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  • TRADEMARKS IN CANADA: The Federal Court clarifies the concept of “bad faith”

    In the decision Beijing Judian Restaurant Co. Ltd. v. Wei Meng, 2022 FC 743, rendered by the Honourable Angela Furlanetto on May 18, 2022, the Federal Court clarified what constitutes bad faith in trademark law. Prior to the decision, the concept of bad faith in relation to trademarks was interpreted rather cautiously in Canadian jurisprudence. Background Beijing Judian Restaurant Co. Ltd. (the “Applicant”) petitioned the Court to invalidate the registration of Respondent Wei Meng (the “Respondent”) for the trademark depicted below (the “Respondent’s Mark”), on the grounds that the registration was obtained in bad faith, and to strike the trademark from the Canadian Register of Trademarks, in accordance with subsection 57(1) and paragraph 18(1)(e) of the Trademarks Act (the “Act”). In support of its application, the Applicant filed two affidavits of its representatives, which set out the facts below. The Respondent did not cross-examine the Applicant on the affidavits, file any evidence, or appear at the hearing. The following facts are therefore undisputed. The facts Since 2005, the Applicant has been running a chain of restaurants in China and using, in connection with its restaurants, the mark below, as well as each of the components of this mark, alone or in combination (the “JU DIAN Marks”). The JU DIAN Marks are highly visible in China. They are featured in numerous advertisements promoting the Applicant’s restaurants and the JU DIAN Marks. The JU DIAN Marks and the Applicant’s chain of restaurants are therefore well known in that country. Moreover, in 2011 and 2013, respectively, the Applicant began promoting its restaurants in association with the JU DIAN Marks on the WEIBO and WECHAT platforms in an effort to target the Chinese population in and outside China. In 2015, the Applicant considered the possibility of bringing its chain of restaurants to Canada. The Applicant decided to open its first restaurants in Canada in the Vancouver and Toronto regions, as these have a large Chinese population that would likely be familiar with the Applicant’s chain of restaurants. The Applicant opened restaurants in Vancouver and Toronto in 2018, and a restaurant in Richmond, British Columbia, in 2019. The Applicant was however unaware that the Respondent had applied to register the Respondent’s Mark in Canada a few months earlier, on June 27, 2017, based on proposed use in association with restaurant services, among others. It appears that, during the same period, the Respondent had also applied to register in Canada several marks belonging to other Chinese restaurant chains. In April 2019, the Respondent visited the Applicant’s Vancouver restaurant and accused the Applicant of stealing his mark. A series of meetings and discussions between the parties ensued, during which the Respondent demanded that the Applicant pay him the sum of $1,500,000 to use the Respondent’s Mark without acquiring its ownership, and threatened to contact the Canada Revenue Agency if the Applicant did not cease using the mark. The Applicant refused to pay the Respondent any sum whatsoever and did not yield to his threats. In the meantime, the Respondent’s Mark was registered in Canada. In June 2019, the Applicant learned of an advertisement that the Respondent had posted on a British Columbia website. The advertisement was for the sale of the registration of the Respondent’s Mark. The Applicant contacted the Respondent anonymously to obtain more information on the offer. The Respondent offered the Applicant a trademark license at a cost of $100,000 per year, justifying the price by stating that the mark was already well known in China with the Applicant’s restaurants. The Applicant then sent the Respondent a formal notice demanding that he cease using the Applicant’s mark and abandon its registration in Canada. The Respondent refused to comply. The Applicant thus filed an application for invalidation and expungement of the registration. The law Although paragraph 18(1)(e) of the Act provides that a registration may be invalidated if the application for registration was filed in bad faith, the Federal Court noted in its decision that the Act contains no definition of the term “bad faith.” It pointed out that, because paragraph 18(1)(e) of the Act is relatively new, very little Canadian jurisprudence has examined what constitutes bad faith in trademark matters. In its decision, the Federal Court drew on various sources to determine whether the registration of the Respondent’s Mark could be invalidated on the basis of bad faith. First, the Court considered the observations of the Parliament of Canada regarding the adoption of the amendments to the Act, which state that: The amendments aim, notably, to hinder the registration of a trademark for the sole purpose of extracting value from preventing others from using it. The amendments would prevent the abusive use of the trademark regime, such as by applying for registration with the sole intention of seeking remuneration from the legitimate owner of a trademark. Second, the Court analyzed certain Canadian decisions rendered prior to the adoption of paragraph 18(1)(e) of the Act in matters of bad faith. It noted that Canadian jurisprudence had already invalidated trademark registrations on the basis of bad faith where the applicant had filed a series of applications for registration in Canada for well-known trademarks. Lastly, the Court reviewed decisions rendered in Europe and the United Kingdom. It concluded that in these jurisdictions, filing an application for registration of a trademark without intending to use it for a legitimate commercial purpose and with the sole intention of preventing a third party from entering the market or interfering with its business may constitute bad faith. The same is true where an applicant wishes to register a trademark for extortion purposes. The Court then analyzed the relevant date in order to assess bad faith under paragraph 18(1)(e) of the Act. It stated that while the relevant date is the date on which the application was filed, evidence subsequent to that date may be considered relevant if it helps to clarify the reasons why the application was filed. The Court held that the Applicant had the burden of establishing bad faith, which had to be proven on a balance of probabilities with clear and convincing evidence. The Court however specified that where the facts could only be known to the Respondent, circumstantial evidence and inferences from proven facts could be sufficient to establish the Respondent’s objectives at the time of the application’s filing. The facts show that, at the time the application was filed, the Respondent was aware of the Applicant’s restaurants in China and that the JU DIAN Marks had acquired a certain reputation, at the very least, among the Chinese population in British Columbia. The Court also concluded that it was highly unlikely that the Respondent had created a mark identical to that of the Applicant on his own, considering the originality of the mark. It was therefore more likely that the Respondent had wanted to register the same mark, knowing that it was associated with the Applicant’s restaurants in China, in order to benefit from its reputation. The Court nonetheless made the following clarification: filing an application for a trademark, even if it is identical to that of a third party, is insufficient to invalidate its registration, as there may be a legitimate basis to obtain a registered trademark in Canada for the same trademark that is registered and used by a third party elsewhere, where the third party’s trademark has no reputation in Canada.  Thus, it is the intention to “abuse the trademark regime” or the bad faith of the owner that must be established on a balance of probabilities. The Court concluded that the Applicant’s evidence established that the Respondent had registered the trademark without a legitimate commercial purpose: The JU DIAN Marks are known in Canada, at least by the Chinese population in British Columbia. The Respondent acknowledged in his exchanges that the JU DIAN Marks are associated with the Applicant’s chain of restaurants and are well-known trademarks.  The Respondent applied to register the Respondent’s Mark in Canada for the purpose of extorting money by leveraging the trademark’s reputation. The Respondent applied to register trademarks in Canada belonging to Chinese restaurant chains. The Court therefore held that the circumstances of the case constituted bad faith, but noted that in the United Kingdom, an inference of bad faith may be rebuttable where there is registration of a known trademark by an applicant who has no connection with the legitimate owner of the trademark. However, in the United Kingdom, where an applicant has engaged in a pattern of acquiring multiple such registrations, rebutting the inference of bad faith becomes significantly more difficult. In the absence of evidence from the Respondent to rebut the inference of bad faith created by the circumstantial evidence, the Court found that the evidence on file established the Respondent’s intent to use the registration for extortion purposes. The Court invalidated the registration of the Respondent’s Mark and ordered that the registration be expunged from the Register of Trademarks. What this means It appears from this decision that the Court’s analysis is largely factual and that the burden of establishing the intent of the owner of a given trademark at the time an application is filed may be difficult, especially 

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  • The Canada Emergency Wage Subsidy: The Canada Revenue Agency takes action

