Canadian Technology & IP Law

SEC comments on corporate disclosures on social media

Stikeman Elliott LLP — Wed, 10 Apr 2013 09:26:30 -0500

Earlier this week, the U.S. Securities and Exchange Commission released a report of its investigation regarding whether Netflix and its CEO, Reed Hastings, violated certain securities regulations prohibiting the selective disclosure of corporate information when Hastings posted a comment on his personal Facebook page regarding the achievement of a corporate milestone.

In doing so, the SEC considered the disclosure of corporate information on social media generally, ultimately finding that its 2008 guidance, which discusses the distribution of information on corporate websites, also applies to corporate disclosures made through social media channels such as Facebook and Twitter. Specifically, the SEC stated that where it is reasonably foreseeable that the recipients (securities professionals and/or shareholders) of such information will trade on the basis of such information, it must be disseminated in a manner reasonably designed to provide broad non-exclusionary distribution to the public. To achieve this, issuers must take sufficient steps to alert investors, the market and the media as to the channels that will be used for the dissemination of material, nonpublic information. As an example, the 2008 guidance encourages periodic reports or press releases to include web site addresses or other information regarding steps investors or the public can take to be in a position to receive important disclosure.

As such, the SEC does not preclude the use of social media sites to distribute material, nonpublic information so long as appropriate notice regarding the use of such sites has been made to investors. To this end, the SEC report cautions that issuers are expected to “rigorously” examine factors indicating whether a particular channel is a “recognized channel of distribution” for communicating with investors. While each case will be fact specific, in most cases (as in the Netflix example) disclosure of material nonpublic information on a personal Facebook page without advance notice is unlikely to qualify as an acceptable method of distribution even if the individual in question has a large number of subscribers or contacts.

In Canada, regulators have not specifically addressed issuer disclosure through social media, however, principles governing selective disclosure are set out in National Policy 51-201 Disclosure Standards. For TSX-listed companies, the TSX has published its own Electronic Communications Disclosure Guidelines. Staff of the Canadian securities administrators have also provided guidance on the use of social media by portfolio managers, noting that firms and registered individuals contemplating the use of social media should consider, among other things, establishing appropriate policies and procedures for the review, supervision, retention and retrieval of materials posted on social media websites.

European Parliament approves legislation on Online Dispute Resolution

Stikeman Elliott LLP — Tue, 02 Apr 2013 10:46:10 -0500

On March 12, 2013, the European Parliament approved legislation that will see the creation of an online dispute resolution platform for use in disputes between E.U. consumers and traders originating from the online purchase of goods and services.

Specifically, the online platform will allow a party to submit a complaint electronically, inform the respondent party about the complaint, and provide the parties with an electronic case management tool. Once the parties are in agreement, the online platform will transmit the complaint to the alternative dispute resolution entity that the parties have agreed to use

Ultimately, the purpose of the legislation is to increase consumer confidence and reduce existing barriers in the digital dimension of the market by providing access to simple, efficient, fast and low-cost methods of resolving disputes. While the legislation aims to address the current lack of mechanisms for dispute resolution in cross-border online transactions, it also applies to domestic online transactions. The online platform is set to become operational by the end of 2015.

A similar initiative was announced on May 7, 2012 in B.C. If enacted, Bill 44, the Civil Resolution Tribunal Act (the Bill), would create a tribunal to provide online dispute resolution services in B.C. for various small claims matters and certain real estate matters. The current reading of the Bill provides for three progressive stages for resolving disputes. The first stage would involve party to party negotiations using online tools. The next stage would involve a case manager, who would attempt to facilitate a resolution. The final stage would be a tribunal hearing which would result in a binding decision.

Similar to the E.U. legislation, the aim of the Bill is to provide accessible, speedy, low-cost and informal dispute resolution services. Whether similar initiatives will be implemented elsewhere in Canada remains to be seen.

Applicants face significant hurdles in registering flavour and scent trademarks in the U.S.

Stikeman Elliott LLP — Tue, 19 Mar 2013 13:04:43 -0500

Justine Whitehead -

In a recent blog post, we noted that the new Bill C-56 would significantly expand the scope of a registrable trade-mark in Canada. If passed, the list of items that could potentially be registered a trade-mark would include “a word, a personal name, a design, a letter, a numeral, a colour, a figurative element, a three-dimensional shape, a hologram, a moving image, a mode of packaging goods, a sound, a scent, a taste, a texture and the positioning of a sign.”

However, the nature of the evidence required to prove registrability is deliberately left vague in the proposed revisions, and a revised s. 32 would allow the Registrar to ask for any evidence deemed necessary to establish that a trade-mark is distinctive at the date of the filing of the application for registration. While Canadian standards would, of course, have to be developed, a recent precedential decision of the United States Patent and Trademark Office’s Trademark Trial and Appeal Board (TTAB) is of interest, as an illustration of the difficulties in proving the requisite acquired distinctiveness to register a scent or flavour trademark.

On February 25, 2013, in its decision in Re Pohl-Boskamp GmbH & Co. KG, the TTAB upheld the Examiner’s initial decisions to reject applications to register “a distinctive flavour of peppermint” and a “peppermint scent” as trademarks for use in association with pharmaceutical formulations of nitroglycerin. The peppermint flavour application was rejected on the grounds that the flavour served a functional purpose. Both applications were rejected on the grounds that the claimed flavour and the claimed scent failed to function as a trademark.

Functionality

U.S. jurisprudence has held that a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article. The reason for refusing trademark protection for functional features is to prevent trademark law from inhibiting legitimate competition by allowing a producer to control a useful product feature.

In this case, the evidence included an issued U.S. patent which claimed that menthol-containing substances (which include peppermint) not only reduced the necessary dosage of nitroglycerin required to be effective, but also reduced the headache and fainting sides effects of the drug. Accordingly, the TTAB determined that peppermint oil could be used as a therapeutic agent.

Despite the fact that the peppermint oil in the applicant’s product was expressly declared to be a “non-medicinal” or “inactive” ingredient, the TTAB rejected the application on the grounds of functionality, reasoning that “to allow applicant the exclusive right to market nitroglycerine formulations having the flavor of peppermint oil would impermissibly prevent the future use of therapeutic peppermint oil by others in applicant’s field.”

Distinctiveness - Failure to Function as a Mark

Each application was also refused on the basis that the flavour and scent did not serve as a trademark. The TTAB confirmed that neither flavours nor scents can be considered inherently distinctive, because each of those (like colour) is generally seen as a characteristic of the relevant goods, rather than as a trademark. Therefore, “a substantial showing of acquired distinctiveness is required to demonstrate that a flavor or scent functions as a mark”.

In considering whether a flavour or scent should be registered as a trademark, the critical question becomes whether the flavor or scent would be perceived as source indicators or merely physical attributes of the relevant product. The evidence required to prove sufficient acquired distinctiveness in relation to scents and flavours is significant, and the TTAB noted that an “applicant’s burden of showing acquired distinctiveness is a heavy one”.

Nitrolingual Pumpspray

In this case, the applicant’s product had been marketed and used in the United States for over two decades, on a “substantially exclusive” basis. However, the applicant was not the only user of a peppermint flavour and scent in association with nitroglycerin pharmaceuticals. Moreover, several other heart-related pharmaceutical products (such as other angina remedies) also used a peppermint flavour and scent.

While the applicant submitted the testimonials of 23 physicians and pharmacists which appeared to support the distinctive nature of the flavour and scent of the applicant’s product, the Board assigned such affidavits little weight because the wording in each declaration was essentially identical, and such statements are less persuasive than those in the declarant’s own words. Moreover, in the TTAB’s view, the declarations stopped short of answering a key question: if the declarant encountered the scent of peppermint in association with a different heart remedy, would he or she associate it with the applicant?

Noting that “consumers are not predisposed to equate either flavour or scent with the source of the product ingested”, the TTAB found that the applicant had not met the heavy burden required to prove acquired distinctiveness, and rejected the scent and flavour trademark applications.

