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A “Pet Valu” franchisee in Ontario claimed that sales were declining, so she terminated the Franchise Agreement. After termination of the agreement, her husband established a competing “Pet Stuff” business nearby. When a franchise location fails as it did in this case, what happens with the “restrictive covenants” in the agreement? Can these provisions be circumvented by the use of a separate company, or by using a friend or family member?

If you are in the franchise business, either as a franchisor or a franchisee, you will undoubtedly have to deal with “restrictive covenants”. These are the provisions in the Franchise Agreement that control what the franchisee can do after the termination of the agreement. Most franchise agreements contain clauses prohibiting the franchisee from establishing a competing business, soliciting customers, or using confidential information of the franchise.

The recent decision in Pet Valu Canada Inc. v. 1381114 Ontario Limited, 2013 ONSC 5361, dealt with an ex-franchisee who established a competing business through her husband’s numbered company within a few blocks of an existing Pet Valu location. Pet Valu, the franchisor, applied to the court for an injunction to compel the ex-franchisee to stop this competition. Pet Value sued both the franchisee and her husband, and each of their companies. Pet Valu argued that the actions of the ex-franchisee breached the terms of the franchise agreement which prohibited:

• the operation of a competing business for a period of 2 years after the end of the franchise agreement within a 20 km radius of any other Pet Valu Store,
• the hiring of any employee of a Pet Valu franchise for 1 year after the end of the Franchise Agreement; and
• the use of customer lists, confidential information and all Pet Valu branded signs, labels and price tags after the termination of the agreement.

The court in this case had no trouble looking behind this “transparent effort” on the part of the ex-franchisee to establish a competing “Pet Stuff” business. The “Pet Stuff” business also hired away one of the store managers who had worked at the Pet Valu franchise, and even made use of shelving and inventory with distinctive labels, price tags and product codes from the old Pet Valu franchise. The court issued an interim injunction against the ex-franchisee and her husband.

Related Reading: Richard Stobbe was recently interviewed by Alberta Venture magazine for the article Is buying a franchise the opportunity of a lifetime, or the worst mistake you’ll ever make?

Calgary – 07:00 MST

As an update to my previous post in August (click here), this bill (Bill C-8) has been re-introduced in Canadian Parliament, and is currently in second reading. Bill C-8 amends the Copyright Act and the Trade-marks Act to add new civil and criminal remedies and new border measures designed to curtail the importation of knock-off products.

Stay tuned, this bill is expected to get through the Parliamentary process and could be law in 2014.

Calgary – 07:00 MST

In the case of Alberta (Information and Privacy Commissioner) v. United Food and Commercial Workers, Local 401, 2013 SCC 62, released last Friday, the Supreme Court of Canada has declared the Alberta Personal Information Protection Act (PIPA) invalid in its entirety.

This case pits constitutional rights against privacy rights. The court reviewed a claim of privacy rights infringement arising from a long strike during which both the Union and the employer recorded and photographed individuals crossing the picketline. Some of those who were photographed crossing the picketline filed privacy complaints when the Union posted those pictures online.

As a consent-based privacy law, PIPA establishes a general requirement to obtain consent for any collection, use or disclosure of personal information. According to the court: “The central issue is whether PIPA achieves a constitutionally acceptable balance between the interests of individuals in controlling the collection, use and disclosure of their personal information and a union’s freedom of expression. PIPA does not include any mechanisms by which a union’s constitutional right to freedom of expression may be balanced with the interests protected by the legislation.” Thus, in the end, the entire Act has been declared constitutionally invalid, and in a unique way of avoiding a gap in the law, the court’s declaration has been suspended for 1 year, to allow the Alberta legislature to fix the law.

Stay tuned.

Calgary – 07:00 MST

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Zynga, the world’s largest app-developer has scored a win against the owner of the SCRABBLE brand. This case brings up several interesting points about international trade-mark protection in the era of apps.

