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Sookman tclg year_in_review_2013

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The Year in Review: Developments in Computer, Internet, and E-Commerce Law (2012-2013) …

The Year in Review: Developments in Computer, Internet, and E-Commerce Law (2012-2013)

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  • 1. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 McCarthy Tétrault Advance™ Building Capabilities for Growth Barry B. Sookman bsookman@mccarthy.ca 416-601-7949 June 27, 2013 Toronto Computer Lawyers’ Group: The Year in Review: Developments in Computer, Internet, and E-Commerce Law (2012-2013)
  • 2. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 McCarthy Tétrault Advance™ Building Capabilities for Growth IT/Computer Contracting
  • 3. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 1004964 Ontario Inc. v. Aviya Technologies Inc , 2013 ONSC 51 ¬ Action by subcontractor t.e.s.t. against prime contractor Aviya for damages arising out of an alleged breach of an oral agreement. ¬ “It is nearly impossible and, in my view, not necessary to repeat each of the factual disputes between the parties. They agree on very little. In fact, this case illustrates the need for a written agreement to be in place as opposed to relying upon an oral agreement based on a proposal with a third party (HSC).” ¬ “At trial, Aviya took the position that both t.e.s.t. and Aviya viewed the work that was being performed on the F7X project as being “one big job”. Therefore, t.e.s.t. had to complete all of the work to be entitled to be paid for any one portion of the work it had completed. As a result, unless t.e.s.t. completed each and every task, Aviya was not obligated to pay the disputed invoices. I disagree. The evidence at trial did not support this contention....Ultimately, the Agreement failed by virtue of Aviya’s failure to pay outstanding Invoices...that were clearly due and owing, and its failure to provide t.e.s.t. with the information necessary to complete its work. Certainly, in the circumstances of the case, t.e.s.t. was not obliged to keep working on the project when it was not being paid in a timely fashion. It would be unreasonable to conclude that it had to continue to provide services for the F7X project on the basis of vague promises of payment and without receiving clear direction from Aviya.” 3
  • 4. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 REGAL WEST CORPORATION v. GrapeCITY, INC., 2013 U.S. Dist. LEXIS 38036 (W.D.Wash.Mar. 19, 2013) ¬ Action for breach of software development contract structured with separate SOWs and deemed acceptance after UAT. ¬ “The first issue the parties dispute is the duty imposed by their contract. Regal contends that it "is undisputed that when Regal contracted with GrapeCity for the development, implementation, and maintenance of an ATM system, the rate engine was the heart of that system." With respect to the contract as a whole, Regal contends that "the contract between Regal and GrapeCity took place over 18 months and Regal paid GrapeCity over $1.6 million for a working ATM system." Although there is evidence of a continuing relationship between Regal and GrapeCity, the evidence in the record shows that the relationship consisted of four different SOWs. Moreover, each SOW outlined specific deliverables, identified dates to begin and deliver the deliverables, and compensation amounts for the deliverables. Therefore, the Court concludes that the contractual duties were imposed pursuant to each separate SOW.” 4
  • 5. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 REGAL WEST CORPORATION v. GrapeCITY, INC., 2013 U.S. Dist.LEXIS 38036 (W.D.Wash.Mar. 19, 2013) ¬ “The next issue is whether Regal accepted the code pursuant to the acceptance provision regardless of whether the rate engine was faulty. GrapeCity contends that the rate engine was part of Iteration 1 of SOW #2 whereas Regal argues that the rate engine was part of Iteration 2. If the rate engine was part of Iteration 1, Mr. Neeves signed an acceptance certificate of Iteration. Therefore, the Court grants GrapeCity's motion as to SOW #2, Iteration 1 because GrapeCity has shown that it fulfilled its obligations with respect to this aspect of the contract.” ¬ “Mr. Neeves as well as other Regal employees claim that the Iteration 2 code never worked. However, even if there were problems with this code, Regal has failed to submit any evidence that it notified GrapeCity in writing of any problem with the code. On this issue, the SOW is clear: ¬ If there is no response from Regal Logistics as per the UAT schedule defined in the Master Schedule, or ten (10) days from the date the Deliverable was submitted to Regal Logistics in case the date is not defined in Master Schedule, then the Deliverable shall be deemed accepted. ¬ The failure to submit written evidence, as opposed to self-serving testimony, is determinative. ” 5
  • 6. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Instep Software, LLC v Instep (Beijing) Software Co. Ltd . 2013 U.S.Dist.LEXIS 47872 (N.D.Ill.Apr. 2, 2013) ¬ Right of licensor to terminate a license for failure to agree on pricing for a renew term. ¬ “the Software License Agreement provides that royalties and pricing are established by written agreement between Plaintiff and Defendant and that the royalties and pricing "must be renewed annually. Grant of this license and rights is contingent on this mutual agreement." Plaintiff provided Defendant a proposed Schedule for Royalties and Pricing on May 6, 2011, and stated that the rights granted to Defendant under the Software License Agreement would terminate on May 13, 2011, four business days later, if Defendant rejected the proposed royalties and pricing terms. Defendant did not accept the proposed royalties and pricing terms. Because the grant of the license to Defendant was expressly contingent on a mutual agreement on royalties and pricing, the parties' failure to agree to royalty terms resulted in the termination of the Software License Agreement. Whatever reasons Defendant seeks to introduce to explain this failure to come to agreement on the royalty terms, including a "drastic" increase in price and the possibility that Defendant would no longer be granted exclusive licensing rights, are irrelevant. The simple fact is that the parties did not come to agreement as to the royalties and pricing in 2011; this failure to agree on terms resulted in a termination of the Software License Agreement, which was expressly contingent on the parties' agreement on royalty terms.” 6
  • 7. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 LINCOLN SAVINGS BANK v. OPEN SOLUTIONS, INC., 2013 U.S.Dist. LEXIS 36260 (N.D. Iowa Mar. 13, 2013) ¬ Breach of contract claims based on representations made to customer before contracting for software and services. ¬ THE WARRANTY SET FORTH IN SECTION 8.1 OF THIS AGREEMENT IS A LIMITED WARRANTY AND IT IS THE ONLY WARRANTY MADE BY OPEN SOLUTIONS. OPEN SOLUTIONS EXPRESSLY DISCLAIMS, AND CLIENT HEREBY EXPRESSLY WAIVES, ALL OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED. ¬ This Agreement is intended as the complete, final and exclusive statement of the terms of the agreement between the parties regarding the subject matter hereof and supersedes all other prior or contemporaneous agreements or understandings, whether written or oral, between them relating to the subject matter hereof. No amendment to, or modification of, this Agreement shall be binding unless in writing and signed by a duly authorized representative of both parties. Each party expressly acknowledges that there are no warranties, representations, covenants or understandings of any kind, manner or description whatsoever by either party to the other except as expressly set forth in this Agreement. ¬ The conspicuous and unambiguous language found in the written agreement makes it clear that there are no warranties, express or implied, other than that found in the agreement itself.” 7
  • 8. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 DINOSAUR SEC., LLC v. TOWNSEND ANALYTICS, LTD ., 2012 NY Slip Op 31981 (N.Y.S.C.2012) ¬ Action claiming fraudulent inducement to enter into agreement for financial trading software. ¬ 13. WARRANTY DISCLAIMER. THE LICENSED PRODUCT, THE TAL DATA AND THE TOWNSEND NETWORK ARE PROVIDED "AS IS" AND WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES AS TO ACCURACY, FUNCTIONALITY, PERFORMANCE OR MERCHANTABILITY. TOWNSEND AND THE SOURCES EXPRESSLY DISCLAIM ALL WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ANY WARRANTIES ARISING FROM TRADE USAGE, COURSE OF DEALING OR COURSE OF PERFORMANCE. TOWNSEND AND THE SOURCES MAKE NO REPRESENTATION, WARRANTY OR COVENANT CONCERNING THE ACCURACY, COMPLETENESS, SEQUENCE, TIMELINESS OR AVAILABILITY OF THE LICENSED PRODUCT, THE TOWNSEND NETWORK, THE TAL DATA OR ANY OTHER INFORMATION OR THE LIKELIHOOD OF PROFITABLE TRADING USING THE LICENSED PRODUCT, THE TOWNSEND NETWORK OR TAL DATA. LICENSEE ACCEPTS FULL RESPONSIBILITY FOR ANY INVESTMENT DECISIONS OR STOCK TRANSACTIONS MADE BY LICENSEE OR ITS AUTHORIZED USERS USING THE LICENSED PRODUCT, THE TOWNSEND NETWORK OR TAL DATA. NO SALES PERSONNEL, EMPLOYEES, AGENTS OR REPRESENTATIVES OF TOWNSEND OR ANY THIRD PARTY ARE AUTHORIZED TO MAKE ANY REPRESENTATION, WARRANTY OR COVENANT ON BEHALF OF TOWNSEND. ACCORDINGLY, ADDITIONAL ORAL STATEMENTS DO NOT CONSTITUTE WARRANTIES AND SHOULD NOT BE RELIED UPON AND ARE NOT PART OF THIS AGREEMENT. LICENSEE ACKNOWLEDGES THAT USE OF THE LICENSED PRODUCT, THE TOWNSEND NETWORK AND THE TAL DATA MAY FROM TIME TO TIME BE INTERRUPTED AND MAY NOT BE ERROR-FREE. LICENSEE EXPRESSLY AGREES THAT USE OF THE LICENSED PRODUCT, THE TOWNSEND NETWORK, THE TAL DATA OR ANY OTHER INFORMATION IS AT LICENSEE'S SOLE RISK AND THAT TOWNSEND AND THE SOURCES SHALL NOT BE RESPONSIBLE FOR ANY INTERRUPTION OF SERVICES, DELAYS OR ERRORS CAUSED BY ANY TRANSMISSION OR DELIVERY OF THE LICENSED PRODUCT, THE TOWNSEND NETWORK, TAL DATA OR ANY OTHER INFORMATION OR CAUSED BY ANY COMMUNICATIONS SERVICE PROVIDERS. ¬ “Thus, any representations made about speed or accuracy of Townsend's services outside of the four corners of the Contract cannot be used as a basis for a cause of action sounding in fraud.” Rightly decided? 8
  • 9. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Blaisdell v. Dentrix Dental Systems, Inc., 284 P. 3d 616 (Utah, Sup.Ct.2012) ¬ Case concerns enforceability of limitation of liability disclaimers arising from the loss of data (electronic patient files, appointment book, treatment plans, and insurance information) while performing installation services of a software upgrade at a dentist's office. ¬ LIMITATION OF LIABILITIES. In no event will Dentrix be liable to you for any indirect, incidental, consequential, special, or exemplary damages arising out of or in connection with your use or inability to use the Product, the breach of any express or implied warranty, or otherwise in connection with the Product, its Software, the Documentation and/or the license even if Dentrix has been advised of the possibility of such damages. ¬ In no event shall Dentrix's total liability for any damages, direct or indirect, in connection with the Product, its Software, the Documentation and/or this License exceed the license fees paid for your right to use this Product whether such liability arises from any claim based upon contract, warrants, tort or otherwise. ¬ "the licensing agreement adequately allocated the risk of data loss to the party with the best ability to prevent such a loss”. Rightly decided? 9
  • 10. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Rottner v AVG Technologies USA, Inc Civil Action No. 12-10920-RGS (D.Mass. May 3, 2013) ¬ Whether Internet advertising claim about performance of PC TuneUP fell within express warranty that software would operate “substantially in accordance with the applicable specification” to support class action claim where EULA disclaimed all express and implied warranties. ¬ “Rottner contends that because the "applicable specification" language of the EULA is vague and undefined, the only rational recourse for the consumer is to turn to the advertising claims and the claims broadcast by PC TuneUp itself as the "applicable specifications." This argument has force in view of Delaware's endorsement of the UCC's liberal approach to express warranty provisions.... A clause generally disclaiming `all warranties, express or implied' cannot reduce the seller's obligation with respect to such description . . . ." ¬ “Moreover, I am confident that the Delaware courts would consider PC TuneUp's claimed functionality as an express warranty separate and apart from the EULA's content-less warranty provisions... Here, although the EULA disavowed previous representations, PC TuneUp software trumpets announcements about its functionality (which track the internet advertising claims) each and every time it is run. These claims, therefore, also form an express warranty on which Rottner may properly allege to have relied.” Righly decided? 10
