We have reviewed a few decisions relating to arbitration clauses in intellectual property license agreements (see here ). Courts in the US have shown that they are willing to uphold arbitrator’s decisions. What is the law in Alberta?

The court in TheraVitae Ltd. v. Kwalata Trading Limited, 2011 ABQB 626 (CanLII) dealt with alleged breaches of stem cell therapy licencing agreements.  The licensing agreements contained arbitration clauses and a dispute arose between the parties, which was referred to arbitration.

Under the Arbitration Act (Alberta), a party must demonstrate that they are entitled to appeal an arbitrator’s decision. If the arbitration agreement includes the right of appeal to court, then either party can appeal the arbitrator’s decision on a question of law, on a question of fact or on a question of mixed law and fact. If the arbitration agreement is silent on the topic of appeal, then Section 44(2) of the Act allows for appeals on questions of law, provided certain criteria are met. Those criteria are:

1. the importance to the parties of the matters at stake in the arbitration justifies an appeal, and
2. whether the determination of the question of law at issue will significantly affect the rights of the parties.

In those two situations, a court may review the arbitrator’s decision. However, Section 44(3) prohibits a court from granting leave where the question being appealed was specifically referred to the arbitral tribunal for decision. In other words, where the arbitrator was asked to rule on a particular question of law, the decision of the arbitrator will not be reviewed by the court. In the TheraVitae decision, the court decided that the question was specifically referred to the arbitrator, so the decision was not reviewable by the court.

Lessons for business?

• Arbitrator’s decisions will be given deference, so if you want to refer your disputes to binding arbitration, be aware that there may be no right of appeal to the courts if you are not happy with that decision.
• Arbitration clauses and agreements must be reviewed carefully to ensure that the parties are aware of the scope of the arbitrator’s authority, and the rights of appeal that may be available.

Calgary – 07:00 MDT

Many intellectual property license agreements refer disputes to arbitration under an arbitration clause. After the arbitrator renders a decision, can that decision be appealed to court? Or is it final and binding on the parties?

This issue was addressed in Affymax, Inc. v. Ortho-McNeil-Janssen Pharmaceuticals, Inc.  , 660 F.3d 281, 285 (7th Cir. 2011) a decision of the Seventh Circuit Court of Appeals in the US. In that case, the court dealt with an appeal from an arbitrator’s decision under a license agreement. The court was clear that it had no interest in vacating or overturning the arbitrator’s award, unless the award is reviewable under one of the 4 circumstances in Section 10 of the Federal Arbitration Act (US):

1. if the award was procured by “corruption, fraud, or undue means”;
2. in the case of “partiality or corruption in the arbitrators”;
3. where the arbitrators were “guilty of misconduct” or misbehavior by which the rights of any party have been prejudiced; or
4. where the arbitrators exceeded the scope of their powers, or so imperfectly executed them that “a mutual, final, and definite award upon the subject matter submitted was not made.”

According to this decision, if it doesn’t fall into one of these 4 categories, then the court will not interfere with the arbitrator’s decision.

Other appeal-level courts in the US are split on this issue, and some have reviewed arbitration decisions based on an independent category, known as “manifest disregard of the law.” Since that is not a specified ground for appeal in Section 10, it was not accepted by the Seventh Circuit in the Affymax decision. The lessons for business? In the US, arbitrator’s decisions will not be subject to review by the courts unless the review falls into one of these 4 narrow grounds.

What about the law in Alberta? Watch for Part 3.

Calgary – 07:00 MDT

This 2010 case is a good reminder that courts will give effect to arbitration clauses if that’s what the parties have chosen in their license agreements.

• In PRM Energy Sys., Inc. v. Primenergy, LLC, 592 F.3d 830 (8th Cir. 2010) , the United States Court of Appeals, Eighth Circuit decided to uphold an arbitration clause in a patent license agreement, which was drafted to cover “all disputes arising under” the agreement. A complex series of agreements and disputes led PRM to sue Kobe Steel, a non-party or “non-signatory” to the original license agreement that contained the arbitration clause. However, Kobe Steel convined the court that the arbitration clause should be enforced. The court decided that PRM’s claims were so intertwined with patent license that contained the arbitration clause that it would be unfair to allow PRM to rely on the license agreement in making its claims, but to avoid the arbitration clause of that same agreement.

