Barry Sookman Partner, McCarthy Tétrault Chair, Internet and Electronic Commerce Law Group (Toronto) [email protected] (416) 601-7949

Barry SookmanPartner, McCarthy TétraultChair, Internet and Electronic Commerce Law Group (Toronto)[email protected](416) 601-7949

www.mccarthy.ca

TCLG

Toronto Computer Lawyers Group

Wednesday May 28, 2003McCarthy Tétrault

Suite 4700, TD Bank TowerToronto, ON

3639894

IT/Internet Law: IT/Internet Law: The Year in Review The Year in Review

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2 McCarthy Tétrault LLP

Enforceability of Enforceability of

On-Line AgreementsOn-Line Agreements

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Enforceability of Click-Wrap AgreementsEnforceability of Click-Wrap Agreements

» Courts that have had the occasion to consider click-wrap contracts have held them to be valid and enforceable. Specht v. Netscape Communications Corp., 150 F.Supp. 2d 585, 594 (SDNY 2001) aff'd, 306 F.3d 17 (2d Cir. 2002) and authorities cited therein.

» Click-wrap licenses are enforceable when they are displayed on the user's computer screen before the software can be installed and the user is required to indicate his assent by clicking on the “I agree” button before proceeding with installation. Moore v. Microsoft Corp., 293 A.D.2d 587 (N.Y. App. Div. 2002).

» See, also, Rudder v. Microsoft, (1999), 2 C.P.R. (4th) 474 (S.C.J.) (“Install-wrap” Agreement)

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“Whether governed by the common law or by Article 2 of the Uniform Commercial Code ("UCC"), a transaction, in order to be a contract, requires a manifestation of agreement between the parties…. a consumer's clicking on a download button does not communicate assent to contractual terms if the offer did not make clear to the consumer that clicking on the download button would signify assent to those terms.” Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002)

Enforceability of Web Wrap AgreementsEnforceability of Web Wrap Agreements

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Enforceability of Web Wrap AgreementsEnforceability of Web Wrap Agreements

“Every person who has actual notice of circumstances sufficient to put a prudent man upon inquiry as to a particular fact, has constructive notice of the fact itself in all cases in which, by prosecuting such inquiry, he might have learned such fact." Cal. Civ. Code § 19. These principles apply equally to the emergent world of online product delivery, pop-up screens, hyperlinked pages, clickwrap licensing, scrollable documents, and urgent admonitions to "Download Now!“ Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002)

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Fighting Bots and AgentsFighting Bots and Agents

Website terms and conditions enforced against the use of scraper tools. American Airlines Inc. v. Farechase, Inc. No. 067-194022-2 (Tex. 67 District Court, Mar. 8, 2003)

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Screen Presentation Screen Presentation

“As was the case with the agreement that was before Mr. Justice Winkler, here the arbitration clause is a separate defined clause with its own heading in bold print. It is displayed just as all of the other clauses of the agreement are displayed. It is not contained within a larger clause dealing with other matters nor is it in fine print or otherwise tucked away in some obscure place designed to make it discoverable only through dogged determination. The clause is upfront and easily located by anyone who wishes to take the time to scroll through the document for even a cursory review of its contents. The arbitration clause is, therefore, not at all equivalent to the fine print on the back of the rent-a-car contract in the Tilden case or on the back of the baseball ticket in the Blue Jays case.” Kanitz v Rogers Cable Inc. (2002) 58 O.R.(3d) 299 (S.C.J.). See, also , Rudder v Microsoft Corp. (1999), 2 C.P.R. (4th) 474 (S.C.J.)

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Electronic NoticesElectronic Notices» (Cancellation Screen):» "You have just requested to cancel the following trades. Enter

your PIN to continue. If you do not receive a confirmation that your change request was accepted, please check the Trade Status Screen or contact your local Merrill Lynch HSBC office. Please remember that your change request is subject to any fills already executed on the market..."

» (Trade Confirmation Screen):» "Below is a confirmation that your trade cancellation request has

been sent. Please note that all cancel and change requests are subject to prior fill.

