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.
Accelerated trademark examination – Canada
Good News from the Canadian Intellectual Property Office! CIPO is taking measures to allow expedited examination of trademark applications in the following cases: Upcoming or current court action in Canada; Combating counterfeit products at the Canadian border; Protecting intellectual property rights from being severely disadvantage on online marketplaces; Preserving a claim to priority within a set deadline and in response to a foreign Trademarks Office request. All requests must be made by way of an affidavit or statutory declaration. There are no fees involved. If the request is accepted, the application will be examined as soon as possible. If not, an explanation for the refusal will be provided. Important to note that if the examination is expedited, this advantage could be lost if the applicant requests an extension of time or misses a deadline.
Entrepreneurs and Intellectual Property: Avoid These Thirteen Mistakes to Protect Yourself (Part 1 of 3)
In this three-part article series, we will share with you the intellectual property (IP)–related mistakes that we regularly see with startups. We hope you will find it useful for your business. Happy reading! Part 1 of 3: Mistakes concerning IP in general Mistake #1: Believing that IP issues don’t affect you Some companies don’t put too much thought into intellectual property considerations, either because they feel they don’t have any intellectual property worth protecting, or because they simply don’t want to go through the trouble of obtaining such protection. While refraining from obtaining IP protection might, in rare instances, be a viable business decision, that does not mean that your company should ignore IP considerations altogether. This is because of the existence of third-party intellectual property rights. As an example, if your business sells or uses technology that has already been patented by a competitor, or your business uses a trademark that is confusingly similar to that of a competitor, then said competitor may be able to sue you for infringement, regardless of whether or not said infringement was deliberate. This is why it is always important to consider third-party IP rights, regardless of the nature of your business activities, and regardless of whether you intend on obtaining IP protection. Mistake #2: Believing that IP will cost you too much Many business owners think that intellectual property is too expensive to warrant spending money on when their company is just starting out. However, while obtaining intellectual property rights can sometimes be an expensive process, it is important to remember that investing in your company’s IP rights is just that: an investment, one that can result in the creation of a valuable asset for your company. This can include a trademark registration for a brand that, over the years, will become incredibly popular, or a patent for a highly sought-after piece of technology. In fact, if properly protected, a company’s intellectual property assets can easily become more valuable than any physical asset. And just like any other valuable asset, it will increase your company’s worth and make your business all the more appealing for potential investors. Mistake #3: Hoping for the intervention of the “IP police” Some entrepreneurs believe that once they have obtained an IP right, the government will be the one to enforce it with their competitors. This is unfortunately not the case. It is up to you, as an IP owner, to monitor the market and ensure that your competitors don’t infringe your rights. Should you fail to do so, you’ll be leaving the door wide open to those who would wish to imitate your products and services. In addition, you even risk losing some of your previously acquired rights. For example, your trademark could become non-distinctive—meaning you would no longer be able to protect it—if you were to fail to react and let a third party copy it. Reacting to every single situation isn’t necessarily called for, but each case should be examined in order to determine what consequences third-party use might have on your rights as a holder. Should you discover, in your market monitoring, that a third party is imitating your intellectual property, talk to your IP advisor or lawyer. They can help you decide on an effective first approach to take, either on your own or through them. Said approach might involve asking the third party to cease its activities, claiming compensation for prejudice caused, requiring that certain modifications be made to the use, and/or negotiating a coexistence agreement or a license with or without royalties. Mistake #4: Believing that you won’t be able to “defend your IP” We sometimes hear entrepreneurs say that securing IP rights isn’t worth their while, as they won’t be able to “defend their IP.” They essentially believe that the only purpose of holding IP rights is to sue competitors who imitate their products and services, which they necessarily believe is very expensive. The result is that they fail to protect their innovations and let their competitors appropriate their products and services. Without IP rights, it is true that they have little recourse. In reality, a lawsuit is usually the last option to use against competitors. Many other steps can be taken before resorting to a lawsuit. As is the case for other IP owners, holding IP rights may allow you to: - Significantly discourage competitors from imitating your products and services by clearly indicating that you hold IP rights; and - Negotiate agreements with your competitors who would like to imitate or who are already imitating your products and services. Remember that only a small minority of IP disputes are resolved in court; all other disputes are resolved out of court quickly and at relatively little cost. Mistake #5: Launching your product or service on the market and waiting to see if it will be a success before obtaining IP protection Some entrepreneurs, preoccupied with saving money, launch their new products or services on the market and wait to see if they are successful before protecting them with IP rights. This constitutes a serious mistake, because some IP rights may no longer be available. More specifically, once a product or service is launched, the possibility of protecting it by patent or industrial design is no more. Note that some exceptions apply, particularly in some jurisdictions that allow grace periods. If you are considering protecting one of your products or services by patent or industrial design, you should start the protection process before you launch your innovation on the market. However, said protection process doesn’t need to be completed in order to begin marketing your product or service. 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 2 | Part 3
Reimbursement clause for extrajudicial fees by a surety: valid or invalid?
