“Technically True” Is Not True Enough: Product Claims and Hidden Terms Are Major Traps in Advertising

March 17, 2015

By Burtley Francis and Laura Rhodes, Articled Clerk

In the digital economy, the ability to advertise across multiple platforms has exponentially increased the opportunities to market to consumers by removing the limits that exist in the physical marketplace (only so many billboards can be displayed along a highway, but how many more can be displayed on a single website?) As a result, consumers face intensified exposure to ads attempting to grab their attention. Businesses may now have only seconds to make positive impressions on consumers, putting more pressure to make impactful ads with bold claims to convince the viewer why they should consider a particular product or service over that of a competing business. What cannot be forgotten though is the legal requirement for both the impression and content of any ads to be accurate and substantiated.

The Competition Bureau in Canada (the “Bureau”) under the Competition Act is the principal regulator of false and misleading advertising in Canada and seeks to protect the consumer’s right to truth in advertising. In recent years, the Bureau has been particularly active with an increased scrutiny and pursuit of offending advertisers.

Below we highlight several recent investigations and decisions by the Bureau, to illustrate two key traps businesses may easily fall into in profiling their products and services; Product Claims and Hidden Terms.

Product Claims

The Bureau protects consumers against inaccurate or unsubstantiated product claims.

  • In 2007, the Bureau ordered clothing retailer Lululemon Athletica to remove tags from its VitaSea product line that made unproven claims that seaweed content in the material reduced the consumer’s stress level, and provided anti-inflammatory, antibacterial, hydrating and detoxifying benefits.
  • In 2011, the Bureau ordered the manufacturer of Nivea brand products to cease making unsubstantiated claims that Nivea’s “My Silhouette” product slims and reshapes a consumer’s body. The manufacturer was also ordered to offer a refund for any consumer purchases of the product.
  • In 2014, home retailer JYSK Canada discontinued sales and offered a full consumer refund on two of its duvet brands, following inspections by the Bureau that found misleading labeling with regard to the actual down content of the duvets.
  • In 2014, the Bureau ordered that Bauer Hockey Corp. cease running advertisements creating the impression that Bauer’s hockey helmets offer protection from concussions, as hockey helmet testing standards are not currently aimed at protecting players from concussions. In a settlement with the Bureau, Bauer agreed to donate $500,000 worth of equipment to a charity that supports youth participation in sport.

The take-away is that advertising claims that promise improvements to the consumer’s health, attractiveness, or safety should be examined with great care, as should any claims regarding the quality of the product. Accuracy is the hallmark, and businesses must validate claims made with the support of proper testing.

Hidden Terms

The Bureau wants to ensure consumers access clear and precise information when making their purchase decisions, including upfront information about any additional fees.

  • In 2013, the Bureau took action against home retailers Leon’s Furniture Limited and its subsidiary The Brick for “drip pricing”, in which consumers are not presented with the full price of a good or service until later in the purchase process. In the case, the retailers buried details of additional up-front fees in their fine print, which led to the final price of a product being higher than the advertised price for consumers who used a deferred payment option. This was characterized by the Bureau as a deceptive marketing practice.
  • In 2015, along similar lines, the Bureau announced action against Aviscar and Budgetcar, and their parent company, Avis Budget Group Inc., for the companies’ practice of collecting fees labeled as government surcharges and fees that the companies impose to recoup their own costs of doing business. The companies’ advertised rental prices were characterized by the Bureau as deceptive marketing because after paying these fees, consumers end up paying higher prices or receiving lesser discounts than advertised.

The take-away is that the advertised price should reasonably reflect the “full” price of the product or service, inclusive of any additional fees that most consumers would typically pay for the product or service.

Going forward, it will be interesting to see which other areas may be targeted by the Competition Bureau. In a speech made in 2014, Matthew Boswell, the Senior Deputy Commissioner of Competition, comments that although privacy issues do not fall squarely within the Bureau’s mandate, he believes that privacy issues “tie in” to the Bureau’s work in the digital economy. For example, the Bureau has taken increased interest in advertisers’ access to metadata and geolocations as recent innovations, but whether these will be targeted as the next priorities for the Bureau is a matter that remains to be seen.

This post is intended for informational purposes only and does not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired.

By Burtley Francis and Laura Rhodes, Articled Clerk

In the digital economy, the ability to advertise across multiple platforms has exponentially increased the opportunities to market to consumers by removing the limits that exist in the physical marketplace (only so many billboards can be displayed along a highway, but how many more can be displayed on a single website?) As a result, consumers face intensified exposure to ads attempting to grab their attention. Businesses may now have only seconds to make positive impressions on consumers, putting more pressure to make impactful ads with bold claims to convince the viewer why they should consider a particular product or service over that of a competing business. What cannot be forgotten though is the legal requirement for both the impression and content of any ads to be accurate and substantiated.

The Competition Bureau in Canada (the “Bureau”) under the Competition Act is the principal regulator of false and misleading advertising in Canada and seeks to protect the consumer’s right to truth in advertising. In recent years, the Bureau has been particularly active with an increased scrutiny and pursuit of offending advertisers.

Below we highlight several recent investigations and decisions by the Bureau, to illustrate two key traps businesses may easily fall into in profiling their products and services; Product Claims and Hidden Terms.

Product Claims

The Bureau protects consumers against inaccurate or unsubstantiated product claims.

  • In 2007, the Bureau ordered clothing retailer Lululemon Athletica to remove tags from its VitaSea product line that made unproven claims that seaweed content in the material reduced the consumer’s stress level, and provided anti-inflammatory, antibacterial, hydrating and detoxifying benefits.
  • In 2011, the Bureau ordered the manufacturer of Nivea brand products to cease making unsubstantiated claims that Nivea’s “My Silhouette” product slims and reshapes a consumer’s body. The manufacturer was also ordered to offer a refund for any consumer purchases of the product.
  • In 2014, home retailer JYSK Canada discontinued sales and offered a full consumer refund on two of its duvet brands, following inspections by the Bureau that found misleading labeling with regard to the actual down content of the duvets.
  • In 2014, the Bureau ordered that Bauer Hockey Corp. cease running advertisements creating the impression that Bauer’s hockey helmets offer protection from concussions, as hockey helmet testing standards are not currently aimed at protecting players from concussions. In a settlement with the Bureau, Bauer agreed to donate $500,000 worth of equipment to a charity that supports youth participation in sport.

