Publications

The March 22, 2017 Budget of the Government of Canada, through its “Innovation and Skills Plan” (http://www.budget.gc.ca/2017/docs/plan/budget-2017-en.pdf) mentions that Canadian academic and research leadership in artificial intelligence will be translated into a more innovative economy and increased economic growth. The 2017 Budget proposes to provide renewed and enhanced funding of $35 million over five years, beginning in 2017–2018 to the Canadian Institute for Advanced Research (CIFAR) which connects Canadian researchers with collaborative research networks led by eminent Canadian and international researchers on topics including artificial intelligence and deep learning. These measures are in addition to a number of interesting tax measures that support the artificial intelligence sector at both the federal and provincial levels. In Canada and in Québec, the Scientific Research and Experimental Development (SR&ED) Program provides a twofold benefit: SR&ED expenses are deductible from income for tax purposes and a SR&ED investment tax credit (ITC) for SR&ED is available to reduce income tax. In some cases, the remaining ITC can be refunded. In Québec, a refundable tax credit is also available for the development of e-business, where a corporation mainly operates in the field of computer system design or that of software edition and its activities are carried out in an establishment located in Québec. This 2017 Budget aims to improve the competitive and strategic advantage of Canada in the field of artificial intelligence, and, therefore, that of Montréal, a city already enjoying an international reputation in this field. It recognises that artificial intelligence, despite the debates over ethical issues that currently stir up passions within the international community, could help generate strong economic growth, by improving the way in which we produce goods, deliver services and tackle all kinds of social challenges. The Budget also adds that artificial intelligence “opens up possibilities across many sectors, from agriculture to financial services, creating opportunities for companies of all sizes, whether technology start-ups or Canada’s largest financial institutions”. This influence of Canada on the international scene cannot be achieved without government supporting research programs and our universities contributing their expertise. This Budget is therefore a step in the right direction to ensure that all the activities related to artificial intelligence, from R&D to marketing, as well as design and distributions, remain here in Canada. The 2017 budget provides $125 million to launch a Pan-Canadian Artificial Intelligence Strategy for research and talent to promote collaboration between Canada’s main centres of expertise and reinforce Canada’s position as a leading destination for companies seeking to invest in artificial intelligence and innovation. Lavery Legal Lab on Artificial Intelligence (L3AI) We anticipate that within a few years, all companies, businesses and organizations, in every sector and industry, will use some form of artificial intelligence in their day-to-day operations to improve productivity or efficiency, ensure better quality control, conquer new markets and customers, implement new marketing strategies, as well as improve processes, automation and marketing or the profitability of operations. For this reason, Lavery created the Lavery Legal Lab on Artificial Intelligence (L3AI) to analyze and monitor recent and anticipated developments in artificial intelligence from a legal perspective. Our Lab is interested in all projects pertaining to artificial intelligence (AI) and their legal peculiarities, particularly the various branches and applications of artificial intelligence which will rapidly appear in companies and industries. The development of artificial intelligence, through a broad spectrum of branches and applications, will also have an impact on many legal sectors and practices, from intellectual property to protection of personal information, including corporate and business integrity and all fields of business law. In our following publications, the members of our Lavery Legal Lab on Artificial Intelligence (L3AI) will more specifically analyze certain applications of artificial intelligence in various sectors and industries.

On May 4, 2016, a draft regulation amending the Regulation respecting the language of commerce and business was published in the Gazette officielle du Québec (see our bulletin on this subject). On November 3, 2016, the Quebec government announced that the amendments to the Regulation respecting the language of commerce and business (the “Regulation”) will come into force on November 24, 2016. It must be noted that these changes are as announced in the May 2016 draft regulation. The purpose of the amendments is to ensure the presence of French when a trade mark in a language other than French is displayed outside a business, as currently allowed under section 25 (4) of the Regulation. The amendments do not go as far as requiring trade mark owners to translate them. However, “sufficient presence of French” required pursuant to the new section 25.1 of the Regulation may consist in the addition of a slogan, a generic term or a description of the goods and services. Without it being necessary that the additional display be at the same location as the trade mark, it must however give French permanent visibility, similar to that of the mark and be legible “in the same visual field” as that covered by it. However, the Regulation specifies that the French elements which must be added are not required to be the same size as the mark. As to the period provided for compliance with the new standards, businesses whose existing display contravenes the amended Regulation must bring it into conformity by no later than November 24, 2019. However, any installation of a new display or any replacement of a trade mark display from November 24, 2016 will have to conform to the new requirements.

In 20141, major retailers Best Buy Canada Ltd., Costco Wholesale Canada Ltd., Gap (Canada) Inc., Old Navy (Canada) Inc., Guess? Canada Corporation, Wal-Mart Canada Corp., Toys “R” Us Canada Ltd. and Curves International Inc. had filed a motion for declaratory judgment before the Superior Court for determining the issue of whether a trade mark in the English language, without a registered French version, used for public display and in commercial advertising was required to be accompanied by a descriptive (generic) term in the French language in order to comply with the Charter of the French Language (“Charter”) and the Regulation respecting the language of commerce and business (“Regulation”). Mr. Justice Michel Yergeau of the Superior Court had come to the conclusion that the public display of trade marks in a language other than French complied with the Charter and the Regulation provided that no French version of the trade mark was registered. The Attorney General had appealed the decision. On April 27, 2015, the Court of Appeal of Quebec2 had dismissed from the bench the appeal of the Attorney General of Quebec. Minister Hélène David reacted following the Court of Appeal verdict, by promising the adoption of a regulation to ensure the presence of French language on the storefront of businesses. On May 4, 2016, a draft regulation amending the Regulation to amend the Regulation respecting the language of commerce and business was published in the Gazette Officielle du Québec. The Minister responsible for the Protection and Promotion of the French Language, Luc Fortin, describes the draft regulation as a solution which “preserves the integrity of trade marks”. The proposed amendments consist in the addition of the new sections 25.1 to 25.5 to the Regulation, which aim to ensure the presence of French when a trade mark in a language other than French is displayed outside a business, such as currently allowed under paragraph 25.4 of the Regulation. However, holders of trade marks will neither be required to translate their marks nor to insert a generic term in the French language such as “store” or “café” in them, although some have already done it on a voluntary basis. Under the new section 25.1 of the Regulation, merchants will henceforth be required to ensure “sufficient presence of French” on the site. This may consist in a slogan, a generic term, a description of their products and services or any other term or indication. Without the additional display being required to be present on the same place as the trade mark, it will however be required to give French permanent visibility, similar to that of the trade mark and be legible “in the same visual field” as that covered by the trade mark. It is however to be noted that since the Regulation does not specify a precise size for the French items which are required to be added, such items will not be required to be predominant relative to the mark. Businesses whose current display does not comply with the new requirements under the Regulation will be required to comply within three years from the date the new provisions come into force. However, any installation of a new display or replacement of the display of a trade mark from the date on which the amended Regulation comes into force will be required to comply with the new requirements.   Magasins Best Buy ltée c. Québec (Procureur général), 2014 QCCS 1427 (CanLII). Québec (Procureure générale) c. Magasins Best Buy ltée, 2015 QCCA 747 (CanLII).

