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Hands off Uncle Sam: the limit on extraterritorial reach of Canadian injunctions in the U.S.

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Hands off Uncle Sam: the limit on extraterritorial reach of Canadian injunctions in the U.S. Aquilina Law September 8, 2021

Hands off Uncle Sam: the limit on extraterritorial reach of Canadian injunctions in the U.S.

Can a Canadian court stop a person from taking action not only in Canada but also abroad? The answer to that question was answered last year by the Supreme Court of Canada (the “SCC”). As we discussed in our previous article, “Google Inc. v. Equustek Solutions Inc., a Commercial Perspective”, the SCC confirmed the ability of Canadian courts to issue injunctions having extraterritorial reach against companies doing business in Canada and abroad.

But what happens if such an injunction violates the laws of a foreign jurisdiction? As this article will discuss, that question was answered by a U.S. court when Google Inc. (“Google”) successfully argued against the Canadian injunction application in the U.S.

Background on the Canadian case

The case originates from a claim by Equustek Solutions Inc. (“Equustek”), a company based in British Columbia, that one of its distributors, Datalink Technologies Gateway Inc. (“Datalink”), had relabelled an Equustek product and passed it off as its own, and had used Equustek’s confidential information to produce a competing product. Initially, Equustek approached Google and asked that Datalink’s websites be removed from Google’s search results. Google complied with the request but only with respect to Datalink’s domain. As a majority of the sales of the infringing products were occurring outside of Canada, Equustek sought an interlocutory injunction in the Superior Court of British Columbia, which granted the injunction preventing Google from displaying the websites on its search results worldwide. An appeal was made to the British Columbia Court of Appeal which affirmed the decision and, in a subsequent appeal, the SCC again affirmed the decision.

However, the SCC left open the possibility for Google to challenge its decision by stating:

“If Google has evidence that complying with such an injunction would require it to violate the laws of another jurisdiction, including interfering with freedom of expression, it is always free to apply to the British Columbia courts to vary the interlocutory order accordingly. To date, Google has made no such application.[i]

The U.S. case

On July 24, 2017, Google filed an action against Equustek in the District Court for the Northern District of California (the “District Court”) to prevent the enforcement of the Canadian court order. Then, Google brought a motion for a preliminary injunctive relief arguing that “the Canadian order is ‘unenforceable in the United States because it directly conflicts with the First Amendment, disregards the Communication Decency Act’s immunity for interactive service providers, and violates principles of international comity.’”[ii]

The District Court set out the elements that a party seeking a preliminary injunction must establish[iii]:

  1. it is likely to succeed on the merits of its claims;
  2. it is likely to suffer irreparable harm in the absence of preliminary relief;
  3. the balance of equities weighs in its favour; and
  4. an injunction is in the public interest.

Merits of Section 230 of the Communications Decency Act

The District Court focused on the likelihood of success on the merits of Section 230 of the Communications Decency Act, which provides immunity from liability for providers of interactive computer services who publish content created by third-parties. The District Court went on to analyze the three elements that must be met in order to qualify for the Section 230 immunity[iv]:

  1. the defendant must be a “provider or user of an interactive computer service”;
  2. the information in question must be “provided by another information content provider”; and
  3. the cause of action asserted by the plaintiff would hold the defendant liable as the “publisher or speaker” of that information.

In holding that Google is likely to succeed based on Section 230, the District Court held that the first element for immunity had been met since Google is a provider of an interactive computer service (which is defined as any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions). Since Datalink, not Google, was the provider of the information in question, the second element was satisfied. Finally, the District Court held that the last element had been met since the Canadian order held Google liable as the publisher or speaker of the information.

Irreparable harm, balance of equities, and public interest

The District Court held, after engaging in a somewhat superficial analysis, that the remainder of the elements for a preliminary injunction had been established: Google is harmed because the Canadian court restricts the activity that Section 230 protects, the injunction would deprive Google of the benefits of U.S. federal law, and an injunction would serve the public interest.

Since the District Court held that Google is likely to succeed on the merits of a Section 230 claim, it did not address the issues of the First Amendment and international comity. On November 2, 2017, in granting Google’s motion for preliminary injunctive relief, the District Court concluded by stating that “the Canadian order undermines the policy goals of Section 230 and threatens free speech on the global internet.”[v] On December 14, 2017, the District Court granted Google’s motion for default judgment and for permanent injunctive relief.[vi]

The Effect of the Decision

This decision could mean that Canadian businesses in situations like that of Equustek may now have limited legal recourse in stopping people who pass off their products to the extent that they are availing themselves of internet resources located outside of Canada (although accessible by third parties from within Canada).

Ultimately, the U.S. court’s decision is unlikely to be the end of this judicial saga as Google may go back to the Canadian court using this decision to demonstrate that the Canadian order violates U.S. laws and asking that the Canadian injunction be limited to Canadian soil. But even if it doesn’t, the District Court’s decision renders the Canadian injunction nugatory as far as its effects in the U.S. are concerned.

It is regrettable that the bold approach of the Canadian courts to the effective enforcement of commercial actions against a wrongdoer operating over the internet was stymied by the hyper-protective American stance on free speech. As a matter of justice, and basic political philosophy, one would not have expected the rights of a search engine provider, much less its free speech rights, to act as a protective shield for the commercial misdeeds of a third party.

[i] Google Inc. v. Equustek Solutions Inc., 2017 SCC 34, [2017] 1 S.C.R. 824 at para 46.

[ii] Google LLC v. Equustek Solutions Inc., Case No. 5:17-cv-04207-EJD, 2017 WL 5000834 (N.D.Cal. Nov 2, 2017).

[iii] Ibid.

[iv] Ibid.

[v] Ibid.

[vi] Google LLC v. Equustek Solutions Inc., Case No. 5:17-cv-04207-EJD (N.D. Cal. Dec. 14, 2017).

This article is for informational purposes only and does not constitute legal advice. If you wish to discuss your issue with a lawyer, contact Martin Aquilina today.

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