Century 21 Canada Limited Partnership v. Rogers Communications Inc.,


Supreme Court of British Columbia

CITATION: Century 21 Canada Limited Partnership v. Rogers Communications Inc.,, 2011 BCSC 1196
DATE: September 2, 2011
DOCKET: S088463


BETWEEN:
 
 
 
Century 21 Canada Limited Partnership, Nechako Real Estate Ltd. d.b.a. Century 21 In Town Realty, Charles R. Bilash, Charles Bilash Personal Real Estate Corporation and Michael James Walton
 
 
 
Plaintiffs
and
 
 
 
Rogers Communications Inc. and 2167961 Ontario Inc. d.b.a. Zoocasa Inc.
 
 
 
Defendants


PRESENT:
The Honourable Mr. Justice R. Punnett

REASONS FOR JUDGMENT:
The Honourable Mr. Justice R. Punnett

Show Headnote


[1] The ability of the law to adapt is part of its strength. Technological innovation tests that resilience.This case considers that ability as claims for breach of contract, trespass to chattels and copyright infringement meet the Internet. At the root of this lawsuit is the legitimacy of indexing publically accessible websites.

[2] The plaintiffs seek an injunction and damages against the defendants for their conduct in accessing Century 21 Canada’s Website and copying photographs and text from that Website without consent.

 Parties

[3] The plaintiff, Century 21 Canada Limited Partnership, is a limited partnership and is the master franchisor of all independent real estate brokerage offices operated under the "Century 21" brand and trademarks in Canada (“Century 21”).

[4] The plaintiff, Nechako Real Estate Ltd. (“Nechako”), does business as Century 21 In Town Realty (“In Town Realty”) as a real estate broker pursuant to a Century 21 franchise agreement with Century 21.

[5] The plaintiffs, Charles R. Bilash (“Bilash”) and Michael James Walton (“Walton”), are licenced real estate salespersons engaged by In Town Realty.

[6] The defendant 2167961 Ontario Inc., doing business as Zoocasa (“Zoocasa”) is a wholly owned subsidiary of Rogers Communications Inc. ("Rogers").

[7] The plaintiff claims against the defendant Rogers on the basis it participated in creating, developing, maintaining and marketing the Zoocasa Website.

 Overview

[8] This case arises from the desire of Century 21 to allow public access to its Website, yet at the same time limit commercial access by its competitors. These competing goals have given rise to this dispute over the defendant Zoocasa’s access to and use of the plaintiffs’ Website and its contents.

[9] The actions of the defendants that are complained of evolved during the course of this litigation. The plaintiffs allege that Zoocasa was bound by the Terms of Use of the Century 21 Website and breached them. It is also alleged that the defendant Zoocasa breached copyright held by the plaintiffs. The claims against the defendant Rogers are that Rogers authorized the breach of copyright contrary to s. 27 of the Copyright Act, R.S.C. 1985, c. C-42 and, in the alternative, that Roger’s induced the breach of contract by Zoocasa.

 Terminology

[10] While the Internet has become part of contemporary society some of the terminology involved may still not have wide exposure. As a result defining of some of the terms is necessary.

 Facts

[11] Century 21 developed and promotes its real estate website, which is found at the uniform (or universal) resource locator (“URL”) address www.century21.ca (the "Century 21 Website" or the “Website”). The Website is hosted by www.WhereToLive.com in the state of Minnesota (“WTL”).

[12] The Century 21 Website features property listings belonging to Century 21 brokers and agents from British Columbia and across Canada. It allows users to search for properties by location, price and other features or attributes of the property. The Century 21 Website features, among other things, property listings belonging to In Town Realty and its representatives, Bilash and Walton.

[13] The goal of Century 21 in creating the Website was to create a site superior to their competitors that would give them a competitive advantage for their franchisees and salespersons. The Website features among other things property listings belonging to In Town Realty and its representatives Bilash and Walton.

[14] Century 21, Bilash, Charles Bilash Personal Real Estate Corporation, In Town Realty and Walton claim copyright protection for photographs of properties listed for sale along with prose descriptions of the properties and property details (the “Works”).

[15] Century 21 also claims copyright protection of property listings and photographs pursuant to an Assignment of Copyright Agreement with Bilash and Walton (the “Assignment”). According to Century 21, the Assignment was created to simplify this proceeding such that the claim for copyright protection may now lie with Century 21.

[16] The defendant Zoocasa created, developed, maintains and markets a website found at the URL address www.zoocasa.com (the “Zoocasa Website”).

[17] The Zoocasa Website includes the following content:

[18] The concept behind the Zoocasa Website is to offer consumers an Internet tool that approaches house buying in the way that consumers do, with the focus not on large geographic areas, but rather on the neighbourhood. This approach provides consumers with information such as whether a listing is near a good school or how far away shopping or work would be. As a result it purports to provide a service of value to the consumer.

[19] The Zoocasa Website functions as a type of search engine, indexing property listings from a number of real estate websites and returning relevant ones in response to search queries by a site visitor such as: location, price, number of bedrooms, etc. Zoocasa then brings together different neighbourhood information together with listing "hits", including mapping, street level photography, school descriptions, neighbourhood descriptions and demographic information.

[20] Zoocasa is however a "vertical search engine", as opposed to a general one, as it is a search engine focused on one area -- real-estate listings in Canada. Initially, Zoocasa indexed and displayed to users information that included a property’s address, price, number of bedrooms, a varying number of the characters of the property description and a photograph of the listing from the source website. The user could then click through to the originating site for more detailed information.

[21] In November 2008, Zoocasa changed its indexing practices to limit its indexing to truncated real property descriptions. It found that the rate of “click-throughs” increased when less information was provided.

[22] The plaintiffs, Bilash and Walton, have not given permission to the defendants to copy or use the content of their respective real estate listings. They object to the use of their content by the defendants. Century 21 has never given its consent to either Zoocasa or Rogers to index the Century 21 Website.

Chronology  

[23] Rogers New Ventures, a division of Rogers, commenced development of Zoocasa in the spring of 2007. In the summer of 2007, Rogers started building a search engine.

[24] Darren Phillipson, an employee of Rogers registered the domain name for the Zoocasa Website on January 19, 2007. Zoocasa was incorporated on March 28, 2008, as 2167961 Ontario Inc. and was first launched to the public in August 2008.

[25] The plaintiff Century 21 first became aware of Zoocasa in August 2008, when representatives of Rogers made a presentation to Century 21 seeking their cooperation in Zoocasa’s plans. Despite Rogers’ overtures, Century 21 decided not to participate or cooperate with Zoocasa. Notwithstanding that, Zoocasa proceeded to access the Century 21 Website.

[26] On September 2, 2008, Century 21 Canada’s solicitors advised Zoocasa,by a letter to Rogers, that Century 21 did not consent to Zoocasa downloading or copying any material from their Website.

[27] On October 5, 2008, Century 21 placed the Terms of Use on their Website, and they have not been amended since.

[28] On October 6, 2008, Century 21’s solicitors, again by letter, advised solicitors for Zoocasa and Rogers that their client did not consent to Zoocasa’s activity and demanded that they remove all of their materials from Zoocasa’s Website and sever all links. They also advised Zoocasa’s solicitors of the existence of the Terms of Use and their alleged breach of them. Zoocasa requested further meetings with Century 21.

[29] Once again on October 17, 2008, solicitors for Century 21 advised solicitors for Zoocasa and Rogers that their client was not interested in any negotiations and that it appeared litigation was necessary to resolve matters.

[30] On November 6, 2008, solicitors for Century 21 wrote to solicitors for Zoocasa advising them that their conduct in continuing to access the Century 21 Website was putting Century 21 at risk of losing access to the Multiple Listing Service database.

[31] On November 20, 2008, Zoocasa commenced displaying truncated property descriptions instead of complete property descriptions.

[32] On December 2, 2008 Bilash, Walton and In Town Realty signed Copyright Licence Agreements with Century 21 and assigned to Century 21 the right to bring an action for copyright infringement.On December 3, 2008, this action was commenced.

[33] On August 20, 2009, Zoocasa began “framing” indexed site information.

[34] On December 15, 2009, Zoocasa ceased framing.

[35] On February 12, 2010, Charles Bilash Personal Real Estate Corporation signed a Copyright Licence Agreement with Century 21 and assigned to Century 21 its right to bring action for copyright infringement.

[36] Zoocasa’s search engines stopped indexing the Century 21 Website in early 2010 and stopped indexing Century 21 listings on March 5, 2010, save and except for cases where individual real estate agents or salespeople requested that their listings be indexed by Zoocasa. Zoocasa now states it will not index the Century 21 Website further without the permission of Century 21.

 Findings Respecting Activities of Zoocasa

[37] Initially, the Zoocasa Website indexed and linked to the Century 21 Website. It is not disputed that the Zoocasa’s robot accessed the Century 21 Website once a day. Such access included a group of requests as opposed to one request. For example, in accessing the listings of Century 21, Zoocasa would access all of the listings as part of that once a day request. The robot would then index the page for information, assess its relevance and continue to the next web page.

[38] Zoocasa took data from certain fields on the Century 21 Website and put it in certain fields in the display of the Zoocasa Website. Initially this included the full property description. As noted earlier, this practice ceased on November 20, 2008.

[39] The Zoocasa Website also included reproductions and republications of the Works in full and hyperlinks that directed their users to specific pages of the Century 21 Website that contained property listings, both with respect to the Works and with respect to property listings of other Century 21 brokers and agents.

[40] Zoocasa acknowledged that they could stop indexing the Century 21 Website by removing it from their list of websites to be indexed. It confirmed it could do so within a week. Despite the letters from solicitors for the plaintiffs, Zoocasa chose not to do so until early 2010, nearly 2½ years after Century 21 first advised Zoocasa they did not consent to Zoocasa’s activities and advised them of the Century 21 Terms of Use and Zoocasa’s alleged breach of these terms.

[41] It is clear that Zoocasa’s operations are commercial in nature. Interestingly, Zoocasa has posted on its site Terms of Use that are similar to those used by the plaintiff. In addition, Zoocasa uses the robot.txt exclusion itself, to prevent others from indexing its site, but does not make available the name of its spider so that others can use the robot.txt exclusion to exclude Zoocasa from indexing their sites.

 Issues

[42] The issues in this case are as follows:

 Preliminary Matters

 Expert Reports

[43] The parties filed expert reports with respect to certain technical matters relating to the claims. The plaintiffs filed a report from John Levine. The defendants’ response report is that of Samuel E. Trosow. The plaintiffs also filed a reply report from John Levine. The defendants object to the admission into evidence of the John Levine reports.

[44] There is no dispute respecting the general principles applicable to expert reports. Expert evidence must not be argumentative, it must not consist of findings of fact or conclusions of law and the facts upon which the expert opinion is founded must be included in the report: See Cogar Estate v. Central Mountain Air Services Ltd., [1990] B.C.W.L.D. 1422 (S.C.), appeal dismissed (1992), 72 B.C.L.R. (2d) 292 (C.A.); Emil Anderson Construction Co. v. British Columbia Railway Co. (1987), 17 B.C.L.R. (2d) 357 (S.C.) at 359-360; Quintette Coal Ltd. v. Bow Valley Resource Services Ltd. (1988), 29 B.C.L.R. (2d) 127 (S.C.); Goerzen v. Sjolie (1997), 86 B.C.A.C. 44 at paras. 16-24 (C.A.).

 Discussion of Expert Reports
 Report of Dr. John R. Levine

[45] With respect to a reply report of an expert it must be limited to a response to the expert evidence to which it is a reply: Canadian National Railway Co. v. Canada, 2002 BCSC 1669.

[46] The report of Dr. John R. Levine addresses the use and operation of search engines on the Internet. The expertise of Dr. Levine is not challenged nor are his comments respecting what is effectively “trade usage” on the Internet in relation to the operation of general search engines. The defendants however do object to those portions of the report that comment on Zoocasa’s alleged failure to comply with certain conventions commonly used by search engines.

[47] The first objection of the defendants is specifically to those portions of John Levine’s report that characterize the conduct of the defendants. The wording they object to is contained in three paragraphs which comment on whether search engines that do not comply with the conventions are “reputable” or “legitimate”. The specific paragraphs objected to are:

[48] The use of terms such as “reputable”, “unethical”, “illegal” or “legitimate” is, in my view, outside the scope of Dr. Levine’s expertise and usurps the role of the court in determining what are issues of law and value judgments. Whether or not a practice is “legitimate” is clearly an issue requiring a legal conclusion. That is the role of the court, not the expert. Such terms raise the appearance of advocacy rather than independent expert evidence.

[49] The defendants also object to para. 36. Reference must be made to paras. 34-35 in order to place para. 36 in context:

[50] The defendants submit that the words in para. 36 stating “in this case, it is straightforward to determine what Zoocasa is doing” are objectionable because there is no disclosure of what facts or materials are relied upon and, in addition, the statement purports to make determinations of fact that are properly the function of the court.

[51] The objections are well founded. I am satisfied however that the report is admissible with editing of the offending paragraphs. The editing is ordered as follows:

 Report of Samuel E. Trosow

[52] The report of Mr. Trosow was filed by the defendants. The plaintiffs do not object to its content. The report of Mr. Trosow comments on the importance of linking and indexing to the functioning of the World Wide Web. It confirms that linking is fundamental to the operation of the web and that indexing facilitates access. He also confirms that Zoocasa links to external websites and that it indexes such sites although he notes that “Canadian jurisprudence has not yet developed specific and particular definitions for concepts such as “indexing” and the usage among various user communities varies”.

[53] In addition he opines that “scraping” is not clearly defined and is currently an informal term although he would characterize it as a subset of the broader concept of indexing. His comments on those portions of Dr. Levine’s report that have been excised are no longer of relevance. However, he does end his report by saying:

[54] “Transformative use” is an American concept and one that I will address later in these reasons in the context of copyright infringement and fair dealing.

 Reply Report of Dr. John L. Levine

[55] The defendants’ objection to the reply report is that it states that Dr. Levine has reviewed the Trosow report and the affidavits of J. R. Langlois and Michael Lee filed on behalf of the defendants but fails to respond to any matters in the Trosow report. They state that it responds only to the fact evidence of Mr. Langlois.

[56] In my opinion, the real issue is that the content of the reply report is argumentative and judgmental. Rule11-2 (1) states:

[57] The following principals are to be considered when assessing expert reports that are overly argumentative:

[58] The last two sentences of paragraph 4 and all of paragraphs 5 and 6 of the Levine Reply Report are inadmissible on the basis that they are argumentative and do not fall within the purview of an expert report. Furthermore, those paragraphs dispute certain factual evidence of a witness and attempt to draw inferences and conclusions based on these facts. I do not find it necessary to deal with the defendant’s contention that the reply report fails to respond to the Trosow report. Even if I were to find that the reply report was proper in form, the noted portions would still be inadmissible for the reasons stated above.

 Contract

 Breach of Contract: Terms of Use

[59] On October 5, 2007, the plaintiff, Century 21, posted Terms of Use on their Website. They were located on the main Century 21 Website at the bottom of the home or first page of the Website.They were not drawn to the attention of users in any active way. The Century 21 Website did not require that the user acknowledge reading and agreeing to the Terms of Use before accessing the Website. The terms stated that upon accessing the Website the user was bound by them. That is, the act of accessing the remainder of the Website was agreement by the user to the contractual terms. This raises issues respecting the formation of a contract, standard form contracts and electronic contracts.

