Trader Corporation v. CarGurus, Inc.

[Indexed as: Trader Corp. v. CarGurus, Inc.]

Ontario Reports

Ontario Superior Court of Justice,

Conway J.

April 6, 2017

137 O.R. (3d) 587 | 2017 ONSC 1841

Case Summary

Intellectual property — Copyright — Infringement — Applicant operating digital marketplaces in Canada for new and used vehicles — Applicant's photographers taking photos of dealers' vehicles to include in listings — Respondent infringing applicant's copyright in photos when it posted photos on its own competing website and made them [page588] available to public — Defence of fair dealing not applying — Respondent failing to establish that it was immune from statutory damages as provider of "information location tool" within meaning of s. 41.27(5) of Copyright Act — Applicant's photos constituting "single medium" for purposes of court's discretion under s. 38.1(3) of Act to reduce damages below statutory minimum — Award of minimum statutory damages of $500 for each of 152,532 photos being grossly out of proportion to infringement — Statutory damages reduced to $2 per photo — Copyright Act, R.S.C. 1985, c. C-42, ss. 38.1(3), 41.27(5).

The applicant operated "digital marketplaces" for new and used vehicles in Canada through its website. It offered dealers a "capture service" which involved the applicant's photographers going to the dealerships and taking photos of the vehicles to include in the listings. After entering the Canadian market in competition with the applicant, the respondent posted the photos taken by the applicant's photographers on its own website. The applicant applied for a declaration of copyright infringement, a permanent injunction restraining the respondent from using its photos and statutory damages under the Copyright Act in the minimum amount of $500 per photo.

Held, the application should be allowed in part.

The photos were original artistic works and were protected by copyright. If the "merger doctrine" applied in Canada, it did not apply in the circumstances of this case. There is not such a limited number of ways to photograph vehicles for sale that affording the applicant copyright protection would give it a monopoly on photographing vehicles for sale. The applicant had established ownership of the copyright in 152,532 photos. The respondent infringed the copyright when it posted the photos on its website and made them available to the public by telecommunication.

The fair dealing defence did not apply. While from the perspective of the user, looking at the listings and photos on the respondent's website could be considered "research" by a user into the purchase of a vehicle. The respondent's use of the applicant's photos was not fair.

The respondent failed to establish that it was immune from statutory damages as the provider of an "information location tool" within the meaning of s. 41.27(5) of the Act. Parliament meant to provide protection to intermediaries that provide tools that enable users to navigate and find information where it is located on the Internet. It did not intend to afford that protection to providers like the respondent that gather information from the Internet and make it available to the user on the provider's own website.

The applicant's photos were a "single medium" for the purposes of the court's discretion to reduce statutory damages below the minimum under s. 38.1(3) of the Act. Awarding the minimum amount of $500 per photo would be grossly out of proportion to the infringement. The respondent did not act in bad faith. The applicant did not advise it that it owned the copyright in the photos until shortly before the notice of application was filed, at which point the respondent removed the photos forthwith. The applicant had sustained no monetary damages and lost no business as a result of the infringement, and the respondent had made no profits. The applicant should be awarded statutory damages in the amount of $2 per photo. The applicant was entitled to the declaration sought. There was no need for the requested injunction.

Twentieth Century Fox v. Hernandez, 2013 CarswellNat 6160, distd [page589]

