–

By Richard Stobbe

The Supreme Court puts it mildly in its opening line: “The Internet raises a host of new and challenging questions about privacy.”

One of those questions is whether an IP address can be considered personal information. An internet protocol (IP) address is the unique numeric identifier of a particular computer and, in a wider sense, can be any node or point in the internet generally. In the recent case of R. v. Spencer, 2014 SCC 43, the Supreme Court of Canada (SCC) considered whether there is a reasonable expectation of privacy in ISP subscriber information including IP address information.

In this case, police identified the IP address of a computer that someone had been using to access child pornography.  Police approached the ISP and obtained the subscriber information associated with that IP address. At this point, no warrant was issued. This led them to the accused  and a warrant was issued for a search of his residence. The accused was charged and convicted. The SCC indicated that in this case, there was a reasonable expectation of privacy in the subscriber information, including the IP address.

Since the search of the subscriber info was obtained without a warrant, the search violated the Charter. While a warrant was eventually issued for a search of the accused’s residence, that warrant could not have been obtained without the original (warrantless, unconstitutional) search of the ISP subscriber information. Since the original search was unconstitutional, it follows that the search of the residence was also unconstitutional. This all leads to the exclusion of the evidence found at the residence.

Nevertheless, the SCC said that, even in light of all of the above points, the “police conduct in this case would not tend to bring the administration of justice into disrepute.”  The court concluded, in essence, that excluding the evidence would be worse than allowing that unconstitutional search. The admission of the evidence was therefore upheld.

A few key points to note:

• Terms of Use and Privacy Policies are carefully reviewed and taken into account by the court in these cases.
• In this case Shaw was the ISP. Shaw’s Privacy Policy said that “Shaw may disclose Customer’s Personal Information to: . . . a third party or parties, where the Customer has given Shaw Consent to such disclosure or if disclosure is required by law…”  The initial warrantless search by the police was not “required by law” (in the sense that it was merely a request and police had no way to legally compel compliance). This contributed to the court’s conclusion that there was a reasonable expectation of privacy on the part of the accused.
• This contrasts with the decision by the Ontario Court of Appeal in R. v. Ward 2012 ONCA 660, where the court held that the provisions of PIPEDA were a factor which weighed against finding a reasonable expectation of privacy in subscriber information. That was another child pornography case. In that case, the ISP was Bell, whose terms said “[Bell Sympatico will] offer full co-operation with law enforcement agencies in connection with any investigation arising from a breach of this [Acceptable Use Policy].” There was no reference to disclosures “required” by law.  In that case, the accused has a subjective expectation of privacy, but that expectation was not objectively reasonable in light of his criminal activities.
• Consider reviewing your privacy policies and your organization’s ability to disclose subscriber information in light of these decisions.

By Richard Stobbe

If the term “CASL compliance” is giving you a nervous twitch, you’re not alone. Many small and medium-sized businesses in Canada are scrambling to prepare for Canada’s Anti-Spam Law (CASL), whose official title says it all – especially the part about “efficiency and adaptability” (take a deep breath before you read “An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act“).

Two weeks from today, on July 1st, the first stage of the new law will come into force. The implied consent provisions in Section 66 create a transitional period.

For a period of three years after July 1, 2014, consent is implied for all “commercial electronic messages” (CEMs) if the sender and the recipient have a pre‐existing business or non-business relationship and that relationship previously included the exchange of CEMs.  Consent can be withdrawn by the recipient at any time during that three‐year period. Note that “commercial electronic messages”, “existing business relationship” and “existing non-business relationship” all have special definitions in the legislation.

While this transitional period only lasts for 36 months, it allows a sender of CEMs to rely on prior relationships that reach back in time. The regular implied consent provisions only permit a sender to rely on a two-year window – in other words, implied consent depends on an existing relationship during the two-year period before the CEM is sent (or only 6-months in some cases).

In recent information sessions, the CRTC has indicated that the Section 66 transition provisions do not impose those two-year or 6-month rules: “So what Section 66 does is during that transition period of three years, the definitions of existing business relationship and existing non-business relationship are not subject to the limitation period, which are six months and two years that would otherwise be applicable. So in theory, if you meet the definition of existing business relationship or existing non-business relationship and there’s the communication of CEMs between the individuals, you could go back 25 years in theory.” [Link to transcript.]

Don’t think the transitional period lets you off the hook. Every organization should be preparing for CASL for a July 1st start date. If you need assistance on reviewing the scope of your obligations, how the law applies, and how the transitional provisions might apply to your organization, contact us.

