Docket: T-1399-09
Citation:
2015 FC 18
Ottawa, Ontario, January
7, 2015
PRESENT: The
Honourable Mr. Justice Manson
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BETWEEN:
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RED LABEL VACATIONS INC., CARRYING ON BUSINESS AS REDTAG.CA OR
REDTAG.CA VACATIONS OR BOTH
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Plaintiff
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and
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411 TRAVEL BUYS LIMITED CARRYING ON BUSINESS AS 411TRAVELBUYS.CA,
CARLOS MANUEL LOURENCO
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Defendants
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JUDGMENT AND REASONS
I.
Facts
[1]
Red Label is a travel business that offers
online travel information services and bookings through its website redtag.ca,
catering mostly to the Canadian market. It was incorporated in 2004, and is
owned and operated by Vincenzo Demarinis.
[2]
Content, including metatag content, on the
Plaintiff’s website was written by an employee named Robert Gennaro, with some
input from Mr. Demarinis.
[3]
Red Label has three registered trademarks:
“redtag.ca” (TMA657,520), “redtag.ca vacations” (TMA657,750), and “Shop.
Compare. Payless!! Guaranteed” (TMA675,219) [the Red Label trademarks]. The
Plaintiff has used all three Red Label trademarks regularly as early as 2004.
[4]
The Defendant 411 Travel Buys Limited [411
Travel Buys] is an online travel agency offering information to customers
through its website, and the availability of agents over the phone to create
bookings for travel and travel-related services. It also caters primarily to
the Canadian market. Incorporated in 2008, its website went online in January
of 2009. Carlos Manuel Lourenco is its sole owner and operator.
[5]
In 2009, the entirety of the 411 Travel Buys’
website was designed and written by an employee/intern, Aniema Ntia. Ms. Ntia
received some input and instruction from a hired consultant, Nhu Tran, but was
otherwise responsible for the content of the website and in the sole possession
of its password. Mr. Lourenco had very little input into the content of the
webpage and did not have any special knowledge as to the use of metatags on the
website.
[6]
411 Travel Buys’ website did not have an online
booking option in 2009. For a customer to book using their services, they would
have to call the Defendant’s call centre to speak to a representative. The
representative would then identify themselves as an employee of 411 Travel
Buys, and assist the customer in making a booking.
[7]
Online travel sales is an inherently seasonal
business in the Canadian market, with sales picking up in the fall and tapering
off and dropping in late winter of each year.
[8]
In January of 2009 Mr. Demarinis purchased the
domain name “411travelbuy.ca” in his wife’s name. He did so with the intention
of selling it to the Defendants for a profit. Content was placed on the
websites which had the effect of directing visitors to the redtag.ca website.
[9]
When the Defendants’ website went online in
January of 2009, a number of its webpages included some identical or very
similar content to the Plaintiff’s webpages. This information included the
title, description and keyword metatags, and the terms “red tag vacations” and
“shop, compare & payless”. The content was not visible to customers
visiting 411 Travel Buys’ website, and was located only in the webpage’s
metadata.
[10]
On February 26, 2009, the Plaintiff discovered 411
Travel Buys’ use of these phrases and alleged copyright and trademark
infringement by the use of the Plaintiff’s metatags and reference to the
Plaintiff’s cascading style sheet [CSS] in a folder. Further, the Plaintiff
alleges that the style of the two websites is so similar as to suggest copying.
[11]
On March 10, 2009 Mr. Demarinis called Mr.
Lourenco to inform him of the allegedly infringing content and demanded that it
be removed immediately.
[12]
Sometime shortly after the phone conversation,
the Defendant’s website was taken down entirely and the allegedly infringing
content was removed by Ms. Ntia over the course of two days. The offending
content was present on the website no longer than from early January to
mid-March of 2009.
[13]
Sometime in March 2009, as a consequence of the
Plaintiff registering the domain name 411travelbuy.ca, the Defendant registered
the domain names “redtagspecials.ca”, “redvacations.ca” and “411redtagbuys.ca”.
No content was ever input onto the websites; they were blank domain names, with
no capacity to redirect web traffic.
[14]
Over the period of February to November 2009,
the Plaintiffs experienced a lull in web traffic and revenue to a higher degree
than in previous years. The estimated period of negative effect or impact on
the Plaintiff’s business created by the Defendants’ alleged infringement is
from March to November of 2009.
[15]
The Plaintiff commenced this action for
copyright infringement, trademark infringement, passing off and depreciation of
goodwill in the Plaintiff’s Red Label trademarks against the Defendant on
August 20, 2009. The Plaintiff seeks Judgment for:
a.
A declaration that the Defendants, have:
i.
Directed attention to 411Travelbuys’ services in
such a way as to cause or be likely to cause confusion between 411Travelbuys’
services and the services of the Plaintiff contrary to the law and section 7(b)
of the Trademarks Act;
ii.
Passed off 411 Travel Buys’ services as and for
those of the Plaintiff contrary to law and section 7(c) of the Trademarks
Act;
iii. Infringed the exclusive rights of Plaintiff’s trademarks as defined
below contrary to section 20 of the Trademarks Act;
iv. Used the Red Label trademarks in a manner that is likely to have the
effect of depreciating the value of goodwill attached thereto contrary to section
22 of the Trademarks Act; and
v.
Reproduced segments of the Plaintiff’s website
(as defined below) and infringed the copyright in the Plaintiff’s website
contrary to law and section 27 of the Copyright Act.
b.
A permanent injunction restraining the
Defendants, their officers, directors, shareholders, agents, servants,
employees, successors, assigns and those in privity with or directly or
indirectly controlled by the Defendants from:
i.
Directing public attention to 411Travelbuys’
services in such a way as to cause or be likely to cause, confusion between the
services of the Plaintiff and those of the Defendants;
ii.
Passing off 411 Travel Buys’ services as those
of the Plaintiff and/or sanctioned, approved or authorized by the Plaintiff;
iii. Infringing Red Label trademarks;
iv. Using the Red Label trademarks in a manner that results in the
depreciation of the goodwill attaching thereto;
v.
Infringing the copyright in the Plaintiff’s
website, including the Plaintiff’s exclusive right to reproduce same; and
vi. Authorizing, inducing or assisting others, to do any of the
aforesaid acts.
c.
A mandatory order directing the Defendants to
transfer or cause to transfer to the Plaintiff any domain names owned or
controlled by the Defendants which are likely to be confusing with the Red
Label trademarks, including but not limited:
i.
redtagspecials.ca;
ii.
411redtagbuys.ca; and
iii. redvacations.ca.
d.
With respect to the cause of action based upon
the Trademarks Act, damages against the Defendants of $760,000.00 (seven
hundred and sixty thousand dollars) suffered by the Plaintiff in 2009 as a
result of the Defendants’ unlawful activities and a further sum for damages
suffered by the Plaintiff for the period of time following 2009;
e.
With respect to the cause of action upon the Copyright
Act, damages against the Defendants of $760,000.00 (seven hundred and sixty
thousand dollars) as a result of the Defendants’ unlawful activities; and a
further sum for damages suffered by the Plaintiff for the period of time following
2009;
f.
Damages against the Defendants in the sum of
$760,000.00 (seven hundred and sixty thousand dollars) suffered by the
Plaintiff in 2009 as a result of the unlawful activities of the Defendants and
a further sum for damages suffered by the Plaintiff for the period of time
following 2009;
g.
Dismissal of the counterclaim of 411 Travel Buys
Ltd (Plaintiff by Counterclaim) against the Plaintiff, (Defendant by
Counterclaim) with costs payable by 411 Travel Buys Ltd (Plaintiff by
Counterclaim) to Plaintiff, (Defendant by Counterclaim), including
disbursements and HST on a full indemnity basis;
h.
Pre-judgment and post-judgment interests;
i.
Cost of this action payable to the Plaintiff by
the Defendants on a full indemnity basis plus, disbursements and HST; and
j.
Punitive and exemplary damage against the
Defendants.
[16]
On October 6, 2009, the Defendant filed a
defence and counterclaim for passing off against the Plaintiff.
II.
Issues
A.
Plaintiff’s Claim
A. Copyright
i.
