Archive for the 'Cloud Computing' Category

Another Canadian Decision Reaches Outside Canada

By Richard Stobbe

This fascinating Ontario case deals with an Alberta-based individual who complained of certain material that was re-published on the website Globe24h.com based in Romania. The server that hosted the website was located in Romania. The material in question was essentially a re-publication of certain publicly available Canadian court and tribunal decisions.

The Alberta individual complained that this conduct – the re-publication of a Canadian tribunal decision on a foreign server – was a breach of his privacy rights since he was named personally in this tribunal decision.

So, let’s get this straight, this is a privacy-based complaint relating to republication in public of a publicly available decision?

Yes, you heard that right. This Romanian site scraped decisions from Canadian court and tribunal websites (information that was already online) and made this content searchable on the internet (making it …available online).

This is an interesting decision, and we’ll just review two elements:

The first issue was whether Canadian privacy laws (such as PIPEDA ) have extraterritorial application to Globe24h.com as a foreign-based organization.  On this point, the Ontario court, citing a range of past decisions (including the Google v. Equustek decision which is currently being appealed to the Supreme Court of Canada) said:

“In this case, the location of the website operator and host server is Romania. However, when an organization’s activities take place exclusively through a website, the physical location of the website operator or host server is not determinative because telecommunications occurboth here and there”: Libman v The Queen, 1985 CanLII 51 (SCC), [1985] 2 SCR 178 at p 208 [Emphasis added]

Secondly, the Ontario court reviewed whether the Romanian business was engaged in “commercial activities” (since that is an element of PIPEDA) . The court noted the Romanian site  “was seeking payment for the removal of the personal information from the website. The fees solicited for doingdoing so varied widely. Moreover, if payment was made with respect to removal of one version of the decision, additional payments could be demanded for removal of other versions of the same information. This included, for example, the translation of the same decision in a Federal Court proceeding or earlier rulings in the same case.”

The Romanian site made a business out of removing data from this content, but the court’s conclusion that “The evidence leads to the conclusion that the respondent was running a profit-making scheme to exploit the online publication of Canadian court and tribunal decisions containing personal information.” [Emphasis added] – in a general sense, that statement could just as easily apply to Google or any of the commercial legal databases which are marketed to lawyers.

The court concluded that it could take jurisdiction over the Romanian website, and ordered the foreign party to take-down the offending content.

This decision represent another reach by a Canadian court to takedown content that has implications outside the borders of Canada.  From the context, it is likely that this decision is going to stand, since the respondent did not contest this lawsuit. The issue of extra-terrtorial reach of Canadian courts in the internet context is going to be overtaken by the pending Supreme Court decision in Equustek. Stay tuned.

 

Calgary – 07:00 MT

 

 

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Is there copyright in a screenshot?

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By Richard Stobbe

Ever wanted to remove something after it had been swallowed up in the gaping maw of the internet? Then you will relate to this story about an individual’s struggle to have certain content deleted from the self-appointed memory banks of the web.

The Federal Court recently rendered a procedural decision in the case of Davydiuk v. Internet Archive Canada and Internet Archive 2016 FC 1313 (for background, visit the Wayback Machine… or see our original post Copyright Implications of a “Right to be Forgotten”? Or How to Take-Down the Internet Archive).

For those who forget the details, this case relates to a long-running plan by Mr. Davydiuk to remove certain adult video content in which he appeared about a dozen years ago. He secured the copyright in the videos and all related material including images and photographs, and went about using copyright to remove the online reproductions of the content. In 2009, he discovered that Internet Archive, a defendant in these proceedings, was hosting some of this video material as part of its web archive collection.  It is Mr. Davydiuk’s apparent goal to remove all of the content from the Internet Archive – not only the video but also associated images, photos, and screenshots taken from the video.

The merits of the case are still to be decided, but the Federal Court has decided a procedural matter which touches upon an interesting copyright question:

When a screenshot is taken from a video, is there sufficient originality for copyright to extend to that screenshot? Or is it a “purely mechanical exercise not capable of copyright protection”?

This case is really about the use of copyright in aid of personal information and privacy goals. The Internet Archive argued that it shouldn’t be obliged to remove material for which there is no copyright. Remember, for copyright to attach to a work, it must be “original”. The Supreme Court of Canada (SCC) has made it clear that:

For a work to be “original” within the meaning of the Copyright Act, it must be more than a mere copy of another work.  At the same time, it need not be creative, in the sense of being novel or unique.  What is required to attract copyright protection in the expression of an idea is an exercise of skill and judgment.  By skill, I mean the use of one’s knowledge, developed aptitude or practised ability in producing the work.  By judgment, I mean the use of one’s capacity for discernment or ability to form an opinion or evaluation by comparing different possible options in producing the work. This exercise of skill and judgment will necessarily involve intellectual effort. The exercise of skill and judgment required to produce the work must not be so trivial that it could be characterized as a purely mechanical exercise.  For example, any skill and judgment that might be involved in simply changing the font of a work to produce “another” work would be too trivial to merit copyright protection as an “original” work. [Emphasis added]

From this, we know that changing font (without more) is NOT sufficient to qualify for the purposes of originality. Making a “mere copy” of another work is also not considered original. For example, an exact replica photo of a photo is not original, and the replica photo will not enjoy copyright protection.  So where does a screenshot fall?

The Internet Archive argued that the video screenshots were not like original photographs, but more like a photo of a photo – a mere unoriginal copy of a work requiring a trivial effort.

On the other side, the plaintiff argued that someone had to make a decision in selecting which screenshots to extract from the original video, and this represented an exercise of sufficient “skill and judgment”.  The SCC did not say that the bar for “skill and judgment” is very high – it just has to be higher than a purely mechanical exercise.

At this stage in the lawsuit, the court merely found that there was enough evidence to show that this is a genuine issue. In other words, the issue is a live one, and it has to be assessed with the benefit of all the evidence. So far, the issue of copyright in a screenshot is still undetermined, but we can see from the court’s reasoning that if there is evidence of the exercise of “skill and judgment” involved in the decision-making process as to which particular screenshots to take, then these screenshots will be capable of supporting copyright protection.

Stay tuned.

 

Calgary – 07:00 MT

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Google v. The Court: Free Speech and IP Rights (Part 2)

 
By Richard Stobbe

Last week, hearings concluded in the important case of Google Inc. v. Equustek Solutions Inc., et al.  The Supreme Court of Canada (SCC) will render its judgment in writing, and the current expectation is that it will clarify the limits of extraterritoriality, and the unique issues of protected expression in the context of IP rights and search engines.