  • 11. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Coastal Contacts Inc. v. Elastic Path Software , 2013 BCSC 133 ¬ Did an arbitrator correctly decide that a licensee had a right of indemnity for patent infringement of licensed software in an ecommerce platform? ¬ “Elastic Path shall defend or settle any claim made or any suit or proceeding brought against Licensee insofar as such claim, suit or proceeding is based on an allegation that any of the software supplied to Licensee pursuant to this Agreement infringes (directly or indirectly) any patent [...] or other proprietary and intellectual property rights of any third party, provided that Licensee shall notify Elastic Path in writing promptly after the claim, suit or proceeding is known to Licensee and shall give Elastic Path information and such assistance as is reasonable in the circumstances, at Elastic Path’s expense. Elastic Path shall have sole authority to defend or settle the same at Elastic Path’s expense. Elastic Path shall indemnify and hold Licensee harmless from and against any and all such claims and shall pay all damages and costs finally awarded or settlement agreed to be paid in the settlement of such claim, suit or proceeding. This indemnity does not extend to any claim, suit or proceeding based upon any infringement or alleged infringement of copyright by the combination of the software in any manner with other components not provided by Elastic Path to Licensee, to the extent such claim could have been avoided but for such combination”. 11
  • 12. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Coastal Contacts Inc. v. Elastic Path Software , 2013 BCSC 133 ¬ The Arbitrator concluded that it was highly unlikely that Elastic Path’s software directly infringed the Hill patents and, after considering the prospect of an indirect infringement, that the software was not likely impugned by the Hill action. ¬ “The sole question for determination was whether there was a mere possibility that the allegation of infringement might apply to the Elastic Path software used by Coastal. Elastic Path’s software was the only software in the Coastal platform that could have been the subject of the Hill action. In circumstances where there is doubt that the pleadings may trigger an obligation to defend, that doubt ought to have been resolved against Elastic Path: see Opron. ¬ Unless I can read the Arbitrator’s conclusion as stating that there was no possibility that the Hill pleadings alleged an infringement, the duty to defend existed”. ¬ “Having found that it was merely “unlikely” that the Elastic Path software directly or indirectly infringed the Hill patent, the Arbitrator accepted that the possibility of alleged infringement by the Elastic Path software existed. The Agreement required Elastic Path to defend any allegation of infringement by its software and Coastal was contractually entitled to a defence subject to the issue of forfeiture”. 12
  • 13. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Coastal Contacts Inc. v. Elastic Path Software , 2013 BCSC 133 ¬ Did Coastal’s failure to provide timely notice of the claim bar a right to the defense and indemnity? ¬ “Late notice alone does not deprive Coastal of the right to claim relief. Absent actual prejudice to an insurer caused by delayed notice, relief from forfeiture can be granted... ¬ From these decisions, I conclude that, but for Elastic Path’s denial of a duty to defend, Coastal was under an obligation in the arbitration to prove the absence of prejudice to Elastic Path by reason of its late reporting of the Hill action. Coastal did not tender any evidence to meet that obligation. However, Elastic Path denied liability on the basis that there was no obligation to defend and, in that circumstance, non-compliance with the notice requirement did not prejudice Elastic Path because it would not have provided a defence or indemnity. ¬ In these circumstances, the combined effect of Kelowna and Canadian Equipment Sales is that if the insurer denies responsibility to defend or indemnify under a policy, the issue of prejudice is, as matter of law, not germane to the claim for relief.” 13
  • 14. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 VLM Holdings Ltd v Ravensworth Digital Services Ltd [2013] EWHC 228 (Ch) (13 February 2013) ¬ “Since the grant by UK was a grant by a sub-licensor, what is the effect on such a grant of the cesser of the head licence?” ¬ “Since one starts with the question of permission, it is therefore pertinent to determine who has permitted whom to do what. It is certainly possible to imagine circumstances in which a sub-licence would survive the termination of the head licence. Take, for example, a case in which a copyright owner gives a licence to another, and expressly permits that other to grant sub-licences which (say) endure for a given period and which are clearly expressed as being capable of surviving the termination of the head licence. It seems obvious that the sub-licences would indeed survive that event. The reason for that, in my view, is that the permission extended by the express term means that there was an authority (permission) from the copyright owner to use the copyright material. In effect, the sub-licensor was authorised to give that consent and, to that extent, to bind the owner. This demonstrates that the key lies in the area of authority – what authority was the sub-licensor given by the owner? In my example the answer is plain.” ¬ “The real question is therefore as to the scope of the authority given by the head licensor to the sub-licensor. That depends on all the facts. If the authority is sufficiently wide to allow the grant of a sub-licence which is capable of surviving the termination of the head licence, then the head licensor (copyright owner) must be taken as giving the ultimate permission himself, on normal agency principles.” 14
  • 15. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Orr -Adams (t/a Applied Concrete Systems, A Partnershi [2013] EWPCC 30 (12 Jun. 2013) ¬ Does a licensee have a continuing right to use confidential information and copyright works after a contract termination and an obligation to continue pay royalties for such use? ¬ “Bearing that guidance in mind, I accept that the Defendants' contention that they remained able to exploit the Disputed Formulations after determination of the agreement made some commercial sense, as otherwise they could have been faced with the difficulty of not having products to sell after determination. Therefore, there would have been an implied term of the agreement for the Defendants to have the right to continue to sell products made to the Disputed Formulations for a limited period after determination. Or, it may have been reasonable for there to be an implied term that they could carry on exploiting them generally after termination. However, in either case I can see no basis for the Defendants' contention that such post-termination sales did not carry with them an obligation to continue making payments to the Claimants. That seems to me to be the obvious corollary of any implied right to continue making such sales.” 15
  • 16. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Harmony Consulting Ltd. v. G.A. Foss Transpo ., 2012 FCA 226 ¬ “That said, Harmony has not persuaded me that the judge was also wrong in concluding that it had not met its burden of establishing the absence of consent ( section 27(1) of the Act). She accepted Ms. Warth’s evidence that these copies were strictly for backup purposes...There are no limitations in the license agreements as to the number of backup copies Foss could make. In fact, Mr. Cristello was making at least one daily. I note that the license agreements were described as “boiler plate wording” used by Mr. Chari. ¬ There was no expert evidence establishing that the expression “for backup purposes” had any technical meaning other than its ordinary meaning of something kept in reserve for emergency replacement. Nor is there any such evidence that “emergency” has a specific meaning in that industry restricting it to certain events and excluding corruption or errors while working on the software. ¬ ”There was no evidence that these copies were used for any other purposes. The judge may have used the wrong turn of phrase in paragraph 271 (“making a single backup copy for the purpose of modifying the software” instead of “before modifying”), but this does not affect the validity of her findings at paragraphs 269 and 273 of the Reasons.” 16
  • 17. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Blizzard v. Simpson, 2012 ONSC 4312 ¬ Motion to enforce California judgment for copyright infringement and violation of EULA related to selling “map hacks” for Starcraft II. Whether a term preventing entry to a web site to detect infringements is enforceable? ¬ “Mr. Simpson did appear at the application hearing before this Court and argued, for the first time, that Blizzard had committed a breach of Mr. Simpson’s hacker software website... ¬ With respect to the Blizzard lawyers accessing Mr. Simpson’s map hack website and breaching the terms of his user agreement, Mr. Radhakant submitted that if infringers could protect themselves from infringement actions by posting terms and conditions on their websites, this would be an untenable position in IP law. I agree with the Applicant’s submissions, Mr. Simpson has not satisfied the onus of establishing any applicable defences to enforcement of the California judgment.” 17
  • 18. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Cascade Divide Enterprises, Inc. v. Laliberte , 2013 BCSC 263 ¬ Motion for mandatory injunction to enforce Transition Agreement in connection with sale of telecommunication services business by Cascade to TNW Services needed for retained co-location business. ¬ “TNW has been expressly denying Next Layer certain of its information and has been expressly denying NextLayer access to its information and data which it otherwise would have been able to obtain through its arrangements with Cascade. It was this past practice of access to the Next Layer information and data which was intended to be continued through the transition period. ¬ A further issue arising in this transition period relates to TNW’s failure to remit monies to Next Layer in accordance with the original allocation formula, as discussed above... ¬ Lastly, another troubling aspect of the transition is that there is evidence that TNW is interfering with Next Layer employees...” 18
  • 19. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Cascade Divide Enterprises, Inc. v. Laliberte , 2013 BCSC 263 ¬ “TNW submits that this is just a matter of money and that money will solve the problems at the end of the day. That is in stark contrast to the position of Cascade and Next Layer, who submit that this is not about money. Rather, they say that Next Layer’s very survival depends on a quick resolution of these transition issues, so that they can continue their efforts to separate the two operations and finish the transition so as to reduce and ultimately eliminate the current interdependence with TNW which places both Cascade and Next Layer in a vulnerable position. ¬ The authorities are clear that the survival of a business is a factor that will be considered in the context of irreparable harm... ¬ I conclude that there is no prejudice if Next Layer is able to enforce the Transition Agreement. This transition can take place as soon as possible and in accordance with the bargain of the parties.” 19
  • 20. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Harmony Consulting Ltd. v. G.A. Foss Transpo ., 2012 FCA 226 When is a person a contractor or employee? ¬“In 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. 2001 SCC 59 (CanLII), 2001 SCC 59, [2001] 2 S.C.R. 983, (Sagaz Industries), the Supreme Court of Canada acknowledged that there is no universal test to establish the existence of an employment relationship. The central question is whether the person has been performing the services as a person in business for his or her own account (Sagaz Industries at paragraph 47). I am satisfied that the judge considered this question.” 20
