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Is an event organizer responsible for an artist’s late appearance? Context is key, answers the Superior Court’s, as it dismisses the application for authorization to institute a class action against Gestion Evenko Inc.1 regarding Travis Scott’s late appearance at the Osheaga Music and Arts Festival in the summer of 2018. Overview of the first class action on this topic in Quebec. Background The Osheaga Festival, organized by the defendant, Evenko, is a huge celebration dedicated to music and visual arts where artists of all genres perform for three days on the many outdoor stages set up in Parc Jean-Drapeau on Notre-Dame Island. Rapper Travis Scott was on the lineup for the evening of August 3, 2018. His performance was scheduled from 9:45 p.m. to 10:55 p.m. on the River stage. Wishing to attend this performance, the plaintiff, who had purchased a weekend pass, went to the venue at 8:45 p.m. Unfortunately, Travis Scott was held up at customs that evening. The sequence of events can be summarized as follows. At 9:55 p.m., Evenko displayed a first message on the site’s giant screens indicating that the show was delayed for a reason beyond its control. At 10:15 p.m., Evenko broadcast a second message, both on the giant screens and on Twitter, indicating that Travis Scott had been delayed at customs and was on his way to Notre-Dame Island. At 10:30 p.m., the plaintiff left the premises; she claimed that she did not believe Evenko's messages, feared a curfew and found the crowd aggressive. At 10:40 p.m., Evenko broadcast a third message on the giant screens confirming that Travis Scott had arrived on the island. At 10:55 p.m., Evenko broadcast a fourth message announcing to festival-goers that the show was about to begin. The show started at 11:00 p.m. and ended around 11:40 p.m. An application for authorization to institute a class action was filed the next day. The plaintiff sought to represent nearly 50,000 festival-goers who, in her opinion, suffered prejudice attributable to Evenko. She claimed that Travis Scott’s 90-minute delay constituted a breach of contract by Evenko such that all members of the group should obtain a refund equivalent to the value of a daily pass. The Decision In carrying out the analysis required by section 575 of the C.C.P., Justice André Prévost concluded that the alleged facts did not appear to justify the conclusions sought. The application for authorization to institute a class action was therefore dismissed. From the outset, the Court questioned some of the allegations in the application: for example, the plaintiff’s assertion that [translation] “Travis Scott’s performance was the main consideration in the contract with Evenko” seems incompatible with the fact that she purchased a three-day pass (paras. 51, 56); similarly, there was no evidence to support her claim that the crowd was aggressive (para. 54). However, it is mainly two deficiencies in the legal syllogism that led the Court to conclude that the application for authorization did not establish an arguable case or a reasonable prospect of success (para. 66). First, the Court refused to reduce the Osheaga Festival experience to a single performance, even that of a headliner. Rather, it described the event as [translation] “a comprehensive experience [...] whose interest lies in the multiplicity and simultaneity of cultural experiences” (para. 48). In fact, in addition to the invited musical, cultural and circus artists, there are various activities, fairs, cruises and awards ceremonies, to name but a few (para. 48). The Court pointed out that all documents relating to Osheaga’s programming and schedule contain one or more of the following warnings: “Schedule and lineup subject to change” or “Artists and schedule subject to change” (para. 47). These warnings are a strong indication that such delays are far from unusual or, in the words of the Court, [translation] “this is not exceptional for those acquainted with the cultural milieu” (para. 57). In this context, Evenko cannot be found to be at fault. The Court continued its analysis, adding that, even if it were found to be at fault, which is not the case, the situation did not result in any compensable damage: Citing Sofio2 and Mustapha3, the Court pointed out that mere annoyance is not prejudice, and that, in fact, [translation] “there is no evidence that Travis Scott’s delayed performance caused a more serious inconvenience than what is usual for people attending festivals of this nature” (para. 65). In short, in the context of a multi-genre festival, an artist appearing late does not necessarily constitute compensable prejudice and does not automatically amount to the promoter’s failure to fulfil its obligations. What It Means The decision is important to the entertainment industry in that it recognizes that major event organizers sometimes deal with unforeseen circumstances and they are allowed reasonable leeway to adapt to them. Of course, each situation will be particular, but a well-informed promoter will make sure to indicate that changes are possible in its documentation. The decision also recognizes that a comprehensive cultural experience is more than the sum of its parts: a single artist appearing late does not cast a pall on the entire event. This conclusion is likely to apply to many other industries: Osheaga is a typical example of a set of distinct and simultaneous performances, but the same characterization can be given to all the rides in an amusement park or all the individual sections of a zoological garden. Our partners, Myriam Brixi and Laurence Bich-Carrière have successfully represented Evenko's interests in this case.   Le Stum c. Gestion Evenko inc., 2019 QCCS 2422. The time limit for appeal expired on July 22, 2019. Sofio c. Organisme canadien de réglementation du commerce des valeurs mobilières (OCRCVM), 2015 QCCA 1820. Mustapha v. Culligan of Canada Ltd., [2008] 2 SCR 114, 2008 SCC 27.

The new provisions of the Trademarks Act allow for earlier intervention with the Registrar in an attempt to prevent the registration of trademarks that create confusion with registered or applied-for trademarks through a notification system. As the owner of pending or registered trademarks in Canada, it is in your interest to know and take advantage of the notification procedure, as it allows you to become more proactive and possibly avoid the costs associated with traditional opposition proceedings. Indeed, the notification procedure allows you to bring to the Registrar's attention grounds bearing on the registrability of a third party’s pending trademark application, as soon as the application is filed, without waiting for it to be published in the Trademarks Journal. The grounds that may be invoked in a notification have recently been specified by the Trademarks Office: The mark applied for creates confusion with a registered mark or with a mark for which a previous application for registration is pending. One or more registered trademarks are used in a trademark application to describe the claimed goods and services. In order to protect your rights and take advantage of the notification procedure, make sure that you have proper trademark monitoring services that allow you to be promptly informed of new trademark applications that may infringe upon your exclusive rights. For any questions regarding trademark protection, the notification process as well as our trademark monitoring services, we invite you to contact our professionals.

At a time when it is becoming harder to distinguish true information from fake news and when a photo posted on social media can travel the world, companies are eager to do all they can to protect their image. What about when it’s your own employees who tarnish your company's reputation? Defamatory acts are increasingly common in the workplace and should not be taken lightly. These manifest in different forms and can permanently damage the employer's reputation. What is defamation? The courts agree that defamation consists in the communication of spoken or written remarks that cause someone to lose in estimation or consideration, or that prompt unfavourable or unpleasant feelings toward him or her. One might think that communication is limited to speech or writing. Nowadays, however, we recognize that defamation can be committed in many other ways, including through images or actions1. The anonymity of the web and the ease with which information can be shared have greatly altered the potential reach of a communication, which, while seemingly benign, can result in many legal proceedings. The courts have called the web the most powerful communication tool on Earth, capable of making a person famous in a few minutes or destroying their reputation with a single click!2 The three situations likely to incur the author's liability According to the Supreme Court3, there are three main situations that can constitute defamation. The first occurs when a person makes unpleasant comments about a third party that he or she knows to be false. Such statements can only be made out of malice, with the intention of harming others. The second situation occurs when a person says unpleasant things about another when he or she ought to have known they are false. A reasonable person generally refrains from sharing negative information about others if he or she has reason to doubt its veracity. Finally, the third, often forgotten, situation is that of a slanderer who makes unfavourable but true comments about another without any valid reason for doing so. In the workplace, these three situations can occur between two employees, between a supervisor and his or her employee, or between an employee and the company he or she works for. What about freedom of expression? Freedom of expression, which is frequently invoked to defend statements made against a third party, is not without limits, especially in an employment context. The concept of defamation makes it necessary to reconcile the right to protection of reputation with the right to freedom of expression, since the former generally takes away from the latter. The courts will seek a balance between these two fundamental rights, which are both protected by Quebec’s Charter of Human Rights and Freedoms. Thus, while in some cases the courts recognize the right of employees to express themselves online about their employer, they will ensure that the comments are not factual statements that prove to be false, unfounded, distorted or exaggerated4. In addition, employees may have various contractual obligations, such as any non-disclosure agreement or confidentiality agreement they may have signed, or they may be required to comply with various employer policies, for example on the use of social media or respect in the workplace. By entering into such agreements, the employee agrees to limit his or her right to freedom of expression5. Beyond any contractual obligations to which an employee has subscribed, the Civil Code of Québec obliges employees to act faithfully to their employer and not use any confidential information they