August 06 2018 | Contributed by Smart & Biggar/Fetherstonhaugh From ILO

Intellectual Property Canada

Introduction

In most jurisdictions, copyright owners face numerous challenges when seeking to enforce their rights against media pirates, including with regard to:

ongoing harm pending judgment;
proving damages; and
unscrupulous defendants destroying evidence or failing to comply with court orders.
However, in a series of recent decisions, the Federal Court granted various extraordinary remedies against media pirates, making Canada an attractive forum for copyright owners to litigate such cases.

Interim and interlocutory injunctions

Generally, the Federal Court will issue a permanent injunction restraining a defendant from further engaging in infringing activities only after a hearing on the merits. However, given that it often takes two to three years (or longer in complex cases) to obtain judgment after commencing a legal proceeding, a copyright owner may suffer significant harm if its rights are continuously infringed throughout the proceeding.

To remedy this situation, two types of temporary injunction are available in Canada: interim and interlocutory injunctions.

An interlocutory injunction restrains a defendant from engaging in infringing activities until issuance of a final judgment. In order to obtain this remedy, a plaintiff must demonstrate that:

its case raises a serious question to be tried;
it will suffer irreparable harm if the injunction is not issued; and
the balance of convenience favours the plaintiff (ie, not granting the injunction will cause the plaintiff more inconvenience than granting the injunction will cause the defendant).
An interim injunction is similar to an interlocutory injunction, with the exception that:

a plaintiff may bring its motion ex parte (ie, without providing notice to the other party); and
the injunction is valid for a maximum of 14 days (although in practice such injunctions are typically extended until the hearing of the plaintiff’s motion for an interlocutory injunction).
In addition to satisfying the above requirements for granting an interlocutory injunction, plaintiffs seeking an interim injunction must also demonstrate urgency.

Although the Federal Court has historically been somewhat reluctant to issue interim and interlocutory injunctions, recent cases suggest that it has become more willing to do so in IP disputes, notably in copyright infringement proceedings targeting media piracy.

ITVBox.net
In Bell Canada v 1326030 Ontario Inc dba ITVBox.net (2016 FC 612), three Canadian television broadcasters obtained an interlocutory injunction against retailers of ‘pre-loaded set-top boxes’ (ie, devices pre-configured with software that provides consumers with unauthorised access to vast amounts of television programmes owned or broadcasted by the plaintiffs).

Because the defendants had made the plaintiffs’ works available to the public without their authorisation, the court held that they had shown a prima facie case of copyright infringement. The court also found that the plaintiffs had demonstrated irreparable harm, notably because of the real risk that the Canadian market for pre-loaded set-top boxes would continue to grow and damage the plaintiffs’ businesses. On the issue of the balance of convenience, the court noted that the defendants’ businesses would not be unduly harmed, as they could continue selling devices that did not contain infringing software.

The Federal Court therefore issued an interlocutory injunction enjoining the defendants from, among other things, advertising, offering for sale and selling pre-loaded set-top boxes.

Notably, since retailers of pre-loaded set-top boxes often operate inconspicuously, the Federal Court issued a special ‘John Doe’ interlocutory injunction, which included a mechanism authorising the plaintiffs to implead additional retailers on an ongoing basis as they are identified on the market, making them subject to the injunction. This flexible and efficient mechanism has allowed the plaintiffs to successfully implead over 100 new defendants.

Lackman
More recently, in Bell Canada v Lackman (2018 FCA 42), the same plaintiffs brought a motion for an interim injunction and an Anton Piller order (discussed further below) against Adam Lackman, who owns and operates the TVAddons website, which promotes and distributes the infringing software that is installed on the pre-loaded set-top boxes described above.

The Federal Court of Appeal issued an interlocutory injunction against the defendant for reasons similar to those in ITVBox.net. Interestingly, the court also recognised the validity of the hands-on interim injunction that had been issued at first instance, which not only restrained the defendant from operating his infringing website, but also authorised bailiffs to seize and take custody of the TVAddons internet domains, servers and social media until a final judgment on the merits. In doing so, the court noted that the defendant had gone to great lengths to mask his identity as the operator of the TVAddons website, including by using offshore companies and bank accounts, and that control over such a website could otherwise easily be transferred outside the court’s jurisdiction.

These recent cases show that the Federal Court is not only increasingly open to issuing interim and interlocutory relief in IP matters, but also willing to tailor this remedy to the particular facts of each case in order to ensure that the injunction has the intended effect.