    In response to the pandemic, the Canadian government launched in the spring of 2020 the Canada Emergency Wage Subsidy (the “CEWS”), a program that provides employers with a subsidy based on the remuneration paid to their employees and income they lost during the pandemic. Section 125.7 of the Income Tax Act (the “ITA”) sets out how the subsidy is to be calculated, and likely caused problems for those who had to interpret this ambiguous provision without supporting doctrine or jurisprudence. For instance, calculating the “qualifying revenue,” which is central to the CEWS calculation, involves many nuances. As an example, it requires that an entity’s revenue during qualifying periods be estimated and that certain items be excluded, such as “extraordinary items,” a term new to the ITA. The calculation of “eligible remuneration,” another important component of the CEWS calculation, also has a number of peculiarities, such as the inclusion of remuneration for related and managerial employees. The Canada Revenue Agency (“CRA”) now has taxpayer’s CEWS calculation in its sights. The CRA began auditing CEWS claims and issuing notices of assessment to taxpayers in an effort to reduce the amount of CEWS originally granted. With reductions in pre-pandemic period qualifying income or the inclusion of items that taxpayers had initially excluded in their qualifying period income, such assessments are likely to have a significant impact on the CEWS amounts to which taxpayers were entitled, especially for companies with a large number of employees. In specific cases, the CRA may also impose penalties which can be as high as 50% of the excess subsidy claimed. Although the time limit for amending CEWS claims has expired, submitting a fairness request to amend a previously filed claim may be possible in some circumstances. Moreover, when notices of assessment are issued, a notice of objection may be filed to contest the adjustments made by the CRA. It is important to keep all documentation related to the calculation of the “qualifying revenue,” your employees’ remuneration and any other accounting documents to support the CEWS amounts claimed. A proactive approach and early intervention in a CEWS audit will not only result in a more favourable outcome in a given case, but will also prevent many back-and-forths with the CRA. Lavery’s tax law team is familiar with the CEWS program and its intricacies, and can assist you should you be audited or should you receive a notice of assessment from the CRA.

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  • Clarifications regarding insurance products offered on the Internet

    In early 2022, the Autorité des marchés financiers (the “AMF”) conducted specific consultations on financial products offered on the Internet. Further to these consultations, the AMF published explanations on the Regulation respecting Alternative Distribution Methods (the “RADM”) in late December 2022.1 Here are some key points that the AMF has clarified: Definitions The AMF has elaborated on the meaning of certain terms and expressions included in the RADM, thereby clarifying the obligations incumbent on firms as concerns insurance products offered on the Internet: “Providing” or “presenting” information: This implies delivering, giving or handing over information to a client without them having to take any action. A client should not have to search for the information to find it. As such, making the information accessible or referring to a policy is not enough.2 “Making visible at all times”: The information should be visible to the client at all times, regardless of the page the client is on. A representative’s contact information is the only information that must be visible on the digital transactional space at all times. Websites that are accessible to people who are blind or use a voice assistant must also have means to present this information.3 “Making a representative available”: The AMF only requires that representatives be available during regular business hours.4 “Making information readily accessible”: A client must have the option of taking cognizance of the information and be able to easily find it. The information must be accessible in one or two clicks. Including a hyperlink or an icon, for example, are ways of making information accessible.5 Under this obligation, a hyperlink may be used to redirect a client to a website or document external to the digital space.6 External documents that are accessible through hyperlinks, such as sample insurance policies, must be up to date. Summary of the complaint processing policy The AMF specifies that the summary of the complaint processing policy referred to in the RADM must be that of the firm running the transactional website, not of a third party. Thus, a property and casualty insurance brokerage cannot refer to an insurer’s policy summary.7 Identification of the firm A firm may display partner logos on its digital space only if doing so does not cause confusion. A client must know which firm runs the space and must be able to distinguish it from partners that do not offer the products or services.8 Product coverage, exclusions and limitations Further to its supervisory activities, the AMF has confirmed that product coverage appears to be well presented in digital spaces. However, exclusions and sometimes limitations are not as well presented. Given that exclusions and limitations constitute information that is necessary for a client to make an informed decision, the AMF urges firms to pay attention to these and to select them based on a proper analysis.9 Suspension of transactions The AMF has clarified how to apply the criteria under section 14 of the RADM, more specifically paragraph 3 of this section, which provides that a firm must suspend a transaction initiated through a digital space when no representative can immediately intervene with a client who asks to deal with a representative and there is a risk that the client will not be able to make an informed decision. The AMF specifies that it is up to the firm to assess and manage its risk. In order to determine whether such a risk exists, the AMF has proposed the following solutions: The firm may caution the client as follows: “Do you wish to continue the process even though no representative is available at this time?” The firm could post its representatives’ availability. If a client decides to enter into a contract through a digital space, the firm could ensure that a representative contacts them within 24 hours. A transaction does not have to be suspended immediately; it can be done at the end of the transaction, before the contract is concluded. Moreover, stopping or temporarily suspending a transaction may also be necessary if a contradiction or irregularity in the information the client provides could lead to an error.10 The digital space must be set up to detect such a contradiction automatically. The AMF considers it preferable to discontinue a transaction if contradictions are detected. It can also be temporarily suspended while the client is informed of the consequences of making false statements and the importance of knowing their entire situation, for example, and to allow them to make corrections, if necessary.11 To better understand the obligations of the RADM, we invite you to consult our bulletin Bill 141: Checklist on insurance products offered via the internet and distribution without a representative. These are only available in French at this time; Regulation respecting Alternative Distribution Methods, CQLR, c. D-9.2, r. 16.1. Autorité des marchés financiers, Explications à l’égard du règlement – Le RMAD expliqué article par article (hereinafter the “Explanations”), ss. 7, 9, 11, 12 and 12.2. The terms “explaining information” or “providing information” under section 12.1 of the RADM should be interpreted in the same manner. Explanations, s. 8. Explanations, s. 8. Explanations, ss. 8 and 10. Explanations, ss. 8 and 10. A representative’s contact information does not have to appear on external documents and websites at all times. It is important to note that under section 9 of the RADM, a document that is to be “provided” or “presented” to a client cannot be located on an external website. Explanations, s. 8. Explanations, s. 8, para. 1. Explanations, s. 9. For example, a client declaring they have no children yet selecting insurance for their children constitutes a contradiction. Explanations, s. 14.

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  • Patent applications and processing times – What’s right for you

