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

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 

 

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

On Jan. 9, 2007, the US Supreme Court handed down its decision in MedImmune, Inc. v. Genentech, Inc. resulting in a significant change to the licensing landscape.  In this case, MedImmune had entered into a licensing agreement with Genentech under which MedImmune was to pay royalties for the use of Genentech’s “Cabilly I” patent and (when it issued) the “Cabilly II” patent.  When the second patent issued, Genentech sent a letter requiring the payment of royalties for the use of the second patent.  MedImmune paid under protest, then turned around and sued the licensor on the basis that the second patent was not valid or enforceable.  By continuing to make the payments, MedImmune kept the license alive.

The essential question in the case was whether a patent licensee was obliged to withhold its royalty payments and therefore commit a material breach of the license agreement before it had grounds to sue to declare the patent invalid?  Prior case law said that a licensee did have to effectively breach the agreement before it had standing to sue.  This decision overturns that line of cases and permits a licensee to challege the validity of the patent in court, while still making payments as a licensee and keeping the license.  For MedImmune, breaching and terminating the license would have effectively shut down its own business.

For patent licensors, there are two practical points to remember:

1.  Watch how you word your letters to licensees when politely requesting (or aggressively demanding) royalty payments, as such letters can be construed as a threat of litigation, providing grounds for a declaratory suit by the licensee;

2.  Consider reviewing language in the patent license to see if licensees can be forced to waive any right to challenge the validity of the licensed patent.

The fallout from this decision will be watched closely by both patent holders and their licensees.

Calgary – 12:32 MST

 

Last night I had the opportunity to hear Don Tapscott speak about his book Wikinomics and the Web 2.0 phenomenon. Yes, I’m sure the term Web 2.0 will eventually be like “Y2K” or “Information Superhighway” — a term which dates those who use it and places them on the historical continuum of the internet’s evolution. However, for the moment it is a term which captures a certain approach to technology’s possibilities. It’s not new by the internet’s standards. The term was coined in 2004 and has been percolating since then, gaining momentum as a way to define the collaborative and community-based development of internet-related technologies. To think of the internet or the Web as one technology among many is itself a bit contrary to the spirit of Web 2.0 — the internet is becoming seamless with the use of other tools, all of which interact and are interacted with, to the point where it’s not clear where one leaves off and the next picks up.

This brings me to the idea of the practice of law: Web 2.0 for lawyers? Lawyers have been described (by one of their own) as a “medieval guild“; in other words, a conservative profession which is resistant to change. That’s not exactly a revolutionary statement. The question is whether you can teach old lawyers new tricks. The legal bankruptcy of the RIAA’s efforts to sue its own customers into compliance is one obvious example where the old thinking about intellectual property rights has to give way. I have two thoughts on this: first, yes I believe lawyers can and will change the way they do business, particularly as their clients demand it. Lawyers all over the country are already showing signs of change: blogs, RSS feeds, podcasts, wikis and client intranets. There’s no shortage of legal information and content. The lawyer’s role will be not only to change the way information is disseminated, but also to continue doing what they do now: provide analysis, recommendations and advice to place that information in context and help clients order their affairs and manage risks. Secondly, the growth and development of Web 2.0 will continue to depend on the underlying foundation provided by intellectual property rights and contract law. Even open sourcing and crowdsourcing depend on copyright law and contract law to function and flourish.

Let me illustrate it this way: health information is more open and available than ever before and patients are no longer passive recipients of health care services: but when you need surgery, all the health information, wikis and blogs won’t replace the role of an experienced surgeon. Some things you don’t leave to the collaborative community.

Calgary – 15:49 MST

 

In an earlier post we answered some common questions about trade-marks. Here are a few more practical issues about usage guidelines:

Q: What are “trade-mark usage guidelines”?

A: A set of “trade-mark usage guidelines” is like a rule-book on how a trade-mark should be used and displayed. These guidelines are designed to guide those who might not otherwise know (or care about) the specifics of how the trade-mark should appear. Guidelines of this type might specify the type of font, the particular colours which should be used, the size and relative position, and the placement of the trade-mark in relation to other elements on the label, or page or ad copy. They should go into enough detail to direct someone in the proper and consistent use of the trade-mark.

Q: Why are they necessary?

