Jun 1, 1998
1998 Canadian Legislative and Judicial Updates
by Gary Dunn

I. SUMMARY

In the context of the Internet, this paper provides a review of selected legislative and judicial activity, primarily relating to trade-marks and copyright, and describes the recent proposals to reorganize the .CA. (Canadian) domain name space.

The paper also makes the point that many in the international community are concerned about domain name allocation and retention in the major top level domains (.COM, .NET, .ORG. and .EDU) as a result of the primacy of U.S. law. The paper predicts an expansion into domains other than the .COM domain, and by implication encourages the use of the .CA domain by Canadian residents as a way of ensuring that domain name legal issues are governed by local trade-mark law.

The paper goes on to discuss recent judicial decisions relating to privacy, criminal, employment and defamation law, with the intention of high lighting potential legal issues relating to the Internet. At the same time, the paper implicitly draws attention to the fact that subtle (and often significant) differences exist between U.S. and Canadian law - as, for example, with respect to defamation.

In recognition of the need for "just in time" information, the paper includes endnotes of links to Internet sources providing Canadian legal information.

II. INTRODUCTION

Marshall McLuhan said of television that "the medium is the message" and predicted "the global village". The Internet seems to be the platform that will take globalization and the ability to freely exchange information and ideas to the heights envisioned by Mr. McLuhan some fifty years ago.

Even so, cultural and legal differences are unlikely to evaporate. Even a close and apparently similar neighbour such as Canada can have different cultural attitudes than the U.S., often as a result of different historical experiences. This shows up in materially different approaches to things such as cultural sovereignty, methods of doing business, foreign investment, health care, freedom of speech, and the relationship between the individual and the state.

We can expect social values and legal systems to grind, and to see an increased need to cooperate in the face of this diversity.

III. TRADE-MARKS

A. LEGISLATION

Legislation in the nature of an intellectual property improvement bill may be introduced to Parliament as early as 1998, and is expected to address "non-controversial matters relating to the administration and interpretation of the Trade-Marks Act".

Additionally, the Registrar of Trade-marks is proposing to make changes to the trade-marks opposition process by way of changes to the regulations to the Trade-marks Act and the Opposition Board Practice. Generally, the changes are procedural in nature, although in certain cases the proposals could have a substantive effect on a party's rights - for example, an opponent would not have an automatic right to submit reply evidence, oral cross-examination would only be available after all parties have filed their evidence, and the Opposition Board would cease its current practise of granting automatic initial extensions of time for each stage of the opposition. A more detailed summary of the proposed changes is available at the Canadian Intellectual Property Office (CIPO) web site(1). See also Colbert and Fyfe, Opposition Before the Canadian Trade-Marks Office, 1998 CIPR 173.

Electronic filing is on the horizon, but no timetable for implementation has been set. Currently, the Registrar is encouraging applicants on a voluntary basis to submit electronic copies of applications, although the paper copy remains the official version.

B. JUDICIAL ACTIVITY

Effective January 1, 1998, a full case management system has been adopted by the Federal Court of Canada with the goal of moving cases though the system in a timely manner - see McKeown, Mr. Justice W.P., Expert and Survey Evidence in Patent and trademark Cases; Proposed Federal Court Case Management Procedures (1997) CIPR 1.

A domain name dispute highlighted trade-mark litigation in 1997, providing guidance on the availability of interlocutory injunctions to restrain the use of a domain name potentially conflicting with a registered trade-mark - ITV Technologies, Inc. v. WIC Television Ltd. [1997] F.C.J. No. 1803 (F.C.T.D.), DRS 98-02239, Court File No. T-1459-97.

ITV Technologies Inc. carries on the business of Internet broadcasting from Vancouver, B.C. using the domain itv.net. WIC Television Ltd. has operated, continuously since 1974, a television station in Edmonton, Alberta as "CITV". WIC is the holder of two " ITV" trade-marks, and also uses the domain itv.ca. ITV sought to have the WIC trade-marks expunged, and in response WIC sought an interim, interlocutory and permanent injunction restraining ITV from using the domain itv.net.