The well known SCRABBLE® brand is a registered trade-mark owned by different owners in different parts of the world. Hasbro Inc. owns the intellectual property rights in the U.S.A and Canada. In the rest of the world, the brand is owned by J.W. Spear & Sons Limited, a subsidiary of Mattel Inc. Mattel is not affiliated with Hasbro – in fact, the two companies are long-time rivals.

In JW Spear v. Zynga, a UK court has decided that the use of the SCRAMBLE brand by Zynga for its word-based app game does not infringe the SCRABBLE trade-mark in the UK, nor does it constitute passing-off. However, the court did consider Zynga’s SCRAMBLE logo design (above left) to constitute an infringement, since the stylized M appears at first glance to resemble a letter B. A few interesting points on this long-running battle:

• As we’ve seen in other IP disputes covered by ipblog, this litigation is part of a wider dispute in multiple jurisdictions, including France and Germany.
• Mattel was chastised by the court for its delay in responding to Zynga’s earlier use of the SCRAMBLE mark, in late 2007. This delay influenced the court’s conclusion that Mattel did not truly perceive SCRAMBLE to be a threat to the SCRABBLE mark. This in turn influenced the court’s opinion that the public would not be confused by the use of the 2 marks.
• Mattel’s delay was likely caused by the efforts of the parties to negotiate a license agreement to produce a physical board-game version of the SCRAMBLE app.  The litigation followed a break-down in negotiations, when Zynga concluded a deal with Mattel’s rival Hasbro.

Calgary – 07:00 MST

A trade-mark must be distinctive – if it is not, it is at risk of being unregistrable, and if for some reason it is registered, it is vulnerable to attack by a competitor.

In Bodum USA, Inc. v. Meyer Housewares Canada Inc. 2013 FCA 240 (appeal from 2012 FC 1450), Bodum USA, Inc. sued Meyer Housewares Canada Inc. in the Federal Court for infringement of the registered trade-mark “FRENCH PRESS” (TMA 475,721) as well as for passing off, and depreciation of goodwill. Bodum lost at the trial level, appealed that decision, and the court made short work of Bodum’s appeal. The appeal was dismissed because the trade-mark “FRENCH PRESS” for non-electric coffee makers is descriptive – it is a generic term applied to all such coffee makers, and the registration probably never should have issued in the first place. By seeking to enforce its descriptive mark against a competitor, Bodum rolled the dice and risked losing any enforceable rights to the mark. In this case, Bodum lost and the court concluded: “The registration is invalid because the term was and is in ordinary and bona fide commercial use as a generic term.” Ouch.

The lessons for business:

• Consult a trade-mark agent to obtain advice on registrability and protectability of your trade-mark, to avoid the problems faced by Bodum’s mark;
• While this case is not precedent-setting, it does confirm Canadian law on trade-mark distinctiveness.
• Note that this litigation is part of a broader IP battle between these competitors. Maybe not as sexy as the smartphone wars between Apple and Samsung, but you might call this a coffee clash: the two companies have faced off in intellectual property litigation in Canada and the US. See this post  for additional analysis of the patent infringement fight over the design of the french press coffee maker.

Calgary – 07:00 MDT

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The app economy is, by most estimates, equivalent in size to the GDP of a small country: $15 billion in 2012, projected to mushroom to $74 billion by 2016. All that economic activity inevitably breeds litigation. In what appears to be a case of first impression in the US, a federal court looked at the issue of whether the app store is liable for the apps it distributes, or the app developer.

The case of Evans v. Hewlett-Packard Co., 2013 WL 4426359 (N.D. Cal. Aug. 15, 2013), the court looked at the liability of Hewlett-Packard for a third-party app which allegedly infringed trade-mark rights.

This case hinges on an interpretation of Section 230 of the Communications Decency Act (47 U.S.C. §230), 1996 legislation which provides immunity for providers of an “interactive computer service”, such as ISPs and website operators. The court decided that HP, as the operator of the app store, does qualify for immunity under this legislation, putting the app store into the same category as ISPs.

Remember, the Communications Decency Act  is US legislation, not Canadian. However, Canadian app developers should take note of this decision, as most Canadian developers seek to market and sell their apps in the US.