A: Trade-mark usage guidelines are necessary because consistency in the appearance of the trade-mark is very important to maintain the validity and strength of the mark over time. If a trade-mark changes too much over time or is inconsistent in the way it is used, it may lose distinctiveness and be open to attack by competitors. Look at the distinctive script used in the Coca-cola trademark. It has been used in the same way since the 1880s and strict guidelines ensure that the relative size, colour and shape of the script remain consistent across time and across a multitude of uses, from bottle and pop can labels to every conceivable type of spin-off merchandising.

Q: When would trade-mark usage guidelines be necessary?

A:  Trade-mark usage guidelines are necessary when others within your company, or others outside your company who are licensed to use your mark, need to reproduce the trade-mark regularly in the course of advertising, labelling, packaging or corporate communications. It is a way of setting and maintaining certain standards when you don’t have direct control over the use of the mark. Here are a few examples: In a large company, guidelines can be distributed to the marketing department, so that the person in charge of the online advertising can be reading from the same set of standards as someone producing corporate T-shirts, or someone sending instructions to an ad agency producing magazine ads or the intern designing the annual report. These are all uses that technically take place within the company or within the direct control of the company. Another trade-mark owner may have franchised its business model so that a hundred individual franchisees all use the mark for their own local advertising across the country or in different countries. Usage guidelines will ensure brand consistency across the entire franchise. Guidelines can also be useful for resellers, authorized distributors or service providers.

Q: Can you give me some tips on trade-mark usage guidelines?

A: Yes, when developing trade-mark usage guidelines, you should keep in mind several things: Who is your audience? Present your guidelines in a way that makes sense for those using the mark. It may make sense to keep the guidelines confidential within the company. It may make sense to publish guidelines on the internet, if that is the most effective way to protect the integrity of the brand. Your marketing department may simply need some basic guidance by email, with a designated “official” file attachment containing the approved form of the mark. Or, you may need a more involved explanation of trademark usage. Some companies prepare detailed guidelines that explain exactly what to do and what not to do. Also, look at what marks you are trying to control. Make sure you list and identify the marks governed by the guidelines. Some marks may not need to be covered by the guidelines. Sone marks may be old forms of the trade-mark that you wish to phase out in favour of a new colour scheme or style as part of a controlled evolution to a new brand.

For a few examples of effective trade-mark usage guidelines, see:
Sun Microsystems
Macromedia
Apple

Calgary – 00:06 MST

As I’ve noted in past posts, privacy and internet law often overlap. In a very interesting Federal Court decision on Monday, the Privacy Commissioner of Canada has been ordered to re-open its investigation into the privacy practices of an American company. A Canadian complainant asked the Privacy Commissioner to investigate Accusearch Inc. for possible violations of the Personal Information Protection and Electronic Documents Act (PIPEDA). In 2005, the Privacy Commissioner’s office closed its file after concluding that it lacked the jurisdiction to investigate a foreign company. In coming to this decision, the Commissioner stated that “Canadian legislation will only apply to the persons, property, juridical acts and events that occur within the territorial boundaries of the enacting body’s jurisdiction.” That decision was appealed to the Federal Court, resulting in Monday’s judgement.

The Federal Court disagreed with the Commissioner and clearly stated that “PIPEDA gives the Privacy Commissioner jurisdiction to investigate complaints relating to the transborder flow of personal information.” The court also noted that absent an investigation and a corresponding report, the complainant’s avenue to an award of damages would be closed. Citing Pro Swing v. Elta, the court noted that “A money judgment may be enforced in another jurisdiction.” This is a curious observation, since Pro Swing is a Canadian decision about enforcement of a foreign judgement in Canada, and any possible order against Accusearch would involve the enforcement of a Canadian judgment in the US, a matter for a U.S. court to decide. This decision will open the door to investigations of foreign companies and will result in some interesting enforcement challenges.

Calgary – 21:28 MST

Seemingly benign technologies can be pressed into service as privacy offenders. 

Internet-based companies are slowly becoming aware of the importance of maintaining customer confidence in the handling of personal information.  Even traditional companies are waking up to privacy issues.  A stolen laptop is the easiest way to understand the risks: a commonly-used piece of technology loaded with customer data makes mobile employees more productive; it can also present a public relations nightmare if the laptop is pinched while your employee is grabbing a coffee.