obtain in the course of their work. These obligations apply not only in the context of employment, but also at all times where the information concerns the reputation and privacy of others. Moreover, these obligations continue for a reasonable time after the contract terminates. The courts recognize that the obligation to act faithfully includes protecting the employer's reputation. In case of defamation, what recourse does the employer have? Sanction the offending employee Whether the victim is an employee or a manager, the employer should not stand idly by if someone claims to be the victim of defamation. In addition to damaging the company's work environment and productivity, the victim may also be tempted to file a psychological harassment complaint, which is why it is important to act quickly and conduct a serious inquiry. The same reasoning applies when an employee makes defamatory statements about the company. If the inquiry determines that defamation has occurred, the employer may sanction the offending employee. The applicable sanctions are determined on a case-by-case basis, but may include dismissal. On this subject, we invite you to consult our guide on imposing disciplinary measures, published on the website. Sue the offending employee If the contested comments constitute a fault and cause damage, the employer could claim compensation from their author, even if he or she is a former employee, insofar as the employer can demonstrate prejudice and a causal link with the alleged comments. For example, see our bulletin on the Digital Shape Technologies decision, under which a former employee was ordered to pay $11,000 to the employer in moral and punitive damages because of the prejudice caused by two negative comments posted anonymously online. Six tips to prevent defamation Implement a policy on non-denigration and social media use and regularly remind all employees of its existence, while making the necessary links with the policies on the prevention and handling of harassment complaints, as well as policies on the promotion of civility in the workplace. Provide training to employees and educate them on the proper and ethical use of social media and the need to respect their obligation to act faithfully not only at work, but also outside it. Revise policies and working conditions (contracts and manuals) to take into account technological innovations and users’ new favourite networks. Keep an eye on traditional and social media. In this respect, it has already been decided that an employer who monitors the media through an automated alert system that informs it when articles and other written material are published about it and that, in this way, finds comments made about it by employees, is not conducting illegal surveillance6. Quickly document any defamatory situation. This is particularly important when the comments are made on the internet. The employer should keep a copy of any video, comment, blog or webpage containing defamatory comments about the employer, as they may be modified by the author or deleted altogether. These files must not be altered or modified. When it comes to an email conversation, it will be necessary to try to obtain the entire conversation and not just the defamatory passage that could be misinterpreted out of context. When the statements have been made verbally, the employer should try to collect evidence and have it recorded in writing during the inquiry. Once the employer realizes that, as a result of its inquiry, it is reasonably able to conclude that a person is damaging the employer’s reputation, it must give notice to the person to retract the comments and block any message reiterating such damage to the employer’s reputation. The employer should also check to what extent the sites and technological tools allow it to intervene in order to block or rectify the alleged remarks directly. Remember that the employer also has an obligation not to commit defamatory acts against its employees. An employer who speaks out in public and denounces the actions of its employees is equally liable. This was the case in particular in the Kativik case7, where the employer had made statements in the Journal de Montréal concerning the unprofessional conduct of one of its employees, who had publicly reported an internal dispute. The comments were deemed to be unfounded and read by more than one million readers, and the grievance arbitrator awarded the employee $15,000 in compensation. Similarly, a prudent employer will not make defamatory comments or seek to harm a former employee when contacted by another employer for references. The employer must provide truthful information, with the prior authorization of the person concerned. Prudent managers will be able to foster a respectful work environment both inside and outside the workplace through these preventive measures and, at the same time, reduce both potential and crystallized disputes by explicitly defining the behaviours expected of everyone and by acting promptly in the event of apparent breaches.   Bou Malhab v. Diffusion Métromédia CMR inc. 2011 SCC 9, par. 15. Laforest v. Collins, 2012 QCCS 3078, para. 117. Prud'homme v. Prud'homme, 2002 SCC 85, par. 6. Digital Shape Technologies Inc. v. Walker, 2018 QCCS 4374, par. 56 and 57. Ibid, para. 29. Syndicat des employées et employés professionnels-les et de bureau, section locale 574 (SEPB-CTC-FTQ) and Librairie Renaud-Bray inc. (Julien Beauregard, griefs patronaux et syndicaux), 2017 QCTA 26. Association des employés du Nord québécois and Commission scolaire Kativik,AZ-50966087.

The Superior Court of Québec dismissed an application for authorization to institute a class action against Yahoo! Inc.1 (hereinafter “Yahoo!”) seeking damages as a result of cyberattacks that compromised the confidentiality of user data. Context In September 2016, Yahoo! issued a press release announcing that nearly 500 million users were reportedly victims of a cyberattack in 2014. In December 2016, the company informed its users of another cyberattack that it claims took place in 2013. In February 2017, users were informed that the use of cookies apparently allowed a third party to access information contained in their accounts between 2015 and 2016. While a class action was brought in Ontario in December 2016, an application for authorization to institute a class action was filed in Québec the following month seeking compensation for users who were victims of one or more of these cyberattacks. The decision No arguable case After limiting the class to Québec residents whose information was lost and/or stolen between 2013 and 2019, the Court addressed the test set forth in paragraph 2 of article 575 of the Code of Civil Procedure. According to this criterion, the plaintiff must demonstrate that the alleged facts appear to justify the conclusions sought. The Court must distinguish factual allegations from arguments, opinions, unsupported inferences and hypotheses, as well as assertions that are implausible or false. This analysis is carried out in light of the plaintiff’s cause of action. In this case, the plaintiff had a Yahoo! email account. She alleged having suffered harm because her account may have been hacked during the 2013 cyberattack, although the nature of the compromised information is not yet known. She added that she suffered additional harm due to the “imminent” and “certainly impending” threat of identity theft and fraud resulting from the sale of her information on the black market and its use by criminals. She was also embarrassed because some of her friends received spam emails from her account in her name. As a result, she must now take steps to protect her personal and financial information. Building on the principles set out in the Sofio2 and Mustapha3 decisions, the Court reiterated that the demonstration of an alleged fault does not presuppose the existence of prejudice and that the latter must be serious and prolonged. Embarrassment and temporary inconveniences of an ordinary nature do not constitute compensable damages. Contrary to the allegations in the application, the Court considered that the plaintiff’s answers during her examination demonstrated that she has no reason to believe that she was a victim of identity theft or fraud, since she did not identify any suspicious charges and did not receive a poor credit report. In addition, she continued to use her Yahoo! account and admitted that she did not purchase any identity protection services, such as credit monitoring. Thus, the only prejudice the plaintiff suffered is the fact that she had to change her passwords for all of the accounts associated with her Yahoo! email address and the embarrassment she suffered because of the spam emails that were sent to her friends. On this point, the Court noted that none of the spam emails were filed into the Court record and that none of the recipients of the spam emails suffered harm. Consequently, the Court concluded that the plaintiff had not demonstrated the existence of an arguable cause. The Court distinguished the facts in this case from those in Zuckerman4 and Belley5, in which the plaintiffs had incurred expenses to protect their information or had been victims of fraud or identity theft. Inadequate representation Adequate representation implies that the representative plaintiff has a valid personal cause of action. However, a civil liability action requires the demonstration of a legal basis for the claim of damages, which was not achieved in this case. To summarize: It is not enough to claim the existence of a fault: damage must result therefrom. The notion of “compensable harm” must go beyond mere annoyance. Conclusion Legal action brought as a result of data breaches has increased exponentially in recent years. Cybercrime has become the second most common type of financial fraud. Any company that retains client data should be aware of the risks associated with cyberattacks and the potential lawsuits. To minimize risks, several measures can be implemented, such as adopting a response plan for cyberattacks, training employees and regularly updating security measures. For example, the PCI DSS (Payment Card Industry Data Security Standard) provides a detailed framework that allows companies to implement secure transaction processes. It is recommended that companies consult an IT specialist or hire an internal expert for guidance. It is also recommended that companies contact their insurers to verify their insurance policy coverage and, if necessary, obtain cyber risk insurance coverage. For class action practitioners, this decision once again demonstrates the importance of bearing in mind the impact that the examination of the representative plaintiff could have on the outcome of a case.   Bourbonnière v. Yahoo! Inc., 2019 QCCS 2624. Sofio c. Organisme canadien de réglementation du commerce des valeurs mobilières (OCRCVM), 2015 QCCA 1820. Mustapha v. Culligan of Canada Ltd., 2008 SCC 27. Zukerman v. Target Corporation, 2015 QCCA 1809. Belley v. TD Auto Finance Services Inc./Services de financement auto TD inc., 2015 QCCS 168/2015 QCCA 1255.

