Canada: E.News @ Gowlings – February 2007

Edited by Louis Benoit

• Microsoft Enjoys Groundbreaking Success In Counterfeit Battle

• Web Sites Could Face Assessments Over GST Ruling

• Wal-Mart Joins Forces With Hollywood

• Congress Welcomes Policy Debates On Data Privacy

• Questions Have Been Raised About Possible Breach Of Copyright Laws In Conservative Television Ads

• Teenager Alleges Conspiracy Theory Over Music Piracy

• Government's Position On Net Neutrality Questionable

• U.S. Courts Increasingly Cite From Wikipedia

• ISP Tracking And Warning Labelling Legislation Introduced In Congress

A Federal Court of Canada judge recently awarded Microsoft $500,000 in a copyright and counterfeiting case against a Montreal-based software retailer. This award represents the maximum statutory damages allowable under the Copyright Act, amended in 1997 to permit awards ranging from $500 to $20,000 per infringed work. Justice Sean Harrington awarded Microsoft $20,000 for each of the twenty-five types of counterfeit Microsoft products that Inter-Plus bought and resold. In addition, Justice Harrington awarded Microsoft another $100,000 in punitive damages from the two Quebec numbered companies that collectively own Inter-Plus and $100,000 personally from the man who controls the Quebec companies. These awards represent the highest punitive damage awards ever granted in a Canadian counterfeiting case.

The defendants have appealed the decision on the grounds that the highest award of statutory damages is not supported by the facts of the case. In particular counsel for the defendants insists that as a "secondary infringement" case, the damages are out of line. The defendants argue that they weren't producing the infringing copies but acquired them from a secondary party. Nevertheless, many observers see this case as groundbreaking given the willingness of the civil courts to protect the rights of intellectual property owners. While the final chapter in this case is yet to be written, what is clear is that intellectual property rights are enjoying a newfound prevalence in Canadian courts.

More information available at:
http://tinyurl.com/2anoz3

Canadian Web sites that don't charge GST to subscribers outside of Canada are in violation of the Excise Tax Act, according to the Canada Revenue Agency. In a recent case, Dawn's Place v. R, the Federal Court of Appeal ruled against Dawn's Place, an adult-oriented Web site for failing to collect GST from non-residents for fees earned in 2001. The Tax Court of Canada had ruled in favour of Dawn's Place holding that the money the website was making for supplying digital content to those outside of Canada should be "zero rated" under the GST, falling under a clause in the Excise Tax Act that relates to the supply of intellectual property.

In response, the Canadian Association of Internet Providers ("CAIP") sent out a legislative alert via e-mail to its members criticizing the court's move and suggested it could impact many other companies that deliver content electronically through their websites. The criticism includes claims that the decision puts Canadian firms at a disadvantage and is contrary to the spirit of the GST. The Canada Revenue Agency would not comment on this, saying only, "it's part of Canadian law" to collect GST from digital media subscribers regardless of their place of residence. The CAIP has engaged legal counsel and wants the appeal overturned.

More information available at:
http://www.itbusiness.ca/it/client/en/home/News.asp?id=41992

Wal-Mart has announced that it has formed a partnership with the six major studios in Hollywood: Walt Disney, Warner Brothers, Universal Studios, Paramount, Sony and 20th Century Fox to sell digital movies and television shows through its website. Wal-Mart becomes the first traditional retailer to enter into such an agreement and hopes to challenge the established competition such as Amazon.com, CinemaNow and Itunes for supremacy in the digital download arena. The company is hoping that its easy-to-use website and extensive video library, coupled with its penchant for price-cutting, will attract customers to its new service.

More information available at:
http://www.nytimes.com/2007/02/06/technology/06video.html

According to Privacy Rights Clearinghouse, over 100 million Americans have had their personal information compromised due to corporate data breaches or mishaps. To address this concern, many political, industry and consumer-interest groups have joined the policy debates. Panel Chairman Barney Frank (D-Mass.) of the powerful House Financial Services Committee, plans to craft a bill that will hold retailers more accountable for data breaches. This bill will require retailers to notify banks immediately of any compromised credit card accounts so that customers can be issued new credit cards before the fraud occurs. Retailers that secure data with encryption technology would be exempt from this requirement.

David Sohn, staff counsel for the Center for Democracy & Technology, a policy group in Washington, agrees with the encryption exemption, so long as the encryption keys (necessary to unscramble the data) are not stolen along with the data. He says that this will avoid alarming and desensitizing consumers over data breaches that are not likely to compromise personal information. Given that data privacy is an area where there are huge corporate interests on both sides, Fred von Lohmann, a senior staff attorney with the Electronic Frontier Foundation, wonders whether the "duelling interest groups will make it difficult for Congress to come to an effective solution."

Despite this, debates and discussions in Congress are ongoing. One data breach bill in particular, reintroduced to Congress this year by Democratic Sen. Dianne Feinstein, is receiving much attention. This bill would require retailers to notify consumers of any breach to their personal information regardless of whether the data was encrypted. Situations where less than 10,000 customer accounts are compromised would be exempt from this requirement. Overall, given the high levels of current interest on the subject, it appears that we can expect some new U.S. federal consumer privacy protection from Congress in the near future.