 The Terms of Use

[60] The relevant provisions of the Terms of Use of Century 21 Limited’s Website are as follows:

 Plaintiffs’ Argument

[61] The plaintiffs submit that the legal principals developed with respect to the law of contract remain intact and have adapted to new technology such as the Internet. They submit that Terms of Use displayed on a website can constitute a binding contract between the owner of the website and its users. They rely on established principles of contract law that they say are applicable to electronic contracts. They state that the Terms of Use found on the Century 21 Website constitute the terms of a contract between Century 21 and those who, with notice of the Terms of Use, choose to use the Century 21 Website.

 Defendants’ Argument

[62] The defendants submit that visitors to the Century 21 Website are not required to read or agree to the Terms of Use. They state that they are not prominently displayed. They allege they are an attempt to impose a unilateral contract. They argue that Zoocasa never agreed to the Terms of Use and that there was no consideration.

[63] The defendants submit that the Terms of Use did not create an enforceable agreement prohibiting Zoocasa from indexing the Century 21 Website. They state that the issue at bar is whether any contract is ever formed at all, something that does not turn on notice. In Zoocasa’s submission affirmative agreement is required even if they had notice of the terms.

 Discussion
 Law of Contract

[64] It is trite law that creation of a contract requires that there be an offer, acceptance and consideration to form a valid and binding contract. Over time as business practices evolved, so too has the determination of what is an offer, what is acceptance, what constitutes consideration and when a contract is formed. Hinds J., in Beatty v. First Exploration Fund 1987 & Co. (1988), 25 B.C.L.R. (2d) 377 at 383 and 385 (S.C.), noted:

[65] While Beatty addressed the use of faxed documents, the observations of Hinds J. apply no less to the law of contract when applied to the technology of the Internet.

[66] G.H.L. Fridman, The Law of Contract in Canada (Toronto: Thomson Carswell, 2006) at 13 states:

[67] And at page 84:

[68] Examples of the law addressing changing methods of contracting are the “ticket” cases that arose in the late 18th century. As public transportation developed the practical matter of establishing the terms of the agreement arose. The House of Lords in Hood v. Anchor Line (Henderson Bros.), [1918] A.C. 837 (H.L.), stated that “if it is found that the company did what was reasonably sufficient to give notice of conditions printed on the back of a ticket, the person taking the ticket would be bound by such conditions”.

[69] Hall J., in Schuster v. Blackcomb Skiing Enterprises Ltd. Partnership (1994), 100 B.C.L.R. (2d) 298, [1995] 3 W.W.R. 443, at para. 14 (S.C.), provides a useful history and analysis of the “ticket” cases. He states:

[70] The plaintiffs argue that such cases stand for the principle that no outward manifestation of acceptance, beyond taking the service with notice of the conditions, is necessary to form a contract provided notice of the contractual terms has been sufficient.

[71] The defendants assert that the “ticket cases” do not address the issue of whether a contract was formed at all. That is, they start from the proposition that the parties know they are entering into a contract and then the issue addressed is whether they have sufficient notice of the terms of the contract. They know that they have the option of accepting the service offered and entering into an agreement or rejecting the offered service. Despite the fact that in ticket cases most consumers likely do not read the fine print they do know that they are entering into an agreement. They know that they are purchasing a service. The defendants submit that what the ticket cases really address is the issue of notice of the terms of a contract. They submit that in the world of the Internet there is no awareness that accessing a website forms a contract.

[72] While the ticket cases deal with notice of contractual terms, the principles applicable can, in my view, be equally applied to the issue of contract formation in the sense that the formation of a contract requires that a party have knowledge or notice of an offer in order to accept it or reject it.

[73] If notice of the terms is sufficient, the issue in principle then becomes whether or not the terms are accepted by confirmation either by express agreement or by implied conduct. Communication of acceptance to the offeror is normally fundamental to the formation of a contract. However, the key issue is whether there is a bargain. Has the offeree accepted the terms in a manner which is “equivalent to acceptance”: Waddams, S.M., The Law of Contracts, 6th ed. (Canada Law Book Inc.: Aurora, Ont., 2010) at 66-69. Conduct may constitute acceptance: Waddams at 75. In this case the defendant had clear notice of the terms hence the nub of the dispute between these parties is whether there has been communication by the defendant Zoocasa of their acceptance of an offer.

[74] The defendants submit that, in the case of electronic communications, the option of acceptance or rejection of the contractual terms does not exist. They assert that a contract is not formed merely because they perform an activity that they have the right to do without a contract. They submit for example that in looking at a billboard no contract is formed. This latter example, however, ignores the fact that a billboard does not make an offer capable of a response. It is static while a website can make an offer that is capable of being responded to. It also ignores the fact that a website consists of multiple pages whereas a billboard does not. There is nothing the observer of a billboard does that is capable of indicating consent. The observer merely views the billboard. A user of a website can respond by accessing deeper layers (pages) of the website.

[75] Fundamental to the defendants’ argument is their assertion that a public website gives a right to access it without any contract. This begs the question before this Court, which is: can accessing a publically available website result in the formation of a contract? In addition, is there a distinction between merely accessing a website and the taking of subsequent steps to use the information on that website? The defendants’’ argument that a website is like a billboard, while perhaps a reasonable analogy to the first page of a website, ignores the active nature of an Internet website. A more apt analogy is that a website is like a book and the first page is simply the cover page or table of contents.

[76] The defendants’ position also implies that, by permitting public access to a website, the owner of that website loses any proprietary claims they may have in the information contained therein, other than those arising under copyright law.

[77] The manner in which the web has developed with freely available access may differentiate a user’s expectations of the web from the user of a service such as a bus, train or aircraft. While the expectation of a user may be that access is free and without restrictions, the Internet and its use is an evolving entity. As such, expectations change as does the sophistication of the user. In addition, it is not the users’ expectation that is determinative. What they assume to be the case does not take precedence over the existence of an offer, notice of that offer and the act of acceptance. An erroneous expectation, even with legal advice, does not prevail.

[78] The defendants say that the Terms of Use on the Century 21 Website did not create an enforceable agreement between Zoocasa and Century 21 under which Zoocasa was contractually bound not to index the Century 21 Website. They submit that:

[79] The defendants state that the plaintiffs’ position amounts to saying: “If you do something you have a right to do, I will say that you accepted a contract with me, even though I know you don’t assent to the contract”. They assert thata contract cannot be imposed in this way. This argument however starts from the erroneous proposition that the defendants have an unrestricted right of access.

[80] The issues therefore are whether there was an offer, whether there was consensus or agreement, whether there was consideration, and whether an enforceable contract was created by Zoocasa accessing the Century 21 Website.

 Was a Contract Formed?

[81] There is limited Canadian jurisprudence on the subject of electronic contracts.

[82] Sookman, Computer, Internet and Electronic Commerce Law, loose leaf (Carswell: Toronto, Ont., 1989) at 10.3 states:

[83] A consideration of Canadian and US authorities respecting the electronic formation of contracts reveals that courts have grappled with the changes in contract formation brought about by electronic communications including such matters as software licences and contracts created over the Internet. Those changes have produced new descriptions of contracts such as “shrink wrap” agreements, “click wrap” agreements and “browse wrap” agreements.

 Shrink Wrap Agreements

[84] The earliest cases addressed the issue of software licensing agreements which purported to bind purchasers by virtue of their purchase and use of the software.

[85] A seminal case that considered shrink wrap agreements is ProCD, Inc. v. Zeidenberg, 86 F. 3d 1447 (Court of Appeals, 7th Cir. 1996), where a purchaser of a CD-ROM containing a telephone directory was held bound by the shrink wrap agreement. The court, at para. 2 noted that:

[86] In ProCD the outside of the box indicated that the purchase was subject to a licence and the licence appeared in the manual enclosed with the software. The licence also appeared on the computer when the software was used. The user had the opportunity to read the licence and accept its terms before using the software. The court held the terms were binding. In doing so they commented on other transactions where the consumer makes purchases before receiving the detailed contractual terms such as a traveler purchasing an airplane ticket.

[87] In North American Systemshops Ltd. v. King (1989), 68 Alta. L.R. (2d) 145, 97 A.R. 46, at 155 (Q.B.), the Alberta Court held that a shrink wrap licence was not enforceable because the vendor did not properly notify the purchaser of any restriction on the use of the product:

[88] The result in North American Systemshops Ltd. turned on the lack of notice of the Terms of Use. The preponderance of authority in the US, provided notice is adequate, is that such an arrangement can result in an enforceable agreement.

 Click Wrap Agreement

[89] As technology evolved purchases of software occurred over the Internet with no box or physical medium being purchased. This led to the concept of the “click wrap” agreement. In such a situation the user indicates their agreement by clicking on an “I Agree” box.

[90] In Rudder v. Microsoft Corp. (1999), 106 O.T.C. 381, 2 C.P.R. (4th) 474 (Ont. S.C.J.), Winkler J. upheld a click wrap agreement. At paras. 16 -17, Winkler J. stated:

[91] In I. Lan Systems, Inc. v. Netscout Service Level Corp., 183 F. Supp. 2d 328 (Dist. Court, D. Mass. 2002), the terms of the agreement appeared on the website after the purchase was made. The plaintiff was found to have consented to the agreement when it clicked the “I Agree” box. At 338 the court stated: “If ProCD was correct to enforce a shrink wrap licence agreement, where any assent is implicit, then it must also be correct to enforce a click wrap licence agreement, where the assent is explicit”.

 Browse Wrap Agreement

[92] The final form of agreement referred to is a “browse wrap” agreement. A browse wrap agreement does not require that the purchaser indicate their agreement by clicking on an “I Agree” button. All that is required is that they use the product after being made aware of the product’s Terms of Use.

[93] In Register.com, Inc. v. Verio, Inc., 126 F. Supp. 2d 238 (Dist. Court S.D.N.Y. 2000), aff’d 356 F.3d 393 (2d Cir. N.Y. 2004), Register.com’s website contained their Terms of Use which stated that if the user accessed the database then the user agreed to the terms. The defendant submitted that simply making a query of the database was insufficient to indicate their consent. Register.com involved commercial parties where the defendant Verio accessed the plaintiff’s computers daily and saw the Terms of Use each time they did so and admitted that they were aware of the terms. Verio conceded that its use of the data for solicitations by mail and telemarketing breached Register.com’s Terms of Use. Registrar.com notified Verio that they were in breach of Register.com’s Terms of Use. Verio argued that it was not bound because the notice was provided after the transaction occurred, not before. The United States Court of Appeals for the Second Circuit found that this argument would only succeed if Verio accessed Register.com’s computers infrequently. The court held that Verio had notice of the terms because of its numerous daily queries and the presence of the Terms of Use after each query.

[94] The Second Circuit Court of Appeals in Register.com held, at 403, that an express statement of agreement is not always required in either paper or online contracts:

  The court held that by taking the benefit of the information on Register.com, Verio accepted the offer of contract.

[95] In Kanitz v. Rogers Cable Inc. (2002), 58 O.R. (3d) 299, 21 B.L.R. (3d) 104 (Ont. S.C.J.), the defendant sought to stay the action on the grounds that there was an agreement between the parties that provided for arbitration of all claims. The disputed agreement stated it was subject to amendment and that notice of amendments would be provided. The court held that notice of the amendments was sufficient and that, pursuant to the agreement, continued use indicated consent. As a result, conduct can imply consent.

[96] The court also commented on the electronic environment as follows at paras. 32-33:

[97] In Pollstar v. Gigmania Ltd., 170 F. Supp. 2d 974 (Dist. Court E.D. Cal. 2000), Pollstar’s website contained a notice that use of the website was subject to a licence agreement and that proceeding to retrieve any further information from the website was agreement to be bound by the terms of the licence agreement. On a motion by the defendant to dismiss, the court held that the licence was arguably valid and enforceable. They noted that this was so even though the notice was in small gray print on a gray background.

[98] However, not all browse wrap agreements have been enforced. The defendants rely on Specht v. Netscape Communications Corp., 306 F. 3d 17 (Court of Appeals, 2nd Cir. 2002). In Specht the court rejected a browse wrap agreement for downloadingsoftware where the purchaser could download the software without seeing the notice of Terms of Use. The Terms of Use were only accessed if the purchaser scrolled down the page. There was no reason for them to do so, given they could access and download the software without needing to view the portions of the web page where the Terms of Use were posted.

[99] Specht is a notice case. Presumably, if the notice of the terms had been prominently placed such that the notice was adequate, then the agreement would have been enforceable.

[100] The Specht decision held that there are two requirements that must be met before a contract is found:first, that notice of the Terms of Use is clearly given; and, second, that there is clear assent to those terms by the user.

[101] In the case at bar, the plaintiffs do not disagree that notice is required. They submit however, that acceptance of such terms does not require an express statement of agreement such as clicking on an “I Agree” button in order to access the Website or download information or software.

[102] The Appeal Court in Register.com distinguished Specht as follows at 402:

[103] The real issue is whether the electronic nature of the transaction meets contractual requirements. In Specht the United States District Court Judge A. Hellerstein stated at 587:

[104] The plaintiffs rely on Canadian Real Estate Association v. Sutton (Québec) Real Estate Services Inc., [2003] J.Q. No. 3606, 2003 CanLII 22519 (Que. C.S.), in which Terms of Use were found to be enforceable for the purposes of an interlocutory injunction. The court emphasized that the respondent was aware of the Terms of Use and had its own browse wrap Terms of Use. In granting the injunction, the court stated at para. 44(g):

[105] The 67th District Court of Texas, in American Airlines Inc. v. FareChase Inc., No. 067-194022-2 (Tex. 67thDistrict Court, Tarrant County, Texas, Mar. 8, 2003), on a temporary injunction application, found that the defendant had violated American Airline’s Terms of Use which prohibited use of their website for commercial purposes and that American Airlines had a probable right of recovery. The defendant FareChase used software to obtain copies of American Airlines flight schedules, seat availability and fares by giving users access to American Airline’s computer system and website. Such access was contrary to the Terms of Use. FareChasecontinued to access the data despite notice to cease and desist. The court granted an interim injunction restraining the defendant’s access to the plaintiff’s website.

[106] Initially in Ticketmaster Corp. v. Tickets.com, Inc., 54 U.S.P.Q. 2d (BNA) 1344 (C.D. Cal. 2000) the California District Court refused a preliminary injunction against Tickets.com where the defendant had not been required to click an “I Agree” button. The plaintiff’s website stated that going beyond that webpage was acceptance of their Terms of Use. Later however, after the plaintiff’s website was modified to make the Terms of Use more prominent and to include a warning that proceeding further bound the user, the court denied the defendants motion for summary judgment having found that the matter of the contract claim should proceed to trial. The court in Ticketmaster Corp. v. Tickets.com, Inc., 2003 U.S. Dist. Lexis 6483 (C.D. Cal. 2003) at para. 6 stated:

[107] As noted in the authorities referred to above, the law of contract requires that the offer and its terms be brought to the attention of the user, be available for review and be in some manner accepted by the user. Such an analysis turns on the prominence the site gives to the proposed Terms of Use and the notice that the user has respecting what they are agreeing to once they have accepted the offer. To establish a binding contract consideration will also be given to whether the user is an individual consumer or a commercial entity and in addition a one-time user or a frequent user of the site.

[108] Browse wrap agreements have the advantage of being readily available for perusal by the user. Their enforcement requires a clear opportunity for the user to read them which, given the nature of computer and the Internet, is likely to be a better opportunity than that available to the user of a product with a standard form contract presented at the time of purchase. A properly enforceable browse wrap agreement will give the user the opportunity to read it before deeming the consumer’s use of the website as acceptance of the Terms of Use. In the case at bar, notice is not an issue given the defendant has acknowledged it was aware of the Terms of Use and what conduct was deemed to be acceptance. In addition, the defendant Zoocasa relies on similar Terms of Use on its own Website. The defendants have also acknowledged that the Century 21 Website Terms of Use are industry standard.