On April 6, 2021, the Court of Appeal, per Justice Mark Schrager, rendered an interesting decision in Bank of Nova Scotia c. Davidovit (2021 QCCA 551). The Bank of Nova Scotia (the “Bank”) had granted a commercial loan to a company, of which Aaron Davidovit (“Davidovit” or the “Surety”) was the principal, for the operation of a gym. Under a clause contained in the personal guarantee (suretyship) signed by Davidovit, he was to reimburse all costs and expenses incurred by the Bank to collect amounts owed to it by the principal debtor or Surety, including, but not limited to, legal fees on a solicitor/client basis (the “Clause”). The Bank was claiming $31,145.22 in extrajudicial fees and legal costs from Davidovit, while the amount claimed from the Surety in capital and interest amounted to $35,004.49. The trial judgment The trial judge, the Honourable Frédéric Bachand, concluded that the contract of suretyship was a contract of adhesion within the meaning of article 1379 of the Civil Code of Québec (the “C.C.Q.”) and agreed with Davidovit’s arguments that the Clause was invalid because it was excessively and unreasonably detrimental to the adhering party and contrary to the requirements of good faith, in violation of article 1437 C.C.Q. Justice Bachand emphasizes two main problems with the Clause: (i) it was unilateral, thus giving a disproportionate advantage to the Bank while the Surety did not benefit from such an advantage; (ii) it could restrict access to justice in that it could deter the Surety (who was already vulnerable vis-a-vis his opponent) from contesting the Bank’s claim, the Clause thus doing little to promote the rule of law. Appeal decision The Court of Appeal reversed Justice Bachand’s judgment on the invalidity of the Clause, but confirmed Davidovit’s personal condemnation as Surety. Firstly, the Court of Appeal pointed out that a unilateral clause is not in itself abusive. All of a borrower’s obligations under a loan agreement or a surety’s obligations under a contract of suretyship are unilateral, but that this fact alone cannot determine whether a clause is abusive. The logic applied by the trial judge would lead to the conclusion that the repayment of a balance due at the end of a loan is abusive, because it is unilateral. Secondly, the fact that one party finds itself at a disadvantage is also not reason to conclude that a clause is abusive. Section 23 of the Quebec Charter of Human Rights and Freedoms, raised by Justice Bachand in dealing with equality of arms in a judicial process, did not apply in this case, despite the fact that a bank may appear to have more means to initiate legal proceedings than a surety does. Thirdly, just because the law provides for a monetary sanction, such as payment of legal fees or other damages (e.g. in application of article 54 or 342 of the Code of Civil Procedure) for an abusive situation (e.g. a frivolous defence of a surety), this does not mean that contracting parties cannot agree to provide for such payment. The judges of the Court of Appeal held that, on the contrary, a clause for the reimbursement of extrajudicial costs and fees allows for legitimate claims to be pursued before the courts against principal debtors and sureties who refuse to pay. Justice Schrager also took the liberty of commenting on the trial judge’s conclusion regarding the qualification of the contract of suretyship as a contract of adhesion. However, considering that neither party questioned this qualification, the Court of Appeal did not formally rule on this aspect, but pointed out that the mere fact that the terms of a contract appear on a preprinted form does not necessarily mean that it constitutes a contract of adhesion, although a preprinted form may be an indication that the terms imposed are not negotiable. The reasonableness of the amount claimed under the Clause Although valid, the Clause must still be subject to control by the courts to ensure that the amount claimed for extrajudicial costs and fees is not abusive and is claimed in good faith. The Court found that the reimbursement of more than $31,000 in legal fees where the principal claim amounts to just over $35,000 is unreasonable and disproportionate. Given 1) the complexity of the case, 2) the amount of the claim against the Surety, 3) that the burden of demonstrating the reasonableness of the costs was on the Bank, 4) that claims for reimbursement of extrajudicial costs and fees must be exercised reasonably and in good faith (in accordance with articles, 6, 7 and 1375 C.C.Q.), the Court of Appeal reduced the claim and arbitrarily established it at $12,000. Conclusion Clauses for the reimbursement of extrajudicial fees have a certain acceptability in society, particularly in the commercial sphere. Even in a contract of adhesion, they are not necessarily abusive and invalid, but their application is subject to control by the courts so that they are exercised reasonably and in good faith.
Loss of personal information: The Superior Court dismisses a class action
On March 26, 2021, the Superior Court rendered a decision dismissing a class action against the Investment Industry Regulatory Organization of Canada (“IIROC”) on the loss of personal information of thousands of Canadian investors.1 The lack of evidence of compensable injury and IIROC’s diligent behaviour are the main reasons for the dismissal of the class action. The Facts On February 22, 2013, an inspector working for IIROC forgot his laptop computer in a public place. The computer, which contained the personal information of approximately 50,000 Canadians, was never found. The information had originally been collected by various securities brokers who were under inspection by IIROC. Mr. Lamoureux, whose personal information was on the computer, brought a class action on behalf of all persons whose personal information was lost in the incident. He claimed compensatory damages for the stress, anxiety and worries associated with the loss of personal information, as well as compensation for the injury associated with the identity theft or attempted identity theft of members. He also claimed punitive damages for unlawful and intentional infringement of the right to privacy protected by the Quebec Charter of Human Rights and Freedoms. On this point, the members claimed that IIROC had been reckless and had delayed in notifying affected persons and brokers, as well as relevant authorities. Decision The class action is dismissed in its entirety. Compensatory damages The Superior Court started by acknowledging IIROC’s admission that it was at fault for the loss of the computer, and that the computer was not encrypted as it should have been to comply with IIROC policies. With respect to compensatory damages, the Court reiterated the principle according to which the existence of fault does not presume the existence of injury; each case must be analyzed on the basis of the evidence.2 In this case, the injury alleged by the members can be summarized as follows: They suffered worry, anger, stress and anxiety about the incident. They were forced to monitor their financial accounts, and in particular their credit cards and bank accounts. They were inconvenienced and wasted time in having to deal with credit agencies and ensuring that their personal information was protected. They felt shame and suffered delays caused by identity checks on their credit applications attributable to flags on their files. In its analysis, the Court held that, apart from the fact that the members were generally troubled by the loss of their personal information, there was no evidence of any particular and significant difficulties related to their mental state. Relying on Mustapha v. Culligan of Canada Ltd.,3 the Court reiterated that “the law does not recognize upset, disgust, anxiety, agitation or other mental states that fall short of injury.” If the injury is not serious and prolonged, and is limited to ordinary discomforts and fears that are inherent to life in society, it does not constitute compensable injury. In this case, the Court found that the negative feelings experienced as a result of the loss of personal information did not rise above the level of ordinary discomforts, anxieties and fears that people living in society routinely accept. Having to monitor one’s personal accounts more closely does not qualify as a compensable injury, as the courts equate this practice with that of [translation] “a reasonable person who protects their assets.”4 The Court also considered the fact that IIROC provided members with free credit monitoring and protection services. It thus concluded that, in this respect, there was no injury to compensate. Finally, the experts who were mandated to analyze the circumstances and wrongful use of the investors’ personal information found that there was no clear indication of wrongful use of the information by a person or group of persons, although evidence of wrongful use of personal information is not necessary to assert a claim. Punitive damages The plaintiff, on behalf of the members of the class action, also sought punitive damages on the grounds that IIROC had been reckless in its handling of the incident. To analyze IIROC’s diligence, the Court noted the following facts. IIROC launched an internal investigation in the week that followed that of February 22, 2013, the date on which the computer was lost. On March 4, 2013, the investigation revealed that the computer likely contained the personal information of thousands of Canadians. IIROC filed a police report. On March 6, 2013, it mandated Deloitte to identify what personal information was lost and who were the affected persons and brokerage firms, and to help it manage the risks and obligations associated with the loss of the personal information. On March 22, 2013, Deloitte informed IIROC that the computer contained “highly sensitive” and “increased sensitivity” information about thousands of Canadian investors. On March 27, 2013, IIROC notified the Commission d’accès à l’information du Québec and the Office of the Privacy Commissioner of Canada. On April 8 and 9, 2013, IIROC met with representatives of the affected brokerage firms, and simultaneously mandated credit agencies to implement safeguards for investors and brokerage firms. IIROC also set up a bilingual call center, issued a press release about the loss of the computer and sent a letter to affected investors. The Court also accepted expert evidence according to which IIROC’s response was consistent with industry best practices, and that the measures put in place were appropriate in the circumstances and consistent with other responses to similar incidents. In light of the evidence, the Court concluded that the loss of the unencrypted laptop computer and the resulting violation of the right to privacy were isolated and unintentional. It therefore dismissed the claim for punitive damages. The outcome is that IIROC was not reckless: it rather acted in a timely manner. Comments This decision introduces a basis for analyzing the diligent conduct of a company should the personal information that it holds be compromised, and confirms that a prompt and diligent response to a security incident can safeguard against a civil suit. It also confirms that the mere loss of personal information, no matter how sensitive, is not in itself sufficient to justify financial compensation, and that it must be proven that injury was suffered. Furthermore, ordinary annoyances and temporary inconveniences do not constitute compensable injury, and monitoring financial accounts is not exceptional, but is rather considered the standard practice expected of a reasonable person protecting their assets. At the time of writing this bulletin, the time limit for appeal has not expired and the plaintiff has not announced whether he intends to appeal the judgment. Lamoureux v. Organisme canadien de réglementation du commerce des valeurs mobilières (OCRCVM), 2021 QCCS 1093. Sofio v. Organisme canadien de réglementation du commerce des valeurs mobilières (OCRCVM), 2014 QCCS 4061, paras. 21 and 22. Mustapha v. Culligan of Canada Ltd., 2008 SCC 27  2 SCR 114. Lamoureux v. Organisme canadien de réglementation du commerce des valeurs mobilières, 2021 QCCS 1093, para. 73.