More information available at:
http://tinyurl.com/35tqmr

Questions have been raised about possible breach of copyright laws after Conservative television ads fired at Liberal Leader Stephane Dion were aired in January 2007. The ads used footage from last fall's Liberal leadership debates to deliver the message that the new Grit leader is weak, indecisive and an environmental failure. The Cable Public Affairs Channel ("CPAC") provided the camera for each debate and the footage belonged to a consortium of TV networks. A spokesperson from CPAC stated that any outside use of debate video would have to be approved by all TV networks, and that video traditionally had never been authorized for use by political parties. CPAC was not aware of any request for the footage, and the Conservatives refused to say how they obtained the video. However, it may be difficult to determine whether or not there had been any copyright infringement without knowing how the Conservatives obtained the debate footage. If a party member taped the debates on television, the ads could fall into a grey zone in Canadian copyright law. The Conservatives could argue that they qualify for some exception under the Copyright Act such as the fair dealing exception for criticism. Professor Michael Geist stated that the use of such video footage in political ads would be entirely proper in the United States which applies a broad 'fair use doctrine', and suggested Canada should adopt a similar 'fair use doctrine' that would allow the Conservatives to use footage of this kind in public political events.

http://cnews.canoe.ca/CNEWS/Canada/2007/01/29/pf-3475135.html

Robert Santangelo, a 16-year-old boy, has been accused of online music piracy by 5 record companies. Santangelo denies that he ever distributed music and asserts that it is impossible to prove that he did. In 2005, Santangelo's mother was sued by the record companies. The industry eventually dropped its case against her but decided to sue Robert and his 20-year-old sister Michelle in the Federal Court. Michelle has been ordered to pay $30,750 in a default judgment because she did not respond to the lawsuit.

Robert, on the other hand, responded at length raising 32 defences, including: that he never sent copyrighted music to others, that the recording companies promoted file sharing before turning against it, that average computer users were never warned that it was illegal, that the statute of limitations had passed, and that all the music claimed to have been downloaded was owned by his sister on store-bought CDs. In his court documents, Robert also accused the recording industry of violating antitrust laws, conspiring to defraud the courts and making extortionate threats. The Recording Industry Association of America (RIAA) has since issued a statement saying: "The record industry has suffered enormously due to piracy. That includes thousands of layoffs. We must protect our rights. Nothing in a filing full of recycled charges that have gone nowhere in the past changes that fact."

More information available at:
http://www.siliconvalley.com/mld/siliconvalley/news/editorial/16584955.htm

It appears that the Tory government is hesitant to impose consumer safeguards to ensure net neutrality. Net neutrality - the subject of extensive debate in the U.S. - aims to regulate Internet Service Providers ("ISPs") to ensure that the smallest blogs load just as fast as corporate web pages. Net neutrality has not received a great deal of attention by the Tory government thus far. The Government had previously declared a "consumer first" approach, but based on documents obtained by the Canadian Press it appears that advisors to Industry Minister Maxime Bernier are heeding the arguments of telecom companies.

"These documents reveal that in Canada, the industry minister and his policy people appear unlikely to provide Canadian Internet users with similar protections to those being offered in the United States," said Michael Geist, law professor at the University of Ottawa. The background papers and reports prepared for Bernier give short shrift to the arguments in favour of net neutrality legislation, and state that major telecom companies are "determined to play a greater role in how Internet content is delivered" and that "they believe they should be the gatekeepers of content, with the freedom to impose fees for their role." Further, the documents state that any legislative change should consider consumer choice, but it should also "enable market forces to continue to shape the evolution of the Internet infrastructure, investment and innovation to the greatest extent feasible."

More information available at:
http://www.cbc.ca/cp/business/070206/b0206149A.html

Wikipedia has increasingly become the default reference source for curious members of the public, recently ranking as the 13th most popular destination on the Internet. In the United States, it appears as though the judiciary is no exception. Since 2004, more than 100 judicial rulings have referenced Wikipedia. This includes 13 decisions from the Circuit Courts of Appeal, one step below the Supreme Court.

The courts' use of Wikipedia for tangential references, side notes, or "soft facts" is generally not seen as problematic. Often, such references are used just to add context or flavour to the decision. For example, the Supreme Court of Iowa used Wikipedia to define the term "jungle juice" as "the name given to a mix of liquor that is usually served for the sole purpose of becoming intoxicated."

However, critics have maintained that it is inappropriate for judges to cite Wikipedia for any issue upon which a case might turn. This is because Wikipedia has extremely lax quality controls and introduces the possibility of opportunistic editing to influence the outcome of cases. It was for these reasons that the United States Court of Federal Claims overruled a lower decision that was partially based on material from Wikipedia. Ironically, in overturning the decision, the Court relied on another article from Wikipedia entitled "Researching With Wikipedia".

More information available at:
http://www.nytimes.com/2007/01/29/technology/29wikipedia.html?ex=1327726800&en=92bbe5fe41874778&ei=5090&partner=rssuserland&emc=rss

Legislation introduced on February 7th, 2007 in the U.S. Congress will require Internet Service Providers ("ISPs") to track and retain records of their customers' Internet use. Under the proposed legislation, ISP employees could face fines and jail time for failing to store the required information. The Bill will also require owners of sexually explicit websites to post warnings or risk jail time.

Proponents of the legislation view it as a necessary tool for criminal law enforcement. Under the current requirements, unless investigators are responding immediately to a suspected illegal activity, the relevant ISP records will likely have been deleted by Internet providers. Such measures have been generally opposed by civil liberties organizations and telecommunications companies. The Bill's potential broad application has also been criticized, as it requires indefinite storage of Internet records and could also result in Internet records being used in private litigations, such as family law disputes. With respect to the warning labelling of explicit content sites, there is also uncertainty as to what type of content would necessitate such a warning. Despite these criticisms, the legislation appears to be receiving support from both sides of the House of Representatives.

More information available at:
http://news.com.com/2100-1028_3-6156948.html

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