In Canada, courts have also shown that they are prepared to uphold arbitration clauses. Consider this case:

• The case of University of Toronto v. John N. Harbinson Ltd. 2005 CanLII 47089 (ON SC), dealt with a broad arbitration clause that said: “Any dispute, controversy or claim arising from this Agreement or its breach, termination or alleged invalidity shall be settled by arbitration in accordance with the Arbitrations Act of Ontario, as amended.” In this case, the court decided that the arbitration clause should be upheld, particularly since no Patent Act claims or remedies were being sought.

Related reading: See Did You Say Arbitration in Kazakhstan?, reviewing a case where arbitration was triggered by one of the parties, and the Alberta Court decided that the breach of contract questions fell within the scope of the arbitration under the law of Kazakhstan.

Calgary – 07:00 MDT

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In the copyright and patent infringement lawsuit between Oracle and Google (we posted on the copyright aspects here: Copyright Protection for APIs and SDKs and APIs: Do they have copyright protection?), a decision was reached last week by the jury on the patent side of the claim. The jury has determined that Google did not infringe the two patents that Oracle held for its Java system. This leaves the Oracle case in tatters, with no real prospect of meaningful damages, even in light of an earlier finding that Google infringed Oracle’s copyright in the Java APIs. The copyright side of the claim is still muddled – the judge has not yet decided the issue of whether APIs can be the subject of copyright protection, and the jury failed to agree on whether Google had a “fair use” defence to the copyright infringement that did take place… assuming that APIs can enjoy copyright that is capable of being infringed.

Still with me? We might expect some clarity on the copyright issue if the judge issues a determination on copyrightability. What’s more likely is that the patent decision is appealed and the copyright decision is sent back down for a retrial, leaving the entire issue unresolved.

Calgary – 07:00 MDT

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Join the Field Law IP & Technology Group for a breakfast seminar on June 6, 2012, in Nisku, Alberta, on the following subjects:

• patents for oilfield service companies;
• intellectual property issues;
• non-disclosure and confidential information in the oil patch;
• copyright and trade-marks, brand protection.

Registration details: RSVP to rsvpEdmonton@fieldlaw.com or (403) 260-8502.

Calgary – 10:30 MDT

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This month marks the 25th year of operations for the .CA domain, Canada’s country-code top-level domain (ccTLD). It was originally allocated to John Demco, an employee of UBC, who operated the domain on a volunteer basis between 1987 and 2000, when it was formally transferred to CIRA (the Canadian Internet Registration Authority). I still recall the days when the mentality around domain name disputes was quite simple – someone knew someone who knew Jon Postel, who could simply reallocate the nameservers. Today, .CA disputes are resolved through formal arbitration under the CDRP – the CIRA Domain Name Dispute Resolution Policy, version 1.3 which came into effect August 22, 2011. A few recent decisions:

• Transfer Granted: In Oakley Inc. v. Zhou Yayang, the famous manufacturer of sunglasses and sportswear claimed rights in the domain name DISCOUNT-OAKLEYSUNGLASSES-SALE.CA. This case was a classic “squatter” case which featured a registrant who filed no defence. Evidence that the domain was being used to sell Oakley products outside of Oakley’s distribution chain. A long line of decisions was cited to support Oakley’s win, and the domain name was ordered to be transferred.
• Claim Dismissed: In Ebates Canada Inc. v. Cranhill & Co., there was a dispute about the EBATES.CA domain name. Ebates Canada claimed that it was the exclusive Canadian licensee of the trade-mark EBATES, a mark which is the subject of two competing trade-mark applications in the Canadian trade-marks office. Cranhill, the registrant, argued that it enjoyed earlier use of the name EBATES dating back to 1994 and had rights in 2000, the year the domain name was registered. In deciding to dismiss the complaint, the panelists noted that the claimant Ebates Canada Inc. was not incorporated until 2011. It did not exist in 2000 and could not have had any rights at the time the domain name was registered.

