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Order permits defendant to continue to service existing customers who are reliant on the software, but resulting revenues to be paid into trust

Knowmadics Inc., a US-based software developer, sought and obtained an interlocutory injunction against a former employee in the Ontario Superior Court of Justice for marketing a similar and competing product. 

The employee had been the principal developer of Knowmadics’ software product, known as SilverEye. SilverEye was principally marketed in conjunction with the plaintiff’s CASES mobile application to the military and law enforcement for the collection and analysis of data from mobile devices. At the beginning of her employment with Knowmadics, she signed an employment agreement that contained “obligations pertaining to ownership of intellectual property, confidentiality, conflict of interest and client servicing.” The defendant, Ms. Cinnamon, left her employment with the plaintiff in 2017 and agreed to continue to provide support to the company. The two also signed a non-disclosure agreement

According to the decision of Justice Hackland, Knowmadics v. Cinnamon, it came to the plaintiff’s attention that Ms. Cinnamon, shortly after leaving her employment, was selling two software products though her company LDX Inc, FireCat and GhostCat, that had similar features to SilverEye and CASES. The plaintiff commenced a lawsuit against Ms. Cinnamon and her company, alleging that the FireCat software infringes Knowmadic’s copyright and for breach of her employment agreement and the post-employment agreements. 

The plaintiff and defendant jointly retained a consultant to review the code of the software at issue. The consultant made the following conclusions:

i) certain FireCat source code is identical or substantially similar to the Knowmadics source code;

ii) “a significant proportion of the LDX database structure and source code has been copied from the Knowmadics BlueBird database”;

iii) “approximately 10 percent of the Knowmadics BlueBird database schema matches 40 percent of the database tables and 30 percent of the table-column pairs in the LDX database schema. Several of these similarities include clear indicia of copying from the Knowmadics database schema”;

iv) similarities in the tables contained in the Knowmadics database and the LDX database “include a number of identical matches indicative of copying”;

v) “some of the LDX stores procedures still contain isolated references that are indicia of copying from the Knowmadics code”;

vi) certain columns that appear in both the Knowmadics and LDX databases “contain identical misspellings” and that it “is highly unlikely that these identical mistakes in each database are coincidental, as there is no legitimate reason for a developer to intentionally incorporate such errors into a database schema”; and

vii) “comparison of the Knowmadics and LDX database schemas identified significant structural and functional overlap indicative of copying by LDX. Furthermore, both databases also contain a significant amount of source code that is either identical or substantially similar, providing further evidence of copying”

The defendant also retained a consultant to determine what portion of the FireCat code was derived from third party code and how much was derived from software she had written before working for Knowmadics. That consultant concluded that much of the code was available elsewhere. The relevance of this would be left to the trial judge:

[15] It is admitted by Ms. Cinnamon that she used what she claimed was her own prior code in developing SilverEye for the plaintiff during the tenure of her employment with the plaintiff. She did so without identifying this to the plaintiff. The position of the defendant Ms. Cinnamon is that she incorporated the Technocality database (which she wrote for her earlier client Technocality) into SilverEye software she developed for the plaintiff and subsequently incorporated it into the FireCat software she wrote for her company, the defendant LDX.

[16] In these factual circumstances, I would respectfully agree with and adopt the plaintiff’s statement (from paragraph 76, plaintiff’s factum).

The relevant issue as far as the database goes is a legal one for the Court to determine at trial: once Ms. Cinnamon delivered SilverEye to Knowmadics incorporating that prior database without identifying that she was doing so, and Knowmadics copyrighted SilverEye with that database code and schema, was Ms. Cinnamon then permitted under copyright law or her agreements with Knowmadics to take a shortcut and use the same code and schema to create a competing software with the same functionalities? This is a serious issue to be determined at trial…

The defendant also argued that an injunction would be catastrophic for her clients, who have come to rely on the FireCat software and all of whom are based in Canada. Many of them are former clients of the plaintiff, but the defendant has not acquired any of the plaintiff’s US-based clients. 

A particularly tailored injunction was ordered, described by the Court:

[27] In the court’s opinion an interim interlocutory injunction which permits the defendants to continue to service only their existing Canadian based clients with their FireCat software until the trial of this action achieves an adequate balancing of the interests of both parties and avoids irreparable harm to either one. The object of such an order would be to maintain the status quo pending trial.

