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127623 Ontario Inc. v. Nexx Online Inc.

File No. C20546/99 (Ontario Superior Court of Justice, June 14, 1999)(CANADA)

Plaintiff 127623 Ontario Inc. operates a website at which it sells home furnishings to the public. Plaintiff's website was hosted on a server maintained by defendant Nexx Online Inc. ("Nexx") pursuant to the terms of a contract between the parties. To promote its internet business and website, plaintiff sent internet users unsolicited bulk e-mail, commonly known as "spam." The recipients of this spam registered complaints with defendant, who, in turn, informed plaintiff that such activity was not permitted under the parties' contract, and could lead to the termination of plaintiff's account. Plaintiff thereafter engaged a third-party to send its spam. These unsolicited e-mails, sent at the rate of approximately 200,000 a day, continued to promote plaintiff's website, which was hosted on defendant's server. As a result, defendant deactivated plaintiff's website.

Plaintiff brought suit, seeking an "interlocutory injunction" directing defendant to "reactivate the plaintiff company's website." Finding the transmission of spam prohibited by the parties' contract, the court denied plaintiff's application.

The contract pursuant to which defendant hosted plaintiff's website provided that "the account holder agrees to follow generally accepted 'Netiquette' when sending e-mail messages or posting newsgroup messages ...". The court determined that the sending of unsolicited bulk e-mail was contrary to generally accepted "Netiquette" and hence violated the parties' contract. Said the court:

The use of the Internet is in its relative infancy. In the words of counsel, it is 'an unruly beast'. Or so it will certainly become without a foundation of good neighbor commercial principles. The unrestricted use of unsolicited bulk commercial e-mail appears to undermine the integrity and utility of the Internet system. Network systems become blocked. The user expends time and expense reviewing or deleting unwanted messages. Of fundamental importance is the distortion of the essentially personal nature of an e-mail address. ... [I]t appears clear that sending out unsolicited bulk e-mail for commercial advertising purposes is contrary to the emerging principles of 'Netiquette'.

The court determined that defendant was also permitted to terminate plaintiff's account under a provision of the parties' contract which permitted defendant to add additional terms to the contract. Upon receipt of notice from defendant that it had decided to add such an additional term, plaintiff had the choice of either agreeing to be bound thereby, or having its account terminated and receiving a refund of any fees paid for services to be rendered after the date of the termination. Defendant's notice to plaintiff to cease sending spam was seen by the court as notice of its decision to add such an additional provision to the parties' contract. Plaintiff's refusal to comply with this new provision provided additional justification for the deactivation of its website.

In reaching its decision, the court was influenced by defendant's contract with Exodus, which acted as "Nexx's service provider" and provided the facilities by which Nexx's servers were connected to the Internet. The Nexx-Exodus contract prohibited the sending of unsolicited bulk e-mail, and contained an "Anti-Spamming Policy." Like Nexx, Exodus had also received complaints about plaintiff's activities. Exodus informed Nexx that it believed such conduct violated the parties' agreement, and that Exodus would suspend service to Nexx unless this activity was stopped. Such action would not only have resulted in Nexx losing its ability to host plaintiff's site, but also from hosting the websites of any of its other approximately 900 clients.

Based on the foregoing, the court determined that plaintiff had failed to make the showing required under Canadian law for the issuance of an "interlocutory injunction," and denied plaintiff's application. To obtain such relief, an applicant apparently must show that: 1) there is a serious question to be tried; 2) absent the requested relief, the applicant will suffer irreparable harm that cannot be compensated in damages; and 3) between applicant and the defendant, applicant is the party that will suffer the greater harm if the requested relief is not granted.

The court determined that plaintiff had not made this showing. As set forth above, it determined that plaintiff had breached the parties' contract, which permitted defendant to stop hosting plaintiff's website. It further determined that plaintiff could avoid any irreparable injury by having a third party host its' site. Lastly, the court determined that the injury to defendant, should it be forced to continue to host plaintiff's site, particularly in light of its contract with Exodus, far outweighed any potential injury to plaintiff.

I must provide a disclaimer -- I am not a Canadian lawyer and am neither licensed nor admitted to practice law in the Canadian courts. Accordingly, do not rely on the foregoing as a statement of Canadian law, or as legal advice on how to govern your activities in Canada.

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