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This Document Contains Chapters 17 to 18 Chapter 17 Introduction to Property Law Instructor’s Manual–Answers V. CHAPTER STUDY Questions for Review, page 435 1. Are all things capable of being privately owned? Answer: Not all things are capable of being privately owned. What constitutes property capable of being owned by individuals or businesses can change over time based on what a society through its state decides. 2. What are some examples real property? Answer: Real property refers to land and whatever is permanently attached to it. Examples include mines and minerals, buildings and light posts. 3. How is personal property different from real property? Answer: Personal property is portable, so it is more difficult to track than real property, which cannot be moved. 4. What are some examples of personal property? Answer: Some examples of personal property are cars, office supplies, trade secrets, and accounts receivable. 5. How is tangible property different from intangible property? Answer: Tangible property has a physical form. Intangible property consists of legal rights. 6. How is ownership of real property acquired? Answer: Land is normally acquired through purchase or lease but sometimes ‘squatters’ can acquire rights to real property. 7. How is ownership of personal property acquired? Answer: There are several ways to acquire ownership, such as buying or making something. See the bulleted list on textbook page 418. 8. What is the bundle of rights? Answer: The collection of legal rights associated with ownership of property is sometimes characterized as a bundle of rights. Included in this bundle are the right to exclude, the right to possession, use, and enjoyment of property, and the right to transfer or dispose of property. 9. What can the owner of personal property do with it? Answer: The owner has several options, such as selling or leasing. See the bulleted list on textbook page 420. 10. How is ownership of intangible property protected? Answer: Many forms of intellectual property are protected by legislation and registry systems. Some forms of intangible property such as insurance contracts are protected by the common law of contract. 11. What is a bailment? Answer: A bailment is a temporary transfer of possession of personal property from one person to another. 12. What are some examples of bailments? Answer: Storage of property, repair of property, and the sending of a package by courier are examples of bailments. 13. How do bailments of value differ from gratuitous bailments? Answer: Commercial bailments involve payment for the use of property or another service. The courts may be less willing to enforce strict limits on liability in consumer bailment contracts. 14. What is the liability of a bailee for damage to the goods? Answer: A bailee must take reasonable care of the goods, considering all the relevant circumstances. 15. How can a bailee limit the liability for damage to the goods? Answer: A bailee can limit liability through clauses in standard form agreements. 16. How can a bailee for value collect fees? Answer: A bailee can collect a debt in the normal fashion, retain possession of the property until payment is received, and, in some cases, sell the property to recover fees. 17. When are contractual limits on damages not enforced? Answer: Contractual limits on damages are not enforced when the standard terms of the agreement are not brought to the attention of the customer, when the language of the terms fails to exclude liability for the event that occurred, and when there is a serious defect affecting the formation of performance of the agreement. The terms of the agreement must also be fair and reasonable. 18. What role does insurance play in bailment? Answer: In a bailment transaction, a carefully negotiated contract will indicate who bears the potential loss in a variety of circumstances. This will, in turn, indicate which party should seek to transfer its risk through appropriate insurance policies. Questions for Critical Thinking, page 436 1. Personal property in the form of chattels is portable. Proving and tracking ownership and possession are challenging. Should we establish a comprehensive system of registering all chattels as we do for motor vehicles? How would such a system help in verifying and tracking? Would the benefits justify the expense? Answer: The major challenges arising from personal property compared with real property (which is not portable) concern the evidence and tracking of ownership and possession. Chattels may be easily moved from one location to another and sold by people who have no legal right to do so. Prospective purchasers have no convenient means of verifying ownership. To be effective, a system of registration would need to deal with these practical difficulties, through such approaches as standardized identification numbers and centralized computer systems. The relatively small value of many chattels would not justify such a comprehensive registration system, but it might be worthwhile for more valuable items. 2. Intangible personal property includes legal rights, which may be contained in legal documents, such as a lease or a loan agreement. Are these rights as difficult to control as chattels? Should those documents be available for examination in a public registry? Answer: Intangible property is even more elusive than tangible property because its only physical form is documentary. Ownership and control depend on written evidence and contracts. Putting such documents in a public registry has obvious privacy implications and would not necessarily improve enforceability. That would still depend on locating those with contractual obligations. Intellectual property (the subject of Chapter 18) is a distinct form of intangible property with public registries established by legislation. 3. Legislation governing innkeepers’ liability for their guests’ property was developed to deal with an environment when guests were to a large extent at the mercy of innkeepers with regard to the safety of their property. Is this the case today where most hotels are professionally owned and managed? Are guests still at risk? Answer: The growing sophistication of hotel management has altered the dynamic of innkeepers’ liability in a major way. Historically, the rules were in place partially to discourage collusion between untrustworthy landlords and criminals. Presumably that risk has disappeared. The risk of loss remains since hotel staff have access to guest rooms and intruders may burglarize the hotel rooms. It is in the best interest of hotel management to implement practices to reduce these risks. Such practices involve selection and training staff, using sophisticated lock and key systems, and providing guests with their own safes. 4. The standard of care in a bailment depends on the type of bailment and the particular circumstances of the transaction. Therefore, the obligations of the bailor and bailee may be difficult to define in a contract in advance of a dispute. Would legislation be an easier way to set the standard? Answer: Although the current case-by-case setting of the standard is complicated and somewhat unpredictable, the huge variety of bailment situations makes hard and fast standards virtually unworkable. The question often comes down to whether the bailee did everything in a particular situation that a reasonable bailee would have done. It is difficult to envision standards that would not take into account the particular circumstances. Different industries based on bailment, such as storage and transportation, have developed their own standards either expressly or by implication. The standard of care in a commercial bailment always relates to what is reasonable in that particular trade. Another issue is whether the solution differs for commercial versus consumer bailments. The legislative trend is to regulate consumer transactions and leave commercial arrangements to the parties involved. See Business Application of the Law: Defining Liability in Contracts of Bailment (page 432). 