Does copyright subsist in the Plaintiff’s
metatags?; and
ii.
If so, did either of the Defendants infringe the
Plaintiff’s copyright in the metatags by using same on the Defendants’ website;
iii.
Did either of the Defendants infringe the
Plaintiff’s copyright by using the Plaintiff’s cascading style sheet(s) or by
copying the “look and feel” of the Plaintiff’s website?;
iv.
If either of the Defendants’ infringed the
Plaintiff’s copyright in the metatags, was that infringement innocent?
v.
What remedy or remedies is the Plaintiff
entitled to as a result of any copyright infringement as alleged?
B.
Trademarks
vi.
Did either of the Defendants’ use of the words
or trademarks redtag.ca, redtag.ca vacations or Shop. Compare. Payless!!
Guaranteed and Trademark registrations TMA657,520, TMA657,750 and TMA675,219 in
respect thereof, on the Defendants’ website constitute trademark infringement,
passing off or cause depreciation of goodwill, contrary to section 7(b), 7(c),
20 or 22 of the Trademarks Act?; and
vii.
If so, what remedy or remedies and costs is the
Plaintiff entitled to as a result of such infringement?
C.
Defendants’ Counterclaim
viii.
Did the Plaintiff’s use of 411 Travel Buys in
the text or metatags of any websites constitute passing off contrary to section
7(b) or 7(c) of the Trademarks Act?; and
ix.
If so, what remedy or remedies are fair and
available to the Defendants as a result of that infringement?
[17]
For the reasons that follow, I find:
A. Copyright
i.
Copyright does not subsist in the Plaintiff’s
combination of the title, description and key word metatags used by the
Defendants;
ii.
The Defendant 411 Travel Buys’ use of the
Plaintiff’s metatags does not constitute copyright infringement. The individual
defendant Carlos Lourenco did not personally infringe any rights of the
Plaintiff;.
iii.
If there had been infringement of the Plaintiff’
copyright by 411 Travel Buys, it would have been innocent infringement.
Consequently, only injunctive relief would have been available to the
Plaintiff;
iv.
The Defendants did not infringe the Plaintiff’s
copyright on the cascading style sheet(s) or in the look and feel of the
website;
v.
No remedy is necessary.
B.
Trademarks
vi.
Use of the Red Label trademarks by the Defendant
411 Travel Buys does not constitute trademark infringement under section 20 of
the Trademarks Act, or passing off or depreciation of goodwill, contrary
to section 7(b), 7(c) or 22 of the Trademarks Act. Given my findings on
copyright and trademark rights of the Plaintiff, there are no damages or other
remedies available to the Plaintiff;
vii.
Costs to the Defendant awarded under Tariff B
column III.
C.
Defendants’ Counterclaim
viii.
The Defendants’ counterclaim is dismissed. There
is insufficient evidence to establish a reputation that would entitle the
Defendants to relief in a passing off claim for the Defendants in respect of
the Plaintiff’s use of 411 Travel Buys, in the relatively short period the
Defendants’ website has been in existence, or having regard to the limited use
of the words 411 Travel Buys by the Plaintiff. Further, no evidence of damages
resulting from the alleged misuse of 411 Travel Buys by the Plaintiff has been
provided by the Defendants for the Court to consider;
ix.
The Plaintiff’s misappropriation of the
Defendants’ business name for the improper purpose of selling it back to the
Defendants for a profit shows a course of bad conduct by the Plaintiff that
further negates any claim by the Plaintiff for enhanced, punitive or exemplary
damages.
III.
Evidence
A.
Plaintiff’s Witnesses
(1)
Vincenzo Demarinis
(a)
Evidence in Chief
[18]
Mr. Demarinis has been the President and CEO of
Red Label Vacations Ltd [Red Label] since its incorporation in 2004. Red Label
is an online travel business that allows customers to purchase travel and
related services online through their website redtag.ca, and by phone, by
directing them to a call center to speak with an agent. Red Label owns 3
registered trademarks: “redtag.ca” (TMA657,520), “redtag.ca vacations”
(TMA657,750) and “Shop. Compare. Payless!! Guaranteed” (TMA675,219).
[19]
In order to remain informed about the website’s
performance, Red Label contracted ComScore in 2008-2011 to provide reports
which were accessed monthly. Mr. Demarinis was also in the habit of regularly
searching his website on Google to monitor its rankings. When performing one of
these searches in February of 2009, he noted a number of the Defendants’
webpages appearing, showing similarities to redtag.ca in their metatags
(including content, ordering and misspellings). It was Mr. Demarinis’ belief
that the similarities constituted copyright and trademark infringement.
[20]
In early March 2009, Mr. Demarinis phoned Mr.
Lourenco to inform him of the infringement, to which Mr. Lourenco replied he
knew nothing about it, but would look into the allegation. Sometime shortly
thereafter 411travelbuys.ca was taken down and the offending content was
removed. Later that same month, Mr. Demarinis learned that Mr. Lourenco had
registered the following three domain names: “redtagspecials.ca”,
“411redtagbuys.ca” and “redvacations.ca”.
(b)
Evidence in Cross-Examination
[21]
Mr. Demarinis established that the majority of
redtag.ca’s total advertising budget was spent on advertising with Google Ad
Words. He further confirmed that the “online sales” portion as identified on a
spreadsheet breaking down redtag.ca’s sales by category in January of 2009,
accounted for $6,535,601 in revenues. He clarified though that sales generated by
someone visiting the website then deciding to call in to the center would not
be accounted for in that figure.
[22]
Mr. Demarinis was also questioned about his
registration of the domain name “411travelbuy.ca” through his wife’s name in
early 2009, prior to Mr. Lourenco’s registration of the above three domain
names, and stated that he had personally purchased the name with the intention
of selling it to Mr. Lourenco for a small profit.
(2)
Robert Gennaro
(a)
Evidence in Chief
[23]
Mr. Gennaro has been a Red Label employee since
2005. He began in a data entry role for the red tag website, which evolved to
become Search Engine Optimization [SEO] director. He estimated that 95% of Red
Label’s business is online, despite their call center handling much of their
bookings. Since Red Label does not advertise their phone number, customers must
visit the website to find out how to call to make travel, hotel and vacation
reservations.
[24]
Much like Mr. Demarinis, Mr. Gennaro checks
redtag.ca’s online performance regularly. He primarily uses Google Analytics to
establish where redtag.ca’s traffic comes from and attempts to streamline
metatags, to attract more organic keyword searches.
[25]
Mr. Gennaro estimated that in early 2009,
redtag.ca had approximately 180,000 webpages associated with the website and
approximately 70,000-80,000 of those were core pages (though he could not be
certain), which required his personal attention to write the content (as much
as one day’s efforts per page). His evidence on this front lacked credibility,
given that the time frame he estimated to create the web pages is unrealistic.
He continued to recognize some content in webpages put before him as his own
writing, which he estimated to have been written at some point in 2007.
[26]
In February 2009, Mr. Gennaro noticed some
irregularities in the website’s Google Analytics and did a search for the
redtag.ca website, discovering the same allegedly infringing content of the
Defendant as Mr. Demarinis. He also noted the presence of the redtag.ca CSS in
the Defendant’s website, and believes that the two websites resembled each
other in style as well as the infringing metatag content.
(b)
Evidence in Cross-Examination
[27]
Mr. Gennaro clarified on cross examination that
of the 180,000 pages on redtag.ca’s website, many that refer to car rentals or
hotels do not require much time to fill with content, whereas others require
more attention. He estimated he had personally written the content for between
4,000 and 15,000 of the more content-heavy pages by 2009. He had trouble
explaining the time frame he allegedly used to create the core web pages and
content, as well as the specific number of pages he created personally, and
lacked credibility on this point.
[28]
With respect to Mr. Byers’ opinion that the
similarities in style between the Plaintiff’s and Defendant’s websites were
typical of industry-wide websites in 2009, he disagreed.
(3)
Aniema Ntia
(a)
Evidence in Chief
[29]
Ms. Ntia was retained by Mr. Lourenco and by
411travelbuys.ca as an intern in September 2008, to complete her placement
requirement for Humber College’s Advanced Web Development for E-Commerce
Business program. She testified in court that while her placement ended in
January of 2009, she did not officially become an employee of 411travelbuys.ca
until February of 2011. The transcript of her interview for discovery however
confirmed that she had previously agreed her employment with 411 Travel Buys
began in November 2008.