The Government of Canada has just announced that the new Patent Rules, as well as certain amendments to the Patent Act, will come into force on October 30, 2019. These changes implement the Patent Law Treaty and reduce the risk of a loss of rights to Applicants but also bring about practice changes worthy of mention: Canadian national phase of a PCT application For applications filed in Canada via PCT national phase entry: Things will be getting faster Under the new system, the deadline to request examination will be reduced to 4 years from the PCT filing date (currently 5 years) and the typical deadline to respond to an Office Action will be reduced to 4 months with possible fee-based extension to 6 months (currently 6 months with no extension). Therefore, CA prosecution shall be shorter overall. “Late” national phase entry It is currently possible to enter the CA national phase past the 30-month deadline and up to 42 months from priority, as a matter of right. Under the new rules, such “late” national phase entry will only be possible if missing the original 30-month deadline was unintentional (a statement must be submitted to that effect). The Canadian Intellectual Property Office (CIPO) will exercise its discretion to accept or refuse such declarations. Therefore, it would be prudent to consider the 30-month deadline as a hard deadline for CA national phase entry. New system for dealing with missed deadlines to request examination or pay maintenance fees Under the current system, if such a deadline is missed, a further 12 months would be available via the abandonment/reinstatement system (applications) or late payment system (patents), as a matter of right. The new system will provide an additional safeguard to Applicants, as missing such deadlines will trigger the issuance of a CIPO notice requesting that the required action be taken within a new deadline. However, missing the new deadline will result in a new category of abandonment requiring reinstatement under a “due care” standard (a statement must be submitted to show “due care”). Once again CIPO will have discretion to accept or refuse declarations of “due care”. The prudent approach will be to avoid relying on showings of due care by meeting all deadlines. Restoration of priority Canadian practice will come into line with the restoration of priority provisions of the PCT. Such a procedure extends the usual 12-month priority period by a further 2 months if missing the original 12-month deadline was unintentional (the standard to be used in CA). Therefore, Applicants can rest easy that such a restoration of priority will also be available in Canada. Sequence listing page fees While sequence listings have been submitted in electronic form for a number of years, they were nonetheless included in the calculation of CIPO excess page fees payable with the issue fee. Under the new practice, a sequence listing submitted in electronic form will no longer be considered in such calculations. This will greatly benefit Applicants who file cases with large sequence listings. “Regular” Canadian applications For Canadian applications directly filed at CIPO (i.e., not via the PCT), equivalent changes to those noted above (with the exception of “late” national phase entry, which is not applicable) will be implemented by comparable provisions. The following additional changes are also noteworthy: Filing certified copies of priority applications For Canadian applications claiming priority under the Paris Convention, it will become necessary to file a certified copy of any priority applications (or refer CIPO to a digital library to access the document). The deadline will be the later of 4 months from filing and 16 months from priority. It will of course be good practice to have such certified copies available at CA filing. Fewer requirements to secure a CA filing date It will be easier to obtain a filing date for such direct-filed applications, as various requirements may be fulfilled shortly after filing. Notably, a translation into English or French, if applicable, may be submitted post-filing (in contrast to CA national phase applications filed via the PCT). It will nonetheless be good practice to have all documents and information ready at filing. We can show you the way! We are here to help guide Applicants as we transition to this new era of Canadian patent practice! Please do not hesitate to contact a member of our team!

On May 17, 2019, the Ministère des Finances du Québec announced new anti-avoidance tax measures in its Information Bulletin 2019-5 (the “Bulletin”) that are in line with today’s tightening of the tax environment and the fight against tax planning deemed to be aggressive. The measures announced on May 17, 2019, essentially target three types of operations: sham transactions; nominee agreements; mandatory disclosure of “prescribed transactions.” Failure to comply with the new measures could have consequences not only for taxpayers having carried out such transactions, but also for various persons associated with or related to said taxpayers. These consequences range from substantial penalties to a ban on doing business with the Government of Québec. The measures also provide for penalties, and, in the case of sham transactions, bans affecting advisers and promoters of such operations. This initiative began on October 15, 20091 and the new measures set out in the Bulletin supplement those announced on November 10, 20172, which included, among other things, penalties imposed on taxpayers3 and promoters of transactions4 when an assessment is issued based on the General Anti-Avoidance Rule (“GAAR”). Most of these measures came into force on February 1, 20185. The new measures Sham transactions The concept of “sham” has been defined as a transaction or a complex series of transactions conducted with an element of deceit so as to create an illusion calculated to lead the tax authorities away from the taxpayer or to confound the tax authorities with respect to the true nature and legal consequences of the transaction(s)6. As announced in the Bulletin, four new measures will apply to assessments, reassessments or additional assessments (an “Assessment”). As a result, taxpayers who are party to a transaction or series of transactions involving a sham could be subject to one or more of the following measures: Longer limitation period to issue a reassessment: The Agence du Revenu du Québec (“Revenu Québec”) will have an additional three years to issue a reassessment for a transaction involving a sham. The limitation period will now be six or seven years rather than three or four years. This measure applies not only to the taxpayer, but also to taxpayers related to or associated with said taxpayer. For example, this measure applies to a taxpayer who is a member of a partnership that is itself party to a sham transaction7. More severe penalties for the taxpayer, promoter and adviser: For a taxpayer having participated in a sham transaction, the new measures introduce a penalty equal to the greater of $25,000 or 50% of the tax benefit generated by the sham transaction; For the Promoter or the Adviser having participated in a sham transaction that will be subject to an Assessment, the penalty will be equal to 100% of the fees paid for said transaction. For the purposes of the new measures and in accordance with section 1079.9 of the Taxation Act, a person is referred to as a “Promoter” if (i) the person or partnership commercializes the transaction or series of transactions, promotes it or otherwise supports its development or the interest it generates; (ii) the person or partnership receives or is entitled to receive, directly or indirectly, a consideration for the commercialization, promotion or support, or another person or partnership related to, or associated with, the person or partnership receives or is entitled to so receive such a consideration; and; (iii) it is reasonable to consider that the person or partnership assumes an important role in the commercialization, promotion or support. In addition, in accordance with section 1079.8.1 of the Taxation Act, an “Adviser” in respect of a transaction means a person or partnership that provides help, assistance or advice regarding the design or implementation of the transaction, or that commercializes or promotes it. In-house and independent tax planners are thus covered by these definitions and are subject to the disclosure obligations and penalties listed below. Suspended limitation period: The limitation period otherwise applicable will be suspended to allow for the issuance of a reassessment to determine the tax consequences arising from a transaction or series of transactions involving a sham when Revenu Québec makes a formal demand for information concerning unnamed persons. These three measures came into force on May 17, 2019, except for a transaction that is part of a series of transactions that began before said date and will be completed before August 1, 2019. Registration in the Register of Enterprises Ineligible for Public Contracts (“RENA”) upon a final assessment: A taxpayer who is the subject of a final assessment in respect of a sham transaction or a promoter or adviser on whom a penalty has been imposed on the same basis will be registered in the RENA. The duration of this ban and the possibility of appealing this decision are not mentioned in the Bulletin and remain unclear. Normally, a five-year ban could apply. In order to obtain the authorization of the “Autorité des marchés publics” to bid for public contracts or subcontracts, the companies concerned will need to obtain a certificate from Revenu Québec confirming that the taxpayer in question has not been the subject of a GAAR-based final assessment nor participated in a sham transaction, in addition to the criteria that already apply, namely that appropriate tax returns and documents have been duly filed and that the taxpayer is not indebted to Revenu Québec. The same will apply to the Promoter or Adviser of the transaction that led to the issuance of the final assessment. The Bulletin announces that these taxpayers will be included on the RENA list. As of the date of this bulletin, this measure has not yet been adopted by the National Assembly. Nominees A nominee agreement is considered to be a valid agreement by which a person is mandated to act in the place of, and in the name of, another person. This type of agreement is often used in real estate transactions. The Bulletin states that the tax legislation will be amended to take into account three new measures: Mandatory disclosure: From now on, any nominee agreement must be disclosed to Revenu Québec within 90 days of its conclusion, using a prescribed form8. No such form is currently available, this does not preclude the taxpayer from providing the information listed in the Bulletin in order to comply with this new measure and avoid any penalties. Penalty for non-disclosure: Failure to comply with the obligation will result in a penalty of up to $5,000. The parties to the nominee agreement will be jointly and severally liable for said amount. Suspended prescription period: In cases where the information return disclosing the nominee agreement is not filed within the prescribed time limit, the prescription period otherwise applicable will be suspended with respect to the tax consequences arising from a transaction or series of transactions that occurred that year and that are part of the nominee agreement. It is important to note that the disclosure made by either party to the nominee agreement will be deemed to also have been made by the other party. These new measures apply to all nominee agreements entered into on or after May 17, 2019. These measures also apply to any nominee agreement entered into before May 17, 2019, for which the tax consequences of transactions relating thereto persist after said date. In these cases, the deadline for disclosure to Revenu Québec is September 16, 2019. Mandatory disclosure and “prescribed transactions” In 2009 and 2015, Revenu Québec implemented measures to counter abusive tax planning that included a mandatory disclosure mechanism for certain transactions deemed to be “aggressive.” The Bulletin states that tax legislation will be amended to extend the scope of this mandatory disclosure mechanism to transactions or series of transactions that will be called “prescribed transactions.” A taxpayer who carries out a prescribed transaction or who is a member of a partnership carrying out a prescribed transaction will be required to file an information return for all transactions that, for a fiscal or taxation year, result in a tax benefit of $25,000 or more or have an impact on income of $100,000 or more. A prescribed transaction will be a transaction or series of transactions whose form and purpose are significantly similar, but not necessarily identical, to those described by Revenu Québec on a list yet to be published. As of the date of this bulletin, said list has not yet been published. Revenu Québec will publish a list of these transactions at such time as it deems appropriate. This measure is not in effect at this time. In addition, an Adviser or Promoter commercializing a prescribed transaction that requires little or no modifications to adapt it to different taxpayers is required to disclose to Revenu Québec, using the prescribed form, the facts relating to the prescribed transaction and any other information provided for in the form. Penalties: : A taxpayer who fails to file the aforementioned information return will incur a penalty of up to $100,000. the taxpayer who fails to comply with this obligation to disclose a prescribed transaction will incur a penalty equal to 50% of the tax benefit obtained as a result of the transaction in question. In addition, the prescription period applicable to a taxation year covered by this information return will be extended in accordance with the current provisions of the Taxation Act; An Adviser or Promoter who fails to file the aforementioned information return will incur a penalty of up to $100,000. Moreover, the Adviser or Promoter who fails to comply with this disclosure obligation will incur a penalty equal to 100% of his or her fees with respect to the various taxpayers to whom he or she has commercialized or promoted the undisclosed prescribed transaction. These measures will apply to all prescribed transactions published by Revenu Québec as of May 17, 2019. For more details, we invite you to refer to the information bulletin 2019-5. Our team specializing in litigation and tax law can help you prevent or resolve any potential disputes with the tax authorities.   Information Bulletin 2009-5. Tax Fairness Action Plan and Information Bulletin 2017-10. Penalty increased from 25% to 50% of the amount assessed. Penalty increased from 12.5% to 100% of the fees paid to the promoter. A ban on contracting with the State when the taxpayer is subject to a final GAAR-based assessment was also provided for, but this measure has not yet been adopted by the National Assembly. This measure would also affect the promoter. Cameco Corporation v. The Queen, 2018 TCC 195. According to the Bulletin, this measure applies to a taxpayer who is party to a sham transaction; a taxpayer who is a member of a partnership that is party to a sham transaction; a corporation associated with the taxpayer or the partnership that is party to a sham transaction at the time that it is carried out; a corporation associated with a taxpayer who is a member of a partnership that is party to a sham transaction at the time that it is carried out; a person related to the taxpayer or the partnership that is party to a sham transaction at the time that it is carried out; a person related to a taxpayer who is a member of a partnership that is party to a sham transaction at the time that it is carried out. The taxpayer must disclose the identity of the parties to the nominee agreement; a full description of the facts relating to the transaction or series of transactions to which the nominee agreement relates; the identity of any person or entity on which such a transaction or series of transactions has tax consequences; and any other information requested in the prescribed form.

As an employer, you may occasionally be required to impose disciplinary measures on problem employees. Handling such difficult situations requires an objective, planned approach so as to put an end to the misconduct and minimize the risk of litigation. To assist you in implementing your intervention and imposing disciplinary measures, here is a brief review of the three essential steps: (1) conducting an investigation, (2) selecting an appropriate disciplinary measure, and (3) imposing the disciplinary measure. It is important to note that a disciplinary measure should be both a penalty and corrective action. Non-disciplinary (administrative) action is used when an employee commits an unintentional violation that cannot be rectified because of the person’s inability to perform the required work (e.g., due to lack of knowledge or skills). On the contrary, disciplinary action is warranted when an employee deliberately engages in misconduct. In this case, the measure is aimed at penalizing the employee and correcting the behaviour. Step one: conducting a thorough, objective disciplinary investigation Steps required for a disciplinary investigation When you find out that an employee may have committed a violation that warrants a disciplinary investigation, it is essential that you promptly gather the facts, rather than acting impulsively. Steps to follow: Determine whether it is necessary to suspend the employee with or without pay during the investigation; Determine who may have witnessed the violation; Set up meetings with the witnesses: Prepare a list of open-ended questions that do not suggest a version of the facts or a judgment of the situation (this list may be improved during investigation meetings by adding sub-questions aimed at obtaining more detail, while ensuring that the same questions are asked and the same aspects confirmed with all those interviewed); Meet with witnesses individually in a private area to ensure the confidentiality of the process; Set aside sufficient time to cover all aspects of the situation being investigated; Plan for replacements for employees called to meetings, if necessary; and Ensure that a second person is present to act as a witness (to take notes during meetings and to attest to what was discussed). Meet with potential witnesses: Take notes that are as complete as possible during meetings; Ensure that you fully understand the answers and information provided by the witnesses; Ask questions to obtain clarification when in doubt to avoid misunderstanding the version of the facts being reported; Do not be afraid of moments of silence, since they sometimes have the effect of making witnesses speak more, giving them the opportunity to elaborate on their answers; and Ideally, obtain a written statement, dated and signed by the witness, that summarizes the information provided during the meeting, or confirm the contents of the oral statement with the witness by having the witness read the notes taken during the meeting. Meet with the employee suspected of having committed the violation last, to obtain his or her version of the facts. Apply the same rules to that meeting as those listed above for setting up meetings and meeting with other witnesses. Act quickly and carefully It is important to act diligently when initiating and conducting the investigation, as doing so will allow you to: Collect evidence while it is still fresh in the minds of those concerned; Rectify the problematic situation quickly; and Avoid creating unnecessary stress for employees, particularly if the investigation reveals that no violation can be proven. Notwithstanding the above, take the time to gather all necessary information or carry out further investigation before deciding whether to impose a disciplinary measure. Respect the collective agreement or the organization’s working conditions If a collective agreement applies to your employees, you must ensure that you comply with the disciplinary investigation requirements set out in the agreement, including the obligation to inform the union or allow a union representative to be present at meetings, time limits for imposing a disciplinary measure, conditions for disclosing the reasons why a measure is being imposed, etc. If there is no collective agreement, it is prudent to follow the rules the employer has set for itself in internal policies or other working condition documents. Step two: selecting the disciplinary measure  If the investigation reveals that the employee has indeed committed a violation that warrants disciplinary action, you must now select a disciplinary measure. Penalty proportional to the misconduct When selecting a measure, the first principle is to ensure the penalty is proportional to the misconduct. The more serious the misconduct, the more severe the penalty should be. Penalty scale (subject to exceptions) Barring exceptional circumstances and subject to your organization’s collective agreement and policies, you should use a penalty scale, which normally includes the following: Verbal notice; Note: Although this is a verbal notice, a detailed description of the notice must be kept in the employee’s file to ensure that the situation is monitored. Written notice; Suspension; Depending on the circumstances, it is generally preferable to impose a short suspension, followed by a longer one, before dismissing an employee. Dismissal. There are exceptions to implementing such a penalty scale, including, in particular, the following: Serious misconduct having the effect of permanently breaking the relationship of trust which must exist between employee and employer; and Management employees (although such a scale is difficult to apply to management employees who have committed violations, nevertheless, with few exceptions, they should have been previously notified of the allegation and been given the opportunity to make amends). Things to consider when selecting a penalty In addition to using a penalty scale, you must ensure that you comply with the collective agreement and your business’s policies, which may include provisions for disciplinary action in the event of violations of the requirements specified in such policies. You must also verify whether the proposed measure is consistent with disciplinary measures applied in previous similar cases, so as to demonstrate that discipline is carried out consistently and fairly throughout the business, while respecting the specific facts of each case. Finally, you must consider the aggravating and mitigating factors that are relevant to your employee’s situation. Here is a non-exhaustive list of examples: Aggravating factors Mitigating factors Seniority (depending on violation) Seniority (depending on violation) Disciplinary record riddled with violations Clean disciplinary record Significant consequences of the violation for the business, customers, colleagues, etc. Violation with no significant consequences for the business, customers, colleagues, etc. Status or importance of the employee’s duties to the business Employee’s tasks are generally supervised or not critical to corporate affairs Premeditated violation Violation that was not premeditated Absence of remorse or apology Admission of guilt, show of remorse and apology Lack of collaboration or transparency during the investigation Collaboration and transparency during the investigation Employee autonomous when carrying out duties, generally without supervision Lax supervision or requirements on the part of the employer in the past in relation to the violation Step three: imposing the disciplinary measure  Once you have determined the disciplinary measure that best fits the circumstances, you must call a meeting to inform the employee of the measure. As with investigation-related meetings, you must meet with the employee in private and ensure that a witness is present with you to take notes during the meeting. Notes and disciplinary measures must be entered in the employee’s file. During the meeting, a disciplinary letter must be given to the employee, and the contents of the letter must be repeated to confirm the measure being imposed and to clearly and succinctly explain the violation(s) the employee is accused of. If the measure is not dismissal, you should take the opportunity to remind the employee of your expectations, which should also be explicitly stated in the disciplinary measure letter. In addition, the letter should state that any subsequent misconduct may result in a more severe disciplinary measure, which could even include dismissal. We remind you that you must document and carry out the measure in accordance with the requirements of the collective agreement and business policies, if applicable. Conclusion This quick reference guide should help you plan the imposition of a disciplinary measure to ensure that you: Carry out a proper investigation; Carefully select the measure to be imposed; and Impose a disciplinary measure in an appropriate manner, ensuring that you monitor your employee’s disciplinary file. However, measures must be imposed on a case-by-case basis. Our Labour and Employment Law team is available to advise and assist you for each of the three steps.

