Does OpenAI (ChatGPT) Have a Presence in Canada? Should it be Subject to Canadian Law?

Based on Common Sense, the Answer Should be “Yes”

Image: Shutterstock

Late last year a consortium of major Canadian media companies (including the Toronto Star, Globe and Mail, CBC-Radio Canada, Canadian Press, Metroland and PostMedia) sued OpenAI, founders and operators of ChatGPT (and Dalle E), for copyright infringement, seeking injunctive relief and damages. OpenAI moved to dismiss the case on jurisdictional grounds. The Ontario Superior Court is now reviewing that question. As the Globe and Mail reports, OpenAI is trying to argue that the Ontario court has no jurisdiction because the company has no physical presence in Canada. It is headquartered in San Francisco and registered in Delaware.

As I commented in an earlier blog posting on this issue, the fact that the US fair use doctrine does not apply in Canada, combined with the closed nature of fair dealing exceptions and the lack of a Text and Data Mining exception in Canadian law, could prove troublesome for OpenAI. However,  OpenAI would rather defend its case in California where it can resort to US “fair use” arguments, as it is doing in its defence against the copyright infringement and trademark dilution lawsuit brought against it by the New York Times. (The NYT case is being heard in the Southern District of New York). While the interpretation of whether fair use applies to unauthorized use of copyrighted materials for AI training is evolving in the US, and the outcome is far from certain, fair use and so-called “transformative use” have no applicability in Canada.

OpenAI claims that none of its corporate entities named in the suit conducts business in Ontario nor has a physical presence there. It also claims that the alleged conduct (web-crawling and copying) overwhelmingly takes place outside Canada. The lawyers for the plaintiffs concede that OpenAI’s servers are outside Canada but instead focus on other aspects of OpenAI’s conduct and presence. They note the websites of the media companies that were (and are) being crawled by OpenAI are hosted in Canada (which is one reason why the NYT suit is being heard in New York, because the content that OpenAI copied is located in New York City). Microsoft, which is a 49% owner of OpenAI, sells OpenAI’s products and services in Canada and its models are “reproduced and hosted” in a Microsoft data centre in Toronto. The suit alleges that the copyrighted content was copied not just once for AI training but is continuously accessed and reproduced through what is known as “Retrieval Augmented Generation” (RAG) whereby (according to the complaint) OpenAI’s models are “provided continuous access to an additional data set (the “RAG Data”), which is continually updated in response to user prompts.”

There is no doubt that OpenAI operates in Canada, offering products to Canadian residents such as ChatGPT subscriptions and accepting payment in Canadian dollars, although it may not be incorporated or have a bricks-and-mortar office. In fact, its student discount offers are pitched specifically as being only for students in the US and Canada. If physical presence in a country is a requirement for the exercise of judicial jurisdiction, it makes me wonder how Elsevier and the American Chemical Society were able to sue Sci-Hub in the US and win substantial damages (which were never paid) given that Sci-Hub had and has no presence in the US. Would Russia or Kazakhstan, which is where its servers are believed to be located, have been the appropriate jurisdictions?

This is no doubt a complex legal question, and we will have to wait to see how the Court rules. In addition to noting the various forms in which OpenAI operates in Canada, the plaintiffs have pointed out that were the Court to surrender jurisdiction, this would amount to giving up the ability to regulate a large part of the digital economy and constitute an affront to Canadian sovereignty, an argument dismissed by OpenAI’s legal team as hyperbolic and sentimental. However—and although this is not based on any legal analysis, which I am not capable of providing– I have a hunch that the sovereignty argument will carry some weight.

In the past, Canadian courts have not shied away from asserting jurisdiction over cases involving Silicon Valley giants, which have been quick to seek transfer of court proceedings to California. I can think of several cases that fit into this category, notably the Equustek case in which the Supreme Court of British Columbia’s decision requiring  Google to de-index certain information from its global search results was upheld by the Supreme Court of Canada after Google had appealed the BC court’s ruling claiming Canada was applying its law extraterritorially. Another was a defamation case in BC where the plaintiff, a resident of both California and British Columbia, sued Twitter in BC for defamation for repeatedly allowing defamatory tweets despite being requested to remove them. Twitter wanted the case moved to California where it could hide behind the notorious Section 230 of the 1996 Communications Decency Act. This legislation has been interpreted by US courts to absolve digital platforms of responsibility for user content they host and disseminate. The BC court refused precisely because under US law the plaintiff would have had no cause of action because of the existence of Section 230. In another case Google tried to invoke the jurisdictional argument, as well as Section 230, in a Quebec defamation case. Google argued the Quebec court had no jurisdiction because its server was located in the US. That argument didn’t fly, nor did Google’s argument that it was protected by Section 230 because of the CUSMA/USMCA trade agreement.

None of these cases is an exact match for the OpenAI case, of course, but I somehow doubt if the Ontario Superior Court is going to let this one go. There have only been a couple of other AI/Copyright cases in Canada along similar lines, CANLII v Caseway AI, where both parties were Canadian entities, and several class action suits brought by authors in British Columbia including a suit against Nvidia by local author J.B. MacKinnon. As far as I am aware, no decision has been reached in any of these suits. New legislation to address unauthorized use of copyrighted content for AI training does not seem to be on the immediate horizon in Parliament so it is left to Canadian courts to establish some guidelines regarding Canadian law in this area. The Toronto Star et al. v OpenAI case would fit this bill perfectly.

© Hugh Stephens, 2025. All Rights Reserved.