EASTHAVEN, LTD., Plaintiff v. NUTRISYSTEM.COM INC. and

                             TUCOWS INC., Defendants

 

                               No.: 00-CV-202854

 

                       ONTARIO SUPERIOR COURT OF JUSTICE

 

                             August 3, 2001, Heard

 

                           August 15, 2001, Released

 

COUNSEL:  [*1]  Zak Muscovitch, for the Plaintiff.

 

Jonathan Stainsby and Andrea Rush, for the Defendant, Nutrisystem.com Inc.

 

JUDGES: NORDHEIMER J.

 

OPINIONBY: NORDHEIMER

 

OPINION:

    REASONS FOR DECISION

 

NORDHEIMER J.:

 

   The defendant, Nutrisystem.com Inc., moves to dismiss the claim against it on

 the basis of res judicata or, in the alternative, to dismiss or stay the action

 on the grounds that it is an abuse of process or, in the further alternative, to

 stay the action on the basis of forum non conveniens.

 

Background

 

   The plaintiff is a corporation incorporated under the laws of Barbardos and

 has its head office in Bridgetown, Barbados. The plaintiff owns the domain name

 "sweetsuccess.com". The plaintiff asserts that it acquired the domain name in

 July 2000 for the purpose of developing an interactive Internet web site

 featuring sports related content.

 

   The defendant, Nutrisystem.com Inc., is a corporation incorporated under the

 laws of the State of Delaware and has its principal place of business in

 Horsham, Pennsylvania, U.S.A. Nutrisystem.com Inc. is engaged in the marketing,

 sales and distribution of weight loss programs including on the Internet.

 Nutrisystem.com [*2]  Inc. owns certain "Sweet Success" (R) trademarks which it

 has used in connection with weight loss products since 1987. These trademarks

 have been extensively advertised and promoted in the United States and in

 Canada.

 

   The defendant, Tucows Inc., is a corporation incorporated under the laws of

 the State of Delaware and has its head office in Toronto, Ontario. Tucows is a

 domain name registration service provider and was, at all material times, the

 registrar of the domain name "sweetsuccess.com".

 

   On August 29, 2000, Nutrisystem.com Inc. made an inquiry by e-mail to the

 plaintiff's agent, Comnetwork, concerning the availability of the domain name.

 The response received, first by a responding e-mail and then by a telephone call

 from Comnetwork to Nutrisystem.com Inc., was that the domain name was available

 for sale at a purchase price of U.S. $ 146,250.

 

   In response to that advice, Nutrisystem.com Inc. commenced an action in the

 United States District Court for the Eastern District of Pennsylvania. In that

 action, Nutrisystem.com Inc. sought relief regarding its registered trademarks

 and to gain control over the domain name. In support of the relief that it

 sought, Nutrisystem.com Inc.  [*3]  relied, in part, on the Cyberpiracy Act

 which is a federal statute in the United States.

 

   The complaint in the Pennsylvania action was served on Easthaven and on its

 agent, Comnetwork. Easthaven was granted permission for its Ontario lawyer to

 appear in the Pennsylvania action.

 

   On or about October 10, 2000, Nutrisystem.com Inc. commenced proceedings as

 required by the Uniform Domain Name Dispute Resolution Policy ("UDRP") and the

 rules promulgated by the Internet Corporation for Assigned Names and Numbers

 ("ICANN"). The ICANN proceeding involved the dispute between Nutrisystem.com

 Inc. and Easthaven over the domain name. It should be noted that clause 4(k) of

 the UDRP expressly permits a party to commence court proceedings regarding the

 same complaint that is the subject of the ICANN proceeding provided that any

 such court proceedings are commenced either before the ICANN proceeding is

 commenced or after the ICANN proceeding is concluded.

 

   On October 11, 2000, Nutrisystem.com Inc. filed a motion for a preliminary

 injunction in the Pennsylvania action. In response, Easthaven brought a motion

 in writing seeking to dismiss the action for lack of personal jurisdiction and

 on the basis [*4]  of forum non conveniens. Nutrisystem.com Inc. filed

 responding material to Easthaven's motion. It appears that, prior to Easthaven's

 lawyers receiving the responding material filed by Nutrisystem.com Inc. and

 having any opportunity to reply, the Pennsylvania court issued its decision

 dismissing the motion of Easthaven. In his decision, Senior Judge Fullham said,

 in part:

 

"I agree with plaintiff that the e-mail and telephone call directed to the

 plaintiff in Pennsylvania by Easthaven's agent, Comnetwork, which included an

 offer to sell the 'sweetsuccess.com' domain name, are sufficient to confer

 specific jurisdiction upon this Court pursuant to Pennsylvania's long-arm

 statute. Defendants' conduct was expressly aimed at this jurisdiction."

