Update and Comment on Blacklock’s Latest Move and Mega Motion: Be Careful What You Wish For?

(https://www.blacklocks.ca)

Blacklock’s will be back in the Federal Court tomorrow on December 12, 2018 at 90 Sparks St. in Ottawa at 9:30 AM with a “mega” motion record of almost 3,000 pages. Blacklock’s is certainly very determined.

It badly lost a Federal Court case alleging copyright infringement in 2016, which it did not appeal. It was then ordered to pay costs of $65,000 –  a ruling which it appealed and badly lost. Excerpts from these rulings and links are provided below.

Following these defeats in 2016, there have been innumerable “docket” events in the active cases – see T-2090-14 for example culminating in the current massive motion filed on August 27, 2018. Blacklock’s changed counsel – but only on January 10, 2018. Note that Blacklock’s former counsel was Yavar Hameed, a well respected and experienced public interest Federal Court litigator. Its new counsel is Scott Miller of MBM Intellectual Property Law LLP.

Now, more than four years after the beginning of the “litany of litigation”, as I have called it, that has comprised 17 cases against the Federal government and its agencies, Blacklock’s is seeking in the motion returnable on December 12, 2018 to:

·       Amend old pleadings to add a new cause of action involving circumvention of technical protection measures. This comes more than two years after Justice Barnes ruled during the trial of the first case in 2016 that circumvention of TPMs has not been pleaded and allegations and arguments based on this would not be heard by the Court. Frankly, even if circumvention had been properly pleaded at the original trial, it’s very likely, as explained below, that it would have failed on the facts before the Court and any correct interpretation of the law;

·       Convert these “simplified actions”, which had an upward limit of $50,000 in terms of liability, into normal actions with an enormous theoretical damage potential based, inter alia, upon the assertion that “Statutory damages for circumvention of a TPM may include statutory damages for the library of works behind the TPM. The Locked Articles subject to potential statutory damages in each of the Blacklock's cases is in the 1000's.” (footnote omitted); and,

·       To seek punitive damages based upon extraordinarily unusual and even “personal allegations” and “personal attacks” (according to the Attorney General of Canada) on the Government’s lead senior counsel up to now, Alexandre Kaufman, which might have resulted in his removal from the file.

Interestingly, in what can only be an incredibly ironic  coincidence, Mr. Kaufman has just been appointed as on December 5, 2018 as a Master of the Superior Court of Ontario – an important position in the administration of justice and an overwhelming endorsement of Mr. Kaufman’s personal and professional qualifications. Here’s just one outside-the-courtroom example  of Blacklock’s attacks directed against Mr. Kaufman, who enjoys an outstanding reputation in both the Federal and Ontario courts as a litigation counsel, published author and adjunct professor.

Here are some excerpts from the key documents, which are on the public record, for the December 12, 2018 motion:

      1.     Blacklock’s Notice of Motion and draft amended pleading re Health Canada;
2.     Blacklock’s Written reps;
3.     Attorney General of Canada Factum; and,
4.     Blacklock’s supplemental reps.

As the Attorney General of Canada (“AGC”) summarizes Blacklock’s Motion:

1. There are two parts to this motion, one that deals with allegations made by plaintiff's counsel against Mr. Kaufman as it relates to his handling of freelancers that provided affidavits and another that deals with amendments to the pleadings, amendments that are largely time-barred. Both parts of the motion should, for the most part, be rejected by this Court.

2. As it relates to the first part of this motion, the plaintiff alleges that Mr. Kaufman breached his professional obligations by asking freelance journalists to either attend for cross-examination or withdraw their affidavits on consent. Mr. Miller contends that the act of putting an affiant to an election is the suppression of evidence for which his client is entitled to punitive damages. These facts form the basis of his amendment. There is nothing improper with asking affiants if they are prepared to stand behind an affidavit. An affiant must be prepared to face cross-examination on their evidence. The amendments in relation to Mr. Kaufman's conduct arc improper and irrelevant to any cause of action. They should not be permitted by this Court.