Other cases referred to

CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, [2004] S.C.J. No. 12, 2004 SCC 13, 236 D.L.R. (4th) 395, 317 N.R. 107, J.E. 2004-602, 30 C.P.R. (4th) 1, 129 A.C.W.S. (3d) 177; Century 21 Canada Ltd. Partnership v. Rogers Communications Inc., [2011] B.C.J. No. 1679, 2011 BCSC 1196, 26 B.C.L.R. (5th) 300, 96 C.P.R. (4th) 1, 338 D.L.R. (4th) 32, [2012] 3 W.W.R. 708, 207 A.C.W.S. (3d) 245; Delrina Corp. (c.o.b. Carolian Systems) v. Triolet Systems Inc. (2002), 58 O.R. (3d) 339, [2002] O.J. No. 676, 156 O.A.C. 166, 23 B.L.R. (3d) 231, 17 C.P.R. (4th) 289, 112 A.C.W.S. (3d) 141; Global Upholstery Co. v. Galaxy Office Furniture Ltd., [1976] F.C.J. No. 802, 29 C.P.R. (2d) 145 (T.D.); Pinto v. Bronfman Jewish Education Centre, [2013] F.C.J. No. 992, 2013 FC 945, 439 F.T.R. 70, 115 C.P.R. (4th) 245, 233 A.C.W.S. (3d) 454; Ritchie v. Sawmill Creek Golf & Country Club Ltd., [2004] O.J. No. 3530, 189 O.A.C. 282, 35 C.P.R. (4th) 163, 133 A.C.W.S. (3d) 335, varg in part [2003] O.J. No. 3144, [2003] O.T.C. 736, 27 C.P.R. (4th) 220, 124 A.C.W.S. (3d) 1151; Royal Conservatory of Music v. MacIntosh (c.o.b. Novus Via Music Group Inc.), [2016] F.C.J. No. 984, 2016 FC 929, 142 C.P.R. (4th) 253, 270 A.C.W.S. (3d) 612; Slumber-Magic Adjustable Bed Co. v. Sleep-King Adjustable Bed Co., [1984] B.C.J. No. 3054, [1985] 1 W.W.R. 112, 3 C.P.R. (3d) 81, 28 A.C.W.S. (2d) 371 (S.C.); Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, [2012] 2 S.C.R. 326, [2012] S.C.J. No. 36, 2012 SCC 36, 2012EXP-2625, J.E. 2012-1381, EYB 2012-208928, 432 N.R. 103, 347 D.L.R. (4th) 272, 38 Admin. L.R. (5th) 186, 102 C.P.R. (4th) 241, 216 A.C.W.S. (3d) 216; Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, [2004] 2 S.C.R. 427, [2004] S.C.J. No. 44, 2004 SCC 45, 240 D.L.R. (4th) 193, 322 N.R. 306, J.E. 2004-1386, 32 C.P.R. (4th) 1, 132 A.C.W.S. (3d) 142; Telewizja Polsat S.A. v. Radiopol Inc., [2006] F.C.J. No. 738, 2006 FC 584, [2007] 1 F.C.R. 444, 292 F.T.R. 195, 52 C.P.R. (4th) 445, 149 A.C.W.S. (3d) 142; Théberge v. Galerie d'Art du Petit Champlain inc., [2002] 2 S.C.R. 336, [2002] S.C.J. No. 32, 2002 SCC 34, 210 D.L.R. (4th) 385, 285 N.R. 267, J.E. 2002-625, 23 B.L.R. (3d) 1, 17 C.P.R. (4th) 161, 112 A.C.W.S. (3d) 941

Statutes referred to

Communications Decency Act of 1996, 47 U.S.C. 231(e)(5)

Copyright Act, R.S.C. 1985, c. C-42, ss. 2.4(1.1), 3(1) [as am.], 5(1), 27(1), 29 [as am.], 34.1(1)(a), 38.1(1) [as am.], (1.1), (1.11), (1.12), (1.2), (2), (3) [as am.], (4), (5) [as am.], 41.24, 41.27, (1), (2), (5)

Authorities referred to

Industry Canada, "Fact Sheet on copyright Remedies" (October 26, 2011), online: http://webarchive.bac-lac.gc.ca:8080/wayback/20131003 064747/ http://www.ic.gc.ca/eic/site/ippd-dppi.nsf/eng/ip00090.html

Tamaro, Normand, The 2016 Annotated Copyright Act (Toronto: Carswell, 2016)

APPLICATION for statutory damages for copyright infringement and for other relief.

Peter Ruby and Hannah Arthurs, for applicant.

Jonathan G. Colombo and Amrita V. Singh, for respondent.

[1] CONWAY J.: — Trader Corporation ("Trader") operates "digital marketplaces" for new and used vehicles in Canada through [page590] its websites "autotrader.ca" and "autohebdo.net" and related mobile applications.

[2] In the spring of 2015, CarGurus, Inc. ("CarGurus") entered the Canadian market and became a direct competitor of Trader. CarGurus is the second largest digital marketplace provider for new and used vehicles in the United States.

[3] Both of these digital marketplaces include listings of vehicles that are available for sale from vehicle dealers ("dealers"). One of the services that Trader offers dealers is its "capture" service ("capture service"). That service involves Trader's photographers going to the dealerships and taking photos of the vehicles to include in the listings. Trader's capture service photos represent about 5 per cent of the photos for all vehicle listings in Canada.

[4] In this application, Trader alleges that when CarGurus entered the Canadian market, it infringed Trader's copyright in 196,740 photos taken pursuant to the capture service. Trader seeks a declaration of copyright infringement and a permanent injunction restraining CarGurus from using Trader's photos. Trader further claims statutory damages under the Copyright Act, R.S.C. 1985, c. C-42 (the "Act") in the amount of $98,370,000 ($500 per infringing photo) and punitive damages of $1 million. 1

CarGurus Enters Canada

[5] In the spring of 2015, CarGurus launched its business in Canada. Before doing so, it sought Canadian legal advice. 2 CarGurus' practices for obtaining vehicle listings in Canada were similar to those it used in the U.S., namely, sourcing information (i) from partners that "feed" dealers' listing information to CarGurus, such as Dealer Dot Com, Inc. ("DDC"); 3 and (ii) by "indexing" or "scraping" dealers' websites. This technique involves using computer software to "crawl" an online data source to identify data of interest and then extract data from that source.

