Use of Photographs

A number of years ago I was asked to rescue an advertising agency.  The advertising agency required a picture of a dancer for the advertising campaign for a large company.  The advertising agency had obtained clearance from the photographer, but had not paid any attention to the identity of the dancer in the picture.  For their purposes, it did not matter as long as a dancer was depicted.  It turned out that the dancer was famous and regularly charged a fee for endorsing any product or service.  All licensing of the dancer’s image was done through a licensing agency, which instructed a legal firm to contact the large company.  My client, the advertising agency, took the “high road” and undertook to bear the cost of rectifying their mistake.  I negotiated a licensing fee, which the advertising agency promptly paid.  However, they had learned a rather expensive lesson.  As I am a lawyer and the matter was settled out of court, in light of the duty of confidentiality that I owe my clients, I am unable to divulge the identity of my client, the identity of the large company, the name of the famous dancer or the settlement amount.

To be clear, it is not necessary for a person to be famous for him or her to have the right to demand a royalty or license fee for use of their image in advertising.  For example, under the British Columbia Privacy Act, it is a tort (meaning it is illegal) for a person to use the name or portrait of another for the purpose of advertising or promoting the sale of, or other trading in, property or services, unless that other, or a person entitled to consent on his or her behalf, consents to the use for that purpose.  Though, to be clear, a person is not liable to another for the use, for such  purposes, of his or her portrait in a picture of a group or gathering, unless the person complaining of the use of the picture is (a) identified by name or description, or his or her presence is emphasized, whether by the composition of the picture or otherwise, or (b) recognizable, and the person who used the picture, by using the picture, intended to exploit the plaintiff’s name or reputation.  Many other jurisdictions have similar laws.

The recent case of Saad v. Le Journal de Montreal, illustrates the more common issue with use of photographs or images, being infringement of copyright (rather than unauthorized use of a person’s image). Le Journal de Montreal was doing an article on a person and asked that she provide a photograph to be used along with the article.  Le Journal de Montreal did not pay attention to the identity of the photographer or ascertain ownership of copyright in the photograph.  The photographer sought compensation for the unauthorized use of the photograph.  Le Journal de Montreal first argued that they had no knowledge that their use of the photograph would constitute infringement.   The Court did not accept that argument as newspapers regularly have to deal with photographs and the photographers name was on the photograph.   Le Journal de Montreal then argued that they fit into an exception provided in the Copyright Act that allows use of a photograph as “fair dealing” for the purpose of news reporting.  The Court noted that in order to invoke the “fair dealing” exception Le Journal de Montreal would have had to acknowledge the source of the photograph by giving the photographers name.  Furthermore, the photo had nothing directly to do with the subject matter of the news article and, therefore, was not “for the purpose of news reporting”.  In the result the photographer was awarded $2000 plus costs.

Legal firms with experience in intellectual property, such as Thompson Cooper, are asked to address these type of issues relating to photographs relatively often.   Parties wishing to use a photographs of persons should be aware that proper authorization  may require  not only the consent of the copyright owner, but also, in some circumstances, the consent of the person who is the subject of the photograph.

CAT CHASES DOG (DANGERS ASSOCIATED WITH PUBLICLY ACCUSING A COMPETITOR OF INFRINGEMENT)

A client called me the other day to discuss some steps he wished to take against a competitor who was infringing his patent.    The client wanted to write letters to some major companies that were purchasing product from the competitor, to make them aware of the infringement and advise them that he would be forced to sue them if they continued to purchase the competitor’s product.  The second step he wished to take was to place an advertisement in a magazine widely read in the industry, to inform companies in the industry of the alleged infringing activity by the competitor.  I advised my client that there were some practical reasons why taking these steps might end in disaster.   Firstly, when you threaten companies with legal action, they are not inclined to do business with you.  In other words, it is bad for business to sue customers.  Secondly, when you make statements tending to discredit the business of a competitor you are “potentially” breaching section 7 (a) of the Trademarks Act which reads:
“No person shall make a false or misleading statement tending to discredit the business, wares or services of a competitor.”
My client protested that everything he was going to place in the letters and the advertisement was absolutely true.    In the recent Federal Court case of Excalibre Oil Tools V. Advantage Products, a businessman with the same attitude as my client found out the hard way the risks of making statements about a competitor that turned out to be false.   Advantage sent letters to customers of Excalibre alleging infringement of three patents. However, when the patent infringement action subsequently proceeded to Court, Advantage Products lost; the Court found key claims to be invalid and the remaining valid claims not to be infringed by Excalibre.  The case is presently proceeding to the “damages” phase to determine the amount Advantage Products is going to have to pay as compensation to Excalibre for making false and misleading statements that discredited the business of Excalibre.   Why give your competitor grounds to counter-claim?  If you believe your competitor is infringing, communicate directly with the competitor and, if the matter remains unresolved, sue.