Calgary – 07:00 MST

By Richard Stobbe

Okay, so maybe it’s neither as romantic as Gershwin’s “An American in Paris“, nor as historical as Mark Twain’s “A Connecticut Yankee in King Arthur’s Court,” but many US lawyers do find themselves facing legal issues in Canada. US practitioners who deal with Canadian legal matters must take note of a few common pitfalls. In this series, we review some of the most common misconceptions and flag a number of important tips in the area of cross-border intellectual property law:

• Copyright Law – both countries are party to the Berne Convention for the Protection of Literary and Artistic Works and both copyright regimes cover the same basic categories of protection. In Canada, the Copyright Act protects original literary works, dramatic works (including choreographic works), musical and artistic works, computer programs, performances, sound recordings and communication signals. The scope of protection the USA is roughly the same.

.       A few tips on copyright:

• The term of protection in Canada the life of the author plus 50 years. In the US, the term of copyright is based on the author’s life plus 70 years. There are variations that will impact the duration of protection, but that important distinction is worth noting.
• If a work is protected by copyright in Canada, it can benefit from protection in the US under the Berne Convention, and vice versa.
• Under the American DMCA, a notice-and-takedown system was implemented for the treatment of copyright infringement claims online. In recent amendments to the Canadian Copyright Act, a so-called notice-and-notice regime has been created. While these provisions are not in force, they are expected to be in force in January 2015.  Once implemented, a notice of online infringement would trigger an obligation to pass along notice of infringement, but not necessarily an obligation to takedown the allegedly infringing material. Under this system, there are penalties for failure to forward the notice of infringement.
• The concept of “works made for hire” does not appear in the Canadian Copyright Act. Employers in Canada, or US employers of Canadian employees, can rely on a provision (Section 13(3)) which stipulates ownership of works that are created in the course of employment are owned by the employer.
• Joint ownership of copyright is handled differently in Canada and the US – let’s use software as an example. In Canada, generally speaking, a co-owner of copyright cannot license the rights to the software without the consent of the other co-owner, whereas in the US, a co-owner can license without consent.

For advice on cross-border intellectual property issues, contact Canadian counsel at Field Law.

Calgary – 07:00 MST

–

By Richard Stobbe

Does your organization have “intellectual assets”? Regardless of what your organization does – whether it is a service-based business, or in the manufacturing sector, whether it is driven by cloud-based software or bricks-and-mortar locations, whether it is a multinational or a local start-up – chances are good that you can start to list the intellectual capital that has value in your organization. What do we mean by “intellectual assets”? There are many definitions, but one broad definition is simply “knowledge that has value in your organization”, and it can encompass:

1. Human know-how and intellectual capital – the unwritten expertise, experience, concepts and technical knowledge that employees have in their heads; and
2. Intellectual assets, including registered and unregistered intellectual property (IP) – this includes the codified or “captured” knowledge that adds to your organization’s value, such as trade secrets that might be captured in internal processes, manuals, design specifications, software source-code and other unpublished know-how, as well as the value represented by:
   • Patents (including Canadian and international applications and issued patents);
   • Copyright-protected works (including published and unpublished written works);
   • Trademarks (including logo designs, registered and common law marks);
   • Industrial designs, and other forms of registered intellectual property.

Some organizations are better at managing and obtaining value from their intellectual assets. What are the best practices for the management of these assets? In this series, we’ll review current best practices for management of intellectual assets as a competitive tool. Experts in the area of intellectual asset management have identified several layers or tiers of sophistication in the handling of such assets. Therefore, while a start-up inventor may certainly learn from the approach of Apple, Inc., each organization must look at best practices from the perspective of their organization, their resources and their stage of development. As a starting point, the following three steps lay the groundwork for future steps of IP management and value creation:

1: Conduct an Audit

The first step in any organization that is new to intellectual asset management is to conduct a review of existing assets. This is also a great exercise for organizations whose IP portfolio may be evolving – perhaps through recent growth, acquisitions, internal research and development (R&D) or divestiture. This step seeks answers to issues such as:

• What does the organization own, and what is merely licensed? What are the gaps in intellectual assets?
• Review unpatented inventions, patent applications, issued patents.
• Review software developed by or for the organization.
• Identify trade-secrets, focusing on non-public information that adds specific value to the organization, including intangibles such as customer lists, processes, early-stage prototypes, and strategic plans.
• What non-disclosure agreements or confidentiality obligations has the organization agreed to?
• Is the organization party to any IP licenses (in- or out-licenses)? Are there any co-development or joint venture agreements that involve IP creation?
• Identify the organization’s trademarks, logos and brands. Note registered and unregistered marks in use by the organization in different jurisdictions.

