Trade Marks on the Internet copyright 1996-2003; last updated August 14, 2003




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JURISDICTION AND ENFORCEMENT ISSUES


Courts recognize international borders; the Internet does not. Canadian courts assume jurisdiction over disputes when there is a substantial connection between the parties or the cause of action. The question is, when does a web site "do something" within a jurisdiction to give the Courts of that jurisdiction power and authority over the web site?

In the past, the distinction was drawn between passive web sites which only display information on the other hand, and "aggressive" or "interactive" web sites that target business from another jurisdiction or contract with customers in other jurisdictions on the other. Courts refused to take jurisdiction over foreign passive web sites but were quick to do so over active web sites on the basis that they could be considered as within the other jurisdiction.

The leading case on Internet jurisdiction in the United States is still Zippo Manufacturing Company v. Zippo Doctor, Inc. ("Zippo")61 The three-pronged test as set out in Zippo makes the assumption of jurisdiction dependent upon:

(1) sufficient minimum contact with the forum state;

(2) the claim arising out of those contacts; and

(3) the reasonable exercise of jurisdiction.

The court in Zippo specifically found that there was a sliding scale of online activities that may give rise to personal jurisdiction: active and repeated transmissions would give rise to personal jurisdiction, passive or one time postings would not. In Zippo, the court found that the "level of interactivity and commercial nature of the exchange of information" should be used to determine whether courts of the forum could assume jurisdiction

The Canadian Approach to Jurisdiction on the Internet


Initially, Canadian courts adopted the active / passive distinction to Internet jurisdiction set out in Zippo.

Consequently, expressly avoiding dealing with Canadian customers (as in the Canadian Kennel Club (French version)62 or soliciting customers only from the local marketplace Desktop Technologies63 allowed foreign web site operators to avoid Canadian jurisdiction whereas purposely targeting Canadian customers caused Canadian courts to assert their jurisdiction over foreign web sites.

In Tele-Direct (Publications) Inc. v. Canadian Business Online Inc., Sheldon Klimchuk and Canadian Yellow Pages on the Internet Inc.64, the Federal Court of Canada asserted jurisdiction over a U.S. company and found it to be in contempt of a Canadian order by operating a web site in the U.S.A. that targeted Canadian customers. The plaintiff, Tele-Direct, was a Canadian corporation carrying on business as a compiler and publisher of business and telephone directories, as well as a provider of Internet services. The plaintiff owned the trade marks in Canada for "Yellow Pages", "Pages Jaunes" and "Walking Fingers" (word and design), ("the Tele-Direct trade marks"). The Yellow Pages trade mark and the Walking Fingers trade mark were "in the public domain in the United States of America". The plaintiff had sued the defendants for trade mark infringement and passing off. The individual defendant, Klimchuk (a Canadian located in Edmonton), was the sole director of the Canadian corporate defendant, CBO (whose office was in Edmonton) and was the incorporator and, until shortly before the Court hearing, was the president of the American corporate defendant, CYPI . CYPI was a U.S. based corporation incorporated and based in Reno, Nevada. The web site cdnyellowpages.com was registered in the name of CYPI.

The American company had been ordered not to operate the web site but continued to do so. The Canadian court held that the American company was in contempt of court by using the trade marks on its U.S. based web site because it had purposely targeted Canada and knowingly used Tele-Direct's marks on its web site to attract Canadian customers. It is interesting to note that using these trade marks in the United States alone would be permissible, because the marks were in the public domain in the U.S. It was the purposeful targeting of Canada that caused the Canadian court to assert its jurisdiction over the U.S. web site (and its Canadian director). The court specifically found that the defendants "'cannot do by the back door what they cannot do by the front door', that is, attempt, by using U.S. based corporations to use, in Canada, the plaintiffs' registered trade marks." A fine of $25,000 was imposed on the two corporate defendants and $10,000 against Mr. Klimchuk.65

You will not be permitted to infringe a registered Canadian trade mark from a web site based in Canada. In Bell Actimedia Inc. v. Andrea Puzo et al 66, the defendant obtained the domain name lespagesjaune.com and used it to operate a web site out of Montreal to service the French speaking world. After two interim injunctions were granted, the defendant asked that the injunction be limited so that it could use the domain name to service customers in other countries where Bell had no trade mark rights. The Court refused the defendant’s request and enjoined the defendant from any use of the domain name.

