his property. Well that’s essentially what Marc Bragg was doing when he launched his lawsuit against Linden Research, the makers of Second Life for seizing his virtual property within Second Life.  In the US case of Marc Bragg vs Linden Research, Inc., No. 06-4925 (ED Pa. May 30, 2007), the court analyzed the Second Life Terms of Service (TOS), which is the online contract governing the relationship between Linden Research and its customers. Linden tried to use the TOS to force Bragg into binding arbitration in San Francisco. The court decided that the mandatory arbitration provision in the TOS were unenforceable against Bragg for the following reasons:

“Taken together, the lack of mutuality, the costs of arbitration, the forum selection clause, and the confidentiality provision that Linden unilaterally imposes through the TOS demonstrate that the arbitration clause is not designed to provide Second Life participants an effective means of resolving disputes with Linden. Rather, it is a one-sided means which tilts unfairly, in almost all situations, in Linden’s favor.”

Ironically, the success of Second Life counted against it: one of the factors that the court pointed to was the lack of any “reasonably available market alternatives” to Second Life, and particularly Linden’s unique policy of permitting customers to retain intellectual property rights in their virtual creations and other virtual assets.

Linden lost this round, but responded by amending their TOS to provide for a clearer, more flexible arbitration process which defused many of the court’s objections.  This should bolster the enforceability of the TOS in future disputes.  

Another lawsuit was filed last week in Federal Court in New York, claiming damages for copyright infringement, trade-mark infringement and passing off – all of which is alleged to be taking place within Second Life. 

For further information in this interesting area, see the following additional resources:

Blog: Our earlier post

Article: Eight questions to ask before doing business in a virtual world

Paper: Intellectual Property Rights In Virtual Environments: Considering The Rights Of Owners, Programmers And Virtual Avatars

 

Calgary – 10:35 MST

Canadians doing business in Asia with registered marks there should not forget about the dot-asia sunrise period. In our earlier post  we refered to the general scope of the roll-out of the dot-asia domain.  The Sunrise 2a period is only open for few more days.  Generally, Sunrise Phase 2 is designed for holders of registered trademarks and/or service marks. Sunrise 2 divided into 3 sub-phases: Sunrise 2a (or “Early Bird Sunrise”), Sunrise 2b (or “General Registered Marks Sunrise”) and Sunrise 2c (for Extended Protection). Sunrise 3 allows registered “juristic entities” based in the DotAsia Community to apply for domain names corresponding to their registered name. Check the guidelines to see whether your organization fits into the definition of “juristic entity” based in Asia for these purposes. The relevant dates are:

· Sunrise 2a: from October 9, 2007 to October 30, 2007

· Sunrise 2b: from November 13, 2007 to January 15, 2008

· Sunrise 2c: from November 13, 2007 to January 15, 2008

· Sunrise 3: from November 13, 2007 to January 15, 2008

International trade-mark owners are queueing up, including Amazon, AOL, Sony Ericsson, Deutsche Telekom, the International Olympic Committee, Yahoo! and others.

More resources:

Detailed Sunrise Guidelines & FAQ (by Deloitte) 

Dot Asia Organization 

 

Calgary – 10:00 MST

In September in the case of National Federation of the Blind v. Target Corp. (N.D. Cal. Sept. 28, 2007), a federal district court in California certified a class action lawsuit on behalf of blind internet users against Target.com, the website of the Target chain of retail stores. The court also ruled that websites such as Target.com qualify as a kind of business establishment, advantage or facility for the purposes of the ADA — something that had previously been reserved for physical places such as bricks-and-mortar stores. The plaintiff is trying to force Target to comply with the World Wide Web Consortium‘s Web Content Accessibility Guidelines or one of the other standards which permit site-reading software to decode the visual content of websites for blind users.