This audit or portfolio review process may start as a simple list, and may evolve into a more detailed table or spreadsheet. It may involve more sophisticated tracking systems which are maintained with IP counsel, to track patent maintenance fees and deadlines.

2: IP Education

An organization must also educate its personnel on the strategic importance of intellectual property within the organization.

This is a process of raising awareness and providing education about the different types of intellectual property and the organization’s policies related to these assets. This must involve the leadership of the organization and it may even trickle down to “front line” personnel. It should involve the integration of intellectual property strategy into overall business strategy, or if that IP strategy is already in place, it may involve internal education sessions and policies, such as confidentiality and invention disclosure policies. In some cases, it involves a process of educating professional advisors about the strategic role of IP in the organization.

IP counsel can play an important role to provide education, and to be a resource for developing internal policies, reviewing agreements, and drafting contractual provisions.

3: Implementing “Make versus Buy” Decisions

The next step can certainly happen in tandem with the other steps of IP portfolio analysis, and IP education. Many organizations are continuously innovating in their industry as they seek to gain and maintain their competitive advantage. However, not all organizations have the capacity to innovate internally. A medium-sized company may not have the R&D strength of its competitor, but it may still use strategic decisions to leverage the value of intellectual assets and gain an edge over competitors. Ultimately, the decisions on how to innovate involve a “make versus buy” decision. Through a screening process, an organization can weigh the various factors that influence its decision to pursue an innovation opportunity. At this stage, the organization is looking at factors such as:

• Are ideas and inventions emanating from within the organization? This is certainly enhanced when the IP education and awareness is part of the organization’s culture.
• What is the value of these ideas and inventions, as against the cost of developing the idea to a commercial product?
• Is this a core or non-core function for this organization?
• Is it more cost-effective for the organization to internally develop this as a product or innovation, to pay someone else to develop it, or to license it in from another company?
• If it is internally developed, is IP protection available, and what type of protection will it be? Is it eligible for patent protection?

Here is one example of how these different pieces may fit together:

Let’s say an organization has reviewed and listed its trade secrets during an intellectual asset audit. In the course of this process, it learned that trade secrets formed an important part of the organization’s competitive advantage, but there was a lack of any internal confidentiality policies, nor was there any invention or idea disclosure process. With the help of counsel, it developed an internal confidentiality policy, as well as a modest reward system for idea disclosures. The CEO directed IP counsel to provide a lunch-and-learn session for employees, including those in the sales team. Employees were educated about their role in the organization’s value-chain, and the importance of maintaining secrecy over confidential information and innovative ideas. After the education sessions, someone in sales came forward to describe an idea for product improvement based on recent feedback from customers. This idea was filtered through the company’s “make versus buy” decision process, leading to a product improvement which was determined to be patentable. This patentable improvement blocked competitors from adopting this product change. The company’s confidentiality policy emphasized the importance of maintaining secrecy over the improvement until the patent application was filed and the product improvement was released for sale.

To discuss the importance of intellectual assets within your organization, contact Richard Stobbe in our Intellectual Property and Technology Group.

Calgary – 07:00 MST

Field Law sponsored the Canadian Lawyer magazine’s in-house general counsel roundtable, moderated by Jennifer Brown: see this link. The participants – from the University of Calgary and technology-driven companies Pason Systems Corp. and Trican Well Services – discuss how risk management is addressed in their organizations.

Calgary – 07:00 MST

By Richard Stobbe

A recent survey of the top patent producing corporations in Canada (see this link, courtesy of our colleagues at IPPractice.ca) shows a few interesting trends:

• Despite its fall from grace over the past 4 or 5 years, BlackBerry remains among the top innovators in the country.
• The top five patentees in Canada all make a significant investment in departments that focus on purely on research and development (R&D):
• BlackBerry (419 patents),
• Qualcomm (329 patents),
• Schlumberger (183 patents),
• Procter & Gamble (164 patents),
• LG Electronics (147 patents)
• Innovators in the oil-and-gas/energy sector are not leading the pack, but are well-represented in the top tier: Schlumberger (183 patents), Baker Hughes (121 patents) and Halliburton Energy Services (105 patents), all of whom provide services to companies in the extraction / production sector.
• Innovation in mature consumer sectors – led by BlackBerry, Qualcomm, Procter & Gamble, LG Electronics, General Electric, Microsoft and Honda – is typically incremental in nature. This is a sector where protection for incremental improvements (as opposed to quantum leaps forward) can play an important role in maintaining a competitive edge.

Review your patent strategy with the Field Law Intellectual Property and Technology Group.