The take-away is that advertising claims that promise improvements to the consumer’s health, attractiveness, or safety should be examined with great care, as should any claims regarding the quality of the product. Accuracy is the hallmark, and businesses must validate claims made with the support of proper testing.

Hidden Terms

The Bureau wants to ensure consumers access clear and precise information when making their purchase decisions, including upfront information about any additional fees.

  • In 2013, the Bureau took action against home retailers Leon’s Furniture Limited and its subsidiary The Brick for “drip pricing”, in which consumers are not presented with the full price of a good or service until later in the purchase process. In the case, the retailers buried details of additional up-front fees in their fine print, which led to the final price of a product being higher than the advertised price for consumers who used a deferred payment option. This was characterized by the Bureau as a deceptive marketing practice.
  • In 2015, along similar lines, the Bureau announced action against Aviscar and Budgetcar, and their parent company, Avis Budget Group Inc., for the companies’ practice of collecting fees labeled as government surcharges and fees that the companies impose to recoup their own costs of doing business. The companies’ advertised rental prices were characterized by the Bureau as deceptive marketing because after paying these fees, consumers end up paying higher prices or receiving lesser discounts than advertised.

The take-away is that the advertised price should reasonably reflect the “full” price of the product or service, inclusive of any additional fees that most consumers would typically pay for the product or service.

Going forward, it will be interesting to see which other areas may be targeted by the Competition Bureau. In a speech made in 2014, Matthew Boswell, the Senior Deputy Commissioner of Competition, comments that although privacy issues do not fall squarely within the Bureau’s mandate, he believes that privacy issues “tie in” to the Bureau’s work in the digital economy. For example, the Bureau has taken increased interest in advertisers’ access to metadata and geolocations as recent innovations, but whether these will be targeted as the next priorities for the Bureau is a matter that remains to be seen.

This post is intended for informational purposes only and does not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired.

Stewart McKelvey Tweets

Anti-Spam Just Got Real: CRTC Levies $1.1 Million Penalty for Sending Unsolicited Emails

March 17, 2015

By Burtley Francis

For those of us wondering when the first shot under Canada’s anti-spam law (“CASL”) would be heard, we now have our answer.  Last week the Canadian Radio-television and Telecommunications Commission (“CRTC”) issued the very first Notice of Violation under CASL levying a $1.1 million administrative monetary penalty against Compu-Finder, a company that provides training consulting services.

In its March 5th press release (available here) CRTC noted that within a day of CASL coming into force on July 1, 2014 the Spam Reporting Centre began receiving complaints about Compu-Finder’s email practices.  In fact, according to the press release, 26% of all of the complaints received by the Spam Reporting Centre for this industry sector were in relation to Compu-Finder’s activities.  This is even more astounding when you consider that Compu-Finder’s activities amount to just four violations that occurred between July 2, 2014 and September 16, 2014.

The Penalty

While the CRTC’s press release characterizes the activities of Compu-Finder as a “flagrant disregard” of CASL, the $1.1 million administrative monetary penalty does still fall short of the $10 million maximum allowable penalty.  Compu-Finder has 30 days to submit its written response, and pay the full penalty. They may also commit to an undertaking to correct their activities, which could result in a reduced penalty.

The Violations

From its investigation, the CRTC alleges that Compu-Finder sent commercial electronic messages (“CEMs”) without the necessary recipients’ consent and further that they sent CEMs in which the required unsubscribe mechanisms did not function properly.

The Consent Issues

The CRTC’s press release notes that Compu-Finder sent unsolicited emails to addresses for businesses it found by scouring websites.

CASL provides an exemption for sending CEMs between businesses (meaning no consent or unsubscribe requirements would apply). In order to be exempt, the businesses though must have a “relationship” (that term remains undefined) and the message must “concern the activities of the organization”.  While one could possibly argue that Compu-Finder’s offered management training services (which were noted to include topics such as management, social media and professional development) at least generally relate to or concern activities of most businesses (who would likely engage in some form of employee training), it is difficult to see a strong case being made that a relationship of any sort would exist between Compu-Finder and an unknown business when the email address of the business was found by mining the internet.

CASL also provides that a business will have implied consent to send CEMs if a person has conspicuously published their email address without indicating that they do not wish to receive unsolicited messages.  However, such messages must be relevant to the recipients’ business, role, function or duties in a business or official capacity to qualify.  Again, one could argue that Compu-Finder’s emails were relevant to the recipients’ role, function, duties, etc. in a general sense, but the CRTC statement (and the level of complaints) clearly shows the recipients in fact did not believe Compu-Finder’s emails were relevant.  This suggests a subjective test on the part of the recipient which will certainly change how the sender seeks to rely on this form of implied consent.

Hopefully more information will come to light in the coming weeks, including through Compu-Finder’s response to the Notice of Violation.  Of particular interest will be the CRTC’s analysis of what constitutes a “relationship” sufficient to allow businesses to avail themselves of the business to business exemption and if the test for whether a message is relevant to the intended recipients’ role, function, duties, etc. is in fact a subjective test considered from the perspective of the particular recipient.

For more information please see our Guide to Canada’s Anti-Spam Legislation available here.

By Burtley Francis

For those of us wondering when the first shot under Canada’s anti-spam law (“CASL”) would be heard, we now have our answer.  Last week the Canadian Radio-television and Telecommunications Commission (“CRTC”) issued the very first Notice of Violation under CASL levying a $1.1 million administrative monetary penalty against Compu-Finder, a company that provides training consulting services.

In its March 5th press release (available here) CRTC noted that within a day of CASL coming into force on July 1, 2014 the Spam Reporting Centre began receiving complaints about Compu-Finder’s email practices.  In fact, according to the press release, 26% of all of the complaints received by the Spam Reporting Centre for this industry sector were in relation to Compu-Finder’s activities.  This is even more astounding when you consider that Compu-Finder’s activities amount to just four violations that occurred between July 2, 2014 and September 16, 2014.