An overview of Bill C-56: Combatting Counterfeit Products Act

Stikeman Elliott LLP — Fri, 08 Mar 2013 09:39:41 -0500

Justine Whitehead -

On March 1, 2013, Bill C-56 was introduced in the House of Commons. The majority of Bill C-56 is directed to amendments to the Copyright Act (CA) and the Trade-marks Act (TMA) to add new tools to fight commercial counterfeiting and piracy activities. An overview of these proposed tools, which include new civil and criminal remedies, and new powers for customs officers in respect of counterfeit and pirated goods, is set out below.

New Criminal Offences

Bill C-56 would expand the criminal provisions of the CA and introduce criminal offenses under the TMA. For the CA, Bill C-56 would make it an offence to possess an infringing copy of a work for the purposes of sale, rental, and/or distribution for the purpose of trade or exhibition in public by way of trade. It would also make it an offence to export (or attempt to export) an infringing copy of a copyrighted work for the purpose of sale or rental. (The CA currently already prohibits import in Canada of any infringing copies of a copyrighted work for sale or rental.)

For the TMA, Bill C-56 introduces a number of offences relating to counterfeit trade-marked goods, including: (i) prohibitions against knowingly selling or distributing counterfeit trade-marked goods (or their labels or packaging) on a commercial scale; (ii) prohibitions against knowingly manufacturing, possessing, importing or exporting counterfeit trade-marked goods (or their labels or packaging) for the purpose of their sale or distribution on a commercial scale; and (iii) prohibitions against knowingly selling or advertising services in association with a third party’s mark (or an essentially similar mark), without the permission of the owner of that mark.

Bill C-56 would also amend the Criminal Code to allow the police to seek judicial authorization to use a wiretap to investigate the new offences under the CA and TMA.

Proposed penalties for conviction on indictment in respect of the new offences are a maximum fine of $1,000,000 and/or imprisonment for a maximum term of five years. Proposed penalties for summary conviction include a maximum fine of $25,000 and/or imprisonment for a maximum term of six months.

New Civil Remedies

Bill C-56 would create new civil causes of action aimed at persons engaging in the sale or distribution of (i) counterfeit trade-marked goods; (ii) packaging and labelling to be used with counterfeit goods; and (iii) infringing copies of copyrighted works.

Importation and Exportation

Bill C-56 would amend the TMA to make it clear that goods cannot be imported or exported if the goods (or their packaging and labelling) bear a trade-mark that is “identical to, or … cannot be distinguished in its essential aspects from”, a registered trade-mark, without the consent of the owner of the registered trademark. However, there are some exceptions to these prohibitions. Grey market goods are expressly excluded, as the provisions do not apply “if the trademark was applied with the consent of the owner of the trademark in the country where it was applied.”

Similar provisions would be added to the CA to make it clear that copies of works cannot be imported or exported if: (i) they were made without the consent of the owner of the copyright in the country where they were made; and (ii) they infringe copyright (or, if the copies weren’t made in Canada, they would infringe copyright had they been made in Canada by the person who made them).

Under the proposed revisions to both the TMA and CA, there are express exemption for goods or copyrighted works imported or exported by individuals, provided that: (i) such goods are in the possession or baggage of the individual; and (ii) the circumstances (including the number of such items) indicate that the goods or copyrighted works are intended only for the personal use of the individual. As well, goods or copyrighted works in customs transit control or customs transhipment control in Canada are not caught by these prohibitions.

Request for Assistance and Border Detention Powers

Bill C-56 would introduce a procedure by which copyright and trade-mark owners could file a “request for assistance” with the Minister of Public Safety in order to help protect their intellectual property rights. While the details of the program are not clear, it appears that this would enable the creation of a database of rights that could be relied upon by customs border officers in the exercise of their new detention powers.

Pursuant to Section 101 of the Customs Act, a border customs officer may detain goods that have been imported or are about to be exported until the officer is satisfied that the goods have been dealt with in accordance with any federal statute relating to import or export of goods. The addition of the express prohibitions against import and export discussed above would allow customs officers to exercise those powers in respect of suspected counterfeit goods and suspected infringing copies. Moreover, Bill C-56 would expressly empower customs officers to provide trade-mark owners and copyright owners with a sample of the goods and any non-identifying information to help the officer determine if such goods are counterfeit or infringing copies.

In addition, if the intellectual property rights holder has filed a request for assistance, the customs officer can provide the owner with a sample of the goods or other information about the goods (including the name and address of the owner, importer, exporter, consignee or manufacturer of the detained goods) that could assist the owner in pursuing a remedy under the CA or TMA. The customs officer would then also have the discretion to allow the rights holder (and others) inspect the detained goods.

Detention power would be limited to 10 working days (or 5 working days if the goods are perishable) after the date that a sample or information is provided to the copyright or trade-mark owner. For non-perishable goods, the trademark or copyright owner could request continued detention for another 10 working days. At the end of these periods, and upon filing evidence that a court proceeding has been initiated with respect to the detained goods, the goods would remain detained until: (i) the court proceeding is finished; (ii) a court order directs the goods to be released; or (iii) the copyright or trade-mark owner consents to the goods no longer being maintained. (The notified copyright or trade-mark owners would be liable to the federal government for storage and handling charges (including costs of destruction) after they first receive a sample or information related to the goods.)

Other Provisions

While the essence of Bill C-56 is clearly directed to counterfeiting and piracy, the legislation also proposes significant amendments to the Trade-marks Act (the TMA) that are unrelated to counterfeiting activities. The most significant of these other changes are highlighted in a previous blog post.

Conclusion

Bill C-56 may face significant criticism, especially from persons who are critical of the Anti-Counterfeiting Trade Agreement to which Canada is a signatory (but which is not yet in force). It remains to be seen whether the draft legislation will change after debate at second reading, and a clause-by-clause review by a committee. We will continue to monitor the progress of this bill, and keep you advised as the bill progresses through the legislative process.

Bill C-56 Tacks on significant amendments to Trade-Marks Act

Stikeman Elliott LLP — Tue, 05 Mar 2013 14:58:35 -0500

Justine Whitehead -

On March 1, 2013, Bill C-56 was introduced in the House of Commons. As might be expected from the short title of the proposed act (Combatting Counterfeit Products Act), the majority of Bill C-56 is directed to amendments to the Copyright Act and the Trade-marks Act to add new civil and criminal remedies to curtail commercial counterfeiting activities. Update: The details of these new provisions are reviewed here.

While the essence of Bill C-56 is clearly directed to counterfeiting, the legislation also proposes significant amendments to the Trade-marks Act (the TMA) that are unrelated to counterfeiting activities. The most significant of these other changes are highlighted below.

Expansion of What Items May Serve as a Trade-Mark

The proposed amendments would significantly expand the scope of a registrable trade-mark. A “trade-mark” would be defined (inter alia) as “a sign or combination of signs that is used by a person for the purpose of distinguishing or so as to distinguish their goods or services from those of others.” The definition of the term “sign” confirms the expansion of items that can serve as trade-marks, including “a word, a personal name, a design, a letter, a numeral, a colour, a figurative element, a three-dimensional shape, a hologram, a moving image, a mode of packaging goods, a sound, a scent, a taste, a texture and the positioning of a sign.” (As a consequence of this expansion, the express provisions regarding distinguishing guises would be deleted from the TMA.)

The nature of the evidence required to prove registrability is deliberately left vague in the proposed revisions, and a revised s. 32 would allow the Registrar to ask for any evidence that the Registrar needs to establish that a trade-mark is distinctive at the date of the filing of the application for registration. Similarly, the proposed revised s. 37.1 would give the Registrar the express right to refuse a trade-mark application because the trade-mark is not distinctive.

Expungement of a Mark that Would Limit Development of an Art or Industry

The proposed amendments would add a new s. 18.1 to permit an application to be made to the Federal Court for expungement of a registered mark, on the grounds that the “registration is likely to unreasonably limit the development of any art or industry”. It will be interesting to review the debate on this provision to get further details on the “mischief” that this provision is meant to address.