  • 21. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Acanac Inc. v. M.N.R., 2013 TCC 163 ¬ Whether an ISPs support staff are employees or independent contractors? ¬ Contractor agreement stated: “The Contractor shall provide such services as an independent contractor and shall not be deemed to be an employee for any purpose. In providing services as a contractor pursuant to the terms of this agreement the Contract shall have full discretion as to the manner of providing services and the nature of the services required and shall render such services in accordance without the highest professional standard.” ¬ “Because the employee-employer relationship has important and far reaching legal and practical ramifications extending to tort law (vicarious liability), to social programs (eligibility and financial contributions thereto), to labour relations (union status) and to taxation (GST registration and status under the Income Tax Act), etc., the determination of whether a particular relationship is one of employee or of independent contractor cannot simply be left to be decided at the sole subjective discretion of the parties. Consequently, the legal status of independent contractor or of employee is not determined solely on the basis of the parties declaration as to their intent. That determination must also be grounded in a verifiable objective reality.” quoting Sagaz 21
  • 22. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Acanac Inc. v. M.N.R., 2013 TCC 163 ¬ Staff held to be employees. ¬ “What really tips the scale on an otherwise relatively even playing field is that Acanac did provide its TSA’s with a system as to how to do the job, by not only providing troubleshooting tools at the outset, but by ongoing communication through Spark as well as the monitoring of calls even to the point of listening to calls for which they received complaints. This suggests to me that even in this informal arrangement there was some hands-on control by the employer. Further, although I will make this point again under the "tools" factor, my impression was that the TSA’s learned primarily on the job. Again, this is not indicative of an independent contractor arrangement. Overall, I find this factor on balance points to employment.” 22
  • 23. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] UKSC 31 (22 May 2013) “The express provisions of clause 8 of her employment contract are of no assistance to Vestergaard’s case. The confidential information wrongly used by Dr Skovmand to develop the Netprotect product was plainly neither “information relating to [her] employment” nor “knowledge gained in the course of [her] employment”. It was knowledge gained by Dr Skovmand in the course of his consultancy work for Vestergaard. It is not seriously arguable that a term can properly be implied into Mrs Sig’s employment contract to the effect that she would not assist another person to abuse trade secrets owned by Vestergaard, in circumstances where she did not know the trade secrets and was unaware that they were being misused. To impose such a strict liability on Mrs Sig appears to me to be wrong in principle as it is (i) inconsistent with the imposition of the more limited express terms of clause 8, (ii) unnecessary in order to give the employment contract commercial effect, and (iii) almost penal in nature, and thus incapable of satisfying either of the well established tests of obviousness and reasonableness.” 23
  • 24. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 McCarthy Tétrault Advance™ Building Capabilities for Growth Ownership/Assignments/Exclusive Licenses
  • 25. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Tremblay v. Orio Canada Inc., 2013 FC 109 ¬ “Any development done for Orio Canada Inc. shall become the exclusive property thereof and may not therefore be marketed or reused by Service Informatique Professionnel or any other party.” ¬ “In this case, the Court has no choice but to find that a signature is lacking. Although the parties have confirmed before this Court that the plaintiff submitted other bids to the defendant that include the same clause, there is nothing in the evidence to support a finding that the bids submitted after April 2007 were signed... Had it not been for the absence of the plaintiff’s signature, there would have been an assignment of the copyright under the Act, but in the circumstances, the Court can only find that, pursuant to subsection13(4) of the Act, the plaintiff did not assign his copyright in the modified SAM program. Accepting the defendant’s argument and making the opposite finding solely on the basis of the plaintiff’s testimony would render meaningless the requirement imposed by Parliament. This finding may appear rigid, but it complies with the formal requirements of the Act.” 25
  • 26. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Planification-Organisation-Publications Systèmes (PO , 2013 FC 427 ¬ A major issue in the case was whether the plaintiffs were the owners of the copyright in the computer software called Ceres. ¬ “The undersigned, co-authors of the business simulation CERES, cede by the present document to the company POPS Ltée, of Sherbrooke, Québec, the rights to promote CERES in all languages and in all countries.” ¬ The trial judge concluded that this language was more consistent with a promotion or distribution agreement than with an assignment of copyright. He held that it was effective “in conferring a very broad and exclusive licence to, among other things, distribute, adapt and sell Ceres.” But it was not an outright assignment of the copyright. ¬ S13(4) ““but no assignment or grant is valid unless it is in writing signed by the owner of the right in respect of which the assignment or grant is made, or by the owner’s duly authorized agent” and in french “mais la cession ou la concession n’est valable que si elle est rédigée par écrit et signée par le titulaire du droit qui en fait l’objet, ou par son agent dûment autorisé.” 26
  • 27. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Delta Hotels v. Backus-Naur et al., 2013 ONSC 582 ¬ “The defendants also say that equitable ownership of copyright is an untenable plea and, as such, should be disallowed. Equitable ownership of copyright is a recognized principle in the United Kingdom. Ms. Zagar submits (and the excerpt cited by her from Professor Vaver’s Intellectual Property Law: Copyright, Patents, Trademarks, 2d ed., at 140 appears to support her submission) that there is no direct discussion in Canadian jurisprudence in favour or against equitable ownership of copyright.” ¬ Ms. Zagar says that...having regard to the state of the law in Canada, it is not absolutely clear that a claim founded on equitable ownership of copyright is incapable of success (even if success is uncertain). On the materials before me, I am inclined to agree with this submission, too. While I accept, as Mr. Seed has argued, that there is now no precedent in Canadian law for the alternative plea proposed, I cannot say that it necessarily follows that on the specific facts of any given case, or this case, there could never be.” 27
  • 28. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Coward v Phaestos Ltd & Ors [2013] EWHC 1292 (Ch) (17 May 2013) ¬ Is software created by a partner a partnership asset even if there is no written assignment of copyright? ¬ “It is not in dispute that the software which was created by Dr Coward, was created for the purposes of the partnership and was the bedrock of that business. The trading could not have been undertaken without it. It was the central tool by which the trading and investment operations of the business were to be carried out. ¬ If one tests the proposition further by applying the criteria set out by Jacob J in Robin Ray, in my judgment, it is equally clear that it is necessary to infer that the software was partnership property.” ¬ “an asset is not prevented from being partnership property as a result of a lack of a transfer of the legal title. As in the case of Don King Productions Inc v Warren, if necessary, the legal owner of the asset will found to hold the legal title upon trust for the partnership.” 28
  • 29. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Tangerine Financial Products Limited Partnership v. T ., 2012 BCCA 521 “Tangerine FP contends that absent an express provision assigning the Worldwide Rights and website property those assets were not assigned under the Agreement. With respect, in my view this submission is backwards. The Agreement expressly transfers all of the Business Know-How from Tangerine FP toTangerine LP. It does not expressly limit the assignment of the Business Know-How to rights in Canada. Rather its assigns “absolutely and unconditionally ... all of the ... right, title and interest ... to the Business Know-How” ... “for its sole use and benefit forever”. This is not the language of reservation.” 29
  • 30. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Tangerine Financial Products Limited Partnership v. T ., 2012 BCCA 521 “The Agreement expressly represented and warranted that the Business Know-How included “all intellectual property and proprietary information”. A plain reading of this language can only mean that it included all the website property (however it is described) in the assignment of the Business Know-How. Furthermore, to make commercial sense, the Business Know- How had to include the Strategy and anything related to its marketing and distribution. The website property was an integral part to the development of the Strategy as a marketable and distributable financial product. In short, the Agreement assigned everything that Tangerine FP owned for the purpose of marketing and distributing the Strategy. Clearly, the website was included in the assignment; to suggest otherwise would result in a commercial absurdity.” 30
  • 31. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Complex Systems, Inc. v. ABN AMRO Bank N.V. 2013 WL 1313763 (S.D.N.Y. Mar. 20. 2013) ¬ “This case presents a cautionary tale regarding what can happen when formerly combined companies part ways prior to having assigned a mission critical license to the entity in need of it most. Fast paced transactional discussions provide a fertile ground in which preeminent goals of negotiating sale price, management control, and other large matters, overshadow these more mundane—but important—details. That appears to be what occurred here.” ¬ “As an initial matter, neither party disputes that to be valid, any assignment of the BankTrade license must have occurred prior to closing the LaSalle Transaction. The License Agreement specifically states that it is non-transferable; but also states that assignments may be made to the “above mentioned entities”—which include IT's direct or indirect parent, subsidiary or affiliate...Those entities are defined as being owned eighty-percent by ABN and/or ABN North America. Prior to consummation of the LaSalle Transaction, it is undisputed that IT was owned by ABN. However, it is also undisputed that once closing occurred, IT was transferred to BAC and was no longer an affiliate of ABN. As a result, unless the assignment of the BankTrade license occurred prior to the closing on October 1, 2007, ABN was unable unilaterally to effect such an assignment.” 31
  • 32. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Actuate Corp. V Aon Corp. 2012 U.S.Dist.LEXIS 75034 (N.D.Cal.2012) ¬ Whether licensee breached non-assignment obligation when company was sold in share deal. ¬ “[Under California law], the validity of an assignment that results merely from a change in the legal form of ownership of a business depends upon whether the assignment affects the interests protected by the nonassignability provision.” ¬ “Actuate cites non-binding opinions, interpreting law from different states, for its contention that AWG's stock acquisition and name change voided the software licenses as a matter of law. These cited opinions are easily distinguished because those facts involved mergers and asset transfers. There was no merger or asset transfer in our case, only a change in stock ownership. As the Court of Appeals for the First Circuit aptly described, ¬ Stock sales are not mergers whereby outright title and ownership of the licensee- corporation's assets (including its patent licenses) pass to the acquiring corporation. Rather, as a corporation, [appellee] "is a legal entity distinct from its shareholders." Absent compelling grounds for disregarding its corporate form, therefore, [appellee's] separate legal identity, and its ownership of the patent cross-licenses, survive without interruption notwithstanding repeated and even drastic changes in its ownership.” 32
  • 33. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 33 Wilkinson v London Strategic Health Authority [2012] EWPCC 48 (14 November 2012) “Where the first assignment in time is of the later work, then its effect will depend on its construction but prima facie an assignee of the copyright in the later work can maintain an action for infringement against a person using the first work to the extent it can be said to reproduce the later work.This is on the basis that the assignment of the second work must generally be taken to include an assignment of the copyright in the preceding works to the extent that they are found in the final work. Otherwise the assignment would be valueless if confined only to what was new in the final work. The assignment could of course be expressly framed to have this effect.” Quoting Copinger (16th Ed) in paragraph 5-93.