Following the adoption of Bill C-86, which amends certain provisions of the Canada Business Corporations Act ("CBCA"), corporations will now need to compile a list of "individuals with significant control" in the corporation in a new register, to be maintained by the corporation. The purpose of these amendments is to create greater transparency in the ownership and control of business corporations, in order to contribute to the fight against money laundering and tax evasion. The new CBCA provisions, which will come into force on June 13, 2019, will apply to all corporations governed by this law and that are private issuers. Who is an "individual with significant control"? An "individual with significant control of a corporation" is defined as: An individual who is the registered holder of a "significant number of shares"; An individual who is the beneficial owner of a significant number of shares; An individual who has direct or indirect control or direction over a significant number of shares; An individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; and/or An individual to whom prescribed circumstances apply.1. What is a “significant number of shares”? A significant number of shares is defined as: Any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares; or Any number of shares that is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value. If a “significant number of shares” is held jointly by many individuals, or if one of the above-mentioned rights is subject to any agreement or arrangement under which the right or rights are to be exercised jointly or in concert by those individuals (such as a unanimous shareholder agreement, for example), each of those individuals will be considered to be an “individual with significant control”. The name of the individual(s) and the other information mentioned below must then be recorded in the register. What Information Must the Register Contain? Bill C-86 provides that, in addition to the other registers currently maintained by corporations with respect to directors, shareholders and securities, corporations must now also maintain a register of "individuals with significant control". This register must include the following information with respect to each of the "individuals with significant control" : Name, date of birth and last known address; The jurisdiction of residence, for tax purposes; The date on which the individual became an “individual with significant control” of the corporation and, if applicable, the date on which the individual ceased to have significant control; A description of how the individual is an “individual with significant control” and, as applicable, a description of his or her rights and interests with respect to the shares of the corporation; Any other prescribed information; 2; Another section of the register must provide a description of each step taken by the corporation to update the information. Corporations must ensure that the information recorded in the register is accurate, complete and up-to-date at least once during each financial year. However, it should be noted that the corporation must also update the register within 15 days after becoming aware of any changes to the information mentioned above. Who Can Access the Register? The information contained in this new register will not be accessible to the public. Only the Director of Corporations Canada, the shareholders, or the creditors of the corporation (as well as their representatives) can, upon request, consult the register. However, the information obtained by the corporation’s shareholders or creditors may only be used in connection with: an effort to influence the voting of shareholders of the corporation; an offer to acquire securities of the corporation; any other matter relating to the affairs of the corporation; The shareholder or the creditor must provide an affidavit to the corporation to this effect. Federal Bill C-97, which also amends the CBCA, will require a corporation, at the request of an investigative body (such as police forces and the Canada Revenue Agency or its provincial counterparts) that has reasonable grounds to suspect that an offence has been committed, to provide the investigative body with a copy of its register of individuals with significant control, or any information specified by that investigative body that appears in the register3. What are the Consequences of a Failure to Comply? The legislative provisions provide for several penal sanctions which can be severe: A corporation that, without reasonable cause, contravenes these new provisions is guilty of an offence and is liable to a fine not exceeding $5,000; A person that, without reasonable cause, uses the information recorded in the register for purposes other than those described above is guilty of an offence and is liable to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 6 months, or to both; 3) Directors or officers of a corporation who, knowingly, (i) authorize, permit or acquiesce in the contravention by the corporation of these new provisions relating to the maintenance of a register, (ii) record, or authorize, permit or acquiesce in the recording of false or misleading information in the register, (iii) provide, or authorize, permit or acquiesce in the provision of false or misleading information in relation to the register to any person or entity, are liable to a fine not exceeding $200,000 or to imprisonment for a term not exceeding 6 months, or to both; 4) Shareholders of a corporation who provide or authorize the provision of false or misleading information to any person or entity, or refuse to disclose the requested information, are liable to a fine not exceeding $200,000 or to imprisonment for a term not exceeding 6 months, or to both. And in the Canadian Provinces? Most Canadian provinces, including Quebec, have already announced that they will follow Parliament’s lead. British Columbia is the first province to propose an amendment to the Business Corporations Act (BC). The Business Corporations Amendment Act of 2019 introduced the “Transparency Register”, which is the equivalent of the federal register of individuals with significant control and its application criteria. This bill also contains a provision enabling police forces to access the register in specific situations. And in Other Countries? The requirement to maintain a register of individuals with significant control was introduced, in particular, in the United Kingdom, in April 2016, with the ultimate objective of deterring money laundering and tax evasion by promoting corporate transparency. Moreover, the register implemented in the United Kingdom is accessible to the public. The legislation in the United Kingdom also includes penal sanctions for non-compliance with its provisions. To date, there have been no references in the media of the United Kingdom to penal charges against corporations that failed to complete the People with Significant Control (PSC) register, or recorded false information in the register. Instead, the Companies House agency seems to be focused on intervening in minor deficiencies of the register in order to reduce the number of incorrect statements about individuals with significant control over a corporation. Companies House also states that the compliance rate of corporations — ranging from 97% to 99% — is excellent. Conclusion The intentions behind these new provisions are laudable, but several questions remain unanswered on reading the legislative provisions that will soon come into force. Difficulties in interpretation and application will inevitably arise, at least until regulations are enacted or the courts can provide some guidance. For example, in cases where corporate structures involve several corporations and/or trusts, the calculation of voting rights or fair market value may be complex. Similarly, when a corporation has issued both preferred and common shares, how will the fair market value of those shares be determined? And what about the concept of “direction” over a significant number of shares, which is not defined in the new legislation? How should this concept be interpreted? Finally, with respect to the “control in fact” of the corporation, will it be necessary to refer to the tax legislation and to the courts’ interpretation of this concept? All these questions will have to be assessed in the coming months. We invite you to communicate with our team in order to implement the measures required by this new legislation.   Note that no regulation has been adopted and no draft regulations have been published as of the date hereof. Note that no regulation has been adopted and no draft regulations have been published as of the date hereof. Bill C-97 was adopted by the House of Commons in 3rd reading on June 6, 2019 and is in first reading before the Senate as of the date hereof.