5. The self-storage industry is growing rapidly as business and individuals need extra space to store their excess property. Does the rental of a storage locker fit the definition of bailment? Are there specific issues in this type of transaction that require a different set of rules from those in place for other bailment-type situations? Answer: The rental of a storage locker does not nicely fit within the definition of bailment because there is no intention to transfer possession of the contents of the locker to the storage company. The renter of the locker retains control of the contents and the locker. The transaction is more analogous to the occupation of a parking space in a garage or the rental of a hotel room. The latter example is more apt since the owner of the lockers has access in the same way that a hotel guest does to a room. However, the key issue remains the extent of liability that the locker owner should bear. The circumstances that differentiate the transaction from a standard bailment create a challenge in determining the appropriate standard of care. The renter of the locker should bear some responsibility. Another issue is the degree of default by renters who, for a variety of reasons, simply abandon their lockers and the contents. See Melrose v Halloway Holdings Ltd, 2004 CanLII 50135 (ONSC) on textbook page 431. 6. Commercial bailees generally try to minimize their liability in a standard form contract. They justify these low limits as a means of controlling risk and keeping their prices competitive. Is there a market opportunity for more generous liability terms? For example, could a storage business increase market share by accepting a greater risk of liability than its competitors and charging a higher price? Answer: More generous liability terms could be used as a promotional message. However, if the incidence of loss in the industry is low, it may be difficult to effectively compete at a higher price than that of competitors, unless customers can be convinced that the higher price is justified by better service and greater security. However, if there is significant incidence of loss among the participants in the industry, a departure from the liability norm could be exploited. Situations for Discussion, page 436 1. Green Acres Ltd. operates a greenhouse on a large lot in Calgary. The lot immediately adjacent to Green Acres is owned by a car dealership and the two properties are separated by a steel fence that was in place when Green Acres purchased its lot. While planning an expansion of its greenhouse, Green Acres Ltd. discovered that the steel fence between the properties intrudes onto Green Acres Ltd’s property by nearly three metres. To make matters worse, the car dealership paved the area on its side of the fence over nine years ago and uses the space to park its fleet of used vehicles. When Green Acres approached the dealership about the problem, the owner suggested they wait until spring to deal with the problem. How should Green Acres proceed? Answer: Green Acres should act as soon as possible as it will potentially lose its right to reassert its ownership if more than 10 years goes by without action on its part. Green Acres should commence its lawsuit, re-enter their lands or enter into an agreement to an agreement to put the limitation period on hold. This case is based on the 2012 Alberta QB decision, 1215565 Alberta Ltd. v. Canadian Wellhead Isolation Corp., 2012 ABQB 145. In that case, the owner discovered that the neighbouring owner’s fence protruded into their lot just three months before the 10 year limitation period for the owner to either commence an action, re-enter the dispossessed lands or enter into a stand-still agreement to stop the limitation period from running. Unfortunately, the owner did not take steps until after the 10 year period had elapsed and the court granted judgment for the plaintiff who had been in possession of the lands. 2. Clancy Cars Ltd. engaged Railco Ltd. to transport several motor vehicles from Montreal to Halifax. The vehicles were to be delivered to Clancy’s on Wednesday, but they were delayed. On Saturday, an employee of Railco informed Clancy’s that the vehicles had arrived at Railco’s facilities in Halifax and would be delivered to Clancy’s on Monday. Over the weekend, a violent wind and rain storm hit Halifax. Although the vehicles were parked in an area for safekeeping, they were severely damaged in the storm. When Clancy’s claimed damages, Railco argued that the storm was so severe it was an “act of God.” Who is responsible for the damage to the vehicles? [footnote deleted] Answer: This case was initially based on a bailment for transport, but because of the carrier’s delay, it became a bailment for storage. In such a bailment, the bailee Railco owes Clancy’s a duty to take reasonable care in the circumstances. Although the storm was unusually severe, it was not unexpected. Railco would need to show that it took appropriate action to protect Clancy’s property in the face of this knowledge. Of course, had Railco delivered the vehicles in a more timely fashion, they would likely have been in possession of Clancy’s at the time of the storm, and Clancy’s would have borne the risk of damage. As the bailee, Railco bears the onus of responsibility. A carefully worded contract could have clearly assigned liability and avoided the uncertainty that led to this dispute. In Carroll Pontiac Buick Ltd v Searail Cargo Surveys Ltd, 2005 NSSM 12, the case this situation is based on, in part, the adjudicator declined to decide whether there was a bailment, but relied instead on an enforceable promise by Railco to pay for repairs when Railco discovered the damage. 3. Black was looking to buy a quality used luxury vehicle. He found a 2010 Audi at Dexter’s Audi that met his needs. He examined the car on several occasions and took it for a couple of test drives. Discussions with Dexter’s salesperson White were productive and Black and White were close to making a deal. Black wanted to have the car inspected by an expert mechanic before finally agreeing to buy it, so he asked to have the car over a long weekend so he could drive it further and complete the inspection. White agreed, but required Black to sign a draft agreement and pay a deposit on the purchase price. Black signed the document “subject to satisfactory inspection.” Black took the car, but before the inspection could be done, he encountered a deer on the highway. He swerved to avoid the deer, lost control, went off the road, and hit a tree at high speed. Black was not injured but the car was demolished. Was this a bailment situation? Who is responsible for the vehicle? [footnote deleted] Answer: This situation illustrates the connection between bailment and the sale of goods. If the sale of the car was complete, either by the terms of the contract or the passage of title rules in the Sale of Goods Act, then title has passed to the buyer and he would bear the risk of loss when the vehicle was destroyed. If title had not passed, then Black was a bailee and bound to take reasonable care of the vehicle, which remained the property of Dexter’s. The degree of reasonable care would depend on the relevant circumstances, such as payment of the deposit, the benefit obtained from the bailment, and whether Black was negligent in causing the accident. In Black v Dexter’s Autohaus, 2008 NSSC 274, on which this situation is based, the court found that the sale was complete before Black inserted the condition regarding the mechanical inspection. The condition was an afterthought and not part of the contract. Therefore, Black was the owner of the vehicle at the time of the collision and bore the risk of loss. 4. Ying leased a machine to haul large logs in her lumbering business. The lease required Ying to keep the machine in good repair and fully insured, and to return it at the end of the lease in its original condition, subject to “normal wear and tear.” The machine never worked very well. Ying ran up large repair bills and began to suspect the machine was not heavy enough for the needs of her business. When she contacted the leasing company, she was reminded that the lessor had made no promises about performance of the equipment. Ying is thinking about stopping her lease payments and insurance premiums and leasing a heavier machine from another dealer. She needs that heavier machine to maintain profitable levels of production. What factors should she consider? What would you advise her to do? Would your opinion be different if Ying had instead leased a truck for her personal use? Answer: A key factor is the basis on which Ying chose this particular model. If this were a sale, the seller would be responsible for its suitability for Ying’s purposes, subject to the requirements of the Sale of Goods Act (see Chapter 23). However, this is not a sale and there are fewer implied terms. The terms of the lease agreement are important as well. They may exempt the lessor from any responsibility of this sort. Ying may be stuck with the terms of the lease, in which case she will be in breach if she stops payments. However, the survival of her business may require her to acquire another machine, regardless of her obligations in this lease. She should attempt to negotiate a settlement with the lessor, who may be interested in such a resolution. If Ying’s business fails, the lease will be of no value to the lessor. If Ying leased a truck for her personal use, then suitability for purpose is less important. Also the lease would be a consumer lease subject to consumer protection legislation in her province. There could be terms implied that would be similar to those in a sale, giving her greater protection. 