As we posted in IT Outsourcing during the “Climb Out” and IP Licenses and Bankruptcy, Canada’s bankruptcy laws have historically permitted certain contracts – including intellectual property licenses – to be “disclaimed” in the course of the bankruptcy of the licensor.

Under amendments to the CCAA and to the Bankruptcy and Insolvency Act  brought into force last week, licensees may now take advantage of US-style protections which permit continued use of licensed intellectual property, even in the face of a disclaimer by a bankrupt licensor.  The disclaimer will not affect the licensee’s right to enforce an exclusive right to use the IP, provided the licensee continues to perform its obligations (including continued payment of license fees) under the terms of the license.

Licensors are encouraged to have their standard-form licenses reviewed in light of these amendments.  Licensees should seek advice in the event of the bankruptcy of their licensor.

Calgary – 07:50 MST

Three recent decisions tackle this issue: 

In the US decision of Cornelius v. DeLuca, 2009 WL 2568044 (E.D. Mo. Aug. 18, 2009), bodybuilding.com (an online retailer of fitness and bodybuilding products), was sued over the content of certain comments posted to the bodybuilding.com website. The plaintiffs complained that the comments were designed to harm the plaintiffs’ business. This decision considered whether the operator of bodybuilding.com should be liable for those user comments.  In the US, there is a standard defence for website operators (Section 230 of the Communications Decency Act), but that defence can be punctured if the operator was in a “conspiracy” relationship with the persons posting the comments.  The court found no such conspiracy and so the website operator was found to be not liable, and the claim was dismissed.  

In Canada, in the decision this month in Warman v. Lemire 2009 CHRT 26, a Human Rights Tribunal found that a site operator should not be liable for comments if the operator had no notice or knowledge of the comments.  This is a “hate speech” case, not a corporate defamation case as in the Cornelius v. DeLuca decision above. Also, it’s worth noting that this comes from a Human Rights Tribunal, not a Canadian court. The decision maker said: “I do not see how liability for hate messages posted by anonymous or pseudonymous third parties should be ‘attributed’ to a message board operator if it has not been established that he or she has notice or knowledge of these postings.” Several comments and articles were reviewed, and in one of the cases, the impugned article was posted or uploaded by the administrator or webmaster.  In that instance the operator was found to be responsible.  However, the operator escaped punishment on constitutional grounds.  The decision is expected to be appealed.

The BC Court of Appeal’s decision last week in Crookes v. Newton 2009 BCCA 392 considered liability for hyperlinks. In that decision (one of many generated by Mr. Crookes’ lawsuits), the Court of Appeal agreed that Mr. Newton was not liable for hyperlinks to defamatory content. The Court reasoned that “reference to an article containing defamatory content without repetition of the comment itself should not be found to be a republication of such defamatory content”.  In other words, if someone merely hyperlinks to a defamatory site, that alone does not make that person a “publisher” of the material found at the hyperlinked site.  This will help clarify the liability of website hosts or operators, since user comments which merely link to defamatory or other offending material, will not attract liability.

Calgary – 09:15 MST

Updated Sept. 22 16:42 MST

Blockbuster operates an online movie rental service in the US, which is subject to a user agreement.  In the recent US decision in Harris v. Blockbuster Inc., 2009 WL 1011732 (N.D. Tex. April 15, 2009), Blockbuster tried to deflect a customer’s lawsuit by using a standard mandatory arbitration clause in the user agreement. If the arbitration clause was valid, then the lawsuit would be dismissed and the complaint would be diverted from court to arbitration. Blockbuster’s user agreement indicated that Blockbuster could: “…at any time, and at its sole discretion, modify these Terms and Conditions of Use, including without limitation the Privacy Policy, with or without notice…”

The Court reasoned that the arbitration clause was “illusory” because Blockbuster could, under its amendment clause, make unilateral changes to the arbitration terms, even after a complaint was made. 

Lessons for business?

• For online terms, make sure your amendment clause is not completely arbitrary. Amendments should only be permitted with reasonable notice.
• When notice of amendments is given, ensure that changes are brought to the attention of users. In some cases it might be appropriate to email copies or mail hard copies of the amended terms to users.
• Obtain advice on a “saving provision”, which could have preserved Blockbuster’s mandatory arbitration clause.