Whether the technology is simple (such as data loaded onto a laptop) or complex (cloaked software which conducts surreptitious surveillance on users), the issue is the same: personal information must be safeguarded in the face of “function creep”.   Function creep is the phenomenon of a particular technology’s function to “creep” beyond its original scope, to include other nefarious purposes.  The temptation to use the technology to harvest valuable personal information is seemingly irresistible.  The Sony Rootkit case is a classic example where efforts at copyright protection crossed the line into privacy violation. 

In Canada, the Federal Privacy Commissioner recently considered this issue in a complaint by employees that their employer was conducting surveillance on them via a GPS system installed in company vehicles.  Interestingly, the Privacy Commissioner found that the data collected by the GPS system did qualify as “personal information” under the relevant Act, even though the system only collected metrics about the use of the vehicle – speed, location, start and stop-times, etc.  The system did not collect any information about the identity of the person driving it, although company records could be used to determine who used which vehicle.  In the end the complaint was resolved in the employer’s favour since the purpose of the technology (safety, productivity and asset management) could be balanced effectively against the potential invasion of employee privacy.

Calgary – 10:48 MST

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Apple unveiled yet another iconic product at MacWorld today: the iPhone, a sleek, multifunction device with a full touch-screen which solves the design problem of packing a number pad and a QWERTY keyboard onto a device meant to slide into your shirtpocket.

The iPhone seems destined to follow in the iPod’s footsteps as a consumer favourite. However, trade-mark lawyers must raise the question: what do they plan to call the thing? Apple’s application for the trademark “iPhone” is being opposed in Canada by Comwave Telecom Inc. which claims rights dating from 2004 in association with local and long distance telephone services, and VOIP telephone services. In the US, the “iPhone” mark is claimed by no less than four companies: Teledex LLC, XTREME Mobile LLC, Ocean Telecom Services LLC, and CISCO Technology, Inc. the last of which has a trademark registration. Apple hasn’t even applied for the trademark in the US. Apple must have a plan of some kind and let’s hope it will be another example of creative thinking. Otherwise this branding exercise will hit a brick wall.

Calgary - 22:15 MST

Let’s start the new year on a positive note: how to resolve differences peacefully when two identical or similar brands start overlapping in the marketplace.  You have taken steps to ensure your brand is unique in your own country.  But what happens when that brand becomes successful elsewhere in the world, and suddenly you’ve got a potential dispute brewing with a foreign trade-mark owner? 

Do you litigate or negotiate? 

In the case of Apple vs. Apple, the answer is a bit of both.  Apple Computers with its stylized apple symbol, and Apple Records , with its granny-smith apple logo, have been in and out of court rooms and the lawyers’ boardrooms for more than twenty years, trying to navigate through the trade-mark minefield.  A 1981 arrangement ended up in court in 1989, resulting in a coexistence agreement in 1991 .  This lasted until 2003, when the success of Apple’s iTunes service ignited another lawsuit.  In 2006, Apple Computer was cleared of the allegations of breaching the coexistence agreement in a decision of the High Court of England.

Another recent case illustrates an alternative approach.  Tsubi, the successful Australian jeans designer bumped up against Tsubo, an American shoe company.  Rather than fight a trade-mark infringement battle, Tsubi and Tsubo reached a settlement in which Tsubi will retain its trade-mark in Australia, but will be re-branded as Ksubi in the rest of the world.  The Australian company now faces the challenging task of educating its customers and migrating them over to the new brand.  A little creativity and flexibility means that they will be spending their money on marketing instead of litigation.   

Calgary – 11:06 MST

The Canadian trade-mark RIDENT for golf clubs is confusingly similar to the US trade-mark TRIDENT for golf clubs.  That’s the easy part.  Now, how do you confine a Canadian company from selling its RIDENT brand golf clubs over the internet to US consumers who may be familiar with the rival TRIDENT brand?  We’ve got e-commerce, intellectual property rights and court orders.  Just the thing to take to the Supreme Court of Canada.