Clarifications Regarding Utilitarian Features

The proposed amendments to s. 12(2) of the TMA include an express prohibition against registration of a trade-mark “if, in relation to the goods or services in association with which it is used or proposed to be used, its features are dictated primarily by a utilitarian function”. Furthermore, s. 20 of the TMA would be amended to make it clear that registration of a trade-mark does not prevent a person from using any utilitarian feature embodied in the trade-mark.

Section 45 (Summary Cancellation) Proceedings

Currently, on request of a third party, a s. 45 notice requires the registrant to provide evidence of use of the subject registered trade-mark in association with all of the goods and services in the registration. The proposed amendments to s. 45(1) would provide the Registrar with the option to give notice to the registrant that it must provide evidence of use of the mark in association with only part of the goods or services specified in the registration.

Opposition Proceedings

The proposed amendments would clarify that a counterstatement need only state that the applicant intends to respond to the opposition. The amendments would also appear to require service of written representations at the same time that a party submits such representations to the Registrar in the opposition proceedings (rather than requiring the Registrar to forward such written arguments to the other party).

Associated Marks

The proposed amendments appear to dispense with the ongoing issues related to associated marks. Association is the statutory procedure by which CIPO permits the registration of two or more confusingly similar trade-marks by one owner. It is a precondition of the registration of the marks that they be owned by the same person or entity and remain so thereafter. Associated marks can be assigned or transferred, but must be all be transferred together, at the same time, to the same assignee. CIPO will refuse to record any assignment or other document which, if registered, would have the effect of placing associated marks in the hand of separate owners.
Section 15 of the TMA would be amended to state that “… confusing marks are deemed to be registrable if the applicant is the owner of all of the confusing trade-marks”. The proposed deletion of the Registrar’s obligation to note associated marks, and to ensure that subsequent changes in ownership or owner’s name are made to every mark in a group of associated marks suggests that the Registrar will no longer prohibit such changes.

Changes to the Application Process

Bill C-56 would amend the TMA to allow for a number of changes in the application process, including:

The ability to divide applications (and further sub-divide divisional applications), and then re-merge such divisionals after registration. Each divisional application would be deemed to have the filing date of the original application, and the Registrar would have the power to set regulations to determine the date of registration and renewal for re-merged applications;
The right to file an application for a proposed certification mark, rather than waiting until after such a mark has been in use;
A requirement for applicants seeking to register word marks (or any combination of letters, numerals, punctuation marks, diacritics or typographical symbols), and who do not wish to limit their registration to any particular font, size or colour, to include a statement to the effect that they wish the trade-mark to be registered in standard characters; and
The potential of a one-week extension of time to the six-month priority filing date.

Amendments to Reflect Jurisprudence

A number of the proposed revisions appear to be directed to codifying the scope of Registrar’s powers that have been decided by prior caselaw. For example, decades after s. 7(e) of the TMA was declared ultra vires, one of the proposed amendments would delete s. 7(e) from the TMA. Similarly, the proposed amendments expressly confirm that the Registrar has the right to issue a split decision in an opposition, and the right to refuse an application with respect to one or more of the goods or services specified in it and accept the application with respect to the others.

Section 38 of the TMA would be amended to make it clear that the Registrar does have the power to strike all or part of a Statement of Opposition on the grounds that it is not properly pleaded (or does not set out a ground of opposition in sufficient details to allow an applicant to reply to it). However, the proposed amendments would require that such a motion be made quite soon after receipt of a Statement of Opposition, because the Registrar’s ability to strike all or part of a Statement of Opposition would have to be exercised prior to the filing of an applicant’s counterstatement.

Housekeeping Matters

A number of the proposed amendments to the TMA are directed to better defining the Registrar’s record-keeping obligations. For example, a new s. 29.1 of the TMA would provide the Registrar with the express right to destroy records relating to refused applications, abandoned applications, expunged registrations, inactive official mark registrations, and similar inactive files within 6 years after the date of the final decision that rendered those files inactive. Similarly, section 64 of the TMA is proposed to be amended to provide the Registrar of Trademarks with an express right to keep electronic records.

Section 41 of the TMA is proposed to be amended to provide the Registrar with a new and very helpful right to “correct any error in the entry that is obvious from the documents relating to the registered trade-mark in question that are, at the time of the entry is made, on file in the Registrar’s office”, provided that such correction is made within 6 months after an entry in the Register is made. Similarly, s. 48 of the TMA is proposed to be amended to allow the Registrar to “remove the registration of a transfer of a registered trade-mark on being furnished with evidence satisfactory to him or her that the transfer should not have been registered”.
Currently, the Registrar of Trade-marks takes the position that he or she has no jurisdiction to make such changes, and the only way to correct such errors is by application to Federal Court.

Finally, to reflect a more modern parlance, the TMA would be amended throughout to replace the word “wares” with the word “goods”.

Conclusion

Bill C-56 has a significant road to travel before it passes into law, and the final version of the legislation may well change after debate at second reading, and a clause-by-clause review by a committee. We will continue to monitor the progress of this bill, and keep you advised as the bill progresses through the legislative process.

New privacy bill would require breach notification, allow Commissioner to make orders

Stikeman Elliott LLP — Tue, 05 Mar 2013 09:04:23 -0500

David Elder -

In an apparent attempt to apply pressure to the government to amend the federal private sector privacy law, New Democrat Digital Issues Critic Charmaine Borg recently introduced a private members bill that would introduce mandatory data breach reporting and provide the Privacy Commissioner of Canada with direct enforcement powers.

The government’s own bill to amend the Personal Information Protection and Electronic Documents Act (PIPEDA) was introduced in September of 2011, but Bill C-12, as the bill is known, has not moved forward since that time.

The New Democrat bill, known as C-475, differs from C-12 in several important ways.

First, C-475 would require that organizations report data breaches to the Privacy Commissioner, who would then determine whether the organization would be required to notify affected individuals (although organizations would not be precluded from providing such notice). By contrast, Bill C-12 includes a provision that would require organizations to report data breaches to the Privacy Commissioner, as well as to notify affected individuals in certain circumstances.

Bill C-475 also contemplates what appear to be lower standards for the types of breaches that require reporting, or with respect to which the Privacy Commissioner may require notification of affected individuals, likely resulting in more reports and notifications than under the government bill.

In this regard, Bill C-12 requires organizations to report material breaches of security safeguards involving personal information; Bill C-475 requires organizations to notify the Privacy Commissioner where a reasonable person would conclude that there exists a possible risk of harm to an individual as a result of the breach. With respect to notification of affected individuals, Bill C-12 would require organizations to notify an individual where it is reasonable to conclude that the breach creates a real risk of significant harm to the individual; Bill C-475 would provide that the Privacy Commissioner may require an organization to notify affected individuals to whom there is “an appreciable risk of harm” as a result of the breach.

Bill C-475 would also provide the Privacy Commissioner with new enforcement powers respecting compliance with PIPEDA as a whole, including the ability to issue orders requiring organizations to take corrective action to come into compliance with the law and to publish notices of any such action taken or proposed to be taken. The Bill would also provide the Privacy Commissioner with the ability to seek from the Federal Court penalties of up to $500,000 against organizations that do not comply with orders issued by the Commissioner.

The Bill would also create a private right of action whereby individuals affected by any violation of PIPEDA that was made the subject of a Privacy Commissioner order may seek damages for losses suffered as a result of the non-compliance.

At the same time, the New Democrat bill omits several important business-friendly reforms contained in the government bill, including a clearer and more expansive carve out for business contact information and a prospective business transaction exception that would allow businesses to disclose personal information without consent in the context of certain transactions, including mergers, acquisitions and financing.

Many business concerns remain following revisions to anti-spam regulations

Stikeman Elliott LLP — Mon, 07 Jan 2013 09:26:23 -0500

David Elder -

Much-anticipated revisions to the originally proposed Electronic Commerce Protection Regulations provide some useful clarifications and additional exemptions with respect to Canada’s Anti-Spam Law (CASL), but many concerns remain with respect to the potential over-reach of the not-yet-in-force law and the unnecessary and burdensome financial and administrative obligations that it may impose on legitimate business activity.

