Archive for August, 2013

The Bluenose Copyright Fight

When it comes to Canadian IP battles, neither The Great Olympic Sweater Debate nor the Distinctly Canadian Patent Fight can rival the court battle over the design of the Bluenose for sheer Canadianess.

In Nova Scotia v. Roué, 2013 NSCA 94 (CanLII) the court addressed the copyright in the design of the famous schooner Bluenose. This is the ship that graces the back of the Canadian dime. Certain descendants of the vessel’s original designer, William J. Roué, launched an action against the Province of Nova Scotia, claiming that the Province was infringing copyright and moral rights in the original design drawings of their ancestor, by restoring or rebuilding the Bluenose vessel.

A little history is in order: The original Bluenose was launched in 1921. A legendary racing schooner, the ship was undefeated for 17 years straight. The original Bluenose sank on a reef off Haiti in 1946. A replica Bluenose II was constructed in 1963, with access to Mr. Roué’s original designs. The Province took ownership in 1971 and now the Province describes its current efforts as a restoration of Bluenose II.  Mr. Roué’s descendants allege that the Province is in fact creating an entirely new vessel and thus infringing copyright and moral rights in the original drawings. The Province responded by arguing, among other things, that the restoration of the Bluenose II is not a “substantial reproduction” of the original Bluenose, but rather an independent design, and if any of the original design was used “it was only dictated by the utilitarian function of the article”, and thus outside the purview of copyright.

As with many fascinating copyright battles, this one turned on relatively mundane court rules. Here, the application and the appeal centred on the question of whether the case could proceed as an application rather than by means of a full trial. Weighing all of the factors, the court suggested that the application could go ahead, without the need to convert it to a full trial. Stay on this tack… the case will continue.

Calgary – 07:00 MDT

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Trade-Secrets and the Departing Employee

Concerned about departing employees who might have confidential information about your business and clients? Or maybe you are the ex-employee and you are unsure of where the line is drawn when departing one job to start another.

In Plaza Consulting Inc. v. Grieve et al , 2013 ONSC 5338 (CanLII), the court addressed an injunction application by QA Consultants, a Canadian company offering software testing and quality assurance services, against former employees and consultants who started a competing business. The court provides some guidance on how these matters are held, when ex-employees are accused of misappropriating confidential information and poaching customers. In this case, the court says:

  • Whether dealing with employees who allegedly misappropriate their former employer’s business methods in breach of a restrictive covenant or in breach of fiduciary duties, the employer must at the very least establish that it “has a proprietary interest that is entitled to protection.” Aon Consulting Inc. v Watson Wyatt & Co., 2005 CarswellOnt 3706, at para 16 (SCJ). Here, the court concludes that the confidential information in question is “highly generic”. Remember that “[a] trade secret cannot be within the realm of general skills or knowledge.”
  • A party who receives allegedly confidential information and who is accused of misusing it must have done so to the detriment of the party that provided the information in the first place. International Corona Resources Ltd. v Lac Minerals Ltd. 1989 CanLII 34 (SCC), (1989), 26 CPR (3d) 97, at 103(SCC). In this case, the court found that the information in question was not used to the detriment of the plaintiff.
  • In the case of the allegations of solicitation of former clients or employees of QA Consultants, the court indicated that, in these agreements, the restrictive covenants were sufficiently vague that the allegations made against the ex-employees were not “clear” breaches of those covenants. The vague definition in the agreements did not help the case. Ultimately, the injunction application was dismissed.

Remember to get advice on the restrictive covenants in employment agreements. Both employees, consultants and employers should understand the scope of confidentiality obligations and non-solicitation restrictions.

Update: Combating Counterfeit Products Act

As a follow-up to our earlier post (Combating Counterfeit Products Act), we wrote in March 2013 that Parliament had introduced a bill (Bill C-56) to amend the Copyright Act and the Trade-marks Act, to combat counterfeit products. With Prime Minister Harper’s decision to prorogue Parliament, this Bill will die on the order paper.

There was a time when the word “prorogue” sent people running to their constitutional dictionaries. Since the prorogations in 2007, 2008 and 2010 this manoeuver has become a common feature of Canadian legislative and political life. The Bill will have to be reintroduced in the next session. Assuming the current senate expense scandal can be resolved, the Bill may make it through the next session of Parliament and be passed into law. Stay tuned.