[30]
In July and August of 2008, she met a handful of
times with Mr. Lourenco, in order to discuss her placement and what it would
entail. It was clarified that Ms. Ntia’s role was to set up the entire
411travelbuys.ca website. At these meetings, Mr. Lourenco showed her a number
of example websites of what he liked in terms of function and flow, though she
did not recall specifically if he showed her redtag.ca in these meetings.
[31]
She made a number of attempts at coding the
Defendants’ website from scratch, but eventually purchased a template from
Joomlashack. She did most of her work on her personal laptop, which already had
the necessary software, until October 2011, at which time she gave the laptop
to her son in Nigeria.
[32]
While she eventually had help from others in
developing the website, she was the administrator and sole password-holder. The
only specific instruction Ms. Ntia received from Mr. Lourenco about the content
of the webpages was not to be afraid to use the word “cheap” throughout their
content. Beyond this input, he did not limit or tell her what to include. In
the first year of the website, Ms. Ntia testified that she created all of the
approximately 100 pages of 411travelbuys.ca herself.
[33]
Her initial attempts to design the website
involved placing a number of pages for the website under a single “head”. When
Mr. Lourenco expressed his disapproval at this design, he hired Mr. Nhu Tran to
consult on SEO, as well as oversee Ms. Ntia’s work. While Mr. Tran was
consulting about the content of the website, it was ultimately Ms. Ntia who
would have to input the information, or grant access for another to do so. In
an initial meeting, Mr. Tran used the redtag.ca website to demonstrate the use
of metatags in SEO. She admitted it is possible he input content from redtag.ca
as a demonstration and she forgot to remove the information before it was saved
onto the Defendants’ website.
[34]
Ms. Ntia insists that she did not notice the
infringing content until Mr. Demarinis called Mr. Lourenco to bring it to his
attention in March 2009. After this call, Mr. Lourenco was noticeably upset and
asked Ms. Ntia to take the website down and review all its content to ensure
there would not be any other issues. She obliged and devoted two straight days
to removing and re-writing all the metatags and checking to ensure that the
website had original content.
(b)
Evidence in Cross-Examination
[35]
In cross examination, Ms. Ntia confirmed that
she had not received any training in trademark and copyright law, and that Mr.
Lourenco had never asked her to copy anything from another website. Overall,
Ms. Ntia’s position is that writing and ordering of metatags takes little skill
or judgment. I found Ms. Ntia to be a credible witness.
[36]
She further confirms that in January to March of
2009, there was no way of booking online at 411travelbuys.ca. A customer would
have to visit the website and then call in to make a booking by speaking with
an agent over the phone.
(4)
Nhu Tran
(a)
Evidence in Chief
[37]
Mr. Tran was hired by Mr. Lourenco to advise on
SEO, as well as to help Ms. Ntia to design the content of the Defendants’
website. For the duration of his association with 411travelbuys.ca, Mr. Tran
maintained he did not have access to the servers, and any work he did was sent
to 411 employees to be implemented.
[38]
He remembered having given advice as to how to
improve the site’s rankings on search engines like Google, but when the results
were not to Mr. Lourenco’s satisfaction, they parted ways in 2010. He insists
that at no time did he suggest another party’s trade names, trademarks, or web
content be copied into the Defendant’s website.
(b)
Evidence in Cross Examination
[39]
Despite his insistence that he had no control
over the Defendants’ server and that he did not suggest to Ms. Ntia to copy
redtag’s website, in referring to Exhibit 33, it was proven that Mr. Tran had
shown redtag’s information to Ms. Ntia as an example she could follow.
(5)
Ephraim Stulberg
[40]
Mr. Stulberg is a Senior Manager and VP of
Matson, Driscoll & Damico Ltd in Toronto, an international forensic
accounting firm. He has 6 years of experience in investigative and forensic
accounting, and has focused exclusively on economic damage quantification and
business valuations since entering the industry in 2008. He is qualified as a
forensic accountant, but the Defendants object to his evidence in paragraphs 40
to 45 of his expert report, as he is not an SEO expert.
(a)
Evidence in Chief
[41]
Mr. Stulberg has calculated the Plaintiff’s lost
profits resulting from the Defendants’ alleged infringement at $760,000. Based
on his review of their financial records he believes they suffered a loss of
profits for longer than strictly the period of the alleged infringement
(January to March 2009); specifically, from February to November 2009 [the
affected period].
[42]
After reviewing the Plaintiff’s financial
records for 2008, Mr. Stulberg added a growth rate of 10% (based on the
Plaintiff’s historic rate of growth, travel industry data from Statistics
Canada, comparable public companies, and analysis of the Plaintiff’s main
vendors), to determine their projected revenue for the affected period. He
estimated the cost of sales at approximately 93.9%, as well as variable sales
commission and bad debt costs of 0.99% of revenue. He also factored in
threshold sales commissions of 0.96% of the lost revenue that would have been
earned.
[43]
According to trends in the Plaintiff’s rate of
growth from 2004 to 2008, Mr. Stulberg estimates that the Plaintiff’s revenue
in 2009 should have been approx. $120,000,000 and $140,000,000 in 2010. In
contrast, their actual revenue in 2009 was $100,000,000 and $131,000,000 in
2010. Looking on a monthly basis, Mr. Stulberg notes strong growth patterns
continued for the Plaintiff through January 2009, but from February 2009 to
December 2009 revenue growth collapsed.
[44]
The Plaintiff’s six top vendors prior to the
affected period (Transat Holidays, Sunwing Vacations, Air Canada Vacations,
Sunquest Vacations, Signature Vacations, Nolitours), accounted for over 50% of
the Plaintiff’s revenue. In Mr. Stulberg’s opinion, when expressed in graph
form the decline in revenue from these vendors and the affected period closely
overlap, indicating likelihood the two are causally connected.
[45]
While acknowledging that it is possible that a
portion of the Plaintiff’s declining revenue can be attributed to negative
industry trends, the Plaintiff’s rate of revenue growth prior to 2009 exceeded
the industry average; as well, online travel agency revenue declined less overall
in 2009 than the rest of the industry, and use of online travel agencies
increased in Canada by 4%.
[46]
Due to the global client base of comparable
public companies like Expedia, their data was limited in relevancy to analyzing
the Plaintiff’s situation. This unfortunately makes it difficult to account for
any effect the relative growth rates of competitor companies might have had on
the Plaintiff during the affected period. Another consideration in calculating
the Plaintiff’s loss in revenue was that Conquest Vacations ceased operations
in April of 2009 (a vendor who previously accounted for approximately 4% of the
Plaintiff’s revenue).
[47]
Mr. Stulberg also considered damage to the
Plaintiff’s revenue in the form of lowered performance on organic keyword
searches in online search engines (derived from Google Analytics statistics).
Between November 2008 and January 2009, there was growth in the Plaintiff’s
organic keyword searches, and during the affected period, their performance
began to slow substantially. Mr. Stulberg opines that this trend was
exacerbated by the downgrading in rankings by a search engine when multiple
versions of a website are perceived.
(b)
Evidence in Cross-Examination
[48]
In cross-examination, Mr. Stulberg confirmed
that he has no background or training in web optimization and that he made
assumptions regarding a correlation between web traffic and revenue while
relying on the 2008 Google data Mr. Byers had testified was irrelevant due to
updates in the Google algorithm around that time. This reliance brings into
question his 10% projected growth estimate for the Plaintiff’s revenue.
[49]
While he made efforts to incorporate
characteristics of the online travel industry in his report, he is not an expert
in the field. For example he did not consider the effects of competitor
companies increasing their efforts to attract online customers when calculating
the Plaintiff’s projected loss, but insists that his 10% projected growth rate
included a conservative buffer to account for such eventualities. I find that
the lack of a concrete foundation for the assumptions made and calculations of
losses due to the Defendants’ alleged infringements render his conclusions on
lost profits and damages speculative at best.
[50]
He also explained that he had not included the
months of August, September and October in some of his calculations due to
timing constraints but agreed that their inclusion would produce a
better-rounded picture of the Plaintiff’s business.
