Wednesday, June 28, 2017

Google Suffers Severe Setback from the Supreme Court of Canada

Google lost today in the Supreme Court of Canada (“SCC”), which held that a trial judge in British Columbia can, on an interlocutory motion, order Google world-wide to de-index sites alleging violating IP law in BC. As the minority points out, this is effectively a permanent injunction and a permanent remedy for all practical purposes.

Watching the webcast of the hearing helps to explain what went so wrong here. It becomes apparent early on.

The best argument apparently wasn’t sufficiently emphasized – namely that this was an IP case and the IP rights in issue, namely trademark and trade secrets were tenuous at best and unestablished outside of Canada and that TM and trade secrecy law differ dramatically outside of Canada and from country to country.

Curiously enough, INTA of all folks was ready to ably make and focus on those arguments – but the Court refused to hear from them as interveners and heard, instead, from the record and film industries.

This is going to create a lot of problems. I don’t see how this is consistent with the SCC’s 2011 decision in Crookes v. Newton, which held that merely linking to a defamatory site is not defamation. Google made that point, but perhaps it wasn’t sufficiently emphasized. It didn’t find its way into the judgment.

I can just see the RIAA and MPAA salivating that the thought of getting global injunctions against Google at an interlocutory hearing from a trial judge in British Columbia. Will the mere fact that copyright subsists in BC - as it does virtually everywhere - be sufficient to get the injunction? One can imagine that few if any defendants would appear in such proceedings.

At least, we have competent trial judges in Canada and the rule of law. However, if other countries become emboldened in this way, perhaps worldwide injunctions against Google will emanate from unsavoury jurisdictions at little cost and with little justice.

HPK 

Friday, June 23, 2017

Facebook Must Face the Fact That Its Forum Selection Clause is Unenforceable in Canadian Privacy Class Action




The Supreme Court of Canada today released a landmark decision in Douez v. Facebook  holding that the the forum selection clause in the click wrap Facebook agreement to which nearly two billion people have "agreed" but likely nobody but a few lawyers have ever read is unenforceable in a privacy class action launched in British Columbia.

The conspicuous references to such concepts as “gross inequality of bargaining power”, “consumer contracts of adhesion”, “grossly uneven bargaining power” are very encouraging for consumers’ rights in an age when, as Justice Abella asks in her concurring opinion:
[99] “What does “consent” mean when the agreement is said to be made by pressing a computer key? Can it realistically be said that the consumer turned his or her mind to all the terms and gave meaningful consent?”
Justice Abella goes on to say:
[104] In general, then, when online consumer contracts of adhesion contain terms that unduly impede the ability of consumers to vindicate their rights in domestic courts, particularly their quasi-constitutional or constitutional rights, in my view, public policy concerns outweigh those favouring enforceability of a forum selection clause.


Any knowledgeable copyright lawyer is going to be asking now whether and how the majority opinion and particularly Justice Abella’s concurrence might impact copyright licence agreements that purport to limit users’ fair dealing rights. There is already other Supreme Court of Canada jurisprudence that indicates that consumers cannot contract out of or relinquish important statutory rights, such as the right to pay off a mortgage at the end of any given five‑year period.

HPK

Tuesday, June 06, 2017

Voltage Pictures Canadian Reverse Class Action - An Update to June 6, 2017




The Voltage Pictures long saga to sue thousands of Canadians who have allegedly have IP addresses that are allegedly connected to allegedly illegal downloading of its films has recently taken on a new twist. Voltage has changed law firms and tactics. It is now pursuing a “reverse class action”, in which one individual by the name of Robert Salna is being forced to defend not only himself but a class of potentially thousands of supposedly similarly situated defendants. As far as I know, this has never been done before in the Federal Court or in Canadian copyright law, and rarely in other cases.  It is certainly not clear that it can, should, or will be done here. However, it is interesting that, apparently, nobody has yet challenged the very possibility that it even can or should be done in this instance.

In the USA, an attempt by Voltage to use a “reverse class action” was tossed by a federal district court judge in Oregon in 2013. According the AP report as carried in US News and World Report:
A federal judge has dismissed a movie company's Internet piracy complaint against 34 Oregonians, saying the company was unfairly using the court's subpoena power in a "reverse class-action suit" to save on legal expenses and possibly to intimidate defendants into paying thousands of dollars for viewing a movie that can be bought or rented for less than $10.
The judge said cases such as Voltage's allow plaintiffs to "use the courts' subpoena powers to troll for quick and easy settlements." She cited a letter sent to defendants that asks $7,500, saying that amount would increase up to $150,000 without prompt payment.