Calgary – 10:45 MST

In some countries (notably, the UK and South Korea, and now Australia) cleantech inventions are being earmarked to receive expedited examination in the patent office (See for example: Green Channel for Patent Applications (UK), and this announcement about changes at the Korean IP Office, plus this post about Australia’s plans). This practice covers “environmentally-friendly technologies”, such as those in the fields of prevention of water pollution and air pollution, waste disposal technologies, recycling, and others.  Sure, this should be a good thing for the environment, but make no mistake – this is also about maintaining a national competitive edge as patented cleantech inventions gain importance in the global economy. 

Should Canada implement such a procedure?

Calgary – 10:30 MST

Putting a lime in your beer is nothing new. But branding it apparently is. US brewing giant Anheuser-Busch Companies Inc. and Canadian Brick Brewing Co. Ltd. are locked in an intellectual property dispute over their labels for lime-flavoured beer. The makers of “Bud Light Lime” complain that Brick’s “Red Baron Lime” is an infringement of copyright and trade-mark rights in the label.  Have a look and decide.  This dispute leaves aside the more important question of why beer needs to come pre-packaged with lime in the first place.

This isn’t the first brand battle for Brick.  Earlier this year, Brick agreed to change its Red Baron labels in the face of a lawsuit by Labatt.

Calgary – 9:45 MST

The importance of IT outsourcing – as a way to reduce costs and manage risks – has been brought into sharp focus during the economic downturn.  The recession may have bottomed, but by all accounts the “climb out” will be long and slow. Here are a few pointers to consider for the negotiation and management of outsourcing agreements:

• Unstable Suppliers:  It is important to conduct due diligence on IT service suppliers, since their financial stability may have been impacted by the loss or instability of their own customers. This due diligence review process can be built into outsourcing agreements, providing an opportunity to periodically re-assess the stability of the supplier. While this does not guarantee that the supplier will remain solvent, it can provide critical lead-time to plan contingencies in case the supplier goes bankrupt.
• Termination Issues: If the supplier does go bankrupt, it is important to recognize that Canadian bankruptcy laws give the court broad latitude to intervene in bankrupt companies. This means that standard termination clauses (which permit termination in the event of bankruptcy), and security interests granted under provincial legislation such as the PPSA, can be set aside by the court (for example, see: SR Telecom & Co. v. Apex – Micro Manufacturing Corporation, 2008 BCSC 1768). Also remember that software licenses can be cancelled if the IT supplier’s assets are sold within a court-approved bankruptcy. (Related reading: Update: Changes to Canada’s Bankruptcy Laws , IP Licenses and Bankruptcy).  Source-code escrow is another possible solution.
• Business Continuity Issues:   Outsourcing mission-critical functions can involve significant risks for business continuity.  For example, outsourcing agreements often include the remote hosting of important data, in servers that may be located in another part of the country, in the US, or offshore.  An outsourcing contract should oblige the IT supplier to assist with data migration and transition in the event of termination. At a minimum, the IT supplier should deliver the data, but in the case of a bankrupt or unstable supplier, this obligation may be difficult to enforce. Consider a mandatory automatic back-up system to outside servers that can be controlled by your organization, so that critical data is secure, even if the service is interrupted.
• Industry Guidelines: In certain sectors, outsourcing guidelines must be observed. Federally regulated financial entities (FREs), should take note of the updated guidelines released this year by the Office of the Superintendent of Financial Institutions (OSFI) “Guideline B-10 on Outsourcing Business Activities, Functions and Processes“ PDF File). Section 7 (Risk Management) of these guidelines can also serve as “best-practices” for other sectors.

Calgary – 11:45 MST

Starting today, Sustainable Development Technology Canada (SDTC) is accepting applications from Canadian companies for funding of clean technologies. Statements of Interest (SOI) are being accepted from today until October 21st for preliminary screening in the fields of Energy Exploration & Production, Power Generation, Energy Efficiency, Transportation, Agriculture, Forestry and Mining and Waste Management.  SDTC is a funding arm established by the Canadian government.