(6)
Barry James Byers
[51]
Mr. Byers is the founder of Search Engine
Academy Toronto (2002), an internet marketing school for business owners and
marketing professionals. He is certified as a Neuro Linguistic Programming
Practitioner, as well as certified to teach Advanced SEO. It was accepted by
the Defendants that Mr. Byers is an SEO expert.
(a)
Evidence in Chief
[52]
Mr. Byers is of the opinion that the Defendants
copied the Plaintiff’s website, and that use of the Plaintiff’s metatags and
content significantly affected the ranking and web traffic for both parties’
websites. In coming to this conclusion, he reviewed the metadata of each
website (typically used to specify page description, keywords, author of
document, last modified, etc., by browsers, search engines and other web services),
as well as having reviewed their coding.
[53]
He noted instances where misspellings in the
keyword metatags were identical in sequential order between the websites. While
leaving misspellings in such tags is common practice, the level of similarity
in this case suggests copying. Further, a number of the Defendants’ webpages
contained the Plaintiff’s brand name or registered trademarks, and similar or
identical metatags that had only been modified by adding the word “cheap”.
[54]
In addition, the CSS (a style sheet language
used for describing the look and formatting of a document that facilitates
manipulation of a website’s design) titled “stylesRedTag.css”, appears to have
been in the Defendants’ website folders at some point, indicating it had likely
been copied from the Plaintiff. Despite evidence of copying in metatags and
coding, Mr. Byers thinks the broader similarities between the websites are in
large part industry-wide and not unique to the parties.
[55]
In analyzing the webtraffic to each website, Mr.
Byers focused on the ComScore and Korax webtraffic reports and statistics
relating to Google (who held 83% of the Canadian market in 2009). Appearing on
the first page of a Google search gets approximately 92% of all Google traffic.
Between December 2008 and March 2009, redtag.ca dropped from 21st position in
Canadian Travel Industry rankings to 26th in April 2009; dropping again to 38th
in May 2009; moving up to 36th in June 2009, then dropped again to 44th in July
2009. In August 2009, they began a 5 month climb back up to 19th position in
December 2009.
[56]
Total unique visitor traffic to the Plaintiff’s
websites followed a similar pattern to their rankings. There was also a decline
in the amount of search hits for the top four branded keyphrases associated with
the Plaintiff (‘red tag’, ‘redtag’, ‘redtag.ca’, ‘red tag vacations’). Mr.
Byers’ opinion is that most, but not all, of this decline in keyphrase searches
can be attributed to seasonal trends.
[57]
While several updates to Google between April
2008 and August 2009 made requesting ComScore and Korax analytics for 2008
irrelevant, a Google update in February of 2009 should have increased traffic
to the Plaintiff’s websites by emphasizing branding, and yet traffic to the
Plaintiff’s website decreased after it took effect.
[58]
Mr. Byers is of the opinion that the Defendant’s
copying of the Plaintiff’s websites had the effect of confusing search engines
into thinking the Defendants’ websites were related to the Plaintiff’s,
resulting in what appeared to be duplicate documents being filtered out of
search results. In his opinion, this process would have begun approximately one
month after a website became active and would take another two to three months
to complete, and that the original website was more likely to be filtered out.
In Mr. Byers’ opinion, effects on traffic of the duplicate content would have
started to take place in March to June 2009. Once the duplicate websites were
removed, it would take approximately three to six months to un-filter, making
it likely to start taking place in June to September of 2009.
(b)
Evidence in Cross-Examination
[59]
Mr. Byers admitted there were significant
discrepancies between the ComScore and Korax reports of internet search traffic
to the Plaintiff’s website (see table below). He further admitted that he had
referred to both sources in creating his expert report (and even compiled a
spreadsheet comparing data from each source relating to 2009) but could not
explain the discrepancy in numbers, other than to point out they are two different
services using different means to compile data. For example, since Korax was
the Plaintiff’s hosting server, their data was based on traffic through their
own server.
[60]
Further, Mr. Byers admitted that he is not an
expert in the online travel industry and may have failed to make suitable
adjustments for the industry’s inherent seasonality. He also admitted that
neither the ComScore nor the Korax statistics on keyword searches would
recognize users who arrived at the Plaintiff’s website by a means other than
the top 4 keywords he had isolated.
[61]
With regards to his report’s statement that
Google’s Vince update would reward brand names in their organic keyword search
rankings, he admitted he was not certain as to whether Google indeed recognized
redtag.ca as a brand at the relevant time. If they did not, it would affect
somewhat his opinion about the effect of the Defendant’s alleged infringement.
Importantly, Mr. Byers further clarified that Google has not for many years
(including in 2008/2009) used metatag keywords in its search rankings.
(7)
Scott Green
[62]
Mr. Green is the Controller at Red Label
Vacations Inc. He has been in this position since May 31, 2010, and was
responsible for the accounting records for the company for the fiscal year
ending August 31, 2010 (September 1, 2009-August 31, 2010). His affidavit
evidence was accepted by the Defendants without personal appearance or
cross-examination at trial.
[63]
Mr. Green prepared the monthly trial balances,
the monthly sales analyses, and the general ledger details for the Plaintiff
for the fiscal years ending August 31, 2007 to August 31 2010 on his office
computer between September 25 and 30 of 2014. His affidavit evidence was
accepted by the Defendants without personal appearance or cross-examination at
trial.
(8)
Jack Massarelli
[64]
Mr. Massarelli is a partner with Fazzari +
Partners LLP, having worked there since 1994. His work there mostly focuses on
assurance and audit engagements of private and public companies, Notice to
Readers and general business advice, consulting and tax planning.
[65]
Mr. Massarelli was responsible for reviewing the
file, managing the staff and issuing the Review Engagement Report for the
Plaintiff regarding the statements of operations, deficit and cash flows for
the year ended August 31, 2005.
[66]
Mr. Masarelli was also responsible for
overseeing the Auditor’s Reports of the Plaintiff’s business for the years
ending August 31, 2006 to August 31 2010. It is his opinion that the financial
statements tendered into evidence present the financial position and operations
of the Plaintiff fairly. This affidavit evidence was accepted by the Defendants
without personal appearance or cross-examination at trial.
(9)
Alex V. Bulan
[67]
Mr. Bulan is the Director and Officer of Korax
Inc., a company that provides website hosting, e-mail services, dedicated
servers, and domain name registration services, and has been in operation since
1997. It exercises complete control over its network and server infrastructure,
and ensures stable, reliable and predictable service through careful monitoring
of its equipment.
[68]
Its web hosting services include a traffic log
maintained for each website it hosts which are available to each customer for
download for thirteen months, after which they are automatically purged from
Korax’s servers. They also generate monthly analytics reports for each hosted
website summarizing the data contained in the traffic logs, which are available
for a limited period (thirteen months between February of 2009 and 2010) after
which they are also purged.
[69]
In Mr. Bulan’s words, “the
analytics reports typically include indicators such as the most popular pages,
the total number of pages requested, and the total volume of data transferred.
In addition… [they] include unique visitors, number of visits, visit duration,
and search engine keyphrases and keywords.” “Unique Visitors” refers to
the number of distinct IP addresses requesting pages from a website.
[70]
Korax was hired to provide web hosting to the
Plaintiff’s website from June 2004 to present. This affidavit evidence was
accepted by the Defendants without personal appearance or cross-examination at
trial.
(10)
Brent Bernie
[71]
Mr. Bernie is the President of ComScore Media
Metrix Canada [ComScore], and has been since 2002. ComScore provides market
research through data related to online audience measurement, e-commerce,
advertising, search, video and mobile. The Plaintiff was a subscriber to
ComScore’s Media Metrix database from December 2008 to March 2011. This service
allows clients to access a database using a web interface protected by
password, enabling them to access different levels of data depending on their
subscription.
[72]
Reports are not typically included in this
service, however customers can access the database to run their own searches to
compile their own report. Some reports are available through the database,
including a Key Measures report which “provides traffic
measurements for a selected list of websites during a selected timeframe”.