5. Ying took her logging machine in for repairs. A week later she got a call from the shop to tell her that the machine was fixed and the bill was $4500. Ying had left strict instructions with the shop that she must approve all work before it was done. What rules of contract determine whether Ying is obligated to pay the bill? If she refuses, what are the shop’s remedies? What safeguards and risks are involved in those remedies for Ying? Would the result be different for a consumer contract? [footnote deleted] Answer: At first glance, this looks like a classic quantum meruit situation (see Chapter 6). If Ying leaves her equipment for repair without agreeing on a price, she makes an implied promise to pay a reasonable amount for the services provided. However, it appears that a term of this contract was that Ying authorize any repairs. If she can prove that this was a term, quantum meruit will not apply. The fact remains that the repairs have been made and likely cannot easily be unmade. Assuming the repairs were necessary and done at a reasonable cost, a negotiated settlement may be the best solution. If she refuses to pay, the shop can likely keep possession of her machine until the dispute is resolved. Even if she wins the dispute (and there is no guarantee that she will), she will not have the use of it in the meantime and is unlikely to fully recover compensation for the consequences of being without it. Anyone in Ying’s position should choose her repairers carefully and ensure that the terms of the contract are clearly laid out and understood. If the repairs had been made to, say, Ying’s personal vehicle, it would have been a consumer transaction and subject to provincial consumer protection legislation. For example, in Gary Auto Repair v Velk, 2010 ONSC 3183, on which is situation is based, in part, the claim for damages was dismissed because the repairer failed to provide a written estimate or get the customer’s authorization, as required by the regulations under the Ontario Consumer Protection Act. Further, the repairer failed to meet the requirements under the regulations to claim for quantum meruit. 6. Roach owned a truck with a large crane attached. Roach took the truck to Vern’s Auto to have the crane removed with the intention of mounting it on another vehicle in the future. Vern’s allowed Roach to leave the crane in its yard, assuring him it would be safe. A few months later, Roach decided to sell the crane. When he went to get the crane, it was gone. Vern’s had no idea what had happened to it, and because they had charged nothing for storing the crane, it was not interested in finding out. Is Vern’s responsible for the missing crane? What are the determining factors? What information is missing? What steps should Roach and Vern’s have taken to safeguard the crane? [footnote deleted] Answer: This appears to be a bailment. It is reasonably clear that Vern’s had possession of the crane. It is possibly an involuntary bailment, likely a gratuitous bailment for the benefit of Roach, the bailor. This will lead to a relatively low standard of care owed by Vern’s to Roach. We would need to know more about Vern’s premises, whether the crane was secured in any way, and the circumstances of its disappearance. The two parties should have come to some agreement about the responsibility for the crane while in Vern’s yard. Vern’s needs to appreciate that the absence of storage fees does not remove all responsibility on their part. Roach needs to understand that the fact that the crane disappeared while on Vern’s premises does not automatically make Vern’s responsible. In the case on which this situation is based, Lowe (DJ) (1980) Ltd v Roach (1994), 131 NSR (2d) 268 (SC), aff’d (1995), 138 NSR (2d) 79 (CA), the court found that a bailment for hire existed based on the original contract. Vern’s failed to refute the owner’s prima facie case, was negligent in the place and manner of storage, and therefore liable for the crane’s value. Justice Grant concluded, The defendant [Vern’s] chose the area on his premises where he would leave it. He chose to leave it outside rather than secure inside. He chose to have an open driveway without a fence or gate. He chose not to employ a watcher, as he had done from time to time. He chose to take a risk on the security of his premises. Those matters were entirely within his control. He took that risk. The defendant apparently knew and permitted the public to come into his yard and look at his wares unattended and at random. Yet he told [the plaintiff Roach] that it was secure. I draw the inference that had he told [the plaintiff Roach] when he was enquiring about security, that the general public came at will into his yard and the goods were left open and unattended, [the plaintiff Roach] would have insisted he put it elsewhere. I find the defendant has not displaced the burden upon him to refute negligence. I find that he was negligent in the place and manner of storage of the boom crane. I find that prima facie negligence was proved by the plaintiff and rather than being refuted by the defendant in his evidence, was actually enhanced. 7. Horst is a collector of hockey memorabilia. He is particularly interested in hockey sticks that have been autographed by well-known players in the National Hockey League. When Horst checked on eBay, he found many autographed hockey sticks for sale, including several signed by his favourite players. He is prepared to pay the going rate, but wants to be sure that the autographs are authentic and that the current owners acquired the sticks legitimately. Horst has heard of organizations that purport to authenticate autographs, but has also heard of many “fake” autographs that were authenticated. What legal issues should Horst consider? How should he manage the risks facing him? Answer: From the perspective of bailment, Horst should be concerned about how the sticks will be transferred from the present owner to the person who will authenticate the stick. In addition, he is at risk of paying for sticks that are fakes. Horst could ask for representations and warranties from the seller and the authenticating party. However, such clauses in a contract may be practically difficult to enforce. If the seller or authenticating party is in a different jurisdiction, the practicality of enforcing the terms of the contract may prove more costly than the worth of the stick. He will need to be aware of any exclusion of liability clauses that may exist in both the bailment agreement and the sales agreement. 8. Canfor hired B.C. Rail to transport wood pulp from the interior of British Columbia to a shipping terminal for eventual delivery to a customer in Scotland. The contract between Canfor and B.C. Rail specified that the railcars would be clean and the pulp delivered free from contamination. Canfor insisted on wood-lined box cars and also routinely inspected and swept out the cars before loading bales of pulp. When the pulp arrived in Scotland, it was contaminated with wood splinters and rejected by the customer. Canfor had to compensate its customer and pay for transporting the pulp back to B.C. Can Canfor recover its losses from B.C. Rail? Explain. [footnote deleted] Answer: In this scenario, B.C. Rail is a common carrier and a bailee for reward. The common law states that a common carrier is an insurer of the goods it transports. The common carrier is relieved of liability only when loss is caused by an act of God, by enemies, as a result of an inherent defect in the goods, or by fraud or fault by the shipper. This duty of the carrier to deliver the goods safely, exists apart from any contract, mainly for historical reasons. It is imposed on the carrier not only because it has contracted to carry and deliver the goods but because it has possession of another’s goods. The common law liability of carriers remains in effect to the extent that it is unaltered by statute. B.C. Rail may be liable for Canfor’s damages because it failed to meet the onus on it as bailee for reward to prove that the damage to Canfor’s goods was not caused by its fault. In its defence, B.C. Rail could argue