Internet Cases on Websites involved with “Scraping”

“Scraping” occurs when a business pulls commercial content from the websites of other businesses using web crawlers or other technologies, and then uses that commercial content for its own commercial purposes.
On April 13, 2017, a decision was rendered in the United States in the case of Craigslist, Inc v. RadPad Inc.  Craigslist alleged that RadPad had “scraped” thousands of Craigslist user postings.  It also alleged that RadPad had harvested user contact information to send spam in an effort to entice Craigslist users to switch to RadPad’s competing service. The Court awarded $60.5 million in damages, including:  $40 million based upon violations related to harvesting from 400,000 emails, $20.4 million for copyright infringement based upon “scraping” commercial content from the Craigslist website, and $160,000 for breach of contract as the scraping activities breached the terms of use for the Craiglist website.
On April 6, 2017, a decision was rendered in Canada in the case of Trader Corporation v. CarGurus.  Trader and CarGurus are competitors in the digital marketplace for new and used vehicles in Canada.  CarGurus “scraped” car dealership websites for photos of cars for sale.  Of the 197,740 photos that were obtained and used by CarGurus, Trader was able to prove that 152,532 of the photos had been taken by photographers paid by Trader.  CarGurus argued that, as the images were located on the car dealership servers and not on CarGurus server, CarGurus had not reproduced the photos but had merely “framed” them.  The Court found that CarGurus had made the photos available to the public for commercial purposes and rejected the suggestion that the photos had not been “reproduced” and rejected any “fair dealing” defence.
CarGurus then  argued that it was entitled to the benefit of section 41.27 of the Canadian Copyright Act, which is intended to protect search engines such as GOOGLE and which reads:
Injunctive relief only — providers of information location tools
41.27 (1) In any proceedings for infringement of copyright, the owner of the copyright in a work or other subject-matter is not entitled to any remedy other than an injunction against a provider of an information location tool that is found to have infringed copyright by making a reproduction of the work or other subject-matter or by communicating that reproduction to the public by telecommunication.
Conditions for application
(2) Subsection (1) applies only if the provider, in respect of the work or other subject-matter,
(a) makes and caches, or does any act similar to caching, the reproduction in an automated manner for the purpose of providing the information location tool;
(b) communicates that reproduction to the public by telecommunication for the purpose of providing the information that has been located by the information location tool;
(c) does not modify the reproduction, other than for technical reasons;
(d) complies with any conditions relating to the making or caching, or doing of any act similar to caching, of reproductions of the work or other subject-matter, or to the communication of the reproductions to the public by telecommunication, that were specified in a manner consistent with industry practice by whoever made the work or other subject-matter available through the Internet or another digital network and that lend themselves to automated reading and execution; and
(e) does not interfere with the use of technology that is lawful and consistent with industry practice in order to obtain data on the use of the work or other subject-matter.

Meaning of information location tool
(5) In this section, information location tool means any tool that makes it possible to locate information that is available through the Internet or another digital network.

The Court rejected this defense.  The Court found that the section did not afford protection to providers, like CarGurus, that gathered information on the internet and made it available to the public on the provider’s own website.  CarGurus was not acting as merely a search engine.