 Public Policy Issue

[109] The defendants submit that to accede to the plaintiffs’ arguments, respecting the binding nature of the Terms of Use, would be contrary to public policy as it would have negative effects on the operation of the Internet. The defendants suggest that accepting use of a website as conduct that serves as acceptance sufficient to form a contract would imperil the operation of the Internet as it currently functions. The concerns expressed are that this would have a chilling effect on the function and structure of the Internet in Canada. They state that the plaintiffs’ claims are vague and would lead to results contrary to the public interest.

[110] The defendants concerns, at first blush, appear to have some substance. That is, it would seem inappropriate that by users simply accessing a website which contains terms and conditions they will be bound contractually as a result, despite not having overtly agreed to such.

[111] The defendants’ argument implies that all information that is made available on the web must be available to all without contractual restrictions. They go so far as to state that the existence of the Internet depends upon it and indexing and linking are essential to the operations of the World Wide Web. I do not accept that submission.

[112] The World Wide Web industry itself has recognized that the owners of websites have the right to restrict access to some or all of the information on their site. For this reason protocols designed to enable a search engine to determine what it is permitted to be included and what it is not have been created. Implicit in such standards is the recognition that the information on the Internet is not open to all. In addition, it is an acknowledgment that restrictions do not in fact inhibit or negatively affect the operation of the Internet to an unacceptable degree.

[113] In Cyber-Surfing on the High Seas of Legalese: Law and Technology of Internet Agreements, (2008) 18 Alb. L.J. Sci & Tech 69 at 121,Ty Tasker & Daryn Pakcyk, the authors state:

[114] The evolution of the Internet as an “open” medium with its ability to hyperlink, being key to its success, does not mean it must function free of traditional contract law. It is simply the manner of contracting that has changed, not the law of contract. The acceptance of click wrap and browse wrap agreements acknowledges the right of parties to control access to, and the use of, their websites.

[115] Just because a party chooses to do business on the Internet should not mean they relinquish their rights to control access to their business assets and information. The defendants’ submission would deny that right to the plaintiff Century 21. In turn, that would decrease their motivation to create and operate their Website.

[116] In my opinion, a publically available website does not necessarily give a right of access free of any contractual terms. Depending on the circumstances, a contract may be formed.

[117] It is important for commercial efficacy that contract terms can be agreed upon as easily in the electronic world as in the world of paper. In my opinion, the defendants’ suggestion that the Internet would be crippled by enforcing Terms of Use is incorrect. To render Terms of Use unenforceable would impair the utility and health of the Internet as creator’s products would not be capable of contractual protection. If offerors could not place information on the Internet without some measure of control, its utility would be diminished.

[118] The defendants argue that what Century 21 provides, in making their Website available to the public, (as opposed to an internal “Intranet”), is merely a grant of access to the site. The defendants’ argument may be correct in part; however, when a user accesses a main page that merely places the user at Century 21’s door. Entry is an additional step and one that website owners clearly control and users can undoubtedly choose to take.

[119] Taking the service with sufficient notice of the Terms of Use and knowledge that the taking of the service is deemed agreement constitutes acceptance sufficient to form a contract. The act of browsing past the initial page of the website or searching the site is conduct indicating agreement with the Terms of Use if those terms are provided with sufficient notice, are available for review prior to acceptance, and clearly state that proceeding further is acceptance of the terms.

[120] While courts may in the future face issues such as the reasonableness of the terms or the sufficiency of notice given to users or the issue of contractual terms exceeding copyright (or Parliament may choose to legislate on such matters), none of those issues arises in the present case for the following reasons:

[121] By October 6, 2008, the defendants knew that the Century 21 Website had Terms of Use, and had read those Terms of Use as solicitors for Century 21 had, by letter dated October 6, 2008 to the defendants’ solicitors, attached a copy of them. The defendants also knew by October 6, 2008 that Century 21 was taking the position that the Zoocasa Website was breaching those Terms of Use. The website notice and adequacy of such notice is therefore irrelevant.

 Was There Consideration?

[122] The defendants also argue that in offering access to their Website, Century 21 is not giving any promise of benefit and undertakes no burden and as a result there is no consideration. I do not find this in fact to be the case.

[123] Clearly the databases created by developers of websites have value. Information has value. The evidence in this case is that Zoocasa has spent over $6 million on its Website. Century 21 has expended over $6,345,849.59 from 2006 to December 31, 2009. Zoocasa’s actions in accessingthe Century 21 Website andcopying photographs, property descriptions and other information affirms that there is value. Presumably if the information was without value Zoocasa would not seek it or use it. In my opinion there is consideration for the contract asZoocasa obtained the benefit of the information displayed on the Website.

 Selective Litigation

[124] The defendants further claim that acceding to the plaintiffs’ claims for breach of contract would encourage selective and differential treatment of website visitors undertaking the same activity, who may not even be aware of the existence of the Terms of Use. Their concern appears to be that the plaintiffs are claiming against them when they are only doing what any other visitor to the Century 21 Website does, yet no others are being sued.

[125] Firstly, the evidence does not support such a proposition. It has not been shown that others are in violation of either the Terms of Use or the copyright of the plaintiffs. Even if that were the case, it is the plaintiffs’ right to decide who to pursue, not that of the defendants. Secondly, Zoocasa is distinguishable from the common consumer as they have a commercial purpose and are a sophisticated consumer.

[126] There can be a myriad of reasons for a plaintiff to initiate an action in one instance and not in another. The decision is theirs.

 The Automated Nature of Web Indexing

[127] Does the fact that Internet search engines access sites such as those of Century 21 using search engines, crawlers and robots change the legal situation? In my view it does not.

[128] The involvement of a machine in the contractual process was considered by Lord Denning long before the ubiquitous presence of personal computers and the Internet. In the 1970 decision Thornton v. Shoe Lane Parking, [1971] 1 All E.R. 686 (C.A.), the plaintiff parked his car in an automatic car park, purchased a ticket from a dispenser and parked. Lord Denning stated at689:

[129] A machine or a computer and the software that runs it has at some point been constructed and programmed by an individual. As noted by Sookman at 10.5:

  I agree with this statement. Liability is not avoided by automating the actions in question.

[130] In this instance, the defendant Zoocasa has acknowledged that, prior toindexing the Century 21 Website, the layout of that site was reviewed by an employee. In other words, the initial access was in fact not automated and an individual programmed the automated indexing. J. R. Langlois, the president of Zoocasa stated that:

  This was done to insure that particular information such as price, description, address, bedrooms, bathrooms and the agent and broker information was included.

[131] While the Terms of Use were not posted when Zoocasa initially set up the automated indexing of the Century 21 Website, they were subsequently made aware of those terms.

 Was a Contract Formed Between the Plaintiff Century 21 and the Defendant Zoocasa?

[132] Zoocasa acknowledges it became aware of the existence of the Terms of Use after they were brought to their attention in October 2008. Mr. Lee, a representative of Zoocasa, admitted that by October 6, 2008, they knew that the Century 21 Website had Terms of Use and had read the Terms of Use. As a result, there is no issue respecting sufficient notice of the Terms of Use or their provisions. The defendants also acknowledge that the Century 21 Website Terms of Use are industry standard. They were also aware that if they did not agree to the Terms of Use then they should not use the Website. They knew as well that if they accessed the Website the Terms of Use purported to form a contract. Notwithstanding these admissions, the defendants state that at no time did they agree to be bound by the Terms of Use.

[133] As a result, notice of the Terms of Use, knowledge of their content and their purported effect are not in issue. The sole issue is whether, with that notice and knowledge, Zoocasa’s acts of accessing the Century 21 Website, formed an agreement.

[134] As previously discussed, where notice of the Terms of Use is established along with the knowledge that using the Website will serve as agreement to the Terms of Use, then I am satisfied that agreement is proven. As noted in the browse wrap cases, the act of proceeding further into the website is sufficient to communicate agreement. I find that Zoocasa’s conduct formed a contract. It is not a case of a contract being imposed without their assent.

[135] However, the defendants also state that for there to be an enforceable contract there must be certainty over the terms of the contract. They note that the Terms of Use purport to allow Century 21 to unilaterally amend the Terms of Use from time to time and to terminate the agreement unilaterally at any time without notice and in its sole discretion. They state that if Century 21 takes no steps to obtain affirmative agreement to any such amendment or its process, then there is no enforceable agreement. In substance they rely on the principle that one party cannot arbitrarily and unilaterally end an agreement or change the terms of an agreement.

[136] Century 21 confirms that there have been no changes to the Terms of Use that were posted on their Website on October 5, 2008. The Terms of Use are also not capable of retroactive change. Given there have been no changes since the Terms of Use were first posted, the plaintiffs rely on the Terms of Use posted on October 5, 2008. As a result of the foregoing, I do not need to further consider the issues that arise from unilateral changes without further notice.

[137] The defendants also state that certain terms of the purported agreement are uncertain. They specifically identify the use of the word “scraping”. As noted earlier, the experts differ on the precise meaning of “scraping”. They do appear however to agree that it is a type of indexing. Dr. Levine defines it at para. 34 of his report as follows:

[138] Century 21 does not dispute that the term is not well defined. Given my findings that Zoocasa has copied both property descriptions and photographs, regardless of whether the act of indexing was of a general nature or involved scraping, is not relevant to the issues in dispute. As a result, I do not need to delve further into whether it is presently capable of precise definition.

 Allegations of Breach of Terms of Use

[139] The Terms of Use prohibit a user from doing the following with content from the Century 21 Website:

[140] I find that Zoocasa has breached each of the above provisions. The evidence of the plaintiffs and the admissions of Zoocasa support findings that Zoocasa has, at the times in question, done the following:

[141] I find that Century 21’s Terms of Use constitute a binding contract between the parties, that Zoocasa had actual knowledge of the Terms of Use and in continuing its actions after notice of those Terms of Use, Zoocasa breached those terms.

 Copyright

[142] Copyright is a creature of statute. In Compo Co. v. Blue Crest Music Inc., [1980] 1 S.C.R. 357 at 372-373, Estey J. commented:

[143] Sections 5 and 27 of the Copyright Act - R.S.C., 1985, c. c-42, provide that:

 Plaintiffs’ Position

[144] The plaintiffs base their claim for copyright infringement on property descriptions and photographs. Copyright in the property descriptions and in the photographs lies with Bilash and Walton. However, each of Bilash and Walton licenced to Century 21 “use of the Works to promote the business of Century 21 Canada, including, without limitation, use on the Century 21 Canada’s Website”. In addition they assigned their right of action for copyright infringement to Century 21. As a result, Century 21 seeks damages for copyright infringement. In the alternative, if the Copyright Licence Agreements are not effective, then judgment is sought in favour of Bilash and Walton for copyright infringement.

 Defendants’ Position

[145] The defendants say that the plaintiffs are proposing to apply an extreme reading of copyright law. They argue that Zoocasa’s indexing and linking is not an infringement of copyright because linking and indexing by search engines on the Internet are integral to the functioning of the Internet. They further argue that policies that seek to impede linking across the Internet threaten the open nature of this system and public policy should discourage attempts to impose such impediments.

[146] The defendants also take issue with who among the plaintiffs is entitled to advance a claim for breach of copyright.

 Ownership of Copyright and Copyright Licence

[147] The Copyright Licence Agreement dated December 2, 2008, licences Century 21 to use the Works of Nechako, Bilash and Walton (the “December Assignment”). The Works are defined as including photographs of properties offered for sale along with their descriptions and other details. It also assigns to Century 21 the right to bring an action for copyright infringement regarding the Works.Similar terms are found in the Copyright Licence Agreement dated February 12, 2010, between Century 21 and Charles Bilash Personal Real Estate Corporation (the “February Assignment”).

[148] Century 21 does not assert that they have a claim in copyright. Their claim is based upon the licences granted by the December Assignment and the February Assignment (the “Assignments”) along with the assignment of the right to bring an action for copyright infringement.

[149] Section 13 of the Copyright Act provides:

[150] In order for Century 21 to bring an action for copyright infringement with respect to the Works, the plaintiffs must establish who owns the copyright in the Works, whether the copyright has been validly assigned andthe effective date of such assignment.

[151] The defendants challenge the plaintiffs’ assertions respecting who owns the Works on the basis that the plaintiffs did not indicate who specifically owned the Works until late in the day. They note as well that the further amended statement of claim advances several alternative assertions as to the ownership of the copyright in the Works and holds out Bilash and Walton as but two possible owners of copyright in the Works in addition to Bilash Corporation, In Town Realty and Century 21.

[152] In the case of Mr. Walton, he writes his own property descriptions and takes his own pictures. On the day this action was started Walton entered into the December Agreement.

[153] The defendants challenge the Agreements and describe that challenge as follows:

[154] With respect to the first two objections, the specific Works and the ownership in those Works is a matter of evidence. In E.W. Savory Ltd. v. The World of Golf Ltd., [1914] 2 Ch. 566 at 568, the copyright holder in that case gave a written assignment to the plaintiffs for “five original card designs inclusive of all copyright” and “four golfing subjects”. The defendants, much like the case at bar, challenged the validity of the assignment on the basis that the description of the subject-matter was not sufficient to validly assign copyright. Neville J. held that the court could admit parol evidence to identify the subject-matter of a contract and found that the copyright over the subject-matter that the plaintiffs claimed had been infringed was in fact the same subject-matter referred to in the assignment agreement. In the case at bar the agreement states that it covers properties listed by Bilash and Walton in British Columbia. In my view that description combined with the listings identified in the statement of claim and established by the evidence is sufficiently specific to identify the subject-matter of the assignment.

[155] With respect to the lack of a provision relating to future created Works the agreement does not address the issue of past, present or future works. Copyright in a non-existent (future) work cannot be assigned, just as you cannot transfer property in non-existent land or goods. However, on the authority of Performing Right Society v. London Theatre of Varieties, [1924] A.C. 1 at 13 (HL) when a work that is not yet created is assigned, partiesare treated in equity as promising to assign the future copyright once the work is created. At that point, the promisee becomes the equitable assignee and the beneficial owner of the copyright, and the promissor is the equitable assignor with a bare legal title: David Vaver, Intellectual Property Law (Irwin Law: Toronto, Ont, 1997) at 245. The power of assignment is not confined to an assignment of the legal property, but will apply to the transfer of any interest, whether legal or equitable: Performing Right Society at 18. As a result, the assignment of future created works is still valid in equity as between the parties provided it is made for valuable consideration. As soon as the works are created the copyright is validly assigned to the assignee.

[156] See also Ward, Lock & Co., Ltd. v. Long, [1906] 2 Ch. 550, where the court held that there can be an assignment in future works in the form of an agreement to assign.

[157] As a result, unless specified otherwise, the assignment agreement applies generally to the Works produced relating to the properties listed by Bilash and Walton.

[158] With respect to Bilash, they also challenge the agreement for similar reasons but in addition address the fact that Bilash did not write the property descriptions in issue. Rather the property descriptions in which he claims copyright were written by his employee Ms. Gray.

[159] Section 13(3) of the Copyright Act provides as follows with respect to works created by an employee in the course of his or her employment:

[160] Ms. Gray had a written contract of employment with Bilash whereby, until January 1, 2009, Bilash personally paid Ms. Gray’s salary. It is not disputed that until January 2009 copyright in the property descriptions resided in Bilash as Ms. Gray’s employer. After January 2009, Ms. Grey continued to work for Bilash as his employee absent a written agreement.

[161] However, in January 2009 Mr. Bilash incorporated a company. The evidence is that the corporation did not enter into an employment agreement with Ms. Gray. The only employment agreement was that between Bilash personally and Ms. Gray. However, Bilash also stated that he intended to declare her income for tax purposes as being paid from the corporation.

