Court Rules Canadian Defendents Caused Irreparable Harm To DTV By Grey Market [Archive]

Gunsmoke2 - GS2

02-10-2007, 07:21 PM

Here:

http://www.canlii.org/bc/cas/bcsc/2006/2006bcsc1970.html

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:
Directv, Inc. v. Sandhu et al,

2006 BCSC 1970

Date: 20061123

Docket: S066129

Registry: Vancouver

Between:

DIRECTV, INC.

Plaintiff

And:

Harjit Sandhu a.k.a. Harjit Singh Sandhu, Harjit Sandhu c.o.b. as Satellite Central, Harjit Sandhu c.o.b. as Satellite Central Inc., Harjit Sandhu c.o.b. as WWW. DTVPROGRAMMING.COM, Harjit Sandhu c.o.b. as WWW.DTVSUBS.COM, Harminder Sandhu a.k.a. Harminder Kaur Sandhu, John Doe, Jane Doe and other persons unknown who have conspired with the named Defendants

Defendants

Before: The Honourable Mr. Justice Cullen

Oral Reasons for Judgment

In Chambers
November 23, 2006

Counsel for Plaintiff
I. Nishisato
R. Dawkins

A. Davison

Counsel for Defendants
R. Josephson

G. Forrester

Place of Trial/Hearing:
Vancouver, B.C.

[1] THE COURT: On September 25th, 2006, I granted an ex parte order on the application of the plaintiff, DIRECTV, Inc. (DIRECTV). The order was against a number of the defendants, including Harjit Sandhu, Harjit Sandhu carrying on business as Satellite Central Inc., Harjit Sandhu carrying on business as WWW.DTVPROGRAMMING.COM and Harjit Sandhu carrying on business at WWW.DTVSUBS.COM (the defendants).

[2] The effect of the order was to enjoin the defendants from engaging in any activity facilitating the unauthorized reception of DIRECTV programming and in specified related activity; and, to authorize representatives of the plaintiffs under specified conditions, to enter upon and search the defendants' premises and requiring the defendants to provide the plaintiff with certain specified information (the Anton Pillar order).

[3] The order also provided that the defendants were prohibited from disclosing the existence or contents of the order for a specified period and from any activity resulting in the distribution, loss or alteration of any evidence that might be obtained through the Anton Pillar order.

[4] The order also sealed the court file from public view for a specified period and granted the defendants liberty to apply to vary or discharge the order with at least 72 hours notice.

[5] Since the order was granted, a further order was made by Justice Tysoe on October 5th, 2006, by consent extending the time in which disclosure was prohibited and the file was to remain sealed until an application to set aside the order was brought. An initial application to set aside the ex parte order was brought on October 25th, 2006, before Mr. Justice Burnyeat. Counsel for the plaintiff applied to adjourn that application so that it could be heard by me.

[6] It was reset for November 8th, 2006. At the same time, the plaintiff brought an application to have the defendants found in contempt of the September 25th, 2006 order and as well certain ancillary and alternative orders.

[7] This application of the defendants to set aside, or in the alternative vary the terms of the September 25th, 2006 order, proceeded on November the 8th. The applications of the plaintiff did not.

[8] The plaintiff, DIRECTV, is a provider of satellite-delivered subscription television programming in the United States. Although the footprint of the satellites that transmit DIRECTV's programming signals includes Canada, DIRECTV has no copyright and is not licensed to transmit or permit the decoding of its encrypted subscription programming signals in Canada at present.

[9] In addition to the purchased programming which comprises the substantial majority of the programming it sells, DIRECTV also creates its own original content programming for which it holds the copyright. The system under which DIRECTV operates is known as a direct broadcasting system where the programs purchased by DIRECTV are delivered to one of its two broadcast centres at which the programming is digitized and compressed and encrypted or electronically scrambled so that once sent, its signals cannot readily be received without authorization, which involves acquiring the necessary receiving equipment and a card capable of decoding the scrambled signals.

[10] The method of distributing the program involves transmitting the encrypted signals to various satellites which in turn relay the signals back to earth within the area of the footprint to DIRECTV's subscriber, which as previously mentioned includes Canada, which falls outside of the area where DIRECTV is licensed to distribute.

[11] The equipment required to receive the programming includes a satellite mini-dish, integrated receiver decoder (IDS) and an access card that is necessary to operate the integrated receiver decoder. The equipment is not manufactured by DIRECTV, but DIRECTV subsidizes the equipment in anticipation of revenues it will receive from sales of its programming.

[12] The access card is the key to DIRECTV's security system and contains an embedded microprocessor component. The access card and the related software were developed by a firm called NDS Ltd., from which DIRECTV holds an irrevocable, perpetual and fully paid licence. The access cards can be acquired by subscribers with their IDS purchase or from DIRECTV or its authorized dealers. The access card will only permit access to DIRECTV test signals once the receiving equipment is installed until the customer purchases a program package from DIRECTV. When that happens, DIRECTV electronically activates the customer's access card in accordance with the program package. The card then allows reception of the particular package or programs purchased after unscrambling.

[13] If a customer is making unauthorized use of DIRECTV programming, DIRECTV has the capacity to transmit a signal that shuts down the access card. There have been many attempts over the years to intercept DIRECTV's signals with unauthorized devices used in substitute for access card, modified software and modified access cards. Such interception equipment and other equipment developed to overcome attempts by DIRECTV to disable unauthorized interceptions were marketed to consumers in competition with DIRECTV's authorized and licensed distribution system in the United States. The market became known as the "black market" and the technology "pirate technology."

[14] Over time, DIRECTV developed more sophisticated access cards which rendered interference with its security system more problematic, abating the black market problem in the United States. In the course of dealing with the black market, the plaintiff instituted an operation in the United States utilizing US legislation to pursue remedies against "end users," that is, those who use the pirate technology to gain access to the plaintiff's programming without authorization or the payment of subscription fees to DIRECTV.

[15] There was evidence that the operation to recover lost profit brought in revenues which exceeded the cost of the program. No information concerning the operation against end users in Canada was provided by either of the parties.

[16] There was also evidence that representatives of the plaintiff had some dealings with the defendant Mr. Sandhu in 2000 arising from his attempt to take access cards from Canada into the United States. Those dealings were referred to in the affidavit of Mr. James Whelan, a vice-president and representative of the plaintiff, DIRECTV, sworn in his September 22nd, 2006 affidavit and relied on in the ex parte application. The relevant paragraphs of Mr. Whelan's affidavit read as follows:

I am informed by Scott Wilsdon of Yarmuth Wilson Calfo PLLC in Washington State, counsel for DIRECTV in various piracy matters, that on or about January 26, 2000, the United States Customs Service (“Customs”) stopped a person named Harjit Sandhu (“Sandhu”) at the Canada-U.S. border in Blaine, WA when he attempted to bring 60 DIRECTV Access Cards (the “Blaine Cards”) into the United States. Customs seized the Blaine Cards.

I am further informed by Mr. Wilsdon that, the customs officer who interviewed Sandhu, Joanne Zylstra, informed him that, when questioned, Sandhu told her that he was bringing the cards into the United States to sell them to Jeff Atkins in Luray, Virginia. Sandhu also apparently stated that he obtained the Blaine Cards by switching them for earlier generation DIRECTV Access Cards that had been modified to function as signal theft devices. Sandhu further admitted to having performed DIRECTV Access Card modifications himself, claiming this activity was legal in Canada.