Cross-border deals are always challenging, but when related to AI technologies, such deas additionally involve substantial variations in terms of the rights granted in each jurisdiction. Looking at cross-border deals about Artificial Intelligence technologies therefore requires a careful analysis of these variations in order to properly assess the risks, but also to seize all available opportunities. Many AI technologies are based on neural networks and rely on large amounts of data to train the networks. The value of these technologies relies mostly on the ability to protect the intellectual property related to these technologies, which may lie, in some cases, in the innovative approach of such technology, in the work performed by the AI system itself and in the data required to train the system. Patents Given the pace of the developments in Artificial Intelligence, when a transaction is being negotiated, we are often working with patent applications, well before any patent is granted. That means we often have to assess whether or not these patent applications have any chance of being granted in different countries. Contrary to patent applications on more conventional technologies, in AI technologies one cannot take it for granted that an application that is acceptable in one country will lead to a patent in other countries. If we look at the US, the Alice1 decision of a few years ago had a major impact, resulting in many Artificial Intelligence applications being difficult to patent. Some issued AI-related patents have been declared invalid on the basis of this case. However, it is obvious from the patent applications that are now public that several large companies keep filing patent applications for AI-related technologies, and some of them are getting granted. Just across the border up north, in Canada, the situation is more nuanced. A few years ago, the courts said in the Amazon2 decision that computer implementations could be an essential element of a valid patent. We are still hoping for some specific decision on AI systems. In Europe, Article 52 of the European Patent Convention excludes "programs for computers". However, a patent may be granted if a “technical problem” is resolved by a non-obvious method3. There may be some limited potential for patents on Artificial Intelligence technologies there. The recently updated Guidelines for Examination of patent applications related to AI and machine learning), while warning that expressions such as "support vector machine", "reasoning engine" or "neural network" trigger a caution flag as typically referring to abstract models devoid of technical character, point out that applications of IA and ML do make technical contributions that are patentable, such as for example: The use of a neural network in a heart-monitoring apparatus for the purpose of identifying irregular heartbeats; or The classification of digital images, videos, audio or speech signals based on low-level features, such as for example edges or pixel attributes for images In contrast, classifying text documents solely based on their textual content is cited as not being regarded to be a technical purpose per se, but a linguistic one (T 1358/09). Classifying abstract data records or even "telecommunication network data records" without any indication of a technical use being made of the resulting classification is also given as an example of failing to be a technical purpose, even if the classification algorithm may be considered to have valuable mathematical properties such as robustness (T 1784/06). In Japan, according to examination guidelines, software-related patents can be granted for inventions “concretely realizing the information processing performed by the software by using hardware resources”4. It may be easier to get a patent on an AI system there. As you can appreciate, you may end up with variable results from country to country. Several industry giants, such as Google, Microsoft, IBM and Amazon keep filing applications for Artificial Intelligence and AI-related technologies. It remains to be seen how many, and which, will be granted, and ultimately which will be upheld in court. The best strategy for now may be to file applications for novel and non-obvious inventions with a sufficient level of technical detail and examples of concrete applications, in the event case law evolves such that Artificial Intelligence patents are indeed valid a few years down the road, at least in some countries. Judicial exceptions remain: Mathematical Concepts: mathematical relationships, mathematical formulas or equations, mathematical calculations; Certain methods of organizing human activity: fundamental economic principles or practices (including hedging, insurance, mitigating risk); commercial or legal interactions (including agreements in the form of contracts; legal obligations; advertising, marketing or sales activities or behaviours; business relations); managing personal behaviour or relationships or interactions between people (including social activities, teaching, and following rules or instructions); and Mental processes: concepts performed in the human mind (including an observation, evaluation, judgment, opinion). Take-home message: patent applications on AI technology should identify a technical problem, provide a detailed technical description of specific implementations of the innovation that solve or mitigate the technical problem, and give examples of possible outcomes have a greater hope of getting allowed into a stronger patent. Setting the innovation within a specific industry or as related to specific circumstances and explaining the advantages over known existing systems and methods contributes to overcoming subject matter eligibility issues. Copyright From the copyright standpoint, we have also some difficulties, especially for the work created by an AI system. Copyright may protect original Artificial Intelligence software if it consists of “literary works” under the Copyright Act, including: computer source code, interface elements, a set of methods of communication for a database system, a web-based system, an operating system, or a software library. Copyright can cover data in a database if it complies with the definition of a compilation, thereby protecting the collection and assembling of data or other materials. There are two main difficulties in the recognition of copyright protection in AI creation: one relates to the machine-generated work that does not involve the input of human skill and judgment and the second concerns the concept of an author, which does not specifically exclude machine work but may eliminate it indirectly by way of section 5 of the Copyright Act, which indicates that copyright shall subsist in Canada in original work where the author was a citizen or resident of a treaty country at the time of creation of the work. Recently, we have seen Artificial Intelligence systems creating visual art and music. The artistic value of these creations may be disputed. However, the commercial value can be significant, for example if an AI creates the soundtrack to a movie. There are major research projects involving the use of AI technologies to write source code for some specific applications, for example in the gaming industry. Some jurisdictions do not provide copyright protection to work created by machines, like the US and Canada. In Canada, some recent case law specifically stated that for a work to be protected under the Copyright Act, you need a human author5. In the US, some may remember Naruto, the monkey that took a selfie. In the end, there was no copyright in the picture. While we are not sure how this will translate for Artificial Intelligence at this point, it is difficult to foresee that an AI system would have any such right if a monkey has none. Meanwhile, other countries, such as the UK, New Zealand and Ireland, have legal provisions whereby the programmer of the Artificial Intelligence technology will likely be the owner of the work created by the computer. These changes were not specifically made with AI in mind, but it is likely that the broad language that was used will apply. For example, in the UK, copyright is granted to “the person by whom the arrangements necessary for the creation of the work are undertaken”6. The work created by the system may have no protection at all in Canada, the US and several other jurisdictions, but be protected by copyrights in other places, at least until Canada and the US decide to address this issue by legislative changes. Trade secrets Trade secret protection covers any information that is secret and not part of the public domain. In order for it to remain confidential, a person must take measures, such as obtaining undertakings from third parties not to divulge the information. There are no time limits for this type of protection, and protection can be sought for machine-generated information. Data privacy Looking at data privacy, some legal scholars have mentioned that, if construed literally, the European GDPR are difficult to reconcile with some AI technologies. We just have to think about the right to erasure and the requirement for lawful processing (or lack of discrimination), which may be difficult to implement7. If we look into neural networks, they typically learn from datasets created by humans or by human training. Therefore, these networks often end up with the same bias as the persons who trained them, and sometimes with even more bias because what neural networks do is to find patterns. They may end up finding a pattern and optimizing a situation from a mathematical perspective while having some unacceptable racial or sexist bias, because they do not have “human” values. Furthermore, there are challenges when working on smaller datasets that allow reversing the “learning” process of the Artificial Intelligence, as it may lead to privacy leaks and trigger the right to remove specific data from the training of the neural network, which itself is technically difficult. One also has to take into account laws and regulations that are specific to some industries, for example HIIPA compliance in the US for health records, which includes privacy rules and technical safeguards8. Laws and regulations must be reconciled with local policies, such as those decided by government agencies and which need to be met in order to have access to some government data; for example, to access electronic health records in the Province of Quebec’s, where the authors are based. One of the challenges, in such cases, is to come up with practical solutions that comply with all applicable laws and regulations. In many cases, one will end up creating parallel systems if the technical requirements are not compatible from one country to another.   Alice Corp. v. CLS Bank International, 573 U.S., 134 S. Ct. 2347 (2014) Canada (Attorney General) v. Amazon.com, Inc., 2011 FCA 328 T 0469/03 (Clipboard formats VI/MICROSOFT) of 24.2.2006, European Patent Office, Boards of Appeal, 24 February 2006. Examination Guidelines for Invention for Specific Fields (Computer-Related Inventions), Japanese Patent Office, April 2005. Geophysical Service Incorporated v Encana Corporation, 2016 ABQB 230; 2017 ABCA 125; 2017 CanLII 80435 (SCC). Copyright, Designs and Patents Act, 1988, c. 48, § 9(3) (U.K.); see also Copyright Act 1994, § 5 (N.Z.); Copyright and Related Rights Act, 2000, Part I, § 2 (Act. No. 28/2000) (Irl.). General Data Protection Regulation, (EU) 2016/679, Art. 9 and 17. Health Insurance Portability and Accountability Act of 1996

