More On Mass Copyright Litigation in Canada – Part I

I have recently written about the Voltage “reverse class action” copyright infringement lawsuit wherein Voltage is trying to sue 50,000 or so people for an effective filing fee of about $0.001 per defendant, and in which Voltage has so far has been unwilling to pay $75,000 for security of costs, despite having been ordered to do so “forthwith” almost 20 months ago on February 2, 2017. The Supreme Court of Canada has refused Voltage’s application for leave to appeal regarding the security for costs issue. Thus, without the payment into court, the Voltage reverse class action lawsuit appears to be stalled with a dead battery. That ligation was launched by Kenneth (“Ken”) Clark of the prominent Toronto law firm Aird & Berlis LLP.

In my previous writing, I also indicated that there have recently been 16 other lawsuits (see below) brought by Mr. Clark on behalf of various film companies against hundreds if not thousands of individual Canadian ISP account holders.  For example, the Bodyguard Productions case, has 726 “Doe” defendants. Another, the Morgan Creek case, has 352 Doe Defendants.

I also wrote that I do not know at this time what connection, if any, Voltage has with these 16 or so mass litigation actions. However, there are at least some possible connections. There is apparently a possible connection between Voltage and Morgan Creek in action T-71-18. There is also an apparent possible connection between Voltage and Dallas Buyers Club in action T-1674-16.

According to a recent article posted August 22, 2018 by Ahmad Hathout in the WireReport – a paywalled niche news service – and my own investigation, there have been a number of settlements, including several for as much as $5,000, in which “…a good number of defendants were also represented by lawyers with copyright law practices.” 

I was asked about this for the WireReport story and was quoted as follows:

“I can’t comment on any particular settlement because I don’t know the

specific facts,” Howard Knopf, a lawyer at Macera and Jarzyna, said in an

email. “However, $5,000 is the maximum statutory damages amount that

could ever be awarded for non-commercial activity in these types of cases

even in a contested proceeding.”

He added: “Canadian courts are clear that statutory damages must somehow

correlate to actual damages, which in these en masse BitTorrent situations

are arguably less than $10 for infringement of one work by one individual.

The minimum statutory damage award for non-commercial infringement is

$100. Generally speaking, even if a settlement amount has to be paid – which

is far from clear in these situations — one would expect that it would be at the

lower end and not the upper limit.”

(highlight added)

In other words, it has become apparent that – for reasons which are far from apparent – some experienced copyright lawyers are filing consents to judgement on behalf of their clients in these lawsuits at the maximum end of $5,000, and the clients are presumably paying that plus whatever legal fees their lawyers charge in addition. I, and other knowledgeable copyright lawyers, are wondering what type of circumstances might suggest a settlement at the “max” end of statutory damages for non-commercial activity at the very beginning of the process.  I have also been advised of instances where these lawsuits have been discontinued as against particular Doe defendants without any payment whatsoever in settlement.

In any event, there has just been a potentially very important new development in mass copyright litigation in the USA which could potentially have great significance in Canada as well.

On August 27, 2018 the 9^th Circuit Court of Appeals  – one of the two most important appellate level courts in American copyright law, next only to the US Supreme Court - ruled as follows in the case of Cobbler Nevada v. Gonzales:

The district court properly dismissed Cobbler Nevada’s claims. The direct infringement claim fails because Gonzales’s status as the registered subscriber of an infringing IP address, standing alone, does not create a reasonable inference that he is also the infringer. Because multiple devices and individuals may be able to connect via an IP address, simply identifying the IP subscriber solves only part of the puzzle. A plaintiff must allege something more to create a reasonable inference that a subscriber is also an infringer. Nor can Cobbler Nevada succeed on a contributory infringement theory because, without allegations of intentional encouragement or inducement of infringement, an individual’s failure to take affirmative steps to police his internet connection is insufficient to state a claim.

The US Court’s stance on contributory infringement is consistent with the Supreme Court of Canada’s position on “authorization” in the 2004 decision in CCH Canadian v Law Society of Upper Canada, in which the SCC held that:

“…a person does not authorize infringement by authorizing the mere use of equipment that could be used to infringe copyright. Courts should presume that a person who authorizes an activity does so only so far as it is in accordance with the law” (para 38).

Cobbler is one of the top six mass BitTorrent litigation plaintiffs in the USA. This ruling, unless it is somehow overturned en banc or in the US Supreme Court (both of which possibilities I believe to be highly unlikely), may mark the beginning of the end of mass copyright litigation directed against BitTorrent users in the USA.  It is, of course, arguably of immense potential significance to the mass litigation now underway in Canada. While American precedents are not binding in Canada, they can be useful and important in the absence of specifically applicable Canadian jurisprudence. This could be just such an instance, especially since it is consistent with the current controlling decision of the Supreme Court of Canada.