Based upon the foregoing facts, on or about February 23, 2000, DIRECTV, and News Datacom Ltd. and NDS Americas Inc. (collectively, “NDS”), companies who at the time had an interest in the DIRECTV Software and DIRECTV Access Cards, collectively applied to Customs for release of the Blaine Cards to them. Now shown to me and attached hereto as Exhibit “A” is a copy of the application.

The Blaine Cards were sent by Customs to NDS for testing to determine whether they had been modified. NDS determined that the Blaine Cards had not been modified.

I am further informed by Mr. Wilsdon that on or about February 24, 2000, he sent an e-mail addressed to Sandhu at jeet@home.com introducing himself as counsel for DIRECTV and NDS and referencing a claim by his clients to the Blaine Cards. Mr. Wilsdon demanded that Sandhu release any claims he believed he had to the cards.

I am informed by Mr. Wilsdon that he had further contact with Sandhu on or about March 31, 2000, having not had a response by that point to the demand in his e-mail of February 24, 2000.

I am further informed by Mr. Wilsdon that on or about April 7, 2000, Sandhu informed Customs that he was not prepared to abandon his claim to the Blaine Cards.

DIRECTV retained a private investigator located in the United States to attempt to purchase an illegally modified DIRECTV Access Card from Sandhu over e-mail in or about March 2000. The investigator was not able to complete the purchase because Sandhu advised him that he did not “sell programmed cards to U.S. residents”. Sandhu further advised the investigator that he could “fix” DIRECTV Access Cards in the investigator’s possession that had been disabled by ECMs, but stated that he could not program the cards because the investigator resided in the United States. Sandhu further advised the investigator that in Canada “it is legal to do that because the systems are not being sold here [i.e. in Canada]”. Now produced and shown to me and attached to this Affidavit as Exhibit “B” is a true copy of an e-mail string between the private investigator and Sandhu between March 6 and 31, 2000, which has been redacted for privilege.

I am informed by Mr. Wilsdon that he had no further contact with Sandhu after in or about April 2000 and that no further claim was advanced or pursued for the return of the Blaine Cards to DIRECTV and NDS.

I am further informed by Ms. Wilsdon that he does not know what eventually happened to the Blaine Cards, and that he took no further action on the file.

[17] DIRECTV is not authorized to distribute its decoded signals in Canada as previously mentioned. The want of authorization rests in relation to the purchased programming on the fact that DIRECTV does not have the necessary copyrights to distribute in Canada and in relation to that programming and its own programming for which it does have copyright on statutory proscriptions in the Radiocommunication Act s. 9 and 10. Those sections as applicable read as follows:

Offences and Punishment:

(1) Prohibitions. No person shall

(a) knowingly send, transmit or cause to be sent or transmitted any false or fraudulent distress signal, message, call or radiogram of any kind;

(b) without lawful excuse, interfere with or obstruct any radiocommunication;

(c) decode an encrypted subscription programming signal or encrypted network feed otherwise than under and in accordance with an authorization from the lawful distributor of the signal or feed;

(d) operate a radio apparatus so as to receive an encrypted subscription programming signal or encrypted network feed that has been decoded in contravention of paragraph (c); or

(e) retransmit to the public an encrypted subscription programming signal or encrypted network feed that has been decoded in contravention of paragraph (c).

(1.1) Prohibition. Except as prescribed, no person shall make use of or divulge a radio-based telephone communication

(a) if the originator of the communication or the person intended by the originator of the communication to receive it was in Canada when the communication was made; and

(b) unless the originator, or the person intended by the originator to receive the communication consents to the use or divulgence.

(2) Idem. Except as prescribed, no person shall intercept and make use of, or intercept and divulge, any radiocommunication, except as permitted by the originator of the communication or the person intended by the originator of the communication to receive it.

(3) Exceptions. Subsection (2) does not apply in respect of radiocommunication that consists of broadcasting, a subscription programming signal or a network feed.

[18] 9.1:

Penalties. Every person who contravenes subsection 9(1.1) or (2) is guilty of an offence punishable on summary conviction and liable

(a) in the case of an individual, to a fine not exceeding twenty-five thousand dollars or to imprisonment for a term not exceeding one year, or to both; and

(b) in the case of a person other than an individual, to a fine not exceeding seventy-five thousand dollars.

[19] 10:

(1) Offences. Every person who

(a) contravenes section 4 or paragraph 9(1)(a) or (b),

(b) without lawful excuse, manufactures, imports, distributes, leases, offers for sale, sells, installs, modifies, operates or possesses any equipment or device, or any component thereof, under circumstances that give rise to a reasonable inference that the equipment, device or component has been used, or is or was intended to be used, for the purpose of contravening section 9

(c) contravenes or fails to comply with an order issued by the Minister under paragraph 5(1)(l), or

(d) contravenes or fails to comply with a regulation, where no punishment is prescribed by regulations made under paragraph 6(1)(r) for that contravention or failure to comply, is guilty of an offence punishable on summary conviction and is liable, in the case of an individual, to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding one year, or to both, or, in the case of a corporation, to a fine not exceeding twenty-five thousand dollars.

(2) Idem. Every person who contravenes or fails to comply with subsection 8(5) or (6) is guilty of an offence punishable on summary conviction and is liable to a fine not exceeding five thousand dollars.

(2.1) Idem. Every person who contravenes paragraph 9(1)(c) or (d) is guilty of an offence punishable on summary conviction and is liable, in the case of an individual, to a fine not exceeding ten thousand dollars or to imprisonment for a term not exceeding six months, or to both, or, in the case of a corporation, to a fine not exceeding twenty-five thousand dollars.

(2.2) Idem. Every person who contravenes paragraph 9(1)(e) is guilty of an offence punishable on summary conviction and is liable, in the case of an individual, to a fine not exceeding twenty thousand dollars or to imprisonment for a term not exceeding one year, or to both, or, in the case of a corporation, to a fine not exceeding two hundred thousand dollars.

(2.3) Exception. No person who decodes an encrypted subscription programming signal in contravention of paragraph 9(1)(c) shall be convicted of an offence under that paragraph if the lawful distributor had the lawful right to make the signal available, on payment of a subscription fee or other charge, to persons in the area where the signal was decoded but had not made the signal readily available to those persons.

(2.4) Not lawful excuse. Nothing in subsection (2.3) shall constitute a lawful excuse for any person to manufacture, import, distribute, lease, offer for sale or sell any equipment or device, or any component thereof, in contravention of paragraph (1)(b).

(2.5) Due diligence. No person shall be convicted of an offence under paragraph 9(1)(c), (d) or (e) if the person exercised all due diligence to prevent the commission of the offence.

(3) Continuing offence. Where an offence under this section is committed or continued on more than one day, the person who committed the offence is liable to be convicted for a separate offence for each day on which the offence is committed or continued.

(4) Injunctions. Where a court of competent jurisdiction is satisfied, on application by the Minister, that an offence under paragraph (1)(a) is being or is likely to be committed, the court may grant an injunction, subject to such conditions as the court considers appropriate, ordering any person to cease or refrain from any activity related to that offence.

(5) Federal court. For the purposes of subsection (4), the Federal Court is a court of competent jurisdiction.