On April 16, 2019, the Federal Court of Appeal issued a judgment resolving a deadlock that had been plaguing the Canadian art community since June 12, 2018. Since June 2018, the Canadian Cultural Property Export Review Board (the “Board”) has had to take into consideration the Federal Court’s findings in Heffel Gallery Limited v. Canada (Attorney General).1 As a result of this judgment, the eligibility of foreign artwork was facilitated with respect to the issuance of permits to export cultural property2 but compromised with respect to the issuance of income tax certificates.3 It was thus easier to obtain a permit to export artwork abroad and more difficult for donors to Canadian museums to benefit from income tax deductions In contrast to the way the Board had been operating, this trial judgment interpreted the “national importance” criterion very restrictively. As a result, the applicability of the Cultural Property Export and Import Act4 (the “Act”) was limited to works with a direct connection to Canada. Outstanding objects that were not produced in Canada or by a Canadian artist could no longer benefit from the protections afforded by the Act when exported5 or qualify for income tax certificates. In a unanimous decision, the Federal Court of Appeal6 overturned the trial judgment by finding that a work by an international artist can meet the level of national importance required under the Act. In this regard, the Federal Court of Appeal found that the “national importance” criterion allows for a determination of the effect that exporting the object would have on the country.7 As a result, a work or its creator does not need to have a direct link to Canada to be eligible for tax deductions and the application of the export control mechanism. The Trial Judgment The piece “Iris bleus, jardin du Petit Gennevilliers”8 (“Iris bleus”) by impressionist painter Gustave Caillebotte is at the heart of this dispute. In November 2016, the Heffel Gallery held an auction in which a London-based commercial gallery acquired the painting. In order to deliver Iris bleus to its buyer, the Heffel Gallery had to apply to the Board9 for an export permit. The expert examiner in the case refused the application, and, subsequently, the Board’s review panel did the same.10 Following these refusals, an application was made to the Federal Court for judicial review, in which it had to rule on the meaning of the national importance criterion as it appears in the Canadian Cultural Property Export Control List11 (the “Control List”). Following to their analysis, the Court deemed the Board’s interpretation of the national importance criterion to be too broad.12 Although it recognized the plurality of Canadian culture, the Federal Court found that the objects covered by the “national importance” criterion must have a direct connection to Canada.13 Pursuant to this interpretation, the Court adopted a position expressly favouring the property rights of owners of cultural property as well as economic liberalism in the art market.14 The trial judgment had unfortunate consequences, most notably, the fact that numerous institutions had to suspend or even cancel new acquisitions15 because certain generous donors could no longer receive tax certificates.16 The Federal Court of Appeal Judgment In its reasons for judgment, the Federal Court of Appeal first reiterates the broad outlines of the applicable legislative framework and its primary objective. In 1977, Parliament enacted the Cultural Property Import and Export Act17 in order to protect Canada’s national heritage. In adopting said law, Parliament was complying with its international commitments to UNESCO to combat the trafficking of cultural objects.18 The control list system established by Parliament (the “Control List”) sets out a number of conditions that must be met in order for an object’s export to be controlled under the Act.19 If the object is not included in the Control List, an export permit may be issued. If it is, an expert examiner determines whether the object "(a) is of outstanding significance by reason of its close association with Canadian history or national life, its aesthetic qualities or its value in the study of the arts or sciences; and (b) is of such a degree of national importance that its loss to Canada would significantly diminish the national heritage”.20 According to the Federal Court of Appeal, the trial judge erred in refusing to defer to the Board’s decision. In other words, when interpreting its own incorporating legislation, the Board is “better situated to understand the policy concerns and context needed to resolve any ambiguities in the statute.”21 » This error is significant because Parliament had granted broad powers to the Board when assessing an object according to the “national importance” criterion. More specifically, these powers recognize the expertise of the members appointed to the Board based on their specialization in the fields of cultural property, cultural heritage and cultural institutions.22 Conclusion Canada’s cultural institutions were undoubtedly relieved by this jurisprudential outcome. By recognizing that a work can be of national importance without necessarily being Canadian, this decision crystallizes the experts’ interpretation of the Act and the resulting practices that were predominant in the cultural community prior to the trial judgment. Donors who own exceptional works by foreign artists can once again donate them to Canadian institutions’ collections and benefit from tax incentives in return. The Federal Court of Appeal concludes by reiterating the purpose of the existing legislative framework, namely to “prevent many Canadian institutions from being ‘culturally ghettoised’ in allowing them to acquire works of art with a view of preserving cultural heritage for future generations.”23   2018 CF 605. Cultural Property Export and Import Act, R.S.C. 1985, c. C-51, ss. 7-16 Id., ss. 32 and 33. The income tax certificate is the mechanism of the Cultural Property Export and Import Act (the “Loi”) that allows those who donate works to Canadian institutions to benefit from the tax deductions provided for in the Income Tax Act. Supra note 2. Under the terms of the Cultural Property Export and Import Act, institutions may exercise a priority right of purchase that delays the export of any work considered exceptional and of national importance for up to six months. Canada (Attorney General) v. Heffel Gallery Limited, 2019 FCA 82 Id., para. 37. 1982, oil on canvas, 21 ¾ x 18 ¼ inches. Cultural Property Export and Import Act, supra note 2, ss. 8(3) and 40. Heffel Gallery Limited v. Canada (Attorney General), supra note 1, para. 8. C.R.C., c. 448. Heffel Gallery Limited v. Canada (Attorney General), supra note 1, para. 12. Id., para. 20-21. Id., para. 26-27. On this subject, see Catherine LALONDE, “Des dons qui échappent aux musées,” Le Devoir, December 19, 2018. Cultural Property Export and Import Act, supra note 2, ss. 32 and 33. Supra note 2. In order to comply with their commitment under the Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, 14 November 1970, 823 UNTS 231 (entered into force April 24, 1972), signatory countries were required to adopt legislation ensuring cross-border control of cultural property. The object must be included in one of the well-defined categories of the Control List, be at least 50 years old and, in the case of a natural person’s work, its creator must be deceased. In addition, where the object is not of Canadian origin, it must have been in Canada for at least 35 years. Cultural Property Export and Import Act, supra note 2, s. 11(1), emphasis added. Canada (Canadian Human Rights Commission) v. Canada (Attorney General), 2018 SCC 31, cited in Attorney General of Canada v. Heffel Gallery Limited, supra note 6, para. 52. Canada (Attorney General) v. Heffel Gallery Limited, supra note 6, para. 33. Id., para. 57

A few weeks before the coming into force of the amendments to the Trade-marks Act, the following is a reminder of the actions you should consider taking before June 17, 2019 to protect your rights and save costs. Actions To Take Benefits Renew your registrations and classify your products & services Cost savings before June 17, 2019: $50 per renewal. $125 for each class of products and services (beyond the 1st class), since products and services must henceforth be classified according to a system of 45 classes. Protect the trademarks associated with your main products & services Review your trademark portfolio and ensure that your currently marketed products and services are protected. If not, file an application before June 17 to save costs: before June 17: a single $250 filing fee, regardless of the number of classes of products and services covered by your application. on or after June 17: a $330 fee for the 1st class + $125 per additional class. Protect your trademarks for your future plans Do you intend to launch new lines of products and services in the next few years? Take advantage of lower fees until June 17 and the elimination of the declaration of use by filing a trademark application to extend your protection. Beware of trolls! Monitor your marks The elimination of the declaration of use has encouraged the spread of trademark trolls to Canada. Use a monitoring service to react quickly to third parties who attempt to misappropriate your mark. The trademark registration process will be greatly simplified as of June 17, 2019, particularly because of the elimination of the declaration of use. The new registration process will indeed allow trademark registration, without any use requirement in Canada by the applicant. To avoid disputes involving your trademarks, remember that it is important to conduct searches before launching a new mark and to quickly file applications for registration.

On April 10, 2019, came into force several long-awaited amendments to the Pay Equity Act, which are mainly intended to improve the pay equity audit process. These amendments follow last year’s Supreme Court of Canada ("SCC") judgment1. We discussed these judgments in a previous bulletin. It should be recalled that the SCC, in its decision of May 10, 2018, essentially declared certain provisions of the Pay Equity Act unconstitutional, stating that: Compensation adjustment, in the context of a pay equity audit conducted every five years, must be retroactive; The information to be included in the posting of the audit results was insufficient to allow employees to properly understand the process followed by the employer during the audit and did not include the date on which inequity manifested itself. In fact, the amendments to the Pay Equity Act go much further than most of the adjustments required by the Supreme Court of Canada, despite public consultations and numerous comments from employer groups in this regard. The following is a brief summary of the most significant amendments to the Pay Equity Act that your organization should review in order to quickly ascertain their repercussions: 1. Pay equity audit: Events leading to adjustments Compensation adjustments, following the pay equity audit process, will now have to be paid retroactively, back to the date of the event leading to the adjustment. The Pay Equity Act does not provide any clarification as to the notion of the event leading to the adjustment. In practice, the employer will therefore have to examine the events that have affected pay equity on a case-by-case basis. One can imagine that this amendment will not be easy to apply and that in the case of several events and adjustments, retroactivity will have to be applied on different dates. The retroactive payment required as a result of the pay equity audit will be payable in a lump sum. However, in some cases, for persons still employed by the employer, this lump sum may be spread over several payments, after consultation with the pay equity audit committee or the certified union representing employees, as the case may be. In addition, the employer must indicate the date of the event on the posting of the audit results. With respect to the date on which an employer must perform the pay equity audit, the Pay Equity Act now provides that the five (5) year time limit is established from the first posting and not the second posting, whether for an initial pay equity exercise (through a program or not) or a previous audit. 2. Pay equity audit: Participation of employees and certified associations Another major change is the introduction of an employee participation process in cases where the initial exercise was conducted by a committee or where there is at least one certified union representing employees. One of the consequences of this participation process is that the employer is obliged to provide information about the audit work, including written documents. The Pay Equity Act provides that persons with access to this information are required to maintain its confidentiality. The employer must also institute consultation measures so that the certified union or employees can ask questions and submit comments. The employer also has an obligation to allow employees to meet at the workplace to determine who will be designated in the participation process. In any event, employees are deemed to be at work for the purposes of this process. Finally, the employer will have to include questions or comments submitted as part of the participation process in the posting and show how they were considered in the audit. 