[28] As the evidence establishes that the defendants have not obtained any customers for LDX’s FireCat software in the United States, I would exercise the court’s discretion to limit the application of the interlocutory injunction to the Canadian market.

[29] The plaintiff has submitted that the defendant LDX should be subject to an order that pending further order of this Honourable Court, the defendant LDX Inc. shall provide a monthly accounting of all its gross revenues to counsel for the plaintiff and pay all such revenue into Court to the credit of this action on a monthly basis.

[30] I will order that the monthly accounting of gross revenues be provided to plaintiff’s counsel until the trial of the action. I decline at this time to order any such revenues to be paid into court but will consider a further application in this regard if a proper case can be put forward to justify doing so.

Costs were to be costs in the cause, as the order was intended to preserve the status quo and the court did not make any findings on the merits.

BC court finds that holding a phone in a position in which it may be used is distracted driving 

The strictness of British Columbia’s distracted driving laws was confirmed in R. v. Ahmed, where a judicial justice found that the accused had violated the Motor Vehicle Act by holding a cellular phone while operating a vehicle. Unlike in some provinces, the BC prohibition deems holding the device in a manner in which it can be used to be using the device:

[33] “Use” under Section 214.1, Part 3.1 of the MVA “in relation to an electronic device means one or more of the following actions:

(a) Holding the device in a position in which it may be used;

(b) Operating one or more of the device’s functions;

(c) Communicating orally by means of the device with another person or another device; and

(d) Taking another action that is set out in the Regulations by means of, with or in relation to an electronic device.”

The police officer observed the accused holding the phone near the centre of the steering wheel while looking up and down at it. This was uncontradicted and thus a conviction was entered.

Lower court had required disclosure of password under “foregone conclusion” exception to the prohibition against mandatory self-incrimination

In a four to three ruling, the Supreme Court of Pennsylvania in Commonwealth of Pennsylvania v. Davis found that a defendant cannot be compelled to disclose a password to allow the state access to the defendant’s lawfully-seized encrypted computer because a compulsion of that sort would violate the Fifth Amendment of the United States Constitution. This decision overturned a previous order of the Superior Court, which required that the defendant turn over a 64-character password to access his computer.

The defendant was accused of child pornography offences and in the course of its investigation, the police seized a desktop computer that was encrypted. During questioning, the defendant was asked for this password. He reportedly replied: “It’s 64 characters and why would I give that to you? We both know what’s on there. It’s only going to hurt me. No f*cking way I’m going to give it to you.” 

The prosecution brought a motion to require the defendant to reveal his password. The main issue under consideration in the court below was whether providing the password to defeat the encryption was testimonial in nature, and thus, protected by the Fifth Amendment. From page 4:

The trial court focused on the question of whether the encryption was testimonial in nature, and, thus, protected by the Fifth Amendment. The trial court opined that “[t]he touchstone of whether an act of production is testimonial is whether the government compels the individual to use ‘the contents of his own mind’ to explicitly or implicitly communicate some statement of fact.” 

The court below applied the “foregone conclusion” exception to the Fifth Amendment rule against incrimination, described at page 5:

The court noted the rationale underlying this doctrine is that an act of production does not involve testimonial communication if the facts conveyed are already known to the government, such that the individual “‘adds little or nothing to the sum total of the government’s information.’” The trial court offered that for this exception to apply, the government must establish its knowledge of (1) the existence of the evidence demanded; (2) the possession or control of the evidence by the defendant; and (3) the authenticity of the evidence. [citations omitted]

The trial court had a very high level of confidence about what was on the computer so it determined that the password fit within the “foregone conclusion” exception.

The appeal court disagreed:

Based upon the United States Supreme Court’s jurisprudence surveyed above, it becomes evident that the foregone conclusion gloss on a Fifth Amendment analysis constitutes an extremely limited exception to the Fifth Amendment privilege against self-incrimination. The Supreme Court has spoken to this exception on few occasions over the 40 years since its recognition in Fisher, and its application has been considered only in the compulsion of specific existing business or financial records. Its circumscribed application is for good reason. First, the Fifth Amendment privilege is foundational. Any exception thereto must be necessarily limited in scope and nature. Moreover, business and financial records are a unique category of material that has been subject to compelled production and inspection by the government for over a century. The high Court has never applied or considered the foregone conclusion exception beyond these types of documents. Indeed, it would be a significant expansion of the foregone conclusion rationale to apply it to a defendant’s compelled oral or written testimony. As stated by the Supreme Court, “[t]he essence of this basic constitutional principle is ‘the requirement that the [s]tate which proposes to convict and punish an individual produce the evidence against him by the independent labor of its officers, not by the simple cruel expedient of forcing it from his own lips.’” (emphasis original). Broadly circumventing this principle would undercut this foundational right.