Is this a development that Canadian website operators need to be concerned about? If a Canadian company operates an e-commerce website with significant US sales, it is certainly an issue to review and monitor as this class action proceeds. We’ll have to wait for the ultimate outcome. At this stage, the law in this area is still unclear, particularly as it might impact pure e-commerce companies, who have no bricks-and-mortar presence, and whether Canadian website operators may be caught up to the extent they are engaged in sales to US consumers.  There is no corresponding Canadian case-law in this area.
Calgary – 10:35 MST

Last week’s Throne Speech made it clear that copyright reform is on the Canadian government’s legislative agenda.  Given the political landscape in Canada at the moment, many speculate [stories here and here] that the Conservative government may be preparing the way for US-style copyright laws to introduce digital-rights management protection and anti-circumvention provisions. In our earlier post,  we noted that the issue was already on the radar in the spring session, and now that Parliament is back to work, we can expect copyright law to come back into the spotlight.  We hope that the Canadian legislators will learn from US missteps in this area and achieve a balanced approach to copyright law in Canada.  We will continue to monitor this issue.

Calgary – 10:00 MST

Costco must have been pretty worried about the impact of a competitor’s mark PRICECO WAREHOUSE for retail sales. They assert that the competitive mark is confusing with their marks PRICE COSTCO and COSTCO. Costco opposed the mark in the Trade-marks Office in 2005, and then launched a trade-mark infringement lawsuit in 2007 against the competitor, seeking an injunction restraining the use of the competing mark. They even tendered expensive survey evidence to show the court how serious the risk of confusion was. The problem? The competitor hadn’t even started using the mark yet.

In Price Costco International, Inc. v. Welcome Warehouse Ltd., 2007 BCSC 1227 (CanLII) the judge was clear that:

“There has been no evidence of actual use of the PRICE WAREHOUSE mark, or anything similar, and no evidence of intention to use it until the Registrar rules in the defendant’s favour. On the contrary, the defendant has undertaken in writing not to use any such mark until that time.”

The lessons?

• First, in high-stakes pre-emptive injunction application where there is no actual infringing use, there must at least be a “real probability of passing off or infringement”; that was not the case here.
• Court is not the only option for fighting this kind of battle; the opposition procedure in the Trade-marks Office had yet to run its course, so those alternatives must be weighed.
• Even though their application failed, Costco may have proved its point; it has done its homework and will be ready if and when the competing mark is ever actually used, provided their survey evidence is not out of date by then.

Calgary – 20:11 MST

After being published for one year, ipblog.ca has generated tens of thousands of hits, developed a loyal base of readers and demonstrated the value of a practical, Canadian-based review of intellectual property, trade-mark and internet law for businesses and practitioners. Here are just some of the sites where ipblog.ca is listed :

• Canadian Law Blogs List  
  A list of Canadian Law Blogs maintained by Steven Matthews:
  http://vancouverlawlib.blogspot.com/2005/12/canadian-law-blogs-list_09.html 
• American Bar Association Journal – Blawg Directory
  A list of intellectual property law blogs:
  http://www.abajournal.com/blawgs/ipblogca_intellectual_property_in_canada/ 
• Legal Tree – Intellectual Property Resources
  A compilation of Canadian intellectual property resources:
  http://www.legaltree.ca/node/296
• The Business Link – Innovation Links
  A Government compiled list of resources for small and medium-sized business:
  Link to Innovation Resources
• Digital Copyright Canada – Sources 
  http://www.digital-copyright.ca/aggregator/sources

Thanks to all our readers and we look forward to another interesting year in IP law.

 

Calgary – 13:42 MST

For our readers who are trade-mark agents, it is worth noting several recent practice changes:

These practice notices will affect opposition procedures and the requirement for the use of disclaimers.  The notice regarding Section 9 official marks codifies recent case-law in this area and clarifies the test to be used in determining eligibility for “public authority” status under Section 9 of the Trade-marks Act.

 

Calgary – 10:15 MST

We wrote about the US Supreme Court decision in KSR International Co. v. Teleflex Inc. in our earlier post. The USPTO has just released Examination Guidelines to aid examiners in determining obviousness in the wake of the KSR decision.

