Saskatoon Star Phoenix Group Inc. v. Noton

[2001] S.J. No. 275

Saskatchewan Court of Queen's Bench
Judicial Centre of Saskatoon
Laing J.

March 28, 2001.
(27 paras.)

 1      LAING J.:&emdash; The plaintiff requests an assessment of damages and an order for permanent injunctive relief with respect to its claim of "passing off" brought against the defendant, which claim has now been noted for default.  The defendant was served with notice of this hearing, but did not appear.  The facts supporting the claim are set out in affidavit material submitted at the time an interlocutory injunction was granted against the defendant, and additional affidavit material filed for this hearing.

Facts

 2      The plaintiff carries on the business of publishing The StarPhoenix, a Saskatoon daily newspaper.  The newspaper is the largest daily in Saskatchewan and is widely distributed throughout the province.  The name StarPhoenix has been associated with the paper for decades.

 3      The plaintiff maintains an internet website with the domain name and address "www.thestarphoenix.com".  The main page of the website contains the current days lead news stories from The StarPhoenix along with advertising paid for by the plaintiff's customers.  This main page is the first page that members of the public see when they search for The StarPhoenix on the Internet.

 4      Sometime between July and November 2000, the defendant created an Internet website with the domain name and address "http:  saskatoonstarphoenix.com" (hereinafter referred to as the "Noton StarPhoenix site).  The defendant set up the main page of the Noton StarPhoenix site to look exactly the same as the plaintiff's main page except:

(a)

He substituted his own advertising for the plaintiff's top banner advertising;

(b)

The bottom of his page states "Noton Inc. now offers FREE Internet Access & FREE Website Hosting CLICK HERE";

(c)

His page contains a scrolling message in the bottom bar of the browser that "saskatoonstarphoenix.com is designed, hosted and marketed by Noton Inc."

A member of the public who is viewing the Noton StarPhoenix site does not see all of the advertising placed by the plaintiff for viewing on its site, and instead, sees advertising placed by the defendant.

 5      The Noton StarPhoenix site was set up to be located by members of the public when they conducted an internet search for the plaintiff's site by establishing "metatags" (which are used as key words to locate search results) for the website that contained repeated variations of "StarPhoenix", "Saskatoon StarPhoenix", "newspaper", and combinations of the same.  In the case of a member of the public who is looking for the plaintiff's website in relation to The StarPhoenix, that person is likely to enter as search words exactly the words that the defendant has established as his metatags as set out above.

 6      The plaintiff asserts and it is accepted, that in choosing the domain name he did, and in using the metatags he has chosen, the defendant was trying to attract members of the public who were looking for the plaintiff's website.

 7      The defendant also maintains a website for "Noton Inc."  At that site the defendant advertises the sale of domain names.  Included among the domain names he offers for sale are:

(a)

http://thestarphoenix.com

(b)

http://starphoenix.com

He also maintains a website for "http://shoppingonlinemadeeasy.com".  On this website listed under "courtesy links" is "The StarPhoenix".  When a person clicks on this courtesy link, he or she is taken to the Noton StarPhoenix site.

 8      In October 2000 an employee of The StarPhoenix became aware the defendant had created the Noton StarPhoenix site.  He telephoned the defendant and requested that he discontinue his StarPhoenix website and cease offering the domain names, including the name StarPhoenix, for sale.  The defendant refused.  On November 3, 2000 counsel for the plaintiff hand delivered a letter to the defendant which brought to his attention the concerns of The StarPhoenix. This letter states in part as follows:

Through your use of domain names including thestarpheonix.com, starpheonix.com and saskatoonstarphoenix.com you have:


1.

Appropriated copyrighted information of my client;

2.

Appropriated the trade name and business name of my client;

3.

Damaged my client's reputation and ability to conduct its normal business through association of my client's name and copyrighted information with your name, advertising and banners; and

4.

Passed yourself off to the public as my client.


In so doing you are in breach of copyright, you are in breach of my client's trade name rights, you are in breach of my client's business name rights, you are guilty of damage to my client's reputation, you are guilty of damage to my client's business and you are guilty of the statutory and common law tort of passing off.

 9      The defendant's response to the foregoing letter was to telephone the lawyer, and advise him that he would continue to use the site.  However, he did offer to sell the "StarPhoenix" domain names to the plaintiff and indicated this was the sole reason for his having registered the domain names in the first place; namely, to sell them back to the persons who would have a business interest in retaining their name on the Web.

 10      As a result of the foregoing response, the plaintiff applied for an interlocutory injunction pending trial which this court granted on December 21, 2000.  The day after the issuance of the interlocutory injunction he was interviewed by a StarPhoenix reporter as part of a larger article on "Cybersquatting" as the domain name game has come to be called.  Quotes from the article, which the reporter swears in an affidavit are accurate include:

Our pitch is that it's a basic responsibility to their users to take this name back.  We'll continue marketing off it until someone buys it.

. . .