… 

Finally, the prohibition of application of the foregone conclusion rationale to areas of compulsion of one’s mental processes would be entirely consistent with the Supreme Court decisions, surveyed above, which uniformly protect information arrived at as a result of using one’s mind. To broadly read the foregone conclusion rationale otherwise would be to undercut these pronouncements by the high Court. When comparing the modest value of this exception to one’s significant Fifth Amendment privilege against self-incrimination, we believe circumscribed application of the privilege is in order. [citations omitted]

The Supreme Court of Pennsylvania concluded that the provision of the password was testimonial and was not within the “foregone conclusion” exception, and reversed the order of the Superior Court.

Saskatchewan Court of Appeal considers multi-pronged attack on admission and consideration of Facebook Messages 

The Saskatchewan Court of Appeal recently reviewed the legal tests to be applied for attributing authorship and authenticating Facebook Messenger messages. The accused/appellant in R v Durocher appealed his finding of guilt for sexual assault and sexual interference with a person under 16, arguing in part that the trial judge had erred in the admission and reliance on Facebook messages put forward as being exchanged between the accused and the complainant. 

As part of the prosecution’s evidence, the complainant testified and referred to a number of Facebook messages. The defence alerted the judge that there may be some objections and that there may be further evidence touching on the messages, the defence did not object and did not call for a voir dire regarding admissibility, reliability or whether the accused was the actual author of the messages attributed to him by the complainant. On appeal, the accused argued that the messages were hearsay and could not be considered unless the judge held a voir dire to determine the question. It was argued that the judge should have done so on his own motion. 

On the question of authorship, the Court of Appeal concluded that it was open to the trial judge to make the conclusion the accused had authored the messages based on the complainant’s testimony and inferences that can be drawn. 

[49] There was no suggestion at trial of tampering or that the sender used an alias. Although the prospect of tampering was discussed in the context of threshold authentication, Watt J.A., in R v C.B., 2019 ONCA 380 (CanLII), 146 OR (3d) 1 [C.B.], was of the view that an inference could be drawn about authorship in the absence of any evidence that gives an air of reality to such a claim:

[72] As a matter of principle, it seems reasonable to infer that the sender has authored a message sent from his or her phone number. This inference is available and should be drawn in the absence of evidence that gives an air of reality to a claim that this may not be so. Rank speculation is not sufficient: R. v. Ambrose, 2015 ONCJ 813 (CanLII), at para. 52.

[50] In my view, the trial judge properly applied the Evans test to determine threshold admissibility. Examining the circumstantial evidence as a whole, it was open to him to draw an inference that Mr. Durocher was the author of the Facebook messages. L.A. provided viva voce testimony and a statement to the police that Mr. Durocher was the person who had sent the Facebook messages to her. She explained the basis for her belief and briefly discussed the content of each message. L.A.’s evidence on this point went in unchallenged.

In considering the threshold of admissibility, the trial judge only needed to be satisfied on the legal standard that the accused made the statements and could rely on circumstantial evidence to do so. Furthermore, a voir dire was not required to consider the question. 

The appellant also challenged the reliability of the messages, which the Court of Appeal found to be rooted in the law related to hearsay. The appellant asserted that the trial judge should have held a voir dire to determine the question, though none was requested at the trial. An out-of-court statement made by a non-testifying declarant “tendered for the truth of its contents” is presumptively inadmissible, subject to specific common law exceptions. 

The Court of Appeal noted that at trial, defence counsel never identified hearsay as a basis for concern or suggest a voir dire was necessary. The defence did make a statement that he “may object” at some point to the Facebook messages during examination. Defence counsel also did not challenge the complaint’s testimony that attributed the messages to the defendant. 

This may have been part of a strategic decision by the defence that ultimately failed: “As commented above, the approach taken by defence counsel at trial was no doubt in furtherance of a strategy that did not succeed, but that alone does not make the trial judge’s approach erroneous.”