[6] According to Martha Blue, CarGurus' senior vice-president business development, the majority of dealers in the U.S. [page591] support CarGurus' technique, as it amounts to free publicity and generates leads for the dealers. She states that in the U.S., the prevailing industry view is that dealers own the photographs in their listings, regardless of who takes the photo. If the dealer does not want the vehicle listing to appear on CarGurus' website, CarGurus removes it upon request. CarGurus' evidence is that it has been using this technique in the U.S. for years without any problem. There is no evidence on this application from DDC or any dealer complaining about CarGurus' practices.

[7] According to Roger Dunbar, Trader's vice-president of marketing, in the spring of 2015 he received complaints from some dealers that their vehicles were appearing for sale on CarGurus' website without their permission. Trader had its intellectual property counsel (Mr. Thurlow) send a letter to CarGurus on June 10, 2015. The letter stated that Trader holds the copyright in the contents of the autotrader.ca website and requested that CarGurus immediately cease its reproduction and display of all content from that website or any other sites operated by Trader. 4 The letter says nothing about Trader's capture service, the fact that any vehicle listings on dealers' websites may contain photos taken by Trader or the fact that Trader might own the copyright in photos appearing on dealer websites.

[8] CarGurus' counsel Ms. Tonus replied to Mr. Thurlow's letter on June 18, 2015. She assured him that CarGurus did not crawl the autotrader.ca website for any content and was not infringing Trader's intellectual property rights. She asked, "if you have a specific dealer that has concerns about their content being on our client's website, please forward that dealer's name so our client can contact them directly, locate the source from which it is getting that dealer's inventory information and, if requested in writing by that dealer, remove that inventory information from CarGurus' site. Our client's policy is always to remove a dealer's listing content, if requested."

[9] Trader's and CarGurus' representatives had a telephone call on June 18, 2015. The Trader representatives were Allen Wales (vice-president of technology), Roger Dunbar (vice-president of marketing) and Robert Rath (vice-president of business development). The CarGurus representatives were Martha Blue (senior vice-president of business development) and Sam Zales (president of international and dealer operations). Prior to the [page592] call, Mr. Wales sent CarGurus an agenda that included "Canadian dealer complaints for unauthorized inventory on CarGurus" and "unauthorized scraping of AutoTrader & Dealer websites".

[10] During the call, Mr. Wales asked Ms. Blue whether CarGurus was indexing the Trader websites. She confirmed that CarGurus was not. Mr. Wales then asked whether CarGurus was indexing dealers' websites or the DDC-hosted websites. Ms. Blue did not answer, nor did Mr. Zales. Ms. Blue's evidence is that she saw no need to disclose to Trader, a direct competitor of CarGurus, how CarGurus was sourcing its vehicle listings in Canada.

[11] The Trader representatives did not tell CarGurus during the call about the capture service or that it claimed copyright in any photos that might appear on dealers' websites.

[12] In July 2015, Trader sent CarGurus a draft of Trader's standard form "syndication agreement" pursuant to which Trader licenses dealers' data to others. 5 Ms. Blue's evidence is that there were "a number of terms that were of great concern to CarGurus as they were designed to prevent CarGurus from effectively competing with Trader in the Canadian marketplace", 6 CarGurus did not respond and Trader did not follow up any further.

Trader Investigates Photos on CarGurus Website

[13] According to Mr. Wales, in June 2015 Trader was investigating whether its photos were appearing on the CarGurus website. Mr. Wales' evidence is that by September 2015, Trader believed that CarGurus had infringed Trader's copyright in "thousands" of photos. Trader was in the process of having its administrative employees identify whether photos on the CarGurus website were the same as those taken by Trader's photographers.

[14] Trader did not advise CarGurus in September 2015 that Trader operated the capture service, that it believed CarGurus was infringing its copyright or that it was in the process of investigating the issue.

[15] On December 2, 2015, Trader's litigation counsel sent a demand letter to CarGurus, alleging that CarGurus had scraped at least 150,000 Trader photos from dealers' websites (there was [page593] no allegation that CarGurus scraped photos from Trader's websites). CarGurus requested identifying information so that it could remove the photos. Out of an abundance of caution, before receiving the identifying information, CarGurus removed one million photos from its website.

[16] On December 18, 2015, Trader filed a notice of application in which it alleged copyright infringement in 144,974 Trader photos. Trader identified the photos on December 22, 2015. CarGurus, without admitting infringement, verified that all of the photos had been removed from its website by January 16, 2016. A few photos that inadvertently remained were removed by February 9, 2016. In April 2016, Trader identified additional photos that it claimed were infringing its copyright. CarGurus removed those additional photos within 30 days.