Pre‑ruling Consultation with the Canada Revenue Agency (CRA): a little‑known yet practical service
Canada’s tax system is very complex and tends to become more complex over time. Amendments to tax laws in recent years have not simplified our tax system, quite the contrary. The introduction of various intention tests in tax laws has also further increased tax authorities’ discretion as to the application of such laws. In this context, it is often a good idea to obtain the Canada Revenue Agency’s (“CRA”) advice on the application of tax laws to proposed transactions. Given that the CRA is responsible for applying the Income Tax Act (the “ITA”) and other legislation, some Canadian taxpayers would be well advised to ensure that the CRA will agree with their interpretation of the ITA in the context of a proposed tax plan or transaction. Getting the CRA’s opinion will help to steer clear of differences in opinion that could lead to lengthy and costly debates. The CRA has long offered Canadian taxpayers the opportunity to consult it before proceeding with tax plans or transactions. The two best known mechanisms for doing so are requests for a Technical Interpretation and requests for a Ruling. As a request for a Technical Interpretation is made anonymously, the resulting interpretation as to the application of the ITA is not binding on the CRA, and it requires a considerable amount of time to obtain. A request for a Ruling, on the other hand, requires identification of the parties and details of the proposed tax plan or transaction, and the resulting Ruling will bind the CRA to certain conditions. It is also faster to obtain. The CRA charges a fee to render a Ruling, but does not charge one for a Technical Interpretation. There is, however, a third, lesser-known mechanism available to taxpayers: a Pre-ruling Consultation. Some of its advantages include: Faster feedback for taxpayers as to the likelihood that the CRA will render the Ruling sought. Lesser preparation costs, as a Pre-ruling Consultation request requires less information than a request for a Ruling. Lower fees to be paid to the CRA in cases where the CRA believes that it cannot render the Ruling a taxpayer is seeking. The use of the Pre-ruling Consultation service will often be the best way to begin the request for a Ruling process. By using the service, taxpayers can quickly determine, at a relatively low cost, whether they should engage in the request for a Ruling process. The service isn’t a substitute for obtaining such a Ruling, however, as a Ruling has the advantage of binding the CRA with respect to the tax consequences of a proposed tax plan or transaction. Our taxation team can guide you and answer your questions regarding the services that the CRA offers in connection with tax compliance.
Studios and designers: How to protect the intellectual property of your video games?
Behind every video game, there is intellectual property (IP) which is worth protecting to optimize monetisation of the game. As discussed in Studios and designers: Are you sure that you own the intellectual property rights to your video games, the first step for studios and designers is to make sure that they own all IP rights on the video game. The next step is to identify what type of IP protection is available between trademarks, copyrights and patents and then put in place an IP strategy to protect these assets in Canada and abroad. Below is a summary of the types of protection to consider to fully protect a video game. Trademarks The name of a video game is a valuable asset, with a potential to become internationally famous. Just think about Call of Duty, Fortnite, Minecraft and Assassin’s Creed or, for the more nostalgic, classic games such as Super Mario. Pokémon and Pacman. Trademarks have this power to evoke unique and captivating experience in the gaming world. In this industry, experience shows that a video game may become an instant international success, since it is an online market with powerful gaming influencers. For this reason, being proactive with trademark protection is key. What does it mean? First, clearance searches should be made as soon as you decide on the name of your game, in the most important markets where you anticipate sales. The idea here is to make sure that your brand is not conflicting with other marks so that you may use it and register it in your main market. Once the mark is cleared, you may then proceed with filing. Here again, the earlier the better as trademark protection is, in most countries, granted to the first-to-file. Filing before your project becomes public is therefore strongly recommend. As for the scope of the application, it should of course cover the game itself but also potential merchandising goods, either because it is part of the business plan to monetize the brand, or as a defensive strategy. Apart from the main brand, other aspects of the game may qualify as trademarks and be protectable. For instance, a sound or sequence of sounds associated with starting a console or a game could potentially be registered as trademarks. The names and image of characters in a game may also be protected, especially for merchandising goods. In short, for studios and designers involved in the video game industry, trademark registration is key to getting the most value out of a video game. This begins with a well-orchestrated protection strategy to minimize risk of conflicts and to build a solid and valuable brand. Copyrights A video game is a mix of literary, artistic and musical works which are protected by copyright, including computer program behind a game’s architecture is also explicitly protected by law.1 The protection offered by the Copyright Act (“CA”) applies as soon as a work is created, without the need for registration. This protection extends to the 176 member countries of the Berne Convention. Although the protection of a work by copyright is automatic, copyright owners may register their right with the Canadian Intellectual Property Office (“CIPO”) at any time. In particular, registration makes it easier to prove ownership of the right in the event of a dispute in that it creates the presumption that the person named in the registration owns the copyright. Copyright protection applies to the entirety of the game, as well as to its various components. Any infringement of these rights by a third party may give rise to a copyright infringement claim if the work or a substantial part of it is copied, unless a defense such as fair dealing is applicable. In this respect, the following activities may qualify as fair dealing: research and private study, education, parody as well as criticism or review and news reporting. Is video game live streaming copyright infringement? In recent years, the phenomenon of video game live