    Part 1: Four reasons to slow down and four reasons to speed up the process Part 2: Slowing down the process (CA, US, EP, PCT) Part 3: Fast track (CA, US, EP, PCT) Part 1: Why slow down or speed up the process? Slowing down the process Why would anyone want to slow down the process when it already usually takes several years for a patent to be issued? Cash flow Uncertainty for competitors Possibility of changing the scope Possibility of filing a divisional application In some cases, cash flow may justify spreading expenses over a longer period of time. Keeping an application pending longer may also be beneficial from a business perspective. In fact, it could create uncertainty for competitors, who cannot easily determine the scope of the exclusive right that may be granted to you. Moreover, claims are easier to amend while the application is pending. Lastly, filing a divisional application is usually only possible when the parent patent application is still pending. Speeding up the process If slowing down the process is so advantageous, why speed it up? Proof of patentability before expanding the patent application family Monetary valuation or capital raising Proceedings before the courts Strong negotiating position After filing a priority application, the applicant has 12 months to file corresponding applications in other countries. Filing abroad can entail considerable expenses. It may therefore be advantageous to obtain results quickly so you can make the best decision about filing applications in other countries. An issued patent is a far better indication of a technology’s value. This can have a major impact on a company’s valuation and, at the same time, allow for additional capital to be raised. Moreover, filing a patent application will not prevent infringers from marketing your technology; you may only commence proceedings in front of the court with an issued patent. The possibility of instituting legal proceedings could drastically change the tone of negotiations with your competitors—and sometimes your suppliers, too. Strategies and costs Special provisions exist to speed up and slow down the process in many territories. For the purposes of this exercise, we will discuss patent applications in Canada, the United States and Europe. We will also look at international patent applications, namely PCT applications. Part 2: Slowing down the process Canada With regard to slowing down the process, the simplest strategy in Canada is to wait before requesting examination as much as possible. While the provision for this has changed over the years, applicants now have four (4) years from the date of filing a Canadian application to request an examination. For PCT national phase entry, Canada allows an extension of the standard 30-month time limit to up to 42 months under certain conditions. However, examination request dates and maintenance fees remain the same. Therefore, this is beneficial in the short term only. For each examiner’s report (also called office action), it is possible to request an extension of the time limit by two months before the original time limit expires. This request must be accompanied by the late fee and is only accepted under certain conditions. The other option is to not reply to the examiner’s report and to wait until the application is deemed abandoned. The application may then be reinstated by filing a response to the examiner’s report and paying an additional fee. It is important to note that a Canadian application is no longer eligible for accelerated processing if an extension of the time limit was obtained for it or it was reinstated. Furthermore, while an application is abandoned, and even if it is later reinstated, third parties could obtain certain rights to the technology. United States In the United States, an extension of time fee may be paid at the same time as the reply to an examiner’s report is filed. However, the maximum time limit must not exceed six (6) months. It is also possible to file a request (or petition) for the suspension of the time limit for replying to an examiner’s report (by paying the relevant fee, of course). This request is only acceptable under certain conditions and cannot exceed six (6) months. Similarly, a request may be filed to defer the examination of the application, which may delay examination by up to three (3) years after the priority date. Once again, certain conditions must be met and there is a fee to pay. Europe As is the case for Canada, for each examiner’s report, a request can be made to extend the time limit by two (2) months before the original time limit expires. However, unlike in Canada, there are no fees or conditions for this request to be accepted. The other option is to not reply to the examiner’s report and to let the application lapse. The application may then be reinstated by filing a response to the examiner’s report and paying an additional fee. As for the 10-day rule, it will continue to apply until November 2023. This rule, which was established at a time when communications were still sent by mail, provides that a dated communication is deemed to have been delivered ten (10) days after the date of the document—the time limit is therefore automatically extended by ten (10) days. All things considered, the elimination of this rule is a plus in helping prevent various communication problems. PCT When it comes to slowing things down, the PCT application itself may be used to slow down the process. In fact, the international patent application system provides allows a decision on international applications to be made as late as 30 months from the priority date. The PCT system is based more on the reservation of rights than on slowing down the process. Nevertheless, both from cash flow and filing strategy standpoints, the longer time limit for making decisions may be beneficial. Summary–slowing down the process CA: Postpone filing the Canadian application or entering the national phase. Push back the examination request. Apply for an extension of the time limit. Do not respond, then apply for reinstatement. US: Pay time limit extension fees. Submit a request to suspend processing. Submit a request to defer the examination. EP: Apply for an extension of the time limit. Apply the 10-day rule. Do not respond, then pay the fees to have the application reinstated. PCT: Take advantage of the 30-to-42-month extension for each country. Part 3: Fast track Canada Of course, the best way to speed up the process is to request an examination as soon as possible and, above all, not put off replying to the examiner’s reports received. After requesting an examination and before receiving the first examiner’s report, it is possible to request that the application be processed expeditiously. The request requires that the Canadian application be published and it may be subject to a number of conditions. An applicant whose rights may be prejudiced by the examination time limit can pay an additional fee to expedite the process. When a patent application relates to so-called green technology or the COVID-19 pandemic, the notion of prejudice does not apply and no fee is due. Speeding up the process is also possible by taking advantage of the outcome of a corresponding application in another jurisdiction deemed credible by the Canadian Patent Office (e.g., Europe, United States, Japan, etc.). This is referred to as a PPH (patent prosecution highway) request (the French translation by “autoroute de traitement des demandes de brevet”, while quite accurate, is rarely used). United States Those who have the means to do so may pay an acceleration fee when filing the application in the US. The intent is then to complete the entire process within 12 months. The ability of the US Patent Office to meet the expectation is also taken into consideration before accepting the request. Special treatment may also be requested for a patent application where the health or age of one of the inventors warrants this. Such a request may also be made when the technology in the patent application is “green” or relates to “counterterrorism.” The US also takes part in the PPH system, and the decision made regarding a corresponding application in another jurisdiction can also help speed up the process. Evidently, it is important not to delay replying to the examiner’s reports received, no matter how else you may choose to accelerate the process. Europe The European Patent Office accepts PPH requests and also offers the “PACE” programme, which helps speed up processing times (search and/or examination) without any fees or specific conditions other than responding to examiner’s reports in a timely manner. The European Patent Office’s ability to handle the requests is also taken into account. PCT Quickly completing national phase entries (i.e., well before the 30-month time limit) makes it possible to proceed faster with the substantive examination in each jurisdiction. During the international phase of the PCT, attempts can be made to move the process along before entering the national phase. This procedure often dubbed as a “Chapter II request” does not guarantee that time will be saved, but certain questions may be anticipated thus avoid multiple delays in front of different examiners. Summary – speeding up the process CA: File the Canadian application or enter the national phase as soon as possible. Make the examination request as soon as possible. Respond quickly to examiner’s reports. Request accelerated processing based on PPH, green technology, COVID-19 technology or possible prejudice. US: Pay acceleration fees when filing. Request accelerated processing through the PPH system. Respond quickly to examiner’s reports. Submit a petition to make the application special (on the basis of age or health, green technology or counterterrorism technology). EP: Request access to PACE programme. Request accelerated processing through the PPH system. Quickly respond to examiner’s reports. PCT: Enter national phase as soon as possible. Apply for examination under “Chapter II.”

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  • The return of Christmas parties: what employers need to know

    After two years of navigating COVID-19, the end of 2022 will be an opportunity for employers to organise larger activities for their employees, such as Christmas parties. The purpose of this newsletter is to make employers aware of their obligations during the holiday season festivities. Below, we will address the following three issues: industrial accidents, disciplinary measures and psychological harassment. Although Christmas parties are generally held outside of the workplace and outside normal working hours, an incident that occurs on such an occasion may qualify as an “industrial accident” within the meaning of the Act respecting industrial accidents and occupational diseases.1 Courts will consider several factors in weighing whether or not such an incident will constitute a work-related accident, including the purpose of the party, the time and place where it was held, whether or not it is organized and financed by the employer, and the presence or absence of a relationship of subordination at the time of the incident. None of these factors are decisive: they serve as a guideline for the tribunal. As many decisions have both granted2 or rejected3 claims in such circumstances. In one case where a Christmas party had been organized by the employer and was intended to encourage a sense of cohesion and belonging amongst the employees, an injury to the coccyx suffered by an employee while dancing with a co-worker was qualified as an industrial accident.4 However, in another case where an employee was injured on an escalator while escorting a drunken co-worker after a Christmas party, the tribunal ruled that the female employee had not suffered an industrial accident due to the absence of authority exercised by the employer at the time of the fall and also because the event was only intended to permit colleagues to fraternize and spend time together and not to improve the work environment.5 In the context of its management rights, an employer may, in certain circumstances, discipline an employee for behaviour which occurred during a Christmas party.6 The degree of the employer’s involvement in the organization of the party and the private nature of the party are important factors in determining whether the employer is justified in imposing disciplinary measures in such a context. For example, an arbitrator upheld the dismissal of an employee who repeatedly hit a colleague and former spouse during the employer's Christmas party held on its premises.7 The fact that the violent acts were committed during a party rather than in the direct context of work was not considered a mitigating factor. This disciplinary power is part of the employer's obligation to ensure a violence-free workplace. This obligation has gained in importance since the recent addition to the Act respecting occupational health and safety8 of the employer's obligation to “take the measures to ensure the protection of a worker exposed to physical or psychological violence, including spousal, family or sexual violence, in the workplace”.9 In another case, the arbitrator concluded that the employer could not discipline an employee for acts committed at a Christmas party organized and entirely financed by the employees and which took place outside the workplace.10 On another note, a single act of serious conduct at a Christmas party may constitute psychological harassment. A complaint for psychological harassment was upheld against an employer in a situation where the owner had touched the breast of an employee by slipping an ice cube into her sweater.11 This contact, a single gesture, was qualified by the arbitrator as serious conduct amounting to psychological harassment. The arbitrator also concluded that excessive alcohol consumption had no mitigating effect on the seriousness of the act committed. Sexual comments, forced touching and kissing by an employee during the Christmas party were also deemed to constitute psychological and sexual harassment by the courts justifying, in certain circumstances, dismissal.12 Conclusion In light of the foregoing, an employer must exercise caution and adopt measures to reduce the risks associated with the organization of Christmas parties, given that they may be held responsible for accidents or various acts or behaviour that occur during such gatherings. [1] CQLR, c. A-3.001, s. 2. [2] See in particular Fafard et Commission scolaire des Trois-Lacs, 2014 QCCLP 6156; Battram et Québec (Ministère de la Justice), 2007 QCCLP 4450. [3] See in particular Environnement Canada et Lévesque, 2001 CanLII 46818 (QCCLP), par. 35-39; Desjardins et EMD Construction inc., 2007 QCCLP 496. [4] Boivin et Centre communautaire juridique de l'Estrie, 2011 QCCLP 2645 [. [5] Roy-Bélanger et Ressources Globales Aéro inc., 2021 QCTAT 1739 [Quebec’s Tribunal administratif du travail]. [6] Teamsters Québec, section locale 1999 et Univar Canada ltée (Jean-Martin Gobeil), 2020 QCTA 344 (L. Viau). [7] Travailleurs et travailleuses unis de l'alimentation et du commerce, section locale 500 (TUAC-FTQ) et Royal Vézina inc. (St-Hubert) (Hicham Alaoui), 2017 QCTA 304 (F. Lamy). [8] CQLR, c. S-2.1. [9] Act respecting occupational health and safety, CQLR, s. 2.1, a. 51, par. 1 (16). This obligation was added pursuant to the Act to modernize the occupational health and safety regime (2021, c. 27, a. 139), [10] Syndicat de la fonction publique et parapublique du Québec et Société de l'assurance automobile du Québec (Joffrey Lemieux), 2021 QCTA 439 (C. Roy). [11] S.H. et Compagnie A, 2007 QCCRT 0348, D.T.E. 2007T-722 (T.A.) (F. Giroux). [12] Pelletier et Sécuritas Canada ltée, 2004 QCCRT 0554 (M. Marchand).  