Calgary – 07:00 MT

By Richard Stobbe

A recent EU decision by the Court of Justice of the European Union (CJEU) has generated a lot of press since it involves a high profile company – Google – and a tantalizing concept of a “right to be forgotten”. The story stems from the efforts by a Spanish man to compel Google to remove search results that referred to the man’s prior financial history – in fact the references were to bankruptcy-related notices published by a Spanish newspaper years earlier. The online newspaper publication remains in place, but the CJEU’s decision touches on the indexing and display of the results in a Google search, which refer back to that online newspaper publication.

So what does this mean for Canada?

There has, as far as I am aware, no equivalent privacy-related decision relating to removal of search results by search engines in Canada. However, there are analogous rights in Canada for individuals to compel an organization to correct or delete personal information. And that would apply to the organization that has “collected, used or disclosed” the personal information.

In Canada, PIPEDA does contemplate the correction of personal information, the withdrawal of consent, and the deletion of personal information that has been collected. Those provisions still require the individual to make a request or a complaint in order to get a remedy.

In that sense the EU organization (in the EU context) in Google’s position then has to decide on the merits of that request or complaint, so the “right” may be subject to the interpretation of these subjective questions by a Google employee, considering all the different criteria that the EU decision has listed.

In Canada (in the PIPEDA context), the organization does not have to make the same kinds of assessments or value judgements – the question is simply whether the individual is withdrawing consent, or correcting information.

In the EU, the organization has to decide if “in all the circumstances” the info appears to be “inadequate, irrelevant or no longer relevant, or excessive” which requires the exercise of a lot more judgement. And more scope for disagreement.

How this is handled by Google, and how it may influence Canadian decisions on requests for removal of personal information, remains to be seen.

Calgary – 07:00 MST

By Richard Stobbe

Industrial design law in Canada protects the visual features of shape, configuration, pattern or ornamentation which are applied to a product. Functional elements are not protected.

Think of the unique shape of a bottle. The functional elements – such as a handle, a cap or lid – those elements could not be protected by industrial design, but design elements like a curved neck, or say a ridged pattern or other ornamental features could be protected.

If the article or product has been “published” (i.e., it’s been made public or offered for sale or use) then it won’t be eligible for protection. However, if the product or article has been “published”, there is a 12 month grace period in which to obtain registration. So timing is important and protection can be lost if the product launch is not coordinated with IP rights protection.

For protection under the Industrial Designs Act, registration is required, and lasts for 10 years from the date of registration. Note that at the five year point, a maintenance fee is required. After the expiry of the 10-year term, the design is available for anyone in Canada to make, import, rent or sell.

Some points to consider for the use of industrial design law as a tool for strategic IP protection:

• industrial designs (also known as a design patent in the US) can be a perfect fit for companies selling manufactured consumer goods and packaged goods, but can also be a competitive tool for service companies who are trying to protect a product or device that is used or sold as part of a service offering
• industrial design can help fill in the gaps between utility patents, trademarks and copyright
• when considering protection, focus on features that would distinguish your product from competitors, and features that competitors or knock-off infringers would want to copy in order to mimic your products
• the scope and period of protection is much narrower than the scope of a utility patent, but it can be a very useful tool, and much more cost-effective means of obtaining protection in the right circumstances.

Talk to experienced IP counsel for advice on exploring the possible advantages of industrial design law for your organization.

Calgary – 07:00 MDT

By Richard Stobbe

Yesterday draft “anti-patent-troll” legislation was put forward in Washington. This is part of a ground swell of opposition to illegitimate patent demand letters from so-called patent assertion entities (PAEs), or “patent trolls”. This draft legislation, according to the sponsor of the proposed bill, “increases transparency and accountability to help expose and prevent fraudulent infringement claims. It would require patent demand letters to include certain basic information to help companies determine whether a letter is legitimate.”

See more at: this link

This proposed law approaches the issue from a consumer protection angle, using Federal Trade Commission (FTC) authority and state Attorney General authority for enforcement.

Another anti-patent-troll bill passed by the US House in 2013 is now stalled in the Senate. Congress may be stalled but the fact that patents are within federal jurisdiction has not prevented state legislatures from passing consumer-protection laws which target PAEs. I attended a lunch yesterday at which the Attorney General of Vermont spoke about his state’s efforts to deploy state-level consumer protection laws against PAEs. A case involving a well-known PAE by the name of MPHJ Technology is currently before the Vermont courts. The debates and the legislative responses are far from over.

Do we need anti-patent troll laws in Canada?