streaming has really taken off. Video gamers film or record their computer screens and broadcast them on platforms such as YouTube and Twitch to show their characters, strategies and tactics for completing certain levels of a game. Some live streaming video gamers, who make this their living, have achieved celebrity status and have thousands of followers. Is live streaming a video game without express permission copyright infringement? The courts have yet to rule on whether live streaming games online constitutes a copyright infringement to communicate the work to the public by telecommunication under section 3(1)(f) of the Act. Faced with this widely popular trend, some studios accept this practice because positive reviews from such gamers can boost game sales. Others criticize the fact that they profit from video games without copyright owners receiving any compensation. Chances are that live streaming is not the highest priority of the video industry who is more concerned by the illegal downloads and counterfeits, which may explain why the courts have not yet had the opportunity to rule on video game live streaming. Patents Patents protect the functional aspects of an invention. The owner of a patent may prevent anyone from making, using or commercializing the patented innovation from the date the patent is obtained. Three aspects are taken into consideration before granting a patent:2 Novelty – The invention must be different or be innovative compared to anything that has been done before, anywhere in the world. Utility – The invention must have a useful function and economic value. Inventiveness – The invention must not be obvious to a person skilled in the field. In Canada, it is not possible to patent an abstract idea, but it is possible to patent the physical embodiment of that idea, provided that it meets the criteria of novelty, utility and inventiveness. Canadian patents in the video game industry Patents obtained in the video game industry mainly relate to consoles, controllers, headsets and other gaming accessories. The video game industry has proved to be innovative with the development of inventions that are both fun and useful. In 2012, Nike patented an invention to encourage physical activity among video game players.3 The patent describes a device placed in a gamer’s shoe when the gamer is physically active and connected to a video game. The energy spent by the gamer gives energy to the virtual character. Once the character’s energy is depleted, the gamer must engage in physical activity again. Are game play mechanics patentable? Certain aspects of a video game are less easy to patent, in particular the game play mechanics, which are a distinctive aspect from the standpoint of gamers when choosing a video game. The game play mechanics consists in the virtual experience of a video game: character movement, the interaction of the player with the game, the way the player moves through the levels of the game, etc. Unique and well-developed game play mechanics can be a great asset for a developer wanting to market new versions of a game. Gamers will go back to a familiar game to get immersed in a new experience. This makes patenting such an experience appealing for a studio. Given that game play mechanics are developed using computer code, it might seem that even if the criteria of novelty, utility and inventiveness were met, this type of invention could not be physically embodied and thus could not be patented. To be patented, game play mechanics must have a physical component in addition to the code itself. Consider a patent describing a video game in which a gamer’s heartbeat is integrated into the game,4 which is a good illustration of physical embodiment. Such transposition of a gamer’s vital signs is done physically through a heart monitor worn by the gamer and connected to the game. As all these aspects were described in the invention, this type of inventive game play mechanics was considered patentable. In the United States, the criteria for patents are similar to those in Canada, meaning that abstract game play mechanics would have to be linked to a physical aspect in order to be patentable. Conclusion Implementing an IP protection strategy prior to launching a video game can prevent conflicts, increase the value of assets and strongly position a company in the market to maximize profits. Copyright Act, section 2. “A guide to patents,” Canadian Intellectual Property Office, Government of Canada, 2020-02-24. Patent No. 2,596,041, issued February 9, 2006. Patent No. 2,208,932, issued June 26, 1997.
COVID-19: Anticipating Capital Gains, Wealth, Gift and Inheritance Taxes
The deficits being generated by the emergency measures that the federal and provincial governments have implemented since March 2020 are a reminder of the magnitude of our governments’ pre-crisis deficits. This situation will inevitably lead to a greater tax burden for businesses and individuals at some point. Despite the unprecedented nature of these circumstances and the difficult financial situations that organizations find themselves in, steps can be taken now to mitigate repercussions. For several years, there has been increasing speculation about the capital gains inclusion rate being increased. Rumours also abound about the potential creation of an inheritance tax, which would undoubtedly be accompanied by a gift tax and a wealth tax. In this context, it is becoming ever more plausible that the federal government will finally increase the capital gains inclusion rate and tax the value of inheritances and gifts as early as the next budget, which has been postponed because of the ongoing crisis. An annual wealth tax on high net worth individuals could likewise be in the pipeline. As is now customary, the measures would apply as of midnight the night before the budget is tabled, closing the door to most tax planning strategies to reduce the impact of such measures. In the face of this situation, several steps can be taken as of now as, for instance: Crystallization of unrealized capital gains using a business corporation, partnership or trust; Gifts of money or property to family members or trusts; Termination of Canadian tax residency in favour of a lower-tax jurisdiction. The majority of tax planning strategies aiming to reduce or postpone the impact of such measures can be reversed should the anticipated measures not be adopted. In the event that governments do not increase the tax burden straightaway or opt for other, difficult-to-predict measures, well-planned transactions, such as realizing an accumulated gain on certain assets, making a direct gift, or making a gift through a trust, will ensure that additional taxes need not be paid. If you would like more information, our taxation team is available to help you.