[73]
ComScore’s data comes primarily from panel and
consensus data. Panel data is compiled from approximately two million people
worldwide who have agreed to allow ComScore to measure their internet
behaviour. Census data is collected through websites and advertisers who place
“tags” on their pages and ads allowing ComScore to measure visitors. Mr. Bernie
is not aware of any issues affecting the operation and maintenance of the
ComScore servers during the relevant period of December 2008 to March 2011.
[74]
This affidavit evidence was accepted by the
Defendants without personal appearance or cross-examination at trial.
(a)
Unique Visitor Data to redtag.ca per the
ComScore and Korax reports submitted by the Plaintiff in their Affidavit of
Documents covering the period of February 2009 to February 2010
|
Month
|
ComScore Date –
Unique Visitors
|
Korax Data – Unique
Visitors
|
Difference
|
|
February 2009
|
541,000
|
560,571
|
19,571
|
|
March 2009
|
562,000
|
548,481
|
13,519
|
|
April 2009
|
399,000
|
459,825
|
60,825
|
|
May 2009
|
270,000
|
370,987
|
100,987
|
|
June 2009
|
303,000
|
369,819,
|
66,819
|
|
July 2009
|
282,000
|
425,337
|
143,337
|
|
August 2009
|
386,000
|
424,747
|
38,747
|
|
September 2009
|
345,000
|
421,547
|
76,547
|
|
October 2009
|
342,000
|
500,144
|
158,144
|
|
November 2009
|
432,000
|
550,498
|
118,498
|
|
December 2009
|
489,000
|
582,147
|
93,147
|
|
January 2010
|
581,000
|
813,420
|
232,420
|
|
February 2010
|
757,000
|
690,433
|
66,567
|
B.
Defendants’ Witnesses
(1)
Marco Braggio
(a)
Qualifications
[75]
Mr. Braggio has been a Product Manager in SEO
and Web Accessibility and Performance for Walmart Canada Corp since June 2013.
Prior to that, he was Lead SEO Specialist at DAC Group (March 2011 - June
2013), Search Engine Marketing Lead for Critter Search Inc (March 2009 -
February 2011), and SEO Analyst for Cryptologic Inc (January 2008 - March
2009). He has an Attestation of Collegial Studies in Network and Internet
Support from CDI College Montreal. He is qualified as an SEO expert, but not in
respect of the industry.
(b)
Evidence in Chief
[76]
Mr. Braggio is of the opinion that having
duplicate content on a website is a disadvantage rather than an advantage, and
could make it more difficult to achieve a high search ranking and relevance.
His report states that search engines can time stamp websites to determine
which was the original website, thereby penalizing the duplicate website in
rankings.
[77]
He states that a website’s Google ranking
depends on how competitive an industry is. Since the travel industry is one of
the most competitive online markets, it would take a new website at least a
year to catch up to more established websites. Since the Plaintiff’s website
has consistently rated in the top five for many industry related keywords, the
Defendants would have a particularly hard time catching up in rankings to the
Plaintiff.
[78]
Regarding the domain names the Defendants
registered sometime in March 2009, they never had a physical website and served
only to redirect traffic. In Mr. Braggio’s opinion, these domain names had
little to no value, since they had no prior webtraffic history or online search
engine equity, resulting in no significant ranking or web traffic implications.
By using an internet archive called the WayBack Machine, Mr. Braggio was able
to find only two instances where traffic was captured from the Plaintiff’s
website and brought to the Defendants’ website, evidencing negligible traffic
impact significance.
[79]
Using the Defendants’ Google Analytics report
from between January 1 and March 16, 2009, which reviewed all new visitors to
the Defendants’ websites, only 0.66% can be attributed to keywords related to
the Plaintiff’s websites, and these keywords only start appearing at 33rd
position in the Defendants’ top traffic keywords. The same report from March
17-September 1, 2009 shows only 0.1% of new visitors were from keywords related
to the Plaintiff.
[80]
In response to Mr. Byers’ opinion that the
Defendant’s website would have been indexed by search engines by the beginning
of 2009, Mr. Braggio does not see any data to substantiate the claim. While the
Defendants may have duplicated some of the Plaintiff’s websites, he sees no
reason to believe this was the sole cause for any loss to the Plaintiff’s web
traffic or revenue. Other competitors may have contributed to such a loss and
were not considered by Mr. Byers.
(c)
Evidence in Cross-Examination
[81]
Mr. Braggio admitted in cross-examination that
he had no experience in SEO related to the online travel industry specifically.
Mr. Braggio disagreed with Mr. Byers’ reports on a number of points. For
example, in his opinion registered domain names with no content would not
affect search engine rankings of another website. Further, when Google would
filter a duplicate website, in his experience it would not filter out the
original website, it would be more likely to filter out the duplicate. While he
admits that the duplicate content of the Defendants’ website could be one
factor in the Plaintiff’s decline in web traffic during the affected period, he
is adamant that it is not the sole, or even primary cause for their losses.
[82]
Mr. Braggio also admitted that much of the
information and articles he relied upon in compiling his report were from long
after the affected period, but with little explanation he insisted that much of
the information is relevant to 2009. Aside form a 2007 article discussing the
increased accuracy of Google’s time-stamping, and a Google Analytics report of
the Defendant’s web traffic from January 1-March 16, 2009 (when the offending
material was present on the Defendant’s website), the information relied on by
Mr. Braggio should be given little weight.
(2)
Carlos Manuel Lourenco
(a)
Evidence in Chief
[83]
Mr. Lourenco is the sole owner of
411travelbuys.ca, which was incorporated in 2008. He has worked in the travel
industry for many years, after having completed a post-secondary travel and
leisure course. He is not experienced in web design or development, and prior
to this litigation had only a cursory knowledge of metatags and their use.
[84]
Mr. Lourenco hired Ms. Ntia as a student intern
to create the 411 Travel Buys website and keep it up to date. After her
placement ended in January 2009, Mr. Ntia became an employee. Mr. Lourenco
asked her to create as much content as she could for the website and showed her
a number of travel websites as examples of what he thought worked well
(including itravel2000.com, and redtag.ca among other UK and North American websites).
At no point did he ask her to copy a website or use any other company’s
metatags. His input on the website was limited, and largely consisted of his
advice not to be afraid of using the word “cheap” throughout the website’s
content. He eventually hired Mr. Tran to assist and instruct Ms. Ntia in how
best to optimize the website to attract organic keyword traffic.
[85]
Mr. Lourenco allocated 411 Travel Buys’
advertising budget in its first year across print and online media but largely
focused on Google Ad Words ($25,000-30,000 per month). He confirmed that his
website did not have a means of booking online in 2009. A customer would have
to call into their call centre in order to book anything; an agent would then
identify themselves as a representative of 411travelbuys.ca.
[86]
In early March 2009, Mr. Lourenco received Mr.
Demarinis’ phone call informing him of the alleged infringing content. Within a
day or two, he contacted Mr. Demarinis asking for more guidance regarding the
issue and was directed to a particular Hola Sun page that Mr. Demarinis felt
exemplified the infringement. Within a short period of time, he asked Ms. Ntia
to shut the website down and to review every page to remove any potentially
infringing content. Overall, the website as it appeared to customers never
showed any association with redtag.ca, nor was any of the infringing content
visible on the 411 Travel Buys website as it appeared to customers.
[87]
In late March and early April of 2009, Mr.
Lourenco discovered that Mr. Demarinis had purchased the domain
“411travebuy.ca” and was upset. When someone visited the page they were
redirected to the redtag.ca website. In his anger he then bought the domains
“411redtagbuys.ca”, “redtagspecials.ca” and “redvacations.ca”, but never put
any content on them. He has abandoned these domain names.
(b)
Evidence in Cross-Examination
[88]
Mr. Lourenco admitted that he is the sole
officer, director and shareholder of 411travelbuys.ca and that he makes all
business decisions, now as well as in 2009.While he had little knowledge of
website design or development and did not possess the website’s password, he
had the ultimate final say for its content. He outlined that despite experience
working with Google Ad Words for his previous employer, he had limited
knowledge of website design and metatag usage in 2009 and relied heavily on Ms.
Ntia and Mr. Tran to develop the website. When spelling errors in metatags on
the Defendants’ website mirroring those of the Plaintiff’s were brought to Mr.
