Law Times

Law Times • apriL 14, 2014 Page 11 www.lawtimesnews.com hile observers have suggested a recent Federal Court de- cision ordering Ontario-based Internet service provider TekSavvy Solutions Inc. to release the names of 2,000 of its customers to film production company Voltage Pictures LLC was a victory for copyright hold- ers, it sends file-sharing cases down such a narrow path that it may not be profitable to follow. Nicholas McHaffie of Stike- man Elliott LLP, who represent- ed TekSavvy in Voltage Pictures LLC v. John Doe and Jane Doe, makes it clear his client didn't oppose the motion to produce the names but sought protection for its clients from abuse of the court system. "TekSavvy's primary interests were that their customers should get notice of the proceedings as it went along and that the form of the order included customer protections to protect them from receiving inappropriate threatening letters." In fact, TekSavvy's initial reaction to the motion was to comply. at was until its cus- tomers began receiving letters threatening them with lawsuits for illegal downloading for amounts in excess of the legisla- tive cap on damages. e situation reflected a phe- nomenon that has long played out in the United States and Brit- ain where companies construct a business model to obtain rev- enue through mass mailing of letters threatening litigation. David Fewer of the Canadian Internet Policy and Public In- terest Clinic, which intervened in the case, says the judge had to provide intellectual property rights holders with access to the court but not for illicit or im- proper purposes. "e court had to walk a tightrope — provide access to IP claimants but not let it be misused in an extortion scheme or business model. e decision has done this. Voltage have got their order but will be subject to supervised proceed- ings. e court will be involved all the way." In fact, prothonotary Kevin Aalto specified the appointment of a case management judge, who in this case will be protho- notary Roza Aronovitch. One of her responsibilities will be to vet the wording of any demand letter sent to ensure there's no inappropriate language or ex- aggerated claim for damages. It must clearly state that no court has made a determination that a subscriber has infringed or is li- able in any way for the payment of damages. "e court was clearly in- terested in the suggestions that TekSavvy made," says McHaffie. "e overarching case management structure pre- scribes the involvement of the court in a number of steps so it doesn't expose TekSavvy customers to inappropriate threats of litigation. ere will be oversight procedurally and substantively. Our client is happy with the protections put in place." Fewer calls the decision "perfect." "We are delighted. It's ex- actly what we wanted in terms of process. e decision says it will not permit an improper purpose to manifest itself. It gave them some rope but just enough to hang themselves." In fact, Voltage coun- sel James Zibarras of Brauti orning Zibarras LLP was also happy with the appoint- ment of a case management judge. "It is great to have one judge involved all the way along to hear arguments and assess the issues," he says. He also anticipates a benefit from receiving the court's stamp of approval on the demand let- ter. "e approval of the case management judge will protect us as well." Zibarras is very aware that his client is carving a new path. "Every time we have to jump through a hoop, it will have to be adjudicated," he says. "It would be very frustrating for both sides to be starting from scratch every time. It is a continuum." e next legal battle will be over the cost to the ISP of pro- ducing the names. "ISPs have taken the position that the costs are very high," says Zibarras. "is is a self-serving means of interfering and creating a bar- rier to potential actions. We will see where it lands aer that issue is resolved." Zibarras emphasizes that his client is merely enforcing long- recognized rights. "We are doing nothing that infringes anyone's rights. Steal- ing is stealing and it always will be stealing. We are not standing by and allowing the diminution of property rights but we knew there would be a lot of legwork involved. We are carving new ground." Fewer gives Voltage the back- handed compliment of calling it the best of the copyright trollers. "Many others are tremen- dously deceptive. I think the court had half an eye cocked towards all the really bad ac- tors watching to see if Canada is open for business." In fact, the prothonotary talked in terms of "fence posts" inserted in the process to re- strain the conduct of the plain- tiffs. "is is reflected in a limi- tation on the extent of the infor- mation, a limitation to control the use of the information, con- trol over the letter to be sent out, costs to be paid and prepaid, and the case management of the pro- ceedings," says McHaffie. He believes the measures will be very effective. "is set of protections will make those considering mass copyright trolling to think twice before proceeding. It will not be an easy entry for anyone sending out a broad array of threaten- ing letters in hopes of reaping a reward." e decision accords with the government's treatment of the issue in capping dam- ages for non-commercial copyright infringement at $5,000 with judges directed to make awards proportion- ate to the breach. "Parliament made an explicit direction that it doesn't want copyright used this way," says Fewer. McHaffie agrees. "No one is condoning copyright in- fringement, but the structure of the act makes it clear that it is not designed to create law- suits against individual users regardless of the context." Fewer anticipates that even if Voltage does locate