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Courts Adopt Aggressive Approach in Cross-Border Internet Jurisdiction Cases

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Wednesday January 09, 2013
In a world where data now moves effortlessly between computers on the Internet without regard for geographic borders, is the appearance of a website on a computer screen sufficient for a court to claim that a trademark has been used in the country? Is the use of a computer server enough to assert jurisdiction over a non-resident?  My weekly technology law column (Toronto Star version, homepage version) notes that two recent cross-border cases - one Canadian and one U.S. which both pitted a U.S. company against a Canadian individual - found that it is.

The Canadian case involved a trade-mark dispute over the mark VRBO. Martin Hrdlicka, a Toronto resident, registered the mark in Canada in 2009. Just over a year later, Homeaway.com, a U.S. company that owns the popular VRBO.com site, sought to expunge the trade-mark on the grounds that Hrdlicka was not entitled to register the mark and had no intent to use it.

Homeaway.com's legal challenge was that the company had no operations in Canada, though many Canadians may have accessed its U.S.-based website. Trade-mark law requires some use of the mark in Canada, yet the "use" in this case was largely confined to the availability of the VRBO website on computer screens.
While the Supreme Court of Canada has emphasized the need for actual use connected to Canada, the Federal Court broke new ground by ruling that "a trade-mark which appears on a computer screen website in Canada, regardless where the information may have originated from or be stored, constitutes for Trade-Marks Act purposes, use and advertising in Canada."

The December decision has already generated fierce criticism within the Canadian intellectual property community, which fears that foreign rights holders could challenge the validity of hundreds of Canadian trade-marks on the grounds that the marks were used before registration on the Internet.

The U.S. decision similarly raises concerns about overly aggressive claims based primarily on computer usage. The case involved Jackie Deiter, a Fort Erie, Ontario resident who worked for the Canadian subsidiary of MacDermid Inc., a Connecticut-based chemical company.

Deiter lost her job in April 2011, but just before her termination, she transferred some company files from the company email account (stored on a computer server in Connecticut) to her personal account, which was based in Canada. At issue in the case was whether a Connecticut court could assert jurisdiction over Deiter.

A lower court ruled it could not, concluding that Deiter had insufficient connections to the state. Late last month, an appellate court overruled that decision, finding that Deiter may have physically used computers in Canada (she emailed the documents from a Canadian-based work computer to a Canadian-based personal computer), but the fact that the company computer server was based in Connecticut was enough to meet the jurisdictional requirement.

The Deiter case is sure to raise concerns since the case implies that mere use of a computer server in the United States may be sufficient grounds for a U.S. court to assert jurisdiction over foreign residents. Given the widespread use of U.S.-based Internet services, it opens the door to many more cases against foreigners before U.S. courts.

Both the Homeaway.com and Deiter cases involved unsympathetic litigants - the court sensed that Hrdlicka had registered the VRBO mark with the hope of selling it for a profit, while Deiter transferred confidential documents to a personal computer in violation of company policy - yet the long-term implications of these decisions is that courts on both sides of the border apparently stand ready to use the Internet to expand traditional notions of jurisdictional rules.
Comments (6)add comment

davegravy said:

Sovereignty... are you there?
Other countries can claim jurisdiction all they want, I don't care. It's whether or not my country will extradite its citizens and for what actions they will do so that matters.

If we're truly subject to the laws of other nations when we're online, then our sovereignty becomes even more of an illusion.
January 09, 2013

Peejay said:

Ridiculous
This copyright and IP stuff is getting so ridiculous that no one will care anymore and they will just ignore it. This also is a good reason why the Canadian government should keep all Canadian data stored on servers in this country.

The US is taking over Canada by small small creeping steps instead of one big swoop. This is why Harper has to go. He will not stand up for Canada or Canadians.
January 09, 2013

joey said:

The big picture
The leveling of the playing field with respect to the Internet as a medium in which a trademark holder may show use doesn't change the remainder of the Trademarks Act.

In HomeAway.com, the court considered the fact that Hrdlicka never used the trademark in issuing its ruling. Furthermore, the VRBO trademark was targeted specifically at Canadians (in addition to Americans). This isn't a case of a company that has nothing to do with Canadians asserting trademark rights simply because some people in Canada viewed their website. In essence, the ruling says that websites and billboards are the same with respect to use of a trademark, but this isn't a blanket statement that a Canadian trademark holder that actively uses its trademark will lose its rights to that trademark just because someone in another country used it first.
January 09, 2013

Angelo said:

still on US servers?
after dealing with DMCA rules, possible lawsuits, and the proposed SOPA regulations, I transfer my server to a Canadian Site and registered domains with a Canadian company.

Any Canadian Company who does otherwise is asking for trouble down the road.
January 10, 2013

Gregg said:

Why I Always Have Used UK Servers.....
Companies have tried to come after me on unfoinded allegations, but the UK court system is so expensive and complex for an overseas dispute, all have dropped their claims.
January 11, 2013

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