In Part 1, I admonished Google, saying “you’re not a natural person and you don’t enjoy Charter rights.” Some commentators have pointed out that this is too broad, and that’s a fair comment.  Indeed, it’s worth clarifying that corporate entities can benefit from certain Charter rights, and can challenge a law on the basis of unconstitutionality. The Court has also held that freedom of expression under s. 2(b) can include commercial expression, and that government action to unreasonably restrict that expression can properly be the subject of a Charter challenge.

The counter-argument about delimiting corporate enjoyment of Charter rights is grounded in a line of cases stretching back to the SCC’s 1989 decision in Irwin Toy where the court was clear that the term “everyone” in s. 7 of the Charter, read in light of the rest of that section, excludes “corporations and other artificial entities incapable of enjoying life, liberty or security of the person, and includes only human beings”.

Thus, in Irwin Toy and Dywidag Systems v. Zutphen Brothers  (see also: Mancuso v. Canada (National Health and Welfare), 2015 FCA 227 (CanLII)), the SCC has consistently held that corporations do not have the capacity to enjoy certain Charter-protected interests – particularly life, liberty and security of the person – since these are attributes of human beings and not artificial persons such as corporate entities.

It is also worth noting that the Charter is understood to place restrictions on government, but does not provide a right of a corporation to enforce Charter rights as against another corporation. Put another way, one corporation cannot raise a claim that another corporation has violated its Charter rights. While there can be no doubt that a corporation cannot avail itself of the protection offered by section 7 of the Charter, a corporate entity can avail itself of Charter protections related to unreasonable limits on commercial expression, where such limits have been placed on the corporate entity by the government – for example, by a law or regulation enacted by provincial or federal governments.

There is a good argument that the limited Charter rights that are afforded to corporate entities should not extend to permit a corporation to complain of a Charter violation where its “commercial expression” is restricted at the behest of another corporation in the context of an intellectual property infringement dispute.

 

Calgary – 07:00 MT

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Google v. The Court: Free Speech and IP Rights (Part 1)

 
By Richard Stobbe

Google Inc. v. Equustek Solutions Inc., et al., the long-running case involving a court’s ability to restrict online search results, and Google’s obligations to restrict search results has finally reached the Supreme Court of Canada (SCC). Hearings are proceeding this week, and the list of intervenors jostling for position at the podium is like a who’s-who of free speech advocates and media lobby groups. Here is a list of many of the intervenors who will have representatives in attendance, some of whom have their 10 minutes of fame to speak at the hearing:

  • The Attorney General of Canada,
  • Attorney General of Ontario,
  • Canadian Civil Liberties Association,
  • OpenMedia Engagement Network,
  • Reporters Committee for Freedom of the Press,
  • American Society of News Editors,
  • Association of Alternative Newsmedia,
  • Center for Investigative Reporting,
  • Dow Jones & Company, Inc.,
  • First Amendment Coalition,
  • First Look Media Works Inc.,
  • New England First Amendment Coalition,
  • Newspaper Association of America,
  • AOL Inc.,
  • California Newspaper Publishers Association,
  • Associated Press,
  • Investigative Reporting Workshop at American University,
  • Online News Association and the Society of Professional Journalists (joint as the Media Coalition),
  • Human Rights Watch,
  • ARTICLE 19,
  • Open Net (Korea),
  • Software Freedom Law Centre and the Center for Technology and Society (joint),
  • Wikimedia Foundation,
  • British Columbia Civil Liberties Association,
  • Electronic Frontier Foundation,
  • International Federation of the Phonographic Industry,
  • Music Canada,
  • Canadian Publishers’ Council,
  • Association of Canadian Publishers,
  • International Confederation of Societies of Authors and Composers,
  • International Confederation of Music Publishers and the Worldwide Independent Network (joint) and
  • International Federation of Film Producers Associations.

The line-up at Starbucks must have been killer.

The case has generated a lot of interest, including this recent article (Should Canadian Courts Have the Power to Censor Search Results?) which speaks to the underlying unease that many have with the precedent that could be set and its wider implications for free speech.

You may recall that this case is originally about IP rights, not free speech rights. Equustek sued Datalink Technologies for infringement of the IP rights of Equustek. The original lawsuit was based on trademark infringement and misappropriation of trade secrets. Equustek successfully obtained injunctions prohibiting this infringement. It was Equustek’s efforts at stopping the ongoing online infringement, however, that first led to the injunction prohibiting Google from serving up search results which directed customers to the infringing websites.

It is common for an intellectual property infringer (as the defendant Datalink was in this case) to be ordered to remove offending material from a website. Even an intermediary such as YouTube or another social media platform, can be compelled to remove infringing material – infringing trademarks, counterfeit products, even defamatory materials. That is not unusual, nor should it automatically touch off a debate about free speech rights and government censorship.

This is because the Charter-protected rights of freedom of speech are much different from the enforcement of IP rights.

The Court of Appeal did turn its attention to free speech issues, noting that “courts should be very cautious in making orders that might place limits on expression in another country. Where there is a realistic possibility that an order with extraterritorial effect may offend another state’s core values, the order should not be made.  In the case before us, there is no realistic assertion that the judge’s order will offend the sensibilities of any other nation. It has not been suggested that the order prohibiting the defendants from advertising wares that violate the intellectual property rights of the plaintiffs offends the core values of any nation. The order made against Google is a very limited ancillary order designed to ensure that the plaintiffs’ core rights are respected.”

Thus, the fear cannot be that this order against Google impinges on free-speech rights; rather, there is a broader fear about the ability of any court to order a search engine to restrict certain search results in a way that might be used to restrict free speech rights in other situations.  In Canada, the Charter guarantees that everyone has the right to: “freedom of …expression, including freedom of the press and other media of communication…” It is important to remember that in Canada a corporation is not entitled to guarantees found in Section 7 of the Charter. (See: Irwin Toy Ltd. v. Quebec (Attorney General), 1989 CanLII 87 (SCC), [1989] 1 S.C.R. 927)

So, while there have been complaints that Charter rights have been given short shrift in the lower court decisions dealing with the injunction against Google, it’s worth remembering that Google cannot avail itself of these protections. Sorry Google, but you’re not a natural person and you don’t enjoy Charter rights. [See Part 2 for more discussion on a corporation’s entitlement to Charter protections.]

Although free speech will be hotly debated at the courthouse, the Google case is, perhaps, not the appropriate case to test the limits of free speech. This is a case about IP rights enforcement, not government censorship.

 

Calgary – 07:00 MT

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Use of a Trademark on Software in Canada

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By Richard Stobbe

Xylem Water Solutions is the owner of the registered Canadian trademark AQUAVIEW in association with software for water treatment plants and pump stations.  Xylem received a Section 45 notice from a trademark lawyer, probably on behalf of an anonymous competitor of Xylem, or an anonymous party who wanted to claim the mark AQUAVIEW for themselves. This is a common tactic to challenge, and perhaps knock-out, a competitor’s mark.