  • 34. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Nautical Data International, Inc. v. C-Map USA I ., 2013 FCA 63 ¬ Was a grant of a license to data/charts exclusive so as to give NDI the right to sue for infringement? ¬ “Subject to the rights reserved in Sections 2.4 and 2.5 below, Canada grants to NDI a sole worldwide right and license (the “License”) to use the CHS Data to produce Products and Product Updates, to integrate these Products with other products or services (provided that such integrated offerings do not derogate in any respect from the availability or reliability of the Products or Product Updates) and to distribute same directly or through third parties to whom a sublicense is granted in accordance with the terms hereof. Except as expressly set out herein, CHS shall have no right to distribute the Products or Product Updates to any person.” ¬ “There is no other provision in the Licence that says expressly that the Crown reserved to itself the right to make digital copies of the CHS Works. That would tend to support the argument of NDI that the Licence was intended to be an exclusive licence.” ¬ Problems: Grant of wrong subject matter; right to “use” not a copyright right; sole ≠ exclusive. Is the decision correct? 34
  • 35. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Righthaven LLC v Hoehn 2013 WL 1908876 (9th.Cir.May 9, 2013) ¬ “Stephens Media and Righthaven executed a copyright assignment agreement for each article. Each copyright assignment provided that, “subject to [Stephens Media’s] rights of reversion,” Stephens Media granted to Righthaven “all copyrights requisite to have Righthaven recognized as the copyright owner of the Work for purposes of Righthaven being able to claim ownership as well as the right to seek redress for past, present, and future infringements of the copyright . . .in and to the Work.” ¬ “Abraham Lincoln told a story about a lawyer who tried to establish that a calf had five legs by calling its tail a leg. But the calf had only four legs, Lincoln observed, because calling a tail a leg does not make it so. Before us is a case about a lawyer who tried to establish that a company owned a copyright by drafting a contract calling the company the copyright owner, even though the company lacked the rights associated with copyright ownership. Heeding Lincoln’s wisdom, and the requirements of the Copyright Act, we conclude that merely calling someone a copyright owner does not make it so.” 35
  • 36. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Craigslist, Inc. v. 3Taps INC., 2013 U.S.Dist. LEXIS 61837 (N.D.Cal.Apr. 30, 2013) ¬ Action for copyright infringement for scraping ads based on license. ¬ “You also expressly grant and assign to [Craigslist] all rights and causes of action to prohibit and enforce against any unauthorized copying, performance, display, distribution, use or exploitation of, or creation of derivative works from, any content that you post (including but not limited to any unauthorized downloading, extraction, harvesting, collection or aggregation of content that you post).” ¬ “Whether that clause has effect depends on whether users granted Craigslist an exclusive license to the user-created content. "[O]nly the owner of an exclusive right under the copyright is entitled to sue for infringement.“... A party may not assign the right to sue for infringement without also granting an exclusive license or ownership.” ¬ “The Court therefore concludes that the TOU, standing alone, did not grant Craigslistan exclusive license. Without an exclusive license, Craigslist cannot sue for infringement; the TOU provision that purportedly granted Craigslist the right to sue is "impermissible”.” 36
  • 37. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 McCarthy Tétrault Advance™ Building Capabilities for Growth Internet/e-commerce/social media
  • 38. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Ontario College of Pharmacists v. 1724665 Ont ., 2012 ONSC 5804 ¬ Does an Internet pharmacy based in Belize sell drugs in Ontario? ¬ “Applying the traditional notion of sale...to the facts of this case leads to the only rational conclusion: the sale of drugs through www.globalpharmacycanada.com is taking place in Ontario. ¬ The Patient Order Form filled out by the client is received by internet or by mail by RXP, and is processed by the staff at RXP in Mississauga. There are two ways to characterize the sale as taking place in Ontario: ¬ First...the offer may be characterized as the terms offered for the sale of drugs on the GPC-Belize website. Acceptance would be the client’s agreement to the terms offered on the website by forwarding the Patient Order Form to the RXP location. ¬ An alternate view of offer and acceptance is that the Patient Order Form sent by the client to RXP constitutes the offer to purchase. The processing of the payment by the staff of RXP using the client’s Visa or MasterCard, or depositing the cheque or money order into the GPC-Ontario bank account constitutes acceptance. ¬ Using either analysis, the sale takes place in Ontario. All documentation – including the Patient Order Form, confirmation of the order, the invoice, and the packing slip – are in the name of Global Pharmacy Canada bearing the Mississauga address.” 38
  • 39. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Ontario College of Pharmacists v. 1724665 Ont 2013 ONCA 381 ¬ Does an Internet pharmacy based in Belize sell drugs in Ontario? ¬ “The Supreme Court’s decision in Celgene instructs us that in a regulatory context, words such as “place of sale”, “sold” and “selling” may not necessarily be given their strict commercial law meanings. At para. 21 of Celgene, the Court says that “[t]he words, if clear, will dominate; if not, they yield to an interpretation that best meets the overriding purpose of the statute.” ¬ I agree with the application judge that, given the overriding purpose of the relevant legislation in this case, a purposive approach to determining the meaning of sale is appropriate. The College has a mandate to regulate the sale of prescription drugs in the province, and a duty to serve and protect the public interest – it is the substance, and not the form, which is relevant when determining whether the sale of prescription drugs takes place in Ontario.” 39
  • 40. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Ontario College of Pharmacists v. 1724665 Ont 2013 ONCA 381 “The application judge made detailed findings of fact about the sale process following restructuring. On those findings, it is clear that the substance of the sale transaction takes place through RXP, an Ontario corporation that is located and operates in Ontario. As the application judge noted, “[a]ll documentation – including the Patient Order Form, confirmation of the order, the invoice, and the packing slip – are in the name of Global Pharmacy Canada bearing the Mississauga address.” Furthermore, critical aspects of the sale transaction by which the customers get prescription drugs and the appellants get paid for providing them, are conducted by RXP. The customer submits its order form, which RXP processes, or calls RXP with its order. RXP takes the order and processes payment for it. RXP then arranges for the delivery of the drugs directly to the American customer. If there is a problem, customers contact RXP. In short, without RXP staff at the call centre in Mississauga, no prescription drugs would flow from Global Pharmacy Canada (or GPC-Belize) to its customers and GPC-Belize would not get paid.” 40
  • 41. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 AJEMIAN v. YAHOO!, INC., 2013 Mass. App. LEXIS 73 (Ma.App.May 7, 2013) ¬ The plaintiffs, co-administrators of their brother’s estate, sought a declaration that e-mails sent and received using a Yahoo! e-mail account are property of his estate. Was the TOS binding on estate administrators? ¬ Although forum selection clauses contained in online contracts have been enforced, courts have done so only where the record established that the terms of the agreement were displayed, at least in part, on the user's computer screen and the user was required to signify his or her assent by clicking "I accept.“.. This is known as a "clickwrap" agreement... Although forum selection clauses have almost uniformly been enforced in clickwrap agreements, we have found no case where such a clause has been enforced in a browsewrap agreement. Here, the record does not establish that the TOS was a clickwrap agreement, or that terms of the TOS were displayed (in whole or part) to Robert or John, or that the terms were accepted by clicking "I accept" or by taking some similar action. As a result, the record does not reflect that the terms of any agreement were reasonably communicated or that they were accepted.” 41
  • 42. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 AJEMIAN v. YAHOO!, INC., 2013 Mass. App. LEXIS 73 (Ma.App.May 7, 2013) ¬ Would the TOS have been binding on the administrators? ¬ “The only parties to the TOS are "you" and Yahoo!. The term "you" is undefined and we can see no reasonable construction of it that would extend to the administrators of John's estate. ¬ The most natural construction of the term is that it refers to the person who accepted the TOS. To the extent that the term is ambiguous, it is to be construed against Yahoo! as the drafter of the contract... Yahoo! controlled the provisions of the TOS and it would have been a simple matter for it to define the parties to the contract to include estates, administrators, executors, successors and the like had that been Yahoo!'s intent. We see no reason to add those terms now.” ¬ “It is clear from the provisions of the TOS that the administrators are not intended third-party beneficiaries. Among other things, the TOS specifies that the agreement grants a nontransferable license only to the person accepting the TOS. The administrators are not entitled to any of the benefits or rights under the TOS: they are not entitled to use Yahoo!'s e-mail service or to use the e-mail account opened by Robert. Yahoo! itself takes the position that the administrators have no rights under the contract.” 42
  • 43. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 AJEMIAN v. YAHOO!, INC., 2013 Mass. App. LEXIS 73 (Ma.App.May 7, 2013) ¬ Would the TOS have been too unreasonable in breadth to enforce? ¬ “Finally, we are of the opinion that the unreasonable breadth of the forum selection clause argues against its application to the plaintiffs in a suit confined to seeking a declaration regarding the assets of John's estate. Unlike typical forum selection clauses, there is no subject matter scope to the provision in the TOS: "You and Yahoo agree to submit to the personal and exclusive jurisdiction of the courts located within the county of Santa Clara, California." As written, this provision would require a suit of any nature to be brought in California, even if it were not between the parties and did not concern the TOS or the e-mail account. The unreasonable breadth of the provision, particularly since it was contained in a consumer contract drafted unilaterally, argues against its application in this case.” 43
  • 44. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Fairstar Heavy Transport NV v Adkins & Anor [2012] EWHC 2952 (01 November 2012) ¬ Is there a property right in emails? ¬ “it seems to me that there are five possible options in relation to the ownership of the content of any particular e-mail. They are: ¬ (1) that title to the content remains throughout with the creator (or his principal); ¬ (2) that, when an e-mail is sent, title to the content passes to the recipient (or his principal) - this being by analogy with the transfer of property in a letter when one person sends it to another; ¬ (3) as for (1), but that the recipient of the e-mail has a licence to use the content for any legitimate purpose consistent with the circumstances in which it was sent; ¬ (4) as for (2), but that the sender of the e-mail has a licence to retain the content and to use it for any legitimate purpose; and ¬ (5) that title to the content of the message, once sent, is shared between the sender and the recipient and, as a logical consequence of this, is shared not only between them but also with all others to whom subsequently the message may be forwarded.” 44