Calgary – 07:00 MDT

By Richard Stobbe

A recent WIPO Survey assessed the use of alternative dispute resolution (ADR) clauses in various technology transactions, and the results make for interesting reading for anyone who is in the business of negotiating technology deals. The goal of the survey was to establish trends in the use of ADR to handle technology-related disputes, and almost 400 participants from 62 different countries participated. A few takeaways:

• Overall, the use of ADR clauses appears to be on the increase, as compared to the use of litigation in court.
• Almost all of the respondents (94%) indicated that dispute resolution clauses are the subject of contract negotiations. In other words, negotiators are paying attention to these clauses, and not merely defaulting to the clause that is proposed by the other side, or comes with the precedent agreement.
• Respondents were asked to estimate the percentage of their technology-related agreements that led to disputes. The results were:
• License Agreements (25% of Respondents)
• R&D Agreements (18% )
• NDAs (Non-Disclosure Agreements) (16%)
• Settlement Agreements (15%)
• Assignments (13%), and
• M&A Agreements (13%).
• The most common dispute resolution clauses according to respondents were:
• Court litigation (32%)
• Arbitration (30%)
• Mediation (12%)
• Multi-tier clauses (17% of all clauses) in which mediation is deployed prior to court litigation, arbitration or expert determination.
• Regarding time and cost, the estimates of respondents were as follows, and remember there are averages, and most would involve patent international disputes:
• Court litigation (home jurisdiction) took approximately 3 years; and amounted on average to US$475,000
• Court litigation (foreign jurisdiction) took on average 3.5 years; and amounted to US$850,000.
• Arbitration was shorter, at 1 year; the cost added to US$400,000.
• Mediation was shortest, at 8 months, and 91% of Respondents indicated that mediation costs were under US$100,000.

Interestingly, 25% of respondents indicated that “management time of business executives and wasted time of other participants in proceedings, lost productivity and lost business opportunities” represented important factors when assessing the costs of dispute resolution.

See: FULL PDF REPORT: Results of the WIPO Arbitration and Mediation Center International Survey on Dispute Resolution in Technology Transactions

Calgary – 07:00

Social media is not just a marketing novelty – it has become the essential tool for running a promotional contest. Have a look at any big brand contest and you’re hard pressed to find one without a social media component. Many Canadian businesses also seek to extend their reach into the US market through promotional contests.

If you are in that category, take note of this recent FTC action against shoe-maker Cole Haan. At the conclusion of their investigation, the FTC warned that the structure of the contest was misleading to consumers since it employed contestants to create Pinterest boards using the #wanderingsole tag, which turned these pins into endorsements for Cole Haan products (…which was the whole point of the contest…). However, FTC rules are clear that the connection between endorsers and marketers should be made clear. While no penalty was levied against Cole Haan, this letter has served as notice to the rest of the industry that the FTC will be watching such contests to ensure that these endorsements are made sufficiently clear.

In Canada, the Competition Bureau oversees false and misleading advertisements, including the apparent endorsement of products by paid endorsers.

The business lessons are clear: a successful social media contest can back-fire if you get more publicity from an FTC or Competition Bureau investigation than from the contest. Not to mention potential penalties. Get advice on your social media policy and contest rules before you launch the next campaign.

Calgary – 07:00 MDT

–

Are you a Canadian software vendor with customers in the USA? Let’s say your US end-user customer is sued for patent infringement in the US based on use of your software, but the lawsuit avoids naming your company. In other words, your customers are sued, but you are not.

Ok, so you avoided a lawsuit. However, for business reasons you may want to be “in the ring” to assist your end-user customers to defend the infringement claims. One of the defences to infringement is to challenge the validity of the patent in question. But if your company is not named, how do you raise that defence? In order to seek a “declaratory judgment” that the patent is invalid, you need something called “standing” – a right to make your case in court. If you are defending an infringement allegation (if you are named in the lawsuit), you have that standing as a defendant. But if not, you have to ask the court for standing… sound complicated?

This is what happened to Microsoft, when its end-users were sued for patent infringement by Datatern. Datatern, not wanting to lock horns with Microsoft (for obvious reasons) just named the software end-users in the patent infringement lawsuit. In Microsoft Corporation v. Datatern, Inc. (Fed. Cir. 2014), Microsoft sought standing to have the patents declared invalid.

The Federal Circuit Court of Appeals in the US said that Microsoft does not have the “right to bring the declaratory judgment action solely because their customers have been sued for direct infringement”. To bring an invalidity declaratory judgment action against DataTern, Microsoft needed something more. The court indicated that:

• Microsoft would need to show a controversy between Microsoft and the patent holder as to Microsoft’s liability for:
• induced infringement, or
• contributory infringement,

based on the alleged acts of direct infringement by the end-user customers; or

• Microsoft would have standing if it had a contractual obligation to indemnify its customers against the infringement claim. In this case, there was no indemnity obligation.