(6) Limitation. A prosecution for an offence under this Act may be commenced within, but not after, three years after the day on which the subject-matter of the offence arose.

[20] The evidence establishes that DIRECTV's signals are distributed, received and decoded in Canada, notwithstanding the deficiencies in its copyright and the statutory proscription. More particularly, the evidence establishes that the programming is distributed, received and decoded through the medium and activities of the defendants and other organizations not before the court.

[21] There is a body of evidence which was adduced at the ex parte hearing and essentially confirmed by Mr. Sandhu in an affidavit sworn October 6th, 2006, establishing that the defendants used false names, addresses and telephone numbers in the United States to be used as billing addresses to justify receiving a subscription package which they then sold in Canada where they are not permitted to be sold and not otherwise available.

[22] In order to sell the programming at attractive rates, the defendants engaged in what is described as activation fraud. As interfering with or compromising access cards became more problematic, other ways of acquiring unauthorized reception of DIRECTV's programming developed. In particular, DIRECTV offers additional subscriptions to a single household at a significantly reduced rate, such that the original subscription for a particular program might cost $45 to $100 and subsequent services to the same household would be sold for approximately $5 for each additional unit/access card and activation.

[23] Unauthorized distributors such as the defendants would purchase a number of additional subscriptions, (the evidence before me establishes up to 21 on one subscription) at the reduced rate by falsely representing that they are for use in the same household. The defendants then sell the reduced rate program packages to customers in Canada at a rate commensurate with making a significant profit.

[24] There is no evidence that the defendants presently use, sell or distribute any pirate technology, either in Canada or the United States and there is affirmative evidence that they do not sell any of DIRECTV's program packages which they acquire through the provision of false information to the plaintiff in the United States or anywhere else where DIRECTV is licensed to sell its programming and subscriptions.

[25] There is evidence that DIRECTV takes steps to avoid activations which fall outside of the geographical area for which it is licensed and those which are falsely represented to be secondary subscriptions and hence subject to a reduced rate. There is also evidence that DIRECTV has developed some means and methods of identifying unauthorized and fraudulent activations and using electronic signals to the access card shutting them down.

[26] The steps and methods employed by DIRECTV were described by Mr. Whelan in his second affidavit sworn October 23rd, 2006, in relation to the defendants' application to set aside the September 25th, 2006 order at paragraph 41, as follows:

(a) revised its customer agreement (the customer agreement) to advise would be consumers that its US satellite broadcasting services are not available outside the United States;

(b) advised would be consumers via its Internet website that DIRECTV is "legally prohibited from transmitting the DIRECTV signals from outside the United States";

(c) implemented area code blocking measures for all calls to DIRECTV customer service centres from outside the United States with the result that calls placed directly from Canada are not answered by DIRECTV;

(d) required as a general policy that DIRECTV receivers be continuously connected to a land-based telephone line in the United States in order to receive certain programming (these receivers periodically play a call to DIRECTV which will not accept calls from outside the US);

(e) refused to set up accounts and terminate accounts where the customers or would be customers are identified by DIRECTV as residing in Canada; and

(f) terminated relationships with authorized sales dealers in the US whom DIRECTV has determined has knowingly sold receiving equipment to consumers for the purposes of establishing grey market or activation fraud accounts.

[27] DIRECTV has also established an "office of signal integrity" to identify, investigate and shut down fraudulent DIRECTV accounts including activations in Canada at an annual budget of approximately $4 million US, exclusive of litigation costs.

[28] In his fourth affidavit sworn October 26th, 2006, Mr. Sandhu deposed that he informed a representative of DIRECTV in late February 2000 of "all material aspects of (his) satellite business pertaining to DIRECTV". He also deposed that he was aware of other Canadian providers of DIRECTV.

[29] In his first affidavit sworn October 6th, 2006, Mr. Sandhu outlined the nature and extent of his satellite business between 2000 and 2004 in paragraphs 27 to 37 as follows:

From the late 1999 through 2002, the Satellite Business grew by leaps and bounds. I believe this was a consequence of decisions of the Courts of British Columbia and various Courts elsewhere in Canada.

Within British Columbia at that time, there was an ever-increasing demand for Satellite Systems. Because of my involvement in the Satellite Business, I was well placed to capitalize on that market and I did so.

During the year 2000, I sold approximately 220 Satellite systems to customers in British Columbia and other Provinces in Canada.

However, at no time did I ever solicit customers in the United States, or enter into any contractual or other relations with any actual or potential customers of DirecTV in the United States.

In fact, from the outset, it has been a policy of my Satellite Business not to solicit United States residents as customers, and to reject any inquiries from residents of the United States, on the basis of their residency. The reasons for this are two-fold:

a. residents of the United States already have access to the services of DirecTV; and

b. I have always believed that it would be unlawful for me to solicit or provide services to residents of the United States.

The Satellite Business was neither geared up for that purpose, nor did I intend to embark upon any form of business that went beyond the confines of the area in which I resided and carried on business.

The only continuing Satellite Business that involved the United States at that time was that I purchased the Satellite Systems from retail outlets and individuals situated in the United States. However, these Satellite Systems were intended for, and actually sold, to individuals residing exclusively in British Columbia or elsewhere in Canada.

In addition to the facts set out in the preceding paragraph, during this time, I was involved in the following business activities over eBay, to individuals in Canada and the United States:

a. the sale of “unprogrammed” access cards, which I ceased in January 2001;

b. the sale of damaged access cards, which were not programmable, which I ceased April 2000;

c. the sale of circuit board devices called “bootstraps” for a period of approximately 10 days in march or April, 2001; and

d. the sale of upgraded personal/digital video recorders, which I ceased in late 2004.

The business of buying and selling Satellite Systems included, by necessity, the programming of DirecTV access cards for the purchaser of the Satellite System as well as for other individuals who had their own existing Satellite system. My expertise involved assisting the purchasers of Satellite systems, as well as the owners of existing Satellite Systems in programming their DirecTV access cards, in a way that would enable them to receive the DirecTV satellite footprint without having to register with DirecTV and pay the monthly subscription fees.

During this period, I was facilitating the reception of DirecTV satellite footprint by non-U.S. residents, without their being required to pay a fee to DirecTV. I charged my customers in British Columbia and elsewhere in Canada a fee for this service.

At times, the Satellite Business also included the sale of other decoding devices that facilitated the decoding of the DirecTV satellite footprint without payment.

[30] It is not entirely clear what the nature and extent of Mr. Sandhu's business was in February 2000 when he deposed he told a representative of DIRECTV all material aspects of it. Mr. Sandhu deposed that he believed that his activities were legal and not in contravention of the Radiocommunication Act, even after the decision of the Supreme Court of Canada in Bell ExpressVu Limited Partnership v. Rex et al. 2002 SCC 42 (CanLII), (2002) 212 D.L.R. (4th) 1 at page 1. He deposed that:

It was and remains by belief that the effect of this decision was that the Supreme Court of Canada has left open the question of the constitutionality of The Broadcasting Act to the extent that it prohibited me and others from engaging in the satellite business.

[31] Mr. Sandhu further deposed that in September 2003, he moved away "from the aspects of his business that involved the programming of access cards" and limited his activity to the activating business out of an abundance of caution to ensure that he operated in the grey market and not as a pirate. He described his method of running his activation business in paragraph 67 to 73 inclusive of his first affidavit as follows:

My Activation Business is comprised of three stages. First, I acquired DirecTV access cards through the normal process of purchasing a DirecTV satellite system from recognized retail outlets in the United States authorized to sell DirecTV products.