» Your trade was cancelled at..." (the time of the cancellation is set out.) Zhu v Merrill Lynch case. [2002] BCCP 0535

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“It strikes me that an electronic system which is incapable of giving to a customer a simple instruction that he should not continue with a request for a trade or cancellation until he or she is advised specifically that the request has been successfully and completely dealt with, or that his transaction is pending until he is advised to the contrary, is in my opinion a faulty system, and does not provide that reasonable level of performance that a customer is entitled to receive from that system and for which he contracted. The faultiness of a NetTrader system is all the more apparent if the customer is advised that he must telephone the provider of the system if he wishes to properly confirm any trade or cancellation made by him. As for the suggestion made the Defendant's Adrian O in retrospect that the customer should resort to process of changing an order rather than canceling an order to ensure successful completion of his request, I find such advice supportive of the inherent faultiness of the system.” Zhu v Merrill Lynch case. [2002] BCCP 0535

Electronic NoticesElectronic Notices

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Enforceability of DisclaimersEnforceability of Disclaimers

» “It strikes me that the Defendant's Legal Disclaimer falls into the category of an agreement which virtually eliminates liability for inaccuracy in the performance of the services contracted for by the customer and can be construed as in fact exonerating the broker from acts of... gross negligence and in fact reserving the right to be grossly negligent to the broker.

» On this basis I find the Legal Disclaimer of the Defendant unenforceable.” Zhu v Merrill Lynch case. [2002] BCCP 0535

» See, also Robet v. Versus Brokerage Services Inc., [2001] O.J. No. 1341 (Ont. S.C.J.)

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UECA Based LegislationUECA Based Legislation

» Alberta – Electronic Transactions Act (Proclamation April 1, 2003.)

» British Columbia – Electronic Transactions Act, in force April 19, 2001.

» Manitoba – Electronic Commerce and Information Act, Royal Assent (partly in force March 19, 2001)

» New Brunswick – Electronic Transactions Act, in force March 31, 2002.

» Newfoundland & Labrador – Electronic Commerce Act, in force December 13, 2001.

» Nova Scotia – Electronic Commerce Act, in force November 30, 2000.

» Ontario – Electronic Commerce Act, in force October 16, 2000.

» PEI – Electronic Commerce Act, in force May 15, 2001.

» Québec – An Act to establish a legal framework for information technology, in force November 1, 2001.

» Sask. – Electronic Information and Documents Act, in force November 1, 2000.

» Yukon – Electronic Commerce Act, in force March 27, 2001.

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Consumer Protection Consumer Protection DevelopmentsDevelopments

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Internet Sales Contract Harmonization Internet Sales Contract Harmonization Template (“Internet Template”)Template (“Internet Template”)

» Template for Internet sales consumer protection laws• Approved May 25, 2001

» Relatively uniform rules expected nationwide» Applies to any Internet sales contract:

• With a consumer• For goods or services

» Covers• Provision of information• Contract formation • Cancellation rights• Credit card charge backs

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Implementation of Internet TemplateImplementation of Internet Template

» Alberta Internet Sales Contract Regulation, Alta. Reg. 81/2001, in force Oct 15/01

» B.C. Consultation paper released

» Manitoba Included as Part 7, in force Oct 23/00

» Ontario Consumer Protection Statute Law Amendment Act, 2002, S.O. 2002, c. 30

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Disclosure of InformationDisclosure of Information

Disclosure of information

» 38. (1) Before a consumer enters into an internet agreement, the supplier shall disclose the prescribed information to the consumer.

Express opportunity to accept or decline agreement

» (2) The supplier shall provide the consumer with an express opportunity to accept or decline the agreement and to correct errors immediately before entering into it. Ontario Consumer Protection Act, 2002

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Disclosure of InformationDisclosure of Information

Manner of disclosure

» S38(3) In addition to the requirements set out in section 5, disclosure under this section shall be accessible and shall be available in a manner that ensures that,

» (a) the consumer has accessed the information; and

» (b) the consumer is able to retain and print the information. Ontario Consumer Protection Act, 2002

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Provide Copy of AgreementProvide Copy of AgreementCopy of internet agreement

» 39. (1) A supplier shall deliver to a consumer who enters into an internet agreement a copy of the agreement in writing within the prescribed period after the consumer enters into the agreement.

Content of internet agreement

» (2) The copy of the internet agreement shall include such information as may be prescribed.