Inspired by a worldwide trend to encourage the growth of innovation, Québec has recently announced a new tax relief measure for innovative companies.  Thus, the Québec government is instituting an “innovative companies deduction” (ICD). The goal of this initiative is to “ensure that innovations developed by Québec businesses yield commercial activity in Québec.” As of January 1, 2017, the deduction will give manufacturing firms that market a patented product developed in Québec a 4% tax rate on revenue attributable to a patent (rather than 11.8%; conditions apply). The main conditions for eligibility set forth in the Economic Plan (see links below) are as follows: Eligible companies   Companies operating a business in Québec: with more than $15 million in paid-up capital; whose Québec activities primarily consist of manufacturing and processing activities. Eligible revenue        Revenue from an eligible patent included in a good manufactured in Québec. Eligible patent           A patent or patent application: held by a corporation with an establishment in Québec; protecting an invention developed with the help of Québec R&D tax credits; filed after March 17, 2016. Rate                            The effective tax rate on eligible income is 4%. The income attributable to the patent cannot exceed 50% of the revenue from the good manufactured in Québec. The 4% tax rate will be reversed and taxes paid back to the government if the patent application is not granted in five years from filing or the patent is invalidated. Goudreau Gage Dubuc, one of the leading intellectual property firms in Canada, joins Lavery Lawyers. The two firms have integrated their operations in order to offer their clients a complete range of legal services. The integration consolidates Lavery’s multidisciplinary approach. As the largest independent law firm in Quebec, Lavery is continuing to grow by adding the expertise brought by lawyers, patent agents and trademark agents specializing in intellectual property law, who belong to one of the most respected teams in the country. To learn more, visit www.YourIPLawyers.ca. --> In addition to the existing system of R&D tax credits, this new program appears to be an incentive to take such innovation to market: “Whereas R&D tax credits are an incentive for corporations to invest more in research, the ICD constitutes support for taking the results of the research through to the marketing stage.” This is certainly positive and encouraging news for many Québec companies. To benefit from this measure, companies will have to set up distinct accounting for revenue derived from the patented invention and will need to be approved for the lower tax rate. We can provide patent advice in relation to this new measure.  Please contact us for more details. See Section B – 5.2 of the Economic Plan at: http://www.budget.finances.gouv.qc.ca/budget/2016-2017/en/documents/EconomicPlan.pdf (particularly pages 172-176 of the .pdf document) See also Section  A – 2.5 of the Additional Information 2016-2017 at: http://www.budget.finances.gouv.qc.ca/budget/2016-2017/en/documents/AdditionalInfo.pdf (particularly pages 53-60 of the .pdf document)

Last April 27, the Court of Appeal of Quebec dismissed the appeal, from the bench, by the Attorney General of Quebec concerning the use of English trademarks on public signs. The Attorney General was contesting the judgment rendered by the Honourable Michel Yergeau of the Superior Court who held that the use of trademarks in a language other than French on public signs was in compliance with the Charter of the French Language ("Charter"), as well as the Regulation respecting the language of commerce and business ("Regulation"), provided there was no registered French version of that trademark. The reader will recall that Best Buy Canada Ltd., Costco Wholesale Canada Ltd., Gap (Canada) Inc., Old Navy (Canada) Inc., Guess? Canada Corporation, Walmart Canada Corp., Toys “R” Us Canada Ltd. and Curves International, Inc. had filed a motion for a declaratory judgment to determine whether an English trademark, with no registered French version, used on public signs and in commercial advertising must be accompanied by a generic descriptive term in French in order to comply with the Charter and the Regulation. This motion was filed because of a change in policy by the Office québécois de la langue française (“Office”) on the interpretation of the Regulation, creating the risk that these corporations would become subject to penal prosecutions, and that their francization certificates would be revoked if they did not attach a French description to their English trademarks. In the judgment rendered by the Court of Appeal, the five judges held that the Office could not amend its regulation to force the corporations to add a French description to the trademarks on their signs. They are therefore entitled to display their English trademarks, as is, on their storefronts even if they are not accompanied by a French generic term. The Court of Appeal reached this conclusion based on its interpretation of sections 58, 63, 67 and 68 of the Charter. Following the decision of the Attorney General of Quebec not to seek leave to appeal the Court of Appeal’s judgment, the Quebec government decided to act and, on June 17, 2015, Hélène David, the Minister responsible for the Protection and Promotion of the French Language, announced that amendments would be made to the Regulation to require retailers to add a French description to trademarks on exterior signs. At the time, Ms. David announced that a draft bill should be published in the Gazette officielle in the fall of 2015, the plan being that it would come into force in early fall 2016. Ms. David reiterated that the purpose of these measures was not to alter the trademarks, but to ensure that they would respect the French character of Quebec. For the time being, it is impossible to know whether there will be any transitional measures to give companies a grace period after the regulation comes into force to bring themselves into compliance, or whether they might benefit from any financial assistance to help them make this transition. As of the date of publication of this bulletin, no draft regulation had yet been published in the Gazette officielle.