Lourenco’s attention, he insisted he did not know why they were there and
assumed there was some sort of strategic reason to include them.
IV.
Analysis
A.
Copyright
[89]
The Defendants raise preliminary objections to
the Plaintiff’s claim in copyright as not being properly pleaded. The
Defendants did not challenge the sufficiency of the Plaintiff’s pleading until
trial, having plead over by simply denying the Plaintiff’s claims in copyright.
[90]
It is true that to properly plead a claim in
copyright, a party should state the identity of the work, such that it is
within the meaning of the Copyright Act, the nationality of the author
and the place of first publication. However, it is clear from discovery that
the primary author is Mr. Gennaro, an employee of the Plaintiff, who created
the red tag website in the course of his employment and to a lesser degree,
possibly Mr. Demarinis, and that the Plaintiff is a Canadian corporation and
the redtag.ca website was first published in Canada. I do not find that the
Defendant has raised any valid objections to the Plaintiff’s pleading with
respect to copyright on these preliminary bases.
[91]
The parties are in agreement that in order for
there to be valid copyright in a work, the work must be original, as stated by
the Supreme Court of Canada in CCH Canadian Ltd v Law Society of Upper
Canada, 2004 SCC 13 at para 16 [CCH]:
16 I conclude
that the correct position falls between these extremes. For a work to be
"original" within the meaning of the Copyright Act, it must be more
than a mere copy of another work. At the same time, it need not be creative, in
the sense of being novel or unique. What is required to attract copyright
protection in the expression of an idea is an exercise of skill and judgment.
By skill, I mean the use of one's knowledge, developed aptitude or practised
ability in producing the work. By judgment, I mean the use of one's capacity
for discernment or ability to form an opinion or evaluation by comparing
different possible options in producing the work. This exercise of skill and
judgment will necessarily involve intellectual effort. The exercise of skill
and judgment required to produce the work must not be so trivial that it could
be characterized as a purely mechanical exercise. For example, any skill and
judgment that might be involved in simply changing the font of a work to
produce "another" work would be too trivial to merit copyright
protection as an "original" work.
[92]
As well, there is no dispute that whether there
is infringement or not is determined under section 3(1) and 27(1) of the Copyright
Act, such that it is an infringement of copyright for anyone to reproduce “the work or any substantial part thereof”. The
question of whether a substantial part of a work has been reproduced is
determined by its quality and not its quantity. The substantial part of a work
is that which represents a substantial portion of the author’s skill and
judgment (Cinar Corporation v Robinson, 2013 SCC 73 at paras 25-27).
[93]
There is also no dispute that in this case, the
Defendant 411 Travel Buys copied the Plaintiff’s metatags, in copying the title
tags, meta descriptions and meta keywords on 48 pages of the 411 Travel Buys
website. On some pages, even spelling errors in the Plaintiff’s metatags were
reproduced. Notwithstanding arguments by the Defendants that many of the words
used in the metatags are common to the travel industry, which may be true,
there is no doubt that copying of the Plaintiff’s metatags, as alleged, did
occur.
(1)
Does Copyright subsist in the Plaintiff’s
metatags?
[94]
What is a metatag? A metatag is a word or small
phrase that’s embedded in the source code of a website. It is not visible on
the actual page itself. When a person types a phrase into the search bar of a
search engine, such as Google, it uses an algorithm to search through the
internet looking for web pages with those particular words in them. The greater
the number of times a term appears in metatags and in the text of the webpage
itself, the greater the chance that a search engine will choose that website to
be listed higher on the list of search results (page 1 of the results list as
opposed to page 6, for example). Search Engine Optimization is an important
step in marketing a company’s wares or services. While Google does use some
metatag data in their search rankings, it has not used keyword metatags for
many years prior to 2009.
(2)
How then does a metatag fit within the scope of
copyright protection in Canada?
[95]
That question is still being debated in Canada as well as the United States, England and elsewhere in the world.
[96]
Justice Roger Hughes in Netbored Inc v Avery
Holdings Inc, 2005 FC 1405, considered copyright in metatags, in the
context of a review of the execution of an Anton Piller Order and conversion of
an interim injunction into an interlocutory injunction. While commenting
generally on copyright in metatags, he questioned whether they are “…simply formulae derived arrangements designed to serve a
business function something like the arrangement of information in
Tele-Direct(Publications) Inc v American Business Information [1998] 2 FC 22
(FCA)”. While not deciding the issue, he certainly questioned the merit
of copyright protection in metatags.
[97]
Justice Christopher Grauer, in a more recent
decision of the British Columbia Supreme Court in Insurance Corp of British
Columbia v Stainton Ventures Ltd, 2012 BCSC 608, found that “the behaviour of search engines is not, in my view, evidence
of anything other than the operation of an algorithm, and search-engine
marketing.” In that case, he refused to find any evidence of confusion
or passing off in the tendency of search engines to turn up the defendant’s
ICBCadvice.com website among others in response to an internet search for
“ICBC”. While not on point with respect to copyright infringement, the decision
bears scrutiny on the finding that a metatag, in the context of a search
engine, is merely “the operation of an algorithm”.
[98]
As stated by the Federal Court of Appeal in Tele-Direct
(Publications) Inc v American Business Information, Inc, [1998] 2 FCR 22
(CA) [Tele-Direct], when considering originality of a work it must be
independently created by the author, and which display at least a minimal
degree of skill, judgment and labour in its overall selection or arrangement.
Moreover, when an idea can be expressed in only a limited number of ways, then
its expression is not protected as the threshold of originality is not met (Delrina
Corp (cob Carolian Systems) v Triolet Systems Inc, [1998] OJ No 2967 at
paras 48-52 [Delrina]; leave to appeal refused, [2002] OJ No 676 (CA)).
[99]
In Distrimedic Inc v Dispill Inc, 2013 FC
1043, Justice Yves de Montigny of this Court considered the Tele-Direct
and Delrina cases above, and held that the forms and other works
resulting from the plaintiff’s compilation of elements will not be considered
to have a sufficient degree of originality when the selection of the elements
entering into the work are dictated by function and/or law, and where their
arrangement into a tangible form of expression is not original. He found that only
the visual aspect of the work is susceptible to copyright protection, if
original.
(3)
Did either of the Defendants infringe the
Plaintiff’s copyright in the metatags by using same on the Defendants’ website?
[100] The evidence before me shows that the Plaintiff’s redtag metatags
allegedly copied by the Defendants were substantially derived from a list of
Google key words which are then incorporated into short phrases descriptive of
travel industry types of travel, locations, and discounts or deals for
consumers. Examples included in comparisons of the redtag.ca and
411travelbuys.ca webpages related to, for instance, cruises, group vacations,
nolitours and hola-sun holidays, are indicative of the common generic terms
used in this regard, to attract consumers, to buy travel packages for various
destinations.
[101] In this case there is little evidence of any sufficient degree of
skill and judgement in creating these metatags, as is required by the test set
out by the Supreme Court of Canada in CCH, above, or for the originality
required in compiling data or other compilations, as discussed by the Federal
Court of Appeal in Tele-Direct. While in some cases there may be
sufficient originality in metatags to attract copyright protection when viewed
as a whole, the substance of the metatags asserted by the Plaintiff in this
case does not meet the threshold required to acquire copyright protection in Canada.
[102] I also find that even if copyright could subsist in the Plaintiff’s
metatags, there has not been substantial copying, when one has regard to the
Plaintiff’s website as a whole. The Defendants only copied metatags on 48 pages
of approximately 180,000 pages on the Plaintiff’s website. While the Court
should look at infringement from a qualitative, not quantitative perspective,
what is required is substantial similarity between the original work and
allegedly infringing work that is observable when they are viewed as a whole. I
do not find that a substantial part of the reproduction contains a substantial
part of the skill and judgment on the part of the Plaintiff’s author or authors
– this is particularly true when one considers the use of the metatags is primarily
functional in nature: their purpose is to affect the behaviour of search
engines, notwithstanding some discretion exists in the choice of words to
describe the travel options in the metatags.
[103] Moreover, I also find on the evidence that the reproduction of the
redtag.ca metatags was inadvertently done by the Defendant 411 Travel Buys and
its employee, Ms. Ntia, and would have constituted innocent infringement if any
infringement had occurred.