Having won the case, Traders sought “statutory damages”, the provisions of which read:
Statutory damages
38.1 (1) Subject to this section, a copyright owner may elect, at any time before final judgment is rendered, to recover, instead of damages and profits referred to in subsection 35(1), an award of statutory damages for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally,
(a) in a sum of not less than $500 and not more than $20,000 that the court considers just, with respect to all infringements involved in the proceedings for each work or other subject-matter, if the infringements are for commercial purposes.

If just the statutory minimum damages were granted, these damages would have amounted to $500.00 per photo x 152,532 photos owned by Trader for a total of $76,266,000.00.

However, the Judge felt that an award of $76,266,000 would be grossly out of proportion to the severity of the infringement and modified the award as a special case to $2 per photo x 152,532 photos owned by Trader for a total of $305,064.  In making this determination, the Judge applied section 38.1(3) of the Copyright Act, which reads:

Special case
(3) In awarding statutory damages under paragraph (1)(a) or subsection (2), the court may award, with respect to each work or other subject-matter, a lower amount than $500 or $200, as the case may be, that the court considers just, if
(a) either
(i) there is more than one work or other subject-matter in a single medium, or
(ii) the award relates only to one or more infringements under subsection 27(2.3); and
(b) the awarding of even the minimum amount referred to in that paragraph or that subsection would result in a total award that, in the court’s opinion, is grossly out of proportion to the infringement.

The factors that the Court considered in  deciding to treat this matter as a “special case” were the fact the CarGurus had not acted in bad faith and had, in fact, obtained a legal opinion that the conduct was permissible before engaging in the activity.  Unfortunately for CarGurus, the legal opinion was wrong because the lawyer involved incorrectly assumed that the photos belonged to the dealerships. Further, the Court felt that there was some bad faith on the part of Trader.  Although the parties had corresponded in an attempt to settle the dispute prior to litigation, Trader intentionally did not disclose the critical fact that Trader owned the photos until after litigation was commenced.

These cases will provide some guidance to those whose business model involves “scraping” content from the websites of others.

Video Games And Circumvention of Technological Protection Measures

In late 2012, the Canadian Copyright Act was amended to prohibit the circumvention of technological protection measures (TPMs – e.g. digital locks). ,  The relevant section of the Act reads:
Definitions
41 The following definitions apply in this section and in sections 41.1 to 41.21.
circumvent means,
• (a) in respect of a technological protection measure within the meaning of paragraph (a) of the definition technological protection measure, to descramble a scrambled work or decrypt an encrypted work or to otherwise avoid, bypass, remove, deactivate or impair the technological protection measure, unless it is done with the authority of the copyright owner; and
• (b) in respect of a technological protection measure within the meaning of paragraph (b) of the definition technological protection measure, to avoid, bypass, remove, deactivate or impair the technological protection measure. (contourner)
technological protection measure means any effective technology, device or component that, in the ordinary course of its operation,
• (a) controls access to a work, to a performer’s performance fixed in a sound recording or to a sound recording and whose use is authorized by the copyright owner; or
• (b) restricts the doing — with respect to a work, to a performer’s performance fixed in a sound recording or to a sound recording — of any act referred to in section 3, 15 or 18 and any act for which remuneration is payable under section 19. (mesure technique de protection)
Prohibition
• 41.1 (1) No person shall
(a) circumvent a technological protection measure within the meaning of paragraph (a) of the definition technological protection measure in section 41;
(b) offer services to the public or provide services if
 (i) the services are offered or provided primarily for the purposes of circumventing a technological protection measure,
 (ii) the uses or purposes of those services are not commercially significant other than when they are offered or provided for the purposes of circumventing a technological protection measure, or
 (iii) the person markets those services as being for the purposes of circumventing a technological protection measure or acts in concert with another person in order to market those services as being for those purposes; or
(c) manufacture, import, distribute, offer for sale or rental or provide — including by selling or renting — any technology, device or component if
 (i) the technology, device or component is designed or produced primarily for the purposes of circumventing a technological protection measure,
 (ii) the uses or purposes of the technology, device or component are not commercially significant other than when it is used for the purposes of circumventing a technological protection measure, or
 (iii) the person markets the technology, device or component as being for the purposes of circumventing a technological protection measure or acts in concert with another person in order to market the technology, device or component as being for those purposes.

