Molson Breweries v. Kuettner, docket T-106-99

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Date: 19991209

Docket: T-106-99

Ottawa, Ontario, this 9^th day of January, 1999

PRESENT: MADAM PROTHONOTARY ROZA ARONOVITCH

BETWEEN:

MOLSON BREWERIES, A PARTNERSHIP

Plaintiff

- and -

MARCUS KUETTNER, JASON MURRAY,

AND SAYCAN INDUSTRIES

Defendants

REASONS FOR ORDER AND ORDER

[1] The plaintiff seeks leave to deposit the declaration of Leonard L. Orentas, the acting manager of Dispute Administration for Network Solutions, Inc. ("NSI"), dated October 5, 1999, tendering control over the use and registration of the domain names, molsons.com and molsonbeer.com, into the Registry of this Court.

Background

[2] This application arises in the context of an action commenced by the plaintiff on January 25, 1999, for infringement, passing off and depreciation of goodwill of the registered trade-marks MOLSON and MOLSON"S. Within the relief sought, is an order requiring the defendants to transfer ownership of the Internet domain names molsons.com and molsonbeer.com.

[3] NSI, an American company based in Herndon, Virginia, is responsible for the registration of "second-level" Internet domain names, in this case, "molson" and "molsonbeer" in the "top-level" .com, .org, .net and .edu domains.

[4] Through the affidavit of Barry E. Hutsell, the plaintiff tenders in evidence, NSI"s Domain Name Dispute Policy, as well as, the "Frequently Asked Questions" page from NSI"s Domain Name Dispute Policy.

[5] The following summarizes the provisions of the dispute policy. NSI registers domain names on a "first come, first served" basis. It does not determine the legality of the domain names registration, or otherwise evaluate whether that registration or use may infringe the rights of a third party.

[6] Pursuant to the policy, NSI has the right to revoke, suspend, transfer or otherwise modify a domain name registration upon notice, or at such time as it receives a properly authenticated order from a Court of competent jurisdiction requiring same.

[7] While NSI neither acts as an arbiter nor provides resolution of disputes arising out of the registration and use of domain names, if presented with information that a domain name may be violating the trade-mark rights of a trade-mark owner, it applies a process stipulated in some detail in the policy. Thus, where it receives a complaint with satisfactory evidence of trade-mark ownership and the potential for legal harm that the owner may be suffering, it has the authority to put the impugned domain name on "hold."

[8] In the instant case, the policy having been engaged by notice on behalf of the plaintiff, the disputed domain names; molson.com and molsonbeer.com, are currently on "hold" and their use and registration is sough to be tendered to the Court by way of the deposit of the declaration of Mr. Orentas.

[9] According to the declaration, NSI"s records indicate, the defendant SAYCAN Industries as the registrant of the molsons.com and molsonbeer.com, domain names. Having placed the domain names on "hold," NSI declares that it will not allow any change to the registration record or change the status of the domain names until either: the Court renders a temporary or final decision regarding the interests of the above-named party in the domain name; or, NSI receives a voluntary dismissal filed by the plaintiff.

[10] In the meantime, through the deposit of this declaration with the Registry of the Court, NSI purports to "tender to the Court complete control and authority regarding the disposition of the registration" of the molsons.com and molsonbeer.com domain names.

[11] The declaration, by its terms, expires automatically and in the event the Court declines to accept the tender of the declaration, control and authority regarding the registration and use of the domain names in question reverts to NSI one hundred and twenty (120) days from the date of the declaration, namely, October 5, 1999.

The plaintiff"s arguments

[12] The motion was originally brought unopposed and with the consent of the individual defendants, in writing, pursuant to Rule 369 of the Federal Court Rules, 1998 ("the Rules"). The applicant stated that there was no provision for the deposit of the declaration into Court and without more, relied on Rule 4 of the Federal Court Rules, 1998 . Further submissions were then requested regarding the Court"s jurisdiction to accept the deposit and the motion was set down for hearing. The defendants, while either consenting or not opposing to the application, made no submissions in support.

[13] NSI is not a party to this action and the declaration, the plaintiff argues, has the effect of maintaining the status quo ante with respect to the domain names until further temporary or final order of the Court in respect of the competing interests in this action.