Corporations that are in need of liquidities can, simply put, not afford to wait until the end of the fiscal year to receive payment of refundable tax credits. For this reason, some lenders offer to advance funds to eligible taxpaying corporations (hereinafter “Taxpayers”) in the form of a loan, while taking security on their future tax credits as collateral (“Advance Tax Credit Financing”). Below, we outline key aspects of Advance Tax Credit Financing, with particular regard to tax credits for scientific research and development, as well as those for film or video production and post-production services. TAX CREDIT ASSISTANCE IN QUEBEC Taxpayers carrying out certain designated economic activities may qualify for government support, particularly in the form of refundable tax credits. Such areas of activity include scientific research and development, market diversification in the manufacturing industry, e-business solutions, design, publishing, film production and post-production, and more. An important distinction must be made between non-refundable and refundable tax credits. Whereas non-refundable tax credits reduce or limit income tax payable, and will be limited by the amount of tax effectively owing by the Taxpayer in question, refundable tax credits can be granted to the Taxpayer even if it has no income tax payable. Hence, a Taxpayer entitled to a refundable tax credit can receive more funds from the government than the amount of tax it has paid.1 In order to qualify for tax credits, including refundable tax credits, a Taxpayer will be required to comply with certain basic criteria over the course of its fiscal year. However, in many cases, it will be possible to apply to Revenue Quebec and/or the Canada Revenue Agency for an Advance Ruling prior to relying on the tax credit, in order to determine whether or not the Taxpayer will qualify at the year’s end. Assuming that the eligibility criteria have been met, once the Taxpayer’s taxation year has passed (generally within six months of its end), the Taxpayer files the relevant tax credit forms with the relevant tax authority, along with its income tax return. SCIENTIFIC RESEARCH AND DEVELOPMENT (“R&D”) Both the Canadian and Quebec governments offer refundable tax credits for R&D. In order to qualify, the research activity in question must relate to either basic and applied research or to experimental development. Further, the Taxpayer will be entitled to claim the cost of support work that supports it directly. For example, for the Quebec tax credit, this will include engineering work, data collection, design, operations research and testing. In an R&D context, a Taxpayer will be eligible for tax credits for salaries and wages paid in the course of conducting its activities. For Quebec alone, such credits can account for as much as 35%, at the federal level, and 30% at the Quebec level, of wages and salaries, and can apply against payments made to contractors and subcontractors subject to certain thresholds. In addition, Taxpayers may receive tax credits of up to 28% for pre-competitive research in private partnerships, university research, or for fees and dues paid to a research consortium of which the Taxpayer is a member. Lastly, although both governments exercise some degree of control over the areas of activity that qualify for tax credits, they are hardly restrictive, as neither requires that the projects developed continue their activities in Quebec or Canada upon completion of their R&D phase, when they are ready to move into production. FILM & VIDEO PRODUCTION SERVICES Much like the tax credits for R&D, refundable tax credits may be issued both federally and provincially for film or video production services. Indeed, the federal Film or Video Production Services Tax Credit (“PSTC”) will provide a credit equivalent to 16% of qualified “Canadian labour expenditures”.2 The Québec Tax Credit for Film Production Services (“QPSTC”) provides a base refundable tax credit at a rate of 20% of eligible production costs, including qualified labour costs, which are roughly equivalent to qualified Canadian labour expenditures under the PTSC, as adapted to Quebec, but also provides credits for the costs of qualified properties and the costs of acquiring or renting properties. Furthermore, the QPSTC provides an additional 16% tax credit for eligible expenditures that relate to computer-aided animation and special effects, for a total tax credit of 36% for such expenses. The 2015-2016 provincial budget extended these tax incentives in certain circumstances. In order to qualify for the PSTC and QPSTC, both governments clearly define the eligibility criteria. Apart from requirements regarding the corporations applying for the credit, in both jurisdictions, productions are subject to similar minimal aggregate expenditure requirements. These expenditures encompass every phase of production from the screenplay to postproduction and compression for distribution. In Quebec, a television series or a pilot program must have minimum aggregate expenditures of $100,000 per episode of 30 minutes or less. For episodes exceeding 30 minutes in length, the minimum is $200,000, and for films, it is a minimum of $1,000,000.3 Furthermore, the production must not fall into one of the categories of excluded productions, such as talk shows, sporting events or reality television.4 As mentioned above, productions that use computer-aided animation and special effects will benefit from an additional 16% tax credit, which will be applicable to the production phase of special effects, including principal photography in front of a backdrop for chroma keying (i.e. a green screen). TAKING SECURITY – ADVANCE TAX CREDIT FINANCING Although the Financial Administration Act5 clearly states that Crown (i.e. Her Majesty in right of Canada) debts are not assignable6, which would seemingly hinder federal tax credits from being offered as security, both the Quebec Taxation Act7 and the Canadian Income Tax Act8 provide that corporations may assign or hypothecate the right to claim amounts payable under each respective Act. Provincial: Section 1055.2, Taxation Act Despite any inconsistent provision of any law, a corporation may assign or hypothecate the right to claim an amount payable to it under this Act. The assignment or hypothec is not binding on the State and, as a result, the following rules apply: (a) the Minister retains discretion to pay or not to pay the amount to the assignee or creditor; (b) the assignment or hypothec does not create any liability of the State to the assignee or creditor; and (c) the rights of the assignee or creditor are subject to the rights conferred on the State by section 31 of the Tax Administration Act (chapter A-6.002) and any right to compensation of which the State may avail itself. Federal: Section 220, Income Tax Act [...] (6) Notwithstanding section 67 of the Financial Administration Act and any other provision of a law of Canada or a province, a corporation may assign any amount payable to it under this Act. (7) An assignment referred to in subsection 220(6) is not binding on Her Majesty in right of Canada and, without limiting the generality of the foregoing, (a) the Minister is not required to pay to the assignee the assigned amount; (b) the assignment does not create any liability of Her Majesty in right of Canada to the assignee; and (c) the rights of the assignee are subject to all equitable and statutory rights of set-off in favour of Her Majesty in right of Canada. [Emphasis added] As these tax credits are refundable, they hold value irrespective of the Taxpayer’s revenues for the taxation year and they may, to a certain extent, be offered up as collateral to lenders. However, as we will see, owing to the discretion retained by the Minister and the fact that the value of the tax credits is contingent on a number of other variables, securing collateral on tax credits is a delicate matter. Indeed, further complicating the equation is the fact that both the Taxation Act and the Income Tax Act specifically state that the assignment or hypothec is not binding on the State and thus the Minister retains the discretion to pay or not to pay the tax credits directly to the creditor. Taking effective security on tax credits is obviously a rather intricate business practice, which will require lenders to retain specialized counsel, as