Ontario appeal court asserts jurisdiction; rules that a domain name is personal property

The Court of Appeal for Ontario in Tucows.Com Co. v. Lojas Renner S.A., 2011 ONCA 548 has issued a ground-breaking decision on domain names and personal property rights.

The unanimous judgment written by Justice Weiler (Simmons and Epstein JJ.A. concurring) merits close reading for those practicing in the area of internet law and jurisdiction.

The action involves a dispute between Tucows.com Co. (“Tucows”) a technology corporation incorporated in Nova Scotia whose principal office is located in Toronto, Ontario, and Lojas Renner S.A. (“Renner”), a Brazilian company operating a series of retail department stores in Brazil (subsidiary of JC Penney, a leading US retailer) over the domain name.  Renner is the registered owner in Brazil and other countries of the trademark “Renner”.

On June 15, 2006, Tucows purchased and registered the domain name from Mailbank Inc., along with over 30,000 other surname domain names, with the Internet Corporation for Assigned Names and Numbers (ICANN).

Renner selected the World Intellectual Property Organization (“WIPO”) Arbitration and Mediation Center to arbitrate the dispute by submitting a complaint via email to Tucows on May 12, 2009.  WIPO formally notified Tucows of Renner’s complaint that it was using the domain name in bad faith and the WIPO proceeding was commenced on May 22, 2009.    The domain name system overseen by ICANN  includes a private Uniform Domain Name Dispute Resolution Policy (the “UDRP”) and related Rules (the “UDRP Rules”).

Tucows response due date for was June 11, 2009, but  Tucows failed to respond to the substantive merits of Renner’s complaint.  Instead, on June 10, 2009, Tucows commenced a declaratory action in the Ontario Superior Court of Justice by issuing a statement of claim for a series of declarations including:

(a)       that Tucows has rights or legitimate interests in respect of the domain name;

(b)       that the domain namehas neither been registered nor is it being used in bad faith by Tucows; and

(c)       that Renner is not entitled to the transfer of the domain name <renner.com>.

 On June 11, 2009, Tucows asked WIPO exercise to its jurisdiction to suspend or terminate the proceeding to allow the Ontario Superior Court of Justice to adjudicate the dispute.  On July 25, 2009, the WIPO Administrative Panel ordered that the proceeding be terminated.  Justice Weiler notes that “[t]he Panel observed that the issues in the Superior Court action were “seemingly identical” to those in the dispute before it.  It held, ‘The Panel therefore has a discretion to suspend or terminate this proceeding in accordance with paragraph 18 of the Rules.’”

Renner then brought a motion pursuant to rule 17.06(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to set aside service of Tucows’s statement of claim and to permanently stay or dismiss Tucows’s action for lack of jurisdiction. Tucows responded that service of the statement of claim outside Ontario without leave was permitted relying primarily on rule 17.02(a) and 17.03, which read in part:

17.02 A party to a proceeding may, without a court order, be served outside Ontario with an originating process or notice of a reference where the proceeding against the party consists of a claim or claims,

(a) in respect of … personal property in Ontario[.]

17.03 (1) In any case to which rule 17.02 does not apply, the court may grant leave to serve an originating process … outside Ontario.

Justice Weiler notes,

[24]         I first address the issue of whether the domain name dispute should have remained with the WIPO administrative panel.  This issue was not directly before the motions judge as the panel’s decision to terminate its proceedings was not the subject of judicial review.  However, given the argument on this issue in the context of whether jurisdiction should be assumed both at first instance and before us on appeal, I must address it as well.  I conclude that the UDRP and the UDRP Rules contemplate the possibility of litigation before domestic courts and that the assumption of jurisdiction by the Ontario courts would therefore not undermine the administrative process.  Jurisdiction need not be declined on this basis.

[25]         I then deal with the issue of whether Tucows was entitled to serve its statement of claim without leave pursuant to rule 17.02(a).  I conclude that a claim for a declaration that Tucows owns the domain nameis a “proceeding” in respect of “personal property in Ontario” within the meaning of rule 17.02(a).  Accordingly, there is a presumption that the dispute has a real and substantial connection with Ontario.  I would hold that that presumption has not been rebutted.  Therefore, Tucows is entitled to seek a declaration as to whether or not it owns the domain nameand I would accordingly allow the appeal.