Defence counsel chose not to advance this argument at trial, and the trial judge was not faulted for not intervening with Mr. Durocher’s strategy during trial. In this case, Facebook evidence was presumptively admissible without a voir dire. The trial judge did not err by failing to hold a voir dire of his own motion in order to determine the admissibility of the Facebook messages because they were hearsay. 

Further, the appeal judge invoked the curative provision of s. 686(1)(b)(iii) of the Criminal Code. While the trial judge believed that Mr. Durocher sent the messages, but they did not add to the allegation of the specific sexual assault 

[73] … I say this because even though the trial judge was satisfied Mr. Durocher was the author of the messages, he did not give the messages any weight in deciding guilt or innocence. To repeat, he said, “I believe that Mr. Durocher did send messages, but they don’t add to the allegation of the specific sexual assault” (emphasis added). The trial judge’s decision came down to the credibility of L.A. He explained why he found her credible and, in the end, was satisfied beyond a reasonable doubt that Mr. Durocher had committed the offences with which he stood charged.

The appellant also challenged the authenticity of the messages, which requires resort to the Canada Evidence Act (“CEA”) and the common law. Authenticity, to put it simply, refers to whether the document is what it purports to be. The CEA is particularly engaged because the messages are electronic documents:

Authentication of electronic documents

31.1 Any person seeking to admit an electronic document as evidence has the burden of proving its authenticity by evidence capable of supporting a finding that the electronic document is that which it is purported to be.

And under the CEA, it is merely a threshold question as the ultimate issue has to be determined at the end of the day with the benefit of all the relevant evidence:

[84] That said, authentication does not necessarily mean the document is genuine: “That is a question of weight for the fact-finder which often turns on determinations of credibility” (citations omitted, Ball at para 70). Evidence can be authenticated even where there is a contest over whether it is what it purports to be. As Professor David Paciocco (as he then was) explained in his article cited above, “Proof and Progress: Coping with the Law of Evidence in a Technological Age” (December 2013) 11 Can J L & Tech 181 [“Proof and Progress”], this is not because the law is interested in false documentation (at 197):

It is simply that the law prefers to see disputes about authenticity resolved at the end of a case, not at the admissibility stage. Disputes over authenticity tend to turn on credibility, and credibility is best judged at the end of the case in the context of all of the evidence. “Authentication” for the purposes of admissibility is therefore nothing more than a threshold test requiring that there be some basis for leaving the evidence to the fact finder for ultimate evaluation. In R. v. Butler, [2009 ABQB 97] 2009 CarswellAlta 1825, [2009] A.J. No. 1242 (Alta. Q.B.), for example, the Court recognized where there was a live issue about whether the accused generated the Facebook entries in question that would be for the jury to decide.

The Court of Appeal also noted that authentication and authorship are two different, but interconnected, questions and each must be resolved. The Court of Appeal, at paragraph 85, quoted from Graham Underwood and Jonathan Penner, Electronic Evidence in Canada, loose-leaf (Rel 1, 2016) vol 1 (Toronto: Thomson Reuters, 2010):

It is also important to note that establishing the authenticity of an electronic document is not necessarily synonymous with demonstrating its authorship. The relationship between authenticity and authorship for electronic documents is not reciprocal; demonstrating authorship is sufficient to establish authenticity, but establishing authenticity of an electronic document does not necessarily provide strong evidence of authorship.

At the end of the day, the burden for authentication is relatively light. Though neither party before the court nor the trial judge referred to the CEA, there was sufficient evidence to establish that authenticity and authorship. The Court of Appeal noted that the complainant testified to the following, all of which was largely unchallenged by the defence: 

(a) she was his Facebook friend;

(b) she described the content of Mr. Durocher’s home page as containing his name in bold and underlined lettering;

(c) the responses to her messages bore her name;

(d) she identified the messages she had sent in response and her responses bore her name;

(e) the messages from the sender contained sexual content with an invitation for sexual activity;

(f) she was able to access the messages from her smart phone;

(g) the sender used the word tatanka that, in the Dakota language, means buffalo;

(h) the messages received by L.A. were contemporaneous with the alleged assaults; and

(i) some of L.A.’s messages, in the chain of messages, were met by a further message from the sender.

