In the early days of the internet, Tim May, an Intel engineer and author of The Crypto Anarchist Manifesto, proclaimed that: "National borders aren't even speed bumps on the information superhighway". More than a clever turn of phrase, May's depiction of the internet as a sort of transnational phenomenon captured the internet's place in the public imagination. From its inception, the internet has been seen not merely as a communications network but literally as a cyberspace, a digital commons in which people everywhere can come together.
The growth of the internet has given companies unprecedented opportunities to reach new customers in what has become a truly global marketplace. Yet, there is also a darker side to this story. Pirates and counterfeiters have also gained a global platform, and the difficulty involved in preventing their infringing acts is immense. While the problem is international, the solutions are largely national. IP laws and the courts that administer them are subject to jurisdictional limitations that do not exist for those profiting from breaking these laws. To pick up May's metaphor: if the law is bound by national borders, how can it possibly act as a speedbump to slow down infringers that act without regard to borders? One solution, front and centre in a recent Canadian court decision, is effectively to ignore the border.
Equustek Solutions v Morgan Jack (2015 BCCA 265) was an appeal of an interlocutory (temporary) injunction issued by the British Columbia (BC) Supreme Court (a court of first instance) prohibiting Google, a non-party, from including specific websites in its search results. The facts of the underlying case are straightforward. The plaintiffs designed, manufactured, and sold network interface hardware. The defendants, originally distributors of the plaintiffs' products, obtained confidential information and trade secrets belonging to the plaintiffs. The defendants used this confidential information to produce a competing product. The competing product was then used to fill orders for the plaintiffs' product, which the defendants continued to advertise on their website. The plaintiffs sued for trade mark infringement and appropriation of trade secrets.
"One solution, front and centre in a recent Canadian court decision, is effectively to ignore the border"
When the lawsuit was commenced, the defendants' operations were based in BC. While the suit was pending, however, they relocated outside of Canada and abandoned their defence. Nevertheless, the defendants continued to offer their products for sale through their websites and filled orders from unknown locations. Unable to locate the defendants, the plaintiffs sought to prevent access to the defendants' websites by having them removed from Google's search indexes. Google agreed to voluntarily remove 345 URLs (uniform resource identifiers) from google.ca (Google's Canadian domain). However, Google would not agree to block the defendants' entire domain. As a result, the defendants simply moved the offensive subject matter to new pages within their websites. Moreover, people conducting searches on google.com or another national Google domain (such as google.co.uk) would still have access to the defendants' webpages.
Frustrated by their unsuccessful attempts at preventing the defendants' activities, the plaintiffs went to Court seeking a broad injunction. After a lengthy hearing, a judge of the BC Supreme Court ordered that Google 'cease indexing or referencing in search results on its internet search engines the websites listed in Schedule A, (including all of the subpages and subdirectories of the listed websites)'. Google appealed this decision to the BC Court of Appeal.
The Court of Appeal affirmed the BC Supreme Court's ruling. Of particular interest, the Court of Appeal held that: (i) BC courts had in personam jurisdiction over Google, a foreign corporation; and, (ii) the broad injunction ordered by the BC Supreme Court was justified even though it would have extraterritorial effect.
Jurisdiction over Google
Google is incorporated in Delaware and based in California. It does not have offices, staff or servers in British Columbia. Accordingly, a question arose whether the company was sufficiently connected with the province to place it under the Court's jurisdiction. Analysis focused on whether it could be said that Google was carrying on business in the province.
Google argued that the mere fact that Google searches are initiated within the province does not mean that the company conducts business within the province. In making this argument, Google relied on the Supreme Court of Canada's decision in Club Resorts v Van Breda (2012 SCC 17). In that case, the Court cautioned against finding that a company was carrying on business in a jurisdiction based on only limited activities. In the Court's words:
Active advertising in the jurisdiction or, for example, the fact that a web site can be accessed from the jurisdiction would not suffice to establish that the defendant is carrying on business there. The notion of carrying on business requires some form of actual, not only virtual, presence in the jurisdiction, such as maintaining an office there or regularly visiting the territory of the particular jurisdiction.
In Google's submission, the company merely offers a passive website that automatically generates search results in response to user-inputted search terms; by extension, the company lacked the actual presence required for the Court to assume jurisdiction.