Weiler, J.A. disagreed with the motion judge’s conclusion that Tucows’s issuance of a statement of claim was an attempt to undermine the UDRP administrative process.   Unlike the usual rules governing arbitration procedures, the UDRP Rules were held to be “an alternative, and not a substitute, for court litigation, which remains open to the parties.”  After reviewing the UDRP Rules, Weiler, J.A. concluded that “Tucows did not breach the spirit of the UDRP or the UDRP Rules in instituting its action.  Thus, the acceptance of jurisdiction by the Ontario Superior Court would not in any way undermine the UDRP process.”

Justice Weiler confirmed that claim for declaratory relief is a proceeding consisting of a claim within the meaning of rule 17.02(a) and held that “the mere fact that the claim is for declaratory relief affords no basis for asserting that Tucows does not have a “good arguable case” or action. “

Following a useful summary of the nature of domain names, Weiler, J.A. then proceeds to consider the issue of whether domain names constitute personal property. Given the paucity of Canadian precedents (the decision of Nordheimer J. in Easthaven Ltd. v. Nutrisystem.com Inc. (2001), 55 O.R. (3d) 334 (S.C.). was distinguished), Justice Weiler admirably turns to international jurisprudence and academic commentators and concludes that “the dominant view emerging from international jurisprudence and academic commentary appears to be that domain names are a new type of intangible property. “

Weiler J.A. concludes that a domain name can be considered to be property in Ontario for the purposes of rule 17.02(a)  rejecting Renner’s argument that the intangible nature of a domain name made it impossible for it to be located “in Ontario”. The Court of Appeal notes:

“…Simply because a domain name is intangible property does not mean that it cannot have a location that allows a court to ground jurisdiction:  see e.g. SRU Biosystems, in which Morin J. held at para. 32 that the plaintiffs had made out “a very arguable case” that the Canadian patent application filed by the defendants was personal property in Ontario.

[68]         Rule 17.02(a) gives the court jurisdiction to settle controversies with regard to rights or claims against personal property.  Personal property consists of both tangible and intangible property:  see Brian A. Garner, ed., Black’s Law Dictionary, 8th ed (St. Paul:  West, 2004), at p. 1254.  See also Metlakatla Ferry Service Ltd. v. British Columbia (1987), 37 D.L.R. (4th) 322 (B.C.C.A.), in which the court held at p. 325 that the term “personal property” in s. 87 of the Indian Act, R.S.C. 1985, c. I-5, included intangible property, in this case a lease and the debt owing under it.  Intangible property refers to personal property that cannot actually be moved, touched or felt, but instead represents something of value such as good will.  In Manitoba Fisheries Ltd. v. R., [1979] 1 S.C.R. 101, the Supreme Court held that although good will is intangible in character, it is part of the property of a business just as much as the premises, machinery and equipment employed in the production of the product whose quality engendered it.  As such, there is a presumption of compensation for the regulatory taking of this property.

[69]         It seems to me, as well, that for purposes of jurisdiction, a domain name is part of the intangible property of Tucows’s business.  In Williams v. Canada, [1992] 1 S.C.R. 877, at pp. 891-93, the Supreme Court developed what is now referred to as the “connecting factors” test,[10] in which the situs of intangible property is determined by where it has the strongest contacts:  see Canada v. Folster, [1997] 3 F.C. 269 (C.A.), at paras. 15-18.  In this case, the domain name, as a business asset of Tucows and a form of intangible property, has its maximum contacts with Ontario.

Applying by analogy the Supreme Court of Canada decision in  Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, [2004] 2 S.C.R. 427, Justice Weiler concludes:

[71]        … in this case the connecting factors favouring location of the domain name in Ontario are the location of the registrant of the domain name, as well as the location of the registrar and the servers as intermediaries.  The evidence concerning the location of Tucows’s target audience is insufficient for me to draw any conclusion based on it.  The location of the registrar is an important consideration because, as Bogdan and Maunsbach point out at p. 182, without the domain name registrar/ administrator being subject to the court’s jurisdiction, questions of the enforceability of the order could arise.

[72]         I would hold that for purposes of rule 17.02(a), the domain nameis intangible personal property located in Ontario.

Accordingly, the Court of Appeal allowed the appeal and set aside the order of the motions judge, and substituted an order that service on Renner outside Ontario was valid and that Ontario has jurisdiction over the dispute between Tucows and Renner.

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