In Pro Swing Inc. v. Elta Golf Inc. 2006 SCC 52, the Supreme Court of Canada (SCC) tackled this problem on a number of levels.  Pro Swing, owner of the TRIDENT trade-mark in the US, initially obtained an order from a US court, stipulating that the Canadian company, Elta Golf, should cease sales of RIDENT brand golf clubs into the US.  But in practical terms, the court order was only enforceable in the US and Elta Golf was an Ontario-based company.  Pro Swing commenced a lawsuit in Canada to enforce its US judgement. 

Traditionally, foreign judgements can be enforced in Canada where they are a final order to pay a defined sum of money.  Or put another way, where compliance is relatively easy to enforce and monitor: either the money has been paid, or it hasn’t.  In the Pro Swing case, the US order was a “foreign non-monetary judgment”.  In other words, it carried with it a number of non-monetary orders and stipulations.  The SCC has now clarified that these types of orders can be enforced in Canada. Unfortunately, the court was split on when they should be enforced. Here are some of the factors the Canadian court will take into consideration:

●       are the terms of the foreign order clear enough?

●       is the foreign order sufficiently limited in scope?

●       is it a final order?

●       is enforcement of the order a justifiable use of Canadian judicial resources? 

In the end Pro Swing’s US judgement was not enforced by the court. The lessons for business?  First, foreign litigants seeking to enforce their foreign judgements in Canada now have a greater range of options available to them; they are not confined to monetary orders alone.  Secondly, because of the thicket of issues which a Canadian court will consider, it is wise for US counsel to seek advice from Canadian counsel prior to drawing up the terms of the US order to ensure it stands the greatest chance of enforcement in Canada.  Third, in practical terms, the world of e-commerce just got a little cozier: cross-border business and internet sales mean that Canadian and US companies will continue to come into conflict and this decision effectively shrinks the gap between foreign and Canadian courts.

Calgary - 09:59 MST

Early in November, Universal Music Group announced an innovative deal with Microsoft.  As part of the negotiations leading up to the launch of Zune (Microsoft’s competitor to the iPod), Universal cut a deal to get a royalty payment for every Zune player sold by Microsoft.  This is separate from the royalties generated by the sale of downloaded music from Universal’s catalogue. 

How did Universal negotiate this and why did Microsoft agree to share its (probably slim) margins on the device?  Let’s call it an alignment of interests.  Microsoft needs the big music catalogues on side if its Zune is going to put a dent in Apple’s mighty iPod.  Secondly, the Zune is marketed by Microsoft as a “social” vehicle: the wireless capability of the Zune player allows users to share their music with other Zune owners.  In legal terms, this means that content subject to copyright can be distributed to unnamed users who have not directly acquired any rights to the music.  Sound like a recipe for a copyright lawsuit?  Not if you cut a deal that aligns interests.  If Universal enjoys a cut of sales of the device, then it has a vested interest in having as many Zune owners as possible.  To answer any fears that one Zune owner can distribute music infinitely, the technical protection measures kick in.  The device can only share with other Zune devices within range, and the shared music actually times out after three days.  Music sharing?  It’s more like a short-term loan. 

For its part, Universal had two other motivators: one, the Diamond Rio case in the U.S. made it clear that MP3 players were not subject to the type of copyright levy applied to blank CDs and other digital recording media.  In Canada, the Federal Court of Appeal came to the same decision in 2004. So iPods and Zunes are not generating tariffs for copyright owners the way blank CDs are.   Second, Universal also has its eye on upcoming negotiations for the renewal of its contract with Apple. With the Microsoft deal in its back pocket, Universal will very likely look to Apple for a cut of iPod sales.  Unfortunately for Universal, it does not have the upper hand in that round of negotiations.  Apple’s iTunes accounts for the lion’s share of the legal download market and any threat by Universal of pulling its catalogue from iTunes would be akin to shooting the goose that’s laying the golden eggs. 

Instead of positioning themselves for a future battle over copyright, Universal and Microsoft used a little creative thinking to align business interests.  It will be interesting and instructive for business owners to watch as the deal-making unfolds.  

Calgary - 08:38 MST

Can a director be personally liable for trade-mark infringement?  We raised this issue in our October 25th post. A recent Federal Court decision has re-examined this question.  Generally, directors and shareholders are considered to be legally separate from their corporation and are not personally on the hook for the debts or liabilities of that corporation.  If the corporation breaches its contractual obligations, defaults on a loan or infringes someone else’s intellectual property rights, then it is the corporation, not the individual, who is liable.