Product advertising in the time of COVID-19: Health Canada and the Competition Bureau are on the lookout for misleading claims
It’s been more than a year since the COVID-19 pandemic began, and many companies are attempting to market products intended to help consumers deal with the risks associated with COVID-19. Some of the most common examples of such products include face masks, testing devices, hand sanitizers, and hard-surface disinfectants. However, while many of these products can be useful (such as by helping reduce the risk of infection), there remains the question of what COVID-19 related claims, if any, can be attributed to the product (e.g. on the product's packaging or in an advertisement). An inaccurate or inappropriate statement can garner the attention of both Health Canada and the Competition Bureau. In fact, since the start of the pandemic, the Competition Bureau has been issuing compliance warnings to businesses across Canada regarding potentially false or misleading claims that their products and services can prevent the disease and/or protect against the virus.1 Accordingly, we have written this newsletter to summarize what Health Canada and the Competition Bureau are looking for when assessing COVID-19-related claims. We also provide examples of the types of statements that have been considered “unacceptable,” as well as a brief description of the consequences of utilizing such unacceptable statements. Please note that the following does not address which licenses are necessary to sell specific products in Canada, nor does it address which legal requirements apply. For example, hand sanitizers, in order to be sold in Canada, must meet the requirements of the Natural Health Products Regulations (NHPR). The general principles of the Competition Act and the rules of the Canadian Competition Bureau With respect to both COVID-19-related claims and product claims in general, the Competition Act prohibits false or misleading claims about any product, service, or business interest. This applies to both the literal meaning of a statement and the general impression it creates. Furthermore, the Competition Act prohibits performance claims that are not backed up by adequate and proper testing. First, such testing must be performed prior to the claim being made and on the actual product being sold, as opposed to a comparable or similar product. Second, they must reflect the product's real-world usage—such as in-home use. Third, the results of the tests must support the general impression created by the claims. Since as early as May 2020, the Competition Bureau has enforced the above guidelines by issuing direct compliance warnings to a variety of businesses across Canada to stop potentially deceptive claims, including warnings against: Making claims that certain products (including herbal remedies, bee-related products, vitamins, and vegetables) can prevent COVID-19 infections; and Making claims—without first conducting the testing required by law—that certain UV and ozone air sterilization systems, as well as certain air filters or air purifiers, will effectively kill or filter out the virus. Accordingly, the above rules should always be followed when making any COVID-19-related claim about a product. Examples of advertising incidents addressed by Health Canada Health Canada has provided a list of more than 400 advertising incidents related to COVID-19.2 The table provided in footnote 2 lists products and corresponding companies or advertising media found to engage in non-compliant marketing, which are currently under review or have been resolved. While many of these incidents have been resolved, it is unclear what resolution occurred. Was the claim modified or removed entirely? Did the company have to pay a fine? Did the company manage to convince Health Canada that their claim was acceptable as is? Nonetheless, it is clear that the statements were questionable enough that Health Canada found it necessary to intervene. The COVID-19-related claims found therein can thus serve as an effective guide of what claims not to use when advertising products. Along with many unauthorized general claims of “preventing” or “treating” coronavirus and/or COVID-19, some interesting examples of statements flagged by Health Canada include the following: “To protect against Coronavirus” – with respect to a “bandana and protection mask set.” “Flatten the curve with these on trend Fashion Masks” – with respect to a face mask. “Anti-Microbial Micropoly Fabric” – with respect to a face mask. “Ideal for Covid-19” – with respect to a face mask. “Anti-coronavirus, blocks pollution like: exhaust fume, smog, flu virus” – with respect to a face mask. “Effectively isolates saliva carrying coronavirus” – with respect to an “Anti-Dust And Anti-Fog Hat Anti Coronavirus Hat.” “The importance of boosting the immune system during the threat of COVID-19” – with respect to various natural health products. “Suitable in bathroom, living room, bedroom hotel, flu Covid-19” – with respect to a “UV Disinfection Lamp Steriliser.” “labeled ‘COVID-19’ under tab” – with respect to a face mask. As can be seen, some of the statements do not even directly mention COVID-19 or coronavirus, and instead reference concepts such as “flattening the curve” or make general representations about having “anti-microbial” properties. Moreover, many of the claims simply reference COVID-19, without making any representations about treating and/or preventing it. In addition to consulting the above guidelines and examples, it may be wise to seek out products that have been approved by Health Canada for use against COVID-19. Some examples of such products include the following: Disinfectants with evidence for use against COVID-19. Authorized medical testing devices for uses related to COVID-19. Authorized medical devices other than testing devices for uses related to COVID-19. Based on the above, products should only bear COVID-19-related claims if they have been approved for use against COVID-19 by Health Canada, and, even then, such claims should be limited to said use and to what the supporting evidence demonstrates. Some of the links above also contain information on how to obtain the aforementioned approval from Health Canada. Please note that, as of the date of this newsletter, no hand sanitizers have been approved in Canada with COVID-19-related claims.3 Consequently, although hand sanitizers can help reduce the risk of infection by, or spread of, microorganisms, COVID-19-related claims should not be used with such products. Even so, Health Canada has provided a list of hand sanitizers that they have authorized for sale in Canada. In general, a sound policy is to thoroughly review your marketing materials to identify any claims related to the prevention or treatment of COVID-19 that may be false, misleading, or unsubstantiated, and immediately modify or remove such claims accordingly. Penalties for false representations and misleading marketing practices The penalties for using COVID-19-related claims that do not comply with the law can be quite severe and can include fines and jail time.4 In fact, false or misleading representations and deceptive marketing practices, regardless of whether they involve COVID-19-related claims, can be prosecuted under civil law and/or criminal law. As an example, under civil law, the court may order a person to cease an activity, publish a notice and/or pay an administrative monetary penalty. On first occurrence, individuals are liable to penalties of up to $750,000, and corporations, up to $10,000,000. For subsequent occurrences, the penalties increase to a maximum of $1,000,000 for individuals and $15,000,000 for corporations. Under criminal law, a person is liable to a fine of up to $200,000 and/or imprisonment for up to one year. We thus strongly recommend avoiding making false or misleading COVID-19-related claims at all times. We hope that our newsletter serves as a useful guide regarding what Health Canada and the Competition Bureau consider an “inaccurate” or “false” COVID-19-related claim, and that it has clearly laid out what the consequences of making such a claim in association with a given product can be. However, whether a COVID-19-related claim is appropriate will depend on many factors, such as the exact wording of the claim and the exact nature of the product. Our intellectual property team would be happy to help you with any questions you may have regarding what COVID-19-related claims, if any, you should use on your products, as well as any other legal requirements that must be met before a specific product can be sold in Canada. https://www.canada.ca/en/competition-bureau/news/2020/05/competition-bureau-cracking-down-on-deceptive-marketing-claims-about-covid-19-prevention-or-treatment.html https://www.canada.ca/en/health-canada/services/drugs-health-products/covid19-industry/health-product-advertising-incidents.html https://www.canada.ca/en/health-canada/services/drugs-health-products/disinfectants/covid-19.html https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03133.html
Payment to non-residents of Canada: How can the Multilateral Instrument (MLI) be applied?
The internationalization of trade has led to an increase in payments made by Canadian companies to non-residents of Canada, which are most of the time subject to Canadian withholding taxes. Canadian payers must ensure that they withhold the correct percentage of Canadian tax on such payments, as they are liable to the tax authorities for any failures on their part in this regard. In addition, payment recipients will normally want to minimize Canadian withholding taxes and ensure that they have benefitted from the lowest applicable rate. Canadian Tax Treaties In many cases, determining the Canadian withholding tax rate will depend on the application of a tax treaty between Canada and the payment recipient’s country of residence for tax purposes. Canadian tax treaties may reduce the rate of the tax that a Canadian payer must withhold. If interpreting tax treaties was already complex in many situations, it has become even more so with Canada’s adoption of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). Since January 1, 2020, the MLI generally applies to most tax treaties between Canada and other countries, and its application may result in the non-application of certain provisions of a tax treaty. In such situations, a Canadian payer will be required to withhold the rate provided for in the Income Tax Act (“ITA”), that is, 25%, instead of the reduced rate provided for in the tax treaty between Canada and the recipient’s country of residence for tax purposes, which will typically vary from 0% to 15%, depending on the type of payment involved and the recipient’s tax status. The application of the Multilateral Instrument (MLI) For the time being, applying the Multilateral Instrument (MLI) is tricky for several reasons. First, the MLI does not apply to all of Canada’s tax treaties, nor to all of the articles of the treaties to which it does apply. It thus becomes necessary to first verify whether the MLI applies to a reduction in the withholding rate provided for in a Canadian tax treaty. Second, the Multilateral Instrument (MLI) provides for a general anti-avoidance rule with rather unclear application criteria. When the rule does apply, it may have the effect of denying a benefit provided for in a tax treaty. In short, the MLI is making the application of the ITA’s withholding tax on payments to non-residents more complex. Given that Canadian tax authorities will now apply the Multilateral Instrument (MLI), Canadian taxpayers should exercise caution and obtain proper advice before applying a rate less than the ITA’s 25% rate. Our taxation team is available to assist you and answer your questions regarding the application of the Multilateral Instrument (MLI) to payments made to non-residents.