Calgary – 14:30 MST

Two recent cases illustrate the limits of employee rights in connection with their use of technology related to the workplace. Although these are extreme examples, they reinforce some basic rules about employee “Acceptable Use” policies, and employee use of technology:

• Employee Blog: In the case of Alberta Union of Provincial Employees v. Alberta QB 2009 ABQB 208 (Nielsen, J.) the court dealt with a union employee who was dismissed on the basis of blog-postings which were critical and contemptous of fellow employees and management.  While the case was sent back to the labour arbitrator because of procedural irregularities (the employer failed to follow the collective agreement in the course of disciplining the employee), it is important to note that the decision to dismiss the employee was not overturned by the court. In short, there are circumstances where an employee can be dismissed for cause due to blog-postings that expose fellow workers to contempt and riducule.
• Reasonable Expectation of Privacy: In the case of R. v. Cole, 2009 CanLII 20699 (ON S.C.), an Ontario high-school teacher was charged with possession of child-pornography, on the basis of images found in a hidden file on a laptop assigned to him, but owned by his employer.  He complained that he had a right to privacy over the contents of the laptop, and therefore the search of his hard-drive was an unreasonable invasion of privacy. The court rejected this argument, saying that by agreeing to the School Board’s “Acceptable Use Agreement“, the accused clearly knew that the data and information on the laptop were not private.  The terms of the Acceptable Use policy were important in establishing the limits of the employee’s right to privacy.

Lessons for business?

1. Employee privacy issues have to be handled carefully and with sound legal advice in accordance with workplace policies;
2. Dismissing an employee based on the contents of a public blog, Facebook page or other online posting is not a trivial matter and must be undertaken after careful consideration of the employer’s procedures and the nature of the online comments;
3. If you don’t have an acceptable use policy, then you should consider having one prepared for your employees. 

Related reading: Employer Access to Employee Gripe Site

Calgary 11:45 MST

Recent news articles have shown that Twitter Inc. has run into problems with its US trade-mark application for TWEET.  Others have beaten them to the trademarks office with applications for marks such as  TWEETMARKS,  COTWEET and TWEETPHOTO, which have been cited by the US trademarks office as being confusing with TWEET. In Canada, Twitter filed their application on June 10th, and it appears a potentially competing mark TWEETBUCKS was filed two days before on June 8th. (The registered mark HOME TWEET HOME for bird houses, owned by an Alberta entrepreneur, likely won’t be a problem for Twitter.) Curiously, Twitter’s application for TWEET is based on “proposed use in Canada”, though the service has been embraced by Canadians for several years.

Lessons for business?

• Don’t wait to protect strategic brands, in both your home jurisdiction and important foreign markets. This shows the risks of waiting too long.
• A successful core service such as Twitter will, in very short order, spawn innumerable spin-off products and services. While these spin-offs can benefit and drive traffic to the core service, they can also threaten the identity of the brand. So in time, Twitter and Tweet may suffer from “genericide” – the effect of such widespread penetration and use that the term morphs from a specific identifiable brand into a generic word.

Calgary – 10:00 MST

Recent news articles from Newsweek and cnet report that the US military has deployed the iPod Touch and iPhone in the battlefield, as a user-friendly, multifunction device to assist soldiers with communication, translation, intelligence-gathering, logistics and training. Sorry, guys, but you’ll have to read the fine-print. The iPod Touch software license clearly says:

“The iPod Touch Software and Services are not intended or suitable for use in situations or environments where the failure or time delays of, or errors or inaccuracies in, the content data or information provided by the iPod Touch Software or Services could lead to death, personal injury or severe physical or environmental damage, including without limitation the operation of nuclear facilities, aircraft navigation or communication systems, air traffic control, life support or weapons systems.”

And you thought the Apple lawyers were just being over-zealous when they drafted that clause.

Calgary – 09:45 MST

Online defamation has always been about two issues: there’s the legal question of whether the online comments are “defamatory” according to the standard legal tests, but before you get to that stage, you need to know who is writing the defamatory comments.

