Internet users may consider their activities on the Internet to be anonymous. However, Canadian law has recently changed to make it easier, or at least less expensive, for copyright owners to obtain the identity of alleged copyright infringers.

Last year, Voltage Pictures, LLC (“Voltage”) was granted an order from the Federal Court of Canada requiring Rogers Communications Inc. (“Rogers”) to disclose the name and address of one of its Internet subscribers who was alleged to have infringed Voltage’s copyright:  2016 FC 881. This Internet subscriber is the proposed representative respondent in a “reverse” class action lawsuit being brought by Voltage against a number of as yet unidentified Canadians.  Voltage alleges these subscribers have infringed copyright in motion pictures owned by Voltage or related companies through unauthorized file sharing over the Internet.

Rogers was prepared to disclose the identifying information pursuant to a court order, but asked that Voltage be required to pay a fee of $100 per hour for work carried out by Rogers (plus HST). Voltage brought an appeal to contest the fee, arguing that the legislative regime precluded Rogers from charging anything, or alternatively that the fee was too high to be reasonable. In a recent decision, the Federal Court of Appeal agreed with Voltage and concluded that Roger’s fee cannot stand: 2017 FCA 97.

The Court analyzed the Notice and Notice regime. In particular, the Court discussed Rogers’ obligations pursuant to section 41.26 of the Copyright Act:

(1) A person described in paragraph 41.25(1)(a) or (b) [e.g. an Internet service provider] who receives a notice of claimed infringement that complies with subsection 41.25(2) shall, on being paid any fee that the person has lawfully charged for doing so,   a) as soon as feasible forward the notice electronically to the person to whom the electronic location identified by the location data specified in the notice belongs and inform the claimant of its forwarding or, if applicable, of the reason why it was not possible to forward it; and   b) retain records that will allow the identity of the person to whom the electronic location belongs to be determined, and do so for six months beginning on the day on which the notice of claimed infringement is received or, if the claimant commences proceedings relating to the claimed infringement and so notifies the person before the end of those six months, for one year after the day on which the person receives the notice of claimed infringement.

(2) The Minister may, by regulation, fix the maximum fee that a person may charge for performing his or her obligations under subsection (1).  If no maximum is fixed by regulation, the person may not charge any amount under that subsection.

The Court held that an Internet service provider, such as Rogers, has two sets of obligations under subsection 41.26(1) (at para. 40):

Overall, putting the two sets of subsection 41.26(1) obligations together, the internet service provider must maintain records in a manner and form that allows it to identify suspected infringers, to locate the relevant records, to identify the suspected infringers, to verify the identification work it has done (if necessary), to send the notices to the suspected infringers and the copyright owner, to translate the records (if necessary) into a manner and form that allows them both to be disclosed promptly and to be used by copyright owners and later the courts to determine the identity of the suspected infringers, and, finally, to keep the records ready for prompt disclosure.

The Court noted that under subsection 41.26(2), the responsible Minister, the Minister of Industry, may, by regulation, fix the maximum fee that an Internet service provider can charge for performing the above obligations. When no maximum fee is fixed by regulation, the Internet service provider may not charge anything for performing these obligations. The Court noted that at present, no regulation has been promulgated. Therefore, Internet service providers like Rogers cannot charge a fee for performing their legal obligations under section 41.26. In other words, “no regulation and, thus, no fee” (at para. 48).

However, the Court held that an Internet service provider can charge a fee for the actual, reasonable and necessary costs associated with the act of disclosure, because the act of disclosure does not fall within the Internet service provider’s legal obligations under section 41.26. One example of the act of disclosure is the delivery or electronic transmission of the identifying information of an alleged infringer by an Internet service provider. In Rogers’ case, some evidence suggested that Rogers’ cost of disclosure was “at most” $0.50 per IP address, although the Court found that there was insufficient evidence to make a determination on this issue (at para. 76).