The use of Microsoft-provided documentation by Datatern in the patent infringement lawsuit was enough to establish standing for Microsoft, since this implied that Microsoft encouraged (or “induced”) the infringing use. However, this only applied to some of the patents in question.

Wherever Datatern used third-party (non-Microsoft) documentation to evidence the alleged infringement, Microsoft was too far removed from the controversy and there was no implied assertion that Microsoft induced the infringement. Microsoft could not establish the necessary controversy between it and Datatern, the patent holder. In connection with that particular patent, Microsoft lacked standing and its declaratory judgment action to challenge the validity of the patent could not proceed.

Remember this is a US case, but Canadian software vendors should review these patent infringement issues with counsel (including the costs and benefits of IP infringement indemnity clauses) to ensure that their end-user license agreements manage the risks in light of this decision.

Calgary – 07:00 MDT

–

Consumers wonder what exactly has changed when they are confronted with a new set of online terms, in a cloud-based service, website terms or software license. We reviewed this issue in an earlier post, which looked at changes to online terms in the middle of the product lifecycle. Amendments are often introduced due to changes in the law or changes in product functionality.

Instagram amended its terms of use in early 2013. In Rodriguez v. Instagram , CGC-13-532875 (San Francisco Sup. Ct. Feb 28, 2014), a US court reviewed a complaint alleging that Instagram’s new terms consituted a breach of good faith and fair dealing. The court noted that: “The New Terms modified the original terms in three allegedly material respects:

1. in the Original Terms, Instagram disclaimed any ownership rights in content users post on Instagram, whereas in the New Terms Instagram disclaimed ownership of content users post on Instagram;
2. in the Original Terms, Instagram was afforded a non-exclusive limited license to use, modify, delete from, add to, publicly perform, publicly display, reproduce, and translate content users posted on Instagram, whereas under the New Terms Instagram has a transferable and sub-licensable license to use the content users post, with the two allegedly material aspects being (i) the addition of sublicensing authority; and (ii) removal of any limitations on the scope of the license; and
3. the New Terms add a liability waiver.”

The New Terms were structured so that users accepted the terms by continuing to use Instagram after the effective date. A user could decline acceptance by ceasing all use of Instagram. The plaintiff in this case did continue use of Instagram after the New Terms were introduced. This opened up the argument for Instagram that this user consented to be bound by the New Terms. The lack of a click-through was not fatal to Instagram’s case. As a result, this decision seems like a bright spot for cloud service providers and software licensors – after all, it seems to permit unilateral amendment clauses in online terms without forcing users into a mandatory click-through screen. The court also seems to accept that the new terms can apply retroactively to user-generated content that pre-dates the New Terms. However, a note of caution should be sounded for cloud computing providers and software vendors:

• unilateral amendments to online terms should always be handled carefully;
• consider in advance whether amendments are permitted under the current terms before imposing new terms;
• due to the facts of this particular plaintiff, the court did not address the question of what would be done with user content if the user had ceased use of the service – i.e. if the user had not impliedly consented by continued use;
• consider how to log or track user consent (either active consent or implied “continued-use” consent) by users.

Calgary – 07:00 MDT

No comments

The article “Software Licenses & Indemnities: What Obligations Are You Taking On?“ was published in the February 2014 edition of The Licensing Journal.

Calgary – 07:00 MDT

As a follow-up to our earlier post (Can BlackBerry Patent a Keyboard?), a US court on Friday issued a preliminary injunction in a dispute between the BlackBerry maker and start-up Typo Products LLC which sells a snap-on keyboard for the iPhone.

The preliminary court order prohibits Typo from the sale of its keyboard products in the US, pending outcome of the case at trial. Typo Products has indicated it will appeal. A preliminary injunction is not determinative but certainly provides an early advantage to BlackBerry as the patent holder.

Stay tuned.

Calgary – 08:00

BIG BITE vs. BIT BITE.

These two marks were assessed in the recent case of 7-Eleven, Inc v BitBite Foods Inc. , 2014 TMOB 16 (CanLII), for snack food products. BitBite Foods filed an application to register the BIT BITE design at right in connection with a variety of food products. 7-11 opposed the application on the basis of their family of BIG BITE marks, including BIG BITE (TMA728,674), 1/3 LB. BIGGEST BIG BITE (TMA593,755), SMOKIE BIG BITE (TMA393,436), and SUPER BIG BITS (TMA602,497), also in association with food products. The 7-11 marks included the BIG BITE Design (TMA405,449) at left.