The Federal Court of Canada issued an interim injunction in November, 1997 ordering ITV to stop operating a web site with the address itv.net. At the subsequent hearing of the application for an interlocutory and permanent injunction, the Applicant's request was refused. The court felt that there was no evidence of established, irreparable harm, and concluded that the harm alleged by WIC was speculative. The court felt that the existence of confusion was not in itself proof of a lessening of good will leading to irreparable harm - harm not capable of compensation with money. See also Christopher Gora, Christopher Harland and Christopher Kent (1998) Can. Bar Rev. 396 for a detailed discussion of the criteria used by Federal Court judges when determining entitlement to an interlocutory injunction.

The court was also encouraged to refuse the application based on ITV's undertaking to indicate clearly on its' web site that it is not affiliated with CITV, to provide a link to the CITV web site, not to broadcast any productions of CITV or bearing the trade-mark ITV, and to maintain accounts or revenues and customers until the trial. It remains to be seen whether infringement will be found when the case is ultimately decided.

In Tele-Direct (Publications) Inc. v. Canadian Business Online Inc. (1997) 77 C.P.R. (3d) 23 (F.C.T.D.), an injunction was sought to prevent the defendant from using the trade-marks "Yellow Pages" and the "walking fingers" logo on its web site. The court declined to find a loss of distinctiveness in the plaintiff's trade-marks based on third party use occurring in the U.S., where the trade-marks were not protected.

In Prologic Systems Limited v. Prologic Corporation, Jan. 6, 1998, T-2765-93 (F.C.T.D.), the applicant sought to have a trade-mark expunged for confusion. The court reminded us that the test is not whether the nature of the applicant's services might be confused with the respondents, but whether the consuming public might believe that the services originated from the same source.

The Federal Court of Appeal decided the question of how far the Trade-marks Act will go to protect famous trade-marks used in relation to completely different wares or services - Pink Panther Beauty Corporation v. United Artists Corporation, March 30, 1998, A-365-96. (FCAD)(2). In a split decision the court, based on a finding that the mark had a high degree of public recognition, decided that the trade-mark deserved a high degree of protection, and concluded that confusion was possible.

Mcdonald, J.A. justified his decision on the basis that Pink Panther Beauty Corporation sought to benefit from the goodwill associated with the plaintiff's trade-mark, and that the average consumer would at least be reminded of the trade-mark when it saw the name Pink Panther. He then came to the conclusion that an average consumer would believe that the products were being "sold by, approved by or endorsed by the Respondent", without having any evidence of confusion before him.

In March, 1998, a U.S. District Court judge ruled in Los Angeles that the ownership of avery.net and dennison.net by a Vancouver, B. C. company diluted the Avery Dennison name - Avery Dennison corp. v. Sumpton (Freeview), CV 97-407JSL (C.D. Cal. 3/19/98. Freeview Listings provides a service of setting up e-mail addresses using common last names. It has registered domain names numbering in excess of 12,000, which include the plaintiff's trade-marks. Avery Dennison Corp. had previously reserved avery.com and averydennison.com. The court found the Freeview guilty of dilution, and ordered it to relinquish the domain names avery.net and dennison.net. The case is under appeal.

For domain names, 1998 also promises to be a year in which "use" by domain name holders in the context of trade-mark law receives even closer scrutiny.

C. REGISTERING DOMAIN NAMES AS TRADE-MARKS

The U.S. Patent and Trademark Office (USPTO) has declared that an applicant must offer services via the Internet in order to register a domain name as a trade-mark - Trademark Examination of Domain Names(3).

While an applicant for a Canadian trade-mark for services must prove that the services are offered in Canada, it is unlikely that the services must also be offered via the Internet. Compliance with subsection 3(2) of the Trade-marks Act, which requires that the trade-mark must be "used or displayed in the performance or advertising of" the services, should be sufficient to qualify as "use" for purposes of trade-mark entitlement.

D. USPTO REVISED TRADE-MARK CLASSIFICATIONS

CIPO has not provided guidance on the re-classification of computer related goods and services similar to the recent changes made by the USPTO(4).

IV. THE CANADIAN DOMAIN NAME SPACE

The Internet Assigned Numbers Authority (IANA) has delegated to the .CA Domain Registrar the authority to issue top level domain names with the suffix ".CA". The .CA domain name space has been organized on a geographic basis - for example, "domain".bc.ca.

