A Canadian company with a database of customer information including names, email addresses and account information, wants to find a service provider to handle the information. A US company seems to provide the best solution and so the Canadian company hires the US provider to host, manage and handle all of the customer data. What should the Canadian company be aware of? Do privacy laws apply?

The trans-border outsourcing of personal-information is becoming more common and requires an awareness of privacy law implications. The easy answer is yes, privacy laws apply. The more complex question is which privacy laws apply?

Canadian privacy laws and recent decisions by Privacy Commissioners at both the federal and provincial level make it clear that companies are responsible for ensuring that they maintain contractual control over personal information handling practices by external service providers. The trans-border nature of the data flow does not mean that Canadian laws won’t apply or that Canadian companies can simply opt out of Canadian jurisdiction. In fact, the Federal Court has recently decided that the Privacy Commissioner can and should investigate complaints relating to the trans-border flow of personal information.

The outsourcing of services to the US raises concerns about the US Government’s ability to access that information under the USA PATRIOT Act. In a 2005 investigation into the outsourcing of financial services to the US, the Privacy Commissioner of Canada noted that:

“[T]he Act cannot prevent U.S. authorities from lawfully accessing the personal information of Canadians held by organizations in Canada or in the United States, nor can it force Canadian companies to stop outsourcing to foreign-based service providers. What the Act does demand is that organizations be transparent about their personal information handling practices and protect customer personal information in the hands of foreign-based third-party service providers to the extent possible by contractual means.”

In a 2006 decision involving a Canadian security company’s handling of personal information by its U.S.-based parent company, the Commissioner was satisfied that the outsourcing of personal information was handled appropriately. The company informed its customers of the practice and permitted customers to opt-out of the outsourcing. The fact that the disclosure was between parent-subsidiary relationship meant that the personal information was not technically disclosed to a third-party, and these factors resulted in the Commissioner approving the handling of personal information in this case.

Careful management of the privacy issues allows Canadian businesses to handle outsourcing and reduce the risks of a customer complaint or investigation by the Commissioner.

 

Calgary – 10:25 MST

Maybe imitation is the sincerest form of flattery.  It also may be the most profitable. 

There is much debate about the enforcement of intellectual property rights in China.  Canadian companies engaging in business there require lawyers with local contacts and expertise to manage the various aspects of intellectual property protection: everything from confidentiality agreements governing the use of manufacturing specifications to software piracy and trade-mark enforcement. 

Witness the state-owned Shijingshan Amusement Park which is a full-fledged knock-off of a Disney-style Magic Kingdom outside Beijing (pictures and video here).  Their catchy slogan is self-explanatory: “Disneyland is too far.”

 

Calgary – 15:35 MST

A recent US Federal Court case, CollegeNET, Inc. v. XAP Corp., 2007 WL 927946 (D. Or.), involved two rivals in the competitive college application business.  CollegeNET sued XAP for patent infringement in 2003, and then added an unfair competition claim in 2004.  A jury returned a verdict in favour of CollegeNET.  What’s interesting is that the unfair competition claim resulted in a damage award of $4.5 million for a deceptive privacy policy (compared with the $4 million patent infringement award). 

XAP’s privacy policy stated that personal data wouldn’t be released to third parties “without the user’s express consent and direction.” In the XAP online application process students were asked the following opt-in question: “Are you interested in receiving information about student loans and financial aid?” If the students answered “yes,” XAP forwarded the students’ personal information to its third-party “partners” for a fee.

This was considered to constitute unfair competition, since students were lured away from CollegeNET to use the free XAP system, not realizing that their personal information was being sold to financial institutions and others.

There are two lessons:

• First, for Canadian companies doing business online with US customers, a well-drafted privacy policy is critical; the pitfalls are not only within the realm of Canadian privacy laws but also in US privacy and trade laws;
• Second, IP lawyers should think creatively about the possible claims as they did here: a successful intellectual property infringement claim was bolstered and (in terms of the damage award) surpassed by an unfair competition award based on the privacy policy.   

The decision can be accessed here.

 

Calgary – 15:30 MST 

The US Supreme Court issued its decision on Monday in KSR International Co. v. Teleflex Inc. , a case which is considered by many commentators to be a watershed decision in US patent law. 