 

   Subsequent to the release of the decision on its motion, Easthaven ceased to

 participate in the Pennsylvania action, other than to write to Senior Judge

 Fullham and complain about the fact that his decision was released before

 Easthaven had the opportunity to reply to the responding material of

 Nutrisystem.com Inc. On December 11, 2000, Senior Judge Fullham issued the

 preliminary injunction sought by Nutrisystem.com Inc. That preliminary [*5]

 injunction, among other things, restrained Easthaven and Comnetwork from taking

 any action to prevent the transfer of the domain name to Nutrisystem.com Inc.

 

   Nutrisystem.com Inc. sent Senior Judge Fullham's order to Tucows. Tucows

 responded by transferring the domain name to Nutrisystem.com Inc. on December

 20, 2000. This action was then commenced on December 21, 2000. In this action,

 Easthaven seeks damages against Nutrisystem.com Inc., a declaration that the

 domain name belongs to Easthaven, an order requiring Tucows to transfer the

 domain name to Easthaven and for other relief. As a consequence of the

 commencement of this action, Tucows placed the domain name on "Registrar hold"

 which has the effect of preventing the domain name from being used. Once the

 domain name was put on "Registrar hold" by Tucows, Easthaven discontinued this

 action against Tucows.

 

   On December 27, 2000, Nutrisystem.com Inc. sought a finding of contempt

 against Easthaven in the Pennsylvania action. While Senior Judge Fullham

 observed that it "may well be that the defendants have violated the spirit of

 the injunctive order", he could not find any violation of the actual terms of

 the order and he therefore [*6]  dismissed the motion by Nutrisystem.com Inc.

 

   Two other facts should be noted. One is that Easthaven did not take any steps

 to seek a reconsideration of the order dismissing its motion regarding the

 jurisdiction of the Pennsylvania court nor did it appeal that order. The other

 is that on or about November 28, 2000 the arbitration panel in the ICANN

 proceeding issued its decision in which it found against Nutrisystem.com Inc.

 The arbitrators concluded that Nutrisystem.com Inc. had failed to establish that

 Easthaven had registered or used the domain name in bad faith and therefore

 declined to order that the domain name be transferred to Nutrisystem.com Inc..

 

Analysis

 

   I now turn to the issues raised by this motion. The first issue is whether

 the dispute between Easthaven and Nutrisystem.com Inc. is res judicata by virtue

 of the determinations made in the Pennsylvania action. The requirements for a

 finding of res judicata have recently been reiterated by the Court of Appeal in

 Canam Enterprises Inc. v. Coles (2000), 51 O.R. (3d) 481 (C.A.) where Finlayson

 J.A. said, at p. 487:

 

"The principle of res judicata applies where a judgment rendered [*7]  by a

 court of competent jurisdiction provides a conclusive disposition of the merits

 of the case and acts as an absolute bar to any subsequent proceedings involving

 the same claim, demand or cause of action. Issue estoppel is one aspect of res

 judicata. The oft-cited requirements of issue estoppel are attributed to Lord

 Guest in Carl-Zeiss-Stiftung v. Rayner & Keeler Ltd. (No. 2), [1967] 1 A.C. 853

 at p. 935, [1966] 2 All E.R. 536 (H.L.): (1) that the same question has been

 previously decided; (2) that the judicial decision which is said to create the

 estoppel was final; and (3) that the parties to the judicial decision or their

 privies were the same persons as the parties to the proceedings in which the

 estoppel is raised or their privies."

 

   In my view, the finding by the Pennsylvania court that Nutrisystem.com Inc.

 was entitled to a preliminary injunction does not constitute that decision as a

 "conclusive disposition of the merits of the case" especially where the

 injunction was obtained on an unopposed basis. There are no reasons from the

 Pennsylvania court in support of the decision and there is, therefore, no

 evidence that there was any conclusive determination [*8]  of the matters in

 issue other than the conclusion that, at the point in time of the order, it was

 appropriate to grant interim relief to Nutrisystem.com Inc. I do not see,

 therefore, that the principle of res judicata can be applied in the

 circumstances of this case.

 

   The second issue is whether the action should be dismissed or stayed as an

 abuse of process. The principle of abuse of process was also reviewed by the

 Court of Appeal in Canam Enterprises Inc. v. Coles, supra. Again, I quote Mr.

 Justice Finlayson at p. 490:

 

"Abuse of process is a discretionary principle that is not limited by any set

 number of categories. It is an intangible principle that is used to bar

 proceedings that are inconsistent with the objectives of public policy."

