Publications

Packed with valuable information, our publications help you stay in touch with the latest developments in the fields of law affecting you, whatever your sector of activity. Our professionals are committed to keeping you informed of breaking legal news through their analysis of recent judgments, amendments, laws, and regulations.

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  • Federal Budget 2022: Good News for Mining Exploration Compagnies!

    On April 7, 2022, Finance Minister Chrystia Freeland tabled the federal government’s new budget for 2022. This budget includes several tax measures relevant to the mining industry in Canada. The Canadian federal government intends to provide $3.8 billion over eight years to implement Canada’s first critical minerals strategy. One of the methods used to implement this new strategy and stimulate exploration is an investment vehicle well known to the mining industry: flow-through shares. The 2022 budget proposes to create a new 30% Critical Mineral Exploration Tax Credit (CMETC) for certain specified minerals. Specified minerals that would be eligible for the new CMETC are: copper, nickel, lithium, cobalt, graphite, rare earth elements, scandium, titanium, gallium, vanadium, tellurium, magnesium, zinc, platinum group metals and uranium. As for the regular mineral exploration tax credit, the exploration expenses must have been incurred in Canada. The renunciation of expenses must also have been made under flow-through share agreements entered into after budget day and before March 31, 2027. It is important to note that there will be no cumulation of tax credits. Eligible expenditures will not be eligible for both the proposed new CMETC and the 15% regular mineral exploration tax credit (METC). In order for exploration expenses to qualify for the CMETC, a qualified person (as defined in National Instrument 43–101 issued by the Canadian Securities Administrators) will further have to certify that the expenses renounced will be incurred in the course of an exploration project for specified minerals. On this point, the measure seems to insert a new legal test of “reasonable expectation” that the minerals targeted by the exploration are “primarily specified minerals”. No details have yet been issued on the mechanics of applying this test.  However, if the qualified person is unable to demonstrate that there is a reasonable expectation that the minerals targeted by the exploration project are predominantly specified minerals, the related exploration expenses would not be eligible for the CMETC and consequently, any credit granted for ineligible expenses would be recouped from the flow-through share holder who received the credit. Pending the tabling of a more detailed legislative version, careful attention and planning will therefore be required for new flow-through share financings to ensure that they meet the legal criteria for this new tax credit. Our team of professionals in securities, mining law and taxation is available to answer all your questions regarding this new measure and to assist you in the implementation of a successful flow-through financing: Josianne Beaudry René Branchaud Ali El Haskouri Charles-Hugo Gagné Éric Gélinas Sébastien Vézina

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  • A dismissed employee’s obligation to mitigate damages in the context of the COVID-19 pandemic

    Over the years, the Quebec courts have repeatedly stated that dismissed employees have a duty to mitigate the damages they suffer as a result of a dismissal. This obligation, which is now codified in the Civil Code of Québec,1 has been adapted to the circumstances of the cases over which the courts have presided. The question, then, is whether the COVID-19 pandemic is likely to have an impact on a dismissed employee’s obligation to mitigate damages. The Administrative Labour Tribunal (hereinafter the “ALT”) addressed this issue in its recent decision Tourigny c. Fonds de solidarité des travailleurs du Québec (FTQ)2 (hereinafter the “Tourigny decision”). Background  On August 30, 2021, the ALT upheld Ms. Tourigny’s complaint against a dismissal made without a good and sufficient cause under section 124 of the Act respecting labour standards.3 The complainant, who held a position as director of the Direction Marketing Investissement department before being dismissed on January 28, 2019, claimed, in particular, the wages she lost as a result of her dismissal up to the date of the ALT decision upholding her complaint. The employer argued that the complainant had failed in her duty to mitigate her losses. For her part, the complainant felt that she had done everything in her power to find a job quickly. It should be noted that the COVID-19 pandemic began while the complaint was being heard in court.  Decision on the obligation to mitigate losses  The ALT reiterated, quoting the decision in Durocher c. Lisam America Inc.,4 that dismissed employees have a duty to mitigate damages resulting from their dismissal, even when they are dismissed without good and sufficient cause. This obligation is one of means and is assessed based on the circumstances of each case using the reasonable person test. The ALT further noted, quoting the decision in Agropur, Division Natrel c. Teamsters Québec local 1999 (Montpetit),5 that the duty to mitigate damages consists of two components, namely (1) to make reasonable efforts to find new employment, and (2) not to refuse an offer of employment that is reasonable in the circumstances. In the Tourigny decision, the ALT confirmed that the complainant had failed to mitigate her losses. As such, it reduced the indemnity for lost wages by $34,000, finding that, given the pandemic and the scarcity of job offers, the complainant should have conducted a more thorough job search and been more open to positions that did not perfectly match the job she held prior to her dismissal. Thus, the ALT stated the following: [69] For the Tribunal, during a recession or even a pandemic, when job offers are less important and less financially attractive than in normal times, one must, on one hand, expect to conduct a more rigorous search. [70] On the other hand, one must be more open to offers which, even if they do not correspond exactly to those held in the previous job, are related to the expertise or jobs already held. [our translation]In short, with the pandemic in mind, the ALT deducted two (2) months of gross salary from the indemnity for lost wages, which amounted to $34,000, because: The complainant had taken two (2) trips abroad of about ten days each in the first few months following her dismissal, and the employer did not have to assume the financial consequences of the complainant’s choice to do so; The complainant had been in a management position for a short time and limited her job search to positions similar to the one she held prior to her dismissal. However, limiting herself to management positions with working conditions similar to those she had with the employer—which were exceptional—did not demonstrate a willingness to mitigate her damages. Thus, according to the ALT, the complainant had set aside several positions that could have provided her with a substantial income; and The complainant had applied for only one job during the first eight (8) months following her dismissal and thirty-eight (38) jobs over the next twenty (20) months, that is, fewer than two (2) jobs per month. Her job search efforts were therefore not considered sufficient. Conclusion In short, the Tourigny decision confirms that the context in which employees find themselves is relevant in determining the extent of their obligation to mitigate the damages they suffer as a result of their dismissal. In theory, employers should not be penalized when a dismissed employee fails to put in the necessary effort to find a job during challenging economic times. In circumstances such as these, arising from, say, a pandemic, a dismissed employee must make greater efforts to find a job, failing which the indemnity paid by their former employer may be reduced considerably. The members of our Labour and Employment Law group are available to counsel you and answer your questions. CQLR, c. CCQ 1991, art. 1479. 2021 QCTAT 5548. CQLR, c. N-1.1. 2020 QCTAT 4648. 2018 QCTA 445.

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  • One Out of Five Critical Illness Insurance Claims Are Denied: Which Changes Should Insurers Make?