The Copyright Act sets out various exceptions that permit reproduction of works subject to copyright.  However, even the various exceptions that allow reproduction do not permit circumvention to make such reproduction.  A reproduction will only be permitted under the various exceptions if the person making the reproduction:
“in order to make the reproduction, did not circumvent, as defined in section 41, a technological protection measure, as defined in that section, or cause one to be circumvented”
The first court decision considering the circumvention of TPMs is Nintendo of America Inc v King et al.,  (Go Cyber Shopping (2005) Ltd) a decision of the Federal Court of Canada, which issued in March 2017
Nintendo’s game consoles and game cartridges contain technological protection measures (TPM)  which are intended to prevent persons from using their game consoles with unauthorized copies of Nintendo game cartridges.   Go Cyber Shopping (2005) Ltd sold “game copiers” that would mimic the function of Nintendo game cartridges so that they could be used on Nintendo’s game consoles.  Go Cyber Shopping (2005) Ltd. sold “mod chips” that would enable the user to disable the TPM in order to use pirated game cartridges.
A first issue considered by the Federal Court was whether the Nintendo protection should be considered a TPM as contemplated by the Act. The court found that it was.

A second issue considered by the Court was whether Go Cyber Shopping (2005) Ltd could claim protection under the exception that allows modifications for the purpose of compatibility, which reads:
Permitted acts
30.6 It is not an infringement of copyright in a computer program for a person who owns a copy of the computer program that is authorized by the owner of the copyright, or has a licence to use a copy of the computer program, to
• (a) reproduce the copy by adapting, modifying or converting it, or translating it into another computer language, if the person proves that the reproduced copy
(i) is essential for the compatibility of the computer program with a particular computer,
(ii) is solely for the person’s own use, and
(iii) was destroyed immediately after the person ceased to be the owner of the copy of the computer program or to have a licence to use it

The Federal Court found that the exception did not apply to these facts.

A third issue considered by the Court was, while Go Cyber Shopping (2005) Ltd was facilitating copying, they were not actually infringing copyright themselves. Members of the public that used the Go Cyber Shopping (2005) Ltd circumvention technologies were the actual infringers.  Upon a reading of the section, the Court found that Go Cyber Shopping (2005) Ltd did not have to actually infringe copyright to be caught by section as “the uses or purposes of the technology, device or component are not commercially significant other than when it is used for the purposes of circumventing a technological protection measure”.

Nintendo sought statutory damages.  Section 38.1 of the Copyright Act, which allows a Court to award statutory damages reads:
Statutory damages
• 38.1 (1) Subject to this section, a copyright owner may elect, at any time before final judgment is rendered, to recover, instead of damages and profits referred to in subsection 35(1), an award of statutory damages for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally,
(a) in a sum of not less than $500 and not more than $20,000 that the court considers just, with respect to all infringements involved in the proceedings for each work or other subject-matter, if the infringements are for commercial purposes;

A fourth issue was how to apply the statutory damages calculation. The Court determined that it would base a statutory damages award upon the number of “works” (games) that Go Cyber Shopping (2005) Ltd technology made illegally accessible.  Citing a need for deterrence the Court awarded the maximum amount of $20,000.00 per work (game).   The Go Cyber Shopping (2005) Ltd technology allowed access to 585 of Nintendo’s catalog of games.  The award, therefore, amounted to $20,000.00 x 585 for a total of $11,700,000.00.

In addition, Nintendo sought punitive damages to punish Go Cyber Shopping and further deter other would be infringers. The Court considered the disregard for Nintendo’s rights and the length of time Go Cyber Shopping had continued their activities and awarded a further $1,000,000 in punitive damages.

In summary, the award in the Nintendo Case totalling 12,700,000.00 should deter potential infringers and encourage game developers to include technological protection measures in their products.