 

   The scope of the principle of abuse of process is also explained in Hunter v.

 Chief Constable of the West Midlands Police, [1982] A.C. 529 where Lord Diplock

 said, at p. 536:

 

"My Lords, this is a case about abuse of the process of the High Court. It

 concerns the inherent power which any court of justice must possess to prevent

 misuse of its procedure in a way which, although not inconsistent with the [*9]

 literal application of its procedural rules, would nonetheless be manifestly

 unfair to a party to litigation before it, or would otherwise bring the

 administration of justice into disrepute among right-thinking people. The

 circumstances in which abuse of process can arise are very varied; those which

 give rise to the instant appeal must surely be unique. It would, in my view, be

 most unwise if this House were to use this occasion to say anything that might

 be taken as limiting to fixed categories the kinds of circumstances in which the

 court has a duty (I disavow the word discretion) to exercise this salutary

 power."

 

   Again, I have difficulty in characterizing this action as an abuse of process

 given the circumstances in which it arises. Nutrisystem.com Inc. commenced

 proceedings in Pennsylvania. That was understandable given that Pennsylvania is

 its base of operations. Pennsylvania has, however, no connection to Easthaven. I

 must say that I have considerable difficulty in understanding the basis upon

 which the Pennsylvania court determined that it had personal jurisdiction over

 Easthaven. The concept that a court can obtain personal jurisdiction over a

 defendant based on the [*10]  fact that the defendant's agent sent a single

 e-mail into that jurisdiction and then placed a single telephone call into the

 jurisdiction is one that results in an assumption of jurisdiction over parties

 that is remarkable in its reach.

 

   Easthaven has chosen a different jurisdiction in which to commence its

 proceeding. Without commenting on whether Ontario is a proper or appropriate

 jurisdiction (a subject to which I will turn shortly), it seems to me that

 Easthaven had every bit as much right to choose Ontario for its proceeding as

 Nutrisystem.com Inc. did to chose Pennsylvania. Certainly, the mere fact that

 Easthaven chose a different jurisdiction to litigate the issue is not one which

 I would find in these circumstances to "be manifestly unfair to a party to

 litigation before it, or would otherwise bring the administration of justice

 into disrepute among right-thinking people". I therefore conclude that this

 action is not an abuse of process.

 

   Finally there is the issue of forum non conveniens. Nutrisystem.com Inc.

 submits that the onus is on Easthaven to establish that Ontario is clearly a

 more appropriate forum for the resolution of this dispute than is Pennsylvania.

 Easthaven [*11]  contends that the onus is on Nutrisystem.com Inc. to displace

 its choice of Ontario as the forum. I do not consider that it is necessary for

 me to resolve the question of onus, given the view that I take as to the proper

 resolution of the issue, as I will set out below.

 

   I do believe that it is first necessary to determine whether Ontario is an

 appropriate forum before one determines whether it is the more convenient forum

 or, put another way, whether there is another forum that is clearly more

 convenient. In order to determine if Ontario is an appropriate forum, it is

 necessary to determine if there is a real and substantial connection between

 Ontario and the subject matter of the litigation, that is, the ownership of the

 domain name.

 

   The requirement that there be a real and substantial connection between the

 subject matter of an action and the right of a court to assume jurisdiction over

 it, is referred to in the decision of the Supreme Court of Canada in Morguard

 Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077. In the course of his

 decision for the court, Mr. Justice La Forest said at p. 1103:

 

"These concerns, however, must be weighed against fairness [*12]  to the

 defendant. I noted earlier that the taking of jurisdiction by a court in one

 province and its recognition in another must be viewed as correlatives, and I

 added that recognition in other provinces should be dependent on the fact that

 the court giving judgment 'properly' or 'appropriately' exercised jurisdiction.

 It may meet the demands of order and fairness to recognize a judgment given in a

 jurisdiction that had the greatest or at least significant contacts with the

 subject-matter of the action. But it hardly accords with principles of order and

 fairness to permit a person to sue another in any jurisdiction, without regard

 to the contacts that jurisdiction may have to the defendant or the

 subject-matter of the suit; . . ."

 

   Easthaven argues that Ontario has a real and substantial connection to the

 subject matter of the action because the registrar for the domain name is Tucows

 and Tucows has its head office in Toronto. Easthaven builds on that fact to its

 assertion that a domain name is property; that property is located where

 registration of it takes place and, therefore, the situs of the domain name is

 Ontario. Nutrisystem.com Inc., on the other hand, asserts that a domain [*13]

 name is not property but is simply a bundle of rights like a copyright. It

 relies in this regard on the decision of the Supreme Court of Canada in Compo

 Co. v. Blue Crest Music Inc., [1980] 1 S.C.R. 357 where Estey J. said, at pp.