    The Autorité des marchés financiers (AMF) has recently published a study that it conducted with the largest active insurers in the Quebec insurance industry, entitled “Critical Illness Insurance Supervisory Report”1 (hereafter the “Report”).The study reveals surprising statistics that have led the AMF to issue recommendations for changes to critical illness insurance: Insurers must try to better explain insurance products to consumers in order to help them better understand the policies they are buying. Critical illness insurance   Critical illness insurance is insurance that consumers can purchase for themselves or a loved one. It provides for the payment of a sum of money should the insured suffer from a critical illness that matches the definition set out in their insurance contract. The illnesses that are typically covered by this type of insurance are cancers (at a life-threatening stage), heart attacks and strokes. In general, the following principles apply to critical illness insurance: Each policy has a list of illnesses it covers. An insurance policy may also specify exclusions to covered illnesses. When an insurance policy covers a critical illness and no exclusions apply, it may have other conditions such as a waiting period2 or a survival period,3 which can vary from one insurance policy to another. AMF findings   The AMF found that insurers deny one out of five critical illness insurance claims. In its Report, it notes that, in general, consumers face several issues with critical illness insurance, both in terms of understanding the product and with its purchase. These issues appear to result from the lack of information, clarity, support and consumer understanding. Covered illnesses and their characteristics differ from one product to the next and from one insurer to another. This makes it hard for consumers to easily compare available products. Moreover, the language used to describe products and draft policies is often complex. Insurance policies also contain many limitations and exclusions (such as pre-existing conditions) and various time limits that can be hard to grasp. AMF Recommendations   Based on its findings, the AMF has developed five recommendations for insurers, and it expects insurers to apply corrective action. For the time being, the AMF does not intend to apply sanctions, but says that it will “take appropriate action when required.”4 Avoid situations where prepared materials and advertising result in confusion for consumers or in an incorrect understanding of the product Insurers must exercise care in how they use statistics and slogans in their materials and advertising. The AMF believes that certain forms of advertising can lead consumers to misunderstand the provided coverage because of statistics and slogans that are broader than the actual coverage set out in a contract. Insurers must keep to information that is relevant to the actual features of the product offered. The AMF insists that “it should not appear to consumers as if the product covers more than it really does or as if they require more insurance than they really need.” Better help consumers properly understand the product An insurance policy may cover different illnesses and may contain varying features. The vocabulary used in critical illness insurance contracts is often technical and specific to medical and insurance fields. Insurers should provide relevant and complete information written in accessible language to avoid confusion with the insured. The AMF suggests that insurers make tools such as guides, glossaries, summaries, illustrations and timelines available to help consumers better understand the features of their insurance policies, the scope of their coverage and any limitations, exclusions, time limits, and so forth. Provide insureds with post-purchase assistance The AMF indicates that support after purchasing critical illness insurance is key to help the insured better understand their rights and obligations and when to exercise them. It suggests that insurers implement post-purchase information communication mechanisms, such as making information available on a secure website, periodic statements or reminders of options that can be exercised. Better equip the distribution channels to appropriately advise their clients The AMF stresses that the various distribution channel stakeholders must be able to provide clear and relevant information to the insured over the entire lifecycle of the product. To do so, insurers should improve their training programs and provide appropriate reference tools to their distribution channels, which could include product features, the target client group for each product and a comparison with other types of products to assist customers in making choices. Facilitate the claims, complaint examination and dispute resolution processes Insurers must ensure that they provide sufficient information to the insured and fairly process claims. The AMF suggests that insurers make claims processes and claim forms easily accessible on their websites. The reasons for denying a claim should also be clearly explained in the letter to the insured, and the letter should outline the next steps, such as the opportunity to request a review or to file a complaint. Conclusion   Insurers offering critical illness insurance products should implement the recent AMF recommendations to better inform consumers on their rights and obligations and on products offered and the coverage they provide. By implementing the AMF’s suggestions into their critical illness insurance activities, insurers will not only reduce the claims denial rate in the industry, but also avoid potential litigation. Autorité des marchés financiers, Critical Illness Insurance Supervisory Report (Report), Québec City, 2021. [Report] Time period that must elapse before critical illness coverage comes into force after the insurance policy is issued. Time period that must elapse before compensation after a critical illness is diagnosed. Report, p. 7.

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  • Self-insurance: possible if in accordance with the Insurers Act

    Introduction There are multiple insurance policies available on the market to protect your property in Quebec. But how well do you know all your options? In 2016, we addressed peer-to-peer insurance, which is essentially a community of users wanting to insure similar goods and services together.1 However, in November 2021, the Superior Court of Québec rendered an interesting decision2 on self-insurance in the context of insurance offered by two (2) student associations. This form of insurance suggests that the first part of compensation be borne by the insured, who cannot therefore transfer this part of the risk to a third party. The decision of the Superior Court of Québec The facts The Association générale des étudiants hors campus de l’Université du Québec à Trois-Rivières and the Association générale des étudiants de l’Université du Québec à Trois-Rivières (hereinafter, the “Associations”) have been providing supplemental health and dental insurance to their 14,000 student members since 2014. They refer to this as a self-insurance plan, which is managed through insurer Major Group Inc. The Autorité des marchés financiers (“AMF”) applied to the Court for a permanent Order of Injunction to require Major Group Inc. and the Associations to cease their insurance activities. It contended that the Associations were acting as insurers and that they cannot do so without its authorization, as provided for under section 21 of the Insurers Act (“IA”).3 Under the IA, the AMF’s authorization is required to carry on insurer activities, if such activities constitute the operation of an enterprise, regardless of any other activities that may be carried on by the operator. The AMF also claimed that the Associations were not practising self-insurance. The Associations maintained that they were not acting as insurers but engaged in self-insurance. Furthermore, they argued that section 21 of the IA cannot apply to their activities as they are non-profit organizations and therefore cannot operate a business within the meaning of the act. The Court’s grounds The Court defined the concept of a self-insurance contract under Quebec law as follows: the insured chooses not to subscribe an insurance contract for all or part of a risk, opting instead to assume the financial consequences itself, thereby not transferring the risk to a third party. The Court determined that the Associations were the policy holders, and the student members were the insured. In this sense, it cannot be considered a self-insurance contract since the risk of the student members is transferred to the Associations, which agreed to insure them in exchange for the payment of a premium. The Court then concluded that the supplemental health and dental insurance offered by the Associations constitutes insurer activities in the course of operating an enterprise, in accordance with section 21 of the IA. Even though the Associations are not-for-profit organizations, they can operate an enterprise. Furthermore, the application of section 21 of the IA does not require an analysis of the nature of the organization as a whole. The agreements between the student associations and Major Group Inc. had a pre-established economic objective, namely, to benefit from the profits that an insurer would normally make. The Associations have been offering this product for almost seven (7) years; it is, therefore, not an episodic or occasional activity. Conclusion The Superior Court of Québec granted the AMF’s application for a permanent injunction against the Associations. It issued an order to the Associations to cease, within three (3) months of the judgment, all insurance activities under the IA, and to Major Group Inc. to cease acting as a third-party administrator with respect to any self-insurance plan implemented by the Associations. *** Self-insurance can save a policyholder money on an insurance premium by providing protection on the essentials of a claim at a lower cost. However, it must be practised in accordance with the law. “Peer-to-peer” insurance: a grassroots revolution? (lavery.ca). Association générale des étudiants hors campus de l’Université du Québec à Trois-Rivières (AGÉHCUQTR) c. Autorité des marchés financiers, 2021 QCSC 5090. Insurers Act CQLR c. A-32.1.

