A Real and Substantial Connection: Ontario Court Confirms Jurisdiction in AI Copyright Case

The Superior Court of Justice has issued an important decision concerning allegations of infringement asserted against AI companies. The decision may help rights holders. Toronto Star Newspapers Limited v. OpenAI Inc., 2025 ONSC 6217

The plaintiffs, including several Canadian new media companies, sued a number of OpenAI entities, including operating companies and the parent /holding companies of the operating companies. The OpenAI companies were located and served with the statement of claim outside of Ontario.

The defendants moved to set aside the service and to stay or dismiss the action on the basis that the court did not have jurisdiction to entertain the action or that Ontario was not the proper and convenient forum in which to adjudicate the plaintiffs’ claims.

The Statement of Claim

The core claims were for copyright infringement, breach of contract and unjust enrichment arising from web or internet-based activities of the OpenAI entities. These claims arise from the crawling and scraping of web content and data, the training of AI large language models (“LLMs”) that power ChatGPT using that data (including the plaintiffs’ copyrighted content), and the reproduction and use of that copyrighted content for the defendants’ commercial purposes.

Unlike the direct claims mentioned above the claim for unjust infringement was derivative of other claims. The unjust enrichment claim extends beyond the defendants directly implicated in the wrongful conduct, to the for-profit entities that directly and indirectly own them, including the defendants that are the direct and indirect and indirect owners of the operating companies.

Subject Matter Jurisdiction

Subject matter jurisdiction differs from in personam jurisdiction (or jurisdiction simpliciter). Subject-matter jurisdiction is concerned with the court's authority to adjudicate the subject-matter of the dispute.  Unlike the Federal Court of Canada, the Superior Court of Justice always has inherent jurisdiction unless that jurisdiction is ousted. 

The Judge concluded the inherent jurisdiction of the Superior Court of Justice over the claims for copyright infringement, circumvention of TPMs, breach of contract or unjust enrichment have not been ousted by any provision of the Copyright Act nor by any contractual arbitration provision.

Territorial jurisdiction

Territorial jurisdiction, known at common law as jurisdiction simpliciter, is concerned with the connection between the dispute and the court's territorial authority. A Canadian court may only assume territorial jurisdiction over a proceeding where there is a real and substantial connection between the action and the territory over which the court exercises jurisdiction.

Since all the named defendants were served ex juris, the court was being asked to assume jurisdiction, which requires the application of the real and substantial connection test. The court applies a two-step analysis:

First, the plaintiffs must show there is some connection between the jurisdiction and the dispute (this may arise by presumption); and

Second, the defendants may rebut the presumption by showing the connection to Ontario does not point to a real relationship between the dispute and the forum. There is not a “real and substantial connection”.

The assessment of whether a presumptive connecting factor has been established is concerned with the existence of a connection between the jurisdiction and the dispute, but the assessment of whether the presumption has been rebutted is concerned with the strength of that connection.

The presumptive factors in issue were:

a)  the defendant carries on business in the province; 

b) the tort was committed in the province;

c) a contract connected with the dispute was made in the province; and

d) property located in the province relating to the asserted claims 

There must be a “good arguable” case supporting at least one presumptive factor for each defendant, taking account of both the allegations in the statement of claim and the evidence tendered on the motion. The standard for establishing a presumptive factor is low.

For OpenAI OpCo, LLC, OpenAI, Inc and OpenAI, LLC the Court concluded that the business activities of these three entities, carried on variously in the relevant period from 2015 to 2025, when viewed in the context of their business as a whole, was enough to establish a presumptive connection of them carrying on business in Ontario. The court also concluded that for these entities a good arguable case has been made that the Copyright Act breaches were sufficiently connected to Ontario.

The breach of contract claim applies to the defendants identified as having engaged in the crawling and scraping activities in breach of the plaintiffs’ Terms of Use. The Court concluded that the plaintiffs had established a third presumptive connecting factor for the two operating defendants, OpenAI OpCo, LLC and OpenAI, Inc., for breach of the plaintiffs’ Ontario-based contract related to the dispute.

The jurisdiction over foreign entities in the action based on unjust enrichment was derived from the jurisdiction that the court has assumed over their subsidiaries, where the parent companies would directly or indirectly profit from the business carried out and wrongful acts alleged to have been committed by their subsidiaries in Ontario. Where the plaintiffs may ultimately be entitled to restitution from the parent companies for the same causes of action that the court has assumed territorial competence over their subsidiaries, it is appropriate for this court assume territorial competence over the parent companies, OpenAI Holdings, LLC, OAI Corporation and OpenAI Global, LLC.

When the presumptive connecting factors were considered together for the defendants to which they apply in this case, the overall connection is not weak and has not been rebutted. A real and substantial connection to Ontario has been established.

For the remaining four defendants the plaintiff did not show a presumptive connecting factor as it was not shown they were involved in the business operations in issue. Service against these defendants of the Statement of Claim was set aside and the action stayed. The motion was dismissed as it relates to the six other defendants, who were involved in the business operations and their direct and indirect shareholders.

Forum Non Conveniens 

The doctrine of forum non conveniens does not consider whether a court has jurisdiction or should assume jurisdiction. It is a discretionary doctrine that applies only once jurisdiction is properly established. It recognizes that multiple forums may be capable of exercising jurisdiction and permits a court to decline to do so where another forum is clearly more appropriate for the adjudication of the dispute.

The analysis is contextual and fact-specific and is guided by a non-exhaustive list of contextual factors aimed at determining the most appropriate forum. The factors include, among other things:

a)    the comparative convenience and expense for the parties to the proceeding and for their witnesses, in litigating in the court or in any alternative forum;

b)      the law to be applied to issues in the proceeding;

c)      the desirability of avoiding multiplicity of legal proceedings;

d)      the desirability of avoiding conflicting decisions in different courts;

e)      the enforcement of an eventual judgment; and

f)      the fair and efficient working of the Canadian legal system.

The defendants assert that the United States is a more appropriate, suitable and convenient forum than Ontario in which to litigate the pleaded claims for breach of copyright and related matters. The burden of showing the alternative forum of the United States is clearly a more appropriate, suitable and convenient forum is on the defendants.

The Judge said the normal situation is that jurisdiction should be exercised once it is properly assumed. To displace that presumption, the defendants must do more than show this litigation could proceed in the U.S. It was not a matter of flipping a coin and it must shown that a court in the U.S. was in a better position to dispose fairly and efficiently of the litigation. The defendants have not done so. The action should proceed in Ontario.

Comment

The appropriate test to be applied to determine when a court has territorial jurisdiction concerning a claim for copyright infringement has not been finally determined by the Supreme Court of Canada. This decision follows previous decisions of lower courts that have applied the real and substantial connection test. OpenAI, Inc. has appealed the decision.

In addition, the decision illustrates the potential issues concerning jurisdiction in cases alleging copyright infringement against AI companies. For example, this seems to be what motivated Getty Images to withdraw its allegations of infringement against Stability Diffusion and instead assert the claim in an action in the US.

If you have questions, please contact me at jmckeown@Ln.Law

John McKeown

Loopstra Nixon LLP.  

130 Adelaide St W Suite 2800

Toronto, Ontario,

M5H 3P5

Canada

jmckeown@Ln.Law

437.290.5960

This article is of general nature and is not intended to provide specific legal advice as individual situations will differ. Specialist advice should be sought about your specific circumstances. 

A version of this article originally appeared in the Law360 Canada published by LexisNexis Canada Inc.