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In 2012, LinkedIn made headlines as a result of a significant data breach. The passwords and email addresses of over 6 million LinkedIn users were hacked and posted online. Encryption and security was improved by LinkedIn in the wake of this breach. A class action lawsuit was commenced in the United States based on claims by LinkedIn “premium” users (who paid a monthly or yearly fee for upgraded services). The claim relied on an alleged breach of the terms of LinkedIn’s privacy policy which included fairly standard language about protection of personal information “with industry standard protocols and technology.” In the decision In re LinkedIn User Privacy Litigation , 2013 WL 844291 (N.D. Cal. Mar. 5, 2013), a US court has shut down the claim, deciding the plaintiffs lack standing. The claims were based on a “benefit of the bargain” concept – an argument that the claimants were allegedly entitled to security as paying customers and LinkedIn breached this promise.

The court rejected the claims since there was no indication that the extra service paid for by premium users included enhanced security or encryption, since “paid” users and “free” users received the same level of security. It is clear that claims based on breach of privacy will face a uphill battle in the US, and this decision together with the decision in last year’s iPhone class action claim demonstrate the complexities and difficulties of this class of claims.

Calgary – 7:00 MDT

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Are APIs protected by copyright?

In the long-running litigation (and hey, is there any litigation that isn’t “long-running”?) between Oracle and Google, a US court decided in 2012 that APIs in this case were not eligible for copyright protection. See our earlier post. This meant a complete loss for Oracle in its lawsuit against Google for infringement of the Java APIs used in Google’s Android software.

Copyright protects only original expression. Applied to software code (including API protocols), the law of copyright tells us that certain elements are not protectable by copyright since they lack originality. The US trial level decision in Oracle vs. Google has been appealed and the parties are now filing briefs in the US Federal Court of Appeals (a copy of Oracle’s brief is here). The briefs make fascinating reading for those interested in the finer points of copyright law and the history of the Java programming.

Oracle’s brief opens by sketching a scene: “Ann Droid wants to publish a bestseller. So she sits down with an advance copy of Harry Potter and the Order of the Phoenix  —the fifth book—and proceeds to transcribe. She verbatim copies all the chapter titles—from Chapter 1 (“Dudley Demented”) to Chapter 38 (“The Second War Begins”). She copies verbatim the topic sentences of each paragraph, starting from the first (highly descriptive) one and continuing, in order, to the last, simple one (“Harry nodded.”). She then paraphrases the rest of each paragraph. She rushes the competing version to press before the original under the title: Ann Droid’s Harry Potter 5.0. The knockoff flies off the shelves.”

Does this constitute copyright infringement?

One of the big issues on appeal will be whether the appeals court accepts the notion that copyright infringement can occur without any actual direct copying of code. This is the so-called SSO argument – that the “structure, sequence and organization” of the software can attract copyright protection, regardless of whether specific code is cut-and-paste. As illustrated in the Harry Potter example above.

Stay tuned. This is one to watch in 2013.

Calgary – 07:00 MST

Photo credit: Google, Inc.

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The use of social means to engage in defamation is nothing new. Indeed, defamation requires the very social element of publication. Social media – Facebook pages or posts, tweets, blogs and online comments – merely make defamation easier and more pervasive.

Canadian courts have struggled to balance the interests of free speech with the interests of individuals who wish to challenge and find redress for defamatory statements. A recent Ontario case has framed the issue as follows:

     “There are few things more cowardly and insidious than an anonymous blogger who posts spiteful and defamatory comments about reputable member of the public and then hides behind the electronic curtain provided by the Internet. The Defendant confuses freedom of speech with freedom of defamation. There are, undoubtedly, legitimate anonymous Internet posts: persons critical of autocratic or repressive regimes, for example, or legitimate whistleblowers. The Defendant is not one of those people. The law will afford his posts all the protection that they deserve, which is to say none.”  Manson v. John Doe , 2013 ONSC 628 (CanLII),

The test laid out by the Supreme Court of Canada (Grant v. Torstar Corp., 2009 SCC 61 (CanLII)) is as follows: In order to establish a claim for defamation a plaintiff must establish that:

a)   the impugned words are defamatory, in the sense that they would tend to lower the plaintiff’s reputation in the eyes of a reasonable person;

b)   the words in fact refer to the plaintiff; and

c)   the words were published, i.e., that they were communicated to at least one person other than the plaintiff.