Second, I activated a subscriber account with DirecTV using one access card and paid the required subscription fee using my credit card.

At the third stage, I contacted DirecTV again and asked them to add a number of additional receivers to my account at a discounted rate. I would then continue to add to the account an average of 15 – 18 additional receivers at the discounted rate.

DirecTV made an inquiry of me as to which room the receiver will be located. DirecTV said to me that I should hook up the receiver in that room to the same telephone line to the first receiver is hooked up to. They said that if I did not do so, they would no longer charge the discounted rate for that receiver, but would instead charge the full rate.

With the rare exception of receivers that had personal video recording capabilities, I always advised my customers not to connect their receiver to a telephone line. I can only assume that DirecTV was aware of that fact because they would have known (by the absence of any telecommunications from a receiver or any receivers on that account) that there was indeed no telephone line connected to the receivers on that account.

Based upon what representatives of DirecTV told me on the telephone, DirecTV intended to monitor whether the receivers were connected to the same (or any) telephone line and (if so) to implement their policy of removing the discount rate for that receiver.

In all of my dealings with DirecTV since September 2003, I have constantly been surprised that they failed to implement that policy. I am satisfied in my mind that DirecTV knew, or had the capacity to know, that many of the additional receivers that were activated on my account were not in fact connected to the same (or indeed any) telephone line for the following reasons:

a. none of the receivers related to the accounts were dialling into DirecTV servers;

b. if a receiver was dialling in, it would have been from a different telephone number than what was listed on the account; and

c. if multiple receivers were dialling in, it would have been from multiple telephone numbers, each of which would have been different from the telephone numbers that was listed on the account.

[32] Mr. Sandhu deposed that in March 2006, DIRECTV shut down all of his accounts over a one-month period, and accordingly in March and April of 2006, he established new accounts, purchased new access cards from DIRECTV or other sources and distributed them to his customers.

[33] He deposed that he went from a customer base of 1350 in March/April of 2006 to about 550 by September 25th, 2006. He further deposed that in opening the various accounts with DIRECTV, he used an American Express card related to his Canadian address which had prefix numbers identifying it (to someone who would know) as Canadian.

[34] In his October 23rd, 2006 affidavit, Mr. Whelan of DIRECTV deposed that after his accounts were shut down in March 2006, Mr. Sandhu "developed a more sophisticated form of activation fraud that involved setting up so called private office accounts." He explained such accounts are designed for small offices that operate several televisions, and which are "not required to speak to DIRECTV's distribution plan to activate more than five direct access cards."

[35] Mr. Whelan described Mr. Sandhu's use of the private office accounts as adding "an additional layer of fraud" to the scheme. He addressed the issue of loss or damage to DIRECTV flowing from the defendants' alleged wrongdoing in his affidavit of September 22nd, 2006, in paragraphs 86 to 94 inclusive under the heading "Irreparable Harm." Those passages read as follows:

DIRECTV’s ability to attract and retain distribution rights for copyrighted programming, as well as subscriber revenues and goodwill, is dependent upon securing and maintaining the integrity of its programming, technology and products.

DIRECTV sustained an economic loss every time black market Piracy Technology (including the necessary piracy software components) was used to receive its programming in place of a legitimate subscription purchased from DIRECTV, since individuals using black market Piracy Technology do not pay any fees to DIRECTV. Damages include the loss of subscription and pay-per-view fees that a legitimate subscriber would have paid to DIRECTV. It is the avoidance of those fees that made the black market piracy devices attractive to certain individuals.

Other expenses incurred by DIRECTV as a result of piracy include the costs of (1) developing and introducing new generations of DIRECTV Access Cards, (2) developing and implementing ECMs to disable pirate devices, and (3) investigating and prosecuting piracy cases.

Based upon its previous experience in cases involving black market satellite piracy, DIRECTV conservatively estimates that it loses approximately USD $205 per month in subscription and pay-per-view fees for each pirate device in use. On an annual basis, the loss to DIRECTV is approximately US $2,500 for each signal theft device. These numbers are conservative estimates only, which could increase significantly depending on the amount of pay-per-view programming viewed. Because the number of illegal customers and the type of programming watched are unknown, it is impossible for DIRECTV to calculate the actual losses it has sustained as a result of the Pirate Defendants’ apparently illegal activities without obtaining access to the Pirate Defendants’ business records.

The damage to DIRECTV from black market activities does not end there. As discussed above, piracy devices, such as programmers, by their very design permitted users with the necessary piracy software components to modify DIRECTV Access Cards on their own. For every “piracy enabling device” sold, DIRECTV faced the loss of not one but potentially hundreds of subscribers or potential subscribers. In a very real sense, the sale of these devices and piracy software components resulted in an unascertainable number of pirated DIRECTV satellite systems and a corresponding, equally unascertainable but substantial loss of revenues.

DIRECTV also sustains significant economic losses from Activation Fraud. These losses include the loss of subscription and pay-per-view fees for the programming being received by fraudulently activated DIRECTV Access Cards, less the Additional Receiver Authorization Fee actually received. DIRECTV further loses amounts paid to subsidize the cost of Receiving Equipment used in Activation Fraud, which amount is expected to be recouped by DIRECTV over time from payments made on the accountholder’s main account. It is impossible for DIRECTV to determine the number of fraudulently activated DIRECTV Access Cards that have been sold or activated by pirates. Accordingly, DIRECTV cannot at present calculate the extent of its losses from Activation Fraud.

Activations of grey market accounts also causes harm to DIRECTV because it, among other things, exposes DIRECTV to potential liability to U.S. and Canadian copyright holders of programming for which DIRECTV holds distribution rights in the United States only and damages the goodwill and reputation of DIRECTV with its content suppliers.

The conduct of the Pirate Defendants has caused significant and irreparable harm to DIRECTV. It has deprived DIRECTV of subscription and pay-per-view revenues and other valuable consideration, comprised DIRECTV’s security and accounting systems, infringed DIRECTV’s trade secrets and the confidentiality of its proprietary information, and interfered with DIRECTV’s contractual and prospective business relations.

In particular, the actions of the Pirate Defendants have caused DIRECTV irreparable harm in that they have:

(a) deprived DIRECTV of an incalculable number of customers, as a result of the inability to ascertain, trace or account for all uses of DIRECTV’s programming;

(b) caused DIRECTV a corresponding loss of revenues, proceeds, profits and other benefits, which is also incalculable because it is difficult for DIRECTV to trace, calculate or prove:

(i) how many persons have received its programming without authorization;

(ii) how much and which type of programming and how much pay-per-view programming these persons have received without authorization;

(iii) the actual value of the programming received without authorization; and

(iv) the number of fraudulently activated DIRECTV Access Cards in use;

(c) compromised the integrity of DIRECTV’s security measures and accounting systems, which were developed by DIRECTV with the investment of significant time and expense;

(d) prevented DIRECTV from recovering the amounts it pays to subsidize the cost of every IRD which “disappears” into the black market or is used in conjunction with an Activation Fraud scheme, which subsidies are made in the expectation that they will promote legitimate subscriptions;

(e) exploited for commercial gain DIRECTV’s trade secrets and confidential information related to DIRECTV’s security system;

(f) exposed DIRECTV to potential liability to U.S. and Canadian copyright holders of programming for which DIRECTV holds distribution rights in the United States for failing to prevent the illegal reception of DIRECTV in Canada (for which DIRECTV has been sued in the past) and in the United States;

(g) jeopardized the goodwill associated with DIRECTV’s name and its reputation in the marketplace, which in turn results in compounded losses of revenue, proceeds, profits and other benefits, which are impossible to ascertain at this time; and

(h) damaged the business relationships and good reputation that DIRECTV has developed over many years.