The Tele-Direct 67 case suggests that the Canadian Federal Court considers trade mark rights to be infringed in Canada (and therefore a trade mark to be used in Canada) when an American web site purposely targets Canada with the use of trade marks registered in Canada. In that case, American companies knowingly used Tele-Direct’s Yellow Pages and/or Walking Fingers trade marks on their Internet site located in the United States and were held to be purposely attempting to find customers by using Tele-Direct's trade marks in Canada.

On the other hand, in Canadian Kennel Club (french version)68 the Federal Court indicated it would not assert its jurisdiction over a U.S. web site that was not soliciting customers from Canada. Reciprocally, the U.S. District Court for Pennsylvania, in Desktop Technologies Inc. v. Colorworks Reproduction & Design, Inc.69 declined to assert jurisdiction over a Vancouver-based printing house operating a web site at colorworks.com. The Pennsylvania business, Desktop Technologies Inc. has held a valid U.S. trade mark for "Colorworks" since 1992. The Canadian company, Colorworks Reproductions holds a valid Canadian trade mark registration for "Colorworks". The court found that although the businesses were essentially in the same field, the Canadian company only used its web site for advertising and did not conduct sales, accept orders, or receive payments on the web site. The court opined that Pennsylvania's long-arm statute (by which a court determines whether it has jurisdiction over a foreign defendant) was one of the most liberal in America. The court found that it had neither general nor specific jurisdiction over the Canadian business. It is therefore unlikely that any U.S. court, faced with similar facts, would assert jurisdiction over the matter. Unfortunately, the tricky issue of priority between Canadian and U.S. trade marks was not argued or decided. Ironically, success in the case did not translate into success in business: at one time the site was being offered for sale by a trustee in bankruptcy and now carries advertisements for M&M’s.

Even if a foreign court can be persuaded to take jurisdiction over an online dispute, its decision won’t necessarily be enforced. In Braintech, Inc. v. John C. Kostiuk70, the British Columbia Court of Appeal refused to recognize the default judgment of a Texas court. Kostiuk was alleged to have made defamatory statements by posting them to a bulletin board. Braintech sued in Texas and relied on the service provisions of Texas law that provide that service can be effected on a non-resident by serving the Secretary of State (who is then statutorily obligated to effect service on the named party). The Court found that the principle of comity did not extend to the recognition of the order in the circumstances. The Court found that the Texas Court did not have personal jurisdiction over Kostiuk because the three-pronged test for assuming jurisdiction over the defendant was not satisfied. Adopting the reasoning in Zippo, the British Columbia Court of Appeal found that:

In these circumstances the complainant must offer better proof that the defendant has entered Texas than the mere possibility that someone in that jurisdiction might have reached out to cyberspace to bring the defamatory material to a screen in Texas. There is no allegation or evidence Kostiuk had a commercial purpose that utilized the highway provided by Internet to enter any particular jurisdiction. A person who posts fair comment on a bulletin board could be hauled before the courts of each of those countries where access to this bulletin could be obtained.

It would create a crippling effect on freedom of expression if, in every jurisdiction the world over in which access to Internet could be achieved.