Copyright, Design and Trademark – A Cautionary Tale

There is a relationship between copyright, design and trademark as they apply to physical products.  Copyright protects “works of artistic craftsmanship”.   Design protection can be obtained for features of shape, configuration, pattern or ornament of useful articles.  Trademark rights may extend to the shaping of wares (products) with such unique shapes being referred to as “distinguishing guises”.  (The old-style glass bottle used by Coca Cola is a good example of a distinguishing guise trademark; the consumer knows what the product is merely from the container.)   It is possible for a product to be subject to all three, copyright, design and trademark at some time during the product’s life cycle.  However, copyright, design and trademark each have their limitations.

When an entrepreneur launches a new product, he or she does not know how successful the product may become.  Sometimes public apathy toward a new product is deflating.  At other times, the response exceeds even the entrepreneur’s expectations.  For that reason, it is not unusual for an entrepreneur to introduce a product into the marketplace and to wait and see how the product sells before seeking protection.

The Court decision rendered on December 14, 2016 in the case of Corocord Raumnetz v. Dynamo Industries is a cautionary tale that helps explain aspects of the relationship between copyright, design and trademark.  Corocord is a manufacturer of playground equipment. Some years ago, Corocord introduced into the market a new playground structure.  Under Canadian law, the playground structure was protected by copyright as a work of artistic craftsmanship at the time of introduction into the marketplace.  Copyright protection does not require any active steps to file paperwork with a government office, although there are advantages in doing so.

Fast forward ahead several years.  By that time, Corocord’s playground structure had become quite successful.  The law suit against Dynamo Industries was triggered when Dynamo introduced a similar product into the marketplace and they ended up bidding against each other on a contract for a playground installation. Corocord sued Dynamo.

Corocord tried to enforce their copyright against Dynamo.  Unfortunately for Corocord, copyright is only intended to protect “works of artistic craftsmanship” that are sold in limited quantities.  The right to sue Dynamo under copyright law was lost, due to the fact that the playground structure had been reproduced in quantities exceeding fifty (50).  Corocord had been too successful to continue to rely upon copyright.  Corocord could have sued Dynamo under design law.  Unfortunately for Corocord, an application must be filed with the Canadian Intellectual Property Office for design protection within 12 months of the playground structure being introduced into the marketplace.  The time had passed, Corocord had waited too long. Corocord tried to sue Dynamo under trademark law, which does not have a time deadline. In order to succeed Corocord had to establish that their playground structures had become so well known that the relevant market would automatically associate the distinctive shape of the playground structure with Corocord.  Unfortunately for Corocord, they had not, as yet, become successful to the extent that the distinctive shape of the playground structure was associated with them.

What could have or should have Corocord done?  It was okay for Corocord to rely upon copyright in the beginning.  Within 12 months Corocord knew that their playground structure was achieving success in the marketplace.  It was a fatal error of Corocord to not apply for design protection before the 12 months deadline for doing so expired.  With design protection, Corocord could have stopped similar products from entering the market.  Subsequently, when design protection was about to expire, they could have applied for trademark protection  in the hope of extending their protection indefinitely on the basis that the distinctive shape of the playground structure had become well know and is associated solely with Corocord.  However, now their ability to obtain trademark protection in future is doubtful.  The distinctive shape of the playground structure will no longer be associated solely with Corocord.  Dynamo is in the market providing playground structures with the same distinctive shape and other competitors may soon follow.