3. As for the second part of this motion, the plaintiff seeks to amend the various statement of claims to: (a) add a claim that the plaintiff owns copyright in all of the articles; (b) add a new cause of action of the circumvention of a technological protection measure ("TPM") under section 41.1of the Copyright Act; ( c) add a claim that the defendant's activities were for a commercial purpose; (d) expand the claim to cover all articles that were available on Blacklock's website during the relevant time and not just the specific articles that were allegedly shared; (e) change the relief sought, including adding new declarations, a permanent injunction, and changing its damages claims to one where the plaintiff may elect either damages or statutory damages. These amendments, which were not brought at the first opportunity, change the nature and substance of the claim.

Below are some comments based upon my concerns as an experienced copyright lawyer who cares about copyright policy and jurisprudence and also as a taxpayer observing the potentially very large claims against the Canadian government and the costs of defending this litany of litigation. First, here’s some background.

Blacklock’s won a Small Claims Court victory in 2015 against the Canadian Vintners Association for $11,470 plus punitive damages of $2,000 plus costs in a judgment that was clearly wrongly decided but not appealed for obvious practical reasons – and which was, in any event, of virtually no precedential value, being a Small Claims Court decision.

On November 10, 2016 Blacklock’s badly lost its first and thus far only Federal Court trial – the substantive result which it did not appeal. It was seeking $17,209.10 plus costs. Let us recall some of what Justice Barnes, a very experienced Federal Court judge, had to say about Blacklock’s in his judgment:

[45] Blacklock’s maintains that this case challenges the viability of its business model including its right to protect news copy behind a subscription-based paywall. The suggestion that Blacklock’s business cannot survive in the face of the minor and discrete use that took place here is essentially an admission that the market places little value on Blacklock’s work-product. All subscription-based news agencies suffer from work-product leakage. But to customers who value easy, timely and unfettered access to news that may not be readily available from other sources, the price of a subscription is worth paying. It also goes without saying that whatever business model Blacklock’s employs it is always subject to the fair dealing rights of third parties. To put it another way, Blacklock’s is not entitled to special treatment because its financial interests may be adversely affected by the fair use of its material. Nothing in these reasons should however be taken as an endorsement of arguably blameworthy conduct in the form of unlawful technological breaches of a paywall, misuse of passwords or the widespread exploitation of copyrighted material to obtain a commercial or business advantage.

Blacklock’s is now presumably but arguably very belatedly placing high hopes on the last sentence, which appears to be meant as a general comment for future litigants and not as an invitation or encouragement to Blacklock’s.  Justice Barnes came to the right decision based upon the evidence before him, which included Blacklock’s use of a paywall and password protection. Litigants always have an obligation to put their “best foot forward at the first opportunity”.

Soon thereafter on December 21, 2016  Blacklock’s got a very unpleasant surprise just in time for Christmas of 2016 in the form of a harsh – though it could easily have been even worse – costs award of $65,000 from Judge Barnes, which I then characterized as a “lump of coal” coming as it did just before Christmas. Here’s some of what I said at that time:

In an unusually trenchant costs award, Justice Barnes of the Federal Court has ruled that Blacklock’s must pay the taxpayers of Canada an “all-inclusive amount of $65,000 plus interest….” This follows decisively upon Blacklock’s clear loss in the first case of what I have called a “litany of litigation” of 11 lawsuits against the Government of Canada and/or its agencies, not to mention several other cases against other parties in the Federal and Ontario courts.

The Court accepted that the Government was entitled to costs based on the mid-level of Column III and double the otherwise payable costs from the date of its early settlement offer of $2,000, which was “...more than double the cost of individual subscriptions for each of the Department of Finance officials who received and read the subject articles over which Blacklock's claimed copyright protection.”

The Court observed that:

[7] …I also reject the Plaintiff's argument that this case raised "strong public interest considerations". Rather, this case was about the Plaintiff's attempt to recover disproportionate damages without any apparent consideration to the legal merits of the claim or to the costs that it imposed on the taxpayers of Canada.