that Canfor insisted on wood-lined rail cars and had their own employees sweep the railcars. In other words, these two acts were representations by Canfor that it would not hold B.C. Rail liable for any damage to its product through contamination by wood splinters and a waiver of B.C. Rail’s obligation as a common carrier to ensure that the goods it carried as a bailee for reward were not damaged. In the case on which this situation was based (B.C. Rail Ltd v Canadian Forest Products Ltd, 2005 BCCA 369), the trial judge found that the defences applied and dismissed Canfor’s action. The finding was reversed on appeal and leave to appeal to the Supreme Court of Canada was refused. The result reinforces the onerous obligations on the part of common carriers. In this case, the carrier was well aware of the technical reasons for Canfor’s insistence on wood-lined cars and Canfor’s actions in sweeping the cars. There was no intention to relieve B.C. Rail of responsibility since these practices had been place for many previous shipments. Chapter 18 Intellectual Property Instructor’s Manual–Answers by Dorothy DuPlessis V. Chapter study Questions for Review, page 470 1. What is intellectual property? Answer: Intellectual property is the result of an intellectual or creative process; it is the bundle of rights that people have in their ideas. 2. What are the major forms of intellectual property rights? Answer: The major forms of intellectual rights are patents, industrial designs, trademarks, copyright, and confidentiality. 3. What is a patent? Give an example. Answer: A patent is a monopoly to make, use, or sell an invention. Recent examples involved in litigation include a device that allows faxes to be sent via radio, a cholesterol-lowering drug, and a washing-machine agitator. 4. Are life forms patentable in Canada? Explain. Answer: Higher life forms are not patentable because they are neither manufactured nor composed of matter that has been mixed together by a person. 5. Are computer programs patentable in Canada? Explain. Answer: Computer programs are not patentable as they receive protection under copyright law. They could, however, receive patent protection as part of a broader patent. 6. What are the three requirements for patentability? Answer: The invention must be new, useful, and obvious. 7. What is the difference between specifications and claims in a patent application? Answer: Specifications are the descriptions of an invention contained in a patent, and a claim is an exclusive right of the patent holder. Specifications describe how the product is made or the best way to perform the process or method, whereas claims are the definitions of the invention. 8. How long does patent protection last? Answer: A patent provides protection for 20 years form the date of filing the application, as long as the appropriate maintenance fees are paid. 9. What is an industrial design? What are the requirements for industrial design registration? How long does an industrial registration last? Answer: An industrial design is usually taken to mean a feature of shape, configuration, pattern, or ornament or any combination of these that in a finished article appeals to and is judged solely by the eye. An industrial design does not protect the functional aspect of the product. It lasts for 10 years. 10. What is the advantage of marking an industrial design to indicate that the design is registered? Answer: Marking an industrial design enhances the owner’s rights in an infringement action. 11. What is the purpose of a trademark? Answer: A trademark indicates the source of the goods or services and gives the owner exclusive rights to use the trademark. It also prevents others from using a confusingly similar trademark. 12. What is the relationship between trademarks and trade names? Answer: Trademarks are marks used to distinguish the source of goods from those of others. A trade name is the name under which a business is carried on. Both trade names and trademarks are protected under trademark law and allow customers to distinguish goods based on their source. 13. Must trademarks be registered to receive legal protection? Explain. Answer: Trademarks may be registered or unregistered. Unregistered trademarks are called common law trademarks. Registered and unregistered trademarks receive protection under both the common law and the Trade-marks Act. The rights attached to common law trademarks tend to be more restrictive and are enforceable only in the geographic area in which the trademark has been used. 14. What is meant by “cyber-squatting?” Answer: Cyber-squatting occurs when domain names are obtained for the purposes of reselling them for a profit, extorting money from the holder of famous trademark, or preventing competition by securing the most obvious domain names. 15. Who owns the copyright in a book? How long does copyright last? Answer: The author of the book owns the copyright, unless there is an agreement to the contrary. If the book was created in the course of employment, the employer owns the copyright unless there is an agreement to the contrary. Copyright protection extends 50 years past the death of the author. 16. What are the moral rights of an author? Give an example. Answer: The moral rights of a work are owned by the author, exist independently of copyright, and provide authors with some control over how their works are used and exploited. Moral rights include paternity, integrity, and association. An example of moral rights is the right to integrity. 17. One of the exemptions under the Copyright Act is fair dealing. What is fair dealing? Answer: Fair dealing exempts the copying of works for the purpose of private study, research, criticism, or review. Copying must be done for one of the enumerated purposes. 18. What are the requirements for the protection of confidential business information? Answer: Confidentiality or secrecy of the information is required for protection. Factors that are considered in determining whether the information meets this requirement are the economic value as a result of not being generally known, efforts to keep the information secret, and the information not being generally known in the industry. 19. What is the difference between an intellectual property assignment and a licence? Answer: An assignment is the voluntary transfer of ownership rights in intellectual property, whereas a licence is consent given by the owner to use the intellectual property for a specific purpose that can normally be done only by the owner. With a licence, no ownership rights are conferred on the licensee. 20. Give an example of how intellectual property rights may be lost if they are not properly used. Answer: A patent may be considered abused effective if the holder does not produce enough of the product to meet Canadian demand. A licence may be issued to a third party as a result. Industrial design rights may be reduced if the goods are not properly marked. A trademark can be rendered useless if the goods are not continually in association with the goods and services for which it was registered. Confidential business information is lost once it is disclosed. 21. How is injunctive relief used in intellectual property disputes? Answer: In many intellectual property infringement cases, it is common for the plaintiff to seek an injunction before trial to prevent the infringer from continuing to damage the business of the plaintiff. An injunction is granted if the applicant can demonstrate that there is a serious issue to be tried, irreparable harm may be caused, and the balance of convenience favours the applicant. 