A Section 45 notice under the Trade-marks Act requires the owner of a registered trademark to prove that the mark has been used in Canada during the three-year period immediately before the notice date. As readers of ipblog.ca will know, the term “use” has a special meaning in trademark law. In this case, Xylem was put to the task of showing “use” of the mark AQUAVIEW in association with software.

How does a software vendor show “use” of a trademark on software in Canada?

The Act tells us that “A trade-mark is deemed to be used in association with goods if, at the time of the transfer of the property in or possession of the goods, in the normal course of trade, it is marked on the goods themselves or on the packages in which they are distributed…” (Section 4)

The general rule is that a trademark should be displayed at the point of sale (See: our earlier post on Scott Paper v. Georgia Pacific). In that case, involving a toilet paper trademark, Georgia-Pacific’s mark had not developed any reputation since it was not visible until after the packaging was opened. As we noted in our earlier post, if a mark is not visible at the point of purchase, it can’t function as a trade-mark, regardless of how many times consumers saw the mark after they opened the packaging to use the product.

The decision in Ashenmil v Xylem Water Solutions AB, 2016 TMOB 155 (CanLII),  tackles this problem as it relates to software sales. In some ways, Xylem faced a similar problem to the one which faced Georgia-Pacific. The evidence showed that the AQUAVIEW mark was displayed on website screenshots, technical specifications, and screenshots from the software.

The decision frames the problem this way: “…even if the Mark did appear onscreen during operation of the software, it would have been seen by the user only after the purchaser had acquired the software.  … seeing a mark displayed, when the software is operating without proof of the mark having been used at the time of the transfer of possession of the ware, is not use of the mark” as required by the Act.

The decision ultimately accepted this evidence of use and upheld the registration of the AQUAVIEW mark. It’s worth noting the following take-aways from the decision:

  • The display of a mark within the actual software would be viewed by customers only after transfer of the software.  This kind of display might constitute use of the mark in cases where a customer renews its license, but is unlikely to suffice as evidence of use for new customers.
  • In this case, the software was “complicated” software for water treatment plants. The owner sold only four licenses in Canada within a three-year period.  In light of this, it was reasonable to infer that purchasers would take their time in making a decision and would have reviewed the technical documentation prior to purchase.  Thus, the display of the mark on technical documentation was accepted as “use” prior to the purchase. This would not be the case for, say, a 99¢ mobile app or off-the-shelf consumer software where technical documentation is unlikely to be reviewed prior to purchase.
  • Website screenshots and digital marketing brochures which clearly display the mark can bolster the evidence of use. Again, depending on the software, purchasers can be expected to review such materials prior to purchase.
  • Software companies are well advised to ensure that their marks are clearly displayed on materials that the purchaser sees prior to purchase, which will differ depending on the type of software. The display of a mark on software screenshots is not discouraged; but it should not be the only evidence of use. If software is downloadable, then the mark should be clearly displayed to the purchaser at the point of checkout.
  • The cases have shown some flexibility to determine each case on its facts, but don’t rely on the mercy of the court: software vendors should ensure that they have strong evidence of actual use of the mark prior to purchase. Clear evidence may even prevent a section 45 challenge in the first place.

To discuss protection for your software and trademarks,  contact us.

Calgary – 07:00 MST

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Android vs. Java: Copyright Update

By Richard Stobbe

In a sprawling,  billion-dollar lawsuit that started in 2010, a jury yesterday returned a verdict in favour of Google, delivering a blow to Oracle.  (For those who have lost the thread of this story, see : API Copyright Update: Oracle wins this round).

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The essence of Oracle America Inc. v. Google Inc. is a claim by Oracle that Google’s Android operating system copied a number of APIs from Oracle’s Java code, and this copying constituted copyright infringement. Infringement, Oracle argued, that should give rise to damages based on Google’s use of Android. Now think for a minute of the profits that Google might attribute to its use of Android, which has dominated mobile operating system since its introduction in 2007. Oracle claimed damages of almost $10 billion.

In prior decisions, the US Federal Court decided that Google’s copying did infringe Oracle’s copyright. The central issue in this phase was whether Google could sustain a ‘fair use’ defense to that infringement. Yesterday, the jury sided with Google, deciding that Google’s use of the copied code constituted ‘fair use’, effectively quashing Oracle’s damages claim.

Oracle reportedly vowed to appeal.

 

Calgary – 10:00 MST

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Liability of Cloud-Based Service Provider For Data Breach

By Richard Stobbe

Silverpop Systems provides digital marketing services through a cloud-based tool called ‘Engage’. Leading Market Technologies, Inc. (“LMT”) engaged Silverpop through a service agreement and during the course of that agreement LMT uploaded digital advertising content and recipient e-mail addresses to the Engage system.  A trove of nearly half a million e-mail addresses, provided by LMT, was stored on the Engage online system. In November 2010, Silverpop’s system was hacked, putting LMT’s email list at risk. Silverpop notified LMT of the data breach.  After LMT refused to pay for further service, Silverpop suspended the agreement.

Litigation commenced in 2012, with LMT claiming damages for breach of contract and negligence based on Silverpop’s failure to keep the email list secure. Should the service provider be liable? Silverpop argued that it was engaged to provide access to its online system, not specifically to keep data secure. Thus there was no breach of its obligations under the agreement. And anyway, if LMT suffered any damages, they were indirect or consequential and consequential such damages were excluded under the terms of the agreement. LMT countered that, in fact, the agreement quite clearly contained a confidentiality clause, and that the damages suffered by LMT were direct damages, not indirect consequential damages.

The US Federal Circuit Court of Appeals in Silverpop Systems Inc. v. Leading Market Technologies Inc. sided with Silverpop:

  • “Here, the parties’ agreement was not one for the safeguarding of the LMT List. Rather, the parties contracted for the providing of e-mail marketing services. While it was necessary for LMT to provide a list of intended recipients (represented as e-mail addresses on the LMT List) to ensure that the service Silverpop provided (targeted e-mail marketing) was carried out, the safe storage of the list was not the purpose of the agreement between the parties.” (Emphasis added)

The court was careful to review both the limit of liability clause (which provided an overall cap on liability to 12 months fees), and the exclusion clause (which barred recovery for indirect or consequential damages). The overall limit of liability had an exception: the cap did not apply to a breach of the confidentiality obligation. However, this exception did not impact the scope of the limit on indirect or consequential damages.  Since the court decided that the claimed breach did not result from a failure of performance, and the consequential damages clause applied to LMT’s alleged loss. As a result, LMT’s claims were dismissed.

Lessons for business?

  • Those limitation of liability and exclusion clauses are often considered “boilerplate”. But they really do make a difference in the event of a claim. Ensure you have experienced counsel providing advice when negotiating these clauses, from either the customer or service provider perspective.