Essentially, both marks were associated with food products, both marks featured a stylized “bite” design element, and the marks were virtually identical except for a single letter. 7-11 argued that their marks were all registered and had been used in Canada since the 1990s. The BIT BITE mark by comparison was applied for on the basis of “proposed use” meaning it has not yet been used in Canada.

How did the board decide this case?

The test for trade-mark confusion in Canada is one of “first impression and imperfect recollection.”  The Trade-marks Act is clear that confusion will result if two trade-marks are used in the same area and would lead a consumer to infer that the products sold under the two marks are manufactured or sold by the same company. Courts in Canada will assess a number of factors when judging two marks:

• the distinctiveness of the two marks
• the length of time each mark has been in use
• the nature of the products or business
• the nature of the trade
• the degree of resemblance between the two trade-marks in appearance and sound or in the connotations.

It is important to note that these factors are not an exhaustive list, and courts are not obliged to give each factor equal weight. The Trade-marks Opposition Board in this case assessed these factors and also weighed the state of the Register and the state of the relevant marketplace.

After assessing all of these factors, the board concluded that marks do share similarities in appearance and when sounded, but the board “found a significant difference between the parties’ marks as a whole, in ideas suggested; a difference, given the simplistic nature of the word components of the parties’ marks, that is readily apparent to the average consumer. “… and the 7-11 “BIG BITE marks are not inherently strong and that the evidence clearly demonstrates that the words BIG and BITE are commonly used in the trade” …therefore “the differences between the parties’ marks [are] sufficient to distinguish them.”

7-11’s opposition was dismissed. One letter was enough of a difference in this case.

Calgary – 07:00 MDT

–

Copyright in Canada is a function of the Copyright Act – without that law, there would be no copyright. How does Canadian copyright law interact with the copyright law in other countries?

In Active Operations Management (AOM) NA Inc. et al v. Reveal Group, 2013 ONSC 8014 (CanLII) (a law-school-exam-question of a case if ever there was one),  the court dealt with a claim by an Ontario company of infringement within Canada of UK copyright, by another Ontario company controlled by an Australian resident, Mr. Crouch.

The claim by AOM reads like a software vendor’s nightmare. AOM is the Canadian distributor of certain software developed in the UK. According to the allegations by AOM, Mr. Crouch copied elements of the software and a business method when he worked for an Australian licensee of the UK software. Mr. Crouch started a company in Canada and then allegedly used that as a vehicle to market a replica version of the UK software and the corresponding method in Canada.  With this (Canadian) copied version of the (UK) software , Mr. Crouch allegedly lured customers away from AOM. AOM filed a lawsuit alleging breach of copyright, misappropriation of trade secrets, interference with contractual relations, unjust enrichment and misappropriation of goodwill.

Remember, AOM was not the owner of the (UK) copyright – it was merely a distributor. The question for the court was whether AOM could maintain a copyright infringement lawsuit in Canada. To complicate matters, the “software” and the “method” were owned by two different (UK) owners. AOM added these owners to the lawsuit, but did not make the specifics clear in their claim.

As the court put it: “Copyright is a very specific right attaching to a ‘work’… Copyright cannot attach to an idea such as a method.  It can of course attach to the manuals or other material in which the method is described.  Similarly with computer software, copyright can attach to source code, to a graphic user interface, to manuals and to other material as defined in the Act.  Copyright cannot attach simply to what a computer program does.  The plaintiff must specify what it is that is covered by copyright and what it alleges has been done that gives rise to the statutory remedies.”

The lessons for business?

• Software vendors from outside Canada should know that, by virtue of international copyright conventions and treaties, international copyright can be enforced under Canadian copyright law;
• The Canadian Copyright Act permits someone other than the copyright owner to sue for infringement of copyright – as long as that person has appropriate rights (such as a local distributor, as in this case). Here, AOM appeared to have rights to maintain the copyright infringement lawsuit, but did not specify its rights with enough clarity in the claim. Ensure that the chain-of-title is clear in the claim itself;
• Regarding the additional claims – in particular, the trade-secret misappropriation – the court had this guidance: “It would be ludicrous …to compel a plaintiff to set out a trade secret with precision in the pleading.  To do so would destroy the secret itself. A trade secret is valuable precisely because it is secret.  It may be that information will have to be provided at the production and discovery stage but at that point the proprietor of the secret may seek confidentiality orders and to the extent that those details must be put into evidence may seek a sealing order.”