In Manson, the court ordered the defendant to pay damages of $100,000 plus aggravated damages of $50,000 and costs. However, the defenant remains anonymous.

Another recent decision in Baglow v. Smith, 2012 ONCA 407 (CanLII), hints at the court’s willingness to permit parties to engage in a heated online political debate, without crossing the line of defamation. In that case, the court observed: “Commentators engaging in the cut and thrust of political discourse in the internet blogosphere can be fervent, if not florid, in the expression of their views.” In the lower court, the statements made in this “cut and thrust” were determined not to constitute defamation. However, on appeal, the court decided the matter was suitable for a full trial and overturned the lower court findings. This is one case to watch.

Related Reading: ipblog’s Defamation Archive

Calgary – 07:00 MST

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Here is the next case that illustrates the potential pitfalls when dealing with social media:

This recent US copyright decision involving Agence France Presse (AFP) and photographer Daniel Morel dealt with the rights of a news publisher to publish images posted to Twitter.

Mr. Morel is a photojournalist who took a number of images of the 2010 earthquake in Haiti. He then posted those images to Twitter. Those images were picked up by AFP who “licensed” the images on to Getty Images.

When Morel complained, steps were taken to have the images removed from the AFP / Getty system. But through series of mixups (of the kind that would be familiar to anyone dealing with information technology and complex organizations such as AFP and Getty Images), the pictures were not removed and were picked up and published by The Washington Post under their agreement with AFP/Getty.

The court ultimately had to decide whether Mr. Morel – the photographer – had granted a kind of license to AFP by posting his images to Twitter. This required an analysis of the Twitter Terms of Service. The court decided no, the Twitter Terms of Service do not grant such a license. The court stated that “even if some re-uses of content posted on Twitter may be permissible, this does not necessarily require a general license to use this content as AFP has.” Put another way, a copyright owner who posts content to Twitter is clearly giving up some rights to that content – the right, for example, to re-tweet, which is a fundamental part of Twitter and is contemplated (even encouraged) by Twitter’s Terms of Service. However, merely by posting to Twitter, that copyright owner is not giving others an unrestrained right or license to remove the content, copy it and redistribute it commercially.

The court says “…the Twitter TOS were not intended to confer a benefit on the world-at-large to remove content from Twitter and commercially distribute it…” This is an important reminder.

In the final analysis (and that is 58 pages of analysis if you want to read the judgement) AFP and The Washington Post were liable for copyright infringement for use of Morel’s images.

Lessons for business:

• This case confirms that any re-use of content from Twitter – and by extension, other social media streams – should be handled carefully.
• Re-tweets are clearly contemplated as being within the scope of permitted uses, but copying and republishing for commercial purposes clearly is not.
• Many situations will fall somewhere in the middle between those two ends of the spectrum. Before using or re-using content for commercial purposes, take time to review the specific situation, including the applicable social media terms of service. Before posting your own content to Twitter, be aware that the Twitter terms do contemplate certain re-uses (the scope of which is difficult to define precisely). Once it’s posted, it’s hard to stuff the genie back in the bottle

The case is Agence France Presse v. Morel.

Calgary – 07:00 MST

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Social media law was not a topic on offer when I went to law school. Now, it’s a subject that’s hard to avoid for any business that has a consumer-facing social media presence. Here are two recent cases that illustrate the potential pitfalls as this area of law becomes more complex and more interesting:

Last week, HMV’s Twitter feed was hijacked by an employee who live-tweeted employee terminations from the company’s official Twitter account. Perhaps “hijacked” isn’t the right word, since the employee apparently had access to the account as part of her employment duties, though that position likely did not involve posting descriptions of firings as “Mass execution of loyal employees”. The next day the ex-employee (“Poppy Rose”) helpfully tweeted a reminder to the company that “you need to go to ‘settings’ and revoke my account access as an admin“. The lessons for business?

• Many companies are slow to grasp the power of social media. Don’t underestimate the viral nature – both good and bad – of this tool. Though the offending tweets were deleted by the company, this became a national story within a few minutes. From the company’s perspective, it required careful handling to avoid any brand damage.
• This highlights the need for a Social Media Policy for employees, to deal with the legal pitfalls of social media and particularly those employees who are engaged directly in social media sphere on behalf of the company. The ownership and control of corproate social media accounts is a simple but important element of such a policy.