The Doctrine of File Wrapper Estoppel in Canada: The Court of Appeal Hands Down its Decision
In December 2018, section 53.1 was added to the Patent Act (the “Act”) allowing reference to be made to communications exchanged with the Canadian Intellectual Property Office (“CIPO”) during the prosecution of an application with respect “[...]to the construction of a claim.” This concept is more commonly known as “file wrapper estoppel.” Salient points Expert evidence regarding how to construe the claims of a patent is not required in order to determine whether infringement has occurred. In a motion for summary judgment, the responding party must put its best foot forward and cannot simply contest the motion on the grounds that the moving party’s evidence is insufficient. File wrapper estoppel applies when rebutting a representation made by the patentee; however, only communications with CIPO are accepted, not those with a foreign patent office. There are several substantive issues yet to be resolved with respect to the file wrapper estoppel doctrine in Canada. In September of 2019, the Federal Court rendered its first decision concerning section 53.1 of the Act in Canmar Foods Ltd v. TA Foods Ltd.1 The decision was appealed, and, on January 20, 2021, the Federal Court of Appeal rendered its first judgment on the application of said section, and thus on the file wrapper estoppel doctrine in Canada.2 Background Canmar Foods Ltd. (“Canmar”) holds a patent on a method for roasting seeds used to produce vegetable oil (the “Patent”). The method claimed in the Patent consists of four steps, including heating the oil seed to a certain temperature in a “stream of air” and transferring the heated oil seed into an “insulated or partially insulated roasting chamber or tower.” During the prosecution of the Patent application, the steps of heating in a “stream of air” and transferring the seeds in the manner mentioned above was added to the Patent claims by amendment in order to limit the scope of the claims. During the prosecution of the Patent application in Canada, Canmar referred to amendments that were “substantially the same” as those made during prosecution of the corresponding U.S. patent application in response to novelty and obviousness objections that had been raised by the examiner. After the Patent was obtained, Canmar sued TA Foods Ltd. (“TA”) for infringement thereof. TA filed a motion for summary judgment on the grounds that the method it used did not include either the step of heating the seeds in a “stream of air” or the step of transferring them into an “insulated or partially insulated roasting chamber or tower.” In support of the motion for summary judgment, the parties both filed affidavits. However, no expert evidence was filed regarding the construction of the claims of the Patent by a person of ordinary skill in the art, a “POSITA.” The Federal Court found that: Expert evidence regarding how to construe the claims of a patent is not required in order to determine whether infringement has occurred. In a motion for summary judgment, the responding party must put its best foot forward and cannot simply contest the motion on the grounds that the moving party’s evidence is insufficient. Section 53.1 of the Act applies because, in contesting the motion for summary judgment, Canmar advanced a construction of the claims that would have the effect of nullifying the amendments made during the prosecution of the patent application. Exceptionally, the prosecution history of the U.S. patent could be relied upon because Canmar made reference thereto during the prosecution of the application for the Canadian Patent. In light of the prosecution history of the U.S. patent, the steps of heating the seeds in a “stream of air” and transferring the heated oil seed into an “insulated or partially insulated roasting chamber or tower” were found to be essential elements of the claims of the Canmar Patent. Even without reference to the prosecution history of the U.S. patent, the Court would have found that these elements were essential. The Court of Appeal upheld the Federal Court’s decision, but pointed out that the judge erred in law by referring to the prosecution history of the U.S. patent. Thus, the Court of Appeal confirmed that the Federal Court had jurisdiction to construe the claims of the Patent and that expert evidence regarding a POSITA’s construction was not necessary in this case. The Court of Appeal nevertheless issued the following warning: Of course, the judge who dispenses with expert evidence will do that at his or her own peril, and it is not a practice that should be lightly countenanced. Claims must always be construed in an informed and purposive way, and it is only in the clearest of cases that judges should feel confident enough to construe the claims of a patent as they would be understood by a skilled person, without the help of any expert evidence. The Court of Appeal also criticized Canmar for failing to produce reply evidence with respect to the infringement. Specifically, the Court states that Canmar should have put its best foot forward, for example by submitting a claim construction that could lead even theoretically to a finding of infringement. In the absence of such evidence, the judge committed no palpable and overriding error in granting the motion for summary judgment. However, the Court of Appeal found that by referring to the prosecution history of the U.S. patent, the Federal Court judge erred in law. After a detailed review of American and British case law on file wrapper estoppel, the Federal Court of Appeal stated: I agree with the appellant that courts should be wary to extend the detailed language of section 53.1, which is specific about the communications being limited to those with the Canadian Patent Office. The legislation is carefully tailored, and it would go against statutory interpretation principles to try to go beyond its original intent. There are also public policy reasons for treading carefully in allowing extrinsic evidence. Opening the door to allowing foreign patent prosecution history into the analysis might lead to overly contentious and expensive litigation. It should be noted that the Court of Appeal then qualified the above statement as follows: Yet, whether the doctrine of incorporation by reference should formally be treated as an exception to the general prohibition on foreign prosecution files, is a question best left for another day. (…) There is nothing in the prosecution file of the ’376 Patent that identifies with any detailed particularity what specific “written communication” from the US prosecution history is incorporated and where that written communication can be found. It is virtually certain that if Canmar had amended its claims and filed with the Canadian patent office the same response that it filed with the U.S. patent office, that response could have been invoked under section 53.1 of the Act. Nevertheless, in such a case, the response in question would unambiguously form part of the Canadian file. On the other hand, if, instead of filing the U.S. response, the applicant had only referred to it in express terms, would section 53.1 of the Act have applied? This is a question that another court will likely have to answer. The Court of Appeal nonetheless dismissed the appeal because the trial judge had found that even without reference to the prosecution history of the U.S. patent, the Federal Court would have concluded that the elements in question were essential. The Court of Appeal found no manifestly unreasonable error in this part of the Federal Court’s judgment. Nor did the Court of Appeal rule on the question as to whether patent prosecution history can be raised solely to rebut an inconsistent construction made by the patentee, or whether it can be referred to whenever claim construction is called into question: The emphasis, therefore, is not so much on the rebuttal of a particular representation, but rather on the interpretive process itself. As the Court stated in Bauer Hockey, “there is no need to identify a particular representation and rebuttal every time a reference is made to the prosecution history. It is simply integrated in the interpretive process” (at para. 65). The resolution of this dispute is best left for another day, as the facts of this case clearly meet the more restricted interpretation of section 53.1 and do not require a broader reading of that section. More germane to the resolution of the case at bar is whether this new provision allows for the consideration of foreign prosecution files. This issue is more than just a theoretical discussion point. In fact, in a recent decision, the Federal Court3 found that section 53.1 was not applicable since the file wrapper was not raised to rebut the patentee’s claim construction. This is because the patent owner had left it to its exclusive licensee to allege infringement. Therefore, although the patentee was eventually made a party to the proceedings (only because invalidity of the patent had been alleged), the claim construction that the defendant wanted to rebut was not made by the patentee, but rather by its exclusive licensee. Thus, unlike Judge Manson in Canmar, Judge Barne in Allergan adopted a much more restrictive interpretation of section 53.1 of the Act. This debate regarding the file wrapper estoppel doctrine will continue and will most likely go all the way to the Supreme Court of Canada. Stay tuned! Canmar Foods Ltd. v. TA Foods Ltd. 2019 FC 1233 Canmar Foods Ltd. v. TA Foods Ltd. 2021 FCA 7 Allergan Inc. v. Sandoz Canada Inc. et al. 2020 FC 1189.