What’s the overall chance of success? If recent statistics are any guide, decisions are most often rendered in favour of applicants. There have been 51 decisions in 2010, 2011 and 2012 (to date) and of those decisions, roughly 80% of decisions have resulted in a transfer; in about 20% of the cases, the claim was dismissed. That may reflect the fact that applicants will only pursue a remedy through the CDRP when they have a strong case. In about 64% of the cases, a single arbitrator was used, as opposed to a panel of 3 decison-makers. Interestingly, of the cases in which the claim was dismissed, the majority (72%) were decided by a 3-member panel.

Calgary – 07:00 MDT

 

As a follow-up to our earlier article (SDKs and APIs: Do they have copyright protection?), the jury in the Oracle v. Google lawsuit issued a decision last week that Google’s Android software infringed copyright in the overall structure, sequence and organization of Oracle’s Java code. However, the jury failed to return a decision on Google’s “fair use” defence. Oracle’s main complaint was that Google’s Android software used Java code – in particular, 37 Java APIs (application programming interfaces) – that was not properly licensed from Oracle. Google has maintained that the use of any Java APIs in Android is protected by a “fair use” defence.

You’d think a jury decision would be a step forward. However, the issue of copyright protection of APIs remains unsettled, since the jury merely assumed copyright protection for the purposes of this issue, without a clear decision by the court on that point. The failure to decide on the “fair use” defence also leaves the issue open. The jury was deadlocked on that question, potentially leading to a mistrial. Indeed, Google filed for a new trial last week.

This jury decision is really just a way-station on the road… a very long road. The next phase of the lawsuit will deal with Oracle’s patent infringement claims; which will be followed by a further hearing to determine any damages. Stay tuned.

Related Reading: Copyrightability of Java APIs would be consistent with law and practice, not a ‘substantial departure’ for industry (FOSS Patents)

Calgary – 07:00

 

You may recall our earlier posts describing the gTLD process (see: The New gTLDs: Who, What and When). 

ICANN‘s process introduces new generic Top-Level-Domains (or gTLDs), expanding the domain name system from the current familar strings such as .com, .net and .ca, etc. to who knows what… .flowers, .lawyers or .anything. The application period was due to close on April 12, 2012. May 1, 2012 was slated as “Reveal Day”, when the applicants and their proposed TLDs were to be published. So far, some 2,091 applications along with USD$350 million in application fees have been submitted to ICANN. The May 1st deadline has passed without the publication of the application information, because ICANN has suffered a “software glitch” which must be resolved before the application period can be reopened and finalized.  

Once that is complete, ICANN will publish the names of applicants and their proposed TLDs. This triggers a seven-month objection period, during which rightsholders can file a complaint. A recent article from Managing Intellectual Property reports that the “Trademark Clearinghouse” is also behind schedule.

Even if half of the applications are approved, that means the introduction of a thousand new generic Top-Level-Domains. Trade-mark owners, brace yourselves.

Related reading: Lawyers Weekly: Domain Name Article

Calgary – 07:00 MDT

 

Virtual desktops running on the cloud (Desktop-as-a-Service or DaaS, if you need another acronym) have delivered desktop-style computing to mobile devices such as iPads and Android tablets. This is a way to remotely access the full functionality of a desktop (such as track-changes in MS Word, which is currently impossible on an iPad). This is the subject of a recent spat between OnLive, tuCloud and Microsoft. This dispute – a dramatic one in which tuCloud openly dared Microsoft to sue it – has focussed attention on the fine-print in Microsoft’s licensing regime under its Service Provider License Agreement. In a broader sense, it impacts any virtualization. When can a licensee of software deliver virtual access to multiple instances of that software, and how does the software vendor control such access? 

This dispute is one which will be watched closely as it develops. Software vendors should review their terms and their licensing models to ensure that they have contractual terms that match the current virtualization risks and opportunities that come with DaaS. 

For a related event, please join us for “Software Licensing: The Good, The Bad, and The Virtual“ on May 31, 2012.