[162] What I take from the evidence is that Bilash incorporated the company with the intention of running his real estate business through his corporation but, as is often the case, he did not formalize this change in relation to his own employment agreement nor the employment agreement with Ms. Gray.The evidence does not indicate if the corporation paid Ms. Gray from a corporate bank account. The evidence of Bilash in response to whom paid her salary was, “Well, when the taxes are going to be done, I mean, she’s going to be taxed as an employee for Bilash Corporation.”

[163] I conclude that, at the time of hearing, Ms. Gray’s existing employment agreement had not yet been cancelled or varied. Bilash remained her employer. As a result I am satisfied that Bilash retains copyright in Ms. Grey’s work.

[164] This finding would normally result in the conclusion as well that the assignment of copyright made by Bilash to Century 21 remains validly assigned. At first blush this may appear to have changed on February 12, 2010, when Bilash Corporation entered into the February Agreement with Century 21. That Agreement however specifically provides that “Bilash Corporation may be the owner of copyright …”. It is therefore only an assignment of such copyright as Bilash Corporation may own.

[165] With respect to the photographs, Bilash stated that he hired the photographers. However, he also stated he carried on business through his corporation. He did not state his corporation hired the photographers. He did acknowledge that his company paid them.

[166] It is clear from the affidavit and discovery evidence that Bilash has a layman’s appreciation of the impact of incorporation which I infer was done primarily for tax purposes. He appears to operate on the basis that his accountant at the end of the year determines what is corporate and what is personal. No documentary evidence was produced indicating any written agreement respecting the photographs as apparently none exists. Nor was there evidence that Bilash informed those photographers that they were now dealing with his company, not him.

[167] I conclude on the balance of probabilities that Bilash personally continued to contract with the photographers and that this arrangement did not change.

[168] On the basis of my conclusion respecting the employment status of Ms. Gray and Bilash’s practice with respect to hiring photographers, I find that after Bilash incorporated, the copyright in the property descriptions created by Ms. Gray and the copyright in the photographs Bilashhired to be taken, remained that of Bilash. Bilash Corporation has no copyright to assign.

[169] Given these findings the nature and effect of the December and February Copyright Licence Agreements must be considered.

 Copyright Licence Agreement

[170] As noted earlier in preparation for these proceedings and in order to enable Century 21 to claim for copyright infringement, Bilash, Walton and Bilash Corp. each executed a Copyright Licence Agreement(the “Agreements”) that purport to assign their interest in copyright to Century 21.

[171] The operative portion of each of the Agreements reads as follows:

[172] The Agreements are described as “Copyright Licence Agreements”. An issue arises between the purported licence to use the Works and the effect of the assignment of the right of action for copyright infringement.

[173] As noted in John McKeown, Fox Canadian Law of Copyright, 3d ed. (Carswell: Scarborough, Ont., 2000) [Fox Canadian Law of Copyright] at 380:

[174] An assignment is a transfer of a right such that the assignee is the owner of the legal interest in the right and the assignor is left without any control over the right transferred, except for moral rights. Under a licence, the licencee is given permission to do certain acts which might otherwise constitute infringement of the licencor’s rights and does not involve any change of ownership in the copyright: Marquis v. DKL Technologies Inc. (1989), 24 C.I.P.R. 289 (C.S. Que.); Fox Canadian Law of Copyright, at 380.

[175] In this instance, the terms of the licence simply grant to Century 21 the use of the Works. It is not even an exclusive use. The copyright holder clearly retains the copyright including any other use or derivative use of the Works. In addition, the use of the Works is pursuant to the ongoing consent of the party which holds copyright, rather than an outright assignment of the copyright in the Works. As a result, I am of the view that what Bilash, Walton and Bilash Corporation purport to grant as an assignment is in fact a licence.

[176] What then is the effect of the assignment to Century 21 of the right to bring an action for copyright infringement with respect to the Works?

[177] The right to assign a right of action arises from s. 13 of the Copyright Act ss. 6 and 7 which I will repeat for convenience:

[178] The right is procedural and grants to the licencee the authority to enforce the rights of the copyright holder to the extent they are granted under the terms of the assignment or exclusive licence.

[179] The licence in this instance is not exclusive as it fails to state such. It simply grants a right to Century 21 to use the Works. Century 21 does not possess a proprietary interest or the grant of an interest in the infringed works. As a result, Century 21 can only enforce licencing, not copyright, infringement to the limited extent granted to it by the licence. In this case, that is the right to use the Works. However, as the licence that Century 21 holds is not exclusive, the assignment of the right of action to enforce copyright infringement is moot.

[180] The claims for copyright infringement therefore lie with Bilash and Walton, not Century 21. The claim of Century 21 for copyright infringement is dismissed.

 Discussion of Copyright

[181] The initial issue is whether the property descriptions and photographs used by the plaintiffs are entitled to copyright protection. The work must have some “literary character”. The work must provide “information, instruction or … literary enjoyment” and the “author must bestow some brainwork upon a work and that a work must not be a ‘mere collection of copies of public documents’”: John McKeown, Fox Canadian Law of Copyright and Industrial Designs, 4th ed. looseleaf (Toronto: Carswell, 2003), at s. 7:4 [Fox].

[182] InCCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13, at paras. 16-17 the Supreme Court of Canada discussed what kind of work is entitled to copyright protection:

[183] Works used for commercial purposes are also entitled to copyright protection. For example, an advertisement inserted in a newspaper has been held entitled to copyright protection: Fox Canadian Law of Copyright at s. 4:6; Slumber-Magic Adjustable Bed Co. v. Sleep-King Adjustable Bed Co. (1984), [1985] 1 W.W.R. 112, 28 A.C.W.S. (2d) 371, (B.C.S.C.). In Slumber-Magic, McLachlin J. stated at 115:

[184] In Ladbroke (Football) Ltd. v. William Hill (Football) Ltd., [1964] 1 All E.R. 465, at 469 Lord Reid said:

[185] The property descriptions describe particular real properties. They are created to market the property to potential buyers. It is apparent they are written for each property in a manner to highlight the positive aspects of the properties. There is also the evidence of Bilash and Walton that there is some level of skill involved in writing an effective property description. I am satisfied that the property descriptions are the product of skill and judgment. As a result they meet the threshold for copyright protection.

[186] Section 13(2) of the Copyright Act provides as follows with respect to photographs:

[187] With respect to the photographs in question, the requirement for originality is low and can arise from the choice of subject matter, the creation of the scene, the angle of the photograph or other factors: Fox Canadian Law of Copyright at s. 10:11(c). Again, I am satisfied that they satisfy the originality requirements of the Copyright Act and they are entitled to copyright protection.

[188] Bilash deposed that he retained a professional photographer to take photographs of each property that he was hired to market as the listing agent. Ms. Gray arranged for photographers to take photographs of the property. Bilash ordered and paid for the original electronic files of the digital images so that he could copy and use them as he saw fit in his marketing campaigns, as opposed to ordering just prints of the photographs. Prior to January 1, 2009, the money to pay the photographers came from Bilash’s personal account. From January 1, 2009, onwards, the money to pay the photographers came from the account of Bilash Corporation.

[189] I am satisfied that Bilash owns copyright in the photographs pursuant to s. 13(2) given he ordered them, they were made for valuable consideration, he paid for the originals and there was no agreement between him and the photographers to the contrary.

[190] Walton owns the copyright in the five property descriptions written by him which are the subject matter of his claim. Bilash owns the copyright in the property descriptions written by his assistant Ms. Gray as she was his employee: s. 13(3) Copyright Act. With respect to the photographs ordered and paid for by him he also owns the copyright in them: s. 13(2) Copyright Act.

 Infringement of Copyright

[191] Section 2 of the Copyright Act defines "infringing" as: "in relation to a work in which copyright subsists, any copy, including any colourable imitation, made, or dealt with in contravention of this Act."

[192] Section 27(1) of the Copyright Act prohibits copyright infringement as follows:

It is an infringement of copyright for any person to do, without the consent of the owner of the copyright, anything that by this Act only the owner of the copyright has the right to do.

[193] Section 3(1) in turn provides the owner of copyright with the sole right to do the following:

[194] In order to find copyright infringement, a plaintiff must prove copying of the work or a substantial part thereof and access to the copyright protected work: Kantel v. Grant, [1933] Ex.C.R. 84 at 96. Determining whether a substantial part of the work has been taken is a question of fact: King Features Syndicate Inc. v. Lechter, [1950] Ex.C.R. 297; U & R Tax Services Ltd. v. H & R Block Canada Inc. (1995), 62 C.P.R. (3d) 257, (F.C.T.D.) at para 35. For example, in Hawkes Son Ltd. v. Paramount Film Service Ltd., [1934] Ch. 593 (C.A.) a film reproduced 20 seconds of the 4 minute long Colonel Bogey March. The portion reproduced was the principal air of the march. The court held that given the portion reproduced was clearly recognizable as the Colonel Bogey March what was reproduced was, in the words of Slesser, L.J., “a substantial, a vital, and an essential part”. He also noted that “other matters beyond mere quantity may and have to be looked at.”

 Has There Been Infringement?

[195] Zoocasa admits that it copied the property descriptions and photographs belonging to Bilash and Walton onto its servers. It also admits that it indexed the Century 21 Website and that it indexed all the property listings found within the Website. That indexing included the URL, price, MLS description, address, province, city, bedrooms, bathrooms, lot size, listing style, year built, status, taxes, storeys, agent name, agent email, agent title, agent website, broker name, broker email, broker phone, broker address, broker website and image URL.

[196] For each property listing that it indexed until approximately November 20, 2008, Zoocasa copied, among other things, the full property description and one photograph onto its servers. That information was stored in Zoocasa’s database. After November 20, 2008, Zoocasa displayed a truncated portion of the description but continued to copy the whole description and a photograph onto its servers.

[197] Given the admissions of Zoocasa all of the listings of Walton and Bilash were accessed as described. The plaintiffs have chosen to rely on a total of 128 Works consisting of 29 property descriptions and 99 photographs that were copied. While Zoocasa disputes that certain of the 128 Works were in fact copied by their company, I am satisfied based on the evidence of Bilash, Walton, WTL and the notices to admit that at least 29 property descriptions and 99 photographs were copied. Zoocasa’s disagreement appears to be based on their inability to match certain of the property descriptions to their records rather than a denial that the Works were copied.

[198] The breakdown of those 128 Works are that 24 of the property descriptions and 99 photographs are owned by Bilash and 5 property descriptions belonging to Walton were copied. The defendants assert that they did not display a substantial portion of the plaintiffs’ Works. They refer to “snippets” having been copied. While that may be the case once they reverted to truncated property descriptions, the previous copying of the complete written property descriptions cannot, in my view, be described as a “snippet”.

[199] What is substantial is not simply a question of quantity. Other factors relevant to the question of whether the taking was “substantial” are the importance of the part, the nature of the work and the use of the work to compete with the copyright holder.

[200] An example of a property description characteristic of those copied is:

[201] In my view, such property descriptions were a substantial portion of each real estate listing page on the Century 21 Website, not only with respect to quantity but also in their overall significance respecting the property listing described.

[202] An example of the truncated property description which Zoocasa commenced using in November 2008 is:

[203] I find that the practice of Zoocasa, from its inception until November 2008, of indexing and copying the entire property description was, in the words of Slesser, L.J. in Hawkes, “the indexing and copying of a substantial, a vital, and an essential part” of the plaintiffs’ Works.

[204] The continued copying of the entire property description to the Zoocasa server is a violation of copyright. The truncated versions of the property description in my view do not infringe copyright as they do not meet the criteria for substantial copying sufficient for copyright infringement.

[205] With respect to the photographs, Zoocasa was not merely copying a thumbnail image as in the case of Kelly v. Arriba Soft Corporation, 336 F. 3d 811 (USCA, 9th Circuit, 2003), but rather the entire photograph. This was a clear violation of copyright.

 Defences to Copyright Infringement

[206] Section 29 of the Copyright Act creates an exception for copyright infringement known as the fair dealing exception. Once it has been shown that copyright has been infringed without permission of the copyright holder, the defendant may plead relief under the fair dealing provisions of the Copyright Act. The Copyright Act creates a two-part test for determining if fair dealings are exempted from copyright infringement. First, the dealing must be fair and second, it must be done for the purpose of research, private study, criticism, review, or news reporting all of which must be without motive or gain. The leading case in Canada concerning fair dealing is CCH cited above at para. 181.

[207] In CCH at paras. 9-10, the Supreme Court of Canada discussed copyright infringement as follows:

[208] The Supreme Court of Canada, in CCH, at para. 53 adopted from the appeal decision of Linden J.A. in the Federal Court of Appeal and in Hubbard v. Vosper, [1972] 1 All E.R. 1023 (C.A.) at 1027, “as well as the doctrine of fair use in the United States” certain factors to be considered when assessing fair dealing identified as follows:

[209] These factors are neither essential nor exhaustive. Not all of these factors will arise in every instance and in some contexts there may be factors other than those listed that will be relevant to a determination of whether the dealing was fair.

 The Application of the Principles of CCH
 Fair Dealing

[210] Both parties refer to American authorities. In doing so the comments of Estey J. in Compo at 367, and relied upon in Théberge v.Galerie d’Art du Petit Champlain Inc., 2002 SCC 34atpara. 72, must be kept in mind:

[211] Zoocasa admits to indexing the Century 21 Website and that up to March 4, 2010, it indexed all of the property listings and a photograph for each of the listings on the Century 21 Website.

[212] The defendants have pleaded that their copying of the plaintiffs’ Works constitutes “fair dealing” under the Copyright Act. Section 29 of the Copyright Act provides an exception from infringement for “fair dealing”:

[213] To qualify for the fair dealing exception, the defendant must prove that the dealing was for a permitted purpose such as research or private study and that the dealing was fair: CCH at para. 50.

[214] The court in CCH further commented on fair dealing as follows at paras. 48 and 50-52:

 Purpose of the Dealing

[215] The plaintiffs’ assert that Zoocasa’s purpose or motive is purely commercial. It generates money from advertising including advertising on the pages of property descriptions on which the plaintiffs’ listings and data appeared. This they say can result in a finding that its use “may not be as fair”: CCH at para. 54.

[216] Zoocasa argues that the purpose of the dealing will be fair if it is for one of the allowable purposes under the Copyright Act, namely research, private study, criticism, review, or news reporting. They note that in Society of Composers, Authors, and Music Publishers of Canada v. Bell Canada et al., 2010 FCA 123 [SOCAN] at paras. 17-20, the Federal Court of Appeal held that “research” included “the action or instance of searching carefully for a specified thing or person” and that commercial research by a consumer qualified as research. Further, the purpose of the dealing in question was to be considered from the point of view of the person for whom the dealings were intended. They argue that the plaintiff is focusing on the purpose of profit as opposed to the purpose for which the dealing was intended.

[217] Zoocasa states that in providing search results and “snippets” of the copyrighted Works to the users to determine if they wish to access the source website they are engaging in an activity that falls within the scope of “research” as contemplated by the Copyright Act. That is, it enables individuals to research real property listings.

 Discussion of Purpose of the Dealing

[218] It is not disputed that Zoocasa’s motive is commercial. While apparently not yet profitable, it is endeavouring to generate income by selling advertising space on the web pages on which the plaintiffs’ listings and data appear.

[219] Century 21’s primary purpose is to list and sell real property. Their Website is not simply a vehicle for advertising; rather it is to promote their property listings to potential buyers.