The Penalty

While the CRTC’s press release characterizes the activities of Compu-Finder as a “flagrant disregard” of CASL, the $1.1 million administrative monetary penalty does still fall short of the $10 million maximum allowable penalty.  Compu-Finder has 30 days to submit its written response, and pay the full penalty. They may also commit to an undertaking to correct their activities, which could result in a reduced penalty.

The Violations

From its investigation, the CRTC alleges that Compu-Finder sent commercial electronic messages (“CEMs”) without the necessary recipients’ consent and further that they sent CEMs in which the required unsubscribe mechanisms did not function properly.

The Consent Issues

The CRTC’s press release notes that Compu-Finder sent unsolicited emails to addresses for businesses it found by scouring websites.

CASL provides an exemption for sending CEMs between businesses (meaning no consent or unsubscribe requirements would apply). In order to be exempt, the businesses though must have a “relationship” (that term remains undefined) and the message must “concern the activities of the organization”.  While one could possibly argue that Compu-Finder’s offered management training services (which were noted to include topics such as management, social media and professional development) at least generally relate to or concern activities of most businesses (who would likely engage in some form of employee training), it is difficult to see a strong case being made that a relationship of any sort would exist between Compu-Finder and an unknown business when the email address of the business was found by mining the internet.

CASL also provides that a business will have implied consent to send CEMs if a person has conspicuously published their email address without indicating that they do not wish to receive unsolicited messages.  However, such messages must be relevant to the recipients’ business, role, function or duties in a business or official capacity to qualify.  Again, one could argue that Compu-Finder’s emails were relevant to the recipients’ role, function, duties, etc. in a general sense, but the CRTC statement (and the level of complaints) clearly shows the recipients in fact did not believe Compu-Finder’s emails were relevant.  This suggests a subjective test on the part of the recipient which will certainly change how the sender seeks to rely on this form of implied consent.

Hopefully more information will come to light in the coming weeks, including through Compu-Finder’s response to the Notice of Violation.  Of particular interest will be the CRTC’s analysis of what constitutes a “relationship” sufficient to allow businesses to avail themselves of the business to business exemption and if the test for whether a message is relevant to the intended recipients’ role, function, duties, etc. is in fact a subjective test considered from the perspective of the particular recipient.

For more information please see our Guide to Canada’s Anti-Spam Legislation available here.

No Host Liability for Readers’ Vitriol on Unmoderated Forum

February 22, 2015

By Nancy Rubin

Until very recently, news media and other forum hosts have been coping with a significant yet ill-defined area of Canadian law concerning their liability for third party user-generated content posted by their readers.

Weaver v. Corcoran, 2015 BCSC 165 is the first Canadian case to explicitly address whether the operator of an internet forum is liable for reader comments that may be defamatory of specific individuals.  The answer is no, unless the operator or forum host is aware of the comments and does not act immediately to remove them.

In the case, Dr. Weaver, a Canadian climate scientist and professor at the University of Victoria (and currently, B.C. MLA and deputy leader of the Green Party) sued the National Post for its own columns as well as responsive reader comments published on the National Post’s internet forum which “attacked the plaintiff’s character in a vitriolic manner”.   The practice of the National Post was not to actively moderate comments but instead, it relied on Terms of Use which prohibited defamatory and other such content, and it responded once a problematic post was brought to its attention.

The Court accepted as a fact that (1) the National Post had a passive instrumental role in the dissemination of the reader comments, but took no action amounting to approval, adoption, promotion or ratification of the content; and (2) once employees of the newspaper became aware of the defamatory nature of the specific comments, the comments were then removed from the website within 1-2 days. In these circumstances, the Court found there was no need to consider defences to defamation such as innocent dissemination since there was no “publication” by the National Post.

The case will be welcomed by forum hosts whose choices until now were to pre-vet every post or hopefully be able to rely on one of the defences to defamation such as truth, fair comment or the poorly defined (at least in Canada) defence of innocent dissemination.

The take-away is that on top of explicit terms of use, a complete hands-off approach paired with a prompt response to complaints, should relieve the forum host from a finding that it is a publisher for defamation purposes.

Going forward, it will be interesting to see what time frame is determined sufficient for an “immediate” response in other cases and whether the volume of comments on the National Post site versus another site will be a factor for consideration.

By Nancy Rubin

Until very recently, news media and other forum hosts have been coping with a significant yet ill-defined area of Canadian law concerning their liability for third party user-generated content posted by their readers.

Weaver v. Corcoran, 2015 BCSC 165 is the first Canadian case to explicitly address whether the operator of an internet forum is liable for reader comments that may be defamatory of specific individuals.  The answer is no, unless the operator or forum host is aware of the comments and does not act immediately to remove them.

Rihanna Publicity Case Shows Differences in UK Law

February 22, 2015

By Rob Aske

A very recent English Court of Appeal decision shows the distinct approach of English courts to publicity rights (Fenty v. Topshop [2015] EWCA Civ 3).

In 2012, the fashion retailer Topshop began selling in its UK stores and through its website a fashion t-shirt showing a clearly recognizable image of Rihanna, the well known pop singer.  The owner of copyright licensed the image to Topshop, but Topshop did not license rights from Rihanna. The image is below:

image001

The Court of Appeal noted that Topshop had previously sold garments bearing images of famous persons, some of which had been authorised and some of which had not. 

Topshop sold about 12,000 units of the Rihanna t-shirt between March and August 2012, at a price of £22.  Initially the shirt was described online as the “Rihanna tank” and “photographic Rihanna motif tank”, but by mid-March of 2012 those references to Rihanna had been removed, possibly because Rihanna is a registered trade-mark for clothing.

The Court noted that Rihanna had been active in the fashion sphere and exercised control over the garments she would wear.  For example, in June 2011 she had entered into an agreement with Armani relating to a women’s wear collection.

The trial judge found that Rihanna was regarded as a style icon, and that when consumers see Rihanna wearing an item of clothing they think it has been endorsed by her.

Topshop contended that the t-shirt was an item of fashion wear, and not a piece of promotional merchandise, and that consumers bought it simply because they liked the product and the image for their own qualities.