Nagoya Protocol

The other day I was asked a question about the Nagoya Protocol.  In order to answer the question, I had to review the text of the Protocol.  Although the Protocol has been around since 2011, it has recently received attention due to the announcement that the Trudeau Liberal government intends to move forward to implement the Protocol.  The Protocol has as its focus the use of biological systems and living organisms to make products and processes for use.  The Protocol seeks to promote a “fair and equitable” sharing of the benefits arising from utilization of genetic resources.  It also seeks to provide funding for the conservation of biological diversity.  An example of the need for conservation of biological diversity is the rapid rate of destruction of the rain forests and conversion to farmland.   It is hoped that funding can be secured that will provide financial incentives to preserve the rainforests.  The knowledge of genetic resources is often held by indigenous and local communities as “traditional knowledge”, and the Protocol contemplates domestic legislation to establish rights of indigenous and local communities over such genetic resources.  The Canadian government will be seeking prior and informed approval and involvement of our indigenous peoples to the use of their traditional knowledge upon mutually agreed terms that will see the indigenous peoples compensated.  The Nagoya Protocol goes hand in hand with the United Nations Declaration on the Rights of Indigenous Peoples (DRIP).  Article 24 of DRIP provides “Indigenous peoples have the right to their traditional medicines and to maintain their health practices, including the conservation of their vital medicinal plants, animals and minerals. Indigenous individuals also have the right to access, without any discrimination, to all social and health services”. Article 31 of DRIP provides “Indigenous peoples have the right to maintain, control, protect and develop their cultural heritage, traditional knowledge and traditional cultural expressions, as well as the manifestations of their sciences, technologies and cultures, including human and genetic resources, seeds, medicines, knowledge of the properties of fauna and flora, oral traditions, literatures, designs, sports and traditional games and visual and performing arts. They also have the right to maintain, control, protect and develop their intellectual property over such cultural heritage, traditional knowledge, and traditional cultural expressions”.  The passing of a law to implement the Nagoya Protocol in Canada should be relatively straightforward.  Other Countries have already adopted the Protocol and a review of their law should be of assistance in preparing equivalent Canadian legislation.  What may be interesting is the negotiations with our indigenous peoples that will follow the passing of the Canadian legislation into law.  Once a spotlight is placed on the rights of indigenous peoples, there may also have to be put in place protection of the “traditional cultural expressions” of the indigenous peoples as contemplated by Article 31 of DRIP.  I suspect we will discover there are many “traditional cultural expressions” that we have come to take for granted, such as the Cowichan blanket.

2016 Annual Meeting of the Intellectual Property Institute of Canada (IPIC)

convention-brochureOne can gain an understanding of issues that the profession is wrestling with by reviewing the titles of the presentations from the 2016 IPIC annual meeting.  Continuing Professional Development: “The Skill Set of the IP Practitioner of the Future – Where will IP be in 20 years?”  Trademarks: “Trademarks in Metatags and Keywords – A summary of the Current State of the Law in Canada as Contrasted with the U.S. and Europe”, “Brand Boot Camp”, “Best Practices before the Trademark Office”.  Patent Issues: “Patent Issues that Keep In-House Counsel Up at Night”, “Patentability:  Dealing with Challenges in IT and Life Sciences”, “Best Practices before the Patent Office”.  Online Issues: “Managing Online Content: Tips, Traps, and Tariffs for IP Practitioners”.  Rights Issues: “Publicity Rights: Guidelines for Giving Clients Practical Risk Assessments”.  Litigation Issues: “Remedies – Quick Results in Trademark Cases: Myth or Reality”, “Top IP Cases of the Year”, “Appellate Advocacy in Specialized Area of the Law”.
Many of the above issues I deal with on a regular basis and have written articles about over the past year.  However, the presentation of “Futurist” Jeremy de Beer was of general application and may be useful to the reader.  Mr. de Beer described an approach to predicting the future using a “grid”.  He creates this grid by placing a first line that represents a trend that one can see today, such as automation (self driving cars, smart homes with remotely controlled appliances).  One end of the line represents the present and the other end of the line represents the future, if the trend continues. He then places a second line crossing the first line at 90 degrees to create his “grid” having four quadrants.  The second line represents a second trend that one can see today, such as the increasing capability of smart phones. Again, one end of the line represents the present and the other end of the line represents the future, if the trend continues.  A first quadrant will predict what happens if neither trend continues, a second quadrant will predict what happens if the first trend continues and the second does not progress, a third quadrant will predict what happens if the second trend continues and the second trend does not progress, a fourth quadrant will predict what happens if both trends progress.  Mr. de Beer indicates when you extrapolate what may happen some of your “predictions” (especially in the fourth quadrant) should appear to be ridiculous.  If this does not occur, you are not pushing the trend far enough. Self driving cars and everyone carrying miniature computers that connect to the internet would have sounded ridiculous 20 years ago. It is not viewed as being ridiculous today.

