Business Law | Equustek Solutions Inc. v. Jack; Equustek Solutions Inc. v. Google Inc
E-commerce crosses borders easily and commonly. Most courts, by contrast, have jurisdiction within a physically defined territory. As a result, courts and businesses are faced with increasingly complex issues of jurisdiction over—and effective remedies for—what are termed cyberliability issues, like theft or destruction of critical data, defamation, libel, and copyright or trademark infringement over the internet.
The British Columbia Supreme Court has recently adjudicated one such case, Equustek Solutions Inc. v. Jack, where Madam Justice Fenlon considered whether the Court had territorial jurisdiction over e-commerce facilitated by Google Inc. and, if so, the extent of its equitable jurisdiction to control that e-commerce. Deciding in this instance that it did have territorial and broad equitable jurisdiction, she ordered Google Inc. to de-index, worldwide, certain web sites. In other words, she ordered Google to prevent its search results showing those websites to anyone, anywhere, using its search engines.
Although the decision has received notoriety as a threat to free speech, the issues at the heart of the case involve the remedies local courts can devise to protect intellectual property rights in the multi-jurisdictional world of the internet. In July, the B. C. Court of Appeal, in Equustek Solutions Inc. v. Google Inc., granted Google leave to appeal the lower court decision but denied the company’s application to stay the effect of the de-indexing order.
The background to this case shows just how complex e-commerce is. The Vancouver-based plaintiff, Equustek, a manufacturer of networking devices, accused Datalink and its principals of designing and manufacturing a competing product using Equustek’s trade secrets. It also alleged that they covered over Equustek’s name and logo in order to pass off Equustek products as Datalink’s. In addition, it claimed that the defendants advertised Equustek products on the Datalink website but, using bait-and-switch tactics, delivered Datalink devices to fill orders for Equustek products.
Since 2012, the B.C. Supreme Court has imposed numerous orders against Datalink and its principals to prohibit them from this online misbehaviour. But they refused to obey these orders and carried on business through what the Court called “a complex and ever expanding network of websites through which they advertise and sell their product.”
During the litigation, Equustek asked Google—and Google initially agreed—to de-index certain Datalink websites from google.ca. But Datalink continued to make prohibited sales outside Canada through other associated websites. When Google refused to remove Datalink’s websites from all of its search pages globally, Equustek brought its application for a worldwide de-indexing order against Google.
During the course of her deliberations, the judge established certain facts:
- This was an intellectual property case where the plaintiff’s right to be free of the continuing infringement was well established.
- No third-party free speech interests appeared to be at stake.
- Datalink’s opportunities to argue that any legitimate business it might have would be harmed by the order were lost long ago in the underlying litigation.
- There was no evidence of technical or practical impediment to the order because Google could de-index worldwide without significant cost.
- Google did not argue de-indexing Datalink’s websites would offend California or any other law.
Google first argued that the Court had no jurisdiction over it because it was a non-resident and non-party with only a virtual presence in this province. The search company claimed therefore that there was no real and substantial connection between it and the B.C. Court. Alternatively, Google argued that California was a more appropriate jurisdiction.
Justice Fenlon applied the Court Jurisdiction and Proceedings Transfer Act (CJPTA), which gives courts “territorial competence” when there is at least one “real and substantial” connection between B.C. and a party to the proceeding or the facts on which the proceeding is based. She held there were two facts creating a “real and substantial” connection under the CJPTA: the proceeding to enjoin Google was brought in B.C. to enforce the plaintiffs’ intellectual property rights at the heart of the underlying action and the injunction sought concerned Google’s business in B.C.
On the latter point, the judge concluded that Google sells advertising space and priority to British Columbians. Further, Google’s websites were active and not merely a “virtual presence”; they responded to a B.C. user’s searches by, among other actions, linking advertisements—including those sold to British Columbians—to the subject matter of a specific search or to a user’s search history.
The judge referred to “Google’s submission that this analysis would give every state in the world jurisdiction over Google’s search services.” In response, she pithily noted: “That may be so. But if so, it flows as a natural consequence of Google doing business on a global scale, not from a flaw in the [Court’s] territorial competence analysis.”