Artificial intelligence soon to be regulated in Canada?
For the time being, there are no specific laws governing the use of artificial intelligence in Canada. Certainly, the laws on the use of personal information and those that prohibit discrimination still apply, no matter if the technologies involved are so-called artificial intelligence technologies or conventional ones. However, the application of such laws to artificial intelligence raises a number of questions, especially when dealing with “artificial neural networks,” because the opacity of the algorithms behind these makes it difficult for those affected to understand the decision-making mechanisms at work. Such artificial neural networks are different in that they provide only limited explanations as to their internal operation. On November 12, 2020, the Office of the Privacy Commissioner of Canada (OPC) published its recommendations for a regulatory framework for artificial intelligence.1 Pointing out that the use of artificial intelligence requiring personal information can have serious privacy implications, the OPC has made several recommendations, which involve the creation of the following, in particular: A requirement for those who develop such systems to ensure that privacy is protected in the design of artificial intelligence systems; A right for individuals to obtain an explanation, in understandable terms, to help them understand decisions made about them by an artificial intelligence system, which would also involve the assurance that such explanations are based on accurate information and are not discriminatory or biased; A right to contest decisions resulting from automated decision making; A right for the regulator to require evidence of the above. It should be noted that these recommendations include the possibility of imposing financial penalties on companies that would fail to abide by this regulatory framework. Moreover, contrary to the approach adopted in the General Data Protection Regulation and the Government of Quebec’s Bill 64, the rights to explanation and contestation would not be limited solely to automated decisions, but would also cover cases where an artificial intelligence system assists a human decision-maker. It is likely that these proposals will eventually provide a framework for the operation of intelligence systems already under development. It would thus be prudent for designers to take these recommendations into account and incorporate them into their artificial intelligence system development parameters as of now. Should these recommendations be adopted, it will also become necessary to consider how to explain the mechanisms behind the systems making or suggesting decisions based on artificial intelligence. As mentioned in these recommendations, “while trade secrets may require organizations to be careful with the explanations they provide, some form of meaningful explanation should always be possible without compromising intellectual property.”2 For this reason, it may be crucial to involve lawyers specializing in these matters from the start when designing solutions that use artificial intelligence and personal information. https://www.priv.gc.ca/en/about-the-opc/what-we-do/consultations/completed-consultations/consultation-ai/reg-fw_202011/ Ibid.
Studios and designers: Are you sure that you own the intellectual property rights to your video games?
The year 2020 will have been difficult for the vast majority of industries, and in particular for the arts, entertainment and recreation industry. The video game industry, however, is growing in leaps and bounds. For example, Nintendo and PlayStation have each set record sales for their games released in 2020, including Animal Crossing:New Horizons and The Last of UsPart II. Over the past few decades, the number of video game players has never stopped increasing. The year 2020 will surely be no exception, especially considering the COVID-19 pandemic. Playing a video game is not only a way to have fun: it is also a way to stay connected with a community that shares the same interests. The world of video games is so popular that the Government of Canada teamed up with the Entertainment Software Association of Canada (“ESAC”) to launch the #CrushCOVID campaign, using ESAC’s and its members’ social media platforms to share mobilization and awareness messages about public health measures. The video game industry is an economic powerhouse in Canada. According to the latest ESAC report, the industry contributed an estimated $4.5 billion to Canada’s GDP in 2019 — up 20% from 20171 — and these figures will likely continue to rise. This video game boom has a decisive impact on the value of companies innovating in this field. A number of recent transactions illustrate this. For instance, last September, Microsoft acquired Bethesda Softworks, one of the largest video game publishers, for US$7.5 billion. Microsoft also bought the Swedish company Mojang Studios, which designed the legendary game Minecraft, for US$2.5 billion in 2014. Closer to home in Montreal, Beat Games was bought by Facebook following the launch of its virtual reality game, Beat Saber, while Typhoon Studios was bought by Google. A successful video game may be lucrative in various ways, between the sale of video games themselves and merchandising goods, such as clothing and accessories, figurines, as well as game-inspired TV series with giants such as Netflix, Amazon Prime, HBO and Hulu, which are always on the lookout for hit TV series. Protecting its intellectual property (“IP”) on a video game is key to monetize all investment put into the development of a game. Doing so is even more crucial in the context where video game commercialization knows no borders, and a game can become an international success overnight. In short, any company should ask itself the following questions before launching its video game, to better position itself in relation to potential investors, licensees or partners, as well as competitors and counterfeiters: Does my company own all of the IP rights on the video game? What kind of IP protection applies and where should IP be protected? Let’s look at the first question. Does my company own all of the IP rights on the video game? Designing a video game usually involves a team of creators, including ideators, programmers, writers, visual and sound effects designers. All these people contribute to the creation of the work that is the video game and the underlying IP. For instance, Ubisoft worked with muralists and graphic designers for its recent game, Watch Dogs: Legion. They designed nearly 300 works to create a post-Brexit urban London. The initiative earned Ubisoft praise even before the game’s release last October.2 Depending on their contribution to the game’s design and their status as employees or consultants, these creators may qualify as authors. As such, they may be considered co-owners of the copyright on the video game. Generally, the copyrights developed by employees in the course of their employment belong to the employer,3 while a consultant remains the owner of the copyrights, unless otherwise agreed upon in writing. Thus, a company behind a video game must make sure that its consultants assigns their IP rights to ensure that it retains full ownership of the copyright. What happens if a consultant has not assigned the copyrights to the company? Can the consultant claim co-ownership of the entire game, or are the consultant’s rights limited to the part he created, such as specific drawings, or music for a particular scene? This is an important question which may have an impact on profit sharing. In Seggie c. Roofdog Games Inc.,4the Superior Court held that a person (non-employee) whose contribution to a game is minimal cannot be considered as a co-author of the entire video game, insofar as: The contribution is limited to a few images; These images are distinguishable from the rest of the work; and The parties had no common intention of creating a collaborative work. Seggie was therefore denied the compensation of 25% of the profits generated by the game that he had