Calgary – 07:00 MT

No comments

The very popular US grocery retailer Trader Joe’s has a following among Canadian consumers. Capitalizing on this popularity north of the border, a Vancouver entrepreneur has made it his business to buy genuine Trader Joe’s-branded merchandise in the US, and re-sell the products in a retail location in Vancouver under the banner  Pirate Joe’s. Citing Lanham Act trademark infringement, TJs sued the Canadian businessman in Washington State (appealed that decision  to the US Federal Circuit Court of Appeals.

While this appeal will run its course under US legal principles, it is worth noting the law on “parallel importation” in Canada.

Parallel importation or “grey marketing” is the importation into Canada of genuine products, which fall outside the brand owner’s established channels. These are not knock-offs or counterfeits, but rather legitimate products imported through a channel “parallel” to the brand owner’s preferred distribution routes (or, in the case of Trader Joe’s, where the brand owner has no established trading network in Canada at all).

There are two main intellectual property tools to attack parallel importation, and unfortunately for brand owners, both of them can be problematic in Canada:

1. Trade-marks: Brand owners sometimes try to rely on their trade-mark rights in Canada (Trader Joe’s may have some reputation in Canada through spill-over advertising). In parallel import cases, any claim of trade-mark infringement in Canada is likely to face challenges in light of decisions like Coca-Cola Ltd. vs. Pardhan, which dealt with the export of genuine Coca-Cola products (I wrote a case commentary on this decision for Canadian International Lawyer, June 2000);
2. Copyright: In the Euro Excellence case (Euro Excellence Inc. vs. Kraft Canada Inc.), the brand owner attempted to employ copyright law to stop parallel imports of genuine Toblerone-branded chocolate bars into Canada. On appeal, the Supreme Court of Canada ruled that the Copyright Act could not be used to block the parallel imports.

Stay-tuned to see where this case leads in the US appeal.

Calgary – 07:00 MST

No comments

–

Most Canadian businesses will have heard of the incoming Canadian Anti-Spam Law (referred to as CASL, which joins the Canadian pantheon of legislative acronyms like PIPEDA and PIPA). The consent requirements for sending commercial electronic messages (CEMs) is covered elsewhere (See here, and see this upcoming event on March 18 and 20, 2014). Those requirements come into effect July 1, 2014.

The software-related regulations are getting less press. Why? Possibly because CASL is being implemented in phases, and the software-related rules are not expected to be in full force until January 15, 2015. And possibly because the software-related regs are complicated and at times confusing.

This element of CASL is designed to control surreptitious installation of software, particularly “invasive software”. Generally, express, clear consent is required. Installation of invasive software imposes additional requirements. Implied consent (or “deemed express consent”) may be relied upon in other cases:

• cookies, HTML code, Java scripts;
• upgrades for telecom network security;
• “reasonable” installs – where it is reasonable to expect that the user would consent.

Software vendors should take note of these incoming obligations, to assess and plan for any updates that will be required for CASL compliance. Get advice on how these regulations apply to your software products.

Calgary – 07:00 MST

–

Where a technology license carries with it an obligation to pay royalties based on revenues, how does the licensor determine if the revenues are accurately reported? The sales are known to the licensee, but the licensor has no way of determining what those sales are. Many license agreements impose reporting obligations on the licensee, so that monthly or quarterly sales are reported to the licensor, to enable accurate royalties to be calculated.  In the recent decision in XY, LLC v. Zhu , 2013 BCCA 352 (CanLII), the BC Court of Appeal dealt with a licensee who breached the terms of the technology license agreement, and committed the “tort of deceit” (that’s how lawyers say “they lied”).

In this case, the licensee did not only underreport or withhold information, they actively falsified records and thus substantially underpaid the royalties owed to the licensor. The tort of deceit is made up of these elements:

1. a false representation or statement made by the defendant,
2. the statement was knowingly false,
3. the statement was made with the intention to deceive the plaintiff, and
4. the statement materially induced the plaintiff to act, resulting in damage.

A damage award of over $8 million was awarded by the court, as an assessment of the amount would put the licensor in the position it would have been in, if the licensee had performed its obligations and paid the propert amount of royalties.

One interesting twist on appeal was whether the employees of the licensee should be personally liable. Employees are not generally held responsible for the wrongs committed by the employer. After reviewing the law, the Court of Appeal decided that the claims of deceit should be available against certain employees, and those employees were not shielded merely because they were employees acting in the course of their duties. Since these employees were actively devising ways to deceive the other side, they were acting outside the scope of regular duties, and the “just following orders” defence was not accepted by the court.

Calgary – 07:00 MST