the requisite security documents will call for specific measures to be put in place. For example, documents will include those allowing a lender to speak directly to the Minister in order to keep up-to-date on tax credit payment amounts, projected payment dates and those ensuring payments are made to the lender as assignee of the Taxpayer. Among other covenants, when financing tax credits for Film Production Services in Quebec, the borrower (the “Producer”) will, for example, undertake to remain eligible for the tax credit in question, and will also provide the lender with a power of attorney to receive, sign, execute, deliver and file any and all necessary documentation with SODEC, or to otherwise communicate with SODEC regarding any matters pertaining to the Producer. Furthermore, the Producer will release SODEC from the obligation to maintain its confidentiality and allow it to provide the lender with any relevant information it should require. In this manner, the lender will gain a certain degree of control over the Producer’s eligibility for the tax credit. In addition, hypothecs will be taken on the universality of claims as well as on specific incorporeal property (which will include rights to the script and movie), thereby providing recourse to the lender whether the credits are issued to the Producer, or whether they remain owing. However, one must also take into account that the receivables generated may be too far into the future from a cash-flow perspective to provide adequate collateral, or that the main intellectual property rights may not be owned by, but simply licensed to, the Producer. Additional guarantees may also be offered up to lenders financing Taxpayers based on their eligibility for future tax credits. Indeed, Investissement Québec, a government agent, has put in place a number of programs that either issue loans or guarantee loans for advances on refundable tax credits. In most cases, in order to apply, the borrower will be asked to provide an eligibility certificate from Revenue Québec, verifying that it qualifies for the tax credit in question. When available, the additional security provided by Investissement Québec as guarantor may reduce the lending institution’s risk, and possibly reduce borrowing costs. With regard to the movie and television businesses, a few Canadian banks and a number of specialized lenders are engaged in the practice of financing film and television tax credits. In all cases, whether financing movies, television or R&D, financiers will ask for opinions from legal counsel, who must be well versed in local laws, but also in the workings of intra-provincial and, if needed, foreign legislation regarding this very particular type of financing 1 In essence, if a Taxpayer incurs eligible expenditures investing in research and development, but generates no taxable income for the fiscal year, as is often the case in the early stages of a business development project, the Taxpayer will not have any taxes owing at the end of the year, but will nonetheless be entitled to receive funds from government in the form of refundable tax credits as it will be deemed to have paid taxes. The refundable tax credit will be based on a percentage of the eligible expenditures incurred in the fiscal year. 2 Canadian labour expenditures, as defined at paragraph 125.5(1) of the Income Tax Act, (R.S.C. (1985), c. 1.), will include only such salaries and wages paid to individuals who were resident in Canada at the time the payments were made. 3 An Act Respecting the Sectoral Parameters of Certain Fiscal Measures, C.Q.L.R., c. P-5.1, Div II, s. 5.4. 4 Id., s. 5.6. 5 R.S.C. (1985), c. F-11. 6 Id., s. 67(a). 7 C.Q.L.R., c. I-3, s. 1055.2. 8 Cited above, note 2, s. 220.

In this age of social networks, the dividing line between private life and public life seems more and more blurred. The same is true of the boundary between individuals' personal and professional lives. Indeed, headlines in the past few weeks remind us that the personal and professional aspects of an individual's life can sometimes become confused, at great cost to the individual. We are referring here to the employee of an Ontario company who was fired because of his behavior toward a journalist, which was captured on camera and went viral.1 This incident raised a number of questions on the scope of the rights, powers and obligations of employers and their employees. In fact, there is a conflict here between the employer's need to protect the image and reputation of its business and the employee's right to their sphere of personal autonomy. In many areas of business, especially information technology, the use of social media is imperative and they play an increasingly important role. Social media enable many businesses to make themselves known, develop their brand, and maintain contacts with customers. However, the use of social media entails some challenges, particularly regarding the manner of their use by employees. Indeed, no employer wants a disgruntled employee to criticize its business, or even the employee's colleagues, on Facebook or Twitter, for all to see. Also, while an employee's conduct, words or writings may be unrelated to his work, there may be clues or indications in his profile or otherwise that can lead back to his employer. Offensive comments made by an employee in a personal context could thereby affect his employer's image. Employees' personal use of company computers is also an important consideration because it can lead to lost time and decreased productivity. In this context, the employer has a strong interest in being fully informed of its rights and implementing the necessary tools to govern the use of social media by its employees. Accordingly, it is essential to adopt a clear policy on the use of social media. This enables the employer to accurately articulate its expectations of its employees and ensure that they clearly understand them. The employer can thereby take a position on and provide guidelines for the use of social media in the workplace, whether for personal or professional purposes. In doing so, the employer can also, under certain circumstances, reserve a right of access for itself to the contents of computers made available to its employees, which, by the same token, decreases their expectations of privacy. In terms of the professional use of social media, the employer may also determine in advance the information that can be posted online regarding the business and set out its expectations relating thereto. The policy on the use of social media therefore plays a preventive role by making employees aware of the consequences of their actions. Beyond prevention, it also plays a role in controlling troublesome behavior through the imposition of pre-determined disciplinary measures. Social media should be considered as instruments for developing a business and not as obstacles to the business. To this end, the policy on the use of social media can be viewed as a tool for helping to ensure the optimal and harmonious management of the business. 1 ICI Radio-Canada. The employee fired for uttering an obscenity on camera could sue Hydro One, May 13, 2015, online (in French)