As usual, I reiterate and, in this case, emphasize that this blog does not provide legal advice. Anyone involved in Canadian mass litigation should consult a lawyer – preferably someone with some copyright expertise.  Since most of my readers are lawyers, they will hopefully know what to do.

Stay tuned for more on related issues.

Meanwhile, for reference purposes, here is a list of the fifteen mass litigation cases referred to above plus the Voltage “reverse class action” case. The links will take readers to the Court’s “docket.” Thanks to Alan Macek and his invaluable IPPractice site for facilitating this compilation.

AIRD & BERLIS LLP “DOE” CASES 

2016-2018

As of August 29, 2018 (Revised August 31, 2018)

	FCT File #	Style of Cause	Type of Case	Date
1.	T-662-16	VOLTAGE PICTURES ET AL v. JOHN DOE ET AL (Salna)	Copyright Infringement [Applications] [note – $75,000 security for costs remains unpaid]	2016-04-26
2.	T-1614-16	CELL FILM HOLDINGS LLC v. DOE #1 ET AL	Copyright Infringement [Actions]	27-SEP-2016
3.	T-1674-16	DALLAS BUYERS CLUB, LLC v. DOE #1 ET AL	Copyright Infringement [Actions]	2016-10-05
4.	T-1692-16	HYBRID, LLC v. DOE #1 et.al.	Copyright Infringement [Actions]	2016-10-07
5.	T-2177-16	ME2 PRODUCTIONS, INC. v. DOE #1 ET AL	Copyright Infringement [Actions]	2016-12-19
6.	T-264-17	LHF PRODUCTION INC v. DOE #1 ET AL	Copyright Infringement [Actions]	2017-02-24
7.	T-265-17	CRIMINAL PRODUCTIONS v. DOE#1 ET AL	Copyright Infringement [Actions]	2017-02-24
8.	T-481-17	WWE STUDIOS FINANCE CORP. v. DOE #1 et.al.	Copyright Infringement [Actions]	2017-03-31
9.	T-908-17	UN4 PRODUCTIONS, INC. v. DOE #1 et.al.	Copyright Infringement [Actions]	2017-06-21
10.	T-909-17	COLOSSAL MOVIE PRODUCTIONS, LLC v. DOE #1 et.al.	Copyright Infringement [Actions]	2017-06-21
11.	T-1085-17	HEADHUNTER LLC v. DOE #1 ET AL	Copyright Infringement [Actions]	2017-07-24
12.	T-1086-17	JUSTICE EVERYWHERE PRODUCTIONS LLC v. DOE #1 ET AL	Copyright Infringement [Actions]	2017-07-24
13.	T-1087-17	VENICE PI, LLC v. DOE #1 et. al.	Patent [Sic?] Infringement	2017-07-24
14.	T-1918-17	BODYGUARD PRODUCTIONS, INC. v. DOE #1 et.al.	Copyright Infringement [Actions]	2017-12-18
15.	T-1926-17	WIND RIVER PRODUCTIONS, LLC v. DOE #1 ET. AL.	Copyright Infringement [Actions]	2017-12-18
16.	T-71-18	MORGAN CREEK PRODUCTIONS, INC. v. DOE #1 et.al.	Copyright Infringement [Actions]	2018-01-12
17.	T-513-18	POW NEVADA, LLC v. DOE #1 ET AL	Copyright Infringement [Actions]	2018-03-16

HPK

PS - August 31, 2018.
Thanks to a vigilant lawyer who pointed out that I missed one of the "Doe" cases -  namely #12 above which is the JUSTICE EVERYWHERE case. There are now 16 cases in addition to the "reverse class action".

Standard of Review: The Beginning of the End or the End of the Beginning?

(Wikimedia)

The deadline for applications for leave to intervene the Supreme Court appeals involving Bell Canada and the “simultaneous substitution” or “simulcast” issue is August 31, 2018 by my calculation.

It very much looks like the real issue is not so much about the Superbowl and simultaneous substitution but what the SCC wants to do about the “sempiternal” issue of “standard of review” and the landmark Dunsmuir case that was supposed to be the beginning of the end of uncertainty but has instead become something more like the end of the beginning about uncertainty.