Deemed supply of internet agreement

» (3) For the purposes of subsection (1), a supplier is considered to have delivered a copy of the internet agreement to the consumer if the copy is delivered in the prescribed manner. Ontario Consumer Protection Act, 2002

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Consequences of Failures to Comply Consequences of Failures to Comply

Cancellation of internet agreement

» 40. (1) A consumer may cancel an internet agreement at any time from the date the agreement is entered into until seven days after the consumer receives a copy of the agreement if,

» (a) the supplier did not disclose to the consumer the information required under subsection 38 (1); or

» (b) the supplier did not provide to the consumer an express opportunity to accept or decline the agreement or to correct errors immediately before entering into it.

Same

» (2) A consumer may cancel an internet agreement within 30 days after the date the agreement is entered into, if the supplier does not provide the consumer with a copy of the agreement pursuant to section 39. Ontario Consumer Protection Act, 2002

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Excluding ArbitrationsExcluding Arbitrations

No Waiver of substantive and procedural rights

» 7(1) The substantive and procedural rights given under this Act apply despite any agreement or waiver to the contrary.

Limitation of Effect of term requiring arbitration

» 7(2) Without limiting the generality of subsection (1), any term or acknowledgment in a consumer agreement or a related agreement that requires or has the effect of requiring that dispute arising out of the consumer agreement be submitted to arbitration is invalid insofar as it prevents a consumer from exercising a right to commence an action in the Superior Court of Justice given under this Act. Ontario, Consumer Protection Act, 2002.

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Excluding Class ProceedingsExcluding Class Proceedings

Class proceedings

8(1) A consumer may commence a proceeding on behalf of members of a class under the Class Proceedings Act, 1992 or may become a member of a class in such a proceeding in respect of a dispute arising out of a consumer agreement despite any term or acknowledgment in the consumer agreement or a related agreement that purports to prevent or has the effect of preventing the consumer from commencing or becoming a member of a class proceeding. Ontario, Consumer Protection Act, 2002.

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Warranty on Quality of ServicesWarranty on Quality of Services

» “The supplier is deemed to warrant that the services supplied under a consumer agreement are of reasonable acceptable quality.” Section 9(1) Ontario, Consumer Protection Act, 2002.

» Industry Implications?

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Are Mass Market Software Are Mass Market Software Agreements Unfair? Agreements Unfair?

» Lawsuit commenced against Microsoft, Symantec and several software retailers over their software licensing agreements alleging.

» “Defendants’ acted in concert and have concocted a scheme to sell consumers in the State of California software licenses in retail stores without allowing them to review the terms and conditions of such software licenses prior to sale - when consumers finally are able to view the software licenses for the first time during the software installation process - consumers who do not electronically agree to such terms and conditions are prohibited from using the software AND are prohibited from returning the software to retail stores. If consumers are able to return the software to the manufacturers such manufacturers have erected hurdles and unfair burdens on such consumers including not refunding taxes paid, not refunding shipping and handling, and causing delays in sending refund checks.

» Plaintiff Cathy Baker brings this action, as more fully stated below, to stop defendants’ unlawful, misleading, and unfair business practices, and allow consumers to make an informed decision on whether they want to agree to the onerous terms of such software license agreements - and if consumers choose not to agree - then allow consumers a fair and symmetrical way to return such software licenses to the retail stores where originally purchased for a FULL refund.” Baxter v Microsoft (Marin County Cal. Feb, 2003)

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Consumer Protection Consumer Protection and Internet Advertisingand Internet Advertising

» Canadian Competition Bureau has published an information bulletin discussing compliance with the Competition Act when advertising on the Internet entitled Application of the Competition Act to Representations on the Internet, Competition Bureau, available at the Competition Bureau’s web site, www.competition.ic.gc.ca.

» Replaces the previous draft guidelines, Staying On-Side” When Advertising On-Line: A Guide to Compliance with the Competition Act When Advertising on the Internet.

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Spam Spam SpamSpam Spam Spam» Industry Canada Discussion Paper: E-mail marketing: Consumer choices and

business opportunities (January, 2003)Should new laws be enacted in Canada? If so, what activities should be targeted?

» Should the use of e-mail for commercial solicitation be prohibited, in some or all instances?

» Should the use of e-mail to acquire new customers be prohibited?

» Should the option of refusing further solicitation be required?

» Should the use of falsified return e-mail addresses be prohibited?

» Should e-mail commercial solicitation be required to be clearly labelled as advertising?

» Should providers or individuals be allowed to seek specified damages for junk e-mail?

» Should software products used for collecting e-mail addresses, transmitting bulk e-mail and falsifying return addresses be controlled or banned?