Other app case are pending, such as this claim (Pirozzi v. Apple, Inc., 12-cv-01529-JST (N.D. Cal. Aug. 3, 2013)) which is proceeding against Apple, for violation of privacy rights. Stay tuned.

Calgary – 07:00 MDT

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My article on Keeping Secrets: Trade Secrets and Confidentiality Agreements is published in the latest issue of The Advisor. This article reviews confidentiality agreements and the decisions in Convolve, Inc. and Massachusetts Institute of Technology v. Compaq Computer Corporation and Seagate Technology, LLC  and Plaza Consulting Inc. v. Grieve.

Calgary – 07:00 MDT

The Kermode bear is a rare species of Canadian black bear, native to the beautiful province of British Columbia.

The recent case of City of Terrace v Canadian Pacific Phytoplankton Ltd., 2013 TMOB 156 brings the iconic animal into the realm of trade-mark law. The City of Terrace, B.C. is the owner of the official mark KERMODE BEAR and the City opposed the application for the KERMODE WARRIOR design mark (at left), applied for by Canadian Pacific Phytoplankton Ltd. An official mark is, in its own turn, a rare species of Canadian trade-mark which, under Section 9 of the Trade-marks Act, is accorded special rights and remedies. Public authorities such as governments and universities can give notice of the adoption of an “official mark”, after which it cannot be used or registered as a trade-mark by others. Think of government coats of arms, university names and crests, that sort of thing. In this case, the official mark claimed by the City of Terrace is comprised of the words KERMODE BEAR, and the City opposed the trade-mark KERMODE WARRIOR for various consumer products, such as dietary supplements, beverages and shampoos.

The Court said: “As stated in section 9(1)(n)(iii) of the Act, the test to be applied is whether or not the Applicant’s mark consists of, or so nearly resembles as to be likely to be mistaken for, the official mark. The case law has interpreted “consisting of” in section 9 to mean “identical to”. Regarding the resemblance test set out in section 9, the case law indicates that it should be applied as a matter of first impression and imperfect recollection…”

The Court came to the conclusion that the marks were not identical, and the opposition was rejected.

In this case, the official marks did not prevail, and the KERMODE WARRIOR applications were allowed to proceed.

Calgary – 07:00 MDT

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The club of Canadian provinces with private-sector privacy legislation welcomes a new member this year: Manitoba has passed the The Personal Information Protection and Identity Theft Prevention Act (PIPITPA), joining B.C., Alberta and Quebec. In other provinces, the federal Personal Information Protection and Electronic Documents Act governs private sector privacy. Of course, most provinces have enacted some form of public sector privacy law, and many also have health-information laws. The Manitoba private-sector law follows the consent-based privacy regime of other Canadian provinces.

This law has yet to be proclaimed into law. Stay tuned.

Calgary – 07:00 MDT

The old dictum “use it or lose it” has been applied countless times to trade-mark law (…and French as a second language) for the very good reason that it neatly sums up the ongoing requirement to put registered marks into actual commercial use in order for trade-mark rights to be maintained. A registered trade-mark is not a guaranteed ironclad bundle of rights. It is vulnerable to an attack (usually by a competitor) based on non-use.

In Canadian trade-mark law, these attacks are known as Section 45 proceedings. As the court recently summed it up: “Unlike other pieces of intellectual property, if a trade-mark is not used, it may be expunged from the register.”  Under Section 45 of the Trade-Marks Act, the registered owner of a trade-mark can be compelled to provide evidence that the trade-mark was in use in Canada at any time during the previous three years. No evidence, no trade-mark.

In the recent case of Medos Services Corporation v. Ridout and Maybee LLP, 2013 FC 1006, the court reviewed a Section 45 challenge to the mark MEDOS. The trade-mark owner asserted its rights by tendering evidence such as various bills, receipts and correspondence, none of which convinced the court.