Related Reading: Who Owns Social Media Contacts: Employers or Employees?

Calgary – 07:00 MST

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The Alberta, British Columbia and Canadian privacy commissioners have released guidance on Cloud Computing for Small and Medium-sized Enterprises: Privacy Responsibilities and Considerations. These documents are designed for practical application to small business, including the issues around transborder data flow.

Related Reading:

• The OPC’s Guidelines for Processing Personal Data Across Borders (PDF);

• Outsourcing by Canadian Companies: Another Look at the USA PATRIOT Act
• Cloud Computing Law: Balancing Privacy and Investigation

Related Event:

Next month, on March 11 and 12, the Canadian Cloud Council’s Cloud Matters conference takes place in beautiful Banff, Alberta. Check out the conference program. I will be attending as a member of the Canadian Cloud Council.

Calgary – 07:00 MST

“There may be no greater area of confusion and misunderstanding than fear of the PATRIOT Act” – Ontario Information and Privacy Commissioner

Cloud computing and data outsourcing has been embraced by many Canadian companies. In a recent poll, the adoption rate of cloud-based services by Canadian businesses experienced one of the highest year-over-year increases. Data security and concerns over personal information and privacy remain one of the biggest barriers to adoption.

One of the most common concerns raised by businesses who are considering cloud computing is the law known as Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (“PATRIOT Act”). There has been much discussion and some misinformation regarding the PATRIOT Act. For those unfamiliar with the topic, the central concern is that U.S. government authorities may use the provisions of the PATRIOT Act to access the personal information of Canadians where that information is stored in the United States, particularly in the context of outsourcing or cloud-computing.

Overall, a review of recent decisions in Canada shows that these concerns are overstated in light of the risks, and that for private sector businesses there are no prohibitions on outsourcing to the United States in light of the PATRIOT Act, provided (1) reasonable safeguards are built into the outsource contract (including confidentiality, use-restrictions, security, and provisions to meet monitoring and audit requirements), and (2) customers are notified in a clear way when their personal information will be stored or handled outside Canada. It is important to remember that the confidentiality and use-restrictions imposed on the service provider must be tied to the purposes to which the customers originally consented.

“Transparency and security” are watchwords for Canadian businesses considering the cloud.

Industry-specific regulations or guidelines, such as those found in the Insurance Companies Act and the OSFI guidelines applicable to banks and other financial institutions, place certain controls on outsourcing but do not specifically prohibit outsourcing or data-storage outside of Canada.  Canadian laws, as well as the PATRIOT Act and OSFI Guidelines are reviewed below.

1.         Federal Private Sector Legislation

The Personal Information Protection and Electronic Documents Act, (PIPEDA) governs federally-regulated entities, such as insurance companies. PIPEDA is also the default private-sector privacy legislation for provinces which have not passed “substantially similar” privacy legislation. To date, only Alberta, B.C. and Quebec have passed general private-sector privacy legislation that has been deemed “substantially similar” to PIPEDA.

PIPEDA governs the handling of personal information by private businesses such as insurance companies in the course of commercial activities. PIPEDA does not prohibit outsourcing of personal information to the U.S.  In fact, there is a clear decision of the Canadian Privacy Commissioner that PIPEDA does not prevent federally-regulated entities from outsourcing personal information data handling or data processing to the U.S.

2.         Provincial Privacy Legislation

There are multiple layers of regulation at the provincial level, for the public sector, private sector and for personal health information. Let’s have a look at the Alberta law. With respect to outsourcing, under the Alberta Personal Information Protection Act (PIPA) (sections 13 and 13.1), a service provider must notify consumers when personal information is stored by a service provider outside Canada. This includes a notification of the position or title of a person who is able to answer the consumer’s questions about the collection, use, disclosure or storage of personal information by the service providers outside Canada.  This is considered prudent practice for any private-sector organization engaging in outsourcing personal information to U.S. service providers.

Other than these notice requirements relating to storage of personal information outside Canada, there is no prohibition on outsourcing or data processing in the U.S. in private-sector privacy laws.