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Consumer Protection PrinciplesConsumer Protection Principles

» The Working Group on Electronic Commerce and Consumers released a document entitled Canadian Code of Practice for Consumer Protection in Electronic Commerce in January, 2003. Available at www.strategis.gc.ca.

» The Code is intended to establish bench marks for good business practices for merchants conducting commercial activities with consumers on-line. The Code leaves unchanged, rights, remedies and other obligations that may exist as a result of consumer protection, privacy or other laws and regulations, or other general or sector-specific voluntary codes of conduct to which vendors may subscribe.

» OECD Consumers in the Online Marketplace: The OECD Guidelines Three Years Later 03-Feb. 2003. Surveys worldwide implementation of OECD Guidelines for Consumer Protection in the Context of Electronic Commerce (9 Dec. 1999)

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CopyrightCopyright

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Copyright ReformCopyright Reform

Consultation Paper on Digital Copyright Issues June 22, 2001

» Supporting Culture and Innovation: Report on the Provisions and Operation of the Copyright Act (Section 92 report) was tabled in the House of Commons October 3, 2002. It proposes an agenda for copyright reform that sets out groupings of issues to be addressed in the short, medium and long terms

» Reforms being considered include “making available” right, ISP liability reform, and technological measures, databases

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Copyright Reform - Copyright Reform - Internet RetransmissionInternet Retransmission

» “The Commission further notes…that recent amendments to the Copyright Act (Bill C-11) exclude Internet retransmitters from the compulsory licensing regime embodied in section 31 thereof. Accordingly, Internet retransmitters will be obliged to negotiate with copyright holders and obtain their consent in order to retransmit the programming of over-the air broadcasters.

» In light of the above, the Commission does not consider it necessary or appropriate to require the licensing of Internet retransmitters. Rather, Internet retransmission undertakings should remain exempt from these and from other requirements under Part II of the Broadcasting Act. In addition, since the recent amendments to the Copyright Act address the main concern identified in this proceeding, the Commission sees no need to amend the New Media Exemption Order at this time.” Broadcasting Public Notice CRTC 2003-2, 17 January 2003, Report to the Governor General in Council pursuant to Order in Council P.C. 2002-1043

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Copyright and Supreme CourtCopyright and Supreme Court

» Théberge v. Galerie d'Art du Petit Champlain inc. (2002), 17 C.P.R. (4th) 161 (S.C.C.)

» SOCAN v. Canadian Assn. of Internet Providers (2002),19 C.P.R. (4th) 289 (Fed. C.A.), leave to appeal to SCC granted.

» CCH Canadian Ltd. v. Law Society of Upper Canada (2002), 18 C.P.R. (4th) 161 (Fed. C.A.), leave to appeal to SCC granted.

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The Music WarsThe Music Wars

34

» 227 million copies KAZAA downloaded

» 2.5 million copies KAZAA downloaded each week

» 4 million people swapping files at “any given moment”. Financial Post May 28, 2003.

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Aimster File Sharing ServiceAimster File Sharing Service» “Defendants in this case have provided the software and the support services

necessary for individual Aimster users to connect with each other. Without Aimster's services, Aimster's infringing users would need to find some other way to connect…The very existence of Club Aimster demonstrates the extent to which Defendants contribute to infringing activity. The Aimster Top 40 catalogues and presents for Aimster users the top copyrighted music that they may wish to transfer. It comments upon that music and, in some cases, even suggests that the user should have it…What's more, users wishing to download music using Club Aimster need merely click on a play button and the Aimster software automatically creates a connection with another users' computer to facilitate the transfer…” “Aimster predicates its entire service upon furnishing a 'road map' for users to find, copy, and distribute copyrighted music.” Defendants manage to do everything but actually steal the music off the store shelf and hand it to Aimster's users.”