It was influential to the trial judge that Topshop and Rihanna had relationships in the past.  This included a shopping competition in 2010 in which Topshop offered entrants a chance to win a personal shopping appointment with Rihanna at its flagship London Oxford Circus store.  There was also a visit by Rihanna to Topshop in February 2012, which Topshop chose to publicise through Twitter, presumably to emphasize that Rihanna was wearing or thinking of wearing Topshop clothing.  So the trial judge concluded that Topshop had recognized and sought to take advantage of Rihanna’s position as a style icon.

The trial judge also found that the image on the t-shirt was significant as it was created during a video shoot for the “We Found Love” single, which was filmed in Northern Ireland, and received substantial press attention due to the risqué clothing that Rihanna was wearing, and because the owner of the land on which the video was recorded had complained about the shoot.

So it was a combination of the striking image, and Topshop’s link with famous stars, including Rihanna, that led the trial judge to conclude that a substantial portion of purchasers would consider the product to have been authorized by Rihanna.

The Court of Appeal confirmed that under English law there is no specific legal right which allows a celebrity to control the use of his or her name or image (unlike much of Canadian and American law). A celebrity must therefore rely on passing off or other grounds.

Passing off protects goodwill, and prevents one person passing off his/her goods or services as those of another.  To succeed in such a claim, the claimant must establish goodwill or reputation attached to the goods or services, that the defendant has made a misrepresentation so the public believes the goods or services are associated with the claimant, and the claimant must show damage because of the misrepresentation.

The Court of Appeal stated it by no means follows that simply because the name or image of a celebrity appears on a consumable commercial item that the public will assume it has been endorsed by that celebrity.  Each case is to be considered on its own facts, and the claimant must show that the activities of the defendant amount to a misrepresentation that the celebrity has endorsed or approved the goods or services.

So it is entirely possible to sell t-shirts with images of celebrities in the UK, which may not meet the test for passing off.

At least two of the three Court of Appeal judges in this case described Rihanna’s case as borderline, and noted that the trial judge relied on two key factors, namely Rihanna’s past association with Topshop, and the distinctive features of the image which was used.

But the Court of Appeal affirmed the trial judgement which found that Topshop’s activities amounted to passing off and which awarded an injunction prohibiting Topshop from dealing with the t-shirt further without informing potential purchasers that it had not been approved or authorized by Rihanna. Any monetary compensation is still to be determined, but already Topshop has been ordered to pay at least several hundred thousand pound sterling of Rihanna’s legal costs.

While Rihanna achieved the remedy she wanted in this case, the “borderline” comments of the Court of Appeal do not make English law entirely celebrity friendly.

By Rob Aske

A very recent English Court of Appeal decision shows the distinct approach of English courts to publicity rights (Fenty v. Topshop [2015] EWCA Civ 3).

In 2012, the fashion retailer Topshop began selling in its UK stores and through its website a fashion t-shirt showing a clearly recognizable image of Rihanna, the well known pop singer.  The owner of copyright licensed the image to Topshop, but Topshop did not license rights from Rihanna. The image is below:

image001

WHAT’S IN A NAME? (WHY THERE IS NO COPYRIGHT IN YOUR NAME)

January 12, 2015

By Michelle Chai

The Alberta Court of Queen’s Bench recently had to deal with a bizarre case in which the defendant obtained a Mastercard from Bank of Montreal, used it for 15 years, made payments on it for 15 years and then stopped paying it: Bank of Montreal v. Rogozinsky, 2014 ABQB 771.  The defendant was sued by BMO for the outstanding balance of $27,064 plus interest.  In defence, the defendant argued, amongst other things, that BMO was estopped from advancing their claim and counterclaimed against BMO for $6 million for trademark and copyright infringement.

Essentially, the defendant was a “freeman-on-the-land” – she claimed she was not a resident of Alberta (but was domiciled by birth), did not accept “joinder” between herself and her name, and (inexplicably) that slavery was illegal.  She also took exception to being called a “Freeman” and claimed such a title was discriminatory.

How does this relate to copyright?  Right before her credit card was suspended by BMO, the plaintiff sent to BMO a “Common Law Copyright Notice”.  It was a “foisted unilateral agreement” which claimed that if someone used the defendant’s name without her permission she could bill them $1 million.  BMO used the defendant’s name in its statement of claim and various court submissions, and thus, had allegedly breached the defendant’s copyright.

The defendant was claiming copyright and trademark in her name, as well as “her biological and physical properties” and “absolute control and mastery over the peaceful possession of [her] body, mind and mental facilities”.  BMO was allegedly interfering with the defendant’s peace of mind by suing her for repayment of her debt.

Astonishingly (at least to me), this defendant was not the first person to come before the Canadian courts and make this argument.  The Court dismissed the copyright and trademark claims of the defendant, and referred to Meads v. Meads, 2012 ABQB 571 (an entertaining and enlightening read on the various characteristics and permutations of freemen-on-the-land).

The issue in Meads was unpaid spousal and child support.  The defendant father and ex-husband attempted to defend against paying spousal and child support on the basis of a myriad of arguments, including that he was not Dennis Meads (his name) because it was a “corporate identity”.  The defendant also claimed copyright/trademark in his own name and argued that there had been breaches of both.

The Court in Meads noted that the special property interests provided by copyright and trademark flow from legislation (the Copyright Act and Trademarks Act).  The Court further noted there is no authority to establish that a personal name can form a creative work that would be subject to copyright (and if there was, such copyright would vest in the authors, presumably the defendant’s parents).  Similarly, no trademark in the defendant’s name had been registered.

If one day you decide to become a freeman-on-the-land, now you know that you can’t claim copyright or trademark in your own name.  Unless perhaps you’ve registered it…in which case, keep an eye out for Apple Inc. v. Apple Martin (Gwyneth Paltrow and Chris Martin’s famously named daughter).

By Michelle Chai

The Alberta Court of Queen’s Bench recently had to deal with a bizarre case in which the defendant obtained a Mastercard from Bank of Montreal, used it for 15 years, made payments on it for 15 years and then stopped paying it: Bank of Montreal v. Rogozinsky, 2014 ABQB 771.  The defendant was sued by BMO for the outstanding balance of $27,064 plus interest.  In defence, the defendant argued, amongst other things, that BMO was estopped from advancing their claim and counterclaimed against BMO for $6 million for trademark and copyright infringement.