[36] In his second affidavit of October 26, 2006, Mr. Whelan further addressed the issue of loss and damage to DIRECTV from the grey market and sale of activations in Canada "in greater detail." He deposed that DIRECTV is exposed to potential claims for damages from the copyright holders of the programming content because it is not licensed by those holders to exhibit the programming in Canada.

[37] He further asserts that DIRECTV also faces potential claims by those who do hold the copyright for the programming for failing to prevent the reception of DIRECTV programming by Canadian residents. He also deposed to a risk that the licensers of the programming will fail to renew DIRECTV's licence to exhibit a particular programming and potential licensers will fail to grant licensing to DIRECTV if it is shown to be inadequate and protecting the copyright of others.

[38] Mr. Whelan cited, as an example, lawsuits brought in 1998 by WIC Premium Television Ltd., a holder of Canadian copyrights and licences to distribute certain programming in Canada, against DIRECTV for failing to ensure DIRECTV's agreements with its program suppliers were abided by. The lawsuits sought $175 million. They were apparently settled for an undisclosed sum.

[39] Mr. Whelan attested to DIRECTV's ongoing loss of reputation suffered in the broadcast industry because of the grey market and the sale of activations in Canada and by the use of its name and logo by "pirates" in Canada.

[40] Mr. Whelan also referred to the scheme by which DIRECTV subsidizes the cost of the receivers and satellite dishes required to receive DIRECTV programming asserting that use of subsidized equipment in the grey market creates a risk of DIRECTV not recovering its subsidy in a realistic time frame. Mr. Whelan asserts in his affidavits that the plaintiff is unable to calculate what it lost and subsidies due to Mr. Sandhu's "grey market" activities.

[41] Mr. Whelan also deposes to "substantial costs to investigate and prosecute persons in Canada involved in the grey market and in the sale of activations." He went to depose that DIRECTV did not have knowledge of Mr. Sandhu's activity when it shut down his accounts in April 2006 as it was just responding to investigations of several apparently fraudulent activations involving many secondary accounts related to one primary account.

[42] The order at issue in this case has five discrete aspects to it, each of which is challenged by the defendants' application to set it aside or vary it. There is the injunction in paragraphs 2(a) to 2(h) and paragraph 3, the Anton Pillar order at paragraphs 3 to 28 inclusive, the prohibition in paragraphs 29 and 30 and the sealing order in paragraph 34.

[43] The basis of the defendants' application to set aside or vary the order is summarized in the memorandum of argument relied on in the application to set aside, paragraphs 5 to 15 inclusive, as follows:

It is the primary position of my clients that the Injunction Component of the Order be set aside in its entirety. The basis for this position is that the litigation does not disclose a prima facie cause of action against my clients. Therefore, there is no basis in law for the relief that was sought and obtained pursuant to the Order.

Alternatively, if your Lordship were to find there is a prima facie case, it is the defendant’s position that the other elements required to be established, such as “irreparable harm” and “balance of convenience” have not been established. Moreover, leaving aside the Anton Pillar component of the Order for a moment, there were no grounds for the Order to have been made on an ex parte basis.

The secondary position of my clients should be varied in a way that will excise from it those portions of it that are not properly supported on the facts or in law.

In this regard, the portions of the Order that are sought to be varied are as follows:

(a) The deletion of paragraphs 2 and 3, 29 and 30, and 34 of the Order in their entirety.

The basis for the variation of the Order in these terms is that the tests required to be met for each component of this Order have not been met and that the Order that is ultimately made in this matter should exclude any and all such components.

It is the position of the Defendants that the Anton Pillar Component of the Order was obtained for an ulterior purpose, which is contrary to the prevailing law.

Moreover, DirecTV has proceeded without responsible self restraint on the part of those executing the Order and has failed to restrain itself from focusing on the limited purpose of an Anton Pillar Order, namely to preserve relevant evidence and not to rush to exploit it.

It is the position of the Defendants that the Prohibition Component of the Order is an unwarranted restriction on the rights of the Harjit Defendants.

Furthermore, as set out below, the Harjit Defendants have been seriously prejudiced by the Prohibition Component of the Order in that the same has restricted their ability to conduct investigations that the Harjit Defendants believe would have been helpful to them in this Application.

Finally, the Prohibition Component of the Order demonstrates the ulterior motive of the Plaintiff in seeking the Anton Pillar Order, as set out further below.

There is no, or alternatively no adequate, basis for the Sealing Component of the Order.

[44] The test for granting injunctive relief is set out in RJR-MacDonald v. Canada (Attorney General) 1994 CanLII 117 (S.C.C.), [1994] 1 S.C.R. 311:

(a) the plaintiff must show there is a serious question to be tried;

(b) the plaintiff must satisfy the court that it will suffer irreparable harm if the relief is not granted; and

(c) the plaintiff must show that in all the circumstances, the balance of convenience favours the granting of an injunction pending trial of the issues between the parties (i.e., that the plaintiff will suffer greater harm relative to the defendant from the refusal of the remedy pending a decision on the merits).

[45] The test for granting an Anton Pillar order is more stringent than that for granting injunctive relief. Those requirements were most recently articulated in Celanese Canada Inc. v. Murray Demolition Corp. [2006] S.C.J. No. 35 at paragraph 35:

There are four essential conditions for the making of an Anton Pillar order. First the plaintiff must demonstrate a strong prima facie case. Second, the damage to the plaintiff of the defendant's alleged misconduct, potential or actual, must be very serious. Third, there must be convincing evidence that the defendant has in its possession incriminating documents or things. And fourthly, it must be shown that there is a real possibility that the defendant may destroy such material before the discovery process can do its work.

[46] To some extent satisfying the requirements of an Anton Pillar order imports satisfying the requirements of an injunction. So it is perhaps useful to analyze the evidence and the parties' respective submissions by the higher standard where that higher standard is applicable. On the issue of both the strong prima facie case and the serious question to be tried, the defendants submit that the basis of the plaintiff's claim under the Radiocommunication Act section 18(1) is tenuous at best, either on the basis of s. 18(1) itself, or because sections 9 and 10, if challenged, are likely to be held unconstitutional.

[47] In relation to the claim based on the tort of fraud, the defendants submitted that the evidence is simply not sufficient to establish to the requisite degree either that the plaintiff relied on the defendants' fraudulent representations, or that if they did, they suffered any damage thereby.

