Do BC Courts have Jurisdiction over Online Companies?

By Andrew Crabtree

The Google decision creates an important precedent for BC courts to take jurisdiction over matters involving businesses, and especially internet-based businesses, that do not have an established, physical presence in BC. This decision means that businesses which did not think they would be subject to BC laws could very well find themselves the subject of a court order from a BC court. For those in the e-commerce industry, this decision is one to take note of and to consider whether your operations would be sufficiently connected to BC, even if only online, to potentially fall within the jurisdiction of a BC court.

Recently, the BC Court of Appeal dismissed an appeal by Google Inc. to set aside an injunction that prohibited Google from including certain websites in its search-engine results. The decision is a particularly important one, especially for those in the e-commerce market, as it signifies the willingness of the BC courts to find creative ways to extend their jurisdictional ‘reach’ to persons without a traditional physical presence in BC and to issue decisions with worldwide effect.

Background

The plaintiffs alleged that the defendants (which at one point had BC-based operations) had unlawfully acquired confidential information and trade secrets from the plaintiffs and used it to design and manufacture a competing product. Google was not named as a party in this litigation. The plaintiffs obtained an injunction requiring Google to stop displaying the defendant’s websites in its search-engine results until the conclusion of the proceedings.

The key issues on appeal were whether BC courts had jurisdiction to:
a) Impose an order over Google despite the fact that it was not a party in the litigation; and
b) Impose an order respecting results in Google’s search engines on a worldwide basis and not just restricted to results on google.ca.

The BCCA decided that it had jurisdiction because the issues and facts arising in the litigation had a real and substantial connection to BC.

Google’s Connection to BC

Google’s argued that it did not have a physical presence in BC, such as computer servers or employees. Further, BC businesses wanting to advertise with Google contracted directly with Google Inc. (a US company) and were subject to California law. Google also argued that it simply offered a “passive website” to BC residents in which Google’s search engines automatically generated search results without Google being actively involved.

The BCCA disagreed with Google – the court concluded that a critical part of Google’s business was carried out in BC: advertising. Further, Google’s search engines were not “passive information sites” but rather accumulated significant amounts of data about its users, including IP addresses and browsing history. These data collection efforts were an important contributor to the overall success of Google’s search results.

The court also noted the expansive jurisdiction it had to issue injunctions. Subject to any statutory restrictions, courts have “unlimited” jurisdiction to grant an injunction against a non-party. The fact that an injunction may affect activities in other jurisdictions should not be a bar to granting such an order.

The decision is groundbreaking and will likely be appealed to the Supreme Court of Canada.

If you have any questions, please contact Andrew at Cooper Litigation: 778-383-3377 or acrabtree@cooperlitigation.ca.