(4)
Did either of the Defendants infringe the
Plaintiff’s copyright by using the Plaintiff’s Cascading Style Sheet(s) or by
copying the “look and feel” of the Plaintiff’s website?
[104] I also find there is no evidence before me that the CSS of the
Plaintiff allegedly copied by the Defendants was so copied. The only basis for
the Plaintiff’s allegation rests with a screenshot of a Google search provided
by Mr. Gennaro, and nothing more. The Plaintiff’s own witness, Mr. Byers,
admitted this was the case. Further, no CSS from the Plaintiff was entered into
evidence to compare to the Defendants’ CSS. It is also admitted by the
Plaintiff’s witness Mr. Byers that the three-column “look” of the parties’
websites was common in travel industry websites in 2009, and Ms. Ntia testified
that she created the website from a template she purchased. I do not find any
copyright infringement by the Defendants on these fronts.
B.
Trademarks & Trade Name
[105] There is no dispute that the Defendants used the phrases “red tag
vacations” (in the metatags of one 411 Travel Buys page) and “shop, compare
& pay less” (in the metatags of three 411 Travel Buys pages), thereby using
the dominant words of the Plaintiff’s trade name and registered trademarks,
redtag.ca, redtag.ca vacations and Shop. Compare. Pay Less!! Guaranteed. None
of the Plaintiff’s trademarks were used by the Defendants in the visible
portion of any of 411 Travel Buys’ web pages.
[106] The 411 Travel Buys website went public (online) on January 5, 2009
and was taken down on March 10, 2009, the same day Mr. Demarinis of the
Plaintiff advised Mr. Lourenco of the Defendants of the misuse of the Red Label
trademarks. The 411 Travel Buys website did not go back online until after all
the metatags using the alleged trademarks and copyright infringing words and
phrases were removed.
[107] It is also acknowledged by the Defendants that, unlike in copyright
cases, unintentional or innocent infringement is no defence to claims of
passing off under sections 7(b), 7(c) of the Trademarks Act, trademark
infringement under section 20, or loss of good will under section 22.
V.
Passing Off
[108]
As both parties again acknowledge, for the
Plaintiff to succeed under section 7(b) of the Trademarks Act, Red Label
must prove three elements:
a.
The existence of goodwill;
b.
The likelihood of deception of the public due to
a misrepresentation; and
c.
Actual or potential damage to the Plaintiff.
Ciba-Geigy
Canada Ltd v Apotex Inc, [1992] 3 S.C.R. 120 at para 33
[109] As with copyright, there is some dispute internationally on whether
use of trademark in a metatag can constitute passing off or trademark infringement.
Both the English Court of Appeal, in Reed Executive plc & Another v Reed
Business Information Ltd & Others, [2004] EWCA Civ 159 at para 147, and
the British Columbia Supreme Court, in Insurance Corp of British Columbia v Stainton
Ventures Ltd, 2012 BCSC 608 at paras 46-47 [ICBC], found that use of
a trademark (and, I would add, a trade name) in a metatag would not support a
finding of confusion, or a likelihood of deception, and therefore trademark
infringement or passing off could not be proven by that use alone. As stated by
Justice Grauer in the ICBC case, above:
[t]he behaviour of search engines is not, in
my view, evidence of anything other than the operation of an algorithm, and
search-engine marketing. It is certainly not evidence of confusion.
[110] However, in contrast to these two cases, the Ontario Superior Court
of Justice in Pandi v FieldofwebsCom Ltd, [2007] OJ No 2739 at para 32,
stated that a website appearance can be an instrument of passing off in much
the same way as a business storefront in the physical world, and at paras
36-39, in considering use of a trade name or trademark in a metatag, stated:
36 Internet
commerce is not, however, completely comparable to pre-electronic commerce.
There are opportunities for competitive advantage and technical capabilities to
engage in unfair practices that never existed before the advent of the internet
and internet search engines. Meta tags appear to be one of them. Meta tags associated with a website are capable of bringing members of the internet public
to a site who may not have intended to go there. The meta tags used by FOW in
association with its site is the third subject matter of the plaintiffs'
complaints in connection with its claim of passing off.
38 It seems
to me that an obvious (though not necessarily the only) reason for FOW's use of
the phrase "Jumpin Jammerz" as a meta tag for its website was to draw
members of the internet public to its site who had some prior knowledge of
Jumpin Jammerz as a vendor of pajamas and believed that they could find footed
pajamas at the website associated with the words "Jumpin Jammerz".
39 In the
physical world, this might be analogized to misleadingly diverting traffic from
one trader's door to that of another. The analogy is necessarily imperfect in
that the product of search engines is merely a list, thus leaving the internet
traveller with the choice as to which sites on the list to visit and in what
sequence, but in my view, the practice of using another trader's domain name,
trade name, trade mark or logo as a meta tag for a website selling competing
wares is objectionable unless the name or mark itself is merely descriptive of
the wares sold.
A.
Existence of Goodwill
[111] Based on the evidence, including marketing on television, radio and
print media, as well as online media such as Google Ads, I find that the
substantial advertising and use by the Plaintiff of its Red Tag trade name and
its redtag.ca trademark as well as use of the Shop.Compare. Payless!!
Guaranteed. trademark, have generated sufficient goodwill or reputation in both
the trade name and trademarks as used in association with the Plaintiff’s
travel services. There is little evidence in respect of use of redtag.ca
vacations and I do not find that a sufficient reputation or goodwill have been
developed in respect of that trademark.
B.
Likelihood of misrepresentation
[112] The parties are direct competitors for providing essentially the
same travel services online to existing and prospective customers. There is no
denial by the Defendants about the use of the Plaintiff’s Red Tag trade name, the
words “red tag vacations”, or the words “shop. compare & pay less”, in the
Defendants’ metatags from January 5, 2009 to March 10, 2009. This use, at least
of the words red tag, by the Defendants, resulted in some redirected traffic
from the Plaintiff’s website providing travel services to the Defendants’
website providing the same or very similar travel services, for a period of
time.
[113] The question I must answer is whether the Defendants’ use of the
Plaintiff’s trade name and the likely confusing words red tag vacations, red
tag and shop. compare & payless words, as metatag identifiers, to attract
business to the Defendants’ website, constitutes passing off by causing a
likelihood of deception.
[114] Some United States Courts have held such use can cause “initial
interest confusion”, where confusion is caused in the customer before actually
purchasing a good or service, when the customer seeks a particular brand of
goods or services, but is drawn or enticed to a competitor’s goods or services
through the competitor’s use of the first company’s trade name or trademark.
[115] However, that approach to likelihood of confusion has not to my
knowledge gained a foothold in Canada. In any event, I do not believe that it
would be applicable to the facts of this case. The use of metatags in a search
engine merely gives the consumer a choice of independent and distinct links
that he or she may choose from at will, rather than directing a consumer to a
particular competitor. Rankings may affect the choice to be made, but
nevertheless, such a choice exists. Even if a searcher is looking for the
website connected with a particular trade name or trademark, once that person
reaches the website, there must be confusion as to the source of the entity or
person providing the services or goods. If there is no likelihood of confusion
with respect to the source of the goods or services on the website, there is no
support for finding this prong of the test for passing off. Accordingly, use of
a competitor’s trademark or trade name in metatags does not, by itself,
constitute a basis for a likelihood of confusion, because the consumer is still
free to choose and purchase the goods or services from the website he or she
initially searched for.
[116] Here, there is no use of any of the Plaintiff’s trademarks or trade
names on the Defendants’ visible website. The website is clearly identified as
411 Travel Buys’ website. There is no likelihood of deception as to the source
of the services provided on the 411 Travel Buys website, and the consumer is
free to redirect his or her search to the Plaintiff’s website.
[117] Given that I find there is no likelihood of deception, and therefore
no passing off, I need not decide on what if any damages may have been incurred
on this front.
C.