[48] In support of their arguments, the defendants say firstly that DIRECTV as a foreign distributor does not fall within the language or scope or section 18 of the Radiocommunication Act, which reads as follows:

18. (1) Right of civil action. Any person who

(a) holds an interest in the content of a subscription programming signal or network feed, by virtue of copyright ownership or a licence granted by a copyright owner,

(b) is authorized by the lawful distributor of a subscription programming signal or network feed to communicate the signal or feed to the public,

(c) holds a licence to carry on a broadcasting undertaking issued by the Canadian Radio-television and Telecommunications Commission under the Broadcasting Act, or

(d) develops a system or technology, or manufactures or supplies to a lawful distributor equipment, for the purpose of encrypting a subscription programming signal or network feed, or manufactures, supplies or sells decoders, to enable authorized persons to decode an encrypted subscription programming signal or encrypted network feed

… may, where the person has suffered loss or damage as a result of conduct that is contrary to paragraph 9(1)(c), (d) or (e) or 10(1)(b), in any court of competent jurisdiction, sue for and recover damages from the person who engaged in the conduct, or obtain such other remedy, by way of injunction, accounting or otherwise, as the court considers appropriate.

(2) In an action under subsection (1) against a person

(a) a monetary judgment may not exceed one thousand dollars where the person is an individual and the conduct engaged in by the person is neither contrary to paragraph 9(1)(e) or 10(1)(b) nor engaged in for commercial gain; and

(b) the costs of the parties are in the discretion of the court.

…

(6) Copyright Act. Nothing in this section affects any right or remedy that an aggrieved person may have under the Copyright Act.

[49] The defendants argue that s.18 is intended to apply to protect Canadian interests and that DTV must show that it falls within one of s. 18 (1)(a) to (d) and has failed to do so. In the alternative, the defendants say that DIRECTV has not proved it has been caused loss or damage in Canada as a result of Mr. Sandhu's conduct and therefore has no remedy under section 18.

[50] It is clear following the decision of the Supreme Court of Canada, in Bell ExpressVu Limited Partnership v. Rex et al., that sections 9 and 10 of the Radiocommunication Act apply to satellite television signals emanating from the United States. I can see no basis on the evidence before me to exclude the defendants from culpability under the Radiocommunication Act where it is established they are assisting others in Canada to receive satellite T.V. signals in breach of ss. 9 and 10.

[51] The main argument of the defendants, as I understand it, is that notwithstanding the applicability of sections 9 and 10 to DIRECTV's signals, because DIRECTV has no right to distribute or decode them in Canada, it cannot establish loss or harm from the defendants' distribution of them in Canada and thus cannot establish a right to engage the remedies in section 18.

[52] To some extent this submission mirrors the defendants' submission on the issue of whether the plaintiff has established irreparable harm or very serious actual or potential damage. In my view, the damage to the plaintiff lies in the effect of the defendants' grey market activities in putting the plaintiff in breach of its licence from copyright holders and the costs entailed in protecting against that breach.

[53] While the nature and extent of the damages may be at issue, I do not think it could be said that section 18 is inapplicable in the facts at bar or that its applicability falls below the level of a very strong case. It follows, of course, that similarly it would not fall below the standard requisite to an injunction of a serious question to be tried.

[54] Insofar as the issue of the constitutionality of sections 9 and 10 of the Radiocommunication Act are concerned, I am not satisfied that merely by raising the issue of the constitutionality and adverting to the observation of the Supreme Court of Canada in Bell ExpressVu Limited Partnership v. Rex et al., to the effect that the issue remains unresolved, the defendants have made an argument that attenuates the plaintiff's case below the requisite standards.

[55] Whether the activity implicated by sections 9 and 10 involve a violation of section 2(b) of the charter and whether, if so, section 1 justifies such a violation or limitation are questions of considerable magnitude and complexity. They are simply not susceptible to anything more than rank speculation on an application of this sort and must give way to a presumption that the law of the land is applicable and constitutional unless otherwise demonstrated.

[56] Insofar as the defendants' attack on the foundations of the plaintiff's claim founded in fraud is concerned, it is based on assertion that the constituent elements of fraudulent misrepresentation have not been met. The defendants submitted that those elements consisted of, (a), a false representation made by the defendant; (b), which is knowingly false; (c), which was made to deceive the plaintiff; and (d), which materially induced the plaintiff to act, resulting in damage.

[57] The defendants say that DIRECTV was not materially induced to act by the representations of the defendants and those representations did not result in damages to the plaintiff. In submitting that the plaintiff was not materially induced to act on the defendants' misrepresentations, the defendants submitted that the plaintiff knew or had the capacity to know that many of the additional receivers that were activated on Mr. Sandhu's accounts were not, in fact, connected to the same (or indeed any) telephone line and knew or had the capacity to know that his subscriptions were paid for by a Canadian credit card.

[58] The defendants say that on the basis of the evidence taken as a whole, a finding akin to what was found in R. v. Ereiser [1997] SJ No. 276 is appropriate. That finding is as follows:

DIRECTV, INC. is not licensed to broadcast in Canada and will not activate a Smart Card for anyone resident in Canada even though such person is ready, willing and able to pay the customary fee charged by DIRECTV. However, DIRECTV, INC. does participate in a thinly veiled scheme to circumvent the laws of Canada by accepting subscription fees directly from Canadians provided that they maintain a United States address. In the instant case, DIRECTV accepted numerous monthly fees paid by way of a Royal Bank of Canada Visa card. Presumably, it takes the position the activated Smart Card is located in the United States. From all of the facts, it is easy to infer that it clearly knows otherwise.

[59] The defendants submit that DIRECTV does receive significant revenues from the defendants' activation business and other similar businesses in Canada, and hence it has a motive to turn a blind eye to the practice of activations in Canada however they are obtained or structured.

[60] Relying on evidence that Mr. Sandhu's credit card used to purchase the programs subscription was Canadian and that Mr. Sandhu had a conversation with a representative of DIRECTV in February of 2000 and told him about his business, the defendants assert a basis exists to conclude that DIRECTV was not materially misled by the false representations but were complicit in the unauthorized distribution of their signals in Canada.

[61] The defendants also submit that the plaintiff has suffered no detriment flowing from the activation business. The defendants submit that as they have no customers in the United States, they were not taking from the plaintiff's pool of potential subscribers, and hence there is no loss but, in fact, a benefit to the plaintiff as they receive revenues from source they otherwise would be unable to access.

[62] The defendants question the currency and strength of the evidence of the plaintiff's liability or potential liability to the Canadian copyright holders and submit on the strength of Lee v. Li 2002 BCCA 209 (CanLII), (2002) 100 B.C.L.R. (3d) 291 (BCCA), that the prospect of future damages is insufficient to found a case of fraud.

[63] The defendants further submit that the evidence adduced by the plaintiff as to the loss relating to the subsidies it pays for the equipment and in acquiring the signals is unclear at best and may even result in a profit to the plaintiff, given that the equipment produces revenues that the plaintiff is not entitled to and would otherwise not receive. The defendants also argue that there is evidence that the cost of enforcement revenues is offset by the "profitable" recovery of funds from unauthorized end users.

[64] Counsel for the defendants contended that nowhere in the plaintiff's materials is there a substantive calculation of amounts lost to the plaintiff and the defendants are unable to challenge the bare conclusory statements of the plaintiffs or to look at offsetting revenues. The defendants submitted it cannot be said that there is a strong prima facie case of fraud for want of adequate evidence of either reliance or loss and, for the same reasons, there is no serious issue to be tried.