KSR, a Canadian auto-parts company on contract to General Motors, designed a pedal with a sensor.  Rival autoparts maker, Teleflex Inc., demanded royalties on the basis that the KSR pedal infringed a Teleflex patent for a pedal equipped with an electronic sensor.  KSR refused to pay, asserting that the Teleflex patent was invalid since it had merely combined existing technologies in an obvious manner.

The court agreed with KSR, stating: “Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility.”

The practical impact of this decision is that many patents will now be open to challenge on obviousness grounds.  Inventions that introduce truly innovative concepts and elements will be more valuable than those which merely combine existing technologies in a new way.

 

Calgary – 09:35 MST

 

One year ago, the dot-eu domain was launched.  Now, more than 2.5 million registrations later, it is worth reviewing this European-level domain.  For Canadian businesses the dot-eu domain is available where they meet the test for eligibility:  registrants must be a company having its registered office or principal place of business within the EU, or an organisation established within the EU, or an individual resident in the EU. 

With any top-level domain, there are hundreds of disputes and in this case they are managed by the Czech Arbitration Court .

One recent dispute involved a complaint by the owners of the famous ESPRIT trade-mark over the registration of the domain name esprit.eu. The Arbitration Decision ordered the domain name to be transferred back to ESPRIT, even though the word is a generic dictionary word (it means “spirit” in French). The trade-mark owner was able to establish the required elements that the domain name was identical to the Complainant’s mark, and the registrant lacked legitimate interests in the domain name. Having established a lack of legitimate interests, the “bad faith” element was not required under the dot-eu regulations.

 

Calgary – 19:40 MST

There are no shortage of studies ranking the value of brands – usually Coca-Cola is at or near the top and the rest of the world’s brands jockey for position after that.  This time around, Google has edged into first place – maybe a sign of the times.

In the latest study, a Canadian company has made the top 100. The study pegs the brand value of the Royal Bank of Canada at US$13.6 billion, number 39 on the top-100, ahead of popular consumer brands like Pepsi, Nike and Sony. 

Another Canadian favourite, Tim Horton’s, is ranked number 5 in the fast-food category, beating out international franchise icons like Pizza Hut and Burger King. 

While this doesn’t mean that Tim’s or RBC has generated the kind of international recognition enjoyed by Nike, Sony or Pizza Hut, it does mean that some Canadian brands generate enough income for their owners that they are ranked in the big leagues.  If you have recently paid a “convenience fee” at an RBC ATM to get cash to pay for your double-double, then you are doing your part to help Canadian brands.

 

Calgary – 14:24 MST

On April 10th, we posted an article about Online Defamation.  This week, a very interesting new online defamation lawsuit  was launched in Canada catching two high-profile defendants: Blogspot.com, Google’s free blog-hosting site, and Wikipedia, the online encyclopedia. 

The suit was filed by Wayne Crookes who alleges that he suffered defamation at the hands of anonymous posts to those sites.  The question will be whether the operators of the sites can be held liable for defamatory postings.  As we noted in our earlier post, online content-providers such as Google and Wikipedia cannot take advantage of the traditional protections provided to newspaper publishers or broadcasters.  The law in Canada could use some further clarity in this area, and this case may provide it.

 

Calgary – 09:50 MST   

There are reports that the Conservative government is planning to introduce long-anticipated amendments to Canada’s copyright laws this spring (barring another Federal election which seems to be an annual occurrence). Controversial amendments such as US-style DRM (digital rights management) protection provisions will certainly generate opposition and the progress of the legislation will be closely watched.  The Liberals’ attempt at copyright reform came in Bill C-60 which died before the government changed hands.  We will be monitoring the proposed legislation when it is introduced.  

Calgary – 16:45 MST 

 

A trade-mark battle over the letter “M” has finally made its way through court, resulting in an injuction against Nissan Canada for passing off.  The Federal Court has issued its decision in BMW Canada Inc. vs. NISSAN Canada Inc. in March 2007.  BMW sued Nissan for infringement of its “M” family of trade-marks, alleging that the use of the letter “M” by Nissan in connection with its Infiniti luxury cars constituted trade-mark infringement and passing off.  BMW’s lawyers compiled survey evidence to show the extent of the reputation of the “M” trade-mark in Canada.  The Court was not convinced that Nissan’s use of the letter “M” met the test for infringement, but agreed with the allegation regarding passing off.  There is a three-part test for passing-off :

• the existence of goodwill,
• deception of the public due to a misrepresentation and
• actual or potential damage to the plaintiff.