You should cover all your bases on the Internet.

. . .

We do a lot of quick flips.  We register a name, it's a really good name, and instead of charging $50,000 we'll say $100 is our minimum bid and we'll sell it for $500.

. . .

We want to have a constant flow.  If the Saskatchewan government sat down with us, we'd sell the name [governmentofsaskatchewan.com] for $250.  We price our things so that people are actually interested.

 11      The plaintiff tendered two e-mails received by it from persons complaining about the Noton StarPhoenix site. One e-mail dated November 28, 2000 states:

Your recent alliance with Shop Shopping has made viewing your site a waste of my time as it takes far too long. While I have enjoyed catching up with news from Saskatoon I have decided I will look elsewhere.

A second one dated December 8, 2000 states:

Being a former Saskatoonian (I now live in Vancouver), I like to check up on the events happening back home. However i [sic] am quite annoyed now that I have to go through a big commercial link to get there.  Is there another way?  If not i [sic] will probably delete this bookmark.

The Law of Passing Off

 12      There is no need to review the law of "passing off" in any detail.  The Supreme Court of Canada in Ciba-Geigy Canada Ltd. v. Apotex Inc., [1992] 3 S.C.R. 120 reviewed the law in this area including the English Court of Appeal decision in Reckitt & Colman Products Ltd. v. Borden Inc., [1990] 1 All E.R. 873, and concluded:

      The three necessary components of a passing-off action are thus:  the existence of goodwill, deception of the public due to a misrepresentation and actual or potential damage to the plaintiff.

 13      The plaintiff has established that it is the owner of the goodwill associated with the name StarPhoenix. It has also established that certain members of the public were deceived into believing that the Noton StarPhoenix site was the plaintiff's site.  With respect to actual or potential damage the plaintiff admits that it cannot point to any direct pecuniary loss as a result of the defendant's activities in the form of cancelled subscriptions or lost advertising revenue, but does claim actual and potential loss of reputation for being unable to control its own website and advertising. The plaintiff relies on the English House of Lords decision in Draper v. Trist et al., [1939] 3 All E.R. 513 to point out that when "passing off" has been established, damage will be presumed.  In this decision Goddard L.J. at p. 526 stated in part:

. . .The law assumes, or presumes, that, if the goodwill of a man's business has been interfered with by the passing-off of goods, damage results therefrom.  He need not wait to show that damage has resulted.  He can bring his action as soon as he can prove the passing-off, because it is one of the class of cases in which the law presumes that the plaintiff has suffered damage.  It is in fact, I think, in the same category in this respect as is an action for libel.  We know that for written defamation a plaintiff need prove no damage.  He proves his defamation.  So it is with a trader.  The law has always been particularly tender to the reputation and goodwill of traders.  If a trader is slandered in the way of his business, an action lies without proof of damage. That does not mean to say that the plaintiff cannot give evidence showing that he has suffered damage in fact. The more he can show that he has suffered damage in fact, the larger the damages he can recover.  The more the defendant can show that he has suffered no damage in fact, the less he will recover.

The plaintiff has established all three necessary components in the affidavit material filed.

Damages

 14      The plaintiff asks for an award of damages for loss of goodwill and reputation, punitive damages, and costs on a solicitor and client basis.

General Damages for Non-pecuniary Loss

 15      Goddard L.J. in Draper v. Trist, supra, made the point at p. 527 that where the law presumes damage to the plaintiff, it is for the jury to determine what is fair and proper compensation to the plaintiff, without being limited to questions of what in truth are special damages (namely actual proven monetary loss).  He rejected the argument that where a passing off has been established that the plaintiff is limited to nominal damages unless that plaintiff can prove actual monetary loss.  He went on to point out that:

. . .once one has established passing off, there is injury to goodwill, and this court or the jury must assess, by the best means they can, what is a fair and temperate sum to give to the plaintiff for that injury. . .

 16      This point was more recently made by MacKinnon J. in Canwest Telephone Co. Inc. et al. v. Canwest Commercial Phone Centre Ltd. et al. (1986), 8 C.P.R. (3d) 360 (B.C.S.C.) where at p. 365 he noted that the relief ordinarily sought in a passing off action is injunctive, but nevertheless damages are also to be assessed by considering the particular circumstances of the case and deciding on a proper and a reasonable amount.

 17      The following factors are relevant to the assessment of general damages in this matter:

(a)

The plaintiff filed material indicating the defendant had registered his Noton StarPhoenix site July 25, 2000.  It is not clear when the defendant's website actually went into operation.  As noted earlier an interlocutory injunction was issued by this court on December 21, 2000, which the defendant obeyed.

(b)

The plaintiff only learned of the defendant's activities with respect to his website at the end of October 2000.  The defendant declined the plaintiff's request of November 3, 2000 to cease misrepresenting its website and carried on for the next month and a half until the injunction issued.