In granting leave to appeal, the Court made the very unusual statement that:

The Court is of the view that these appeals provide an opportunity to consider the nature and scope of judicial review of administrative action, as addressed in Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, 2008 SCC 9, and subsequent cases. To that end, the appellants and respondent are invited to devote a substantial part of their written and oral submissions on the appeal to the question of standard of review, and shall be allowed to file and serve a factum on appeal of at most 45 pages. 

The Court has also taken the unusual step of appointing amicus curiae  to assist on these case and a related case.

A crucial aspect of this discussion is the presumption of “expertise” by administrative tribunals. In a recent posting by the Copyright Board of remarks by its Chair Justice Robert Blair at an event on May 1, 2018, the learned Chair effectively admitted that the Board may lack expertise in certain respects and that the Board’s expertise may depend upon who is chosen to be a member or even the Chair:

I think it is also important to keep in mind that, while the Board’s staff, and at least the current Vice-Chair, are the repositories of a great deal of expertise in the rate-setting process, all members of the tribunal at the hearing may not have that same in-depth knowledge. The Chair must be a sitting or retired superior court judge (where very little intellectual property work, much less copyright work, is done), and to date has not come from the Federal Court system where they actually know something about those subjects! In addition, none of the present members is an economist. In this sense, the old adage that applies to every good counsel, in any setting, is relevant: know your adjudicator and your forum.

Copyright lawyers will know that the Supreme Court has carved out a special niche for the Copyright Board, essentially holding it to the stricter “correctness” standard because the same questions of law concurring the Copyright Act can arise both before the Board and in the courts. See
Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, [2012] 2 SCR 283, 2012 SCC 35 (CanLII), <http://canlii.ca/t/fs0v9>

One can only hope that this niche is preserved. Copyright law is sometimes very arcane and Copyright Board rulings can be very important in many ways. It is perfectly reasonable, if I can put it that way, that the Copyright Board be held to the standard of correctness on questions of law.

Interveners, start your engines.

HPK

Will the Canadian Voltage Reverse Class Action Now Fizzle?

I have been writing about Voltage, copyright trolls,  and mass litigation in Canada and elsewhere for almost seven years (beginning on September 9, 2011  here).

On August 9, 2018 the Supreme Court of Canada dismissed Voltage Pictures et al’s application for leave to appeal from a judgment from the Federal Court of Appeal (FCA) affirming the Federal Courts’ February 2, 2017 order regarding security for costs but for very different reasons. That order required that Voltage must pay $75,000 into court for security for costs “forthwith” pursuant to Federal Courts Rule 416.  This case is the very controversial “reverse class action” in which Voltage and  a few others are trying to sue more than 50,000 individuals at once. This is an unprecedented and arguably completely unforeseen and unintended use of the relatively new Federal Courts rules permitting class actions.

For reasons that are not apparent, the FCA’s decision has only just been posted very belatedly on August 13, 2018, although it was rendered on November 15, 2017. I presume that this was an oversight. It’s unfortunate, because this proceeding was a major milestone in the ongoing efforts by Voltage and others to sue tens of thousands of individuals through this reverse class action and in approximately 15 current mass litigation law suits naming hundreds of “Does”. For example, one such action, that of Bodyguard Productions, has 726 “Doe” defendants. Another, Morgan Creek, as 352 Doe Defendants. Both of these strategies – namely the “reverse class action” and the 15 or so mass litigation lawsuits – are being pursued by the law firm of Aird and Berlis, LLP. The lead counsel is Mr. Kenneth “Ken” Clark, whose name has arisen before on this blog. Interestingly, most of these 15 mass litigation proceedings began after the Federal Court ordered the payment into court “forthwith” of $75,000 for security for costs on February 2, 2017.

I do not know at this time what connection, if any, Voltage has with these 15 or so mass litigation actions. However, there are at least some connections. There is apparently a possible connection between Voltage and Morgan Creek in action T-71-18. There is also an apparent possible connection between Voltage and Dallas Buyers Club in action T-1674-16. 

The SCC’s refusal to grant leave to appeal to Voltage will come as good news to the potential 50,000 or so defendants in this very unusual and indeed unprecedented “reverse” copyright class action. One person, Mr. Robert Salna, was singled out by Voltage to represent thousands of potential class members. As luck would have it, Voltage chose quite possibly the very worst possible representative person from Voltage’s standpoint, Mr. Robert Salna, who is a landlord whose internet account allegedly “was used (likely by his tenants) to unlawfully distribute all of the films at issue in the underlying proceeding.”  Mr. Salna clearly has some means, has stood on principle and has good counsel.

I have previously written about how Voltage’s attempt to use a “reverse class action” in the USA was tossed by a federal district court judge in Oregon in 2013.