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  • Doing Business as Usual – Prior User Rights Under Canadian Patent Law

    Prior user rights have long been recognized in Canadian patent law. These rights, which are a defence against patent infringement, are seen as a means of ensuring fairness by allowing a person who has independently manufactured, used or acquired an invention that is subsequently patented to continue using the invention. A revised version of section 56 of the Patent Act, which defines prior user rights and is similar to section 64 of the UK Patents Act, came into force on December 13, 2018. The revised provision applies to an action or proceeding commenced on or after October 29, 2018, involving a patent issued from an application filed on or after October 1, 1989. The pith and substance of prior user rights under the revised provision had never been judicially interpreted until a recent Federal Court decision was handed down in Kobold Corporation v. NCS Multistage Inc. The two corporations involved in the case supply equipment used in the oil and gas industry for hydraulic fracturing. Kobold Corporation (hereinafter Kobold, the plaintiff) alleged that four of NCS Multistage Inc.’s (hereinafter NCS, the defendant) proprietary fracturing tools infringed Canadian Patent No. 2,919,561, and NCS petitioned the Court through a motion for summary judgment to dismiss the infringement action on the basis of prior user rights. In its analysis of section 56 in its current form, the Court considered the English and French versions of the section, legislative history, Canadian jurisprudence on the previous section 56 and the corresponding legislation in the UK. The Court began by pointing out that section 56 of the Patent Act, effective since December 13, 2018, grants broader rights than the former section 56 did, underscoring the three following differences: First, it noted that the previous legislation was limited to granting “a prior user the right to use and sell” a physical product, whereas the current provision “grants a prior user the right to commit an “act” that would have otherwise constituted infringement.” It added that the word “act” must be interpreted in light of section 42 of the Patent Act, which grants exclusive rights to “making, constructing and using the invention and selling it to others to be used,” which includes patented methods. This interpretation may limit the rights of prior users, and the Court gave the example of a prior user who previously manufactured and used a device—they can continue to manufacture and use it, but they cannot rely on a prior use defence under section 56 to begin selling the device, as selling is different from manufacturing or using within the meaning of the Act.   Second, it pointed out that whereas the previous legislation “limited the protection to the sale or use of the [...] physical manifestation of the invention”, section 56 as amended protects the commission of an act “that would have constituted infringement.” Third, it pointed out that the current legislation extends protection to a person who “made serious and effective preparations to commit [...] an act” of infringement prior to the claim date, which was not the case under section 56 in its previous form. The parties had different interpretations of the term “same act” contained in subsection 56(1), particularly as to the degree of similarity required. The Court determined that the word “same” in subsection 56(1) means “identical” with respect to an act, while subsections 56(6) and 56(9) “allow a third party defence of prior use on the less stringent standard of “substantially the same.”” The Court stated that a prior user may “add to or alter” aspects that “do “not [...] infringe the patent”, for example by changing a device’s paint colour, but the prior user may not alter an aspect that relates to the invention’s inventive concept. The Court then set out the factors that must be considered in assessing the defence of prior user rights under subsection 56(1). Verbatim, it stated: First, one must determine whether the acts being performed before and after the claim date are identical [...]. If they are, then there is no need to consider infringement, as subsection 56(1) would always provide a defence to any potential infringement. Second, if the acts are not identical, one must determine whether the acts infringe the patent, and if they do, which claims. If the post-claim acts do not infringe the patent, then there is no “otherwise infringing acts” and therefore no need to rely on subsection 56(1). If the pre-claim acts do not infringe the patent, subsection 56(1) cannot apply. If the post-claim date acts infringe a particular claim of the patent that the pre-claim date acts do not, subsection 56(1) cannot apply. Finally, if the pre- and post-claim date acts are not identical but only infringe the same claims, then one must determine whether the changes relate to the inventive concept of the patent. If they do not, then subsection 56(1) will provide a defence. The Court concluded that a motion for summary judgment is only appropriate in cases where acts committed before and after the claim date are clearly identical, and thus where it is not necessary to “construe the claims [...] or conduct an infringement analysis.” In this case, given that the acts performed by NCS before and after the claim date differed, the Court concluded that a full trial was required to analyze the issue of infringement and the application of subsection 56(1) of the Patent Act.  Conclusion This first detailed analysis of section 56 of the Patent Act as amended in December 2018 has clarified several aspects of a defence against patent infringement based on prior user rights. It will certainly serve as a foundation for future decisions involving this issue. However, the application of subsection 56(1) of the Patent Act was not examined in this motion for summary judgment. We’ll have to wait for a future trial on the issue for more insight on the scope of prior user rights under Canadian law.

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  • The Supreme Court of Canada’s Decision in Prelco: The Application of Limitation of Liability Clauses in Case of a Breach of a Fundamental Obligation of a Contract