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  • Construction: An unwarranted contestation may be considered an abuse of procedure

    In the decision in 9058-4004 Québec inc. c. 9337-9907 Québec inc.1 rendered on October 21, 2022, the court granted compensation to a subcontractor for its extrajudicial fees further to a general contractor’s unfounded contestation of its claim as part of a hypothecary action. The facts In May 2019, Portes de garage Citadelle Ltée (“Citadelle”) and general contractor 9337-9907 Québec inc. (“AllConstructions”) concluded a contract for the provision of services and materials needed to install unloading docks in a building under construction. On May 16, 2019, notice of the contract was given to the building owner, 9058-4004 Québec inc. (“Transport Pouliot”). The first two phases of Citadelle’s work were completed between June and August 2019. In late September 2019, AllConstructions allegedly vacated the worksite after a dispute with Transport Pouliot. The third phase of Citadelle’s work was completed in October 2019. On November 25, 2019, Citadelle sent a statement of account to AllConstructions and registered a legal hypothec on the building two days later. On December 23, 2019, after registering a prior notice of the exercise of a hypothecary right, AllConstructions brought a hypothecary action against Transport Pouliot in the Superior Court, claiming the sums it was owed. For its part, Citadelle brought a hypothecary action against the owner, Transport Pouliot, and instituted legal proceedings against AllConstructions in April 2020. It is important to note that during the proceedings, AllConstructions admitted that it had received payment from Transport Pouliot for the sums invoiced by Citadelle. To justify its refusal to pay its subcontractor Citadelle, AllConstructions argued summarily that the services and materials provided were inadequate and did not meet standards. Despite its weak position and the lack of compelling evidence, AllConstructions maintained its argument. Citadelle had no choice but to pursue its legal proceedings and apply to have AllConstructions’ action declared abusive in order to recover its extrajudicial fees. AllConstructions’ abuse of procedure Citadelle claimed that AllConstructions’ defence was unfounded, frivolous and intended to delay. AllConstructions only had testimonial evidence to support its allegations, and it failed to file any expert opinions or exhibits. The contract did not contain a “pay when paid” clause, and AllConstructions admitted in the proceedings that it had received payment from Transport Pouliot for the sums invoiced by Citadelle. AllConstructions claimed that it had serious arguments to make in response to the application to have its action declared abusive. It stated that the work performed by Citadelle was inadequate and that the materials and services provided were not up to standards. It maintained its position, despite the fact that it had vacated the worksite a month before Citadelle’s work was completed and, therefore, could not have verified the actual quality of the work performed. In March 2022, AllConstructions ultimately abandoned its contestation of Citadelle’s claim a few days before the trial and nearly a year and a half after the proceedings began. The judge allowed Citadelle’s application to have AllConstructions’ action declared abusive. AllConstructions’ defence was unfounded, frivolous and intended to delay. It had no solid factual or legal basis. The allegation that Citadelle failed to comply with standards in the performance of its contract is mere speculation, as AllConstructions left the worksite in September 2019. Citadelle incurred unnecessary extrajudicial fees as a result of AllConstructions’ unfounded contestation of its claim. The judge awarded Citadelle a sum of $9,000.00 as compensation for the legal fees that it had paid. What it means A general contractor that cannot justify a deduction from its subcontractor’s claims after the work is completed but does so anyway risks having its contestation declared abusive. Jurisprudence has established that abuse of procedure may consist of légèreté blâmable [blameworthy conduct]2 or témérité [recklessness] resulting from allegations that do not stand up to careful analysis or are exaggerated beyond the scope of the dispute between the parties.3 A manifestly unfounded action is a civil fault that may be subject to legal proceedings and sanctions in accordance with article 51 of the Code of Civil Procedure.4 A party that considers itself the victim of abusive proceedings may, in addition to applying to have the proceedings declared abusive, claim the reimbursement of reasonable legal fees it has paid.5 This is precisely what Citadelle did and what it obtained. AllConstructions irresponsibly managed its dispute with its subcontractor. It made arguments based only on unverified assumptions, even though the evidence set out in the application was relatively solid and complete. As a victim of abuse of procedure, Citadelle was granted a reimbursement of its legal fees in addition to the sums that it was owed by AllConstructions. Court file No. 760-22-011912-204 Royal Lepage commercial inc. c. 109650 Canada ltd., 2007 QCCA 915 El-Hachem c. Décary, 2012 QCCA 2071 2741-8854 Québec inc. c. Restaurant King Ouest, 2018 QCCA 1807 (CanLII) Only extrajudicial fees deemed reasonable are reimbursed in full. The factors considered in establishing a total reasonable amount are summarized in paragraph 32 of the case at hand and are cited from Groupe Van Houtte inc. c. Développements industriels et commerciaux de Montréal inc., 2010 QCCA 1970, and Iris Le Groupe visuel (1990) inc. c. 9105-1862 Québec inc., 2021 QCCA 1208

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  • SOCAN Decision: Online music distributors must only pay a single royalty fee