3.         USA PATRIOT Act

Regarding the PATRIOT Act, the Privacy Commissioner of Canada has stated that: “.. there is a comparable legal risk that the personal information of Canadians held by any organization and its service provider — be it Canadian or American — can be obtained by government agencies, whether through the provisions of U.S. law or Canadian law.” The Ontario Information and Privacy Commissioner has gone further and stated: “There may be no greater area of confusion and misunderstanding than fear of the PATRIOT Act. The PATRIOT Act has invoked unprecedented levels of apprehension and consternation – far more than I believe is warranted.”

The PATRIOT Act has been in effect for over 10 years, and during this time the Government of Canada states that there have been no instances where the personal information of a Canadian has been accessed under the PATRIOT Act.

Some public sector laws in B.C., Nova Scotia and Quebec require public bodies to ensure that personal information is stored only in Canada. For example, in B.C. public bodies and their service providers are obliged to notify the government if the public body receives “a foreign demand” for personal information. This is designed specifically to address PATRIOT Act concerns.

In Alberta, the public sector Freedom of Information and Protection of Privacy Act, permits a public body to disclose in response to a “subpoena, warrant or order” issued by a court, as long as the court has “jurisdiction in Alberta.” While no prohibition on outsourcing to the U.S. is explicitly built into the Alberta law, this provision is intended to ensure that the public body is constrained in its ability to disclose to a court of a foreign (U.S.) jurisdiction. Once again, it should be noted that this is public sector legislation.

Several privacy commissioner decisions have directly considered the issues raised by the PATRIOT Act in the context of Canadian public and private sector privacy laws.

• In a 2005 decision, the Privacy Commissioner of Canada decided that PIPEDA does not prohibit the use of foreign-based third-party service providers, but it does oblige Canadian-based organizations to have provisions in place, when using third-party service providers, to ensure a comparable level of protection (including guarantees of confidentiality and security of personal information). The Commissioner’s decision was also clear that, at the very least, a company in Canada that outsources information processing to the U.S. should notify its customers that the information may be available to the U.S. government or its agencies under a lawful order made in that country.
• Again in 2006 and 2008, the Privacy Commissioner of Canada decided that data handling in the U.S., which exposed the personal information to potential PATRIOT Act concerns, did not offend PIPEDA since the Canadian company had implemented comprehensive strategy and techniques to safeguard the personal information.   
• Most recently, a June 2012 decision of the Information and Privacy Commissioner of Ontario reviewed a complaint about PATRIOT Act concerns with the outsourcing of personal information to the U.S. by an Ontario public body (the Ministry of Natural Resources). The Commissioner decided that the Ministry’s collection, use and disclosure of personal information for the purpose of administering the Ministry’s hunting and fishing licensing program was in compliance with the Act.

All of these decisions point to the need for transparency and openness when dealing with customers, to ensure that they are made aware in cases where personal information handling, processing or storage may or will be outsourced to the U.S. Secondly, the service or outsourcing agreement must contain contractual protections ensuring confidentiality, security and compliance with privacy laws, so that service provider provides a comparable level of protection for the personal information.

4.         OSFI Guideline B-10: Outsourcing of Business Activities, Functions and Processes

OSFI’s Guideline B-10  describes requirements for federally-regulated entities (FREs), such as banks, financial institutions and insurance companies, when engaging in outsourcing. These are the guidelines relevant to the issue of outsourcing to foreign jurisdictions. Generally, these guidelines mandate appropriate security and data confidentiality protections.   

Guideline 7.1.1(j) (“Confidentiality, Security and Separation of Property”) says: “At a minimum, the contract or outsourcing agreement is expected to set out the FRE’s requirements for confidentiality and security. Ideally, the security and confidentiality policies adopted by the service provider would be commensurate with those of the FRE and should meet a reasonable standard in the circumstances. The contract or outsourcing agreement should address which party has responsibility for protection mechanisms, the scope of the information to be protected, the powers of each party to change security procedures and requirements, which party may be liable for any losses that might result from a security breach, and notification requirements if there is a breach of security.”

OSFI also expects “appropriate security and data confidentiality protections to be in place. The service provider is expected to be able to logically isolate the FRE’s data, records, and items in process from those of other clients at all times, including under adverse conditions.”

