IP Trolls In Canada

A uniquely 21st Century business headache is the demand letter from so-called “IP trolls”. Someone claiming to own patent, copyright or other intellectual property rights demands the recipient pay a settlement or license fee for use of the IP.

The “trolls” name suggests the letter writers have no business other than amassing IP portfolios to support these demands. They also have little or no intention to go to court to enforce their rights. This is because the demands are so small (a few hundred to a few thousand dollars) that it would not be cost-effective to go to trial. But they gamble that recipients will pay the nuisance fee rather than fight.

Trolling is big business in the U.S. but less common in Canada, at least for now. Part of this is due to IP laws which are more content-owner friendly in America and because of the much lower lawsuit award structure in our country. This might be why the Federal Court of Canada’s decision in Voltage Pictures LLC v. John Doe and Jane Doe from February 20, 2014 received so much news attention.

First, whether or not Voltage is a copyright troll is still debatable since the judge declined to comment. They clearly displayed some of the major features, though. Voltage owns a portfolio of movie properties and claimed its movies were being traded illegally through popular file sharing tools such as BitTorrent. In the U.S., Voltage aggressively tracked down users whose IP addresses were connected with downloads and made demands on them for payment.

Voltage’s problem is they can identify the IP addresses of computers which are sharing and downloading their properties. But only the ISP knows who that IP address belongs to. Voltage needed that information to start making demands against or suing the alleged infringers. And Canadian courts have not been co-operative with those requests.

The ISP in this case was a company called TekSavvy Solutions Inc. Voltage claimed that about 2,000 of TekSavvy’s subscribers had IP addresses showing infringing activity. Even though the ISP wasn’t a party to the action (Voltage was suing the still unknown downloaders) Voltage sought an order compelling TekSavvy to divulge the names and contact information behind the IP addresses.

TekSavvy took no position on the motion but Voltage was opposed by the Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic. They argued the case from the users’ perspective.

CIPPIC said that Voltage was a copyright troll engaged in “speculative invoicing” which tried to intimidate individuals into easy settlements through demand letters and litigation threats. They claimed that the cost, uncertainty and stigma of litigation bullied most people into making payments whether they were involved in illegal activity or not. On that latter point, remember that Voltage only had IP addresses. They would have no way of knowing who actually used the address for downloading (it might be another family member, a friend or even a stranger if the customer’s wi-fi was left open).

The Court acknowledged CIPPIC’s caution not to become an inadvertent tool assisting the troll business model. In the end, however, the Judge ruled that TekSavvy should disclose the information.

That’s the part that got news coverage but the decision is more nuanced. Although it may disappoint those who argue for an impenetrable cloak at the ISP level, the Court was not deaf to the potential problems. The order was therefore subject to many limitations. These included that only names and addresses were divulged, the demand letter needed to be approved by the Court and emphasize that no ruling on infringement had been made, that TekSavvy’s costs of complying needed to be first paid by Voltage and that Voltage must keep the information confidential.

The terms of the order may make it cost prohibitive for Voltage to enforce any of its rights in court. The costs of reimbursing TekSavvy and of continued litigation will almost certainly exceed the damages they could expect to recover under Canadian law. They may hope their demand letters serve as a deterrent for future infringement but if they really are copyright trolls that is not their goal; their business model requires payments now.

Further, the really clever infringers, including organized crime where the big money and damages lie, won’t get caught by this dragnet. They are undoubtedly using VPN’s, TOR networks and other tools to hide their identities even if disclosed by the ISP. Voltage might catch individuals who have downloaded a movie or two but that’s about it.

You can reach your own conclusion of whether Voltage is a troll or what you think of that business model. The thing to remember is that demands from alleged IP owners are just that: demands. People are free to ask for whatever they want but likewise, recipients should examine the facts to find out how legitimate the claims are.

This article originally appeared in Saskatchewan Business magazine and is reprinted with their kind permission