In fact, while the revised Regulations do respond to some of the concerns raised with respect to the previously proposed regulations – and indeed, the Act as a whole - the new Regulations may be more notable for what they don’t include than for what they do cover.

In this regard, many of the issues raised and exemptions requested by the business community following the pre-publication of the original proposed Regulations have not been accommodated, including:

Accepting as valid under CASL consents to the receipt of commercial electronic messages that are obtained in compliance with the federal private sector privacy law, the Personal Information Protection and Electronic Documents Act. In the explanatory remarks accompanying the proposed Regulations, the Government explicitly indicates that CASL is intended to create a higher threshold for consent for the receipt of commercial electronic messages.
Allowing Canadian businesses to send, on behalf of foreign organizations, commercial electronic messages to recipients outside of Canada. Concerned with the potential for abuse by spammers, the Government rejected submissions that the lack of an exemption for such activity would put Canadian outsourcing and cloud computing firms at a significant disadvantage with respect to their foreign counterparts.
Allowing manufacturers without a direct relationship with end users of their products (such as where the products are purchased from a retailer) to send commercial electronic messages to those end users. The Government rejected an exemption for manufacturers as too broad, but as noted below, has created new exemptions with respect to sending warranty and recall information.
Reducing the complexity of the requirements for the collection and withdrawal of consent for the receipt of commercial electronic messages sent by as-yet-unknown third parties. The Regulations continue to require organizations collecting such consents on behalf of such third party organizations to engage in detailed tracking of such consents and take responsibility for the actions of such third parties.
Expanding the “existing business relationship” exemption to include legitimate commercial electronic messages sent in the context of additional ongoing business relationships, which do not clearly fall within the narrow definition of the current exemption.

Nevertheless, the revised regulations do provide some clarification of key legislative terms, as well as new exemptions for business activities that were not intended to be within the scope of CASL. Moreover, the Government has indicated that Industry Canada and the CRTC are exploring the use of interpretational guidelines and other guidance material to provide clarity where appropriate.

Virtual Friends

One such clarification is that the revised Regulations amend the previous definition of “personal relationship” so as to correct what many argued was an unduly narrow exemption from the anti-spam requirements for commercial electronic messages sent between individuals.

CASL provides that its core anti-spam provision does not apply to commercial electronic messages that are sent by an individual to another individual with whom they have a “personal or family relationship.” However, in the original regulations proposed by Industry Canada, the term “personal relationship” was defined so as to recognize only those relationships where the individuals concerned had actually met face-to-face within the previous 2 years.

The revised Regulations exempt commercial electronic messages sent between individuals who have had direct, voluntary two-way communications, in circumstances where it would be reasonable to conclude that the relationship is personal. In reaching such a conclusion, all relevant factors are to be considered, including the nature and frequency of such communications, the length of time over which the parties have communicated and whether the parties have met in person. The two-year limitation period has been removed. Recipients of exempted “personal relationship” messages may opt-out of receipt of such messages, in which case the exemption no longer applies.

The exemption may be most relevant for businesses where they may facilitate or encourage customers to send commercial electronic messages to their personal networks, such as through “forward to a friend” features.

B2B Exemptions

One of the chief criticisms of the earlier regulations, and of CASL as a whole, has been that the since the definition of “commercial electronic message” is so broad, the Act could impose unnecessary consent and disclosure requirements on regular business communications that should not be within the scope of the law.

In response, the revised Regulations introduce new exemptions for commercial electronic messages sent within a business, or sent between businesses that are already in a business relationship, where the messages are sent by employees, representatives, contractors or franchisee and the message concerns the organization or the individual recipient’s role, functions or duties within or on behalf of the organization.

Messages in Response

Again, due to the broad definition of “commercial electronic message”, concerns were raised that businesses responding to inquiries could be caught by the anti-spam law. While CASL includes an exemption for individuals contacting an organization to inquire about its business, there was no corresponding exemption with respect to the organization’s response.

Accordingly, the revised regulations include a new exemption for commercial electronic messages that are sent in response to a request, inquiry or complaint, or that is otherwise solicited by the recipient.

Incidentally in Canada

One of the key concerns of many foreign companies was that CASL applies to commercial electronic messages that are either sent from or accessed through a computer system located in Canada. Accordingly, concerns arose about the potential application of the law to commercial electronic messages sent from outside Canada, to recipients who are ordinarily resident outside Canada, but who may access such messages during visits to Canada.

A new provision in the revised Regulations appears to largely satisfy this concern, by exempting such messages, provided that they relate to a product, good, service or organization located or provided outside Canada, and that the sender did not know and could not reasonably be expected to know that the message would be accessed using a computer system located in Canada. However, uncertainties still remain, for example with respect to the treatment of a non-Canadian sender who also makes the product or service in question available through a Canadian subsidiary or affiliate.

Non-Transactional Business Communications

The revised Regulations also include a new provision exempting commercial electronic messages sent for purposes relating to the satisfaction, notification or enforcement of legal or juridical rights and obligations, such as sending warranty or recall information, electronic bank statements, notices of copyright infringement, etc.. Again, such an explicit exemption was considered necessary by some in view of the broad definition of commercial electronic message found in the Act.

Referral Messages

The revised Regulations contain a new exemption for commercial electronic messages sent based on a referral by one or more individuals, where such individuals have an existing business or non-business relationship or a personal or family relationship with the sender and the recipient. The exemption applies only to the first commercial electronic message sent to contact the recipient, and the message must disclose the full name of the referring individual or individuals. Several stakeholders had previously expressed concern that without such an exemption, they could not directly act upon referrals from friends, family and clients without first obtaining consent.

Telecom Service Provider Software

Finally, the revised regulations add two types of telecom service provider (TSP) software to the list of specified computer programs (such as HTML code, Java scripts, cookies, etc.), for which express consent is assumed if the individual’s conduct leads to a reasonable belief that they consent to such an installation. The new exemptions relate to TSP programs to prevent unauthorized or fraudulent use of a service or system, or to update or upgrade systems on their networks.

Next Steps

While passed into law in December 2010, CASL has yet to be proclaimed in force, in part because the Government was awaiting the finalization of two sets of regulations: one to be made by Industry Canada, and one to be made by the CRTC. The Electronic Commerce Protection Regulations (CRTC) were finalized last year, and the CRTC has issued two interpretation bulletins to provide guidance as to how it intends to apply those Regulations.

The proposed revisions to the remaining Electronic Commerce Protection Regulations were officially published for comment on January 5^th,2013, starting CASL on the final leg of its long journey to coming into force. Following a 30 day comment period, it is expected that the Regulations will be finalized, and a date will be announced for the coming into force of the new anti-spam regime.

Most of Copyright Modernization Act provisions now in force

Stikeman Elliott LLP — Wed, 14 Nov 2012 08:45:28 -0500

Alexandra Stockwell -

As we noted in our post on July 3, the Copyright Modernization Act had received royal assent, but would not come into force until an Order-in-Council was issued. This has now happened: on November 7, 2012, most of the new provisions of, and amendments to, the Canadian Copyright Act came into force as a result of the publication in the Canada Gazette of Order SI/2012-85. The Order also specified that certain provisions, which relate to the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty, will come into force when those treaties are ratified by Canada.

A notable exclusion from the Order is the “Notice-and-Notice” regime (the future sections 41.25, 41.26 and 41.27(3) of the Copyright Act), which will only come into force after a consultation process and the establishment of regulations that will be needed to implement the regime. The Canadian “Notice-and-Notice” regime, which differs from the “Notice-and-Take-Down” rules in the United States, will oblige Internet Service Providers (ISPs), after being notified of infringement allegations by a rights holder, to notify the relevant subscriber of the allegations received. ISPs will also be required to retain records that would enable the identification of the subscriber allegedly engaged in the infringing activity for a period of six months (or one year, if infringement proceedings are commenced in respect of the claimed infringement within six months of the initial notice from the rights holder). Once the regulations are ready, the date when the “Notice-and-Notice” provisions come into force will be published in a separate Order-in-Council.