The case is Voltage Pictures LLC v. Does,  2013 WL 1907059. The judge uses some blunt language to point out the potential for prejudice to defendants in joining together all users at once in a “reverse class actin”
The court agrees that technological advances have resulted in anonymous and stealthy tools for conducting copyright infringement on a large scale. The court further agrees peer-to-peer sharing technologies, such as BitTorrent, have a serious impact on the profitability of the commercial production of films and music. But, the need to discover copyright infringers, who conduct their activities relatively anonymously, through peer-to-peer networks, must be balanced against the rights of Doe defendants who share no more of a connection than merely committing the same type of act in the same type of manner. While these are indeed the type of cases in which discovery, pre-service, is merited, the use of a reverse class action is not. This is especially true given the proliferation of the use of the courts’ subpoena powers to troll for quick and easy settlements.
Thus, it is apparent that plaintiff seeks to place all users with the same degree of culpability regardless of intent, degree of sharing or profit. For instance, the grandparents whose young grandchild used their computer to download what looks like an entertaining Christmas movie, to his innocent mind, through their IP address, are the same as an organization intentionally decrypting and duplicating DVDs en masse while planting stealth viral advertising, or more nefarious Trojan horses, into the upload stream. By being lumped together, the Doe defendant who may have a legitimate defense to the allegedly infringing activity is severely prejudiced.
Accordingly, plaintiff’s tactic in these BitTorrent cases appears to not seek to litigate against all the Doe defendants, but to utilize the court’s subpoena powers to drastically reduce litigation costs and obtain, in effect, $7,500 for its product which, in the case of Maximum Conviction, can be obtained for $9.99 on Amazon for the Blu–Ray/DVD combo or $3.99 for a digital rental.
 The court will follow the majority of other courts in declining to condone this practice of en masse joinder in BitTorrent cases and orders all Does beyond Doe one severed and dismissed from the cases. While the ease with which movies can be copied and disseminated in the digital age no doubt has a deleterious effect on the paying market for such entertainment, just as a mass of plaintiffs harmed through separate, but similar acts of one defendant must generally seek redress individually, so should a plaintiff seek redress individually against a mass of defendants who use similar tactics to harm a plaintiff.
Even though it makes a good deal of sense to start these cases initially by joining all Does so that the process of discovering them can be economized,2 it has now become apparent that plaintiffs’ counsel seeks to abuse the process and use scare tactics and paint all Doe users, regardless of degree of culpability in the same light. This practice does not “comport with the principles of fundamental fairness.”

Footnote 2: I, however, note that even this justification is muted because it is not clear if the account holders of a given IP address is the actual infringer. Moreover, mere participation in a given swarm may not result in a full download.
(highlight added)

However, even before the current Canadian reverse class action certification motion can proceed, Voltage must come up with $75,000 to pay into court as security for costs to get through to the certification motion following the Federal Court’s curiously unreported order of February 2, 2017 requiring the payment of the $75,000 amount for security for costs “forthwith”. In my view, this is not really very much money for such a novel and potentially very complicated matter and is barely more than half of what Salna asked for. Ironically, there likely would not have been a security for costs order if Voltage were a Canadian entity. The rule that was used applies to non-resident entities. Therefore, this begs the question of what might happen in a hypothetical future case when a technically Canadian entity tries to force one unlucky soul into defending a potentially abusive reverse class action trolling case.

Despite the “forthwith” aspect, Voltage has apparently not yet paid the money into Court. Indeed,  it has appealed. There  is also a cross appeal underway, which would suggest that Mr. Salna wants even more money for security of costs, which is not surprising. This all may suggest that this entire effort will fizzle, as did Voltage’s previous effort against Teksavvy’s customers. It appears that the certification motion that had long been scheduled for June 7 and 8, 2017 has been postponed pending determination of the appeal and cross appeal as to the security for costs order.

This time, Voltage is going after Rogers’ customers. Once again, Rogers has apparently shown no interest in defending its customers’ privacy or resisting the controversial concept of a “reverse class action”, or in challenging the adequacy of the evidence that led to the disclosure order – as Shaw and Telus did successfully in the first of these cases back in 2004, in which I was very much involved.  Rogers sole interest seems to be is in getting paid for its efforts in complying with the order to disclose the identities of the customers that Voltage wants to sweep into the reverse class action.