Though the Court of Appeal would have preferred that the judge had held a voir dire on this question, the low barrier of section 31.1 of the CEA was easily passed. In paragraph 96, the Court of Appeal noted: 

However, bearing in mind the low bar attached to s. 31.1, the functional approach adopted by the courts with regard to its application, the presumption of integrity under the CEA and the fact the trial judge ultimately found Mr. Durocher was the author of the Facebook messages, I am satisfied that the evidence adduced by the Crown was capable of authenticating the Facebook messages.

Customers complained they could not access their funds; approximately $16M owed

On November 4, 2019, the British Columbia Securities Commission announced that it had made an application to the Supreme Court of the province for the appointment of an interim receiver to take custody of the assets, undertaking and business of a group of companies operating a cryptocurrency exchange, called the Einstein Exchange. The receiver entered and secured the premises on November 1, 2019.

According to the affidavit of the Lead Investigator with the Enforcement Division of the BCSC, the Securities Commission commenced its investigation in May 2019 after hearing complaints from several of the company’s customers indicating they were not able to access their assets on the exchange. Two other individuals, including a shareholder, also complained about possible money laundering. According to documents filed with the court, the company trades nineteen different cryptocurrencies and its customers are currently owed just over $16 million.

US government to strictly enforce KYC rules for cryptocurrency exchanges

As the New York Times recently reported, at a conference hosted by a blockchain analysis company, the Director of the US Financial Crimes Enforcement Network (FinCEN) announced that the US government would be strictly enforcing the “travel rule” anti-money laundering measure over cryptocurrency exchanges. The travel rule “requires cryptocurrency exchanges to verify their customers' identities, identify the original parties and beneficiaries of transfers $3,000 or higher, and transmit that information to counterparties if they exist.” It is a standard feature of anti-money laundering law and the subject of recent recommendations by the Financial Action Task Force (FATF), which held that the rule should apply to cryptocurrency exchanges due to the large amount of theft, scams and fraud associated with them (estimated to be $4.3 billion this year). The report indicates this was something of a surprise to cryptocurrency firms, who felt that cryptocurrency was not money and that the travel rule therefore didn’t apply to them.

Test case by ACLU and EFF upholds privacy interest in e-devices

The question of when it is legal for border officials to search the electronic devices of travelers has been a contentious one for some time, both in Canada and in the United States. The dominant argument made by governments has been that privacy interests are low at the border, while national security and law enforcement interests are high, and therefore devices should be subject to search at any time. Civil society organizations and defendants have asserted that due to the intense privacy interest in the large amounts of data carried in computers and smart phones, searches are much more invasive than would be the case for other things a traveller might have with them (such as a suitcase), and have advocated for requiring the state to have reasonable grounds or reasonable suspicion before conducting a search.

In the recent case of Alasaad v. Neilsen, a U.S. District Court for Massachusetts has ruled that searches of the devices carried by 11 travellers (10 US citizens and one permanent resident) by US Customs and Border Protection (CBP) and Immigrations and Customs Enforcement (ICE) violated the US 4^th Amendment, because they were done in the absence of reasonable and individualized suspicion that contraband or evidence was present. The action was brought by the American Civil Liberties Union (ACLU) and the Electronic Frontier Foundation (EFF), and one could infer that the plaintiffs were carefully chosen due to the circumstances and effects of the searches that were done. Plaintiff Alasaad was a Muslim woman who objected to male officers searching her phone and viewing pictures of her and her daughters without their headscarves, yet was subject to search without grounds on two different occasions. Other searches saw border officials viewing privileged solicitor-client material, confidential work data belonging to an employee of NASA, and journalistic work product with lists of contacts. One plaintiff, a writer, was asked about her blog posts after the search, and when her phone was returned the Facebook app was open to her “friends” page, which had not been open when the phone was taken. The majority of the plaintiffs had their devices searched more than once. The court observed that the harm to the plaintiffs’ interests from the searches was ongoing, since the evidence indicated that data from the devices would be retained and “used to inform decisions on future searches.”