Calgary – 14:00 MDT 

 

My article on “Intellectual Property Issues in Corporate-Commercial Transactions” is published in the Field Law newsletter The Medium.

Calgary – 07:00 MDT

For intellectual property lawyers, sting operations against counterfeiters of luxury handbags is what dreams are made of. An undercover sting - complete with a clandestine meeting at a Toronto gas station, undercover agents and hidden cameras – resulted in a trade-mark infringement award against a reseller of copycat merchandise such as Gucci handbags, Louis Vuitton and Hugo Boss items. In Guccio Gucci S.p.A. v. Mazzei, 2012 FC 404 (CanLII)  the counterfeiter was slapped with an $85,000 damage award. 

This was based on the rough math of infringement in Canada: damages of $3,625 per infringement against flea market vendors and “itinerant sellers”; $7,250 where the infringer is operating from a “fixed retail establishment”; and $24,000 against importers, distributors and manufacturers.

 

Calgary – 07:00 MDT

 

A recent Gmail outage reminds us that the cloud is not always up. What goes up must come down. Servers crash. Companies go bankrupt. When a cloud service provider fails or the technology falters, what happens to the servers that house the data?  Think of where your cloud-based data is hosted… and then try to imagine what it would take to get that data back. In these cases, questions of jurisdiction and bankruptcy law quickly come to the fore.

In the ongoing case involving Megaupload, a court battle is being fought over the servers: who will take conduct of them and what’s to be done with the data on those servers?

The Canadian case of Stanford International Bank Ltd. (Syndic de), 2009 QCCS 4106 (CanLII), also involved a dispute over servers of a bankrupt company. In the Stanford International case, the bankrupt company was offshore. A liquidator acting for receivers based in Antigua sought an order from a Canadian court to confirm the winding-up order. However, the court objected when it discovered that the servers, located in Canada, had been erased by the Antiguan receivers, the data had been copied, and the copies were stored in Antigua. Essentially, the Antiguan receivers removed all the electronic data from the Canadian servers to Antigua, thus removing the data from the jurisdiction of Canadian courts and regulatory authorities.

The number of servers in that case was small enough to permit copying; compare that to the Megaupload case which involves some 1100 servers. No-one wants to incur the cost to house and maintain such a large number of servers, so they are in legal limbo until the court makes a ruling.  

In some cases, the data sits on identifiable servers – you could in theory (if you know where the server farm is located) point to a box and say, that’s where my data is stored. In other cases, such as Amazon’s “Elastic Compute Cloud” Service, high levels of redundancy mean the same data may appear in multiple instances across multiple servers, located in multiple geographical areas. It would be impossible even in theory to determine where the data is physically located. When negotiating mission-critical cloud-computing agreements, take time to consider the issues of what happens when the cloud comes down, and get proper advice for a soft landing.

Calgary – 07:00 MDT

 

Yes, only lawyers ask such questions. But now that the question has been asked…. A recent lawsuit has framed this question in copyright terms. In Canada Post Corporation v. Geolytica Inc. c.o.b. Geocoder.ca (Federal Court, No. T-519-12), Canada Post has sued Geocoder for breach of copyright in postal codes. According to the Statement of Claim, a compilation of Canadian postal codes within a database is the property of Canada Post, and a production or reproduction of that database constitutes an infringement of the copyright held by Canada Post. Geocoder, for its part, has responded by claiming in its Statement of Defence that its “Canadian Postal Code Geocoded Dataset” was independently authored through a “crowdsourcing” effort over several years. “Geolytica created this database without ever accessing or copying any database of postal codes of the Canada Post Corporation.” 

The first question is whether postal codes are even eligible for copyright protection? Second, if they are protectable by copyright, but no direct copying occurred, can there be an infringement? What about indirect copying? Perhaps the closest case on record is Ital-Press Ltd. v. Sicoli, 1999 CanLII 8048 (FC), where the court considered telephone listings and indicated the following: telephone listings that are “…garden-variety white pages director[ies], devoid of even the slightest trace of creativity” cannot be eligible for copyright protection (citing the famous US case of Feist Publications, Inc. v. Rural Telephone Service Co., Inc…. famous for copyright lawyers that is).