Anton Piller orders

An Anton Piller order allows a plaintiff to search a defendant’s premises and seize and preserve evidence when there is a risk that the defendant will hide or destroy that evidence. Because the element of surprise is necessary for this remedy to be effective, it is always obtained without putting the defendant on notice.

Before the Federal Court will issue an Anton Piller order, the plaintiff must demonstrate:

a very strong prima facie case against the defendant;
very serious damage, either actual or potential;
that the defendant possesses relevant evidence and that there is a real possibility that it may hide or destroy such evidence; and
that the search will not harm the defendant or its case.
In Lackman, the Federal Court of Appeal held that the plaintiffs had met the four-prong test and lawfully sought and executed the Anton Piller order. Importantly, the Federal Court of Appeal found that the defendant’s history of copyright piracy and other criminal behaviour, as well as his attempt to destroy and conceal relevant evidence during the execution of the Anton Piller order, were relevant factors in upholding its validity.

Anton Piller orders are notoriously difficult to obtain in the Federal Court, particularly due to the need to show a strong prima facie case of infringement at the interlocutory stage. Lackman demonstrates that the Federal Court can nevertheless find that a plaintiff’s prima facie case is very strong even when the technology in question is relatively complex and the defendant vigorously raises a statutory defence to infringement.

Statutory damages

An important advantage of the Canadian copyright regime is the ability to seek statutory damages on a per-work basis in lieu of actual damages and the defendant’s profits. Under the Copyright Act, a copyright holder may elect to recover statutory damages of up to:

C$20,000 per infringed work if the infringement was for commercial purposes; or
C$5,000 per work for non-commercial purposes.
This option can lead to substantial damages awards, especially in the TV and video game industries where rights holders often own massive libraries of copyrighted works.

For example, in Twentieth Century Fox Film Corporation v Hernandez (T-1618-13), the Federal Court awarded Twentieth Century Fox C$10 million in statutory damages against the defendant, an individual who had copied and transmitted hundreds of episodes of The Simpsons and Family Guy over the Internet.

In Nintendo of America Inc v King (2017 FC 246), the Federal Court awarded Nintendo of America Inc over C$11 million in statutory damages. Nintendo was the first time that a Canadian court had issued a judgment for circumvention of technological protection measures, which is prohibited under the Copyright Act. Notably, the Federal Court granted statutory damages per work made accessible by the circumvention of technological protection measures.

Contempt proceedings

The Federal Court has inherent power to ensure that its orders are respected. Federal Court judges can therefore hold a party in contempt and issue significant penalties, including:

the payment of a fine;
the completion of community service; and
up to five years’ imprisonment.
Before the Federal Court will find a defendant guilty of contempt, the plaintiff must demonstrate:

the existence of a court order;
the defendant’s knowledge of the order; and
that the defendant deliberately performed (or failed to perform) an act in violation of the order.
Given the quasi-criminal nature of contempt proceedings and the prospect of incarceration, the plaintiff bears the burden to prove its case beyond a reasonable doubt. Nevertheless, if the plaintiff tenders evidence of contempt, any reasonable doubt must:

be based on common sense;
be logically based on the evidence or lack of evidence; and
not be imaginary or frivolous.
For instance, in Bell Canada v Vincent Wesley dba MtlFreeTV.com (2018 FC 66), the plaintiffs had presented evidence that the defendant, Vincent Wesley, had sold a pre-loaded set-top box in contravention of the Federal Court’s interlocutory injunction mentioned in ITVBox.net. The evidence showed that the pre-loaded set-top box sold by Wesley had been configured with software providing access to infringing content, in contravention with the injunction. However, Wesley argued that he had not configured software on the set-top box and that it must have therefore been tampered with by an unknown party. Rejecting Wesley’s argument as unfounded and based on mere suspicion, the Federal Court found him guilty of contempt of court. As Wesley had already been sentenced to hundreds of hours of community service for prior contempt, the sentence for this most recent contempt judgment is still pending.

Comment

These recent decisions demonstrate that the Federal Court is prepared to grant a wide range of extraordinary remedies to copyright owners in an era where media piracy is on the rise and the underlying technology is constantly evolving. The Federal Court has become an important venue for rights holders in these industries and clearly recognises the investments made by artistic communities and the economic value of their works. Copyright owners should not hesitate to turn to the Federal Court to seek appropriate remedies against infringers located in Canada.

For further information on this topic please contact Mark Biernacki, Guillaume Lavoie Ste-Marie or Joshua Neubarth at Smart & Biggar/Fetherstonhaugh by telephone (+1 514 954 1500) or email ([email protected], [email protected] or [email protected]). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.

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