SUMMARY MUNICIPAL TAXES: IS IT POSSIBLE TO REDUCE THE BILL? PATENTS ON INFORMATION TECHNOLOGY: NEW BENCHMARKS   MUNICIPAL TAXES: IS IT POSSIBLE TO REDUCE THE BILL? Audrey-Julie Dallaire The tax pressure stemming from municipal taxes certainly constitutes an irritant for businesses. It was recently described as “unjustified” and “unfair for SMEs” by the Canadian Federation of Independent Business (CFIB), which made the following observation: [TRANSLATION] “(…) in 2013, for real-estate assets of equal value, Quebec SME owners pay on average 2.22 times the taxes charged to owners of residential properties”1. In a context where the payment of municipal taxes constitutes a significant expense for SMEs, it seems appropriate to review the means and programs that are available to SMEs and may have a favourable impact on their municipal tax burden. CONTESTATION OF THE MUNICIPAL ASSESSMENT The property tax bill which the owner of a property must pay is the result of the following mathematical operation: the assessment of the property multiplied by the tax rate applicable to its category. Thus, the establishment of the municipal property taxes which a business owes is based on the value of its property as determined by the municipal assessor and entered on the property assessment roll of the municipality. The value of the property entered on the property assessment roll must be equal to its actual value, that is, “its exchange value in the free and open market”2. What can be done if the commercial or industrial property is overvalued? Any person having an interest has recourses available for contesting the correctness, existence or absence of an entry on the property assessment roll. This recourse is exercised by filing an application for review with the municipal body which is responsible for the assessment before May 1 following the coming into force of the triennial assessment roll. Failing an agreement with the municipal assessor, the person who made the complaint may exercise a recourse before the immovable property division of the Tribunal administratif du Québec (TAQ) within the time prescribed by law. NON-TAXABLE EQUIPMENT When dealing with contestations pertaining to industrial properties, the TAQ must rule on, among other things, the taxability of some items of equipment. In fact, the Act Respecting Municipal Taxation provides that equipment used or intended to be used for industrial production purposes is not to be entered on the roll3. In another recent decision, the TAQ ruled that silos, robots, palletizers and coating machines used for industrial production purposes must be excluded from the value of the property4. In the same way, only the electrical or mechanical systems or portion thereof which are necessary for lighting, heating, air conditioning, ventilation, drinking water supply or water evacuation for a building must be included in the municipal assessment while any other element must be excluded. Furthermore, a machine, device and their accessories intended to abate or control pollution must be excluded from the property value. TAX CREDIT AND ASSISTANCE PROGRAMS FOR ENTERPRISES Non-litigious solutions are also available to business seeking to lighten their municipal tax burden. They may avail themselves of tax credits and assistance to businesses under municipal programs, where available. Since 2006, municipalities have new powers in respect of support to economic development. A municipality may grant assistance to any person that operates a private-sector enterprise already present on its territory and is the owner or occupant of an immovable other than a residence. It is to be noted that the value of the assistance that may be granted to the beneficiaries as a whole in this way may not exceed $100,000 per fiscal year5. Municipalities may also grant assistance for relocating on their territories a commercial or industrial enterprise which is already established on their territory, the amount of such assistance being limited to the actual cost of the relocation. Lastly, municipalities may adopt a tax credit program intended for persons that operate a private-sector enterprise for profit and cooperatives that are the owners or occupants of an industrial immovable or conduct certain types of commercial activities6. It must be noted however that although such programs constitute an interesting tool for local economic development, not all municipalities have implemented them. CONCLUSION A major obstacle to the growth and development of SMEs, property taxes constitute a recurring expense which is often neglected by businesses. In a highly competitive economy, SMEs would be well-advised to more carefully review solutions for reducing this form of taxation which is unrelated to their economic performance. ________________________________ 1 « PME et bungalow : deux poids, deux mesures dans la taxation municipale », October 2013, http://www.cfib-fcei.ca/cfib-documents/rr3304f.pdf (French only). 2 Sec. 42 and 43 of the Act Respecting Municipal Taxation, C.Q.L.R. c. F-2.1. 3 Sec. 65 of the Act Respecting Municipal Taxation. 4 9008-5747 Québec inc. v. Ville de Boucherville et al., 2014 QCTAQ 09135. 5 Sec. 92.1 of the Municipal Powers Act, C.Q.L.R. c. C-47.1. 6 Sec. 92.1 and 92.2 of the Municipal Powers Act.     PATENTS ON INFORMATION TECHNOLOGY: NEW BENCHMARKS Éric Lavallée Businesses often develop and try to protect intellectual property related to computer-based business methods, which may consist, among other things, of websites through which a business can be operated in an innovative manner. In 2011, in the case of Canada (Attorney General) v. Amazon.com, Inc.1, The Canadian Federal Court of Appeal invited the commissioner of patents to determine the patentability of a one-click shopping process on the Internet, keeping in mind that new business method may constitute an essential element of a valid patent claim. However, the Court repeated that a claim of this nature cannot be allowed where the only inventive aspect of the claim is an algorithm programmed in a computer. A parallel may be drawn between the above decision and another decision issued last June by the U.S. Supreme Court in the case of Alice Corporation PTY. Ltd. v. CLS Bank International et al.2 (hereinafter, “Alice”). In this case, CLS Bank was requesting the invalidation of patents held by Alice Corporation, which were related to a method for mitigating financial risk. The claims in support of this patent application related to a method of exchanging financial obligations, as well as a computer system and a computer-readable medium containing the source code enabling an individual to implement the method. The U.S. Supreme Court determined that the patents were invalid on the ground that they related to abstract ideas which were not patentable. The fact that the underlying business method has been declared non-patentable is in line with the prior decisions of this same court. However, the Alice decision institutes several additional benchmarks as to the inventions implemented by computer. Among other things, the highest U.S. court is of the view that the generic computer implementation of a method does not have the effect of rendering patentable an abstract idea which would not otherwise qualify to a patent. These decisions highlight the difficulty of obtaining valid patents for inventions implemented by computer and will henceforth have to be taken into account when drafting patent applications related to inventions of that nature. Developers often wish to obtain patents on software. However, in the light of recent case law, this is not possible for simple generic implementations of computer algorithms. Therefore, in many cases, the best protection will no longer be afforded by the monopoly which may stem from a patent, but rather by alliances forged with major players of the industry or the notoriety acquired by a business based on the fact that it was the first to occupy a specific niche. Furthermore, for businesses wishing to acquire rights on patents pertaining to computer-implemented inventions, it will certainly be relevant to first assess the validity of these patents. It must be noted that in the last few months, U.S. lower courts invalidated many patents granted prior to the Alice case. Acquiring rights on patents of that nature may thus reveal to be a very bad investment. Lastly, one must not overlook the importance of carefully documenting the source code pertaining to the computer-implemented business methods since such source code is usually protected by copyright. Copyrights confer in many cases a complementary protection to that which may result from a patent. Although it is sometimes relatively easy to circumvent copyrights by developing source code with a different structure but yielding equivalent results, it nonetheless remains that situations often occur where source codes which required extensive developing efforts from a business are simply copied by unscrupulous ex-employees or business partners. In these situations, it is crucial to be in a position to prove to the satisfaction of the courts what was developed by the business in order to enforce copyrights on the relevant source code. In concluding, a strategy must be established in matters pertaining to the computer-related intellectual property of a business, covering commercial secrets, patents and copyrights and taking into account the recent benchmarks established by case law in the area of computer-related patents. ________________________________ 1 2011 CAF 328, [2012] 2 RCF 459. 2 (2014) (Docket No. 13-298).