  • 45. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Fairstar Heavy Transport NV v Adkins & Anor [2012] EWHC 2952 (01 November 2012) ”I can find no practical basis for holding that there should be property in the content of an e-mail, even if I thought that it was otherwise open to me to do so. To the extent that people require protection against the misuse of information contained in e-mails, in my judgment satisfactory protection is provided under English law either by the equitable jurisdiction to which I have referred in relation to confidential information (or by contract, where there is one) or, where applicable, the law of copyright. There are no compelling practical reasons that support the existence of a proprietary right - indeed, practical considerations militate against it.” 45
  • 46. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Nautical Data International, Inc. v. C-Map USA I ., 2013 FCA 63 “NDI’s statements of claim allege that the Crown “owns” the CHS Data. That allegation presents the same ambiguity. If it is intended to mean that data can be owned in the same way as property can be owned, then there is some question as to whether it is correct as a matter of law. Generally speaking, data – mere information – cannot be “owned” as though it were property. It can be kept confidential by its creator or the person who is in possession of it, and a legal obligation can be imposed on others by contract or by legislation to keep the information confidential. However, there is no principle of property law that would preclude anyone from making use of information displayed in a publicly available paper nautical chart, even if the information originated with the Crown or is maintained by the Crown.” 46
  • 47. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Schnabel v. Trilegiant Corp., 697 F. 3d 110 (2nd .Cir.2012) ¬ Enforceability of arbitration provision in email following subscription to a service. ¬ “In the case at bar, the plaintiffs were presented with the arbitration provision in an email delivered to each of them after they had enrolled in Great Fun. Trilegiant asserts that the fact that we can assume that the email was received by the plaintiffs is enough to support the conclusion that they were on inquiry notice of its terms. But that someone has received an email does not without more establish that he or she should know that the terms disclosed in the email relate to a service in which he or she had previously enrolled and that a failure affirmatively to opt out of the service amounts to assent to those terms... The case law does not support such a "terms later by email" conception of contract formation under these conditions. 47
  • 48. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Schnabel v. Trilegiant Corp., 697 F. 3d 110 (2nd . Cir.2012) ¬ “Unlike shrinkwrap agreements, moreover, the recipient of the terms in this case would not have been confronted with the existence of additional terms before being able to benefit from Great Fun. As noted, even if a purchaser of a shrink-wrapped product is not required to read the shrink-wrapped terms or affirmatively to acknowledge their existence before using the product in order to be bound by the terms, at least he or she necessarily learns of the existence of those terms upon opening the packaging — or, as is the case in many of the amendment cases cited by Trilegiant, during the course of maintaining and using the service to which the terms apply... ¬ A reasonable person may understand that terms physically attached to a product may effect a change in the legal relationship between him or her and the offeror when the product is used. But a reasonable person would not be expected to connect an email that the recipient may not actually see until long after enrolling in a service (if ever) with the contractual relationship he or she may have with the service provider, especially where the enrollment required as little effort as it did for the plaintiffs here. In this context the email would not have "raise[d] a red flag vivid enough to cause a reasonable [person] to anticipate the imposition of a legally significant alteration to the terms and conditions" of the relationship with Trilegiant.” 48
  • 49. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Schnabel v. Trilegiant Corp., 697 F. 3d 110 (2nd .Cir.2012) “inasmuch as consumers are regularly and frequently confronted with non-negotiable contract terms, particularly when entering into transactions using the Internet, the presentation of these terms at a place and time that the consumer will associate with the initial purchase or enrollment, or the use of, the goods or services from which the recipient benefits at least indicates to the consumer that he or she is taking such goods or employing such services subject to additional terms and conditions that may one day affect him or her.” 49
  • 50. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Schnabel v. Trilegiant Corp., 697 F. 3d 110 (2nd .Cir.2012) “Unilateral modification terms" — so called because the offeror retains the power to add terms to the agreement while the offeree has no power to do the same — are not necessarily effective. See generally, Oren Bar-Gill & Kevin Davis, Empty Promises, 84 S. CAL. L. REV. 1 (2010) (describing, among other things, the legal status of "unilateral modification terms"). But the inclusion of such terms at least helps to bolster the offeror's argument that the offeree is on inquiry notice of later arriving terms, particularly where the modification (or amendment) is itself submitted in such a manner that a reasonable offeree would be likely to see it.” 50
  • 51. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Lima v. Gateway, Inc., 886 F. Supp. 2d 1170 (C.D. Cal.2112) ¬ Whether arbitration term is binding on purchaser ordering computer monitor at call centre because term was available on web site or delivered with monitor. ¬ “Gateway maintains that Lima had constructive notice that the Terms Agreement would apply to his purchase because it was available via a hyperlink at the bottom of Gateway's product specifications webpage, which Lima had visited before his purchase...Yet, in California, "an offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he is unaware, contained in a document whose contractual nature is not obvious." Specht v. Netscape Commc'ns Corp., 306 F.3d 17, 32-35 (2d Cir.2002)...Here, the facts offer even less support for a finding that Lima had constructive notice. 51
  • 52. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Lima v. Gateway, Inc., 886 F. Supp. 2d 1170 (C.D. Cal.2112) ¬ Hill suggests in dicta that additional "shrinkwrap" terms might be incorporated into agreements for the sale of consumer goods even if such terms' existence is made known to the consumer for the first time when he or she opens the box after it is shipped. This dicta rested on the assumption that the costs of returning the product and cancelling the transaction would be negligible...Here, they are not. The Terms Agreement warns purchasers that they may be charged a 15% restocking fee if they return a product...), i.e.,approximately $245 in this case, which is not a negligible amount for the ordinary consumer. Thus, even if the Hill dicta is a correct statement of the law in California — which is doubtful — it is inapplicable here. ¬ Lima did not have notice of the Terms Agreement — actual or constructive — until after the purchase when his receipt arrived in the mail. As a result, the Terms Agreement became a proposal for additional terms. Because Lima never manifested his assent to these additional terms, the arbitration clause in particular, they are not a part of his purchase agreement with Gateway. 52
  • 53. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 TRATON NEWS, LLC v. TRATON CORP.,2012 U.S.Dist. LEXIS 121947(S.D.Ohio 2012) affirmed 6th.Cir.June 11, 2013) ¬ Enforceability of forum selection clause against defendant in Lanham Act proceeding. Not enforceable because claim not arising out of use of website. ¬ “The Court first finds that Plaintiff's federal Lanham Act claims fall outside the limited scope of the forum selection clause, which states, "You hereby consent to the exclusive jurisdiction and venue of courts in or nearest to the United States District Court for the Southern District of Ohio, Western Division, in all disputes arising out or relating to the use of this Web site.“ ...The relevant language in the forum selection clause at issue here is: "all disputes arising out of or relating to the use of this Web site." To "arise out of" means "to originate from a specified source.“...To "relate to" means "[t]o stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with.“ ¬ Plaintiff's Lanham Act claims — for "cyberpiracy," trademark infringement, false designation and false description — arise from alleged activities that are wholly separate and distinct from Traton Homes' use of Plaintiff's website. These claims do not "arise out of or relate to" Traton Homes accessing www.traton.com.” 53
  • 54. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Lima v. Gateway, Inc., 886 F. Supp. 2d 1170 (C.D. Cal.2112) ¬ Hill suggests in dicta that additional "shrinkwrap" terms might be incorporated into agreements for the sale of consumer goods even if such terms' existence is made known to the consumer for the first time when he or she opens the box after it is shipped. This dicta rested on the assumption that the costs of returning the product and cancelling the transaction would be negligible...Here, they are not. The Terms Agreement warns purchasers that they may be charged a 15% restocking fee if they return a product...), i.e.,approximately $245 in this case, which is not a negligible amount for the ordinary consumer. Thus, even if the Hill dicta is a correct statement of the law in California — which is doubtful — it is inapplicable here. ¬ Lima did not have notice of the Terms Agreement — actual or constructive — until after the purchase when his receipt arrived in the mail. As a result, the Terms Agreement became a proposal for additional terms. Because Lima never manifested his assent to these additional terms, the arbitration clause in particular, they are not a part of his purchase agreement with Gateway. 54
  • 55. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 TRATON NEWS, LLC v. TRATON CORP.,2012 U.S.Dist. LEXIS 121947(S.D.Ohio 2012) affirmed 6th.Cir.June 11, 2013) ¬ Enforceability of forum selection clause against defendant in Lanham Act proceeding. Not enforceable because claim not arising out of use of website. ¬ “The Court first finds that Plaintiff's federal Lanham Act claims fall outside the limited scope of the forum selection clause, which states, "You hereby consent to the exclusive jurisdiction and venue of courts in or nearest to the United States District Court for the Southern District of Ohio, Western Division, in all disputes arising out or relating to the use of this Web site.“ ...The relevant language in the forum selection clause at issue here is: "all disputes arising out of or relating to the use of this Web site." To "arise out of" means "to originate from a specified source.“...To "relate to" means "[t]o stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with.“ ¬ Plaintiff's Lanham Act claims — for "cyberpiracy," trademark infringement, false designation and false description — arise from alleged activities that are wholly separate and distinct from Traton Homes' use of Plaintiff's website. These claims do not "arise out of or relate to" Traton Homes accessing www.traton.com.” 55