22. What are the penalties for copyright infringement? Answer: The copyright owner has a full range of remedies. An owner may also elect statutory damages of up to $20 000 instead of damages and profits. As well, the infringer is subject to criminal sanctions of fines up to $1 million or five years in jail or both. Questions for Critical Thinking, page 471 1. Three-dimensional printers have the capacity to reproduce solid objects. Using computer modelling software, they can reproduce an object using materials such as rubber, plastics, ceramics, and metals. The potential is to reproduce everything from automobile parts to toys to household items. How does this technology possibly impact intellectual property-rights holders? How should companies deal with the risk posed by this technology? [footnotes deleted] Answer: 3D printers have the capacity to create three-dimensional objects, layer by layer, using a digital blueprint. There are no intellectual property provisions exclusively dedicated to 3D printing. But given the diversity of products that can be printable with 3D printers, intellectual property rights holders may be concerned about the ability of the 3D printer to reproduce the very thing that they hold rights on. For example: Copyright: If the object produced by the 3D printer is artistic in nature, it has the potential to infringe copyright. Also the drawings, designs, or plans for making the object may also infringe copyright. The potential for copyright infringement is compounded by the difficulty in detecting infringement and exemptions for users where a copy is made for personal use under appropriate circumstances. Patent law: The making of an article that is subject to a patent may constitute infringement. The problem for rights holders will be identifying when that occurs. The Patent Act unlike other intellectual property statutes does not provide for a personal use exemption. Industrial design: The design features and visual appearance (shape, configuration, and ornamentation) of products produced by 3D printers may infringe an industrial design registration. The limitation of this protection is that infringement is only triggered when a copy is produced that is identical, thus through slight customization, consumers may be able to avoid infringement. Trademark: The features of an object (i.e., shape of the goods), if distinctive of its source may be protected as trademarks. As the Trademarks Act generally requires “use” of the mark in a commercial sense to constitute infringement, it is conceivable that using a 3D printer to replicate trademarked goods for personal use may not be actionable under the statute. The risk posed by this technology is widespread infringement of intellectual property rights similar to the widespread copying of music that occurred as a result of MP3 files. Intellectual property rights owners could go after the infringers but it would be extremely difficult to go after people in their homes. They could go after the makers of the printers or the websites that host the software that is needed to run the 3D printer. This too may be difficult—the music industry was unable to stop the copying of music. Perhaps a better approach would be for rights holders to embrace the new technology and the new markets that it presents. They could set themselves up as authorized dealers of the software and materials and cater to the consumer that wants a customized product to meet his personal needs. Sources: Laura Macfarlane, “The legal perils of 3D printing,” Field LLP (12 February 2014), online: Mondaq ; Phyllis Korkki, “Beyond the 3D magic,” The New York Times (24 November 2013) 5; Paul Banwatt & Ashlee Froese, “The practical and artistic sides of 3-D distinctiveness,” The Lawyers Weekly (9 May 2014) 12; Paul Banwatt & Ashlee Froese, “The future in 3D,” The Lawyers Weekly (3 May 2013) 10. 2. When a major sporting event—the Grey Cup game, the Stanley Cup playoffs, the Olympics—occurs in a city, local businesses like to show their support of the home players. Often they decorate their businesses with the team logo, put signs of support in their display windows, or develop products named after their heroes. The official sponsors of an event who have paid for the right to be a sponsor are often not happy. They do not like to see other businesses capitalizing on the goodwill associated with the event without paying. For example, during the 2011 Stanley Cup playoffs, a Vancouver Honda dealership received a cease and desist letter from the National Hockey League after it displayed “Go Canucks Go!” above the words “honk if you’re a fan” and the Canucks stick-and-rink logo. Do the actions of the dealership amount to trademark infringement? What intellectual property issues are raised when businesses try to benefit from the popularity and excitement of sporting events without paying for the right to be a sponsor? What is the risk to an organization in protecting its trademarks and sponsorship arrangements from violations? [footnote deleted] Answer: Whether the actions of the dealership amount to trademark infringement is difficult to answer. On the one hand, the dealership is using a National Hockey League trademark in relation to goods, but on the other hand, it is unlikely that the NHL registered the trademark in relation to car dealerships. Also, it is not known whether the trademarks are famous enough to receive wider protection than simply the goods and services for which they were registered. When businesses try to benefit from the popularity and excitement of sporting events by getting involved in activities, such as themed events, storefront signage and displays, and other promotional activities, they may be infringing on the intellectual property rights of those that have paid for the right to use trademarks associated with the sporting event. They may be creating the false impression that there is a connection between their businesses and the sporting event. By protecting its brands and sponsorship arrangements too zealously, an organization runs the risk of creating negative publicity and a public backlash. See David Spratley, “Team spirit—or IP infringement?” The Lawyers Weekly (1 July 2011) 10. 3. Websites on the Internet offer powerful marketing opportunities for businesses. However, the websites, and the domain names that identify them, also present opportunities for others to take unfair advantage of the goodwill that a business has worked hard to establish. “Cyber-squatters” do this by registering domain names that include a business’s trademark. How can a business, short of litigation, protect its portfolio of trademarks from cyber-squatters? Answer: A business can protect its portfolio of trademarks from “cyber-squatters” without litigation by using alternative dispute resolution mechanisms. ICANN (Internet Corporation for Assigned Names and Numbers) offers an online dispute resolution mechanism for alleged bad faith registration of a domain name. A company can also consider one or more of the following offensive and defensive registration practices: • registering domain names in all generic top-level domains and in every country where it does business • registering all registered and unregistered trademarks as domain names • registering popular generic words related to a company’s business as domain names • registering common misspellings or alternative spellings • registering embarrassing variations • registering hyphenated and non-hyphenated variations • registering both singular and plural versions of domain names • registering domain names before any public announcement of a new product or service Source: Elliott Simcoe, “How to fight cybersquatters on a limited budget,” The Lawyers Weekly, (8 September 2000) 10. 4. The United States Patent and Trademark Office has allowed patents for all manner of business methods, including, for example, Amazon’s one-click method for purchasing goods on the Internet; Priceline’s name-your-own price reverse-auction process; and Mattel’s system that allows its customers to order personalized toys. Patents have even been granted for reserving office bathrooms, for enticing customers to order more food at fast-service restaurants, and for the process of obtaining a patent. The Federal Court of Appeal’s decision in Canada v Amazon (see page 443) opens the door to similar patents being granted in Canada. Are business-method patents good for Canadian business? Some business-method patents have been criticized because they have covered subject matter that is old or obvious. What are other criticisms of allowing patents for business methods? Answer: The biggest advantage of allowing patents for business methods is the protection of something new, unique, and useful, which is the overall purpose of protecting intellectual property rights generally. Advocates of business method patents, such as Jay Walker, founder of the Internet company Priceline.com, contend that a process, such as Priceline’s system of online reverse auctioning, is a unique business practice and an innovation in e-commerce that deserves protection. Reverse auctioning means letting shoppers specify the terms of purchase for items, such as airline tickets and new cars, and then having the system find a seller who will match the terms (Alex Lash, “Patent Office wrestles with e-commerce,” The Industry Standard (21 August 1998) at ). The patent process, its advocates contend, is the best means of protecting such business methods. In Canada, companies now have a greater opportunity to increase the level of intellectual property protection for their innovative technology. However, they will also have to meet new challenges, including