Calgary – 22:50 MST

The US recording industry finally had its day in court.  After suing thousands of individuals for copyright infringement (most settled out of court), one of the cases finally made its way through trial and resulted in a damage award of $220,000 against Jammie Thomas, a now famous Minnesota woman.  An award of $220,000 for filesharing 24 songs works out to about $9,000 a song.  The verdict on October 4th has generated headlines around the world.  Thomas has indicated she will appeal.

The recording industry wanted to send a message and it definitely achieved that goal. However, it’s a pyrrhic victory: the industry’s legal fees far outstrip any amount recovered; the industry comes away looking like an unreasonable bully; and filesharing continues unabated. 

In Canada, the recording industry has not had the same “success” in court. The first attempt in BMG Canada Inc. v. John Doe (F.C.A.), 2005 FCA 193, [2005] 4 F.C.R. 81 hit a brick wall when the record company failed to obtain the identities of the particular customers alleged to have infringed copyright. 

Even worse for the recording industry, the judge in the BMG case actually said “downloading a song for personal use does not amount to infringement” which has been widely interpreted as judicial blessing for filesharing.  Never mind that this line was challenged by the Federal Court of Appeal ; in some ways the judicial cat is already out of the bag.

Lastly, the Canadian copyright levy on digital media has generated millions for the recording industry, arguably providing a de-facto license for personal copying when using “audio recording medium” as defined by the Copyright Board. 

It will be interesting to see whether this will be a high water mark for the legal adventures of the recording industry, or whether this judgement will simply encourage more enforcement suits.

 

Calgary – 13:30 MST 

 

In what appears to be the first US case to test the limits of the GPL (General Public License), an organization known as the Software Freedom Law Centre (SFLC) has spearheaded a lawsuit against Monsoon Multimedia for alleged violation of the terms of the GPL. 

Monsoon uses an open source software application known as BusyBox, which is subject to the GPL, but it is alleged that Monsoon has failed to make the source code available to its customers.  Such a failure would violate the terms of the GPL.  By breaching the GPL Monsoon would lose its rights to use the BusyBox software.  The suit seeks an injunction preventing Monsoon from using the BusyBox software in its own products.  BusyBox is a popluar component included in Linux-based devices and applications developed by Nokia, IBM, Sharp, HP and others.

The case may settle if Monsoon releases the code.  If it proceeds to trial, the lawsuit will test the enforceability of the GPL and will provide much-needed guidance in this area.  So far in Canada and the US the GPL has been enforced informally but has never been directly tested in court.  It also serves as a reminder for businesses using open source software:

• When developing software (in-house or out-sourced) be sure to have clear guidelines and policies regarding the use of open source applications;
• Get advice on the license terms which apply to open source applications: not all open source licenses are the same;
• Determine what the impact will be for proprietary software and what disclosure will be required to comply with the open source license terms.

Calgary 11:45 MST

If you earn your living on eBay, then the tax collector is interested in you.  In another case which raises privacy questions in the world of e-commerce, the Canada Revenue Agency sought and won a Federal Court order forcing eBay to disclose the names, addresses, phone numbers and e-mail addresses of all its high-volume sellers, even though that data resides in servers located in the US.  eBay initially resisted the request on the basis that eBay Canada did not “own” or “possess” any such information in Canada.  The court decided that eBay Canada has access to the information and this was enough to permit the order for disclosure. 

Calgary – 11:50 MST

 

U.S.-based drug-maker Pfizer  scored a win this month at the Canadian Federal Court in its fight with Ranbaxy.  Ranbaxy, a generic drug manufacturer based in New Delhi, is India’s largest pharma company.  The Canadian court granted Pfizer’s application for an order preventing Ranbaxy from launching its generic product in Canada until expiration of Pfizer’s patent in 2016.  It is expected that Ranbaxy will appeal this decision.  Ranbaxy has enjoyed some success in other jurisdictions in getting its generic products approved.

In Canada and the U.S., billions of dollars worth of patented drugs will expire or go “off patent” in the next five years, which means competition will continue to intensify among brand name and generic drug makers for marketshare.  After patents on blockbuster drugs expire, the brand name manufacturers are trying new tactics. Merck’s Zocor cholesterol pill generated over $4 billion in sales in 2006.  After the Zocor patent expired, Merck announced plans in 2007 to cut prices of Zocor to try and stave off competition from incoming generics.  

