Written by Gavin H. Finlayson and Gannon G. BeaulneMore than ever before, foreign companies with websites accessible by Canadians should consider whether their online activities”even mere data gathering”put them at risk of being subject to the jurisdiction of a Canadian court. In its recent decision in Equustek Solutions Inc v Google Inc, the Court of Appeal for British Columbia made clear that foreign companies can become subject to Canadian laws and courts due to their online interactions with Canadians, even without a physical presence in Canada.
In Equustek, the plaintiffs sued in British Columbia for trademark infringement and unlawful appropriation of trade secrets. They alleged that the defendants were selling counterfeit versions of their products. The plaintiffs obtained injunctions prohibiting the defendants from carrying on their business, and Google agreed to de-index certain webpages from search results. But the defendants continued to sell their products online by simply moving objectionable content to new webpages within their websites. The plaintiffs described the situation as a game of "Whack-A-Mole" in which the defendants were able to nimbly circumvent Google's voluntary de-indexing of the offending webpages.
To forestall this clandestine method of doing business, the plaintiffs applied for an interim injunction against Google, the world's leading search engine. Google was a third party to the substance of the litigation and was only involved by virtue of its dominance in the search engine market. Although Google had voluntarily de-indexed some 345 URLs from search results on google.ca, the plaintiffs turned to the British Columbian courts to force Google to stop indexing or referencing in search results the defendants' websites altogether.
Google argued at the injunction hearing that, among other things, it was not connected with British Columbia in a sufficiently meaningful manner to permit British Columbian courts to assume jurisdiction in personam over Google. Google is a foreign company: it is incorporated in Delaware and headquartered in California. It does not have employees, offices, or servers in the province. It submitted that the British Columbian courts lacked jurisdictional competence on the injunction application.
Justice Fenlon of the Supreme Court of British Columbia disagreed with Google. She accepted that Google's search engines are not "passive" information websites. Rather, these websites anticipate requests and gather data, and Google also sells advertising to British Columbian customers. Justice Fenlon therefore concluded that she had territorial competence over Google. Ultimately, she granted the interim injunction.
On appeal, the Court of Appeal for British Columbia upheld Justice Fenlon's decision. It held that Google's activities in gathering data through web crawling software, distributing targeted advertising to local users, and selling advertising to local businesses were sufficient to establish a jurisdictional nexus with British Columbia, even absent a physical presence in the jurisdiction in the form of employees, offices, or servers.Equustek may indicate a greater willingness on the part of Canadian courts to assert jurisdiction over foreign companies doing business with Canadians through the ostensibly borderless Internet. If this trend continues, the implications for companies located outside of Canada but with a virtual presence accessible by Canadians could be significant. Such businesses may be at risk of having to comply with a broad range of Canadian laws and regulations”including (but in no way limited to) rules governing tax, privacy, anti-spam, consumer protection, language, advertising, contracts, product safety, intellectual property, and civil procedure.
This risk extends beyond search engines and websites that sell goods directly to Canadians. For example, websites that collect data through cookies, registration, or subscriptions may also be subject to Canadian jurisdiction in some circumstances. Although previous case law suggested that Canadian courts would not assert jurisdiction in personam merely because a passive website was accessible by Canadians, the range of online activities considered sufficiently passive to preclude assertions of jurisdiction may be shrinking.
Businesses may be able to take steps to mitigate these risks. For example, in an unrelated forum non conveniens decision released in June, the Court of Appeal for British Columbia decided in Douez v Facebook, Inc that a class action should not proceed against Facebook in British Columbia because Facebook's contract of use specified that all disputes would be resolved in California. Other ways of managing the risk of becoming subject to Canadian laws and courts due to online interactions with Canadians might also be available, depending on the specific business and context.
It remains to be seen whether Google will attempt to appeal this decision to the Supreme Court of Canada. But, for now, foreign companies interacting online with Canadians, including by collecting data, are well-advised to consider their connections to Canada and the risks that they may be unwittingly assuming.