Essentially, the defendant was a “freeman-on-the-land” – she claimed she was not a resident of Alberta (but was domiciled by birth), did not accept “joinder” between herself and her name, and (inexplicably) that slavery was illegal.  She also took exception to being called a “Freeman” and claimed such a title was discriminatory.

How does this relate to copyright?  Right before her credit card was suspended by BMO, the plaintiff sent to BMO a “Common Law Copyright Notice”.  It was a “foisted unilateral agreement” which claimed that if someone used the defendant’s name without her permission she could bill them $1 million.  BMO used the defendant’s name in its statement of claim and various court submissions, and thus, had allegedly breached the defendant’s copyright.

The defendant was claiming copyright and trademark in her name, as well as “her biological and physical properties” and “absolute control and mastery over the peaceful possession of [her] body, mind and mental facilities”.  BMO was allegedly interfering with the defendant’s peace of mind by suing her for repayment of her debt.

Astonishingly (at least to me), this defendant was not the first person to come before the Canadian courts and make this argument.  The Court dismissed the copyright and trademark claims of the defendant, and referred to Meads v. Meads, 2012 ABQB 571 (an entertaining and enlightening read on the various characteristics and permutations of freemen-on-the-land).

The issue in Meads was unpaid spousal and child support.  The defendant father and ex-husband attempted to defend against paying spousal and child support on the basis of a myriad of arguments, including that he was not Dennis Meads (his name) because it was a “corporate identity”.  The defendant also claimed copyright/trademark in his own name and argued that there had been breaches of both.

The Court in Meads noted that the special property interests provided by copyright and trademark flow from legislation (the Copyright Act and Trademarks Act).  The Court further noted there is no authority to establish that a personal name can form a creative work that would be subject to copyright (and if there was, such copyright would vest in the authors, presumably the defendant’s parents).  Similarly, no trademark in the defendant’s name had been registered.

If one day you decide to become a freeman-on-the-land, now you know that you can’t claim copyright or trademark in your own name.  Unless perhaps you’ve registered it…in which case, keep an eye out for Apple Inc. v. Apple Martin (Gwyneth Paltrow and Chris Martin’s famously named daughter).

Countdown to Anti-Malware/Spyware: CRTC Issues Guidance on Computer Program Installations Under CASL

December 22, 2014

By Laura Rhodes, Articled Clerk

In preparation for the January 15th, 2015, coming into force of section 8 of Canada’s Anti-Spam Legislation (“CASL”), and associated regulations, the Canadian Radio-television and Telecommunications Commission (“CRTC”) has provided an interpretation bulletin, entitled “CASL Requirements for Installing Computer Programs”.

The bulletin provides guidance on the applicability of CASL to software or computer program installations in the course of commercial activity, including requirements of disclosure and consent, and specific guidance on updates or upgrades to software.

If your business installs software or other computer programs on other people’s connected devices in Canada, including any installation of mobile apps as promotional tools, you should be aware of these significant new requirements coming in 2015.

Covers “Commercial Activity” Broadly. The legislation covers a broad range of installations of a commercial character. Limited exceptions are created for installations in support of law enforcement, protection of public safety, and national defence.

Self-Installations Excluded. In general, CASL does not apply to self-installed software. Therefore, any time an individual knowlingly downloads and installs an app or program, or loads software from a CD, or accepts a prompt to update an existing program, CASL will not apply. Similarly, if an employer installs software on its own network, CASL will not apply.

However, this exclusion will only apply if the scope of installation is consistent with the program functionalities the consumer expects. In other words, unexpected functionalities may not “tag along” with a consumer’s self-installation, as discussed below.

Disclosure & Consent Required. An organization or individual must have the express consent, in writing or given orally, of the owner or authorized user of the device for each act of software installation, including (as of January 15, 2018) for updates or upgrades to the consumer’s programs that were self-installed before January 15, 2015.

This initial consent may encompass the consumer’s consent to any future updates or upgrades to the program.

Informed consent generally requires that the installer disclose to the owner / authorized user of the device the following information: the identity of the installer, the function and purpose of the computer program, that consent may be withdrawn at any time, and an email address to which requests to remove the program may be directed.

The CRTC bulletin advises that this information is required to be provided separate and apart from any terms and conditions listed in a contract or end-user licensing agreement, and that valid consent cannot be obtained using pre-checked boxes or other forms of opt-out consent.

Enhanced Disclosure & Consent. If the program interferes with the owner / authorized user’s control of and access to the device, or causes the device to communicate with other devices, or performs certain functions such as the collection of personal information stored on the device, the installer will also be required under CASL to share information about that functionality’s purpose, the impact of that functionality on the device’s operation, and seek explicit acknowledgement from the owner / authorized user that they understand and agree that the program will perform these functions.

Implied Consent. For the first three years, computer programs that were installed before January 15, 2015 will benefit from implied consent until January 15, 2018, unless the owner / authorized user gives notification that they no longer consent to the original installation.

Deemed Consent. If the person’s conduct is such that it is reasonable to believe that they consent to the program’s installation, consent is deemed to have been provided for certain types of installations, including cookies, HTML code, Javascript, operating systems, and all programs executable through another program that was already consented to. However, if the owner / authorized user has, for example, disabled cookies or Javascript, or activated “do not track” functionality, this is sufficient (according to the CRTC) to negate deemed consent.

Penalties associated with non-compliance are significant, up to $10M for corporations and other organizations for an offence under CASL. A private right of action will become effective as of July 1st, 2017, allowing individual claims for damages. Class actions are expected.

Please see our Guide at Get Ready for CASL.

You may also contact Rob Aske, Practice Manager for IP/IT/Entertainment at Stewart McKelvey.

By Laura Rhodes, Articled Clerk

In preparation for the January 15th, 2015, coming into force of section 8 of Canada’s Anti-Spam Legislation (“CASL”), and associated regulations, the Canadian Radio-television and Telecommunications Commission (“CRTC”) has provided an interpretation bulletin, entitled “CASL Requirements for Installing Computer Programs”.

The bulletin provides guidance on the applicability of CASL to software or computer program installations in the course of commercial activity, including requirements of disclosure and consent, and specific guidance on updates or upgrades to software.

Notice and Notice Coming January 2nd under Canada’s Copyright Act

December 16, 2014

By Rob Aske

Canada’s Copyright Act was substantially changed with various revisions which came into effect in November of 2012.  But the Notice and Notice regime was deferred until a later date, and it now comes into force on January 2, 2015.