The court noted that CBP and ICE had policies under which “basic” searches (searches of devices by hand) did not require any grounds, while “advanced” searches (involving hooking the device up to another computer) required reasonable suspicion. The court rejected the government’s argument that both of these searches were “routine” and thus subject to the “border search exception” to the 4^th Amendment. Even a basic search could turn up extremely personal and private information on a device, including metadata, particularly given that even cell phones have search functions that can be used. This being so, it was clear that a standard of “reasonable suspicion” should apply to both, the standard being defined as “a showing of specific and articulable facts, considered with reasonable inferences drawn from those facts, that the electronic device contains contraband.” While granting the plaintiffs’ request for declaratory relief, the court declined their request to issue a nation-wide injunction against searches not based on reasonable suspicion.

Court applies traditional test for interlocutory third-party injunctions to require largest internet service providers to block allegedly copyright infringing site

A judge of the Federal Court of Canada has issued a precedent-setting site-blocking order at the behest of a range of Canadian IP rights holders. The application was brought by Bell Media Inc., Groupe TVA Inc., and Rogers Media Inc., three Canadian broadcasters and the third party respondents were a number of Canadian internet service providers, a number of which are affiliates of the plaintiffs.

In July 2019, the plaintiffs filed a suit against the unnamed persons operating two websites: goldtv.biz and goldtv.ca, and sought an injunction against the defendant alleging that the GoldTV services had been infringing copyright in various broadcasts owned by the plaintiffs. The injunction was granted, but the plaintiffs alleged that GoldTV continued make copyrighted materials available through its services. The plaintiffs then sought an injunction to force the Canadian internet service providers to block consumers from connecting to a range of IP addresses and websites associated with GoldTV.

A number of the ISPs (Bell Canada, Fido Solutions Inc., Rogers Communications Inc. and Videotron Ltd.) consented to the motion, while four others took no position. The only respondent to object was Teksavvy Solutions Inc. The objection is summarized by the Court:

[11] TekSavvy opposes the motion arguing that: (1) the motion relates strictly to the issue of site blocking; (2) the subject matter of the dispute falls within the specialized expertise and mandate of the Canadian Radio-television and Telecommunications Commission [CRTC] pursuant to the Telecommunications Act, SC 1993, c 38 [Telecommunications Act]; and (3) in this circumstance, and although the Court may have jurisdiction, in a narrow sense, the Court should decline to exercise that jurisdiction. TekSavvy further submits that if the Court concludes otherwise, then in the alternative the Plaintiffs have failed to satisfy the test for an interlocutory injunction.

The Court determined that the Federal Court does have jurisdiction simpliciter to issue injunctions against third parties such as the ISPs, and then turned to the question of whether it could issue this particular order.

Teksavvy argued that Parliament had been presented with the possibility of a new legal regime that included site-blocking and had declined to do so. It further argued that the CRTC had exclusive jurisdiction over site blocking by virtue of section 36 of the Telecommunications Act:

36 Except where the Commission approves otherwise, a Canadian carrier shall not control the content or influence the meaning or purpose of telecommunications carried by it for the public.

The Court noted that when a coalition of broadcasters (the “Fairplay Coalition”) had petitioned the CRTC to enable site-blocking for these purposes, the CRTC had concluded that it did not have jurisdiction over copyright and that the Copyright Act is a complete code dealing with the issue. The Court then wrote:

[37] Teksavvy seeks to characterize the issue on this motion as one of site blocking only. I am not convinced the injunction remedy sought can be so simply divorced from the essential character of the underlying copyright infringement action.

[38] Teksavvy has not argued that the CRTC erred in concluding it lacked jurisdiction in the area of copyright infringement. For the purposes of addressing the issues before me and absent argument to the contrary I accept the CRTC conclusion that Parliament intended the Copyright Act to be an exhaustive regime. Absent clear statutory language to the contrary, where the essential character of the dispute is one of copyright, remedies are to be found in the Copyright Act.

…

[42] In summary, the Court has jurisdiction to grant the relief sought. I am not convinced that any of the provisions of the Telecommunications Act, nor the fact that there is ongoing debate about the role of site blocking in Canada's telecommunications regulatory regime, support the view that the Court should decline to exercise its discretion in this case.

