On Thursday, the Supreme Court of Canada granted leave to appeal in the case of Google Inc. v. Equustek Solutions Inc., et. al, an appeal from a British Columbia Court of Appeal decision, in which a broad worldwide injunction was granted restraining Google, a non-party to the action, from including the defendants’ websites in Google’s search results.

The proceeding is SCC Case #36602, an appeal from 2015 BCCA 265.

This appeal brings several interesting issues before the Supreme Court of Canada, including: (1) whether the order against Google infringes freedom of expression and the right to access information online; and (2) under what circumstances are parties entitled to an interlocutory injunction against a non-party?

Background

In the underlying case, Equustek Solutions Inc. (“Equustek”) had sued the defendants for conspiring with one of the plaintiffs’ former employees and others to design and manufacture competing products with the plaintiffs’ trade secrets. Equustek also alleged that the defendants had passed off its product for the Equustek product through the use of its trademarks on the defendants’ websites.  The defendants failed to comply with interim court orders and fled the jurisdiction. As such, Equustek sought an interim injunction restraining Google, a non-party, from including the defendants’ websites in Google search results. Google had earlier agreed to remove over 300 specific pages (or URLs) from its google.ca search results but refused to block the defendants’ entire domain or to remove the offending websites from google.com or other national Google domains. This enabled the defendants to easily circumvent Google’s efforts by setting up websites under different URLs, thus creating a “Whack-A-Mole” problem fro Equustek.

BC Supreme Court

There were three issues at play in Equustek Solutions Inc. v Jack, 2014 BCSC 1063: whether the Court has territorial competence over a global search provider; whether the Court should decline to exercise jurisdiction on the basis that California is the more appropriate forum; and whether the injunction should be granted.

Justice Fenlon concluded that the Court had territorial competence over Google: there was a presumptive substantial connection to the province as the plaintiffs’ intellectual property, the subject of the underlying action, was moveable property in British Columbia. Further, the Court found there was a real and substantial connection to the province, because Google carries on a business in British Columbia selling contextual advertising considered inextricably linked to the company’s search services.

With respect to whether California was the more appropriate forum, Justice Fenlon disagreed with Google’s position. In the Court’s view, the comparative convenience, and desirability of avoiding multiplicity of proceedings were considered to favour British Columbia as the more appropriate forum. Moreover, a California court would be no more appropriate than British Columbia if the order involved worldwide relief.

On whether the order should be granted, the plaintiffs were considered to have established that they suffered irreparable harm through the defendants’ ongoing sale of products on their websites. Google, the search engine used for 70-75% of all Internet searches, was found to be inadvertently facilitating this harm. The remedy compelling Google to block the defendants’ websites worldwide was considered necessary to preserve the Court’s process in the new reality of e-commerce.

BC Court of Appeal

The British Columbia Court of Appeal granted Google leave to appeal, but dismissed the application for an interim stay of the injunction (2014 BCCA 295). The Court also granted intervener status to the Canadian Civil Liberties Association, the Electronic Frontier Foundation, and the International Federation of Film Producers Associations (“FIAPF”) jointly with the International Federation for the Phonographic Industry (“IFPI”).

In the appeal of the lower court’s judgment, Justice Groberman for the BC Court of Appeal upheld lower court’s decision to grant the injunction. The Court found no error in the trial judge’s conclusion that the British Columbia Supreme Court had territorial competence. The facts in the underlying proceeding, concerning the violation of the plaintiffs’ trade secrets and intellectual property rights, were considered to have a strong connection to British Columbia.

Justice Groberman for the unanimous court found that Google had a real and substantial connection to British Columbia despite arguments that Google had no servers or offices in the province:

While Google does not have servers or offices in the Province and does not have resident staff here, I agree with the chambers judge’s conclusion that key parts of Google’s business are carried on here. The judge concentrated on the advertising aspects of Google’s business in making her findings. In my view, it can also be said that the gathering of information through proprietary web crawler software (“Googlebot”) takes place in British Columbia. This active process of obtaining data that resides in the Province or is the property of individuals in British Columbia is a key part of Google’s business.

The appellate court concluded that injunctive relief may be granted against non-parties as a means of preserving the parties’ rights in the well-established jurisdiction of the Court. While the issue of comity was discussed, the BC Court of Appeal found that there had been “no realistic assertion” that the order would offend the sensibility of any other state’s core values. Justice Groberman further stated:

British Columbia courts are called upon to adjudicate disputes involving foreign residents on a daily basis, and the fact that their decisions may affect the activities of those people outside the borders of British Columbia is not determinative of whether an order may be granted.

With respect to the granting of an interlocutory injunction, the Court of Appeal considered the real issue to be whether the balance of convenience favours the applicant. The trial judge was found to have appropriately concluded that the only practical way for the defendants’ websites to be inaccessible was to grant a worldwide injunction.

Google, the Canadian Civil Liberties Association and Electronic Frontier Foundation brought concerns regarding the openness of the internet and the need to avoid unnecessary impediments to free speech. On this point, the Court found that there was no evidence that the defendants’ websites had ever been used for lawful purposes, but concluded that if the character of the websites changes, then it is open to the defendants or others to seek a variation of the injunction.

Brand owners seeking to enforce intellectual property rights in an online world where infringers may not be located in Canada welcomed the BC Court of Appeal’s decision. However, the decision also raises concerns about orders with extraterritorial application and how best to deal with court orders that impact other jurisdictions in which the product is not subject to intellectual property protection. The Supreme Court’s decision of today granting leave to appeal is no surprise, and it will be interesting to see how Canada’s highest court addresses the scope of non-party injunctions with extraterritorial impact, as well as the freedom of expression arguments that will be raised by Google and like-minded interveners.

This is a guest post by Sangeetha Punniyamoorthy, one of my partners at Dimock Stratton LLP.

[More information on other intellectual property proceedings at the Supreme Court are available on my Supreme Court litigation page.– AM]