An apparent "international order" was obtained from the Federal Court of Canada in Canada Post Corporation v. Sunview Management Group71.  Sunview Management Group ("Sunview"), an American corporation with its registered office in New York, registered the domain name MAILPOSTE.COM with NSI in the United States. Canada Post is the owner of several Canadian registered trade marks and official marks for MAIL POSTE & Design and POSTE MAIL & Design. On October 19, 1998, Canada Post obtained an interim and interlocutory injunction against Sunview. On January 11, 1999, Canada Post obtained a permanent injunction restraining Sunview from using the words "MAIL POSTE" or any other words likely to be confusing therewith in connection with an Internet web site or domain name. The judgment contained two other somewhat bizarre terms:

"3. The original domain name declaration, which tenders control over the domain name registration and use of MAILPOSTE.COM is hereby deposed [authors’ note: typo for deposited?] into the Registry of the Court.

4. This Court directs the transfer, conveyance or assignment of the domain name MAILPOSTE.COM to the Plaintiff, Canada Post."

It is surprising to see the Federal Court of Canada granting an order such as this where it has no international effect. It was likely phrased in that manner to allow Canada Post to have NSI recognize an order against the domain name to amend the registry. Canada Post now owns the domain name after having obtained default judgment.

In Pro-C Limited v. Computer City, Inc.72 the Ontario Superior Court of Justice found that a U.S. based computer retail company, Computer City, was liable when it used a Canadian company’s trade mark, WINGEN, used in association with software, on computer hardware. The Ontario court took jurisdiction over the matter despite the fact that none of the hardware was sold in any of Computer City’s Canadian stores. The court specifically found that advertising for the WINGEN hardware was available to Canadians and that there was no indication on the web site that Canadians could not purchase WINGEN computers. Applying the three-pronged test from Zippo and more traditional Canadian conflicts of law cases, the court had no trouble in coming to the conclusion that there was a “real and substantial connection” between Canada and the purposeful activity of Computer City. The Court found that the defendant had purposefully targeted Canadian consumers and awarded $450,000 for trade mark infringement and $750,000 in punitive damages. Although it seems that the Court arrived at a just result, the legal basis for determining that Computer City “used” the mark, as that term is defined in s.4 of the Trade marks Act, was dubious and the decision was appealed.

On appeal,73 the Ontario Court of Appeal reversed the much criticized lower court decision and found that the defendant’s passive web site could not constitute use of a trade-mark in association with wares because no transfer of ownership was possible over the Internet. While the issue of jurisdiction was not specifically addressed in the appeal, the fact that the Court characterized the web site as being passive suggests that the distinction may not be dead for the purposes of determining jurisdiction over online activities. However, it is likely that the real and substantial connection test will be applied by Canadian courts to determine issues of jurisdiction in the future.

It remains to be seen whether or not the Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters of the Hague Convention will come to alter the legal tests for jurisdiction and enforcement that are being developed.

To date, the consistent application of the Zippo test in Canada and the United States has brought some certainty to inter-jurisdictional problems on the Internet. Hopefully, adaptation of the “real and substantial connection” test will ensure that jurisdiction issues relating to the Internet will, as far as possible, be resolved in a manner that is consistent with non-Internet jurisdiction issues.



The authors wish to express their appreciation to Jagruti Chauhan, Craig Bridgman, Eric Angelini, Sandra Barton, Tom S. Onyshko and David Castell who assisted in researching former versions of this paper.



1ENDNOTES

 See, for example: Trade marks Act , R.S.C. 1985, c. T-13. While the Trade marks Act establishes a statutory scheme of trade mark registration, it also codifies the common law relating to unregistered trade marks in s. 7. For a brief discussion of the common law action of passing off, see: Roger T. Hughes and Toni Polson Ashton, Hughes on Trade Marks (Markham: Butterworths, 1984/updated to 1996) at 660ff.