However, a decision of May 9, 2017 from the Federal Court of Appeal “FCA”) in the Voltage reverse class action litigation holds that, absent regulations, ISPs cannot require any reimbursement for the costs of forwarding notices or disclosing the identity of allegedly infringing subscribers pursuant to a court order. The Court concluded:
[79]  Again, if Rogers and other internet service providers consider this level of compensation for their work to be unfair, they can ask the Minister to pass a regulation setting a maximum fee. As explained, this would permit them to charge a fee not just for the act of delivery, but also for the discharge of their subsection 41.26(1) obligations.

Even though some were “shocked” by the ruling and are predicting “floodgates” of trolling activity, the decision is not really surprising given the wording of the statute and the legislative history as described by the Court.

Nevertheless, CIPPIC’S Director, David Fewer, has been quoted by the Financial Post on May 26, 2017  as criticizing this decision in unusually outspoken and even strident language:
“It’s a horrific decision from a policy perspective and it’s bad news for consumers, it’s bad news for Internet service providers, it’s bad news for Canada,” said David Fewer, director of the Canadian Internet Policy and Public Interest Clinic.
“Your costs of engaging in trolling activity have just plummeted to the floor. This is the Federal Court of Appeal throwing the floodgates wide open.”
The ruling misconstrued the purpose and the function of Canada’s “notice and notice” regime, he said. The system, introduced in 2015, enables copyright owners to alert Internet providers of alleged infringement and requires providers to send notices to subscribers. While most copyright owners use these as an educational tool, some use them to demand sums around $3,500. Others, such as Voltage, take the next step to identify offenders in order to launch lawsuits.
(highlight added)

Other than this reported media comment, CIPPIC has had very little visible role in this case. It was notably absent in this appeal  in which it could have applied for leave to intervene , which would likely have been granted in view of CIPPIC’s intervener role below.  Indeed, it appears that CIPPIC did not even follow up on its earlier stated intention in a letter to the Federal Court of December 13, 2016 that it “anticipates” seeking leave to intervene in the certification motion – for which the hearing dates of June 7 and 8, 2017 are now “vacated” for the time being. In view of Mr. Fewer’s dire assessment of the implications of this ruling, one would have thought that CIPPIC would have intervened as forcefully as possible at every appropriate opportunity in this case, which indeed does have the potential to further facilitate aggressive trolling litigation in Canada. CIPPIC has also not sought leave to intervene in the security of costs appeal.

The good thing about this current FCA decision is that it should – and clearly is intended to – get the immediate attention of the Government and ISPs such as Rogers who presumably know their way around Ottawa. Ironically, if the decision is correct, then regulations should solve the ISPs problem, at least going forward. However, “A regulation can take effect before it is made (i.e., be retroactive) only if the enabling act clearly authorizes the retroactivity and the text of the regulation specifies the date”. Whether the Supreme Court of Canada would even grant leave in this case or whether a legislative amendment is needed are questions that are no doubt being urgently considered.

There may be an interesting “Catch 22” problem here. If the FCA is right that the Government could implement regulations to provide for payment to Rogers and other ISPs for the costs of complying with Norwich disclosure orders, then the Government presumably can and should do so. However, if the FCA is wrong, as Rogers apparently argued in court and CIPPIC is arguing in the media, then the Government may have no authority to implement such regulations. New legislation would be required, which would open up the entire “notice” regime. No doubt, the lobbyists representing the American film and music industries would salivate at the opportunity to turn our made-in-Canada (albeit incomplete) "notice & notice" regime into an American style "notice and takedown" regime.

However, unless and until the Supreme Court grants leave to appeal and ultimately overturns this FCA decision, it has the status of “stare decisis”, i.e. binding precedent.  In principle, the Minister thus has the authority, though the Governor in Council, to implement regulations giving Rogers what it wants – at least on a going forward basis. Thus, Rogers, CIPPIC and others who may want to try to get this case to the Supreme Court of Canada may wish to be careful what they wish for.

In any event, it would be somewhat surprising if the SCC were to grant leave in this case, since the FCA decision is only interlocutory and there is an apparently simple solution in sight to the issues raised – which is that of implementing regulations.

HPK


Tuesday, May 30, 2017

The Canadian Nintendo Circumvention Decision – Should it be given “high precedential value”?