» “Here, it is our finding that Aimster is a service specifically designed to aid the infringing activities of its users and, on that basis alone, should not be eligible for Sony's protections.” In re Aimster Copyright Litigation 2002 WL 31006142 (N.D.Ill.2002)

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MP3Board File Sharing Service MP3Board File Sharing Service

“However, there is sufficient evidence from which a factfinder could determine that MP3Board engaged in an overall course of conduct which materially contributed to copyright infringement. The MP3Board site featured a search engine: an automated system devoted to searching for, aggregating and organizing links…The site also solicited third parties to post links to sites containing audio files…MP3Board provided a link to a third party named Freedrive where users could store audio files online… MP3Board offered new users "getting started" information and a tutorial containing instructions on how to locate and download audio files via MP3Board — actually using one of the record companies' copyrighted recordings as an example.” Arista Records, Inc. v MP3Board, Inc, 2002 WL 1997918 (S.D.N.Y. 2002)

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Grokster CaseGrokster Case

“Defendants distribute and support software, [Streamcast (Morpheus) (Kazaa) and Gnutella] the users of which can and do choose to employ it for both lawful and unlawful ends. Grokster and StreamCast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights. While Defendants, like Sony or Xerox, may know that their products will be used illegally by some (or even many) users, and may provide support services and refinements that indirectly support such use, liability for contributory infringement does not lie "merely because peer-to-peer file-sharing technology may be used to infringe plaintiffs’ copyrights." Napster, 239 F.3d at 1020-21 (citation omitted). Absent evidence of active and substantial contribution to the infringement itself, Defendants cannot be liable.” MGM Studios v Grokster Ltd (C.D. Cal. Apr. 23, 2003)

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DMCA Circumvention DMCA Circumvention of Technological Measuresof Technological Measures

» “The authentication sequence that occurs between Lexmark’s printers and the microchips contained on authorized Lexmark toner cartridges constitutes a technological measure that controls access to a copyright work. This authentication sequence requires the application of information and the application of a process to gain access to Lexmark’s copyrighted Toner Loader Programs and Printer Engine Programs.

» Lexmark’s authentication sequence effectively controls access to the Toner Loader Programs and Printer Engine Programs because it controls the consumer’s ability to make use of these programs.”

» “SCC’s SMARTEK microchips cannot be considered independently created computer programs. The SMARTEK microchips serve no legitimate purpose other than to circumvent Lexmark’s authentication sequence and the SMARTEK microchips cannot qualify as independently created when they contain exact copies of Lexmark’s Toner Loading Programs.” Lexmark Int’l, Inc. v Static Control Components, Inc. 66 USPQ2d 1405 (E.D.Ken. 2003)

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Copying to Achieve CompatibilityCopying to Achieve Compatibility

“Even if the Toner Loading Programs were somehow considered to be lock-out codes, copyright infringement would still exist in the instant case…Infringement may still be found if there is substantial similarity and ‘that those similarities extend beyond those necessary to produce the sequence of bits that will unlock the [copyright owner’s] console…’ ‘[T]he fact that multiple ways exist to generate the necessary signal stream may provide evidence that [the accused infringer] copied more than was necessary to achieve compatibility.’” Lexmark Int’l, Inc. v Static Control Components, Inc. 66 USPQ2d 1405 (E.D.Ken. 2003)

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Copying to Achieve CompatibilityCopying to Achieve Compatibility» “Both Altai and Mitel clearly held that in determining aspects of the

program not entitled to protection because of external factors, we examine the program from the viewpoint of the creator…The Mitel court pointedly noted that the focus is on the factual circumstances and the external factors surrounding the author of the infringed program…

» Dewar’s explanation of the need to interoperate two programs, and industry practice and custom, do not justify unauthorized accessing and copying Geac’s copyrighted code. The Court in Mitel specifically rejected the analysis of the district court in that case which focused on whether external factors such as market forces and efficiency considerations justified the copying… We also reject the doctrine of externalities, including interoperability, as justification for using the Copy and Call commands to access Geac’s copyrighted software in violation of the License Agreements and the Copyright Code.” Dun & Bradstreet Software Services v Grace Consulting Inc. 64 USPQ2d 1705 (3rd Cir. 2002)

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Reverse Engineering Reverse Engineering and Copyright Pre-emptionand Copyright Pre-emption

» “Thus, case law indicates the First Circuit would find that private parties are free to contractually forego the limited ability to reverse engineer a software product under the exemptions of the Copyright Act. Of course, a party bound by such a contract may elect to efficiently breach the agreement in order to ascertain ideas in a computer program unprotected by copyright law. Under such circumstances, the breaching party must weigh the benefits of breach against the arguably de minimus damages arising from merely discerning non-protected code.” Bowers v Baystate Technologies Inc. 65 USPQ2d 1746 (Fed.Cir.2003)

