Cybersquatting

By Alan Gahtan - August 27, 2001

While the Canadian government has yet to enact powerful anti-cybersquatting legislation like our southern neighbor, Canadian courts have shown that they are nevertheless prepared to defend the rights of trademark holders. A recent decision of the Saskatchewan Queen’s Bench joins only a handful of other Canadian decisions regarding the use of Internet domain names. However, in addition to the now common injunctive remedy, the Court also awarded damages and costs and suggested that even punitive damages may be appropriate in future cases.

The plaintiff in Saskatoon Star Phoenix Group Inc. v. Steven Noton (March 28, 2001) carried on the business of publishing The StarPhoenix, a Saskatoon daily newspaper which is the largest daily newspaper in Saskatchewan and is widely distributed throughout the province. The plaintiff also maintained an internet website with the domain name and address “www.thestarphoenix.com” which contained the current days lead news stories from the paper edition along with paid advertising.

Sometime between July and November 2000, the defendant created an Internet website with the domain name and address “http://saskatoonstarphoenix.com” and set up the main page of his site to look exactly the same as the plaintiff’s main page except that different advertising was substituted. The bottom of the defendant’s page also contained a notice that the site was “designed, hosted and marketed” by the defendant and also contained a scrolling message promoting the defendant’s owned services.

The defendant also inserted metatags (which are special tags that are indexed by Internet search engines) that contained repeated variations and combinations of “StarPhoenix”, “Saskatoon StarPhoenix” and “newspaper” – search terms that a member of the public would enter when looking for the plaintiff’s website.

The defendant maintained a separate corporate website where he advertised for sale “thestarphoenix.com” and “starphoenix.com” domain names. The defendant also maintained a shopping website which contained a link labeled as “The StarPhoenix”, which when selected, would take a visitor to the defendant’s website.

After becoming aware of these activities, the plaintiff attempted, through phone calls and letters, to pursuade the defendant to cease his activities. After failing to obtain a satisfactory response, the plaintiff applied and was granted an interlocutory injunction pending trial on December 21, 2001.

The Court found that the plaintiff had established all three of the necessary components for passing off in its affidavit materials: (1) the existence of goodwill, (2) deception of the public due to a misrepresentation and (3) actual or potential damage to the plaintiff. It issued an injunction restraining the defendant from using variations of the defendant’s domain name or directing public attention to his websites in such a way as to cause or be likely to cause the public to think the defendant’s website is the plaintiff’s website. The defendant was also ordered to transfer to the plaintiff registration of the three domain names at issue.

In addition to injunctive relief, the plaintiff asked for an award of damages for loss of goodwill and reputation, punitive damages, and costs on a solicitor and client basis. The Court awarded $5,000 for general damages based upon the short period of time during which the passing off had occurred and a finding that there was minimal damage to the plaintiff’s goodwill and reputation (because the nature of the damage consisted largely of inconvenience to users of its website).

The Court did not find it appropriate to award punitive damages because it believed that there was very little, if any, precedent to guide would be entrepreneurs of domain names prior to this and other recent decisions. However, it stated that punitive damages may be appropriate in the future if, after several decisions such as this, the defendant or otherwise persist in such activities.

The Court disapproved of the defendant’s unwillingness to investigate his legal position after he was warned by the plaintiff that his activities were unlawful and having put the plaintiff to the expense of legal proceedings to shut down his activities. It granted “enhanced” costs after finding that in the circumstances, it is reasonable that the plaintiff should receive something more than party and party costs, and it is reasonable that the defendant have brought home to him that he cannot with impunity cause other people to incur legal expenses to shut down his unlawful activity, as opposed to voluntarily ceasing such activities.

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