The purpose of this regime is to require internet intermediaries, such as ISPs and website hosts, to take certain actions upon receiving a notice of alleged copyright infringement.

Canada’s Notice and Notice system is distinct from the Notice and Takedown system used in the U.S. and elsewhere.

Under the U.S. system, a procedure is created where online service providers are not liable (a “safe harbour”) to pay monetary compensation if they comply with the Notice and Takedown regime, which requires the allegedly infringing work to be taken down.  The alleged infringer must be notified, but if it provides a counter-notice, the objection must be forwarded to the claimant.  If the claimant does not bring a lawsuit within a defined period, then the material must be restored to its location on the network.  Critics of the U.S. system find that it is prone to excessive removal of content.

Canada has taken a very different approach, based on an informal practice that has developed prior to these Notice and Notice provisions coming into force.

Under our Notice and Notice system, a notice of claimed infringement must contain certain information, such as the identity of the work, the Claimant’s interest, and its location, and when the ISP or host receives that information, they must forward it to the alleged infringer, while also maintaining records for a defined period of time which allow the identity of the alleged infringer to be determined .

If the ISP or host fails to comply with its duties under the Notice and Notice procedure, the copyright owner is entitled to damages between $5,000 and $10,000.

But the key difference from Notice and Takedown is that the ISP or host is not required to take down the work merely based on receipt of the notice.

Some argue that Notice and Notice provisions are not clear enough as to whether an ISP or host may be liable if they know or should know that copyright infringement is occurring.

Our Notice and Notice regime will affect search engines differently.  Under the Copyright Act, a search engine is not liable to pay monetary compensation, but is only subject to an injunction (stop order), if the search engine provider is found to have infringed copyright by making a reproduction of the work.  This protection is subject to certain conditions which essentially require bona fide operation of the search engine.

In addition, if after the alleged work is taken down by a host or service provider the search engine is sent a notice, then the search engine may be liable for monetary compensation if the search engine reproduces that work more than 30 days after receipt of the notice.  Therefore a search engine must be sure to remove any cached copies within 30 days of receipt of the notice.

Search engine providers are not required to forward a notice of infringement to the alleged infringer.

As a result of these new provisions, ISPs and hosts should focus their attention on developing effective systems to meet the obligations imposed on them under the Notice and Notice regime.  Search engines will need to be ready to manage their caching systems to deal with these obligations as well.

Please contact us if you have any questions about Canada’s new Notice and Notice copyright regime.

By Rob Aske

Canada’s Copyright Act was substantially changed with various revisions which came into effect in November of 2012.  But the Notice and Notice regime was deferred until a later date, and it now comes into force on January 2, 2015.

The purpose of this regime is to require internet intermediaries, such as ISPs and website hosts, to take certain actions upon receiving a notice of alleged copyright infringement.

Canada’s Notice and Notice system is distinct from the Notice and Takedown system used in the U.S. and elsewhere.

Clean Slate Trade-mark Case Leaves Batman (and Warner Bros.) Unscathed

December 1, 2014

By Rob Aske

A recent US Court of Appeals decision (7th Circuit) in Fortres Grand Corporation vs. Warner Bros provides an interesting look at a trade-mark claim alleging that a fictional trade-mark in a major feature film violated trade-mark rights.

The plaintiff Fortres develops software known as Clean Slate, which is used on public computers to return the computer’s hard drive back to its original configuration upon reboot.  Fortres holds a U.S. federal registered trade-mark for Clean Slate.

In Warner Bros.’ third and final installment of the Batman movies, known as The Dark Knight Rises, one of Batman’s allies, Selina Kyle (Catwoman) begins the story as an unwitting pawn where she provides her services in exchange for a software program known as The Clean Slate which was developed by the fictional Rykin Data Corporation, and allows an individual to erase all traces of their criminal past from every data base on Earth, so that they can lead a normal life.  But Catwoman is deceived and is told that the program does not exist.  Batman’s alter ego, Bruce Wayne, had secretly acquired the program and ultimately provides it to Catwoman in exchange for her assistance.

In the closing scene of the movie we see that Catwoman has used the program to erase her criminal past and is now leading a normal life with Bruce Wayne.

As part of the marketing of the movie, two websites were created purporting to be affiliated with the fictional Rykin Data Corporation. These websites described The Clean Slate hacking tool and its operation, and showed an image of a fictional patent.  Nothing was available for purchase or download from the sites, and they were purely to enhance the story of the fictional Gotham City universe.

After release of the movie, Fortres claimed it had a significant decline in sales and believed it was due to potential customers mistakenly believing it’s software product was illicit or phoney on account of the use of the name in the movie.

Warner Bros. successfully applied to have Fortres’ claim tossed out before trial, but Fortres appealed.

On appeal, Fortres argued that its claim was based on “reverse confusion”, where the first party in the marketplace (Fortres) suffers confusion due to a dominant “junior user” or later arrival in the marketplace; i.e.  the dominance of the Warner Bros.’ movie would lead consumers to believe that Fortres’ software product was associated with Warner Bros.

The Court of Appeals did not like Fortres’ arguments.  The Court found that the comparison must be between tangible products, namely Fortres’ software, and the movie, rather than the fictional software used in the movie’s story.

The Court assessed the various factors used in trade-mark confusion and stated that Fortres “has alleged no facts that would make it plausible that a super-hero movie and desktop management software are goods related in the minds of consumers in the sense that a single producer is likely to put out both goods.”

The Court also found that someone visiting Fortres’ website is very unlikely to believe it is sponsored by Warner Bros.

The Court noted that the expression “clean slate” is just one variation of a phrase that traces its origins back to Greek philosophers, and its use is descriptively and suggestively broad and therefore Warner Bros’ use in the movie to describe a program that cleaned the criminal’s slate is unlikely to cause confusion.

The Court stated:

Fortres has not and could not plausibly allege that consumers are confused into thinking that Fortres Grand is selling such a diabolical hacking tool licensed by Warner Bros. …

Trade-mark law protects the source-denoting function of words used in conjunction with goods and services in the marketplace, and not the words themselves. … Fortres Grand’s reverse confusion allegation – that consumers may mistakenly think Warner Bros. is the source of Frotres Grand’s software – is still “too implausible to support costly litigation”.

