Canadian COMPETITION LAW

Guest Post by Jacob Kojfman (Vancouver Tech Law Blog)

Apple Inc. (“Apple) may be famous for bringing us 1000s of songs in our pocket with its iPod, and then changing everything again with its iPads.  It is also in second place in the smartphone wars, behind Samsung Electronics Co. (“Samsung”).  This is not sitting well with Apple, so much so that Apple launched a lawsuit against Samsung.  Apple won the first round when it was granted an injunction against Samsung, giving Apple time to catch up in the sales department.  That injunction was just the opening act.  Now comes the main feature, and if it does go to a jury, who knows what it will mean for these tech titans.  Having reviewed Apple’s statement of claim and Samsung’s statement of defence and counterclaim, the central claims are that Apple has certain utility and design patents, trademarks, and trade dress protection and that Samsung is only able to compete because its products “blatantly imitate the appearance of Apple’s…”

Apple’s claim is based on its products being so distinctive and recognizable and that they have been accorded the protection of trade dress.  Apple claims that the public will associate Samsung’s products, such as its Galaxy line of tablets, with Apple because Samsung’s products have the “unmistakable Apple look…”
 Of course, Samsung denies any illegal conduct, and actually points out flaws in Apple’s claim, such as two different definitions of “Apple iPhone Trade Dress”, and denies the distinctiveness of the iPad 2 Trade Dress.  Furthermore, Samsung says that it could not have infringed the Apple patents because they are invalid because they fail to satisfy at least one of the conditions of patentability, and that some of Apple’s patents have also been copied and documented by other parties first.
 Samsung turns the table on Apple by claiming that Apple is violating Samsung’s patents.
 The implications from this trial could be huge.  For one thing, if the jury finds in favor of Apple, it could give Apple the boost it needs in the smartphone wars to overtake Samsung and develop a big lead.   It could also answer questions about design – can one protect certain designs as trade dress?   After all, there are only so many ways to design a smartphone or tablet.

Law slowly catching up to digital technologies. The law is slowly catching up to the new digital world in which we live.  A recent ruling of the Supreme Court of Canada has rejected copyright fees for music downloaded off of the Internet.  According to the ruling, downloading music is considered a “private transmission”, while streaming music is still a communication to the public, and are still subject to paying royalties.
 The Supreme Court said that the online streaming music can be transmitted to large segments of the public and is designed to do just that – be made available to anyone who wants access to it.
 The Supreme Court rejected the copyright fees for the downloaded music, relying on its judgement in another case in which the decision was that video games do not have to pay royalties to composers for games downloaded from the Internet.  The majority decision in that case said that requiring a royalty for music from a downloaded game would violate the principles of technology neutrality, and that the download is not a “communication” under the Copyright Act.  These decisions help clarify questions around new ways to listen to music and other technologies.  The main thing I get out of these two decisions is judicial clarification about key phrases in the Copyright Act: “communicate” and “to the public”.   There are still a lot of questions that need to be answered about digital content and any rights associated with them.

One start-up is testing those rights by setting up a system to re-sell digital downloads that have been legally purchased.  John Ossenmacher, the founder of ReDigi, has been sued by the record labels for copyright infringement.  If it does reach as far as a court decision, the decision will explain traditional legal principles, in this case first-sale doctrine, in the context of technology: whether the right to sell objects you own applies to digital goods.  This could mean changes in the licenses that the music companies or retailers, such as iTunes, may have to make to reflect what exactly is a digital song and who exactly owns it.

Apple’s New Strategy: Win Lawsuits.  It has been a good summer so far for Apple.  Earlier in May, the tech giant won a dismissal of a lawsuit from a company seeking to block Apple’s use of the iPad name.  This week, Apple won a huge victory when it was granted an injunction against Samsung.  These rulings coming amongst a midst of negative patent litigation outcomes for Apple.
 Keep in mind, the injunction against Samsung is just that – an injunction.  Samsung is expected to appeal the ruling.  Another important factor to consider is that the injunction is not a judgment that Samsung did violate Apple’s patents, but rather that Apple demonstrated its claim of infringement was strong, and that Apple needed the injunction so it could complete fairly with a possibly-infringing device.  The question of actual infringement will still be set for trial.

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