The wider issue is one we’ve seen many times over the history of copyright: a traditional business or institution feels threatened by smaller start-ups who innovate to reproduce or replace an established business model. We will monitor developments in this fascinating case.

Calgary – 07:00 MDT

 

Cloud service providers often want to change online terms in the middle of the product lifecycle. Amendments are typically required due to changes in the law or changes in product functionality. For example, Apple’s introduction of its iCloud service triggered changes to the iTunes terms of use. If users want access to the new functionality, they must assent to the revised terms. It amounts to a midstream unilateral change to the contract. Do these changes hold up in court? Two recent US cases suggest there is a valid way to effect such changes:

• In Fineman v. Sony Network Entertainment (N.D. Cal.; Feb. 9, 2012), consumers objected to Sony’s amendments to the online terms governing the Sony PlayStation Network. The changes were challenged and ultimately upheld in court. 
• In Lebowitz v. Dow Jones & Co., 06 Civ. 2198 (MGC) (S.D.N.Y.; Mar. 12, 2012), a New York court permitted unilateral changes to the terms and pricing for the WSJ Online subscription service. This turned, in part, on the terms of the original contract, which permitted the vendor to make reasonable changes to the terms as long as notice was provided to the user. For further discussion, see Eric Goldman’s post.)
• In Canada, this issue was addressed in the leading case of Kanitz v. Rogers Cable Inc., 2002 CanLII 49415 (ON SC), in which a Canadian court upheld a change in the online terms imposed on Rogers internet customers.

Note: software vendors and cloud service providers need to be cautious about forcing users to waive class-action rights. Such amendments can conflict with local consumer-protection laws. Unilateral changes need to be managed carefully. Get advice before you attempt to impose unilateral changes to ensure the best outcome. 

Calgary – 07:00 MDT

 

The Federal Court of Appeal (FCA) released its decision in Weatherford Canada Ltd. v. Corlac Inc.  (2011 FCA 228) in 2011 on the subject of “good faith” prosecution. Leave to appeal to the Supreme Court of Canada has been refused. See Neil Kathol’s article on the FCA decision.

Calgary – 07:00 MDT   

 

What’s the sound of a trade-marks office changing its tune? The Canadian Intellectual Property Office (CIPO) reversed its long-standing policy against sound marks by abruptly issuing a new practice notice last week, announcing that it will accept sound marks for registration in Canada. As we argued a few years ago (Time for Sound Marks in Canada?), this change has been debated and anticipated for many years, and no trade-mark owner is more aware than MGM, the applicant that has pursued its iconic lion’s roar sound mark since the application was first filed in October, 1992 (Application No. 714314).  MGM’s lawsuit has resulted in a Federal Court order that paved the way for CIPO’s new policy.

The application for the registration of a trade-mark consisting of a sound should:

1. state that the application is for the registration of a sound mark;
2. contain a drawing that graphically represents the sound;
3. contain a description of the sound; and
4. contain an electronic recording of the sound.

Calgary – 09:00 MDT

 

Patent infringement damage awards often run into the billions. Not to be outdone, a copyright infringement case between Oracle and SAP resulted in a jury award in excess of $1 billion, based on a “hypothetical license“.

In 2007, Oracle sued SAP for copying thousands of documents and programs from Oracle’s “Customer Connection” website. After years of litigation, the remaining issue for decision by the jury was the amount of the damages. In November, 2011, the jury returned a verdict in favour of Oracle for $1.3 billion. SAP challenged this award as “unduly speculative” and sought a new trial or a lower damage award. Oracle had the choice of accepting a lower damage award of $272 million or going into a new trial; it opted for a new trial which has now been set for June, 2012.