 372-373:

 

"Mr. Hughes for the respondent in answer to a question from the Bench put it

 very well when he said that copyright law is neither tort law nor property law

 in classification, but is statutory law. It neither cuts across existing rights

 in property or conduct nor falls between rights and obligations heretofore

 existing in the common law. Copyright legislation simply creates rights and

 obligations upon the terms and in the circumstances set out in the statute. This

 creature of statute has been known to the law of England at least since the days

 of Queen Anne when the first copyright statute was passed. It does not assist

 the interpretive analysis to import tort concepts. The legislation speaks for

 itself and the actions of the appellant must be measured according to the terms

 of the statute."

 

   I am inclined to agree with Nutrisystem.com Inc. on this point. It does seem

 to me to be difficult to characterize a domain name [*14]  as property. When I

 say property, I refer to either real or personal property. I appreciate that a

 domain name, like a copyright or a trademark, could be properly characterized as

 intangible property. I adopt, in this regard, the definitions of property and

 intangible property from Black's Law Dictionary, 7th edition, as follows:

 

"property - the right to possess, use, and enjoy a determinate thing (either a

 tract of land or a chattel)"

 

"intangible property - property that lacks a physical existence."

 

   The definition of intangible property aptly demonstrates the problem which is

 central to the issue here. A domain name lacks a physical existence. The mere

 fact that it is registered through a corporation that happens to carry on

 business in Toronto does not give the domain name a physical existence in

 Ontario. A domain name is still simply a unique identifier for a particular

 internet site located on a particular computer. That computer may be located

 anywhere in the world and be unrelated to where the domain name is registered.

 The fact is that the internet is an entity without conventional geographic

 boundaries. As Whitten J. observed in Pro-C Ltd. v. Computer City  [*15]   Inc.,

 [2000] O.J. No. 2823 (S.C.J.) at para. 1:

 

"The Internet, in reality a network of networks, has created a whole new

 territory independent of conventional geography. The conceptual location of this

 electronic interactivity available to us through our computers is oft referred

 to as 'cyberspace' [note omitted]. Unlike a 'real' territory with fixed borders,

 the Internet is constantly growing and at a phenomenal rate."

 

   The question of how one determines jurisdictional issues when dealing with

 the internet or cyberspace is one which has only recently arisen and there is,

 consequently, little authority dealing with the issue. Indeed, I was not

 provided with any authorities by the parties on the issue - a fact that is

 perhaps not surprising given that there appear to be few authorities which have

 expressly dealt with the issue. This point was made by the U.S. Court of

 Appeals, Ninth Circuit, in Panavision International v. Toeppen, 141 F.3d 1316

 (9th Cir. 1998) where Judge Thompson said, at p. 1320:

 

"Applying principles of personal jurisdiction to conduct in cyberspace is

 relatively new. 'With this global revolution looming on the horizon, the [*16]

 development of the law concerning the permissible scope of personal jurisdiction

 based on Internet use is in its infant stages. The cases are scant.' Zippo Mfg.

 Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1123 (W.D. Pa. 1997)."

 

   The decision in Panavision is helpful, however, because it does expressly

 address this issue albeit in the context of American procedure and legal

 concepts. The court in Panavision observed that personal jurisdiction could be

 founded on either general jurisdiction or specific jurisdiction. The court held

 that general jurisdiction could be found in such a case only if the person was

 domiciled in the jurisdiction or his activities there were "substantial" or

 "continuous and systematic". In terms of specific jurisdiction, the court

 adopted a three-part test as follows, at p. 1320:

 

"(1) The nonresident defendant must do some act or consummate some transaction

 with the forum or perform some act by which he purposefully avails himself of

 the privilege of conducting activities in the forum, thereby invoking the

 benefits and protections of its laws; (2) the claim must be one which arises out

 of or results from the defendant's [*17]  forum-related activities; and (3)

 exercise of jurisdiction must be reasonable."

 

   The court then referred to its earlier decision in Cybersell, Inc. v.

 Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997) and made the following

 observation, at p. 1321:

 

"In reaching this conclusion in Cybersell, we carefully reviewed cases from

 other circuits regarding how personal jurisdiction should be exercised in

 cyberspace. We concluded that no court had ever held that an Internet

 advertisement alone is sufficient to subject a party to jurisdiction in another

 state. Id. at 418. In each case where personal jurisdiction was exercised, there

 had been 'something more' to 'indicate that the defendant purposefully (albeit

 electronically) directed his activity in a substantial way to the forum state'."