[220] The Supreme Court of Canada in CCH states that research, even if commercial in nature, may be fair. However, as noted by the Supreme Court of Canada, at para 54, “some dealings, even if for an allowable purpose, may be more or less fair than others; research done for commercial purposes may not be as fair as research done for charitable purposes.” Also, as quoted in CCH at para. 52 from Hubbard, “[i]f they are used to convey the same information as the author, for a rival purpose, that may be unfair”.

[221] Additionally, the Federal Court of Appeal in SOCAN at para. 22, held that when assessing if a dealing was fair the dealing must be considered “from the point of view of the person for whom they are intended: the consumer of the subject-matter of the copyright.” The issue in SOCAN was whether 30 second previews of musical works available on the Internet were subject to royalty payments. The court agreed with the Copyright Board’s decision that the length of each preview in proportion to the length of the completed work was considered fair as the user’s objective was research, in that case, the seeking and finding of a desired musical work.

[222] The commercial aspect is therefore not determinative but is one of the factors to be taken into account. The nature of the commercial aspect however can vary. When the intended use of copyrighted material is to generate revenue in competition to the copyright holder the use may be less fair. However, if the purpose produces a value to the public interest that may be more fair. If however the first factor, that of revenue to the user outweighs any public benefit, then the use may not be fair.

 Character of the Dealing

[223] The plaintiffs emphasize that custom or practice in a particular trade or industry is relevant in determining whether or not the character of the dealing is fair: CCH, at para. 55. The plaintiffs place considerable emphasis on Zoocasa’s failure to abide by the Robot Exclusion Standard.

[224] The defendants emphasize that the focus of the inquiry at this stage is “how the Works were dealt with”. They state that the plaintiffs, in focusing on the remark in CCH that it “may be relevant to consider the custom or practice in a particular trade or industry”, are ignoring the analysis required by CCH, that is, how were the Works dealt with?

[225] They assert that the Robot Exclusion Standard is irrelevant to the fair dealing analysis because all it does is permit indexing or permit indexing of some pages and not others or does not permit indexing at all.

 Discussion of Character of the Dealing
 Transformative Use

[226] In the US the concept of “fair dealing” is described as “fair use”. The defendant argues that American jurisprudence has developed four factors similar to those listed in CCH the first of which is the “purpose and character of the use”. In doing so they place particular emphasis on the US concept of “transformative use”.

[227] In Perfect 10 v. Amazon.com, 508 F.3d 1146 (9th Cir. 2007), the Ninth Circuit Court of Appeals considered the public importance of search engines and the “transformative” nature of their use of copyrighted material. Perfect 10 involved a copyright owner’s efforts to stop an Internet search engine from facilitating access to infringing images.

[228] TheCourt in Perfect 10 stated at para. 1164:

[229] In considering whether the use of thumbnails by search engines was transformative the court commented at para. 1165:

[230] Zoocasa argues that by indexing the property listings in question, they transformed them from advertisements of properties for sale into an electronic reference tool, or a signpost, indicating where the property listing could be found. They say that the character of use in creating the signpost is entirely different from the purpose of the property listings in question. They submit, for example, that brokers or real estate salespeople create property listings to advertise properties for sale while Zoocasa creates an electronic reference tool to enable consumers to better find those advertisements. In essence, they characterize their approach as a more focused search engine. What they call a vertical search engine.

[231] With respect to the photographs at issue, Zoocasa created a lower resolution thumbnail image that served as a link to the original property listing. With respect to the property descriptions, Zoocasa created a copy on its server and then later reproduced a portion of it, calculated to provide a visitor with just enough information to decide whether or not to click through to the original listing.

[232] This issue of transformative use is addressed by the United States Court of Appeals, Second Circuit in American Geophysical Union v. Texaco Inc., 60 F.3d 913 (2nd Cir. 1994) at 923:

[233] As a result, Zoocasa asserts that the character of the dealing supports a finding of fair dealing by Zoocasa.

[234] In my opinion, the difficulty that arises from the defendants’ emphasis on “transformative use” is that what may be transformative, and as a result fair use in the US, may still be copyright infringement in Canada. For example, The US Copyright Act of 1976, 17 U.S.C. s. 107 [US Copyright Act] refers to “fair use of a copyright work, for purposes such as criticism, comment, news reporting, teaching, scholarship or research”. The nature of this defence in the US is very broad and is essentially a codification of a judge-made rule. In comparison, Canadian copyright law is rooted in the Copyright Act which specifically grants to the creator rights to the reproduction of the entire work or a substantial portion of the work: Copyright Act, s. 3. Under the Canadian Copyright Act, the exceptions or defences to copyright are more narrowly defined and extensively listed (although the list is not exhaustive) such as the purpose of the dealing is for research, private study, criticism, review or news reporting: see ss. 29, 29.1 and 29.2 of the Copyright Act. Canadian courts have not recognized “transformative use” as a characteristic of fair dealing.

 Failure to Comply with Robot Exclusion Standard

[235] The plaintiffs state that the failure to comply with the Robot Exclusion Standard overshadows any finding that the character of the dealing is fair. They state that the Robot Exclusion Standard is evidence of custom or practice in the search industry and as a result applies to a consideration of the character of the dealing. They state that in fact the defendants’ failure to abide by the Robot Exclusion Standard is decisive.

[236] The defendants, however, submit that consideration of the Robot Exclusion Standard as a factor in the fair dealing analysis is misconceived and that whether or not a website owner wishes the contents of the site to be found by search engines is not the issue and is irrelevant to the analysis. This despite the fact that Zoocasa itself uses the Robot Exclusion Standard on its Website.

[237] The defendants argue that an analysis of the authorities cited by the plaintiffs reveal that none of the cases incorporate the Robot Exclusion Standard issue into the four factors considered in the US concept of fair use. The issue arises in those cases in the context of implied licence or an additional factor of good faith.

[238] They note that the issue is not custom or practice respecting indexing, rather the plaintiffs rely on CCH where the court stated that the focus of the inquiry at this stage of analysis is “how the works were dealt with”. The defendants state that the plaintiffs, in focusing on the remark that it “may be relevant to consider the custom or practice in a particular trade or industry”, ignore the emphasis on the purpose of the inquiry.

[239] It is not disputed that the Robot Exclusion Standard is a “kind of de facto standard” in the industry that governs relations between websites and automated processes. Nor is it disputed that it permits websites to opt out if they do not want to be indexed. It also permits selective opting out where some search engines are permitted, some are not and indeed where only certain pages are permitted to be indexed.

[240] The major search engines such as Google, Bing and Yahoo! make the information required to opt out from their search engines publicly available. The defendant does not participate in this industry standard nor do they provide such information if requested. In fact, they do not have a “branded” Internet robot although the evidence is there is no technical reason why they could not.

 Discussion of the Robot Exclusion Standard as a Characteristic of Fair Dealing

[241] Mr. Levine, the plaintiffs’ expert, explains the Robot Exclusion Standard in his expert report in this way:

[242] In eBay v. Bidder’s Edge Inc., 100 F. Supp.2d 1058 (N.D. Cal. 2000)the United States District Court defined the Robot Exclusion Standard as follows at 1161:

[243] Zoocasa acknowledges that it was aware of the Robot Exclusion Standard and that it is widely followed in the marketplace and among search engines. It was also aware that the Robot Exclusion Standard allows a website to opt out of being indexed by all search engines or just specific search engines by inserting the appropriate line of text in the robots.txt file. As noted earlier, Zoocasa itself implements the Robot Exclusion Standard and enjoys the benefits of using the standard.

[244] Century 21’s Website has a robot.txt file and uses it to indicate to specific search engines that Century 21 does not want them to index the Century 21 Website. However, Century 21, through its website operator, has not been able to use its robot.txt file to block Zoocasa because it does not know the name of Zoocasa’s robot or spider. That information is required before a site can be blocked. Zoocasa has refused to provide the name of its robot. On this application Zoocasa indicated for the first time that it does not currently have a “branded” Internet robot. Zoocasa has not explained why it does not given how widespread the standard is in the industry.

[245] The Robot Exclusion Standard is an accepted industry standard that permits search engines to function by allowing them to copy content from websites without obtaining the prior consent of potentially many millions of websites, and it also allows individual website operators to opt out of being indexed if they wish.

[246] The plaintiffs assert that American courts have recognized the Robot Exclusion Standard as striking the appropriate balance in determining what use is “fair” for the purposes of the fair dealing exception (or the “fair use” exception, as it is known in the United States). In particular, they rely on Field v. Google Inc., 412 F. Supp. 2d 1106 (Dist. Court, D. Nev. 2006), and Parker v. Yahoo!, 2008 U.S. Dist. LEXIS 74512, (E.D. Pa. 2008).

[247] In Field, the plaintiff claimed for copyright infringement against Google alleging that Google’s caching of the plaintiff’s web pages breached copyright. The plaintiff knew that he could use a meta tag to instruct Google not to provide a cached link. The plaintiff also created his own robots.txt file and set it to permit all robots to access his website and to index all of the pages on his website. Google removed the cached links as soon as it was served with the lawsuit. Based on these facts and the expert evidence of John Levine, who is also the plaintiffs’ expert in the case at bar, Jones J. found that the plaintiff’s conduct could be reasonably interpreted as a grant of a licence to Google to index and cache his website.

[248] Jones J. commented about the use of industry standard protocols between website owners and search engines as follows:

[249] In Parker, the US District Court of Eastern Pennsylvania followed Field and found that a website owner, who, despite knowing about the electronic protocols to prevent indexing and caching (including robots.txt), failed to object to the infringing conduct was granting a licence for the infringing use.

[250] In Parker, Yahoo! continued to display works even after the commencement of the lawsuit. The court held that initiation of a lawsuit itself may constitute revocation of an implied licence if there was no consideration for the licence. In obiter, the court also said that continuing to display works after the commencement of the lawsuit may constitute direct copyright infringement.

[251] In the case at bar, Zoocasa has failed to abide by the Robot Exclusion Standard, despite acknowledging it as an industry standard and using it itself. As a result, Zoocasa, in choosing not to embrace the industry standard, has made itself vulnerable to claims of copyright infringement. Zoocasa explains that it was of the view that any site that did not want to be accessed could simply block the Zoocasa IP address. They understood that all websites log visitors IP addresses and it is a technically easy task to block certain addresses. Unbeknownst to them the operator of the plaintiff Century 21’s Website did not log such addresses. In addition, as was stated in eBay, blocking IP addresses is an inefficient and ineffective means of controlling access from unwanted robotic searches. Zoocasa implicitly acknowledged on discovery that it does not attempt to avoid or evade IP blocking.

[252] The issue of fair dealing only arises where there is no consent to the activity complained of. The fact that consent has not been given, or has been refused, whether orally or in writing or in a robots.txt file, is only the starting point for a fair dealing analysis. It is not the end point for an analysis of fair dealing. The test is the character of dealing not the dealing without consent.

[253] In my opinion the Robot Exclusion Standard addresses how the copyrighted material was acquired, not how it was used. How the works in question come into the possession of a party is quite irrelevant to a consideration of fair dealing which is concerned with the use of the works, not their manner of acquisition. The manner of acquisition may have relevance to other claims such as bad faith in damage claims but in my view does not assist in a fair dealing analysis.

 Alternatives to Dealing

[254] The determination of fairness includes consideration of “non-copyrighted equivalent of the work that could have been used instead of the copy-righted work … [and] … whether the dealing was reasonably necessary to achieve the ultimate purpose”: CCH, at para. 57.

[255] The plaintiffs’ analysis regarding this issue is that the dealing was not reasonably necessary to achieve the ultimate purpose because if the industry can function with sites being entitled to opt out of being indexed, then there are alternative sources of information. In this case, the fact that Zoocasa did at one time and now once again does not index those sites that do not want to be indexed is alleged to be evidence that there are alternative non-copyrighted equivalents to the Century 21 Works.

[256] The defendants submit that this factor involves a determination of whether or not there was an alternative to the dealing with the infringed work. That is, was there a non-copyrighted equivalent of the work in question available? They submit that in this case, there was no non-copyrighted alternative if they were to accurately index actual listings.

[257] They further state that the plaintiffs’ analysis is flawed as the issue, in their view, is not whether to index sites that do or do not want to be indexed, but rather, the issue is whether there was an alternative non-copyrighted source of the work in question. Fair dealing is premised on a lack of consent. However, the lack of consent is not relevant to the analysis itself.

[258] According to the evidence of Mr. Lee, Zoocasa, in September 2008, operated on the basis that target websites could opt out of being indexed. However, shortly thereafter they abandoned that policy and in the case of the plaintiffs continued to index their site and information despite knowing they did not wish to be indexed. They have now returned to the earlier policy of allowing websites to opt out of being indexed. Mr. Lee stated “now that the business focus of Zoocasa has been refined, it is apparent that it is not part of Zoocasa’s business model to index sites that do not wish to be indexed”. The fact that Zoocasa was once and is now able to function adequately without indexing websites that do not wish to be indexed demonstrates that there are alternatives to dealing with infringed works. The practice of all major search engines allowing websites to opt out of being indexed also supports a finding that there are viable alternatives to Zoocasa’s previous practice of copying content despite the website operator’s objections.

[259] The issue, in my view, is whether alternative information is available. It is apparent that if given the choice, Zoocasa would prefer to have access to the Century 21 Website. Their business plan is premised on linking to as many real estate listings as possible.

[260] Alternatives to the dealing was defined by the Supreme Court of Canada in CCH at para. 57, as “non-copyrighted equivalent of the work that could have been used instead of the copy-righted work … [and] … that it will also be useful for courts to attempt to determine whether the dealing was reasonably necessary to achieve the ultimate purpose.”

[261] It appears therefore that the test is whether there is a non-copyright equivalent of the work. However, the test is premised on the determination that an equivalent was necessary to accomplish what was intended.

[262] In this instance, the evidence respecting non-copyrighted equivalents of the Works is that the public is free to access the information sought through individual real estate agents of Century 21. In addition, it appears that the manner of obtaining the copyright work, although preferred by Zoocasa, was not reasonably necessary to achieve its ultimate purpose given they can source the material elsewhere. I find that Zoocasa had alternatives to the dealing that they chose not to pursue in order to minimize time and expense. As a result their dealings with respect to this factor were not fair.

 Amount of the Dealing

[263] The court in CCH, at para. 56, articulated the principles used to guide courts when determining whether the amount of the dealing was fair. In this regard the court said:

[264] In Hubbard, supra at 1027, the English Court of Appeal considered the scope of the defence of fair dealing in relation to criticism or review of literary works. Lord Denning made the following remarks:

[265] Substantial taking is not alwaysmeasured by the quantity of matter reproduced from a copyrighted work, though that may be a significant factor: Horn Abbot Ltd. v. W.B. Coulter Sales Ltd. (1984), 77 C.P.R. (2d) 145 (F.T.D.) (The "Trivial Pursuit" case). Courts will also look to the quality of matter reproduced. In U & R Tax Services Ltd. v. H & R Block Canada Inc. (1995), 97 F.T.R. 259 (F.T.D.), at para. 35,the court held that assessing whether or not a taking is substantial may depend upon a number of factors such as:

[266] Zoocasa, throughout all times in issue, copied the whole of Century 21’s property descriptions onto its servers. Until approximately November 20, 2008, they also displayed those full property descriptions on their Website. After November 20, 2008, they displayed truncated descriptions on their Website. They also copied and displayed the whole photographs that are the subject of this claim. The plaintiffs submit this amount of dealing militates against a finding of fairness.

[267] Zoocasa submits that it only takes a portion of the data from the property listings it indexes. They emphasize that the property description must be looked at as part of a whole. They assert that the amount taken may be more or less fair depending on its purposes. As a result, the quantity of the work dealt with will not be determinative of the fairness. They state that given the sole purpose of indexing the property listings in question was to better publicize them and further their purpose of advertising property for sale, that even if the court considers that a substantial portion of the Works or the property listing has been dealt with, the dealing is nonetheless fair.