[14] The plaintiff also submits that effective January 1, 2000, NSI plans to change its dispute policy and will no longer place disputed domain names on "hold." Thus, should the Court decline to accept the deposit of the domain names, it would be possible that the disputed domain names could be taken off "hold" and used once more by the defendants or possibly a third party, if the corporate defendant ceases to pay its fees, and the names become available for registration by a third party.

[15] It is argued therefore, that the interests of the litigation would best be served if the Court were to accept the deposit of the disputed domain names and to retain authority and control over the same to ensure their "safekeeping". This would assure that the plaintiff"s trade-marks are not used as second-level domain names without its consent and that a third party could not do so "without first obtaining the approval of this Honourable Court".

[16] In that regard, it is submitted that the Court has jurisdiction pursuant to Rules 377 and 378 of the Federal Court Rules, 1998, to provide for the custody and preservation of property, and may accordingly, order the deposit of the declaration of Mr. Orentas with the Registrar.

[17] The property in question, the domain names, constitute intangible property in the possession of a third party thus, the plaintiff relies on Reading & Bates Construction Co. et al v. Baker Energy Resources Corp. et al, (1998) 20 C.P.R. 3d 396. In that case, the Court, concerned that profits for which the defendants would have to account to the plaintiff would be dissipated, required a third party to pay those profits into Court.

[18] In the alternative, the plaintiff relies on Rule 4 of the Federal Court Rules, 1998, the "Gap Rule" which permits the Court to grant an order in respect of procedural matters not provided for within the rules, if it can be demonstrated that such an order might be contemplated by other relevant Federal Statutes or the Rules of Practice of the Superior Court of a Province to which the subject matter of the proceeding most closely relates.

[19] As no other federal statutes permit the deposit of a declaration of this sort, having reference to items of intellectual property, the plaintiff submits for the Court"s consideration, Rules 30.11 and 45.01 of the Ontario Rules of Civil Procedure (R.R.O. 1990, Reg 194) and Rule 46 of the Supreme Court Rules, B.C. Reg 221/90. These jurisdictions are chosen in light of the residence of the offices of the plaintiff and the defendants respectively.

[20] Rules 377 and 378 of the Federal Court Rules, 1998, provide as follows:

377. (1) On motion, the Court may make an order for the custody or preservation of property that is, or will be, the subject-matter of a proceeding or as to which a question may arise therein.

(2) Rule 374 applies to interim orders for the custody or preservation of property referred to in subsection (1), with such modifications as the circumstances require.

378. (1) An order under subsection 377(1) shall

(a) identify the property to be kept or

preserved;

(b) state where, by whom, for how long and at whose cost the property is to be kept or preserved; and

(2) An order under subsection 377(1) shall be directed solely to the protection of the property in question.

377. (1) La Cour peut, sur requête, rendre une ordonnance pour la garde ou la conservation de biens qui font ou feront l'objet d'une instance ou au sujet desquels une question peut y être soulevée.

(2) La règle 374 s'applique, avec les adaptations nécessaires, aux ordonnances provisoires pour la garde ou la conservation de biens.

378. (1) L'ordonnance rendue en vertu du paragraphe 377(1) :

a) identifie les biens à garder ou à conserver;

b) précise dans quel lieu, par qui, pendant combien de temps et aux frais de qui les biens doivent être gardés ou conservés;

c) précise si les biens doivent être assurés et, dans l'affirmative, la personne qui assumera le coût de l'assurance.

(2) L'ordonnance rendue en vertu du paragraphe 377(1) porte exclusivement sur la protection des biens en cause.

[21] Rule 30.11 of the Ontario Rules of Civil Practice Procedure allows the deposit of confidential documents for safekeeping with the Registrar, Rule 45.01 permits the Court to make an interim order for the custody or preservation of any property at issue in a proceeding. The corresponding Rule 46 of the Supreme Court Rules, B.C., in the same vain, authorizes the detention of property in addition to its custody and preservation.

Analysis

[22] As a preliminary matter, I do not agree that the Court need have regard to the above rules of practice or indeed that the Gap Rule has any application where there subsists an applicable Federal Court Rule. If Rules 377 and 378 cannot be relied on by the plaintiff, the application by the Court of a similar provincial court rule, which may have broader scope, would have the effect of amending the Rules which is neither the intended nor appropriate application of the Gap Rule.

[23] As a result, the question before me is as to whether Rules 377 and 378 may be applied in the circumstances of this case.

