Will the Supreme Court Rein in Evasive Defendants? Equustek v Google Inc

by Bennett Jones LLP

The persistence of a small technology company in British Columbia may expand the options available in Canadian courts to enforce intellectual property rights.

Equustek Solutions Inc. sued elusive defendants for violation of its trade secrets and trademarks. Like many other IP owners, it obtained several different court orders to try to prevent the breaches and shut down the unlawful business. But the defendants continued to rely on the anonymity of the Internet to conceal their locations, and frequently changed web addresses, all to evade criminal and civil prosecution.

Equustek then asked the BC courts to grant a novel order against Google, which was not a defendant in the lawsuit. The order would effectively remove all of the defendants’ web pages from Google’s search engine results, anywhere in the world. Equustek succeeded.

Google, concerned about the implications, has persuaded the Supreme Court of Canada to hear the case.

Pre-hearing Orders to Assist Plaintiffs

In compelling cases, civil courts have created limited and specific pre-hearing remedies to assist private litigants to preserve and protect their legal rights, particularly against those who show disregard for the rule of law. These novel orders often take the name of the first case in which they were granted.

A Mareva injunction[1] may be obtained to freeze a defendant’s assets before they can be dissipated – a particularly useful tool in fraud cases. The order is obtained without notice to the defendants and may be granted in Canada to freeze assets worldwide, as money moves across borders with relative ease.

Then there is an Anton Piller order – effectively a civil search warrant.[2] These Orders, also obtained without formal notice, authorize a plaintiff to have surprise access to physical premises and electronic records of a defendant to locate and preserve evidence of wrongdoing. The order requires the plaintiff to show that the defendant would otherwise be likely to destroy that evidence if served with a claim in the ordinary manner.

For these remedies to be effective, a plaintiff must know where the defendants or their assets are. If that information is not known, or if the plaintiff does not yet know who the defendants are, the courts may assist in obtaining evidence in the hands of a third party.

In a third seminal case, Norwich Pharmacal knew that its patent was being infringed, but did not know the names of the infringers. It successfully applied to an English court to require a third party to divulge that information, so it could then enforce its rights. Years on, a line of Canada cases has developed granting so-called Norwich Pharmacal Orders,[3] which are discussed further here. Financial institutions are often affected: they have done nothing wrong but are somehow “mixed up” in the acts of the wrongdoers and are the only practical source of key information required by plaintiffs to enforce their rights.

With more unlawful activity moving to the shadowy corners of the Internet, plaintiffs in IP and other cases are motivated to ask search engines, such as Google, to block offending web pages from appearing in search results. No one alleges that Google has done anything unlawful or illegal. It is not a party to the lawsuit. But the algorithms in its search engine provide people with hyperlinks to websites operated by defendants in violation of IP or other rights, or in breach of a court order.

Equustek v Google Inc

Equustek manufactures networking devices for industrial use. It claims that one of its former employees conspired with a company called Datalink to create a competing product that used Equustek’s trade secrets and trademarks.

Equustek sued Datalink, and a number of individual defendants. The Datalink defendants did not participate in the litigation, and their defences were struck. However, they continued to sell the material through a number of websites.  The BC court granted several extraordinary orders to stop the defendants’ conduct pending a trial, including a Mareva injunction and an injunction prohibiting the defendants from dealing with Equustek’s intellectual property.

These orders, and a criminal arrest warrant for one individual, did not stop the Datalink defendants; they continued to sell the disputed product the on the web from undisclosed locations.

As part of its enforcement strategy, Equustek turned to Google, asking it to stop indexing the defendants’ websites anywhere in the world. Google voluntarily removed 345 URLs from its search results on google.ca. But Equustek was not satisfied. Practically, the allegedly infringing material was still available online.  Even though Google is not a party to the underlying action, and has never been alleged to do have done anything wrong, Equustek sought a court order compelling Google to stop displaying any part of the impugned websites on any search results anywhere in the world.

No Canadian court had ever granted such an order. But the BC Supreme Court did. Styled as an interlocutory injunction, the order was upheld by the BC Court of Appeal. Both courts mentioned the “whac-a-mole”™ problem of deleting multiple URLs, only to have new ones pop up on the defendants’ websites.[4]

Off to Ottawa

In granting leave to further appeal the decision, the Supreme Court will be grappling with a number of novel legal issues and arguments. Among those issues is whether such an order can be even be granted against a third party not involved in any wrongful activity. If so, the test to obtain such an order will need to be determined, as well as its geographic and temporal scope.

A factor to be weighed in the Supreme Court’s decision will be access to justice. In many areas of law, courts have expressed concern that effective remedies should not be limited to individuals or companies with deep pockets. The type of order granted against Google is certainly an effective additional remedy from a plaintiff’s perspective.

Other issues include the boundaries of a Canadian court’s territorial jurisdiction. May a Canadian court order a search engine company in California to prevent users in other countries from viewing entire websites? It is also expected that Google will raise constitutional issues, specifically whether blocking search results limits access to information or freedom of expression on the Internet.

The BC Court of Appeal recognized the limits on its jurisdiction and the need for restraint where a requested injunction has international ramifications. The appeal court also noted that the requested injunction was the only practical way to impede the defendants from flouting the court’s previous Orders, so the involvement of Google was necessary. It considered the Equustek Order to be ancillary, designed to give force to the earlier Orders prohibiting the defendants from unlawfully marketing the products.

We will be watching this case closely. Substantive guidance from the Supreme Court on IP remedies is not a regular occurrence. Whether or not the court upholds an “Equustek Order” and defines a legal test for when it will be granted, the outcome will certainly impact the efficacy of pre-hearing remedies available to all IP owners.

[1] Named for Mareva Compania Naviera S.A. v. International Bulkcarriers S.A., [1975] 2 Lloyd’s Rep. 509 (C.A.). See Aetna Financial Services v. Feigelman, [1985] 1 SCR 2.

[2] See Anton Piller KG v. Manufacturing Processes Ltd., [1976] 1 Ch 55 (C.A.) and Celanese Canada v. Murray Demolition, [2006] 2 SCR 189.

[3] Norwich Pharmacal Co. v. Commissioners of Customs and Excise, [1974] AC 133 (HL); Glaxo Wellcome PLC c. MNR, [1998] 4 FCR 439 (CA) and GEA Group AG v. Ventra Group Co., 2009 ONCA 619.

[4] Equustek Solutions Inc. v. Jack, 2014 BCSC 1063, affirmed Equustek Solutions Inc. v. Google Inc., 2015 BCCA 265, leave to appeal granted SCC No. 36602 (McLachlin CJ, Cromwell and Côté JJ.) (18 February 2016). For whac-a-mole, see the BCSC at para 72 and the BCCA at para 25.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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