the risk of infringing the patent rights of their competitors. In the United States, “patents have been issued for business techniques that have been described as “shockingly mundane.” The tendency is especially marked in the field of Internet business. However weak these patents may be legally, they have real practical consequences, which related back to the penumbral zone of protection that surrounds intellectual property rights. Competitors who want to use (or continue using) virtual shopping carts “are getting out their checkbooks and paying patentees ... on pain of possible infringement lawsuits.” The expense of going to court and establishing the invalidity of the patent—with the risk of losing—is greater than the cost of simply paying the patentee for a license. Lawrence Lessig, Berkman Professor of Law at Harvard Law School, is an outspoken opponent of business methods patents. Apart from the more obvious difficulties of placing crippling limits on competition, Prof. Lessig sees the patent system as a drain on the overall resources in a particular field: “Awarding patents of that type siphons off resources from technologists to lawyers—from people making real products to people applying for regulatory privilege and protection. An increasingly significant cost of Net start-ups involves both defensive and offensive lawyering—making sure you don’t ‘steal’ someone else’s ‘idea’ and quickly claiming as yours every ‘idea’ you can describe in a patent application” (Lawrence Lessig, “The problem with patents,” The Industry Standard (23 April 1999) at ). Thus, in addition to the limitations business methods patents place on competition, the protection process itself may be seen as a drain on the resources of a particular field, which hinders the development of newer and even more unique methods and practices. 5. A “patent troll” is a person or company that holds patents for the sole purpose of extracting licence revenue or suing infringers. The troll does not make, use, or sell new products or technologies but waits until a company has invested in, developed, and commercialized an idea and then it pounces—offering a licence in return for cash. The target company is often left with only two options: pay up or litigate. How can companies manage the risk posed by patent trolls? [footnote deleted] Answer: There are a number of actions that companies take to reduce their exposure to patent trolls: • Have a good documentation system in place. The best defence against a troll is evidence of having performed the method before the troll filed a patent. • Conduct an infringement assessment. Review the troll’s patent carefully to determine whether the company’s systems come within the claims in the troll’s patent. • Consider the options. Early settlement of the case may cost much less than if the case goes on to trial. However, if the business is susceptible to multiple attacks by trolls, it might not be smart to pay. It may be worthwhile to fight and incur the legal cost. • Obtain patent infringement insurance. Insurance is available to help protect companies from inadvertently infringing a third party’s patents. Source: Sarah C Columbia, “Beware patent trolls,” Risk Management Magazine (April 2006) 22. 6. The intellectual property regimes of many countries, including all members of the European Union contain droit de suite protection or artist resale rights. This right entitles artists for a term usually equal to copyright protection to a share of revenue (for example, 5 percent of gross profit) when their art is resold. The artwork that carries this protection is generally visual artistic works such as paintings, photographs, engravings, sculptures, carvings, and the like. Should Canadian copyright legislation contain a droit de suite right? What are the arguments for and against such a right? [footnote deleted] Answer: Arguments for: • Present system leaves Canada out of step with many peer countries (protections can be found in the legal regimes of 60 countries); • Something inherently unfair about an artist not being able to share in the increase in value of a work of art; • Experience in other countries do not indicate that a droite de suite has a negative impact on the market and price for original art; • The fact that some benefit disproportionately (i.e., those that least need it) by the right is not an argument that holds much sway in other areas. Arguments against: • The implementation of what is in effect a tax will have a negative impact on the market for original art; • Administrative difficulties in enforcement; • Benefits of the right disproportionately accrue to those that need it the least; • Why should art be treated differently than other goods or services? Source: Bob Tarantino, “Forgotten corner of the copyright canvas,” The Lawyers Weekly (20 January 2012) 13. Situations for Discussion, page 472 1. Masterpiece, an Alberta corporation applied to register the trademark “MASTERPIECE LIVING” in relation to the retirement industry. The application was denied because Alavida, an Ontario company had already been granted a registration for the same trademark for the same services. Masterpiece then applied to the Federal Court to expunge Alvida’s trademark registration on the basis that Masterpiece had beens using a confusingly similar trademark (“MASTERPIECE THE ART OF LIVING”) prior to Alvida’s application for trademark registration. Masterpiece failed at both the Federal Court and the Federal Court of Appeal but was successful at the Supreme Court of Canada. What is the relationship between registered trademarks and common law trademarks? What are the most important business lessons to be learned from this decision? Is Masterpiece entitled to register “MASTERPIECE” for retirement services? Explain. [footnote deleted] Answer: A registered trademark gives the owner national rights. A common law trademark gives the owner rights only in the area in which his reputation has spread. That said, a trademark cannot be registered if it is the same or similar to a common law trademark. Important lessons for businesses: • Register trademarks early on. If Masterpiece had done so it would have avoided the time and cost in challenging Alvida’s registration; • Do a thorough search to identify trademarks that may be similar. If Alvida had done so it could have avoided spending resources to build up goodwill in the trademark that was being used by someone else; • Monitor trademark publications. If Masterpiece had done so it could have opposed Alvida’s registration and have avoided the expungement proceedings. If Masterpiece applied to register the trademark, it is possible that Alvida could oppose the registration based on its use of the trademark in Ontario. Note the Supreme Court did not rule on the issue of Masterpiece entitlement to a national registration for the Masterpiece trademark. Sources: Brandon Potter & Jud Virtue, “What brand owners can learn from an SCC ‘masterpiece’,” The Lawyers Weekly (16 September 2011) 13; Varoujan Arman, “Supreme Court decides trademark dispute: What it means for your business,” Blaney McMurtry LLP (9 November 2011), online: Blaney McMurtry . 2. Duncan, a small town on Vancouver Island, is known as the “City of Totems.” Almost 80 totem poles can be found spread throughout the city, both in its downtown core and on the Trans-Canada Highway. In 2007, the city council created a copyright policy to govern the use of images of the totem poles. The policy states that the city holds the copyright policy on the totem collection, that the use of the totem images requires approval from the city, and that the city reserves the right to levy a copyright charge. On what basis could Duncan claim to own copyright in the various totem poles located in the town? If Duncan owns copyright in the totem poles, could people be prevented from taking pictures of the totem poles? Is existing copyright law suitable for the protection of Aboriginal cultural property, such as traditional legends, stories, songs, and knowledge? [footnote deleted] Answer: Duncan’s copyright policy assumes that it holds copyright in the totem poles. Copyright applies to artistic works and a totem pole is an artistic work; however, the copyright is owned by the individual who created the work. On this basis, it is probable that the city does not own copyright in the work as it is unlikely that the artists who created the work assigned their copyright interest to the city. The term of copyright is generally the life of the author plus 50 years. On this basis, the copyright in the older totem poles have likely expired and the work is in the public domain. Even if Duncan owns copyright in some or all of the totem poles, it could not prevent others from taking pictures of the totem poles. The Copyright Act, RSC 1985, c C-42, s 32.2 (b)(ii) provides that it is not an infringement of copyright for any person to reproduce a sculpture or work of artistic craftsmanship that is permanently situated in a public place. The current copyright law is probably not well suited to providing protection for a lot of Aboriginal work because of the requirement that a work must be expressed in material form. Many Aboriginal people’s legends, songs, stories, music, and the like are passed down from one generation to the next and do not exist in material form. There are also problems with identifying the creator of the work and determining if the work is “original.” Source: David Spratley, “Copyright law offers poor protection for aboriginal cultural property,” The Lawyers Weekly (23 November 2007) 8. 