Overview of Legal Issues

[17] This application raises numerous legal issues. By way of overview, those issues are as follows:

• Are the photos in question protected by copyright?
• Does Trader own the copyright in the photos?
• Did CarGurus infringe Trader's copyright in the photos?
• Is CarGurus protected by the "fair dealing" defence?
• Is CarGurus protected from statutory damages as the provider of an "information location tool"?
• If statutory damages are to be awarded, what is the appropriate quantum? Can the court order an amount that is less than the $500 per work minimum?
• Is Trader entitled to an award of punitive damages?
• Is there any basis for a permanent injunction against CarGurus?

Are the Photos Protected by Copyright?

[18] Section 5(1) of the Act provides that copyright subsists in Canada in "every original literary, dramatic, musical and artistic work". Under s. 34.1(1)(a), where the defendant puts in issue the existence of the copyright, "copyright shall be presumed, unless the contrary is proved, to subsist in the work". The onus is on CarGurus to displace that presumption.

[19] CarGurus argues that the photos in question are neither "original" nor "artistic works". [page594]

[20] With respect to originality, the Supreme Court of Canada stated in CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, 2004 SCC 13, at para. 25:

[A]n "original" work under the Copyright Act is one that originates from an author and is not copied from another work. That alone, however, is not sufficient to find that something is original. In addition, an original work must be the product of an author's exercise of skill and judgment. The exercise of skill and judgement required to produce the work must not be so trivial that it could be characterized as a purely mechanical exercise. While creative works will by definition be "original" and covered by copyright, creativity is not required to make a work "original".

(Emphasis added)

[21] The court gave the example of a purely mechanical exercise, at para. 16: "For example, any skill and judgment that might be involved in simply changing the font of a work to produce aeanother' work would be too trivial to merit copyright protection as an aeoriginal' work."

[22] With respect to the term "artistic works", it is specifically defined in s. 5(1) of the Act as including "photographs". When applying this definition, Canadian courts do not evaluate the artistic or aesthetic nature of a photograph. 7

[23] CarGurus argues that the photos are not original or artistic works, as Trader's photographers are trained in Trader's methods and required to take the photos in accordance with Trader's standardized procedures. I reject that submission. Trader's evidence is that, as the result of their training, its photographers exercise skill in photographing the vehicles. They apply their judgment in selecting among the various options for taking photographs, taking into account variables such as the subject matter, angles, staging and framing.

[24] In my view, the fact that the photographers receive training and follow standardized procedures does not eliminate the use of their skill and judgment in taking the photos, nor does it reduce the exercise of taking the photos to a simple mechanical exercise. 8 [page595]

[25] CarGurus argues that the "merger doctrine" applies to deny copyright protection to the photos. According to that doctrine, the court will not afford copyright protection to the "expression" of an idea where, if there is only a limited number of ways of expressing the idea, it would effectively give the copyright holder a monopoly over the "idea" itself. It relies on the case of Delrina Corp. (c.o.b. Carolian Systems) v. Triolet Systems Inc. (2002), 58 O.R. (3d) 339, [2002] O.J. No. 676, in which the court considered, at para. 52, whether "if there was only one or a very limited number of ways to achieve a particular result in a computer program, to hold that that way or ways are protectable by copyright could give the copyright holder a monopoly on the idea or function itself". Trader argues that the merger doctrine is a U.S. principle and does not apply in Canada. Even if it does, I do not consider that there is such a limited number of ways to photograph vehicles for sale that affording Trader copyright protection would somehow give it a monopoly on photographing vehicles for sale.

[26] I find that the photos are protected by copyright.

Does Trader Own the Copyright in the Photos?

[27] There is no issue that Trader owns 152,532 of the photos. They were taken by Trader employees or contractors who assigned their rights to Trader. Those photographers swore affidavits stating that they took the photos associated with their names and personally identified the photos in question.

[28] However, there are 44,208 photos for which Trader has not provided direct evidence of ownership. Trader asserts that those photos were taken by Trader photographers who are no longer employed by or under contract with Trader. The evidence of authorship with respect to those photos comes from three Trader managers, who provided their "opinion" that the photos were taken by the former Trader photographers. That is insufficient to establish ownership of those photos. Trader did not make any meaningful effort to find the former photographers who actually took the photos. The managers are not qualified as experts and are not independent. Further, they had difficulty identifying the photos and their evidence is not reliable.

[29] I find that Trader has established ownership of 152,532 of the photos. I will refer to those photos as the "Trader photos". [page596]

Did CarGurus Infringe Trader's Copyright in the Trader Photos?

[30] As the owner of the copyright in the Trader photos, Trader has the exclusive rights set out in s. 3(1) of the Act:

3(1) For the purposes of this Act, copyright, in relation to a work, means the sole right to produce or reproduce the work or any substantial part thereof in any material form whatever . . . and includes the sole right

(f) in the case of any literary, dramatic, musical or artistic work, to communicate the work to the public by telecommunication[.]

[31] Under s. 2.4(1.1) of the Act, "communication of a work or other subject-matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public" (my emphasis added).

[32] Under s. 27(1) of the Act, it is an infringement of copyright for any person to do, without the consent of the owner of the copyright, anything that only the owner of the copyright has the right to do.