Remember:

• The burden on the trade-mark owner is not very high: The proceeding is “simply an opportunity for the registered owner to show, if he can, that his mark is in use or if not, why not.”
• Invoices or receipts which do not show the mark are of no use in Section 45 proceedings. The evidence must show “use” of the registered mark for sales of the specific products or services listed in the registration.
• It is not enough to show correspondence with a supplier or customer which might lead to future sales. There must be evidence of actual sales.
• The court said: “Evidence of use can take the form of a single commercial transaction in the ordinary course of business.”

Keep track of your trade-mark use and maintain accurate records. The well-prepared trade-mark owner will be able to fend off a Section 45 challenge with relative ease. The unprepared owner will have a much harder time, and as in the MEDOS case, may face expungement of the mark.

Calgary – 07:00 MDT

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Canadian patent and trade-mark applicants take note: the  USPTO has indicated that it will remain open despite the pending shutdown of US government offices and agencies. Therefore, prosecution of US patent and trade-mark applications should be uninterrupted by the current political drama in Washington.

Calgary – 12:00 MDT

Update: October 4, 2013

As the shutdown drags towards the end of week 1, the USPTO maintains that it has reserves to continue operations and accept new applications. As of October 3, 2013, the U.S. Copyright Office has shut down.

Calgary – 9:45 MDT

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Restrictive covenants attempt to tie up a business person who sells a business, in order to restrict that person from competing against the business they just sold. In an earlier post (Are Non-Competition Restrictions Enforceable?), we reviewed restrictive covenants in the context of employment agreements. The Supreme Court of Canada recently weighed in on the topic of restrictive covenants in the context of a commercial transaction. While this is not specifically an intellectual property law topic, it is a very common issue faced by technology companies.

In Payette v. Guay Inc. , 2013 SCC 45, the court reviewed the enforceability of non-competition and non-solicitation clauses in an asset purchase and sale agreement. While there was also a restrictive covenant in place in an employment agreement, the case really turned on the enforceability of the restrictions arising from the purchase and sale agreement. The court was clear that different rules apply to each type of agreement. The court provides the following guidance for those negotiating restrictive covenants:

• “In the commercial context, a restrictive covenant is lawful unless it can be established on a balance of probabilities that its scope is unreasonable having regard to the context in which it was negotiated.”

• “A non-competition covenant will be found to be reasonable and lawful provided that it is limited, as to its term and to the territory and activities to which it applies, to whatever is necessary for the protection of the legitimate interests of the party in whose favour it was granted.” In this case, a five year period was reasonable in light of the highly specialized nature of the business.

• “While it is true that in the case of a non-competition covenant, the territory to which the covenant applies must be identified, a determination that a non-solicitation covenant is reasonable and lawful does not generally require a territorial limitation.” In this case, there was no territorial limitation in the case of the non-solicitation clause, but the clause was still upheld as reasonable.

This decision is good news for buyers who are acquiring a business and wish to impose enforceable non-competition and non-solicitation restrictions on the seller. The Supreme Court of Canada is clear that different rules apply in the employment context and anyone negotiating these agreements should take note.

Calgary – 07:00 MDT

Thinking of patenting, but waiting for some customers first? Tread carefully. By merely offering your invention for sale, even if the invention has not even been manufactured, you may lose patent rights.

The recent US case of Hamilton Beach v. Sunbeam Products Inc. (Case No. 11-CV-0345, Decided: August 14, 2013) dealt with a challenge to Hamilton Beach’s patent for a slow-cooker design. The critical event was a transaction between Hamilton Beach and a foreign supplier in early 2005.  The offer occurred before the patent filing date – to be specific, it occurred more than 1 year before the filing date. This offer by Hamilton Beach was considered by the court to be an offer for sale of a product that anticipated the asserted claims and the court found that the invention was ready for patenting prior to the relevant date. The court noted that “An actual sale is not required for the activity to be an invalidating commercial offer for sale… An attempt to sell is sufficient so long as it is ‘sufficiently definite that another party could make a binding contract by simple acceptance.'”

As a result, the patent was held to be invalid.

