The internet’s sheer breadth often gives the impression that it transcends local legal jurisdictions. As commerce and trade become increasingly electronic ventures, courts now grapple with how to enforce orders against parties not operating within traditional physical jurisdictions.
In June, the British Columbia Court of Appeal (the “Court”) in Equustek Solutions Inc. v. Google Inc., 2015 BCCA 265, upheld a decision granting an injunction ordering Google to de-index from its search results certain websites selling goods subject to an intellectual property infringement claim.
The core issue for the Court was how it could properly protect the plaintiff’s intellectual property rights against a defendant operating an online business. But the ruling leaves lingering issue regarding to what extent courts should exercise jurisdiction over online content.
The underlying claim involved the misappropriation of intellectual property and trade secrets. The plaintiff designs, manufactures and sells industrial network interface hardware. The defendant was a former distributor of the plaintiff’s product. Their relationship soured and the plaintiff alleged that the defendant was re-labeling the plaintiff’s products, passing them off as their own, and was using the plaintiff’s confidential information and trade secrets to manufacture a competing product.
The plaintiff commenced an action and obtained various interlocutory orders including that the defendant cease referencing the plaintiff’s products on their website and that it disclose its customer’s names. The defendants did not comply. Instead, they ceased physical operations and offered their products online. It was, in the Court’s word, a “clandestine” operation.
The defendant relied on internet search engines to direct potential customers to their website. The plaintiff argued that an interlocutory injunction against Google, a non-party to the underlying action, restraining it from publishing search results that include the defendant’s websites was the only way to give effect to the Court’s early rulings.
The issue before the Court was: on what basis could a British Columbia (“BC”) court have the jurisdiction to compel Google to de-list websites from its worldwide indexes? Despite the absence of any of Google’s servers, or a physical operation in BC, the Court found that Google was conducting its business there and that BC courts have jurisdiction in personam over it.
The Court noted that alone, passive operation of a website accessible to BC users does not give the Court jurisdiction over that website’s creator. Neither does the mere act of advertising in Canada. But the Court held that Google’s activities in BC were not passive because they included:
- an auto-complete function that actively makes suggestions to BC users based on previous searches, or common searches by other BC users;
- selling advertising to BC companies (rather than merely adverting in BC); and
- actively gathering information from BC through its proprietary web crawler software, thereby obtaining data that resides in BC and was property of individuals in BC.
Each was considered a key business activity that contributed Google’s success. Therefore, Google was conducting business in BC and was subject to injunction by BC courts.
After determining the Court’s jurisdiction over Google, granting the injunction was relatively simple. The test for granting an interlocutory injunction in Canada is well established: the applicant must demonstrate that there is a serious question to be tried, that it will suffer irreparable harm if the injunction is not granted, and that the balance of convenience favours granting an injunction.
The Court held that there was a serious question to be tried and that the plaintiff would suffer irreparable harm, as they were unlikely to ever recover damages from the defendants.
The Court reviewed the chamber judges’ findings on the balance of convenience and held that:
- granting injunctions against third parties to preserve a party’s rights is a well-established practice of the Courts;
- the injunction would not materially inconvenience Google, nor would Google incur expense in complying with it; and
- granting the injunction was the only way to make the defendant’s website inaccessible and keep them from flouting the Court’s orders.
The Court held there was sufficient basis to grant an injunction and that the plaintiff’s interests could only be protected if that injunction was given worldwide effect.
What about Free Speech?
The fear among some observers is that the precedent set by this and other such rulings may violate and restrict free speech.
The Court directly addressed this concern, noting that there was no evidence that the websites in question had ever been used for lawful purposes, nor any reason to believe that the domain names in question are uniquely suitable for any expression beyond marketing illegal products. Further, the Court left open the possibility to review the order’s terms, should the websites’ character change.
For those who believe the internet should be as regulation-free as possible, the Court’s order removing content from the World Wide Web is not a welcome decision. But to intellectual property rights holders, this ruling provides another means of slowing down counterfeiters who attempt to avoid the repercussions of local laws by operating in a virtual marketplace.