The Federal Court of Canada on March 1, 2017 rendered a lengthy judgment in favour of Nintendo dealing with copyright infringement and circumvention. It is the first significant reported superior court decision on the 2012 anti-circumvention measures in Canada’s Copyright Act.  The Court expressed explicit awareness of the potentially “high precedential value of the expected outcome” of this case. However, due to certain unusual aspects of how this case unfolded, jurists, academics, and future litigants might question the precedential value of the decision.

Here, in the Court’s words, is the explanation of how and why this judgment was rendered:
[11] As to the nature of the decision to be rendered in conclusion of the litigation, Counsel for the Applicant stated the Applicant’s interest in developing the law with respect to TPMs, their circumvention, statutory damages, and enforcement measures to the benefit of the industry concerned in Canada and globally. Given the high precedential value of this expected outcome, at my request, Counsel for the Applicant agreed to supply a final consolidated written argument stating the terms that the Applicant would prefer to be the substance of the final determination of the litigation, to be served and filed on Counsel for the corporate Respondent to allow a potential reply.
[12] The argument was prepared, served, and filed, and by letter dated December 19, 2016, Counsel for the corporate Respondent replied “kindly be advised that the Respondent will not be filing additional representations…”.
[13] In the result, to fairly and appropriately acknowledge the precise, clear, well supported, and effectively uncontested final argument prepared by Counsel for the Applicant, with which I fully agree, I find that the Applicant is entitled to have the final argument, as stated below, as my reasons for decision in the present litigation.
(highlight and emphasis added)

Here is some further context and analysis.

In the instant Nintendo decision, the Court awarded against the corporate defendant:
a. $11,700,000 in statutory damages pursuant to s. 38.1 of the
Copyright Act in respect of circumvention of technological
protection measures;
b. $60,000 in statutory damages pursuant to s. 38.1 of the Copyright Act in respect of copyright infringement of the Header Data works;
c. $1,000,000 in punitive damages
… [interest award]
f. costs, assessed under Column V of Tariff B to the Federal Courts Rules.

After the individual Respondent agreed to a consent judgment against him for $70,000, the case was “effectively uncontested”, as the Court noted. This was an “application” and not an “action”, which means that evidence can only be put in by affidavit and there are no “live” witnesses.   The Respondents had filed written representations before the commencement the hearing but provided no evidence and did not cross-examine any of Nintendo’s witnesses on their affidavits.

The Court requested and received further written final supplemental written submissions before the conclusion of the hearing.  The respondents did not, although entitled, reply. Indeed, the Respondent’s counsel did not appear for the final oral argument.

The Court proceeded on this basis to render a judgment in which all but the introductory 14 paragraphs of this 181 paragraph 51-page judgment are a virtually verbatim reproduction of Nintendo’s final supplemental written submissions. Paragraphs 14 and thereafter until the conclusion of the judgment track paragraphs 14 and thereafter of Nintendo’s supplemental written submissions.

There is nothing necessarily improper about a judge copying material from a party’s memorandum. The learned and very experienced trial judge provided acknowledgement of his request for the supplemental written submissions and how they were used. That satisfies a requirement that has been dealt with by the Federal Court of Appeal in Apotex Inc. v. Janssen-Ortho Inc., 2009 FCA 212 (CanLII), where the need for explicit “acknowledgment” of the adoption of a party’s written submissions was addressed. For those further interested in jurisprudence on what the Supreme Court of Canada recently referred to as “the long tradition of judicial copying”, see  Cojocaru v. British Columbia Women’s Hospital and Health Centre, [2013] 2 SCR 357, 2013 SCC 30.

The real issue here is that the judgment makes some sweeping pronouncements and awards an enormous amount of very likely uncollectable damages based upon “effectively uncontested” arguments and unchallenged evidence that, in the result, leaves the Court with something not much different than a default proceeding. This left the Court without the benefit of full submissions and argumentation on some of the key issues and relevant case law. That is not the way the adversarial process normally works when we depend on it to generate binding precedents. In this case, we now have a judgment that, with respect, may be wrong in certain important aspects because the Court did not have the benefit of opposing arguments.

Nintendo’s argument, as adopted into the decision resulted in an enormous – by Canadian standards – unprecedented award of statutory damages in respect of circumvention of TPM measures. It is based upon the Court’s conclusion that Nintendo is entitled to the maximum level of $20,000 of statutory damages are due “for each of the 585 Nintendo Games to which the Respondent’s circumvention devices provide unauthorized access” (para 141 if Judgement). (emphasis added).