The new provisions that are now in force include the following:

Protection of Digital Rights Management (DRM). Also known as “technical protection measures” or, more commonly as “digital locks”, DRM is built into digital music, DVDs, and other media and technology products to ensure that they are not subject to unauthorized copying. The amendments include anti-circumvention provisions that prohibit the removal or tampering with DRM. The new provisions also prevent the removal of, or tampering with, Rights Management Information, which is used to identify the rights holders of an original work or to outline restrictions on use of the copyrighted work.
Reproduction for private purposes. Provisions have been added to the Copyright Act to allow individual Canadians to make copies of music and other copyrighted material if the original copy is not an infringing copy, the individual legally obtained the original copy other than by borrowing it or renting it, and the individual owns or is authorized to use the medium or device onto which the copy is reproduced (such as a computer, iPod or MP3 player) and as long as a digital lock is not picked in making the copy. The reproduction may only be used for private purposes and cannot be given away, sold or rented without first destroying all reproductions of the original copy. In addition, these provisions do not apply if the reproduction is made onto a medium that is governed by the private copying provisions currently found at Part VIII of the Copyright Act, such as CD-Rs.
Education exemptions. Provisions have been added to the Copyright Act to make it legal for students at schools and higher learning institutions to download copyrighted information for the purpose of study and research. The provisions permit schools to transmit materials used in classrooms to students located off-campus to facilitate learning, as long as the material is restricted to students. In addition, teachers and students are allowed to use copyrighted material in lessons conducted over the Internet. This applies both to teachers and students in a physical classroom and those who may be viewing recordings of the lessons over the Internet at a later time. Teachers can also digitally deliver course content to students, subject to fair compensation to copyright owners.
Time-shifting provisions have been added which finally legitimize the decades long practice of viewers making one recording of communication signals or programs for private purposes. The time-shifting recording must be obtained from a legal source and used only for private purposes. As well, technical protection measures could not be circumvented to make the recording, and the recording cannot be kept “longer than is reasonably necessary in order to listen to or view the program at a more convenient time”.
Statutory damages for non-commercial infringement have been lowered from the previous maximum of $20,000.00 for infringement of each protected work, to a new maximum of $5,000.00 in respect of all infringements involved in the proceedings for all works or other subject-matter. Moreover, if a plaintiff elects statutory damages for non-commercial infringements, it will be barred from collecting statutory damages from that defendant for any other non-commercial infringements occurring before the proceeding began, and no other copyright owner may elect statutory damages against that defendant for non-commercial infringements that were done before the initiation of the proceedings in which statutory damages were elected.
Expanded fair dealing exceptions. Fair dealing, which permits use of a copyrighted work without permission of the copyright owner, has been expanded to include uses for the purposes of education, parody or satire in addition to prior fair use exemptions such as use for research or private study. While procedurally, a defendant is required to prove that his or her dealing with a work has been fair, the Supreme Court of Canada has noted (most recently in Alberta (Minister of Education) v. Canadian Copyright Licensing Agency, which we wrote about here) that a fair dealing exception is a user’s right, and should not be interpreted restrictively.
A new non-commercial “mash-up” exemption, exempting from copyright infringement the use of pre-existing works to create new non-commercial works, defined as “user-generated content”. This exemption is only available if the use of the copyrighted work is done solely for non-commercial purposes and does not have a substantial adverse effect (financial or otherwise) on the exploitation of the existing work (including that the new work isn’t a substitute for the existing one), and provided that the individual making the new work reasonably believes that the source material is not itself infringing copyright and that there is a mention (if it is reasonable in the circumstances) of the sources of the works incorporated in the new work.
Also effective November 7, 2012, engravers, photographers and portraitists will be the default owners of copyright in the engravings, photographs and portraits they create on commission, unless there is an agreement to the contrary. This is the result of the repeal of section 13(2) of the Copyright Act, which provided that a person who commissions an engraving, photograph or portrait is the first owner of copyright of those types of works.

Supreme Court issues clear warning of need to respect the "Patent Bargain"

Stikeman Elliott LLP — Mon, 12 Nov 2012 16:32:38 -0500

Ian P. Goodman -

On Thursday, November 8, 2012, a unanimous Supreme Court of Canada issued a decision with significant implications for those wishing to obtain or enforce Canadian patent rights. Owners of issued patents seeking to enforce such rights should carefully scrutinize the disclosure and claims of their issued patents in light of this decision, and patent applicants should consider this decision when drafting the specifications of new applications.

The case of Teva Canada Ltd. v. Pfizer Canada Inc. arose out of a Patented Medicines (Notice of Compliance) [PMNOC] proceeding in which Novopharm Limited (now, Teva Pharmaceuticals Limited) sought approval from Health Canada to market and sell a generic version of Pfizer’s Viagra-branded sildenafil tablets. To obtain such approval, the decision-maker had to be convinced that Pfizer’s patent (the ‘466 Patent) was invalid. However, Teva was unsuccessful at both the Federal Court of Canada and the Federal Court of Appeal, each of which held that Teva’s allegations of invalidity were not justified.

Teva appealed to the Supreme Court. The primary issue on appeal was whether Pfizer complied with section 27(3) of the Patent Act and properly disclosed its invention in the ‘466 Patent. In considering this issue, the Supreme Court reiterated the importance of a patent applicant respecting the “patent bargain”. The essence of the patent bargain is that in exchange for a time limited monopoly granted to an inventor for a new and useful invention, the inventor discloses this invention to the public so that society can benefit from the inventor’s knowledge. From a societal perspective, the patent bargain exchanges short term inefficiencies (the potential for “monopoly” rents for the patent rights) for long-term gains (the encouragement of efficiencies gained through innovation). However, the bargain cannot be one-sided: adequate disclosure in the specification is a precondition for the granting of a patent.

Pfizer’s ‘446 Patent is directed to compounds for treating erectile dysfunction (ED). The claims are arranged in a cascading structure in which claim 1 is directed to over 260 quintillion compounds (i.e. 260,000,000,000,000,000,000!), claims 2 to 5 directed to gradually fewer compounds, and claims 6 and 7 each directed to a single compound. Most importantly, claim 7 is directed to sildenafil, which is the only active ingredient in Pfizer’s Viagra product.

Section 27(3) of the Patent Act requires that the “specification of an invention must correctly and fully describe the invention and its operation or use as contemplated by the inventor…”. The “specification” includes both the claims of a patent and the disclosure made in the patent.

The Supreme Court affirmed previous decisions that a patent specification must answer two questions: (1) what is the invention; and (2) how does it work? If the patent disclosure answers these questions, the applicant has held up his or her part of the patent bargain. More particularly, the specification must provide sufficient information to enable a person of skill in the art to which the invention relates to be able to use the invention, using only the instructions of the specification.

The Supreme Court was of the view that the lower courts erred in considering the sufficiency of disclosure (and therefore the validity) of a single claim independently of the rest of the specification. As a result, the lower Courts erroneously confused the principle that the claims of a patent define the scope of the exclusive right being sought with the principle that the content of the specification determines whether the disclosure requirements have been met.

The Supreme Court found that Pfizer was aware through testing, as of the filing date of the ‘466 Patent, that only sildenafil was effective in treating ED, and that none of the other compounds were effective in treating ED. Despite this, Pfizer provided no indication in its disclosure as to which one of the preferred compounds was effective in treating ED. The Supreme Court held that by failing to expressly disclose the use of sildenafil to treat ED, Pfizer did not adequately disclose the invention in its specification.

Pfizer had argued that its specification was adequate, because one of the claims in the ‘466 Patent clearly described the use of sildenafil as effective in treating ED. The Supreme Court did acknowledge that a skilled reader would know that “when a patent contains cascading claims, the useful claim will usually be the one at the end concerning an individual compound”. However, this acknowledgement did not assist Pfizer because in the case of the ‘466 Patent, the cascading claim ended with two individually claimed compounds, thereby obscuring the true invention. A person skilled in the art would still have to perform further testing to determine which of the two compounds was actually effective in treating ED. The Supreme Court therefore held that the specification of the ‘466 Patent did not meet the requirements of section 27(3) of the Patent Act.