  • 56. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 TRATON NEWS, LLC v. TRATON CORP.,2012 U.S.Dist. LEXIS 121947(S.D.Ohio 2012) affirmed 6th .Cir.June 11, 2013) ¬ “Alternatively, the Court finds that Traton Homes is not bound by the forum selection clause because no contract was formed between Plaintiff and Defendants.... Traton Homes did not receive a benefit from Plaintiff by accessing its website. Rather, it visited the website in order to view what negative material was being posted about its company in order to protect its reputation.” ¬ “In determining whether a valid agreement was formed, the Court examines traditional contract principles.... A valid contract must be supported by consideration. "Consideration is `[s]omething (such as an act, a forbearance, or a return promise) bargained for and received by a promisor from a promisee.’”... Under the unique factual circumstances of this case, the Court finds there is no consideration (i.e., a bargained-for legal benefit or detriment) to support a contract between Plaintiff and Traton Homes. Traton Homes did not gain any benefit (nor forbear from an act) in exchange for visiting Plaintiff's website. Rather, in the Court's view, Traton Homes was induced into monitoring Plaintiff's website to defend itself.” 56
  • 57. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Agence France Presse v. Morel, 106 U.S.P.Q. 2d 1192 (S.D.N.Y.2013) ¬ Did Twitter’s license permit AFP to use Daniel’s Morel’s photos of the earthquake in Haiti uploaded to TwitPic without authorization? ¬ “You retain your rights to any Content you submit, post or display on or through the Services. By submitting, posting or displaying Content on or through the Services, you grant us a worldwide, non-exclusive, royalty-free license (with the right to sublicense) to use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute such Content in any and all media or distribution methods (now known or later developed). ¬ Tip[:] This license is you authorizing us to make your Tweets available to the rest of the world and to let others do the same. But what's yours is yours — you own your content.” 57
  • 58. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Agence France Presse v. Morel, 106 U.S.P.Q. 2d 1192 (S.D.N.Y.2013) ¬ “AFP argues that it was a third party beneficiary to the Twitter TOS and derives a license from those terms of service, and is therefore insulated from liability...The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract. An individual may be a third-party beneficiary to a contract if the terms of the contract "necessarily require" that the promisor conferred a benefit on that third party.” ¬ “The Court need not fix the precise scope of any license created by the Twitter TOS in order to resolve the dispute before it. Rather, it suffices to say that based on the evidence presented to the Court the Twitter TOS do not provide AFP with an excuse for its conduct in this case... Put differently, the evidence does not reflect a clear intent to grant AFP a license to remove the Photos-at- Issue from Twitter and license them to third parties, nor does it "necessarily require" such a license... Indeed, this is the fatal flaw in AFP's argument: it fails to recognize that even if some re-uses of content posted on Twitter may be permissible, this does not necessarily require a general license to use this content as AFP has.” 58
  • 59. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Apfeldorf v. Yitzhak (C 46636-07-11) ¬ Does making full website content available through an RSS feed license aggregators to publish the content? ¬ “The plaintiff testified that he was aware that technically the RSS allows withdrawal of headers and content from the blog, when he did not choose the default of using only headers and allowed headers and full text from the blog. Moreover, the plaintiff installed icons that allowed sharing of content from the blog in social networks and sharing through other sites. By doing so, the plaintiff declared, explicitly, that it means to disseminate the content in the blog, to the possible extent. [...] By installing the RSS protocol there is not waiver of the author on the protections granted by law to his works and you cannot determine that the installation of the RSS by itself means that there is a waiver of protection thereof and a license to copy the works. [...] The plaintiff did not choose a default where the RSS feed shall solely distribute headers, but also the full text, and therefore, the posts were downloaded in full, and this is a statement by the plaintiff about his conduct and wish to distribute his words. Under these circumstances, I rule that examining the plaintiff's conduct under the microscope of current internet practices indicates the conclusion that the plaintiff, by his conduct, waived the protection granted by law“. Quoted from http://blog.ericgoldman.org/archives/2013/02/israeli_court_s.htm 59
  • 60. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Beckman v Match.com 2013 WL 2355512 (D.Nev. May 29, 2013) ¬ Does an online service such as a dating service have a duty of care to protect subscribers against violent acts of other subscribers? ¬ “Match.com asserts that plaintiff has failed to state a claim for her negligence claims because Match.com had no legal duty to prevent the brutal attack. Plaintiff responds that a special relationship has arisen because she was a "paying subscriber" as alleged in the complaint. (See doc. # 1, ¶ 32). However, merely being a "paying subscriber" is insufficient to establish a special relationship. ¬ Here, the brutal attack occurred offline several months after plaintiff and Ridley had ended their dating relationship that began by communicating over the website. The court finds that plaintiff's factual allegations do not support her claim that a special relationship existed between herself and Match.com. Plaintiff cites no authority, and the court is aware of none, that supports her position that Nevada courts would find a special relationship between a provider of online dating services and subscribers. In fact, a district court has held that, under Texas law, a website operator's relationship with a paying website subscriber is not special, but instead an "ordinary commercial contract relationship.“” 60
  • 61. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Vidéotron ltée c. Bell ExpressVu, l.p., 2012 QCCS 3492 ¬ Videotron claiming $374 million in damages for lost revenues for Bell’s failure to control signal piracy of its direct to home satellite system. Awarded $339K. ¬ “Contrary to that which may exist in the common law Provinces, the regime of extra-contractual civil liability in Québec does not require proof of a breach of a specific duty of care between a party and its victim where the act complained of is one of fault by omission.” ¬ “Extracontractual liability can be triggered for an omission likely to cause harm to another, notwithstanding the absence of a close relationship between the wrongdoer and the victim, as it would be required under the common law tort of negligence. A civil fault exists where one does something that is not reasonable in light of the circumstances and is likely to cause damages to another.” 61
  • 62. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Trkulja v Google Inc LLC & Anor (No 5) [2012] VSC 533 (12 November 2012) ¬ Is a search engine liable for publishing defamatory materials that are assembled for the first time in an automated manner by its programmed computers? ¬ Trkulja, claimed a Google search using his name returned search results that displayed his picture and name together with pictures of other individuals either known to have committed serious criminal offences or against whom serious criminal allegations had been made and an article with the heading “Melbourne crime”. ¬ “In my view, it was open to the jury to find the facts in this proceeding in such a way as to entitle the jury to conclude that Google Inc was a publisher even before it had any notice from anybody acting on behalf of the plaintiff. The jury were entitled to conclude that Google Inc intended to publish the material that its automated systems produced, because that was what they were designed to do upon a search request being typed into one of Google Inc’s search products. In that sense, Google Inc is like the newsagent that sells a newspaper containing a defamatory article. While there might be no specific intention to publish defamatory material, there is a relevant intention by the newsagent to publish the newspaper for the purposes of the law of defamation.” 62
  • 63. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Tamiz v Google Inc [2013] EWCA Civ 68 (14 February 2013) ¬ Google, as the host of the Blogger.com site, had potential liability for defamation by failing to take down or disable access to defamatory content once it receives notice that it is hosting such content. ¬ “The provision of a platform for the blogs is equivalent to the provision of a notice board; and Google Inc goes further than this by providing tools to help a blogger design the layout of his part of the notice board and by providing a service that enables a blogger to display advertisements alongside the notices on his part of the notice board. Most importantly, it makes the notice board available to bloggers on terms of its own choice and it can readily remove or block access to any notice that does not comply with those terms. Those features bring the case in my view within the scope of the reasoning in Byrne v Deane. Thus, if Google Inc allows defamatory material to remain on a Blogger blog after it has been notified of the presence of that material, it might be inferred to have associated itself with, or to have made itself responsible for, the continued presence of that material on the blog and thereby to have become a publisher of the material.” 63
  • 64. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 McKeogh v Facebook High Court Ireland RECORD NO. 20121254P, May 16, 2013 ¬ “There is no doubt that the offending material was published on various sites owned and controlled by the defendants and that it was seriously defamatory of the plaintiff. It is of course true that it was not these defendants who defamed the plaintiff. Rather it was the individual posters of that material. But that publication is at least enabled by the availability of the defendants’ sites....The plaintiff sought the assistance of these defendants but with limited success. .. ¬ In my view a payment of damages cannot be an adequate remedy as long as there is any possibility that all offending material can be removed from the internet, whether accessible from this jurisdiction or worldwide. The plaintiff’s expert says that this should be possible. No evidence to the contrary has been adduced by the defendants. Given the technical expertise which must be available within these defendant entities, I would have thought that they must be in a position to assist the plaintiff. They may find it inconvenient to so cooperate. They may even legitimately fear that if they assist this plaintiff in this way, they may be required to assist many other persons who for one reason or another want such assistance, and may not want to open that floodgate. While I can understand such concerns on their part from a commercial point of view, it still remains the case that people have availed of technology which is the property of these defendants in order to seriously defame the plaintiff. They ought in my view render more assistance to him that they appear to be willing to render thus far. In such circumstances, the plaintiff cannot be reasonably expected to accept damages as an adequate remedy.” ¬ Facebook and Google seeking to appeal decision, http://www.irishtimes.com/news/crime- and-law/internet-giants-seek-stay-on-order-removing-defamatory-video-1.1435410 64
