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US companies seeking to enforce intellectual property rights against Canadians face certain challenges. First, a US company would commence a lawsuit in a US court, and must serve the Canadian person or entity in Canada. A US plaintiff would serve a Canadian under the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (known as the “Hague Convention”). Under this Convention, there is a Central Authority designated federally and for each province and territory. In Alberta, this is done through Alberta Justice, Office of the Sheriff (Civil Enforcement) in Edmonton or Calgary. The normal procedure for service in Canada is personal service, and in Alberta this is through a ”process server”. Once served, the Canadian then has to decide whether to respond to the US lawsuit.

In some case, the Canadian decides to ignore the US lawsuit. This happened in Blizzard v. Simpson, 2012 ONSC 4312 (CanLII), where Blizzard Entertainment sued Michael Simpson, a developer who was alleged to have authored and sold a “maphack” for Blizzard’s popular multiplayer game known as StarCraft II – Wings of Liberty. Mr. Simpson was served in Canada but failed to file any defence to the California lawsuit. As a result, Blizzard took default judgement in which Mr. Simpson was ordered to pay statutory damages of $150,000 legal fees and costs of $45,000. A permanent injunction was also ordered to prevent further infringement of Blizzard’s StarCraft II copyright or violation of the StarCraft II End User License Agreement (”EULA”) and Battle.net terms of use (”TOU”), among other things.

Blizzard then came to Canada to enforce their US judgement against Mr. Simpson. This required a second lawsuit (in Ontario, where Mr. Simpson resided). A Canadian court assesses the jurisdiction of the original court (by applying Canadian conflict of laws rules), and verifies that there are no defences of fraud, breach of natural justice, or public policy, which would cause the Canadian court to refuse to enforce the US judgement.

In this case, Mr. Simpson elected to defend the lawsuit in Canada. But by that time it was too late, since the court was not considering the merits of the copyright infringement case, but rather was reviewing the enforcement of a foreign judgement that had already been granted. Mr. Simpson attempted a novel defence by alleging that it was Blizzard who breached the terms of Mr. Simpson’s own website (terms that prohibited access by employees or lawyers of Blizzard). The court found this argument “untenable”, and concluded by entering the California judgement as a judgement of the Ontario court.

It is worth noting that defences to the copyright infringement claim may have been available in the California lawsuit - it is clear in both Canadian and US law that a breach of the terms of use does not (by itself) infringe copyright. It is not clear whether any copyright infringement actually occurred, but Blizzard won that argument by default.

Related Reading: Apps, Bots and Workarounds

Lessons for Canadian business: don’t ignore US lawsuits!

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Any well-drafted technology or patent license agreement will contain dispute resolution provisions that may cover a number of things: such as picking a governing law in case of disputes, mandating arbitration or other alternatives to litigation, or even picking the courts or “forum” in which disputes will be heard - known as a “forum selection clause”.

Canadian licensors should take note of the recent US decision in Mitek Systems, Inc. v. U.S. Services Automobile Association, in which the forum selection clause in a technology license chose Delaware as the applicable law, and any “court of competent jurisdiction sitting in the State of Delaware” as the forum in which lawsuits must be filed. Delaware was the home jurisdiction of the licensor, though it carried on business in California, and the licensee was based in Texas.

When a dispute arose, the licensee brought a claim first, in the State of Texas. The licensor filed a second lawsuit in Delaware, claiming that was the proper forum for disputes to be heard.

See this article from the Licensing Executives Society: A Forum-Selection Clause in a License Agreement May Not Necessarily Prevent a Litigation From Being Filed and Permitted to Proceed in a Different Court for a discussion of the decision. Essentially, the court decided that other factors were more important than the forum selection clause, and the case was allowed to proceed in Texas.

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