Commercial Litigation and Dispute Resolution Blog

On October 27 and 28, the British Columbia Court of Appeal heard the appeal in Equustek Solutions Inc. v. Jack, 2014 BCSC 1063, which will have significant implications for the ability of courts to deal with online wrongdoing, and which raises questions of how to balance a Court’s jurisdiction – and respect for the jurisdiction of other courts – with the worldwide reach of cyberspace, and to what extent foreign non-parties can be compelled to assist the Court when there is no claim against them.

Equustek manufactures networking devices for industrial equipment. After the breakdown of its relationship with a former distributor –  due to the distributor allegedly passing off Equustek’s products as its own and then developing a competing product – Equustek filed suit against it and a number of other defendants. In the course of the litigation, the defendants stopped conducting business in Vancouver, and now operate as a virtual company through an ever-expanding network of websites, defying Court orders and continuing to sell the alleged knockoffs. Certain of the defendants have had their Responses to Civil Claim struck out for this noncompliance, and an arrest warrant remains outstanding for the defendant Morgan Jack.

In a further effort to halt continuing sales, and in the apparent hope of avoiding having to seek out and try to shut down the various ISPs hosting the defendants’ web sites, Equustek obtained an injunction against Google Inc. in June of this year, requiring it to stop including the defendants’ web sites in any of its search results, effectively removing them from Google searches worldwide, the source of approximately 75% of the world’s search traffic. The hope was that this would effectively cripple the defendants’ business.

Google had voluntarily removed certain, specific web pages relating to the defendants, from its Canadian search page www.google.ca, but not from its search pages for other countries. In addition, Google would not block the “mother sites” that generated the individual web pages. This was insufficient for Equustek, as the defendants could simply generate new webpages as ones were blocked, and sold mostly to customers outside Canada in any event. Although Google provided the mechanism by which the majority of traffic reached the defendants’ websites – and thus generated sales, the Court did not agree that Google was aiding or abetting the Defendants in their contempt.

The Chambers Judge found that the Court had jurisdiction, or “territorial competence”, over Google. Its search page was not simply a passive website accessible in B.C., but was rather an interactive one which offered services based in part on data collected from the user, including IP address, location, and previous searches and online behaviour. In addition, Google’s selling of advertising space to B.C. residents strengthened the connection to B.C. The Court also found that B.C. was the appropriate forum for the proceeding, as opposed to California, which Google had argued.

The Court rejected Google’s arguments that removal of the defendants’ web sites from search results would constitute censorship, as Google regularly and voluntarily removed other websites from searches on other grounds. The Court also did not agree that Google’s First Amendment rights would be breached, making the order unenforceable in California where its servers were located. Last, the Court did not agree that the order was too broad just because the effect of the Order could extend worldwide, noting that even orders made enjoining conduct in B.C. could have effects outside the province. For example, an injunction to stop a company from shipping goods from a warehouse in B.C. could affect orders placed from around the world. The balance of convenience was found to favour granting the injunction.

The appeal was heard over two days and drew a number of intervenors, including the Canadian Civil Liberties Association, the International Federation of Film Producers and International Federation of the Phonographic Industry, the Electronic Frontier Foundation, and the Samuelson-Glushko Canadian Internet and Public Interest Clinic.

On appeal, Google argued that the Chambers Judge had erred in finding that the Court had jurisdiction over Google for all purposes, including with respect to sites located in other countries, not readily accessible by Canadian citizens, and designed to serve non-Canadians. Google further argued that the Chambers Judge erred in imposing a positive obligation on Google to assist the plaintiff where there was none, and in granting an injunction when the plaintiff had no underlying claim against Google. The plaintiff (unsurprisingly) contended that the Chambers Judge had come to the right decision, and that the injunction order represented a necessary and proper evolution of the law.

In deciding the appeal, the Court will have to consider how to balance the rights of an innocent, foreign, non-party with the need to enforce its process and authority in the face of brazen contempt, and to what extent search engine providers may be pressed into service to enforce Court orders against others. The Court will also need to decide how to balance the need to impose order – and indeed enforce orders - on the internet while respecting the territorial limits of its own jurisdiction. Whichever way the appeal is decided, the effect of it will be significant for cases involving everything from e-commerce, to misuse of confidential information, and defamation. There will only be more to come.