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Toronto Real Estate Board v Commissioner of Competition, 2017 FCA 236, 1 December 2017 The Federal Court of Appeal ruled that the Toronto Real Estate Board’s database, among other things, was contrary to competition law rules and lacked sufficient originality to attract copyright protection. Legal context Subsection 79(1) of Canada’s Competition Act, RSC 1985, c C-34 (the ‘Competition Act’) sets out a three-part test to determine whether there has been an abuse of a dominant position, namely: Where, on application by the Commissioner, the Tribunal finds that (a) one or more persons substantially or completely control, throughout Canada or any area thereof, a class or species of business, (b) that person or those persons have engaged in or are engaging in a practice of anti-competitive acts, and (c) the practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market, the Tribunal may make an order prohibiting all or any of those persons from engaging in that practice. In turn, subsection 79(5) provides an exception to anticompetitive conduct that involves the mere exercise of an intellectual property right: For the purpose of this section, an act engaged in pursuant only to the exercise of any right or enjoyment of any interest derived under the Copyright Act, Industrial Design Act, Integrated Circuit Topography Act, Patent Act, Trade-marks Act or any other Act of Parliament pertaining to intellectual or industrial property is not an anti-competitive act. Facts The Appellant maintains a database of Toronto area real estate listings (current and past). Among other things, the database contains the addresses of the properties in question, pricing information and interior/exterior photographs. Most of this information is available to the Appellant’s members through a direct data feed. Some information, however, is withheld from that data feed but available through other means (eg e-mail, fax or in-person). The withholding of this information from brokers who wished to operate virtual offices ‘excluded, prevented, or impeded the emergence of innovative business models and service offerings in respect of the supply of residential real estate brokerage services in the [Greater Toronto Area]’ (2017 FCA 236, paragraph 7), according to the Respondent. In 2013, the Competition Tribunal dismissed the Respondent’s application because it (the Respondent) was a trade organization that did not compete with its members (The Commissioner of Competition v The Toronto Real Estate Board, 2013 Comp Trib 9). The Federal Court of Appeal, however, disagreed. It referred the matter back to the Tribunal for reconsideration, holding that the abuse of dominance provisions could indeed apply (2014 FCA 29). A differently empanelled Tribunal granted the Respondent’s application in part (The Commissioner of Competition v The Toronto Real Estate Board, 2016 Comp Trib 7 (merits); and The Commissioner of Competition v The Toronto Real Estate Board, 2016 Comp Trib 8 (remedy)). Both decisions were appealed to the Federal Court of Appeal. Analysis A unanimous Federal Court of Appeal agreed that the Appellant had substantially reduced competition with its selective data feed. After reviewing the Tribunal’s findings, the court held that the correct test for ‘substantially’ had been applied, and the Appellant’s ‘practice regarding the disputed data was a practice which had the effect of preventing competition substantially in the [Greater Toronto Area]’ (2017 FCA 236, paragraph 92). The alleged privacy concerns of the Appellant were also dealt with in short shrift. The court held that the Appellant’s actions were not motivated by privacy concerns, rather the ‘principal motivation in implementing the [restrictions] was to insulate its members from the disruptive competition that [motivated] Internet-based brokerages’ (2017 FCA 236, paragraph 131 (referring to paragraph 321 of the Tribunal’s decision)). In fact, the alleged privacy concerns were ‘an afterthought and continue to be a pretext for [the Appellant’s] adoption and maintenance of the [restrictions]’ (2017 FCA 236, paragraph 131 (citing paragraph 390 of the Tribunal’s decision)). The copyright arguments fared no better. The court held that subsection 79(5) of the Competition Act precluded an intellectual property right from competition scrutiny only if that right was being exercised ‘as such’, without anything more. The finding that the Appellant was, in fact, using the allegedly protected database to engage in anticompetitive acts (with accompanying conditions) precluded the exception under subsection 79(5) (2017 FCA 236, paragraph 176). As the court explained: Parliament clearly signaled, through the use of the word ‘only’, to insulate intellectual property rights from allegations of anti-competitive conduct in circumstances where the right granted by Parliament, in this case, copyright, is the sole purpose of exercise or use. Put otherwise, anti-competitive behaviour cannot shelter behind a claim of copyright unless the use or protection of the copyright is the sole justification for the practice. (2017 FCA 236, paragraph 180) Obiter, the court also held that the database of real estate information lacked sufficient originality to attract copyright protection as a database (or otherwise). According to the court, the database was dictated largely by ‘industry standards’ and, per Geophysical Service Inc v Encana Corp, 2016 ABQB 230, ‘there is no entitlement to copyright protection … where the selection or arrangement is directed by accepted and common industry practices’. Any claim to copyright over the database would therefore fail, as the compilation of data lacked a creative element and amounted to a mechanical exercise devoid of any originality (2017 FCA 236, paragraphs 192 and 194). Practical significance Intellectual property and competition law have always had an uneasy relationship, if not for the simple reason that the former is inherently anticompetitive. The exception carved out in Canada’s Competition Act is a limited one. It speaks to the mere exercise of intellectual property rights as not being anticompetitive. Such rights are rarely exercised per se and are almost always governed by terms, limitations, other intellectual property rights and other rights generally. From a practical perspective, the exception is of limited application in today’s modern licensing era. © The Author(s) 2018. Published by Oxford University Press. All rights reserved. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices)
Journal of Intellectual Property Law & Practice – Oxford University Press
Published: May 9, 2018
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