The Federal Court of Appeal’s decision may have important ramifications for both copyright owners and Internet users. The Court was careful to interpret the law in a manner to ensure that it would discourage hiding illegal infringement activities under “the cloak of anonymity on the internet”. Copyright owners seeking to enforce their rights can potentially be seeking the identity of thousands of alleged infringers.  Thus, over many subscribers, the cost to obtain the identity of those subscribers can be significant unless the fee to obtain the identity of each subscriber is relatively low. The Federal Court of Appeal’s decision clarifies that an Internet service provider cannot charge a fee for discharging its obligations under the notice-and-notice regime, although it can charge a fee for “the actual, reasonable and necessary costs” associated with disclosing identifying information. Thus, this decision ensures that the cost for copyright owners to obtain information as to the identity of subscribers who are alleged to have infringed copyright will be relatively low on a per-subscriber basis.

At the moment, it remains to be seen whether Voltage will ultimately succeed in having its proposed reverse class action certified. We continue to watch as the next steps in this case to unfold.

From Kentucky Fried Chicken’s original recipe to Google’s search algorithm, the business value of a trade secret is no secret. Kentucky Fried Chicken reportedly keeps its original handwritten recipe housed in a safe encased in two feet of concrete and monitored by video cameras and motion detectors. Google’s search algorithm powers the most popular search engine in the world.

Trade secrets are more than recipes and software algorithms. Other types of trade secrets include formulas, designs, data, industrial and manufacturing processes, customer and supplier lists, business and marketing plans, etc. A trade secret is essentially any information that gives a business an advantage over its competition due to its secrecy, which the business must take reasonable efforts to protect.

A trade secret is unlike most other forms of intellectual property since there is no requirement to file an application for protection, and there is no fixed term of protection. For example, the term of a patent is usually 20 years from the filing date of the patent application. The term of a trade secret is unlimited so long as the information remains secret.

Canada, unlike some jurisdictions such as the United States, does not have any federal or provincial laws that specifically govern trade secrets. In Canada an aggrieved trade secret owner may sue under common law causes of action such as breach of confidence, breach of fiduciary duty, breach of contract, and unjust enrichment.

While every new concept developed by a business starts off as a trade secret, the business will soon need to decide whether to maintain the concept as a trade secret or attempt to patent it. Decisions will need to be made on a case-by-case basis, and numerous factors should be considered including:

• Is the concept likely to meet the patenting requirements of novelty, non-obviousness and utility? The hurdle of non-obviousness has arguably become higher in recent years. The contents of a patent application are made publicly available 18 months after filing the application, so even if a patent is not ultimately granted (or if the granted patent is later invalidated), the business cannot later claim trade secret protection.
• Is the concept patent-eligible subject matter? For example, the patent eligibility of computer-implemented inventions has narrowed in recent years. There are no subject matter constraints on trade secret protection.
• Is the concept being constantly modified. Google’s constant and incremental modifications to its search algorithm are suited to trade secret protection. (Interestingly, the PageRank system which is the original basis for Google’s search algorithm was patented but that patent is due to expire this year.)
• How susceptible is the concept to reverse engineering? If the concept is inherently self-disclosing or can be readily reverse engineered then trade secret protection may be meaningless.
• How susceptible is the concept to being independently developed by a competitor? If a competitor is likely to independently stumble onto the concept, then securing patent protection may deter the competitor from exploiting the concept, whereas trade secret protection would not prevent exploitation of what the competitor independently develops.
• How difficult would it be to detect patent infringement by a competitor? The greater the difficulty, the greater the chances of competitors being tempted to risk infringement and the greater the difficulty in actually enforcing a patent.

The key risk of trade secret protection is that the protection is lost once secrecy of the information is lost. This risk is increased in today’s environment where information is usually kept in digital form and if accessed can be instantly and widely disseminated. Businesses should take vigilant measures to safeguard their trade secrets. Measures can include:

• Assessing risks to identify and prioritize trade secret vulnerabilities.
• Securing trade secrets, including all digital and paper copies, using measures proportional to their priority and vulnerability.
• Ensuring all parties with access to the trade secret sign confidentiality agreements, including employees, contractors, and research partners.
• Educating and reminding staff on policies for safeguarding trade secrets, including at exit interviews.

In summary, trade secrets are essential to the success of many businesses. Various considerations can be weighed in deciding to protect an innovation as a trade secret or through patents. For trade secret protection, reasonable measures should be taken to control and protect the trade secret.