3. Anne recently returned from a holiday in Ottawa. While there, she visited the National Gallery and was most impressed by a landscape painting by one of the Group of Seven artists. Anne believes that the scene depicted in the painting would provide a wonderful design for her house wares business. She would like to use it for wallpaper, dishes, and other bric-a-brac. Does her plan have any implications in terms of intellectual property? Explain. Answer: Copyright protection lasts for the duration of the artist’s life plus 50 years. Because the 50-year protection period is calculated from the death of the artist, it is important to consider which artist painted the landscape that impressed Anne. Four of the founding members of the Group of Seven died more than 50 years ago: J.E.H. MacDonald (1932), Franklin Carmichael (1945), Francis Hans Johnston (1949), and Lemoine FitzGerald (1956) (Group of Seven artists at, ). If the landscape was painted by any of these three artists, it would no longer enjoy copyright protection and would be in the public domain. Anne’s copying the image would therefore not violate the copyright of another and neither would her use itself attract copyright protection. If, however, the landscape was painted by a more recently deceased member of the group—such as Lawren Harris (1970)—the painting would still be protected by copyright. Anne would therefore likely have to enter into a licensing agreement with the holder of the copyright, or simply gain the holder’s permission to use the image. Regardless of whether there is copyright protection or not, if Anne intends to produce 50 or more manufactured articles bearing the image, then she may gain protection only through industrial design legislation, which requires formal registration. Regardless of any copyright protection that may exist in a work of art, once it is used or is intended to be used as a model or pattern to produce more than 50 single useful articles or sets of articles, it usually is considered to be an industrial design, which can only be protected under the Industrial Design Act. There are many advantages to registering an industrial design before marketing the product, the most obvious of which is the comfort of having protection before revealing the design to the public. A less obvious benefit, however, involves the time limit for filing an application for registration. There is no time limit for filing unless there has been publication, that is, the design has been made public or offered for commercial sale or use anywhere in the world. An application for registration must be made within 12 months of the date of the publication. Once Anne has registered her industrial design, she may further protect herself by placing an industrial design mark on the product. It is not mandatory for all industrial designs to bear such a marking, but if there is no mark, a court may only award an injunction to prevent further infringement. By marking her products, however, Anne may be awarded other remedies in a court proceeding for infringement. See also: François Guay and Ekaterina Tsimberis, “How do design and copyright interact?” Smart & Biggar Fetherstonhaugh (December 2012/January 2013), online: Smart & Biggar . 4. Tabatha Pelkey had worked at Physical Fitness Equipment Sales Ltd. as its manager for six years; she left following a pay dispute with the owner. A few weeks later, she opened her own store just 18 blocks from Physical’s site. She sold the same exercise equipment to the same market and featured an almost identical sign. Her business was instantly successful and had a serious negative impact on Physical’s operations. Could Physical successfully sue Pelkey for breach of confidence? What would Physical need to prove to be successful? How could Physical have protected itself from competition from Pelkey? [footnote deleted] Answer: This situation is based on the following case: Physique Health Club Ltd v Carlsen (1996), 193 AR 196, 141 DLR (4th) 64 (CA), leave to appeal dismissed, [1997] SCC No 40. Glenn Carlsen worked at Physique Health Club as its manager from November 1987 until March 1992, when he left following a pay dispute with the owner, his uncle. A few weeks later, he opened his own store just 18 blocks from his uncle’s site. He sold the same exercise equipment to the same market and featured an almost identical sign. His business was instantly successful, and had a serious impact on Physique’s operations. Physique sued, arguing that pricing policies, marketing techniques, and store layout, although not confidential on their own, eventually take on an economic value that makes them confidential. Carlsen agreed that he was a better businessperson as a result of running his uncle’s store but argued that that was the result of his own hard work and initiative. He also said that if general knowledge about a store’s operations were confidential, employees would never be able to leave and start their own businesses. The trial judge agreed but added that the right of an employer to protect his investment takes precedence over the rights of employees who want to start their own businesses. The court of appeal, however, was not of the same opinion. General knowledge about a business is not confidential. As there was no suggestion that Carlsen took customer lists or acquired any special or unique knowledge that belonged to Physique, he was not liable for breach of confidence. Carlsen had not breached any fiduciary duty as he did not actively solicit specific customers of his former employer, nor did he take a maturing business opportunity from Physique. (end of case summary) Based on the above, it is unlikely that Physical could successfully sue Pelkey for breach of confidence. The problem for Physical is the information used by Pelkey is not confidential information but knowledge that is part of her personal knowledge, skill, and expertise. Confidential business information generally refers to information of a business or technical nature that is kept private for the purpose of economic gain. Trade information, on the other hand, refers to the “general skill and knowledge” of a person learned in a particular trade (Roger T Hughes QC, ed, Trade Secrets [Toronto: Law Society of Upper Canada, 1990]). The distinction is most germane in an employment context. Employees, “in addition to any contractual obligation ... owe a duty of good faith and loyalty to their employers,” which requires respecting the confidentiality of the employer’s confidential business information (Roger T Hughes QC, ed, Trade Secrets [Toronto: Law Society of Upper Canada, 1990]). The competing policy issues, therefore, are the protection of the employer’s confidential business information and the former employee’s ability to use his or her general knowledge (gained in employment in the trade) to compete with the former employer. The uncle could have been protected himself from competition from his nephew by having included an express term in the employment contract restricting the nephew’s ability to open a competing business in the same trade. In the absence of an express term, the court considers any implied terms of the employment contract, as well as any common law duties that the employee would owe to his or her former employer. Neither of these was found in Carlsen. 