Naturally, each of the 50,000 or so defendants in this “reverse class action” may have had a different factual story to tell. Moreover, as any copyright lawyer in Canada knows, there is no Canadian case law establishing liability involving the use of BitTorrent technology by individuals.  In any event, even if there is liability in such a case, the amount of actual damage by any individual is likely to be minimal – since the cost of streaming or buying a movie is at most a few dollars. The range of statutory minimum damages for non-commercial activity is $100 to $5,000 and Canadian courts are consistent in ruling that statutory minimum damages must bear a correlation to actual damages. Even $100 is arguably far more than any reasonable measure of actual damage attributable to one individual in the circumstances as alleged.

There are approximately 50,000 class members as estimated by the plaintiffs in this proposed class action. If each of them is held liable for the maximum statutory damages amount of $5,000 for infringement of one work, that could lead to damages of $250,000,000. Even at the $100 low end of the range, the judgment could be in the realm of $5,000,000. In fact, several works are involved in this proposed class proceeding

In this instance, Voltage is attempting to sue at least 50,000 individuals for a total court filing fee of $50 for an “application.”  This is in contrast to a normal “action”, which would normally require a filing fee of either $150 or $50 for each separate lawsuit, the latter being available only for a “simplified action” when the amount claimed does not exceed $50,000.

So, if Voltage pursues its strategy and succeeds in getting this reverse class action certified, it will get to sue at least 50,000 individuals for a court filing fee of less than $0.001each – that’s less than a tenth of a cent.

Voltage and the other plaintiffs were unwilling to put up any security for costs, which is a very normal step at the outset of any Federal Court litigation when, inter alia, the plaintiff is a non-resident entity or when it does not provide an address. See Federal Courts Rule 416.

Voltage had argued the Federal class action regime was designed to prevent costs awards, including any “security for costs” requirement.

334.39 (1) Subject to subsection (2), no costs may be awarded against any party to a motion for certification of a proceeding as a class proceeding, to a class proceeding or to an appeal arising from a class proceeding, unless

·        (a) the conduct of the party unnecessarily lengthened the duration of the proceeding;

·        (b) any step in the proceeding by the party was improper, vexatious or unnecessary or was taken through negligence, mistake or excessive caution; or

·        (c) exceptional circumstances make it unjust to deprive the successful party of costs.

Voltage wanted to argue that the class action mechanism in the Federal Courts Rules is intended to immunize plaintiffs from costs except in very limited circumstances. However, the Federal Court of Appeal ruled that the nature of a reverse class action may well be an example of when “exceptional circumstances make it unjust to deprive the successful part of costs”. The motions judge in this instance, Justice Boswell, awarded $75,000 security for costs because he reasoned that the certification motion had not yet been filed.

The FCA convincingly ruled that Justice Boswell got the right result but for the wrong reason:

[8] Notwithstanding this, I believe that the Federal Court’s order should nonetheless be upheld as there is an alternate basis for finding that the Court possessed the jurisdiction to make it. In the exceptional circumstances of this case, which involve a proposed reverse class proceeding brought by foreign corporations with no significant assets in Canada against a proposed class potentially comprised of thousands of individuals resident in Canada, it is entirely possible that, if he is successful, the respondent might be awarded costs under Rule 334.39(1)(c). This paragraph allows for costs in respect of a certification motion, a class proceeding or an appeal arising from a class proceeding if “exceptional circumstances make it unjust to deprive the successful party of costs”. Such circumstances could well be found to exist in the present case, but that issue will not be addressed unless and until the Federal Court dismisses the certification motion.

[9] The circumstances in Rules 416(1)(a) and (b) apply, and, therefore, but for this being a proposed class proceeding, the Federal Court would be empowered to make an order for security for costs. I do not believe that the fact that this is a proposed class proceeding forecloses the Federal Court from making such an order in the present case. More specifically, I do not believe that a determination under Rule 334.39(1)(c) is a condition precedent to the exercise by the Federal Court of its discretion under Rule 416 to order security for costs in a case such as this, and there is nothing in the Rules or the case law of this Court that would require such a conclusion.

…

[11] If the appellants were correct in the interpretation they urge, an order for security for costs could never be made in the case of a class proceeding involving exceptional circumstances as a determination under Rule 334.39(1)(c) cannot be made until a determination on the merits is made. In my view, such an interpretation is untenable as it could well deprive a representative defendant like Mr. Salna of any realistic hope of recovering the costs he might eventually be awarded.