    In Society of Composers, Authors and Music Publishers of Canada v. Entertainment Software Association1 (the “SOCAN Decision”), the Supreme Court of Canada ruled on the obligation to pay a royalty for making a work available to the public on a server, where it can later be streamed or downloaded. At the same time, it clarified the applicable standard of review for appeals where administrative bodies and courts share concurrent first instance jurisdiction and revisited the purpose of the Copyright Act2and its interpretation in light of the WIPO Copyright Treaty3. The Supreme Court also took the opportunity to reiterate the importance of the principle of technological neutrality in the application and interpretation of the Copyright Act. This reminder can also be applied to other artistic mediums and is very timely in a context where the digital visual arts market is experiencing a significant boom with the production and sale of non-fungible tokens (“NFTs”). In 2012, Canadian legislators amended the Copyright Act by adopting the Copyright Modernization Act4. These amendments incorporate Canada’s obligations under the Treaty into Canadian law by harmonizing the legal framework of Canada’s copyright laws with international rules on new and emerging technologies. The CMA introduced three sections related to “making [a work] available,” including section 2.4(1.1) of the CMA. This section applies to original works and clarifies section 3(1)(f), which gives authors the exclusive right to “communicate a work  to the public by telecommunication”: 2.4(1.1) Copyright Act. “For the purposes of this Act, communication of a work or other subject-matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public.” Before the CMA came into force, the Supreme Court also found that downloading a musical work from the Internet was not a communication by telecommunication within the meaning of section 3(1)(f) of the CMA5, while streaming was covered by this section.6 Following the coming into force of the CMA, the Copyright Board of Canada (the “Board”) received submissions regarding the application of section 2.4(1.1) of the Copyright Act. The Society of Composers, Authors and Music Publishers of Canada (“SOCAN”) argued, among other things, that section 2.42.4(1.1) of the Copyright Act required users to pay royalties when a work was published on the Internet, making no distinction between downloading, streaming and cases where works are published but never transmitted. The consequence of SOCAN’s position was that a royalty had to be paid each time a work was made available to the public, whether it was downloaded or streamed. For each download, a reproduction royalty also had to be paid, while for each stream, an additional performance royalty had to be paid. Judicial history The Board’s Decision7 The Board accepted SOCAN’s interpretation that making a work available to the public is a “communication”. According to this interpretation, two royalties are due when a work is published online. Firstly,  when the work is made available to the public online, and secondly, when it is streamed or downloaded. The Board’s Decision was largely based on its interpretation of Section 8 of the Treaty, according to which the act of making a work available requires separate protection by Member States and constitutes a separately compensable activity. Federal Court of Appeal’s Decision8 Entertainment Software Association, Apple Inc. and their Canadian subsidiaries (the “Broadcasters”) appealed the Board’s Decision before the Federal Court of Appeal (“FCA”). Relying on the reasonableness standard, the FCA overturned the Board’s Decision, affirming that a royalty is due only when the work is made available to the public on a server, not when a work is later streamed. The FCA also highlighted the uncertainty surrounding the applicable review standard in appeals following Vavilov9 in cases where administrative bodies and courts share concurrent first instance jurisdiction. SOCAN Decision The Supreme Court dismissed SOCAN’s appeal seeking the reinstatement of the Board’s Decision. Appellate standards of review The Supreme Court recognized that there are rare and exceptional circumstances that create a sixth category of issues to which the standard of correctness applies, namely concurrent first instance jurisdiction between courts and administrative bodies. Does section 2.4(1.1) of the Copyright Act entitle the holder of a copyright to the payment of a second royalty for each download or stream after the publication of a work on a server, making it publicly accessible? The copyright interests provided by section 3(1) of the Copyright Act The Supreme Court began its analysis by considering the three copyright interests protected by the Copyright Act, or in other words, namely the rights provided for in section 3(1): to produce or reproduce a work in any material form whatsoever; to perform the work in public; to publish an unpublished work. These three copyright interestsare distinct and a single activity can only engaged one of them. For example, the performance of a work is considered impermanent, allowing the author to retain greater control over their work than reproduction. Thus, “when an activity allows a user to experience a work for a limited period of time, the author’s performance right is engaged. A reproduction, by contrast, gives a user a durable copy of a work”.10 The Supreme Court also emphasized that an activity not involving one of the three copyright interests under section 3(1) of the Copyright Act or the author’s moral rights is not protected by the Copyright Act. Accordingly, no royalties should be paid in connection with such an activity. The Court reiterated its previous view that downloading a work and streaming a work are distinct protected activities, more precisely  downloading is considered reproduction, while streaming is considered performance. It also pointed out that downloading is not a communication under section 3(1)(f) of the Copyright Act, and that making a work available on a server is not a compensable activity distinct from the three copyright interests.11 Purpose of the Copyright Act and the principle of technological neutrality The Supreme Court criticized the Board’s Decision, opining that it violates the principle of technological neutrality, in particular by requiring users to pay additional fees to access online works. The purpose of the CMA was to “ensure that [the Copyright Act] remains technologically neutral”12 and thereby show, at the same time, Canada’s adherence to the principle of technological neutrality. The principle of technological neutrality is further explained by the Supreme Court: [63] The principle of technological neutrality holds that, absent parliamentary intent to the contrary, the Copyright Act should not be interpreted in a way that either favours or discriminates against any form of technology: CBC, at para. 66. Distributing functionally equivalent works through old or new technology should engage the same copyright interests: Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, 2012 SCC 36, [2012] 2 S.C.R. 326, at para. 43; CBC, at para. 72. For example, purchasing an album online should engage the same copyright interests, and attract the same quantum of royalties, as purchasing an album in a bricks-and-mortar store since these methods of purchasing the copyrighted works are functionally equivalent. What matters is what the user receives, not how the user receives it: ESA, at paras. 5-6 and 9; Rogers, at para. 29. In its summary to the CMA, which precedes the preamble, Parliament signalled its support for technological neutrality, by stating that the amendments were intended to “ensure that [the Copyright Act] remains technologically neutral”. According to the Supreme Court, the principle of technological neutrality must be observed in the light of the purpose of the Copyright Act, which does not exist solely for the protection of authors’ rights. Rather, the Act seeks to strike a balance between the rights of users and the rights of authors by facilitating the dissemination of artistic and intellectual works aiming to enrich society and inspire other creators. As a result, “[w]hat matters is what the user receives, not how the user receives it.”13 Thus, whether the reproduction or dissemination of the work takes place online or offline, the same copyright applies and leads to the same royalties. What is the correct interpretation of section 2.4(1.1) of the Copyright Act? Section 8 of the Treaty The Supreme Court reiterated that international treaties are relevant at the context stage of the statutory interpretation exercise and they can be considered without textual ambiguity in the statute.14 Moreover, wherethe text permits, it must be interpreted so as to comply with Canada’s treaty obligations, in accordance with the presumption of conformity, which states that a treaty cannot override clear legislative intent.15 The Court concluded that section 2.4(1.1) of the Copyright Act was intended to implement Canada’s obligations under Section 8 of the Treaty, and that the Treaty must therefore be taken into account in interpreting section 2.4(1.1) of the Act. Although Section 8 of the Treaty gives authors the right to control making works available to the public, it does not create a new and protected “making available” right that would be separately compensable. In such cases, there are no “distinct communications” or in other words, “distinct performances”.16 Section 8 of the Treaty creates only two obligations: “protect on demand transmissions; and give authors the right to control when and how their work is made available for downloading or streaming.”17 Canada has the freedom to choose how these two objectives are implemented in the Copyright Act, either through the right of distribution, the right of communication to the public, the combination of these rights, or a new right.18 The Supreme Court concluded that the Copyright Act gives effect to the obligations arising from Section 8 of the Treaty through a combination of the performance, reproduction, and authorization rights provided for in section 3(1) of the Copyright Act, and by respecting the principle of technological neutrality.19 Which interpretation of section 2.4(1.1) of the Copyright Act should be followed? The purpose of section 2.4(1.1) of the Copyright Act is to clarify the communication right in section 3(1)(f) of the Copyright Act by emphasizing its application to on-demand streaming. A single on-demand stream to a member of the public thus constitutes a “communication to the public” within the meaning of section 3(1)(f) of the Copyright Act.20 Section 2.4(1.1) of the Copyright Act states that a work is performed as soon as it is made available for on-demand streaming.21 Therefore, streaming is only a continuation of the performance of the work, which starts when the work is made available. Only one royalty should be collected in connection with this right: [100] This interpretation does not require treating the act of making the work available as a separate performance from the work’s subsequent transmission as a stream. The work is performed as soon as it is made available for on-demand streaming. At this point, a royalty is payable. If a user later experiences this performance by streaming the work, they are experiencing an already ongoing performance, not starting a new one. No separate royalty is payable at that point. The “act of ‘communication to the public’ in the form of ‘making available’ is completed by merely making a work available for on?demand transmission. If then the work is actually transmitted in that way, it does not mean that two acts are carried out: ‘making available’ and ‘communication to the public’. The entire act thus carried out will be regarded as communication to the public”: Ficsor, at p. 508. In other words, the making available of a stream and a stream by a user are both protected as a single performance — a single communication to the public. In summary, the Supreme Court stated and clarified the following in the SOCAN Decision: Section 3(1)(f) of the Copyright Act does not cover download of a work. Making a work available on a server and streaming the work both involve the same copyright interest to the performance of the work. As a result, only one royalty must be paid when a work is uploaded to a server and streamed. This interpretation of section 2.4(1.1) of the Copyright Act is consistent with Canada’s international obligations for copyright protection. In cases of concurrent first instance jurisdiction between courts and administrative bodies, the standard of correctness should be applied. As artificial intelligence works of art increase in amount and as a new market for digital visual art emerges, driven by the public’s attraction for the NFT exchanges, the principle of technological neutrality is becoming crucial for understanding the copyrights attached to these new digital objects and their related transactions. Fortunately, the issues surrounding digital music and its sharing and streaming have paved the way for rethinking copyright in a digital context. It should also be noted that in decentralized and unregulated digital NFT markets, intellectual property rights currently provide the only framework that is really respected by some market platforms and may call for some degree of intervention on the part of the market platforms’ owners. 2022 SCC 30. R.S.C. (1985), c. C-42 (hereinafter the “Copyright Act”). Can. T.S. 2014 No. 20, (hereinafter the “Treaty”). S.C. 2012, c. 20 (hereinafter the “CMA”). Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34. Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35. Copyright Board of Canada, 2017 CanLII 152886 (hereinafter the “Board’s Decision”). Federal Court of Appeal, 2020 FCA 100 (hereinafter the “FCA’s Decision”). Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65. SOCAN Decision, par. 56. Ibid, para. 59. CMA, Preamble. SOCAN Decision, para. 70, emphasis added by the SCC. Ibid, paras. 44-45. Ibid, paras. 46-48. Ibid, paras. 74-75. Ibid, para. 88. Ibid, para. 90. Ibid, paras. 101 and 108. Ibid, paras. 91-94. Ibid, paras. 95 and 99-100.