[8] Any reporter with the barest understanding of copyright law could not have reasonably concluded that the Department's limited use of the subject news articles represented a copyright infringement. Indeed, the fair dealing protection afforded by section 29 of the Copyright Act, RSC, 1985, c C-42, is so obviously applicable to the acknowledged facts of this case that the litigation should never have been commenced let alone carried to trial.

(highlight added)

The Court went on to say that:

[9] I am also troubled by Plaintiff's attempt to claim an excessive amount of damages beginning with its demand for compensation completely divorced from the Department's limited use of the two articles. In no circumstances would Blacklock's losses have exceeded the cost of individual subscriptions by the six officials who read the articles; yet Blacklock's demanded a license fee equivalent to its bulk subscription rate of over $17,000.00. This practice appears to be consistent with Blacklock's usual approach which is to hunt down, by Access to Information requests, alleged infringers and then demand compensation based on an unwarranted and self-serving assertion of indiscriminate and wide-spread infringement. The record discloses that in several instances government departments acquiesced for business reasons and paid the full amounts demanded. In this instance the Department appropriately took a hard line and succeeded in its defence. (highlight added)

In any event, Blacklock’s very predictably lost its appeal on the costs award. As I noted in my blog:

The Federal Court of Appeal (“FCA”) heard Blacklock’s appeal of Justice Barnes’ costs ruling on September 12, 2017 and perfectly predictably dismissed the appeal with costs. The FCA not only ruled “from the bench” but, as I understand, did not even call upon the Attorney General of Canada to respond. As practicing lawyers well know, this means that Blacklock’s did not raise any issues that even needed an oral response. This was a decidedly decisive disposition.

The FCA’s judgment, which is somewhat surprisingly specific for a judgment from the bench, is available here. Notably, the FCA:

·                  Agreed with Justice Barnes that the issues – primarily the fair dealing issue – were “well-settled in the jurisprudence and, thus, neither novel nor of public significance” (para. 5)

·                  Ruled that Justice Barnes’ costs award was “amply supported” by the factors in the rules and that the Federal Court considered, among other things:

o   the respondent’s success in the litigation and the one-sided nature of the outcome,

o   the appellant’s litigation strategy,

o   the existence of a settlement offer,

o   the complexity of the litigation, and

o   the actual costs of the respondent.

(para7)

Flashing forward to the current motion and nearly two years of inconclusive proceedings before two Case Management Judges of the Federal Court, here are some further comments on the current mega motion.

If Blacklock’s somehow succeeds in getting its proposed amendments allowed, its troubles may seriously increase. It will have to convince one or more trial judges and potentially the FCA and SCC that that the law and the facts are on its side, despite the fact it chose to go forward with the facts that have already been presented to Justice Barnes – who clearly ruled adversely. In this country, we have principles known as “issue estoppel” and “res judicata” – and in common English for litigants to put their “best foot forward at the first opportunity”.

Blacklock’s has a tough road ahead. It faces a potentially very large costs award – even if it wins this pleadings amendment motion – and far more if it succeeds on the motion but loses at the trials.

Regarding the substance of Blacklock’s proposed amendments, many if not most copyright lawyers would be surprised and, indeed, upset if Blacklock’s succeeds. Blacklock’s theory of circumvention is based on the assertion that:

Circumvention of the Blacklock’s TPM includes:

(i) sharing of a unique subscriber password with someone who is not

authorized to have the unique subscriber password;

(ii) sharing of a Locked Article accessed from a single user subscription to

any party; or

(iii) unauthorized person(s) or entity(s) requesting and thereafter receiving a

Locked Article from anyone having access either directly or indirectly to

the Locked Article.

Even if these facts can be proven, it’s arguably extremely unlikely that any court could correctly conclude that they amount to actionable “circumvention”.  This will not be decided on this motion – where Blacklock’s needs only to establish a “reasonable prospect of success.” However, it’s very arguable that Blacklock’s has no “reasonable prospect of success” on the circumvention claims - which is the required threshold it must meet according to the case law to amend at this late stage – even leaving aside other issues, such a limitation periods. Even if it somehow succeeds Blacklock’s will have a very uphill battle going forward if it crosses this threshold.