[33] CarGurus' only argument on infringement is that for 34,185 of the Trader photos, it did not actually reproduce them but rather "framed" them -- that is, although the images from dealers' websites appeared to be part of CarGurus' website, they were not physically present on CarGurus' server, but located on servers hosting the dealers' websites. I reject that argument. In my view, when CarGurus displayed the photo on its website, it was "making it available" to the public by telecommunication (in a way that allowed a member of the public to have access to it from a place and at a time individually chosen by that member), regardless of whether the photo was actually stored on CarGurus' server or on a third party's server.

[34] I find that CarGurus infringed the Trader photos when it posted them on the CarGurus website and made them available to the public by telecommunication.

The Fair Dealing Defence

[35] CarGurus relies on the "fair dealing" defence. Section 29 of the Act states: "Fair dealing for the purpose of research, private study . . . does not infringe copyright."

[36] There is a two-step test in determining whether this defence has been established -- the first step is to determine whether the dealing is for the purpose of either "research" or "private study". The second step assesses whether the dealing is [page597] "fair" and looks at six factors: the purpose, character and amount of the dealing; the existence of any alternatives to the dealing; the nature of the work; and the effect of the dealing on the work: CCH, supra, at para. 53. The onus of establishing this defence is on CarGurus.

[37] Whether something is research is to be considered from the perspective of the user or consumer's purpose: CCH, at para. 12. The term "research" is to be given a broad and liberal interpretation: CCH, at para. 51; Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, [2012] 2 S.C.R. 326, 2012 SCC 36, at paras. 20-22. I am prepared to accept that from the perspective of the user, looking at the dealer listings and photos on CarGurus' website can be considered "research" by a user into the purchase of a new or used vehicle.

[38] However, I am not persuaded that CarGurus' use of the Trader photos is "fair". At this stage of the analysis, CarGurus's own purpose may be considered -- that purpose was strictly a commercial one. The character of the dissemination of the Trader photos was unfair, in that they were widely disseminated through the Internet for the entire life of the vehicle listing. The entire photo was displayed, not just a portion of it.

[39] CarGurus had alternatives to copying and making the Trader photos available online. CarGurus could have taken its own photos of the vehicles or arranged for others to do so. The nature of the works is commercial photography, which is being used to further CarGurus' commercial interests. The effect of the dealing in the Trader photos was to compete squarely with Trader in the Canadian digital marketplace arena.

[40] Considering all of these factors, I find that CarGurus has not met its onus of establishing that its dealing in the Trader photos was fair. The fair dealing defence fails.

Is CarGurus the Provider of an Information Location Tool?

[41] Section 41.27(1) of the Act provides that a copyright owner is not entitled to any remedy other than an injunction against a provider of an "information location tool", so long as the provider satisfies the conditions in s. 41.27(2). CarGurus argues that it is exempt from Trader's statutory damages claim as the provider of an "information location tool".

[42] The term "information location tool" is defined in s. 41.27(5) as

. . . any tool that makes it possible to locate information that is available through the Internet or another digital network. [page598]

[43] This exemption was introduced in 2012 when the Act was modernized to, among other things, extend various "safe harbour" protections to providers of network services and information location tools, i.e., providers of services that enable the public to use and navigate the Internet. The term "information location tool" has not been judicially considered as yet.

[44] CarGurus tendered the expert evidence of Dr. John Levine, who provided his opinion that CarGurus operates a search engine and, as such, is an "information location tool". Dr. Levine's opinion is based on the U.S. Communications Decency Act of 1996, which defines the term "Internet information location tool" as "a service that refers or links users to an online location on the World Wide Web. Such term includes directories, indices, references, pointers and hypertext links". 9

[45] Dr. Levine's opinion is that the term "indices" means "search engines" and therefore any search engine (such as CarGurus) is an "information location tool". I note that the Act does not specifically refer to indices or search engines. It contains only the general definition of "information location tool" set out above.

[46] The crux of the defined term "information location tool" in the Act is the locating of information -- it is a tool that it "makes it possible to locate information that is available through the Internet". In my view, Parliament intended to afford protection to intermediaries that provide tools that enable users to navigate and find information where it is located on the Internet. It did not intend to afford that protection to providers like CarGurus that gather information from the Internet and make it available to the user on the provider's own website.

[47] The background document released by the Government of Canada along with Bill C-11 (The Copyright Modernization Act) explained that "the bill will clarify that Internet service providers (ISPs) and search engines are exempt from liability when they act strictly as intermediaries in communication, caching, and hosting activities" 10

(my emphasis added). [page599]

[48] This is reflected in the way that s. 41.27 works. If the provider of an information location tool caches (i.e., temporarily stores) information and meets the other conditions of s. 41.27(2) in facilitating a user's navigation to the location of that online information, the provider is protected from liability for copying that information. 11 The rationale, in my view, is that the provider is enabling the user to get to the location of the online information and therefore should not be liable simply for acting as an intermediary.