Once the Court determined that it had jurisdiction to issue the particular order, the analysis switched to what test should be applied. The usual test for interlocutory injunctions was accepted, though the Court sought guidance from a similar order issued in Cartier International AG & Ors v British Sky Broadcasting Ltd & Ors [2016] EWCA Civ 658 (“Cartier CA”), a trademarks decision of the England and Wales Court of Appeal:

[52] In Cartier CA the EWCA endorsed a number of principles or factors as being relevant in determining if a site-blocking order is proportional. The factors are:

A. Necessity — a consideration of the extent to which the relief is necessary to protect the plaintiff's rights. The relief need not be indispensable but the court may consider whether alternative and less onerous measures are available;

B. Effectiveness — a consideration of whether the relief sought will make infringing activities more difficult to achieve and discourage Internet users from accessing the infringing service;

C. Dissuasiveness — a consideration of whether others not currently accessing the infringing service will be dissuaded from doing so;

D. Complexity and Cost — a consideration of the complexity and cost of implementing the relief sought;

E. Barriers to legitimate use or trade — a consideration of whether the relief will create barriers to legitimate use by unduly affecting the ability of users of ISP services to access information lawfully;

F. Fairness — a consideration of whether the relief strikes a fair balance between fundamental rights of the parties, the third parties and the general public;

G. Substitution — a consideration of the extent to which blocked websites may be replaced or substituted and whether a blocked website may be substituted for another infringing website; and

H. Safeguards — a consideration of whether the relief sought includes measures that safeguard against abuse.

The Court carried out an analysis of each of the above Cartier CA factors and determined that the balance of convenience favoured the plaintiffs.

A fifteen paragraph order issued to require the blocking of the sites and IP addresses requested by the plaintiffs, the first of which reads:

1. Within fifteen (15) days of the issuance of this Order, the Third Party Respondents shall block or attempt to block access by at least their residential wireline Internet service customers to the websites or online services identified at Schedule 1 to this Order (the "Target Websites"), by blocking or attempting to block access to all of the Target Websites' domains, subdomains and IP addresses identified therein. For clarity, the Go1dTV.ca Service is a Target Website for the purpose of this Order. Schedule 1 to this Order is empty for the Go1dTV.ca Service as of the date of issuance of this Order, and may be supplemented by the Plaintiffs if and when appropriate in accordance with paragraph 2 of this Order.

Notably, any customer of any of the third party ISPs has the right to make an application to the Court to vary the order if it affects their ability to access or distribute non-infringing content.

Federal Court refuses to certify Voltage “reverse class action” on numerous grounds

The Federal Court of Canada appears to have brought the Voltage “reverse class action” for copyright infringement to an end (subject to appeal). On November 12, 2019 in Voltage Pictures et al. v Salna et al.the Federal Court of Canada dismissed the application for certification brought by a group of production companies (“Voltage”) that sought to sue, in a single class proceeding, hundreds of Canadians accused of unlawfully downloading and uploading movies for which the plaintiffs own the exclusive rights.

In a certification motion, the plaintiffs have the burden of satisfying the test set out in the Federal Courts Rules, which require:

Conditions

334.16 (1) Subject to subsection (3), a judge shall, by order, certify a proceeding as a class proceeding if

(a) the pleadings disclose a reasonable cause of action;

(b) there is an identifiable class of two or more persons;

(c) the claims of the class members raise common questions of law or fact, whether or not those common questions predominate over questions affecting only individual members;

(d) a class proceeding is the preferable procedure for the just and efficient resolution of the common questions of law or fact; and

(e) there is a representative plaintiff or applicant who

(i) would fairly and adequately represent the interests of the class,

(ii) has prepared a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members as to how the proceeding is progressing,

(iii) does not have, on the common questions of law or fact, an interest that is in conflict with the interests of other class members, and

(iv) provides a summary of any agreements respecting fees and disbursements between the representative plaintiff or applicant and the solicitor of record.

Voltage argued that its amended statement of claim met the test. It is important to note that the decision is based on the pleadings, assuming the allegations to be true.

Justice Boswell determined that the Voltage pleadings did not disclose a reasonable cause of action for either primary or secondary infringement. Primary infringement refers to making a film available for upload by BitTorrent or advertising through BitTorrent that a film was available for download. Secondary infringement or authorizing infringement refers to failing to take steps, as a controller of an internet account, to prevent the two acts of primary infringement, or authorizing either of them. With respect to a primary infringement, Voltage did not identify any person who it alleged to be a primary infringer. Voltage did name an alleged secondary infringer who had an IP address that was associated with making five films available on the BitTorrent network at various times.