The judge was convinced and issued an order to stop Nissan in its tracks.  Nissan promptly applied for a stay of the injunction.

The lessons for business?  Trade-mark searches will uncover potential issues with competitor’s marks and experienced counsel can assist in interpreting the search results and providing guidance.  The cost of rebranding (let alone damages) makes a trade-mark search look like a pretty good preventative measure.

 

Calgary – 15:50 MST

When I wrote an article about online defamation in 2005, MySpace and YouTube were still relatively unknown.  The prospect of a highschool principal suing former students for defamation would have been remote.  Now, it’s a reality. 

In Canada, the issue of internet defamation came back into the spotlight when Sharman Networks CEO Nikki Hemming filed a libel lawsuit against p2pnet last year.  The suit will be interesting to watch as it may clarify when ISPs and hosts of online discussion forums will be liable for publication of defamatory content. 

In the 2003 case of Bahlieda v. Santa, the Ontario Court of Appeal dealt with a complaint of online defamation.  The lower court initially decided that the online material qualified as a ‘broadcast’ (similar to a television or radio broadcast) for the purposes of the provincial Libel & Slander Act.  Under that law a defendant can deflect a complaint if it is not brought within six weeks.  On appeal, the court overturned this decision, allowing the complaint to proceed.

In Weiss v. Sawyer, a defamatory letter was published in both the hard-copy paper and online version of a newspaper.  Both the paper and the online versions were treated as ‘newspapers’ for the purpose of the provincial libel and slander law, and the time limits applied. The complaints were dismissed because they were brought outside those strict time limits. However, an email transmission of the same material was not considered a ‘newspaper’ or ‘broadcast’ under the legislation. The complaint in connection with the email was allowed to proceed.

ISPs and online content-providers probably can’t take advantage of the protections afforded to newspaper publishers or broadcasters unless the material appears in an online version of a traditional newspaper or broadcast.

 

Calgary – 11:45 MST

As Canadian companies branch out into foreign markets, it is inevitable that they will confront local trade-mark issues.  It even happens to the titans of the brand-name world. Lawyers for Starbucks Corp. are attempting to stop a new chain of coffee shops in India.  The chain is the brainchild of Shahnaz Husain, an Indian businesswoman, who  plans to use the trade-mark “Starstruck“.

Starbucks is concerned that a coffee-shop chain with a similar name will eat into local market share.  There are plenty of Canadian examples. Take the profusion of knock-offs of Canadian wine  in the Chinese market. A few local wine labels famously billed themselves as ”Whistler Estates, Canada ice wine” and “Toronto Ice Wine”.  The local effect is to erode market share for Canadian companies selling the genuine article.

Addressing international trade-mark issues requires:

• an awareness of the local business environment including the connotations of your trade-mark in the local language and culture;
• an awareness of the local options available for trade-mark protection and dispute resolution; and
• access to expertise in local trade-mark law.

Calgary – 14:52 MST

In the wake of Dawn’s Place vs. the Queen, a recent (October 2006) decision from the Federal Court of Appeal, website operators who sell digital content to non-residents should be reviewing their system of collecting GST (Goods and Services Tax) on the sales.

The question in Dawn’s Place was whether the Canadian website operator should be collecting GST on subscription fees for access to its website.  Access to the website was previously considered a zero-rated supply for GST purposes.  The term “zero-rated” refers to a specified list of goods and services that are taxable at the rate of 0%. Generally, intellectual and intangible property is covered under the definition as a zero-rated supply and GST is not charged for non-resident customers.

In the decision, the appeal court found that customers had the right to download and retain a copy of copyrighted material accessed on the website.  The appeal court made a distinction between the supply of copyrighted material and the supply of some or all of the bundle of rights that comprise the copyright, and agreed with the government position that the latter was not covered by the definition of a zero-rated supply. 

As a result of this decision, Canadian website operators may be required to charge GST on subscription or access fees charged to non-residents.  Website operators should review their tax collection procedures as well as the terms (including license terms) under which they are supplying intellectual or intangible property to non-resident customers.

 

Calgary – 9:45 MST

In Perfect 10 Inc. v. CCBILL LLC, the US Ninth Circuit Court of Appeal issued an important new decision considering the (US) Digital Millennium Copyright Act (DMCA). The case involved allegations of copyright infringement by Perfect 10. While the case considered a complex range of issues, there are a few practical points to highlight: the Court was clear that that ISPs who rely on the DMCA safe harbor must maintain records on which subscribers are allegedly “repeat infringers” under the DMCA, but ISPs do not need to go so far as to “actively police” their users for evidence of infringement. Where ISPs receive “direct financial benefit” from infringing conduct, they cannot take advantage of the safe harbor provisions.