CONTENT Overview of the Proposed Rules Respecting Equity Crowdfunding Trademarks in the English Language on Pubilc Signs and PostersOVERVIEW OF THE PROPOSED RULES RESPECTING EQUITY CROWDFUNDINGJosianne BeaudryIn 2013, the Autorité des marchés financiers (AMF) launched a consultation on equity crowdfunding, as we already discussed it in this publication last fall. Following this consultation, the AMF and the securities regulators of Saskatchewan, New Brunswick, Manitoba and Nova Scotia (the “Participating Jurisdictions”) published last March the Draft Regulation 45-108 respecting Crowdfunding (the “Draft Regulation”) and the Draft blanket order relating to the Start-up Crowdfunding Prospectus and Registration Exemption (the “Draft Exemption”). Some other Canadian jurisdictions published similar draft local notices.Currently, in Canada, crowdfunding respecting the issuance of securities is not allowed. The Canadian Securities Administrators are aware of the increasing development of Internet-based fundraising and the fundraising needs of start-ups and SMEs. Participant Jurisdictions define crowdfunding as a method of funding a project or venture through small amounts of money raised from a potentially large number of people over the Internet via an Internet portal.For the purpose of facilitating such fundraising, in the Draft Regulation and Draft Exemption, Participating Jurisdictions propose two offering schemes the first one, available to reporting issuers and non-reporting issuers and the second one, available to start-ups (which are necessarily non-reporting issuers). The rules governing crowdfunding by these two classes of issuers would be somewhat different. The rules applicable to start-ups will be less stringent than those applicable to reporting issuers and non-reporting issuers. The concept of start-up is not defined in the proposed rules.Furthermore, by adopting the Draft Regulation, Participating Jurisdictions wish to regulate the registration of funding portals. For instance, funding portals for offering to be conducted under the Draft Regulation would be required to register as exempt market dealers while funding portals for offering to be conducted under the Draft Exemption would not be subject to such requirements. By so distinguishing between the various types of issuers, Participating Jurisdictions are of the view that they facilitate fundraising at the various stages of the growth of enterprises.Many rules will apply to crowdfunding. The following table shows the most important of those:  A streamlined disclosure document must be provided that includes basic information about the offering, the issuer and the portal. This document must also contain certain financial information. In the case of a start-up, it will rather be a standardized document (a form) without any obligation to provide financial statements. It must be noted that under Quebec securities regulations, such a document must be prepared either in French or in French and English, both for a Quebec issuer and an issuer from another jurisdiction which intends to distribute its securities to Quebec subscribers.Reporting issuers who complete this type of financing will remain subject to the continuous disclosure obligations under securities legislation while non-reporting issuers will henceforth be required to provide, among other things, annual financial statements (audited or reviewed under the circumstances provided for in the Draft Regulation). Start-ups that will have distributed their securities under the Draft Exemption will have no ongoing disclosure obligation than that provided under their corporate governance statutes.Funding portals which serve as intermediaries for the crowdfunding of non-reporting issuers and reporting issuers will be required to register as exempt market dealer. The funding portals of start-ups under the Draft Exemption will have no registration obligation but will be required to send to the Participating Jurisdictions information such as personal information on each of its promoters, directors, officers and each person participating in the control of the portal. A portal cannot provide specific recommendations or advice to investors about securities being offered on its platform. Portals will be required to ensure that the maximum investment thresholds per investor are complied with.Issuers will not be allowed to pay compensation under any form whatsoever to a person other than the portal respecting the offering under the regime of this exemption. Such prohibition does not apply to the fees of lawyers and accountants who may help the issuer in drafting the offering documents.Prior to allowing an issuer to access their websites, registered portals will also be required to conduct background checks on the issuer’s, directors, officers and promoters through the requirement to file a personal information form such as that required by the Canadian Securities Administrators for prospectuses or the Canadian exchanges.This Draft Regulation will not apply to issuers of the real-estate sector who are not reporting issuers or to investment funds.In conclusion, the intention of the Participating Jurisdictions to facilitate fundraising by some start-ups and SMEs is genuine. However, public protection requires a framework for this “new” financing method. It remains to be seen whether the industry will view the proposed framework as providing an adequate balance between regulatory requirements and compliance costs. The consultation period ends on June 18, 2014.TRADEMARKS IN THE ENGLISH LANGUAGE ON PUBLIC SIGNS AND POSTERSDavid Eramianwith the collaboration of Sylvie Demers, articling studentOn April 9 last, the Superior Court of Québec issued its judgment1 on a motion for a declaratory judgment pertaining to trademarks in the English language on public signs and posters. The applicants, Magasin Best Buy Ltée2, Costco Wholesale Canada Ltd, Gap (Canada) Inc., Old Navy (Canada) Inc., Corporation Guess? Canada, la Compagnie Wal Mart du Canada, Toys “R” Us Canada Ltée and Curves International Inc. were seeking to have the Court answer the following question : [TRANSLATION] “are trademarks in the English language, without a registered French version, used on public signs and posters and in commercial advertising, required to be accompanied by a generic descriptive term in the French language to comply with the Charter of the French Language (“Charter”) and the Regulation respecting the language of commerce and business (“Regulation”)?” This motion for a declaratory judgment was made in the context of a recent change of policy of the Office de la langue française (“Office”) as to the interpretation of the Regulation, which was putting the applicants at risk of becoming the subject of penal proceedings and having their francization certificates withdrawn if they did not use their trademarks in the English language in conjunction with a generic descriptive term in the French language. The Attorney General of Québec was inviting the Court to answer the question in the affirmative.The Superior Court answered the question in the negative, ruling in favour of the applicants. Firstly, the Court noted the distinction between the legal concepts of a business name and a trademark. The Court concluded that it was with full knowledge that the government had introduced a specific exception to the French language signage requirement to allow trademarks in other languages than French on public signs and posters. The scheme of the Act could not then be invoked to run against an exception created by the legislator with full knowledge.Secondly, the Court noted that the Office had consistently applied section 25(4) of the Regulation since it came into force in 1993, allowing trademarks registered in languages other than French on public signs and posters without them being accompanied by generic terms. This interpretation was thus continuous and could be considered as an interpretative custom allowing the applicants to believe that their signage practices complied with the Charter. The interpretation proposed by the Attorney General would have resulted in depriving this derogation specifically provided for under section 25(4) of the Regulation of any practical application.The Superior Court concluded by stating that it is not for the courts to modify clear legislative and regulatory texts supported by an interpretative custom which has been consistently applied for 20 years. It is rather for the legislator, if it so wishes, to intervene and impose the solutions it deems adequate as to the language to be used by businesses on public signs and posters.________________________________1 2014 QCCS 1427, par. 9.2 This decision of the Superior Court was appealed, on May 8, 2014, by the Attorney General of Québec.