The Registrar has not delegated his power with respect to the management of any of the subdomains. This is in contrast to the U.S., where the Registrar is willing to and has delegated the power to manage subdomains.

Fundamental changes (the "proposal") are being contemplated to the .CA domain name space(5). The target date for implementation was May 1, 1998, now expected to be January 1, 1999.

A. NAME APPROVAL

The geographic structure of the .CA domain name space will disappear with the over haul of the domain name space.

For the present, guidelines for name approval can be found with the application form for a domain name(6). To qualify for the ".ca" suffix, the highest level name in the domain, one must be incorporated federally, have a registered trademark in Canada, or have offices or points of presence in more than one province. To qualify for the provincial level (.bc.ca), one must have offices or points of presence in more than one location in the province, or be a government agency, educational institution, or hospital. The balance of names will be granted in the municipal sub domain (for example, vancouver.bc.ca). Proof of qualification is required for all names other than at the municipal level. The proposal does not provide for a transitional period to allow migration from the provincial or municipal levels to the top level.

The proposal requires that applicants must, in most cases, use the services of an agent appointed by the .CA domain authority.

The Registrar will permit an organization to register one name only. It is difficult to change that name later. The proposal will remove this limitation. In keeping with the desire of the Canadian Registrar that domain names bear a close connection to an organization's name, two character "names" are also closely looked at before they are approved.

Geographic place names have been reserved by the Registrar, as have all one letter names. There is nothing in the Registrar's policies to prevent a name from being granted in the .CA domain which is identical to another name in one of the other top level domains, provided that it meets the criteria for registration in Canada.

A "WHOIS" for the Canadian name space was established in March, 1998(7).

B. TENURE

Currently, the Registrar in his policies makes it clear that no rights are conferred by the granting of a domain name. This was done in an attempt to limit his liability as a party to the allocation process.

The proposal contemplates a five year term for each name in return for a fee of $100. Not surprisingly, this part of the proposal has been criticized for facilitating people to claim domain names with the express purpose of selling them to others.

C. DISPUTE RESOLUTION

Presently, there is no policy in place regarding conflicts over domain names, nor is one contemplated by the proposal. This is viewed by many as a serious inadequacy, and one that can only encourage litigation.

If a dispute arises, the Registrar's policy is to look to the parties to resolve it directly, or through the courts.

Given that the four top level domains (.COM, .EDU, .NET and .ORG) are subject to U.S. law, the enforceability of foreign judgements relating to domain name allocation and retention is a serious concern to many in the international community. Freeview's experience will do nothing to alleviate this fear in Canada, and one can expect the popularity of the .CA domain name space, among others, to increase in popularity both because of concerns over domain name retention.

D. SEARCHING FOR INTERNATIONAL DOMAIN NAMES

A number of international domain name search engines now exist, one of which is Presence Web(8).

V. COPYRIGHT

A. LEGISLATION

Significant amendments to the Copyright Act were passed in April, 1997 - S.C. 1997, c. 24. The next legislative review is scheduled for the year 2000.

The majority of the amendments were effective September 1, 1997, but some provisions have not been proclaimed into law. The general tone of the legislative is one of improving copyrights and improving cash flow to record produces, book producers and copyright collecting societies at the expense of broadcasting and education. For a discussion of the amendments in more detail, see David Vaver, The Copyright Amendments of 1997: An Overview, 12 I.P.J. December, 1997.

The educational, archival, and library exemptions in particular have been described as failing to mirror the practice of education in Canada. As it is, they are much more restrictive than those in the U.S.

An oddity regarding photographs was introduced in the course of changing the rule regarding ownership of commissioned photographs - now the customer will own the copyright only after the "consideration is paid". Among other problems, the section does not deal with what occurs if the first owner (the photographer) disposes of the copyright before payment.

As yet unproclaimed, the amendments provide statutory damage provisions similar to the U.S., with the addition of the right of a court to award punitive damages without limit.

The copyright in unpublished works is now limited to the life of the author plus 50 years, as opposed to previously where copyright existed forever if the work remained unpublished.