» See, also Frontline Test Equipment v. Greenleaf Software, 10 F. Supp. 2d 583, 593 (W.D. Va. 1998)

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Jurisdiction Jurisdiction

and the Internetand the Internet

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Subject Matter Jurisdiction - PatentsSubject Matter Jurisdiction - Patents» “The claimed invention requires there to be a host computer. In the age that we live in, it does

not matter where the host computer is situated. It could be in the United Kingdom, on a satellite, or even on the border between two countries. Its location is not important to the user of the invention nor to the claimed gaming system. In that respect, there is a real difference between the claimed gaming system and an ordinary machine. For my part I believe that it would be wrong to apply the old ideas of location to inventions of the type under consideration in this case. A person who is situated in the United Kingdom who obtains in the United Kingdom a CD and then uses his terminal to address a host computer is not bothered where the host computer is located. It is of no relevance to him, the user, nor the patentee as to whether or not it is situated in the United Kingdom.

» If the host computer is situated in Antigua and the terminal computer is in the United Kingdom, it is pertinent to ask who uses the claimed gaming system. The answer must be the punter. Where does he use it? There can be no doubt that he uses his terminal in the United Kingdom and it is not a misuse of language to say that he uses the host computer in the United Kingdom. It is the input to and output of the host computer that is important to the punter and in a real sense the punter uses the host computer in the United Kingdom even though it is situated in Antigua and operates in Antigua. In those circumstances it is not straining the word "use" to conclude that the United Kingdom punter will use the claimed gaming system in the United Kingdom, even if the host computer is situated in, say, Antigua. Thus the supply of the CD in the United Kingdom to the United Kingdom punter will be intended to put the invention into effect in the United Kingdom.” Menashe Business Mercantile Ltd. & Anor v William Hill Organization Ltd. [2002] EWCA Civ 1702 (Eng.C.A.Nov.28 2002)

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Subject Matter Jurisdiction - PatentsSubject Matter Jurisdiction - Patents

Roger’s prepaid wireless system not infringing US patent where billing database in U.S. but system control point in Canada. Court ruling that: “As a matter of precedent, a transnational system that extends beyond the United States border can satisfy the territoriality requirement where the system’s control point is present within the United States.” Freedom Wireless, Inc. v Boston Communications Group, Inc. et al (D. Mass. Apr. 16, 2002)

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Personal JurisdictionPersonal Jurisdiction“…the person who sets up the website can be regarded as potentially committing a delict in any country where the website can be seen, in other words in any country in the world. It does not follow that he actually commits a delict in every country in the world, however. It is obvious that the overwhelming majority of websites will be of no interest whatsoever in more than a single country or a small group of countries. In my opinion a website should not be regarded as having delictual consequences in any country where it is unlikely to be of significant interest. That result can readily be achieved by a vigorous application of the maxim de minimis non curat praetor; if the impact of a website in a particular country is properly regarded as insignificant, no delict has been committed there. In determining whether the impact of a website is insignificant, it is appropriate in my opinion to look both at the content of the website itself and at the commercial or other context in which the website operates.” Bonnier media Limited v Smith http://www.scotcourts.gov.uk/opinions/DRU2606.html

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Personal JurisdictionPersonal Jurisdiction“In my opinion an inference may readily be drawn from the foregoing facts that the defenders, acting together, intend to set up a website which is designed to pass themselves off as the pursuers, and to make use of a name sufficiently close to the pursuers' trade mark to amount to an infringement of that trade mark. Those acts are clearly aimed at the pursuers' business. That business is centred in Scotland, and it is in my opinion obvious that the defenders' actings are intended to have their main effect in Scotland. In these circumstances I am of opinion that the requirement that the effect in Scotland of the website should be significant is plainly satisfied, and that accordingly the defenders can be regarded as threatening a delict in Scotland. I accordingly conclude that the Scottish courts have jurisdiction over the defenders.” Bonnier media Limited v Smith http://www.scotcourts.gov.uk/opinions/DRU2606.html

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U.S. Personal JurisdictionU.S. Personal Jurisdiction