Our clients from outside the province of Quebec often ask us the following questions: what are the linguistic labelling requirements in Canada, and particularly Quebec? There are several statutes and regulations governing labelling in Quebec and Canada. The following is a summary of some of the major points relating to the use of the French language.RULES APPLICABLE THROUGHOUT CANADACOMPULSORY INFORMATIONThe Consumer Packaging and Labelling Act1 as well as the Consumer Packaging and Labelling Regulations2 provide that the following three pieces of information must appear on the labels of all prepackaged products throughout Canada: the identity of the product, the net quantity of the product, and the identity and principal place of business of the dealer. The statute and regulation also provide that this information must be set out in both official languages, i.e. English and French. There is one exception to this rule: the identity and principal place of business of the person by or for whom the prepackaged product was manufactured, processed, produced or packaged for resale may be indicated in either official language.It is important to note that where there are one or more surfaces on the label of a prepackaged product that are of the same size and prominence as the principal display panel, the identity and net quantity of the product may be shown on the principal display panel in one of the official languages only, but only if that information is shown in the other official language on one of those other surfaces.3 With respect to imported goods, the above-mentioned statute and regulation state that where a product is wholly manufactured outside Canada, the product label must contain the identity of the product, the net quantity of the product, as well as the name and place of business of a Canadian dealer preceded by the words "imported by / importés par" or " imported for / importé pour"; or the statement of geographic origin in the space adjacent to the declaration of the identity and place of business of the foreign dealer; or the identity and place of business of the foreign dealer.ADDITIONAL INFORMATIONUnder the federal legislation, it is not necessary for the additional information appearing on the label (user instructions, advertising claims, or a food recipe, for example) to be indicated in both official languages, although the Competition Bureau encourages companies to set out all information in both languages whenever possible.USE OF A LANGUAGE OTHER THAN FRENCH OR ENGLISHLanguages other than English and French may appear on a label, on condition that the compulsory information is shown in the two official languages. In addition, it is important that all the information appearing on the label is true and not misleading, regardless of the language used.FOOD AND DRUGS ACT4AND FOOD AND DRUG REGULATIONS5The Food and Drugs Act and Food and Drug Regulations also require certain information to be indicated on the label for a food. Except for a few specific exceptions, all the information that must appear on a food label under that regulation must be set out in both official languages, such as the list of ingredients, nutrition facts table, and net quantity.The following are some of the exceptions: the common names of certain alcoholic beverages may appear in only one of the two official languages if such name is indicated on the principal display panel in the manner prescribed by regulation; the same exception applies to certain special foods (communion wine and wafers sold to religious institutions, for example) and certain local foods in specific circumstances.SPECIFIC RULES IN QUEBECCOMPULSORY USE OF FRENCH ON SIGNS AND POSTERSWhile the federal statutes and regulations only require some information to appear in both official languages, the Quebec provincial legislation is more severe with respect to the use of French on the labelling of a product sold in Quebec. Indeed, the Charter of the French Language, in force throughout the province of Quebec, requires that every inscription on a product, its container or wrapping, or on a document or object supplied with it, including the directions for use and the warranty certificates, must be drafted in French. This rule also applies to menus and wine lists. However, a language other than French may also be used, provided that no inscription in the other language is given greater prominence to those written in French.EXCEPTIONS TO FRENCH SIGNS AND POSTERSDespite the aforementioned general rule, the Regulation respecting the language of commerce and business provides that an inscription on a product may be written only in a language other than French in certain cases, such as the following: a product from outside Quebec that has not yet been marketed in Quebec and is being exhibited at a convention, conference, fair or exhibition; an inscription embossed on a tire; the name of a firm established exclusively outside Quebec; the denomination of an exotic product or foreign specialty; and finally, a recognized trademark within the meaning of the Trade-marks Act, unless a French version has been registered.A recent judgment of the Superior Court6 confirmed that retailers may display their trademarks in English if no French version has been registered, without adding a description of the trademark in French. This judgment arose out of a motion for a declaratory judgment brought by Best Buy Canada Ltd., Costco Wholesale Canada Ltd., Gap (Canada) Inc., Old Navy (Canada) Inc., Guess ? Canada Corporation, Wal-Mart Canada Corp., Toys “R” Us Canada Ltd. and Curves International, Inc. Indeed, although the retailers involved in this action had not registered a French version of their trademarks, the Office québécois de la langue française wanted them to add a description in French of their trademark, such as "Boutique Old Navy". The judge found that firms are under no such obligation, but nothing prevents them from adding a description in French to one of their trademarks in English, if they so wish, as many firms already do on a voluntary basis.CONCLUSIONAlthough product labelling may seem quite simple, there are numerous rules to be complied with relating for example to linguistic aspects, print size to indicate certain information, specific features for alcoholic products or standardized container sizes for certain products (facial tissue, peanut butter, wine and glucose syrup or sugar syrup), to name just a few. Thus, one can never be too careful, and we would strongly advise that you contact a professional to ensure that your labels are in compliance when you do business in Quebec_________________________________________1 R.S.C. (1985), c. C-38.2 C.R.C., c. 417.3 Section 6(8) of the Consumer Packaging and Labelling Regulations.4 R.S.C. (1985), c. C-38.5 C.R.C., c. 870.6 Magasins Best Buy ltée et al. c. Québec (Procureur général), 2014 QCCS 1427.