 

Calgary – 07:00 MST

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Clickwrap Agreement From a Paper Contract?

 
By Richard Stobbe

Can a binding contract be formed merely with a link to another set of terms? (For background on this topic, check out our earlier post What, exactly, is a browsewrap? which reviews browsewraps, clickwraps, clickthroughs, terms of use, terms of service and EULAs).

The answer is clearly… it depends. Consider the American case of Holdbrook Pediatric Dental, LLC, v. Pro Computer Service, LLC (PCS), a New Jersey decision which considered the enforceability of a set of terms which were linked from a paper hard-copy version of the contract. In this case, PCS sent a contract to its customer electronically. The customer printed out the paper version and signed it in hard copy. A hyperlink appeared near the signature line, pointing to a separate set of Terms and Conditions in HTML code. Of course on the paper copy these terms cannot be hyperlinked.

PCS asserted that these separate terms were incorporated into the signed paper contract, since they function as a clickable hyperlink in the electronic version.  The court disagreed: “In order for there to be a proper and enforceable incorporation by reference of a separate document . . . the party to be bound by the terms must have had ‘knowledge of and assented to the incorporated terms.’”  Here, there was no independent assent to the additional Terms and Conditions, and the mixed media nature of the contracting process worked against PCS. In addition to the fact that the separate terms were not easily accessible by the customer, the text was not clear. It merely said “Download Terms and Conditions”, without providing reasonable notice to the customer that assent to the main contract included assent to these additional terms. The additional terms were not binding on the customer.

Lessons for business? Get legal advice!

 

Calgary – 07:00 MST

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CASL Enforcement (Part 2)

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By Richard Stobbe

As reviewed in Part 1, since July 1, 2014, Canada’s Anti-Spam Law (or CASL) has been in effect, and the software-related provisions have been in force since January 15, 2015.

In January, 2016, the Canadian Radio-television and Telecommunications Commission (CRTC) executed a search warrant at business locations in Ontario in the course of an ongoing investigation relating to the installation of malicious software (malware) (See: CRTC executes warrant in malicious malware investigation). The allegations also involve alteration of transmission data (such as an email’s address, date, time, origin) contrary to CASL. This represents one of the first enforcement actions under the computer-program provisions of CASL.

The first publicized case came in December, 2015, when the CRTC announced that it took down a “command-and-control server” located in Toronto as part of a coordinated international effort, working together with Federal Bureau of Investigation, Europol, Interpol, and the RCMP. This is perhaps the closest the CRTC gets to international criminal drama. (See: CRTC serves its first-ever warrant under CASL in botnet takedown).

Given the proliferation of malware, two actions in the span of a year cannot be described as aggressive enforcement, but it is very likely that this represents the visible tip of the iceberg of ongoing investigations.

Calgary – 07:00 MT

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Online Infringement and Norwich Orders: an update

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By Richard Stobbe

This is a case that became something of a lightning rod in the storm of subscriber privacy rights vs. copyright. As we wrote in our earlier post, a copyright owner can only enforce its rights against online infringement if it knows the identity of the infringer. It can seek a court order (called a Norwich order) to disclose the identity of those alleged infringers. Canadian law is clear that “A court order is required in every case as a condition precedent to the release of subscriber information.”

Such an order was used by Voltage Pictures to obtain the names and addresses of some 2,000 subscribers of an ISP known TekSavvy Solutions Inc. TekSavvy sought reimbursement of its costs for complying with the order: TekSavvy claimed recovery of a total of $346,480.68. Voltage offered to pay $884.00. The lower court concluded that Voltage should pay $21,557.50 to cover TekSavvy’s legal costs, administrative costs, and disbursements of abiding with the Order.

TekSavvy appealed that order.

In Voltage Pictures LLC v. John Doe, 2015 FC 1364 (CanLII), the court awarded TekSavvy an additional amount of $11,822.50. A win? Not really, considering how much they claimed, and what it would have cost to run the appeal.

The court also wagged a finger at TekSavvy. Since TekSavvy was only obliged to deliver the subscriber info after payment of its costs, the payment issue resulted in a significant delay in the supply of the subscriber names. The court complained that “…Voltage has not been able to obtain the information that it was lawfully entitled to for more than two years after Prothonotary Aalto’s Order. The failure to provide this information, on all accounts, appears to be due to TekSavvy’s unwarranted and excessive cost claims in the amount now of $350,000…”

It went on to note that “…the background circumstantial results do not sit well with the Court. They confirm that the policy in these types of motions should normally be to facilitate the plaintiff’s legitimate efforts to obtain the information from ISPs on the prima facie illegal activities of its subscribers. In my view, courts should be careful not to allow the ISP’s intervention to unduly interfere in the copyright holder’s efforts to pursue the subscribers, except where a good case is made out to do so. While it may be a practice to require prepayment of the ISP’s costs of the motion, the court must not let this issue delay unnecessarily the execution of the order to the extent possible. Reasonable security for costs may be preferable in some cases.” [Emphasis added]

As with the earlier decision, this case serves as guidance to copyright holders who are seeking the information of anonymous infringers, and to ISPs who must balance the privacy rights of subscribers.

Calgary – 07:00 MT

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Limitations of Liability: Do they work in the Alberta Oilpatch?

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By Richard Stobbe

Let’s consider that contract you’re about to sign. Does it contain a limitation of liability? And if so, are those even enforceable? It’s been several years since we last wrote about limitations of liability and exclusion clauses (See: Limitations of Liability: Do they work?) and it’s time for another look.

A limitation of liability seeks to reduce or cap one party’s liability to a certain dollar amount – usually a nominal amount. An exclusion clause is a bit different – the exclusion clause seeks to preclude any contractual claim whatsoever.

To understand the current state of the law, we have to look at the decision in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4 (CanLII), 315 D.L.R. (4th) 385, where the Supreme Court of Canada laid down a three-part framework. This test requires the court to determine:

(a) whether, as a matter of interpretation, the exclusion clause applies to the circumstances established in the evidence;

(b) if the exclusion clause applies, whether the clause was unconscionable and therefore invalid, at the time the contract was made; and

(c) if the clause is held to be valid under (b), whether the Court should nevertheless refuse to enforce the exclusion clause, because of an “overriding public policy, proof of which lies on the other party seeking to avoid enforcement of the clause, that outweighs the very strong public interest in the enforcement of contracts”.

We can illustrate this if we apply these concepts to a recent Alberta case. In this case, the court considered a limitation of liability in the context of a standard form industry contract, the terms of which were negotiated between the Canadian Association of Oilwell Drilling Contractors and the Canadian Association of Petroleum Producers. Anyone doing business in the Alberta oilpatch will have seen one of these agreements, or something similar.