(c)

The nature of the damage to the plaintiff's goodwill and reputation consisted largely of inconvenience to users of it's website.  The advertising content substituted by the defendant on his website was not offensive, and would not in itself have hurt the plaintiff's reputation or goodwill.

In the end result, considering the short period of time the passing off occurred, and what I perceive to be minimal damage to the plaintiff's goodwill and reputation, I conclude a general damage award of $5,000.00 is appropriate.

Punitive Damages

 18      Plaintiff's counsel suggests this is an appropriate case for punitive damages on the basis the defendant:

1.

Profited from his "passing off" activity out of proportion to the plaintiff's loss;

2.

Deliberately continued the activity after being advised by the plaintiff it considered it unlawful;

3.

A deterrent element was required to prevent the defendant and/or others persisting in this type of activity.

In the end result, I do not consider this an appropriate case for punitive damages.

 19      What emerges from the newspaper interview with the defendant, is that he is 22 years old, and he obtained the idea to register domain names approximately one year ago while travelling in Europe with a friend.  Up until the interim injunction was issued he considered domain names a commodity which anyone could register and thereafter sell back to any person who wished to use such registered name.  Newspaper articles indicate he was not alone in this belief.  One such article indicates Celine Dion recently obtained a United Nations World Intellectual Property Organization Panel ruling restoring to her the right to use her name as a domain name. There was very little, if any, precedent to guide would be entrepreneurs of domain names prior to this and other recent decisions.

 20      The defendant's use of the plaintiff's website material to pass off his Noton StarPhoenix site as that of the plaintiff's is in a different category than his registration and sale of domain names.  It is difficult to imagine that he thought this activity was legal, and yet, tied in as it was to his overall scheme of selling back registered domain names this activity was not "so malicious, oppressive and high handed that it offended this court's sense of decency" (per Cory J. in Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130 at p. 1208).  Punitive damages may be appropriate in the future if, after several decisions such as this, the defendant or others persist in the activity.

Injunctive Relief

 21      The plaintiff is entitled to an order restraining and enjoining the defendant from:

(a)

Using the internet domain names:


-

http://saskatoonstarphoenix.com

-

http://thestarpheonix.com

-

http://starpheonix.com


(b)

Using the name "Star Phoenix" or any variation thereof.

(c)

Directing public attention to his internet websites in such a way as to cause or be likely to cause the public to think the defendant's website is the plaintiff's website.

 22      The plaintiff also requests that the defendant be ordered to transfer to the plaintiff registration of the three domain sites referred to above.  Its point is that without such an order the defendant would be free to sell the names to a third party whose use of the names would be beyond the control of the plaintiff.  Given the fact the defendant admits that he is in the business of selling domain names, there is merit to this request.  Therefore, it is ordered that the defendant transfer to the plaintiff registration of the three domain site names referred to above within 30 days.

Costs

 23      Plaintiff's counsel in this matter requests costs on a solicitor-client basis.  His point is that this was deliberate conduct on the part of the defendant after he was warned that his activity was regarded as unlawful by the plaintiff, and the plaintiff should be indemnified for the costs of the legal proceedings required to prevent the defendant from continuing the unlawful activity.  Counsel for the plaintiff indicates his client has incurred costs in excess of $10,000.00 with respect to these proceedings.

 24      Awards of solicitor-client costs following litigation are not the norm.  The civil litigation system operates largely on a party and party cost basis as set out in the tariff to the Rules of Court.  The rationale for limiting the costs available to the successful party in civil litigation, is that cost should not be so onerous as to stifle novel actions or defences which have contributed to the growth of the common law.  As noted per McLachlin J. in Young v. Young, [1993] 8 W.W.R. 513 (S.C.C.) at p. 541:

. . . Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. . . .

The conduct referred to may arise in the circumstances that lead up to the litigation, or in the manner in which the litigation is conducted.

 25      In Garcia v. Crestbrook Forest Industries Ltd. (1995), 119 D.L.R. (4th) 740 at p. 745, Lambert J.A. concluded the word reprehensible was a word of wide meaning and encompassed not only scandalous or outrageous conduct, but also encompassed milder forms of misconduct deserving of reproof or rebuke.  This definition was applied by this court in Bailey v. Registered Nurses' Assn. (Saskatchewan), [1996] 7 W.W.R. 751.

 26      In this case, the activity of the defendant that is deserving of reproof or rebuke is his unwillingness to investigate his legal position after he was warned the plaintiff regarded his activities as unlawful, and thereafter putting the plaintiff to the expense of legal proceedings to shut down this activity.  He did not offer a defence to the proceedings, and indeed it is not obvious that a defence was available.  Yet the defendant would not desist.  In these circumstances it is reasonable that the plaintiff should receive something more than party and party costs, and it is reasonable that the defendant have brought home to him that he cannot with impunity cause other people to incur legal expense to shut down his unlawful activity, as opposed to voluntarily ceasing the same.  In the end result I consider it reasonable to award costs to the plaintiff in the amount of $7,500.00.

 27     Judgment accordingly.