 

Comment:  I received some comment from Keith Sketchley that I felt should be shared.  He indicated that one should beware of overly simplistic methodologies.  He identified two fundamental flaw, in the futurists approach that he described as follows:

1. Trends do not continue indefinitely, in part because people change behaviours. In technical things that’s called “feedback”.  For example, increasing prices of a product will be met by reduced consumption in response to prices, demand drops, suppliers lower their prices.
2. It is difficult to predict new products and services, and some predictions fall far short. For example, a professor gave a Mr. Smith a C, sneering at his idea that people would pay a premium for assured delivery timing of documents. Mr. Smith went on to start an industry, he called his company “Federal Express

Rules for settling legal disputes

Some time ago, I travelled to Calgary to try to settle a legal dispute through mediation.  In mediation, a mediator attempts to guide the parties to a negotiated settlement. However, in this case the arrangement was that if the parties could not arrive at a settlement, the mediator would change roles and become an arbitrator, that is, authorized to impose a settlement upon the parties. My client and I travelled to Calgary for the weekend, in the expectation that we would fly back Sunday night having resolved the dispute.  My client’s view was the same as mine, that even a poor settlement would be better than a great lawsuit.  Time was also important, as my client had to resolve the dispute with the Calgary Company, before he would be free to enter into a new agreement with another company that was waiting in the wings for the dispute to be resolved. The mediation did not go well.  Every time we made progress, the opposing lawyer would inflame the discussions with allegations of “facts” that my client strongly disputed.   The point was reached where my client told me that he had had enough and he wished to move on to the arbitration phase. The matter then took an unexpected turn.  Instead of hearing submissions and rendering a prompt decision, the arbitrator  required a “Statement of Claim” to be prepared and served by a first date, a “Statement of Defence” to be prepared and served by a second date, an exchange of relevant documents to take place by a third date, examination of the parties under oath by a fourth date, and a “trial” at the Alberta Law Society Offices in Calgary on a fifth date, and indicated that a written decision would be rendered by him by a sixth date.  Under the schedule set forth by the arbitrator, it took another 11 months for the dispute to be resolved.  In another matter, I attended a settlement meeting in Edmonton with the General Manager of a biotech company.  The General Manager had to report to a wealthy individual who was the major shareholder and financial backer of the biotech company.  On the other side of the negotiating table was a person from the University’s commercialization office and a person heading up a biotech research team.   The person from the University’s commercialization office had to report to a University oversight committee.   The people in the room rapidly had a meeting of the minds and reached agreement on all issues, subject to approval of the persons to whom we reported.  It was in the reporting back that the agreement fell apart.  The major shareholder and financial backer, and the University oversight committee repeatedly came back with further conditions which made the job of settling the matter more difficult.  The first settlement meeting gave rise to a second and then a third settlement meeting, as each side tried to cope with shifting and evolving instructions.  I recently read an article regarding Federal Court Prothonotary (type of judicial officer) Mireille Tabib’s experiences as a mediator, which inspired this commentary.  The article, along with my own experiences, provides the following “rules” to follow when entering into negotiations of a legal dispute.  The first rule is to start at an early stage, where the focus is still on business concerns and has not yet shifted to “winning” the legal case at all costs.  The second rule is to focus on commercial realities, that is, what will “work” as a settlement and not the details of the claim that are often in dispute.  The third rule is that everyone doing the actual negotiating must have full authority to settle.