  • 65. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 A.B. v. Bragg Communications Inc., 2012 SCC 46 ¬ Whether the privacy interests of a child to keep her identity anonymous in legal proceedings outweighed the open court principle. ¬ 15-year-old girl finding out that someone had posted a Facebook profile using her picture, a slightly modified version of her name, and other particulars identifying her with unflattering commentary about the girl’s appearance along with sexually explicit references. ¬ “If we value the right of children to protect themselves from bullying, cyber or otherwise, if common sense and the evidence persuade us that young victims of sexualized bullying are particularly vulnerable to the harms of revictimization upon publication, and if we accept that the right to protection will disappear for most children without the further protection of anonymity, we are compellingly drawn in this case to allowing A.B.’s anonymous legal pursuit of the identity of her cyberbully… ¬ The acknowledgment of the relative unimportance of the identity of a sexual assault victim is a complete answer to the argument that the non-disclosure of the identity of a young victim of online sexualized bullying is harmful to the exercise of press freedom or the open courts principle. Canadian Newspapers clearly establishes that the benefits of protecting such victims through anonymity outweigh the risk to the open court principle.” 65
  • 66. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 United Food and Commercial Workers, Local 401 v Alberta (Attorney General), 2012 ABCA 130, leave to appeal to Sup. Ct. of Canada granted ¬ Does an individual’s right to privacy for publically crossing a picket line under Alberta’s PIPA have to yield to a union’s right of free expression to film and disseminate that act on social media under the Canadian Charter of Rights and Freedoms? ¬ “Individuals undoubtedly do have an interest in how their images are used. Members of the public cannot, however, have a reasonable expectation that they can live their lives in total anonymity. People do not have a right to keep secret everything they do in public, such as crossing picket lines. There is no recognized right to withhold consent to the dissemination of information about unpleasant conduct. Holding people accountable for what they do or do not do in public is a component of the right to free expression.” 66
  • 67. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Martin & Ors Gabriele v Giambrone P/A Giambrone & Law [2013] NIQB 48 (5 March 2013) ¬ Facebook posting: "They thought they knocked me down, now they will see the full scale of my reaction. F*** them, just f*** them. They will be left with nothing.“ - leading to Mareva injunction. Was the posting confidential? ¬ “This application fails on a number of different grounds. Before I go on and deal with those issues I should say that anyone who uses Facebook does so at his or her peril. There is no guarantee that any comments posted to be viewed by friends will only be seen by those friends. Furthermore it is difficult to see how information can remain confidential if a Facebook user shares it with all his friends and yet no control is placed on the further dissemination of that information by those friends. No evidence was adduced as to how many friends the defendant had and what his relationship was with each of them. It was certainly not suggested that those friends were in anyway restricted as to how they used any information given to them by the defendant. For the avoidance of doubt, I do not consider that any of the friends viewing that information would necessarily have concluded that the information was confidential and could not be disclosed. I have received no evidence as to why those friends were in any way restricted as to how they can use information received from the defendant and why they would have known this information was confidential or private.” 67
  • 68. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Eagle v. Morgan, Civil Action No. 11-4303, (ED Penn. Mar 12, 2013) ¬ Edcomm, Eagle’s employer, changed LinkedIn password and information in account to display a different name, picture and credentials when name searched. Whether breach of privacy, conversion, or tortious interference with contract. ¬ “The Restatement (Second) of Torts describes a tortfeasor who has committed an invasion of privacy by appropriation of name or likeness as "[o]ne who appropriates to his own use or benefit the name or likeness of another." Restatement (Second) of Torts § 652C. "Invasion of privacy by appropriation of name or likeness does not require the appropriation to be done commercially.“” ¬ “Attempting to defend against this claim, Defendant Edcomm focuses on the fact that it did not attempt to use Dr. Eagle's likeness and credentials on the account page during the two- week period in which Edcomm had control of Plaintiff's LinkedIn account. This argument, however, disregards its use of her name to initially direct users to that page. As noted above, Plaintiff had a privacy interest not just in her picture and resume, but in her name. There is sufficient evidence that the name "Dr. Linda Eagle" had the benefit of reputation, prestige, and commercial value within the banking education industry... Thus, someone searching for Dr. Eagle on LinkedIn would be unwittingly directed to a page with information about Ms. Morgan and Edcomm. Such a scenario could be deemed to be "appropriat[ing] to [Edcomm's] own use or benefit the reputation, prestige, social or commercial standing, public interest or other values of plaintiff's name.” 68
  • 69. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Eagle v. Morgan, Civil Action No. 11-4303, (ED Penn. Mar 12, 2013) ¬ “The sole item converted in this case is the LinkedIn account. Numerous courts, however, have found that items such as software, domain names, and satellite signals are intangible property not subject to a conversion claim.” ¬ “Although Plaintiff was unable to offer into evidence the contract with LinkedIn to which she agreed when establishing her account, the Court can reasonably infer from the existence of her account that Plaintiff had in fact entered into a contractual relationship with LinkedIn. Moreover, Plaintiff has established that, by entering her account and changing her password, Defendant Edcomm acted with purpose or intent to harm Plaintiff by preventing that relationship from continuing. Edcomm asserts that it had a privilege to enter Dr. Eagle's account under Edcomm's policy that it "owned" its employees' LinkedIn accounts and could "mine" them for information upon departure of those employees. As set forth above in the Findings of Fact, however, no such official policy existed. Moreover, the LinkedIn User Agreement clearly indicated that the individual user owned the account. ¬ Were these the sole elements of the tort, Plaintiff would likely be able to succeed on her cause of action against Edcomm. A key element of this tort, however, is damages.” 69
  • 70. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Public Relations Consultants Association Ltd v The Newspaper Licensing Agency Ltd & Ors [2013] UKSC 18 (17 April 2013) ¬ UK Supreme Court ruled that the exception permitting temporary copying as part of a technical processes in section 28A of the Copyright, Designs and Patents Act 1988, permitted copying in a web browser. ¬ “...it has never been an infringement, in either English or EU law, for a person merely to view or read an infringing article in physical form...All that article 5.1 of the Directive achieves is to treat the viewing of copyright material on the internet in the same way as its viewing in physical form, notwithstanding that the technical processes involved incidentally include the making of temporary copies within the electronic equipment employed... ¬ “...nothing in article 5.1 affects the obligation of Meltwater to be licensed in order to upload copyright material onto their website or make non-temporary copies of it in some other way. At the moment, the licence fee payable by Meltwater is fixed on the basis that its customers need a licence of their own from the publishers and that the service will be supplied only to end- users who have one. It seems very likely (although I am not deciding the point) that the licence fee chargeable to Meltwater will be substantially higher if end-users do not need a licence because on that footing the value of the rights for which Meltwater is licensed will be significantly higher. The respondents have lodged an alternative claim with the Copyright Tribunal on that basis. In my view it is altogether more satisfactory that a single large licence fee should be payable representing the value to the person who puts the material onto the internet, than that tiny sums should be separately collectable from hundreds (in other cases it may be millions) of internet viewers.” 70
  • 71. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Football Dataco Ltd & Ors v Stan James Plc & Ors [2013] EWCA Civ 27 (06 February 2013) ¬ Is the operator of a website that offers a pop-up box that links to another site and which, when accessed by a user, will inevitably result in infringement, liable for primary infringement as a joint tort-feasor? ¬ “What is at issue is whether Stan James is a joint-tortfeasor with the UK punters who avail themselves of the pop-up Live Scores on Stan James' website. ¬ What does follow from the fact that Stan James and Sportradar act together is that Stan James' pop-up Live Scores should be treated just as if it were Stan James' own link. ¬ So the question boils down to this: if A has a website containing infringing material which will inevitably be copied into the computer of B if he enters that website, is A a joint tortfeasor with B? I am conscious that this question is important. The answer would seem to apply equally to copyright as to database rights. If the answer is yes, then the owner of any website anywhere in the world will be a joint tortfeasor with a UK user of that website if the inevitable consequence of access to that site by the user is infringement by that user. ¬ I would hold the answer to be yes. The provider of such a website is causing each and every UK user who accesses his site to infringe. His very purpose in providing the website is to cause or procure acts which will amount in law to infringement by any UK user of it. The case is not one of a mere facilitator, such as eBay or Amstrad where the choice to infringe or not ultimately lay with the consumer. Here Stan James is in reality responsible for the punter's infringement.” 71
  • 72. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Homeaway.com, Inc. v. Martin Hrdlicka, 2012 FC 1467 ¬ “The use of the trade-mark at issue, “VRBO, is the offering vacation rental services and by advertising such services over the web. The trade- mark will appear on the screens of computer users in Canada and elsewhere. Given that HomeAway is a Delaware company, we may presume that the information is inputted through one or more computers in the United States. The computer screens display the information in Canada as well as elsewhere.” ¬ “While not a perfect analogy, the eBay case serves to demonstrate that legislation must be interpreted in a manner consistent with modern day realities and that computer information which is stored in one country can be said to exist in another; in this case, Canada.” ¬ “I find, therefore, that a trade-mark which appears on a computer screen website in Canada, regardless where the information may have originated from or be stored, constitutes for Trade-Marks Act purposes, use and advertising in Canada.” 72
  • 73. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Interflora Inc v Marks and Spencer Plc [2013] EWHC 1291 (Ch) (21 May 2013) “Taking into account the factors mentioned by the CJEU, the factors relied upon by Interflora and the factors relied upon by M & S, the conclusion I have reached is that, as at 6 May 2008, the M & S advertisements which are the subject of Interflora's claim did not enable reasonably well-informed and reasonably attentive internet users, or enabled them only with difficulty, to ascertain whether the service referred to in the advertisements originated from the proprietor of the Trade Marks, or an undertaking economically connected with it, or originated from a third party. On the contrary, as at 6 May 2008, a significant proportion of the consumers who searched for "interflora" and the other Signs, and then clicked on M & S's advertisements displayed in response to those searches, were led to believe, incorrectly, that M & S's flower delivery service was part of the Interflora network. Thus M & S's use of the Signs had an adverse effect on the origin function of the Trade Marks. Furthermore, I conclude that this is still the case even now. It follows that M & S has infringed the Trade Marks under Article 5(1)(a) of the Directive and Article 9(1)(a) of the Regulation.” 73