[49] In this case, CarGurus was not acting as an intermediary to facilitate the user's navigation to the location of online information. The evidence is that from the date of the launch in May 2015 until September 2015, CarGurus only had a basic plan for dealers, in which the vehicle listings did not contain the name of the dealer, its address, its Internet address or any hyperlink to any part of the dealer's website. While CarGurus may have located information about a vehicle and provided it to the user through its website, it did not enable the user to find this information where it was located on the Internet (i.e., the dealer's webpage for that vehicle listing). If the user was interested in a particular vehicle, the user was required to contact CarGurus, which in turn acted as a liaison between the user and the dealer.

[50] The evidence is that at some point after September 2015, the dealer's name and contact information, including the dealer's website address, appeared on the CarGurus website for dealers on the basic plan. 12 However, in my view, while the addition of that information might have assisted the user in conducting its own additional searches or contacting the dealer where the vehicle was located, CarGurus was still not providing a tool that enabled the user to get to the online location of that vehicle information (the dealer's webpage for the listing). [page600]

[51] I therefore cannot conclude that CarGurus acted as an intermediary as contemplated by s. 41.27 during the infringement period. CarGurus has failed to establish that it was the provider of an "information location tool" and is not entitled to protection from statutory damages.

Statutory Damages

[52] Trader has elected to claim statutory damages, rather than its actual damages, pursuant to s. 38.1(1) of the Act, which states:

38.1(1) Subject to this section, a copyright owner may elect, at any time before final judgment is rendered, to recover, instead of damages and profits referred to in subsection 35(1), an award of statutory damages for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally,

(a) in a sum of not less than $500 and not more than $20,000 that the court considers just, with respect to all infringements involved in the proceedings for each work or other subject-matter, if the infringements are for commercial purposes[.]

[53] Trader is claiming the minimum of $500 per work. It submits that based on simple arithmetic, it is entitled to statutory damages of $98,370,000 ($500 times 196,740 infringed photos). That number would be $76,266,000 based on my reduced number of 152,532 Trader photos.

[54] Pursuant to s. 38.1(3) of the Act, the court may award a lower amount than $500 if the following conditions are met:

38.1(3) In awarding statutory damages under paragraph 1(a) . . . , the court may award, with respect to each work or other subject-matter, a lower amount than $500 . . . that the court considers just, if

(a) either

(i) there is more than one work or other subject matter in a single medium; . . . or

(b) the awarding of even the minimum amount referred to in that paragraph or that subsection would result in a total award that, in the court's opinion, is grossly out of proportion to the infringement.

[55] Section 38.1(5) provides that in exercising its discretion to reduce statutory damages pursuant to s. 38.1(1) to (4), the court shall consider "all relevant factors", including

• the good faith or bad faith of the defendant;
• the conduct of the parties before and during the proceedings; [page601]
• the need to deter other infringements of the copyright in question.

[56] The purpose of statutory damages is intended to ease the evidentiary burden on a copyright owner, for whom it may be difficult, if not impossible, to prove the extent of the loss: see Government of Canada's "Fact Sheet on copyright Remedies". 13 However, statutory damages are intended to compensate the copyright owner for its losses (and, as well, to deter future infringements). The case law has held that there should be some correlation or proportionality between actual damages and statutory damages. 14 In this case, Mr. Dunbar acknowledged on cross-examination that Trader has suffered no monetary damages and has lost no business as a result of the infringement.

[57] Trader argues that the court cannot reduce the $500 minimum pursuant to s. 38.1(3) because the Trader photos are not in "a single medium". I reject that submission. The word "medium" is not defined in the Act and is used broadly throughout the statute. I see no reason why the term "medium" cannot encompass an electronic (as opposed to physical) medium, given that it is a means through which the user can access the photos. In both Telewizja Polsat SA v. Radiopol Inc., supra, and Century 21 Canada Ltd. v. Rogers Communications Inc., supra, the court reduced the statutory damages pursuant to s. 38.1(3) where the infringement was through a website, implicitly accepting that a website can be a "medium".

[58] Trader also argues that there is no "single" medium because the Trader photos can be accessed through both a desktop and a mobile application. In my view, the medium in this case is the CarGurus website. The desktop and mobile application are simply two user interfaces for accessing that website. The Trader photos are therefore in a single medium, meeting the first condition for reduced statutory damages in s. 38.1(3). [page602]

[59] The next issue is whether awarding even the minimum amount of $500 per photo would result in a total award that, in the court's opinion, is grossly out of proportion to the infringement. There is no question that an award of $76,266,000 would be grossly out of proportion to the infringement in this case.

[60] I have considered the good or bad faith of the defendant and the conduct of the parties before and during the proceeding. I do not accept Trader's submission that CarGurus acted in bad faith when it entered Canada.