    Introduction Non-liability clauses are often included in many types of contracts. In principle, they are valid and used to limit (limitation of liability clause) or eliminate (exoneration clause) the liability of a party with respect to its obligations contained in a contract. The recent unanimous decision of the Supreme Court of Canada confirms that under Quebec law, parties may limit or exclude their liability in a contract by mutual agreement. However, a party may have such a clause declared inoperative by invoking the doctrine of breach of a fundamental obligation of the contract. In this case, the Supreme Court of Canada confirmed the validity of the clause at issue and circumscribed the limits of the application of the doctrine. The Supreme Court of Canada’s decision The facts The dispute relates to a contract signed between 6362222 Canada inc. (“Createch”), a consulting firm specializing in the improvement and implementation of integrated management systems, and Prelco inc. (“Prelco”), a manufacturing company specializing in the fabrication and transformation of flat glass. Under the terms of the contract that the parties concluded in 2008, Createch was to provide software and professional services to help Prelco implement an integrated management system. Createch prepared a draft contract and Prelco did not ask for any changes to the proposed conditions. A clause entitled Llimited Liability was included in the contract, which stipulated that Createch’s liability to Prelco for damages attributed to any cause whatsoever would be limited to amounts paid to Createch, and that Createch could not be held liable for any damages resulting from the loss of data, profits or revenues or from the use of products or for any other special, consequential or indirect damages. When the system was implemented, numerous problems arose and Prelco decided to terminate its contractual relationship with Createch. Prelco brought an action for damages against Createch for the reimbursement of an overpayment, costs incurred to restore the system, claims from its customers and loss of profits. Createch filed a cross-application for the unpaid balance for the project. At trial, the Superior Court of Québec concluded that the limitation of liability clause was inoperative under the doctrine of breach of fundamental obligation, because Createch had breached its fundamental obligation by failing to take Prelco’s operating needs into account when implementing the integrated management system. The Court of Appeal of Québec confirmed the trial judge’s decision and held that the doctrine of breach of fundamental obligation can annul the effect of an exoneration or limitation of liability clause by the mere fact that a breach relates to a fundamental obligation. The Supreme Court of Canada’s reasons The Supreme Court of Canada allowed the appeal and set aside the decisions of the lower courts. Per Chief Justice Wagner and Justice Kasirer, the Supreme Court held that the limitation of liability clause in the parties’ contract was valid, despite the fact that Createch had breached its fundamental obligation. The Supreme Court addressed the two legal bases for the existence of the doctrine of breach of fundamental obligation: the validity of the clause having regard to public order and he validity of the clause having regard to the requirement relating to the cause of the obligation. In this case, the Court determined that public order could not render the limitation of liability clause inoperative as the contract at issue was one by mutual agreement and the parties were free to share the risks associated with a contractual breach between them, even if the breach involved a fundamental obligation. As for the validity of the limitation of liability clause, the Court determined that it was not a no obligation clause that would exclude the reciprocity of obligations. Createch had significant obligations to Prelco, and Prelco could keep the integrated management system, obtain damages for unsatisfactory services and be compensated for necessary costs for specific performance by replacement, but no higher than what had been paid to Createch. A limitation of liability clause does not therefore deprive the contractual obligation of its objective cause and does not exclude all sanctions. The Court explains: “[86] Thus, art. 1371 C.C.Q. applies to contract clauses that negate or exclude all of the debtor’s obligations and, in so doing, deprive the correlative obligation of its cause. Where a contract includes such clauses, it can be said that the reciprocal nature of the contractual relationship is called into question (arts. 1371, 1378 para. 1, 1380 para. 1, 1381 para. 1 and 1458 C.C.Q.). To apply a more exacting criterion would amount to annulling or revising a contract on assessing the equivalence rather than the existence of the debtor’s prestation and, as a result, to indirectly introducing the concept of lesion, which is narrowly delimited in the Code.”1 Prelco remains bound by the limitation of liability clause in this case. The Supreme Court of Canada is of the view that the trial judge and the Court of Appeal erred in law in declaring the limitation of liability clause inoperative. It allowed Createch’s appeal. Conclusion This Supreme Court of Canada decision confirms the importance of the principles of autonomy of contracting parties and freedom of contract between sophisticated legal persons in Quebec law. The doctrine of breach of fundamental obligation does not permit the circumvention of the principle of freedom of contract: It cannot be said that an obligation is deprived of its cause when a sanction for nonperformance of obligations fundamental to the contract is provided for in a limitation of liability clause. [1] 6362222 Canada inc. v. Prelco inc., 2021 SCC 39, para. 86..

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  • Can an Idea, Style or Method Be Protected Under the Copyright Act?