The court describes this agreement as a bilateral no-fault contract, where one party takes responsibility for damage or loss of its own equipment, regardless of how that damage or loss was caused. Precision Drilling Canada Limited Partnership v Yangarra Resources Ltd., 2015 ABQB 433 (CanLII) dealt with a situation where one of Precision’s employees caused damage to Yangarra’s well. In the end Yangarra lost $300,000 worth of equipment down the well, which was abandoned. Add the cost of fishing operations to retrieve the lost equipment (about $720,000), and add the cost of drilling a relief well (about $2.5 million). All of this could be traced to the conduct of one of Precision’s employees – ouch.

Despite all of this, the court decided that the bilateral risk allocation (exclusion of liability) clauses in the contract between Yangarra and Precision applied to allocate these costs to Yangarra, regardless of who caused the losses. The court decided that enforcing this limitation of liability clause was neither unconscionable nor contrary to public policy. The clause was upheld, and Precision escaped liability.

Calgary – 07:00

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Apple’s Liability for the Xcode Hack

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By Richard Stobbe

I don’t think I’m going out on a limb by speculating that someone, somewhere is preparing a class-action suit based on the recently disclosed hack of Apple’s app ecosystem.iphone6_34fl_3_color_spaced_homescreen_landing.jpg

How did it happen? In a nutshell, hackers were able to infect a version of Apple’s Xcode software package for iOS app developers. A number of iOS developers – primarily in China, according to recent reports – downloaded this corrupted version of Xcode, then used it to compile their apps. This corrupted version was not the “official” Apple version; it was accessed from a third-party file-sharing site. Apps compiled with this version of Xcode were infected with malware known as XcodeGhost. These corrupted apps were uploaded and distributed through Apple’s Chinese App Store. In this way the XcodeGhost malware snuck past Apple’s own code review protocols and, through the wonder of app store downloads, it infected millions of iOS devices around the world.

The malware does a number of nasty things – including fishing for a user’s iCloud password.

This case provides a good case study for how risk is allocated in license agreements and terms of service. What do Apple’s terms say about this kind of thing? In Canada, the App Store Terms and Conditions govern a user’s contractual relationship with Apple for the use of the App Store. On the face of it, these terms disclaim liability for any “…LOSS, CORRUPTION, ATTACK, VIRUSES, INTERFERENCE, HACKING, OR OTHER SECURITY INTRUSION, AND APPLE CANADA DISCLAIMS ANY LIABILITY RELATING THERETO.”

Apple could be expected to argue that this clause deflects liability. And if Apple is found liable, then it would seek the cover of its limitation of liability clause. In the current version of the terms, Apple claims an overall limit of liability of $50. Let’s not forget that “hundreds of millions of users” are potentially affected.

As a preliminary step however, Apple would be expected to argue that the law of the State of California governs the contract, and Apple would be arguing that any remedy must be sought in a California court (see our post the other day: Forum Selection in Online Terms).

Will this limit of liability and forum-selection clause hold up to the scrutiny of Canadian courts if there is a claim against Apple?

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Court of Appeal Upholds Injunction Against Google (Equustek Solutions Inc. v. Google Inc.)

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By Richard Stobbe

Apparently Google does not appreciate being ordered by a Canadian court to remove worldwide search results. In Update on Injunction Against Google (Equustek Solutions Inc. v. Google Inc.) we reviewed a 2014 decision in which Google was ordered to de-index certain offending websites which were selling goods that were the subject of an intellectual property (IP) infringement claim (that decision was Equustek Solutions Inc. v. Jack, 2014 BCSC 1063 (CanLII)). Google appealed that decision to the B.C. Court of Appeal.

Last week, in Equustek Solutions Inc. v. Google Inc., 2015 BCCA 265, the B.C. Court of Appeal upheld the original order.

In the underlying action, Equustek alleged that Mr. Jack and Datalink Technologies designed and sold product which infringed the IP rights of Equustek. The original lawsuit was based on trademark infringement and misappropriation of trade secrets. Equustek successfully obtained injunctions prohibiting this original infringement. The infringement, however, continued through a variety of websites, and relying on search engines (such as Google) to attract customers. Equustek obtained another injunction prohibiting Google (“the world’s most popular search engine” – those are the court’s words) from delivering search results which directed customers to the offending websites.

Google appealed, arguing that this injunction was overreaching since it was beyond the Canadian court’s jurisdiction. After all, Google has no employees, business offices, or servers within British Columbia. The appeal court observed that Google’s “activities in gathering data through web crawling software, in distributing targeted advertising to users in British Columbia, and in selling advertising to British Columbia businesses are sufficient to uphold the chambers judge’s finding that it does business in the Province.” The court, therefore, was entitled to assert jurisdiction over Google even though it was not a party to the underlying litigation. Put another way, “the underlying litigation clearly has a “real and substantial connection” to British Columbia. Equally, Google’s services, which provide a link between the defendant’s products and potential customers, are substantially connected to the substance of the lawsuit.”

The court drew a parallel with a recent English case, Cartier International AG v. British Sky Broadcasting Limited, [2014] EWHC 3354 (Ch.), where Cartier sought an injunction against a number of ISPs in the UK in order to block access to the offending websites which sold counterfeit Cartier products. The court granted the order in that case.

The B.C. court rejected a creative free-speech argument (the argument that the injunction may have the effect of stifling freedom of expression from the blocked websites). (“There is no evidence that the websites in question have ever been used for lawful purposes, nor is there any reason to believe that the domain names are in any way uniquely suitable for any sort of expression other than the marketing of the illegal product.”)

The court also gave short shrift to the argument that the injunction should be restricted to “Canadian” results from google.ca as opposed to an injunction with worldwide effect (“…an order limited to the google.ca search site would not be effective.”)

If Google successfully appeals this decision, it will undoubtedly attract even more intervenors and will provide an opportunity for Canada’s top court to clarify the law in this area.

Need assistance with intellectual property disputes and internet law? Get advice from experienced counsel.

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Outsourcing by Canadian Companies after the USA PATRIOT Act

capture2.JPGBy Richard Stobbe

Wondering about outsourcing your data to the U.S.? What follows is an update to one of our most popular posts: Outsourcing by Canadian Companies: Another Look at the USA PATRIOT Act, originally written in January 2013.

In that post, we discussed the concern that U.S. government authorities may use the provisions of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (“PATRIOT Act”) to access the personal information of Canadians where that information is stored in the United States in the context of outsourcing or cloud-computing.

We also noted that for private sector businesses there are no specific legal prohibitions on outsourcing to the United States in light of the PATRIOT Act, provided (1) reasonable safeguards are built into the outsource contract (including confidentiality, use-restrictions, security, and provisions to meet monitoring and audit requirements), and (2) customers are notified in a clear way when their personal information will be stored or handled outside Canada. The only exceptions to this are within the public sector, as reviewed in our earlier post.