[268] The copying of basic information such as the property address and the legal description is in my view not copyright infringement. However the copying of the property description created for the purpose of encouraging property sales goes beyond such basic information. The written description of the property contains the key information concerning the property. It is a description of the property in prose form while the remainder of the site consists of basic information such as lot size, property taxes etc. In addition, the repeated daily access and indexing of such information militates against a defence of fair dealing. This is not a situation of a one-time copy being taken. It is conduct consisting of repeated actions by the defendants. In my view the amount of dealing exceeds what is fair.

 Nature of the Work

[269] In regard to the nature of the work, the court in CCH at para. 58, stated:

[270] The plaintiffs submit that this relates to unpublished confidential work, neither of which factors are present in the case at bar and as a result this factor is not relevant.

[271] The defendants however state that the nature of the Works, in this case a property description and a property listing, is significant on the basis that the Works exist solely in order to publicize property for sale. They argue that the plaintiffs’ position rests on a restrictive interpretation of the statement in CCH that dissemination of an unpublished work might be more fair, while the dissemination of a confidential work might be less fair: CCH at para 58.

[272] However, CCH reveals that the Supreme Court of Canada appears to favour “wider public dissemination of the work” where the work in question is unpublished but not confidential. In the case at bar the work is published on the Century 21 Website for advertising purposes. As a result this favours fair dealing.

 Effect of the Dealing on the Work

[273] The court in CCH described this factor as follows:

[274] Zoocasa submits that the copying is fair because its Website is intended to drive traffic to the Century 21 Website. The evidence indicates that less than 1% of the Century 21 Website traffic comes from Zoocasa’s site. This however is not the real issue. Zoocasa competes with the Century 21 Website for Internet users who are searching for properties for sale. Zoocasa’s own marketing materials state that it “helps reduce the time and effort” required to search for properties online by allowing the user to avoid having to use individual realty websites such as the Century 21 Website.

[275] Although the primary purpose of Century 21‘s Website is to facilitate real estate sales and Zoocasa’s primary purpose is to gain profit from advertising such listings, the Zoocasa Website clearly competes with the Century 21 Website in the market for Internet users seeking to search for properties for sale. Both Century 21 and Zoocasa use the copied material in the same way. That is, to facilitate searches by users for real properties.

[276] As a result, this factor favours a finding that the dealing is not fair.

 Conclusion on Fair Dealing

[277] The Supreme Court of Canada in CCH discussed how to assess the fair dealing factors as follows at para 60:

[278] The preparation of the property descriptions and the photographs, as I have noted, required some level of skill. The fact that they had value is indicated by the fact that the Zoocasa availed itself of them. In University of London Press v. University Tutorial Press, [1916] 2 Ch. 601 at 610 Peterson J. noted that “there remains the rough practical test that what is worth copying is prima facie worth protecting”.

[279] Based on my conclusions above regarding the elements of the test for fair dealing, and given it is a matter of impression, in my view the actions of Zoocasa during the time that they copied and displayed the whole of the property descriptions and a photograph were, in my opinion, not fair.

[280] In this case, the Robot Exclusion Standard is not an additional element because it addresses only the manner in which access was gained not the issues relevant to fair dealing.

 No Relief for the Defendants under Section 39 of the Copyright Act

[281] At para. 27 of their amended statement of defence, the defendants plead reliance on s. 39 of the Copyright Act. Section 39(1) provides as follows:

[282] The defendants are unable to shelter under this provision for two reasons. First, the defendants were put on notice by September 2, 2008, that Zoocasa’s indexing of the Century 21 Website was contrary to the Copyright Act. Secondly Mr. Lee on behalf of Zoocasa admitted on discovery that Zoocasa understood there is copyright protection in the prose that people write and the photographs that people take.

 Trespass to Chattels

[283] The plaintiffs submit that by continuing to access the servers used to host the Century 21 Website after Century 21 demanded that Zoocasa cease doing so, Zoocasa committed the tort of trespass to chattels.

[284] Zoocasa argues that such an action cannot be maintained for two reasons. First, the tort does not apply in Canada to the act of accessing computer systems. Second, the plaintiff has no possessory interest in the servers that are used to host their Website.

 Discussion

[285] Trespass to goods is defined as in Halsbury’s Laws of Canada, Torts, 1st ed. (LexisNexis: Markham, Ont. 2007) at 150 as:

[286] This raises the issue of whether Century 21 is in possession of the servers from which its Website is operated to a degree sufficient to support the tort of trespass to chattels. In 1162994 Ontario Inc. v. Bakker, [2004] O.J. No. 2565 (C.A.), at para. 20, the court stated:

[287] Black’s Law Dictionary, 6th ed. (West Publishing Co.: St. Paul, Minn., 1990) at 1163 defines "possession” as follows:

[288] Marsh v. Kulchar, [1952] 1 S.C.R. 330, 1 D.L.R. 593 (S.C.C.), at 334-335, also considered the meaning of possession:

[289] Any claim by the plaintiff to possession of the computer system that supports its Website is based on its agreement with WTL. The plaintiff entered into an agreement with WTL dated July 27, 2006 (the “WTL Agreement”). I assume for the moment that any claim the plaintiff has to trespass with respect to its Website involves the servers on which the Website content, listings, property descriptions and photographs are located. As a result, the provisions of the agreement must be considered.

[290] The WTL Agreement states that WTL provides “Internet-based software services to the real estate industry”. The definitions applicable to the trespass issue are as follows:

[291] The relevant provisions of the WTL Agreement are:

[292] Through the WTL Agreement, WTL granted Century 21 a licence to use WTL Technology for its Website and the corresponding services. They do not have any grant of licence respecting the infrastructure which includes the servers. That is simply the technology used by WTL to provide hosting services.

[293] In this instance it is alleged that the trespass occurred on the WTL servers. Century 21 relies on eBay for the assertion that American courts have held that accessing a website without authorization constitutes a trespass to chattels. In that case eBay sought a preliminary injunction against Bidder’s Edge on the ground of trespass to prevent Bidder’s Edge from crawling its website. Bidder’s Edge operated an aggregation site that scraped content from several auction sites and posted that content to its own site. In some respects this is similar to the activities of Zoocasa which accumulates real estate listings from multiple sites.

[294] The court, in granting eBay’s application for an interlocutory injunction, found that the right of Bidder’s Edge to use eBay’s personal property, even if the use was negligible, was not a right recognized by law and held as follows at 1070:

[295] The tort has traditionally been applied to physical interference with a chattel. The issue then becomes whether or not electronic access is “physical” or whether it needs to be “physical” for the tort claim to succeed. In Thrifty-Tel, Inc. v. Bezenek, 46 Cal. App. 4th 1559 (Cal: Court of Appeals, 4th Appellate Dist., 3rd Div. 1996), the court held that electronic access is sufficient and stated at 1566-1567:

[296] It is not at all clear that Canadian law supports the proposition that electronic access to a computer system is a physical act involving some degree of force. As noted by G.H.L. Fridman, The Law of Torts in Canada, 2d ed. (Carswell: Toronto, 2002) at 125: “Trespass involves a physical act vis-a-vis the object in question”. However, given my findings below respecting Century 21’s claim to a possessory interest in WTL’s website servers it is not necessary to resolve this issue.

[297] Even assuming that in Canada, as has been found in the US, that electronic signals are sufficiently tangible to trespass there must still be a physical object that is trespassed upon: Thrify-Tel, Inc., supra; CompuServe, Inc. v. Cyber Promotions, Inc., 962 F. Supp. 1015 (Dist. Court, SD Ohio 1997); eBay, supra; and Intel Corp. v. Hamidi ,1999 WL 450944 (Cal. Sup. Ct., 1999).

[298] In Canada, the physical trespass of a chattel is a requirement necessary to plead the tort of trespass: Fridman, The Law of Torts in Canada, above at para. 297 at 121-123.

[299] The chattels in question are the servers of WTL or its third party suppliers. Century 21 under its agreement with WTL has no possessory interest in those servers. As a result, an essential element of the tort of trespass to chattels is not present. Any potential claim for trespass to chattels would be that of WTL. They are not a party to this action. Century 21’s claim respecting trespass to chattels is dismissed.

 Liability of Rogers

[300] The plaintiff advances its claim against Rogers on several grounds. They claim that Rogers is liable for authorizing the breach of copyright pursuant to s. 27(1) of the Copyright Act. They also claim that Rogers is liable for inducing Zoocasa’s breach of contract arising under the Terms of Use and finally that Rogers is guilty of the tort of inducing breach of contract.

[301] The plaintiffs base Roger’s liability on allegations that Rogers has gone beyond the role of shareholder and investor and has directly supported and promoted the Zoocasa Website. The plaintiffs make this claim on the basis of Rogers’ initial role in developing Zoocasa and its ongoing support for the company.

[302] In particular, the plaintiffs cite the involvement of Rogers’ employees in developing the Zoocasa idea, Website and search engine before Zoocasa was incorporated on March 28, 2008, and in advancing the Zoocasa project by leveraging relationships that Zoocasa had with the industry.

[303] The plaintiffs further cite Rogers’ ongoing support for the project, noting that Rogers is the sole provider of funding and support for the development and maintenance of the Zoocasa Website. The plaintiffs note several instances where Rogers’ employees, acting in their capacity as such, actively promoted the Zoocasa Website to Century 21. The plaintiffs also cite the fact that Zoocasa’s three directors are all officers of Rogers.

 Defendants’ Position

[304] The defendants deny that Rogers can be liable as asserted by the plaintiffs and say that the Zoocasa Website is operated by a separate legal entity, all employees are now those of the numbered company and any decisions about indexing and listing are made by Zoocasa, not Rogers. The defendants say that Rogers is a shareholder of Zoocasa and is not liable for the actions of Zoocasa. They deny that Rogers authorized the conduct of Zoocasa.

 Rogers Involvement in Zoocasa

[305] Rogers has actively participated in Zoocasa’s business. Michael Lee and Barry Choi developed the idea for the Zoocasa project in the spring of 2007 while they were both employees of Rogers and before Zoocasa was incorporated.

[306] The work to build the search engine for the Zoocasa Website began in late summer of 2007, before Zoocasa was incorporated. Rogers, not Zoocasa, registered the domain name for the Zoocasa Website. Rogers also lent employees to Zoocasa for the development of the Zoocasa Website and leveraged relationships that Rogers had with the industry, both of which helped to advance the Zoocasa project. The initial programming for the Zoocasa Website was completed by Rogers’ employees.

[307] In addition, Zoocasa has three directors, all of whom are officers of Rogers. Rogers is also the sole provider of funding and support for the development and maintenance of the Zoocasa Website having contributed $2.1 million in 2008 and $2.2 million in 2009.

[308] Rogers also supports the Zoocasa Website by providing services in kind (i.e., using other business units to drive traffic to the Zoocasa Website). Rogers has also provided legal services to support the Zoocasa Website as Rogers and its external counsel drafted the terms of use for the Zoocasa Website.

[309] Even after Zoocasa was incorporated on March 28, 2008, employees of Rogers continued to be actively involved in promoting the Zoocasa Website. On July 4, 2008, Darrell Cox of Rogers sent an email to Barbara Fromm of Century 21 to introduce her to the Zoocasa Website. He identified himself in the email as Director of Business Development, Rogers Communications Inc., andstated as follows:

[310] When Mr. Phillipson and Mr. Cox met with Century 21 in the summer of 2008, they presented themselves with their Rogers business cards as being, respectively, Manager, Business Development, Rogers Communications Inc., and Director, Business Development, Rogers Communications Inc.

[311] Darren Phillipson, who was actively involved in developing and promoting the Zoocasa Website, was never officially an employee of Zoocasa. He was at all times an employee of Rogers. Mr. Cox also worked on the Zoocasa project while an employee of Rogers to “help support the venture”, as did Mr. Lewin for a period of time.

[312] On October 16, 2008, C.B. Ross, a representative of Rogers Wireless who had no position with Zoocasa, sent two emails to Ms. Fromm of Century 21, in which he underscored Rogers’ direct involvement in the development and maintenance of the Zoocasa Website.

[313] Direct conduct by Rogers continued thereafter directly in the operation of the subsidiary. On January 13, 2009, Mr. Cox, writing in his capacity as Director of Business Development, Rogers Communications Inc., from Roger’s head office in Toronto, sent an email to Sherry Chris, a representative of the owner of the Century 21 brand in the United States, in which he attempted to arrange a meeting between representatives of Rogers and Century 21 USA to discuss the Zoocasa Website.

 Discussion
 Roger’s Alleged Authorization of Copyright Infringement

[314] Is Rogers liable for copyright infringement by authorizing Zoocasa’s infringement? The plaintiffs’ submit that s. 27(1) of the Copyright Act prohibits anyone from doing that which only the owner of the copyright owner has the right to do. Pursuant to s. 3(1), only the copyright owner has the right to “authorize” the reproduction of a work.

[315] Liability for contravening s. 3(1) through authorizing violations of copyright is found in s. 27 of the Copyright Act:

[316] The meaning of “authorize” in this context was reviewed by the Supreme Court of Canada in CCH at para. 38 where the court stated as follows:

[317] It is not disputed that Rogers, through its employees and representatives, directly supported and promoted the Zoocasa Website. However, the plaintiff submits that in addition Rogers has directly sanctioned, approved, countenanced, favoured, and encouraged the Zoocasa Website. They submit that liability for authorizing copyright infringement can arise from acts that are less than direct and positive, including a sufficient degree of indifference.

[318] Zoocasa relied on Rogers for development and support of its Website, search engine and “spider” or “robot”. However, the court in CCH made it clear that “a person does not authorize infringement by authorizing the mere use of equipment”. Therefore, the question then becomes whether Rogers authorized Zoocasa’s alleged copyright infringement?

[319] The relevant principle is stated in de Tervagne v. Beloeil (Town), [1993] 3 F.C. 227 (T.D.) at para. 49, where the Federal Court cited P. D. Hitchcock’s article “Home Copying and Authorization” (1983), 67 C.P.R. (2d) 1983, at 17-49:

[320] In CCH, the Supreme Court of Canada rejected the claim that the Law Society of Upper Canada authorized copyright infringement by providing self-service photocopiers in the Great Library at Osgoode Hall in Toronto, stating as follows:

[321] Similarly, and in the context of the Internet, the Supreme Court of Canada in SOCAN at paras. 122-123, expanded on this issue:

[322] In SOCAN, the court approved the decision of the Copyright Board that an institution’s knowledge that the means provided may be used to infringe copyright does not, in and of itself, constitute authorization. The Copyright Board had stated as follows:

[323] The Court in SOCAN continued:

[324] However, the court did not have to consider the possibility that knowledge of a copyright infringement coupled with failure to take remedial action might constitute implicit authorization:

[325] Where a party supplies equipment but does not have control over how the equipment is to be used, that party does not “authorize” the copyright infringement. In Vigneux v. Canadian Performing Right Society Ltd., [1943] S.C.R. 348, reversed [1945] UKPC 1, A.C. 108 (P.C.), the defendants supplied a phonograph to a restaurant and, in exchange for a monthly rental, provided records. The Privy Council found this did not constitute the defendants “authorizing” the restaurant owner’s public performance of the works in question as they did not give the alleged performance nor have control over the machine. As stated by Lord Russell at 123:

[326] In Muzak,referred to above, Kellock J. cited with approval the above passage from Vigneux. In Muzak the court held that merely furnishing electronic transcriptions of musical works, arranged so as to be performed on transcription turntables, did not authorize the use of these works in a manner which violated the owner’s copyright. This could not be construed as authorization because, as in Vigneaux, Muzak did not have control of the actual performances.