“Thus, adopting and adapting the Zippo model, we conclude that a State may, consistent with due process, exercise judicial power over a person outside of the State when that person (1) directs electronic activity into the State, (2) with the manifested intent of engaging in business or other interactions within the State, and (3) that activity creates, in a person within the State, a potential cause of action cognizable in the State's courts. Under this standard, a person who simply places information on the Internet does not subject himself to jurisdiction in each State into which the electronic signal is transmitted and received. Such passive Internet activity does not generally include directing electronic activity into the State with the manifested intent of engaging business or other interactions in the State thus creating in a person within the State a potential cause of action cognizable in courts located in the State” ALS Scan Inc. v Digital Service Consultants Inc. 63 USPQ 2d 1389 (4th Cir. 2002)

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U.S. Personal JurisdictionU.S. Personal Jurisdiction“Similarly, in Young v. New Haven Advocate, two newspapers in Connecticut posted on the internet articles about the housing of Connecticut prisoners in Virginia that allegedly defamed a Virginia prison warden. The Fourth Circuit held that Virginia could not exercise personal jurisdiction over the Connecticut defendants because “they did not manifest an intent to aim their websites or the posted articles at a Virginia audience.” Following its decision in ALS Scan, Inc. v. Digital Service Consultants, it reasoned that “application of Calder in the Internet context requires proof that the out-of-state defendant’s Internet activity is expressly directed at or directed to the forum state.” It observed that more than simply making the news article accessible to Virginians by defendants’ posting of the article on their internet sites was needed for assertion of jurisdiction: “The newspapers must, through the Internet postings, manifest an intent to target and focus on Virginia readers.”” Revell v Lidov 317 F.3d 467 (5th Cir. 2002)

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U.S. Personal JurisdictionU.S. Personal Jurisdiction

“Cases citing a defendant's knowledge of the effects of its tortious conduct on an industry centered in the forum state to support a finding of jurisdiction under the effects test are inapposite. In exercising jurisdiction, those courts concluded that the defendant's knowledge of industry-wide effects in the forum state in conjunction with other evidence of express aiming at the forum state established purposeful availment under the effects test. Thus, those cases merely hold that such knowledge is relevant to any determination of personal jurisdiction. They do not establish that such knowledge, by itself, establishes express aiming. Indeed, DVD CCA does not cite, and we have not found, any case where a court exercised jurisdiction under the effects test based solely on the defendant's knowledge of industry-wide effects in the forum state.” Pavlovich v DVD Control Copy Association Inc 65 USPQ2d 1422 (Sup. Ct. Cal. 2002)

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US Personal JurisdictionUS Personal Jurisdiction

“As Zippo and the Courts of Appeals decisions indicate, the mere operation of a commercially interactive web site should not subject the operator to jurisdiction anywhere in the world. Rather, there must be evidence that the defendant "purposefully availed" itself of conducting activity in the forum state, by directly targeting its web site to the state, knowingly interacting with residents of the forum state via its web site, or through sufficient other related contacts.” Toys “R” US, Inc. v Step two, S.A. 65 USPQ2d 1628 (3rd Cir. 2003)

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Defamation Defamation


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Where Defamation OccursWhere Defamation Occurs» “Harm to reputation is done when a defamatory publication is comprehended by the

reader, the listener, or the observer. Until then, no harm is done by it. This being so it would be wrong to treat publication as if it were a unilateral act on the part of the publisher alone. It is not. It is a bilateral act - in which the publisher makes it available and a third party has it available for his or her comprehension.”

» “In defamation, the same considerations that require rejection of locating the tort by reference only to the publisher's conduct, lead to the conclusion that, ordinarily, defamation is to be located at the place where the damage to reputation occurs. Ordinarily that will be where the material which is alleged to be defamatory is available in comprehensible form assuming, of course, that the person defamed has in that place a reputation which is thereby damaged. It is only when the material is in comprehensible form that the damage to reputation is done and it is damage to reputation which is the principal focus of defamation, not any quality of the defendant's conduct. In the case of material on the World Wide Web, it is not available in comprehensible form until downloaded on to the computer of a person who has used a web browser to pull the material from the web server. It is where that person downloads the material that the damage to reputation may be done. Ordinarily then, that will be the place where the tort of defamation is committed.” Dow Jones & Company Inc. v Gutnick [2002] HCA 56 (10 December 2002) Per Gleeson J.