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  • CNESST – Transfer of Costs Under Section 326 of the Act Respecting Industrial Accidents and Occupational Diseases: Important Decision from the Tribunal

    Employers subject to the personalized rate or retrospective rate regime know how important it is to control the costs related to occupational injury cases in order to limit the impact on their annual premiums. One way to attain this objective is to apply for a transfer of costs under section 326 of the Act Respecting Industrial Accidents and Occupational Diseases. Indeed, the CNESST may, “on its own initiative or on the application of an employer, impute the cost of benefits payable by reason of an industrial accident to the employers of one, several or all units if the imputation under the first paragraph would have the effect of causing an employer to support unduly the cost of benefits due by reason of an industrial accident imputable to a third person or unduly burdening an employer.” Traditionally, in cases involving the undue burdening of an employer, the CNESST would not process applications for transfers of costs under section 326 as long as the end date of the transfer period remained unknown. This could be detrimental to an employer’s cash flow, especially if the application remained unprocessed and the situation continued to exist over several months, even worse, for years. The recent Corporation d’Urgences-santé1 decision could, in certain circumstances, provide employers with a tool to convince the CNESST to render decisions without an end date for the transfer period. In this file, where Lavery Lawyers represented the employer, the worker could not be temporarily assigned to light duties because of his caregiver status. At the time of the hearing, the employee was still acting as a caregiver and the Tribunal was not in a position to know when the impediment might end. When asked to rule on its jurisdiction and powers, the Tribunal accepted our proposal that the transfer be granted, but that it remains the CNESST’s responsibility to determine the end date of the transfer period. The tribunal ruled that such date ultimately corresponds to the date on which the worker ceases to be incapable of undergoing temporary light-duty assignment due to his caregiver status.   Thus, in its decision, the Tribunal recognizes the employer’s right to benefit from a transfer of costs since January 1, 2022, as a result of the employee’s caregiver status. This allows the employer to reduce immediately its financial burden up and until the CNESST renders a decision to establish the date of the occurrence of the event giving rise to the end of the transfer. This is the first decision to be rendered on the issue. It opens the door to a number of possibilities, including requiring the CNESST to make a ruling on a cost transfer application before the full transfer period can be determined. However, this type of application with the CNESST will require case-by-case analysis, as certain conditions must be met for the application to be admissible.  If you are dealing with a similar situation requiring special attention, do not hesitate to contact a member of our labour law department specializing in workers’ compensation matters. They will be able to assist you with any questions relating to the management of these cases, whether or not they are the object of litigation. 2022 QCTAT 4634

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  • The duration of copyright protection in Canada is extended to 70 years as of December 30, 2022

    On June 23, 2022, Bill C-19 received Royal Assent. The bill was introduced by the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, and resulted in amendments to the Copyright Act1 that will come into force on December 30, 2022, further to an order in council issued earlier this week. Bill C-19, or An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022, and other measures, was tabled on April 28, 2022, by the federal government following the release of the 2022 budget. This bill essentially follows up on the commitments the government made in its annual budget. In the 2022 budget, the federal government said it wanted to make changes to the Copyright Act. It announced a legislative amendment to meet its obligation under the Canada-United-States-Mexico Agreement (CUSMA) to extend the general term of copyright protection from 50 years to 70 years after the death of the author. Like the United States and Mexico, Canada has committed to a copyright protection term that is not less than the life of the author, plus 70 years following the natural person’s death.   Section 6 of the Copyright Act currently stipulates that copyright protection lasts for the author’s lifetime and an additional 50 years after their death. The section will now read as follows: Except as otherwise expressly provided by this Act, the term for which copyright subsists is the life of the author, the remainder of the calendar year in which the author dies, and a period of 70 years following the end of that calendar year. [emphasis added]. The term of copyright is also extended to 70 years after the death of the author or the last surviving co-author in the case of posthumous works and collaborations. Finally, Bill C-19 clarifies that legislative amendments to the Copyright Act do not reactivate copyrights that expired before the effective date of the amendments. [1] RSC 1985, c C-42.

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  • Cybersecurity and the dangers of the Internet of Things

    While the Canadian government has said it intends to pass legislation dealing with cybersecurity (see Bill C-26 to enact the Critical Cyber Systems Protection Act), many companies have already taken significant steps to protect their IT infrastructure. However, the Internet of Things is too often overlooked in this process. This is in spite of the fact that many devices are directly connected to the most important IT infrastructure for businesses. Industrial robots, devices that control production equipment in factories, and devices that help drivers make deliveries are just a few examples of vulnerable equipment. Operating systems and a range of applications are installed on these devices, and the basic operations of many businesses and the security of personal information depend on the security of the devices and their software. For example: An attack could target the manufacturing equipment control systems on the factory floor and result in an interruption of the company’s production and significant recovery costs and production delays. By targeting production equipment and industrial robots, an attacker could steal the blueprints and manufacturing parameters for various processes, which could jeopardize a company’s trade secrets. Barcode scanners used for package delivery could be infected and transmit information to hackers, including personal information. The non-profit Open Web Application Security Project (OWASP) has released a list of the top ten security risks for the Internet of Things.1 Leaders of companies that use this kind of equipment must be aware of these issues and take measures to manage these risks. We would like to comment on some of the risks which require appropriate policies and good company governance to mitigate them. Weak or unchangeable passwords: Some devices are sold with common or weak initial passwords. It is important to ensure that passwords are changed as soon as devices are set up and to keep tight control over them. Only designated IT personnel should know the passwords for configuring these devices. You should also avoid acquiring equipment that does not allow for password management (for example, a device with an unchangeable password). Lack of updates: The Internet of Things often relies on computers with operating systems that are not updated during their lifetime. As a result, some devices are vulnerable because they use operating systems and software with known vulnerabilities. Good governance includes ensuring that such devices are updated and acquiring only devices that make it easy to perform regular updates. Poor management of the fleet of connected devices: Some companies do not have a clear picture of the Internet of Things deployed in their company. It is crucial to have an inventory of these devices with their role in the company, the type of information they contain and the parameters that are essential to their security. Lack of physical security: Wherever possible, access to these devices should be protected. Too often, devices are left unattended in places where they are accessible to the public. Clear guidelines should be provided to employees to ensure safe practices, especially for equipment that is used on the road. A company’s board of directors plays a key role in cybersecurity. In fact, the failure of directors to monitor risks and to ensure that an adequate system of controls is in place can expose them to liability. Here are some elements of good governance that companies should consider practising: Review the composition of the board of directors and the skills matrix to ensure that the team has the required skills. Provide training to all board members to develop their cyber vigilance and equip them to fulfill their duties as directors. Assess cybersecurity risks, including those associated with connected devices, and establish ways to mitigate those risks. The Act to modernize legislative provisions respecting the protection of personal information sets out a number of obligations for the board of directors, including appointing a person in charge of the protection of personal information, having a management plan and maintaining a register of confidentiality incidents. For more information, you can read the following bulletin: Amendments to Privacy Laws: What Businesses Need to Know (lavery.ca) Lastly, a company must at all times ensure that the supplier credentials, passwords and authorizations that make it possible for IT staff to respond are not in the hands of a single person or supplier. This would put the company in a vulnerable position if the relationship with that person or supplier were to deteriorate. See OWASP top 10