In considering the notice-and-take-down regime, the Court stipulated that copyright holders must “substantially comply” with all requirements under the DMCA in order for their notices to trigger the take-down procedures. ISPs can ignore notices which fall short of substantial compliance.

Canadian copyright holders who are considering action against copyright violations taking place through US-based ISPs should seek advice on ensuring their DMCA notices comply with the requirements.

A few more DMCA cases are making their way up to the appeal level and decisions are expected soon.

Calgary – 9:20 MST

 

On Friday a proposed Federal surveillance law (Bill C-416) was introduced in Parliament. The bill is designed to require ISPs and other telecommunications service providers to establish and maintain surveillance capabilities to permit interception of online communications. The proposed law also requires ISPs to “provide basic information about their subscribers to the Royal Canadian Mounted Police, the Canadian Security Intelligence Service” and provincial police services.

Calgary – 20:44 MST

In a decision released last week, the domain name yellowpage.ca walked away from a challenge mounted by the Yellow Pages Group Co.

In Yellow Pages Group Co. v. Coolfred Co.  (March 13, 2007), the three-member panel reviewed a complaint by the owners of the famous YELLOW PAGES family of trade-marks.  In its complaint, the trade-mark owner alleged that an Ontario registrant registered the domain name yellowpage.ca in violation of the dispute resolution policy.  To succeed, the complainant had to establish three things:

• that the domain name is identical or confusingly similar to the complainant’s trade-mark;
• that the registrant has no legitimate interest in the disputed domain name; and
• that the domain name was registered in “bad faith”.

The trade-mark owner was able to meet the first two tests but failed on the third. Despite creative arguments to paint the registrant as a career cybersquatter, the complainant failed to convince the panel that the domain name was registered in bad faith.  The complaint was dismissed and the registrant held on to the domain name. 

One other point is worth noting: Under paragraph 4.6 of the CDRP, a $5,000 penalty may be imposed on unsuccessful complainants who are engaged in reverse hijacking of domain names.  In this case, the registrant countered with its own claim that Yellow Pages Group should be obliged to pay out the $5,000 to defray the registrant’s costs.  Such a counter-claim can only succeed where the complainant mounted its challenge “unfairly and without colour of right”.  The panel correctly denied this relief, but it serves as a useful reminder of the potential costs of failed complaints.

Calgary – 12:35 MST

 

 

A Nevada federal court has decided that the mere operation of a website accessible to Nevada users is, by itself, not enough for a Nevada court to assert jurisdiction over the operators of the site.  This case, Mullally v. Jones, Civil No. 06-14867, 2007 WL 628367, dealt with a website operator based in the UK who tried to avoid the jurisdiction of the Nevada court.  If the same analysis is applied, the reasoning should also hold true for a website operator based in Canada.  The Nevada court applied the Ninth Circuit’s analysis from the 1997 case Cybersell v. Cybersell in reviewing the nature of the site and the contacts between the site and the state in question.  In Mullally v. Jones the website operator did not have any other contacts with Nevada and did not purposefully direct business to Nevada residents.

Calgary – 10:45 MST 

 

Digital music has come a long way since the revolutionary CD was first introduced in 1983. Now a computer company – Apple Inc. – dominates the music market and the Copyright Board of Canada has just decided that 7.9 cents on every 99-cent iTunes download must make its way back to the copyright collective.

The Board issued its decision on Friday on the tariff covering online music in Canada. The Board ruled that in the case of permanent downloads, 7.9% of the price of a song must be paid back to copyright holders as a royalty. For subscription-based downloads, the tariff is 5.9% of the cost of a month’s subscription, and for on-demand streaming music, the rate is 4.6% of the monthly subscription cost. This brings to an end several years of debate on the tariff and represents a compromise between the music stores and representatives of copyright holders.

Calgary – 21:00 MST

The owner of the trade-mark CHEAP TICKETS has struck out in Canadian Federal Court in a decision handed down on March 2, 2007. This is the second blow, coming after the owner’s loss in a 2003 domain name arbitration decision.  