What Has Changed and What Remains the Same

This is a complicated area of law. Starting in June 2013, Edward Snowden’s revelations about N.S.A.’s pervasive warrantless surveillance programs triggered a broader debate about privacy, as well as the specific risks of outsourcing to U.S. companies.

Certain provisions of the PATRIOT Act expired under a sunset clause on June 1, 2015. The U.S. Congress passed the USA FREEDOM Act on June 2, 2015 (in keeping with the American penchant for legislative acronyms, the full name is “Uniting and Strengthening America by Fulfilling Rights and Ending Eavesdropping, Dragnet-collection and Online Monitoring Act“).

The USA FREEDOM Act restores many of the expired provisions of the PATRIOT Act through 2019. Some provisions of the Foreign Intelligence Surveillance Amendments Act will expire in 2017 (including Section 702, a provision which underpins some of the N.S.A.’s bulk surveillance of online communications). Under the FREEDOM Act, certain sections of the Foreign Intelligence Surveillance Act of 1978 were amended in an effort to delimit the NSA’s mass data collection programs. However, the restrictions on bulk data collection don’t take effect for 6 months after the USA FREEDOM Act is enacted. There is also a carve-out to permit the government to obtain FISA orders during this 180-day period. The effect of this is unclear, but commentators have speculated that during this 6-month grace period the N.S.A. can continue bulk collection, and obtain FISA orders which are not constrained by the requirement for a “selection term”.

Furthermore, bulk collection of phone data is not necessarily coming to an end – arguably, it is merely being delegated to the telecoms: “The Freedom Act does take the bulk collection of Americans’ telephone records out of the hands of the National Security Agency and leaves those records with the phone companies; it sets up procedures for the NSA to get access to those records when it wants to.

The new law does introduce reforms for oversight of government surveillance. In a nod to transparency, some FISA Court opinions may become available, and technology companies will have the ability to publicly report the number of government surveillance requests or investigation inquiries they receive. Previously, companies were prohibited from reporting that such requests had been received.

Generally, under the FREEDOM Act, indiscriminate bulk data collection is to be reformed by requiring the use of “specific selection terms”. In other words, government agencies such as the NSA must use a search term – the name of a specific person, account, address, or personal device, or any other specific identifier – to limit the scope of data collection “to the greatest extent reasonably practicable”.

In 2004, after the initial flurry of anxiety about US government surveillance under the PATRIOT Act, the Privacy Commissioner of Canada noted: “The [PATRIOT] Act is simply one example of a law that can give the United States government or its agencies access to personal information about Canadians that has been transferred to the United States. Research done by the Office of the Privacy Commissioner and discussions with the Department of Justice suggest that the USA PATRIOT Act is not likely in the normal course of events to be used to obtain personal information held in the United States about Canadians.” (Emphasis added)

In light of the 2013 Snowden revelations (and the 2007 Mark Klein disclosures), we now know that, in fact, the bulk collection of phone and internet data by the N.S.A. would have resulted in a lot of personal information about Canadians being collected by the N.S.A. in the United States through the N.S.A.’s PRISM, ECHELON and related surveillance programs.

Data access by Canadian or American government authorities in the course of investigations is not new. Don’t forget that the PATRIOT Act itself was merely an amendment and expansion to a series of existing government investigation tools which were already part of U.S. law, such as the Electronic Communications Privacy Act, Computer Fraud and Abuse Act, Foreign Intelligence Surveillance Act, Money Laundering Control Act and the Bank Secrecy Act. Going back even further, NSA’s cooperation and information-sharing with Canadian security agencies actually dates to the 1940s (see: the UK-USA Agreement). However, the sheer scope, breadth and depth of surveillance was new.

The Americans are not the only ones who carry on surveillance. There are a number of Canadian laws that enable police, security agencies and government investigators to obtain access to information held in Canada in the course of an investigation. And as in the U.S., Canadian security agencies have also been caught exceeding the legal limits on their online surveillance (see X (Re), 2013 FC 1275; aff’d 2014 FCA 249, where the Federal Court and Federal Court of Appeal decided that CSIS breached the duty of candour owing to the Court in seeking and obtaining search warrants fro surveillance on Canadians outside Canada).

Canadian police and security agencies can also obtain information held in the U.S., just as American security agencies can obtain records held in Canada through information-sharing agreements, protocols and a bilateral treaty between the United States and Canada known as the Mutual Legal Assistance Treaty (the “MLAT”). Other countries have similar investigative powers.

While the Americans are making some modest reforms to their surveillance laws, Canadian authorities are actually expanding their reach; the Anti-terrorism Act, 2015 (Bill C-51) was passed on June 9, 2015, and is awaiting royal assent. This new law expands the information-gathering powers between CSIS, police investigators and other Canadian government agencies.

Further, the effect of so-called “boomerang routing” means that online information flowing between a Canadian sender and Canadian recipient is still often routed through the US. (See: IXMaps.ca) Thus, even where data is not physically stored in the US, it may be caught by ongoing N.S.A. surveillance at the point the data traverses through an internet exchange point located within the United States.

Conclusion

As a matter of risk-assessment for Canadian companies outsourcing data to cloud-computing service providers, should you be concerned that your (or your customers’) Canadian online data will be subject to access by the U.S. government?

1. We know that for Canadian private sector businesses there are still no legal prohibitions against outsourcing data to the United States (note that the public sector is treated differently);

2. Best practices still dictate that (a) reasonable safeguards should be built into the outsource contract (including confidentiality, use-restrictions, security, and provisions to meet monitoring and audit requirements), and (b) customers should notified in a clear way when their personal information will be stored or handled outside Canada.

3. There can be no doubt that surveillance practices under the (old) PATRIOT Act resulted in the mass indiscriminate collection of internet and phone data for many years (and very likely continues within the 6-month period after enactment of the FREEDOM Act). It appears very likely that Canadian data outsourced to the U.S. was subject to bulk collection by the N.S.A. Due to “boomerang routing”, it appears likely that even data stored on servers located within Canada often flows through internet exchange locations within the U.S., and therefore would be susceptible to bulk collection by the N.S.A. The USA FREEDOM Act (which is really the PATRIOT Act 2.0) does impose some mild but important reforms on the scope of N.S.A. surveillance. If bulk data and phone-record collection is actually curtailed, the ongoing risk is associated with “targeted” or “selection term” access, in situations where government security and law enforcement agencies exercise rights of accessing and monitoring online data in the course of investigations of a “specific person, account, address, or personal device” in the U.S. It is worth noting that this ongoing risk of access is similar on both sides of the Canada/U.S. border, since Canadian security and law enforcement agencies have similar powers of investigation, and the two governments can rely on MLAT requests and other information sharing protocols to share data.

When you weigh the issues and risks associated with outsourcing Canadian data to the U.S., consider these points and seek advice from experienced IT and privacy counsel.