claimed. However, the court recognized that Seggie held a copyright on the works he specifically created and which were incorporated into the game, and granted him a compensation of $10,000. Incidentally, this compensation is in our opinion arguable, given that Seggie had agreed to work pro bono for his friend. This decision shows how important it is to have a copyright assignment signed by any person contributing to the conception of a work, regardless of the extent of their involvement. Waiver of moral rights In addition to the assignment of copyrights, the company owning a video game should also ensure that the authors sign a waiver of their moral rights, so as not to limit the potential to modify the game or to associate it with another product or a cause. Indeed, the authors of a work have moral rights that enable them to oppose the use of their work in connection with another product or a cause, service or institution to the prejudice of their honour or reputation. An example would be the use of music or a character from a video game to promote a cause or product, or a television series derived from the game whose script could potentially harm the author’s reputation. To make sure you have plenty of leeway to exploit the commercial potential of the game, a waiver of moral rights should be signed by any employee and consultant involved in the creation of the video game. Conclusion Launching a video game requires a huge investment in terms of resources, time and creativity. In order to develop an effective protection strategy, the first step is to make sure that you own all rights. Then, you are in a position to fully protect and enjoy your IP rights. The next article in this series will discuss the significance and application of these IP rights—i.e., trademarks, copyrights and patents—to the video game industry. “The Canadian Video Game Industry 2019,” Entertainment Software Association of Canada, November 2019, [online]. CLÉMENT, Éric, “Le talent montréalais en vedette dans un nouveau jeu d’Ubisoft,” published in La Presse+, October 21, 2020, edition. Copyright Act, subsection 13(3). Seggie c. Roofdog Games Inc., 2015 QCCS 6462.
Work, Lockdown and Curfew: Answers to Your Questions
In order to reduce community transmission and preserve everyone’s safety and that of our healthcare system, the government requires everyone to make extra efforts, both in their private lives and at work. The closure of retail businesses, save for some exceptions, is maintained, the lockdown to prevent gatherings continues and a curfew was added on January 9, 2021, to remain in effect until the currently announced date of February 8, 20211. How can employers review their work organization to the extent possible for them while complying with government guidelines? Here are a few questions and answers to clarify the situation. With the curfew in effect, do I need to review my work organization and schedules if my activities are not suspended or prohibited? If you operate an essential retail business, you are required to review your employees’ schedules and work hours in order to abide by the curfew and allow your employees to leave your business no later than 7:30 p.m. in order to be home by 8 p.m. Companies in the construction, manufacturing and primary processing industries must reduce their activities “to pursue only those activities necessary to fulfil their commitments” (our translation): To properly measure the scope of this requirement, the guidelines and directives issued by the authorities (including CNESST) must be closely followed. However, on the basis of this statement in the Decree adopted on the evening of January 8, 2021, in order to be able to demonstrate the steps taken to comply with directives, companies should review confirmed contracts and orders, agreed-upon delivery dates and inherent production delays to modify work planning (e.g. priority orders to be delivered by February 8, 2021, staff work days and hours, evening and night shifts). In its online communications, the Government of Quebec asks not only that activities be reduced to a minimum to complete commitments, but also that shifts be adjusted to limit the staff present at any time on production and construction sites. Businesses in this situation may require special negotiations to make the necessary adjustments given working conditions, policies or collective agreements in place. When should I consider temporary layoffs due to a reduction in my activities as a result of the increased lockdown or curfew? Subject to the provisions of a collective agreement or employment contract (e.g. guaranteed hours of work), an employer may consider reorganizing work and allocating working hours among employees by coming to an agreement on temporary working conditions with them to avoid layoffs. If such an agreement is not possible for legal, organizational or efficiency reasons, layoffs may be considered: With confirmation of the layoffs as being related to COVID-19, in which case concerned employees can verify their eligibility for the Canada Recovery Benefit or EI benefits depending on the circumstances. An employer should also document the reasons behind temporary layoffs and, for example, in its determination of who is affected according to the organization’s applicable criteria, for recall purposes and analysis of whether or not extending such layoffs is necessary. How do I protect my essential employees who would have to travel during curfew to get to work or return home? For each employee required to travel during the 8 p.m. to 5 a.m. curfew, the employer must prepare an explanatory letter (attestation letter) as evidence that the employer’s activities are authorized under the applicable directives and that the employee’s work is essential to carrying out authorized activities (this includes transporting goods required for such activities). The attestation letter must include information that could reasonably lead the police to conclude that the employee is allowed to travel during the curfew because that employee qualifies for one of the exceptions provided by the government. Exceptions are known to be interpreted restrictively. On the basis of the form letter issued by the government and the purpose of the attestation letter, this letter should include information such as: The name of the employer and its authorized representative (with letterhead confirming the company’s contact information, including its website). The nature of the employer’s activities. The employee’s duties, home address and work contact information. The employee’s work schedule. The contact information and telephone number of the person available between 8 p.m. and 5 a.m. to provide details to police officers who may stop the employee (this person must be familiar with the employer’s authorized activities involving the employee as well as the employee’s position and schedule). The validity period of the attestation and its date of signature. I operate a retail business that is not identified as an authorized priority business since December 25, 2020. Can I operate and sell goods online and how can my customers retrieve their purchases? E-commerce is allowed, even for non-essential goods (sales can also be completed by phone). The key points: Telework should be maximized as much as possible, with physical presence being limited to only those employees whose presence is essential to the workplace. Goods can be delivered or picked up at the door without entering a store. Payment must be made by telephone if a sale is made in this way and without the customer entering the business. We will follow developments and keep you informed as it is important to keep track of possible—and often frequent changes and adjustments brought to the directives. The professionals of our Labour and Employment team are available to advise you and answer your questions. See https://www.quebec.ca/en/health/health-issues/a-z/2019-coronavirus/confinement-in-quebec/ and the January 8, 2021, Order in Council 2-2021 Ordering of measures to protect the health of the population amid the COVID-19 pandemic situation.