    Ahead of the 2021 holiday season, as children dream about the toys that Santa Claus will bring them, let’s take a look back at a landmark decision that reviews what is copyrightable under the Copyright Act. As visual artist Claude Bouchard (“Bouchard”) learned from the outcome of her legal action against Ikea Canada (“Ikea”),1 the Copyright Act2 does not protect the ideas, styles or methods developed and used by artists to create their works, even if their work is exhibited in museums and marketed internationally. From 1994 to 2005, Bouchard sold in a Montreal’s Unicef store soft toys that she designed based on children’s drawings. In September 2014, Ikea held a drawing competition for children and made 10 soft toys from the winning entries, marketed as part of the “Sogoskatt” collection. A portion of the profits were donated to UNICEF. Originally, Bouchard was seeking a monetary award against UNICEF and Ikea for copying her toys, alleging that they had used, in particular, her idea, her original style and her methods. In 2018, the Superior Court ruled on the case for the first time, dismissing the legal action against UNICEF based on the privileges and immunities of the United Nations.3 UNICEF’s immunity from suits is in this case absolute since Bouchard’s legal action is directly related to the organization’s mission.4 In January 2021, Justice Patrick Buchholz of the Superior Court put an end to the dispute between Bouchard and Ikea, dismissing the legal action for infringement of Bouchard’s works based on the Copyright Act as being ill-founded, destined to fail and unreasonable, thus opening the door to its dismissal for abuse of process.5 Why was Bouchard’s infringement action ill-founded? The Court first examined the arguments put forward by Ikea to the effect that two essential elements giving rise to the infringement action6 could not be demonstrated by Bouchard: There is no evidence that Ikea had access to Bouchard’s work.7 There is no evidence that Ikea reproduced a substantial part of the plaintiff’s work. Therefore, Ikea argues that there was no infringement of the copyright of Bouchard, who was seeking a monopoly on an idea, style or method, which is not protected under the Copyright Act8 Lack of access to Bouchard’s works The Court did not accept Ikea’s first argument that there was a lack of access to Bouchard’s works. It ascertained that the proceedings were at a too preliminary stage to make a determination.9 The Honourable Justice Buchholz pointed out that section 51 of the Code of Civil Procedure is not [our translation] “a free pass to bypass the judicial process and prematurely set aside otherwise allowable claims” when the evidence is still incomplete.10 The Court also noted the seriousness of the links between Ikea and UNICEF, which may have made access to Bouchard’s works possible and likely.11 In this context, only a hearing on the merits could have clarified the question of access to Bouchard’s works by making it possible to test, more precisely, the credibility of the witnesses at trial.12 Lack of reproduction of a substantial part of the work Bouchard alleged that the toys designed by Ikea incorporate eight essential features of her soft toy concept, namely [our translation]: Round eyes cut from non-fraying fabrics and sewn around the edges; Thinly cut linear mouths sewn into non-fraying fabrics; iii. Polyester fibre stuffing; iv. The toy is proportionate to the size of children’s hands; v. Soft toy faithful to the child’s drawing; vi. Child’s name and age on the tag; vii. Everything is solid (head, body, legs, and tail), in the same plane and stuffed; viii.  Use of textiles, plush, and the original colours of the drawings.”13 However, the Court accepted Ikea’s second argument that Ikea’s soft toys did not reproduce a substantial part of Bouchard’s work. Since Bouchard’s works and Ikea’s works did not share a resemblance, this means that a substantial part of the works was not reproduced.14 How to determine if a “substantial part” of a work has been reproduced? Under the Copyright Act, copyright, “in relation to a work, means the sole right to produce or reproduce the work or any substantial part thereof”.15 The Supreme Court defined “substantial part” of the work in the Cinar decision,16 stating that it is a flexible notion to be interpreted based on the facts. The assessment is holistic and qualitative in nature. The criteria to be used by the courts to determine whether there has been a reproduction of a “substantial part” of a work are as follows: The originality of the work, which must be protected under the Copyright Act;17 The part “represents a substantial portion of the author’s skill and judgment”;18 The nature of the two works as a whole, without looking at isolated passages;19 “[T]he cumulative effect of the features copied from the work”.20 Although there are some similarities between the Bouchard and Ikea soft toys, the soft toys are completely different and do not look the same because they are designed from the drawings of different children. Bouchard even admitted that [our translation] “a toy made from a unique child’s drawing is in itself a unique toy”.21 Can the Copyright Act protect an idea, a concept or a body of work? Bouchard instead claimed that Ikea illegally reproduced her idea, concept, style or methods.22 She ultimately argued that Ikea did not copy a specific work, but instead copied her “work” in a broader sense.23 Bouchard’s arguments highlight issues that often come up in the court system and demonstrate a misunderstanding of what is protected by copyright. Copyright of an idea, concept, style or method In 2004, the Supreme Court pointed out that copyright protects the expression of ideas in a work and not the ideas themselves.24 Justice Buchholz rightly pointed out that an artist can be inspired by another artist without infringing the rights protected by the Copyright Act. He noted, for example, that if styles were protected, Monet could not have painted in the Impressionist style.25 The Court also noted that the soft toys made by Bouchard correspond to a generic style dictated by safety standards for the manufacture and sale of toys.26 Thus, the Copyright Act does not offer any protection for ideas, concepts, styles or manufacturing methods and techniques. Copyright of an artistic legacy, corpus, or collection The Court specified that the Copyright Act does not protect a body of work or an artistic legacy, but rather each individual work.27 Bouchard c. Ikea Canada, 2021 QCCS 1376. R.S.C. 1985, c. C-42. Bouchard c. Ikea Canada, 2018 QCCS 2690. Idem, para. 24–25. Section 51, Code of Civil Procedure, CQLR c. C-25.01. Section 2, “infringing”, Copyright Act. Bouchard c. Ikea Canada, supra, note 1, para. 16–17. Idem, para. 15. Idem, para. 34. Idem, para. 28. Idem, para. 37–39. Idem, para. 40. Idem, para. 49. Idem, para. 55. Section 3, Copyright Act. Cinar Corporation v. Robinson, 2013 SCC 73, para. 26, 35–36. Idem, para. 26. Idem. Idem, para. 35. Idem, para. 36. Bouchard c. Ikea Canada, supra, note 1, para. 53. Idem, para. 56. Idem, para. 69. CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13, para. 8. Idem, para. 67. Toys Regulations, SOR/2011-17, adopted under the Canada Consumer Product Safety Act, S.C. 2010, c. 21, s. 29, 31–32. Bouchard c. Ikea Canada, supra, note 1, para. 69–71.

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  • A False Sense of Cybersecurity?

    Ransomware has wreaked so much havoc in recent years that many people forget about other cybersecurity risks. For some, not storing personal information makes them feeling immune to hackers and cyber incidents. For others, as long as their computers are working, they do not feel exposed to no malware. Unfortunately, the reality is quite different. A new trend is emerging: malware is being released to collect confidential information, including trade secrets, and then such information is being sold to third parties or released to the public.1 The Pegasus software used to spy on journalists and political opponents around the world has been widely discussed in the media, to the point that U.S. authorities decided to include it on their trade blacklist.2 However, the use of spyware is not limited to the political sphere. Recently, a California court ordered a U.S. corporation, 24[7].ai, to pay $30 million to one of its competitors, Liveperson.3 This is because 24[7].ai installed competing technology on mutual client websites where LivePerson’s technology already is installed. Liveperson alleged in its lawsuit that 24[7].ai installed spyware that gathered confidential and proprietary information and data regarding Liveperson’s technology and client relationships. In addition, the software which 24[7].ai allegedly installed removed some features of Liveperson’s technology, including the “chat” button. In doing so, 24[7].ai interfered in the relationship between Liveperson and its clients. This legal saga is ongoing, as another trial is scheduled to take place regarding trade secrets related to a Liveperson client.4 This legal dispute illustrates that cybersecurity is not only about personal information, but also about trade secrets and even the proper functioning of business software. A number of precautions can be taken to reduce the risk of cybersecurity incidents. Robust internal policies at all levels of the business help maintain a safe framework for business operations. Combined with employee awareness of the legal and business issues surrounding cybersecurity, these policies can be important additions to IT best practices. In addition, employee awareness facilitates the adoption of best practices, including systematic investigations of performance anomalies and the use of programming methods that protect trade secrets. Moreover, it may be advisable to ensure that contracts with clients provide IT suppliers with sufficient access to conduct  the necessary monitoring for the security of both parties. Ultimately, it is important to remember that the board of directors must exercise its duty with care, diligence and skill while looking out for the best interests of the business. Directors could be held personally liable if they fail to meet their obligation to ensure that adequate measures are implemented to prevent cyber incidents or if they ignore the risks and are wilfully blind. Thus, board members must be vigilant, be trained in and aware of cybersecurity in order to integrate it into their risk management approach. In an era in which intellectual property has become a corporation’s most important asset, it goes without saying that it is essential to put in place not only the technological tools, but also the procedures and policies required to adequately protect it! Contact Lavery for advice on the legal aspects of cybersecurity. See Page, Carly, “This new Android spyware masquerades as legitimate apps,” Techcrunch, November 10, 2021. https://techcrunch.com/2021/11/10/android-spyware-legitimate-apps; Page, Carly, “FBI says ransomware groups are using private financial information to further extort victims,” Techcrunch, November 2, 2021. https://techcrunch.com/2021/11/02/fbi-ransomware-private-financial-extort. Gardner, Frank, “NSO Group: Israeli spyware company added to US trade blacklist,” BBC News, November 3, 2021. https://www.bbc.com/news/technology-59149651. Claburn, Thomas, “Spyware, trade-secret theft, and $30m in damages: How two online support partners spectacularly fell out,” The Register,June 18, 2021. https://www.theregister.com/2021/06/18/liveperson_wins_30m_trade_secret. Brittain, Blake, “LivePerson wins $30 million from [24]7.ai in trade-secret verdict,”Reuters, June 17, 2021. https://www.reuters.com/legal/transactional/liveperson-wins-30-million-247ai-trade-secret-verdict-2021-06-17.