In the case of Petrillo v. Allmax Nutrition Inc., 2006 FC 1199 (CanLII), the plaintiff brought an allegation of trade-mark infringement against both the corporation and Richard Glover and Michael Kichuk, the directors of that corporation.  The individual defendants brought a motion to have the lawsuit dismissed against them personally.  They succeeded.  In coming to its decision, the court made several important points:

One, even though a small company may be controlled by one or two individuals who may function as shareholders, directors and officers, the authorization required for personal liability will not be inferred merely from the fact that a company is closely controlled.  Secondly, the court said that “it is not enough for a Plaintiff to assert personal liability on the part of an officer or director of a company in a statement of claim, in the hope that evidence to support the allegation will be uncovered during the discovery process.  A lawsuit is not a fishing expedition.” (at para. 36)

In the end, no evidence was brought forward to implicate the directors personally and so the lawsuit against them was dismissed. 

Calgary - 14:02 MST

Many companies want some basic guidance on copyright. This discussion provides some practical tips and information on copyright in Canada.

Q. What is copyright?

Copyright is at its most basic level the “right to make copies”. It was originally developed to give writers and artists a measure of control over who can rightfully copy their works.  Copyright protects original creations such as books, music, images, photographs, and has evolved to provide protection for software, layout and design of websites, broadcasts and performances.  Copyright is a function of the law set out in the Copyright Act and in the court decisions which interpret that Act.

Q. How is copyright created?

Someone who creates an original work automatically enjoys copyright protection in that work by virtue of the Copyright Act.  For copyright to subsist, the work must be original and it must be reduced to a fixed form (for example, copyright does not protect mere ideas which are not expressed in writing). 

Q. Do I need to register copyright and if so, how do I do that?

Technically, you do not need to register copyright in order to enjoy the protections under the Copyright Act.  However, you can benefit from registration because a registration entitles the copyright owner to the benefit of certain presumptions.  In other words, you are presumed to be the owner of a work in which you have a copyright registration without having to prove that you were the author of the work.  Whereas, without a registration, you would have to prove authorship and ownership of that work in the event of any dispute.  Copyright registration is easy to do (relative to patents or trade-marks, for example).  The Canadian Intellectual Property Office provides more detailed guidance on that process.

Q. What can I do if someone else uses my copyrighted works without my permission? 

When someone else uses works in which you enjoy copyright protection and they don’t have your permission, this is what we call copyright infringement.  There are a number of exceptions in the Copyright Act which permit copying under certain circumstances, but if those exceptions are inapplicable, then you may be able to sue the infringer to prevent the unauthorized copying.  The Copyright Act permits copyright holders to collect statutory damages of up to $20,000 in certain cases where infringement can be shown.

If a company is sued for infringement of intellectual property rights, can the director be held personally responsible?  One of the benefits of incorporating a company is that the company’s shareholders and directors are not personally liable for the debts and liabilities of the company.  That’s a basic proposition of corporate law.  Of course, there are exceptions.  In the 2006 decision in Krav Maga Enterprises, LLC v. Edge Combat Fitness Inc., the Federal Court allowed the addition of a director in a lawsuit for trade-mark infringement.  Essentially, if the director or officer is engaged in “deliberate, willful and knowing pursuit of a course of conduct that is likely to constitute infringement or reflects an indifference to the risk of it” then the director can be tagged with personal liability.  This is not a new idea.  The Federal Court of Appeal has established this type of liability in cases such as Mentmore Manufacturing Co. Ltd. v. National Merchandise Manufacturing Co. (1978), 40 C.P.R. (2d) 164 in a case of patent infringement and another decision of the Federal Court adding a personal defendant in Dimplex North America Ltd. v. Globaltec Distributors Ltd. from 2005, a case also alleging patent infringement. 

