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Software-Generated “Infringement Report” Supports $262,931 in Remedies for Copyright Infringement

January 26, 2021

By Adam Bobker and Martin Brandsma

The unauthorized copying of software has long been held to constitute copyright infringement under Canada’s Copyright Act. But such unauthorized reproductions often occur behind closed doors. How then can software owners obtain sufficient evidence to enforce their rights without access to the device(s) on which they believe illicit copies have been made? A recent decision from the Federal Court of Canada offers a possible efficient means for doing so. On a motion for default judgment, the Court assessed damages for copyright infringement in a computer program based on an infringement report generated by antipiracy software. The decision sets a highwater mark for the courts’ embrace of such technology to enforce property rights.

In Trimble Solutions Corporation v. Quantum Dynamics Inc., 2021 FC 63 (“Trimble”), the Plaintiffs brought an ex parte motion for default judgment against the Defendants for infringement of copyright by virtue of unauthorized use of their three-dimensional modelling software (the “Program”). After concluding the Defendants were in default, the Court determined first, whether the Plaintiffs had established that copyright subsisted in the Program, and second, whether the Plaintiffs’ evidence demonstrated infringement by the Defendants and the extent of such infringement.

Copyright in the Program

Computer programs have long been protected as literary works under Canada’s Copyright Act. In Trimble, the Plaintiffs provided evidence that copyright in versions 20.0 and 21.0 of the Program had been registered in Canada.

The Court noted that there were various “sub-releases” of the Program, including Version 20.1 which was the specific version at issue. Copyright was not registered on each sub-release because “they are modifications and improvements built entirely on the base code and documentation for the previous release”. Without discussion, including how Version 20.1 differed from the registered versions, the Court concluded that Version 20.1 of the Program was an original work that fit within the definition of “literary work” as set out in the Copyright Act.

Infringement

The Plaintiffs’ evidence of unauthorized copying is notable. There were two third-party antipiracy products built into the Program to detect unauthorized use. One of the products from SmartFlow Compliance Solutions Ltd. (SmartFlow), provided a range of information once it detected an unauthorized use, including time and date of the event, the IP address associated with the user, a “unique MAC” identifier associated with the user’s device, and information about the user’s Wi-Fi signal. This information was then sent to SmartFlow’s servers and an “infringement report” was subsequently generated by the software.

In February 2018, the Plaintiffs became aware of a series of unlicensed uses of the Program. An infringement report was then generated in December 2019 that showed 335 unlicensed uses of the Program from January 2015 to March 2019, originating from six discrete devices. On the motion, the Plaintiffs filed an affidavit from SmartFlow’s CEO who explained that from the infringement report, he was able to connect the six devices to the Defendants including from the generated IP addresses, the Wi-Fi broadcast information, and using Google Maps.

The Plaintiffs had attempted to contact the Defendants in February 2018. After a year without response, the Plaintiffs retained a third-party agency (IT Compliance Association (ITCA)) to attempt contact. Nine days after ITCA contacted the Defendants, it purportedly received an e-mail response from the individual Defendant apologizing for the “unlicensed copies” and stating all were destroyed. After a follow-up, the Defendant also returned to ITCA a signed licence agreement, but no payment. The Plaintiff asserted no payment was ever received and that the unauthorized copies were never deleted. The decision makes no reference to whether an affidavit was provided by ITCA on the motion.

Based on the infringement report generated by SmartFlow’s antipiracy software, along with the purported Defendant e-mails to ITCA, the Court found on a balance of probabilities that the six devices identified in the infringement report were owned or used by the Defendants, that they were repeatedly used to execute and use the Program, and that each use constituted an infringement of copyright in the Program “because every time the unlicensed software was opened a copy of it was made on the Defendants’ device”. The Plaintiffs did not have access to the devices identified in the report as having made the copies and therefore could not actually put any illicit copies into evidence on the motion.

Despite the Court acknowledging that “from a practical perspective, [it is] impossible to know who was using the devices at the precise times indicated in each incident report”, the Court unfortunately provides no discussion to explain the rigor in which the Plaintiffs’ evidence was scrutinized. For example, there is no comment on:

  • the accuracy and error rate of SmartFlow’s infringement detection system;
  • whether there was verifiable evidence to demonstrate the system detects a target correctly, consistently, and reliably, and whether there was a potential for false positives;
  • available academic papers on, or security audit of, the detection software system in question;
  • the integrity and chain of custody of the infringement report, including who ran the report and tracing its subsequent history up to the time of trial;
  • evidence that the infringement report was routine business data and information;
  • the system used to store the infringement report on the SmartFlow servers, including whether it was secure, and whether it was at all material times operating properly;
  • whether the Defendants’ Wi-Fi was or was not secure;
  • the chance of whether the Defendants network could have compromised and used as a conduit for another user’s traffic;
  • evidence regarding contemporaneity since the decision notes the infringement report was ran in December 2019, but had identified unauthorized uses dating back to January 2015;
  • evidence of industry standard, including information to databases conformed to the standard practice in the industry; or
  • evidence showing the origin and integrity of the Defendants’ e-mails with the third-party ITCA, including whether the content was complete in the form intended, and free from error or fabrication.

Remedies

As for remedies, the Plaintiffs sought general damages (as opposed to statutory damages), reflecting the cost of their typical licences during the infringing period. The Court was satisfied that the licensing fees were an appropriate proxy for damages, which amounted to $212,931 for all six devices.

The Court also held that a $50,000 punitive damage award was appropriate in light of the e-emails in which the individual Defendant purports to admit to copyright infringement, fails to delete the infringing programs despite promises to do so, and his failure to pay after completing and enclosing the licence agreement.

It is difficult to know what impact, if any, there would have been on the case’s outcome had the Plaintiffs’ motion been contested. For example, perhaps errors in the Plaintiffs’ evidence could have been brought to light through cross-examination. The Court did note as a factor in awarding punitive damages the Defendants’ failure to participate. Consequently, the case illustrates the importance of retaining experienced counsel for intellectual property disputes when the potential exposure to damages is high.

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Author(s):

Adam Bobker Adam Bobker
B.Sc. (Elec. Eng.), LL.B.
Partner
416.957.1681  email Adam Bobker
Martin Brandsma Martin Brandsma
HBSc., MSc., J.D.
Associate
416.957.1627  email Martin Brandsma