Further reading: Law, Privacy and Surveillance in Canada in the Post-Snowden Era.

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Reverse Engineering Cloud-Based Software

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By Richard Stobbe

Let’s say you provide web-based software in a SaaS subscription model. What if your reseller or strategic business partner works against you to redesign and reverse engineer your software so they can launch a competing product?

This is what happened to Warehouse Solutions (WSI) in the recent U.S. case Warehouse Solutions, Inc. v. Integrated Logistics, LLC (May 8, 2015, Fed. CA 11th Cir.). WSI developed and sold a web-based software product known as “Intelligent Audit” which interfaced with UPS and FedEx tracking systems to allow companies to track and manage packages. Integrated acted as a reseller of “Intelligent Audit”, but was also a competitor to WSI, in the sense that Integrated sold its own package-tracking software. The reseller relationship between WSI and Integrated, however, was never documented in a written agreement. The parties had verbal discussions about the confidential and proprietary nature of the “Intelligent Audit” software.

Although Integrated never had access to the source code for “Intelligent Audit”, it had high level administrator access rights to the software, and therefore had much broader insight into the features, functionality and structure of the software, compared to the typical end-user.

On the side, unknown to WSI, Integrated developed its own web-based package-tracking software product that was visually and functionally similar to “Intelligent Audit”. Integrated even went so far as to give its own software developer access to “Intelligent Audit”. Eventually, Integrated dropped “Intelligent Audit” and began selling its own competing product under the ShipLink brand name.

WSI then sued Integrated for reverse engineering and copying its software, and through various court proceedings, the claims came down to the issue of trade secrets. The court drew a distinction between a software program’s underlying source code, which may be a trade secret, and the program’s “look and feel” and “functionality,” which cannot be protected as a trade secret, since these features are readily apparent to any user. Since WSI did not enter into a written confidentiality agreement with Integrated, the trade secret claim failed, and WSI’s claim was dismissed.

Lessons for business?

1. It’s worth noting that this case turns largely on U.S. concepts of “trade secret” protection under the Trade Secrets Act, and there is no equivalent legislation in Canada. Canadian software vendors are frequently bound by local U.S. laws in their dealings with American customers, resellers and strategic partners, so this case is an important one for Canadian SaaS providers, even though it involves U.S. law.

2. There are situations – such as in AirWatch, LLC v. Mobile Iron, Inc., (Unpublished) No. 1:12-cv-3571 (N.D. Ga. Sept. 4, 2013) – where a software licensor can protect its software as a trade secret, where it uses written agreements to clearly preserve the secrecy of the program’s functions and specifications.

3. Overall, the message for software vendors and SaaS providers is that clear written agreements will always be preferable to handshake deals and verbal warnings about confidentiality.

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CASL 2.0: The Computer Program Provisions (Part 3)

By Richard Stobbe

The CRTC has released guidelines on the implementation of the incoming computer-program provisions of Canada’s Anti-Spam Law (CASL). Software vendors should review the  CASL Requirements for Installing Computer Programs for guidance on installing software on other people’s computer systems. Remember, the start-date of January 15, 2015 is less than 2 months away. Here are a few highlights:

  • CASL prohibits the installation of software to another person’s computing computer – which includes any device, laptop, smartphone, desktop, gaming console, etc.) in the course of commercial activity without express consent;
  • Downloading your own app from iTunes or Google Play? CASL does not apply to software, apps or updates that are downloaded by users themselves; 
  • Maybe you still use a CD to install software? CASL does not apply to “offline” installations by a user;
  • Where implied consent cannot be relied upon, then express consent is required. The guidelines state the following:

“When seeking consent for the installation you must clearly and simply set out:

  1. The reason you are seeking consent;
  2. Who is seeking consent (e.g., name of the company; or if consent is sought on behalf of another person, that person’s name);
  3. If consent is sought on behalf of another person, a statement indicating which person is seeking consent and which person on whose behalf consent is being sought;
  4. The mailing address and one other piece of contact information (i.e., telephone number, email address, or Web address);
  5. A statement indicating that the person whose consent is sought can withdraw their consent; and
  6. A description in general terms of the functions and purpose of the computer program to be installed.”  

 

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Two Privacy Class Actions: Facebook and Apple (Part 2)

Courtesy of Apple

By Richard Stobbe

In Part 1, we looked at the B.C. decision in Douez v. Facebook, Inc.

Another proposed privacy class action was heard in the B.C. court a few months later: Ladas v. Apple Inc., 2014 BCSC 1821 (CanLII).

This was a claim by a representative plaintiff, Ms. Ladas, alleging that Apple breached the customer’s right to privacy under the Privacy Act (B.C.), since iOS 4 records the location of the “iDevice” (that’s the term used by the court for any Apple-branded iOS products) by surreptitiously recording and storing locational data in unencrypted form which is “accessible to Apple”. The claim did not assert that this info was transmitted to Apple, merely that it was “accessible to Apple”. This case involved a different section of the Privacy Act (B.C.) than the one claimed in Douez.

The Ladas claim, curiously, referred to a number of public-sector privacy laws as a basis for the class action, and the court dismissed these claims as providing no legal basis. The court did accept that there was a basis for a claim under the Privacy Act (B.C.) and similar legislation in 3 other provinces. However, the claim fell down on technical merit. It did not meet all of the requirements under the Class Proceedings Act: specifically, the court was not convinced that there was an “identifiable class” of 2 or more persons, and did not accept there were “common issues” among the proposed class members (assuming there was an identifiable class).

Thus, the class action was not certified. It was dismissed without leave to amend the pleadings.

Apple’s iOS software license agreement did not come into play, since the claim was dismissed on other grounds. If the claim had proceeded far enough to consider the iOS license, then it would surely have faced the same defences raised by Facebook in Douez. As the judgement noted: Apple argued that “every time a user updates the version of iOS running on the user’s iDevice, the user is prompted to decide whether the user wants to use Location Services by accepting the terms of Apple’s software licensing agreement. Apple relies on users taking such steps in its defence of the plaintiff’s claims. The legal effect of a user clicking on “consent” or “allow” or “ok” or “I agree” would be an issue on the merits in this action.”

Any test of Apple’s license agreement will have to wait for another day.

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Two Privacy Class Actions: Facebook and Apple

By Richard Stobbe

Two privacy class actions earlier this year have pitted technology giants Facebook Inc. and Apple Inc. against Canadian consumers who allege privacy violations. The two cases resulted in very different outcomes.

First, the Facebook decision: In Douez v. Facebook, Inc., 2014 BCSC 953 (CanLII), the court looked at two basic questions:

  1. Do British Columbian users of social media websites run by a foreign corporation have the protection of BC’s Privacy Act, R.S.B.C. 1996, c. 373?
  2. Do the online terms of use for social media override these protections?