Recall that Justice Barnes made it clear in para. 45 of this substantive judgement quoted above that: “It also goes without saying that whatever business model Blacklock’s employs it is always subject to the fair dealing rights of third parties. To put it another way, Blacklock’s is not entitled to special treatment because its financial interests may be adversely affected by the fair use of its material.” That statement is NOT obiter dicta. It is the heart of the “ratio decidendi” of this decision and is a binding and very precedential.

If the Court ultimately concludes that the mere copying of material or even an entire article behind a paywall in a manner that amounts to fair dealing is actionable circumvention, the legislation will need to be changed. However, when one looks at the legislation and the difference between “access” and “copy” control, the legislation is sufficiently clear to show that what is going on here is not actionable circumvention. Even if there is circumvention leading to unauthorized copying, the government departments are not engaged in a “service” of offering unauthorized copying – which is what s. 41.1 requires.

Leaving aside proper interpretation of the statute for the moment (which, of course, the Court cannot avoid), consider from a common-sense point of view how incongruous it would be for a court to find that merely cutting and pasting from – or even copying an entire article  behind a paywall - is actionable circumvention. This happens countless millions of times a day when people share information for fair dealing purposes that may be on a password protected newspaper website such as the New York Times, The Economist, the Toronto Star, the Globe and Mail and even much smaller niche media such as Hill Times and the Wire Report, which may  use password protected paywalls of varying sophistication and be more or less “effective” as a putative TPM. But they don’t sue their customers – who subscribe because they value the utility of the information and may actually need to conveniently share it for research purposes, for example. Above all, the intention of the legislation is stop hacking, decrypting, bypassing or “breaking” of digital locks or other devices to gain unauthorized “access” (none of which is happening here) – not to nail anyone who shares or reads any material behind a paywall – especially when such activity is “fair dealing”. In any case, “reading” is not something that is even covered by the Copyright Act.

It is obvious that Blacklock’s intends to rely – both on this motion – and going forward if it succeeds – on the one and only Federal Court decision we have to date on circumvention, namely Nintendo of America Inc. v. King, 2017 FC 246 (CanLII), <http://canlii.ca/t/h0r1j>

I wrote about that decision extensively on my blog here. The decision should not only not be given “high precedential value”. With all respect to the learned trial judge, the Nintendo decision should be given little if any precedential value.  As I said in my blog:

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.

(highlight added)

Coincidentally, the defendants’ law firm in the Nintendo case was the same firm now representing Blacklock’s – namely MBM Intellectual Property Law LLP.

Blacklock’s also faces significant hurdles if it hopes to win a pot of gold at the end of the rainbow based on large damages award either from copyright infringement or circumvention of all of the articles in its database, or even the thousands of locked articles. Even if liability is somehow established based upon the proposed new pleadings, the amount of statutory minimum damages can be reduced, depending on the circumstances,  to an effectively nominal amount and there is ample case law establishing that statutory minimum damages must bear some correlation to actual damages, which in these cases would likely be at most the cost of a one-year institutional subscription, i.e. $15 to $17 K or so for each of the government departments. The government is under no obligation to have multiyear subscriptions to Blacklock’s.

Blacklock’s also faces some very serious procedural problems on this motion. For example:

·       It waited a very long time to bring this motion – almost two years after Justice Barnes ruled that circumvention needed to be specifically pleaded;

·       Most if not all the facts that Blacklock’s would presumably rely on, including the presence of password protection and how it operates, were before Judge Barnes in the first trial. The principles of stare decisis, issue estoppel and the need to put one’s “best foot forward at the first opportunity” could presumably be in play not only now but even if Blacklock’s gets to go forward;

·       Many if not most of the cases under consideration are now said by the defendants to be statute barred because of the expiration of the applicable limitation period; and,

·       Even if Blacklock’s succeeds in amending the pleadings in some of these case, it could face very large costs consequence because of, inter alia, prejudice to the defendants and the sheer scope of this motion, including the very serious and even “personal” nature of the allegations and attacks against former AGC counsel Alexandre Kaufman ­­­– now Master Kaufman.

Will this turn out for Blacklock’s to be an example of the old adage about “be careful what you wish for”?

HPK