[61] First, there is no allegation that CarGurus scraped or copied photos from Trader's websites. Second, CarGurus obtained legal advice before it entered the Canadian market. Third, it used the business model that it used in the U.S. CarGurus' explanation was that in the U.S., the dealer listings (including the photos) are the intellectual property of the dealers and that most dealers in the U.S. have no issue with CarGurus scraping their websites because it generates publicity and leads for the dealer. For those who complain, CarGurus removes the listing and the photos from its website.

[62] CarGurus entered the Canadian market on the assumption that the dealers owned the copyright in the photos in their vehicle listings and that CarGurus' U.S. model would work in Canada. CarGurus was wrong. It turned out that Trader, not the dealers, owned the copyright in 5 per cent of the photos for vehicle listings in Canada. However, while additional due diligence on the part of CarGurus might have revealed the existence of Trader's capture service and the fact that Trader owned some of the photos on the dealers' websites, I cannot conclude that the manner in which CarGurus entered the market amounts to bad faith.

[63] I have considered Trader's own conduct. The demand letter sent by Trader's intellectual property counsel in June 2015 referred only to "copyright in the contents of autotrader.ca" and required that CarGurus cease all reproduction of content from that site. There was no mention of Trader's capture service or the fact that Trader claimed copyright in some of the photos on dealers' websites. In the conference call in June 2015, Trader focused on its rights in the autotrader.ca website. When CarGurus' representatives refused to answer questions about scraping dealer websites, Trader's representatives did not tell CarGurus about the capture service or the fact that Trader owned the copyright in photos on dealers' websites. In September 2015, when Trader believed that CarGurus had infringed thousands of Trader's photos, Trader did not advise CarGurus that it owned the copyright in the photos. [page603]

[64] The first time that Trader told CarGurus about its copyright in the photos was when it sent its counsel's letter of December 2, 2015, just shortly before the notice of application was filed. As noted, CarGurus removed the photos forthwith after it received the letter and the identifying information for the photos in question.

[65] Trader relies on the case of Twentieth Century Fox v. Hernandez, 2013 CarswellNat 6160, in which $10 million in statutory damages were awarded, as well as punitive damages. The defendant was a repeat copyright pirate who illegally copied and uploaded over 700 episodes of the "Family Guy" and "The Simpsons" television shows to his websites for public streaming, where they were streamed millions of times. He sold advertising on the websites and promotional items related to the shows. He did not defend the plaintiff's claim and the damages were awarded on a default judgment. That case is highly distinguishable from the case at bar.

[66] I have reviewed other cases in which statutory awards were made: Century 21, supra ($250 per photograph for a total award of $32,000); Ritchie v. Sawmill Creek Golf & Country Club Ltd. 15 ($200 per photograph for a total award of $1,800); Pinto v. Bronfman Jewish Education Centre, supra ($300 per musical work for a total award of $17,400); Royal Conservatory of Music v. Macintosh (Novus Via Music Group Inc.), supra ($500 per musical work for a total award of $10,500); Telewizja, supra ($150 per television program for a total award of $301,350). The award in each case turned on the facts specific to that case.

[67] Considering the factors in s. 38.1(5), I am exercising my discretion under s. 38.1(3) to reduce the statutory damages to $2.00 per Trader photo, which is an amount that I consider just, for a total award of $305,064. I have calculated this award taking into account the following:

• Trader charges its syndication partners a license fee of $5.00 per dealer per month, regardless of how many Trader photos are associated with that dealer. CarGurus calculates that if it had entered into Trader's syndication agreement for the 501 dealers in question, CarGurus would have had to pay Trader $17,535 during the infringement period; 16 [page604]
• Trader's competitors such as Boost Motor Group and Carpages offer similar capture services and charge between $0.22 and $0.93 per photo;
• Trader's own cost of providing the capture service in 2015 was $2.4 million. The total number of photos produced that year was 1.45 million. Even if the total number of 196,740 photos had been infringed, the cost of creating those photos would have been approximately $118,864;
• as noted above, Trader acknowledges that it has sustained no monetary damages and lost no business as a result of the infringement;
• during the relevant period, CarGurus made no profits in Canada and its gross revenues in Canada were $100,000; and
• a deterrence factor is included to reflect the failure of CarGurus to conduct sufficient due diligence to ascertain the copyright owner for the photos on dealer websites and to confirm its assumption that its U.S. business model would work in the Canadian market.

[68] Given my finding that there was no bad faith on the part of CarGurus, there is no basis for an award of punitive damages against CarGurus.

Permanent Injunction

[69] CarGurus has removed all of the Trader photos. It has ceased indexing dealer websites. It has undertaken to Trader that it will not reproduce any future Trader photos obtained from CarGurus' feed providers, if Trader provides a means for CarGurus to identify those photos (such as the vehicle identification numbers associated with the photos). CarGurus submits that Trader has already instructed those feed providers not to syndicate any Trader photos to CarGurus and that it is unlikely that any future infringements will occur for photos obtained from feed providers.