In Guideline 7.2.2 (“Location of Records”) OSFI indicates that: “In accordance with the federal financial institutions legislation, certain records of entities carrying on business in Canada should be maintained in Canada. In addition, the FRE is expected to ensure that OSFI can access in Canada any records necessary to enable OSFI to fulfill its mandate.” This is intended to cover information such as accounting records, incorporation documents, corporate by-laws, rather than personal information.

Guideline 7.2.4 (“Outsourcing in Foreign Jurisdictions”) indicates the following: “When the material outsourcing arrangement results in services being provided in a foreign jurisdiction, the FRE’s risk management program should be enhanced to address any additional concerns linked to the economic and political environment, technological sophistication, and the legal and regulatory risk profile of the foreign jurisdiction(s).”

Once again, this speaks to the need for enhanced attention to security rather than any outright prohibition on outsourcing to the U.S.

5.         Breaches in Alberta

The Alberta Privacy Commissioner’s 2012 Breach Report shows that a majority (64%) of the 63 reported cases meeting the real risk of significant harm threshold involved human error or lost or stolen unencrypted electronic devices:

• 22 breaches (35%) were caused by human error. These incidents included inappropriate disposal of personal information, misdirected emails or faxes, loss of files and portable media, and unauthorized disclosure of passwords. The most common form of human error was mail and courier errors caused by delivery to the wrong recipient. 
• 18 breaches (29%) were caused by theft, such as office and car break-ins. 
• 14 breaches (22%) were caused by electronic system compromises, typically through targeted attacks by external hackers.
• 9 breaches (14%) were caused by a failure to adequately control access to electronic or paper files.

None of the cases involved a disclosure or breach through the PATRIOT Act. And it should be noted that hackers can access records on both Canadian and U.S. servers, so in that sense no additional risk is associated with outsourcing to the U.S.

Conclusion

Many concerns have been raised about the reach of the PATRIOT Act. It should be remembered that Canadian government authorities have similar powers to access personal information in the course of investigations, and to respond to requests by their allies, such as the U.S. in investigations.

This review of recent decisions in Canada demonstrates that private sector businesses are not prohibited from outsourcing to the United States in light of the PATRIOT Act. However, Canadian companies are well advised to implement reasonable safeguards and build these safeguards into the outsource contract. Secondly, customers should be notified in a clear way when their personal information will be stored or handled outside Canada.

Calgary – 07:00

If you missed the details about the introduction of new generic Top-Level Domains (gTLDs) or need a refresher, see our earlier post here, from October, 2012: An Update on gTLDs. The period for filing formal objections against these new domains has now been extended to 13 March 2013. Once the objection filing period closes, the objections will be processed through a dispute resolution mechanism which will likely run into August 2013.

Note this upcoming webinar hosted by ICANN:

• New gTLD Objection & Dispute Resolution Webinar
  Date: 29 January 2013
  Time: 16:00 – 17:30 UTC (9:00am – 10:30am PST)
  Adobe Connect: https://icann.adobeconnect.com/newgtldwebinar
  Dial In: Dial in numbers are available here [PDF, 22 KB]

  (An overview of the new gTLD objection process, plus a Q&A with Dispute Resolution Service Providers.)

Calgary – 07:00 MST

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Megaupload Ltd. is alleged to have disseminated copyright protected movies and music and US prosecutors now have the task of gaining access to the company’s servers in a bid to prove their case. In the fascinating Megaupload saga, a Canadian court has been asked to decide what to do with 32 servers belonging to Megaupload which are located in Canada. The servers are packed with information – “100 laptops” worth of data according to the judgement – and the court was asked by the US government to deliver that data to American prosecutors who are pursuing charges against Megaupload for criminal infringement of copyright, conspiracy to infringe copyright, money laundering and racketeering.

In last week’s decision, Canada (United States of America) v. Equinix Inc.  , 2013 ONSC 193, the court denied this request, indicating that the massive volume of data meant that the scope of the investigation should be narrowed to just that information that is the target of the search, rather than the entire contents of the data trove. However, the judge did not deny that the evidence should be delivered. Evidence to implicate Megaupload likely is contained within those servers, and it is only a matter of time and negotiation to determine the scope of the search, rather than an absolute denial of the request. “Given the undisputed conclusion” the judge wrote, “…that there were reasonable grounds to believe that evidence of the offences would be located on the servers in my view the appropriate balance of the state interest in gathering evidence and privacy interests in information can be struck by an order that the servers be brought before the court …so that the court can make an order refining what is to be sent.”