B. JUDICIAL ACTIVITY

People who wish to copy yellow page telephone directories can now sleep easier, as it has been determined that there is no copyright in the directory in question - Tele-Direct (Publications) Inc. v. American Business Information Inc. [1996] F.C.J. No. 908 (F.C.T.D.). This judgement was confirmed on appeal in October, 1997.

The plaintiff compiles directories based on subscriber information provided by the telephone companies. Approximately 35% of the listings were based solely on customer information, and the remainder had been enhanced in some way based on contact by the plaintiff's sales representatives. The listings were organized under headings suggested by an industry association, and there were relatively few headings used that were not commonly used in other directories.

When determining if copyright attaches to a compilation, the court continued to look to the "degree of industry, skill or judgement" involved. In other words, the "sweat of the brow" doctrine continues to apply. Originality continues to be a question of fact in each case. Having said that, the case is interesting because it demonstrates an unwillingness on the part of the court to find originality in the organization of facts, and by extension suggests a weakening of the "sweat of the brow" doctrine.

The court also made some interesting observations regarding infringement. It declared that the plaintiff must prove substantial similarity between the two works, and went on to say that in determining the similarity of two works, the court must first exclude from consideration portions not subject to copyright - in this case the majority of the "work". It also declared that an important consideration was whether the two works were in competition with each other - in the present case they were not.

Unlike the U.S., it bears repeating that parody is not a form of criticism, and is not permitted under the fair use doctrine - Compagnie Generale Des Etablishments Michelin - Michelin & Cie v. National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW - Canada), (1997) 2 F.C. 306 (F.C.T.D.)(9). The defendant union had used the "Michelin man" on a pamphlet which was critical of the plaintiff. However, the court also decided that the use of "Michelin man" did not constitute "use" as a trade-mark, as it was not used in conjunction with the provision of goods or services.

Conversations continue to fail to reach the bar of copyright entitlement - Gould Estate V. Stoddart Publishing Co. (1996) 30 O.R. (3d) 520 (Ont. H.C.). The composer's estate refuses to take no for an answer and they have appealed the decision, continuing to argue that the author of a book about Mr. Gould is not entitled to use either photographs taken by the author or his tape recordings of interviews with Mr. Gould. A statutory copyright now exists for improvisational performances, but the court in its' decision was clear that Mr. Gould's interviews were not performances.

C. ENFORCEMENT

On February 18., 1998 the Royal Canadian Mounted Police and the Department of Justice issued a joint communique commonly referred to as the Copyright Enforcement Policy(10). Effectively, the policy signals a shift in enforcement priorities to "copyright piracy on a commercial scale" and away from policing infringement at the retail level.

It is believed that the action is in response to increasingly embarrassing demands being made on the RCMP to enforce copyright infringement of watches and musical performances by street vendors and rock concert vendors.

The policy also sets out four evidentiary requirements that will have to be satisfied before an investigation will be commenced - and generally puts the onus on the complainant to provide evidence of knowledge on the part of the accused, and evidence of copyright. Emphasis is placed on providing a certificate of registration of copyright.

VI. INDUSTRIAL DESIGN

The Industrial Design Office of CIPO issued a practice notice on March 26, 1997 outlining when electronic icons are capable of being registered as industrial designs(11). The practice notice is not binding.

VII. PRIVACY RIGHTS

R. v. Weir [1998] A.J. No. 155 (unreported) questioned the validity of a search warrant relating to the admissibility of evidence from Weir's e-mail. Weir's Internet service provider had discovered an e-mail with an attachment containing child pornography while repairing Weir's e-mail box. The ISP informed police and copied the material for the police, who subsequently obtained a search warrant and searched Weir's residence, seizing a computer and disks.

It was held that the Charter of Rights and Freedoms (Canada) was not violated. While Internet e-mail carries a reasonable expectation of privacy, the court decided that technological nature of it leaves it vulnerable to exposure in repair situations. Neither the police nor the ISP broke the law. In particular, the ISP was a private, unregulated organization which provided the information to police under the belief that it was illegal.

After a lengthy discussion of electronic mail, the court concluded that the public had an expectation that it would remain private. Having said that, the court went on to conclude that the nature of the technology is such that the degree of privacy that can reasonably be expected is less than that provided by the regular postal service, but more than that provided by cellular telephones.

The moral of the story - use innocuous message headers, and hope that your message is split between two or more packets taking different routes to their destination.