 Did Rogers Authorize More Than “Mere Use of Equipment”?

[327] In my view, Rogers, in providing the means by which to establish the Zoocasa idea, Website and search engine, did no more than “authoriz[e] the mere use of equipment which could be used to infringe copyright.” As in SOCAN, the technology in question is “neutral technology” in the sense that there are plausible legal uses for tools which index, list and link websites. Indeed, the evidence suggests that allowing for automatic indexing is an industry standard provided that the site being indexed can reasonably exercise a right to “opt-out” if this is desired.

[328] Furthermore, the situation is akin to that in Vigneux and Muzak as there is no evidence that Rogers exercised specific control over the manner in which the tool operated. In particular, there is no evidence that Rogers controlled which sites Zoocasa’s “robot” or “spider” accessed or the process by which the tool’s administrator prevented the collection information from parties who did not want such information collected. The evidence is that the tool that Rogers assisted Zoocasa to develop was able to exclude specific websites upon request.

[329] However, if implicit authorization can be established based on knowledge by Rogers of the alleged infringement and the support offered despite this knowledge the presumption that it only authorized Zoocasa to index, list and link websites in accordance with the law, may be rebutted by evidence that “a certain relationship or degree of control existed” between Rogers and Zoocasa.

[330] This then leads to the question of whether there was such a relationship or degree of control between Rogers and Zoocasa so as to rebut the presumption that the activity was only authorized in so far as it is in accordance with the law.

 Exercise of Control by a “Parent” Company over Its Subsidiary

[331] Ordinarily, control exercised by Rogers in its capacity as a shareholder in Zoocasa would not make Rogers liable. Recognition of such control would pierce the corporate veil. As stated by the British Columbia Court of Appeal in Edgington v. Mulek Estate, 2008 BCCA 505, a case involving a breach of contract, control by a shareholder of a corporation is expected and that on its own is not sufficient to disregard the separate legal personality of the corporation:

[332] In Mentmore Manufacturing Co. v. National Merchandise Manufacturing Co., (1978), 89 D.L.R. (3d) 195 at 202-203 (F.C.A.), 2 A.C.W.S. 486, the Federal Court of Appeal stated, in the context of patent infringement, that a corporation’s shareholders are not considered to have authorized an infringement by that corporation:

[333] The “personal liability” of the shareholder referred to in Mentmore should be identified with liability of shareholders generally -- regardless of whether the shareholder is a natural person or another corporation.

[334] In my view, I can only consider Rogers’ control of Zoocasa asshareholder if, in the present circumstances, the corporate veil can be pierced when dealing with a subsidiary corporation. The law with regard to when the court should look behind a subsidiary corporation and place liability on the parent company is stated in International Trademarks Inc. v. Clearly Canadian Beverage (1999), 47 B.L.R. (2d) 193, 85 A.C.W.S. (3d) 306, at paras. 10-11 (B.C.S.C.):

[335] The evidence does not establish that Zoocasa was “under the complete control” of Rogers and had “no independent functioning of its own.” As a result, the court is not entitled to consider control exercised by Rogers in its capacity as a shareholder of Zoocasa. The corporate veil is not pierced.

 Relationship of Control between Rogers and Zoocasa

[336] As stated in CCH, the presumption that the activity was only authorized to the extent that it conforms with the law may be rebutted if “a certain relationship or degree of control existed between the alleged authorizer and the persons who committed the copyright infringement” can be shown.

[337] In CCH, the court determined that the Law Society of Upper Canada lacked sufficient control over the Great Library’s patrons to permit a finding that it authorized the infringement. In particular, the court stated that the Law Society and Great Library patrons “are not in master-servant” or “employer-employee relationship.”

[338] For the proposition that a relationship of control must exist in order to rebut the presumption of lawful use, the court in CCH cited, inter alia, Muzak, de Tervagne and P. D. Hitchcock’s, "Home Copying and Authorization" (1983), 67 C.P.R. (2d) 17, at 29-33.

[339] In de Tervagne, the Federal Court once again relied upon P.D. Hitchcock’s analysis of Muzak for this principle:

[340] In de Tervagne, the court analyzed English and Australian jurisprudence and concluded that:

[341] As a result, the necessary relationship to establish Rogers’ liability under this category is one of “master-servant”, “employer-employee” or “principal-agent”.

[342] Although, the plaintiffs plead that Rogers, “through its employees and representatives, directly supported and promoted the Zoocasa Website”, the plaintiffs did not plead that any of the above categories of relationship existed between Zoocasa and Rogers. Nor does the evidence establish the necessary relationship. As a result, the plaintiffs have failed to rebut the presumption that Rogers only authorized Zoocasa to use the Zoocasa Website in accordance with the law.

 Inducing Breach of Contract

[343] The plaintiffs also submit that Rogers is liable for inducing Zoocasa’s alleged breach of contract. The test for this tort was recently stated by the Ontario Court of Appeal in Drouillard v. Cogeco Cable Inc., 2007 ONCA 322 at para. 26, as follows:

[344] A similar test was articulated in Super-Save Enterprises Ltd. v. Del’s Propane Ltd., 2004 BCCA 183. However, the main difference was that the court required that the “defendant was or can be assumed to have been aware of the existence of the contract.” This requirement is discussed further below.

[345] Although not addressed in the plaintiffs’ submissions, if the plaintiffs succeed in establishing all of the elements of the tort, the defendants can still show legal justification for their action. I will discuss justification after addressing the elements of the tort.

[346] As discussed above, Rogers’ liability for the tort of inducing breach of contract can only arise from its corporation-to-corporation relationship with Zoocasa. To take into account Rogers’ role as the sole shareholder in Zoocasa would be to pierce the corporate veil. Indeed, the Alberta Court of Appeal has affirmed this position in the specific context of a shareholder alleged to have induced a breach of contract: Brae Centre Ltd. v. 1044807 Alberta Ltd, 2008 ABCA 397 at para. 1.

 Discussion
 Elements of the Tort of Inducing Breach of Contract
 Existence of a Valid and Enforceable Contract

[347] As I noted earlier in my reasons, the Terms of Use are a valid and enforceable contract between Century 21 and Zoocasa. This element of the test is met.

 Awareness of the Existence of the Contract

[348] The plaintiffs state that Rogers was aware of the existence of this contract as a result of correspondence that Century 21 sent to Rogers consisting of four “cease and desist” letters sent either to Rogers or to their solicitors.

[349] The knowledge requirement for the tort of inducing breach of contract includes situations where knowledge of the contract can be assumed. In this regard, the Alberta Court of Appeal in Royal Bank of Canada v. Wilton et al. (1995), 123 D.L.R. (4th) 266, 28 Alta. L.R. (3d) 1, at 272, adopted the explanation of the “knowledge” requirement given in N. Klar, Tort Law (Carswell, Toronto 1991) at 436:

  See also: Posluns v. Toronto Stock Exchange and Gardiner (1964),46 D.L.R. (2d) 210 at 268, (Ont. H.C.J.).

[350] As a result, the plaintiffs are required to prove that the defendants were aware of the contract or had “the means of knowledge” to be aware of the contract. The plaintiffs are not required to establish that the defendants were aware of the contract’s precise terms although they would need to know the nature of the contract and that it prohibited indexing without permission.

 The Defendant Intended To and Did Procure the Breach of the Contract

[351] This element of tort has two requirements. First, that Rogers possessed the necessary intention to procure the breach of contract. Second, that Roger’s action in fact resulted in the breach of the contract.

[352] With regard to the “intention” requirement, the court in Drouillard, at paras. 29-30 stated the following:

[353] In order to prove that the defendant intended to procure a breach of contract, the plaintiff must show that the defendant acted with the desire to cause a breach of contract, with substantial certainty that a breach of contract would result from the defendant’s conduct or with indifference to whether the contract would be breached: Thermo King Corp. v. Provincial Bank of Canada (1981), 130 D.L.R. (3d) 256 (Ont. C.A.); Dirassar v. National Trust Co. (1966), 59 D.L.R. (2d) 452 (B.C.C.A.); Emerald Construction Co. Ltd. v. Lowthian, [1966] 1 W.L.R. 691 at 704 (Eng. C.A.).

[354] As a result, the plaintiffs must establish that Rogers desired to cause Zoocasa to breach its contract with Century 21 or acted with substantial certainty that a breach of contract would result or, at a minimum, that Rogers was indifferent to whether a breach would result as a consequence of its actions.

[355] As stated in Garry v. Sherrit Gordon Mines Ltd. (1988), 45 D.L.R. (4th) 22, [1988] 1 W.W.R. 289 at 335 (Sask. C.A.), the requirement that the defendant’s actions “in fact resulted in the breach of the contract” is a straightforward question of causation. The standard to be applied is whether the breach is “fairly attributable to any such pressure, persuasion or procuration on the part of the … defendants”: D.C. Thomson & Co. v. Deakin, [1952] Ch. 646 at 686 (Eng. C.A.).

[356] As a result, if the plaintiffs are able to establish that Rogers intended to procure the breach of contract, they must still establish that Zoocasa’s breach of contract is “fairly attributable” to the actions Rogers is alleged to have taken in support of Zoocasa.

[357] The plaintiffs submit that Century 21 has established all the elements of the tort because:

[358] The defendant Rogers states that:

 Discussion of Intent to Procure Breach of Contract and Authorize Copyright Infringement

[359] The argument of the plaintiffs is that the authorization of copyright infringement and inducing breach of contract do not raise the issue of piercing the corporate veil. The liability of Rogers is alleged to arise from its position as the only shareholder of Zoocasa and its active participation, support and control over it.

[360] To establish that Rogers authorized copyright infringement or induced breach of contract the plaintiffs must establish more than the level of involvement of Rogers that they have shown. The fact that Rogers funded, supported and assisted with the development of Zoocasa does not establish that Rogers authorized Zoocasa to infringe copyright or to breach the contract.

[361] The plaintiffs assert that liability for authorizing copyright infringement can arise from facts that are less than direct and positive and that such liability can be established by a “sufficient degree of indifference”.

[362] While Rogers level of involvement in the planning, creation, funding and promotion of Zoocasa has been established the evidence does not establish that Rogers intended that Zoocasa breach copyright or Century 21’s Terms of Use. Nor does the evidence support a finding that Rogers turned “a blind eye”. I am not satisfied that the plaintiff has, on the balance of probabilities, succeeded in proving that Rogers is liable for Zoocasa’s copyright infringement or breach of contract.

 Injunctive Relief

 Century 21’s Claim for Injunctive Relief

[363] Century 21 seeks an injunction preventing the defendants from accessing the Century 21 Website.

[364] Zoocasa states that an injunction is not required because in September 2008, it declared that it would not index a website that did not want to be indexed.

[365] However, on discovery, Mr. Lee, on behalf of Zoocasa, stated that while the defendant Zoocasa has agreed not to access the Century 21 Website generally, they intend to resume accessing the Website where individual realtors give their consent.

[366] While individual realtors have certain rights with respect to the text and the photographs, it is Century 21 which controls the Terms of Use upon which users can access their Website. It would be a breach of the Terms of Use if Zoocasa indexed that portion of the Century 21 Website respecting individual realtors who have consented as such access also requires the consent of Century 21.

[367] However, the defendant notes that on discovery Century 21 stated that it had no objection to Zoocasa indexing and linking to any property listing on century21.ca where the realtor in question gives consent. A close reading of the discovery evidence reveals that Century 21 does not object to brokers or salespeople giving permission for the indexing of data by Zoocasa “… if they send the data … to Zoocasa”. Likewise a letter from solicitors for Century 21 indicates that the plaintiff does not object to Zoocasa obtaining information directly from their brokers but at no time has Century 21 consented to such material being accessed through its Website.

[368] Century 21’s concern is that the apparent policy of the defendant Zoocasa has changed and may change again. Given that fact, they seek an injunction to ensure that the plaintiffs’ contractual rights respecting the Terms of Use are protected.

[369] Given my findings respecting copyright infringement, Century 21’s claim for an injunction can only be based in breach of contract and cannot be enforced as a remedy for copyright infringement. An injunction is an equitable remedy and is within the court’s discretion. Before granting an injunction the court must first consider whether damages or an injunction, or both, are the appropriate remedy for breach of contract.

[370] In North West Community Video Ltd. v. Telecommunications Workers Union, [1978] 2 W.W.R. 289, at 296 (B.C.S.C.) MacDonald J. adopted the words of A.L. Smith, L.J. in Shelfer v. City of London Electric Lighting Co., [1895] 1 Ch 287 at 322-323, respecting the granting of a permanent injunction:

[371] A.L. Smith, L.J. then said at p. 323:

[372] In situations where damages are an adequate remedy, injunctions will be inappropriate to restrain actionable wrongs: London & Blackwall Railway Co. v. Cross (1886), 31 Ch. D. 354 at 369. In the same manner, injunctions should not be granted in situations where the plaintiff can be fully compensated by an award of damages or where the wrongdoing has ceased and there is no likelihood of its recurring: Proctor v. Bayley, (1889) 42 Ch. D. 390.

[373] However, where the defendant wrongfully interferes with the claimant’s rights as an owner of property, and intends to continue that interference, the claimant is prima facie entitled to an injunction: Hilton v. British Columbia (Ministry of Transportation and Highways), [1986] B.C.J. No. 1077 at para. 18 (S.C.) citing Pride of Derby and Derbyshire Angling Association v. British Celanese Ltd, [1953] Ch. 149 at 181; Canadian Pacific Limited v. Paul et. al., (1983), 2 D.L.R. (4th) 22 at 40, (N.B.C.A.).

[374] An injunction may also be necessary in circumstances where the breach of contract cannot be fairly compensated through a monetary award. A defendant cannot buy the privilege of infringing the claimant’s rights.

[375] In my view, the plaintiff is entitled to injunctive relief given the difficulty of assessing damages, Zoocasa’s past conduct and their apparent view that with the consent of Century 21 brokers they can access the Century 21 Website in violation of the Terms of Use.

[376] Century 21 is therefore entitled to a permanent injunction restraining Zoocasa, by itself, its servants, agents, affiliates, subsidiaries, or otherwise from accessing the Century 21 Website in contravention of the Terms of Use posted on the Century 21 Website.

 Bilash and Walton’s Claim for Injunctive Relief

[377] The notice of motion also seeks injunctive relief on behalf of Bilash and Walton. I am not inclined to grant injunctive relief on the claims advanced by Bilash and Walton as there is no indication that Zoocasa is or will continue to infringe the copyright of Bilash and Walton.

 Damages for Breach of Contract

[378] On September 2, 2008 solicitors for Century 21 advised Zoocasa that the plaintiff did not consent to their proposed access to and use of their Website. Despite that knowledge, Zoocasa proceeded to access the Website.

[379] In order to award damages, I must first determine what damages have been established.

[380] Century 21’s evidence is that they suffered loss, inconvenience and expense as a result of having to deal with Zoocasa’s actions. Employees spent time dealing with the problems created by the Zoocasa Website. The evidence of Mr. Lawby of Century 21 was that he had spent approximately 18 hours dealing with Zoocasa’s breach of the Terms of Use, not including time spent preparing for and attending for discovery and that his staff had spent another six hours also dealing with the same matters. His evidence was that his time, and that of his staff, was valuable and that dealing with Zoocasa’s breach has been a cost to the plaintiff’s business.

[381] In addition, Zoocasa’s actions caused problems for Century 21 with respect to its relationship with what is called the REB4 Boards being a group consisting of the the Real Estate Board of Greater Vancouver, Fraser Valley Real Estate Board, the Chilliwack and District Real Estate Board, and the Calgary Real Estate Board.