[12] Moreover, it appears that none of the access to justice concerns that motivate the prima facie no-costs regime enshrined in the Rules for class proceedings militates against the order for security in the instant case. The appellants appear to be fully able to bring their action, and, indeed, had two lawyers gowned before this Court on this appeal. In addition, they declined to file any evidence detailing their financial means to retain and instruct counsel or to post the required security for costs. On the other hand, the respondent and other members of the proposed class will likely face difficulty in funding representation. Thus, there is no principled basis for finding that an order for security for costs should not be made in the present case and there is no binding authority that indicates that the Federal Court erred in making such an order. I therefore believe that it was open to the Federal Court to make the impugned order for security for costs.

[13] Nor do I see any basis to interfere with the quantum of the security set by the Federal Court, a discretionary factual determination that this Court cannot interfere with in the absence of palpable and overriding error. The appellants can point to no such error here, particularly in light of the magnitude of the expenses incurred to merely litigate the motion for security. Further, if the appellants are right and the Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic will be intervening in the certification motion and carrying the bulk of the argument, it would be possible for the appellants to seek to have the Federal Court vary its order and decrease the amount of the security for costs they are required to provide. Indeed, in its reasons, the Federal Court commented on just such a possibility.

[14] Thus, I would dismiss this appeal.

The Supreme Court of Canada is not going to hear Voltage’s appeal regarding the security for costs order. As usual, they don’t provide reasons. The bottom line is that the FCA decision stands as controlling precedent.

Thus, the takeaway from all this is arguably as follows:

• A “reverse class action” is indeed an “exceptional circumstance” and any foreign plaintiff must be prepared to put up potentially substantial security for costs at an early stage and potentially even more to follow at later stages if such an action ever gets certified, which is far from being clearly likely, for reasons beyond the scope of this blog

• Voltage may also be liable for reasonably substantial costs for the motion for security for costs.

It will be extremely interesting to see whether Voltage now proceeds in this controversial “reverse class action”. If it wishes to proceed, it must put up $75,000 now and may be liable for substantial costs of the vigorously opposed security for costs motion in due course. I have previously noted how a prior Voltage foray in the Federal Court against Tekksavy customers fizzled when it was ordered to pay substantial costs. In fact, notwithstanding the Federal Court’s order of February 2, 2017 that the $75,000 for security for costs be paid into court “forthwith” (which means in a matter of days, not months or years), it apparently has still not been done, which seems rather odd. That order was not stayed by the unsuccessful appeal to the FCA or the subsequent unsuccessful leave to appeal application to the SCC.

Moreover, it will also be very interesting to see whether the possibly greater awareness amongst lawyers and even self-represented defendants about Federal Courts Rule 416  and “security for costs” will have any impact on the 15 or so mass litigation lawsuits against thousands of “Doe” defendants that were also launched by Mr. Clark.

Stay tuned.

HPK

Some Notes About Recent Developments at the Copyright Board of Canada

https://lotta56sparks.ca/56-sparks-canadas-most-famous-address/

Justice William Vancise, who retired from the Board on May 13, 2014, has apparently rendered his last decision on January 19, 2018 – almost four years after his retirement.  This was the Access Copyright K-12 “reconsideration” matter, almost exactly a year after January 27, 2017, when “the Federal Court of Appeal agreed with Access that the Board failed to consider that expert evidence had been filed to estimate the degree of the underestimation of the number of copied works comprised in Access’ repertoire. The Court concluded that this was a reviewable error and sent the matter back to the Board for reconsideration.” It took the Board almost a year to conclude that “[31] As such, and despite the presence of errors in the dataset (which, as noted above, is not unusual in such a large exercise), the initial data remains the best available source from which to estimate the total volume of copying from works in Access’ repertoire. We therefore cannot reliably make any adjustments to the royalty rates the Board previously fixed on February 19, 2016. The Access Copyright Elementary and Secondary School Tariff, 2010-2015 is therefore unchanged.”

Nelson Landry, who was appointed in 2010, has recently retired following the expiration of his second term (which was for three years) on February 10, 2018. He previously had a career mainly as patent lawyer, with dozens of reported patent cases, and a few trademarks, copyright and industrial design reported cases. He is currently seized of the following outstanding files:

-      Access Copyright – Post-Secondary Educational Institutions Tariff (2011-2013 and 2014-2017)

-      Television Retransmission (2014-2018)

-      SOCAN-Re: Sound - Pay Audio Services Tariffs, 2007-2016

-      SODRAC v. CBC Licences [Redetermination (2008-2012); Determination (2012-2018); Interactive kiosks (2011)]

-      Commercial Radio Stations/ Stations de radio commerciales [CSI: 2014-2018; Connect/SOPROQ: 2018; Artisti: 2015-2018]