From a cloud computing law perspective, this case raises several important points:

• Canadian courts will order seizure and search of cloud-computing servers – just like they will with any piece of evidence in Canada – pursuant to a request from US authorities in the course of a criminal investigation;
• Privacy interests will be balanced by the court, since the law is developing a sense of when individuals have an expectation of privacy in the contents of computers or servers;
• However, that privacy right is not absolute, but it will be balanced with the interests of governments to conduct investigations.

We can expect another decision to be released before long, where the contents of the servers are indeed delivered to US prosecutors, with some conditions or limitations as to the scope of the search.

Calgary – 07:00 MST

 

My article Click and Copy: Breach of Online License Agreements and Copyright Infringement was published in Canadian Intellectual Property Review in December.  The enforceability of click-through licenses for online software-based services is critical within the information technology industry. Software vendors and cloud-computing service providers require certainty that the licence terms governing these products will be enforceable.

In other words, vendors require certainty that, if there is a breach by a user, the law will provide a remedy, under the law of either contract or copyright, or both. When does a breach of a licence or breach of online terms of use constitute not only a contractual breach but also an infringement of copyright in the software?

The outcome of this question affects whether a vendor or provider would be able to access the infringement remedies under part IV of the Copyright Act, including injunction, damages, accounts, delivery up, and statutory damages. By reviewing some of the recent case law in this area, this article examines the intersection of copyright and contract law in the context of click-through software licences and online terms of use, specifically when a breach of such terms constitutes copyright infringement, giving rise to remedies under the Copyright Act, and when a breach is merely a breach, giving rise to remedies and potential damage awards under contract law.

Calgary – 07:00 MST

 

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Several recent stories have highlighted the concerns over personal information, privacy and the reach of mobile apps.  Once again, the law is labouring to keep up with technology.

• So-called Cyber-Stalking Apps provide the means to track the location of a phone through an app that is not visible or easily detectable by the phone’s owner. The cloaked app resides on the phone and essentially reports back to the person who installed the app on the user’s whereabouts. In the US, a proposed law has been drafted to make such apps illegal (The Location Protection Privacy Act). This draft legislation moved out of committee and may become law in 2013.
• A number of mobile apps have been criticized for collecting personal information about kids, and selling that info without parents’ consent. To tackle these problems associated with mobile apps directed at children, privacy advocates have been pushing for changes to the rules under COPPA (Children’s Online Privacy Protection Act). The US Federal Trade Commission (FTC) amended the Children’s Online Privacy Protection Rule in December 2012. The Rule now applies to mobile apps and web-based text messaging programs, and requires app developers to get permission from parents before collecting a child’s photographs, videos and geolocational information. The amended Rules will become effective on July 1, 2013.
• It is worth noting that these are both developments under US law.  In Canada, app developers who target children’s personal information would be caught by Canada’s broad private-sector privacy laws, such as the Personal Information Protection and Electronic Documents Act (PIPEDA) at the federal level, or one of the provincial-level privacy laws, such as the Personal Information Protection Act in Alberta.  Cloaked “cyber-stalking” apps could constitute an invasion of privacy  contrary to Canadian law. However, that would apply to the person who surreptitiously loaded the stalking app, rather than the app developer.

App developers: Make sure you get advice on a properly-drafted privacy policy, terms of use or end-user license, and that you understand the implications of privacy laws when launching mobile apps.

Calgary – 07:00 MST

Update: January 29, 2013: see comment below regarding WhatsApp privacy issues.

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Infringement! Litigation! Legislation! There is never a dull moment in the wonderful world of intellectual property law, and 2013 will be no exception. Here’s our list of what to watch in the coming year:

Copyright. If you keep making the same predictions year after year, eventually one of them will come true, right? For the last several years, we predicted that copyright reform would finally come to Canada. 2012 did not disappoint as the year of copyright, with the release of five SCC decisions and the passing of the copyright modernization legislation that had been long awaited.  We expect that 2013 will provide some opportunities to test the new law in court.