The 2006 decision by the Ontario Court of Appeal in the case of CivicLife.com Inc. v. Canada is instructive in how not to treat your software developer. The case involved a botched pilot project known as Access.ca which was touted as a ground-breaking portal for communities across Canada, designed to make all information and services of federal ministries and agencies accessible on-line. This was in 2000, back when we all used the endearing term “Information Superhighway.” The project foundered for a number of reasons and ended in litigation between Industry Canada and one of its contractors, a software company known as CivicLife.com Inc. It makes for a good case study, so here are a few of the lessons:

Lesson 1: Keep Track of the Cooks in the Kitchen
Sometimes you need to bring a number of technology providers together to get a project done. That’s business. However, make sure you know how many you really do need, and ensure there is a clear structure in place to deal with communication and governance. In the CivicLife case, the government engaged two contractors to work on the project: CivicLife and another software company called Smartsources.com Technologies Inc. Smartsources was the junior partner, hired to provide some of the minor components of the portal. The parties did turn their minds to the issue of communication and cooperation: in the legal agreements the two contractors were obliged to cooperate and communicate with each other and the government had established a communication structure between itself and each contractor.

But at some point in the process, someone at Industry Canada decided that Smartsources should take the lead and develop its own portal. Problem is, no-one ever told CivicLife, who continued to toil away at the project wondering why their partners weren’t cooperating. If you decide that one contractor needs to be dropped, do it early and negotiate a resolution of the issue or a termination of that contractor. Secretly encouraging one contractor while stonewalling the other will only breed confusion, inefficiency and ultimately litigation. The court found that: “The misconduct was carried out in secret while all along Industry Canada was telling CivicLife the project was proceeding as agreed, and when CivicLife learned of the portal submitted by SmartSources, Industry Canada invented a false story to convince CivicLife that its position was not altered.”

Lesson 2: The Duty of “Good Faith”
The court was clear that Industry Canada breached its duty of good faith when dealing with CivicLife. What does that mean? Essentially, the government secretly encouraged Smartsources while stringing along CivicLife with no intention of making the relationship work. According to the court, they “acted in such a way as to undermine the very objectives of the contract.” The government’s lawyers (hey, they were doing their job) argued that it was not a specific term of the contracts that the government act in good faith. Okay, they were technically correct, there was nothing expressly imposing such an obligation in the text of the government’s contracts. But that didn’t stop the court from “reading in” or implying a duty of good faith in its dealings with CivicLife. You may have a duty to act in good faith even if there is no such obligation written in your contract.

Lesson 3: The Fine Print
Of course the fine print can always come back to haunt you. And there’s nothing like litigation to shine a light on it. Here are a few nuggets from this case:
• If you have a duty to use “best efforts” you must exercise your discretion reasonably and fairly.
• If you can do something in a contract in your “sole discretion” don’t think that means you can ride roughshod over the other party. When exercising your discretion, these words can mean acting reasonably, honestly and in good faith and with regard to how the other party’s interests are affected.
• An “entire agreement” clause will not stop the court from implying a term of the contract, such as a duty of good faith or the duty not to abuse a discretion.

Lesson 4: The Value of Good Evidence
Industry Canada never provided any evidence to explain whether it ever rejected or found fault with any of CivicLife’s deliverables. It could never explain why it decided to ask SmartSources to provide a stand-alone portal or why it did not proceed with the national launch of Access.ca. If they had the evidence, it would have come out. On the other side, CivicLife could show that it sent written correspondence to Industry Canada, and this documentation helped win the case. In the court’s words: “Even though Industry Canada knew CivicLife was in dire financial straits and needed to be told the truth as soon as possible, it deliberately chose not to respond to CivicLife’s many letters and kept silent to allow CivicLife to drown in useless and expensive attempts to keep the project alive.”

This case isn’t a cutting-edge Supreme Court of Canada judgement, but it neatly illustrates some of the practical business issues to watch for. You may as well take a few tips: CivicLife ended up in receivership.

If a US company obtains a judgement from a US court for intellectual property infringement in the US, can the judgement be enforced in Canada?

Several American movie studios sued a Canadian company Click Enterprises Inc. (“Click”), and its principal, an Ontario resident named Philip Evans, for infringement of intellectual property rights.  Specifically, the lawsuit involved allegations of copyright infringement arising from unauthorized movie downloads.  The movie studios obtained default judgement in New York state and sought to enforce their judgement against the Ontario company in Canada.  In the decision in Disney Enterprises Inc. v. Click Enterprises Inc. the Ontario court decided that there was a “real and susbstantial connection” between Click’s conduct and the United States, where the original judgement was granted.  The court said “it is inescapable that Click was making its services available to residents of the United States who wished to illegally download American films.”  Because of this connection, the US court had exercised proper jurisdiction in the eyes of the Ontario court, and the US judgement was upheld in Ontario.  In effect, the US judgement was enforced as though it was the judgement of a Canadian court.