This case has important repercussions when drafting a patent application. While emphasis is typically placed on the claims because they define the scope of the monopoly, this case shows that identifying the invention in the specification can be equally important, particularly in relation to pharmaceutical patents. The Supreme Court has clearly warned patent holders against “playing games” with the public by not providing a complete disclosure of the invention and therefore not upholding their end of the patent bargain.

Interestingly, the Supreme Court’s remedy was to “invalidate the patent”. Normally in an appeal of a PMNOC proceeding and given the Supreme Court’s findings, the remedy would be to deny Pfizer’s application seeking obtain a prohibition order, thereby permitting the Minister of Health to issue Teva a Notice of Compliance and thus allowing Teva to manufacture and sell sildenafil tablets. The Court may give further directions in this respect.

Crossing the line: Supreme Court of Canada to consider balance between privacy rights and freedom of expression in picket line videotaping case

Stikeman Elliott LLP — Thu, 25 Oct 2012 14:07:42 -0500

David Elder -

In an important constitutional case, the Supreme Court of Canada has granted leave to hear an appeal from a decision that found that the application of privacy law to the videotaping of individuals crossing picket lines infringed the Canadian Charter of Rights and Freedoms.

As we noted in a previous post, the judgment in question considered the activities of a union that had videotaped picketing activity during a strike at an Edmonton casino. Like other Canadian private sector privacy laws, Alberta’s Personal Information Protection Act (PIPA), generally requires the consent of individuals for the collection, use and disclosure of their personal information, including videotaped images of identifiable individuals. The union, which did not obtain such consent, videotaped and photographed the picket lines in order to publicize the images of individuals crossing the lines.

Several of the individuals in question complained to the Information and Privacy Commissioner for Alberta. An adjudicator for the Commissioner found that in failing to obtain the consent of the individuals being videotaped, the union had violated PIPA.

The Alberta Court of Appeal found that the application of PIPA to the union’s activity in the context of a labour dispute violated the right of the union to freedom of expression guaranteed by s. 2(b) of the Charter. The Court accordingly declared that the application of PIPA to the activities of the union was unconstitutional.

While the facts under appeal relate only to the application of Alberta’s private sector privacy law, the decision on the appeal may also affect the application of substantially similar laws in British Columbia and Québec, as well as the federal law, the Personal Information Protection and Electronic Documents Act.

The outcome of the appeal to the Supreme Court may have important implications well beyond the legality of surveillance activity in connection with picket lines, as it explores the intersection between privacy law and other conflicting rights, potentially calling into question the adequacy of the typically narrow exceptions to the consent requirement in privacy statutes. In considering the balance between consent requirements and free expression, the appeal may also have important implications for the application of Canada’s Anti-Spam Law (not yet in force), which includes restrictive consent requirements with respect to the sending of commercial electronic messages.

See Information and Privacy Commissioner et al. v. United Food and Commercial Workers, Local 401 et al. (Alta.) (Civil) (By Leave) (34890)

One more province (partially) exempt from PIPEDA

Stikeman Elliott LLP — Wed, 24 Oct 2012 12:23:58 -0500

The Federal government has expanded the list of organizations that are exempt from the Personal Information Protection and Electronic Documents Act (PIPEDA) on the basis that similar provincial legislation sufficiently protects the relevant personal information. As of October 10, 2012, health care organizations subject to Newfoundland and Labrador’s Personal Health Information Act (PHIA) are exempt from PIPEDA because provincial legislation is “substantially similar”.

Newfoundland and Labrador is now the sixth province to be granted an exemption from some or all of Part I of PIPEDA, and the third to enact exempted personal health information legislation.

Under s. 26(2)(b) of PIPEDA, organizations or activities subject to provincial privacy legislation that is substantially similar to Part I of PIPEDA can be exempted from PIPEDA for the collection, use or disclosure of personal information within that province. This ensures that organizations will not have to comply with two sets of rules that provide the same or greater protection for personal information.

It is important to note that exemptions from PIPEDA are granted only to relevant organizations for their activities within the relevant province. PIPEDA continues to apply to personal information collected, used or disclosed by federal works, undertakings and businesses, as well as to personal information collected, used or disclosed across provincial or Canadian borders in the course of business. The Newfoundland and Labrador exemption is therefore limited in scope as PIPEDA continues to apply to health care organizations’ collection, use and disclosure of personal health information from/into other provinces.

Newfoundland and Labrador’s PHIA has been in force since April 1, 2011. The legislation provides rules for organizations that collect, use and disclose health information that (i) could identify an individual, and (ii) relates to delivering or administering health care. Such organizations include health care providers and operators, provincial agencies involved in health care and health information, ambulance services, pharmacies and others. PHIA provides that consent from the individual must be obtained to collect, use and disclose health information except in specific circumstances. PHIA also provides that applicable organizations must take reasonable steps to secure health information and prevent its disclosure, failing which a fine of not more than $10,000 or imprisonment for a term not exceeding 6 months is possible. However, an organization will not be liable if they demonstrate that reasonable steps were taken to prevent the contravention.

Comprehensive personal information legislation in three provinces has already been declared to be substantially similar to PIPEDA: the Personal Information Protection Act, in British Columbia, the Personal Information Protection Act in Alberta, and An Act respecting the protection of personal information in the private sector in Quebec. Personal health information legislation of two other provinces, in addition to Newfoundland and Labrador, has been declared substantially similar: the Personal Health Information Privacy and Access Act in New Brunswick and the Personal Health Information Protection Act in Ontario. In light of this most recent exemption, it will be interesting to see if similar exemptions are granted in other provinces, leading to fewer organizations which are subject to PIPEDA.

Supreme Court of Canada says reasonable expectation of privacy for workers continues on employer-supplied laptops

Stikeman Elliott LLP — Mon, 22 Oct 2012 08:35:24 -0500

David Elder -

Employees in Canada retain some reasonable expectation of privacy in personal data stored on an employer-supplied laptop, even where workplace policies and practices provide that all information stored or generated on such devices is the property of the employer, says the Supreme Court of Canada. However, the implications of this criminal law case remain unclear for private sector employers.

In its judgement in R. v. Cole, on appeal from a decision of the Ontario Court of Appeal, the Court considered the case of an Ontario high-school teacher, on whose school board-supplied laptop a school technician found nude images of a student. The technician copied the photos in question onto a disk for the school’s principal, who seized the laptop and informed police, who took possession of the laptop and disks, then examined their contents. The police did not obtain a warrant before seizing the equipment or examining the contents.

For employers, it is important to note that the real focus of the decision is on criminal law: the guarantee in the Canadian Charter of Rights and Freedoms against unreasonable search and seizure and the failure of police to obtain judicial authorization before accessing the laptop in question -- not on the rights or powers of private sector employers to audit employee use of company equipment. In fact, the majority decision explicitly notes that it leaves “for another day the finer points of an employer’s right to monitor computers issued to employees.”

However, notwithstanding this Charter focus, the decision may nonetheless provide important guidance to private sector employers as well.

In its judgement, the Supreme Court drew an important distinction between the search and seizure of the laptop by school officials, and its subsequent search and seizure by police. The Court found that school officials had a statutory duty to maintain a safe school environment, and therefore, by necessary implication, a reasonable power to seize and search a board-issued laptop. However, while it found that the school was legally entitled to inform the police of its discovery, this entitlement, and the lawful authority of the employer to seize the device, did not extend to provide authorization to the police to examine the contents of the laptop – an act that is prima facie unreasonable without prior judicial authorization.

By analogy, private sector employers would also have clear duties to maintain safe, non-discriminatory workplaces, and to protect the interests of their workforce and shareholders generally – and may therefore also have reasonable powers of search and seizure to protect these interests, as well as the legal authority to advise law enforcement authorities of employee device usage that may be in breach of law. However, language in the ruling suggests that such authority by employers may extend only to content and behaviour that is reasonably connected to these objectives; not necessarily to all personal data that may be contained on an employer supplied device or network.