This decision shows that mere use of a fictional trade-mark, which may have some similarity to a real one in the marketplace, does not provide an easy avenue for a legal claim.

By Rob Aske

A recent US Court of Appeals decision (7th Circuit) in Fortres Grand Corporation vs. Warner Bros provides an interesting look at a trade-mark claim alleging that a fictional trade-mark in a major feature film violated trade-mark rights.

The plaintiff Fortres develops software known as Clean Slate, which is used on public computers to return the computer’s hard drive back to its original configuration upon reboot.  Fortres holds a U.S. federal registered trade-mark for Clean Slate.

In Warner Bros.’ third and final installment of the Batman movies, known as The Dark Knight Rises, one of Batman’s allies, Selina Kyle (Catwoman) begins the story as an unwitting pawn where she provides her services in exchange for a software program known as The Clean Slate which was developed by the fictional Rykin Data Corporation, and allows an individual to erase all traces of their criminal past from every data base on Earth, so that they can lead a normal life.  But Catwoman is deceived and is told that the program does not exist.  Batman’s alter ego, Bruce Wayne, had secretly acquired the program and ultimately provides it to Catwoman in exchange for her assistance.

In the closing scene of the movie we see that Catwoman has used the program to erase her criminal past and is now leading a normal life with Bruce Wayne.

As part of the marketing of the movie, two websites were created purporting to be affiliated with the fictional Rykin Data Corporation. These websites described The Clean Slate hacking tool and its operation, and showed an image of a fictional patent.  Nothing was available for purchase or download from the sites, and they were purely to enhance the story of the fictional Gotham City universe.

After release of the movie, Fortres claimed it had a significant decline in sales and believed it was due to potential customers mistakenly believing it’s software product was illicit or phoney on account of the use of the name in the movie.

Warner Bros. successfully applied to have Fortres’ claim tossed out before trial, but Fortres appealed.

On appeal, Fortres argued that its claim was based on “reverse confusion”, where the first party in the marketplace (Fortres) suffers confusion due to a dominant “junior user” or later arrival in the marketplace; i.e.  the dominance of the Warner Bros.’ movie would lead consumers to believe that Fortres’ software product was associated with Warner Bros.

The Court of Appeals did not like Fortres’ arguments.  The Court found that the comparison must be between tangible products, namely Fortres’ software, and the movie, rather than the fictional software used in the movie’s story.

The Court assessed the various factors used in trade-mark confusion and stated that Fortres “has alleged no facts that would make it plausible that a super-hero movie and desktop management software are goods related in the minds of consumers in the sense that a single producer is likely to put out both goods.”

The Court also found that someone visiting Fortres’ website is very unlikely to believe it is sponsored by Warner Bros.

The Court noted that the expression “clean slate” is just one variation of a phrase that traces its origins back to Greek philosophers, and its use is descriptively and suggestively broad and therefore Warner Bros’ use in the movie to describe a program that cleaned the criminal’s slate is unlikely to cause confusion.

The Court stated:

Fortres has not and could not plausibly allege that consumers are confused into thinking that Fortres Grand is selling such a diabolical hacking tool licensed by Warner Bros. …

Trade-mark law protects the source-denoting function of words used in conjunction with goods and services in the marketplace, and not the words themselves. … Fortres Grand’s reverse confusion allegation – that consumers may mistakenly think Warner Bros. is the source of Frotres Grand’s software – is still “too implausible to support costly litigation”.

This decision shows that mere use of a fictional trade-mark, which may have some similarity to a real one in the marketplace, does not provide an easy avenue for a legal claim.

Good Faith is now a part of all Canadian commercial contracts

November 17, 2014

By Rob Aske

Entertainment and IT contracts are often full of uncertain promises about future possibilities – such as exercise of options, working together on various manifestations of an entertainment or IT property, serving in various capacities if a project moves ahead, co-producing/developing if certain financing and other factors are satisfied, etc.  Canada’s top court has now imposed a duty of good faith over all contractual relations, which will need to be kept in mind when dealing with such clauses which require the parties to cooperate together. You could face liability for bad faith conduct even if you are compliant with the strict wording of the contract.

In its November 13, 2014 decision, Bhasin v. Hrynew, the Supreme Court of Canada (SCC) unanimously ruled that “good faith contractual performance is a general organizing principle of the common law of contract.” This also includes a specific duty to act honestly in the performance of contractual relations.

Here are the facts:

Harish Bhasin built up a sales force over ten years selling education savings plans for Canadian American Financial Corp (Can-Am) in Alberta. His business thrived and Can-Am gave Bhasin numerous awards for his work.

The contract at issue was signed in 1998 by Can-Am and Bhasin. It obliged Bhasin to sell only Can-Am products, and Can-Am owned the customer lists. Bhasin could not sell his business without Can-Am’s consent.

The contract had an initial three year term, and automatic renewal, but either party could terminate by giving at least 6 months notice prior to the end of that term.

Can-Am chose not to renew and provided such notice to Bhasin in May of 2001.

But incidents leading to that termination were found to be contrary to the duty to act in good faith.

The defendant Hrynew was a competitor of Bhasin, and he wanted Bhasin’s market share. Hrynew pressured Bhasin to merge, and he threatened Can-Am that he would leave if Can-Am did not force a merger. But Bhasin refused.

In 1999 the Alberta Securities Commission became concerned with compliance of Can-Am’s sales force. The Commission required Can-Am to appoint a compliance officer, and Can-Am appointed Hrynew. This meant that Hrynew would be required to audit Bhasin’s business, to which Bhasin vigourously objected. Can-Am told Bhasin that Hrynew was bound to treat any information confidentially, which was found by the trial court to be false. Can-Am threatened to terminate if Bhasin did not permit Hrynew to audit.

In June of 2000 (a year prior to termination), Can-Am made submissions to the Alberta Securities Commission which showed restructuring plans for Can-Am which included Bhasin working for Hrynew. A couple of months later Bhasin asked Can-Am if such a merger was a “done deal” but Can-Am did not offer a clear answer – notwithstanding that Can-Am “wanted to force a merger”.