2 See, for example: Trade marks Act , R.S.C. 1985, c. T-13, ss. 12-19.


3 Trade marks Act , R.S.C. 1985, c. T-13, ss. 12(1)(b) and 12(2)


4 Trade marks Act , R.S.C. 1985, c. T-13, s. 20


5 Trade marks Act , R.S.C. 1985, c. T-13, s.22


6 Supreme Court of New York, July 25, 2001, Index No. 600703/01


7 The court specifically considered Network Solutions, Inc. v. Umbro International Inc. 529 S.E.2d 80 (2000) and Dorer v. Arel, 60 F. Supp.2d 558, 561(E.D. Va. 1999). In Dorer, the Court found that a domain name that was not a trade mark confers only contract, not property rights. On the basis that laborzionist.com was not a patent or trade mark, the Court found that Zukakov only had a contract right and not a property right in the domain name.


8 (1999), 3 C.P.R. (4th) 479 (F.C.T.D.)


9 [2001] O.J. No. 3306 (Ont. S.C.J.)


10 The question is meant to be rhetorical.  As it turns out, a company called Web Group, Inc. in South Carolina registered champion.com, and Champion Mortgage now operates a website at the address. A real estate company in Mississauga, Ontario registered the champion.ca domain name but that too now points to Champion Mortgage. The dog food company uses championpetfoods.ab.ca and the paper manufacturers use championproducts.com, but it appears that the spark plug and clothing manufacturers have not yet tried to stake out their own territory on the Internet.


11 Section 4 of the Trade marks Act , R.S.C. 1985, c. T-13


12 Joshua Quittner; “Billions registered”; Wired 2.10; October 1994; http://www.wired.com/wired/archive/2.10/mcdonalds.html


13 Roadrunner Computer Systems, Inc. v. Network Solutions, Inc., 96-413-A (E.D. Va 1996), filed March 26, 1996. See also: www.patents.com/nsi.htm.


14 Partridge, Mark; “Internet Domain Name System: The Search for Solutions”; AIPLA, February 5, 1999


15 (2002), 60 O.R. (3d) 457 (Ont. S.C.J.)


16 For example, see note vii supra. Additionally, U.S. courts have found that a domain name can be garnished. (see www.courts.state.va.us/txtops/1991168.txt) and can be seized (wwwD.mercurycenter.com/srtech/news/indepth/docs/dom010601.htm) but apparently can’t be stolen (www.wired.com/news/politics/0,1283,38398,00.html)


17 2000 U.S. Dist. LEXIS 6159 (E.D. Va. May 3, 2000)


18 Partridge. Mark; “Internet Domain Name System: The Search for Solutions”; AIPLA, February 5, 1999, p. 5.


19 983 F.Supp 1331 (D.Ore. 1997)


20 (N.D.Ca. 1996)


21 Trade marks Act , R.S.C. 1985, c. T-13, s. 20


22 Trade marks Act , R.S.C. 1985, c. T-13, s.22


23 Suzanne Wintrob, "Bell, consultant at odds over use of Sympatico name," (April 25, 1996) Computing Canada

24


25 [2001] F.C.J. No. 400 (F.C.A.); [2001] S.C.C.A. No. 156 (S.C.C.)


26 (2000), 47 C.P.C. (4th) 149 (Alta Q.B.)


27 [2001] B.C.J. No. 151 (B.C.S.C.) (Sigurdson J.)


28 See for example, Epost Innovations Inc. v. Canada Post Corp. (1999), 2 C.P.R. (4th) 76 (B.C.S.C.); Canada Post Corp. v. Epost Innovations Inc. (1999), 2 C.P.R. (4th) 21 (F.C.T.D.); and Canada Post Corp. v. Epost Innovations Inc. (1999), 12 C.P.R. (4th) 41 (F.C.T.D.).


29 Erven Warnink BV v. J. Townsend & Sons (Hull) Ltd., [1979] A.C. 731 (H.L.)


30 (1993), 52 C.P.R. (3d) 497 (Fed. T.D.)


31 61 C.P.R. (3d) 334 (P.E.I.S.C.)


32 2002 BCSC 1249; [2002] B.C.J. No. 1909


33 [2002] O.J. No. 5002; [2002] O.J. No. 5002 (Ont. S.C.J.)