Trademark Infringement
[118]
The Plaintiff has alleged trademark infringement
under section 20 of the Trademarks Act. In order to establish
infringement under section 20 “a plaintiff must
establish that: (1) it is entitled to commence the action with respect to the
registered trade-mark in issue; and that (2) a sale, distribution or
advertisement of any wares or services has occurred; (3) in association with a
confusing trade-mark or trade-name; (4) by a person not entitled under the
Trade-marks Act to the use of the registered trade-mark; (5) as a trade-mark”
(Kelly Gill, Fox on Canadian Law of Trade-marks and unfair Competition, Fourth
Edition, Toronto ON, Carswell, 2014).
[119] Section 20 of the Trademarks Act states:
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Infringement
20. (1) The right
of the owner of a registered trade-mark to its exclusive use shall be deemed
to be infringed by a person not entitled to its use under this Act who sells,
distributes or advertises wares or services in association with a confusing
trade-mark or trade-name, but no registration of a trade-mark prevents a
person from making
(a) any bona fide
use of his personal name as a trade-name, or
(b) any bona fide
use, other than as a trade-mark,
(i) of the
geographical name of his place of business, or
(ii) of any
accurate description of the character or quality of his wares or services,
in such a manner as is not likely to have the effect of
depreciating the value of the goodwill attaching to the trade-mark.
Exception
(2) No
registration of a trade-mark prevents a person from making any use of any of
the indications mentioned in subsection 11.18(3) in association with a wine
or any of the indications mentioned in subsection 11.18(4) in association
with a spirit.
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Violation
20. (1) Le droit
du propriétaire d’une marque de commerce déposée à l’emploi exclusif de cette
dernière est réputé être violé par une personne non admise à l’employer selon
la présente loi et qui vend, distribue ou annonce des marchandises ou
services en liaison avec une marque de commerce ou un nom commercial créant de
la confusion. Toutefois, aucun enregistrement d’une marque de commerce ne
peut empêcher une personne :
a) d’utiliser de
bonne foi son nom personnel comme nom commercial;
b) d’employer de
bonne foi, autrement qu’à titre de marque de commerce :
(i) soit le nom
géographique de son siège d’affaires,
(ii) soit toute
description exacte du genre ou de la qualité de ses marchandises ou services,
d’une manière non susceptible d’entraîner la diminution de la
valeur de l’achalandage attaché à la marque de commerce.
Exception
(2)
L’enregistrement d’une marque de commerce n’a pas pour effet d’empêcher une
personne d’utiliser les indications mentionnées au paragraphe 11.18(3) en
liaison avec un vin ou les indications mentionnées au paragraphe 11.18(4) en
liaison avec un spiritueux.
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[120] Section 4(2) of the Trademarks Act provides that a trademark
is deemed to be used in association with services if it is used or displayed in
the performance or advertising of those services.
[121] For the reasons I have given above with respect to likelihood of
deception under passing off, I do not find that use of the Plaintiff’s trade
name or trademarks in metatags constitutes trademark infringement.
(1)
Section 7(c) of Trademarks Act
[122] There is no evidence before me to support a claim under section 7(c)
of the Trademarks Act.
(2)
Section 22 – Depreciation of Goodwill
[123] The section 22 claim for depreciation of goodwill requires four
elements to be proven:
Section 22 has four elements. Firstly, that
a claimant's registered trade-mark was used by the defendant in connection with
wares or services -- whether or not such wares and services are competitive
with those of the claimant. Secondly, that the claimant's registered trade-mark
is sufficiently well known to have significant goodwill attached to it. Section
22 does not require the mark to be well known or famous (in contrast to the
analogous European and U.S. laws), but a defendant cannot depreciate the value
of the goodwill that does not exist. Thirdly, the claimant's mark was used in a
manner likely to have an effect on that goodwill (i.e. linkage) and fourthly
that the likely effect would be to depreciate the value of its goodwill (i.e.
damage).
Veuve Clicquot Ponsardin v Boutiques Cliquot
Ltée, 2006 SCC 23 at para 46
[124] “Use” under section 22 requires use of the plaintiff’s trademarks,
as registered. There has been no such use here and accordingly, section 22 does
not apply. Moreover, even if it could arguably be said that there is at least
some use of redtag.ca by use of red tag, that use was not in any visible
portion of 411 Travel Buys’ website, it was in the metatags. There is no
connection between the online services of 411 Travel Buys on their website and
the services of the Plaintiff as offered on 411 Travel Buys’ website.
VI.
Liability of Carlos Lourenco
[125] The test for finding an officer or director of a corporation
personally liable is set out in Tommy Hilfiger Licensing Inc v Produits de
Qualité IMD Inc, 2005 FC 10 at paras 140-142:
140 The Ontario Court of Appeal held in
Normart Management Ltd. v. West Hill Redevelopment Co. (1998), 37 O.R. (3d) 97,
page 102:
It is well established that the directing
minds of corporations cannot be held civilly liable for the actions of the
corporations they control and direct unless there is some conduct on the part
of those directing minds that is either tortious in itself or exhibits a
separate identity or interest from that of the corporations such as to make the
acts or conduct complained of those of the directing minds: see Scotia McLeod
Inc. v. Peoples Jewellers Ltd. (1995), 26 O.R. (3d) 481 at p. 491, 129 D.L.R.
(4th) 711 (C.A.).
141 Therefore, the mere fact of
exercising control in a company is not sufficient to establish personal
liability. What kind of conduct can trigger personal liability? Le Dain J.A.
offers his views in Mentmore Manufacturing Co., Ltd. v. National Merchandising
Manufacturing Co. Inc. (1978), 89 D.L.R. (3d) 195, (1978), 22 N.R. 161
(F.C.A.):
What, however, is the kind of participation
in the acts of the company that should give rise to personal liability? It is
an elusive question. It would appear to be that degree and kind of personal
involvement by which the director or officer makes the tortious act his own. It
is obviously a question of fact to be decided on the circumstances of each
case.[...]
142 In my opinion, there must be
circumstances from which it is reasonable to conclude that the purpose of the
director or officer of a company is to deliberately, willfully and knowingly
pursue a course of conduct that will incite infringement or an indifference to
the risk of infringement. The precise formulation of the appropriate test is
obviously a difficult one. Room must be left for a broad appreciation of the
circumstances of each case to determine, if there is personal liability (Mentmore,
supra, at pages 172-174).
[126] In cases where personal liability is found, there has been a
knowing, deliberate, wilful quality to the participation of the corporate
officer or director. As well, small or closely held corporations are not to be
treated any differently:
31 This principle applies not just to
large corporations, but to small, closely held companies as well. As the
Federal Court of Appeal noted in Mentmore, at para. 24, there is no reason why
small, one or two-person companies should not have the benefit of the same
approach to personal liability as large corporations, merely because there is
generally and necessarily a greater degree of direct and personal involvement
in management on the part of its shareholders and directors.
32 That is, the mere fact that
individual defendants may be sole shareholders and directors of a company is
not, by itself, enough to support an inference that the company was their agent
or instrument in the commission of acts of infringement, or that they
authorized such acts, so as to make themselves personally liable: Mentmore, at
para. 24.
33 The necessary result of this is
that not only will the particular direction or authorization required for
personal liability not be inferred merely from the fact that a company is
closely controlled: it will also not be inferred from the general direction
which those in such control must necessarily impart to its affairs: Mentmore,
at para. 24.
34 The Federal Court of Appeal
concluded in Mentmore that to attract personal liability on the part of a
corporate director or officer:
[T]here must be circumstances from which it
is reasonable to conclude that the purpose of the director or officer was not
the direction of the manufacturing and selling activity of the company in the
ordinary course of his relationship to it but the deliberate, willful and
knowing pursuit of a course of conduct that was likely to constitute
infringement or reflected an indifference to the risk of it: at para. 28.
Petrillo v Allmax Nutrition Inc, 2006 FC
1199 at paras 31-34
[127] There is no evidence before me that Mr. Lourenco acted in any way
outside the normal course of his duties as an officer and director of 411
Travel Buys. To the contrary, he appears to have acted in good faith and
without any knowing or willful disregard for the Plaintiff trade name and
trademark rights, or any other property rights of the Plaintiff’s. He is not
personally liable.
VII.
Remedies
[128] Given my decision that there has been no violation of the
Plaintiff’s alleged copyright or trademark rights, there is no need to consider
quantification of alleged lost profits of the Plaintiff.
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