The BC Supreme Court refused to accept that Google did not have an actual presence in the province. The judge noted that Google, through Google Canada, actively sells advertising to British Columbians. In the Court's view, a company actively selling advertising is distinguishable from a company advertising its own business in the province. It made this finding despite the fact that the advertising contracts were with Google Inc (not Google Canada) and contained a provision that disputes would be governed by Californian laws. More interestingly, the Court noted that Google collects information about its users, which it uses to target them with tailored advertising. The trial judge concluded that Google, by individually targeting users in BC, was actively operating in the province.
"Pirates and counterfeiters have gained a global platform, and the difficulty involved in preventing their infringing acts is immense"
The Court of Appeal agreed that Google had more than a passive presence in the province, and, in agreement with the lower court, found that:
The gathering of information through proprietary web crawler software (Googlebot) takes places in British Columbia. This active process of obtaining data that resides in the Province or is the property of individuals in British Columbia is a key part of Google's business.
Even more interesting was the Court of Appeal's response to Google's contention that framing Google's services in such a manner would effectively give every state jurisdiction over the company. The Court of Appeal agreed with the lower court that this was a possibility but noted that: 'it is the world-wide nature of Google's business and not any defect in the law that gives rise to that possibility'. While this pronouncement reflects the Court's finding that Google was actively 'doing business' in the province, it is nevertheless surprising. Arguably, the Van Breda case suggests that a global presence does not necessarily ground a claim for jurisdiction. If so, it may be something of a leap to suggest, as the chambers judge did, that jurisdiction is a 'natural consequence' of such a global presence.
Perhaps recognising the potentially far-ranging implications of such a statement, the Court of Appeal characterised Google's concerns about multi-jurisdictional control as 'overstated'. In its view:
Courts must, in exercising their powers, consider many factors other than territorial competence and the existence of in personam jurisdiction over the parties. Courts must exercise considerable restraint in granting remedies that have international ramifications.
The Court's comments are quite remarkable when the terms of the injunction under deliberation are considered.
As Google is not resident in BC and the injunction enjoined all Google's search sites (not merely google.ca), Google argued that the Court erred in ordering the injunction. In Google's submission:
The court is not competent to regulate the activities of non-residents in foreign jurisdictions. This competence-limiting rule is dictated both by judicial pragmatism and considerations of comity. The pragmatic consideration is that the court should not make an order that it cannot enforce. The comity consideration is that the court refrains from purporting to direct the activities of persons in other jurisdictions and expects courts in other jurisdictions to reciprocate.
The Court of Appeal rejected Google's submissions. While acknowledging that BC courts once refrained from issuing injunctions that enjoined activities outside of the province, the Court of Appeal explained that more recent cases have confirmed that courts have authority to make such orders. Provided that the court has territorial competence under the relevant legislation, the court is free to make such an order if it is deemed appropriate. The Court of Appeal noted that 'issues of comity and enforceability are concerns that must be taken into account' but rejected the notion that these considerations amounted to a legal impediment to subjecting non-residents in foreign jurisdictions to orders of Canadian courts.
With respect to the question of comity, the Court of Appeal said that the key considerations are whether the Canadian court has 'failed to pay due respect to the right of other courts or nations' and whether there is a realistic possibility that an order with extraterritorial effect may "offend another state's core values". While it was suggested that the order under review could interfere with the right to free expression in other jurisdictions, the Court found that international mores would not be offended by the order. In the Court's words: 'It has not been suggested that the order prohibiting the defendants from advertising wares that violate the intellectual property rights of the plaintiffs offends the core values of any nation'. Framed in this way, it is hard to argue that the protection of intellectual property would be offensive. Whether this is a fair characterisation of the broader concern is a matter for debate. Indeed, the Canadian Civil Liberties Association and the Electronic Frontier Foundation were granted leave to intervene in the case; this in and of itself suggests that broader societal interests than the protection of IP rights were at stake.
Google also argued that, even if an injunction was warranted, it should apply only to the google.ca website. The Court of Appeal conceded that an order with international scope should not be made lightly and that such an order should not be made where an order with only domestic consequences is sufficient. On the facts before it, however, the Court of Appeal decided that an order limited to only the google.ca site would be ineffective. The BC Supreme Court order was therefore deemed appropriate despite its extraterritorial application. In closing, the Court of Appeal noted that, if the order was found to have unintended deleterious consequences, interested parties could apply to the Court to vary the terms of the order.