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  • Canadian Patents: Federal Court confirms that the PM(NOC) Regulations provide a patent enforcement mechanism only in relation to products that are in fact available to Canadians

    In a recent Federal Court decision, Justice Fothergill dismissed AbbVie’s applications for judicial review of the following decisions of the Minister of Health (the “Minister”): that JAMP was not a “second person” for the purposes of s 5(1) of the PM(NOC) Regulations; and to issue NOCs to JAMP for its SIMLANDI Presentations. Background AbbVie's drug HUMIRA first received approval in Canada in 2004 as a 50 mg/mL concentration of adalimumab. HUMIRA is widely used to treat numerous medical conditions including rheumatoid arthritis, adult and pediatric Crohn’s disease, and psoriasis. In 2016, high-concentration (100 mg/mL) HUMIRA was approved in Canada in a 40 mg/0.4 mL pre-filled syringe (DIN 02458349), and as a 40 mg/0.4 mL pre-filled auto-injector pen (DIN 02458357). In fact, AbbVie has marketing authorization in Canada for a variety of concentrations, but is actively selling only: the original (lower) 50 mg/mL concentration in 40 mg/0.8 mL strengths in both auto-injector pen and pre-filled syringe presentations, and the newer (higher) 100 mg/mL concentration in a 20 mg/0.2 mL pre-filled syringe. In December 2020 or January 2021, JAMP sought regulatory approval in Canada for its SIMLANDI drug, a “biosimilar” of AbbVie’s HUMIRA, in some of the strengths not actively sold by AbbVie (i.e., a 40 mg/0.4 mL pre-filled syringe, a 40 mg/0.4 mL auto-injector pen, and an 80 mg/0.8 mL pre-filled syringe). In its NDS, JAMP relied on three HUMIRA drug products having the same exact dosage forms, strengths, and routes of administration as the drugs to be marketed as SIMLANDI. None of these formulations of HUMIRA was marketed in Canada by AbbVie at the time JAMP submitted its NDS. Hereinafter, these drugs (DINs 02458349, 02458357, and 02466872) are referred to as the “referenced HUMIRA products”. In its correspondence with Health Canada’s Office of Submissions and Intellectual Property (“OSIP”), and after being told that their NDS was incomplete, JAMP submitted Form Vs on a “without prejudice” basis, yet took the position that it was not required to comply with s 5(1) of the PM(NOC) Regulations, as they were not a “second person” as defined therein because the referenced HUMIRA products had not been marketed in Canada for several years and therefore they were not drugs “marketed in Canada” as required by s 5(1). 5 (1) If a second person files a submission for a notice of compliance in respect of a drug and the submission directly or indirectly compares the drug with, or makes reference to, another drug marketed in Canada under a notice of compliance issued to a first person and in respect of which a patent list has been submitted, the second person shall include in the submission the required statements or allegations set out in subsection (2.1). [Emphasis ours] Health Canada’s Office of Patented Medicines and Liaison (“OPML”) later advised AbbVie of its preliminary view that the referenced HUMIRA products were indeed not currently being marketed in Canada. Therefore, the referenced HUMIRA products did not trigger s 5(1) of the PM(NOC) Regulations. However, AbbVie argued that JAMP nevertheless made reference to a drug product they marketed in Canada, thus falling within s 5(1) of the PM(NOC) Regulations. Namely, AbbVie argued that JAMP SIMLANDI indirectly made reference to their HUMIRA 20 mg/0.2 mL pre-filled syringe because both products had the same drug concentration (i.e., 100 mg/mL). Hence, the issue was to determine whether a second person seeking approval for a drug with a specific dosage strength could be considered to indirectly refer to a “drug marketed in Canada” with another dosage strength but having the same concentration. The Minister’s Decision After reviewing submissions from both parties, the OPML issued its final decision on December 23, 2021, in which it confirmed its preliminary determination that JAMP was not a second person for the purposes of s 5(1) of the PM(NOC) Regulations, and the corresponding obligations did not arise unless the second person’s NDS “directly or indirectly compares the drug with, or reference” to “another drug marketed in Canada”. The OPML found that “another drug marketed in Canada” must be interpreted to be specific with respect to strength, dosage form, and route of administration (i.e., it is DIN-specific).” The Minister found that the “indirect” comparison of s 5(1) did not expand the scope of the drugs for which a second person must address the patents listed on the Patent Register beyond the DIN-specific “another drug”. Hence, the HUMIRA 20 mg/0.2 mL pre-filled syringe marketed by AbbVie was not a proper reference product for JAMP’s 40 mg/0.4 mL pre-filled syringe, 40 mg/0.4 mL auto-injector pen, and 80 mg/0.8 mL pre-filled syringe. Accordingly, on January 5, 2022, the Minister issued NOCs to JAMP and JAMP launched its products on April 13, 2022. Subsequently, AbbVie sought judicial review of these two related decisions of the Minister, the result of which is the presently-discussed Federal Court decision. Ultimately, the Federal Court agreed with the Minister. Specifically, the Federal Court concluded that inter alia the following findings by the Minister were reasonable: that the term “another drug” in s 5(1) of the PM(NOC) Regulations is confined to the drug products identified by Health Canada, and that these products must have an identical dosage form, strength, and route of administration to the drug product of the second person. that s 5(1) of the PM(NOC) Regulations applies only where a second person files a submission for an NOC that (1) directly or indirectly compares its drug, or makes reference to “another drug”, (2) that other drug is marketed in Canada under an NOC issued to a first person, and (3) that other drug is a drug in respect of which the first person has submitted a patent list; that a drug that is not marketed is not eligible for the protections under the PM(NOC) Regulations; and that JAMP was not a second person under s 5(1) for the simple reason that AbbVie was not marketing in Canada the HUMIRA drugs that JAMP relied on for its NDS. Conclusion The Minister's decisions, as well as the Federal Court's finding that they were reasonable (pending any appeal), emphasizes one of the statutory objectives of the PM(NOC) Regulations, namely to provide a patent enforcement mechanism only in relation to products that are in fact available to Canadians. This also clarifies certain practical effects of this statutory objective, namely that the enforcement mechanism of the PM(NOC) Regulations is only available to an innovator that markets its innovative drug in Canada, and that s 5(1) of the PM(NOC) Regulations applies only to reference drug products that are identical down to a DIN-specific level with the drug to be approved. However, this does not mean that innovators are entirely without recourse when it comes to drugs they are not marketing in Canada. Under such circumstances, while innovators may not be able to utilize the PMNOC Regulations to prevent a NOC from being issued to a competitor, it can nonetheless commence normal patent infringement proceedings in Federal Court.   A copy of this decision, AbbVie Corporation v. Canada (Health), 2022 FC 1209, is available here.   Our intellectual property team would be happy to help you with any questions you may have regarding the PM(NOC) Regulations.