The courts have also held, as in the case involving Michelin referred to above, that it is not permissible to use private property (for example, trade-mark rights) in exercising rights granted under the Charter of Rights and Freedoms.

The Freedom of Information and Privacy Act (B.C.) is presently under going a legislative review. It is expected that the provisions of the Act relating to access to information will be relaxed in response to the government's belief that the Act is being used as a political tool against it.

It is not expected that the privacy rights enshrined in the Act will be extended to the private sector at this time.

VIII. MISCELLANEOUS JUDICIAL ACTIVITY

A. CRIMINAL

Not unexpectedly, cyber crime involving child pornography received the most attention from police and prosecutors in 1997.

In Canada, it is an offense to possess child pornography, in addition to the expected prohibitions preventing its' production and distribution.

In R. v. Daniels [1997] N.J. No 242 (NFLDSC), the defendant subscriber to a bulletin board originating in Mexico was found guilty of possession of child pornography, even though a search of Mr. Daniels residence failed to disclose evidence of physical or electronic possession.

B. EMPLOYEE OR INDEPENDENT CONTRACTOR?

The status of an individual in the workplace has a significant impact on rules governing (1) ownership of copyrights created during the term of the relationship, and (2) the obligation to pay severance pay, and (3) determines the extent of the "employer's" obligation to pay a variety of government levies.

In Canada, the first owner of a copyright created during the course of employment is the employer. The converse is true for an independent contractor. In the absence of an agreement to the contrary, the author retains the "moral right" to prevent unauthorized alteration of the work regardless of ownership.

The Copyright Act does not define employment. To determine whether a relationship is one of master/servant, the courts in Brown v. Western Legal Publications (1998) B.C.J. No. 223 confirmed that the answers to the following questions are indicative of the type of relationship:

(1) whether or not the "agent" is limited exclusively to the service of the "principal";

(2) the degree of control that the agent is subject to, including what, when, where, and how tasks are performed;

(3) whether the agent has an investment in what are characterized as the "tools" relating to the agent's service;

(4) whether or not the agent has undertaken any risk in a business sense, or has any expectation of profit associated with the delivery of the services, as distinct from fixed commissions;

(5) whether or not the activity of the agent is a part of the business organization of the principal. Whose business is it?

When considering questions of wrongful dismissal, the courts have also disregarded the parties' apparent intentions - also Brown v. Western Legal Publications:

"The indicia of or status as an employee cannot be frustrated by the plaintiff's filing of his income tax as a 'sole proprietor' or as an independent contractor".

It is conceivable that the courts may also use a similar analysis to determine whether a programmer is an employee or an independent contractor - and determine copyright ownership in the process.

The existence of an employment relationship will also result in an employer being liable to remit income tax, make contributions to the Canada Pension Plan and Unemployment Insurance scheme, and to pay assessments made pursuant to the Worker's Compensation Act (B.C.).

In a recent case, the Minister was in part unsuccessful in his attempt to assess a software developer for failing to remit unemployment insurance premiums in respect of 36 individuals. However, the court discussed at length changes in the modern work environment brought about by technology, and recognized that the traditional rules, relying heavily on the concept of control, will have to change - AirWorks Media Services Ltd. v. Canada (Minister of National Revenue) [1997] T.C.J. No 1105.

In addition to being liable for back payments, an employer can find herself liable for significant penalties for failing to remit. Federally regulated businesses may also find themselves the object of a claim for unjust dismissal under section 240 of the Canada Labour Code.

In the interest of awarding severance pay to an individual who is not an employee, the courts have developed a concept of an "intermediate" relationship, although the amount of severance pay awarded is usually less than in a conventional employment situation - Ashman V. Orphan's Home and Widow's' Friend Society [1993] O.J. No. 104. This concept has more recently been applied to agency relationships. In Marbry v. Avrecan International Inc. (1997) 28 C.C. E.L. (2d) 320, a long term verbal agency agreement relating to the exclusive distribution of Reebok products in British Columbia which was cancelled without notice. The court awarded damages equivalent to 15 months of commission. Among other things, the court looked at the significance of the contract to the plaintiff (75% to 90% of revenue), the degree of control exercised by the defendant, the investment in inventory and showroom, and the time estimated to establish a new arrangement with another distributor.