However, it is very doubtful that Nintendo was entitled to damages for “each” of these 585 works when there was no evidence that any of them were actually illegally copied by anyone. Moreover, it appears that the Court was not provided with arguably very relevant case law that might have at least resulted in an award of a nominal fraction the maximum statutory damages of $20,000 per work. One can only begin to imagine the absurd result if such an approach to damages were used, for example, against a researcher (e.g. a university professor or student) who somehow gains unauthorized access to a newspaper website or other research database, perhaps reads a single article, is found to have “circumvented” a TPM, and is then held liable for $20,000 for each the tens or hundreds of thousands of individual articles that were never downloaded or even read on the website.

The reasoning with respect to the physical configuration of the Applicant’s game cards as an effective TPM for controlling access to the Nintendo Games is seriously worrisome. Does this mean that an arbitrary un-patentable design for a cable connector or any other physical interface involved in a so-called proprietary system can become a TPM for Copyright Act purposes? This could have immensely anti-competitive implications, for example with respect to the market for ear buds or selfie sticks or another smart phone accessories.

In my respectful view, given the “effectively uncontested” nature of this proceeding and the novel and important issues that were raised, the learned Judge could or should have merely entered a non-precedential decision with a minimal recitation of the “effectively unopposed” factual outline, just as he did for the individual respondent.  That would serve a deterrent effect – just as the consent order for an enormous judgment against Gary Fung and iSoHunt has no doubt done to some extent – but not result in any legal precedent and particularly not an arguably incorrect legal precedent. Such a non-precedential decision would have consistent with Chief Justice Crampton’s recent NOTICE TO THE PARTIES AND THE PROFESSION PUBLICATION OF DECISIONS OF PRECEDENTIAL VALUE June 19, 2015, which allows for:
Non-Precedential Decisions
Final decisions that are considered by the presiding judicial officer not to have precedential value are normally issued in the form of a “Judgment”, without detailed reasons. These decisions will not be given a neutral citation number and will not appear on the Court’s website. Interlocutory decisions that are considered not to have precedential value are normally issued as an “Order,” again without detailed reasons, in which case they are not given neutral citation numbers and are not posted on the Court’s website. This category typically includes “speaking orders” or “endorsement”-style decisions, including judgments rendered orally in open court and reduced to writing thereafter.
Interestingly, the same learned Judge in 2013 awarded an eye-catching sum of $10.5 million of statutory damages in a default judgment in Twentieth Century Fox v. Hernandez. This was, quite properly, an unreported case. Nonetheless, it got some attention in the media and blogosphere. Here is Prof. Scassa’s comment and here is a link to a privately posted copy of the judgment as provided by Prof. Scassa. Once again, although the Nintendo case was not technically a default situation, it was quite close to it for practical purposes. It might have been better if the learned judge had used a similar approach here to send a message without necessarily setting an arguably binding and arguably substantively incorrect precedent.  This would have received lots of attention but not resulted in potential questions as to the very precedential value or weight of the decision.
On the one hand, one can be sympathetic to Nintendo wanting a precedential judgment in this proceeding, given the resources it applied to the case and the issues at stake. To Nintendo’s credit, this was not a “default” proceeding – although it effectively comes quite close. It does not, however, necessarily follow that this decision should be given “high precedential value”.
On the other hand, one must be wary of the potential that powerful parties can effectively write their own judgments by suing much weaker parties who don’t simply default but cannot begin to fully fight back. One thoughtful commentary on this case comes from Ariel Thomas at Fasken’s, who at least poses the questions of “Can a party write its own judgment?” and “Is this the first of several judgments to come that is actually written by one of the parties?”.
Most of the comments to date have uncritically suggested the precedential importance of this case without digging deeper into the circumstances behind it.
Michael Geist was perhaps first out of the gate to point out how sweeping the decision is, although he does not question its precedential value.  John McKeown, another respected commentator, has written about the decision but questions it only to the extent of noting that “the amount of statutory damages ordered to be paid may also be a function of the fact that the case was in effect uncontested”. There have been a number of other commentaries, and ALAI has even scheduled an event on April 30, 2017 about this case.
In the end, the process in this case did not provide the trial judge with the benefit of a balanced adversarial exploration of the critical issues before him. A full hearing is crucial to the fundamental principle of stare decisis. The Nintendo decision raises some interesting questions in this respect and should not, as a result, be given “high precedential value”.
HPK