Anti-Spam. As with copyright, many have predicted that Canada’s “new” anti-spam law would come into effect for several years. Yes, Parliament passed the Fighting Internet and Wireless Spam Act and it did receive royal assent way back in December, 2010. However, Canada’s anti-spam legislation is still not in force. Industry Canada released draft revised anti-spam regulations last week, and it would be surprising if we didn’t see final regulations in the first half of 2013.

App Law. We predicted in 2011 that app law would develop as regulations and laws fight to keep pace with the explosion of the app economy which is expanding in both business and personal life, along with cloud computing. 2012 provided a number of important developments in app law, mostly in the US. 2013 should continue to provide clarity in this growing area of law.

Apple and Samsung. The litigation that brought patent infringement back into the public consciousness like no case since RIM vs NTP may be resolved in 2013. Even Judge Koh has made a plea for “global peace.”

Calgary – 13:00 MST

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In June, the Copyright Modernization Act was passed by Parliament. However, it did not have the force of law yet (See: Copyright Bill Becomes Law). Today, portions of the new copyright law came into force (See: this link). This phased approach is somewhat confusing. The provisions relating to format-shifting, time-shifting, satire, parody – essentially all the provisions directed at education and consumers – are in force.

Those sections dealing with ISPs and the notice-and-notice procedures (subsection 47 [41.25, 41.26, and 41.27(3)]), will be determined through a separate order-in-council process once the regulations are finalized. The provisions which implement certain WIPO treaties (World Intellectual Property Organization Copyright Treaty (WCT) and the World Intellectual Property Organization Performances and Phonograms Treaty (WPPT) are held back, and will come into effect when the treaties are ratified.

I will be speaking tomorrow to the Canadian Bar Association, Technology & IP Subsection, on the subject of copyright updates, and will be reviewing these provisions.

Calgary – 21:00 MST

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Not so fast. In 1999, the CEO of Sun Microsystems famously said: “You have zero privacy anyway. Get over it.”  The Supreme Court of Canada apparently disagrees.

The Supreme Court of Canada (SCC) released their decision in R. v. Cole last week. While this does stray from our usual review of intellectual property law, it is an important decision impacting the overlapping areas of privacy and technology. The SCC has decided that it’s reasonable for Canadians to expect privacy in the information contained on computers used for personal purposes “at least where personal use is permitted or reasonably expected.” In this analysis, ownership of the computer or laptop (or tablet, smartphone, etc.) factors into the decision of what’s reasonable, but is not conclusive. Similarly, an employer’s policies may be taken into consideration, but won’t be determinative. In other words, regardless of who owns the hardware or what the policy says, courts will consider “the totality of the circumstances in order to determine whether privacy is a reasonable expectation in the particular situation.”

Even where the laptop is owned by the employer and the workplace policy informs employees that their use will be monitored – these factors may result in a lower expectation of privacy but the expectation of privacy, according to the SCC, does not disappear as easily as you might think.

Lessons for business? Employers must tread carefully and get advice when monitoring or accessing the personal information of employees on workplace computers, laptops, tablets, smartphones and virtual systems.

Related Reading: Our earlier post: Privacy in a workplace laptop, reviewing the Ontario Court of Appeal decision in R. v. Cole, 2011 ONCA 218.

Calgary – 07:00 MDT

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“Great Fun” is a service offered by a company called Trilegiant. Trilegiant offers certain discounts to Great Fun members based on a monthly membership fee. Problem is, some members didn’t realize they were members until they saw the membership fee on their credit card statement. In Schnabel v. Trilegiant Corporation & Affinion, Inc. , Court of Appeals, 2nd Circuit (September 2012), the court considered whether terms could be considered enforceable if the terms were sent by email after the formation of the online contract.

In this case, there were online terms in the sign-up page, but for a variety of reasons, Trilegiant couldn’t rely on these terms, and was obliged to argue that the emailed terms were binding. Trilegiant asserted that the members assented to an arbitration clause by signing up, and receiving the emailed terms at a later date, and then failing to cancel their membership during the “free trial period”. The Second Ciruit Court of Appeals took a dim view of this approach. In the U.S., a consumer may receive “actual notice” of the online terms, or “inquiry notice”. “Inquiry notice” occurs when the consumer has actual notice of circumstances where a prudent person would be on guard to the existence of terms. It’s a stretch, but can still result in enforceable terms. The court concluded that neither “actual notice” nor “inquiry notice” were provided by means of the emailed terms. The court concluded:

“We do not think that an unsolicited email from an online consumer business puts recipients on inquiry notice of the terms enclosed in that email and those terms’ relationship to a service in which the recipients had already enrolled, and that a failure to act affirmatively to cancel the membership will, alone, constitute assent.”