 

   I find the analysis of the U.S. Court of Appeals in Panavision to be helpful

 in my consideration of whether I should conclude that Ontario does have

 jurisdiction in the circumstances of this case. I can easily conclude that there

 is no general jurisdiction in this court over the defendant. Nutrisystem.com

 Inc. is not domiciled in Ontario nor is there any evidence [*18]  that it has

 engaged in activities here that were substantial or continuous and systematic.

 

   In terms of whether I could find a basis for jurisdiction under the concept

 of specific jurisdiction, I note that none of the three factors set out above

 are established by the facts of this case. First, Nutrisystem.com Inc. has not

 done any act nor consummated any transaction within Ontario. Second, there being

 no activities by Nutrisystem.com Inc. in Ontario, it follows that the claim

 cannot arise from such activities. Third, it seems to me in the circumstances of

 this case it would be unreasonable for this court to exercise jurisdiction over

 a Pennsylvania corporation at the behest of a Babados corporation. Finally, the

 sole cogent connection to Ontario is the presence of Tucows as a defendant in

 the action but even that basis has since been removed as a consequence of the

 plaintiff's decision to discontinue the action against Tucows. If Tucows had

 remained in the action, a different conclusion might have resulted although I

 will say that it does not seem that Tucows is a necessary party to any

 proceeding since it appears that Tucows is prepared to abide by any court order,

 regardless of [*19]  the jurisdiction from which it emanates, that finally

 determines the issue of the ownership of the domain name.

 

   I have concluded, therefore, that there is no real and substantial connection

 between the remaining parties, or the events giving rise to this claim, and

 Ontario. Consequently Ontario has no jurisdiction over the subject matter of

 this action and the action should be stayed on that basis pursuant to rule

 21.01(3)(a) of the Rules of Civil Procedure.

 

   For the sake of completeness, I will briefly address the issue of forum non

 conveniens on the assumption that Ontario could exercise jurisdiction over the

 subject matter of the action. The factors to be considered in determining the

 issue of forum non conveniens are set out in Eastern Power Ltd. v. Azienda

 Communale Energia and Ambiente, (1999), 178 D.L.R. (4th) 409 (Ont. C.A.) where

 Mr. Justice MacPherson listed them as follows:

 

(i) the location where the contract in dispute was signed;

 (ii) the applicable law of the contract;

 (iii) the location in which the majority of witnesses reside;

 (iv) the location of key witnesses;

 (v) the location where the bulk of the evidence will come from;  [*20]

 (vi) the jurisdiction in which the factual matters arose;

 (vii) the residence or place of business of the parties, and;

 (viii) loss of jurisdical advantage.

 

   None of these factors either establish Ontario as the convenient forum nor do

 they weigh in favour of having the action determined here. While the plaintiff

 relies on the fact that its contract with Tucows is subject to the laws of

 Ontario, the dispute here is not about that contract. While there is no evidence

 before me as to the witnesses that would be called in this action, since neither

 Easthaven nor Nutrisystem.com Inc. has any connection to Ontario it is a

 reasonable assumption that none of their witnesses are here nor is any of their

 evidence. While it could be said that Ontario is the jurisdiction where the

 factual matters arose, on the assumption that the fact of the domain name being

 registered through Tucows in favour of Easthaven is a central factual matter,

 that, by itself, is insufficient to make Ontario the convenient forum. As I have

 already noted, neither Easthaven or Nutrisystem.com Inc. have their place of

 business here. Finally, there is no loss of juridical advantage to which

 Easthaven can point if the [*21]  action is not determined in Ontario whereas

 there may be a loss of juridical advantage to Nutrisystem.com Inc. if the action

 is tried here given its reliance on the Cyberpiracy Act of the United States.

 

   Considering all of these factors, and recognizing the fact that a court in

 Pennsylvania has already assumed jurisdiction over this matter, I conclude that,

 as between Ontario and Pennsylvania, Pennsylvania would clearly be the more

 convenient forum for the determination of the issues raised in this action.

 

   Consequently, I grant an order staying this proceeding. Nutrisystem.com Inc.

 is entitled to its costs of the proceeding, including this motion, payable

 forthwith by Easthaven. I am prepared to fix the costs of the proceeding on

 receipt of proper submissions from the parties in that regard unless the parties

 can agree on the amount. Nutrisystem.com Inc. will file its submissions within

 10 days of the date of these reasons and Easthaven will file its responding

 submissions within 10 days thereafter. No reply submissions are to be filed

 without leave.

 

   NORDHEIMER J.