The plaintiff Ms. Douez alleged that Facebook used the names and likenesses of Facebook customers for advertising through so-called “Sponsored Stories”.  The claim alleges that Facebook ran the “Sponsored Stories” program without the permission of customers, contrary to of s. 3(2) of the B.C. Privacy Act which says:

“It is a tort, actionable without proof of damage, for a person to use the name or portrait of another for the purpose of advertising or promoting the sale of, or other trading in, property or services, unless that other, or a person entitled to consent on his or her behalf, consents to the use for that purpose.”

Interestingly, this Act was first introduced in B.C. in 1968, even before the advent of the primitive internet in 1969 .

Facebook argued that its Terms of Use precluded any claim in a B.C. court, due to the “Forum Selection Clause” which compels action in the State of California. The court accepted that, on its face, the Terms of Service were valid, clear and enforceable. However, the court went on to decide that the B.C. Privacy Act establishes unique claims and specific jurisdiction. The Act mandates that claims under it “must be heard and determined by the Supreme Court” in British Columbia. This convinced the court that Facebok’s Forum Selection Clause should be set aside in this case, and the claim should proceed in a B.C. court.

The class action was certified. Facebook has appealed. Stay tuned.

Next up, the Apple experience.

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CASL 2.0: The Computer Program Provisions (Part 2)

By Richard Stobbe

In Part 1 we looked at some basic concepts. In Part 2, we look at “enhanced disclosure” requirements.

If the computer program that is to be installed performs one or more of the functions listed below, the person who seeks express consent must disclose additional information. This disclosure must be made “clearly and prominently, and separately and apart from the licence agreement”. In this additional or enhanced disclosure, the software vendor must describe the program’s “material elements” including the nature and purpose of the program, and the impact on the user’s computer system. A software vendor must bring this info to the attention of the user. This applies if you, as the software vendor, want to install a program that does any of the following things, and causes the computer system to operate in a manner that “is contrary to the reasonable expectations of the owner”. (You have to guess at the reasonable expectations of the user.) These are the functions that the legislation is aimed at:

  • collecting personal information stored on the computer system;
  • interfering with the owner’s or an authorized user’s control of the computer system;
  • changing or interfering with settings, preferences or commands already installed or stored on the computer system without the knowledge of the owner or an authorized user of the computer system;
  • changing or interfering with data that is stored on the computer system in a manner that obstructs, interrupts or interferes with lawful access to or use of that data by the owner or an authorized user of the computer system;
  • causing the computer system to communicate with another computer system, or other device, without the authorization of the owner or an authorized user of the computer system;
  • installing a computer program that may be activated by a third party without the knowledge of the owner or an authorized user of the computer system.

If the computer program or app that you, as the software vendor, want to install does any of these things, then you need to comply with the enhanced disclosure obligations, as well as get express consent.

There are some exceptions: A user is considered to have given express consent if the program is

  • a cookie,

  • HTML code,

  • Java Scripts,

  • an operating system,

  • any other program that is executable only through the use of another computer program whose installation or use the person has previously expressly consented to, or

  • a program that is necessary to correct a failure in the operation of the computer system or a program installed on it and is installed solely for that purpose; AND

  • the person’s conduct is such that it is reasonable to believe that they consent to the program’s installation.

Remember: These additional provisions in CASL which deal with the installation of software come into effect on January 15, 2015, in less than 3 months. An offence under CASL can result in monetary penalties as high as $1 million for individuals and $10 million for businesses.

If you are a software vendor selling in Canada, get advice on the implications for automatic installs and updates, and how to structure consents, whether this is for business-to-business, business-to-consumer, or mobile apps. There are already more than 1,000 complaints under the anti-spam provisions of the law. You don’t want to be the test case for the computer program provisions.

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CASL 2.0: The Computer Program Provisions (Part 1)

By Richard Stobbe

It’s mid-October. Like many businesses in Canada, you may be weary of hearing about CASL compliance. Hopefully that weariness is due to all the hard work you did 3 months ago to bring your organization into compliance for the July 1st start-date.

If you’re a software vendor, then you should gird yourself for round two: Yes, there are additional provisions in CASL which deal with the installation of software, and those rules come on stream in 3 months on January 15, 2015.

Section 8 of CASL ostensibly deals with spyware and malware. Hackers are not the only problem; think of the Sony Rootkit case (See our earlier post here) as another example of the kind of thing that this law was designed to address.

This is the essence of Section 8: “A person must not, in the course of a commercial activity, install …a computer program on any other person’s computer system… unless the person has obtained the express consent of the owner …” This applies only if the computer system is located in Canada, or if the person either is in Canada at the relevant time or is acting under the direction of a person who is in Canada at the time when they give the directions.

This relatively simple idea – get consent if you want to install an application on someone else’s system in Canada – has far-reaching implications due to the way the legislation draws the definitions of “computer program” and “computer system” from the Criminal Code. As you can guess, the Criminal Code definitions are extremely broad. So, what does this mean in real life?

  • Certain types of specified programs require “enhanced disclosure” by the software vendor. (I am saying ‘software vendors’ as those are the entities most likely to bring themselves into compliance. Of course, hackers and organized crime syndicates should also take note of the enhanced disclosure requirements);
  • Express consent, under this law, means that the consent must be requested clearly and simply, and the purpose of the consent must be described;
  • The software vendor requesting consent must describe the function and purpose of the computer program that is to be installed;
  • The software vendor requesting consent must provide an electronic address so that the user can request, within a period of one year, that the program be removed or disabled;
  • Note that if a computer program is installed before January 15, 2015, then the person’s consent is implied. This implied consent lasts until the user gives notice that they don’t want the installation anymore. Or until January 15, 2018, whichever comes first. I’m not making this stuff up, that’s what the Act says.
  • One more thing: Enhanced disclosure does not apply if the computer program only collects, uses or communicates “transmission data”. Transmission data is what you might call envelope information. The Act defines it as data that deals with “dialling, routing, addressing or signalling” and although it might show info like “type, direction, date, time, duration, size, origin, destination or termination of the communication”, it does not reveal “the substance, meaning or purpose of the communication”. So there is effectively a carve-out for the tracking of this category info.

Don’t worry, Canadian anti-spam laws are kind of like Lord of the Rings: Sequels will keep coming whether you like it or not. Once we’re past January 15, 2015, you can look forward to July 1, 2017, which is the day on which sections 47 to 51, 55 of CASL come into force. These provisions institute a private right of action for any breach of the Act.

If you are a software vendor selling in Canada, get advice on the implications for automatic installs and updates, whether this is for business-to-business, business-to-consumer, or mobile apps. There are already more than 1,000 complaints under the anti-spam provisions of the law. You don’t want to be the test case for the computer program provisions.

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