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Where Defamation OccursWhere Defamation Occurs

“However, such results are still less than wholly satisfactory. They appear to warrant national legislative attention and to require international discussion in a forum as global as the Internet itself. In default of local legislation and international agreement, there are limits on the extent to which national courts can provide radical solutions that would oblige a major overhaul of longstanding legal doctrine in the field of defamation law. Where large changes to settled law are involved, in an area as sensitive as the law of defamation, it should cause no surprise when the courts decline the invitation to solve problems that others, in a much better position to devise solutions, have neglected to repair.” Dow Jones & Company Inc. v Gutnick [2002] HCA 56 (10 December 2002) Per Gaudron J.

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Defamation on the InternetDefamation on the Internet» Is material placed on a website and made available through the internet a

“newspaper” or a "broadcast" under the Libel and Slander Act triggering the notice and limitations provisions of Sections 5(1) and 6 of the Act.?

» “In my view, the purpose and scheme of the notice provision in the Libel and Slander Act are to extend its benefits to those who are sued in respect of a libel in a newspaper irrespective of the method or technique of publication. To use the words of Justice Lax, “a newspaper is no less a newspaper because it appears in an online version”. Weiss v. Sawyer, (2002) 61 O.R. (3d) 526 (Ont. C.A.)

» “The internet, sometimes more than traditional broadcast media, reaches a mass audience. It uses the same infrastructure common to radio and television, as set out in the Act. I conclude therefore, that placing material on the internet, via a website, where it may be accessed by a large audience, constitutes broadcasting within the meaning of the Libel and Slander Act.” Bahlieda v. Santa, (2003-04-02) ONSC 02-0017

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Trademarks Trademarks


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UDRP ProceedingsUDRP Proceedings» WIPO received its 5,000th domain name case under the Uniform Domain Name

Dispute Resolution Policy (UDRP) this month.

» The Center has handled over 15,500 cybersquatting cases under specific dispute resolution policies, bringing the total number of cybersquatting cases filed with WIPO to 20,511. The Center is receiving new UDRP cases at an average rate of three per day, suggesting that the abusive registration of trademarks as domain names continues.

» A review of the cases received shows the multinational nature of the phenomenon. The Center has so far processed disputes in ten languages - Chinese, English, French, German, Japanese, Korean, Norwegian, Portuguese, Russian, Spanish. The geographical distribution of parties involved in UDRP cases filed with the WIPO Center spans 110 countries. The top five filing countries are United States of America (46.8%), United Kingdom (9%), France (6%), Spain (5.5%), and Germany (5.1%). The top five respondent countries are United States of America (44%), United Kingdom (9.4%), Spain (6%), Republic of Korea (5.2%) and Canada (3.9%). WIPO Press Release Geneva, May 20, 2003

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CIRA DNDRPCIRA DNDRP

» For cases decided under CIRA Domain Name Dispute Resolution Policy, see, http://www.cira.ca/en/cat_dpr_decisions.html

־ Red Robin International, ־ Browne & Co. Ltd./Lteé Bluebird Industries־ Biogen, Inc־ Cheap Tickets and Travel Inc.־ Elysium Wealth Management Inc.־ Canadian Broadcasting Corporation/Société Radio-Canada־ Air Products Canada Ltd / Prodair Canada Ltée ־ Trans Union LLC1491070 Ontario Inc.transunion.ca

» Loads of cases under U.S. Anti-Cyber-squatting legislation

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Passing-off/Trade-mark InfringementPassing-off/Trade-mark Infringement» “Has there been a misrepresentation that amounts to a deception?

That is to say, when CDNE uses lawsocietyofbc.ca or lsbc.ca to attract members of the public to websites other than the Society's for the purpose of generating income (that is to say uses the goodwill of the society for CDNE's own profit as Mr. Wright conceded during oral submissions) is there a good argument that that second requirement for passing off has been met? I think there is. I think that in part because of what is indicated in the case of British Telecommunications plc and Another v. One In A Million Ltd. which is a case in the English Court of Appeal reported at [1998] 4 All E.R. 476.” Law Society of British Columbia v Canada Domain Name Exchange Corporation 26 2002 BCSC 1249

» See also, Bonnier media Limited v Smith http://www.scotcourts.gov.uk/opinions/DRU2606.html

Barry SookmanPartner, McCarthy TétraultChair, Internet and Electronic Commerce Law Group (Toronto)[email protected](416) 601-7949

www.mccarthy.ca

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Toronto Computer Lawyers Group

Wednesday May 28, 2003McCarthy Tétrault

Suite 4700, TD Bank TowerToronto, ON

3639894

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