The case also underlines the importance of employers having clear, documented polices for the use of workplace computers and networks, particularly if employees are permitted some personal use, as well as communications and compliance programs to regularly remind employees of these policies. For the purposes of a Charter analysis, the Supreme Court found that such policies and practices served to diminish, but not eliminate, the reasonable expectation of privacy that an employee would otherwise have in personal content stored on an employer-supplied computer. From the perspective of Canadian private sector privacy laws, such policies help to establish the requisite knowledge and consent of employees to the collection, use and disclosure of their personal information.

Finally, although the Court stresses that device ownership is not a determining factor in assessing the reasonable expectation of privacy that an employee may have on stored personal data, the Court’s decision may nevertheless have important implications for the increasing trend toward “Bring Your Own Device”, whereby employers allow employees to use their own devices for work purposes and to access employer networks. If employees retain even a diminished expectation of privacy in personal data stored on an employer-supplied device, employees who own the devices they use for work purposes might enjoy an even higher expectation of privacy in such stored information.

CRTC guidance on check-boxes for e-marketing likely to tick off business community

Stikeman Elliott LLP — Fri, 12 Oct 2012 08:26:50 -0500

David Elder -

Although the date on which Canada’s Anti-Spam Legislation (CASL) may come into force is uncertain, the CRTC has issued two bulletins that provide guidance as to how to comply with the new law, once proclaimed in force.

But while some of the new guidance is helpful, other provisions will likely create significant operational concerns for businesses.

The Commission is the body charged with oversight and enforcement of most provisions of the new law, including the core provisions respecting commercial electronic messages (CEMs), alteration of transmission data and the installation of computer programs. In addition, the CRTC has the power to make regulations under the Act with respect to certain matters.

As we noted previously, the CRTC registered its Electronic Commerce Protection Regulations (CRTC) in March of 2012, providing additional clarification of these new regulations in a subsequent Regulatory Policy.

The first of the new Compliance and Enforcement Bulletins provides further, and in some cases helpful, guidance on the interpretation of these Regulations, such as providing details on acceptable unsubscribe mechanisms for each of email and SMS messages, including visual mock-ups of acceptable approaches.

However, the Bulletin also indicates that the Commission considers that, where included in general terms and conditions of use or sale of a product or service, requests to send commercial electronic messages, alter transmission data or download computer programs must be obtained through separate positive affirmations of the user, such as the proactive checking of a tick-box to signify consent to each of these actions, in addition to the acceptance of other contractual terms or an organization’s privacy policy.

Most problematically, in a second Compliance and Enforcement Bulletin, the CRTC seems to be ruling out default settings that favour consent, even where the user can uncheck a box to exercise their choice (a process that the Commission refers to as “toggling”) and where the user does provide a positive affirmation to a set of terms or an agreement. The following example, included in the Bulletin, shows that even where the pre-checked box and related consent is featured prominently, and is adjacent to a button that the user must pressed to signify agreement to a contract, the CRTC will not consider this to be valid consent to the receipt of CEMs under the anti-spam law.

Another area of likely concern for businesses relates to CRTC guidelines respecting the collection of oral consent, a form of consent which is explicitly authorized by the Electronic Commerce Protection Regulations (CRTC). The Bulletin suggests that in order to be able to discharge the onus of proving that it obtained oral consent, a business would have to have that consent verified by an independent third party or retain a complete and unedited audio recording of the consent.

We would note that, while these methods may work where consent is collected by telephone, through a call centre, they would create significant operational problems where consent is collected during a face-to-face interaction, such as might commonly occur at point of sale.

While the Bulletins do not have the force of law, they do provide a clear indication of how the CRTC will interpret the law and regulations that is charged to enforce.

High Court stands behind victims of online bullying

Stikeman Elliott LLP — Wed, 10 Oct 2012 09:52:58 -0500

Anti-bullying advocates will applaud a recent Supreme Court of Canada decision that paves the way to give young victims of online bullying stronger legal rights. The case of A.B. v Bragg Communications Inc. is notable as it directly pits society’s interest in the protection of children from cyberbullying against freedom of the press and the open court principle.

The facts of the case are straightforward. A 15-year old Nova Scotia girl, identified only as A.B., discovered that someone had created a phony Facebook profile using her name and picture. The picture was accompanied by some unwelcomed commentary about the girl’s appearance along with sexually explicit references. A.B. applied to a Nova Scotia court for an order requiring Eastlink, an internet service provider, to disclose the identity of the person(s) standing behind the IP address used to publish the phony Facebook profile. In order to protect her privacy, A.B. also asked the court for permission to make her application anonymously and for a publication ban on the contents of the fake Facebook profile. Her request to proceed anonymously and under a publication ban were denied by the trial judge and the Court of Appeal but those decisions were partially overturned in this case by the Supreme Court of Canada.

In reaching its decision to allow A.B. to proceed both anonymously and under partial publication ban, the Supreme Court carefully considered the impact such a decision would have on the open court principle—the idea that court proceedings should be open and accessible to the media and the public. While it was observed that this principle is a “hallmark of a democratic society” and is “inextricably tied to freedom of expression,” the Court held that the privacy and protection of children from cyberbullying must ultimately prevail because the serious harm in failing to protect young victims of bullying through anonymity outweighs the minimal harm to press freedom.

The Court’s conclusion on this point was buttressed by a report on bullying and cyberbullying, which noted that “The immediacy and broad reach of modern electronic technology has made bullying easier, faster, more prevalent, and crueller than ever before.” Equally unsettling for the Court was the fact that, without anonymity, children might shy away from pursuing responsive legal action out of embarrassment or fear of retaliation. Finally, the Court noted that a victim’s identity constituted only a “sliver of information” and that any restriction on freedom of the press and the open court principle was thus “minimal”. For these reasons, The Court found that A.B. could proceed anonymously and with a publication ban covering the identity-revealing content of the phony Facebook profile.

This case demonstrates that freedom of the press and the open court principle are not absolute rights and that the privacy and protection of children from cyberbullying will prevail over press freedom in cases such as this one.

Leading websites in Canada found to leak personal information

Stikeman Elliott LLP — Wed, 03 Oct 2012 08:32:12 -0500

Research by the Office of the Privacy Commissioner of Canada found that leading websites in Canada are providing registered users’ personal information to third-party websites without their users’ knowledge or consent. The third-party recipients include advertising, marketing, social networking and web analytics websites.

The study found that one out of four websites in the sample regularly disclosed its users’ personal information to third-parties. According to the Privacy Commissioner, the findings raise significant questions about compliance with privacy laws in the online world.

Ontario's Bill 96 proposes amendments to the Electronic Commerce Act directed at using electronic signatures in real estate transactions

Stikeman Elliott LLP — Wed, 22 Aug 2012 10:24:00 -0500

On May 17, 2012, Bill 96, An Act to amend the Electronic Commerce Act, 2000, was introduced to amend Ontario’s Electronic Commerce Act (Act) with respect to real estate transactions. Currently in the First Reading stage, the Bill:

removes the current exclusions from the application of the Act:
1. documents of title; and
2. land transfer documents - “documents, including agreements of purchase and sale, that create or transfer interests in land and require registration to be effective against third parties”; and
requires documents related to real estate transactions to be subject to the reliability requirements for electronic signatures pursuant to s.11(3) of the Act

It's not over yet - Patent lapse due to clerical error may yet be saved

Stikeman Elliott LLP — Tue, 31 Jul 2012 09:34:32 -0500

On July 27, 2012, the Federal Court of Canada - for the second time - quashed a decision of the Commissioner of Patents to refuse to correct a clerical error relating to Repligen Corporation’s Canadian Patent # 1,341,486.

In 2008, Repligen’s patent lapsed due to the inadvertent non-payment of its maintenance fees. Although the fees were sent to the Patent Office under Repligen’s name, they were sent with the wrong patent number. When Repligen’s new patent agents caught the mistake, they requested a correction under section 8 of the Patent Act. Section 8 gives the Commissioner the discretion to correct clerical errors in “any instrument of record in the Patent Office”. Although the Commissioner acknowledged that the error was clerical in nature, she refused to correct it. In 2010, Repligen succeeded in an application for judicial review of the Commissioner’s decision but their request for correction was again refused upon redetermination by the Patent Office.

