Punitive damages for cybersquatting, court suggests

Facts
Decision

A recent judgment of the Saskatchewan Queen's Bench emphasizes that Canadian cybersquatters cannot act with impunity and suggests that punitive damages may be appropriate as case law develops. In Saskatoon Star Phoenix Group Inc v Steven Noton, Justice Laing issued an injunction requiring the defendant to transfer the domain name in dispute and also awarded costs.

Facts

The plaintiff published The StarPhoenix, the largest daily newspaper in Saskatchewan that is widely distributed throughout the province. The plaintiff also maintained a web site with the domain name and address www.thestarphoenix.com, which contained the current day's lead stories and paid advertising.

Sometime between July and November 2000 the defendant (a 22-year old entrepreneur) created a web site with the domain name and address 'saskatoonstarphoenix.com'. He designed the main page of his site to look almost exactly the same as the plaintiff's. The bottom of the defendant's page also contained a notice that the site was "designed, hosted and marketed" by the defendant and a message promoting the defendant's services.

The defendant also inserted metatags that contained repeated variations and combinations of the words 'StarPhoenix', 'Saskatoon StarPhoenix' and 'newspaper' - search terms that a member of the public would probably enter when looking for the plaintiff's web site.

The defendant maintained a separate corporate web site where he advertised for sale the 'thestarphoenix.com' and 'starphoenix.com' domain names. The defendant also maintained a shopping web site that contained a link labeled 'The StarPhoenix', which would take a user to the defendant's site.

The plaintiff attempted, through phone calls and letters, to persuade the defendant to cease his activities. After failing to obtain a satisfactory response, the plaintiff applied and was granted an interlocutory injunction pending trial on December 21 2001.

Decision

The Queen's Bench found that the plaintiff had established all three of the necessary components for passing off: (i) the existence of goodwill, (ii) deception of the public due to a misrepresentation, and (iii) actual or potential damage to the plaintiff. The court issued an injunction restraining the defendant from using variations of the plaintiff's domain name or directing public attention to his web sites in such a way as to cause the public to think the defendant's web site is in fact the plaintiff's. The defendant was also ordered to transfer registration of the three domain names to the plaintiff.

In addition to injunctive relief, the plaintiff asked for an award of damages for loss of goodwill and reputation, punitive damages and costs. The court awarded C$5,000 for general damages based on the short period of time during which the passing off had occurred, and the fact that there was minimal damage to the plaintiff's goodwill and reputation (because the nature of the damage consisted largely of inconvenience).

The court did not award punitive damages because it believed that there was very little precedent to guide would-be entrepreneurs of domain names prior to this and other recent decisions. However, it stated that punitive damages may be appropriate in the future if, after several decisions such as this, the defendant or others persist in such activities.

The court disapproved of the defendant's unwillingness to investigate his legal position after being warned by the plaintiff that his activities were unlawful. It granted the plaintiff's request for "enhanced costs" after finding that the defendant should be made aware that he cannot with impunity cause other people to incur legal expenses to shut down his unlawful activity, as opposed to voluntarily ceasing such activity.

Alan Gahtan, Mann & Gahtan (in association with Brown Raysman Millstein Felder & Steiner), Toronto