  • 74. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 McCarthy Tétrault Advance™ Building Capabilities for Growth Patents and Agreeements; FRAND Obligations for Standards Essential Patents (SEPs)
  • 75. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Teva Canada Ltd. v. Pfizer Canada Inc. 2012 SCC 60 ¬ Supreme Court of Canada ruled that Pfizer’s patent for its popular drug Viagra used for treating erectile dysfunction was void for not meeting the disclosure requirements in s. 27(3) of the Patent Act. The specification did not indicate that sildenafil was the effective compound that worked. ¬ “The issues in this appeal are best understood by reference to the fundamental principles underlying the patent system. As the courts below noted, sufficiency of disclosure lies at the very heart of this system. If the issues are viewed through this lens, the case becomes more straightforward, and the conclusion flows easily from this principle. ¬ The patent system is based on a “bargain”, or quid pro quo: the inventor is granted exclusive rights in a new and useful invention for a limited period in exchange for disclosure of the invention so that society can benefit from this knowledge. This is the basic policy rationale underlying the Act. The patent bargain encourages innovation and advances science and technology…” 75
  • 76. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. Ill.2012) ¬ Could Motorola obtain an injunction under a SEP? ¬ “To begin with Motorola's injunctive claim, I don't see how, given FRAND, I would be justified in enjoining Apple from infringing the '898 unless Apple refuses to pay a royalty that meets the FRAND requirement. By committing to license its patents on FRAND terms, Motorola committed to license the '898 to anyone willing to pay a FRAND royalty and thus implicitly acknowledged that a royalty is adequate compensation for a license to use that patent. How could it do otherwise? How could it be permitted to enjoin Apple from using an invention that it contends Apple must use if it wants to make a cell phone with UMTS telecommunications capability — without which it would not be a cell phone.” 76
  • 77. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. Ill.2012) “Motorola counters that Apple's refusal to negotiate with it after rejecting its initial offer of a 2.25 percent royalty warrants injunctive relief; by opting not to take a license ex ante, it argues, Apple should lose the FRAND safe harbor. But Apple's refusal to negotiate for a license (if it did refuse — the parties offer competing accounts, unnecessary for me to resolve, of why negotiations broke down) was not a defense to a claim by Motorola for a FRAND royalty. If Apple said no to 2.25 percent, it ran the risk of being ordered by a court to pay an equal or even higher royalty rate, but that is not the same thing as Motorola's being excused from no longer having to comply with its FRAND obligations. Motorola agreed to license its standards-essential patents on FRAND terms as a quid pro quo for their being declared essential to the standard. FTC Statement on the Public Interest, supra, at 2. It does not claim to have conditioned agreement on prospective licensees' making counteroffers in license negotiations.” 77
  • 78. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Microsoft Corp. v. Motorola, Inc., 696 F. 3d 872 (9th .Cir.2012) ¬ Is Microsoft entitled to an anti-suit injunction in U.S. preventing Motorola from obtaining injunctive relief in Germany or elsewhere in contravention of FRAND commitments (where German law does not recognize third party beneficiary rights to FRAND obligations). ¬ “In sum, whether or not the district court ultimately determines that Motorola breached its contract with the ITU (it may or may not have), it is clear that there is a contract, that it is enforceable by Microsoft, and that it encompasses not just U.S. patents but also the patents at issue in the German suit. Moreover, even if Motorola did not breach its contract, then, however the RAND rate is to be determined under the ITU standards, injunctive relief against infringement is arguably a remedy inconsistent with the licensing commitment. That the licensing agreement is not itself a license according to the ITU Policy does not detract from this conclusion. The question is how the commitment to license is to be enforced, not whether the commitment itself is a license.” 78
  • 79. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Microsoft Corporation v. Motorola, Inc., 2012 U.S. Dist. LEXIS 170587 (W.D. Wash. Nov.30, 2012) ¬ Whether Motorola can obtain injunctive relief under its SEPs anywhere in the world based on its FRAND obligations. ¬ “At this stage in the litigation, and based on this court's prior rulings, the court concludes that Motorola cannot demonstrate irreparable harm. Here, the court has previously ruled that Microsoft is a third-party beneficiary of Motorola's commitments to the ITU (and the IEEE) such that Microsoft is entitled to a RAND license agreement for Motorola's H.264 (and 802.11) standard essential patents. The Motorola Asserted Patents, at issue in this litigation, are standard essential patents of the H.264 Standard and are included in Motorola's H.264 standard essential patent portfolio. Thus, Microsoft is entitled to a license to the Motorola Asserted Patents on RAND terms. As Microsoft has committed to accept a license on RAND terms for Motorola's entire H.264 standard essential patent portfolio, and the litigation is continuing to determine the details of such a license, it is now clear that at some point in the future (either by agreement of the parties or by court adjudication) a license agreement for the Motorola Asserted Patents will become a reality.Because Microsoft will pay royalties under any license agreement from the time of infringement within the statute of limitations, this license agreement will constitute Motorola's remedy for Microsoft's use of Motorola's H.264 standard essential patent portfolio to include the Motorola Asserted Patents. Accordingly, Motorola cannot demonstrate that it has been irreparably harmed.” 79
  • 80. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Microsoft Corporation v. Motorola, Inc., 2012 U.S. Dist. LEXIS 170587 (W.D. Wash. Nov.30, 2012) ¬ “The court's decision dismissing Motorola's request for injunctive relief for the Motorola Asserted Patents logically extends to all of Motorola's H.264 standard essential patents. This is so because the RAND litigation in this matter involves not only the Motorola Asserted Patents, but all of Motorola's H.264 standard essential patents on a worldwide basis. Indeed, the basis for the court's dismissal of injunctive relief for the Motorola Asserted Patents is in no way specific to those patents, but instead is the very fact that litigation in this matter has progressed to the point that it is now clear that a license agreement will result for all of Motorola's H.264 standard essential patents. ¬ As a result, this court's order not only dismisses injunctive relief for the Motorola Asserted Patents, but also for Motorola's entire H.264 standard essential patent portfolio including the European Patents at issue in the German action. In short, the dismissal of injunctive relief in this order takes the place of the court's prior anti-suit injunction that enjoined Motorola from enforcing an injunction in the German action.” 80
  • 81. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Microsoft Corporation v. Motorola, Inc. 2013 WL 2111217 (W.D.Wash.Apr.25,2013) ¬ Motorola claimed > $4 billion; awarded approx. $1.8 million per year. See, http://ow.ly/mj66r ¬ Basic principles: ¬ A RAND royalty should be set at a level consistent with the SSOs' goal of promoting widespread adoption of their standards. ¬ A RAND royalty should be set at a level consistent with the SSOs' goal of promoting widespread adoption of their standards. ¬ At the same time, a RAND royalty should be set with the understanding that SSOs include technology intended to create valuable standards. ¬ From an economic perspective, a RAND commitment should be interpreted to limit a patent holder to a reasonable royalty on the economic value of its patented technology itself, apart from the value associated with incorporation of the patented technology into the standard. 81
  • 82. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 McCarthy Tétrault Advance™ Building Capabilities for Growth Humorous/questionable?
  • 83. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 R. v. Cockell, 2013 ABCA 112 ¬ The Court reversed the conviction of an accused on three counts of child luring using a computer system under s 172.1(1) of the Criminal Code because it wasn’t proved the BlacKBerry smartphone used to commit the offense was a computer system. ¬ “Constable Hancey was not asked and did not testify that the appellant’s Blackberry contained computer programs pursuant to which logic and control were performed, a requirement of the offence; see s 342.1(2) (b)(i). There was no direct evidence on this point… The trial judge incorrectly believed the defence to have admitted that the Blackberry met all the requirements of the definition of “computer system” in s 342.1(2) of the Criminal Code. He stated at para 20 of his decision that only the issue of identification was in play in relation to the three luring counts. His reasons do not otherwise address the issue of whether the Blackberry was a “computer system”. This issue had been, however, extensively addressed mid-trial where defence expressly drew to the trial judge’s attention that in other cases upon which the Crown intended to rely, expert evidence on this point had been tendered”. 83
  • 84. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 Lee v. MAKHNEVICH, No. 11 Civ. 8665 (PAC). (S.D.N.Y.Mar. 27, 2013) ¬ “This lawsuit about a toothache and a dentist's attempt to insulate herself from criticism by patients has turned into a headache. After appealing to his dentist for pain relief, Plaintiff Robert Allen Lee, ironically, is appealing to the court for relief from his dentist. The Defendants are New York dentist Stacey Makhnevich and her practice Aster Dental. Defendants would not treat any patients unless they signed a confidentiality agreement as a precondition to treatment. The agreement purports to assign to Defendants a copyright over any comments created or made by patients about Defendants.” ¬ "In consideration for treatment . . . Patient agrees to refrain from directly or indirectly publishing . . . commentary, upon Dentist and his practice, expertise and/or treatment. If Patient does prepare commentary for publication about Dentist, the Patient exclusively assigns all intellectual Property rights, including copyrights, to Dentist for any written, pictorial, and/or electronic commentary. This agreement shall be operative and effective at the time or creation (prior to publication) of the commentary. . . . In addition, Patient will not denigrate, defame, disparage, or cast aspersions upon the Dentist; and . . . will use all reasonable efforts to prevent any member of their immediate family or acquaintance from engaging in any such activity." ... 84
  • 85. McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca 12561273 85 Slides available @ barrysookman.com and mccarthy.ca • Underlines in quotes may reflect emphasis added.
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