Equustek Case – US District Court overrules SCC?

A few days ago, an injunction by the US District Court for Northern California purported to overrule an order of the Supreme Court of Canada, setting the stage for a jurisdictional enforcement battle and challenging the principle of international comity.

SMITHS IP’s earlier blog provided the background of the case.

Equustek Solutions Inc., a supplier of communication protocol conversion systems for industrial and other equipment, secured Canadian court orders against an alleged infringer in respect of passing off and misappropriation of trade secrets. The recalcitrant infringer fled Canada, an arrest warrant issued for contempt and the infringer continued to sell the offending product through a succession of shell companies and new domains. With the initial cooperation of Google, Equustek secured an order compelling Google to de-index specific web pages from the infringer’s web sites in the Google searches. However, Google only de-indexed the pages for searches through the Canadian URL, google.ca. Equustek then secured a broader order, this time resisted by Google, to de-index the infringer’s entire web sites and on a worldwide basis.

On June 28, 2017, the Supreme Court of Canada considered issues of comity, freedom of expression and extraterritorial effect and confirmed the order against Google, also noting that absent a showing that the order would compel Google to break U.S. law, the extra-territorial reach of the order was justified in the circumstances of the case.

Google then turned to ND Cal for assistance. In a proceeding in which Equustek did not appear, on November 2, 2017 the District Court issued the preliminary injunction prohibiting the enforcement in the United States of the Canadian order. This seems at odds with the principle of judicial comity which strives to foster harmony between the judicial processes of various jurisdictions. According to comity, courts take cognizance of the fact that a foreign court has assumed jurisdiction if the basis for assuming jurisdiction generally conforms to private international law rules. Google did not dispute in personam jurisdiction before the Supreme Court of Canada.

As the District Court injunction has no effect on liability for contempt of the Canadian order, Google is at risk of all of the usual remedies for contempt in Canada, including fines, imprisonment of officers and seizure of assets even if the impugned activity is within the US. Conversely, assuming that the California order is enforceable against Equustek, it might be blocked from attempting to have the Canadian order recognized in a US court for the purpose of enforcing it through the US enforcement processes.

It seems likely that Google is trying to secure an order that it can then rely on to seek variation of the Canadian order, as the Supreme Court of Canada indicated that might be an avenue open to it.

The case illustrates the difficulties that arise when the international comity is not respected, as the District Court appears not to have done in this case. It remains to be seen how this will play out, not only in Canada and the US, but in other jurisdictions, but it may signal an erosion of the principle of international comity and more frequent court orders competing across jurisdictions.