That’s often where the inquiry starts and stops. Since online anonymity is so hard to pierce, the identity of the poster of defamatory comments is never known, and the person who is defamed has no-one to sue for defamation.  A court order on Monday has shed some light on the process of getting over that anonymity hurdle.  In the case of Cohen v. Google Inc., Index No. 100012/09 (N.Y. Co. August 17, 2009) (Madden, J., J.S.C.) (related story), a Canadian model has obtained an order compelling Google to disclose the identity of the author of the alleged defamatory comments.  “Pre-complaint disclosure” is not new, but this case has attracted attention because of the elements: a New York model, Google, and blogging.

In Canada, similar orders have been made in online defamation cases. In a 2009 decision in the case of Warman v. Fournier, the Ontario Superior Court of Justice ordered the disclosure of all personal information, including name, email and IP address, of eight anonymous posters in a defamation case.

Calgary – 14:00 MST

IsoHunt, a British Columbia-based service that indexes BitTorrents for peer-to-peer file sharing, attempted a pre-emptive strike against the Canadian Recording Industry Association (see our previous post), by asking the Court to declare that its activities were legal under Canadian copyright law.  Isohunt lost that bid in March, when a BC Court decided that the issues were too complex to be dealt with summarily, and that a full trial would be required. 

IsoHunt appealed that decision, and in late July, the BC Court of Appeal dismissed isoHunt’s appeal.  This means that the matter is unresolved, and will go ahead to a full trial – something that favours the recording industry, since the issues will be more complex and legal costs will escalate.  The stakes are high for both sides, and the resulting decision (if it does go through to trial) could be a landmark case for Canadian copyright law.

Related reading: isoHunt’s original petition (PDF courtesy of Torrent Freak).

Calgary – 09:45 MST

A small Canadian company, Infrastructures for Information Inc. (i4i), won a significant damage award earlier this year in its patent infringement fight wth Microsoft.  The lawsuit claimed that MS Word 2003 and Word 2007 contained custom XML tagging features that infringed the Canadian company’s patent.  Although the jury found in favour of i4i in May to the tune of $200 million, the heat was turned up this week when a U.S. judge added $40 million to the damages for Microsoft’s “willful infringement”, along with pre-judgment interest of $37 million. To top it off, the Court also issued a permanent injunction prohibiting Microsoft from selling its flagship Word program in the US. Microsoft has 60 days to comply with the injunction.  Not surprisingly, Microsoft has announced plans to appeal the ruling.

 

Calgary – 09:45 MST

In what appears to be a case of first impression in Canada, a Federal Court has confirmed that the title of a literary work cannot function as a registered trade-mark in Canada. This is consistent with the law in the US, but the issue has apparently never come before a court in Canada until earlier this year in the obscure but fascinating decision in Drolet v. Stiftung Gralsbotschaft and Foundation of the Grail Movement, 2009 FC 17 (CanLII) .  In that case, the Court decided that several registered trade-marks should be expunged from the register because they were used merely as titles of published works and were “inherently descriptive”. 

Compare this to the registrations for CHICKEN SOUP FOR THE SOUL, Registered, TMA546104, or any one of the HARRY POTTER books. Whenever the title of a successful book series is the subject of a trade-mark registration, care must be taken to ensure the registration can stand on its own as a trade-mark, and is not vulnerable to challenge on the basis set out in the Drolet decision.

Calgary – 10:30 MST

Applications for mobile devices are in their infancy (think of Hollywood in the 1930s). Apple’s App Store is one year old, barely out of diapers, and in that time customers have downloaded more than 1.5 billion applications. More than 65,000 apps populate the store, and the number of developers is growing by the month.  Blackberry entered the game in April with its own App World, already featuring a few thousand apps.  And Android Market – designed for Google’s platform – provides another venue for mobile applications.  There are currently about 6,000 apps available for Android.

Many businesses have recognized that a well-designed app can have benefits on many levels including revenue generation, exposure, access to early-adopter customers, and viral-marketing.  If you are considering this, ensure you have a proper App Development Agreement in place when engaging a developer, and consider intellectual-property ownership, cross-platform concerns and potential trade-mark issues.