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  • Do you know your open-source licences?

    Do you have the right to copy source code written and developed by someone else? The answer to this question depends on the situation; however, even in the context of open innovation, intellectual property rights will be the starting point for any analysis required to obtain such an answer. In the software industry, open-source licences allow anyone to access the source code of corresponding software, free of charge and with few restrictions. The goal is generally to promote the improvement of this code by encouraging as many people as possible to use it. Linus Torval, the programmer of the Linux kernel (certainly one of the most well-known open-source projects) recently stated that without the open-source approach, his project would probably not have survived.1 However, this approach has legal consequences: Vizio was recently hit with a lawsuit alleging non-compliance with an open-sourceGPL licence used in the SmartCast OS software embedded in some of its televisions. It is being sued by Software Freedom Conservancy (“SFC”), an American non-profit promoting and defending open-source licences. As part of its lawsuit, SFC alleges, among other things, that Vizio was required to distribute the SmartCast OS source code under the above-mentioned open-source GPLlicence, which Vizio failed to do, thereby depriving consumers of their rights2. In Canadian law, section 3 of the Copyright Act3 gives the author the exclusive right to produce or reproduce all or any substantial part of an original work. This principle has been adopted by all signatories of the 1886 Berne Convention, i.e., almost every country in the world. A licence agreement, which may inter alia confer the right to reproduce the work of another person, can take different forms. It also establishes the extent of the rights conferred and the terms and conditions of any permitted use. However, not all open-source licences are equivalent. Many allow creators to attach various conditions to the right to use the code that has been made available. Under these licences, anyone may use the work or software, but subject to the following constraints, depending on the type of licence in effect: Obligation to display: An open-source licence may require disclosure of certain information in the software or in the source code itself, such as the following: The author’s name or pseudonym, or even maintaining the anonymity of the author, depending on their wishes, and/or a citation of the title of the work or software; The user licence of the redistributed open-source work or software; A modification note for each modified file; and A warranty disclaimer. Contribution obligations: Some licences require the sharing of any modifications made to the open-source code, with said modifications being under the same licence conditions. In some cases, this obligation extends to any software that incorporates the open-source code. In other words, code derived from open-source material can itself become open-source. This obligation to contribute can generally be categorized as follows: Any redistribution must be done under the original licence, making the result open-source as well; Any redistribution of the code, modified or not, must be done under the original licence, but other code may be associated or added without being subject to the open-source licence; or Any redistribution is done without any sharing constraints. Ban on commercialization: Some licences prohibit any use for commercial purposes. Apache v2 Level of obligation to contribute upon redistributionAny redistribution of the software, modified or not, or with added components, must be done under the terms of the original licence. Mandatory elements to display Licence of the redistributed open-source software Identification of any changes made to the code Copyright notice Warranty disclaimer Commercial use permittedYes BSD Level of obligation to contribute upon redistributionAny redistribution of the software can be done without any obligation to share. Mandatory elements to display Copyright notice Warranty disclaimer Commercial use permittedYes CC BY-NC 4.0 Level of obligation to contribute upon redistributionAny redistribution of the software can be done without any obligation to share. Mandatory elements to display Licence of the redistributed open-source software Identification of any changes made to the code Copyright notice Warranty disclaimer Commercial use permittedNo CC0 1.0 Level of obligation to contribute upon redistributionAny redistribution of the software can be done without any obligation to share. Mandatory elements to display Licence of the redistributed open-source software Commercial use permittedYes GPLv3 Level of obligation to contribute upon redistributionAny redistribution of the software, modified or not, or with added components, must be done under the terms of the original licence Mandatory elements to display Licence of the redistributed open-source software Identification of any changes made to the code Copyright notice Warranty disclaimer Commercial use permittedYes, but sub-licensing is not allowed LGPLv3 Level of obligation to contribute upon redistributionAny redistribution of the software, modified or not, must be done under the terms of the original licence. New components can be added, but not integrated, under other non-open-source licences Mandatory elements to display Licence of the redistributed open-source software Identification of any changes made to the code Copyright notice Warranty disclaimer Commercial use permittedYes MIT Level of obligation to contribute upon redistributionAny redistribution of the software can be done without any obligation to share. Mandatory elements to display Licence of the redistributed open-source software Copyright notice Warranty disclaimer Commercial use permittedYes It is important to make programming teams aware of the issues that can arise when using modules governed by what are known as “viral licences” (such as the CC BY-NC 4.0 licence) in the design of commercial software. Such software could lose significant value if such modules are incorporated, making it difficult or even impossible to commercialize said software. In the context of open innovation where developers want to share their code, in particular to encourage collaboration, it is important to understand the scope of these different licences. The choice of the appropriate licence must be made based on the project’s objectives. Also, keep in mind that it is not always possible to change the licence used for the distribution of the code once said distribution has commenced. That means the choice of licence can have long-term consequences for any project. David Cassel, Linus Torvalds on Community, Rust and Linux's Longevity, The NewStack, Oct. 1, 2021, online: https://thenewstack.io. See the SFC press release: https://sfconservancy.org/copyleft-compliance/vizio.html. RSC 1985, c. C-42.

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  • Minimal! - Court of Appeal Reduces the Post-Employment Duty of Loyalty

