In July of 2017 we discussed the decision of the Supreme Court of Canada of Equustek Solution Inc. v. Google Inc. Typically a decision of the Supreme Court of Canda is the last word but not in this case.
The Facts
The plaintiffs operate a small technology business relating to the design, manufacture and sale of industrial network interface hardware.
The defendants distributed the plaintiffs’ products at one point. The plaintiffs alleged that the defendants began to relabel the plaintiffs’ product and pass it off as their own. Later the defendants were said to have unlawfully acquired confidential information and trade secrets belonging to the plaintiffs and used the information to design and manufacture a competing product. The defendants continued to advertise the plaintiffs’ product for sale but filled their orders with their own competing product.
The plaintiffs instituted an action against the defendants when the defendants were carrying on business in Vancouver. The defendants ceased to defend the action and their statement of defence was struck.
The defendants stopped operating in Vancouver but continued to offer their product through a number of websites that they controlled. The defendants filled orders from unknown locations, apparently outside Canada. The only business address that the defendants provided were for rental mailboxes.
One of the principals of the defendants was found to be in contempt of court and a warrant for his arrest was issued. However, the plaintiffs were unable to find any information concerning the defendants and their status and as a result could not take any further steps directly against them.
The plaintiffs obtained a Mareva injunction freezing the worldwide assets of the defendants including their product inventory.
The plaintiffs then obtained an injunction prohibiting the defendants from dealing with broad categories of intellectual property and documents and information that lies at the heart of the business carried on by the parties. Although very broad, this order was granted since the defendants were using a series of companies and non-existing entities to breach the previous orders of the court.
Notwithstanding these orders, the defendants continued to carry on business as an outlaw company selling their product on a series of websites to customers all over the world.
The Interlocutory Injunction
The plaintiffs sought an interlocutory injunction against Google to force it to remove a number of websites used by the defendants from its search indexes. Google voluntarily removed some 345 urls from the search results on “google.ca” but was not willing to go further.
When the matter was heard, the judge at first instance granted an order requiring that Google cease indexing or referencing a series of websites listed in schedule “A” to the order until the trial of the action or a further order of the court. The contents of schedule “A” have been modified by subsequent orders.
The matter was appealed by Google unsuccessfully to the British Colombia Court of Appeal. Google then appealed to the Supreme Court of Canada, who in turn dismissed the appeal.
On the appeal to the Supreme Court of Canada Google asserted that the injunction restricted freedom of expression. This was unsuccessful and the Supreme Court of Canada said that the injunction did not require Google to remove speech that engaged freedom of expression values, it was an order to de-index websites in violation of several court orders. The Court has not, to date, accepted that freedom of expression requires the facilitation of the unlawful sale of goods.
The court also said that if Google had evidence that complying with the injunction would require it to violate the laws of another jurisdiction, including interfering with freedom of expression, it was free to apply to the British Columbia courts to vary the injunction.
The Action in United States District Court in California
Approximately one month after the release of the decision of the Supreme Court of Canada, Google filed a complaint with the United States District Court in California, seeking an order that the injunction issued by the British Columbia Supreme Court was unlawful and unenforceable in the United States.
Google’s application before the U.S. District Court were unopposed. Although the plaintiffs in this action were named as defendants in the California action, they did not attorn to the jurisdiction and did not defend the action. The order requested by Google was granted.
The U.S. Court found that the injunction made Google liable as the “publisher or speaker” of the information on the infringing Defendants’ websites. This was contrary to the Communications Decency Act, a U.S. federal statute, which states that “No provider of user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider”.
It was said the injunction “undermines the policy goals of Communications Decency Act and threatens free speech on the global internet”. The Judge did not address Google’s further argument that the injunction was an infringement of its right of free speech guaranteed by the First Amendment of the U.S. Constitution.
Google’s Motion to Vary the Injunction
Google then brought a motion to set aside or vary the terms of the injunction granted by British Columbia Supreme Court on the grounds that there was a material change in the facts that gave rise to the original injunction and in particular that the US Court had found the injunction to be offensive to core values.
The judge first observed that in initiating the US proceedings and taking its present approach Google was advancing a position contrary to the position that it initially taken. On the initial hearing relating to the injunction Google did not suggest that an order requiring it to block the defendants’ websites would offend California law, or the law of any state or country from which a search could be conducted. Google acknowledged that most countries will likely recognize intellectual property rights and view the selling of pirated products as a legal wrong.
Regarding the alleged violation of American law the Judge said that U.S. decision did not establish that the injunction violated American law. That would be the case if, for example, the original defendants obtained an order from a U.S. court requiring Google to link to their websites. But there was no suggestion that any U.S. law prohibited Google from de-indexing those websites, either in compliance with the injunction or for any other reason. Absent the injunction, Google would be free to choose whether to list those websites and the injunction restricted that choice, but injunctions frequently restrain conduct that would otherwise be prima facie lawful. A party being restricted in its ability to exercise certain rights is not the same as that party being required to violate the law.
The judge also said that Google has not demonstrated that the injunction violated core American values as the U.S. Judge expressly declined to rule on Google’s submissios that its First Amendment rights were violated by the injunction. The effect of the U.S. order was that no action can be taken against Google to enforce the injunction in U.S. courts. That does not restrict the ability of the British Colombia Court to protect the integrity of its own process through orders directed to parties over whom it has personal jurisdiction.
As a result Google’s motion was dismissed.
Comment
Given what has happened in this litigation to date this may not be the final word. At the time of preparation of this note Equustek’s action is proceeding at a trial. However, this may result in a permanent injunction instead of an interlocutory injunction. In any event the decision seems to have had the positive effect of stopping Google from engaging in forum shopping to avoid the effect of the final Canadian decision.
If you have questions, please contact mckeown@gsnh.com
John McKeown
Goldman Sloan Nash & Haber LLP
480 University Avenue, Suite 1600
Toronto, Ontario M5G 1V2
Direct Line: (416) 597-3371
Fax: (416) 597-3370
Email: mckeown@gsnh.com
These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.