In the present decision, the Federal Court found that the Commissioner erred by focussing on both Repligen’s lack of due diligence (in failing to detect the error) and on the possibility of prejudice to Rolls-Royce (owner of the patent belonging to the “wrong” number), without balancing these considerations against the impact on Repligen of the loss of the patent. The central issue should rather have been that Repligen intended to maintain its patent rights and continued to pay its fees (despite those fees being misdirected). The Court found that the Commissioner’s exercise of discretion should reasonably reflect the interests of both Repligen and Rolls-Royce, where both attempted to comply with maintenance fee provisions, and should be in keeping with the remedial nature of section 8 of the Patent Act. The matter has again been sent to the Patent Office for redetermination.

For more information, see Repligen Corporation v. Canada (Attorney General)

Previews of musical works do not infringe copyright

Stikeman Elliott LLP — Fri, 13 Jul 2012 17:40:36 -0500

As we've discussed in a number of recent blog posts, the Supreme Court of Canada this week released a number of major copyright-related decisions. In one of these cases, Society of Composers, Authors and Music Publishers of Canada v. Bell Canada (SOCAN), the Supreme Court considered whether there would be a tariff for the communication of previews of musical works over the internet.

Online music previews are short extracts of musical works and assist a consumer in deciding musical purchases. The Copyright Board concluded that those who make previews available, and the users that listen to previews, were entitled to avail themselves of the fair dealing exception under section 29 of the Copyright Act, as listening to the previews constituted research of a purchasing decision (see our previous post). The Federal Court of Appeal upheld the Copyright Board’s decision and SOCAN sought leave to appeal to the Supreme Court of Canada.

In upholding the decisions below, the Supreme Court concluded that the previews constituted fair dealing, applying the test articulated by the Court in CCH Canadian Ltd v. Law Society of Canada (CCH).

In applying the first step of the test and determining whether the previews are provided for the purpose of “research”, the Court rejected arguments limiting the definition of “research” and affirmed that the term be given a “large and liberal interpretation”. Whether the dealing constitutes “research” should be analyzed from the perspective of the user or consumer rather than the online service provider since it is the consumer who uses the preview for the purpose of conducting research to identify which musical work to purchase. As a result, the Court concluded that the previews were provided for the purposes of research.

The second step of the test required determining whether the use of the previews was “fair” in accordance with the six CCH factors: (i) the purpose, (ii) character and (iii) amount of the dealing, (iv) the existence of any alternatives to the dealing, (v) the nature of the work, and (vi) the effect of the dealing on the work. The Court concluded that: (i) the main purpose to provide previews was to facilitate the consumer’s research purposes; (ii) the previews were streamed and not downloaded, after listening, the preview was automatically deleted from the user’s computer, and copies could not be duplicated or further disseminated; (iii) regarding the quantity, the Court confirmed the “amount” meant the “quantity of the work taken”, the proportion of the excerpt used in relation to the whole work; (iv) previews were found to be reasonably necessary to help consumers research what to purchase since there were no other reasonable alternatives that could effectively preview the musical work; (v) previews were also necessary in disseminating the work because dissemination required a consumer to be able to locate and identify a work he or she wanted to buy; (vi) since the previews served to increase the sale of the work, they could not be said to be in competition with it, and thus the dealing did not adversely affect the work.

Performers and makers of film soundtracks not entitled to broadcast royalties

Stikeman Elliott LLP — Fri, 13 Jul 2012 16:45:20 -0500

In a ruling issued July 12, 2012, the Supreme Court upheld the decisions of the Federal Court of Appeal and the Copyright Board in Re: Sound v. Motion Picture Theatre Associations of Canada, concluding that performers and makers of sound recordings are not entitled to royalties for the broadcast of their recordings in film or on television as part of a movie soundtrack.

Under section 19 of the Copyright Act, performers and makers of sound recordings are entitled to remuneration when their recordings are performed or telecommunicated to the public. However, the section 2 definition of “sound recording” excludes a “soundtrack of a cinematographic work where it accompanies the cinematographic work.” “Soundtrack” is not defined, but the appellants had argued that it means the whole aggregate of sounds accompanying the film, and not the individual pre-existing sound recordings incorporated into the soundtrack. They contended, therefore, that royalties should be collected when those recordings are broadcast as part of a film’s soundtrack.

In its analysis, the Court found that the ordinary meaning of “soundtrack” includes pre-existing sound recordings. These recordings, then, would be captured within the section 2 exclusion, absent a clear contrary expression of intent by Parliament. The Court also noted that this interpretation is supported by the legislative history of the Act, particularly comments made at the Standing Committee on Canadian Heritage.

The Court rejected the appellants’ arguments that the Copyright Board’s decision is incompatible with Canada’s obligations under the Rome Convention, pointing out that the Rome Convention contemplates only protection of “exclusively aural fixation of sounds.” The Court also discounted the precedential value of Australian and U.K. jurisprudence because of significant differences in wording between Canadian and foreign copyright laws.

Supreme Court clarifies scope of fair dealing

Stikeman Elliott LLP — Fri, 13 Jul 2012 12:52:41 -0500

On July 12, 2012, the Supreme Court of Canada clarified the scope of the “fair dealing” exception to copyright infringement, found in section 29 of the Copyright Act (the Act), which allows copies to be made for research, private study, criticism and review.

Facts and Judicial History

As stated in a previous blog post, the case of Alberta (Education) v Canadian Copyright Licensing Agency surrounds the contention over whether elementary and secondary schools can claim the benefit of “fair dealing” exception for copies of works made at the teacher’s initiative for the student’s use.

The Copyright Board (the Board) distinguished between copies made by the teacher at the request of a student and copies made by the teacher without prior request from a student. It concluded that copies made by teachers for student use were made for the allowable purpose of “research or private study”, but found, applying the CCH fairness factors articulated in CCH Canadian Ltd v Law Society of Upper Canada, that the copies did not constitute fair dealing and were therefore subject to a royalty. The Federal Court of Appeal upheld the Board’s conclusion.

The Supreme Court

The decision of the Court hinged on its interpretation of the two-part test for fair dealing, articulated in CCH. There was no dispute on whether the first step was met; therefore, the Court reviewed the Board’s analysis of the second step of the test, namely whether the copies were “fair” according to the factors set out in CCH. In a 5-to-4 split decision, the majority determined that the Board’s finding of unfairness was based on a misapplication of the CCH factors and therefore, its outcome was unreasonable. The CCH factors underlying what is fair will be examined in turn below.

Purpose of the Dealing

The Court continues to favor user’s rights in fair dealing issues as evidenced in its analysis of the “purpose of the dealing” factor. Referencing CCH, the Court concluded that photocopies made by a teacher and provided to primary and secondary students are an essential element in the research and private study undertaken by those students. The Court felt that the Board’s distinction between copies made by the teacher at the request of a student and copies made by the teacher without a prior request from a student drives an artificial wedge into the unified purpose of research and private study. The Court noted that the copier’s purpose will be relevant to the fairness analysis if the copier “hides behind the shield of the user’s allowable purpose” in order to engage in a separate purpose – such as a commercial one (para 22). In this case, the Court held that there was no separate purpose on the part of the teachers.

Amount of the Dealing and Character of the Dealing

The Court emphasized that assessing fair dealing and the amount of the work being copied is not a quantitative assessment based on aggregate use, but rather an examination of the proportion between the excerpted copy and the entire work. The quantification of dissemination should be assessed under the “character of the dealing” factor.

Alternatives to the Dealing

The Court cited CCH in that “a dealing may be found to be less fair if there is a non-copyrighted equivalent of the work that could have been used, or if the dealing was not reasonably necessary to achieve the ultimate purpose” (para 57). It concluded that buying books for each student is not a realistic alternative to teachers copying short excerpts of the work.

Effect of the Dealing on the Work

As for the “effect of the dealing on the work” factor, the Court concluded that there was no evidence to link photocopying short excerpts with a decline in textbook sales and therefore the Board’s analysis was unreasonable.