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  • Sales without legal warranty at the buyers’ risk: Clarity is key

    On July 15, 2022, Justice François Lebel of the Court of Québec rendered a decision1 confirming that, in the case of the sale of immovable property, a clear and unambiguous exclusion clause, whereby the warranty is waived at the buyer’s risk, results in a break in the chain of title preventing the buyer from taking any legal action under such warranty against the seller and previous sellers. Justice Lebel thus declared the originating application against the defendants Marshall and Bergeron inadmissible and dismissed the call in warranty. This decision is consistent with the recent decision of the Court of Appeal of Quebec in Blais,2 rendered in May 2022, which clarified the state of the law on the consequence of waiving a legal warranty where successive sales are involved. The facts In March 2009, the defendant Bergeron sold an income property (hereinafter the “Property”) to the defendants, the Marshalls, with a legal warranty of quality. In May 2012, the Marshalls in turn sold the Property to the defendants Hamel and Drouin, still with a legal warranty of quality. In December 2016, the defendants Hamel and Drouin resold the Property to the plaintiff, but this time [translation] “without legal warranty of quality, at the buyer’s risk, but with warranty of ownership”. In the fall of 2020, the plaintiff had work done to repair the drain tile system. It was at that point that it discovered the presence of petroleum hydrocarbons in the soil under the Property’s foundation, rendering the soil unsuitable for residential use. According to an expert report, the alleged contamination stemmed from a heating oil tank once located in a shed behind the Property. The tank was apparently removed before the sale in December 2016. The plaintiff was seeking a reduction in the sale price and to have the defendants Hamel and Drouin, as well as the two previous sellers, the defendants Marshall and Bergeron, held solidarily liable. The plaintiff referred to the warranty of quality provided for in articles 1726 and following of the Civil Code of Québec (C.C.Q.) and the warranty against public law restrictions provided for in article 1725 C.C.Q. The plaintiff also claimed to be the victim of fraud on the part of the defendants Hamel and Drouin. After being called in warranty by the defendants Hamel and Drouin, the Marshalls moved to dismiss the substantive claim and the action in warranty. They claimed that the sale of the Property between the defendants Drouin and Hamel and the plaintiff was made at the buyer’s risk and that such a clause in a subsequent deed of sale irrevocably breaks the chain of title, thereby preventing the plaintiff from taking any legal action against the seller and previous sellers. The law and the importance of a clear clause According to article 1442 C.C.Q., which codifies the principles arising from the decision in Kravitz,3 buyers may seek to have the sellers previous to their own seller held liable. However, for such an action to be deemed valid, it must be established that: The defect existed at the time that the previous sellers owned the immovable; and The right to the legal warranty was transferred to the plaintiff through subsequent sales. Indeed, the buyer of an immovable may take legal action directly against a previous seller in accordance with article 1442 C.C.Q. However, this article presupposes that the right to the legal warranty was passed on from one owner to the next, right down to the current buyer seeking to file a claim for latent defects. In other words, the legal warranty must have been transferred to each owner through the chain of title. In Blais, the Court of Appeal confirmed that an unambiguous warranty exclusion clause results in a break in the chain of title. Such a clause prevents the buyer of an immovable from taking legal action directly against the former owners who sold the immovable with a legal warranty. Given the decision in Blais, it is now clear that such a clause waiving the legal warranty closes the door to any direct recourse against a seller’s predecessors, even if such predecessors sold the immovable with a legal warranty.4 In these circumstances, a buyer who acquires an immovable at their own risk will be deprived of their right to take legal action directly against the previous sellers, insofar as the warranty exclusion clause in the deed of sale is clear and unambiguous. In this case, Justice Lebel considered that the wording of the warranty exclusion clause in the deed of sale, which was binding on the plaintiff, was clear and unambiguous, and that a sale at the buyer’s “risk” excludes both the warranty of quality and the warranty of ownership, which covers the public law restrictions of article 1725 C.C.Q. Justice Lebel indicated that there was a break in the chain of title resulting from the sale at the buyer’s risk and that the plaintiff could not claim that it was still entitled to take legal action directly against any sellers other than the defendants Hamel and Drouin. He therefore ruled in favour of the defendants Marshall and Bergeron and declared the originating application against them inadmissible. Key takeaways A warranty exclusion clause in a deed of sale will only be deemed valid if it is clear and unambiguous. The mention that a sale is made “at the buyer’s risk” completely eliminates the warranty of quality provided for in article 1726 C.C.Q. and the warranty of ownership provided for in article 1725 C.C.Q. A deed of sale containing a valid warranty exclusion clause AND a mention that the sale is made “at the buyer’s risk” precludes any recourse by the buyer against the seller, but also against previous sellers. With the current state of the Quebec real estate market, the decision in Hamel, which ties in with the Court of Appeal’s teachings in Blais, certainly clarifies how case law established in recent years should be applied, in particular as concerns the effect of a warranty exclusion clause on successive sales. The members of our Litigation and Dispute Resolution group are available to advise you and answer your questions. 9348-4376 Québec inc. c. Hamel, 2022 QCCQ 5217 Blais c. Laforce, 2022 QCCA 858. General Motors Products of Canada Ltd v. Kravitz, [1979] 1 S.C.R. 790 Supra note 1, paras. 6 and 8.

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  • Authorizations for treatment: the Court of Appeal rules on the legal representation of patients and hospitalization and re-hospitalization clauses

    In a decision rendered on September 1, 20221, the Court of Appeal of Quebec stated that a judge seized of an application for authorization for treatment must ensure that the patient in question can be heard and assert their rights. The Court also took the opportunity to analyze the indefinite hospitalization clauses and the re-hospitalization clauses made necessary following a subsequent deterioration in a patient’s health. Legal representation of patients The Court’s reasoning was based on the following elements: Article 90 C.C.P. allows the judge to appoint a lawyer ex officio to safeguard the rights and interests of an incapable person; A hearing on an application for authorization for treatment should not be held without the person who is the subject of the application being represented by a lawyer; The principle that such a person should be represented by a lawyer may have certain exceptions, but it can only be discarded after steps have been taken to offer the person involved the presence of a lawyer, following a close consideration of the stakes and circumstances of the case and of a decision expressly reasoned by the judge. As such, when an application for authorization for treatment is presented, the following analytical framework must be applied from the start of the hearing: The judge must assess whether the person concerned is incapable. To meet this first requirement, preliminary evidence of “likelihood of incapacity” must be provided2; The appointment of a lawyer must be necessary to safeguard the rights and interests of the person3 When these conditions are met, the judge must suspend the proceedings under article 160 C.C.P. for the period necessary for a lawyer to be appointed to represent the patient. The court may also issue a safeguard order. If the judge is not convinced that the second condition is met, they can withhold their decision and hear the evidence. Once the evidence has been adduced, they can decide to issue a safeguard order if the steps are met or decide on the merits of the application if this second criterion has not been met. In the latter case, they must expressly state the reasons which led them to this conclusion. The Court pointed out that prior to a hearing, a healthcare establishment must make sure that everything is done to ensure that the person concerned has the possibility of being represented by a lawyer. The bench is also of the view that the presence of an available lawyer at treatment hearings would be an ideal practice in order to allow the judge to appoint them ex officio. Hospitalization and re-hospitalization clauses In this case, the patient challenged the finding that they must remain hospitalized from the delivery of the judgment authorizing their treatment until their medical discharge. The court pointed out that in the absence of appropriate evidence, it is not up to the Court to usurp the role of the medical profession by setting a term for an ongoing hospitalization. The court maintained the order’s conclusion that the patient’s hospitalization should continue “until the attending physician deems [the patient’s] condition has sufficiently stabilized to allow them to be discharged safely.” Finally, the patient also challenged the conclusion of the judgment relating to their re-hospitalization in the event of non-collaboration with treatment. The Court of Appeal clarified that a clause of this nature should not be a sanction for non-compliance with the treatment plan. A re-hospitalization clause for non-collaboration depends on the circumstances of each case and must be substantiated by appropriate evidence. However, the court does not rule out that this eventuality may justify the re-hospitalization of a patient if evidence to this effect is presented. The members of Lavery’s Administrative Law team regularly represent healthcare establishments and remain available to advise you and answer your questions in connection with this new development in jurisprudence. A.N. c. Centre intégré universitaire de santé et de services sociaux du Nord-de-l’Île-de-Montréal, 2022 QCCA 1167 Para. 33 et seq. Para. 49 et seq.

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