Ontario Court Finds No Liability for Infringement by Nortel in Software Sale

On April 26, 2016, in Re Nortel Networks Corporation (2016 ONSC 2732), the Ontario Superior Court of Justice granted Nortel’s summary judgment motion and found Nortel not liable for copyright infringement in relation to the sale of SNMP’s software under the Companies’ Creditors Arrangement Act (CCAA).

SNMP had licensed Nortel certain software pursuant to an agreement under which Nortel was prohibited from using or selling SNMP’s software (including source code) without its permission. Subsequent to Nortel’s creditors’ arrangement filing under the CCAA, SNMP made a post-filing claim against Nortel alleging, among other things, copyright infringement of its software. Nortel brought this summary judgment motion.

In this motion, Nortel argued that it was not liable for breach of copyright because (i) the sales of software were authorized by Court order pursuant to the CCAA and (ii) SNMP had not established that it had suffered any damages or that Nortel earned any profits.

The Court rejected Nortel’s first argument on the grounds that under the CCAA, Nortel’s sale of assets only included assets owned by Nortel and therefore the Court’s order of an asset sale could not include the sale of SNMP’s software. To address Nortel’s second argument, the Court framed the issue as whether there was a causal nexus between the receipt of revenue by Nortel and the infringement. Under section 35(2) of the Copyright Act, the onus was on SNMP to prove profits earned by Nortel from the sale of SNMP’s software. The Court found that SNMP failed to discharge its burden, thereby resulting in summary judgment in favour of Nortel.