[24] To come within the ambit of Rules 377 and 378, the plaintiff must identify the property in respect of which the Court will exercise its jurisdiction and persuade the Court that such property requires protection. Indeed, the issuance of an order pursuant to Rule 377 is to be directed solely to the protection of the property in question. Rothstein J. (has he then was), in Perini America Inc. v. Alberto Consani North America Inc., (1992) 57 F.T.R.139, sets out the tests to be met in that regard. The context is an application pursuant to Rule 470, the precursor of the current Rule 377.

The law respecting applications under Rule 470 has been outlined in Société pour l'administration du Droit de Reproduction Mécaniques des auteurs, compositeurs et éditeurs (S.D.R.M.) v. Trans World Record Corp. [1977] 2 F.C. 602, where at page 604 Pratte J. states:

It should be borne in mind that Rule 470, which is in this respect similar to the Rules dealing with interlocutory injunctions, is a provision the sole purpose of which is to maintain the status quo by ensuring the preservation of property that is the subject matter of an action.

This being the case it is necessary to have regard to those tests that have been established for interlocutory injunctions. The tests were originally formulated in American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (H.L.) and are now well known. The tests were adopted by the Supreme Court of Canada in Manitoba (Attorney General) v. Metropolitan Stores Ltd., [1987] 1 S.C.R. 110. They are:

a) has the applicant demonstrated a prima facie case, or at least a serious question to be tried;

b) has the applicant demonstrated that unless the injunction is granted, it will suffer irreparable harm that is not susceptible to, or is difficult to compensate in damages; and

c) with which party does the balance of convenience lie.

[25] He held moreover, that the threshold test requires the plaintiff to demonstrate that there is a serious question to be tried in relation to the substantive action and not in relation to the procedural application under the former Rule 470 now 377.

[26] As stated above, it is the applicant"s onus to identify the property which is sought to be preserved, as well as the respective rights in such property. It is not evident that intellectual property may not be "property" within the meaning of Rules 377 and 378 or that the categories of what may constitute "property" are closed (Unilux Manufacturing Co. v. Miller, [1995] F.C.J. No. 455). In addition, the retention or custody of property in the Court, is not precluded either by the wording of the above Rules or otherwise (Reading & Bates Construction Co. et al v. Baker Energy Resources Corp. et al, (1998) 20 C.P.R. 3d 396). The application fails however, in that neither the exact nature nor the effect of the deposit of the declaration is clear.

[27] The plaintiff suggests in argument, that "an element of the transfer of beneficial property in the domain names would occur by way of the deposit of the declaration". Counsel for SAYCAN, explains that whatever the statement in the declaration purporting to transfer control of the domain names may mean, such rights as his client may have in the domain names, would "travel with the deposit into the Court" and would accordingly be safeguarded.

[28] Admittedly, the law in respect of domain names, their registration, the rights and property which they confer is merely nascent. Having said that, the plaintiff seeks to have the Court take into custody and order the preservation of rights or property, the nature, an effect of which is unclear to the parties themselves. Among the questions outstanding and unanswered, whether the acceptance of the tender, by the Court, may give rise to rights in third parties or may be challenged by these and whether there may be a potential burden or responsibility to the Court as a result. It would appear that NSI is seeking to devolve its responsibility in favour of the Court where a more appropriate mechanism might be by way of a third party escrow arrangement. Certainly, it is not apparent that the tender is in any way necessary for the Court"s determination of the rights of the parties in the litigation.

[29] Also fatal to the application, is that the affidavit evidence required to meet the tests in Perini, is not before the Court. No evidence is tendered for example, that the plaintiff or the defendants would suffer irreparable harm if denied. The forthcoming or apprehended dispute resolution policy, which is apparently posted on-line, is not before the Court. There is no evidence of whether or how the new policy will effect the rights of the parties, especially those who are, as in this case, former registrants.

[30] Accordingly, while I am satisfied that the motion cannot succeed, I would dismiss it without prejudice to the plaintiff"s right to bring a further motion with sufficient argument and affidavit evidence to meet the applicable tests at law.

ORDER

1. The motion is dismissed without prejudice to the parties to bring a subsequent motion having regard to the above Reasons.

"Roza Aronovitch"

Prothonotary

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Molson Breweries v. Kuettner, docket T-106-99

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docket T-106-99