C. DEFAMATION

A defamation claim in Canada favours the plaintiff to a significant degree more than in the U.S.

In libel (defamation in writing), once "publication" of defamatory material is proved (material damaging the plaintiff's reputation in the minds of right thinking Canadians), then the law presumes:

(1) that the material is false;

(2) that the publisher is malicious (motivated by an undisclosed ulterior purpose or grudge); and

(3) that the publication caused damage.

Once publication is proved, the onus also shifts to the defendant, with only a few defenses. Generally, these are (1) qualified privilege, (2) fair comment, (3) truth, (4) consent, and (5) mitigation. There may also be statutory defenses.

Where the libel concerns a professional or relates to the way in which an individual earns her living, the courts are more willing to find liability and to reward the plaintiff with significant damages.

These presumptions do not apply to trade libel (usually called "slander of goods").

There are also statutory causes of action relating to goods in the Competition Act (Canada), but a discussion of these is beyond the scope of this paper.

Circulation of defamatory articles by an individual resident in Florida about British Columbia residents constituted defamation - Southam Inc. and David Baines v. George Chelekis, et al [1998] B.C.J. No. 848 (BCSC). The case also decided by implication that electronic mail constitutes publication of the defamatory statements.

IX. GOVERNMENT/JUDICIAL RESOURCES

CIPO(12), as a pilot project, is offering access to a text version of its' trade-mark database(13). The data-base includes all pending and registered word trade-marks in Canada. There are significant searching limitations (text based searches only). Trade-mark information in the data base includes wares, services and also designs covered by the registrations, notwithstanding the text based search limitations.

The Supreme Court of Canada has established a trial web site in conjunction with the University of Montreal, which at present is limited to current decisions(14).

The Federal Court of Canada, which generally exercises jurisdiction in intellectual property cases, also maintains a web site with limited reference to recent decisions(15).

And British Columbia has introduced a site for the purpose of making available current court decisions rendered in British Columbia, including the Supreme Court and the Court of Appeal(16).

Last but not least, see also Raciot, Hayes, Szibbo and Trudel, "A Study of the Issues of Liability for Content Circulating on the Internet", 1997(17) commissioned by Industry Canada. Topics covered include copyright, trade-mark, defamation, and obscenity and hate literature.



ENDNOTES - DOWNLOAD THESE URLS

1. http://strategis.ic.gc.ca/sc_mrksv/cipo/con_dis/tm/tmopposition_e.shtmll

2. http://www.fja-cmf.gc.ca/en/cf/1998/orig/html/1998fca22291.o.en.shtmll

3. http://www.uspto.gov/web/offices/tac/domain/tmdomain.shtml

4. http://www.uspto.gov/web/offices/tac/domain/domcl.shtmll

5. http://www.canarie.ca/cdncc/comments

6. http://www.cdnnet.ca/reg-services/index.shtmll

7. http://www.cdnnet.ca/search/index.shtmll

8. http://www.presenceweb.com/anglais/engine.shtmll

9. http://www.fja-cmf.gc.ca/en/cf/1996/orig/html/1996fcaa0474.o.en.shtmll

10. to be posted to the Department of Justice website

11.http://strategis.ic.gc.ca/sc_mrksv/cipo/prod_ser/online/i_design/prnote-e.shtmll

12. http://cipo.gc.ca

13. http://strategis.ic.gc.ca/sc_consu/trade-marks/engdoc/cover.shtmll

14. http://www.scc-csc.gc.ca/services.shtml

15. http://www.fja-cmf.gc.ca/en/cf/

16. http://www.courts.gov.bc.ca/

17. http://strategis.ic.gc.ca/SSG/it03117e_pr115.sgml

Gary Dunn

Gary Dunn is a graduate of the University of Alberta Law School (1975). He specializes in intellectual property and related business law issues relating to computers, information technology, the Internet, and multi-media for all industries. Mr. Dunn is a registered Trade-Mark Agent and a frequent speaker on intellectual property and business matters, particularly relating to electronic commerce, contracting, copyright, trade-marks, content acquisition, and the Internet. Mr. Dunn is also a sessional instructor at the University of British Columbia, where he teaches a course on Internet Law.