Litigation & Dispute Resolution

In 2014, the B.C. Supreme Court ordered Google Inc. (Google) and Google Canada Corporation (Google Canada) to remove all of a company’s websites from its search results. As we noted in our June 2014 Blakes Bulletin: Can’t Search This: B.C. Court Grants Global Restraining Order Against Google, the Supreme Court’s decision marked the first time a Canadian court ever made an order resulting in an injunction against a non-party with such global ramifications.
On June 11, 2015, the B.C. Court of Appeal in Equustek Solutions Inc. v. Google Inc. dismissed Google and Google Canada’s appeal from the Supreme Court’s order. In dismissing the appeal, the Court of Appeal articulated important principles about when the courts will take jurisdiction over companies doing business on the Internet without a physical presence in the forum and when injunctions may be issued against non-resident, non-parties.
The underlying action involved an intellectual property dispute in B.C. The plaintiffs manufactured computer networking devices. They claimed that the defendants stole their trade secrets and used those secrets to sell and distribute a competing product on the Internet, passing it off as a product of the plaintiffs.
The defendants had carried on business in B.C., but moved entirely online through a complex and expanding network of websites through which they marketed their products. These websites were the subject of numerous court orders, including an order prohibiting the defendants from carrying on business through any website. The defendants ignored these court orders and continued to market their products online.
Google was not a party to the underlying action. The defendants’ websites, however, were listed on Google’s search engine. Google initially complied with the plaintiffs’ request to remove specific web pages (or URLs) from its Google.ca search results (i.e. from searches originating in Canada), but was unwilling to categorically block the defendants’ websites from appearing in any search results, conducted on any Google website, from any location anywhere in the world.
The plaintiffs brought an application to the B.C. Supreme Court for an interim injunction against Google and Google Canada to stop them from including the defendants’ websites in worldwide search results. Google and Google Canada opposed the order on the basis that the B.C. court did not have jurisdiction — neither was present in B.C. and the injunction would not relate to Google doing or refraining from doing anything in either B.C. or Canada. Google argued that even if the B.C. courts had jurisdiction, the Supreme Court should decline to make the order because it would amount to a worldwide order that could not be enforced and because it would constitute an unwarranted intrusion into Google’s lawful business activities as a search engine.
The B.C. Supreme Court concluded that it had territorial jurisdiction to grant an injunction against Google under the Court Jurisdiction and Proceedings Transfer Act. It found that even though Google is incorporated in Delaware and operates out of California, it carried “on business in the province” on the basis that it sells advertising to B.C. clients. Having found territorial jurisdiction, the Supreme Court refused Google’s alternative argument that California was the more appropriate jurisdiction to hear a claim for an injunction with worldwide impact.
Finally, Google argued that the Supreme Court did not have the authority to grant an injunction over a non-party, non-resident. All parties agreed that a Canadian court had never made such an order. The Supreme Court, however, concluded that it would be the first and found that it could grant the injunction against Google. The Supreme Court analogized the injunction sought to a Mareva injunction, which prevents a party from removing assets from the court’s territorial jurisdiction and can be ordered against non-parties (usually financial institutions). 
From there, the Supreme Court applied the test for an interlocutory injunction, and determined that the plaintiffs in this case would experience irreparable harm to their business if the injunction was not granted. Google, by contrast, could not claim a similarly drastic impact if an injunction was granted. On this basis, the Supreme Court granted order. 
On appeal, the Court of Appeal found that because the Supreme Court had territorial jurisdiction over the underlying subject matter of the dispute — the plaintiffs’ intellectual property dispute — the court had territorial jurisdiction over the injunction application regarding the non-parties (Google and Google Canada). The Court of Appeal ruled that the focus of the analysis must be the main dispute (the “proceeding” in question), and not the narrow issue of the application against the non-party. This is a potentially significant expansion of the courts’ power over non-resident, non-parties.