-      Radio Retransmission (2014-2018)

-      SODRAC Tariff 5 (Reproduction of Musical Works in Cinematographic Works for Private Use or for Theatrical Exhibition), 2009-2014, 2015 and 2016

Some of these proceedings could go on for a long time. The Access Copyright Post-Secondary file is more than 8 years old – with no end in sight, presumably because there is no end in sight to the York University litigation that resulted from this arguably ill-conceived interim tariff – for  which no timely judicial review was pursued by either colleges or universities – which could have obviated the long and unfortunate resulting litigation. It now seems very possible that the Access Copyright v. York University case could end up in the Supreme Court of Canada – which means that we may not know the ending of this litigation saga for least another three years or so. The appeal from the trial decision is unlikely to be heard for at least another few months. I shall update on this long story in due course.

The retransmission tariff is worth a lot of money – potentially at least $200 million per annum – and there was a lengthy hearing more than 2.5 years ago, although the record did not close until August, 2016 – i.e. several months thereafter.  The Board has more than once taken about 30 months after a hearing to render a decision, even in relatively routine circumstances.

As for membership on the Board, the situation seems to be as follows:

There were two processes launched in September 2017 for Governor in Council Appointments: one for the Vice-Chairperson and another for part-time Members. We are still awaiting the results of these processes. The Government’s website currently shows one vacancy.

The tenure of Claude Majeau is about to expire on August 3, 2018. That date is based upon an unusual “amendment” dated July 31, 2017 to the Order in Council appointing him originally on June 13, 2014 for a three year second term that was to expire on August 3, 2017.

The Government issued a press release on August 9, 2017 indicating that Mr. Majeau’s term would be extended for one year effective August 3, 2017. This extension by means of a retroactive amendment to an order in council was potentially legally controversial because the legislation allows appointment only for two terms of up to five years each and states that a member can be “re-appointed once only”. I am not aware that anyone has taken issue with this extension. This is presumably because Mr. Majeau is widely respected for his corporate memory, wisdom and impartiality and the extension was understandably deemed necessary to “maintain continuity”. It will be interesting to see if there is another retroactive extension. This would seem unlikely, given the dubious nature of the previous extension.  Even if this mechanism is not re-used to further extend Mr. Majeau’s term beyond August 3, 2018, he will presumably be seized of several files for a long time, along with Mr. Landry, and his considerable experience and corporate memory will be presumably be available to the Board. I will provide the list of the cases of which he is seized when available. Moreover, the Board’s Secretary General, Gilles McDougall, has been there for approximately 15 years and is also a highly knowledgeable and very well-regarded source of wisdom, corporate memory and managerial continuity.

Unless new appointments are announced very soon, there could be potential issues as whether a quorum exists, since the only remaining member would be the Chair, Justice Blair. While there may not be problem for matters in which retired members are still seized (see below), this potentially could become an issue in new matters. See s. 22 of the Interpretation Act.

The current government has been slow in many of its GIC appointments. In the case of the Copyright Board, there has been a perennial issue arising from the need to hopefully have members with both substantive expertise at the time of appointment as well as actual and perceived independence. In the rather small world of copyright in Canada, that is not an easy goal to attain. The first Vice Chair of the Copyright Board, Michel Hétu appointed in 1989, who had previously had a long career in government, was a notable exception and exemplified both qualities.

Note on Retired Members and Unfinished Business

Retired Board members are allowed to work on matters which the retired member “previously has begun to consider” s. 66.5(1). Unlike the Supreme Court of Canada and other courts, there is no time limit on who long this can go on. I’ve written about this several times, including in in my submission on the Copyright Board reform process last year.

Whatever the reason for the unusual open-ended nature of this provision for retired members, it certainly does not encourage confidence in the expeditious renderings of decisions. Judges in the Federal Courts get only 8 weeks to finish off their decisions after they cease to hold office. Supreme Court of Canada justices have six months after they retire. The Canadian Judicial Council has specifically pronounced that “judges should render decisions within six months of hearing a case, except in very complex matters or where there are special circumstances. In some provinces, such time lines are included in legislation.” The Federal Court, Federal Court of Appeal and Supreme Court of Canada routinely render decisions on matters much more complex than any Copyright Board case in six months following the hearing. And when a hearing is over at the Copyright Board, it ought to be over. I see no sufficient reason why the Copyright Board frequently seems to find it necessary to go back to the parties and ask for more evidence or submissions.  I’ll come back to this another day.