She also determined that the Court should exercise its territorial competence because California was not obviously the more appropriate venue in which the application should proceed. A number of facts were important to the judge on this issue. She held Equustek was a comparatively small B.C. company, was suffering damages in B.C., and it was no hardship for Google to litigate in this province. Refusing to exercise jurisdiction would mean Equustek would have to start a second proceeding in California.
Justice Fenlon also held that an order requiring Google to do something outside B.C. would be effective because it could be enforced by B.C. courts’ contempt powers. Those powers, she noted, permit the courts to order fines or imprisonment and the ability to “dismiss or refuse to hear proceedings brought by a party who is violating a court order.”
Most importantly, the judge decided that the fact a worldwide de-indexing order was sought did not make California a more appropriate jurisdiction than B.C.
On this point, Google had argued that the B.C. Court’s order could not be enforced in California but it provided no proof of California law on the point. In response, the judge indirectly referred to statements made by Chief Justice McLachlin in dissenting reasons in a 2006 Supreme Court of Canada judgment involving the enforcement of a foreign non-monetary judgment in Canada, the mirror case on this issue. In Pro Swing Inc. v. Elta Golf Inc., the Chief Justice wrote that “the common law must evolve in a way that takes into account the important social and economic forces that shape commercial and other kinds of relationships” and “a court should not refuse to enforce a foreign non-monetary judgment merely because there is a theoretical possibility that questions may arise in the course of enforcement.”
Justice Fenlon took a broad view of the B.C. Court’s equitable jurisdiction, finding it could make the order. She reasoned:
The Court must adapt to the reality of e-commerce with its potential for abuse by those who would take the property of others and sell it through the borderless electronic web of the internet. I conclude that an interim injunction should be granted compelling Google to block the defendants’ websites from Google’s search results worldwide. That order is necessary to preserve the Court’s process and to ensure that the defendants cannot continue to flout the Court’s orders.
In deciding that she should grant the order, the judge also forcefully rejected Google’s four remaining arguments, holding that:
- Google would not have to monitor content because it was being asked to de-index all the defendant’s web sites, as it had already done for google.ca.
- The de-indexing would not constitute “undue censorship” because Google already censors search results for, and removes, child pornography and “hate speech” pursuant to court orders.
- Google would not be ordered to contravene a law in another jurisdiction because, as Google conceded, most countries will likely recognize intellectual property rights and view the selling of pirated products as a legal wrong.
- Although Google was at least initially only unwittingly involved, the Court needed to adapt to the reality of e-commerce.
In the Court of Appeal, on the application to stay the effect of the Supreme Court’s “worldwide” de-indexing order, Google’s central arguments were that it would suffer “irreparable harm” because it claimed that a Canadian court’s making of a worldwide de-indexing order might tempt other jurisdictions to use Google “as a vehicle for global enforcement of their laws” and that the order might cause concerns for or difficulties with Google’s clients.
The Court of Appeal rejected these arguments in principle, stating clearly: “A stay will not change the fact that the Supreme Court of British Columbia has found jurisdiction to make the impugned order.”
On the merits of the appeal, Equustek will hope the Court of Appeal upholds the order or will provide another equally effective remedy to stop or slow the abuse of its rights and the lower court’s orders that Datalink continues to flout. For its part, Google will argue for what it clearly sees as the best result: the ability to defend applications such as this in California and the overturning of an unprecedented order.
In arriving at its decision, the Court of Appeal will have to wrestle with whether or not there can be objective and consistent standards for determining jurisdiction for courts in complex, cross-border, e-commerce cases and, if so, what they should be. It will also have to consider, if jurisdiction is established, the extent of a court’s ability to fashion effective remedies. We expect it to provide significant further insight and guidance on these issues.
For more information on this case and matters involving the Court Jurisdiction and Proceedings Transfer Act or electronic commerce in general, please contact David.
Kyle Thompson, summer student, assisted with the research and writing of this article.