After Can-Am gave notice to terminate in May 2001 Bhasin sued.

The Court noted that in earlier court cases a good faith obligation had been found in specific situations, including where the parties must cooperate to achieve certain objects (e.g. seeking planning permission), where one party has a discretionary power (e.g. to determine fair market value), or where a party seeks to avoid contractual duties (e.g. repudiating for a cause which the same party brings about). The Court also noted that good faith had been imported into classes of relationships, such as employment, insurance and tendering.

The Court chose to expand good faith to all commercial contracts, and described the basic obligation as follows:

The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. While “appropriate regard” for the other party’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith. This general principle has strong conceptual differences from the much higher obligations of a fiduciary.  Unlike fiduciary duties, good faith performance does not engage duties of loyalty to the other contracting party or a duty to put the interests of the other contracting party first.  [para 65]

This principle is not to be used “as a pretext for scrutinizing the motives of the parties” [para 70].

Under this new “organizing principle” the Court then chose to establish a new specific duty:

….there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance. [para 73, underlining added]

The Court said this is not an implied term but a “general doctrine of contract law”, and the parties are not free to exclude it. However the parties may “relax the requirements” by agreement as long as the core requirement is respected.

The Court was explicit that a failure to disclose may be acceptable where “active dishonesty” would not. (How well this distinction works in reality remains to be seen – withholding information can have impact).

The duty of honest performance does not require that the defendant intend that their representations be relied on.

The Court found that Can-Am acted dishonestly (and repeatedly) about the desired merger of Bhasin’s business with Hrynew, and about Hrynew’s role in the required audit of Bhasin, and that “this dishonesty on the part of Can-Am was directly and intimately connected to Can-Am’s performance of the Agreement with Mr. Bhasin and its exercise of the non-renewal provision.” [para 103].

The Supreme Court awarded damages for Bhasin’s value of the business ($87,000), “on the basis that if Can-Am had performed the contract honestly, Mr. Bhasin would have been able to retain the value of his business rather than see it, in effect, expropriated and turned over to Mr. Hrynew” [para 109].  Presumably Bhasin would have been in a position to prepare his sales force to sell alternative products, though the Court is vague on that point.

It is noteworthy that the Court did not accept the trial judge’s much larger award based on lost income over a period of nine years, which failed to recognize the clear right of either party to terminate.

This case is likely just the start of the expansion of the organizing principle of good faith in contractual matters, and new duties may be established by the courts going forward. But for the moment one should consider the following:

-       It may be helpful to add detail in contracts about the agreed requirements to permit future changes in the relationship such as  termination, exercise of options or otherwise, to remove room for argument that the chosen route is not one of good faith;

-       Despite the Court’s statements to distinguish between active dishonesty and a duty of disclosure, one will need to be cautious where silence in the face of questions is a lie (the Court indeed found Can-Am liable for failing to provide straight answers when Bhasin asked about a possible merger with Hrynew);

-       Conduct and communications with another party may need to be given greater attention despite contractual provisions which appear to put you in a position of strength.

 

By Rob Aske

Entertainment and IT contracts are often full of uncertain promises about future possibilities – such as exercise of options, working together on various manifestations of an entertainment or IT property, serving in various capacities if a project moves ahead, co-producing/developing if certain financing and other factors are satisfied, etc.  Canada’s top court has now imposed a duty of good faith over all contractual relations, which will need to be kept in mind when dealing with such clauses which require the parties to cooperate together. You could face liability for bad faith conduct even if you are compliant with the strict wording of the contract.

In its November 13, 2014 decision, Bhasin v. Hrynew, the Supreme Court of Canada (SCC) unanimously ruled that “good faith contractual performance is a general organizing principle of the common law of contract.” This also includes a specific duty to act honestly in the performance of contractual relations.

Parody Recognized Throughout the European Union

October 28, 2014

By Rob Aske

The Court of Justice of the European Union has recently ruled that the concept of parody must be regarded as an autonomous concept of EU law, in the case known as Dechmyn v. Vandersteen (case Case C‑201/13).

Johan Dechmyn was a member of a far right political party in Belgium, and at a 2011 event he distributed calendars which included an image adapted from the cover of a comic book from Vandersteen’s comic series, which is known in English by the title Spike and Suzie.

In the adaption of the comic book cover, the mayor of Ghent was depicted as one of the comic book characters, throwing gold coins to immigrants.  The heirs of the owner of the original work sued in Belgium for infringement of copyright.

The Brussels Court of Appeal referred certain matters to the Court of Justice of the European Union in respect of parody law.

The original and modified images at issue in the case were as follows (click on image to expand):

parody

The defendant Dechmyn argued that the modified image was a political cartoon which fell within the scope of parody, and therefore permission from the copyright owner was not required.

The CJEU stated that parody must be regarded as an autonomous concept of EU law and interpreted uniformly throughout the European Union.

The Court found that there were two basic criteria for parody: Firstly that the work of parody evokes an existing work while being noticeably different from it, and, secondly, the work must constitute an expression of humour or mockery.

The reference to humour or mockery is wider than some jurisdictions interpret parody, such as the United States, where some courts require that the parody specifically comment on the original work or its creator.

The European Court found that parody does not require (i) that the parody must display an original character of its own, other than displaying noticeable differences with respect to the original work; (ii) that it could be reasonably attributed to a person other than the author of the original work, nor (iii) that it must relate to the original work or mention the source of the original work.

The Court found that the exception for parody must strike a fair balance between the interests of the owner, and freedom of expression of the user.

However, the Court also noted that the use in this case may convey a discriminatory message, and the Court ruled that it was to be determined by the National Court whether the parody was discriminatory, which might negate the parody protection. The Court stated that the owners of the work have a legitimate interest in ensuring that it is not associated with such a discriminatory message.

This decision will be of interest to creators distributing works of parody in the European market.

By Rob Aske

The Court of Justice of the European Union has recently ruled that the concept of parody must be regarded as an autonomous concept of EU law, in the case known as Dechmyn v. Vandersteen (case Case C‑201/13).

Johan Dechmyn was a member of a far right political party in Belgium, and at a 2011 event he distributed calendars which included an image adapted from the cover of a comic book from Vandersteen’s comic series, which is known in English by the title Spike and Suzie.