The new PMNOC (patented medicines) regime – which involves extremely complex evidence and hearings involving huge amounts of money – must now be completed from start to finish in the Federal Court – including the judgment – within 24 months. I’ve discussed this in my submission on the Copyright Board reform process last year.

Contrast these benchmarks this to the 7 or 8 years commonly associated with Copyright Board hearings, which routinely involve 24 - 30 months to render a decision after the hearing is over – with subsequent judicial review often following. These long delays and the resulting retroactivity are now on the radar screen of the Supreme Court of Canada, because of submissions I made with Prof. Ariel Katz and Prof. David Lametti as he then was in the SCC in the CBC v. SODRAC case. See Canadian Broadcasting Corp. v. SODRAC 2003 Inc., [2015] 3 SCR 615, 2015 SCC 57 (CanLII), paras. 109-11 and footnote 2 in which now retired Justice Rothstein wrote:

[2]   During the hearing before this Court, counsel for the interveners the Centre for Intellectual Property Policy and Ariel Katz briefly raised concerns regarding the Board’s power to issue retroactively binding decisions in general. That issue was not squarely before this Court in this case, and I do not purport to decide broader questions concerning the legitimacy of or limits on the Board’s power to issue retroactive decisions here.

It would be interesting to know the financial costs associated with this 66.5(1) process broken down by the matter involved – including any amounts paid to retired members over the years, any travel costs, etc. and any policies or guidelines that may be relevant to such payments. I am not in any way whatsoever suggesting that this provision has ever been or would ever be used inappropriately by any retired member at any time. The real issue is that the open-ended mechanism applicable to retired members cannot possibly encourage or be seen to encourage the most expeditious of resolutions. The imposition of a six-month limit – at the most – for retired members to conclude their work would seem to be an obvious change to include in any legislation dealing with reform of the Copyright Board.

HPK

Unsettling Comments from the Ontario Courts re the Settled Law of Trademarks and Parallel Importation

The Ontario courts have made some unsettling comments suggesting that the Canadian trademarks law is “unsettled” on the issue of parallel imports or grey marketing. Ironically, like the leading Canadian case on parallel imports discussed below, this also appears to be a case about chocolate bars. The comments were made in the context of an attempt by the parallel importers to defend against the enforcement of March 2006 settlement agreements on the basis that the settlement agreements were in restraint of trade and, therefore, void.

In  Mars Canada Inc. v Bemco Cash & Carry Inc. 2016 ONSC 7201 (CanLII), Justice F. L. Meyers of the Ontario Superior Court stated that:

[8] …. The law is unsettled as to whether a Canadian trade-mark holder can prevent third parties from selling products bearing the Canadian company’s trade-marks which are legitimate goods sourced from a foreign parent or affiliate of the Canadian trademark holder. …

The motions judge goes on to state:

[10] The parties argued at some length about the current state of the law concerning grey marketing in Canada and whether, in particular, a Canadian trade-mark holder is entitled to enforce its trade-marks to prevent sales in Canada by third parties of genuine product purchased from the trade-mark holder’s foreign parent company. I have not found it necessary to resolve that issue as part of the resolution of the motion before the court.

The Ontario Court of Appeal recently repeated this comment in an appeal of the foregoing decision in Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239:

[4]          …The law is unsettled as to whether a Canadian trademark holder can prevent this activity.

With respect, there is nothing that is “unsettled” about this question. Nor was anything unsettled even back in March 2006 (when the settlement agreements were entered into) about whether Canadian trademark law can be used to “thwart” parallel imports, which are by definition legitimate products put on the market by a trademark owner in another country. The answer was and is clearly “no” – except perhaps in very rare factual situations where the imported product may be of a materially different character or quality than the Canadian product and consumers get to buy a very different product from that which they expected. Usually, these grey market cases involve identical products – even from the very same ultimate source – that were acquired outside of the “official” or “authorized” channels of trade. While such parallel trade might displease the Canadian trademark owners or exclusive licensee or distributor who wishes to lessen competition and raise prices in the Canadian market, trademark law does not give them any such power.

The well-known 2007 Supreme Court of Canada decision in  Euro-Excellence Inc. v. Kraft Canada Inc., [2007] 3 SCR 20, involved the parallel importation of Toblerone and Côte d’Or chocolate bars concerning which Kraft sought unsuccessfully to “thwart” parallel importation by using copyright law instead of trademarks law. Kraft was the trademark owner in that case and if it could have used trademark law, it surely would have done so. It was represented by a very sophisticated IP litigation firm.