    Suppose that your best employee, the up-and-comer you’ve been training for several years, resigns. It’s terrible news for you, especially amid a labour shortage. And, to top it off, their new employer is your main competitor. How long has the employee been planning to leave? Did they plan during working hours? Using your company’s resources? What about the knowledge and contacts gained over the past few years: Will the employee share them with your competitor? If they did so, would it be illegal? At this point, one of your main concerns would be whether the resigning employee’s employment contract contains restrictive covenants, such as non-competition, non-solicitation or confidentiality undertakings. If it did, it would bode well for you provided that the covenants are valid and enforceable. You would otherwise have to rely on the duty of loyalty provided for in article 2088 of the Civil Code of Québec, a safety net that employers have relied on until a recent decision of the Court of Appeal of Québec limited its scope. Sahlaoui c. Médicus1 Mr. Sahlaoui, an orthotist-prosthetist, had been working for Médicus for about ten years, during which time he had built a relationship of trust with clients thanks to the quality of his services. He informed Médicus that he was resigning to start a competing company, Evo. Accusing Mr. Sahlaoui of breaching his duty of loyalty, Médicus sued him and his new company, claiming damages for one year’s lost profits, for hardship and inconvenience. The Superior Court awarded Médicus damages in the sum of $135,238, plus interest. However, the Court of Appeal dismissed Médicus’ recourse in its entirety and reaffirmed the right to freedom of work, concluding that the former employee, both before and after his resignation, had not breached his duty of loyalty. The Court thus considers that the duty of loyalty provided for in the Civil Code of Québec must be assessed in two stages, namely during and after employment. Duty during employment In the course of employment, an employee’s duty of loyalty is significant, especially for key employees and those with a great deal of professional discretion. The close ties that Mr. Sahlaoui had developed with clients during his employment were not enough to convince the Court that he had held a key position in his employer’s business, which, it should be noted, had approximately 350 employees at 15 branches. The Court is of the opinion that seeking new work does not in itself constitute a breach of the duty of loyalty, as it is an extension of the freedom of work. There are legitimate limits to the openness and transparency required under the terms of an employment contract, such that an employee may keep both their intention to change jobs and the steps taken to do so secret.2 On the other hand, the employee, while still employed, must not prepare their departure during working hours with tools provided by the employer. Stealing or hacking confidential information, withholding or misappropriating the employer’s business opportunities, taking client lists and recruiting clients for the employee’s benefit are examples of disloyal acts that the Court mentions. The judges cite with approval a 2007 decision of their court, which held that retaining or “refusing to turn over a former employer’s property in some cases constitutes outright theft, regardless of the notion of loyalty.”3 Duty after employment The Court of Appeal believes that the duty of loyalty is considerably reduced after an employee’s departure. The duty of loyalty set out in the Civil Code of Québec does not impose restrictions on an employee equivalent to those resulting from a well-drafted non-competition clause,4 particularly in terms of duration, because the duty of loyalty remains in effect for only a reasonable amount of time, which rarely exceeds a few months (three to four months).5 In this case, although Mr. Sahlaoui had signed a loyalty, confidentiality and non-competition undertaking to govern his post-employment conduct, the Court disregarded it because such undertaking did not meet the requirements for restrictive covenants established by the courts. Mr. Sahlaoui’s actions were therefore analyzed in terms of the duty of loyalty set out in article 2088 of the Civil Code of Québec. As the Court of Appeal points out, an employee who is not subject to a non-competition clause (or a non-solicitation or confidentiality clause having a term that exceeds the end of employment) may use their personal professional experience, i.e., their expertise, knowledge, network and skills acquired and developed with the former employer, as they see fit. Such employee may compete with their former employer, by soliciting its clientele, for example, without committing a fault.6 In short, the duty of loyalty under the Civil Code of Québec does not prohibit competition, but requires that it be exercised in moderation and only for a short time after employment ends. What it means Because the duty of loyalty is “rather minimal,” to quote the Court of Appeal, any organization would be well advised to protect itself by using restrictive clauses and having a clear plan of action for when an employee leaves to join the competition. To be enforceable, restrictive covenants must be specific and contextual. They must not exceed what is reasonable to protect the legitimate interests of the employer. The following questions are worth considering: When preparing an employment contract, is it possible to predict whether the employee in question will have direct relations with clients or suppliers? Will the employee learn, for example, the manufacturing processes or techniques that the organization strives to safeguard? If so, what restrictive clauses should be included in the employment contract, in particular regarding the nature of the employee’s tasks, reporting level and unique expertise? What needs to be protected? Examples include the confidentiality of information and the business’ reputation and services. The business should also protect itself against competition and solicitation of its clientele, suppliers and employees. To avoid unpleasant surprises, it is important to understand the purpose of each restrictive clause. They should also not be confused between them or thought to encompass the restrictions of another. Do the restrictive clauses meet the reasonable criteria necessary to be enforceable? Will they withstand contestation to the extent possible? Once the employee’s departure is announced, who will take over with clients or suppliers in order to maintain their trust? What security measures will be put in place when the departure is announced to ensure and preserve the confidentiality of certain information? The absence of restrictive covenants at the time of hiring is not disastrous, as the parties may negotiate such undertakings during the course of employment. While an employee cannot be forced to accept them, it is easier to reach an agreement when discussing a salary increase, promotion or other consideration, always making sure that the restrictive clauses are reasonable in light of the employee’s work context and the employer’s legitimate needs and rights. The parties may also agree to certain restrictions as part of an exit agreement. The Médicus decision has, at the very least, clarified the scope of the duty of loyalty provided for in the Civil Code of Québec. The members of our Labour and Employment Law group are available to advise you and answer your questions. Sahlaoui c. 2330-2029 Québec inc. (Médicus), 2021 QCCA 1310, see paragraph 59. See paragraph 35. Concentrés scientifiques Bélisle inc. c. Lyrco Nutrition inc. 2007 QCCA 676. See paragraph 44. See paragraph 48. See paragraph 53.

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  • Entrepreneurs and Intellectual Property: Avoid these 13 mistakes to protect yourself (Part 3 of 3)