3. Retention of documents Documents used to achieve pay equity or to perform the pay equity audit must now be kept for a period of six (6) years instead of five (5). In the case of a complaint or investigation, the employer is required to keep these documents until a final decision is made or until the investigation is closed. 4. End of posting notices Good news: In order to somewhat streamline the posting process, it will no longer be necessary for employers to issue a notice stating that a pay equity posting is in progress. 5. Creation of a complaint form The Commission des normes, de l'équité, de la santé et de la sécurité du travail ("CNESST") has created a complaint form that employees will have to use to file a complaint. This complaint must briefly state the reasons for which it is being filed. 6. Grouping complaints and conciliation The Pay Equity Act now provides the possibility for the CNESST to group complaints if they have the same juridical basis, are based on the same facts or raise the same points of law, or if circumstances permit. In addition, when more than one certified union represents employees in the same job class and one of these unions files a complaint, the process requires the appointment of a conciliator. In the case of a group of complaints or a complaint filed by a certified union in an enterprise, an employee who has also filed a complaint must receive a copy of the agreement that has been reached, and this employee may refuse to be bound by this agreement. In the event that no agreement has been reached, the Commission des normes, de l'équité, de la santé et de la sécurité du travail ("CNESST") must then determine the measures that must be taken to ensure that pay equity is achieved or maintained. Transitional measures Second postings related to a pay equity audit made prior to April 10, 2019, continue to be governed by the previous provisions of the Pay Equity Act. However, in the case of a first posting made before April 10, 2019, the second posting must include the date of each event leading to an adjustment, in accordance with the changes made: A period of 90 days (until July 9, 2019) is allowed to make this second posting. Note: Adjustments resulting from this second posting will be due as of the date of the event that generated these adjustments and will therefore be retroactive according to the ministère du Travail, de l’Emploi et de la Solidarité sociale. An employer that must issue a posting related to the pay equity audit by July 9, 2019, is not required to implement a participation process under the new provisions of the Pay Equity Act, even if a pay equity committee had been formed when pay equity was achieved or if a certified union represents all or some of the employees concerned. If an employer was authorized by the CNESST before February 12, 2019, to conduct its pay equity audit after April 10, 2019, and, if not for that authorization, the posting of the audit would have been done before April 10, 2019, then the previous provisions of the Pay Equity Act will apply. For pay equity audits to be completed by April 10, 2020, the new reference dates for calculating audit periods will only apply as of the next pay equity audit. What employers should do Right now? The Quebec government had to amend the Pay Equity Act to reflect the SCC's decision. These amendments will give rise to a number of practical difficulties that employers will have to anticipate. Pay equity audit Although the maintenance of pay equity must be audited every five years, we believe that employers will have to institute a mechanism to periodically identify major changes within the company that could lead to pay inequities for predominantly female job classes. It will be necessary to keep a history of these events in order to be able to determine which ones have led to adjustments, if any, when posting the audit results. In any case, a history of the work should be kept, whether or not it was done by a committee, in order to ensure a certain continuity within the enterprise in the event of a change of manager. Since it requires continuous monitoring of the payline to comply with legal requirements, the audit process itself will become less onerous. Employee participation With respect to employers now required to institute an employee participation process, it will also be prudent to have employees who participate in the audit process sign a confidentiality agreement and make them aware of the sensitive nature of the information to which they have access. Posting Employers will have to ensure adequate disclosure of information in the postings, which will enable better understanding of the audit results and potentially minimize the risk of complaints. Training and communication It will be essential to train managers on pay equity in order to ensure a good understanding of the legislation and avoid inconsistencies in the implementation of the audit process. In short, although pay equity is a value that has reached a point of consensus in our society, the fact remains that the law imposes a restrictive and formal framework that will have to be put in place. Our Labour and Employment team can provide you with valuable support in this exercise and we invite you to contact us.   Quebec (Attorney General) v. Alliance du personnel professionnel et technique de la santé et des services sociaux, 2018 SCC 17

On June 13, 2018, Bill 141, An Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutions (hereinafter referred to as the “Act”), received assent. This reform has a significant impact on certain laws governing the financial sector, amending the Civil Code of Québec (“C.C.Q.”) regarding the divided co-ownership of an immovable. While many of the legislative amendments will have to wait for the regulations to come into force, others took effect on December 13. Here is an overview of them. Insurance obligations of the syndicate of co-owners The provisions of section 6411 of the Act amend the manner in which the insurance obligations of the syndicate of co-owners under article 1073 of the C.C.Q. are regulated. Here is a brief description of these amendments: Deductible Insurance taken out by syndicates must have a reasonable deductible. It will be up to the legislator to define this concept in a future regulation. Risks covered The risks covered by operation of law will be prescribed by regulation. These will be deemed to be covered, unless the policy or a rider sets out, expressly and in clearly legible characters, which of those risks are excluded. Amount of coverage The amount of insurance must cover the reconstruction of the immovable in accordance with the standards, usage and good practice applicable at that time; the amount must be evaluated at least every five (5) years by a member of a professional order designated by government regulation. Insured persons The members of the syndicate’s board of directors and the manager as well as the chair and the secretary of the general meeting of the co-owners and the other persons responsible for seeing to its proper conduct must take out third person liability insurance. It should be noted that the manager may be a co-owner or a third party, in accordance with article 1085 C.C.Q. The insured status of a management company for the purposes of a syndicate's policy could have a significant impact on insurers' potential recoveries. Identification of improvements to private portions The Act provides that the syndicate must keep at the disposal of the co-owners a description of the private portions that is sufficiently precise to allow any improvements made by co-owners to be identified2. The identification of these improvements will in principle have the advantage of clearly defining what is covered by the co-ownership’s insurance and what is covered by the co-owner’s insurance. If not identifiable, the improvements would remain the responsibility of the syndicate. Creation of a self-insurance fund In addition to having to set up a contingency fund and an operating fund, the syndicate will have to set up a self-insurance fund that is liquid and available on short notice3. This fund will be used to pay the deductibles provided for in the insurance policies taken out by the syndicates and to compensate for damage to property in which the syndicates have an insurable interest, when the contingency fund or an insurance indemnity cannot provide for it. The amount of the self-insurance fund must be based on the amount of the deductible and must provide for an additional reasonable amount to cover the other expenses for which it is established. Insurance obligation Each co-owner must take out third party liability insurance, the amount of which will be determined by regulation4. Damage to property - Repair or claim Section 642 of the Act provides for the insertion of articles 1074.1 to 1074.3 after article 1074 C.C.Q.5. These articles have the following provisions: When a loss occurs which falls under the coverage provided for by a property insurance contract entered into by the syndicate and the syndicate decides not to avail itself of the insurance, it shall with dispatch see that the damage caused to the insured property is repaired. A syndicate that does not avail itself of insurance may not sue a co-owner, a person who is a member of a co-owner’s household, or a person in respect of whom the syndicate is required to enter into an insurance contract to cover the person’s liability for expenses incurred. On the other hand, it seems that the syndicate could benefit from a right of recourse in the event of a claim not involving insurance coverage. However, the sums incurred by the syndicate to pay the deductibles and make reparation for the injury caused to property in which the syndicate has an insurable interest may not be recovered from the co-owners otherwise than by their contribution for common expenses, subject to damages it can obtain from the co-owner bound to make reparation for the injury caused by the co-owner’s fault. This reservation making it possible to claim damages is open to interpretation. It would be possible to read these new articles and conclude that the syndicate retains rights of recourse against a co-owner for damage to property in which it has an insurable interest in the event that no insurance coverage is at stake and the co-owner's fault can be demonstrated. Or, perhaps the legislator intended to preserve the syndicate’s rights to claim damages other than the cost of repairing the damage caused to the property, as permitted by article 1728 C.C.Q. in respect of latent defects. These amendments and this notion of damages will undoubtedly need to be clarified by the courts. Finally, syndicate insurance will take precedence in the event that the same risks and property are covered by more than one insurance policy. Insurers’ subrogatory action The limitations on insurers' subrogatory rights in matters of divided co-ownership are now codified. The insurer of the syndicate, co-owner, person who is a member of a co-owner’s household, or person in respect of whom the syndicate is required to enter into an insurance contract to cover the person’s liability will be denied the right to bring a subrogatory action against one of these persons. The only possible exception to this rule applies in the case of bodily or moral injury or if the injury is due to an intentional or gross fault5. Conclusion Although many of the above-mentioned amendments remain dependent on the adoption of regulations, it remains important for the representatives of co-ownership syndicates to carry out the necessary checks to validate their insurance needs and obtain the appropriate advice from professionals in this sector. Insurers will also have to adjust their practices as a result, both when insurance is taken out and when managing claims.   These amendments will come into force 12 months after the publication of a regulation made under the 3rd paragraph of article 1073 C.C.Q. A first regulation must be published by June 13, 2020, at the latest. The provisions of section 638 come into force on different dates depending on the date of establishment of the co-ownerships concerned. See sections 653 and 814 para. 2 of the Bill 141. The provisions regarding the self-insurance fund will come into force 24 months after the publication of a regulation made under the 3rd paragraph of article 1072 C.C.Q. A first regulation must be published by June 13, 2020, at the latest. The entry into force of these provisions is conditional on the adoption of a regulation to be published no later than June 13, 2020. These provisions have been in effect since December 13, 2018.