Limitations of Non-Disclosure Agreements

Non-Disclosure PhotoI recently read an article entitled “The scope and limitations of Non-Disclosure Agreements”.  The article explained that a non-disclosure agreement is an agreement in which a party receiving information (Receiving Party) agrees to take reasonable precautions to protect from disclosure information received from a party disclosing information (Disclosing Party).   The article then went on to list a series of matters that must be addressed in a well drafted non-disclosure agreement, including: identifying the information that is to be protected, identifying that the information is being disclosed in order to permit the Receiving Party to complete a specified task for the Disclosing Party, setting forth rules regarding disclosure to employees and safe storage of the information while the task is being undertaken and  requiring the destruction or return of the information when the Receiving Party has completed the specified task.  The article also touched upon remedies available to the Disclosing Party in the event of a breach of the agreement.  Although the article was well written, in my opinion, the author neglected to touch upon a significant limitation of non-disclosure agreements.   Most non-disclosure agreements contain the following provision: “The Receiving Party shall have no obligation with respect to such information where the information has become publicly known through no wrongful act of the Receiving Party”.   Entrepreneurs carefully go around and have non-disclosure agreements signed by parties who are assisting them by manufacturing and supplying components.   Non-disclosure agreements are also signed by parties who are assisting in the preparation of business plans, creating brand names and logos, setting up websites, and setting up marketing plans.  Finally, non-disclosure agreements are signed by parties being approached for investment capital and by parties being approached to assist in marketing and wholesale distribution.   Then on the day of the launch of the product or service, all of the Receiving Parties who signed non-disclosure agreements are released from their obligations, as the Disclosing Party has publicly released the information and thus that information has become “publicly known through no wrongful act of the Receiving Party”.     Non-disclosure agreements are fine for having preliminary discussions, but  once the Receiving Party is working with you, a further agreement needs to be put in place that prevents the Receiving Party from competing with you while they are working with you and for a period of time (for example 2 years) after they cease working with you.  As a practical matter, one or more of the parties you are relying upon as a member of your team may have better connections and more resources than you do.  Once they are released from their obligations under the non-disclosure agreement by your public disclosure, they may come to the realization that they are in an excellent position to deliver the product or service and they no longer need you.  Of course, they will delay acting until they have the opportunity to gauge the market response to your new product or service.  Get the additional agreements signed.  After you have taken all the risks and proven there is a market for the product or service, there will be imitators.  Make sure the imitators are not parties who you thought were members of your team.

New Developments in the Canadian Music Business

SOCAN (the Society of Composers, Authors and Music Publishers of Canada) collects royalties based upon tariffs approved by the Copyright Board of Canada for Canadian performances of songs for Canadian and international songwriters and music publishers. Tariffs have been set for recorded or live music ranging from concerts to restaurants to fitness classes.  Of particular relevance to this article are the tariffs for performance of songs on the internet and on mobile devices. In May of 2016 SOCAN announced that it had acquired Seattle-based MediaNet.  This was followed by an announcement by SOCAN in July of 2016 that it had acquired New York-based Audiam.  As with all performing rights organizations, SOCAN’s main functions are firstly to determine what music is being performed and, secondly, to collect the applicable royalty prescribed by Canadian law.  Collection of royalties relating to the internet and mobile devices create technological challenges.   MediaNet has more than 51 million sound recordings in its database, each containing a unique audio identifier.  By acquiring MediaNet, SOCAN will be able to identify digital performances from around the world in real-time. Audiam similarly, has one of the world’s most complete databases of sound recording and underlying song/composition metadata.  In addition, Audiam has technology to proactively find works that are not licensed and for which royalties have not been paid. With the combined strength of MediaNet and Audiam, SOCAN can identify the use of music on digital services such as Spotify, Apple Music, YouTube, and Google Play.  When songs are performed, in addition to royalties compensating the songwriters and music publishers, there are also royalties compensating the artists who perform the songs and music recording companies.  Prior to acquiring Audiam, SOCAN was not involved in collecting royalties for performing artists and music recording companies.  In contrast, a significant portion of the business of Audiam was the collection of royalties for performing artists and music recording companies.  With the acquisition of Audiam, SOCAN now has the capability to collect songwriter-music publisher royalties and performing artist-music recording companies royalties.  With changes brought on by the internet, songwriters and performing artists had become frustrated by the ineffectiveness of the performing rights organizations in the collection of royalties, resulting in a fracturing, with new performing rights organizations being formed by the disenchanted.  Through its acquisition of MediaNet and Audiam, SOCAN has greatly increased its ability to be effective at identifying uses of music on the internet and collect royalties.   SOCAN’s acquisition of Audiam’s expertise in collecting royalties for performing artists and music labels, has been heralded by some commentators as an important new development that raises the possibility of SOCAN becoming a “one stop shop” on the Canadian music scene.  The fact that MediaNet and Audiam are U.S. based also suggests that SOCAN will become more active in collecting royalties in the United States.