The Court of Appeal then addressed whether the B.C. courts had constitutional, territorial jurisdiction over Google itself. The Court of Appeal agreed that the Supreme Court could assume jurisdiction over Google because it conducted business in B.C. through its advertising, search and proprietary information gathering activities, all of which were part of its “business.”
Having found that the Supreme Court was correct to assume jurisdiction over the dispute and Google, the Court of Appeal went on to consider whether the Supreme Court was correct in finding that it had the authority to grant the injunction. Google took the general position that there were clear limits on the Supreme Court’s authority to grant the order in this case. It argued that because there was no claim between the plaintiffs and Google, the Supreme Court had no power to grant the injunction. The Court of Appeal acknowledged that while it was unusual for a court to make an order against a non-party, that did not mean that courts were powerless to do so. The issue really was one of judicial discretion and the principles to be applied when exercising that discretion.
The Court of Appeal rejected Google’s argument that there were limits on the Supreme Court’s authority to grant an injunction with extra-territorial effect, noting that “[o]nce it is accepted that a court has in personam jurisdiction over a person, the fact that the court’s order may affect activities in other jurisdictions is not a bar to making an order.”
While the Court of Appeal noted there was no firm rule against making an order with extra-territorial effect, a court should be mindful of the principle of comity, which requires courts to respect the jurisdiction and norms of other courts and nations. In particular, the Court of Appeal agreed with intervenor, Canadian Civil Liberties Association’s submission that in making orders with worldwide effect, B.C. courts must be very cautious in making orders that might place limits on expression in another country. The Court of Appeal held that where there is a realistic possibility that an order with extra-territorial effect may offend another state’s core values on freedom of expression, the order should not be made.
However, on the facts before the Court of Appeal, there was nothing impacting foreign freedom of speech or violating principles of comity. The defendants were not using the websites for any legitimate or lawful activity. The Court of Appeal concluded that the Supreme Court was correct in finding that the balance of convenience favoured granting the injunction against Google in these circumstances. Any issues arising from issues of international comity or restrictions on freedom of expression in other countries could be addressed by the parties or others with identifiable legal interests coming before the court to seek a variation of the order. Other provisions in the order, such as a sunset clause, could be used in appropriate circumstances.
The Court of Appeal’s decision clarifies a number of important points about how courts must deal with foreign non-parties.
First, the decision confirms that businesses operating over the Internet will be found to carry on business in B.C. where they have commercial connections with residents or other businesses in the province, even if they do not have a physical presence there.
Second, the likely result of the way in which the Court of Appeal defined the nature of a “proceeding” is that the scope of analyzing jurisdiction is now considerably more expansive in relation to non-parties where an underlying “proceeding” has been initiated and has a legitimate connection with B.C.
Third, the Court of Appeal’s conclusion that there is no prohibition on the Supreme Court’s authority to grant injunctions against non-parties and to grant injunctions with worldwide impact calls into question some recent Supreme Court statements in which it had declined to make orders against innocent, non-resident,
non-parties, so long as the court can find that it has jurisdiction over that non-party. The Court of Appeal’s decision confirms the courts’ ability to make such orders and likely quiet concerns about judicial overstretch, by placing the obligation on the court to limit itself in the exercise of its discretion.
Finally, in exercising this discretion in the context of worldwide orders, the Court of Appeal’s analysis of comity is a welcome development in the law. Courts must be mindful of the impact their orders may have on activities in a foreign country, which may have different fundamental norms about expression and other constitutional principles. Courts now are charged with accommodating comity within their orders as a matter of discretion and must provide an ability of the parties and non-parties with identifiable legal interests to appear before the court to amend or clarify the order.
For further information, please contact:
Joe McArthur      604-631-3383
Mathew Good     604-631-4282
Tom Posyniak     604-631-5257
or any other member of our Litigation & Dispute Resolution group.
Tags: Information Technology, Litigation & Dispute Resolution, United States

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