I made the prevailing arguments in that case in the SCC on behalf of the intervener Retail Council of Canada. Kraft tried to use copyright law because it knew that trademarks law wouldn’t work and was a non-starter. In fact, Kraft’s very experienced counsel told INTA, the major American based International Trademark Association, in a June 23, 2006 letter to encourage it to intervene in the SCC, that:

In light of the limitations imposed by legal authorities on enforcement of trade-mark rights in cases of parallel importation, Section 27(2) is very important to intellectual property right holders.

Indeed, as the trial Judge, whose decision was eventually overturned, noted that, even though it was not contested that Kraft owned the trademark, it did not try to invoke trademark law in its attempt to thwart the parallel importation of its chocolate bars. Instead, it developed an interesting strategy, alleging that the importation infringed its copyright in the artwork on the chocolate bars wrappers:

 [4] Kraft has developed an interesting strategy in an effort to thwart Euro Excellence's

distribution of these chocolate bars in Canada. To better appreciate the strategy, I should first say what it has not done. If it put distribution restrictions on Euro Excellence's supplier, it has not invoked them. Nor does it rely on trade-mark protection, although it alleges, and it is not contested, that it is the owner in Canada of the trade-marks "Côte d'Or" and "Toblerone". What it has done is take Canadian licensing rights in the artworks on the chocolate bar wrappers which have been copyrighted in Canada. It does not seek to enjoin Euro Excellence from distributing Toblerone and Côte d'Or chocolate bars. Rather, it seeks to enjoin it from distributing the copyrighted artwork on the wrappers. The idea is that the cost of re-wrapping or covering over the copyrighted artwork would act as a major disincentive...(emphasis added)

Kraft Canada Inc. v. Euro Excellence Inc. (F.C.), 2004 FC 652

(highlight and emphasis added)

Here is a comment I wrote for LSUC in 2008 shortly after the decision.

Even a trademark “owner” cannot use trademarks law to stop parallel importation. There are no developments since the Kraft case of which I am aware that would suggest otherwise.  I would be very interested in hearing from any expert counsel or academic who believes otherwise. Notwithstanding some obiter dicta in the Smith & Nephew, any attempt to change ownership of Canadian trademarks in favour of a Canadian subsidiary so as to enhance the chance of a more positive outcome in a grey marketing case is fraught with risks that include the potential loss of distinctiveness of the trademark and income tax issues.

The law was also clear before the Kraft decision.  See also:

·       Consumers Distributing Co. v. Seiko, [1984] 1 S.C.R. 583

·       Coca-Cola Ltd. et al. v. Pardhan et al. (1999) 85 C.P.R. (3d) 489 Affirming 77 C.P.R. (3d) 501 (FCA)

·       Smith & Nephew Inc. v. Glen Oak Inc. et al.; Beiersdorf Ag, Necessary Party (1996) 68 C.P.R. (3d) 153.

It is worth noting that this Bemco litigation – which has a very long and voluminous record – arises from a settlement agreement entered into in March, 2006 – at the very time when leave to appeal to the Supreme Court of Canada was being sought in the Kraft case. Perhaps Bemco settled in 2006 based upon perceived uncertainty about whether copyright law could be used to “thwart” parallel importation of chocolate bars. I don’t know and can only speculate.

However, the law on trademarks and grey marketing/parallel imports seemed very clear at the time, as shown above, which is why Kraft had chosen to frame its litigation as a copyright case. I make no comment on the underlying issues concerning the Bemco settlement agreements or the ensuing litigation in which it was apparently been argued that the settlement agreements were in a “restraint of trade”.

Speaking generally, and not about this case in any way, there are potential issues regarding settlement agreements involving intellectual property that can raise serious antitrust and pubic interest issues. This has become quite obvious in “pay for delay” cases involving generic drugs, such as FTC v. Actavis that went to the US Supreme Court.

I reiterate that I make no comment on whether or not the 2006 agreements made commercial or legal sense at the time. However, they were apparently negotiated by sophisticated parties with experienced counsel. Courts are normally very reluctant to set aside such agreements, and that seems to be the conclusion reached here after much obviously expensive and complex litigation concerning which I make no comment, except for the following.

For whatever reasons, the Ontario Superior Court and now the Ontario Court of Appeal have recently stated that the law concerning trademarks and parallel imports is “unsettled”.  This is of some concern if other parties and counsel begin to believe that perfectly legal commercial activity involving grey marketing may now be illegal or even arguably so under Canadian trademarks law. The fact that the Ontario courts in this very protracted Bemco litigation seem to believe and feel the need to state that the law regarding trademarks and parallel imports is “unsettled” is in itself unsettling.

HPK