[70] There is no need for the requested "wide injunction" that would enjoin CarGurus from reproducing all current and future Trader photos. Trader acknowledges that the practical effect of any such injunction would be for CarGurus to clear with Trader in advance the rights to any Canadian photos it wishes to use, or enter into a license agreement with Trader on mutually acceptable terms. As CarGurus points out, that [page605] would have the effect of forcing CarGurus to enter into Trader's syndication agreement or cease operating in Canada.

[71] If there are any infringements in the future, Trader will be entitled to assert and enforce whatever intellectual property rights it has at that time.

Decision

[72] I grant the following orders:

(a) a declaration that CarGurus infringed Trader's copyright in 152,532 Trader photos; and

(b) an award of statutory damages payable by CarGurus to Trader in the amount of $2.00 per photo, for a total statutory damages award in the amount of $305,064.

[73] Trader's request for punitive damages against CarGurus is dismissed.

[74] Trader's request for a permanent injunction against CarGurus is dismissed.

[75] If the parties are unable to agree on costs, I will receive brief submissions (no longer than five pages, double spaced, exclusive of bill of costs). Trader's submissions shall be received within 21 days and CarGurus' within 15 days thereafter.

Application allowed in part.

Notes

1 Trader brought this application on the Superior Court of Justice (Commercial List), which has concurrent jurisdiction with the Federal Court of Canada on the issues in the application: see s. 41.24 of the Act.

2 The contents of that advice are privileged.

3 DDC hosts approximately 1,500 Canadian dealers' websites. Trader administers many of the dealer websites hosted by DDC. CarGurus has a commercial relationship with DDC, as does Trader.

4 The letter made no reference to Trader administering any dealer websites hosted by DDC.

5 Syndication agreements are a means by which Trader makes the dealer's data (owned by the dealer but licensed through Trader as an administrative convenience) available to others, including competitors of Trader.

6 For example, CarGurus points to a provision in the syndication agreement that would require CarGurus' dealer leads to go through Trader so that it would appear that the lead is coming from Trader.

7 Normand Tamaro, The 2016 Annotated Copyright Act (Toronto: Carswell, 2016), at 49.

8 Commercial photographs appearing on websites and in catalogues have been protected by copyright in numerous cases: see, for example, Century 21 Canada Ltd. Partnership v. Rogers Communications Inc., [2011] B.C.J. No. 1679, 2011 BCSC 1196 (S.C.); Global Upholstery Co. v. Galaxy Office Furniture Ltd., [1976] F.C.J. No. 802; Slumber-Magic Adjustable Bed Co. v. Sleep-King Adjustable Bed Co., [1984] B.C.J. No. 3054.

9 47 U.S.C. 231(e)(5).

10 Government of Canada, News Release, "Harper Government Delivers on Commitment to Reintroduce Copyright Modernization Act" (Ottawa, September 29, 2011), archived online: https://w.canada.ca/en/news/archive/2011/09/harper-government-delivers-commitment-reint

11 See Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, [2004] 2 S.C.R. 427, 2004 SCC 45, at paras. 113-16, in which the court recognized that "caching" is a means of facilitating the communication between the user and the content provider. It is dictated by the need to deliver faster and more economic service and should not, when undertaken only for such technical reasons, attract copyright liability.

12 CarGurus also launched an enhanced paid plan for dealers in September 2015, in which the dealer could pay CarGurus to put their full contact information on and receive website clicks and map and direction clicks to their location, as well as hyperlinks. Mr. Zales' evidence is that only 80 of CarGurus' dealers (out of a total of 2,000-3,000 dealers) are on the paid plan. The rest of the dealers are on the basic plan.

13 Industry Canada, "Fact Sheet on copyright Remedies" (October 26, 2011), archived online: http://webarchive.bac-lac.gc.ca:8080/wayback/20131003 064747/ http://www.ic.gc.ca/eic/site/ippd-dppi.nsf/eng/ip00090.html.

14 Telewizja Polsat S.A. v. Radiopol Inc., [2006] F.C.J. No. 738, 2006 FC 584, at para. 45; see, also, Pinto v. Bronfman Jewish Education Centre, [2013] F.C.J. No. 992, 2013 FC 945, at para. 195; Théberge v. Galerie d'Art du Petit Champlain inc., [2002] 2 S.C.R. 336, 2002 SCC 34, at para. 31; Royal Conservatory of Music v. MacIntosh (c.o.b. Novus Via Music Group Inc.), [2016] F.C.J. No. 984, 2016 FC 929, at paras. 119-21.

15 [2003] O.J. No. 3144, vard in part [2004] O.J. No. 3530.

16 CarGurus's calculation is based on 144,974 photographs for 501 dealers for a seven-month period from June 2015 to January 2016.

End of Document