We’re likely to see more of these patent battles between the Pfizers and Ranbaxys of the world.

 

Calgary – 11:00 MST

There is something fascinating and unsettling about Street View, a relatively new offering from Google with help from Calgary-based Immersive Media. If you enjoyed finding your own house on Google Earth, then wait until you see yourself strolling down a side-walk on Street View. At the moment, the service is offered for New York, San Francisco and a handful of other US cities. But it doesn’t take long to see the potential for this to be rolled-out in cities around the world.  Reportedly, Vancouver, Calgary, Toronto, Ottawa, Montreal and Quebec City have already been “imaged”.

In anticipation of this coming soon to a street corner in Canada, the Canadian Privacy Commissioner has raised a few questions about the privacy implications of recognizing individuals on the street – in other words, collecting personal information without consent and then selling it.

The law regarding surveillance video will be helpful in the analysis, but this is a new twist on an old problem.  Once again, technology, intellectual property and privacy rights have intersected to stir-up some interesting issues and the law will have to catch-up and sort out the implications. 

Calgary – 10:30 MST

For Canadian inventors and patent owners, the US is almost always the first jurisdiction in which patent protection is pursued.  Last Friday the U.S. House of Representatives passed a long-awaited comprehensive Patent Reform bill that will implement sweeping changes to the U.S. Patent system when it becomes law.  The Senate is expected to pass their bill later this year. For a copy of the bill as passed thus far and further discussion, click here.  Highlights include:

• Switch: from first-to-invent system to first-to-file system.
• Damages: damages would be tied to the “economic value [of the invention] properly attributable to the patent’s specific contribution over the prior art”, reducing many damage awards.
• Treble Damages:  the instances where treble damages will be awarded are restricted, reducing damage awards.
• Post-Grant Review: post-grant review proceedings would be available within 12–months of issuance .
• Open Examination: Opening of the system for making submissions of prior art for any patent or pending application.
• Venue and Jurisdiction: Restrictions on venue would likely remove the popular E.D.Texas as a choice for patent infringement lawsuits.

 

The progress of this bill is being closely watched and still hotly debated in the patent and licensing community in the US.
Calgary – 10:15 MST

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In the midst of the dot-com boom, a brilliant bit of ad copy appeared to promote one of the many overnight companies riding the wave of interest in the “New Economy”. It read “Thanks Old Economy, we’ll take it from here…” and it captured the brash, over-confident tenor of the times.  

It has become clear since then that the “Old Economy” still has lots of life in it, and the “New Economy” has survived its growing pains to become slightly more mature. 

KPMG has authored an interesting look at “Enterprise 2.0: Fad or Future?“, the process of applying Web 2.0 technologies to increase efficiency and effectiveness within business.  Many traditional sectors of industry are now adopting new models of transacting business – models that would have appeared revolutionary even to the dot-com boomers in 1999.  And many new companies in the information-media sector are building value in a traditional way, with actual revenue.  In both cases, intellectual property legal issues from copyright to trade-mark to patents are front and centre and require careful management, the old fashioned way.

 

Calgary – 10:17 MST

In our earlier post, we highlighted a defamation lawsuit brought against Google, Wikipedia, Yahoo, MySpace and others by a B.C. man who alleged he was defamed by certain online postings.  Multiple lawsuits have been filed. This week in Crookes v. Yahoo, 2007 BCSC 1325, a B.C. court dismissed the case against Yahoo, a California-based company.

The court disposed of the claim by reasoning that there was no evidence that the alleged defamatory material was accessed by someone in B.C.  “Publication is an essential element for an action in defamation,” said the judge. “In this case … [t]here is no evidence anyone read the material in British Columbia.”

As a result, the court did not even consider the other issues about whether California law applied under the terms applicable to the online services, nor about the wider issues relating to liability for online content.

 

Calgary – 13:35 MST