In Emall.ca Inc. v. Cheap Tickets and Travel Inc. (2007 FC 243), the court dealt with a challenge brought by Emall that the trade-mark CHEAP TICKETS, owned by Cheap Tickets and Travel Inc., was too descriptive or generic to function as a valid trade-mark.  Trade-mark law insists that a trade-mark must be distinctive of the products or services of the trade-mark owner.  Where the trade-mark is descriptive of the products or services themselves or is so generic that it fails to distinguish the owner’s products or services, it can’t function as a trade-mark (just like SHREDDED WHEAT can’t be used as a trade-mark for shredded wheat cereal).  The court agreed with Emall’s challenge and concluded that the trade-marks should never have been registered in the first place.  The registered trade-marks were ordered struck from the register.

In 2003, Cheap Tickets and Travel Inc. launched an unsuccessful CDRP challenge to Emall’s registration of the cheaptickets.ca domain name.  Emall’s lawyers defended, claiming that the trade-mark was generic and that the complaint constituted an attempt to hijack the domain name.  In the arbitration decision, the panel agreed with Emall and dismissed the complaint since the domain name was registered before the Complainant had any rights to the CHEAP TICKETS trade-mark. 

 

Calgary – 14:35 MST

What is the scope of intellectual property protection for two- and three-dimensional articles or images? 

A recent US case (Eliya Inc. v. Kohl’s Department Stores, S.D.N.Y., No. 06 Civ 195 (S.D.N.Y. Sept. 13, 2006)) determined that making a three-dimensional object (in this case, a designer shoe), based on a two-dimensional image of that object, did not constitute copyright infringement.  This was the case despite the registration of the two-dimensional image under the Copyright Act.  The court concluded that the scope of protection under copyright law only extended to the reproduction of the 2-D image or drawing of the shoe, not the creation of a functional 3-D shoe which was copied from the 2-D image.  However, the plaintiff also claimed trade dress infringement under the US Lanham Act, and this claim survived.

In another recent US decision (Meshwerks Inc. v. Toyota Motor Sales U.S.A. Inc., D. Utah, No. 2:06 CV 97), the court decided that animated three-dimensional digital images of car designs did not enjoy copyright protection since they lacked the creative spark required for copyright to apply.  In this case Meshwerks was hired by Toyota to create the 3-D digital replicas of cars for use in advertisements.  Meshwerks went so far as to register copyright in their 3-D images and then they turned around and sued Toyota for copyright infringement.  The court denied that the images enjoyed copyright protection since they were merely “product-accurate representation without the introduction of new creative elements.”

In Canada, Pyrrha Design Inc. v. 623735 Saskatchewan Ltd., 2004 FC 423, (2004), 30 C.P.R. (4th) 310 dealt with a claim for infringement based on the defendant’s copying of certain jewellery designs.  The plaintiff sued under copyright.  The defendant argued that the Copyright Act didn’t apply since, because of the exceptions and stipulations under Section 64 of the Act, the jewellery designs were covered by the Industrial Design Act, not the Copyright Act.  The court agreed and since the lawsuit was founded solely on copyright infringement, the claim was dismissed.

The lessons for business?  Several things come to mind:

(1) There may be concurrent protection under both copyright and industrial design.  Determine where you can get the best protection and, if necessary, obtain a registration.  To obtain an industrial design registration, certain conditions need to be satisfied, so ensure that you have reviewed your options in advance.

(2) Where you are entering into an agreement (like the one between Meshwerks and Toyota), ensure that ownership of copyright in the resulting images or designs is clearly dealt with.  Even though Toyota won the case, the lawsuit might have been avoided altogether if the agreement was clear on copyright ownership.

Calgary – 14:28 MST

Proposed legislation has been introduced to focus specifically on the protection of Olympic trade-marks.  The Olympic and Paralympic Marks Act (Bill C-47), introduced last week, will attempt to prevent unauthorized use of the Olympic trade-marks by anyone other than corporate licensees who have paid handsomely for the privilege of associating themselves with the 2010 Games.  Oops, I just used two protected words which appear in the Bill, along with Winter, Gold, Silver, Bronze, Medals and Canada’s Games.  In my earlier post, I queried why such legislation was required in light of the extraordinary protection already provided under Section 9 of the Trade-marks Act.  Other commentators have also expressed concern over this special-interest legislation. If passed, the law will grandfather all potentially infringing uses which were in use prior to March 2nd.  Enforcement will be interesting to watch. 

 Calgary – 15:06 MST