Lessons for business? Get advice on your online terms and sign-up process for any online contracting: including cloud-computing contracts, software-as-a-service, online products sales, license agreements and terms-of-use.

Related Reading:

• Facebook App: Dispute Resolution Terms Upheld

• Changing Online Terms Midstream

Calgary – 07:00

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In a Facebook app called “SuperPoke! Pets”, players adopted virtual pets and acquired or purchased virtual currency to buy things for their virtual pets. As one of the first Facebook apps, the game took off in popularity after its launch in 2008. The game was acquired by Google in 2010, but was eventually discontinued at the end of 2011, leaving users without access to their accumulated virtual pets, currency and pet accessories. Users attempted a class-action suit against Google for “elimination of users’ money, goods and property.”

Google defended the class action by citing the dispute resolution clause, which compelled arbitration. In Abreu v. Slide, Inc., 12 0042 WHA (N.D. Cal.; July 12, 2012), the court confirmed that for an arbitration clause to be unenforceable, it must be both “procedurally” and “substantively” unconscionable. Essentially this means that an unenforceable clause would be oppressive due to unequal bargaining power between the parties, or would lead to “overly harsh or one-sided results.” As the court phrased it, the clause must be so one-sided as to “shock the conscience.”

In this case, the clause was upheld, and the dispute was sent to arbitration to be resolved.

Lessons for business?

• When drafting online terms, ensure you get advice on the dispute resolution options.
• An app developer or game publisher may be tempted to stack the “Terms of Use” in their favour, but these terms must be balanced. The inclusion of harsh or shocking terms in the fine-print may put the entire agreement at risk of being declared invalid and unenforceable by the courts.

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For those who missed it, check out this excellent article by my colleague Tom O’Reilly: $5 Cab Ride – SCC Copyright Decisions Don’t Take Us Very Far providing some balanced commentary on the recent Supreme Court of Canada copyright decisions.

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Bookmark ipblog.ca on your iPhone, iPad, Android tablet or mobile device for updates and developments in Canadian intellectual property law, including practical information and commentary on intellectual property business issues, technology commercialization and developments in the law, copyright and patent questions, trade-mark law, software and IT outsourcing, and related areas including privacy and cleantech licensing.

ipblog has been published since 2006.  In 2009, we added applaw.ca to our site, covering legal developments in the growing mobile application industry.

We have surpassed 1 million page-views from readers around the world. It’s hard to compete against YouTube cats… but we try.

Thanks to all of our readers. We’ll be taking a break during the month of August, and will resume in September, 2012.

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In October, I will be presenting at the 5th Cloud Computing Law Conference in Calgary, Alberta (October 9 and 10, 2012). Check out the brochure for a full description, including the topic “ALLOCATING IP RISKS IN THE CLOUD”: Service providers often seek to impose standard form contracts for the provision of cloud computing services containing standards of services that are often on an “as-is” basis. This session will explore the process of negotiating warranties, indemnification and limitation of liability clauses to satisfactorily allocate risks, including: scope of warranties; service vs. product warranties; remedies available for breach of warranties; and scope of customary indemnification obligations.

Readers of ipblog.ca are eligible for a 15% discount (Email me for the registration discount code).

Relating Reading: ipblog’s Cloud Computing library of articles, including “The Cloud: What goes up must come down” and “Online Agreements: Click-Through Upheld“.

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Our earlier post (Domain Name is “Personal Property”) related to the decision in Tucows.Com Co. v. Lojas Renner S.A., 2011 ONCA 548, where an Ontario court had to decide if the domain name renner.com was intangible personal property “located in Ontario”. This was an important issue in the case, since a finding that the domain name was property located in Ontario would permit the court to take jurisdiction and the lawsuit to proceed. The court decided that there is an emerging consensus among other courts that domain names are a form of property, and found that domain names, for the purposes of Ontario law, can be considered intangible personal property. This case was denied leave to appeal to the Supreme Court of Canada in Lojas Renner S.A. v. Tucows.Com Co., 2012 CanLII 28261 (SCC).

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