Update: eBay and the Taxman

In a story we posted last year, eBay lost when the Canada Revenue Agency compelled disclosure of its records – specifically, records showing how much money was earned in Canada by so-called “PowerSellers”. 

The Federal Court of Appeal (eBay Canada Limited vs. The Minister of National Revenue, 2008 FCA 141) has now upheld that lower court decision, and ordered eBay Canada Ltd. to produce the names, addresses, phone numbers, e-mail addresses as well as gross sales figures for all Canadian PowerSellers.  eBay’s argument that the records were stored in the US and did not reside in Canada, was not accepted by the Court and this decision has implications on a number of levels – the right to privacy for anonymous eBay sellers, as well as the production of documents by US and other foreign companies doing business in Canada.

 Calgary – 10:15 MST

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Technology in Alberta

As a plug for the local technology industry, we report that the Government of Alberta has just announced a few economic measures aimed at tech companies:

  • Starting January 1, 2009, companies will be able to take advantage of a refundable tax credit worth 10% of eligible expenditures on scientific research and experimental development up to $4 million for a maximum annual credit of $400,000.
  • $100 million is earmarked to establish the Alberta Enterprise Corporation. This government entity will provide early-stage venture capital for technology start-ups by co-investing in early-stage venture capital funds.

Calgary – 10:00 MST

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Crash-and-Burn Case Study

This story is reminiscent of the dot-com days, when tech companies hit the wall at two hundred miles an hour.  One day they’re flush with cash, enjoying the new marble floors and capuccino machines; the next, the doors are closed and everyone is laid off.

Canadian company Geosign rode this wave in 2007 with $100 million in revenue and $160 million in VC funding.  Now, a year later, the sign posted on their home page says it all: “Sorry, this site is temporarily unavailable. Please check back later.” 

How did it happen?  The company was like a small sailboat that capsized when the mighty Google supertanker changed direction.  Geosign initially profited by taking advantage of an internet advertising system that came to a crashing halt when Google changed its policies. The changes were made by Google to ensure that ad-words took visitors to legitimate content, rather than pages which were composed of nothing but more ads. Google feared that customers would lose confidence in ad-words (and the Google search engine) if searches simply led to a nest of advertising links.  Before Geosign could reposition itself as a content-provider, Google had changed its policies and the damage was done.  Geosign went belly-up.  It serves as a cautionary tale for small tech companies and illustrates the power of dominant players like Google.

Related reading: Financial Post Business Magazine Cover story: Blown away


Calgary – 15:25 MST

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Trade-mark and Metatag Litigation

A recent US Court of Appeal decision (North American Medical Corp. v. Axiom Worldwide, Inc., 2008 WL 918411, 11th Circuit Court of Appeals, April 7, 2008) deals with meta-tags and trade-mark infringement.  In a nutshell, the court agreed that the use of a competitor’s trade-marks in metatags constitutes infringement.  This decision is the latest, but does not settle the matter in the US; first, the Second Circuit Court of Appeals has applied different reasoning, and next, the changing nature of metatags requires a more sophisticated analysis of how search engines produce results. 

In Canada, the decision in BCAA et al. v. Office and Professional Employees’ Int. Union et al., 2001 BCSC 156 (CanLII) is still one of the most-cited case on the topic of trade-marks and metatags.  In the midst of a labour dispute, a disgruntled union used the BCAA’s metatags in a union protest site.  The court found that one of the early versions of the union’s site did constitute passing-off.  However, both the North American Medical case and the BCAA case illustrate the problem posed by changing technology. 

In BCAA, the court noted that: “When search engines gather information they seek out and obtain the information in the meta tags.  Meta tags are used by most search engines and directories to gather information.”  This statement is no longer accurate, because of the way search engine technology has evolved.  New court decisions will have to catch up to the search engines.

In the meantime, don’t use competitor’s trademarks in your website metatags – it won’t do you much good in search engine rankings, and the courts are clear that it will be perceived as infringement.

Calgary – 10:15 MST

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Dot-Ca Update

A new decision and a new policy:

  • In a recent decision (Enterprise Rent-A-Car Company v. David Bedford ), Enterprise won handily in its dispute over the bank of names registered by Mr. Bedford, a BC domainer. The dozen domain names (enterpriseautorental.ca, enterprisecarrentals.ca, enterprisecanada.ca, etc.) were used with a pay-per-click advertising scheme and this decision provides a useful precedent for trade-mark owners, along with the panelist’s finding that the test under the CDRP is one of resemblance, not confusion.
  • CIRA, Canada’s official dot-ca domain name registry, is introducing changes to the WHOIS policy, starting in June 2008.  Under the new policy, private information about individual registrants will no longer be accessible through the dot-ca WHOIS database. The WHOIS information of corporate registrants will be displayed by default. This means that in order to contact an individual owner of a dot-ca domain name – say, for the purposes of proposing a transaction, or complainaing about trade-mark abuse – a new “administrative process” will be used.  This new process is under development, but it is expected to be an online form which will automatically forward correspondence to anonymous registrants, via CIRA. 


Calgary – 10:30 MST

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Canadian Comment: Apple Sued Over Ad Copy

Million of colours or millions of dollars in damages?  Apple’s lawyers must be wondering whether people have too much time on their hands.  A recent California lawsuit  alleges that Apple’s ad copy for its iMac computers is misleading because it incorrectly boasts “millions of colours”.  Gullible customers take this to heart and suffer when it turns out to be inaccurate. Just like Microsoft’s ads claim that “Xbox Live is where games come alive.”  And Maxwell House alleging that it’s “Good to the Last Drop.” …Right. That’s what ads do. They make the products sound great so you spend your money.

In an oft-cited Ontario case (Church & Dwight Ltd. v. Sifto Canada Inc., 1994 CanLII 7314 (ON S.C.)), the court dealt with an allegation of false advertising.  To succeed on this claim in Canada, you have to prove: 

  • actual economic loss,
  • that the offensive statements were false, and
  • that they were made with the intent to cause injury,
  • that they were made without lawful justification.

According to the Sifto case, advertisements claiming a product is “100 per cent pure and 100 per cent natural” are “examples of the ‘puffery’ which is the staple of the advertising industry and of marketers everywhere.”   Apparently, this hasn’t been explained to iMac customers in California.

Related Reading:  “Quebec couple battles corporate giant and wins” where a Telus customer successfully sues for a deceptive promotion under Quebec’s Consumer Protection Act

Calgary – 10:30 MST

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Patent Infringement Update

We posted last month about a Canadian company that lost a patent infringement suit in Texas to competitor Blackboard Inc.  The Canadians lost another round a few weeks later when the judge barred them from selling the infringing products in the US.  In a recent reversal of fortune, the U.S. Patent and Trademark Office has now issued a preliminary decision that rejects all 44 patent claims made by Blackboard Inc. in its software patent. 

This shows the value of a coordinated patent litigation defence – fighting the patent infringement claim both in the courts and in the USPTO. 


Calgary – 15:30 MST


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