The Canadian Internet and Public Interest Clinic (“CIPPIC”) argued that Voltage’s own affiant admitted during cross-examination that an IP address cannot be associated with a particular individual in copyright infringement matters. The operator of the account identified by Voltage had two tenants who were also identified; however, it is unclear who (or if any of them) were the ones to allegedly infringe the plaintiffs’ copyright. Because of this, no Direct Infringer could be identified by Voltage, and it is therefore plain and obvious that its claim of primary infringement cannot succeed. From Paragraph 77: “Without an identifiable respondent the action could not appropriately go forward as a class proceeding…”.

For secondary infringement or authorizing infringement, the court similarly found that the Voltage claim as pled was doomed to fail. With BitTorrent, there is no difference between downloading and uploading files as they take place simultaneously. When files are shared on BitTorrent, they are shared by all users and not necessarily with the users’ knowledge.

The Court determined that Voltage failed to provide sufficient evidence about the actual existence of a class of two or more persons:

“The nexus between an IP address and the person responsible for copyright infringement is highly technical and difficult to assess without a consideration of the merits of individual liability issues” (para 106).

Voltage also failed to demonstrate to the court’s satisfaction that there was some basis in fact that the claims of the class members raise common questions of law or fact. The final nail in the coffin for Voltage was that its litigation plan was unmanageable for having to deal with individual issues, for relying on public resources for a private end and because it largely relies on the notice-and-notice regime of the Copyright Act to facilitate a large-scale class proceeding that could affect thousands of Canadians.

The motion was dismissed with costs.

Court holds Internet-based dangers to children justify stricter sentencing

In R. v. Alcantara, the accused had pleaded guilty to the offence of internet luring under s. 172.1 of the Criminal Code, arising from a sting operation in which he interacted in a sexual manner with “Brayden,” an undercover officer who was playing the part of a 14-year old boy. “Brayden” had responded to an ad the accused placed on a site called “Doublelist!”, in which the accused sought sexual activity with a person emphasized as “young.” After short conversations with sexual content, the accused arranged a discreet “meeting” with “Brayden” and was apprehended thereafter.

The sentencing judge, Rolston J. of the Manitoba Provincial Court, took account of Parliament’s clear prioritization of combatting child sexual exploitation and its “growing concern for offences involving internet use,” which was reflected in turn by the creation of minimum sentences for deterrence purposes. The court remarked:

[6] As a general observation, it is worth noting that the use of social media on the internet has virtually exploded since the time that the Ontario court expressed the noted concerns in D.D. in 2002. In 2019, virtually everyone carries a phone that is capable of accessing the vast number of internet applications that cater to connecting people to one another in some form or another. Often, the children as opposed to the adults, are the experts in the use of these devices. Despite often being experts in internet navigation, children remain naïve and vulnerable to influence and predatory behaviour. Therefore, the words of Justice Moldaver (as he then was) in D.D. add perspective to his words written more recently on behalf of the Supreme Court in R. v. Morrison, [2019] S.C.J. No. 15 at paragraph 153:

Child Luring is a serious offence that targets one of the most vulnerable groups within Canadian society—our children. It requires a high level of mens rea and involves a high degree of moral blameworthiness.

The reality is that today’s technology is moving at light speed. The potential for damage to our “valued and vulnerable assets” is real. The combination of these facts logically calls for a focus on the principles of deterrence and denunciation in sentencing those who use the internet as a tool to lure and victimize our youth. These sentiments have been echoed time and time again in courts across the country (see, for example: R. v. Legare, 2009 SCC 56 (CanLII), R. v. Alicandro, 2009 ONCA 133 (CanLII), R. v. Paradee, 2013 ABCA 41 (CanLII), R. v. Jepson, [2004] O.J. 5521, R. v. Harris, 2017 ONSC 940 (CanLII), and R. v. Galatas, Unreported MBQB, May 1, 2019). The concern of Parliament to ensure that the principles of deterrence, denunciation and protection of the public are at the forefront, is reflected in the increased sentences imposed by law.

Here, the defendant had challenged the constitutionality of the 1-year mandatory minimum sentence attached to the offence, but the court found that a sentence of at least one year would be appropriate in the circumstances and thus it did not need to consider the challenge. The defendant was sentenced to one year in jail and one year of probation, along with various conditions restricting his internet use, including a ban on the use of social media.