On April 9 last, the Superior Court of Québec issued its judgement1 on a motion for a declaratory judgment pertaining to trademarks in the English language on public signs and posters. The applicants, Magasin Best Buy Ltée, Costco Wholesale Canada Ltd, Gap (Canada) Inc., Old Navy (Canada) Inc., Corporation Guess? Canada, la Compagnie Wal Mart du Canada, Toys “R” Us Canada Ltée and Curves International Inc. were seeking to have the Court answer the following question : [TRANSLATION] “are trademarks in the English language, without a registered French version, used on public signs and posters and in commercial advertising, required to be accompanied by a generic descriptive term in the French language to comply with the Charter of the French Language (“Charter”) and the Regulation respecting the language of commerce and business (“Regulation”)?” This motion for a declaratory judgment was made in the context of a recent change of policy of the Office de la langue française (“Office”) as to the interpretation of the Regulation, which was putting the applicants at risk of becoming the subject of penal proceedings and having their francization certificates withdrawn if they did not use their trademarks in the English language in conjunction with a generic descriptive term in the French language. The Attorney General of Québec was inviting the Court to answer the question in the affirmative.The Superior Court answered the question in the negative, ruling in favour of the applicants. Firstly, the Court noted the distinction between the legal concepts of a business name and a trademark. The Court concluded that it was with full knowledge that the government had introduced a specific exception to the French language signage requirement to allow trademarks in other languages than French on public signs and posters. The scheme of the Act could not then be invoked to run against an exception created by the legislator with full knowledge.Secondly, the Court noted that the Office had consistently applied section 25(4) of the Regulation since it came into force in 1993, allowing trademarks registered in languages other than French on public signs and posters without them being accompanied by generic terms. This interpretation was thus continuous and could be considered as an interpretative custom allowing the applicants to believe that their signage practices complied with the Charter. The interpretation proposed by the Attorney General would have resulted in depriving this derogation specifically provided for under section 25(4) of the Regulation of any practical application.The Superior Court concluded by stating that it is not for the courts to modify clear legislative and regulatory texts supported by an interpretative custom which has been consistently applied for 20 years. It is rather for the legislator, if it so wishes, to intervene and impose the solutions it deems adequate as to the language to be used by businesses on public signs and posters.________________________________1 2014 QCCS 1427, par. 9

On January 27, 2014, the parliamentary secretary of the Canadian Minister of Foreign Affairs tabled five treaties in the House of Commons dealing with intellectual property, of which three relate to trademarks.These three treaties on trademarks are as follows: The Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (the "Madrid Protocol") The Singapore Treaty on the Law of Trademarks The Nice Agreement Concerning the International Classification of Goods and Services for the Registration of Marks (the "Nice Classification")If ratified by Canada, these three treaties dealing with trademarks would allow Canada to align itself with most of its trade partners, and would provide definite benefits to Canadian trademark owners.The Madrid Protocol would enable Canadian trademark owners to file applications for international registration via the Canadian Intellectual Property Office. This would simplify procedures, allowing for the filing of a single application that would be effective in many contracting countries to the Madrid Agreement or Madrid Protocol. Indeed, from the date of the international registration, the trademark would be protected in each of the designated countries as if an application for registration had been filed directly with the official trademark office in each of these countries.The purpose of the Singapore Treaty on the Law of Trademarks is to simplify and standardize the formalities and procedures for the administration of trademarks. It provides for more user-friendly and harmonized international procedures that would save time for trademark registration applicants.As for the Nice Arrangement, it would provide for the adoption by Canada of the Nice Classification, which is already in use by most countries for trademark registration.Most countries that have adopted the Nice Classification require filing fees for applications calculated on the basis of the number of international classes of goods and services covered by the application. However, in Canada, it is possible that a single filing fee will set, even for multi-class applications.There is no known timetable for the ratification of these treaties, but we will continue to monitor the process and keep our clients informed of further developments.

The production and circulation of counterfeit products have been an economic and social problem for some time. Not only can such products pose a safety risk to consumers who use them, counterfeit products also lead to considerable lost income for legitimate businesses, decrease consumer confidence in the marketplace and are often used to finance organized crime. The retail value of counterfeit goods seized by the RCMP increased from $7.6 million in 2005 to $38 million in 20121. Although it is generally considered imperative to set up means of eradicating this problem, Canada’s current legal system does not provide the necessary tools to do so. In a concrete attempt to tackle this problem, on March 1st the federal government tabled Bill C-56, An Act to Amend the Copyright Act and the Trade-marks Act and to Make Consequential Amendments to Other Acts, known under the short title the Combating Counterfeit Products Act ( the “Bill” ). As its name implies, the Bill proposes changes to the current legislation to strengthen the rights of copyright holders and trade-mark owners. Among other things, the Bill proposes specific measures to introduce additional civil and criminal actions as well as new border measures.The additional powers given to border authorities no doubt constitute the most concrete measure introduced by the Bill. Customs officers would be able to seize suspicious products as they are being imported into Canada, with a view to potential action under the law. These border measures will not apply to the import or export of goods by individuals for personal use.The Bill also allows a copyright holder or trade-mark owner to file a request for assistance with the Minister to facilitate an action involving products that are imported or exported illegally. In particular, a customs officer with reasonable grounds to suspect that products retained under his or her authority are banned from being imported or exported will have the discretion to provide copyright holders or trade-mark owners who file a request for assistance with samples of the goods and information about the goods, which could be useful in taking civil action against infringers.Furthermore, the Bill introduces new criminal offences for trade-mark counterfeiting that are analogous to existing offences in the Copyright Act. The Bill also creates new criminal offences with respect to the possession and import and export of infringing copies or counterfeit trade-marked goods, packaging or labels.The changes made by the Bill to the Trade-marks Act are quite technical but demonstrate the legislator’s intention to evolve the law to consider changing market realities. The Bill introduces the possibility of registering so-called “non-conventional” trade- marks (sounds, odours, tastes and textures). Other changes are designed to simplify and clarify certain notions in the current legislation.The Bill is an ambitious initiative by the federal government. It will be interesting to follow its progress and see what practical effects it will eventually have._________________________________________ 1 Industry Canada – Backgrounder – “Combating Counterfeit Products Coming into Canada”, March 1, 2013, http://www.ic.gc.ca/eic/site/064.nsf/eng/07280.html.