the alleged infringers and proves the in- fringement, the amount of dam- ages may be negligible. "ey can't prove thousands of dollars in damages. It's hard to show any damages at all. ey are out of the cost of a DVD rental or a paid movie download. is decision has shut the door on copyright trolling in Canada." Zibarras contends that the damages sought by Voltage are reasonable. "We are not out to destroy someone because they stole a movie. You have to keep it in perspective. It doesn't mat- ter whether the damages are $100 or $5,000. It's the message it sends out. If someone stole a T-shirt or running shoes, the amount viewed as a detriment is something more than it would have cost for the shoes." Zibarras believes Aalto's deci- sion has already sent out a mes- sage that illegal downloaders are exposing themselves to penalty. "We hope that someone will hesitate when before they wouldn't have and as we go down the track, we hope that even more people will hesitate. We are paving the way for all copyright holders." LT Online copyright File-sharing cases sent down narrow path FOCUS "e case stands for the proposition that in comparative claims advertising, all testing must be completed prior to the ad campaign," says David Elder of Stikeman Elliott LLP. "At the end of the day, Rogers proved its point, but it couldn't necessarily prove it at the time the claim was made. It was a technical violation." It was this finding that led to the imposition of a $500,000 fine on Rogers, an amount Bunting describes as a small sanction in the circumstances. "Not only did the judge find that the advertisement wasn't false and misleading, he also said it was true." Elder now believes companies must perform testing on a market-by-market basis. "at aspect of the decision was a surprise," he says. "For a na- tional carrier to make comparative claims, detailed research will be required." In fact, Rogers wasn't purely relying on drive-by testing in making its claim but in pre-established facts that only required confirmation. "ere were well-established technological facts, such as cell identity, which is the number of cell towers in that space," says Bunting. "at makes the signal stronger and better. ey were operating on two frequencies, one of which was the low band, which is far superior to the bands the competitors had. Rogers had an es- tablished built-out network of indoor transmit- ters — sub-networks all through buildings to make indoor service better — and they had their overall experience. Wireless networks are works of art. It takes years to tweak the network to perform at its optimal level." Rogers called an expert who said he would have known as a scientific certainty that the claims were true without any drive-around testing, which was at the crux of substantiating the claims. In light of the ruling, Campbell says companies will need to be more alive to the fact that they need to test. "It could have the perverse effect of making them stay away from comparative claims. In the big picture, we don't want to discourage performance- based claims. ey are important information from a consumer's perspective. Consumers need to have all the information relevant to the decision- making process." Elder agrees. "Price and service are one thing, but the main thing people consider in this market are speed and connectivity. It is useful to carriers to compare themselves with each other on an objec- tive basis." Lawford was disappointed the tests that satis- fied the court weren't very scientific. "ey applied the industry standard test, which is to drive around and see if the calls drop out. I watched the Compe- tition Bureau argue for something more scientific and statistically significant to no avail." Bunting believes there's more to come on this is- sue. "ere could be cases where the technical facts might be enough. ere could be some reliance on pre-existing tests such as Internet speed, but as a matter of caution people may need a specific test for every specific claim, which will be onerous and costly." Rogers' counsel believe another key point to take away from the decision is the effect on the general impression test laid down by the Supreme Court in Richard v. Time Inc. "When assessing the general impression on how an ad will be interpret- ed from the perspective of the consumer, the Su- preme Court said you have to assume the customer is credulous and inexperienced," says Bunting. "e commissioner argued that should apply here but Justice [Frank] Marrocco said that the Competition Act is different from the Quebec Consumer Protection Act. e starting point in this case is the interested consumer. at finding has potentially lowered the threshold." Lawford isn't surprised the Competition Bureau has decided not to appeal the decision. "ere is a downside risk to opening it up. e comparative testing rules survived and there's no point risking that at the Supreme Court. In any case, we are so many years down the road. If you look at where Wind is now and the establishment of Chatr, it won't help much." Bunting emphasizes how frustrating it was for Rogers to have to go through the proceeding over a claim that was true. "I know the Competition Bureau will continue to be active in this area but I expect they will approach enforcement in a more transpar- ent way going forward. ey need to ensure there is a continuing dialogue with the industry." LT 'Technical violation' of ad rules Continued from page 8 BY JuDY VAn RHIJn For Law Times W 'No one is condoning copyright infringement, but the structure of the act makes it clear that it is not designed to create lawsuits against individual users regardless of the context,' says Nicholas McHaffie.

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