    In the third and final entry of this three-part article series, we share with you the last set of intellectual property (IP)–related mistakes (mistakes #10 to #13) that we regularly see with startups. We hope you will find it useful for your business. Please be sure to read our first and second entries in this series, where we go over mistakes #1 to #5 and #6 to #9, respectively. Happy reading! Part 3 of 3 Mistake #10:       Assuming that your invention is unpatentable One common mistake we see business owners make is that they assume their technology is not patentable. This frequently applies to computer-related inventions, such as software. Even though there is no outright ban on patenting software in Canada, many inventors are under the impression that software is unpatentable. This is most likely due to the fact that many patent applications for computer-implemented inventions are initially refused because the Patent Office determines that the invention in question is merely a disembodied series of mental steps and/or a mathematical formula (both of which are not considered patentable subject matter). However, it is important to remember that, while certain types of subject matter are not patentable in Canada (e.g., disembodied mental steps and mathematical formulae, as mentioned above), that does not mean that technology involving such unpatentable subject matter (e.g., computer software) is completely void of patentability. Often, it simply means that another aspect of the technology should be the focus of the patent application. For example, with regard to computer-implemented inventions, one strategy to increase the likelihood of patentability is to draft the patent application in such a way so as to emphasize that the computer hardware is essential, or to draft the application in such a way that it is clear that the invention creates an output comprising discernible effects or changes (e.g.: this can be as simple as generating distinct groups in a classification method). It is also worth noting that many inventors are under the mistaken impression that a new piece of technology has to be all but revolutionary in order to be patentable. However, improvements over existing technology are also patentable as long as they are sufficiently new and inventive. Accordingly, it is important to speak to a patent agent to properly determine if and how your invention may be patented. Mistake #11:       Believing that your patent automatically gives you the right to use and/or commercialize your invention One common misconception regarding patents is that they give the owner thereof the right to use and/or commercialize the patented technology without fear of infringing third-party patents. However, what a patent actually does is allow its owner to exclude others from using and/or commercializing their patented technology. It is not a shield against potential infringement of third-party IP rights. For example, if you obtain a patent for a piece of technology you developed, that does not necessarily mean you have the right to use or commercialize that technology. Specifically, if your technology incorporates patented technology owned by another company, then that company can actually prevent you from using or commercializing your own invention. This is an important aspect of “patent protection” that all entrepreneurs should be aware of. Mistake #12:       Not informing yourself about the criteria for recognition as an inventor or owner of an invention, and not training your employees on these criteria Many types of intellectual property disputes can arise within a business. Most of the time, they are the result of misconceptions, such as: An employee believes they are the inventor of an invention, when they are not; An employee believes that as the inventor of an invention, they are necessarily entitled to consideration (monetary or otherwise); the invention belongs to them rather than to the company; they are free to use the invention, for example upon leaving the company to become a competitor; or An employer believes that their company can use the specific results of a researcher’s work obtained from a previous job. It’s easy to imagine how messy such issues can get! An ounce of prevention is certainly worth a pound of cure. Get informed! Also, clarify these issues with new employees as soon as you hire them, and set down in writing who will own the rights to intellectual property developed during the course of employment. A quick training session before such problems arise can set the record straight and avoid conflicts based on unrealistic expectations. Mistake #13:       Not having an intellectual property protection strategy After reading this three-part article, we hope you now have a better understanding of the importance of developing an intellectual property strategy for your company. While such strategies can be very complicated, we have provided three broad questions that you should consider at all times (not just when starting out).  What intellectual property is my company using? This first question tasks you with identifying intellectual property that your company uses. This would include any technology that you are using or selling; any brand names/logos; and any works you are currently using (e.g., logos, slogans, website layouts, website texts, pictures, brochures or computer programs). Is there a risk that I am infringing a third party’s IP? Once you have identified the above intellectual property, you should ask yourself if your activities might infringe a third party’s IP rights. Obtaining a response may involve the following: Hiring a patent agent to perform a freedom to operate search for any technology you plan on using. Hiring a lawyer specialized in IP to perform a trademark search and opinion for any brand names/logos you use, as well as to negotiate and prepare an assignment of IP rights. How can I expand my own IP portfolio? This question involves determining, for each piece of IP you have identified, if and how it can be protected. This can include asking yourself the following additional questions: Is any of the technology I use or commercialize worth protecting? If so, should I file a patent application or keep the technology a trade secret? In which countries do I want IP protection? Are any of my company’s brand names or logos worth protecting by filing a trademark application? What’s important is not necessarily that you protect each and every piece of intellectual property your company owns, but that you have properly evaluated your company’s IP and have come up with an effective strategy that suits your business. In order to properly optimize your company’s IP portfolio, we naturally recommend speaking with your IP professional, whether it be a patent agent, a trademark agent, or a lawyer. Conclusion Lavery’s intellectual property team would be happy to help you with any questions you may have regarding the above or any other IP issues. Why don’t you take a look at our Go Inc. start-up program? It aims to provide you with the legal tools you need as an entrepreneur so you can start your company on the right foot. Click on the following links to read the two previous parts. Part 1 | Part 2

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  • Canadian Patent Practice Update: Act Now to Avoid Excess Claim Fees

    Excess claim fees on the horizon As reported earlier, the Canadian government published proposed amendments to the Patent Rules on July 3, 2021. A significant component of the proposal is the introduction of excess claim fees on the order of $100 CAD for each claim beyond 20 claims, which will be payable when requesting examination, and will be re-assessed upon allowance to determine if further claim fees are due when paying the final fee based on changes in the number of claims during examination. Consider acting now In anticipation of the likely introduction of such a regime in early 2022 (which may be announced with only 30 days’ notice), Applicants may wish to begin assessment of their Canadian patent matters and consider requesting examination by the end of 2021 to avoid the payment of such excess claim fees and retain the right to present a larger number of claims for examination. Based on the transitional provisions in the proposed Rules, taking such action now shall avoid payment of such excess claim fees when requesting examination and when paying the final fee upon allowance. We thus recommend that Applicants consider taking such action this year to retain the benefits of the current regime, particularly for cases with a large number of claims as well as those which were already being considered for requesting examination in the short term. Stay Tuned! While the exact details and timing of the upcoming changes remain unknown, the earlier proposal suggests that they will likely be soon and with little advance notice. Please stay tuned for upcoming news in due course, and do not hesitate to contact a member of our patent team for guidance through the ultimate transition.

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  • IT services dispute: the Supreme Court considers the non-liability clause

    In IT service contracts, it is common to find non-liability clauses protecting companies that provide software and professional IT system implementation or integration services. Issue In Dispute Is such a contractual non-liability clause valid under Quebec civil law where a fundamental obligation is breached? In 6362222 Canada inc. v. Prelco inc., recently rendered, the Supreme Court of Canada ruled that the non-liability clause in question was freely negotiated between the parties and resulted from compromises made by both sides. It therefore had to be respected. The respondent “Prelco” mandated the appellant “Créatech” to supply software and provide services to implement an integrated management system, the purpose of which was to manage and track all operational services information found in a large number of databases. Further to the many recurring problems during the system implementation, Prelco decided to end its contractual relationship with Créatech and hired another company to render the system operational. Prelco then claimed damages from Créatech, while Créatech filed a counterclaim for the unpaid balance for the project from Prelco. This began a long legal battle, which ended in the Supreme Court. In its decision, the Supreme Court treated various arguments which, according to Prelco, would have precluded the application of the non-liability clause. The Court dismissed these arguments. Reaffirmation Of The Primacy Of Freedom Of Contract The Supreme Court of Canada held that the Civil Code is set out in such a way as to provide for parties’ freedom to contract and to strike a balance between the notion of public order and the principle of freedom of contract. In considering the applicable legal principles, the judges noted however that the principle of respect for the contractual will of the parties does have exceptions, for example in cases of gross negligence or intentional fault, where economic forces are unbalanced ( such as a contract between a merchant and a consumer), where adhesion contracts and other types of contracts, such as nominate contracts mentioned in the Civil Code are involved, or where exclusions cover liability for body or moral injury.  Conclusion From this decision, it appears beneficial for IT service providers or other service providers to choose to be governed by the Quebec regime in contracts where the parties negotiate a clause limiting or excluding liability.

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