For rights holders struggling to protect their interests against infringers located abroad, the Equustek decision is a breath of fresh air. The decision recognises that, in an increasingly borderless world, enforcing IP rights may require actions with consequences that extend beyond national borders. Even in protecting a national right, action across borders may be required.
"There is a risk that Canadian courts will be used as a forum of convenience for parties seeking to limit a competitor’s online presence"
The Court of Appeal's reasoning also lays the foundation for the issuance of similar orders in the future by carefully framing the issues, and rejecting the claim that all injunctions with effect beyond Canada's borders necessarily engage the courts on a slippery slope. Some commentators have suggested that diminishing the importance of judicial comity might lead foreign courts to order the removal of websites that merely offend the political sensibilities of foreign parties or governments. While this result would obviously be undesirable, it is hard to imagine that the Equustek decision truly opens the door to such a possibility. The Court carefully explained that the case before it was about the protection of property rights misused by a clandestine party seeking to escape legal process.
This is not to say that the Equustek decision does not raise legitimate concerns. What happens when a national court orders that search engines remove all references to an infringing product, even though the product is not subject to IP protection in some or any other jurisdictions? While such an order may be necessary to protect IP rights in the issuing jurisdiction, the order could be alleged to extend such a monopoly to other jurisdictions. There is no reason to think that Canadian injunctions could not be tailored to address at least some of these concerns, however.
One might also wonder whether there is a risk that Canadian courts will be used as a forum of convenience for parties seeking to limit a competitor's online presence (legitimate or otherwise). By way of analogy, parties have selectively litigated libel cases in the United Kingdom because the law on point is perceived to be more plaintiff-friendly than in other jurisdictions. Might parties selectively litigate in Canada knowing that a broad injunction might be obtained that would reap benefits in other jurisdictions?
At present, one can only speculate about the implications of the Equustek case. While a willingness to grant orders with extraterritorial application to protect IP rights may be welcomed as a useful tool in fighting international piracy and counterfeiting, time will tell whether other consequences will arise that may require renewed emphasis on national borders and jurisdiction.
Bradley White is a partner and chair of the national IP department at Osler, Hoskin & Harcourt. He practises IP law with an emphasis on complex patent litigation and patent prosecution. He provides a number of clients with strategic advice on the enforcement of their patent rights, including the coordination and management of litigation strategies throughout multiple jurisdictions. He has appeared as lead counsel before the Federal Court of Appeal, the Federal Court and the Ontario Superior Court.
Brad is also a registered patent agent specialising in Canadian and foreign patent and industrial design prosecution, strategic reviews of IP portfolios, patentability, patent infringement and validity opinions, and advising on world-wide patent portfolio management and enforcement. He is registered to practise before the US Patent and Trademark Office and he serves on the patent legislation and industrial design committees for the Intellectual Property Institute of Canada. He is also a former associate editor of the Canadian Patent Reporter.
Brad has received international recognition by: Best Lawyers in Canada 2015, Chambers Global; The World's Leading Lawyers for Business 2015; Canadian Legal Lexpert Directory 2015; Benchmark Litigation Canada 2015; Managing Intellectual Property's 2015 IP Stars; and, IAM Patent 1000 (2012-2015).
Vincent de Grandpré
Vincent de Grandpré's litigation practice focuses on IP matters, including complex pharmaceutical patent litigation. He advises and represents clients in the life sciences and pharmaceutical industries on regulatory and privacy issues.
Vincent has appeared as counsel in both official languages before several Canadian courts, including the Federal Court, the Federal Court of Appeal, the Ontario Superior Court of Justice and Divisional Court, as well as the Quebec Superior Court and Court of Appeal. From 2000 to 2003, Vincent practised intellectual property and commercial litigation at a New York firm. After graduating from law school, he served as a law clerk to Chief Justice Antonio Lamer of the Supreme Court of Canada.
Vincent's work has been recognised by: The Best Lawyers In Canada 2015; Chambers Global; The World's Leading Lawyers for Business 2015; and, IAM Patent 1000 2015.