[65] I do not think that the defendants' arguments on these points can prevail. There is a body of evidence that the plaintiff has instituted specific measures and taken affirmative steps to prevent activations and fraudulent activations in Canada. There is no doubt that if the defendants did not misrepresent where the subscribers lived and what the subscriptions related to, the plaintiff would not facilitate the reception of signals through activation.

[66] Whether the defendants' scheme could have been discovered and shut down earlier may be an issue for trial, but on the evidence before me, it does not reduce the strength of the case below the requirement of a strong prima facie case or a serious case to be tried.

[67] Similarly, while the actual damage that is suffered by the plaintiff may be inchoate or difficult to quantify, there is substantial evidence that the plaintiff has suffered a real risk of harm to its own economic interests by acting on the misrepresentations of the defendants. In particular, DIRECTV is exposed to lawsuits by Canadian copyright holders and to prosecution under the Radiocommunication Act.

[68] If it were to be found complicit in the defendants' activities through inaction or turning a blind eye, it could also be exposed to a lawsuit from the Canadian copyright holders based on the fraudulent representation that it served only subscriptions in the United States. Even if it not complicit, DIRECTV may have to account to the Canadian copyright holders for the revenues generated by the grey market operators to which it is not entitled.

[69] As I see it, while the actual damages or detriment may be difficult to quantify, there is a strong case of a clear risk to the plaintiff's economic interest founding its action in fraud and justifying some form of relief. The evidence in this case is unlike that in Lee v. Li, as in that case there was a finding that no one had acted on the document said to constitute the fraudulent misrepresentation, and hence the tort was anticipatory only. Here the plaintiff has acted on the misrepresentation by activating the subscriptions at issue.

[70] The defendants argue that even if there could be said to be a sufficiently strong prima facie case or a serious case to be tried, the plaintiff's case falters on its inadequate evidence of irreparable harm in relation to the injunction order or "very serious" potential or actual damage to the plaintiff in relation to the Anton Pillar order.

[71] On this ground, the defendants rely upon the same asserted deficiencies in the evidence as they did in contending at that there was little or no evidence of damage to found a claim in the tort of fraud. The defendants concede, and properly so, that the plaintiff has an obligation to remediate against unauthorized use of its encrypted signals in Canada in order to protect the holders of the Canadian copyright to the programming and not to be in breach of the Radiocommunication Act.

[72] Against that backdrop, however, they assert that when carefully analyzed, the plaintiff's claims of loss and damage arising from grey market activity are at best tenuous and simply do not justify a finding of either irreparable harm or very serious actual or potential damage.

[73] Not all harm or damage is quantifiable in monetary terms. The harm which the defendants' activities in the Canadian grey market exposed the plaintiff to flow from its legal responsibility to act within the boundaries of the licence granted to it, to not encroach upon the markets of other copyright holders, to avoid breaching statutory proscriptions and to establish a reputation in the industry conducive to maintaining and expanding its commercial relationships.

[74] It is manifestly not in the plaintiff's economic interest to be consistently breaching the licence granted to it, encroaching on other's markets, breaching statutory conditions or tainting its reputation in the industry. Findings such as those in R. v. Ereiser that DTV "participates in a thinly veiled scheme to circumvent the laws of Canada" put the plaintiff's economic interests at risk. It follows that the defendants' and other's use of the plaintiff's signals in a way that is inimical with the plaintiff's contractual and statutory responsibility creates, in the absence of effective preventative action by the plaintiff, a very serious risk of harm which cannot necessarily be quantified.

[75] I also conclude that the harm to the plaintiff is irreparable, as it would be difficult if not impossible to gauge the ongoing or future effects of exposing the plaintiff to the harm at issue, and damages would therefore be no adequate compensation. As noted in RJR-MacDonald, "irreparable refers to the nature of the harm suffered, rather than its magnitude." It includes "permanent market loss or irrevocable damage to its business reputation."

[76] In this case, the balance of convenience clearly favours the plaintiff and not the defendants, whose interests at stake appear on the materials before me to be proscribed by statute and in violation of the copyright of others, in other words, to be unlawful.

[77] While there is no issue that the defendants had "incriminatory documents or things" within the meaning of the Anton Pillar order in their possession, the defendants contest the existence of evidence of "a real possibility that the defendants may destroy such material before the necessary process can do its work."

[78] The defendants say that Mr. Sandhu has always conducted his business openly and transparently, has deposed to his belief that he was not breaking any laws or acting unlawfully. The defendants point to the fact that nothing has been destroyed or hidden and submit that beyond the fact that the records at issue were on a computer and hence susceptible to destruction or alteration or concealment, there is no evidence of a significant risk that evidence would be destroyed if notice were given.

[79] I conclude that an evidentiary basis exists for a real possibility that the defendants may have destroyed evidence “before the discovery process can do its work. The defendant business by its very nature involves deceit and subterfuge. At its heart is a misrepresentation to the plaintiff that subscriber programs being activated are in the US and that they relate to secondary activations in the same household.

[80] The openness with which the defendants carry on their business and Mr. Sandhu's professed belief in its lawfulness are, while consistent with his claims, also consistent with being a function of his business’s need to advertise openly to gain subscriptions to increase his profits and to therefore present a picture of an open and apparently legitimate business. It does not, in context, provide the basis for an acceptance of the likelihood that if given notice, Mr. Sandhu would not destroy or conceal evidence.

[81] More telling in my view is the fact that when his customers' accounts were shut down in March 2006, Mr. Sandhu, despite being confronted with the fact that DIRECTV did not acquiesce in his interception of their signals in Canada, quickly induced DIRECTV to activate new signals by a further series of misrepresentations, this time about the use of different receivers in office buildings.

[82] On balance, I am satisfied that the evidentiary or substantive requirements for an Anton Pillar order and injunction are met.

[83] The defendants also challenge the procedural integrity of the basis for granting the orders asserting in the case of the injunction there was no urgency and that in the case of both orders, all relevant information was not disclosed. The defendants further assert that the plaintiff had options short of an Anton Pillar order rendering it and the injunction unnecessary. They also assert that the plaintiff’s decision to seek a remedy as draconian as an Anton Pillar order was motivated by an oblique purpose and represents an abuse of process.

[84] In connection with the lack of disclosure, the defendants assert that the plaintiff's failure to disclose that Mr. Sandhu spoke for an hour to a lawyer representing DIRECTV in February 2000 explaining what he was doing and that DIRECTV ran what the defendants describe as a "very profitable operation in recovering goods from end users" in the U.S. undermines the plaintiff's basis for obtaining the ex parte orders because it detracts from the plaintiff's position that it never acquiesced in the defendants' activities and supports the defendant’s contention that this action is brought only to gain access to end users to pursue a profitable operation against them.

[85] Further, the defendants contend that the plaintiff's description of its loss and damage in Mr. Whelan's first affidavit is heavily dependent on loss and damage occasioned by black market activity and in context, leaves the misleading impression that the defendants' activities engaged in that sort of loss and damage, when clearly it does not.

[86] In my view, the defendants' position on these points must fail. That there was communication between Mr. Sandhu and DIRECTV's lawyer in February of 2000 was set out in Mr. Whelan's affidavit of September 2006. Whether Mr. Sandhu explained to the plaintiff's lawyer on that occasion what he was doing in February 2000 or not, there is simply no evidence that there was any sort of acquiescence to whatever he was doing then, much less to what he was doing surreptitiously in the ensuing years.

