American satellite provider DirecTV is seeking damages and a permanent injunction against a Canadian “grey market” reseller in a case that could send a strong message to grey market operators.

“We have an interlocutory injunction and the action is for a permanent injunction and for damages,” Christopher Bredt, a senior partner with Borden Ladner Gervais LLP, representing DirecTV, told The Wire Report in an interview.

“Unless the matter settles, we would pursue [it] to obtain a permanent injunction.”

The grey market consists of Canadian resellers who misrepresent themselves to DirecTV by providing U.S. addresses to get satellite receivers and set-top boxes. The resellers then sell the receivers to customers who can watch DirecTV’s American programming in Canada.

“What they are doing is falsely representing to DirecTV that the receiver is in the United States,” Bredt said.

In July, DirecTV obtained a temporary, or interlocutory injunction from the Ontario Superior Court against Kent Haskell.

The court decision on the injunction, issued July 16, said Haskell operated two storefronts and several websites out of Windsor, Ont., and sold DirecTV subscriptions on the so-called grey market.

Haskell previously worked with Paul Donaldson at a company owned by Haskell called Can-Am Satellites. Their business relationship ended in 2004-2005, the court injunction said.

On Sept. 29, 2008, DirecTV obtained an order against Donaldson to prevent him from “distributing, providing, offering for sale, importing, leasing, installing, operating or possessing any Grey Market Technology and engaging in any activation fraud,” the injunction said.

The injunction cited another interim court order involving Haskell, issued July 2, 2009 by Ontario Superior Court Justice Herman Wilton-Siegel, who said the court needed to determine whether Haskell acted contrary to sections 9(1)(c) and 10(1)(b) of the Radiocommunication Act.

“Mr. Haskell has admitted that he has sold and has for sale DirecTV receivers … The evidence is that Canadian residents use DirecTV receivers by establishing false addresses in the United States to obtain DirecTV programming in contravention of the Radio Communication Act,” Wilton-Siegel wrote in the interim order decision.

Section 9(1)(c) of the act says that no person shall decode an encrypted signal without the permission from the signal’s distributor.

Section 10(1)(b) states that any person who manufactures, leases, sells or installs radio communications equipment against its intended purpose can be subject to fines up to $5,000 and a year in jail. A corporation can be fined up to $25,000.

The lawsuit against Haskell is still before the court. Parties in the case have yet to determine the costs associated with the injunction, and as of Wednesday no hearing date had been set.

David Canton, counsel with Harrison Pensa in London, Ont., said the Ontario Superior Court’s decision to issue an interlocutory injunction against Haskell should send a strong message to grey market operators.

“To the extent that people are still working the grey market industry, it certainly sends a definitive message to them that people will go after them,” Canton said.

To obtain the injunction DirecTV argued that it suffered irreparable harm through grey market activities.

“We have potential liability to programming rights holders in Canada and in the U.S.,” Robert Mercer, a spokesman for DirecTV, told The Wire Report in an interview.

He said DirecTV is licensed to broadcast only its own content in the U.S. and that the company can be held liable by broadcasters and content owners if its programming is made available elsewhere.

In 1997, WIC Western International Communications Ltd., formerly a satellite distributor now owned by Shaw Communications Inc., filed a suit against DirecTV for not going far enough to stop grey market resellers and ensure that its signals could not be received in Canada.

DirecTV argues that grey market activities have incurred costs through enforcement initiatives and lost equipment.

“We’ve spent millions in Canada taking actions, like the [Ontario Superior Court] suit in question, to keep individuals in Canada from illegally receiving our signal,” Mercer said.

DirecTV leases the set-top boxes its customers use to receive satellite programming.

“If the [set-top] boxes are shipped outside of the country, the idea is that the boxes are supposed to be returned at the end of the lease period or when the agreements are ended,” Bredt said.

“That is difficult if not impossible to enforce once the set-top boxes have been exported from the United States up to Canada.”

Daphne Johnston, a lawyer representing Haskell, declined to comment for this story, but the court injunction said Haskell argues there are four legal uses of DirecTV equipment in Canada.

Haskell argues the equipment can be legally used to receive satellite radio, connect with Dish Network programming, use as a “free-to-air satellite,” or record digital video.

DirecTV argues that its equipment cannot be legally used for the first three functions and can only be used as a digital video recorder if a user has a valid subscription to its service.

Sgt. Julie Gagnon, a spokeswoman for the RCMP, could not comment on the scope of the grey market for satellite television in Canada, but told The Wire Report that the police force works closely with telecom providers to “investigate satellite piracy throughout Canada.”

Prior to 2005, DirecTV was largely focused on stopping the black market for satellite television in Canada, under which individuals sold devices allowing Canadians to receive DirecTV signals without paying.

DirecTV does not have a licence to broadcast its signals into Canada, and because the company serves the continental United States, its satellite footprints spill over the border, making it possible for Canadians to receive their programming illegally.

Mercer said the black market was solved by improved encryption for their television signals.

“We were laser-focused on the black market,” Mercer said.

“That was the big problem in Canada and the U.S., a problem that we ultimately solved through technology when we built a bulletproof conditional access card; that is to say that it cannot be hacked, and has not been hacked to date.”

In April 2002, the Supreme Court of Canada ruled that it is illegal for Canadians to decode encrypted satellite signals unless they have the permission of the distributor—which has the rights to transmit the signal.

Bell Canada and Shaw, Canada’s incumbent satellite television providers, declined to comment for this story.

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