The lessons for business?  The use of the internet was instrumental in cementing the “real and substantial connection” between Click’s conduct and the United States.  Click had US customers and accepted online payments in the US.  Any online business must take into account the risks of intellectual property infringement which might actually take place south of the border.  If a Canadian business infringes IP rights in the US, the long arm of the law does have a way of reaching across the border.

Calgary – 22:09 MST – Many companies want some basic guidance on trade-mark usage. This discussion provides some practical tips and information on trade-marks in Canada.

Q: What is a trade-mark?

A: A trade-mark is a brand name which distinguishes one company’s products or services from the products and services of all the competitors in the marketplace. It’s a way of identifying which product or service comes from which company or “source”. The most common forms of trade-mark are logos or designs (for example, the Nike swoosh or the Royal Bank lion), letters or initials (such as IBM or DKNY) or slogans (such as “Don’t leave home without it” or “The breakfast of champions”). Successful trade-marks are valuable assets of their owners which convey a secondary meaning to consumers.

Q: How are trade-marks created?

A: Trade-marks are created through use. In this sense, “use” refers to use of the mark by the trade-mark owner in association with the sale of the owner’s products and services. Registration is not required for a trade-mark to exist, although registration is recommended. When you apply to register your trade-mark, your trade-mark agent will ask you about the “date of first use”. In other words, the question is “When did you start using your mark in the sense of selling products or services in association with that mark?” It does not refer to the date when you first had the idea for your mark, or the date business cards were printed, or any number of other points which might be mistaken for actual “use” in this sense. To document your use of the trade-mark, keep copies of invoices, hang-tags, labels, copies of advertising, pictures of signage and other indicators which coincide with the date of sales of your products or services using that mark.

Q: When do I use the “TM” and the ®?

A: This is a common question. In Canada, the Trade-marks Act does not refer to the TM or ® symbols. Customarily, the TM symbol is used to designate unregistered trade-marks and the ® is used with registered trade-marks. If you have a registered trade-mark, always use the ® symbol, to put the world on notice that you have registered trade-mark rights in connection with that mark. If your mark is unregistered, then use the TM as a way of indicating your intention to protect the mark. For those trading into the United States, we recommend using the ® symbol only in association with a mark registered in the US. The use of the ® symbol in the US for a mark which is not registered in the US can be considered a type of offence under what is essentially consumer-protection legislation.

Q: What’s the difference between a registered trade-mark and one that isn’t registered?

A: A mark can be unregistered and still be a valid trade-mark. This is known as a “common law” mark. A trade-mark owner enjoys more benefits and rights of enforcement under the Trade-marks Act if the mark is registered.

Q: What happens in the registration process?

A: The registration process starts with searches to determine the availability and registrability of the proposed mark. A trade-mark agent will typically render a report or opinion on the availability and registrability of the mark. If the path forward is clear, an application is prepared in a particular form, and submitted to the Trade-marks Office (the Canadian Intellectual Property Office) for examination. An examiner at the office will review the application and if there are no objections to registration (for example, an objection based on the similarity of the proposed mark with an existing mark owned by someone else), the mark will proceed. The examination process ends in “advertisement” of the mark which refers to the publication of the proposed mark (along with all the other proposed marks which are being applied for) in the Trade-marks Journal. A third-party (usually a competitor) may take the opportunity to oppose the application if the mark is confusingly similar to an existing mark, or if the mark is vulnerable to attack on any number of other grounds of opposition. Assuming there is no opposition or the opposition challenge is defeated (or a negotiated settlement is reached) the mark may proceed to allowance and ultimately registration. The whole process can take 12 – 18 months.

Q: Can others use my trade-mark?

A: In short, no-one else should use a mark without the permission and control of the owner. This goes for business partners, affiliates, joint-venture partners, distrubutors, even subsidiaries. Any use by someone other than the owner can jeopardize the mark. All such uses by others should be properly controlled and documented with properly-drafted Trade-mark License Agreements.

Q: Can you give me some tips on trade-mark usage guidelines?

A: Yes, tips on trade-mark usage will appear in future posts!