In Canada, the Copyright Act (under Section 35) allows for damages and part of the profits that the infringer made from the infringement or an election of “statutory damages” under Section 38.1. The concept of a reasonable royalty (a rate that the infringer would have paid to the owner in a hypothetical license negotiation) is a concept that has been considered in patent cases in Canada – for example, in Jay-Lor International Inc. v. Penta Farm Systems Ltd., 2007 FC 358 (CanLII), the court calculated damages after analysis of a “hypothetical negotiation”.  The court in Oracle vs. SAP has shown that such a calculation must be grounded in objective evidence, and where possible, actual benchmarks to prove market value. Subjective or speculative evidence should not be used for such calculations.

Calgary – 07:00 MST

 

My recent article “You Can’t Have Clouds Without a Little Bit of Lightning: Cloud Computing in 2012” is published in The Advisor (PDF) newsletter (Winter 2012).

 

Calgary – 10:00 MST

 

ICANN is now implementing its plans to permit the creation of new generic top-level domains (gTLDs). TLDs are everything to the right of the dot. (For example, a new gTLD might be .canada, .newyork, or .mac) Many brand owners are tired of seeing announcements about gTLDs, Sunrise Periods and procedures for rightsholders. Seemingly endless changes – from the launch of new TLDs such as dot-ASIA and dot-XXX, to the introduction of internationalized domain names, to recent dot-CA changes – make this a bewildering area of law for trade-mark owners. Here is a summary of what to expect from ICANN in 2012:

• January 2012  - ICANN started accepting applications for new gTLDs. Who will apply? With a US$185,000 application fee, and significant legal and technical hurdles, the applicants are expected to be limited to large corporations and investor groups with a business plan directed at a specific community or niche. Remember that the list of new gTLDs will likely include non-Latin domains, based on Cyrillic, Chinese or Arabic.
• April 12, 2012  – The application period closes.
• May 1, 2012 is “Reveal Day” at which point the applicants and their proposed TLDs are published. This triggers a seven-month objection period, during which rightsholders can file a complaint based on valid rights to the string of characters that make up the gTLD. For example, trade-mark owners may make an objection to a proposed gTLD on this basis.
• Late 2012 – ICANN has proposed a “Trademark Clearinghouse” which would be a (very cumbersome) database of registered trademarks to support trademark claims and sunrise services. As new gTLDs are launched, ICANN will require that every new gTLD operator uses this Clearinghouse and conducts both a Trademark Claims and a Sunrise Process. 
• Late 2012 – probably sometime in 2013 – The actual launch of new gTLDs, with the usual array of Sunrise and Landrush Periods.

We’ll keep you posted as this develops.

You’ll notice we didn’t cover the question “Why”. Why is there a compelling need for new gTLDs?  If you figure that one out, please let us know.

Calgary – 07:00 MST

 

 

 

iBooks Author is Mac app  allowing users to develop and publish multitouch digital books. If you author a digital book, you can then submit it to the iBookstore for purchase or free download, or distribute it through iTunes U, or use it with the iPad. It’s being touted as a way to bring digital publishing to the masses – for example, textbooks with embedded videos, audio and rotatable 3-D models that students can pinch and zoom.

Sounds great, but do you own what you create? Let’s have a look at the EULA (End User License Agreement v. 1.0.1).

According to the terms of the EULA (section 2(b)), you own the rights to the content that you create, and you can distribute that content any way you want, as long as it doesn’t include any files in the .ibooks format. (Making files in the .ibooks file format is the whole point of using this app.) If it does include .ibook files, then you can distribute the book by any means as long as you are giving it away for free. If you want to distribute your digital book for a fee, then it must be sold through Apple’s iBookstore, with Apple taking its customary 30% cut.

This does not mean (as some blog posts have suggested) that Apple takes any ownership of the content you have authored. You continue to own that content. The license terms mean that, by agreeing to use their software, templates and publishing tools (and in particular, the .ibooks file format), you agree to sell your iBooks book through Apple’s retail channel.

This isn’t really all that different from an author’s agreement with a traditional publisher, since a publisher will typically insist on exclusivity in handling final editing, packaging, marketing and sales of a book. They take a cut and share the royalties with the author. The author, who remains the copyright owner, is not free to then sell the book through a different distribution channel. They must sell through their publisher.
Calgary – 07:00 MST