Remember:

• If such a sale or even an offer for sale is made when the invention is ready for patenting, that will start the 1 year clock running for patent filing in Canada and the US. The inventor would have 1-year from that date in which to file a patent.
• This may result in a loss of patent rights outside Canada and the US, for countries in which there is no 1-year grace period.
• An invention is “ready for patenting” when prior to the critical date:
• The invention is reduced to practice; or
• The invention is depicted in drawings or described in writings of sufficient nature to enable a person of ordinary skill in the art to practice the invention.
• In Canada, the courts have come to similar conclusions – consider this case  dealing with a device that was manufactured and rented to a third party for use in drilling an oil well in Texas prior to the relevant date of the Canadian patent. This earlier device invalidated the patent, since it constituted an “enabling disclosure” of the invention more than 12 months prior to filing of the patent application.

Calgary – 07:00 MDT

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When you upload your pictures to a website, you might click through some terms of use…Did you just transfer ownership of the copyright in your pictures?

In a recent US case (Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., No. 12-2102, Fourth Circuit Court of Appeals) the court dealt with a copyright infringement claim over photos uploaded to a real estate website. Users were required to click-through the website terms of use (TOU) prior to uploading, and those terms clearly indicated that copyright in the images was transferred to the website owner.

In the course of the infringement lawsuit, this was challenged, so the court had to squarely address the question of whether copyright can be validly transferred via online terms. “The issue we must yet resolve,” said the Court, “is whether a subscriber, who ‘clicks yes’ in response to MRIS’s electronic TOU prior to uploading copyrighted photographs, has signed a written transfer of the exclusive rights of copyright ownership in those photographs consistent with” the Copyrght Act.

In Canada, the equivalent section of the Act says “The owner of the copyright in any work may assign the right, either wholly or partially …but no assignment or grant is valid unless it is in writing signed by the owner of the right…”.

The Court in the Metropolitan Regional case decided that yes, an electronic agreement in this case was effective to transfer copyright for the purposes of the Copyright Act.

Calgary – 07:00 MDT

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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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.

Calgary – 07:00 MDT
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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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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

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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As a follow-up to our earlier post about Revoking an “Implied” Software License, this interesting US case (Davis v. Tampa Bay Arena Ltd.) deals with the use of photographs on Facebook postings. A freelance photographer, Davis, worked for the Tampa Bay Arena, taking photos for various events. The photographer and arena had a verbal agreement since 1996, and then a written agreement since 2000. The written agreement stated that the arena had “rights to reproduce images for newsletter, advertising, display prints, broadcast, and the [Forum] web site.” The agreement was also clear that Davis retained copyright in the images.

That was the language dating from 2000. Fast forward 10 years, and the arena started posting Davis’s photos to its Facebook page, something not contemplated in the scope of the original agreement. However, for months Davis permitted the images to be posted, and even set up a upload site to allow the arena’s marketing department to easily resize images for the Facebook page. By this course of conduct and the email record, the court found that Davis granted an implied nonexclusive license to the arena to make use of the images in this way. Davis countered by saying that if an implied license was granted, it was only granted with certain strings attached – conditions regarding additional payment that were never met. Because these conditions were not met, the use of the photographs was unauthorized, giving rise to a copyright infringement claim.

The court disagreed. On the copyright claim, the court decided that “even assuming that Davis attached conditions to the Forum’s use of his images on Facebook, the record is clear that these conditions were covenants, not conditions precedent to the granting of the implied license. Accordingly, any breach on the Forum’s part of these covenants provides Davis with a breach of contract claim against the Forum, not a copyright infringement claim.” (Emphasis added.)

Lessons?

• A chain of emails can easily establish a contract, such as the implied copyright license in this case;
• For any license – particularly copyright, media or trade-mark licenses – check the original terms of the license. Social media can cause problems when its use is unauthorized by the scope of the original license, even though it seems like a natural extension of what is authorized within the scope of the original license.

Related Reading: Click & Copy: Breach of Online License Agreements & Copyright Infringement

Calgary – 07:00 MDT