[382] Time and legal expenses were incurred when Century 21 was required to consult with legal counsel to protect their proprietary interest in the listings and photographs contained on their Website. Additionally, their Website operator WTL spent time dealing with the Zoocasa Website which resulted in an opportunity cost to Century 21 as WTL had less time to spend developing and promoting the Century 21 Website. WTL estimated the Zoocasa actions used approximately 70 hours of staff time that would have otherwise been devoted to expanding, improving and promoting the Century 21 Website.

[383] Century 21 also claims loss specifically arising from Zoocasa’s practice for a time of framing from the Century 21 Website within its own Website. As noted earlier, framing involves the practice of displaying information from one website within another in a manner that has the appearance of making the framed site’s content that of the framing website. The result is confusion for the user as to the source of the content. It also permits the website that is doing the framing to claim attribution for the page viewing giving it an advantage in terms of how websites are ranked by search engines. The framing commenced in August 2009 and ceased after the matter was raised at the discovery of Mr. Lee on December 14, 2009.

[384] The defendants state that no damages of any substantial character have been established. As a corporation they state Century 21 has not shown any actual monetary loss. They specifically note the following:

[385] As a result the defendants state the court cannot determine appropriate damages even if the breach is proven.

[386] I am satisfied that Zoocasa breached Century 21’s Terms of Use and in doing so caused loss, inconvenience and expense to Century 21. They may have done so in the belief that such Terms of Use were not binding. However, I have determined that such belief was incorrect. An award of damages is therefore appropriate.

[387] In Pinewood Recording Studios Ltd. v City Tower Development Corp.(1996), 31 C.L.R. (2d) 1, 67 A.C.W.S. (3d) 71, Pinewood J. described the assessment of damages as follows:

[388] Century 21’s claim for damages for breach of contract consists of both a general damage claim founded in damages for breach but also includes as part of the damages claimed expenses incurred in dealing with the consequences of the breach. The latter is normally addressed through the issue of costs. S. M. Waddams, Law of Damages, 3d ed., (Canada Law Book: Aurora, Ont., 1997) at 314 states:

[389] Waddams relies on Acme Investments Ltd. v. York Structural Steel Ltd. (1974), 9 N.B.R. 2d 699, 1 A.P.R. 699 (N.B.C.A.), a breach of construction contract case where the New Brunswick Court of Appeal stated:

[390] In my view, it was reasonably foreseeable that breach of the Terms of Use would cause the plaintiff to incur certain expenses arising from the breach. Century 21 is entitled to damages for such loss as part of their claim for general damages for breach of contract.

[391] Century 21 also claims that as a result of Zoocasa framing their Website from August 20, 2008 to December 14, 2009, they have suffered damages. However, the evidence in support is limited to the assertion that framing causes confusion to the user as to the source of content and results in the framer being able to claim attribution.

[392] While Century 21 has established that it suffered loss for breach of contract, they have not provided evidence of the value of that loss. Presumably they could have done so given the nature of some of the damages claimed. For example, the time spent by Wheretolive.com has not been supported by any values, the legal fees incurred to respond to REB4’s communications have not been disclosed, nor has the value of the time spent by Century 21 staff dealing with the Zoocasa breach been quantified.

[393] In such a situation should the court order damages?

[394] Just because the loss is difficult to establish does not mean damages will not be awarded. However, that assumes there are difficulties in quantifying the loss, not the situation where the plaintiff has chosen not to lead specific evidence on the issue.

[395] An award of damages for breach of contract where proof of damage is minimal can be addressed by an award of nominal damages although nominal does not necessarily mean that the damages will be small: RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2004 BCSC 1464, (where a nominal award was $1,000) var’d on other matters 2007 BCCA 22, var’d on other matters 2008 SCC 54. However, in McGee v. Clarke, [1927] 1 W.W.R. 593 (B.C.C.A.) and State Vacuum Stores of Canada Ltd. v. Phillips et al, [1954] 3 D.L.R. 621 (B.C.C.A.) both courts relied on the dictum of Lord Halsbury in The “Mediana”, [1900] A.C. 113 at 116 (H.L.) and held that nominal damages are not the same as small damages. However, it seems evident from the context in The “Mediana” that Lord Halsbury meant that compensatory damages might sometimes be small, not that nominal damages should be large.

[396] I find that Century 21 has not proven damages of any substantial character. In my view however an award of nominal damages is appropriate. Such damages need not be small: Green et al. v. Stanton (1969), 6 D.L.R. (3d) 680 at 691-692 (B.C.C.A.).As stated in Green:

[397] In my view, based on the lack of evidence of loss and expenses incurred relating to the actions of Zoocasa, an award in the sum of $1,000 in favour of Century 21 would be appropriate.

 Damages for Copyright Infringement

 Position of the Parties

[398] On May 18, 2010, the plaintiffs delivered an election to claim statutory damages pursuant to s. 38.1 of the Copyright Act. Section 38.1 provides as follows:

[399] In seeking statutory damages for each individual Work, the plaintiffs Bilash and Walton claim for a total of 128 individual Works (29 property descriptions and 99 photographs) and submit that $500 per infringement is appropriate for total statutory damages of $64,000.

[400] With respect to property descriptions, 24 belong to Bilash and five to Walton. All 99 photographs belong to Bilash.

[401] The plaintiffs further argue that the defendants cannot be said to have acted in good faith for the purposes of s. 38.1, and, for this reason, a significant award of damages is appropriate. They assert that a significant award is also needed to deter not only the defendants but others who might adopt a similar online business model.

[402] The defendants state that if statutory damages are warranted that they should be assessed at the lowest possible quantum. They submit there is no evidence of bad faith, no need to deter other infringements of the copyright in question and finally that the court has a discretion to order a per work award of statutory damages below $200.

[403] The president of Zoocasa, J. R. Langlois, in his affidavit of May 13, 2010, deposed that Zoocasa was in a “learning process concerning some aspects of the real estate industry. In particular, the question of rights in respect of property listing data is very entangled in Canada.”He stated that:

[404] In other words, Zoocasa apparently entered into the market without due consideration of the legal issues surrounding copyright and intellectual property generally. Counsel for Zoocasa also referred to the conduct of both parties leading to this litigation as stubborn.

[405] I am not satisfied that Zoocasa’s intransigence was rooted in bad faith. Rather, it appears to have its roots in entering into a new area with a new business model and a lack of appreciation of the legal issues arising. In Gateway Realty Ltd. v. Arton Holdings Ltd. (1991), 106 N.S.R. (2d) 180 at 191-198, aff’d on appeal (1992), 112 N.S.R. (2d) 180 (N.S.C.A.), the trial judge articulated the doctrine of good faith performance in the following terms:

[406] In Mesa Operating Ltd. Partnership v. Amoco Canada Resources Ltd. (1994), 19 Alta. L.R. (3d) 38 at para. 14 (C.A.), Kerans J. accepted the trial judge’s observations regardingimplied contractual terms of good faith andcorrespondingbad faith. To this end Kerans J. held that “the duty to act in good faith extends beyond the duty to avoid acting for bad motives”. At trial, the trial judge held and Kerans J. accepted that:

[407] The obligation of good faith is an obligation not to act in relation to the contract so as to nullify the bargain objective or benefit owing to the other party: Mannpar Enterprises v. H.M.T.Q. , 1999 BCCA 239; Schluessel et al v. Maier et al, 2001 BCSC 60. Once the contract has been entered into, the parties must perform their respective obligations in good faith: Gateway Realty Ltd. above.

[408] However, failure to act in good faith does not necessarily imply that a party has acted in bad faith. Bad faith conduct is conduct that is contrary to community standards of honesty, reasonableness or fairness. It is also conduct where a party acts in a manner that substantially nullifies the contractual objectives or causes significant harm to the other, contrary to the original purposes or expectations of the parties: Mesa Operating Ltd. Partnership.

[409] Good faith conduct on the other hand holds that the parties should pursue their mutual contractual objectives. From this perspective, the good faith obligation is different from the obligation to act reasonably in that the interests of the party acting in good faith are not subordinate to any other party. Rather, the party acting in good faith cannot act in ways that are abusive, unfair or dishonest: Peel Condominium Corp No. 505 v. Cam-Valley Homes (2001), 196 D.L.R. (4th) 621(Ont. C.A.); Mason v. Freedman, [1958] S.C.R. 483.

[410] I cannot find that Zoocasa acted dishonestly, unreasonably or unfairly toward the plaintiffs. Although Century 21 alleges that Zoocasa’s refusal to operate by the Robot Exclusion Standard indicates bad faith, I do not find it to be so. Rather, Zoocasa believed that a website that does not want to be indexed could simply block their IP address. As I mentioned earlier, Zoocasa appears to have entered into a new market without due appreciation for the standardized protocols of the industry. While Zoocasa may have been negligent in educating themselves regarding industry and community standards, I cannot find that they acted in bad faith.

 Discussion of Damages for Copyright

[411] Subsection 38.1(5) of the Copyright Act provides a list of relevant factors for the court to consider in exercising its discretion when awarding statutory damages. Those relevant factors include:

  The analysis of Taylor J. in Pinewood Recording Studios Ltd., discussed above, is still relevant to damages for copyright infringement.

[412] Additionally, in Microsoft Corporation v. PC Village Co. Ltd., 2009 FC 401, the Federal Court considered the factors listed in s. 38.1(5) of the Copyright Act. The defendants were found to have infringed Microsoft’s copyright in its Microsoft Office software programs. In assessing statutory damages, the court emphasized that the defendants had ignored cease and desist letters from Microsoft. The court held that an award of statutory damages must be sufficiently high to deter future infringements by the named defendants and others: at paras. 34 and 39. The court awarded $10,000 per infringement.

[413] The plaintiffs submit that in the present case, as in Microsoft, the defendants ignored repeated cease and desist letters from the plaintiffs and continued to infringe copyright even after the litigation had started. They state that the defendants also made a public pronouncement that they did not index websites that did not want to be indexed and allowed that pronouncement to remain publicly accessible long after they knew it was no longer true.

[414] In reply the defendants submit that there is no evidence of bad faith and that in fact Zoocasa held an honest belief in its ability to index a publicly available website, particularly where that website encouraged other search engines to do what they viewed as the same thing. They also note that the effect of their actions was to promote the plaintiffs’ listings and hence their business. In addition, the defendants have voluntarily stopped indexing the plaintiffs’ Website and have agreed to not index it further save for realtors or brokers who provide their consent.

[415] The plaintiffs have relied on the cease and desist letters sent to the defendants in September and October 2008. The defendants argue that those letters were sent by counsel for Century 21, not Bilash or Walton, and at the time Century 21 had no ownership in copyright nor a basis to claim for infringement.Century 21 was entitled to seek compliance with their Terms of Use. The cease and desist letters of September 8, 2008, was restricted to notice of copyright infringement. The October 6, 2008, letter gave notice respecting alleged breach of both copyright and contract.

[416] However, the defendants’ argument focuses on the legitimacy of the letters and ignores the fact of notice. Surely the point is that notice alerts them to a potential claim which may or may not be proven valid at a future date. To ignore a claim however is to run the risk of potential liability if breach of contract or ownership of copyright and its infringement is eventually proven.

[417] The defendants also rely on s. 38.1(2) of the Copyright Act which states:

[418] Since the defendants were put on notice in the fall of 2008 that copyright subsisted in the property descriptions and photographs, the defence set out in s. 38.1(2) of the Copyright Act does not assist them.Section 38.1(3) however is potentially available to the defendants.

[419] In Telewizja Polsat S.A. v. Radiopol Inc., 2006 FC 584, the Federal Court found that the overarching mandate of a judge assessing statutory damages in lieu of loss of profits is to arrive at “a reasonable assessment in all of the circumstances in order to yield a just result.”: para. 37. Pursuant to s. 38.1 3(b), the court has the power to order a per-work award of statutory damages of below $200 “where the awarding of even the minimum amount referred to in ss. 38.1 (1) or (2) would result in a total award that, in the court’s opinion, is grossly out of proportion to the infringement.”

[420] As the court noted in Telewizja at paras. 38 and 39:

[421] There are a number of factors that may be relevant in considering the applicability of 38.1(3). In this case the length of the infringement was relatively short, there was no evidence that a high award is required to deter others. The defendantstopped the activity and I have not made a finding of bad faith on the part of Zoocasa. In addition, the nature of the infringement, the fact that the copyright serves a commercial purpose, and that there was, in the eyes of the defendants, a benefit to the plaintiff, supports a lesser award. Of most importance is that the actual damages claimed are not substantial. The evidence of Bilash and Walton on discovery was as follows:

[422] Due the temporary nature of online property listings, the plaintiffs are unable to provide evidence of each and every instance of Zoocasa’s copyright infringement of their photographs and property descriptions. However, the plaintiffs have adduced evidence that Zoocasa infringed copyright in no less than 99 photographs and 29 property descriptions.

[423] The defendants dispute the number of infringements claimed. However, they base that on factors such as not locating the property description, only finding properties under the MLS copies or not matching the property descriptions on the Zoocasa pages. I am not satisfied that the defendants have shown that the number of infringements differs from those established by the plaintiffs.

[424] Zoocasa acknowledges indexing the Century 21 Website during the periods alleged and the evidence of the plaintiffs respecting the properties listed on the site during those periods. I am satisfied that the plaintiff has established that the defendant Zoocasa infringed copyright of the plaintiffs with respect toat least 29 properties of which Bilash was the original owner of 24 and Walton was the original owner of 5 of the infringed listings.

[425] Likewise, with respect to the 126 photographs claimed to have been copied I am satisfied that at least that many were copied by Zoocasa. The 99 photographs for which copyright infringement are claimed are those that are the property of Bilash.

[426] Statutory damages provided for in s. 38.1, are set at $500.00 per infringement, this would result in a statutory damage award of $64,000. However, given the circumstances of this case including Zoocasa’s apparent unintentional infringement such an award is grossly out of proportion to the infringements. I therefore order damages in the sum of $250 per infringement resulting in a total statutory damage award of $32,000.

[427] Bilash, as the holder of copyright to 24 real property descriptions and 99 photographs is entitled to damages of $30,750. Walton, as the holder of copyright to 5 real property descriptions is entitled to damages in the sum of $1,250.

 Punitive Damages

[428] Punitive damages are awarded where the conduct of a party is egregious and deterrence is appropriate. Such damages can be awarded for breach of contract and, as well, for infringement of copyright. The act does not prohibit such an award: Pro Arts, Inc. v. Campus Crafts Holdings Ltd. (1980), 28 O.R. (2d) 422 at 441 (H.C.J.).

[429] The plaintiff describes the conduct of the defendants as “calculated and deliberate”. They say that the defendants are “sophisticated commercial entities that employ similar Terms of Use on their own websites.” They point to the continued indexing and copying of the Century 21 Website after notice that the plaintiffs objected and the awareness of the defendant Zoocasa that their right to do so was in issue. They also note from the discovery of Mr. Lee on behalf of Zoocasa:

[430] I note that Zoocasa, which had begun framing the Century 21 Website on August 20, 2008, ceased doing so immediately after Mr. Lee’s examination for discovery on December 14, 2009.

[431] The defendants’ position is summarized by them as follows:

[432] Punitive damages are granted where the conduct of the plaintiff is particularly egregious. I am not satisfied that in the circumstances of this case the conduct of the defendant was particularly egregious. In my opinion the conduct of the defendant Zoocasa, while deliberate, was not of a nature that warrants punitive damages.

 Summary

[433] In summary:

[434] If the parties cannot agree on costs they are at liberty to apply.

“Punnett J.”


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