Calgary – 08:00 MDT

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Non-Disclosure Agreements: A Cautionary Tale

Agreements which contain non-disclosure obligations (also known as a confidentiality agreements, CAs, NDAs or confidential disclosure agreements) are common in many industries – from licensing deals to franchise agreements, from manufacturing to retail industries. Confidential information may be disclosed during early-stage negotiations, even before a formal contractual relationship is concluded. Or it may be disclosed in the course of an ongoing contract, for example, a licensing or manufacturing agreement. In all of these cases, the exact definition of “Confidential Information” may be critical.

In CONVOLVE, INC. AND MASSACHUSETTS INSTITUTE OF TECHNOLOGY v. COMPAQ COMPUTER CORPORATION and SEAGATE TECHNOLOGY, LLC, the US Federal Circuit Court of Appeals dealt with a claim for misappropriation of trade-secrets and breach of confidence, arising out of a certain Non-Disclosure Agreement (NDA) signed between the parties.

The Court noted that: “The NDA states that, to trigger either party’s obligations, the disclosed information must be: (1) marked as confidential at the time of disclosure; or (2) unmarked, but treated as confidential at the time of disclosure, and later designated confidential in a written memorandum summarizing and identifying the confidential information.” This definition of confidential information meant that certain disclosures by Convolve which failed to include a written designation or notification of confidentiality were not considered to be confidential. The failure to mark that information as “confidential” meant that the information was not caught by the agreement. The Court also decided that Convolve’s remedies under the California Uniform Trade Secrets Act (CUTSA) were pre-empted by this NDA, leaving Convolve (the disclosing party) without any remedy for misappropriation of this information by the other side.

Lessons for business?

  • While this decision turns, in part, upon an interpretation of US law (remember there is no equivalent of the Uniform Trade Secrets Act in Canada), the take-away is the same: NDAs are not just “boilerplate”. They protect the secrets of your organization, the information that gives you an advantage over the competition.
  • The definition of “Confidential Information” is important, and following the definition of “Confidential Information” is just as important. The first may be easy to focus on while the agreement is being negotiated and vetted by legal. The second is more difficult to remember as the parties engage in fast-paced negotiations, and information is disclosed by personnel within the organization who may never actually see the written NDA.

Calgary – 07:00 MDT

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Trade-marks: The McDonald’s McAdvantage

While “famous” marks are handled differently in Canada than they are in the US, there is nevertheless a great advantage for marks such as the well-known  McDonald’s “family” of marks when it comes to effective trade-mark protection. In the recent case of CHEAH v MCDONALD’S CORPORATION, the Federal Court dealt with an application for the mark MACDIMSUM in association with a number of food items. The application was opposed by McDonald’s restaurants.

Anyone seeking to register a mark using the prefix “MAC” or “MC” in association with food and restaurant services should expect some scrutiny by McDonald’s trade-mark lawyers.

As noted by the Court, McDonald’s owns “a large number of trade-marks referred to as a ‘family’ of trade-marks registered and used by McDonald’s in Canada in association with foods and drinks and restaurant services. These are referred to in argument as the MC plus food item, or MAC plus food item, marks.” By presenting evidence of the dozens of these MAC / MC marks, coupled with survey evidence of the public’s likely perception of the mark MACDIMSUM as yet another one of McDonald’s marks, McDonald’s as the opponent of this application was able to persuade the Trade-Marks Oposition Board that this application should not be permitted to proceed. The Court agreed. A few interesting points to note:

  1. Yes, let’s face it, there is an undeniable advantage to having dozens of marks to present as part of a billion-dollar chain of restaurants. A ‘lesser’ opponent (with less recognition, lower sales, less advertising and a smaller family of marks) simply would not be in a position to present such evidence in opposition proceedings.
  2. Survey evidence is expensive to obtain but can be effective, as it was in this case. However, note Justice Hughes’ comments that:  “The Court has been suspect as to the growing use of and reliance upon surveys in proceedings such as this. The remarks of Rothstein J, in the Supreme Court of Canada decision in Masterpiece Inc v Alavida Lifestyles Inc, [2011] 2 SCR 387 at paragraphs 78 to 101, stating that survey evidence should be used with caution and not supplant the role of the judge, are apt.”

Calgary – 07:00 MDT

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