5. In 1995, Aldo Buccioni invented and patented a standup hockey bag with wheels, zippered storage compartments for each piece of a player’s gear and a strap on the outside to fasten a hockey stick. In 2004, he brought the design to Greg Collins, founder and owner of Grit Inc., an Ontario company. Collins refined the bag design, registered an industrial design for it and concluded a royalty agreement between Grit Inc. and Buccioni. In 2013, Grit Inc. filed a case in federal court alleging that Sport Maska Inc., a subsidiary of Reebok-CCM Hockey Inc. infringed its intellectual property rights by marketing a hockey bag similar to Grit’s. The distinctive wedge-shaped bag of Grit’s called the Hockey Tower has sales of about $5 million annually. In 2010, Grit Inc. filed a similar claim against Travelway Group International Inc. and Hockey Canada over an upright hockey bag that was sold at Walmart stores. This case was settled out of court. What does Grit have to prove for patent infringement? for industrial design infringement? What are the risks for Grit in taking on an industry giant like Reebok? [footnote deleted] Answer: Once an invention is patented, exclusive rights are granted to the patent holder. Any interference with the patent holder's monopoly granted by the patent is considered a patent infringement. Thus, for example, making, constructing, using, or selling a patented invention without the patent holder's permission constitutes infringement. Therefore, Grit would need to prove that Sport Maska did one of the above, that is, that Sport Maska’s bag contained the essential features of the Grit’s patented hockey bag. During the existence of the industrial design registration, no one can without the permission of the owner of the design make, import, sell, or offer for sale any article in respect of which the design is registered. As well, no one can manufacture or sell a confusingly similar design. Therefore, Grit would need to prove that Sport Maska did one of the above, that is, its bag does not differ substantially in appearance from Grit’s bag. The risk of taking on an industry giant is that the industry has the financial means to wage a long and protracted battle in court. In addition, the costs of intellectual property litigation are notoriously high therefore even if Grit wins, it is still likely to be out a great deal of money. Source: Janet Mcfarland, “Hockey bag maker goes toe to toe with Reebok over patent,” The Globe and Mail (7 May 2013) B1. 6. Coco Sharpe is a software developer specializing in online games and puzzles. He has developed a revolutionary new poker game aimed at enhancing the skills of would-be poker players. Coco believes that he can make a lot of money selling the game online. Coco calls his game Coco Cardsharp, and he has received a registered trademark for the name. However, when Coco applies to register the domain name, he discovers that www.cococardsharp.com is registered to Janet Rollins. When contacted by Coca, Janet claims that she knows nothing about Coco’s game but that she is willing to sell the rights in the domain name to Coca for $50 000. What are Coco’s options? How should Coco attempt to settle the dispute with Janet? What are the advantages and disadvantages of pursuing online dispute resolution? What are the advantages and disadvantages of pursuing litigation? Answer: Coco has several options. He may pay the $50 000 to Janet, negotiate a lower fee, if possible, register the name coco cardsharp in a different top-level domain (TLD), pursue online dispute resolution, or sue for trademark infringement. The Internet Corporation for Assigned Names and Numbers (ICANN) is responsible for the administration of the .com TLD. It has set up a dispute resolution mechanism whereby a complainant and a registrant submit their dispute to a one- or three-person panel. To be successful the complainant must prove • that the domain name is identical or confusingly similar to a trademark in which the complainant has rights • the person who registered the domain name has no rights or legitimate interest in the trademark • the name has been registered and is being used in bad faith The advantages of this system are that it is quick and inexpensive. The disadvantage is that remedies are limited to cancelling the registration of the domain name or transferring it to the complainant. An alternative to the dispute resolution procedure is suing in court for trademark infringement or for the tort of passing off. Both have particular elements to prove but key is proving confusion: proof that the domain name causes confusion regarding the source of the associated goods or services in the mind of the consumer. The advantages of a court action are greater and more flexible remedies, such as an injunction. The disadvantages are cost, time, and the issue of jurisdiction. A court will not award a remedy unless one party is a resident of or somehow connected to the place where the court is located. Source: Alex Cameron, “Domain name disputes,” Canadian Internet Policy and Public Interest Clinic (2 June 2007), online: CIPPIC . 7. In 1969, Cynthia and Frederick Brick opened a high-end furniture store in Winnipeg. They operated the store under the name Brick’s Fine Furniture. In 1988, Brick Warehouse Corp., a national chain of lower-priced furniture sent the Bricks a letter demanding that they stop using “Brick” as part of their business name. In 1977, Brick Warehouse had filed a number of trademark applications that included the word “Brick.” The Bricks had not registered the word “Brick” as a trademark. As they had used the same name for more than 20 years, they refused to comply with Brick Warehouse’s demand. The furniture chain sued and after a protracted legal battle that cost the Bricks $178 000 in legal fees, the case settled. The parties agreed to co-exist in Winnipeg. What legal arguments were available to the Bricks? How could the Bricks have prevented this dispute? [footnote deleted] Answer: The strongest legal argument available to the Bricks was that they had a common law trademark, that is, they had being using the word “Brick” in relation to furniture since 1969 and therefore have a right to continue to use the name. See Masterpiece Inc v Alavida Lifestyles Inc, 2011 SCC 27, where the Supreme Court of Canada confirmed that it is the use of the mark and not registration that confers priority of title and the exclusive right to the trademark. The first user has the rights to oppose applications or to apply to expunge registrations. The Bricks most likely could have prevented the dispute by having registered their trademark. Their registration would likely have prevented the Brick warehouse’s trademark registrations. Also, if their trademark had been registered, Brick Warehouse lawyers may have seen it and suggested another name for the business. See Eric Swetsky, “Trademark law is a sleeping tiger,” In-House Counsel (Fall 2010) 10. 8. For the past 15 years, Chuck Morrow has owned and operated Chuck’s Grill House in Burnaby, British Columbia. His restaurant offers a selection of beef dishes, including prime rib, steaks, burgers, and ribs. The most popular dish on the menu is Chuck’s BBQ Ribs. The ribs are cured and smoked (using a secret method invented by Chuck), slow-roasted, and then finished on a grill. Chuck has recently developed a new and improved method of curing and smoking ribs by using flavoured wood chips, and he wants to protect it so that others cannot use it. Chuck may be able to protect his new and improved method of curing and smoking ribs from being used by others through a patent or by keeping his recipe a trade secret. What are the requirements for patent protection? What are the advantages and disadvantages of patents versus trade secrets? What factors should be considered in making a choice between secrecy and patenting? Answer: To meet the requirements for patent protection, an invention must be • new (i.e., not disclosed publically) • useful (i.e., solve some practical problem) • unobvious (i.e., involves an inventive step) A patent gives the patent holder a monopoly for 20 years in return for disclosure in full of the invention. A trade secret can last indefinitely; however, there is a risk that the secret will leak out or be discovered independently. A patent requires an application process and the payment of fees whereas there is no process for a trade secret. The following are some factors to consider: • Is it actually possible to keep the invention a secret? • How easy would it be for others to discover the secret through reverse engineering? • Is the invention new and unobvious? • Is the cost of patenting justified in view of the potential commercial return? • Are there benefits from patenting, such as licensing, that justify the cost? See Taylor Euan, “Patent or trade secret? How to make the right choice,” The Lawyers Weekly (7 May 2010) 12. Solution Manual for Canadian Business and the Law Philip King, Dorothy Duplessis, Shannon O'byrne 9780176570323, 9780176509651, 9780176501624, 9780176795085