Related reading: Apple’s battle over apps

Calgary – 09:00 MST

Another day, another lawsuit against Google (Rosetta Stone Ltd. v. Google, Inc., 1:09-cv-00736-GBL-JFA (E.D. Va. complaint filed July 10, 2009)). This lawsuit comes in the wake of recent changes made by Google to its AdWords policy. These changes relaxed the rules relating to the use of trade-marks and permitted the use of trade-marks in ad text in the U.S. even without approval from the trade-mark owner.  Not surprisingly, a recent study shows that, after the recent changes, there was an increase in the number of advertisers who sponsored or used trade-marks in their ad copy text. In other words, the use of trade-marks as sponsored keywords appears to be increasing with the new AdWords policy.

Calgary – 09:30 MST

The Canadian government has launched another attempt at reforming the Canadian Copyright Act, to bring it in line with the digital age. The last major overhaul of the legislation occured more than 10 years ago, and since then several attempts to introduce revised legislation were stymied, either by public opposition, or more often, intervening elections (Canada has held federal elections in 2000, 2004, 2006 and 2008, and commentators are watching for another in the fall of 2009). The current public consultation process runs from July 20 to September 13, 2009.  It is hoped that this process will permit Canadians to weigh-in (again) on copyright issues such as user rights, ISP-liability, file-sharing, piracy and downloading. The process also serves a useful political function: it permits the government to neutralize the copyright issue in the event of a snap fall election.

Calgary – 13:30 MST

 

This month the US Patent and Trademark Office opened an exhibit of Michael Jackson’s patents and trade-marks which is scheduled to run through the summer of 2009. One of Mr. Jackson’s more famous intellectual property assets – besides his songs and brands – is his patented “Method and means for creating anti-gravity illusion” (Michael J. Jackson et al, Patent number: 5255452), comprising a special boot (shown at left) used in connection with a device set into the stage.

Calgary – 09:00 MST

In the good old days, the boss overheard you complain at the pub after work.  Now, employees have more sophisticated methods of dishing the dirt. And employers must walk a careful line when navigating the issue of employee privacy.  

• In Pietrylo v. Hillstone Restaurant Group, Docket No. 2:06-cv-05754 (D.N.J. 2008), a US court decided that employees enjoyed a certain amount of privacy over a gripe-page they created on MySpace.  The pages were designed to be accessed by invitation-only, and provided a place for employees of the Houston’s restaurant chain to rant about their employment. Management heard about it, and asked one of the employees for the password to the site. The employer then promptly fired the 2 employees who had established the site.  When the employees sued their former employer, the court found in favour of the employees, on the basis of invasion of privacy and ordered payment of back-pay.
• While there has been no similar case yet in Canada, the issues were discussed in University of British Columbia (Re), 2007 CanLII 42407 (BC I.P.C.) where the employer secretly installed spyware on an employee’s workplace desktop to monitor his internet use. The Information and Privacy Commissioner investigated and found that the employer was in breach of public-sector privacy rules by surreptitiously monitoring its employee when it had “less intrusive means to manage the complainant’s employment.”

Related reading: Our post on workplace surveillance cases 

Calgary – 15:30 MST

L.E.I. for jeans is arguably confusing with both LEVI’S and LEE, making it a perfect candidate for a trade-mark battle.  Lee Canada went to bat to defend its LEE brand in the face of an application for the mark L.E.I. (stylized) for use in association with jeans. Lee Canada opposed the registration – and won – on the grounds of confusion with its registered LEE marks, used in Canada since 1937. (Lee Canada Inc. v. Jones Investment Co., 71 C.P.R. (4th) 112 (T.M.O.B.).)

The owner of the L.E.I. mark also owns associated marks L.E.I. LIFE ENERGY INTELLIGENCE for clothing.  Though the mark LEE is not highly distinctive according to the Trade-marks Opposition Board, Lee Canada was able to establish that its reputation in Canada was entitled to protection.  The application for the mark L.E.I. was refused, but the damage may already be done: the same owner already owns a registered mark for L.E.I. for jeans, registered in 2002, a mark that likely slipped past Lee Canada.  L.E.I.-brand jeans are sold in Walmart, and recently signed-on country star Taylor Swift to endorse the clothing line, so this brand is not one to be ignored.

Calgary – 15:00 MST