[87] Similarly while the evidence of the recovery of lost profits in the American black market might be relevant to a claim in that context, it does not address the loss at issue in the present case. Furthermore while there was considerable discussion of black market activity and losses in Mr. Whelan's affidavit, it was ultimately clear that the harm at issue in the September 25th, 2006 application related exclusively to grey market activity and the loss or damage associated to that.

[88] So far as the issue of the urgency of the injunction is concerned, I am satisfied that rule 52(12.1) is broad enough in its scope to encompass the circumstances at bar. In Rule 52(12.1), provision is made for an ex parte motion in circumstances rendering service "impracticable or unnecessary." Given my earlier findings as to the real possibility of destruction or concealment of evidence, there is similarly a basis to conclude that service in the circumstances would be impracticable.

[89] The defendants' submissions regarding the oblique motive of the plaintiff is that the true purpose of the Anton Pillar order is to identify and pursue third parties but not to preserve evidence in connection with the present action. It is the defendants' contention that the presence of the program designed to recover revenues from black market end users in the US is an indication of the real purpose of the plaintiff in seeking the information that it is in the present action.

[90] The defendants say that taking such a tack flies in the face of the purpose of an Anton Pillar order and breaches the spirit of the Supreme Court's guidance in Celanese Canada, supra, which emphasizes at that the purpose of an Anton Pillar order is to preserve evidence not to rush to exploit it.

[91] The defendants rely on the plaintiff's failure to disclose its source of revenues from end user programs in the United States as evidence of its oblique motive and rely on the words of Hoffman J. in Lock International v. Beswick [1989] 1 W.L.R. 1268 (Ch.D.) at page 1281 quoted with approval in Pulse Microsystems Ltd. v. Safesoft Systems Inc. reflex, (1996) 110 Man.R. (2d) 163 as follows:

There must be some proportionality between the perceived threat to the plaintiff's rights and the remedy granted. The fact that there is overwhelming evidence that the defendant has behaved wrongfully in his commercial relationships does not necessarily justify an Anton Pillar order.

[92] As I see it, although it is clear that Anton Pillar orders must be used with considerable restraint in light of their draconian nature and have as their justifying principle the need to preserve evidence, the evidence before me does not support the contention that the plaintiff was acting obliquely in bringing its ex parte application.

[93] On the contrary, the plaintiff quite explicitly disclosed that one of the purposes for which it brought its application was to expand the scope of the present action to include those "up and down the chain" in the wrongful interception of the plaintiff's signals or to bring separate actions against them.

[94] The plaintiff asserts at that such an objective, particularly in cases involving wrongdoing, has readily been countenanced by courts in granting Anton Pillar orders, citing Sony Corp. v. Anand [1981] F.S.R. 398 (Ch.D.) as the primary authority where Browne-Wilkinson J. said as follows:

It is therefore in my judgment established that one of the main purposes of the Anton Pillar order is to enable the plaintiff to get information from the defendants for the very purpose of using such information not against those defendants but against third parties. It therefore seems to me that information obtained from an Anton Pillar order (on the basis that the defendants are being implicated in tortious wrongdoing are bound to give information to other persons involved in that wrongdoing) can be used for the purpose of pursuing claims against third parties implicated in the same willful handling of the same infringing foods.

[95] In my view, given the legal basis for such a position, it could not therefore be said that the plaintiff's purpose was oblique in bringing its application on the basis that it did.

[96] I am alive to the need for proportionality but observe that there is no basis on the evidence before me upon which it could be said that the activities of the defendants or those “up and down the chain” are lawful. This is not a case of a defendant behaving wrongfully in the course of a lawful commercial relationship. Here there is no evidence that any commercial relationship, except one induced by fraud, exists, and there is no evidence of any lawful justification for the defendants' activities or those he is aiding and abetting.

[97] In their submissions that the Anton Pillar order and the injunction are not necessary and should not be sustained, the defendants contend that notwithstanding the plaintiff's obligation to take steps and protect its and other copyright holders' legal rights, that it has three options, the most draconian of which is the Anton Pillar order. The other options involve taking operational steps to shut down the grey marketers or by notifying the authorities of apparent breaches of the Radiocommunication Act.

[98] I do not think the presence of other options militates against the use of the Anton Pillar order or an injunction in the circumstances of this case. The effectiveness of DIRECTV's operational steps against the defendants must be viewed in light of what occurred in March 2006 when DIRECTV shut down the defendants' customers in Canada and the defendant developed a more sophisticated scheme to reactivate cards.

[99] Similarly, while notifying the authorities of apparent grey market activity may absolve DIRECTV of complicity in that activity, the effectiveness of such steps is bound to be conditioned by the willingness or ability of the authorities to pursue prosecutions, the effectiveness of such prosecutions and penalties in ending or abating the activity and the absence of an injunctive power to prevent the activity from continuing.

[100] I do not think it is sound in policy or law to limit a party from pursuing an effective legal remedy only because other less effective remedies are available. I am therefore not satisfied on the evidence before me that the plaintiff's pursuit of the defendants in this action constitutes an abuse of process as maintained by the defendants or that it is unnecessary in the circumstances.

[101] Finally, the defendants submit that the order prohibiting disclosure of the order or its content and the sealing order should be set aside. The defendants submit the orders are in furtherance of what they have sought to characterize as the plaintiff's ulterior purpose in applying for an Anton Pillar order and further handcuffs the defendants in acquiring information to mount a defense to the case at bar.

[102] In my view, there remains some justification for the maintenance of the sealing and non-disclosure order, as the defendants have yet to provide the information ordered that would disclose the identity of those "up and down the chain." In the original order I granted ten days for the sealing order and the non-disclosure order. That order was extended because of the defendants' failure to provide the required information pending hearing of this application.

[103] As this application has now concluded and in light of my reasons, I would expect the required disclosure to be made and thus would order the sealing and non-disclosure order to be extended for a further ten days from the date of this order in keeping with the intent of the original order.

[104] I also order costs to the plaintiff. Counsel have liberty to apply in the event that they are unable to agree as to the appropriate scale.

(Submissions)

[105] THE COURT: I will grant ten days for the extension of the sealing order. I am a little concerned about keeping things under wraps endlessly for obvious reasons, but I will give you or your friend liberty to apply and we will deal with it. I do not want to bring counsel back before the court unnecessarily, but I think there should be a relatively short leash on the sealing order.

“A. F. Cullen, J.”
The Honourable Mr. Justice A.F. Cullen

Defendents lost all arguements. I don't think activating 18 Subs on the same account was a good idea because that surely opens the door to allege Activation Fraud. The Court said the Plaintiffs had a right to file litigation under section 18 of the Canadian Radio Communication Act. The Court basically agreed with the Plaintiffs that the action of the Defendents leads to possible irreparable harm because of the exposure of them getting lawsuits against them as was the case when Wic Premuim Tv filed suit.

The Judge ruled the Anton Piller Order was just in this case to gather evidence which to me means the likely hood of any Judge ruling otherwize is very slim when you consider all the Anton Piller Orders Granted in Canada to various Plaintiffs on previous Satellite claims. The Judge said that the Plaintiffs had the right to get the Anton Piller Order for the purpose of pursuing other third party claims because they were be considered as being unlawful to be included in the "up and down the chain". see paragraph [93]

The Judge also ordered Court costs for the Plaintiffs.

GS2