34 Panavision International L.P. v. Toeppen (141 F.3d 1316)


35 867 F. Supp. 202 (S.D.N.Y. 1994). See also: http://www.jmls.edu/cyber/cases/mtv.txt.


36 94 CV 1604 (S.D.N.Y. 1994)


37 94 C 7195 (N.D. Ill 1995)


38 The MTV case settled for undisclosed terms while in Kaplan and KnowledgeNet the defendant agreed to transfer the disputed domain name to the plaintiff. For discussion of MTV and Kaplan , see: Working Group on Intellectual Property Rights, Information Infrastructure Task Force, Intellectual Property and the National Information Infrastructure (Washington, D.C.: Information Infrastructure Task Force, September 1995) at 255-256. The report also noted that U.S. companies have expressed concern about third party site names which may infringe well-known trade marks such as COCA-COLA, McDONALD'S and MCI.


39 CV 96-0213 (C.D. Cal. April 25, 1996), 1996 WL 376600 (C.D. Cal. 1996).


40 [1998] E.W.J. No. 954 (C.A.)


41 40 U.S.P.Q. 2d 1474 (W.D.Wash. 1996)


42 Alitalia-Linee Aeree Italiane S.p.A. v. CasinoAlItalia.com (2001) U.S. Dist. Lexis 534)


43 (United States District Court – Eastern District of Wisconsin , Case No. 00-C-1391)


44 839 F. Supp 1552 (M.D. Fla. 1993)


45 Playboy Enterprises Inc. v. Calvin Designer Label (985 F. Supp. 1220)


46 Playboy Enterprises v. Welles, (Case No. 98-CV-0413-K (JFS)) (279 F.3d 796 (9th Cir. 2002)


47 (2000) (F.C.T.D.) 5 C.P.R. (4th) 81


48 (1991 499 US 340)


49 (2000 203 F3d 596)


50 (NDCA'00 100 F.Supp2d 1058)


51 See generally, Carl S. Kaplan, Lawsuits Challenge Search Engines' Practice of 'Selling' Trade marks, The New York Times on the Web, (February 12, 1999) at www.nytimes.com/library/tech/99/02/cyber/cyberlaw/12law.html


52 55 F. Supp. 2d 1070.


53 174 F. 3d 1036.


54 (2001), 12 C.P.C. (4th) 4 (Sask. Q.B.)


55 (1999), 3 C.P.R. (4th) 479 (F.C.T.D.)


56 (2001), 12 C.P.R. (4th) 95 (F.C.T.D.)


57 (2001) (B.C.S.C.) 5 C.P.R. (4th) 134


58 (2000), 6 C.P.R. (4th) 487 (F.C.T.D.)


59 [2001] O.J. No. 943 (Ont. S.C.J.)


60 [2001] O.J. No. 1558 (Ont. S.C.J.)


61 952 F.Supp. 1119 (W.D.Pa. 1997)


62 [1997] F.C.J. No. 1728 (F.C.T.D.)


63 1999 U.S. Dist LEXIS 1934


64 Federal Court, Trial Division T-1340-97 per Teitelbaum, J., September 15, 1998], (1998), 83 C.P.R. (3d) 34


65 Tele-Direct (Publications) Inc. v. Canadian Business Online Inc. et al. (1998) C.P.R. (3d) 332 (F.C.T.D. per Teitelbaum, J.)


66 [1999] F.C.J. No. 683 (F.C.T.D.).


67 (Docket: T-1340-97) Federal Court of Canada

68


 [1997] F.C.J. No. 1728 (F.C.T.D.)


69 1999 U.S. Dist. LEXIS 1934


70 (1999) B.C.C.A. Docket No: CA24459


71 Canada Post Corporation v. Sunview Management Group unreported (Court No. T-1800-98) (F.C.T.D. per Dube J.) January 11, 1999


72 (Docket No. 929/98, June 30, 2000)


73 Pro-C Ltd. v. Computer City, Inc., [2001] O.J. No. 3600 (Ont.C.A.)



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